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Dollar Weakness To Continue?

Dear Traders,

What a day for the USD! The U.S. dollar depreciated sharply against all of the major currencies as signs of a slowing U.S. economy pushed the 2016 rate-hike likelihood lower. Despite a stronger-than anticipated ADP report, the USD was exposed to strong selling pressure after a report showed U.S. services industries expanded last month at the slowest pace in nearly two years, clouding the economic outlook. In addition, comments from New York Fed President William C. Dudley, who said that the recent financial turmoil “may alter the outlook for growth and the risk to the outlook for growth going forward” set off the dollar’s weakness.

The subsequent rise in the euro and cable was also technical driven as stops were triggered, sending both pairs even higher. The focus now shifts to the Non-Farm Payrolls report due for release tomorrow, which is expected to show fewer than 200K jobs for the first time since September. The payrolls report may determine whether the dollar weakness will continue. In the meantime, let us focus on the technical side:

EUR/USD

The euro rose as high as 1.1145 on the back of broad-based dollar weakness. Depending on tomorrow’s U.S. labor market data, we may see another round of a dollar selloff, which could send the euro towards 1.12 and 1.1280 in a next step. For the time being, we expect the 1.1160-level to act as a current resistance, while downward moves may be limited until 1.10/1.0980. An important support zone is currently seen at 1.0850.

ECB President Mario Draghi is scheduled to speak at 8:00 GMT today, which could have a short-term impact on the EUR/USD.

Chart_EUR_USD_Daily_snapshot4.2.16

GBP/USD

The Bank of England will present its Quarterly Inflation report along with the monetary policy announcement at 12:00 GMT today. While the Monetary Policy Committee is widely expected to keep rates unchanged, BoE Governor Mark Carney may offer some insight when he presents the BoE’s latest economic projections at a press conference 45 minutes later. The expectations are high and traders should be prepared for everything. If the February predictions look bright, predicting inflation would overshoot the BoE’s target over the medium term, the pound sterling could extend its gains versus the greenback. Let’s wait and see.

Taking a look at the 4-hour chart the risk seems to be to the downside. The cable tagged a fresh resistance at 1.4650 and it might be smarter to wait for a significant break above 1.4665/70 in order to buy GBP towards key resistances at 1.47 and 1.48. The direction will hinge on the BoE Inflation report and Carney’s comments but in case of a dovish tilt, we may see the cable sliding back towards 1.4440, 1.4370 and 1.43.

Chart_GBP_USD_4 Hours_snapshot4.2.16

U.S. data such as Initial and Continuing Jobless Claims (13:30 GMT) and Factory Orders (15:00 GMT) may take a back seat.

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Will FOMC Statement Pose A Risk To Dollar Bulls?

Dear Traders,

The biggest story Friday was the sharp rise in the GBP/USD. After hitting a fresh five-year low at 1.4079 on Thursday, the currency pair rallied towards 1.4365 despite Friday’s weaker-than expected retail sales report. The rise can be attributed to the result of profit-taking after the recent linear decline in the British pound. The cable now faces the 1.4250/30 support-area once again but as long as the pair remains trading above that zone we expect some possible upward swings which may occur in the near-term (see technical analysis below).

The most important piece of U.K. economic data will be Gross Domestic Product, scheduled for release on Thursday and if data disappoints to the downside, sterling could be vulnerable to further losses again. On Tuesday, Bank of England Governor Mark Carney appears in Parliament to speak on financial-stability risks and a major topic could be the U.K. referendum on its membership in the EU and a potential “Brexit“.

The EUR/USD trended slightly lower, moving around the 1.08 support level. For the time being, we anticipate the 1.0770-level to be the next support before a renewed downswing toward 1.0730/15. On the upper side, we see current resistance-levels at 1.0835 and 1.0860.

The most important piece of Eurozone data this week will be the German IFO report, due for release at 9:00 GMT today. If IFO numbers fall short of expectations, the euro could tumble toward lower targets. Furthermore, German Consumer Prices are scheduled for release on Thursday.

All eyes will be on the Federal Reserve’s monetary policy meeting on Wednesday. While the central bank is not expected to alter its monetary policy and there will be no press conference, the statement could fail to add further strength to the U.S. dollar. Rather, the risk for the USD is to the downside, in case the FOMC statement turns out to be more dovish, suggesting a rate hike in March is less likely.

