U.K. inflation accelerated more than expected and the pound surged to a high of 1.2474. While we expected some upcoming upward movement this morning, we doubt that this short squeeze will be sustained. Investors are now pricing a rate increase by summer 2018 but the imminent Brexit trigger next week could limit gains in the pound. Prime Minister Theresa May will trigger Article 50 of the Lisbon Treaty on March 29 to start the two-year negotiation process for leaving the EU. A hard Brexit will be negative for the currency, so traders should prepare for downward movements in the medium-term.
However, day traders benefited from the fresh bullish momentum and thus, we were able to realize a good profit.
The euro broke above 1.08 after Emmanuel Macron won the first French presidential election debate, easing political fears in the Eurozone. Traders now wonder how high the euro might go. We still see a near-term barrier around 1.0825. If the euro however breaks above 1.0830, it may head for a test of the resistance level at 1.0850/70. There are no major economic reports scheduled for release from the Eurozone. The price action could therefore be limited to a range of 1.0830 - 1.0680.
From the U.S., there are several Federal Reserve officials speaking throughout this week. Any hawkish comments could have a positive impact on the U.S. dollar.
Daily Forex Signals:
EUR/USD
Long at 1.0785 SL 25 TP 30-35
Short at 1.0710 SL 25 TP 20, 40
GBP/USD
Long at 1.2390 SL 25 TP 20, 80
Short at 1.2320 SL 25 TP 20, 60
We wish you good trades and many pips!
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