Euro pauses ahead of ECB decision
The euro has been relatively unchanged against the USD this week as investors wait for the European Central Bank’s monetary decision which is expected late today. Investors expect it to leave the deposit facility rate at minus 0.40% and the marginal lending facility at 0.25%. Most importantly, investors are waiting for guidance regarding the next interest rates hike. In the last meeting, the bank extended the period from summer to December. In addition, investors are waiting for the ECB’s outlook of the European economy after the IMF lowered the global outlook yesterday.
The Japanese yen was relatively unchanged against the USD after more data showed weakness in the economy. In February, the core machinery orders declined by minus 5.5%, which was lower than the expected -5.2%. In January, the orders declined by -2.9%. This was the lowest decline since the one released in November last year. On a MoM basis, the orders increased by 1.8%, which was lower than the expected 2.5%. On a positive side, in March, the PPI increased by an annualized rate of 1.3%, which was higher than the expected 1.1%. Bank lending also increased by 2.4%.
Sterling was also unmoved after the EU indicated that it will give the UK another extension of Article 50. Theresa May has requested this extension to help her negotiate with the opposition. The Europeans have asked for a serious proposal from the PM because this is the second extension she has asked for. In addition, they are afraid that the divisions in the UK parliament are so large that no bill will be voted for. While the extension removes the probability of a no-deal Brexit on Friday, it continues the fatigue and uncertainty about the future of the UK. Today, the ONS will release the first reading of first quarter GDP. Traders will also receive the industrial production, manufacturing production, and trade data from the country.
The price of crude oil was also relatively unmoved after the American Petroleum Institute (API) released its weekly crude oil stock number. The inventories rose by 4.0 million barrels. Today, the EIA will release its data, which is expected to show that the inventories rose by 2.294 million barrels. This will be lower than last week’s data of 7.23 million barrels. In addition, traders will receive the monthly report from OPEC. Meanwhile, traders will also receive the minutes of the last Fed meeting.
On Monday, the USD/JPY pair reached a high of 111.80. Since then, the pair’s price has moved lower, and yesterday, it reached a low of 110.97. This was along the 61.8% Fibonacci Retracement level. The price is now trading at 111.13, which is along the middle line of the Bollinger Bands. The stochastic oscillator has been moving upwards. There is a likelihood that the pair will remain within this range as traders wait for the Fed minutes.
The EUR/USD pair has been relatively unmoved and is currently trading at the 1.1260 level. On the hourly chart, this price is slightly above the 23.6% Fibonacci Retracement level. It is also slightly above the lower line of the Envelopes indicator while volumes have remained a bit low. Today, the pair will likely see some major changes as investors receive the direction from the ECB and the Fed minutes.
The XTI/USD pair reached a YTD high of 64.80 on Monday. Since then, the upward momentum has slowed, and the pair is now trading at the important psychologically level of 64. On the hourly chart, this price is along the 25-day moving average and slightly below the 50-day moving average. The Awesome Oscillator has also moved slightly in the negative side. There is a likelihood that the pair will resume the upward trend but this will depend on the inventory numbers from the US.