Is Bullish Bias Set To Persist?

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Dear Traders,

Both major currency pairs experienced a volatile start to the new week and there was something for everyone. While bears initially set the tone, providing short-traders a good profit bulls won out against the bears at the end of the day, sending the euro and British pound higher against the U.S. dollar.

Consequently, the current sentiment appears to be strongly bullish but what is next? Let’s have a look at the technical side.

GBP/USD

Sterling still trades within a tertiary downward channel. After the recent rise the situation appears somewhat overbought so traders should generally expect increased bearish momentum in the near-term. If the pair is able to break significantly above 1.43, we see next resistances at 1.4360 and 1.44. Even if concerns about a potential Brexit have eased somewhat, the latest U.K. economic reports were not really encouraging. We therefore favor a bearish stance and focus on next resistances from where GBP may bounce back.

Chart_GBP_USD_4Hours_snapshot8.3.16

Bank of England Governor Mark Carney is scheduled to testify at Parliament’s Treasury Committee on the economic and financial benefits of EU membership today at 9:15 a.m. GMT. Carney is declined to reveal any details of the possible actions the BoE will be considering in the event of Brexit. A potential EU withdrawal fueled speculation the U.K. could fall into recession and the central bank would have to respond with a rate-cut. Traders should keep an eye on Carney’s testimony as any new insights or details could have a significant impact on the pound.

The Eurozone Gross Domestic Product is scheduled for release at 10:00 GMT but no changes are expected.

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British Pound Recovers, Euro Remains Sideways – What’s Next?

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Dear Traders,

The stronger-than-expected ADP report failed to have a major impact on the U.S. dollar. The private report showed companies added 214k workers in February, indicating the U.S. labor market remains strong. However, ahead of tomorrow’s highly anticipated payrolls report, traders should not expect too much. It would need an unambiguous strong report with payrolls figures exceeding 200k and average hourly earnings showing an accelerated growth in order to revive the dollar rally. Expectations of imminent rate hikes by the Federal Reserve are being pushed back while market participants are currently seeing a 38 percent chance of an increase in June. Consequently, the dollar rally could be paused until the market will receive fresh hawkish hints from the Fed.

The best performer yesterday was the British pound which experienced a relief rally towards 1.41. But traders should not get fooled by the recent recovery as sterling remains vulnerable to losses in the medium-term. We expect the rebound in the currency pair to be short-lived with gains being capped at 1.41 or 1.4160. If GBP breaks above 1.4160 a bullish extension would be possible until 1.4230. However, the risk is to the downside and traders should focus on a break below 1.39.

The most important data from the U.K. will be Services PMI, scheduled for release at 9:30 GMT and if the report disappoints sterling could start giving up its gains.

GBP/USD

Chart_GBP_USD_4Hours_snapshot3.3.16

 

EUR/USD

The euro continued its sideways move and traded well above 1.08. Whether we will see increased momentum in the near-term will hinge on the performance of the U.S. dollar and thus U.S. data.

We see the currency pair trading within a downward channel. Based on that channel corrections could be currently limited until 1.0940 before shifting the focus to a break of 1.08.

Chart_EUR_USD_4Hours_snapshot3.3.16

The most important piece of economic data before the NFP report will be the ISM Non-Manufacturing index, due for release at 15:00 GMT. Any significant change could affect the USD accordingly. Before coming to the ISM index, we will also keep any eye on U.S. Jobless Claims (13:30 GMT) even if data is not expected to have a significant impact on the greenback.

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Upcoming breakouts?

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Dear Traders,

While the British pound experienced a rollercoaster ride, trading choppily sideways between 1.4020 and 1.39, the euro continued its recent downward trend against the U.S. dollar Tuesday. The greenback strengthened after the ISM index showed a higher reading, adding to evidence that the pressure on manufacturing may be easing.

Nevertheless, both of our major currency pairs failed to show sustained movements yesterday, raising the chances of upcoming break-outs – perhaps as early as today. Dollar bulls are eager to see whether the labor market is showing further signs of improvement and today’s ADP report may provide a little foretaste of the NFP report. However, disappointing ADP numbers could prompt investors to refrain from any long dollar positions ahead of Friday’s high risk event.

The euro dropped as low as 1.0834 but ended the day unchanged against the dollar. Consequently, the technical outlook has not changed and a downside break of 1.08 could be a next possible scenario. On the upside we will focus on a break above 1.09, which could drive the euro towards 1.0950/60.

GBP/USD

Traders had to struggle with sharp fluctuations and false breakouts within a narrow 100-pip trading range. Given the recent consolidation we expect a breakout in the near-term, triggering fresh momentum. Current resistances are seen at 1.4030 and 1.4070, whereas support levels are seen at 1.3905 and 1.3850.

The U.K. Construction PMI is scheduled for release at 9:30 GMT and could have a short-term impact on the GBP.

Important economic data for today:

9:30 UK Construction PMI

10:00 UK BoE’s Broadbent speaks

13:15 USA ADP report

15:30 USA Crude Oil Inventories

(Timezone GMT)

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EUR/USD To Remain Under Pressure- Focus On 1.08

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Dear Traders,

Those who traded the British pound Monday had to have patience as the cable provided only later some gains towards the 1.3950-barrier. After a false bearish break-out below 1.3840, GBP recovered its losses and is currently facing a next resistance at 1.3950. Once it breaks above 1.3965, we might see a renewed test of 1.40/1.4020.

The most important U.K. data will be Manufacturing PMI scheduled for release at 9:30 GMT and if data surprises to the downside, we expect sterling to fall back below 1.39. A lower target could be at 1.3820.

The euro traded lower against the U.S. dollar on speculation the European Central Bank will add further stimulus at the ECB’s next meeting on March 10. Euro-area inflation turned negative in February putting pressure on the central bank to consider further easing. Within the next few days we expect the euro to trend lower against the greenback. For the time being, we focus on the 1.08-mark, which could act as a current support for the EUR/USD. Bearish momentum could accelerate with a break below 1.0770.

Traders should keep an eye on important economic data such as the German Unemployment report, due at 8:55 GMT and from the U.S. the ISM Manufacturing index, scheduled for release at 15:00 GMT.

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We wish you good trades and many pips!

Any and all liability of the author is excluded.

Copyright © All Rights Reserved 2016 Maimar-FX.

www.maimar.co