US Dollar Talking Points:
- It’s been a big week for global markets with a number of drivers producing visible moves across a variety of asset classes.
- From yesterday, the big movers appeared to be the early-morning Tweet from President Trump regarding a US-China trade deal along with the UK General Election, which helped to produce an aggressive breakout in the British Pound.
US Dollar Falls to Five-Month-Lows as EUR/USD, GBP/USD Break Out
We’re nearing the end of what’s been an eventful week. And while rate decisions out of the FOMC and the ECB produced little by way of action, the UK General Election yesterday brought the volatility across the currency market while stocks continued to ramp-higher on the expectation for the Federal Reserve to remain loose and passive heading into 2020, going along with some optimism on the US-China trade-front.
Probably the most visible volatility took place in the British Pound as GBP/USD broke out to fresh 18-month highs, temporarily testing above the psychological 1.3500 level before pulling back. In the US Dollar, this pushed the currency down to fresh five-month-lows, continuing the Q4 reversal scenario that’s played out in the US currency, which was looked at in the Q4 Technical Forecast for the USD.
US Dollar Daily Price Chart
Chart prepared by James Stanley; US Dollar on Tradingview
GBP/USD: 450+ Pip Rocket After UK Elections
Yesterday brought another General Election to the UK and the response in the British Pound was pronounced. In GBP/USD, an earlier-day dip down to 1.3049 was quickly reversed as price action jumped above the 1.3500 level temporarily. The psychological level held buyers at bay over a couple of different tests last night, and prices have pulled back, giving the appearance of trying to carve-out higher-low support around the 1.3375 area on the chart.
GBP/USD Hourly Price Chart
Chart prepared by James Stanley; GBPUSD on Tradingview
Making matters more interesting around the Pound is the fact that next week’s economic calendar brings a couple of high-impact events out of the UK. Wednesday morning brings UK CPI for the month of November and the day after brings the Bank of England. The latter of those events will be especially interesting given the backdrop produced by the general election results.
DailyFX Economic Calendar: High-Impact UK Events
EUR/USD Tests Key Resistance at Four-Month-Highs
The British Pound wasn’t the only currency on the move yesterday as an early-morning ECB rate decision helped to keep the Euro volatile. But it was perhaps the USD sell-off that was more impactful, as EUR/USD has pushed up to a fresh four-month-high, finding resistance in a very key zone on the chart that runs from 1.1187-1.1212. This was the same zone of prices that had come into play earlier this year, first helping to stall the sell-off and soon becoming resistance. It functioned as support again in June and July before sellers had their way, and in August it showed again as resistance before the pair pushed down to fresh two-year-lows.
But with yesterday’s breakout re-testing this zone, will bulls be able to continue to drive? Christine Lagarde taking over at the ECB does produce a backdrop with a potential for change, but the breakout is still in the very early stages so the next few weeks/months will be key for gauging that next trend in the world’s most popular currency pair.
| Change in | Longs | Shorts | OI |
| Daily | -6% | 5% | -2% |
| Weekly | -2% | 10% | 3% |
EUR/USD Daily Price Chart
Chart prepared by James Stanley; EURUSD on Tradingview
--- Written by James Stanley, Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX
