Experts expect the yen to strengthen against the backdrop of a weaker dollar

Trading 18 jan 2019 Commentaire »

Today, the yen became cheaper against the dollar after The Wall Street Journal reported that the US authorities are discussing the possible abolition of import duties on Chinese goods, although the US Treasury later denied this information.

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According to a number of experts, despite optimistic expectations regarding the resolution of trade disputes between Washington and Beijing, the situation in the future will not be in favor of Greenback.

"We believe that the effect of fiscal stimulation in the United States will gradually come to naught, and investors will eventually lose their desire to buy risky assets, in connection with which the yen will strengthen. We expect the USD / JPY pair to reach 103 over the next 6-12 months," said experts at Citigroup financial conglomerate.

"The Japanese currency is very cheap compared to its long-term fair value, and investments in it, in our opinion, are more profitable than in euros," they added.

Citigroup has revised down its forecast for the dollar index for 2019 from 93.33 to 92.56.

Analysts at Bank of America Merrill Lynch (BofAML) adhere to a similar point of view.

"We believe that in the foreseeable future, interest in risky assets will decline due to the fact that the growth rate of the world economy may have reached its maximum," they noted.

According to the BofAML forecast, by the end of the year, the USD / JPY pair will drop to 101.

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Media: the US may waive duties on Chinese goods

Trading 18 jan 2019 Commentaire »

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According to the newspaper The Wall Street Journal, the United States is considering the possibility of abandoning the protective duties previously imposed by Washington on the import of Chinese goods. The White House administration sees such a move as a way to calm global financial markets and encourage Beijing to make deeper and longer-term concessions in a trade war.

With the proposed measures do not agree on US Trade Representative Robert Lighthizer. He believes that China may perceive such a step as a weakness on the part of Washington.

The idea of partial cancellation of duties or complete rejection of them was proposed by US Treasury Secretary Steven Mnuchin. The politician argues that such a policy of easing trading conditions will help succeed in advancing trade negotiations with China and enlist Beijing's support in conducting joint longer-term reforms.

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Euro bets on ECB

Trading 18 jan 2019 Commentaire »

Weak statistics on the German economy and the mention of Mario Draghi of the word "recession" led the single European currency into the red zone for the week by January 18. And let the head of the ECB argued that the recession is not a question, we need to talk about a smooth landing, the financial markets are rather shy. If German GDP shows the worst dynamics since 2013, and its European counterpart, judging by business activity, closes the fourth quarter worse than the modest third (+ 0.2% q / q), then why buy EUR / USD? Wouldn't it be better to continue to keep the US dollar in investment portfolios?

Theoretically, the slowdown in the US economy, the pause in the process of normalizing monetary policy and the growing recession risks should weaken the position of the bears on the main currency pair. However, while macroeconomic statistics do not confirm the idea of a significant loss in the rate of US GDP, and the yield curve has not inverted, it is too early to panic. Yes, the indicator predicted the last 7 recessions of 7, yes, the macro statistics are retrospective, and the indications of financial markets are of a predictive nature, but until the thunder breaks out, the peasant will not cross himself.

Dynamics of the US yield curve

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Fed officials are beginning to pay increased attention to the dynamics of stock indices. In their opinion, the high turbulence of the stock market, the growing risks of a slowdown in the global economy and global demand, as well as tight financial conditions and a strong dollar are strong arguments in favor of slowing monetary restriction. However, looking at the peak of the USD index at the end of 2018, it can be concluded that the factor of the "pigeon" rhetoric of the FOMC plenipotentiaries is already partially taken into account in the EUR / USD quotes.

A single European currency would be nice to get up on its feet, and a week by January 25 may be decisive in its fate. In its course, the results of the ECB meeting and figures on business activity for January will be known. The strong start of purchasing managers' indices in 2019, coupled with the preservation of the Governing Council's optimism about the recovery of GDP and inflation of the currency bloc, can inspire EUR / USD "bulls" to attack. On the contrary, the inability of PMI to implement moderately positive forecasts of Bloomberg experts and hints of Mario Draghi on the expansion of the stimulus package, if necessary, will return the initiative to the bears.

The course of negotiations between the US and China can also contribute to its dynamics. If the idea of Steven Mnuchin to lift import duties in order to calm the financial markets comes to life, then we are expected to sell safe-haven assets, including the US dollar. On the contrary, the escalation of the conflict will hurt the euro.

