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Euro Reversal Eyes Initial Resistance Hurdle

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Euro reversed off confluence support last week with the advance now approaching the first major resistance hurdles. Here are the updated targets and invalidation levels that matter on the EUR/USD charts heading into the start of the week. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.

EUR/USD Daily Price Chart

EUR/USD Price Chart - Daily

Technical Outlook: Earlier this month in my EUR/USD Weekly Technical Perspective we highlighted a key support zone at in Euro at 1.1436/97 (low-week reversal close and the 61.8% retracement of the August advance). Price registered a low at 1.1432 on October 9th with the subsequent rebound faltering just ahead of a key resistance confluence at 1.1617/27 – a region defined by the monthly open & opening-range highs, the 50% retracement of the late-September decline and the 100-day moving average. A breach above this level targets 1.1669 (breakout-zone for the Euro). Initial daily support rests at 1.1529 backed by the monthly low-day close at 1.1491.

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EUR/USD 240min Price Chart

EUR/USD Price Chart - 240min

Notes:A closer look at near-term price action shows Euro trading within the confines of an ascending pitchfork formation extending off the October lows. Note that the upper parallel converges on the 1.1617/27 resistance zone and further highlights the technical significance of this region. Initial resistance rests with the median-line (currently 1.1550s) backed by 1.1521/29 with near-term bullish invalidation now raised to 1.1497-1.15.

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Bottom line: EUR/USD is approaching near-term resistance targets which could see prices pullback a bit. From a trading standpoint, look for possible price exhaustion on a rally into 1.1617/27 – the trade remains constructive while above 1.15 with a breach above 1.1669 needed to fuel the next leg higher in price. The October opening-range is set – for now, I’ll favor fading weakness while within this formation. Keep in mind the EU-UK summit is on tap this week as well and may fuel increased volatility in the Euro & GBP crosses.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

EUR/USD Trader Sentiment

EUR/USD Trader Sentiment

  • A summary of IG Client Sentiment shows traders are net-long EUR/USD – the ratio stands at +1.12 (52.8% of traders are long) – extremely weak bearishreading
  • Traders have remained net-long since October 1st; price has moved 0.2% lower since then
  • Long positions are7.8% lower than yesterday and 13.5% lower from last week
  • Short positions are 5.9% higher than yesterday and 0.3% higher from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EUR/USD prices may continue to fall. Yet traders are less net-long than yesterday & compared with last week andthe recent changes in sentiment warn that the current EUR/USD price trend may soon reverse higher despite the fact traders remain net-long.

See how shifts in EUR/USD retail positioning are impacting trend- Learn more about sentiment!

Relevant EUR/USD Economic Data Releases

EUR/USD Economic Calendar

Economic Calendarlatest economic developments and upcoming event risk. Learn more about how we Trade the News in our Free Guide!

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– Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex or contact him at mboutros@dailyfx.com

https://www.dailyfx.com/free_guide-tg.html?ref-author=Boutros



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Yen, US Dollar May Bounce as Markets Weigh Auto Tariff Threat

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TALKING POINTS – YEN, US DOLLAR, TRADE WAR, CHINA, AUTO TARIFF

  • Yen and US Dollar down, commodity FX up as China talks up US trade talks
  • Thin data docket, US holiday closures may make for quiet start to trading week
  • Potential for tariffs on US auto imports may stoke trade war escalation fears

The anti-risk Japanese Yen and US Dollar traded lower while the sentiment-geared Australian and New Zealand Dollars rose with stocks as Asia Pacific bourses picked up on Friday’s risk-on lead from Wall Street. Regional shares added over 1 percent on average amid reports of progress in US-China trade talks.

For its part, Beijing claimed that it has reached an agreement in principle with Washington DC on how to proceed with resolving key differences. US President Donald Trump echoed the upbeat mood, saying the talks have been “very productive”.

TRADE WAR ESCALATION FEARS MAY SOUR MARKET MOOD

Looking ahead, a lull in top-tier event risk and US market closures for the Presidents Day holiday might make for a quiet, consolidative session. Still, potential for headline-driven volatility remains acute, especially against the backdrop of diminished participation.

Impetus can come from a variety of sources. Further encouragement from China or a longshot breakthrough in Brexit talks might buoy sentiment. Fears trade war escalation may send the opposing signal however after President Trump received a report on whether imported autos pose a national security threat.

The White House has used a similar process to set stage for raising aluminum and steel tariffs. Commerce Secretary Wilbur Ross – a vocal trade hawk – has now issued a formal opinion on the matter. It is unclear yet what this means. Allies like the Eurozone and Japan may be targets of any new penalties.

What are we trading? See the DailyFX team’s top trade ideas for 2019 and find out!

