Yesterday, the Euro traded above 1.25, as it was driven by positive financial data, including the PMI, which came out better than expected, in addition to the German ZEW output. However, the Euro couldn’t continue the bullish trend; and retreated after reaching a high of 1.2560, which is a critical level.
The Forex market is expected to be volatile today; due to the nature of the fundamental data to be released.
The EUR/USD has proven that it’s being led by the financial data and today will be the best day to provide momentum to the ultimate trend, which could turn out to be either bullish or bearish. But, what we are sure of is that the EUR will not remain neutral against the USD.
Here are the major Resistance (R) & Support (S) levels of the EUR/USD:
Pivot Point 1.2490
As for today’s figures, starting with the U.K., the Average Earnings Index is scheduled for release, measuring the change in the price paid by the businesses and the government for labor, including bonuses.
The Average Earnings figure gives us a good indication of the personal income growth during the given month.
A higher than expected reading should be taken as positive for the GBP, while a lower than expected reading should be taken as negative for the GBP.
Simultaneously, the Claimant Count Change announcement will be released; measuring the change in the number of unemployed people in the U.K. during the reported month. A rising trend indicates weakness in the labor market, which has a negative effect on the consumer spending and the economic growth.
Forecast: -21.2 K
Previous: -20.4 K
A higher than expected reading should be taken as negative for the GBP, while lower than expected reading should be taken as positive for the GBP.
The Monetary Policy Meeting Minutes is also scheduled for release at the same time. It is a detailed record of the Bank of England's policy setting meeting; containing in-depth insights about the economic conditions that influenced the decision regarding the new interest rates. The breakdown of the MPC members' interest rate votes tends to be the most important part of the minutes.
The European Consumer Price Index (CPI) will also be released today; measuring the change in the price of goods and services from the perspective of the consumer. It is a key way to measure changes in the purchasing trends and inflation.
A higher than expected reading should be taken as positive for the EUR, while a lower than expected reading should be taken as negative for the EUR.
Moving to the U.S., the Core Consumer Price Index (CPI) is scheduled for release; measuring the changes in the price of goods and services, excluding food and energy. The CPI measures the price change from the perspective of the consumer. It is a key way to measure changes in the purchasing trends and inflation.
A higher than expected reading should be taken as positive for the USD, while a lower than expected reading should be taken as negative for the USD.
The FOMC Economic Projections report will also be released; it includes the Federal Open Market Committee's (FOMC) projection for the inflation and the economic growth over the next 2 years. An important part of the report is the breakdown of the individual FOMC members' interest rate forecasts.
Then, the U.S. Federal Reserve's Federal Open Market Committee (FOMC) statement will be released; it’s the primary tool used by the panel in order to communicate with investors regarding the monetary policy. It contains the outcome of the vote on interest rates, discusses the economic outlook and offers clues on the outcome of future votes.
A more dovish than expected statement could be taken as negative for the USD, while a more hawkish than expected statement could be taken as positive for the USD
The FOMC members will vote on where to set the rate. Traders watch interest rate changes closely as short term interest rates are the primary factor in the currency valuation.
A higher than expected rate is positive for the USD, while a lower than expected rate is negative for the USD.
Staying in the U.S., the Federal Reserve Chair, Janet Yellen, is expected to speak today. Being the head of the Fed, which controls short term interest rates, she has more influence over the U.S. dollar's value than any other person.
Traders closely watch her speeches as they are often used to drop hints regarding the future monetary policy. Her comments may determine a short-term positive or negative trend.
Finally from New Zealand, the Gross Domestic Product (GDP) announcement is scheduled for release; measuring the annualized change in the inflation-adjusted value of all goods and services produced by the economy. It is the broadest measure of the economic activity.
A higher than expected reading should be taken as positive for the NZD, while a lower than expected reading should be taken as negative for the NZD.
We wish you luck in your trading activities. For any further assistance, please do not hesitate to contact us at analysis@ICMCapital.co.uk.
The prices and news mentioned in this outlook are absolutely no guarantee of future market performance.
Financial markets can move in either direction causing profits to be made or complete losses to be incurred by the trader.
Each trader must decide for themselves what their risk appetite is and ensure that correct risk management procedures are in place before placing any trades.
Engaging in CFDs or Spot FX carries a high risk to your capital. You should not engage in this form of investing unless you understand the nature of the Transaction you are entering into and the true extent of your exposure to the risk of loss.
Your profit and loss will vary according to the extent of the fluctuations in the price of the underlying markets on which the trade is based.