Dollar extends gains

GBP/USD and EUR/USD have declined in overnight trading as interest rate decisions from the UK and eurozone this week have given the dollar a head start. 

Euro and US dollar notes
Source: Bloomberg

GBP/USD at $1.54

The pound has dipped over the weekend against the dollar as the market eyes up the Bank of England interest rate decision and US jobs report on Thursday and Friday respectively.

The pound has been declining against the dollar in the past few trading sessions, driven by the strong core inflation rate from the US.

The currency pair has been in an upward trend since early February, and even though it has witnessed a pullback recently the $1.54 region is providing support.

At 9.30am (London time) the UK will announce the manufacturing PMI report for February, and the market is expecting a reading of 53.5 compared with January’s reading of 53. GBP/USD will encounter selling should the report fail to meet estimates, and this will perpetuate the downward trend since Thursday.

The pound is receiving support in the $1.54 region, and if this level is held the upside resistance at the 200-day moving average of $1.5436 will be the initial target, followed by $1.5460. If that mark is cleared $1.55 will be the next target. A move below $1.54 will bring the downside support at $1.5460 into play, and if it is punctured $1.53 will be on the radar.

EUR/USD sub $1.12

The euro has started the week on the wrong foot as the strength of the dollar combined with the European Central Bank’s government bond-buying scheme, beginning this month, have put pressure on the single currency.

Now that the Greek issue has been put aside for a few months traders will be focused on the eurozone CPI report that is due out at 10am, and the market is expecting a reading of -0.5%. The ECB has embarked on quantitative easing to combat deflation, and EUR/USD will experience selling should estimates be missed.

EUR/USD has been in a downward trend since May and there are no signs of it recovering. The $1.12 level is acting as resistance and if this is upheld the downside support at $1.11 will be brought into play. A move back above $1.12 will make the upside resistance at $1.1245 the initial target, followed by $1.13.

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