EUR/USD and GBP/USD Forecast | Euro and British Pound Analysis

What to Know

• EUR/USD and GBP/USD are currently influenced by unexpected US dollar strength despite expectations of upcoming Fed rate cuts.
• The euro is testing support near the 1.1550 level, with potential downside toward 1.14 if this support fails.
• The British pound has broken below 1.34, with a key trading range between 1.32 and 1.36 indicating near “fair value.”
• Technical indicators, including the 50-Day and 200-Day EMAs, are providing key resistance and support levels for both pairs.
• Market momentum suggests that risk appetite and capital flows into US assets are driving currency movements, contrary to consensus forecasts.
• Traders should monitor both pairs for potential breakouts or breakdowns as economic data and Fed guidance evolve

Recently, we have been seeing a lot of narration that the United States dollar is going to continue to see downward pressure, and of course, the United States dollar was going to start losing strength rapidly, as the latest FOMC meeting suggested that the reserve might be cutting rates going forward. All things being equal, this is a market that is doing something completely different than what most pundits expected. Quite frankly, the fact that the US dollar is strengthening in the face of interest rate cuts and the fact that there are more coming should, at least in theory, work against the value of the US dollar.

However, the press conference during the FOMC meeting was actually the blue top for both the euro and the British pound. Sometimes, there is the simple fact that the market will do what it wants to do, and with this being the case, it’s obvious that the market is trying to tell us something. Most likely answer is that money is flowing back into the United States, either out of fear or investment, as the United States stock markets continue to look extraordinarily strong.

Sometimes, momentum will tell you everything you need to know, and in this situation, even though there were huge calls for the US dollar to lose massively to other major currencies around the world, the exact opposite has actually been the case since the FOMC meeting on September 17. The question now will be “Is there something out there to worry about?”

EUR/USD

The euro continues to drift lower, as the 50 Day EMA has offered resistance over the last couple of days. It is worth noting that a major trend line had been broken previously, just before the market bounced and retested that trend line for potential resistance, which, of course, was there. The 1.1550 level is an area of interest and potential support. If the market were to break down below that level, then it’s very possible that the euro could go looking at the 1.14 level, where the 200 Day EMA is currently hanging about.

GBP/USD

The British pound broke below the 1.34 level during the trading session on Tuesday, as it looks like the British pound is also struggling with the US dollar strength overall. It’s worth noting that the larger area of interest in this pair is between the 1.32 level on the bottom and the 1.36 level on the top. Currently, the market is hanging around the middle part of the overall trading range, suggesting that we are close to “fair value.” Ultimately, it is worth noting that in this pair, much like the EUR/USD pair, the market actually peaked once the Federal Reserve admitted that there would be more cuts. This shows that the US dollar has been moving against the overall consensus, suggesting that perhaps there is something under the surface that traders need to be aware of as far as risk appetite is concerned.

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