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ECB Decision Day: Hawkish Or Dovish Taper Mr Draghi?

Dear Traders,

It’s decision day at the European Central Bank and traders in all EUR crosses brace for heightened volatility at this highly anticipated event that will bring forth news on the pace of the ECB’s quantitative easing program (QE). The euro traded higher against the U.S. dollar ahead of today’s announcement since the ECB is expected to announce a reduction in the size of its monthly bond buying. While this expectation alone is considered euro-positive, the devil is in the details. There are a number of possible scenarios while the best (but most unlikely) scenario for the euro would be a reduction of EUR40 billion bonds buys until September 2018. The most likely scenario is however a taper of 30 billion euros with a nine-month extension of the QE program. Since the latter scenario is already largely priced in the euro’s price development, the risk is tilted to the downside if the ECB fails to surprise the market. Bearing in mind that ECB policy makers want to avoid a too strong euro they need to be careful in their statement. If the market senses a more cautious approach towards monetary policy normalization or in the case of a reduction of only EUR20 billion bond buys per month, the euro could fall.

Whatever the case, the good news is that ECB President Mario Draghi can be expected to emphasize that the Eurozone economy is in a good shape and probably capable to withstand tighter monetary policy over the medium-term.

The ECB’s decision will be announced at 11:45 UTC and Draghi will speak 45 minutes later.

EUR/USD

The euro currently trades around the resistance line of its recent downtrend channel near 1.1840. If the euro breaks above this barrier, the focus will shift to the 1.19-level. A sustained break above 1.1915 is needed to encourage euro bulls for a run for 1.20 or 1.21. If 1.19 however holds, particular focus remains on the 1.17-support. A renewed break below 1.1680 and 1.1650 could send the euro towards 1.1580.

The British pound rose on upbeat U.K. GDP data that bolstered the case for a Bank of England rate hike next week.

From a technical point of view, the primary uptrend channel finally proved correct and suggests that we may see further gains towards 1.33 and 1.3350. A break above 1.3365 would brighten the bullish outlook. A current support is however seen at 1.3150.

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Market Listens To Draghi: Tapering Or Expanding Stimulus Plan?

Dear Traders,

Top event risk for the upcoming session is the European Central Bank meeting and ECB President Draghi‘s comments on tapering. While recent ECB meetings have rendered little market reaction, there has been speculation recently that the central bank will begin tapering its bond purchase program at one of its next meetings. While Draghi was optimistic about the outlook for the Eurozone economy, most economists predict the ECB won’t start tapering before the second half of 2017. Quantitative easing is currently scheduled to end in March and with consumer prices still hovering close to zero, policymakers should at least be comfortable with the current level of stimulus or even extend the program before gradually phasing it out once inflation approaches the ECB’s goal of 2 percent.

The ECB will announce its policy decision at 11:45 UTC but no changes are expected. The main focus will be on the press conference 45 minutes later and Draghi’s comments. If he pushes back aggressively against recent talk of tapering, the euro could be vulnerable to further losses. Any signal that the ECB plans to reduce bond purchases will provide a strong boost to the euro. If the central bank however refrains from providing any signals and defers any changes until December, today’s announcement could turn out to be a non-event for euro traders.

To cut it short, let us have a look at the technical chart and prepare for both possible scenarios.

EUR/USD

The euro recently weakened against the U.S. dollar but found some halt around the 1.0950-level, the descending trend line of the euro’s recent downward channel. If the pair breaks below 1.0940 we see a higher likelihood of further losses towards 1.09 and 1.0830. On the upside, the euro would need to break above 1.1060 in order to spark some bullish momentum towards 1.1170.

chart_eur_usd_daily_snapshot20-10-16

Apart from the ECB meeting we have U.K. Retail Sales at 8:30 UTC, the Philly Fed index at 12:30 UTC as well as U.S. Existing Home Sales at 14:00 UTC scheduled for release but all these reports could take a backseat to the ECB.

