ECB’s interest rate decision due out today

The ECB’s interest rate decision is due out today. The majority of market participants appear to expect the bank to remain on hold, with EUR OIS currently implying a 99.88% for such a scenario to materialize. We tend to agree with the consensus that the bank may remain on hold during today’s monetary policy meeting, as such we turn our attention to the bank’s accompanying statement and the post-decision press conference. In our opinion, the better-than-expected preliminary manufacturing PMI figures for Germany, France and the Eurozone as a whole for January, could provide the bank with some leeway should ECB policymakers opt to push back on market expectations of rate cuts. Such a scenario could support the EUR, whereas should the bank’s statement appear predominantly dovish in nature, it could weigh on the EUR. The US S&P Preliminary Manufacturing and Services PMI figures for January came in better than expected during yesterday’s American session. The better-than-expected PMI figures may imply that the US economy remains resilient and appears to be expanding in both sectors. Therefore, the apparent economic resiliency from the US, appears to have provided support for the dollar. The UK’s Preliminary PMI figures for January came in better than expected, which may have provided support for the pound. In the US Equities markets, we note that Tesla (#TSLA) announced its earnings for Q4 2023, with the company’s CFO stating that “In 2024, our volume growth will be lower”, which could weigh on the company’s stock price.

GBP/USD appears to be moving in a sideways fashion, after failing to break above the 1.2760 (R1) resistance line. We maintain a sideways bias for the pair and supporting our case is the RSI indicator below our chart which currently registers a figure of 50, and our sideways moving channel which was incepted on the 14^th of December 2023. For our sideways bias to continue, we would like to see the pair remain confined between the 1.2610 (S1) support level and the 1.2760 (R1) resistance line. On the other hand, for a bullish outlook, we would like to see a clear break above the 1.2760 (R1) resistance line, with the next possible target for the bulls being the 1.2870 (R2) resistance ceiling. Lastly for a bearish outlook, we would like to see a clear break below the 1.2610 (S1) support level, with the next potential target for the bears being the 1.440 (S2) support base.

EUR/USD appears to be moving in a sideways fashion, with the pair having failed to break above the 1.0925 (R1) resistance line. We maintain a sideways bias for the pair and supporting our case is the RSI indicator below our chart which currently registers a figure of 50, implying a neutral market sentiment. For our sideways bias to continue, we would like to see the pair remain confined between the 1.0830 (S1) support level and the 1.0925 (R1) resistance line. On the other hand, for a bullish outlook, we would like to see a clear break above the 1.0925 (R1) resistance line, with the next possible target for the bulls being the 1.1000 (R2) resistance ceiling. Lastly, for a bearish outlook, we would like to see a clear break below the 1.0830 (S1) support level, with the next possible target for the bears being the 1.0745 (S2) support base.

Other highlights for the day:

Today in the European session, we note the release of Germany’s Ifo indicators for January, Norway Norgesbank’s interest rate decisions, from the UK the CBI distributive trades for January, Turkey CBT’s interest rate decision and Canada’s business barometer for January. In the American session, we note the release of the US durable goods orders growth rate for December, the weekly initial jobless claims figure and we highlight the advanced GDP rate for Q4. During tomorrow’s Asian session, we get from Japan, Tokyo’s CPI rates and the UK’s Consumer confidence figure both for January while on the monetary front, we note the release of the BoJ’s December meeting minutes.

GBP/USD H4 Chart

Support: 1.2610 (S1), 1.2440 (S2), 1.2270 (S3)

Resistance: 1.2760 (R1), 1.2870 (R2), 1.2990 (R3)

EUR/USD H4 Chart

Support: 1.0830 (S1), 1.0745 (S2), 1.0665 (S3)

Resistance: 1.0925 (R1), 1.1000 (R2), 1.1080 (R3)

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