Tag: EUR/GBP

FX Commentary – US Dollar Climbed Again On Risk Aversion.

Nicholas

Market Talk
–  The U.S. dollar scaled two-year peaks aided by a potential increase in U.S. interest rates and a wave of risk aversion that hit global markets while the Chinese yuan posted its largest three-day losing streak in nearly four years on growing worries of an economic slowdown in the world’s second-largest economy.

– The euro was at $1.0723, a fraction above the overnight low of $1.0697, its weakest since March 2020, as market nerves trumped any optimism from the re-election of French President Emmanuel Macron.

– The pound was at $1.2744, having hit its lowest since September 2020 overnight. U.S. futures market data show that funds have amassed their biggest wager against the pound since October 2019, a bet now worth close to $5 billion.

– The Australian dollar was at $0.7177, and hit a two-month low overnight, suffering particularly because the China lockdowns have weighed on commodity prices. Crude oil price fell on reduced demand, dragging the Canadian dollar lower to $1.2777.

– Gold rose on risk aversion as concerns over global growth due to COVID lockdowns in China lifted prices from the low of $1891.40 in the previous session to above $1900 in Tuesday Asian trades.


Chart Focus USD/CAD

Key Points

1. Buy USD/CAD recommendation.

2. Buy USD/CAD at 1.2655. Stop at 1.2620 and profit target at 1.2780

3. An increase in risk aversion and a decline in crude oil price are both likely to weigh on the Canadian dollar.

4. Price is likely to be supported by the Fibonacci 38% and 20EMA with MACD hinting at a bullish price trend.

Fundamental Comments

1. An increase in risk aversion is aiding the US dollar.

2. A decline in crude oil price due to reduced demand as a result of lockdown in China is likely to weigh on the Canadian dollar

Technical Comments

1. Price is likely to be support by the Fibonacci 38% correction point and the 20EMA.

2. MACD remains bullish and a turnaround would hint at a bullish price trend.



Key Levels

Support1.26501.26151.2580
Resistance1.26951.27301.2780

Technical Overview

USD/JPY – We had a buy recommendation at 128.05 which was filled on Thursday and yesterday, we had recommended lifting stop order higher to cost at 128.05 and keeping profit order unchanged at 129.35. Last night, our stop was triggered and we are out of this position at break even. MACD and Stochastic are both hinting that price could be turning up again but 20EMA is hinting at a bearish price trend.

Support127.75127.35126.95
Resistance128.20128.65128.95

EUR/USD – Price declined to a low of $1.0696 overnight and Stochastic is deep in the oversold zone. However, both MACD and 20EMA are hinting at a strong bearish price trend. We think the downtrend is likely to persist. There may be a pullback to the previous support turned resistance line at 1.0758 and this could offer a good opportunity to get into the downtrend. Only a move above 1.0820 would negate this bearish price trend.

Support1.06951.06351.0570
Resistance1.07351.07751.0815

GBP/USD – Price declined to a low of $1.2696 overnight and we think price may have reached a low. A Hammer candlestick price pattern has appeared on the 4-hourly chart, hinting at a possible price low. However, 20EMA is hinting at a strong bearish price trend. MACD is also hinting at a bearish price trend. We think the corrective rally is likely to be halted by the 20EMA at 1.2845 and the downtrend is likely to resume again from this resistance point.

Support1.27301.26951.2645
Resistance1.27701.28201.2880

XAU/USD – Price reached a low of $1891.40 overnight and has moved above $1900 this morning but we think the price rally is likely to be halted by 20EMA line at $1921.10. From here, we are likely to see another decline to test the low of $1889. Stochastic is deep in the oversold zone but both 20EMA and MACD are hinting at a strong bearish price trend. A break of $1889 could send price lower to $1847 in the next few days ahead.

Support1899.701889.101877.90
Resistance1907.351918.201931.25

EUR/GBP – We had a sell call yesterday at 0.8420 but price went up to a high of 0.8419, missing our entry order. Stochastic is in the overbought zone and moving lower. Price remains above the 20EMA and MACD has also remained bullish. There is a chance that price may continue to move higher to test 0.8440 again especially is price can stay above the 20EMA line at 0.8335.

