Will The Dollar’s Strength Continue?

Dear Traders,

The U.S. dollar received a boost from hawkish comments from Federal Reserve Chair Jerome Powell who conducted his first congressional testimony on Tuesday. The Fed Chair noted that his outlook for the economy has strengthened along with his confidence on inflation getting stronger. Stronger economic growth may prompt policy makers to rethink their plan for three interest rate increases in 2018. These optimistic comments probably led to the market to believe that a fourth rate hike might be in the cards, even though Powell did not mention a number for hikes.

EUR/USD

The EUR/USD was hit hard by Powell’s testimony, falling below 1.2275 and heading towards its important support around 1.22. Whether we will see a sustained break below 1.2160 will now hinge on the appetite for dollars and today’s Eurozone data.

The German Labor Market Numbers are scheduled for release at 8:55 UTC followed by the Eurozone Consumer Price Report at 10:00 UTC. If the CPI report comes in weaker than expected, the euro could further fall.

Technically, bears lie in wait for a sustained break below 1.2160 so that the double-top pattern will be played out. Nevertheless, however tempting that bearish pattern might be, traders should also have a look at the oversold situation in the EUR/USD chart, which could become an obstacle for euro bears.

GBP/USD

Compared to the EUR/USD, losses were limited in this pair. The pound found some support around 1.3850 and it seems as if sterling is still struggling to determine a direction in the near-term. Thus, with the cable still trading within a narrow price range, we see a higher likelihood of potential price breakouts now.

If the price breaks out of the symmetrical triangle, we expect larger movements and even more profitable trading opportunities.

From the U.S., we have the GDP report scheduled for release at 13:30 UTC today.

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Powell’s Speech To Be Front And Center In The Market

Dear Traders,

There was little follow-through after the pound broke above 1.4040 but the cause for the cable’s reverse is easy to identify. In the 4-hour chart there is a falling trendline beginning at the January high which prevented sterling bulls from pushing GBP/USD beyond 1.4070. Rather, bears were swooping in around that trendline, sending the cable back towards the 1.39-support. Whether 1.39 holds, remains to be seen. If the pound drops below 1.39 we favor a bearish stance with lower targets at 1.38 and 1.3750. On the topside, we would need to see another break above 1.4050 in order to anticipate further bullish momentum.

Unlike the GBP/USD, the EUR/USD remained within a narrow trading range between 1.2355 and 1.2275.

Today’s testimony from new Fed Chair Jerome Powell will be front and center in the markets. At 13:30 UTC Powell’s Congressional Testimony will be released while Powell testifies to House Financial Services Committee at 15:00 UTC. This important event risk could have a strong impact on the dollar’s price action which is why traders should prepare for high volatility around his speech.

Powell will testify on the economy and monetary policy and if he gets specific on rate hikes and emphasizes the potential need of even 4 rate hikes this year, the dollar could rally. If he, however, refrains from providing specific guidance on what to expect from the Fed (most likely scenario before the Fed’s next meeting on March 20-21), the dollar could be losing ground against its major counterparts.

Other economic data reports will take a backseat to Powell’s speech today.

We wish you good trades!

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EUR/USD & GBP/USD: Next Targets To Watch Out For

Dear Traders,

For sterling traders Thursday has been another challenging trading day with GBP/USD fluctuating between 1.3990 and 1.3850. The U.K. GDP was revised lower but that report was not enough to spur bearish momentum towards 1.3830 and 1.38. The reason for yesterday’s rise was mainly a weakening USD which gave up gains from the FOMC minutes.

The euro traded higher following the ECB minutes but bullish momentum fizzled out after the euro was unable to overcome the 1.2350-level. The minutes were not overwhelmingly hawkish but what is interesting to note is that ECB officials expressed concern that the Dollar was being deflated artificially by U.S. policy which in turn was lifting the euro.

There are no major reports scheduled for release today that could lead to a major change in sentiment. Thus, we will focus on the technical picture.

EUR/USD: We now expect the pair to trade between 1.2330 and 1.2220. If the euro, however, breaks above 1.2360 bullish momentum could accelerate towards 1.24.

GBP/USD: As long as the cable remains below 1.3970 we prepare for dips towards 1.3880 and 1.3810. A sustained break above 1.40, however, will increase the chances of a bullish run for 1.42.

We wish you good trades and a beautiful weekend.

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Will The Pound Receive A Boost From U.K. GDP Data?

Dear Traders,

The U.S. dollar appreciated against its major counterparts in the aftermath of the Fed’s minutes. The tone of the FOMC minutes was passively hawkish while the transcript showed increasing confidence that economic growth will pick up steam despite inflation concerns.  Market participants are now pricing in the possibility of a tighter Fed rate hike path with a current 90 percent chance of a next rate hike in March and a 60 percent chance of three rate hikes through the year. The possibility of even four rate hikes in 2018 is currently over 20 percent. After initial teething problems, the dollar was finally able to end the trading day in positive territory against the euro and pound.

