USD Recovers As Both EUR And GBP Fail To Overcome Resistances

Dear Traders,

The U.S. dollar experienced a rebound last Friday after the euro and British pound were unable to overcome crucial resistance levels. The euro rejected again from the upper barrier of its current sideways trading range, even though the single currency took a short glimpse above 1.2550 before it reversed direction. For the euro to regain strength it would need a sustained break above 1.2650 which could result in further gains towards 1.28. As long as the EUR/USD remains stuck between 1.26 and 1.22 the outlook is neutral.

The British pound bounced off the upper trendline of its recent downward channel around 1.4150 and traders now wonder whether there will be further losses towards 1.37 and 1.3670 now. As long as the downward channel remains unbroken we see a higher likelihood of bearish momentum driving the pound towards 1.37. A renewed break above 1.4140, however, may encourage sterling bulls for a run towards 1.4250.

It could be a quiet start to the new week as U.S. markets will be closed for the President’s Day holiday today. Looking out for fundamental themes that could impact the price action in major currency pairs in the days ahead, we have the FOMC minutes (Wednesday) and a range of Fed as well as BoE speakers on tap this week.

Sterling traders should keep an eye on key BoE members speaking (today and Wednesday) as well as on the U.K. jobs report due for release on Wednesday.

BoE Governor Mark Carney is scheduled to speak at an event in London today at 17:45 UTC.

We wish you a good start to the new week and profitable trades in the days ahead.

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U.S. Dollar Back In Fashion

Dear Traders,

The worst performer last Friday was the British pound which came under increased selling pressure, dropping to a low of 1.3764. The reason for the sharp sell-off in the GBP/USD was not only the U.S. dollar which came back into fashion amid the sell-off in the equity markets, but also Brexit discussions. On Friday, the EU’s chief negotiator Michel Barnier warned that a “Brexit transition is not a given if disagreements persist”. The pound subsequently gave up its gains that it scored after the BoE’s hawkishness on Thursday.

GBP/USD

We saw the cable recently trading with a downward tilt, loosing further ground after the pound was unable to stabilize above 1.40. Whether there will be further losses towards 1.3650 remains to be seen and hinges on the market’s appetite for dollars. If the pound falls below 1.3740 we expect further losses towards 1.3650 and 1.36. If the pound, on the other side, climbs back above 1.40 it could extend its upward movement towards 1.4170. Given the overall uptrend and with the support around 1.3750 still intact we may see some buyers sweeping in.

This week, the spotlight turns to Consumer Price Reports from the U.K. and USA. The U.K. Consumer Price Report is due for release Tuesday and is expected to have a significant impact on the pound’s price action. On Wednesday we have the U.S. CPI report, which is expected to show that headline and core inflation rates ticked down. If inflation data, however, surprises to the upside, the greenback will receive a further boost.

EUR/USD

The euro remains above 1.22 but for how long? The single currency was able to hold above the 1.22-treshold but chances are currently in favor of upcoming bearish potential, at least as long as the euro remains below 1.2350. We will focus on a significant break below 1.22 in order to anticipate further bearish momentum. Lower targets could then be at 1.21 and 1.2050. If the euro is however able to stabilize above 1.2350 it could head towards 1.25.

There are no major important economic reports from the Eurozone this week. Wednesday’s GDP reports are not expected to have a significant impact on the euro.

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Will The Dollar’s Recovery Be Sustained?

Dear Traders,

The U.S. dollar received a boost from Friday’s Non-Farm Payrolls report which came in above expectations. The biggest question among traders is now, whether the dollar’s recovery will be sustained or whether the recent downward move in both EUR/USD and GBP/USD could turn out to be a bear-trap. As usual, we will turn our focus to the technical picture in order to evaluate profitable trading opportunities and potential shifts in the market’s bullish bias. For more details see our technical analysis below.

This week’s biggest event will be the Bank of England’s Super Thursday, as this will be the BoE’s first rate decision with a press conference since the central bank hiked rates on November’s Super Thursday. While no one expects a change in interest rates this time, the focus will be on the wording of the statement and BoE Governor Carney’s tone in the press conference. The other main event is the release of the BoE’s Quarterly Inflation Report at the same time as the meeting.

Apart from the BoE’s Super Thursday there is little economic data on the calendar this week.

The U.K. Service Sector PMI, due for release today at 9:30 UTC could have a minor impact on the pound’s price action ahead of the BoE meeting Thursday.

Furthermore, the ISM Non-Manufacturing Index is scheduled for release today at 15:00 UTC but with payrolls already released, this report is not expected to have a significant impact on the dollar.