Support0.84000.83650.8335
Resistance0.84400.84650.8510

FX Commentary – Yen Weakened To A 3-Year Low

Nicholas

Market Talk


– The US dollar rose as surging energy prices prompted investors to seek safe havens and on expectations the U.S. Federal Reserve will announce a tapering of its bond purchases next month.

– The inflationary impact of rising energy prices has solidified the case for the U.S. Federal Reserve to announce a tapering of its massive bond buying programme in November, raising the possibility of interest rate hikes in late 2022; even though jobs data published last Friday missed expectations.

– The yen hit a fresh three-year low on Tuesday, sliding to 113.48 per dollar in early Asia trade, its weakest since December 2018 as traders wagered surging energy prices, rising US bond yields and expectation of a US rate hike next year would drive Japan’s demand for dollars.

– The pound rose to a two-week high of 1.3673 on Monday before easing back slightly to last change hands at 1.3586. The euro stayed pinned near its lowest levels in a year, fetching 1.1550 while the Aussie dollar hit a one-month high on surging energy prices and a bounce in iron ore.

– Gold prices edged lower, weighed by a rallying dollar on bets the U.S. Federal Reserve would not put off stimulus tapering, although stagflation expectations limited losses in the inflation-hedge bullion.

Chart Focus USD/JPY

Key Points

1. Buy USD/JPY recommendation.

2. Buy USD/JPY at 112.70. Stop at 112.30 and profit target at 113.80

3. Surging energy prices and rising US bond yields are both likely to aid the US dollar.

4. Price is likely to find support at the Fibonacci 38% and 20EMA point with MACD and 20EMA hinting of a bullish price trend.

Fundamental Comments

1. Surging energy prices is likely to lead to inflation which could lead to a US rate hike.

2. Rising Treasury yields are aiding the US dollar against the yen

Technical Comments

1. Price is likely to be supported by the 20EMA and Fibonacci 38% correction points in a corrective decline.

2. MACD and 20EMA are both hinting of a bullish price trend.



Key Levels

Support113.15112.85112.40
Resistance113.50113.90114.10

Technical Overview

USD/CAD – Price reached a low of 1.2445 this morning but there were no divergence warning from either MACD or Stochastic. We think price is likely to make another new low in the next couple of days ahead. Stochastic is weak in the oversold zone but MACD remains bearish. 20EMA is pointing lower and is hinting of a bearish price trend. Price will need to move above 1.2570 to avert the bearish trend.

Support1.24451.24201.2390
Resistance1.25001.25351.2570

EUR/USD – Price had reached a low of 1.1528 last Wednesday and this low was accompanied by divergence warnings from both Stochastic and MACD indicator, hinting of a possible price low in the making. However, price failed to above 1.1585 and has been caught in a range of 1.1528 to 1.11585 since last Wednesday. MACD and 20EMA are both neutral while Stochastic is in the middle of its range. We could face another day in the above range. Watch the breakout for clues.

Support1.15501.15251.1490
Resistance1.15851.16151.1645

GBP/USD – Price broke above 1.3660 yesterday morning, negating our bearish view. However, this turns out to be a false breakout. After reaching a high of 1.3673, price has gone back into the range again. Stochastic is moving towards the oversold zone but MACD is flat and neutral at the moment. 20EMA is also flat and neutral. We think price is likely to range and we will have to watch the breakout for clues.

Support1.35901.35501.3500
Resistance1.36301.36751.3715

XAU/USD – Price broke above the range’s high of $1770.35 on Friday after a disappointing NFP data. Price reached a high of $1781.20 but has fallen inside the previous week’s range again. Price may have found support at $1750.00. Stochastic is turning up from the oversold zone while MACD has turned bullish. 20EMA is neutral. We may see another test of $1781.20 again in the next few days if price is able to stay above $1750.

Support1757.551745.001734.80
Resistance1766.851781.201790.55

EUR/GBP – We had a sell recommendation on this pair yesterday, but our call was wrong. We lost 15 pips on this trade. Stochastic continues to rise but MACD remains bearish. MACD is also starting to warn with divergence of a possible price low as well.  20EMA is flat but capping price at 0.8500 at the moment. A move above 0.8500 would confirm a Double Bottom chart pattern, with a price target at 0.8530.

