KostiaForexMart Posted September 26, 2022 Share Posted September 26, 2022 Tips for beginner traders in EUR/USD and GBP/USD on September 26, 2022 Details of the economic calendar for September 23 Last week ended with the publication of preliminary data on business activity indices in Europe, the United Kingdom and the United States. The indices came out badly, except for the US. Eurozone manufacturing PMI fell from 49.6 to 48.5 points, while services PMI fell from 49.8 to 48.9 points. UK manufacturing PMI rose from 47.3 to 48.5 points, while services PMI recorded a decline from 50.9 to 49.2 points. The composite index fell from 49.6 to 48.4 points. In the United States, the picture is reversed, with the manufacturing PMI up from 51.5 to 51.8. Services PMI rose from 43.7 to 49.2 points. The publication of an anti-crisis plan to rescue the UK economy was considered the key event on Friday. The largest tax cut in 50 years, the removal of the 45% surcharge for the highest paid workers, and a sharp reduction in taxes on dividends are expected. Not only that, but the plan includes a long-term freeze on household electricity rates, which experts estimate will cost around £60bn over the six months starting in October. All these actions are reminiscent of all-in tactics, where huge borrowings will be needed to cover the budget deficit. This news brought down the value of the British currency by about 8% against the US dollar. Simultaneously with the fall of the pound sterling, the British stock market also collapsed. This pivotal decision has raised doubts in economic and political circles about the future sustainability of the UK economy and concerns about whether the UK's new economic approach is sustainable. Media "The UK is behaving a bit like an emerging market turning itself into a submerging market," former U.S. Treasury Secretary Larry Summers told Bloomberg TV. "Britain will be remembered for having pursued the worst macroeconomic policies of any major country in a long time." Analysis of trading charts from September 23 Since Friday, the euro has lost more than 250 points in value against the US dollar. As a result, the quote peaked at 0.9553, last seen in June 2002. The GBPUSD currency pair did not just collapse by almost 1,000 points (about 8.5%), the quote also broke through all possible levels and updated the lows. History has never seen such low price values. The cause and effect of the fall is described above. Economic calendar for September 26 Today, the macroeconomic calendar is empty, the publication of important statistical data is not expected. It is worth noting that the tense information background persists, and market participants will focus on it. Trading plan for EUR/USD on September 26 At the moment, the formation of a technical pullback is observed on the trading chart, which, under current circumstances, is considered justified in the market due to overheating of short positions in the euro. It is worth noting that the speculative mood prevails in the market, which sets in motion an inertial course. Thus, it is impossible to exclude from the possible scenario the subsequent depreciation of the euro after the pullback, where technical signals will be ignored. Trading plan for GBP/USD on September 26 The minimum price value that has arisen since the opening of a new trading week is 1.0345. There was a technical pullback relative to it, approximately by 3.8% (400 points), which, like the euro, is justified on the market due to the catastrophic overheating of short positions in the pound sterling. In this situation, despite the historical values, the market retains a high interest in the downward cycle. Speculators, on the occasion of inertia, can still continue to decline, ignoring technical signals. In this case, we can see the price approaching parity—1.0000. The situation could improve if the BoE postpones planned bond sales and the Treasury is forced to announce a medium-term fiscal consolidation plan to restore market confidence. In this case, the pullback may turn into a full-scale correction, restoring the exchange rate of the British currency. Quote Link to comment Share on other sites More sharing options...
KostiaForexMart Posted September 27, 2022 Share Posted September 27, 2022 Tips for beginner traders in EUR/USD and GBP/USD on September 27, 2022 Details of the economic calendar for September 26 The macroeconomic calendar was empty; no important statistics were published. Investors and speculators worked out the information flow of the past week. The UK Treasury yesterday commented on everything that is happening in the country's economy, the main theses: - The medium-term financial plan will be presented on November 23. - The budget plan will set out additional details, including ensuring that the share of UK debt to GDP falls in the medium term. At the same time, the Bank of England made its comments: - We closely monitor the market for significant revaluation of financial assets; - We will not hesitate to raise the interest rate to bring inflation back to the target level of 2.0%. According to media reports, traders are waiting for an unscheduled rate hike by the Bank of England amid the collapse of the national currency. Perhaps this was the reason for such a significant pullback. There is no confirmation of rumors regarding an unscheduled rate hike. If the regulator does not take any drastic action, the pound will continue to decline. Analysis of trading charts from September 26 The EUR/USD currency pair opened a new trading week with an update of the low of the downward trend. As a result, the quote reached the levels of June 2002, at 0.9553, relative to which the stage of technical pullback occurred. The GBP/USD currency pair has set several records at once. The absolute low was updated, the quote overcame the level of 1985, eventually reaching the value of 1.0345. The scale of the pound's collapse from last Friday to the beginning of Monday's trading amounted to almost 1,000 points, while the pullback caused by the fatal overheating of short positions on the pound was about 550 points. Economic calendar for September 27 Today, data on orders for durable goods in the United States will be published, which may decrease by 0.9%. This is a fairly strong reduction, which foreshadows a noticeable decline in consumer activity, which is the locomotive of the American economy. As a result, these negative data, if confirmed, can put pressure on dollar positions. Also, U.S. Federal Reserve Chairman Jerome Powell and ECB President Christine Lagarde are scheduled to give a speech. It is worth listening to what they will say, although everything has already been said before. Time targeting: Fed Chairman Jerome Powell Speech – 11:30 UTC ECB President Christine Lagarde Speech – 11:30 UTC U.S. Durable Goods Orders (August) – 12:30 UTC Trading plan for EUR/USD on September 27 At the moment, there is a characteristic stagnation, where the pullback stage has slowed down its formation despite the continuing technical signal about the oversold euro. In order for the pullback to be prolonged and become the starting point for a full-size correction, the quote first needs to stay above the value of 0.9700 for at least a four-hour period. At the same time, the downward scenario will become relevant again as soon as the current low is updated. Trading plan for GBP/USD on September 27 In this situation, there is still a speculative rush on the market, which allows new price jumps. In order to prolong the current pullback, the quote needs to stay above the high of the previous day at 1.0928. At the same time, the scenario of further decline will be considered by traders if the price holds below 1.0630. Quote Link to comment Share on other sites More sharing options...
KostiaForexMart Posted September 28, 2022 Share Posted September 28, 2022 Tips for beginner traders in EUR/USD and GBP/USD on September 28, 2022 Details of the economic calendar for September 27 Orders for durable goods in the United States decreased by 0.2% during the period of August. This is not the best indicator, but they expected a reduction of 0.9%. The divergence of expectations served as a stimulus for the growth of dollar positions. At the same time, data on new home sales in the US were also published, which recorded a strong growth of 28.8% in August. In addition to macroeconomic statistics, there were quite a lot of comments from the Fed, where everyone unanimously talks about the risks associated with inflation. Chicago Fed President Charles Evans: - The average forecast for the interest rate at the end of the year is between 4.25%–4.5% and 4.6% by the end of next year. - For us, task number 1 is to bring inflation under control. - The tightening of monetary policy will continue for some time. - 4.5% unemployment in the United States is still a good level. - At some point in time there will be a need to reduce the rate of interest rate increases. But now it needs to be further improved. - This year, our forecasts for an objective increase in interest rates by another 100–125 basis points. - We see long-term inflation expectations at acceptable levels. - I expect that the level of inflation will noticeably decrease within two years. - I expect a slight increase in GDP this year. Former New York Fed President William Dudley: - The Fed has made it clear that it intends to fight inflation. - During the September meeting, the regulator clearly indicated that they are ready to raise the interest rate in order to return inflation to an acceptable level. - Based on the forecasts of the Fed, GDP growth is expected in the coming years. - It looks like there is no clear consensus among the Fed representatives on how long they will continue to fight inflation. St. Louis Fed President James Bullard: - We have serious problems with inflation in the country. - The credibility of the inflation targeting regime is under threat. - The labor market is very strong, which gives us the opportunity to fully focus on inflation. - We must correctly and timely respond to inflation. - At subsequent meetings, we certainly must continue to raise the interest rate. - The possible maximum interest rate is about 4.5%. - We'll probably have to stick with the high stakes for a while. Minneapolis Fed President Neel Kashkari: - We believe that the markets understand what the Fed is doing. - Representatives of the Fed are united and committed to reducing inflation. - We are moving at a fast pace, it is dangerous. - The Fed is working to bring inflation back to 2%. We need to keep raising interest rates. - We need to further tighten monetary policy to see evidence that we are succeeding in reducing inflation, and move on to slow down. - I'm not sure that the current monetary policy is tight enough. Philadelphia Fed President Patrick Harker: - We are working to achieve an acceptable level of inflation in the country. - The housing market is a key segment in the growth of inflation - Inflation in the country is very high in many categories San Francisco Fed President Mary Daly: - Our goal is to return inflation to the level of 2.0%. - The level of inflation is very high, we must properly assess the current situation. Conclusion based on the comments of the Fed representatives Based on the above material, a clear "hawkish" approach is visible. The regulator intends to fight high inflation by all possible means, which they point out in their statements. For this reason, we see a further decline in the US stock market, as well as an increase in the value of the dollar against other currencies. Analysis of trading charts from September 27 The EUR/USD currency pair resumed its decline after a short pullback. As a result, the local low of the downward cycle at 0.9553 was updated, which indicates the prolongation of the main trend. The GBP/USD currency pair ignores the fact that it is treading water at historical lows. In fact, the technical signal of oversold is covered by a high rush for short positions on the part of speculators. Economic calendar for September 28 Today the macroeconomic calendar is empty, all hope is for the information flow, where speeches by the Fed and ECB representatives are expected again. Trading plan for EUR/USD on September 28 Stable price retention below 0.9550 will lead to a subsequent decline. In this case, the technical signal about overheating of short positions can be ignored by market participants. A possible prospect of a move is a decline towards the lows of 2001 and 2000. An alternative scenario of market development is considered by traders in the form of another price rebound from the 0.9550 value area, as it happened at the beginning of the trading week. Trading plan for GBP/USD on September 28 In this situation, keeping the price below the 1.0600/1.0630 area in a four-hour period may well lead to a subsequent decline towards the recent local low. It is worth noting that with such overheating of short positions, spontaneous consolidations may occur, which, in turn, will lead to a technical pullback. Until the quote is stable below the control area, the risk of the subsequent formation of the amplitude of 1.0630/1.0930 remains. Quote Link to comment Share on other sites More sharing options...
