Euro Drops On Prospects Of EU Instability

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Dear Traders,

Italy votes ‘No’ and the euro falls. The single currency dropped more than 1% against the U.S. dollar after Prime Minister Matteo Renzi‘s program of constitutional reform was rejected by Italian voters by a clear majority in Sunday’s referendum. Renzi said he will hand in his resignation to President Sergio Mattarella on Monday and while there are fears the vote could further shake up Europe’s financial stability, investors are selling the euro and Italy’s bonds as they see Italy as the biggest risk to the future of the eurozone. Markets now assess the risk of early elections and if they happen, the eurosceptic Five-Star Movement could campaign on a promise to hold a referendum on Italy’s membership in the euro.

While a ‘No’ vote was already priced into Italy’s government bonds the most immediate concern is a potential banking crisis and the risk of contagion around Europe. So all in all, short-term prospects for the euro appear to be somewhat gloomy so let’s take a brief look at the technical picture.

EUR/USD

In an initial reaction to Renzi’s defeat, the euro dropped towards 1.05 but it was able to stabilize around 1.0560. If it falls again below 1.0530 we see a higher likelihood of further losses towards the descending trend line which is currently at 1.0470/60. Below 1.0460 however, the dollar rally could accelerate with the euro heading towards parity. For the euro to gain some ground it might need to stabilize above 1.0585 and then head back towards the 1.0660-resistance.

chart_eur_usd_4hours_snapshot5-12-16

Austria‘s presidential vote was however received with relief after Alexander Van der Bellen defeated Norbert Hofer, sending “a signal of hope and positive change throughout Europe”. The Austrian vote was seen as a victory over the populist sentiment in Europe.

The focus now shifts to the European Central Bank meeting on Thursday and while a period of political uncertainty might follow after Renzi’s defeat, the ECB could announce even more aggressive measures to support the European economy.

From the U.S. we do not have any market-moving economic reports scheduled for release this week. The ISM Non-Manufacturing index is due for release today at 15:00 UTC but given the fact that NFP numbers have been released before the report, it should be of less importance.

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Monthly Review: Profits Despite Recent Sideways Trend

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Dear Traders,

We welcome you to the trading month of December. While November has proven very profitable for day traders yesterday’s trading was not to our liking as we had to give up some monthly gains with both currency pairs trading directionless sideways. The U.S. dollar was supported by better-than-expected private jobs data but the euro found some halt slightly above 1.0550. Our short-entry therefore failed to provide a sustained profit. The British pound seesawed between 1.2515 and 1.2420 and thus our daily entries were unfavorably triggered before prices reversed. On balance, however, we look back at a successful month in November with a profit of 509 pips generated by our daily signals, as well as 125 pips by our monthly swing signals.

Given investor’s risk aversion ahead of tomorrow’s U.S. non-farm payrolls report and the Italian referendum on Sunday, we do not expect huge market movements today. Nonetheless we will keep an eye on incoming data releases such as the German Manufacturing PMI (8:55 UTC), U.K. Manufacturing PMI (9:30 UTC) and ISM Manufacturing due at 15:00 UTC.

EUR/USD

The euro is still confined to a sideways trading range and we will wait for breakouts either above 1.0670 or below 1.0560. Euro bulls should however bear in mind that any upward movements might be limited until 1.0715.

chart_eur_usd_4hours_snapshot1-12-16

 

GBP/USD

The cable seems to be headed towards a test of 1.2550 but let’s wait and see. Above 1.2560 the pound may climb towards 1.2670 and even perhaps 1.28. On the downside we will now wait for a sustained break below 1.24.

chart_gbp_usd_daily_snapshot1-12-16

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Euro And Cable: Sideways Movement Continues

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Dear Traders,

Despite better than-expected U.S. economic data the greenback refused to trade higher versus its major peers – this was at least the case in the EUR/USD and GBP/USD. Having already fully discounted a Federal Reserve rate hike in December, investors will now wait for fresh hints about the future rate hike path before entering new long-term positions.

The euro traded sideways and, as expected, the currency pair remained confined to a trading range of nearly 100 pips. While the support at 1.0560 is still intact the euro might tend to test the 1.0715-resistance level, before resuming its overall downtrend. However, if the euro is unable to trade above 1.0670 we will shift our focus to a renewed break below 1.0580.

The cable remained stuck between 1.2530 and 1.2385. A break above 1.2530 may send the pound slightly higher towards 1.2550 but for the pound to rise towards higher targets this resistance level must be significantly breached in order to ignite fresh bullish potential. On the downside we will keep an eye on a break below 1.24.

The Bank of England publishes the results of its annual bank stress tests alongside its Financial Stability Report at 7:00 UTC. Following the report, BoE Governor Mark Carney will hold a press conference, so sterling traders should keep an eye on the price development as the pound might be vulnerable to volatile swings.

From the Eurozone we have the German Unemployment Report scheduled for release at 8:55 UTC, followed by Eurozone CPI data at 10:00 UTC. Chances are that these reports will have a positive impact on the euro, pushing it towards 1.0715. Furthermore, ECB President Mario Draghi speaks in Madrid at 12:30 UTC.

