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Dollar’s bull run stalls

The dollar has experienced a pullback after its exceptional move higher on Friday, and this has propped up GBP/USD and EUR/USD.

Dollar and euro notes in a pile
Source: Bloomberg

Sterling ticking higher

GBP/USD has made a small recovery over the weekend as the dollar pauses from its upward trajectory. The gains that the currency pair made in February have been nearly wiped out this month, and the pound has fallen back into the downward trend that it has been in since June 2014. We are not expecting major economic announcements from the UK or the US today, and market volatility is not expected to be high.

Mark Carney and Ian McCafferty are due to speak tomorrow at 2.35pm and 6.30pm (London time) respectively, and the commentary will be carefully watched by the market. Mr McCafferty is one of the more hawkish members of the Bank of England, and he could trigger short-term buying if he expresses hawkish sentiment.

GBP/USD is still in last week’s downward trend with the first downside target at $1.50, and if that level is punctured it will bring $1.4970 into sight. The upside target is $1.51, and beyond that traders will look to the 50-hour moving average of $1.5160.

Spot FX GBP/USD chart

Euro edges up

EUR/USD plummeted to an 11-year low on Friday following the strong non-farm payrolls number, but we have seen a small correction over the weekend. As Chris Beauchamp stated, the announcement of the government’s bond buying scheme on Thursday coupled with a drop in US unemployment weighed on the single currency. EUR/USD has been in a downward trend since May 2014 and the decline has been accelerating recently.

The currency pair is oversold on a daily basis, and this suggests a further pullback with $1.09 as the initial target. If that level is cleared it will bring $1.0950 into sight. The downside target is $1.0840, and a move below this will bring $1.08 into play.

Spot FX EUR/USD chart

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