U.S. Dollar Slumped as Fed September Rate Hike Seems Unlikely

Dear Traders,

The euro and British pound rebounded strongly against the U.S. dollar after bearish momentum failed to drive both currency pairs significantly lower. Ultimately, short-traders’ efforts did not pay off and we suffered losses with yesterday’s short-entries.

The Federal Reserve is more upbeat about the economic outlook, saying that near-term risks to the U.S. economy have diminished and that job gains were strong, the FOMC statement showed. However, there was no indication of the specific timing of the next potential rate hike and with Esther George being the lone hawk, it has not been enough for the greenback to maintain it strength. Consequently, traders gave up on dollar long positions as they see only little chance of a rate hike in September. The market is now pricing in a 50-50 chance of a rate increase in December.

The euro rose towards 1.1080 on the back of broad based dollar weakness. We now see a next resistance around the 1.11-level which could limit the gains in the EUR/USD. If the euro breaks above 1.1130 it could head for a renewed test of 1.1160. However, if prices fall back below 1.10 we will favor a bearish stance.

The British pound marked a strong support at 1.3060 from where it reversed. Given the recent sideways trend we will now focus on an upper bound at 1.33, whereas the 1.3060-level is seen as the lower bound of the cable’s trading range. Above 1.3350 the sentiment may shift in favor of the bulls but we expect short-term gains to be limited until 1.3410/50.

There are no major economic reports scheduled for release today. The German Unemployment report (due at 7:55 UTC) may have a short-term impact on the euro but the price action will depend on risk appetite.

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Quiet Summer Months

Dear Traders,

It was a quiet start to the new week with both major currency pair fluctuating within narrow trading ranges. Generally, the summer months of July and August are traditionally the quietest time of the year in the financial markets. Hence it is not unusual that the market is sluggish. Given these moderate market conditions we advise traders to take profits even at smaller targets as the market may fail to generate major moves and do not invest too much during the summer period.

The euro traded slightly higher against the U.S. dollar after figures showed the German Ifo index fell less than expected in July. However, the euro was not able to break through the 1.10-hurdle and remained in a sideways movement. Once it climbs above 1.10, we expect the 1.1025/30-level to act as a resistance for the currency pair. Today’s price action will hinge on the appetite for dollars as the focus will be on important U.S. data such as Consumer Confidence due for release at 14:00 UTC.

The cable traded sideways between 1.3165 and 1.3080. We will now focus on a break below 1.3070 in order to sell sterling toward lower levels. On the upside gains might be capped at 1.32.

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U.S. Dollar Rises As Investors Expect Fed Rate Hike By December – Focus On FOMC Statement

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How To Trade The Current Market? Not At All!

Dear Traders,

How one can trade in a market where even central bankers are unable to assess the economic situation and the need for further measures? The answer is simple: It is best to not trade at all. At least, this might be the motto of the financial markets at the moment. Traders who had hoped for some profitable fluctuations following the ECB announcement have been disappointed, once again.

The new trend among policy makers is to just admit that they are uncertain about how the big themes including Brexit and other political turmoil will affect the global economy. European Central Bank president Draghi refrained from providing new insights as the central bank has no clear picture of the impact of Brexit. He admitted on Thursday that nobody can see what the consequences might be as policy makers have not enough data to evaluate the situation right now. The mood therefore remains skeptical. The next ECB meeting is on September 8 and it remains to be seen whether the central bank has a clearer picture until then.

Looking at the technical chart we would actually assume that the euro might be primed for an upside correction but given the uncertain market sentiment all predictions of further movements could be useless. We are therefore not going to refer to the technical picture today, as there is no clear trend within a low volatile market environment.

German and Eurozone PMI reports are scheduled for release at 7:30 and 8:00 UTC but these reports are not expected to have a significant impact on the euro.

The cable’s price development ended in a narrow trading range, formatting a symmetrical triangle in the hourly chart which may predict upcoming price breakouts. With prices above 1.3245 bullish engagements could be rewarding whereas a break below 1.32 could reinvigorate bearish momentum in the short-term. Market participants will focus on the U.K.PMI report due for release at 8:30 UTC.

Although the market doesn’t offer profit opportunities at the moment, we will stay on the ball and try to make the best out of the current market conditions.

Have a nice weekend.

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Euro Traders Prepare For Short Squeeze Unless Draghi Provides A Surprise

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U.S. Dollar Regains Strength, Pulling Euro And Sterling Down

Dear Traders,

The U.S. dollar strengthened against most of its major peers Tuesday as economic data in the U.S. signal expansion. With the latest data showing that the U.S. economy is picking up steam overall, the greenback enjoys stronger demand among investors whereas other currencies are tumbling. This trend could continue as the Federal Reserve is the only central bank which is on track to raise interest rates while other central banks are ready to ease monetary policy to steer economic growth.

On the back of renewed dollar strength the euro was forced to test the 1.10-support, which still remains intact this morning. With no major economic reports scheduled for release today, the dollar might have difficulty pulling the euro below this important support level. In addition, we see a next lower barrier around the 1.0970-level which may lend an additional support to the euro. Today’s price action could thus be oriented towards the upper and lower bound of the current trend channel. Resistances are currently seen at 1.1080 and 1.1130, whereas a crucial support could be at 1.0970.

Chart_EUR_USD_4Hours_snapshot20.7.16

The British pound broke through 1.3120 and slid towards 1.3060. Unfortunately, we had two stop-losses with yesterday’s short-entry before the pound went down, which is why we missed out on the final downward move.We are now looking for a test of 1.30 before we expect major pullbacks to occur. A current resistance is seen at 1.3150 and if sterling is able to climb above that level it could head for a renewed test of 1.32. However, given the recent dollar strength, gains might be limited in the GBP/USD.

Sterling traders should keep an eye on the U.K. labor market report, scheduled for release at 8:30 UTC. The focus will be on Average Earnings and if wages exceed expectations, the pound could be vulnerable to some upswings within its downward trend.

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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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