Analyst Articles – Forex News 24

GBPUSD Rate Defends Bull Trend Ahead of UK CPI Amid Brexit Extension
Can Dow Hit a Record, Dollar Restore Its Run Next Week?
March Australia Jobs Report & AUDJPY Price Forecast
March Canada Inflation & USDCAD Price Forecast
What Does AUDJPY Price Action Suggest for Risk Assets?
Q1’19 New Zealand CPI & NZDUSD Price Forecast
S&P 500 Grasps at New Highs as Retail Traders Fear Past Declines
EURUSD Rate Outlook Guided by March Range Following ECB Meeting
US Dollar Sidelined as Surging Stocks See AUDJPY, EURJPY Breakout
GBP/USD Pushes Towards Triangle Resistance

GBPUSD Rate Defends Bull Trend Ahead of UK CPI Amid Brexit Extension

Posted: 13 Apr 2019 03:07 AM PDT

British Pound Rate Talking Points

GBP/USD recoups the losses from earlier this week as the European Union (EU) pushes the Brexit deadline out to October 31, and fresh data prints coming out of the U.K. may fuel the advance from the monthly-low (1.2987) should the developments put pressure on the Bank of England (BoE) to further normalize monetary policy.

Looking for a technical perspective on the GBP ? Check out the Weekly GBP Technical Forecast.

Fundamental Forecast for British Pound: Bullish

Headlines surrounding the Brexit saga may generate increased volatility in the British Pound as Chancellor of Exchequer Philip Hammond insists that a deal can be reached over the coming weeks, and it remains to be seen if Prime Minister Theresa Maywill be able to deliver a meaningful announcement going into the Easter holiday as U.K. lawmakers struggle to meet on common ground.

In turn, updates to the Consumer Price Index (CPI) may shake up the near-term outlook for GBP/USD as the headline reading for U.K. inflation is anticipated to increase to 2.0% from 1.9% per annum in February. The core rate is also expected to nudge higher, with the index projected to print at 1.9% in March compared to 1.8% the month prior, and signs of sticky price growth may push the Bank of England (BoE) to adopt a more hawkish tone as 'the Committee continues to judge that, were the economy to develop broadly in line with those projections, an ongoing tightening of monetary policy over the forecast period, at a gradual pace and to a limited extent, would be appropriate to return inflation sustainably to the 2% target at a conventional horizon.'

Keep in mind, the BoE appears to be in no rush to implement higher interest rates as 'shifting expectationsabout the potential nature and timing of the United Kingdom's withdrawal from the European Union have continued to generate volatility in UK asset prices, particularly the sterling exchange rate,' and the Monetary Policy Committee (MPC) may largely refrain from altering the forward-guidance at the next quarterly meeting on May 2 as officials warn that 'the monetary policy response to Brexit, whatever form it takes, will not be automatic and could be in either direction.'

With that said, positive data prints coming out of the U.K. may spark a bullish reaction in the British Pound as it puts pressure on the Governor Mark Carney and Co. to prepare U.K. households and businesses for higher interest rates, but the recent pickup in British Pound volatility continues to shake up market participation amid an ongoing shift in retail interest.

The IG Client Sentiment Report shows 63.8% of traders are now net-long GBP/USD compared to 72.7% earlier this week, with the ratio of traders long to short at 1.76 to 1. Keep in mind, traders have been net-long since March 26 when GBP/USD traded near 1.3200 handle even though price has moved 0.8% lower since then.

The number of traders net-long is 10.9% lower than yesterday and 12.6% lower from last week, while the number of traders net-short is 1.1% higher than yesterday and 4.4% higher from last week. Net-long interest has fallen back from an extreme reading, with the change indicative of profit-taking behavior as GBP/USD extends the rebound from the monthly-low (1.2987), while net-short interest recovers after narrowing during the previous week.

The recent developments raise the risk for range-bound prices as retail sentiment falls back from an extreme reading, but the GBP/USD appears to be coming off of channel support, with the Relative Strength Index (RSI) appears to be highlighting a similar dynamic as it threatens the bearish formation carried over from the previous month.

GBP/USD Rate Daily Chart

GBP/USD

The broader outlook for GBP/USD remains mired by the failed attempt to close above the Fibonacci overlap around 1.3310 (100% expansion) to 1.3370 (78.6% expansion), but the pound-dollar exchange rate appears to be finding channel support amid the lack of momentum to test the March-low (1.2960).

In turn, GBP/USD may face range-bound conditions over the coming days asthe 1.2950 (23.6% retracement) to 1.3000 (61.8% retracement) area offers support, with a move back above 1.3090 (38.2% retracement) raising the risk for a move towards 1.3170 (78.6% retracement).

Additional Trading Resources

For more in-depth analysis, check out the 2Q 2019 Forecast for GBP/USD

Are you looking to improve your trading approach? Review the 'Traits of a Successful Trader' series on how to effectively use leverage along with other best practices that any trader can follow.

Want to know what other currency pairs the DailyFX team is watching? Download and review the Top Trading Opportunities for 2019

— Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong.

