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BoE Super Thursday To Provide Trading Opportunity For Sterling Traders

Dear Traders,

It’s Super Thursday at the Bank of England, which means we get a rate decision along with the Quarterly Inflation Report and comments from BoE Governor Mark Carney. Today’s meeting is the most important event this week and sterling traders prepare for volatile swings around the monetary policy announcement. The big question among market participants is how hawkish the BoE might be towards the end of this year. The market is fully pricing in a rate increase at the BoE’s Super Thursday in November while market participants see a 50/50 chance of an earlier rate hike in May. If evidence points to a rate rise in May, the pound will rally and may find its way back to 1.42. However, if the tone in today’s statement is not as hawkish as traders are hoping, the pound will fall.

The focus will also be on the inflation report and if economic growth and inflation forecasts are revised higher, GBP/USD could recover some of its recent losses.

There is also the possibility of a muted response following today’s statement. Brexit risks continue to cause uncertainty about the outlook and if those risks have not changed substantially, the market’s reaction to the statement could be muted.

We will know more today at 12:00 UTC.

GBP/USD: The cable found some support around 1.3850 and if this barrier is breached to the downside we expect further losses towards 1.3750. For bullish momentum to accelerate, it would however need a sustained break above 1.40.

EUR/USD: The euro broke out of its recent sideways trend channel and fell towards 1.2240. The break below 1.23 came despite Angela Merkel’s deal with the SPD to form a great coalition in Germany. Technically speaking, the chances are now in favor of further downside potential driving the pair towards 1.2220 and 1.2170. If the euro rises back above 1.2350, bulls may take over control.

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Can The Pound Hold Onto Its Gains? Carney Will Decide

Dear Traders,

At the end of the day, the FOMC meeting has proved to be a non-event for traders with the Federal Reserve holding interest rates flat and providing no new insights on the pace of future rate hikes. As expected, there were no surprises and so the U.S. dollar resumed its decline against its major peers. The Fed reiterated its intention to raise rates gradually as the labor market tightens and market participants will now shift their focus to Friday’s jobs report. Due to the fact, that the FOMC statement did not appear overly hawkish, an imminent rate hike in March is increasingly unlikely.

The euro rose again towards 1.08 after marking a short-term support around 1.0730. Traders are eagerly waiting for the euro to break through the 1.0810-barrier and once that level is breached we may see the euro further rising towards 1.0870. Current supports are seen at 1.0715 and 1.0660. From the Eurozone, there will be no major economic reports scheduled for release today so we expect the price action to depend on the demand for dollars.

ECB president Mario Draghi is scheduled to speak at 12:15 UTC but today’s speech is not expected to have a major impact on the euro.

Today will be a big day for sterling traders with the Bank of England publishing its quarterly inflation report alongside the MPC statement and rate decision. Moreover, BoE governor Mark Carney will hold a press conference following the announcement. While the BoE is expected to stand pat, policymakers may revise up its growth and inflation forecasts. Inflation is on the rise and for Carney it could be a communicative challenge to keep monetary policy unchanged in the face of accelerating price growth. Investors suspect that the central bank might shift its bias from neutral to slightly hawkish while traders are pricing in a higher likelihood of a hike than a cut. This assumption is expressed in the pound’s recent rise.

The BoE will release its Quarterly Inflation Report and rate decision at 12:00 UTC, followed by a press conference 30 minutes later.

GBP/USD

The pound is facing its resistance zone at 1.2730-75. Whether this barrier could give way hinges on the BoE statement. Above 1.2685 a test of 1.2720/30 becomes increasingly likely. On the downside, the 1.26 support is intact. Below that level we may see the pound tumbling towards 1.2550/20.

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Traders Prepare For Volatile Swings This Week

Dear Traders,

We welcome you to a new trading week. Financial markets are dominated by uncertainty surrounding Donald Trump’s administration, prompting large investors to adopt a wait-and-see stance. The U.S. dollar came under further pressure after Trump’s order halting some immigration, causing geopolitical tensions. Risk aversion has therefore led to a recent sideways trend with both major currency pairs trading in relatively narrow trading ranges. This phase of trendless and uncertain markets makes it difficult for day traders to benefit from limited fluctuations and the lack of price breakouts.

This week’s major event risks might bring some new momentum to the markets and trigger profitable breakouts. The economic calendar is very busy in terms of market moving data and traders await high volatility throughout the entire week. The week starts off with the German Consumer Price report, scheduled for release today at 13:00 UTC which could lend a support to the euro. On Tuesday, the Eurozone Consumer Price report will be important to watch while an upbeat report could lead to speculation that the European Central Bank might start to reduce its asset purchases in the near future. With regard to top-tier U.S. economic data, the FOMC rate decision and the Non-Farm Payrolls report (Friday) will take center stage this week. The FOMC committee will deliver an update on its policy stance on Wednesday and while the FOMC statement is expected to be relatively upbeat, the fiscal policy uncertainty may frustrate the greenback’s recovery.

For sterling traders, the most interesting event will be the Bank of England‘s ‘Super Thursday‘ which may shape expectations for the near-term outlook for sterling. The BoE releases its Quarterly Inflation Report alongside its monthly monetary policy decision. If BoE policymakers show greater willingness to drop their dovish tone and gradually move away from their easing cycle, the pound could be vulnerable to further gains, heading for a test of 1.2780/90.

Important data for today:

13:00 EUR German CPI data

13:30 USA PCE Report

15:00 USA Pending Home Sales

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Will The BoE Deliver Or Disappoint?

