U.S. Dollar Back In Focus: Will U.S. Data Help Or Hurt?

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Dear Traders,

While both of our major currency pairs fluctuated more or less sideways yesterday, the U.S. dollar was gaining momentum as upbeat economic data boosted optimism on the world’s largest economy. A gauge of consumer confidence rose to its highest level in nine years, coming in as a positive surprise for the market.

The euro tested the 1.12-support but, for the time being, the currency was able to remain above that important price level. Once the 1.1190-level is significantly breached, we may see accelerated bearish momentum towards 1.1130. However, given the recent sideways trend in the EUR/USD we anticipate the price action to be confined to a range between 1.1285 and 1.1120.

GBP/USD

The pound sterling rebounded against the greenback Tuesday and rose to a high of 1.3026. While we expect any further gains in this pair to be limited until 1.3070, downward movements may also be limited towards the lower bound of the pounds recent trading range at 1.2920. Once the 1.29-mark is breached to the downside, we could see further losses towards 1.2820.

chart_gbp_usd_4hours_snapshot28-9-16

Today, we will watch U.S. Durable Goods Orders, scheduled for release at 12:30 UTC, which could have a major impact on the U.S. dollar. Furthermore, Fed chair Janet Yellen testifies before the House Financial Services Committee at 14:00 UTC. Market participants scrutinize her remarks, looking for clues regarding future monetary policy but Yellen is not expected to reveal anything new after last week’s news conference.

ECB President Mario Draghi is scheduled to speak at 14:30 UTC at a meeting of the German Parliament’s EU Committee, but his speech is not expected to have a significant impact on the euro.

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U.S. Presidential Debate In Full Swing But Investors Remain Risk-Averse

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Dear Traders,

This week started with some volatile swings in the Forex market with GBP/USD being the most volatile currency pair on Monday. The British pound dropped again towards its current support at 1.2910 before it started a relief rally. The cable has been torn between the rising fears of a “hard Brexit” and the weakening dollar.  The euro, however, rebounded against the U.S. dollar and the pair tested its resistance zone around 1.1275/85. As stated in yesterday’s analysis euro bulls should better wait for prices above 1.13 and even better above 1.1350. As long as the euro remains below 1.13, our focus shifts to a break of the 1.12-support.

The pound sterling traded volatile during the Asian session as the first U.S. presidential debate is in full swing. A Clinton win is seen as dollar-positive while a Trump victory would lead to chaos in the markets and has not yet been priced in. Investors remain risk-averse in the run-up to the presidential election in November and seek safe havens. Recent polls show a close head-to-head contest between the two candidates.

Apart from the U.S. debate and safe haven flows, U.S. Consumer Confidence, due at 14:00 UTC could have an impact on the greenback.

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No Chance Of A Fed Rate Hike?

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Dear Traders,

Markets were generally calm as investors wait for decision from the Bank of Japan and the Federal Reserve today. While the euro continued its sideways trend between 1.12 and 1.1140 Tuesday, the British pound dropped significantly below 1.30 as European Union leaders recalled the consequences of a Brexit, provided that Article 50 will be invoked next year.

While the Bank of Japan decision is expected to spark some volatile moves in the market this morning, the focus will be on the Fed meeting and Janet Yellen‘s press conference. The Fed is widely expected to hold rates steady this month but there are a few banks forecasting that officials will hike rates. The argument in favor of a rate increase in September is that traders have too steeply discounted Fed officials’ intent to hike after the central bank has remained on hold for longer than expected. Hawks out there are wondering that, if the Fed is confident in its outlook to send a hawkish signal of an upcoming rate hike in December, why not hike rates now? Many would argue that the Fed doesn’t want to derail the economy before the presidential election in November but on the other hand, politics has little impact on the rate setting decision.

In a nutshell, the odds are in favor of a rate increase in December as the Fed doesn’t like to surprise the market. Dollar gains could therefore be limited as the market expects rates to remain on hold. The central bank will also release fresh “dot plot” projections, probably signaling one quarter-point rate hike by the end of the year.

Whatever the case, we will be prepared for surprises as well as breakouts in both directions.

The Fed is due to unveil its rate decision at 18:00 UTC, followed by the FOMC press conference 30 minutes later.

EUR/USD

The euro formatted a slight downtrend channel and it will now need to break below the current support level around 1.1130 in order to revive fresh bearish momentum towards the lower bound at 1.1090. In the unlikely event of a Fed rate hike, the dollar will soar, sending the euro below 1.1050. However, above 1.1220 gains could be limited until 1.1290.

chart_eur_usd_daily_snapshot21-9-16

 

GBP/USD

The pound fell to a one-month low against the greenback. We now see a next lower target at around 1.29 from where potential pullbacks may occur. Based on the current downward channel we see a resistance at 1.3125. The price action will be however dominated by the appetite for dollars. Below 1.2850 the pound could head for a renewed test of its record-low at 1.2797.

chart_gbp_usd_4hours_snapshot21-9-16

 

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The Calm Before The Storm?

