EUR/USD And GBP/USD: Rebounds May Be Short-Lived

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Dear Traders,

Markets were relatively quiet at the beginning of this eventful week while both GBP/USD and EUR/USD were accompanied be a slight upward tendency. We believe that the slight rebound in the euro and British pound could be of a temporary nature as the U.S. dollar faces some event risks with the FOMC decision and Non-Farm Payrolls report on tap. Dollar bulls may tend to jump back in ahead of these events.

The EUR/USD recovered some losses towards 1.1660 but this small recovery could prove to be a correction within a downtrend. For the bias to shift from bearish to neutral euro bulls would need to push the single currency beyond 1.18. As long as the euro remains below 1.18 we favor the bearish bias and focus on a price breakout below 1.1550.

The Eurozone Consumer Price report is due for release today at 10:00 UTC but if CPI print is in line with expectations it will not affect the euro’s price action.

The GBP/USD traded with a tailwind but gains were capped at 1.3215. We consider the 1.3250-barrier to be a crucial short-term resistance in the cable. If the pound drops back below 1.3120 we may see further losses towards 1.3050.

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Euro And Pound Sell-Off, Focus Now On U.S. GDP Data

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Dear Traders,

The EUR/USD sold off on the back of a dovish ECB announcement on the one side and a strengthening U.S. dollar on the other side. European Central Bank policy makers agreed to cut monthly bond purchases in half to EUR30 billion in January but extend the bond buys at this pace until September 2018. While this outcome was exactly what the market has anticipated, Draghi said there won’t be a “sudden end to the buying” and the shift shouldn’t even be called tapering. What weakens the euro was the fact that a “large majority” of ECB policy makers favored keeping the bond buying program open-ended so they can adjust it at any time in case inflation stays sluggish. With regard to future interest rate hikes, Draghi said that rates will remain “at the present levels for an extended period of time, and well past the horizon of our net asset purchases”.

In short, the ECB’s decision can be described as slightly more dovish than euro bulls may have hoped for.

As regards the U.S. dollar, prospects for the U.S. tax reform spurred the dollar rally. The U.S. House passed a budget resolution unlocking a process to cut taxes by the end of the year. The greenback experienced broad-based gains versus other major currencies but the focus now shifts to the third-quarter GDP reading, scheduled for release today at 12:30 UTC. Even though economists are looking for slower growth of 2.6 percent, dollar bulls may take this opportunity to jump back in on pullbacks. Traders should prepare for heightened volatility around the GDP release.

EUR/USD: The euro cleared its crucial support at 1.17 and even 1.1650. After breaking below theses support levels, the case has built up for the bears and we now expect the euro to tumble towards 1.1550 but maybe not straight-lined. Former support levels could now turn into resistances with pullbacks may be limited until 1.17/1.1730.

GBP/USD

Only yesterday we have talked about the pound’s bullish break above 1.3230 which seemed to indicate further gains towards 1.33 but the opposite happened: The pound fell in tandem with the euro and headed for another test of 1.3110. If the 1.31-support breaks the previous bull breakout above 1.3230 turns out be a fake-out. In case the cable falls below 1.3085 we anticipate further losses towards 1.3030 and 1.2950.

We wish you good trades and a relaxing weekend.

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ECB Decision Day: Hawkish Or Dovish Taper Mr Draghi?

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Dear Traders,

It’s decision day at the European Central Bank and traders in all EUR crosses brace for heightened volatility at this highly anticipated event that will bring forth news on the pace of the ECB’s quantitative easing program (QE). The euro traded higher against the U.S. dollar ahead of today’s announcement since the ECB is expected to announce a reduction in the size of its monthly bond buying. While this expectation alone is considered euro-positive, the devil is in the details. There are a number of possible scenarios while the best (but most unlikely) scenario for the euro would be a reduction of EUR40 billion bonds buys until September 2018. The most likely scenario is however a taper of 30 billion euros with a nine-month extension of the QE program. Since the latter scenario is already largely priced in the euro’s price development, the risk is tilted to the downside if the ECB fails to surprise the market. Bearing in mind that ECB policy makers want to avoid a too strong euro they need to be careful in their statement. If the market senses a more cautious approach towards monetary policy normalization or in the case of a reduction of only EUR20 billion bond buys per month, the euro could fall.

Whatever the case, the good news is that ECB President Mario Draghi can be expected to emphasize that the Eurozone economy is in a good shape and probably capable to withstand tighter monetary policy over the medium-term.

The ECB’s decision will be announced at 11:45 UTC and Draghi will speak 45 minutes later.

EUR/USD

The euro currently trades around the resistance line of its recent downtrend channel near 1.1840. If the euro breaks above this barrier, the focus will shift to the 1.19-level. A sustained break above 1.1915 is needed to encourage euro bulls for a run for 1.20 or 1.21. If 1.19 however holds, particular focus remains on the 1.17-support. A renewed break below 1.1680 and 1.1650 could send the euro towards 1.1580.

