GBP/USD Tests Crucial Price Levels

Dear Traders,

The British pound has broken lower against the U.S. dollar after rejecting the 1.34-hurdle. The cable is still trading within a bullish channel, at least as long as 1.33 holds. We therefore may see a run for 1.3420, provided that the pound remains above 1.3290.

The EUR/USD failed to show any signs of a sustained recovery Monday while the upward movement was limited to a high of 1.1744. As long as the euro holds above 1.1675 we may see a leg higher towards 1.1850. On the bottom side we will pay attention to lower supports at 1.16 and 1.1550.

This week we will see a slew of Bank of England speakers as well as ECB President Mario Draghi who is scheduled to speak in Frankfurt today at 13:00 UTC.

For sterling traders, the U.K. Services PMI due at 8:30 UTC might be of interest, followed by a speech of BoE member Cunliffe.

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NFP Data To Spur USD Strength?

Dear Traders,

Global trade war fears are back in focus after news that the Trump administration was pursuing the metal tariffs against the EU, Canada and Mexico. While the news has led to a slide in the S&P 500 and Dow, the U.S. dollar received only little attention. The greenback is still seen as the top reserve currency but whether it can hold that title in the future remains an open question.

The euro received a slight boost from updates from Italy that an election is basically off the table. The Italian Five-Star Movement and the League parties have reached a new agreement on a possible coalition government. Prime Minister Giuseppe Conte accepted an offer to form a new government with the Eurosceptic Paolo Savona who has been named as EU affairs minister.

Today, all eyes will turn to the U.S. Non-Farm Payrolls report due at 12:30 UTC.  The U.S. economy is expected to have added 190K jobs in May while wages are expected to post modest upticks. An upside surprise in any headline figure of the report could spur the dollar’s strength.

We wish you good trades and a relaxing weekend.

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Risk Aversion Leads To EUR And GBP Sell-Off

Dear Traders,

The fragility of the European Union is back in the spotlight and there seems to be nothing that could stop the euro from falling. The euro broke below crucial support levels against the U.S. dollar and fell to the weakest level in ten months. Whether the euro will extend its tailspin towards 1.1420 or even 1.1350 remains to be seen and hinges on the risk aversion in the market. As soon as risk aversion gives way to a greater risk appetite, the euro may find the strength to recover some of its losses.

The same applied to the British pound, which fell victim to increased risk aversion in the market and dropped towards $1.32. As long as the cable remains below 1.33 we focus on a lower target at 1.3180/70. On the topside, we see a current resistance at 1.3350. For sterling bears, Tuesday has been a very profitable trading day with our short signal providing twice a good profit.

The focus now turns to U.S. data such as the GDP report, scheduled for release today at 12:30 UTC. Greater attention, however, will be paid to the U.S. NFP report Friday. Today’s ADP Employment Change (12:15 UTC) could provide a foretaste of what to expect on Friday.

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EUR And GBP: Bearish Bias Persists

Dear Traders,

The euro traded within a 50-pip range between 1.1750 and 1.17 but despite that limited price range we were able to book a good profit with our daily long signal. Looking ahead, there are no major economic reports out of the eurozone in the next days, which is why we keep tabs on the technical picture in the EUR/USD. As long as the euro remains below 1.1790 and 1.1830, we favor a bearish stance in this pair.

The pound sterling rose to a high of 1.3422 after U.K. retail sales came in better-than-expected. However, that report was not enough to trigger a sustained recovery in the pound given that rate hike expectations are unchanged. Thus, the risk remains tilted to the downside.

With the GBP/USD trading below 1.34 and more importantly below 1.3430, the cable maintains its bearish bias, suggesting that sterling prices may continue to fall. We will wait for price breaks below 1.3360 and 1.3340 to anticipate further losses. Lower targets are seen at 1.33 and 1.3270.

Today, traders will watch the U.K. GDP report at 8:30 UTC and U.S. Durable Goods Orders at 12:30 UTC.

We wish you a beautiful weekend or long-weekend for those who have a holiday on Monday.

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Profitable Sell-Off In EUR/USD And GBP/USD

Dear Traders,

After several days of sluggish price fluctuations, yesterday has proved to be a profitable trading day in particular for short traders of the EUR/USD and GBP/USD.

