Analyst Articles – Forex News 24

USDCAD Price Outlook Hinges on Canadian Retail Sales Data
GBPUSD Price May Yet Drop More as UK Inflation Data, Brexit Sour Mood
SEK and NOK Hold Breath Ahead of FOMC Meeting Minutes
GBPUSD Rate Risks Near-Term Rebound on Rising UK CPI
Gold Prices May Drop as FOMC Minutes Cool Rate Cut Speculation
Dow Gaps Higher Amid Trade War and GDP Downgrade, EURGBP Notches 13 Days
Singapore Dollar, Malaysian Ringgit Chart Analysis: Turning Point?
GBPUSD Currency Volatility: Brexit Latest Rattles Sterling
Gold Price Edges Lower in Range as Gold Volatility Sinks
FX Price Action Setups in EUR/USD, GBP/USD, USD/CAD and AUD/USD

USDCAD Price Outlook Hinges on Canadian Retail Sales Data

Posted: 22 May 2019 04:12 AM PDT

Canadian Dollar (CAD) on Edge Ahead of Retail Sales Data

Will Canadian retail sales data continue last month's uptick?
USDCAD testing one-month support but the pair may be oversold.

Q2 2019 CAD and USD Forecasts andTop Trading Opportunities

USDCAD Price Continues to Probe Support

Canadian retail sales showed a sharp uptick last month, after three prior months of negative data, and today's figure is expected to top February's 0.8% increase, the strongest reading since May 2018. Retail sales data can be unpredictable and volatile and a sizeable miss, either way, could set the tone for USDCAD in the coming days.

For a comprehensive guide to all this week's data and events, you can see the DailyFX Economic Calendar

here.

Today's retail sales print may give a little bit more insight into next Wednesday's Bank of Canada rate decision – expected unchanged at 1.75% – and next Friday's Q1 2019 GDP release. The Canadian economy continues to support a robust jobs market, while inflation is currently running at 2% y/y, rising steadily from January this year.

Canadian Inflation Data

The price of oil has drifted off its late-April high and is seemingly stabilizing in a narrowing range. Important support levels near and this could affect USDCAD if these levels fail to hold. The ongoing US-China trade was will also weigh on growth concerns, and the price of oil, unless talks take a positive turn.

Crude Oil Eyeing Break of Near-Term Technical Support

USDCAD has been stuck in 150 pip range since the April 24 with the lower bound now under increasing pressure. The pair have recently broken below the 20- and 50-day moving averages, adding to bearish sentiment, and now eye the May 1 low at 1.3377. A break and close below here would target 1.3335 before two old lows and the 200-day moving average between 1.3250 and 1.3283 come into focus. Downside momentum may be slowed by the CCI indicator that shows the pair in oversold territory. USDCAD traders should also take into account two Fed speakers after the retail sales release and the FOMC minutes released later in the session.

USDCAD Daily Price Chart (May 2018 – May 22, 2019)

Retail traders are 47.3% net-long USDCAD according to the latest IG Client Sentiment Data. See how recent daily and weekly positional changes affect USDCAD and currently give us a bearish contrarian trading bias.

Traders may be interested in two of our trading guides – Traits of Successful Traders and Top Trading Lessons – while technical analysts are likely to be interested in our latest Elliott Wave Guide.

What is your view on USDCAD – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author at nicholas.cawley@ig.comor via Twitter @nickcawley1.

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2019-05-22 11:00:00

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GBPUSD Price May Yet Drop More as UK Inflation Data, Brexit Sour Mood

Posted: 22 May 2019 02:18 AM PDT

GBP price, news and analysis:

The GBPUSD price outlook remains poor as brief Brexit optimism Tuesday dissipates and the race to replace Theresa May as UK Prime Minister waits for the starting flag to be waved.
Meanwhile, news of weaker-than-expected UK inflation data is adding to Sterling's woes.

GBPUSD weakness may persist

GBPUSD continues to trade within the downward channel on the charts that has been in place for most of this month so far and could fall to 1.26 as the Brexit process continues to go nowhere. After an offer Tuesday by UK Prime Minister Theresa May of a Parliamentary vote on a second Brexit referendum, that gave Sterling a brief boost, failed to gain support, GBP dropped back again and continues to look weak.

