Welcome back to a holiday-shortened trading week which is fully loaded with important risk events and economic data. Friday's Non-Farm Payrolls report remains the biggest news of all while the European Central Bank rate decision and Draghi's press conference on Thursday are no less important. But before getting to these major risk events which are considered as a big market mover, the focus will be on today's important items, such as the German Unemployment report, Eurozone Consumer Prices and the U.S. PCE index.
This week started with a brief spell of dollar weakness, driving both euro and British pound higher against the greenback. After appreciating its value against all other major peers last week, the U.S. dollar took a breather ahead of the jobs report on Friday. The odds of a Federal Reserve rate hike increased in favor of a summer hike, while odds of a move in July are currently at 54 percent. Many Fed officials including Fed Chair Janet Yellen have hinted at higher interest rates within the next few months, helping the dollar to regain some footing. While we are looking for further dollar gains in the near-term, the euro may receive special attention if Eurozone data comes in with an upside surprise.
The currency pair traded recently within a downward channel, according to which we expect the resistance line at 1.1180 to act as a short-term barrier for the euro. If the euro breaks above the current channel, we see a next resistance area between 1.1215 and 1.1245, from where a reversal is becoming more likely. Euro bears, however, should wait for a break below 1.1080 in order to sell the EUR/USD towards lower targets.
The British pound rose against the dollar and climbed above 1.47 early this morning. The cable was, however not able to hold onto its gains as the pound reacts highly sensibly to any new polls. We expect high volatility to continue the closer the June referendum approaches. As Brexit headlines will continue to dominate the price action in the pound sterling, traders should prepare for unexpected swings in the GBP/USD. A current resistance is seen at 1.4720/30 while a next support could be at 1.4480, provided that the cable breaks below 1.4560.
Important economic data today:
7:55 EUR Unemployment Numbers
9:00 EUR Eurozone Consumer Prices
12:30 USA Personal Consumption Expenditure
14:00 USA Consumer Confidence
(Time zone: UTC)
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