ECB Decision: Will The Euro Extend Its Gains?

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The dinner meeting between U.K. Prime Minister Boris Johnson and European Commission President Ursula von der Leyen ended without a breakthrough. The talks will continue until Sunday as both sides still want a deal.

The pound gave up previous gains and dropped back below 1.34. Sterling’s price action followed a short-term downtrend channel (see our analysis from Wednesday), suggesting that upward movements could be limited to 1.3450 given that there is no Brexit breakthrough within the next two days.

Today all eyes will turn to the European Central Bank policy decision and the euro’s reaction to it. The ECB will publish its decision at 1:45 p.m. Frankfurt time and President Christine Lagarde will hold a virtual press conference 45 minutes later.

Policy makers are expected to add 500 billion euros to their emergency bond-buying program and extend it until at least the end of 2021. The deposit rate is expected to remain at -0.5%.

One risk is the current exchange rate of the euro which is making exports from the currency bloc less competitive and putting downward pressure on inflation by making imports cheaper. The ECB frequently stresses that it does not target the exchange rate but its commentary may try to restrain the euro.

The bottom line is that even if more easing is on the way which would normally weaken the currency, chances are in favor of a continuation of the euro’s rally.

Recently, traders in the EUR/USD have taken a more cautious approach which can be seen in the euro’s consolidation phase following its peak at 1.2177 (see short-term downtrend channel in our analysis from Wednesday). However, the pause in the euro rally doesn’t necessarily mean that the bullish outlook has been negated.

Technically, the short-term downtrend channel (or bull flag if rally continues) now ranges from 1.2130 to 1.2040 and we will focus on breakouts above or below these levels.

We wish you good trades!

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EZB Zinsentscheid: Wird der Euro seine Gewinne ausweiten?

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Das Dinner-Treffen zwischen U.K. Premierminister Boris Johnson und EU-Kommissionspräsidentin Ursula von der Leyen endete ohne einen Durchbruch. Die Gespräche werden jetzt bis Sonntag fortgesetzt, denn beide Seiten wünschen sich immer noch eine Einigung.

Das Pfund gab alle vorigen Gewinne wieder ab und rutschte zurück unter 1.34. Sterlings Kursbewegung orientierte sich an dem Abwärtstrendkanal, welcher sich auf kurzfristigen Zeitebenen ausbildete (siehe unsere Analyse vom Mittwoch). Sollte dieser noch intakt bleiben, könnten Aufwärtsbewegungen vorerst bis 1.3450 begrenzt bleiben, vorausgesetzt es bleibt in den nächsten zwei Tagen bei keinem Brexit Durchbruch.

Heute werden sich alle Augen auf die Entscheidung der Europäischen Zentralbank und auf die Reaktion des Euros darauf richten. Die EZB wird ihre Entscheidung um 13:45 Uhr in Frankfurt bekanntgeben und EZB Präsidentin Christine Lagarde wird 45 Minuten später eine virtuelle Pressekonferenz halten.

Es wird erwartet, dass die Währungshüter ihr Pandemie Rettungspaket um weitere 500 Milliarden Euro aufstocken werden und dieses bis mindestens bis zum Ende 2021 laufen lassen werden. Der Zinssatz wird erwartungsgemäß unangetastet bei -0,5% bleiben.

Ein Risiko ist der aktuell hohe Kurs des Euros, welcher Exporte aus dem Währungsblock weniger wettbewerbsfähig macht und die Inflation dämpft, weil Importe billiger werden. Die EZB hat oft betont, dass sie nicht nur den reinen Wechselkurs im Fokus habe, dennoch könnte die Zentralbank versuchen die Rhetorik so zu wählen, dass die Aufwärtstendenz des Euros eingedämmt wird.

Unterm Strich sei gesagt, dass eine expansive Gelpolitik die Währung normalerweise schwächen würde, jedoch stehen die Chancen heute eher zugunsten einer Fortführung der Rally im Euro.

Trader im EUR/USD haben jüngst ein vorsichtigeres Vorgehen gewählt was ersichtlich ist in der Konsolidierung des Euros nach dem Hoch von 1.2177 (siehe Abwärtstrendkanal in unserer Analyse vom Mittwoch). Dennoch bedeutet die Pause in der Euro Rally nicht, dass die Rally gleich beendet ist. Technisch gesehen, erstreckt sich der kurzfristige Abwärtstrendkanal (Bullen Flagge) von 1.2130 bis 1.2040 und wir werden unseren Fokus auf Ausbrüche ober- bzw. unterhalb jener Bereiche haben.

