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U.S. Dollar Back In Focus: CPI To Determine Direction

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Dear Traders,

Both EUR/USD and GBP/USD experienced short breakouts of their recent trading ranges but ended the day more or less unchanged against the U.S. dollar. While the euro dropped below the 1.11-level the pair was able to stop its fall just slightly above the current support at 1.1070. The cable, however, traded higher on hopes the UK could reach a deal with the EU on terms of Britain’s membership. As negotiations could last for some time before reaching an agreement and even then, Brexit concerns are not off the table, the pound could be vulnerable to larger losses at any time.

Sterling traders should keep an eye on the U.K. Retail Sales report scheduled for release along with Public Finances at 9:30 GMT. Retail sales are forecast to show an increase and if figures beat expectations, GBP could head for a renewed test of 1.44 and further 1.4425 and 1.4445. Below 1.4270 we favor a bearish stance, shifting the focus to lower levels at 1.4250 and 1.42.

The euro bounced back from the 1.1070-level and climbed above 1.11 again. Whether the common currency is able to stay above that level remains to be seen and could hinge on the appetite for U.S. dollars. U.S. Consumer Prices are scheduled for release at 13:30 GMT and if CPI data surprise to the upside the greenback could rally in response. Bear in mind that a break below 1.1070 could send the euro quickly towards 1.1050 and 1.0990. Current resistances are seen at 1.1150 and 1.12.

We wish you many green pips and a beautiful weekend.

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Euro Benefits As Funding Currency – Sterling Under Pressure

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Dear Traders,

The euro advanced as it plays an important role as a funding currency at times of market turmoil. Before rallying above 1.12 the common currency was able to gain ground above 1.1085. For the time being, we continue to expect the 1.1070/50-level to act as a current support-zone. On the upper side, next important price levels could be at 1.1260 and 1.1280. While many traders are wondering how high the euro may go, we should bear in mind, that a strong rise in the euro, much to the displeasure of the European Central Bank, brings policymakers on to the scene in order to talk down the currency. We expect verbal intervention by the ECB should the euro rise further.

The cable, however, declined towards its next important support-level at 1.4350. As long as Brexit concerns remain on the table, the currency is likely to remain under pressure. We expect increased bearish momentum as soon as sterling breaks below 1.4330/25. Lower targets could be at 1.4240 and 1.4180. A short-term resistance-zone is seen at 1.4450/65. Above 1.4475, sterling may climbs towards 1.4540.

Today we have second-tier data scheduled for release, which is expected to have only a minor impact on the currencies.

9:30 UK Trade Balance

15:00 USA Wholesale Inventories

(Timezone GMT)

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GBP/USD: Further Weakness Ahead? Focus On A Break Of 1.42

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Dear Traders,

Not much has changed since yesterday and trading was relatively quiet. The EUR/USD traded slightly higher against the U.S. dollar despite a weaker Ifo report. Neither the fact that it was the lowest reading in almost one year, nor cautious comments from Mario Draghi, who is trying to convince investors that the ECB is willing to act if needed, could weaken the euro. On the contrary, the common currency rose above 1.0845 and tested the next resistance level at 1.0860. If the euro is able to break above 1.0865/75 we will shift our focus to the 1.09-level again. Ahead of the FOMC statement on Wednesday, we expect the EUR/USD to remain within its current range between 1.0940/80 and 1.0770/15.

Despite the low level of volatility our short-entry in the GBP/USD turned out to be somewhat unfortunate and any further bearish momentum was blocked by the recent support level at 1.4230. Sterling traders should now pay attention to a break of 1.42. If GBP falls significantly below that level, we could see the pair sliding towards lower levels at 1.4155, 1.4130 and even 1.41.

Bank of England governor Mark Carney will testify to lawmakers on financial stability today at 10:45 GMT. Renewed concerns about a potential Brexit and the U.K. outlook may increase the pressure on the British pound.

The most important piece of U.S. data on today’s calendar will be Consumer Confidence, due for release at 15:00 GMT, which may have a short-term impact on the USD.

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Will FOMC Statement Pose A Risk To Dollar Bulls?

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Dear Traders,

The biggest story Friday was the sharp rise in the GBP/USD. After hitting a fresh five-year low at 1.4079 on Thursday, the currency pair rallied towards 1.4365 despite Friday’s weaker-than expected retail sales report. The rise can be attributed to the result of profit-taking after the recent linear decline in the British pound. The cable now faces the 1.4250/30 support-area once again but as long as the pair remains trading above that zone we expect some possible upward swings which may occur in the near-term (see technical analysis below).

The most important piece of U.K. economic data will be Gross Domestic Product, scheduled for release on Thursday and if data disappoints to the downside, sterling could be vulnerable to further losses again. On Tuesday, Bank of England Governor Mark Carney appears in Parliament to speak on financial-stability risks and a major topic could be the U.K. referendum on its membership in the EU and a potential “Brexit“.

The EUR/USD trended slightly lower, moving around the 1.08 support level. For the time being, we anticipate the 1.0770-level to be the next support before a renewed downswing toward 1.0730/15. On the upper side, we see current resistance-levels at 1.0835 and 1.0860.

The most important piece of Eurozone data this week will be the German IFO report, due for release at 9:00 GMT today. If IFO numbers fall short of expectations, the euro could tumble toward lower targets. Furthermore, German Consumer Prices are scheduled for release on Thursday.

All eyes will be on the Federal Reserve’s monetary policy meeting on Wednesday. While the central bank is not expected to alter its monetary policy and there will be no press conference, the statement could fail to add further strength to the U.S. dollar. Rather, the risk for the USD is to the downside, in case the FOMC statement turns out to be more dovish, suggesting a rate hike in March is less likely.

Further important U.S. economic reports are due for release with Consumer Confidence (Tuesday), Durable Goods Orders (Thursday) and U.S. Gross Domestic Product (Friday).

GBP/USD

Looking at the 4-hour chart, we see that there could be some upside room after a break of 1.4365. A next bullish target could be at 1.4420/45 with a possible extension until 1.4470. However a current support-zone is seen at 1.4250/30 and if the cable falls again below that level, we expect bearish momentum to accelerate towards 1.4170 and 1.4130.

Chart_GBP_USD_4Hours_snapshot25.1.16

 

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Copyright © All Rights Reserved 2016 Maimar-FX.

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