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Thursday, February 22nd
The EUR/USD pair follows broad market trend this Thursday, backed by ongoing demand for the US dollar, while losing points for the third consecutive day. Recent growth of the greenback is mostly attributed to the hawkish FOMC minutes, which showed regulator’s confidence in further growth of the inflation. All Fed members agreed that inflation should meet its target level in 2018 already, which in turn provided additional support to the US dollar due to recent positive US inflation results. This outcome of the latest Fed meeting forced investors to start pricing-in more aggressive Fed monetary policy tightening, thereby accelerating the growth of the US dollar against its major peers. Now it’s time for the ECB to publish its account of monetary policy meeting, which will be able to trigger fresh speculations regarding divergence between two monetary policies, while the US data calendar won’t bring us anything noteworthy today, leaving the pair at the mercy of broad market trend and the US dollar price dynamics.
The GBP/USD pair remains bearish for the fifth session in a row, having dropped below the level of 1.3900 this morning. The key reason of pair’s weakness can be called the risk-off sentiment, which was weighing the higher-yielding pound during Asia. Moreover, yesterday’s hawkish FOMC minutes showed confidence of the regulator in further economic growth, which accelerated US dollar’s growth against its major rivals. However, yesterday the pound also received notable bullish impetus following testimony of Mr.Carney and MPC members, who demonstrated an upbeat assessment of the economy. The MPC members noted that the growth pace of the economy exceeded expectations and further tapering of stimulations would be needed. These hawkish comments make us to believe that the Bank will implement 3 more rate hikes this year, instead of 2 expected previously. However, Committee members agreed that Brexit remains the key uncertainty, which is weighing on business investments. Today the economic calendar won’t be so busy as yesterday, however, investors will be able to catch some pips after the UK GDP report, while the US calendar will remain broadly silent this Thursday.
The USD/JPY pair shows choppy trades this Thursday, struggling to find a clear direction. In early Asia the pair received notable bearish impetus, having refreshed its intraday lows in the vicinity of 107 mark, on the back of spike of the demand for safety, which positively affected less risky assets, such as the yen. However, the pair managed to bounce off its recent lows and recover part of its overnight losses, as US bulls are still dominating the market, especially in wake of yesterday’s hawkish FOMC protocols, which pointed to a faster policy tightening path. Today, nothing much is scheduled in the data calendar, so the US dollar price actions will keep the status of the main determinant for the pair during this trading session.
The AUD/USD pair has stalled its recent abrupt retreat and now is trying to consolidate its positions near the level of 0.7800. However, it is expected that the major will continue to stay under pressure, as several bearish factors are weighing the pair. First, yesterday the FOMC meeting minutes indicated confidence of the regulator in the economic growth and increased probability of multiple rate hikes ahead this year, which in turn triggered speculations across the market regarding divergence between policies of the Fed and RBA. Moreover, broad risk-off tone is also negatively affecting higher-yielding Aussie this Thursday. Today, in absence of any relevant data releases the pair will continue to stay under influence of broad market trend and the US dollar price dynamics, backed by recent economic events.
Major events of the day:
German Ifo Business Climate Index – 11.00 (GMT +2)
Prelim. UK GDP – 11.30 (GMT +2)
ECB Publishes Account of Monetary Policy Meeting – 14.30 (GMT +2)
Canada Core Retail Sales – 15.30 (GMT +2)
US Crude Oil Inventories – 18.00 (GMT +2)
Support and resistance levels for the major currency pairs:
EURUSD S. 1.2227 R. 1.2387
USDJPY S. 107.00 R. 108.28
GBPUSD S. 1.3837 R. 1.4047
USDCHF S. 0.9322 R. 0.9430
AUDUSD S. 0.7737 R. 0.7931
NZDUSD S. 0.7270 R. 0.7408
USDCAD S. 1.2598 R. 1.2754
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