The GBP USD is posting a strong gain overnight following an upward revision in Fourth Quarter GDP.
The GBP USD is posting a strong gain overnight following an upward revision in Fourth Quarter GDP. The final GDP figure showed the economy expanded by 0.4% during the fourth quarter, up from the previous estimate of 0.3%. Economists claim upward revisions in services and construction were responsible for the increase.
Additional support was provided by an unexpected narrowing of the current account deficit. Finally, the Nationwide home price index blew out the pre-report estimate. Economists had called for an expansion of 0.4% which was exceeded by the actual number of 0.7%.
The daily chart indicates the main trend is still down but the market has formed a secondary higher bottom at 1.4797. Overnight the market is testing a key 50% level at 1.5080. Regaining this area could lead to an acceleration to the upside.
Upside momentum is slowing in the EUR USD as the buzz over the European Union/International Monetary Fund Greece bailout plan seems to be fading. Last night’s rally stopped short of completing a 50% retracement of the 1.3817 to 1.3267 range at 1.3542. This could indicate that a short-term retracement to 1.3402 may be necessary to confirm the recent bottom and to attract fresh buyers.
The mixed Euro is helping to hold the USD CHF in a tight range between a pair of retracement levels at 1.0628 to 1.0600. If the Euro weakens, then look for a short-covering rally. A stronger Euro should trigger an acceleration to the downside through the lower end of the retracement zone.
The USD JPY weakened initially overnight, but turned positive after global equity markets rallied. If U.S stock indices rally early, then look for the Japanese Yen to weaken. Overbought conditions are still limiting movement in this currency pair along with a slow down in upside momentum in U.S. stock markets.
Speculators are driving the USD CAD lower on expectations of a strong U.S. jobs report on Friday. Many traders feel that strong jobs data will also help the Canadian economy and help bring the Bank of Canada closer to raising interest rates than the Fed. Look for sellers to try to press this pair through 50% support at 1.0181. A move through this level will most likely trigger an acceleration to 1.0152.
The AUD USD continued its surge to the upside, buoyed by bullish comments from over the week-end by Reserve Bank of Australia Governor Stevens. The central bank leader said that improvements in the Australian housing market may warrant another interest rate hike in April. In addition, speculators are anticipating a bullish Retail Sales Report on Wednesday. Now that this market has crossed to the bull side of a retracement zone, look for a test of the last main top at .9251.
Greater demand for higher risk is helping to drive the NZD USD into a key 50% retracement level at .7124. A breakout over this level could trigger at test of the .618 level at .7199. A rally in U.S. equity markets today is likely to trigger a surge to the upside.