The last week was characterized by a strengthening U.S. dollar due to higher Treasury yields, pushing both euro and British pound lower in turn.
Looking at the technical picture, both currency pairs formatted secondary downtrend channels which now could be a reason providing some relief for the euro and sterling.
The euro touched 1.0686 which corresponds with the lower descending trendline of a short-term downside channel. Above 1.0760 chances are in favor of bulls with a higher target at around 1.0840. On the downside we expect that the 1.0650-support will provide some hold.
Like the euro, we almost see the same picture in the GBP/USD. After a recent low at 1.2445, bears could take a breather, allowing bulls to go for 1.2550 and 1.2630. If, however, the pound falls below 1.2440, the next crucial support lies at 1.24.
What is important for this week?
On Wednesday the focus turns to the U.S. inflation report. A mixed report is expected with core inflation seen weakening while the headline rate is estimated to rise from 3.2 percent to 3.6 percent.
On Thursday all eyes turn to the European Central bank rate decision. Bulls and bears are divided on this month’s decision while pricing is skewed towards a rate pause. Economic conditions deteriorate so this month might be the last opportunity for the ECB to raise rates.
We will know more on Thursday.
We wish everyone a good and successful week ahead.
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