Euro strength continues to be the most compelling area at present, with the single currency moving by leaps and bounds against both sterling and the US dollar.

A person counting euro and US dollar notes
Source: Bloomberg

EUR/GBP rally continues

The euro’s bounce continues, and with sterling weak as well this currency pair has been one of the more interesting ones to watch. The current rally is still, it must be stressed, part of a longer-term downtrend, but it still looks quite robust at this stage. We can expect some resistance to materialise at the 50-day SMA (£0.7143), but the real struggle will take place around the 100-day SMA at $0.7193. The key event today will be a firm close above £0.71, the high from last Thursday’s session. 

EUR/USD momentum indicators continue to rise

A second way of playing euro strength would be to take advantage of US dollar-related indecision ahead of the Federal Open Market Committee meeting on Wednesday. EUR/USD is still pushing steadily higher, backed by rising stochastics and RSI on the daily chart. The pair has already cleared Thursday’s highs, although it needs to cement this by closing above $1.10; should this be achieved, then the next target would be the 50-day SMA at $1.11.

AUD/USD could fall to early-2006 lows

The $0.7260 level is still acting as staunch support here, but if this disappears then there is precious little to stop the pair heading rapidly towards $0.70, the lows from early 2006. Although oversold once again on the monthly chart, the weakness in commodities and potential USD buying ahead of the Fed meeting on Wednesday means that we could see this pair move very far, very fast. 

USD/JPY bears beginning to take control

There is a sense of a trapdoor gradually giving way here, as the bears finally seem to be wresting control of this pair from the bulls. A failure to hold above ¥124 last week has now lead to more sustained downside, with the pair now resting just above the 50-DMA at ¥123.28. A break below here would point towards more downside, in the direction of the July lows sub-¥121.

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