Dollar Higher Vs. G10; Pound Plunged after UK Data; Oil Lower Despite Output Freeze

The dollar was higher during Tuesday and early Wednesdayversus the commodity currencies, but by mid-morning it had lost some, but not all, of those gains; on the other hand, it made its biggest gains versusthe British pound on the back of weaker UK inflation data. EUR/USD was more or less unchanged from its early European opening levels as investors await the European Council meeting, as well as the release of the ECB Monetary Policy Meeting Accounts, which is due early tomorrow.
The Japanese yen recovered some of its previous lost ground against the dollar and is currently trading back below 114.00. The gold prices snapped a four-day losing streak on Wednesday, following the aggressive move above the key level of $1,250. The precious metal hit a one-year high of $1,260 an ounce last week.Oil prices slipped off session highs during yesterday’s session despite an agreement by several major oil producers to freeze production.U.S. indices ended higher during yesterday’s trading session, helped mainly by gains in consumer discretionary and financials.

USD

Markets' attention today will likely focus on the U.S. from where a fair bit of data is due – Industrial Production, Housing Starts, Building Permits, Capacity Utilisation –, as well as the release of the FOMC Minutes.

The GBP/USD pair fell after the release of the UK inflation data
The British pound continued falling against all of the G10 currencies despite the optimistic data released from UK. The UK inflation rate picked up to 0.3%, a twelve month high and a step closer to Bank of England’s 2% inflation target as it helped from the low oil prices. The Brexit is still high on the agenda and the GBP looks set to remain under pressure. The GBP fell sharply vs JPY, as it lost more than 1.5% of its value during yesterday’s session.

GBP

The focus on attention today and mainly today’s direction will come with the release of the UK unemployment data. The unemployment rate in December is expected to fall even lower from the current record low to 5.0% while the average earnings to remain at the same levels. The Claimant Count in January, the people claim unemployment benefits are forecasted to decrease by 3.0K.

The GBP/USD pair plunged below the ascending trend line, which started in mid-January, as well as it fell below the 4-hour 50-SMA and the 200-SMA. The pair moved significantly lower during the release of the UK data, after testing the suggested target at 1.4516. The morning decline is particularly strong and this creates the conditions for a further drop towards the 1.4200 area. The weakness is also confirmed by our short-term studies, since the MACD crossed below its trigger in a bearish territory and the RSI is moving lower. The ADX is sloping upwards above the 25 level indicating further downward momentum while the 50-SMA and the 200-SMA on the 4-hourchart, both are moving above the price increasing the possibility for a further fall.

EUR/USD remained firm after ZEW data
The single currency remained firm against most of its G10 peers despite the better than expected economic sentiment in the Eurozone. The indicator came out 13.6 versus market consensus of 10.3, however, it slumped from 22.7 the month before, at the lowest level for more than one year ago.
The German ZEW economic sentiment tumbled at 1 from 10.2 in January above predictions of 0 while the current situation fell to 52.3 below forecasts to fall at 55.5.

The EUR/USD remains firm, after having recovered from a dip below 1.1150 and currently sits pretty much unchanged slightly above the latter level. On the downside, support will be seen at 1.1030, which includes the 200-SMA on the daily chart, while on the upside the first obstacle for the bulls will be the 1.1235 level, which coincides with the 50-SMA on the 4-hour chart.

Commodity currencies (AUD, NZD, CAD)
The commodity currencies continued to extend their losses against the U.S. dollar with the Australian dollar falling to a fresh intraday low and the NewZealand dollar closing a fresh 2-week low. The USD added more than 0.6% against the CAD the last 24 hours and is now trading above the key support level of 1.3800.

The USD/CAD pair continued its sharp reversal and managed to record a higher low above 1.3638, which includes the 38.2% Fibonacci retracement level. It seems that the correction is over and its time to move North. Therefore, the next level to watch will be the 1.4000 – 1.4020 zone, which coincides with the 23.6% Fibonacci level and we believe that will be then next target for the CAD bulls. Above here would see another run towards the 4-hour 200-SMA, near 1.4100.

