The US Dollar took a hit yesterday; especially against the Euro and the GBP.  Commodity currencies also took advantage of this Dollar weakness as market sentiment improved. The JPY doesn’t like it when sentiment improves in financial markets. This caused the USD/JPY to climb more than 100 pips from the opening levels on Monday.

But this morning, the USD is trying to put up a fight. EUR/USD is down 50 pips which it lost in an hour. We are following this forex pair closely because as we mentioned in the previous forex update, we are looking to open another sell forex signal here.

Although, the GBP has been hit the hardest during the last couple of hours. I can’t find any fundamental reason as to why GBP/USD has lost 120 pips in the last two hours. It’s not a technical move either because the resistance comes at 1.4370s, and the high so far today was 1.4240s.

The sellers have pushed below the 20 SMA

But, we can use technical analysis to see how far this pair might fall. As you can see from the H4 GBP/USD chart above, the 20 SMA (grey) has been broken and it is now acting as resistance around 1.4150s.

The next target is the 50 SMA (yellow) which has acted as support and resistance previously. It comes at a previous resistance level which is likely to turn into support now. That level comes at 1.4070s, so there’s still 60 pips profit to be made on the way down for those who are already short on this pair. We are not going short now because the risk/reward ratio is not satisfactory.