Daily FX Summary: November 2
Courtesy of Talking Forex
The pair finished the session higher on Tuesday amid a weaker greenback, which fell as investors looked forward to the FOMC decision on Wednesday which is expected to feature a statement on asset purchases and also following the release of higher than expected European manufacturing PMI's. The Bulls largely disregarded renewed concerns over the Eurozone and the pair steadily marched higher and by the closing stages on Tuesday was trading above the key 1.4000 level. Going forward, at least in the near-term much will depend on the USD-reaction to the FOMC decision which is likely to result in a sharp fall by the USD index if the Fed announces a “shock and awe” style version of QE. On the other hand, the pair will likely enter a correction mode if the Fed agrees on a more measured approach. In terms of technical levels, to the upside, resistance levels are seen at 1.4050/80 and 1.4140. To the downside, 1.3920/00 and 1.3850 levels are expected to contain any selling.
Despite a weaker than expected UK construction report, the pair finished the session on Tuesday largely unchanged as a weaker greenback counteracted the selling and provided the much needed support for the pair. As such, the pair continued to trade near 1.6000 level and unless the BoE surprises markets by announcing that it is to resume buying assets via its Asset Purchase Facility (APF) on Thursday, the Bullish momentum should see the pair move towards 1.6500 level. The pair is expected to be highly reactive to the FOMC decision on Wednesday and there is a risk of a near-term downside correction if the policy makers choose to initiate smaller than expected QE. In terms of technical levels, resistance levels are seen at 1.6060/80 and 1.6130. To the downside, supports are seen at the 21DMA at 1.5877 and 10DMA at 1.5862.
Despite a weaker USD on Tuesday, the pair remained stuck in a tight trading range in the high 80.00 territory. All eyes on Wednesday will be on the FOMC decision, where the Fed is expected to announce that it is to initiate another round of asset purchases. Much of the attention will be on the size of the potential program and there is a risk that the pair will test historic lows at 79.75 if the Fed announces a so-called “shock and awe” style QE. Worth noting recent comments from Japanese finance minister Noda who said that the government will take decisive steps on currencies when necessary. So if the all-time lows are be re-tested in the pair then be on the look out for any potential intervention from the BoJ and Ministry of Finance.