Other Weekly Fundamental Forecast:

Australian Dollar Forecast – Australian Dollar Outlook Bearish on RBA. AUDUSD Eyes China Q1 GDP

Crude Oil Forecast – Crude Could Crumble if Growth Concerns Catch Fire Again

2019-04-13 10:00:00

Can you get luxurious from fx trading? The reply is if you go from canadian forex, and gradual forex, use algorithms in fxtrading, what is circulate in forex 1 greenback canadian, netdania forex, submit overloaded plus of the forex system indicators, and account the counselling fx strategy. We present win win all.

Can Dow Hit a Record, Dollar Restore Its Run Next Week?

Posted: 12 Apr 2019 09:24 PM PDT

Dow Talking Points:

The Dow, S&P 500 and Nasdaq are within easy reach of fresh record highs, but hitting a record and restoring trend are very different
Dollar, Euro and Pound find little technical nor fundamental footing for clear breakout – much less trend – but Yen and Aussie tempts
Top event risk includes Chinese GDP, Eurozone PMIs and the BOE’s financial conditions report; but themes may not be stirred

What do the DailyFX Analysts expect from the Dollar, Euro, Equities, Oil and more through the 2Q 2019? Download forecasts for these assets and more with technical and fundamental insight from the DailyFX Trading Guides page.

The Scenarios for the Dow and S&P 500 as They Close in on Record Highs

We closed out this past week with another speculative jump. The effort was most notable in the US indices given their proximity to record highs. The Nasdasq is closest and the blue-chip Dow furthers of the major three – though that is still less than a 2 percent climb to hit a new milestone. As of Friday’s close, the S&P 500 is approximately 1.2 percent away from the intraday record high set just six months ago and 0.8 percent from the achievement on a daily close basis. If we were to take a straight-line extrapolation from the previous quarter’s performance with the favorable, preferential treatment of the mixed fundamental updates, overtaking that watermark would seem an easy feat for the week ahead. Yet, traders should calibrate their assumptions. Given their outperformance and the prominence afforded to the most heavily invested asset class in the world’s largest market, US stocks will hold a strong influence over sentiment in general. That said, what if its recovery effort for the first quarter falls apart short of the full retracement mark? It wouldn’t trigger any imminent collapse but it will effectively cap the drift higher in most other risk assets. Should we move to record highs and bulls struggle, the enthusiasm to close the gap to distant highs in other asset classes will be tepid; while a break higher and then move to retrace first quarter gains could ultimately prove the most damaging scenario for global markets. A lot of responsibility is being placed on the lofty shoulders of US indices – a story similar to that of the Fed relative to its global counterparts.

Chart of Dow Index and Distance from Record High (Daily)

Chart of Dow Jones Index

When there is a high-profile technical milestone – like a psychological level in a record high – in close proximity, there is often a speculative pull that can override engrained skepticism to see the level hit. That gravity is severely diminished or non-existent however when such benchmarks are still a ‘trend away.’ That is the situation with most other popular risk-leaning assets. Rest of world equities (VEU) are generally milling around the half-way point of the recovery from 2018’s bear trend. Emerging market benchmarks like the EEM and EMB are similarly far from their previous highs. Carry trade, commodities and sovereign yields are all similarly far from summitting. This presents a very different reality of global speculative intent than what a cherry-picked benchmark like the Dow may insinuate. In time, the gap will close between US indices and broader risk; but it is unclear whether the latter slowly advances to fill the gap or the former’s collapse does. Making a serious effort to resolve the disparity over the coming week would be a very tall task. The critical themes of influence these past months has ebbed and liquidity over the coming week will be historically truncated. The Good Friday holiday observed by the US, Europe and a number of other liquidity centers drain momentum through the second half of the week definitively – and likely short circuit its potential throughout.

Relative Performance of S&P 500, Carry Trade, Emerging Markets, Commodities, Junk Bonds

Key Event Risk May Not Find Systemic Themes So Easy to Catalyze

Through the week ahead, there are a number of high-profile releases due to cross the wires; but due to the lost traction of much of the systemic focus and various caveats on what is on tap, these sparks are unlikely to catch. Of the three major fundamental drivers we’ve seen trade control of the markets over the past months, monetary policy is the least likely to rear its head. There are no major rate decisions on tap and the run of central bank speakers is unlikely to offer definitive rate speculation when they have been so careful about setting the speculative wheels turning. That said, don’t completely lose sight of this issue as pressure on the markets and economy will raise desperation and dependency on the banks to step in to offer salvation. Their capacity at this point is little more than symbolic. Far more potent an issue ahead will be the update on growth conditions. While we don’t have a scheduled global update as we did these past two weeks (with the IMF and WTO), we do have a very high profile 1Q Chinese GDP update. The markets rightfully question the veracity of this data when it crosses the wires, but the markets are nevertheless tuned. There will also be April Eurozone and US PMIs on offer in the closing hours of liquidity Thursday, but market depth will likely curb all but a significant surprise.

