FOREX NEWS: SCOTTISH INDEPENDENCE VOTE – AN EVENT WITH HISTORICAL IMPLICATIONS
Forex News: The US Dollar strengthened yesterday on the back of Yellen’s hawkish comments as she noted that economy is continuing to make progress towards goals but the FOMC outlook didn’t offer too many surprises and movement was far from smooth on the lower time frames.
It seems like the bears are gathering strength for another push towards the support at 1.2860. Although 1.2960 was briefly broken and 1.3000 was almost touched, the bulls couldn’t sustain the move and this shows their lack of power, thus increasing the chances of more downside movement. The day ahead is full of market-shaking events and a prediction based solely on technical factors cannot be very accurate.
The European Central Bank will announce today the Targeted LTRO (Long Term Refinancing Option) which is the amount of money the Central Bank will create and loan to European banks. This is the first month of the program and the effects are hard to anticipate since market participants still don’t know exactly what is too much or too little, thus we recommend caution for this release. The scheduled time is 10:15 am GMT.
At 12:45 pm GMT Fed Chair Janet Yellen will deliver a speech at a Conference in Washington DC but the effects are likely to be mild considering that she will speak via satellite and audience questions are not expected. The Philly Fed Manufacturing Index is announced at 2:00 pm GMT and is expected to drop from the previous 28.0 to 22.8, a fact which would weaken the US Dollar and drive the pair higher.
Better than expected unemployment data helped the Pound climb during the first part of yesterday but the US events brought the pair back down, erasing the previous gains.
After yesterday’s initial climb above 1.6250 and above the 50 period Exponential Moving Average, the pair returned to the broken zone and this type of price action can have two outcomes. A move below the mentioned zone would suggest downtrend continuation and possibly a touch of 1.6160 support, while a bounce higher means that the strength of the bears is starting to fade and the Pound is ready to recover.
Today the Scottish people will express their opinion regarding Scottish Independence through a vote. Irregular movement is anticipated throughout the day because a potential separation of Scotland from the United Kingdom would have tremendous historical implications and would drastically weaken the Pound. It is uncertain when the vote results will come out and a high level of caution is recommended.
The British Retail Sales come out at 8:30 am GMT and are expected to increase by 0.4% while last month’s change was 0.1%. This would strengthen the Pound but the market will be affected by the Scottish vote which may overshadow any other events.