A Skew on the Pound’s Potential Via Brexit Near-Term


Brexit Talking Points:

  • The Pound rallied Tuesday on reports the Government was warming to a delay to reduce the risk of a ‘no-deal’ outcome on March 29
  • Is the Sterling poised to significant further gains if a delay is more likely? Is the currency even that deeply discounted?
  • My preferred GBP bearish candidates are GBPUSD, GBPUSD and GBPCAD while the top bullish options are EURGBP and GBPCHF

See how retail traders are positioning in US Crude Oil, EURUSD, FX majors, indices, commodities and cryptocurrency on an intraday basis using theDailyFX speculative positioning data on the sentiment page.

A Pound Rally on a Brexit Delay

The British Pound put in for a remarkable rally this past session. While not a record-breaking bullish charge of any historical context, it was nevertheless among one of the most amplified and broadly-based moves we have seen from the currency over the past months. The spark for the move looks to be the standard for the Sterling: Brexit headlines. Following Prime Minister Theresa May’s decision over the weekend to postpone a meaningful vote out to March 12 from the scheduled Parliamentary session on Wednesday, there was a mild optimism that seemed to be displaced enthusiasm from a call that offered little reason to be enthusiastic. This past session, there was something more tangible to account for with headlines indicating that May would put up to vote the options of her deal, ‘no deal’ or a delay to the March 29th Brexit date. Reducing the probability of a convoluted breakup with no guidelines as to how the UK will operate with its largest trade partner and financial counterpart is unmistakably a positive turn of events. Yet, how much good will can this rebalance of probabilities facilitate? Is a delay a long-term relief for the Sterling and UK-based assets? If you intend to take a view and/or position on the Pound, you must be able to answer these questions for yourself.

Chart of GBPUSD (Daily)

A Skew on the Pound's Potential Via Brexit Near-Term

The Different Scenarios and Market Speculation

Moving forward, the British Pound faces a number of possible scenarios in the Brexit saga. The different outcomes carry significantly different impact for the currency and markets. Before considering the individual nodes and their market response, it is first important to consider what the market is currently pricing in. The Pound’s charge through this past session denotes short-term enthusiasm but looking at the general position since the initial Brexit vote, there is reason to argue that the market is far from discounting the full impact of a messy divorce. This market course leading into critical dates such as today’s Parliamentary session weighing the MPs control over the process, the March 12th ‘meaningful vote’ and the actual March 29th Brexit date establishes how readily and significantly the market responds. The best-case scenario is an imminent deal. That could certainly lift the Pound but the situation is so convoluted that such an outcome would be very difficult to muster. A more practical outcome for the near future is a vote to defer the Brexit decision by three months (out to June) which has been floated more seriously this past week. While rumor of just such a course has offered some degree of lift, this is not a boundless well of bullish interest. Business industry groups have warned more time will result in further logistical chaos. In general, the mere wait until the next opportunity to make a decisive call on direction would likely see enthusiasm ebb. I would look for opportune scenarios to fade any rally of this outcome. If there is a ‘no deal’ Brexit, there is little doubt that the Sterling would come under severe pressure as growth and financial fears are realized.

Poll Assessing Traders Expectations for Brexit

A Skew on the Pound's Potential Via Brexit Near-Term

Choosing Options for Different Scenarios

While there is are bullish and bearish scenarios to consider, the recent skew in bias and the burden of time spell greater capacity for disappointment. First though, I would consider the unexpected. If there is indeed a bullish outcome for the Pound, I would be very selective for candidates to pursue. A genuine deal found in a very timely manner (before the Article 50 period runs out) could lead to a meaningful break from the likes of GBPUSD above its 1.3300 resistance and fuel further follow through. In that case, we could pick most crosses and find a productive follow through. More practical would be a controlled Pound stabilizing as worst case scenario fears are beaten back. In that case, I like EURGBPin its break below 0.8625 to trade to levels not seen since May 2017. This registers as a much larger reversal on a technical basis, but the real appeal is in the Euro’s own, under-appreciated exposure in this situation. On the opposite end of the spectrum, a ‘no deal’ outcome would find the Pound uniformly hammered lower. There would be little difficulty in selecting an exposure for this perspective, but the disconnect comes in that there is still considerable time until that cliff is reached – March 29th at the earliest and possibly even another three months beyond that. More practical is the more controlled bearish Pound implications should time cut down on the recent speculative premium won for bulls. For this, I like proximate technical levels like the GBPUSD’s 1.3300 resistance or GBPJPY trendline and Fib resistance at 147. More practical given broader market conditions though may be the likes of GBPCAD, GBPAUD or GBPNZD. We consider the market’s assumptions, the various scenarios and possible candidates for different Brexit courses moving forward.