Chart of VEU All-World ex US Equity ETF and CNH/USD Exchange Rate (Daily)

VEU All World ex US Equity Index and USDCNH

In terms of what can prove a surprise fundamental driver, trade wars is still a headline dependent motivator. To a certain extent, the Chinese growth figures will offer a milestone for the war’s impact to this point. On Friday, China reported its trade surplus jumped to $32.6 billion despite the tariffs, but the climb was leveraged by a 14.2 percent increase in exports and -7.6 percent drop in imports. Consumption by the world’s second largest economy still accounts for a considerable percentage of global growth. As for negotiations between the United States and China, we are still living headline-to-headline awaiting the official summit to be scheduled between Presidents Trump and Xi. In the meantime, the world is lurching towards a much more systemically-threatening trade situation as the European Commission has reportedly drawn up a provisional list of some 20 billion euros in US goods that it is prepared to apply import taxes on if President Trump follows through on his threat to enact $11 billion in tariffs as retaliation for ‘illegal’ subsidies for Airbus.

If Breakouts Struggle and Trends are Improbable, Identify Range Opportunities

Considering the liquidity anchor, the detached thematic influence and uneven scheduled event risk; it is difficult to forecast strong breakouts much less productive trends. In the absence of those critical market types, we are left with range conditions. Far from the unfavorable market type that so many market participants seem to label ‘congestion’, the definable technical bounds and regular turns actually suit retail traders’ appetites quite well. In the FX market, most of the major are contained to well-established boundaries. That is particularly true for the Dollar, Euro and Pound. The Greenback is trading in its smallest 40-week range since 2014 – and before that 1996 – with both instances ending with extreme volatility to match the extreme inactivity to precede it. And, among its major pairings, EURUSD as a baseline is currently trading almost dead center of its wedge/range between 1.1400 and 1.1200. The Euro itself has a few fundamental issues for which it is juggling – the ECB’s dovish dive, Euro-area growth stalling in critical areas and Italy stirring fresh political troubles. The Eurozone PMIs and Bank of Italy/Istat weigh-in on the controversial budget will be important this week, but the depth of impact will likely prove shallow.

Chart of DXY Dollar Index and Aggregate CBOE FX Implied Volatility (Daily)

DXY Dollar Index and FX Volatility

As for the British Pound, Brexit is still an unresolved threat with considerable fall out…when the decision is ultimately forced. The EU Summit resulted in an agreement to push back the cutoff by six months out to October 31st. While that doesn’t change the likelihood that officials are going to come to any more favorable an agreement, it does buy time. That may allow greater interest around the upcoming week’s UK jobs figures, the inflation data and BOE’s financial health report; but a return to trend is highly improbable. If meaningful breakouts (the type with follow through) are unlikely and trends even lower in the probability totem, then range conditions are more likely to prevail. For pairs like GBPUSD, AUDUSD, EURCHF and others; that can match market conditions to fundamental inactivity to technical opportunity. Consider the ranges you find in the markets this week. We discuss market conditions in the week ahead in this weekend Trading Video.

Can Dow Hit a Record, Dollar Restore Its Run Next Week?

If you want to download my Manic-Crisis calendar, you can find the updated file here.

2019-04-13 03:00:00

March Australia Jobs Report & AUDJPY Price Forecast

Posted: 12 Apr 2019 04:53 PM PDT

Talking Points:

– The March Australia jobs report is due on Thursday, April 18 at 01:30 GMT.

– Overall, the Australian jobs market only has seen two months of contraction since October 2016.

– Retail tradersremain net-short AUDJPY, and have increased their net-short positions over the past week.s

Join me on Mondays at 7:30 EDT/11:30 GMT for the FX Week Ahead webinar, where we discuss top event risk over the coming days and strategies for trading FX markets around the events listed below.

04/18 THURSDAY | 01:30 GMT | AUD Employment Change and Unemployment Rate (MAR)

Despite ongoing trade tensions between its largest trading partners, the Australian economy has continued to chug along, steadily adding jobs for eight consecutive months. If the Bloomberg News survey is correct, March will make it nine months in a row with positive jobs growth. Australian employment is due to have increased by 15K in March after adding 4.6K jobs in February. Overall, the Australian jobs market only has seen two months of contraction since October 2016.

With the unemployment rate set to hold at 5.1%, the Reserve Bank of Australia is simply looking for more evidence that the labor market remains a source of stability, particularly as wage growth remains weak and topline inflation pressures have only started to stabilize across developed economies.

Like the Reserve Bank of New Zealand, the RBA is stuck in neutral when it comes to policy expectations for the first half of the year: according to overnight index swaps, there is only a 23.1% chance of a 25-bps rate cut in June; and there is a 64.9% chance of a 25-bps cut by December 2019.

Pairs to Watch: AUDJPY, AUDNZD, AUDUSD

AUDJPY Technical Forecast: Daily Price Chart (January 2018 to April 2019) (Chart 1)

Following the Yen flash crash in January, AUDJPY prices have been consolidating in a sideways pattern, but may finally be breaking to the topside. The range between 77.50 and 79.85 has given way to a bullish breakout,with the range providing a measured move up to 82.20. Before 82.20, however, AUDJPY bulls may have to contend with the descending trendline from the 2018 swing highs, which come in closer to 81.65/90 over the coming week.

