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 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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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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All Eyes On U.K. Inflation Numbers

Dear Traders,

Yesterday’s trading was not to our liking and amidst the choppy performances in both EUR/USD and GBP/USD there was nothing to gain for traders.

Traders now brace for more volatile and hopefully more profitable movements in the GBP/USD. Today brings the U.K. Consumer Price Report, due at 9:30 UTC and the expectation is for January inflation to come in at 2.9 percent. If we will see a number above 3 percent, the pound will rise. If inflation numbers however disappoint we could see the pound tumbling towards 1.3740.

GBP/USD

From a technical perspective we see the chances in favor of upcoming breakouts this morning. Prices narrowed, formatting a symmetrical triangle in the 4-hour chart. Based on that triangle we will pay attention to price breakouts above or respectively below that pattern. A higher target could be around 1.3980 whereas a lower target could be around 1.3740.

EUR/USD: The euro traded resilient above 1.2235 but bullish momentum was not enough to push the pair beyond 1.23. If the euro rises above 1.2330/40 we expect accelerated bullish momentum towards 1.24, while on the bottom side, the 1.22-support remains in focus.

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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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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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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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FX Market Less Influenced By Equity Selloff And Subsequent Rebound

Dear Traders,

The Forex market was less influenced by the selloff in equities at the beginning of this week. While the recent crash and subsequent recovery in equities have sparked a wave of volatility in global markets, the moves in forex have been more conservative.

The EUR/USD remained resilient and ended the trading day virtually unchanged after bouncing off near the 1.2310/00-support level. As long as the euro trades between 1.25 and 1.23 there is nothing new to report.

The GBP/USD dropped amid heightened volatility towards 1.3830 from where a relief rally started, erasing earlier losses with a rebound towards 1.40. At the end of the day, the pound ended the trading unchanged against the dollar. Traders should now prepare for larger swings with Brexit talks and Super Thursday looming.

GBP/USD

Looking at the daily chart we see that bearish momentum is fading after the pound stopped its fall above 1.3830. While we expected lower targets to be at 1.3830 and 1.38, we now prepare for potential pullbacks. If the pound climbs back above 1.40 and is able to stabilize above that threshold, we anticipate further bullish momentum towards 1.42 and possibly even a break above 1.43. That bullish scenario is however not a foregone conclusion as sellers may re-emerge.

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Greenback Continues Recovery But Today It’s Turn-Around Tuesday

Dear Traders,

The U.S. dollar continued its recovery against all major currency pairs and thus, pairs like EUR/USD and GBP/USD trended lower at the start of this week. While short traders were able to book a profit yesterday we recommend a cautious approach when expecting further bearish momentum. On so-called ‘turn-around Tuesdays’ there is a risk that we may see some pullback following Monday’s decline.

GBP/USD: The cable broke below the psychological level of 1.40 and, as mentioned in our yesterday’s analysis, chances could be in favor of the bears now. A next lower target could be around the 1.39-barrier and if 1.39 breaks, the pound may drift lower towards 1.3830/00.

For bullish momentum to accelerate, the pound would need to climb back above 1.4030.

As for the EUR/USD, we still see the pair trading within its recent sideways trading range while remaining above 1.2335. As long as 1.23 holds, we anticipate pullbacks towards 1.2430/40. Higher resistances are seen at 1.2480 and 1.2540. If the euro, however, falls below 1.2290, we expect further losses towards 1.22.

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We wish you good trades and many pips!

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