The best performing currency of Thursday was sterling which jumped following BoE MPC votes while gold outperformed, meeting our suggested target at $1,230. Today, the market will pay attention to Trump-Merkel meeting with the German industry giants.
Euro gained some ground from the strong CPI report and ECB Nowotny’s rate hike suggestion while U.S. dollar was mixed against the majors.
U.S. Dollar On Path to End the Week with Losses
The U.S. dollar ended Thursday and early Friday mixed against the majors following Fed decision to raise rates to 1.0% on Wednesday and mixed U.S. economic indicators released yesterday which failed to drive the dollar. Housing starts rose 3% in February versus a decline of 2.6% the previous month while building permits decreased by 6.2% against a rise of 4.6% in January. Both initial and continues jobless claims remained close to their last prints without big surprises. Moreover, Philadelphia Fed manufacturing survey revealed a better than expected situation in March of 32.8 from 30.0 estimated and 43.3 before. Later in the day, Michigan consumer sentiment is scheduled for release, however, the main event of interest will be the meeting of U.S. President Donald Trump with German Chancellor Angela Merkel and the German industry giants. The week is about to end negatively for the dollar, as the macro-data released was unable to erase the weekly losses recorded.
USD/JPY – Technical Outlook
The Fed’s decision to raise interest rates on Wednesday had a negative impact on the U.S. dollar which slipped sharply lower against the Japanese yen approaching the 113.00 strong psychological level. The USD/JPY pair plunged more than 1.3% since Fed's announcement on Wednesday and hit the 112.90 support barrier while it is completing a bearish week.
The currency pair is testing 113.00 and is having difficulty breaking below it, however, a successful penetration will drive the price until the 111.60 obstacle. On the daily chart, the currency pair is developing within a consolidation area with upper boundary the 115.50 resistance level and lower boundary the 111.60 support level since January 11th. The price fell below the 50 and 100 SMAs while the technical indicators seem to be in agreement with the downward thought. The RSI indicator is flattening within the negative territory whilst the MACD oscillator is moving lower near its mid-level.
BoE to Raise Rates Sooner than Expected
Bank of England left interest rates unchanged at 0.25% yesterday, however, there was a big surprise that boosted the British pound against the majors. One of the nine policymakers voted for a rate hike while the market was expecting the committee members to vote unanimously to keep main interest rates on hold. It was the first time since July that the vote to maintain rates had not be unanimous.
The meeting minutes released hinged that other committee members may join tightening vote in the upcoming policy meetings. This means that the central bank may be closer to raising rates of what the majority of the market participants had in mind. During Thursday’s trading session, the pound added 0.54% against the dollar, 0.50% against the yen and 0.26% versus the euro. No economic data is expected today from U.K. to impetus the sterling lower, thus we would expect the currency to keep the gains earned and close the week in green against most or all of the majors.
GBP/USD – Technical Outlook
The best-performing currency during the last two days was sterling, which jumped more than 1.7% versus the U.S. dollar. The GBP/USD pair would probably be trading much higher as investors covered their short positions. Also, the price hit our suggested first target at 1.2350 and now, is approaching the second one at 1.2400 psychological resistance level which is near with the 50 and 100 SMAs on the daily chart (see technical analysis here: https://bit.ly/2nqtnQ4).
On the daily chart, the technical structure suggests further upside movement as MACD and RSI are rising. The MACD oscillator beat its trigger line and is moving upwards. Also, the RSI indicator is moving towards the overbought area but is found a small difficulty of climbing above the 70 level.
ECB Nowotny Suggests Rate Hike; Euro Higher
The euro boosted by final February’s report which confirmed a robust rise of consumer prices of 2.0%. Moreover, market surprised by ECB council member and Austria’s central bank Governor Nowonty who stated that ECB could on the way for a rate hike. After years of strong stimulus packaged, the central bank achieved its 2% inflation target, raising the odds for a rate hike.
EUR/USD – Technical Outlook
The EUR/USD pair edged higher over the last two days and surpassed the strong barrier at 1.0715. Euro added to its performance more than 1.6% against the greenback and is approaching our recommended resistance level at 1.0800 that we mentioned in our yesterday’s analysis (see technical analysis here: https://bit.ly/2mwkf8p).
If the price surpasses the aforementioned psychological level then the next level to watch is the descending trend line, that is holding since last May, near 1.0870 which overlaps with the 200-daily SMA. From the technical point of view, the common currency pair climbed above the 50 and 100 SMAs on the daily chart while the technical indicators are signalling further upward movement. MACD entered the positive path with strong momentum while RSI is pointing upwards in the bullish area. Going to a lower timeframe, technical indicators are moving in the overbought zone.
XAU/USD – Technical Outlook
The yellow metal created an aggressive run since Wednesday as it exploited greenback’s weakness and traded sharply higher after the bounce off the $1,196 support level which overlaps with the 50.0% Fibonacci retracement level of the last upward move with low on December 15th and high on February 27th. The XAU/USD pair managed to meet our target for profit at $1,230, the 23.6% fibo level (see technical analysis here: https://bit.ly/2m8F7Xv), and if it jumps above it, it will open the way for the $1,265 resistance barrier. Despite that, the price needs to go through the 200-daily SMA which act as an obstacle for the bulls.
In addition, on the same chart, the technical indicators surged higher confirming the bullish tone. The RSI indicator climbed above its mid-level and is strengthening whilst the MACD oscillator created a bullish crossover with its trigger line and is approaching the positive path.
What to Watch Today
In contrary with the crowded economic calendar on Wednesday and Thursday, Friday will be quieter. For Euro area, trade balance and construction output for January are coming out. Across the Atlantic, in the U.S., February’s industrial production is projected to have a small expansion of 0.2% from 0.5% decline the prior month. The preliminary Michigan consumer sentiment for February will be released with expectation for deterioration to 96.0 against the previous 96.3.