Daily economic digest from Forex.ee

The EUR/USD pair failed to extend its recovery and retreated to the area of 1.1570. Recall, yesterday the pair witnessed another sharp retreat on the back of dovish rhetoric of the ECB President, who said that significant monetary accommodation is still needed and the Bank will remain patient in determining the timing of the first rate hike. These comments negatively affected the pair, sending it to refresh 3-week lows on the level of 1.1531. Moreover, ongoing buying interest around the US dollar is also limiting pair’s chances for recovery this Wednesday. As for the economic events, today market’s attention will remain focused on another speech by ECB President M. Draghi on the ECB Forum in Sintra, but this time he will share a panel with Fed Chair J. Powell and other central bankers, whose comments will also be able to spark some volatility.

The GBP/USD pair is consolidating its positions within tight range of 1.3155-80, staying near its 7-month lows, marked on the level of 1.3150 a day before. Yesterday the pair came under strong bearish pressure on the back of news headlines about UK PM T. May’s defeat in the upper chamber of the Parliament that significantly increased uncertainty over Brexit negotiation process. Moreover, the pound received additional negative impetus after warns of EU Chief Negotiator Michel Barnier that the UK needs to be prepared for a hard Brexit scenario. And finally, today it is expected that the pair won’t show any sharp moves, as we are heading towards the BoE meeting, which will take place tomorrow. But today investors will pay attention to comments of the Fed Chair J. Powell, who will speak on the ECB Forum, and to the US data due for release during the NA session.

The USD/JPY pair recovered a part of its yesterday’s losses, having stepped above the level of 110.00 this morning, on the back of improved risk-on sentiment. Now markets remain in anticipation of fresh developments regarding recently announced US tariffs on $200 billion of Chinese goods. However, in absence of any further news over the US-China conflict the interest around less risky assets started to cool off, allowing the pair to recover after its yesterday’s drawdown. In addition, in Asia the BoJ released meeting minutes, where the regulator once again indicated that inflation target level of 2% is still far away, despite ultra-easy monetary policy. Looking ahead, today investors will focus on the ECB Forum, where the heads of the US and Japanese CBs will take a part, and also on the US housing data, which will be able to set up pair’s further direction.

The AUD/USD pair recovers after its 4-day consecutive days at a loss. Yesterday the pair refreshed its yearly lows on the level of 0.7347, as risk aversion, caused by escalation of tensions between the US and China, was weighing the higher-yielding Aussie. Meanwhile, it seems that fears of a global trade war have cooled off somewhat amid lack of fresh developments, thereby offering some relief to risky assets. Moreover, another reason of pair’s recovery can be called oversold conditions of the Australian dollar, which is trying to recover its positions against its major competitors in the middle of this week. Today market’s attention will remain focused on the final round of the ECB Forum, where central bankers, including Mr. Lowe and Mr. Powell, will discuss a longer-term perspective of the global economy, while another portion of the US data from the housing market will also be able to offer some trading opportunities during the NA session.

Major events of the day:

Fed Chair J.Powell’s Speech – 16.30 (GMT +3)

ECB President M.Draghi’s Speech – 16.30 (GMT +3)

US Existing Home Sales – 17.00 (GMT +3)

US Crude Oil Inventories – 17.30 (GMT +3)

Support and resistance levels for the major currency pairs:

EURUSD S. 1.1475 R. 1.1703

USDJPY S. 109.01 R. 111.13

GBPUSD S. 1.3075 R. 1.3323

USDCHF S. 0.9884 R. 1.0006

AUDUSD S. 0.7306 R. 0.7466

NZDUSD S. 0.6851 R. 0.6971