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GBP Retreats On Carney’s Comments On Brexit

Daily Forex Market Preview, 19/09/2017

The markets were trading relatively quiet yesterday with the main events of the day coming from the BoE Governor Carney's comments and the Eurozone inflation data. The British pound was seen trading weaker yesterday on the back of the comments from Carney.

Speaking of inflation, Carney said that Brexit would prove to be an inflationary event as the central bank prepares to hike rates. He cautioned that although the intention was Brexit was not to isolate Britain from the rest of the world; the initial outcome would be similar due to uncertainty in trade ties with Europe.

The euro managed to make some gains, especially against the British pound as latest inflation data from Eurostat showed that consumer prices in the Eurozone surged to a four-month high at 1.5% in August. Interestingly, the ECB's monthly bulletin, however, showed that due to a statistical quirk, inflation in the eurozone could fall to below 1% in the first quarter of 2018. That did not dent the sentiment in the euro which managed to hold on to the gains.

Looking ahead, economic data today will see the release of the US building permits data and housing starts. Overall, the day looks a bit relaxed, but investors are likely to turn cautious as the Fed's two-day monetary policy meeting starts today.

EURUSD intraday analysis

EURUSD (1.1966): The EURUSD managed to post some modest gains yesterday as price action was seen recovering back to 1.1954. On the 4-hour chart, we see a potential inverse head and shoulders pattern that is evolving with the neckline resistance seen forming at 1.1976. With the right shoulder now formed, we expect EURUSD to rally back to 1.2060 at the minimum on a successful upside breakout from this pattern. Alternately, failure to break out above 1.1976 will put EURUSD in a sideways range which could keep the currency pair range supported above 1.1882. A breakdown below this support level will keep EURUSD biased to the downside targeting 1.1688.

USDJPY intraday analysis

USDJPY (111.49): USDJPY has posted strong gains in the past few sessions. The gains saw prices rallying to recover above the 111.00 resistance level. Having cleared this level, USDJPY could be seen aiming for further gains. However, we expect to see some short-term declines in the process. Any near-term dips are likely to be supported near the 111.00 level where the unfilled gap from Monday's open is likely to be tested. A decline below 111.00 could, however, push prices lower to test the breakout level from the falling median line.

XAUUSD intraday analysis

XAUUSD (1308.70): Gold prices have posted a steady decline with price action gapping lower below 1324.72. We expect the downside momentum to see further declines that could send gold prices down to test the support at 1300.86. However, there is scope for a modest reversal off the current levels. Resistance at 1324.72 will be in play as gold prices aim to fill this minor gap from earlier this week. A reversal around 1324.72 will signal the completion towards the 1300.86 support. To the upside above 1324.72, signals a bullish bias in gold that could see price aiming for the 1345.87 resistance level.