After the euro and British pound hit new highs versus the U.S. dollar, we recently saw some reversal in the uptrend of both EUR/USD and GBP/USD. Much of the strong performance of the euro and pound was based on the weakening dollar. Market participants doubt that the Federal Reserve will be able to achieve their four additional rate hikes until the end of 2018 after Fed policy makers have grown less hawkish with U.S. inflation dwindling lower for much of this year. While the dollar is still facing a number of problems in the medium-term, it became oversold in short-term time frames. Thus, we are looking for some correction in the uptrend of the euro and cable.
U.S. inflation figures are scheduled for release on Thursday and dollar bulls would need at least a 1.8 percent print in order to heave a sigh of relief. Following Thursday’s CPI data, the next risk event for dollar traders will be next week’s FOMC meeting. The Fed will be releasing fresh forecasts at the FOMC rate decision on September 20th.
This week should be an interesting one for sterling traders as we will have the U.K. Consumer Price Report (Tuesday), the jobs report (Wednesday) and, last but not least, the Bank of England meeting (Thursday) on the calendar. While there is almost no chance of higher interest rates for the foreseeable future, inflation is expected to show an uptick in August. Tomorrow’s U.K. CPI figures could therefore encourage sterling bulls to test the August high at 1.3268. Let us be surprised.
GBP/USD
From a technical perspective however, we prepare for some pullback towards 1.3050. Looking at the Relative Strength Index (RSI), we see an overbought situation which may lead to corrective movements. For the time being we expect the pair to fluctuate between 1.3250 and 1.3050.
EUR/USD
Double top pattern in play? After the euro failed to exceed the 1.21-barrier, it fell back toward 1.20. If the pair drops below 1.1970 we expect further losses towards 1.1920. That level may act as a support. From the Eurozone, there are no important data releases scheduled for this week, so the price action might be oriented towards the dollar’s performance.
Here are our daily signal alerts:
EUR/USD
Long at 1.2025 SL 25 TP 20, 60
Short at 1.1980 SL 25 TP 20, 40
GBP/USD
Long at 1.3225 SL 25 TP 20, 40
Short at 1.3165 SL 25 TP 20, 40
We wish you good trades and many pips!
Disclaimer: Any and all liability of the author is excluded.