The USD yesterday remained relatively stable despite the soft financial data (note the Philly Business Index drop) released. Despite the USD’s initial weakening due to the soft data mentioned, higher US bond yields provided some support balancing the greenback. The soft data indirectly strengthen the case for the Fed to keep its interest rates steady at least for the short term. Analysts point out that the market seems stuck in a tight range and rather numb to any developments of the US-Sino negotiations. It would be indicative that the market seems to be moving from one financial release to another seeking for clues about the dollar’s direction. We could see the USD in the coming days remain relatively stable, however we would not be surprised to see any sudden moves of the USD due to fundamentals. EUR/USD maintained a sideways motion yesterday, despite at some point temporarily breaking the 1.1345 (R1) resistance line. We could see the pair maintaining the range bound movement, yet some bearish tendencies could be in the cards, as financial releases could weaken EUR. Should the bears dictate the pair’s direction, we could see the pair, aiming if not breaking the 1.1300 (S1) support line. Should on the other hand the bulls have the upper hand, we could see the pair breaking the 1.1345 (R1) resistance line and aim for the 1.1385 (R2) resistance level.
Brexit continues to drive the pound.
The pound was temporarily lifted yesterday as hopes grew for UK’s PM Theresa May to get the Brexit deal changed. However expectations were later on cooled off, as a UK source reduced the chances of an imminent Brexit deal. On the other hand, reports state that the EU expects the UK to request a technical extension of 3 months for Brexit. It should be noted that UK finance minister Philip Hammond stated yesterday that the talks in Brussels have been constructive and that the UK Parliament could vote on a revised deal by next week. We see the case for the pound to strengthen should a revised Brexit deal be struck with Brussels as it would constitute another step toward an agreed Brexit. Despite cable getting a Brexit hope boost yesterday, breaking the 1.3070 (R1) resistance line it ended the session below it yesterday. We could see the pair maintaining a sideways movement, but we expect to remain highly sensitive to any further Brexit headlines. Should the pair find extensive buying orders along its path, we could see it breaking the 1.3070 (R1) resistance line and aim for the 1.3175 (R2) resistance level. On the flip side if cable comes under the selling interest of the market, we could see it aiming if not breaking the 1.2960 (S1) support line.
Today’s other economic highlights
During the European session today, we get Germany’s final GDP growth rate for Q4, Ifo’s business climate indicator for February while from the Eurozone we get the final CPI rate for January. In the American session, we get Canada’s retail sales growth rates for December and from the US the baker Hughes active oil rig count figure. Please note that we will be having an extensive number of speakers today (mainly from the Fed) as Atlanta Fed President Raphael Bostic, New York Fed President John Williams and San Francisco Fed President Mary Daly, ECB President Mario Draghi, Fed’s Richard Clarida, Saint Louis Fed President James Bullard, Philadelphia Fed President Patrick Harker and Fed’s Randal Quarles speak.
GBP/USD
Support: 1.2960 (S1), 1.2830 (S2), 1.2710 (S3)
Resistance: 1.3070 (R1), 1.3175 (R2), 1.3270 (R3)
EUR/USD H4
Support: 1.1300 (S1), 1.1260 (S2), 1.1215 (S3)
Resistance: 1.1345 (R1), 1.1385 (R2), 1.1420 (R3)
