Investors poured back into riskier assets which in turn led to a pullback in Treasury yields, a weakening U.S. dollar and thus an upward tendency in both EUR/USD and GBP/USD. The DAX on the other side, was reluctant to extend its upward move and refrained from a test of our next bullish target at 14500.
Today, traders expect higher volatility around the upcoming release of the monthly U.S. inflation data at 13:30 UTC. A higher-than-expected reading could spark another upswing in bond yields and the greenback.
Looking at the technical picture and in case of further USD strength we will mark next lower targets at 1.1820 and 1.1760 in the EUR/USD and at 1.3815 and 1.3780 in the GBP/USD. A break below 1.3770 in the cable could invigorate fresh bearish momentum and send the pair lower towards 1.37.
Conversely, if inflation figures surprise to the downside, we will see a rebound in both major FX pairs. Current resistances are seen at 1.1960 and 1.2050 in the EUR/USD and at 1.39 and 1.40 in the GBP/USD.
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