Asia Stocks Wobble as Trump-Kim Summit Cut Short, S&P 500 at Risk


Asia Pacific Markets Wrap Talking Points

  • Asia equities aim lower as sentiment wobbled, Trump-Kim summit cut short
  • Australian Dollar declines on soft Chinese manufacturing PMI data, Yen up
  • S&P 500 futures hint of a top as all eyes are on the US GDP data release

Find out what retail traders’ equities buy and sell decisions say about the coming price trend!

On Thursday, most Asia Pacific stocks fell. Equities continue struggling to achieve significant gains in the aftermath of what has arguably been the most progress made in US-China trade talks yet. Recent developments have been keeping the mood muted such as geopolitical tensions between India and Pakistan and testimony from US Trade Representative Robert Lighthizer, who poured some cold water on trade negotiations.

Japan’s Nikkei 225 declined over 0.3% heading into the close, kept down by most sectors. China’s Shanghai Composite fared roughly a similar fate. South Korea’s Kospi was one of the worst performers, falling over 0.5%. According to newswires, Trump-Kim summit talks were abruptly changed for reasons that have not been made clear yet at the time of this writing.Nikkei 225 futures aimed lower on the news.

The New Zealand Dollar remained under pressure following multiple disappointing local confidence data. Meanwhile, the Australian Dollar aimed lower following dismal Chinese manufacturing PMI data, giving up earlier gains on a strong domestic private capital expenditure report. The anti-risk Japanese Yen and Swiss Franc aimed cautiously higher.

Over the remaining 24 hours. all eyes will be on delayed US GDP. The first estimate of economic growth in the fourth quarter is expected to slow to 2.2% q/q from 3.4% in Q3. Lately, local economic data has been tending to increasingly underperform relative to economists’ expectations, opening the door to a downside surprise. If this is the case, it would underpin slowing global growth concerns.

S&P 500 Futures Technical Analysis

Looking at S&P 500 futures shows multiple warning signs that a turn lower that could come ahead. Recently, prices stalled after the formation of a Shooting Star candlestick amidst fading upside momentum. In addition, a rising wedge pattern has been brewing since about the beginning of this year. This is a bearish formation that, with confirmation, can precede a descent. Otherwise, near-term resistance is between 2824.25 to 2814.00.

S&P 500 Futures Daily Chart

Asia Stocks Wobble as Trump-Kim Summit Cut Short, S&P 500 at Risk

Chart Created in TradingView

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— 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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Is the Euro Preparing to Turn Lower?


EUR/USD Technical Strategy: BEARISH

  • Euro testing trend resistance set from January 2018 once again
  • Candlestick patterns on daily, four-hour charts point to topping
  • Sellers may wait for a near-term support break to bet in earnest

Build confidence in your Euro trading strategy with our free guide!

The Euro is once again testing resistance guiding the move lower from January 2018 against the US Dollar. The appearance of a bearish Dark Cloud Cover candlestick pattern hints that a turn lower may be brewing ahead. Support guiding the upswing form mid-February remains intact however, so confirmation of even a near-term pullback is absent for now.

Euro vs US Dollar chart - daily

A look at the four-hour chart seems to bolster the case for topping. Back to back bearish candlestick patterns are reinforced by negative RSI divergence, pointing to ebbing upside momentum and setting the stage for a breakdown. As with the daily chart however, prices are sitting immediately atop unbroken near-term support. Sellers might find this unattractive on risk/reward and confirmation grounds.

Euro vs US Dollar chart - 4 hour

That means bearish commitment may be absent without a further catalyst – like disappointing economic data, for example – to force prices through support. It may likewise imply substantial pent up interest on the short side waiting for a conclusive break to pounce however. That might mean that when (and if) support is breached, follow-through might be meaningful.

An initial push below the 1.1366-71 area would expose a minor chart barrier at 1.1321, but a true test of lasting bearish conviction probably calls for descent to the 1.1216-34 zone. This marks the floor on the choppy range in play since mid-November. A daily close below it might mark the start of the next leg in the structural, long-term downtrend. Overall trend resistance is now at 1.1430.

