Euro and Pound correct to the upside but the outlook remains unchanged

The theme in the currency markets during the first 24 hours of trading this week has been a slight correction against the US Dollar. The US currency has given up some of its recent gains against the Euro and the Pound during the first session of the week as there has been little in terms of fresh news to spur the Dollar to new highs.

As a result the likes of the Euro and the Pound found the opportunity to breathe a bit easier yesterday but does that alter the sentiment? We believe that it has nothing to do with the way traders are thinking and with what we should expect as we move further into the week. Until we find otherwise the bias remains in favor of the Dollar, especially now that December is here and it’s time to find out what the Fed will finally do with raising interest rates.

Today the session ahead promises interesting price action as we will have the opportunity to receive fresh data from various sources around the world. The release of the German Unemployment data in the morning followed by the Manufacturing PMI levels from the UK are bound to get a reaction from traders and especially the UK report is expected to print in a bearish manner casting doubts over the Pound’s outlook. Later in the day the Manufacturing ISM index from the US is eyed to print higher so the stage is set for fresh gains for the Dollar if reports don’t miss their marks.

Regarding yesterday’s price action, the Euro edged lower but didn’t find enough support to continue to the downside. The 1.0560 lows limited the Euro’s short-term outlook but if today’s reports reveal further weakness we should expect fresh losses from the Single currency. It is a fact that these losses come harder every time as the Euro is oversold and traders are waiting for a confirmation to sell the currency even more but that sentiment remains to the downside and any corrections higher should only be treated as opportunities to sell the Euro at a higher price.

The Cable was on a corrective course yesterday since the Dollar took a back seat and the UK currency managed to rally for about 100 pips making it to the 1.5100 level. As we mentioned above the lack of any fresh news and the overbought state of the Dollar has allowed the other majors to pick up some gains and breathe a bit easier but today the pressures might return. The release of the Manufacturing PMI report from the UK is expected to print in a bearish manner and that should not bode well for the Cable that will probably look to test its previous lows.