Risk aversion and the liquidity drain ahead of the Easter holiday are hobbling the market. Tuesday’s best performer, however, was the British pound which soared to a high of 1.2494. The pound sterling benefited from a weakening U.S. dollar, which suffered some losses amid geopolitical tensions. The U.S.’s recent tougher stance created a new round of risk aversion in the market. However, the longer-term outlook for the dollar is still positive, including higher interest rates from the Fed while dollar bulls are likely to return to the market after the Easter break.
The bullish movement has stalled near 1.25, a level that is considered a short-term resistance for the currency pair. The pound could possibly extend its gains to 1.2510/15 before we see a stronger correction. A break above 1.2525 however, could open the door for further bullish momentum, driving the cable towards the higher resistance zone around 1.2550/85. A current support is seen around 1.2430.
The U.K. Labor Market report is scheduled for release at 8:30 UTC and could have an impact on the price action. At the same time, Bank of England Governor Carney will speak at an event in London.
The euro rose to a weekly high of 1.0630 but the currency pair’s price action is still confined to a narrow trading range. For breakout traders there was nothing to gain amid this subdued price development. The situation could persist until the French presidential election on April 23 as investors remain cautious ahead of that trend-setting event. For the time being we expect the euro’s price development to be limited to a range of 1.0650 and 1.0575.
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