The US dollar was on the retreat yesterday once again and during today’s Asian session, ahead of the FOMC’s meeting. Markets seem to expect that the FOMC would adopt an even more dovish policy on Wednesday and there seem to be also concerns that about the US growth outlook. Analysts point out that there may be expectations of a possible rate cut by year end according to Feds Funds Futures. Analysts also point out that should the Fed show a really gloomy outlook for growth and rates, the hit could extend beyond the USD, also to the equity markets. We expect there to be increased volatility for USD pairs as there seems to be high risk on the final outcome of the meeting. USD/JPY dropped yesterday breaking the 111.40 (R1) support line (now turned to resistance). We could see the pair weakening further, as the FOMC interest rate decision draws near, yet it may prove sensitive to today’s financial releases. Should the pair continue to be under the market’s selling interest, we could see the pair breaking the 110.90 (S1) support line and aim for the 110.30 (S2) support barrier. Should on the other hand the market favour the pair’s long positions, we could see it breaking the 111.40 (R1) resistance line and aim for the 112.00 (R2) resistance hurdle.
Pound gets some support yet remains in check.
The pound dropped yesterday due to Brexit developments, yet corrected higher during today’s Asian session. UK Parliament’s speaker Bercow said that Theresa May’s deal could not be voted on again, unless a different proposal is submitted. Analysts pointed out that chances of the UK crashing out of the EU have increased once again, as the EU requires a clear plan and strategy before they grant an extension. However it should be noted that the EU is not open to renegotiating the last deal, so substantial alterations could be off the table. Hence, we could see the chances of a longer delay of the Brexit date increasing, along with alternative solutions being presented once again, such as a second referendum and general elections. We expect volatility for the pound to continue as a number of developments along with financial releases and BOE’s interest rate decision are due out, in the next days. Cable dropped by 120 pips yesterday, yet corrected higher, remaining above the 1.3265 (S1) support line. We could see the pair trading in a bearish market, should the pound weaken. It should be noted though that the pair could prove sensitive to todays’ financial releases as well as any Brexit headlines. Should the bears dictate the pair’s direction, we could see it breaking the 1.3265 (S1) support line and aim if not break the 1.3175 (S2) support level. Should on the other hand, the bulls take over, we could see the pair breaking the 1.3350 (R1) resistance line and aiming higher.
Other economic highlights, today and early tomorrow
In today’s European session we get UK’s Employment Data for January as well as Germany’s ZEW Economic Sentiment indicator for March. In the American session, we get the US Factory orders growth rate for January, the API weekly crude oil inventories figure and just before the Asian session starts, we get New Zealand’s Current account balance for Q4. Please note that the minutes of BoJ’s meeting in January are due out, during tomorrow’s Asian session. As for speakers be advised that ECB’s Peter Praet and RBA’s assistant governor Bullock are scheduled to speak today and during tomorrow’s Asian session.
GBP/USD
Support: 1.3265 (S1), 1.3175 (S2), 1.3070 (S3)
Resistance: 1.3350 (R1), 1.3450 (R2), 1.3560 (R3)
USD/JPY H4
Support: 110.90 (S1), 110.30 (S2), 109.65 (S3)
Resistance: 111.40 (R1), 112.00 (R2), 112.80 (R3)
