Short-Covering, Profit-taking Boosts EUR/USD and GBP/USD

The EUR/USD and GBP/USD firmed on Monday after last week’s sizable losses. Most of the buying was due to profit-taking and short-covering. Nothing changed over the week-end regarding the fundamentals. In addition, some traders believed that Friday’s steep declines were an overreaction to the stronger-than-expected U.S. Non-Farm Payrolls report.

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This week could be a relatively quiet week after last week’s volatility. Some of the major players are already talking about heading to the sidelines ahead of the start of next week’s two-day Federal Reserve monetary policy meeting on March 17 – 18.

On Monday, Euro Zone officials are scheduled to hold their regular monthly meeting in Brussels, with Greece’s bailout agreement expected to be the main topic of discussion.

The key report for the U.S. Dollar will be Thursday’s U.S. retail sales report for February. Early estimates are for a 0.3% rise.

Early Tuesday at 8:01 p.m. ET, British Pound traders will get the opportunity to react to the latest BRC Retail Sales Monitor report.

April Comex Gold is trading a little better following last week’s sharp sell-off. A weaker dollar is the catalyst behind the short-covering and profit-taking. Like the currency markets, gold may trade sideways to higher most of the week if the short-covering continues ahead of next week’s Fed meeting.

April Crude Oil is trading a little firmer, but traders are starting to become more concerned about support after several weeks of consolidation. Despite numerous rig shutdowns since January, U.S. production remains high. Last week’s failed rally at $54.20 paints a negative picture on the chart since it represents another lower top to chart-watchers. Bearish traders may begin heavy liquidation if $47.80 fails as support.

With the exception of crude oil which is following production and the rig count, gold, EUR/USD and GBP/USD may go into sideways mode the rest of the week after last week’s sharp sell-off and ahead of next week’s Fed meeting. Look for lower volume and volatility also. 

Published by

James Hyerczyk

James A. Hyerczyk has worked as a fundamental and technical financial market analyst since 1982. His technical work features the pattern, price and time analysis techniques of W.D. Gann.

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