Euro is up and dollar is down, the Fed is all a little whim

Trading 31 jan 2019 Commentaire »

After the Fed promised to be careful with further increases in interest rates, the dollar weakened while the Australian dollar responded with an increase in this statement. The Fed left interest rates unchanged and abandoned its promises of "further gradual increases" in interest rates as expected. The dollar fell to a three-week low against other major currencies, and the yield of US Treasury bonds dropped significantly.

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Risky assets are growing on this news and the dollar is falling. The Fed may raise interest rates in June but at the moment, it doesn't matter what direction policy is moving in the medium term as the foreign exchange market participants still sell the dollar. The fall of the "American" benefited the euro, relegating concern about weaker growth in the eurozone to the background. The downside of the dovish policy of the Fed is the strengthening of the euro, and the ECB will certainly take note of this, which can also lead to actions to control this process. However, in buying euros, do not forget that the weakening of the economic impulse in the eurozone will put pressure on the currency during most of 2019 and may limit the growth of the euro in the medium term.

The Australian dollar grew by 0.3 percent to 0.7277 dollars after a jump on Wednesday immediately by 1.3 percent, which has every chance to continue the climb. The Swiss franc and yen added about 0.15 percent against the dollar. The Sterling, which is struggling with its own problems regarding Britain's withdrawal from the European Union, rose by 0.2 percent to $1.3157.

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Fundamental Analysis of USD/CHF for January 31, 2019

Trading 31 jan 2019 Commentaire »

USD/CHF has been correcting and consolidating at the edge of 0.9950 area for a few days in a row from where a break above the area is expected to lead to further bullish momentum. Yesterday FOMC meeting ended with the dovish policy update. The US central bank maintained the Federal Funds rate unchanged, thus leaving the market sentiment derived off the gains on the bullish side.

The US Federal Reserve recently sent the clearest signal that the cycle of monetary policy tightening is coming to an end while the pressure is rising on the economy as a result of a slowdown in the global economic growth. The US central bank left interest rates on hold and expressed the patient approach to every rate hike in the future. There are still chances of at least 2 rate hikes this year. FED Chairman Jerome Powell sounded quite dovish in the meeting while discussing tight financial conditions. The Funds Rate was left unchanged as expected at 2.50% which did not have much impact. The following press conference made the strongest impact, affecting USD growth along with the partial government shutdown recently. Tomorrow, US NFP report is going to be published which is going to include Average Hourly Earnings report which is expected to decrease to 0.3% from the previous value of 0.4%, Non-Farm Employment Change is expected to decrease to 165k from the previous figure of 312k and Unemployment Rate is expected to be unchanged at 3.9%.

On the other hand, recently Swiss Trade Balance report was published with a significant decrease to 1.90B from the previous figure of 4.75B which was expected to be at 4.55B. The downbeat economic report played a vital role injecting weakness for the Swiss Franc, but USD could not sustain it further. Moreover, KOF Economic Barometer report was published with a decrease to 95.0 from the previous figure of 96.4 which was expected to increase to 96.8 and Credit Suisse Economic Expectation report was also published with a significant decrease to -44.0 from the previous figure of -22.2. Tomorrow SECO Consumer Climate report is going to be published which is expected to have a slight increase to -5 from the previous figure of -6 and Retail Sales are expected to increase to 0.1% from the previous value of -0.5%.

Meanwhile, USD has been struggling for gains amid soft economic data and Fed's dovish rhetoric. On the other hand, CHF is struggling as well which enabled certain correction and indecision along the way. Ahead of US NFP and Switzerland's Retail Sales report tomorrow, the pair is likely to trade with higher volatility and sudden spikes. However, USD has a greater probability to take the lead in the coming days.

Now let us look at the technical view. The price is currently trading inside the Kumo Cloud resistance while also residing below 0.9950 with a daily close. The price is currently being held by dynamic level of 20 EMA, Tenkan, and Kijun line as support which is expected to carry it throughout the upward break which is expected to push the price higher towards 1.0050 resistance area in the coming days.

