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Latin America EM Express: Brazil's inflation cools to a 6-month low in May

 

 

 

 

Brazil's Mid Month Inflation growth decelerated to the slowest pace seen since November, according to data published on Wednesday. This is good news for Brazil's central bank which will be able to stop hiking the benchmark rate for now, currently at 11%, in the face of price pressures remaining under control in the last two months.

 

Brazilian CPI slowed to 0.58% in May, following a 0.78% rise seen previously, Instituto Brasileiro de Geografia e Estatistica said on Wednesday. The deceleration was attributed to an easing of increases in foodstuffs' prices. Year-on-year inflation climbed slightly to 6.31% from 6.19%. 

 

Meanwhile, Mexican Retail Sales surprised to the upside, rising by 0.8% in March, compared with the 1.3% fall in February and against consensus of a 0.2% decline. Year-on-year Retail Sales jumped 1.7%, following a 1.7% drop and against forecasts of a 1.5% decrease.

 

Technicals

 

At the moment of writing USD/BRL was down 0.14% at 2.2075. 

 

On Tuesday the USD/BRL daily FXStreet Trend Index was strongly bearish, with the OB/OS Index neutral. RSI was at 45 at the last close, and has slid to 40 so far today. Daily 2-StDev Volatility Bandwidth was shrinking at 97 pips, with ATR (14) shrinking at 183 pips. The 1D 200 SMA was at 2.3019, while the 1D 20 EMA was at 2.2249.

 

 

 

 


 

 

May 21, 2014

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Latin America EM Express: Brazil's inflation cools to a 6-month low in May

 

 

 

 

Brazil's Mid Month Inflation growth decelerated to the slowest pace seen since November, according to data published on Wednesday. This is good news for Brazil's central bank which will be able to stop hiking the benchmark rate for now, currently at 11%, in the face of price pressures remaining under control in the last two months.

 

Brazilian CPI slowed to 0.58% in May, following a 0.78% rise seen previously, Instituto Brasileiro de Geografia e Estatistica said on Wednesday. The deceleration was attributed to an easing of increases in foodstuffs' prices. Year-on-year inflation climbed slightly to 6.31% from 6.19%. 

 

Meanwhile, Mexican Retail Sales surprised to the upside, rising by 0.8% in March, compared with the 1.3% fall in February and against consensus of a 0.2% decline. Year-on-year Retail Sales jumped 1.7%, following a 1.7% drop and against forecasts of a 1.5% decrease.

 

Technicals

 

At the moment of writing USD/BRL was down 0.14% at 2.2075. 

 

On Tuesday the USD/BRL daily FXStreet Trend Index was strongly bearish, with the OB/OS Index neutral. RSI was at 45 at the last close, and has slid to 40 so far today. Daily 2-StDev Volatility Bandwidth was shrinking at 97 pips, with ATR (14) shrinking at 183 pips. The 1D 200 SMA was at 2.3019, while the 1D 20 EMA was at 2.2249.

 

 

 

 


 

 

May 21, 2014

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EUR/JPY bounces from 14-week lows

 

 

 

 

FXStreet (Córdoba) - The EUR/JPY slipped further before Wall Street opening and bottomed at 138.13 reaching the lowest price since February 6. Afterwards rebounded as the Yen pulled back across the board and managed to rise back above 138.50, trimming losses. 

 

Currently the pair trades at 138.66, down 0.15% from today’s opening price. The Euro is headed toward the lowest daily close since early February and has been able to rise only in two days out of the last two weeks. 

 

EUR/JPY technical outlook

 

The bias continues to point toward the downside particularly after consolidating below 140.00. Some technical indicators show oversold conditions but so far no major signs of a bullish correction has emerged. 

 

To the downside support levels might lie between 138.00 and 138.15 and below here at 137.50 (January 31 low). To the upside, immediate resistance lies at 138.70 (American session high) and then 139.40.

