The broad-based strength of the U.S. dollar drove the activities in the currency market and allowed for adequate profits for sterling and euro bears. The British pound was hit hard by Brexit concerns on the one hand and dollar strength on the other. As a result, the cable fell to a 31-year low against the greenback and traders prepare for further losses in the GBP/USD. While the pound is expected to depreciate further ahead of Britain’s planned exit from the EU, investors believe that a weaker currency will help to boost British exports, making larger U.K. companies more competitive.
Technically, we expect the 1.27-level to lend a short-term support to the pound before we may see further losses. In case that the 1.27-mark withstands the downward pressure, we anticipate a correction toward the 1.28-level.
The euro was accompanied by higher volatility on Tuesday and losses in the EUR/USD were soon erased after a report said that the European Central Bank will probably taper bond purchases before the conclusion of quantitative easing. The euro overreacted on that hawkish statement and jumped towards 1.1250. Nevertheless, the technical picture has not changed materially as the euro is still confined to its tight trading range between 1.1240 and 1.1140. Above 1.1240 we may see a renewed test of 1.1270 while a current support is still seen around the 1.1130-level.
Today, we have some interesting economic data scheduled for release, influencing the price development of both major currency pairs:
8:30 UK Services PMI
9:00 EUR Euro-zone Retail Sales
12:15 USA ADP Employment Change
14:00 USA ISM Non-Manufacturing Composite
(Time Zone UTC)
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