Chart of EURGBP (Weekly)

A Skew on the Pound's Potential Via Brexit Near-Term

Chart of GBPJPY (Daily)

A Skew on the Pound's Potential Via Brexit Near-Term

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



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EUR/USD Vulnerable to France GDP, Italian Confidence Indicators?


EURO TALKING POINTS – EUR/USD, FRANCE GDP, ITALY CONFIDENCE INDICATORS

  • EUR/USD eyeing EU economic data
  • Germany, Italy stalling. France next?
  • How or will the Euro recover in 2019?

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

The Euro may take a hit tomorrow if French quarter-on-quarter GDP falls short of the 0.3% forecast and could be compounded if Italian confidence indicators undershoot expectations. The latter is also struggling with a technical recessionwith Germany not far behind. France’s economy – when only looking at GDP – has the strongest growth rate relative to the other two. However, to be fair, the economic bar is not exactly high.

The outlook for European growth for months has been declining as the IMF and ECB continued to publish grimmer forecastsas regional political fragmentation threatened the politically-fragile Euro. This in turn has put pressure on the central bank’s intention to raise rates at least once this year. Using a weighted index against the Euro, the decline of the currency relative to its counterparts suggests bullish sentiment is waning.

Chart Showing Euro against basket of currencies

The outcome of Brexit and its potential political and economic impact on the Euro Area remains unclear with the addition of looming threats of a possible EU-US trade conflict. The upcoming European Parliamentary elections are also a source of concern. Several preliminary polls have shown a decline in the popularity of Europhile liberals with the simultaneous rise in Eurosceptic anti-establishment parties.

Looking ahead, PMI data out of Germany, France and Italy is scheduled to be released later in the week and could warrant the attention of Euro traders. EUR/USD may struggle to reach past 1.1415 on good news and could potentially flirt with the support at 1.1359 should economic data tomorrow disappoint.

EUR-USD – Daily Chart

Chart Showing EUR/USD

EUR/USD 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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Uptrend Holds But May Be Tiring


Nikkei 225 Technical Analysis Talking Points:

  • The Japanese stock benchmark has risen consistently this year
  • Some pause for consolidation is only to be expected
  • However key supports are quite nearby

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The Nikkei 225 is exhibiting a pattern rather common to developed market equity right now.

Just as with Australia’s ASX 200, the Japanese benchmark remains well within its dominant daily-chart uptrend channel and has made its way into an old trading range from 2018. However, it is showing some signs of exhaustion and may need a period of consolidation before it can push on.

Nikkei 225, Daily Chart

The range in question comes in between 21,943 and 21,169. That range formed a brief pause on what turned out to be the road lower towards the end of 2018. The bulls need to top it convincingly if they are to take a stab at the previous significant high -December 2’s 22,847.

However, at present the index seems to be topping out around the 21,629 level. The last couple of weeks have been replete with the sort of narrow daily ranges which might suggest a bit of investor indecision.

Still, momentum indicators have risen only gradually and do not at this point claim the index as overbought.

The question now, then, is whether the index can consolidate around current levels, in which case it could push higher, or whether it will retrace more seriously. Fundamental risk appetite is likely to dictate this, with investors looking keenly to trade headlines from either Washington or Beijing following this week’s evidence that negotiations are going well.

Near-term technical signals could involve the range base at 21.169, and the upward channel base further below it at 20,500 or so. As long as any slips are confined to the region between these two levels then the ‘consolidation’ story will look plausible and further upside may then follow, whether or not it can top that December high.

