On the forex front, the U.S. Dollar Index was broadly flat at 99.15 amid thin holiday trading. In the U.S., the New York Federal Reserve will publish February’s Empire Manufacturing Index (5.0 expected). The National Association of Home Builders will deliver January Housing Market Index (75 expected). Let’s take a look at trade plans.
Economic Events to Watch Today
EUR/USD – Daily Analysis
The EUR/USD traded mostly around the 1.0830 price zone, a few pips above 1.0826, the multi-year low pasted last Friday. Market participants are struggling to find a catalyst, as the European macroeconomic calendar was empty yesterday due to the U.S. Presidents’ Day holiday.
The traders eagerly anticipated the German ZEW economic sentiment, which was expected to worsen to 21.5 in February against. 26.7 reported in January. As per the recent release, the ZEW Indicator of Economic Sentiment for Germany decreased sharply in February, dropping 18.0 points to a distinct reading of 8.7 points.
The fundamental event is thus lightly beneath its December 2019 mark. The evaluation of the economic situation in Germany has also worsened when we compare it with the previous month.
Moreover, EUR/USD currency pair near-term technical outlook also shows a bearish picture, with a test of the psychological support at 1.0800 on the cards. The traders will have their sights on the coronavirus headlines for taking fresh clues.
Daily Support and Resistance
- S1 1.0795
- S2 1.0817
- S3 1.0826
Pivot Point 1.0839
- R1 1.0848
- R2 1.0861
- R3 1.0883
EUR/USD– Trading Tips
On Tuesday, the EUR/USD trades near 1.0825 support level despite weaker than expected German ZEW economic sentiment data. At the moment, the pair appears to have formed neutral candles as the investors still didn’t find any solid reason to trigger bearish breakout at 1.0825 level. Today’s candle is also neutral, and it is pretty much likely to drive upward correction. Today, if the EUR/USD pair manages to drop below 1.0840, we may see EUR/USD prices going towards 1.0760. Let’s look for buying trade today above 1.0840.
GBP/USD– Daily Analysis
The GBP/USD is trading sideways on Tuesday, but modest losses near the 1.3000 figure. Earlier today, the Sterling declined during but concerns about whether the current Chancellor of Exchequer will be ready to pass the budget on time. A report from U.K. Prime Minister Johnson’s spokesman confirmed that the U.K. is not asking anything distinct from the E.U. in trade discussions and that they are available to negotiate.
Besides, the market risk-tone getting worse day-by-day mainly due to the coronavirus fears, which provides support to the greenback as a safe-haven currency. Despite lowering the pace of the death toll and infected peoples in China, the uncertainty and fears still surrounding the market.
On the forecasted views, the Bank of England’s last MPR looks for the unemployment rate to stay unchanged at 3.8% for the next 3-4 months, we look for an increase to 3.9% in December (mkt 3.8%), with the potential for another pop higher in January. As wage growth, we look for the recent pattern of deceleration to continue, with headline wage growth slowing to 3.0% y/y (mkt 3.0%), and private sector regular pay to 3.3% y/y (mkt: 3.3%).
As the latter measure, the short-term trend growth rate has more than halved from a peak of 5.0% on a 3m/3m annualized basis in July to 2.2% as of November.
Daily Support and Resistance
- S1 1.2912
- S2 1.2965
- S3 1.2985
Pivot Point 1.3018
- R1 1.3038
- R2 1.3072
- R3 1.3125
GBP/USD– Trading Tip
The GBP/USD pair slipped lower to test the next support level of 1.2960 and has formed a Doji candle around this corner before taking a sharp bullish reversal. The bullish reversal is mostly caused by robust unemployment claims data, which is in support of the Sterling.
The GBP/USD is trading at 1.3036, below the 1.3065 resistance level. Closings of candles below this level may help secure a sell trade around 1.3065, whereas, a bullish breakout of 1.3065 can lead the Cable towards
The MACD and RSI are holding in the buying zone, supporting bullish bias for the GBP/USD pair. Let’s look for bullish trades above 1.3018 today.
USD/JPY – Daily Analysis
The USD/JPY currency pair flashing red dropped to 109.70 from the 109.90, mainly due to safe-haven Japanese Yen strength in the wake of intensifying coronavirus fears. The USD/JPY is currently trading at 109.75 and consolidates in the range between the 109.66 – 109.90. However, the equity market again turned in red and sending Japanese yen higher.
The futures on the S&P 500 are currently reporting a 30% drop on the day. Meanwhile, stocks in South Korea and Hong Kong are presently dropping more than 1%. Major indices like Japan’s Nikkei and China’s Shanghai Composite are reporting a 1.2% and 0.30% drop, respectively.
Whereas, the yield on the U.S. ten-year Treasury dropped nearly 3-basis points at 1.559%. The equity market flashing red and the uptick in the anti-risk Japanese yen could be the reason for on-going concerns on the economic impact of the coronavirus outbreak in China.
The number of new virus cases in region China dropped below 2,000 on Tuesday for the first time since January; experts say it is too quick to say the outbreak has risen.
On the other hand, China’s growth rate is expected to drop sharply in the 1st-quarter, while the officials seem not in favor of significant monetary stimulus. According to the MNI News, the officials have asked for a careful monetary policy action that will target only affected areas and avoid changing the current overall neutral stance.
Looking forward, the risk-tone of the equity market may get worse, as tech giant Apple said on Monday that it would not reach its target income for the first quarter, largely because of to weaker iPhone production and softer market in China in the wake of coronavirus.
Daily Support and Resistance
- S1 109.6
- S2 109.74
- S3 109.81
Pivot Point 109.89
- R1 109.96
- R2 110.03
- R3 110.18
USD/JPY – Trading Tips
The USD/JPY pair is trading 110.025 – 109.500 as the demand for safe-haven assets remains in check. At the moment, the USD/JPY pair is holding below 110 resistance as it failed to violate the horizontal resistance level of 110.025. In case, the USD/JPY manages to break above 110.025 level; we may see USD/JPY prices going towards 110.350 at first and then towards 110.850. Alternatively, the USD/JPY can drop to 109.300 in case of failure to break above 110.025.
All the best for today!