EUR/USD has been trapped in a roughly 100pips trading range for about a week. The forex market participants are cautious ahead of a gathering of central bankers and economists in Jackson Hole. Without doubt the Fed’s annual symposium, which starts today, will be the next big market catalyst. Investors are going to wait to see if U.S. Federal Reserve Chairman Ben Bernanke delivers firmer hints on more monetary easing. Any signal from Chairman Bernanke that the U.S. central bank will embark on another asset buying programme would be negative for the American dollar and cause the currency to weaken against its major counterparts as it is tantamount to printing money and dilutes its value.
This would give an additional boost to the Europe’s common currency, which has been buoyed recently by expectations the European Central Bank will unveil concrete plans next week to rein in surging borrowing costs in Spain and Italy. However, the pair’s rise was limited due to uncertainties about Fed policy, with recent change in the environment marginally reducing the chances of more quantitative easing. The data released since the meeting of the minutes made it doubtful if the Fed will take as aggressive actions as markets appear to have taken from the minutes.
The Asian stock markets opened lower today. NIKKEI started the day at 8,891.75, previous close was 8,983.78. HANG SENG opened at 19,516.90, previous close was 19,552.90. Chief strategist at Okasan Online Securities, Yoshihiro Ito said “The disappointment is weighing heavily on the market, but now investors are switching their attentions to the European Central Bank and whether they will start buying bonds to bring down Italy and Spain’s borrowing rates. We could hope for a stronger euro to help Japanese exporters as it seems the yen isn’t going to soften against the dollar”.
EUR/USD is trading at 1.2504 by the time of typing and for today resistances are located at 1.2557 and 1.2598. Support levels are 1.2480 and 1.2445.
GBP/USD is at 1.5792. Resistance levels are located at 1.5854 and 1.5915. Supports are located at 1.5751 and 1.5709.
USD/CHF is trading at 0.9602 by the time of typing and for today resistances are located at 0.9648 and 0.9705. Support levels are 0.9562 and 0.9503.
AUD/USD is trading at 1.0293. Resistances are located at 1.0336 and 1.0373. Support levels are 1.0268 and 1.0201.
The economic calendar is loaded with the high impact events today. German Retail Sales data and UK Nationwide HPI figures will be released at 07:00 GMT. EZ CPI Flash Estimate and Unemployment Rate will be released at 10:00 GMT. Statistics Canada will release GDP data at 13:30 GMT. Chicago PMI is due at 14:45 GMT. Fed Chairman Bernanke’s speech starts at 15:00 GMT.