EUR/USD: short-term euro weakness or serious dollar bid for growth?

Trading 17 Fév 2021 Commentaire »

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Returning from a long weekend, US stock market participants seem to have decided to lock in profits, deeming the recent rise to record highs excessive.

Meanwhile, US Treasury yields are rising by leaps and bounds.

Investors are waiting for the next $1.9 trillion package of assistance to the US economy, proposed by US President Joe Biden, to be adopted soon.

Large-scale fiscal stimulus means an increase in the chances of accelerating economic growth and inflation in the country.

Expectations of an increase in US debt issuance triggered a sell-off in treasuries, which led to an increase in the yield on ten-year government bonds, which has already reached a level close to the pre-pandemic level, rising above 1.30%. This, in turn, made the dollar more attractive in the eyes of investors.

The USD index declined by 0.3% the day before, but then it moved to growth.

After reaching the local low around 90.1 points on Tuesday, the greenback recovered to 90.5 points.

Meanwhile, the euro ended Tuesday's trading lower against the US dollar, despite the fact that the eurozone macroeconomic reports that were released had exceeded analysts' expectations.

In particular, the currency bloc's GDP indicator for the fourth quarter was revised upward.

However, strong data on the New York Fed's manufacturing index and the dollar's reversal led to a fall in the main currency pair to the 1.2100 level. It continued to decline on Wednesday.

"A net break of EUR/USD below 1.2081 indicated the presence of a minor peak. The next support will come into play at 1.2019, and the more important one at 1.1945-1.1952. This is where the bears should be. Otherwise, the pair expects a more serious drawdown and test of 1.1800, and possibly 1.1695," said strategists at Credit Suisse.

"The nearest resistance is located at 1.2098. Downside risks will persist as long as the 1.2125-1.2128 area remains unbroken. Above it, the 55-day moving average around 1.2152 will come into play, and a break above 1.2190 will confirm the resumption of the underlying bullish trend," they added.

The main factor of pressure on the pair is still the strengthening of the US dollar across the entire spectrum of the market.

The USD index reached almost 1.5-week highs in the area of 91 points.

The positive dynamics of the greenback is due to the fact that the yield of 10-year US government bonds is confidently stayed in the area of annual highs.

In addition, the January reports on retail sales and industrial production in the United States were unexpectedly strong, significantly exceeding forecasts.

It is possible that the strengthening of the dollar will continue until the Biden administration's stimulus package takes effect, possibly in March, after which investors will begin to wind down their long positions on the USD.

However, in the near future, the US currency will have to pass a test of strength.

"The sharp jump in treasury yields means that Federal Reserve Chairman Jerome Powell's semi-annual speech to Congress on February 23 takes on special significance. We expect a clear signal from Powell that it is too early to talk about a change in the monetary rate. This will confirm the central bank's commitment to a soft monetary policy, " MUFG Bank specialists said.

The dollar risks losing its support in this scenario, and the euro will be able to recover after the fall.

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EUR/USD. Dollar rushes into battle: pair approaches a powerful support level

Trading 17 Fév 2021 Commentaire »

The EUR/USD pair is heading towards the bottom of the 20th figure, against the background of the general strengthening of the greenback. Growth in 10-year Treasury yields, strong macroeconomic reports and a general strengthening of anti-risk sentiment amid the energy crisis in 14 American states - all these factors made it possible for dollar bulls to dominate in almost all pairs - including the euro. The EUR/USD bears broke the support level of 1.2060 (Tenkan-sen line on the daily chart) and opened their way to the next price barrier at 1.1980: at this price point, the lower line of the Bollinger Bands indicator on the daily chart coincides with the lower border of the Kumo cloud.

The European currency could not withstand the onslaught of dollar bulls, despite the fact that impressive indices from ZEW (both non-German and European) and relatively good data on the growth of the EU economy in the fourth quarter of 2020 (the second estimate turned out to be better than the initial one) were published.. The euro survived the moment of glory and even overcame the resistance level of 1.2150 - but by the end of Tuesday it had lost all the points it had won.