From the Eurozone, ECB President Mario Draghi presents annual report to the European Parliament today at 16:00 UTC.

GBP/USD

While the cable’s uptrend is still intact bullish momentum came to a halt after the pound failed to close above 1.43. We now see a potential double-top pattern that could point to further bearish momentum, provided that the pair falls below 1.3980.

EUR/USD

The euro remained confined to a sideways trading range between 1.2530 and 1.2330. While the current uptrend channel is still unbroken, we will pay attention to the euro’s sideways range, focusing on breakouts above 1.2540 or below 1.2330.

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EUR/USD And GBP/USD Consolidate: Further Bearish Momentum Ahead?

Dear Traders,

While the U.S. dollar became recently an unloved investment, other major currencies benefitted from global growth and the weakening dollar. Thus, both major currency pairs EUR/USD and GBP/USD experienced strong uptrends, climbing towards fresh highs. Many market participants now wonder, whether there will be a follow through and extension of gains or whether there could be sharp corrections following a series of new highs. While traders should generally follow the primary trend, it is important to focus on technical barriers and previous resistance and support zones to evaluate the prospects of profitable movements. Let’s take a quick look at the technical picture in our chart analysis below.

Furthermore, there need to be catalysts on a fundamental basis to spur momentum to the respective direction. This week could be characterized by the search of a catalyst spurring further bullish momentum or leading to corrections.

We have the Federal Reserve’s FOMC statement on Wednesday but this month’s meeting could prove a nonevent as there is no press conference while no changes are expected. The market will look for hawkish hints suggesting the Fed will prepare for three, perhaps even four, rate hikes this year. Today we have the Fed’s favored inflation gauge, the PCE deflator scheduled for release at 13:30 UTC. This reading could have an impact on the dollar ahead of Friday’s Nonfarm payrolls report.

From the Eurozone, we have the 4Q GDP report (Tuesday), the region’s inflation and labor market data (Wednesday) scheduled for release this week.

As for the pound sterling, traders will listen to BoE Governor Carney, who will speak before the U.K. Parliament in London Tuesday. On the same day, U.S. President Trump will deliver his first State of the Union address.

In summary, it could be a volatile trading week even though the chances are currently in favor of consolidative movements, rather than major breakouts.

EUR/USD

The euro failed to hold above 1.25, which is why we saw some pullback towards the current support zone around 1.2360. We will now keep an eye on the 1.2350-1.23-area which could act as a near-term support zone. If the single currency is, however, able to climb back above 1.25, we expect further gains towards 1.26 and 1.2650.

GBP/USD

The British pound corrected some of its gains and dropped back towards 1.41. Sterling bears should pay attention to price breakouts below 1.4080 which could lead to further losses towards 1.40 and 1.3950. If the pound climbs back above 1.42, bulls could regain control, driving the cable towards 1.4270 and possibly even 1.44.

We wish you a good start to the new week and many profitable trades!

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ECB Meeting Will Be Front And Center For Euro Traders

Dear Traders,

Market participants brace for bearish reversals in EUR/USD and GBP/USD ahead of Thursday’s ECB meeting and important data releases from the U.S. and U.K. due on Friday.

The biggest question in the market this week will be whether ECB President Mario Draghi is keen to talk the euro down. While the ECB is not expected to announce any substantive change in policy, the press conference could bring significant bearing on flows in the euro. On Thursday we will know more and until then we might see the euro favoring a slight bearish tilt.

Elsewhere, the euro received some small boost from hopes of a grand coalition in Germany. The Social Democrats (SPD) voted to hold formal talks with the CSU/CDU block after months of uncertainty following last year’s election.

The U.S. dollar, on the other side, has largely shrugged off a government shutdown that began in the absence of a budget deal on Friday.

As for the pound sterling, U.S. dollar weakness and the rising prospects of an agreed Brexit deal have spurred bullish momentum in the GBP/USD. While the psychologically important 1.40-level could be a hart nut to crack for sterling bulls, chances are currently in favor of a minor setback. Important U.K. economic data is due on Wednesday with the U.K. labor market report followed by the GDP reading on Friday.

EUR/USD

The pair recently traded within a sideways trading range between 1.23 and 1.2165. We will now focus on price breaks above 1.23 and further 1.2365 in order to maintain a bullish stance. If the euro drops below 1.2165 it could fall towards 1.21 and further 1.2050.

