Key Economic Data - Coming Up Today (All Times GMT+3)
*Retrieved from Forex Factory
The EURUSD is stuck in the recent range between 1.2900-1.3000. Yesterday's high was 1.2960 and the low 1.2909. The market is awaiting important economic data across major G8 economies this week. The Euro Area is stagnating and has just lowered interest rates (minimum bid rate) to 0.05 and is exploring more and more ways to make monetary policy accommodative to revive the struggling economy. At the same time the US is expected to begin tightening monetary policy following holding down interest rates at 0-0.25% since 2008 and have been providing stimulus to the economy since 2006 i.e. 8 years now. This is a classic setup that favors US Dollar strength barring any other important events. Where one Central Bank (ECB) is loosening policy while the other Central Bank (Federal Reserve) is preparing to tighten, along the way to raising rates.
This week could be explosive in the markets, FX, Stocks, Bonds, Commodities etc. particularly if the FOMC announces unexpected or either more aggressive or more dovish news than anticipated by market participants. At present the Euro is under pressure with the pair below 1.30 and still trading below the downtrend channel. As long as the pair remains below 1.30 and below the downtrend channel, the bias remains bearish.
EURUSD Support areas include 1.2900, 1.2867, 1.2800, 1.2745 followed by a key support at 1.2550. Resistance levels above are at 1.2959, 1.30 figure level, followed by 1.3165.
The GBPUSD has slumped this morning from the 1.6250 level to below 1.6200 and is presently trading at 1.6180. This decline in the pound has not been mirrored in other pairs against the USD and may be related to the upcoming CPI Inflation reading that is expected out later this morning in the UK. On Thursday the Scotland Independence voting will take place and the market may be looking ahead to this also. The pound could be under pressure following a 250pip dead cat bounce off of 1.6050 all the way up to 1.6300. According to a recent Bloomberg article the Scottish Nationalists have a 45% probability of winning the referendum. I would expect the GBPUSD to overreact to the downside if this materializes and then recover losses, as the market realizes that England and Scotland will likely work together to maintain most current economic ties but from an independent framework. The greatest risk is if Scotland ditches the pound. This could hurt the pound severely in the very short term and again id expect this to be retraced subsequently, although the initial impact could be larger than most might expect. Could lead to 5%-10%max decline in the GBPUSD in my worst case scenario.
GBPUSD support areas include 1.6150, 1.6100, 1.6000, 1.5900, and 1.5850. Resistance levels and upside targets at 1.6250, 1.6365 and 1.6500.
USDJPY is trading at 107.05 after pulling back from the 107.30 level and is only several pips away from making a new high for the year. The Dollar is being supported by growing expectations of a Fed Rate Hike by September 2015. The pair has moved higher steadily and is forecast to continue its upward trajectory. of A breach below 100 would be required to shift the pair's trajectory to the downside. Analysts at JP Morgan predict a rate of 109.00 in the USDJPY by the end of 2014. While the trend remains up I don't dismiss the possibility that by following a new high we could see strong selling due to profit-taking, and to provide the market with a necessary correction and stronger base from which to build a new move higher. Over the last hour the pair has declined from 107.34 and is back just above the 107.00 level, a breach below 106.70 may set off more selling. All eyes on the data and the Fed this week.
Support levels for USDJPY can be seen at 107.00, 106.65, 106.00 and 104.65. Resistance to the upside at 108.00, 109.00 and of course big level at 110.The USDJPY is trading at a 6 year high, levels not seen since 2008.