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U.S. Dollar weak, Pound Jumps to Fresh Highs – Next Targets in Focus

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The biggest story in the Forex market was the rise of the British pound which jumped to the highest level since April 2018. Falling coronavirus cases, the U.K.’s successful vaccination drive and a neutral stance of the Bank of England could bolster the pound’s uptrend in the short-term. However, traders who are betting on the pound’s long-term strength should be careful since the pound is behaving like a risk-on currency, making it vulnerable to a reversal.

Some strategists are already becoming more bearish on the pound, saying that trade disruptions, a widening current account deficit and under-priced political risk around another Scottish independence referendum are providing a headwind for the pound.

In short-term time-frames we saw GBP/USD testing the 1.39-level, bringing a higher target of 1.3970 in focus. However, the currency pair remains in overbought territory, making a correction more likely than a linear continuation of the pair’s uptrend. A current support is seen at around 1.3750.

The anti-risk U.S. dollar depreciated Friday. With the pace of coronavirus outbreaks slowing further, investors are banking on U.S. government spending and the vaccine rollout to boost the economic recovery, even though new variants of the virus are threatening to temper the outlook.

The EUR/USD was able to stabilize above 1.21 after Friday’s decline below 1.21 has proved short-lived as bearish momentum faded. As long as the currency pair trades above 1.2080, we will focus on a test of 1.2170-80.

The DAX seems to be on its way towards a test of 14200. If the index breaks above that level, we may see a continuation of the upward movement towards 14400. A current support is however seen at 14000.

U.S. markets are shut for President’s Day today, so we might have a quiet start to the new week.

Upcoming key events this week:

  • EU finance ministers will discuss the bloc’s current economic situation and outlook on Tuesday.
  • FOMC minutes from the January meeting are due Wednesday.

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GBP/USD: Will The Pound Rise Or Fall?

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Today the focus turns to the Bank of England and its monetary policy decision. While no changes are expected the BoE is preparing to take a significant step into the debate on whether negative interest rates should be used to stimulate the U.K. economy. While negative interest rates are used to spur an economic recovery, the mere possibility of such a step should be negative for the respective currency. Economists expect the central bank to embrace negative rates as a tool but stop short of implementing them for now. According to a survey, most economists expect the key rate to remain at or above the current 0.1 percent through the middle of 2023 but BoE policy makers may indicate that further rate cuts are feasible.

In a nutshell, if Governor Andrew Bailey downplays the need for negative rates the pound will rise. If, however, Bailey indicates that the U.K. needs more help from the BoE, sparking speculation about negative rates the pound will fall.

The BoE rate decision is scheduled for 12:00 UTC.

Let’s take a brief look at the technical picture in the GBP/USD:

We see the pound testing the lower bound of its recent sideways trading range. A break below 1.36 could invigorate fresh bearish momentum but it will depend on the BoE whether a downside break remains sustained. In case of dovish commentary, a next lower target will be at 1.3520. For a bullish breakout, traders may pay attention to prices above 1.3670 that motivate sterling bulls for another test of 1.3750.

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The Fed is Unlikely to Surprise the Market

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The British pound rose to a high of 1.3750 against the U.S. dollar and analysts predict that sterling will continue to outperform against other peers. One of the reasons for the pound’s strength is the vaccine rollout in the U.K. which is going better than almost anywhere else. While vaccine rollouts elsewhere are lagging, Britain has immunized around five times as many people as a proportion of its population than the European Union. Pound traders bet on a sterling comeback on the back of optimism that the economy will find its footing faster than other peers. Some analysts even predict that the pound could advance 20 percent against the euro.

Looking at the GBP/USD chart, chances are in favor of further bullish momentum with a higher target at 1.3850. For bearish momentum to gain traction we would need to see the pound declining again below 1.3630.

The EUR/USD remained trading within a relatively narrow price range between 1.2176 and 1.2107. We will now focus on price breakouts either above 1.2220 or below 1.2115 that could reinvigorate fresh momentum.

Today the focus turns to the Federal Reserve policy decision and Fed Chair Jerome Powell is expected to strike a cautious tone when it comes to curbing the Fed’s massive asset purchases, even though the economic outlook has brightened further thanks to the expected big budgetary boost from U.S. President Joe Biden. Even if some market participants may hope for a change in the Fed’s ultra-dovish policy stance, the most likely scenario is that the central bank maintains the current guidance indicating that monetary policy will remain ultra-loose for at least another year.

