EUR/USD has continued its downward trend after posting a high of a little above the 1.3250 figure at 1.3254 in yesterday’s session. Since early European opening it has retraced back down to the 1.32 level ahead of German PMI figures and since the release of that figure it has dropped around another 40 pips or so. The
German PMI figure was expected to show a rise from 50.2 to 51.0 however the figure read a disappointing contractionary 48.1. Services PMI also disappointed as it posted a drop to 51.8 instead of the expected rise to 53.0 from 52.8.
As suggested in my last report the floor seems to be at 1.30 with a toppish level in the late 1.32’s. We keep trading in this range and only when we see a clear break above 1.33 or a strong move below 1.30 will we have a clear direction on the pair.
Cable has followed the EUR/USD move lower after initially shrugging off the dovish comments after the BoE minutes yesterday and recovered lost ground and tested the 1.59 level in the American session. We’re now pushing to the downside on this pair and as stated previously I expect a loss of the 1.58 levels with a push lower into the 1.57s with the 1.55 level targeted soon. I don’t expect GBP/USD to break through the 1.60 level as I expect dollar strength this year with GBP/USD eyeing the 1.50 level rather than anything above 1.60. If you’re a buyer of USD, and it’s only a suggestion, I’d put orders in at the 1.5850/1.59 figure and look to take advantage of any uptick in the US or overnight Asian sessions. It’s very straightforward to place a market order and it’s cost free to do. Please contact to discuss utilising this trading tool.
And what of our beloved GBP/EUR pair? We’re again dancing with our partner 1.20 and they’re now holding hands. We have had Retail Sales (MoM) (Feb) out and also Retail Sales (YoY) (Feb) out of the UK this morning. The (MoM) figure was expected in at -0.4% with the (YoY) figure expected in at 2.5% and came in at
-0.8% and 1.0% respectively. Do I think the ‘pair’ will be dancing into the early hours tomorrow and watching the sun come up? Unlikely. I don’t see a sustained base above the 1.20 figure and I’d expect a move back into the lower 1.19’s delaying the notion of a romance for the time being. I don’t think we’ll see much upward movement on this pair until we see EUR/USD under 1.30 and well under this figure at that.
You’ll all have your own views on yesterday’s UK budget so I won’t go into too much detail. With any Budget, dependent on your circumstances, you’ll view it as either positive or negative. I do think the Chancellor was right to continue with tough austerity measures as its crucial to retain bond market confidence and the UK’s current AAA credit rating. I’m sure many of you will disagree with this viewpoint. The Retail Sales figures were the main data release out of the UK this morning and Cable has taken a hit with it pushing back into the 1.57’s level on the back of disappointing figures.
We don’t have any market moving data out today with the Industrial New Orders out of the EMU and Initial and continuing jobless claims out of the US being the main figures across the Atlantic. We also have Fed’s Bernanke speaking at -16.45pm (UK time) so this may provide further volatility for the USD.
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