Analyst Picks

James Stanley , Currency Strategist

James Stanley
My Picks:  GBPUSD, EURUSD, USDCHF, USDJPY
Expertise:  price action - macro
Average Time Frame of Trades:  few days - few weeks

FX Setups for the Week of February 18, 2019

- DailyFX Quarterly Forecasts are available directly from the following link: DailyFX Trading Guides, Q1 Forecasts.

- For trading ideas, please check out our Trading Guides. And if you’re looking for something more interactive in nature, please check out our DailyFX Live webinars.

- If you’d like more color around any of the setups below, join in our live DailyFX webinars each week, set for Tuesday and Thursday at 1PM Eastern Time. You can sign up for each of those sessions from the below link:

Tuesday: Tuesday, 1PM ET

Thursday: Thursday 1PM ET

Do you want to see how retail traders are currently trading the US Dollar? Check out our IG Client Sentiment Indicator.

Next week brings a US market holiday on Monday, and after that markets will face a relatively quiet economic calendar with only a handful of high-impact events. This will be prime opportunity for US Dollar bulls to show their hands, as the post-FOMC run in the currency has driven prices higher throughout the month of February. Below, I look at a series of setups on either side of the US Dollar with the aim of devising strategy for the week ahead.

Bearish GBP/USD Biases on Hold Below 1.2960

The fundamental backdrop around the British Pound remains very unclear on a number of issues, key of which is a very uncertain backdrop around Brexit. And while volatility has become a bit more commonplace in the British Pound, traders will likely want to continue to focus on shorter-term approaches, looking for swing trades off of support or resistance levels with the aim of limiting the amount of time exposed to swings and turns in GBP.

This week marked a continuation of GBP/USD’s reversal of January strength. After the currency perched above the 1.3200 level three weeks ago, sellers have re-grasped control; and this week was marked by a continuation of lower-lows and lower-highs in the pair. Along the way, a big support zone that runs from 1.2828-1.2850 was taken-out after a quick bounce set a weekly swing high at 1.2959. This can keep focus on a deeper support zone that runs from 1.2671-1.2735. On the resistance side of the coin, the 1.2920 level remains of interest, as this is the 38.2% retracement of the January move, and this is a level that offered a bit of support when prices in the pair were on their way down, as looked at last week.

GBPUSD Four-Hour Price Chart

gbpusd gbp/usd four hour price chart

Chart prepared by James Stanley

Bearish USDCHF: Reversal Potential on Hold Below 1.0100

It’s been an abnormal week in USDCHF that started off in a peculiar manner. Shortly after the open of this week’s trade, a ‘mini flash crash’ showed in the Franc, and that propelled prices in USDCHF up to the 1.0096 resistance level, albeit temporarily. After prices pushed back to parity, the rest of the week saw buyers push prices back up to 1.0096, with sellers continually furnishing supply to hold resistance at this level.

USDCHF Two-Hour Price Chart

usdchf usd/chf two hour price chart

Chart prepared by James Stanley

At this stage, a continued hold of resistance in this area can keep the door open for reversal strategies in the pair. I had looked at this market in the Thursday webinar, and that theme remains as resistance has continued to hold in this area. Traders looking for short-side USD strategies or for those playing a reversal of the bullish move in USDCHF, a return to parity could remain as a targeted objective, after which break-even stops could be utilized to look for a deeper reversal move.

USDCHF Weekly Price Chart

usdchf usd/chf weekly price chart

Chart prepared by James Stanley

Bullish EURUSD on Hold Above 1.1215

This is somewhat related to the above theme in USDCHF, as EURUSD remains very near a longer-term support zone that’s, at least thus far, proving difficult to break. This support zone first came back into play in November of last year; and it’s held multiple tests in the four months since.

EURUSD Eight-Hour Price Chart

eurusd eur/usd eight hour price chart

Chart prepared by James Stanley

On a near-term basis, selling has started to slow as the bottom of that zone has come closer, and this has led into a shorter-term falling wedge pattern. This will often be approached with the aim of looking for bullish reversals, as the evidence of sellers slowing at the lows may prelude and eventual shift in order flow. This can keep the door open for the longer-term range pattern in the pair to fill-in, with stops investigated below support and initial targets set to the mid-point of the recent range or higher.

