Forex Video Briefing (7/29) – EUR/USD, GBP/USD, USD/JPY Ahead of the FOMC Decision
The EUR/USD is falling toward 1.34. There is no reason to believe it will reverse yet, but the RSI readings in the 1H , 4H, and daily charts are all in oversold territory. There is still downside risk toward the 1.3295-1.33 Nov. 2013-low, but we can expect some intra-session consolidation around 1.34 given the oversold technical signs, especially as traders don’t want to get caught too close in front of tomorrow’s fundamental risks. If at the end of the day, the FOMC is hawkish, and indeed hints at a rate hike before mid-2015, or even just accelerates tapering, we might see EUR/USD continue lower without a hitch and should keep price below this week’s high at 1.3445 as it attempts to push to 1.33. Otherwise, if the FOMC is neutral, and does not speed up tapering, we can expect some consolidation, with upside risk in the short-term toward the 1.35 area.
GBP/USD continues to fall today, and is now inching towards the rising trendlines in 2014, and a rising trendline from Nov. 2013. All these trendlines are just above the 1.69 handle. This is the key support area to monitor for after tomorrow’s US fundamental risks. A break below 1.69 opens up the 1.67 support pivot area. However, we should first respect the 200-day SMA which is around 1.6850, especially if the RSI dips below 30. However, we can then expect sellers on a rally, with resistance at 1.70, this week’s high so far. If the market instead holds north of 1.69 after tomorrow, let’s see how it acts after Friday’s NFP report. If it still holds above 1.69, we can expect some consolidation in the short-term toward 1.71. Above 1.71, we will have to consider the bullish continuation scenario, especially since the previaling trend would be intact. But if price holds below 1.71, we are in consolidation, and can expect price to challenge 1.69 again.
The USD/JPY is breaking above 102 and a falling trendline since June. It is now essentially testing the 2014 descending triangle. Will traders remain bullish after tomorrow’s data points and FOMC decision? A break above 102.50 would open up the bullish outlook, first towards common resistance around 103, then the 104-104.13 April highs. If price fails to push above the triangle tomorrow, we will have one more chance on Frirday’s NFP. But if this key week of US fundamentals fails to push USD/JPY above the triangle, the focus could return toward the 101.10 lows, then the 100.75 2014-low.