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Pound With A Tailwind While The Euro’s Downtrend Ran Out Of Steam

Dear Traders,

Tuesday’s best performer was the British pound which rose towards its next resistance zone at 1.2320/50. The pound was supported by better than expected U.K. CPI data, limiting speculation that the Bank of England will need to ease monetary policy further. After bouncing off the 1.2330-resistance level we recommend sterling bulls to wait for a break above 1.2375 in order to buy GBP towards 1.2425. However, if the pound drops back below 1.2220, we expect increased bearish momentum towards 1.2170/50.

The U.K. Labor Market report is scheduled for release today at 8:30 UTC and any changes in the headline figures could have a significant impact on the GBP/USD.

The EUR/USD however, refrained from trading any lower than 1.0970. On the other hand, the pair was also not able to take the hurdle at 1.1030 which is why the euro remained confined to a narrow sideways trading range. If the euro falls below 1.0940 the bias could change in favor of the bears, driving the pair lower towards 1.0830.

While there are no economic reports from the Euro-zone today the price action could be determined by dollar flows. However, U.S. Housing data (12:30 UTC) and the Fed’s Beige Book (18:00 UTC) might be of secondary importance for traders.

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Brexit Polls Dominate The Market

Dear Traders,

At present, nothing affects the market more than any new Brexit polls and the associated risks and fears determine the price action in both major currency pairs. While any incoming economic data, whether it is good or bad, is currently taking a back seat, the market seems to be only focussed on the recent U.K. referendum polls. Only yesterday, we learned how sensitive market participants are to shifts in opinion polls, whereby an online poll put the Brexit camp ahead, in contrast to a previous poll showing a lead for the ‘Remain’ camp. As stated in yesterday’s analysis, traders should expect more volatility in the run-up to the U.K. vote which is why both currency pairs remain vulnerable to wild swings.

The euro dropped on Brexit risks, but remained confined to a narrow trading range between 1.1173 and 1.1122 on Tuesday. The performance of the EUR/USD was therefore muted and unfortunately did not provide any sustained profit for day traders. However, the recent downward channel is still intact with a current resistance line at 1.1163 and on the other hand, a support line at 1.1073. The German Manufacturing PMI is scheduled for release at 7:55 UTC but we do not expect this report to have a major impact on the euro.

The British pound fell sharply as two ICM opinion polls showed the Brexit camp ahead. Short-trader’s efforts thus paid off and we were able to pocket a nice profit on the last trading day of May. Given that bearish momentum, we will now focus on a break below the recent support at 1.4442 in order to sell the pound towards 1.4405 in a first step. If sterling drops significantly below 1.4385 we see a next support at 1.4340. A current resistance is seen at 1.4522. The U.K. Manufacturing PMI is due at 8:30 UTC and economists forecast an uptick in May. Whatever the case, Brexit concerns will continue to determine the performance in the pound.

From the U.S. the most important piece of economic data will be the ISM Manufacturing Index, scheduled for release at 14:00 UTC. Any unexpected outcomes should affect the dollar accordingly.

Last but not least, the Federal Reserve releases its Beige Book at 18:00 UTC.

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U.S. Data To Help The Greenback Regain Strength?

Dear Traders,

The British pound extended its gains towards 1.4350 after CPI data came in stronger than expected, reaching the highest level since December 2014. Nonetheless, the pound was not able to maintain the high price level and finally ended the day unchanged against the U.S. dollar. Our focus now shifts to the next support level at 1.4225. In case of a break below 1.4225, lower targets are seen at 1.4207, 1.4195 and 1.4170. The market’s attention is focused on U.S. Retail Sales, scheduled for release at 12:30 GMT and as the figure is a significant market mover and expected to show a rise in March, market participants might be inclined to be bullish on USD ahead of the report.

The euro peaked at a yearly high of 1.1465 before prices quickly reversed direction and dropped back to below 1.14. The attention is now directed to the lower band of the euro’s current trading range. A break below 1.1335 could boost bearish momentum and send the euro towards 1.13 and 1.1285. Below 1.1280 we expect the euro to decline toward the 1.12-level. However, in case of renewed upward momentum, we will pay attention to current resistance levels at 1.14 and 1.1430 but bullish movements exceeding these levels could be limited until 1.1470.

The U.S. Retail Sales report will be the most important piece of economic data today and Industrial Production figures from the Eurozone (9:00 GMT) and the Fed’s Beige Book (18:00 GMT) could thus take a backseat.

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Any and all liability of the author is excluded.

Copyright © All Rights Reserved 2016 Maimar-FX.

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GBP’s Sell-Off: Only A Steep Correction?

Dear Traders,

The biggest story yesterday was the sharp sell-off in the British pound. The cable was crushed as UK inflation unexpectedly dropped below zero. Consumer prices fell 0.1 percent in September, which was even worse than economist’s forecast of stagnation. The decline will reinforce the view that the Bank of England is far away from raising interest rates in the near future. Interestingly, the pound already weakened before inflation data was due for release. Traders have therefore reason to believe, that there was a leak and that some market participants were already aware of the weak CPI report.

Today’s focus shifts to the U.K. Labor Market report, scheduled for release at 8:30 GMT. Economists predict that wage growth accelerated in August, which could incite sterling bulls to buy GBP towards 1.54 again. A strong labor market report would have the potential to turn yesterday’s decline into a sharp correction of the recent uptrend.

The EUR/USD has nothing new to report. The German ZEW survey came in even weaker than anticipated, but the euro was unaffected by the deterioration in investor sentiment. The currency remained trading within its narrow range between 1.1410 and 1.1345.

The most important piece of U.S. data will be today’s Retail Sales report, due for release at 12:30 GMT. If data disappoints, we could see a sharp sell-off in the U.S. dollar, pushing its major peers towards fresh highs. Independently of the outcome, this report should have a significant impact on the greenback.

Furthermore, the Federal Reserve releases the Beige Book at 18:00 GMT.

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We wish you good trades and many pips!

Any and all liability of the author is excluded.

Copyright © All Rights Reserved 2015 Maimar-FX.

www.maimar.co