GBP/USD

Like the EUR/USD, the cable has been in a sideways trading range and traders should keep tabs on price breaks above 1.3950 or below 1.3740.

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Strong Uptrend In Both EUR And GBP While USD Weakness Dominates

Dear Traders,

The euro experienced a strong increase of more than 3 percent versus the U.S. dollar following last week’s ECB minutes that hinted at a potentially faster than previously anticipated QE exit. Moreover, signs that progress is being made in German coalition talks bode well for the single currency. The euro climbed steeply and stabilized well above 1.22.

The focus now shifts to the final Eurozone inflation print of 2017 due tomorrow. If inflation data comes in at 1.4 percent y/y from 1.5 percent y/y it could give traders an excuse to take profit on euro long positions, leading to a short-term correction in the euro’s strong uptrend.

Also, the British pound strengthened against the U.S. dollar on encouraging Brexit news and jumped above 1.38. The pound rose steeply against the weak U.S. dollar ahead of today’s U.K. inflation numbers. The CPI figure (due at 9:30 UTC) is expected to tick down to 3.0 percent but given the strong uptrend, sterling bulls could be looking for an opportunity to buy GBP at lower price levels.

The U.S. dollar, however, is burdened by the general market trend that capital is flowing to riskier assets and other economies that are looking to normalize their monetary policy even if other central banks are not on the same rate hike path like the Federal Reserve. Given the increased risk appetite, USD weakness could continue over the medium-term even though the dollar’s outlook is not negative.

The technical picture in the EUR/USD and GBP/USD looks pretty much the same.

The uptrend is strong while USD weakness dominates but near-term corrections are becoming more likely as both pairs approach overbought territory, shown in the RSI chart.

EUR/USD                             GBP/USD

 

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EUR/USD And GBP/USD In Tight Ranges; Breakouts Imminent?

Dear Traders,

Friday’s NFP report gave dollar bulls little reason to celebrate. While the U.S. jobless rate held steady and wages picked up slightly, payrolls gain fell short of expectations with nonfarm payrolls rising only 148K in December. As expected, the market’s reaction to Friday’s report was muted. This is not least due to the fact that the appetite for monetary policy speculation has shifted out of favor of the U.S. dollar. While the Federal Reserve will continue to be the most hawkish central bank, investors are deterred by political risks and the scandal in the U.S. government, spurring concerns about any US-investments.

The dollar initially fell after Friday’s job report but was later able to stabilize against the euro and pound sterling.

At the opening of this week we see both EUR/USD and GBP/USD trading within narrow price ranges. The economic calendar this week is relatively light in terms of market moving events.

U.S. inflation data will be the most interesting piece of economic data this week but the CPI report (due on Friday) is forecast to show a muted price growth, giving dollar advocates no reason to assume faster Federal Reserve tightening in 2018. With this in mind, we still tend to expect further upside momentum in both major currency pairs but recommend traders to keep an eye on important price barriers, shown in our technical chart analysis below.

EUR/USD

The euro remained confined to its current trading range between 1.2090 and 1.20. If the euro drops below 1.1990 it may extend its slide towards 1.1930 and 1.19. In the bullish case of a break above 1.2090 we anticipate further bullish momentum towards 1.2135.

GBP/USD

The cable formatted an ascending triangle in the 4-hour chart, suggesting upcoming bullish momentum in the case of a sustained break above 1.3590. If the pound, however, drops below 1.3540, the bias may change in favor of the bears. Next lower targets could be at 1.35 and 1.3450.

 

 

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EUR/USD And GBP/USD Pullbacks: Is This The End Of The Uptrend?

Dear Traders,

A happy new year to all of you! We hope you had a perfect start into 2018 and wish you all the best for a successful year with many profitable trades.

What happened during our absence from the market? The U.S. dollar was broadly lower against its major counterparts driving both major currency pairs EUR/USD and GBP/USD higher. When market participation is thin there are often formations of extended trends even if major market drivers are lacking. Thus, the euro and British pound followed a clear uptrend since mid-December while heading towards new highs. The euro broke above 1.20 and rose to a high of 1.2081 while the pound took the hurdle at 1.3550 and then tested the 1.36-barrier. Yesterday, however, the inevitable happened and the U.S. dollar attempted a technical rebound while ending the trading day higher against the euro and pound. Is this the end of the current uptrend in both major currency pairs? Let’s have a look at the current chart picture in our technical analysis below.

The minutes from the December FOMC meeting did little to alter current rate hike expectations. Having only hiked in December, the Federal Reserve is not expected to raise interest rates at their next FOMC meeting. The market is currently pricing in a 60 percent chance of a March rate hike.