The British pound rose on upbeat U.K. GDP data that bolstered the case for a Bank of England rate hike next week.

From a technical point of view, the primary uptrend channel finally proved correct and suggests that we may see further gains towards 1.33 and 1.3350. A break above 1.3365 would brighten the bullish outlook. A current support is however seen at 1.3150.

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We wish you good trades and many pips!

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Euro Consolidates Pre-ECB While Pound Declines On Brexit Uncertainty

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Dear Traders,

The EUR/USD is still consolidating within a narrow trading range as it waits for the ECB announcement to encourage volatility. Tomorrow’s ECB announcement is expected to bring a cut of the central bank’s monthly purchases to EUR30B but there is speculation that ECB policy makers may favour a dovish taper in the effort of keeping the euro relatively weak. Traders should prepare for more volatile swings now ahead of tomorrow’s highly anticipated event. However, with no new drivers we still expect the EUR/USD to fluctuate between 1.1850 and 1.17.

Sellers in the GBP/USD were able to gain a good profit yesterday with the pound heading for 1.31. The pound declined amid uncertainty around Brexit negotiations between the UK and EU and while the tortuous Brexit talks are continuing to sour the sentiment in the pound, there is a ray of hope – at least in short-term time frames: UK GDP figures (due for release today at 8:30 UTC) are expected to show an economic growth of 1.5 percent year/year that is likely to persuade the Bank of England to hike interest rates at the BoE’s ‘Super Thursday’ next week on November 2.

From a technical perspective, we still see the GBP/USD fluctuating within its crucial price range of 1.32/1.3230 – 1.31. While sustained price breakouts did not happen we still focus on both scenarios; either a bullish breakout above 1.3235 or a bearish breakout below 1.3085.

From the U.S. we have Durable Goods Orders scheduled for release at 12:30 UTC.

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Limited Price Swings Amid Lull In Volatility But Breakouts May Be Looming

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Dear Traders,

There was nothing to gain for traders of the EUR/USD and GBP/USD on Monday. Both major currency pairs were little changed with larger price fluctuations being absent. The euro fell to a low of 1.1725 before reversing its losses towards 1.18. In sum, trading the EUR/USD lately did not serve us well since larger price movements and breakouts are still lacking. However, this unprofitable trading phase could soon be over as the ECB meeting looms ahead. The ECB policy announcement is expected to bring clarity on the fate of the ECB’s asset purchase program but until then the euro may continue its sideways movement between 1.1850 and 1.17.

EUR/USD: If the pair breaks above 1.1790 it faces the next hurdle at 1.18 but given prepositioning ahead of the ECB meeting, it may trend higher, heading for a test of 1.1850/60. A current support is however seen at 1.1720.

The German Manufacturing PMI is scheduled for release at 7:30 UTC but this report is unlikely to have a major impact on the price action in the euro.

GBP/USD: Recent price action in the cable indicates that a bullish breakout may be imminent. We see prices formatting an inverted head-shoulders pattern after failing to break the 1.31-support significantly. We now prepare for upcoming bullish momentum driving the cable towards 1.33 and possibly 1.3370.

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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 2017 Maimar-FX.

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EUR/USD And GBP/USD Bounce Off Resistance Levels; USD Stronger

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Dear Traders,

Positive developments in Washington and hopes that the U.S. tax reform bill could pass the House have been supportive for the U.S. dollar. The greenback advanced against the euro and British pound, driving both EUR/USD and GBP/USD towards important support levels. The U.S. Senate adopted a fiscal 2018 budget resolution on Thursday that House GOP leaders agreed to accept.

On the flipside, the euro received no support from political developments in Spain. Madrid is finalizing plans to take control of Catalonia and to suspend the region’s autonomy. This step should keep the political situation in Spain tense.

The pound fell on disappointing U.K. data and speculation that the upcoming Bank of England rate hike could be a one-off. The BoE is forecast to hike rates on their next monetary policy meeting on November 2 but analysts doubt that there could be more than one rate increase in the medium-term. For the time being, we expect the pound to trade with volatile swings between 1.3250 and 1.30. As mentioned in yesterday’s analysis, for bearish momentum to accelerate the pound will have to break the 1.31-support significantly.

EUR/USD: As expected, the resistance level at 1.1850/60 has proved correct and the euro tested this barrier before reversing some of its gains. We now expect the pair to trade lower and focus on targets at 1.1770 and 1.17.

There are no major economic reports scheduled for release today. Fed Chair Janet Yellen is scheduled to hold a speech today but since this speech is only due after markets close, it will not affect the price action.

We wish you good trades and a nice weekend.

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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 2017 Maimar-FX.

www.maimar.co