EURUSD Forecast: A week of 90 pips as the result of Brexit optimism, not a self-strength.
The summary of the past week: A week of 90 pips as the result of Brexit optimism, not a self-strength.
USD ended the week lower against all of the major currencies on the back of softer economic data. DXY ended the week at 95.88.
After the mixed employment report released in the previous week, and weaker-than-expected US data released throughout the week. US CPI increased by 1.5% YoY in February, while the core reading printed 2.1%, below the previous estimate of 2.2%, slightly below the market’s expectations. Inflation at factory levels also increased by less-than-expected according to the PPI figures, while Durable Goods Orders were mixed, as the headline reading was better-than-expected, but the ex-transportation sub-component was a miss. And New Home Sales decreased by 6.9% in January vs. an expected 0.6% decline. Instead of improving, the Empire State Manufacturing Index dropped to a 22-month low in March while industrial production grew less than expected. The University of Michigan Consumer Sentiment index increased but the improvement also fell short of expectations.
In response, Treasury yields turned lower and the dollar headed south.
Things in the EU were not much better, although there were not many relevant releases. German inflation was also softer-than-expected up by just 1.5% YoY. Eurozone Data is still not promising.
EURUSD gains were the result of Brexit optimism, as GBP rally added pressure on USD. Nevertheless, investors can’t find a reason to go long in the EUR, leaving the pair confined to the range established in the previous week.
Slowing global economic growth, contradictory headlines related to the US-China trade war, and Brexit chaos, were behind the absence of a clear trend.
Money is looking for a place to go. One of the primary reasons why the dollar outperformed in the first quarter is relative weakness abroad but as some big uncertainties subside, money could flow back into riskier currencies and riskier assets.
GBP: The UK still doesn’t have a Brexit deal but at least we know that they won’t be spinning-out without an agreement.
CHINA: Slower growth in China has been a big problem for the rest of the world but tax cuts could provide a big boost to the economy.
The prospect of improvements could make other investments more attractive, easing demand for US dollars even as the US economy outperforms. However, in the long term, demand for USD should remain strong as the Fed continues to be the only major central bank to raise interest rates this year. ( BoE may join FED depending on Brexit )
We have an interesting week ahead: The FED and BOE Interest Rate Decision and Monetary Policy Statement.
Some analysts believe that “low inflation” will lead FED to take more Dovish stance. However, the latest comments of FED members was putting it straight. ” Inflation would not be the FED’s main concern anymore ”
The FED isn’t expected to make fundamental changes to its monetary policy, with attention shifting to the dot-plot and any revision to future rate moves. Market players believe that at least one rate hike is still in the docket for this year. More relevant the Fed will offer new forecasts on inflation and growth, following the December update. Back then, the central bank reduced chances of rate hikes from three to two, but ever since then, the dovish ‘patient’ stance has dented hopes of such happening.
On the Euro Side: The most relevant macroeconomic data will be the German ZEW survey, expected to show that Economic Sentiment deteriorated further in the Union, and preliminary March Consumer Confidence. By the end of the week, preliminary Markit PMI for both economies will be out. EU numbers posted a modest bounce in February, but not enough to spoke the ghost of slowing economic growth. As long as Eurozone data remains unpromising with all aspects, the EUR has no chances of posting solid gains against USD.
Summary: We are talking about EURO vs USD. There are two legs of this equation. On the one side, there is FED continues to be the only major central bank to raise interest rates this year. On the other side, there is a slowing down economy and continuous unpromising macroeconomic figures. Under the current macroeconomic fundamental conditions, EURUSD can not have a sustainable ” bullish ” move. All temporary bullish moves will be used as a selling opportunity by the investors.
I will not add any indicators on to the chart. The picture and the levels are clear enough. The pair has been trading in a descending channel for two months.
On the upside, the key resistance resides at 1.13600. A firm break and close above 1.13600 would send the pair 1.14200 and 1.14800.
