Dollar dominance continues

GBP/USD and EUR/USD are offside today as the greenback extends its gains from yesterday’s trading session.

A man counting euro and US dollar notes
Source: Bloomberg

Sterling slips again

The upward move in GBP/USD over the month of February was ground to a halt yesterday when the US core inflation figures came in ahead of analysts’ estimates – 0.2% vs 0.1% expected. Adding to the pound’s problems were the comments from Federal Reserve member James Bullard, who stated the US central bank should drop the word ‘patient’ from its statement.

We are not anticipating any economic announcements from the UK today which means the trading session will be driven by US data, and we are expecting US CPI and the University of Michigan consumer sentiment at 1.30pm and 3pm (London time) respectively. These reports will give us a better indication of the state of the US economy, and whether an interest rate rise in the middle of the year is on the horizon or not. GBP/USD will decline should expectations be met.

The 200-hour moving average of $1.5430 is acting as resistance, and if this level is held it will make $1.54 the initial target; a move through this level brings $1.5340 into sight. However, a move above the 200-hour MA will bring the upside resistance of $1.5460 into play, and beyond that traders will look to $1.55.

Euro eyes $1.12

EUR/USD has made a minor recovery in the wake yesterday’s collapse. The single currency has been under the pressure over the past month due to the political and financial uncertainty surrounding Greece, and now the euro is being squeezed by the prospect of an interest rate rise in the US.

Germany will reveal its preliminary CPI report for February at 1pm (London time), and the market is expecting a reading of 0.6%; this compares with a reading of -1.1% in January. The bias is still to the downside for EUR/USD, but we will see a pullback if German inflation swings back into growth territory.

The $1.12 level is acting as support and a drop below it will turn the level into resistance, bringing the downside support at $1.11 into sight. If $1.12 is maintained, the upside resistance at $1.1280 will be the target followed by $1.13. 

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