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Here it is necessary to recall that the EUR/USD bears were already trying to fall below the 20th figure in early February (namely, on the 4th), against the background of another surge in anti-risk sentiment. At that time, the general nervousness was associated with an increase in anti-Chinese rhetoric on the part of the hawks of the White House. In addition, there was unconfirmed information in the press that Washington will increase sanctions pressure on Beijing – not to mention the preservation of those tariffs that were inherited from Trump. However, despite the growth of the US dollar index, the EUR/USD bears could not settle in the area of the 19th figure – the pair was only below the 1.2000 mark for a few hours. This suggests that at the moment, sellers are approaching a fairly powerful level of support, and weighty arguments of a fundamental nature are necessary in order to overcome it (and most importantly – to consolidate below). Information that provides momentum is needed, while at the moment the dollar is growing due to a combination of factors.

So, as already mentioned above, the US published a report on the volume of retail sales. This indicator remained in the negative area in December, reflecting the weak consumer activity of Americans. Taking into account car sales, and excluding this component, the indicator came out in the red zone, putting pressure on the greenback. According to preliminary forecasts, the January indicator should have shown a minimal, albeit growth: the overall indicator should increase to 1.1%, excluding car sales - to 0.9%.

However, the actual numbers exceeded the forecasts in many ways. The release component excluding auto sales jumped to 5.9% (the best result since January last year), and taking into account sales - to 5.3% (an 11-month high). In addition, the Producer Price Index (PPI) was published today, which is an early signal of changes in inflationary trends. It has shown good dynamics in recent months, but its growth was quite surprising -both in monthly and annual terms. Judge for yourself: instead of the predicted increase to 0.4% m/m and 0.9% y/y, the indicator jumped to 1.3% 1.7%, respectively. Excluding food and energy prices, this indicator showed similar dynamics (0.2% m/m and 1.3 y/y). Among other things, the figures of industrial production were also pleasing: the volume of industrial production increased in January by 0.9% (the preliminary forecast was +0.4%).

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Against the background of such strong releases, there was talk that the Federal Reserve may begin to wind down its stimulus programs earlier than agreed. Fed members who recently commented on the current situation also added fuel to the fire. The head of the Federal Reserve Bank of Boston President Eric Rosengren, on the one hand, voiced concern about the weak Nonfarm and weak dynamics of inflation. But he expressed confidence that the US economy will show strong growth in the second half of the year: "stronger growth than previously expected." According to him, the key macroeconomic indicators in the next few months will receive significant support due to additional fiscal measures. A similar opinion was expressed by his colleague, the head of the Federal Reserve Bank of Richmond, Thomas Barkin. He also expressed optimism about the growth prospects of the US economy. According to him, American companies will be able to return to normal operation "approximately in the last third of this year."

And although such members of the Fed did not make any hints about an early curtailment of QE, their rhetoric was optimistic. This fact made it possible for the dollar to strengthen its position throughout the market, especially against the background of strong macroeconomic releases.

All this suggests that the dollar's upward trend has not yet exhausted itself - against the euro, the greenback is quite capable of reaching the base of the 20th figure or even testing the support level of 1.1980 (the lower line of the Bollinger Bands indicator on D1, coinciding with the lower border of the Kumo cloud). However, short positions will look extremely risky when you reach this price range. The last time the EUR/USD pair traded in the area of the 19th figure (and below) was in November 2020, and since then it only looked under the 1.2000 mark once. Therefore, as soon as the price overcomes this target, mass profit-taking is likely with the simultaneous opening of longs.

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Analytics and trading signals for beginners. How to trade GBP/USD on February 18? Analysis of Wednesday. Getting ready for

Trading 17 Fév 2021 Commentaire »

Hourly chart of the GBP/USD pair

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The GBP/USD pair continued its weak downward movement on Wednesday, which eventually led to overcoming the upward trend line. Thus, the trend has now changed to a downward one, therefore, short positions have become relevant. We draw your attention to a very remarkable fact: the volatility of the pound/dollar pair was lower today than that of the euro/dollar pair. This is very strange, since it is usually the other way around. Normal daily volatility for the British currency is 80-120 points. For the euro - 60-80 points. But today, as we said, everything was the other way around. Given that both pairs were moving down. As a result, novice traders who opened long positions on yesterday's buy signal received losses worth 15 points. Although yesterday we analyzed the fact that this buy signal was not worth working out, since the candlestick on which it formed was more than 50 points. After such a strong movement for about an hour, it is difficult to count, especially in the evening, just moving in the same direction. The next signal was a sell signal, which was created when the trend line was broken. Traders could enter the market at a price of 1.3869, and the target was the support level of 1.3819, to which the price has not yet reached, although the distance is only 40 points. Thus, according to this trading signal, we recommend to transfer Stop Loss to breakeven. Or close at a low profit.

