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Brexit Is The Big Elephant In The Room Urging The Fed To Adopt Slower Rate Hike Path

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Dear Traders,

The market reaction to the FOMC statement was more muted than expected. While the cable maintained a daily price level around the 1.42-mark, the euro surged to a high of 1.1298 after the Federal Reserve held interest rates steady. While the decision to leave rates steady in June was widely expected, Fed chair Yellen declined to provide any guidance on the timing of future rate increases during her press conference. However, the Fed has taken a more cautious stance with regard to next week’s referendum in the U.K., a decision that “could have consequences for economic and financial conditions in global financial markets (…) and in turn for the U.S. economic outlook”, Yellen said. At present, the Brexit vote is the greatest uncertainty in the market.

In the light of a slower approach to interest-rate increases, the U.S. dollar weakened but losses were limited as the dollar is profiting from its function as a safe haven amidst all uncertainties. Traders should bear in mind that as long as the market is biased by the upcoming Brexit vote we might not see any sustained movements in the currencies. Large investors are likely to wait until after the big event in order to take new positions.

Today, the focus shifts to the U.S. Consumer Price report scheduled for release at 12:30 UTC. In case of any unexpected surprises the dollar will respond accordingly. Apart from that most important piece of economic data, the Bank of England is scheduled to announce its monetary policy decision at 11:00 UTC but no changes are expected, making it a non-event for traders. Before the BoE interest rate decision, U.K. Retail Sales are due for release at 8:30 UTC which could have a minor impact on the pound.

From the Eurozone we have Consumer Prices scheduled for release at 9:00 UTC but if the report is in line with the expectations, it will not have a significant impact on the euro.

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Inflation Data To Determine Direction

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Dear Traders,

Sterling traders had to bite the bullet and watch the cable’s profitable upward swing without being invested in the pound after our second buy attempt failed to provide any profits. Consequently, we are still in the red this month but we are confident that losses will be compensated as we consistently stay on the ball and remain disciplined.

The British pound rose towards 1.45 as Brexit fears are easing. A poll of U.K. voters showed 55 percent were in favor of the remain camp, while a minority of 40 percent wanted to leave the EU. Furthermore, sterling traders await the the U.K. Consumer Prices report, scheduled for release at 8:30 UTC and chances are that the inflation report is more upbeat. In case of better inflation figures, we might see the pound extending its gains towards 1.4520 and 1.4540. Above 1.4570, the currency pair could even head for a test of 1.4630. If U.K. inflation numbers fail to impress, the focus shifts to the U.S. CPI data. Below 1.4380 we expect sterling to drift lower towards 1.4340 and 1.43.

The euro ended the day unchanged against the U.S. dollar and traders must be patient and wait for an increase in volatility in order to benefit sustainably. Today’s price development will be mainly determined by the dollar’s performance and its response to the U.S. Inflation numbers, scheduled for release at 12:30 UTC. An increase in CPI data could revive the dollar’s strength and drive the pair towards 1.1250 and 1.1220. On the upside, we focus on a break above 1.1365, which may result in an upswing towards 1.14 and 1.1435.

Apart from important inflation data, some Fed officials are scheduled to speak today at 16:00 UTC, which could have a short-term impact on the dollar.

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U.S. Dollar Suffers Losses After Yellen Sends Dovish Message

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Dear Traders,

While dollar bulls may have hoped for salvation before Yellen’s speech in New York, the chair indoctrinated the market with a dovish message and stressed the need for a cautious approach. Yellen stated detailed conditions investors need to watch for future rate hikes. These conditions contain the stabilization of commodity prices and foreign economies. Furthermore she stressed the importance of a strong dollar, which would depress inflation and exports if it appreciates further.

The most dovish line was when Yellen said that the committee “would still have considerable scope” to ease policy if needed, smashing down the latest hawkish comments from Fed officials pointing to the possibility of a rate hike in April. The Fed chair said it was appropriate to “proceed cautiously” and reiterated that the Fed is not following a pre-set course of rate hikes, but will act when conditions are right.

