Sterling Traders Focus On Carney’s Testimony

Dear Traders,

The U.S. dollar slumped against the euro and British pound after the U.S. services sector index unexpectedly dropped to a six-year low, bolstering speculation that the Federal Reserve will stand pat on lower interest rates. The ISM non-manufacturing index expanded at its weakest pace in six years and this decline was reason enough for dollar bulls to give up on their dollar long positions, sending the greenback’s counterparts significantly higher in return.

The euro jumped above 1.12 and currently attempts to sustainably overcome the next resistance level at 1.1250. Above 1.1270 it could head for a test of 1.13 and 1.1330. In the case of further dollar weakness we see a next crucial resistance zone around the 1.1360-level. Euro bears should however wait for prices below 1.1220 in order to sell the euro.

The pound sterling extended its gains and rose above 1.34. Whether there is still some more upside room remains to be seen and could hinge on today’s U.K. data and a testimony of Bank of England Governor Carney. The BoE governor will answer to a panel of lawmakers and questions will also center on the August Inflation report, in which officials lowered their growth forecasts by the most ever. The testimony is scheduled for 13:15 UTC today and could have a major impact on the pound as it will be scrutinized for clues about the U.K. outlook and the possibility of a further rate cut by the end of the year.

U.K. Industrial and Manufacturing production figures are scheduled for release at 8:30 UTC.

Last but not least, the Fed releases its Beige Book at 18:00 UTC which could have a minor impact on the dollar.

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