Analyst Articles – Forex News 24

US Q2 GDP Preview: Slowest Growth Since 2017
GBPUSD Breaks Down, Boris Johnson Bounce Fades
GBPUSD Rate Vulnerable to Dovish BoE Forward Guidance
GBPUSD May Be the Best Major to Highlight a Weak US GDP
USD/SGD Uptrend in Focus, USD/INR Outlook Hinges on 2018 Resistance
EURUSD Round Two Moving Past ECB Onto US GDP
EURGBP Retreats After 11-Week Sugar Rush. Crash Ahead?
Why the Euro, Dollar Rally After the ECB? Leaving EURUSD at Support
EUR/USD, GBP/USD, USD/CAD and AUD/USD
Outside-day Reversal Off Key Support Post-ECB

US Q2 GDP Preview: Slowest Growth Since 2017

Posted: 26 Jul 2019 04:34 AM PDT

Talking Points:

US Q2 GDP is expected to show that the economy is growing at its slowest pace in two years
Business demand growth may be a signal of third quarter strength
Likelihood of Fed cutting rates remains high, even if GDP is better than expected

Q2 GDP forecasts show that the US economy is likely to have experienced slower growth in the second quarter of the year on the back of continued trade tensions despite consumer spending being firm. It is expected that GDP grew 1.8% in the second quarter, which would be slowest rate of growth since 2017. Despite the figure being in line with periods when growth is slowing, it would be a sharp decline from the 3.1% growth seen at the beginning of 2019 and the worst figure since Donald Trump took office.

The period from April to June is likely to have seen an unwinding of stockpiles in response to the various tariff deadlines imposed during that period, bringing down the number of exports and weighing heavily on domestic output.

But figures released on Thursday showed that demand for business equipment increased in the month of June by the biggest amount since early 2018. Orders place in US factories for business equipment jumped 1.9% in June showing that despite trade disruption and tariffs business investment is regaining momentum.

This carries the potential that the performance in June might have safeguarded growth more than expected, which could see GDP being slightly above expectations. This would see USD regain strength pushing GBPUSD and EURGBP back close to 2017 lows.

The fall in growth is unlikely to have an impact on the anticipation of a rate cut by the Federal Reserve in the meeting next week, but it will help gauge the health of the US economy and will provide policy makers with the tools to decide on whether more cuts are needed in the future. Despite the likelihood of the Fed cutting rates being high, if Q2 GDP is confirmed to be in line with, or below, expectations we may see a retracement in US equities as they react to a weakening economy, but that would quickly be corrected as a lower growth rate increases the likelihood of a rate cut, a positive sign for equity markets.

Source: CME Group

Brexit News and Sterling (GBP) Price, Chart and Analysis:

GBPUSD fading lower, nears fresh 27-month low.
EU says UK's new Brexit demands are 'unacceptable'.

Q3 2019 GBP Forecast andTop Trading Opportunities

Sterling (GBP) on the Backfoot, EU on the Front Foot

The British Pound is moving lower going into the weekend and has given back all the limited Boris Johnson 'bounce' seen in the middle of the week. While the PM has packed his new cabinet with hardline Brexiteers and made voiced loudly that the EU must change their negotiating stance otherwise the UK will leave without a deal on October 31, the EU has not flinched. The EU's chief negotiator Michel Barnier said that the UK's demand to remove the Irish backstop was unacceptable and added that the tone of PM Johnson's speech was 'rather combative'.While this backdrop remains, Sterling will continue to fade lower.

A look at the daily chart shows the technical picture also starting to break down, with the previously mentioned symmetrical triangle now looking at a potential breakout to the downside. The pair currently trade on the uptrend line and a break and close below this should open a re-test of the recent low at 1.2382. GBPUSD is just moving into oversold territory, using the CCI indicator, and this may act as a brake to any move lower.

All of this ahead of next week's Bank of England 'Super Thursday', a potent combination of monetary policy decisions and inflation data. Keep up to date with all key economic data and event releases via the DailyFX Economic Calendar

GBPUSD Daily Price Chart (December 2018 – July 26, 2019)

Retail traders are 78.0% net-long GBPUSD according to the latest IG Client Sentiment Data, a bearish contrarian indicator. However recent daily and weekly positional changes give us a stronger bearish contrarian GBPUSD 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 GBPUSD – 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.