The British pound was volatile as expected but again failed to overcome the 1.40-barrier. Technically speaking, however, we got the price breakouts we were looking for and given the fact that 1.40 remained unbroken we got a dip towards 1.39. A next lower target could now be at around 1.3850/30.

Today we have the U.K. GDP scheduled for release at 9:30 UTC and this report could possibly provide a boost to the weakening pound.

EUR/USD: The euro traded with a downward tilt on the back of a strengthening dollar but from a technical perspective, we still see this pair confined to a sideways trading range between 1.2550 and 1.22. Only if the euro breaks significantly below 1.22 the short-term outlook will shift in favor of the bears.

The next top event risk is the minutes from the European Central Bank’s January meeting which are due at 12:30 UTC. However, unlike the January release, which covered the December meeting which had a new set of Staff Economic Projections revealed, the coming minutes will have much less hard information to discuss. Thus, it could be a non-event for euro traders.

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We wish you good trades and many pips!

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EUR/USD And GBP/USD Trade Lower In Thin Trading

Dear Traders,

Market conditions on Monday were quiet with U.S. markets being closed for President’s Day holiday.

EUR/USD: The euro dropped to a low of 1.2369 in thin trading. We currently see the possibility of further losses towards 1.2345, provided that the euro remains below 1.24. A break above 1.2415 could, however, spur some bullish momentum towards 1.2435 and 1.2460.

The German ZEW Survey Expectations are scheduled for release at 10:00 UTC but this report is not expected to have a major impact on the euro’s price action.

GBP/USD: The pound sterling traded with a downward tilt Monday but bearish momentum came to a halt slightly below 1.3960. As long as the pound remains unable to stabilize above the 1.40-level, we prepare for further losses towards 1.3920 and 1.3895. If sterling bulls are able to push the pair above 1.4020 we could possibly see a run for 1.4050 and 1.4070.

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We wish you good trades and many pips!

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U.S. Dollar Weakness Continues

Dear Traders,

The U.S. dollar’s weakness continued while there was nothing to prevent the euro and pound from further rising against the greenback. The British pound was able to stabilize above 1.40 on the back of positive Brexit-related news and climbed back up towards 1.4150.

The euro rose in tandem with the pound after stabilizing above 1.2455.

Given the strong uptrend in both EUR/USD and GBP/USD we could possibly see further gains but traders should be careful and watch out for potential corrections in the near-term.

EUR/USD: The euro took out the 1.25-hurdle and seems to be primed for a clear breakout above its recent trading range with the upper barrier being at 1.2540. Next hurdles could come in at 1.26 and 1.2640. While traders now may favor the upward direction, we will also pay attention to possible pullbacks towards 1.25, 1.2450 and 1.2370.

GBP/USD: The pound experienced a parabolic rise towards 1.4150 while that next barrier could serve as a make-it or break-it level. If the pound breaks the 1.4150-level significantly it could further rise towards 1.4270 and 1.43. Below 1.4065 however, bearish momentum could accelerate driving the pair back towards a test of 1.40.

It all depends on the market’s risk appetite. From a fundamental perspective, there are no major reports scheduled for release today.

Have a wonderful weekend.

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We wish you good trades and many pips!

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No Love For The U.S. Dollar On Valentine’s Day

Dear Traders,

There was no love for the U.S. dollar on Valentine’s day, so the greenback ended up losing ground against the euro and pound despite better-than-expected U.S. inflation data. As expected, the U.S. CPI report had a major impact on the dollar, driving it sharply higher right after the report came out above expectations. The dollar rally did not last long, however, as stocks began to trade higher and that better atmosphere resulted in a sell-off of the dollar.

In general, even if yesterday’s CPI did beat estimates, the inflation data seems unlikely to change the pace of Fed tightening. Therefore, we may see continued dollar weakness in medium-term time frames.

Both EUR/USD and GBP/USD launched sharp recoveries after marking fresh supports.

EUR/USD: The euro dropped to a low of 1.2275 before bears were handing over control to the bulls. That shift in sentiment has sent the euro sharply higher and we now see the single currency trading around 1.2480 following yesterday’s 2-percent-surge. For traders it will now be interesting whether the euro is able to take out the next hurdle at 1.2485 before it faces the resistance zone between 1.2515- 1.2540. A break of these barriers might be possible but given the absence of fresh catalysts bullish momentum might be running out of steam. A current support is still seen at 1.23.