Further important U.S. economic reports are due for release with Consumer Confidence (Tuesday), Durable Goods Orders (Thursday) and U.S. Gross Domestic Product (Friday).

GBP/USD

Looking at the 4-hour chart, we see that there could be some upside room after a break of 1.4365. A next bullish target could be at 1.4420/45 with a possible extension until 1.4470. However a current support-zone is seen at 1.4250/30 and if the cable falls again below that level, we expect bearish momentum to accelerate towards 1.4170 and 1.4130.

Chart_GBP_USD_4Hours_snapshot25.1.16

 

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GBP/USD: Next Bearish Target At 1.4455?

Dear Traders,

Yesterday’s trading was dominated by a  counter-movement in both major currency pairs. The euro trended downwards, moving away from its resistance at 1.0940, but the slide came to a halt at nearly 1.0840. For the time being, we expect the euro to trade within its current 100-pip trading range between 1.0935 and 1.0840. A break above 1.0945 may push the common currency for a rise towards 1.0980. However, with no important economic data releases from the eurozone, gains in the EUR/USD could be capped at 1.10 and 1.1050. On the bottom side, we expect a next support at 1.08, provided that the euro breaks below 1.0840.

Traders should listen to comments of Federal Reserve Presidents this week. Fed’s Vice Chair Fischer speaks in Paris today at 10:30 GMT.

The British pound recovered from the 1.45-support and tested the next important price level at 1.46. In the end, the upward turned out to be short-lived and sterling gave up its gains. Today could be a busy day for sterling traders, with Industrial Production figures due at 9:30 GMT and BoE Governor Mark Carney scheduled to speak in Paris at 14:15 GMT. Investors are pessimistic with regard to a first BoE rate increase. Even though a weakening pound comes handy to the economy and inflation, BoE policymakers are unlikely to feel any pressure following the Fed in raising rates.

GBP/USD

While the trend is clear, it will hinge on economic data and BoE speak whether GBP could be vulnerable to further losses. We see a next possible halt at 1.4460/50, from where GBP may bounce back in a first attempt. On the other side, upwards moves could be limited until 1.4630 and 1.4665.

Chart_GBP_USD_4Hours_snapshot12.1.16

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EUR/USD: Will The 1.10-Barrier Withstand The Upward Pressure?

Dear Traders,

While U.S. nonfarm payrolls have surged to 292K jobs in December, beating all estimates, Friday’s dollar rally did not last long. The spoilsport was slower wage growth, which disappointed the market’s expectations and increased less than 2.7 percent.  The EUR/USD experienced a sharp dip towards 1.08 at the time when payrolls were released but the pair was able to quickly recover all losses. As noted in previous analysis, the 1.10-1.1050 area remains to be a key resistance zone. As long as the currency pair trades below that area, we will favor a bearish stance, targeting lower price levels at 1.0810 and 1.0720.

The British Pound fell to a five-year low against the dollar, dipping slightly below the 1.45-mark. A reason for GBP’s current weakness is a more pessimistic outlook for a first rate increase by the Bank of England. In the light of the current financial turmoil in China the BoE’s policy stance could be more dovish, waiting with a liftoff until well into 2017. In addition, the uncertainty surrounding the U.K.’s possible exit from the European Union threatens to weigh on the economy, which is why the BoE is expected to keep policy unchanged for a considerable time. The central bank will announce its latest monetary policy decision on Thursday. Aside from the BoE interest rate decision, Industrial and Manufacturing Production numbers, scheduled for release on Tuesday could be interesting to watch.

The most important piece of U.S. data will be Retail Sales, due for release on Friday. Furthermore, we will have some speeches of Federal Reserve officials throughout this week, which may impact on the dollar.

There are no major economic reports from the eurozone this week but the eurogroup meeting towards the end of the week could reveal interesting information for euro traders.

Let’s wait and see. We wish you a good start to this week and successful trading.

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Will 2016 Be A Year Of Further Dollar Strength?

Dear Traders,

Happy New Year! We hope you have had a good start into 2016 and wish you all the best for the New Year and, of course, many profitable trades.

