The USD dipped to 119.87 yen

Good morning from Hamburg and welcome to our latest Daily FX Report. The Pentagon is considering sending U.S. military aircraft and ships to assert freedom of navigation around growing Chinese-made artificial islands in the disputed South China Sea, a U.S. official said on Tuesday. U.S. Defense Secretary Ash Carter requested options that include sending U.S. military ships and aircraft within 12 nautical miles of reefs that China has been building up in the disputed Spratly Islands, the official said. German bond yields climbed on Tuesday on optimism that inflation may have bottomed in the euro zone, lifting demand for the euro, while volatility in global bond markets weighed on stock indexes.

However, we wish you a successful trading day!

Market Review – Fundamental Perspective

The U.S. dollar nursed modest losses against a basket of major currencies early on Wednesday, having fallen in particular against sterling which raced to a five-month high on the back of upbeat UK data. Traders said the market was also taking a more defensive stance on the greenback in case U.S. retail sales due later in the day were to disappoint. The dollar index last traded at 94.561, having shed 0.5 percent on Tuesday. The USD dipped to 119.87 yen, from Tuesday's high of 120.28. Still, it remained stuck in a 118.500-120.845 range seen since April. The euro climbed to $1.1216 from $1.1134, but was well short of retesting a two-month peak of $1.1392 set last week. The GBP was one of the best performing major currencies overnight, rallying as far as $1.5710, a high last seen in mid-December, before settling at $1.5668 early in Asia. Official data showed British industrial output grew at its fastest rate in six months in March after an unexpected bounce in oil and gas extraction, easing fears that economic growth is starting to slow. In contrast, U.S. retail sales are expected to rise a mere 0.2 percent in April, slowing from a 0.9 percent jump in March, though sales ex-autos should be better.
There is a host of other event risks due later in the day including China's industrial production and retail sales data and the Bank of England's quarterly inflation report. This means the major currencies are likely to settle into a tight range in the lead up to these reports, traders said.
In Ausralia the Australian government plans to sell around A$74 billion ($59 billion) in bonds in the fiscal year to end June 2016, up slightly from A$72 billion in 2014/15.

Daily Technical Analysis

EUR/GBP (Daily)

Since 2013 the GBP was able to appreciate until the pair reached the resistance line at 0.8034 where a sideward movement begun. During the last months we saw a sharp decline of the EUR versus the GBP. Especially over the course of the last couple months the EUR experienced a sharp decline and it remains to be seen whether the EUR will be able to rebound. According to the indicators this downward movement may last for a while since there are no clear signs for a significant trend reversal and the fundamentals of the EUR are not very promising at the moment.

Support & Resistance (Daily)