At first glance, the market should be willing to calm down and take a breather. In practice, both the euro and the pound sterling clicked into gear instead. EUR/USD and GBP/USD opened last week exactly with the same sentiment. The economic calendar was almost empty. Besides, the fundamental background remains roughly the same. Geopolitical tensions are escalating in the Middle East and on the Arabian Peninsula in particular. In theory, crude oil and gold should follow the uptrend. In fact, such commodities are actually trading lower. Therefore, the catalyst for the growth of the euro and the pound sterling is of a different nature. To be more exact, it is the flash estimate of the CPI for the Eurozone which is due today.

The consensus suggests a sharp slowdown in consumer inflation from 4.3% to 3.3%. Yesterday, some analysts came up with more radical forecasts according to which the CPI might have plummeted to 3.1%. With such CPIs, a further rate hike by the ECB is out of the question now. Moreover, the time might be ripe for the ECB to greenlight rate cuts in the near future. The prospects of a dovish revision of the monetary policy in the Eurozone will set the stage for the weakness in the single European currency which, in turn, will drag down the pound sterling. Commonly, the market moves in the opposite direction in anticipation of such crucial changes and events. In other words, market makers engage in traditional speculative games. As a result, trading instruments develop sharp price swings later on. Apparently, we will see such developments later today.

EUR/USD kicked out of the resistance area at 1.0600/1.0620. This price action indicates that traders are adding short positions. If the instrument settles below 1.0600, the price could decline lower to 1.0500.

GBP/USD is following a similar technical pattern. The upward cycle was halted after the instrument had reached resistance at 1.2150. As a result, traders decided to increase short positions. If GBP/USD settles below 1.2150, the price is likely to fall to 1.2050.