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GBP/USD Trends Upwards While EUR/USD Remains Stuck In Consolidation Phase

Dear Traders,

Monday was characterized by a weakening U.S. dollar which suffered a slight setback against its counterparts. The recent weakness can be attributed to uncertainty over the future monetary policy stance of the Federal Reserve. New York Fed President William Dudley plans to retire next year and with Dudley’s planned exit, the unfilled board seats create uncertainty over the Fed’s approach to policy in the coming year.

The EUR/USD extended its consolidative mode into the new week and traders are still struggling with false breakouts and limited price swings. ECB President Mario Draghi is scheduled to speak at the ECB Forum on Banking Supervision today at 9:00 UTC but these opening remarks might be not enough to free the euro from its lethargy. Technically speaking, we now wait for a break below 1.1570 to sell euros whereas on the topside, we expect potential gains to be limited until 1.1660 and 1.17 amidst subdued price action.

The best performer was the GBP/USD which rose towards 1.3180, providing buyers a good profit yesterday. The latest upward move is not surprising given the fact that the pound continues to oscillate within its range between 1.3340 and 1.30.

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Dollar Weakness To Continue?

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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Copyright © All Rights Reserved 2016 Maimar-FX.

www.maimar.co