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EUR Plummets on ECB Dovish Rate Guidance

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US Market Snapshot via IG: DJIA 0.33%, Nasdaq 100 0.4%, S&P 500 0.3%

Major Headlines

  • ECB Plans QE Exit, but Signals Rate Hikes are Distant
  • UK Retail Sales Sees Another Sizeable Rebound
  • US Retail Sales Beat Analysts Estimates

EUR: ECB surprised markets by announcing decision to reduce the pace of QE purchases after September 2018 by EUR 15bln until the end of December 2018, by which net purchase will come to an end. However, the Euro plunged following its rate path guidance, whereby the council judged that current rates will remain at current levels at least until Summer of 2019. Consequently, money markets have repriced a 10bps rate hike for September 2019.

GBP: Another sizeable rebound in UK retail sales for May, which saw all metrics printed ahead of expectations, subsequently, this took GBP too session highs against its major counterparts. The headline monthly reading surged 1.3% (Exp. 0.5%), while there was also an increase in the core reading of 1.3% (Exp. 0.3%). The ONS stated that the bounce in retail sales was due to good weather, alongside the royal wedding celebrations resulting in a boost on food and household goods. However, the gains in the Pound had been hampered following the rise in the USD, which had been led by EUR selling post ECB. GBPUSD now toying with the 1.33 handle.

USD: The greenback outperforms, largely as a by-product of the sell-off in the Euro, as such, the USD is back above 94.00. Another factor supporting the USD has been the better than expected retail sales and jobless claims data.

DailyFX Economic Calendar: Thursday, June 14, 2018 – North American Releases

US AM Digest: EUR Plummets on ECB Dovish Rate Guidance

DailyWebinar Calendar: Thursday, June 14, 2018

US AM Digest: EUR Plummets on ECB Dovish Rate Guidance

IG Client Sentiment Index: EURUSD Chart of the Day

US AM Digest: EUR Plummets on ECB Dovish Rate Guidance

EURUSD: Data shows 53.8% of traders are net-long with the ratio of traders long to short at 1.16 to 1. The number of traders net-long is 5.7% lower than yesterday and 8.7% lower from last week, while the number of traders net-short is 16.6% lower than yesterday and 7.9% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EURUSD prices may continue to fall. Positioning is more net-long than yesterday but less net-long from last week. The combination of current sentiment and recent changes gives us a further mixed EURUSD trading bias.

Five Things Traders are Reading

  1. ECB Announces QE Taper, However, EUR Falls on Rate Path Guidanceby Justin McQueen, Market Analyst
  2. EURUSD May Fall Sharply in the Months Ahead” by Nick Cawley, Market Analyst
  3. GBPUSD Rises as Royal Wedding Celebrations Lifts Retail Salesby Justin McQueen, Market Analyst
  4. Technical Outlook – EURGBP Battling Confluence of Resistanceby Nick Cawley, Market Analyst
  5. EURUSD May Fall as ECB Disappoints the Euro Bulls” by Martin Essex, MSTA , Analyst and Editor

— Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.comFollow Justin on Twitter @JMcQueenFX



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Forex

Bitcoin Net-Longs Slide Into 1-Month Lows

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Bitcoin Client Positioning

Bitcoin Net-Shorts 5.2% Higher Since Last Week

Bitcoin: Retail trader data shows 76.8% of traders are net-long with the ratio of traders long to short at 3.3 to 1. The number of traders net-long is 1.1% lower than yesterday and 8.0% lower from last week, while the number of traders net-short is 0.5% lower than yesterday and 5.2% higher from last week.

Be sure to check out our Bitcoin Trading Guide if you’re new to cryptocurrencies!

Bitcoin Net-Long Dip Indicate Bullish Bias

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Bitcoin prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current Bitcoin price trend may soon reverse higher despite the fact traders remain net-long.

— Written by Yayati Tanwar, DailyFX Research



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Canadian Dollar (CAD) Eyes Latest Inflation Report

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Canadian Dollar Price, News and Analysis

  • Inflation expected unchanged, but any uptick could seal another rate hike in October.
  • Canadian economy continues to grow strongly.

IG Client Sentimentshows retail are 46.3% net-long of USDCADa bullish contrarian sentiment indicator.

