Euro and Cable holding above important support levels as Dollar gains

Price action during the past 24 hours has been relatively quiet and without any surprises as the Dollar is once again in the driver’s seat versus the rest of the majors. In our previous report yesterday we made the case of why the US currency has returned strong and explained why last week’s correction was more of a technical move rather a reaction to any fundamental changes.

This week we expect the Dollar to remain in charge against its major peers and the only thing in our mind that could cast any doubts is whether the currency remains overbought. Both the Euro and the Pound are trading near important technical support levels this morning and the bias is bearish for both of them but the question still remains: are there enough Dollar buyers out there to push them through?

Today the focus will on Europe for the first part of the day as the release of the IFO Survey in the morning and BoE Carney’s testimony to the Treasury Committee will attract traders’ attention and the outcome of both events will dictate the price action. Both the Euro and the Pound are trading near important levels as we mentioned above and are bound to react to these events. Later in the day the US GDP report and Consumer Confidence levels will offer more data for Dollar traders to build their portfolios ahead of the upcoming Fed meeting next month.

Taking a look at the technical outlook, the Euro is trading above the 1.0600 level this morning having found some support ahead of this important area at least for now. The sentiment in the Euro is bearish and with the ECB ready to ease further the medium-term target remains the 1.0500 area. However this might not come as easy as one might think and today’s IFO Survey could fuel a correction especially if the Dollar is overbought as a couple of weeks ago. Any corrections though should be capped by the 1.0700 area and will only be opportunities to sell Euros higher.

The Cable is in a similar outlook with the Euro trading above the 1.5100 level this morning having dropped from the 1.5300 highs of last week. This morning’s testimony by BoE Governor Carney could take its toll on the currency depending on the tone he will use and whether his remarks will focus on the positives or negatives of the domestic economy. At any case the resistance of 1.5200 is what limits Cable’s outlook this morning and it will take a lot of effort to drive it above that while the 1.5020 lows are the target to the downside if Pound breaks into fresh lows.