Last but not least, it should be worth watching the release of upcoming U.S. data, such as the ADP report due at 13:15 UTC, PCE numbers at 13:30 UTC and the Fed’s Beige Book at 19:00 UTC.

So it could be an interesting trading day with hopefully profitable trading chances.

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Is The U.S. Dollar Poised For A New Round Of Strength

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Dear Traders,

The U.S. dollar regained some of its strength, pushing the euro and cable lower. While the euro stopped its fall slightly above 1.0560, the British pound turned out to be Monday’s worst performer and dropped towards 1.2385. British companies are increasingly pessimistic about the future outlook and with the Brexit debate intensifying, the pound remains vulnerable to larger losses. We currently see a higher likelihood of a bearish breakout in the GBP/USD but we recommend traders waiting for a break below 1.2350 in order to sell sterling.

European Central Bank President Mario Draghi warned that Britain, rather than the Eurozone, would be the first to suffer from the consequences of a Brexit. When speaking at the European Parliament in Brussels on Monday he described a cocktail of political risks hanging over the global economy, including the Brexit vote, Donald Trump’s election and the looming Italian referendum. Draghi also signaled the ECB’s readiness to continue its monetary stimulus. At the ECB meeting next week, the central bank is widely expected to announce an extension of its bond-buying program.

EUR/USD – Interesting chart formation

While there are good arguments for both bulls and bears favoring one direction or another, it should be interesting in which direction the euro may be heading within the next days. Given the uncertainty ahead of the Italian referendum, the risk is to the downside but with investors staying on the sidelines in the run-up to the important vote on Sunday, the euro could also trade directionless sideways. For the time being, we expect the pair to range-trade between 1.0670 and 1.0570. Above 1.0670 it may head for a test of 1.0710, whereas a break below 1.0560 may invigorate fresh bearish momentum towards 1.0470.

chart_eur_usd_4hours_snapshot29-11-16

Important economic data for today:

13:00 EUR German Consumer Price Index

13:30 USA GDP Report

15:00 USA Consumer Confidence

(Time zone: UTC)

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More To Lose Than To Gain Amid Liquidity Drain

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Dear Traders,

With many U.S. market participants being on holiday for a long weekend, there was not much consistency in the performance of the U.S. dollar and given the unsteady fluctuation there was more to lose than to gain. With liquidity running short we recommend traders not investing much or doing a trading break until market liquidity stabilizes next week.

The euro was little changed and refrained from trading any higher than 1.0585. On the downside, it marked a fresh low at 1.0518 which was much to the displeasure of short traders as our short entry was triggered and quickly stopped out. We expect the euro to trade between 1.0610 and 1.0540 today whereas a break above 1.0615 may drive the euro higher towards 1.0640 or even 1.0660. Below 1.0540 we see chances of accelerated bearish momentum towards 1.05 and 1.0480.

The trading range in the GBP/USD narrowed and breakouts are becoming more likely in the near-term. Sterling traders should keep an eye on the U.K. GDP report scheduled for release at 9:30 UTC. Any surprises may boost the price action in the cable.

As the US rests we do not expect big market movements but nonetheless the U.S. Advance Goods Trade Balance due at 13:30 UTC might be worth watching.

Have a beautiful and relaxing weekend.

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Quiet Trading On Thanksgiving?

/in /by

Dear Traders,

The FOMC minutes did not provide any new insights but did confirm the market’s assumption that a December rate hike should be a done deal. The minutes showed that Federal Reserve officials saw a strengthening case to raise interest rates as the labor market improved ‘appreciably’, with some saying a hike should take place next month. The U.S. dollar extended its gains versus the euro while the common currency fell to a fresh one-year low.

As stated in yesterday’s analysis, we now see next support levels at 1.0520 and 1.0470 and if these barriers fall, the next stop could be at parity. A current resistance is however seen at 1.06.

U.S. markets will be closed for Thanksgiving, which is why we expect market movements to be limited amid a low liquidity environment. Let’s see.

The only piece of economic data will be the German IFO index due at 9:00 UTC, which could have a minor impact on the euro.

The British pound remains the only major currency to outperform the U.S. dollar and traded resiliently between 1.2470 and 1.2360. Sterling traders were looking in vain for any profitable movements and so we had to record some losses after three failed sell attempts. However, the technical picture has not changed and we still wait for a break of 1.2515 or 1.2350 respectively.

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GBP/USD: Still Room For Further Gains?

/in /by

Dear Traders,

We finally saw some corrections in both major currency pairs at the beginning of this holiday-shortened week as investors took profit on long dollar positions. While the euro rose only moderately to 1.0650, the British pound proved to be the best performer and surged to a high of 1.2513. While we believe that the upward movement in the EUR/USD may be limited until 1.0660/90, there could be some room for further gains in the GBP/USD. If the cable is able to break above the 1.2515-level, the focus shifts to the higher target at 1.2550. As stated in previous analysis, a sustained break above 1.2550 could reinvigorate fresh bullish momentum, driving the pair even higher towards 1.2770. Current supports are however seen at 1.2380 and 1.23.