SUPPORT: 0.9550, 0.9700, 0.9850

RESISTANCE: 1.0050, 1.0130-50

BIAS: BULLISH

MOMENTUM: VOLATILE

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Simplified wave analysis of AUD / USD for January 31

Trading 31 jan 2019 Commentaire »

Large-scale graphics:

Since the end of January last year, a descending wave has been formed at the price of an "Aussie". The structure of the wave is close to the impulse type of motion.

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Medium scale graphics:

The bull wave of January 3 has a high wave potential. In the structure of a larger structure, it may take the place of the correction of the entire previous trend section.

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Small-scale graphics:

On January 25, the bullish wave started, which completes the upward zigzag of the older TF. In the coming days, a short-term depreciation is not excluded.

Forecast and recommendations:

The price of the instrument is in a lifting phase, which may be delayed for the entire next month. Before the price breaks up, the probability of a price pullback is high, which can be used by bull traders.

Resistance zones:

- 0.7600 / 0.7650

- 0.7340 / 0.7390

Support areas:

- 0.7170 / 0.7120

Explanatory notes for the figures: The simplified wave analysis uses waves consisting of 3 parts (A – B – C). The analysis uses 3 consecutive scale graph. Each of them analyzes the last, incomplete wave. Zones show calculated areas with the highest probability of reversal. The arrows indicate the wave marking by the method used by the author. The solid background shows the formed structure, the dotted - the expected movement.

Note: The wave algorithm does not take into account the duration of tool movements over time. To conduct a trade transaction, you need confirmation signals from the trading systems you use!

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The EUR/USD is approaching the upper limit of the daily channels, Will it hold ? January 31, 2019

Trading 31 jan 2019 Commentaire »

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Since June 2018, the EUR/USD pair has been moving sideways with slight bearish tendency within the depicted bearish Channel (In RED).

On November 13, the EUR/USD demonstrated recent bullish recovery around 1.1220-1.1250 where the current bullish movement above the depicted short-term bullish channel (In BLUE) was initiated.

Bullish fixation above 1.1420 was needed to enhance further bullish movement towards 1.1520.

However, the market has been demonstrating obvious bearish rejection around 1.1420 few times until Monday when the daily candlestick achieved a bullish closure above 1.1420.

Further bullish advancement should be expected towards the price level of 1.1550 where the upper limit of both depicted channels (RED & BLUE) is located.

Around 1.1550, there's a confluence of supply levels (upper limit of channels & previous historical bottoms) where bearish rejection as well as a valid SELL entry would be expected.

On the other hand, any bearish closure below 1.1420 terminates the current bullish movement (initiated on January 25) allowing another bearish visit towards 1.1350 and 1.1300.

Trade Recommendations:

Conservative traders should wait for the current bullish pullback to pursue towards the price level of 1.1550 for a valid SELL entry.

T/P levels to be located around 1.1420 and 1.1300. S/L to be located above 1.1600.

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Oil shortage is canceled, experts say

Trading 31 jan 2019 Commentaire »

Three years ago, the largest oil industry experts warned the markets about a large-scale reduction in investment and a growing drop in oil prices. Analysts argued that the world would face a shortage of black gold but pessimistic forecasts were not justified.

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Currently, leading market experts predict a few more years of oil abundance. According to Ed Morse, the authoritative researcher in the field of commodity markets of Citigroup Inc., the global black gold market may not be worried. There will be no oil supply crisis.

The most impressive collapse of the oil market in the past 25 years has forced a number of companies to cut costs dramatically. According to estimates by the International Energy Agency (IEA), over the period from 2014 to 2016, investments in the oil and gas industry decreased by 40% to $ 350 billion. Experts consider this to be the most significant decline since the 1980s. Recall that in that period, oil prices plummeted from levels above $ 120 to $ 30.

In 2015, IEA analysts warned that the increase in oil supply in countries outside OPEC would dry up by 2020. Experts predicted a shortage of black gold in the amount of 10 million barrels per day, which is equivalent to the volumes mined earlier by Saudi Arabia. Concerns about the crisis were shared by almost all participants in the oil industry.

However, instead of a shortage of black gold, the world is faced with an abundance of supply. According to experts, the United States will produce about 12 million barrels per day in 2019. Previously, analysts said that the country will reach such a level only by 2042. In Russia, oil production is also at a record level while Iraq is close to historic highs. In Brazil, experts expect the most active growth in oil production over the past 15 years.

