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Can FOMC Minutes Fuel Demand For Dollars?

Dear Traders,

The U.S. dollar’s relief rally has lost some momentum with both EUR/USD and GBP/USD heading upwards. From a technical perspective it is noteworthy that the important resistance levels in both major currency pairs are still unbroken, at least for now. The greenback may receive attraction ahead of the FOMC meeting minutes which are scheduled for release today at 18:00 UTC. Bearing in mind that the Federal Reserve plans to raise interest rates one more time this year followed by another three hikes next year, the minutes should confirm the hawkish outlook. While this alone is dollar positive we have to consider that a December rate hike has been largely priced in by the markets. Thus, the minutes could possibly be a non-event for traders today but let us be surprised.

On the flipside, the euro received some support from Catalonia’s president Carles Puigdemont who stepped back from an immediate declaration of independence from Spain. He said he would “suspend” the referendum result for a period of some weeks for dialogue with Prime Minister Mariano Rajoy’s administration. The euro rose towards its resistance area at 1.1830-40 but as long as that barrier remains unbroken, we expect the euro to drop back towards 1.1775 and possible even 1.17.

The British pound touched the lower bound of its current resistance zone ranging from 1.3250 to 1.3220. In short-term time frames we see the cable formatting a potential double top pattern which could predict upcoming bearish momentum, provided that the cable remains below 1.3230. A break below 1.3175 could reignite bearish momentum driving the pair towards 1.3130.

Apart from the FOMC minutes there are no major drivers in the market today. Let us wait to be surprised.

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Yellen Confirmed Rate Hike Expectations But Watch Out For Corrections Now

Dear Traders,

And the winners were once again: Dollar bulls. However, it was no surprise that the dollar further strengthened after Federal Reserve Chair Janet Yellen signaled the likelihood of a December rate hike. She said that a rate increase “could well become appropriately relatively soon”, giving investors the green light to expect a move next month. Yellen cautioned that the Fed did not want to wait “too long”. Regarding the future economic outlook under Trump she said that policy makers “don’t know what’s going to happen” and that the Fed “will be watching the decisions that Congress makes and updating their economic outlook as the policy outlook becomes clearer”.

In a nutshell, the Fed remains on track to raise interest rates as Trump’s election has not altered the central bank’s short-term plans whereas in the future, “there’s a great deal of uncertainty”.

From a technical perspective, we all know that a rate increase is being well priced in BUT with more than three weeks to go before the FOMC rate decision in mid-December the dollar is clearly overbought, making corrections more likely in the near-term.

EUR/USD

The euro trades in a well-defined downward channel and based on that channel the euro might tend to drop towards 1.0525 before it corrects some losses. But be careful: The pair is oversold and we should now expect upcoming corrections towards 1.07 and 1.0750.

chart_eur_usd_4hours_snapshot18-11-16

The technical picture in the GBP/USD has not changed much. After dipping below 1.24 sterling bears will have to wait for a significant break below 1.2330 and further 1.23.

There are no economic reports scheduled for release today. The only interesting event for euro traders could be Draghi‘s speech at the Euro Finance Week in Frankfurt scheduled at 8:30 UTC.

We gained again a good profit this week and wish everyone a beautiful weekend.

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Market Remained Unimpressed By FOMC Statement

Dear Traders,

The market reaction to the FOMC statement was muted with the U.S. dollar ending the trading day virtually unchanged against the euro and British pound. While the Fed minutes confirmed that the central bank is moving toward tightening it also shows continuing disagreement among policy makers. Last month’s decision to hold interest rates at their current level was a close call with three FOMC members dissenting for a rate rise, the minutes showed. Market participants expect the Fed to move in December and while the market is pricing in the probability of year-end hike, the Fed may consider that move to be inevitable to preserve the central bank’s credibility.

Overall, the dollar remains bid on corrections and investors will be looking for dollar dips to buy the currency and participate on the dollar rally. Consequently, we expect further dollar gains in the medium-term but we will pay attention to potential pullbacks in the short-term.

There are no major economic reports scheduled for release today so trading could be quiet.

Here is where we see current resistance and support levels for both currency pairs:

  Resistances Supports
EUR/USD 1.1050/60

1.11

 

1.10

1.0970

 

 

  Resistances Supports
GBP/USD 1.2230

1.2320

1.2150

1.21

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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 2016 Maimar-FX.

www.maimar.co