Dollar eyes beige book

The dollar is gathering pace ahead of the beige book tonight, and is pushing EUR/USD and GBP/USD lower.

Source: Bloomberg

Euro awaits ECB meeting
Traders have a lot to focus on this trading session as EUR/USD will be pulled and dragged in all directions. We are expecting the European central bank’s (ECB) rate decision and press conference at 12.45pm and 1.30pm respectively, the beige book will be announced at 7pm (London time), and the Greek debt crisis is still in the mix.

The market is expecting no change from the ECB in terms of the interest rate decision, but the subsequent press conference will provide us with an idea as to what the ECB are thinking. It is early days yet for their bond buying scheme, but traders will try and ascertain how long it will be in place for, and as we know from the Federal Reserve’s stimulus package, it can last for a number of years.

Greece is on the brink of another deadline in regards to its debt levels, and the Greek finance minister Yanis Varoufakis is flying out to the US to meet with President Obama. Mr Varoufakis will also be meeting a top US lawyer who has experience in debt restructuring. As Alastair McCaig stated, the Financial Times mentioned that Athens is preparing for a default, and the fear of such an event will keep pressure on EUR/USD.

The 100-hour moving average (MA) is providing support at $1.0625 and if this mark is held the resistance at $1.07 will be brought into play. A move through that mark will put the 200-hour MA of $1.0760 in sight. A drop below the 100-hour MA will put $1.06 on the radar, and if that is punctured the $1.0540 area will be the next target.

Sterling trades sideways
GBP/USD is flat on the session but dealers are still conscious that the UK rate of inflation remained at zero. The market is afraid that the UK will head down the deflation route, just like its large trading partner the eurozone. The UK consumer price index report is rounded off to one decimal, but if you rounded it off to two decimal places it would have been a negative reading, and this will weigh on GBP/USD.

The beige book from the US will shed some light on the state of the US economy. The latest Fed minutes showed that there is deep division within the central bank over when to raise rates, and a strong beige book update will drive GBP/USD lower.

The 200-hour moving average is acting as resistance at $1.4790, and the first target to the downside is $1.47. Anything below that traders will look to $1.46. If the 200-hour MA is cleared the initial hurdle will be $1.48 and then the resistance at $1.4870 will be the target. 

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