Forex snapshot

It’s a dollar-focused day, with very little in the way of eurozone or UK figures out to keep traders moving in the first part of the session. However, a bonanza of US figures will provide plenty of potential for movement during the afternoon.

Pound coin and dollar note
Source: Bloomberg

GBP/USD stalls below $1.6150

Yesterday’s upward move in GBP/USD has run out of steam for now, although a rising hourly moving average might suggest there is some strength left in the currency pair for a move higher.

In fact a dearth of really meaty data from the UK means that the pound remains at the mercy of sentiment towards the US dollar. In particular everyone will be keeping an eye out for durable goods this afternoon. The usually volatile figure is expected to see a rise of 0.5% for September, up from August’s 18.4% drop, but the more useful ex transportation figure (which strips out airline orders and other such volatile numbers) is forecast to rise 0.5% from 0.4% in August. In addition we’ll get some consumer confidence data and, if both these heavy-hitting numbers come in ahead of expectations, we could see a rally in US dollar-buying ahead of the FOMC tomorrow.

We saw the intraday RSI touch oversold levels yesterday but since then buyers have stepped out of the picture. Immediate support could be found close to yesterday’s lows at $1.6094, while the 200-hour MA at $1.6080 is going to be an important line in the sand.

On the daily chart, recent pushes above the 20-DMA have been the signal for further selling of this pair, and while the daily RSI is still in the ascendant a failure to move above 50 in this indicator would also give a clear bearish signal. 

EUR/USD rises for third day

The general sigh of relief around markets yesterday that the bank stress tests were not dire gave the euro the capability to move upwards. Today we’re seeing it recover $1.27 in early trading, although there has been little in the way of upward catalysts for the currency pair.

In fact, euro-watchers will have to kick their heels until Thursday for some real data of note, including unemployment figures and CPI numbers from the German powerhouse. IFO figures yesterday failed to match the trend from the end of last week, when improving German manufacturing PMI numbers soothed some market jitters. For EUR/USD (and for all other dollar crosses too), tomorrow’s Fed meeting will be a make-or-break moment.

The statement (there is no press conference) is expected to be dovish, signaling that the Fed is aware of the downturn in inflation data both in the US and further afield, and highlighting Janet Yellen’s awareness of seeming to be too fixated on an interest rate hike at some point in 2015. There has been some talk that the committee will keep $5 billion in quantitative easing as a token gesture, but this would be a symbolic move rather than a really solid step in the direction of looser monetary policy.

The euro’s clamber above $1.27 does little to change the bearish outlook for this currency pair, with attempts in recent weeks to get back above $1.28 knocked back. Even if it does, it will run headlong into the 50-DMA at $1.2863. A drop lower targets $1.26 and then the October lows just above $1.25.

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