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RE: Wave Analysis by InstaForex

 
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RE: Wave Analysis by InstaForex - 1/2/2019 3:32:49 AM   
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RE: Wave Analysis by InstaForex - 1/2/2019 8:49:12 PM   
IFXGertrude

 

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GBP/USD. And again Brexit: the pound fell into the zone of turbulence

The situation in the foreign exchange market is changing rapidly: in the morning the pound-dollar pair showed a positive attitude, taking advantage of the weakness of the US currency – but in the second half of the day the British sharply fell throughout the market, testing the 25th figure paired with the greenback. It was followed by the euro, which was unable to hold local highs and hastily returned to December positions. After the New Year holidays, traders again remembered Brexit, the prospects of which are still very vague.

The immediate reason for the price collapse of the GBP/USD was the message that Theresa May is holding an emergency meeting of the cabinet ministers today, on the agenda of which there will be only one issue – preparation for a "hard" Brexit. Traders reacted anxiously to this news, although, in my opinion, today's situation should be considered from a slightly different angle.

The fact is that since the beginning of December, when Theresa May canceled the Brexit vote, the general mood among British parliamentarians has not changed. It would be possible to talk about any changes if Brussels went to a meeting and outlined the validity period of the backstop. But Europe refused, so the prime minister returned to London with nothing, refusing to even hold a press conference. May's behavior is quite understandable: after all, the Europeans not only refused her request, but even criticized her for the lack of structural elements. Brussels expressed bewilderment: what kind of "legal guarantees" can we talk about if the draft agreement already approved by the European Union and British ministers provides for consideration of this issue during the transition period?

In other words, over the past three weeks, the situation has not changed, whereas after two weeks the British deputies must render their verdict to the proposed deal. Theresa May still needs to consolidate the votes of not only her fellow party members (117 of whom voted for her resignation), but also find 10 more votes outside the Conservative Party. The task, to put it mildly, is not easy, so the prime minister needs to act "decisively and convincingly."

And apparently, May decided to play the "no alternative" card of the proposed agreement again. The previous attempt ended in failure: according to preliminary estimates, on the eve of December 11, the prime minister lacked a few dozen votes, which was the reason for the cancellation of the vote. Now the situation is somewhat different, so the prime minister will certainly try her luck again - especially since there are simply no other options.

Let me remind you that since around the end of September, May has been actively focusing on the catastrophic consequences of chaotic Brexit, recalling that the proposed deal is a single alternative to this scenario. This position was repeated by the European Union: according to the European side, the members of the Alliance will under no circumstances reconsider any points of the agreement reached. Speaking with a "united front", Brussels and London tried to convince members of Parliament that they have little choice: either they vote for the deal (with all its shortcomings), or let the country "derail", allowing a chaotic scenario.

But shortly before the key vote, the deputies began to discuss possible alternatives. Among them is the rejection of Brexit as such (the European court at the end of 2018 allowed such an option) or a new referendum. As a result, Theresa May's script has lost its trump card, which lay in the proverbial no alternative.

Why does May again begin to escalate the situation, "scaring" politicians with hard Brexit? The fact is that in late December, the leader of the British opposition, Jeremy Corbyn, disappointed supporters of the second referendum with his unexpected statement. He said that his party supports Brexit, but at the same time the Labour Party will try to change the terms of the deal if they win the early elections in 2019 (if they are held, of course). Thus, the probability of holding a second referendum has largely decreased, since now only small parties defend this idea, which are unable to change the situation as a whole.

Other proposed scenarios look too ephemeral to "compete" with the draft deal proposed by May. That is why in the coming days the situation will only escalate: supporters of the prime minister will, under any pretext, "scare" the public and politicians with catastrophic consequences of a hard Brexit. This strategy can persuade doubting MPs that a bad deal is better than a chaotic option – especially in the absence of clear alternatives.

Traders of GBP/USD, in turn, will have to be patient: the pound reacts sharply to any comments or events related to the prospects of the "divorce process". Therefore, the period of "panic" will be perceived by the British quite painfully. At the moment, the pair is heading to the nearest, strongest support level of 1,2505 (the lower line of the Bollinger Bands on the daily chart), where a corrective pullback may follow.

Analysis are provided by InstaForex


(in reply to IFXGertrude)
Post #: 302
RE: Wave Analysis by InstaForex - 1/3/2019 9:29:27 PM   
IFXGertrude

 

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EUR/USD. Friday's Jackpot: Nonfarm and European inflation

The foreign exchange market is experiencing a period of increased volatility, showing strong price impulses. The dollar/yen pair has passed more than 400 points in the last day, the pound/dollar – almost 150, the "kiwi" and "loonie" – about 100. In all cases, the dollar for some time significantly strengthened its position, but then just as rapidly fell throughout the market. This difference in mood is due to the changeable fundamental background, which is clearly confusing traders.

The fact is that the dollar last year (especially in the second half of it) actively enjoyed the status of a defensive instrument – even the negative events in the United States increased the demand for the greenback. The US currency had a powerful trump card in the form of the hawkish policy of the Fed, especially against the background of the uncertainty of the rest of the central banks of the leading countries of the world. Now the situation has changed somewhat: the problems in the US are still growing like a snowball, but the position of the Federal Reserve has softened significantly. The results of the December Fed meeting will "chase" the dollar for a long time, especially if the key US economic indicators show a decline in the first half of the year. Some representatives of the American regulator, who had recently voiced the "hawkish" position, added fuel to the fire. Now their rhetoric has changed significantly.

For example, the head of the Federal Reserve Bank of Dallas, Robert Kaplan, said today that the regulator should take a wait-and-see position for at least two quarters of 2019. The essence of his position boils down to the fact that the US-Chinese trade conflict has harmed not only the world economy and not only China – but also the United States. In view of this fact, he expects a slowdown in US GDP growth and inflation this year. The Fed, in his opinion, should react accordingly, so as not to aggravate the already precarious situation. Here it is worth recalling that in the autumn of last year Kaplan stated that 4 rounds of increase would follow to the neutral level of the rate (that is, the neutral level would be at the level of 3.25%). As we see, now his opinion has changed dramatically: now he stands for a six-month pause.

If the rest of the Fed members move to the "dovish" camp in the same way, the dollar finally loses its foothold. In this context, it is important to listen to Jerome Powell, who will speak at the economic conference tomorrow with his predecessors, Janet Yellen and Ben Bernanke. If the incumbent Fed chief also softens his rhetoric (or at least repeats the main points of the December meeting), the dollar index will continue its downward trend.

However, tomorrow is full of other events. First of all, we are talking about the Nonfarm, which can give an additional impetus to dollar pairs. According to preliminary estimates of experts, the number of people employed in the non-agricultural sector in December should increase by 180 thousand, while the unemployment rate will remain at the previous level of 3.7%. This is a good forecast, so if real numbers meet expectations, then the dollar will avoid another wave of sales.

But as shown today, experts can make a big mistake in their estimates: the American manufacturing index ISM, contrary to all forecasts, fell to the mark of 54.1 - this is the weakest result since September 2016. This unexpected result discouraged dollar bulls, after which the EUR/USD pair was able to return to the 14th figure for a short time. If tomorrow's Nonfarm will present a similar "surprise", then the market reaction will be more extensive.

Another important release on Friday is the dynamics of wages. The indicator of the average hourly wage in the USA has been fluctuating in the range of 0.1% to 0.3% (m/m) for a long time, although in annual terms the indicator has grown slightly (up to 3.1%). For EUR/USD bears, it is important that the indicator does not cross the zero line on a monthly basis and does not "dive" under the three percent mark in annual terms. This indicator is closely monitored by the Fed, so its negative dynamics will affect the position of the US currency.

