All Quiet In The Market

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Dear Traders,

It has been a quiet start on Monday with the euro being stuck to a 40-pips range and the cable not showing much effort to break below its recent uptrend channel. The British pound found some halt around the lower barrier of its latest upward trend-channel at 1.2465 but it was unable to hold onto that high level and fell towards 1.24 this morning. If the pound breaks also below 1.2390, we expect further losses towards 1.2330 and 1.23. As noted in yesterday’s analysis, the cable will need to break the 1.26-level significantly in order to invigorate fresh bullish momentum.

Sterling traders will watch the U.K. Construction PMI, scheduled for release at 8:30 UTC. This report could have a short-lived impact on the pound.

The euro remained stuck between 1.0680 and 1.0640. We may see some accelerated momentum today but euro traders are unlikely to get any new insights into the ECB’s thinking from ECB president Mario Draghi who is scheduled to speak at 13:30 UTC in Frankfurt. If he does not refer to monetary policy, his speech will be a nonevent for traders. From a technical perspective, we expect the EUR/USD to trade between 1.06 and 1.07 in short-term time frames.

From the U.S. we have Durable Goods Orders due for release at 14:00 UTC but this report is only of secondary importance.

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Euro Trends Downwards While Pound Remains Stable

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Dear Traders,

The euro depreciated against the U.S. dollar and fell below 1.07 while the British pound has shrugged off the U.K.’s process of leaving the European Union. One reason for the pound’s resilience is the fact that an expected slowdown of the U.K. economy has not yet materialized. Inflation seems to be accelerating, paving the way for higher interest rates while investors expect the U.K.’s negotiation talks with the EU to be constructive.

The pound tested the 1.25-level but for the time being, it was unable to hold above that level. A break above 1.2530 could encourage sterling bulls to push the pound for a test of 1.2560. Above 1.26 however, we expect sterling to head for a test of 1.27. A current support is seen at 1.2425. Sterling traders will watch the U.K. GDP report scheduled for release at 8:30 UTC.

The euro knew only one direction on Thursday: downwards. The single currency came under pressure following a report that European Central Bank officials said they are cautious about changing their monetary policy any time soon. Given that dovish message and the slowdown in German consumer prices, there was no reason for euro bulls to justify higher price levels. The EUR/USD could even extend its losses provided that Eurozone CPI data, due for release at 9:00 UTC, comes in weaker-than-expected. Euro traders should also keep an eye on the German Employment report scheduled for release at 7:55 UTC. In short-term time frames we expected the currency pair to trade between 1.06 and 1.0715.

We wish you a wonderful weekend.

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GBP/USD: Upcoming Breakout?

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Dear Traders,

The U.K.’s formal triggering of Brexit has proved to be a non-event for traders. The market showed little reaction to the Article 50-trigger with the pound trading consolidated between 1.2480 and 1.2385. However, the GBP/USD remains a sell on rallies against the background of uncertain prospects for the U.K. economy and, in a countermove, the Federal Reserve’s tightening path.

GBP/USD

In short-term time frames, chances are in favor of upcoming breakouts given the symmetrical triangle. A break above 1.2465 could push the pound towards higher targets at 1.25 and 1.2560, whereas a break below 1.2420 may reinvigorate bearish momentum towards 1.2340.

The U.S. dollar received some support from fresh hawkish Fed comments particularly from Fed President Eric Rosengren who was in favor of a total of four rate hikes this year. The latest round of hawkish comments should serve as a reminder that the Fed is still the only central bank which sees the possibility for additional rate hikes in 2017 amidst a healthy economy growth.

The U.S. GDP report is scheduled for release today at 12:30 UTC and could have an impact on the dollar’s price action.

The EUR/USD traded lower following the Brexit trigger. After dropping below 1.0775 the bearish move came to a temporary halt at 1.0740. Whether we will see further losses in this pair could depend on the German Consumer Price Index, scheduled for release today at 12:00 UTC. CPI data is expected to show a slowdown and this could increase pressure on the European Central Bank to maintain its accommodative monetary policy. If the euro falls below 1.0740 it could extend its losses towards 1.07 and 1.0650. On the upper side, euro bulls may wait for a renewed break above 1.0825 in order to buy euros towards 1.0920.

