Is The U.S. Dollar Vulnerable To A Correction This Week?
MaiMarFX | May 23, 2016 07:30AM ET
We welcome you to a new trading week. Last week, the market was driven by renewed Fed tightening expectations, which led to broad-based dollar strength.
Federal Reserve policymakers raised the prospects of policy tightening at one of the central bank's next two meetings, and market participants are now wondering whether the dollar trend could carry over into this week.
The economic calendar this week is pretty light, with no major risk events in the days ahead. The most important pieces of U.S. data will be Durable Goods Orders (Thursday) and GDP numbers (Friday).
Furthermore, there will be some Fed speak due throughout this week, underpinning the central bank's hawkish stance. Fed President James Bullard is scheduled to speak in Beijing today, while Fed chair Yellen will speak at Harvard University on Friday.
From the Eurozone, we have PMI reports, GDP figures, ZEW and IFO indices scheduled for release within the first three weekdays.
We currently see a higher likelihood of some upward moves in the EUR/USD, driving the euro towards 1.1345 and 1.1445. In case the euro falls below 1.1140, we see a next target at 1.1105 before heading towards 1.1050 and 1.10.
The German Manufacturing PMI is scheduled for release today at 7:30 UTC, followed by the Eurozone PMI report. A stronger-than-expected report could drive the pair towards 1.1290. If the EUR/USD marks prices above 1.13, chances are that the pair could test the resistance area around 1.1340.
GBP/USD
The British pound declined sharply last Friday but was able to stop its fall slightly below 1.45.
Uncertainty ahead of the U.K. referendum continues to dominate the price action in the GBP/USD, and sterling reacts very sensitively to any new polls. The most important piece of U.K. data will be revisions to first-quarter GDP numbers on Thursday.
From a technical perspective, it should now be interesting whether the pound remains within its recent uptrend channel or breaks below 1.4470, which could lead to a slide towards 1.44.
However, above 1.4575, the pound could head for a test of 1.46 and 1.4635.
Get The News You Want
We wish you a good start to this week and many green pips.
Here are our daily signal alerts:
EUR/USD
Long at 1.1265 SL 25 TP 20, 60
Short at 1.1190 SL 25 TP 30, 60
GBP/USD
Long at 1.4560 SL 25 TP 40
Short at 1.4480 SL 25 TP 40, 70
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