The U.S. dollar resumed its advance on Monday but we are continuing to be on the lookout for reversals since the dollar’s rally could be somewhat overstretched in many major currency pairs.
The euro extended its slide to a low of 1.2184 but the breakout below 1.22 appears unsustainable, at least as long as the euro remains above 1.22. We now keep tabs on the 1.2240/50-level which could act as a short-term resistance in the EUR/USD. A higher resistance is seen at 1.2330. On the bottom side, we expect a lower support around the 1.2160/55-level that could limit losses. We bear in mind that the pair is in oversold territory which is why traders should prepare for pullbacks.
Short traders of the GBP/USD have been able to gain a good profit in recent days. Commentary made by BoE Governor Carney has sent the pound into a tailspin as he prompted speculation that a rate hike in May is not sure. Consequently, rate hike odds have dropped from 85 percent to below 50 percent following Carney’s remarks.
The GBP/USD traded with a heavy bearish bias and dropped towards 1.39. Given the oversold situation, we still expect some pullback sending the pound back towards a test of 1.4015 and 1.4050. A lower support is, however, seen at around 1.3875.
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