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Market Still Seems To Be In Its State of Summer Lethargy

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Dear Traders,

Friday’s non-farm payrolls report failed to put an end to the market’s summer lethargy and instead of giving direction, most major currency pairs remained virtually unchanged after some short-term fluctuations during payrolls release. While the August jobs report came in weaker than-expected, tempering speculation of an imminent Federal Reserve interest rate hike in September, the market’s reaction to the report was restrained with both euro and cable rising only marginally. The market environment therefore became somewhat unattractive for traders since large market movements have become a rarity.

In terms of economic market moving data, there is not much going on this week. From the U.S., the only important pieces of economic data are the ISM Non-Manufacturing Index (Tuesday) and the Fed’s Beige Book (Wednesday). The most important event this week will be the European Central Bank’s monetary policy announcement on Thursday. The ECB meeting could trigger some market moves as the central bank is expected to lengthen quantitative easing for a second time. Although the ECB is not expected to cut interest rates, Thursday’s meeting is the most likely opportunity to announce more stimulus or change the QE program. We therefore expect the euro to come under pressure ahead of the announcement. Technically, we will focus on a break of the 1.1120-level in order to sell euros towards 1.1080 and 1.1050. On the upside, a break above 1.1330 could change the bias in favor of the bulls.

The British pound was able to maintain its price level around the 1.33-mark. Above 1.3350 we see chances of a test of 1.3370 and 1.34. However, any further gains could be limited until the pound’s current key resistance at 1.3480. Sterling traders should keep an eye on the Industrial and Manufacturing Production figures (Wednesday) as well as on the Services PMI report, due for release today at 8:30 UTC.

The U.S. market will remain closed for a public holiday on Monday, so we expect volatility to be low and recommend traders to take profits at lower targets given the calm market.

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Pound In Free Fall Amidst Uncertainty

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Dear Traders,

The free fall of the British pound continues with the U.K. economy facing difficult times in the aftermath of Britain’s vote to leave the EU-bloc. The huge sell-off in the pound was the biggest story in the market yesterday and it continued even during the Asian trading session, sending the pound to a record low of 1.2797. The effects of Brexit on the U.K. economy and its confidence are becoming more and more evident. Meanwhile, Bank of England Governor Mark Carney outlined more tools to contain the Brexit fallout, pledging to implement any other measures needed. Carney warned of prospects for “a material slowing of the economy” amid concern over the health of the global economy.Given the high level of uncertainty in the U.K. commercial property market, three of the U.K.’s largest real estate funds have frozen almost 9.1 billion pounds of assets to halt Brexit retreat. All in all, the pound’s future does not look bright and traders should expect further losses given the uncertain environment. Dark clouds are gathering on Britain’s horizon and this is only the beginning.

Given the pound’s sharp depreciation, investors seek for safer assets, flocking into the U.S. dollar. The euro dropped towards 1.1035 as a result of that risk aversion. A next important support is seen around the 1.0990-level. Below 1.0980, we expect the euro to fall towards 1.0940 and 1.0870. On the upper side, the euro rejected the 1.1186-level, from where it went into a tailspin. With the 1.12-resistance being intact for the time being, euro bulls should wait for a break above 1.1215/20 in order to buy euros towards higher targets.

Market participants pushed back their bets for a Federal Reserve rate hike this year, even though the Fed is likely to stay on track to raise interest rates if growth and inflation expectations are met.

The Fed releases minutes from its June 14-15 FOMC meeting, but the FOMC minutes are expected to take a backseat to heightened concerns about global growth and risk aversion.

The ISM Non-Manufacturing Index, scheduled for release at 14:00 UTC will be watched closely whereby a better figure could add further strength to the greenback.

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The Lack Of Market Moving Data Could Result In Sideways Motion

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Dear Traders,

Friday’s U.S. labor market report showed that the economy is still performing well overall. While the unemployment rate rose to 5 percent from 4.9 percent as more people entered the labor force, closely-watched average hourly earnings increased 0.3 percent. The uptick in wages and a solid 215k gain in payrolls add confidence that the U.S. economy will hold up against slowing global growth. The U.S. dollar strengthened in response to the report but gains were limited in the EUR/USD, whereas the cable came under increased pressure on the back of a weaker manufacturing PMI and amid concern that economic and political uncertainty could deter investment inflows from overseas.

As expected the short-term uptrend in the British pound has been reversed and the focus returns to the next support levels at 1.4150 and 1.4050. Short-traders efforts paid off last Friday as our short-entry proved to be profitable and reached our target of 90 pips. Before shifting our focus to next support zones at 1.4140 and 1.4120, the cable must break below 1.4170. After a break below 1.41 a next important support is seen at 1.4050. On the topside we expect upward movements to be limited until 1.4320 and 1.4345.

The euro marked a current resistance around the 1.1440-level. With a renewed break above 1.1415 we might see another test of that resistance level followed by a rise towards 1.1460 and further 1.15. Remaining below 1.14, we expect the 1.1350-level to lend a short-term support to the euro. However, below 1.1335 the focus will shift to the 1.13-barrier.

This week’s economic calendar is relatively light in terms of market moving data. Apart from the FOMC minutes on Wednesday we get some speeches from Fed Presidents throughout this week as well as a speech by ECB President Mario Draghi, scheduled for Thursday. The only important piece of U.S. data will be the ISM Non-Manufacturing index, due for release on Tuesday.

Sterling traders should pay attention to Tuesday’s PMI reports as well as Manufacturing and Industrial Production figures, due for release on Friday.

Today, the U.K. Construction PMI, scheduled for release at 8:30 GMT could have an impact on the British pound.

