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Quiet Trading: Waiting For Larger Fluctuations

The U.S. GDP expanded at a 6.4 percent annualized rate in the first quarter, supporting the Fed’s strong assessment of the economy. In addition, President Joe Biden’s proposal of two additional spending plans would infuse trillions more dollars into the U.S. economy over the next decade. The U.S. dollar, however, ended yesterday’s trading day virtually unchanged against its peers.

The DAX turned negative after failing to overcome the 15340-mark and slid below 15100. As long as the crucial 15000-support holds, we will keep an eye on the index’s recent sideways trend but if it breaks below 14950, traders should expect further losses.

The technical picture in the EUR/USD and GBP/USD has not changed since yesterday and it remains to be seen whether the support levels at 1.21 and 1.38 will hold.

Have a beautiful weekend.

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Biden’s Plan: Millions And Millions Of Jobs

Even though large movements lacked on the final day of the first quarter, which was by the way the best quarter in a year for the U.S. dollar, traders were able to profit on the long side in both GBP/USD and DAX.

U.S. President Joe Biden laid out a $2.25 trillion infrastructure plan that will be funded with higher corporate taxes. The administration said that tax increases would “fully pay for” the plan, with corporate income tax rising to 28 percent from 21 percent. What Biden laid out yesterday is just the first part of his long-term economic program, with a second part to be announced in mid-April. According to an administration official, Biden’s plan will create millions and millions of jobs which would bode well for the U.S. dollar over the next years.

GBP/USD: The cable tested the 1.38-handle but refrained from a bullish breakout – at least until this morning. In case of a break above 1.3815 we expect the pair to head for a test of its resistance at 1.3840-50. Below 1.3750 however, we anticipate lower targets around 1.3720.

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Will Quarter-End-Flows Generate Big Moves Today?

Today is not only the last day of March but also the last day of the first quarter and traders know very well that month-end and quarter-end rebalancing flows might lead to volatile movements in the currency market. Yesterday we saw the U.S. dollar strengthening against the euro and British pound while short traders in both EUR/USD and GBP/USD were able to profit from the greenback’s strength.

U.S. President Joe Biden is due to announce part-one of his infrastructure package today and it will be interesting whether we will see a continuation of the greenback’s rally or whether a correction is due to profit taking and month-end flows.

EUR/USD

The euro is on its way down towards 1.17. While we may see even a test of 1.1690, traders should brace for potential pullbacks since the pair is in oversold territory. However, a break below 1.1680 may pushes the pair lower towards a test of 1.1630 and 1.16. A current resistance on the other side is seen at 1.18.

GBP/USD

Based on the recent downward trend channel we may see a continuation of the cable’s decline targeting at 1.36 and 1.3570. An upside break of 1.3850 could however pave the way for fresh gains towards 1.40.

DAX

The index hit the bullish target at 15000 and market participants wonder whether more gains could be in store. From a technical perspective, as long as the DAX holds above 14850-14800, we may see an extension of gains until 15120 but this depends on the market’s risk appetite and today’s rebalancing flows. If 14800 breaks, gains could be corrected towards 14700 and 14600.

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Two Key Events Ahead Of The Easter Holiday

Ahead of the Easter weekend there are two key events to watch this week:

  • U.S. President Joe Biden plans to unveil a further stimulus program with a tilt toward infrastructure. Biden will outline his plan in Pittsburgh on Wednesday, according to White House administration officials. Inflation expectations are likely to rise further following Biden’s announcement.
  • On Good Friday the U.S. employment report for March is due for release and economists expect a big 500K job gain, which would bode well for the U.S. dollar. While the U.S. dollar may continue to appreciate ahead of Friday’s job report, volatility could be subdued towards the end of this week with most trading exchanges being closed for the Good Friday holiday, leading to illiquid market conditions.

EUR/USD

With Europe heading towards a third Covid wave with an extension of restrictive measures, the Euro is expected to remain under pressure. Euro bulls looking for short-term pullbacks will watch out for an upside break of 1.1830 with a higher target at around 1.1870. If the euro falls below 1.1730 next lower targets will be at 1.17 and 1.1630.

As the EU economy is likely to recover later and less strongly from the pandemic than other countries, the euro will continue to weaken against other currencies.

GBP/USD: The British pound traded higher against the U.S. dollar last Friday but as long as the area around 1.3880-1.39 remains unbroken to the upside, bears could regain control in this pair. Bullish momentum seems to have subsided as of late, so we may see a period of consolidation now.

We wish you good trades!

Any and all liability of the author is excluded.

Copyright © All Rights Reserved 2021 MaiMarFX.

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