U.S. Dollar Suffers Losses After Yellen Sends Dovish Message

Dear Traders,

While dollar bulls may have hoped for salvation before Yellen’s speech in New York, the chair indoctrinated the market with a dovish message and stressed the need for a cautious approach. Yellen stated detailed conditions investors need to watch for future rate hikes. These conditions contain the stabilization of commodity prices and foreign economies. Furthermore she stressed the importance of a strong dollar, which would depress inflation and exports if it appreciates further.

The most dovish line was when Yellen said that the committee “would still have considerable scope” to ease policy if needed, smashing down the latest hawkish comments from Fed officials pointing to the possibility of a rate hike in April. The Fed chair said it was appropriate to “proceed cautiously” and reiterated that the Fed is not following a pre-set course of rate hikes, but will act when conditions are right.

On the bottom line we can say that there is not much hope for the U.S. dollar to show signs of recovery in the near-term. Yellen’s dovish message diminished rate hike expectations for 2016, changing the odds in favor of a December rate hike or even later.

As expected in yesterday’s analysis, the euro headed for a test of 1.13 after breaking above 1.1260. We expect the euro to continue its bullish bias and focus on a break above 1.13 and further 1.1340. If the euro is able to climb above the February high of 1.1376 we see a next resistance at 1.1430/50 before facing the 1.15-barrier. Current supports are seen at 1.1250 and 1.1220.

The British pound responded with the most volatile upswing, jumping more than 130 pips from our long-entry. As stated in yesterday’s analysis the pound could be vulnerable to losses after peaking at 1.44/1.4430. However, a break above 1.4450 could send sterling towards 1.45. On the bottom side we expect the 1.43-level to lend a current support to the GBP/USD.

Traders should pay close attention to important economic data, such as the German CPI, scheduled for release at 12:00 GMT followed by the ADP report 15 minutes later.

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Happy Easter!

The team of MaiMarFX wish you a happy Easter!

There will be no analysis and signals on Good Friday and Easter Monday. We will be back on Tuesday, March 29.

Market May Underestimate The Fed’s Hawkish Outlook

Dear Traders,

Despite the relatively low volatility in the currency market the U.S. dollar appreciated against all other major currencies. Trading conditions in the EUR/USD were overall quiet and short-traders had to be satisfied with smaller profits. Given the low volatility environment before the Easter break we do not expect the euro to show larger movements today even though U.S. Durable Goods Orders are scheduled for release at 12:30 GMT and forecasts point to a decline in the headline figure, which may trigger short-term pullbacks in the greenback.

Unlike the euro the GBP/USD showed more volatile swings which have unfortunately resulted in two false breakouts before sterling was able to break below 1.4150. According to the saying “all good things come in threes” a third sell order would have finally hit all profit targets but as we always abide by our trading rules we missed out on that profitable downward move.

Having digested the recent terror attacks in Brussels the interest of investors is once again increasingly directed towards the Federal Reserve’s tightening cycle. Comments from Fed speakers seem to be suggesting a more hawkish outlook for interest rates than the market is currently pricing in. Fed Bank of St. Louis President James Bullard said in an interview yesterday that policy makers should consider an interest rate increase at their next meeting in April. He sees the case for a move in April if another strong jobs report confirms that the labor market is improving, underlining the unchanged economic outlook and prospects for higher inflation. Bullard stressed that the committee might “raise rates more rapidly later on” if unemployment exceeds targets. Fed officials will now “look at April and see what the data looks like” when the next meet on April 26-27.

The focus will therefore shift to March Nonfarm payrolls data due for release next Friday April 1. As a rate hike next month has not been priced in, the dollar could rally strongly if the jobs report is strong.

U.K. Retail Sales (9:30 GMT) and U.S. Durable Goods Orders (12:30 GMT) are due for release today and could trigger the last volatile swings this week.