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Dear Traders,

With financial markets remaining largely directionless ahead of the key policy decisions in the U.S. and Japan, there was nothing to be gained for traders. Instead, we had to bother with limited movements and false breakouts on Monday, making it an unprofitable trading day. In order to protect the trading capital from huge losses a professional day trader has to know when to adopt a low risk approach and this is precisely what we did yesterday. Consequently, we have not lost much in the mixed market environment.

The euro and British pound ended the day unchanged against the U.S. dollar, so there is nothing new to report from the technical perspective.

U.S. Housing Starts and Building Permits are scheduled for release at 12:30 UTC and this report will be the last piece of U.S. economic data before the Federal Reserve unveils its monetary policy decision.

We are still in a “wait and see” mode and will remain risk-averse ahead of tomorrow’s event.

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Traders Prepare For High Volatility Today

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Dear Traders,

The British pound has recovered some losses after it tested the lower bound of its current downtrend channel. Based on that channel we now see a current resistance at 1.3290 while any bearish moves could be limited until 1.3130. Today will be an interesting trading day for sterling traders as the Bank of England is scheduled to announce its rate decision alongside the release of the MPC meeting minutes.

The BoE is expected to hold its benchmark interest rate steady at today’s meeting but the minutes of officials’ deliberations may offer fresh clues to their thinking on Britain’s post-Brexit economy, particularly on whether another rate cut is still in the cards later this year given that growth appears to be holding up better than expected. Yesterday’s U.K. labour data showed resilience following the Brexit vote while the U.K. unemployment rate stayed steady at an 11-year low.

The BoE rate decision and MPC meeting minutes are scheduled for release at 11:00 UTC and traders should prepare for volatile swings in the GBP/USD. Before the important event, U.K. Retail Sales are due for release at 8:30 UTC.

Apart from the British pound the focus will be on the U.S. dollar today with the U.S. Retail Sales report and Philadelphia Fed Survey scheduled for release at 12:30 UTC. Stronger U.S. data will fuel speculations that the Fed could tighten monetary policy at their FOMC meeting next week.

EUR/USD

The euro finally showed some larger swings yesterday, testing its current resistance zone around 1.1270. In the 4-hour chart we see a symmetrical triangle, which may predict increased momentum after the euro broke above or, respectively, below that pattern. Above 1.1275 we see chances of a rise towards 1.1310, the resistance line of the recent downtrend channel. If the euro breaks above that resistance line we watch out for pullbacks around the 1.1330-level as it could act as a crucial resistance. On the bottom side a break below 1.1220 could send the euro lower towards 1.1170 and 1.1130.

chart_eur_usd_4hours_snapshot15-9-16

From the eurozone we have Consumer Prices scheduled for release at 9:00 UTC but no changes are expected. How the euro will trade today will mainly hinge on the performance of the greenback.

We wish you many profitable trades for today.

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Pound Drops On Gloomy Economic Prospects, Will Employment Data Brighten The Mood?

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Dear Traders,

While the euro still lacked a clear direction the British pound showed some larger moves on Tuesday after U.K. inflation data came in unchanged at 0.6 percent, disappointing analyst forecasts of a rise to 0.7 percent. Sterling fell more than 100 pips from our short-entry after consumer prices held steady in August. The question therefore arises whether the Bank of England believes that there is a need for a further rate cut to stimulate growth and push inflation nearer towards the central bank’s 2 percent target. The BoE is expected to keep interest rates unchanged at tomorrow’s meeting, but policymakers could still cut them further by year-end. The pound therefore remains a sell on rallies.

The U.K. Labor Market report is scheduled for release at 8:30 UTC today and may help paint a clearer picture of the situation of the U.K. economy in the aftermath of Brexit.

GBP/USD

Sterling traders should pay close attention to the next support area at 1.3160/50. A significant break below that level could send sterling towards the next support at 1.31 from where it could bounce back. With sterling trading above 1.3150 we anticipate a slight correction towards 1.3250 and possibly even a renewed test of 1.33.

chart_gbp_usd_4hours_snapshot14-9-16

The euro remained confined to its narrow 60-pip trading range and euro traders must exercise patience. The euro would now need to break below 1.1170 to reinvigorate fresh bearish momentum. With no major economic data scheduled for release from the Eurozone, we expect the pair to continue its sideways trend between 1.1250 and 1.1170. We recommend traders to take profits at smaller targets if there are any.

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Further Gains In The British Pound? Focus On CPI Data

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Dear Traders,

The euro ended the day unchanged against the U.S. dollar after it fluctuated considerably on Federal Reserve Governor Lael Brainard’s comments. She remained dovish and urged “prudence” in her approach to tighter monetary policy, even as she acknowledged that the U.S. economy is moving toward achieving the Fed’s goals of maximum employment and 2 percent inflation. Traders had to struggle with unsteady price movements in the EUR/USD, leading to losses instead of profits. The most important piece of economic data from the eurozone will be the German and Eurozone ZEW Survey, due to be released at 9:00 UTC. We hope for a breakout of the euro’s recent trading range, sending the pair towards 1.1315 on the upside or 1.1170 on the downside.

