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Further U.S. Dollar Weakness Expected

Dear Traders,

We hope you successfully weathered the first day of Yellen’s testimony and the currencies’ whipsaw performance.

The Federal Reserve Chair sounded slightly more cautious on the inflation outlook while saying the U.S. economy should continue to expand over the next few years, allowing the central bank to stick to its path of higher interest rates. In the Q&A session, Yellen indicated the Fed is still considering risks around the inflation outlook while inflation is running below the Fed’s 2 percent target. Concerning the Fed’s balance sheet, Yellen mentioned that the central bank anticipates it will start reducing its balance sheet “this year” while the size of the balance sheet is uncertain.

The Fed chair will continue testifying today at 14:00 UTC before the Senate Banking Committee.

In short, Yellen’s comments suggest that the Fed is in no rush to tighten monetary policy because of too-low inflation, even though the U.S. economy is in good shape. This slightly less hawkish tone bodes well for U.S. stocks but weakens the U.S. dollar.

Traders of the EUR/USD now might argue that the U.S. dollar strengthened instead in the aftermath of the testimony. One reason for the euro’s short-term decline might be speculation the ECB could follow the Fed’s low inflation expectations and may put the awaited taper in question, at least in the near future.

For our part, we expect the EUR/USD to strengthen, heading for a test of 1.15. Euro bears should however wait for a break below 1.1380 or, on the other hand, sell euros at higher levels following a test of 1.15.

As expected, the GBP/USD received a boost from stronger-than-expected U.K. labor market data and started its relief rally towards 1.29. If the pound breaks above 1.2930 we expect further gains towards 1.2970 and possibly even 1.3020. A significant break below 1.2850 however, could spark bearish momentum towards 1.28.

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EUR/USD Forecast Met; Focus Now On Further Upside Momentum

Dear Traders,

We got what we were looking for in yesterday’s analysis: A breakout in the EUR/USD. The euro broke out of its narrow trading range and surpassed the 1.1445-barrier. Our long entry has thus proved a success. We are now looking for additional upside in this pair and look at higher targets at 1.15, 1.1530 and 1.1580. With the EUR/USD gradually approaching overbought territory we also anticipate pullbacks which may drive the euro back toward 1.1415. With the euro remaining above 1.1460 however, there is no cause for concern for euro bulls, at least for a while.

Federal Reserve Chair Janet Yellen gives testimony today and tomorrow with market participants looking for guidance on when the Fed could start shrinking its balance sheet. Ms. Yellen is due to start her prepared remarks at 12:30 UTC followed by Q&A at 14:00 UTC. Yellen’s testimony is the prime monetary policy event for dollar traders and so we expect higher volatility in all USD crosses.

The British pound depreciated against the U.S. dollar Tuesday and fell toward a low of 1.2830. The catalyst for the decline was a speech by Bank of England Deputy Governor Broadbent who refrained from commenting on interest rates. Broadbent instead warned of Brexit risks and hence the pound weakened as the market has hoped that there would be anything hawkish in his speech.

From a technical perspective, we now expect the GBP/USD to trade with a tailwind since the pair refrained from a break of its recent downtrend channel. Based on that channel, it could be time for a pullback and hence upcoming bullish momentum toward 1.2920. Let us be surprised.

The U.K. Labor Market report is scheduled for release at 8:30 UTC and could have an impact on the pound. Signs of stronger job growth may encourage the BoE to start normalizing monetary policy. Stronger job/wage growth figures would thus have a positive impact on the pound sterling.

We wish you profitable trades for today!

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USD Receives Boost On Hawkish Yellen Comments

Dear Traders,

The U.S. dollar was bolstered by hawkish comments from Fed Chair Janet Yellen on the first day of her testimony. While Yellen did not reveal much new information, she was surprisingly hawkish, saying that “waiting too long to remove accommodation would be unwise, potentially requiring the FOMC to eventually raise rates rapidly, which could risk disrupting financial markets”. In other words, the pace of interest rate hikes could accelerate, still leaving the door open for a hike in March. Market participants will now shift their focus to the U.S. Consumer Price data with the intention to evaluate the need for faster rate normalization.

