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Forex snapshot

EUR/USD finally drops back below the $1.36 level, while the 50-day moving average continues to act like a magnet for GBP/USD.

Euro and US dollar notes
Source: Bloomberg

EUR/USD drops below $1.36

It has taken almost a week but last night EUR/USD finally fell through the $1.36 level again, having briefly spiked below it during Mario Draghi’s speech on 5 June. The initial suspicion was that the ‘bazooka strategy’ of announcing a range of tools to tackle eurozone inflation and strength of the euro would trigger a collapse in EUR/USD; that was short-lived, whoever. Last night and today have seen fresh selling in EUR/USD, which has once again dropped below $1.36. The two next levels of support that could offer a platform to bounce off are last week’s intra-day low of $1.3505 or the February lows of $1.3477. Market observers are more likely to get an accurate assessment of how successful the ECB’s actions have been by watching euro strength than watching equity indices. 

Spot FX EUR/USD chart

GBP/USD drifts lower

The stigma of failing to break the five-year highs from August 2009 appears to be weighing heavily on the GBP/USD rate, as once again it is drifting lower. Having broken below the $1.68 level earlier today it is now making its way down towards the 100-day moving average on a daily chart.

As my colleague Chris Beauchamp stated yesterday, we appear to be reaching a ‘make or break’ level in GBP/USD. Chris has looked at the hourly chart and although it is still in a downward trend after failing to break through the psychological barrier of the 9 August highs, it is about to meet a plethora of moving averages that combined could be enough to force GBP/USD to break this move and mount a fresh challenge on previous highs.

Spot FX GBP/USD chart

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