KostiaForexMart Posted September 29, 2022 Share Posted September 29, 2022 USD/JPY: When will Groundhog Day end? The USD/JPY pair continues to tread in the 144-145 range, in which it has been stuck since the beginning of the week. Consolidation is pretty boring for both bulls and bears, but there is no trigger on the horizon yet. This year, the Japanese currency has fallen in price relative to its American counterpart by more than 20%. The reason for the weakening of the yen was the strong monetary divergence between the US and Japan. Last week, the dollar-yen pair set another high-profile record. After the Federal Reserve raised rates again, and the Bank of Japan left the indicator unchanged, the quote jumped to a new 24-year high at 145.90. The sharp fall of the yen forced the Japanese government to intervene in support of its national currency for the first time since 1998. As a result of the intervention, the USD/JPY pair went into a steep peak. However, the asset did not stay as a loser for long. It only took a couple of days for it to get back on track leading to the main goal for today – level 145. Since the beginning of this week, the dollar-yen pair has already come close to the cherished mark several times, but each time it rolled back. According to analysts, the main deterrent for dollar bulls at the moment is the risk of repeated currency intervention. Given the huge number of warnings from the Japanese authorities, traders still prefer not to get into trouble. However, the situation may change dramatically if a particularly powerful trump card in favor of the dollar appears on the market. You may ask: isn't it here now? Indeed, the dollar received strong support from the Fed last week. The US central bank not only raised rates, but also made it clear that it intends to tighten its monetary policy in the future. This week, American politicians have further intensified hawkish rhetoric, which contributed to the explosive growth of the dollar. The greenback has reached a new 20-year high, showing impressive dynamics in almost all directions, but not paired with the yen. The psychologically important 145 barrier still remains impregnable for the USD/JPY asset. This suggests that the market has already taken into account the further growth of discrepancies in the monetary policy of the Fed and the BOJ. Now traders need specifics: how big the gap in US and Japanese interest rates can become. If in the near future American officials again talk about raising the indicator by 100 bps, perhaps this will be the very impetus for the dollar, which will move it from the dead point. – Of course, the Japanese Ministry of Finance is aware of the current vulnerability of the yen. Probably, the authorities will continue to intimidate traders with interventions to deter speculators, Rabobank analysts warn. – Nevertheless, we are still guided in our 3-month forecast for the USD/JPY pair to the level of 147. As for the short-term dynamics of the asset, do not expect miracles in the coming days. Most experts believe that the dollar-yen pair will remain in the zone of broad consolidation. The technical picture for the USD/JPY 200-day exponential moving average at 141.20 scales higher. This indicates that the long-term trend is still stable. At the same time, the relative strength index (RSI) fluctuates in the range of 40.00-60.00, which indicates that the movement continues within the current range. For a decisive bearish reversal, the asset needs to fall below the previous week's low at around 140.35. Dollar bulls may push the pair higher after overcoming the previous week's high at 145.90. This may lead the quote to the August 1998 high at 147.67. And its breakthrough will send the dollar even further upward – to psychological resistance in the area of 150.00. Quote Link to comment Share on other sites More sharing options...
KostiaForexMart Posted October 3, 2022 Share Posted October 3, 2022 Technical Analysis of GBP/USD for October 3, 2022 Exchange Rates analysis Technical Market Outlook: The GBP/USD pair has bounced 9.11% from the lowest level since 1985 located at 1.0352 and is approaching the technical resistance located at 1.1210. The next technical resistance is located at 1.1410 and only a sustained breakout above this level would change the outlook to bullish. Please notice, the level of 1.1410 is the target for the wave 5 as well, so a corrective cycle might occur after this level is hit. On the other hand, the next target for bears is located at the parity level of 1.0000, so please keep an eye on this level. The intraday technical support is seen at the level of 1.0929. The momentum remains strong and positive, so the short-term outlook is bullish. Weekly Pivot Points: WR3 - 1.15812 WR2 - 1.13861 WR1 - 1.12966 Weekly Pivot - 1.1191 WS1 - 1.11015 WS2 - 1.09959 WS3 - 1.08008 Trading Outlook: The bears are still in charge of Cable market and the next target for them is the parity level. The level of 1.0351 has not been seen since 1985, so the down trend is strong, however, the market is extremely oversold on longer time frames already. On the other hand, in order to terminate the down trend, bulls need to break above the level of 1.2275 (swing high from August 10th). Quote Link to comment Share on other sites More sharing options...
KostiaForexMart Posted October 4, 2022 Share Posted October 4, 2022 Tips for beginner traders in EUR/USD and GBP/USD on October 4, 2022 Details of the economic calendar for October 3 Data on the European manufacturing sector came out worse than the preliminary estimate. The index fell during the period of September from 49.6 to 48.4, despite the expected decline to 48.5 points. In the United Kingdom, manufacturing PMI for September rose from 47.3 to 48.4 but was predicted to rise to 48.5 points. Meanwhile, the United States manufacturing PMI rose to 52.0 from 51.5, with forecast growth of 51.8. There was no market reaction to the statistical data for the reason that all the attention of traders was focused on the information and news flow. So the leverage for speculators was the rumor that the UK intends to cancel the plan to reduce the tax rate from 45% to 40%. This rumor was subsequently confirmed by UK Finance Minister Kwasi Kwarteng via Twitter. "We get it, and we have listened," he wrote. Based on this information, there was speculative interest in the position of the pound sterling, which locally jumped in value by 180 points, pulling the euro along with it. Analysis of trading charts from October 3 The EURUSD currency pair, during the corrective movement, reached the resistance level of 0.9850, relative to which there was a reduction in the volume of long positions on the euro. As a result, there was a rebound in the market, which eventually turned into stagnation within the 0.9750/0.9850 range. The GBP/USD currency pair continued to form a corrective move from the local low of the downward trend. As a result, in about a week, the British currency recovered its value by 10%, which is more than 1,000 points. Economic calendar for October 4 Today, the euro may receive support from buyers as producer prices in the EU may accelerate from 37.9% to 43.6%. That is, with such data, inflation in Europe will continue to grow, which will lead to further tightening of the ECB's monetary policy. That is, interest rates will continue to rise. During the American trading session, data on the Job Openings and Labor Turnover Survey (JOLTS) for August in the United States will be published, which is expected to decline. This is a negative factor in the labor market. Time targeting: EU Producer Price Index (Aug) – 09:00 UTC US JOLTS Job Openings (Aug) – 14:00 UTC Trading plan for EUR/USD on October 4 With the opening of European platforms, a breakdown of the upper limit of stagnation occurred. This step led to the prolongation of the corrective move in the market. A stable hold of the price above 0.9850 may eventually lead to a move towards parity. Trading plan for GBP/USD on October 4 Despite such impressive price changes, which herald a technical overbought signal, the pound still has an upside margin. For this reason, holding the price above the level of 1.1410 in a four-hour period may lead to a subsequent increase in the volume of long positions. This process will lead to the prolongation of the current cycle. If the level area of 1.1410 has a proper impact on sellers, then the first thing that will occur is a slowdown, relative to which a reverse price movement will be considered. Quote Link to comment Share on other sites More sharing options...
