USD Fluctuates, NFP Next

The Bank of England left its monetary policy unchanged and the interest rate steady at 0.25% with the consensus of 9-0 votes. The QE program remained steady as well, with corporate bond purchases at GBP10 billion and government bond purchases at GBP435 billion. The BoE raised its growth forecasts for 2017 from 1.4% to 2% while the longer term predictions were kept lower at a GDP growth of 1.6% for 2018 and 1.7% for 2019.

However, the Bank’s view on inflation remains unchanged for the next 2 years as the labor market evaluation could weaken the inflationary pressures. Governor Carney said that a new UK-EU deal will have effect on the UK economic potential, while the better economic outlook does not mean that Brexit will lack consequences. The Bank’s statement sent the pound 150 pips lower from 1.27 to 1.255. Of course, GBP’s depreciation helps the UK to overcome the Brexit shock.

Regarding the US, the Fed held its monetary policy decision yesterday and left the interest rates steady as well at 0.75%, as it was widely expected. The policy report did not give any new hints of the timing of the next rate hike and the US dollar’s reaction was limited. In the meantime, the President Donald Trump is looking for a weaker dollar to favor his trading plans and the dollar is performing at 11-week low.

However, the January ADP Nonfarm Employment Change exceeded expectations by adding 246K jobs against expectations of 165K. The next economic release that is expected to affect the dollar’s trend is the NFP release on Friday. The expectations lie around 175K while the ADP indicates for a larger number.

NFP Vs ADP Employment Change

Technical View

EUR/USD The EUR/USD broke the downtrend line on the daily chart by advancing above 1.08 and testing the cross of SMA100 and Bollinger’s® upper band. If the pair closes the day above the SMA100 then the reversal is confirmed. The next valid near-term resistance to the upside is around 1.085 and 1.088 while the supports are near the critical level of 1.077 and then 1.072. In the long term, the resistance level of 1.010 which coincides with SMA200 is the next valid upwards target while the downside risks lie near the supports of 1.07. Both of MACD and RSI indicate bullish signals while ADX is on neutral levels indicating lack of clear directional movement.

EUR/USD Daily Chart

GBP/USD The pair fell sharply today by 150 pips after the monetary policy meeting of the BoE. The pair is currently testing the Fibo retracement level of 38.2% at 1.253 at the time of writing while the indicators are on bearish territories. Upon penetration of this level, the next bearish target becomes the retracement of 23.6% at 1.248. However, if the support of 1.253 persists then the pair is expected to cover its losses with the first bullish target at 1.256 and the second one at 1.26.

GBP/USD H1 Chart

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