Analyst Articles – Forex News 24

Krona Plunges on Unemployment Data
Earnings to Test Dow and Nasdaq, US GDP the Dollar, BOC Decision the Loonie
Euro Eyeing Italian Leading Indicators
Aiming to Test Below 0.71 Figure?
EUR/USD Downtrend Eyed as Euro Sinks Before Good Friday Holiday
History Suggests the Stock Market Will Climb in the Weeks After Easter
Next Brexit Steps to Prove Pivotal for EURGBP, GBPJPY, GBPUSD Prices
What Could Collapsing Currency Volatility Spell for the Forex Market?
US Dollar Price Action Setups in EUR/USD, GBP/USD and AUD/USD
US Manufacturing and Services PMI Miss Estimates, Reveals Slow Growth

Posted: 18 Apr 2019 11:57 PM PDT

TALKING POINTS – SWEDISH KRONA, UNEMPLOYMENT RATE, RIKSBANK

Swedish krona plummets on unemployment data
Technical range held despite momentary break
How will this impact Riksbank's rate decision?

See our free guide to learn how to use economic news in your trading strategy!

The Swedish Krona and Norwegian Krone plunged following yesterday's release of Sweden's unemployment rate. Unemployment passed the 6.6 percent forecast and clocked in at 7.1 percent, the highest level since June. USDSEK spiked over one percent, the highest one-day jump since March 22. However, the pair's rise was constrained by the 9.2273-9.3110 range and failed to close above critical resistance.

Given that Sweden's economic activity has been underperforming relative to economists' expectations for a few months now, the rise in unemployment falls in-line with the broad trend in economic performance. It also says that analysts have perhaps been overly optimistic about Sweden's outlook. Certainly, policymakers at the Riksbank would fit this description due to the incongruence of their inflation models with the actual results.

Officials at the central bank intend on raising rates in the latter half of 2019 with eyes on a hike in September. Overnight index swaps show that market participants believe that there is a 24.4 percent probability of a hike at the July meeting with a zero percent chance of a cut. The recent uptick in rate hike expectations could be due to recent ambiguously-hawkish commentary from Deputy Governor Martin Floden.

However, given that inflation still remains below the two percent target and global growth is showing increasing weakness, it is difficult to see on what leg the Riksbank can stand on when it comes to a hike. Growth in the EU – Sweden's largest trading partner and key export destination – has been lackluster as illustrated by the most recent data releases out of Germany and the Eurozone.

On April 25, the Riksbank will be announcing its rate decision which will likely be followed by commentary from key officials. It is not likely that the central bank will hike rates given that underlying economic performance shows that the economy may not be able to endure a state of tightened credit. However, prolonged accommodative policy can also create bloated equities and rising household indebtedness; among other issues.

CHART OF THE DAY: USD/SEK HELD WITHIN 9.2273-9.3110 RANGE

NORDIC TRADING RESOURCES

— Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter

2019-04-19 06:30:00

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Earnings to Test Dow and Nasdaq, US GDP the Dollar, BOC Decision the Loonie

Posted: 18 Apr 2019 09:59 PM PDT

Volatility and Liquidity Tralking Points:

A long holiday weekend will temporarily sidetrack markets and further deflate volatility, how fast and far will conditions reverse?
Looking out to next week, top known themes will be US earnings and trade wars and top event risk Friday’s 1Q US GDP release
Traders should consider the Swiss Franc, Australian and Canadian Dollars for volatility outside the struggling ‘majors’Earnings to Test Dow and Nasdaq, US GDP the Dollar, BOC Decision the Loonie

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.

Volatility Drops Deeper into Extremes as Holiday Conditions Set In

A last gasp of volatility arose from the markets through Thursday’s session as the final wave of meaningful event risk found a thinned but receptive audience. Economic activity was a notable focus for the day as PMI activity reports and retail sales data was on tap. The Eurozone composite PMI slipped from 51.6 to 51.3 while the US equivalent took a steeper dive in a drop from 54.6 to 52.8. In contrast, the retail sales updates from the US, the UK and Canada were all markedly better than their respective previous months’ readings. The response from risk-concentrated assets was naturally uneven while the US Dollar posted a meaningful advance of its own. Regardless of whether you were following the course of speculative readings or the Greenback, there was little anticipation that volatility was a sign of impending trend. When liquidity is thin, fundamental and speculative shocks tend to produce bigger moves; but the ultimate impact typically peters out long before it can even tickle hopes for a systemic run. Market depth should be every traders’ top priority for evaluating the market environment through the final day of this trading week and the open of the next one. Many of the world’s liquidity centers are offline Friday for the Good Friday holiday while Europe, the UK and Hong Kong are closed through Monday of next week. That will seriously warp the market’s ability to start – much less carry through – any new systemic trends.

