Dollar makes a comeback but will Yellen’s testimony allow it to continue higher?

General market theme
The US Dollar made a comeback yesterday when the US Consumer Confidence levels printed much better than expect along with the current month’s Services PMI reading which helped build up the case for a well-progressing US economy. We’d seen a weakness in the Dollar recently but investors got a breath of fresh air yesterday and it now depends on the way the Fed comments on these new figures. We believe that the Dollar is not out of the woods yet and much will be decided next week when the Non-Farm Payrolls report will be made public.

Price action highlights
The Euro reversed to the downside yesterday and made its way to the 1.1200 area from when it bounced for the time being. A penetration below this level though could accelerate losses towards the 1.1100 area especially if the Dollar receives further support from the several Fed officials speaking in public the following days. At any case, last week’s rally for the Euro seems to have ended now and the question becomes whether we will see a tight consolidation or a return to the 1.1100 base of support.

The Cable held up pretty well against the advancing Dollar and after reaching the 1.3000 area seems to try to build a base of support around that level. The US reports didn’t prevent the UK currency to hike higher which is a sign of robustness from the Pound which is still in trouble though while the Brexit-related concerns are still part of the public chatter. To the upside the 200-period moving average is the first resistance and if the Pound wants to move towards the 1.3100 area it needs to overcome this obstacle first.

Focus of the day
The US Durable Goods is the only piece of important data pending for release today, however there’s a host of officials speaking in public today and their comments will take a toll on the majors’ price action. Fed Chairwoman Yellen is testifying before a House panel, Mario Draghi is speaking in London and later in the day several Fed Presidents will also be sharing their views in public so we need to remain alert and note down their comments and any hints they wish to make about future action.

Economic Calendar

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Disclaimer Notice

Euro and Pound corrected lower yesterday but Dollar is not in the clear yet

General market theme
A day of corrections in the major instruments we monitor in our report yesterday as after the rallies post-FOMC the Dollar managed to claw back some of the ground it lost after the Fed meeting. The Euro and the Pound were in a corrective mood and allowed the US currency to recover partially but we’re not sure that the Dollar is in clear yet.

Being Friday today we might not see too much of a price action but starting next week we would expect further weakness from the buck at least until fresh data support the case of a rate hike before the end of the year. Today the focus will be primarily in Europe with the release of several PMI reports from the Euro area and it will be interesting to see how they print and how the Euro will react.

Price action highlights
The Euro pulled back over the past 24 hours and after making it to the 1.1250 area it corrected to test the 1.1200 level where the 55 and 200-period moving averages lie and it attempts to mount a new effort to the upside this morning. The release of the Eurozone PMI figures will play a role in today’s price action and should the levels print steady it could help the Single currency make another move towards the 1.1250 area on the back of the current weakness in the US Dollar.

The Cable was also on a corrective course yesterday and after reaching the 1.3100 level the rate dropped to the 1.3030 area where we find it this morning. It is crucial for the Pound to find some support around this level if it is to successfully challenge the 1.3100 resistance once more in an attempt to look higher and capitalize on Dollar’s weakness on the back of the conservative Fed meeting earlier this week.

Focus of the day
As we mentioned above today the focus will be on the Eurozone with the release of several PMI readings from around Europe. Analysts expect the figures to print in a mixed manner so it will be interesting to see how the Euro will react to them while later in the day the release of the Manufacturing PMI figures from the US is also important given the current US Dollar weakness.

Economic Calendar

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Yellen disappoints traders and Dollar takes a dive as Fed leaves rates unchanged

General market theme
The main event of the week was the Fed meeting on monetary policy yesterday and the central bank disappointed investors with their decision and the forward guidance they offered. The Fed decided to leave rates unchanged at this time as everyone expected but most of the market participants were looking forward to a bullish tone from Fed Chairwoman Janet Yellen that would hint towards an almost certain move before the end of the year.

However Yellen appeared rather conservative and tied the possibility of a rate hike to a strong rebound of the labor market and that took the air off Dollar’s wings. As a result the Dollar’s outlook still remains mixed and we need to wait until next month’s employment data to assess whether we should prepare for a stronger Dollar towards the end of the year.

Price action highlights
The Euro rallied to the upside on the back of the Fed meeting and made it to the 1.1200 area before the day was over. Fed’s conservative tone allowed the Single currency to profit and this morning the Euro is already hiking higher towards the 1.1250 level on the back of investors dumping Dollars to rebalance their portfolios. We need to be patient though as this strength might not last long as the Euro has its own problems and soon investors will realize that a stronger Dollar towards the end of the year is a much more preferable position than betting on the Euro.

