The euro advanced against the US dollar after ECB President Christine Lagarde announced the regulator’s intention to raise the benchmark rate by the end of the third quarter of 2022. In addition, traders of the euro were encouraged by positive macroeconomic reports.
Thus, traders have learnt that Germany’s business climate is recovering, thus minimizing the likelihood of the economic recession.
What is more, rather weak data on the US continuing unemployment claims allowed the euro and the pound sterling to climb higher. The fact is that economists had expected a decline of 7 thousand, but the number of claims added 31 thousand. This is quite a considerable jump.
However, traders should remember that both the euro and the British pound are overbought. For the last two weeks, the currencies have significantly gained in value. In particular, the euro has risen by 400 pips, whereas the pound sterling has appreciated by 500 pips. That is why the market needs at least a local correction. Today is a perfect day for such a movement since the macroeconomic calendar is almost empty. Moreover, today is a federal holiday in the US. In other words, traders are leaving the market for long weekends.
Let us focus on the trading charts.
The euro/dollar pair rebounded from the support level of 1.0636, thus prolonging its upward correction. As a result, the volume of long positions surged, allowing the price to hit a new weekly high.
Notably, over the last two weeks, the euro has gained more than 400 pips. This a strong jump that may lead to a slowdown and a change in the market sentiment. The resistance level is located at 1.0800.
Meanwhile, after a short pause near 1.2600, the pound/dollar pair managed to resume its upward correction. This, in turn, boosted bullish activity, thus enabling the pound sterling to go on rising.
The correctional movement from the support level of 1.2155 has already spurred significant price changes. The pound sterling has almost reached its overbought levels. Notably, the rise in the pair has become of speculative nature. The area of 1.2670/1.2720 is acting as resistance. It is quite possible that a touch of this area will lead to a drop in the volume of long positions, thus slackening the uptrend.
According to the alternative scenario, the pound/dollar pair is likely to go on climbing. This signal will be proved if the price consolidates above 1.2750 on the daily chart.
