23 Jan 2014
Session recap: GBP takes the scene as BoE gets room to raise rates
FXstreet.com (San Francisco) - The sterling was the winner of the day as it got a push from the better than expected UK unemployment rate that fell to 7.1%, close to the MPC's 7.0% threshold to begin raising rates. The GBP traded higher across the board and market started to think about normalization in monetary policy.
The GBP/USD advanced for fourth day to 20-day high of 1.6585. The Cable climbed around 275 pips since January 17 from 1.6310 and today closed at 1.6570. "In the 4 hours chart indicators show some signs of exhaustion also in overbought territory, yet the bullish trend is on," FXstreet.com chief analyst Valeria Bednarik comments. "Dips towards 1.6510 will likely be seen as buying opportunities."
The EUR/USD resumed its bearishness on Wednesday as the pair wasn't able to break above 100-day MA. The Euro closed at 1.3545, first lost in the last 3 days. "The EUR/USD faltered at its 100 DMA mid Wednesday an interesting sign that bull strength continues to decrease," points Bednarik. "In the 4 hours chart price struggles around a still bearish 20 SMA, while indicators hold in neutral territory: a break below 1.3510 is required to confirm a new leg down, eyeing the 1.3440 price zone."
In America, the Bank of Canada decided to leave its interest rate unchanged at 1%. The bank was mostly dovish sending the USD/CAD to 1.1090, highest since September 2009. In this framework, Shaun Osborne, Chief FX Strategist at TD Securities reaffirmed they remain bullish USD/CAD. He said USD/CAD fair value is 1.17; however he is targeting 'at least 1.12/1.13 area'.
"We can only see more upside for funds—at least to the 1.12/1.13 area (weak CPI data Friday will sink the CAD). Technically, we target the upper 1.12s. And there is very limited corrective potential for USDCAD from here; buyers may have settled for something in the 1.0950/1.10 range for now, if we get there at all."
Finally, with central banks positioning to start tapering its QE, market started to focus on "the potential for normalization in monetary policy from the world’s most important central bank," as Kathleen Brooks from FOREX.com commented in a recent report.
According to Brooks, "Two camps have started to emerge: the haws and the doves." The hawks are New Zealand, UK and the Fed; while the doves are Japan, Canada the ECB and RBA. Brooks sees opportunities on carry trade in 2014 and points that "relative monetary policy is a pillar of the FX market, and we think it could become one of the major themes this year."
Main headlines in the American Session:
BoC holds rates in January, points to downside risks to inflation
Greek budget surplus could be largely wiped after court rejection of wage cuts
BOE's McCafferty: Will have more to say on guidance when jobless rate hits 7%
US stocks finish mixed as IBM dragged Dow
The GBP/USD advanced for fourth day to 20-day high of 1.6585. The Cable climbed around 275 pips since January 17 from 1.6310 and today closed at 1.6570. "In the 4 hours chart indicators show some signs of exhaustion also in overbought territory, yet the bullish trend is on," FXstreet.com chief analyst Valeria Bednarik comments. "Dips towards 1.6510 will likely be seen as buying opportunities."
The EUR/USD resumed its bearishness on Wednesday as the pair wasn't able to break above 100-day MA. The Euro closed at 1.3545, first lost in the last 3 days. "The EUR/USD faltered at its 100 DMA mid Wednesday an interesting sign that bull strength continues to decrease," points Bednarik. "In the 4 hours chart price struggles around a still bearish 20 SMA, while indicators hold in neutral territory: a break below 1.3510 is required to confirm a new leg down, eyeing the 1.3440 price zone."
In America, the Bank of Canada decided to leave its interest rate unchanged at 1%. The bank was mostly dovish sending the USD/CAD to 1.1090, highest since September 2009. In this framework, Shaun Osborne, Chief FX Strategist at TD Securities reaffirmed they remain bullish USD/CAD. He said USD/CAD fair value is 1.17; however he is targeting 'at least 1.12/1.13 area'.
"We can only see more upside for funds—at least to the 1.12/1.13 area (weak CPI data Friday will sink the CAD). Technically, we target the upper 1.12s. And there is very limited corrective potential for USDCAD from here; buyers may have settled for something in the 1.0950/1.10 range for now, if we get there at all."
Finally, with central banks positioning to start tapering its QE, market started to focus on "the potential for normalization in monetary policy from the world’s most important central bank," as Kathleen Brooks from FOREX.com commented in a recent report.
According to Brooks, "Two camps have started to emerge: the haws and the doves." The hawks are New Zealand, UK and the Fed; while the doves are Japan, Canada the ECB and RBA. Brooks sees opportunities on carry trade in 2014 and points that "relative monetary policy is a pillar of the FX market, and we think it could become one of the major themes this year."
Main headlines in the American Session:
BoC holds rates in January, points to downside risks to inflation
Greek budget surplus could be largely wiped after court rejection of wage cuts
BOE's McCafferty: Will have more to say on guidance when jobless rate hits 7%
US stocks finish mixed as IBM dragged Dow