As the runners and riders jostle for position at the starting line, waiting for the official starting flag to be waved in the race to replace May as Prime Minister, uncertainty is bound to persist – and so far GBPUSD has shown little sign of responding favorably to her likely fall.

GBPUSD Price Chart, Hourly Timeframe (May 3 – May 22, 2019)

Chart by IG (You can click on it for a larger image)

DailyFX poll: Corbyn could be best successor to PM May for GBP

In the meantime, UK inflation data for April showed a smaller-than expected increase to 2.1% year/year from March's 1.9%. That compares with the consensus forecast of 2.2%, although it was still the highest this year, pushed up by a rise in energy bills.

Resources to help you trade the forex markets:

Whether you are a new or an experienced trader, at DailyFX we have many resources to help you:

— Written by Martin Essex, Analyst and Editor

Feel free to contact me via the comments section below, via email at martin.essex@ig.com or on Twitter @MartinSEssex

2019-05-22 09:15:00

SEK and NOK Hold Breath Ahead of FOMC Meeting Minutes

Posted: 21 May 2019 11:50 PM PDT

SEK, NOK TALKING POINTS – FOMC MEETING MINUTES, USDSEK, USDNOK

SEK and NOK traders are preparing for release of FOMC meeting minutes
Krona volatility may be compounded by Riksbank financial stability report
Trade war, global growth fears hang over Norway and Sweden economies

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

Norwegian Krone and Swedish Krona crosses with the US Dollar will experience higher-than-usual volatility after the FOMC meeting minutes are published. Since February, economic data out of the US has been tending to underperform relative to economists' expectations. While the US-China trade war has had a relatively limited impact on Fed monetary policy, that could change.

St. Louis Fed President James Bullard yesterday said in an interview that if US-China tariffs remain in place for another six months, it could begin to impact the central bank's monetary policy. The trade deal between the two superpowers carries additional weight because of US President Donald Trump's intention of pushing through a $2 trillion fiscal reform after an accord is reached between the US and China.

The inflationary pressure that would likely ensue may then prompt the Fed to adjust its monetary positioning from neutral to more hawkish. At the last meeting, Fed Chairman Jerome Powell said that the lull of price growth was "transitory". Assuming US economic growth shows strength and inflationary pressure picks up, it may give the Fed impetus to raise rates against what policymakers would perceive as a favorable backdrop.

Due to the gravity of the FOMC meeting minutes, the market reaction from it may overshadow the potential volatility that would arise from the Riksbank's publication of the Financial Stability Report. Interest rates in Sweden are expected to hold at least throughout summer and the early months of autumn. This in large part is due to headline risks of Brexit, the US-China trade war and slowing European growth.

Unless these fundamental risks are resolved or significantly reduced in their capacity to disrupt markets, Riksbank officials may have a hard time finding a justification to raise rates. Dovish expectations from the Swedish central bank may help explain why the Krona has been suffering all year while the country's benchmark equity index has been skyrocketing – likely from expectations of continued loose credit.

CHART OF THE DAY: KRONA WEIGHTED INDEX AT LOWEST POINT SINCE 2009

NOK, SEK TRADING RESOURCES

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

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

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2019-05-22 06:30:00

GBPUSD Rate Risks Near-Term Rebound on Rising UK CPI

Posted: 21 May 2019 11:09 PM PDT

Trading the News: U.K. Consumer Price Index (CPI)

Updates to the U.K. Consumer Price Index (CPI) may curb the recent decline in GBP/USD as both the headline and core rate of inflation are projected to pick up in April.

Signs of sticky price growth may trigger a bullish reaction in the British Pound as it puts pressure on the Bank of England (BoE) to respond to above-target inflation, and Governor Mark Carney & Co. may keep the door open to implement higher interest rates as 'the Committee continues to judge that, were the economy to develop broadly in line with its Inflation Report 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.'

However, another below-forecast reading for both the headline and core CPI may keep GBP/USD under pressure as it encourages the BoE to retain a wait-and-see approach for monetary policy, with the British Pound at risk of facing headwinds ahead of the next meeting on June 20 as indications of limited price growth dampen bets for a BoE rate-hike.

