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EUR/USD holds above 1.18 ahead of inflation data

The U.S. dollar is holding above 1.18 after the eurozone services PMI figures and ahead of inflation data.

The Eurozone services PMI fell to 51.6 in January, down from 52.4 in December and from the preliminary 51.9 reading. Both services and composite readings are at 4-month lows, suggesting sustained momentum. The drag in January is largely due to flagging demand conditions, with new orders barely rising and employment also stagnating.

Consumer prices in the eurozone are expected to remain below the ECB's 2% target, which could pave the way for the central bank to leave interest rates on hold tomorrow. Cooler-than-expected inflation could fuel speculation that the ECB may need to cut rates again this year, which could send the euro lower.

Meanwhile, the US dollar is holding steady after Trump signed a bill into law that ends the two-day U.S. government shutdown, easing market fears. Dollar bulls are still celebrating the pick of Kevin Warsh as the next Federal Reserve chair, who was expected to be cautious with further rate cuts and continue to guarantee the central bank's autonomy.

Looking ahead, attention will be on the US ISM services PMI, which is expected to ease to 53.5, down from 54.4. Prices paid will also be watched closely for clues on inflation. The ADP private payroll change is also expected to rise slightly to 48k, up from 41k. Higher payrolls could help ease concerns about a labour market slowdown and support the Fed's view that the labour market is stabilising. Upbeat data could help the US dollar rise.
 

EUR/USD forecast- technical analysis

After recovering from the 200 SMA, EUR/USD rose to a multi-year high of 1.2080 before rebounding lower. The price found support at 1.1780, the falling trendline dating back to September 17.

Buyers will look to extend the recovery toward 1.1870, with 1.1820 coming into focus above here.

Support is seen at 1.1780, yesterday’s low and the falling trendline. A break below here negates the near-term uptrend and exposes the 50 SMA at 1.17 ahead of the 200 SMA at 1.16.
 

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FTSE 100 reaches a record high, boosted by oil majors and miners

The FTSE 100 has risen to a fresh record high above 10,380, driven by energy and mining stocks.

Oil majors are leading the gains, with Shell and BP trading up more than 2% as crude oil prices rally for a second straight session amid rising geopolitical tensions between the US and Iran.

Meanwhile, mining stocks are also pushing higher as gold and silver extend their recovery from Monday's lows, lifting Fresnillo by 2.5% and Endeavour by 1.7%.

Gold prices are recovering from the recent shakeout, driven by safe-haven demand.

On the data front, attention is turning to the PMI figure. The services PMI is expected to confirm the preliminary reading of 54.3, whilst the composite PMI, which is considered a good gauge of business activity, is expected to confirm 53.9. Upbeat data could support the UK index.

Attention is also turning to the Bank of England interest rate decision tomorrow, where the central bank is widely expected to leave rates unchanged. The market will be watching the vote split and the tone of this statement, as well as the press conference from Bank of England governor Andrew Beatty, for clues over the timing of the next rate cut. The market is pricing in a 25-basis-point rate reduction for April. A more dovish-sounding BoE could support UK stocks higher.
 

FTSE 100 forecast- technical analysis

The FTSE continues to trend higher, forming a series of higher highs and higher lows to a fresh record high above 10,380. The RSI supports further gains while it remains out of overbought territory.

With blue skies above, buyers will look to rise towards 10,500 as the next logical level.

Support is at 10,100. A break below here opens the door to 10,000, the rising trendline support, and the psychological level.
 

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