The British pound reached a 4-week high against the US dollar on Tuesday after Theresa May’s offer to extend the deadline for Brexit. The Japanese yen, which is considered as a safe haven for forex traders, withdrew from its lowest level this year as the appreciation of US stocks stock market opened investors’ risk appetite.
The US dollar index, which measures the strength of the greenback against the basket of the six major currencies, edged 0.1% lower, to 96.329 points.
The market participants expect data, which should be released in the second half of the week, for the health of the global economy, including manufacturing activity in China and the US, and revised US gross domestic product figures for the fourth quarter.
The investors will also expect the US Federal Reserve’s latest position on economic and monetary policy. The Fed Chairman Jerome Powell will have a speech to the Senate Banking Committee later on Tuesday in his first two-day talks with lawmakers.
Jerome Powell and other members of the Fed Board have already indicated that they support the idea of a delay in tightening of the monetary policy because of the recent signs of a slowdown in economic growth. Many traders, however, have speculated that the central bank will not raise interest rates at all in 2019.
The Euro appreciated to 1.1363 USD after on Monday it rose by 0.2%. The single currency is helped by weaker dollar ahead of Fed Chairman Powell’s testimony to a US Senate committee later today, as traders would look for signs whether the central bank feels comfortable with a recently adopted more cautious stance on future rate hikes.
The EUR/USD pair may choose an alternative scenario and form a new ascending structure towards 1.1376 USD. Later, the market may resume trading inside the downtrend to return to 1.1347 USD.
The Euro stands at the front foot on Tuesday and holds at the upper side of week-long congestion. Tuesday’s action holds above 20SMA (1.1352 USD) and probes again above 30SMA (1.1362 USD), a clear break of which would generate a bullish signal for extension towards barriers at 1.1381-1.1391 USD (55/100 SMA’s).
Broken Fibo barrier at 1.1341 USD (38.2% of 1.1514/1.1234) reinforced by rising 5SMA, offers solid support which needs to hold and keep bullish bias.
Only return below 10 SMA (1.1321 USD) would sour the sentiment and turn near-term focus lower.
The British pound reached a 4-week high against the US dollar on Tuesday. The pound rose by 0.4% to 1.3143 USD, after having reached a peak of 1.3149 USD, which is the highest level since January 31.
The British currency reached its highest value against the US dollar after reports that British Prime Minister Theresa May is considering delaying the deadline of Brexit, which is initially scheduled for March 29.
Actually, it is very likely with a postponement of the Brexit to May to raise the chances for Hard Brexit, as at this point any further delay will mean that the UK will have to stay in the EU without parliamentary support.
Theresa May will propose to officially reject the “No deal” scenario, which could lead to a delay in the UK’s exit from the EU by several months.
On this background, the GBP/USD pair continued gaining strong positive traction the mid-European session on Tuesday and climbed further beyond the 1.3200 handle, hitting the highest level since mid-October. Meanwhile, a sustained move beyond the 1.3100 handle was seen as a key trigger for intraday bullish traders and behind a strong 140-pips intraday up-move to levels beyond the 1.3200 mark.
However, slightly overstretched technical indicators on hourly charts kept a lid on any strong follow-through ahead of the UK PM Theresa May’s statement in the parliament later today. Any positive headlines might be enough to provide an additional boost and easily lift the pair further beyond the 1.3250-60 intermediate hurdle towards reclaiming the 1.3300 handle.
The USD/JPY pair rose by a quarter to 110.80 JPY after investors sought the security of the Japanese currency after US stock prices declined in Asian trade.
The Japanese currency, which is considered as a safe haven during market stress and volatility, fell against the US dollar to 111.24 JPY on Monday, the lowest since December 27, after US President Donald Trump said he would postpone rising import duties for Chinese goods.
The USD/JPY pair is moving downwards to reach 110.72 JPY. Later, the market may start a new growth towards 111.06 JPY and then continue trading downwards with the short-term target at 110.60 JPY.