08.03.202117:25 Forex Analysis & Reviews: Euro is dominated by bearish sentiment. Pound prepares for a reversal

The labor market report released on Friday was strong, and the US Senate approved the proposed $1.9 trillion stimulus package. However, sales are still going on in the market of risky assets, against this background, the dollar managed to strengthen against the basket of competitors to almost a 3-month high.

On Monday, the US dollar index is still showing a progressive upward trend. The hints on the recovery dynamics on the Dow Jones index do not interfere with the growth so far. In general, there is mixed dynamics in the global markets, the appetite for risk is uncertain, the rate on 10-year Treasuries fluctuates around 1.55%.

It is worth noting that in the last reporting week, traders reduced their short position in the dollar to $27.80 billion. This is the smallest short position since mid-December last year. Judging by the latest observations, dollar bears are in no hurry to increase rates against the greenback.

Euro sellers, on the other hand, are more active. Last Friday's breakout of the 1.1950 level reinforced the bearish sentiment. On Monday, traders broke through two target decline levels - first at 1.1920 and then at 1.1880.

The second reduction target is of the greatest importance. If the EUR/USD pair manages to gain a foothold below this mark, then the road may open further to 1.1840, and then to the 1.1790 mark.

Since the decline in euro quotes has now slowed down, one should not discount the likelihood of an increase in the rate. In case of activation of the bullish scenario and breakdown of the level of 1.1930, the EUR/USD quotes may go to the levels of 1.1990 and 1.2020.

The sterling is consolidating in the area of local minimums, while the GBP/USD currency pair is also dominated by selling sentiments. The level of 1.3860 now acts as a significant resistance for the sterling.

The bearish offensive is likely to increase, with potential downside targets in the 1.377, 1.373, and 1.367 zones.

However, the pound slightly slowed down the downward movement. Perhaps traders took a wait-and-see attitude before the speech of the head of the Bank of England. Andrew Bailey spoke about the economic outlook on Monday in a webinar hosted by the independent think tank The Resolution Foundation. Bailey's unexpected statements may well affect the further dynamics of the sterling.

If traders regard the speech of the head of the regulator as positive for the sterling, the bearish scenario may be canceled. In this case, the level of 1.3860 will be broken first. After fixing above it, buyers will begin to storm the mark in the region of the 39th figure. They may again be able to take the pound above 1.40 against the dollar.