EUR/USD Remains Below 1.18, GBP/USD Faces 1.33

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Dear Traders,

The euro ended the trading day virtually unchanged against the U.S. dollar after a bullish reversal towards 1.18 has proved short-lived. We now expect the EUR/USD to trade lower towards 1.1680 unless we see a sustained break above 1.18 and farther 1.1840, which would shift the bias in favor of the bulls.

The GBP/USD followed its short-term upward trend channel (see yesterday’s analysis) and rose to a high of 1.3280. If the cable is able to hold above 1.32 we expect further gains towards 1.3310 and possibly even 1.3325. But irrespective of the technical outlook, any new Brexit headlines or speculation about the Brexit progress will affect the cable’s price action in the near-term.

Sterling traders should keep an eye on the Bank of England testimony at 10:00 UTC. Several BoE officials are scheduled to testify before Parliament and if there are indications of further monetary policy normalization in 2018, the pound could soar.

Federal Reserve Chair Janet Yellen is scheduled to speak later today at 23:00 UTC but her comments may have little impact on the greenback’s price action as she announced her retirement from the Fed in February after Jerome Powell has been sworn into office.

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USD Weakness Sends EUR And GBP Soaring

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Dear Traders,

While the House passed its version of tax bill Thursday, the U.S. dollar was little impressed and plunged during the Asian session amid low trading volumes.

The EUR/USD traded higher in the early European trading hours and we now focus on the 1.1850-barrier, which could prove crucial in terms of further bullish momentum. If the euro is able to stabilize above 1.1850, the next target is 1.1905. Sellers should, however, wait for a break below 1.1720 in order to sell euros towards 1.1670 and 1.1580.

Most attention will be paid to a speech of ECB President Mario Draghi today at 8:30 UTC, which could affect the euro’s price action.

The British pound soared on new Brexit optimism. After the U.K. has shown a “willingness to conclude a positive outcome” according to German MEP Manfred Weber, the EU is growing more confident that the current Brexit impasse will be broken and that exit talks will progress. While there might be some room for further gains in the GBP/USD, we bear in mind that as long the pair remains range-bound between 1.3340 and 1.30 there is no directional bias.

We wish you a nice weekend.

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The Dollar’s Fate Is In The Hands Of The U.S. Tax Reform Bill

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Dear Traders,

U.S. inflation data, at the end of the day, did not have a major impact on the U.S. dollar with the greenback ending the trading day virtually unchanged against the euro and British pound. The EUR/USD soared to a high of 1.1860 before it fell back below 1.18. Our assumption of a slight extension of gains in the EUR/USD has proved correct but the sharp intraday reversal could cause euro bulls to run out of breath now. While the 1.1910-Level remains a crucial resistance on the topside, the euro could now struggle to overcome the 1.1805-hurdle. If the single currency is able to stabilize above 1.18 we may see a run for 1.19 but with bullish momentum running out of steam the euro may head for 1.1730.

Euro traders should keep an eye on the Eurozone Consumer Price report due at 10:00 UTC, which could have a minor impact on the euro’s price action.

The current price action in the GBP/USD frays the nerves of day traders. The pair trades without any discernable direction and for traders looking to assign a directional approach, we recommend waiting for price breakouts either above 1.3270 and 1.3350 or below 1.31 and 1.3020.

Sterling traders should pay attention to a round of Bank of England speakers including BoE Governor Carney who is scheduled to speak at 14:00 UTC.

Apart from market-moving topics like Brexit and monetary policy, the fate of the U.S. dollar is in the hands of the U.S. tax reform. Today, the House will vote on its tax-overhaul bill, aiming to take the most concrete step toward overhauling the American tax system. House Republicans aim to get the tax reform done by year-end and that is exactly what dollar bulls want to see. How the dollar will trade in the near-term could therefore hinge on the outcome of today’s vote.

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Monetary Policy Speak And U.K. CPI Data Could Boost Risk Appetite

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Dear Traders,

The price trend in both GBP/USD and EUR/USD remains disappointing overall. The price of the euro has barely changed with the currency pair still oscillating around 1.1670. The British pound found some halt near 1.3060 and ended the trading day above 1.31.