EUR/USD TRADING RESOURCES

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

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





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USDJPY Uptrend Still Worth Tracking


Japanese Yen Technical Analysis Talking Points:

  • USD/JPY’s 2019 uptrend shows little sign of breaking to either side
  • More rises still look like the most likely course
  • GBP/JPY has gained sharply but now looks over-extended

Get live and interactive coverage of all major Japanese economic data at the DailyFX Webinars. We’d love to have you join us.

The Japanese Yen remains broadly on the defensive against the US Dollar and seems likely to remain so for as long as fundamental risk appetite holds up.

USD/JPY remains within the well-respected daily-chart uptrend which has held sway since January 10 and which is itself a continuation of the longer rise up from the recent significant low, which was printed on January 2.

US Dollar Vs Japanese Yen, Daily Chart

While a channel break either way doesn’t look immediately likely, the pair is clearly much closer toward the channel top than it is to the base and, within the channel has just managed to print a higher-high. Monday’s close this week put USD/JPY above February 13’s top of 113.07, which was also the last time the channel top was tried and rejected.

Admittedly the pair as seen some sharp down days, when risk appetite has diminished but until a break is confirmed there seems little better short-term option than continuing to play the channel. It now offers resistance at 111.59 a point which would appear to be too far above the market for an immediate test unless daily ranges start to widen once more.

Immediate support looks to be around 110.33, where the 23.6% Fibonacci retracement of this year’s rise kicks in.

Bulls of the British Pound are doing well against the Japanese Yen, meanwhile, as they are against most other currencies as markets speculate about a delay to Brexit, or the diminishing chance of a damaging ‘no deal’ walkout for the UK.

UK Pound Vs Japanese Yen, Daily Chart

Whatever the merits of these prognoses, GBP/JPY is now back up to highs not seen since late last year, with a solid uptrend in place from the lows of January, 2019. That said the Pound now looks unsurprisingly overbought and probably ready for a little consolidation.

Should that occur and take the cross no lower than the previous significant peak then Sterling bulls will probably remain in the driving seat overall. That peak was 144.54 and it was printed intraday on January 25

Resources for Traders

Whether you’re new to trading or an old hand DailyFX has plenty of resources to help you. There’s our trading sentiment indicator which shows you live how IG clients are positioned right now. We also hold educational and analytical webinars and offer trading guides, with one specifically aimed at those new to foreign exchange markets. There’s also a Bitcoin guide. Be sure to make the most of them all. They were written by our seasoned trading experts and they’re all free.

— Written by David Cottle, DailyFX Research

Follow David on Twitter@DavidCottleFX or use the Comments section below to get in touch!





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USD/MYR, USD/IDR and USD/PHP May Reverse. SGD Sits Within Support


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

  • Malaysian Ringgit and Indonesian Rupiah face reversal candlestick patterns
  • USD/PHP kept falling but is overshadowed by fading downside momentum
  • The Singapore Dollar overturned a reversal pattern as it sits within support

We released our Q1 forecasts for currencies like the US Dollar in the DailyFX Trading Guides page

USD/MYR Technical Analysis – Bullish Reversal Pattern Brewing

The Malaysian Ringgit struggled to breach support against the US Dollar at 4.0650 as expected. Positive RSI divergence overshadowed USD/MYR’s attempt to resume the dominant downtrend. This showed fading downside momentum and it could precede a turn higher. Furthermore, a falling wedge candlestick pattern is brewing. This is typically a bullish reversal pattern. A turn higher would place near-term resistance at 4.0925. For updates on the ASEAN pairs that I am closely watching, you may follow me on Twitter @ddubrovskyFX for updates in the interim.

USD/MYR Daily Chart

USD/MYR, USD/IDR and USD/PHP May Reverse. SGD Sits Within Support

USD/IDR Technical Analysis – Inverse Head and Shoulders

Another bullish reversal pattern seems to be brewing in an ASEAN currency, the Indonesian Rupiah. USD/IDR’s downtrend is overshadowed by an inverse head and shoulders candlestick formation. Prices have just rebounded on the right shoulder, aiming towards the neckline which is sloping downward from January highs. Pushing above this would open the door to testing resistance at 14396. Meanwhile, clearing support exposes the head of the formation which is a range between 13848 – 13923. With that said, IDR weakness could be fundamentally countered by intervention from the Bank of Indonesia.

