Euro under risk of further decline today as German inflation might tick lower

Dollar continued gaining over its peers during yesterday’s session as the US GDP report printed in a bullish manner allowing the US currency to extend its gains. Over the past couple of sessions the Dollar has seen a significant correction higher after strong losses earlier in the month and what remains to be seen is how traders will react as the September Fed meeting is approaching.

Today the focus will be on Europe and the release of the UK Gross Domestic Product levels and the German inflation report that could help the two European currencies recover versus the Dollar. However although analysts are calling for a steady UK GDP release the German inflation levels are expected to show weakness over the last month and that might weigh down on the Single currency.

As we mentioned above, the Euro continue being under pressure over the past 24 hours as the recent string of US-related reports has helped the Dollar mount a reversal towards higher levels. The Euro ticked as low as 1.1200 yesterday having dropped 500 pips since the beginning of the week.

It seems that as quickly as the Euro climbed higher over the temporary Dollar weakness last week it gave up its gains in an equally swift manner. Now the Euro seems oversold and even though a lower reading in the German inflation report might drive it even lower we should be aware of the fact that any losses might be hard to be sustained.

The Cable was also under pressure yesterday and the sell-off continued driving the UK currency to the 1.5400 area. From a technical perspective the currency pair is strongly oversold and a correction would be justified but we need to remain cautious as the August volatility might drive currency pairs in wild swings. The UK GDP release today might provide some spark for traders but for the Cable to really mount a reversal the figure to overcome is the 1.5500 resistance level.