EUR/USD
The EUR/USD pair had a volatile session on Tuesday as traders came back to work. However, we really didn’t accomplish much other than form a slightly negative looking candle. In the end, the body of the candle was fairly short. I still see the 1.05 level above as the beginning of significant resistance, that will more than likely extend all the way to the 1.07 handle. In other words, if we rally from here, I’m looking to sell again. The ECB has just extended its quantitative easing by nine months, and that will do the Euro no favors against the US dollar. Because of this, I think a “sell the rallies” attitude continues.
GBP/USD
It was volatile in the British pound as well, but this market has been consolidating in the general vicinity of 1.224 several days now. I think any bounce from here is probably going to offer a selling opportunity sooner rather than later, just as a breakdown below the bottom of the range for the Tuesday session would have sellers coming back in. I believe that were going to try to get to the 1.21 handle, and then eventually the 1.20 level. I don’t have any scenario in which I am willing to buy the British pound against the US dollar at the moment, even though I think that the British pound can be bought again several other currencies.
The US dollar is without a doubt one of the strongest currencies in the world currently, and I don’t see that changing anytime soon. With the Federal Reserve likely to raise interest rates this coming year, it’s likely that we will continue to see people buying the greenback as a form of protection. We have quite a bit of uncertainty in the United Kingdom because of the exit vote, so at this point it makes sense that we continue to go lower over the longer term.
