On Tuesday the euro/dollar closed trading practically without change with regards to its Monday closing price. The price fluctuations have passed through the 63 point range. After a fall to 1.1154 the euro rebounded to 1.1217. A sharp growth for the euro was brought about by Canadian statistics. In my last review I warned that when there’s no data on the US, it has a powerful effect on all of the major currency pairs.
According to the published report, Canada’s GDP in Q4 of 2014 grew by 2.4% YOY, whereas the market only expected the indicator to be in the 2.0-2.2% region. GDP growth for Q3 was reassessed to 3.2% from its initial 2.8% assessment. In expectation of results from the Bank of Canada’s meeting, the Canadian dollar reacted with a growth against the US dollar and dragged the euro/dollar and pound/dollar up with it.
There’s a lot of news planned for today. The players could take a wait-and-see approach before the Bank and Canada convenes (Wednesday), the Bank of England convenes (Thursday) and Friday's report on Non-Farm payrolls. Between 10:45 – 11:00 EET the indexes for European countries on business activity in the service sector are due. At 11:30 EET the UK is due to publish their version of the same index. At 12:00 EET a report on January Eurozone retail sales is due to be released. During the American session it’s worth having a look at the report for the capacity change in non-agricultural sector based on ADP info (15:15 EET), the service ISM (17:00 EET) and the Bank of Canada’s interest rate decision.
On Tuesday the euro/dollar reached its expected level and closed near the LB line as was supposed. What can you expect from the pair today? Obviously, after the euro’s sharp fall on Thursday, the market has been forming a complex correctional model for the last three days. Since it has a downward slope, there’s a high risk that it’ll head to 1.1097.
Due to there being lots of information being planned for Wednesday, in the first half of the day I expect a growth, but I expect a fall in the second half to 1.1146. If the PMI service index turns out to be lower than expected, there’ll possibly be a test of the 1.1148 limit during European trades.
The euro/pound cross is trading in a narrow corridor. You really need to watch the dynamic of this pair. If it hastens downwards, it’ll be worthwhile selling euros rather than pounds. If 0.7295 is passed, then it’ll be better to stave off selling until Thursday and wait to see what Mario Draghi has to say. Taking into account that the ECB is going ahead with QE, I’d refrain from making any purchases. If you’re going to buy anything, buy pounds.