Daily FX Anlaysis: Carney and Draghi to set tone for GBP and EUR

Big data day tomorrow, which could definitely set the tone for some of the major pairs.

In the morning we have UK Industrial production, Manufacturing and Trade Balance; following this we also have the BoE rate decision and QE total.

Although the BoE is expected to keep the rates and QE on hold, Mark Carney, current Bank of Canada Governor - and soon to be Bank of England Governor - is speaking in to the UK parliamentary committee.

The key here is he is set to outline his stance and views on monetary policy for the UK. We could see Carney take a less rigorous approach to inflation targets as currently fretted over by Sir King. As per Carney's comments in Davos we may also see him highlight that QE as a tool still has further capacity as opposed to the current stance. Carney's stance on loss monetary policy until 'escape velocity' is well known and we could see additional comments supporting this.

Essentially though markets are looking for clues as to whether Carney is likely to take a slightly more accommodative approach to monetary policy which could result in leaving the door open for further QE and therefore downside to the GBP/USD.

The pound still has room to fall in my opinion and strong signs of buying through the day could be paired. The key is to wait for a good signal but a rejection of higher prices on a daily basis would put me short again.

Not only do we have Carney speaking tomorrow but we are also lucky enough to have Super Mario himself at the ECB press conference.

Draghi is likely to be quizzed this time over rates, LTRO payments and QE. We suspect although everything still remains on hold we could see some comments highlighting that the high Euro is somewhat unhelpful; watch for something along the lines of 'additional strength unwelcomed,' but at this stage they are unlikely to take any drastic action.

If we get a dip tomorrow, followed by a push higher it could be a nice entry signal for longs, therefore keep an eye out.
Given the relatively quiet week, Thursdays can often spark some interesting price action and we like the way tomorrow could be shaping up.

EUR/USD
Euro dipped today on profit taking and position squaring ahead of the ECB meeting tomorrow.
I remain Bullish on this pair and like the idea of buying dips towards the 1.34 mark if we get a nice rejection off of support.
Personal Bias: Bullish
Support: 1.3465/ 1.3400
Resistance: 1.3710 / 1.3830
My Strategy: Look for buying opportunities on a retracement and rejections off of support to the 1.34 mark. The Euro has the potential to hit the 1.3830 mark at this point and therefore I would prefer to look for buying opportunities as opposed to picking tops in this pair.




GBP/USD
Remain Bearish on this pair but have reduced exposure into the key risk events tomorrow, any moves higher I will use to add to my short position if they provide rejections of resistance towards the 1.5800 mark.
Personal Bias: Bearish
Support: 1.5680 /1.5600
Resistance: 1.5800 / 1.5880
My Strategy: Will look to add to short positions towards the 1.5800 mark, looking for a test of 2012 lows by the 1.53 level.
Close and hold above the 1.58 mark would negate my immediate bias.



AUD/USD
Now that the Aussie has finally breached previous support, it now sits at new support in the form of the 200 day moving average.
I suspect the pair could get choppy now but I remain Bearish looking for a test of the 1.0150 mark.
Personal Bias: Bearish
Support: 1.0400 / 1.0350
Resistance: 1.0450 / 1.0500
My Strategy: Look for sell signals on a failed test of the previous support level now turned resistance.


USD/JPY
Highlighted in our RTAS sentiment system that the USDJPY could have turning sentiment here. Our in house system finally closed its long positions from back in November.
I will keep my eye on this pair for any signs of a Bearish reversal, but for now I remain on the sidelines.
Personal Bias: Neutral
Support: 92.00 / 91.00
Resistance: ?????
My Strategy: Stand aside await clear signals