There’s not much in the way of top-tier reports in the London session, so I’m looking at this textbook break and retest play as inflection points could hold.
Fresh Market Headlines & Economic Data:
- Australia’s headline Q4 2019 CPI up from 0.5% to 0.7% vs. 0.6% forecast
- Australia’s trimmed mean CPI steady at 0.4% as expected
- Japanese consumer confidence index unchanged at 39.1 vs. 39.6 forecast
- BOJ Summary of Opinions: ECB and Fed policymakers reviewing policy approach to avoid “Japanification”
- Asian markets bogged down by Hong Kong slide on coronavirus concerns
- Death toll on coronavirus at 132, with nearly 1,500 new cases
- OPEC could extend supply cuts if coronavirus hurts demand
Upcoming Potential Catalysts on the Forex Calendar:
- German GfK consumer confidence index at 7:00 am GMT
- German import prices at 7:00 am GMT
- U.K. Nationwide HPI at 7:00 am GMT
- Credit Suisse Economic Expectations index at 9:00 am GMT
What to Watch: EUR/GBP
The lack of major market releases in the upcoming session could allow near-term inflection points to hold among European currencies, especially with traders taking it easy ahead of the FOMC decision later in the day.
EUR/GBP is currently retesting the broken support around the .8475 area, which lines up with the 38.2% Fibonacci retracement level on the latest slide. Stochastic is already on the move down to indicate that sellers have the upper hand and could take the pair down to the swing low next.
A larger retracement could still reach the 50% Fib, which is closer to the .8500 major psychological mark.
Shorting at current levels with a stop past the 61.8% Fib could be enough to weather the average intraday volatility for EUR/GBP. Here’s MarketMilk’s volatility guide if you’re not sure on where you should put your exits: