FX snapshot – US Dollar Basket, EUR/USD, AUD/USD, EUR/GBP

The Fed drives US dollar strength, pushing AUD/USD and EUR/USD lower. However, EUR weakness has also fed through to other markets, with EUR/GBP looking for further losses.

A trader looking at a screen
Source: Bloomberg

Dollar continues to rise following hawkish Fed

The US Dollar Index saw yet another spike higher yesterday, this time driven by a hawkish Fed. We have seen a very strong move higher for the dollar of late, and everything we are currently seeing following yesterday’s spike points towards further upside.

The move lower has formed two doji candles, which are typical for period of indecision. The issue with that is that coming after such a major move, I would expect a strong move downwards should there be any decent amount of bears in this market. We have not seen that, and instead the current price action is forming a flag formation; this is a continuation pattern. Thus I expect to see further upside, with a break through the top end of this flag. The next major levels of resistance in view are $98.05, $98.43 and $98.61.

EUR/USD flag points to further downside

The EUR/USD selloff overnight has also led to a flag (remember EUR/USD is the dominant constituent of the US Dollar Index). Thus we are looking at a very similar story, with expectations of a move lower.

For now, the price can drift higher to its content, but I do expect a break lower in the near future through the supporting trendline and back down through $1.0897. Should we see that break lower, I would be looking at $1.0819 as the next major support level.

AUD/USD continues to break lower

The AUD/USD pair has been breaking lower following the push lower from the falling wedge formation seen throughout October. The pair has been fairly choppy with its retracements, yet it looks a lot like we are within the middle of another leg lower currently. Thus I am bearish for a move back towards $0.7044 and $0.7.

My bearish view looks for a continuation of the creation of new lows and lower highs. I maintain this view as long as the price doesn’t close above this morning’s swing high of $0.7119.

EUR/GBP drifts higher yet further losses likely

The EUR/GBP pair has been gradually moving higher this morning following a strong selloff yesterday. This comes off the back of a period of weakness driven by last Thursday’s dovish European Central Bank statement. I do expect to see further losses in the near future and will be looking for signs such as a bearish engulfing for the selloff to continue.

For now, the price is attempting to break through £0.7168 resistance, which points towards further short-term gains. However, I prefer to await another sell signal to move with the trend rather than a riskier countertrend strategy.

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CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen.