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Inflation Will Be Key – Not Only For Fed But Also For The ECB

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In the end, there were no dramatic price fluctuations Friday with U.S. jobs missing expectations. The payrolls report showed 559K jobs in May, a number that fell short of economists’ estimates while a half million new jobs is still a good growth number. The jobless rate fell to 5.8 percent while wage growth increased. As for the Federal Reserve policy stance, the shortfall in job growth, along with views that recent inflationary pressures will prove temporary, may help explain the Fed’s adhering to its ultra-loose policy.

The U.S. dollar depreciated against other peers in a first reaction to Friday’s report but the greenback’s drop was not sustained to push the euro or British pound above current resistance levels.

EUR/USD: As long as the pair trades between 1.2350 and 1.20 there is nothing new to report.

GBP/USD: Friday’s gains were capped at 1.42 and if sterling bulls are unable to push the pair above that barrier and further above 1.4270, the focus is on a break below 1.4070 but more importantly below 1.40.

While the slightly softer-than expected job gain probably won’t change the Fed’s thinking, another rise in inflation could spur the taper talk. The U.S. consumer price index is scheduled to be released on Thursday.

Also on Thursday, the European Central Bank will decide whether faster bond-buying will be extended until September to ensure the economic rebound. Economists expect the ECB to keep the pace of weekly bond buying unchanged through the summer before slowing down. However, this meeting could be tricky since the economic outlook is looking brighter, making it difficult for ECB policy makers to avoid a debate about a policy shift. While the short-term outlook is improving, the ECB may use a dovish rhetoric on medium-term inflation.

As for the ECB’s rhetoric, policy makers may stress that it is too early to withdraw any kind of stimulus with the taper debate returning to the fore after the summer.

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Greenback With A Tailwind After Inflation Jump

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U.S. consumer prices surprised the market yesterday with the highest increase in 13 years. Federal Reserve Vice Chair Richard Clarida said he was surprised by the jump, but that it should prove largely transitory. Market participants however question the Fed’s control of inflation amid concern that the central bank might wait too long to address the increase while the U.S. is overheating.

As expected, the greenback advanced against other peers in reaction to the CPI report.

EUR/USD: The pair tumbled towards 1.2050 on the back of a strengthening dollar. If the 1.2050-level breaks, the next target is 1.20 where we see a crucial support. On the upside we expect the 1.2150-area to serve as a resistance while a break above 1.2160 could reinvigorate bullish momentum towards 1.22.

GBP/USD: More bearish momentum could be in store as long as the cable remains below 1.4140. It will be interesting now whether the 1.40-support holds. Below 1.3990 we target the 1.3920-mark.

DAX: We expect the index to fluctuate between 15300 and 14980. A break above 15340 could push the DAX higher towards 15500 whereas a downside break of 14950 could lead to further losses towards 14800.

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Further U.S. Dollar Strength Ahead Of CPI Report?

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Today all eyes will be on the U.S. inflation data scheduled for release at 12:30 UTC. Consumer price inflation is forecast to show an increase in April and investors wonder whether rising inflation will force the Federal Reserve to tighten its monetary policy sooner than current guidance suggests. Fed officials reiterated that it’s premature to discuss pulling back monetary support but with the taper discussion coming back at the Fed’s meeting next month when economic projections are due to be released, early positioning could help the U.S. dollar strengthening. A lower-than expected inflation reading however may lead to another rally in risk assets.

Let’s have a look at the technical picture in both USD crosses:

Time for a correction?

GBP/USD

After the pair tested the upper trend channel border between 1.4150-1.4180, a correction wouldn’t come as a surprise. While we see chances in favor of the bears today it will be crucial for the pair to remain below 1.42 in order to test current support levels at 1.40 and 1.39. A breakout above 1.42 however could possibly lead to a test of the February high at 1.4243 and a further run for 1.43.

EUR/USD

In shorter time frames we see a double-top-pattern which could predict upcoming bearish momentum in case of a break below 1.2120. A next lower target would be at 1.2050. For the euro to rise towards 1.2250 we will first need to see a break above 1.2185.

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How High Can EUR/USD And GBP/USD Go?

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The U.S. dollar held losses after Friday’s NFP report missed the market’s high expectations. U.S. jobs rose by only 266K in April while 1 million was projected. What we saw on Friday was a short squeeze as traders gave up on dollar long positions while the weak job number suggest the Federal Reserve will stick to its accommodative monetary policy stance for the time being.

