FEDERAL RESERVE MEETING EYED; GBP UNEMPLOYMENT REMAINS UNCHANGED
In the fourth Quarter, the US current account deficit, which measures US trade and financial transactions with rest of world, widened to 128.16 billion dollars. The US has had trade deficits for decades now. The current account gap widened due to the larger deficit for secondary goods, a wider gap between imports and exports of goods, and a smaller surplus for primary income.
Yesterday, the US dollar posted a strong rebound against other major currencies as traders are expecting the first interest rate hike by the Federal Reserve for 2018. But with today's policy statement just a couple of hours away, their focus has shifted to whether the US central banks will signal if they are expecting to see three rate hikes this year.
Later today, the unemployment rate in the UK remained steady and growth in wages accelerated to 2.6% from 2.5% previously, driven by higher pay settlements in construction and manufacturing. The labor market remains healthy despite low growth in the economy. The Bank of England expects wage growth to pick up further this year.
The UK Prime Minister, Theresa May, hopes to seal an agreement with other European countries this week on transition terms between Britain's formal exit from the European Union in March next year and the start of its future relationship with the EU bloc. If Theresa May succeeds in making an agreement the transition period will last until the end of 2021.
EUR/USD is under pressure and expected to continue its downside movement. The pair is capped by the declining 20-period moving average. The pair also saw heavy selling yesterday and touched 1.2239 (yesterday's low). The relative strength index is also moving below the neutrality level. Key resistance level lies at 1.2354 (yesterday's high). As long as the price remains below the resistance level expect a downward movement toward 1.2239 (yesterday's low) and 1.21873 (last month's low).
NZD/USD is under pressure and is expected to trade in a lower range. The pair remains in a downtrend and is capped by both the declining 20 day moving average and 50 day moving average, the relative strength index is also below its neutrality area of 50. Key resistance lies at 0.72475 (yesterday's high). To sum up, below 0.7247 look for a new targets at 0.7100 and 0.7050 (this year's low).
GBP/USD is expected to continue its upside movement amid positive wage growth data and hopes for finalizing the transition period agreement. The relative strength index is showing the upside momentum and is now trading above the neutrality area of 50. The 20 day moving average is also showing upward momentum. Major support lies at 1.39818 (yesterday's low). To Sum up, as long as the price is above 1.3981, look for further upside towards 1.4115 and 1.4145.