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Further U.S. Dollar Strength Ahead?

The euro consolidated within a 50-pip-range against the U.S. dollar Tuesday and it seems as if the dollar is only taking a breather before we see the greenback resuming its rally and thus seeing more bearish momentum in the EUR/USD. As long as the pair remains trading below 1.13, the chances are in favor of the bears with a next lower target seen at 1.1150.

The GBP/USD trended lower as prospects for a Bank of England December rate hike started to fade. Below 1.3340, the next target is at 1.33.

Today, traders await key U.S. data such as the PCE index due at 15:00 UTC as well as the latest Federal Reserve minutes at 19:00 UTC. If the PCE index surprises to the upside, the dollar could further strengthen with traders speculating on a tighter Fed monetary policy path.

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Profitable Trades

We got what we have been braced for: A profitable breakout in both EUR/USD and GBP/USD. The surprise strength in U.S. retail sales raised the prospect of a Federal Reserve taper and thus strengthened the U.S. dollar. The Fed’s FOMC meeting next week is now another possible source of volatility as market participants await clues about the taper time-line and eventually interest rate hikes.

EUR/USD

The euro dropped below 1.18 and extended its slide to the support zone around 1.1750. We went short at 1.1790 and took advantage of that bearish move.

We also went short at 1.3820 in the GBP/USD yesterday and profited from the greenback’s strength until 1.3780.

Today we will save our weekly profit and will wait for the next week to offer some profitable movements.

Good weekend everyone.

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NFP Report: Caution – Danger of Burns

As expected, we saw some bigger movements on Thursday with market participants positioning for a stronger payrolls report after ADP employment change surprised on the upside. Short traders in both EUR/USD and GBP/USD were able to profit yesterday and everyone is eager to see whether today’s U.S. jobs report will shift the Federal Reserve taper talk. If the report beats expectations, the U.S. dollar will soar as there is more pressure on the Fed to make a hawkish move, sooner rather than later.

However, expectations are very high today and traders should be cautious amid potential exaggerated market reactions around the release time of the jobs report at 12:30 UTC. Extreme volatility can quickly erase previous gains and lead to steep losses. Payrolls estimates range from 335,00 to 1 million job gain in May, so anything is possible which is why it is extremely dangerous to take a position ahead of the release.

What should also be monitored closely is the wage inflation number. The greenback will benefit from a higher reading with taper speculation gaining traction.

While everything will depend on the NFP outcome, let’s take a brief look at the technical picture for better orientation.

EUR/USD

The overall trend is still upwards with crucial support zones seen at 1.20, 1.19 and 1.16. In short-term time frames, if the euro falls below 1.2070, we expect further losses towards 1.19. On the upside, bulls will need a significant break above 1.23 and further 1.2350 in order to shift the focus towards 1.25.

GBP/USD

As long as the cable trades above 1.4050, the recent upward trend channel remains intact. A crucial support-zone comes in between 1.40 and 1.3950 and once that zone is breached to the downside, we anticipate steeper corrections towards 1.38 and 1.37. On the upside, bulls will need to overcome 1.4250 in order to push the pound towards 1.4350.

 

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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Greenback Strengthens On Optimistic FOMC Minutes

The U.S. dollar ended the day higher against its counterparts as the minutes showed Federal Reserve officials were cautiously optimistic about the U.S. recovery with some indicating they would be open “at some point” to discussing adjustments to the pace of bond purchases. In other words, the taper talk could be on the table as early as next month which could bolster the greenback. The Fed next meets June 15-16.

GBP/USD: The cable slid below 1.4140 and is currently testing the 1.41 short-term support. Below 1.4070 we expect further losses towards 1.40 whereas on the upside, the 1.4170-level will be of particular interest. An upside break of 1.4170 could lead to another upward movement towards 1.4250 while in the opposite case, if that level remains unbroken, we could see the formation of a head-shoulders pattern, predicting steeper losses.

DAX: The index dropped below 15000 but the dip proved to be short-lived. As long as the DAX holds above the crucial 15000-mark we expect another run for higher targets at 15570 and maybe even 15800.

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Further U.S. Dollar Strength Ahead Of CPI Report?

Today all eyes will be on the U.S. inflation data scheduled for release at 12:30 UTC. Consumer price inflation is forecast to show an increase in April and investors wonder whether rising inflation will force the Federal Reserve to tighten its monetary policy sooner than current guidance suggests. Fed officials reiterated that it’s premature to discuss pulling back monetary support but with the taper discussion coming back at the Fed’s meeting next month when economic projections are due to be released, early positioning could help the U.S. dollar strengthening. A lower-than expected inflation reading however may lead to another rally in risk assets.

Let’s have a look at the technical picture in both USD crosses:

Time for a correction?

GBP/USD

After the pair tested the upper trend channel border between 1.4150-1.4180, a correction wouldn’t come as a surprise. While we see chances in favor of the bears today it will be crucial for the pair to remain below 1.42 in order to test current support levels at 1.40 and 1.39. A breakout above 1.42 however could possibly lead to a test of the February high at 1.4243 and a further run for 1.43.

EUR/USD

In shorter time frames we see a double-top-pattern which could predict upcoming bearish momentum in case of a break below 1.2120. A next lower target would be at 1.2050. For the euro to rise towards 1.2250 we will first need to see a break above 1.2185.

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Can U.K. Inflation Numbers Finally Lift The Pound?

Dear Traders,

The biggest story in the market was the sharp drop of the British pound as sellers have shown-up in the GBP/USD following hawkish comments from Fed Chair Jerome Powell. With the U.S. economy remaining in good shape despite recent worries about trade tensions, the FOMC believes that “the best way forward is to keep gradually raising the federal funds rate.” The U.S. dollar received a boost from that upbeat outlook with traders bracing for further tightening from the Fed. The market is now pricing in a 90 percent chance of a next rate hike in September and a 64 percent chance of a hike in December.

