Analyst Articles – Forex News 24

US Dollar Price Outlook Still Positive as Markets Wait for Powell Testimony
GBP/JPY Price Eyes the High End of Current Trading Zone
UK Economy Grows in May But Underlying Risks Continue
GBPUSD RSI Flirts with Oversold Zone, Retail Sentiment Gets Stretched
US Dollar May Rise on Fed Minutes if Dovish Forecasts are Foiled
Aussie Dollar Top May Be in Place
Crude Oil and Gold Prices at Risk on Powell Speech, FOMC Minutes
Dollar, S&P 500 and Gold on Volatility Watch as Powell Set to Testify
AUD Fixed On Fed’s Powell, In-Line China CPI Fails To Distract It
AUD Fixed On Fed’s Powell, In-Line China CPI Fails To Distract It

US Dollar Price Outlook Still Positive as Markets Wait for Powell Testimony

Posted: 10 Jul 2019 04:27 AM PDT

USD price, news and analysis:

Jerome Powell, who chairs the US Federal Reserve, will give his semi-annual testimony to Congress today and tomorrow.
He will likely strengthen forecasts of a quarter-point US rate cut at the end of this month but could also dampen expectations of more rate reductions to follow soon.
That would be another positive signal for US Dollar bulls.

US Dollar price outlook constructive

Federal Reserve Chair Jerome Powell will give his semi-annual testimony to Congress today and tomorrow, beginning with an appearance before the House Financial Services Committee and ending with a further appearance before the Senate Banking Committee.

He is most unlikely to dampen speculation of a 25 basis points reduction in US interest rates to the 2.00%-2.25% range from the current 2.25%-2.50% when the rate-setting Federal Open Market Committee ends its next meeting on July 31. Market pricing currently puts the chances of such a cut at 94.5%.

However, for the US Dollar, the key question is whether Powell hints at more rate reductions to come or leans towards a pause before they are cut again. For the moment at least, the latter looks more likely and that would support the Greenback and potentially prompt a further advance after its recent gains.

USD Index Price Chart, Hourly Timeframe (June 25 – July 10, 2019)

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

As I reported here yesterday, bullish factors are beginning to build for the USD. In particular, US and Chinese trade officials held a "constructive" phone conversation yesterday, according to White House economic adviser Larry Kudlow. Moreover, yields on US Treasury notes and bonds look to be rising again.

Cautious traders should perhaps wait for the release today, after Powell speaks, of the minutes of the FOMC meeting on June 19 for further clues on the Federal Reserve's current thinking but both fundamentally and technically the USD looks well placed to make further gains.

Click this link to find out how gold could respond to Powell's testimony

And click here for longer-term forecasts for the USD and other currencies

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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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2019-07-10 11:10:00

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GBP/JPY Price Eyes the High End of Current Trading Zone

Posted: 10 Jul 2019 03:12 AM PDT

GBP/JPY Price Forecast

GBP Sterling Charts and Analysis
GBP/JPY price action.

Have you checked our latest trading guide for USD and Gold? Download for free our Q3 Forecasts

GBP/JPY – Stuck in a Sideways Move

On July 3, GBP/JPY tested 135.55 for second time since June 18 and could not close below, causing a trendless movement.

The Relative Strength Index (RSI) rose from 33 to 40 indicating to the lack of momentum to kick start an upside nor a downside move for now.

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

GBP/JPY DAILY PRICE CHART (Oct 13, 2016 – JULY 10, 2019) Zoomed out

GBP/JPY DAILY PRICE CHART (April 18 – JULY 10, 2019) Zoomed IN

Looking at the daily chart we notice GBP/JPY moving in a narrow trading zone 135.55 – 136.40. On July 3 the price tested the low end of this zone and after failing to close below the pair eyes currently a test of the high end.

A close above the high end of the aforementioned trading zone may cause a rally towards 139.00, nonetheless; the weekly resistance levels underlined on the chart (Zoomed in) should be watched along the way.

In turn, a close below the low end of the trading zone could press the price towards 133.40, although; the weekly support levels highlighted on the chart need to be kept in focus. See the chart to find out more about the next significant support levels if the selloff continues below 133.40.

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

GBP/JPY Four-HOUR PRICE CHART (JunE 26 – July 10, 2019)

Looking at the four-hour chart, we notice 0n July 3 GBP/JPY rebounded from 135.17 – its lowest level in six months. Since then the price rallied and never tested this area, hence; any break to this level might send it towards 134.50 to test the downtrend line originated form the June low at 135.81, although; the weekly support level marked on the chart needs to be considered.

