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342

FOREX NEWS: THE US DOLLAR TAKES A BLOW OR GETS A PUSH. THE FED DECIDES

EUR/USD

Forex News: Despite worse than expected US economic data, the pair moved lower yesterday and this shows the greenback possesses underlying strength and that we are likely to see further downside.


Technical Outlook

The bearish movement is likely to continue today and 1.1000 is the first target. The Stochastic is clearly out of oversold so a bearish cross will announce a possible fall, but the Relative Strength Index is still close to its 30 level and overall the picture offered by the oscillators is pretty blurry. Price action might be slow during the day until the big Fed event scheduled in the afternoon.

Fundamental Outlook

At 6:00 pm GMT the Fed will announce their decision on the interest rate. Unlike in September, a change is not expected (currently <0.25%) but a surprise will generate huge movement on all US Dollar pairs. At the same time the FOMC will release a Rate Statement, outlining the reasons that stood behind the rate decision.

GBP/USD

The Pound was negatively affected by a disappointing value of the British Gross Domestic Product (forecast 0.6%; actual 0.5%) that generated a bearish trading session and a break of the bullish trend line.


Technical Outlook

Price is below the 50 period Exponential Moving Average, the oscillators are curved downwards but not oversold and the bullish trend line is broken so all things point towards a bearish market and probably an encounter with 1.5200 in the near future. If the pair starts to move to the upside, first resistance will be offered by 1.5330 and the recently broken trend line.

Fundamental Outlook

The United Kingdom didn’t schedule major news announcements but the pair will be directly affected by Fed’s decision regarding the interest rate and by the FOMC Rate Statement.

343

FOREX NEWS: END OF YEAR RATE HIKE STILL ON THE TABLE. LOOK FOR MORE US DOLLAR STRENGTH

EUR/USD

Forex News: Before the Fed released their rate decision and Monetary Policy Statement, price action was slow and choppy but as anticipated, the release created strong volatility, although the rate was not changed. The Fed made it clear that a potential hike is tightly correlated to jobs and inflation.


Technical Outlook

The US Dollar strengthened on optimism that a December rate hike is still on the table and the pair broke through 1.1000 with ease after a close encounter with the resistance at 1.1100 earlier during the day. Our bias for the pair is negative, expecting a touch of 1.0820 during the days to come but the strong bearish move is likely to see a rubber band effect and a pullback higher before the mentioned target can be touched. If this occurs, the first potential resistance is located at 1.1000.

Fundamental Outlook

The United States will release at 12:30 pm GMT the Advance Gross Domestic Product which is the first in a series of three versions but also the most important. Values above the expected 1.6% usually strengthen the greenback.

Half an hour later, at 1:00 pm GMT the German Preliminary Consumer Price Index comes out, expected to show -0.1% while the previous was -0.2%. Since this is the main gauge of inflation and is currently considered too low, higher values will most likely strengthen the euro while the opposite is true for lower values.

GBP/USD

Similar to the Euro, the Pound gained ahead of the FOMC release but the US Dollar erased all these gains when the Statement came out.


Technical Outlook

During yesterday’s movement, 1.5330 was confirmed as resistance and now we can expect this level to reject price if touched in the future. As for today, our outlook is bearish, expecting a continuation of the move started by the FOMC Statement; the pair is likely to come closer to 1.5200 but probably a retracement will occur before this level can be touched.

Fundamental Outlook

The United Kingdom has scheduled a light calendar for today so the main focus will be on the US Advance GDP and the technical aspect.

344

FOREX NEWS: RETRACEMENTS COMPLETE, US DOLLAR TAKES BACK CONTROL

EUR/USD

Forex News: The German Preliminary CPI was slightly better than anticipated while the US Advance GDP showed a disappointing value and all this, combined with the rubber band effect we discussed yesterday, created a bullish retracement.


Technical Outlook

Yesterday’s price action confirmed 1.0900 as support and bounced higher, mostly due to the reasons outlined above. Now we observe a bullish divergence (price is making lower lows but the Relative Strength Index is making higher lows) so the current move up might extend into 1.1000 which may turn into resistance. The overall picture still remains bearish, with 1.0900 as first target.

Fundamental Outlook

The German Retail Sales come out today at 7:00 am GMT, with a big increase anticipated, from the previous -0.4% to 0.4%. Because sales made at retail levels are a big part of overall economic activity, higher numbers usually strengthen the euro. Later at 10:00 am GMT the Eurozone Consumer Price Index is released and expected to show 0.0% compared to the previous -0.1%. Higher numbers for this indicator usually benefit the euro as well.

