Both the euro and the U.S. dollar fell broadly against the major currencies on Wednesday and early Thursday while the sterling was managed to end the day near its opening levels against most of the G10.
Fed Yellen and U.S. Trump Health Care Bill in Focus; U.S. Dollar and Indices Susceptible
The greenback was traded broadly lower against the G10 currencies on Wednesday, as the macro-data came out, disappointed the housing market while U.S. President Donald Trump struggles to push through a healthcare bill, shaking the stock market. The housing price index remained flat in January despite market expectations to keep its pace of growing at 0.4%. Existing home sales decreased by 3.7% in February to 5.48M from a rise of 3.3% the prior month or 5.69M. The U.S. dollar index, which monitors the performance of the U.S. dollar against the basket of G10 currencies, pulled slightly higher from the seven-week low hit yesterday, at 99.33, and tries hard to retain its gains. The 99.42 support barrier offers strong support to the index. Fed Chair Janet Yellen will give a public speech at 12:45 GMT which will probably have an impact on the greenback.
Later in the day, the exact time had not set yet, the healthcare bill prepared by U.S. President Donald Trump, which will repeal Obamacare, will be in the House of Representatives’ agenda for approval. If the policymakers refuse to give the needed votes for the reform to pass or delay it further, will hurt hardly investor’s confidence in Trump’s legislative ability to apply other reforms promised in taxes, infrastructure and business in general, deteriorating the stocks' losses. The three most popular U.S. indices, Dow Jones, S&P500 and Nasdaq experienced the worst one-day falls on Tuesday, following the mentioned concerns, while on Wednesday, Dow managed to remain virtually unchanged and the other two to record marginal gains.
USD/JPY – Technical Outlook
The U.S. dollar remains under pressure against the Japanese yen as it extended its losses below 111.30 support level over Wednesday’s trading session. It is worth mentioning that the currency pair printed a fresh four-month low at 110.67. Meanwhile, the USD/JPY pair slipped below the significant 38.2% Fibonacci retracement level of the last upward move with low on June 24th of 2016 and high on December 15th of 2016. However, the price failed to end the day below the latter level and currently is developing within the narrow area 111.30 – 111.60.
On a long-term basis, the momentum indicators, MACD and RSI, are pointing increasingly lower and a further downside price action is more likely in the sessions ahead. On the short-term, while both 4-hour and daily charts remain negative, we are waiting for the technical indicators to enter the oversold areas. Despite that, the momentum seems to slow a little today in order to allow the price to recover but selling rallies will be the main theme. If there is a penetration of the strong aforementioned fibo level, then the price will expose towards the 200-daily SMA near 108.80 which overlaps with the 50.0% Fibo level. Otherwise, a jump above the 111.60 strong barrier, it will expose the price towards 112.90.
British Pound steady while Euro Sank due to Disappointing Data
TheBritish pound was steady on Wednesday despite the terror attack in London which left 5 people dead and decades injured. It closed Wednesday’s trading session near its opening levels against the majors. Today, the U.K. retail sales will attract some attention. Meanwhile, the euro dropped against the majors following the release of Eurozone’s current account which decreased significantly in January. Seasonally adjusted indicator came out €24.1B, below market expectations of €29.3B and even lower from €30.8B the previous month. The non-seasonally adjusted figure has a more rapid drop to €2.5B versus the revised downwards €46.9B in December. From the euro area today, we expect the release of the targeted LTRO and the preliminary consumer confidence for March.
EUR/USD – Technical Outlook
The EUR/USD pair has been choppy and fairly directionless as it remains below the descending trend line that is holding since May 2016 and failed one more trading session to extend its gains above the 1.0830 resistance level. The common currency pair fell almost 0.2% yesterday and ended the day below the psychological level 1.0800. Moreover, the EUR/USD pair is recording the fourth positive consecutive week.
The technical structure remains bullish to neutral, with the pair meeting some short-term buying interest around 1.0870, which includes the 200-SMA on the daily chart. If the price falls below 1.0800, it will hit again 1.0715 and then we would expect a further upside move again. Also, it should be noted that the long-term diagonal line, continues to provide a significant resistance to the price action. The RSI indicator is sloping upwards and is moving towards the 70 level whilst the MACD oscillator is rising with strong momentum. The stochastic oscillator is flattening near its overbought area.
GBP/USD – Technical Outlook
Sterling was virtually unchanged versus the greenback over Wednesday’s period as it ended the day near its opening price. However, early in the morning, the GBP/USD pair showed its intention for further bullish move. The cable is in the process to create the second positive week in a row. After it broke above the descending trend line on a long-term basis, it created a short-term uptrend line that is holding over the last ten days. We could see a run until the 1.2580 resistance level which overlaps with the 200-daily SMA.
From a technical point of view, the trend remains upward based on short-term charts as both the Stochastic and RSI are moving higher with strong momentum. RSI is trying to enter the overbought path whilst stochastic is strengthening above the 80 level. In addition, the price is still developing above the three moving averages (50, 100 and 200 SMAs) while the 50-SMA had a bullish crossover with the 100-SMA indicating upward move.
What to Watch Today
Today the focus will be Fed Chair Janet Yellen speech at 12:45 GMT and U.S. congress decision whether they will prove Trump’s health care measures. Early in the European morning, Eurozone’s Economic Bulletin will be published. U.K. retail sales are expected to show an expansion of 2.6% in February from 1.5% before. The U.S. weekly jobless claims and the new home sales are coming out. Eurozone’s preliminary consumer confidence is predicted to have improved to -5.8 in March versus -6.2 the previous month. New Zealand’s trade report will be published including imports, exports and trade balance for February.