Nothing New From The ECB, Focus Now On U.S. GDP Numbers

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Dear Traders,

The ECB meeting is behind us but we had hoped for some larger market moves yesterday with a bit more follow-through after the euro’s technical break below 1.2150. The reason why the ECB statement turned out to be less market-moving this time is obvious: The central bank made absolutely zero changes to its policy statement in comparison with the March meeting, keeping to its commitment to bond-buying at a monthly 30 billion euros until at least September with interest rates on hold “well past” then.

ECB President Draghi talked primarily about their confidence in broad-based growth and that inflation will converge towards the ECB’s target over the medium term. He refrained from discussing monetary policy and the end of asset purchases.

In sum, despite Draghi’s upbeat tone the ECB statement revealed nothing fundamentally new. The next time the ECB releases a new set of Staff Economic Projections will be in June.

The euro dropped below 1.2150 but found a lower support at 1.2095 for the time being. The EUR/USD is still in deeply oversold territory, so traders should prepare for pullbacks. We expect a current resistance-zone to come in between 1.2160-80 but given the strong bearish bias the focus shifts to a next lower target around 1.2060/50.

Yesterday’s trading in the GBP/USD was not to our liking as the pound traded choppily between 1.40 and 1.39. As for sterling bulls, the way is clear with buyers waiting for an upside break above 1.40. On the bottom side, however, sterling bears will have to wait for a break below 1.3875 in order to anticipate further losses.

We will watch the U.K. GDP numbers at 8:30 UTC which could have a major impact on the cable’s price action.

From the U.S. we have the Q1 GDP numbers scheduled for release at 12:30 UTC. The annualized growth rate is expected to register 2 percent down from 2.9 percent. If there is an upside surprise, the greenback could resume its rally and drive other major peers lower in return.

We wish you good trades for today and a nice weekend.

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Moderate Recovery In EUR/USD And GBP/USD

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Dear Traders,

On Tuesday we finally saw some corrective movements in both EUR/USD and GBP/USD, even though yesterday’s pullbacks have been rather modest in terms of profitable movements.

The British pound was able to recover some of its recent losses and rose back towards 1.40. Given the recent bearish bias, we now expect the GBP/USD to trade within a price range between 1.4030 and 1.3820. For bullish momentum to accelerate we would need to see a breakout above 1.4035. A higher target could be at 1.4080.

The euro trended upwards after it has marked a fresh support at 1.2180. We mentioned in yesterday’s analysis that there could be a next resistance at 1.2240/50 and that level has proven stable for the time being. If the euro is able to overcome that barrier and rises significantly above 1.2250, we anticipate a higher price target at 1.2280/90. On the bottom side, we keep tabs on a price break below 1.2175 that could result in further losses towards 1.2090.

There are no major economic reports scheduled for release today so the price action could be subdued ahead of the ECB meeting tomorrow.

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USD Rally Appears Overstretched

/in /by

Dear Traders,

The U.S. dollar resumed its advance on Monday but we are continuing to be on the lookout for reversals since the dollar’s rally could be somewhat overstretched in many major currency pairs.

The euro extended its slide to a low of 1.2184 but the breakout below 1.22 appears unsustainable, at least as long as the euro remains above 1.22. We now keep tabs on the 1.2240/50-level which could act as a short-term resistance in the EUR/USD. A higher resistance is seen at 1.2330. On the bottom side, we expect a lower support around the 1.2160/55-level that could limit losses. We bear in mind that the pair is in oversold territory which is why traders should prepare for pullbacks.

Short traders of the GBP/USD have been able to gain a good profit in recent days. Commentary made by BoE Governor Carney has sent the pound into a tailspin as he prompted speculation that a rate hike in May is not sure. Consequently, rate hike odds have dropped from 85 percent to below 50 percent following Carney’s remarks.

The GBP/USD traded with a heavy bearish bias and dropped towards 1.39. Given the oversold situation, we still expect some pullback sending the pound back towards a test of 1.4015 and 1.4050. A lower support is, however, seen at around 1.3875.

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British Pound Continues Decline On Carney Comments

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Dear Traders,

The pound sterling continued its decline on Thursday with the cable dropping below 1.4145 and easily breaking through the 1.4090-support. Whether the pound’s sharp trend reversal will be sustained within the near-term remains to be seen but short traders in the GBP/USD should be rather cautious, at least for now.

Another reason for accelerated bearish momentum in the cable was an interview with Bank of England Governor Mark Carney who downplayed expectations of a rate hike at the BoE’s next meeting in May. He said that one rate hike is likely in 2018 but there are other meetings over the course of this year. However, if the BoE chooses to raise rates next month, despite recent data disappointments, sterling bulls may take over control ahead of the monetary policy decision on May 10.