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Der Inhalt des Beitrags spiegelt die persönliche Meinung des Autors wider. Dieser übernimmt für die Richtigkeit und Vollständigkeit keine Verantwortung und schließt jegliche Regressansprüche aus. Dieser Beitrag stellt keine Kauf- oder Verkaufsempfehlung dar.

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EUR/USD & GBP/USD: Breakouts Ahead?

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The euro has been treading water Tuesday, with the price reluctant to push above 1.2135. Thus, there has been no rewarding trading chance for day traders in the EUR/USD.

Is it now time for a breakout in the EUR/USD?

Maybe – at least for a small technical breakout ahead of tomorrow’s ECB rate decision. Prices narrowed formatting a symmetrical triangle this morning which predicts upcoming price breakouts to either side. A renewed rise above 1.2130 could encourage bulls to buy euros towards the 1.2140-50 area where we see a next hurdle. If the euro is able to take out the 1.2150-barrier and climbs above 1.2165 we may see a run for 1.2230. On the downside we will keep an eye on a sustained break below 1.21 which could send the euro lower towards 1.2050. A break below 1.2030 could result in a test of 1.20.

GBP/USD

Today, U.K. Prime Minister Boris Johnson travels to Brussels for dinner with EU Commission President Ursula von der Leyen as both sides seek to save Brexit trade negotiations. Until we know more in the next couple of days, the Brexit saga continues. But bear in mind, that if there is no agreement the pound could fall much more than its 1.6% plunge on Monday. With a deal we could see sterling racing towards 1.3650 and maybe even higher, depending on what is already priced in into the pound’s uptrend.

Looking at the technical picture we see the cable confined to a trading range between 1.34 and 1.33. In case of a renewed rise above 1.3410 it will be interesting whether bearish momentum starts to emerge if price touches the 1.3450-zone (red ellipse). On the downside, the 1.3285-level remains of interest, while a break below that level could invigorate fresh bearish momentum towards 1.32. However, a no-deal would wipe out all previous forecasts and analysis with lower targets which are not conceivable.

We wish you good trades!

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EUR/USD & GBP/USD: Bevorstehende Ausbrüche?

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Der Euro trat am Dienstag auf der Stelle, wobei sich der Kurs sträubte über 1.2135 zu steigen. Somit gab es keine lohnenswerte Handelschance für Daytrader im EUR/USD.

Ist es jetzt Zeit für einen Ausbruch?

Vielleicht – zumindest für einen kleinen technischen Ausbruch im Vorfeld der morgigen EZB Zinsentscheidung. Die Kurse sind enger zusammengeflossen und formatierten heute früh ein symmetrisches Dreieck, welches aufkommende Ausbrüche zu beiden Seiten prognostiziert. Ein erneuter Anstieg über 1.2130 könnte nun die Bullen dazu veranlassen Euros bis zum 1.2140-50-Bereich zu kaufen, wo wir eine nächste Hürde sehen. Kann der Euro jene Barriere überwinden und klettert über 1.2165, so wäre auch ein Lauf bis 1.2230 denkbar. Auf der Unterseite werden wir ein Auge auf einen nachhaltigen Bruch unter 1.21 haben, welcher den Euro zu einem tieferen Ziel bei 1.2050 schicken könnte. Unterhalb von 1.2030 könnte es zu einem Test von 1.20 kommen.

GBP/USD

Heute Abend werden sich U.K. Premierminister Boris Johnson und EU-Kommissionspräsidentin Ursula von der Leyen zu einem Krisen-Dinner treffen um endlich eine Einigung in den Brexit Verhandlungen zu erzielen. Wir werden in den nächsten Tagen eventuell mehr wissen und bis dahin hält die Brexit Saga an. Wir behalten im Hinterkopf, dass, falls es zu keiner Einigung kommen sollte, das Pfund weit tiefer abstürzen könnte als die 1,6% Talfahrt vom Montag. Im Falle eines Deals hingegen, könnte Sterling bis 1.3650 emporschnellen und eventuell sogar höher, abhängig von dem was bereits im Aufwärtstrend des Pfunds eingepreist ist.

