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British Pound Boosted by BoE Unity; USD Inching Higher Pre-Bernanke

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ASIA/EUROPE FOREX NEWS WRAP

After yesterday’s trade which saw the US Dollar slight across the board, the Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) is struggling to rebound off of its lowest level since June 26, as nervous market participants await Federal Reserve Chairman Ben Bernanke’s testimony this morning in Washington DC. Notably, among the majors, the British Pound has arrived as top performer, with the GBPUSD surging above $1.5200 earlier, as the Bank of England released the first meeting Minutes under newly-minted Governor Mark Carney.

As opposed to the July 4 policy meeting that produced a massive Sterling selloff, the reaction to the Minutes’ release today stands in dramatically contrasting position. Indeed, whereas the inclusion of a policy statement and ensuing shift to include forward guidance as part of its monetary policy produced dovish speculation, the Minutes today showed that policymakers have unified behind Governor Carney, with 9-0 votes on both the Asset Purchase Target (currently £375B) and the main interest rate (0.50% since March 2009).

Accordingly, with the BoE in wait-and-see mode – policymakers suggested that policy remains “appropriate” as hopes for economic recovery later in 2013 take hold – the British Pound has enjoyed a shot in the arm of relief. Depending on what ‘hat’ the Fed chairman wears to his testimony today – the one from May 22 and June 19, or the one from July 10 – the GBPUSD could see its gains diminished or amplified.

Read more: Chinese GDP Sets Table for Improved Risk amid CPI Data from EZ, UK, US

Taking a look at European credit, government debt has eroded only slightly after the relatively less dovish BoE, and ahead of Fed Chairman Bernanke’s testimony; overall, peripheral credit suffered after the May 22 and June 19 Bernanke sightings. The Italian 2-year note yield has increased to 1.701% (+1.8-bps) while the Spanish 2-year note yield has increased to 1.993% (+3.8-bps). Similarly, the Italian 10-year note yield has increased to 4.485% (+2.5-bps) while the Spanish 10-year note yield has increased to 4.702% (+3.0-bps); higher yields imply lower prices.

RELATIVE PERFORMANCE (versus USD): 10:35 GMT

GBP: +0.32%

CHF: +0.01%

EUR: -0.11%

CAD:-0.22%

NZD:-0.39%

AUD:-0.46%

JPY:-0.57%

Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): -0.67% (+0.06%prior 5-days)

ECONOMIC CALENDAR

British_Pound_Boosted_by_BoE_Unity_USD_Inching_Higher_Pre-Bernanke_body_Picture_1.png, British Pound Boosted by BoE Unity; USD Inching Higher Pre-Bernanke

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TECHNICAL ANALYSIS OUTLOOK

British_Pound_Boosted_by_BoE_Unity_USD_Inching_Higher_Pre-Bernanke_body_x0000_i1028.png, British Pound Boosted by BoE Unity; USD Inching Higher Pre-Bernanke

EURUSD: Yesterday I said that “with back-to-back Hammers on the daily chart amid price recovering the 50% retracement of the July low/high, it appears that a retest of the critical 1.3175/245 zone may be necessary before another dip.” This zone has been approached but not yet broken, indicating that that “short-term price action is thus biased lower unless $1.3200/10 is breached.Overall, a [weekly] close below 1.2800 tentatively triggers the broader HS pattern, whose measured move points to a return to the June 2010 lows near 1.1875. A break of 1.3175/245 puts 1.3300 and 1.3400/20 in focus.

British_Pound_Boosted_by_BoE_Unity_USD_Inching_Higher_Pre-Bernanke_body_x0000_i1029.png, British Pound Boosted by BoE Unity; USD Inching Higher Pre-Bernanke

USDJPY: No change as prices have ranged the past five days: “The rejection of the 76.4% Fib retracement at ¥101.35/40 (May high to June low) is only a near-term setback, as the break off of the late-May to mid-June correction in the pair completed the last week of June. …longs preferred into early next week. Indeed, the 50% retracement of the June low to July high at 98.75 held as support and the pair has already bounced higher; a run at 102.00 shouldn’t be ruled out this week. A daily close below 98.75 negates this bias; a move to 97.00 would be anticipated on a reversal lower.”

British_Pound_Boosted_by_BoE_Unity_USD_Inching_Higher_Pre-Bernanke_body_x0000_i1030.png, British Pound Boosted by BoE Unity; USD Inching Higher Pre-Bernanke

GBPUSD: While the ‘big picture’ move towards $1.4225/40 is underway, the first Fibonacci extension objective at 1.4850/53 was reached and has produced a rebound. Resistance found at 1.5170/80 (21-EMA, 23.6% Fib January high to July low) broke earlier, biasing price higher into 1.5275/300 (July highs, 55-EMA). A rebound could see the pair back up towards 1.5390/400 (38.2% Fib), which has proven to serve as both support and resistance since April.

British_Pound_Boosted_by_BoE_Unity_USD_Inching_Higher_Pre-Bernanke_body_x0000_i1031.png, British Pound Boosted by BoE Unity; USD Inching Higher Pre-Bernanke

AUDUSD: No change: “Despite chopping around and through said level, the AUDUSD has more or less held the 38.2% Fibonacci retracement off the 2008 low to the 2011 high at $0.9141. While fundamentally I am long-term bearish, it is worth noting that the most readily available data shows COT positioning remains extremely short Aussie...A Bullish Broadening Wedge may be forming at the lows as a base; 0.9750/75 would be the target on a close above 0.9415.”

British_Pound_Boosted_by_BoE_Unity_USD_Inching_Higher_Pre-Bernanke_body_x0000_i1032.png, British Pound Boosted by BoE Unity; USD Inching Higher Pre-Bernanke

SP 500: No change: “Now price finds itself on its way towards mid-June swing highs and the 76.4% Fib retracement (May high June low) at 1655/60. Gains have accelerated, with the SP 500 achieving the 88.6% Fib retracement at 1672/75 overnight; a test of the yearly and all-time high at 1687.4 shouldn’t be discounted yet.1640 is key support for bulls.”

British_Pound_Boosted_by_BoE_Unity_USD_Inching_Higher_Pre-Bernanke_body_x0000_i1033.png, British Pound Boosted by BoE Unity; USD Inching Higher Pre-Bernanke

GOLD: No change “Gold has fallen into the 10/20 RSI support region, where price has held on numerous probes lower ultimately producing a short-term rally. More recently, daily RSI has only dipped into this region in mid-February and mid-April…Basing just below $1200/oz shouldn’t be dismissed, as at 1189.91 lies the 100% extension of March high/April low/April high move, as well as the 61.8% extension of the October high (post-QE3 announcement)/April low/April high move at 1192.” It should be noted that the rally off of Friday’s low has produced a maximum of +10.02% so far, eclipsing the rebound seen from late-May to early-June, when Gold rebounded by +6.36%.

— 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

Analys från DailyFX

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

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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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