Bank of England – MaiMarFX

Price Action Leaves Much To Be Desired

December 15, 2022/in General News & Updates /by MaimarFX

This was definitely not the volatility what would be expected from the last large risk event of the year. The price action in the U.S. dollar was noticeably more constrained and there was no traction following the event.

Overall, yesterday’s outcome was in-line with expectations, even though Fed chair Jerome Powell warned the Fed is not close to ending its anti-inflation campaign of rate hikes while saying “we still have some ways o go”. In terms of terminal rates, policymakers projected rates would end next year at 5.1 percent before being cut to 4.1 percent in 2024 (see dot plot). Even though these are higher levels than previously indicated, the market didn’t see reason for a repricing.

The focus now shifts to the Bank of England and European Central bank decisions.

Both central banks are expected to announce a 50bp rate hike today. The BoE is expected to have further to run before hitting its own terminal in 2023 compared to its US counterpart while as for the ECB, there seems more potential for further tightening into 2023. with recession risks remarkably high for Europe and the rest of the world combatting inflation more aggressively, the Eurozone’s policy authority may find it reasonable to tapering its efforts with a lower terminal rate.

EUR/USD: The euro finds itself within the resistance zone between 1.06 and 1.08. The technical outlook has not noticeably changed which is why we still focus on price breakouts either above 1.08 or below 1.0350.

GBP/USD: The cable’s recent upward channel is still intact, showing a price range between 1.25 and 1.2150.

Given the December liquidity drain around the holiday, we do not expect to see larger movements after traction was all but absent even yesterday.

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U.K. Inflation Hits Highest Level In 41 Years

November 17, 2022/in General News & Updates /by MaimarFX

U.K. inflation rose to 11.1 percent from a year ago while this result increases the chances the Bank of England will raise interest rates again next month.

From a technical perspective, there could be room for a bullish extension towards 1.2060 but sterling bulls should be careful since the pound remains slightly overbought. The current support area is seen at around 1.17.

Our trading ideas for today 17/11/22:

EUR/USD

Long @ 1.0410

Short @ 1.0340

GBP/USD

Long @ 1.1925

Short @ 1.1885

DAX® (GER40)

Long @ 14340

Short @ 14290

Settings for all trades today: Entries from 8:00 am UTC, SL 25

Disclaimer: All trading ideas and expressions of opinion made in the articles are the personal opinion and assumption of MaiMarFX traders. They are not meant to be a solicitation or recommendation to buy or sell a specific financial instrument.

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Bullish Breakout

June 17, 2022/in General News & Updates /by MaimarFX

The British pound experienced a bullish breakout despite the Bank of England which disappointed with a 25bp rate hike move. U.K. inflation is expected to hit as high as 11% later this year. The BoE however signaled that it is prepared to unleash larger moves if needed. Trading the cable was messy yesterday, with an initial bearish move towards 1.2040 that quickly reversed and now the pair is trading above 1.23. In other words, we weren’t able to catch the big gain we were looking for.

GBP/USD tested the 1.24-resistance from where it bounced off. If the pair holds above 1.2250/1.22, sterling bulls may try to push for a test of 1.25. Below 1.2140 however, we expect the pair to head south with lower targets seen at 1.1950 and 1.19.

The EUR/USD rose on more hawkish ECB expectations and tested the 1.06-level. As long as the 1.0350-support holds, gains could be extended towards 1.07 and 1.08.

Have a good weekend.

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U.S. Dollar Retreats As Fed Goes Predictable Route

March 17, 2022/in General News & Updates /by MaimarFX

The U.S. dollar retreated following the Federal Reserves’ statement as the central bank went the predictable route. Policy makers have finally realized they have a serious inflation problem and need to act. While they are willing to hike rates faster and higher than previously expected, Fed Chair Jerome Powell played down the risk of recession for the U.S. economy. However, the 25bps rate hike and the projection of six more increases this year were already priced in, which is why the greenback retreated.

While waiting for bigger moves, we have tried two buy attempts in the EUR/USD that finally ended with a net loss of -10 pips as gains were capped at 1.1040.

GBP/USD – All eyes on the Bank of England rate decision today at 12:00 UTC

The BoE is expected to hike 25bps today, the third rate increase in row.

Technically, we will pay attention to a significant break above 1.3210 in order to anticipate further gains towards 1.3350. Bears on the other side will watch out for prices below 1.3080 in order to shift their focus to lower targets at 1.2950 and 1.29.

Our short-term trading idea for 17/3/22

GBP/USD

Long @ 1.3210

Short @ 1.3140*

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Fed Delivers Dovish Taper, All Eyes on BoE Now

November 4, 2021/in General News & Updates /by MaimarFX

Wednesday’s trading was dominated by U.S. dollar weakness as the Federal Reserve delivered a dovish tapering. The market’s rate hike bets remained virtually unchanged after Fed Chair Jerome Powell said officials can be patient on raising interest rates. “We don’t think it is a good time to raise interest rates because we want to see the labor market heal further,” he said. Investors continue to see two quarter-point hikes in 2022 starting around mid-year. Attention will now be paid to Friday’s NFP report which could bolster rate hike bets if the headline figure impresses.

