Gains were capped at 1.4220 in the GBP/USD which was an anticipated resistance level. Traders wonder whether there could be a deeper correction towards 1.4150 now – provided that the 1.4220-1.4230-area remains a resistance.
The situation was similar in the EUR/USD with the pair extending its uptrend above 1.22 but being reluctant to show much follow-through, at least until now.
Volatility could pick up today with investors awaiting the release of the minutes from the Federal Reserve’s April meeting. The FOMC minutes due at 18:00 UTC may offer more insight into policy maker’s thinking about inflation and may hint on a timeline for tapering stimulus.
Regardless of all inflation concerns, we will keep tabs on the technical picture in both major currency pairs.
After 1.4220 has been hit we saw the cable correcting some of its gains and as long as the price remains below 1.42, we could see the formation of a bull flag with a potential low at around 1.4150. A bull flag is a continuation pattern within a strong uptrend and if new buyers enter the market above 1.42, we could see another leg up towards 1.4230 and possibly 1.43. On the bottom side, if the pair falls below 1.4140, we anticipate further losses towards 1.4070 and possibly even a dip towards 1.40.
The euro faces the 1.2250-hurdle now and once this barrier is eliminated, we will focus on a higher target at 1.2320. On the downside, the focus is on the 1.21-support.
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