Break-out traders who had hoped for larger fluctuations in the EUR/USD have been disappointed by yesterday's inconsistent performance. In addition, we had a bit bad luck with our short-entry and had to give up some of our previous gains. Sterling traders, however, were able to take advantage of high volatility in the GBP/USD and gain profits in both directions.
All eyes will be on the FOMC minutes today, but it is doubtful whether the Fed meeting minutes will be a big market mover. Given the last monetary policy statement and Yellen's latest remarks on the economy, the Fed's stance is anticipated to be neutral to slightly dovish, which would be dollar-negative in the near-term. Looking back on the trading day of the last Federal Reserve meeting, we saw the EUR/USD trending upwards, while the GBP/USD was trending downwards. While we do not expect today's FOMC minutes to have a major impact on the currencies, we expect the euro trade higher against the greenback ahead of the minutes, whereas the cable could be vulnerable to further losses.
For the British pound, the most important piece of data will be today's U.K. labor market report scheduled for release at 9:30 GMT. While the unemployment rate is forecast to show a decline, the focus will be on wage growth, which is expected to expand at a slower pace. If Weekly Earnings fall short of expectations, we could see sterling tumbling towards 1.42 and 1.4150.
The cable broke below its recent trading range and tested the lower trend line of its secondary uptrend channel. If the pair breaks below 1.4265 and further 1.4240 next lower targets are seen at 1.4208, 1.4150 and 1.4130. On the upside, the currency pair would need to break significantly above 1.4370 and further 1.4410 in order to rally towards 1.4475 and 1.4550.
Important economic data for today:
9:30 UK Labor Market Report
13:30 USA Housing Data & PPI
19:00 USA Fed Minutes
(Time zone GMT)
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