EUR/USD and EUR/GBP depreciate while US Dollar Index surges

​Swift descent in EUR/USD continues

EUR/USD is trading at level last seen in March 2020 as worries about surging inflation, the US Federal Reserve (Fed) pursuing an aggressive tightening policy and further lockdowns in China are on investors’ minds.

The EUR/USD depreciation hasn’t been stemmed by the outcome of the French presidential election with the centrist incumbent Emmanuel Macron having been the first president in 20 years to have succeeded in being re-elected without having to form a coalition with rival parties.

The March 2020 low at $1.0638 thus remains in focus and should technically continue to do so, while the 28 March low and early April highs at $1.0923 to $1.0945 aren’t overcome. This resistance area is where the currency pair recently faltered, before rapidly coming off.

Immediate resistance today can be found at the $1.0806 March trough and also at the 8 April $1.0837 low.

EUR/GBP’s rally seems to have stalled below the 200-day simple moving average at £0.8449

EUR/GBP rally off the mid-April low at £0.825 low stalled marginally below the 200-day simple moving average (SMA) at £0.8449 with the incumbent Emmanuel Macron having won the French presidential election with over 58% of the vote.

A slide back towards the 11 April high at £0.838 seems to be on the cards today. Further down the 55-day SMA can be spotted at £0.8358 and the 28 March low at £0.8322 which offers potential support with the 8 April low at £0.8308.

Only a currently unexpected rise above the 200-day SMA and the mid-March high at £0.8449 to £0.8458 would engage the late March peak at £0.8512.

The US Dollar Index continues to rally on flight to quality flows

The US dollar index (DXY) is trading at levels last seen in March 2020, underpinned by the prospect of a more aggressive pace of US Fed tightening to combat surging inflation and worries about further lockdowns in China and their effect on economic growth in that economy and throughout the region.

The DXY, which has risen for four consecutive weeks, has broken out of its two-year uptrend channel whilst aiming for the March 2020 peak at 103.82.

The upper channel line at 101.25 may act as short-term support, if revisited, as could last week’s high at 100.92 and the May 2020 high at 100.60 as well as the psychological 100.00 mark.