Technically, the bulls in EUR / USD do not leave hopes for the implementation of the Bat pattern with a target of 88.6%. To do this, they need to bring the quotes of the pair outside the consolidation range of 1.1265-1.1485 and rewrite the January maximum. On the contrary, the inability of euro buyers to keep quotes above $ 1.14 will increase the risks of continuing the pair's southern hike.

EUR / USD, the daily chart

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GBP / USD pair: plan for the American session on January 18. Yesterday’s speculative growth of the pound did not find the

Trading 18 jan 2019 Commentaire »

To open long positions on the GBP / USD pair, you need:

Buyers missed the support level of 1.2963, and the main task for the second half of the day is to return to this range, which will allow forming the lower limit of the new ascending channel and count on the continued growth of the pound in the region of maximum 1.3016 and 1.3064. In the case of a further downward correction of the GBP/USD pair, taking a closer look from the 1.2896 or 1.2835 low is the best option in considering for long positions.

To open short positions on the GBP / USD pair, you need:

Failing to fix above the resistance of 1.2963 in the second half of the day will be a signal to open short positions in the pound. However, the main task is to return to the support level of 1.2896, which will likely update the minimum of 1.2835, where I recommend taking profits. In the case of a return of GBP/USD to the resistance level of 1.2963, it is best to return to short positions from the maximum of 1.3016 and 1.3064.

Indicator signals:

Moving averages

Trade returned to the area of 30- and 50-day moving, which indicates the lateral nature of the market.

Bollinger bands

Volatility remains low, which does not give signals to enter the market.

More in the video forecast for January 18

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Description of indicators

MA (moving average) 50 days - yellow

MA (moving average) 30 days - green

MACD: fast EMA 12, slow EMA 26, SMA 9

Bollinger Bands 20

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EUR / USD pair: plan for the American session on January 18. There is almost no movement in the market

Trading 18 jan 2019 Commentaire »

To open long positions on EUR / USD pair, you need:

The weak fundamental statistics did not allow euro buyers to form a larger upward correction. It is important that the bulls manage to hold the EUR/USD pair above the support level of 1.1375. However, the main task is to return to the resistance level of 1.1411, which will lead to a larger upward correction to the area of the maximum of 1.1451 and 1.1490, where I recommend to fix the profit. A Weak data on the US labor market can help the bulls with correction. In the case of a repeated decline in the support area of 1.1375 in the afternoon, it is best to return in long positions to the rebound from the minimum of 1.1343.

To open short positions on EUR / USD pair, you need:

The sellers did not manage to return to the support level of 1.1375 and for the second half of the day, their main task is to break this range, which will lead to a larger EUR/USD sale with a minimum of 1.1343 and 1.1312, where I recommend to fix the profit. In case that a quick downward movement is not formed after testing the minimum of 1.1375, as it was today in the first half of the day, I recommend closing short positions since a large upward correction in euro can be formed from this level. When the growth scenario is above the resistance of 1.1411 against the background of weak fundamental statistics for the USA, it is best to consider short positions in EUR/USD pair on a rebound from 1.1451.

Indicator signals:

Moving averages

Trade is conducted in the area of 30- and 50-medium moving, which indicates the side character of the market.

Bollinger bands

The volatility of the Bollinger Bands indicator is low, which does not give signals to enter the market.

More in the video forecast for January 18

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Description of indicators

MA (moving average) 50 days - yellow

MA (moving average) 30 days - green

MACD: fast EMA 12, slow EMA 26, SMA 9

Bollinger Bands 20

The material has been provided by InstaForex Company - www.instaforex.com

EUR and GBP. The problems in the UK economy is increasing. Euro buyers disappointed with statistics

Trading 18 jan 2019 Commentaire »

The euro remained traded in a narrow side channel paired with the US dollar, but held its position after the release of the next weak fundamental statistics for the eurozone.

The reduction in the positive balance of the current account of the eurozone's balance of payments in November 2018 again indicates that the eurozone economy is slowing again by the end of the year and is unlikely to show good growth rates in early 2019. The sharp decline compared with October and the level of 2017 is bad news for the European Central Bank, which recently more and more often speaks not about raising interest rates, but about the need to further stimulate the economy.

Important is the fact that, in the main, a reduction in the positive balance of payments was caused by a reduction in trade in goods due to an increase in imports.

