General market theme
Over the past 24 hours volatility has definitely eased in the currency markets, and even though we’ve had a couple of important fresh news and reports, they didn’t have too much of an effect on the major instruments we monitor in our report. The BoE rate decision and monetary policy statement was thought to be the most important event of the day, and even though it caused some short-term volatility in the pound, it didn’t change much. However, it is important to note that the Bank of England is growing increasingly nervous about the possibility of a Brexit, and as long as the outcome of the referendum is not clear the pound will remain under pressure.
Price action highlights
The euro extended its losses yesterday, and the downtrend reached the 1.1250 area, where it seems that it has found enough support to arrest the decline. The single currency spent the best part of the day trading sideways around that area as the momentum seems to be dying out. Over the next 24 hours we don’t expect any important news to change the outlook of the currency, so we would expect the euro to remain around the same area for the time being, with the 1.1300 level being the resistance on the topside.
On a similar yet slightly more volatile pattern, the cable has reached the 1.4100 support level, but the reaction from that area sent the UK currency slightly higher to trade around the 1.4150 area. The BoE meeting and policy statement did little to affect the price action, even though their rhetoric has become notably more bearish ahead of the potential of a Brexit. There’s nothing in the news for the pound until the end of the week, hence we would expect a quiet trading day while the cable trades between 1.4100 and 1.4150.
Focus of the day
In terms of reports and news worthy of our attention, we only have a couple from the US later in the day. The release of the Industrial and Manufacturing Production levels and more importantly the University of Michigan Confidence are important to note down as they are key metrics of the progress of the US economy, but we doubt that they would have any immediate effect on the price action today.
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