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25 February Forex daily review

Sergiy Zlyvko
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The dollar index closed with a slight decrease. Even after updating the minimum, DXY index managed to regain losses. Weak data on consumer confidence in the U.S. has strengthened doubts about the sustainability of the U.S. economic recovery. The previously weak U.S. data will constrain the dollar bulls before the series of positive statistics.

The consumer confidence index fell in February to 78.1 from 79.4 in January. Dollar rebounded from a low of 80.00 during the presentation of Daniel Tarullo from the Fed. He said that in order to refuse monthly bond purchases by 10 billion dollars a month at each meeting of the central bank the members need a significant deterioration of economic outlook.

The situation on the currency market remains uncertain and waits for the exchange of price ranges formed. For this we need new drivers. On Wednesday, there are three stories that may provoke sharp price fluctuations.

At 7.00 GMT GfK consumer confidence index in Germany in March publishes. Expected growth rate is fluctuates from 8.2 to 8.3 points. In the case of the coincidence of the actual figure to the forecast, the response will be weak. If the index is above the 8.3, EURUSD will grow by 20 points. If below 8.2 – it will decrease by the same 20 points.

At 9.30 GMT in the UK the report with preliminary GDP data for the fourth quarter publishes. According to the forecast, it is expected that the data will not change and amounted to 0.7% q/q and 2.8% y/y. This is the second estimate of UK GDP. There are three of them. The most influential is the the first. Subsequent assessment made market reaction on average 15 points. Significant difference was not observed since 2011. These news will have mostly psychological impact on traders.

At 15.00 GMT statistics on the U.S. housing market publishes. Expected decrease in sales in the primary market from is evaluated from 406 thousand to 414 thousand. Our main scenarios are for the growth of the dollar under fluorescent lights.

Perhaps the dollar paired with the Swiss franc had a chance to form and develop the local bottom of upward correction. Last fall to 0.8855 attracted buying interest, which led to an increase of USDCHF pair to 0.8890. Continue of dollar’s upward momentum failed because offers located here and pushed it to 0.8865. Nevertheless downward fluctuations attract buyers and the breakdown of the resistance at 0.8915 will improve technical prospects of the dollar. In turn, a drop below 0.8855 will lead to testing of 0.8800 level.

The fall of the British pound continues to attract buyers. Member of Committee on monetary policy of the Bank of England yesterday in the comments noted that the further growth of the national currency may slow economic growth and lead to the postponement of the interest rate increase. However, he stressed that the current levels of the pound CB do not cause an anxiety. Therefore, the sale of the British currency was not observed, but also to develop an upward trend until the British in a position that creates a risk of larger correction development. This, of course, will depend on macroeconomic statistics from the UK.

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