The pair has attempted several times to break above 1.13300, although it failed to sustain gains above it. In the weekly chart, the price is now just below a directionless 200 SMA, while the 20 and 100 SMA remain above the larger one.
We can say that EURUSD is in a ” No Trade Zone” as the technical indicators in the mentioned chart offer a neutral stance, heading nowhere right below their midlines, with the risk still skewed to the downside in the longer run.
On the downside, the levels that Bulls will try to defend are 1.12900 and 1.12600. Breakout of 1.12600 will trigger the bearish move.
On the smaller charts, a bearish Butterfly Pattern is in action. – Area of the entry 1.1344-1.13520- The pattern has reached its structural targets.
Our trading strategy is to sell the bullish attempts towards 1.13600. We have published a triangle pattern on Friday and we plan to add short at the breakout of the triangle 1.12900.
Closing above 1.13600 can be used as a buying opportunity with the targets 1.14200 and 1.14800 shorter-term.
We will publish the fresh trade setups for the members as soon as they appear on the charts.
The dollar index was down 0.1 percent at 90.359. The index has risen 0.4 percent this week.
Treasury debt prices gained and yields declined as investors sought the safety of government bonds.The 10-year Treasury note yield fell 2 basis points to 2.811 percent, pulling back from Thursday’s nine-day high of 2.838 percent.
Trump said late on Thursday that he had instructed U.S. trade officials to consider $100 billion in additional tariffs on China, fuelling the trade dispute between the world’s two economic superpower
Traders are focused on NFP. Considering USD’s recent strength, investors are positioning for a stronger labour-market number but there’s also plenty of room (in wage growth and the jobless rate) for a downside surprise, which makes trading NFP this month particularly difficult.
Technical Analysis and Key Levels:
We want to keep it simple for you. As shown in the H4 Chart:
EURUSD is below EMA 50, 100 and EMA 200. Golden Cross is very close. RSI is oversold. However, in the daily chart, RSI has room downside.
The main resistance zone – orange coloured- is 1.23000 – 1.23300. Above the resistance zone, 1.23600 will be the key level for the continuation of the upside move.
Below the current level, 1.22080 – 1.21780 ( Red Coloured ) zone is the main support. Break below this support will carry the price 1.21090 – 1.20900.
1.20900 was the breakout of the bullish triangle. 450 pips bullish move had started after the breakout of 120900. This level is likely to play a key support role. If EURUSD breaks below 1.20900, we can start to speak about a trend reversal and 1.17000.
H4 Chart Overview is updated prior to London and New York Opening. This is just a technical summary of the said pair/instrument on the mentioned chart timeframe. Please note that the fundamentals and Economic Calendar Data Flow may have a strong impact.
Murrey Math Calculations ( Support / Pivot / Resistance ):
Upside Levels: 1406.25 MM 6/8 Major Pivot Reverse 1421.88 MM 7/8 Weak Stall Reverse 1437.50 MM 8/8 Ultimate Resistance
Downside Levels: 1390.63 MM 5/8 Hourly Support 1375.65 MM 4/8 Major Support
Summary: Potential price movements towards 1421-1430 can be used as a selling opportunity. Potential pullbacks towards 1375 SMA 50 can be used as a buying opportunity. H4 Closing below 1375 could send the price 1359.
Divergence ( Regular / Hidden)
CCI: Bearish Divergence / Confirmed – Signal 2 candle before –
Candle Patterns ( Confirmed Only )
Breakout and Harmonic Patterns
Symmetrical Triangle H1 Chart / Emerging Not Validated Yet
Inverse Head and Shoulders M30 / Emerging Not Validated Yet
Technical Summary H4 Chart:
Bullish Scenario: XAUUSD may retest latest high @ 1412. If it breaks above 1412, it is likely to test 1421 resistance which is the area of the entry of the Bearish Butterfly on the Daily Chart. This level can be used as a selling opportunity.
