The U.S. dollar regained some of its strength, pushing the euro and cable lower. While the euro stopped its fall slightly above 1.0560, the British pound turned out to be Monday's worst performer and dropped towards 1.2385. British companies are increasingly pessimistic about the future outlook and with the Brexit debate intensifying, the pound remains vulnerable to larger losses.
As long as the pound trades below 1.2560, we see a higher likelihood of a bearish breakout in the GBP/USD but we recommend traders waiting for a break below 1.2350 in order to sell sterling. On the topside, a crucial resistance is seen at 1.2550 and sterling may need to overcome this barrier significantly in order to reinvigorate fresh bullish momentum.
European Central Bank President Mario Draghi warned that Britain, rather than the Eurozone, would be the first to suffer from the consequences of a Brexit. When speaking at the European Parliament in Brussels on Monday he described a cocktail of political risks hanging over the global economy, including the Brexit vote, Donald Trump's election and the looming Italian referendum. Draghi also signaled the ECB's readiness to continue its monetary stimulus. At the ECB meeting next week, the central bank is widely expected to announce an extension of its bond-buying program.
EUR/USD - Interesting chart formation
While there are good arguments for both bulls and bears favoring one direction or another, it should be interesting in which direction the euro may be heading within the next days. Given the uncertainty ahead of the Italian referendum, the risk is to the downside but with investors staying on the sidelines in the run-up to the important vote on Sunday, the euro could also trade directionless sideways.
For the time being, we expect the pair to range-trade between 1.0670 and 1.0570. Above 1.0670 it may head for a test of 1.0710, whereas a break below 1.0560 may invigorate fresh bearish momentum towards 1.0470.
Important economic data for today:
13:00 EUR German Consumer Price Index
13:30 USA GDP
15:00 USA Consumer Confidence
(Time zone: UTC)
Here are our daily signal alerts:
EUR/USD
Long at 1.0675 SL 25 TP 20 - 30
Short at 1.0570 SL 25 TP 20, 40
GBP/USD
Long at 1.2420 SL 25 TP 20, 40
Short at 1.2380 SL 25 TP 17, 40
Daily Signal performance in pips:
November 2016:
EUR/USD: +242 pips
GBP/USD: +316 pips
We wish you good trades and many pips!
Disclaimer: Any and all liability of the author is excluded.