EUR/USD: Italy, Draghi, Brexit

Trading 16 jan 2019 Commentaire »

The foreign exchange market in anticipation of key events of today, month, and possibly - the year. The British Parliament will deliver its verdict on Brexit late tonight (and possibly late at night), so today's trading is cautious and quite volatile. In particular, at the beginning of the US session, the euro/dollar pair surprised traders with a downward impulse toward the founding of the 14th figure. Considering the fact that the pound was relatively calm at the same time, it was possible to conclude that Brexit had nothing to do with it.

Later it became known that the single currency reacted so keenly to the statements of the Italian prime minister, who criticized the European Central Bank. Italy again reminded of itself, although traders turned over this Chapter at the end of last year, when Rome and Brussels agreed on a budget, thus preventing a disciplinary procedure. However, now conflict situations have arisen in a somewhat different plane. The fact is that the ECB is seriously concerned about the state of the Italian banking sector, especially after a number of recent events. I recall that in early January, the European regulator took control of the tenth largest bank in Italy, Banca Carige. The European Central Bank has appointed three temporary administrators and a supervisory committee, thereby replacing the bank's board of directors.

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And here it is worth noting that Banca Carige is one of the most troubled Italian banks, which was provided with assistance in the amount of 320 million euros from the Italian Interbank Fund last fall. But because of the frankly inept management and the conflict of shareholders, the bank failed to restructure and get rid of "bad" debts. The Fitch rating agency, in turn, lowered the bank's credit rating to CCC + with a negative outlook, while warning that Carige could go bankrupt. As a result, the Italian National Commission on Companies and Stock Exchanges ceased trading in bank shares, as the board of directors wereunable to reach an agreement on raising capital. This was the last straw for the majority of the members of the Board of Carige, after which the leadership was transferred to the temporary administrators appointed by the European Central Bank. By the way, after that, both Italian and German government bonds collapsed, putting significant pressure on the euro.

The above situation did not remain without consequences. Two weeks later, that is, today, the ECB demanded that Italian banks prepare reserves to cover the so-called "bad loans" for seven years. Italy's Vice Prime Minister Silvio Matteo "with hostility" took this demand, calling it "irresponsible." In his opinion, the European regulator demonstrates double standards and abuses its powers, using them for political purposes. He also noted that the central bank's intervention on banks which are "undesirable", can be an expensive cost for Italy- Matteo announced the amount of 15 billion euros. In addition, the Italian Deputy prime minister warned that the European regulator by its actions could provoke political and financial instability in the country.

Such harsh statements came as a complete surprise, so the single currency reacted accordingly. Mario Draghi, who spoke today in the European Parliament, added fuel to the fire. He said that the latest macroeconomic indicators turned out to be "much weaker" than forecasts, and this fact suggests that stimulating the economy through soft monetary policy is "still necessary."

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He also said that the regulator will pursue an accommodation policy in the foreseeable future until inflation rises to the target level. Given the fact that inflation has recently shown only negative dynamics, it is not difficult to build an appropriate logical chain. In other words, the chances of an ECB rate hike within the current year are melting before our eyes, especially in the face of uncertain prospects for Brexit.

By the way, it was Brexit's question that put pressure on the pound and the dollar in the second half of today: and the closer the time to "X hour", the more volatility is expected in the market, and for no apparent reason. For example, the dollar index fluctuated without any enthusiasm throughout the day, but by the end of the day it soared up, although the producer price index in the United States and the Empire Manufacturing index were worse than expected (the last figure dropped to 1.5-year lows). The general nervousness of the market affects the dynamics of the US currency, although there are still no significant reasons for strengthening the greenback.

All this suggests that before a vote in the British Parliament, traders are best to take a wait-and-see attitude: events in London will have an impact not only on the pound or the euro, but also determine the mood of the entire foreign exchange market.

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Trading tips for the GBPUSD currency pair – placing trading orders (January 15)

Trading 16 jan 2019 Commentaire »

The pound/dollar currency pair for the previous day's trading day showed volatility equal to the average daily 111 points, resuming an ambiguous upward move. From the point of view of technical analysis, we see that the short-term pullback turned into further growth, up to the level of 1.2929, which we do not suck adequately in anticipation of a big event. Many traders believe that this fluctuation is connected with the emotional attitude and reflects a certain bay before a sharp fall, but this, as you understand, is just a hypothesis. The news background is heating up in the run-up to the UK parliament, Theresa May, in turn, randomly shouts to chants how bad things will be if they don't approve the agreement. Experts, in turn, are inclined to believe that the agreement will not be approved.

