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

The dollar continues to sell off, yet the existence of major support mean a reversal is likely.

Pound and dollar
Source: Bloomberg

Dollar recovery could be on the cards

The dollar is looking like having a strong session today, following some worrying developments earlier this week. The ability to move back above $96.52 is crucial given it represents a key support level in the near-term and the bullish engulfing that is currently being formed could point to a move back towards yesterday’s high of $97.06 and higher.

With this in mind, I am bullish for the dollar index as long as price does not close below $96.52. A bullish engulfing on the four-hour would give me confidence that we are set to see the next leg higher towards $97.06 and possibly $97.31. That would have dollar positive implications for our other USD charts.

GBP/USD in triangle as resistance zone looms

GBP/USD is trading within a short-term symmetrical triangle formation, just below the resistance zone which has typically capped any upside over the past month. Given the recent trend of higher lows, there is reason to believe we could see this break back towards the resistance zone of $1.5690-$1.5652.

However, the key will be whether we break the near-term resistance ($1.5637) or support ($1.5574). A break towards the upside would then bring us back into the resistance zone which would therefore mean that any upside scenario would be less confident of a significant spike. Whereas, a move below $1.5574 would be more likely to see a bigger target of a move towards the $1.5534 and $1.5467.

USD/CAD consolidation expected to provide further gains

USD/CAD is trading within a range, following a move higher off the bottom and of a falling broadening formation. The continued sell off in crude should provide a bearish environment for the CAD, while the expected resurgence in the US dollar today should provide a bullish view to the USD side of the matter.

Given the current rectangle consolidation phase we are currently seeing, I do expect us to continue the strength that saw us come into this position and thus I am bullish for a move back towards the top end of this formation (C$1.3103 and C$1.312). 

EUR/GBP could continue to range unless breakout occurs

EUR/GBP has broken back towards the £0.716 resistance level yesterday, yet we are seeing signs that possibly we may remain within a period of consolidation for what is left of this week. The move back to £0.7131 support this morning is a worry and provides an intraday lower low to accompany the higher high. Thus indecision dominates the current position.

With this in mind, I prefer to look for a bearish view if we see a close below £0.7131, for a return to £0.7102. Otherwise a close above £0.716 would give me a bullish outlook, for a move towards £0.7223.

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