Overbought Territory Amid Low Volatility

Last week was characterized by significant bullish moves across the greenback’s counterparts. The U.S. dollar sold-off sharply after the June inflation report surprised to the downside. Given the strength of the latest upward moves and with both EUR/USD and GBP/USD overcoming key technical hurdles, we expect some further upside potential.

On Wednesday, the UK inflation report will be released and if there are signs that inflation is falling, the pound could correct from its heavily overbought territory.

GBP/USD: A higher resistance is seen between 1.3150 and 1.32. The pair remains, however, in deeply overbought territory, increasing the chances for a consolidation phase. A support is now seen at 1.2850.

EUR/USD: Remaining above 1.12, the focus shifts to higher resistances at 1.14 and 1.15. A current support could lie at 1.11.

Summer doldrums: We advise traders not invest too much or doing a trading break since volatility typically remains at very muted levels during the summer months of July and August. When volatility is low, there is more to lose than to gain.

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