The Single Currency against the US dollar (EURUSD) had another big rising day yesterday. This is against the backdrop of nearly all commentators’ views that the medium-to-long term tendency in this pair is to the downside. Many market participants were ready for a continuation of the upward surge that had been started by the actions of the ECB last week, when it announced much smaller than expected measures to extend Quantitative Easing (QE), but were nevertheless surprised when the pair headed through the big figure, and seriously psychological barrier, of 1.10.
Now we are looking at a possible range between 1.05, which is a strong support level, and the combination of the 200 Day Simple Moving Average (SMA) and the other big figure resistance of 1.11. This has acted as support in the past (see chart) and it is normal for a previous support to become resistance.
Bank of England day today
The Bank of England Monetary Policy Committee is on stage later today when it will announce its interest rate decision, any changes to its asset purchase facility, publish its latest monetary policy statement and release the minutes of its meeting.
No changes are expected on any front, except perhaps in the language that might be used in the statement when compared with previous ones. These have been giving the impression that rate rises had been put off into the distant future. Recent falls in energy prices will reinforce that tendency. The only opposing force is the belief in the markets and elsewhere that the US Federal Reserve is on the cusp of tightening - the Bank of England will not want to wait too long before following suit.