Daily Forex Market Preview, 18/09/2017

The US dollar was seen giving up some of the gains by Friday’s close, but the US dollar index was seen supported above the multi-year support level of 91.44. As a new trading week unfolds, all eyes are on the FOMC meeting due this Wednesday. Last week saw the British pound emerging on the top logging over 3% gains against the US dollar. This came as the Bank of England signaled that interest rates could rise in the coming months.

The Japanese yen was, of course, the weakest, as the currency declined 2.5% on the week by Friday’s close. This made GBPJPY the currency pair logging the biggest gains as a result.

The economic calendar today is relatively light. Scheduled for 0900 GMT, the Eurostat will be releasing the final inflation figures for August. Based on the flash inflation estimates, consumer prices in the eurozone are forecast to rise 1.5% on the headline and 1.2% on the core. While headline CPI is accelerating, core CPI continues to remain sluggish in comparison. Still, the inflation data is unlikely to dent the sentiment in the euro currency.

EURUSD intraday analysis

EURUSD (1.1943): The decline in the retail sales data and the contraction in the US industrial production figures impacted the sentiment in the US dollar. This helped the EURUSD to recover some of the losses from earlier in the week. The currency pair is locked within a range of 1.2058 and 1.1882 which was briefly tested before bouncing back higher. We expect this range to hold into Wednesday’s FOMC meeting. The price action on the 4-hour chart signals a cup and handle formation coming at the top end of the rally. A validation of this pattern could signal an upside rally to as much as 1.2200 eventually. However, watch for the support level at 1.1882 which will be critical as a breakdown below this level could shift the bias to the downside.

GBPUSD intraday analysis

GBPUSD (1.3593): The British pound rallied strongly after rate hike expectations from the BoE found renewed optimism. GBPUSD close at 1.3588 by Friday’s close. The cable now remains within a few pips short of filling the gap at 1.3677 from the June 2016 Brexit event that saw prices gapping lower. We do expect this rally to 1.3677 to be a touch and go event as the GBP is likely to take a breather in the short term. Support is now seen at 1.3236, exposing a large downside risk to the currency pair. Economic data from the UK this week is limited to only the retail sales numbers on Wednesday and of course the FOMC meeting later in the day.

GBPJPY intraday analysis

GBPJPY (151.15): Having posted strong gains last week, the GBPJPY has broken out from the ascending triangle pattern on a weekly timeframe. This puts the minimum upside to 159.75. However, ahead of a further rally in the currency pair, the support level at 147.15 needs to be tested having previously served as resistance. Any declines are likely to be stalled at this level as GBPJPY could prepare for another leg to the upside. Failure to reverse the correction at 147.15 could, however, signal an impending decline in the currency pair that could reverse the risk to the downside.