US DOLLAR TO FRESH ONE-YEAR HIGHS

The US Dollar’s bullish bounce from support took a short break yesterday around Jerome Powell’s second day of testimony; and after a pull back to the 95.00 level on DXY, prices have re-ascended and are heading directly for the June swing high. That June swing high at 95.53 saw two separate failures at this level, first on June 21st and again a week later. We’re now nearing this level for another test, and the big question is whether bulls will be able to keep pushing; or whether we’ll walk away with a third failed attempt at taking out the 95.53 level.

US DOLLAR VIA ‘DXY’ FOUR-HOUR PRICE CHART: TESTING FRESH ONE-YEAR HIGHS

Chart prepared by James Stanley

Taking a step back to look at longer-term charts in order of deriving potential targets, we can see a series of levels just above current resistance that could soon become of interest. The level of 96.04 is the 50% retracement of the 2017-2018 down-trend, and the 38.2% retracement of that level had previously helped to mark support in DXY at 94.20. At 96.45, we have the 23.6% retracement of the 2011-2017 major move, and a bit-higher around the 98.00 level, we have a confluent area of potential resistance, as we have the 23.6% marker of the 2014-2017 major move, along with the 61.8% retracement of the 2017-2018 down-trend.

These are the same levels we shared as targets for the currency in our Q3 technical forecast on the US Dollar, and that full report is available directly from the following link: US Dollar Q3 Forecast, DailyFX Trading Guides.

US DOLLAR VIA ‘DXY’ DAILY PRICE CHART

Chart prepared by James Stanley

GBP/USD BREAKS 1.3000, MORE WEAKNESS TO FOLLOW?

The sell-off in the British Pound is continuing into this morning, and GBP/USD is now testing below the 1.3000 level for the first time in ten months. This comes after two days of negative data: Yesterday’s disappointing inflation report was followed by this morning’s disappointing retail sales, both of which have helped to give bears a bit more running room. Each of these data points make the prospect of a rate hike from the BoE in a couple of weeks seem less-likely, and if we do see an actual rate rise out of the bank this year, November may be more likely as we should have a greater deal of clarity on the Brexit-front.

At this point the one potentially positive driver behind the currency, the potential for a rate hike out of the BoE, is coming into question and that’s helping bears push prices below support. But – we may be nearing a point where the currency is so oversold that bearish strategies might want to take a step back to wait for a cleaner setup. We’ve seen RSI diverge on the daily chart over the past couple of months and this highlights just how oversold this trend has become. And while oversold doesn’t preclude the possibility of further losses, it does set the bar a bit higher for short-side strategies. Traders looking to work with bearish continuation will likely want to wait for a pullback to potential resistance, and areas such as 1.3050 or even 1.3117 could be usable for such a purpose.

GBP/USD DAILY PRICE CHART: DIVERGENT RSI HIGHLIGHTS OVERSOLD CONDITIONS IN THE PAIR

Chart prepared by James Stanley

EUR/USD SETS FRESH JULY LOW, KEY 1.1500 SUPPORT NEARS

EUR/USD bears have re-gained control in the pair after an initial move of strength to open Q3, and prices are now trading at fresh July lows after a continuation of yesterday’s downside run. Price action is making a move towards the support swing that showed in May and June around 1.1509, just a bit above the 1.1500 psychological level.

At the core of the move is the dovish posture around the ECB that caught another gust of motivation around the bank’s June meeting. That will come further into view next week as the European Central Bank hosts their July rate decision, set to be announced next Thursday morning (July 26th, 2018). If the ECB is able to show a continued dovish stance even despite the fact that inflation is running very near the bank’s goal of 2%, the stage could be set for a showdown at this low along with the potential for a deeper bearish breakdown.

EUR/USD DAILY PRICE CHART

Chart prepared by James Stanley