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Traders Await BoE Inflation Report

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Dear Traders,

Today will be a big day for sterling traders with the Bank of England Quarterly Inflation Report, Rate Decision and the speech by BoE Governor Mark Carney. While the BoE is not expected to change its monetary policy, traders will be looking for clues on policy makers’ thinking and await the outcome of the inflation report. As the June 23 referendum draws closer, the British pound is exposed to risk and any Brexit-related concerns remain a main driver in the currency pair. Even though Carney may emphasize that a potential Brexit entails a high risk for the financial stability in the U.K., he will have to avoid taking a position on any campaign.

The focus will mainly be on the inflation report and whether the central bank will raise its inflation forecasts. If inflation and growth forecasts have been revised higher, sterling could soar as a result. From a technical perspective, we still focus on a sustained break above 1.4480 in order to buy GBP towards higher levels. Yesterday’s rise above 1.4480 proved to be only short-lived and sterling traders had to face volatile but unsteady sideways swings without clear trends. We expect larger movements today in the GBP/USD and pay close attention to upside breaks above 1.4490 and 1.4520 and, on the bottom side, a downside break below 1.4390.

The BoE Inflation Report is scheduled for release at 11:00 UTC along with the BoE Rate Decision, while Carney is scheduled to speak 45 minutes later.

EUR/USD

The euro traded higher against the U.S. dollar but the 1.1450-level proved to be a short-term resistance as expected. If the euro climbs back above 1.1440 we see a next hurdle at 1.1470 from where it may reverse. In case the currency pair is able to trade significantly above 1.1470/80, euro bulls may push prices up towards 1.1520/40. However, on the downside the 1.14-barrier will be in focus and once this level is significantly breached to the downside we could see the euro falling towards 1.1335.

Chart_EUR_USD_4Hours_snapshot12.5.16

Eurozone Industrial Production is scheduled for release at 9:00 UTC but this report is not expected to have a major impact on the currency.

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Dollar Weakened On Dovish Fed Statement

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Dear Traders,

The FOMC statement came in slightly more dovish than markets had expected, predicting two quarter-point rate increases by the end of this year. The Federal Reserve’s stance was generally friendly and while policy makers are still looking for two rate hikes in 2016 the statement pointed to risks to global economic growth, citing the impact from global risks on the U.S. economy. The market’s reaction to the Fed’s statement suggests that expectations were somewhat more bullish, focusing on the “dot-chart” of interest-rate forecasts which finally represented only two rate hikes instead of the expected three hikes this year. With regard to the so-called “dot plot” projections which were recently of considerable importance, Yellen tried to downplay the significance of those forecasts saying that they are neither a present plan nor a commitment.

On the bottom line, the Fed maintains its hawkish monetary policy stance even if the pace of further tightening slightly slowed. The probability of a rate hike in April is currently at 15 percent whereas economists see a 42 percent-chance of a rate increase in June.

Both euro and British pound benefitted from the dovish statement and rose towards next resistance levels. The EUR/USD bounced back from the next resistance level around 1.1250 but was able to remain above 1.12. For euro traders it was yet another day of huge profits and our monthly performance increased by 100 pips to 304 pips profit. Technically we see a next hurdle at 1.1280 before heading towards a test of 1.13 but traders should bear in mind that the euro is generally not the most attractive currency and can quickly give up on its gains as soon as risk appetite declines. Euro bears should wait for a break of 1.1050 and 1.10.

The British pound climbed towards 1.43 on the back of broad-based dollar weakness. Whether the pair will be able to break above 1.43 remains to be seen. However, concerning the technical picture the bias remains bearish and we will focus on current resistance from where the pound may bounce back.

The Bank of England will announce its monetary policy statement including the rate decision today at 12:00 GMT but no changes are expected. Let us have a look at the technical outlook.

GBP/USD

Looking at the daily chart we see that the overall trend is bearish and that the recent upward move can yet be considered as correction within a downward trend. With a break above 1.4310 next resistances are seen at 1.4375 and 1.44. We expect the 1.4515- 1.4580 area to be a key resistance for the currency pair. Consequently we favor the downward trend sending sterling back towards 1.4040 and 1.40.