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The economic calendar today has statistics from the United States, an index of retail sales, but, as I wrote earlier, the world's only news is the vote in Parliament.

Further development

Analyzing the current trading schedule, we see that the rapid growth turns into decline and it is more logical to see stagnation ahead by voting, but I already doubt that this will be so many emotions. We can say only one thing that we have been provided to the rally, if we refer to the majority opinion and do not approve the agreement, the current bay will go to a sharp decline, where the marks of 1.2770/1.2700 will fly quickly. In turn, the major players strongly recommend taking a pause in the positions, since due to the high volatility, losses in the event of emotional bumpiness can be great. If you are a speculator, it is possible to look at the values of 1.2810 when setting short positions. Long positions are considered already in fact.

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Analyzing a different sector of timeframes (TF), we see that in the short term, there was a downward interest against the background of the current decline. Intraday and mid-term perspective maintains an upward mood. Indicators indicators on the eve of a vote can be arbitrarily changed.

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Weekly volatility / Measurement of volatility: Month; Quarter; Year

Measurement of volatility reflects the average daily fluctuation, based on monthly / quarterly / year.

(January 15 was based on the time of publication of the article)

The current time volatility is 60 points. Now everything depends on the vote, and the volatility in any outcome will exceed the average daily value.

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Key levels

Zones of resistance: 1.2920 *; 1.3000 ** (1.3000 / 1.3050); 1.3200 * 1.3300; 1.3440 **; 1.3580 *; 1.3700

Support areas: 1.2770 (1.2720 / 1.2770) **; 1.2620; 1.2500 *; 1.2350 **.

* Periodic level

** Range Level

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GBP/USD. January 15. Results of the day. In a few hours, the fate of Brexit will be known.

Trading 16 jan 2019 Commentaire »

4-hour timeframe

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The amplitude of the last 5 days (high-low): 93p - 94p - 73p - 156p - 112p.

Average amplitude for the last 5 days: 106p (98p).

The British pound sterling on the second trading day of the week a few hours before the voting in the British Parliament is losing ground against the US currency. It should be noted that the previous day, the House of Lords rejected Theresa May's proposal regarding Brexit. Now it's up to the House of Commons. And then ... what will happen further remains unknown. If the vote fails, then Jeremy Corbyn, the leader of the Labour Party, is ready to put forward a vote of no confidence against May, which will now be considered by the entire parliament, and not just by the Conservative Party, like last time. However, if May's plan is not approved, in principle, this will mean that the current prime minister will leave her post. How does all this affect the pound sterling? We believe that failure in voting is very likely and in the short term will put a lot of pressure on the pound sterling, as it will mean the senselessness of the two-year negotiations with the European Union. Failure with a high probability will also mean a "hard" variant of the country's exit from the EU, which is certainly less attractive financially. There is another option in which a country can remain in the European Union, but for this, at a minimum, it will be necessary to change the government and take advantage of the decision of the European Court regarding Article 50 of the Lisbon Treaty, and at the most hold a new referendum. By the way, about 100 deputies of the European Parliament have already offered the British to think about the new referendum, promising to support the country if it refuses to exit.

Trading recommendations:

The GBP/USD pair is declining ahead of the Brexit vote. We do not recommend to open any positions in the current situation, as it is associated with high risks. The pair can be extremely volatile in the next few hours.

The same applies to sell orders. If you open any position, trying to "predict" the decision of the Parliament and the reaction of the majority of traders, then be sure to put up Stop Loss protective orders.

In addition to the technical picture, fundamental data and the timing of their release should also be taken into account.

Explanation of illustration:

Ichimoku Indicator:

Tenkan-sen-red line.

Kijun-sen – blue line.

Senkou span a – light brown dotted line.

Senkou span B – light purple dotted line.

Chikou span – green line.

Bollinger Bands Indicator:

3 yellow lines.

MACD:

Red line and histogram with white bars in the indicator window.

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EUR/USD. January 15. Results of the day. Traders have focused on the meeting of the Parliament of Great Britain

Trading 16 jan 2019 Commentaire »

4-hour timeframe

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The amplitude of the last 5 days (high-low): 63p - 121p - 85p - 83p - 31p.

Average amplitude for the last 5 days: 76p (88p).

