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Price Action Setups Around a Falling US Dollar After CPI Sell-Off

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In this webinar, we used price action to look at macro markets in the aftermath of this morning’s US CPI report. That report showed continued strength in US inflation as we’ve now had the sixth consecutive month of at-or-above-target inflation as we approach next week’s FOMC rate decision. But, despite the backdrop for higher rates as driven by consistent inflation gains, the US Dollar remains weak as the year-long down-trend remains in order.

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US Dollar Takes a Hit After CPI

This morning’s CPI print out of the US was not all that bad, as we saw the sixth consecutive month of at-or-above target CPI growth ahead of next week’s Federal Reserve rate decision. But the reaction in the Dollar was a pronounced move of weakness that syncs well with the timing of this morning’s CPI release, even though many are attributing this downdraft in the Greenback to the morning announcement of the firing of Secretary of State, Rex Tillerson. And while there may be something there, the fact of the matter is that most drivers, both positive and negative, have brought upon the same net result of USD-weakness. This alludes to the fact that there is something else going on here helping to drive weakness into USD even in-light of seemingly positive factors, like inflation pushing the Fed towards tighter policy options. This can help to keep the bearish trend in the US Dollar at the forefront as we near next week’s FOMC rate decision.

US CPI: Sixth Consecutive Month At-Or-Above Target, USD Falls in Response

us cpi monthly

Chart prepared by James Stanley

EUR/USD Support Bounce Runs to 1.2400

Last Thursday we looked at support in EUR/USD, and we’ve since seen a respectable recovery from the ECB-fueled dip to 1.2280. The problem at this point is the fact that we’re so far away from support that bullish setups could be difficult to justify. A pullback to the prior support zone of 1.2335-1.2350 keeps the door open for additional topside in the pair; perhaps even to another approach towards the 1.2500 psychological level.

EUR/USD Four-Hour Chart: Approaching Last Week’s Highs After 2280 Support Visit

eurusd four hour chart

Chart prepared by James Stanley

GBP/USD Catches a Bid After Spring Statement

Growth forecasts were upgraded this morning in the UK’s Spring Statement, and this has brought some life into the British Pound. This helped GBP/USD to break above a bearish trend-line that’s held in the pair since late-January. This can start to open the door for short-term top-side setups, but for the longer-term move, traders will likely want to await a bullish break of the 1.4000 psychological level, as stops can be difficult to justify given recent swing-lows.

GBP/JPY Approaching Under-Side of Post-Brexit Trend-Line

For short-side GBP plays, GBP/JPY may be getting close to a point of interest, as there is a bit of confluence around 149.41, as we have both the 38.2% Fibonacci retracement of the February sell-off along with the projection of the post-Brexit trend-line that had previously done a good job of helping to carve-out support.

AUD/USD Rallies to Resistance Zone

While the US Dollar has been exuberantly weak this morning after that CPI report, AUD/USD has started to show what could finish as an indecision candlestick on the Daily chart. Resistance is coming-in around a zone that we’ve been following around the .7900 level, and this can start to open the door to short-side setups. We looked at how lower time frames can be used to assist with timing into the setup; allowing for traders to let the move start to show before looking at fading what’s been a really strong short-term trend. This was previously a favored long-USD candidate, and with today’s resistance starting to show even as the US Dollar remains weak, that door may be re-opening around the Aussie.

NZD/USD Testing Longer-Term Fibonacci Resistance

We’ve been following a level in NZD/USD that’s started to come into play, and now its time to watch what the pair does to see if this is a workable theme. The level in question is the 38.2% Fibonacci retracement of the 2009-2011 major move at .7335, and this level has done a great job of helping to form resistance on the weekly chart over the past couple of years. With a really weak US Dollar running into a strong NZD in February, the pair was able to temporarily eclipse this value, leading to a fall to .7200. But since that support showed at .7200, prices have been on the way up and we’re now re-testing .7335 again.

We looked at the hourly chart to focus-in on this recent strength, and how a break below a short-term trend-line can start to open the door to short-side setups.

USD/CAD Comes Back to Life After 1.3000 Resistance

Last week saw a really weak Canadian Dollar as USD/CAD testing the 1.3000 psychological level. After three days of tests Monday-Wednesday, USD-weakness took over and drove the pair down to 1.2800. Since then, we’ve seen more recovery as CAD-weakness has remained a dominant theme. We’re now catching resistance around 1.2928, which is the 50% Fibonacci retracement of the May-September sell-off from last year. We looked at how shorter-term charts can be used to work with the current setup in USD/CAD.

Yen-Weakness Pronounced Ahead of BoJ Minutes

There appears to be a brewing theme around the Japanese Yen that should get some more information tonight with the release of BoJ meeting minutes from last week’s rate decision. Yen-strength has become quite pronounced in 2018, and this goes along with a consistent rise in inflation that saw January come-in at 34-month highs. This is similar to the Euro and the ECB last year, where stronger growth and inflation led markets to buy the Euro in anticipation of an eventual move away from stimulus. While we’re still waiting on confirmation of that move away from stimulus, Euro-strength remains; and in the Yen, that strength has crafted a fresh yearly-high against the US Dollar. Starting around the Tokyo open last night, however, was a spate of Yen-weakness that had begun about 24 hours ahead of the release of those meeting minutes.

USD/JPY Weekly Chart: Support Holding on at a Long-Term Area of Interest

usdjpy weekly chart

Chart prepared by James Stanley

To read more:

Are you looking for longer-term analysis on the Euro, the British Pound or the U.S. Dollar? Our DailyFX Forecasts for Q1 have a section for each major currency, and we also offer a plethora of resources on our EUR/USD, GBP/USD, USD/JPY, AUD/USD and U.S. Dollar pages. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.

— Written by James Stanley, Strategist for DailyFX.com

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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

Trade all the major global economic data live and interactive at the DailyFX Webinars. We’d love to have you along.

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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