The greenback traded higher against the euro and British pound and while we generally expect further gains in the dollar, traders should also prepare for some pullbacks in short-term time frames.

The euro found some halt at 1.0560 and it may now tend to correct recent losses towards 1.0615 and possibly even 1.0630. Today’s price action will, however, again hinge on the demand for dollars. In case of better-than-expected CPI data the euro could extend its losses towards 1.0540 and 1.05.

The British pound dropped towards 1.2440 after the U.K. Consumer Price Index failed to meet market expectations. Signs of weaker price growth may encourage the Bank of England to maintain a neutral monetary policy. From a technical perspective, the cable is still confined within a sideways trading range between 1.2550/85 and 1.2440. A break below 1.2440 may prompt sterling bears to sell sterling towards 1.2350 and further 1.2270. On the topside, the pound will need to break through 1.2530 and 1.2560 in order to invigorate fresh bullish momentum.

We will keep an eye on the U.K. Labor Market report, due for release at 9:30 UTC, which could affect the price action in the GBP/USD, provided that there is any surprise.

Higher volatility is expected during the U.S. session with Consumer Prices and Advance Retail Sales scheduled for release at 13:30 UTC.

Fed Chair Yellen will testify before the House Financial Services Committee at 15:00 UTC.

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Yellen Testimony Takes Center Stage

Dear Traders,

The currency market got off to a cautious start before the testimony from Federal Reserve’s Janet Yellen. The U.S. dollar was little changed against the euro and British pound Monday and while the euro took a dip below the 1.06-level, we still cannot speak of a significant downside breakout. The pound sterling ended the trading day in positive territory and it currently appears poised to break through the 1.2550-barrier. For sterling traders, it will be an interesting trading day with U.K. Consumer Prices being due for release at 9:30 UTC. Traders should prepare for volatile swings even ahead of the upcoming inflation figures. Above 1.2560 the pound may head for a test of 1.2575/95. While the risk for inflation is clearly on the upside there is also potential for disappointment last month.

The euro is hovering around the 1.06-mark and we still wait for a sustained break below the 1.0580-support. Once that level is breached we expect further losses towards 1.0550 and 1.0520. On the upside, the 1.0650-level may limit potential gains but today’s price action will hinge on Yellen’s testimony. Euro traders will also pay attention to the German ZEW Survey and Eurozone GDP figures, both reports scheduled for release at 10:00 UTC.

The Fed chair will start testimony in Congress in Washington at 15:00 UTC. While Yellen is not expected to give any clear hints as to the timing of the next rate hike, her comments on monetary policy could trigger larger market moves.

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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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Fed December Rate Hike Has Been Almost Completely Priced In; Time For A Correction?

Dear Traders,

After the dust settled around the U.S. Presidential elections, market participants returned to business as usual while risk appetite has been boosted by the Trump reflation trade. The focus now shifts back to Federal Reserve rate hike in December, while there was some concern that a Trump victory would give the Fed reason to delay further tightening. Instead the U.S. dollar and U.S. yields are running higher amid speculation Trump’s plans to boost infrastructure spending will spur rate hikes as inflation and economic growth pick up. Fed rate hike odds are currently holding above 80 percent and economic data this week may further support the Fed’s hawkish bias.

Most attention will be paid to Tuesday’s economic calendar with Eurozone GDP data, U.K. Consumer Prices and U.S. Retail Sales due for release. On Thursday, U.S. Consumer Prices are worth watching followed by Janet Yellen’s testimony before the Joint Economic Committee. CPI figures should be strong enough to keep the Fed on track to hike rates next month while Yellen is expected to maintain her bias towards higher rates. Last but not least, ECB President Mario Draghi is scheduled to speak at the Euro Finance Week in Frankfurt on Friday. The European Central Bank is expected to hold its course while analysts focus on a small alteration in the size and scope of the QE program in December rather than a rate cut.

