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Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.

EUR/USD and GBP/USD are topping out while EUR/GBP rallies

Outlook on EUR/USD, EUR/GBP and GBP/USD as traders re-access last week’s Fed, ECB and BoE rate hikes and exceptionally strong US unemployment data.

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EUR/USD is seen topping out

EUR/USD’s rally to its ten-month high at $1.1033 came to an abrupt end last week as the US dollar regained some of its recent losses on the back of the US Federal Reserve’s (Fed’s) 25-basis point rate hike, with the fed funds rate rising to 4.50%-4.75%, and much stronger-than-expected non-farm payroll (NFP) data on Friday.

EUR/USD has since given back over 2% and is fast dropping towards its $1.0766 to $1.0715 support zone, made up of the December highs and mid-January low, despite German factory orders rising by 3.2% month-on-month in December of 2022 versus an anticipated rise by 2% and reversing from a downwardly revised 4.4% tumble in November. The speed and depth of the last few days’ decline in the cross points towards at least a several day and perhaps week-long pause in the EUR/USD medium-term uptrend. A fall through $1.0715 would engage the 55-day simple moving average (SMA) at $1.0661.Resistance can be spotted along the breached November-to-February uptrend line at $1.0827 and above it at the $1.0887 mid-January high.

EUR/USD chart Source: IT-Finance.com
EUR/USD chart Source: IT-Finance.com

EUR/GBP is gunning for the minor psychological £0.9000 mark

EUR/GBP’s steep ascent last week has taken the currency pair so far to £0.8978 and thus close to the psychological £0.90 mark which is now in focus as the British Pound is depreciating while the euro remains strong, following last week’s respective 50-basis point rate hikes by the European Central Bank (ECB) and the Bank of England (BoE).

The cross is trading at levels last seen in September of 2022 and may begin to lose some of its recent strong upside momentum around the £0.90 mark. Further up sits the 28 September high at £0.9066.Support can be found around the January high at £0.8897 and then at the £0.8877 December high, ahead of the 25 January £0.8852 high.

EUR/GBP chart Source: IT-Finance.com
EUR/GBP chart Source: IT-Finance.com

GBP/USD slips back to towards the lower end of its two-month trading range

[currencies:GBP/USD’s] recent failure around the December high at $1.2446 has provoked a swift sell-off which is taking the currency pair back towards the lower end of its December-to-February trading range seen between $1.2448 and $1.1841 as the British pound weakens on fears that the UK economy is sliding into recession.

The first downside target is the 200-day SMA at $1.1955, around which the cross may find short-term support. Further down sits the $1.1841 early-January low with resistance being spotted along the 55-day SMA at $1.218.

GBP/USD chart Source: IT-Finance.com
GBP/USD chart Source: IT-Finance.com

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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