EUR/USD Resistance Test as USD Tests SupportEUR/USD bears haven't been able to re-take control since the jarring pullback after the August 1st NFP report. But, that said, there may be more attractive areas to look for that USD-weakness to continue, such as GBP/USD.
While Trump is pushing hard for rate cuts in the U.S. and markets are highly expecting that in September with at least one and perhaps two more by the end of the year, the USD continues to hold higher-lows from July, with a big spot of support currently in-play. And in the mirror image of that move, we have lower-low and lower-high structure that remains in-play on EUR/USD daily. Shorter-term we have seen bulls continue to chew back parts of that prior sell-off, with short-term resistance-turned-support at the 1.1593 level, followed by a venture back up to the 1.1686 level. Now bulls are driving above that, extending the short-term bounce, and this exposes two key levels in the pair.
At 1.1788 we have the lower-high from mid-July. This is the level that sellers would need to hold to retain that bearish structure that had built last month. And below that, we have the 78.6% Fibonacci retracement at 1.1748, which is confluent with a bearish trendline taken from those lower-highs as we move towards later this week or early next week.
If we are going to see continued breakdown in the USD, we're probably going to need to see the Euro onload some strength as it's a 57.6% weighting in the DXY basket. But, in that scenario, I still think Cable (GBP/USD) could be a more attractive venue for that theme. - js
