The new week began with a correction in the market with the euro giving up some of its recent gains in the early trading hours while elsewhere, crypto investors are waking up with a sore head after the latest ‘peak party’ in the biggest cryptocurrencies.
This week the focus will be on the European Central Bank on Thursday. The ECB is expected to keep its policy unchanged but the tone of the press conference may offer some hints on the plans to pare back monetary policy support. However, a full assessment of the pace of asset purchases will not happen until June, so it’s probably too soon for a debate about a policy shift and bond-buying to be tapered.
The took out the 1.20-barrier this morning after it corrected some of its recent gains. We expect gains could be limited until 1.2025 in short-term time frames. Euro bulls could better wait for a break above 1.2060 in order to buy euros towards 1.21 and 1.2170.
On the downside, we see a current support at 1.19. If the euro falls below 1.1890, we will turn our focus to a lower support area which ranges from 1.1875 to 1.1835 (orange ellipse).
Our long entry at 1.1985 has already proved profitable.
The rebounds against the U.S. dollar as the U.K. economy is building up momentum while restrictions ease further. The Bank of England anticipates a rapid recovery with almost two thirds of adults in the U.K. immunized against the coronavirus.
Taking a look at the technical picture in the GBP/USD we see the pound breaking out of its recent downtrend channel, heading towards 1.3850 earlier this morning. Above 1.3850 we focus on a higher target at 1.3915 where we see a short-term resistance for sterling bulls. Above 1.3920 the focus turns to the crucial 1.40 resistance. A short-term support is however seen at 1.3750.
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