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Sterling has been guided by an ascending channel against its Canadian counterpart since late September 2017. The pair bounced off the lower boundary of a dominant channel on September 11 and has since rallied against the Loonie.

The currency pair has moved closer to the border of a medium-term pattern and could be set for a breakout. From a theoretical point of view, a retracement south is likely. However, this retracement could find a support cluster set by the weekly PP and the 55– hour SMA near 1.7550.

Technical indicators suggest that the exchange rate is likely to continue its bullish movement in the nearest future.

The Euro was trading with low volatility during the first part of Wednesday. Higher volatility was introduced later in the evening when the FOMC released its meeting minutes.

The Fed praised the strength of economic growth, while expressing concerns over missed inflation targets. This statement resulted in an immediate upward pressure on the pair, which was soon overrun by the stronger Greenback. As a result, the session ended with a 56 pip decline in price.

Given that the prevailing senior channel was breach mid-session, traders might see a decline in the medium term. However, in terms of the following session, the Euro is expected to bounce off the junior channel and the weekly S1 at 1.2240 to begin a brief period of recovery. Upside target for today—the 1.2350/1.2400 area.

The resistance cluster which limited a move above the 1.40 mark provided a strong barrier for the Pound on Wednesday. Thus, bears took over the market. As already expected, the pair breached the two-week channel down circa 1.3825 later in the evening and has since been moving lower in line with the junior pattern.

Daily technical indicators favour a continuous fall within the following trading sessions; thus, it is likely that the Sterling targets the bottom boundary of the senior channel near 1.3750.

In terms of today, the pair is expected to remain between the weekly S1 and the combined resistance of the 55– and 200-hour SMAs and the 38.20% Fibo retracement in the 1.3840/1.3960 area. A retracement from the breached channel is the most likely scenario.

Despite several attempts to edge lower on Wednesday, the movement of the US Dollar was guided by the 200-hour SMA. As apparent on the chart, the pair has still not reached the upper boundary of a two-month channel down. This is expected to occur today.

A possible test of this line is also supported by the fact that the nearest southern barrier is provided by the 200– and 55-hour SMAs and the monthly S1 which are restricting the pair's movement below the 107.20 mark. This might put upward pressure on the rate just to allow for a test of the senior channel.

Technical indicators are in favour of subsequent bearish pressure that should dominate the market today. Thus, the test of 108.00 could be followed by a decline in price. This, in turn, might mark the beginning of a new wave down during next week.

After breaching the 200-hour SMA late on Tuesday, the yellow metal has since been moving lower. Wednesday's trading session, however, did not introduce significant changes, as the pair closed the day with a limited 0.35% decline. The FOMC meeting minutes introduced some upward volatility which was still more favourable for the US Dollar.

As apparent on the chart, the narrow junior channel has managed to confine the rate for the third consecutive session. A breakout is expected to occur today. Gold might still slide lower down to the weekly S1 or the 38.20% Fibo at 1,320.70 and 1,316.70, respectively.

However, the overall direction should nevertheless be north with gains being capped near the 55– and 200-hour SMAs, the monthly PP and the 23.60% Fibo in the 1,332.00/1,338.00 territory.

The Fed is surely confident about the US economy
Momentum is weak for the euro bulls
Pullback in the equity market may encourage investors to park their funds in safe-haven

The European markets and US futures are under the influence of the change in the monetary policy stance by the Fed. Having said that, the yield on the 10-year treasury bonds have retraced from it’s high.

Forex

The Fed is surely confident about the economy, does not matter if the stock market feels that way especially if we see the traders reaction to the FOMC minutes. The word “further” in the FOMC minutes added fuel to the fire. To a greater extent , the minutes gave an acute signal that the Fed is open to debate that there could be 4 interest rate hikes this year. The markets are pricing this reaction now and this has pushed the dollar index above the 90 mark. The FOMC meeting minutes are suggesting an upward revision in US economic projections provide a further green light for traders to long the dollar.

The officials were more positive in their economic outlook and optimistic that they can achieve their inflation target. Positive US economic data, including a 0.5% monthly gain in CPI and a 2.9% increase in average hourly wages for January, anchored investors’ expectations for aggressive interest rate hikes this year. Increased Fed hawkishness is perhaps enough to say goodbye to the dollar sell-off fuelled by speculation that the Trump Administration would pursue a weak-dollar strategy.

The German IFO provided further hints about the momentum in the German economy. The momentum is weak for the euro bulls, traders are going to focus on the ECB’s minutes and their debate on capping asset purchase. This would be in the limelight. The doves have a little or no excuse to delay the talks around the change in the forward guidance stance. The bank may not be revealing what is going on behind the closed doors, but one can guess that the ECB must have had a debate about changing the forward guidance

The Euro plummets down to 1.2265 against the greenback, but this is more to do with a firmer USD rather than changing Euro fundamentals, so we could see a slight pullback may continue as the dollar remains firm. Elsewhere, despite English policymakers striking a hawkish tone on inflation, the Sterling bulls are going to keep the upcoming limelight on the second estimate GDP q/q reading. The number is improving as we have come a long way from 0.2% which was the reading in May last year. Given that the EU has said that the timeline for the transition period for the UK leaving the EU is on track, boosts some confidence amidst traders. However, the stronger dollar and poor GBP employment figures, causing the Cable to retest the 1.38 region.