USD/IDR Daily Chart

USD/MYR, USD/IDR and USD/PHP May Reverse. SGD Sits Within Support

USD/PHP Technical Analysis – Fading Downside Momentum

USD/PHP cleared a support range between 51.93 and 52.00 pointed out last week, opening the door to resuming the dominant downtrend. However, positive RSI divergence is showing here too which ought to be a sign of caution for Philippine Peso bulls. The pair is sitting right on 51.78 which was a support area from February to April 2018. If it holds, the pair may climb to test the near-term falling resistance line from the middle of February 2019. Otherwise, descending exposes support at 51.62 next.

USD/PHP Daily Chart

USD/MYR, USD/IDR and USD/PHP May Reverse. SGD Sits Within Support

USD/SGD Technical Analysis – Bullish Reversal Pattern Fell Apart

Last week, I noted an inverse head and shoulder in USD/SGD. Since then, the Singapore Dollar gained against its US counterpart as it overturned the candlestick formation. It remains within a support range between 1.3443 and 1.3489. Clearing it would expose the rising trend line from January 2018. On the other hand, if USD/SGD turns higher, then it must contend with multiple descending resistance lines pointed out on the chart below.

USD/SGD Daily Chart

USD/MYR, USD/IDR and USD/PHP May Reverse. SGD Sits Within Support

**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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S&P 500 Tips Breakdown as Trade Wars Lift and Market Prepares for US GDP


GDP Talking Points:

  • Simultaneous testimony by Lighthizer, Powell and Cohen covered trade wars, monetary policy and political instability themes
  • UK’s Parliament voted overwhelmingly for an amendment that significantly reduces the risk of a ‘no deal’ Brexit
  • Top event risk ahead is US 4Q GDP, the high profile growth report amid multiple GDP reports and a more generally appreciated theme

See how retail traders are positioning in the FX majors, indices, gold and oil intraday using the DailyFX speculative positioning data on the sentiment page.

Trade Wars and Monetary Policy Concerns Ebb Further as the S&P 500 Threatens Reversal

Has the move to defuse one of the world’s most amorphous and volatile threats saved the markets from an imminent technical reversal? The S&P 500 and Dow Jones Industrial Average took a technical stumble Wednesday that could readily qualify as the first step into a reversal when both dropped through support for aggressive, rising wedge patterns. The pace and consistency behind these indices’ rise these past two months not only defies the very prominent uncertainty found in the fundamental backdrop, but it was a direct contrast to the far more restrained pace in other risk-guided asset classes (global equities, emerging markets, junk assets, carry trade, etc).

There is a considerable list that can be drawn upon to justify a reversal, but complacency has a way of rising at the most convenient of times. The tentative spark for the tempting reversal pattern offered no follow through and had fairly weak ‘breadth’ across other speculative benchmarks. The headlines this past session probably had a lot to do with muddling intent. During the US session, there were three simultaneous testimonies taking place. Former Trump Lawyer Michael Cohen’s answers were high drama, but political stability fears is not presently an active market concern. Fed Chairman Jerome Powell had his second day before Congress for his semi-annual update. His insights didn’t change much from day one, though he suggested a decision on the balance sheet could be coming soon.

US Trade Representative Lighthizer touched the more exposed nerve when he suggested the US-China negotiations were not complete, but that his department would soon officially take down the March 1st deadline for the tariff hike on the trade partners’ $200 billion in goods. The question now on traders’ minds – or it should be – is how much ‘relief’ rally is left in this theme? If there were an unambiguous deal struck with China and President Trump dropped all pretense of a possible auto tariff, we could perhaps squeeze further advance out of the market. Yet, we are unlikely to see anything that clear. Watch the US indices’ charts closely.

Chart of 12-Month Relative Change in Volatility Measures (Daily)

Chart of Volatility for Stocks, Currencies, Yields Emerging Markets and Oil

Brexit Risks Drop Sharply After Parliamentary Vote Curbs Threat of ‘No Deal’

Another advance that has earned clear technical progress and has its rooting in fundamentals was the charge from the Pound. The currency advanced across the board Wednesday, but the tempo was notably more restrained than what we had seen the day before. Nonetheless, the extension earned a loaded GBPUSD advance through 1.3300, an extension of the EURGBP’s larger bearish reversal and tentative technical clearance for crosses like GBPJPY and GBPCAD. For the market participant starved for volatility and moves with greater reliability for follow through, this is a very tempting picture. However, I personally defer to general market conditions when seeming ‘exceptions to the rule’ seem to pop up and tempt my speculative appetites.

