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Traders Prepare For Volatile Swings This Week

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Dear Traders,

We welcome you to a new trading week. Financial markets are dominated by uncertainty surrounding Donald Trump’s administration, prompting large investors to adopt a wait-and-see stance. The U.S. dollar came under further pressure after Trump’s order halting some immigration, causing geopolitical tensions. Risk aversion has therefore led to a recent sideways trend with both major currency pairs trading in relatively narrow trading ranges. This phase of trendless and uncertain markets makes it difficult for day traders to benefit from limited fluctuations and the lack of price breakouts.

This week’s major event risks might bring some new momentum to the markets and trigger profitable breakouts. The economic calendar is very busy in terms of market moving data and traders await high volatility throughout the entire week. The week starts off with the German Consumer Price report, scheduled for release today at 13:00 UTC which could lend a support to the euro. On Tuesday, the Eurozone Consumer Price report will be important to watch while an upbeat report could lead to speculation that the European Central Bank might start to reduce its asset purchases in the near future. With regard to top-tier U.S. economic data, the FOMC rate decision and the Non-Farm Payrolls report (Friday) will take center stage this week. The FOMC committee will deliver an update on its policy stance on Wednesday and while the FOMC statement is expected to be relatively upbeat, the fiscal policy uncertainty may frustrate the greenback’s recovery.

For sterling traders, the most interesting event will be the Bank of England‘s ‘Super Thursday‘ which may shape expectations for the near-term outlook for sterling. The BoE releases its Quarterly Inflation Report alongside its monthly monetary policy decision. If BoE policymakers show greater willingness to drop their dovish tone and gradually move away from their easing cycle, the pound could be vulnerable to further gains, heading for a test of 1.2780/90.

Important data for today:

13:00 EUR German CPI data

13:30 USA PCE Report

15:00 USA Pending Home Sales

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Will FOMC Statement Pose A Risk To Dollar Bulls?

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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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Copyright © All Rights Reserved 2016 Maimar-FX.

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