An extended period of quiet markets came to an end on Friday with a spurt in volatility, with the US Dollar turning sharply higher across the board after the Fed Chair Janet Yellen's speech at Jackson Hole symposium and comments from various Fed officials fueled speculations of an eventual Fed rate-hike action in the near-term.
After an initial downside reaction, hawkish comments from Fed Vice Chairman Stanley Fischer increased investors’ confidence that the central bank would go ahead and raise interest-rate by the end of this year and triggered a sharp greenback rally, with the GBP/USD pair reversing from a fresh 3-week high to erase over 50% of its weekly gains while the EUR/USD pair tumbled below 1.1200 handle to retest 100-day SMA support.
With UK banks closed on Monday in observance of the Summer Bank Holiday, trading activity is likely to remain light during European session. Later during NA trading session, release of Core PCE Price Index (Fed's preferred inflation gauge), personal income and spending data would provide fresh impetus in the FX market.
Technical outlook
GBP/USD
The pair is reversing from an important confluence resistance near 1.3275-80 region but has managed to hold 1.3100 round figure mark support. A follow through selling pressure below 1.3100 handle is likely to drag it immediately to 1.3040 horizontal support area, which if broken decisively seems to turn the pair vulnerable to head back towards retesting a strong support around 1.2900 region.
Meanwhile on the upside, 1.3190-1.3200 area now seems to act as immediate resistance above which the pair seems to make a fresh attempt to head back towards 1.3275-80 confluence resistance, comprising of a short-term descending trend-line resistance and 50-day SMA. Only a convincing strength above this strong resistance would negate any near-term bearish bias and open room for further recovery in the near-term.
EUR/USD
Currently trading back above 1.1200 handle, the pair is rebounding from 100-day SMA support. The recovery is likely to gain momentum above 1.1220 immediate resistance, nearing 38.2% Fibonacci retracement level of 1.0952-1.1366 recent up-move, above which the pair seems to head back towards 23.6% Fibonacci retracement level resistance near 1.1265-70 region. A decisive strength above 1.1265-70 resistance would negate any near-term bearish expectations and help the pair to move back above 1.1300 handle and aim to surpass recent high resistance near 1.1350 area, towards reclaiming 1.1400 round figure mark.
Conversely, sustained weakness below 100-day SMA support near 1.1180 is likely to drag the pair immediately to 50% Fibonacci retracement level support near 1.1155-50 region before dropping to test a strong confluence support near 1.1110-1.1100 round figure mark, comprising of 61.8% Fibonacci retracement level and the very important 200-day SMA.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
AUD/USD: Gains appear capped near 0.6580
AUD/USD made a sharp U-turn on Tuesday, reversing six consecutive sessions of gains and tumbling to multi-day lows near 0.6480 on the back of the robust bounce in the Greenback.
EUR/USD tumbles out of recent range, tests below 1.0770 as markets flee into safe havens
EUR/USD slid below the 1.0670 level on Tuesday after an unexpected uptick in US wages growth reignited fears of sticky inflation, chopping down rate cut expectations and sending investors into safe haven bids.
Gold pullbacks on rising US yields, buoyant US Dollar as inflation heats up
Gold prices drop below the $2,300 threshold on Tuesday as data from the United States show that employment costs are rising, thus putting upward pressure on inflation. XAU/USD trades at $2,296 amid rising US Treasury bond yields and a stronger US Dollar.
Ethereum slumps again as long liquidations exceed those of Bitcoin
Ethereum experienced a further decline on Tuesday following a disappointing first-day trading volume for Hong Kong's spot Bitcoin and ETH ETFs. This comes off the back of increased long liquidations and mixed whale activity surrounding the top altcoin.
No tap dancing around inflation concerns
Tuesday saw U.S. stocks closing considerably lower as investors grappled with economic indicators indicating increasing labour costs and a decline in consumer confidence, all coming ahead of a crucial Fed policy meeting aimed at determining the trajectory of interest rates.