If we add to all the data for this week the likelihood of a new trade war between the US and the EU, the prospects for the European currency at the beginning of this year do not seem so rosy as before.

According to the report of the European regulator, the positive balance of the current account of the balance of payments in the eurozone in November 2018 amounted to 20 billion euros against 27 billion euros in October. Compared with November 2017, the decline is impressive, since at that time the surplus was 35 billion euros. The surplus of trade in goods in November fell to 18 billion euros from 31 billion euros in November 2017.

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Weak data for the euro area all week does not allow euro buyers to form a larger upward correction, and, ultimately, everything could end in another wave of falling risky assets.

As for the technical picture of the EUR / USD pair, the bears are trying to resume the downward movement in the market after the unsuccessful attempt of the bulls to return to the game. A break of 1.1375 may lead to a larger decrease in risky assets with the renewal of lows around 1.1340 and 1.1310. In the case of another false breakdown in the area of 1.1375, bulls can willingly return, which will lead to a powerful upward impulse with a test and a breakthrough of the intermediate resistance 1.1415 and the main goal of updating the maximum of 1.1450.

The British pound remained under pressure and corrected after yesterday's growth, based more on expectations than on facts.

Weak data on retail sales in the UK once again indicated a slowdown in economic growth at the end of 2018. According to the report of the National Bureau of Statistics ONS, retail sales in the UK in December 2018 decreased by 0.9% compared with the previous month. This is another confirmation that the growth momentum of the UK economy is fading. Given the situation with the EU and Brexit, it is unlikely that in the near future it will be possible to expect a change in the situation, as consumer confidence decreases, as do their expenses.

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GBP/USD short-term technical levels with Linear Channels and trading recommendations for January 18, 2019

Trading 18 jan 2019 Commentaire »

Blue channel is based on the price movement of yesterday.

Violet channel is based on the previous two-day consolidations.

Yellow channel is based on the previous three-day consolidations.

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The recent bullish movement of the GBP/USD pair which started around 1.2700, has lost much of its bullish momentum since Wednesday.

Lack of enough bullish momentum is demonstrated on the chart so that Today's recent movements have turned into sideways consolidations.

The pair is currently moving within the depicted narrow channel (Violet channel) after a bearish breakout of the BLUE channel was demonstrated earlier today.

Looking to the downside, the GBP/USD pair has an Intraday support located around 1.2900 which corresponds to mid-range of the yellow channel.

Any bearish pullback towards 1.2900 can be considered for a short-term BUY position.

On the other hand, any decline below 1.2900-1.2880 (Mid-Range Support) enables a deeper decline towards 1.2830 and 1.2780 where the lower limit of the yellow channel is located.

Having a look to the upside, the GBP/USD pair has a key-resistance zone around 1.3020 where bearish rejection may be anticipated.

That's why, obvious bullish breakout above 1.3020 is mandatory for BUYERS to pursue towards 1.3080-1.3100.

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Gold is waiting for new growth drivers

Trading 18 jan 2019 Commentaire »

Despite the continued uncertainty around Brexit, the "shutdown" in the United States and the prospect of slowing down the process of raising the Fed's interest rate, the gold exchange rate has not yet been able to overcome the $1,300 mark.

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Against the background of the emergence of contradictory news regarding these events, gold market participants seem to have taken a wait-and-see attitude, which is reflected in the dynamics of the precious metal price.

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Meanwhile, according to a number of experts, gold still has good chances for growth.

"We believe that the current year should be favorable for the yellow precious metal since financial markets will experience instability, and therefore investors will begin to refuse to invest in risky assets," said representatives of the World Gold Council (WGC).

"The unfavorable political situation in Europe will also serve as a supporting factor for the cost of the precious metal. One of the main problems of the European Union remains to be the unregulated exit of Great Britain from the European Union. Here, it is necessary to add the protests of the "yellow vests" in France and the government of Euro-skeptics in Italy. Another reason why investors will prefer to invest in gold - the weakening of the US dollar and the low-interest rates of the Fed. In addition, it is expected that central banks will continue to buy precious metals in order to diversify their reserves," they added.

"I believe that one of the drivers of growth in the price of gold will be an increase in the US government debt. In the event of a recession in the country, the rate may increase by 5%. There is also the risk of a downward trend in the stock market, which was last observed in the 1970s. Even its first signs can make investors pay attention to gold," said by John Hathaway of investment company Tocqueville Management.

