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9 January Forex daily review

Sergiy Zlyvko
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The Bank of England and the ECB on the results of the meetings left monetary policy unchanged yesterday. Interest rates remained at levels of 0.5% and 0.25% respectively. The Bank of England also kept the size of the program to buy back bonds in the amount of 375 billion pounds.

GBPUSD spent the day at the level of 1.6460 and continues to move within the ascending channel originating from 1.6335 (minimum of 6 January). The EURUSD on M.Draghi’s performance decreased to 1.3550.

ECB President M.Draghi said nothing new, but every month market participants react differently to his statements. The ECB intends to keep stimulating monetary policy as long as it is needed. Draghi expects inflation to remain below 2% for at least two years and if the mid-term evaluation will worsen inflation expectations, the ECB will act in order to ensure price stability. Draghi reiterated that interest rates at current or lower levels will remain for a long period of time.

EURUSD fall by 80 points and restore by 50 points makes us think about how the currencies will react to today’s NFP report. We clearly remember December 6, when the dollar on strong NFP firstly rose and then fell on the entire market.

The main scenario we consider a rising dollar on Friday. Firstly we made only one option, but then looked at the gold and added an alternative scenario duplicates the dynamics of exchanges on December 6. Let’s look how the bulls buy gold and do not even fear that after the strong ADP, released on Wednesday, members are also waiting for good NFP data. It is expected that in December 194 thousand new jobs were created in the non-agricultural sector, while the unemployment rate remained at around 7%. We think in the December the figure will be more than 200 thousand and the first reaction to the report will be – a rise of the dollar.

From a minimum of 1.3550 the pair rebounded to 1.3630. There is a three-day downward channel. While the price will not go beyond 1.3650, the single currency will remain under pressure. Alternative scenario is actual in case of the movement for December 6 repetition. We expect NFP value above 200 thousand because indicators AO and AC on H4 are overloaded so the fall consider a breakdown of a bottom of the channel. If the pair will fall to the 1.3540 on weekends don’t leave short euro positions, because Monday market adjusted against Friday.

British pound kept at the level of 1.6460 and the EURUSD fell sharply, the GBPUSD through cross EURGBP updated intraday and weekly maximum. British moves inside the rising channel range of 85 points. The main scenario we consider the breakdown of support, followed by a fall to 1.6380, as the forward NFP rate is evaluated above 200 thousand. If the motion of December 6 is repeated, so the price is likely to remain in the channel. While at 13.30 the price can test both upper and lower boundary of the channel.

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