Alpesh Patel
InvestingBetter.com
A day of mixed performances for the majors yesterday as the week started with limited volatility due to the lack of any important economic events. The more important news are expected towards the end of the week hence we should expect more of the same today as the main focus in the market will be on the UK Pound and the release of the Manufacturing and Industrial Production reports and BoE Governor Carney’s speech in Paris.
The UK currency has been under pressure for more than 2 weeks now and as we mentioned in our report yesterday this bearish rally was the longest period without a correction since last September. The way the Production reports print today and Carney’s comments could turn the tables on the Cable that reached the 1.4500 area yesterday but the most likely scenario is that more bearish remarks should be the main part of his speech.
Low inflation for the Pound, the volatility in the global markets and the recent drop in oil prices are all important factors that usually make policymakers nervous. And that is not a suitable environment to think about raising interest rates hence the Cable is probably in for more losses in the medium term. Later in the week the release of the US Retail Sales report will also provide some friction in the markets during a relatively quiet week in terms of fresh news and important reports.
Price action in the majors yesterday was rather mixed, the Euro was in the red for the most part of the day and lost the 1.0900 support level. However the lack of momentum meant that the drop was limited to the 1.0850 area and overnight the Euro corrected and this morning the currency is trading shy of the 1.0900 level again. The rest of this resistance area will decide the short-term outlook for the Single currency, as long as the Euro remains below the 1.0900 area then we should see a test of the 1.0800 support level.
The Cable corrected to the upside for the first time after 10 trading sessions in the red but the correction was limited and lacked any follow-through. The UK currency managed to rally to the 1.4600 area but the rest of the day and overnight it remained around the 1.4550 area. The currency’s short and medium term outlook hinges on the Production reports pending for release today and Governor Carney’s comments and our bias is mostly to the downside.
Economic Calendar
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