General market theme
Mixed performances from the majors during yesterday’s session as investors are taking a defensive stance ahead of the events coming up today and tomorrow. With the dollar being in the centre of attention ahead of the Jackson Hole meeting tomorrow, market participants appeared cautious and we saw diverging performances from the US currency against its peers.
The euro extended its decline lower as the dollar enjoyed fresh demand, while the cable pushed even higher against the US currency, even though this morning we’re seeing early selling pressures.
Apart from tomorrow’s US-related event, today traders will focus on the release of the IFO Survey, and we have reasons to believe that the figures could surprise to the downside and add more pressure on the euro at this point.
Price action highlights
The euro was in the red yesterday and dropped below the 1.1300 area to trade as low as the 1.1250 level, even though overnight it manage to pull back higher a bit. However, this morning we’re seeing a bearish bias in the single currency, and we could see fresh losses and possibly a break below yesterday’s lows if the IFO survey prints in a bearish manner.
Recent weakness in the manufacturing and services activity in the euro area could translate into lower business confidence and in turn could send the single currency into a fresh swing to the downside.
The cable extended its rally to the upside during the early European hours and the rate reached the 1.3250 area before losing its steam. During the rest of the day the UK currency remained directionless while trading near the same levels, but this morning we’re seeing some selling pressure attempting to drive the pound towards the 1.3200 area.
The sterling has enjoyed a good rally higher recently, and we believe we could see a slight correction to the downside before the uptrend can pick up more steam to the upside.
Focus of the day
There are a few important reports to keep track of today both from Europe and the US. The release of the IFO Survey this morning will be closely monitored from traders looking to benefit from any weakness in the euro, while later in the day the release of the Durable Goods Orders, Initial Jobless Claims and preliminary Services PMI levels will affect the dollar ahead of tomorrow’s Jackson Hole testimony from Fed boss Janet Yellen.
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