The greenback weakened against a number of its counterparts, as investors focus on Fed’s interest rate decision on Wednesday. The market seems to be expecting the Fed to signal a possible pause of its interest rate hikes, which could explain the bearishness of the USD. Analysts point out that the USD direction is still downwards and the markets are to take notes of any possible signals, while others note that the Fed could keep rates unchanged this year given the state of economic growth worldwide. The reopening of the US government could have also contributed to the weakening of the greenback as its role as a safe haven could have been reduced. We could see the USD maintaining a bearish momentum in the short term, especially if the Fed signals a possible rate hike pause or if developments in the US Sino trade negotiations weaken the role of the USD as a safe haven as well. EUR/USD rallied on Friday and during today’s Asian session breaking consecutively the 1.1350 (S2) resistance line, the 1.1387 (S1) resistance level (both now turned to support) and tested the 1.1425 (R1) resistance hurdle. We could see the pair continuing to trade in a bullish market, should the USD weaken even further as no financial releases of particular importance are expected today for either side of the currency pair. Should the bulls continue to dictate the pair’s direction, we could see it breaking the 1.1425 (R1) resistance line and aim for the 1.1460 (R2) resistance hurdle. Should on the other hand, the bears take over, we could see it breaking the 1.1387 (S1) support line and aim lower.
Pound strengthens ahead of UK Parliament’s vote
The pound strengthened against the USD, ahead of UK Parliament’s vote on Tuesday for Theresa May’s revised Brexit plan. The strengthening of the pound was also fueled by a number of positive news reports from the UK and Europe which enhanced further hopes for Brexit. Analysts point out that the number of lawmakers which want a hard Brexit is falling and this is positive for the pound, at least in the short term. We maintain a bullish outlook for the sterling as long as positive headlines for Brexit continue to reel in. Cable also rose during Friday and today’s Asian session, breaking the 1.3175 (S1) resistance line (now turned to support). We see the case for the pair to continue to trade in bullish market as the upward trendline incepted since the 21st of January remains intact. Please note that the RSI indicator of the pair, in the 4 hour chart has surpassed the reading of 70, implying a rather overcrowded long position for the pair. Should the pair find fresh buying orders along its path, we could see it breaking the 1.3280 (R1) resistance line and aim for higher grounds. Should the pair come under the selling interest of the market, we could see it breaking the 1.3175 (S1) support line and aim if not break the 1.3070 (S2) support barrier.
Today’s other economic highlights
In today’s late American session, we get from New Zealand’s trading balance for December. As for speakers, ECB’s president Mario Draghi, BoE’s governor Mark Carney and Cleveland Fed President Loretta Mester speak.
As for the rest of the week:
On Tuesday, from the US we get the CB Consumer Sentiment for January and the UK parliament is to vote on Theresa May’s revised Brexit plan. On Wednesday, we get Australia’s CPI rate and France’s GDP for Q4, Eurozone’s consumer and economic sentiment and Germany’s HICP rate for January and the US GDP for Q4. Also on Wednesday, we get FOMC’s interest rate decision. On a busy Thursday, we get Japan’s industrial production growth rate for December, China’s NBS Mfg PMI for January, Germany’s retail sales for December, France’s CPI (EU Norm.) for January, Germany’s unemployment data, Eurozone’s GDP for Q4, the US Core PCE prices and personal consumption for December and Canada’s GDP for November. On Friday, we get from China the Caixin Mfg PMI for January, UK’s Mfg PMI for January, Eurozone’s CPI rate for January, the US Employment report and the US ISM Mfg PMI for January.
EUR/USD H4
- Support: 1.1387 (S1), 1.1350 (S2), 1.1305 (S3)
- Resistance: 1.1425 (R1), 1.1480 (R2), 1.1495 (R3)
GBP/USD H4
- Support: 1.3175 (S1), 1.3070 (S2), 1.2960 (S3)
- Resistance: 1.3280 (R1), 1.3372, (R2), 1.3470 (R3)
