- With the shift in global financial markets to a “risk off” phase through the first half of May, currency markets have been dominated by a stronger Yen and US Dollar as safe havens, whilst “risk currencies’, such as the Australian and New Zealand Dollars have weakened.
- In this climate, the Euro has been relatively neutral versus the US Dollar, but recent weakness in EURUSD during the rebound phase for equity markets has underlined a broader preference for the US Dollar and leaves EURUSD vulnerable to further losses.
- A complete lack of any positive progress in Brexit talks between the Conservative and Labour parties, alongside the increasingly unstable position of Prime Minister Theresa May leaves the Pound exposed and GBPUSD heading lower in its bear trend.
- In our article today we highlight downside risks for the EURUSD and GBPUSD Forex rates.
EURUSD threats stay lower
Another push lower Friday as expected through 1.1164 and minor trend line support from mid-May, sustaining the negative tone from Thursday’s selloff just through the 1.1176/65 support area and reinforcing the small top that has developed through mid-May (with the failure back from just below 1.1265 resistance, from 1.1264), to keep risks lower for Monday.
The latter April plunge through 1.1175 set an intermediate-term bear trend.
- We see a downside bias through 1.1150; break here aims for 1.1134, maybe 1.1109.
- But above 1.1184 aims for 1.122, maybe 1.1244.
Intermediate-term Outlook – Downside Risks: We see a downside risk for 1.1109.
- Lower targets would be 1.1000 and 1.0839.
- What Changes This? Above 1.1324 shifts the intermediate-term outlook straight to a bull theme.
4 Hour EUR USD Chart
GBPUSD bear trend reinforced
A further plunge lower Friday through key 1.2771 support from February for a significant selloff as seen through mid-May since the earlier May rebound failure from below our 1.3081 resistance (from 1.3047), to keep risks lower for Monday.
The latter April probe below 1.2947 signalled an intermediate-term Double Top pattern and set an intermediate-term bear trend, BUT risk is now for a break above 1.3196 for an intermediate-term bull shift.
- We see a downside bias for 1.2704/00 and next key 1.2668; break here aims for 1.2616.
- But above 1.2753 aims for 1.2795/98 and maybe opens risk up towards 1.2853.
Intermediate-term Outlook – Downside Risks: We see a downside risk for 1.2771.
- Lower targets would be 1.2437, 1.2366 and 1.2109
- What Changes This? Above 1.3047 shifts the outlook back to neutral; above 1.3177 is needed for a bull theme.
4 Hour GBP USD Chart