A slide below both, however, would probably put market focus on the psychologically important support level of 20,000. The index fell below this only briefly at the turn of last year. Before that it had held since April, 2017.

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

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Brexit News Revives Dominant Downtrend


EUR/GBP Technical Analysis

  • The latest Brexit news sent EUR/GBP crashing through key support
  • Awaiting a close lower to confirm January downtrend renewal next
  • Upside risks include fading downside momentum on the daily chart

Just started trading EUR/GBP? Check out ourbeginners’ FX markets guide!

EUR/GBP is aiming for its lowest close on the weekly chart since May 2017 after support at 0.8620 gave way. There was a brief intraday rally to the upside towards the end of last week after positive RSI divergence on the 4-hour chart hinted of a turn higher. Fundamentally, the backdrop behind gains in the British Pound across the board were due to fading chances of a ‘no-deal’ Brexit. When looking at the medium-term, the next clear-cut area of support doesn’t seem to come in until 0.8337, a place not tested since 2016/2017.

EUR/GBP Weekly Chart

EUR/GBP Technical Analysis: Brexit News Revives Dominant Downtrend

Zooming in on the daily chart below, EUR/GBP experienced its most aggressive decline over the course of 24 hours since January 11 as it fell 0.89%. Drawing a Fibonacci extension that uses the decline in January and reversal to February 14th, we find that prices are sitting right on the 50% midpoint at 0.8593. For those that are bearish, keep an eye on RSI which indicates fading downside momentum. This could precede a retest of the April 2018 lows around 0.8620.

EUR/GBP Daily Chart

EUR/GBP Technical Analysis: Brexit News Revives Dominant Downtrend

If confirmation of the break under critical support is achieved via another close lower on the daily chart, this could be a strong signal that a resumption of the dominant downtrend from January is in store next. Looking at the EUR/GBP 4-hour chart, such a decline would place the next area of interest around the 61.8% extension at 0.8592. On the other hand, pushing above resistance opens the door to testing the descending trend line from February 14 highs.

EUR/GBP 4-Hour Chart

EUR/GBP Technical Analysis: Brexit News Revives Dominant Downtrend

**Charts created in TradingView

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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Dow Jones Trade War Momentum Ebbs, Dollar Sinks on Powell, Pound Surges Amid Brexit Talk


Trade War, Brexit and Fed Talking Points:

  • Only two days after the delay of the US-China trade war escalation data, the Dow has lost momentum…and so has the SHCOMP and Yuan
  • The Dollar sunk this past session, but Fed Chairman Powell’s outlook for the economy and markets wasn’t a likely culprit
  • Pound has rallied into noteworthy resistance via GBPUSD following reports May is warming to a Brexit delay ahead of Parliament’s vote

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.

That Trade War Enthusiasm Didn’t Last Long, Not Even for The Chinese Markets

It was only Monday that the markets had their first opportunity to respond to news that US President Donald Trump has pushed back the March 1st timeline to upgrade tariffs on nearly $200 billion in Chinese imports. That is without doubt a positive development in the outlook of economic activity and financial market stability, but you wouldn’t know it if Dow price, USDCNH price, crude oil prices or other baseline market metrics were your litmus test. The lack of follow through from the likes of the Dow and S&P 500 Monday afternoon was unmistakable but we could account for the curbed enthusiasm in the anticipation built up late last week and the remarkable recovery extended through January and February. Far more remarkable was the absolute loss of traction in assets with a more direct benefit like the Chinese Yuan and Shanghai Composite this past session. Despite the improved course, USDCNH actually rose this past session and the benchmark Chinese equity index slid through its session Tuesday. If the markets have already accounted for an eventual resolution between the two superpowers, disappointment is likely to follow through either lackluster growth figures or another pointed catalyst. If there is buoyancy yet to be accounted for, it is more likely to come from slower moving assets like emerging markets or other world equities. Other themes aside from trade wars to keep tabs on include collective monetary policy and global growth. Meanwhile, traders should keep close watch of the deflating volatility across the financial system. The VIX and volatility of VIX measures are further joined by lulls in FX, commodity, emerging market and yield volatility indicators. The world is no longer as aloof of its own complacency – and thereby lack of preparedness – as it once was before 2018.

