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GBP/USD Ignores Dollar Strength After BoE’s Surprise Divison

Dear Traders,

The market digests the Fed’s hawkish policy shift and sends the U.S. dollar higher. The euro declined on the back of a strengthening dollar and thus, EUR/USD headed towards the lower barrier of its recent sideways trend channel. We now expect a next support to come in at 1.11 and 1.1070. Current resistance levels are however seen at 1.12/1.1225.

While the EUR/USD was the best performer for day traders Thursday, the GBP/USD went on a roller coaster ride after the Bank of England’s split came as a surprise for sterling traders. The pound rose against the dollar after a surprise division within the BoE’s monetary policy committee, with three members of the MPC voting for a rate increase. Given this hawkish shift despite the uncertainty that follows last week’s U.K. election, a rate hike may be closer than the market currently expects. The pound rose towards 1.28 in an initial reaction to the MPC statement. A break above 1.2820 may send the pound higher towards 1.2860 while a sustained rally in the GBP/USD might be difficult given the renewed strength in the USD. Sterling bears may however wait for a renewed break below 1.2720 in order to sell pounds towards 1.2650.

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Can The Pound Hold Onto Its Gains? Carney Will Decide

Dear Traders,

At the end of the day, the FOMC meeting has proved to be a non-event for traders with the Federal Reserve holding interest rates flat and providing no new insights on the pace of future rate hikes. As expected, there were no surprises and so the U.S. dollar resumed its decline against its major peers. The Fed reiterated its intention to raise rates gradually as the labor market tightens and market participants will now shift their focus to Friday’s jobs report. Due to the fact, that the FOMC statement did not appear overly hawkish, an imminent rate hike in March is increasingly unlikely.

The euro rose again towards 1.08 after marking a short-term support around 1.0730. Traders are eagerly waiting for the euro to break through the 1.0810-barrier and once that level is breached we may see the euro further rising towards 1.0870. Current supports are seen at 1.0715 and 1.0660. From the Eurozone, there will be no major economic reports scheduled for release today so we expect the price action to depend on the demand for dollars.

ECB president Mario Draghi is scheduled to speak at 12:15 UTC but today’s speech is not expected to have a major impact on the euro.

Today will be a big day for sterling traders with the Bank of England publishing its quarterly inflation report alongside the MPC statement and rate decision. Moreover, BoE governor Mark Carney will hold a press conference following the announcement. While the BoE is expected to stand pat, policymakers may revise up its growth and inflation forecasts. Inflation is on the rise and for Carney it could be a communicative challenge to keep monetary policy unchanged in the face of accelerating price growth. Investors suspect that the central bank might shift its bias from neutral to slightly hawkish while traders are pricing in a higher likelihood of a hike than a cut. This assumption is expressed in the pound’s recent rise.

The BoE will release its Quarterly Inflation Report and rate decision at 12:00 UTC, followed by a press conference 30 minutes later.

GBP/USD

The pound is facing its resistance zone at 1.2730-75. Whether this barrier could give way hinges on the BoE statement. Above 1.2685 a test of 1.2720/30 becomes increasingly likely. On the downside, the 1.26 support is intact. Below that level we may see the pound tumbling towards 1.2550/20.

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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 2017 Maimar-FX.

www.maimar.co