Impact that the U.K. CPI report had on GBP/USD during the previous release

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

MAR

2019

04/17/2019 08:30:00 GMT

2.0%

1.9%

-11

-8

March 2019 U.K. Consumer Price Index (CPI)

GBP/USD 10-Minute Chart

Image of gbpusd 10-minute chart

The U.K. Consumer Price Index (CPI) was unchanged in March, with the headline reading steady at 1.9% per annum, while the core rate of inflation crossed the wires at 1.8% for the second month. A deeper look at the report showed Transportation costs climbing to 3.3% from 3.1% per annum in February, while prices for clothing/footwear contracted 1.6% during the same period.

The below-forecast prints spurred a small pullback in GBP/USD, with the exchange rate consolidating throughout the day to close at 1.3038. Learn more with the DailyFX Advanced Guide for Trading the News.

GBP/USD Rate Daily Chart

Keep in mind, the broader outlook for GBP/USD is no longer bullish as the exchange rate snaps the upward trend from late last year after failing to close above the Fibonacci overlap around 1.3310 (100% expansion) to 1.3370 (78.6% expansion).
In turn, the advance from the 2019-low (1.2373) may continue to unravel as the Relative Strength Index (RSI) highlights a similar dynamic, with the oscillator now tracking the bearish formation carried over from March.
The break/close below the Fibonacci overlap around 1.2760 (38.2% retracement) to 1.2800 (50% expansion) brings the 1.2610 (23.6% retracement) to 1.2640 (38.2% expansion) region on the radar, but will keep a close eye on the RSI as it struggles to push into oversold territory, with failure to hold below 30 raising the risk for a rebound in the exchange rate.

Additional Trading Resources

New to the currency market? Want a better understanding of the different approaches for trading? Start by downloading and reviewing the DailyFX Beginners Guide.

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.

— Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong.

2019-05-22 06:00:00

Gold Prices May Drop as FOMC Minutes Cool Rate Cut Speculation

Posted: 21 May 2019 10:28 PM PDT

GOLD & CRUDE OIL TALKING POINTS:

Gold prices rudderless as Brexit news-flow offers conflicting influences
Crude oil prices remain range-bound, eyeing EIA inventory flow report
FOMC meeting minutes may cool rate cut bets, hurt commodity prices

Gold prices struggled to for direction, trading inversely of seesaw swings in the US Dollar. It succumbed to cross-currents from a jump in the GBP/USD exchange rate after UK Prime Minister Theresa May floated the possibility of a second Brexit referendum. The move promptly fizzled however, with a rebound in the benchmark currency cooling anti-fiat demand and forcing the yellow metal to retreat.

All eyes now turn to minutes from May's FOMC meeting. Commentary reiterating officials' wait-and-see approach amid a raft of global uncertainties may cool rate cut hopes. That seems inherently USD-supportive, with haven demand acting as a further accelerant as markets pining for policy support tilt into risk-off territory. Gold is vulnerable in this scenario.

Crude oil prices swung modestly lower but remained well within the narrow congestion range prevailing since late last week. Fed-inspired risk aversion might make for a more committed selloff. Pressure may be compounded if EIA inventory data echoes an API projection showing US stocks added 2.4 million barrels last week. Analysts are betting on a 1.28-million-barrel increase.

Did we get it right with our crude oil and gold forecasts? Get them here to find out!

GOLD TECHNICAL ANALYSIS

Gold prices are still probing support at a rising trend line guiding them higher since mid-August 2018. This is bolstered by the 1260.80-63.76 inflection area. A daily close below that targets the 1235.11-38.00 zone thereafter. Alternatively, a rebound above resistance in the 1303.70-09.12 region broadly aims for February's high at 1346.75, with a minor hurdle in the 1323.40-26.30 price band along the way.

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices continue to mark time at the lower bound of a dense block of overlapping resistance levels in the 63.59-67.03 area. If buyers manage the wherewithal to breach it, an opening to retest the $70/bbl figure may present itself. Alternatively, a drop through near-term support at 60.39 sees the next downside barrier in the 57.24-88 zone.

COMMODITY TRADING RESOURCES

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

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

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2019-05-22 05:00:00

Dow Gaps Higher Amid Trade War and GDP Downgrade, EURGBP Notches 13 Days

Posted: 21 May 2019 09:15 PM PDT

Trade Wars Talking Points:

A fractional improvement in trade war relations bumped risk appetite, but a 90-day reprieve for Huawei from the US isn’t true fuel
The OECD downgraded its forecast for the global economy and business investment with a direct warning on trade wars
UK Prime Minister May tried to break the Brexit impasse by offering a second referndum…but she was again rejected

See how retail traders are positioning AUDUSD, EURUSD, S&P 500 along with the other FX majors, indices, gold and oil intraday using the DailyFX speculative positioning data on the sentiment page.

