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GBP/USD: 1.25-Area May Prove To Be Crucial Price Level

And finally, the GBP/USD corrected south in the aftermath of the Bank of England’s rate hike. Still, the cable remains our problem child this month and we hope for some profitable movements to come in the days ahead. Bulls might jump in again at around 1.2490 since this is the price area of the lower trendline of the cable’s recent uptrend channel. Thus, the 1.2490-80 zone could lead either to a breakout or a pullback.

We wish you a happy weekend.

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Our trading ideas for today 12/5/23:

EUR/USD

Long @ 1.0965

Short @ 1.0910

GBP/USD

Long @ 1.2540

Short @ 1.2485

DAX® (GER40)

Long @ 15890

Short @ 15830

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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Markets Keep Betting Against The Fed

And finally, bulls were able to profit yesterday. The best performer was the euro which soared to a high of 1.10 following Federal Reserve Chair Jerome Powell’s comments. The cable, however, proved to be difficult to trade with two false breakouts before a final third buy order compensated some losses.

The Fed raised rates as expected with a 25bp hike and warned of further rate hikes which, however, didn’t interrupt the market’s dovish speculations. Powell stressed that the central bank ‘will need to stay restrictive for some time’ and that inflation remains elevated. Policymakers see no rate cuts this year which deviates from the market’s view which prices in 2 rate cuts towards the end of this year. The market’s disbelief could quickly result in disappointment if there is something hard and fast to change its view.

Today, both European Central Bank and Bank of England are anticipated to raise their rates by 50bp. The ECB decision poses, however, a risk to the lofty euro.

EUR/USD

The euro tested the upper ascending trendline of its recent uptrend channel. If euro bulls are unable to push the euro above 1.1060 and thus towards the next resistance at 1.12, we could see a sharp correction. The current support area is seen between 1.08 and 1.07.

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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.

BoE To Shock The Market With A Bigger Rate Hike?

What a trading day!

The Federal Reserve raised rates by 75bp, the biggest interest rate increase since 1994 and prices whipsawed. The EUR/USD tried to break its crucial support around 1.0350 with an all-time low sitting at 1.0340 but such historical bearish break seemed to be precipitously which is why prices consolidated around 1.0450, for now. The British pound rose on elevated rate hike expectations and provided some good profits for traders at the end of the trading day. The central bank’s aggressive tightening brings the economy closer to a recession and the effects will only be felt later on. In other words, we still have a long road ahead of us.

Today all eyes will turn to the Bank of England’s rate decision and to the British pound’s reaction to it. The BoE is expected to hike rates by (only) 25bp, compared to yesterday’s big Fed move. The risk for the GBP/USD is to the downside, since the BoE may have to take a more cautious approach to raising rates after data showed a surprise contraction in the U.K. economy in April. Most attention will be paid to the vote split of today’s decision for further insight into the BoE’s overall appetite for higher rates.

The BoE rate decision is due at 11:00 UTC.

A bigger-than-expected rate hike would be a shock and could send the pound above 1.2210 and further to a higher target of 1.23. Bears on the other side should pay attention to a slide below 1.2080 which could see another test of 1.20.

Our trading ideas for today 16/6/22:

GBP/USD

Long @ 1.2160

Short @ 1.2115

We wish you good trades!

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Copyright © All Rights Reserved 2022 MaiMarFX.

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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.

We wish you good trades!

Any and all liability of the author is excluded.

Copyright © All Rights Reserved 2022 MaiMarFX.

www.maimar.co

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U.S. Dollar Retreats As Fed Goes Predictable Route

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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EUR/USD And GBP/USD: Bullish Bias To Persist?

Bulls in both EUR/USD and GBP/USD were able to cash in profits ahead of today’s top event risk Thursday.

While this profitable week so far increases hope for more profitable moves to come, we advise some caution. Today’s central bank decisions may turn the tide since it will be difficult for policymakers to live up to the market’s extremely hawkish expectations. The market began to price in a 10bp ECB rate hike for July while the ECB’s expected policy path is further set to diverge to other central banks.

To sum up, if the ECB grows less dovish (as the market began to price in), we could see another upward movement in the EUR/USD.

Most attention will be paid to the ECB press conference at 13:30 UTC.

EUR/USD – ‘Escape the rectangle’

We will focus on prices either above 1.1390 (bullish) or below 1.12 (bearish). As long as the euro trades within the rectangle, we will maintain a neutral stance. A break above 1.1390 could open the door for another leg up towards 1.1480 and 1.1520. A break below 1.12 and further 1.1180 could send the euro tumbling towards 1.0950.