Looking across the financial system, there are few assets that are generating undue anticipation that would conflict with the realities of shaped by liquidity. For rest-of-world equities (VEU), emerging markets (EEM), carry trade (Yen crosses) and many other risk-tailored assets, the technical pressure simply doesn’t register. The exception remains the US equity indices. The Dow ended this past shortened week with an advance that didn’t bring the record October high any closer and the S&P 500 made zero progress on an vary narrow expanding wedge. The exception is the tech-heavy Nasdaq which earned its record high, but it did so with few backing instruments to suggest this is anything other than a rampant speculative chase. While risk appetite can facilitate moves readily enough, it is much less likely that a trend develops for a specific risk-anchored benchmark when its related sentiment measures continue to struggle for traction. Instead, this particular outperformance from the Nasdaq suggests the markets are chasing sheer momentum rather than value itself. Unless there is an emergent rise in risk trends that is only now taking shape, such a move will flounder and inspire a short-term speculative collapse as it closes the unsustainable gap opened to the rest of the market – which can unexpectedly spur a more committed wave of deleveraging by a nervous market vigilant of leading measures. Be wary of jumping on any bandwagons heading into next week.

Chart of Relative Performance Including Majors Underway.

Earnings to Test Dow and Nasdaq, US GDP the Dollar, BOC Decision the Loonie

Top Themes for Next Week Starts With Earnings but Includes Trade Wars, GDP and Monetary Policy

If you are looking for something on the fundamental side that can carry the load to a more productive drive into the coming week, it is best to keep tabs on the systemic themes. Though not one of the three primary winds I have been keeping tabs on recently, the US first quarter earnings season will certainly be an important environmental development moving forward. While there are individual reports from key companies to watch for and no doubt an overall evaluation as to the state of Corporate America as more key updates cross the wires, we can also measure important themes depending on how we assess the data. The abject speculative reach will be under scrutiny through the high-flying tech company updates scheduled for release. Microsoft and Intel are old hands while the Amazon and Facebook figures will draw in the noncommittal crowd more effectively. In contrast to the outperforming tech picture offered by the likes of the Nasdaq, the health sector has proven one of the hardest hit of the blue-chip industry. The Anthem figures will be monitored closely for its confirmation or refutation of the pained United Health market response. Cutting closer to the growth bone while also tapping trade wars, we have industrials that are worthy of observation. Caterpillar was a trade war-impacted company in previous updates and Harley-Davidson was specifically targeted by US President Trump. Boeing will be another interesting update given Trump used its European rival (Airbus) subsidies as a basis for triggering large tariffs against Europe – threats to which Europe has responded in kind.

While earnings will be the fundamental well that keeps giving through the coming week, there are other issues on hand that could generate volatility or even trigger a broader movement with the ‘right’ (or ‘wrong’ depending on your perspective) update. Trade wars remains on of the most fluid systemic issues as present. This past week, the leaks suggesting US and Chinese negotiations were heading towards an end-of-May resolution to the trade wars seemed to have generated one of the shortest fundamental half life's in some time. That isn’t to say it didn’t have an effect, rather it doesn’t seem a discount from which we will be mounting any serious trends. Meanwhile, the United States’ threat to shut down EU-US trade discussions without agricultural goods included in the discussions and the USMCA finding moderate growth analysis in insight as governments question their internt, has yet to stoke a trend that can reliably be expected to burn through the system. In contrast to the lingering, negative risks, the EU and Japan are expected to hold a confidence in the week ahead. As for monetary policy, the Bank of Japan (BOJ) and Bank of Canada (BOC) updates hold far more local influence than international intrigue. For global interest, I would pay closer attention to President Trump’s repeated bashing of the Fed’s policies and his unrealistic market forecasts arising from these comparisons.

