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EURUSD and GBPUSD downside risks

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  • The past week has produced a destructive breakdown in global equity markets, as growing concerns from the US regarding potential inflationary pressures and a more hawkish FOMC, pushed yields higher across the US Treasury curve.
  • For FX markets, this has translated a flight to quality, with the Yen the main beneficiary, closely followed by the US$ as a safe haven.
  • For EURUSD, the growing threat is to neutralised the intermediate-term bull theme evident from Q4 2017 and accelerating in January, with a shift to a neutral intermediate-term outlook (but with downside risk) seen below 1.2159.
  • For GBPUSD, an equivalent shift from bullish to neutral for the intermediate-term view is likely (again with the threat then still lower), which would require surrender of 1.3730.

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EURUSD Downside threat remains to key 1.2159

A low-level con on Friday, with price action contained below our initial, modest resistance at 1.2295 and prodding just below the 1.2210 setback low, sustaining the deeper sell off from last week through support targets at 1.2340 and 1.2312 and since the Double Top pattern was signalled last Tuesday, to keep the bias to the downside Monday .

The end of 2017 push through 1.1961 saw an intermediate-term bullish shift to set an upside bias for January, BUT risk is growing for a shift back to a neutral theme below 1.2159.

For Today:

  • We see a downside bias for 1.2204; break here aims for 1.2194 and maybe towards key 1.2159, even to 1.2110.
  • But above 1.2295 opens risk up to 1.2345 and maybe 1.2388.

Intermediate-term Outlook – Upside Risks:

  • Whilst above 1.2159, we see a positive tone with the bullish threat up to 1.2600, maybe towards 1.3000.

What Changes This? Below 1.2159 signals a neutral tone, only shifting negative below 1.1914.

Resistance and Support:

1.2295 1.2345 1.2388* 1.2435 1.2475*
1.2204 1.2194 1.2159*** 1.2110 1.2059*

4 Hour EURUSD Chart

EURUSD Chart

GBPUSD Downside threat remains to key 1.3730

Another new correction low on Friday Thursday spike higher after the Bank Of England were seen as more hawkish, but the subsequent intraday setback from 1.4067 highlights ongoing bearish pressures evident from early February, to  keep the bias lower for Monday .

The prior break above 1.3549 shifted the intermediate-term outlook from neutral to bullish, BUT we see risk to challenge 1.3740/30, below which would see the intermediate-term bull view shift to neutral.

For Today:

  • We see a downside bias for 1.3785; break here aims for the key 1.3740/30 support area, maybe 1.3683.
  • But above 1.3908 opens risk up to 1.4006, maybe 1.4067.

Intermediate-term Outlook – Upside Risks:

  • We see a positive tone with the bullish threat back up to target 1.4465 and 1.4600.

What Changes This? Below 1.3730 signals a neutral tone, only shifting negative below 1.3456.

Resistance and Support:

1.3908 1.4006* 1.4067** 1.4151** 1.4228
1.3785 1.3740/30*** 1.3683 1.3664 1.3610

4 Hour GBPUSD Chart

GBPUSD Chart