US Dollar Weakness Allows EUR/USD and GBP/USD to Rally Further

EUR/USD and GBP/USD Forecasts - Prices, Charts, and Analysis

• US Fed speak weighs on the US dollar.
• EUR/USD and GBP/USD rallies may have further to go.

See our latest US Dollar Q4 forecast for the weeks ahead.

The US dollar is currently printing a 5th red candle in a row despite the greenback benefitting from flight-to-safety flows. The multi-week bullish trend is being tested despite the ongoing crisis in the Middle East.

The latest CME FedWatch data show the probabilities of an additional US rate hike diminishing, just a week or so after showing a near 50/50 chance of a further rate hike this year. Recent Fed commentary has had a more dovish feel with the recent rise in longer-term US Treasury yields a contributing factor. Fed official Philip Jefferson this week said that the central bank would need to proceed carefully when considering any further rate hikes. Further, Dallas Fed President Lorie Logan noted in a speech on Monday that if long-term interest rates remain elevated because of higher-term premiums, ‘there may be less need to raise the fed funds rate’. There are four Fed officials scheduled to speak today and their comments will need to be closely monitored.

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The dollar index is currently pressing against the 20-day simple moving average and is attempting to break below the September 29th spike low at 105.67. A confirmed break would leave 105.48 and 105.35 as the next levels of support.

US Dollar Index Daily Price Chart – October 10, 2023

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Against this background of a weaker greenback, EUR/USD has pushed off the recent multi-month low at 1.0448 and now trades back around 1.0600. The Euro as a currency remains weak and all of the EUR/USD move higher is being driven by a weak US dollar. The next level of resistance for the pair is at 1.0635. While the chart still looks negative, the recent move higher may have further to go, especially if the pair can break and open above the 20-day sma.

EUR/USD Daily Price Chart – October 10, 2023

The GBP/USD chart is a near identical pattern to the above EUR/USD chart with five green candles in a row and a current test of the 20-day sma. The next level of resistance is close at 1.2303 before 1.2447 comes into play.

GBP/USD Daily Price Chart – October 10, 2023

See How Changes in Daily and Weekly Positioning Affect GBP/USD Sentiment

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What is your view on the US Dollar – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.