Chart of Ratio Nasdaq Relative to S&P 500 (Daily)

Earnings to Test Dow and Nasdaq, US GDP the Dollar, BOC Decision the Loonie

Dollar, Euro and Pound Will Struggle for Drive While Aussie, Loonie and Swissie Should be Monitored

If you are watching for regional risk – or volatility – over the coming week, the US Dollar is certainly a currency to put to the top of the watch list. Through Thursday’s session, the miss on the PMIs and beat from US retail sales seemed to leave a balanced intent. What was it then that led to the DXY Dollar Index’s best single-day performance since March 7th? I personally believe market conditions and illiquidity had far more to do with recent performances than any of the scheduled updates. The DXY Index has carved out one of its smallest 10-day trading ranges (as a percentage of spot) in many months, while the 40-week measure leaves us virtually unprecedented in how quiet conditions are. In the week ahead, updates on thematic interests like trade wars will find a receptive Dollar while the top event risk is Friday’s 1Q US GDP release. If the focus for the broader financial system is on growth, that will make any effort to charge the Dollar to life a lost cause as all anticipation will be pushed back to Friday. From the subsequent two most liquid majors, a forecast for struggle results from a lack of targeted event risk rather than an abundance or principal listing as with the Dollar. The Euro has updates such as the ECB economic bulletin which simply fall short while the Sterling is rightfully transfixed on a Brexit breakthrough which could come any time over the next six months.

Chart of DXY Dollar Index and 10-day Historical Range (Daily)

Earnings to Test Dow and Nasdaq, US GDP the Dollar, BOC Decision the Loonie

Where the core FX currencies may be be lacking for a definitive driver moving forward, there is certain discrete volatility that may arise for certain lower-liquidity ‘majors’ attached to key event risk. The Australian Dollar was stirred by the jobs figures and business sentiment update this past session and a more targeted 1Q consumer inflation (CPI) figure is on tap for the week ahead. Pairs like AUDCAD, AUDJPY and EURAUD should be monitored closely. The Canadian Dollar is another outlier that deserves closer observation. The upcoming Bank of Canada (BOC) rate decision is one of two major central bank rate decisions on tap over the coming week. Yet, unlike the Bank of Japan’s meeting, it would not be unreasonable to watch for sentiment shift from the Canadian authorities with even a mention of a hike as the next move leveraging a contrast to the Dollar. Perhaps the most overlooked major that traders should consider is the Swiss Frank. This currency is a counterpart and part-time corollary to the Euro. That said, EURCHF cleared trendline resistance, USDCHF shows technical intent and other crosses reflect an overextended short-term thrust. We discuss all of this and more in this weekend Trading Video..

Chart of USDCHF (Daily)

Earnings to Test Dow and Nasdaq, US GDP the Dollar, BOC Decision the Loonie

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

2019-04-19 02:56:00

Euro Eyeing Italian Leading Indicators

Posted: 18 Apr 2019 09:20 PM PDT

TALKING POINTS – EURO, ITALY ECON DATA, BUDGET DEFICIT, POLITICAL HEADWINDS

Euro watching Italy leading indicators
What political obstructions lie ahead?
Concerns about economic stability rise

See our free guide to learn how to use economic news in your trading strategy!

Economic data out of Italy – and more broadly the Eurozone – has been underperforming relative to economists' expectations even with the ECB's new liquidity provisions and accommodative monetary policy. Today, Italian leading indicators – e.g. consumer, manufacturing confidence – will be published and could offer insight on consumers' and producers' outlook.

If current trends hold, it is unlikely that the data will surprise to the upside. Even if it does, it may not offer any meaningful support for sentiment. Meanwhile, an underperformance may not only confirm the downtrend but may also elicit a comparatively stronger negative reaction. This would not be surprising considering the outlook for European political and economic affairs have been deteriorating for over a year.

German Finance Minister Olaf Sholz recently announced in Berlin growth rate cuts for Germany, Italy's primary destination for exports and a central node for growth in Europe. This was followed by underperforming German and Eurozone flash PMI publications that prompted a selloff in the Euro and sent German Bond yields tumbling as ECB rate hike bets cooled.

Political infighting between Luigi di Maoi and Matteo Salvini have created a political rift in the government that could complicate an already-fragile alliance and controversial budget proposal. The recent cut growth forecasts and wider-than-expected budget deficit have put markets on alert again as a collision course with Brussels now seems almost inevitable.

