George Davis, Chief FIC Technical Analyst at RBC Capital Markets, says the outlook for the US dollar is mixed, with bottoming patterns favouring some additional strength against EUR, JPY and CHF, whilst other price action suggests increasing weakness against AUD, CAD and GBP.
Looking at EURUSD, Davis notices that a couple of double top patterns (at 1.2446 and at 1.2537) are limiting its upwards momentum and that a distribution phase appears to be playing out (see Chart 1). He says a daily close below trendline support at 1.2230 would trigger a bearish reversal that would expose 1.2155/61 and then 1.2046. Davis’ one- to three-month target for EURUSD is 1.2100.
Davis is still bullish on GBPUSD however. He thinks a daily close above 1.4226 would reassert the uptrend and expose the high at 1.4325 and then the channel top at 1.4525 (see Chart 2). Support can be found at 1.3765 and at 1.3619.