The UK published an inflation report, which had no effect on the pair's movement. The report turned out to be stronger than the forecast values, so the pound could have grown on Wednesday. But instead, an indistinct downward movement continued. The most interesting thing is that traders did not work out the US retail sales report, since the price dropped 20 points after its release. If 20 points is a reaction to a rather important report, then you don't need to look into the calendar of macroeconomic events at all.

Both the UK and the US will not release a major macroeconomic report on Thursday. Thus, the macroeconomic background will have a very weak impact on the pair's movement. However, the macroeconomic background was present on Wednesday and also had no effect on the pair. Thus, we still rely on technical analysis when making trading decisions.

Possible scenarios on February 18:

1) Long positions have lost their relevance, since the price still crossed the trend line. So now beginners need to wait for a new upward trend or the end of the new downward trend and only after that should you look for new opportunities to open long positions.

2) Novice traders are now advised to consider short positions, as a new downward trend has formed. The last sell signal has not yet been canceled, so it can be left open with an initial target of 1.3819. You can also close it when the MACD indicator turns up or leave it open and set Stop Loss to breakeven.

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

Analytics and trading signals for beginners. How to trade EUR/USD on February 18? Analysis of Wednesday. Getting ready for

Trading 17 Fév 2021 Commentaire »

Hourly chart of the EUR/USD pair

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The EUR/USD pair continued its downward movement on Wednesday, which had begun the day before. We did not expect the pair to drop 80 points out of the blue. However, 80 points is not that much. It's just that in the last week the average daily volatility was 40-50 points, so a movement of 80 points in the graph looks like a collapse. In fact - a common, banal downward movement. After breaking the upward trend line, the price immediately continued to move down. And the MACD indicator has not turned upward since yesterday's article was written. Thus, novice traders could, all this time, the whole day, continue to remain in short positions that were opened using yesterday's signal to break the trend line. We were aiming for 1.2086. If beginners closed short positions near this level, they could get 20 points of profit. If the closing was made on the MACD reversal to the upside, then the deal should be opened and you could be in profit by around 60 points. Anyway, congratulations on your profit. The trend is now downward. Thus, we recommend waiting for the MACD indicator to discharge and create a new sell signal. It is impossible to form a new trend line or channel now, since there has not yet been a single round of correction in the downward movement.

There was only one interesting report on Wednesday - the report on retail sales in the United States, which quite unexpectedly turned out to be significantly better than forecasts. Analysts predicted an increase by 1.1% in January on a monthly basis, while in reality, retail sales rose by 5.3% m/m. Thus, exceeding the forecast by almost five times. Traders could buy the US dollar after this report was released. However, the dollar was rising all day (growth of the dollar = fall of the euro/dollar pair). Thus, this report only supported the bearish sentiment in the US trading session.

Beginners will have a completely secondary report on applications for unemployment benefits in the United States. The number of secondary applications is expected to continue to decline to 4.4 million. However, not so long ago Federal Reserve Jerome Powell said that the real unemployment in America is now not 6.3%, as the statistics say, but 10 percent. Thus, these data on applications are not particularly significant.

Possible scenarios on February 18:

1) Long positions have lost their relevance, as the price settled below the rising trend line. And so novice traders should not trade bullish right now. Moreover, a new upward trend is unlikely to form tomorrow, therefore, most likely, buy orders will not have to be considered on Thursday.

2) Trading bearish is currently relevant. But after a sufficiently strong downward movement, at least a small upward correction is required, which will allow the MACD indicator to discharge to the zero level and create a new sell signal. Also, an upward pullback can make it possible to form a downward trend line or channel, which will also help in trading. On a new sell signal, you are advised to open short positions while aiming for 1.2076 and 1.2048. Since we do not know how strong the correction will be, the maximum Take Profit should be 40-50 points.