The EUR/USD currency pair on Tuesday, January 15, a day that could be crucial for the UK, Theresa May and the current government, and is simply very important for the EU, continued to decline a few days ago. However, in the US trading session, the European currency began to grow. However, all these movements can be completely unrelated to the evening vote in the British Parliament. We have already written several times about what decisions can be made by the UK government. We will not repeat. From our point of view, the May plan for Brexit will not be adopted. And in this case new political peripeteias will begin with a possible second referendum, new negotiations with the EU. If the parliament approves the Chequers plan, then it will be a frank surprise for everyone, and especially for the euro currency and the pound sterling. In this case, both European currencies can get substantial support. Literally in an hour, the speech of the Chairman of the European Central Bank, Mario Draghi, will begin, which in his speech may touch on the topic of monetary policy and the topic of Brexit. In the course of the day, not a single important macroeconomic report was published either in America or in the European Union. Thus, in the last hours ahead of the meeting of the Parliament of Great Britain, it is recommended not to aggravate the situation and not to risk in vain. From a technical point of view, the picture needs to be clarified, since a new "dead cross" has been formed, but the price failed to consolidate below the critical line. In general, the best option for traders is to remain out of the market until the final Brexit decision appears in the media.

Trading recommendations:

The EUR/USD pair continues its downward movement. Formally, shorts are now relevant in small lots for the purpose of the support level of 1.1386. A Stop Loss order is required, as well as increased caution in the coming hours.

Long positions can be considered not earlier than the consolidation of the price above the Kijun-sen line with the first target of 1.1526, and then – to 1.1560. In this case, the initiative on the instrument will again fall into the hands of the bulls.

In addition to the technical picture, fundamental data and the timing of their release should also be taken into account.

Explanation of illustration:

Ichimoku Indicator:

Tenkan-sen-red line.

Kijun-sen – blue line.

Senkou span a – light brown dotted line.

Senkou span B – light purple dotted line.

Chikou span – green line.

Bollinger Bands Indicator:

3 yellow lines.

MACD:

Red line and histogram with white bars in the indicator window.

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

Brexit’s Night: the main scenarios

Trading 16 jan 2019 Commentaire »

The main event of the day is a historic vote in the British Parliament, where deputies will make their verdict on the proposed deal. Most experts and currency strategists talk about the high probability of Theresa May being defeated, despite certain optimistic signals. According to the already established "tradition", on the eve of a key event on the market, numerous rumors appeared that often contradicted each other: some sources said that the most influential members of the Conservative Party decided to support the deal, while other insiders assured journalists the opposite. Considering the whole background of the issue, skepticism still prevails in the market, which, however, does not prevent the pound from keeping within the 28th figure.

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The British currency yesterday received an impulse for its growth on two facts. First, according to many sources, some opponents of Theresa May (among the Conservatives) began to doubt their position, and, therefore, today can vote for the approval of the agreement. This is a parliamentary association of eurosceptics-Conservatives (European Research Group), which includes almost 50 deputies. The problem is that there is no consolidated position among them: even if one of the influential representatives of this group decided to support the deal, this does not mean that May can count on the approval of all the others. Nevertheless, the market jumped at such rumors, after which the demand for British currency increased.

In addition, the pound received some support from Brussels, however, in my opinion - of a very dubious nature. The fact is that the European Union sent an open letter to the British parliament yesterday, explaining its approach to Brexit's main unresolved problem - the regime for controlling the border 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 transitional period so that the parties could have time to prepare a mutually beneficial agreement on future cooperation.

Yesterday, Theresa May "presented" the EU's appeal to the British Parliament and again tried to convince the deputies that there was no alternative to the proposed deal. In addition, she somewhat tightened her rhetoric, stating that in the event of a failed vote, Brexit might not take place, and the country would "fall apart" due to a severe political crisis.

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Despite all the above factors, almost everyone in the market is confident that the deal in its current form will not find support among the majority of British deputies. Therefore, we are not discussing the probability of victory/defeat, but the possible scale of today's defeat. So, according to analysts, if the number of opponents of the deal will exceed 100-120 deputies, the May government is likely to resign (as an alternative – Labour will put to the vote a vote of no confidence in the prime minister). If the number of opponents fluctuates around 20-50, the government will still have a chance to approve the deal during the second vote.

Let me remind you that according to the recently adopted norm, the Cabinet of Ministers should provide the Parliament with a "plan B" within three days, that is, a new plan for the country's exit from the EU. If the transaction undergoes significant changes, then Brexit will still have to be postponed for several months in order for London to coordinate the innovations with Brussels. And although May is categorically against postponing the "deadline", in this case there will be no choice - either a chaotic scenario or a postponement of the release date. By the way, this is one of the most problematic options, as the European Union has repeatedly stated that it is not set to revise the agreement reached and sit down at the negotiating table again.

