EURUSD – maintaining the momentum…
The EURUSD managed to move out of the multiday 1,3030-1,3230 consolidation and yesterday tested the upper limit but this time as a support. Despite numerous attempts bears failed to push the pair back into this range as the 1,3230 was tested this time as a support and consequently the pair moved up. A typical target is a range of a previous consolidation, that is 1,3430. On the weekly bulls may aim at an upper limit of the long-term downward channel – currently at around 1,36.
Naturally, those prospects are dependent on the ECB today. The Bank will almost certainly refrain from cutting rates but the consensus assumes the cut may be suggested for March. Should that happen, the EURUSD rally could be undermined. Only stopping short of such suggestion by Mr Draghi will be a clear buy for the pair.
GBPUSD – another surprise?
The BoE meeting today is no less relevant. The Bank was observing the situation for a while and the consensus assumes that it is a time for some action. Precisely, the Bank is expected to expand the capacity of the bond purchases program by 50 bln GBP (to 325 bln). Nevertheless, the decisions does not look as a done-deal to us. The British PMIs in January literally sky-rocketed and since it was (more less) a Europe-wide tendency, authorities may hope for the recovery to come sooner than expected and thus refrain from expanding the balance sheet.
A situation on the GBPUSD is somewhat tricky. The pair failed to move above 1,59 and we saw a bearish engulfment yesterday on the daily which could well herald some correction of the recent rally. That could happen if the BoE expands the balance sheet and the ECB announces a cut (for March), undercutting a rally on the EURUSD. However, should the market be surprised in both instances, we may well have a surprise rally, taking us even to 1,6125.
Copper – Chinese inflation
One of the reasons behind a recent rally, especially on industrial commodities, was an expectation that the Chinese authorities were once again bound to support the economy in light of a global slowdown. Those expectations were not without a ground as the Chinese may want to keep the economy running at full speed ahead of the political shift in 2013. In that context, the CPI data for January are disappointing.
The CPI rose to 4,5% y/y from 4,1% in December, beating expectations of 4,0-4,1% y/y and suggesting the reserve ratio cuts were not so certain. That’s a bad news for copper that has been testing a key 8600 USD resistance following an impressive rally. This new uncertainty suggest a profit taking, taking us at least to 8150 USD.
