GBPUSD Bounces At Support; US Dollar Hits Resistance At Monthly Highs

US DOLLAR RALLY RUNS INTO RESISTANCE AT MONTHLY HIGHS

The week-long rally in the US Dollar has continued, and the currency is now trading above two resistance levels of note; testing above both the trend-line projection and the 96.47 Fibonacci level. This move has had reverberations through many FX pairs, with bearish themes showing more prominently in pairs like EUR/USDGBP/USDAUD/USD and NZD/USD.

The big question around the US Dollar at this point is for how long might bulls be able to push? A bit of resistance has started to show off of the late-January swing-high of 96.66, and a bit higher on the chart is another area of interest around 97.00. Inside of recent price action, that 96.47 level could be of interest for support themes; but given the deep overbought nature of RSI on shorter-term charts, prices may pose a deeper retracement before that bullish trend is ready to resume, and this can keep interest around the 96.30 and 96.04 levels for deeper zones of potential support.

US DOLLAR FOUR-HOUR PRICE CHART: OVERBOUGHT USD PULLS BACK FROM MONTHLY HIGHS

(Click on image to enlarge)

US Dollar USD Four Hour Price Chart

Chart prepared by James Stanley

GBP/USD DIPS THEN BOUNCES ON BOE

Going along with that Dollar-strength over the past week has been a reemergence of sellers in Cable. GBP/USD topped out around the 1.3200 level in late-January, and since then sellers have been getting more aggressive, posing two key support breaks so far this week. The 1.3000 level was taken-out on Monday, and after building in a day of support at the 1.2920 Fibonacci level, prices have sunk down to test the next potential zone that I looked at in yesterday’s article, spanning 1.2828-1.2850.

This morning’s drivers in GBP are emanating from the first ‘Super Thursday’ rate decision of 2019. The Bank of England cut growth forecasts, and Mr. Mark Carney noted that the ‘Fog of Brexit’ is creating tension and the British economy is not properly prepared for a No-Deal Brexit, which is looking increasingly likely with Brexit-day now just seven weeks away. This brought in an initial move of weakness that drove prices down towards that 1.2850 support. Mr. Carney did also note, however, later in his speech that clarity on Brexit could bring on the upside, which did appear to help soften the blow to a degree as buyers returned to push prices back above 1.2920.

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