The euro experienced a strong increase of more than 3 percent versus the USD following last week’s ECB minutes that hinted at a potentially faster than previously anticipated QE exit. Moreover, signs that progress is being made in German coalition talks bode well for the single currency. The euro climbed steeply and stabilized well above 1.22.
The focus now shifts to the final Eurozone inflation print of 2017 due tomorrow. If inflation data comes in at 1.4 percent y/y from 1.5 percent y/y it could give traders an excuse to take profit on euro long positions, leading to a short-term correction in the euro’s strong uptrend.
Also, the British pound strengthened against the U.S. dollar on encouraging Brexit news and jumped above 1.38. The pound rose steeply against the weak U.S. dollar ahead of today’s U.K. inflation numbers. The CPI figure (due at 9:30 UTC) is expected to tick down to 3.0 percent but given the strong uptrend, sterling bulls could be looking for an opportunity to buy GBP at lower price levels.
The U.S. dollar, however, is burdened by the general market trend that capital is flowing to riskier assets and other economies that are looking to normalize their monetary policy even if other central banks are not on the same rate hike path like the Federal Reserve. Given the increased risk appetite, USD weakness could continue over the medium-term even though the dollar’s outlook is not negative.
The technical picture in the EUR/USD and GBP/USD looks pretty much the same.
The uptrend is strong while USD weakness dominates but near-term corrections are becoming more likely as both pairs approach overbought territory, shown in the RSI chart.
Here are our daily signal alerts:
EUR/USD
Long at 1.2310 SL 25 TP 30, 60
Short at 1.2240 SL 25 TP 20, 40
GBP/USD
Long at 1.3820 SL 25 TP 30-40
Short at 1.3775 SL 25 TP 30-40
We wish you good trades and many pips!
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