Also, we should not forget that tomorrow the release of data on the growth of European inflation is expected. The consensus forecast suggests that the consumer price index will drop again - to 1.8%. Core inflation should remain at the same level - 1%. Any deviations from the forecast scenario will cause strong volatility - depending on the direction in which the pendulum will swing. The recovery of inflation indicators will inspire the bulls of the EUR/USD pair, as the chances of a rise in the ECB rate this year will increase. If the price pressure continues to weaken, the euro will be too vulnerable - even against the background of an uncertain greenback.

Analysis are provided by InstaForex

(in reply to IFXGertrude)
Post #: 303
RE: Wave Analysis by InstaForex - 1/10/2019 10:04:42 PM   
IFXGertrude

 

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GBP/USD: do not succumb to the illusions of growth

The pound/dollar pair is now extremely unreliable in the context of any forecasts – and in the short term, and even more so in the long term. The general weakness of the US currency can create the illusion of the northern trend of GBP/USD, but in this case it is absolutely impossible to focus on the dynamics of the dollar. "Cable "for two and a half years is completely subject to Brexit, so the vector of price movement here depends only on the fate of the "divorce process".

However, sometimes emotional news related to the prospects of the Federal Reserve's monetary policy still drowns out Brexit. One of those rare occasions happened yesterday. The resonant statement of the head of the Federal Reserve of Atlanta that the regulator can hypothetically reduce the interest rate coincided with the failure of the British parliament to vote for Theresa May's government. The GBP/USD pair remained in its positions (showing even the northern dynamics) only at the expense of the dollar that had sharply fallen throughout the market.

Although in reality there are no reasons for optimism among bulls of the pair, and there was no. Although in reality there are no reasons for optimism among bulls of the pair, and there is no.

On the one hand, the amendments adopted yesterday by British MPs do not entail any serious consequences - at least for today. Members of the House of Commons have adopted amendments to the tax law, thereby limiting the powers of the Cabinet of Ministers in this area in the event of the development of a "hard" Brexit scenario. Now the Ministry of Finance will not be able to change the amount of taxes (thus offsetting the negative effect of "hard" Brexit), if this step is not approved by the deputies. According to legislators, this rule will prevent the country's chaotic exit from the EU: "Now Theresa May must by all means reach a compromise solution with the European Union and the British Parliament," said Labour leader Jeremy Corbyn.

The logic of this law is to "force negotiations": as many politicians believe, Theresa May has largely conceded to Brussels, and now "frightens" the Parliament by the lack of any alternative to the agreement reached. The above norm, in the opinion of the deputies, will incline the prime minister to additional negotiations with the EU.

British MPs adopted another rule and is very significant of character. Parliament ordered the government to prepare a new Brexit plan if the members of the House of Commons do not vote on January 15 for the proposed draft deal. Moreover, ministers are obliged to present a "plan B" within three days after the failed vote. 308 of the 618 deputies of the lower house of Parliament voted in favour of the proposal, while 297 opposed the idea.

It is not even the essence of the adopted bills that is important here (although their content also speaks volumes) - yesterday's voting showed a preliminary political alignment in the Parliament. And apparently, it is clearly not in favor of "soft" Brexit. The results of the vote suggest that the majority of deputies in the House of Commons are opposed to leaving the EU without an agreement – May's opponents are not only among Labour and other opposition parties, but also among "their" conservatives.

Thus, the British prime minister's "saving strategy" seems to be a fiasco. Let me remind you that the local press this week discussed a possible scenario in which the Parliament approves the deal, but only if Brussels provides additional guarantees regarding the duration of the special regime on the Northern Ireland border. As you can see, the Parliament decided to go its own way, playing ahead. In addition, representatives of the European side also hurried to assure their British colleagues that they will no longer discuss the terms of the deal – under any conditions.

What are the options then? According to the majority of experts, there are not so many of them, or to be more precise, only two: either the prime minister will postpone the vote again, as it was in December, or she will postpone the country's exit from the EU for an indefinite period, using the decision of the European Court of Justice, which at the end of last year clarified the provisions of the 50th article of the Treaty of Lisbon. Both options are negative for the British currency, despite the fact that they save from the "hard" Brexit. The market is quite exhausted by the two-year period of uncertainty, so the prolongation of this regime will be bad news for GBP/USD bulls.

That is why the northern dynamics of the pair now looks unreliable and unconvincing. Long positions on the pair are too risky, especially on the eve of January 15, when a key vote in the British Parliament is to be held. If Theresa May takes one of the two decisions listed above at the weekend, the pound may collapse on Monday for several figures, as it was in mid-December. It will be possible to speak about the confident growth of the "cable" only when the "soft" Brexit becomes a reality – that is, when it receives the approval of the British parliamentarians.

Analysis are provided by InstaForex

(in reply to IFXGertrude)
Post #: 304
RE: Wave Analysis by InstaForex - 1/14/2019 8:33:02 PM   
IFXGertrude

 

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Brexit: Scenarios of the movement of the British pound. May, Tusk and Juncker exchanged courtesies

The euro fell in the first half of the day to the area of a minimum amid weak industrial production data, indicating the likelihood of a slowdown in economic growth in 2018. A further bearish trend in the EUR/USD pair gets more real.

Eurozone

According to the report, industrial production in the eurozone in November last year declined more significantly than expected. As noted in Eurostat, industrial production in the euro area fell by 1.7% in November compared with October. This is the biggest drop since February 2016. Economists had expected a decline in production of 1.3%. Germany, where production fell by 1.9%, and Spain, where the decline was marked by 1.6%, were among the leaders in countries where production was falling the fastest.

Thus, the decline in industrial production in many European countries only confirms the weakening of the global economy.

This was noted in today's report of the Organization for Economic Cooperation and Development, which states that the growth rates of the United States and many other developed countries will continue to slow down this year. The only exception may be the Chinese economy, which shows signs of stabilization. But even here, a lot will depend on the trade agreement with the United States.

According to the data, the leading indicator for the US fell for the third month in a row, being at the level of 99.6 points. China's indicator rose to 98.9 points, indicating a less active slowdown in economic growth. The leading indicator of the eurozone is below the level of 100 points, indicating a continued slowdown in the pace of activity.

As for the technical picture of the EUR/USD pair, it remained unchanged compared with the morning forecast. Buyers of risky assets need to go back to the resistance level of 1.1490 since the future direction will depend on it. If this fails to be done, then it is likely that the bears will continue to push the euro down to the support of 1.1425 and 1.1370.

UK and Brexit

The British pound continues its growth, which, apparently, is still more speculative. Traders positively perceived the information that the Prime Minister of Great Britain today sent a letter to Tusk and Juncker, in which she confirmed her intentions to carry out the decision made during the referendum. However, despite this, May is concerned about the fate of the Brexit deal, which is under threat due to concerns over Northern Ireland. The Prime Minister of Great Britain assured that the EU's concerns about the threat of a rigid border are groundless and negotiations will continue immediately after the vote in the UK. The focus of these negotiations will be on technology that will give up the guarantee of the absence of a rigid border.

In turn, Juncker and Tusk responded to May in the same style, sending her a letter with assurances regarding the Brexit deal, but adding that they would not agree to anything that changes the agreement or does not correspond to it. Juncker also noted that the EU will quickly work on a trade agreement in order to avoid applying the guarantee of the absence of a rigid border in Ireland.

All of these suggest that if the deal with the EU in the framework of a vote does not receive the support of parliamentarians tomorrow, the British pound may remain in the side channel until a final decision is reached since there are a lot of future development scenarios. Starting from the postponement of the exit of the UK from the EU, ending with indiscriminate exit without the adoption and approval of the basic laws.

The prospect of complete abolition of Brexit also has a place to be that will support the British pound when information appears about the next referendum on this matter.