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Focus Shifts From U.S. Dollar Rally To Non-U.S. Event Risks

Dear Traders,

We welcome you to a new trading week. While the last week ended with broad based U.S. dollar strength, the greenback could be pushed into the background this week given major event risks such as the European Central Bank meeting on Thursday as well as important economic reports from China and U.K.

Market participants will be closely watching U.K. inflation data on Tuesday. Consumer Price Inflation is forecast to accelerate in September given the fact that sterling’s recent drop boosts inflation. We saw the pound tumbling towards 1.2150 where it found some support for the time being. We anticipate some upward movements towards 1.2225/50 ahead of tomorrow’s report, whereas a break below 1.2130 may boost bearish momentum towards 1.21 and 1.2090.

Euro traders are eagerly awaiting the ECB’s policy decision and the announcement from ECB President Mario Draghi. The market was rocked earlier this month by a report that the central bank could start to taper its bond-buying program of 80 billion euros a month. Draghi could therefore attempt to calm the market by emphasizing that the stimulus would continue. The euro fell below 1.10 and tested the 1.0970-support level on the back of a strong dollar. Whether the EUR/USD could be vulnerable to further losses may hinge on the ECB announcement. If Draghi announces changes to the QE program the euro will react accordingly. For the time being, we consider the 1.0970-50 price area as a support for the pair. On the topside we see a current resistance at 1.1150.

From the U.S. we will have less market moving data this week with the CPI report (Tuesday) being the only interesting piece of economic data. Politically, U.S. presidential candidates Hillary Clinton and Donald Trump will hold their final debate on Wednesday. 

Today, Eurozone Consumer Prices are scheduled for release at 9:00 UTC but this report is not expected to have a major impact on the euro. Furthermore, U.S. Industrial Production figures are due at 13:15 UTC.

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Amazing Trading Day: Bad For The ECB But Good For Traders

Dear Traders,

What an amazing trading day! While the euro’s rise can be characterized as a bitter pill for the European Central Bank as the market’s reaction was certainly not the sort of movement the ECB may have hoped for, it was a very profitable day for traders. Before getting into the reasons for the euro rally let us look back on a very successful trading day. Short-trader’s efforts paid off after the ECB surprised the market with a drop in the benchmark to zero and we got what we have been looking for: +100 pips. Shortly after reaching our profit target the bearish movement was already exhausted and the euro started its relief rally. As if the profit would have not already been enough, just 90 minutes later our long-entry was triggered and we could watch the euro hitting our higher profit target where we have gained another 100 pips profit. The volatile swings in the EUR/USD allowed even more profit but at some point traders should not be profit-greedy and save the winnings.

The ECB delivered a full stimulus package which can be described as even more aggressive step than everyone has expected. That package included cuts in the deposit and benchmark rates, a pledge to increase the monthly QE purchases to 80 billion euros and four more multi-year lending operations (TLTROs). On top of that, the central bank lowered its GDP and inflation forecasts for 2016 and 2017.

So what was finally the reason for the euro’s later uptrend? ECB President Mario Draghi has made a little faux pas when he told reporters after the meeting that “from today’s perspective, we don’t anticipate it will be necessary to reduce rates further.” In other words there is a limit to monetary easing and the central bank has finished cutting rates further. Draghi’s comments thus considerably outweighed the impact of increased stimulus.

EUR/USD

The euro experienced an upside breakout above 1.1070. Given the high volatility and the shift towards a bullish bias the euro could possibly extend its gains towards 1.1245 and 1.13. While we see a current resistance at around 1.13, the next major resistance zone is only at 1.14-1.15. If the pair breaks above 1.1315 a next target is seen at 1.1370 before heeding towards 1.14. However, the bullish move is not a done deal and traders should also bear in mind that the Federal Reserve is likely to maintain its hawkish policy stance – a fact that could strengthen the U.S. dollar in the medium-term. The former resistance at 1.1070 could now act as a support.