Poll of Traders’ Expectations for Risk Trends After Trade War Progress

Dow Jones Trade War Momentum Ebbs, Dollar Sinks on Powell, Pound Surges Amid Brexit Talk

Dollar Takes a Significant Hit Though it Didn’t Seem to be Powell’s Doing

For significant moves this past session, the Dollar mustered one of the stronger drops on the day. A cursory assumption would be that the dip was the result of a fairly active fundamental docket. It is true that there was meaningful event risk on tap, but its outcome and market reaction didn’t exactly align. The top listing (the one that garnered the most and most bombastic headlines) was Fed Chairman Jerome Powell’s testimony before the Senate Banking Committee. He would touch on growth, monetary policy, external risks, political influence and inequality among other issues; but there were few true revelations for market participants. The central banker was optimistic about growth moving forward but preached caution that would be applied to monetary policy. There was no material change in rate forecasts as measured by the yield implied through December Fed Fund futures, so his cautious dovish tone altered few opinions. As for the data, housing starts and prices took a dive but the macro implications are finding few deep reflections but the same was true of the Conference Board’s Consumer Confidence survey swell. The headline figure jumped 6.5 points to 131.4 (a big change) while the expectations component surged 14 points to 103.4. What this may tell us about the world’s largest collective consumer is severely skewed by the reality that this is a reversal of a temporary US government shutdown influence. It is more likely that the Dollar’s slip was the collective reflection of its stronger counterparts, but that is an unreliable guide given the other majors’ drivers ahead. Local data will keep headlines busy but will struggle to mount the kind of speculative response to earn a genuine break from the DXY Dollar Index’s or EURUSD’s persistent range. Powell’s day two (at the House) and trade figures are significantly lower on my watch list than Thursday’s delayed 4Q GDP release. If the Dollar is set to range, consider pairs like GBPUSD, AUDUSD and NZDUSD.

Chart of the DXY Dollar Index and Implied Fed Funds Yields from December 2019 Contract

Dow Jones Trade War Momentum Ebbs, Dollar Sinks on Powell, Pound Surges Amid Brexit Talk

Pound Rallies Ahead of Parliament’s Discussion on Brexit, Keep Tabs on the Euro as Well

The other big FX mover this past session, the Sterling, was more aligned to its principal catalyst and will find more capable market activity through the forthcoming 24-48 hours. The Pound surged Tuesday, pushing EURGBP to break a significant range low and raise the threat profile of a more systemic reversal while GBPUSD moved up to an ambitious range resistance in 1.3300. The motivation for the British currency were reports that UK Prime Minister Theresa May was considering offering up an option of a Brexit extension as the clock quickly winds down to the March 29th split. It is encouraging that another option aside from a ‘no deal’ is being entertained, but this was a likely shift regardless. Faced with the threat of leaving the EU with no establish economic ties, MPs would hear the warnings by business groups, the Bank of England, the IMF and the government itself in their heads. They would likely force greater control away from the Prime Minister. May’s move heads off this power move and resets the focus to her March 12 proposed ‘meaningful vote’. The upcoming Parliamentary session could still force control away from the PM, but that is unlikely. The real question is whether the Sterling can simply hold its buoyancy – much less further it as we get near the Brexit date, vote or not. Without fresh headlines to further build anticipation, that would be difficult to achieve. In the meantime, keep watch over the Euro as this theme unfolds. There are deep ramifications from this separation for the EU and the stability of the Euro-area markets and currency. And, unlike the Pound, they are not well accounted for in current pricing. In its own fundamental listing, the Euro will have sentiment surveys to register as well as the on-again, off-against issues in regional politics moving increasingly away from co-dependency. We discuss all of this more in today’s Trading Video.

Chart of GBPUSD (Daily)

Dow Jones Trade War Momentum Ebbs, Dollar Sinks on Powell, Pound Surges Amid Brexit Talk

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



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Brexit Latest Bolsters British Pound, S&P 500 Looking More Weak


Asia Pacific Market Open Talking Points

  • GBP rally accelerates as chances of a ‘no-deal’’ Brexit fade
  • US equities struggled rallying again on supportive news flow
  • S&P 500 futures suggest APAC stocks may fall as Yen gains

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

The British Pound continued rallying against its major counterparts throughout Tuesday’s session, building on expectations that a ‘no-deal’ Brexit might be avoided. It began early in the day on reports UK Prime Minister Theresa May could delay the divorce. Then, gains in Sterling were amplified after UK lawmakers were reportedly planning a second referendum as a proposal during Wednesday’s amendment debate in Parliament.

GBP/AUD Technical Analysis

GBP/AUD climbed about 2.4% since I warned about an impending resistance break about two weeks ago. Prices are sitting on the outer boundaries of next major resistance between 1.8508 and 1.8434. Negative RSI divergence warns that upside momentum is fading. While that may precede a turn lower in the interim, confirming a close under the rising trend line from December could signal a more lasting reversal.

GBP/AUD Daily Chart

Brexit Latest Bolsters British Pound, S&P 500 Looking More Weak

Chart Created in TradingView

Wall Street had a volatile session as towards the end of the day, the S&P 500 trimmed intra-day gains to end almost 0.1% lower as expected. The index initially got a boost when Fed Chair Jerome Powell testified before Congress and reiterated a patient forecast on rates. Shortly after, better-than-expected US consumer confidence data helped contribute to this. But this optimism didn’t last, similar to the lack of follow through on upbeat US-China trade news.

Traders ought to proceed with caution as this could signal weakness in the underlying asset if it struggles rallying on supposedly supportive news. With that in mind, S&P 500 futures are pointing lower as Wednesday’s Asia Pacific trading session gets underway. The ASX 200 looks particularly vulnerable after its worst day since January. Declines in equities may boost the anti-risk Japanese Yen. Meanwhile, a wildcard could be the second Summit between US President Donald Trump and North Korea’s Leader Kim Jong Un.

US Trading Session Economic Events

Brexit Latest Bolsters British Pound, S&P 500 Looking More Weak

Asia Pacific Trading Session Economic Events

Brexit Latest Bolsters British Pound, S&P 500 Looking More Weak

** 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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Implied Volatility Depressed Despite Upcoming Event Risks


USDCAD Implied Volatility – Talking Points:

  • USDCAD 1-week implied volatility seems subdued as currency option traders expect muted price action
  • Several key economic indicators scheduled for release out of the United States and Canada could push the forex pair outside its statistical trading range
  • Technical indicators are portraying a mixed message, with prices trading comfortably between near-term support and resistance

Canadian Dollar implied volatility looks depressed compared to its historical average. This is particularly interesting seeing that significant event risk lies ahead for the currency. One-week (1W) implied volatility currently rests at 5.87 percent, which is below last year’s average of 7.20 percent.

USDCAD IMPLIED VOLATILITY PRICE CHART: DAILY TIME FRAME (JANUARY 01, 2018 TO FEBRUARY 25, 2019)

USDCAD Currency Implied Volatility Price Chart

With USDCAD spot prices currently resting at the 1.319 level, the implied volatility priced by the forex option market suggests that the currency pair will trade between 1.315 and 1.323. That’s a narrow band considering the plethora of economic data slated for release over the next few days.

FOREX MARKET IMPLIED VOLATILITY AND TRADING RANGES

EURUSD, GBPUSD, USDJPY, USDCHF, USDCAD, AUDUSD, NZDUSD Forex Implied Volatility Table

Notably, the Canadian Consumer Price Index for January is scheduled to cross the wires at 13:30 GMT tomorrow along with the US Advance Goods Trade Balance for December – both of which have market-moving potential if actual data comes in materially above or below consensus.

Check out the free comprehensive Economic Calendar by DailyFX here for a full list of upcoming data releases affecting major currency pairs.

Also, 4Q 2018 GDP numbers out of the US and Canada will be released Thursday and Friday respectively, while manufacturing PMIs for the two countries will come out at the end of the week.