GBP/USD

The Pound also benefited from disappointing U.S. data and the pair rallied but the move wasn’t significant and first resistance wasn’t threatened.


Technical Outlook

The pair created minor support around 1.5250 and this is now the first target of the day. The current up move could extend into 1.5330 resistance but we don’t expect this level to be broken considering that overall the short term trend is bearish and the 50 period Exponential Moving Average is descending and will probably offer resistance if touched.

Fundamental Outlook

There are no major releases scheduled for today so the pair will be mainly influenced by the technical aspect.

We hope you had a profitable trading week and we wish you a relaxing weekend.

345

FOREX NEWS: TOO HIGH, TOO FAST – BEARISH ACTION EXPECTED

EUR/USD

Forex News: For the most part of Friday the pair had a bullish bias, continuing to climb after the bounce at 1.0900 support. However, later in the afternoon the sellers stepped in and erased some of the gains.


Technical Outlook

The bullish divergence mentioned last week was a warning sign about an extended up move but now we note bearish divergence (price is making a lower high but the Relative Strength Index is making a higher high) and this could mean that we will see another drop. Price stopped very close to 1.1000 but if early in the day we will see a move below this level, probably most of the day will be controlled by the bears, heading into 1.0900 (probably such a move will not be completed in one day).

Fundamental Outlook

The only notable event of the day is the release of the US Manufacturing Purchasing Managers’ Index scheduled at 3:00 pm GMT. This is a survey of about 400 purchasing managers from the manufacturing sector who are asked to rate the current level of business conditions and acts as a leading indicator of economic health. Usually numbers above the forecast 50.0 are beneficial for the US Dollar but the impact is higher if the actual number differs significantly from the analysts’ consensus.

GBP/USD

The Pound exhibited tremendous strength Friday and totally reversed the bearish momentum seen earlier, breaking several resistances and opening the door for more upside movement.


Technical Outlook

The strong move seen Friday is likely to retrace lower before heading higher and the first potential bounce area is 1.5370 combined with the recently broken 50 period Exponential Moving Average. The Stochastic and the Relative Strength Index are touching their overbought levels, increasing the chances of a move south. A key level of resistance remains 1.5500 so if price heads there without retracement, it will probably bounce lower.

Fundamental Outlook

The United Kingdom will also release their Manufacturing PMI earlier in the day, at 9:30 am GMT. Similar to the U.S. indicator, this index usually strengthens the currency if higher than anticipated values are posted. The forecast is 51.3, a slight change from the previous 51.5.

346

FOREX NEWS: BEARISH PRESSURE BUILDING UP. BULLS STILL ACTIVE

EUR/USD

Forex News: The U.S. Manufacturing PMI released yesterday was close to analysts’ expectations and the impact wasn’t tremendous. Overall the session was choppy, with slow movement.


Technical Outlook

The pair remained above the support at 1.1000 but movement was mostly sideways and the bearish divergence is still present, making us anticipate a drop below the mentioned level. A move above the 50 period Exponential Moving Average and above 1.1100 would invalidate a bearish scenario and would shift the short to medium term bias in favour of the bulls.

Fundamental Outlook

The day lacks major news releases for the euro and the greenback but late afternoon at 7:00 pm GMT, ECB President Mario Draghi will deliver a speech at an event titled the European Cultural Days 2015, in Frankfurt. The late hour and the fact that the speech’s topic is not monetary policy, may translate in a lower than usual impact.

GBP/USD

The Pound had a good first part of yesterday, on the back of a better than expected value posted by the British Manufacturing PMI (actual 55.5, forecast 51.3), so the pair touched 1.5500 resistance, but failed to break it and retraced lower in the afternoon.


Technical Outlook

As anticipated, a touch of a strong resistance like 1.5500, combined with the overbought condition of the oscillators, triggered a move south. If the support zone created around 1.5415 can reject price higher, then we will probably see a break of 1.5500 resistance; otherwise we expect a touch of the bullish trend line which was broken earlier but can still offer some form of support.

Fundamental Outlook

At 9:30 am GMT the British Construction PMI comes out, with an expected value of 58.9, lower than the previous 59.9. Same as with the other PMIs, higher values are beneficial for the Pound and the impact will be bigger if the actual value differs a lot from analysts’ expectations.

347

FOREX NEWS: FIRST LOOK AT U.S. EMPLOYMENT – A STEP CLOSER TO A RATE DECISION

EUR/USD

Forex News: For almost the entire duration of yesterday’s trading session the pair descended so the bears regained control over short term price action and we expect the downside to continue.


