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Can The Euro Hold Onto Its High Price Level?

Dear Traders,

The euro broke above Monday’s spike high at 1.0923 but gains were capped at 1.0950, at least for the time being. The question now is whether there is still room for further gains. Looking at the 4-hour and daily chart we see that the EUR/USD is in overbought territory, a situation that increases the likelihood of upcoming corrections. We see a next hurdle at around 1.0970 followed by a stronger resistance at 1.10. As long as the euro remains firmly below 1.10 we prepare for corrective movements towards 1.09, 1.0840 and possibly even 1.0750.

The British pound rose towards the upper bound of its recent sideways trading range but still refrained from an upside break above 1.2850. As noted in previous analysis, sterling bulls better wait for a significant break above 1.2860 in order to buy pounds towards 1.30. A break below 1.2730 however, could send the pound tumbling towards 1.2650.

There are no major economic reports scheduled for release today, so the price action could hinge on U.S. President Trump’s tax-reform speech. Trump is expected to unveil a tax plan that includes a cut of the corporate rate to 15 percent from 35 percent. If he delivers we could see some renewed strength in the U.S. dollar.

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Euro And Cable Consolidate Following Strong Moves

Dear Traders,

The British pound gave up some of the gains it had made on Tuesday and fell back below 1.28. As long as the pound remains above the 1.26-mark, the recent drop could be considered a correction within the recent uptrend. We will now focus on a break above the short-term resistance at 1.2860. Once that level has been breached to the upside, sterling could make a run for 1.2950. A short-term support could however be at 1.2750 and 1.2720.

Bank of England Governor Mark Carney is scheduled to speak at an event in Washington today at 17:30 UTC and his comments could have an impact on the pound, provided that he refers to the BoE’s monetary policy.

The euro held above the 1.07-level and market participants seem to be shying away from taking any positions in the EUR/USD ahead of France’s presidential election this weekend. From a technical perspective, we see a symmetrical triangle in the 4-hour chart which could predict small breakouts.

Above 1.0720 the euro could rise towards 1.0760, whereas a break below 1.07 may send the euro towards 1.0675. However, given the risk aversion in the market we do not expect larger fluctuations within the next 48 hours.

 

From the U.S., we have the Philadelphia Fed Index due for release at 12:30 UTC but we doubt that this report will have a major impact on the greenback.

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GBP/USD: How High Can The Pound Go?

Dear Traders,

Markets have had a surprisingly volatile start after the Easter holidays as the shock news of a U.K. election has caused the British pound to skyrocket against the U.S. dollar. The euro traded in sympathy with the pound and was able to climb above the 1.07-barrier.

The biggest story on Tuesday was however sterling’s roller coaster ride amid U.K. Prime Minister Theresa May’s announcement in Downing Street. When May initially said she would make an announcement outside Downing Street, she offered no further explanation. Consequently, the pound dropped towards 1.2515 as a result of uncertainty. When it was clear that May announced an early election, the pound jumped to fresh highs, breaking through significant technical barriers. The announcement came as a surprise in the market and as a trader we know that surprise moves can be very profitable. And thus, every of our swing and daily signal trades have easily reached the final profit target.

The snap election that will be held on June 8 was called in order to increase May’s majority in the House of Commons before the difficult two-year negotiating period with the European Union.

GBP/USD

How high can sterling go? This is precisely the question that interest traders. In the near-term, we expect a continuation of the recent upward move, targeting at the next resistance zone around 1.29 – 1.2920. If sterling breaks through 1.2950 it may head for a test of 1.3050 – the upper resistance level. We expect a stronger resistance around 1.3050 and 1.31 that could limit further gains in the pound. On the downside, we see current support levels at 1.27 and 1.26, barriers at which bulls could take the opportunity to buy sterling at lower levels.

The euro broke through 1.07 and was able to hold above that important price level. We do not expect larger market moves ahead of the French elections as uncertainty prevails, but anything is possible. A next resistance is seen around 1.0750 and the single currency would need to break significantly above that level in order to extend potential gains towards 1.08. A crucial support-zone remains intact at around 1.0640/30.

Eurozone Consumer Prices are scheduled for release at 9:00 UTC but this report could be of minor importance.

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U.S. Dollar Slides On Trump But Technical Picture Has Not Yet Changed

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All Quiet In The Market

Dear Traders,

It has been a quiet start on Monday with the euro being stuck to a 40-pips range and the cable not showing much effort to break below its recent uptrend channel. The British pound found some halt around the lower barrier of its latest upward trend-channel at 1.2465 but it was unable to hold onto that high level and fell towards 1.24 this morning. If the pound breaks also below 1.2390, we expect further losses towards 1.2330 and 1.23. As noted in yesterday’s analysis, the cable will need to break the 1.26-level significantly in order to invigorate fresh bullish momentum.

Sterling traders will watch the U.K. Construction PMI, scheduled for release at 8:30 UTC. This report could have a short-lived impact on the pound.