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Pound Depreciates Ahead Of Brexit Trigger

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Dear Traders,

The biggest story on Tuesday was the trend reversal of the British pound. Sterling reversed shy of 1.26 and dropped sharply towards 1.2350. The sharp sell-off was due to the much-anticipated Brexit trigger which will happen today. The formal Brexit process starts around 13:30 local time when a letter personally signed by U.K. Prime Minister Theresa May will arrive in Brussels. May signed the historical document on Tuesday evening and it will be handed to EU President Donald Tusk today. Tusk will read out a statement at 13:45 (GMT+2) while May will address the U.K. Parliament about the same time. The uncertainty over terms of Brexit could weigh on the pound in the medium-term, so traders should generally prepare for further losses as long as the prospects of U.K. monetary policy tightening remain far off.

From a technical perspective, sterling bears should wait for a bearish break below 1.2340 in order to sell the pound towards 1.21. Nonetheless, there is also a risk of a short squeeze in short-term time frames which could occur through profit taking. We see a crucial resistance zone between 1.2530 – 1.2570 and it would require a renewed break above that area to shift the bias in favor of the bulls.

EUR/USD

The shared currency was unable to break above 1.0875 and therefore fell back towards 1.08. For the time being, the euro is holding above the 1.08-mark but this may change quickly as the Brexit trigger poses a risk to the euro.

Bearish scenario: If the euro falls below 1.0780 it may heads for a test of the lower support-zones at 1.0760 and 1.07. A significant break below 1.0680 could lead to further losses towards 1.06.

Bullish scenario: A fresh break above 1.0875 may prompt euro bulls to buy euros towards 1.0920/50.

The risk is however to the downside.

 

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Can Euro And Pound Hold Onto Their High Levels?

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Dear Traders,

The U.S. dollar fell to its lowest level since November as investors assessed the U.S. administration’s ability to push through promised tax cuts and infrastructure spending. That, in turn, raises doubts as to whether the Federal Reserve can raise interest rates as aggressively as had been priced in. Fed chair Janet Yellen will speak today at 16:50 UTC and dollar bulls fear that fiscal uncertainty may discourage Fed officials from taking an aggressive stance towards higher rates. In case Yellen’s tone is more cautious, the dollar could tend to fall.

Apart from Yellen’s speech, U.S. Advance Goods Trade Balance (12:30 UTC) and Consumer Confidence (14:00 UTC) are scheduled for release.

The euro broke above 1.0870 and extended its gains to a high of 1.0906. In case of a renewed break above 1.0875 we expect further bullish momentum, sending the euro higher towards 1.0920/50. A current support is however seen at around 1.0820.

The pound sterling marked a fresh high at 1.2615 while sterling traders have shrugged off tomorrow’s Brexit trigger. On Wednesday, U.K. Prime Minister Theresa May will formally trigger the start of two years Brexit negotiations and while this event poses a risk to the currency the British pound remained stable around 1.2550. Nonetheless, we expect the upward movement to be limited to 1.2650 in short-term time frames. The pound may tend to test that resistance area before we will see any major pullback.

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Euro & Pound: Are We Finally Seeing The Long Overdue Correction?

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Dear Traders,

Trading has been quiet with the dollar-trade losing its attraction. Fed Chair Janet Yellen did not comment on monetary policy when she spoke at a conference in Washington yesterday and market participants are skeptical about whether President Trump’s pro-growth policies will pass through Congress when Republicans did not even agree on a health-care bill.

U.S. Durable Goods Orders are scheduled for release today at 12:30 UTC but given the uncertain situation in the greenback, we doubt that we will see larger market movements today.

