Dear Traders,
Many analysts, including myself are expecting a temporary USD strength to return in the coming weeks. My previous analyses were mainly highlighting these USD strength scenarios. But today’s post will explore a much more gloomy scenario for the dollar, which could yet appear over the coming trading days.
The EURUSD and GBPUSD have been in sturdy bullish trend channels (see pictures). They are both dancing around price levels where a bearish reaction MUST happen very soon if the bearish scenario for these currency pairs are to remain valid (i.e. EURUSD bearish scenario = forming a diagonal as wave A of 2 and GBPUSD scenario = about to start a wave 3 of a new bearish trend).
The wave patterns are very difficult to read within these channels, with both bearish and bullish options possible (numbers shown in pictures are very rough labels for bullish scenario). The fact is that until price manages to break out of these channels to the downside, a very strong bullish continuation is still possible. So what are the scenarios in this case?
GBPUSD
EURUSD
Although there are good arguments for why such immediate dollar weakness may be unlikely, the truth is that the Greenback must begin to show significant strength now in order to avoid getting crushed for the foreseeable future. The longer-term picture does not look good for the dollar in any case, with numerous USD pairs showing significant weakness potential. The question is simply how quickly and how severely its fate will decent upon it.
All the best along your trading journey
Hubert
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