Market participants await central bank interest rate decisions

Rate focus

During the upcoming trading week, traders and investors look to central bank interest rate decisions and key PMI manufacturing data from the eurozone economy. This week the People’s Bank of China, Bank of Canada, European Central Bank, and the Bank of Japan will all decide on interest rates. The European Central Bank interest rate decision is likely to be the main market mover this week, especially if ECB President Lagarde sounds more dovish than the market is expecting.

Aside from the rate decisions, we see the release of January PMI manufacturing data from the US economy, and a raft of economic data from the German economy. The United Kingdom economy also releases important monthly Unemployment and Wage data.

Monday 20th January, German Producer Price Index

The German Producer Price Index is released by the Statistisches Bundesamt Deutschland and is a key index that measures the change in prices received by domestic producers of commodities in all stages of processing. Changes in German Producer Prices are an indicator of commodity inflation, German PPI excludes volatile items, such as energy components and seasonal food, in order to provide a more accurate picture of price developments.

• The EURGBP pair is only bullish while trading above the 0.8510 level, key resistance is found at the 0.8580 and 0.8640 levels.
• If the EURGBP pair moves below the 0.8510 level, sellers may test towards the 0.8400  and 0.8340 levels.

Tuesday 21st January, UK Unemployment Rate

The Unemployment Rate is a figure released by the National Statistics and calculated by dividing the number of out of work individuals in the labor force, by all individuals currently in the labor force. The unemployment rate does not include part time or ‘underemployed’ individuals who actively seek full time work. Usually, unemployment is indicative of the economy’s production, workers’ earnings, private consumption, and consumer sentiment. High unemployment generally indicates that an economy is unsatisfying or has a falling gross domestic product and low unemployment may reflect an expanding economy.

• The GBPUSD pair is only bearish while trading below the 1.3190 level, key support is found at the 1.2970 and 1.2900 levels.
• If the GBPUSD pair moves above the 1.3190 level, key resistance is found at the 1.3220 and 1.3260 levels.

Wednesday 22nd January, Bank of Canada Rate Decision

The Bank of Canada Interest Rate Decision is a decision of the governing council members on where to set the nation’s interest rate. Short term interest rates are the primary factor in currency valuation, and directly affect the value of the Canadian dollar. The monetary policy statement contains the Bank’s collective perspective on the economy also ideas about future monetary policy.

• The USDCAD pair is only bearish while trading below the 1.3160 level, further losses towards 1.2900 and 1.2780 levels then remain possible.
• If the USDCAD pair trades above the 1.3160 level, buyers are likely to test the 1.3210 and 1.3260 resistance levels.

Thursday 23rd January, ECB Rate Decision

The European Central Bank’s interest rate decision is made by the ECB Governing Council on whether to either increase, decrease or maintain interest rates. The key mechanism behind the monetary policy is the control of interest rates. After the ECB Interest Rate Decision is announced, the European Central Bank holds a lengthy monthly press conference with ECB President Christine Lagarde.

• The EURUSD pair is bullish while trading above the 1.1110 level, key resistance is found at the 1.1170 and 1.1240 levels.
• If the EURUSD pair moves below the 1.1110 level, sellers may test towards the 1.1060 and 1.1000 levels.

Friday 24th January, EU Manufacturing PMI

The EU Manufacturing Purchasing Managers Index is released by Markit Economics and measures the activity level of purchasing managers in the manufacturing sector. The manufacturing PMI is an important indicator of business conditions and the overall economic condition in the eurozone because the manufacturing sector represents nearly a quarter of total GDP. A reading above 50 indicates expansion in the sector and below 50 indicates contraction.

• The EURJPY pair is only bearish while trading below the 121.50 level, key support is found at the 121.00 and 120.50 levels.
• If the EURJPY pair trades above the 121.50 level, buyers may test towards the 122.50 and 123.20 resistance levels.