Canadian Dollar May Receive a Boost on Latest Inflation Report

The Canadian dollar is currently treading water ahead of the July CPI report with the market expecting a 0.1% month-on-month rise and a 2.5% annualized reading, both unchanged from last month’s strong report. Canadian CPI grew at its fastest rate in over six years in June, due to higher energy prices, and another strong reading today will increase pressure on the Bank of Canada to hike rates again, probably at the October meeting. The central bank has already hiked rates by 0.25% twice this year and by a total of four times in the last 12 months. Last week data showed Canadian unemployment falling to 5.8% from a prior 6% while employment grew by 54.1k against expectations of 17K and a prior month’s 31.8k.

USDCAD has remained in a 1.2950 – 1.3200 range over the last month, despite the strength of the US dollar and fears over the NAFTA negotiations. The pair currently trade at 1.3130, just above 23.6% Fibonacci support at 1.3118 and below the July 24 high at 1.3192. An inline or slightly stronger-than-expected reading would seal another 0.25% rate hike and see USDCAD break lower with the 38.2% Fibonacci retracement at 1.2952 the short-term target. A weaker-than-expected reading today would see the July 24 high under pressure.

We have recently released our Q3 Trading Forecasts for a wide range of Currencies and Commodities, including the Canadian Dollar.

USDCAD Daily Price Chart (January – August 17, 2018)

Canadian Dollar (CAD) Eyes Latest Inflation Report

DailyFX has a vast amount of updated resources to help traders make more informed decisions. These include a fully updated Economic Calendar, and a raft of Educational and Trading Guides

— Written by Nick Cawley, Analyst

To contact Nick, email him at nicholas.cawley@ig.com

Follow Nick on Twitter @nickcawley1



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USD/CNH & Gold Price Action Point to Reversals Gaining Traction

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Gold, USD/CNH Technical Highlights

  • Gold price reversal and sentiment supportive of a low
  • Correlation between Gold & CNH extremely high
  • USD/CNH reversing hard from near Dec ’16 peak

For an in-depth intermediate-term technical and fundamental outlook, check out the Q3 Gold Forecast.

Gold price reversal and sentiment supportive of a low

On Wednesday, we were discussing the oversold, overly bearish backdrop in gold, but that first we needed to see some type of swift flush and reverse or something of that nature before looking for a low. We didn’t have to wait long, as the past few sessions qualified as flush-and-reverse price behavior, with silver, unsurprisingly and in silver-like fashion, displaying even more capitulation-like behavior, shedding 3 of its 4% in an hour on Wednesday.

As long as gold & silver can hold onto yesterday’s lows on a closing basis, we’re looking for at least a rebound back to the point of origination of the most recent leg lower (~1210 & 15.30). If another leg lower develops we’ll have to reassess.

Check out the IG Client Sentiment to see how other traders are positioned and why it can be used as a contrarian indicator.

Gold Daily Chart (Flush & Reverse)

Gold daily chart, flush and reverse

Correlation between Gold & CNH extremely high

If gold is reversing then so is CNH and vice versa. Gold and CNH have a 3-month correlation of 97%. They are effectively the same market at this juncture. How one plays it is up to the instrument of choice, but be mindful of total risk if trading both.

Gold/CNH Daily Chart (97% 3-mo Correlation)

Gold/CNH daily chart (97% 3-mo correlation)

USD/CNH reversing hard from near Dec ’16 peak

USD/CNH is in the process of carving out a weekly key-reversal bar just shy of the December 2016 high, assuming it doesn’t post a big rally from here. Trade a little higher today or lower and the reversal currently in place will stand as confirmed.

The candle development along with a break in the upward channel on the daily time-frame should usher in more selling, and perhaps in swift fashion. Looking lower, there are minor levels along the way that were carved out as the channel matured, but the broader target is the bottom of the upward grind since last month, right around the 6.60 mark.

USD/CNH Weekly Chart (Key-reversal nearly complete)

USD/CNH weekly chart, key-reversal as long as no sizable rally ensues today

USD/CNH Daily Chart (Channel break to send it lower)

USD/CNH daily chart, channel break to send price lower

Resources for Forex & CFD Traders

Whether you are a new or experienced trader, we have several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.

—Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX



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