Both euro and British pound ended yesterday’s trading day virtually unchanged against the U.S. dollar after the euro had risen to a high of 1.0777 whereas the cable had rejected the 1.2850-resistance. The limited upward movement was due to a slight increase in the dollar after U.S. Treasury Secretary Steven Mnuchin spread optimism that the Trump administration is close to bringing forward major tax reform. He said the White House will unveil a tax plan “very soon”.
Meanwhile, the euro held steady above 1.07 after a police officer was killed in Paris just days before France’s presidential election starts. The incident could have an impact on the outcome of the first round of the election on Sunday since the Islamic State is claiming responsibility for the attack.
Polling is suggesting it will be a close call between independent Emmanuel Macron and the National Front’s Marine Le Pen. The two leading candidates will run off in a winner-takes-all contest on May 7.
EUR/USD- The calm before the storm?
The euro performed quite resiliently ahead of the most tightly contested elections in France.
On a technical basis, we will focus on a current trading range between 1.0740 and 1.0680. A renewed break above 1.0740 may boost bullish momentum until a fresh high at 1.08. We would speak of a bullish breakout in case the euro climbs above 1.0820. A higher target could be at 1.0950. However, below 1.0680/70 we could see the euro tumbling towards 1.0640 and 1.06. A break below 1.0590 could reinvigorate fresh bearish momentum.
The British pound was unable to take the hurdle at 1.2850 and dropped back below 1.28. As long as the GBP/USD remains trading between 1.2860 and 1.2770 we do not pay much attention to the cable’s price action. A break below 1.2770 would shift the focus to lower targets near 1.27 and 1.26 whereas it would need a sustained break above 1.2860 to spark bullish momentum towards 1.2950.
The U.K. Retail Sales report is scheduled for release at 8:30 UTC and will draw traders’ attention.
We wish you good trades and a nice weekend.
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