US Dollar Coils for Next Leg - Setups in EUR/USD, GBP/USD, USD/CHF
- EURUSD remains bearish sub-1.3475.
- GBPUSD could spill into 1.6700, USDCHF flags for 0.9160/89.
- August forex seasonality in QE era supports a stronger US Dollar.
Although FX market volume and volatility are still mostly uncomfortably low for breakout and momentum traders, the recent flurry in activity during the first week of August may be an early sign that the relatively dormant period is ending.
Today might not be the day for sustained heavy trading, as a lack of developments along any of the major conflict points in the world right now has paralyzed market participants with anticipation. A similarly devoid economic calendar out of the United States for the first two days of the week also looks to weigh on volatility still.
Regardless, last week's activity certainly set the stage for bigger moves over the coming days and weeks. In USD-pairs in particular, the US Dollar remains strong despite overbought readings versus most of the other majors in the short-term.
Now that the USDOLLAR Index is nudging through a historically important pivot zone, there is still good reason for keeping short EURUSD, GBPUSD and long USDCHF opportunities on the table. See the video above for a technical outlook on these currency pairs.
--- Written by Christopher Vecchio, Currency Strategist
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