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 in the Forex market should remember that every trade cannot be profitable. Developing a clear strategy and money management are the keys to success in trading over a long period of time.

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

Luxembourg Inflation Accelerates To 1.9%

Trading 17 Fév 2021 Commentaire »

Luxembourg's headline inflation accelerated in January and prices rose from the previous month, driven by higher prices for oil products. Consumer price inflation accelerated to 1.9 percent in January from 0.6 percent in the previous month, figures from the statistical office showed Wednesday. The statistical office attributed the acceleration to the shift in the sales period, which this year will only be included in the results for February. Without this effect, inflation was 0.4 percent. Compared to the previous month, consumer prices rose 0.7 percent in January. Separately, the statistical office forecast 1.7 percent inflation for this year. Price growth would be supported by the recovery in oil prices while underlying inflation would remain contained, the agency said. Inflation is expected to rise to 1.8 percent next year, led by the economic recovery and the indexation of salaries.


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

UK House Price Inflation Highest Since October 2014

Trading 17 Fév 2021 Commentaire »

UK house price inflation accelerated in December to its highest level in over six years, official data showed Wednesday. The house price index rose 8.5 percent year-on-year following a 7.1 percent increase in November, the Office for National Statistics said. The rate of inflation was the highest since October 2014. The average house price hit a record high GBP 252,000 in December. On a seasonally adjusted basis, average house prices rose 1.3 month-on-month in December following an increase of 1.2 percent in the previous month.


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U.S. Homebuilder Confidence Unexpectedly Inches Higher In February

Trading 17 Fév 2021 Commentaire »

Homebuilder confidence in the U.S. has unexpectedly seen a modest improvement in the month of February, the National Association of Home Builders revealed in a report on Wednesday.

The report said the NAHB/Wells Fargo Housing Market Index inched up to 84 in February after falling to 83 in January. Economists had expected the reading to be unchanged from the previous month.

The NAHB said the unexpected uptick in homebuilder confidence came as strong buyer demand helped offset supply chain challenges and a surge in lumber prices.

"Demand conditions remain solid due to demographics, low mortgage rates and the suburban shift to lower cost markets," said NAHB Chief Economist Robert Dietz.

"But we expect to see some cooling in growth rates for residential construction in 2021 due to cost factors, supply chain issues and regulatory risks," he added. "Some builders are at capacity and may not be able to expand production due to these headwinds."

The modest increase by the housing market index came as the gauge charting traffic of prospective buyers rose to 72 in February from 68 in January.

The index gauging current sales conditions held steady at 90, while the component measuring sales expectations in the next six months fell to 80 in February from 83 in January.

On Thursday, the Commerce Department is scheduled to release a separate report on new residential construction in the month of January.

Housing starts expected to decrease by 0.7 percent to an annual rate of 1.658 million, while building permits are expected to slump by 1.5 percent to a rate of 1.678 million.


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Sharp Rise In U.S. Retail Sales Buoys Dollar

Trading 17 Fév 2021 Commentaire »

The U.S. dollar spiked higher against its major counterparts in the European session on Wednesday, as the nation's retail sales rebounded sharply in January amid the additional government stimulus, signaling an economic recovery from the crisis.

Data from the Commerce Department showed that U.S. retail sales rebounded much more than anticipated in the month of January.

The Commerce Department said retail sales spiked by 5.3 percent in January after sliding by a revised 1.0 percent in December.

Economists had expected retail sales to jump by 1.1 percent compared to the 0.7 percent decrease originally reported for the previous month.

Excluding sales by motor vehicle and parts retailers, retail sales soared by 5.9 percent in January after tumbling by a revised 1.8 percent in December.

Economists had expected ex-auto sales to increase by 1.0 percent compared to the 1.4 percent slump originally reported for the previous month.

Data from the Labor Department showed that U.S. producer prices jumped much more than expected in the month of January.

The Labor Department said its producer price index for final demand surged up by 1.3 percent in January after rising by 0.3 percent in December. Economists had expected producer prices to increase by 0.4 percent.

