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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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Focus Turns To The Fed: Dot-Plot To Show 4 Rate Hikes This Year?

Dear Traders,

This trading week has been, so far, not only volatile but also very profitable for traders. Yesterday, we saw the U.S. dollar gaining back ground against the euro and British pound ahead of today’s highly anticipated FOMC decision. Thus, short traders were able to book a good profit.

The pound slipped below 1.40 after U.K. inflation data came in worse-than-expected but losses were limited due to hopes that tomorrow’s Bank of England statement will be hawkish.

The euro sold off after the German and Eurozone ZEW Surveys fell well below expectations.

Today, all eyes will be on the Fed decision due at 18:00 UTC followed by Jerome Powell’s news conference 30 minutes later. Market participants are curious whether the central bank will lift its projections for the pace of policy tightening this year. While a 25-basis-point rate is almost certain the focus will turn to updated economic projections (SEP – Summary of Economic Projections) and the Fed’s dot plot forecast. If the dot plot shows monetary policy makers favoring 4 rate hikes this year, the dollar will rise. Anything else could disappoint the market’s high expectations and could send the dollar tumbling.

While today’s Fed decision will be one of the most important decisions in years, it does not mean that it will be market-moving in terms of profitable trading opportunities. As usual, we will prepare for both bullish and bearish scenarios and will update traders (subscribers) about all current and pending trades on our live signal page.

We wish you profitable trades for today!

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Will Yellen’s Final Move Depreciate The USD?

Dear Traders,

It’s decision day at the Federal Reserve and what makes this final policy decision of the year a significant meeting is not the anticipated rate hike, but the monetary policy outlook for 2018. While the market is certain of a third 2017 hike, the focus will turn to forecasts for the pacing through 2018. We will therefore keep an eye on the dot-plot in order to shape expectations for next year’s rate hike path. If the Summary of Economic Projections (SEP) projects another three or possibly even four rate hikes ahead, the dollar will further rally. However, it is very unlikely that the Fed surprises the market and accelerates its pace. Hence, there is a risk of disappointment today, which could lead to a sell-off in the dollar. We recommend preparing for heightened volatility during the entire North American trading session, while most price action will take place around the FOMC decision and press conference, as well as the CPI reading that will be due before the rate decision.

For Fed Chair Janet Yellen it will be her final quarterly press conference before she steps down in February. It is therefore unlikely that she will signal any new prospects on the Fed’s guidance.

13:30 USD Consumer Price Index (CPI)

19:00 USD FOMC Rate Decision

19:30 USD Yellen Holds Press Conference

(Time zone UTC)

Yesterday’s price performance in both EUR/USD and GBP/USD was not to our liking as both currency pairs failed to pick a clear direction despite the broad-based strength in the USD. Technically speaking, the picture has not changed.

GBP/USD: The cable refrained from a break below 1.33 and we currently focus on a price range between 1.3450 and 1.3220. Yesterday’s better-than-expected U.K. inflation data failed to lift up the currency but if investors take profit on dollar positions today, we could finally see some corrective movements driving the pair higher before the holiday liquidity drain.  

EUR/USD: The euro remained well above 1.17 and as long as there is no clear break below 1.1680 the euro could head for another test of 1.1790. Below 1.1680 we focus on lower targets at 1.1640 and 1.16.

We wish you good trades for today.

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All Eyes On The FOMC Decision Even Though No Changes Are Expected

Dear Traders,

While the euro ended yesterday’s trading day virtually unchanged, the pound sterling headed for a test of 1.33 but reversed some of its gains just shy of that barrier. Whether we will see a sustained breakout above 1.33 remains to be seen and hinges on the risk appetite for pounds ahead of tomorrow’s BoE Super Thursday. The bank of England is widely expected to raise interest rates for the first time in a decade but this move is shrouded in suspicion. We will discuss the risk potential in tomorrow’s analysis.

Today’s focus will be on the Federal Reserve and the market’s appetite for U.S. dollars. It could thus be a turbulent trading day with traders bracing for higher volatility in all USD crosses.

The FOMC rate decision today at 18:00 UTC is top listing but the market is virtually certain that no change to the benchmark will be made this month. Economists expect policy makers to keep rates on hold for now and increase them at the December meeting. The probability of a December rate hike is at 83 percent. However, even if today’s Fed decision is unlikely to serve as a big market mover it could still surprise dollar bulls. In case of a less hawkish outcome, in other words, if there are a number of hawkish dissents, the dollar could give up some of its gains. Let us be surprised.

With regard to the U.S. tax reforms, the House Republicans are expected to release the tax bill text on Thursday.