On the bottom line we can say that there is not much hope for the U.S. dollar to show signs of recovery in the near-term. Yellen’s dovish message diminished rate hike expectations for 2016, changing the odds in favor of a December rate hike or even later.

As expected in yesterday’s analysis, the euro headed for a test of 1.13 after breaking above 1.1260. We expect the euro to continue its bullish bias and focus on a break above 1.13 and further 1.1340. If the euro is able to climb above the February high of 1.1376 we see a next resistance at 1.1430/50 before facing the 1.15-barrier. Current supports are seen at 1.1250 and 1.1220.

The British pound responded with the most volatile upswing, jumping more than 130 pips from our long-entry. As stated in yesterday’s analysis the pound could be vulnerable to losses after peaking at 1.44/1.4430. However, a break above 1.4450 could send sterling towards 1.45. On the bottom side we expect the 1.43-level to lend a current support to the GBP/USD.

Traders should pay close attention to important economic data, such as the German CPI, scheduled for release at 12:00 GMT followed by the ADP report 15 minutes later.

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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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Cable Remains Trading Sideways – Focus On CPI

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Dear Traders,

The euro dropped below 1.1160 as ECB President Mario Draghi confirmed the central bank’s easing bias. The ECB stands ready to act in the light of recent financial turmoil and would pay close attention to the impact of renewed declines in energy prices as well as the ability of banks to transpose the ECB’s monetary policy. Draghi said “if either of these two factors entail downward risks to price stability, we will not hesitate to act”. His remarks to the European parliament indicate that the central bank could unveil further stimulus at their next ECB meeting in March. The EUR/USD traded lower in response to Draghi’s statement.

Furthermore, the OMT bond buying program returns to the headlines. The Federal Constitutional Court holds again a hearing in a lawsuit against the European Central Bank’s Outright Monetary Transactions program (OMT), a never-used bond buying program announced in 2012. If Germany’s top judges decide that the ECB is overstepping its mandate, they could restrict the central bank’s options.

The Eurozone ZEW Survey is scheduled for release at 10:00 GMT along with German ZEW Index and if figures are even lower than the expectations, the euro could accelerate its decline.

The British pound traded lower on Monday but still remained within its current trading range. U.K. Consumer prices are due for release today at 9:30 GMT and may help to determine a clear direction and increase the momentum. A sustained break below 1.4350 could drive the cable towards 1.4290, whereas a break above 1.4540 may invigorate renewed bullish momentum.

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GBP/USD: Bottom At 1.4235? GBP Awaits CPI And Carney’s Comments

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Dear Traders,

The performance of the British pound was hampered by a short-lived upside correction, which was more limited than we had previously expected. While we anticipated the short pullback to last until at least 1.4335, the pound sterling reversed shy of 1.4325.  The currency pair is now facing its support at 1.4230 and if we see a break below that level, GBP could slide towards next lower targets at 1.42, 1.4150 and 1.4110. Short-term resistances are seen at 1.4310/25 and 1.4350.

Sterling traders will pay attention to the U.K. Consumer Price report, scheduled for release at 9:30 GMT today. While the Core CPI is forecast to hold steady, inflation data from December may show an uptick. Whatever the case, any changes in CPI could have a strong impact on the currency. Furthermore, Bank of England Governor Mark Carney is scheduled to speak on the economy at 12:00 GMT. If he sounds more dovish, GBP could extend its losses versus the U.S. dollar.

The EUR/USD traded sideways within a narrow trading range. With prices above 1.0910 the euro may head for another test of 1.0945 and further 1.0975. On the bottom side we see a current support-area ranging from 1.0870 until 1.0845. The currency pair will first need to break this area significantly in order to test next important price levels at 1.0834 and 1.0810.

The most important piece of economic data from the Eurozone will be the German ZEW Survey due at 10:00 GMT alongside the Eurozone Consumer Price Report. In case of any disappointments, the euro could be trending downwards.

