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Bullish Bias As Risk-Appetite Increases

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Dear Traders,

Yesterday’s best performer was the British pound, which rallied towards 1.43 as investors shrugged off oil’s losses and Chancellor Osborne’s warning of “permanent” damage should U.K. vote to leave the European Union. While we continue to favor a bearish stance in the GBP/USD, extensions of the recent upward movement might be possible until 1.4380 and 1.4430. Once the pair breaks above 1.4330 a next crucial resistance zone could be at 1.4370-95, from where reversals are becoming more likely. On the bottom side, we expect the 1.4250-level to lend a short-term support to the currency pair. However, if GBP falls back below 1.4225, a lower target could be at 1.4160.

Bank of England Governor Mark Carney will give evidence to the House of Lords Economic Affairs Committee today at 14:30 GMT. This event is likely to be this week’s fundamental highlight for the pound sterling and could affect the currency accordingly. If he favors a pro-EU stance, it should be supportive for the pound.

The euro did not show much movement Monday and traded within a narrow 60-pips trading range. None of our entries was triggered but euro traders hope for major movements today before the German and Eurozone ZEW Surveys are scheduled for release. In case of a major improvement, the euro could head for a test of 1.1350. Here we see a crucial resistance level, which could cap on gains in the EUR/USD. The common currency would need to break significantly above 1.1365 in order to revive bullish strength towards 1.14. On the downside, we will focus on a break below 1.13 in order to sell the euro towards lower targets at 1.1275 and 1.1250.

Important events and economic reports:

9:00 EUR ZEW Surveys

12:30 USA Housing Starts and Building Permits

14:30 UK Carney’s Testimony

(Time zone GMT)

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Is Bullish Bias Set To Persist?

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Dear Traders,

Both major currency pairs experienced a volatile start to the new week and there was something for everyone. While bears initially set the tone, providing short-traders a good profit bulls won out against the bears at the end of the day, sending the euro and British pound higher against the U.S. dollar.

Consequently, the current sentiment appears to be strongly bullish but what is next? Let’s have a look at the technical side.

GBP/USD

Sterling still trades within a tertiary downward channel. After the recent rise the situation appears somewhat overbought so traders should generally expect increased bearish momentum in the near-term. If the pair is able to break significantly above 1.43, we see next resistances at 1.4360 and 1.44. Even if concerns about a potential Brexit have eased somewhat, the latest U.K. economic reports were not really encouraging. We therefore favor a bearish stance and focus on next resistances from where GBP may bounce back.

Chart_GBP_USD_4Hours_snapshot8.3.16

Bank of England Governor Mark Carney is scheduled to testify at Parliament’s Treasury Committee on the economic and financial benefits of EU membership today at 9:15 a.m. GMT. Carney is declined to reveal any details of the possible actions the BoE will be considering in the event of Brexit. A potential EU withdrawal fueled speculation the U.K. could fall into recession and the central bank would have to respond with a rate-cut. Traders should keep an eye on Carney’s testimony as any new insights or details could have a significant impact on the pound.

The Eurozone Gross Domestic Product is scheduled for release at 10:00 GMT but no changes are expected.

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Bearish Bias On GBP/USD And EUR/USD

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Dear Traders,

Uncertainty and potential risks in the event of a Brexit overshadowed the financial markets Monday and triggered a sharp sell-off in the British pound. Rating companies warned that a U.K. exit from the European Union would hurt business confidence and affect investment negatively. As a result, sterling fell to its lowest level in almost seven years, touching a fresh low at 1.4057. Traders are now wondering how low can GBP go and since we know about the sustainability of sterling’s trends and its ability to fall several consecutive trading days without a major correction, we expect further losses towards 1.40, 1.3960 and 1.39. We bear in mind that, for the time being, the 1.40-level could act as psychological barrier before heading towards record lows at 1.36. A next lower target could be at 1.4020, whereas current resistances are seen at 1.4250 and 1.43.