IG Client Sentiment Index: AUDJPY (April 12, 2019) (Chart 2)

Retail trader data shows 37.6% of traders are net-long with the ratio of traders short to long at 1.66 to 1. In fact, traders have remained net-short since April 3 when AUDJPY traded near 79.338; price has moved 1.3% higher since then. The number of traders net-long is 0.6% higher than yesterday and 5.3% lower from last week, while the number of traders net-short is 24.9% lower than yesterday and 11.2% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests AUDJPY prices may continue to rise. Positioning is less net-short than yesterday but more net-short from last week. The combination of current sentiment and recent changes gives us a further mixed AUDJPY trading bias.

FX TRADING RESOURCES

Whether you are a new or experienced trader, DailyFX has multiple resources available to help you: an indicator for monitoring trader sentiment; quarterly trading forecasts; analytical and educational webinars held daily; trading guides to help you improve trading performance, and even one for those who are new to FX trading.

— Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher, email him at cvecchio@dailyfx.com

Follow him in the DailyFX Real Time News feed and Twitter at @CVecchioFX

2019-04-12 23:30:00

March Canada Inflation & USDCAD Price Forecast

Posted: 12 Apr 2019 03:01 PM PDT

Talking Points:

– The March Canada inflation report is due on Wednesday, April 17 at 12:30 GMT.

– The ongoing rebound in energy prices over the past several months means that Canadian inflation data should have stabilized.

– Retail tradersremain net-short USDCAD, and recent positioning changes suggest price may continue lower.

Join me on Mondays at 7:30 EDT/11:30 GMT for the FX Week Ahead webinar, where we discuss top event risk over the coming days and strategies for trading FX markets around the events listed below.

04/17 WEDNESDAY | 12:30 GMT | CAD Consumer Price Index (MAR)

The ongoing rebound in energy prices over the past several months means that Canada inflation data should have stabilized; Crude Oil prices were up another 5.1% in March and were up by 32.5% in Q1'19. As a result, a Bloomberg News survey forecasts thatheadline CPI is due in at 1.9% (y/y), a meaningful increase from 1.5%, and the monthly reading is due in at 0.7% (m/m), as it was in February.

It still holds that improvement in energy markets will help the Canadian Dollar and inflation rebound hand-in-hand. As such, traders should keep expectations low for a policy change from the Bank of Canada any time soon; expectations have moved lower in recent weeks. At the start of April, overnight index swaps were pricing in a 24.3% chance of a 25-bps rate cut by July; now, odds are only 12%.

Pairs to Watch: EURCAD, CADJPY, USDCAD

USDCAD Technical Forecast: Daily Price Chart (January 2018 to April 2019) (Chart 1)

A clear lack of follow through to the topside in USDCAD following the breakout from the early-2019 symmetrical triangle resulted in…another symmetrical triangle. USDCAD price has been consolidating since early-March once more, trading between the 23.6% and 38.2% retracements of the Q4'18 high/low range; the symmetrical triangle from January to early-March consolidated between the 38.2% and 61.8% retracements. If USDCAD price is able to break lower, near-term levels of interest are the April low at 1.3284 and the March low at 1.3251 (concurrently where the rising trendline from the February 2018, October 2018, and March 2019 lows intersects next week).

IG Client Sentiment Index: USDCAD (April 12, 2019) (Chart 2)

Retail trader data shows 46.6% of traders are net-long with the ratio of traders short to long at 1.15 to 1. The number of traders net-long is 18.7% higher than yesterday and 11.0% lower from last week, while the number of traders net-short is 30.2% lower than yesterday and 20.3% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests USDCAD prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current USDCAD price trend may soon reverse lower despite the fact traders remain net-short.

FX TRADING RESOURCES

— Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher, email him at cvecchio@dailyfx.com

Follow him in the DailyFX Real Time News feed and Twitter at @CVecchioFX

2019-04-12 21:25:00

What Does AUDJPY Price Action Suggest for Risk Assets?

Posted: 12 Apr 2019 01:40 PM PDT

AUDJPY IMPLIED VOLATILITY – TALKING POINTS

The Australian Dollar has appreciated meaningfully against the Japanese Yen so far this year as recovering market sentiment and cratering volatility have supported 'risky' currencies such as the Kiwi relative to 'safe-haven' counterparts like the Yen.

In fact, AUDJPY has inked year-to-date spot returns in excess of 5 percent while the currency pair's 1-week implied volatility has dropped from 16 percent to 7 percent at the same time.

AUDJPY IMPLIED VOLATILITY PRICE CHART: DAILY TIME FRAME (OCTOBER 01, 2018 TO APRIL 12, 2019)

Moreover, AUDJPY 1-month implied volatility now sits at its lowest level in over a year. Aussie-Yen implied volatility has been on a steady decline since the Japanese Yen Flash Crash back in early January.

