Markets Have Been Shaken By BOJ Surprise

Dear Traders,

Investors’ risk appetite has strongly increased leading to a sharp increase in volatility. The high volatility was exacerbated this morning after the Bank of Japan unexpectedly adopted negative interest rates, sending the yen sharply lower and the U.S. dollar higher in return. The market responded with a dramatic move due to the fact that only a few economists expected that the BoJ would expand its already-record stimulus. The greenback appreciated against its major peers as a result. The euro came under selling pressure but quickly recovered its losses.

EUR/USD

Traders should focus on a break below 1.09 and further 1.0870. Once the 1.0870 is significantly breached we expect the euro to decline toward 1.0820. On the topside, the 1.0970-level will be in focus. If the euro breaks above 1.0975, we may see an upward extension until 1.10 and 1.1045.

Chart_EUR_USD_Hourly_snapshot29.1.16

The British pound traded in a 160-pip trading range Thursday, rising from its support level near 1.4240 towards next resistance levels at 1.44 and 1.4470. The upward movement was accompanied by volatile swings which resulted in a nice profit for sterling bulls at the end of the day.

GBP/USD

Still room for further gains? We see sterling trading within a current upward channel ranging from 1.4440 to 1.4285. Based on that channel, GBP may extend its gains towards 1.4440 or even the next resistance at 1.4470. Bearish movements, however, could be limited until 1.4285 and 1.4240.

Chart_GBP_USD_4Hours_snapshot29.1.16

 

Given the rise in volatility traders should pay attention to important data releases as currency pairs may react strongly to any surprises.

Important data today:

10:00 EUR Eurozone Consumer Price Index

13:30 USA Gross Domestic Product

(Timezone GMT)

We wish you profitable trades and a wonderful weekend.

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Fed May Shift Towards Slower Pace Of Interest-Rate Hikes

Dear Traders,

In the end the market reaction to the FOMC statement was muted and has left much do be desired for currency traders. While the statement was a communications challenge for the Federal Reserve it came in as balanced as possible. Particularly noteworthy is the shift into a wait-and-see mode, which signals a less-hawkish forward guidance. While an interest rate hike at the next FOMC meeting in March is less likely Fed policy makers have left the door open for a March. Officials said that rate increases will depend on how the U.S. economy performs and said that they were “closely monitoring global and financial developments”.

In a nutshell, the Fed may be inclined to move forward at a slower pace of interest-rate hikes but the main focus remains on labor market and inflation data.

The EUR/USD did not show much movement yesterday, trading firmly around the 1.09-mark. For the time being, we expect swings to be muted unless the euro breaks above 1.0960 or vice versa, breaks below 1.08 and 1.0770. Upwards movements could be capped at 1.0925 and 1.0955 while downward swings may be limited until 1.0870 and 1.0820 in the short-term.

The German Consumer Price Index is scheduled for release at 13:00 GMT, a report which could affect the price action in the EUR/USD.

The British pound continued to trade lower against the greenback. We generally favor a bearish stance in GBP/USD and our focus is on the 1.42-barrier. A renewed test of that support level may reinvigorate fresh bearish momentum towards 1.4170, 1.4150 and 1.4120. Current resistance levels are seen at 1.4285, 1.4308 and 1.4340.

U.K. GDP numbers are due for release at 9:30 GMT and if GDP is lower than expected, sterling could easily slide below 1.42.

Important U.S. data are scheduled for release at 13:30 GMT with U.S. Durable Goods Orders, followed by Pending Home Sales at 15:00 GMT.

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GBP/USD: Further Weakness Ahead? Focus On A Break Of 1.42

Dear Traders,

Not much has changed since yesterday and trading was relatively quiet. The EUR/USD traded slightly higher against the U.S. dollar despite a weaker Ifo report. Neither the fact that it was the lowest reading in almost one year, nor cautious comments from Mario Draghi, who is trying to convince investors that the ECB is willing to act if needed, could weaken the euro. On the contrary, the common currency rose above 1.0845 and tested the next resistance level at 1.0860. If the euro is able to break above 1.0865/75 we will shift our focus to the 1.09-level again. Ahead of the FOMC statement on Wednesday, we expect the EUR/USD to remain within its current range between 1.0940/80 and 1.0770/15.

Despite the low level of volatility our short-entry in the GBP/USD turned out to be somewhat unfortunate and any further bearish momentum was blocked by the recent support level at 1.4230. Sterling traders should now pay attention to a break of 1.42. If GBP falls significantly below that level, we could see the pair sliding towards lower levels at 1.4155, 1.4130 and even 1.41.