Support0.84700.84500.8415
Resistance0.85000.85300.8550

FX Commentary – Yen Weakened As US Treasury Yield Rises

Nicholas

Market Talk
– The dollar ticked up to a 2-1/2-year high versus the yen on Monday after a soft U.S. payrolls figure did little to alter market expectations that the U.S. Federal Reserve will announce it will start tapering its massive bond-buying next month.

– The Labour Department’s nonfarm payrolls report showed the U.S. economy in September created the fewest jobs in nine months as hiring dropped at schools and some businesses were short of workers. However, the unemployment rate fell to 4.8% from 5.2% in August and average hourly earnings rose 0.6%, which was more than expected.

– U.S. benchmark 10-year Treasury yield rose to a four-month high of 1.617%, boosting the dollar’s yield attraction. The yen slipped to as low as 112.72 yen per dollar this morning, a level last seen in April 2019.

– The Canadian dollar changed hands at 1.2473 per U.S. dollar, having hit a two-month high of 1.2452 on Friday thanks to surprisingly strong Canadian payrolls data and lofty crude oil prices. Crude oil prices surged to a 7-year high on Friday.

– Gold was down on Monday morning in Asia, as the U.S. Federal Reserve is expected to begin asset tapering as per its timeline after Friday’s disappointing NFP data failed to sway the Federal Reserve from starting a tapering of its asset purchases as early as November.


Chart Focus EUR/GBP

Key Points

1. Sell EUR/GBP recommendation.

2. Sell EUR/GBP at 0.8475. Stop at 0.8490 and profit target at 0.8450

3. Expectation of a BoE hike and interest rate differential are both aiding the British pound.

4. A bearish Pennant chart pattern, coupled with bearish MACD and Stochastic, is hinting of a bearish price trend.

Fundamental Comments

1. Sterling is aided by growing expectations that the Bank of England could raise interest rates to curb soaring inflation.

2. Interest rate differential is in favour of the British pound.

Technical Comments

1. Price has a Pennant chart pattern which is a hint of a price decline ahead.

2. Stochastic is declining and MACD is bearish. Both are hinting of a bearish price trend ahead.



Key Levels

Support0.84650.84500.8415
Resistance0.84850.85000.8525

Technical Overview

USD/JPY – We had a buy call at 111.10 which was filled on Tuesday. On Friday, we had recommended stop at 111.40 and profit target at 112.00. Our profit order was filled on Friday. We made 90 pips on this trade. Stochastic is inside the overbought extreme but MACD remains bullish. 20EMA is pointing up with a steep slope, which is a hint of a strong bullish price trend. The Fibonacci 127% and 161.8% reside at 112.92 and 113.90 respectively.

Support112.40112.05111.70
Resistance112.90113.20113.55

EUR/USD – Price had reached a low of 1.1528 on Wednesday and this low was accompanied by divergence warnings from both Stochastic and MACD indicator, hinting of a possible price low in the making. Price is currently moving towards the previous resistance at 1.1635. Stochastic, 20EMA and MACD are hinting of a rising price trend but price will need to move above 1.1640 to confirm the low at 1.1528.

Support1.15651.15251.1490
Resistance1.16151.16401.1685

GBP/USD – Price broke above 1.3660 this morning, negating our bearish view. A move above this key resistance is likely to send price higher to 1.3750 over the next couple of days. Stochastic is rising towards the overbought zone, which is a hinting of a rising price trend. MACD is bullish and 20EMA is also rising and bullish. Only a move below 1.3535 would negate our bullish view for the next couple of days.

Support1.36301.35901.3550
Resistance1.36901.37451.3770

XAU/USD – Price broke above the range’s high of $1770.35 after a disappointing NFP data. Price reached a high of $1781.20 but is currently inside the previous week’s range again. There was a MACD divergence when price hit the high on Friday. We think price is likely to test and break the lower range at $1745.70 over the next few days. Stochastic is declining and 20EMA has turned bearish.