Dear Traders,

The U.S. dollar slightly advanced versus the euro after the ADP report came in better than expected. Unlike the euro, the British pound lacked direction before the Bank of England’s rate decision and fluctuated within a sideways range of 100 pips.

Today, there is only one subject in the market: The Bank of England rate decision and Inflation Report, scheduled to be released at 11:00 UTC. Our focus therefore shifts to the GBP/USD as we prepare for volatile swings. While a 25bp rate cut is widely expected, the price action will depend on how aggressive BoE policymakers will support their dovish stance. If they signal further easing in the near-term, the pound could quickly fall towards 1.32 and even lower. On the other hand, if the central bank is in no hurry to introduce further easing except the anticipated 25bp rate cut, investors could be disappointed and give up on their short positions. The pound could surge as a result of a less dovish BoE.

However, as stated in yesterday’s analysis the 1.3420 level could act as a crucial resistance for the pound. Hence, gains could be limited until 1.3425 and 1.3480. Only a significant break above 1.35 would change the bias in favor of the bulls. On the bottom side, we will focus on the 1.32-level. In case sterling drops below 1.3170 we see chances of an extended downward move towards 1.3030.

Given the fact that today’s focus is on the pound sterling, we do not expect larger fluctuations in the EUR/USD. The euro could trade sideways between 1.12 and 1.11. We recommend traders not investing too much today and take profits at smaller targets if there are any.

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We wish you good trades and many pips!

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Traders Await BoE Inflation Report

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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Rate-Rise Expectations Unchanged After Disappointing Payrolls

Dear Traders,

Market participants were left relatively unimpressed by Friday’s weaker-than-expected U.S. jobs report, which showed the smallest jobs gain in seven months. Although earnings growth came in with an uptick it was not enough to change investors’ expectations of gradual monetary policy tightening. The market’s rate-rise expectations therefore remained unchanged and traders see an even chance of a Fed rate hike this year and only an eight perecent probability of a June hike.

As expected, the euro’s price action remained confined within a narrow trading range between 1.1480 and 1.1380 on the back of an unspectacular payrolls report. The British pound finally decided to drift lower after touching a high of 1.4546 on Friday. We still expect GBP/USD to test the 1.4330/15-level, before we may see a pullback towards 1.4550. A short-term resistance is seen at 1.4465, whereas sterling must now break below 1.44 in order to revive fresh bearish momentum.

This week’s calendar is relatively light in terms of market moving data. Only towards the end of the week we have major important reports scheduled for release. The most important event for sterling traders will be the Quarterly Inflation Report, scheduled for release on Thursday. The Bank of England will publish new forecasts in its inflation report, alongside its interest-rate decision. BoE governor Mark Carney is set to give a press conference on the economic outlook following the release of the inflation report.

The most important piece of economic data from the Eurozone will be GDP reports scheduled for release on Friday. From the U.S., Advance Retail Sales, also due on Friday will be important to watch.

We wish you a good start to the new week and many profitable trades.

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Dollar Weakness To Continue?

Dear Traders,

What a day for the USD! The U.S. dollar depreciated sharply against all of the major currencies as signs of a slowing U.S. economy pushed the 2016 rate-hike likelihood lower. Despite a stronger-than anticipated ADP report, the USD was exposed to strong selling pressure after a report showed U.S. services industries expanded last month at the slowest pace in nearly two years, clouding the economic outlook. In addition, comments from New York Fed President William C. Dudley, who said that the recent financial turmoil “may alter the outlook for growth and the risk to the outlook for growth going forward” set off the dollar’s weakness.

The subsequent rise in the euro and cable was also technical driven as stops were triggered, sending both pairs even higher. The focus now shifts to the Non-Farm Payrolls report due for release tomorrow, which is expected to show fewer than 200K jobs for the first time since September. The payrolls report may determine whether the dollar weakness will continue. In the meantime, let us focus on the technical side:

EUR/USD

The euro rose as high as 1.1145 on the back of broad-based dollar weakness. Depending on tomorrow’s U.S. labor market data, we may see another round of a dollar selloff, which could send the euro towards 1.12 and 1.1280 in a next step. For the time being, we expect the 1.1160-level to act as a current resistance, while downward moves may be limited until 1.10/1.0980. An important support zone is currently seen at 1.0850.

ECB President Mario Draghi is scheduled to speak at 8:00 GMT today, which could have a short-term impact on the EUR/USD.

Chart_EUR_USD_Daily_snapshot4.2.16

GBP/USD

The Bank of England will present its Quarterly Inflation report along with the monetary policy announcement at 12:00 GMT today. While the Monetary Policy Committee is widely expected to keep rates unchanged, BoE Governor Mark Carney may offer some insight when he presents the BoE’s latest economic projections at a press conference 45 minutes later. The expectations are high and traders should be prepared for everything. If the February predictions look bright, predicting inflation would overshoot the BoE’s target over the medium term, the pound sterling could extend its gains versus the greenback. Let’s wait and see.

Taking a look at the 4-hour chart the risk seems to be to the downside. The cable tagged a fresh resistance at 1.4650 and it might be smarter to wait for a significant break above 1.4665/70 in order to buy GBP towards key resistances at 1.47 and 1.48. The direction will hinge on the BoE Inflation report and Carney’s comments but in case of a dovish tilt, we may see the cable sliding back towards 1.4440, 1.4370 and 1.43.

Chart_GBP_USD_4 Hours_snapshot4.2.16

U.S. data such as Initial and Continuing Jobless Claims (13:30 GMT) and Factory Orders (15:00 GMT) may take a back seat.

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We wish you good trades and many pips!

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Copyright © All Rights Reserved 2016 Maimar-FX.

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