Gains in the EUR/USD were capped at 1.08 and given the fact that the euro was unable to overcome the 1.0820-boundary significantly, we expect further losses towards 1.0730/10. Euro bears should however wait for a renewed break below 1.07, which could send the currency pair tumbling towards 1.0620. On the upside we will focus on a break above 1.0805 which could lead to a subsequent test of the euro’s resistance level at 1.0850.

From the Eurozone we have the Manufacturing PMI reports scheduled for release at 8:30 and 9:00 UTC, but these reports could be of minor importance.

The pound sterling was on a roller-coaster ride after U.K. economic data came in better than expected. The GBP/USD surged from a low at 1.2463 to a high of 1.2531 but sterling bulls were unable to hold onto that high level. A correction was in any case long overdue and so we saw the pound falling back below 1.25. We will now focus on the 1.2430-level. A break below that short-term support could send the pound lower towards 1.2390 and 1.2340. On the topside, a short-term resistance is now seen at 1.25.

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

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Pound Consolidates – Focus Now On CPI Data

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Dear Traders,

Those who had been looking for sustained breakouts or extended gains on Monday had been disappointed by the market’s consolidation phase. The pound sterling traded sideways within a 100-pip trading range between 1.2435 and 1.2335. Given the fact that the pound was unable to hold above the 1.24-level, we expect upcoming bearish momentum in the GBP/USD. As long as sterling remains below 1.2430 we see a higher likelihood of a downside break below 1.23 which could accelerate bearish momentum towards 1.22 and possibly even 1.2050.

How the cable will trade within the next days will mainly hinge on the Brexit trigger, which will happen on March 29. Prime Minister Theresa May plans to invoke Article 50 of the Lisbon Treaty next Wednesday, starting two years of exit talks. A hard Brexit will be negative for the currency, so traders should prepare for downward movements. However, before Article 50 is triggered, the pound could retest the 1.24-mark and possibly even the 1.2470-level on stronger inflation figures. U.K. Consumer Prices are scheduled for release at 9:30 UTC and a rise in inflation could help pushing the pound higher in the short term.

The euro traded consolidated between 1.0775 and 1.0720. A renewed break above 1.0770 may prompt euro bulls to buy the single currency toward 1.0815. A break below 1.0720 however, could lead to further losses towards 1.0680. With no market-moving economic reports from the Eurozone, we expect the price action to be limited to a range of 1.0820 – 1.0680.

Towards the end of the North American trading session some Fed officials are scheduled to speak. Any hawkish comments could have a positive impact on the U.S. dollar.

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U.S. Dollar Weakens On Unchanged Fed Forecasts

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Dear Traders,

The market’s response to the FOMC announcement was as expected. The Federal Open Market Committee raised its benchmark interest rate to a range of 0.75-1.00 percent and continued to project two more hikes in 2017. In a nutshell, since the Fed’s rate hike path remained unchanged from December 2016 there was no new hawkish guidance which would have helped to boost the U.S. dollar. Thus, yesterday’s rate hike is interpreted as a ‘dovish hike’.

The U.S. dollar slipped on the unsurprising decision as well as unchanged forecasts and both euro and pound climbed toward higher targets in return. The euro touched a high of 1.0746 while euro bulls were able to pocket a good profit. The euro received an additional boost after a large majority of Dutch voters have rejected anti-European populists. Conservative Dutch Prime Minister Mark Rutte has beaten his far-right rival Geert Wilders in the Dutch elections.

On balance, that’s good news for the euro but what can we expect from a technical perspective? There could still be some room for further upward momentum toward 1.08. If the euro climbs above 1.0750 it may head for a test of 1.08 but gains could be limited until that level. For the euro to continue to rally, it may require a break above 1.0830. If the 1.08-level remains unbroken we expect some corrections towards 1.0650 and 1.0550.

Eurozone Consumer Prices are scheduled for release at 10:00 UTC but those figures are not expected to surprise the market.

The British pound slightly strengthened on a weakening greenback but gains have been limited until the 1.23-resistance area. In case the pound will be able to overcome that hurdle we anticipate a run for 1.24.  On the downside, we will wait for a significant break below 1.22 in order to favor a bearish bias. The 1.2230/10-area could act as a current support-zone for the pound.

