EUR / USD: the next resistance level is 1.1515

Trading 28 déc 2018 Commentaire »

The pre-New Year period in the foreign exchange market is characterized by two opposite states either a phlegmatic flat or abnormal volatility. The euro-dollar traders did not go into hibernation and show quite vigorous activity this year. This contributes to the colorful fundamental background, primarily regarding the prospects for the US currency. The dollar index fell from 97.4 points to the current 95.9 for the three weeks of December, reflecting the decline in demand for greenbacks. The yield on 10-year-old treasuries also consolidated below the 3% mark, putting additional pressure on the currency.

The main reasons for the weakening of the dollar can be divided into two components: firstly, this is the position of the Fed, and secondly - the current events of a macroeconomic and political nature. In my opinion, the starting point for a decline in the dollar was the December meeting of the Federal Reserve, where the regulator announced a slowdown in the tightening of monetary policy. Traders have always treated with some doubt the point forecast of the Fed, which, as a rule, reflects the most optimistic scenario. Therefore, when the regulator reduced the approximate number of raises to two, then there immediately appeared on the market that the market should be prepared for only one rate increase in 2019. Some experts voiced a more pessimistic option in which the Fed will take a wait and see position throughout the next year.

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Under conditions of such uncertainty, the role of key macroeconomic indicators is growing. Let me remind you that the American regulator lowered its forecasts for GDP growth and inflation, while Jerome Powell added that next year the statistics will be "not so favorable" to the Fed's forecasts, as it was, for example, this year. Therefore, the consumer confidence index published yesterday seriously knocked down the position of the US currency. The release was much worse than expected: for the first time in five months, the indicator dropped below the 130th mark.

The decline in consumer activity is fraught with a slowdown in inflation - and after all, the consumer price index showed weak growth in November. In addition, the index of personal consumption expenditures which is one of the main indicators, which is closely monitored by the Fed also disappointed traders. On a monthly basis, the indicator remained at 0.1%, although experts predicted a minimal increase to 0.2%. Similarly, other indicators in the same way do not make happy dollar bulls as the level of wages is marking time. Nonfarm dropped to 155 thousand and the GDP indicator was revised downwards to 3.4%.

All this suggests that investors' concerns about the lingering pause are very reasonable and although these are only independent speculations of traders, these factors have a strong pressure on the US currency. The political crisis in the US plays only a background role, which incidentally, also complements the overall negative picture. Yesterday, the US Senate did not consider the budget, thereby extending the "shutdown" until January 2 of next year when the legislators will meet in a new composition. Trump is upholding his election promise to build a wall on the border with Mexico and the congressmen, in turn, refuse to allocate a fabulous amount of five billion dollars for this.

The situation is clearly at an impasse and without any compromise solutions. According to the Democrats, they are ready to allocate only 1.3 billion to "other measures to ensure border security," while Trump said he would not sign such a budget. On his Twitter account, he said that the shutter will last "as long as it takes," hinting at further confrontation. The political split is aggravated by the fact that the Democrats in January will gain control over the House of Representatives while the Republicans will take several additional seats in the Senate.

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In other words, the hazy outlook for the monetary policy of the Fed and political uncertainty put pressure on the dollar, pushing the EUR/USD pair to the borders of the 15th figure. The European currency does not yet have its own arguments for growth, therefore, the northern price dynamics are due only to American events. However, the European calendar is not completely empty. A preliminary assessment of data on inflation growth in Germany will be published today. The dynamics of German inflation can have a significant impact on the euro, especially since experts predict the contradictory dynamics of this indicator. After a two-month decline on a monthly basis, the consumer price index should rise to 0.3% while it is expected to decline to 1.9% in annual terms. If these indicators come out in the "green" zone, the pair will receive a reason for further growth.

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In technical aspect, the pair broke the first resistance level of 1.1440 (the upper line of the Bollinger Bands on the daily chart) and headed for the next barrier that corresponds to the upper boundary of the Kumo cloud on the same timeframe (1.1515 mark). If the price consolidates above this level, the Ichimoku Kinko Hyo indicator will generate a bullish Parade of Lines signal, which will open the way to the area of the 16th figure. Today, these are all prerequisites for the implementation of this scenario.

