EUR/USD rallies as US Dollar slips, EUR/GBP side-lined
EUR/USD rallies as US Dollar Index trades in one-month lows, EUR/GBP side-lined.
EUR/USD targets the $1.0806 March low
EUR/USD’s near 4% rally from its mid-May $1.035 low has so far taken it to a one-month high at $1.0765 as the US dollar continues to weaken as Federal Open Market Committee (FOMC) minutes strike a less hawkish tone ahead of the US Personal Consumption Expenditure (PCE) price inflation data for April which is expected to come in at 0.3% as in the previous month.
With the Federal Reserve (Fed) perhaps considering a pause in its rate rises after its July meeting to assess the impact of its policy tightening, the cross is now in its second week of rallying and is about to hit the 55-day simple moving average (SMA) at $1.0774 and then the March low at $1.0806. Further up the 2022 downtrend line can be seen at $1.0823.
Minor support sits between Wednesday’s low at $1.0643 and the two-week support line at $1.064. Much further down lies Friday’s $1.0533 low.
EUR/GBP continues to range trade around the £0.85 mark
Earlier this week EUR/GBP stalled at £0.8587, marginally below the £0.8618 mid-May peak, before it rapidly came off again as German GfK consumer confidence data for June came in at a worse than expected -26.0 versus a revised -26.6 record low in May.
Strong support below Tuesday’s minor low at £0.848 remains to be seen along the 200-day SMA and two-month support line at £0.8445 to £0.8438.
Any intraday bounce is expected to lose upside momentum around the 16 May high at £0.8534.
US Dollar Index trades in one-month lows
The US Dollar Index’s (DXY) sharp rise, amid soaring inflation, heightened geopolitical tensions and growth concerns pushed it not only above the January 2017 and March 2020 Covid-19 pandemic peaks around 103.82 but also above the 104.60 July 1999 high to its mid-May high at 104.91 before slipping by nearly 3.5% in the past couple of weeks amid waning concerns over aggressive tightening by the US Fed.
The 55-day SMA and 20 April high at 100.97 to 100.92 are within sight, a slip through which could lead to the mid- to late April lows at 99.70 to 99.48 being reached before the index stabilises.
Immediate downside pressure should continue to be seen while the DXY remains below its last relative high, meaning a daily candle which has a higher high than the one to its left and the one to its right, at Wednesday’s 102.29 high.
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