By Orbex Blog
Daily Forex Market Preview, 31/01/2018
The common currency posted strong intraday gains on the back of better than expected GDP data but the euro closed weaker by Tuesday’s close.
The preliminary GDP data from the Eurozone released yesterday showed that the economy expanded 0.6% on the quarter ending December 2017. This was in line with the general expectations and it pushed the annual GDP to 2.7%. It was the fastest pace of annual GDP expansion since 2007. Germany and France GDP numbers were also released which managed to push the Eurozone economy higher and offset a weaker pace of GDP expansion from Spain.
Elsewhere, the BoE Governor Carney was quizzed by lawmakers. In his testimony, Carney brushed aside speculation of being overly biased towards Brexit and noted that inflation could remain at the current levels due to the depreciation in the exchange rate.
Looking ahead, a major event risk for the euro comes from the flash inflation estimates for the month of January. Economists forecast that consumer prices might have slowed even further at a pace of 1.3% on an annual basis. Core inflation is however expected to rise 1.0%, up from 0.9% in December. The ADP payrolls report will be coming up with forecasts showing a 191k gains in the private sector. This will be followed up later in the evening by the FOMC meeting. Fed officials are expected to keep rates steady.
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EURUSD intra-day analysis
EURUSD (1.2423): The EURUSD managed to break out from the bullish flag pattern but the gains were quickly erased. Price action was seen falling back to the break out level and declined further. This potentially invalidates the bullish flag pattern unless the common currency is able to reverse the losses. The downside bias is now increasingly a risk for the EURUSD. Major support is seen at 1.2090 which could be tested. With the economic calendar busy today with data from the U.S. this could potentially weaken the euro further from the current highs. Despite the short term declines, the EURUSD is expected to maintain the bullish trend.
USDJPY intra-day analysis
USDJPY (108.87): The USDJPY was seen trading flat yesterday with price action caught within the range from last Friday’s high and low. Price action remains trading close to the 108.26 level in the near term. The modest decline yesterday resulted in a higher low being formed near the top end of the support at 108.64. A break out above 109.08 could suggest a reversal and a correction. The upside target comes in at 110.34 at the very least where the previously held support level could turn to resistance.
NZDUSD intra-day analysis
NZDUSD (0.7376): The New Zealand dollar has stayed flat with prices consolidating near the 0.733 level. This potentially suggests that the upside could be exhausted. A major event catalyst could validate a downside move. This could come from today’s FOMC meeting. Support for NZDUSD is seen at the technical level of 0.7160 that could be tested in the event that the kiwi dollar slips lower. Below 0.7160, another support level at 0.6943 could be in focus. Alternately, in the event that NZDUSD manages to bounce off the current levels, the currency pair will need to advance above January 24 highs at 0.7407 to maintain further gains.
