The Dollar Struggles Near Last Week’s Highs
The US dollar has gained some strength in the early week but the dollar index (DXY) is now facing some resistance. DXY rallied to a high posted during last week’s Fed meeting and has been edging lower since.
The dollar recovery has dominated the major currency pairs in the early week, leading to a fresh three-week low in EUR/USD. GBP/USD, on the other hand, has been holding up a bit better but continues to trend lower from a peak posted on at the start of the month.
Political developments in the United Kingdom have been making headlines although the exchange rate has not reacted much to them. GBP/USD has mostly just consolidated in a sideways range since around the middle of October, after it became clear that Brexit would be delayed once again.
The Bank of England will have a chance to provide some forward guidance following the decision to push back Brexit and to hold an election. Recent BoE meetings have not had much of an impact on the exchange rate, but considering the recent developments, we could see a bit of volatility this week.
GBP/USD is well supported here and I think the most likely scenario is a continued range into Thursday’s BoE meeting.
Support for the pair is seen from the 50 and 100-period moving averages on a 4-hour chart. Beyond the indicators, there is also support from a horizontal level at 1.2846 which I think will hold any sell-off attempts.
To the upside, major resistance falls at 1.2924. Yesterday, the pair made a run at the level but sellers stepped in slightly ahead of it. We might see another attempt to trigger stops from weak hands above yesterday’s high. But, as mentioned, I think a narrow range seems most likely for the session ahead.
- The dollar index has run into some resistance and is paring gains.
- GBP/USD has fallen into a narrow range
- The range is likely to continue as investors await the latest word from the Bank of England. The BoE meeting takes place on Thursday, just ahead of the North American open.
This article was originally posted on FX Empire
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