All Eyes On U.S. GDP Report – Will The Report Help Or Hurt The Dollar?

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Will U.K. GDP Numbers Drive The Pound To 1.21?

Dear Traders,

The U.S. dollar weakened slightly against the euro and British pound Wednesday. After peaking at a daily high of 1.0946 the euro, however, shied away from its resistance at 1.0950 and dropped back below 1.09. If the EUR/USD remains unable to take the hurdle at 1.0950 we expect further losses towards 1.08. In case of a rise above 1.0965 it may head for a test of 1.10. The greenback will be back in focus within the next 48 hours with Durable Goods Orders scheduled for release today at 12:30 UTC and Gross Domestic Product data due tomorrow. GDP data and the nonfarm payrolls report next week will offer further clues on the health of the U.S. economy.

The pound sterling still remained within its current trading range between 1.2250 and 1.2150. Above 1.2250 it may head for a test of 1.2320 but be careful, the risks are currently rather still geared to the downside and it only takes one negative impulse to reinvigorate fresh bearish momentum in the GBP/USD. This impulse might come from important U.K. data such as today’s Gross Domestic Product figures, due at 8:30 UTC. If GDP numbers come in below expectations we could see sterling tumbling towards 1.2150 and further 1.21. Below .2130 we are looking for a steeper fall towards 1.20.

chart_gbp_usd_4hours_snapshot27-10-16

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U.S. Dollar Takes A Breather While Euro And Pound Recover Slightly

Dear Traders,

We got what we have been looking for: A breakout of the cable’s narrow trading range. While an initial attempt to buy sterling above 1.2235 proved unsuccessful, breakout traders were later able to profit from the pound’s sharp drop towards 1.2080. Sterling tumbled before BoE Governor Carney’s testimony to the House of Lords Tuesday but bounced back from its fresh low of 1.2082 as Carney said there were limits to the Monetary Policy Committee’s (MPC) willingness to look beyond an overshoot of their inflation target. In other words, his comments on inflation mean that further easing is unlikely in the near term, highlighting policy makers’ concerns about the risk of stagflation, which arises from the depreciation of the pound.

Carney’s recent comments suggest the MPC will stick to the sidelines at the next ‘super Thursday’ event on November 3.

Technically the pound remains confined to a recent 100-pips trading range between 1.2250 and 1.2150. Above 1.2250 it could head for a test of 1.2320 whereas a break below 1.2130 may drive the GBP/USD to fresh lows around 1.2050.

The EUR/USD however, failed to show larger movements yesterday and remained stuck between 1.09 and 1.0850. It was the second consecutive trading day on which none of our signal entries was triggered. European Central Bank President Mario Draghi defended the ECB’s easy monetary policy but conceded that low interest rates are not ‘costless’ for the eurozone and policy makers “certainly prefer not to have to keep interest rates at such low levels for an excessively long time”. Draghi’s ‘neutral position’ drove the euro higher but gains were capped at 1.09 for the time being. We are still looking for a significant break above 1.09 but any upward movements could be on a shaky footing as a next resistance is seen at 1.0950.

There are no major economic reports scheduled for release today. The only reports come from the U.S. and will be Advance Goods Trade Balance at 12:30 UTC, Services PMI at 13:45 UTC and New Home Sales at 16:00 but none of these reports is expected to have a major impact on the greenback.

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Is The Cable Poised For A Breakout?

Dear Traders,

Both of our major currency pairs ended the trading day virtually unchanged as there was not much consistency in the dollar’s performance Monday. The euro tested the 1.09-level on better than-expected Eurozone data. Manufacturing and Services PMI reports showed the fastest pace of economic momentum this year but this uptick was not sufficient to alter the sentiment in the EUR/USD. The euro trades on the increasing divergence in monetary policy between the U.S. and Europe and that is precisely the driver for the euro’s weakness. ECB President Mario Draghi is scheduled to speak in Berlin today at 15:30 UTC and any comments on extending the QE program beyond March could put further pressure on the euro. Before his speech the German IFO index is due for release at 8:00 UTC but this report is not expected to have a significant impact on the currency pair. Technically, we wait for a significant break above 1.0910 in order to buy euros towards 1.0950. On the downside the 1.0860-level remains in focus whereas a break below that level may drive the euro as low as 1.0830.

The pound sterling remained within a tight trading range between 1.2250 and 1.2190. We see chances of an upcoming breakout of that narrow range provided that sterling breaks above 1.2235 on the upside or respectively below 1.2190 on the downside.

chart_gbp_usd_4hours_snapshot25-10-16

Bank of England Governor Carney appears at the House of Lords economic committee today at 14:35 UTC and any comments on future monetary policy changes could have an impact on the pound.

From the U.S. we Consumer Confidence scheduled for release at 14:00 UTC, a report which could influence the dollar’s performance.

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No Clarity On The ECB’s QE Program, Next Decision To Be Made In December

Dear Traders,

Mario Draghi refused to provide any clear information on what the ECB plans to do in the coming months, leaving investors suitably disappointed. Neither did he refer to tapering nor to extending the ECB’s QE program. The only takeaway that we got from yesterday’s ECB meeting is to wait and to come back in December and see what the central bank thinks then. Nonetheless, Draghi’s stance could be described as somewhat more “dovish”, noting that there is no “convincing upward trend” in underlying inflation, suggesting that the ECB might announce an extension of its bond buying program, rather than a taper at their policy meeting December 8.

