The U.S. dollar strengthened against most of its major peers Tuesday as economic data in the U.S. signal expansion. With the latest data showing that the U.S. economy is picking up steam overall, the greenback enjoys stronger demand among investors whereas other currencies are tumbling. This trend could continue as the Federal Reserve is the only central bank which is on track to raise interest rates while other central banks are ready to ease monetary policy to steer economic growth.
On the back of renewed dollar strength the euro was forced to test the 1.10-support, which still remains intact this morning. With no major economic reports scheduled for release today, the dollar might have difficulty pulling the euro below this important support level. In addition, we see a next lower barrier around the 1.0970-level which may lend an additional support to the euro. Today’s price action could thus be oriented towards the upper and lower bound of the current trend channel. Resistances are currently seen at 1.1080 and 1.1130, whereas a crucial support could be at 1.0970.
The British pound broke through 1.3120 and slid towards 1.3060. Unfortunately, we had two stop-losses with yesterday’s short-entry before the pound went down, which is why we missed out on the final downward move.We are now looking for a test of 1.30 before we expect major pullbacks to occur. A current resistance is seen at 1.3150 and if sterling is able to climb above that level it could head for a renewed test of 1.32. However, given the recent dollar strength, gains might be limited in the GBP/USD.
Sterling traders should keep an eye on the U.K. labor market report, scheduled for release at 8:30 UTC. The focus will be on Average Earnings and if wages exceed expectations, the pound could be vulnerable to some upswings within its downward trend.
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