Technical Outlook

The bearish divergence we talked about a day earlier proved a reliable sign for a drop and now the pair is trading well below 1.1000, headed towards 1.0900. The oscillators are not oversold and the pair is moving with good speed so a stronger retracement is likely to happen around 1.0900. A sudden reversal of direction will probably find resistance near 1.1000.

Fundamental Outlook

At 9:00 am GMT, ECB President Mario Draghi will speak in Frankfurt at the ECB Forum on Banking Supervision, then later in the day at 1:15 pm GMT we will take a first look at U.S. employment with the release of the ADP Non-Farm Employment Change. This is a report issued by a privately owned company and doesn’t have the strong impact of the government data which comes out Friday but numbers above the anticipated 183K usually have a positive impact on the US Dollar.

Later in the day, at 3:00 pm GMT, Fed Chair Janet Yellen will testify before the House Financial Services Committee, on the topic of bank regulation. The impact on the greenback can be strong so caution is recommended, as always when heads of central banks speak publicly.

GBP/USD

The British Construction PMI came out very close to analysts’ consensus and the impact was muted but the pair traveled south for the most part of yesterday, with some bullish price action in the afternoon.


Technical Outlook

The pair moved below 1.5415, piercing through the 50 period Exponential Moving Average and the previously broken trend line but signs of rejection are present as the last four hour candle has a very small body and a long wick. If during the day the low of the last candle is broken, we expect a touch of 1.5330, otherwise we will most likely see a choppy trading day.

Fundamental Outlook

The last British PMI in the series is released today at 9:30 am GMT: the Services PMI. This survey gauges the optimism of purchasing managers regarding the services sector and acts as a leading indicator of economic health so higher numbers than the anticipated 54.6 will most likely strengthen the Pound.

348

FOREX NEWS: BIG DAY FOR THE POUND: BOE INTEREST RATE AND INFLATION REPORT

EUR/USD

Forex News: The euro-dollar pair continued its descent yesterday and was not much affected by the economic releases or by the speeches of the two heads of central banks, Janet Yellen and Mario Draghi.


Technical Outlook

The bears scored an important victory yesterday by breaking 1.0900 support and now the pair is headed towards 1.0820. We anticipate a touch and later a break of this level but before that can happen, the pair is likely to stall or even retrace higher, with 1.0900 zone being a good place for downside movement to resume. The oscillators are entering oversold, warning about a potential bounce higher.

Fundamental Outlook

The Eurozone Retail Sales are released at 10:00 am GMT and expected to show an increase of 3.0% from the previous 2.3% (annualized numbers). Such a climb would suggest that economic activity is increasing and would be beneficial for the euro.

GBP/USD

The British Services PMI showed a value of 54.9 yesterday, close to analysts’ estimation of 54.6 and the Pound didn’t react strongly; the later part of the day was controlled by the bears who managed to take price below support.


Technical Outlook

During the last couple of days, price created minor support at 1.5360 and this will be the first barrier that needs to be broken en route to 1.5330. The pair is now trading below the 50 period Exponential Moving Average and below resistance, with the oscillators moving downwards, without being oversold so the bearish momentum is likely to continue.

Fundamental Outlook

At 12:00 pm GMT the Bank of England will release the Inflation Report which contains a 2-year outlook for economic growth and inflation. At the same time the BOE will announce the interest rate (no change anticipated from the current 0.50%) and a breakdown of the members’ rate votes. Later at 12:45 pm GMT, BOE Governor Mark Carney will hold a press conference discussing the Inflation Report; strong moves are possible during these events and caution is recommended throughout the day.

349

FOREX NEWS: U.S. EMPLOYMENT DATA AHEAD. BRACE FOR IMPACT!

EUR/USD

Forex News: The European Retail Sales numbers came out worse than anticipated, creating some euro weakness but overall yesterday’s trading session lacked strong movement and one-sided control.


Technical Outlook

The pair climbed in very close vicinity of 1.0900 which will probably turn into resistance now. If this is the case, we expect price to drop into 1.0820 and to break it if the U.S. employment data will show that more jobs than anticipated were created during the previous month. Please note that both oscillators are clearly oversold and starting to move upwards, increasing the chances of a bullish move; however, the technical aspect will be overshadowed by the NFP release.

Fundamental Outlook

At 1:30 pm GMT the U.S. Non-Farm Payrolls are released and a huge impact is expected, especially because the Fed have made it clear that a rate hike is tightly correlated with jobs and inflation. It is safe to assume that a better than expected value of today’s release will spur speculation about a December rate hike and will strengthen the US Dollar. The forecast is for 179K new jobs, better than the previous 142K.

GBP/USD

The Bank of England kept the interest rate unchanged as anticipated but the Inflation Report revealed they have lowered inflation and economic growth expectations. The Pound reacted swiftly yesterday and dropped for more than 150 pips.