2019-07-26 08:00:00

GBPUSD Rate Vulnerable to Dovish BoE Forward Guidance

Posted: 25 Jul 2019 10:10 PM PDT

British Pound Talking Points

GBPUSD holds above the monthly-low (1.2382) ahead of the Bank of England (BoE) meeting, but fresh projections coming out of the central bank may produce headwinds for the British Pound if Governor Mark Carney and Co. alter the forward guidance for monetary policy.

GBPUSD Rate Vulnerable to Dovish BoE Forward Guidance

The British Pound appears to be stuck in a narrow range following change in UK leadership, but headlines surrounding Brexit may continue to shake up the near-term outlook for GBPUSD as Prime Minister Boris Johnson pledges to meet the October 31 regardless of the outcome.

It seems as though the first speech by PM Johnson have eased concerns of a no-deal Brexit as the new leader insists that "we will do a new deal,a better deal that will maximise the opportunities of Brexit while allowing us to develop a new and exciting partnership with the rest of Europe, based on free trade and mutual support."

In turn, the Monetary Policy Committee (MPC) may stick to the sidelines as the next meeting on August 1, and the central bank may reiterate that in the event of "a smooth Brexit, 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."

More of the same from Governor Carney and Co. may heighten the appeal of the British Pound as the central bank appears to be on track to endorse a wait-and-see approach until the MPC meets again in November.

However, the updates to the BoE's quarterly inflation report (QIR) may hint at a looming shift in monetary policy as "GDP is now expected to be flat in Q2."

As a result, a downward revision in the economic projections along with a material shift in the MPC's forward guidance may produce headwinds for the British Pound, but retail sentiment remains skewed even though GBPUSD falls back towards the monthly-low (1.2382).

The IG Client Sentiment Report shows 78.0% of traders are still net-long GBPUSD compared to 75.8% earlier this week, with the ratio of traders long to short at 3.54 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 5.0% lower since then. The number of traders net-long is 0.5% higher than yesterday and 11.5% higher from last week, while the number of traders net-short is 10.7% lower than yesterday and 5.6% lower from last week.

The recent decline in net-short interest points to profit-taking behavior as GBP/USD trades near the monthly-low (1.2382), but the ongoing tilt in net-long position offers a contrarian view to crowd sentiment as the exchange rate tracks a bearish trend, with the Relative Strength Index (RSI) highlighting a similar dynamic.

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 rebound from the monthly-low (1.2382) may continue unravel amid the failed attempts to test the Fibonacci overlap around 1.2610 (23.6% retracement) to 1.2640 (38.2% expansion), with the lack of momentum to hold above the 1.2440 (50% expansion) region raising the risk for a move towards 1.2370 (50% expansion).
Next region of interest comes in around 1.2240 (61.8% expansion) followed by the 1.2100 (61.8% expansion) handle.

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

Additional Trading Resources

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

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

— Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong.

2019-07-26 05:00:00

GBPUSD May Be the Best Major to Highlight a Weak US GDP

Posted: 25 Jul 2019 09:34 PM PDT

GDP Talking Points:

Top event risk through Friday’s close is the United States 2Q GDP reading
The US – and by virtue the Dollar – has garnered considerable support this week through favorable growth signals
While US GDP may print favorably, the steady bid and Fed rate cut backdrop leverage greater potential from any shortfall

See how retail traders are positioning in Dollar, including EURUSD, GBPUSD and other key pairings using the DailyFX speculative positioning data on the sentiment page.