There is also growing concern about the upcoming European Parliamentary elections that will likely affect markets this year more than before. This in large part has to do with the rise of Euroscepticism and nationalism across the region that threatens the institutional day-to-day working within the EU. In Italy, the competition between Salvini and Di Maoi for seats in the EP may erode the already-precarious relationship.

Want to learn more about Eurozone political, economic affairs? You may follow me on Twitter @ZabelinDimitri.

CHART OF THE DAY: WIDENING SPREAD BETWEEN ITALIAN-GERMAN 10-YEAR BOND YIELDS DURING 2018 BUDGET CRISIS:

FX TRADING RESOURCES

— Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter

2019-04-19 03:30:00

Aiming to Test Below 0.71 Figure?

Posted: 18 Apr 2019 07:14 PM PDT

AUD/USD Technical Strategy: BEARISH

Australian Dollar rejected after multiple tests of four-month resistance
Break of support from April swing low hints at probe below 0.71 ahead
Downswing might develop into long-term bearish trend resumption

Get help building confidence in your AUD/USD strategy with our free trading guide!

The Australian Dollar recoiled from resistance guiding it lower against its US namesake since early December. The drop followed several days of grinding forays to the upside that ultimately fizzled. What's more, progress proved to be elusive despite a supportive fundamental backdrop. That gives the currency pair's subsequent retreat an air of capitulation.

Continued progress to the downside faces rising trendline support set from early March (now at 0.7088) but the true test of sellers' mettle comes in the 0.6982-7021 area. A daily close below this would confirm the formation of a bearish Descending Triangle chart pattern carved out since late 2018. That would speak to the resumption of the structural decline launched in January 2018.

Turning to the four-hour chart, there seems to be adequate momentum to at least begin attempting such a move. Prices have broken well-established support from the April 2 swing bottom. That seems to set the stage for a test below the 0.71 figure to challenge the March-based trend line, followed by the 0.7049-73 congestion area. A close above 0.7207 probably neutralizes immediate bearish pressure.

AUD/USD TRADING RESOURCES

— Written by Ilya Spivak, Currency Strategist for DailyFX.com

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter

2019-04-19 02:00:00

EUR/USD Downtrend Eyed as Euro Sinks Before Good Friday Holiday

Posted: 18 Apr 2019 04:09 PM PDT

Asia Pacific Market Open Talking Points

Disappointing German and Eurozone data weakened the Euro
EUR/USD fell towards support, eyeing downtrend resumption
Thin illiquid conditions ahead due to the Good Friday holiday

Trade all the major global economic data live as it populates in the economic calendar and follow the live coverage for key events listed in the DailyFX Webinars. We'd love to have you along.

FX News Thursday

The Euro was the worst-performing major on Thursday, declining with front-end Eurozone bond yields signaling increasingly dovish ECB monetary policy expectations. Euro sellers had disappointing German wholesale inflation and Eurozone PIM data to compel them. This underpinned concerns that ECB President Mario Draghi noted about the outlook for growth being tilted to the downside from April's rate decision.

EUR/USD Technical Analysis

On a daily chart, EUR/USD declined by the most in a single day in almost four weeks (-0.6%). Prices fell under a near-term rising support line that was initiated by a bullish Morning Star at the end of March. This was also after support-turned-resistance held at 1.1302. Negative RSI divergence also preceded the turn lower over the past 24 hours. With that in mind, EUR/USD is eyeing support next at 1.1176. If broken, the dominant downtrend from a year ago may resume.

EUR/USD Daily Chart

Chart Created in TradingView

Amidst the backdrop of economic weakness from Europe and the Euro, the US Dollar was quick to capture the attention of traders. Better-than-expected US retail sales data offered the Greenback a further boost, but softer market manufacturing and services PMI data took some of that away. While the latter also hurt the S&P 500, it ended the day higher as it was supported by the industrial sector.

Friday's Asia Pacific Trading Session

With US markets offline on Friday due to the Good Friday holiday, expect thin and more illiquid-than-usual trading conditions during the Asia Pacific trading session. The Nikkei 225 may gap to the upside as it echoes gains from the Wall Street trading session, but follow-through may be lacking until next week. As such, the anti-risk Japanese Yen may remain mute, brushing aside local inflation data given a status quo BoJ.

