GBP/USD: we ignore data, we don’t believe rumors

Trading 15 Déc 2020 Commentaire »

The British dollar is still in the zone of turbulence: the GBP/USD pair fluctuates within a wide price range, but cannot determine the vector of its movement. The price managed to visit the area of the 31st figure in December, and was marked at highs in the area of the 35th price level. The 400-point band, within which the pound flies, can become a kind of trap for inexperienced traders. Due to conflicting rumors about the prospects of Brexit, price movements are unpredictable, and standard and familiar fundamental factors simply do not work. In a period of such uncertainty, even the main macroeconomic reports should be treated in a special way: taking into account all the published figures, you should not rush to trade decisions. The market may react reflexively to the report, but then it will still return to the topic of Brexit. During such periods, it is quite easy to fall victim to a false price movement.

For example, key data on the UK labor market was released this morning. Many components entered the green zone, but the market reaction was negative: the pound dropped to the 32nd figure against the dollar. Although the unemployment rate in Britain came out at around 4.9% (with a forecast of growth to 5.1%), and wages showed the strongest growth since February this year (+ 2.7% including premiums, +2.8% excluding premiums). You might have thought that GBP/USD traders had noticed the only flaw in today's release - the number of applications for unemployment benefits jumped to 60,000. But no - just a few hours after the publication, the pound sharply rose throughout the market, even against the dollar.

All this suggests that standard fundamental factors have now lost their influence on GBP/USD, even when it comes to the release of data on the British labor market.

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A similar situation may develop tomorrow, December 16. Let me remind you that important macroeconomic statistics will also be published on Wednesday - inflation. We will learn the meaning of the general consumer price index, core inflation, as well as the dynamics of the retail price index, producer purchase prices and producer selling prices.

Back then when the Brexit issue was not hanging over traders like an impending disaster, an inflationary report had an unconditional priority for the GBP/USD pair. But now markets are focused on the negotiations, at stake which is a trade deal between London and Brussels. The transition period ends on December 31, and if the parties do not find a compromise, then starting on January 1, the trade regime between Britain and the EU will be determined only by the rules of the World Trade Organization. This scenario is highly undesirable for the British currency, which is why GBP/USD traders react so sharply to the news flow associated with the negotiation process.

The news reports were quite contradictory. For example, according to Reuters, British Prime Minister Boris Johnson told his ministers that the most likely outcome of trade negotiations with the European Union would be "no deal". At the same time, according to Bloomberg, the likelihood of a deal "has grown significantly." This information was voiced to journalists not just by anyone, but by the Prime Minister of Ireland, Micheal Martin. Traders react to such news feeds accordingly, which is why the pound flies within a wide price range.

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Trading in such conditions is very, very risky, as no one knows at what point the negotiators will announce their final verdict. Tentatively, the negotiations will last until the end of this week, although the parties may take additional time - in this case, the fate of the deal will be decided at the very last moment.

But any decision by the negotiators will cause strong volatility in the GBP/USD pair. If the dialogue fails again, the price will be in the area of 29-28 figures in the blink of an eye. If the parties still manage to find a compromise, then the pound will be in the region of 36-37 figures. The unlikely (but still probable) option to extend the transition period will also support the pound.

In which direction the pendulum will swing as a result is unknown, so it is now necessary to take a wait-and-see attitude on the GBP/USD pair.

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

Analytics and trading signals for beginners. How to trade EUR/USD on December 16? Analysis of Tuesday deals. Getting ready

Trading 15 Déc 2020 Commentaire »

Hourly chart of the EUR/USD pair

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The EUR/USD pair continued to trade in a narrow price range on Tuesday, completely ignoring all technical signals and constructions. However, novice traders themselves can see everything in the chart or in the terminal. Even beginners understand that now the pair is trading absolutely sluggish, illogical and unpredictable again. The quotes of the pair have reached the 1.2159 level three (!!!) times and all three attempts to overcome it ended in nothing. However, the downward movement did not start after that. Therefore, all three rebounds, which can generally be interpreted as sell signals, did not affect the course of trading in any way. In addition, two more sell signals from MACD were formed (circled in the chart). However, they did not lead to a downward movement that could be rejected. If by the first signal novice traders could enter the market and exit it with minimal losses, then they should not have entered at the second signal, since it formed 40 points down after the candlestick, which, taking into account the current volatility (44 points for today), is a lot. Yesterday the quotes were already trying to gain a foothold below this line, but then the consolidation was unconvincing. Today the pair did it twice and also without any results for further downward movement.

