Will U.S. Dollar Strength Persist?
Welcome to a new trading week.
The U.S. dollar has strongly recovered after the Federal Reserve showed a tighter monetary policy stance than other central banks, which have already eased policy. Market participants now expect only one Fed rate cut this year versus two or three earlier. The hawkish Fed statement from last week attracted buyers in the greenback and thus, dragged the euro and British pound lower.
The Bank of England is likely to pave the way towards a rate cut this summer as inflation and the labour market show signs of continued easing. However, the BoE is unlikely to surprise the market with a rate cut when they meet this Thursday but their messaging will be eagerly anticipated. If UK inflation data, released one day before the BoE decision, is in line or better, the central bank may be able to give a more dovish forecast. And a more dovish BoE could extend the current downward move in the cable.
GBP/USD
Looking at the weekly chart we see that the pair fell back below the 1.27-benchmark (blue EMA200). Remaining below 1.27 could see a next leg lower towards 1.2550 (orange EMA100). We recommend traders to wait for a break below 1.2640 in order to sell the pound towards 1.2620 and 1.26. Below 1.2590 we will go for 1.2550 and 1.2520.
DAX
Investors continue to exit the market in the wake of a shift to the far right in the European elections and the index corrected sharply. Only the crucial 18000-threshold could stop the fall – for now. Traders will now pay attention to a break below 17940 with a lower target at around 17700. Bulls may engage, however, only above 18250.
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Disclaimer: All trading ideas and expressions of opinion made in the articles are the personal opinion and assumption of MaiMarFX traders. They are not meant to be a solicitation or recommendation to buy or sell a specific financial instrument.
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