Market News & Insights
31 October 2017

Month End Flows to Drive Price Action

Its month end and as usual rebalancing flows may knock major currency pairs somewhat out of their recent directional bias, if only in the short term. We are seeing some euro demand vs USD supply so EURUSD is likely going to look to press higher into the 4pm fix this afternoon. It’s similar story with GBPUSD as well, while EURGBP may find itself also facing some later afternoon demand.

The euro itself traded firmer against the USD through much of yesterday’s session as the greenback gave back some of last week’s gains to welcome in the week. EURGBP has had a look back below .8800 but some key technical levels provide support between .8730 – .8760 area and this area will be the major focus. A break below that area breaks out of the rising trend in place since 2015 and indicates we may well see further downside in EURGBP into the year end and beyond should major support break. Generally speaking yesterday’s session had an air of caution about it, suggestions in the US that tax plans would be phased in over five years did not help, while news that Trump’s former campaign manager was also arrested and faces charges of conspiracy against the US also raised some questions on risk.

Today in the European session we’ll be keeping a close eye on the Eurozone Q3 GDP and October CPI. French GDP already released this morning suggest growth in France is now at its fastest pace since 2011, while the Eurozone regional figure is expected to confirm growth at 2.3%, and at .5% through Q3. Inflation is expected to remain unchanged at 1.5% year on year but given the slide in euro last week and the general sentiment from the ECB’s Mario Draghi, the euro is likely more exposed to downside risks should these readings disappoint.

EURUSD support sits at 1.1575, while resistance up to 1.1660 still offers the first target for any rally higher. EURGBP light support at .8800 but as mentioned it will take a big push to break back below .8730, we might have to wait until Thursday BOE for that catalyst, and any rally higher in the interim will find resistance towards .8850/60.