The British pound continued its slide versus the U.S. dollar on the back of worse-than-expected U.K. inflation data. The annual CPI fell to 2.4 percent from 2.5 percent while the core CPI fell to 2.1 from 2.3 percent. Lower inflation could keep interest rates lower for longer with the Bank of England being in no rush to tighten monetary policy sooner rather than later. Thus, BoE rate hike expectations are pushed back to November.

The pound marked a fresh support at 1.3305 from where a slight recovery started. As long as pullbacks are limited to 1.34 and 1.3450, sterling bears might retain control.

The euro fell below 1.17 after the weak PMI reading put further pressure on the single currency. We now focus on the 1.1810-level which could act as a short-term resistance. A break below 1.1650 could open the door for further losses towards 1.1620 and 1.1550.

The FOMC Minutes had only a limited impact on the dollar’s price action. With the markets widely anticipating a Fed rate hike in June the minutes were not expected to reveal anything new. The only note in the statement that weighed on the dollar was that “it was premature to conclude that inflation would remain at levels around 2 percent”.

Today we have U.K. Retail Sales scheduled for release at 8:30 UTC. Furthermore, BoE Governor Mark Carney is scheduled to speak at the BoE Markets Forum in London.

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Pound Marks Support At $1.34- But For How Long?

Dear Traders,

The U.S. dollar initially rose against the euro and British pound Monday morning but then ended the trading day virtually unchanged. Given these limited bearish movements, there wasn’t much to gain for short traders.

The cable has pushed down to a low of 1.3390 but the pair was able to stabilize above 1.34. Whether the 1.34-barrier will hold, remains to be seen but as long as GBP/USD remains below 1.35 we generally maintain a bearish stance in this pair. A significant break above 1.35 would shift the focus back to a previous sideways trading range between 1.36-1.35.

BoE Governor Carney will testify before parliament this morning at 8:15 UTC. Any new comments on inflation or monetary policy changes could get the pound moving.

The euro bounced off the 1.1715-level and corrected previous losses towards 1.18. The downtrend is still intact and as long as EUR/USD remains below 1.1850 we anticipate lower supports to come in at 1.1680 and 1.16.

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Euro Drops On Italy Concerns

Dear Traders,

The euro extended its bearish movement Wednesday. The euro’s recent weakness is, however, not only due to a strong U.S. dollar but also due to concerns about the political landscape in Italy. Signs that the far-right League and Five Star Movement parties could form a Eurosceptic, populist government in Italy have added to uncertainty in the euro area.

EUR/USD: The euro fell to a low of 1.1763 and if the currency pair is now unable to stabilize above 1.1850 we expect the downtrend to continue until 1.1720/1.1680. A current resistance is seen at around 1.1920.

GBP/USD: The British pound continued to trade within its slight downtrend channel ranging from 1.3590 to 1.3440. Recently, there wasn’t much to gain for day traders of the cable since the pair traded consolidated between 1.3620 and 1.3450. However, we hope for better trading conditions as soon as the pair breaks out of its tight trading range.

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Focus On U.K. Job Report, U.S. Retail Sales

Dear Traders,

Despite the upswing in the euro and British pound, Monday proved to be a fairly quiet trading day with any larger market moves lacking. While the upside potential in the EUR/USD was limited to a high of 1.1996, none of our daily signal entries was triggered in the GBP/USD. With the crucial 1.20-barrier remaining a hart nut to crack for euro bulls, the focus shifts back to the euro’s down trend and the next support around 1.19. If the single currency drops below 1.1880 we may see a continuation of the euro’s down move.

Revisions to the Eurozone GDP Q1 figures are scheduled for release along with the ZEW Surveys today at 9:00 UTC but both reports might take a backseat to the final April CPI release on Wednesday.

The British pound refrained from a sustained climb above 1.36 and fell back towards 1.3550.

On the data front, we have the U.K. jobs figures scheduled for release at 8:30 UTC and these numbers have the potential to spark volatility in the pound, provided that the report surprises. Sterling traders should thus keep an eye on the job numbers this morning. Technically speaking, the GBP/USD still finds itself within a trading range between roughly 1.36 and 1.35. Looking for sustained breakouts, we will keep tabs on prices either above 1.3650 or below 1.3440.

