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Riding the Rollercoaster: Exciting Price Action on EUR/USD, GBP/USD, and AUD/USD Amidst Plummeting US Dollar

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US DOLLAR FORECAST – EUR/USD, GBP/USD, AUD/USD

  • The U.S. dollar extends losses, sinking to its weakest point since early August
  • Meanwhile, EUR/USD, GBP/USD and AUD/USD break out to the topside, clearing key price levels in the process
  • This article focuses on the technical outlook for top forex pairs

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Most Read: US Dollar Outlook – PCE, Powell to Set Market Tone, Setups on EUR/USD, USD/JPY

The U.S. dollar, as measured by the DXY index, retreated for a fourth straight trading session on Tuesday, settling below the 103.00 threshold and hitting its lowest level since early August, pressured by a pullback in U.S. Treasury yields.

In recent days, U.S. interest rate expectations have shifted in a more dovish direction on bets that the FOMC has finished hiking borrowing costs and will move to ease its stance next year. This sentiment gained momentum today after Federal Reserve Governor Christopher Waller, typically a hawkish voice, stated that he is “increasingly confident” that monetary policy is in the right place and that, if inflation continues to slow, rate cuts could be considered.

Against this backdrop, the euro, British pound, and Australian dollar posted solid gains against the greenback, with their exchange rates breaching key levels in the process. In this article, we analyze the technical outlook for EUR/USD, GBP/USD, and AUD/USD, taking into account market sentiment, price action dynamics and chart formations.

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EUR/USD TECHNICAL ANALYSIS

EUR/USD extended its advance on Tuesday, clearing Fibonacci resistance at 1.0960 and rising to its best mark in more than three months. If the pair holds onto recent gains and establishes a support base near 1.0960, there’s a possibility of an upward push towards 1.1080 following a period of consolidation. Should bullish momentum persist, attention could turn to the 2023 highs near 1.1275.

In case of a downward shift from current levels, it is imperative to closely monitor price action around 1.0960, bearing in mind that a breach of this technical zone could send the exchange rate towards 1.0840. On further weakness, we could witness a retreat towards the 200-day simple moving average, located slightly above confluence support near 1.0760.

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EUR/USD TECHNICAL CHART

EUR/USD Chart Created Using TradingView

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of clients are net long.




of clients are net short.

Change in Longs Shorts OI
Daily -15% 6% -4%
Weekly -22% 17% -3%

GBP/USD TECHNICAL ANALYSIS

GBP/USD has been on a bullish tear in November, rising nearly 4.5% since the beginning of the month. After Tuesday’s gains, the pair has reached its best level since late August, but has been unable to reclaim the 61.8% Fibonacci retracement of the July/October slump (1.2720). If this ceiling holds, the upside momentum could run out of steam, paving the way for a drop towards 1.2590, followed by 1.2460.

In the event of a clear break above 1.2720, sentiment on sterling is likely to improve, unleashing animal spirits that could propel a potential upward move towards 1.2850. On further strength, buying interest could accelerate, opening the door to a climb toward the 1.3000 handle. Although the bullish case for GBP/USD is strong, it is important to exercise caution as the pair is about to enter overbought territory.

GBP/USD TECHNICAL CHART

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GBP/USD Chart Created Using TradingView

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AUD/USD TECHNICAL ANALYSIS

AUD/USD jumped on Tuesday, breaching a key technical ceiling in the 0.6600-06620 band and reaching its strongest level in nearly four months. The bulls have been burned on several occasions by fakeouts in the pair, so caution is warranted after the latest rally, but if this week’s breakout holds, attention might pivot toward trendline resistance at 0.6675. Higher, the focus will be on 0.6800.

Conversely, if profit-taking among bullish traders leads to a price reversal, support appears in the 0.6620/0.6600 area. If this floor caves in, we could see a retracement towards the 200-day simple moving average, potentially followed by a retest of the 0.6525 region. Vigorous defense of this support zone is crucial for the bulls, as a breakdown could trigger a pullback towards 0.6460.

