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8 January Forex daily review

Sergiy Zlyvko
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Neither ADP, nor the FOMC minutes were able to balance the market between major currency pairs. The single currency, the Australian dollar and the Swiss franc closed the day against the U.S. dollar in the red zone, the British pound is closed up.

Traders used strong ADP index to open short positions on the dollar before FOMC minutes publication. On the labor market report the U.S. dollar appreciated against most currencies by 30-40 points and during a few seconds lost all the profits.

According the data, the number of jobs in the private sector of the U.S. in December increased by 238 thousand (forecast was 200 thousand). The November figure was revised up from 215 thousand to 229 thousand. Positive December ADP data will force many banks to revise its forecast for NFP (report comes out on Friday at 13.30 GMT).

Immediately after the publication of FOMC minutes, the dollar strengthened against the euro, the franc and the Australian dollar. British pound is kept at the level of 1.6445 due to cross-rates. Traders expect the protocols of the last Fed meeting to see QE3 reduction schedule and dates. Fed confined to generalities – the economy recovers, the labor market situation improves, quantitative easing program reducing was supported by an overwhelming majority. Reaction was muted to the protocols as participants switched their attention to today’s meeting of the Bank of England and the ECB. On Thursday after the day we expect dollar’s growth.

On Wednesday, the EURUSD fell to 1.3555 mark. We think that the decline at this level is completed and will go lower to 1.3510. Given the congestion of AO and CCI indicators, the main scenario is rebound forward to 1.3610 line. It would be better if the correction from a minimum will be to 1.3555. During the day ECB meeting and press conference of M.Draghi are scheduled. Surprises can be by decision of the ECB and of Draghi, so at 12.45 GMT the scenarios diverge. Because payrolls are scheduled for tomorrow then we expect the closing of the day at around 1.3610.

It so happened that the British pound received support from the crosses during the day. ADP report was used by the bulls to open long positions. The growth stopped at the 1.6470 mark. Rising channel is formed from 1.6335. In the U.S. session the upper boundary of the channel passes through 1.6500. Current exchange rate is 1.6465. Before the announcement of the decision of the Bank of England GBPUSD rate is expected to decline to 1.6425. Since cross EURGBP cross-rate at the moment is corrected, the pound is weak. We do not know what to expect from 12.00 GMT. It is expected that the interest rate and the amount of assets’ repurchase remain at the same levels.

During the day AUDUSD rate fell to 0.8880. Since at the U.S. session the bulls achieved new highs, they had to rebuild the level of 0.8950. Statistics from Australia is expected the weak. Overall, we get the picture on the decline to 0.8830, but since today is a lot of important data, sellers may change plans after 12.00 GMT.

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