BOE and ECB maintained the interest rate

Bank of England maintained the interest rate at 0.50% and the QE unchanged. They expect for the inflation rate to keep on climbing for the next period.  GBPUSD touched 1 month low at 1.5075 and it is traded now at 1.5102

ECB did not touch the interest rate, but investors are waiting for the press conference. Mario Draghi will get all the attention. He might be reserved in what concerns the economy evolution and say that they will be prepared to cut the interest rate if necessarily.

EURUSD is still calm under 1.3000. Lower limit would be 1.2950 and 1.2900, while upper limits are found at 1.3000 and 1.3050.

FX: Today’s Wrap Up, GBPUSD Signaling Reversal

Today’s calendar was full of economic publications with high impact on the Forex market.

For the Euro Area (Italy and Spain) the services PMIs were mainly in line with expectations. A surprise came from Retail Sales which had a 1.0% growth.

The USA reports were the most expected by investors. The ADP Non-Farm was published above expectations, 188K. This good reading was balanced by a lower Trade Balance, 45.0B, Unemployment Claims in line with the expectations, 343K, and a lower than expected ISM Non-Manufacturing PMI, 52.2.


Chart: EURUSD, H4

Euro with the US dollar had a dip right after the ADP release, but it didn’t last too much because the next data from United States have pushed the dollar lower and the quotation got back above 1.3.

On the chart we can see several bullish signals. First, the price action made a Falling Wedge, second the RSI made a positive divergence. If the signals will be confirmed, we might see a rally of the euro back to 1.3100 or 1.3190.


Chart: GBPUSD, Daily

In our last analysis on GBPUSD (FX: GBPUSD Is History Repeating Itself?) we were expecting for this pair to recover after an important fall. After a false breakout under the support the British pound started to gain. Today’s rally was triggered by a very good Services PMI (56.9 vs. 54.6 expected).

At this point a Bullish Engulfing was drawn. This pattern could be the confirmation needed for an up move. A rally of the GBP could get the price up to 1.5350 or even 1.5400.


Chart: USDJPY, H4

The dollar gained 7.5% in front of the Japanese yen during the last month. Now we can see that the price is pretty close to the trend’s line. A break under it, or better said, under the 99.25 support could trigger another fall for the US dollar. Potential targets for a fall are 0.382 retrace (98.13) and 50% retrace (97.30).

If the local resistance, 100.15, will be broke, we can expect a rally back to 100.80 or even higher, to 101.00.

FX: GBPUSD Is History Repeating Itself?


Chart: GBPUSD, H4

From 16th of June the US dollar started to strengthen. In half a month it gained 3.75% in front of the British pound.

We can see that the down trend respected a clear line. On the troughs we can also draw a line, from now a Falling Wedge pattern became visible. This is not all, because the level where the price has stopped it is an important one.

At 1.5160 it is both the 0.786 Fibonacci retrace from the earlier up trend and the equality with the last down trend. Combining this with the fact that the RSI already broke its downtrend line and went under 30 level, we can say that there are some pretty strong reasons to think of a throwback.

We are expecting now a consolidation inside the 1.5160 and 1.5250 area. Our favorite scenario (1st scenario) would be a breakout through the local resistance and a rally to 1.5350 or, why not, 1.5400. But we should not forget that the Non-Farm Payrolls will be published on Friday and the dollar may go ballistic, especially if the data will be good.

If the dollar will get stronger the price might break the lower boundary (2nd scenario). In this case we expect a drop to 1.50 area, with a short pit stop at 1.51.