EURUSD Hourly Price Chart

eurusd eur/usd hourly price chart

Chart prepared by James Stanley

Bullish USDJPY on Hold Above 109.67

This week saw USDJPY breakout from a big zone of resistance that runs from 109.67-110.00. That resistance zone first came back into play just a couple of weeks into the New Year, showing a stark contrast to the selling in the pair that populated the first few days of USDJPY trade in 2019. But, after almost a month of resistance tests in that area, buyers pushed up to fresh highs shortly after this week’s open, and that theme has remained prominent ever since.

This morning saw a quick pullback to a short-term support level at 110.30, and that has held thus far. But the pair may need a bigger pullback before the longer-term bullish trend is ready to continue, and a support test at that prior zone of well-defined resistance can open the door for such a theme.

USDJPY Four-Hour Price Chart

usdjpy usd/jpy four hour price chart

Chart prepared by James Stanley

To read more:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts have a section for each major currency, and we also offer a plethora of resources on USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.

Forex Trading Resources

DailyFX offers a plethora of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

--- Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

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Paul Robinson , Market Analyst

Paul Robinson
My Picks:  Bearish AUDNZD
Expertise:  Technical
Average Time Frame of Trades:  Several days to several weeks

Struggling right now? It happens to the best. Check out these four core ideas to help boost your Confidence as a Trader.

AUDNZD trading bias is for more weakness, in-line with macro breakdown

AUDNZD was stuck in a narrowing trading range (wedge) from early 2015 up until it broke in December. The break was initially clean, but then the Jan 2 flash-crash put a bit of a wrinkle into the short-term outlook. Since then we’ve seen a ‘repairing of the chart’ and retest and failure of the underside trend-line of the long-term wedge, further confirmation of the breakdown in December.

This has the broader forces in favor of shorts and if the wedge is to fully play out then this will be the case for quite some time. With that in mind, looking for shorter-term bearish set-ups should put one in-line with the path of least resistance.

Looking for Trading Forecasts and Education to assist you in your trading? We’ve got you covered on the DailyFX Trading Guides page.

AUDNZD Weekly Chart (Wedge broken, big-picture bias is lower)

AUDNZD weekly chart, wedge broken, big-picture bias is lower

NZD’s rip yesterday took out the corrective price action in AUDNZD we’d been discussing in recent webinars, also pushing it below most of the lows since December. Staying below the thicket of lows up to around 10470 keeps pressure on the pair in the near-term. It will be important for price to stay below this week’s high of 10546 to maintain a clean bearish bias. Initially, the first target will be the flash-crash low at 10192, but ultimately looking for a move to the 2015 low just above parity and worse.

AUDNZD Daily Chart (Near-term support breaking)

AUDNZD daily chart, near-term support breaking

***Updates will be provided on these ideas and others in the trading/technical outlook webinars held on Tuesday and Friday. If you are looking for ideas and feedback on how to improve your overall approach to trading, join me on Thursday each week for the Becoming a Better Trader webinar series.

Resources for Forex & CFD Traders

Whether you are a new or experienced trader, we have several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at@PaulRobinsonFX

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David Song , Currency Analyst

David Song
My Picks:  Bearish EUR/USD
Expertise:  Fundamental and Technical
Average Time Frame of Trades:  2 - 10 Days

EUR/USD remains under pressure even though a growing number of Federal Reserve officials endorse a wait-and-see approach for monetary policy, and fresh data prints coming out of the euro-area may shake up the exchange rate as Germany, Europe’s largest economy, is expected to avoid a technical recession.

Image of DailyFX economic calendar

The updated Gross Domestic Product (GDP) report is anticipated to show Germany growing 0.1% in the fourth-quarter of 2018 after contracting 0.2% during the three-months through September, and a positive development may curb the recent decline in EUR/USD as it instills an improved outlook for the monetary union.

Image of ecb interest rate

It remains to be seen if the European Central Bank (ECB) will alter the forward-guidance later this year as euro-area interest rates are ‘to remain at their present levels at least through the summer of 2019,’ and the Governing Council may stick to the same script at the next meeting on March 7 as ‘the incoming information has continued to be weaker than expected on account of softer external demand and some country and sector-specific factors.’ In turn, a below-forecast GDP report coming out of Germany may drag on the Euro as it encourages President Mario Draghi & Co. to retain the zero-interest rate policy (ZIRP) beyond 2019, with the exchange rate at risk of making a run at the 2018-low (1.1216) as it snaps the yearly opening range. Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss potential trade setups.