 

 

 

 


 

 

May 21, 2014

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USD/CAD looking firmer - TD Securities

 

 

 

 

FXStreet (Guatemala) - Shaun Osbourne, Chief FX Strategist at TD Securities suggested that the USD/CAD is tracking a slightly firmer profile.

 

Key Quotes

 

"USD/CAD is tracking a slightly firmer profile, with the USD maintaining gains above short-term technical resistance in the upper 1.08s seen over the past 24 hours. USD/CAD may not be inclined to move too far today, with key domestic data out later in the week but cross flows may have a pull on the market to some degree. For example, CAD/JPY weakness looks poised to extend back towards the 91 area we think, and may help boost USD/CAD to some degree."

 

"Generally, we think USD/CAD is in a better technical place after last week's consolidation. The lack of downside follow-through interest below the mid/upper 1.08s suggests to us that, from a technical perspective at least, the bear pressure on the USD is moderating at the moment. Gains above trend resistance off the March peak imply a firmer technical trend may be developing at the very least."

 

"More broadly, the topside break out from the narrowing consolidation range (bull wedge pattern) that has been developing over the past few months is inherently bullish and signals that the broader USD bull trend is trying to get back on track."

 

 

 

 


 

 

May 21, 2014

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USD/CHF is disillusioned at 0.8950 resistance

 

 

 

 

FXStreet (Moscow) - USD/CHF plunged from the resistance level of 0.8950 to its current lows of 0.8928

 

PMI to digest

 

The yesterday’s weakness of the euro gave the pair another reason to rise, and proved the still strong correlation between the EUR and CHF moves. Today, the pair may get some more catalysts to move on, as the EMU data is scheduled for release. The market is closely watching any new evidence of fragile recovery in euro zone, thus, any indication of weakness in core or periphery economies may support the demand on USD/CHF with initial target at 0.8950 resistance.

 

What are today’s key USD/CHF levels?

 

Today's central pivot point can be found at 0.8932 with support below at 0.890978, 0.8862 and 0.8827, with resistance above at 0.8967, 0.9002, and 0.9037. Hourly Moving Averages are bullish, with the 200SMA at 0.8905 and the daily 20EMA bullish at 0.8867. Hourly RSI is bullish at 56.

 

 

 

 


 

 

May 22, 2014

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USD/JPY a drop to 100.76 is not ruled out - UOB

 

 

 


FXStreet (Barcelona) - The Market Strategy Team at UOB Group does not discard another bearish attempt to the key area of 100.75.

 

Key Quotes

 

"The low of 100.81 low yesterday was just a few pips shy of our 100.75 target. While the mid-term outlook still appears to be bearish, the short-term downward momentum has waned considerably with the strong rally from the low".

 

"Expect choppy short-term trading in the next 1-2 days but as long as the key resistant at 102.10 is not taken out, we are not ruling out another stab lower towards 100.75".

 

 

 

 


 

 

May 22, 2014

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EUR/USD: Downtrend remains intact - UBS

 

 

 

FXStreet (Córdoba) - The UBS analyst team notes that the downtrend in EUR/USD remains intact, with worries about the European elections next weekend weighing on the currency.

 

Key Quotes

 

"The Eurozone current account fell further, confirming our view that the stabilization in Spain, Italy and other peripheral countries brings stronger import demand and reduces the support for the euro". 

 

"The fall of EUR/USD during the Wednesday trading session was however more driven by worries about the European elections next weekend and other soft factors. Nevertheless, it is a nice confirmation that the downtrend in EUR/USD remains intact".

 

 

 


 

 

May 22, 2014

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GBP/JPY hovering around 171.50

 

 

 

FXStreet (Córdoba) - The GBP/JPY is consolidating above 171.00 after soaring on Wednesday and still holds some bullish momentum. During the Asian session the pair reached a fresh weekly high at 171.86, extending the gains extending the rally that started yesterday at 169.75. 