FX Trading Resources

— Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

2019-04-18 23:00:00

History Suggests the Stock Market Will Climb in the Weeks After Easter

Posted: 18 Apr 2019 02:19 PM PDT

Stock Market Talking Points:

The S&P 500 has a list of favorable statistics behind it as traders enter the long holiday weekend
Since 1989, the S&P 500 has – on average – finished higher 60% of the time in the month after Easter
Concerned about the quarter ahead? Check out our free Second Quarter Equity Forecast along with outlooks for the US Dollar, Gold price and more

History Suggests the Stock Market Will Climb in the Weeks After Easter

After the S&P 500 posted its largest first quarter return since 1998 at the end of March, many market participants were skeptical the rally could continue. Now that the index is within 2% of all-time highs, investors are wary of another stock market crash with February and October 2018 fresh in their minds.

Thankfully for bulls, the near record-breaking first quarter may have set the index up for success.

S&P 500 First Quarter Returns

Apart from 1Q 2019, there have only been two other first quarters in the last 30 years that have returned higher than 13%. The first quarter of 1991 is one such instance and offered the largest first quarter return for the index since 1989. In the following three quarters, the S&P 500 climbed another 10.95% with an average quarterly return – excluding 1Q – of 3.65%. In total, the S&P 500 boasted a 24.58% return heading into 1992.

1998's first quarter narrowly missed the return in 1991 but would eventually surpass the annual return offered in 1991. From the beginning of the second quarter to the end of 1998, the S&P 500 climbed 13.48% – with an average quarterly gain of 3.49% and an absolute average of 11.36%. Including the historically strong start to the year, the index ended 27.01% higher than it opened that year.

To expand the data set, average quarterly returns following a first quarter return above 10% are good for a 3.07% gain. While not quite as robust, an important takeaway is that every year with a first quarter return above 10% has closed higher for the year and higher than the end of the first quarter- suggesting the year's strength was somewhat widespread.

Use IG Client Sentiment Data to gauge how retail traders are positioned on the S&P 500, Dow Jones, Gold and more.

If the S&P 500 is to follow in the footsteps of history, it could bear to lose around 2.3% before the year is over and still maintain the trend from 1989. But if bulls intend to keep pace with the average Q2-Q4 growth following years with first quarter growth above 10%, the index will need to grow another 8.4% before 2019 concludes.

S&P 500 Returns Following Easter Sunday

Such a pace will be difficult to maintain, especially with heightened recession fears and signs that the index is petering out near prior tops. However, if history is any indication, the weeks following Easter Sunday may serve to reignite the S&P 500's rally.

Return calculated from Holy Thursday's closing price to closing price of following Friday

Since 1989, the S&P 500 has seen a positive return during the week following Easter Sunday in 18 of 30 (60%) instances – good for an average weekly return of 0.34%. The week of Easter Monday in 2001 offered the highest return in that timeframe – well above the absolute average move of 1.51%. Similarly, the month following Easter has also offered positive returns for the S&P 500 on average.

Return calculated from Holy Thursday's closing price to the S&P 500's closing price four Friday's later

In the four weeks following Holy Thursday's close, a familiar 60% of instances witnessed growth, including six consecutive years. That said, the variability of returns is understandably greater. On average, the S&P 500 grew 1.09% in the month following Easter, with an average absolute change of 2.97%.

As traders head home for the holiday weekend, the historical performance of the weeks ahead offers a glimmer of hope for continued equity strength in 2019. While past performance is by no means indicative of future results, a statistical observation of the weeks ahead favors the bull.

–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.

2019-04-18 20:30:00

Next Brexit Steps to Prove Pivotal for EURGBP, GBPJPY, GBPUSD Prices

Posted: 18 Apr 2019 01:38 PM PDT

Talking Points:

– Brexit is out of the headlines for now thanks to the Easter holiday. All of that will change next week when UK parliament reconvenes on April 23.

– Cross-party talks between Labour and Tory leadership appear doomed to fail; a general election may be around the corner.

– Recent positioning changes draw into question the British Pound's ability to sustain anything more than a short-term relief rally.

Looking for longer-term forecasts on the British Pound? Check out the DailyFX Trading Guides.

Traders have been able to ignore the Brexit mess for the past few days, particularly as UK parliament is out of session until April 23 due to the Easter holiday. But as the end of the week comes into focus – tomorrow is effectively the last day for Europe, given the closure for Good Friday – traders should start thinking about what will come next in the Brexit process once markets resume full steam ahead after Easter Monday.

