Bulls take dollar profits off the table

USD bulls could be cashing in year-long positions, as questions over the eurozone remain largely unanswered.

Wall Street bull
Source: Bloomberg

Sterling chops higher

GBP/USD is trading marginally higher in pre-London open markets, continuing to chop higher in a tight consolidation pattern which sees a lower-band of consolidation at 1.5690 with topside resistance at 1.5741. This has been breached already on Monday, but has subsequently failed to post a close bar above said level. Positive CBI Industrial Trends Orders data, released on Monday at 11:00 GMT, will likely see a re-testing of the upper-bound of consolidation, which if broken will see a possible move higher to 1.5770.

Later during Monday’s trading session we will see the release of US industrial production figures, where market expectations anticipate a rebound to 0.7% from its previous level of -0.1% month-on-month.

With the last full week of trading upon us, as well as taking into consideration previous short-term weakness, it’s possible that year-long USD bulls are taking profits of the table heading into the years end. 

Euro bears unwinding positions

A similar story can be seen in EUR/USD, which is unfolding in a relatively lethargic move higher within a tight range. The euro has fallen foul to overwhelming dollar strength on the back of an expectation from the market that the European Central Bank will in fact engage in an explicit round of bond purchases in a US-style quantitative easing policy. However, the market front-running the ECB may have overdone the bearish move on the euro and could now be seeing some short-covering should announcements in Q1 2015 once again disappoint bears.

Immediate risk ranges present themselves at 1.243 to the downside, which, should a close bar be seen below, could result in a move to 1.241. However, with an RSI just greater than 50, should the 1.243 level hold then a re-testing of overnight highs of 1.247 could be seen.

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