 

On European hours the Pound lost momentum across the board pushing the GBP/JPY to the downside. Price found support at 171.20 and bounced to the upside. Currently is testing levels above 171.50, attempting to approach daily highs 

 

GBP/JPY range-bound

 

On a wider perspective price continues to move in a range, with a slightly upside bias but facing strong resistance around 173.50; and below here at 172.00. To the downside, price has been rejected from levels under 170.00. The support to the current range lies at 169.40 and then 167.70

 

 

 


 

 

May 22, 2014

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CBoT cut its refi rate - BTMU

 

 

 

FXStreet (Barcelona) - Lee Hardman, FX Analyst at the Bank of Tokyo Mitsubishi UFJ, observed the CBoT is reversing its last emergency rate hike.

 

Key Quotes

 

"The Central Bank of Turkey even judged yesterday that it now has some scope to begin reversing the aggressive emergency monetary tightening which was delivered at the end of January. The CBoT’s actions proved successful at helping to stabilize the lira which has since retraced most of its sharp sell off which was recorded between December 2013 and January 2014."

 

"The CBoT decided yesterday to lower their benchmark repurchase rate by 0.50 point to 9.50% citing reduced uncertainty and a decline in Turkey’s risk premium as the main justification for the move. The CBoT also stated that it will maintain a tight monetary policy stance until there is a significant improvement in the inflation outlook."

 

"Inflation is soon expected to peak although it remained elevated at 9.4% in April, and is now expected by the CBoT to be at 7.6% by the end of 2014. With the real policy rate adjusted for inflation only just in positive territory now further CBoT monetary easing would leave the lira more exposed if financial market conditions were to become more volatile again. However, current low volatility conditions still remain supportive for carry currencies like the lira in the near-term."

 

 

 


 

 

May 23, 2014

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Canada: CPI (Apr) rose 2.0% YoY

 

 

FXStreet (Edinburgh) -Canadian consumer prices rose 2.0% on a year to April and 0.3% inter-month, matching expectations. The Bank of Canada Core CPI rose 1.4% over the last twelve months and 0.2% MoM.

 

 

 


 

 

May 23, 2014

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GBP/USD steadies as UK heads into a long weekend

 

 

FXStreet (Córdoba) - The GBP/USD entered a consolidation phase during the New York session and has spent the last hours trading within a narrow range.

 

The GBP/USD dropped roughly half a cent and pulled back toward the 1.6825 area after failing to overcome 1.6875 during the European trade. No UK data was released today and with new home sales as the highlight of the US calendar until Tuesday, the Cable has been left searching for catalysts ahead of the long weekends in UK and US. 

 

At time of writing, the GBP/USD is trading at the 1.6840 area, 0.16% below its opening price, but still on track to close the week higher after receiving strong boost on the back of much better than expected UK retail sales Wednesday.

 

GBP/USD technical outlook

 

Valeria Bednarik, chief analyst at FXStreet notes that the technical picture is bearish according to short-term charts. “Below 1.6770 the pair has a pretty clear path down to 1.6730 past week low, but further losses are not yet likely”.

 

Bednarik locates next support levels at 1.6810, 1.6770 and 1.6730, while she sees resistances at 1.6885, 1.6920 and 1.6960.

 

 

 


 

 

May 23, 2014

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What would a negative deposit rate achieve? - Rabobank

 

 

FXStreet (Guatemala) - Analysts at Rabobank explained that given that there are still imbalances in the way liquidity is distributed across the banking system in the eurozone, a negative deposit rate may speed up the process of defragmentation. 

 

“Net policy lending by the Eurosystem to banks in Spain and Italy is still significant, whereas it is negative in some core member states, such as Germany, the Netherlands and Austria, where deposits at the central bank outstrip their borrowings from the ECB”. 

 

“Germany and Luxembourg are also the main counterparts in terms of having net Target-2 claims”.