GBP/USD: Technically we see current resistances at 1.4155 and 1.4190, whereas lower support levels could be at 1.4035 and 1.40.

EUR/USD: Amidst low volatility conditions we see current resistances at 1.1205 and 1.1235. However, lower supports are seen at 1.1135 and 1.1110.

Please note that we will not provide any signal alerts on Good Friday and Easter Monday. We will be back on Tuesday, March 29.

We wish you a very Happy Easter!

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Market Reacts On Terror Attacks In Brussels

While there was only little movement in the finical markets yesterday, the market reacted strongly to multiple explosions in Brussels today. The euro slid below 1.12 on heightened geopolitical risks. As history has shown that such reactions tend to be short-lived, we may see a pullback towards 1.1250.

The British Pound fell sharply towards its next support at 1.4250 on speculation the Brussels terror attacks will boost the motivation of voters in favor of leaving the European Union. We currently see a lower support at 1.4220.

Our thoughts are with the victims of the attacks and their families.

Low Volatility Fails To Provide Profitable Environment For Traders

Dear Traders,

There was little movement in the finical markets with the euro and British pound being uninfluenced by any hawkish Fed speak and U.S. economic data. Despite hawkish comments from Atlanta Fed President Dennis Lockhart and San Francisco President John Williams saying that recent economic data may justify additional policy tightening there was no appetite for U.S. dollars. Neither did weaker U.S. existing home sales numbers affect the greenback negatively.

Volatility has been very high during the last two weeks and many investors and day traders have locked up a good profit which is why many investors prematurely went on vacation or now refrain from taking any positions ahead of the Easter holidays. This week we expect volatility to remain moderate with traded volumes being subdued. Traders should therefore not expect too much and take profits at smaller targets.

The EUR/USD refrained from trading below the 1.1230-level but does not seem to favor the upward trend, either. A current resistance is seen at 1.1285, whereas short-traders should pay close attention to a break of the 1.1220-1.12 support. The German IFO and ZEW surveys are due for release today and forecasts point to an increased confidence. Positive numbers may lend support to the euro’s bullish bias.

Trading the GBP/USD yesterday has offered us nothing but losses. The cable marked a recent support at around 1.4360 whereas upward movements were limited until 1.4430. We see next important support levels at 1.4335 and 1.4310 which have to be breached in order to reinvigorate fresh bearish momentum. U.K. Consumer Prices are due for release at 9:30 GMT and if data provides a positive surprise we could see sterling strengthening towards 1.4450 and 1.45.

9:00 EUR German IFO Business Climate

9:30 UK Consumer Prices

10:00 EUR German ZEW Survey

13:45 USA Markit Manufacturing PMI 

(Time zone GMT)

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We wish you good trades and many pips!

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Have Euro And Cable Peaked?

Dear Traders,

The U.S. dollar has depreciated against most major currency peers after the Federal Reserve lowered expectations for the path of interest rate increases in 2016. The British pound surged to a fresh one-month high after the Bank of England left interest rates unchanged. The 1.45- level will now be crucial for the currency pair. Once GBP breaks above 1.4515 we see next resistances at 1.4545 and 1.4580. On the bottom side there could be a current support zone around the 1.43-level.

EUR/USD

The euro climbed above 1.13 and marked a new high at 1.1342. The big questions now is whether the euro will extend its gains even further but looking at the four-hour chart we see a major resistance at 1.1370/75 that could limit gains in the pair. However, in case of a break above 1.14 the next important resistance level is seen at 1.15. On the bottom side, we will turn our focus to a downside break of the 1.1275-level which could increase bearish momentum towards 1.1240 and 1.1160.

Chart_EUR_USD_4Hours_snapshot18.3.16

We had a successful week and therefore recommend traders not to reinvest their weekly profits and even consider a trading break today. So we will stay risk-averse and save our profits.

Michigan Confidence due for release at 14:00 GMT is the only important piece of U.S. data today.