USDCAD CURRENCY PRICE CHART: 4-HOUR TIME FRAME (JANUARY 14, 2019 TO FEBRUARY 26, 2019)

USDCAD Currency Price Chart

USDCAD technical indicators now portray a mixed message with prices trading comfortably between near-term support and resistance at the 0.382 and 0.500 Fibonacci retracement levels.

The bearish downtrend witnessed over the last two weeks could represent a bullish flag, however, which suggests prices could pivot higher. As the setup continues to evolve, oil prices could serve as a bellwether to the CAD’s next direction if economic data is reported in line with market expectations.

Written by Rich Dvorak, Junior Analyst for DailyFX

Follow on Twitter @RichDvorakFX

Check out our Education Center for more information on Currency Forecasts and Trading Guides.





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New Zealand Dollar Trades Lower on Disappointing Trade Data


New Zealand Dollar Talking Points:

  • New Zealand’s January trade balance read -914 million NZD versus an expected deficit of -300 million
  • Learn to trade news events like this one with our Trade the News Trading Guide

See how IG clients are positioned on the Dow, Crude oil and the US Dollar with our free IG Client Sentiment Data.

The New Zealand Dollar traded lower against its United States counterpart late Tuesday as disappointing trade data crossed the wires. New Zealand’s January trade balance was a deficit of -914 million NZD, notably higher than the expected deficit of -300 million. Compared to the month prior, New Zealand’s trade deficit increased by more than 1 billion New Zealand Dollars.

New Zealand Dollar Price Chart: 1-Minute Time Frame (February 26) (Chart 1)

NZDUSD price chart trade data

The country’s year-to-date trade balance totaled -6.358 billion NZD versus the expected -5.496 billion and -5.858 billion to December. Imports again surpassed exports in January, contributing further to the deficit. January imports read 5.32 billion NZD the country notched 4.4 billion in exports. The New Zealand Dollar traded lower on the news, but subsequently mounted a rebound to steady off near 0.6891.

NZDUSD Price Chart: 4-Hour Time Frame (December 2018 – February 2019) (Chart 2)

nzdusd 4 hour price chart

As for the broader NZDUSD picture, the trade data seemingly did little to alter the landscape at first glance. While off session highs, the pair is still comfortably within the wedge it has formed in the past few months. Should Kiwi strength continue, the next area of resistance appears to be in the 0.6930 area at the top of the wedge.

Check back here for updates as the story develops…

–Written by Peter Hanks, Junior Analyst for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX

Read more: Crude Oil Price May Falter as IEA Forecasts Supply Swamp

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.





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FX Price Action Setups: EURUSD, USDJPY and USDCAD


FX Price Action Setups in EURUSD, USDJPY and USDCAD

US Dollar Talking Points:

– If you’re looking to improve your trading approach, our Traits of Successful Traders research could help. This is based on research derived from actual results from real traders, and this is available to any trader completely free-of-charge.

– If you’re looking for a primer on the FX market, we can help. To get a ground-up explanation behind the Forex market, please click here to access our New to FX Trading Guide.

If you’d like to sign up for our webinars, we host an event on Tuesday and Thursday, each of which can be accessed from the below links:

Tuesday: Tuesday, 1PM ET

Thursday: Thursday 1PM ET

US Dollar Drops From Fibonacci Resistance to Fresh Weekly Low

It’s been a busy morning in the US Dollar as FOMC Chair Jerome Powell began the bank’s twice-annual testimony in-front of Congress. This morning brought the Senate Finance Committee and tomorrow brings the House Financial Services Committee. While sounding fairly positive on the economy as a whole, Chair Powell remained non-committal to future rate hikes and this helped to bring on a move of USD-weakness.

Initially the US Dollar firmed after Powell’s opening statement, with resistance soon setting in off of the 96.47 Fibonacci level. But buyers could not hold the move and sellers soon came-in to push lower, and prices broke-below the 96.30 support that had held the lows since last week.

The next area of interest for USD support is the 96-96.04 support zone; and for short-term resistance, the prior area of support around 96.30 remains of interest.