Chart_GBP_USD_Daily_snapshot17.3.16

Further important economic data for today:

10:00 EUR Eurozone Consumer Prices

12:00 UK Bank of England Rate Decision

12:30 USA Philly Fed Index

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Copyright © All Rights Reserved 2016 Maimar-FX.

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GBP/USD: Steeper Decline Or Short Squeeze?

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Dear Traders,

Today will be an important day for the British pound and sterling traders seem to be waiting in their starting blocks. The Bank of England will announce its policy decision and release the minutes of its meeting at 12:00 GMT. While the central bank is expected to keep monetary policy unchanged, traders and analysts pushed back their expectations of a BoE liftoff. The market is currently pricing in a very dovish BoE tightening cycle, not expecting the central bank to raise rates until well into 2017. These speculations are manifested in the pound’s sustained downtrend. But we have learned from past experience, that any surprises can quickly alter the market’s sentiment which is why investors were caught on the wrong foot sometimes. Some currency traders even stress the idea that sterling’s’ weakness looks considerably overdone. It is worth noting that the depreciation of the British pound should suit policy makers and could have a positive impact on inflation. Any shifts away from the central bank’s dovish monetary policy stance could trigger a strong rebound in the GBP/USD.

However, following the motto “the trend is your friend”, traders should, for the time being, prefer to sell any rallies towards lower targets.

GBP/USD

Taking a look at the weekly chart, it is tempting to focus on a steeper decline, targeting at the 1.40-barrier. But first, we will pay attention to the 1.43-level and GBP will need to break significantly below that level in order to reveal fresh bearish momentum towards the next support at 1.4230. Current resistances are seen at 1.4530, 1.46 and 1.4640.

Chart_GBP_USD_Weekly_snapshot14.1.16

The euro bounce back from its 1.08-support and started a small relief rally against the U.S. dollar. The next hurdle will be at 1.09 and it remains to be seen whether the currency pair will be able to extend gains towards 1.0940 and 1.0980. There are no major important economic reports due for release today. The German GDP report, due for release at 9:00 GMT, may have some impact on the euro. However, the euro remains to trade between 1.10 and 1.08 and as long as there is no breakout above or below these zones, traders will have to wait and focus on the current trading range.

Fed President Bullard is scheduled to speak at 13:30 GMT. At the same time, U.S. Continuing and Initial Jobless Claims are due for release.

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Copyright © All Rights Reserved 2016 Maimar-FX.

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EUR/USD: Will The 1.10-Barrier Withstand The Upward Pressure?

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Dear Traders,

While U.S. nonfarm payrolls have surged to 292K jobs in December, beating all estimates, Friday’s dollar rally did not last long. The spoilsport was slower wage growth, which disappointed the market’s expectations and increased less than 2.7 percent.  The EUR/USD experienced a sharp dip towards 1.08 at the time when payrolls were released but the pair was able to quickly recover all losses. As noted in previous analysis, the 1.10-1.1050 area remains to be a key resistance zone. As long as the currency pair trades below that area, we will favor a bearish stance, targeting lower price levels at 1.0810 and 1.0720.

The British Pound fell to a five-year low against the dollar, dipping slightly below the 1.45-mark. A reason for GBP’s current weakness is a more pessimistic outlook for a first rate increase by the Bank of England. In the light of the current financial turmoil in China the BoE’s policy stance could be more dovish, waiting with a liftoff until well into 2017. In addition, the uncertainty surrounding the U.K.’s possible exit from the European Union threatens to weigh on the economy, which is why the BoE is expected to keep policy unchanged for a considerable time. The central bank will announce its latest monetary policy decision on Thursday. Aside from the BoE interest rate decision, Industrial and Manufacturing Production numbers, scheduled for release on Tuesday could be interesting to watch.

The most important piece of U.S. data will be Retail Sales, due for release on Friday. Furthermore, we will have some speeches of Federal Reserve officials throughout this week, which may impact on the dollar.

There are no major economic reports from the eurozone this week but the eurogroup meeting towards the end of the week could reveal interesting information for euro traders.

Let’s wait and see. We wish you a good start to this week and successful trading.

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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 2016 Maimar-FX.

www.maimar.co