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EUR/USD analysis for December 28, 2018

Trading 28 déc 2018 Commentaire »

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Recently, the EUR/USD pair has been trading upwards. The price tested the level of 1.1470. According to the M15 time – frame, I have found that price is trading above the Ichimoku cloud and above the daily pivot (1.1410), which is a sign that buyers are in control today. I also found that triple top formation on the point and figure chart, which is another sign of strength. My advice is to watch for buying opportunities. The upward target is set at the price of 1.1512 (resistance 1).

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Trading Plan 12/28/2018

Trading 28 déc 2018 Commentaire »

The big picture: The year ends.

All news happenings after the New Year.

Only a short day remains in the month and year before December 31 on Monday.

The market is trying to start a move against the dollar.

In case of a breakout of the EUR/USD rate above 1.1485 and closing of the day above this level, a triple bottom figure is expected with a minimum target of 1.1750.

Buying from 1.1485.

Happy New Year!

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Technical analysis of EUR/USD for December 28, 2018

Trading 28 déc 2018 Commentaire »

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Overview:

Pivot: 1.1421.

The EUR/USD pair continues to move upwards from the level of 1.1421. Today, the first support level is currently seen at 1.1421, and the price is moving in a bullish channel now. Furthermore, the price has been set above the strong support at the level of 1.1421, which coincides with the 61.8% Fibonacci retracement level. This support has been rejected three times confirming the uptrend. According to the previous events, we expect the EUR/USD pair to trade between 1.1421 and 1.1550. So, the support stands at 1.1421, while daily resistance is found at 1.1550. Therefore, the market is likely to show signs of a bullish trend around the spot of 1.1421. In other words, buy orders are recommended to be placed above the spot of 1.1421 with the first target at the level of 1.1550; and then towards 1.1603. However, if the EUR/USD pair fails to break through the resistance level of 1.1550 today, the market will decline further to 1.1342.

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Technical analysis of USD/CAD for December 28, 2018

Trading 28 déc 2018 Commentaire »

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Overview:

The USD/CAD pair set above strong support at the level of 1.3531, which coincides with the 61.8% Fibonacci retracement level. This support has been rejected for four times confirming uptrend veracity. Hence, major support is seen at the level of 1.3531 because the trend is still showing strength above it.

Accordingly, the pair is still in the uptrend from the area of 1.3531 and 1.3600. The USD/CAD pair is trading in a bullish trend from the last support line of 1.3531 towards the first resistance level at 1.3660 in order to test it.

This is confirmed by the RSI indicator signaling that we are still in the bullish trending market. Now, the pair is likely to begin an ascending movement to the point of 1.3660 and further to the level of 1.3727.

The level of 1.3727 will act as second resistance and the double top is already set at the point of 1.3660. At the same time, if a breakout happens at the support levels of 1.3531 and 1.3450, then this scenario may be invalidated. But in overall, we still prefer the bullish scenario.

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Investors are hiding in safe assets for the United States and China

Trading 28 déc 2018 Commentaire »

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The Japanese yen and the Swiss franc continued to strengthen their positions against the US dollar, as investors decided to move to safe assets after the publication of the weaker-than-expected macroeconomic statistics of the United States and China, as well as the resumption of trade disputes between countries.

Reuters News Agency on Thursday reported that the administration of US President D. Trump is considering the possibility of declaring an emergency in 2019 in order to prohibit US companies from using Chinese Huawei Technologies and ZTE products.

In addition, the date of the end of the 90-day truce in the trade war is approaching, and countries still cannot reach a mutually beneficial agreement, which further increases market anxiety.

Against this background, the Japanese yen against the US dollar is trading at three-month lows, at around 100.50.

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Intraday technical levels and trading recommendations for EUR/USD for December 28, 2018

Trading 28 déc 2018 Commentaire »

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On the weekly chart, the EUR/USD pair is demonstrating a high-probability of the Head and Shoulders reversal pattern where the right shoulder is currently in progress.

On the Daily chart, the pair has been moving sideways with slight bearish tendency. Narrow sideway consolidations have been maintained within the depicted daily movement channel since June 2018.

On November 13, the EUR/USD demonstrated recent bullish recovery around 1.1220-1.1250 where the lower limit of the channel as well as the depicted demand zone came to meet the pair.

Bullish fixation above 1.1420 was needed to enhance further bullish movement towards 1.1520. However, the market has demonstrated significant bearish rejection around 1.1420 few times so far.

Recently, the EUR/USD pair has been trapped between the price levels of 1.1420 and 1.1270 waiting for breakout since November 5.