Euro bears should however wait for a renewed break below 1.0570 in order to sell euro towards 1.05.

There are no major economic reports scheduled for release today. The U.S. Existing Home Sales report due at 15:00 UTC is not expected to have a significant impact on the dollar.

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Quiet Trading Over US Thanksgiving Holiday?

/in /by

Dear Traders,

The market’s sentiment was recently strongly influenced by political events and while political risks in the Eurozone continue to build up, the euro went into a tailspin. With the Italian constitutional referendum coming in on December 4, the situation for the euro may deteriorate as political risks are rising across Europe.

Trump’s win seems to have reinvigorated populist sentiment across the continent and if the UK can Brexit, the US can elect Trump, it is also possible that France and Italy could pull out of the EU. In this uncertain political environment, the euro remains vulnerable to losses. However, bearing in mind that the euro is oversold in short-term time frames, we expect some corrections in the EUR/USD.

The economic calendar this week is rather light in terms of market-moving data. The U.S. Thanksgiving holiday on Thursday usually leads to low liquidity in the market, which is why we do not expect significant market movements this week. The only interesting piece of U.S. data will be Durable Goods Orders on Wednesday followed by the FOMC Meeting Minutes which are expected to confirm the hawkish tilt of the Federal Reserve. Everything else than a Fed rate hike next month would be a big surprise.

From the Eurozone, we have the PMI Report (Wednesday) and the German IFO Report (Thursday) due for release this week. Furthermore, ECB President Mario Draghi speaks at the European Parliament in Strasbourg today at 16:00 UTC.

Technically we expect the EUR/USD to trade between 1.07 and 1.0530 in the near-term while a break above 1.0720 may invigorate some bullish momentum towards 1.0770 and 1.08 whereas a break below 1.0520 would increase the pressure on the currency pair.

GBP/USD

The pound sterling dropped towards 1.23 and sterling bears are eager to see whether the cable will break below that crucial support. After a break below 1.23 we see a next lower target at 1.2150. A break above 1.2550 however, would shift the bias in favor of the bulls.

chart_gbp_usd_daily_snapshot21-11-16

From the U.K. , the only interesting piece of economic data will be the Autumn Budget Statement (Wednesday) and Friday’s GDP Report.

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Yellen Confirmed Rate Hike Expectations But Watch Out For Corrections Now

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Dear Traders,

And the winners were once again: Dollar bulls. However, it was no surprise that the dollar further strengthened after Federal Reserve Chair Janet Yellen signaled the likelihood of a December rate hike. She said that a rate increase “could well become appropriately relatively soon”, giving investors the green light to expect a move next month. Yellen cautioned that the Fed did not want to wait “too long”. Regarding the future economic outlook under Trump she said that policy makers “don’t know what’s going to happen” and that the Fed “will be watching the decisions that Congress makes and updating their economic outlook as the policy outlook becomes clearer”.

In a nutshell, the Fed remains on track to raise interest rates as Trump’s election has not altered the central bank’s short-term plans whereas in the future, “there’s a great deal of uncertainty”.

From a technical perspective, we all know that a rate increase is being well priced in BUT with more than three weeks to go before the FOMC rate decision in mid-December the dollar is clearly overbought, making corrections more likely in the near-term.

EUR/USD

The euro trades in a well-defined downward channel and based on that channel the euro might tend to drop towards 1.0525 before it corrects some losses. But be careful: The pair is oversold and we should now expect upcoming corrections towards 1.07 and 1.0750.

chart_eur_usd_4hours_snapshot18-11-16

The technical picture in the GBP/USD has not changed much. After dipping below 1.24 sterling bears will have to wait for a significant break below 1.2330 and further 1.23.

There are no economic reports scheduled for release today. The only interesting event for euro traders could be Draghi‘s speech at the Euro Finance Week in Frankfurt scheduled at 8:30 UTC.

We gained again a good profit this week and wish everyone a beautiful weekend.

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The Euro Refrains To Trade Below 1.07

/in /by

Dear Traders,

There was little consistency in the performance of the EUR/USD Tuesday and the euro’s roller coaster ride gave traders no cause for joy. The euro peaked at 1.0816 before it ended the day in negative territory. We went long and short but no movement proved to be sustained. However, the 1.07-support level is still unbroken and as long as the euro remains firmly above that level, we shift our focus to an upside break above 1.0820.

There is no important economic data from the Eurozone today. From the U.S. we have the PPI Report at 13:30 UTC and Industrial Production figures at 14:15 UTC due for release but these reports are not expected to have a dramatic impact on the greenback.

The pound sterling fell towards 1.2380 after a report showed U.K. inflation unexpectedly slowed last month. Meanwhile, BoE policy makers shifted to a neutral stance with Carney saying in testimony that the neutral path is “appropriate” and officials are not considering expansion of any of the Bank of England’s programs. Sterling traders should pay attention to U.K. Employment Report at 9:30 UTC today as any surprises may lead to volatile swings in the GBP/USD. Technically we are waiting for a renewed break below 1.24 in order to sell the pound towards 1.2350. Above 1.2560 however, the bias may shift in favor of the bulls.

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