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EUR/USD, GBP/USD and AUD/USD reverse lower after recent rebound

EUR/USD, GBP/USD and AUD/USD reverse lower as the dollar comes back into prominence.

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​EUR/USD rolling over as dollar starts to come back into strength

EUR/USD has been on the back foot since the Tuesday rise into parity, with the bears coming back into prominence as markets start to roll over once again. The long-term trajectory evident over the course of this year brings a clear bearish bias, and thus the weakness we are seeing from here plays into that negative view. Meanwhile, commentary from the Federal Reserve (Fed) members highlight the expectation that they will continue to remain steadfast on their push to drive down inflation via rate increases.

Today brings a fresh update from the US jobs market, with traders keeping a close eye out for any pick up in earnings growth and unemployment. With the dollar coming back into prominence, the bearish trend is expected to continue here, with the wider downtrend on broken in the event that the price breaks up through the $1.0198 swing high. Until then, bearish trades are favoured, with the price expected to continue this downward trajectory as we move forward.

EUR/USD chart Source: ProRealTime
EUR/USD chart Source: ProRealTime

GBP/USD starts to weaken after period of strength

GBP/USD is also on the back foot as we head towards the weekend, with dollar dominance once again looking likely to take hold. The recovery of the post-budget slump has provided some relief from feelings that the pair could be in freefall on concerns of fiscal stability. However, irrespective of the impact played by the budget, the wider bearish trajectory remains in play as traders prefer the haven dollar.

With that in mind, another leg lower is favoured here, with the bearish reversal in the stochastics giving us a fresh sell signal after moving below the 80 threshold. This bearish outlook holds unless we see the price rise through the $1.2277 level.

GBP/USD chart Source: ProRealTime
GBP/USD chart Source: ProRealTime

AUD/USD heads lower, with the price closing in on two-year low

AUD/USD has lagged many of its peers of late, with the price failing to provide the kind of rebound we have seen for EUR/USD and GBP/USD last week. With the Reserve Bank of Australia (RBA) having raised rates by just 25 basis points (bp) this week, it is clear that the pace of tightening in Australia is significantly less rapid than at the Federal Open Market Committee (FOMC). We are now seeing the pair head lower, with the price approaching the $0.6363 low established last Wednesday.

A break below that level would provide a fresh sell signal, with stops subsequently placed above the recent retracement high of $0.6547. As such, for today the key question is whether we see the price break that 0.6363 low to set a fresh two-year low.

AUD/USD chart Source: ProRealTime
AUD/USD chart Source: ProRealTime

This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa 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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