KostiaForexMart Posted October 5, 2022 Share Posted October 5, 2022 Tips for beginner traders in EUR/USD and GBP/USD on October 5, 2022 Exchange Rates analysis Details of the economic calendar for October 4 Producer prices in the EU accelerated more than expected, from 38.0% to 43.3%, that is, these data indicate that the limit of inflation growth in the eurozone has not yet been reached. Thus, the ECB has plenty of incentive to further tighten monetary policy. In this case, interest rates will continue to rise, which may support the European currency. During the American trading session, data on the Job Openings and Labor Turnover Survey (JOLTS) in the United States were published, where negative indicators for the labor market are recorded. The number of vacancies in the US in August hit a 14-month low, falling by 1.8 million from a record high in March. This is a characteristic call for the Fed that the labor market is under threat. All this may lead to a slowdown in the pace of rate increases, waiting for the ADP report and the report of the US Department of Labor. Analysis of trading charts from October 4 The EURUSD currency pair accelerated its upward movement, as a result of which the quote reached the expected parity level (1.0000). The scale of the euro's strengthening from the local low of the downward trend amounted to a little more than 450 points. The GBPUSD currency pair has overcome the resistance level of 1.1410 during a rapid corrective movement from the local low of the downward trend. The move indicates a strong desire by speculators to continue rising despite the fact that the pound sterling has already gained more than 1,100 points in the 7 trading day period. Economic calendar for October 5 Today, business activity data in the services sector and the composite index in Europe, the United Kingdom, and the United States are expected. It should be taken into account that these are the final data, and if they coincide or practically coincide with the preliminary estimate, then the reaction on the market should not be expected. During the American trading session, in addition to the PMI index, the ADP report on employment in the United States will be published, which may rise by 200,000. The ADP report is often viewed by traders as a leading indicator of the US Department of Labor report. Time targeting: EU Services PMI (Sept) – 08:00 UTC UK Services PMI (Sep) – 08:30 UTC ADP report – 12:15 UTC US Services PMI (Sep) – 13:45 UTC Trading plan for EUR/USD on October 5 At the moment, parity is considered by traders as a strong resistance level. Thus, a price rebound scenario is allowed, which will lead to a partial recovery of dollar positions relative to the recent correction. The upward cycle prolongation scenario will be used if the price holds above 1.0050 in a four-hour period. Trading plan for GBP/USD on October 5 In this situation, there is an overheating of long positions on the pound, which fully allows for a scenario of stagnation or pullback. In this case, the return of the price below 1.1400 may temporarily weaken the exchange rate of the British currency, strengthening short positions on it. At the same time, there is still speculative interest in the market, which allows a prolongation of the correction if the quote overcomes 1.1525. Under this scenario, the subsequent growth of the pound sterling towards the level of 1.1750 is possible. Quote Link to comment Share on other sites More sharing options...
KostiaForexMart Posted October 7, 2022 Share Posted October 7, 2022 Tips for beginner traders in EUR/USD and GBP/USD on October 7, 2022 Exchange Rates analysis Details of the economic calendar for October 6 The rate of decline in retail sales in the EU accelerated from -1.2% to -2.0%, which at first glance is better than forecasts that indicated a decline to -2.2%. It is worth noting that the previous data was revised for the worse from -0.9% to -1.2%. In any case, there is a rather impressive decline in consumer activity in the EU, which is a negative factor for the economy. During the American trading session, weekly data on jobless claims in the United States were published, which recorded growth. This is a negative factor for the US labor market. Statistics details: The volume of continuing claims for benefits rose from 1.346 million to 1.361 million. The volume of initial claims for benefits rose from 190,000 to 219,000. Analysis of trading charts from October 6 The EURUSD currency pair has corrected quite strongly from the parity level. In just 48 hours, the rate fell by more than 200 points, as a result, the 0.9850 variable support level was passed. Such a rapid decline could well lead to an overheating of euro short positions in the short term. The GBP/USD currency pair has partially lost what it gained during the recovery period. In two trading days, there has been an active decline, as a result of which the quote fell by more than 300 points. The area of 1.1410/1.1525, relative to which a reverse movement has occurred, serves as resistance. Economic calendar for October 7 The main event of the outgoing week is considered to be the report of the United States Department of Labor, which is likely to have a strong impact on the market and speculators. The unemployment rate is forecast to remain unchanged at 3.7%, while 290,000 new jobs could be created outside of agriculture. This is quite a lot, which can create prerequisites for a further reduction in unemployment. Everything indicates that the US dollar may still begin to strengthen, but we should not forget that the US currency is overbought, and everyone understands this very well. Thus, it may turn out that the report will come out well, but its indicators will be compared with the previous ones, where there was an increase in employment by 315,000. As a result, this factor will indicate a loss in the dynamics of the labor market recovery. Time targeting: US Department of Labor Report – 12:30 UTC Trading plan for EUR/USD on October 7 The downward scenario is considered by traders as an inertial one, where technical signals about the local oversold euro will be ignored. In this case, keeping the price below 0.9750 may well stimulate speculators to action. As for the upward scenario, it will be considered by traders if the price returns above the level of 0.9850. Trading plan for GBP/USD on October 7 In this situation, the subsequent increase in the volume of dollar positions may occur when the price is kept below 1.1080, which will lead to a gradual decline to the values of 1.1020 and 1.0900. The upward scenario will be taken into account if the quote holds above 1.1230 in a four-hour period. Quote Link to comment Share on other sites More sharing options...
KostiaForexMart Posted October 10, 2022 Share Posted October 10, 2022 Tips for beginner traders in EUR/USD and GBP/USD on October 10, 2022 Details of the economic calendar for October 7 The main event of last Friday was considered to be the report of the United States Department of Labor, which surprised market participants. The unemployment rate was forecast to remain unchanged at 3.7%. However, US unemployment fell to 3.5%, which was a catalyst for demand for the dollar. Non-farm Payrolls came out slightly below the forecast, but above the consensus of 263,000. A strong labor market can become the trump card of the Fed in the tightening of monetary policy. Analysis of trading charts from October 7 The EURUSD currency pair is moving on a downward trajectory from the parity level, as a result of which the quote dropped by about 270 points in a matter of days. In fact, there is a gradual process of restoring dollar positions relative to the recent correction from local trend lows. Since the middle of last week, the GBPUSD currency pair has entered a phase of active decline. The pound sterling loses about 3.5% in value, which is more than 400 points of a downward move. The price area 1.1410/1.1525 is considered as resistance, against which a change in trading interests occurred. Economic calendar for October 10 Monday is usually accompanied by an empty macroeconomic calendar. Important statistics in Europe, the United Kingdom, and the United States are not expected. In this regard, investors and traders will focus on the labor market data published last Friday, and monitor new incoming information. Trading plan for EUR/USD on October 10 Despite the scale of the weakening of the euro, sellers are still in the market. For this reason, keeping the price below 0.9700 may well lead to a subsequent increase in the volume of short positions. An alternative scenario considers a temporary stagnation relative to the current values, where long positions will be considered if the price returns above the value of 0.9750. Trading plan for GBP/USD on October 10 At the moment, the quote has approached quite close to the level of 1.1000, where earlier in history there was already a reduction in the volume of short positions in its area. Thus, a price rebound cannot be excluded from the possible scenario, which will lead to a partial recovery of long positions on the pound. As for the downside scenario, in order to prolong the current cycle, the quote needs to stay below the level of 1.1000 for at least a four-hour period. Quote Link to comment Share on other sites More sharing options...