Analysis are provided by InstaForex

(in reply to IFXGertrude)
Post #: 305
RE: Wave Analysis by InstaForex - 1/14/2019 9:58:54 PM   
IFXGertrude

 

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EUR/USD. Spotlight on China and Brexit

The economic calendar of the foreign exchange market is nearly empty today. Nevertheless, the most important release of the day caused quite a strong resonance among traders. We are talking about the publication of data on the state of China's foreign trade.

The importance of this indicator is due to the general concern of investors about the slowdown in the world economy. Any facts that somehow confirm this concern have a strong impact on the dynamics of trading – both in the currency and stock market. Today's figures once again reminded the market of the consequences of the trade war, which is still ongoing, despite the intention of the parties to conclude a broad deal.

On the one hand, the surplus of Chinese foreign trade was at an impressive level – the December figure came out at 57.1 billion dollars, reaching a three-year high. Immediately after the publication, the market was optimistic about these figures. But the structure of this release is frankly disappointed, as the performance of imports and exports showed weak dynamics, continuing the trend of slowdown. Thus, according to China's General Administration of Customs, exports from the country (in dollar terms) fell by 4.4% year-on-year. Imports fell more significantly-immediately by 7.6% year-on-year. In other words, Chinese exports and imports in the last month of last year showed the sharpest decline in two years.

According to experts, the lion's share of Chinese imports is imported into the country not for final consumption, but for further production of goods. That is, a significant decrease in imports is a wake-up call, which indicates the upcoming slowdown in the Chinese economy as a whole. According to preliminary data, last year the Chinese economy grew by only 6.6% - this is the lowest rate in the last 19 years. Naturally, such weak results of the second world economy in nominal GDP will provoke a "domino effect". In particular, at the end of last year, the head of Apple sharply reduced the forecast for revenue for the first quarter of 2019 – by 8 percent, that is, from 91 to 84 billion dollars. It is noteworthy that Apple has revised downward quite a fresh forecast: the target of 91 billion was set just two months ago. According to Tim Cook, the negative dynamics associated with the slowdown of the Chinese economy and the "tough" policy of the Federal Reserve.

The situation with Apple is just one example, which is the most recent and revealing. If the economic momentum of the PRC continues to lose its strength, such situations will be repeated more often, not to mention the slowdown of the commodity market with all the ensuing consequences.

A broad trade deal between the US and China could change this state of affairs – at least in the long run. But the parties are in no hurry to disclose the details of the latest negotiations, although the officials promised to publish them "in the near future". More than a week has passed since then, but the cart is still there. The very fact of such silence suggests certain thoughts, the essence of which is reduced to the presence of unresolved problems between Washington and Beijing. And although all this is still speculation, the overall situation in the market remains uncertain.

The EUR/USD pair also cannot determine the vector of its movement. The dollar index drifted at the base of 95 points, and the European currency is under pressure from the uncertain prospects of Brexit and negative data on the growth of industrial production in the eurozone. The indicator came out much worse than expected: year-on-year at – 3.3% (with a forecast of -2.2%), and month-on-month at –1.7% (with a growth forecast of 0.3%). In France, this figure subsided due to long-term protests of "yellow vests" in Germany – because of problems in the automotive industry, and a general decline in the entire industry was recorded in Italy.

Conflicting fundamental picture does not allow EURUSD to demonstrate a strong momentum, so traders have to bargain in a flat in anticipation of a strong infopovod. It is obvious that Brexit, or rather today's discussion of this issue in the British Parliament, will become such an occasion.

At the moment, it is known that the European Union has sent a written appeal to London, which assures the British that the subsequent negotiations in the transition period will avoid the use of the backstop mechanism. In the evening, during Theresa May's speech to the Parliament, we will learn the details of this letter, and so far the market is in limbo – and regarding the prospects of the "divorce process", and regarding the prospects of the US-Chinese trade conflict.

On the technical side, the EUR/USD bulls need to gain a foothold above 1.1530 to demonstrate their advantage. In this case, the Ichimoku Kinko Hyo indicator on the daily chart will form a bullish "Parade of lines" signal , increasing the probability of price growth to the borders of the 16th figure. If the general interest in the risk fades, the pair may already return to the average line of the Bollinger Bands indicator on D1, that is, to the level of 1.1410. A break of this level will send the pair to the lower boundary of the Kumo cloud, that is, to the level of 1.1350.

Analysis are provided by InstaForex


(in reply to IFXGertrude)
Post #: 306
RE: Wave Analysis by InstaForex - 1/15/2019 9:25:24 PM   
IFXGertrude

 

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EUR/USD: Italy, Draghi, Brexit

The foreign exchange market in anticipation of key events of today, month, and possibly - the year. The British Parliament will deliver its verdict on Brexit late tonight (and possibly late at night), so today's trading is cautious and quite volatile. In particular, at the beginning of the US session, the euro/dollar pair surprised traders with a downward impulse toward the founding of the 14th figure. Considering the fact that the pound was relatively calm at the same time, it was possible to conclude that Brexit had nothing to do with it.

Later it became known that the single currency reacted so keenly to the statements of the Italian prime minister, who criticized the European Central Bank. Italy again reminded of itself, although traders turned over this Chapter at the end of last year, when Rome and Brussels agreed on a budget, thus preventing a disciplinary procedure. However, now conflict situations have arisen in a somewhat different plane. The fact is that the ECB is seriously concerned about the state of the Italian banking sector, especially after a number of recent events. I recall that in early January, the European regulator took control of the tenth largest bank in Italy, Banca Carige. The European Central Bank has appointed three temporary administrators and a supervisory committee, thereby replacing the bank's board of directors.

And here it is worth noting that Banca Carige is one of the most troubled Italian banks, which was provided with assistance in the amount of 320 million euros from the Italian Interbank Fund last fall. But because of the frankly inept management and the conflict of shareholders, the bank failed to restructure and get rid of "bad" debts. The Fitch rating agency, in turn, lowered the bank's credit rating to CCC + with a negative outlook, while warning that Carige could go bankrupt. As a result, the Italian National Commission on Companies and Stock Exchanges ceased trading in bank shares, as the board of directors wereunable to reach an agreement on raising capital. This was the last straw for the majority of the members of the Board of Carige, after which the leadership was transferred to the temporary administrators appointed by the European Central Bank. By the way, after that, both Italian and German government bonds collapsed, putting significant pressure on the euro.

The above situation did not remain without consequences. Two weeks later, that is, today, the ECB demanded that Italian banks prepare reserves to cover the so-called "bad loans" for seven years. Italy's Vice Prime Minister Silvio Matteo "with hostility" took this demand, calling it "irresponsible." In his opinion, the European regulator demonstrates double standards and abuses its powers, using them for political purposes. He also noted that the central bank's intervention on banks which are "undesirable", can be an expensive cost for Italy- Matteo announced the amount of 15 billion euros. In addition, the Italian Deputy prime minister warned that the European regulator by its actions could provoke political and financial instability in the country.

Such harsh statements came as a complete surprise, so the single currency reacted accordingly. Mario Draghi, who spoke today in the European Parliament, added fuel to the fire. He said that the latest macroeconomic indicators turned out to be "much weaker" than forecasts, and this fact suggests that stimulating the economy through soft monetary policy is "still necessary."

He also said that the regulator will pursue an accommodation policy in the foreseeable future until inflation rises to the target level. Given the fact that inflation has recently shown only negative dynamics, it is not difficult to build an appropriate logical chain. In other words, the chances of an ECB rate hike within the current year are melting before our eyes, especially in the face of uncertain prospects for Brexit.

By the way, it was Brexit's question that put pressure on the pound and the dollar in the second half of today: and the closer the time to "X hour", the more volatility is expected in the market, and for no apparent reason. For example, the dollar index fluctuated without any enthusiasm throughout the day, but by the end of the day it soared up, although the producer price index in the United States and the Empire Manufacturing index were worse than expected (the last figure dropped to 1.5-year lows). The general nervousness of the market affects the dynamics of the US currency, although there are still no significant reasons for strengthening the greenback.

