Bullish Bias As Risk-Appetite Increases
Dear Traders,
Yesterday’s best performer was the British pound, which rallied towards 1.43 as investors shrugged off oil’s losses and Chancellor Osborne’s warning of “permanent” damage should U.K. vote to leave the European Union. While we continue to favor a bearish stance in the GBP/USD, extensions of the recent upward movement might be possible until 1.4380 and 1.4430. Once the pair breaks above 1.4330 a next crucial resistance zone could be at 1.4370-95, from where reversals are becoming more likely. On the bottom side, we expect the 1.4250-level to lend a short-term support to the currency pair. However, if GBP falls back below 1.4225, a lower target could be at 1.4160.
Bank of England Governor Mark Carney will give evidence to the House of Lords Economic Affairs Committee today at 14:30 GMT. This event is likely to be this week’s fundamental highlight for the pound sterling and could affect the currency accordingly. If he favors a pro-EU stance, it should be supportive for the pound.
The euro did not show much movement Monday and traded within a narrow 60-pips trading range. None of our entries was triggered but euro traders hope for major movements today before the German and Eurozone ZEW Surveys are scheduled for release. In case of a major improvement, the euro could head for a test of 1.1350. Here we see a crucial resistance level, which could cap on gains in the EUR/USD. The common currency would need to break significantly above 1.1365 in order to revive bullish strength towards 1.14. On the downside, we will focus on a break below 1.13 in order to sell the euro towards lower targets at 1.1275 and 1.1250.
Important events and economic reports:
9:00 EUR ZEW Surveys
12:30 USA Housing Starts and Building Permits
14:30 UK Carney’s Testimony
(Time zone GMT)
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