US-China Trade War Rhetoric Hardens, So is a Huawei Access Extension Good News?

If were were keeping a tally on the progression of the global trade wars, the pain side of the ledger would certainly be gaining serious ground over the troublingly anemic list of improvements. Nevertheless, it seemed the market would cling to the small wins this past session to offer a broad nudge higher in risk-leaning assets. For the S&P 500, Tuesday began with the biggest bullish gap since April 1st – a welcome contrast to a record of nine drops to open trade over the past 11 active sessions. Yet, this strong start notably lacked for momentum in any meaningful follow through, leaving the index with yet another terminal wedge that slows progress and reloads unrealistic hope for a productive breakout with follow through. This morsel of speculative interest wasn’t simply relegated to the US indices. The ‘rest of world’ equity measure (VEU) offered a very similar pattern – significantly lower than the proximate record highs the S&P 500 hovers around – while emerging markets, junk bonds and carry trade via Yen crosses all notched modest gains. Breadth is important when evaluating the influence of speculative appetite, but conviction is the other piece to that equation and we are seeing very little of that at the moment.

Chart of S&P 500 and Daily Gaps (Daily)

Where was the market finding its measured enthusiasm this past session? Trade wars are far from a full resolution, but discernible improvement can still exert more influence than many may suspect. In the aftermath of the United States tariff hike on the $200 billion in Chinese imports it taxes and China’s subsequent retaliation, the most remarkable development has been the White House’s ban on the supposed state-owned telecommunications firm Huawei. That maneuver was a clear political shot across the bow, so there was a raw of hope working its way through the clouds this past session when the government said that existing American business relationships with the company would have a 90-day reprieve to continue business. I tend to believe this has more to do with avoiding unnecessary fallout for American businesses, but the market seems to also register this move as a sign that negotiations are possible. In the meantime, Chinese President Xi made a highly publicized visit to rare-earth material producers likely as a warn as to where the next trade escalation could come from and the leader warned his fellow countrymen and women that they should prepare for a “new Long March, and we must start all over again!”. Meanwhile, the US seems to be making corrective moves to shore up its fight with reports the Trump administration is considering subsidies to American farmers to the tune of $2 per bushel for soybeans, $0.63 for wheat and $0.04 for corn.

Chart of USDCNH and Huawei in Blue (Daily)

Dow Gaps Higher Amid Trade War and GDP Downgrade, EURGBP Notches 13 Days

Before we grow too optimistic about the state of trade going forward, we should take account of the increased warnings from data and by trade groups recently. Alongside its update on growth forecasts, the OECD issued a clear warning about the significantly negative impact that ongoing trade wars could pose to the global economy – not an uncommon assessment. As the pressure mounts, industries are increasingly lobbying for relief from the idealistic governments. A host of apparel companies – including Nike, Adidas and Under Armour among others – issued a plea to the administration calling on an exception for footwear, warning the cost to Americans could be ‘catastrophic’ ($7 billion per annum in their estimate). Seeing the writing on the wall, auto manufacturers are not resting on their laurels for the six month pause before President Trump considers taxes on imported automobiles and parts again. An industry group headed by the JAMA – Japanese Auto Manufacturing Association – ran statistics to suggest how much investment and how many jobs their companies have brought to the US over the past decade. We will see if the data budges this dedicated administration.

Chart of CARZ Autos ETF and Index of Apparel Company Shares in Blue (Daily)

Dow Gaps Higher Amid Trade War and GDP Downgrade, EURGBP Notches 13 Days

OECD Downgrades Growth Forecasts and Political Risks Gnaw at Confidence

Trade wars is the most loaded theme to carry weight over the market, but it isn’t the only threat on the horizon for which traders are keeping track. Economic potential is still the endgame when it comes to the risk and potential of these various developments. Following the impressive showing for the 1Q Japanese GDP release and the poor numbers from the Chicago Fed’s national activity index, the OECD offered an update for the global economy. The supranational group downgraded its outlook from 3.3 to 3.2 percent expansion and sharply downgraded the business investment outlook from a previous 3.5 percent pace to 1.75 percent. The two largest participants in the trade wars received downgrades for growth of their own – US to 2.8 and China to 6.2 percent – while their subsequent 2020 projections were even slower. It comes as no surprise that trade wars were afforded more than their fair share of the responsibility for the economic struggle.

