Sterling Outlook Remains Positive, Euro Could Be Poised For Small Rebound

Friday’s U.S. came in weaker than expected and reinforced the fragility of the economic recovery while highlighting the case for further stimulus. The U.S. dollar posted fresh losses following Friday’s release.

Treasury Secretary Janet Yellen said on Sunday that the U.S. can return to full employment in 2022 if it enacts a robust enough relief package.
 
On the economic data front, the week ahead is relatively quiet. The U.S. will release its on Wednesday and there will be some speeches from central bank policymakers.

GBP/USD

After the Bank of England eliminated negative rates and expects growth to recover rapidly towards pre-Covid levels over 2021, the outlook for the pound remains positive. The is back near its resistance at 1.3750 and traders now wait for a break above 1.3770 which would be encouraging for sterling bulls. However, we note that the currency pair entered overbought territory, which is why we might see a pullback towards 1.37 before bulls take over control.

EUR/USD

The depreciated against the since the Eurozone is lagging far behind on vaccinations, deteriorating the prospects of a strong economic recovery in comparison to the U.S. and U.K., countries that will likely be first to recover economically from the slump caused by the pandemic.

Looking however on the technical picture in short-term time frames, we saw that the 1.1950-support was able to withstand bearish pressure (at least for now) and we now expect a rebound towards 1.21 and possibly even 1.2170. Nonetheless, with no market-moving data on the calendar trading ranges might be small.
 

EUR/USD D1

EUR/USD D1

DAX

The finally broke above 14140 and we now turn our focus to 14350/14400. On the downside, if the index falls back below 14000, we anticipate further losses towards 13700.

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