All this suggests that before a vote in the British Parliament, traders are best to take a wait-and-see attitude: events in London will have an impact not only on the pound or the euro, but also determine the mood of the entire foreign exchange market.

Analysis are provided by InstaForex


(in reply to IFXGertrude)
Post #: 307
RE: Wave Analysis by InstaForex - 1/16/2019 9:39:59 PM   
IFXGertrude

 

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GBP/USD. Results of the day. Cancel Brexit, Brexit transfer, new Brexit negotiations?

The amplitude of the last 5 days (high-low): 94p - 73p - 156p - 112p - 246p.

Average amplitude for the last 5 days: 136p (106p).

The British pound sterling on Wednesday, January 16th, is not moving. Traders, with such a feeling, do not know what to do next. On the one hand, yesterday, a fateful decision was made for Britain. On the other hand, the situation with Brexit did not become clearer. It only became clear that the UK is not exactly leaving the EU according to the Chequers plan. However, whether it will leave the European Union at all and under what conditions it is now is unknown. Today on the agenda in the British Parliament is the question of distrust of Theresa May, initiated by the leader of the main opposition party (Labour), Jeremy Corbyn. If the majority of deputies vote in favor, Theresa May will be dismissed. We believe that this is exactly what will happen. But again, it is not known how traders will react to this event. From our point of view, the resignation of Theresa May will give a chance for new negotiations with the EU, perhaps more productive and beneficial for the United Kingdom, as well as a chance for the country not to leave the EU at all. Thus, Theresa May's resignation could provoke ... the growth of the British currency. In any case, it is best to wait for the evening and find out how the debate in Parliament will end. Inflation, published today in the UK, did not cause any reaction from the market, as it corresponded to the predicted value - 2.1% y/y in December. In his speech today, the head of the Bank of England, Mark Carney, noted that the loss of Theresa May and the strengthening of the British pound means that markets believe in reducing the chances of a disorderly exit of the country from the EU.

Trading recommendations:

The GBP/USD currency pair remains in an upward trend on the eve of a new vote in the British Parliament. Once again, we do not recommend opening any positions in the current situation, as it is associated with increased risks. The pair can again be extremely volatile in the next few hours.

The same applies to sell orders. Any positions you can open, aware of the increased risks and always placing protective Stop Loss orders.

In addition to the technical picture, fundamental data and the timing of their release should also be taken into account.

Explanation of illustration:
Ichimoku Indicator: Tenkan-sen-red line. Kijun-sen – blue line.
Senkou span a – light brown dotted line.
Senkou span B – light purple dotted line.
Chikou span – green line.
Bollinger Bands Indicator:
3 yellow lines.
MACD:
Red line and histogram with white bars in the indicator window.

Analysis are provided by InstaForex


(in reply to IFXGertrude)
Post #: 308
RE: Wave Analysis by InstaForex - 1/17/2019 8:42:26 PM   
IFXGertrude

 

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EC and the United States: a new trade war between the EU and the USA is very close

The European currency again failed to gain a foothold above key resistance levels and began to gradually lose ground against the US dollar in the afternoon after the release of a good report on the US labor market, as well as before the publication of the report of the US Department of Commerce, in which the import of cars from the European Union will be important.

The trade war is gaining momentum.

It is expected that in the above report it will be clear whether US President Donald Trump will return to a protectionist policy towards the EU, since from an economic point of view, the import of cars is strategically important and can pose a threat to US national security. For example, last year tariffs on Chinese goods were introduced in this way.

Even today, EU authorities have imposed restrictions on the import of steel in order to combat the consequences of US trade policy, which makes it possible for the US president to verify the need for import duties on metals, which were introduced last year by the United States.

The European Commission said that the new measures involve the introduction of quotas on imports of 26 categories of goods, as well as 25% duty on imports in excess of this quota. This decision will take effect from February 4 and will replace the temporary solution, which was introduced in July 2018.

Today's data on inflation in the eurozone, as yesterday in Germany, fully coincided with the forecasts of economists, which is likely to force the European Central Bank to adhere to a wait-and-see approach at a meeting to be held next week. However, the main focus, of course, will be shifted towards the deterioration of the growth prospects of the European economy in 2019.

According to the statistics agency, the consumer price index CPI of the eurozone in December this year remained unchanged and year-on-year grew by 1.6%, fully coinciding with the forecasts of economists. The Core CPI core consumer price index, which does not take into account volatile categories, rose 0.5% in December compared to November and 1.0% year-on-year. The consumer price index of the eurozone excluding tobacco products in December was 1.5%.

The US labor market data provided some support to the US dollar. According to a report from the US Department of Labor, the number of initial jobless claims for the week from 6 to 12 January fell by 3,000 to 213,000. Economists had expected the number of applications to be 220,000.

Activity increased in the mid-Atlantic region of the United States in January. According to the Federal Reserve Bank of Philadelphia, the index of business activity rose to 17.0 points in January 2019 against 9.1 points in December, while economists had expected the index to reach 8.0 points in January. The report notes that companies remain optimistic for the next six months, with more than 46% of the companies surveyed expecting increased activity.

As for the technical picture of the EURUSD pair, the bears are trying to resume the downward movement in the market after an unsuccessful attempt of bulls to return to the game. The breakout of 1.1375 may lead to a larger decline in risky assets with the update of the lows of 1.1340 and 1.1310. In the case of another false breakout at 1.1375, the bulls may be willing to return, which will lead to a powerful upward momentum with a test and a breakthrough of the intermediate resistance of 1.1415 and the main goal of updating a high of 1.1450.

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Post #: 309
RE: Wave Analysis by InstaForex - 1/20/2019 10:26:48 PM   
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Technical analysis: Intraday level for USD/JPY, Jan 21, 2019

Today, Japan and the US will not release any economic data. So there is a probability the USD/JPY pair will move with a low to a medium volatility during this day.

TODAY'S TECHNICAL LEVEL:
Resistance. 3: 110.20.
Resistance. 2: 109.98.
Resistance. 1: 109.77.
Support. 1: 109.50.
Support. 2: 109.29.
Support. 3: 109.07. (Disclaimer)

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RE: Wave Analysis by InstaForex - 1/21/2019 9:53:37 PM   
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British Triangle: Tory, Whigs and Theresa May

Tonight (at about 15:30 London time) Theresa May will again try to convince the British Parliament to support her deal with Brussels. In anticipation of this event, the pound is behaving extremely cautious after a significant decline on Friday. At the end of last week, the pound slumped in a matter of hours by more than a hundred points, as the initial optimism was replaced by habitual pessimism. Today, the mood of traders has not improved: judging by the rhetoric of May's entourage, she does not intend to postpone Brexit's term, not excluding the "hard" scenario.

A new vote on the updated version of the agreement with the European Union will be held in the House of Commons on January 29. But here it is worth noting that the British can demonstrate increased volatility today, that is, until the key moment of the vote. The fact is that many market participants are worried that the government will only make superficial changes to the original version of the agreement, keeping the key points unchanged. Such fears are logically justified - for several days it is simply impossible to prepare an alternative deal, eliminating the positions agreed with the EU. This means that the transaction will retain its design, and all changes will be only of a formal nature.

According to most experts, Theresa May will present a new version of the resolution of the Irish border problem today. This issue is the main stumbling block that impedes the approval of the transaction. Having enlisted the support of the deputies, she will actually go to Brussels with an ultimatum: either the European Union will make concessions, or Brexit will follow the "hard" scenario, without concluding a deal. That is why May categorically rejects the option of postponing Brexit date - in this case, the whole point of the ultimatum of negotiations is lost.