KostiaForexMart Posted October 11, 2022 Share Posted October 11, 2022 Tips for beginner traders in EUR/USD and GBP/USD on October 11, 2022 Details of the economic calendar for October 10 Monday, as usual, is accompanied by an empty macroeconomic calendar. Important statistics in Europe, the United Kingdom, and the United States were not published. In this regard, investors and traders have been focused on monitoring the information flow. The main financial topics discussed in the media: • The Bank of England is doubling down on potential bond buybacks as the contingency plan draws to a close. • Fed officials Charles Evans and Lael Brainard continue to point to high inflation. At the same time, they mentioned in their speech that soon it will be necessary to limit the tightening of the monetary policy. Analysis of trading charts from October 10 The EURUSD currency pair follows a downward trajectory from the parity level, which has recently played the role of resistance. Dollar positions have recovered by more than half relative to the recent correction. The GBPUSD currency pair has formed a downward trend from the 1.1410/1.1525 area. As a result, sellers have already managed to weaken the pound by more than 450 points. Relative to the previous day, the quote conditionally stood in one place, having a lateral amplitude within 100 points. On the one hand, the scale of 100 points may seem large, but within two weeks this is the lowest activity, which could play the role of the accumulation of trading forces. Economic calendar for October 11 Today, with the opening of the European session, data on the labor market in the UK was published. The unemployment rate fell from 3.6% to 3.5%, while employment in the country decreased by 109,000, which was expected to grow by 12,000. An additional factor that caused misunderstanding among investors is that the data for employment was for July, and unemployment was for August. With current figures, everything points to the fact that next month the unemployment data may be revised for the worse. Trading plan for EUR/USD on October 11 The downward cycle has already led to the weakening of the euro by more than 300 points since the middle of last week. This price move indicates a technical signal that the euro is oversold in the short term. Based on this, a pullback scenario with respect to the current downward cycle cannot be ruled out. The level 0.9650 serves as a support on the way of sellers. As for the strengthening of the downward cycle, for this scenario, it is necessary to stay below the support level for at least a four-hour period. In this case, speculators will ignore technical oversold signals, and the quote will move towards the base of the downward trend. Trading plan for GBP/USD on October 11 In this situation, the stagnation was formed near the support level of 1.1000. Thus, for a downward scenario, the quote needs to stay below this level for at least a four-hour period. In this case, there will be a subsequent stage of recovery of dollar positions. As for the upward scenario, the quote needs to stay above 1.1120 for it to be considered. With this outcome, a move towards 1.1220 is possible. Quote Link to comment Share on other sites More sharing options...
KostiaForexMart Posted October 13, 2022 Share Posted October 13, 2022 Loretta Mester: Fed sees no progress on inflation As I mentioned in yesterday's article, the Fed's key rate decisions are in the spotlight. If earlier some traders expected a shift to a softer stance, now everyone is betting on further tightening. The regulator is likely to raise the interest rate at least 3 more times at its meetings. Some analysts reckon the Fed may continue to hike rates in 2023. At the start of this year, the Fed planned to raise the benchmark rate to 3.5%. Now, many Fed officials expressed the need to hike the key rate to 4.5%. If inflation does not begin to decline at the pace set by the central bank, the watchdog may switch to aggressive tightening. The Fed's top priority is to tame inflation to 2%. However, the central bank admits that it may take years. Notably, inflation is not only an economic issue but also a political one. If Joe Biden's administration fails to slow down soaring consumer prices, the Democrats may lose their majority in the Senate and Congress. This is why Joe Biden and the Democratic Party need to push inflation down as soon as possible. The Fed is an independent organization. Yet, it should also achieve some positive shifts in the fight against inflation as confidence in the central bank has declined sharply during the pandemic and in the years after the pandemic. The inflation report is due tomorrow. Analysts do not expect a noticeable slowdown. The reading is likely to decline by 0.1-0.2% on an annual basis. Yesterday, Cleveland Fed President Loretta Mester said that the Fed is still unable to cap galloping inflation. "Unacceptably high and persistent inflation remains the key challenge facing the US economy. Despite some moderation on the demand side of the economy and nascent signs of improvement in supply-side conditions, there has been no progress on inflation," Mester said. When inflation comes down, the Fed will hold interest rates at high levels for some time to assess the cumulative impact of what the Fed has done. "Monetary policy is moving into restrictive territory and will need to be there for some time in order to put inflation on a sustained downward path to our 2% goal," she said, adding "I do not anticipate any cuts in the fed funds target range next year." In my opinion, the Fed is ready to raise the interest rate even above 4.5%. If this scenario comes true, demand for the US currency may climb even more. The US dollar is steadily growing amid monetary tightening. So, it may rise even higher amid sharper rate hikes. If traders have already priced in the likelihood of the rate increase to 4.5%, they may factor in a bigger rate increase. If investors have ignored two ECB rate hikes and seven Fed rate hikes, then they may continue to do so in the coming months. I believe that the US currency is likely to reach new highs. In this case, the current wave markup of the euro/dollar pair is correct. However, the wave markup of the pound/dollar pair needs adjustments with the construction of a downward trend section. I believe that there is a construction of a downward trend section now but it may end at any moment. The instrument could complete another upward correction wave. So, I advise selling with the target level located near 0.9397, the Fibonacci level of 423.6%. The MACD indicator is pointed downward. It is better to be cautious as it is unclear how long the euro may decline. Quote Link to comment Share on other sites More sharing options...
KostiaForexMart Posted October 14, 2022 Share Posted October 14, 2022 Analysis and trading tips for GBP/USD on October 14 Analysis of transactions in the GBP / USD pair The price test of 1.1100 happened when the MACD line was far above zero, so the upside potential was limited. No other signals appeared for the rest of the day. GBP/USD rose on Thursday because the September data on US CPI indicated a slowdown in inflation. As for today, the quarterly bulletin of the Bank of England is due to be released, but it is unlikely to harm the pound. The only thing that could affect it is the decision of the central bank regarding bond purchases. If the Bank of England does not extend its program of buying bonds, pound will sharply lose ground against dollar. Then, in the afternoon, data on US retail sales will be released, and this could force the Fed to raise rates further, provided that the figure indicates the persistence of high inflation. Consumer sentiment and inflation expectations from the University of Michigan will likely be ignored, as will speeches from FOMC members Lisa Cook and Christopher Waller. For long positions: Buy pound when the quote reaches 1.1329 (green line on the chart) and take profit at the price of 1.1407 (thicker green line on the chart). Growth will occur as long as the Bank of England continues its program of buying bonds. But remember that when buying, the MACD line should be above zero or is starting to rise from it. Pound can also be bought at 1.1283, however, the MACD line should be in the oversold area as only by that will the market reverse to 1.1329 and 1.1407. For short positions: Sell pound when the quote reaches 1.1283 (red line on the chart) and take profit at the price of 1.1195. Pressure will return if upcoming US reports exceed expectations. But take note that when selling, the MACD line should be below zero or is starting to move down from it. Pound can also be sold at 1.1329, however, the MACD line should be in the overbought area, as only by that will the market reverse to 1.1283 and 1.1195. Quote Link to comment Share on other sites More sharing options...
