EUR/USD & GBP/USD Forecast: Stronger Dollar Caps Upside

What To Know

• Stronger-than-expected U.S. core CPI lifted the U.S. dollar.
• EUR/USD remains trapped within a potential bearish flag pattern.
• GBP/USD failed to break above the 200-day EMA.
• Rising geopolitical tensions continue driving forex market volatility.
• Higher U.S. interest rates could add further pressure on both pairs.

The backdrop right now is one of major uncertainty as the United States and Iran are starting to escalate things again, and that, of course, has a major influence on risk appetite in general, which translates to more volatile markets.

Keep in mind that the interest rate markets will move due to that, but at the same time, during the early part of the Tuesday session, we got core CPI numbers that came out much higher than anticipated in the United States, thereby allowing the US dollar to get back some of its strength. That being said, I don’t know how much has changed.

EUR/USD

The Euro rallied initially during the trading session on Tuesday, reaching toward the 1.1460 level and failing again. This is a market that’s gone sideways in this area and is still in the process of forming a bit of a bearish flag. This pattern will continue to be one that we are watching closely.

If we do get a little bit of negativity or interest rates jumping in America, that in and of itself could send the Euro looking to the 1.12 level, below which has been important previously. I have no interest whatsoever in buying the Euro at the moment, especially as traders will have to worry about energy in the European Union yet again.

GBP/USD

The British Pound launched during the trading session and then failed about the 200-day EMA. This tells me there just isn’t enough upward momentum to really get things going. And in fact, it wouldn’t surprise me to see this thing roll over. That being said, the British Pound has been stronger than many other currencies against the US dollar, so I think this is a gradual decline more than anything.

The US dollar starts to struggle, and then the British pound ends up being a winner based on the recent price action. With this, the pair continues to see a lot of noisy behavior.

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