Forex: Price Movement of the US Dollar Before the CPI: EUR/USD, GBP/USD

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The US dollar made further bearish entry Wednesday, falling below a support level that had been in view as the expected target of a double top pattern two weeks earlier.

Just below the USD price action are a number of support levels, including a trendline, a Fibonacci retracement, and a number of previous swing highs.

The next significant moving point for the USD price is the CPI data for October, which will be released tomorrow.

After a support bounce failed, the bullish trend in the USD suffered yet another setback yesterday. The currency was driven lower by sellers to make a new monthly bottom, but support quickly appeared around the same level that had been in play a few weeks before and served as a target for a double top pattern at 109.62. There are a number of levels close below that flip as well, which may allow for a support recover before the release of the CPI data tomorrow.

From our perspective point, the major question is whether a stronger recovery can be seen in the Euro. Over the past nine months, the euro has been battered and bruised, but as of my initial inspection in October, the pain was beginning to subside and a deeper downturn was beginning. And that’s beginning to show; even while EUR/USD bulls have still not been able to accomplish a meaningful run beyond parity, there has been a building support argument, and if EUR/USD can prompt another bullish breakthrough, the door may be open for more.

The drivers in the equation are primarily to blame for how shaky everything now is. The most current FOMC rate move was only a week ago, yet the currency markets have completely forgotten about that reaction as the USD has erased all of those Pumped gains and more. Even though Chair Powell made a very hawkish statement at the press conference, this nevertheless occurred.

It makes sense to consider if the fundamentals in that pair have exerted a greater influence on the near-term USD price movement than another round of underlying hawkishness from the FOMC given that the USD (through DXY) is 57.6% Euro.

The USD is currently trying again above psychological level 110.00 after finding support near 109.62. There is currently little evidence of a potential trend shift off of the four-hour price chart., but that might alter if price can go back over yesterday’s swing top at 110.61.

DAILY USD

We can see some potential support levels right below yesterday’s low on the daily chart. There is a bullish trendline extrapolation that joins the swinging lows from late-March and August, as well as a Fibonacci retracement from a protracted setup that charts at 109.14. Additionally, it lines up with another trendline forecast, which might form a descending wedge formation.

This collapsing wedge, which resembles a bull flag pattern, emphasizes stabilization seen in the DXY since the GBP’s trend toward breakdown in late September.

Sellers have the potential to invalidate the pattern if they can break through that group of support points. But the structure might still be in place for tomorrow’s US CPI news if bulls can compel a greater topside advance.

EUR/USD

It can be challenging for traders from other markets to fully grasp how crucial the Euro is to the movement of the DXY price. Because full-scale globalization had not yet begun when the DXY index was developed in 1973, the index is mostly focused on western economies. Since it was founded prior to the creation of the Euro, a large portion of this appropriation was drawn from European currencies such as the Deutsche Mark or the Peseta Franc.

And when the Euro really materialized, the allocations were simply put together and redistributed to a single 57.6% block of Euros. The only exposure to Asian currencies in the index is a meagre 11.9% allocation to Japan; there is almost no allocation to China.

Given that the second-largest economy in the world isn’t at all represented, it is therefore a dated and poor indicator of USD value in the market.

The fact that DXY is significantly overexposed to the Euro helps to explain this year’s pronounced positive trend in the DXY, since the Euro was fiercely sold off due to a number of issues, the most important of which was the conflict erupting on their Eastern border. That began in February, at which point the EUR/USD trend completely changed course.

We’re not looking at a meme stock or a cryptocurrency here. Since these are the two most important currencies in the world, balance is a desirable quality. Such trends cause economic instability on both sides of the divide. Inflation figures in the upcoming months will undoubtedly reflect the Euro’s recent deterioration. Because imports are more expensive when the euro is weak, prices will rise as a result. A high US dollar will make purchasing exports much more difficult in the US, which will eventually hurt American corporations.

In EUR/USD, it appeared as though the savagery was pausing. Valuation had been rising in a string of elevated when last week’s psychological support test at.9750 came into play soon after the FOMC and sparked a lobbed run back over the parity handle.

Given the close closeness to where it printed, the string of higher-lows has now developed into a channel, which creates a bear flag pattern.

Last month, when we first began to consider the EUR/USD comeback scenario, I expected prices to rise beyond parity before running into resistance at a previous swing low near 1.0095. The retreat move down to.9750 began at that level, which ultimately served as the high for the month of October’s trading.

The stakes are slightly raised by a speedy recovery to that price, where another resistance pivot is located. We have a v-shaped inversion that should be observed first and foremost. It’s possible that bullish action will continue, and bears may not react kindly to the following test of 1.0095. even .9900. All of which would continue to support further lows above the previous swing bottom of.9750.

However, if sellers are successful in triggering a breach of.9750 before a new high, we will have the fill of a double top configuration, with an estimated objective of.9400 based on the approximately 350 pip distance between the top and neckline. This would be a violent shift since it would not only reach a new low but would also obliterate a number of pillars of support on the way there. But once more, this possibility only comes into play if the support from the previous week is actually violated.

TRENDLINE REACTION IN VIEW: GBP/USD

We’ve been researching GBP a lot lately. The rubber band was aggressively pulled back on GBP/USD and GBP/JPY developments last Thursday as a result of the Bank of England rate announcement, which came the morning after the Fed and delivered a fresh injection of anxiety. But as I noted that morning, there was a chance that support would emerge, and that is exactly what did so later in the session, setting up a Friday that was very robust.

Price has approached a critical trendline extrapolation and encountered resistance there. After yesterday’s spinning top, this is setting up a potential evening star on the daily chart. As the late-week rebound from last night is more priced-out, price is now back below the psychologically significant 1.1500 barrier, which from the daily chart provides the look of negative continuation potential.

GBP/USD Relatively short Term

This area of previous support now has lower-high resistance potential on a shorter time scale, and it charts between 1.1500 and 1.1550. For bears, the 1.1350 level is still crucial, and a violation underneath it allows for a move lower towards the lows of last week, which were around 1.1150.

Daily Moving Averages

Pivot Points EUR/USD