The Fundamental Skew Built Behind the Dollar Through Growth Winds

This past session, the EURUSD prove a magnet for volatility. The appeal of the pair was mixed given the high profile event risk from the ECB rate decision and the ominous technical bearing with the pair leaning on a range low that could open the market to levels not seen in two years. Yet, anticipation on the Dollar side was an inconvenient disruptor which threatened to short-circuit potential. And, that is ultimately what would happen. With the US 2Q GDP reading on tap for Friday, anything Dollar-based would find it difficult to mount a distinct and lasting bull or bear trend with such an uncertainty hanging over its head. Yet, now the market is due to pay the piper. The world’s largest economy is due to reports its latest economic report, and anticipation has put in for a hefty skew. This week, we have seem the IMF seed an unexpected enthusiasm for the US economy by nudging its own forecast for 2019 higher (0.3 ppt) while edging the global outlook lower (-0.1 ppt). That picture was further filled in by the July PMIs which showed an uptick for the US composite while Japan floundered below 50 and the Eurozone reading dropped. This has left us with an inherent assumption that US is on a stronger course than its major counterparts.

A Technical Picture of the US Dollar

With the market padding the fundamental outlook for the US, there is little surprise that the Dollar has found its way higher. There is an unmistakable buoyancy for the Greenback over the past week in particular. This hasn’t bee a move that has forced any critical technical breaks, but it has certainly driven the currency back from the brink on a few pairs – like AUDUSD. With EURUSD within striking distance of its range low at 1.1100, USDJPY flirting with a reversal and GBPUSD worked into a wedge; there is a potential for a break. That said, a break in favor of the Greenback will prove difficult – though not impossible – to achieve. Given build up over the week, there is already some favorable lift behind the USD. Furthering the growth-based skew is possible, but the further marginal return will be lost in the weekend liquidity drain and anticipation of Wednesday’s FOMC rate decision.

Chart of DXY Dollar Index with 200-Day Moving Average (Daily)

Alternatively, with a short-term build up in elevation that has distracted from an overbearing theme like monetary policy, the potential for ‘disappointment’ is far more significant. Undermining the IMF’s forecasts and minimizing the importance of a singular month’s proprietary activity gauge can cater nicely to a short-term reversal fueled by the return of interest in a likely dovish turn from the central bank ahead. It is important to distinguish a reversal without a clear boundary from a turn within a range. The latter is far more feasible, and it helps filter expectations.

Why the Pound Makes a Better Dollar-Bear Partner

Beyond just the positioning of with Dollar on a technical basis, an important qualification for the cross that can take advantage of a speculative rebalancing is to select a counterpart without its own overwhelming influence. EURUSD is certainly interesting given its clearance of the ECB rate decision without a full-tilt rally, but the Euro-area 2Q GDP figures next week are important enough that they could anchor a prevailing move in anticipation. USDJPY has the BOJ and risk while also lacking the technical intrigue. AUDUSD and USDCAD are each interesting but the former is not as charged medium-term and USDCAD is only now attempting a short-term bullish break. My preference is actually GBPUSD.

Chart of GBPUSD (Daily)

Chart of GBPUSD

In the ‘Cable’ we have a pair that has been absolutely racked by fear of the impending Brexit with a steady descent these past few months leaving the benchmark pair heavily depressed and the Sterling strained across the financial system. New Prime Minister Boris Johnson raises the risk of a no-deal Brexit, but his pursuit of this line will be hampered by key dates and the fairly higher risk of a general election challenge which further delays everything. That certainly represents risk, but it is also profound delay that can help return the focus back onto the Dollar’s motivation.

What if the US GDP Impresses and Prompts Dollar Strength?

While I believe the greater market-moving potential would follow a US GDP reading that disappoints and sends the recently lifted Dollar stumbling, it is always worth considering alternative outcomes to simply be prepared. If the country’s growth prospects only build upon the IMF outlook and July activity figures, it will be important to identify a pair with reasonable traction. EURUSD would be a poor choice as triggering a multi-year breakdown would require far greater conviction than we can reasonably muster short of the FOMC decision. USDCAD on the other hand is better suited with the recent inverse head-and-shoulders pattern neckline break, yet it still traverses a recent range. We focus on the Dollar pairs heading into the US 2Q GDP reading in today’s Quick Take video.

Chart of USDCAD with 20-Day Moving Average (Daily)

Chart of USDCAD

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

Watch the US GDP release and its impact on the market live with Senior Currency Strategist Christopher Vecchio, CFA starting 15 minutes before the official release. Sign up for the event on the DailyFX webinar calendar.

