European currencies still struggle to capitalize on Dollar’s weakness

General market theme
Price action in the currency markets was limited for yet another day yesterday as investors were rather cautious at the beginning of the week. From the European currencies, the Euro was the most active one but the initial push to the upside was abandoned and the rate corrected lower even though the IFO Survey printed in a better than expected way.

The report showed that the Brexit-related consequences were milder than initially feared and that the Eurozone is doing relatively well, however the Euro failed to benefit from it. Today investors will focus their attention on the US Dollar as the Services PMI reading and the Consumer Confidence levels are scheduled for release and the bias is against the US currency.

Price action highlights
The Euro edged higher and made it to the 1.1275 level but the momentum was just not there and the upswing was quickly reversed and the day ended with the rate trading below the 1.1250 area. Whether the Euro can go higher depends on how the Dollar will react to today’s reports and truth be told the bias is against the US currency so we might see an attempt towards the 1.1300 area which is the first target for the day ahead.

The Cable seems to have settled around the 1.2950 to 1.3000 area and what it now needs is a reason to break in to higher ground. Should the Dollar remain under pressure from today’s report we could see the Pound making an effort to trade above the 1.3000 barrier even though the fresh Brexit-related concerns are casting doubts over the currency’s outlook. From a technical point of view the chances for a break higher are high but we should remain cautious as the fundamentals are mixed.

Focus of the day
Like we mentioned above today the focus will be on the US Dollar as we have 2 Dollar-related reports from the US: the release of the Services PMI levels for the current month and the Consumer Confidence figures.  The PMI release is unlikely to cause a lot of reaction as it is a premature reading, however the consumer report will be closely monitored as analysts expect a bearish reading which will put Dollar’s outlook under more doubts.

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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.

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Pound pops while Euro holds on as Services PMIs come in, ISM figures coming up next

General market theme
Limited price action at the beginning of the week for the majors and with the US bank holiday taking place there was little to be excited about for traders and investors. The European currencies were in focus in light of the Services PMI reading from the Eurozone and the UK along with the EZ Retail Sales figures. The Pound was the main benefactor from these reports as a surprisingly strong reading sent the UK currency above the 1.3350 area while mixed reports from the Euro area kept the Single currency looking for direction. Today the Services PMI levels from the US along the all-important ISM reading will attract our attention and possibly add some much needed support to the US Dollar.

Price action highlights
The Euro was mainly in the red yesterday without much of a trading action throughout the day as the currency retreated towards the 1.1140 level from its morning highs of around 1.1180. Mixed reports from the Eurozone put the Single currency under pressure with the Services PMI levels printing in a bearish manner while the Retail Sales report was the one that added some support. Looking ahead the way the US reports will print today will dictate the price action for the Euro and we don’t expect much of a change in momentum as it will most likely remain between the 1.1130 and 1.1210 levels for the time being.

The Cable benefited from the way the Services PMI reading printed for the UK yesterday and that allowed the UK currency to print fresh highs on its current uptrend. The Pound reached the 1.3370 level yesterday when the report showed impressive strength from the domestic economy and the Pound climbed further against the Dollar. The question now becomes whether the UK currency will manage to hold on its gains and that will mostly depend on the way the US reports will print today and how the Dollar will respond to them.

Focus of the day
Today the focus will be on the US-related reports but the day will start with the release of the Eurozone Gross Domestic Product levels where we don’t expect any surprises and the price action will most likely hinge on the US figures. Later in the day the release of the US Services PMI and the ISM Non-Manufacturing index are the events that will dictation the price action in the majors.

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Euro and Pound take charge and push higher as Dollar retreats for now

General market theme
Strong reversals at the beginning of the week with the US Dollar giving up its recent gains against the rest of the major currencies. The US currency had climbed higher against the likes of the Euro and the Pound at the end of last week but yesterday the European majors reversed their flows and pushed higher. The reversal could have been triggered either from today’s PMI reports from the Euro area that investors expect to print in a robust manner or once more doubts are creeping in on whether the Dollar can get another rate hike this year to justify its strength. As we already mentioned today’s focus will be on the release of the PMI reports from the Eurozone and we’re keen to see how the Brexit volatility has affected the region with rumors making word for a positive reading that should keep the Euro bid.

Price action highlights
The Euro reversed its flows yesterday as we mentioned above and after dropping below the 1.1300 level during the overnight Asian session the currency made its way back above this pivot level. The Euro enjoyed a nice rally yesterday and this morning it’s trading just shy of the 1.1350 level ahead of the release of the PMI levels from the Euro area. A possible robust printing should propel the Single currency further to the upside to retest its recent highs and it will be interesting to see whether the Euro can go all the way.

The Cable was also on the rise yesterday and climbed above the 1.3100 key figure once more after dropping lower at the end of last week. The UK currency pulled an impressive U-turn over the past 24 hours and this morning we’re seeing the Pound trading sharply above the 1.3150 level and contesting its recent highs around that area. We’re not sure whether the Pound can sustain these gains and we think it’s important to keep an eye out for Dollar’s return towards the end of the week ahead of fresh Fed-related events.

Focus of the day
The release of the Manufacturing and Services PMI reports from France, Germany and the Eurozone is the key event for the day and the early releases should dictate the price action for the rest of the day. Later in the afternoon the Manufacturing PMI reading from the US shouldn’t affect the price action too much as investors are looking towards the end of the week for fresh Dollar-related volatility.

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ECB didn’t attempt to talk down the Euro but investors remain bearish

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General market theme
The increased volatility in the markets continued yesterday in a day with two important events that attracted investors’ attention: the ECB meeting on monetary policy and the release of the UK Retail Sales. The central bank meeting was the event that drove volatility to new highs as market participants were eager to hear how the ECB will react to the recent rally in the Euro that is not helping growth in the Euro area. Instead the central bank and its president Mario Draghi didn’t spend much time on talking down the bullish Euro hence the initial rally higher.

Immediately after the end of the press conference though the Single currency reversed its flows and drove lower to where it began the day signaling that there is limited confidence among traders over its outlook. Today’s PMI releases might be the reason why traders are not willing to back the Euro so we need to approach today’s releases with increased caution.

Price action highlights
The Euro initially spiked to 1.1400 as Mario Draghi didn’t sound too concerned about the rally in its price over the recent weeks but as his press conference was coming to a close and investors were assessing what they were walking away with the flows in the Euro reversed. What followed was a downwards correction as strong and fast as its previous rally higher and the Euro ended the day around the same area it was trading before the ECB meeting. Now the focus turns to the release of the PMI levels today and it will be interesting to see how they print and how the Single currency will react to any bearish correction in the indices.

The Cable had a similar day in terms of volatility as the first part of the day included a push higher following the Euro to fresh highs even though the Retail Sales report printed lower. The UK currency has been showing a total disregard for any fundamental developments in recent weeks and even though all the important metrics have printed in a bearish manner the Pound held strong. Of course after the initial drive higher the Cable reversed its flows along the Euro and corrected to where it began but we have to note the currency’s resilience which is proving impressive. No reports today for the Pound so price action might be less volatile for now.

Focus of the day
The Eurozone PMI levels are the most important reports of the day today and after yesterday’s ECB meeting and press conference it’s important for traders to assess how well the Euro area is going at this time. Most reports are pointing higher but we need to be patient and see how they print along the US Manufacturing PMI later in the day.

Economic Calendar

Technical Analysis and Trading Ideas

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