On the first day of a fresh trading week, both the British Pound and the shared currency traded with negative bias against a broadly stronger greenback. The overall U.S. Dollar Index, which measures greenback performance against its key counterparts, extended its near-term bullish trajectory to the highest level in more than eight months. Intense selling pressure around the Euro led by the European Central Bank has been the primary driver of the greenback and the spillover effect has been weighing on the British Pound as well. The majors, however, remained within Friday's trading range, with the pound/dollar pair hovering around 1.2200 handle, while the euro/dollar pair maintained its offered tone near its lowest level since mid-March.
Today's release of the flash version of eurozone PMI will be in focus during the European session while later during the North American trading session, Fed rhetoric might provide fresh impetus to the greenback's near-term momentum, especially as markets building on expectations that the central bank would eventually move towards raising interest rates in 2016. Federal Reserve Bank of New York President William Dudley and Federal Reserve Bank of St. Louis President James Bullard are scheduled to speak at various appearances and their comments will be scrutinized to gauge the timing of next Fed rate hike action.
Technical outlook
The pair has managed to hold a short-term ascending trend-channel support but has failed to register any meaningful bounce and hence, seems more likely to extend near-term weakness. From current levels, a convincing break below trend-channel support near 1.2190-85 region is likely to turn the pair vulnerable to immediately aim towards 1.2150-1.2100 intermediate supports before heading towards flash-crash swing lows support near 1.2000 psychological mark.
Meanwhile on the upside, the 1.2230-35 horizontal zone seems to act as immediate resistance, above which the recovery momentum is likely to get extended immediately towards 1.2275 resistance. At a follow through buying interest above 1.2275 resistance, the pair seems all set to reclaim 1.2300 handle and surpass 1.2330 horizontal resistance towards testing the ascending trend-channel resistance near 1.2355-60 region.
Despite near-term oversold conditions (RSI below 30 mark), the pair has failed to witness any short-covering bounce. Hence, from current levels, the pair’s depreciating move is likely to get extended towards the 1.0810-1.0800 support area, from where the pair could stage a minor bounce back.
Meanwhile, any pullback from multi-month lows might now confront immediate resistance near the 1.09000 round figure mark. Even if the pair manages to clear this immediate hurdle, any further recovery might now be capped at an important support break-point turned strong resistance near the 1.0955-60 horizontal area.
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