According to available information, the British prime minister will propose to conclude a separate agreement between Britain and Ireland. In this document, the parties will fix the details and terms of the special border regime with Northern Ireland. By and large, we are talking about those legal guarantees from the EU, which have been talked about for so long in the British parliament. It is quite probable that the deputies of the House of Commons will support this scenario - however, it is absolutely impossible to count on the same support from Brussels. First, the Europeans initially stated that they would not revise the agreement reached. Secondly, the idea of London to conclude a bilateral agreement on the border has already been rejected by Ireland.

Therefore, even if the British deputies today support the above proposal of May, the pound can ignore this fact or even react with a decline - after all, this scenario is not viable, given the position of Brussels and Dublin.

But if the House of Commons supports the idea of extending the 50th article of the Lisbon Treaty, then the British currency can demonstrate a strong enough northern impulse. And although the Theresa May government is categorically against this option, this does not mean that it cannot be realized. The previous polls suggest that the prime minister's opponents can, in a fit of unity, take the necessary decisions, regardless of party affiliation.

For example, not only Labour, but some Conservatives also voted for amendments to tax legislation. More than 100 Conservatives voted against the original deal, in unison with the Labour Party. And this is not a complete list of situations when representatives of the Tories find agreement with representatives of Whigs And in this case, they can also vote in harmony, trying, on the one hand, to avoid the chaotic Brexit, and on the other hand, to force May to return to the negotiating table with Brussels.

There is one more scenario, in which the Parliament will gain control over the negotiation process. However, in the context of today, this scenario is unlikely - they can return to it in case of a failed vote on January 29.

Thus, today's statement by the prime minister in the British Parliament will not be formal. Moreover, the presented "Plan B" will make it possible to understand in what direction the subsequent events will develop - either the prime minister will rely on Brussels, or will nevertheless try to convince her party members.

In any case, Brexit continues to be the number one topic for the GBP/USD pair, so you should not focus on the release of tomorrow's data on the growth of the labor market in Britain. Published figures may provide temporary support for the pound (forecasts are mostly optimistic), but the initial reaction may be a trap. Representatives of the Bank of England have repeatedly stated that the prospects of monetary policy directly depend on the prospects of the "divorce process", so macroeconomic data in this context play a secondary role.

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RE: Wave Analysis by InstaForex - 1/22/2019 8:47:58 PM   
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A preview of the January meeting of the Bank of Japan

Tomorrow, the Bank of Japan will hold its first meeting this year. Traditionally, investors do not expect the Japanese regulator to take any action on the parameters of monetary policy: the central bank will continue to purchase bonds for 80 trillion yen a year, the interest rate on deposits will remain at the level of -0.1%, and the target yield of 10-year government bonds-at about 0%. There are no prerequisites for any radical actions on the part of the central bank now, so the main attention of traders will be focused on the press conference of Haruhiko Kuroda.

Here it is worth recalling that since the summer of last year, a form of "sword of Damocles" hangs over the yen. The fact is that then the Japanese central bank expanded the range of the estimated rate, thus admitting the likelihood of monetary policy easing. And although since then Kuroda has not voiced such intentions on a practical plane ("scaring" only traders with a hypothetical probability), this fact has a background pressure on the yen. It is obvious that the regulator has reserved this scenario for the future, if inflation trends become negative. And given the weak growth rates of wages and inflation, now there is every reason for concern: at the January meeting, traders may well hear hints of a possible reduction in the interest rate to -0.2%.

The fact is that consumer prices excluding the cost of fresh food (this is the main indicator of inflation monitored by the Japanese regulator) in December fell to 7-month lows, continuing a consistent decline. Thus, the Core Inflation Rate in September-October was kept at the level of 1%, while in November it decreased to 0.9%, and in December - to 0.7%. At each meeting, Haruhiko Kuroda recalls that inflation remains below the two-percent target, and achieving it "requires a larger time range than previously thought". However, in this case, it can respond to the current negative trend with sharper wording of the "dovish" character.

Weak growth rates of consumer spending against the background of the decline in the oil market have created fertile ground for reducing inflation. Although oil prices showed positive dynamics during the last month, this is clearly not enough to reverse the situation as a whole. Therefore, tomorrow Kuroda can voice soft rhetoric, thereby exerting pressure on the national currency.

Another intrigue of the January meeting of the Bank of Japan is the possible expansion of the range of fluctuations in yield on 10-year government bonds. According to some experts, the regulator will allow a decrease in profitability in the negative area. Let me remind you that last summer the Japanese central bank decided to limit the fluctuations in yield in the range of -0.2% to + 0.2%. The minutes of the last meeting showed that one of the members of the regulator proposed to expand this range, arguing that the stagnation in this issue will neutralize the positive effect of soft monetary policy in the context of inflation expectations. However, there is no unambiguous position on this issue among the members of the regulator: the members of the Board of Governors of the Bank of Japan disagreed, de facto keeping the parameters of monetary policy at the same values.

What to expect from Haruhiko Kuroda following the results of tomorrow's meeting? First, a "dovish" rhetoric. And although the market has long been accustomed to the soft position of the head of the Japanese central bank, tomorrow it may still surprise the market if it allows an interest rate reduction in the foreseeable future. Second, the regulator may lower its forecast for inflation and GDP growth this year. The probability of such a step is quite high, given the recent inflation trends. Thirdly, Kuroda can comment on the issue of a possible expansion of the yield fluctuation range on 10-year government bonds.

The rhetoric of the head of the Bank of Japan can put significant pressure on the yen, especially if it goes beyond the usual theses (and there are prerequisites for this). In this case, the USD/JPY pair can demonstrate a pulse growth to the first resistance level of 111.05 – this is the upper line of the Bollinger Bands indicator on the daily chart.

In general, from a technical point of view, the Ichimoku Kinko Hyo indicator currently demonstrates one of its strongest signals, the Golden Cross, in which the price fixed above the crossed lines of Tenkan-sen and Kijun-sen, while the Kumo cloud is still above the price chart . This signal indicates the upward direction of the pair. Also, the upward movement is confirmed by the location of the price between the middle and upper lines of the Bollinger Bands indicator, which began to narrow its channel. The support level is the Tenkan-sen line, which corresponds to 108.80. And the resistance level is the upper line of the Bollinger Bands indicator - the price is 111.05.

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RE: Wave Analysis by InstaForex - 1/23/2019 8:40:59 PM   
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The January meeting of the ECB: too dovish expectations may bring down the bears of EUR/USD

The euro/dollar pair this week shows almost no signs of life: any attempts to grow or decline are stopped at the root. The 14 figure is not available to the EUR/USD bulls, and the bears cannot hold the pair below the 1.1350 mark. Everyone is waiting for the main event of this week – the January meeting of the ECB, which will take place tomorrow. Mario Draghi will either knock out the single currency or give it a chance for a corrective recovery. Despite the general negative attitude, both options have a chance to live - to one degree or another.

The vast majority of experts are confident that the ECB head will take a very soft position tomorrow, given his previous rhetoric and the decline in key macroeconomic indicators. Indeed, last week, Draghi said that the incoming data is weaker than the ECB forecasts, and this fact confirms the feasibility of the accommodation policy. These words came amid the release of German data, which showed a slowdown in Germany's largest economy.

Thus, the German GDP index last year grew by only 1.5% - this is the weakest result in the last five years. For comparison - in 2017, this indicator was released at the level of 2.2%. Here again, we can talk about the echoes of the US-China trade war, since China is one of the main trading partners of Germany. Therefore, following the economy of China, the German economy is also declining. According to experts, the slowdown in Europe's largest economy will inevitably affect the growth dynamics in the rest of the EU countries and the eurozone as a whole.