BoE decision due at 12:00 UTC

The Bank of England is expected to raise interest rates to 0.5 percent today which would complete the first back-to-back increase since 2004. The 0.5 % key rate is the threshold where policymakers can start paring back the 895-billion-pound asset portfolio. The question now is whether more rate hikes will follow. Some economists fear that maybe more hikes are needed and perhaps at a faster pace given the scale and persistence of inflation. Economists however are far more cautious than investors as they currently see the BoE key rate at 0.75 percent in December, while investors are betting the BoE will lift the key rate to 1 percent by June.

GBP/USD – Captured between 1.3690 and 1.3450?

With no surprises from the BoE, we expect the cable to remain trading between 1.3690 and 1.3450. A break above 1.3710 could increase bullish momentum towards 1.3830 but much of the BoE’s hawkishness is already priced in into the cable’s recent upward move. For bears to regain control it would need a break below 1.3350.

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We wish you good trades!

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Fasten Your Seat-belt For a Volatile Week

The U.S. dollar broadly outperformed its major peers in recent days as the market started to price in five Federal Reserve rate hikes this year. This week we will get more central bank monetary policy announcements from the European Central Bank and the Bank of England (both decisions are due on Thursday) that will help shape the market mood in the days ahead.

If the ECB and BoE follow in the footsteps of the Fed, offering increasingly hawkish shifts, we could see the euro and British pound strengthening. Traders will brace for elevated volatility in both EUR/USD and GBP/USD in the coming days.

Last but not least, traders’ eyes will be on the non-farm payrolls report on Friday. Here, most attention will be paid to average hourly earnings which are anticipated at 5.2 percent y/y from 4.7 percent prior. A solid earnings reading could boost the U.S. dollar.

ECB decision – “Very different situations”

Following the Fed’s fast tightening path on the one hand and the Bank of England that is gearing up for its second consecutive rate increase this week on the other hand, investors have pulled forward bets for an ECB rate hike as early as this year. ECB President Christine Lagarde, however, has pushed back against those hawkish expectations, highlighting the “very different situations” the three economies face. The ECB will try to reach a reasonable balance between its readiness to change course if inflation pressures prove more persistent and its prudence not to tighten prematurely. Economic growth slowed sharply at the end of last year, and the International Monetary Fund already slashed its 2022 outlook for the euro zone while intensifying tensions at the Russia-Ukraine border have emerged as a new risk.

The ECB is thus expected to maintain its dovish stance over the medium term. Lagarde will probably reiterate that the central bank is unlikely to hike in 2022, but refrain from pushing back on market expectations for tightening in 2023. A failure to push back on market pricing for 2022 would be a sign that the ECB is shifting to a more hawkish stance.

Our technical forecast for EUR/USD ahead of the ECB decision: Slightly bullish with a next target seen at 1.1220-30.

BoE decision – More aggressive path of interest rate hikes?

The Bank of England is expected to raise interest rates to 0.5 percent on Thursday. This move could also open the door for the BoE to start shrinking its balance sheet by stopping the reinvestment of expired bonds. After this February meeting traders bet the BoE will raise rates to 1 percent in June. However, with traders calling the central bank increasingly unpredictable, anything can happen and traders will prepare for both hawkish and less hawkish outcomes.

Our technical forecast for GBP/USD ahead of the BoE decision: Bullish above 1.3450, next target then seen at 1.35.

 

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.

We wish you good trades!

Any and all liability of the author is excluded.

Copyright © All Rights Reserved 2022 MaiMarFX.

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Surprise Means Profits

Surprise, surprise. The Bank of England raised interest rates by 15 basis points for the first time since the beginning of the crisis. The hike came as a surprise for many market participants and has thus sent the pound surging against other peers. As traders, we were able to catch the big fish in the GBP/USD with our long entry at 1.3270 hitting precisely its profit target at 1.3370 before price reversed.

The European Central Bank will wind down its emergency stimulus as planned in March. As for rate hikes, ECB President Christine Lagarde said that a rate increase in the euro zone isn’t going to happen any time soon. The EUR/USD hit a two-week high at 1.1360 but remained below crucial resistance levels. We profited with our long entry at 1.1310.

We will save our weekly profits and wish everyone a good weekend.

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ECB To Remain Dovish?

Market participants seems to be having enough of the U.S. dollar rally while the greenback may have reached the peak of its rally.

The Federal Reserve announced that it will double the pace of its taper to $30 billion a month and projected three quarter-point interest rate increases in 2022, another three in 2023 and two more in 2024.  The updated dot plot shows a much more aggressive tightening cycle than envisioned in September when Fed policy makers saw only half a hike.

Despite the Fed’s hawkish turn, the market’s reaction was muted since much of the move was already priced in. We bear in mind that if the demand for dollars is fading, it could mean that a reversal is just around the corner.

Having the Fed behind us, the Bank of England and the European Central Bank will release their respective policy statements today.

