Greece and BoE Minutes Likely to Drive Markets

During yesterday’s session the dollar continued to weaken against most of its G10 counterparts. The only exception was the yen which fell against the dollar.

The big winner was the Australian dollar, driving the AUD/USD currency above the psychological level of 0.7700. This level is significant since it coincides with the 50-period SMA as well as the 200-period SMA on the 4-hour chart, therefore, short-term traders should watch that closely. The Australian Dollar strengthened against the dollar after the RBA Trimmed CPI, the CPI without food and energy prices and unusual changes in the month, for the first quarter outperformed expectations. The Trimmed CPI, rose to 2.3% yoy from 2.2% expected while the general domestic prices increased by 1.3% yoy for the first quarter, in line with the expectation, and lower than the previous three months figure of 1.7%. Despite that Inflation Rate decreased for the third quarter in a row, from 3.0% in Q2 2014, the above expectations number has seen as positive for the AUD. The RBA target of Inflation is between 2% and 3% annually. Technically, the AUD/USD pair is trading in a sideways channel the last couple of weeks between the 0.7560 barrier and the psychological level of 0.7900. A clear break outside the pattern would enforce the pair’s new directional movement.

Not far behind the Swedish krona was the second biggest winner against the dollar as the SEK enjoys a second consecutive winning session, however, the 50-period SMA on the daily chart and the 200-period SMA on the 4-hour chart are supporting the uptrend which started back in February 2014. However, I am looking out for the creation of a lower high, below the psychological level of 8.5000 to give me more confidence of the pair pushing lower in the coming days.

EUR/USD was effectively unchanged from early European levels after Economic Sentiment dropped unexpectedly to 53.3 in April despite the forecast that would increase to 55.3 from 54.8 before. Probably this dent after five months of continuous growths related to the fears for the Greek economy. Contrary, the same Survey showed that Current Situation reached a climax at 70.2 versus expectations of 56.0 from 55.1 in March. The highest figure since July 2011. Overall the German economy is proceeding at a steady pace. The single currency is trading in a tight range against the dollar the last couple of days between the 1.0660 and 1.0780 levels, which coincides with the 50-period SMA and the 200-period SMA on the 4-hour chart. There is very little Eurozone data on the calendar for the rest of the week and for this reason investors have shifted their focus on Friday’s Eurozone Finance Ministers meeting. From a fundamental perspective, this is what would likely drive the markets in the next few days and especially the euro crosses.

The pound continued to hover below the psychological level of 1.5000 ahead of the BoE MPC meeting. If we do not see a reaction above that level in today’s session then I would expect the GBP/USD pair to continue moving between the latter level and the 1.4800 barrier as we are now 15 days away from the UK general election. Yesterday, the pound bounced from the 200-period SMA around the 1.4850 region and approached once more the 1.5000 level.

In other currency trade, the US dollar rose against the Canadian dollar to 1.2310 Wednesday morning, following the aggressive sell-off below the 1.2400 level few days ago. The USD/CAD plunged below 1.2400 following the BoC policy meeting. The pair is trading below the psychological level of 1.2300, which includes the 23.6% Fibonacci retracement level. However, I would expect the pair to pick up some momentum and to test the 1.2300 and 1.2350 levels before resuming downwards again.

The ICE U.S. Dollar Index (DXY), a measure of the U.S. currency against a basket of six major rivals failed to hold above the 98.50 level and retreated. However, the dollar index closed positive during yesterday’s session and is now ready to record its fourth consecutive positive day, if it close above 98.15.

At the close of U.S. trading, the Dow Jones Industrial Average fell 0.47% at 17,950 and the S&P 500 Index fell 0.15%. On the other hand, the technology-heavy Nasdaq Composite Index edged higher 0.39% at 5,014. Technically, the Dow Jones index is finding strong resistance from the short-term descending trend line which started back in March 2015. On the downside, the 200-period SMA on the 4-hour chart is ready to provide a significant support to the index in case of further fall, therefore, short-term traders should watch that closely, as a break below here, could prompt a more aggressive move towards the 17,850 level.

Economic Indicators

Today, we expect the release of Bank of England minutes. At the last minutes released, policymakers flagged their concerns that the stronger Pound will affect negatively the current deflationary climate. Further to the upbeat data announced in the UK the last weeks, traders will keep an eye for any signal for a rate hike in the BoE minutes. Meanwhile, the Monetary Policy Committee of BoE are expected to vote unanimously to keep rates on hold at its April meeting. In Eurozone, the only indicator will be released is the Preliminary Consumer Confidence for April.

In US, the Existing Home Sales and the Housing Price Index for March and February respectively are coming out and will be looked by investors for additional clues to gauge the strength of broader U.S. economic recovery from the housing sector. In addition, the results of ZEW Survey for Switzerland's Expectations in April will be published.