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.
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