The taper announcement was delivered as expected with the committee saying it would scale back by $15 billion a month starting in November. In terms of the pace of tapering Powell said that officials are on track to wrap the process up by mid-2022 but can speed it up or slow it down depending on the economic outlook.

As for the inflation outlook, Fed officials retained their ‘dovish’ inflation-rhetoric. “Inflation is elevated, largely reflecting factors that are expected to be transitory,” officials said in the statement. “Supply and demand imbalances related to the pandemic and the reopening of the economy have contributed to sizable price increases in some sectors.” Also here, we got a dovish statement.

With the FOMC decision behind us, the focus now turns to the Bank of England decision today at 12:00 UTC noon.

A rate rise in the U.K. would be the first since the pandemic from a central bank in the world’s leading economies. It would mark a far quicker move toward normalization than in the aftermath of the global financial crisis more than a decade ago. Economists see today’s decision as a very close call, with a Bloomberg survey showing 51% forecast a hold and 49% a hike. In case a lift-off will be delayed to December, investors could question the BoE’s credibility. Thus, the central bank will struggle to meet the already very hawkish market expectations.

GBP/USD technical view: Chances are in favor of the bulls. A higher resistance comes in around 1.3750 but a rise above 1.3780 could encourage sterling bulls for a test of 1.3820. Bears on the other side will wait for a significant break below 1.3550 in order to anticipate steeper losses.

DAX – Test of 16000 done

As expected in previous analysis the DAX hit a fresh high above 16000. We now see higher price targets around 16300. A current support zone is seen at 15700.

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ETH/USD

Long @ 4590

Short @ 4520

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A profitable Trading Week

September 24, 2021/in General News & Updates /by MaimarFX

Signal performance in September: +479 pips so far.

A profitable trading week is drawing to a close. As for our daily signals this week’s best performer was the GBP/USD, that provided a net gain of +115 pips in only two days of trading. The largest profit was generated by yesterday’s buy position which was opened at 1.3660 and closed at 1.3745.

The reason for the pound rally was the Bank of England which raised the prospect of hiking interest rates as soon as November to contain a surge in inflation. Yesterday’s decision puts the BoE in the more hawkish camp of global central banks, which is now expected being first for a hike, well ahead of the Federal Reserve.

GBP/USD: Remaining above 1.3620, we expect the pair to test the 1.3880-level.

EUR/USD: Chances are currently in favor of the bulls. We pencil in higher targets at 1.1770 and 1.1820.

DAX: If 15800 remains unbroken to the upside, we expect the index to drop back towards 15500. Above 15820, we will shift our focus again to the 16000-level.

Today we will save our weekly profits and wish everyone a beautiful weekend!

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U.S. Dollar Remains On Solid Footing After Fed Decision

September 23, 2021/in General News & Updates /by MaimarFX

To sum up, yesterday’s FOMC announcement was hawkish enough to keep the U.S. dollar on a strong footing, even though big market movements were lacking. In terms of a first rate hike, Federal Reserve officials are now evenly split on whether or not it will be appropriate to begin raising rates as soon as next year. The market continued to price in a first hike around the start of 2023, an assumption that can be considered less hawkish and which has led to a very small sell-off in the greenback at the time when projections were released.

The dollar gained back ground around the time of the press conference with Fed Chair Jerome Powell saying the central bank could begin scaling back asset purchases in November and complete the process by mid-2022. This was the hint on tapering the market has expected.

As for fears over an economic collapse in China, Powell spoke on the Evergrande situation during his press conference but he does not expect any spillover into global markets. Market participants will now be looking to see if Evergrande makes its next debt payment which totals $83.5 million.

The next central bank decision is around the corner with the Bank of England monetary policy announcement due at 11:00 UTC today.

While risks are tilted for a hawkish outcome for the BoE meeting, there is a concern that markets may be overly optimistic amid the recent increase in rate hike calls by analysts. A rate increase is seen by May 22.

In the GBP/USD we continue to look at a price range between 1.39 and 1.3550 and bear in mind that the pair is still oversold making it vulnerable for corrections.

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All Eyes On The British Pound And The BoE Decision

May 6, 2021/in General News & Updates /by MaimarFX

The best performer on Wednesday was the DAX which rebounded towards 15200 while we have made a large catch with our long entry at 15020 that ended with a 100-points profit.

Today the focus turns to the British pound and the Bank of England’s monetary policy decision. Some investors expect the central bank to slow the pace of bond purchases by a small amount instead of ending the stimulus abruptly in November. Policy makers are also expected to upgrade forecasts for growth and inflation today.

