Yesterday we talked about the diminishing momentum behind the US Dollar over the past few days and called for a possible reversal in the major instruments’ outlook. Indeed it was pretty clear from a technical standpoint that the Dollar that has enjoyed a nice string of positive sessions seemed to have lost the drive behind its recent rally and could do with a small correction.
And this was the case yesterday, at lease for most of the instruments that we monitor. The Dollar gave up some of its recent gains against the Euro and Gold but posted fresh ones against the Pound, at least temporarily. The reason behind the further decline of the Cable was not that the Dollar itself dragged the pair lower but rather the disappointment traders tasted after the release of the UK GDP report.
Taking a quick look at the technical outlook, the Euro mounted a slight correction against the Dollar yesterday even though the sentiment concerning Greece still remains bearish with the country struggling to make its IMF payment. The Single currency overcame the 1.0900 barrier and is trading around the 1.9050 area this morning with limited momentum behind this move. The first target for the Euro stands around the 1.1000 area where the suppose behind this correction higher will be tested.
The Cable on the other hand was supposed to be the focus of the day yesterday with the release of the British GDP levels that were supposed to print higher and send the Pound climbing against its US counterparty. However to our surprise the report printed lower than expected sending out a wave of disappointment among traders. This development pushes away again any chances for a 2015 rate hike and the Pound will suffer on the back of that on the medium term.
During this last session of the week the focus will mostly be on the US and the release of the GDP report that could provide the spark for some last minute volatility in the markets. The sentiment is towards the Dollar but the recent rallies have been overextended and a correction could come as a natural development. Any retreats in the US GDP report will provide a fundamental trigger for the correction to pick up some momentum.
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