Dear Traders,
The recent weakness of the U.S. dollar is surprising. A main reason for the broad-based decline in the greenback is the fact that a Federal Reserve liftoff next week is almost completely priced in and investors are shifting their focus to the following guidance after a rate hike. Fed Chair Janet Yellen has reiterated several times that the pace of increases will be gradual but speculations are the Fed could favor a more dovish policy stance after a first liftoff.
The euro climbed significantly above the key resistance of 1.10. The common currency received some support from comments of ECB member Ewald Nowotny, saying the financial community had unrealistic expectations for more stimulus last Thursday. Nonetheless, the more the value of the euro rises, the more pressure is on the ECB to "do what it must". So traders should bear in mind that the current upwind could also quickly come to an end. ECB President Mario Draghi is likely to wait and see how the euro will respond to the Fed next week. If the Fed fails to drive the U.S. dollar higher and in turn, the euro lower, the ECB is likely to deploy additional measures in order to warrant the effectiveness of its QE program.
The British also beneffited from a weakening dollar and rose towards 1.52. The Bank of England will announce its latest policy decision today at 12:00 GMT. While the BoE is expected to keep interest rates unchanged, the MPC minutes could impact on the price action in the GBP/USD. For investors it is difficult to gain insight into the monetary policy path as the central bank has repeatedly altered its view on the timetable for a liftoff.
Let's have a look at the technical side:
GBP/USD
GBP is still trading within its downward channel. Given the recent bullish momentum, we may see further gains towards higher levels. In order to reveal fresh bullish potential, GBP would need to break significantly above 1.52. A next target could be at 1.5250. Above 1.5260, chances are that sterling heads for a test of 1.5330 and the resistance line at 1.5360. For any bearish engagements, traders should pay attention to a break of 1.51. Below 1.5090, lower targets at 1.5060, 1.50 and 1.4950 are coming to the fore.
Here are our daily signal alerts:
Daily Forex Signals:
EUR/USD
Long @ 1.1031 SL 25 TP 20, 40
Short @ 1.0975 SL 25 TP 20, 40
GBP/USD
Long @ 1.5210 SL 25 TP 25, 50
Short @ 1.5169 SL 25 TP 30, 60
Additional entries for subscribers.
