Beware The Dollar Can Reverse Course Fast

GBPUSD and EURUSD have been going up in the past week. GBPUSD and EURUSD both gained almost 1000 pips in the last 10 days. Why? Because the dollar is getting clobbered in the market.

Dollar bulls are not ready to throw in the towel and are still betting diverging central bank policy sends the euro to parity with the U.S. currency later this year.

Weak technicals for the greenback are making some investors squirm, as the euro charges ahead and looks set to score more gains. That is the battleground for the dollar, which was higher against the pound, the yen and emerging market currencies Thursday.

“We still have our forecast in euro/dollar ending the year at parity, and we remain comfortable with that, mainly because we see the slowdown we had in the last couple of months as transitory,” said Ian Gordon, senior foreign exchange strategist at Bank of America Merrill Lynch.

GBPUSD fell around 200 pips yesterday. EURUSD is still going up. Both GBPUSD and EURUSD stochastic is overbought on the daily chart. Both will come down hard soon. Keep this in mind. A strong GBP and a strong EUR is also not what the Bank of England and the European Central Bank wants. Weak GBP and EUR is what is good for the exports. Both Bank of England and the European Central Bank will intervene soon as both GBP and EUR become too strong for their economies.

But as currency traders it doesn’t matter to us whether GBPUSD and EURUSD go up or down. We just need to be in the right direction. Too much fundamental analysis is not good. What we need is more focus on the technicals.

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