- SWFX market sentiment is 53% bearish
- Pending commands in the 100-pip range 63% short
- Pair opened Wednesday's session at 1.1060
- Aggregate daily technical indicators bet EUR/USD will depreciate
- Economic events to watch over the next 24 hours: EU Industrial Production (May); US Import Price Index (Jun); Fed's Kaplan Speaks; US Beige Book and Monthly Budget Statement (June); Fed's Harker Speaks
According to the Mark Carney, criticism towards the Bank of England in the run-up to the EU referendum had been "extraordinary in all senses of the word". For the first time in more than seven years, economists are finally expecting some action from the Bank of England towards the UK interest rates during its first meeting after the Brexit referendum on Thursday. It is expected, that in order to calm financial markets and spur confidence after the Britons voted to leave the European Union, the central bank is widely seen to reduce its key interest rate to 0.25% from a current record low of 0.5%, where it has stood since March 2009. Currently, the BOE, is trying to find a balance of addressing the potential economic impact of a Brexit, without seen as siding with either political position. Philip Shaw, chief economist at Investec adds "Carney alluded to a range of available policy options, some of which were not used previously. We are at pains to identify exactly what the Governor might have in mind here. Dropping cash from helicopters (or a practical equivalent), has been ruled out by several central banks and we do not see this as a realistic possibility". Meanwhile, the BOE rate decision and minutes are going to be announced on Thursday.
The U.S. labour market continued to slow in June but at a more moderate pace as the economy moved closer to full employment, according to an index prepared by the Federal Reserve. The US labour market conditions index registered a 1.9 decline for June from after a revised drop of 3.6 the previous month. This was the sixth successive decline and also a slightly larger than expected decline for the month, maintaining the generally disappointing trend seen for 2016 as a whole. The data could suggest an imminent turning point, but further evidence will be needed to convince markets of a sustained improvement despite the bumper payrolls release last Friday. The LMCI is a broad composite index of 19 labour-market indicators and it watched closely by the Federal Reserve with Chair Janet Yellen instrumental in setting up the index. The Fed introduced the index in 2014 as a way to measure the labour market's momentum. Moreover, Fed officials have touted the LMCI as a more comprehensive view of the labour market than the one provided by individual data releases from the Department of Labour and other agencies.
Upcoming fundamentals: EU Industrial Production, US Imports and monthly budget
On Wednesday morning, the EU will publish its monthly and annual industrial production change for May at 9:00 GMT. Afterwards, news will come from the US, as Import Price Index for June will be published at 12:30 GMT first. The Fed's Kaplan will give a speech at 13:00 GMT at the World Affairs Council of Houston. Later in the evening, at 18:00 GMT the US Beige Book on which the FOMC base their decisions will become publicly available, and at the same time US Monthly Budget for June will be released. Last but not least, the Fed's Harker will give speech at 22:00 GMT.
EUR/USD unchanged on Tuesday
Daily chart: The Euro against the US Dollar pair was volatile during Tuesday's session, as midday it jumped above the resistance cluster made up of weekly PP at 1.1079 and 200-day SMA at 1.1090. However, the pair closed the day's trading session at 1.1060, which is not far from where it started it at 1.1056. On Wednesday morning the currency exchange rate remains almost flat, as it has moved only three pips up, which is from the opening rate of 1.1060 to 1.1065 by 5:00 GMT. If the pair continues to move upwards, it is bound to test again the previously mentioned resistance cluster.Daily chart
Hourly chart: On the hourly chart it can be seen that the EUR/USD pair surged at the start of Tuesday's session, as it moved first to the weekly pivot point at 1.1079, against which it struggled for two three hours starting from 2:00 GMT to 5:00 GMT. Afterwards, the currency exchange rate surged, easily passing the 200-hour SMA at 1.1090 by 7:00 GMT. However, the rate starting falling at 9:00 GMT, and step by step it fell back to the level of 1.1060 by midnight. Since then, the pair has moved five pips upwards, as it struggles with the resistance put up by the 55 and 100-hour SMAs.
Hourly chart
SWFX traders bearish on Wednesday
OANDA trader bearish sentiment has decreased compared to Tuesday's 59.39%, as, at the moment, 56.97% of OANDA open positions are short. In addition, SAXO Bank clients have decreased their bearish stance, as their open short positions are now at 55.32% compared to 56.04% of last trading session.