Forex Trade Signals: EURUSD October-November 2018

“Politics run the show, economic data playing second fiddle”

■ Market: Foreign Exchange

■ Asset: EURUSD

Currently, we are witnessing a relatively stable outlook for EURUSD, but the macroeconomic environment is prone to political pitfalls. Euro has to deal with the emerging political and economic risks in Italy, and the advancing yield of the 10-year Italian Bond. On the other side of the Atlantic, the US economy is still very strong. However, the US Dollar has to deal with the US 2018 midterm elections. The scenario that is priced today is that the Democrats will win the house, and the Republicans will win the Senate. Any deviation from this basic scenario may trigger significant price movements in both Forex and equity markets (Results on November 7th, 2018).

EURUSD Technical Analysis

As mentioned in the beginning, politics run the show at this moment. Nevertheless, these are some key support/resistance price levels for EURUSD.

Chart: EURUSD (D1)

Read more: Free Forex Trading Signals: EURUSD October-November 2018

USDX and EURUSD February-March 2018

In short, the Euro seems ready to explode as high as 1.34 in the following months, but ECB is trying hard to prevent it. The Americans say never trade against the FED, let’s see if that is true for ECB as well.

■ Market: Foreign Exchange

■ Assets: EURUSD, USD-X

■ EURUSD Today: 1.2350

■ Basic Forecast: EURUSD will range between 1.19-1.26 for several weeks, and then it will move considerably higher, targeting 1.34

■ Trade Signals: (i) Long Positions if EURUSD retraces to 1.1900, or (ii) Long positions if EURUSD manages to cross above 1.12600-1.2650 in the weekly chart

EURUSD OUTLOOK -EU and the US back in a Currency War

There are concerns by the European Central Bank that a continued USD weakness could have strong negative consequences for Europe’s economic growth. On the other hand, the American Administration is unwilling to respond to increasing inflationary concerns. Note that in the first quarter of 2018, the American GDP is expected to grow by 4.5% (annualized).

In this context, a new currency war breaks between FED and ECB. These are the basic actions of each side:

□ FED ACTIONS (Goal is a weaker dollar to push growth further):

(i) Still implements an Expansionary Fiscal Policy, which is financed by Treasury debt

(ii) Not responding to inflationary concerns (there was a recent 2.9% rise in annualized average hourly earnings)

(iii) Not responding to the further widening of the US Trade Deficit

(iv) Feels comfortable as GDP growth is expected at record levels in the 1st quarter of 2018

(v) Threats of further protectionism –Trump Administration imposed trade tariffs on solar panels in January 2018

□ ECB ACTIONS (Goal is stopping the Euro’s advance):

(i) Revealing concerns about the Euro’s volatility (January -Mario Draghi)

(ii) Tactical interventions (statements) by ECB members against a weak USD

(iii) Plans for a full banking union and a further fiscal integration between EU members

(iv) ECB is still printing money and the long-term inflation target remains at 2.0%

Read more: Free Forex Trading Signals EURUSD February 2018

Free Forex Trading Signals: USDX May/June 2018

■ Market: Foreign Exchange

■ Asset: USDX (US Dollar Index)

Economic growth despite political instability, stockmarket volatility, flags of war in the Middle East, and a growing oil price create one of the most complex and controversial macroeconomic environments of recent years.

Macroeconomic Outlook

The economy is growing on both sides of the Atlantic but the political instability in the US, the turmoil in the Middle East, the rising bond yields, and the rising price of the ‘black gold’ make investors feel very nervous. This is the perfect environment for extreme volatility in global money and capital markets.

At a glance, this is the current macroeconomic outlook for the US and Eurozone.

• US Inflation and FED Interest Rate Hikes in 2018

In its recent meeting, FED decided to hold interest rates and confirmed that inflation has risen to almost meet its target. According to FED, inflation over the next 12 months should "run near" the 2.0% target. The next interest rate hike is expected in June 2018. In total, we should expect three (3) more interest hikes in 2018. Currently, the target rate is 150-175 bps, this is the basic forecast for the remaining of the year:

□ June (13th) Meeting → 175-200 bps (Hike)

□ August (1st) Meeting → No Hike

□ September (28th) Meeting → 200-225 bps (Hike)

□ November (8th) Meeting → No Hike

□ December (19th) Meeting → 200-250 bps (Probable Hike)

• Eurozone’s Inflation and Growth Rate

In April, inflation in Eurozone was 1.2% remaining below the European Central Bank's 2.0% target. Eurozone ended 2017 with the strongest growth rate in almost seven years, but in 2018 the euro economy seems to grow slower. In the first quarter of 2018, growth slowed to 0.4%, compared with 0.7% in the previous quarter. In a yearly basis, the growth reached 2.5%. Nevertheless, Eurozone is still doing much better than the UK, which only grew by 0.1% in the first quarter of 2018. "This was the fifth out of seven consecutive quarters that the euro zone grew faster than the UK following the EU referendum," said Barret Kupelian of PricewaterhouseCoopers.

Read more: Forex Trading Signals USDX May-June 2018