As the economic bill through troubled GDP accumulates with time, there is a more dynamic threat to account for in political risk. This is not easily defined as events such as trade wars general fit this open-ended category. Yet, there are unmistakable aspect to this dynamic threat that should be monitored more closely for the inordinately expansive threat they pose to the global order of the global financial system. The OECD mentioned the infrastructure spending program the US has floated at different times in the recent past as a recommended source of growth for the world’s largest economy, but the tension between the Executive and Legislative branch puts that effort in serious peril. From unrealized support to outright risk, the threat of open engagement between the US and Iran continues to nudge closer each day. The later country’s foreign minister this past session said that the country wont restart dialogue with the US until the country ‘respects’ Iran – or more pointedly the nuclear treaty that collapsed between the two. Despite the disruption this threatens in supply, crude oil prices have not charged higher on the back of this news. It seems the abundant supply fueled by record production in the US and the output from OPEC is enough to check against fading growth forecasts for demand.

Chart of US Crude Oil Price (Daily)

Dow Gaps Higher Amid Trade War and GDP Downgrade, EURGBP Notches 13 Days

An Effort at Brexit Breakthrough Generates Pound Volatility, A Study in Fundamental Priority

One of the most remarkable examples of volatility this past session would come on behalf of the British Pound. The currency sported an inordinate amount of intraday volatility and ultimately completed an aggressive round trip on the day. The result was a sustained trend from GBPUSD and GBPJPY, but the real standout was EURGBP. After the short-lived correction for the pair (recovery for the Sterling) sputtered, a large bullish wick formed on the daily candle and it ultimately ended with a record-breaking 13 consecutive trading days of advance. Interestingly, despite the unexpected contribution from the last two days, there has been no definitive break above the technical resistance pulled from the midpoint on the 2019 range. The spark for the volatility was UK Prime Minister Theresa May’s statement that she would support a second referendum vote if MPs supported her Brexit plan. Both leadership from the Labour and ERG parties rejected the proposal.

Chart of EURGBP and Consecutive Candle Moves (Daily)

Dow Gaps Higher Amid Trade War and GDP Downgrade, EURGBP Notches 13 Days

If you suspect the Pound to simply take the news and extrapolates a strong sustained bear trend, be mindful of the anticipation surrounding the upcoming EU Parliamentary elections. The UK’s participation in this event speaks to the state of the divorce proceedings and the strategy of the government to rouse support will depend on this event. Yet, the implications may prove far more significant from this vote for the Euro. The rise of nationalist support in the polls threatens to solidify the anti-EU and anti-Euro sentiment to something on the level of true economic weight. If there is a clear anti-Euro wind to come in the results of this event, the threat to the shared currency (the second most liquid in the world) will be unmistakable. Few developments would drive EURUSD to parity more quickly. Wait-and-see is the tempo most appropriate for the likes of the Pound and Euro and that is likely to decide the Dollar’s fate as well. The Greenback is far less influenced by its own fundamental measures – growth, Fed forecast, even trade status – which leaves its indirect status as the benchmark liquidity alternative as the principle driver. We discuss all of this and more in today’s Trading Video.

Chart of EURUSD and CME's Euro Volatility Index (Daily)

Dow Gaps Higher Amid Trade War and GDP Downgrade, EURGBP Notches 13 Days

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

2019-05-22 02:52:00

Singapore Dollar, Malaysian Ringgit Chart Analysis: Turning Point?

Posted: 21 May 2019 08:38 PM PDT

ASEAN Technical Outlook – USD/PHP, USD/SGD, USD/IDR, USD/MYR

Both the Singapore Dollar and Malaysian Ringgit may be at turning points
Indonesian Rupiah is facing increasing intervention from its central bank
The Philippine Peso may also be readying to turn course versus the USD

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

USD/SGD Technical Outlook

The Singapore Dollar extended its decline against its US counterpart following the break above a key resistance line noted last week. This brought USD/SGD into the near-term psychological barrier between 1.3749 and 1.3774. More broadly, this followed the break above the descending trend line from November of last year, resulting in the creation of a new dominant uptrend. SGD has since weakened over 1.8%.

