Taking a look at European currencies on Monday, August 25th.
GBP/USD
The British pound has been very quiet in early trading, and I find that a bit interesting considering just how much strength it had shown on Friday. After all, the Federal Reserve looks set to cut rates, and typically that is going to be a reason for people to short the US dollar. However, the fact that there’s no follow-through tells me that maybe traders are starting to worry about the global economy, which is actually good for the US dollar. So at this point, what does that bring the British pound against the US dollar? I think we probably see a bit of sideways action. Now, I do have an area that I’m willing to watch, and that’s 1.36. If we can clear that area, then I think you’ve got a real shot at this market breaking out to the other side, perhaps the 1.38 level. But the lack of follow-through on Monday tells me, “We may be going sideways for a while.” That does make a certain amount of sense, considering the time of year is typically pretty quiet as well.
EUR/USD
The Euro is slightly negative against the US dollar, but nothing to be overly concerned about. What it does tell me, though, again, is there’s no follow-through. We aren’t ready to burn the US dollar at this point, and if that’s going to be the case, I think you’ve got a situation where the Euro ends up being very sideways. The 50-day EMA is at the 1.16 level, and that could offer a bit of support, just as the 1.18 level above offers resistance. It’s very possible that at this point, we could be going back and forth in a roughly 200-pip range. I’m not expecting huge moves out of this pair, at least not in the short term.
USD/CHF
Over here in the US dollar against the Swiss Franc pair, there’s a little bit of positivity, but not enough to change much. It typically runs inverse of the Euro against the US dollar, so that’s not a huge surprise. It seems as if the 0.9280 level is a bit of a magnet for price, and we are sitting just above it. So I think we’re pretty close to fair value. I would anticipate a lot of short-term back and forth scalping opportunities in this pair, and it might actually be where I spend most of my time. If we do see a run back to the US dollar in perhaps a little bit of a scare—because if the Fed is cutting rates, that means the economy could be slowing down—then people a lot of times run to the dollar. But it will be different here against the Swiss Franc. Even if it were to rise, it would rise slower than the Euro or the pound would fall in that scenario. So again, I think this one out of the three, which is typically the case, is going to be the slowest mover. But I think it does open up the possibility of 15 to 20 pip scalping here and there for those who are a little bit more active.