GBP/USD: Further Weakness Ahead? Focus On A Break Of 1.42

Dear Traders,

Not much has changed since yesterday and trading was relatively quiet. The EUR/USD traded slightly higher against the U.S. dollar despite a weaker Ifo report. Neither the fact that it was the lowest reading in almost one year, nor cautious comments from Mario Draghi, who is trying to convince investors that the ECB is willing to act if needed, could weaken the euro. On the contrary, the common currency rose above 1.0845 and tested the next resistance level at 1.0860. If the euro is able to break above 1.0865/75 we will shift our focus to the 1.09-level again. Ahead of the FOMC statement on Wednesday, we expect the EUR/USD to remain within its current range between 1.0940/80 and 1.0770/15.

Despite the low level of volatility our short-entry in the GBP/USD turned out to be somewhat unfortunate and any further bearish momentum was blocked by the recent support level at 1.4230. Sterling traders should now pay attention to a break of 1.42. If GBP falls significantly below that level, we could see the pair sliding towards lower levels at 1.4155, 1.4130 and even 1.41.

Bank of England governor Mark Carney will testify to lawmakers on financial stability today at 10:45 GMT. Renewed concerns about a potential Brexit and the U.K. outlook may increase the pressure on the British pound.

The most important piece of U.S. data on today’s calendar will be Consumer Confidence, due for release at 15:00 GMT, which may have a short-term impact on the USD.

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