Technical Outlook

The bears took price below support and have regained control over the pair but the level of 1.5250 is still not decisively broken and will probably offer some support. Also, a big move is often followed by a pullback so we are likely to see at least a brief period of stagnation before the downside can resume. The U.S. jobs data released today will be a deciding factor for the pair’s direction.

Fundamental Outlook

The British Manufacturing Production numbers are released at 9:30 am GMT, with an expected change of 0.4% (previous 0.5%) and later in the day, at 3:00 pm GMT, NIESR will release an estimate of the British Gross Domestic Product. The previous value was 0.5% and values above it usually strengthen the Pound; the same is true for the Manufacturing Production numbers but we expect the US jobs data to be the day’s highlight.

350

FOREX NEWS: THE “RUBBER BAND” EFFECT MAY BRING LIMITED UPSIDE ACTION

EUR/USD

Forex News: The U.S. Non-Farm Employment report surprised everyone in the market by posting a huge and unexpected value of 271K while the forecast was 181K. The US Dollar strengthened swiftly and the pair dropped for more than 170 pips.


Technical Outlook

The trend is bearish, no doubt, but retracements higher are due, mostly because a strong move often generates a rubber band effect and price pulls back a little because it’s too extended. The first support is located at 1.0660 but probably the pair will pull back to 1.0820 before it can head into this level. The Relative Strength Index has been moving above and below its lower level without touching the upper boundary for quite a long while and now it is oversold, increasing the chances of moves north.

Fundamental Outlook

The Eurogroup Meetings take place today, attended by finance ministers and other personalities from the Euro zone. The meetings are usually closed to the press but sometimes participants speak to journalists during the day and this can create some volatility on euro-related pairs.

GBP/USD

The greenback strengthened against the Pound as well Friday, on the back of the surprisingly better than anticipated NFP report and the pair continued the downside momentum started Thursday.


Technical Outlook

The overall picture is obviously bearish, with the pair trading below key levels but both the Relative Strength Index and the Stochastic are deep in oversold territory and this calls for a retracement higher or at least a period of sideways movement. The first barrier (and a good place for downside movement to resume) is the recently broken support at 1.5100, which can turn into resistance if price will bounce off of it.

Fundamental Outlook

The United Kingdom didn’t schedule any economic announcements for today but British representatives will participate in the Eurogroup Meetings mentioned earlier and this could affect the Pound to some extent.

351

FOREX NEWS: DEEP OVERSOLD STILL CALLS FOR FURTHER UPSIDE?

EUR/USD

Forex News: Overall we had a slow session yesterday, with limited upside retracements and another move south later in the afternoon. The economic calendar was light, contributing to the slow movement.


Technical Outlook

The small retracement which we anticipated seems to be complete now and this suggests that the next stop is 1.0660 support zone. The oscillators are still trading close to their oversold levels but this is normal in a downtrend and doesn’t necessarily mean that a reversal is coming. In the eventuality that price starts to move up, the first potential resistance is located at 1.0820.

Fundamental Outlook

The economic calendar is light today, with the only important event being the ECOFIN Meetings, attended by Finance Ministers from the EU member states. The impact of the meeting on the currency market differs, depending on the matters discussed but caution is recommended nonetheless.

GBP/USD

The pair retraced higher and encountered resistance that stopped the upwards momentum but overall we had a slow session compared to the way last week ended.


Technical Outlook

Price breached the resistance at 1.5100 and soon rejected was seen, but the upside move can still continue above this level. The oscillators are trying to come out of deep oversold territory so a clear break of 1.5100 is very possible; if this scenario occurs, we are likely to see further upside movement but the extent should be limited.

Fundamental Outlook

The technical aspect will be the main focus today as the United Kingdom didn’t schedule major news or economic indicator releases.

352

FOREX NEWS: US DOLLAR REGAINS CONTROL AGAINST EURO, POUND STILL PLAYS HARD TO GET

EUR/USD

Forex News: The US Dollar started to regain its control over the euro as yesterday we saw a new low and a move closer to support. The day lacked major economic data releases and most of the session was controlled by the bears.


Technical Outlook

The pair is likely to hit 1.0660 support and once this happens, we expect a struggle for control between buyers and sellers. The Relative Strength Index is again entering oversold so we may see a move higher after the touch of 1.0660, with the first potential resistance being 1.0790. ECB President Mario Draghi speaks today and the euro is likely to have a strong reaction.

