Continued dollar weakness drives rebounds in EUR/USD and GBP/USD, while weakening USD/JPY
The dollar is heading lower ahead of the latest US inflation reading today, driving counter-trend moves in EUR/USD, GBP/USD and USD/JPY.
EUR/USD opens the day above 50-day SMA
The latest rebound here has witnessed EUR/USD recover from the 20-year lows that we saw earlier in the month.
But the downtrend is still firmly in place, and while the price has managed to open above the 50-day simple moving average (SMA) for the first time since February, the overall bearish view has not changed. This is still a counter-trend rebound unless and until it breaches the August-high, at which point a more neutral view can be considered.
Further gains would target a move towards $1.035, while sellers will be watching for a reversal that puts the price back on a downward footing and indicates that yet another lower high has been created.
GBP/USD rebound enters a third day
Dollar weakness has given sterling space to rally against the US currency, with GBP/USD moving higher as risk appetite recovers globally.
But like EUR/USD, it will take a lot to shift the bearish view. The price has yet to reach the 50-day SMA, and the August-highs at $1.225 mark the next major level to watch. For the moment the recovery is simply a bearish rebound.
While the bounce may move beyond the 50-day SMA and $1.20, the expectation is that a lower high will be created in due course.
USD/JPY edges towards ¥142
After its fresh higher high last week, USD/JPY is dropping back, though the uptrend remains intact.
At present the pullback is only shallow, but a continued drop could go as far as the 50-day SMA (currently ¥137.10), or, as in the case of August, to the 100-day SMA (currently ¥134.37).
Nonetheless, any higher low reinforces the uptrend and points towards fresh gains. It will take a move back below the August-low to alter this outlook.
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