At every beginning of the year many market participants wonder what they can expect from the new year. There has already been speculation as to whether the dollar rally will last another year or not. After three straight years of gains the odds are in favor of the U.S. dollar, even though the Federal Reserves’s monetary tightening cycle could weigh on U.S. growth. It will therefore be a challenge for the Fed to raise interest rates to an appropriate level which allows responding to economic setbacks. We generally expect the greenback to strengthen in the coming months as the Fed is forecast to continue raising interest rates. But as we all know, appearances can be deceptive and traders should bear in mind that both major currency pairs could be bottoming out if Fed officials begin to backtrack their hawkish views.

What is important for this week?

There are plenty of important data releases this week, but since the market participation may be slow in the first weeks of January, the impact of economic data could be limited. The focus will be on Consumer Prices from the Eurozone, scheduled for release on Monday and Tuesday. Furthermore, the Fed will release the FOMC minutes from its December meeting on Wednesday. The minutes are unlikely to have a significant impact on the dollar as the FOMC voting membership rotates every year, which is why some central bankers who voted for a rate hike last year are no longer voting members this year. Moreover, all eyes will be on the U.S. Employment data on Friday. If payrolls growth exceeds 200k alongside a strong rise in average hourly earnings, the dollar could be poised for further gains.

Let’s take a brief look at the technical side:

EUR/USD

The euro traded consolidated in a 1.10-1.08 trading range. We will need to wait for breakouts of this range in order to see fresh momentum. In the near-term we expect the euro being capped from 1.0950 and 1.10. A sustained break above 1.10 could invigorate bullish momentum towards 1.1050 and 1.11. On the bottom side the 1.08-level will be key and it would require unambiguous positive U.S. data to push the pair through this support.

Chart_EUR_USD_4 Hours_snapshot04.01.16

GBP/USD

Based on the recent bear trend we see a next important support area at 1.4635 and further 1.4560. However, given the latest strong downward move, chances are that sterling shows some corrections in the short-term. Current resistances are seen at 1.4850 and 1.4950.

 

Chart_GBP_USD_Daily_snapshot04.01.16

Important data for today:

8:55 EUR German Manufacturing PMI

9:30 UK Manufacturing PMI

13:00 EUR German Consumer Price Index

15:00 USA ISM Manufacturing

(Timezone GMT)

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Quiet Trading

Dear Traders,

These are the very last days of the year and many institutional investors have already closed their books. Despite some important economic reports scheduled for release within the next 3 days, this shortened trading week is expected to be very quiet.

The most important reports coming from the U.S. will be Q3 Gross Domestic Product figures, Existing Home Sales due for release on Tuesday and Personal Income scheduled for release alongside Durable Goods Orders on Wednesday. Most of these reports are expected to show softer numbers, which may lead to a minor weakness in the U.S. dollar’s uptrend. However, going into 2016, monetary policy remains the dominant theme. With the Federal Reserve remaining on track for tighter monetary policy while other central banks are tending towards an accommodative policy stance, the dollar should receive attraction throughout 2016.

Sterling traders should keep an eye on the U.K. GDP numbers, due for release on Wednesday. If data will be in line with expectations, the impact on the currency pair will be limited.

Let’s have a look at the technical side:

EUR/USD

As previously noted, the 1.08-level remains important to pay close attention to. Prices formatted a head-shoulders pattern, predicting upcoming bearish momentum once the 1.08-mark is significantly breached to the downside. Lower targets could be at 1.0708 and 1.0640. We see an important support area at 1.0550. Below 1.0520, the currency pair could free-fall towards 1.0465 and 1.04. However, current resistances could be at 1.0930 and 1.10. With sustained prices above 1.10 we consider the head-shoulders pattern as void.

Chart_EUR_USD_4Hours_snapshot21.12.15

GBP/USD

Sterling is currently trading around the support line of its downward channel. A break below 1.4850 could reinvigorate fresh bearish potential, whereas a break above 1.4965 may drive the pair towards 1.50 and 1.5050.

Chart_GBP_USD_Daily_snapshot21.12.15

We wish traders profitable trades just before the Christmas holidays and recommend not to invest too much during these days and take profits at smaller targets.

Please note that we will take a Christmas break from December 23 until January 1. During this period we will not provide our signal service. We will be back on January 4.