There are two more scenarios, the implementation of which cannot be excluded. These are early parliamentary elections and a new referendum. By the way, according to a number of experts, Theresa May herself can initiate early elections if the deputies do not support the proposed deal en masse. If the prime minister's proposal is supported by two-thirds of the Parliament, the country enters a new election, while Brexit date will probably be postponed to a later date (July or September). The "sub-item" of this scenario is the option of announcing a vote of no confidence in the prime minister. Laborites have long been threatening to put this question to the vote - literally last weekend, the party leader said that "this will take place very soon." Most likely - right after a failed vote or after disapproval of "Plan B".

It is worth noting that if the Cabinet of Ministers will be suspicious, then there are also several scenarios. Over the next two weeks, the Parliament should (or rather, can) express confidence in the alternative composition of the government proposed by the Conservatives (in other words, only the replacement of the prime minister, but not of the cabinet ministers). If this does not happen, then special elections will be scheduled, which will be held no earlier than in 25 days. Also, the Parliament may "change its mind" and, within the framework of the aforementioned two weeks, lend confidence to the Theresa May government - then the prime minister will continue her work. There are more unlikely options: a Conservative minority government (but with a different prime minister), a coalition government, or a government formed by the Labour Party.

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Well, in the end - a new referendum. This option was categorically rejected by Theresa May, but if the government is dismissed, her opinion will be advisory in nature. It is worth noting that a repeated referendum is quite difficult to justify from a legal point of view: for this, it is necessary to make changes to several laws at once (on political parties, elections, referendum, etc.). In addition, for a new plebiscite, it will require a separate piece of legislation, with the written terms and conditions. At the moment, this is the most unlikely option, although it cannot be excluded.

Thus, today for many traders there will be a sleepless night. At about 6:00 pm (London time) Theresa May will speak in the British parliament with a "parting word", followed by discussion and voting for the draft transaction. It is difficult to say under what scenario further events will develop - each of the above options has the right to life.

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"Authorities" put on the British pound

Trading 15 jan 2019 Commentaire »

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It will take a majority of the votes of the legislators so that Theresa May's unpopular Brexit agreement will be approved. If the document is rejected by 100 people, it will increase the risks, in particular, the risk of strengthening the opposition and early elections will increase, which will lead to a drop in the pound.

Nevertheless, the sterling in this situation has the opportunity to resist, since the market will follow the chances of the British prime minister to the second vote. This opinion is shared by global strategists surveyed by Bloomberg. The agency has published the views of the most experienced analysts on the likely outcome of a meaningful vote and the potential reaction of the pound.

Credit Agricole

If there are 100 votes or less against the agreement, this can lead to consolidation of sterling. With a greater number of votes against in conjunction with a vote of no confidence from the Labor Party, the pound may have to part with recent conquests. In the case of a loss of Theresa May with a margin of 100 or more votes, the pair GBP / USD will reach $ 1.25. Credit Agricole has a deal targeting $ 1.39 for half a year. Banking analysts are confident that the British pound will soon begin an uptrend.

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Mizuho Bank

The bank has little faith in the complete defeat of May, while allowing for this development. Over 220 votes against a pound fall to $ 1.2250. With a less significant margin of 20–100 votes, the sterling is likely to jump to $ 1.3350. If the project is rejected by 20 people, then the British currency is waiting for a rally with a potential yield of $ 1.35.

Danske Bank

The rejection of the draft agreement by 100 or more votes is already a negative for the pound. The bank does not believe that Teresa May will receive approval from Parliament. Further, "we will enter uncharted territory," experts wrote. Maybe anything: the second referendum, the second vote. The odds of the pair GBPUSD bank were in the range of $ 1.25– $ 1.30 until further clarification of the situation.

Rabobank

"Given that the EU does not show any signs and willingness to make concessions, May will probably need a loss with a slight margin in order, as the market thinks, to win the second round, perhaps less than 50 votes," experts write.

This can reassure a pound, which will rise to $ 1.30. Defeat by a margin of 200 votes will not allow the British prime minister to keep the lead. Labor's far-left government will put pressure on sterling, and GBP / USD risks falling to $ 1.15– $ 1.20.

