Is The Cable Poised For A Breakout?

Dear Traders,

Both of our major currency pairs ended the trading day virtually unchanged as there was not much consistency in the dollar’s performance Monday. The euro tested the 1.09-level on better than-expected Eurozone data. Manufacturing and Services PMI reports showed the fastest pace of economic momentum this year but this uptick was not sufficient to alter the sentiment in the EUR/USD. The euro trades on the increasing divergence in monetary policy between the U.S. and Europe and that is precisely the driver for the euro’s weakness. ECB President Mario Draghi is scheduled to speak in Berlin today at 15:30 UTC and any comments on extending the QE program beyond March could put further pressure on the euro. Before his speech the German IFO index is due for release at 8:00 UTC but this report is not expected to have a significant impact on the currency pair. Technically, we wait for a significant break above 1.0910 in order to buy euros towards 1.0950. On the downside the 1.0860-level remains in focus whereas a break below that level may drive the euro as low as 1.0830.

The pound sterling remained within a tight trading range between 1.2250 and 1.2190. We see chances of an upcoming breakout of that narrow range provided that sterling breaks above 1.2235 on the upside or respectively below 1.2190 on the downside.

chart_gbp_usd_4hours_snapshot25-10-16

Bank of England Governor Carney appears at the House of Lords economic committee today at 14:35 UTC and any comments on future monetary policy changes could have an impact on the pound.

From the U.S. we Consumer Confidence scheduled for release at 14:00 UTC, a report which could influence the dollar’s performance.

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