We had waited some time for a reversal to happen and yesterday we finally saw the greenback taking a breather while EUR/USD traded off its highs. The euro fell more than 100 pips from its 2.5-year high and dollar bulls might ask whether the greenback’s recovery will last a bit longer. Looking at the technical picture, EUR/USD and GBP/USD still remain well above their crucial support levels, so for the time being, there is no reason to speak of a trend reversal. Up to now, it was only a necessary correction in an overbought market.
EUR/USD: Euro bulls took profit after several consecutive days of euro strength. That profit taking led to a sharp reversal and drove the euro back below 1.17. As long as the euro remains above its support area at 1.1625/1.16, the uptrend remains intact.
German Consumer Prices are scheduled for release at 12:00 UTC, a report that could affect the price action in the EUR/USD.
GBP/USD: Recently, the cable traded with a tailwind and appeared to be headed for a test of 1.32. This test could still happen but for the recent uptrend to remain intact the pound will need to hold above 1.2950/1.29. A break below 1.29 could spark bearish momentum toward 1.28 and 1.2750. Let us wait and see.
How the U.S. dollar will trade today will mainly hinge on the GDP report, scheduled for release at 12:30 UTC. U.S. second quarter growth is expected to show an upswing but if GDP numbers disappoint, the dollar could resume its slide.
Having already gained a good profit this month, we will not invest our weekly and monthly profits and will thus stay on the sidelines.
We wish everyone a beautiful weekend.
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