Dollar strength pressures EUR/USD and GBP/USD but lifts USD/JPY
Risk-off sentiment has returned, and this has resulted in gains for the dollar at the expense of the euro, sterling and yen.
EUR/USD
EUR/USD returned to the 50-day simple moving average (SMA) this week ($1.0588), having rallied modestly from the lows of June, along with most risk assets. However, it looks like the hiatus from risk-off sentiment has come to an end once again, and a fresh move lower is in store.
Further declines from here will bring $1.0384 and then $1.035 into view, as the pair heads back to retest recent lows seen over the past two months.
A revival back above the 50-day SMA and then above $1.06 would be needed to suggest a resumption of the bounce, which then targets $1.0637 and higher.
GBP/USD struggles in early trading
For GBP/USD as well it looks like a new drop is at hand, as the dollar strengthens again and the concerns about inflation and growth begin to build.
The downtrend here looks to be in the process of reasserting itself, which suggests a resumption of the move back to $1.20 and lower. Below this there is not much evidence of support until the March 2020 lows of $1.15.
Buyers will need to step in soon and push the price back above $1.2366 if they are to avoid this scenario, although a bounce back above $1.263 would be needed if it is to push on to create a higher high.
USD/JPY holds near highs
USD/JPY has returned to the highs of last week, with the uptrend here just as firmly in place as the downtrends are for EUR/USD and GBP/USD.
Now that the 2002 highs have been breached, the next step would be ¥146.75, the highs from 1998. Horizontal and trendline support come into view around ¥135.00, which may help support the price in the end of any drop in coming days.
Below this the price would head towards the 50-day SMA at ¥131.00.
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