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Central bank divergences show
The Bank of England (12:00 London time) and the European Central Bank (12:45) are scheduled to announce interest rate decisions today, both of whom are expected to leave rates unchanged at 0.50% and 0.25% respectively.
Adding to the likely flurry of activity surrounding this pair will be the result from today’s Central Bank announcements. The ECB press conference, scheduled for 13:30, is likely to see a spike in volatility across EUR pairs whether it announces any policy changes or not. Prior to the announcement, however, EUR pairs are likely to trade in a tight consolidation range in anticipation of any changes.
Intermediate risk ranges to the downside are likely to be seen at Wednesday’s low of £0.7832, with topside resistance expected at £0.7920.
Euro posts fresh low ahead of ECB meeting
A similar story is expected to be seen in EUR/USD ahead of the ECB meeting later today. Prior to the London open EUR/USD posted a fresh year-to-date low of $1.2315. US initial jobless claims, expected at 13:30, are forecast to show 297K additional claims, down from its previous level of 313K.
Despite the sustained move lower in EUR/USD, it is not yet oversold on momentum indicators. Intermediate risk ranges to the downside are at $1.2234 and with upside at $1.2420.
Nothing new expected from Bank of England
Sterling pairs are lower against the majority of its major counterparts today. Ahead of the London open GBP/USD was 0.08% lower at $1.5680, and appears to be continuing to trade within a tight range between $1.5646 and $1.5722 since November 16. However, today’s Bank of England interest rate decision is likely to spark activity, despite a general expectation for an unchanged level of 0.50% as well as its QE total commitments of £375 billion.
Intermediate risk ranges to the downside are at $1.5387 with upside resistance likely to be seen at $1.6000.
USD/JPY posts fresh high
USD/JPY has continued its bullish run posting a fresh high at ¥119.90 in overnight markets and continued to be supported before the London open. With expectations for unchanged policies from both the BoE and ECB it’s likely the current market risk sentiment will too be unchanged, thus USD/JPY will likely attract further support.
Intermediate risk ranges to the downside are at ¥118.90 with upside resistance likely to be seen at ¥120.80.
AUD fails to gain on better data
Australian dollar pairs were trading lower across the board before of the London open, despite overnight data showing 0.4% growth in retail sales, beating expectations of 0.1% as well as a positive print in its trade balance. AUD/USD has continued lower, which has been the overriding theme from its September high of $0.9402 to its current level of $0.8368 because of the sharp move lower in commodity markets.
Intermediate risk ranges to the downside are at $0.8304 with upside resistance likely to be seen at $0.8468.