Dollar shakes off GDP number

EUR/USD and GBP/USD are both in decline today as the greenback regains its strength in the wake of Friday's soft growth numbers.

Source: Bloomberg

Greece default looms
Greece is heading towards bankruptcy unless it can reach a deal soon with its creditors. The nation must make a repayment on Friday 5 June – this is also the day the current bailout programme expires. It’s the same old story with Greece, and Athens needs to agree to certain austerity measures in order to unlock the next trance of the bailout which will go towards repayment. While no deal has been agreed upon, EUR/USD will remain under the cosh. 

The US job report on Friday will be the highlight of the trading week, especially when you consider the negative first-quarter growth numbers from the US last week. The strength of the greenback is being called into question as an interest rate rise from the US seems less likely this year on the back of first-quarter GDP numbers.

EUR/USD has been in a downward trend for over two weeks now, and the support at $1.08 is the initial downside target. If that mark is cleared, $1.06 will be the next level of support. Currently acting as resistance is $1.10, and if that level is taken out $1.12 will be the next barrier to a rally.

Pound drifts lower
GBP/USD has resumed its trend lower, and even though the pound received a small boost on the back of weak US growth numbers on Friday, it was short-lived. As I previously stated, it will be difficult to for the Federal Reserve to justify an interest rate rise this year when the US economy contracted in the first-quarter. The US is still ahead of the UK when it comes to raising rates first, but now the gap is narrowing between countries.

The Bank of England will announce its monetary policy on Thursday, and the market is expecting no change to the current policy of interest rates at 0.5% and the bond buying scheme at £375 billion. As the Fed wound down its quantitative easing scheme, this keeps it ahead of the BoE in the interest rate race for now.

GBP/USD has been in a downward trend since mid-May, and $1.53 is acting as resistance. If this mark isn’t cleared, the support at $1.52 will be the target, and a move through that mark will bring $1.50 into play. A move above $1.53 will bring the resistance at $1.54 into sight.

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