The reason this bullish push looks more reliable is the headline fundamental support it draws as a natural ‘justification’ for those simply pining for more productive markets. The session in Parliament Wednesday was significantly downgraded in terms of importance when Prime Minister Theresa May announced she was moving the ‘meaningful vote’ on a possible Brexit proposal out to March 12th. With this push, UK politics would not find their definitive call on forcing next steps. However, the day was not completely spent for potential. In fact, the amendments that would be addressed in the Commons carried a particularly important update that would significantly reduce the spectrum of risks surrounding the UK’s divorce from the EU.

The Cooper amendment passed 502 to 20, essentially forcing what was suggested by the Government that in the event that the proposal was rejected on March 12th that May would in turn start the process to delay the March 29th Brexit date. There are still risks and unknowns factored into this situation, but it materially reduces the risk of an economically-painful ‘no deal’. Whether or not the Pound continues to advance in the interim though is a question of how much of a discount there is still built into the Sterling with this ‘confirmation’ of a softening on the UK’s position in the negotiations. Again, I would defer to general market conditions with skepticism of follow through and favor for evidence that a fade effort was finding traction.

Chart of GBPUSD

Chart of GBPUSD

Top Event Risk Ahead Goes to the US GDP Release, But There Is More on Tap

With themes like the trade wars and Brexit actively crowding out the headlines, it is easy to overlook one of the more mundane (but ultimately crucial) fundamental themes simultaneously unfolding: growth. That will likely change today however with the United States due to report its delayed 4Q GDP update. Economic activity has been covered extensively these past weeks and months whether through rest-of-world official readings, timely proxies like PMIs, troubling forecasts from officials (IMF, central banks, governments) and sentiment surveys. The view is not an encouraging one.

With the world’s largest economy reporting its official growth update, we will have a definitive sign post for the world’s economy. So, where this has implications for the relative appeal of the Dollar (via Fed potential) and US assets; it will also serve as the baseline for a very prominent divergence between tangible economic activity and indulgent speculative positioning. The US isn’t the only country updating on growth. Hong Kong – a proxy for China – reported its economy slowed from a 2.9 percent annual pace in the third quarter to 1.3 percent in the most recent reading.

Alongside the US figures, we are due Swiss, Indian, Brazilian and the French final report. Though less potent, traders have a few other currencies/regions to track for volatility. The Euro is heading for regional employment and inflation figures after in-line sentiment surveys. The Australian, Canadian and New Zealand Dollars are facing less extreme data but the technical positioning of the crosses and the concentrated potential of the updates could trigger range swings or even limited breakouts. We discuss all of this and more in today’s Trading Video.

Chart S&P 500 and Aggregate 10-Year Yield (US, UK, Germany, Japan) and Correlation (Daily)

Chart of S&P 500 and Global Yields with Correlation

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



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Australian Dollar Wilts As China Manufacturing PMI Contracts Again


Australian Dollar, China Purchasing Managers Index, Talking Points:

  • A key gauge of China’s manufacturing health was weak for yet another month
  • AUD/USD reversed sharply in the aftermath
  • Hopes of a trade settlement between China and the US may have limited damage

First-quarter technical and fundamental forecasts from the DailyFX analysts are out now.

The Australian Dollar slipped sharply Thursday on the news that China’s manufacturing sector contracted for a third straight month in February.

The country’s official Purchasing Managers Index came in at 49.2, below both the 49.5 which had been both January’s print and the expected February result. This series has now been below the 50 mark which separates expansion from contraction since December.

The non-manufacturing PMI was in the green, however. It came in at 54.3, for a composite of 52.4, but the weakness in manufacturing weighed heavily nonetheless.

The Australian Dollar can act as the markets’ favorite liquid China proxy given Australia’s close export links to the world’s second largest economy. It seems to have done so Thursday, with the China data more than erasing gains made earlier when Australia’s fourth-quarter private capital expenditure data smashed forecasts by rising 2% when a 0.5% gain had been tipped.