On the other hand, a rally above 136.40 may see the price heading towards 136.99, however; the daily resistance underlined on the chart should be watched closely. See the chart to find out more about the key chart points if the rally continues above mentioned levels.

Written By: Mahmoud Alkudsi

Please feel free to contact me on Twitter: @Malkudsi

https://www.dailyfx.com/free_guide-tost.html?ref-author=Alkudsi

2019-07-10 09:48:00

UK Economy Grows in May But Underlying Risks Continue

Posted: 10 Jul 2019 02:34 AM PDT

GBP Talking Points:

UK GDP grew by 0.3% in May, above expectations of just 0.1%, and April GDP is revised higher potentially avoiding contraction in Q2
Despite a small push for Sterling, both EURGBP and GBPUSD are nearing levels last seen in January 2019 when GBP was at year lows
Manufacturing and industrial production manage to grow slightly in May but global trade wars and slowing growth continue to weigh on the industry

Sterling faced some sell off pressure in the opening of the European session as investors awaited key manufacturing and growth figures to be released. GBPUSD is nearing year-lows as continued political uncertainty keeps sterling in a downward spiral. The pair is currently trading around 1.2455, close to its 1.2422 dip experience in January 2019, its lowest level since the aftermath of the Brexit referendum. The pair then managed to correct higher as monthly GDP figures showed that the UK economy managed to correct previous losses and grew 0.3% in May, above expectations.

EURGBP followed suit with an initial push higher for the pair which was later corrected on the release of the data. The pair is currently trading around 0.8999, its highest level since January 11.

PRICE CHART: GBPUSD DAILY TIME FRAME (OCT 2018 – JULY 2019)

UK GDP grew 0.3% in May, above expectations of just a 0.1% growth, and the April figure has been revised upwards from an initial contraction of 0.3% to a growth of 0.4%, which was partly due to the unwinding of stockpiling on the back of the Brexit deadline being pushed back. The upward revision could mean that the economy could have avoided a contraction in the second quarter of the year, which was initially feared, with growth for the first half of the year running below potential, and fears of a possible recession increasing. Inflation dropped slightly in May, but it remains close to its target of 2%, easing the pressure to increase rates and falling closer in line with the dovish tone from most of the other Central Banks. Key focus will be on next week's CPI figures as a further drop in inflation could increase the likelihood of a rate cut in the next FOMC meeting.

Manufacturing and industrial production figures for the month of May continue to show the struggles manufacturers are facing on the back of slowing growth and trade wars. YoY manufacturing production in May showed no growth has been experienced from this time last year as expectations were for a 1% growth. Monthly manufacturing showed that the industry managed to pick up in the last month, with a change of 1.4% from the previous month, when it experienced a drop of 4.2%, but the figure was still below expectations of 2.2%. Industrial production showed slight growth both in the monthly and yearly figure, but they were both still below expectations. This data comes after manufacturing PMIs for the month of June came in at 43.1, much lower than expectations of 49.3, as client confidence is dampened by heightened economic and political uncertainty.

Economic landscapes in a "sea of change"

Bank of England Governor Mark Carney warned investors last week that global economies face a shock as global trade tensions have shifted market expectations towards interest rate cuts by most central banks. His comments led to an increase in bets that the BoE will cut rates by the end of the year as markets price in the need for more monetary stimulus.

Industry experts have warned that the British economy is facing its slowest growth since the 2008 recession, falling behind other G7 countries. The uncertainty surrounding the Brexit outcome continues to drag on investment as the deadline was pushed back from March to October. The extension of the exit date has meant that companies and households have been on "preparation" mode for almost a year now, pushing back consumption and spending until the uncertainty dissipates, which is damaging the economy.

Not only is lacklustre data dragging down on sterling, as the race to become the next tory leader and prime minister only adds to the concern. The current political landscape seems to be more about who is the toughest candidate to stand up to the European Union to achieve a new deal or follow through with a no-deal harsh Brexit, which markets still consider to be the worst possible outcome. Rather than working towards building up consumers' confidence in the future of the British economy by finding possible ways to dissipate the fallout from the UK's divorce from the European Union, both candidates seem to be tied up in a game of trying to prove who is the biggest "macho" out of the two, which is not going to help in reviving investment.