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German economy – a new headache for the euro

Trading 15 jan 2019 Commentaire »

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The expected slowdown in the growth rate of the German economy hit the euro. The single European currency fell on concerns about a wider downturn in Europe. The region's largest economy is experiencing a cooling of the global economy and the effects of trade conflicts caused by the policies of US President Donald Trump.

The German economy grew by 1.5 percent in 2018, the lowest in five years. Soon after the release of GDP data, the euro fell to a five-day low of $ 1.1423. The first alarming "bell" for the euro was the unexpected drop in industrial production in Germany, which raised concerns about the ECB's plans to stop stimulating. There is an opinion that, although these figures are in line with expectations, the gloomy picture as a whole reinforces the doubts that the ECB will raise interest rates in general in 2019.

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In the short term, the biggest risk for Europe and the euro is the uncoordinated Brexit, which can occur at the most inappropriate moment for the German economy. For the same reason, it is necessary to closely monitor the sterling on the eve of a vote in parliament.

The dollar is growing and overall looks very attractive against this background, despite recent losses caused by fears of a global slowdown and expectations of a pause in the Fed's rate hike this year.

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Pound sterling pending an important vote on Brexit

Trading 15 jan 2019 Commentaire »

Today, British parliamentarians will need to make a decision that can determine the scenario for the United Kingdom's withdrawal from the European Union. The further dynamics of the British currency depend on the voting results in the House of Commons.

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The question of whether the country's Prime Minister Theresa May can get parliamentary approval for her bill on Brexit terms or not is still open.

The further dynamics of the British currency depend on the voting results in the House of Commons.

There are several options for the development of events.

1. Theresa May wins.

If the parliament approves the draft transaction promoted by the head of government, the pound will rise in price against the dollar, as a result of which, the GBP/USD pair will easily reach the level of 1.31 and then continue to rally to 1.35.

2. Theresa May will lose a minimum margin (50 or fewer votes).

This outcome is likely to signal that the position of the Prime Minister is not as weak as it is currently believed, and she has enough support in the government to try to push the deal again.

It is not excluded that Theresa May, herself, will consider this a victory and will continue negotiations with the EU on the mechanism of "bet stop".

In this case, the pound can strengthen to $1.30, but not more.

3. The head of the cabinet will lose by a large margin.

Losing 100 or more votes will be a serious challenge for Theresa May, and she will have to extend the 50th article of the Lisbon Treaty or withdraw Britain from the EU without a deal. Regardless of what the next steps of the Prime Minister will be, the defeat of May will provoke a sharp drop in the pound exchange rate, which will push the GBP/USD pair below 1.25. The further fate of the British currency will depend on how quickly the head of government announces a backup plan of action and how aggressively the opposition insists on holding early parliamentary elections or a repeat Brexit referendum.

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Theresa May: The Path to Calvary

Trading 15 jan 2019 Commentaire »

So, this day has come. The British Parliament will vote today whether it will support the agreement with the EU, concluded by Prime Minister Theresa May.

Experts promise a crushing defeat in May.

Is it possible that this will actually become a vote of no confidence in the May government?

- Yes, probably. How can the prime minister rule the country when the most important decision of the parliament failed?

Most likely, the failure of the agreement with the EU will lead to the resignation of the cabinet and to new elections quite possibly.

Furthermore, Britain's withdrawal from the EU will take place at the end of March 2019. And if the agreement is failed, there will be an exit without an agreement and this is very negative for the British economy.

Why do MP's vote against the agreement?

Part of it is because they are generally against the exit of Britain and the latter, it is because they believe that May is bending too far under the EU. Although my opinion is not at all like this - rather, the EU is too far towards Britain.

Voting is scheduled for 19.00 London time.

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BITCOIN Analysis for January 15, 2019

Trading 15 jan 2019 Commentaire »

Bitcoin managed to push higher above the $3,600 area after a certain bounce off the area from where the price is currently making a correction before pushing further upwards in the process. The price is currently held by 200 EMA as resistance while Kijun and 20 EMA are holding the price as support. The price movement above Kumo Cloud also indicates that the bullish pressure is quite stable now and may lead to further bullish momentum in the coming days. Though the trend is currently bearish, but having certain bullish engulfing momentum in the process, further upward momentum is expected as the price breaches above 200 EMA with a daily close. As the price remains above the $3,500-600 area, the impulsive bullish pressure is anticipated to continue in order to push the price higher towards the $4,000 area in the future.

SUPPORT: 3,000, 3,500, 3,600

RESISTANCE: 4,000, 4,250, 4,500

BIAS: BEARISH

MOMENTUM: VOLATILE

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