The euro traded higher on dollar weakness and the fact that European Central Bank (ECB) president Mario Draghi foregoes another rate cut as the eurozone continues to struggle, skipping alone the bottom of global growth expansion.
The recent run-up has more to do with worries about a taper opposed to positive anything out of the euro-bloc. The daily chart show strong price action moving to the topside of an ascending triangle. The strong rally from 1.3545 led right to the top resistance trend line. Early Asian trading will likely create a pullback from current levels.
If tomorrow’s data out of the US is strong, risk assets will take a hit, and so will the euro. Look for a strong pullback to the supporting trend line, reverting yesterday’s gains. Otherwise, the eurodollar could breakout of the top and challenge 1.37 and potentially 1.3745.
The GBPUSD lost momentum after breaking the yearly highs as it stagnated in the supply zone first issued in “GBPUSD Trading Towards a Triple Top.” The previous analysis indicated that traders should “look for the pound to trade higher on general dollar weakness into the supply zone, failure to break out of this zone to the topside could be dangerous for pound bulls.”
The daily chart shows lost momentum at the candle that made the daily high quickly sold off. The preceding candle attempted to reach the previous levels, but it also quickly sold off and led into the current pullback.
As mentioned, the GBPUSD got ahead of itself as bullish traders were looking for Bank of England (BoE) Governor Mark Carney to raise rate even those Carney’s targets were not hit. He did not increase rates and reaffirmed his position, and the Sterling sank.
Look for price action to pullback to support at 1.6260. Depending on news out of the US, the pound could trade higher to 1.6340 if the dollar continued to selloff. However, targets of 1.6152 and 1.6070 are favored to the downside as positive labor force data in the United State is speculated given data leading up to tomorrow’s release.