Subsequent to this event, AUDJPY has mirrored the rise in global equities with investor concerns over the slowing global growth getting pushed to the back seat following dovish monetary policy from central banks around the world aiming to restore market confidence. The Kiwi also received positive attention as the US-China Trade War progressively deescalated.

FOREX MARKET IMPLIED VOLATILITIES AND TRADING RANGES

Forex Market Implied Volatility Currency Market Implied Volatility

Collapsing currency market implied volatility is not isolated to AUDJPY and has impacted several major currency pairs. While forex traders typically fiend for market volatility, the lack thereof has increased the relative attractiveness for currency carry trades.

Consequently, the demand for traders to go long high-yielding currencies like the Australian Dollar and take a short position on low-yielding currencies like the Japanese Yen has likely contributed to the strong advance of AUDJPY.

Furthermore, the Deutsche Bank G10 Currency Carry Trade Index has gained roughly 4 percent so far this year which outperforms spot returns across the major currency pairs. If volatility across markets continues to fall, the carry trade and risk assets could keep rising as a result.

AUDJPY TRADER CLIENT SENTIMENT

Australian Dollar Japanese Yen Price Chart Trader Sentiment Client Positioning

Check out IG's Client Sentiment here for more detail on the bullish and bearish biases of EURUSD, GBPUSD, USDJPY, Gold, Bitcoin and S&P500.

TRADING RESOURCES

– Written by Rich Dvorak, Junior Analyst for DailyFX

– Follow @RichDvorakFX on Twitter

2019-04-12 20:00:00

Q1’19 New Zealand CPI & NZDUSD Price Forecast

Posted: 12 Apr 2019 01:03 PM PDT

Talking Points:

– The Q1'19 New Zealand Consumer Price Index is due on Tuesday, April 16 at 22:45 GMT.

– The Reserve Bank of New Zealand has taken on a more dovish tone in recent months, with rates markets leaning towards a 25-bps rate cut in June.

– Retail tradersare net-long NZDUSD but recent positioning changes point to more losses.

Join me on Mondays at 7:30 EDT/11:30 GMT for the FX Week Ahead webinar, where we discuss top event risk over the coming days and strategies for trading FX markets around the events listed below.

04/16 TUESDAY | 22:45 GMT | NZD Consumer Price Index (1Q)

Q1'19 New Zealand inflation data are due to underscore the Reserve Bank of New Zealand's recent concerns about a sluggish economy, according to Bloomberg News surveys. Following the collapse of both agricultural and energy commodity prices in Q4'18, the prevailing trend of low inflation across the developed economic world is expected spread to New Zealand's shore. Quarterly price pressures are expected in at +0.3% after having gained +0.1% in Q4'18, while the yearly reading is due in at +1.7% from +1.9%.

Despite the expected decline in inflation readings, traders may want to be alert for potentially better than expected price pressures. New Zealand Terms of Trade likely rebounded in Q1'19 because of a sharp rebound in milk product prices. The New Zealand Global Dairy Trade (GDT) Price Index was up nearly 17% in the first quarter, which should have helped inflation readings stabilize.

As such, even if inflation remains below the RBNZ's medium-term target of +2%, a 'beat' on the data may see rates markets fail to become any more dovish than they currently are priced. After all, rates markets are pricing-in a 54.9% chance of a 25-bps rate cut by June 2019. Simply pushing back the timing of the first expected hike to September 2019 could provoke a short-term rally by the New Zealand Dollar.

Pairs to Watch: AUDNZD, NZDJPY, NZDUSD

NZDUSD Technical Forecast: Daily Price Chart (June 2018 to April 2019) (Chart 1)

Since bottoming out of its 2018 downtrend in early-November, NZDUSD has spent most of 2019 consolidating in a symmetrical triangle. In April so far, price has broken down through the March low at 0.6745 and temporarily broken through the February low at 0.6720, culminating in a break of the uptrend from the October 2018 and January 2019 lows.

But as price action on Friday, April 12 drew to a close, the NZDUSD daily price candle was working on a bullish outside engulfing bar, suggesting that the recent breakdown lower may indeed me a false breakout. In the coming days, a return back within the symmetrical triangle would validate this point of view, and in turn suggest that the odds of return back towards symmetrical triangle resistance (coming in near 0.6900) would increase materially; a better than expected Q1'19 New Zealand CPI report could be the catalyst required.

IG Client Sentiment Index: NZDUSD (April 12, 2019) (Chart 2)

Retail trader data shows 70.1% of traders are net-long with the ratio of traders long to short at 2.34 to 1. In fact, traders have remained net-long since April 2 when NZDUSD traded near 0.67513; price has moved 0.3% higher since then. The number of traders net-long is 11.9% lower than yesterday and 2.6% higher from last week, while the number of traders net-short is 17.5% lower than yesterday and 17.9% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests NZDUSD prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger NZDUSD-bearish contrarian trading bias.