Chart_EUR_USD_Daily_snapshot11.3.16

The ECB announcement also triggered volatility in other currencies such as the British pound. The pound participated in the euro’s uptrend and moved finally higher against the greenback. If the pair breaks significantly above 1.4315 we could see sterling rallying towards 1.44. Remaining below 1.43 lower targets could be at 1.4180.

We wish you a wonderful weekend!

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EUR/USD To Remain Under Pressure- Focus On 1.08

Dear Traders,

Those who traded the British pound Monday had to have patience as the cable provided only later some gains towards the 1.3950-barrier. After a false bearish break-out below 1.3840, GBP recovered its losses and is currently facing a next resistance at 1.3950. Once it breaks above 1.3965, we might see a renewed test of 1.40/1.4020.

The most important U.K. data will be Manufacturing PMI scheduled for release at 9:30 GMT and if data surprises to the downside, we expect sterling to fall back below 1.39. A lower target could be at 1.3820.

The euro traded lower against the U.S. dollar on speculation the European Central Bank will add further stimulus at the ECB’s next meeting on March 10. Euro-area inflation turned negative in February putting pressure on the central bank to consider further easing. Within the next few days we expect the euro to trend lower against the greenback. For the time being, we focus on the 1.08-mark, which could act as a current support for the EUR/USD. Bearish momentum could accelerate with a break below 1.0770.

Traders should keep an eye on important economic data such as the German Unemployment report, due at 8:55 GMT and from the U.S. the ISM Manufacturing index, scheduled for release at 15:00 GMT.

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Whipsaw Performance In Both Currency Pairs

Dear Traders,

While we initially anticipated further trendsetting movements in the GBP/USD on Thursday, traders have been disappointed by the cable’s zigzag moves ranging between 1.4445 and 1.4360. In the face of GBP’s recent depreciation, the currency might have taken a little breather yesterday, which has led to false breakouts and limited movements, making it an overall non-profitable trading day. Bank of England officials kept its monetary policy unchanged and said the outlook for growth and inflation has weakened further. Thus, investors continue to hold a very bearish bias over the medium-term.

The euro, however, started the day with some profitable bullish moves towards 1.0945. That short-term rise can be attributed to speculation that further European Central Bank stimulus may be limited. On the other hand, some ECB policy makers expressed a preference for an even larger rate cut, according to an account of the Dec. 3 policy meeting, published on Thursday. The ECB next meets on January 21 and investors will be looking for new insights into the ECB’s guidance.

The U.S. dollar slightly weakened on cautious comments from Federal Reserve President James Bullard, who sounded more cautious by saying the latest decline in oil prices may delay the return of inflation to the Fed’s target of 2 percent.

All in all, it was none of our favorite trading days as the market failed to provide much consistency in the currencies performances.

Today, traders will have another opportunity to watch out for some strong movements in the U.S. dollar. U.S. Retail Sales are scheduled for release at 13:30 GMT and this report could trigger a strong reaction in the greenback.  Retail Sales are expected to show a decline in December and any surprises could affect the dollar’s performance. Last but not least, Michigan Confidence is due at 15:00 GMT.

Let’s see if we can pocket some profit on the last trading day of this week.

Have a nice weekend.

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Any and all liability of the author is excluded.

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Obedient Euro And Stubborn Cable

Dear Traders,

The story is always the same: Whenever the euro increased its value too rapidly only because of speculation against the U.S. dollar, someone has to talk down the currency. This is what happened yesterday. European Central Bank member Ewald Nowotny said yesterday in Warsaw, that core inflation in the euro area is “clearly missing the ECB’s target”. He added that “…in my view it is quite obvious that in the current economic situation additional sets of instruments are necessary. These include structural measures”. His comments were perceived as a signal that the ECB could step-up more stimulus in the near-term. In response to the remarks, the euro bounced off the 1.15-level and weakened significantly against the U.S. Dollar.