2019-07-26 03:17:00

USD/SGD Uptrend in Focus, USD/INR Outlook Hinges on 2018 Resistance

Posted: 25 Jul 2019 08:58 PM PDT

USD/SGD, USD/INR, USD/MYR, USD/PHP Talking Points

USD/SGD may extend near-term uptrend to resistance
USD/INR gains face more difficult technical barriers
USD/MYR outlook biased little higher as PHP ranges

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 US Dollar may extend its advance against the Singapore Dollar after taking out resistance at 1.3658, opening the door to testing the next psychological barrier between 1.3707 and 1.3725. This would be in-line with the uptrend since the beginning of July after the descending trend line from May was breached. On the other hand, turning lower has support eyed as a range between 1.3609 and 1.3624.

USD/SGD Daily Chart

USD/INR Technical Outlook

Against the Indian Rupee, the US Dollar faces a more difficult path. USD/INR sits right in a range of resistance between 69.04 and 69.13. Even if this is cleared, there remain the descending trend lines from December and October of 2018. I have outlined the difference between these two lines as a pink area on the chart below. Closing above these opens the door to overturning the dominant downtrend from last year.

USD/INR Daily Chart

USD/MYR Technical Outlook

Technical conditions in the Malaysian Ringgit offer a slightly bearish outlook. USD/MYR closed above a near-term falling trend line from June after holding above support at 4.1070. This may result in a test of near-term resistance at 4.1250 which if cleared, opens the door to reaching what may be a potential falling trend line from late May. Otherwise, turning lower past support exposes 4.0950 – 4.0930.

USD/MYR Daily Chart

USD/PHP Technical Outlook

Meanwhile, USD/PHP is struggling to find direction as it hovers around a long-term trend line from 2013. If it ends up holding, we may see a resumption of Philippine Peso weakness that has defined its momentum for six years. Near-term resistance is at 51.29 followed by 51.50. For technical confirmation of a breakout lower, keep an eye on the December 2017 high at 50.79.

USD/PHP Daily Chart

**All Charts Created in TradingView

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

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

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2019-07-26 03:30:00

EURUSD Round Two Moving Past ECB Onto US GDP

Posted: 25 Jul 2019 08:21 PM PDT

EURUSD Talking Points:

EURUSD offered both clear sign of volatility and lack of conviction following the ECB rate decision to hold its policy mix steady
Dollar will take up the fundamental baton Friday as US 2Q GDP offers the capstone to a week of heavy growth reflection
Despite a louder ‘no-deal’ Brexit voice, the Pound may steady while the Australian and Canadian Dollars retreat without design

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.

Why Would the Euro Not Drop on Such Dovish ECB Rhetoric

There is little mistaking the dovish shift in the European Central Bank’s (ECB) policy stance this past session with their official meeting. Though the group remained confident of the economic outlook – policy groups must be cheerleaders of their economies – it was also clear in the rhetoric that they were signaling intent to introduce more accommodation through the near future. We will put aside the long-term implications of major central banks moving further and further out on the limb of financial stability for the time being and account for the short-term influence. The statement was subtly dressed up to say rates were expected to be held at “present or lower” levels through at least the first half of 2020. Further, they were said to be examining further policy options such as new asset purchases and tiered excess reserve adjustments. The market reads it as further dovish policy adjustment come September, which incoming President Christine Lagarde seems to support through the IMF’s official assessment.

Chart of Probability for ECB Rate Cuts from Swaps (Daily)

Further easing from the already stretched ECB would certainly present a significant fundamental weight on the Euro, so then why didn’t EURUSD clear 1.1100 or EURGBP extend its head-and-shoulders break? While the European bank’s course is definitely dovish, it wasn’t as dovish as had been expected. Swaps had shown the market had afforded an approximate 40 percent probability of a rate cut at this meeting. Furthermore, the Euro itself has experienced a steady slide across board since ECB President Draghi’s remarks at the Sintra speech last month. The bar was simply set too high. So, while the outcome is ultimately dovish, it wasn’t dovish enough. In turn, we were left with an actual bounce from an equally-weighted measure of the Euro while EURUSD would put in for a volatile but little changed day which took on a ‘doji’ candle pattern.

Chart of EURUSD with 'Tails' Measure (Daily)