Bank of England governor Mark Carney will testify to lawmakers on financial stability today at 10:45 GMT. Renewed concerns about a potential Brexit and the U.K. outlook may increase the pressure on the British pound.

The most important piece of U.S. data on today’s calendar will be Consumer Confidence, due for release at 15:00 GMT, which may have a short-term impact on the USD.

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Will FOMC Statement Pose A Risk To Dollar Bulls?

Dear Traders,

The biggest story Friday was the sharp rise in the GBP/USD. After hitting a fresh five-year low at 1.4079 on Thursday, the currency pair rallied towards 1.4365 despite Friday’s weaker-than expected retail sales report. The rise can be attributed to the result of profit-taking after the recent linear decline in the British pound. The cable now faces the 1.4250/30 support-area once again but as long as the pair remains trading above that zone we expect some possible upward swings which may occur in the near-term (see technical analysis below).

The most important piece of U.K. economic data will be Gross Domestic Product, scheduled for release on Thursday and if data disappoints to the downside, sterling could be vulnerable to further losses again. On Tuesday, Bank of England Governor Mark Carney appears in Parliament to speak on financial-stability risks and a major topic could be the U.K. referendum on its membership in the EU and a potential “Brexit“.

The EUR/USD trended slightly lower, moving around the 1.08 support level. For the time being, we anticipate the 1.0770-level to be the next support before a renewed downswing toward 1.0730/15. On the upper side, we see current resistance-levels at 1.0835 and 1.0860.

The most important piece of Eurozone data this week will be the German IFO report, due for release at 9:00 GMT today. If IFO numbers fall short of expectations, the euro could tumble toward lower targets. Furthermore, German Consumer Prices are scheduled for release on Thursday.

All eyes will be on the Federal Reserve’s monetary policy meeting on Wednesday. While the central bank is not expected to alter its monetary policy and there will be no press conference, the statement could fail to add further strength to the U.S. dollar. Rather, the risk for the USD is to the downside, in case the FOMC statement turns out to be more dovish, suggesting a rate hike in March is less likely.

Further important U.S. economic reports are due for release with Consumer Confidence (Tuesday), Durable Goods Orders (Thursday) and U.S. Gross Domestic Product (Friday).

GBP/USD

Looking at the 4-hour chart, we see that there could be some upside room after a break of 1.4365. A next bullish target could be at 1.4420/45 with a possible extension until 1.4470. However a current support-zone is seen at 1.4250/30 and if the cable falls again below that level, we expect bearish momentum to accelerate towards 1.4170 and 1.4130.

Chart_GBP_USD_4Hours_snapshot25.1.16

 

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Roller Coaster Ride In Both EUR/USD And GBP/USD

Dear Traders,

Both EUR/USD and GBP/USD experienced a roller coaster ride yesterday and while short-traders initially achieved good profits, some of these gains were lost owing to the strong rebound. In the end, both major currency pairs ended the day more or less unchanged against the U.S. dollar.

The euro slid to a low of 1.0778 on dovish comments from ECB president Mario Draghi. While interest rates were kept unchanged, he readied the market for more stimulus at the next ECB meeting in March and traders got what they have been looking for: A strong hint that the ECB is willing to increase stimulus. Draghi said officials will review their programs in March and there are “no limits” on how far the central bank is willing to deploy additional measures within mandate. He signaled concerns about low commodity prices and their effects on inflation and said that policy makers “have to be vigilant about that”. Further clues on the inflation outlook will be published in the Quarterly Survey of Professional Forecasters, scheduled for release today at 9:00 GMT.

Draghi is scheduled to speak today at 7:45 GMT in Davos.

While a dovish ECB was enough to sent the euro in the short-term lower, it is still not enough to change the overall sentiment immediately. But at least yesterday’s statement will put pressure on the EUR/USD and traders should generally favor the downtrend. Below the important support at 1.08 the euro marked a second support at 1.0775, which needs to be broken in order to revive further bearish momentum towards 1.0730 and 1.0665.

The British pound followed the roller coaster ride and rose from its fresh 1.4079-low to 1.4249. Current resistances could be intact at 1.4250 and 1.4285/1.43, while recent support-areas are seen at 1.4155, 1.4130 and 1.4080/65.

Important U.K. economic data is scheduled for release at 9:30 GMT with the U.K.Retail Sales report. Economists are looking for a weaker report and if they are right, sterling could continue its downtrend.

