FX snapshot – US Dollar Index, EUR/USD, GBP/USD, USD/CAD

The US dollar is expected to strengthen further following a lull in the early part of the week. As such, breakouts from consolidation dominates current expectations.

Joshua Mahony
Market Analyst, London

2015-11-10T08:39:58+0000

Source: Bloomberg

US dollar continues to rally

The US Dollar Index has rallied heavily since the mid October low of $93.91, helped in no small part by a dovish European Central Bank and strong US jobs data. The continued stepped move higher, means that traders see each a pullback as another opportunity to buy in, and as of yet we have seen no signs that this is any different. As such, an upside breakout is expected before long, as signified by a close above yesterday’s high of $99.44. The next major resistance comes at $100.27, followed by $100.79. We would need a move back below $98.00 to negate the bullish view.

US Dollar Index chart

EUR/USD upside fleeting

EUR/USD continues to move higher this morning, following on from the gradual recovery we saw yesterday. However, this is likely to be a short-term phenomenon given the sharp selloff we have recently seen and should it persist resistance would be expected at either $1.0808 (July low), $1.0833 or $1.0897. The downtrend is clearly in play and another leg lower is highly likely. Ultimately, whether we reach those resistance levels or not, the bearish outlook remains unless the price breaks back above $1.0897, with downside levels to watch at $1.0520 and $1.0462.

EUR/USD chart

Will GBP/USD boost last?

Yesterday’s boost in GBP/USD brought the price back above the key $1.5107 resistance level. While the price has not sustained, it is a sign of strength and gives us an idea of what could come. The bounce came off a descending trendline which forms the bottom of a channel in play over the last two months. Current downside looks like a possible bullish flag formation, and thus it makes sense to await another break back above $1.513 as a signal that we are going to see another move higher, with the next resistance coming at $1.517. Alternately, a move through the trendline support would signal another major selloff to come.

GBP/USD chart

USD/CAD upside expected

The USD/CAD pair has been trading within a broadening formation over the past 24 hours, in a week long uptrend. The bullish US dollar picture has dominated here and another break higher seems the more likely outcome. As such, a close above yesterday’s high of C$1.33 would be the signal for another leg higher, with resistance levels at C$1.3353 and C$1.3457. Alternately, a close below C$1.325 (38.2% Fibonacci) would point towards a deeper retracement, where C$1.3141 would need to be broken to bring a bearish view.