European majors on the brink of reversal as Dollar's momentum slows down

The Dollar was once again king in the currency markets over the past 24 hours and the US currency was able to extend its recent gains against its main competitors. The current bias in favour of the Dollar has allowed it to perform admirably against the likes of the Euro and the Pound marking a 7-day rally versus the European coins.

Yesterday was no different as the Economic Calendar didn’t offer much in terms of fresh news hence price action continued on the same pro-Dollar beat. However we need to point out here that the technical indications on the Euro and the Cable do paint a slightly different image as the momentum that drove them both to fresh lows seems to be diminishing and that could be a precursor towards an upcoming reversal.

Taking things on at a time, the Euro came under fresh pressure yesterday morning and dipped to the 1.0820 level during the European session while concerns about Greece’s ability to meet its IMF payment by the end of the week resurfaced. However it is important to notice that during the rest of the day the Euro was able to recover from these lows and this morning we find it trading around the 1.0900 area.

The technical indications suggest that a correction to the upside is possible and could actually be justified after such an extended rally in favour of the Dollar. For the Euro to break above the 1.0930 barrier though and pick up momentum a fundamental trigger would be required. In terms of scheduled reports there’s little on the docket today but any glimpse of positive developments, possibly from Greece’s front, could spark a move towards the 1.1000 area.

Technically similar outlook for the Cable today as the UK currency declined again yesterday after a brief correction overnight. The Cable tested the 55-period EMA around the 1.5435 area but quickly collapsed to print a fresh low at the 1.5300 floor. Nevertheless the Cable could see a reversal today as the release of the UK Gross Domestic Products report is expected to print higher. Given that the momentum to the downside has already shown signals of decay a move towards the 1.5450 area could be in the cards.