The best performer Tuesday was the U.S. dollar which strengthened against the euro and British pound, providing short traders in both EUR/USD and GBP/USD good profits.
Federal Reserve Chairman Jerome Powell played down the risk that economic growth would spur unwanted inflation in yesterday’s testimony. He noted that policy must remain accommodative for now. Powell and Secretary Janet Yellen will testify together again today in front of the Senate Banking Committee.
GBP/USD: We saw the cable breaking below the lower bound of its recent sideways range and dropping towards 1.37. Now that the pair broke below 1.3750, we anticipate further losses towards 1.3620 and possibly even 1.3570. The area between 1.3870 and 1.39 on the upside could now serve as a lower resistance.
For sterling traders, the focus now turns to U.K. CPI data this morning followed by the PMI report due at 9:30 UTC.
EUR/USD: The pair slid towards 1.1836 but refrained from a sustained break of the March low at 1.1835– at least until now. We expect that losses could be extended towards 1.18 and possibly 1.1770 before we see some rebound. For chances to shift in favor of the bulls we recommend waiting for a break above 1.1920.
DAX: After several days of unprofitable fluctuations, we were finally able to benefit from the index’s volatile swings yesterday. We first booked a profit with the DAX falling towards 14500 while a later buy order towards 14700 has also proved profitable. Remaining between 14670 and 14480 could confirm a bull flag within the DAX’s overall uptrend.
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