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Oct 27, 2017

EURO SINKS AS THE ECB ANNOUNCE THE START OF SLOW QE TAPERING

ECB ANNOUNCE SLOW TAPER

The euro moved sharply lower against the U.S dollar this week, as European Central Bank policy makers kept interest rates on hold, and announced the start of QE tapering. The sell-off in the euro came as the monetary policy statement noted stimulus will be needed for a longer period than financial markets had anticipated. ECB President Mario Draghi, delivered an overall dovish policy statement to investors, prompting the EURUSD pair to drop toward below its key 100-day moving average.

  • The EURUSD is strongly bearish below the 1.1679 technical level, with downside targets of 1.1580 and 1.1510.

  • A move above the 1.1679 level should see the EURUSD move higher towards the 1.1713 level.

KIWI TUMBLES ON NEW POLICIES

The New Zealand dollar fell to a five-month trading low against the U.S dollar, after the incoming New Zealand Labour government outlined its upcoming policies. New Zealand’s new government reaffirmed a strong commitment to reducing immigration, raise the minimum wage and banning foreigners from buying local homes.

The NZDUSD pair broke lower towards the $0.6800 cents level, as the new policies were seen by financial markets as unfriendly to overseas investors.

  • The NZDUSD pair remains strong bearish while trading below the $0.6890 level, further declines towards $0.6780 and $0.6665 can be expected while below this key level.

  • Should the NZDUSD pair move above the $0.6890 level, a further advancement towards $0.6930 and $0.6990 should be expected.

BOC ON HOLD

The Bank of Canada left its benchmark interest rate unchanged this week, following two straight rate hikes. The Canadian dollar fell lower against the U.S dollar and the British pound as the BOC suggested future increases are still likely, but at a much more gradual pace.

In its scheduled announcement, the central bank said it did not deem it currently necessary to raise interest rates, with the stronger Canadian dollar helping to slow the rise in the pace of inflation.

  • The USDCAD pair remains strongly bullish while trading above the 1.2770 level. Further advances towards 1.2930 and 1.3000 can be expected above this key level.

  • A decline below the 1.2770 level should lead to a sell-off in the USDCAD pair towards the 1.2740 and 1.2690 levels.

UK RATE HIKE PRICED IN

The British pound moved sharply higher against the U.S dollar, after the United Kingdom economy released much better than expected third fiscal quarter Gross Domestic Product numbers. Official statistics showed that the United Kingdom economy grew 0.4 percent in the third quarter, while year-on-year growth hit 2 percent.

The market reaction saw the GBPUSD pair move sharply higher, as financial markets priced in the better than expected growth figures, which may prompt the Bank of England to hike interest rates at the upcoming BOE monetary policy meeting in November. However, the British pound fell back against the U.S dollar on Thursday, as the GBPUSD pair followed the EURUSD lower.

  • The GBPUSD pair remains strongly bearish while trading below the 1.3200 technical level. Further declines towards 1.3080 and 1.3040 can be expected while below this level.

  • If GBPUSD buyers push-price action back above the 1.3200 level, a further advance towards the 1.3230 and 1.3268 levels can be expected.

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