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Wednesday, October 18th
The EUR/USD pair extends its bearish trend for the fifth consecutive session, remaining within striking distance of its weekly lows, marked yesterday at 1.1736 spot. Ongoing decline of the pair could be mainly explained by increasing demand for the US dollar. Yesterday the greenback caught fresh bids after hawkish comments of Fed member P.Harker, who predicted another three rate hikes next year, which were considered by the market as hint on more aggressive Fed monetary policy tightening. Moreover, yesterday US President D.Trump added some extra optimism around the US dollar, saying that he wants to implement tax reform by Christmas. On the other side, any further recovery of the euro looks unlikely, as the Catalan crisis is still unresolved. Today, the head of the ECB M.Draghi is expected to speak, while the US will release data from the housing market, which will provide additional trading opportunities to investors during the NA session.
The GBP/USD pair failed to extend its recovery path in Asia, after less enthusiastic talks of BoE members, keeping its positions below the level of 1.3200. Yesterday the pair came under strong bearish pressure, following not hawkish enough speech of BoE Governor M.Carney. Although Mr.Carney confirmed the possibility of a rate hike in the coming months, markets remained disappointed by lack of any details regarding further Bank’s monetary policy actions. Meanwhile, yesterday’s crucial data from the UK economy also did little to support the pair, as inflation figures reached market’s estimations that failed to impress bulls. Adding to this, ongoing concerns over Brexit negotiations also remain negative driving factor for the pound lately, as the UK and EU are still struggling to make any progress in Brexit deal discussions. Looking ahead, today we have plenty of economic events, scheduled in data calendar, such as important data from the UK labor market, the US housing market and the Crude Oil Inventories report, which, in turn, may influence market’s risk sentiments.
The USD/JPY pair stays bullish at the equator of this week, as demand for the US dollar remains one of the key themes across the market. Recent upside of the greenback is mainly attributed to hawkish talks of Fed member P.Harker, who sees the implementation of more aggressive monetary policy tightening path. Adding to this, fading demand for safety also negatively influences yen’s positions today, thus contributing to pair’s further growth. On the data front, today the US calendar will release the building permits numbers, which will be able to set up pair’s next trajectory, while increasing cautiousness ahead of Sunday’s Japanese election will likely limit pair’s any further sharp moves.
The NZD/USD pair failed to keep its yesterday’s bullish trend, triggered by positive NZ inflation data, and came under heavy selling pressure in the Asian trading session. Broad demand for the US dollar, underpinned by yesterday’s hawkish comments of Fed member P.Harker, remains one of the key factors weighing on the major. Moreover, uncertainty on the political field of the NZ, where the NZ National Party still hasn’t formed the government, also provides negative influence on the pair. However, positive dynamics of oil prices provides support to commodity-linked assets that may stall somewhat pair’s further decline. Today the US docket will bring the building permits report and the crude oil stockpiles, which are key events of this Wednesday, while several Fedspeaks will also be able to affect pair’s further direction during the NA session.
The main events of the day:
ECB President M.Draghi’s Speech– 11.10 (GMT +3)
UK Average Earnings Index +Bonus – 11.30 (GMT +3)
UK Claimant Count Change – 11.30 (GMT +3)
US Building Permits – 15.30 (GMT +3)
US Crude Oil Inventories –17.30 (GMT +3)
Support and resistance levels for the major currency pairs:
EURUSD S. 1.1704 R. 1.1830
USDJPY S. 111.79 R. 112.67
GBPUSD S. 1.3078 R. 1.3344
USDCHF S. 0.9711 R. 0.9845
AUDUSD S. 0.7799 R. 0.7883
NZDUSD S. 0.7119 R. 0.7227
USDCAD S. 1.2463 R. 1.2619
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