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Will U.S. Consumer Prices Spur Dollar Bulls?

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Dear Traders,

The U.S. dollar weakened against the euro on speculation the greenback could be vulnerable to a post-Fed selloff. Investors are either taking profits before year-end or adjusting their positions ahead of the big event tomorrow. The Fed is widely expected to increase its benchmark but the focus will be on the overall monetary policy path following a first hike. The British Pound, however, was forced to test its 1.5110-support before it followed the current upward trend.

Today’s focus will be on Consumer Price Reports from the U.S.and U.K. As recently noticed, the market only shows a strong reaction when reports are falling short of expectations. We will therefore be looking for any surprises in CPI figures. Moreover, the German and Eurozone ZEW Survey is scheduled for release at 10:00 GMT.

9:30 UK CPI

10:00 EUR German & Eurozone ZEW Index

13:30 USA CPI

Here is where we see short-term resistances and supports:

  Resistances Supports
EUR/USD 1.1040

1.1060

1.11

 

 1.0965

1.0935

1.09

 
  Resistances Supports
GBP/USD 1.5187

1.52

1.5260

 1.5110

1.5075

1.5045

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Euro with tailwind, sterling may have bottomed out

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Dear Traders,

Yesterday’s trading has been relatively quiet. After the euro refrained from taking any dips below 1.1145, euro bulls finally got their chance to gain some pips after EUR/USD broke above 1.1215. The British pound, however, followed its downward trend against the U.S. dollar and fell toward its recent support at 1.5155.

Today, traders should focus on eurozone data, such as German Consumer Prices, due for release at 12:00 GMT and important U.S. data, scheduled for release at 14:00 GMT – Consumer Confidence. Furthermore, Bank of England Governor Carney is scheduled to speak in London at 19:40 GMT, which could impact the pound sterling.

EUR/USD

While we generally expect the euro to trade lower in the long-run, the pair is currently heading upwards because of less-dovish comments of ECB policymakers, downplaying the possibility of further QE. Nonetheless, today’s inflation data will be interesting to watch, as the report could have a significant impact on the currency. If the German CPI indicates further weakness, the euro could come under increasing pressure.

Next resistances are seen at 1.1275, 1.1320 and 1.1360.

Supports could be at 1.1220, 1.1185 and 1.1120.

GBP/USD

The pound showed further weakness versus the greenback despite expectations that the BoE will not be far behind the Federal Reserve in relation of raising interest rates. Speculations are that the BoE could start tightening by February 2016.

If GBP breaks below 1.5135 a next support could be at 1.51 and 1.5080.

We see a current resistance at 1.5210. Above 1.5220, GBP may head for another test of 1.5260 and 1.5285.

U.K. Mortgage Approvals and Net Consumer Credit are scheduled for release at 8:30 GMT, reports which could have only a limited impact on the currency.

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Will today’s economic data trigger big moves?

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Dear Traders,

Market participants are very cautious ahead of the Fed decision on Thursday. Price fluctuations have been muted as a result. Nonetheless short-traders were able to gain a small profit by yesterday’s decline in the EUR and GBP.

Today, we will pay closer attention to important economic data such as U.K. Consumer Prices, the German ZEW survey and U.S. Retail Sales. Each report could have a more or less significant impact on the currency pairs, but since the market is dominated by uncertainty and risk-aversion, the reaction to these reports could result in unsteady and choppy swings.

EUR/USD

Technically we see the next major resistance zone at around 1.14. Euro traders might look for an upside move until 1.14/ 1.1420. However, with a significant break below 1.1250, we expect the euro to depreciate towards 1.1180 and 1.11.

Chart_EUR_USD_4Hours_snapshot15.9.15

 

Important economic data:

8:30 UK CPI

9:00 EUR German ZEW Survey

12:30 USA Advance Retail Sales

(timezone: GMT)

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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 2015 Maimar-FX.

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