KostiaForexMart Posted October 17, 2022 Share Posted October 17, 2022 The British Finance Minister has been dismissed, and the Defense Minister is next in line. Exchange Rates analysis The political crisis in the UK is gaining momentum, which cannot but put pressure on the British pound. After the instrument has moved away from its low by more than 1000 basis points, the British pound is in danger again. But this time, political problems have also been added to the economic problems. On Friday, it became known that British Finance Minister Kwasi Kwarteng was dismissed. He spent only 38 days in his position. The reason for the resignation was the shock in the UK's financial markets caused by tax amendments to the legislation. These amendments have not even been adopted yet, and it is unknown whether they will be adopted. They concerned several tax rates, which, according to the British government, should be lowered to reduce the pressure from rising energy prices on households and businesses. However, the tax reduction plan was criticized by economists, and it immediately became known that its implementation would lead to a huge budget deficit. Even the conservatives themselves spoke out against this plan, so the Liz Truss government had to urgently make a statement that the plan was still "raw" and needed improvements. It has already become known that the maximum tax rate of 45% will not be canceled, and the proposed changes may also be canceled for other taxes. Since someone had to "take over" responsibility for the shock in the financial and currency markets, most likely, this role was performed by Kwasi Kwarteng, who personally developed this plan. The media noted the importance of this event because Kwarteng was not just the Minister of Finance but also a close friend and colleague of Truss. Former Foreign Minister Jeremy Hunt may become the new finance minister. However, this is not all the upheaval in Parliament. Yesterday, it became known that Defense Secretary Ben Wallace may resign if Liz Truss reneges on her promise to increase defense spending. Earlier, during the election campaign, Truss promised to increase defense spending to 2.5% of GDP by 2026 and 3% of GDP by 2030. It is reported that this promise prompted Wallace to support the candidacy of Truss and not Rishi Sunak, who refrained from such statements. Jeremy Hunt, who may now take up his new position, has already stated that spending on many items will have to be cut amid the developing recession and the energy crisis in Europe. At this time, there was talk about the possible departure of Wallace, who believed that the defense budget needed to be increased. It is also reported that NATO recommended that all member countries of the union increase their defense budgets to 2.5% of GDP, and the UK was supposed to be one of the first to do so. The Bank of England somehow restored stability in the financial markets through an emergency program of buying bonds for 65 billion pounds. Still, political problems remain very serious, and the recession and the energy crisis may continue to pressure the pound and the UK economy. The wave pattern of the pound/dollar instrument implies the construction of a new upward trend segment. Thus, now I advise buying a tool for MACD reversals "up" with targets located above the peak of wave 1. Buy and sell should be careful since it is unclear which wave markings (euro or pound) will require adjustments, and the news background may negatively affect both the euro and the pound. Corrective wave 2 may already be completed. Quote Link to comment Share on other sites More sharing options...
KostiaForexMart Posted October 18, 2022 Share Posted October 18, 2022 Tips for beginner traders in EUR/USD and GBP/USD on October 18, 2022 Details of the economic calendar of October 17 Monday was usually accompanied by an empty macroeconomic calendar. Important statistics in Europe, the United Kindom, and the United States were not published. In this regard, investors and traders monitored the incoming information and news flow. The main financial topics discussed in the media: The new British Chancellor of the Exchequer, Jeremy Hunt, said that Liz Truss's previously announced plans to cut taxes and increase subsidies will not be implemented. It is expected that this will allow the authorities to save about £32 billion. This news flow is pushing the pound up, and due to the positive correlation, the euro is also growing. Analysis of trading charts from October 17 The EURUSD currency pair has updated the high of the past week during the upward movement. As a result, a technical signal arose about a change in trading interests, which led to an increase in the volume of long positions in the euro. The GBPUSD currency pair resumed its upward cycle, as a result of which the quote once again touched the resistance area of 1.1410/1.1525. The third consecutive convergence of the price with the area of resistance indicates a high desire of traders to keep the upward cycle in the market. Economic calendar for October 18 Today, data on industrial production in the United States will be published, where the growth rate may slow down from 3.7% to 3.4%. These statistics may put pressure on dollar positions. Time targeting: US industrial production –13:15 UTC Trading plan for GBP/USD on October 18 Stable price retention above the value of 0.9850 in the future may open the way towards the parity level. Otherwise, stagnation within the current value may lead to a price rebound in the direction of the variable level of 0.9700. Trading plan for GBP/USD on October 18 From a technical point of view, the resistance area is still putting pressure on buyers, but this could change if the price holds above 1.1525 in a four-hour period. In this scenario, the volume of long positions may increase in the market, which will lead to a subsequent increase in the value of the pound sterling. Until then, the scenario of a price rebound from the resistance area cannot be ruled out. Quote Link to comment Share on other sites More sharing options...
KostiaForexMart Posted October 19, 2022 Share Posted October 19, 2022 Gold: When will the downward trend reverse? Gold has lost almost a fifth of its value from its March highs, and to regain that lost luster it must do the impossible—beat the Forex king. This, of course, is about the American dollar, which sweeps away everything in its path. A host of problems in economies outside the US and an aggressive Fed allowed the USD index to climb to a 20-year high. The ascent continues, which pushes the XAUUSD quotes down. For the precious metal to bottom, the dollar must peak. In the past, this has happened when the global economy outside the US has outpaced the US or the Fed has injected colossal amounts of cheap liquidity into financial markets. The Fed is determined. It is willing to sacrifice its own labor market and economy to break the back of high inflation. The futures market and FOMC forecasts suggest that the federal funds rate will rise to 4.6%. However, given the core CPI's stubborn reluctance to slow down, one would expect the ceiling on borrowing costs to be even higher. Barclays predicts growth to 5–5.25%. If this happens, the USD index will continue to rally, and gold will fall into the abyss. Dynamics of gold and USD index The armed conflict in Ukraine, snap elections in Italy, the energy crisis in Europe, turmoil in the financial markets of Britain, and currency interventions in Japan. The list of shocks has not been so rich for a long time. But high inflation and geopolitical risks, as a rule, create a tailwind for gold. Indeed, in March, it jumped above $2,000 per ounce amid the war in Eastern Europe, but then, without options, it ceded the status of the main safe haven asset to the US dollar. And is still in its shadow. What can break the downward trend in XAUUSD? Most likely, a recession in the American economy. In this scenario, the Fed will either slow down the process of tightening monetary policy or reverse it. According to Goldman Sachs, a dovish reversal or transition from raising the rate to lowering it will drive up the price of the precious metal by 18–34%. In my opinion, by the time this happens, there will be many moons in the sky. Kotak Mahindra Bank believes that one of the factors that could slow the carnage in the gold market is increased demand for the physical asset from the largest buyers in the face of India and China. They account for about 50% of the world's precious metal imports. At the same time, the wedding season and the Lunar New Year will raise interest in gold. In my opinion, hardly. When prices fall, it moves from West to East. This is a common process that convinces the stability of the downward trend in XAUUSD. Technically, on the daily chart, the inability of the gold bulls to latch onto the $1,670 an ounce fair value is indicative of their weakness. I recommend keeping the focus on selling the precious metal towards the pivot points at $1,620 and $1,580. Quote Link to comment Share on other sites More sharing options...
KostiaForexMart Posted October 20, 2022 Share Posted October 20, 2022 Tips for beginner traders in EUR/USD and GBP/USD on October 20, 2022 Details of the economic calendar of October 19 UK inflation rose again to a record 10.1% in September. The consumer price index returned to this year's July level when a 40-year record for annual inflation was set. The British currency reacted quite calmly to these data. The quote was gradually decreasing, which fits into the technical picture of the price rebound from the resistance area. In the European Union, inflation data slightly differed from the preliminary estimate, which indicated an increase in consumer prices to the level of 10%. As a result, inflation accelerated from 9.1% to 9.9%. Even though the indicator above is slightly lower, inflation is still very high. Thus, the ECB has all the arguments for a further increase in interest rates. Analysis of trading charts from October 19 The EURUSD currency pair failed to stay above the benchmark value of 0.9850. Instead, a stagnation was formed, which eventually led to a downward momentum, lowering the quote below the 0.9800 mark. The GBPUSD currency pair came close to the price gap at the beginning of the trading week during the downward movement from the lower boundary of the resistance area 1.1410/1.1525. In this case, the gap serves as a support, which led to a reduction in the volume of short positions. Economic calendar for October 20 Today, weekly data on US jobless claims will be published, where figures are expected to rise. This is a negative factor for the US labor market. Statistics details: The volume of continuing claims for benefits may rise from 1.368 million to 1.375 million. The volume of initial claims for benefits may rise from 228,000 to 230,000. Time targeting: US Jobless Claims - 12:30 UTC Trading plan for EUR/USD on October 20 The 0.9750 mark serves as a variable pivot point. To prolong the downward cycle, the quote needs to stay below this value. This move will lead to a depreciation of the euro at least to the level of 0.9700. An alternative scenario for the development of the market will be considered by traders if the price returns above 0.9800. In this case, euro buyers will have a second chance to hold the price above the control value of 0.9850. Trading plan for GBP/USD on October 20 For a technical signal about the prolongation of the downward cycle to appear, the quote needs to stay below 1.1150. In this case, the sellers will open the way in the direction of 1.1000. As for the upward scenario, the current stagnation within the price gap may eventually lead to a price rebound. In this case, a reverse move to the resistance area 1.1410/1.1525 cannot be ruled out. Quote Link to comment Share on other sites More sharing options...
