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14 January Forex daily review

Sergiy Zlyvko
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On Tuesday, at the end of the day dollar index closed with a slight increase. Euro/dollar stood in the range 1.3630-1.3690 and most of the time trading around 1.3675 mark. On European trading positive comments of ECB representative Ewald Nowotny endorsed the bulls and increased the demand for the single currency, resulting in the euro/dollar jumping by 38 points to 1.3700, but the effect of the ECB representative speech lasted less than an hour and a pair retreated from 1.3700 high.

Ewald Nowotny praised monetary policy conducted by the ECB and said that in the short and medium term, there are no strong threat of inflation and deflation and economic growth in the current year may exceed the previous year.

Strengthening of the single currency on Tuesday restrained EURGBP cross-rate, which corrected after two-day rally. Against this background, GBPUSD pair managed to recover the loss and rise to the closure of the European session to 1.6465.

On Tuesday during the trading, U.S. dollar was down against the British pound and greatly strengthened its position to the Australian dollar, the Swiss franc and Japanese yen. As a result, the dollar index showed growth daily. USDCHF rate is a mirror of EURUSD. Dollar against the franc broke the resistance formed by a maximum of 13 January 2014. As a result, the dollar index DXY on Asian session broke the resistance at 80.75, the euro/dollar broke through 1.3640 support and fell to 1.3625. In this situation, the position of bulls is weakened and the scales tipped to the side of sellers. Although the British pound yesterday managed to recover some of the losses incurred earlier, the pound will remain under pressure and the immediate goal will make the level of 1.6365.

With the opening of trading in Europe, a slight decline of the dollar is expected (correction). In the second half we should expect to continue the growth of the morning to 81.15.

With the support of the cross-rate, GBPUSD pair managed to test the level of 1.6465. After the last two days, the pound situation remains uncertain, but given that the franc and the Australian dollar fell yesterday against the dollar and the EURUSD broke through support, we venture to make basic scenario for the reduction to 1.6365.

No support from crosses – no growth. AUDUSD yesterday blocked a two-day growth. Pair stayed at the three intermediate levels: 0.8990, 0.8965, 0.8915. From the zone of pinning, the pair returned to the line D3. We think today we should not expect such a fall. If the crosses will be rolled back, then today EURUSD, GBPUSD and from AUDUSD should be expected from the downward range.
USDCHF rate in the main scenario rolled up to 0.9035 and in Asia today it overcame a maximum of 13 January 2014. We suppose that at European trading the pair should retrace to 0.9045 from which to start a new rise of the dollar to 0.9100 level.

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