Forex Trading Signals

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%

Free Forex Trading Signals: USDX May/June 2018Forex 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)

EURUSD (D1)

Forex Trading Signals: USDX July-August 2018

Market: Foreign Exchange

Asset: USDX

In our previous analysis (May-June 2018) we have forecasted a broad range for the US Dollar Index between 91.00 and 95.0 points. Today, USDX trades just below the upper boundary of our forecast. If the USDX manages to cross above the current levels (95.05) it will grow to 97.50 and probably even to 100.40 points in summer 2018. On the opposite scenario, USDX will seek support at 91.00.

The USDX Paradox

According to Phoenix Capital “The US Dollar was at exactly that level at the end of 2017, and it was no problem, now what changed?" What changed is that by that time, the Fed implied a $10 billion tightening program per month or $120 billion on a yearly basis. Today, the Fed withdraws $360 billion liquidity on a yearly basis and plans to raise that number to $600 billion. At the same time, ECB adds €30 billion euros per month. As concerns interest rates, the Fed raised rates seven times in two years (2016-2018), while the ECB continues to maintain its negative rates.

The next FED interest rate hike is expected to happen in September 2018. This is our basic forecast for the remaining of the year:

□ 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)

USDX Technical Analysis

The US Dollar Index is still very strong but the resistance at 95.05 is strong too. This is the USDX daily (D1) chart:

USDX Technical Analysis

Free Forex Trading Signals: USDX May/June 2018Free 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.

Forex Trading Signals: EURUSD October-November 2017

Market: Foreign Exchange

Asset: EURUSD

It seems that the last quarter of 2017 is signaling a new macroeconomic era for the currencies of developed countries. This new era includes a significant monetary shifting towards the beginning of a global economic 'tapering'. First, let us evaluate our previous Forex Trading signal.

Evaluating Our Previous Trading Signal

In our previous trading signal (August 2017), we have forecasted a bearish US Dollar market, more specifically: “The USDX trend is clearly bearish. The key support area for USDX is NOT close. Currently, USD-X trades at 95.48, and the support zone commences at 90.80 (S1)”. Actually, the US Dollar Index slumped from 95.48 to below 91.00 very rapidly, founding support at about 90.95 points. The previous trading signal was confirmed.

EURUSD Outlook -Politics Run the Show, the Economy Plays Second Fiddle

Recently the Euro managed to climb to 1.209, which is its highest level since early 2015. After the German Elections and the unexpected rise of the extreme right, the Euro lost some of its gains. A Deutsche Bank Asset Management team argues that politics move currencies nowadays, not the economy, nor the interest rate differential. One thing is for sure, the currencies of developed countries are more sensitive to politics than ever.

Currently, the EURUSD pair is trading in a bearish trend that it will lead it probably at 1.148-1.144 (S1), but be aware that the last month of each year is a traditionally a bullish month for the EURUSD. Therefore, we expect the continuation of the bearish trend for a couple of weeks, and after, a strong reversal. Probably that will happen in late November.

EURUSD Technical Analysis and TCI Chart

The following EURUSD chart (D1) includes a TCI chart for the same period (October 2015 - October 2017). The Trading Center Indicator (TCI) is a Technical Indicator developed by TradingCenter.More About TCI

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