Daily Commentary | 11/01/2019
USD weakens on Powell’s and Clarida’s comments
USD weakened against a number of its counterparts during the Asian session today, as Fed Chairman Powell and Fed Vice Chair Clarida made some dovish comments. Fed Chairman Powell repeated on Thursday that the Fed could be patient on monetary policy, given that inflation remains stable. It should be noted though that the greenback got some temporary support as Powell at some point mentioned that the Fed may further shrink its balance sheet, implying that some indirect tightening could happen. Fed Vice Chair Clarida also backed Powell’s comments later on as he stressed the Fed’s ability for a more patient stance. Analysts, note that the market has almost priced in that the Fed will not be hiking rates any further in 2019. We currently maintain a bearish outlook for the USD and we could see it being sensitive to today’s financial releases. Dropped during the European and the American session, breaking the 1.1550 (R1) support line (now turned to resistance), however bounced during today’s Asian session on the 1.1500 (S1) support line. We maintain a bullish outlook for the pair, as the USD may weaken even further. The pair could also prove sensitive to today’s US financial releases as the headline CPI for December is expected to slow-down. Should the pair find fresh buying orders along its path, we could see it breaking the 1.1550 (R1) resistance line and aim for the 1.1610 (R2) resistance hurdle. Should the pair come under the selling interest of the market, we could see it breaking the 1.1500 (S1) and aim for the 1.1465 (S2) support barrier.
Increasing Brexit uncertainty keeps the pound in check
Increased Brexit uncertainty seems to be keeping the pound in check, especially after the UK Parliament, voted that Theresa May will have only a few days to prepare and present a plan B should her Brexit plan be rejected on Tuesday. Analysts, point out that the two parliamentary defeats of Theresa May, undermines the authority of Theresa May as a PM and enhances the possibility of a general election. UK’s Labour party has already called for a general election, should Theresa May’s Brexit plan be rejected by parliament. The possibility of such a scenario, could prevent Labour MP’s from crossing the line and supporting Theresa May’s plan, reducing even further the chances of the plan being approved. Overall, we maintain a bearish outlook for the GBP and today’s GDP data could weigh on the pound. GBP/USD maintained its sideways movement yesterday, testing the 1.2795 (R1) resistance line. WE expect the pair to maintain its sideways movement, however it may prove sensitive to UK’s financial data releases and especially the GDP growth rates, during today’s European session. Should the bulls dictate the pair’s direction we could see the pair breaking the 1.2795 (R1) resistance line and aim for the 1.2880 (R2) resistance zone. Should on the other hand the bears take over, we could see the pair breaking the 1.2700 (S1) support line and aim for the 1.2630 (S2) support area.
Today’s other economic highlights
In today’s European session, we get from the UK the GDP growth rates, the manufacturing output growth rate and the trading balance, all for November. In the American session from the US we get the headline and core inflation rates for December and Baker Hughes oil rig count.
• Support: 1.2700 (S1), 1.2630 (S2), 1.2555 (S3)
•Resistance: 1.2795 (R1), 1.2880 (R2), 1.2960 (R3)
• Support: 1.1500 (S1), 1.1465 (S2), 1.1425 (S3)
•Resistance: 1.1550 (R1), 1.1610 (R2), 1.1655 (R3)