General market theme
The recent euro and pound gains against the dollar have been the main theme of the currency markets in the past few days, but it seems that the European majors were not able to hold onto their gains. Yesterday the euro corrected to the downside, while the pound has reached fresh highs but seems unable to keep trading near these levels as the momentum behind these moves is diminishing.
Traders are focusing their attention towards the end of the week when fresh Fed comments will shed more light on the central bank’s plans, but we have to mention that there’s widespread mistrust on whether we should expect any fresh dollar strength.
Price action highlights
The euro edged above the 1.1350 level yesterday morning but immediately reversed lower as it was clear that profit-taking kicked in and traders liquidated part of their profits, driving the currency lower. The euro ended the day below the 1.1300 level where we find it this morning, and with little on the economic calendar we could expect limited price action for the day ahead.
The recent lows of the 1.1270 area where the 200-period moving average lies as well is the immediate support, and as long as the euro trades above that we should expect more sideways trading.
The cable rallied to the 1.3200 area yesterday morning and spent most of the day trading around that level. Overnight the currency corrected lower, and this morning it seems it could challenge the 1.3150 level where the short-term support lies. It will be interesting to see whether the pound can hold on to its recent gains or a deeper correction will erase most of the rally from the 1.3050 to the 1.3200 areas.
Focus of the day
The economic calendar is empty of any important events or reports today, and we should expect limited price action in the most important instruments. The UK Loans for Home Purchase and the US Mortgage Applications and Existing Home Sales report should keep traders busy today, but we don’t expect any reaction from the major currencies to these tier-2 economic reports.
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