The euro and British pound benefited from the weakening U.S. dollar, which fell sharply after U.S. Housing data slumped more than projected in March. Moreover, the euro is currently supported by speculation European Central Bank President Mario Draghi is unlikely to announce further monetary easing at the ECB meeting tomorrow. While the central bank’s easing measures start to take effect, the danger for the ECB is the currency strength of the euro, undermining the economic improvements. Draghi could therefore try to talk down the currency but since the central bank rhetoric has somewhat ceased to have effect, the euro could even extend its recent uptrend instead of being vulnerable to losses.
Ahead of tomorrow’s ECB meeting we expect the euro to range-trade between 1.1410/30 and 1.1335. Above 1.1430, upside extensions are possible until 1.15, whereas below 1.1330, the euro may fall back towards 1.1250/20.
The British pound climbed above 1.44 but found a current resistance around the 1.4420-level. The U.K. Labor Market report is scheduled for release today at 8:30 UTC and should have an impact on the pound. If data surprise to the upside, sterling could extend its gains towards 1.4450 and 1.4490. However, traders should bear in mind that the currency pair trades near crucial resistance levels and reversals are becoming more likely.
Looking at the 4-hour chart we see an overall downtrend and a current consolidation phase. Prices recently fluctuated within 1.4450 and 1.4050. If GBP is able to break significantly above 1.4430/50, we could see a test of 1.45. However, if the pair refrains from trading above 1.44, we favor the downtrend and focus on lower targets at 1.4310, 1.4260 and 1.42.
From the U.S. we have Existing Home Sales and Crude Oil Inventories scheduled for release at 14:00 and 14:30 UTC.
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