Bearish Scenario: If Gold breaks below 1394, it is likely to test 1390 and 1386. Firm closings below 1389 could send the pair 1375 which can be used as a buying opportunity.
We have different emerging patterns on smaller chart timeframes.
All potential intraday trading opportunities will be sent to members.
The technical summary will be updated prior to the London Session.
Murrey Math Calculations ( Support / Pivot / Resistance ):
1.04670 MM 3/8 H4 1.04980 MM 4/8 D1 Resistance
1.04370 MM 2/8 H4 Support 1.04060 MM 1/8 Weak, Stall&Reverse 1.03760 MM 0/8 Major Support
Summary: Bearish Below 1.05590
Divergence ( Regular / Hidden)
RSI: Bullish Divergence H4
OSMA: Bullish Divergence H4
STOCHASTICS: Bullish Divergence H4
Candle Patterns ( Confirmed Only )
Engulfing Bullish H4 June 28 04:00
Breakout and Harmonic Patterns
Bullish Max Gartley H4 & D1 1.04390
Bullish Three Drives H4 & D1 1.04100
Bullish AB=CD H1 1.04030
Head & Shoulders H4: In Construction
Inverse Head & Shoulders H1: In construction
Divergences and Overbought Oscillators confirm and support the harmonic patterns as mentioned above. However, the strong bearish indicator readings recommend using potential pullbacks as selling opportunities. Stong support resides @ 1.03760. RBA Interest rate decision will determine the next direction of the pair.
EURUSD Forecast and Technical Analysis Week July 8-12
After Friday’s Non-Farm Payrolls Reports, USD Bulls regain the control. On the other side, the unemployment rate increased and most importantly wage growth held steady at 0.2% instead of rising to 0.3% like economists anticipated.
The dollar index broke the critical resistance. The reason for the Dollar’s rally despite the FED’s shift to a dovish bias is clear: The U.S. economy is stronger than its peers.
The upcoming week will bring more clarity about the Fed’s path. Powell is due to testify before the Congress, while the central bank will release the Minutes of its latest meeting. The US will also publish CPI data for June, with core inflation seen steady at 2.0%.
Dollar Bears approach is different. They believe that job report reduces the need for an immediate interest rate cut, but it doesn’t eliminate it. Nearly half of the members of the FOMC feel that easing is necessary this year and they won’t be swayed by a mixed jobs report and this week’s FOMC minutes should remind us of the extent of the central bank’s dovishness. Their concerns center around trade and inflation and while the US and China agreed to restart trade talks at G20, only time will tell whether the progress is real.
On the other side, the latest Germany Factory orders data proved that the slow down in the Eurozone economy is not temporary. The ECB is likely to take more easing actions including a rate cut.
The FED is now expected to cut rate just once this year by 25bps, as a “preventive” move. Concerns about a global economic slowdown are still driving the financial world, but the US continues being the strongest ring of the chain. As long as the market keeps believing that the Fed will pull the trigger just once this year, the dollar will likely keep rallying.
Now its in Powell’s hands. Whether the pair could break lower will depend solely on Powell. Will he maintain its confident outlook and down talk chances of aggressive rate cuts. I bet on it 95%.
Summary: Strongly Bearish. The Golden Cut is being printed.
The first MA Resistance: 1.1255 SMA 100 Daily
The first MA Support: Downside is empty.
Murrey Math Calculations ( Support / Pivot / Resistance for Monday )
1.12650 MM 1/8 Weak, Stall, Reverse 1.12910 MM 2/8 Major Pivot Resistance 1.13200 MM 3/8 Top of the Trading Range
1.12000 MM 0/8 Overshoot, 1.11697 MM -1/8 Extremely Overshoot, 1.11400 MM -2/8 Bottom
Senkou Span A: 1.11750
Senkou Span B: 1.12770
Tenkan-sen Kijun-sen: Bearish
Ichimoku Summary: The price is inside the cloud. Cloud’s support is 1.117500 and breakout of the support will accelerate the sell-off. Cloud’s resistance is 1.1.12770 and pullbacks towards 1.12770 can be used as a selling opportunity.