We wish everyone a beautiful weekend!

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Any and all liability of the author is excluded.

Copyright © All Rights Reserved 2016 Maimar-FX.

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Dollar Weakened On Dovish Fed Statement

Dear Traders,

The FOMC statement came in slightly more dovish than markets had expected, predicting two quarter-point rate increases by the end of this year. The Federal Reserve’s stance was generally friendly and while policy makers are still looking for two rate hikes in 2016 the statement pointed to risks to global economic growth, citing the impact from global risks on the U.S. economy. The market’s reaction to the Fed’s statement suggests that expectations were somewhat more bullish, focusing on the “dot-chart” of interest-rate forecasts which finally represented only two rate hikes instead of the expected three hikes this year. With regard to the so-called “dot plot” projections which were recently of considerable importance, Yellen tried to downplay the significance of those forecasts saying that they are neither a present plan nor a commitment.

On the bottom line, the Fed maintains its hawkish monetary policy stance even if the pace of further tightening slightly slowed. The probability of a rate hike in April is currently at 15 percent whereas economists see a 42 percent-chance of a rate increase in June.

Both euro and British pound benefitted from the dovish statement and rose towards next resistance levels. The EUR/USD bounced back from the next resistance level around 1.1250 but was able to remain above 1.12. For euro traders it was yet another day of huge profits and our monthly performance increased by 100 pips to 304 pips profit. Technically we see a next hurdle at 1.1280 before heading towards a test of 1.13 but traders should bear in mind that the euro is generally not the most attractive currency and can quickly give up on its gains as soon as risk appetite declines. Euro bears should wait for a break of 1.1050 and 1.10.

The British pound climbed towards 1.43 on the back of broad-based dollar weakness. Whether the pair will be able to break above 1.43 remains to be seen. However, concerning the technical picture the bias remains bearish and we will focus on current resistance from where the pound may bounce back.

The Bank of England will announce its monetary policy statement including the rate decision today at 12:00 GMT but no changes are expected. Let us have a look at the technical outlook.

GBP/USD

Looking at the daily chart we see that the overall trend is bearish and that the recent upward move can yet be considered as correction within a downward trend. With a break above 1.4310 next resistances are seen at 1.4375 and 1.44. We expect the 1.4515- 1.4580 area to be a key resistance for the currency pair. Consequently we favor the downward trend sending sterling back towards 1.4040 and 1.40.

Chart_GBP_USD_Daily_snapshot17.3.16

Further important economic data for today:

10:00 EUR Eurozone Consumer Prices

12:00 UK Bank of England Rate Decision

12:30 USA Philly Fed Index

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Possible Pullbacks In The Greenback – Focus On U.S. Retail Sales

Dear Traders,

The U.S. dollar was supported by speculation about the trajectory of interest rates before the Fed announcement tomorrow. While a rate hike this month is very unlikely ,chances for an increase later this year have increased. The probability of a rate hike in June is now about 50 percent while analysts see a 63 percent chance of an increase by December.

The euro weakened against the greenback but was able to remain above the 1.1070-50 support area. We will focus on a break of 1.1070/50 in order to sell the pair EUR/USD towards lower levels at 1.10 and 1.0910. On the upside gains could be limited until 1.1160 and 1.1220. With only one day to go before the FOMC announcement the dollar could be vulnerable to pullbacks as U.S. Retail Sales scheduled for release at 12:30 GMT are forecast to show a marked decline in February.  

The pound sterling returned to the slippery slope, falling back below 1.43. As stated in yesterday’s analysis we see a current support at 1.4250/40. Once that support level is significantly breached to the downside we will shift our focus towards lower targets at 1.4170 and 1.4120. Current resistances are seen at 1.4310 and 1.4360.

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Copyright © All Rights Reserved 2016 Maimar-FX.

