Analyst Articles – Forex News 24

US Dollar Range Breakout Would Suggest Major Topping Potential
Canadian Dollar Price – USD/CAD May Resume Bearish Price Action
Trading GBP When a New Tory Leader Takes on Labour
Dollar Chart Buckles; EURUSD, GBPUSD, and Gold Rate Outlook

US Dollar Range Breakout Would Suggest Major Topping Potential

Posted: 04 Jun 2019 08:44 AM PDT

Top FX News Talking Points

Fed Chair Jerome Powell says that the Fed is "closely monitoring" impact of trade developments and it will "act as appropriate" to help sustain the US' near-record long expansion.
Rates markets have now begun to price-in three rate cuts over the next year, a major reason why the US Dollar has been dragged lower in recent days.
Retail traders are buying the US Dollar on dips, suggesting that DXY Index losses may continue in the near-term.

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

The US Dollar has seen prices decline significantly in recent days, thanks largely due to the growing threat of US-led trade wars. With US President Donald Trump across the pond for a visit to the UK, news flow around real trade developments has slowed somewhat. But markets are open and moving, suggesting that traders feel that changes in both fiscal and monetary policies over the coming months will have profound influences on US Dollar price action for the next several years.

Fed Chair Powell on US-led Trade Wars

With the prospect of a US-Mexican trade war front opening up as the US-China trade war intensifies, Fed Chair Powell has found good reason to speak out against the potential consequences of trade frictions. With estimates showing that the steepest tariffs against China and Mexico could detract around 1% of US GDP, Fed Chair Powell has said that policymakers are now "closely monitoring" the impact of trade developments.

To this end, as the US recovery approaches 10 years old next month – the longest stretch of economic growth in US history – Fed Chair Powell has also said that the Fed will "act as appropriate" to help sustain the expansion.

What Would Be an Appropriate Fed Response to Trade Wars?

Last week we noted that "if the Fed is going to get involved in trade wars, then it is highly likely that it will do so along the interest rate route…traders would be wise to watch how US rates markets have evolved in recent days as trade war concerns have skyrocketed." Indeed, given how rates markets have moved in the past week, it's of little surprise why the US Dollar has been hit so hard over the past few days.

Fed Funds Pricing Two Potential Rate Cuts in 2019

The probability of policy loosening by the Federal Reserve in 2019 has increased significantly over the past week. Prior to the May Fed meeting, there was a 68% chance of a 25-bps rate cut by the end of the year; those odds now stand at 97%. Overall, there is an 89% chance of a first Fed rate cut by September and an 82% chance of a second Fed rate cut by December.

Federal Reserve Rate Hike Expectations (June 4, 2019) (Table 1)

We can measure whether a rate cut is being priced-in by this time next year by examining the difference in borrowing costs for commercial banks over a one-year time horizon in the future. Over the past two weeks, rate expectations have been rapidly pricing in a cut, with rates markets discounting -73-bps by June 2020; this is a 18-bps increase from this time last week.

Eurodollar June 2019/2020 Spread: Daily Timeframe (October 2018 to June 2019) (Chart 1)

Rate pricing has changed dramatically since the end of April as the Eurodollar June 2019/2020 contract spread collapsed dramatically in May. Whereas one 25-bps rate cut was priced-in at the start of May, now two cuts (or 50-bps) are priced-in; rates markets are effectively pricing-in three 25-bps rate cuts by the Federal Reserve between now and June 2020.

US DOLLAR TECHNICAL ANALYSIS (DXY INDEX): DAILY PRICE CHART (JUNE 2018 TO MAY 2019) (CHART 2)

As Fed rate cut expectations have been dragged forward in recent days, the price forecast for the US Dollar (via the DXY Index) has weakened materially. Foremost, the DXY Index has fallen back to five-week range support near 97.15. Additionally, the DXY Index is now looking at a retest of the rising trendline from the February 2018, March 2018, and March 2019 low lows – the backbone of the entire bull move.

As far as this strategist is concerned, if the DXY Index closes below 97.15 this week it would signal not only the start of a double top pattern pointing towards 95.97/96.00 in the near-term, but longer-term major topping potential in the form of a bearish rising wedge – which would ultimately call for the DXY Index to decline back towards its 2018 lows near 88.25 over the next 16-months.

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

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2019-06-04 14:55:00

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Canadian Dollar Price – USD/CAD May Resume Bearish Price Action

Posted: 04 Jun 2019 06:17 AM PDT

USD/CAD Price Outlook, Charts and Analysis

US Dollar looking ahead to Fed Chairman Powell speech today.
USD/CAD edging lower after the last week's failure to close above the consolidation zone.

Did we get it right with our US Dollar forecast? Find out more for free from our Q2 USD and main currencies forecasts

To learn more about data releases for this week check outDailyFX Economic Calendar

USD/CAD – Back to the Congestion Area

On May 29, USD/CAD rallied off the consolidation zone . However, it failed to close above 1.3517 and repeated its failure twice in the following days after returning to trade within the same old consolidation zone. The price showed a lack of momentum to keep rallying and this has been confirmed as the (RSI) reading remained flat between 58- 59.

