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18 February Forex daily review

Sergiy Zlyvko
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The consumer price index in the UK in January was published at -0.6% vs. -0.5%, while core CPI – at 1.6% vs. 1.9%. Thus, data on consumer price inflation in the UK showed rising inflationary pressures and thus could not support the pound. The British currency dropped yesterday and euro cross-rate and in tandem with the U.S. dollar, although the strong movements were observed. On data publication GBPUSD pair fell to a level of support in the area of 1.6655, but was later able to recover to 1.6725.

EURUSD smoothly pulled to the 1.3800 mark that largely takes place against the background of the EURGBP and decline of USDCHF than due to increased demand for the pair. Nevertheless bulls may in the short term to test resistance at 1.3830 after the breakdown of which upward momentum will grow. But at this stage it seems unlikely to breakdown the level, rather we should see increased activity of bears. Immediate support lies in the level of 1.3710, its loss would open the way to 1.3620.

Yesterday’s rise of USDJPY in the Asian session did not continue. Instead, the pair gradually decreased closer to the support at the mark 102.15, where 100-day moving average is situated. The loss of this support would jeopardize more important level – 101.60. A drop below would indicate that a downward correction is still in force. The growth above 102.75 will return the control of the situation to the bulls.

Today the minutes of the Bank of England monetary policy last meeting and the Federal Open Market Committee on the U.S. Federal Reserve. If the protocol of the Bank of England shows that the meeting had two or more votes in favor of the rate increase or reduce the volume of its asset purchase program, the British pound should quickly return to its current highs. Otherwise, the downward correction will gain momentum.

As for the minutes of FOMC meeting, market participants here will interest whether weak U.S. statistics, in particular on employment, affects the rates of third round of quantitative easing folding. If yes, then the dollar will continue to decline. If not – the U.S. currency could rise in the short term, but we can hardly expect a strong rally.

EURUSD breaks up, despite reports of failing German ZEW, dubious foreign background and common moral disorder among market participants. The bulls have lost all sense of reality in purchases or the market is trying to climb up and then accidentally drop the euro from the highs. In any case, the pause of pending in QE3 folding is playing against the dollar – in today’s preparing for publication “minutes” of the Federal Reserve by the end of January meeting will be find the most likely direct references to the desire of the regulator to postpone the new cuts.

The Fed does not explain what exactly happens in the U.S. economy, but it is clear and so all those measures that were aimed at the revival of monetary turnover, stabilization of the labor market and other important moments for the United States have already been implemented.

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