USD Reverses Course Gaining Ground

Feb 17 21, 10:22 GMT

USD escaped from the boundaries of its sideways motion of the past few days gaining ground against a number of its counterparts yesterday. The US treasury yields were on the rise also puling with them the greenback higher, while analysts tend to note that the yields may have been driven higher by market concerns for inflation. Also, it should be noted that manufacturing data for the wider New York Area provided an upbeat picture for economic activity picking up pace. On the monetary front, St. Luis Fed President Bullard stated that financial conditions are generally good, which boosted optimism, while San Francisco Fed President Daly said that pressures on inflation are still downwards and implying that the Fed is to maintain low rates. We expect focus today to be on the release of the Fed’s last meeting minutes, while also financial releases could affect the markets.

AUD/USD dropped yesterday aiming for the 0.7725 (S1) support line. As the drop of the pair’s price action broke the upward trendline incepted since the 5th of February, we switch our bullish outlook in favour of a sideways movement initially, albeit the bears may be just around the corner, should USD continue to strengthen. Also note that the RSI indicator below our 4-hour chart is at the reading of 50, implying a rather indecisive market. Should the bears dominate, we may see the pair breaking the 0.7725 (S1) support line, which reversed the pair’s downward movement on the 12th of February and aim for the 0.7680 (S2) support hurdle. Should the bulls be in charge of the pair’s direction, we may see AUD/USD breaking the 0.7785 (R1) resistance line and aim for the 0.7875 (R2) resistance level.

Pound’s rise continues

The pound’s rise against the USD seems to have been dented somewhat yet the bullish outlook remains while it gained against the EUR and JPY. It seems that the markets are intensifying their expectations for quicker recovery of the UK economy driven by the rapid rate of Covid 19 vaccinations. Also, it should be noted that the expectations are ongoing despite lockdowns in the UK still being employed and the GDP rate to remain in the negative territory for the current quarter. Today, we expect pound traders to focus on the inflation rates for January while BoE deputy Governor Ramsden’s speech could also be interesting.

GBP/USD retreated somewhat yesterday yet remained well above the 1.3835 (S1) support line. We maintain our bullish outlook for the pair, as it remains above the upward trendline, which steepened since the 4th of February. On the other hand, the RSI indicator below our 4-hour chart remains near the level of 50, which may imply that the market’s buying appetite may be somewhat dented. Should cable find fresh buying orders along its path, we may see it breaking the 1.3990 (R1) resistance line aiming for higher grounds in which case cable would have reached new record high levels, since April 2018. Should on the other hand the market’s selling interest be intensified, we may see cable breaking the prementioned upward trendline, the 1.3835 (S1) support line and start aiming for the 1.3700 (S2) support barrier.

Other economic highlights today and early Tuesday:

Today during the European session, the main release could be UK’s CPI and PPI rates for January. In the American session, we note Canada’s inflation rates and from the US the Retail sales growth rate and the industrial output growth rate, all releases being for the month of January. As for speakers in the American session we note Richmond Fed President Barkin, Boston Fed President Rosengren, BoE Deputy Governor Ramsden which are scheduled to speak. The main release though could prove to be the minutes of the Fed’s last meeting. Overall, should a cautiousness be evident in the minutes, we see the risks related in the release as tilted to the bearish side for the USD. Just before the Asian session starts oil traders could be eyeing the release of the API weekly crude oil inventories figure, while later on Dallas Fed President Kaplan is speaking and Australia’s employment data for January are due out.

AUD/USD H4 Chart