With that in mind, the Singapore Dollar is facing its next big test, 1.3774 and negative RSI divergence. The latter shows fading upside momentum with prices conveniently sitting at resistance. If both these instances hold, we could be looking at a turn lower towards a couple of rising support lines (red lines on the chart below). Otherwise, resuming the uptrend places 1.3816 as near-term resistance.

USD/SGD Daily Chart

USD/MYR Technical Outlook

Like the Singapore Dollar, the Malaysian Ringgit is facing a similar dilemma when looking at USD/MYR. Following the break above the Falling Wedge bullish reversal pattern back in April, the currency pair rose more than 2.6%. Fundamentally, this has occurred amidst a rate cut from the central bank of Malaysia and an uptick in US-China trade war fears.

The Ringgit thus finds itself sitting right under key resistance at 4.1855 with negative RSI divergence posing as a downside risk. If resistance holds and there is a turn lower, keep an eye on the rising trend line from early April (red line below). Clearing it would then expose former support at 4.1448. Otherwise, additional gains in USD/MYR will face the next psychological barrier between 4.1950 and 4.2000.

USD/MYR Daily Chart

USD/IDR Technical Outlook

Recently, USD/IDR has slowed its ascent following the push above the falling resistance line from December. Keep in mind that the Bank of Indonesia has been frequently expressing its commitment to maintain price stability in the Rupiah and guard it. The presence of multiple Shooting Stars, which are signs of indecision, under 14482 seems to reflect the central bank stepping in to keep the currency stable.

The US Dollar is attempting to push higher against the Indonesian Rupiah, with USD/IDR resistance at 14482 under pressure. Clearing it would expose 14646 and continue upholding the uptrend since the middle of April. On the other hand, gains in IDR would face near-term support at 14435. If that is taken out, that may open the door to testing 14340 thereafter.

USD/IDR Daily Chart

USD/PHP Technical Outlook

Meanwhile, the Philippine Peso has also paused its weakness against the US Dollar with USD/PHP sitting above support at 52.37. This has occurred after the close under the near-term rising support line (red line below). Given confirmation, this may precede a turn lower towards the next psychological barrier around 52.12. Otherwise, resuming gains entails testing 52.73 followed by 52.87.

USD/PHP Daily Chart

**All Charts Created in TradingView

Read this week's ASEAN fundamental outlook to learn about the underlying drivers for these currencies!

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

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2019-05-22 03:30:00

GBPUSD Currency Volatility: Brexit Latest Rattles Sterling

Posted: 21 May 2019 03:23 PM PDT

GBPUSD & BREXIT – TALKING POINTS

Spot GBPUSD went on a rollercoaster ride during Tuesday's trading session as ongoing Brexit drama intensifies
Upcoming UK economic data and EU Parliamentary elections threatens further turbulence in the British Pound
Download the free Q2 GBP Forecast via DailyFX for in-depth British Pound outlook

GBPUSD whipsawed on Tuesday in a volatile session with the cable ranging between an intraday high and low of 1.2814 and 1.2685 – a range of 129 pips. British Pound price action quickly followed the latest Brexit developments out of the UK as Prime Minister Theresa May announced that the government will offer up a second referendum hoping to avoid a no-deal departure from the EU.

CURRENCY VOLATILITY AND TRADING RANGES (IMPLIED)

Currency volatility for major USD currency pairs

Spot GBPUSD initially soared on the news, but the sterling subsequently swooned as corralling enough support from British MPs – and avoiding a no-deal Brexit – remains an uphill battle.

Following the second Brexit extension provided to the UK last month, GBPUSD implied volatility took a nosedive.However, GBPUSD price action looks to creep higher with Brexit uncertainty beginning to build once again.

GBPUSD IMPLIED VOLATILITY: DAILY TIME FRAME (OCTOBER 01, 2018 TO MAY 21, 2019)

Aside from Brexit, upcoming EU Parliamentary elections which the UK will partake in could stoke additional GBPUSD volatility as well. Moreover, the cable has potential to swing during Wednesday's trading session in response to UK inflation data due for release at 8:30 GMT. A red-hot reading on the CPI may prop up the British Pound as it is likely to support hawkish BOE bets.