Support1745.701734.801721.60
Resistance1760.901770.351787.10

NZD/USD – We had a sell recommendation on Friday at 0.6930 and had placed a stop at 0.6960. Unfortunately, price reached a high of 0.6960 and we are out of this trade with a 30 pips loss. Stochastic has a bearish crossover and is heading lower. MACD remains bearish while 20EMA is flat and neutral at the moment. We remain bearish on this pair and we are looking for a decline to 0.6860.

Support0.69100.68750.6855
Resistance0.69600.69900.7030

FOREX TRADING IDEA EUR/GBP

Nicholas

Strategy

Buy 0.8700 for 0.8850 with a stop below 0.8595.

Technical View
Since the start of the year 2021, the EUR/GBP has been on a decline. The decline reached a low of 0.8471. We have since seen a recovery in this pair to 0.8717. We are likely to see a continuation of this rally higher to 0.8850 in the next couple of months ahead. The projected target is the Fibonacci 127% of the rally off the low.

We have also seen both Stochastic and MACD gave bullish divergence warnings as price moved lower. This is a warning of a low in the process of forming. We have seen a rally off the low as a result of this divergence warning. While Stochastic has moved close to the overbought zone, MACD remains bullish and has moved above the zero line. Most importantly, MACD is hinting of a bullish price trend ahead. 20EMA is also hinting of a bullish price trend ahead.

We think price has the potential to move higher to the Fibonacci 127% projection price target at 0.8850.

Fundamental View
The British pound had strengthened earlier in the year against the Euro as the U.K. had a fast and effective vaccination rollout for COVID-19.  A faster vaccination rollout is likely to lead to an earlier economic re-opening which is likely to lead to stronger economic growth at the end of the year. Euro zone vaccination was hammered earlier in the year as Pfizer had to cut back planned supply to the union as the company claimed that “fluctuations” triggered by the improvement in the Puurs plant. However, the improvement in this plant would lead to a significant increase in production later in the year.

On April 14, Pfizer would be adding an extra 50 million doses of vaccination, adding up to 250 million doses to be delivered to the European Union. Given the union population size of 746 million, it would mean that one third of its population could be vaccinated by the end of June 2021. This has helped the Euro to recover against the British pound and is likely to continue its recovery going forward.

The British pound had also gained against the Euro, earlier in the year as the Europe zone economy was expected to bounce less than it British counterpart. However since the end of March 2021, German Ifo has come in above expectation. On the 26 April, the German government reportedly raises 2021’s GDP growth expectation from 3% to 3.5%. The British economy is expected to grow at 4% in 2021. This has narrowed the gap between the 2 countries, leading to a recovery in the EUR/GBP exchange rate.

Forex Trading Idea EUR/GBP

Nicholas

Strategy
Buy EUR/GBP at 0.9000.  Stop at 0.8860 and profit target at 0.9350

Technical View
Price has been moving in an uptrending channel since the beginning of May 2020. We think price is likely to move within this channel. Currently price is moving closer to the lower trend line of the channel which could offer a good buying opportunity with limited losses if price moves below the lower trend line. On the other hand, if price were to move to the upper trend line, the rewards would be more than double the risk involved. Supporting the limited downside scenario, Stochastic is near to the oversold extreme. MACD is bearish at the moment but is close to the zero line.

On the political side, with European Council meeting coming up on Oct 15-Oct 16 and with Boris Johnson self-imposed dead line of a solution by this council meeting, the risk of a no trade deal Brexit is high, which will favour the Euro and weighs on the British pound.


Fundamental View
British Prime Minister Boris Johnson imposed new restrictions on Monday to tackle a second wave of the coronavirus outbreak after UK experience a rising number of coronavirus cases. This second wave of inflection is registering higher cases than the first wave of inflection; although death rate is much lower. The new lockdown tier system breaks down UK into regions and regions are classified from medium to very high categories according to the spread of the virus. This second wave of inflection is likely to disrupt UK’s economy recovery three months after UK eased lockdown restrictions.

Another factor that weighs down Sterling is ongoing Brexit worries. With talk between UK and the European Union over a trade deal yielding little progress, the worries are that UK has until October 15 to reach agreement over a trade deal or there will be a messy no trade deal Brexit. Although optimism of a deal is high, this optimism may be misplaced. Trade talks could also be derailed by a controversial bill introduced by the UK government that will violate the Brexit deal with EU, who has already launched a legal battle with the UK.