The US released a report on industrial production for November, which rose by just 0.4% and is 0.1% more than predicted. And that's all. And given the current volatility, it was generally possible not to look at the calendar of macroeconomic events. Donald Trump officially lost the election, as electoral colleges of all states voted and Joe Biden won with a score of 306-232. Of course, Trump's representatives immediately announced that they would continue to fight for "fair elections" and "they have enough time until January 20 to restore justice," but traders no longer react to this information and do not believe that the incumbent president will be able to change the results voting.

The European Union is set to publish business activity indices in the services and manufacturing sectors. The same indices will be published in America. However, the key event of the day will be in the evening. The Fed meeting and the announcement of its results. The parameters of monetary policy are expected to remain unchanged, so Fed Chairman Jerome Powell's press conference will be the most important.

Possible scenarios for December 16:

1) Long positions are not relevant at the moment, since we have not surpassed the 1.2159-1.2177 area. Therefore, you need to wait until the specified area has been overcome and afterwards, you can finally open buy orders while aiming for 1.2206 and 1.2236 and slightly higher, by 20 points. You also need to be prepared for the fact that the upward movement can end near this area.

2) Trading for a fall looks more appropriate, however, a strong bullish sentiment is still present in the market, and the bears were unable to start moving down even after at least seven rebounds from the 1.2159 level. Thus, novice traders can try to open short positions while aiming for 1.2114 and 1.2084, but then Stop Loss should be placed above the 1.2177 level.

On the chart:

Support and Resistance Levels are the Levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.

Red lines are the channels or trend lines that display the current trend and show in which direction it is better to trade now.

Up/down arrows show where you should sell or buy after reaching or breaking through particular levels.

The MACD indicator (14,22,3) consists of a histogram and a signal line. When they cross, this is a signal to enter the market. It is recommended to use this indicator in combination with trend lines (channels and trend lines).

Important announcements and economic reports that you can always find in the news calendar can seriously influence the trajectory of a currency pair. Therefore, at the time of their release, we recommended trading as carefully as possible or exit the market in order to avoid a sharp price reversal.

Beginners on Forex should remember that not every single trade has to be profitable. The development of a clear strategy and money management are the key to success in trading over a long period of time.

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

U.S. Industrial Production Rises Slightly More Than Expected In November

Trading 15 Déc 2020 Commentaire »

Partly reflecting a continued increase in manufacturing output, the Federal Reserve released a report on Tuesday showing U.S. industrial production rose by slightly more than expected in the month of November.

The report said industrial production climbed by 0.4 percent in November following a downwardly revised 0.9 percent advance in October.

Economists had expected industrial production to rise by 0.3 percent compared to the 1.1 percent jump originally reported for the previous month.

The Fed said manufacturing output increased for the seventh straight month, advancing by 0.8 percent in November amid a 5.3 percent spike in motor vehicles and parts production.

"The solid 0.8% increase in manufacturing output last month underlines that, regardless of the virus situation, production is continuing to catch up with the recovery in consumption," Michael Pearce, Senior U.S. Economist at Capital Economics.

He added, "With firms starting to rebuild lean inventories over recent months, we suspect production will continue to rise, even as consumption drops back in the face of new virus restrictions over the coming months."

The report also showed a substantial rebound in mining output, which surged up by 2.3 percent in November after falling by 0.7 percent in October.

On the other hand, utilities output plunged by 4.3 percent in November after jumping by 1.8 percent in October, as warmer than usual temperatures reduced the demand for heating.

The Fed noted that industrial production has rebounded to about 5 percent below its pre-pandemic levels after having plummeted by 16.5 percent between February and April.

Capacity utilization for the industrial sector increased to 73.3 percent in November from a revised 73.0 percent in October.

Economists had expected capacity utilization to inch up to 72.9 percent from the 72.8 percent originally reported for the previous month.

The report said capacity utilization in the manufacturing and mining sectors rose to 72.6 percent and 79.4 percent, respectively, while capacity utilization in the utilities sector slid to 70.2 percent.


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New York Manufacturing Activity Edges Slightly Higher In December

Trading 15 Déc 2020 Commentaire »

A report released by the Federal Reserve Bank of New York on Tuesday showed regional manufacturing activity edged slightly higher in the month of December.

The New York Fed said its general business conditions index slipped to 4.9 in December from 6.3 in November, but a positive reading still indicates growth in regional manufacturing activity. Economist had expected the index to dip to 5.8.

"Empire State manufacturing growth pulled back to a softer pace of expansion in December as the recovery cools and resurgent infection rates weigh on activity," said Oren Klachkin, Lead U.S. Economist at Oxford Economics.

The modest decrease by the headline index partly reflected a slight slowdown in the pace of growth in new orders, as the new orders index edged down to 3.4 in December from 3.7 in November.

