General market theme
Limited price action over the past 24 hours in the major currency and stock markets as the beginning of the week offered little in terms of fresh news or data for traders to act upon. This is not what we expect for the rest of the week though and starting today there is a host of reports that will dictate price action mainly in the European majors with the euro and the pound being in the centre of traders’ attention. Given that the week is shortened due to the Easter Holiday on Friday we would prefer to focus on the short-term outlook of the instruments we monitor and look to take advantage of any opportunities as swiftly as possible.
Price action highlights
The euro edged lower on Monday and tested the 1.1250 support area printing an intra-day low at 1.1230 but the volatility was extremely limited and essentially the euro spent the day trading sideways on either side of the 1.1250 level. The bias for the single currency is bullish though and today the release of the IFO and ZEW Surveys is expected to show the positive effects of ECB’s easing programme on business confidence thus we could be in for a reversal higher again. Given the dollar’s current weakness the euro could benefit from renewed confidence in Eurozone’s business activity and the 1.1300-50 highs could be revisited.
The cable was also in the red yesterday spending most of the day below the 1.4400 support area but again there was no follow-though to take the currency even lower as there is a lack of confidence in the dollar at this point. The risks that a potential Brexit pose over the domestic economy are casting a doubt over the pound’s outlook and complicate things so the UK currency doesn’t have a clear bias at this time. The release of the inflation data this morning might provide the pound with some direction in the short term and chances are in favor of a positive reaction towards the 1.4500 highs.
Focus of the day
As we mentioned in our commentary above today traders will focus their attention on the European majors as the release of the ZEW and IFO business confidence surveys is expected to provide the euro with renewed support. Also today the pound will probably get a confidence boost from the release of the inflation data as analysts are predicting a healthy bounce higher that could allow the pound to get some traction.
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