Dollar extends gain

GBP/USD and EUR/USD lost ground in overnight trading as the dollar continues to dominate.

Pound coins and a dollar note
Source: Bloomberg

Sterling sub-$1.50

The pound has dropped to its lowest level versus the dollar since July 2013 as the greenback surges in the wake of the European Central Bank’s quantitative easing announcement. The demise of the pound has been dollar-driven, and the downward trend that GBP/USD has been in since July has accelerated as the market seeks the security of a safe haven currency.

The UK will release the retail sales for December at 9.30am (London time) — the consensus is for a decline of 0.6%. The Christmas period is the busiest in the year for the retail calendar, and should estimates be missed it will add to sterling’s woes.

The pound is currently trading below $1.50, and if resistance is held at this metric, $1.49 will be the target. The relative strength indicator on the daily chart is in oversold territory leaving potential for a pullback, while the 50-hour moving average of $1.51 will be in sight.

 

GBP/USD chart

EUR/USD at 11-year low

The euro has dropped to its lowest level against the dollar in more than a decade as the stimulus package from the ECB sends the single currency into a downward spiral. Even though the decision by Mario Draghi was well anticipated, there has been no let-up in pressure applied to the euro. As Chris Beauchamp stated, Germany opposed the move but Mr Draghi got his way in the end and this will keep EUR/USD in its downward trend.

The next major hurdle for the euro to overcome is the Greek election — as Brenda Kelly stated, Greece is close to leaving the eurozone. The polls still put Syriza, the anti-austerity party, in the lead and a victory for the left-wing party at the weekend will drive EUR/USD lower.

The daily and hourly RSI are both in oversold territory, and this could lead to a short-term snap back which would see the 50-hour moving average at $1.15 brought into play. If resistance at $1.14 is held, the market will look to $1.13 as the target. 

EUR/USD chart

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