We also have the ADP Report scheduled for release at 12:15 UTC followed by the ISM Manufacturing Index due at 14:00 UTC, so there is plenty of economic data that could affect the price action in the greenback today.

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We wish you good trades and many pips!

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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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We wish you good trades and many pips!

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Copyright © All Rights Reserved 2017 Maimar-FX.

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GBP/USD Trends Lower But Prepare For Pullbacks

Dear Traders,

U.S. President Donald Trump’s tax-plan announcement had little impact on the market as it foreshadows an uphill battle in U.S. Congress. While Trump said the tax-cut plan was aimed at helping working people and making the tax code fairer, there is concern about the budget deficit. The plan contained only few details on how to pay for the tax cuts without expanding the budget deficit and adding to the nation’s amount of debt. The plan must be turned into legislation and investors are still skeptical that Congress could approve a tax bill in the near future.

The U.S. dollar slightly extended its climb against the euro and British pound as market participants raised their expectations for one more Federal Reserve rate hike this year. The priced-in probability of a December rate hike is now 70 percent.

Traders should keep an eye on the U.S. GDP figures, due for release at 12:30 UTC. In case of a surprise we will see more volatile fluctuations in the USD crosses.

GBP/USD

The British pound extended its slide and fell below 1.3380. However, the dip below that support level was not sufficient to increase bearish momentum and we now expect the pair to find some support around 1.3350. Looking at the 4-hour chart we see the Relative Strength Index (RSI) approaching oversold territory. This situation may encourage buyers to take long positions above 1.3340. If the pound climbs back above 1.3430 we could see a run for 1.35.

Traders await a speech of Bank of England Governor Mark Carney at the BoE Independence conference at 8:15 UTC. If Carney raises rate hike expectations the pound could quickly recover from its lows.

The euro continued its short-term downtrend and fell towards 1.17. As stated in yesterday’s analysis we expect a stronger support coming in between 1.1710 and 1.1680. Buyers of the EUR/USD should now wait for prices above 1.1825 in order to buy euros towards 1.19.

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We wish you good trades and many pips!

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U.S. Dollar Strengthens, Trump Tax Plan Back In Focus

Dear Traders,

The U.S. dollar strengthened against its major counterparts as comments from Federal Reserve Chair Yellen and President Trump bode well for some renewed upward momentum in the greenback. Yellen boosted expectations for a rate hike in December, saying the Fed “should be wary of moving too gradually” in its rate hike cycle. The Fed does not want to surprise markets when raising rates earlier than expected and while the probability of what the market is currently pricing in is still a little bit too low, Yellen seeks to prepare markets for another rate increase this year.

Moreover, the greenback received some boost from Trump’s comments on the long-awaited tax plan. Recent comments included lowering the corporate tax rate to 20 percent from 35 percent while the individual tax rate should be lowered to 35 percent. However, full details of the tax plan have yet to be revealed. Trump is expected to announce his tax overhaul plan today during a speech in Indiana.

Furthermore, U.S. Durable Goods Orders are scheduled for release at 12:30 UTC but this report is not expected to have a major impact on the USD.

From a fundamental perspective, the dollar trade might be preferable now but traders should also pay attention to the technical picture in order to confirm the current forecast.

EUR/USD

The euro dropped below an important support area at 1.1830-1.18. As long as the pair remains well below 1.1830, we expect further losses towards 1.1730 and possibly even 1.1680. For the euro to regain some strength it would need a renewed break above 1.1865 and further 1.19. A resistance is seen at around 1.1970.

The British pound was able to hold above 1.34. If GBP/USD breaks below 1.3380 we anticipate further losses. A current resistance is however seen at 1.3550.

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We wish you good trades and many pips!

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Hawkish Fed Surprises

Dear Traders,

Incredible but true: The U.S. dollar finally ended the trading day unchanged against the euro and British pound after it came under strong selling pressure following the weak U.S. inflation report. Market participants sold dollars ahead of the FOMC decision on speculation the Fed could forgo raising interest rates again this year. Weaker than anticipated inflation figures have led to the assumption the Fed may grow less hawkish but the opposite happened. The Fed statement was overly hawkish with Fed Chair Janet Yellen noting that the Fed continues to see conditions favorable in place for inflation to rise. Policy makers maintained their outlook for one more hike in 2017 and set out some details of the central bank’s plans to reduce its balance sheet. While U.S. economic data came in on the negative side most recently, it is difficult for the market to trust more the Fed’s rhetoric than the current data output. This fact limited the greenback’s strength and led to an almost unchanged picture.

We went long in both currency pairs EUR/USD and GBP/USD ahead of the Fed statement but gains were limited to smaller targets with the upward trend failing to be sustained.

