Connect with us

Forex

Post-FOMC EUR/USD Weakness to Subside on Detailed ECB Exit Strategy

Published

on


Euro Talking Points

EUR/USD quickly retraces the decline following the 25bp rate-hike from the Federal Open Market Committee (FOMC), with the exchange rate at risk of staging a more meaningful rebound over the remainder of the week if the European Central Bank (ECB) unveils a more detailed exit-strategy.

Image of daily change for major currencies

Post-FOMC EUR/USD Weakness to Subside on Detailed ECB Exit Strategy

Image of daily change for EURUSD

Even though the FOMC appears to be on track to implement four rate-hikes in 2018, the fresh updates from Chairman Jerome Powell and Co. suggest the central bank is in no rush to extend the hiking-cycle as officials continue to project a longer-run neutral Fed Funds rate of 2.75% to 3.00%.

At the same time, it seems as though the Fed will tolerate above-target price growth for the foreseeable future as ‘indicators of longer-term inflation expectations are little changed,’ and the static forecasts paired with the moderately hawkish tone appears to be sapping the appeal of the greenback as the FOMC tames bets for a more aggressive normalization cycle.

With that said, attention now turns to the ECB meeting as the Governing Council is also slated to present its updated economic assessment, and the fresh rhetoric from President Mario Draghi and Co. may heighten the appeal of the single currency if the central bank shows a greater willingness to move away from its easing-cycle. The ECB may prepare European households and businesses for a less accommodative stance as the quantitative easing (QE) program is set to expire in September, and the Governing Council may taper asset-purchases ahead of the deadline as ‘the underlying strength of the euro area economy continues to support our confidence that inflation will converge towards our inflation aim of below, but close to, 2% over the medium term.

However, the ECB may merely try to buy more time as ‘an ample degree of monetary stimulus remains necessary for underlying inflation pressures to continue to build up and support headline inflation developments over the medium term,’ and more of the same from the ECB is likely to drag on the euro exchange rate as the central bank keeps the door open to further support the monetary union.

EUR/USD Daily Chart

Image of EURUSD daily chart

  • Broader outlook for EUR/USD remains mired by the break of the November-low (1.1554), with the failed attempts to close above the 1.1790 (23.6% retracement) to 1.1810 (61.8% retracement) region raising the risk for further losses as the exchange rate carves fresh series of lower highs & lows raising the risk for further losses.
  • In turn, a break below the 1.1670 (78.6% expansion) to 1.1680 (50% retracement) region opens up the 2018-low (1.1510), with the next area of interest coming in around 1.1390 (61.8% retracement).
  • However, recent developments in the Relative Strength Index (RSI) raises the scope for a larger recovery as the oscillator breaks out of the bearish formation from earlier this year, with move above the 1.1790 (23.6% retracement) to 1.1810 (61.8% retracement) region opening up the next area of interest around 1.1940 (23.6% retracement) to 1.1970 (23.6% expansion).

For more in-depth analysis, check out the Q2 Forecast for the Euro

Interested in having a broader discussion on current market themes? Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss potential trade setups!

Image of DailyFX economic calendar

Additional Trading Resources

Are you looking to improve your trading approach? Review the ‘Traits of a Successful Trader’ series on how to effectively use leverage along with other best practices that any trader can follow.

Want to know what other currency pairs the DailyFX team is watching? Download and review the Top Trading Opportunities for 2018.

— Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.



Source link

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Forex

Bitcoin Net-Longs Slide Into 1-Month Lows

Published

on

By


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



Source link

Continue Reading

Forex

Canadian Dollar (CAD) Eyes Latest Inflation Report

Published

on

By


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



Source link

Continue Reading

Forex

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

Published

on

By


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



Source link

Continue Reading

Trending

Copyright © 2017 Zox News Theme. Theme by MVP Themes, powered by WordPress.