Overall, economic conditions for the Eurozone remain stable and euro traders should bear in mind that the recent dip in EUR/USD can be attributed to the dollar’s rate expectations. Thus, the appetite for USD will continue to dominate the price action for the time being.The currency pair tested the support area around 1.0770 and it will now be interesting whether this support proves to be strong enough to withstand the downward pressure. If the euro drops below 1.0770 we expect further losses towards 1.07 and 1.0630. Near-term resistances are seen at 1.0850 and 1.0950.

The GBP/USD dropped back below 1.26 but the decline came to a halt slightly above 1.25. If the pound is able to climb back above 1.26, we expect further gains towards 1.2720. Sterling bears should however focus on a break below 1.2440, reinvigorating fresh bearish momentum towards 1.2350 and 1.2270. U.K. CPI data on Tuesday will receive most attention but Wednesday’s U.K. Employment Report may also be worth watching.

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

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We wish you good trades and many pips!

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Copyright © All Rights Reserved 2016 Maimar-FX.

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U.S. Dollar Back In Focus: Will U.S. Data Help Or Hurt?

Dear Traders,

While both of our major currency pairs fluctuated more or less sideways yesterday, the U.S. dollar was gaining momentum as upbeat economic data boosted optimism on the world’s largest economy. A gauge of consumer confidence rose to its highest level in nine years, coming in as a positive surprise for the market.

The euro tested the 1.12-support but, for the time being, the currency was able to remain above that important price level. Once the 1.1190-level is significantly breached, we may see accelerated bearish momentum towards 1.1130. However, given the recent sideways trend in the EUR/USD we anticipate the price action to be confined to a range between 1.1285 and 1.1120.

GBP/USD

The pound sterling rebounded against the greenback Tuesday and rose to a high of 1.3026. While we expect any further gains in this pair to be limited until 1.3070, downward movements may also be limited towards the lower bound of the pounds recent trading range at 1.2920. Once the 1.29-mark is breached to the downside, we could see further losses towards 1.2820.

chart_gbp_usd_4hours_snapshot28-9-16

Today, we will watch U.S. Durable Goods Orders, scheduled for release at 12:30 UTC, which could have a major impact on the U.S. dollar. Furthermore, Fed chair Janet Yellen testifies before the House Financial Services Committee at 14:00 UTC. Market participants scrutinize her remarks, looking for clues regarding future monetary policy but Yellen is not expected to reveal anything new after last week’s news conference.

ECB President Mario Draghi is scheduled to speak at 14:30 UTC at a meeting of the German Parliament’s EU Committee, but his speech is not expected to have a significant impact on the euro.

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We wish you good trades and many pips!

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Brexit Debate Enters Hot Phase

Dear Traders,

The British pound extended its gains towards 1.48 while the euro went into a tailspin Tuesday. Sterling benefited from reduced chances of a so-called Brexit, even if Thursday’s U.K. referendum is not a foregone conclusion. We expect the pound to be highly volatile on the last day before the vote and we will not elaborate on the technical picture today as anything is possible.

The euro dropped towards 1.1235 after it rejected the 1.1350 level. In short-term timeframes we expect the 1.1310-level to act as a resistance for the euro, whereas a lower bound could be currently found at 1.1222/1.12. Above 1.1360 the euro could climb towards 1.1395 and 1.1435. Below 1.1220 we will favor a bearish stance, targeting lower levels at 1.1185 and 1.1135.

Fed chair Yellen adopted a cautious approach to the outlook and the appropriate pace of interest rate hikes in yesterday’s testimony before lawmakers in Washington. She highlighted concerns about longer-term problems in the U.S. economy, adding to signs that the Fed may go for only one hike this year. Yellen is due to address lawmakers for a second day today at 14:00 UTC, while at the same time U.S. Existing Home Sales are scheduled for release.

The Brexit debate is entering the hot phase and traders should prepare for higher volatility ahead of tomorrow’s vote. Whatever the outcome may be, we wait to be surprised and try to get the best out of the market’s movements.

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We wish you good trades and many pips!

Any and all liability of the author is excluded.

