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28 January Forex daily review

Sergiy Zlyvko
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On Tuesday at the trading in Europe, despite the fact that British GDP coincided with predicted values, the U.S. dollar was supported by expectations that the U.S. Federal Reserve will continue the process to minimize quantitative easing program.

The EURUSD fell to 1.3630, GBPUSD – to 1.6535. At 13.30 GMT the dollar has already fallen across the market. Disappointing data on orders for durable goods helped the bulls to return the rate to 1.3685, GBPUSD rebounded to the level of 1.6615. Even we could not imagine that orders are so reduced, respectively, and was not ready for a rebound. Despite the weak data, EURUSD and USDCHF worked basic scenario with small deviations.

Orders for durable goods in December fell by 4.3% vs. 1.9% and 2.6% in November (revised from the value of 3.5%). Excluding transportation equipment, instead of the expected growth of 0.7% orders fell by 1.6%. After a report on consumer confidence the dollar partially rescued the loss. Consumer confidence in the U.S. in January rose to 80.7 compared with 77.5 in December (forecast 78.1).

On Wednesday, for us there is no basic scenario. One script made to the close of the European session and then who knows how British pound behaves at 12.15 GMT during speech by Bank of England Governor Mark Carney. All attention is focused on FOMC meeting. According to forecasts, the volume of bond purchases may be reduced by 10 billion to $65 billion per month. If they cut by $10 billion – the dollar strengthens, leave unchanged – the dollar falls.

Tuesday in European trading EURUSD dropped to a mark of 1.3630 and rebounded on data for durable goods orders in the U.S. Yesterday we wrote that there are signs for the formation of a descending triangle. Ugly, but the course has achieved the goal and bounced forecast.

There was confident that EURUSD rate will drop to 1.3600, but all were surprised by U.S. data. After such a pricing model (from 1.3740 to the current price), there are risks to rise above 1.3750. The price is in the downward trend. We made the script just before the closing of the European session and it is not clear how to the pound and EURGBP will react on M. Carney’s performance. Mark can shake the market, but we think his speech before the FOMC meeting will be neutral for the market.

British pound after the release of UK GDP fell to 1.6535, but it couldn’t fall below. The pair blocked all decline and is trading at 1.6575 mark. Traders are nervous because U.S. publishes weak statistics (reduces the likelihood of QE3 reducing at this meeting). On the other hand, Carney wants to decouple the monetary policy from unemployment level. If you draw a line on the top and bottom, it turns the range of 1.6550-1.6600 with borders. We suppose that before the meeting of the FOMC GBPUSD rate will be traded in this range. We do not know, what the U.S. Federal Reserve will decide after the meeting, but there will be strong fluctuations.

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