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Tuesday, September 26th
The EUR/USD pair failed to keep its overnight recovery mode, as demand for the US dollar has returned to the market. Currently the pair continues to extend its march into red territory, having refreshed its monthly lows at 1.1822. The main driver for the pair’s retreat remains the divergence between monetary policies of the Fed and ECB, fueled by hawkish outcome of Fed meeting and dovish speech of ECB president M.Draghi, delivered a day before. During his speech, Mr.Draghi stressed that the ECB will continue to adhere to accommodative policy as long as it will be needed. Moreover, recent A.Merkel’s disappointing win on the German election also continues to weight the common currency. Later today, Fed Chair J.Yellen will deliver her speech, which will be especially interesting in view of recent economic developments from both sides. On the data front, nothing noteworthy is expected from the EU economic calendar, while the US will publish bloc of important data releases, which will keep investors busy during the NA session.
The dollar/yen pair remains offered on Tuesday, trading within striking distance of its yesterday’s lows, marked at 111.47, as risk-off moods are dominating markets lately. Yesterday N.Korean foreign minister Ri Yong Ho said that US President D.Trump's comments over the weekend were a clear declaration of war and now Pyongyang is within its rights to shoot down US planes even if they are not in North Korean airspace. This announcement has strongly boosted flight to safety, lending support to the Japanese currency. Looking ahead, today Fed Chair J.Yellen will deliver her speech. Hints about another Fed rate hike this year may add some fuel to speculations regarding divergence between two monetary policies, forcing the pair to reverse its previous losses. Besides the speech of Mrs.Yellen, today investors are looking forward for the data from the US housing market and the CB consumer confidence gauge, which will bring additional short-term impetus to the pair during the NA session.
Today the GBP/USD pair corrects higher after two consecutive days with losses, stepping above the level of 1.3500. Recent correction of the pair became available due to strong gains of the pound in the cross with the euro. However, further upside of the pair looks unlikely, as continuing uncertainty around the Brexit process following UK PM T.May’s speech in Florence last week, is negatively influencing the pound. Adding to this, another round of Brexit negotiations also hasn’t brought any clarity on the UK and EU divorce process, as Brexit Secretary D.Davis and EU chief negotiator M.Barnier failed to make any progress on the key Brexit topics. Today the UK data calendar will continue to keep silence, while the US will publish CB consumer confidence and new home sales reports, which will set up pair’s next short-term direction during the NA session.
The NZD/USD pair extends its yesterday’s post NZ election retreat, having touched its 8-day lows at 0.7232 level during the Asian session. The pair received additional bearish impetus this morning after NZ showed higher-than-expected drop in trade balance numbers, which forced the pair to accelerate its downside slide. Adding to this, yesterday N.Korean ForMin Ri Yong Ho delivered his speech, saying that Pyongyang has all rights to take countermeasures in response to the US declaration of war. These announcement triggered strong risk aversion trend, leaving all higher-yielding assets, such as the Kiwi, under pressure. However, further downside of the pair may appear capped, as investors are preparing to another important event of this week – RBNZ meeting, which will take place tomorrow. But today investors will closely watch for a slew of important data releases from the US side, while Fed Chair J.Yellen’s speech will take center stage during the NA session.
The main events of the day:
US CB Consumer Confidence – 17.00 (GMT +3)
US New Home Sales – 17.00 (GMT +3)
Fed Chair J.Yellen’s Speech– 19.45 (GMT +3)
Support and resistance levels for the major currency pairs:
EURUSD S. 1.1767 R. 1.1977
USDJPY S. 110.84 R. 112.96
GBPUSD S. 1.3351 R. 1.3629
USDCHF S. 0.9580 R. 0.9786
AUDUSD S. 0.7898 R. 0.7992
NZDUSD S. 0.7204 R. 0.7356
USDCAD S. 1.2282 R. 1.2428
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