Schauen wir uns das technische Bild an, so sehen wir, dass der Cable momentan auf eine Spanne zwischen 1.34 und 1.33 begrenzt ist. Im Falle eines Anstiegs über 1.3410 wird es interessant werden, ob der 1.3450-Bereich (rote Ellipse) ein neues Einstiegslevel für Bären darstellt oder ob dieser gebrochen wird. Auf der Unterseite bleibt das 1.3285-Level von Interesse, wobei ein Bruch unterhalb jenes Levels frische Bärendynamik bis 1.32 auslösen könnte. Im Falle keines Deals würden jedoch alle vorigen Prognosen und Analysen ausradiert werden und die tieferen Ziele wären aktuell nicht absehbar.

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Der Inhalt des Beitrags spiegelt die persönliche Meinung des Autors wider. Dieser übernimmt für die Richtigkeit und Vollständigkeit keine Verantwortung und schließt jegliche Regressansprüche aus. Dieser Beitrag stellt keine Kauf- oder Verkaufsempfehlung dar.

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Daily Forex Signals

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Dear traders,

The British pound fell like a stone Monday after warnings Brexit talks could fail. For several weeks the market was optimistic that a deal between the U.K. and EU would be reached in order to avoid a ‘hard Brexit’- the worst-case scenario. Talks are at a critical stage and both sides have said they are far apart on key issues. U.K. Prime Minister Boris Johnson headed to Brussels yesterday for urgent talks with European Commission President Ursula von der Leyen to try and get a deal done.

GBP/USD slid to a low of 1.3224 before it recovered losses and consolidated between 1.34 and 1.33. Bulls in this pair should now watch out for a sustained break above 1.34 which could send the pair back towards 1.35 in a first stage – provided that there will be a break of deadlocked negotiations. Bears, on the other side, could wait for prices below 1.3280 to sell sterling towards 1.32.

Euro bulls took a breather Monday and EUR/USD recorded a small setback, sending the single currency below 1.21. The decline was however short-lived and the pair was able to hold above 1.21 (for now). We now expect the euro to trade between 1.2150 and 1.2060-40.

Daily Forex Signals:

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EUR/USD:

We are long at 1.2125

Short @ 1.2080

We wish you good trades!

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British Pound Sharply Falls on Prospects of a No-Deal

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Dear traders,

Friday’s disappointing U.S. employment data had little impact on the haven-linked U.S. dollar which largely underperformed. We decided not to trade Friday’s choppy movements in EUR/USD and GBP/USD and stayed on the sidelines.

Elsewhere, global equities aimed mostly higher as the world moved closer toward the first doses of a coronavirus vaccine.

The euro is eyeing the European Central Bank rate decision on Thursday where the ECB may increase bond-buying operations. Last week’s rise in EUR/USD took it to a high of 1.2177 and traders now wonder whether the ECB would intervene to weaken its currency. Generally speaking, the central bank is more likely to look at the euro’s value against the currencies of the EU’s major trading partners to evaluate the euro exchange rate. Nonetheless, bulls in the euro might be cautious ahead of the ECB decision, which is making a correction more likely in the next days.

What is expected from the ECB

No change in interest rates is expected but the central bank has hinted that it will ease monetary policy still further. An increase in its Pandemic Emergency Purchase Program (PEPP) of around 500 billion euro is the most likely level. Such action would normally weaken the currency but given the fact that these times are not normal, anything can happen.

EUR/USD Technical picture

On short-term time frames a double top-pattern could suggest upcoming bearish momentum, provided that the euro slips below 1.21. A lower target could be around 1.2040. However, if the euro rises back above 1.2180, gains may be extended until 1.22 but any bullish move could be on shaky grounds.

Brexit is the elephant in the room

The pound posted its largest decline in almost three months after Michel Barnier warned that Brexit talks could collapse in the next few hours. Optimism now turned to pessimism and sterling traders brace for a no-deal scenario.

GBP/USD Technical picture

The pound extended its gains until 1.3539 on Brexit optimism but now the facts count. In case of no deal, the pound will quickly erase its gains and could even fall towards 1.3050. The last important support was 1.34 early morning and now that the pound broke below 1.33, we will shift our focus to the 13220-00 support. On the upside we would need to see a rise back above 1.35 in order to encourage bulls for a run for 1.3580-1.36.