The lethargic market situation might soon come to an end as market participants brace for higher volatility ahead of today’s upcoming high-profile event. The Heads of the European Central Bank, Federal Reserve and Bank of England are scheduled to speak on a panel in Frankfurt at 10:00 UTC. Chances are slim that policymakers will reveal anything new that the market does not already know but traders should prepare for heightened volatility around this event. If none of today’s speakers touches on monetary policy, the round table discussion will be a non-event for traders.

Shortly before that, sterling traders will pay close attention to the U.K. Consumer Price Report at 9:30 UTC. If inflation data beats expectations the pound could soar towards 1.32 and 1.3250. On the bottom side we will wait for a break below 1.3020 and more importantly 1.30.

EUR/USD

In short-term time frames the euro seems to be primed for an upside breakout. If the price climbs above 1.1680 we may see some bullish continuation towards 1.1715/25. For bearish momentum to accelerate the single currency must significantly drop below 1.1640.

 

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USD Dips On Concerns Over Tax Cut

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Dear Traders,

We finally saw larger market swings Thursday with the EUR/USD finding directional bias toward the North.

The catalyst for the weakening USD was news the U.S. Senate would delay tax cuts to the corporate rate until 2019 and while a delay is not what dollar bulls want to hear right now, they sold dollars on the news.

EUR/USD: We got the price breakout we were looking for in yesterday’s technical analysis. After the break above 1.1605 the euro gained ground against the dollar and rose towards 1.1655. If the euro breaks above 1.1660 we may see a run for 1.1685 and possibly the crucial resistance zone of 1.17-1.1730. On the bottom side, we focus on dips below 1.1570 and 1.1550, that could reinvigorate fresh bearish momentum.

GBP/USD: The price action in the cable remains messy. As long as there is no directional bias, traders may have to struggle with false breakouts. We are still looking for profitable price breakouts either above 1.3165 or below 1.3090.

U.K. Manufacturing Production figures are scheduled for release at 9:30 UTC and could have a minor impact on the pound.

From the U.S. we have the University of Michigan Consumer Sentiment due for release at 15:00 UTC but this report is not expected to have a major impact on the dollar.

We wish you good trades and a beautiful weekend.

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Forex Market Remains Subdued

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Dear Traders,

The price action in both EUR/USD and GBP/USD remains subdued amid the lack of market-moving economic reports and risk events throughout this week.

EUR/USD: The euro stabilized above the 1.1550-level and appears to be headed for another test of the 1.1615-resistance. If the 1.1615/20-barrier gives way to fresh bullish momentum we may see the euro rising towards 1.1650/60. For bearish momentum to accelerate it would need a sustained break below 1.1520.

GBP/USD: The cable traded with a tailwind after it rejected the 1.31-support. We now focus on a potential trading range between 1.3220 and 1.3130. Sterling bulls could benefit from price breakouts above 1.3180 while bears should wait for prices below 1.3130 in order to sell sterling towards 1.31 and 1.3070.

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GBP/USD Trends Upwards While EUR/USD Remains Stuck In Consolidation Phase

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Dear Traders,

Monday was characterized by a weakening U.S. dollar which suffered a slight setback against its counterparts. The recent weakness can be attributed to uncertainty over the future monetary policy stance of the Federal Reserve. New York Fed President William Dudley plans to retire next year and with Dudley’s planned exit, the unfilled board seats create uncertainty over the Fed’s approach to policy in the coming year.

The EUR/USD extended its consolidative mode into the new week and traders are still struggling with false breakouts and limited price swings. ECB President Mario Draghi is scheduled to speak at the ECB Forum on Banking Supervision today at 9:00 UTC but these opening remarks might be not enough to free the euro from its lethargy. Technically speaking, we now wait for a break below 1.1570 to sell euros whereas on the topside, we expect potential gains to be limited until 1.1660 and 1.17 amidst subdued price action.

The best performer was the GBP/USD which rose towards 1.3180, providing buyers a good profit yesterday. The latest upward move is not surprising given the fact that the pound continues to oscillate within its range between 1.3340 and 1.30.

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All Eyes On The FOMC Decision Even Though No Changes Are Expected

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Dear Traders,

While the euro ended yesterday’s trading day virtually unchanged, the pound sterling headed for a test of 1.33 but reversed some of its gains just shy of that barrier. Whether we will see a sustained breakout above 1.33 remains to be seen and hinges on the risk appetite for pounds ahead of tomorrow’s BoE Super Thursday. The bank of England is widely expected to raise interest rates for the first time in a decade but this move is shrouded in suspicion. We will discuss the risk potential in tomorrow’s analysis.