FX TRADING RESOURCES

— Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher, email him at cvecchio@dailyfx.com

Follow him in the DailyFX Real Time News feed and Twitter at @CVecchioFX

2019-04-12 19:30:00

S&P 500 Grasps at New Highs as Retail Traders Fear Past Declines

Posted: 12 Apr 2019 11:48 AM PDT

S&P 500 Outlook Talking Points:

S&P 500 Grasps at New Highs as Retail Traders Fear Past Declines

As the S&P 500 looks to retest all-time highs, market participants may be more sensitive to risk this time around. With the S&P 500 approaching levels that preceded prior declines in January and September of 2018, investors are keen to investigate each threat to the rally.

One such threat may be the emerging market bond ETF (EMB). The fund saw its largest outflow since February 5, 2018 and the S&P 500 subsequently slumped about 1%. After the streak of outflows was finished and the fund registered its next net inflow (10 days later) the S&P 500 had sunk 4.4%. During the streak, the fund saw nearly $2.2 billion leave its coffers.

Despite the considerable risk-off mood that swept over markets during this period, the S&P 500 rebounded by roughly 2.8% over the following four weeks. It is important to note that previous outflows for the fund trailed declines in the S&P 500 which reduces the efficacy of the fund as a leading indicator and with that in mind, the cause for concern due to the outflow is seriously mitigated.

Further, EMB flows were largely unbothered by the index's decline in September and recorded net inflows through the end of 2018. In fact, Tuesday's outflow from EMB may be due to a report from the IMF which highlighted emerging market debt as an area of global weakness. While the longer-term implications of emerging market weakness are certainly worrisome, it seems a stretch to pin the outflow as a precursor to another S&P 500 retracement.

Similarly, mutual fund flows – typically indicative of retail trader funds – have seen roughly $9.70 billion in outflows last week, with the vast majority from equities. The data gathered by the Investment Company Institute bolsters a bullish case – as we typically take a contrarian view to retailer sentiment. This research is compounded by our own findings at IG.

Over the past few weeks, IG retail traders have only increased their short exposure to the S&P 500. During this time, the S&P 500 has climbed relatively unbothered. With the advent of earnings season, a string of positive earnings from JP Morgan, Wells Fargo and PNC Bank have set high standards for upcoming reports. Follow @PeterHanksFX on Twitter for equity insight and earnings season updates.

–Written by Peter Hanks, Junior Analyst for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX

DailyFX forecasts on a variety of currencies such as the US Dollar or the Euro are available from the DailyFX Trading Guides page. If you're looking to improve your trading approach, check out Traits of Successful Traders. And if you're looking for an introductory primer to the Forex market, check out our New to FX Guide.

2019-04-12 18:30:00

EURUSD Rate Outlook Guided by March Range Following ECB Meeting

Posted: 12 Apr 2019 08:36 AM PDT

Euro Rate Talking Points

EUR/USD trades to a fresh weekly-high (1.1324) even though the European Central Bank (ECB) shows a greater willingness to insulate the monetary union, and the failed attempt to test the 2019-low (1.1176) may spur a larger rebound in the euro-dollar exchange rate as it tracks the range-bound price action from the previous month.

Image of daily change for major currencies

EURUSD Rate Outlook Guided by March Range Following ECB Meeting

Image of daily change for eurusd rate

The Euro appears to be unfazed by the ECB meeting as EUR/USD extends the advance from the monthly-low (1.1184),and it seems as though the central bank will continue to endorse a wait-and-see approach for monetary policy as the Governing Council pledges to keep euro-area interest rates 'at their present levels at least through the end of 2019.'

With the Targeted Long-Term Refinancing Operation (TLTRO) scheduled to launch in September, it seems as though the ECB will stick to the sidelines over the coming months, but it remains to be seen if the Governing Council will alter the forward-guidance at the next quarterly meeting on June 6 as board member Ignazio Visco insists that the central bank will 'take a view on the parameters of the TLTROs and associated with that obviously all that has been discussed.'

Image of ECB staff macroeconomic projections

The comments suggest the ECB will keep the door open to further support the monetary union as the central bank struggles to achieve its one and only mandate for price stability, and President Mario Draghi & Co. may continue to insulate the euro-area over the coming months as the International Monetary Fund (IMF) cuts its global growth forecast for 2019.

Image of CIA world factbook

The trade dispute between the U.S. and China may become a growing concern for the ECB as the two region are ranked major trading partners for Germany, Europe's largest economy, and a growing number of Governing Council officials may favor a more accommodative stance amid 'the persistence of uncertainties related to geopolitical factors, the threat of protectionism and vulnerabilities in emerging markets.' With that said, the ECB may have little choice but to further support the monetary union as 'the information that has become available since the last Governing Council meeting in early March confirms slower growth momentum extending into the current year,' but it seems as though the Governing Council will keep monetary policy on auto-pilot ahead of the second-half of the year as President Draghi's term is set to expire at the end of October.

Until then, the ECB's wait-and-see approach for monetary policy may keep EUR/USD afloat as the central bank insists that 'underlying inflation is expected to increase over the medium term,' and the euro-dollar exchange rate may continue to track the range-bound price action carried over from the previous month amid the failed attempt to test the 2019-low (1.1176).