(edit) while writing up the archive for the webinar (but before publishing), prices have broken down to the next support zone of interest.

US Dollar Hourly Price Chart

us dollar usd hourly price chart

EURUSD Range Holds but Buyers Showing Less Enthusiasm

I’ve been looking at the EURUSD range over the past couple of weeks and that theme has continued to hold. The issue with the pair is short-term price action, as buyers have had a tendency to slow their approach as prices have tested resistance levels above the 1.1360 area; and current prices are quite far away from recent support to justify a move back to 1.1448. But with prices now tip-toeing above that resistance, can the door be opening for another test of the 1.1448-1.1500 longer-term resistance area?

EURUSD Four-Hour Price Chart

eurusd eur/usd price chart

GBPUSD Puts in Aggressive Breakout

This morning brought some volatility to the British Pound around a report that Theresa May is preparing to delay the Brexit vote into March. This helped to propel GBPUSD up to fresh 2019 highs, and that move showed a pullback ahead of the Powell testimony. But, as USD-weakness came-in during the Q&A, GBPUSD pushed back up to fresh highs, running as high as 1.3285 before digesting that recent movement. As discussed in the webinar, this morning brought the potential for reversal scenarios; but given the continuation of the bullish move, that thesis no longer looks as attractive. For GBPUSD bulls or, for those looking for bearish-USD options, looking for topside continuation in GBPUSD may be an attractive theme. I looked at three possible pullback levels during the webinar that can be used for such a purpose.

GBPUSD Hourly Price Chart

gbpusd gbp/usd price chart

USDCAD Holds Lower-High

In USD/CAD, the pair has continued to show bearish tendencies as brought upon by lower-lows and lower-highs that have printed over the past few weeks. This setup appears to be very much tied with Oil prices, as the bullish bounce that showed in USDCAD at the start of this week appears correlated with the bearish push in WTI. As shared on Oil, this isn’t necessarily a directional change as much as an inflection, and this can keep the door opened for a bullish Oil thesis as well as bullish CAD, bearish USDCAD.

USDCAD Four-Hour Price Chart

usdcad usd/cad price chart

WTI Oil: Can Oil Bulls Stage a Defense of $55?

Oil prices softened yesterday after a specific tweet on the topic; but that pullback showed up at an interesting point on the Oil chart. The level of 57.47 is the 38.2% Fibonacci retracement of the 2016-2018 major move in WTI, and this is a price that started to show as resistance last week. So, at this point, that appears to be more of an inflection than a point of reversal.

The big question at this point is whether bulls will defend the $55 level, or whether another trip to the 51.48 level is in the cards, as this is the 50% marker of that same major move and previously helped to build-in a double-bottom formation in January and February of this year.

WTI US OIL Four-Hour Price Chart

US OIL WTI CRUDE

USDJPY Breakout Falters, Support at Prior Resistance?

Despite the US Dollar’s themes of weakness over the past week and a half, USDJPY has held up fairly well, all factors considered. This highlights just how weak the Japanese Yen has been of recent, and this can be evidenced in the GBPJPY chart shared below.

USDJPY put in a false breakout in the early portion of this week, and prices soon pulled back to find support around a bullish trend-line. Should USD-weakness continue to show, this can put the bullish theme in USDJPY further on the back-burner, opening the door for a re-test of support at the prior resistance zone of 109.67-110.00.

USDJPY Four-Hour Price Chart

usdjpy usd/jpy price chart

EURJPY Builds into Bear Flag

This is a longer-term observation, so it may take some time to get into a workable spot. But after the surge of Yen-strength to start the year, EURJPY has spent much of the time since building into a bullish channel. And as looked at in the webinar, the pair retains bullish qualities on short-term charts, so this formation may not yet be ready to work. But, this is something to keep on the radar in the event of another wave of ‘risk off’ themes through global markets.

EURJPY Daily Price Chart

eurjpy eur/jpy price chart

GBPJPY Tests Key Fibonacci Level – Reversal Potential

As shared in the webinar, this would have to be looked at as an extremely aggressive setup; but GBPJPY has put in significant strength so far today to run up to fresh three-month highs. Prices began to resist at the 147.04 level, which is the 61.8% retracement of the 2011-2015 major move in the pair; but perhaps more importantly this level has a plethora of recent inflections.

