USD Whipsaws; Busy Day For The GBP

Mar. 02, 2018 6:53 AM ETUUP, FXE, EUO, FXB, UDN, ERO-OLD, USDU, GBB-OLD, DRR, ULE, EUFX, URR, DEUR, DGBP, UEUR, UGBP

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Summary

EURUSD was seen closing with strong gains as price action posted a bullish engulfing pattern on the daily chart.
British pound braces for a volatile day as the British Prime Minister Theresa May and the BoE Governor Mark Carney are expected to speak today.
Gold prices closed with a doji pattern yesterday with price action indicating a corrective move to the upside.

Daily Forex Market Preview, 02/03/2018

The U.S. dollar whipsawed yesterday after the Fed Chair Jerome Powell returned to testify to the U.S. Congress as part of the two day semi-annual testimony. In his recent remarks, Powell said that there were "no signs of wage inflation" as yet but more gains can come before inflation starts to rise. Powell also said that the labor market could continue to strengthen without causing inflation to rise.

The remarks were seen to be toned down compared to the first statement where the markets understood Powell's comments to be more hawkish.

The U.S. President Trump announced yesterday that new tariffs for steel and aluminum imports would come into effect next week. The U.S. is set to raise the tariffs on imports by 25% and 10% respectively. The equity markets reacted strongly by closing weaker on the day.

On the economic front, the Fed's preferred gauge of inflation, the core PCE price index, was seen rising 0.3% on the month, matching estimates and accelerating from 0.2% previously. The ISM manufacturing PMI accelerated to 60.8 beating estimates of 58.7 and extending from January's 59.1.

Looking ahead, the economic calendar today will see the release of the UK's construction PMI. Economists forecast a print of 50.5 which is slightly higher from January's 50.2 print. The British PM May is expected to speak later today while the BoE Governor Carney is also scheduled to speak.

EURUSD intra-day analysis

EURUSD (1.2276): The EURUSD was seen closing with strong gains as price action posted a bullish engulfing pattern on the daily chart. This could suggest some upside momentum in price action. Currently, EURUSD is seen trading near the 1.2260 level. A reversal near this price level could suggest the bearish trend being resumed. However, further continuation could put EURUSD on path to retest the major resistance level near 1.2333 and could invalidate the bearish flag pattern. Watch for a hidden bearish divergence on the 4-hour Stochastics indicator which could signal a move to the downside.

GBPUSD intra-day analysis

GBPUSD (1.3781): The British pound braces for a volatile day as the British Prime Minister Theresa May and the BoE Governor, Mark Carney are expected to speak today. Following the strong declines earlier this week, GBPUSD managed to stabilize as price action was seen closing with a spinning bottom pattern on Thursday. This could suggest some near term upside in GBPUSD. A reversal could potentially signal an upside correction as price action could be seen rising towards 1.3900 where resistance is likely to be established.

XAUUSD intra-day analysis

XAUUSD (1317.11): Gold prices closed with a doji pattern yesterday with price action indicating a corrective move to the upside. Following the breakdown of the support level near 1327 - 1325, gold prices briefly tested the 1303 level before reversing strongly. We expect to see the upside momentum, pushing gold prices back to the breached support level where resistance could now be established. Watch for a reversal at this level as we expect the declines to continue lower back to 1303 level.

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