The Bank of England surprised markets at its last policy meeting by electing not to raise interest rates despite rampant inflation. The central bank may choose to hold off on a rate hike yet again, as the country struggles with the spread of the Omicron variant. However, rate hikes are just around the corner while the BoE is expected to hike next year.

The European Central Bank was sounding more dovish of late than other central banks. While the ECB may announce an alteration to its pandemic emergency purchase program (PEPP), policymakers may choose to remain dovish as the continent struggles with Omicron. The reemergence of lockdowns and rising infection rates could hamper Eurozone growth, which could force the ECB to remain dovish for the near-term. Economists don’t expect the first rate increase until 2023 at the earliest. Any hawkish surprise today will let the euro fly.

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We wish you good trades!

Any and all liability of the author is excluded.

Copyright © All Rights Reserved 2021 MaiMarFX.

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Event-Laden Trading Week

Welcome to the last fully-liquid and event-laden trading week of the year 2021. Before the liquidity drain towards the end of the year, this week is overloaded with major event risk such as the FOMC rate decision on Wednesday and the rate decisions of the Bank of England and European Central Bank on Thursday. Traders are thus prepared for surprise volatility this week.

Top event risk will be Wednesday’s FOMC decision and while the tone-setting Federal Reserve carries far more weight than other central banks, the Fed will avoid triggering surprise volatility. There will be no change in interest rates but catalysts for potential market moves will be the pace of tapering and the timeline for rate hikes. FOMC officials have recently signaled a hawkish shift in their policy stance amidst elevated inflation (CPI hit a nearly four-decade high last Friday), robust economic growth and strengthening labor market conditions. Market participants have thus pushed rate hike speculation up to two full Fed hikes in 2022. Even if Fed officials have turned slightly more hawkish, the Fed perhaps cannot live up to the market’s more hawkish expectations. Traders should thus be prepared for disappointment and a potential U.S. dollar retreat.

Bank of England rate hike unlikely

The risks remain tilted to the downside for the British pound while the market still sees a 42 percent chance of a 15bps rate hike Thursday. However, the BoE is not expected to raise rates this time due to the newly uncertain economic outlook. Moreover, the BoE is much more likely to raise rates in months when it also delivers forecasts and a press conference where it can explain the decision to the public. The next one of those will be in February. Nonetheless we bear in mind that policy makers have warned that the consequences might be steeper when rates are raised later. In other words, BoE policy makers may have to raise rates further than markets currently expect to moderate inflationary pressures.

GBP/USD Technical view: Chances of a reversal

Given the oversold situation of the pound in longer time frames, we may get close to peak bearishness with increasing chances of a reversal toward 1.35. As long as the cable holds above 1.3150 and 1.31, bulls may regain some control in this pair.

Euro traders are well advised to sit on the sidelines until Thursday

The European Central bank meeting on Thursday is difficult to predict as there could be an internal battle between hawks and doves. The dovish core of the council will want to avoid premature tightening while high inflation and near-term upside risks could justify the removal of the ECB’s policy support. However, as long as an interest rate hike is not in the cards, the euro may trend to the downside against other peers.

EUR/USD Technical view: Waiting for a bear flag confirmation

In longer time frames the euro formatted a potential bear flag (green trend channel lines) within the recent downtrend. Should the pair now show a weekly close below 1.1250, we could have a confirmation of the bear flag with the focus shifting to lower targets at 1.11 and 1.10. For a bullish breakout on the other side, we would need to see a significant break above 1.1450. As long as the euro remains trading between 1.1450 and 1.1250, we will maintain a wait-and-see attitude.

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We wish you good trades!

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Pound Vulnerable to Further Losses After BoE Shock

The Bank of England shocked the market yesterday by keeping interest on hold, disappointing hawkish rate hike bets. The pound dropped almost two percent from our short entry, providing sellers a very good gain. BoE officials voted 7-2 to keep the benchmark interest rate at a record low of 0.1 percent. Defending the BoE’s decision, Governor Andrew Baily said that policy makers will focus on jobs and the risks to economic growth instead of inflation.

Bets on the first 15-bp BoE rate hike are now pushed back to February.

GBP/USD: As traders digest the shock, the pound may be vulnerable to further losses. A next lower target comes in at 1.3415, followed by 1.3330. A lower resistance is currently seen at 1.3650.

All eyes now turn to the U.S. nonfarm payrolls report today at 12:30 UTC.

Analysts expect the NFP report to cross the wires at 450k for October. That is more than double the 194k September print. A better-than-expected figure will strengthen the Fed’s basis for more tightening and will benefit the U.S. dollar. Alternatively, a poor print is likely to do the opposite with the greenback vulnerable to losses.

We wish you all a beautiful weekend!

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Try out our new signals for cryptocurrencies:

ETH/USD

Long @ 4560

Short @ 4515

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