With the dollar regaining strength both euro and British pound came under increased selling pressure. The GBP/USD dropped more than 140 pips from our short entry level while the EUR/USD slid back towards 1.1650.

Today is day 2 of Powell’s testimony and traders may be looking for further gains in the dollar. We also have the U.K. June inflation numbers scheduled for release at 8:30 UTC. This will be the final piece of CPI data ahead of the BoE August rate decision so watch out for volatile movements in the GBP/USD around that important release.

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Focus On U.S. CPI

Dear Traders,

Technically speaking, we got what we were looking for: A breakout of the cable’s consolidated price range. The GBP/USD broke below 1.3230 after the pair failed to overcome the 1.3285-barrier. The downward movement was mainly due to a strengthening U.S. dollar.

Also, the EUR/USD fell victim to a new round of dollar strength and declined below 1.17. We see a current support at 1.1650 which could stop sellers from entering into new short positions, at least for now. A short-term resistance is, however seen at 1.1740, from where sellers could take the opportunity to sell euros at higher levels.

Today we have the U.S. Consumer Price Index scheduled for release at 12:30 UTC. The headline CPI is due in at 2.9 percent from 2.8 percent which could help boosting the dollar rally. However, a miss could have a bigger impact on the dollar rather than an outcome in line with expectations.

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U.S. Dollar Strengthened Against Euro And Pound – Now What?

Dear Traders,

The euro came down from its most recent high at 1.1720 while Tuesday’s decline in the EUR/USD was mainly due to a strengthening U.S. dollar. We now turn our focus to a day trading range between 1.1685-1.1630 and keep tabs on price breakouts either above or below that range in order to evaluate profitable trading chances in the near-term. If the euro is able to overcome the 1.1715-hurdle again, we expect accelerated bullish momentum towards 1.1820. As for the bears, the 1.1510/00-level remains of crucial importance in terms of a profitable breakout level.

The only piece of economic data today will be U.S. Durable Goods Orders at 12:30 UTC.

The British pound depreciated against the greenback and tested the 1.32-support level. As long as 1.32 holds we turn our focus to a break above the 1.33-handle. Below 1.3190 however, the pound may suffer further losses towards 1.3150 and 1.3070.

Bank of England governor Mark Carney is scheduled to speak about the Financial Stability Report today at 8:30 UTC although he is not expected to drift too far from the subject. Thus, the impact on the pound could be less significant.

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FOMC To Provide An Excuse For Profit-Taking On Dollar Long Positions?

Dear Traders,

The U.S. dollar showed no signs of weakness and extended its gains versus other major peers Tuesday. Thus, short traders in the EUR/USD and GBP/USD were once again able to book a good profit.

Having just warned in our analysis from Monday that signs could point to a bearish breakout, that break below crucial key levels in both of our major currency pairs came faster than we had expected. Despite the oversold situation in many major pairs and the need for consolidation, the U.S. dollar continued its bullish bias for the 9th trading day pushing its counterparts even lower. While the greenback’s linear rise is surprising, many traders wonder how long this dollar move will last. However, we continue to warn traders of profit-taking and potential pullbacks.

The market focus will now turn to the Federal Reserve meeting and FOMC rate decision today at 18:00 UTC.  The expectation for any change in monetary policy is very low at this meeting with no updated forecasts and no press conference from Fed Chairman Powell. However, the meeting should be a runway for another rate hike in June and if Fed policy makers don’t commit to rate increase next month the dollar will quickly fall as market participants are positioned for hawkishness from the Fed.

Investors will closely watch for whether the Fed makes more explicit its intention to raise rates three more times this year, for a total of four hikes in 2018.

In a nutshell, while the policy statement is expected to tilt to the hawkish side, there is a risk of disappointment. Dollar bulls may thus take the opportunity to take profit on dollar long positions.

Before coming to the FOMC decision, we will watch the ADP Employment Change at 12:15 UTC.

EUR/USD

The euro fluctuates around the 1.20-level while still being in oversold territory. We now expect the pair to trade between 1.2050 on the upper side and 1.1950 on the lower side.

GBP/USD

Given the strong bear candles in the daily chart we expect the risk to remain tilted to the downside with a lower target being at 1.3530/1.35. However, the cable is deeply oversold, which is why we prepare for pullbacks towards 1.37 and 1.3730.

 

 

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USD Rally Appears Overstretched

Dear Traders,

The U.S. dollar resumed its advance on Monday but we are continuing to be on the lookout for reversals since the dollar’s rally could be somewhat overstretched in many major currency pairs.

The euro extended its slide to a low of 1.2184 but the breakout below 1.22 appears unsustainable, at least as long as the euro remains above 1.22. We now keep tabs on the 1.2240/50-level which could act as a short-term resistance in the EUR/USD. A higher resistance is seen at 1.2330. On the bottom side, we expect a lower support around the 1.2160/55-level that could limit losses. We bear in mind that the pair is in oversold territory which is why traders should prepare for pullbacks.

Short traders of the GBP/USD have been able to gain a good profit in recent days. Commentary made by BoE Governor Carney has sent the pound into a tailspin as he prompted speculation that a rate hike in May is not sure. Consequently, rate hike odds have dropped from 85 percent to below 50 percent following Carney’s remarks.

The GBP/USD traded with a heavy bearish bias and dropped towards 1.39. Given the oversold situation, we still expect some pullback sending the pound back towards a test of 1.4015 and 1.4050. A lower support is, however, seen at around 1.3875.

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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.

www.maimar.co