While the British pound experienced a rollercoaster ride, trading choppily sideways between 1.4020 and 1.39, the euro continued its recent downward trend against the U.S. dollar Tuesday. The greenback strengthened after the ISM index showed a higher reading, adding to evidence that the pressure on manufacturing may be easing.
Nevertheless, both of our major currency pairs failed to show sustained movements yesterday, raising the chances of upcoming break-outs – perhaps as early as today. Dollar bulls are eager to see whether the labor market is showing further signs of improvement and today’s ADP report may provide a little foretaste of the NFP report. However, disappointing ADP numbers could prompt investors to refrain from any long dollar positions ahead of Friday’s high risk event.
The euro dropped as low as 1.0834 but ended the day unchanged against the dollar. Consequently, the technical outlook has not changed and a downside break of 1.08 could be a next possible scenario. On the upside we will focus on a break above 1.09, which could drive the euro towards 1.0950/60.
Traders had to struggle with sharp fluctuations and false breakouts within a narrow 100-pip trading range. Given the recent consolidation we expect a breakout in the near-term, triggering fresh momentum. Current resistances are seen at 1.4030 and 1.4070, whereas support levels are seen at 1.3905 and 1.3850.
The U.K. Construction PMI is scheduled for release at 9:30 GMT and could have a short-term impact on the GBP.
Important economic data for today:
9:30 UK Construction PMI
10:00 UK BoE’s Broadbent speaks
13:15 USA ADP report
15:30 USA Crude Oil Inventories
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