Canadian Inflation and Monetary Policy Are in focus. Euro bearish ahead of ECB meeting. Sterling Bullish – no rate cut? EUR/USD, GBP/USD, USD/JPY, USD/CAD
The economic calendar is quite light for the Eurozone today. Yesterday, the Euro saw a recovery following upbeat economic sentiment. The European Central bank will post their monetary policy decision tomorrow at 12:45 GMT, following a two-day policy meeting that starts today. Today also marks the 5-year anniversary when previous ECB President Mario Draghi introduced Quantitative Easing to restore inflation in the eurozone. Now, new President Christine Lagarde and policymakers are going to have a thorough review on why inflation is still below target and what steps need to be taken next. Lagarde has also again called on Germany and the Netherland to increase fiscal spending to aid the European economy.
EUR/USD on the Daily TF spiked up to its 13 EMA but then returned below our head and shoulders neckline as resistance and using the 61.8% Fibo level as support. Tomorrow we want to pay close attention to the ECB statement.
Technically: The price is currently at a strong level of support, which is the 61.8% Fibo level and also the local trend line up from October 1st, 2019. The Parabolic SAR is pointing down, the MACD is bearish, both the 13 and 48 EMA are pointing down and the price is below the EMAs. Yesterday’s rejection of higher prices may also indicate that Euro bears are willing to add to their short positions.
Resistance: R1 50% Fibo 1.11103, R2 38.2% Fibo 1.11407.
Support: S1 1.10575, S2 1.10266, S3 1.10.
The British Pound experienced a recovery yesterday following better than expected labor figures. This is a pleasant change following last week’s depressing manufacturing (-1.7%), inflation (1.3% YoY), GDP (0.6% YoY) and Retail Sales (-0.6% Dec.). The Bank of England is hesitant to launch into monetary policy easing while there is still Brexit unrest, but as of last week, the markets were pricing in a 75% chance of a rate cut. Today the CBI Industrial Trends Orders were released above the forecast, although still well below zero (-22). On Friday pay close attention to the Manufacturing and Services PMIs as they are the last indicator before the monetary policy meeting next Thursday.
GBP/USD on a Daily TF is generally trading flat. The price met resistance at our local trend line down, around 1.30715.
Technically: Today the price moved above the 13EMA and our resistance around 1.30500 which the price is currently using as support. The Parabolic SAR is pointing down, the MACD is flat with a bearish histogram decreasing and the MACD line is pointing slightly up. We see bullish momentum on lower time frames and therefore further Sterling recovery is not ruled out.
Resistance: R1 50% Fibo 1.31675, R2 1.33327, R3 61.8% Fibo 1.34529.
Support: S1 1.29877-1.29500, S2 38.2% Fibo 1.28821, S3 1.27685.
USD/JPY on the Daily TF is consolidating and trading slightly below 110, around 109.953. Japanese Yen saw strength yesterday following an optimistic BoJ. The price is now above November-December resistance, using the level as support.
There is also a slight risk-off sentiment in the markets pertaining to the coronavirus breakout in China that has spread to several countries including Thailand, Korea, Japan, Taiwan and the United States. Both the USD and JPY are considered to be safe-haven assets. Tomorrow, pay attention to the U.S. Initial jobless claims at 1:30 pm GMT and Japan CPI at 11:30 pm GMT.
Technically: The 13 and 48 EMAs are pointing up, the price is above the EMAs. The MACD remains bullish although its histogram has decreased.
Resistance: R1 110.681, R2 111.069, R3 111.376.
Support: S1 109.745, S2 109.181, S3 108.860.
The Canadian Dollar is in focus today with the release of inflation at 1:30 GMT and monetary policy at 3 pm.
USD/CAD on a Daily TF has been trading in a range between the 23.6% and 38.2% Fibo since January 9th. Better than expected employment in December (35.2K) and a drop in unemployment from 3.9% to 3.6% in December failed to provide further CAD momentum. Today the price broke above the 13 EMA but met resistance at the 38.2% Fibo. The Parabolic SAR is pointing up and the MACD bullish histogram is increasing.
Resistance: R1 38.2% Fibo 1.30927, R2 48EMA 1.31151, R3 50% Fibo 1.31363.
Support: S1 23.6% Fibo 1.30388, S2 1.29800-1.29650.