Among the euro pairs, the EUR/JPY is the one which has caught my attention of late. This pair has surged higher in recent times, breaking through several levels of resistance, including 124.10, which was the prior swing high. Mind you, it has had difficulty breaking through this level, but while above it, the short-term bias would have to be bullish.
At the start of this week, the U.S. dollar initially rose against currencies that had performed well last week as traders banked some profit. However, the gains could not last long, especially against the euro. The EUR/USD surged past 1.12 handle to a new yearly high.
The euro continued its recent ascent thanks to the market-friendly outcome of the German regional election, and previously the French general election. When the single currency rises in a “risk on” market environment, the euro/Japanese yen (EUR/JPY) currency pair is usually the euro pair that tends to outperform as the safe haven yen takes a back seat.
The U.S. dollar is mixed as it gained against the euro, Swiss franc, New Zealand dollar and Japanese yen, but lost ground against the CAD, GBP and AUD. Political risk continues to impact markets as U.S. uncertainty, the official triggering of Brexit and the upcoming French elections make investors anxious even as energy markets rebound thanks to a possible extension to the Organization of the Petroleum Exporting Countries (OPEC) production cut deal. On the diplomatic front, Chinese President Xi Jinping will visit the United States and is scheduled to meet U.S. President Donald Trump for the first in-person meeting on April 6–7.
The euro/British pound (EUR/GBP) currency pair may start to ease as speculators potentially reduce their record net short positions in GBP and increase their bearish bets on the euro. However, the long-term outlook on GBP remains uncertain, so we are only expecting – at this stage – a moderate GBP recovery relative to EUR.
Trumpmania is taking a break from dominating the global media headlines as UK Prime Minister Theresa May is the talk of the town after she finally invoked Article 50, effectively providing a letter to the European Union telling Europe that the United Kingdom wants a divorce.
I am on the lookout for short-to-medium term bullish price patterns to form on the GBP/USD and other GBP pairs in the coming days. Currently, the cable is stuck within its wide 1.20-1.27 range. But is in the upper half and above the now rising 50-day moving averages. A couple of higher lows have now been formed.