Dollar Accelerates Losses and EUR/USD Rallies on Expectations of More Rate Hikes.

Regardless of Treasury Secretary Geithner’s confidence, there are still questions and doubts about the U.S. reducing long-term debt and narrowing record-breaking budget deficits.
The reasons for the dollar’s slide continue to be the same and traders who bought into the April 18 rally must remember that as long as the U.S. Dollar Index remains below 76.00, rallies are most likely to simply be bounces that the bears will sell into. The EUR/USD triggered just such an entry as the dollar’s strength pushed the EUR/USD lower into the support of the 34EMA Wave on the daily chart.

The EUR/USD may be exhausting in the near-term as bulls struggled to keep the momentum going through 1.4550. This major psychological level has put in a ceiling after 1.4597 and 1.4599 high revealed just where the bears were willing to step in. Is today’s rally a “too far, too fast” move that could fade? I’m not proposing an all-out trend reversal but a correction would be welcome here if for no other reason than it would set up more swing buy opportunities on the 30 and/or 60-minute time frames.

The GBP/USD is looking tired after a third attempt at the resistance between 1.6425 and 1.6427. The green GRaB candles show the bullish sentiment and momentum on the daily time frame and with the support of the “twelve to two o’clock” 34EMA Wave angle, a pullback could trigger a buying opportunity at 1.6270. In fact, stepping in front of the 1.6300 major psychological level could be an aggressive swing entry long if sellers cannot push the pair below the “00”. Fundamentally, the ceiling on the GBP/USD could prove to be formidable since after the Bank of England’s minutes revealed a weaker-than-expected economy in the U.K., rate hike expectations are being tempered. With inflation in the U.K. appearing to have slowed in the month of March, the rationale for a rate hike is evaporating. Still the overall trend in the pound sterling is up against the dollar so moves lower towards 1.0643 to 1.0606 would trigger swing buys across the 30 and 60-mimute chart respectively.

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April 20th, 2011 in Forex News

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