From the euro zone we have the German Manufacturing and Services PMI, due at 8:30 GMT, which could have a short-lived impact on the euro.

Furthermore, U.S. Manufacturing PMI scheduled for release at 14:45 GMT and Existing Home Sales due at 15:00 could only have a small impact on the dollar.

We wish you a beautiful weekend.

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British Pound Extends Losses

Dear Traders,

The pound sterling dropped like a stone, breaking easily through $1.4230 after Bank of England governor Mark Carney said that “now is not yet the time to raise interest rates”. He highlighted global economic risks weighing on inflation and said that inflation “will likely remain very low for longer”. His comments dashed investors’ hopes for an early rate hike and sent the pound sharply lower toward its next target at 1.41.

Ahead of Carney’s speech an unexpectedly uptick in core consumer price index has driven GBP to a weekly high at 1.4340, which now marks a faraway resistance for the currency pair. We will now turn our focus to the next lower barrier at 1.41. A sustained break below that level could push sterling towards 1.4050 and 1.40, important price levels where the cable may gain some ground. However, upward movements could currently be limited until 1.42 and 1.4235.

Today we will focus on the next important economic report from U.K. which will be labor market data, due at 9:30 GMT, here in particular Average Weekly Earnings. Wages are forecast to show a decline, which could put further pressure on the currency.

The EUR/USD marked a current support at 1.0859 from where it started a relief rally toward its resistance area at 1.0985. In case of a renewed test of this resistance it should be interesting whether the euro will be able to break above 1.10, pointing towards a higher target at 1.1035. However, the current upward momentum could be deceptive ahead the European Central Bank meeting tomorrow. ECB president Mario Draghi may deliver a more dovish than-expected message to talk down the euro. Euro traders should prefer to turn their focus to a downside break of 1.0830 and 1.08 rather than an upside break of 1.0985.

We have some interesting U.S. data scheduled for release today. U.S. Consumer Prices are due at 13:30 GMT along with the release of U.S. Building Permits. If CPI figures surprise to the upside, the greenback could trade higher against its major peers. 

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GBP/USD: Bottom At 1.4235? GBP Awaits CPI And Carney’s Comments

Dear Traders,

The performance of the British pound was hampered by a short-lived upside correction, which was more limited than we had previously expected. While we anticipated the short pullback to last until at least 1.4335, the pound sterling reversed shy of 1.4325.  The currency pair is now facing its support at 1.4230 and if we see a break below that level, GBP could slide towards next lower targets at 1.42, 1.4150 and 1.4110. Short-term resistances are seen at 1.4310/25 and 1.4350.

Sterling traders will pay attention to the U.K. Consumer Price report, scheduled for release at 9:30 GMT today. While the Core CPI is forecast to hold steady, inflation data from December may show an uptick. Whatever the case, any changes in CPI could have a strong impact on the currency. Furthermore, Bank of England Governor Mark Carney is scheduled to speak on the economy at 12:00 GMT. If he sounds more dovish, GBP could extend its losses versus the U.S. dollar.

The EUR/USD traded sideways within a narrow trading range. With prices above 1.0910 the euro may head for another test of 1.0945 and further 1.0975. On the bottom side we see a current support-area ranging from 1.0870 until 1.0845. The currency pair will first need to break this area significantly in order to test next important price levels at 1.0834 and 1.0810.

The most important piece of economic data from the Eurozone will be the German ZEW Survey due at 10:00 GMT alongside the Eurozone Consumer Price Report. In case of any disappointments, the euro could be trending downwards.

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Whipsaw Performance In Both Currency Pairs

Dear Traders,

While we initially anticipated further trendsetting movements in the GBP/USD on Thursday, traders have been disappointed by the cable’s zigzag moves ranging between 1.4445 and 1.4360. In the face of GBP’s recent depreciation, the currency might have taken a little breather yesterday, which has led to false breakouts and limited movements, making it an overall non-profitable trading day. Bank of England officials kept its monetary policy unchanged and said the outlook for growth and inflation has weakened further. Thus, investors continue to hold a very bearish bias over the medium-term.

The euro, however, started the day with some profitable bullish moves towards 1.0945. That short-term rise can be attributed to speculation that further European Central Bank stimulus may be limited. On the other hand, some ECB policy makers expressed a preference for an even larger rate cut, according to an account of the Dec. 3 policy meeting, published on Thursday. The ECB next meets on January 21 and investors will be looking for new insights into the ECB’s guidance.