Mario Draghi during his press conference may focus on this fact, especially against the background of slowing inflation and GDP in the eurozone. But in my opinion, the situation is not as critical as many try to present it. Indeed, despite the difficult conditions and the ongoing trade conflict between China and the United States, the German economy was able to avoid a technical recession and showed weak, but still growth. Of course, Draghi, in the course of his communication with journalists, may recall Germany in a negative context, but the text of the accompanying statement will surely contain a statement about balanced risks (and this is much more important for traders).

In general, too "dovish" expectations may bring down the bears of EUR/USD/. At the moment, the market does not expect any "hawkish" hints from Draghi - the general opinion is that the interest rate will not be increased until 2020, and this year the program of long-term financing will be resumed. The previous TLTRO program ends in the middle of next year, however, the banking sector will already need liquidity this year. As the minutes of the last meeting of the ECB showed, regulators raised this topic in December, so tomorrow Draghi can make clearer comments on this issue.

As for the prospects of interest rates, here Mario Draghi is unlikely to take a clear position. At the moment, there are too many uncertain factors that do not make it possible to talk about long-term prospects - neither in the context of "for", nor in the context of "against". Brexit, trade negotiations between Beijing and Washington, prospects for the Chinese/world economy, elections to the European Parliament, the dynamics of the oil market and ultimately the level of domestic consumer demand — these circumstances will not allow Draghi to think too far, assessing the possibility of tightening monetary policy. Most likely, he will disguise his answer with vague phrases that monetary policy will depend on incoming data, and it is not advisable to talk about this earlier this fall, given the trend of incoming data. By the way, such a position can play into the hands of EUR/USD bulls, as it does not exclude an increase in the interest rate in the framework of the current year, while the market has already "put up with" the reference point for 2020.

Thus, the totality of macroeconomic factors suggests that the regulator tomorrow will take a soft, but very "obscure" position. The ECB probably will not talk about shifting risk balances, keeping a waiting position until the next meeting, which will be held in March. In my opinion, the market is now too "twisted" by the fact that Draghi will voice too pessimistic estimates - if these expectations are not met, the European currency can get quite strong support.

In technical standpoint, the situation is as follows. The EUR/USD bulls need to break the mark of 1.1440 to confirm their dominance. In this case, the Ichimoku Kinko Hyo indicator will generate a bullish Parade of Lines signal, which will open the way to the top line of the Bollinger Bands indicator - the mark of 1.1525. The support level is at 1.1310 - this is the bottom line of the Bollinger Bands on the daily chart.

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RE: Wave Analysis by InstaForex - 1/24/2019 9:04:00 PM   
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ECB meeting: the bearish triumph did not work, but buying EURUSD is risky

Trading "on the news" is extremely risky - today traders could once again see this. The January meeting of the ECB turned out to be very intense, but the expected "bear triumph" turned out to be an illusion or, more simply, a trap.

The initial decline in EUR/USD to the bottom of the 13th figure was very reasonable. Mario Draghi began his press conference with a series of negative comments that did not bode well for the pair's bulls. First, he reiterated that the latest macroeconomic data turned out to be much weaker than the ECB's preliminary forecasts and in the short term this trend will continue. In his opinion, the root cause of such a dynamic is a decrease in external demand in the EU countries. First of all, of course, we are talking about Germany, which showed in last year's lowest growth of the economy over the last 5 years.

Secondly, Draghi recalled that the European Central Bank "has all the necessary tools" for regulating monetary policy and, if necessary, the central bank uses them. What kind of levers of influence are we talking about, the head of the ECB did not elaborate, however, even without this nuance, it became clear that if the downward dynamic of inflation continues, the regulator will apply retaliatory measures to soften its policies.

Third, Mario Draghi was rather pessimistic about Brexit's prospects. In his opinion, the uncertainty in this issue is growing, and the negative factors associated with the "divorce process" only exacerbate the difficult situation in the eurozone economy. "If the factors continue their impact, the economy will show a weakening over a longer period of time," said the ECB head. This is a fairly transparent allusion to the upcoming events to be held in the British Parliament next week. If the parties do not find mutual understanding and do not approve the deal, the uncertainty will have a negative impact on both the European economy and the British one.

Such a portion of the "dovish" comments pulled the EUR/USD to the mark of 1.1307, thereby attracting bears. However, literally in a few minutes the situation changed radically. During the question and answer period, Draghi not only offset the "dovish" mood, but also provoked a demand for a single currency throughout the market. First of all, the head of the ECB said that at the moment there are no grounds for implementing the next TLTRO program. According to him, this issue was discussed at the meeting, but no decision was made on it, and in general this topic requires a "good justification".

It should be noted that TLTRO is perceived by the market as one of the tools to mitigate monetary policy, so this position of Draghi played into the hands of the European currency. Although many experts warned that members of the regulator were still discussing the possibility of a new round of long-term lending programs in December. The previous TLTRO program ends in mid-2020, however, according to some economists, the banking sector may already need liquidity this year. Nevertheless, the central bank is not in a hurry with this issue, and this fact has supported the bulls of EUR/USD.

Afterwards, Mario Draghi made quite optimistic assessments in contrast to his initial statements. In his opinion, the growth rate of core inflation will accelerate in the medium term, given the positive dynamics of wages in the eurozone and the ECB accommodative policy. By the way, Draghi emphasized that in some EU countries full employment has been achieved, and the labor market continues to strengthen steadily. In addition, members of the regulator at the January meeting came to the unanimous opinion that the probability of a recession in the eurozone countries is close to zero. This thesis is consistent with the assessment of the prospects for the Chinese economy - according to "some members of the ECB" (Draghi did not specify exactly who we are talking about), the decline in the PRC economy will not last long, as "Beijing responds to all risks in a timely manner."

The final chord of the January meeting was the question of the prospects of the interest rate. Here Mario Draghi said that traders are laying in the current price of the first increase in early 2020: "...and this suggests that the markets understood us correctly," he added. However, the ECB at the end of the meeting said that it is not going to raise the rate "until the end of summer". And although the market did not receive a clear answer to the question – whether the rates will be changed within the current year – EUR/USD bears could not take advantage of this fact. Too "dovish" expectations of traders did not materialize, so they began to buy back the pair when approaching the bottom of the 13th figure.

In summary, it should be noted that now we should be especially careful with long positions on the EUR/USD pair. First, the dollar received support from the manufacturing PMI. Secondly, the demand for the US currency may increase due to ambiguous news about the US-China trade negotiations. Representatives of Beijing and Washington voice opposite theses – but if the risk of another failure increases, the dollar will rise in price throughout the market, and the EUR/USD pair will not be an exception.

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RE: Wave Analysis by InstaForex - 1/27/2019 10:21:14 PM   
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USD/JPY Approaching Support, Prepare For Bounce

The USD/JPY pair is approaching its support at 109.16 (61.8% Fibonacci extension, 38.2% Fibonacci retracement, horizontal overlap support) where it could potentially bounce to its resistance at 109.66 (61.8% Fibonacci retracement).
Stochastic (55, 5, 3) is nearing its support at 7.6% where a corresponding bounce could occur.
USD/JPY is approaching its support where we expect to see a bounce.
Buy above 109.16. Stop loss at 108.84. Take profit at 109.66.

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RE: Wave Analysis by InstaForex - 1/28/2019 8:32:20 PM   
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EUR/USD. The shutdown completed – but the dollar is no better

Late Friday night, the House of Representatives of the U.S. Congress unanimously supported the adoption of the provisional budget, and within hours, the US president signed a bill to stop the shutdown. However, they didn't put an end to this issue - this is a temporary "truce" that will last until February 15. During this time, congressmen and the White House must find a compromise on the allocation of additional funds for the construction of the wall on the border with Mexico. To date, this issue has remained in limbo.

