Daily Market Review - 1/14/2014

Technical Analysis

EUR/USD

After recent rally the Euro is consolidating. It is trading in the narrow range approximately between 1.3637 and 1.3687. In the near term analysts expect it to stick to the current pattern, so there is no particular bias. A breach of either boundary will indicate further trend in a corresponding direction.

USD/JPY

The pair continues its way down. After some rebound it continues to follow prior trend. So in the short term the outlook is bearish.

GBP/USD

The Pound is apparently recovering after recent abrupt fall. The short term bias is bullish. Support is near 1.6357. If it is not crossed, prior trend is not likely to resume.

Market Overview

Last Thursday there was an ECB meeting, but Draghi’s press conference is in focus: everyone was waiting for his comments about inflation, which’s stuck on too low levels. As a reminder, according to recent statistics inflation dropped to 0.8%, what is beneath the lower boundary of the regulator, which is 2%. Nevertheless there was good news: an abrupt growth of retail sales by 1.4% and positive statistics on overall European composite PMI.

By the way, past meeting has become the first one after Latvia joining the Euro zone. In the beginning Draghi repeated his words about inflation, which’s supposed to remain on low levels further on. Monetary policy will remain adaptive as long as it is needed. Key interest rates will also stay on current levels or even lower ones. We’ve heard that before multiple times already. So there was no surprise about that.

He also mentioned that the situation on the markets was fine, but contingencies are not ruled out, what could force the ECB to perform more actively. Among potential risks Draghi mentioned toughening of conditions on monetary markets, and also deterioration of inflation state.

As for the latter issue, Draghi refused to be more specific about potential actions of the regulator. He also marked peripheral states progress in the Euro zone, which had been achieved due to budget consolidation. At that while assessing economic recovery of the Euro zone, Draghi called it modest and fragile.

Economic Calendar