We went short this morning at 1.3370 and were able to book a good profit.

We wish you good trades!

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GBP/USD Touches 1.35: Are Sterling’s Best Days Behind it?

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Dear traders,

The British pound touched 1.35 and thus climbed to the highest level since December 2019. Many analysts now believe that profit taking could be around the corner, sending the pound lower. Although some investors are still betting on rising prices when a trade deal is signed, many hedge funds have already increased short bets against the pound.

The bottom line is that optimism around Brexit is fully priced in into the pound’s upward trend which is why sterling’s best days may be behind it.

We now expect the cable’s price range to be between 1.3510 and 1.3330.

The euro extended its gains to a high of 1.2174 and hinging on the market’s risk appetite it may touches 1.22 before we see corrective movements. If the euro falls back below 1.2090, we see lower targets at 1.2020 and 1.1960.

The U.S. jobs report is due at 13:30 UTC today.

We wish you a beautiful and healthy weekend!

We wish you good trades!

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Global Equities Rally, U.S. Dollar Weakens

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Dear traders,

Global equities were on course for the best month on record amid a usually quiet Thanksgiving holiday week.

The U.S. dollar held its decline while speculation that Coronavirus vaccines and a possibly peaceful presidential transition are steps toward normalization in the economy drove U.S. shares higher and the Dow Jones to a record high.

Elsewhere, the euro benefited from the dollar’s weakness and rose back above 1.19 this morning. Also, the DAX was spurred by the market’s rally and touched an early September-high at 13383.

The only currency pair that treated water Tuesday was the GBP/USD remaining within an 80-pips trading range.

Today we have some key events coming up:

USD: Minutes of the most recent Federal Open Market Committee meeting are due in the evening (19:00 UTC)

USD: U.S. jobless claims, GDP and personal spending data (13:30 & 15:00 UTC)

GBP: U.K. expected today to deliver the government’s spending plans for next year.

 

We wish you good trades!

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U.S. Dollar Strengthens on Better-Than Expected PMI Data

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Dear traders,

The best performer Monday was the British pound that rallied as signs the U.K. and European Union are close to agreeing a trade deal. The latest progress in the development of a coronavirus vaccine bolstered the currency’s upward move.

Bulls in the GBP/USD profited while sterling rose to the highest level since early September. Looking ahead, the potential for progress in Brexit talks, growing optimism for a vaccine and fresh fiscal stimulus should keep the cable supported.

We bear in mind, that a Brexit deal is largely priced in to the pound, which is why a breakdown in talks would see a much larger move lower.

The euro experienced a sharp reversal after the U.S. dollar gained traction on better than expected flash PMI data. The monthly PMI report crushed market forecast as it came in at a five-year high.

From a technical perspective, not much has changed in the EUR/USD. Above 1.1920 gains may be extended towards 1.1960 whereas below 1.1790 the euro may slip towards 1.1690.

The U.S. dollar could experience bullish tailwinds in short-term time frames as robust U.S. economic data could downplay the urgency of another fiscal stimulus package or additional accommodation from the Federal Reserve.

 

We wish you good trades!

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No Big Market Moves

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Dear traders,

The British pound rose to a high of 1.3273 Tuesday as the U.K. and European Union edge closer to agreement on longstanding sticking points. A possible breakthrough could be announced as soon as Monday while there is still potential for the negotiations to collapse.

GBP/USD: The cable will now need to overcome the 1.33-1.3310 hurdle and if that bullish breakout happens, we will turn our focus to a higher target at 1.3480. On the downside, the 1.32-level will now play an important role and if the pound falls below 1.3190 we may see a dip toward 1.31.

No Big Market Moves

With the election uncertainty behind us, the market’s focus turned to Covid and the vaccines but we remember that wide distribution of a shot is still months away, which is why big market movements are currently missing. We may get some news on the stimulus front in the next weeks that could breathe new life into the market. We will wait and see.

EUR/USD: We still see a current resistance at 1.1940-50. If the euro, however, falls back below 1.1840 in short-term time frames it may extend losses toward 1.18 and 1.1750.

DAX: Traders should pay attention to breakouts either above 13280 or below 13000 that could generate further bullish or bearish momentum.

 

We wish you good trades!

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