FX snapshot

Dollar bulls will be aiming to maintain the upward move of last week, while the pound will be looking to recover some lost ground early on.

Pound and dollar
Source: Bloomberg

Dollar Index could drop to 95.81

The area between 96.50 and 97.00 has marked the high watermark for the US dollar index all through September, and last week was no exception.

So long as the price fails to move beyond this resistance zone then the risk of a drop back towards 95.81 increases. 

GBP/USD eyes move higher

Cable continues to defend $1.5150, as it did at the beginning of the month. If the pair can move back through $1.5250 then we may see a more sustained rebound, potentially as far as $1.5488.

A move through $1.5150 would then head towards the May low at $1.5067 and then onwards to $1.4790.

The risk of a move to the downside, given current USD strength, appears to be strong, potentially leading to a more extended drop in coming weeks.

EUR/USD could test $1.10

For the past few sessions this pair has remained relatively quiet, with little movement either side of the 200-day SMA at $1.1185. It appears that, for now, the 50- and 100-day SMAs ($1.1152 and $1.1146 respectively) are acting as support.

A failure to push on beyond $1.12 soon would suggest that the sellers are still in control and that we will head to the lows of last week and then the $1.1078 mark.

Below this we are looking at another test of $1.10 and then towards the July and August lows of $1.08. Any rally would need to clear $1.1270 and then head towards the month high of $1.14.

AUD/USD buyers have upper hand

Thursday’s big rally here has not been followed up with more extensive gains, but nonetheless the buyers still appear to have the upper hand. The pair must now break through $0.7050 to sustain the upward move, which would go some way to undoing the heavy losses seen in the past two weeks.

A move back through $0.70 would raise the prospect of another test of the 24 September low at $0.6950. 

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