The USD has been resilient since last week. The GBP is finding strength as well after the BoE meeting minutes leaned had a hawkish tone in terms of inflation. Subsequently, the EUR/USD and EUR/GBP are both showing bearish continuation price action towards key support levels.
In the 1H EUR/USD chart, we can see that price respected a short-term falling trendline as resistance. Then a strong bearish candle started the 5/20 US session signaling bearish continuation. But let’s hold off the horses for now because there are some key support factors just ahead.
The 4H chart shows that price is testing a previous support pivot at 1.1065. Just below down, down to the 1.10 we can see a rising trendline and the 200-period SMA. Therefore, we should limit the bearish outlook signaled in the 1H chart to the 1.10 handle for now. A break below that might open up further downside risk, with the 1.0520 support area in sight. Otherwise, we should anticipate a pullback to test the 1.13 handle. A break back above 1.13 would signal bullish continuation and bring last week’s high at 1.1466 in play.
The EUR/GBP also started the 5/20 US session with bearish continuation price action. It looks like there is a descending wedge forming, and a break above 0.7180 might neutralize the bearish outlook, but only a break above the 0.7230 area should open up a bullish outlook. Now to the downside, we have a couple of key support factors ahead.
Looking at the daily chart, we can see that the prevailing trend is bearish, and that after a consolidation since March, the bearish bias still remains. The immediate support is around 0.71-0.7105. Below 0.71, the 0.7014 low on the year comes into play. The EUR/USD seems to have bullish tilt, while the EUR/GBP seems to have a bearish one. While we should limit the bearish outlook in EUR/USD, we should anticipate the 0.7014 low on the year to break if price does indeed threatens this support.
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