Dollar declines again

EUR/USD and GBP/USD have gained ground overnight as the dollar continues to retreat.

GBP/USD
Source: Bloomberg

EUR/USD holds $1.12
EUR/USD is trading at a level not seen since early March, and the move is almost largely down to the pullback in the greenback. As I stated yesterday, the update from the Federal Reserve was so vague traders are left in the dark as to when interest rates will rise.

For too long there was major pressure on the Fed to be hawkish in their outlook, and that we have had a spate of soft economic indicators, coupled with a slight dovish tone from the US central bank, traders are unwinding their long trades on the dollar. Dealers in continental Europe are on holiday today as it is May Day, and trading volumes and market volatility are anticipated to be low.

EUR/USD has been in an upward trend for over two weeks now, and $1.12 is acting as support, and the initial target is $1.13. A move beyond that will bring the resistance at $1.14 into play. If $1.12 is punctured, the 50-hour moving average of $1.1150 will provide support, and $1.11 will be the next level of support below that.

Sterling eyes 200 DMA
GBP/USD is knocking against the 200-day moving average (DMA) but it has failed to close above it. The rapid retreat in the dollar has given sterling a serious boost in recent weeks, and even though the GDP reading from the UK was not impressive, GBP/USD’s rally is not showing any signs of wavering.

We are less than one week away from the UK general election, and all sign are pointing towards to a hung parliament, but this hasn’t prevented GBP/USD from pushing higher. As Alastair McCaig stated, a survey for Bloomberg stated that most participants don’t foresee an interest rate hike from the US until September, and this hammers home the point that the upward move in GBP/USD is dollar driven.

GBP/USD is receiving support from the $1.5330/40 region and the 200-day moving average at $1.5487 is the initial target, and a move through would bring $1.54 into sight. A close above the 200-DMA would be s very bullish indicator. A fall below $1.5330/40 will put $1.53 on the radar, and a move through that will put $1.52 in traders’ minds.

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