Recently there was little consistency in the performance of the U.S. dollar and even improving economic data with a stronger rise in CPI data failed to encourage dollar bulls. While the market is still sceptical about the prospects for tightening by September, Federal Reserve officials take a hawkish tone in order to direct the market's speculation towards earlier tightening this year. Atlanta Fed President Dennis Lockhart said that he currently assumes two or even three rate increases in 2016. This means that a possible June or July hike is not off the table, even though market participants refrained from pricing in such move.
The minutes of the Federal Open Market Committee's last meeting may shed further light on the debate about earlier rate hikes. Investors currently see less than 23 percent chance policy makers will raise interest rates at either of the Fed's next two meetings. As the Fed is unlikely to surprise the market with an unexpected move in June or July Fed officials would rather be inclined to increase the odds in favor of an imminent rate hike than bolstering the case for a moderate pace of tightening. However, given the recent low-volatile trading environment, the FOMC minutes could possibly fail to trigger larger market moves. Let's wait and see.
The FOMC minutes are scheduled for release at 18:00 UTC.
Before shifting the focus to the minutes, the U.K. labor market report due at 8:30 UTC and Eurozone Consumer Prices at 9:00 could have a short-term impact on the currency pairs.
EUR/USD
The euro drifted lower and is now facing the 1.1270-barrier. If the euro breaks below that level we might see a drop towards 1.1230/20. A significant break below 1.12 could even drive the pair towards 1.1110. Current resistances are seen at 1.1330, 1.1360 and 1.1415.
GBP/USD
The cable marked a current resistance at 1.4525 from where it bounced back. We will now focus on a break below 1.4385 in order to sell GBP towards 1.4305 and 1.4280. Above 1.4530 we favor a bullish bias targeting at 1.4620.
Here are our daily signal alerts:
EUR/USD
Long at 1.1326 SL 25 TP 35, 100
Short at 1.1270 SL 25 TP 35, 100
GBP/USD
Long at 1.4470 SL 25 TP 40, 130
Short at 1.4430 SL 25 TP 40, 120
We wish you good trades and many pips!
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