However, BOE Governor Mark Carney has shied away from economic data readings, deferring to a 'wait-and-see' approach due to the vast outstanding Brexit uncertainty. OIS futures are currently pricing an 18.9 percent probability that the BOE raises rates by its November 7 meeting – the central bank's first gathering following the October 31 Brexit deadline.

GBPUSD PRICE CHART: DAILY TIME FRAME (DECEMBER 21, 2018 TO MAY 21, 2019)

According to GBPUSD 1-month implied volatility – which is expected to encompass the upcoming EU Parliamentary election results and the fourth Withdrawal Agreement vote anticipated to take place in early June – the cable is estimated to trade between 1.2440 and 1.2958 with a 68 percent statistical probability over the next 30 days.

– Written by Rich Dvorak, Junior Analyst for DailyFX

– Follow @RichDvorakFX on Twitter

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2019-05-21 21:30:00

Gold Price Edges Lower in Range as Gold Volatility Sinks

Posted: 21 May 2019 02:11 PM PDT

Gold Price Talking Points:

The gold breakout during the first half of May has failed, with price returning back into the 1266.18 to 1288.58 range from April 15 to May 13.
After hitting a four-week high in early-May, gold implied volatility has quickly slumped back towards its all-time low.
Changes in retail traders positioning suggest that gold prices could still fall.

Looking for longer-term forecasts on Gold and Silver prices? Check out the DailyFX Trading Guides.

The return of uncertainty over the US-China trade war negotiations initially proved bullish for safe haven assets like the Japanese Yen and US Treasuries. But amid a return of US Dollar strength alongside the bid in safe havens, gold prices have been hobbled in recent days, effectively neutralizing bullion's appeal during a time of risks seemingly rising everywhere around the globe.

Shortly after hitting an all-time low on May 3, GVZ, the measure of 1-month implied Gold volatility, rebounded to a four-week high as new developments in the US-China trade war spooked investors globally. While rising volatility is usually seen as a disconcerting development for prices, gold benefits from rising volatility: higher levels of uncertainty increase the safe haven appeal of gold.

GVZ (Gold Volatility) Technical Analysis: Daily Price Chart (May 2018 to May 2019) (Chart 1)

Keeping this relationship between gold prices and gold volatility in mind, the past few weeks have seen measures of gold volatility fall, and in turn, the appeal of Gold wane. GVZ peaked on May 13, and gold prices hit their monthly high the following day; as gold volatility has quickly slumped back towards its all-time low, the Gold price breakout from early-May has failed in turn.

Gold prices remain within the range carved out between 1266.18 and 1288.58 from April 15 to May 13 after having returned to said consolidation last week. Typically, when false breakouts occur, we see price return to the other side of the consolidation; we thus can't rule out a further drop in gold prices towards the consolidation support – particularly if Gold volatility continues to head lower.

Gold Price Technical Analysis: Daily Chart (April 2018 to May 2019) (Chart 2)

gold price, gold technical analysis, gold chart, gold price forecast, gold price chart

In early-May, gold prices attempted to climb through four-week consolidation resistance above 1288.58, and for several days, it appeared that a bullish breakout was gathering pace; the downtrend from the February and March swing highs was temporarily broken as well.

Nevertheless, the gold price forecast is still neutral so long as the range is in place; the breakout is on hold for now. Should gold prices move above 1288.58, we would again be looking at topside break of the consolidation as well as the downtrend from the February and March 2019 highs, while, a drop below 1266.18 would constitute a downside break of the consolidation as well as the uptrend from the late-2018 swing lows.

IG Client Sentiment Index: Spot Gold Price Forecast (May 21, 2019) (Chart 3)

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Spot gold: Retail trader data shows 79.3% of traders are net-long with the ratio of traders long to short at 3.83 to 1. The number of traders net-long is 3.9% lower than yesterday and 11.2% higher from last week, while the number of traders net-short is 3.2% lower than yesterday and 26.5% lower from last week.