 

“We believe it is quite unlikely that core banks will suddenly start lending more to banks in the periphery should the ECB introduce a small negative deposit rate, but we would envision downward pressure on interbank deposit rates and short-term instruments such as T-bills from the highest rated member states, as banks with a large liquidity surplus seek alternatives to paying for their excess reserves”. 

 

Moreover, global banks, which have access to overnight facilities at other central banks that still pay for excess liquidity, may be incentivized to enter cross currency swaps and put their excess reserves at the Federal Reserve or Bank of England, for example. Therefore, at the margin, we believe a negative deposit rate could also put further downward pressure on the euro exchange rate – which of course does appear to be one of the aims of such a policy measure (although the ECB wouldn’t explicitly admit so)”.

 

 

 


 

 

May 24, 2014

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USD/JPy gains to remain capped - TDS

 

 

FXStreet (Guatemala) - Strategists at tD Securities explained that they look for USD/JPY gains to remain capped at or near the cloud resistance base (currently 102.44) from here.

 

"USD/JPY’s decline stalled around the 200-day MA and the 2014 low just below 101 this week; the large “doji” candle that price action developed mid-week around these technically sensitive support points will allow for a modest rebound in the USD in the near-term but we do not (yet, at least) have any conviction that the recovery in the USD is sustainable". 

 

"Underlying momentum indicators are still negatively aligned on the longer-term studies and the USD’s overall position on the daily cloud chart remains negative". 

 

We look for USD/JPY gains to remain capped at or near the cloud resistance base (currently 102.44) from here. Only a sustained push higher through the mid/upper 102s would imply that there is more recovery potential at the moment.

 

 

 


 

 

May 24, 2014

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Lower Canada relative productivity linked with CAD upside – BTMU

 

 

FXStreet (Guatemala) - Strategists at Bank of America Merrill Lynch explained that the productivity growth has long been a concern in Canada, where it has been running lower than that of the US. 

 

Key Quotes:

 

“The differential has actually widened substantially since the end of the tech boom”. 

 

“From an FX perspective, generally such a negative productivity differential implies longer-term currency weakness”.

 

“However, the relatively low productivity growth in Canada has been consistent with a stronger CAD (see the Chart of the day, which shows one reduced-form illustration of the link between USD/CAD changes and relative Canadian productivity), despite the usual relationship between weaker productivity and a weaker currency over the longer-term”. 

 

“The persistent relative under performance of Canadian productivity relative to that in the US is consistent with our own longer-term expectations that broader macro conditions should lead to some further Canadian dollar weakness this year, but with some resumption of strength afterward”.

 

 

 


 

 

May 24, 2014

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EUR/USD edges higher, eyes on 1.3650

 

 

FXStreet (Edinburgh) - The single currency remains buoyant on Monday, now lifting the EUR/USD to post fresh intraday highs around 1.3645/50.

 

EUR/USD in 2-day highs

 

The pair is partially trimming the recent sharp pullback to the vicinity of 1.3600 the figure, managing to recover the mid-1.3600s. Next of note in the euro area will be the M3 Money Supply figures due on Wednesday ahead of confidence/sentiment gauges on Thursday. However, the main scenario remains unchanged: market participants continue to assess the potential easing measures by the ECB, as we get closer to the June 5th meeting. “Despite oversold conditions, the EUR down-move still appears incomplete. However, waning downward momentum suggests that a sustained break below 1.3600 is unlikely for now. Only a move above 1.3655 will indicate that an interim low is place”, observed Que Ser Leang, Market Strategist at UOB Group.

 

EUR/USD key levels

 

As of writing the pair is up 0.04% at 1.3635 and a surpass of 1.3658 (high May 23) would open the door to 1.3688 (high May 22) and finally 1.3723 (high May 21). On the flip side, the initial support aligns at 1.3616 (low May 23) followed by 1.3585 (low Feb.13) ahead of 1.3563 (low Feb.12).

 

 

 


 

 

May 26, 2014

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GBP/USD deflates to 1.6830

 

 

FXStreet (Edinburgh) - The sterling is following the market mood on Monday, with the GBP/USD trading in a narrow range around 1.6830.