In other words, we do not expect any surprises at today’s decision but if the Fed sends a relatively more hawkish message, the U.S. dollar will strengthen in response.

We wish you good trades!

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Pound Trades Resiliently Amid Brexit Headlines

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Dear traders,

We welcome you to a new trading week.

Traders of the GBP/USD have been on a roller-coaster ride Friday with the pound failing to find a clear direction and trading choppily between 1.2963 and 1.2863.

The British pound was resilient to negative Brexit headlines after negotiations over a Brexit deal have stalled with Boris Johnson announcing on Friday that he will focus on preparations to leave the EU’s single market and customs union at the year-end without a trade deal. End of October/ Early November is the last likely moment a deal can be struck and implemented until year-end.

With 15 days to go until the U.S. election, polls show increasing odds of a Democratic sweep and the market thus sees increasing chances of larger economic stimulus. The upcoming election will determine main market moves and if polls suggest a too-close-to-call election volatility will rise quickly.

The final presidential debate before the U.S. election, between President Donald Trump and Joe Biden, will be live from Nashville, Tennessee on Thursday.

 

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British Pound Climbs on Hopes of Brexit Deal

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Dear traders,

It has been a rocky trading day Wednesday with the euro and cable finding a short-term support before they managed to recover some lost ground against the U.S. dollar.

The British pound climbed as investors awaited more news on Brexit negotiations. The U.K. and EU consider the end of October or first days of November as real deadline for getting a deal. The U.K. will leave the bloc’s single market and customs union with or without a new trade agreement when the 11-month transition period expires on December 31, but any deal has to be approved by the British and European parliaments before then.

The DAX hasn’t served us well yesterday and neither bullish nor bearish momentum provided any profitable trading chance.

Let’s see what today brings.

 

We wish you good trades!

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The Rise And Fall Of The Pound Amidst Political Turmoil

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Dear Traders,

The biggest story on Monday was the rise and fall of the British pound which were due to political headlines. After Davis’ resignation, Boris Johnson and Steve Baker followed, who did not support Theresa May’s less aggressive so-called ‘soft Brexit’ approach. This throws the stability of the U.K. government into question. Any signs that Brexit negotiations could be delayed due to political uncertainties, could increase the pressure on the pound.

GBP/USD: The pound rose to a high of 1.3363 before the sharp decline happened that sent sterling back towards a test of 1.32. A significant break below 1.32 could spur bearish momentum towards 1.3150 and 1.31. For bullish momentum to resume we would need to see a sustained break above 1.3320.

The euro reversed shy off 1.18 but found some short-term support at 1.1730. ECB President Mario Draghi reiterated his warning that trade wars pose the greatest risk to growth and stability. From a technical perspective, we will keep tabs on a break below 1.17 as long as the euro proves unable to overcome the 1.18-hurdle.

Today, traders will watch first monthly estimate of the U.K. GDP at 8:30 UTC. From the eurozone we have the ZEW Surveys due at 9:00 UTC.

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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 2018 Maimar-FX.

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BoE Decision: Is August Rate Hike Still In The Cards?

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Dear Traders,

The British pound ended the trading day little changed against the U.S. dollar after compromise has been reached between the U.K. government and Parliament on the progress of the EU Brexit bill. The pound’s rise to a high of 1.3217 proved short-lived and traders now wonder whether the 1.3140-level could give way to further bearish momentum. A lower target could be at 1.3080.

Today, all eyes will turn to the Bank of England rate decision at 11:00 UTC but there aren’t any actual expectations for a move at this meeting. The big question is rather whether the BoE begins to lay the groundwork for a possible rate hike in August. This is, however, not the most likely scenario.

After that rate decision, BoE Governor Mark Carney is due for his annual Mansion House speech and this may actually turn out to be a more proactive driver for the pound. Carney’s speech will be widely-watched for clues or hints around his expectations for the UK economy.

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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 2018 Maimar-FX.