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Much Ado About Nothing

Dear Traders,

In the end there was ‘much ado about nothing’. Market participants who had hoped for immediate sustainable moves after the Fed’s decision, were disappointed. The price action was relatively muted with only small fluctuations to both sides. In the end the U.S. dollar was the winner and accelerated against the euro and British pound.

Federal Reserve policy makers unanimously voted to raise interest rates up to 0.5 percent. This alone was the most hawkish scenario as there were no dissenters. Moreover, policy makers forecast an appropriate rate of 1.375 percent at the end of 2016, indicating four rate increases next year. This is unambiguously less dovish than the market anticipated. The FOMC is confident that inflation will rise and highlighted that the risks to the outlook for economic activity and the labor market are now “balanced”.  On the bottom line the Fed statement encouraged dollar bulls not to give up on the dollar rally in the long-run. Nonetheless, we expected more momentum on that historic day. Investors are likely to begin their holiday season now, a reason for smaller movements and a decline in volume.

Important data for today (timezone GMT):

9:00 EUR German IFO Report

9:30 UK Retail Sales

13:30 USA Philly Fed Index 

The reports could have a short-term impact on the currency pairs, but market participants are likely to digest the new Fed era and could be looking to buy dollars at lower levels. We therefore generally expect a bearish bias.

EUR/USD: Traders should pay close attention to the 1.08-level. If the euro falls below 1.0780, we see chances that it drops 100-200 pips towards the south.

GBP/USD: The focus is on the 1.49-barrier. Once this level is significantly breached, GBP could find a next support at 1.4820/15.

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UP Or DOWN For The USD?

Dear Traders,

Today is going to be an historic day, as the Federal Reserve is expected to normalize monetary policy and end seven years of near-zero interest rates. The following guidance is expected to be dovish, implementing less than three increases of 0.25 percentage points in 2016. Market participants will turn their focus to the FOMC Press Conference, led by Fed Chair Janet Yellen. It might be a communicative challenge for Ms. Yellen, as the Fed neither want to cause turbulence with any hawkish comments nor want to lose their credibility. Anything can happen today, so traders should prepare for big moves in either side. If Yellen signals a clear guidance regarding the Fed’s tightening cycle, the USD could rally. However, the risk is to the downside for the greenback, as any cautious comments could trigger a sharp selloff.

The U.S. dollar advanced against its major peers going into the Fed’s decision. The British pound dropped like a stone on the Bank of England’s dovish monetary policy outlook. BoE Governor Carney said in an interview that economic conditions for a U.K. rate hike are not yet in place. The U.K. central bank has signaled it is in no rush to follow the Fed which is forecast to begin policy tightening.

The U.K. Employment Report is scheduled for release today at 9:30 GMT and the focus will be on Average Weekly Earnings. If wage growth comes in softer than expected, sterling could be vulnerable to further losses.

Eurozone Consumer Prices are due for release at 10:00 GMT, but as long as data meets expectations, the impact on the euro could be limited.

The Federal Reserve decides on monetary policy at 19:00 GMT, followed by the press conference at 19:30 GMT.

Let’s have a look at the technical side:

EUR/USD

Looking at the daily chart, we see the pair still trading within a downward channel. Depending upon the Fed speak, we see some chances that dollar bulls may drive the EUR/USD to lower levels. Lower targets could be at 1.0840 and 1.08. In case the pair falls significantly below 1.0780, the focus turns to 1.0690 and 1.0635. The support line is at 1.0450 but an unambiguously hawkish statement would be needed in order to send the pair towards such levels.

A bullish scenario could gain attraction with prices above 1.11.A sustained break above this key resistance could lead the EUR/USD towards 1.13.

Chart_EUR_USD_Daily_snapshot16.12.15

GBP/USD

We see an upward channel within a primary downward channel. While the primary trend is downwards, the pound sterling formatted a recent upward channel, which is still intact this morning. If GBP breaks below 1.5020 and further 1.50, we expect the pair to decline towards lower targets at 1.49 and 1.4850. Based on the recent upward channel, it is also possible that sterling rebounds, heading for 1.5130 and 1.5290.

Chart_GBP_USD_Daily_snapshot16.12.15

 

Everything will depend on the Fed. So,we will wait and see. We wish all traders profitable trades for today.

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Copyright © All Rights Reserved 2015 Maimar-FX.

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No Optimism For The U.S. Dollar

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