EUR/USD Rate Daily Chart

Keep in mind, the broader outlook for EUR/USD remains clouded with mixed signals as the exchange rate appears to be stuck in a wedge/triangle formation, but the lack of momentum to test the 2019-low (1.1176) paired with the failed attempt to close below the Fibonacci overlap around 1.1190 (38.2% retracement) to 1.1220 (78.6% retracement) raises the risk for a larger correction.
The break above the 1.1270 (50% expansion) to 1.1290 (61.8% expansion) region brings the 1.1340 (38.2% expansion) hurdle on the radar, with the next area of interest coming in around 1.1390 (61.8% retracement) to 1.1400 (50% expansion).

Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss key market themes along with potential trade setups.

For more in-depth analysis, check out the 2Q 2019 Forecast for EUR/USD

Additional Trading Resources

Are you looking to improve your trading approach? Review the 'Traits of a Successful Trader' series on how to effectively use leverage along with other best practices that any trader can follow.

Want to know what other currency pairs the DailyFX team is watching? Download and review the Top Trading Opportunities for 2019.

— Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.

2019-04-12 15:30:00

US Dollar Sidelined as Surging Stocks See AUDJPY, EURJPY Breakout

Posted: 12 Apr 2019 07:24 AM PDT

Talking Points

– Two of the biggest concerns for traders in recent months have seemingly disappeared: the US-China trade talks are nearing resolution; and the Brexit deadline has been pushed back until October 31.

– Against a backdrop of central banks proving increasingly dovish, the near-term environment for risk appetite has improved significantly in the past few days.

– Retail traders are buying Yen weakness despite breakouts transpiring in AUDJPY and EURJPY.

Looking for longer-term forecasts on the US Dollar? Check out the DailyFX Trading Guides.

The US Dollar (via the DXY Index) is not enjoying the latest bout of increased risk appetite sweeping across global asset classes. With the Japanese Yen and Swiss Franc struggling as well, it's clear that FX markets are dumping the traditional safe havens in favor of the higher yielding, high beta currencies. Traders need not look any further than the latest news headlines to understand why.

Latest Brexit News Sees Volatility Measures Implode

The big market impact from the Brexit deadline being kicked down the road to October 31, 2019 is that traders are no longer pricing in the possibility of significant market moves over the coming months. Various measures of implied volatility have collapsed across the GBP-crosses, with overnight and 1-week implied vols sinking to yearly lows.

But the starkest change in market behavior is seen in the GBPUSD 1-month implied vol, which has sunk back to its lowest level since January 2018. With the Easter holiday week forthcoming, UK parliament isn't in session, and therefore, traders should be expecting very little progress, if any news comes out at all, regarding the cross-party talks between UK Prime Minister Theresa May and Labour party leader Jeremy Corbyn.

Short-term News Momentum Points to Improved Risk Appetite

It's not just the latest Brexit headlines that are helping lift investors' spirits. Commentary from both American and Chinese officials in recent days suggest that a trade agreement may be nearing completion. Although there are still several outstanding issues in play, mainly forced intellectual property transfers from foreign companies to the Chinese government and a viable enforcement mechanism for compliance, it appears that the Trump administration may be willing to punt on these issues until 2025 – when the next administration would have to deal with it (assuming that Trump wins a second term).

The fact of the matter that both of the big thematic issues that have plagued markets for many months now may be moving off the radar, either indefinitely or for at least an amount of time that will push concerns to the back of traders' minds. Such developments have proven to be not only good news for global equities, but for higher yielding, high beta currencies as well.

AUDJPY Technical Forecast: Daily Price Chart (December 2017 to April 2019) (Chart 1)

US Dollar Sidelined as Surging Stocks See AUDJPY, EURJPY Breakout

After consolidating in a sideways pattern since early-January – indeed, right after the Yen flash-crash – AUDJPY prices may finally be breaking to the topside. The range between 77.50 and 79.85 could be giving way to a potential measured move up to 82.20 over the coming weeks. Still, AUDJPY bulls may have to contend with the descending trendline from the 2018 swing highs beforehand, which come in closer to 81.65/90 over the coming week.

EURJPY Technical Forecast: Daily Price Chart (March 2018 to April 2019) (Chart 2)

US Dollar Sidelined as Surging Stocks See AUDJPY, EURJPY Breakout

EURJPY has had quite a few choppy days of price action, but resolution appears to be emerging for a topside breakout. Having cleared out the downtrend from the September 2018 and March 2019 swing highs, EURJPY is well-established above its daily 8-, 13-, and 21-EMA envelope now. Likewise, both daily MACD and Slow Stochastics have turned higher. The path of least resistance may be back towards the 61.8% retracement of the 2018 to 2019 high/low range at 127.67; the March high comes in slightly earlier at 127.50.

