Technical Analyst, Saxo Bank
Summary: EURUSD below key support eyeing 1.05
GBPUSD testing key support at 1.2175. Will it hold?
EURGBP testing 0.87 resistance set to movbe higher
Dollar Index testing key resistance at 105.80. Correction time before higher levels?
EURUSD After a couple of tries EURUSD has closed below key support at around 1.0635.
RSI has cancelled its divergence indicating likely lower EURSUD levels. Next support at around 1.05
If 1.05 is reached expect a correction but the underlying sentiment and trend is down as indicated by alle daily Moving Averages are declining. Adding to that the 55 Moving Average is just a few days from breaking below the 100 Moving Average.
Medium-term EURUSD is currently indicating bearish trend. If EURUSD is closing the week below 1.0635 and if weekly RSI is closing below 40 threshold.
To demolish the short-term bearish trend a close above 1.0770 is needed.
GBPUSD is testing key support at around 1.2175. RSI is around 20 i.e., indicating extremely oversold but there is no divergence suggesting lower GBPUSD levels are likely. However, a correction should be expected. We rarely see these long periods of trends as we have now seen in GBPUSD (down trend since mid-July) without a larger correction
If RSI is breaking back above its falling (blue) trendline expect a correction to occur. A move up to test the 200 daily Moving Average from beneath is quite common after breaking below.
However, the 1.2175 support is not the strongest support level meaning GBPUSD is likely to continue (after a likely correction) its downtrend towards 1.20 level.
21, 55 and 100 Moving Averages are alle declining and the 200 is very close to showing an underlying bearish trend and sentiment
Medium-term GBPUSD is in a confirmed bearish trend after it closed last week below 1.23.
Weekly RSI is currently below 40 threshold and if closing the week below it will just add to the bearish picture with medium-term downside potential to around 1.18.
EURGBP has reached the 0.382 distance of the top to bottom of the Descending triangle and is is testing the triangle peak at around 0.87.
RSI is above 60 strongly indicating higher EURGBP levels are likely. A close above 0.87 will pave the way towards 0.88 as indicated by the two vertical arrows.
However, statistically the move after a Descending triangle break out is often cut short at around the 0.618 ratio i.e., at around 0.8737
To demolish this bullish picture EURGBP needs to close back below the upper falling trend line in the triangle The Dollar Index has touched the strong resistance at around 105.80.
RSI is showing positive sentiment but there is divergence indicating the uptrend is stretched and a correction is looming.
If the Dollar Index is closing above 105.80 the RSI is closing above its upper falling trendline indicating likely higher Index levels. But if the Index is sliding back and the RSI is closing below its lower rising trendline a correction is most likely unfolding
Strong support at around 104.40. A close below is likely to initiate a larger correction down to the 0.382 retracement at around 103.35
A close below 102.85 will reverse the bullish trend.
Medium-term the Dollar Index is likely to move higher. Weekly RSI has closed above 60 indicating likely higher Index levels.
If the Index is closing above 105.80 is could pave the way top 107.90
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Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.