EUR/USD and GBP/USD Forecast: Dollar Strength Tests Key Support Levels

What To Know

• EUR/USD rebounded from the 1.15 level but faces resistance near 1.1650 and the 50-day EMA near 1.1775.
• A break below the 200-day EMA could send the euro back toward 1.15 support.
• GBP/USD failed at the 1.35 level and the 50-day EMA, signaling potential downside pressure.
• The British pound could fall toward the 1.33 level if US dollar strength continues.
• Geopolitical tensions and risk sentiment remain key drivers of forex market volatility.

You’re going to have to be glued to your news feed if you’re trading anything with any volatility, but that’s part of why I’ve chosen these 2 pairs. During the trading session on Tuesday, we’ve seen a lot of volatility, and I think that continues to be the case as the war in Iran continues quite frankly. You’re going to have to be glued to your news feed if you’re trading anything with any volatility, but that’s part of why I’ve chosen these 2 pairs. They don’t typically move much and certainly in the case of the Euro, that’s truer than the British Pound, but keep in mind that they do tend to move in ranges.

EUR/USD

We recently had bounced from the 1.15 level and really started to take off but the question is can we hang on to this momentum? If we break below the 200-day EMA, then I think a lot of questions will be asked of the Euro at that point, and we could go looking to the 1.15 level. A break above the 1.1650 level opens up to the 1.1775 level where the 50-day EMA would come in to offer some resistance. Keep in mind the European Central Bank has the specter of energy concerns coming and that could very well put a dent in the European economy.

GBP/USD

The British Pound initially rallied but it has failed at the 50-day EMA and the 1.35 level. This is an area that if the US Dollar starts to strengthen, perhaps in a risk-off type of move, you could very well see the British Pound suffer. The Bank of England’s a little different than the European Central Bank, they have to worry about inflation and therefore the Pound’s probably more resilient.

Quite frankly, there’s probably an argument to be made for shorting the Euro against the Pound and skipping the Dollar altogether. That being said, it would not surprise me at all to see the 200-day EMA targeted, followed by the 1.33 level. This is a market that I think has a lot of work to do to change the overall trend and right now, I think we just tested the top of this consolidation area that we’ve been in.

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