FX Snapshot

EUR/USD and GBP/USD still look likely to move higher in the medium term.

EUR/USD upward bias remains

A two-month high in the German Ifo index has provided a short-term bounce for EUR/USD, but yesterday’s high of $1.3850 remains a bridge too far for the time being.

On an hourly chart, we can see that plenty of support lies either side of $1.38, at $1.3810, $1.3800 itself and $1.3790. The European Central Bank continues to be the prime mover here, with investors expecting no action from the central bank to combat persistently low inflation. A speech by Mario Draghi today may lead to some profit-taking in the short term, but overall the upward bias remains in place.

As a result, I would still look to see $1.39 in the near term, driven by increasing risk appetite and a general weakening of the US dollar, although a retest of the 100-day moving average around $1.3724 cannot be ruled out.

200-hour MA supports GBP/USD

Upward progress has stalled here for the time being, as the currency pair holds below $1.68 for a second consecutive day. However, yesterday we saw the selling of GBP/USD peter out towards $1.6760 and at present, the 200-hour moving average provides support. Bank of England minutes as usual were fairly irrelevant to the price action, with the recovery of the 18 April low of $1.6780 signalling once again that this is a currency pair that is in no mood to go lower.

So long as we continue to hold above the 200-hour MA then $1.6900 becomes the target to look out for. Sterling’s upward trend against the dollar is still in effect, and the 2009 highs are just a short distance away. 

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