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Daily economic digest from Forex.ee

25 January 2018, 12:58

EEAnalytics

Daily economic digest from Forex.ee

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Thursday, January 25^th

The EUR/USD pair keeps its bid tone, having again refreshed 3-year highs at 1.2459 spot, on the back of ongoing weakness of the US dollar, caused by several factors. The latest drawdown of the greenback is mainly attributed to recent comments of US Treasury Secretary S.Mnuchin at the WEF in Davos, saying that weaker dollar is good for the US, as it relates to trade and opportunities. The market negatively reacted on this statement, accelerating greenback’s rally to the red territory. Moreover, it seems that speculations regarding possible convergence between monetary policies of the Fed and ECB also exert some pressure on the buck especially in wake of upcoming ECB meeting, which will take place later today. Market participants remain in anticipation of fresh details regarding possible changes in forward guidance, which could be implemented in early 2018, as it was mentioned in the last ECB protocols. However, Mr. Draghi’s comments during his press conference can also bring notable impetus on the common currency, as they may contain some important information about further monetary policy, and not necessarily these comments will be hawkish. Besides the ECB meeting, investors will also pay attention to the German IFO data and US new home sales numbers, which will also be able to help the pair to form its further trajectory.

The GBP/USD pair extends its 4-day bullish rally in wake of persistent broad-based US dollar weakness, having gained more than 250 pips during previous session and again refreshed its post-Brexit vote highs at 1.4328 mark. The latest upside move of the pair could be explained by negative market’s reaction to recent comments of US Treasury Secretary S.Mnuchin, which accelerated dollar’s downside trend vs its main competitors. However, it seems that bulls took a breather at the beginning of the European session, forcing the pair to retreat from its recent tops, as Brexit concerns, fueled by absence of any progress in negotiations, are weighing the pound lately. Looking ahead, today traders will look forward another batch of data from the US labor market, however, it is expected that broad softness of the US dollar will continue to determine market trend as well as GBP/USD’s further direction.

The NZD/USD pair shows pretty volatile dynamics lately on the back of important NZ data and ongoing weakness of the US dollar. Yesterday the pair received strong bearish impetus following disappointing NZ inflation indicators, which forced the pair to retreat from its 5-month highs, marked on the level of 0.7436. However, the pair managed to regain its positive traction in Asia and by the European morning had recovered the most part of its recent losses, benefiting from the ongoing weakness of the US dollar, which remains a key driver on the market in the last few days. Adding to this, positive tone on the commodity market, especially around oil prices, which today refreshed its multiyear highs, also provides some support to the resource-linked Kiwi. On the data front, today investors will focus their attention on the another bunch of data from the US housing market, which will be released during the NA session, while USD price actions will remain the key driving factor for the pair on Thursday.

The dollar/yen pair follows broad market trend, staying under strict bearish control. Today the pair once again refreshed its 4-month lows, this time having broken through the level of 109.00, as broad weakness of the US dollar remains the key driving factor across the FX-market this week. The latest catalyst of US dollar’s sell-off was rhetoric of the US Treasury Secretary S.Mnuchin at the WEF in Davos, who said that weaker USD is good for trade purposes. Today we have another important data from the US housing market due for released during the NA session, however, further US dollar price moves will remain as a key driving factor for the pair during this trading session.

Major events of the day:

German Ifo Business Climate – 11.00 (GMT +2)

ECB Interest Rate Decision – 14.45 (GMT +2)

Canada Core Retail Sales – 15.30 (GMT +2)

ECB Press Conference – 15.30 (GMT +2)

New Home Sales – 17.00 (GMT +2)

Support and resistance levels for the major currency pairs:

EURUSD S. 1.2244 R. 1.2496

USDJPY S. 108.13 R. 110.87

GBPUSD S. 1.3898 R. 1.4430

USDCHF S. 0.9332 R. 0.9640

AUDUSD S. 0.7957 R. 0.8137