The Dollar Corrected After a Sharp Decline. Will the Uptrend Resume?

A sustained decline in the core consumer price index in the US contributed to a sharp pullback in the American currency. The GBP/USD currency pair is trading near the psychological level of 1.3000, EUR/USD buyers are attempting to hold above 1.0900, and USD/JPY has lost over 300 pips in just two days. However, after the release of positive retail sales data yesterday, the dollar managed to recover some of its losses. Let's consider whether it is possible for the USD to resume its upward trend and what factors might influence this.

GBP/USD

The British currency strengthened sharply after the Labour Party's victory in the recent parliamentary elections. The slow but steady economic growth and reduction in political uncertainty are playing into the hands of the British currency: the GBP/USD pair is preparing to test the year's highs at 1.3140-1.3100.

Technical analysis of GBP/USD indicates the possibility of continued growth, as a “bullish engulfing” pattern was formed on the weekly timeframe after breaking through the resistance at 1.2850. The primary target for the upward movement is the range of 1.3140-1.3100. If pound buyers manage to hold above these levels, a rise to the strategic levels of 1.3600-1.3500 is possible. In the case of a drop below 1.2900, a downward correction towards 1.2870-1.2850 is likely.

The following events may influence the pair's price formation:

• Today at 09:00 (GMT +3) the publication of the UK Consumer Price Index (CPI) for June;
• Today at 15:30 (GMT +3) the volume of new home construction in the US;
• Today at 16:30 (GMT +3) the volume of industrial production in the US.

EUR/USD

The single European currency is trading near the psychological resistance at 1.0900. If this level transitions to support, the upward price movement may continue towards 1.1100-1.1000. The upward scenario could be cancelled if it firmly holds below 1.0870-1.0850.

The following news will be crucial for the pair's future movement:

• Today's eurozone Consumer Price Index (CPI) for the previous month at 12:00 (GMT +3);
• Tomorrow’s ECB meeting scheduled for 15:15 (GMT +3).

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