The FOMC minutes are not expected to be a big market mover as Fed Chair Janet Yellen has just reiterated the Fed’s approach to proceed cautiously in raising interest rates. Given that cautious outlook, the dollar could thus show further signs of weakness.

We wish all traders a good start to this week and many profitable trades.

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Copyright © All Rights Reserved 2016 Maimar-FX.

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British Pound Recovers, Euro Remains Sideways – What’s Next?

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Dear Traders,

The stronger-than-expected ADP report failed to have a major impact on the U.S. dollar. The private report showed companies added 214k workers in February, indicating the U.S. labor market remains strong. However, ahead of tomorrow’s highly anticipated payrolls report, traders should not expect too much. It would need an unambiguous strong report with payrolls figures exceeding 200k and average hourly earnings showing an accelerated growth in order to revive the dollar rally. Expectations of imminent rate hikes by the Federal Reserve are being pushed back while market participants are currently seeing a 38 percent chance of an increase in June. Consequently, the dollar rally could be paused until the market will receive fresh hawkish hints from the Fed.

The best performer yesterday was the British pound which experienced a relief rally towards 1.41. But traders should not get fooled by the recent recovery as sterling remains vulnerable to losses in the medium-term. We expect the rebound in the currency pair to be short-lived with gains being capped at 1.41 or 1.4160. If GBP breaks above 1.4160 a bullish extension would be possible until 1.4230. However, the risk is to the downside and traders should focus on a break below 1.39.

The most important data from the U.K. will be Services PMI, scheduled for release at 9:30 GMT and if the report disappoints sterling could start giving up its gains.

GBP/USD

Chart_GBP_USD_4Hours_snapshot3.3.16

 

EUR/USD

The euro continued its sideways move and traded well above 1.08. Whether we will see increased momentum in the near-term will hinge on the performance of the U.S. dollar and thus U.S. data.

We see the currency pair trading within a downward channel. Based on that channel corrections could be currently limited until 1.0940 before shifting the focus to a break of 1.08.

Chart_EUR_USD_4Hours_snapshot3.3.16

The most important piece of economic data before the NFP report will be the ISM Non-Manufacturing index, due for release at 15:00 GMT. Any significant change could affect the USD accordingly. Before coming to the ISM index, we will also keep any eye on U.S. Jobless Claims (13:30 GMT) even if data is not expected to have a significant impact on the greenback.

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Copyright © All Rights Reserved 2016 Maimar-FX.

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Upcoming Breakouts?

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Dear Traders,

Not much has happened yesterday. While the euro slightly extended its gains as far as 1.0940, the British pound fluctuated more or less sideways versus the U.S. dollar. The limited fluctuations in both currency pairs did not permit any sustained profit for traders on Tuesday.

Ahead of Bank of England’s Quarterly Inflation Report and monetary policy announcement on Thursday we expect GBP to trade nervous between 1.4470 and 1.4310/1.4290. The Bank of England is forecast to keep interest rates on hold until after Britain’s referendum on EU membership. In the medium term, investors are pessimistic and pushed back their expectations on the timing of a rate hike. The U.K. Services PMI is scheduled for release at 9:30 GMT and may spur the cable for a breakout of its narrow trading range.

GBP/USD

Prices narrowed and formatted a symmetrical triangle this morning. Traders should focus on a breakout above or below that pattern, which may ignite fresh momentum in any direction.

Chart_GBP_USD_Hourly_snapshot3.2.16

EUR/USD

The technical outlook remains unchanged. Based on a symmetrical triangle in the daily chart, we will focus on an upside break of 1.0960 for any bullish and, vice versa, on a downside break of 1.0835 for bearish engagements.

Chart_EUR_USD_Daily_snapshot3.2.16

All eyes will be on ADP numbers and the ISM Non-Manufacturing index. Both reports are expected to show a small pullback in comparison with the previous month but if numbers show a steeper decline, the USD could further weaken.

13:15 USA ADP Employment Change

15:00 USA ISM Non-Manufacturing Composite

(Timezone GMT) 

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Euro recovered its losses after ‘No’ vote

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Dear Traders,

The euro slipped sharply to 1.0970 on Greece’s ‘No’ vote. Greece voted with a 61 percent majority against further austerity demanded by creditors, rejecting of further spending cuts and tax increases. While Prime Minister Alexis Tsipras described the result as a “great victory”, seeing himself with a strengthened hand now, the result also significantly raises the chances of a Greek exit from the currency bloc. The euro group must now decide if a financial rescue of the country is still possible.

Euro-area leaders called for an emergency summit on Tuesday. The European Central Bank is meeting today to discuss extending its emergency credits to Greek lenders. As long as negotiations are ongoing between Greece and the euro group the ECB is unlikely to cut the emergency liquidity for Greek banks. The next important date is the July 20 deadline, when Greece is due to pay 3.5 billion euros to the ECB. A non-payment could lead to drastic steps such as an exit of the euro-area.

Even if contagion for other peripheral economies in the euro zone is likely to be contained, investors could remain risk-averse and wait and see what happens now.

The British Pound traded lower against the U.S. dollar last Friday. We see a next support at 1.55. With a significant break below 1.5480, sterling may slide towards 1.5430 and further 1.5350. Current resistances are seen at 1.5650 and 1.5770.

Apart from eurozone financial stability risks in the near term, market participants will keep an eye on the U.S. monetary policy. The Federal Reserve releases FOMC minutes from its June 16-17 meeting on Wednesday. The Bank of England is scheduled to decide on monetary policy on Thursday.

The most important piece of economic data this week will be the ISM Non-Manufacturing Index, due for release today at 14:00 GMT.

We wish you a good start to the week and good trades.

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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 2015 Maimar-FX.

www.maimar.co