On the other hand, the report said the shipments index jumped to 12.1 in December from 6.3 in November and the number of employees index advanced to 14.2 from 9.4.

The prices paid index also surged up to 37.1 in December from 29.1 in November, while the prices received index fell to 10.0 from 11.3.

Looking ahead, the New York Fed said firms remained optimistic that conditions would improve over the next six months, with the index for future business conditions rising to 36.3 in December from 33.9 in November.

"Manufacturing's strong performance this year isn't likely to be repeated in 2021," Klachkin said. "An end to the health crisis is slowly coming into view, but less buoyant demand, some lingering Covid-related supply chain disruptions, and less stimulative fiscal policy will constrain manufacturing activity next year."

He added, "Additionally, double dip recession risks will continue to run high if Congress doesn't provide more fiscal relief and the health crisis isn't over."

On Thursday, the Philadelphia Federal Reserve is scheduled to release its report on regional manufacturing activity. The Philly Fed Index is expected to drop to 20.0 in December from 26.3 in November.


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

U.S Import Prices Inch Up Less Than Expected In November

Trading 15 Déc 2020 Commentaire »

Import prices in the U.S. saw a modest increase in the month of November, according to a report released by the Labor Department on Tuesday, while the report also showed export prices climbed much more than expected.

The Labor Department said import prices inched up by 0.1 percent in November after edging down by 0.1 percent in October. Economists had expected import prices to rise by 0.3 percent.

The uptick in import prices reflected a spike in prices for fuel imports, which soared by 4.3 percent in November after falling by 0.9 percent in October. Higher prices for both natural gas and petroleum contributed to the rebound.

Excluding fuel imports, import prices fell by 0.3 percent in November after inching up by 0.1 percent in the previous month.

Non-fuel import prices declined for the first time since April, as lower prices for foods, feeds, and beverages, non-fuel industrial supplies and materials and automotive vehicles more than offset higher prices for capital goods.

Meanwhile, the report said export prices advanced by 0.6 percent in November after rising by 0.2 percent in October. Export prices were expected to increase by 0.3 percent.

The bigger than expected increase in export prices came as prices for agricultural exports continued to skyrocket, jumping by 3.7 percent in November after surging up by 3.4 percent in October.

Prices for agricultural exports showed their biggest increase since December of 2018, reflecting a 7.6 percent spike in price for both soybeans and corn as well as higher prices for dairy products and eggs, vegetables, wheat, fruit, meat, and cotton.

The report said prices for non-agricultural exports also rose by 0.3 percent in November after edging down by 0.1 percent in October.

Higher prices for non-agricultural industrial supplies and materials, automotive vehicles, and non-agricultural foods more than offset lower prices for consumer goods and capital goods.

Compared to the same month a year ago, import prices in November were down by 1.0 percent, unchanged from October. The annual decrease in export prices slowed to 1.1 percent from 1.6 percent.


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

Dollar Little Changed After U.S. Industrial Production

Trading 15 Déc 2020 Commentaire »

Fed's Industrial Production for November has been released at 9:15 am ET Tuesday. The greenback changed little against its major rivals after the data.

The greenback was trading at 103.81 against the yen, 0.8871 against the franc, 1.2147 against the euro and 1.3378 against the pound around 9:20 am ET.


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*U.S. Industrial Production Rises 0.4% In November

Trading 15 Déc 2020 Commentaire »

U.S. Industrial Production Rises 0.4% In November


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

Dollar Mixed Ahead Of U.S. Industrial Production

Trading 15 Déc 2020 Commentaire »

Fed's Industrial Production for November will be released at 9:15 am ET Tuesday.

Ahead of the data, the greenback traded mixed against its major rivals. While it dropped against the yen, it held steady against the rest of major rivals.

The greenback was worth 103.79 against the yen, 0.8871 against the franc, 1.2145 against the euro and 1.3385 against the pound as of 9:10 am ET.


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

New York Manufacturing Index Dips More Than Expected In December

Trading 15 Déc 2020 Commentaire »

A report released by the Federal Reserve Bank of New York on Tuesday showed regional manufacturing activity edged slightly higher in the month of December.

The New York Fed said its general business conditions index slipped to 4.9 in December from 6.3 in November, but a positive reading still indicates growth in regional manufacturing activity. Economist had expected the index to edge down to 5.8.

Looking ahead, the report said firms remained optimistic that conditions would improve over the next six months.


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

*Hungary Central Bank Leaves Key Interest Rate Unchanged At 0.60% As Expected

Trading 15 Déc 2020 Commentaire »

Hungary Central Bank Leaves Key Interest Rate Unchanged At 0.60% As Expected


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