China’s numbers may need a grain of salt. The Lunar New Year break may well have weakened activity. However, they come after a raft of similarly weak numbers from around the world, and notably out of Europe, and are likely to be seen as further evidence that the global economy is slowing.

Australian Dollar Vs US Dollar, 5-Minute Chart

This is likely to be especially bad news for the Australian currency which is typically quite sensitive to world growth prospects.

That said the Aussie remains in a broad range against its US big brother. The currency was hit earlier this month by the Reserve Bank of Australia’s admission that record-low domestic interest rates could yet fall further. Futures markets had been pricing in just such a possibility since late 2018, but the RBA had previously stuck to its view that the next move was likely to be a rise, albeit not any time soon.

The central bank also slashed the growth and inflation forecasts on which its policy rests. For all that AUD/USD remains above the downtrend which dominated last year’s trade. Growing optimism for a trade settlement between China and the US has helped; Australia probably has as much skin in that game as any third country. A deal is probably the biggest single near-term risk currently run by Australian Dollar bears.

Australian Dolalr Vs US Dollar, Daily Chart

Increased caution around the path of US intertest rates has weakened the USD side of the pair, while strong Australian employment numbers also helped Aussie bulls’ cause.

Resources for Traders

Whether you’re new to trading or an old hand DailyFX has plenty of resources to help you. There’s our trading sentiment indicator which shows you live how IG clients are positioned right now. We also hold educational and analytical webinars and offer trading guides, with one specifically aimed at those new to foreign exchange markets. There’s also a Bitcoin guide. Be sure to make the most of them all. They were written by our seasoned trading experts and they’re all free.

— Written by David Cottle, DailyFX Research

Follow David on Twitter@DavidCottleFX or use the Comments section below to get in touch!





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British Pound Rally Resumed. AUD/USD Eyes Capex, China PMI Data


Asia Pacific Market Open Talking Points

  • British Pound kept rising, EUR/GBP dominant downtrend resumed
  • Sentiment was fragile, beginning with geopolitical tensions in Asia
  • AUD/JPY remains within bullish reversal pattern ahead of key data

See our study on the history of trade wars to learn how it might influence financial markets!

The British Pound continued to receive the most attention as it achieved major technical breaks across its major counterparts. Brexit-related news continues kept upholding this trading dynamic, with markets becoming increasingly confident that the UK could avoid a ‘no-deal’ divorce before the March 29 deadline. Today, Parliament voted to accept Amendment F as EUR/GBP’s dominant downtrend resumed.

Yet, sentiment was fragile over the past 24 hours as European equities closed mostly lower and US ones just missed a neutral day. It began with geopolitical tensions in Asia after Pakistan downed two Indian jets, increasing tensions between two nuclear powers. Then, US Trade Representative Robert Lighthizer seemed to have poured cold water on recent progress in US-China trade negotiations.

The pro-risk Australian and New Zealand Dollars were some of the worst performing majors on Wednesday. Meanwhile, the anti-risk Japanese Yen was rather mixed as the S&P 500 attempted to trim its losses towards the end of the trading session. Crude oil prices received a major boost when weekly US stockpiles unexpectedly contracted by the most since July 2018.

Thursday’s Asia Pacific session is loaded with economic event risk. The Australian Dollar looks to private capital expenditure data as markets are becoming increasingly confident about an RBA rate cut by the end of this year. Afterwards, the Aussie could be vulnerable if Chinese Manufacturing PMI data continues to underpin the reality that the world’s second largest economy is slowing.

S&P 500 futures are pointing narrowly lower, suggesting that APAC equities could be at risk. A deterioration in risk trends would leave AUD vulnerable while potentially boding well for JPY. AUD/JPY remains within the realm of a bullish reversal formation after near-term resistance was reinforced at 79.84. Keep an eye on the rising trend line from the beginning of this year.

US Trading Session Economic Events

British Pound Rally Resumed. AUD/USD Eyes Capex, China PMI Data

Asia Pacific Trading Session Economic Events

British Pound Rally Resumed. AUD/USD Eyes Capex, China PMI Data

** All times listed in GMT. See the full economic calendar here

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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Currency Volatility Curbed by Possible Brexit Delay


GBPUSD Implied Volatility – Talking Points:

  • GBP implied volatility suggests forex traders are betting that most of the Brexit-induced price action will occur prior to March 14
  • 1-month implied volatility for the currency has dropped from 11.4 percent to 10.2 percent since Monday
  • Looking to the shorter term, there has been a modest uptick in implied volatility on the 2-week contract which is set to expire on March 13

There are officially 30 days until March 29 – the Brexit deadline for when the United Kingdom is scheduled to separate from the European Union. That’s exactly the number of days set on the standard 1-month (1M) options contract.