Fundamental Outlook

U.S. banks are closed today in observance of Veterans Day, so the New York session is susceptible to irregular volatility and possibly choppy movement. At 1:15 pm GMT, ECB President Mari Draghi will deliver a speech at Bank of England’s Open Forum 2015. As always, his public speeches should be treated as potential market movers and caution is recommended.

GBP/USD

During the first part of yesterday’s trading session the Pound inched higher against the US Dollar but the pair soon showed signs of rejection; overall neither buyers nor sellers made significant advances.


Technical Outlook

Price has moved above 1.5100 but the long wick of the last four-hour candle shows clear rejection and warns that a move lower is likely to occur. If the bears can indeed take the pair below 1.5100, the first target is represented by the minor support created around 1.5030. Also keep in mind that 1.5000 is strong psychological support and is likely to stop the pair if a stronger drop occurs.

Fundamental Outlook

Today we get a look into British unemployment with the release of the Claimant Count Change scheduled at 9:30 am GMT. The expected number is 1.6K (previous 4.6K) and usually higher values are detrimental for the Pound because the economy is contracting when more people are unemployed.

353

FOREX NEWS: ECB PRESIDENT DRAGHI’S “DOUBLE TROUBLE” APPEARANCE

EUR/USD

Forex News: The speech of ECB President Mario Draghi didn’t trigger strong moves yesterday and overall the entire session lacked strong movement. The economic calendar was light, contributing to the choppy price action.


Technical Outlook

We still anticipate a move into 1.0660 which is likely to occur today but neither side seems to be interested to make a decisive move. The oscillators offer mixed signals, without clear direction so we must wait for an exit from this congestion zone. The levels to watch remain 1.0660 as support and 1.0790 as first resistance, followed by the 50 period Exponential Moving Average.

Fundamental Outlook

ECB President Mario Draghi will speak twice today: the first appearance is scheduled at 8:30 am GMT when he will testify on monetary policy before the Committee on Economic and Monetary Affairs. The second speech is scheduled at 10:30 am GMT and this time the President will talk about his role as Chairman of the European Systemic Risk Board, at the European Parliament. These two speeches will probably create more movement than what we’ve seen yesterday but the impact cannot be anticipated so caution is recommended.

GBP/USD

Despite a worse than expected number for the British Claimant Count Change, the Pound rallied higher yesterday and tested the resistance 1.5200, creating another bullish day.


Technical Outlook

The bulls are struggling to break the important level at 1.5200 but the medium term direction is down and the Stochastic has entered overbought. This makes us believe that another leg of the recent downtrend will begin and that price will bounce lower from here, aiming for 1.5100. The 50 period Exponential Moving Average is in close vicinity, increasing the chances of a bounce lower, but a move above 1.5200 will make 1.5250 the first target.

Fundamental Outlook

The United Kingdom didn’t schedule major economic data releases but the US Dollar (and obviously the pair) will be influenced by the speech of Fed Chair Janet Yellen scheduled at 2:30 pm GMT in Washington DC. She will open the Conference on Monetary Policy Implementation in the Post-Crisis Period but she will not answer audience questions so the impact might be muted; however, caution is recommended.

354

FOREX NEWS: CURRENCIES IN TURMOIL AS EUROPEAN AND U.S. MONETARY POLICIES DIVERGE

EUR/USD

Forex News: ECB President Mario Draghi emphasised during yesterday’s appearances that the bank may extend the stimulus program and that inflation downside risks are still present, weakening the euro as a result. However, later in the day some Fed officials voiced their concerns about U.S. inflation and the greenback gave back all the gains.


Technical Outlook

Overall yesterday’s trading session was characterized by whipsaws and sharp reversals on the lower time frames but we can now notice rejection off of 1.0790 resistance. The last four hour candle shows a long wick formed when the bulls breached resistance but lacked the strength to close above it. Another attempt to close above 1.0790 will be probably made today and a failure will suggest that price will finally head into 1.0660. The 50 period Exponential Moving Average is also in close vicinity of resistance, creating a confluence zone which will be more difficult to break.

Fundamental Outlook

The German Preliminary CPI is released at 7:00 am GMT, expected to show a 0.3% change compared to the previous 0.4%. This is the main gauge of German inflation, which is a big part of overall European inflation, so higher values are beneficial for the euro.

At 1:30 pm GMT the US Retail Sales come out, expected to show an increase of 0.3% (previous 0.1%). Since sales made at retail levels represent an important part of the entire economic activity and the Fed is on the verge of increasing rates, a higher value will probably spur once again speculation about a hike and thus, will strengthen the US Dollar.

Later in the day, at 3:00 pm GMT the University of Michigan will release their Consumer Sentiment survey which is expected to increase to 91.3 from last month’s 90.0; because consumer sentiment is closely correlated with consumer spending, a higher value for this survey will likely strengthen the greenback.

