FOREX NEWS: US DOLLAR IN THE SPOTLIGHT FOR YELLEN’S SECOND TESTIMONY
EUR/USD
Forex News: Germany posted yesterday a disappointing number for the ZEW Economic Sentiment, showing that optimism regarding economic conditions is declining. On top of that, Fed Chair Janet Yellen stated that the economy continues to improve and the US Dollar added to the previous gains.
Technical Outlook
The support at 1.3585 was broken yesterday on the back of Euro weakness coupled with greenback strength but the level still needs to be re-tested to confirm the break. This re-test is usually seen easier on a lower time frame and if it is successful, we anticipate a touch of the next support, located at 1.3520. A move back above 1.3585 would make 1.3640 the first target and would suggest that the ranging period is still not over.
Fundamental Outlook
The US Producer Price index is released at 12:30 pm GMT, showing the change in prices paid by producers for their goods and services, compared to the previous month. The indicator has inflationary implications because a higher price charged by producers will be eventually passed on to retailers and ultimately, to the consumer. The expected change is 0.2% compared with last month’s -0.2% and higher numbers are considered beneficial for the greenback. Later in the day, at 2:00 pm GMT Fed Chair Yellen will testify before the House Financial Services Committee, an event considered to have a high impact on the US Dollar.
GBP/USD
The Pound scored another major victory against the greenback as United Kingdom’s CPI showed an unexpected increase from 1.5% to 1.9%. As a result, the pair printed a new multi-year high at 1.7191.
Technical Outlook
Although we have a new high, the resistance located around 1.7180 held yesterday and even rejected price lower; at the moment, that resistance is just pierced, not broken and we expect a new descent into 1.7095 support zone as the market is still overextended. A daily close above 1.7180 would be considered a true break of resistance and would indicate that higher prices will follow.
Fundamental Outlook
The day’s main event for the Pound is the release of the Claimant Count Change, an indicator which tracks changes in the number of unemployed people claiming social help due to their lack of jobs. A higher number suggests economic contraction and usually weakens the Pound; the release is scheduled at 8:30 am GMT and the expected change is -27.1K while the previous was -27.4K.