The euro dropped to a 2-week low versus the dollar on Monday as a bigger than expected fall in German industrial orders put pressure on the single currency. Given the thin news and data flow from Europe this morning investors continued to focus on last week’s US jobs report, which gave support to the dollar.

Sterling firm on BoE expectations

The Sterling held firm on Monday, rising against both the euro and the dollar, as expectations are mounting that the Bank of England will raise interest rates by the middle of this year. Forex traders cited a report in the Sunday Times in which a ‘shadow’ MPC voted for a rate hike. This added to speculation that more members of the MPC could join committee members Sentance and Weale in voting for a rate rise.

The Pound is up a quarter percent against the euro, and is currently more than 0.50 percent trading at 1.6140 versus the greenback after hitting 1.6186 earlier in the session. The dollar hit a fresh 2-week high at 1.3534 versus the single currency and is currently up 0.10 percent.

Technical Studies pointing towards a major reversal in EUR/USD

This morning a corrective recovery in EUR/USD off Friday’s low of 1.3543 stalled by 1.3626, prompting expectations for a major bearish reversal. Incidentally today’s high of 1.3626 represents the top of an Ichimoku cloud on the daily chart. Right now, technicals point to the weekly chart on EUR/USD as price action has turned in a weekly bearish doji close followed by a bearish gravestone doji close last week.

The formation of these patterns supports a major reversal scenario, with a medium-term top established at 1.3862. Support is represented by the top of a weekly Ichimoku cloud at 1.3510, by the 38.2% Fibonacci retracement of the move from 1.2874 to 1.3862 at 1.3485 and the 100-day and 20-day SMAs (Simple Moving Average) at 1.3532 and 1.3529 respectively.

TheTraderTip for EUR/USD today suggests the pair may meet resistance in 1.3587 – 1.3603 zone, and is expected to drop to 1.3528. Weekly analysis hints that the pair may fall to 1.3467 while 1.3725 – 1.3785 resist.