Next Steps in the Brexit Timeline: April

By the end of April: Now that the European council has agreed to extend the Brexit deadline to October 31, 2019 with a check-in at the end of June, UK Prime Minister Theresa May and Labour party leader Jeremy Corbyn have continued cross-party talks. The goal is to find enough common ground to whip the votes for the EU-UK Withdrawal Agreement to pass through UK parliament. Early indications from both Labour and Tory party officials suggest that the talks will result in very little.

If 'no' cross-party deal (most likely outcome): Tory party leader May could step down as prime minister. If so, this would trigger a new Tory party leadership election in May. If UK PM May does not resign, the Labour party would likely take other steps in May.

If 'yes' cross-party deal: A cross-party deal could take two different forms. On one hand, it could mean that there is enough cross-party support for a 'soft Brexit,' something that hasn't come together in any of the indicative votes put forth in parliament yet. On the other hand, a cross-party deal could be an agreement for a second referendum on the Brexit vote altogether.

Next Steps in the Brexit Timeline: May

If Theresa May Resigns: If May has resigned as PM, the Tory party would hold new leadership elections, very likely seeing a 'hard Brexiteer' come to power. In turn, moderate Tories could leave the party, leaving the Tories without enough support for a governing majority. Without a governing majority, a general election would need to be called.

If Theresa May Does Not Resign: If UK PM May does not resign, it is likely that the Labour party brings forward a no confidence vote forward. If the vote succeeds, then a general election would need to be called. If the vote fails, then odds are extremely high that no progress will be made by the end of June check-in with the EU.

By May 22: If there are enough votes to get the EU-UK Withdrawal Agreement passed through UK parliament, ensuring a 'soft Brexit,' UK parliament will need to ratify the EU-UK Withdrawal Agreement by May 22 to avoid European elections. If the UK parliament fails to ratify the EU-UK Withdrawal Agreement, then the UK will have to partake in European parliamentary elections.

British Pound Positioning Paints Mixed Picture

The lack of clarity about what could happen over the next few weeks has provided little relief for traders; that the British Pound hasn't rallied during a time when volatility readings have been depressed is a cause for concern. Recent changes in positioning across the GBP-crosses suggests that if prices do rally, the nature of the rally will be a short-term relief rally; more evidence is required to determine whether or not GBP-crosses are bottoming out in tandem.

IG Client Sentiment Index: GBPUSD Price Forecast (April 18, 2019) (Chart 1)

GBPUSD: Retail trader data shows 75.3% of traders are net-long with the ratio of traders long to short at 3.06 to 1. In fact, traders have remained net-long since Mar 26 when GBPUSD traded near 1.3205; price has moved 1.5% lower since then. The percentage of traders net-long is now its highest since April 8 when GBPUSD traded near 1.30594. The number of traders net-long is 8.8% higher than yesterday and 17.9% higher from last week, while the number of traders net-short is 12.9% lower than yesterday and 23.1% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBPUSD 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 GBPUSD-bearish contrarian trading bias.

IG Client Sentiment Index: GBPJPY Price Forecast (April 18, 2019) (Chart 2)

GBPJPY: Retail trader data shows 54.1% of traders are net-long with the ratio of traders long to short at 1.18 to 1. The percentage of traders net-long is now its highest since April 10 when GBPJPY traded near 145.204. The number of traders net-long is 11.1% higher than yesterday and 11.9% higher from last week, while the number of traders net-short is 23.4% lower than yesterday and 6.9% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBPJPY 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 GBPJPY-bearish contrarian trading bias.

IG Client Sentiment Index: EURGBP Price Forecast (April 18, 2019) (Chart 3)

EURGBP: Retail trader data shows 42.3% of traders are net-long with the ratio of traders short to long at 1.36 to 1. In fact, traders have remained net-short since April 5 when EURGBP traded near 0.85835; price has moved 0.7% higher since then. The number of traders net-long is 10.0% higher than yesterday and 8.4% lower from last week, while the number of traders net-short is 13.1% lower than yesterday and 11.9% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURGBP 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 EURGBP 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 Vecchio, e-mail at cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

View our long-term forecasts with the DailyFX Trading Guides

2019-04-18 13:00:00

What Could Collapsing Currency Volatility Spell for the Forex Market?

