The Euro retraced higher to the 1.47 level overnight having tested below 1.46 in US hours. The economic calendar is effectively empty for most of European trading. Sterling followed the Euro’s lead, rising towards 1.8450. The lack of fundamental catalysts is likely to see price action pick up directional momentum from cross-market forces. This opens the door for knee-jerk volatility ahead of the US Durable Goods release set for late into the session.
Key Overnight Developments
• US Federal Reserve says the next policy change will see rates higher
• Euro, Pound retrace pull up from US session losses
Critical Levels
The Euro retraced higher to the 1.47 level overnight having tested below 1.46 in US hours. DailyFX Senior Currency Strategist Jamie Saettele expects the Euro to correct to at least 1.49 before downside momentum resumes. Near term support is seen at 1.4563, with resistance at 1.4752. Sterling followed the Euro’s lead, rising towards 1.8450. Support is found at 1.8307 while resistance stands at 1.8507.
Asia Session Highlights
Minutes from the last policy meeting of the US Federal Reserve’s decision-making committee revealed that policy makers see their next rate change as an increase. The markets are pricing in a quarter-point rate hike by the second quarter of next year, with a total of 75 basis points in monetary tightening on deck in the next 12 months.
Australian Construction Work metric fell -2.6% in the second quarter, vastly underperforming expectations of 1.5% growth. We noted earlier in the week that, “construction work is reasonably expected to decline as Building Approvals have fallen sharply over the first and second quarter.”
New Zealand’s Business Confidence recovered some ground in August, printing at -20.5 versus -43.2 in July. Earlier this week, we noted that the metric could improve on expectations of 150 basis points in monetary easing from the Reserve Bank of New Zealand in the next 12 months.
Euro Session: What to Expect
The economic calendar is effectively empty in the forthcoming European session. The only item on the docket is Italian Consumer Confidence, expected to tick slightly higher in August on softer oil prices. While this would be a slight improvement from last month’s record-low result, it would still put the metric uncomfortably close to the lowest in 4 years. The market is pricing in an ECB interest rate cut of 25 basis points by the second quarter of next year to check deterioration in the Euro Zone. Traders expect a total of 50 basis points in rate cuts over the next 12 months.
On balance, the lack of fundamental catalysts is likely to see price action pick up directional momentum from cross-market forces. This opens the door for knee-jerk volatility ahead of the US Durable Goods release set for late into the session.
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