The next event risk for the pound will be Bank of England Governor Carney’s testimony scheduled at 10:00 GMT today. Carney testifies to lawmakers about the outlook for the U.K. economy and monetary policy and given the BoE’s latest inflation and growth projections, the odds favor further downside momentum.

The euro finally broke below 1.1070 and fell all the way down towards the 1.10-barrier, which has led a current support for the EUR/USD. We expect bearish potential to continue in the near-term, sending the currency pair towards 1.0970 and 1.0920. On the upside, previous support-areas at 1.1070 and 1.11 could now act as resistances.

The German IFO Survey is scheduled for release at 9:00 GMT and could have an short-term impact on the euro.

From the U.S. we will have Consumer Confidence scheduled for release at 15:00 GMT and figures are forecast to show a decline in February which could negatively affect the greenback in short time frames.

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Dollar Weakness To Continue?

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Dear Traders,

What a day for the USD! The U.S. dollar depreciated sharply against all of the major currencies as signs of a slowing U.S. economy pushed the 2016 rate-hike likelihood lower. Despite a stronger-than anticipated ADP report, the USD was exposed to strong selling pressure after a report showed U.S. services industries expanded last month at the slowest pace in nearly two years, clouding the economic outlook. In addition, comments from New York Fed President William C. Dudley, who said that the recent financial turmoil “may alter the outlook for growth and the risk to the outlook for growth going forward” set off the dollar’s weakness.

The subsequent rise in the euro and cable was also technical driven as stops were triggered, sending both pairs even higher. The focus now shifts to the Non-Farm Payrolls report due for release tomorrow, which is expected to show fewer than 200K jobs for the first time since September. The payrolls report may determine whether the dollar weakness will continue. In the meantime, let us focus on the technical side:

EUR/USD

The euro rose as high as 1.1145 on the back of broad-based dollar weakness. Depending on tomorrow’s U.S. labor market data, we may see another round of a dollar selloff, which could send the euro towards 1.12 and 1.1280 in a next step. For the time being, we expect the 1.1160-level to act as a current resistance, while downward moves may be limited until 1.10/1.0980. An important support zone is currently seen at 1.0850.

ECB President Mario Draghi is scheduled to speak at 8:00 GMT today, which could have a short-term impact on the EUR/USD.

Chart_EUR_USD_Daily_snapshot4.2.16

GBP/USD

The Bank of England will present its Quarterly Inflation report along with the monetary policy announcement at 12:00 GMT today. While the Monetary Policy Committee is widely expected to keep rates unchanged, BoE Governor Mark Carney may offer some insight when he presents the BoE’s latest economic projections at a press conference 45 minutes later. The expectations are high and traders should be prepared for everything. If the February predictions look bright, predicting inflation would overshoot the BoE’s target over the medium term, the pound sterling could extend its gains versus the greenback. Let’s wait and see.

Taking a look at the 4-hour chart the risk seems to be to the downside. The cable tagged a fresh resistance at 1.4650 and it might be smarter to wait for a significant break above 1.4665/70 in order to buy GBP towards key resistances at 1.47 and 1.48. The direction will hinge on the BoE Inflation report and Carney’s comments but in case of a dovish tilt, we may see the cable sliding back towards 1.4440, 1.4370 and 1.43.

Chart_GBP_USD_4 Hours_snapshot4.2.16

U.S. data such as Initial and Continuing Jobless Claims (13:30 GMT) and Factory Orders (15:00 GMT) may take a back seat.

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GBP/USD: Bottom At 1.4235? GBP Awaits CPI And Carney’s Comments

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Dear Traders,

The performance of the British pound was hampered by a short-lived upside correction, which was more limited than we had previously expected. While we anticipated the short pullback to last until at least 1.4335, the pound sterling reversed shy of 1.4325.  The currency pair is now facing its support at 1.4230 and if we see a break below that level, GBP could slide towards next lower targets at 1.42, 1.4150 and 1.4110. Short-term resistances are seen at 1.4310/25 and 1.4350.