Unlike the euro, the British pound trended upwards and provided a good gain with both of our long-entries. Thus our swing long-entry at 1.3240 already proved to be highly profitable.

The U.K. Consumer Price report is scheduled for release at 8:30 UTC and should have a significant impact on the pound. Chances are that sterling extends its gains towards 1.3375 and even 1.3440. A break below 1.3250 however could shift the bias from bullish to bearish.

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After The ECB Is Before The ECB

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Dear Traders,

As expected, the European Central Bank kept rates unchanged but it also refrained from making any changes to its asset-purchasing program for now. ECB President Mario Draghi merely reiterated that the ECB has the ‘full mandate’ to redesign QE, leaving the door open for additional stimulus. The market’s reaction to the announcement was thus rather subdued. The euro peaked at a high of 1.1327 but was not able to hold onto its gains. We see a resistance zone between 1.1350 and 1.14 and as long as the euro remains below that zone we maintain a neutral stance in the EUR/USD. If the euro drops below 1.1220 we see a higher likelihood of falling prices towards 1.1150.

The British pound tumbled below 1.33 but ended the day virtually unchanged against the U.S. dollar. In a nutshell, there was not much to be gained for daytraders. U.K. Trade Balance is scheduled for release at 8:30 UTC but we do not expect the report to have a major impact on the pound.

The market still lacks momentum and within that low-volatility environment we advise traders to take profits at smaller targets and secure weekly profits.

Have a wonderful weekend.

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Sterling Traders Focus On Carney’s Testimony

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Dear Traders,

The U.S. dollar slumped against the euro and British pound after the U.S. services sector index unexpectedly dropped to a six-year low, bolstering speculation that the Federal Reserve will stand pat on lower interest rates. The ISM non-manufacturing index expanded at its weakest pace in six years and this decline was reason enough for dollar bulls to give up on their dollar long positions, sending the greenback’s counterparts significantly higher in return.

The euro jumped above 1.12 and currently attempts to sustainably overcome the next resistance level at 1.1250. Above 1.1270 it could head for a test of 1.13 and 1.1330. In the case of further dollar weakness we see a next crucial resistance zone around the 1.1360-level. Euro bears should however wait for prices below 1.1220 in order to sell the euro.

The pound sterling extended its gains and rose above 1.34. Whether there is still some more upside room remains to be seen and could hinge on today’s U.K. data and a testimony of Bank of England Governor Carney. The BoE governor will answer to a panel of lawmakers and questions will also center on the August Inflation report, in which officials lowered their growth forecasts by the most ever. The testimony is scheduled for 13:15 UTC today and could have a major impact on the pound as it will be scrutinized for clues about the U.K. outlook and the possibility of a further rate cut by the end of the year.

U.K. Industrial and Manufacturing production figures are scheduled for release at 8:30 UTC.

Last but not least, the Fed releases its Beige Book at 18:00 UTC which could have a minor impact on the dollar.

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Market Still Seems To Be In Its State of Summer Lethargy

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Dear Traders,

Friday’s non-farm payrolls report failed to put an end to the market’s summer lethargy and instead of giving direction, most major currency pairs remained virtually unchanged after some short-term fluctuations during payrolls release. While the August jobs report came in weaker than-expected, tempering speculation of an imminent Federal Reserve interest rate hike in September, the market’s reaction to the report was restrained with both euro and cable rising only marginally. The market environment therefore became somewhat unattractive for traders since large market movements have become a rarity.

In terms of economic market moving data, there is not much going on this week. From the U.S., the only important pieces of economic data are the ISM Non-Manufacturing Index (Tuesday) and the Fed’s Beige Book (Wednesday). The most important event this week will be the European Central Bank’s monetary policy announcement on Thursday. The ECB meeting could trigger some market moves as the central bank is expected to lengthen quantitative easing for a second time. Although the ECB is not expected to cut interest rates, Thursday’s meeting is the most likely opportunity to announce more stimulus or change the QE program. We therefore expect the euro to come under pressure ahead of the announcement. Technically, we will focus on a break of the 1.1120-level in order to sell euros towards 1.1080 and 1.1050. On the upside, a break above 1.1330 could change the bias in favor of the bulls.

The British pound was able to maintain its price level around the 1.33-mark. Above 1.3350 we see chances of a test of 1.3370 and 1.34. However, any further gains could be limited until the pound’s current key resistance at 1.3480. Sterling traders should keep an eye on the Industrial and Manufacturing Production figures (Wednesday) as well as on the Services PMI report, due for release today at 8:30 UTC.

The U.S. market will remain closed for a public holiday on Monday, so we expect volatility to be low and recommend traders to take profits at lower targets given the calm market.

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We wish you good trades and many pips!

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