During the early hours of new trading session the yellow metal continued to lose value against the buck in a junior descending channel.
Basically, the consolidation period might last until the exchange rate will hit the support line of a four-week long ascending channel.
Although yesterday’s fluctuations required some adjustments, the main assumption remained unchanged.
The cable is continuing to trade in a symmetrical triangle pattern whose upper trend line simultaneously represents the slope of a larger falling wedge formation.
From dominant pattern’s perspective the breakout should happen in southern direction towards support zone located between the 1.3338 and 1.3331 marks.
In line with expectations, the cable continued to gradually moving to the bottom after making a rebound from the upper edge of a currently active ascending channel that was additionally secured by resistance line at the 1.3338 mark.
In first hours of this trading session the pair managed to bypass the weekly R1 at 1.3300 and the 55-hour SMA at 1.3293, which suggests that the rate is likely to reach the opposite side of the channel by the end of the day.
This year the Euro zone economy expanded at a strong pace. Do you expect the ECB to start tapering anytime soon or not?
We do expect the October announcement to reveal that the ECB is extending its QE program into the next year, however, at a slower pace, which the ECB itself does not describe as tapering. We would call it a rescaling or recalibration. But overall we do think that conditions are met for asset purchases to be slowed and eventually terminated by the end of the next year.
Some analysts suggested that the strong Euro had a little impact on trade between the EU and the major economies. Do you agree with the statement?
The British Pound had a very challenging trading session yesterday. Due to comments made by the EU Chief Negotiator Michel Barnier about a "deadlock" in Brexit negotiations the Sterling lost 116 basis points against the Greenback just in couple of hours. Despite a release of better than expected US Core PPI data, traders managed to return the pair to the pre-fall 1.3250 level.
In the first half of this trading session the currency rate is expected to test a resistance near the 1.3290 mark. However, whether the cable will manage to soar and bypass the 1.3300 level or fall back to the 200-hour SMA near 1.3192 will depend on release of data about the US CPI and retail sales, which, in turn, will have major implications on decision about the need of another interest rate hike this year.
In first half of the day the pair continued to move, as expected. However, a speech delivered by Governor Powell created a favourable impulse for the buck and elevated it against the Yen by 0.36% just in couple of hours.
The fact that the pair did fall below the 112.40 level and made a rebound additionally confirms that it is moving in a medium-term ascending triangle.