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Thursday, February 1st
The EUR/USD pair was trading under bearish pressure during the Asian session on the back of hawkish rhetoric, sounded at the last FOMC meeting presided by Janet Yellen. As it was widely expected, the Fed left its interest rate unchanged at the 1.5% level. However, the regulator showed some confidence about its inflation outlook, expecting that the inflation will show upbeat results this year. Moreover, the Fed remained determined to raise its interest rates in case if the growth of the US economy will continue to gather pace, thus leaving the door open for a possible interest rate hike in March. However, it is not yet clear whether the regulator will adhere to a more aggressive monetary policy tightening path and will deliver three interest rate hikes this year or we will see more gradual measures of tightening. Looking ahead, today both economic calendars contain manufacturing PMI reports, which will bring fresh trading opportunities during this session, while markets have already started to shift their attention towards the NFP report, which will be released at the end of this week.
The GBP/USD pair was trading with a negative bias during the Asian session, however, it seems that UK bulls had managed to regain control over the pair by the European opening, allowing the pair to regain its positions above the level of 1.4200. Yesterday the pair followed broad market trend and came under selling pressure, as the demand for the US dollar, backed by hawkish outcome of the FOMC meeting, was dominating the market. However, the pair managed to regain its positive mood in early Europe, despite recent headlines, saying about potential sanctions from the EU side against the UK. Recent upside move of the pair is mainly attributed to market confidence in BoE Governor M.Carney’s rhetoric, who expects a significant inflow of investments into the UK economy after resolving uncertainties regarding Brexit. On the data front, today both economies will offer investors manufacturing PMI reports, which will help the pair to determine its further direction.
The USD/JPY pair extends its bullish trend for the second consecutive session, having gained more than 100 points since yesterday’s lows. Recent upside move of the pair could be mainly attributed to increased divergence between monetary policies of the Fed and BoJ. Recall, earlier this week, the head of the Japanese regulator delivered dovish message, where he stated that the Bank would continue to implement strong economic easing measures, as inflation is still far away from its target level. On the other side, the outcome of yesterday’s FOMC meeting showed confidence of the regulator about its inflation outlook, expecting that it will reach target level this year. However, it is expected that slight cautiousness will continue to dominate the market, as we are getting closer to another important event of this week – release of the NFP report, which will take place tomorrow. Besides the key data from the US labor market, today investors will also pay attention to the US ISM manufacturing PMI report, however, since this is the only important release for today, broad market trend will continue to navigate the pair this Thursday.
The AUD/USD pair remains better offered in the second half of this week, getting towards its psychological level of 0.8000. The first and most important bearish factor for the pair remains renewed buying interest around the US dollar, sparked by slightly hawkish outcome of the FOMC meeting, where the regulator left the door open for the rate increase in March. Moreover, negative results from the Australian housing market also added some negative pressure on the Aussie, while neutral Chinese PMI data did nothing to affect pair’s direction. It is expected that today the pair will continue to keep a bearish bias following the US dollar price dynamics, as traders are still digesting recent economic events. Moreover, today the US economy will offer investors manufacturing PMI data, which will also help the pair to form its further short-term trajectory.
Major events of the day:
German Manufacturing PMI – 10.55 (GMT +2)
UK Manufacturing PMI – 11.30 (GMT +2)
US ISM Manufacturing PMI – 16.00 (GMT +2)
Support and resistance levels for the major currency pairs:
EURUSD S. 1.2336 R. 1.2512
USDJPY S. 108.22 R. 109.92
GBPUSD S. 1.4069 R. 1.4293
USDCHF S. 0.9251 R. 0.9389
AUDUSD S. 0.7986 R. 0.8152
NZDUSD S. 0.7272 R. 0.7466
USDCAD S. 1.2201 R. 1.2403
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