US Dollar Forecast
by Christopher Lewis
The next week should be pretty big for the US dollar, as we see the Greenback testing serious levels in a couple of major markets. Both the GBP/USD pair and the EUR/USD pair are currently making decisions that could impact the markets for the next several weeks. I think that the US Dollar Index is also trying to tell us something as well. Because of this, it should be an important week for the markets.
The first market I am looking at, the GBP/USD pair, closed just below the 1.55 level on Friday. This is an area that was once resistive, and now should be supportive. I see this support going all the way down to the 1.54 level, as it is more of a “zone” in my opinion. Over the course of the next couple of sessions we will have to make a move. Will we break below the 1.54 level and start selling off, or will we break above the 1.55 level in order to start going higher and towards the 1.58 level again?
Looking over at the EUR/USD pair, I think that the 1.10 level will continue to be important. This is basically where we stopped trading on Friday, and this of course is an area that will attract a lot of attention as we broke out from there a while back. This should now be supportive at this point in time, but closing at the bottom of the candle make me think that the market could very well sell off a bit more. If it does – this is the sign I need to start selling this pair, as it should continue to the 1.06 level given enough time. The market could also form a supportive candle, and a bounce would have me looking to aim for the 1.14 level.
Looking at the US Dollar Index, we broke above the 96 handle on Friday, which I believe is a very good sign. However, the 97 level is the start of a significant amount of noise above, and I think that the market will try to reach for 100 – only if we get above the 97 level. In the mean time, I think it is a “wait and see” type of situation.
Because of these three charts, I think the Forex markets are looking to answer some longer-term questions. However, I think that Monday being Memorial Day in the US will make it a difficult decision to read or understand until Tuesday. Nonetheless, I think that we are going to be able to determine the next 500 pips or so in both the EUR/USD and GBP/USD pairs in the next couple of daily candles.