The FOMC remained on hold at +2.5% as was widely expected and maintained a clear dovish tone in the accompanying statement. The highlights of the accompanying statement included a alteration from previously intended “gradual rate hikes” towards being “patient” on future moves. On the flip side the bank stated that it will continue to unwind its balance sheet program. In the following press conference, Fed Chair Jerome Powell acknowledged the growing risks in the global economy as China and Europe’s growth slows down. Also the Fed Chair noted the effect of the US government shutdown and implied a weakening US outlook. The USD weakened on the release and throughout the Asian session and the implications of the Fed switching to a more neutral stance regarding rate hikes could imply a more bearish outlook for the greenback. EUR/USD rallied yesterday breaking consecutively all of our resistance lines, landing just above the 1.1495 (S1) resistance line (now turned to support). We could see the pair weakening today as a number of financial releases could weaken the common currency. Should the pair come under the selling interest of the market, we could see the pair breaking the 1.1495 (S1) support line and aim for the 1.1460 (S2) support level. Should on the other hand the pair find fresh buying orders along its path, we could see it breaking the 1.1525 (R1) resistance line.

GBP stabilizes, as UK seeks new Brexit deal

GBP corrected somewhat higher yesterday after the initial shock of UK parliament’s vote and stabilised. Analysts point out that investors may still expect that the UK government would be able to avoid a hard Brexit. Never the less, the EU’s negative stance to any change in the Irish backstop in contrast to Theresa May’s goals. On other news the renewed uncertainty has also caused the market to reduce expectations of a possible rate hike by the BoE in 2019. We see the case for the pound to remain under pressure as Brexit clouds the UK outlook. Cable maintained a rather sideways movement yesterday testing the 1.3070 (S1) support line and getting a lift from FOMC’s interest rate decision yesterday. We could see the pair remaining under pressure in the next two days, however please note that the pair could prove sensitive to any Brexit headlines as well as any financial releases (for example UK’s manufacturing PMI for January or the US employment report for January). Should the bulls dictate the pair’s direction, we could see cable breaking the 1.3175 (R1) resistance line and aim for the 1.3280 (R2) resistance level. Should the bears take over, we could see the pair breaking the 1.3070 (S1) support line and aim for the 1.2960 (S2) support barrier.

Today’s other economic highlights

In today’s European session, we get from Germany the retail sales growth rate for December and the unemployment data for January, from France the preliminary CPI (EU Normalised) for January and from Eurozone the preliminary GDP for Q4 and unemployment rate for January. In the American session, we get the US Core PCE price index growth rate and the personal consumption growth rate, both for December, while from Canada, we get the GDP growth rate for November. As for speakers, ECB’s Yves Mersch and Benoit Coeure as well as Germany’s BuBa president Jens Weidmann speak.

GBP/USD H4

• Support: 1.3070 (S1), 1.2960 (S2), 1.2830 (S3)
•Resistance: 1.3175 (R1), 1.3280 (R2), 1.3365 (R3)

EUR/USD H4

• Support: 1.1495 (S1), 1.1460 (S2), 1.1425 (S3)
•Resistance: 1.1525 (R1), 1.1560 (R2), 1.1600 (R3)