The euro reversed shy of 1.13 and preferred trending around 1.12. As long as there is no sustained breakout either above 1.1285 or below 1.11, the technical picture in the EUR/USD remains unchanged favoring a sideways trend.

The cable took a glimpse above 1.28 but was unable to hold onto this high level. Sterling traders will watch today’s Bank of England policy decision at 11:00 UTC. While the BoE is unlikely to change its policy, attention will be paid to the central bank’s future guidance. A neutral stance might be considered as positive for the pound whereas a dovish stance could increase the pressure on the pound.

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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 2017 Maimar-FX.

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Euro And Pound Steady Ahead Of FOMC Decision

Dear Traders,

The British pound stabilized above 1.27 after touching a fresh low at 1.2635 on Friday. It seems that sterling at least temporarily reached bottom after Prime Minister Theresa May’s Conservative Party unexpectedly lost the majority in Thursday’s U.K. election. This makes Brexit negotiations with the EU more difficult, leading to new complications in the U.K. The Bank of England will decide on monetary policy on Thursday but BoE policy makers are in no position to alter their course in the near-term. Sterling traders shall pay attention to the U.K. Consumer Price Index, scheduled for release on Tuesday. As long as GBP/USD trades above 1.27, we anticipate some upward movements towards 1.2850 and possibly even 1.2950. A significant decline below 1.27 could however open the door for further losses towards 1.26 and 1.24.

 

The highly anticipated FOMC decision on Wednesday is expected to end with a rate hike. How the U.S. dollar will trade, hinges however on the Fed forecasts for the second half of 2017. If the Federal Reserve calls for three rate hikes this year despite recent disappointing U.S. economic data outcomes, the greenback could strengthen. However, given the low probability the Fed will embark on an aggressive tightening cycle, traders should prepare for a weakening dollar, especially ahead of U.S. inflation data due to be released on Wednesday.

The EUR/USD traded little changed between 1.1215 and 1.1165. Technically, the recent sideways trading range is still unbroken and as long as there is no breakout either above 1.1285 or below 1.11, there is nothing new to report.

From the Eurozone, the most important piece of economic data will be the German ZEW survey scheduled for release on Tuesday morning.

 

With no major market drivers and given the typical seasonal lull in market activity, we do not expect exaggerated currency moves.

Daily Forex signals:

 

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We wish you good trades and many pips!

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Wild Wednesday: Anything Is Possible, Even A Disappointment Despite Fed Tightening

Dear Traders,

It’s Fed-decision day and the waiting finally comes to an end. After several days of range-bound conditions and low volatility, traders now prepare for volatile swings and trend-setting movements. The probability of a Federal Reserve rate hike is completely priced in while the U.S. dollar shrugged off the bullish bias. The greenback’s reluctance to commit to further tightening suggests that dollar bulls might be unimpressed by the FOMC policy announcement.

The Fed’s monetary policy decision will be announced at 18:00 UTC but the impact on the dollar could be muted as traders appear to be well prepared for a March rate hike. The spotlight however, will be on the following press conference with Fed Chair Janet Yellen and revised rate path projections. Economists expect the path for rates to include three hikes this year and in case of a steeper tightening path, the dollar will rally. However, there is a greater potential for disappointment and if Yellen sounds more balanced, preferring a wait-and-see mode, the dollar will be vulnerable to losses.

All eyes will be on the FOMC announcement but before that major risk event, traders should also pay attention to U.S. Consumer Prices, scheduled for release at 12:30 UTC.

Apart from the Fed decision, elections in the Netherlands will draw the focus back on the euro’s resilience. The Dutch vote is the biggest test of the strength and resilience of the populist surge this year. The euro could therefore tend to fluctuate sharply towards the end of the American trading session.

EUR/USD

From a technical perspective, we expect bearish momentum to accelerate if the euro falls below 1.0570. Lower targets could then be at 1.05 and 1.0380. A short-term resistance is however seen at around 1.0650. If the euro significantly breaks through that resistance-level we may see further gains towards 1.07 and 1.0790.

 

GBP/USD

Today’s short squeeze in the British pound was an impressive reminder that there is still potential for exaggerated movements. The pound surged to a high of 1.2257, which is considered a current resistance-zone in the cable. Above 1.2260 we may see further gains toward 1.23 but everything is possible today and the price action will also hinge on the appetite for USD. We generally anticipate the cable to remain within a range between 1.24 and 1.21 for the time being. On the bottom side, the pound will need to break below 1.2080 in order to invigorate fresh bearish momentum.

The U.K. employment report is due for release at 9:30 UTC and could have a minor impact on the pound.

 

Daily Forex signals:

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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 2017 Maimar-FX.

www.maimar.co