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U.S. Dollar Mixed After FOMC

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Dear Traders,

The U.S. dollar produced a mixed reaction to the FOMC statement and unfortunately, we were caught on the wrong foot when we tried participating in yesterday’s choppy waters. While the dollar showed some pullback on the initial release of the statement, that rebound proved short-lived with the dollar finishing the trading day cautiously higher against the euro and British pound.

The FOMC announcement didn’t really disappoint dollar bulls with the Fed upgrading its view on inflation, even though not so much on economic growth. The chances of a rate hike next month are at 100 percent while odds for a September and December hike remain unchanged.

Trading the choppy swings yesterday proved unsuccessful for day traders but that’s trading and these days can happen.

The euro faces some event risk today with the Eurozone Consumer Price Index, scheduled for release at 9:00 UTC. If CPI data disappoints we might see a drop towards 1.19 in the EUR/USD. Euro bulls, however, should watch out for price breaks above 1.2030.

The British pound dropped to a low of 1.3554 in the aftermath of the FOMC. If the GBP/USD remains below 1.3620 we expect the cable to extend its losses versus the greenback.

From the U.S. we have the ISM Non-Manufacturing Index scheduled for release at 14:00 UTC today.

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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 2018 Maimar-FX.

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GBP/USD: Prepare For Reversals

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Dear Traders,

U.S. President Donald Trump accused China and Russia of devaluing their currencies with the consequence that investors refrained from buying dollars amid concerns about the U.S. policy. The dollar further weakened against the euro and pound.

The British pound was the best performing currency on Monday and rose to a high of 1.4344. While buyers in the GBP/USD were recently able to gain a good profit by the cable’s upward move, we now prepare for pullbacks that could send the pound back towards a test of the 1.4250/70-support. Bear in mind that the pair is in overbought territory, a situation that makes upcoming corrections more likely.

Today we will watch the U.K. employment report at 8:30 UTC which could have an impact on the pound.

The EUR/USD was accompanied by an upward tilt but the euro still refrained from taking out the 1.24-barrier. As mentioned in yesterday’s analysis, we expect a higher resistance-zone to come in at 1.2430-50 but for now, a break above 1.24 must be done first. If the euro, however, formats a double-top below 1.24, bearish momentum may gather steam, driving the euro back towards 1.2350 and possibly even 1.23.

The German and Eurozone ZEW Surveys are scheduled for release at 9:00 UTC, but the impact on the euro could be short-lived.

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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 2018 Maimar-FX.

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Will Payrolls Lead To Further Losses In EUR/USD And GBP/USD?

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Dear Traders,

The ECB’s policy decision came as a surprise for many market participants as policymakers decided to change their guidance by dropping a pledge to increase QE if needed. This tiny step to policy normalization shows confidence in the durability of euro-area growth. The euro initially rose on that hawkish bias but it was ECB President Draghi’s comments at the press conference that send the euro tumbling.

For euro bulls it should have been no surprise that the euro sharply reversed after another test of 1.2450 failed to provide a breakout. Rather, bearish momentum accelerated after the euro dropped below 1.2380 for a second time with the focus now turning to the 1.2280-support level.

The reason for the euro’s decline was that Mario Draghi gave a rather dovish speech saying that he sees interest rates at their present levels well beyond the end of QE. This dovish tone was all traders needed to sell euros toward lower levels.

The British pound was hurt by news from U.K. officials saying that they see “no Brexit deal until next year”. The pound fell toward a low of 1.3780 and currently struggles to hold above 1.38. If it falls below 1.3750 we will focus on lower targets at 1.3710 and 1.3610. A current resistance is however seen at 1.3890.

From the U.K. we have Manufacturing Production figures scheduled for release at 9:30 UTC but this report should take a backseat to the U.S. Nonfarm-payrolls report due at 13:30 UTC, which will receive more attention.

Heading into today’s NFP release, current expectations for the data are modest, with the unemployment rate expected to drop to 4.0 percent and the headline jobs figure to come in at 205K. The focus will also be on average hourly earnings.

Have a nice weekend.

Daily Forex Signals:

Additional daily and long-term entries are available for subscribers.

View our daily signal alerts https://www.maimar.co/category/daily-signals/

Subscribe to our daily signal service https://www.maimar.co/signals/

We wish you good trades and many pips!

Any and all liability of the author is excluded.

Copyright © All Rights Reserved 2018 Maimar-FX.

www.maimar.co