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Rate Cut Fears Weaken The U.S. Dollar’s Counterparts

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We wish everyone a good new trading week.

Most important event risk of this week, will be the U.S. NFP data, due for release on Friday.

Rate cuts are in focus and while U.S. economic data continues to support a robust economy, expectations raise that the European Central Bank may even cut interest rates earlier than the Federal Reserve. This exerted some pressure on the euro and British pound against the greenback.

EUR/USD: Lower support zones come in at around 1.07 and 1.0650, while on the topside, the 1.0830 could act as a resistance.

GBP/USD: The pair closed below 1.26, so the next target is seen at 1.25.

 

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Our trading ideas for today 2/4/24:

EUR/USD

Long @ 1.0765

Short @ 1.0720

GBP/USD

Long @ 1.2570

Short @ 1.2530

DAX® (GER40)

Long @ 18540

Short @ 18440

Settings for all trades today: Entries from 8:00 am UTC, SL 25, TP 40

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.

 

We wish you good trades!

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Traders Brace For Heavy Docket Of Event Risks

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Last week ended with a fresh bout of risk aversion in the market, with the safe-haven U.S. dollar benefitting from fragile global risks factors and fears over Federal Reserve tightening including rising rate hike odds.

This week brings high-profile event risks such as the Federal Reserve rate decision (Wednesday), followed by the Bank of England decision (Thursday). While the BoE is expected to leave its stimulus package in place amid a slowing economy, the Fed will probably hint that it is moving towards tapering monthly asset purchases and may make a formal announcement in November. Most economists expect the Fed to start tapering in December. A first rate hike is expected in the second half of 2023, followed by three more in 2024 according to a survey. The much-watched “dot plot” of rate forecasts will include 2024 for the first time and will thus be the big story on Wednesday.

Elevated Fed rate hike odds have produced a more favorable trading environment for the greenback and if the Fed dots surprise to the upside, dollar bulls will have room to price in a more hawkish Fed.

EUR/USD

There is not much positive to report amid the euro’s clear bear trend. From a fundamental perspective, the common currency faces further downside risks in the coming days such as monetary policy decisions of its counterparts as well as Sunday’s German Federal Election. Technically, the risk is tilted to the downside but there is a crucial support zone ranging from 1.17 to 1.1660 which could halt the euro’s fall – at least in the short-term. Additionally, the pair approaches oversold territory, making small rebounds more likely. On the upside, we see a short-term resistance at 1.18. However, if 1.1650 breaks to the downside, lower supports come in at 1.16 and 1.1530.

DAX

The sell-off accelerates. Last Thursday we prepared traders for upcoming breakouts and we got what we have been looking for – much to the pleasure of the bears. This morning we see the index extending its slide towards 15300, while we penciled in a next potential support at around 15270. However, as long as 15000 remains unbroken, we could see some reversal towards 15700 but we bear in mind that political risk could weigh on the index.

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Euro Depreciates Against Dollar, Pound With A Tailwind

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Dear Traders,

The U.S. dollar experienced a long-needed recovery against most of its major peers at the beginning of this week while the strongest move was seen against the euro. The EUR/USD dropped below 1.20 and extended its slide towards 1.1950. Whether we will see further losses in this pair remains to be seen and hinges on the appetite for dollars ahead of Friday’s U.S. CPI data.

Unlike the euro, the pound sterling was able to stem the decline and rebounded against the greenback after it marked a recent support at 1.3520. Our assumption of a steeper slide following a break below 1.3540 has been shown to be false, at least for now. We still see a higher likelihood of an extended upside swing after a break above 1.3590. However, if the pound falls back below 1.3530 it may be vulnerable for a break below 1.3520. Lets us be surprised.

Sterling traders should keep an eye on important price barriers shown in the table below.

  Resistances Supports
GBP/USD 1.3590

1.3615

1.3650

 1.3520

1.3490

1.3450

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We wish you good trades and many pips!

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www.maimar.co