GBP/USD

The pair also had a tumultuous trading session yesterday, moving above and below 1.5200 but failed to establish a clear direction.


Technical Outlook

After moving very close to 1.5250 the pair bounced lower and is now trading below 1.5200 but the direction is not clear. The bulls have been very active lately so we may see another attempt to touch and possibly break 1.5250 but note the overbought condition of the Stochastic which has now crossed downwards and is moving below its 70 level. This could generate some bearish pressure but it shouldn’t be considered a sell signal on its own.

Fundamental Outlook

The Pound will not be affected by major economic data announcements today but the pair will be directly affected by the U.S. events mentioned above.

We hope you had a profitable trading week and we wish you a relaxing weekend.

355

FOREX NEWS: TECHNICAL POINTS TO A DROP, FUNDAMENTAL WILL DECIDE

EUR/USD

Forex News: Friday’s price movement was influenced by the economic releases as the Euro was weakened by lower inflation values and the US Dollar was negatively affected by worse than expected Retail Sales numbers.


Technical Outlook

The resistance zone created between 1.0790 and 1.0820 rejected price lower and bearish divergence is present on both oscillators (price is making a lower high and the oscillators are showing higher highs). This suggests that a move lower is likely to happen today or in the near future but the first barrier that needs to be broken is the bullish trend line seen on the chart above, followed by 1.0660.

Fundamental Outlook

At 10:00 am GMT the Final version of the European CPI comes out, expected to show no change from the previous 0.0%. This is the least important version because the German Prelim CPI and European Flash Estimate are already released, but a value which differs from analysts’ expectations can trigger strong moves, with higher numbers being beneficial for the Euro.

ECB President Mari Draghi will deliver a speech at 10:15 am GMT, in Madrid, at the European Roundtable of Industrialists Plenary Session. The impact is not known but a hawkish attitude will strengthen the Euro and the opposite applies for a dovish stance.

GBP/USD

The pair made an attempt to break the congestion zone by moving above resistance but the impulse faded and turned into a move lower which was also reversed soon after. The entire Friday session was characterized by irregular price behaviour.


Technical Outlook

The 50 period Exponential Moving Average is completely flat and price is moving sideways, trapped in a horizontal channel. Until the pair breaks out of this congestion zone, we can expect further choppiness and sharp reversals on the lower tine frames. The levels to watch are 1.5200 as support and 1.5250 as resistance and a breakout should be confirmed by a re-test of the respective level.

Fundamental Outlook

There are no events on the British calendar today so the pair will be primarily influenced by the technical side of the market.

356

FOREX NEWS: BRITISH AND U.S. INFLATION DATA GUARANTEE A VOLATILE TRADING DAY

EUR/USD

Forex News: Yesterday’s price action was slow and rather choppy, with the pair descending close to the previous low even if the European Final CPI showed a better value than analysts’ expected.


Technical Outlook

The bullish trend line we mentioned a day earlier is now broken and the bears seem to gather up strength so we expect a touch and a consequent break of 1.0660 support. However, there is not a lot of strong movement and both bears and bulls seem undecided so if the pair will touch 1.0660 today, we expect it to bounce higher on the first attempt to break it; this can all change, depending on US inflation data.

Fundamental Outlook

The German ZEW Economic Sentiment survey is released today at 10:00 am GMT and expected to show a value of 6.7 compared to the previous 1.9. Higher readings are beneficial for the Euro but the day’s main event will be the release of the U.S. Consumer Price index, scheduled at 1:30 pm GMT. The CPI is the main gauge of inflation and inflation plays a major role in Fed’s decision to raise the interest rate or to keep it unchanged. Higher values than the forecast 0.2% (previous -0.2%) will most likely strengthen the US Dollar. Pay attention to the CORE version of the indicator (excludes food and energy), released at the same time.

GBP/USD

The Pound-Dollar pair also had a slow and choppy session, with price grinding below the lower boundary of the horizontal channel. Even if this barrier was broken, we cannot deem the move a breakout.


Technical Outlook

Before we can consider 1.5200 support broken, we have to see a move below it, followed by a successful re-test. Until this scenario occurs, the market is still ranging and in indecision mode. The 50 period Exponential Moving Average is flat, confirming the pair doesn’t have clear direction but all this can change today when British inflation data comes out.

Fundamental Outlook

At 9:30 am GMT the British Consumer Price Index is released. Since this is the most important gauge of overall inflation, its outcome usually has a strong impact on the Pound and a higher change than the forecast -0.1% (previous -0.1%) can positively impact the Pound.