The euro remained stuck between 1.0680 and 1.0640. We may see some accelerated momentum today but euro traders are unlikely to get any new insights into the ECB’s thinking from ECB president Mario Draghi who is scheduled to speak at 13:30 UTC in Frankfurt. If he does not refer to monetary policy, his speech will be a nonevent for traders. From a technical perspective, we expect the EUR/USD to trade between 1.06 and 1.07 in short-term time frames.

From the U.S. we have Durable Goods Orders due for release at 14:00 UTC but this report is only of secondary importance.

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Pound Depreciates Ahead Of Brexit Trigger

Dear Traders,

The biggest story on Tuesday was the trend reversal of the British pound. Sterling reversed shy of 1.26 and dropped sharply towards 1.2350. The sharp sell-off was due to the much-anticipated Brexit trigger which will happen today. The formal Brexit process starts around 13:30 local time when a letter personally signed by U.K. Prime Minister Theresa May will arrive in Brussels. May signed the historical document on Tuesday evening and it will be handed to EU President Donald Tusk today. Tusk will read out a statement at 13:45 (GMT+2) while May will address the U.K. Parliament about the same time. The uncertainty over terms of Brexit could weigh on the pound in the medium-term, so traders should generally prepare for further losses as long as the prospects of U.K. monetary policy tightening remain far off.

From a technical perspective, sterling bears should wait for a bearish break below 1.2340 in order to sell the pound towards 1.21. Nonetheless, there is also a risk of a short squeeze in short-term time frames which could occur through profit taking. We see a crucial resistance zone between 1.2530 – 1.2570 and it would require a renewed break above that area to shift the bias in favor of the bulls.

EUR/USD

The shared currency was unable to break above 1.0875 and therefore fell back towards 1.08. For the time being, the euro is holding above the 1.08-mark but this may change quickly as the Brexit trigger poses a risk to the euro.

Bearish scenario: If the euro falls below 1.0780 it may heads for a test of the lower support-zones at 1.0760 and 1.07. A significant break below 1.0680 could lead to further losses towards 1.06.

Bullish scenario: A fresh break above 1.0875 may prompt euro bulls to buy euros towards 1.0920/50.

The risk is however to the downside.

 

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Lack Of Market-Moving Data May Lead To Range-Bound Price Action

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U.S. Dollar Weakens On Unchanged Fed Forecasts

Dear Traders,

The market’s response to the FOMC announcement was as expected. The Federal Open Market Committee raised its benchmark interest rate to a range of 0.75-1.00 percent and continued to project two more hikes in 2017. In a nutshell, since the Fed’s rate hike path remained unchanged from December 2016 there was no new hawkish guidance which would have helped to boost the U.S. dollar. Thus, yesterday’s rate hike is interpreted as a ‘dovish hike’.

The U.S. dollar slipped on the unsurprising decision as well as unchanged forecasts and both euro and pound climbed toward higher targets in return. The euro touched a high of 1.0746 while euro bulls were able to pocket a good profit. The euro received an additional boost after a large majority of Dutch voters have rejected anti-European populists. Conservative Dutch Prime Minister Mark Rutte has beaten his far-right rival Geert Wilders in the Dutch elections.

On balance, that’s good news for the euro but what can we expect from a technical perspective? There could still be some room for further upward momentum toward 1.08. If the euro climbs above 1.0750 it may head for a test of 1.08 but gains could be limited until that level. For the euro to continue to rally, it may require a break above 1.0830. If the 1.08-level remains unbroken we expect some corrections towards 1.0650 and 1.0550.

Eurozone Consumer Prices are scheduled for release at 10:00 UTC but those figures are not expected to surprise the market.

The British pound slightly strengthened on a weakening greenback but gains have been limited until the 1.23-resistance area. In case the pound will be able to overcome that hurdle we anticipate a run for 1.24.  On the downside, we will wait for a significant break below 1.22 in order to favor a bearish bias. The 1.2230/10-area could act as a current support-zone for the pound.

Today’s major risk event will be the Bank of England’s monetary policy announcement at 12:00 UTC. While no changes are expected, the BoE’s statement could trigger large market moves in the GBP/USD. Let us be surprised.

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Euro Trends Sideways While Cable Extends Losses

Dear Traders,

While the euro showed only little movement on Tuesday, short traders that sold the British pound have benefited from the downswing until a low of 1.2169. Volatility in the EUR/USD is still low with the currency pair remaining range bound. Euro traders await tomorrow’s ECB meeting for further direction. Until then, we may have to watch the euro trading between 1.0640 and 1.0490.  In the hourly chart we currently see a higher likelihood of upcoming bearish momentum, provided that the euro drops significantly below 1.0560. This assumption is based on a descending triangle in the hourly chart. If the euro breaks however above 1.0575, that chart pattern becomes void.

Unlike the euro, the GBP/USD could be vulnerable to pullbacks after having dropped as low as 1.2169. If the pound breaks above 1.2215 we may see a correction towards 1.2250 and 1.2280.However, if sterling falls back below 1.2190 it could extend its losses towards 1.2140/30.

In short-term time frames we see an ascending triangle which could predict upcoming bullish momentum.

 

From a fundamental perspective, the only interesting piece of economic data will be the ADP Employment report scheduled for release at 13:15 UTC which could have an impact on the greenback.

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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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