The U.S. dollar failed to trade sustainably higher against the euro and British pound Thursday. While dollar bulls may have hoped for stronger U.S. data to reaffirm the dollar’s strength, expectations have been disappointed – at least yesterday. The Philadelphia Fed index came in softer than expected and thus failed to encourage dollar bulls to push the currency higher. With the Fed’s willingness to raise rates as early as June, the main focus will be on the May Non-Farm Payrolls report due to be released on June 3. The currency market is generally looking to further dollar strength and if incoming U.S. data is surprising on the upside it could be a catalyst for some downside breakouts in both EUR/USD and GBP/USD.
U.S. Existing Home Sales are scheduled for release at 14:00 UTC but this report is unlikely to trigger significant movements.
The British pound initially rose as high as 1.4663 as the price action was boosted by stronger-than-expected U.K. retail sales. However, sterling was unable to hold onto its gains and ended the day unchanged against the greenback. We now see a higher likelihood of an upcoming breakout of the cable’s recent narrow trading range. We will therefore focus on prices above 1.4620 for any bullish and vice versa on prices below 1.4590 for any bearish engagements. Given the recent uptrend channel higher targets could be at 1.4695 whereas a support could be at 1.4490.
The price action in the EUR/USD was muted and the currency pair fluctuated within a narrow trading range of 50 pips. Traders should wait for an upside break above 1.1230 or vice versa, a downside break below 1.1180. Above 1.1230, higher targets could be at 1.1260 and 1.1290, whereas below 1.1180, the euro could fall towards 1.1130.
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