KostiaForexMart Posted October 21, 2022 Share Posted October 21, 2022 Tips for beginner traders in EUR/USD and GBP/USD on October 21, 2022 Details of the economic calendar of October 20 Weekly data on jobless claims in the United States reflected a slight increase in the overall figure. Statistics details: The volume of continuing claims for benefits rose from 1.364 million to 1.385 million. The volume of initial claims for benefits fell from 226,000 to 214,000. What are they talking about in the media? The main news of the past day is the statement of Liz Truss that she is leaving the post of Prime Minister of Great Britain. An interesting fact is that Truss's premiership was the shortest in British history, with only 45 days. The reason for her resignation was the discontent and dissension caused by her radical program of tax cuts and increased spending. This plan drew a sea of criticism from all economic and political circles. How does the market react to her departure? The pound sterling slightly appreciated in value. There were no cardinal changes in the market due to vague prospects. Analysis of trading charts from October 20 The EURUSD currency pair once again rebounded from the control value of 0.9850. As a result, the quote returned to where the trading day on Thursday began. The value of 0.9750 serves as a support. The GBPUSD currency pair, despite the impressive information flow, is moderately active. This suggests a characteristic uncertainty among market participants. As before, the value of 1.1150 serves as a support. Economic calendar for October 21 At the opening of the European session, data on retail sales in the UK were published, which fell from -5.4% to -6.9%, with a forecast of -4.8%. The reaction of the pound sterling to the negative statistics was appropriate—it continued to decline. Trading plan for EUR/USD on October 21 In this situation, traders are guided by two main values at this stage—holding the price below 0.9750 in a downward scenario and 0.9885 in an upward market development. It is worth noting that due to the strong information and news flow in the UK, market speculation may arise, where synchronous price jumps will occur through a positive correlation with the pound sterling. Trading plan for GBP/USD on October 21 In this situation, keeping the price below 1.1150 will increase the chances of sellers for further decline in the direction of 1.1000. It is worth noting that the market is still in confusion. For this reason, chaotic price jumps are possible. Quote Link to comment Share on other sites More sharing options...
KostiaForexMart Posted October 24, 2022 Share Posted October 24, 2022 FX interventions to stop USD rally? The US dollar and the euro opened the week amid a mixed fundamental background. The euro is still under pressure from geopolitical tensions and the energy crisis, while the greenback risks getting into a so-called intervention loop. According to analysts at Nordea Bank, currency interventions carried out in the global market "may dampen the strengthening of USD in the short to medium term." For your reference, FX interventions are done by the countries that seek to prop up their currencies against the US dollar. However, this scenario is very unlikely as most countries do not have "an endless amount of USD at disposal to sell." Nordea Bank is sure that such interventions will fail when the supply of US dollars in these countries runs dry. FX interventions involve selling US Treasuries which adds upward pressure on key rates and leads to a stronger US dollar. Experts warn that this intervention loop may turn out to be negative for the greenback as it could lead to "dollar overshooting." Yet, even this potential failure of USD will not support the euro as it is likely to face a new sell-off wave in the near future. This is quite logical as EUR/USD has been trading within the downtrend since late September 2022. The pair is currently staying in the range of 0.9500 –1.0000. As the geopolitical and economic situation in the EU is getting worse, the euro is set to decline to the lower boundary of this range at 0.9500. At the moment, the euro/dollar pair looks stable although the euro is still depreciating against the dollar. Early on Monday, October 24, EUR/USD was hovering near 0.9839, trying to maintain the balance. The triangle pattern formed after the breakout of the resistance at 1.0000 may become the main catalyst that will push the pair up to the level of 1.0250. The greenback opened this week with another advance that has become typical for the currency. At the same time, records showed that the number of long positions opened by large market players decreased by the end of the previous week after a 3-week rally. However, the number of long positions opened by hedgers remained unchanged. This indicates persistent market uncertainty and low risk sentiment among market participants. Experts stress that financial conditions have been worsening for several weeks now. However, the limit of monetary tightening has not been reached yet. Therefore, the Fed will have to pursue its policy of aggressive rate hikes. Against this backdrop, the stock market tumbled. All measures taken by the Fed are aimed at combating inflation. Most investors expect the US regulator to raise the rate further. It is estimated that the Fed's rate will peak at 5% by May 2023. If so, financial conditions will naturally deteriorate, analysts warn. According to some forecasts, US inflation may reach 4% to 5% in the next 4-8 months. Then, a slowdown may follow. But even so, the US central bank is unlikely to ease its policy. Instead, it could slow down the pace of rate increase. There is an opinion that inflation in the US is caused by transitory factors in contrast to other countries. The situation is believed to improve soon. If this is true then the Fed may focus on economic growth and lower the rate. So, there is a chance that by 2024, the key rate will decline to 4.5–5%. Quote Link to comment Share on other sites More sharing options...
KostiaForexMart Posted October 25, 2022 Share Posted October 25, 2022 GBP/USD. The dollar will soar by the end of the week. It's time for the pound to cool down The pound has been evaluating political news in a positive light since the morning. How will the mood of traders of the British currency develop in the near future and is it worth counting on the growth of the exchange rate in the future? Today, investors are assessing the news about the appearance of a new British prime minister. Rishi Sunak was elected head of the ruling Conservative Party of Great Britain, and will also take the post of prime minister of the country. England has surpassed itself in political twists and turns. Sunak will be Britain's third prime minister this year. In July, Boris Johnson announced his intention to resign. Liz Truss, who was elected in his place, was able to stay in the prime minister's chair for 44 days and also resigned due to an avalanche of criticism against her. Many see the new prime minister as a source of stability. Perhaps there really is some truth in this, when compared with the chaotic rule of the Truss, during which serious volatility was observed in the markets. Time will tell what kind of ruler Rishi Sunak will be, but for now market players are breathing a sigh of relief and are in a cautiously positive frame of mind. Today, the GBP/USD pair rose to 1.1293 from the previous closing level of 1.1275. As expected, the pound may continue to rise in the short term, but it risks failing during the week. Economic data is ahead, and they are likely to show an even greater divergence from the US economy for the worse. While the market has welcomed the recent developments surrounding the election of a new prime minister, they alone can do little to improve Britain's economic prospects. The GBP/USD pair may continue to rise, but estimates regarding the extent of the rate hike are already declining. If the 1.1500-1.1700 range becomes a reality in the very near future, this does not mean that the quote will fly further and higher. Such a scenario is more like a decent short entry point. The target range for the end of the year is still 1.0800-1.1200. Britain released a disappointing PMI on Monday. Indices of activity in the manufacturing sector and the service sector collapsed, falling below market expectations. The composite index in October was 47.2, which is two points lower than in September. Its value has become the lowest in the last two years. In addition, the business activity indicator has been below 50 points for three consecutive months. The reason for the sharp decline in the index in October is called political instability in the country, which caused turmoil in the financial markets. Anyway, the current situation points to the recession that has formed in the country. A reduction in economic growth may occur as early as the third quarter, and in the fourth negative trends will only intensify. The prospects of the pound, among other things, depend on the positioning of the US dollar and its further strength. Will the decline in the dollar index last until the end of the week? Much will depend on how traders react to the upcoming economic reports in connection with the forecast of the Federal Reserve's policy. The focus is on the GDP report for the third quarter and the employment cost index for the same period. Data on wages and inflation will strengthen the hawkish attitude of the Fed. One of the most significant risks for the pound this week will be the US GDP report. It can show that America is emerging from a technical recession, while the UK is entering an active phase of recession. Divergence in economic prospects will undermine the pound's recovery. A serious obstacle is the core PCE price index's release this Friday, the Fed's preferred inflation indicator. The inflation rate is expected to increase from 4.9% year-on-year to 5.2%. If so, it will be more than enough to guarantee the Fed's hawkish attitude, which has helped the dollar reach new heights against many currencies in the weeks since the bank set course to raise the benchmark interest rate to 4.5% by the end of the year and 4.75% at the beginning of the next. In general, the dollar index is forecast to rise to 114.00 this week. Quote Link to comment Share on other sites More sharing options...
