GBP/USD. Coronavirus vs key reports: pound between a rock and a hard place

Trading 25 Jan 2021 Commentaire »

The pound is between a rock and a hard place. On the one hand, key macroeconomic indicators are in the green zone, reflecting the recovery of the British economy, on the other hand, the authorities are in no hurry to ease quarantine restrictions, despite the ongoing mass vaccination of the population. Moreover, British Prime Minister Boris Johnson scared the markets with the news of another coronavirus mutation. According to him, at the moment there is a risk of a new strain, against which the developed vaccines will be powerless. This turn of the story put pressure on the GBP/USD pair, although such assumptions were voiced exclusively in a hypothetical context.

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Abstracting from intraday price fluctuations, we can say that in general, the pound retains the potential for further growth. The coronavirus factor serves as a burdensome anchor, but nevertheless, the GBP/USD pair is in an upward trend. At the end of last week, traders were able to approach the resistance level of 1.3750 (the upper line of the Bollinger Bands indicator on the daily chart), but could not test this target. Against the background of another surge of interest in the US currency, buyers of GBP/USD were forced to retreat by almost 100 points – to the support level of 1.3630 (the Tenkan-sen line on D1). The downward momentum was also quickly "eroded": the bears lost control of the pair at the end of the trading session on Friday.

Today, neither the bears nor the bulls of GBP/USD can also determine the vector of price movement. Buyers took the initiative in the first half of Monday afternoon: the pair entered the area of the 37th figure. However, in the afternoon, all the gains were lost after a pessimistic speech by Boris Johnson. As a result, the total score for today is 0:0. Investors are clearly undecided and can not decide on the direction of further price movement.

In my opinion, the pound-dollar pair will continue to gain momentum. Slowly, with deep corrective pullbacks, but the price will still creep up, opening new price horizons for itself. The pound looks quite attractive against the background of the dollar's weak positions, especially after the release of quite good data on inflation growth in the UK. Let me remind you that, according to the latest release, the general consumer price index in monthly terms left the negative zone and reached 0.3%, while on an annualized basis the indicator will accelerate to 0.6% (from the previous value of 0.3%). Core inflation rose to 1.4%. The producer price index also came out of the negative area: an increase was recorded to the level of 0.6% m/m after a decline to -0.3%. Other components of the release showed similar dynamics, in particular, the producer purchase price index and the selling price index.

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The pound will have to go through another kind of test on Tuesday: key data on the growth of the British labor market will be published. It is worth noting here that the preliminary forecasts are not unambiguously negative. For example, the unemployment rate should rise to 5.1% (from the current value of 4.9%), but the increase in the number of applications for unemployment benefits should show a downward trend. The fact is that tomorrow the unemployment rate for November will be published. In turn, the increase in the number of applications for benefits will reflect the December situation. While the nationwide lockdown was in effect in the UK between November 5 and December 2. By the way, the number of applications for benefits in November increased by 64,000 at once (the forecast for December is +35,000).

Also, traders need to pay attention to the salary component of the release. The average earnings indicator has been growing at a rapid pace for several consecutive months. For example, taking into account bonuses and bonus payments, this indicator is growing for the third straight month (rising from 0.1% to the current level of 2.7%). Excluding premiums, the indicator showed a stronger trend: it has been growing for five months, jumping from -0.2% to +2.8% during this period. In other words, tomorrow's release is likely to report that the UK labor market, on the one hand, is experiencing the consequences of the next wave of the COVID-19 epidemic – but on the other hand, the "coronavirus strain" was not as strong and destructive as analysts previously expected.

If such forecasts are justified, the pound will get another reason to grow further. And do not forget that this will be released on the eve of the first meeting of the Bank of England this year (which will be held on February 4). At the previous meeting, BoE Governor Andrew Bailey stressed that the issue of introducing a negative rate is still "under study". Last summer, the central bank organized a large-scale study, in which the country's financial institutions had to express their opinion on reducing the rate to zero or below zero. It is expected that at the February meeting, the British central bank will present the results of its research and announce a general verdict on the prospects for reducing the rate in the negative area – including taking into account the dynamics of key macroeconomic indicators. Therefore, if tomorrow's release does not turn out to be weak, then buyers of GBP/USD will receive support, including in the context of further prospects for monetary policy.

The coronavirus factor will certainly serve as a kind of counterweight in this situation, preventing the pound from impulsively breaking through technical price barriers. But judging by the dynamics of GBP/USD, we can conclude that Covid news has a limited impact on the pair. The overall trend for the pair remains north, despite quarantine restrictions in Britain and Boris Johnson's pessimism.