GBP/USD: A crucial support is now seen at 1.4010/1.40 but with no important economic reports or fundamental events scheduled for release today it is unlikely that the pound is vulnerable to a downside break of that important barrier. A current resistance, on the other hand, is seen between 1.4150-1.4180.

The euro’s second attempt to break above 1.24 ended in failure, which is why the risk remains tilted to the downside. As mentioned in previous analysis, short traders in the EUR/USD should keep tabs on a break of the 1.23-barrier. Lower targets could be at 1.2265 and 1.2230. Euro bulls, on the other hand, should wait for an upside break above 1.2430.

We wish you good trades and a beautiful weekend.

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Pound Slumps On Disappointing Inflation Data

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Dear Traders,

The biggest story in the Forex market on Wednesday was the sharp drop of the British pound. The pound extended its losses towards 1.4170 following the release of disappointing U.K. inflation data. Inflation fell to 2.5 percent, the lowest level in a year and investors fear that the lower reading could encourage Bank of England policy makers to postpone an imminent rate hike in May. Consequently, expectations for a rate hike next month dropped to a 65 percent probability, down from 87 percent.

GBP/USD

From a technical perspective, we saw the pound rushing through a previous support-area between 1.4250 and 1.4220 which turned into a current resistance now. A lower support now comes in at around 1.4145. However, traders should bear in mind that the overall uptrend is still intact and with the next BoE meeting (and a potential rate hike) still three weeks away, buyers may take the opportunity to buy pounds at lower levels.

We will keep tabs on a price range between 1.4250 and 1.4140 now. If the pound breaks out of that range we might see momentum accelerating to the respective direction. A lower support is seen at 1.4090, whereas for the bullish bias to resume it would need a renewed break above 1.4315.

The U.K. Retail Sales report is due for release today at 8:30 UTC.

In contrast to the high volatility in the GBP/USD, we have seen a lackluster price development in the EUR/USD. The pair is still range-bound and this long period of range (three months already) has discouraged many traders from trading the EUR/USD. However, there have been some profitable trading opportunities but larger swings tend to be rare at the moment.

We are still looking for an upside break of the 1.24-barrier and if that breakout happens our patience could pay off. Based on the recent uptrend channel we expect a higher bullish target to come in at around 1.2470. Bears in the EUR/USD should, however, wait for a significant break below 1.23.

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GBP Tests Support, What’s Next?

/in /by

Dear Traders,

It came as it had to come in the GBP/USD: The British pound retreated from its highs and corrected some of its recent gains. Before yesterday’s pullback happened, we saw the pound touching a fresh post-Brexit high at 1.4377 but the U.K. employment report put an end to the cable’s rally. As we warned traders yesterday, the pullback was inevitable given the overbought situation in the GBP/USD. The job report was, however, generally positive and likely to keep the Bank of England on track to raise interest rates next month.

Today we have the U.K. Consumer Price Report scheduled for release at 8:30 UTC. If inflation numbers come in weaker than expected, the pound could drop towards 1.4230/20. A significant break below 1.4220 could even open the door for a larger decline towards 1.4150. If the pound sterling is, however, able to gain ground above 1.43, buyers may take the opportunity to buy pounds at lower levels with a higher target at 1.4420.

The euro’s climb above 1.24 had been brief while the pair EUR/USD was unable to hold above that important threshold – at least for the time being. With the 1.24-barrier being a hart nut to crack, we now focus on the 1.2350-support which is equivalent to a rising trendline of the recent uptrend channel. Euro bulls should pay attention to a break above 1.2425 which could justify accelerated bullish momentum towards higher targets.

The Eurozone Consumer Price report is scheduled for release at 9:00 UTC but as long as there is no surprise in the headline figure, the report’s impact on the price action could be limited.

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GBP/USD: Prepare For Reversals

/in /by

Dear Traders,

U.S. President Donald Trump accused China and Russia of devaluing their currencies with the consequence that investors refrained from buying dollars amid concerns about the U.S. policy. The dollar further weakened against the euro and pound.

The British pound was the best performing currency on Monday and rose to a high of 1.4344. While buyers in the GBP/USD were recently able to gain a good profit by the cable’s upward move, we now prepare for pullbacks that could send the pound back towards a test of the 1.4250/70-support. Bear in mind that the pair is in overbought territory, a situation that makes upcoming corrections more likely.

Today we will watch the U.K. employment report at 8:30 UTC which could have an impact on the pound.

The EUR/USD was accompanied by an upward tilt but the euro still refrained from taking out the 1.24-barrier. As mentioned in yesterday’s analysis, we expect a higher resistance-zone to come in at 1.2430-50 but for now, a break above 1.24 must be done first. If the euro, however, formats a double-top below 1.24, bearish momentum may gather steam, driving the euro back towards 1.2350 and possibly even 1.23.

