The European Central Bank (ECB) meeting is the major highlight of the day. The ECB is expected to maintain its rates unchanged, yet to hint at the future of its Quantitative Easing (QE) program. Expectations are dovish; hence traders are mainly positioned short into the meeting. If the ECB fails to meet the dovish expectations at today’s meeting, the EUR/USD could resume its rise to the critical 1.0816 / 1.0830 area (major 38.2% retracement on post-Trump slump / 50-day moving average) and step into the mid-term bullish consolidation zone.
The US dollar softened against all of its G10 counterparts in Asia. The kiwi (+0.57%) has been the leading gainer amid the Reserve Bank of New Zealand (RBNZ) Governor Wheeler hinted at no additional rate cutting in the future. Improved carry appetite sent the kiwi to a one-month high against the Aussie.
The Australian dollar has struggled with additional bad news. On top of the 0.5% quarterly contraction announced on Wednesday, the trade deficit unexpectedly widened to AU$ -1541 million from AU$ -1227 million in October, versus AU$ -610 million expected. Solid offers above 0.7500 capped the upside in AUD/USD. More resistance is eyed at 0.7445/0.7550 area. We could expect a possible pullback to 0.7475 (minor 23.6% retracement on Dec 1st to Dec 8th recovery), before 0.7455 (major 38.2% retrace).
Softer industrial data sent the GBP/USD to 1.2569 yesterday. The 200-hour moving average (1.2585) has acted as a solid support. The recovery is underway as the pair has cleared the 1.2625 level (major 38.2% retracement on Nov 28th to Dec 6th rise). Fading negative momentum on hourly basis suggests a further recovery to 1.2682 (minor 23.6% retrace), before 1.2725 (100-day moving average) and 1.2775 (weekly resistance).
The USD/JPY slipped below its 200-hour moving average (113.45) for the first time in a month. We turn neutral until a stronger signal. Intra-day support is eyed at 111.58 (minor 23.6% retracement on Nov 9th to Dec 1st rise). The EUR/JPY remains capped at the hourly Ichimoku cloud top (122.60) heading into the ECB meeting.
Gold traded ranged within $1173/$1178. Softer US dollar is supportive of a minor recovery, yet firm US yields are expected to cap the appetite pre-$1180/1182 (weekly descending channel top).
Oil is under pressure despite a stronger than expected decline in US crude inventories. The 50-hour moving average in WTI, $51.20, escorts the downside trend for a deeper correction to $50.00/49.86 (major 38.2% retracement on Nov 29th to Dec 5th rise) and $49.60 (200-hour moving average).