Instead of extending its correction towards 1.19 against the U.S. dollar, the euro jumped above 1.20 and headed quickly towards 1.2050. And the rally continues this morning with the euro soaring towards the higher target at 1.21 but we advise caution. The EUR/USD is in overbought territory and thus vulnerable for pullbacks, so do not get your fingers burnt.
The situation wasn’t any different in the GBP/USD which rallied towards 1.40. Stabilizing above 1.4020, we see a next higher target at 1.42 but here, too, the overbought situation calls for caution.
Those who wonder why the U.S. dollar came under increased selling pressure, it may be told that the market is in a risk-on mode where risky assets outperform havens such as the greenback.
Our long entries in both EUR/USD and GBP/USD have proved profitable and reached their profit targets.
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