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Technically, the pair is between the middle and upper lines of the Bollinger Bands indicator on the daily chart, as well as above all the lines of the Ichimoku indicator, including above the Kumo cloud. This indicates the priority of the growth movement. It is important for buyers to keep the price above 1.3600 - this is the support level, upon overcoming which the growth scenario will temporarily lose its relevance (here you can place a stop loss). The target for the upward movement is 1.3750 - this is the upper line of the Bollinger Bands on the same timeframe.

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

Should the dollar hope for support from the Fed?

Trading 25 Jan 2021 Commentaire »

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The Federal Reserve will hold its first meeting this week, not only in a new year, but also with the new administration. The inauguration of the 46th president of the United States was held on January 20. No adjustment of monetary policy parameters is expected at this meeting, but traders will closely monitor the tone of the central bank's management, where it could provide signals for possible further actions.

Some analysts believe that the January meeting of the US central bank will be similar to the recent meeting of the European Central Bank. In other words, the Fed, like the ECB, will leave everything as it is and report on the risks that the pandemic generates. The difference is that the epidemiological situation in Europe is much worse than in America.

It is worth noting that the Fed meeting will take place during a certain legislative impasse. Congressmen have not yet decided what to do with the new stimulus project and the impeachment of former President Donald Trump. Nor is it entirely clear what the work of the new divided Senate will be.

From Fed Chairman Jerome Powell, investors expect to maintain a balance between the need for monetary stimulus and some optimism about the prospects for the economy against the background of mass vaccination. At the press conference, Powell will have to reassure investors of the stability of the Fed's policy and keep them hoping for an improvement in the economy.

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It is worth noting that this week the Senate will confirm Janet Yellen as the new head of the US Treasury. Presumably, the former head of the Fed knows which buttons to push in order to get the central bank to agree with the policy of the new administration. In her last speech, Yellen made it clear that she was concerned about the growing national debt. Main priority is to help Americans and businesses in the fight against the pandemic. She urged officials not to delay with incentives and to act on a large scale.

Recent confidence in the economic recovery has boosted treasury yields. Thus, borrowing for the Treasury has become more expensive. This year, America will have to place trillions of dollars, the first two need to be placed in the coming months.

The Fed is also interested in uncontrolled growth in government bond yields, although it remains independent of the government. At the moment, the US Fed prefers less strict control, targeting the total volume of purchases on the balance sheet and short-term rates. However, in other large countries (Japan and Australia), they apply control over the yield curve. It was also used in the last century, when the US national debt was at just as dangerously high levels and there was nowhere to cut rates.

The willingness to take such measures may be expressed in the comments at the upcoming meeting. It is unlikely that this will have any serious impact on the US dollar. At least the national currencies of Japan and Australia did not collapse after the introduction of similar measures in their countries.

Today, after the consolidation in the afternoon, the dollar index moved to growth. In the US session, it gained a symbolic 0.3%. The dollar's rebound is driven by a drop in risk appetite, with investors eyeing defensive assets.

Dollar traders are waiting for further signals from the Fed or the Treasury Department. It is unlikely that they will act ahead of the curve, thus driving the dollar far up or down. Most likely, they will take a wait-and-see attitude before an important event this week.

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As for the dollar's current growth, it comes at a time not only of growing yields, but also at a time of reduced risk appetite caused by increased uncertainty in US policy. Joe Biden has just taken office, and investors are already worried about his ability to pass a $1.9 trillion stimulus package and distribute 100 million doses of the vaccine in the first months of his presidency. Mass vaccination is not happening as quickly as originally planned, as the states are facing supply constraints. At the same time, Republican leaders oppose the new stimulus program and consider it doomed to failure. Without successful vaccination and an aggressive incentive package, it is known that a further rally of risky assets is impossible.

However, no one can predict a radical change in the trend or a steady movement up in the dollar. Speculators in the foreign exchange market remain extremely bearish to the US currency.

MUFG believes that it is too early for the dollar to hope for support from the central bank. Therefore, experts still bet on a further weakening of the dollar against a basket of competitors.

"The Fed may not begin to slow down the pace of quantitative easing purchases until next year. The process of reducing quantitative easing is likely to be a gradual process that may last through 2022," the analysts wrote.

Thus, the first rate increase will not occur until 2023.