Sterling traders will pay attention to the U.K. Consumer Price report, scheduled for release at 9:30 GMT today. While the Core CPI is forecast to hold steady, inflation data from December may show an uptick. Whatever the case, any changes in CPI could have a strong impact on the currency. Furthermore, Bank of England Governor Mark Carney is scheduled to speak on the economy at 12:00 GMT. If he sounds more dovish, GBP could extend its losses versus the U.S. dollar.

The EUR/USD traded sideways within a narrow trading range. With prices above 1.0910 the euro may head for another test of 1.0945 and further 1.0975. On the bottom side we see a current support-area ranging from 1.0870 until 1.0845. The currency pair will first need to break this area significantly in order to test next important price levels at 1.0834 and 1.0810.

The most important piece of economic data from the Eurozone will be the German ZEW Survey due at 10:00 GMT alongside the Eurozone Consumer Price Report. In case of any disappointments, the euro could be trending downwards.

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GBP/USD: Next Bearish Target At 1.4455?

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Dear Traders,

Yesterday’s trading was dominated by a  counter-movement in both major currency pairs. The euro trended downwards, moving away from its resistance at 1.0940, but the slide came to a halt at nearly 1.0840. For the time being, we expect the euro to trade within its current 100-pip trading range between 1.0935 and 1.0840. A break above 1.0945 may push the common currency for a rise towards 1.0980. However, with no important economic data releases from the eurozone, gains in the EUR/USD could be capped at 1.10 and 1.1050. On the bottom side, we expect a next support at 1.08, provided that the euro breaks below 1.0840.

Traders should listen to comments of Federal Reserve Presidents this week. Fed’s Vice Chair Fischer speaks in Paris today at 10:30 GMT.

The British pound recovered from the 1.45-support and tested the next important price level at 1.46. In the end, the upward turned out to be short-lived and sterling gave up its gains. Today could be a busy day for sterling traders, with Industrial Production figures due at 9:30 GMT and BoE Governor Mark Carney scheduled to speak in Paris at 14:15 GMT. Investors are pessimistic with regard to a first BoE rate increase. Even though a weakening pound comes handy to the economy and inflation, BoE policymakers are unlikely to feel any pressure following the Fed in raising rates.

GBP/USD

While the trend is clear, it will hinge on economic data and BoE speak whether GBP could be vulnerable to further losses. We see a next possible halt at 1.4460/50, from where GBP may bounce back in a first attempt. On the other side, upwards moves could be limited until 1.4630 and 1.4665.

Chart_GBP_USD_4Hours_snapshot12.1.16

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Rebound for the U.S. Dollar?

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Dear Traders,

Last Friday the markets tended to lack direction and did not provide attractive opportunities to invest profitably. The U.S. Non-Farm Payrolls report showed a stronger-than expected job growth of 211k with a steady unemployment rate. Average hourly earnings were in line with expectations and showed a slightly lower rise. All in all, payrolls data supported the view that the U.S. economy can withstand a rate increase by the Federal Reserve. The reactions of the market, however, have been very modest. It could be observed that market reactions to incoming data have been fundamentally changed showing that as long as there are no major surprises, the market does not react anymore.

What is important for the week ahead?

The most relevant reports and events are scheduled for release towards the end of this week. On Thursday we will have the Bank of England’s Rate Decision and a speech by BoE Governor Carney. The U.S. Retail Sales report will be the most important piece of data from the U.S., due for release on Friday. From the Eurozone we have the Gross Domestic Product figures, scheduled for release on Tuesday.

There are no important reports scheduled for release today, but sterling traders should pay attention to a speech by BoE Governor Carney at 15:00 GMT. In short-term time frames, GBP would need to break below the current support at 1.5080 and further 1.5050 in order to reinvigorate bearish momentum. A current resistance is seen at 1.5150.

EUR/USD

Bearish Bias: Technically the currency pair is tending towards a break of the 1.0850-level. Based on the descending triangle, we will focus on a break of the 1.0850/30 area in order to sell the pair towards lower levels. Lower targets could be at 1.0790 and 1.0750. Resistances are seen at 1.09 and 1.0950.

