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Is The Pound Sterling Overvalued?

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The pound sterling corrected some of its recent gains against the U.S. dollar after the GBP/USD failed to break above 1.2660. As we stated in previous analysis, we expect an even stronger correction that may lead to a slide back towards 1.24 in the near-term. Some investors are even most bearish on the pound, saying the market has to go much further in pricing out Bank of England rate hikes. Some market participants think that the pound is overvalued in the long-term pointing on concerns over U.K. financial imbalances.

However, from a technical point of view the GBP/USD remains in a downtrend with a next resistance seen at 1.2680. Sterling bulls may prefer to wait until 1.27 is cleared to jump in on buy attempts toward 1.30.

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GBP/USD

Long @ 1.2620

Short @ 1.2560

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Profitable Trading Day For Sterling Bears

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Dear Traders,

What a trading day – at least for sterling traders that sold pounds on the initial exit polls. Before we start to explain the reason for sterling’s knee-jerk decline let us allow to be enthusiastic about our short trade which has hit the profit target of 140 pips within less than one minute after initial results showed the U.K. faces a hung parliament. We hope that many of you were also able to capture the profitable downward move in the GBP/USD, even though some orders may have got triggered a few pips lower due to high slippage.

In sum, the U.K. vote is a disaster for Theresa May as the ruling Conservative Party is falling short of an overall majority. A hung parliament is considered a nightmare scenario for sterling investors as the U.K.’s course and Brexit path are much more uncertain now. We remember that Prime Minister Theresa May has called this snap election to win a comfortable majority but the opposite happened: the Conservatives are losing seats instead of winning seats. Consequently, May lost her bet. She will now need to resign or try to form a new government.

The pound dropped as much as 2.5 percent on the new round of political uncertainty. The 1.27-level served as a short-term support but if the pound drops below 1.2690 we could see further losses towards 1.26 and 1.24. If the pound climbs back above 1.28, we expect a resistance to come in at 1.2850 and 1.29.

The ECB decision and testimony from former FBI director Comey did little to impact the price action in the euro and U.S. dollar. The EUR/USD traded slightly lower on Comey’s testimony but remained within a narrow trading range between 1.1265 and 1.1180. As long as the euro remains confined to a sideways range of 1.1285 – 1.1150, there is nothing new to report.

With no major risk events being on tap today, the price action could be muted.

Have a good weekend and remember to secure your weekly profits.

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All Eyes On NFP Data

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Dear Traders,

It is U.S. jobs day and the May Nonfarm Payrolls report is considered the top event risk this week as it could generate big swings for the U.S. dollar. The greenback’s performance was only modestly affected by yesterday’s solid ADP report and a strong ISM manufacturing report, so traders hope for more profitable swings today. The expectation is for 180K jobs to have been added in May and while a rate hike at the Fed’s next meeting on June 13 and 14 is widely expected, investors will read between the lines to assess the economic environment in the U.S. The dollar has been weak throughout the month of May and dollar bulls need a good reason in order to reinvest into the dollar trade.

The first trading day of June has been a challenging one for sterling traders as the cable traded choppily sideways, triggering and eliminating pending orders easily. We hope for more profitable trading opportunities today.

The euro refrained from falling below the 1.12-mark and hold steadily above that threshold. In case of a dip below 1.1190 we will once again shift our focus to the 1.1160-support. Lower barriers are seen at 1.11/1.1080 and 1.10 whereas any upward movements above 1.1265 could be limited to a high of 1.1350.

The Payrolls report is scheduled for release at 12:30 UTC today.

We wish you good trades and a beautiful weekend.

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Sterling Traders Benefit From High Volatility Environment

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Dear Traders,

The pound sterling is currently the most volatile currency and traders’ efforts were rewarded once again: As expected in yesterday’s analysis, some of the GBP’s recent losses have been corrected due to an oversold situation. Consequently, our long-entry has proved to be successful, providing traders a nice profit on Monday. The pound rejected the 1.4330-level and dropped back below 1.42. Given the fact that the ‘Leave’ Campaign gains ground against the ‘Remain’ before next week’s referendum, traders should generally expect further losses in the GBP. A next lower target could be at 1.40, whereas corrections might be limited until 1.4260. U.K. Consumer Prices are scheduled for release at 8:30 UTC and even if the report comes in with an uptick in CPI, the pound is likely to remain under pressure.