ASIA PACIFIC TRADING SESSION

Asia Pacific Trade Economic Calendar

EUROPEAN TRADING SESSION

Yen, US Dollar May Bounce as Markets Weigh Auto Tariff Threat

** All times listed in GMT. See the full economic calendar here.

FX TRADING RESOURCES

— Written by Ilya Spivak, Currency Strategist for DailyFX.com

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter



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IDR Eyes Bank of Indonesia as USD May Appreciate on Soft EU Data

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ASEAN Fundamental Outlook

  • Most ASEAN currencies weakened as US Dollar narrowly edged higher, especially IDR
  • Indonesian Rupiah may not weaken if its associated central bank doesn’t see a hike soon
  • MYR, SGD and PHP may weaken as USD gains on more dismal European economic news

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Last week, the US Dollar ended cautiously higher (if you are looking at DXY) and this was felt across most ASEAN currencies. The highly liquid and yielding Greenback saw seesawing price action as rising stock prices and ebbing haven demand competed for its attention. Factors such as weak economic data from Europe, mixed news on trade wars and the US avoiding going back into a shutdown all contributed to this.

The Indonesian Rupiah was the notable underperformer, falling with the Jakarta Stock Exchange Composite Index. This was partially due to Indonesian exports dropping by the most since June 2017, with the trade deficit widening by more than expected. The Malaysian Ringgit also depreciated despite a better-than-expected GDP report in Q4. The Bank of Malaysia noted that the MYR outlook could be affected by external uncertainties.

USD 5-Day Performance Versus ASEAN FX

Next week, the regional and external economic event docket notably thins out. Most important, USD/IDR will be eyeing a Bank of Indonesia monetary policy announcement. Rates are anticipated to be left unchanged with inflation running within their parameters. Meanwhile, the Fed has considerably reduced its hawkish stance. Keep an eye out for what the Indonesian central bank has to say about the state of IDR.

They have consistently upheld that they see it as undervalued. As such, a lack of a clear-cut signal to hike again may not necessarily depreciate the Rupiah. Its performance will more likely depend on how the central bank feels about its performance which – granted – has been appreciating since October. Technically speaking, USD/IDR has cleared a key resistance barrier but intervention to keep it down presents a persistent threat.

For what may impact the US Dollar next week – and thus USD/MYR – keep an eye on the FOMC minutes from the January monetary policy announcement. Reiteration of their more cautious approach may hurt the Greenback. Lately, more attention has been placed on European economic data after Italy went into a technical recession and Germany narrowly avoided one.

With that in mind, watch out for the German and Eurozone ZEW sentiment surveys. Data has been tending to underperform relative to economists’ expectations, opening the door to a downside surprise. If the US Dollar gains as equities turn lower, the Singapore Dollar may succumb to selling pressure relatively speaking. Fundamentally, the S&P 500 could be heading for a reversal in the medium term which leaves equities vulnerable.

FX Trading Resources

— Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter



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Nikkei 225 Eyes Key Resistance After Rally in S&P 500 as USD Fell

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Asia Pacific Market Open Talking Points

  • British Pound outperforms amidst weakness in the US Dollar as S&P 500 rose
  • Latest US-China trade news, government avoiding shutdown bolstered sentiment
  • Asia stocks may rise Monday, Nikkei 225 has chance to close above key resistance

Find out what retail traders’ equities buy and sell decisions say about the coming price trend!

The British Pound outperformed against its major counterparts, benefiting amidst weakness in the US Dollar and better-than-expected UK retail sales data. Declines in the Greenback were largely thanks to a recovery in risk appetite which lead to the S&P 500 closing 1.09% higher. US government bond yields rose as prices fell, signaling fading demand for haven assets.

Upbeat mood in the markets occurred due to a couple of developments. First, reports crossed the wires that China and the US reached a consensus on topics related to trade negotiations such as intellectual property protection and non-tariff barriers. Meanwhile, US President Donald Trump signed an agreement to avert going back into a government shutdown. Albeit, he declared a national emergency to fund the border wall.

Pro-risk currencies such as the Australian and New Zeeland Dollars climbed. The Canadian Dollar also gained, rising alongside sentiment-sensitive crude oil prices. As the new trading week begins, the US markets are offline Monday for a holiday, reducing levels of liquidity. A lack of prominent economic event risk places the focus on risk trends. As such, Asia Pacific equities may follow Wall Street higher.

Nikkei 225 Technical Analysis

Should the Nikkei 225 climb higher Monday, the index may keep making progress above the falling trend line from October 2018. The recent break has not had much follow-through but that could change. With that in mind, a daily close above 21243.40 could be that bullish signal. Keep an eye on RSI though, negative divergence may emerge signaling fading upside momentum.

Nikkei 225 Daily Chart

Nikkei 225 Eyes Key Resistance After Rally in S&P 500 as USD Fell

US Trading Session Economic Events

Nikkei 225 Eyes Key Resistance After Rally in S&P 500 as USD Fell

Asia Pacific Trading Session Economic Events

Nikkei 225 Eyes Key Resistance After Rally in S&P 500 as USD Fell

** All times listed in GMT. See the full economic calendar here

FX Trading Resources

— Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter



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