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Dollar continues to reverse off highs

The dollar is on the back foot as positive German data lifts EUR/USD while bullish GDP expectations drive sterling higher. 

Pound coins and a dollar note
Source: Bloomberg

Euro sees back-to-back gains

EUR/USD is up 0.25% on the day, currently trading at $1.1280, having touched a low of $1.1224 in overnight trading as markets continue to price in the fall out of the recent Greek election. The Syriza victory could have wider implications for the single currency union should the newly elected party break the terms of its IMF loans.

Helping to prop up EUR/USD was Germany’s Ifo business climate index data, which came in at 106.7, up from its previous level of 105.5.

EUR/USD is being supported higher by its 50-hour moving average, currently trading at $1.1229 – a level likely to continue to act as an area of strong support. Topside resistance of $1.1291 is being tested at present, and if this fails to hold we could see a move higher with targets at the 100-hour MA at $1.1374.

Spot FX EUR/USD chart

Sterling bulls front-run positive UK GDP data

GBP/USD has continued to push higher on Tuesday, currently trading at $1.5088, adding 0.02% at the London open as support continues to come in ahead of today’s preliminary UK GDP data at 9.30am (London time). This is expected to show an increase of 2.8% from 2.6% year on year, with a quarter-on-quarter increase of 0.6% from 0.7%. However, should bullish expectations be met, any gains may be capped by the later release of US core durable goods orders at 1.30pm, which are expected to show a sharp rebound to 0.6% from -0.7% month on month.

Upside moves in GBP/USD are currently being capped by the 200-day moving average, at $1.5112, an area which price action has recently failed to push through and if this continues to be respected we could see a retest of $1.4972. If the 200-hour MA is broken it could lead to $1.5253.

Spot FX GBP/USD chart

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