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

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— Written by Christopher Vecchio, CFA, Senior Currency Strategist

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2019-05-21 21:00:00

FX Price Action Setups in EUR/USD, GBP/USD, USD/CAD and AUD/USD

Posted: 21 May 2019 12:23 PM PDT

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

Gold Price Breaches Trend-Line, Exposes 2019 Low

Risk aversion themes have been on display of recent in Gold prices. A couple of weeks ago, I had looked at topside potential on a continuation of risk aversion, as echoed by similar themes of US equities pulling back. Gold caught a strong bid early last week and prices posed a quick run-up to resistance at 1302.76. But, that's when the music stopped, and since then, bears have been pushing back as risk tolerance has extended. Gold prices put in a breach of a bullish trend-line that had previously helped to catch the May low. This runs around a double-bottom at 1266.10. A break-below that level exposes a deeper pocket of support around the 1252-1253 area on the chart.

Gold Price Four-Hour Chart

Chart prepared by James Stanley

US Oil Builds Range Between Fibonacci Levels

Recent Support in WTI has shown around 62.85 while resistance has continued to play-in from around 63.71. This has produced a range-bound environment over the past week. A bullish break above 63.71 could soon re-open the door to topside strategies, looking for targets towards the 64.50-64.77 level on the chart.

US Oil Two-Hour Price Chart

Chart prepared by James Stanley

EUR/USD Trap Potential – European Elections Coming Up

EUR/USD has been fairly quiet so far this week, all factors considered. But, that may not last for long as this Thursday brings the start of European elections and that runs alongside the release of ECB minutes for Thursday morning. Notably – EUR/USD appears as a bear trap given the current backdrop. Despite last week's consistent run of USD-strength, EUR/USD bears have been fairly shy around tests of prior lows. This morning even brought a quick flicker of strength in the pair, but sellers showed up around the 1.1187 Fibonacci level that marks the bottom of the prior support zone. This can make for a muddy backdrop going into the later-week risk items in the pair.

For more background on European elections and how that might impact the single currency, our own Martin Essex has produced a primer for the event entitled, Euro Price Slide Set to Continue as European Elections Draw Closer.

EUR/USD Four-Hour Price Chart

Chart prepared by James Stanley

GBP/USD Holding a Big Area of Long-Term Support

Brexit dynamics have made an appearance in GBP/USD, once again. And this can be a difficult theme to work with as it's a rather pensive manner with a low degree of predictability. But – for volatility traders, this may produce a workable backdrop. At this point, GBP/USD is testing a big area of support that I've been following that runs from 1.2671-1.2721. This can keep the door open for reversal potential; and on the short-side of the pair, traders can look for breaks below 2671 to re-open the door for bearish strategies.

GBP/USD Daily Price Chart

Chart prepared by James Stanley

USD/CAD Ranges Between Key Support and Resistance

The 1.3500 level has continued to hold the highs in USD/CAD, and support has similarly played-in from a familiar zone of recent relevance. The approach here may be more attractive on the long side, looking for the recent higher-lows that have started to price-in to, eventually, bring upon a break of the resistance zone around 1.3500. In the webinar, I showed how a box breakout strategy could be instituted in the pair, along with how continued range could be worked with (in the Q&A portion of the session).

USD/CAD Four-Hour Price Chart

Chart prepared by James Stanley

USD/JPY – Beware the Gap Trap

There is a fairly attractive area of resistance potential nearing in USD/JPY, and this runs around a prior area of support from 110.75-110.86. This zone had most recently helped to set lower-high resistance following the early-May gap-down. To date, that gap hasn't yet been filled, and this can make for a difficult backdrop. Prices moving back into 110.75-110.86 may give the attractive appearance of short-side potential; but traders may want to wait for that gap to first fill before entertaining such scenarios.

USD/JPY Four-Hour Price Chart

Chart prepared by James Stanley

Aussie Fills Gap, Clings to Support

I had looked into AUD/USD yesterday. The pair put in a gap-higher to open this week's trade but, as warned yesterday, a fill of that gap coupled with a hold of last week's low may soon open the door to bullish reversal strategies. That backdrop has since filled-in, and similar to GBP/USD above, this can open the door for topside strategies as long as that support holds and, if sellers are able to break-below, bearish strategies could come back into play to target the .6750 area on the charts.

AUD/USD Two-Hour Price Chart

Chart prepared by James Stanley

NZD/USD Clings to .6500

Similar as the above in AUD/USD with the notable exception of a better support structure around current levels.

NZD/USD Daily 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

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2019-05-21 19:00:00