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Pound Consolidates – Focus Now On CPI Data

Dear Traders,

Those who had been looking for sustained breakouts or extended gains on Monday had been disappointed by the market’s consolidation phase. The pound sterling traded sideways within a 100-pip trading range between 1.2435 and 1.2335. Given the fact that the pound was unable to hold above the 1.24-level, we expect upcoming bearish momentum in the GBP/USD. As long as sterling remains below 1.2430 we see a higher likelihood of a downside break below 1.23 which could accelerate bearish momentum towards 1.22 and possibly even 1.2050.

How the cable will trade within the next days will mainly hinge on the Brexit trigger, which will happen on March 29. Prime Minister Theresa May plans to invoke Article 50 of the Lisbon Treaty next Wednesday, starting two years of exit talks. A hard Brexit will be negative for the currency, so traders should prepare for downward movements. However, before Article 50 is triggered, the pound could retest the 1.24-mark and possibly even the 1.2470-level on stronger inflation figures. U.K. Consumer Prices are scheduled for release at 9:30 UTC and a rise in inflation could help pushing the pound higher in the short term.

The euro traded consolidated between 1.0775 and 1.0720. A renewed break above 1.0770 may prompt euro bulls to buy the single currency toward 1.0815. A break below 1.0720 however, could lead to further losses towards 1.0680. With no market-moving economic reports from the Eurozone, we expect the price action to be limited to a range of 1.0820 – 1.0680.

Towards the end of the North American trading session some Fed officials are scheduled to speak. Any hawkish comments could have a positive impact on the U.S. dollar.

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U.S. Dollar Remains Bid, Fed Speak Reaffirms Rate Hike Expectations

Dear Traders,

Apart from a loss-making cable, there was not much going on in the markets on Thursday. Dollar bulls remained active, sending the greenback higher against its major counter parts but trading the GBP/USD has proved unsuccessful. The pound sterling refrained from trading any lower than 1.2240 and tagged a fresh support at 1.2258. We will now wait for a sustained break below 1.2230, possibly pushing the pound for a test of 1.22. On the upside we expect a short-term resistance at 1.2330/50.  The U.K. Services PMI report is scheduled for release at 9:30 UTC, but this report is not expected to have a major impact on the pound.

The EUR/USD traded slightly lower, dipping below 1.05. For the euro to fall towards lower targets the pair will need to break below 1.0485. As long as the euro remains firmly above 1.05 we could see some pullback towards 1.0540/50.

Market participants will listen to Fed speak from Janet Yellen who is expected to reaffirm the case for tightening at the next FOMC meeting in two weeks. Yellen gives an address on the economic outlook in Chicago today at 18:00 UTC.

The ISM Non-Manufacturing index is scheduled for release at 15:00 UTC and could also have a minor impact on the greenback.

We generally expect further dollar strength in the coming days, even though we may see some corrective movements in both major currency pairs.

Have a good weekend.

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U.S. Dollars Recovers On Hawkish Fed Rhetoric

Dear Traders,

The U.S. dollar regained some strength following a slew of hawkish Fed rhetoric. Federal Reserve Chair Janet Yellen reiterated in a town hall meeting that the U.S. economy is doing quite well. She was optimistic on the labor market and inflation and wage growth, saying that inflation is close to the Fed’s 2 percent goal.

These hawkish remarks helped the greenback to recover from its recent lows. The euro peaked at 1.0684 before falling back toward the 1.06-support level. Below 1.0570 we may see further losses towards 1.0480.

The British pound took a brief glimpse above 1.23 but was not able to stabilize above that high level. The 1.21-level will now be back in focus and if the pound drops below that mark, we expect a next lower target to be at 1.20. The beginning of next week is going to be interesting for sterling traders as U.K. Prime Minister Theresa May will set out her Brexit vision in a speech on Tuesday. Recent speculation about a so-called ‘hard Brexit’ has increased the pressure on the pound.

Today we will watch important economic data releases such as U.S. Retail Sales, scheduled for release at 13:30 UTC and University of Michigan Confidence due at 15:00 UTC. The Retail Sales report is expected to show an uptick in December and should this be confirmed, the dollar could recover even more quickly.

Have a nice weekend.

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Pound Comes Under Selling Pressure After May Comments

Dear Traders,

We welcome you to a new trading week. While liquidity returns to the markets, providing a more volatile trading environment, there will be no top-tier economic reports until late in the week. Thus, with no market-moving data scheduled for release until Friday, trading could be quieter and prices more range-bound in the first half of the week.

Those who did a trading break last Friday and did not reinvest weekly profits (as recommended), have not missed out on anything. On the contrary, trading during U.S. payrolls release has once again proved to be more loss-making rather than profitable as high volatile swings bear a high risk for both pending and open orders. The U.S. dollar received a small boost as wage growth rose by 0.4 percent, giving reason for optimism that growth in the U.S. economy is poised to accelerate. While the focus was on wages, monthly payrolls fell short of analysts’ expectations but this decline is not enough to change the Federal Reserve’s hawkish monetary policy stance.

The euro tumbled toward the lower bound of 1.05 and we shall now turn our focus to the 1.0480-level. If the euro falls below that support level we expect further losses towards 1.04 and 1.0370. However, considering that the euro recently traded sideways, we anticipate the price action to be limited to a price range between 1.0640 and 1.0340.

The pound’s price action is dominated by political risk and fears of a so-called hard Brexit.The pound sterling traded lower against the greenback after comments by Prime Minister Theresa May on the U.K.’s European Union negotiations. May signaled regaining control of immigration and lawmaking are her Brexit priorities even if that means quitting Europe’s single market. Bearish momentum accelerated this morning, pushing the pound below its crucial support at 1.22. If the currency pair is unable to stabilize above 1.22, we expect further losses towards 1.2120 and 1.21. Looking at the technical picture we see that the descending trend line of the recent downward channel is currently at 1.2120, providing an attractive opportunity to buy sterling towards 1.22. A short-term resistance is however seen at 1.2270.

Apart from a busy docket of scheduled speeches from several central bank officials, the only interesting piece of economic data will be U.S. Retail Sales and Consumer Confidence on Friday.

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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