GBP BREAKS THROUGH 1.4000 LEVEL
The US dollar fell to a 3-year low against a basket of world currencies thanks to a number of prevailing factors. First up, the US Secretary of the Treasury pointed out the positive impact of a weaker dollar on the trading conditions for the country. Another reason for the increase of the EUR/USD has come from strong statistics on the flash services PMI in the Eurozone that increased to 57.6 in January against the 56.5 expected. Meanwhile, investors ignored the preliminary report on the flash manufacturing PMI in the Eurozone that decreased to 59.6 in January compared to 60.6 in December.
The mood of traders today may be influenced by the statistics on existing home sales in the US at 15:00 GMT. Investors may also be looking to fix profits ahead of the ECB Chair, Mario Draghi’s, speech where he may hint on the future plans of the regulator to tighten fiscal policy settings in the monetary union.
The British pound has been supported by the weaker greenback and by positive macro data on the labour market in the UK. Unemployment has remained at 4.3% for November and the average earnings index for 3 months also stayed at 2.5% which points to the strength of the labour market.
The USD/JPY kept falling and the impact of the depreciating US dollar was able to offset controversial statistics from Japan. The Japanese trade surplus in December was only 0.09 trillion yen, which is three times less than forecasted, while the growth of flash manufacturing PMI in January increased by 0.4 to 54.4.
The EUR/USD price has managed to break through the local high at 1.2300 and is currently approaching the immediate target at 1.2400. In case of further increases and overcoming the 1.2400 mark, the next objective is likely to be at 1.2500. The RSI on the 15-minute chart is close to the overbought zone and this points to a possible rollback to the closest support at 1.2300.
The GBP/USD has shown a sharp increase after breaking though the psychologically important 1.4000 level. The increase accelerated also due to the triggering of stop loss orders above 1.4000. In case of breaking through 1.4200, the target range will be 1.4400-1.4500. The RSI on the 15-minute chart is in the overbought territory, which is a sign of a possible descending correction.
The USD/JPY quotes have broken through the support at 109.60 which opened the way for reaching the next target at 108.50. The MACD signal line has changed direction on the 15-minute chart which may hint on a possible rebound to the SMA100 on the same timeframe chart or even to the resistance at 110.30. The bears may take a break after the powerful move of the last few days.