Daily Technical Analysis and Forecasts

The AUD had another tough session and after the failed attempt above the key level of 0.7127 it is now trading sharply lower. The AUD/USD pair is now testing from above the daily 50-SMA while the 200-SMA, near 0.7200, is ready to provide a significant resistance to the bulls. However, for now, the bias remains to the downside and therefore, I would expect the greenback to advance further and to test the 4-hour 200-SMA near 0.7040 and then the psychological level of 0.7000.

After another volatile week, the NZD/USD headed lower to finish the day below the significant level at 0.6590. Technically the 4-hour chart looks negative and it could be that most of the traders are rolling over which could keep the NZD under selling pressure. The key for the bears will be if the can overcome the 200-SMA on the 4-hour chart, near 0.6550. If they do, then look for a run towards 0.6500. On the upside, resistance will be seen again around 0.6590 and then again at 0.6620.

The gold prices snapped a four-day losing streak on Wednesday
The precious metal continued its reversal this morning, despite the despite the four-day losing streak, which forced the precious metal to close below the all-important level of $1,200. According to the 4-hour and daily momentum indicators further gains look possible. The next obstacle for the bulls will now be the $1,215, intraday low. Above here would see another run towards $1,234 and even to the $1,263 high.

Russia, Venezuela and Saudi Arabia to freeze oil output
Oil prices plunged during yesterday’s session despite the agreement from some major oil producers to freeze oil output. Oil ministers from Saudi Arabia, Russia, Venezuela and Qatar have reached an agreement to freeze their country’s output of crude.Following the announcement, Brent crude, which has risen more than 4% earlier, ended the day down 3%, near $30 while the WTI was down 2%, ending the day slightly below $29.00. It should be noted that oil prices have fallen by more than 70% in the past 2 years, driven down by near-record production both from OPEC members and other producers, such as Russia.

WTI: Further losses look possible and thus the next levels to watch will now be the $27.70 barrier and then the key support level at $27.50.

Brent: Following the aggressive move below the significant level at $$32.00, further losses also look possible. Therefore, a run towards the key level of $31.00 and then at $30.35 will be the next downside scenario.

U.S. stocks close at session highs
U.S. stocks rallied to close at intraday highs Tuesday, helped mainly by gains in consumer discretionary and financials.Dow Jones Industrial Average rose 222.57 points (+1.39%)led by Boeing Co.(BA) and Caterpillar Inc. (CAT), while the S&P 500 Index closed positive at 1,895.58 (+1.65%). The Nasdaq Composite also gained ground +98.44 points (+2.27%) to close at 4,435.96 led by gains in the tech sector (GRPN and BABA).

Daily Technical Analysis and Forecasts

The S&P 500 is now testing a significant level at 1900, which coincides with 200-SMA on the 4-hour chart. The 4-hour indicators remain positive while the dailies have started to turn positive. A break of 1900 could take us back to 1948 (01 February high). On the downside, support will be seen, in a case of a pullback, around 1870, which includes the 50-SMA on the 4-hour chart.

A similar picture prevails in Dow Jones index which is struggling at the moment to overcome the 200-SMA on the 4-hour chart, near the key level at 16240. The short-term indicators remain positive and in the event of breaking above the session high of 16240, look for a run towards 16486. On the downside, support will be seen around 16025, which includes the 4-hour 50-SMA.

Economic Calendar
Early on Wednesday, the ECB will have a non-monetary meeting. A while later, the British employment report will be released. The unemployment rate in December is expected to fall even lower from the current record low to 5.0% while the average earnings to remain at the same levels.
The Claimant Count in January, the people claim unemployment benefits are forecasted to decrease by 3.0K.

UK Labour Market

In U.S., the Building Permits and the Housing Starts for January are coming out as well as the industrial production and the capacity utilization. The FOMC minutes that are coming out later in the day will hog the limelight.

During the night, the Australian employment report will be published. The unemployment rate is expected to remain steady at 5.8% and the employed people to have increased by 15.0k in January versus a decrease of 1k before.

Australian Unemployment Rate

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