Traders remain cautious in front of the developing banking crisis in Europe

General market theme
The lack of any significant price action in the major currencies continued yesterday as investors remain cautious in their trading while the situation with Deutsche Bank continues making headlines. As long as the issue is not being resolved one way or another the bias will remain on the cautious side as market participants fear a much broader problem should the banking giant collapse and rumors are already mentioning other key institutions across Europe. Given that environment many analysts believe that the current easing efforts from major central banks around the world will continue and could possibly force the Fed to hold back on tightening further this year. Even though it’s still too early to suggest something like this we need to keep it in mind as we move forward.

Price action highlights
The Euro remained range-bound for yet another day as traders are keeping their feet out of the water and the 1.1200 level seems to be holding for now but should the situation in German take a turn for the worse the rate will take a hit. Given the current bias with Deutsche Bank’s problems it’s kind of a wonder that the Euro is still holding on which indicates that investors are hopeful of a solution but should there be limited progress on that front then a flight towards safer havens will put the Euro under pressure with the 1.1120 lows being the next area of interest.

The Cable dropped lower again yesterday and traded below the 1.3000 level once more as the banking crisis in Europe along with the recent Brexit-related concerns are weighing down on the UK currency. It will be interesting to see how the Pound will react as it moves closer to the 1.2900 support base and given that the decline has limited momentum we need fresh stimulus for the support to be penetrated. With limited events on today’s calendar and being the end of the week we don’t expect too much of a price action today in the Pound.

Focus of the day
Eurozone inflation levels and US Personal Income and Spending reports are the most important events of the day ahead and we wouldn’t call them market-moving in any sense. We believe that investors will look to protect their portfolios at the end of the week and probably not get into too much trading today so volatility should remain at low levels.

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Lack of fresh market-moving news forces investors in a wait-and-see mode

General market theme
Limited price action in the majors for yet another day and the lack of any fresh news that could move the market is evident especially as investors are keeping a cautious stance over the outlook of the Dollar and the rest of the key currencies. Several Fed speakers expressed a balanced view about the economy yesterday and even though they acknowledged recent improvements in some areas they are keeping their expectations low.

This kind of approach doesn’t allow any serious repositioning in investors’ portfolios and the focus will turn to the US labour market data next week in order to assess whether the Fed has a case for a rate hike until the end of the year. At the same time the Deutsche Bank issue in Germany remains a risk factor and rumors about further easing in the UK are keeping the European currencies in check.

Price action highlights
The Euro was rather choppy yesterday in its trading action and remained generally unchanged trading on either side of the 1.1200 level on the back of no momentum towards any direction. While the Dollar’s outlook remains in doubt and Germany has to find a solution to the developing crisis with its largest bank the Single currency will struggle for direction and momentum so investors are sitting on the sidelines waiting for something concrete before entering the market. We believe that a clear breakout from this sideways pattern is needed before taking the next step.

The Cable hike relatively higher yesterday making its way towards the 1.3050 area but the lack of momentum is obvious and as fresh concerns about the consequences of invoking Article 50 are surfacing again we believe the uptrend might have a hard time going further. The lack of Dollar demand is fueling this move higher but we should be very careful about joining it as it could quickly collapse and push towards its recent lows.

Focus of the day
The German labour market data and the inflation levels from Eurozone’s strongest economy will be in focus during the morning session but we fail to see how it would affect price action in a material way. Later in the day the release of the Initial Jobless Claims will do little to change investors’ bias over the Dollar hence we’re in for another choppy trading day where caution is advised.

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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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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.

Economic Calendar

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Major instruments looking for direction as momentum is lacking right now

General market theme
Limited price action at the end of last week with the major currencies looking for fresh stimulus to dictate the direction and we believe there are going to be plenty of opportunities as we move forward. The US Dollar remains in focus as we’re getting closer to the end of the year and investors are beginning to discuss whether the possibility of no new rate hikes this year is real.

We will have the opportunity to hear from several Fed presidents this week in order to better assess what they’re thinking ahead of the upcoming NFP report for the past month. At the same time the Pound is making headlines again as Brexit-related news and concerns are surfacing again pressuring the UK currency to the downside.

Price action highlights
The Euro made an effort to reach its previous 1.1250 highs on Friday but the momentum was lacking and the upswing only reached to the 1.1230 area before settling around there. The Single currency is in the focus for the day ahead as the release of the IFO Survey is the most market-moving event of the day but expectations are mixed. At this point for the Euro to benefit a clear bullish reading is needed and we doubt we could see something like that and we expect more sideways trading for the Euro at least for the time being.

The Cable came under pressure on Friday and collapsed from the 1.3100 area to trade near the 1.2900 level as fresh Brexit news drove investors towards safer havens. Recent rumors that the British Government is contemplating over triggering the Article 50 exit clause at the beginning of next year made market participants nervous, especially since we’re seeing no progress in the trade agreements the government is supposed to be negotiating right now. However with limited Dollar strength the Pound is not likely to continue falling for a sustained period of time so we need to keep calm and patient.

Focus of the day
The release of the IFO Survey is the most attractive report of the day but apart from that ECB President Mario Draghi will be speaking in the European Parliament in the afternoon and his comments always have the potential to change the dynamics in the markets. Other than that several Fed speakers will be speaking this week with Tarullo and Kaplan being the first ones today.

Economic Calendar

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