The German and Eurozone ZEW Surveys are scheduled for release at 9:00 UTC, but the impact on the euro could be short-lived.

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Lackluster Price Development While Focus Remains On Syria

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Dear Traders,

Geopolitical tensions have been on the lighter side yesterday but the situation remains fragile.

As long as the risk of military conflict between Russia and the U.S. in Syria remains high, we may see a lackluster price development in the market which provides little profitable trading opportunities. Traders should therefore maintain a cautious approach.

The euro traded with a downward tilt following relatively dovish ECB minutes. The minutes highlighted the appreciating euro as a cause of concern for the economic outlook in the Eurozone, as well as the risk of trade conflicts. While we anticipated short-term bullish sets after a test of either 1.23 or 1.2250, the price action in the EUR/USD remains more or less range bound despite the primary bullish trend.

Technically speaking, we now expect the euro to trade between 1.2380 and 1.2250. If the euro drops below 1.2280 it could be headed for a test of 1.2250/20. Whether we will see some more volatile (and hopefully more profitable) market movements in the Forex market will depend on the market’s risk appetite for currencies.

The pound sterling caught a bid and rose back above 1.42 following a test of the potential support level at 1.4145. We now expect the GBP/USD to trade within an upward trend channel between 1.43 and 1.4190.

The only piece of economic data today will be the release of the University of Michigan Sentiment at 14:00 UTC.

With the focus being on news on Syria, traders should stay alert to possible changes in sentiment but as long as the risk appetite among investors is low, trading might be quiet.

We wish you a nice and peaceful weekend.

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Geopolitical Tensions Lead To Risk-Aversion In The Market

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Dear Traders,

Yesterday’s U.S. inflation data and March FOMC minutes took a backseat to geopolitical tensions between the U.S. and Syria. U.S. President Trump warned Russia of incoming airstrikes on Syria for the Assad regime’s suspected use of chemical weapons. The prospect of U.S. military action against Syria have led to broad-based risk aversion in the market with Gold benefiting from its reputation as a safe-haven investment.

From a technical perspective there was nothing to gain for day traders in the Forex market with the U.S. CPI data and FOMC having only a limited impact on yesterday’s price action amidst the risk-off mode in the market.

As long as the risk of military conflict between Russia and the U.S. in Syria remains very high, we may see a lackluster price development in the market which provides little profitable trading opportunities.

Looking at the technical daily chart in both major currency pairs we see that near-term momentum is deep in overbought territory which is why we are looking for upcoming pullbacks.

EUR/USD: A drop below 1.2330 could open the door for accelerated bearish momentum towards 1.23 and 1.2250. However, given the overall uptrend buyers may swoop in at lower levels following a potential pullback. On the topside, the euro would need to take out the 1.24-hurdle to spark fresh bullish momentum towards 1.2430 and 1.2470.

Euro traders should keep an eye on the ECB minutes which are due for release today at 11:30 UTC.

GBP/USD: The pound refrained from stabilizing above 1.42 and dropped back towards 1.4160. We now expect a lower support zone to come in between 1.4120-1.4080. A current resistance is however seen at 1.4270.

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Prepare For Corrections Around U.S. CPI And FOMC Minutes

/in /by

Dear Traders,

The U.S. dollar continued its recent weakness ahead of today’s U.S. CPI numbers. Subsequently, the EUR/USD was accompanied by a bullish tilt and rose towards 1.2380. Long traders in the euro were thus able to book a good profit by trading our long entry.

It will now be interesting for traders of the EUR/USD as the currency pair could be primed for a technical breakout. If the euro rises above 1.2370/80 we see chances of an extended upward move towards 1.2430. A significant break below 1.2350, however, could shift the short-term bias in favor of the bears with lower targets at 1.2330 and 1.2310. A break below 1.23/1.2290 could even alter the current sentiment from bullish to bearish.

The British pound stabilized above 1.4150 against the dollar and now faces the 1.42-barrier. A break above 1.4225 could lead to further strength towards 1.4270. Bears in the GBP/USD should, however, pay attention to a significant break below 1.4080, which could drive the pair towards 1.4025.

Today, the focus will return to economic data and the outlook for U.S. consumer prices (due for release at 12:30 UTC). Later in the day we have the FOMC minutes scheduled for release, so there could be some volatile movements around these releases. Bear in mind that the Federal Reserve is optimistic concerning further rate hikes this year, so the minutes could underline that positive outlook which would be dollar-positive. In other words, prepare for corrective movements around the CPI and FOMC release.

Apart from U.S. data, sterling traders will watch the U.K.’s Industrial Production numbers due for release at 8:30 UTC, while euro traders will listen to a speech of ECB President Mario Draghi at 11:00 UTC.

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We wish you good trades and many pips!

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