Daily Forex Market Preview, 17/08/2017
The US dollar gave up some of the gains on Wednesday following the release of the FOMC meeting minutes. The minutes showed that Fed officials were divided on the course of interest rates. They also raised concerns about the underlying inflation with some members expecting inflation to remain below the Fed's 2% target rate. On the other side, some hawkish members argued that there would be risks from the tightening conditions in the US labor markets.
On the economic front, data yesterday saw the UK's unemployment rate falling to historic lows. Beating estimates, the unemployment rate in the UK slipped to 4.4%. However, wages continued to lag behind inflation. The British pound managed to post a modest recovery as a result. In New Zealand, the producer prices data showed a 1.4% increase in input prices, while output prices rose 1.3%, both beating the median estimates.
Looking ahead, the economic calendar today will include the UK retail sales which are expected to rise just 0.2%. In the eurozone, final inflation figures for July will be released. Consumer prices are expected to rise 1.3% on the headline and 1.2% on the core.
EURUSD intraday analysis
EURUSD (1.1777): The EURUSD managed to recover the losses from Wednesday following the FOMC meeting minutes which turned out to be dovish than expected. Still, the current retracement is likely to be a minor pullback with the overall bias shifting to the downside. The key risk is the fact that EURUSD once again managed to rally back above the support of 1.1730. Near-term bullish momentum could send EURUSD back to the resistance level of 1.1800. After that, the sideways range is likely to be formed. A break down below 1.1730 would suggest a move to 1.1635. To the upside, above the resistance of 1.1800, expect EURUSD to continue pushing towards the next main resistance level of 1.1835.
GBPUSD intraday analysis
GBPUSD (1.2904): The British pound managed to post a modest rebound yesterday. Slightly better than expected labor market data helped to improve the sentiment in the cable which weakened earlier in the week on account of inflation data. The rebound off 1.2835 is likely to see some upside in prices. Near-term resistance is seen at 1.2980 - 1.3000 which could be tested. If resistance is formed here, then GBPUSD could be forming the final right shoulder in the head and shoulders pattern that is evolving on the daily charts. This would suggest further downside in prices on a break below 1.2835.
USDJPY intraday analysis
USDJPY (109.90): The USDJPY declined after failing to break past the resistance level of 110.80. Declines are likely to push USDJPY to test the lower support at 109.70 where support is currently being tested. A rebound off this level, which coincides with the trend line support would suggest some upside in prices. The USDJPY is also likely to form an inverse head and shoulders pattern on a successful rebound off 109.70. If the currency pair manages to break past the resistance level of 110.80, then the next target is towards 111.77 resistance level.