Forex snapshot

The pressure of US dollar strength against both the pound and the euro looks to be easing at least in the short-term.

Pound and dollar currency
Source: Bloomberg

GBP/USD could reach $1.58

GBP/USD has now seen over 200 pips added over the last week as the five-month move lower finally looks to be becoming exhaustive. The month of December might be quieter in terms of equity trading volumes, but is arguably the most important for the retail markets. Retail sales in the run up to year-end will help analysts interpretate how strong consumer confidence is.

OPEC’s meeting today will also be watched by currency traders as the perception that the OPEC nations will not reduce output could see oil continue to collapse and global inflation continue to drop.

For the time being, a rangebound trading pattern between $1.56-$1.58 could emerge as a lateral move materialises waiting for either moving averages to move lower, or a shift in the trend of economic data releases from the US.

EUR/USD could find support at $1.24

Inflation is an even bigger issue for the eurozone as it is for the Bank of England and the consequences of today’s OPEC meeting and production levels will have ramifications on  EUR/USD too. The trend of stronger US economic data, and slightly worrying eurozone economic data, has been in place for some time and the markets are becoming increasingly immune to the seemingly one-way traffic.

The European Central Bank is in a holding pattern at the moment as it has already embarked on both an asset-backed purchasing scheme, and targeted LTRO’s but neither has been running long enough for the markets to feel their full benefits.

The $1.24 level has proven to be supportive for EUR/USD, but with the 50-day moving average already creeping below $1.26 it is difficult to argue too convincingly for a move higher.

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