The pound will rally if the BoE tapers more drastically than currently expected. However, a slowdown in the pace of purchases could probably not have the same impact as the tightening seen by the Bank of Canada last month but it will be important to know whether rate hike expectations are being brought forward and whether there is still a likelihood of a further total envelope or not as the U.K. economy rebounds sharply from pandemic lows. If the BoE disappoints the market’s hawkish expectations, the pound could fall below 1.38.

The Bank of England decision is scheduled for 11:00 UTC.

GBP/USD

The cable remained in a narrow trading range ahead of today’s risk event and we expect some larger movement around the BoE decision. Above 1.3915 we see a next resistance at 1.3950 which needs to be broken before shifting the focus to 1.40 again. A bullish breakout above 1.4010 could result in a strong bullish move towards 1.42. On the downside we will keep an eye on the support levels. A break below 1.38 could lead to a test of 1.3770, followed by a lower target at 1.37. Below 1.3660 the pound could extend its slide towards 1.3550.

The next risk event for the pound will be today’s parliamentary elections in Scotland. The election could have profound consequences for the U.K. since it will decide not just who runs Scotland, but whether the battle for another Scottish independence referendum by the end of 2024 is back on the table.

Scotland elections could thus prove a litmus test for the nation’s appetite for breaking away from the United Kingdom. There is potential for massive chaos across the U.K.’s economic landscape in the next years if a split happens. Some investment managers see a 10 percent devaluation of the pound amid financial chaos and recession. The market is currently not pricing in such scenario.

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Focus On BoE And NFP Report

May 3, 2021/in General News & Updates /by MaimarFX

The U.S. dollar ended the last week higher against the euro and British pound and while the dollar’s recent strength appeared to be month-end rebalancing flows, traders wonder whether the dollar could extend its gains this week. Greenback bulls could hope for further bullish potential as long as there is a rise in U.S. Treasury yields but we bear in mind that rising near-term inflation expectations could outpace gains in U.S. Treasury yields while a dovish Federal Reserve could limit gains in the dollar.

On Friday we will have April’s non-farm payrolls report scheduled for release and almost one million jobs are anticipated to be added. The unemployment rate is also expected to decline to 5.7 percent from 6 percent in the previous month. The focus will also be on average hourly earnings for further insight into inflationary pressures.

GBP/USD

It could be a volatile week for the British pound. The Bank of England is due for its monetary policy announcement on Thursday and a QE taper could be in the cards. On the same day Scotland holds parliamentary elections which could bring back expectations of another independence referendum. Sterling could come under pressure ahead of the election as a potential referendum remains a risk for the currency.

As for Thursday’s other risk event, the Bank of England is expected to upgrade its economic projections with a stronger Q2 GDP forecast and there is a chance that the BoE will announce a slight tapering of asset purchases.

Technically, chances are slightly in favor of the bears right now with the pair eyeing the 1.38-support. If the cable falls below 1.3770, we could see a test of the lower support around 1.37 and possibly even a fall towards 1.36. However, given the possibility of a BoE taper on Thursday, losses might be limited to the support zones.

EUR/USD

The euro gave up some of its recent gains and dipped towards its crucial support at 1.20. We expect a lower support area to be at around 1.1950 from where more buyers could swoop in. A current resistance is seen at 1.2130. If the euro falls below 1.1940, bearish momentum may accelerate towards 1.1850 and 1.18.

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Fed Holds Dovish Line, Focus Shifts To BoE

March 18, 2021/in General News & Updates /by MaimarFX

The Federal Reserve held its dovish line and continued to project near-zero interest rates at least through 2023 while the central bank upgraded its forecasts for economic growth and the labor market. The dot plot showed that seven of 18 Fed officials predicted higher rates by the end of 2023 compared with five of 17 at the December meeting which was a slightly larger group of ‘hawkish dots’.

As for the withdrawal of the ultra-easy monetary policy, Fed Chair Jerome Powell said in a virtual press conference that the time to talk about reducing the Fed’s asset purchases was “not yet”.

While prospects of stronger growth have ignited some concern about higher inflation among investors the Fed expects that a bump in inflation this year will be short-lived.

In a nutshell, the market did not get such a hawkish outcome leading to a shift in the current risk sentiment. Instead, the Fed’s projected policy path and its upgrade of the economic outlook provide a positive backdrop for risk assets, which is why the anti-risk dollar weakened.

Today we will have the Bank of England rate decision at 12:00 UTC. The BoE is expected to leave monetary policy unchanged but volatility could pick up around the time of the decision.

GBP/USD: The technical picture has not materially changed. We will pay attention to price breakouts either above 1.4020 or below 1.3850 and further 1.3780.

DAX: The index hit our bullish target of 14720. If there is no break above 14760, the DAX could be due to a correction now. A higher support is seen at around 14500.