Although
markets widely expect the ECB to leave monetary policy unchanged in March,
speculation remains elevated over the central bank dropping its “easing bias”.
This move is likely to be interpreted as an early step towards policy
normalization – ultimately supporting the Euro. While the ECB could continue
expressing optimism over the Eurozone economy, concerns over low inflation and
an unwelcome return of political risk in Europe have the ability to keep the
central bank on standby.
Investors
will direct their attention towards Mario Draghi’s press conference later in
the day for fresh insight on what could happen after September, when QE is
expected to come to an end. With political risk in Europe weighing on sentiment
and trade war fears lingering in the background, Draghi could end up
disappointing markets today.
Focusing
on the technical perspective, the EURUSD edged lower on Thursday, with prices
trading around 1.2390 as of writing. Any signs of Draghi striking a cautious
tone during his conference could weaken the Euro. A decisive breakout and daily
close above the 1.2440 level could encourage an incline higher towards 1.2500.
Alternatively, a failure for bulls to conquer 1.2440 could result in a decline
lower towards 1.2300.
Dollar attempts
to claw back losses
The
Dollar edged higher against a basket of major currencies on Thursday, as
investors attempted to look beyond the unexpected resignation of White House’s
chief economic advisor, Gary Cohn -
focusing on Friday’s NFP instead. Bulls
could be instilled with fresh inspiration to elevate the Greenback, if NFP and
wage growth figures exceed market expectations.
While
speculation of higher US interest rates may push prices higher, anxiety over a
potential trade war has the ability to limit upside gains. Dollar volatility is
likely to become a dominant market theme, as investors continue to tussle with
the conflicting fundamental themes driving the currency.
From a
technical standpoint, the Dollar Index remains at threat of extending losses if
bulls are unable to push prices back above 90.00.
Commodity
spotlight – Gold
Gold
edged slightly lower on Thursday, with prices trading towards $1324.50 as of
writing. It has certainly been a rollercoaster week for the yellow metal, as
the combination of political uncertainty and US rate hike expectations
attracted both buyers and sellers. Much attention will be directed towards
Friday’s NFP report, which could play a role in how Gold concludes this week. A
strong US jobs report may encourage bears to drag prices below $1324. From a
technical standpoint, sustained weakness below $1324 could invite a decline
towards $1310 and $1300, respectively. Alternatively, if bulls can defend $1324
then $1340 is on the cards.
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