USD On Demand Ahead Of FOMC Minutes

 |  Includes: FXE, UDN, UUP
by: FXstreet

The dollar trades firmer across the board, as the day has been marked by risk aversion since the European session. The pound tumbled, dragging other currencies with it, after the latest Bank of England minutes showed the MPC voted 6-3 to keep the amount of asset purchases unchanged, against 8-1 expected.

Meanwhile in the U.S., a report showed housing starts declined sharply in January, although behind the main headline, data was overall optimistic. Starts for single-family units, representing two-thirds of the total, rose to their highest since July 2008. This helped to lift investors' appetite for risk, but not for long. U.S. equities are down as well as commodities, while European markets closed mostly lower.

Looking ahead, the minutes of the last FOMC meeting will be published at 19:00GMT, although there shouldn't be anything surprising in there after the statement came in fully as expected.

Euro Weakens, But Holds Above 1.3300

After being rejected by the 1.3430 area, the shared currency came under pressure. Having lost over 90 pips throughout the session, it hit a low of 1.3337 before recovering slightly. Even though short-term charts hold a negative tone, the EUR/USD looks neutral in a bigger timeframe, as failure to break below the 1.3305 level (38.2% retracement of the broader 1.2660/1.3710 rally) has left the pair stuck within its recent range.

The UBS analyst team keeps a neutral view on EUR/USD. "There is strong support at 1.3270. Only a closing break below this would trigger a deeper sell-off to 1.3187," they commented. "Resistance is at 1.3393 ahead of 1.3520."

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