UK POUND FALLS AMID DOUBTS OVER NEXT INTEREST RATE INCREASE
The EUR/USD is consolidating within a narrow range as it waits for new drivers to encourage volatility. Mixed data from the Eurozone has not helped investors to pick a market direction. The preliminary report on flash manufacturing PMI showed growth of the indicator to 58.6 in October, which is 0.5 more than expected. On the other hand, preliminary data on flash services PMI showed a decline to 54.9 compared to 55.8 in September. Investors are waiting on ECB President Mario Draghi’s speech on Thursday in search of a direction. Tomorrow the focus will be on the housing market report and durable goods orders in the US that may trigger sharp moves.
The sterling declined amid uncertainty around the possibility of an interest rate hike by the Bank of England. Investors are also skeptical about the outcome of negotiations between the UK and European Union, despite the progress that has been seen recently. Tomorrow the preliminary statistics on the country’s GDP growth for the third quarter will be published. The GBP/USD was also under pressure from positive news on the growth of flash services PMI in the US for October, which grew to 55.9 against 55.3 in September.
Traders attention will turn to the consumer price index report in Australia early tomorrow morning at 00:30 GMT. If we see a growth in inflation, the Reserve Bank of Australia may look to tighten monetary policy despite earlier statements that the current interest rate level is reasonable.
The single currency quotes are moving in a narrow range and after the end of the current consolidation we are likely to see a sharp movement in either direction. Breaking through the support at 1.1730 may become a trigger for the bears to pull the pair down to 1.1620 or even 1.1550. At the same time, we do not exclude growth resuming and in case of opening long positions with potential targets at 1.1825 and 1.1925, the stop should be set under 1.1730.
The British pound is testing an important support level at 1.3150, breaking through it may be a stimulus for further drops with the next objectives at 1.3050 and 1.2950. We should note that currently the RSI on the 15-minute chart is close to the oversold zone, which indicates a potential rebound. An increase is likely to be limited by the inclined resistance line at the 1.3250 mark.
The fall of aussie quotes has slowed and the price is consolidating at the moment. Previously the price broke the important 0.7800 level, which was the basis for further price declines to the target levels at 0.7740 and 0.7700. The MACD signal line is approaching zero and its crossing may point to a potential upward movement with correction to the SMA100 on the 15-minute chart and 0.7800 resistance line.