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

Analytics and trading signals for beginners. How to trade GBP/USD on January 26? Analysis of Monday. Getting ready for Tuesday

Trading 25 Jan 2021 Commentaire »

Hourly chart of the GBP/USD pair

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The GBP/USD pair only moved down in the morning of Monday, January 25. The upward movement continued in the evening, which began on Friday and so novice traders had every right to work it out. Recall that the MACD buy signal was formed on Friday and it was strong, as the indicator turned up from the area below the zero level. Thus, long positions should have been open until the indicator turned back down. This trade could eventually bring up to 30 points. Not bad, considering that trading was not the most volatile on Monday. But it was not recommended to work out the spiral of the downward movement since the upward trend is still present, which is eloquently signaled by the upward trend line. So now you should wait for a new buy signal, which can form the MACD indicator or a trend line, from which a rebound will occur.

No important reports from the UK on Monday, and Bank of England Governor Andrew Bailey did not mention anything particularly important or interesting in his speech. Traders already know all the most important and interesting things. So this information has no effect on the pound. In short, there is no fundamental reason for the pound to be at such high levels. The pound is overbought and remains very high against the dollar, while ignoring all the important news and statistics.

Several interesting reports will be published in the UK on Tuesday, but one can reasonably ask the question: when was the last time the pound reacted to data on wages or unemployment? Of course, this is very interesting data, which will most likely continue to indicate a worsening situation in Great Britain, but does anyone really expect the pound to fall tomorrow if these reports turn out to be weak, as forecasts suggest? The pound may simply fall as part of the next round of correction in the upward trend. However, it is unlikely to be below the upward trend line. Thus, we personally believe that everything will depend on technique and technical signals. In any case, in the morning you will need to conduct a new analysis and find out what has changed overnight.

Possible scenarios on January 26:

1) Long positions remain relevant since the price is still above the trend line. Thus, you are advised to monitor the formation of buy signals. In case the MACD indicator reverses to the upside (it is already sufficiently discharged) or a rebound from the trend line occurs, then it is recommended to open long positions while aiming for 1.3731.

2) It is not recommended to consider short positions now, since there is an upward trend. Thus, you should only open short positions when the price has settled below the trend line. The targets in this case can be located around 1.3583 and 1.3531.

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 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

Belgium Business Confidence Improves In January

Trading 25 Jan 2021 Commentaire »

Belgium's business confidence improved at the start of the year, led by construction and services sectors, survey data from the National Bank of Belgium showed on Monday. The business confidence index rose to -7.5 from -8.4 in December. "The business climate has firmed up in the building industry and for the second consecutive month, in business-related services, too," the bank said. "However, entrepreneurs appeared a bit more pessimistic in the trade sector and in the manufacturing industry."

The seasonally adjusted rate rose to 78.9 percent in January from 76.7 percent in October.


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

Analytics and trading signals for beginners. How to trade EUR/USD on January 26. Analysis of trade on Monday. Getting ready

Trading 25 Jan 2021 Commentaire »

1-hour chart of EUR/USD.

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On Monday, EUR/USD began a new round of a downward correction as we had projected in the previous review. All in all, the currency pair sank 66 pips. Then, it revealed some sings of a further climb. There were no market catalysts on Monday which could change trading sentiment. So, we have no reasons to assume that EUR/USD will reverse a trend downwards. Thus, I'm poised to think that the price will reverse upwards from the current levels. Another option is that the price will rebound from the lower border of the upward channel. The overall trend on EUR/USD remains bullish. Therefore, it is recommended to trade the pair upwards.

On Monday, the pair has generated two buy signals which were recommended for consideration by beginners. One of them was a weak signal. While being formed, MACD failed to discharge in full. It is pointed by the first circle in the chart. The second strong signal is due to form in the nearest hour. Thus, beginners will be able to open a trade in the nearest hour. It would be difficult to monitor this deal late at night, but that's how the market works.

On Monday, January 25, the only important event was a speech by Christine Lagarde. She said nothing either about monetary policy or about economics. Hence, we can reckon that the economy calendar was empty on Monday. Anyway, the market gives a muted response to fundamental events. To sum up, the economic calendar lacked events and traders took little interest in any events. EUR/USD has been trading on the grounds of technical mechanisms.

On Tuesday, January 26, the trading day will be similar. No crucial and interesting events are slated for this date. So, novice traders again will not be distracted by fundamental factors but focus entirely on technical charts. The currency pair will be trading quietly tomorrow.

