Yes, Donald Trump is President of the United States and this is the only thing that is certain at the moment. Trump's initial promise of generous stimulus had triggered a broad based dollar rally but this optimism has been dampened somewhat since the turn of the year after details about Trump's fiscal policy were absent in his recent speeches.
The market's reaction to Trump's inaugural vow of "America first" was mostly silence and uncertainty, leaving investors increasingly uncertain about the future outlook. Market participants have now adopted a wait-and-see attitude and everything will depend on the impact of whatever fiscal program Mr. Trump pursues.
The U.S. dollar weakened against its major peers pushing the euro and British pound higher in return. Let's have a brief look at the technical picture:
EUR/USD
The euro currently trades near the upper bound of its recent uptrend channel. Euro bulls should pay attention to a potential break above 1.0765 which could spark fresh bullish momentum towards 1.0850/70. If the euro remains below 1.0760 we expect a short-term pullback towards 1.0630, the lower bound of that channel. For the bias to shift from bullish to bearish the euro might need to fall back below 1.0580.
Today, European Central Bank President Mario Draghi is scheduled to give a speech at 11:30 UTC. Having recently outlined a dovish point of view, Draghi is not expected to change its view in his speech. The ECB is likely to keep its policy on hold for the foreseeable future even if Eurozone data show signs of steady improvement. With that in mind, the euro may not receive any support from Draghi.
GBP/USD
The pound sterling tested its resistance level at 1.2450. Once that level is significantly breached on the upside we expect further gains towards 1.25 and possibly even 1.2550. However, a current support is seen at 1.2350 and if the pound drops back below that level and further below 1.23 we anticipate bearish momentum to increase.
The economic calendar this week is fairly light in terms of market moving data. The fourth-quarter GDP numbers from U.K. (Thursday) and the U.S. (Friday) will be the highlight this week.
Here are our daily signal alerts:
EUR/USD
Long at 1.0775 SL 25 TP 20, 40
Short at 1.0690 SL 25 TP 20, 35
GBP/USD
Long at 1.2470 SL 25 TP 20, 40
Short at 1.2365 SL 25 TP 20, 40
We wish you good trades and many pips!
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