The euro advanced as it plays an important role as a funding currency at times of market turmoil. Before rallying above 1.12 the common currency was able to gain ground above 1.1085. For the time being, we continue to expect the 1.1070/50-level to act as a current support-zone. On the upper side, next important price levels could be at 1.1260 and 1.1280. While many traders are wondering how high the euro may go, we should bear in mind that a strong rise in the euro, much to the displeasure of the European Central Bank, brings policymakers on to the scene in order to talk down the currency. We expect verbal intervention by the ECB should the euro rise further.
The cable, however, declined towards its next important support-level at 1.4350. As long as Brexit concerns remain on the table, the currency is likely to remain under pressure. We expect increased bearish momentum as soon as sterling breaks below 1.4330/25. Lower targets could be at 1.4240 and 1.4180. A short-term resistance-zone is seen at 1.4450/65. Above 1.4475, sterling may climb towards 1.4540.
Today we have second-tier data scheduled for release, which is expected to have only a minor impact on the currencies.
9:30 UK Trade Balance
15:00 USA Wholesale Inventories
(Time zone GMT)
Apart from Fed-Chair Janet Yellen's testimony on Wednesday and Eurozone GDP-reports and U.S. Retail Sales on Friday the economic calendar is light. Yellen appears before the House Financial Services Committee to testify on economy and monetary policy and market participants will look for an unambiguous confirmation of the future outlook, whether the Fed will grow less hawkish or maintain an optimistic stance, pointing to further tightening in 2016. The dollar's performance could therefore hinge on Wednesday's testimony.
Here are our daily signal alerts:
EUR/USD
Long at 1.1240 SL 25 TP 20, 40
Short at 1.1180 SL 25 TP 30-35
GBP/USD
Long at 1.4480 SL 25 TP 25, 45
Short at 1.4390 SL 25 TP 25, 50
We wish you good trades and many pips!
Disclaimer: Any and all liability of the author is excluded.