British Pound Talking Points

GBPUSD appears to be on track to test the 2019-low (1.2373) as the Bank of England (BoE) changes its tune, and the exchange rate may exhibit a more bearish behavior over the coming days as the Relative Strength Index (RSI) flirts with oversold territory.

GBPUSD RSI Flirts with Oversold Zone, Retail Sentiment Gets Stretched

GBPUSD extends the decline from the start of the month as BoE Governor Mark Carney insists that the central bank "will respond to any material change in the outlook, adjusting policy in either direction, as required to bring inflation sustainably back to the 2% target."

The comments suggest the Monetary Policy Committee (MPC) will abandon the rate hiking cycle as "growth in the second quarter will be considerably weaker," and it seems as though the central bank will continue to change its tune over the coming months as "recent data also raise the possibility that the negative spillovers to the UK from a weaker world economy are increasing."

In turn, the BoE may alter the forward guidance at the next meeting on August 1 as the central bank updates its quarterly inflation report (QIR), and the updates to the monthly UK Gross Domestic Product (GDP) report may do little to influence the monetary policy outlook as the update is anticipated to show the economy expanding 0.3% in May after contracting 0.4% the month prior.

With that said, the British Pound stands at risk of facing a more bearish fate over the remainder of the year as "a global trade war and a No Deal Brexit remain growing possibilities," but retail sentiment remains skewed despite the recent pickup in GBPUSD volatility.

The IG Client Sentiment Report shows 83.2% of traders are net-long GBPUSD, with the ratio of traders long to short at 4.94 to 1. In fact, traders have remained net-long since May 6 when GBPUSD traded near the 1.3100 handle even though price has moved 4.9 lower since then.

The number of traders net-long is 7.8% higher than yesterday and 24.3% higher from last week, while the number of traders net-short is 2.1% higher than yesterday and 19.5% lower from last week. Profit-taking behavior may explain the decline in net-short interest as GBPUSD trades to a fresh monthly-low (1.2439), but the extreme reading in net-long position indicates the retail crowd is attempting to fade the recent decline in the exchange rate as the gauge pushes to fresh 2019 highs.

The tilt in retail interest offers a contrarian view to crowd sentiment especially as GBP/USD snaps the bullish trend from late-2018, while the Relative Strength Index (RSI) continues to track the bearish formation from earlier this year.

GBP/USD Rate Daily Chart

Keep in mind, the broader outlook for GBP/USD is no longer constructive 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).
The Relative Strength Index (RSI) highlights a similar dynamic, with recent developments in the oscillator offering a bearish signal as it snaps the upward trend from May and appears to be on the cusp of pushing into oversold territory.
In turn, a break/close below 1.2440 (50% expansion) raises the risk for a move towards the 1.2370 (50% expansion) region, which lines up with the 2019-low (1.2373), with the next area of interest coming in around 1.2240 (61.8% expansion).

For more in-depth analysis, check out the 3Q 2019 Forecast for GBP

Additional Trading Resources

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— Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong.

https://www.dailyfx.com/free_guide-tg.html?ref-author=Song

2019-07-10 08:00:00

US Dollar May Rise on Fed Minutes if Dovish Forecasts are Foiled

Posted: 10 Jul 2019 12:00 AM PDT

GBPUSD, POWELL TESTIMONY, FED MEETING MINUTES, UK DATA– TALKING POINTS

US Dollar may rise with bond yields if dovish Fed expectations are foiled
GBPUSD likely to experience high volatility from local data, Fed minutes
Uncertainty about Brexit and PM elections is continuing to impact the BoE

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

APAC RECAP

Asia Pacific equities were a mixed, though the Australian Dollar found itself trading lower after Westpac consumer confidence data came in under expectations. The Aussie's downward move was then amplified by disappointing Chinese PPI data and CPI that came in at the 2.7 percent estimate. As the global economy continues to slow, weaker data out of key world economies will likely continue to persist.

POWELL TESTIMONY, FED MEETING MINUTES

Fed Chair Jerome Powell's testimony in front of the House Financial Services Committee will be closely watched as he comments on policy and the outlook of the US economy. This comes amid displeasure from US President Donald Trump who has expressed discontent with Powell's approach to policy. Trump has repeatedly stated that he wants lower rates and has attempted to politicize the central bank.

However, what will likely garner the most attention is the publication of the June 19 FOMC meeting minutes. Depending on the nature of the content, the US Dollar – arguably – may rise if the rhetoric is more dovish or less dovish than expectations. If it's the former, it signals that economic conditions are poor enough to warrant looser credit conditions which could lead to risk aversion and put a premium on the liquidity king: the USD.