Posted: 18 Apr 2019 01:02 PM PDT

CURRENCY MARKET VOLATILITY – TALKING POINTS:

Forex traders have witnessed currency price action seemingly evaporate from the market as macroeconomic risks such as Brexit and the US-China Trade War appear to have subsided
While several uncertainties appear to have moved to the backburner, it is probable that volatility will eventually flare up again and even more likely to occur during periods of low liquidity as is typical around global holidays
Check out this article for information on the Top 10 Most Volatile Currency Pairs and How to Trade Them

Forex market volatility has cratered to lows not seen in years. In fact, the Cboe Currency Volatility Index for the Euro, Yen, and British Pound have all plunged to their lowest levels on record since the financial instruments began trading in 2015.

EURO, YEN, AND STERLING VOLATILITY INDEX PRICE CHART: WEEKLY TIME FRAME (JANUARY 12, 2015 TO APRIL 18, 2019)

Although British Pound price action was on the rise as Brexit uncertainty sent the Sterling swinging in response to the latest headline, delaying the UK's departure date to October 31 has sent GBPUSD implied volatility nose-diving.

Rebounding market optimism with the help of central bank dovishness subsequent to last year's widespread selloff has similarly contributed to the collapse in volatility for the Euro and Yen.

EURUSD PRICE CHART: WEEKLY TIME FRAME (JUNE 23, 2013 TO APRIL 18, 2019)

EURUSD's average-true-range has dropped to a mere 14 pips which is the metric's lowest reading since September 8, 2014. Although, the last time spot EURUSD price action was this muted, currency traders subsequently experienced a sharp return in volatility between August 2014 and June 2015.

USDJPY PRICE CHART: WEEKLY TIME FRAME (JUNE 23, 2013 TO APRIL 18, 2019)

Likewise, the average-true-range for USDJPY has also collapsed to its lowest level since September 8, 2014. However, similar to the proverbial law of physics 'what goes up must come down,' volatility can only stay so low for so long before a catalyst emerges that sparks a significant market move.

The most recent occurrence of this was at the beginning of the year when Apple lowered its earnings guidance which sent a shockwave across APAC markets and ignited a currency flash-crash in the Japanese Yen.

Now with Brexit delayed for another 6 months, the US-China trade war supposedly coming to an end and rebounding global economic growth expectations, several of the market's largest risks have dwindled. These developments have contributed to the overarching risk rally and has increased the relative attractiveness for currency carry trades due to dissipating uncertainty and related volatility.

That being said, these risks albeit less prevalent are still unresolved. If uncertainty regarding these issues flares up or factor jolts market sentiment and risk appetite, this could just be the 'calm before the storm.'

TRADING RESOURCES

– Written by Rich Dvorak, Junior Analyst for DailyFX

– Follow @RichDvorakFX on Twitter

2019-04-18 19:34:00

US Dollar Price Action Setups in EUR/USD, GBP/USD and AUD/USD

Posted: 18 Apr 2019 12:24 PM PDT

Forex Talking Points:

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US Dollar, EUR/USD, GBP/USD, AUD/USD Talking Points:

Tomorrow brings the Good Friday Holiday, and Monday is Easter, meaning many Western markets will be closed in observance of holidays. But in an ironic twist, many markets began to show breakout tendencies ahead of the weekend despite the fact that much of 2019 trade has been populated by back-and-forth price action.

In this webinar, I tried to take a step back to look at the bigger picture across a series of US Dollar backdrops.

US Dollar Pushes Towards Key Resistance

At the source of many of the current FX moves, the US Dollar has finally began to trade-higher after a general tone of weakness had populated early Q2 trade. As of the Tuesday webinar, the US Dollar was without much to speak of for trends. But that began to shift yesterday and hit fever pitch today as USD bulls pushed prices up to fresh two-week-highs, with price action testing above a descending trend-line connecting the March, April highs.

This makes for a difficult backdrop to plot for USD-strength given the context, and this can keep the door open to a pullback to support in the early-portion of next week, perhaps around the 97.00 level, to look for re-engagement at 97.70.

US Dollar Eight-Hour Price Chart

Chart prepared by James Stanley

EURUSD Breaks Below Bear Flag – but Can Bears Push the Breakout?