KostiaForexMart Posted October 26, 2022 Share Posted October 26, 2022 Tips for beginner traders in EUR/USD and GBP/USD on October 26, 2022 Details of the economic calendar of October 25 The macroeconomic calendar was empty, thus statistical data in Europe, the United Kingdom, and the United States were not published. For this reason, investors and traders paid special attention to the information flow, where Rishi Sunak officially took office as Prime Minister of Great Britain. The main theses of the speech of the new Prime Minister: - The effects of the pandemic on the economy remain. - We will put economic stability at the center of the agenda. - There will be difficult decisions; - We will build an economy that will take full advantage of Brexit. - I'm not scared, I understand that I must restore trust. The British financial sector welcomed the new prime minister; the pound sterling was actively strengthening in value, pulling up the euro. Analysis of trading charts from October 25 The EURUSD currency pair completed fluctuations within the intermediate level of 0.9850. As a result, an inertial upward move appeared on the market, which brought the euro rate close to the parity level. During the past day, the euro exchange rate strengthened at the peak by about 1%, which is about 100 points. The GBPUSD currency pair, during an intensive upward movement, has overcome the lower border of the resistance area of 1.1410/1.1525. This move indicates a high hype for long positions in the pound sterling by market participants. During the past day, the pound sterling appreciated at the peak by about 2%, which is about 200 points. Economic calendar for October 26 Today, the macroeconomic calendar is half empty, only the data on new home sales in the US is expected. September sales may fall sharply, which is a negative factor for the country's economy, which may put pressure on dollar positions. Time targeting: US new home sales – 14:00 UTC Trading plan for EUR/USD on October 26 After an upward rally, the quote temporarily formed a stagnation that lasted throughout the Pacific and Asian sessions. This consolidation led to the accumulation of trading forces, which resulted in a new speculative surge in activity. As for the direction of movement, everything here will depend on how market participants behave within the parity level. In this situation, it would be reasonable to see a rebound due to the technical signal of the euro being overbought in the short term. If the parity level is broken, and the quote is firmly held above it in the daily period, then there is a high probability of a subsequent upward move. In this case, we can see a gradual recovery of the euro. Trading plan for GBP/USD on October 26 At the opening of the European session, buyers of the pound sterling again broke into the market, which led to a new upward impulse. As a result, the quote rose above the resistance area, which may indicate the possibility of prolongation of the current ascending cycle from the low of the downward trend. It should be noted that the technical signal of the prolongation will be confirmed only after the stable holding of the price above the level of 1.1525 in the daily period. Quote Link to comment Share on other sites More sharing options...
KostiaForexMart Posted October 27, 2022 Share Posted October 27, 2022 USD/JPY: USD to come out on top again The currency market seems to have turned upside down. The US dollar, which has remained a king on Forex this year, suddenly began to lose ground. The yen, which is considered the main outsider this year, took advantage of the greenback's weakness which. It rose significantly. Why USD loses ground On Thursday night, the US dollar saw a large-scale sell-off. The US dollar index dived by 1.1%, reaching the monthly low of 109.56. The greenback dropped across the board due to increased expectations of less aggressive tightening by the Fed and more hawkish stances of the ECB and the Bank of England. In light of the recent weak US economic reports, traders have revised their outlooks for the Fed's monetary policy. Investors expect the regulator to raise the interest rate by 75 basis points at the next meeting. However, they believe that the regulator will hardly undertake the same rate increase in December. Aggressive tightening launched by the Fed to tame soaring inflation has adversely affected the economy. The world's largest economy is starting to show signs of slowing down. It may force the Fed to shift to less aggressive rate hikes. If this scenario comes true, it will be rather bearish for the US dollar. This year, the main driver for a rally was the monetary tightening. As the Fed has hiked rates more aggressively than other central banks, the greenback has skyrocketed to multi-year highs against its rivals. It has grown the most versus the yen amid the divergence in monetary policies of the Fed and the BoJ. Since the beginning of the year, the yen has fallen by more than 20%, logging the worst performance among all the currencies. The yen has become an outsider due to the Bank of Japan's commitment to a dovish stance. The regulator maintains its ultra-loose stance, while other major central banks are hiking rates. After expectations of a slowdown in monetary tightening by the Fed have increased, the yen managed to climb. The yen has been growing for two consecutive sessions. This morning, the Japanese currency extended gains. At the time of writing the article, the USD/JPY pair fell by 0.5%, trading around 145.6. This is almost 5% below the high of 152 reached last week. USD likely to rebound Now, the dollar/yen pair is rapidly recovering after recent sell-offs. It has already approached a 32-year low. However, many analysts believe that the current rally of the JPY will be short-lived as the US dollar could assert strength amid strong US economic data. The US GDP report for the third quarter is due today. The indicator is projected to advance by 2.4% following a decrease of 0.6% in the previous quarter. If this scenario comes true, market participants will have to revise their forecasts for the Fed's further plans for monetary policy, abandoning hopes for a softer stance. The US dollar is sure to regain ground, while the yen will resume a downward movement. On top of that, the JPY may decline even more after the results of the BoJ meeting. This event has been the main driver for the yen this week Given a domestic demand shock in Japan, many analysts believe that the Bank of Japan will maintain its ultra-loose monetary policy to spur economic growth. "The Bank of Japan will likely keep its main policy levers unchanged, yet again. Core inflation well above the 2% target and set to hit 3% isn't enough to prompt the BOJ to reduce monetary easing. Stronger wage growth is desired first," Bloomberg emphasizes. The BoJ may keep the interest rate in negative territory, while the ECB may raise the key rate by 75 basis points today. The Fed will do the same next week. This is why the yen may again lose luster with investors. In the short term, it may resume a sharp decline. If the yen collapses to critical levels again, the Bank of Japan will have to intervene once again. Over the past month, the Japanese government has intervened in the forex exchange market three times. One intervention was officially announced. Analysts are sure that there have been two more. However, the Ministry of Finance did not announce them. All interventions had a short-lived effect. The greenback recovered quickly thanks to strong fundamental factors, which boosted bullish bias. Bulls are confident that the pair will climb again despite any intervention. The main thing is that the Fed adheres to its hawkish stance. If so, the US dollar will definitely resume an upward movement. Quote Link to comment Share on other sites More sharing options...
KostiaForexMart Posted October 31, 2022 Share Posted October 31, 2022 Trading plan for EURUSD on October 31, 2022 Technical outlook: EURUSD dropped through the 0.9914 lows intraday on Monday before finding support and reversing sharply to 0.9945. The single currency pair is seen to be trading close to 0.9935 at this point in writing as the bulls prepare to resume higher towards the 1.0170-1.0200 area. The currency pair is testing the backside of the past resistance trend line around 0.9910-20, which now serves as support. EURUSD might have one more rally left to terminate its counter-trend rally, which began from 0.9535 earlier. The proposed target prices are towards 1.0200 and 1.0350, which are also lined up with resistance levels as marked on the daily chart. Immediate support is at 0.9700 on the daily chart and we can expect higher prices from here until it remains intact. EURUSD is currently working on its recent upswing between 0.9700 and 1.0093. Prices are finding support just above the 0.9900 mark and could resume higher from here. Strong intraday support is seen at about 0.9850 as it is also the Fibonacci 0.618 retracement of the above upswing. We are looking higher from here in the near term. Trading idea: Potential rally through 1.0200 and higher against 0.9500 Good luck! Quote Link to comment Share on other sites More sharing options...
