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Pound Depreciates Ahead Of Brexit Trigger

Dear Traders,

The biggest story on Tuesday was the trend reversal of the British pound. Sterling reversed shy of 1.26 and dropped sharply towards 1.2350. The sharp sell-off was due to the much-anticipated Brexit trigger which will happen today. The formal Brexit process starts around 13:30 local time when a letter personally signed by U.K. Prime Minister Theresa May will arrive in Brussels. May signed the historical document on Tuesday evening and it will be handed to EU President Donald Tusk today. Tusk will read out a statement at 13:45 (GMT+2) while May will address the U.K. Parliament about the same time. The uncertainty over terms of Brexit could weigh on the pound in the medium-term, so traders should generally prepare for further losses as long as the prospects of U.K. monetary policy tightening remain far off.

From a technical perspective, sterling bears should wait for a bearish break below 1.2340 in order to sell the pound towards 1.21. Nonetheless, there is also a risk of a short squeeze in short-term time frames which could occur through profit taking. We see a crucial resistance zone between 1.2530 – 1.2570 and it would require a renewed break above that area to shift the bias in favor of the bulls.

EUR/USD

The shared currency was unable to break above 1.0875 and therefore fell back towards 1.08. For the time being, the euro is holding above the 1.08-mark but this may change quickly as the Brexit trigger poses a risk to the euro.

Bearish scenario: If the euro falls below 1.0780 it may heads for a test of the lower support-zones at 1.0760 and 1.07. A significant break below 1.0680 could lead to further losses towards 1.06.

Bullish scenario: A fresh break above 1.0875 may prompt euro bulls to buy euros towards 1.0920/50.

The risk is however to the downside.

 

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Pound Consolidates – Focus Now On CPI Data

Dear Traders,

Those who had been looking for sustained breakouts or extended gains on Monday had been disappointed by the market’s consolidation phase. The pound sterling traded sideways within a 100-pip trading range between 1.2435 and 1.2335. Given the fact that the pound was unable to hold above the 1.24-level, we expect upcoming bearish momentum in the GBP/USD. As long as sterling remains below 1.2430 we see a higher likelihood of a downside break below 1.23 which could accelerate bearish momentum towards 1.22 and possibly even 1.2050.

How the cable will trade within the next days will mainly hinge on the Brexit trigger, which will happen on March 29. Prime Minister Theresa May plans to invoke Article 50 of the Lisbon Treaty next Wednesday, starting two years of exit talks. A hard Brexit will be negative for the currency, so traders should prepare for downward movements. However, before Article 50 is triggered, the pound could retest the 1.24-mark and possibly even the 1.2470-level on stronger inflation figures. U.K. Consumer Prices are scheduled for release at 9:30 UTC and a rise in inflation could help pushing the pound higher in the short term.

The euro traded consolidated between 1.0775 and 1.0720. A renewed break above 1.0770 may prompt euro bulls to buy the single currency toward 1.0815. A break below 1.0720 however, could lead to further losses towards 1.0680. With no market-moving economic reports from the Eurozone, we expect the price action to be limited to a range of 1.0820 – 1.0680.

Towards the end of the North American trading session some Fed officials are scheduled to speak. Any hawkish comments could have a positive impact on the U.S. dollar.

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Dutch Election Cast Shadows Over EU-Future

Dear Traders,

Financial markets got off to a relatively quiet start on Monday as investors remained risk-averse ahead of major risk events on Wednesday.

The euro surged briefly to a high of 1.0714 before it started giving up some of its gains. Meanwhile, the outcome of the Dutch election threatens to cast more doubts over the future of the European Union. With only one day to go until the Dutch election on March 15, the euro came slightly under pressure. A victory of the right-wing Populist Party PVV (Party for Freedom) could mean further euro losses. Euro-skeptic Geert Wilders heads up the populist Party of Freedom, which has gathered momentum on growing nationalist and anti-Islamic sentiment.

Traders should pay attention to a renewed break below 1.06 which could possibly send the euro tumbling towards 1.0490. On the upside, the 1.08-level remains in focus.

Today, the only interesting piece of economic data will be the German ZEW Survey, due for release at 10:00 UTC.

The British pound initially strengthened against the U.S. dollar but it was unable to overcome the resistance-level at 1.2250. The U.K. Parliament on Monday passed legislation allowing the government to invoke Article 50, which means the formal start of Brexit. Prime Minister Theresa May plans to trigger Brexit in the last week of March. Thus, the pound could be vulnerable to further losses in anticipation of the possible effects of a Brexit. An important support is seen at 1.21 and the cable will need to break below 1.2080 in order to spark fresh bearish momentum.

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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.

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Pound Near Post-Brexit Low as U.K. Sets EU-Exit Date

Dear Traders,

The British pound came under huge pressure after U.K. Prime Minister Theresa May set a March 2017 date to trigger Article 50 and begin exiting from the European Union. The pound subsequently went into a tailspin as market participants now prepare for a “hard Brexit“.

GBP/USD

The cable may face a next support around its post-Brexit low at 1.2798. Technically, we see an oversold situation in the 4- hour chart, which could increase the probability of some corrections toward the 1.29-level in the near-term. In case of a break below 1.2790 however, sterling could fall towards 1.2720.

chart_gbp_usd_4hours_snapshot4-10-16

From the U.K. we have the Construction PMI scheduled for release at 8:30 UTC, which could have a minor impact on the pound.

The euro traded slightly lower against the U.S. dollar Monday. With no major market moving data we expect the 1.1160/50- area to lend a short-term support to the EUR/USD while a current resistance is still intact at 1.1250.

Daily Forex signals:

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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