Harmonic and Chart Patterns:
Ascending channel has been broken.
Emerging Bullish Cypher Pattern H Chart: 1.11170
Oversold RSI H Chart and Bollinger Bandwidth/Percentage confirm a minor retracement toward 1.12600 – 1.12800. This potential pullback can be used as a selling opportunity. Technically, the near term targets of the pair are 1.12000, 1.11800. Closing below 1.11700 would send the pair 1.11500 and 1.11200 medium terms.
We will update and send entry notification to members
EURUSD Forecast: Possible U.S. FX Intervention and Scenarios
What will determine the price of EURUSD Pair: Macroeconomic figures, monetary policies of the Central Banks or the lords of the currency wars?
Last week we saw similar articles and news in Bloomberg and Financial Times pointing out a possible U.S FX Intervention.
“The buzz around possible U.S. currency intervention is growing louder as Goldman Sachs Group Inc. has now weighed in on an idea that’s been making the rounds on Wall Street.
President Donald Trump’s repeated complaints about other countries’ foreign-exchange practices have “brought U.S. currency policy back into the forefront for investors,” strategist Michael Cahill wrote in a note Thursday. Against a fraught trade backdrop that’s created the perception that “anything is possible,” the risk of the U.S. acting to cheapen the dollar is climbing, he said.”
“Goldman joins analysts from banks such as ING and Citigroup Inc. in writing on the prospect. The intervention has become a hot topic since Trump tweeted last week that Europe and China are playing a “big currency manipulation game.” He called on the U.S. to “MATCH, or continue being the dummies.”
Buoyed in part by a round of Federal Reserve rate increases, the dollar has strengthened against many of its peers. A Fed trade-weighted measure of the greenback isn’t far below the strongest since 2002, underscoring the competitive headwinds American exports face overseas. Trump has grown concerned that the currency’s strength will undermine his economic agenda, which has also fed into his criticism of the U.S. central bank.
Still, in a tweet on Thursday, where Trump criticized Facebook Inc.’s plan for a digital currency, the president came out in support of the greenback, calling it “by far the most dominant currency anywhere in the world.”
The market has yet to display much concern about the prospect of U.S. intervention: Global currency volatility is at a five-year low. However, the risk of Trump moving beyond words to achieve a weaker greenback would increase if the European Central Bank pursues further monetary stimulus.
In in the intensifying currency war against the Eurozone (Germany), he will instruct the US Treasury (via the NY Fed) to intervene directly and unilaterally to drive the dollar lower.
This is not surprising. F.T summarized the case well: “Action to weaken the dollar is a ‘low but rising risk”
We will focus on 1.13600. Firm closings above 1.13600 can be the confirmation of U.S. FX Intervention. But we should not forget that ECB is ready for a Euro Intervention.
What will calendar bring us the upcoming week?
Tuesday: German ZEW Economic Sentiment, U.S. Retail Sales, U.S Production Data Set
Wednesday: Eurozone CPI, U.S Housing Data
EURUSD ended the week at 1.12700 above MA50 H4 Chart. It is stuck in 80 pips trading range.
On the downside: 1.12400 is the key support and price will continue its bullish move as long as it maintains to stay above 1.12400. A firm closing below 1.12400 will send the pair 1.12000 and 1.11700.
On the upside: 1.12900 is the key resistance level. Break above 1.12900 will lead the pair toward 1.13200 and 1.13600.
On the smaller charts, we see an emerging Cup&Handle pattern. The ultimate target of the pattern is 80 pips.
Harmonic readings show two patterns. A bullish Bat Pattern at 1.12100 and a bearish White Swan pattern at 1.13500.
Now the pair is in NO TRADE zone. We will send entry notifications as soon as one of the patterns ( Breakout or Harmonic) become validated.