The following scenarios are possible on January 26

1)Long positions are still valid as the price remains inside the upward channel. However, beginners are recommended to wait until a new buy signal is formed by MACD. When the signal is evident, it would be a good idea to trade EUR/USD upwards with targets coinciding with resistance levels of 1.2171 and 1.2190.

2)Trading the pair downwards is out of the question for a while. To resume sell positions, the uptrend should be eventually cancelled. To make sure it happens, the upward channel should be ruined. In other words, the price should fix below it. As the price is passing not far away from its lower border at the moment, this scenario is possible in the nearest 10-12 hours. If this is the case, it would be the right time to open short positions. However, it would be better to wait until morning and re-evaluate the situation.

What's on the chart:

Support and Resistance levels are the levels that are targets when opening buy or sell orders. Take Profit levels can be placed near them.

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

Up / down arrows show whether the pair should be traded up or down when reaching or overcoming particular obstacles.

MACD indicator (14,22,3) is a histogram and a signal line. When they are crossed, this signals a market entry. It is recommended for use in combination with trend lines (channels, trend lines).

Important speeches and reports in the economic calendar can greatly influence the movement of the currency pair. Therefore, during their release, it is recommended to trade as carefully as possible or exit the market in order to avoid a sharp price reversal against the previous movement.

Beginners in the forex market should remember that every trade cannot 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

*ECB's Lane: GC Routinely Looks At Wide Range Of Measures To Gauge State Of Financing Conditions

Trading 25 Jan 2021 Commentaire »

ECB's Lane: GC Routinely Looks At Wide Range Of Measures To Gauge State Of Financing Conditions


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

*Belgium January Business Confidence -7.5 Vs. -8.4 In December

Trading 25 Jan 2021 Commentaire »

Belgium January Business Confidence -7.5 Vs. -8.4 In December


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

EUR/USD : le dollar s’apprécie avant la réunion de le Fed cette semaine

Trading 25 Jan 2021 Commentaire »
L’euro bloque sous la résistance des 1,2180$. Les investisseurs dans l'attente des déclarations de Jerome Powell.

U.S. Dollar Spikes Up As Risk Sentiment Sours

Trading 25 Jan 2021 Commentaire »

The U.S. dollar climbed against its major counterparts in the European session on Monday, as weak German data along with rising coronavirus cases raised concerns about the global economy.

Survey results from the ifo institute showed that German business confidence weakened in January.

The business confidence index fell to 90.1 in January from revised 92.2 in the previous month. The score was forecast to drop moderately to 91.8.

The coronavirus cases exceeded 99 million worldwide and the death toll climbed above 2 million, according to data compiled by Johns Hopkins University.

The French government may impose a third lockdown in the coming days to combat coronavirus in the country. The government is planning to meet on Wednesday to decide whether further measures are required.

U.S. President Biden will reimpose a ban on non-U.S. citizens from the United Kingdom, Ireland, and 26 countries in Europe attempt to enter the country. The order will also prohibit travelers from Brazil and South Africa, where new virus variants have been detected.

The greenback appreciated to 4-day peaks of 0.8877 against the franc and 1.2140 against the euro, up from its prior lows of 0.8846 and 1.2183, respectively. The next possible resistance for the greenback is seen around 0.90 against the franc and 1.17 against the euro.

The greenback reversed from an early low of 1.3724 against the pound and moved up to 1.3666. If the dollar climbs further, 1.34 is likely seen as its next resistance level.

The U.S. currency bounced off from its earlier lows of 1.2687 against the loonie and 0.7747 against the aussie and was worth 1.2718 and 0.7718, respectively. The greenback is seen finding resistance around 1.29 against the loonie and 0.75 against the aussie.

After a fall to 103.67 at 2:00 am ET, the greenback rose back to 103.85 against the yen. On the upside, 108.00 is likely seen as its next resistance level.

On the other hand, the greenback held steady against the kiwi, after having dropped to 0.7217 at 1:45 am ET. The pair finished Friday's trading at 0.7175.


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

Czech Economic Confidence Weakens In January

Trading 25 Jan 2021 Commentaire »

The Czech economic confidence weakened in January, survey results from the Czech Statistical Office showed on Monday.

The economic sentiment index fell to 87.3 in January from 88.6 in December.

The business confidence index decreased to 87.1 in January from 87.8 in the previous month.

The industrial sentiment index fell to 93.2 in January from 93.5 in the preceding month.

The measure of confidence in construction declined to 108.5 from 110.9 in the prior month, while that for trade fell to 90.4 from 93.5.

The consumer confidence decreased to 88.5 in January from 92.0 a month ago.


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