Consequently, one would presume that implied volatility – the implicit variable in the Black Scholes pricing model that represents hedging costs – on the 1M Sterling option contracts should begin to tick higher. According to GBPUSD option data pulled from Bloomberg, however, that is not the case.

GBPUSD IMPLIED VOLATILITY PRICE CHART: DAILY TIME FRAME (DECEMBER 03, 2018 TO FEBRUARY 27, 2019)

GBPUSD Currency Implied Volatility

In fact, 1M implied volatility for the currency pair has dropped from 11.4 percent to 10.2 percent since Monday. This is likely due to forex market participants repositioning to account for increased odds that the official March 29 Brexit date will get pushed back.

GBPUSD IMPLIED VOLATILITY AND TRADING RANGE TABLE

GBPUSD: Currency Volatility Curbed by Possible Brexit Delay

New to trading Forex? Check out the Free DailyFX Education Center for more information on Currency Forecasts and Trading Guides.

The likelihood that the UK departs from the EU on March 29 decreased after MP’s approved Amendment F earlier today 502-20. The amendment effectively states that British Parliament rejects no-deal Brexit and requires the House of Commons to put forward a motion to extend Article 50 on March 14 if the PM’s renegotiated deal is not approved by March 12.

FOREX MARKET IMPLIED VOLATILITY AND TRADING RANGES

Forex Market Implied Volatility Table

Looking to the shorter term, there has been a modest uptick in implied volatility on the 2-week (2W) contract which is set to expire on March 13. However, 3-week (3W) implied volatility has decreased and is now lower than 2W implied volatility.

The pattern is the same for 1-week (1W) implied volatility. This indicates that forex markets are betting that most GBP price action in response to Brexit developments will occur before March 14.

GBPUSD CURRENCY PRICE CHART: DAILY TIME FRAME (OCTOBER 02, 2018 TO FEBRUARY 27, 2019)

GBPUSD Currency Price Chart

As for technicals, the Pound has jumped to its highest level since July of last year in response to dwindling odds of a hard, no-deal Brexit. This has caused the RSI to skyrocket well into overbought territory with the GBPUSD breaking out to the upside above medium-term downtrend resistance and Fibonacci retracement levels.

In the short term, however, the currency pair’s recent ascent could stabilize and send prices back towards the 1.32-1.31 handles near support at the 0.382 Fibs as March 12 approaches.

Written by Rich Dvorak, Junior Analyst for DailyFX

Follow on Twitter @RichDvorakFX





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2019 Range in Focus Ahead of ECB Meeting


EUR/USD extends the advance from the previous week as Fed Chairman Jerome Powell endorses a wait-and-see approach in front of Congress, and recent price action brings the monthly-high (1.1489) on the radar as the exchange rate tracks the range from earlier this year.

Image of federal reserve total assets

The prepared remarks for the semi-annual testimony suggest the Federal Open Market Committee (FOMC) will continue to change its tune over the coming months amid the slowdown in ‘China and Europe,’ and a growing number of Fed officials may show a greater willingness to taper the $50B/month in quantitative tightening (QT) as Chairman Powell states that ‘the Committee can now evaluate the appropriate timing and approach for the end of balance sheet runoff.’

The comments put increased emphasis around the March 20 interest rate decision as Fed officials are slated to present their updated forecast, and it remains to be seen if Chairman Powell & Co. will adjust the Summary of Economic Projections (SEP) as the previous update indicate a longer-run interest rate of 2.75% to 3.00%.

Image of ecb interest rate

Ahead of the FOMC, the European Central Bank (ECB) delivers its next interest rate decision on March 7, with the Governing Council widely expected to retain the current policy as the central bank struggles to achieve its one and only mandate for price stability. In turn, President Mario Draghi & Co. may show a greater willingness to further support the monetary union amid the growing discussion for another round of Targeted Long-Term Refinancing Operations (TLTRO), and the ECB may introduce a more dovish forward-guidance over the coming months as the Governing Council remains in no rush to remove the zero-interest rate policy (ZIRP).

