Both major currency pairs experienced a volatile start to the new week and there was something for everyone. While bears initially set the tone, providing short-traders a good profit bulls won out against the bears at the end of the day, sending the euro and British pound higher against the U.S. dollar.
Consequently, the current sentiment appears to be strongly bullish but what is next? Let’s have a look at the technical side.
Sterling still trades within a tertiary downward channel. After the recent rise the situation appears somewhat overbought so traders should generally expect increased bearish momentum in the near-term. If the pair is able to break significantly above 1.43, we see next resistances at 1.4360 and 1.44. Even if concerns about a potential Brexit have eased somewhat, the latest U.K. economic reports were not really encouraging. We therefore favor a bearish stance and focus on next resistances from where GBP may bounce back.
Bank of England Governor Mark Carney is scheduled to testify at Parliament’s Treasury Committee on the economic and financial benefits of EU membership today at 9:15 a.m. GMT. Carney is declined to reveal any details of the possible actions the BoE will be considering in the event of Brexit. A potential EU withdrawal fueled speculation the U.K. could fall into recession and the central bank would have to respond with a rate-cut. Traders should keep an eye on Carney’s testimony as any new insights or details could have a significant impact on the pound.
The Eurozone Gross Domestic Product is scheduled for release at 10:00 GMT but no changes are expected.
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