Dollar drifts sideways

GBP/USD and EUR/USD are trading sideways as a lack of economic announcements forces dealers to wait on the sidelines.

A pound atop a dollar note
Source: Bloomberg

GBP/USD eyes 50-DMA

Sterling was been trading within the tight range of $1.52-$1.5260 this week, and the market is preparing for the Bank of England inflation report tomorrow at 10.30am (London time). Mark Carney is expected to issue a deflation warning that will subsequently put major pressure on GBP/USD. The eurozone is the UK’s largest trading partner and the region is already experiencing negative inflation growth; now a similar problem is seeping into the UK.

Looking at the relative strength index indicator, GBP/USD is right in the middle of the aforementioned trading range on both the daily and hourly chart, and this sums up how lackluster trading has been. The pound has been in a downward trend since July, and even though we have seen some signs of recovery from it, there is no evidence to suggest the trend is changing.

The 50-day moving average at $1.5285 is acting as resistance, and if this level is held the downside support at $1.52 will be brought into play. If the pound clears the 50-DMA, this metric will then act as support and the upside resistance at $1.5340 will be the target.  

Greek debt talks continue

EUR/USD has been subdued this week as all eyes are on the battle between Greece and the rest of the eurozone over its debt position.

Today eurozone finance ministers will meet in Brussels to discuss Greece’s future, and the showdown between Yanis Varoufakis and Wolfgang Schauble will be the focus of traders’ attention. Mr Varoufakis has no intention of scrapping his anti-austerity policies, while on the other hand Mr Schauble has stated that if Greece does not abide by the existing bailout then it is ‘over’ for the country.

EUR/USD is still in its downward trend and any moves higher will encounter resistance at the 200-hour moving average of $1.1360 – if this level is cleared $1.14 will be the target. The downside support at $1.1280 is the initial target, and should the level be punctured $1.12 will be brought into play. 

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