The key trigger point was the softer-than-expected US CPI data yesterday and the dollar is now holding lower once again today. The euro and pound are decent gainers so far, but it is more of the case that both currencies are looking to solidify a further technical break higher against the dollar from yesterday.
Let's dive straight into the charts.
In the case of EUR/USD, the pair managed to secure a daily break above the key trendline resistance (white line) from the downside swing from January last year. That key level is seen around 1.0598 and a weekly break above that as well as the 38.2 Fib retracement level at 1.0610 will be a massive win for buyers, allowing for scope to push towards 1.0800 next.
As for GBP/USD, the pair managed to breach resistance from its August highs at 1.2276-93 and is now running to fresh highs since June. A push towards 1.2500 looks to be on the cards but of course, the Fed will have the biggest say in terms of what comes next for the pair for the remainder of the week.
The 50.0 Fib retracement level of the downswing from last year is also at risk of being breached, seen at roughly 1.2306 (this may vary depending on what the low price is for the September drop). That will just add to more momentum for buyers in chasing a further move higher if the central bank stars line up via the Fed and BOE in the sessions ahead.
As much as the dollar is looking to count on the Fed for assistance later today, the technical predicament that it is in currently is already making it tough for dollar bulls to really turn things around. With such vulnerabilities being exposed, it won't take much to trigger another round of selling in the greenback as we look towards the FOMC meeting.