Yesterday, the bears took the initiative leading USD/CAD to close below 1.3457. Alongside, the (RSI) crossed below the 50 threshold, tipping the scale to the downside.

Having trouble with your trading strategy?Here's the #1 Mistake That Traders Make

USD/CAD DAILY PRICE CHART (FEB 11, 2019 – Jun 04, 2019)

Looking at the USD/CAD daily chart we notice the bears looking to send the price to the lower end of April 23 consolidation zone at 1.3377. Weekly support levels at 1.3410, 1.3400 and 1.3386 should be watched closely.

Further bearish sentiment could start if the pair closes below 1.3377 moving the price to the March 4 – April 23 consolidation zone (1.3286 – 1.3377) with an increased likelihood to see the lower end of the range. Weekly support at the May 22 low 1.3357/54 and the support zone at 1.3341- 1.3335 should be monitored. Additionally, key support levels at 1.3309 and 38.2% Fibonacci retracement at 1.3299 also need to be considered.

A close above 1.3457 could mean a rally towards 1.3517. Daily resistances at 1.3469, 1.3493, remain in focus.

Just getting started?See our Beginners' Guide for FX traders

USD/CAD Two-HOUR PRICE CHART (, 2019)

Looking at the 2-hour chart, today USD/CAD broke below the May 27 low at 1.3429 then rose to 1.3449. The price is testing the aforementioned low eying 1.3410. If the pair breaks below 1.3410 it may edge even lower towards 1.3377. The support at 1.3393 need to be monitored besides the daily and weekly support levels mentioned above.

A break above the down-trend line originated from the May 31 high at 1.3565 could lead the price towards 1.3493. Resistance at 1.3485 and the daily resistance mentioned above at 1.3469 are worth monitoring.

Written By: Mahmoud Alkudsi

Please feel free to contact me on Twitter: @Malkudsi

2019-06-04 13:00:00

Trading GBP When a New Tory Leader Takes on Labour

Posted: 04 Jun 2019 05:03 AM PDT

GBP forecast, UK politics, news and analysis:

In the wake of Theresa May's resignation as UK Prime Minister, her ruling Conservative Party is choosing a new leader, who will succeed her as PM automatically.
Against this background, traders need to consider not just who would be best for the Sterling markets short-term but also whether a new PM would beat Labour leader Jeremy Corbyn in a General Election.

Trading Sterling as the UK faces a new Prime Minister and a possible General Election

The European Parliament elections in the UK were a disaster for both the UK's mainstream political parties, with voters deserting them in droves for the Brexit Party, the Liberal Democrats, the Greens and other alternatives. That makes the result of the next UK General Election – whenever that might be – a tough call, so traders in Sterling assets need to keep a closer eye than ever on UK politics.

The UK Prime Minister Theresa May, having failed to gain support for her proposed Brexit deal with the EU, announced just before the European elections that she will quit, and her successor as leader of the ruling Conservative Party will become Prime Minister automatically. In the short term, traders should focus on that new head of Government's policy on Brexit. Longer-term, though, the spotlight will be on whether he or she could beat the Opposition Labour Party's leader Jeremy Corbyn.

The Conservatives' method of picking a new leader is complex:

First, there is a series of debates between the contenders, known as hustings,
Then, Conservative Members of Parliament pick the top two,
Finally, all Conservative Party members choose between them.

Because of the length of the process, a new Prime Minister will probably not be in place until the end of July, with May remaining in office until then. It's a process that needs to be monitored closely because the new PM's Brexit policy will likely affect all UK assets from GBPUSD and EURGBP to the FTSE 100 index of the major London-listed stocks and UK Government bonds, known as Gilts.

Leading contenders favor hard Brexit

In essence, if a Prime Minister is chosen who might lead the country into a no-deal Brexit, GBP will likely fall further than if one is chosen in favor of a deal between the UK and the EU although, as I explained in my article on why Boris Johnson as UK Prime Minister might be good for Sterling, that is not necessarily the case. For now, most of the leading contenders are in favor of a so-called hard Brexit but there are other candidates too – and at least one has warned of a national election before the end of the year.

Jeremy Hunt, the UK Foreign Secretary, wrote in The Daily Telegraph newspaper:

"Any Prime Minister who promised to leave the EU by a specific date – without the time to renegotiate and pass a new deal – would, in effect, be committing to a General Election the moment Parliament tried to stop it. And trying to deliver no deal through a General Election is not a solution; it is political suicide… and [would] probably put Jeremy Corbyn in No 10 by Christmas."

Clearly, therefore, traders' longer-term focus should be on who might win a General Election, with these the leading Conservative candidates and their possible impact on the British Pound. The European Parliament elections in the UK, however, have muddied the waters – showing a major waning of support for both the Conservatives and Labour. Both the Brexit Party and those against Brexit – the Liberal Democrats, the Greens, Change UK and others – gained ground, showing the country as split as ever on whether to leave the EU.