Gold

The Fed is hawkish and the dollar index has crossed above the 90 mark, these are enough reasons for the bears to draw their boundary. The weakness in the gold price is prominent, however, there is no major panic especially when the metal is still holding on to gains if you look at its performance from YTD perspective. A soaring dollar is the main reason for investors to scale back on Gold, however, the pullback in the equity market may encourage investors to park their funds in safe-haven- gold. Imminent geopolitical tensions remain a major concern for Gold shorts, so the dip may provide an ideal buying opportunity for traders wanting to get a piece of the yellow metal.

Oil

Oil traders had a little to no chance to react to the dropping crude oil inventories, a similar message which was echoed in the API date too. However, pressure from Saudi Arabia to push Oil prices higher ahead of the Aramco IPO may give an indication that there is still upside potential for the commodity.The 50 day moving average is serving an interesting purpose because the last time the price crossed this was back in September 2017 and since then we had a massive rally. I think the support of 58, which is also where the 100 day moving average is an important point and there is a possibility that we could touch mark.

Cable continues to trend lower and hit new low at 1.3869 in early European trading on Thursday (the lowest since 16 Feb), pressured by stronger dollar.

Bearish setup on daily techs adds to negative near-term outlook which could drive pound further down for test of next significant support at 1.3800 zone (Fibo 61.8% of 1.3457/1.4344 upleg).

Further negative impact on sterling could be expected from UK GDP data which showed that Britain’s economy grew at slower pace in the last quarter of 2017 than initially estimated.

UK GDP q/q rose by 0.4% in Q4, missing forecast at 0.5%, which was the figure of Q3.

Annualized GDP also slowed, showing growth by 1.4% in Q3 vs forecasted / Q3 release at 1.5%.

Weaker than expected GDP data could affect strong expectations for BoE’s attempts in normalizing monetary policy.

Cable stays in red for the fifth straight day and bears eye 1.3854 (Fibo 76.4% of 1.3764/1.4144 upleg) break which would open way towards 1.3800 and 1.3764 (09 Feb low).

Broken 10SMA marks solid resistance at 1.3946 which should ideally keep the upside protected and guard next pivot at 1.4000 (psychological barrier / 20SMA).

Res: 1.3917, 1.3946, 1.4000, 1.4049
Sup: 1.3869, 1.3854, 1.3800, 1.3764

EUR/USD

Current level - 1.2269

The brief rebound above 1.2290 was capped below 1.2370 and the downtrend is renewed, towards 1.2210 area. Initial intraday resistance lies at 1.2300.

USD/JPY

Current level - 107.37

The second test of 108.00 failed as well and the intraday bias is bearish, for a slide towards 106.80 area. 

GBP/USD

Current level - 1.3881

The break through 1.3920 shows, that the downtrend is intact, heading towards 1.3760 lows. Crucial on the upside is 1.4010.

The pair holds in red on Thursday and showing initial signal of reversal after strong rally of past four days stalled on approach at 108 barrier.

Pullback from recovery high at 107.90, posted on Wednesday, returned below falling 10SMA (currently at 107.36) and dipped near pivotal support at 107.00 (Fibo 38.2% of 105.54/107.90 upleg), looking for firmer bearish signal on break lower.

Overall bearish structure favors fresh weakness after correction, with close below 107 handle today needed to form bearish outside day pattern and signal further easing towards next pivotal support at 106.44 (Fibo 61.8% of 105.54/107.90).

Daily MA’s turned to full bearish setup, while 14-d momentum heads south in deep negative territory, supporting further weakness.

Alternative scenario requires sustained break above 108 and extension through falling 20SMA (108.26) to bring near-term bulls back to play.

Res: 107.36, 107.76, 107.90, 108.26
Sup: 107.00, 106.72, 106.44, 106.10

The Euro remains in red on Thursday and hit 1 ½ week low at 1.2259 after Fed minutes further inflated the dollar.

Minutes of Fed’s 30/31 Jan policy meeting showed the US policymakers upgraded their forecasts for economic outlook since December and showed more confidence regarding interest rates hikes this year on improved view on inflation.

Rising hopes for more rate hikes than initially planned keep the single currency under pressure, as extension below 1.2288 (broken Fibo 76.4% of 1.2205/1.2553 upleg) opens way towards key supports at 1.2205 (09 Feb higher low) and 1.2173 (Fibo 38.2% of Nov/Feb 1.1553/1.2555 ascend).

Violation of these support would generate stronger bearish signal for extension of descend from daily double-top (1.2537/55) towards 1.2132 (rising 55SMA) and 1.2092 (former top of 08 Sep).

Daily techs are maintaining strong bearish momentum and backing further weakness, but oversold slow stochastic warns that bears may take a breather ahead of 1.2205 pivot.

Falling thick hourly cloud (spanned between 1.2330 and 1.2367) weighs on near-term action and is expected to cap upticks, as resistance is reinforced by a cluster of daily MA’s (10/20/30 SMA, laying between 1.2336 and 1.2369).

Release of German Ifo business climate index is the key event in the European session (Feb f/c 117.1 vs Jan 117.6) with softer than expected numbers to further weaken the Euro.

Res: 1.2288, 1.2330, 1.2369, 1.2412
Sup: 1.2259, 1.2235, 1.2205, 1.2172