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17 December Forex daily review

Sergiy Zlyvko
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On Tuesday on inflation data in the U.S., dollar lost all points earned in the European session. This is due to the fact that the slowdown of U.S. inflation will force the Fed to delay QE3 program folding and continue to stimulate the growth of the U.S. economy and inflation. According to the latest survey of economists conducted by Bloomberg, 34% of respondents expect that QE3 program folding starts today. Remaining respondents believe the Fed will delay reduction of asset purchases until next year. Most economists agree that early incentive program reduction may lead to increased deflationary expectations that are not included in the plans of the Fed.

In Europe session at 9.30 GMT the report about business activity indexes in Germany will be published by IFO. Three indicators expected to be above previous values. ZEW Surveys of Germany and Eurozone yesterday were better than expected values, so IFO indices can also surprise the market. Euro/dollar weakly responded to ZEW report, but today after yesterday’s pullback bulls may decide to test the strength level of 1.38. The situation will largely depend on the reaction of market participants to the Bank of England minutes (9.30 GMT). Minute and report on the labor market in the UK able to stir up the market and cause sharp fluctuations of the pound. The traders should be vigilant all this time.

The dollar index is trading at a support line. Before the meeting, the Fed can, of course, to implement Monday scenario.

In the American session, the euro/dollar dropped to 1.3725. After the publication of inflation data from the U.S. the pair returned to 1.3770, where at the moment and it is fluctuating. If through the highs of 1.3810 and 1.3800 we hold the line, it forms a projection of resistance at 1.3790. Resistance below 1.3780 passes through 1.3735 level. We do not see the break of 1.3790, but we can check. We inclined to think that until the evening, the EURUSD will be traded near the 1.3785 mark. Expectations for a strong IFO report will support the pair in the first half of the day.

Yesterday the EURGBP cross rate is expected to fall, but ZEW index supported the single currency, as a result of the dollar against the growth rate of GBPUSD decreased to 1.6220, which is 130 points from 1.6350 mark. After the release of U.S. data, GBPUSD rate rebounded and is currently trading at 1.6285.

AUDUSD exchange rate following the main scenario fell to 0.8880. From minimum point, the pair rebounded to 0.8925 level. The upper boundary of the channel passes through 0.8950. 0.8950 level today stands as strong resistance. Sales remain as a priority.

From a minimum of 0.8845 USDCHF exchange rate rose to 0.8895 mark, from which the pair fell to 0.8830. Traders before the meeting of the U.S. Federal Reserve decided to shift in the franc and yen. Before the opening of U.S. session we consider a restoring to 0.8870.

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