Euro and Sterling Weaken as the Dollar Strengthens Ahead of Key US Data

The US dollar continues to hold firm against its major counterparts, supported by strong US macroeconomic data and expectations surrounding the release of further labour market indicators. Additional support for the greenback comes from persistent inflationary risks and the Federal Reserve’s cautious stance regarding further monetary policy easing. Against this backdrop, EUR/USD and GBP/USD remain under pressure, with market participants preferring to reduce long positions in the euro and sterling ahead of the next batch of economic releases.

EUR/USD

EUR/USD continues to trade within its established range following the recent decline, consolidating near the lower boundary.

Technical analysis of EUR/USD points to continued sideways trading within the 1.1570–1.1660 range. Should US data come in strong, pressure on the pair could intensify, potentially leading to a break below the lower boundary of the range and the beginning of a new bearish impulse. Conversely, if incoming data disappoint market expectations, EUR/USD may strengthen above 1.1660.

Key events for EUR/USD:

• today at 10:30 (GMT+3): Germany S&P Global Construction PMI;
• today at 15:30 (GMT+3): US Initial Jobless Claims;
• today at 20:00 (GMT+3): speech by Federal Open Market Committee (FOMC) member Mary Daly.

GBP/USD

GBP/USD also remains under pressure following its recent decline. Sterling previously attempted to develop an upward correction; however, buyers failed to establish themselves above local resistance levels. As a result, the pair has returned to the range between 1.3360 and 1.3480, where a balance between buyers and sellers is currently taking shape.

Technical analysis of GBP/USD suggests the possibility of a test of the lower boundary of this range. A decisive move below 1.3360 could lead to a retest of the recent low near 1.3300. If buyers manage to secure a foothold above 1.3480, a move towards the 1.3510–1.3550 area may follow.

Key events for GBP/USD:

• today at 11:30 (GMT+3): UK Construction PMI;
• today at 18:40 (GMT+3): speech by Bank of England Governor Andrew Bailey;
• tomorrow at 13:30 (GMT+3): UK mortgage lending data.

Key takeaways

The dollar continues to enjoy an advantage thanks to resilient US economic indicators and expectations of further labour market data. At the same time, EUR/USD and GBP/USD are trading close to important technical support levels, making the upcoming data releases a key factor for the market’s next move. Strong US figures could increase pressure on European currencies and trigger downside breakouts from their respective ranges, while weaker data may support a corrective recovery in both the euro and sterling.

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