The Fed minutes, due at 2:00 pm ET, is expected to reaffirm the central bank's commitment to maintain an accommodative monetary policy to attain employment goal.

In an interview with CNBC, St. Louis Fed President James Bullard said on Tuesday that the dollar's position as the world's reserve currency was safe.

U.S. inflation was in excellent condition right now, but it would likely move up this year.

Market prices were not showing signs of a bubble, even though he noted stocks were "highly valued."

The dollar rose in the Asian session, driven by a surge in U.S. Treasury yields amid concerns about a possible rise in inflation.

The USD/CHF pair gained 0.7 percent, approaching an 8-day high of 0.8979. At yesterday's trading close, the pair was quoted at 0.8920. Immediate resistance for the dollar is likely seen around the 0.92 level.

The greenback added 0.6 percent to hit a 9-day high of 1.2030 against the euro. The pair was worth 1.2106 when it closed deals on Tuesday. The greenback may face resistance around the 1.18 region, if it gains again.

Data from Eurostat showed that Eurozone's construction output dropped for the first time in three months in December.

The construction output decreased 3.7 percent month-on-month in December, after a 2.3 percent growth in November.

The greenback rose back to 106.21 against the yen, a pip short of more than a 5-month peak of 106.22 seen in the Asian session. The pair had closed Tuesday's deals at 106.04. Further rally in the currency may challenge resistance around the 108.00 region.

Data from the Ministry of Finance showed that Japan posted a merchandise trade deficit of 323.9 billion yen in January.

That beat forecasts for a shortfall of 600 billion yen following the 751 billion yen surplus in December.

The greenback was up by 0.4 percent against the pound, at a 5-day high of 1.3841. The pound-greenback pair had ended yesterday's trading session at 1.3902. Next near term resistance for the greenback is found around the 1.34 level.

Data from the Office for National Statistics showed that UK consumer price inflation rose marginally in January.

Consumer price inflation rose slightly to 0.7 percent from 0.6 percent in December. The rate was forecast to remain stable at 0.6 percent.

After falling to 1.2682 at 5:00 pm ET, the greenback turned higher against the loonie, touching a 5-day high of 1.2737. The greenback was trading at 1.2684 a loonie at yesterday's close. Should the currency rallies again, 1.29 is possibly seen as its next resistance level.

The greenback approached a 5-day high of 0.7725 against the aussie, climbing from a low of 0.7772 seen at 3:45 am ET. The greenback was worth 0.7754 per aussie at Tuesday's New York session close. The greenback may test resistance near the 0.75 level.

The latest survey from Westpac Bank and the Melbourne Institute showed that the Australian economy is gradually starting to pick up steam in January, with a leading index forecast of 4.48 percent - up from 4.24 percent in December.

The growth rate of the Index continues to point to above trend growth in the Australian economy through 2021.

The greenback reached as high as 0.7158 against the kiwi, setting nearly a 2-week high. At Tuesday's close, the pair was valued at 0.7210. Extension of the greenback's upward trading is likely to lead it to a resistance around the 0.70 level.

The Fed minutes from the January 26-27 meeting are set for release at 2:00 pm ET.


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U.S. Business Inventories Climb Slightly More Than Expected In December

Trading 17 Fév 2021 Commentaire »

Largely reflecting a jump in retail inventories, the Commerce Department released a report on Wednesday showing U.S. business inventories increased by slightly more than expected in the month of December.

The Commerce Department said business inventories climbed by 0.6 percent in December after rising by 0.5 percent in November. Economists had expected another 0.5 percent increase.

Retail inventories jumped by 1.2 percent during the month, while manufacturing and wholesale inventories both edged up by 0.3 percent.

The report also showed business sales increased by 0.8 percent in December after coming in unchanged in the previous month.

Manufacturing sales spiked by 1.7 percent and wholesale sales surged up by 1.2 percent, more than offsetting a 0.6 percent drop in retail sales.

With inventories and sales both climbing, the total business inventories/sales ratio in December was unchanged from the previous month at 1.32.


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*U.S. Housing Market Index Inches Up To 84 In February

Trading 17 Fév 2021 Commentaire »

U.S. Housing Market Index Inches Up To 84 In February


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