FOREX NEWS: US DOLLAR SHOWS MIXED SIGNALS AGAINST COUNTERPARTS. FOMC MINUTES EYED FOR RATE HIKE CLUES
Forex News: A much needed breakout took place yesterday on the back of better than forecast European economic data. The pair dropped to touch the important support at 1.0525 where we expect a pause or possible bounce higher.
Last time the pair visited 1.0525 area, it bounced strongly and it’s very possible to see the same type of behaviour again. This view is also supported by the oversold condition of the Stochastic and Relative Strength Index, so even if we will see price move below 1.0525, the extent should be limited and a pullback should soon follow. Overall our bias is bearish as long as the pair is trading below the 50 period Exponential Moving Average.
The German IFO Business Climate comes out at 9:00 am GMT, showing the opinions of about 7,000 businesses regarding current economic conditions as well as a 6-month outlook. The impact is medium-to-high and usually, numbers above the forecast strengthen the Euro; today’s anticipated value is 109.6 vs. 109.8 prior.
Later in the day, at 7:00 pm GMT the Fed will release the FOMC Meeting Minutes, which contain details about the latest rate vote and possibly hints about the next rate hike. Usually the Minutes have a strong impact on the US Dollar only if they offer clues about the next rate hike and if that is the case, we expect strong movement on all USD pairs.
The Inflation Report Hearings had a surprisingly low impact on the Pound but later in yesterday’s session the pair showed increased volatility and jumped after another failed attempt to break support.
Once again the US Dollar showed that it lacks the strength to break support and the pair immediately jumped higher, testing the 50 period Exponential Moving Average and coming very close to horizontal resistance and to the bearish trend line. Once the bearish trend line is broken (by then the other 2 elements will be probably broken as well), we expect price to move into 1.2550. Of course, given the current stalemate, it’s not out of the question to see a move back into support, so our view is currently neutral, expecting a clear breakout.
The main event for the Pound is the British Second Estimate Gross Domestic Product, scheduled at 9:30 am GMT and expected to show a change of 0.6%, same as previous. The GDP is an economy’s main gauge of performance but the version released today is less important than the Preliminary version released a month ago; nonetheless, values above expectations can strengthen the currency and the opposite is valid for numbers below forecast.