DXY Index Technical Forecast: Daily Price Chart (March 2018 to April 2019) (Chart 3)

US Dollar Sidelined as Surging Stocks See AUDJPY, EURJPY Breakout

More downside is emerging for the DXY Index despite basing attempts on Wednesday and Thursday. The move to fresh weekly and monthly lows comes as the bearish evening star candle cluster established last week around the two-month range highs has proved to be a valid topping signal. At present time momentum is continuing to shift to the downside – price is below its daily 8-, 13-, and 21-EMA envelope while both daily MACD and Slow Stochastics have turned lower (albeit in bullish territory still). The lack of clear technical indicate that traders may want to stay sidelined in the DXY Index and look for better opportunities in the JPY-crosses (like AUDJPY and EURJPY) over the coming days.

FX TRADING RESOURCES

— Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher Vecchio, e-mail at cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

View our long-term forecasts with the DailyFX Trading Guides

2019-04-12 14:10:00

GBP/USD Pushes Towards Triangle Resistance

Posted: 12 Apr 2019 06:48 AM PDT

GBP, GBPUSD, British Pound Talking Points:

– The British Pound has rallied this week with GBP/USD making a strong push from a key area of support that's now held the lows for almost two months. While Brexit headlines continue to drive volatility in the pair, prices have been caught in a bout of mean-reversion for the past month. Breakouts may soon be nearing, in one direction or the other.

– GBPUSD and the descending triangle in the pair appears to have a link to the longer-term ascending triangle in the US Dollar. For Cable to break-below this key zone of support, a bullish move in the US Dollar will likely be needed but, the big question is whether USD bulls can pose that push in the face of a more-dovish FOMC.

– DailyFX Forecasts are published on a variety of currencies such as the US Dollar or the Euro and are available from the DailyFX Trading Guides page. If you're looking to improve your trading approach, check out Traits of Successful Traders. And if you're looking for an introductory primer to the Forex market, check out our New to FX Guide.

Do you want to see how retail traders are currently trading GBPUSD? Check out our IG Client Sentiment Indicator.

GBPUSD Bounces from Key Support, Approaches Bearish Trend-Line

It's been a relatively quiet start to Q2 for the British Pound, and this comes after a month of March that saw a rather aggressive bout of two-sided volatility. But, given the general tone of strength in the currency from January and February, GBP closed out Q1 as one of the strongest currencies in the quarter, even with all of the mayhem taking place around Brexit.

As looked at coming into this week, GBPUSD has continued to hold a key zone of support around the psychological level of 1.3000. The zone around that level, running from the February and March swing lows around 1.2962, as now held the lows for almost two full months as some big fundamental themes have been playing out in the Pound. But – as also noted in this week's FX Setups, the lower-highs that have built-in over the past month produce a descending trend-line that, when taken with horizontal support, makes for a descending triangle formation in the pair.

GBPUSD Four-Hour Price Chart

Chart prepared by James Stanley

The formation looked at above will often be approached in a bearish manner, as traders look for the motivation that's driven-in bears at lower-highs to, eventually, take-over at the horizontal level of support. And as looked at in this week's FX Setups, traders could look to bullish short-term strategies until the bottom side of that formation was taken-out; and given the backdrop in the US Dollar, there appears to be a link between the US Dollar's longer-term ascending triangle and the GBPUSD shorter-term descending triangle.

To really propel that down-side break in GBPUSD, US Dollar bulls will likely need to make a push beyond 97.71. This is not to say that a downside break could not be provoked by dynamics around GBP, as news of a No-Deal Brexit may create that bearish break which could, eventually, drive the Dollar through resistance, allowing for the British Pound to lead the way in the realization of both of those themes.

But for now, that prospect remains a bit more distant as the support bounce in GBPUSD has continued to play out through this week. At this point, GBPUSD is testing short-term resistance at the 1.3117 Fibonacci level, which is the 38.2% retracement of the 'Brexit move' in the pair. Price action is fast-approaching the trend-line which sets resistance in the descending triangle formation.

GBPUSD Two-Hour Price Chart

Chart prepared by James Stanley

GBPUSD Strategy Moving Forward

At this point, the 'big picture' potential for bearish breakouts appears to remain linked to either bullish USD breakouts of the longer-term ascending triangle. Or, some element of surprise around Brexit where a No-Deal Brexit becomes more likely. At this point, it does not appear as though market participants are betting on either of those outcomes – so this keeps focus on near-term levels in order to incorporate the near-term volatility into shorter-term swing strategies.

If prices are able to test above the bearish trend-line, another key zone of resistance lurks above, and this runs from 1.3181-1.3187. This is the same zone that held the highs last week as a considerable amount of grind showed on short-term charts, followed by that trip back down to 1.3000. Short-side strategies could be investigated on a resistance test in this area.

For bullish strategies in the pair – traders would likely want to wait for a re-test of the support zone around 1.3000. Alternatively, if bulls are able to continue pushing in the early-portion of next week, a bullish break beyond 1.3200 may re-open the door for such a theme; but traders would likely want to approach that scenario with a bit of patience as the propensity for noise remains very high in GBP.

To read more:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts have a section for each major currency, and we also offer a plethora of resources on USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.

Forex Trading Resources

DailyFX offers an abundance of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you're looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we're looking at what we're looking at.

If you're looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

— Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

2019-04-12 13:37:00