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GBP / USD: The assault of the 30th figure failed, the pair can go to 1.2860

Trading 18 jan 2019 Commentaire »

The pound has entered again the zone of uncertainty on the eve of the most important negotiations between London and Brussels and the subsequent vote in the House of Commons. For two and a half years from the moment of the historic referendum, the British currency has repeatedly experienced strong volatility, which as a rule, on the threshold of the key stages of Brexit. Now the Briton responds to the information background regarding the prospects of the negotiation process. The stakes are too high: if Theresa May finds a common denominator between parliamentarians and the European Union, the deal can be approved as early as next week. Otherwise, negotiations will drag on for several months, and Brexit's date will have to be postponed to a later date (although May now rejects this scenario). In any case, the coming days for GBP/USD traders will be intense.

London and Brussels "exchanged pleasantries" yesterday. Hence, the representative of the European Commission said that the European side is ready to consider a possible proposal by the British to postpone Brexit, if only they give valid reasons for this. However, Downing Street categorically rejected such a scenario. A spokesman for the British government said that if the EU announced a proposal to extend the 50th article of the Treaty of Lisbon (which allows for the postponement of Brexit), Britain will say no. In other words, the proposal to postpone the withdrawal of the country from the Alliance is not considered by the parties as a matter of priority - it is rather a backup plan, which will be relevant only if the British parliament fails to vote for an updated draft of the transaction.

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At the moment, the sequence of actions is as follows: on Monday, Theresa May presents her "Plan B" after consulting with the leaders of parliamentary associations. Then, she must agree on a renewed deal with Brussels if she undergoes significant changes on key issues, and proceed to a vote on January 29. In my opinion, the "European" stage of negotiations is the most difficult in the process of the forthcoming agreement. On the one hand, the main negotiator from the European Union, Michel Barnier, said yesterday that the European Union is ready for a "more ambitious deal." He did not clarify the meaning of his expression, but the general message is obvious: Brussels is ready to sit down at the negotiating table, despite its "principled" position regarding the inviolability of the agreements reached. On the other hand, the market doubts it.

In this vein, the written appeal of the EU leadership to the British parliamentarians is indicative, which was sent to London on the day of voting on the first draft of the deal. In this letter, Brussels explained its approach to Brexit's main unsolved problem: the regime of border control between Ireland and Northern Ireland after the country's withdrawal from the Alliance. The letter did not have the main thing, not even a hint of the provision of legal guarantees to Britain regarding the time frame of the backstop. Brussels limited itself to the phrase that the European Union would not use this regime "beyond the strictly necessary period." This is a rather vague wording, which, among other things, has no legal force. Also, the European Union has once again confirmed that it is ready to extend the transition period.

Now, the fact that it is safe to say that this appeal is useless. From this, we can make an obvious conclusion that no verbal exhortations of Europeans can convince opponents of May, only legal guarantees regarding the mode of action of the back-stop will shift the situation from a dead end. "Are you ready to go for it in Brussels or not?" is an open question. That is why today, pessimism has returned to the market regarding the prospects for the upcoming talks and the pound, in tandem with the dollar, has suspended its growth, saving it from the psychologically important mark of 1.30.

If we talk about macroeconomic statistics, then the situation is quite contradictory as the British inflation reached the predicted level. The core consumer price index even exceeded expectations, being at the level of 1.9%, while retail sales were clearly disappointed with -0.9% m/m and 3% y/y compared to the forecast of -0, 8% m/m and 3.6% g/g.

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However, traders actually ignored these releases. Brexit is still a priority for the market. Hence, until the end of the negotiation process, the pound will focus only on this news background. This means that it is almost impossible to predict the price movement of GBP/USD, since any comment by representatives of London and Brussels can turn the price up or down, depending on the context. Whereas today, GBP/USD bears can easily pull the pair to the first support level of 1.2860 against the background of profit taking on the eve of restless holidays.

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Bitcoin analysis for January 18, 2019

Trading 18 jan 2019 Commentaire »

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My yesterday's call is still active and profitable. I am still bullish on BTC from $3.575 but the level at $3.597 is a solid area to add another bullish position. It is the Fibonacci retracement 38.2%. Price is also near the lower Keltner band, which is a sign that intraday traders became exhausted. Watch for buying opportunities.

Trading recommendations for today: We are still long on BTC from $3.575 with upward targets at the price of $3.647 and $3.687 and protective stop below the level of $3.520.

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