US Stock Markets Bypass Inflation
IronFX | Feb 15, 2018 04:18AM ET
US Stock-markets bypass inflation
- US dollar strengthened upon release of the inflation rates, but the markets quickly got over it, with the dollar being on the defensive side currently. Analysts suggest that confidence in a strong economy may have overshadowed the higher than expected inflation rate. However, the paradox exists were the US dollar is weakening despite the higher inflation. It may be the case that the US dollar is losing its appeal against its major counterparts as other central banks start slowly normalizing their monetary policy. We see the case for the weakening momentum of the US dollar to continue in the short term at least.
- Cable, dropped upon release of the US inflation data, however, it quickly regained any losses and continued trading on higher grounds aiming for the 1.4040 (R1) resistance line. We see the case for the pair to continue to have a positive momentum, however, the rise may not be that sharp anymore, and stabilize later on during the day. We also see the case for the pair to continue to trade above the upward trend-line incepted since the 11th of January for the next couple of days. Should the bears take the driver’s seat we could see the pair breaking the aforementioned upward trend-line and aim for the 1.3750 (S1) support line. Should the bulls have the reins of the pair’s direction we could see the pair breaking the 1.4040 (R1) resistance line and hover above it or even try to aim for the 1.4168 (R2) resistance zone.
German coalition deal in the balance, again
- German SPD leader Martin Schulz resigned yesterday, in hope of ending inner SPD turbulence about the deal struck with CDU-CSU. The deal is about to come to a vote from SPD party base early March and the outcome seems to be in the balance. Merkel on the other side, in an attempt to appease CDU reactions for the loss of the finance ministry, promised not to allow any deficits in future budgets. In other news, the German economy seems to be doing well, despite the political uncertainty, based on strong exports and business confidence. Currently, we see the case for the economic side to overshadow the political side and support the EUR, maybe until the 4th of March, when the SPD vote results will be announced.
- EUR/USD followed a similar path as cable yesterday reflecting the course of the US dollar, by heading south and breaking the 1.2355 (S1) support line and later on breaking it again by moving upwards and continuing to trade in higher grounds. We see the case for the positive momentum to continue for the pair, however at a slower pace as the US dollar side could stabilize. We also see the case for the pair to continue to trade above the upward trend-line incepted since the 18th of December 2017, at least for the short term. Should the pair find selling orders, we could see it aiming or even breaching the 1.2355 (S1) support line. On the other hand should cable find fresh buying orders, the pair could break the 1.2455 (R1) resistance line and aim for the 1.2600 (R2) resistance hurdle.
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As for today’s other economic events:
- From Sweden we get the Unemployment rate for January which could weaken the SEK somewhat, as it is forecast to accelerate to 7.0% compared to previous reading of 6% and from the Eurozone the Trade Balance surplus figure for December, which could support the EUR as it is forecast to increase. Later on, we get the US Core PPI for January and the US industrial production for January. As for speakers, ECB’s Mersch, Praet and Lautenschlager speak. Later on BoC Gov. Council member Schembri speaks.
GBP/USD
Support: 1.3750(S1), 1.3590(S2), 1.3338(S3)
Resistance: 1.4040(R1), 1.4168(R2), 1.4325(R3)
EUR/USD
Support: 1.2355(S1), 1.2230(S2), 1.2100(S3)
Resistance: 1.2455(R1), 1.2600(R2), 1.2766(R3)
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