357

FOREX NEWS: EURO PREPARES FOR RETRACEMENTS, US DOLLAR STRONGLY INFLUENCED BY FOMC MINUTES

EUR/USD

Forex News: The U.S. Consumer Price Index matched analysts’ expectations and the release didn’t have the anticipated strong impact on price action. However, the pair did reach the projected target zone around 1.0660.


Technical Outlook

Although the bears managed to drive the pair into a new low and threatened 1.0660 support, the momentum seems to fade away and we expect a bounce higher before a new attempt to break this support will be made. The Stochastic has entered oversold and the Relative Strength Index is showing bullish divergence (price is making a lower low but the oscillator is only making a higher low) and these signs support our short term bullish bias. Of course a clean break of 1.0660 would invalidate such a scenario.

Fundamental Outlook

The Fed will release today at 7:00 pm GMT the FOMC Meeting Minutes which contain details of their latest meeting and also insights into the reasons that determined them to keep the interest rate unchanged. More importantly, the Minutes can contain hints about whether we will see or not a rate increase later this year. Usually the impact is strong on the greenback so caution is recommended.

GBP/USD

The British CPI posted the value that was anticipated by the majority of analysts but the CORE version of the indicator showed a slight increase and this fact triggered upside movement after an early morning drop.


Technical Outlook

The pair moved below 1.5200 support but the re-test we talked about a day before wasn’t successful so the break proved to be a false one. Now price is once again between 1.5200 and 1.5250 and the direction is not clear but the last four hour candle shows a long upper wick and this is a sign of rejection (however, not a very strong one). The pair remains in ranging mode until support or resistance is broken and then successfully re-tested.

Fundamental Outlook

The Pound will not be affected by major economic announcements today so price direction will be influenced by the technical aspect and of course, by the FOMC Meeting Minutes.

358

FOREX NEWS: PRESSURE MOUNTS, BREAKOUTS EXPECTED AS FOMC MINUTES GIVE MIXED SIGNALS

EUR/USD

Forex News: Ahead of the FOMC Meeting Minutes the pair started to move to the upside but the document contained mixed signals, with some Fed members seeing a December rate hike still on the table and others suggesting that an increase might bring risks to the economy.


Technical Outlook

Price action at the time of the Minutes’ release was choppy and irregular, mostly because the market had difficulties interpreting the mixed signals given by the document. No substantial advances were made and price is still hovering close to 1.0660, with the Stochastic moving up and exiting oversold, so upside action is a distinct possibility but it all depends on how the market will interpret the Minutes and their impact.

Fundamental Outlook

At 3:00 pm GMT the Philly Fed Manufacturing Index is released, offering insights into the health of the manufacturing sector in the Philadelphia district. The impact varies for each release but usually higher numbers than the forecast 0.1 (previous -4.5) will strengthen the US Dollar.

GBP/USD

For the most part of yesterday the pair continued to move erratically and to reverse all moves. The FOMC Minutes didn’t manage to break the range but some bullish action was seen.


Technical Outlook

The pair is still trading between 1.5200 support and 1.5250 resistance, so even if the latest impulse is bullish, we cannot expect stronger movement until resistance is broken and re-tested from above. If price shows signs of rejection around 1.5250, we expect a bounce that will take it back into 1.5200.

Fundamental Outlook

A high impact indicator is released today: the British Retail Sales. The scheduled time is 9:30 am GMT and the expected change is -0.4%, a huge drop from the previous 1.9%. Sales made at retail levels represent a major part of the entire economic activity so a higher than expected change will likely strengthen the Pound.

359

FOREX NEWS: US DOLLAR LOSES GROUND, STRUGGLES TO REGAIN CONTROL

EUR/USD

Forex News: The pair moved higher yesterday, showing that the market interpreted the FOMC Minutes as dovish and that most traders now have a slightly bullish bias.


Technical Outlook

The current move up is a retracement for the overall downtrend so we expect the pair to continue its movement south once the pullback is complete. The 50 period Exponential Moving Average is the first barrier in front of rising price but both the Relative Strength Index and the Stochastic are showing bullish momentum so we may see a move into 1.0790 before the bearish movement can resume.

Fundamental Outlook

There are no major economic releases today but ECB President Mario Draghi will deliver a speech at the Euro Finance Week in Frankfurt. The scheduled time is 8:00 am GMT and his attitude could very well decide the euro direction for the entire day, especially if he will talk about ECB’s monetary policy.

GBP/USD

The British Retail Sales showed a disappointing value of -0.6% (forecast -0.4%) and the Pound weakened but only briefly and soon after the bulls regained control of the pair.