EUR/USD Daily Chart

Image of eurusd daily chart

The advance from earlier this year has unraveled following the failed attempt to trade back above the 1.1510 (38.2% expansion) hurdle, with the break of the January-low (1.1289) raising the risk for a run at the 2018-low (1.1216). In turn, the 1.1220 (7.86% retracement) area sits on the radar, with a break/close below the stated region opening up the next downside hurdle around 1.1140 (78.6% expansion).

For more in-depth analysis, check out the 1Q 2019 Forecast for the Euro

Additional Trading Resources

Are you looking to improve your trading approach? Review the ‘Traits of a Successful Trader’ series on how to effectively use leverage along with other best practices that any trader can follow.

Want to know what other currency pairs the DailyFX team is watching? Download and review the Top Trading Opportunities for 2019.

--- Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.

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Dimitri Zabelin , Junior Currency Analyst

Dimitri Zabelin
My Picks:  Bearish AUD/JPY
Expertise:  Global Political Economy
Average Time Frame of Trades:  1-6 Months

AUD/JPY TALKING POINTS – RBA, GLOBAL GROWTH, TRADE WARS

  • AUD/JPY aiming for 78.691?
  • Global risks to weigh on AUD
  • Dovish RBA pushes Aussie down

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

AUD/JPY FUNDAMENTAL ANALYSIS

AUD/JPY has been trading between 77.735-78.217 since the RBA announced it will maintain the benchmark rate at 1.50, just a few hours before Governor Philip Lowe delivered a speech in Sydney. Domestic and international risks shifted the central bank’s outlook to now having a more balanced approach. The following is an excerpt from the Governor’s speech:

‘Over the past year, the next-move-is-up scenarios were more likely than the next-move-is-down scenarios. Today, the probabilities appear to be more evenly balanced’.

Forecasts for economic growth in 2019 and 2020 were revised down with the central bank keeping a close eye on falling house prices and rising household debt. The Australian Dollar responded accordingly and fell through several resistance levels and is now attempting to re-enter its previous trading range.

AUD/JPY – Daily Chart

Chart Showing AUD/JPY

This comes as economic news flow out of Australia has been underperforming relative to economists’ expectations since early December according to the Citi Economic Surprise Index. Forecasts of slower global growth, uncertainty over trade wars and weakness in China, combined with greater political economy risks in Europe may continue to weigh on major economic indicators as international risk appetite fades.

AUD/JPY May Struggle to Breach and Sustain Movement Above 79.055

All of these factors will likely cool RBA rate hike expectations and pressure the central bank to maintain a monetary policy conducive for countering a downturn in the business cycle. Looking ahead, this week there are not many market-moving data releases coming out of Australia or China. The following week, however, has a little more in store, particularly on Thursday:

AUD/JPY May Struggle to Breach and Sustain Movement Above 79.055

AUD/JPY TECHNICAL ANALYSIS

AUD/JPY for the time being has been trading between 77.735-78.217 but is struggling to make it past the upper bound. The pair might flirt with 78.691, but in order to gain sufficient momentum to reach past 79.055, key economic indicators have to outperform forecasts by a significant margin. The recent trend in data suggests that such an outcome does not look very likely.

AUD/JPY – 1-Hour Chart

Chart Showing AUD/JPY

It also important to remember, that if the pair manage to break above 79.055, while encouraging for Aussie bulls, it is important to look at the bigger picture. Since January 2018, the Australian Dollar has fallen 12 percent against the Japanese Yen. It is unlikely that in the near future the fundamental outlook will shift so dramatically that it will reverse the broad downward trajectory.

AUD/JPY – Daily Chart

Chart Showing AUD/JPY

AUD/JPY TRADING RESOURCES

--- Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter

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James Stanley , Currency Strategist

James Stanley
My Picks:  USDCAD, USDJPY
Expertise:  price action, macro
Average Time Frame of Trades:  few days - few weeks

FX Setups for the Week of February 11, 2019

- DailyFX Quarterly Forecasts have been updated for Q1, and are available directly from the following link: DailyFX Trading Guides, Q1 Forecasts.

