[B]FOREX NEWS: VOLATILITY GUARANTEED: U.S. FEDERAL FUNDS RATE ANNOUNCEMENT[/B]
Forex News: Movement was slow and choppy yesterday, mostly due to the lack of major economic releases. The pair remained in range-mode and no substantial advances were made by either side.
The pair is confined in a tight range and movement is slow; this behavior is usually followed by a strong breakout but the direction is difficult to predict. Our general bias is bullish as long as price is trading above the 50 period Exponential Moving Average but that doesn’t exclude a drop to touch the EMA or even break it. For now we recommend caution because probably today we will see a strong breakout.
The first key event of the day is the release of the ADP Non-Farm Employment Change, a report that tracks changes in the total number of employed people, excluding the farming industry and Government. This is less important than the Government data (NFP), announced Friday, but it is still a very important indicator, which can strengthen the US Dollar if it posts a higher reading than today’s forecast of 178K; the scheduled time of release is 12:15 pm GMT.
Later in the day, at 6:00 pm GMT the FOMC will release the Rate Statement, which contains the outcome of the interest rate vote (no change expected from the current <1.00%) and also details of the reasons that stood behind the votes. If the document will contain hints about future monetary policy direction or possibly about the pace of rate hikes, then we will most likely get a volatility boost on all US Dollar pairs. Either way, caution is recommended.
The Pound was strengthened yesterday by the British Manufacturing PMI, which posted a reading of 57.3, better than the expected 54.0. The release erased an earlier drop below 1.2905.
The move below 1.2905 may be considered just a retracement in an uptrend, especially because price rallied from close vicinity of the 50 period Exponential Moving Average and 1.2855 support. The first resistance is now located at 1.2965 and a break of it would open the door for a move into 1.3000 psychological level. Today the technical aspect will be somewhat secondary to the fundamental because both currencies in the pair will be affected by important releases.
The British Construction PMI is released today at 8:30 am GMT and expected to show a value of 52.1, almost identical to the previous 52.2. This is a survey of purchasing managers that acts as a leading indicator of economic health, focused on the Construction sector; higher numbers usually strengthen the Pound but the impact is limited if the actual reading matches analysts’ expectations.