That raises the possibility of no overall winner in a General Election and no solution to the Brexit conundrum – two outcomes likely to both be bad for Sterling.

Much could change before then with Labour, for example, edging towards supporting a second Brexit referendum that might lead to no Brexit at all. However, the slide in GBPUSD both before and immediately after the European Parliament election results were announced on May 26 suggests that traders are overwhelmingly bearish towards the pair.

GBPUSD Price Chart, Daily Timeframe (February 15 – June 4, 2019)

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

From a contrarian perspective, that might imply that at some point traders should consider buying it. Moreover, as mentioned earlier, a victory for Corbyn might not be as bad for GBP as some analysts fear.

However, the latest opinion polls all put Labour in the lead against the Conservatives, although not by enough seats to rule without forming a coalition with one of the smaller parties, and that could arguably be the worst possible outcome for Sterling, particularly if the Brexit issue has not been resolved by then.

The most recent poll at the time of writing, by Deltapoll for The Mail on Sunday, put Labour on 26%, the Brexit Party on 24%, the Conservatives on 20% and the Liberal Democrats on 16%.

By contrast, the latest betting odds put the Conservatives and Labour neck and neck in the battle for most seats in the House of Commons – underlining how close a General Election might be and therefore how volatile GBP could be in the runup to a Parliamentary election.

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— 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

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2019-06-04 11:45:00

Dollar Chart Buckles; EURUSD, GBPUSD, and Gold Rate Outlook

Posted: 04 Jun 2019 04:25 AM PDT

The U.S. Dollar has taken a sudden turn for the worst, big support levels starting to come into play. The Euro is largely responsible for the DXY's sudden shift, but still has headwinds it faces. GBPUSD is trying to trade off a major trend-line dating back to 2016, but still struggling to find buying interest. Gold has exploded in the past few sessions, bringing the top of a macro-wedge pattern into view again.

Technical Highlights:

Dollar Index (DXY) pressing down on support
EURUSD trying to take it to the next levels
GBPUSD in a fight at 2016 trend-line
Gold rate surging towards long-term levels

Fresh Q2 Forecasts are out for major markets and currencies. Check them out on the DailyFX Trading Guides page.

Dollar Index (DXY) pressing down on support

The US Dollar Index (DXY) suddenly took a turn for the worst after looking like it wanted to make good on a breakout to 2-year highs. This has the trend-line from February 2018 currently in focus as support. A hold here keeps it in-line to still to trade higher, but if not then the next level of support comes by way of a slope and 200-day combo that may be even more important for the Dollar's bigger picture outlook. The slope running over from September is quite steady and with the long-term MA in confluence, it could provide a pivotal make-or-break spot.

US Dollar Index (DXY) Daily Chart (2018 t-lines, then 200-day combo)

Find out where our analysts see USD heading in the coming weeks based on both fundamental and technical factors – Q2 USD Forecast

EURUSD trying to take it to the next levels

The Euro's sudden surge is primarily responsible for the DXY's suddenly rocking back on its heels. It is currently sneaking above the Feb '18 trend-line, but has a slope running down from September as well that is helping keep a lid on the single-currency.

A reversal off trend resistance will be closely watched as any strength in recent months has been quickly reversed, and that could turn out to be the case once again. A sustained move above both of these thresholds could quickly bring into play the 200-day at 11375.

EURUSD Daily Chart (pushing above Feb '18 t-line)

Find out where our analysts see the Euro heading in the coming weeks based on both fundamental and technical factors – Q2 EUR Forecast

GBPUSD in a fight at 2016 trend-line

I looked at GBPUSD over the weekend for this week's technical forecast, and the primary focus was on the trend-line dating back to the October 2016 flash-crash low. Friday saw a minor reversal off this threshold and as long as it holds we must respect it as support. The push has been modest so far, but that could quickly change. First up as resistance on further strength is the May 27 high at 12748. A break below 12559 would likely have Cable rolling back downhill with force again as the long-term trend-line breaks.

GBPUSD Chart (trying to lift off 2016 t-line)

Find out where our analysts see the Pound heading in the coming weeks based on both fundamental and technical factors – Q2 GBP Forecast

Gold rate surging towards long-term levels

The gold surge off the August trend-line has been strong and surprising. It has another $15-25 to go before some seriously big levels come into play. The top of the wedge dating back to 2014 will soon be a big focal point. How things play out there could determine the technical outlook from a macro-perspective. Initial strength up to the top of the wedge around 1340/55 will be viewed as a spot of potential selling interest.

Gold Rate Weekly Chart (Nearing top of macro-wedge)

Gold Rate Daily Chart (big spot above)

Find out where our analysts see gold heading in the coming weeks based on both fundamental and technical factors – Q2 Gold Forecast

Resources for Forex & CFD Traders

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

—Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX

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2019-06-04 11:00:00