Conversely, if the Fed is less dovish than markets are expecting, capital may also start pouring into the US Dollar and could cause bond yields to tumble along with the S&P 500. US equity markets are likely being buoyed by these dovish expectations because underlying economic growth is not strong enough to push stocks higher, therefore investors have to rely on cheap credit to inflate their assets' value.

Market participants are currently pricing in three rate cuts from the Fed by year-end while the central bank has hinted that it may implement one rate cut either by the end of 2019 or 2020. The significant disjoint between market expectations and reality will be the epicenter of volatility and will likely cause major equity indices to dip. This may then spill over into Asia and cause APAC equities to echo the move in US stocks.

HOW WILL UK ECONOMIC DATA IMPACT BOE MONETARY POLICY?

The Bank of England (BoE) has been catering its monetary policy around the outcome of the EU-UK divorce. The uncertainty about the economic impact of a hard-Brexit against the backdrop of a slowing global economy leaves policymakers in a tough spot. Despite inflation hovering around levels that would normally result in a hike, officials have been holding off on the basis that a premature rate move could destabilize the system.

Industrial production data are expected to show modest expansions, though the reports may fall short of expectations in light of recent revisions to the economic outlook. The UK economy is expected to shrink in the second quarter as the downside risks to the global economy continue to worsen along with a greater expectation of a no-deal Brexit against the backdrop of the ongoing race for Prime Minister.

GBPUSD TECHNICAL ANALYSIS

The event risk above may cause significant distortions in US-Dollar crosses, and particularly with GBP because of the slew of economic data coming out of the UK over the same 24-hour period. The pair's flirtation with former resistance now-turned support (red parallel channel) signals overall weakness in Sterling in conjunction with rising strength in the USD. Uncertainty about Brexit continues to be a headwind for the pair.

CHART OF THE DAY: GBPUSD RE-TESTING CRITICAL PRICE CHANNEL AMID STRONGER USD

FX 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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2019-07-10 06:30:00

Aussie Dollar Top May Be in Place

Posted: 09 Jul 2019 10:47 PM PDT

AUDUSD TECHNICAL OUTLOOK: BEARISH

AUDUSD recoils from trend resistance, signals a top is in place
Near-term support at 0.6827, with 2019 low at 0.6744 following
Overall chart setup still hints at descent to challenge 0.67 figure

Get help building confidence in your AUDUSD strategy with our free trading guide!

The Australian Dollar tracked lower after a retest of support-turned-resistance at the bottom of a bearish Descending Triangle chart pattern, as expected. Prices attempted to recover after breaking counter-trend support and even managed to set a higher swing top, but the effort fizzled. A bearish Evening Star coupled with negative RSI divergence now reinforces the case for a reversal.

From here, the next significant layer of support seems to be in the 0.6827-65 area, marked by recent attempts to challenge trend-defining support at the January 2016 low. Securing a break below that on a daily closing basis probably opens the door for a challenge of the 2019 spike low at 0.6744. The outermost layer of downward-sloping trend resistance is now at 0.7088.

Zooming out to the weekly chart, overall technical positioning continues to suggest the AUDUSD downtrend started in early 2018 has resumed following a period of congestion. While the support at 0.6827 is yet to be broken, measuring the width of the Descending Triangle pattern defining the digestive period prior to breakdown implies a steeper decline to test the 0.67 figure.

AUDUSD 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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2019-07-10 05:30:00

Crude Oil and Gold Prices at Risk on Powell Speech, FOMC Minutes

Posted: 09 Jul 2019 09:25 PM PDT

CRUDE OIL & GOLD TALKING POINTS:

Crude oil prices inch higher to challenge two-month trend resistance
Gold prices marking time after break of near-term rising support line
Fed Chair Powell testimony, FOMC minutes may hurt commodities

Crude oil prices reflected a modest recovery in risk appetite, pacing an upswing in the bellwether S&P 500 index. Gold prices edged up in tandem. These moves probably reflect pre-positioning ahead of major event risk ahead as markets brace for much-anticipated Congressional testimony from Fed Chair Powell as well as the release of minutes form June's FOMC policy meeting.

The main issue in play is yawning disparity between the Fed's own outlook for upcoming monetary policy and that of the financial markets. June's forecast update envisioned one 25bps cut between now and the end of 2020. Investors are far mode dovish, seeing at least two and possibly three cuts (for an aggregate of 50-75bps in easing) before the end of this year.