The Cable also benefited from the Fed event and looked to the upside having reached the 1.3050 area and this morning the Pound continues to gain against the Dollar. However we need to note that recent Brexit-related concerns are keeping momentum at low levels as investors are hesitating to load their portfolios with British Pounds as we get closer to the end of the year and a potential date for triggering Article 50. The 1.3100 area is the important barrier for the Pound at this time and for any serious gains to come along the UK currency needs to clear it first.

Focus of the day
Apart from an early ECB Economic Bulletin this morning there’s really nothing too important scheduled for the day ahead. The release of the Initial Jobless Claims and Existing Home Sales reports from the US along with the Eurozone Consumer Confidence levels are not expected to take much of a toll on the price action and investors will look to readjust their portfolios on the back of the Fed meeting yesterday.

Economic Calendar

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Disclaimer Notice

Majors’ medium-term outlook hinges on what the Fed decides today

General market theme
The US Dollar took control of the major currencies again yesterday just a day before the Fed meeting that is scheduled for today as investors seem to believe that it will be a bullish one. As we have said many times it is rather difficult for the Fed to raise interest rates in this meeting so the focus will be on the future guidance they will offer and we should expect volatility to be at high levels.

If the Fed leaves rates unchanged it will be bad for the Dollar as the market expected more than one rate hikes by the end of the year and that would not be the case should they opt to stay put. However if Janet Yellen hints on a bullish agenda looking ahead and/or some of the FOMC members vote in favor of a hike right now then the Dollar will quickly rebound and move higher as expectations for a move before the end of the year will create demand for the US currency.

Price action highlights
The Euro pushed further lower yesterday as the Dollar was in demand once again and the rate dropped below the 1.1150 level to print a 1.1120 low overnight. As we mentioned above we expect increased volatility today and depending on how many members vote in favor of a rate hike and how the Fed will prepare investors for the rest of the year the Euro stands to lose even more ground. We should approach the Single currency with a patient manner today as the volatility might drive the currency in different directions before settling down.

The Cable printed a fresh low yesterday when it penetrated below the 1.3000 barrier to go as low as the 1.2950 area where it settled for the rest of the day ahead of the Fed event later today. Brexit-related concerns and Dollar’s momentum are keeping the Pound under pressure and the bias remains to the downside. Depending on the outcome of the Fed meeting we could see the Pound dropping further lower and for a reversal to the upside an ultra-bearish Janet Yellen is needed which seems rather unlikely.

Focus of the day
ithout a doubt the Fed meeting tonight is the most important event of the day and it will shape the outlook of the major currencies for the weeks to come. Earlier in the day the UK Public Sector Finances and Borrowing figures will do little to change the outlook of the Pound as investors will be focused on whether the FOMC members voted to change their rate policy, how many voted in favor of doing so and what we should expect looking ahead.

Economic Calendar

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Disclaimer Notice

Limited price action as investors are waiting for Fed’s meeting tomorrow

General market theme
Limited trading action in the currency markets yesterday as there was a complete lack of any fresh news, developments or reports to spark investors’ interest. On the back of Friday’s strong Dollar gains the US currency gave back some of the ground it had gained as investors looked to insulate their portfolios ahead of the upcoming Fed meeting that is considered a very important one.

We have said that the possibility of a rate hike at this time is extremely low but we’re more focused on what the central bank will do looking ahead. Depending on how much bullish they will be the Dollar will either take flight or correct lower affecting the price action of the major currency pairs and stock indices will also take their cue from Fed’ plans.

Price action highlights
The Euro corrected to the upside yesterday after the steep drop on Friday and the currency rate has already started the day on the right foot as it is extending the rally to the upside. The Euro ended the day around the 1.1175 area yesterday but this morning it’s already trading around the 1.1200 area. The 200-period moving average which is located around there is the first barrier and if the Euro wants to shoot for its previous highs it needs to overcome this resistance first.

The Cable made an effort to correct yesterday and actually almost made it to the 1.3100 area but fresh Brexit-related rumors pushed the Pound lower. The possibility that the UK banks will lose their right to conduct business freely with the Eurozone’s single market is a very real threat when the UK formally leaves the EU hence the bearish bias for the UK currency. Depending on how investors want to approach the Fed meeting the Cable can proceed higher towards the 1.3200 area or remain below the 1.3100 barrier waiting for fresh stimulus.

Focus of the day
Exactly like yesterday there’s nothing in the calendar to spark any trading actions this morning and a couple of housing-related reports from the US in the afternoon will do little to affect the price action in the major instruments. We believe that investors will look to re-adjust their portfolios ahead of tomorrow’s Fed meeting and this will show us how bullish the market participants are over the central bank’s plans.

Economic Calendar

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