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Brexit Polls Show Neck-And-Neck Race, Will GBP Maintain Its High Price Level?

Dear Traders,

The British pound is exposed to extremely volatile trading conditions in the run-up to the U.K. referendum. Separate polls are showing leads for both sides, creating uncertainty among speculators. The most recent survey showed ‘Leave’ at 44 percent and 42 percent for ‘Remain’, while a different poll saw ‘Remain’ at 53 percent and ‘Leave’ at 46 percent. The British pound rose to a high of 1.4721 on increased risk appetite but, as noted in yesterday’s analysis, it still fluctuates within its range with the annual high at 1.4816. An upside break above 1.4730 may drive the pound towards its May high at 1.4770, while a downside break below 1.4580 could lead to a downswing towards 1.4520 and 1.4470.

U.K. Public Finances are due for release at 8:30 UTC, but Brexit headlines will continue to dominate the price action in the pound.

The euro was slightly tilted to the downside but for the time being, the 1.13-support proved to be intact. Hence, short traders’ efforts didn’t pay off as the downswing was limited. On the upper side, we will now focus on a renewed break above 1.1360 in order to buy euros towards 1.14 and 1.1440. Below 1.1280, we expect bearish momentum to increase, driving the euro towards 1.1230 and 1.12 in a next step.

Fed Chair Yellen is scheduled to testify before lawmakers in a semiannual report today at 14:00 UTC. Yellen is unlikely to provide new insights into the timing of future interest rates but she may stress the risks of a potential Brexit which would harm the U.S. economy. The U.S. dollar might be vulnerable to some losses if she sounds less hawkish.

From the Eurozone, we have the German ZEW Survey scheduled for release at 9:00 UTC, a report that could have a short-term impact on the euro. However, price fluctuation in the EUR/USD will be dominated by the level of risk-appetite for euros and dollars, while economic data will take a backseat with only two days before the Brexit vote.

Before Yellen’s testimony, ECB President Mario Draghi speaks in Brussels at 13:00 UTC.

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We wish you good trades and many pips!

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Fasten Your Seatbelt For The Most Important (Volatile) Week Of The Year

Dear Traders,

This week is the most important week of the year with Thursday’s U.K. referendum paving the way for new trends in the market. The British pound jumped to a high of 1.4624 on eased concerns about the Brexit vote. The euro benefited from that optimistic tone and rose towards 1.14 on increased risk appetite.

The first poll taken after the murder of UK lawmaker Jo Cox showed the ‘Remain’ camp is gaining ground. The tragic death of pro-EU supporter Cox shifted some support back to ‘Remain’ and helped the pound and euro to recover from their lows. However, traders should be careful ahead of Thursday’s vote as volatility is likely to remain extremely high and large fluctuations in both directions are possible.

Ahead of the U.K. vote, Fed chair Janet Yellen testifies before Congress on Tuesday and Wednesday but no one expects her to reveal anything new about the guidance of future rate hikes. Policymakers are likely to wait for the outcome of the U.K. vote before setting the right course.

Traders should prepare for a volatile week in the Forex market and should bear in mind that anything can happen. We are curious to see how the market reacts and wish all traders many profitable trades.

EUR/USD

The euro rallied towards the upper bound of its recent downtrend channel. Once this barrier is significantly breached to the upside, the next important price level will be the crucial resistance zone at 1.14-1.1450. In search of attractive buying opportunities, the 1.1465- level may serve as a profitable long-entry. Above that level, the euro may head for a test of 1.15. Above 1.1530 it could even rally towards 1.1750. For the time being, we see a current support around the 1.13-level. Below 1.1230 the euro could drop back to 1.1130.

Chart_EUR_USD_Daily_snapshot20.6.16

GBP/USD

Looking at larger time frames, the pound sterling is still trading within its range between 1.4750 and 1.40. We expect high-volatile swings ahead of Thursday’s referendum but as long as the currency pair remains confined to that range, there is no new trend. Let’s wait and see.

Chart_GBP_USD_Daily_snapshot20.6.16

 

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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 2016 Maimar-FX.

www.maimar.co