GBP/USD

The best performer was the British pound which broke above the crucial 1.40-resistance on the back of a weakening U.S. dollar on the one side and last week’s Bank of England taper on the other side. From a fundamental perspective, the economic outlook in the U.K. continues to be positive with the country ending its lockdown and vaccinating over half of its population. As for the Scottish independence referendum, Nicola Sturgeon’s National Party fell one seat short of an outright majority after last week’s election, providing some relief for sterling investors. While an independence referendum is not off the table there seems to be no immediate political risk for the pound right now.

Technically, the short-term forecast is bullish – provided that the cable holds above 1.39. We see a next higher target around 1.4150 but for bullish momentum to continue we need to see the pound stabilizing above 1.40. If the pair breaks below 1.3920 chances could shift in favor of the bears.

EUR/USD

The euro stabilized above 1.2130 and could now be on its way towards 1.2250. As long as the pair remains above 1.2040, we favor the uptrend.

DAX

The index trended upwards while the 15500-mark comes back into focus. We will now wait for the DAX to break above the April high at 15518 in order to shift the focus to higher targets beyond 16000. A current support is seen at 15300.

On Wednesday, the U.S. CPI report will be of particular interest with inflation forecast to show an increase in April, putting pressure on the Fed to think about tapering sooner rather than later.

On the same day Bank of England Governor Andrew Bailey is scheduled to give his remarks on monetary policy which could have an impact on the pound.

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Will CPI Figures Spark Another Upswing in The U.S. Dollar?

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Investors poured back into riskier assets which in turn led to a pullback in Treasury yields, a weakening U.S. dollar and thus an upward tendency in both EUR/USD and GBP/USD. The DAX on the other side, was reluctant to extend its upward move and refrained from a test of our next bullish target at 14500.

Today, traders expect higher volatility around the upcoming release of the monthly U.S. inflation data at 13:30 UTC. A higher-than-expected reading could spark another upswing in bond yields and the greenback.

Looking at the technical picture and in case of further USD strength we will mark next lower targets at 1.1820 and 1.1760 in the EUR/USD and at 1.3815 and 1.3780 in the GBP/USD. A break below 1.3770 in the cable could invigorate fresh bearish momentum and send the pair lower towards 1.37.

Conversely, if inflation figures surprise to the downside, we will see a rebound in both major FX pairs. Current resistances are seen at 1.1960 and 1.2050 in the EUR/USD and at 1.39 and 1.40 in the GBP/USD.

We wish you good trades for today!

We wish you good trades!

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GBP Overdue For Correction?

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The U.S. dollar experienced a new wave of weakness and EUR/USD and GBP/USD soared as a result.

As for the GBP/USD, the recent linear upward movement appears to be somewhat stretched with a correction being overdue. We may see a bullish extension until 1.3840 but traders should brace for a correction since the pair is in deeply overbought territory. Below 1.38 we will focus on the former 1.3760-50 resistance which could now serve as a support.

EUR/USD: The euro was able to stabilize above 1.21 and we now expect the pair to trade between 1.2175 and 1.2050, whereas a break above 1.2180 could increase bullish momentum.

DAX: As long as the index remains above the crucial 14000-handle we focus on a next higher target at 14230.

We have U.S. Consumer Prices scheduled for release today at 13:30 UTC while an unexpected outcome can lead to a spike in volatility in USD crosses.

We wish you good trades!

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Prepare For Corrections Around U.S. CPI And FOMC Minutes

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Dear Traders,

The U.S. dollar continued its recent weakness ahead of today’s U.S. CPI numbers. Subsequently, the EUR/USD was accompanied by a bullish tilt and rose towards 1.2380. Long traders in the euro were thus able to book a good profit by trading our long entry.

It will now be interesting for traders of the EUR/USD as the currency pair could be primed for a technical breakout. If the euro rises above 1.2370/80 we see chances of an extended upward move towards 1.2430. A significant break below 1.2350, however, could shift the short-term bias in favor of the bears with lower targets at 1.2330 and 1.2310. A break below 1.23/1.2290 could even alter the current sentiment from bullish to bearish.

The British pound stabilized above 1.4150 against the dollar and now faces the 1.42-barrier. A break above 1.4225 could lead to further strength towards 1.4270. Bears in the GBP/USD should, however, pay attention to a significant break below 1.4080, which could drive the pair towards 1.4025.

Today, the focus will return to economic data and the outlook for U.S. consumer prices (due for release at 12:30 UTC). Later in the day we have the FOMC minutes scheduled for release, so there could be some volatile movements around these releases. Bear in mind that the Federal Reserve is optimistic concerning further rate hikes this year, so the minutes could underline that positive outlook which would be dollar-positive. In other words, prepare for corrective movements around the CPI and FOMC release.