CRUDE OIL AND GOLD PRICES MAY FALL ON POWELL TESTIMONY, FOMC MINUTES

Markets have preceded the Fed in a dovish policy pivot since late 2018. To the extent that they are already optimized for rapid big-splash easing, commentary suggesting the central bank will continue to follow investors' lead might have relatively little scope for further adjustment. Worries about the dire conditions that would compel such actions might sour sentiment however, boosting haven US Dollar demand.

On the other hand, rhetoric amounting to pushback against would-be dovish excess in the markets' view might force traders to reprice expectations to a more modest setting. Not surprisingly, the Greenback seems likely to find support in this scenario as well. That seems to suggest that stasis might be a best-case scenario for oil prices, whereas gold appears broadly vulnerable to selling pressure.

Get the latest crude oil and gold forecasts to see what will drive prices in the third quarter!

GOLD TECHNICAL ANALYSIS

Gold prices are languishing in digestion mode after edging below trend line support guiding the move higher since late May. Sellers face a dense support bloc running through 1346.75 from here. Critical resistance remains at 1433.85, marked by the August 2013 high and former uptrend support from December 2016.

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices edged up to test resistance capping gains since late April, now at 59.43. A daily close above that is quickly followed by former support in the 60.39-95 area. Alternatively, a rejection lower that takes prices below support at 54.55 targets the 50.31-51.33 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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2019-07-10 04:00:00

Dollar, S&P 500 and Gold on Volatility Watch as Powell Set to Testify

Posted: 09 Jul 2019 08:42 PM PDT

Federal Reserve Talking Points:

Fed Chair Powell is due to testify before the House Financial Services Committee Wednesday and stir a monetary policy-focused market
A Bank of Canada (BOC) rate decision is a top scheduled event risk, but be mindful of the crosses you evaluate for opportunities
While Brexit concerns are key for Sterling, a run of May data for the UK – including GDP – can alleviate or exaggerate the pressure

What do the DailyFX Analysts expect from the Dollar, Euro, Equities, Oil and more through the 3Q 2019? Download forecasts for these assets and more with technical and fundamental insight from the DailyFX Trading Guides page.

Fed Chairman Testimony and FOMC Minutes Pose the Greatest Volatility Risk

The reaction this past Friday from the S&P 500 and other benchmark US equity indices to the June US employment report made clear that monetary policy is the top fundamental theme in the broader financial markets at the moment. A drop from his benchmark risk asset despite the marginal improvement in economic health indicated hope for greater external accommodation (translation: Fed hikes) mattered far more for temporary relief than any long-term hope of shoring up the yawning gap between financial cost and tepid value. After a relatively restrained two days of trading, we are now wading back into economic docket items that will tap directly into this particular interest.

While there are a few monetary policy-direct and related events on tap for the upcoming session, one region’s listings promise far more weight than all the others. On the US calendar, we have Fed Chairman Jerome Powell’s first day of his annual economic testimony before the House of Representatives. This is an opportunity to see his own views separated from those of the more watered down group perspective. If it comes off that he is not leaning towards earlier rate cuts or an overall more aggressive regime of easing, the impact for the Dollar and risk trends could prove substantial. In terms of stretched speculative view, the Greenback is unlikely to get the relative value of a slightly less dovish player relative to its major counterparts. That said, the S&P 500 and Dow pushing record highs – despite the more middling performance of other risk assets – presents an inflated premium that could collapse on itself. Alternatively, carrying the market higher is not difficult, but generating the level of true enthusiasm to sustain the trend of the past month – already at record highs – would likely take more than they can offer.

Chart of S&P 500 and December Fed Funds Futures Contract (Daily)

Another event of significance when gauging the intent and influence of the world’s largest central bank through the upcoming session is the FOMC (Federal Open Market Committee) meeting minutes. This is effect a more detailed transcript of the June monetary policy decision. While there is certainly opportunity for clarification on key points and undercurrent, Powell’s press conference and the Summary of Economic Projections (SEP) immediately following the rate decision itself gave significant insight. If this is truly the top fundamental theme however, nuance matters – especially after the questionable charge of enthusiasm after the June 19th hold that offered up a median forecast among its members of no expected change in interest rates through 2019 against a market forecast for three 25 basis point cuts through December at the time.

Probability of Fed July 31st Policy Decision Outcome According to Swaps (Daily)