United and Invincible: The Dollar Continues to Weaken against the Euro

Fundamentals
The UK consumer price index came out yesterday. Prices grew at a rate of 0.5% relative to the previous period (2.7% on an annual basis). Inflation in the United Kingdom is therefore intensifying, which may influence the BOE’s decision on the main discount rate (you’ll recall that the Bank of England’s next meeting will take place on June 15, 2017).
Also on Tuesday, the number of new construction permits in the United States was published at 12:30 pm GMT. The number was worse than expected: 1,229,000 versus the predicted 1,270,000. The Fed’s decision on raising the rate at its next meeting on June 14, 2017, is still in question, although the market believes that the rate will be raised. The dollar has now weakened substantially relative to the single European currency, managing to get to 1.1000. If the bulls are able to consolidate above this number, it is quite possible that we’ll soon see a reversal of the mid-term trend.
Today the US Department of Energy releases the usual Wednesday data on crude oil inventories. The data will be published at 2:30 pm GMT.
At 8:30 am GMT the change in the number of jobless claims in the UK comes out.
At 9:00 am GMT the Eurozone’s consumer price index will be published. The CPI is expected to stay at 1.9%.

Stocks
CISCO, an information technology leader, releases its reports today. Analysts expect a slight increase in EPS to $0.58. The shares are traded on the US market, and on May 12, 2017 the asset formed a gap up at the opening of trading on May 15, 2017. Technical analysis shows a rising 9-day EMA, which proves the bulls’ strength. If the numbers are strong, the shares might provide additional fundamental support, which will reinforce the current trend. The company’s accounting statements indicate solid growth. In 2016, the company’s assets were US$121.652 billion, i.e., they rose by US$8.279 billion compared to the previous fiscal period. At the same time, the company’s liabilities increased by US$4.391 billion. Investors should therefore look favorably on investing in these assets and can count on further profit growth.
Russian traders might turn their attention on Wednesday to Rostelecom’s reports. Analysts expect a substantial fall in EPS to RUB 0.47.

Currency Market
On the weekly charts the AUD/CAD pair is near the lower boundary of a fairly wide price channel where the currencies’ parity is located. Technically, consequently, we just might expect the Australian dollar to bounce up. It will be a buy signal if the 9-day moving average breaks through bottom up and turns upward. The target might be 1.0300.
The GBP/CHF pair broke through the support at 1.2867, which is a 23.6% Fibo correction. The pound is now stopped at the support of 1.2750. We won’t rule out the possible formation of a bullish correction wave that might turn into a head-and-shoulders. If the bears succeed in pushing through the support, the next level is 1.2660, which is already a 50% Fibo correction. Technically the signal points to a continued decline, including for the Directional Movement Index in the form of the intersection of the +/- DM lines.

Nikolay Dudchenko, Olymp Trade analyst.

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