According to Bank of America Corp., three-quarters of non-shale projects will be profitable in five years, even at an oil price of $40 per barrel. At the same time, the risks to the market caused by the American sanctions against Venezuela and Iran have not disappeared anywhere. However, as the activity in the shale fields of the USA grows and the costs of oil producers decrease due to the use of new technologies, the threat of a deficit goes away.

The recent shale boom recorded in America gave signals of a slowdown in the market but fears were in vain due to increased production in the country. According to estimates by the consulting company Rystad Energy AS, the United States will produce more oil than both the world's leading oil producers, Russia, and Saudi Arabia by 2025.

According to most experts, the future is for shale oil and this process cannot be stopped. "It is possible that at some point its growth rates will slow down, but the trend will not turn around," said Paul Stevens, strategist at Chatham House.

The collapse of the oil market three years ago forced companies to increase their efficiency and significantly change the volume of production costs in the industry. Companies cutting costs learned how to produce oil at much lower prices. By optimizing the process, mining costs in the Gulf of Mexico and Brazil fell by 50%. The companies used the previously created infrastructure, combining it with new technologies.

According to Ed Morse of Citigroup Inc., the current costs in the oil industry continue to decline. This trend is characteristic of the whole world. Experts pay attention to the active growth of black gold production. According to analysts, large oil producers, such as Saudi Arabia and OPEC countries, are counting on an increase in oil prices, which is very beneficial for them. Therefore, it declares a shortage of supplies in the next three years.

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Forecast for AUD / USD pair on January 31, 2019

Trading 31 jan 2019 Commentaire »

AUD / USD pair

The Australian dollar is unstoppable. Taking advantage of the temporary weakness of the US dollar and similarly temporary and weak growth in commodity markets due to the political crisis in Venezuela), the "Australian" went above the upper limit of the lowering price channel. On both scales, the trend is clearly increasing in all indicators based on the daily and four-hour charts. We are waiting for the continuation of price growth to 0.7340 (maximum November 16) then to 0.7413 (minimum of May 9).

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Wave analysis of EUR / USD for January 31. Another three-wave structure?

Trading 31 jan 2019 Commentaire »

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Wave counting analysis:

The trading on Wednesday, January 30, ended with a 50 bp rise. Thus, the estimated wave 2 in the composition of the new downtrend of the trend took too long. The rise of the pair was associated with too soft statements by the Fed in the covering letter. Now the whole wave counting can be transformed into the next three wave structure. If this is true, then the growth of the instrument can be maintained up to the maximum of wave c, after which we are waiting for a decline in the region of 13 figures.

Sales targets:

1,1289 - 0.0% Fibonacci

1.1215 - 0.0% Fibonacci

Shopping goals:

1.1502 - 76.4% Fibonacci

1.1569 - 100.0% Fibonacci

General conclusions and trading recommendations:

The pair remains in the stage of building a correctional wave 2. Thus, its completion should lead to a resumption of the instrument's decline with targets located near the marks of 1,1289 and 1.1215, which equates to 0.0% and 0.0% Fibonacci. Since wave 2 has taken on too deep a look, the downward wave should still be there, but it can even start from the 1.1569 mark.

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Wave analysis of GBP / USD for January 31. Waves predict a pound rise to 1.3300

Trading 31 jan 2019 Commentaire »

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Wave counting analysis:

On January 30, the GBP / USD pair rose by 50 bp, presumably completing the construction of wave 4, as part of the future 3 uptrend trend. If the current wave counting is correct, then the increase in quotations will continue within wave 5 with targets located near the Fibonacci 127.2% level. Wave 4, at 4 at the moment looks fully equipped, a breakthrough of its minimum will lead to the need to clarify the wave pattern. The greatest doubts in the option with the increase is the lack of a specific and intelligible decision on the issue of Brexit s well as the preliminary refusal of the EU to conduct new negotiations with Britain. More so, Theresa May's parliament rejected the plan.