The US currency actually ignored these events: the dollar index shows minimal growth, remaining within 95 points. Similarly, the euro/dollar pair behaves, which, although it has not conquered the 14th figure, but with enviable persistence, has been besieging this level for more than a week. Dollar bulls are still unable to reverse the situation on the pair due to the remaining problems.

According to American political analysts, it will be extremely difficult for the parties to find a common denominator in the migration issue, as Trump offers an unequal exchange: he promises to soften his position in the legislative field, while in return he requires $5 billion for the construction of the notorious wall. Therefore, with a certain probability we can say that the shutdown may have a relapse, especially in February, Republicans and Democrats will start another political battle – this time about the limit of public debt of the country.

The single currency is also under the burden of its problems – the data published last week from ZEW and IFO eloquently demonstrated the slowdown of key economic indicators in Europe, including Germany. ECB head Mario Draghi also did not present any surprises, keeping the "dovish" position on the prospects of monetary policy. After the January meeting of the regulator, the pair did not collapse just because traders expected softer rhetoric from the Draghi. However, he kept a certain balance, optimistic about the prospects for inflation in the eurozone. Therefore, instead of the expected fall, the EUR/USD pair showed an unexpected growth, however, the 14th figure was again too tough for bulls.

All this suggests that the tone of trading on the pair is set by the dollar, which, in turn, focuses on the political climate in the US, the position of the Federal Reserve and the US-China trade negotiations. All these factors, unfortunately, are now opposed to the US currency. The shutdown is only suspended for three weeks, while Republicans and Democrats are not ready to make concessions to each other. Do not forget that next November presidential elections will be held in the United States, so all the events taking place in Washington should be considered in this aspect as well.

The record for the duration of the shutdown strongly hit on the electoral positions of Trump - and the Democrats simply could not fail to draw the appropriate conclusions. Therefore, with a high degree of probability we can say that political conflicts will continue to shake the United States. By the way, at the end of last week, the former political adviser to the American president Roger Stone was arrested: he is accused, in particular, of putting pressure on witnesses, obstructing justice and giving false testimony (total of 7 counts). Since this is the sixth arrested adviser to Trump (though with the prefix "ex"), the American press started talking about the fact that the results of the investigation of US Special Prosecutor Robert Mueller can "hurt" the positions of the head of state.

As for the prospects of monetary policy, there is also no reason for optimism. First, many representatives of the Fed recently almost in unison stated that the regulator can "be patient" this year. It is expected that at the January Fed meeting Jerome Powell will confirm these "dovish" intentions. In addition, according to the American press, the US central bank plans to accelerate the process of reducing its balance sheet. This factor also has a background pressure of the greenback, considering all other circumstances.

The US-China conflict has also stopped fueling dollar growth, despite conflicting rumors about the failure of the negotiation process. So, representatives of Washington last week said that the parties are" too far " from progress. Earlier in the media, information emerged that the negotiations "stalled": the stumbling block was the issue of protecting the intellectual property of American companies. But against all odds, trade talks will resume again this week – this time in Washington. This news reduced the demand for defensive tools, including the US dollar.

Thus, the US currency is still under some pressure, which may increase following the results of the January Fed meeting. The events of the weekend did not change the general fundamental alignment of the pair, forcing traders to maintain a cautious position. The single currency, in turn, also has no arguments for growth, especially given tomorrow's Brexit vote. Thus, the EUR/USD pair is likely to fluctuate in the flat, waiting for powerful news drivers.

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RE: Wave Analysis by InstaForex - 1/29/2019 8:34:33 PM   
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January Fed meeting: what to expect and what to fear

Tomorrow is an important day for the dollar: we will learn not only the data on the growth of the US economy, but also listen to the head of the Federal Reserve, who will sum up the January meeting of the central bank. This year, Jerome Powell will hold press conferences after each meeting (rather than 4 times a year, as it was before), so traders will be able to get more coherent information about the sentiments of members of the Federal Reserve.

However, at the moment the situation is quite unambiguous. Now, Fed officials observe a 10-day regime of silence on the eve of the next meeting, but until that moment their rhetoric was exclusively "dovish" in character, to one degree or another. In particular, the head of the Federal Reserve Bank of Boston, Eric Rosengren, who for a long time was a consistent hawk, suddenly announced that at the moment there are "potential threats" to tighten monetary policy, given the incoming signals from the markets. His colleague James Bullard, who also has the right to vote this year, again stated that the stakes are now "at an acceptable level" and there is no need to adjust them. The break in the rate increase was also supported by Esther George (he has the right to vote), who was rightly called the "main hawk of the Fed." According to her, the regulator must be patient in raising the rates, "to avoid overheating and prolong the growth of the economy."

Another Fed official, Charles Evans, is concerned about the slowdown in inflation. According to him, now there are no signs that core inflation will cross the 2% target level, so it is not necessary to rush into tightening monetary policy. But at the beginning of this year, Raphael Bostic implied a probability of easing monetary policy. However, he then somewhat adjusted his position (speaking for a smooth rise in the rate to a neutral level), but his initial statement fits very well into the outline of the general sentiments of the members of the regulator.

Given this soft rhetoric, traders do not expect any "hawkish" surprises from the Fed. According to some experts, the probability of a rate increase until June of this year is only 19%. According to estimates by another group of analysts, the regulator will take a wait-and-see position at least until January next year.

On the one hand, the market has already taken into account in current prices a likely dovish Fed meeting. But on the other hand, a certain intrigue of the January meeting remains. We are talking about reducing the rate of folding the Fed's balance sheet. This issue is discussed at the level of rumors, as representatives of the regulator practically do not comment on the perspectives of this aspect. According to many experts, the reduction of the portfolio will be one of the main causes of volatility for the EUR/USD pair, exerting a strong downward pressure on the dollar.

Let me remind you that the Fed began to reduce the volume of investments by Janet Yellen - at that time this volume was 4.5 trillion dollars. Their reduction began with a "modest" $10 billion, then this figure rose to 50. This fact is a strong source of irritation for Donald Trump, who is in favor of both reducing the rate of monetary tightening and early completion of the balance reduction program. And although the Federal Reserve declares its independence from the White House on a public plane, de facto, the regulator still listens to Trump's "wishes". It should immediately be noted that the Fed is unlikely to announce the suspension of the balance reduction - but it may hint at a decrease in its pace.

So, according to the American press, the regulator is ready to state that in the end it will keep more securities in its portfolio than previously planned. However, insider sources disagreed as to whether it will be announced at the January meeting or at the next one, which will be held in March. The fact is that because of the shutdown, many key macroeconomic indicators will be published after the January meeting, so the Federal Reserve can wait a bit with loud statements, assessing the situation in the country's economy. Therefore, the intrigue in this matter remains, putting pressure on the dollar. If concerns about the Fed's balance sheet are not justified at this time, the greenback can receive significant support, even if the prospects for a rate hike remain questionable.

Now a few words about macroeconomic statistics. Tomorrow, a preliminary estimate of US GDP growth for the 4th quarter of last year will be published. According to the general forecast, the indicator will significantly decrease to 2.6%. In the second and fourth quarters, this indicator came out at 4.2% and 3.4%, respectively. The price index of GDP should also show a negative trend - up to 1.7%.

On the one hand, all the attention of the market tomorrow will be focused on the outcome of the January Fed meeting. But if the worst fears of investors are realized, then the fact that the American economy slows down will play the role of the "last drop", pulling down the dollar throughout the market. The nearest upward target of the euro/dollar pair is at the level of 1.1525 - this is the top line of the Bollinger Bands indicator on the daily chart. The support level is the price of 1.1380 - the lower boundary of the Kumo cloud.