Tomorrow’s Nonfarm payrolls report is the highlight of the first week of January. However, market participants may return only after this holiday-shortened week, which is why we do not expect exaggerated swings from the U.S. jobs data.

Today we have the ADP payrolls due for release at 13:15 UTC, a report that could serve as a small foretaste of tomorrow’s jobs report.

EUR/USD

The euro trended upwards since mid-December and true to the motto “the trend is your friend” we expect further gains in this pair unless the euro breaks below its uptrend channel. We currently see the euro trading within the resistance zone between 1.21 and 1.20. If the euro climbs above 1.2085 it may extend its gains towards 1.2130.

GBP/USD

The pound sterling experienced its first pullback against the greenback yesterday after several days of steady price increase. Here too, we stick to the motto “the trend is your friend” and expect further gains unless the pound breaks below 1.3450. With the cable remaining above 1.3450 we will focus on a higher price target at 1.3650.

Sterling traders should have an eye on the U.K. Services PMI due at 9:30 UTC today.

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Market Shrugs Off Congressional Passage Of U.S. Tax-Cuts

Dear Traders,

The market shrugged off news that the U.S. Senate and House had passed the long-anticipated tax-reform with the U.S. dollar showing little response to the milestone that investors had been waiting for since the 2016 U.S. election. The reasons for the market’s muted reaction were on the one hand the liquidity drain as we head into the holidays, on the other hand the fact that the outcome has been already priced in. Investors will now turn their focus to the longer-term impact the tax reform will have on the U.S. economy.

GBP/USD

The British pound remained confined to a narrow trading range between 1.3420 and 1.3350.

Technically speaking, we still see the risk tilted to the downside.

EUR/USD

The euro rallied to a high of 1.1901 while we were able to book a good profit by trading our recent long entries. Despite lower liquidity there was a higher degree of risk appetite in the market driving the euro higher against the greenback. We will now pay attention to a potential break above 1.1925/35 which could lead to further gains towards 1.20 and 1.21. For bearish momentum to accelerate it would need a break below 1.1760 but more importantly below 1.1710.

Today, all eyes will be on the U.S. GDP revisions and the Philadelphia Fed’s manufacturing index, both reports due at 13:30 UTC. In case of any surprises the dollar could respond with volatile swings.

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USD Slips On Fed Rate Hike, Focus Now On ECB And BoE Rate Decisions

Dear Traders,

Not surprisingly, the U.S. dollar retreated on the ‘buy the rumor, sell the news’ basis. The Federal Reserve announced a rate hike and further maintained a forecast for another three rate hikes in 2018. While this is considered a clear hawkish outcome, the only problem was inflation. While the Fed lifted its estimate for growth next year to 2.5 percent from 2.1 percent, policy makers are somewhat concerned about low inflation. While some analysts might argue that these inflation concerns have led to the sell-off in the dollar, we believe that profit taking on dollar positions have had a greater impact on the greenback’s price action post-FOMC.

However, we got what we have been looking for and were able to book a good profit by trading our long entries. The GBP/USD produced the largest profit yesterday with our long trade hitting a profit target of 100 pips.

There might be another round of higher volatility today, as the focus turns to the ECB and BoE rate decisions. While most attention will be paid to the European Central Bank decision and ECB press conference, the ECB is unlikely to change its monetary policy standing. The central bank is expected to reveal details of plans to taper the ECB’s asset purchases and ECB President Mario Draghi will comment on the outlook for 2018 at the ECB press conference. While the ECB has no intention to raise rates until QE ends, the euro could be vulnerable to some upside swings given speculation over the future outlook.

The ECB rate decision is scheduled for 12:45 UTC but this event is not expected to act as a market mover. More interestingly will be the ECB press conference 30 minutes later.

EUR/USD

As mentioned in previous analysis, we saw chances of an upside swing as long as the euro remains above 1.17. This assumption has proved correct so far and the euro might extend its recent gains towards 1.1930 and possibly even 1.2050, provided that euro bulls are keen to push the single currency higher on the ECB outcome.

Sterling traders will pay attention to the Bank of England’s monetary policy announcement at 12:00 UTC. Having already raised interest rates at the last BoE meeting, the BoE is expected to keep monetary policy unchanged in the coming months. However, risk appetite could get the pound moving. If the pound is able to climb above 1.3550 it could extend its gains towards 1.3650 and 1.37. For bearish momentum to accelerate it would need a break below 1.33.

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We wish you good trades and many pips!

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