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The US labor and retail markets continue to be one of the most important drivers for the US economy that has recently ended its Quantitative Easing programme. David Sloan, senior economist at 4CAST, believes that the net export figures, which have been a reasonably bright spot in the US economy recently, should become a modest negative in the perspective. He also adds that given the US economic prospects are looking brighter compared to those from the majority of other countries, and the US Dollar is generally on a stronger path, he thinks net exports would be negative going into the 2015 for the US economy.
At the same time Uk's recovery is also on its way as public finances in Britain improved in October, with borrowing excluding banks falling to 7.7 billion pounds, according to the Office for National Statistics. Net borrowing excluding banks for October was 2.4% lower compared with the same period last year after an increase in stamp duty receipts, which have soared 3.6% to 1.3 billion pounds and a rise in income tax related payments. With five months before the end of the fiscal year, borrowing now stands at 64.1 billion pounds, while the Office for Budget Responsibility's expects a target of 86.6 billion pounds for the full fiscal year.
Volatility poised for an increase on important fundamentals ahead
Today we can expect an increase in the volatility across both GBP and USD pairs. UK BBA mortgage approvals will be important to evaluated the current situation in the nation's housing sector that remains a problem. However, the highest levels of volatility most likely will occur after UK inflation report hearings and US prelim GBP release.{ATTACHMENT}
GBP/USD oscillates around 1.5660
GBP/USD remains range-bound, with the ceiling and the floor represented by 1.57 and 1.56, respectively. In case the resistance gives in, the Sterling will be expected to rise up to the 2013 Q4 low at 1.5850, where it coincides with the monthly S1 and a five-month down-trend line. Conversely, should the bears manage to gain the upper hand over the demand at 1.56, this will expose 1.5450, namely the monthly S3 level.Daily chart
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Meanwhile, on the lower time-frame the Euro seems to have bottomed out at the 17-day up-trend. Right now the currency is consolidating, but eventually it should be able to recover from 1.2640 and reach 1.2730, though the rally may have the strength to extend to 1.2840 (mid-October highs), if the bulls keep buying. Still, we should still be wary of the nearby resistances – most (69%) of the pending orders placed 100 pips from the spot price are to sell the European currency, and if they are triggered, it may stall the advancement.
Hourly chart
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