In short, the outlook for USD-crosses at the end of the year is further USD-strength from a technical and fundamental perspective. The FOMC is poised to raise rates before the middle of 2015, while the BoE has been delaying its rate hike, the ECB is still at the cusp of implementing QE, and the BoJ is no where near the end of its stimulus campaign. Let’s take a look at the charts for the technical perspectives.
The EUR/USD is wrapping up the year with a new low and is poised to capture 1.21 before the year is over.
Price action, moving averages and the RSI readings reflect a persistent downtrend, so we should expect the market to sell on a rally. At this point, a pullback should be faded between 1.2280 and 1.24, roughly the levels of support in November and December.
At this point, only a break back above 1.26 should constitute a reversal, though a break above 1.24 should introduce early signs of consolidation/bullish correction with upside towards 1.26, but limited below it.
Looking at GBP/USD’s daily chart, we can see a similar development in the medium-term since July to that of EUR/USD. However, in the short-term GBP/USD seems to be supported roughly above 1.55, but it is struggling to capture 1.56. So, despite some resilience, GBP/USD’s outlook remains bearish.
If GBP/USD hold above 1.56, we might have some consolidation, or correction. But only a break above 1.58 should open up a bullish correction/reversal scenario. Otherwise, we should expect continuing decline in GBP/USD.
The USD/JPY daily chart also shows that the USD has been strong since July. The pair has been making fresh highs on the year until stalling at 121.70, after which there was a sharp correction to 115.56.
Even though this was a sharp correction, the bullish bias is maintained as price remained above the 50-, 100-, and 200-day SMAs. The daily RSI has also been holding above 40, showing persistent bullish momentum.
The medium-term and even long-term outlook for USD/JPY is bullish, but early in January, we might see some more consolidation in the short-term. IF we do get another bearish correction leg, look for support around 114, especially if the daily RSI approaches 40 and stalls.
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