USDCAD Forecast: Retracement or Major Trend Change?
Fundamentals: Battle of the dovish Central Banks. BoC kept the interest rates benchmark unchanged and injected a maple dose of dovish rhetoric into the market. On the other hand; FED is prepared to cut interest rates soon despite record stock prices, low unemployment and core inflation above 2.0% because it’s worried about the economy. After 2,5 years Core CPI moved above UST10. That’s why Fed Chairman Jerome Powell isn’t really focused on the economy itself — it’s doing OK, actually. He’s nervous about what economists like to call internal or external “shocks.” A trade war certainly qualifies as one.
Rising Oil prices support the Canadian Dollar. The BoC is expected to end 2019 without a single rate move.
The Surprise Index has been clearly positive for Canada. It puts a large weight on headline employment and the unemployment rate. But as we showed last week, the quality of those job gains means the apparently tight labour market hasn’t translated into particularly strong consumer spending or GDP growth. Indeed, 2019 GDP estimates for Canada have actually fallen further below those for the US even with the “positive” data surprises.
Economic Calendar of USDCAD
Tuesday: U.S Production Data Set
Wednesday: U.S Housing Data, Canada CPI and Manufacturing Sales
Break below 1.30150 could send the pair 1.29700. A potential breakout of the trend line and daily closing below 1.29500 would confirm the medium term trend change. 1.28170 will be the next target of the pair.
If the pair fails to break below 1.30150, it is likely to test 1.30900 resistance. However, the upside is capped by the SMA 100 H4 chart at 1.31200.
Medium Term Trade Opportunities:
Long Opportunity at 1.29700
Short Opportunity at 1.31200
We have published our near term trade plan for the members and we will send entry notifications.
USDCHF Technical Overview And Potential Long Opportunities
Market players focused on the FOMC Meeting and the FED’s interest rate decision in July.
FED officials signalled they are ready to lower interest rates by a quarter-percentage point later this month, while indicating the potential for additional reductions, despite the recent surge in market expectations of a half-point cut.
USDCHF ended the week 0.98160, 15 points above the physicological 0.98000 support.
Near term technical overview is still bearish.
The upside is capped by SMA100 H4 & MM 2/8 at 0.98600 and SMA200 H4 at 0.98750. We see a Bearish Bat Pattern forming on the smaller charts which can be used as a selling opportunity. I will publish this pattern later.
USDCHF pair is likely to test 0.97940 on Monday. A clear breakout would send the pair 0.97660 support.
A Bullish Gartley ( 0.97600 ) and Bullish Bat Patterns ( 0.97350 ) are being printed on the H4 chart.
U.S Inflation expectations rose to 2.5% from 2.3% of historical lows. A one and done 25bp rate cut from the FED could support the U.S Dollar medium term.
The USDCHF pair may fill the Bat Pattern until FOMC statement. The emerging Bat pattern which would be completed in 0.97350 – 0.97250 regions can be used as a buying opportunity with medium-term purposes.
Geopolitical risks and OPEC+ Supply Cut can not help oil prices because there is a lack of demand.
IMF lowered the Global Growth projections. IEA reduces its Oil Demand Growth projections.
In the near term, geopolitical risks can be the only reason for the bullish market. Saudi Arabia needs higher prices for Aramco’s IPO. But if there is no demand, cutting the supply could only a temporary solution which is not sustainable.
Near-term selling pressure remains as long as the prices stay below 58 $. Only a firm closing above 58 $ may change the near term overview and we may see the prices testing 59.40 $ – 60.00 $.
On the downside, we have two target levels: 55.40 $ and 54.70 $
Breakout of 54.70 will add weight on the prices and we could see 53 $ per barrel. At this level we expect the bulls to be more defensive.
We have a few patterns to trade intraday.
Our strategy is to sell the potential pullbacks and book profit at 53 $
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Past performance is not indicative of future results.