Today’s focus will be on the Federal Reserve and the market’s appetite for U.S. dollars. It could thus be a turbulent trading day with traders bracing for higher volatility in all USD crosses.

The FOMC rate decision today at 18:00 UTC is top listing but the market is virtually certain that no change to the benchmark will be made this month. Economists expect policy makers to keep rates on hold for now and increase them at the December meeting. The probability of a December rate hike is at 83 percent. However, even if today’s Fed decision is unlikely to serve as a big market mover it could still surprise dollar bulls. In case of a less hawkish outcome, in other words, if there are a number of hawkish dissents, the dollar could give up some of its gains. Let us be surprised.

With regard to the U.S. tax reforms, the House Republicans are expected to release the tax bill text on Thursday.

We also have the ADP Report scheduled for release at 12:15 UTC followed by the ISM Manufacturing Index due at 14:00 UTC, so there is plenty of economic data that could affect the price action in the greenback today.

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EUR/USD And GBP/USD: Rebounds May Be Short-Lived

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Dear Traders,

Markets were relatively quiet at the beginning of this eventful week while both GBP/USD and EUR/USD were accompanied be a slight upward tendency. We believe that the slight rebound in the euro and British pound could be of a temporary nature as the U.S. dollar faces some event risks with the FOMC decision and Non-Farm Payrolls report on tap. Dollar bulls may tend to jump back in ahead of these events.

The EUR/USD recovered some losses towards 1.1660 but this small recovery could prove to be a correction within a downtrend. For the bias to shift from bearish to neutral euro bulls would need to push the single currency beyond 1.18. As long as the euro remains below 1.18 we favor the bearish bias and focus on a price breakout below 1.1550.

The Eurozone Consumer Price report is due for release today at 10:00 UTC but if CPI print is in line with expectations it will not affect the euro’s price action.

The GBP/USD traded with a tailwind but gains were capped at 1.3215. We consider the 1.3250-barrier to be a crucial short-term resistance in the cable. If the pound drops back below 1.3120 we may see further losses towards 1.3050.

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Euro And Pound Sell-Off, Focus Now On U.S. GDP Data

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Dear Traders,

The EUR/USD sold off on the back of a dovish ECB announcement on the one side and a strengthening U.S. dollar on the other side. European Central Bank policy makers agreed to cut monthly bond purchases in half to EUR30 billion in January but extend the bond buys at this pace until September 2018. While this outcome was exactly what the market has anticipated, Draghi said there won’t be a “sudden end to the buying” and the shift shouldn’t even be called tapering. What weakens the euro was the fact that a “large majority” of ECB policy makers favored keeping the bond buying program open-ended so they can adjust it at any time in case inflation stays sluggish. With regard to future interest rate hikes, Draghi said that rates will remain “at the present levels for an extended period of time, and well past the horizon of our net asset purchases”.

In short, the ECB’s decision can be described as slightly more dovish than euro bulls may have hoped for.

As regards the U.S. dollar, prospects for the U.S. tax reform spurred the dollar rally. The U.S. House passed a budget resolution unlocking a process to cut taxes by the end of the year. The greenback experienced broad-based gains versus other major currencies but the focus now shifts to the third-quarter GDP reading, scheduled for release today at 12:30 UTC. Even though economists are looking for slower growth of 2.6 percent, dollar bulls may take this opportunity to jump back in on pullbacks. Traders should prepare for heightened volatility around the GDP release.

EUR/USD: The euro cleared its crucial support at 1.17 and even 1.1650. After breaking below theses support levels, the case has built up for the bears and we now expect the euro to tumble towards 1.1550 but maybe not straight-lined. Former support levels could now turn into resistances with pullbacks may be limited until 1.17/1.1730.

GBP/USD

Only yesterday we have talked about the pound’s bullish break above 1.3230 which seemed to indicate further gains towards 1.33 but the opposite happened: The pound fell in tandem with the euro and headed for another test of 1.3110. If the 1.31-support breaks the previous bull breakout above 1.3230 turns out be a fake-out. In case the cable falls below 1.3085 we anticipate further losses towards 1.3030 and 1.2950.

We wish you good trades and a relaxing weekend.

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We wish you good trades and many pips!

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