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RE: Wave Analysis by InstaForex - 1/31/2019 8:26:18 PM   
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USD/CAD. The loonie ignored a weak GDP, but is waiting for news from China

Canadian economic growth slowed again: on a monthly basis, GDP fell to a negative area and reached -0.1% in November. In annual terms, the indicator also fell, however, was still in the "green zone": with a growth forecast of 1.6%, the indicator rose to 1.7%, while in October the growth was more significant – 2.2%.

In response to this release, the USD/CAD pair moved away from annual lows (that is, from the level of 1,3119), but the further upward dynamics was questionable. The "loonie" remains in the area of multi-month lows - the last time the pair was at the bottom of the 31st figure in November last year. If we ignore the intraday dynamics, we can say that traders actually ignored today's release, focusing on other fundamental factors.

This reaction is explained quite simply: the market was ready to slow down the Canadian economy – this was said by many experts, this was warned by the head of the Bank of Canada at the end of the last meeting. In monthly terms, the indicator fully coincided with the forecast, and in annual terms – slightly exceeded pessimistic expectations. Therefore, against the background of other events, this release did not act as a catalyst for volatility on the pair – traders showed only a formal reaction, which is unlikely to have any significant continuation.

The limiting factor was the oil, which again went up after the announcement of the results of the January Fed meeting. A barrel of Brent crude oil is now trading around 62 dollars, showing a positive trend. And the weak US dollar cannot afford to seize the initiative in the USD/CAD pair: in my opinion, the market has not fully realized the negative consequences of yesterday's meeting of the Federal Reserve. By and large, the regulator has announced a protracted pause in raising interest rates – and no one knows how long this period will be.

According to most analysts, if the key indicators of US inflation continue to show vague dynamics, the regulator may "be patient" until next year. However, even the most optimistic scenarios assume one rate hike - approximately in October or December of the current year. Therefore, the large-scale growth of the USD/CAD pair can be caused either by a significant weakening of the Canadian dollar, or by the failure of the US-China trade negotiations.

As for "internal" factors, the USD/CAD bulls have nothing to count on. On the one hand, at its January meeting, the Bank of Canada lowered its forecasts for the growth of the country's economy in 2019 (from 2.1% to 1.7%). But, on the other hand, it retained a "hawkish" attitude, to talk about their future plans. The head of the Central Bank, Stephen Poloz, said that the interest rate should eventually grow to a neutral value so that the inflation rate would be in the "necessary range." Given the fact that the latest data on GDP growth came out at a predictable level, the Canadian regulator is unlikely to change its position on this issue. The only question is when exactly the Central Bank will decide on another round of rate increase.

The next meeting of the central bank is scheduled for March 6, while most experts are inclined to believe that the rate will be raised at the April meeting (April 24). By and large, the monthly time gap does not play any role in this context, especially since the market expects another rate increase before the end of this year. In other words, the Canadian regulator is still heading for the normalization of monetary credit policy, in contrast to the Federal Reserve, which yesterday announced a pause in this matter.

Thus, internal fundamental factors will not be able to reverse the downward trend for the USD/CAD pair. But the situation with the external fundamental background looks a bit more complicated. Indeed, oil quotes are rising - the cost of Brent and WTI has increased by almost 20% since the beginning of the year, giving support to commodity currencies. However, the shadow of the trade war puts pressure on traders - if the current negotiation process ends in failure, the oil quotes will go down and the dollar, on the contrary, will gain momentum using the status of a safe-haven asset.

At the moment there is no unambiguous information about the two-day negotiations. Trump, using his usual way of communication - Twitter - stated that "good intentions and a positive attitude are felt on both sides". He also confirmed that he will meet with the head of the Chinese delegation in the Oval Office today. But then he somewhat tightened his tone, causing a certain alarm in the markets.

First, he stated that a deal could be concluded only after a personal meeting with Xi Jinping, since he needed to discuss "difficult issues" with him. Secondly, Trump delivered a new ultimatum: he said that China should open its markets not only to financial companies, but also to companies in the industrial, agricultural and other sectors. Beijing has not yet responded to these statements - it is likely that the reaction will follow after the return of the Chinese delegation to their homeland. But in general, the situation remains "in the balance": if the parties fail in negotiations, as early as March 1, the trade war will begin with a new force, and the US dollar will receive a reason for its growth.

That is why the expediency of short positions on the USD.CAD pair depends on the outcome of the US-China negotiations. If, in spite of everything, the parties parted on a positive note, the downward impulse of the loonie can be continued with the first target at around 1.3060 (the upper limit of the Kumo cloud on the weekly chart).


News are provided by InstaForex


(in reply to IFXGertrude)
Post #: 318
RE: Wave Analysis by InstaForex - 2/3/2019 10:38:20 PM   
IFXGertrude

 

Posts: 496
Joined: 8/15/2014
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NZD/USD Approaching Support, Prepare For Bounce

NZD/USD is approaching its support at 0.6860 (61.8% Fibonacci extension, 23.6% Fibonacci retracement, horizontal pullback support) where it could potentially bounce to its resistance at 0.6936 (horizontal swing high resistance).
Stochastic (55, 5, 3) is nearing its support at 1.65% where a corresponding bounce could occur.
NZD/USD is approaching its support where we expect to see a bounce.
Buy above 0.6860. Stop loss at 0.6796. Take profit at 0.6936.

Analysis are provided by InstaForex


(in reply to IFXGertrude)
Post #: 319
RE: Wave Analysis by InstaForex - 2/5/2019 9:24:30 PM   
IFXGertrude

 

Posts: 496
Joined: 8/15/2014
Status: offline
EUR and GBP: Indices for the services sector in many countries are declining, putting pressure on the economy

The euro has once again dropped against the background of data in which stagnation is noted in the economies of Italy and France. Only the prospect of growth in the German economy keeps the EURUSD from a larger downward movement.

According to today's report, the Purchasing Managers Index (PMI) for the eurozone services sector remained unchanged in January of this year and amounted to 51.2 points against 51.2 points in December last year. Economists had expected the PMI for the eurozone services sector to drop to 50.8 points. The eurozone composite PMI fell to 51.0 points in January against 51.1 points in December.

Let me remind you that the index value above 50 points indicates an increase in activity.

The above figures for the euro area were mainly saved due to data on the PMI purchasing managers index for the services sector in Germany, which in January of this year rose to 53.0 points, whereas in December the PMI was 51.8 points.

This is where the good news ends. In France and Italy, similar figures continue to be below 50 points, dropping lower and lower, indicating a decline in activity, which will negatively affect the prospects for economic growth in the first quarter of this year.

According to the report, the Purchasing Managers Index (PMI) for France fell to 47.8 points in January against 49.0 points in December. In Italy, the same indicator for the service sector also turned out to be below 50 points and amounted to 49.7 points.

As a result of such weak data, the euro continued its decline against the US dollar, gradually approaching the support level at 1.1400.

The British pound broke through the next weekly lows and continued to decline after the release of weak data on the services sector. All this, of course, may affect the statements of the Bank of England after the decision on interest rates, which will be known this Thursday.

According to the report, PMI for the services sector fell to 50.3 points in January of this year, which is a low of two and a half years. These data once again confirm the concerns associated with Brexit and uncertainty, which negatively affects the economy.

As for the composite index PMI, in January it dropped to 50.1 points from 51.2 points in December. Economists had expected the index to be 51.5 points in December.

The Australian dollar rose today in the morning after the Reserve Bank of Australia left the key interest rate unchanged at 1.50%, but said it had good prospects for the future.

The RBA believes that downside risks for the global economy have increased, but the current monetary policy is consistent with sustainable economic growth.

Annual inflation is expected to return to the target range from 2% to 3%, while Australia's GDP growth is projected at 3% this year. As for unemployment, it can be reduced to 4.75%.

Analysis are provided by InstaForex


(in reply to IFXGertrude)
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