The Eurogroup meetings failed to boost volatility and the pair traded in a 40 pip range for most of yesterday’s session. Overall we had a slow day which was characterized by indecision and rather choppy movement.
Although yesterday’s price action doesn’t offer a lot of clues about future direction, one thing is worth mentioning: the fact that bulls couldn’t even threaten the resistance located at 1.3915. This is probably due to the lack of developments on the fundamental scene but could also signify that buyers are starting to lose interest and sustaining such high prices becomes increasingly difficult (the pair didn’t reach 1.3915 since late 2011). The first level of interest to the upside remains 1.3915 while first support will probably be offered by 1.3830 but keep in mind that we are not dealing with confirmed support as it didn’t reject price higher since 2011. The market remains bullish until 1.3830 is broken to the downside.
The indicator with the highest potential to affect the pair is released at 07:00 am GMT: the German Trade Balance which shows the difference between exported and imported goods and is estimated to increase from the current 18.5 billion Euros to 19.3 billion Euros, a fact which would benefit the shared currency and would probably send the pair north. However, this is a medium -impact indicator so we don’t anticipate huge moves, unless surprising values are posted.
For almost the entire duration of yesterday’s trading session the pair moved on a bearish path. The move was most likely generated by rumors that Mark Carney’s testimony scheduled today will be one of the most difficult he had to give so far as he will probably attempt to defend Bank of England’s integrity which has been somewhat tainted by the currency-market rigging scandal.
The move lower which started Friday was continued throughout yesterday and the support located at 1.6640 was touched. At the moment price is trading close to the mentioned level and we anticipate a stall here before a bounce or a break can occur; yesterday the bears made a clear attempt to take control of the pair and today we anticipate a touch of 1.6600 support which is in close vicinity to the 200 EMA, creating a confluence zone which is likely to attract price. Keep in mind that Mark Carney’s testimony will probably overshadow the technical aspect.
At 09:30 am GMT the British Manufacturing Production is announced; this is an indicator which measures the change in the output generated by manufacturers and is estimated to increase from the previous 1.5% to 3.3%. If such a forecast comes true or even higher values are posted, the Pound is likely to strengthen against the greenback.
The main event of the day will most likely be BoE Governor Mark Carney’s testimony before the Parliament’s Treasury Committee. The Governor and several other members of the Monetary Policy Committee will testify on the economic outlook and inflation and probably the thorny issue of market rigging will be in focus. Volatility and irregular movement are possible during the testimony so caution is recommended.