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EUR/USD and GBP/USD edge lower as USD/JPY moves cautiously higher

FX markets have seen some further dollar strength, although the risk-off move is much more muted when compared to equities.

Transcript

EUR/USD resumes Monday’s downward move

The selling has continued for EUR/USD, although the losses have been contained when compared to equities.

The pair remains within something of a rising trend channel, with the drop back from last week’s highs coming after a test of the upper bound of the channel. Thus a decline towards the lower bound towards $1.174 might provide buyers with a chance to resume the upward move. A break below the lower bound could bring the September low at $1.1615 into view.

GBP/USD pulls back towards rising trendline

GBP/USD continues its steady push higher from the September lows, and the drop of the past few days could be viewed as a natural retracement after the spike last week.

Trendline support from the September low comes into play around $1.30, and if this holds we could see the creation of a higher low and a new bounce to the upside. Alternatively, if momentum indicators such as moving average convergence/divergence (MACD) roll over in coming sessions and the trendline is lost then a more bearish short-term view comes into play.

USD/JPY edges up for another day

USD/JPY's small recovery from last week’s lows has been seen here, with the price moving back above ¥104.50.

For the third time since late July a drop towards this level has found support, but it has been notable that the rallies following these lows have been weakening over time, forming lower highs since mid-August. It is also worth noting that the bounce above ¥105.00 yesterday was sold, suggesting that the sellers remain in control overall.

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