KostiaForexMart Posted November 1, 2022 Share Posted November 1, 2022 Euro sadness is growing: macro data makes you sad. And the dollar is no stranger to: either retreat, or win The US currency has once again bypassed the European one, which is seriously puzzled by a new batch of news about inflation. At the same time, the dollar draws confidence in the Federal Reserve's actions, which allows the completion of the current cycle of rate hikes. The greenback significantly strengthened at the beginning of this week, restoring some of the positions lost over the past month. This was largely facilitated by the expectation of another interest rate hike from the Fed, whose two-day meeting is scheduled for November 1-2. According to preliminary calculations, on Wednesday, November 2, the central bank will raise the key rate by 75 bps, to 3.75-4.00%. This will be the fourth step on the Fed's part in raising rates. However, many analysts and market participants doubt the continuation of the Fed's harsh rhetoric. According to experts, after the fourth rate hike by 75 bps, the central bank will take a less aggressive position on this issue. Michael Wilson, currency strategist at Morgan Stanley, is sure of this. He believes that the Fed's rate hike cycle is nearing completion. In support of his words, Wilson cites the inversion of the yield curve of ten-year and three-month US Treasury bonds. Recall that this is one of the key indicators indicating the need for a reversal of the central bank's tight monetary policy to a softer one. However, some experts do not share the optimism of the Morgan Stanley representative. Currency strategists at UBS Global Wealth Management are confident that a reversal in the Fed's policy is unlikely, since the inflation rate in the US remains high. Against this background, the central bank will have to raise the rate until inflation recedes, the bank emphasizes. The current situation puts pressure on the dollar, which, despite the current tension, is gradually strengthening. Against this background, the EUR/USD pair has been declining for the third consecutive day, continuing to struggle with the pull of the downward trend. On the morning of Tuesday, November 1, the EUR/USD pair was cruising near 0.9911. This is a difficult situation for the euro since it has to resist negative macro data. Recall that reports on inflation in the eurozone were published on the evening of Monday, October 31, which again demonstrated its sharp rise. As a result, the inflation rate in the region soared to a new historical high, and the euro bloc economy lost its growth momentum. According to analysts, consumer prices in the EU rose by 10.7% in October 2022 compared to October 2021, exceeding forecasts. In the third quarter of this year, the volume of production in the eurozone decreased to 0.2% compared to the same period last year. According to experts, the current situation is aggravated by a sharp increase in the European Central Bank's interest rates. At the same time, many analysts believe that the central bank should continue to actively fight inflation, which includes raising rates. It is possible that after the recent rate hike, the ECB will raise it again by 75 bps at the next meeting, which is scheduled for December 15. However, such a scenario is still in question, as well as a possible pause in the process of raising rates by the Fed. Some analysts do not expect dovish decisions from the US central bank, although the current situation requires revision. According to experts, the aggressive tightening of the monetary policy contributes to the early onset of a recession in the United States, as well as a large-scale drop in treasury state bonds and stocks over the past few years. Take note that as rates rose and the economic downturn that followed the tightening of the monetary policy, the markets were gripped by a crisis. It was followed by an increase in the number of defaults, which seriously hit investors. In the current situation, the leading central banks will have to solve the issues that provoked such problems. The current situation significantly affected the dynamics of the EUR/USD pair, provoking a correction at the end of September. However, the pair is gradually returning to a relatively stable course. According to experts, a new round of risk appetite in the markets will save the EUR/USD pair from further decline. At the same time, experts expect a New Year rally on the US stock market and the growth of risky assets in the near future. Quote Link to comment Share on other sites More sharing options...
KostiaForexMart Posted November 2, 2022 Share Posted November 2, 2022 GBP/USD: dollar and pound in the ring. Waiting for the last knockout? The British currency has cheerfully started November, but experts fear that its ardor will fade in the near future. The prerequisites for this are economic instability in the UK and the long-term strengthening of the US currency, which is not going to give up its position. Sterling ended October on a negative note, losing 1% shortly before the decisive meeting of the Federal Reserve, which will end on Wednesday, November 2. According to its results, an additional increase in the interest rate by 75 bps is expected. The implementation of such a scenario will be the first step for the Fed to slow down the pace of rate hikes starting in December 2022, economists believe. The past month was a time of recovery for the pound, experts believe. Against this background, the GBP/USD pair gained 3%, simultaneously reaching an impressive 1.1646. In many ways, this improvement is due to the curtailment of the economic policy of Liz Truss, the former prime minister of Great Britain, and her resignation. However, it was not only the rejection of the "mini-budget" that helped GBP get out of the price hole. The expectation of positive changes in the Fed's policy played a significant role. In addition, at the end of October, the US currency weakened. At the beginning of the last month of autumn, the pound behaved cautiously, occasionally trying to rise. On Wednesday morning, November 2, the GBP/USD pair was trading at 1.1513, significantly retreating from the previous high positions. This was facilitated by the strengthening of the greenback, which continues its victorious march in the global market. According to currency strategists at Bank of America (BofA), in the short and medium term, the dollar will still be the leader. Analysts are confident in the dollar's dominance. However, the implementation of such a scenario can dramatically limit the recent recovery of the pound. A similar development is likely with the next increase in the Fed's interest rate, according to BofA. By the end of 2022, the market expects an additional rise in the Fed rate (the total volume of these increases is 135 bps). At the same time, by the first quarter of 2023, the peak of the federal funds rate will be 5%, BofA is confident. The bank believes that the Fed's decision in November will provide significant support to the greenback. According to John Skeen, currency strategist at Bank of America, at the moment the US currency is at 40-year highs. At the same time, "the strength of the dollar will remain at such levels at the beginning of 2023," the expert emphasizes. The current sterling losses are due to the release of positive macroeconomic data from the United States, which provided significant support to the greenback, but pushed the pound and the euro into the abyss. According to reports, business activity in the US manufacturing sector (PMI) soared to 50.4 points in October (against the expected 49.9 points), and the ISM business activity index in the manufacturing sector rose to 50.2 points, exceeding the projected 50 points. Before the release of the reports, the GBP lost almost 100 points, falling sharply to 1.1550. In the future, sterling lost almost all the positions won earlier and fell into a downward spiral, reaching 1.1455. Later, the British currency managed to recover, but the consequences of such a "knockout" received from the dollar seriously affected the further dynamics of the GBP. However, UOB currency strategists remain positive about the GBP/USD pair, believing that the pound will stand until the 1.1440 level is broken. If this stronghold falls, then sterling will be in a price hole for a long time. However, this is unlikely now, the UOB emphasizes. Earlier, analysts predicted the pound's growth to 1.1700, but the chances of this are melting every day. According to experts, in the coming weeks, the euro and the pound will remain under pressure against the USD. Nevertheless, market participants do not lose hope for the pound's recovery in the long term. Many large hedge funds have raised their bets on the pound's growth, although asset managers have reduced their short positions against the GBP. However, the majority of market participants, taking into account the positive changes in the UK fiscal policy, support the position of hedge funds. At the same time, many analysts believe that optimism about the pound is justified. Quote Link to comment Share on other sites More sharing options...
KostiaForexMart Posted November 3, 2022 Share Posted November 3, 2022 USD slides down after Fed interest rate hike The US currency reacted negatively to another Fed funds rate increase following the FOMC meeting. USD slumped significantly, losing many of its earlier gains. However, market players and analysts believe that the US dollar is strong enough to recoup its losses. USD decreased late on Wednesday after the Federal Reserve increased the interest rate by 75 basis points. Fed policymakers stated that future rate hikes, which are aimed at decreasing galloping inflation, could be smaller than the previous ones. Analysts noted that the market regarded this statement as quite dovish. Investors assumed that the regulator will slow down the pace of rate hikes in the current situation. Many analysts believe that the Fed would increase the rate by only 50 bps in December. While some market players expected the Fed to slow down monetary tightening significantly, these expectations were dispelled by Fed chairman Jerome Powell. At the press conference following the meeting he said that the Federal Reserve does not plan to slow down the pace of rate hikes. "It is very premature to be thinking about pausing," Powell added. The Fed chairman said the regulator will present a new summary of interest rate trajectory projections. Furthermore, Powell pointed out the steady rise of the US dollar and called it "a challenge" for many countries. Expectations of an excessively high rate hike strongly pressured USD. Early on Thursday, November 3, EUR/USD traded near 0.9825. Earlier, the pair rose to 0.9832, but retreated slightly afterwards. Market players hoped the Fed would slow down interest rate hikes this year and ultimately end the tightening cycle in the first quarter of 2023. However, the Fed's actions did not match their expectations. A 50 bps rate increase in December is the only likely policy adjustment the regulator can do. Rising employment in the US became a key indicator signalling that the Fed would not soften their stance. According to the latest data by ADP, the US economy added 239,000 new jobs in October, well above 192,000 new jobs reported in September. The Federal Reserve uses such data to determine the level of inflation and interest rate adjustments. Strong US labor market data gives the Fed more room for maneuver, allowing the regulator to tighten its monetary policy more aggressively to fight soaring inflation. Amid such developments, experts note that the US dollar rally can potentially continue in 2023, fuelled by concerns over a global recession and the hawkish Fed. FX strategists at Capital Economics believe that the Fed's tightening cycle is close to an end. The research firm's chief economist Jonas Goltermann predicts that the US dollar will continue to climb in the first half of 2023. Goltermann believes that if interest rates reach their peak, it will not be an obstacle for a USD rally in the future. The economist said falling risk appetite in the global markets and rising demand for safe haven assets have given support to the US dollar. According to Goltermann, the US currency went up during earlier tightening cycles. Earlier outlooks by some analysts saw the Fed increase interest rates up to 5% in 2023. Bloomberg predicts that the effective Fed funds rate could hit a peak of 5.1% by May 2023. Market players expect the key interest rate to decrease afterwards in the first or second quarters of the year. Quote Link to comment Share on other sites More sharing options...
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