Forex snapshot

The US dollar continues to dominate, and as traders await the US jobs report at 1.30pm (London time) the greenback is showing no signs of letting up. The consensus is for 235,000 jobs added in October and for the unemployment rate to remain at 5.9%. 

Sterling notes being counted
Source: Bloomberg

Euro breaches $1.24

The single currency dropped to a two-year low after Mario Draghi reiterated his commitment to using unconventional tools to turn the tepid eurozone economy around. Dealers viewed this as Mr Draghi leaving the door open to full blown QE, and this sent the euro crashing through $1.24.

This morning it was reported that German industrial production in September increased, but it failed to meet the market consensus (1.4% vs 2.1% expected). This highlights that the strongest economy in the currency union isn’t as strong as traders have hoped.

The drop below the psychologically important $1.24 mark keeps the pressure on the euro. As Brenda Kelly stated, $1.2290 has been a major support level, and if that is breeched $1.22 will be in the crosshairs.

To the upside, the 50-hour MA of $1.2455 is the immediate target, and the next level up is the November high $1.2577. Beyond that, traders will look to $1.26.

Spot FX EUR/USD chart

Sterling eyes $1.58

GBP/USD has sunk to a 12-month low following the Bank of England’s decision to keep rates and the bond-buying scheme unchanged.

Now that the Federal Reserve has wound down its bond-buying scheme and its UK counterpart is showing no signs of changing its policy in the near future, the pressure remains on the pound. Sterling has been in a downward trend since July and we are yet to see any real attempt to buck the trend.

As Chris Beauchamp stated, solid ADP employment data from the US on Wednesday kept the pound under the cosh. A decline in US jobless claims yesterday added to high expectations of a solid jobs report today.

The immediate downside target is $1.58, and a move below that could put $1.57 on the radar. On the upside, the 50-hour MA of $1.5913 would be the initial target and then the psychologically important $1.60 would be the focus. A convincing move through the 50-day moving average of $1.6128 would be required to halt the downward trend.

Spot FX GBP/USD chart

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