Until then, the range from late-2018 remains on the radar as both the Fed & ECB endorse a wait-and-see approach for monetary policy, with EUR/USD at risk for a larger rebound following the failed attempt to test the 2018-low (1.1216). Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss potential trade setups.

EUR/USD Daily Chart

Image of eurusd daily chart

The upper bounds of the near-term range is in focus for EUR/USD as the 1.1220 (7.86% retracement) area provides support, with a break/close above the 1.1390 (61.8% retracement) to 1.1400 (50% expansion) region raising the risk for a move towards 1.1510 (38.2% expansion). Next area of interest comes in around 1.1640 (23.6% expansion) to 1.1680 (50% retracement) followed by 1.1810 (61.8% retracement), which largely lines up with the September-high (1.1815).

For more in-depth analysis, check out the 1Q 2019 Forecast for the Euro

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 Analyst

Follow me on Twitter at @DavidJSong.



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Dow Softens From 2019 Highs as 26k Re-Test Continues


Dow Jones Talking Points:

– The 2019 US equity rally has continued into this week, as the Dow Jones Industrial Average set a fresh three-month-high on Monday. Since then, prices have been pulling back but support has continued to hold with the index currently re-testing the 26k psychological level.

– At this point, short-term strategies will likely be focusing on bullish continuation themes, looking for 2019 strength to continue. On a longer-term or swing-basis, the potential for reversal is building as noted by a rising wedge formation building near November/December swing-highs.

– DailyFX Forecasts on a variety of currencies such as the US Dollar or the Euro are available from the DailyFX Trading Guides page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.

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

The 2019 US equity rally has continued into this week as the Dow Jones Industrial Average set a fresh three-month-high on Monday. The index is now re-testing the 26,000 psychological level as prices have pulled back in the face of a heavy economic calendar. The past two days have seen FOMC Chair Jerome Powell testify on Capitol Hill as part of the Fed’s twice-annual testimony in-front of Congress; and while Chair Powell avoided any direct signals of future rate hikes or tighter policy options at the Fed, US stocks remain on their heels after a very strong eight-week run.

Dow Jones Four-Hour Price Chart: Test of 2019 Support Trend-Line

DJIA four hour price chart

Chart prepared by James Stanley

Dow Jones Short-Term

The big question on a short-term basis in the index is for how long the bullish theme might run. Prices have stayed on a consistent trajectory throughout 2019 with buyers continually offering higher-low support, and that’s been in stark contrast to the bearish themes of Q4. As shown above, price action is in the process of testing the bullish trend-line that’s held the lows for the bulk of this year.

For those looking at bullish continuation approaches, support potential exists at the Fibonacci level at 25,816, as this is the 78.6% retracement of that Q4 sell-off. A bit lower brings the 14.4% marker of the post-Election run in the Dow, taking the low from November 2016 up to last year’s high. That level rests at 25,595 and this is the same price that had held the highs in the Dow in mid-February. And below that is another possible level of interest around 25,266, as this is the 14.4% retracement of the 2015-2018 major move, and this is the price that had helped to set the low in the index in the middle of this month. A break-below that support brings to question the viability of continuation themes of the bullish trend.

Dow Jones Two-Hour Price Chart

Dow Jones two hour price chart

Chart prepared by James Stanley

Dow Jones: Reversal Potential

As shown in the first chart in this article, the Dow is currently building into a rising wedge pattern. This type of formation will often be approached with the aim of bearish reversals; largely looking for the lack of enthusiasm from buyers at highs to eventually take-over, opening the door for bears to take-control. But, given the motivation that’s been pushing stocks-higher so far this year, that can be a difficult case to make. So, for those looking at bigger-picture reversals in US stocks, following a continued downside break from this formation, could begin to open the door for such a scenario. A downside break through the two-week-low around 25,764 could be an early signal of impending reversal potential.

Dow Jones Eight-Hour Price Chart

DJIA Dow Jones Eight Hour Price Chart

Chart prepared by James Stanley

You may also be interested in:

Day Trading the Dow Jones: Strategies, Tips & Trading Signals

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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 a plethora 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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