Talking Points:
– BoE meeting unlikely to offer new surprises as UK economy continues to improve.
– Both policy statement and press conference will be important for ECB today.
– Expect higher than usual volatility in pre-US equity market hours.
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INTRADAY PERFORMANCE UPDATE: 10:45 GMT
Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): +0.10% (+0.08% prior 5-days)
ASIA/EUROPE FOREX NEWS WRAP
Price action has been exceptionally quiet overnight outside of the AUD-crosses (thanks to a disappointing Australian labor market report), as investors gear up for significant event risk in the pre-North American session hours. Of note, there are three “high” importance events due out between 07:00 EST and 08:30 EST (12:00 GMT and 13:30 GMT) aimed directly at three of the most heavily traded currencies in the world, the British Pound, the Euro, and the US Dollar.
While each of these events poses risk to the EURUSD and the GBPUSD, risk is disproportionate given the run up in prices ahead of these events as well as consensus expectations. The least exciting of three events, the Bank of England Rate Decision, will kick off the morning as the GBPUSD finds itself trading back in the middle of an eight-week sideways range:
GBPUSD H4 Chart: September 10 to Present
The break in GBPUSD through the uptrend off of the July, August, and October lows on October 30 sent the pair towards $1.5880/900, range support dating back to September 15. Yet with UK economic data continuing to improve and only a modest improvement developing in underlying US Dollar fundamentals over the past week, there’s been little impetus for a further breakdown, which would set in motion a Double Top in the pair.
Accordingly, we are taking time into account when considering the impact of the BoE today, in that failure to close above 1.6100 could threaten the rebound off of last week’s lows; and for the bull case to reignite, price needs to take the July-October rising TL, coming in at 1.6130 at today’s close (1.6170 by the end of the week). Otherwise, the 1.5880/6260 range should hold for the near future.
EURUSD H4 Chart: September 22 to Present
The EURUSD is far more exciting that the GBPUSD today, given the rising expectations behind the European Central Bank Rate Decision and the 3Q’13 US GDP report. Unlike the UK, the Euro-Zone and US economies have seen a stretch of weakening data that has led to speculation that additional monetary easing from the ECB and the Fed might be necessary.
Read more: Rising US Yields Building Base for USD, but Don’t Dismiss EUR Rally
ECONOMIC CALENDAR – UPCOMING NORTH AMERICAN SESSION
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— Written by Christopher Vecchio, Currency Analyst
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
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