Bearish Momentum Faded – Time For Corrections?
While the British pound continued its slide against the U.S. dollar Wednesday, the euro quickly recovered its losses after the U.S. services PMI showed contraction, raising concerns about the resilience of the U.S. economy. The euro initially fell to a low of 1.0957 but was later able to stabilize above the 1.10-mark. We consider the 1.1050-area as a current resistance for the EUR/USD, whereas downside movements could be extended toward 1.0930.
The euro is still trading within a short-term downward channel. With a sustained break above 1.1070/80 we might see the pair rallying toward 1.1140. However, bearish movements could be limited until the descending trend line, which is currently at around 1.0930.
From the eurozone we have Consumer Prices scheduled for release at 10:00 GMT but no changes are expected.
The pound has gained some ground against the greenback and was able to remain above 1.39. Upside movements could be capped at 1.40 and 1.4050 whereas a break below 1.39 could drive the cable towards lower levels at 1.3850.
U.K. Gross Domestic Product figures are scheduled for release at 9:30 GMT, but as long as numbers are consistent with the expectations the impact on the GBP should be limited.
The most important piece from the U.S. will be Durable Goods Orders, due for release at 13:30 GMT. Data is expected to show an improvement, which could add strength to the dollar in the short-term.
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