Market participants sent the euro on a roller coaster ride before it ended the trading day significantly lower against the greenback. During the Asian session the euro slightly broke below 1.09 and we now wait for a significant break below 1.0880 in order to sell euros towards the next support level at 1.0820/1.08. Current resistance levels are seen at 1.10 and 1.1050.

There was little consistency in the performance of the British pound yesterday. While the currency remains vulnerable to further losses given the troubled picture of the eventual Brexit negotiations at the EU summit, it remains a sell on rallies. We now focus on a downside break below 1.22 or on the other hand, an upside break above 1.23.

Apart from the EU summit there are no major economic reports scheduled for release today. We recommend not investing your weekly profits today and wish you a wonderful weekend.

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Market Listens To Draghi: Tapering Or Expanding Stimulus Plan?

Dear Traders,

Top event risk for the upcoming session is the European Central Bank meeting and ECB President Draghi‘s comments on tapering. While recent ECB meetings have rendered little market reaction, there has been speculation recently that the central bank will begin tapering its bond purchase program at one of its next meetings. While Draghi was optimistic about the outlook for the Eurozone economy, most economists predict the ECB won’t start tapering before the second half of 2017. Quantitative easing is currently scheduled to end in March and with consumer prices still hovering close to zero, policymakers should at least be comfortable with the current level of stimulus or even extend the program before gradually phasing it out once inflation approaches the ECB’s goal of 2 percent.

The ECB will announce its policy decision at 11:45 UTC but no changes are expected. The main focus will be on the press conference 45 minutes later and Draghi’s comments. If he pushes back aggressively against recent talk of tapering, the euro could be vulnerable to further losses. Any signal that the ECB plans to reduce bond purchases will provide a strong boost to the euro. If the central bank however refrains from providing any signals and defers any changes until December, today’s announcement could turn out to be a non-event for euro traders.

To cut it short, let us have a look at the technical chart and prepare for both possible scenarios.

EUR/USD

The euro recently weakened against the U.S. dollar but found some halt around the 1.0950-level, the descending trend line of the euro’s recent downward channel. If the pair breaks below 1.0940 we see a higher likelihood of further losses towards 1.09 and 1.0830. On the upside, the euro would need to break above 1.1060 in order to spark some bullish momentum towards 1.1170.

chart_eur_usd_daily_snapshot20-10-16

Apart from the ECB meeting we have U.K. Retail Sales at 8:30 UTC, the Philly Fed index at 12:30 UTC as well as U.S. Existing Home Sales at 14:00 UTC scheduled for release but all these reports could take a backseat to the ECB.

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We wish you good trades and many pips!

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Pound With A Tailwind While The Euro’s Downtrend Ran Out Of Steam

Dear Traders,

Tuesday’s best performer was the British pound which rose towards its next resistance zone at 1.2320/50. The pound was supported by better than expected U.K. CPI data, limiting speculation that the Bank of England will need to ease monetary policy further. After bouncing off the 1.2330-resistance level we recommend sterling bulls to wait for a break above 1.2375 in order to buy GBP towards 1.2425. However, if the pound drops back below 1.2220, we expect increased bearish momentum towards 1.2170/50.

The U.K. Labor Market report is scheduled for release today at 8:30 UTC and any changes in the headline figures could have a significant impact on the GBP/USD.

The EUR/USD however, refrained from trading any lower than 1.0970. On the other hand, the pair was also not able to take the hurdle at 1.1030 which is why the euro remained confined to a narrow sideways trading range. If the euro falls below 1.0940 the bias could change in favor of the bears, driving the pair lower towards 1.0830.

While there are no economic reports from the Euro-zone today the price action could be determined by dollar flows. However, U.S. Housing data (12:30 UTC) and the Fed’s Beige Book (18:00 UTC) might be of secondary importance for traders.

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U.S. Dollar Weakened Ahead Of CPI Data

Dear Traders,

The U.S. dollar weakened against the euro and British pound ahead of today’s consumer price reports. While Monday’s trading in the EUR/USD was quiet and none of our entries was triggered, sterling traders had to struggle with false breakouts within a tight trading range. Thus we had to record some losses before our last buy attempt proved to be successful. The pound strengthened before the U.K. releases inflation figures today at 8:30 UTC and sterling traders should pay close attention to the CPI report as it could have a major impact on the price action in the GBP/USD.

Technically, the pound broke above a descending trend line, pointing to further upside momentum in the short-term. If the pair is unable to break above 1.2275, the recent upward movement could be on shaky ground.

Bullish scenario: Above 1.2275 we expect further gains towards the next resistance at 1.2320/50. Above 1.2375 the pound may even head towards 1.2430.

Bearish scenario: Below 1.2130 we expect further pound weakness.

chart_gbp_usd_4hours_snapshot18-10-16

Apart from the U.K. CPI report we have U.S. Consumer Prices scheduled for release at 12:30 UTC. Economists predict the report to show inflation is accelerating and if they are right the dollar will strengthen in the wake of Federal Reserve rate hike speculations before year-end.

Daily Forex signals:

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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