The euro tested the 1.13-barrier and held steady around that level amidst uncertainties surrounding the Brexit vote and the Federal Reserve’s rate decision. With no major important economic reports scheduled for release from the Eurozone, the euro is expected to fluctuate within smaller trading ranges. The focus will rather be on the U.S. dollar and important U.S. data such as Retail Sales due at 12:30 UTC. Retail Sales are expected to show a slower growth in May and this expectation could weigh on the dollar before the report is due for release.

We currently see a higher likelihood for upcoming bullish momentum, driving the EUR/USD towards 1.1390. A crucial resistance level is seen at 1.1330/40 which must be significantly breached to the upside in order to reinvigorate fresh bullish potential. If the euro is unable to break above 1.1305 we will shift our focus to the 1.1270-level. Below that level we expect the euro to fall towards 1.1240 and 1.1215.

Chart_EUR_USD_Hourly_snapshot14.6.16

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Copyright © All Rights Reserved 2016 Maimar-FX.

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Massive Increase In Volatility: Sterling Jumps 180 Pips This Morning

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Dear Traders,

Watch out for extreme volatility in the British pound with only two weeks to go before the U.K. referendum. Today’s sharp rise demonstrates the enormous potential despite uncertainties surrounding the U.K. vote. Only this morning we saw a higher likelihood for upcoming bullish momentum if the cable was able to break above 1.4480 but the cable came up first with its strong upward move before we published today’s analysis. The British pound has soared within seconds by 180 pips towards a high of 1.4661 but was not able to hold onto its huge gains. The currency pair remains vulnerable to high-volatile swings and traders should be prepared for huge breakouts at any time.

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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.

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U.S. Dollar Back In Focus: CPI To Determine Direction

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Dear Traders,

Both EUR/USD and GBP/USD experienced short breakouts of their recent trading ranges but ended the day more or less unchanged against the U.S. dollar. While the euro dropped below the 1.11-level the pair was able to stop its fall just slightly above the current support at 1.1070. The cable, however, traded higher on hopes the UK could reach a deal with the EU on terms of Britain’s membership. As negotiations could last for some time before reaching an agreement and even then, Brexit concerns are not off the table, the pound could be vulnerable to larger losses at any time.

Sterling traders should keep an eye on the U.K. Retail Sales report scheduled for release along with Public Finances at 9:30 GMT. Retail sales are forecast to show an increase and if figures beat expectations, GBP could head for a renewed test of 1.44 and further 1.4425 and 1.4445. Below 1.4270 we favor a bearish stance, shifting the focus to lower levels at 1.4250 and 1.42.

The euro bounced back from the 1.1070-level and climbed above 1.11 again. Whether the common currency is able to stay above that level remains to be seen and could hinge on the appetite for U.S. dollars. U.S. Consumer Prices are scheduled for release at 13:30 GMT and if CPI data surprise to the upside the greenback could rally in response. Bear in mind that a break below 1.1070 could send the euro quickly towards 1.1050 and 1.0990. Current resistances are seen at 1.1150 and 1.12.

We wish you many green pips and a beautiful weekend.

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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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Euro Benefits As Funding Currency – Sterling Under Pressure

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Dear Traders,

The euro advanced as it plays an important role as a funding currency at times of market turmoil. Before rallying above 1.12 the common currency was able to gain ground above 1.1085. For the time being, we continue to expect the 1.1070/50-level to act as a current support-zone. On the upper side, next important price levels could be at 1.1260 and 1.1280. While many traders are wondering how high the euro may go, we should bear in mind, that a strong rise in the euro, much to the displeasure of the European Central Bank, brings policymakers on to the scene in order to talk down the currency. We expect verbal intervention by the ECB should the euro rise further.