 

GBP/USD extends the correction

 

The pair seems to have found decent support near 1.6800 the figure, coming down from last week’s tops above the 1.6900 handle. Looking forward, it will be a light week in terms of data releases in the UK economy: BBA Mortgage Approvals (Tuesday), Nationwide Prices (Wednesday) and the Gfk Consumer Confidence survey (Friday). In the view of Jane Foley, Senior FX Strategist at Rabobank, “The fact that sterling retains its place at the best performing developed world currency over the past 12 months suggests there is a lot of good news priced-in. Long positions and the tendency for the market to allow itself to be carried away suggest that the pound is likely to be subject to bouts of profit-taking in the months ahead”.

 

GBP/USD levels to consider

 

As of writing the pair is up 0.03% at 1..6837 with the immediate resistance at 1.6875 (high May 23) ahead of 1.6917 (high May 22) and finally 1.6922 (high May 21). On the flip side, a breakdown of 1.6813(low May 23) would expose 1.6802 (low May 20) and then 1.6784 (low May 16).

 

 

 


 

 

May 26, 2014

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EMEA EM Express: Ukrainian stocks soar on succesful presidential election

 

 

FXStreet (Łódź) - As widely expected, billionaire chocolate tycoon Petro Poroshenko won a decisive victory in the Ukrainian presidential election, with former PM Yulia Tymoshenko finishing on a distant second position. 

 

After the release of exit polls Poroshenko pledget to resolve the conflict in eastern Ukraine as soon as possible and announced that his first trip would be to the regions overcome by unrest, including the cities of Luhansk and Donetsk, where pro-Russian separatists took control of governemnt buildings and many roads.. In the 1 million city of Donetsk nobody was allowed to vote and in Luhannsk most of the polling stations were closed. 

 

Russia's Foreign Minister Sergei Lavrov also commmented on the Ukrainian vote, saying that Moscow was ready to hold talks with Poroshenko, but called for toning down the military operation against the separatists in the eastern part of the country. 

 

"Taking into account the expression of will that has taken place, which we respect, we will be prepared to establish pragmatic, equitable dialogue on the existing foundation - by which I mean the fulfillment of all existing agreements, including in trade and the gas sector," Lavrov assured. 

 

Poroshenko's victory was a positive development for both the Ukrainian and the Russian bond markets, where yeilds were seen dropping.

 

Russia’s Micex Index climbed by 1.2% to 1,455.59 while the Ukrainian Equities Index soared 4.9% to 1,233.73, the most worldwide. It was the highest level recorded by the index in two years. 

 

Economic data

 

The Polish Central Statistical Office informed on Monday that on a monthly basis Unemployment has decreased to 13% in April from 13.5% recorded in March, slightly missing expectations of a decline to 12.9%.

 

Polish annual Retail Sales grew 8.4% in April, up from the 3.1% increase the previous month and below forecasts of +9.1%. 

 

Turkish Foreign Arrivals jumped to 8.2% in April, from 0.6% in March, according to data published by TurkStat. 

 

Technicals

 

The Ukrainian hryvnia was up 0.3% at 11.915 against the greenback on Monday.

 

On Friday, ahead of the elections, the USD/UAH daily FXStreet Trend Index was strongly bullish, with the OB/OS Index neutral. RSI was at 56 at the last close.

 

The Russian ruble was little changed against the central bank’s target dollar-euro basket at 39.7695, as well as against the dollar, at 34.17. It fell against the euro by 0.1% to 46.6355. 

