General market theme
The selloff in the major European currencies remained the main theme in the currency markets yesterday with the euro and the pound extending their losses against the US dollar. The sentiment has been bearish throughout the week, a week that started slowly with a lack of any important news or reports but was later market by the terrorist attacks in Brussels that took their toll on the trading sentiment.
Fundamentally the euro and the pound don’t share the same bias and that’s why we see a different extent in their declines. The euro has seen less bearish bias hence the drop is more or less around 200 pips while the pound has been under considerable pressure from discouraging reports and the threat of a Brexit that the decline has been running for more than 400 pips since the beginning of the week.
Price action highlights
The euro extended its losses yesterday edging even lower than the 1.1200 level and this morning the currency is trading just shy of the 1.1150 area. The momentum that is driving the euro lower is not the strongest one however since market participants have no reason to back the Single currency at this time the decline goes on. The 1.1150 area is considered an important area of support and we might see the downtrend finding some trouble overcoming it especially ahead of the Easter holidays as most markets will remain closed tomorrow and Monday. At any case we should not put any stock behind the current decline as it lacks any fundamental backing so it could reverse at any point.
The cable on the other hand has enough backing in terms of fundamental drivers behind the extended decline with the possibility of the UK exiting the EU being a very real scenario. Yesterday London mayor Boris Johnson continued his campaign on the Leave vote and his comments always take a toll on the pound that today also has to tackle the release of the Retail Sales report. The consumer demand figures are expected to print in a bearish manner and we could see further as the cable is trading near last week’s lows at 1.4050. Next support lies at the 1.4000 and 1.3900 areas should the cable continue its drop.
Focus of the day
Today the economic calendar holds 2 important reports that we should pay attention to: the release of the UK Retail Sales figures as we mentioned above and the printing of the US Durable Goods Orders. A bearish Retail Sales report will add to the pressures of the pound while a potential lower Durable Goods reading could shave off any momentum in the dollar that has been gaining against the euro and the pound this week.
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