EURUSD and GBPUSD: A significant repair of the market

• During the Asian session, the euro strengthened against the dollar after a significant withdrawal on Friday.
• During the Asian session, the British pound strengthened against the dollar. A significant repair of sentiment in the market helped the pound to make up for a good part of Friday’s losses.
• Prime Minister Boris Johnson and a confidence vote.

EURUSD chart analysis

During the Asian session, the euro strengthened against the dollar after a significant withdrawal on Friday. Extremely high inflation in the euro area (+ 8.1% year-on-year compared to expectations + 7.7%) indicates that a turn in the ECB’s monetary policy could follow soon. A regular meeting of the European Monetary Authority is being held on Thursday. Yields on long-term US bonds have slowed, supporting the euro. At around 09:25, the euro was exchanged for 1.07400 dollars, representing the strengthening of the common European currency by 0.19% since the beginning of trading last night. We now need a continuation of positive consolidation above 1.07500 if the euro plans to continue the current bullish trend. If the euro manages to set above 1.07500 levels, then we could expect further growth towards the 1.08000 level. We need negative consolidation and pullback prices below the 1.70000 level for the bearish option. A euro break below would open up space for us towards the 1.06500 support zone. Potential lower targets below are 1.06000, 1.05500 and 1.05000 levels.

GBPUSD chart analysis

During the Asian session, the British pound strengthened against the dollar. A significant repair of sentiment in the market helped the pound to make up for a good part of Friday’s losses. The British economy is not doing well; inflation is still at a high level, which may continue to put pressure on the island’s currency. The pound is exchanged for 1.25550 dollars, representing the British currency’s strengthening by 0.53% since the beginning of trading last night. Today’s resistance is at the 1.25800 level, and we need to break above in order to get confirmation on the chart for the potential continuation of the bullish trend. Our following higher targets are 1.26000 and 1.26500 levels. For the bearish option, we need a GBPUSD drop to this morning’s support zone to 1.25000. If we happen to see a break below this level, our potential bearish targets are 1.24500 and 1.24000 levels.

Market overview

Prime Minister Boris Johnson and a confidence vote

The British pound rose on Monday against a much weaker dollar hours before Prime Minister Boris Johnson was due to vote on a vote of confidence approved by members of his Conservative Party. Johnson is seen surviving a vote that was called after a growing number of MPs from the ruling Conservative Party questioned the British leader’s authority over the “partygate” scandal, leading to police fines for rallies that violated COVID-19 locking rules.

Vasileios Gkionakis, the head of the currency strategy in Citi, attributed the strength of the pound on Monday to a partially weaker dollar, which was under pressure as other central banks grew. “A vote of no confidence immediately turns into political uncertainty, so we should see sterling under pressure,” Gkionakis said.

Analysts at ING Bank noted that the pound was unresponsive when the “partygate” scandal first exploded. Even the prospect of a change of leadership may not have many political implications.

“Nevertheless, the pound remains vulnerable in the short term due to deteriorating growth prospects and potential price changes in expected BoE rates,” they wrote, adding that a fall below $ 1.25 could pave the way for a fall to 1.2300-1, $ 2350.