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Pound Boosted by PMI Ahead of BoE; Euro Struggles Before ECB

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ASIA/EUROPE FOREX NEWS WRAP

Mixed data overnight has thrown the majors for a loop, with recent underperformers the Australian Dollar and the British Pound as top performers by mid-morning in Europe, while the recently strong Euro and Japanese Yen are the worst performers. As always, the start of a new month brings about the ever-important PMI surveys. Here’s where they fell to provoke a shuffle among recent best/worst performers in FX:

Australian PMI Manufacturing (JUL): 42.0 from 49.6

Chinese PMI Manufacturing (JUL): 50.3 versus 49.8 expected, from 50.1

Euro-Zone PMI Manufacturing (JUL F): 50.3 versus 50.1 expected unch

UK PMI Manufacturing (JUL): 54.6 versus 52.8 expected, from 52.9

While the Australian and Chinese data have produced only a modest move higher by the Australian Dollar, focus today is centered around the British Pound and the Euro ahead of the Bank of England and European Central Bank policy meetings today, respectively. Both currencies were hampered by the introduction of “forward guidance” at the July meetings, and today could see similar results, depending on what point of view each central bank takes.

Overall, for the both the BoE and the ECB, it boils down to this: will the focus be on the upswing in recent growth prospects (bullish for the EUR and GBP); or will it be on ensuring interest rates stay lower for an extended period of time (bearish for the EUR and GBP).

Read more: Join Currency Analyst Christopher Vecchio to discuss the BoE at 06:45 EDT/10:45 GMT

Taking a look at European credit, peripheral yields continue to edge lower ahead of the ECB – a sign of dovish expectations. The Italian 2-year note yield has decreased to 1.523% (-2.1-bps) while the Spanish 2-year note yield has decreased to 1.858% (-2.0-bps). Similarly, the Italian 10-year note yield has decreased to 4.369% (-3.2-bps) while the Spanish 10-year note yield has decreased to 4.618% (-2.1-bps); lower yields imply higher prices.

RELATIVE PERFORMANCE (versus USD): 09:30 GMT

GBP: +0.03%

AUD: -0.03%

CAD: -0.08%

NZD:-0.39%

CHF:-0.40%

EUR: -0.41%

JPY:-0.80%

Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): +0.08% (+0.81%prior 5-days)

ECONOMIC CALENDAR – UPCOMING NORTH AMERICAN SESSION

Pound_Boosted_by_PMI_Ahead_of_BoE_Euro_Struggles_Before_ECB_body_Picture_1.png, Pound Boosted by PMI Ahead of BoE; Euro Struggles Before ECB

See the DailyFX Economic Calendar for a full list, timetable, and consensus forecasts for upcoming economic indicators. Want the forecasts to appear right on your charts? Download the DailyFX News App.

TECHNICAL ANALYSIS – CHART OF THE DAY

Pound_Boosted_by_PMI_Ahead_of_BoE_Euro_Struggles_Before_ECB_body_x0000_i1028.png, Pound Boosted by PMI Ahead of BoE; Euro Struggles Before ECB

GBPUSDMy focus remains on the GBPUSD with the BoE policy meeting today. The key support noted yesterday – “that guided the pair off of the March lows, coinciding with the 23.6% Fibonacci retracement of the yearly high/low move…at $1.5150/75” – has held and now back-to-back daily Hammers might potentially evolve.

However, I find that risk remains skewed to the downside, as the Fed couldn’t knock back the US Dollar; the BoE should strike a dovish tune; and US NFPs on Friday look to be strong after the strong private sector jobs report yesterday.

I thus maintain: “A break below eyes a move to 1.5000 as former daily RSI trend support comes under pressure. Overall, the big picture calls for a move lower into 1.4225/40, the 100% extension off of the yearly high to the March low, extension drawn to the June high; the 61.8% extension at 1.4816 held as support on July 9 (low was 1.4815).”

— Written by Christopher Vecchio, Currency Analyst

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

To be added to Christopher’s e-mail distribution list, please fill out this form

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EURUSD Weekly Technical Analysis: New Month, More Weakness

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What’s inside:

  • EURUSD broke the ‘neckline’ of a bearish ‘head-and-shoulders’ pattern, April trend-line
  • Resistance in vicinity of 11825/80 likely to keep a lid on further strength
  • Targeting the low to mid-11600s with more selling

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Coming into last week we pointed out the likelihood of finally seeing a resolution of the range EURUSD had been stuck in for the past few weeks, and one of the outcomes we made note of as a possibility was for the triggering of a ’head-and-shoulders’ pattern. Indeed, we saw a break of the ’neckline’ along with a drop below the April trend-line. This led to decent selling before a minor bounce took shape during the latter part of last week.

Looking ahead to next week the euro is set up for further losses as the path of least resistance has turned lower. Looking to a capper on any further strength there is resistance in the 11825-11880 area (old support becomes new resistance). As long as the euro stays below this area a downward bias will remain firmly intact.

Looking lower towards support eyes will be on the August low at 11662 and the 2016 high of 11616, of which the latter just happens to align almost precisely with the measured move target of the ‘head-and-shoulders’ pattern (determined by subtracting the height of the pattern from the neckline).

Bottom line: Shorts look set to have the upperhand as a fresh month gets underway as long as the euro remains capped by resistance. On weakness, we’ll be watching how the euro responds to a drop into support levels.

For a longer-term outlook on EURUSD, check out the just released Q4 Forecast.

EURUSD: Daily

EURUSD Weekly Technical Analysis: New Month, More Weakness

—Written by Paul Robinson, Market Analyst

You can receive Paul’s analysis directly via email bysigning up here.

You can follow Paul on Twitter at@PaulRobinonFX.

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Euro Bias Mixed Heading into October, Q4’17

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Euro Bias Mixed Heading into October, Q4'17

Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.

EURUSD: Retail trader data shows 37.3% of traders are net-long with the ratio of traders short to long at 1.68 to 1. In fact, traders have remained net-short since Apr 18 when EURUSD traded near 1.07831; price has moved 9.6% higher since then. The number of traders net-long is 15.4% lower than yesterday and 16.4% higher from last week, while the number of traders net-short is 0.4% higher than yesterday and 10.5% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD prices may continue to rise. Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EURUSD trading bias.

— Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

To be added to Christopher’s e-mail distribution list, please fill out this form

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British Pound Reversal Potential Persists Heading into New Quarter

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British Pound Reversal Potential Persists Heading into New Quarter

Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.

GBPUSD: Retail trader data shows 38.2% of traders are net-long with the ratio of traders short to long at 1.62 to 1. In fact, traders have remained net-short since Sep 05 when GBPUSD traded near 1.29615; price has moved 3.4% higher since then. The number of traders net-long is 0.1% higher than yesterday and 13.4% higher from last week, while the number of traders net-short is 10.6% lower than yesterday and 18.3% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPUSD prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current GBPUSD price trend may soon reverse lower despite the fact traders remain net-short.

— Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

To be added to Christopher’s e-mail distribution list, please fill out this form

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