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EUR/USD and GBP/USD retreat from recent highs as USD/JPY builds a base

The story of building dollar strength has continued into another day, putting the euro and sterling on course for fresh losses against the greenback, while USD/JPY edges higher.

EUR/USD on course for parity again?

Two sharp down days for EUR/USD seem to point towards the resumption of the downtrend here, putting the pair on track to test parity once again.

The pair reached the 50-day simple moving average (SMA) on Wednesday and Thursday last week, for the first time in six weeks, but a reversal from there has seen the creation of a probable lower high.

This revives the downtrend and puts parity and lower into play. A recovery above $1.035 would be needed to reverse this view.

GBP/USD looking at a fourth consecutive daily fall

As for GBP/USD in which the pound has taken a hit against the dollar as well over the past few sessions, and it looks like the downtrend is back in action here too.

The reversal over the past three days has seen the price drop back below the 50-day SMA, after failing to push on above $1.225 for the second time in a month. As with EUR/USD, it looks like this move has carved out a lower high, and now the lows of July at $1.18 are back in play.

A recovery above $1.212 would put the pair in a more neutral view, while a move above $1.225 is needed to put the buyers back in charge.

USD/JPY holds steady

USD/JPY in which the dollar strength has been building for several days, and the continued reluctance to head below the 100-day SMA suggests the buyers retain overall control.

A more definite bullish catalyst would come with a move above ¥135, and then above the 50-day SMA, which the price was unable to achieve at the beginning of the month. This then puts the July high back into play as a target.

A reversal below the 100-day SMA negates this view, and would suggest a test of the 2 August low at ¥130.40, and then potentially lower.

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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