Greek negations continue

EUR/USD dips as Greece seeks a loan extension and GBP/USD starts the week off on the wrong foot. 

Euro and dollar notes
Source: Bloomberg

Sterling slides over the weekend

GBP/USD has dropped in overnight trading as traders book their profits from last week’s surge. The upward trend that the pound has been in since the start of the month is showing signs of a correction.

This week is relatively quiet in terms of economic data for the UK. At 11am (London time) the UK CBI realised sales will be announced and the consensus is for a reading of 42. This compares with a reading of 39 in January, and should expectations be met it will trigger short-term buying.

The slightly hawkish comments from last week’s Bank of England report helped the sterling gain ground versus the greenback but the acid test will be the UK GDP estimate on Thursday, with the market expecting a reading of 0.5%. If the report comes in better than estimated it will give GBP/USD the next leg up in its upward trend.

GBP/USD is trapped between the 100- and 200-hour moving averages, at $1.54 and $1.5370 respectively. A move through $1.54 will bring the upside resistance at $1.5460 into play. If the pound drops below the $1.5370 mark, support will be found in the $1.5340 area, and if that mark is punctured then $1.53 will be the target.

Greece hoping for extension

Greece continues to dominate the headlines when it comes to the euro, and the nation will submit a list of reforms it is willing to implement today in exchange for an extension to its loan.

Greece has been in this situation many times in the past few years and a compromise has always been reached. This is why traders are not overly panicked by the situation in the medium term.

While the discussions over Greece’s financing continue the pressure will remain on EUR/USD. Tomorrow we are expecting statements from Mario Draghi and Janet Yellen at 2pm and 3pm respectively, and these updates will add to the volatility.

EUR/USD is currently trading in the $1.1340 region, and this area has been a level of support recently. If it is punctured it will bring $1.13 into sight, and beyond that traders will look to $1.1270. If the $1.1340 mark is held it will bring the upside resistance at $1.1375 into play, and the next level up to watch is $1.14.

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