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Dollar begins to rebound following last week’s decline

May 8, 2024

Key points

  • EUR/USD Stability: After testing the 1.0800 and 200-day moving average, the EUR/USD pair eyes potential declines, marking its first consecutive daily drops since mid-April.
  • GBP/USD Adjustments: The GBP/USD faces downward pressure, slipping below critical moving averages, with potential sights set on the 1.2300 level if minor supports fail.

The dollar displayed initial uncertainty at the outset of the week. However, recent sessions have seen a revival in its strength, spurred by key technical observations. After approaching crucial technical levels last Friday, the dollar avoided a breakdown, aiding its recovery early this week amid a fluctuating market sentiment.

Picture: EUR/USD price movement as seen on VT Markets trading app.

EUR/USD at a crossroad

In the EUR/USD market, Friday’s test of 1.0800 and the 200-day moving average proved to be a critical juncture. With these levels holding firm, the pair now faces the possibility of recording back-to-back daily declines for the first time since mid-April. This could indicate a cautious approach by traders as they anticipate further cues.

AUD/USD faces resistance

As the Reserve Bank of Australia (RBA) held back on new directives, the currency struggled against established resistance levels between 0.6634 and 0.6650. This resistance has started to tip the balance back in favor of the sellers, hinting at a short-term repositioning in the market.

GBP/USD Struggles below key resistance levels

Picture: The downside prevails for GBP/USD. Download the VT Markets trading app.

Turning to the GBP/USD, the pair has decreased by 0.3% and is currently near 1.2470. After a brief rise earlier in the week, resistance at the 50.0 Fibonacci retracement level at 1.2596 has proved formidable, with subsequent declines now taking the pair below both the 100 and 200-hour moving averages. This shift suggests sellers are regaining dominance, especially with the price now below the 1.2500 mark. 

The forthcoming U.S. economic reports, including Producer Price Index (PPI) data on Tuesday, followed by Consumer Price Index (CPI) and retail sales figures on Wednesday, will be pivotal. These releases will either confirm or question the validity of the trends observed this week, providing a clearer direction for market movements.

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