- For trading ideas, please check out our Trading Guides. And if you’re looking for something more interactive in nature, please check out our DailyFX Live webinars.

- If you’d like more color around any of the setups below, join in our live DailyFX webinars each week, set for Tuesday and Thursday at 1PM Eastern Time. You can sign up for each of those sessions from the below link:

Tuesday: Tuesday, 1PM ET

Thursday: Thursday 1PM ET

Do you want to see how retail traders are currently trading the US Dollar? Check out our IG Client Sentiment Indicator.

US Dollar Bulls Continue to Run

It was a big week for US Dollar bulls after the currency set a higher-low last week after the FOMC rate decision. Buyers have remained in-control for much of the time since, and already USD is making a fast approach towards the 2019 high around the 97.00-handle. A pullback that developed this week off of monthly highs was stopped short, with buyers returning to show support around the 96.47 level, which is the 23.6% Fibonacci retracement of the post-Election move in DXY.

For next week, the economic calendar brings high-impact US data on Wednesday (CPI) and Friday (Advance Retail Sales, U of Mich Consumer Sentiment). This can help to keep the Dollar’s recent bullish trend in-focus, and below I look at two setups designed for next week based around the US Dollar.

US Dollar Four-Hour Price Chart

us dollar usd four hour price chart

Chart prepared by James Stanley

Bullish USDJPY on a Top-side Break Through 110.10

It’s already been a busy year for USD/JPY. The Japanese Yen came into the year with a significant surge of strength, with USD/JPY jumping all the way down below the 105.00 psychological level after trading above 111.00 just a week earlier. But calm soon prevailed and Yen-sellers returned, helping the pair to recover.

The 109.67-110.00 resistance zone looked at last month soon came back into play. This area held three separate topside advances in the month of January, and as the door opened into February, 110.00 continued to help hold the highs in the pair. As looked at in yesterday’s webinar, a range had even developed within that resistance zone, indicating the bulls are continuing to persist despite the continued defense of 110.00 from sellers.

A topside break through this zone next week, with prices pushing up to fresh two-month highs can re-open the door to bullish strategies in the pair. The past month-plus of price action has built in an ascending triangle formation on the chart; which will generally be approached in a bullish manner with the expectation for the motivation that’s brought bulls in at higher-lows to eventually take out the horizontal resistance that’s held the highs.

Next possible areas of resistance following a break to fresh highs would be 110.86 (61.8% Fibonacci retracement), 111.40 (late-December swing-highs) and 112.34 (76.4% Fibonacci retracement.

USD/JPY Four-Hour Price Chart

usdjpy usd/jpy four hour price chart

Chart prepared by James Stanley

Bearish USDCAD on Hold Below 1.3326

It was a busy week in USD/CAD, as the pair firmed after last Friday’s support inflection at the 1.3066 Fibonacci level. As Oil prices dropped, CAD weakened, and this propelled prices in USDCAD back-above the 1.3300 handle in this week’s trade, albeit temporarily. Canadian employment numbers on Friday morning brought a bit of strength back into the currency, but USD/CAD sellers were thwarted at the support zone looked at in yesterday’s webinar that runs from 1.3235 up to 1.3259.

Taking a step back, should resistance hold at this morning’s highs, this would open the door for a continuation of the lower-lows and lower-highs that printed in the pair throughout this year. This can keep the door open for bearish strategies with the next potential areas of support around 1.3180, 1.3132, 1.3065 and then the psychological level of 1.3000.

USDCAD Eight-Hour Price Chart

usdcad usd/cad eight hour price chart

Chart prepared by James Stanley

To read more:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts have a section for each major currency, and we also offer a plethora of resources on USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.

Forex Trading Resources

DailyFX offers a plethora of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

--- Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

https://www.dailyfx.com/free_guide-tg.html?ref-author=Stanley

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Nick Cawley , Analyst

Nick Cawley
My Picks:  EURJPY: Bearish Bias
Expertise:  Technical and Fundamental analysis
Average Time Frame of Trades:  One week to One month

The Brand New DailyFX Q12019 EUR and JPY Forecasts are now available to download.