From the U.S. we have Advance Retail Sales scheduled for release at 12:30 UTC, a report that could have a short-term impact on the price action in the dollar.

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Pound Drops On Decreased BoE Rate Hike Odds

Dear Traders,

Thursday has proved to be a high volatile trading day which became most visible in the pound’s price action following the BoE Super Thursday rate decision. While we have focused on a potential short squeeze in the GBP/USD, provided that the Bank of England would have maintained its hawkishness, the opposite scenario happened. The BoE went dovish and disappointed sterling bulls that had hoped for a bullish reversal from the pound’s lows. BoE policy makers decreased their near-term hawkish monetary policy expectations and noted that inflation may have peaked. Inflation and GDP forecasts were lowered. BoE Governor Mark Carney was back to the previous ‘slower and gradual’ rate hike path instead of warning that rate hikes could happen faster than expected.

Consequently, rate hike bets for an August rise fell to 42 percent from 62 percent. The most likely meeting for when a rate hike would occur is probably the November meeting, with a current priced-in probability of 64 percent.

As for the U.S. dollar, U.S. inflation numbers disappointed but, looking at the price action in the EUR/USD and GBP/USD, the greenback refrained from showing any signs of weakness shortly after the numbers were released. However, even though inflation numbers came in weaker-than-expected, the Fed is likely to maintain its current rate hike path.

GBP/USD: The cable bounced off the rising trendline refraining from a climb above 1.3620 and finally headed for a break below the 1.35-support. At the end of the day however, the pound was more or less unchanged against the dollar with any larger swings lacking.

We will now focus on a trading range between 1.3630 and 1.3440. Any breakouts above or below these levels can spur momentum to the respective direction.

EUR/USD: The Euro tested the area around 1.1950 and euro bulls should keep an eye on a potential run for 1.20 now. As long as the euro remains above 1.1880 we favor the upward momentum.

ECB President Draghi will speak in Florence today at 13:15 UTC.

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We wish you good trades and many pips!

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GBP/USD: Preparing For Potential Short Squeeze Scenario

Dear Traders,

After the absence of a major driver or catalyst in the markets, today is loaded with market-worthy data and thus, traders are bracing for higher volatility in most major currency pairs. Top event risk will be the Bank of England rate decision with the BoE’s Quarterly Inflation Report. While the BoE is unlikely to raise interest rates at this meeting, it is the inflation report and the press conference with BoE Governor Carney that garner most attention.

The Bank of England will announce its rate decision alongside the release of the central bank’s inflation report at 11:00 UTC. The press conference will follow 30 minutes later.

Following the complete U-turn in rate hike expectations out of the BoE, the central bank has little choice but to signal a rate hike in August to maintain the bank’s credibility. The risk is therefore tilted to the upside with a potential short squeeze scenario in the GBP/USD. If the BoE, however, disappoint in terms of rate hike speculation deviating from their hawkish bias, the pound will further fall.

Another, no less important, report will be the April Consumer Inflation Report (CPI) from the U.S., which is due shortly after the BoE’s decision at 12:30 UTC. The Federal Reserve debate over a fourth rate hike in 2018 is still ongoing, which is why inflation figures could affect current rate hike speculation. Thus, a surprise in CPI data could have a major impact on the dollar, paving the way for some profit-taking or maybe an extension of the dollar rally.

Let’s take a look at the technical picture:

GBP/USD

The cable traded consolidated between roughly 1.36 and 1.35. The short-term bias is slightly bullish, with the focus now being on an uptrend channel between 1.3615 and 1.3515.  A break above 1.3810 could open the door for accelerated bullish momentum towards 1.40. On the bottom side, the 1.35-support remains a crucial price barrier. If the pound drops below 1.3480 we may see a drift towards 1.3330.

EUR/USD: The euro still trades around the falling trendline of its recent downtrend channel. As mentioned in yesterday’s analysis, the 1.19-barrier could prove an important hurdle for euro bulls now. A break above 1.1910 may encourage bulls for a test of 1.1950. Today’s price action will, however, hinge on the appetite for USD, which is why we focus on U.S. CPI data.

Additional daily and long-term entries are available for subscribers.

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We wish you good trades and many pips!

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