 

On Friday the USD/RUB daily FXStreet Trend Index was slightly bearish, with the OB/OS Index oversold. RSI was at 26 at the last close, and has climbed to 59 so far today. Daily 2-StDev Volatility Bandwidth was expanding at 5355 pips, with ATR (14) shri

 

 

 


 

 

May 26, 2014

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Latin America EM Express: Zuluaga wins the first round of the Colombian presidential election

 

 

FXStreet (Łódź) - Colombia held presidential elections on Sunday and exit polls suggest that Former Finance Minister Oscar Ivan Zuluaga has won in the first round with a 29.3% support, which is a blow for incumbent Juan Manuel Santos who received only a 25.7% backing. The runoff election will take place on June 15.

 

Both rivals for the post have similar policies, although Zuluaga calls for adopting a tougher stance against the Revolutionary Armed Forces of Colombia (FARC). In case of his victory the ongoing peace talks could be broken off. 

 

Economic data

 

On Friday Brazil released Current Account data which showed a widening to a $ -8.29B deficit in April from $ -6.25B in March, above expectations of a $ -6.70B result. Foreign Direct Investment increased to $5.23B from $5.00B, below forecasts of $5.40B. 

 

Argentina's annual preliminary Industrial Production dropped 4% in April, up from the 5.9% decrease in March and beating expectations of a 6.1% fall.

 

Colombia's Trade Balance numbers revealed that the $-505.6M deficit seen in March narrowed to $-276.2M in April 

 

On Monday Mexican flash Trade Balance data showed that the $1.027B surplus recorded in March narrowed to $0.510B in April, against consensus of a shift to a $-0.758B deficit. 

 

Technicals

 

The Colombian peso was little changed at 1,909.76 against the dollar on Monday.

 

The Brazilian real on the other hand was boosted by the successful Ukrainian election and increased rose a three week low on Monday, strengthening by 0.1% 2.2217 against the greenback.

 

On Friday the USD/BRL daily FXStreet Trend Index was slightly bullish and the OB/OS Index was neutral. RSI stood at 47 at the last close, and has slid to 46 so far today. Daily 2-StDev Volatility Bandwidth was expanding at 98 pips, with ATR (14) shrinking at 161 pips. The 1D 200 SMA was at 2.2999, while the 1D 20 EMA was at 2.2228.

 

 

 


 

 

May 26, 2014

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ECB's Mersch: All three rates could be cut next week

 

 

 

FXStreet (Łódź) - Speaking on panel in Tokyo on Wednesday ECB Executive Board member Yves Mersch signaled that the ECB was comfortable with adopting a combination of conventional as well as unconventional measures at the upcoming meeting on June 5. 

 

The ECB policymaker suggested that if the Governing Council decided to cut rates they would most probably affect all three rates: the main refi rate, the deposit as well as the marginal lending facility. 

 

He said that the exchange rate plays an important role as far as inflation is concerned, but that the ECB didn't have an exchange rate objective.

 

 


 

 

May 28, 2014

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EUR/USD warming up for 1.3600?

 

 

 

FXStreet (Edinburgh) - The shared currency is extending its intraday decline on Wednesday, with the EUR/USD putting to the test the key support at 1.3600. 

 

EUR/USD in multi-week lows

 

The pair is losing ground for the fourth consecutive week after hitting ytd tops just below the 1.4000 handle, drifting back to levels last seen in early February near the critical 1.3600 support. The demand for the EUR remains subdued amidst speculations of further easing by the ECB in its next meeting on June 5th. “EUR dipped overnight to retest the recent low at 1.3615. While the undertone is negative, the rebound from the low has resulted in a mixed outlook for today. Expect 1.3670/75 to limit any further recovery but a sustained down-move is likely only upon a clear break below 1.3610/15”, noted Quek Ser Leang, Market Strategist at UOB Group.

 

EUR/USD relevant levels

 

As of writing the pair is losing 0.16% at 1.3612 with the next support at 1.3585 (low Feb.13) ahead of 1.3563 (low Feb.12) and finally 1.3552 9low Feb.7). On the upside, a break above 1.3638 (high May 28) would open the door to 1.3669 (high May 27) and then 1.3672 (Tenkan Sen).

 

 


 

 

May 28, 2014

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