Price action in the currency markets intensifies as traders are coming back from their Easter holidays and the main theme in the markets is the rise of the US Dollar once again. It is now clear that the market participants have shrugged off the weak US jobs report last Friday and instead found the temporary dip of the Dollar as an opportunity to buy lower.
The US currency quickly erased all losses on Monday and over the past 24 hours we’ve seen a further advance against the rest of the majors.
We believe that the key fundamental themes of Quantitative Easing and Greek debt risk in the Euro-zone and the unpredictable elections’ result in the UK will continue to weigh on the two European currencies. As such with the Dollar traders pilling up their positions in favour of the US currency we expect to see further gains for the buck and critical support levels in both the Euro and the Cable will be threatened.
The Euro traded down to 1.0800 yesterday where it found some support ahead of the key figure but the fact that traders disregarded the better than expected news from the Euro area signals that the bias towards the US Dollar is the main drive of the market. Further economic reports are expected today and it will be very important to see how the Euro will react to another test of the 1.0800 area as a successful break will open the door for further losses with the 1.0700 floor appearing as the next target.
The Cable was equally on the downside yesterday and tested the 1.4800 area before the end of the day. The UK currency was largely volatile during the morning trading session, traded sharply lower before making an attempt to correct but the general bearish bias drove it to the 1.4800 area by the end of the day. As we mentioned above the key support area of 1.4800 is under threat at this point and further uncertainty from the upcoming elections and the troubled Euro-zone could send the Cable below this area of support with the 1.4750 level coming up.
Over the next 24 hours we will have a number of economic reports coming in from the Euro area with the Retail PMI and Retail Sales reports featuring as the most important and it will be interesting to see how the Euro will react to them. The bias is bearish this morning and it could translate to further losses for the currency while the release of the FOMC minutes from the Fed is expected to add more pressure to the European currencies against the US Dollar.
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