The U.S. dollar ended the month of February higher against other major currencies such as the euro and pound sterling.
Recently, however, it was not only the dollar’s strength that drove major pairs lower. The British pound came under increased selling-pressure as U.K.’s Prime Minister Theresa May rejected a proposed Brexit draft from the EU. The document contained details about the U.K.’s exit from the EU bloc. May is due to deliver a speech tomorrow so the price action in the pound could be volatile or even messy ahead of that speech.
Today, traders will be watching the PCE Core (13:30 UTC), the Fed’s favorite inflation indicator and the Manufacturing ISM report (15:00 UTC). Furthermore, we have a second appearance from Fed Chairman Powell before the Senate Banking Committee today at 15:00 UTC, but the market could remain largely unaffected by today’s testimony.
EUR/USD: The euro dropped below 1.22 but still holds above 1.2165 which means that it finds itself within a crucial support zone. We have the Italian election on Sunday, so investors may take profits ahead of the weekend which could lead to further losses in this pair. As mentioned in previous analysis, the next crucial price level will be 1.2160 and for euro bears it would need a sustained break below that level in order to anticipate further downward momentum. A current resistance area is seen between 1.2250 and 1.23.
GBP/USD: The pound declined on Brexit concerns and we now expect a next lower target to be at 1.36. However, traders should be careful trading the pound as the price action in the pound could become messy ahead of May’s Brexit speech tomorrow. We now expect prices to accelerate between 1.40 and 1.36.
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