Technical Outlook

The resistance at 1.5250 was broken and then successfully re-tested from above so we can assume we are dealing with a true break and probably moves higher will be next. Short term support sits now at 1.5250, followed by the 50 period Exponential Moving Average which is starting to curve upwards. The first bullish target is represented by 1.5330 and we expect retracements lower once it is touched, mostly because both oscillators will probably be oversold at the time.

Fundamental Outlook

The British Public Sector Net Borrowing is released at 9:30 am GMT and is the only notable indicator of the day but the impact is often overlooked. The expected value is 5.5B (previous 8.6B) and usually, lower numbers are beneficial for the currency.

We hope you had a profitable trading week and we wish you a relaxing weekend.

360

FOREX NEWS: DOLLAR BACK IN ACTION, THREATENING KEY SUPPORT

EUR/USD

Forex News: The US Dollar regained control over the Euro during Friday’s trading session on the back of hawkish comments made by New York Fed President Dudley who suggested that positive economic data may trigger a rate hike “relatively soon”.


Technical Outlook

The pair descended below 1.0660 but this cannot be considered a true break until price puts some distance between it and the mentioned level. It has to be noted that on a Daily chart the Relative Strength Index and the Stochastic are both very close to oversold and this situation has been going on for a relatively long while, so we can expect stronger moves to the upside. However, the overall direction is down and bullish moves could be considered good opportunities to sell; the first resistance is the 50 period Exponential Moving Average.

Fundamental Outlook

At 8:00 am GMT the French Flash Manufacturing PMI comes out, expected to show a figure of 50.7 and half an hour later the indicator with the same name but for the German economy is released, with a forecast value of 52.2. These surveys act as leading indicators of economic health and higher numbers usually strengthen the euro.

The Eurogroup Meetings take place today but are closed to the press; some volatility can be created if information about the discussions leaks to journalists. Once the meetings are concluded, a formal statement is released.

GBP/USD

The effects of William Dudley’s comments were better seen on the Pound-Dollar pair as the bears managed to break support Friday and to generate strong downside action.


Technical Outlook

After the almost perfect bounce at 1.5330 resistance, the pair traveled through 1.5250 and 1.5200, heading for the minor support at 1.5155. The oscillators are moving down, with good momentum and without being oversold so we expect the mentioned level to be touched today. As an alternate scenario, we might get a slow day, with price moving above and below 1.5200, without clear direction.

Fundamental Outlook

The British Pound is not affected by major economic announcements but British representatives will participate in the Eurogroup Meetings so volatility may be present.

361

FOREX NEWS: BREAKOUTS AHEAD, FUELLED BY A HEAVY ECONOMIC CALENDAR

EUR/USD

Forex News: The euro-dollar established a new low early in the morning and then the bulls managed to bring the pair higher on the back of a better than expected value of the German Flash Manufacturing PMI so yesterday’s movement was mixed, without substantial moves.


Technical Outlook

Late in the afternoon the pair touched the level at 1.0660 and bounced lower, turning it into short term resistance. Probably during today’s trading session we will see another attempt to move above 1.0660 and the way price behaves near the level will determine the next move. The oscillators on a Daily chart are still oversold, increasing the chances of a move north but we are still in a downtrend and it’s likely to see a move into 1.0500 soon.

Fundamental Outlook

Three important events are scheduled for today: at 9:00 am GMT the German IFO Business Climate survey comes out, expected to show 108.3 (higher values are beneficial for the euro) and later, at 1:30 pm GMT the U.S. Prelim Gross Domestic Product is released, showing the overall performance of the American economy. The forecast annualized change is 2.0% (previous 1.5%) and higher values usually strengthen the US Dollar, bringing the pair lower.

The final announcement of the day is the U.S. Consumer Confidence survey, scheduled at 3:00 pm GMT and expected to show 99.3 (previous 97.6). Because consumer confidence is tightly correlated with consumer spending, higher numbers could strengthen the greenback.

GBP/USD

The pair had a difficult to trade session yesterday, characterized by a sharp reversal and movement above and below resistance.


Technical Outlook

The minor resistance at 1.5155 wasn’t very important yesterday as price moved above and below it without bouncing on it. However, the last four hour candle shows a huge wick in its upper part and this is a clear sign of rejection, meaning that we will probably see a touch of 1.5100 today. Bullish movement will encounter resistance at the 50 period Exponential Moving Average and at 1.5200.

Fundamental Outlook

At 9:00 am GMT the Inflation Report Hearings take place; BoE Governor Mark Carney and members of the Monetary Policy Committee will testify on economic outlook and inflation before the Treasury Committee of the Parliament. The Pound will be most likely affected by these talks so caution is recommended until the hearings have concluded.