Going along with that move of strength in the US Dollar has been a bearish push in EURUSD. The pair has broken below the bear flag formation looked at yesterday, and prices made a quick-run towards longer-running range support from 1.1187-1.1212; and as looked at this morning – that made for a difficult prospect around risk-reward in bearish scenarios.

Similar to the US Dollar above, plotting for fresh breakouts around holiday conditions can be a difficult prospect. This keeps the door open for another support inflection at this key zone. Bearish breakouts can be sought on a push below 1.1175 in the early-portion of next week, and sellers also have the option of looking for a pullback to prior support around 1.1250 to re-open the door for bearish trend strategies.

EURUSD Four-Hour Price Chart

Chart prepared by James Stanley

GBPUSD: Bear Trap Potential Ahead of Holiday Trade

GBPUSD is in a similar spot as EURUSD above, where a longer-term case of digestion has come into focus ahead of the holiday. In GBP/USD, the pair has been building a descending triangle over the past couple of months, with multiple inflections around support from 1.2960-1.3000, while resistance has continued to come-in at lower-highs over the past month. Such a formation will often be approached in a bearish fashion, looking for the motivation that's driven-in sellers at lower-highs to, eventually, take-out the horizontal level of support.

The big question is whether that can happen now as holiday conditions near. This could be a bear trap that traders want to avoid until next week might present a cleaner backdrop for near-term analysis.

GBP/USD Four-Hour Price Chart

Chart prepared by James Stanley

AUD/USD Holds Resistance at Key Fib – Range Continuation or Eventual Bullish Break?

I've been focusing on the range in AUD/USD over the past month and, by and large, that's worked out well. Yesterday saw the top-side of 'r2' come into play at .7206, which is a long-term Fibonacci level, and this has helped to hold the highs in the pair. Prices reacted by dropping 70-pips off of that level but, curiously, as US Dollar strength has run rampant, AUD/USD has seen softening around the lows, with buyers offering support in the prior zone of 'r1' resistance. This can place emphasis on an area from .7113-.7125, looking for buyers to hold up the lows there in order to bring on another resistance test at .7185-.7206.

AUD/USD Four-Hour Price Chart

Chart prepared by James Stanley

To read more:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts for Q4 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

2019-04-18 19:08:00

US Manufacturing and Services PMI Miss Estimates, Reveals Slow Growth

Posted: 18 Apr 2019 09:09 AM PDT

Markit PMI Talking Points:

The U.S. Markit services PMI moderated with a reading of 52.9 in April, the slowest growth in the index since March 2017
The weak trend from the first quarter continues into April with continued slowing growth for both manufacturing and services
Manufacturing PMI Index came in unchanged from last month at 52.4, signaling the weakest growth in the manufacturing sector since June 2017

Markit Economics released their monthly Purchasing Managers Index readings this morning for the service and manufacturing sectors. The Services PMI came in at 52.9 which missed analyst estimates of 55.0, which are largely attributed to purchasing managers revising their output expectations lower for the year and slower growth in employment. New business was also lower with it being the softest increase since March 2017.

The soft marks in the service sector follow weak numbers in consumer spending to start the year which coupled with continued weakness in the Service PMI could stoke fears that consumers are losing their appetite to spend, however some fears could be eased by this morning's stronger than expected retail sales – mainly attributed to strength in the auto sector.

The manufacturing PMI reading was 52.4 which missed estimates and went unchanged from last month's reading. This was the weakest improvement in the manufacturing sector since June 2017. Improved indicators for output and new orders were offset from slowing increases in employment and pre-production inventories according to purchasing managers.

There was also an increase in new business, with the best reading in three months. However, compared to the same period last year, the increase is somewhat underwhelming. Inflation pressure eased across the sector with input prices declining for the sixth consecutive month, but survey participants noted that small increases in cost are generally being passed on to their clients.

The data from Markit puts the U.S. economy at its weakest growth since 2016 in relation to manufacturing and services, with hiring and output being the main sources for the slowdown. It appears weak manufacturing in the first quarter has started to bleed into April. The easing of inflation pressure on prices for manufactures has reduced pricing power which, coupled with weaker demand, could cause continued downward pressure into the rest of the second quarter.

–Written by Thomas Westwater, Intern Analyst for DailyFX.com

Contact and follow Thomas on Twitter @FxWestwater

2019-04-18 15:25:00