The U.S. dollar slightly weakened on cautious comments from Federal Reserve President James Bullard, who sounded more cautious by saying the latest decline in oil prices may delay the return of inflation to the Fed’s target of 2 percent.

All in all, it was none of our favorite trading days as the market failed to provide much consistency in the currencies performances.

Today, traders will have another opportunity to watch out for some strong movements in the U.S. dollar. U.S. Retail Sales are scheduled for release at 13:30 GMT and this report could trigger a strong reaction in the greenback.  Retail Sales are expected to show a decline in December and any surprises could affect the dollar’s performance. Last but not least, Michigan Confidence is due at 15:00 GMT.

Let’s see if we can pocket some profit on the last trading day of this week.

Have a nice weekend.

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GBP/USD: Steeper Decline Or Short Squeeze?

Dear Traders,

Today will be an important day for the British pound and sterling traders seem to be waiting in their starting blocks. The Bank of England will announce its policy decision and release the minutes of its meeting at 12:00 GMT. While the central bank is expected to keep monetary policy unchanged, traders and analysts pushed back their expectations of a BoE liftoff. The market is currently pricing in a very dovish BoE tightening cycle, not expecting the central bank to raise rates until well into 2017. These speculations are manifested in the pound’s sustained downtrend. But we have learned from past experience, that any surprises can quickly alter the market’s sentiment which is why investors were caught on the wrong foot sometimes. Some currency traders even stress the idea that sterling’s’ weakness looks considerably overdone. It is worth noting that the depreciation of the British pound should suit policy makers and could have a positive impact on inflation. Any shifts away from the central bank’s dovish monetary policy stance could trigger a strong rebound in the GBP/USD.

However, following the motto “the trend is your friend”, traders should, for the time being, prefer to sell any rallies towards lower targets.

GBP/USD

Taking a look at the weekly chart, it is tempting to focus on a steeper decline, targeting at the 1.40-barrier. But first, we will pay attention to the 1.43-level and GBP will need to break significantly below that level in order to reveal fresh bearish momentum towards the next support at 1.4230. Current resistances are seen at 1.4530, 1.46 and 1.4640.

Chart_GBP_USD_Weekly_snapshot14.1.16

The euro bounce back from its 1.08-support and started a small relief rally against the U.S. dollar. The next hurdle will be at 1.09 and it remains to be seen whether the currency pair will be able to extend gains towards 1.0940 and 1.0980. There are no major important economic reports due for release today. The German GDP report, due for release at 9:00 GMT, may have some impact on the euro. However, the euro remains to trade between 1.10 and 1.08 and as long as there is no breakout above or below these zones, traders will have to wait and focus on the current trading range.

Fed President Bullard is scheduled to speak at 13:30 GMT. At the same time, U.S. Continuing and Initial Jobless Claims are due for release.

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GBP/USD: Next Bearish Target At 1.4455?

Dear Traders,

Yesterday’s trading was dominated by a  counter-movement in both major currency pairs. The euro trended downwards, moving away from its resistance at 1.0940, but the slide came to a halt at nearly 1.0840. For the time being, we expect the euro to trade within its current 100-pip trading range between 1.0935 and 1.0840. A break above 1.0945 may push the common currency for a rise towards 1.0980. However, with no important economic data releases from the eurozone, gains in the EUR/USD could be capped at 1.10 and 1.1050. On the bottom side, we expect a next support at 1.08, provided that the euro breaks below 1.0840.

Traders should listen to comments of Federal Reserve Presidents this week. Fed’s Vice Chair Fischer speaks in Paris today at 10:30 GMT.

The British pound recovered from the 1.45-support and tested the next important price level at 1.46. In the end, the upward turned out to be short-lived and sterling gave up its gains. Today could be a busy day for sterling traders, with Industrial Production figures due at 9:30 GMT and BoE Governor Mark Carney scheduled to speak in Paris at 14:15 GMT. Investors are pessimistic with regard to a first BoE rate increase. Even though a weakening pound comes handy to the economy and inflation, BoE policymakers are unlikely to feel any pressure following the Fed in raising rates.

GBP/USD

While the trend is clear, it will hinge on economic data and BoE speak whether GBP could be vulnerable to further losses. We see a next possible halt at 1.4460/50, from where GBP may bounce back in a first attempt. On the other side, upwards moves could be limited until 1.4630 and 1.4665.

Chart_GBP_USD_4Hours_snapshot12.1.16

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