In the end, the euro was re-balanced, falling back into its recent trading ranges below 1.14.

Moreover, the dollar received support from better than expected U.S. Consumer Prices.

It was not a good day for sterling traders. The British pound refused to trade above 1.55 and there was neither further bullish nor fresh bearish engagement in the GBP/USD. We had therefore to struggle with stop-losses without a profitable ending.

What is important for today?

Eurozone Consumer Prices are scheduled for release at 9:00 GMT today, which could have an impact on the EUR/USD.

Furthermore, traders should have an eye on today’s U.S. data. U.S. Industrial and Manufacturing Production are due for release at 13:15 GMT, followed by Michigan Confidence at 14:00 GMT.

We wish you a profitable trading day and a beautiful weekend.

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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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Fasten your seatbelt for another volatile week

Dear Traders,

The recent trading days have been very profitable for traders due to high volatility amid concern over China and global uncertainty. Given this week’s major risk events, volatility is likely to persist, providing traders new chances for some profitable moves.

While the divergence in monetary policy between the European Central Bank and the Federal Reserve should determine the market’s price action, the focus will be on the U.S. Non-Farm Payrolls report on Friday. The monthly job report could be a key factor for the Fed’s decision to raise rates in September. If there is a solid job growth with payrolls exceeding 200k and average hourly earnings moving up, the Fed could hike rates on their next FOMC meeting despite global turmoil. Nonetheless, investors have reduced the probability of a Fed move next month.

An important indicator before payrolls are due for release will be the ISM Manufacturing index, scheduled for release on Tuesday.

The European Central Bank will announce its monetary policy decision on Thursday. Moreover, ECB president Mario Draghi will present the quarterly economic forecasts at the press conference. Market participants are looking for further easing to be announced before year-end.

It should be an interesting week for traders and regardless of which way the financial markets move, we will try to gain a nice profit in either direction.

The week starts off with important data releases such as Eurozone Consumer Prices at 9:00 GMT.

EUR/USD

We see the euro currently trading between 1.13 and 1.12. If the currency pair is able to break significantly above 1.13, chances are that it heads for a test of 1.14. Below 1.12 we favor a bearish stance but note that the support line could still act as a small hurdle for euro bears.

Chart_EUR_USD_Hourly_snapshot31.8.15

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First Fed-move expected in September – Focus now on ECB

Dear Traders,

While sterling bears had to struggle with multiple short-entries, making it a strenuous trading day, euro trader’s efforts paid off. The euro traded lower on stronger U.S. data and hawkish comments from Janet Yellen, providing euro bears many green pips.

Yellen is optimistic and expects U.S. growth to strengthen over the rest of 2015. She said that “every FOMC meeting is a Live meeting”, which means that the Federal Reserve could raise rates at any meeting. She stressed that the pace of policy tightening is more important than the timing of the first rate increase. In other words, a September liftoff is still possible, increasing the demand for U.S. dollar.

Greek parliament approved new austerity measures

229 members of the 300-seat parliament in Athens accepted the agreement with creditors, paving the way for more emergency funds. The focus shifts now to the European Central Bank which must weigh the level of emergency liquidity assistance (ELA) in order to help Greek banks to re-open after more than two weeks.

The ECB will also decide on monetary policy at 11:45 GMT followed by the ECB Press Conference led by Mario Draghi at 12:30 GMT. Before the ECB decision, it should be important to watch the release of Eurozone Consumer Prices at 9:00 GMT. If data fails to meet the market’s expectation, it could lead to a strong reaction in the EUR/USD.

Furthermore, Fed Chair Janet Yellen delivers her testimony at 14:00 GMT along with the release of the Philadelphia Fed survey.

Today is our last trading day before our summer holiday break.We will leave for summer holiday from tomorrow until 31/07/2015 and will resume the signal service on August 3rd.

Until then we wish you successful trading and enjoyable summer days.

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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.

www.maimar.co