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Amazing Trading Day: Bad For The ECB But Good For Traders

Dear Traders,

What an amazing trading day! While the euro’s rise can be characterized as a bitter pill for the European Central Bank as the market’s reaction was certainly not the sort of movement the ECB may have hoped for, it was a very profitable day for traders. Before getting into the reasons for the euro rally let us look back on a very successful trading day. Short-trader’s efforts paid off after the ECB surprised the market with a drop in the benchmark to zero and we got what we have been looking for: +100 pips. Shortly after reaching our profit target the bearish movement was already exhausted and the euro started its relief rally. As if the profit would have not already been enough, just 90 minutes later our long-entry was triggered and we could watch the euro hitting our higher profit target where we have gained another 100 pips profit. The volatile swings in the EUR/USD allowed even more profit but at some point traders should not be profit-greedy and save the winnings.

The ECB delivered a full stimulus package which can be described as even more aggressive step than everyone has expected. That package included cuts in the deposit and benchmark rates, a pledge to increase the monthly QE purchases to 80 billion euros and four more multi-year lending operations (TLTROs). On top of that, the central bank lowered its GDP and inflation forecasts for 2016 and 2017.

So what was finally the reason for the euro’s later uptrend? ECB President Mario Draghi has made a little faux pas when he told reporters after the meeting that “from today’s perspective, we don’t anticipate it will be necessary to reduce rates further.” In other words there is a limit to monetary easing and the central bank has finished cutting rates further. Draghi’s comments thus considerably outweighed the impact of increased stimulus.

EUR/USD

The euro experienced an upside breakout above 1.1070. Given the high volatility and the shift towards a bullish bias the euro could possibly extend its gains towards 1.1245 and 1.13. While we see a current resistance at around 1.13, the next major resistance zone is only at 1.14-1.15. If the pair breaks above 1.1315 a next target is seen at 1.1370 before heeding towards 1.14. However, the bullish move is not a done deal and traders should also bear in mind that the Federal Reserve is likely to maintain its hawkish policy stance – a fact that could strengthen the U.S. dollar in the medium-term. The former resistance at 1.1070 could now act as a support.

Chart_EUR_USD_Daily_snapshot11.3.16

The ECB announcement also triggered volatility in other currencies such as the British pound. The pound participated in the euro’s uptrend and moved finally higher against the greenback. If the pair breaks significantly above 1.4315 we could see sterling rallying towards 1.44. Remaining below 1.43 lower targets could be at 1.4180.

We wish you a wonderful weekend!

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Bears Regained Some Control – The Calm Before The Storm?

Dear Traders,

The British pound has begun to give up some of its gains and dropped below the 1.42-level. Meanwhile, the upcoming U.K. referendum and the Brexit debate have led to new tensions between lawmakers and the Bank of England. In yesterday’s hearing, the central bank was accused of being supportive of the “remain”-campaign, overstating the positives. Uncertainties surrounding a potential Brexit-scenario are weighing on the pound which is why the odds are in favor of further bearish momentum. The closer the June-vote approaches, the more tensions we can expect.

Next lower targets are seen at 1.4155 and 1.4110. If GBP breaks significantly below 1.41 we might see a slide towards 1.4060 and 1.4020. On the upside, gains were capped at 1.4275 and it would require a sustained break above 1.43 in order to revive fresh bullish momentum.

U.K. Industrial and Manufacturing Production figures are scheduled for release at 9:30 GMT, a report which could have a short-term impact on the cable.

The euro reversed just shy of 1.1060 and ended the day lower against the greenback. Our focus now shifts towards the 1.0950-support. A break below 1.0940 could drive the euro towards lower levels at 1.0910 and 1.0870. On the topside, the resistance-zone at 1.1060/70 remains intact.

There are no important economic reports from the Eurozone scheduled for release today but going into tomorrow’s crucial ECB meeting, the euro could be vulnerable to further losses.

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We wish you good trades and many pips!

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Copyright © All Rights Reserved 2016 Maimar-FX.

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