After Tuesday’s recovery the euro and British pound dropped back to their lower levels where the rallies had started out yesterday. The rapid decline is due to an airport terror attack in Istanbul late Tuesday. Three suicide bombers killed at least 36 people at the entrance to the main international airport in Istanbul. Investigations indicated the Islamic State (IS) was behind the terror attack. The attack came at a time when Turkey is struggling with the biggest slump in tourism as a result of the ongoing terrorist threat in the country.
Overall, there is a considerable degree of uncertainty in the market which negatively influences investments as well as the economic environment. European leaders pressed the U.K. to lay out a Brexit plan as quick as possible in order to avoid further uncertainty. However, it may take some time as the U.K. will only start the EU withdrawal process once a new government has been installed. This could happen as early as September.
From a technical perspective not much has changed. The euro traded consolidated between 1.11 and 1.1035. While we are still looking for breakouts either above 1.1135 or below 1.10 the trading range has narrowed which is why traders should keep an eye on prices above 1.1085 for bullish and, vice versa, for prices below 1.1035 for bearish engagements.
The cable peaked at 1.3419 before trending lower again. Our focus shifts to a renewed break below 1.3270 before anticipating lower targets at 1.3220 and 1.3150. On the topside, the 1.3370-level is seen as a current resistance.
Apart from the EU-U.K. summit, German Consumer Prices scheduled for release at 12:00 UTC and the U.S. PCE index due at 12:30 UTC could have a minor impact on the currencies.
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