Today, another attempt of bullish breakout above 1.1420 is being executed. This enhances the bullish side of the market. Bullish persistence above 1.1420 enables further bullish advancement towards 1.1520 and 1.1580 as initial targets.

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Global macro overview for 28/12/2018

Trading 28 déc 2018 Commentaire »

Discussions about the roadmap over the agreement between the US and China are underway and President Trump called them "very productive". What's more, later Trump even announced interventions on the arrest of Meng Wanzhou, head of finance Huawei, a Chinese giant in the production of smartphones.

Trump told the agency that phone calls are being held with Beijing and he will not raise tariffs until he is sure about the chances of a deal. What's more, China is considering cutting tariffs on US cars from 40 to 15 percent. Nevertheless, later that day, US parliamentarians proposed a law that would prohibit the sale of American products to Chinese companies that violate the export ban or sanctions imposed. The global investors remain somewhat confused after these situations, but the general mood is slowly improving.

Let's now take a look at the Gold technical picture at the daily time frame. The market is still going up and the price has almost hit the 61% Fibo retracement at the level of $1,286. The local high was made at the level of $1,281, so it is very close to this level. It is worth keeping an eye on the 61% Fibo to see how the market will react on this level as the momentum is still strong and positive, but the market conditions are now extremely overbought. The nearest technical support is seen at the level of $1,261.

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Global macro overview for 28/12/2018

Trading 28 déc 2018 Commentaire »

Overnight, the Summary of the Opinions of the last Bank of Japan meeting was published. This report includes the BOJ's projection for inflation and economic growth. It's the primary tool the BOJ uses to imform investors about their economic and monetary projections.

According to the central bank's management, the risk of the global economic slowdown is growing. Recent data indicate a slowdown in the Chinese economy, which will also have a negative impact on Japan. Inflation is still on the upside, but the impact of cheap oil can slow its growth. The future price growth forecast is uncertain, for now, it is unsatisfactory. One should carefully assess the benefits and costs of running the current monetary policy. The Bank of Japan must be sure that it supports the economy without putting it off balance.

The early normalization of monetary policy may lead to lateral effects and to eradicate the progress made so far. This is why the central bank must tolerate the policy of long-term interest rates below zero.

Let's now take a look at the USD/JPY technical picture at the H4 time frame chart. The market did not manage to break through the short-term trend line (dashed black) around the level of 111.00 and reversed towards the technical support at the level of 110.37. If this level is violated, then the next target for bears is seen at the level of 110.15 and even at the swing low at the level of 110.02. The momentum remains below its 50 level, supporting the short-term bearish outlook for this pair.

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Trading plan for 28/12/2018

Trading 28 déc 2018 Commentaire »

EUR/USD returned to 1.1450, USD/JPY falls below 110.50, but GBP/USD is passively hanging close to 1.2650. Positive recovery is recorded by AUD, NZD, and CAD.

However, Asia is not quite bold to pull the move and Japanese Nikkei225 fell 0.31 percent. Chinese Shanghai Composite grows 0.3 percent.

On Friday, December 28, the event calendar is light with important data releases, but the global investors should keep an eye on German CPI and Import Prices data, KOF Economic Barometer data from Switzerland, Chicago Purchasing Managers Index data, Wholesale Inventories, and Good Trade Balance data from the US.

SPX analysis for 28/12/2018:

The stock market in the US made a rally in the last hour of trading, which allowed positive close at +0.86%. In two days, the index gained 5.9 percent, which is the best result since August 2015. Dow Jones gained 800 points in less than an hour. It might go even higher after the US data will be published, as well as the most important Chicago Purchasing Managers IndexChicago PMI, a monthly measure of the business conditions based on surveys of purchasing managers across Illinois, Indiana and Michigan. Released on the last business day of the reporting month, the report's significance has recently declined as it precedes the more anticipated ISM report. Subsequently, it is used to predict the ISM report as the Chicago survey retains a high correlation with the broader economic release.

Referring to a benchmark of 50, the report is considered to reflect expansion with a reading of 50 or higher. Conversely, a reading of 49 and lower would indicate contraction.

Let's now take a look at the SPX technical picture at the H4 time frame. The market has broken above the 23% Fibo level and closed at the level of 247.96. The next target for bulls is the technical resistance at the level of 249.71, which is just below the 38% Fibo at 251.55. The market conditions are still oversold, but the momentum indicator is pointing to the north, supporting the short-term bullish outlook.

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