Yesterday, was an interesting day, as a series of events affected the Forex market. In the Asian session, the BOJ interest rate decision was announced in which the central bank decided not to introduce any major change. The market was looking for some hints regarding additional stimulus efforts. This came as a disappointment for Japanese Yen sellers, as the buyers took control and pushed the USDJPY lower yesterday.
UK production data
The next major release was the UK industrial and manufacturing production data. The market was not expecting any major jump in the industrial production compared to the last reading. However, the outcome was better than expected, which lifted the cable during the European session.
According to the report, UK production output increased by 2.7% (YoY) between February 2013 and February 2014. Sector wise distribution suggests increases of 3.8% in manufacturing; 8.5% in water supply, sewerage & waste management and 0.2% in mining & quarrying. The decrease was registered by 8.8% in electricity, gas, steam & air conditioning output. The month-over-month rate registered an increase of 0.9%.
UK manufacturing production registered a strong rise of 1.0% between January 2014 and February 2014. The year-over-year reading registered an increase of 3.8%, which is the largest increase since February 2011. The outcome was definitely encouraging, and as a result the GBPUSD climbed higher. The pair mounted more than 50 pips within an hour of the release.
The market sentiment was overall bearish US dollar in the European session, which helped the pairs such as EURUSD and AUDUSD to gain a lot of ground. EURUSD traded above the 1.3800 level, and AUDUSD traded towards the 0.9380 level. GBPUSD took advantage of the market sentiment further and surged higher to trade as high as 1.6754 in the NY session.
The GBPUSD pair bullish run stalled just below an important trend line, as can be seen in the 4 hour chart below. The pair managed to break the 76.4% Fibonacci retracement level of the last down-move from 1.6821 high to 1.6461 low. This break higher is critical. However, there are several resistances on the way up for the pair, as highlighted in the chart. One of the major barriers is around the 1.6785 level, which also coincides with the trend line. The broken 1.6680 support level might now act as a support for the pair in the short term. It would be interesting to see how the pair behaves in the upcoming session.
NIESR GDP Estimate
UK’s GDP estimate was released by the National Institute of Economic and Social Research. According to the report, monthly estimates of GDP suggest that output grew by 0.9 percent in the three months ending in March after growth of 0.9 percent in the three months ending in February 2014. The previous estimate was also revised up. This again adds bullish value for the nasty cable. The pound was also seen trading higher against the Euro as well.
FOMC meeting minutes
One of the most important events for today will the FOMC meeting minutes, which will be published in the NY session. The market and investors will keep a close eye on the minutes to know what the Fed has to say about the labor market and inflation. The statement could have an impact in the market, as the investors might start pricing in further action/tapering from the Fed based on the statement tone.
So, keep an eye on all important events friends and trade accordingly.
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Happy Trading Friends!
