FOREX NEWS: POUND AFFECTED BY A CLUSTER OF EVENTS; EURO LIKELY TO RETRACE
Forex News: Yesterday’s main market mover was the German ZEW Economic Sentiment which posted a very disappointing value of 33.1 while the anticipated one was 41.3. This huge gap between estimated and actual figure weakened the Euro substantially and took the pair into major support.
Price fell without first touching the resistance at 1.3790, a fact which indicates clear bear strength and signals a potential reversal of the long term bullish trend. However, the Relative Strength Index spent a considerable amount of time below the 30 level, a fact which indicates an oversold market and gives a heads-up for a move higher. This oversold condition, combined with the fact that price reached an important support level makes us believe that today the pair will either retrace higher or move in a ranging fashion.Fundamental Outlook
The headline today is the release of the US Producer Price Index, scheduled at 12:30 pm GMT and expected to decrease from the previous 0.5% to 0.2%. The indicator tracks changes in the price charged by producers for their goods and services and it often signals fluctuations in inflation because a higher price charged by producers will be eventually passed on to the consumer. For today’s release, a figure that surpasses estimates is viewed as beneficial for the US Dollar.GBP/USD
The bears dominated yesterday’s trading session and the disappointing value of the US Retail Sales didn’t do much to help the bulls. The support at 1.6820 was missed by a few pips and overall the pair had a normal trading day, without sharp reversals.Technical Outlook
The pair’s direction will be heavily affected today by the fundamental aspect but from a strictly technical point of view, price is likely to penetrate the area between 1.6820 and 1.6750. The momentum still belongs to the bears and attempts to break resistance are quickly reversed; a break above 1.6880 would tip the balance in favor of the bulls but for the time being, there are no clear signs of buying pressure.Fundamental Outlook
At 8:30 am GMT, United Kingdom’s Claimant Count is released, showing the change in the number of unemployed people; the expected figure is -30.7K a small decrease from the previous month’s -30.4K and since the indicator is a gauge of unemployment, lower numbers are beneficial for the Pound. At the same time, UK’s Unemployment Rate is announced, with a small decrease expected, from 6.9% to 6.8% (again, lower numbers strengthen the Pound).
An hour later, at 9:30 am GMT the Bank of England will publish the Inflation Report, containing inflation projections and an economic outlook for the next 2 years. At the same time Governor Mark Carney will hold a Press Conference during which he will discuss the Report. This entire cluster of events can trigger huge volatility and sharp moves so caution is recommended.