EURJPY Nears Fibonacci Support

A mixture of fundamentals and technicals suggest that EURJPY may continue to move lower as the relative strength of each currency comes into focus. In brief the Euro remains under pressure as growth in the single bloc stagnates with Germany likely to just miss going into technical recession. Commentary from various central bankers suggest that fresh liquidity measures are being seriously considered and that the idea of a rate hike has been pushed further back. Italian government bond yields – a risk indicator - are pushing back towards 3% while the safe-haven German bond market is negative yielding all the way out to nine years. Against this the safe-haven Japanese Yen continues to gain strength as US China trade talks are pushed back and are unlikely before March 1, the day before tariffs on Chinese imported goods hit 25%.

On the chart, the recent recovery in EURJPY looks likely capped at the 50% Fibonacci level at 126.18 if it breaks above the 20- and 50-day moving averages between 124.90 and 125.50. The pair have just touched a new two-week low and eye the 123.35-123.50 level where the January 7 and 15 lows meet 61.8% Fibonacci retracement. A break and close below here would bring the January 2 spike low back into focus.

EURJPY Daily Price Chart (December 2017 – February 8, 2018)

EURJPY: Chart Starts to Break Down

IG Client Sentiment Datashows how retail investors are positioned in a range of currencies and asset markets.

Traders may be interested in two of our trading guides – Traits of Successful Traders and Top Trading Lessons – while technical analysts are likely to be interested in our latest Elliott Wave Guide.

What is your view on EURJPY – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author at nicholas.cawley@ig.comor via Twitter @nickcawley1.

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Peter Hanks , Junior Analyst

Peter Hanks
My Picks:  EURUSD Bullish Bias
Expertise:  Fundamental and Technical Analysis
Average Time Frame of Trades:  1-4 Weeks

EURUSD Trade Setup Talking Points:

  • EURUSD trades below a plethora of resistance but has etched a series of higher highs and higher lows
  • A fundamental change in the US Dollar could spur some weakness despite the rate differential
  • I have a bullish bias for the pair but will wait for a break through resistance to place a position targetting the longer-term

EURUSD Technical Landscape

After months of congestion for EURUSD, the pair may finally choose a direction as technical levels converge and fundamental winds shift. From a technical perspective, the pair faces a plethora of resistance immediately above the current trading price.

Read the intermediate-term fundamental and technical outlooks for the Euro in the Euro Q1 Forecast.

A trendline from September 2018 has guided the pair lower in recent weeks and poses continued risk for bulls in the future. Similarly, a trendline from March 2018 has rebuked the pair multiple times. The 1.1500 price level also looks to pose some moderate resistance as the pair has failed to break the area in recent weeks. Finally, the Fibonacci retracement from the lows of January 2017 to the heights of February 2018 places the 50% level at 1.14480.

EURUSD Price Chart: Daily Timeframe (March 2018 – February 2019) (Chart 1)

EURUSD Price Chart Trade

As far as support goes, the pair seems short-handed at first glance. A support trendline from November 2018 could materialize in the near future upon a third failed test and would bolster a bullish argument. In the same area lies 1.1300. The price was the August swing-low and has provided moderate support in the recent bout of congestion. A bounce off of one of these levels is critical for my setup.

Below the proposed trendline and 1.1300 support lies the 61.80% fib level at 1.11880. This level has not been tested for some time, but given the respect commanded by the other fib levels in the retracement, it would be fair to assume the .6180 level will act similarly.

Improve your trading with “Traits of Successful Traders – Number One Mistake Traders Make.”

With the technical landscape laid out, a bearish bias seems clear. That said, a series of higher highs and higher lows in the congested area could suggest some additional underlying support for the pair. Given that the pair has traded narrowly below resistance for months but has lacked a determined move lower, the case for an upside swing can be made. The fundamental outlook may bolster the argument.

A Dovish Fed – A Stronger Euro?

A remarkably dovish tone from the Federal Reserve in recent weeks should spur Dollar weakness as rate hike expectations have slipped considerably from the highs tagged by the pair in 2018. While the ECB remains more dovish than the Federal Reserve and facets of the European economy are nearing recession, I believe the stance of the ECB has been factored into the pair for some time.

