UK PMI FALLS; EURO ZONE ECONOMY GROWS FASTER THAN ANTICIPATED
Today's Eurozone composite PMI for the month of January grew to 58.8 from the previous month’s, and the forecasted, 58.6, which is the highest level since June 2016. The positive data release shows that the Eurozone economy has entered 2018 on a very strong footing. Examining the data at national levels, Italy recorded its highest PMI figure in almost 12 years. As hiring for business is at the fastest pace it’s been for seventeen years, the European Central Bank will be encouraged to expect an acceleration in wages growth that would help meet its inflation target in the coming years. Official data released during the previous week indicated that the Eurozone economy grew at its fastest rate and outpaced the US economy in the last year. French Bank BNP also raised its 2018 Eurozone economy forecast to 2.8% from 2.4% which marks an increase from the 2.5% expansion in 2017.
On the other hand, UK services PMI fell in January and came out at 53.0 versus 54.2 in December and against the expected 54.1, which is almost a 16-month low. The weaker PMI reading reflected a marked warning in the lack of demand for business and consumer-oriented services like hotels and restaurants.
The EURUSD is expected to trade with a bullish outlook. The technical view for the pair is bullish as the pair is trading on the upside. The relative strength index is mixed to bullish and has not displayed a reversal signal yet. So as long as 1.2350 is not broken, look for another rise towards 1.2435 and 1.2475 (today's high). Alternatively, if the price moves in the opposite direction below 1.2350, look for 1.2330 and 1.2300.
The AUDUSD is under pressure and expected to trade on the downside. The pair dipped below the key level of 0.7900 and posted a low of 0.7887 (today's low). It is trading on the downside and capped by the descending 20- day moving average. The relative strength index is also below the 30 region, which shows a continued downward momentum. To sum up, as long as the pair stands below 0.79530 (today's high), look for 0.7887 (today's low) and 0.7840.
The GBPUSD is under pressure and expected to continue the downside movement. The downside movement is further accelerated by the declining 20 day and 50 day moving averages. The relative strength index is bearish and calls for further declines. As long as 1.4100 (yesterday's low) is resistance look for further declines towards 1.3970 (last week's low) and 1.3935.