Today’s major risk event will be the Bank of England’s monetary policy announcement at 12:00 UTC. While no changes are expected, the BoE’s statement could trigger large market moves in the GBP/USD. Let us be surprised.

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Wild Wednesday: Anything Is Possible, Even A Disappointment Despite Fed Tightening

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Dear Traders,

It’s Fed-decision day and the waiting finally comes to an end. After several days of range-bound conditions and low volatility, traders now prepare for volatile swings and trend-setting movements. The probability of a Federal Reserve rate hike is completely priced in while the U.S. dollar shrugged off the bullish bias. The greenback’s reluctance to commit to further tightening suggests that dollar bulls might be unimpressed by the FOMC policy announcement.

The Fed’s monetary policy decision will be announced at 18:00 UTC but the impact on the dollar could be muted as traders appear to be well prepared for a March rate hike. The spotlight however, will be on the following press conference with Fed Chair Janet Yellen and revised rate path projections. Economists expect the path for rates to include three hikes this year and in case of a steeper tightening path, the dollar will rally. However, there is a greater potential for disappointment and if Yellen sounds more balanced, preferring a wait-and-see mode, the dollar will be vulnerable to losses.

All eyes will be on the FOMC announcement but before that major risk event, traders should also pay attention to U.S. Consumer Prices, scheduled for release at 12:30 UTC.

Apart from the Fed decision, elections in the Netherlands will draw the focus back on the euro’s resilience. The Dutch vote is the biggest test of the strength and resilience of the populist surge this year. The euro could therefore tend to fluctuate sharply towards the end of the American trading session.

EUR/USD

From a technical perspective, we expect bearish momentum to accelerate if the euro falls below 1.0570. Lower targets could then be at 1.05 and 1.0380. A short-term resistance is however seen at around 1.0650. If the euro significantly breaks through that resistance-level we may see further gains towards 1.07 and 1.0790.

 

GBP/USD

Today’s short squeeze in the British pound was an impressive reminder that there is still potential for exaggerated movements. The pound surged to a high of 1.2257, which is considered a current resistance-zone in the cable. Above 1.2260 we may see further gains toward 1.23 but everything is possible today and the price action will also hinge on the appetite for USD. We generally anticipate the cable to remain within a range between 1.24 and 1.21 for the time being. On the bottom side, the pound will need to break below 1.2080 in order to invigorate fresh bearish momentum.

The U.K. employment report is due for release at 9:30 UTC and could have a minor impact on the pound.

 

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Dutch Election Cast Shadows Over EU-Future

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Dear Traders,

Financial markets got off to a relatively quiet start on Monday as investors remained risk-averse ahead of major risk events on Wednesday.

The euro surged briefly to a high of 1.0714 before it started giving up some of its gains. Meanwhile, the outcome of the Dutch election threatens to cast more doubts over the future of the European Union. With only one day to go until the Dutch election on March 15, the euro came slightly under pressure. A victory of the right-wing Populist Party PVV (Party for Freedom) could mean further euro losses. Euro-skeptic Geert Wilders heads up the populist Party of Freedom, which has gathered momentum on growing nationalist and anti-Islamic sentiment.

Traders should pay attention to a renewed break below 1.06 which could possibly send the euro tumbling towards 1.0490. On the upside, the 1.08-level remains in focus.

Today, the only interesting piece of economic data will be the German ZEW Survey, due for release at 10:00 UTC.

The British pound initially strengthened against the U.S. dollar but it was unable to overcome the resistance-level at 1.2250. The U.K. Parliament on Monday passed legislation allowing the government to invoke Article 50, which means the formal start of Brexit. Prime Minister Theresa May plans to trigger Brexit in the last week of March. Thus, the pound could be vulnerable to further losses in anticipation of the possible effects of a Brexit. An important support is seen at 1.21 and the cable will need to break below 1.2080 in order to spark fresh bearish momentum.

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We wish you good trades and many pips!

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