AUD/USD TECHNICAL CHART

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AUD/USD Chart Created Using TradingView

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Riding the Rollercoaster: Exciting Price Action on EUR/USD, GBP/USD, and AUD/USD Amidst Plummeting US Dollar

The foreign exchange market has been buzzing with activity as major currency pairs, including EUR/USD, GBP/USD, and AUD/USD, continue to experience exciting and volatile price action. At the center of it all is the weakening US dollar, which has been plummeting against its major counterparts due to a variety of factors. Whether you’re a seasoned trader or just someone interested in the world of forex, understanding and keeping up with the recent price movements in these currency pairs could prove to be a valuable skill. In this article, we will delve into the current state of the foreign exchange market, focusing on the EUR/USD, GBP/USD, and AUD/USD pairs, and provide valuable insights and tips for anyone looking to ride the rollercoaster of price action amidst the plummeting US dollar.

Understanding the Plummeting US Dollar

Before we dive into the price action of the aforementioned currency pairs, let’s first understand the factors behind the plummeting US dollar. In recent months, the US dollar has been on a downward trend against its major counterparts, with the US Dollar Index (DXY) hitting its lowest level in over two years. There are several reasons behind this, and one of the main ones is the ongoing COVID-19 pandemic. As the infection rate in the United States continues to rise, there are growing concerns about the country’s economic recovery, impacting the dollar’s value.

Furthermore, the US Federal Reserve’s (Fed) aggressive stance on monetary policy has also contributed to the weakening of the dollar. The Fed has pledged to keep interest rates near zero until 2023, while also pursuing a massive quantitative easing program. This has led to an oversupply of US dollars in the market, further devaluing the currency.

Price Action on EUR/USD

The EUR/USD pair has been on a bullish trend since March 2020, and it has only gotten stronger as the US dollar weakens. In August, the pair reached its highest level since May 2018, breaking the key resistance level of 1.2000. This level had previously acted as a strong support before turning into a resistance level due to the sharp rise in price.

The recent price action on EUR/USD has been driven by various factors, including the European Union’s stimulus package and an overall sentiment towards a potential economic recovery in the region. Additionally, the upcoming US presidential election has also influenced the currency pair, as markets anticipate a potential change in leadership and economic policies.

Price Action on GBP/USD

The GBP/USD pair has also seen strong momentum in recent months, with the British pound reaching its highest level against the US dollar since May 2018. The pair broke through the key resistance level of 1.3500 in September, propelled by a weaker dollar and positive Brexit developments. Despite the uncertainties surrounding the ongoing Brexit negotiations, markets have shown confidence in the British pound, resulting in a bullish trend.

The rise in price on the GBP/USD pair could also be attributed to the recent Bank of England (BOE) meeting, where policymakers voted unanimously to keep interest rates unchanged. This decision was accompanied by comments from the BOE Governor, who stated that negative interest rates are “potentially” on the table. This has created speculation and uncertainty in the currency market, leading to volatility and a potential further rise in price for GBP/USD.

Price Action on AUD/USD

The Aussie dollar has been another currency that has been enjoying the weakening US dollar. The AUD/USD pair has been on an upward trend since March 2020 and has reached its highest level since February 2019. The pair has broken through key resistance levels, including 0.7200 and 0.7300, and is currently trading near 0.7500.

The Australian dollar has been bolstered by the country’s handling of the COVID-19 pandemic, with relatively fewer cases and a faster economic recovery compared to many other developed countries. Additionally, the ongoing tensions between the US and China, Australia’s largest trading partner, have also supported the Australian dollar’s rise against the US dollar.

Tips for Trading in Volatile Markets

Riding the rollercoaster of price action amidst the plummeting US dollar could be a highly profitable trading opportunity, but it’s important to understand and manage the risks involved. Here are some tips to help you navigate the market’s volatility:

1. Stay up to date with market news and developments: As we have seen, news and events can greatly impact the price action of currency pairs. Keeping up with the latest developments and their potential impact on the market can give you an edge in your trading decisions.

2. Use technical analysis: Technical analysis, such as chart patterns and indicators, can be an effective tool in identifying potential entry and exit points in the market. However, always remember to combine it with fundamental analysis to get a well-rounded view of the market.

3. Manage your risk: Volatility in the market can lead to significant gains but also to significant losses. It’s essential to have a risk management strategy in place to protect your capital and minimize potential losses.

Conclusion

To sum it up, the recent price action on EUR/USD, GBP/USD, and AUD/USD has been driven by various factors, with the plummeting US dollar being the common denominator. As the currency market continues to be volatile, it’s important to stay informed and be adaptable with your trading strategies. Following the tips mentioned above can increase your chances of success in these exciting times in the foreign exchange market. Happy trading!

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