We welcome you to a new trading week. The euro has recovered some losses against the U.S. dollar and is currently trading at around 1.12. The pound sterling traded virtually unchanged against the greenback amidst a low volatility environment. Despite a surprise hawkish shift by Bank of England officials and the formal start of Brexit negotiations, the pound’s volatility is surprisingly low with the GBP/USD fluctuating within the tightest monthly range in almost three years. Formal negotiations on the U.K.’s exit from the EU are due to start today while the outcome is still difficult to predict. If Brexit talks turn unfriendly, increasing the chances of a hard Brexit, the pound could sharply depreciate against other major currencies.
The economic calendar this week is fairly light in terms of market moving economic data whereby also fundamental drivers are sorely lacking. Thus, we do not expect any major price swings in the coming days. However, let us be surprised and focus on the technical picture.
The euro recovered some losses against the dollar after it fell to a low of 1.1132. The recent sideways trend is however still intact with the pair’s price action remaining constrained to a range between 1.13 and 1.11. Given that bullish drivers are lacking, we need to be patient and seek to take potential profits at smaller targets.
The cable’s price action has further narrowed which is why we currently see chances of upcoming breakouts, although potential price fluctuations might be less dynamic. If the pound breaks above 1.2810 we may see the pair heading for 1.2850 whereas, on the bottom side, we will pay attention to a break below 1.2720 which could result in a slide towards 1.2650. Given the low-volatility environment we recommend not expecting too much and take profits even at smaller targets.
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We wish you good trades and many pips!
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