Apart from U.S. data, sterling traders will watch the U.K.’s Industrial Production numbers due for release at 8:30 UTC, while euro traders will listen to a speech of ECB President Mario Draghi at 11:00 UTC.

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No Love For The U.S. Dollar On Valentine’s Day

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Dear Traders,

There was no love for the U.S. dollar on Valentine’s day, so the greenback ended up losing ground against the euro and pound despite better-than-expected U.S. inflation data. As expected, the U.S. CPI report had a major impact on the dollar, driving it sharply higher right after the report came out above expectations. The dollar rally did not last long, however, as stocks began to trade higher and that better atmosphere resulted in a sell-off of the dollar.

In general, even if yesterday’s CPI did beat estimates, the inflation data seems unlikely to change the pace of Fed tightening. Therefore, we may see continued dollar weakness in medium-term time frames.

Both EUR/USD and GBP/USD launched sharp recoveries after marking fresh supports.

EUR/USD: The euro dropped to a low of 1.2275 before bears were handing over control to the bulls. That shift in sentiment has sent the euro sharply higher and we now see the single currency trading around 1.2480 following yesterday’s 2-percent-surge. For traders it will now be interesting whether the euro is able to take out the next hurdle at 1.2485 before it faces the resistance zone between 1.2515- 1.2540. A break of these barriers might be possible but given the absence of fresh catalysts bullish momentum might be running out of steam. A current support is still seen at 1.23.

GBP/USD: The pound broke above 1.40 after finding support at the round number of 1.38. For bullish momentum to accelerate the pound will need to break above 1.4070. A higher target could then be at 1.4150. As long as 1.38 holds, chances are in favor of the bulls.

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We wish you good trades and many pips!

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U.S. Inflation Print To Impact The Dollar’s Price Action

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Dear Traders,

We got what we were looking for in the GBP/USD: A breakout of the cable’s narrow trading range even though that breakout has proved not as strong as we had hoped for. Sterling bulls attempted to push the pound above 1.39 but bullish momentum was somewhat muted following the U.K. January inflation print which came in at 3 percent, better than the 2.9 percent forecast ahead of the release. Overall, rising prices and economic fundamentals create conditions for a stronger currency even if Brexit risks are the main concern for investors.

Technically speaking, we now expect the GBP/USD to trade with a slight upward tilt heading towards 1.3970/80. If the pound is able to take out the 1.40-hurdle again, we will focus on higher targets around 1.4160. A current support is seen around 1.3740.

The EUR/USD broke above 1.2340 and is currently heading towards 1.24. If it breaks significantly above 1.2410, we may see another leg up towards 1.2470. As long as 1.23 holds, chances are in favor of the bulls. Euro bears should better wait for prices below 1.2280.

Today’s focus turns to the U.S. inflation figures due at 13:30 UTC. The U.S. Consumer price index probably increased at a moderate pace in January. Investors will pay particular attention to that report, which is why potential surprises in the inflation print could have a significant impact on the dollar.

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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 2018 Maimar-FX.

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British Pound Experiences Roller Coaster Ride On Soft Brexit Speculation

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Dear Traders,

The biggest story in the market on Thursday was the British pound which experienced a roller coaster ride. The GBP/USD initially dropped to a low of 1.3121 from where a sharp reversal started, quickly pushing the pound towards 1.33. The reason for the sharp price rise was a report, saying that Europe’s top negotiator may offer the U.K. a two-year Brexit transition period to stay in the single market. Any signs in favor of a soft Brexit are generally positive for the pound, while a hard Brexit is seen as the worst scenario for the U.K. economy. Until only recently the official line had been that there was no major progress in the Brexit discussions.

While Brexit remains the main driver of the pound, traders should keep an eye on the technical picture. GBP/USD is still below 1.33 and once that hurdle is significantly taken out, we could see the pound further rising towards 1.3350 and 1.3450. Sterling bears should however wait for prices below 1.3150.

 

The euro traded range-bound between 1.1870 and 1.1825. ECB President Draghi’s speech failed to have an impact on the euro’s price action. We now expect the EUR/USD to trade between 1.1930 and 1.1830. Sellers should keep an eye on prices below 1.1780 that could lead to further losses towards 1.1730.

Most attention will be paid to the U.S. Consumer Price Report scheduled for release at 12:30 UTC today. Around the release time of this report we expect higher volatility in all USD crosses.

We wish you good trades and a wonderful weekend.

Daily Forex signals:

Additional daily and long-term entries are available for subscribers.

View our daily signal alerts https://www.maimar.co/category/daily-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 2017 Maimar-FX.

www.maimar.co