Weekly Analysis for EUR/USD and GBP/USD from 4th June-8th June
Dollar Index has a very productive last 2 months where it rose from 88.90 to 95.10, that’s a nearly 7 percent run in just two months. A solid US economy fueled by tax cut benefits and a slowing global growth were the main drivers behind this dollar run.
During this course, EUR/USD also fell from 1.2475 to 1.11510 which is nearly a 1000 Pips move. Last week it bounced from its daily trend line around 1.1500 to 1.1530 support zone. It kept on rising until Thursday and it made high of 1.1724.
So after a 1000 Pip fall, there was a 200 Pips bounce. So will it last or keep on marching towards higher resistance?
It found an early resistance around 1.1725-1750 zone and couldn’t close it above. So it still keeps bears in control. And downtrend for EUR/USD since April is still in play. In near term, it can form a 200 pips range from 1.1530 to 1.1730 until there is a fresh catalyst arrives.
But still, keep on shorting any bounce in this pair is still the way to go. One can also look to buy the pair but that should be around near support zone of 1.1520, not before that, and with strict stop loss.
This pair also feels pressure from substantial dollar strength and a disappointing streak of UK economic data which caused the May hike delay from BOE. As the market was pricing more than 95 percent probability of may hike so because of that pound was having a very good run until mid-April.
It made a high of 1.4378 on 17th April when data started to pop the rally and market caught off guard. From then on it kept on falling and BOE dovishness also helped the downfall. It made a low of 1.3205 on 29th may which make a 1200 pips fall from its high in 1 and half month. Now it is trying to consolidate for the time period.
Last week closing candle was a hammer. So downside for GBP/USD is over?
As we already mentioned there are enough reasons to keep selling pound like a fragile economy, strong US growth, hawkish FED, and BREXIT.
So GBP bulls have a very tough road ahead of them as there are very strong resistance level from 1.3400-13600 levels. There is a very minor support around 1.3200 level and if it falls through it then bigger support comes at 1.3050 level which should hold this fall for some time until next risk event unfolds itself.