Euro, sterling and Aussie retreat against the dollar
The strong dollar is once again putting pressure on EUR/USD, GBP/USD and AUD/USD.
EUR/USD heads lower
EUR/USD has come under fresh pressure as the dollar strengthens once more. The dovish view of Wednesday’s Federal Reserve (Fed) decision has been reversed and now markets are firmly convinced of the Federal Open Market Committee's (FOMC’s) hawkishness.
As a result, we can expect additional downside here, with last week’s lows just above $1.04 likely to be tested, setting the stage for additional declines if this low is breached. Admittedly the price looks stretched to the downside, but even a rally back towards $1.09 leaves the downtrend firmly intact.
GBP/USD slumps in wake of BoE meeting
The Bank of England (BoE) raised rates yesterday, and expect inflation to reach 10% by the end of the year, but their outlook on the UK economy was so gloomy that the pound fell once again. Indeed, the Monetary Policy Committee (MPC) might be close to pausing their hiking given the slashing of growth forecasts for 2023 and 2024.
The news sent the pound slumping against the dollar, pushing it back below $1.24 for the first time in two years. The area around $1.215 becomes the next big zone to watch for support. As with the euro versus the dollar, GBP/USD is in some sense ‘due’ for a rebound, which could carry it as far as $1.3, but for now the dollar is firmly in control here.
AUD/USD reverses gains from RBA hike
The bounce that seemed so strong here with AUD/USD earlier in the week in the wake of the Reserve Bank of Australia's (RBA’s) rate hike has now almost entirely disappeared. Like most other risk assets, yesterday the Aussie endured a dramatic pullback.
The week’s lows at $0.704 now come into view, and then below this the big zone of support on AUD/USD around $0.7 comes into view. This area has held since the final months of 2020, so a drop below here reinforces the bearish view significantly. For a more bullish view to emerge the price needs to recover $0.72.
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