The USD weakened against a number of its counterparts yesterday as hopes grew for further progress in the US-Sino negotiations. Both participants reported progress on the negotiations in Beijing, albeit the US also stated that much work remains to be done. Negotiations are expected to continue in Washington next week and market focus seems to concentrate on the possible outcome. Analysts point out that market’s expectations for further progress have shifted investors away from the safety of the USD, in favor of riskier assets. Should the positive headlines about the US-Sino negotiations continue to reel in, we could see the USD continuing to weaken. EUR/USD strengthened on Friday and during today’s Asian session, breaking the 1.1260 (S2) and the 1.1300 (S1) resistance lines, now turned to support. We could see the pair trading in a sideways manner today as the US markets are closed and no major financial releases are expected. Should the bearish momentum for the USD continue, we could see the pair aiming if not breaking the 1.1345 (R1) resistance line. On the other hand should the pair come under the selling interest of the market, we could see it breaking the 1.1300 (S1) support line and aim for the 1.1260 (S2) support barrier.
Pound strengthens on strong sales data
The pound strengthened on Friday as strong sales data, gave some relief to GBP traders, amidst Brexit uncertainty. January’s UK retail sales growth rate acceleration was substantial and both the headline and core rate aligned, indicating stronger demand and stopping the weakening course of the pound. On the other hand, Brexit uncertainty remains, especially after Theresa May’s symbolic defeat in the UK parliament last week. Analysts point out that Theresa May’s recent defeat in Parliament, shows that she does not enjoy a majority among UK lawmakers, which could undermine her negotiating position with EU leaders. Should Brexit uncertainty continue and depending on the headlines, we could see the GBP weakening again yet financial releases may disrupt that trend in the coming days. Cable rallied on Friday, breaking the 1.2830 (S1) resistance line (now turned to support). Technically, it should be noted that the pair’s price action, broke the downward trendline dominating the pair’s direction since the end of January, hence we switch once again the pair’s bearish outlook in favor of a sideways movement. Should the pound be under pressure today, we could see the bears taking over and cable could drop, breaking the 1.2830 (S1) support line. Should on the flip side, the bulls renew their momentum, we could see the pair breaking the 1.2960 (R1) resistance line and aim for the 1.3070 (R2) resistance hurdle.
Today’s other economic highlights
It’s expected to be a slow Monday today as no major financial releases from Europe are expected and the US and Canadian markets are to be closed. Never the less please be advised that we could see some surprises as it is expected to be a period of thin trading today.
As for the week ahead
On Tuesday, from Australia, we get RBA’s meeting minutes, from the UK the employment data for December and from Germany the ZEW economic sentiment indicator for February. On Wednesday, we get Japan’s trading balance for January, Australia’s wage price index for Q4, Eurozone’s preliminary consumer confidence for February, and from the US FOMC meeting minutes. On Thursday, we get Japan’s Nikkei Mfg PMI for February, Australia’s employment data for January, Germany’s and Eurozone’s preliminary PMI’s for February, ECB releases its meeting minutes, while from the US we get the Durable goods orders growth rates and the Philly Fed Mfg Index. On Friday, we get Japan’s CPI rates for January, Germany’s Ifo Business Climate for February and Canada’s retail sales growth rates for December.
GBP/USD H4
Support: 1.2830 (S1), 1.2710 (S2), 1.2600 (S3)
Resistance: 1.2960 (R1), 1.3070 (R2), 1.3175 (R3)
EUR/USD H4
Support: 1.1300 (S1), 1.1260 (S2), 1.1215 (S3)
Resistance: 1.1345 (R1), 1.1385 (R2), 1.1420 (R3)