GBP/USD: The pound broke above 1.40 after finding support at the round number of 1.38. For bullish momentum to accelerate the pound will need to break above 1.4070. A higher target could then be at 1.4150. As long as 1.38 holds, chances are in favor of the bulls.

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U.S. Inflation Print To Impact The Dollar’s Price Action

Dear Traders,

We got what we were looking for in the GBP/USD: A breakout of the cable’s narrow trading range even though that breakout has proved not as strong as we had hoped for. Sterling bulls attempted to push the pound above 1.39 but bullish momentum was somewhat muted following the U.K. January inflation print which came in at 3 percent, better than the 2.9 percent forecast ahead of the release. Overall, rising prices and economic fundamentals create conditions for a stronger currency even if Brexit risks are the main concern for investors.

Technically speaking, we now expect the GBP/USD to trade with a slight upward tilt heading towards 1.3970/80. If the pound is able to take out the 1.40-hurdle again, we will focus on higher targets around 1.4160. A current support is seen around 1.3740.

The EUR/USD broke above 1.2340 and is currently heading towards 1.24. If it breaks significantly above 1.2410, we may see another leg up towards 1.2470. As long as 1.23 holds, chances are in favor of the bulls. Euro bears should better wait for prices below 1.2280.

Today’s focus turns to the U.S. inflation figures due at 13:30 UTC. The U.S. Consumer price index probably increased at a moderate pace in January. Investors will pay particular attention to that report, which is why potential surprises in the inflation print could have a significant impact on the dollar.

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We wish you good trades and many pips!

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High Volatility Led To Unsteady Currency Movements

Dear Traders,

The Bank of England surprised investors with a hawkish twist yesterday and warned that rate hikes may be faster and larger than originally anticipated. This hawkish tone caught the market by surprise and led to high volatility and a short squeeze in GBP/USD. While sterling bulls were able to benefit from the rapid surge to a high of 1.4067, the upward move turned out to be only short-lived and traders had to be quick to take the profit.

To sum it up, the BoE lifted its forecasts for economic growth and said interest rates may need to rise at a steeper pace than previously thought. BoE policymakers now see three rate hikes over the course of three years while the market is now pricing in a 70 percent chance of a rate increase in May, up from nearly 50 percent yesterday.

While the BoE’s hawkishness should pave the way for further gains in the pound, it were high volatility and ongoing Brexit uncertainty that prevented the currency from rising further against the U.S. dollar.

We were able to book a good profit yesterday by trading our daily long signal.

The euro ended the day unchanged against the greenback after it dropped to a low of 1.2212. For euro bears, however, the downward move has proved insufficient to provide a sustained profit. Prices in the EUR/USD narrowed, suggesting that we may see some upcoming breakout of that tight range. If the euro climbs above 1.2265 we may get another test and potential break of 1.2295. A higher target could then be at 1.2330. If the euro, however, falls below 1.2240 it could further decline towards 1.22. A lower target could then be at 1.2150.

There are no major economic reports scheduled for release today. U.K. Manufacturing Production is the only second-tier report scheduled for release at 9:30 UTC.

Have a nice weekend.

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We wish you good trades and many pips!

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BoE Super Thursday To Provide Trading Opportunity For Sterling Traders

Dear Traders,

It’s Super Thursday at the Bank of England, which means we get a rate decision along with the Quarterly Inflation Report and comments from BoE Governor Mark Carney. Today’s meeting is the most important event this week and sterling traders prepare for volatile swings around the monetary policy announcement. The big question among market participants is how hawkish the BoE might be towards the end of this year. The market is fully pricing in a rate increase at the BoE’s Super Thursday in November while market participants see a 50/50 chance of an earlier rate hike in May. If evidence points to a rate rise in May, the pound will rally and may find its way back to 1.42. However, if the tone in today’s statement is not as hawkish as traders are hoping, the pound will fall.

The focus will also be on the inflation report and if economic growth and inflation forecasts are revised higher, GBP/USD could recover some of its recent losses.

There is also the possibility of a muted response following today’s statement. Brexit risks continue to cause uncertainty about the outlook and if those risks have not changed substantially, the market’s reaction to the statement could be muted.

We will know more today at 12:00 UTC.

GBP/USD: The cable found some support around 1.3850 and if this barrier is breached to the downside we expect further losses towards 1.3750. For bullish momentum to accelerate, it would however need a sustained break above 1.40.

EUR/USD: The euro broke out of its recent sideways trend channel and fell towards 1.2240. The break below 1.23 came despite Angela Merkel’s deal with the SPD to form a great coalition in Germany. Technically speaking, the chances are now in favor of further downside potential driving the pair towards 1.2220 and 1.2170. If the euro rises back above 1.2350, bulls may take over control.

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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 2018 Maimar-FX.

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