CFDs are complex instruments. You can lose your money rapidly due to leverage. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money. CFDs are complex instruments. You can lose your money rapidly due to leverage. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money.

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.


This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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