Chart_EUR_USD_Hourly_snapshot7.12.15

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Euro In A Waiting Mode – Cable Found Support At 1.50

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Dear Traders,

The recent decline in the British pound came to a temporary halt after a short dip below the 1.50-level. As we noted in yesterday’s analysis, the 1.50-level will be important to watch this week and as long as this support remains intact, sterling bulls may push GBP for a test of 1.5130/50.

The EUR/USD appears to be in a waiting mode ahead of the ECB policy decision and there was only little consistency in the euro’s performance yesterday. The 1.06-mark acts as a current resistance for the currency pair. With a break above 1.0620, the focus will turn to higher targets at 1.0640 and 1.0660. Nevertheless, the euro is likely to favor a bearish stance going into Thursday’s big event.

What will be important today?

The German employment report is due for release at 8:55 GMT, but the impact on the euro could be limited as the market is focused on the ECB. Sterling traders should pay attention to the speech of BoE Governor Mark Carney, who is due to speak at 9:00 GMT. Despite a healthy growth of the U.K. economy, BoE officials have highlighted concerns about parts of the U.K. financial system. Carney’s comments could therefore have a significant impact on the GBP’s further direction.

The U.S. ISM Manufacturing Index is scheduled for release at 15:00 GMT. Any positive surprises are likely to reinforce dollar buying.

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Euro Appeared Unaffected By Geopolitical Tensions

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Dear Traders,

The euro remained resilient amidst heightened tensions between Turkey and Russia. The European currency was capped at 1.0670/75, resulting in a barrier for any bullish engagements. While other currencies such as the JPY benefitted from safe haven flows after geopolitical tensions overshadowed financial markets, the U.S. dollar received less attraction as a safe haven. Political analysts consider a major escalation unlikely given the risks associated with any conflict between Russia and Turkey as a NATO member.

The British pound traded lower on dovish comments from Bank of England officials. BoE Governor Mark Carney said in testimony to lawmakers that interest rates are likely to remain low for some time. BoE Chief Economist Andrew Haldane sounded even more dovish saying risks to the inflation outlook were to the downside. So all in all, given the bleak outlook, sterling could be vulnerable to further losses in the near-term. The currency pair marked a recent support at around 1.5050. Next target is 1.50.

Yesterday’s U.S. data came in mixed and failed to trigger a big reaction in the USD. The focus will now shift to Personal Consumption Expenditure and Durable Goods Orders, scheduled for release at 13:30 GMT. U.S. New Home Sales are due for release along with Michigan Confidence at 15:00 GMT.

EUR/USD

The euro is trending downwards. A current resistance can be found at 1.0690/1.07. Any bullish breakouts above 1.07 are likely to be limited until 1.0760-75. A lower support could currently be at 1.0575, from where some pullback may occur.

Chart_EUR_USD_4Hours_snapshot25.11.15

 

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Wait-And-See Mode

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Dear Traders,

The market is still in a wait-and-see mode and larger movements are lacking. While the euro rose on the back of improvements in the European Central Bank’s lending report, the cable failed again to overcome its 1.55-hurdle.

The euro climbed to a high of 1.1387 after an ECB report showed that there is an improvement in the region’s lending conditions, diminishing prospects for additional monetary stimulus. Market participants fear that Draghi could probably sound less dovish at the ECB press conference tomorrow, since the report gives policymakers less cause for more QE.

Moreover, there were no new insights  from the Federal Reserve. Fed chair Yellen did not comment on the outlook for monetary policy when she made a statement yesterday.

There are no major economic reports scheduled for release today, so we shall have to wait until tomorrow when there are catalysts for more volatility. The only second-tier data is coming from the U.K. with public finances due for release at 8:30 GMT. Furthermore, BoE Governor Mark Carney is scheduled to speak today on the U.K.’s membership in the European Union at 17:00 GMT.

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We wish you good trades and many pips!

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Copyright © All Rights Reserved 2015 Maimar-FX.

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