Shopping goals:

1,3297 - 127.2% Fibonacci

1.3367 - 127.2% Fibonacci

Sales targets:

1.2996 - 76.4% Fibonacci

1.2889 - 61.8% Fibonacci

General conclusions and trading recommendations:

The wave pattern assumes the construction of wave 5, 3. Thus, I expect the resumption of the increase and recommend buying the instrument with targets near the estimated level of 1.3397, which equals 127.2% Fibonacci . Breakthrough of the minimum of wave 4, in 3 will cancel the execution of the variant with the construction of an upward wave.

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Indicator analysis. Daily review on January 31, 2019 for the pair EUR / USD

Trading 31 jan 2019 Commentaire »

On Thursday, after touching the cloud consisting of the resistance line 1.1507 (red bold line) and the sliding level 76.4% - 1.1505 (yellow dashed line), the price will move down. The first lower target of 1.1478 is the rolling level of 14.6% (blue dashed line).

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Fig. 1 (daily schedule).

Comprehensive analysis:

- indicator analysis - up;

- Fibonacci levels - down;

- volumes - down;

- candlestick analysis - down;

- trend analysis - down;

- Bollinger lines - up;

- weekly schedule - up.

General conclusion:

On Thursday, the price will move down. The first lower target of 1.1478 is the rolling level of 14.6% (blue dashed line).

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Trading plan for 31/01/2019

Trading 31 jan 2019 Commentaire »

Trading plan for 31/01/2019:

Dovish surprises in the FOMC decision bring the weakness in USD and rally in the stock market

The dollar loses after the publication of the FOMC statement. The market is focused on three new elements: the Fed has removed the mention of gradual interest rate increases. In its place appeared a fragment with a patient approach to further changes in the level of rates (this departs the specter of the hike in March). At the same time, the FOMC is ready to consider changes in the policy of reducing the balance sheet total. As a result, the USD is also the weakest currency during the Asian part of the session. EUR / USD remains just above 1.15, USD / JPY at 108.80, and GBP / USD at 1.3130. The government PMI Manufacturing data from China in January increased modestly to 49.5 from 49.4, but it was still better than expected 49.4. The index for the service sector jumped to 54.7 from 53.8 (threshold 53.8).The US indexes climbed on four-month highs, as the Fed's continued moderation in policy tightening is good news for emerging markets and general risk appetite. Chinese Shanghai Composite grows 0.3%, Hang Seng gains 1.0%, and Nikkei225 grew by 1.06%.

On Thursday, the 31st of January, the event calendar is not that rich in important data release, but the global investors should keep an eye on Unemployment Rate and Unemployment Change data from Germany, the GDP data from Eurozone, Gross Domestic Product and Raw Materials Price Index data form Canada and Unemployment Claims and Personal Spending data from the US. There is a speech from ECB's Yves Mersch scheduled at the late morning hours.

USD/CAD analysis for 31/01/2019:

The main event today is the Canadian GDP release at 13:30 pm GMT and the global investors expect a significant decline in the GDP from the level of 2.2% to 1.6% on the yearly basis. On the monthly basis expectations are low as well: a decrease from 0.3% to -0.1% is being expected.

A comprehensive measure of Canada's overall production and consumption of goods and services. GDP is a significant report in the forex market, serving as one of the primary indicators of a country's overall economic health. Robust GDP growth signals a heightened level of economic activity and often a higher demand for the domestic currency. At the same time, economic expansion raises concerns about inflationary pressures which may prompt monetary authorities to increase interest rates. Thus positive GDP readings are generally bullish for the Canadian Dollar, while negative readings are generally bearish.

Most production reports that lead to Canadian GDP are released before the official GDP number. Therefore, actual GDP figures usually confirm expectations. However, an unexpected release can move markets due to the significance of the figure.

Let's now take a look at the USD/CAD technical picture at the H4 time frame. The Canadian Dollar deterioration continues. The pair just hit the 61% Fibonacci retracement level of the last big multi-week swing up and this is a very important support level. At the lower time frame, the pair made a 1:1 Fibonacci measured move to the level of 1.3117, just two pips below the 1.3119 where the Fibonacci level is. The trend is clearly down, both at the big and smaller time frames. There is a chance for a pull-back if the GDP data will surprise to the upside and the short-term target level for the bounce is seen at the level of 1.3158, 13178 and 1.3200.

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