EUR/USD
The EUR tried to rally during the Thursday session, but found far too much in the way resistance at 1.05 to continue going higher. This is a market that looks as if it has tested major resistance, and then failed. I believe that the longer-term downtrend will continue due to this, and with this being the case it’s likely that the market will drop down to the 1.03 level. I think we break down below there and go to parity given enough time, but right now it’s a very light volume type of market so I think it is going to be in more of a grind lower than any type of serious breakdown. If we did somehow break above the 1.05 level, I feel that there’s enough resistance above to keep this market lower on that attempt.
GBP/USD
The British pound initially tried to rally on Thursday but fell enough to break below the 1.23 level. We have broken the bottom of an uptrend line recently, and it now looks as if we are going to continue to go even lower. I feel that rallies will be sold off, and that now that we have broken below the 1.23 level, the market should then reach towards the 1.21 level underneath. After that, I expect to move to the 1.20 level. The US dollar continues to strengthen, and that of course is a reaction to the Federal Reserve interest rate hike, and the assumed future ones that are coming.
On the other side of the Atlantic, the Bank of England has no way to raise rates, and quite frankly could introduce more quantitative easing if things dictate as such. If that’s the case, that should continue to add fuel to the fire of GBP/USD sellers. I have no scenario in which I’m willing to buy at this point, and recognize that the British pound should continue to soften.