The cable, however, declined towards its next important support-level at 1.4350. As long as Brexit concerns remain on the table, the currency is likely to remain under pressure. We expect increased bearish momentum as soon as sterling breaks below 1.4330/25. Lower targets could be at 1.4240 and 1.4180. A short-term resistance-zone is seen at 1.4450/65. Above 1.4475, sterling may climbs towards 1.4540.

Today we have second-tier data scheduled for release, which is expected to have only a minor impact on the currencies.

9:30 UK Trade Balance

15:00 USA Wholesale Inventories

(Timezone GMT)

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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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Euro and Sterling Rose Against The Greenback

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Dear Traders,

The euro and British pound traded higher against the greenback Monday. The best performing currency pair was the cable, which experienced a short squeeze and broke through all recent resistance-levels. A next resistance is seen at 1.4470/75 and if sterling is able to break above that level, we may see a test of 1.45. However, given the uncertainty surrounding the U.K. referendum, which is possible as early as June, the risk is to the downside for GBP/USD. Current support levels are seen at 1.4350, 1.4310, 1.4240 and 1.4180.

The EUR/USD flirted with the 1.09-barrier  but as long as there is no sustained break above 1.0915/25, the euro may drop back towards 1.0840 and 1.0810. On the upper side, the 1.0955/60-level remains in focus and euro-bulls should wait for prices above that level.

Meanwhile, ECB President Draghi reiterated the ECB’s plan to review its stimulus program in March and thus confirmed its dovish tilt. The euro is therefore more vulnerable to losses going into the next monetary policy meeting in March.

The German Unemployment report is scheduled for release at 8:55 GMT which could have a short-term impact on the euro if numbers surprise to the upside.

Sterling traders should keep an eye on the U.K. Construction PMI, due for release at 9:30 GMT.

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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.

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GBP/USD: Steeper Decline Or Short Squeeze?

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Dear Traders,

Today will be an important day for the British pound and sterling traders seem to be waiting in their starting blocks. The Bank of England will announce its policy decision and release the minutes of its meeting at 12:00 GMT. While the central bank is expected to keep monetary policy unchanged, traders and analysts pushed back their expectations of a BoE liftoff. The market is currently pricing in a very dovish BoE tightening cycle, not expecting the central bank to raise rates until well into 2017. These speculations are manifested in the pound’s sustained downtrend. But we have learned from past experience, that any surprises can quickly alter the market’s sentiment which is why investors were caught on the wrong foot sometimes. Some currency traders even stress the idea that sterling’s’ weakness looks considerably overdone. It is worth noting that the depreciation of the British pound should suit policy makers and could have a positive impact on inflation. Any shifts away from the central bank’s dovish monetary policy stance could trigger a strong rebound in the GBP/USD.

However, following the motto “the trend is your friend”, traders should, for the time being, prefer to sell any rallies towards lower targets.

GBP/USD

Taking a look at the weekly chart, it is tempting to focus on a steeper decline, targeting at the 1.40-barrier. But first, we will pay attention to the 1.43-level and GBP will need to break significantly below that level in order to reveal fresh bearish momentum towards the next support at 1.4230. Current resistances are seen at 1.4530, 1.46 and 1.4640.

Chart_GBP_USD_Weekly_snapshot14.1.16

The euro bounce back from its 1.08-support and started a small relief rally against the U.S. dollar. The next hurdle will be at 1.09 and it remains to be seen whether the currency pair will be able to extend gains towards 1.0940 and 1.0980. There are no major important economic reports due for release today. The German GDP report, due for release at 9:00 GMT, may have some impact on the euro. However, the euro remains to trade between 1.10 and 1.08 and as long as there is no breakout above or below these zones, traders will have to wait and focus on the current trading range.

Fed President Bullard is scheduled to speak at 13:30 GMT. At the same time, U.S. Continuing and Initial Jobless Claims are due for release.

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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