This can open the door to reversal potential. It could be seen as a lower-probability setup given the fact that this has been an aggressive topside breakout and the trader would, essentially, be looking for something ‘new’ to happen. But, it could present an attractive risk-reward ratio for those looking at or open to reversal setups.

GBPJPY Four-Hour Price Chart

gbpjpy gbp/jpy price chart

USDCHF: Swissy Slides Back to Parity – Can Bears Push to .9902?

USDCHF is testing a big support zone now at the parity spot on the chart. Bears have yet to make a significant push back below the level but should USD-weakness remain as a theme in the near-term, this setup can remain attractive. For next supports, the .9902 Fibonacci level remains of interest after helping to set the late-January swing-low.

USDCHF Four-Hour Price Chart

usdchf usd/chf price chart

Chart prepared by James Stanley

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— Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX





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Brexit Vote Uncertainty May Weigh on FTSE 100, Firms’ Exit Plans


FTSE 100 Talking Points:

  • HSBC has delivered Brexit plans to investors as the bank prepares to mitigate the impact of the UK’s exit from the EU
  • The company plans to shift 7 branches to its French subsidiary and roughly 1,000 employees
  • A second Brexit referendum, or a delayed exit deadline, could alter the bank’s plans and create further uncertainty for the FTSE 100

See how IG clients are positioned on the Dow, Crude oil and the FTSE 100 with our free IG Client Sentiment Data.

Investors with exposure to the financial sector in the FTSE 100, particularly HSBC, will watch tomorrow’s Brexit proceedings keenly. Beyond the event’s impact on the British Pound and the broader FTSE 100, a change in the Brexit timeline could spark deeper uncertainty for firms who have concrete plans to shift operations to continental Europe.

HSBC Price Chart: 1 – Hour Time Frame (January 2019 – February 2019) (Chart 1)

HSBC price chart

In August 2018, HSBC announced plans to transfer seven of its branches from the United Kingdom to its French subsidiary and acquire two other branches under its French arm. While the bank fell short of naming Brexit explicitly, the French branch released a statement outlining the rationale. “As political and regulatory change in Europe continues, it is important that HSBC organizes its business in a way that supports its pan-European proposition for customers” the statement said. The move is slated to take place in Q1 2019, just as the United Kingdom is scheduled to leave the European Union.

DailyFX Brexit Timeline

Brexit Vote Uncertainty May Weigh on FTSE 100, Firms' Exit Plans

With Brexit only 31 days away, HSBC’s proposed move looks primed to take place. However, with tomorrow’s Brexit vote the schedule could be altered as uncertainty mounts. Wednesday’s key debate in Parliament will cover the Kyle-Wilson amendment. The amendment states that MPs will support the Prime Minister’s deal, which has been agreed to by the EU, only if it is put to a second referendum.

View our Economic Calendar for data releases and live event times.

If passed, the vote would necessitate an extension of Article 50, a proposition the EU has been open to. The Article 50 extension would then allow a second vote to be put to the public, effectively allowing English nationals to vote directly on the Brexit terms secured by Theresa May. Such a development could throttle the plans of HSBC and other companies to reduce operations in the UK as the country could be in a state of flux for longer, or potentially remain in the EU.

FTSE 100 Price Chart: 1 – Hour Time Frame (December 2018 – February 2019) (Chart 2)

FTSE 100 price chart

That said, the vote is largely expected to fail and thus May’s government will be locked between a rock and a hard place with time quickly dwindling. Alongside HSBC and the FTSE 100, look to increased volatility in the Pound as traders watch tomorrow’s vote unfold. The currency experienced a broad and substantive rally this past session. The FTSE 100 has traded slightly lower to the middle of the recent range etched out from February 8th. RSI is similarly average, slightly under 50.

–Written by Peter Hanks, Junior Analyst for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX

Read more: GBPUSD Gains on Brexit Delay, USDJPY Rejects 200DMA – US Market Open

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