Thus, a more recent and arguably dramatic shift by the Fed should generate a fundamental tailwind for EURUSD in the medium term. That said, the tailwind may prove an insufficient catalyst to push the pair through the multiple levels of resistance and therefore the trade will wait for bullish confirmation.

EURUSD Position Awaits Topside Break

The long position will be contingent on a breakthrough of resistance. Both the trendlines from March and September of 2018 will need to be broken before I will consider the trade a possibility. Similarly, I would like to see the pair respect the proposed support trendline from November 2018 and the 1.1300 level.

Ideally, I would like to see the price moves materialize before the end of February. Once a close below support or above resistance has occurred, I will provide updates and key price levels. In the meantime, follow me on Twitter @PeterHanksFX for commentary and updates on this trade and others.

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

Contact and follow Peter on Twitter @PeterHanksFX

DailyFX forecasts on a variety of currencies such as the US Dollar or the Yen are available from the DailyFX Trading Guides page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.

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David Song , Currency Analyst

David Song
My Picks:  Bearish EUR/USD
Expertise:  Fundamental and Technical
Average Time Frame of Trades:  2 - 10 Days

The EUR/USD advance following the European Central Bank (ECB) meeting unravels, with the exchange rate under pressure even as the Federal Reserve drops the hawkish forward-guidance for monetary.

The Federal Open Market Committee’s (FOMC) first meeting for 2019 caught increased attention as the central bank warned of ‘cross currents’ surrounding the economic outlook, and Fed officials may continue to tame bets for higher interest rates as ‘there is elevated uncertainty around several unresolved government policy issues, including Brexit, ongoing trade negotiations, and the effects from the partial government shutdown in the United States.’

Image of fed fund futures

In turn, Fed Fund Futures may continue to show the central bank on hold throughout the first-half of the year, but the 304K expansion in U.S. Non-Farm Payrolls (NFP) appears to be raising questions about the shift in Fed rhetoric as the central bank pledges to be ‘data dependent.’ As a result, Chairman Jerome Powell & Co. may find it difficult to defend a wait-and-see approach as the U.S. economy currently shows little to no signs of a recession, with EUR/USD at risk of facing range-bound prices ahead of the next FOMC rate decision on March 20 amid the failed attempt to test the January-high (1.1570).

At the same time, the bullish momentum appears to be abating as the Relative Strength Index (RSI) snaps the upward trend from late-2018, and recent price action warns of a further decline in EUR/USD as the exchange rate carves a series of lower highs & lows. Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss potential trade setups.

EUR/USD Daily Chart

Image of eurusd daily chart

The outlook for EUR/USD has once again become uneventful amid the failed attempt to test January-high (1.1570), with the exchange rate at risk for range-bound prices as the bullish momentum abates. The recent series of lower highs & lows brings the 1.1290 (61.8% expansion) region on the radar, which largely lines up with the 2019-low (1.1290), with the next region of interest coming in around 1.1220 (78.6% retracement).

For more in-depth analysis, check out the 1Q 2019 Forecast for the Euro

Additional Trading Resources

Are you looking to improve your trading approach? Review the ‘Traits of a Successful Trader’ series on how to effectively use leverage along with other best practices that any trader can follow.

Want to know what other currency pairs the DailyFX team is watching? Download and review the Top Trading Opportunities for 2019.

--- Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.

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Justin McQueen , Analyst

Justin McQueen
My Picks:  USDJPY Bearish Bias
Expertise:  Fundamental
Average Time Frame of Trades:  1-3 months

Check out the brand new Q1 FX forecast guides

USDJPY BEARISH BELOW 110.00-45

  • Risks: Equity Markets Continue to Rise, Global Data Picks up Notably

Dovish Fed, Limited Upside for Risk Markets to Spark Bid in Safe Haven JPY

Risks to the global economic outlook are deteriorating, which in turn has led to central banks altering their bias with regard to monetary policy, most notably the Federal Reserve provided a dovish pivot last week. As such, with the support from the Fed unwinding for the USD, risks are tilting to the downside.

The typically safe-haven JPY has weakened in light of a bounce back in equity markets. Despite the fact that this boost in equity markets has predominantly been based on a dovish Fed that has grown concerned over the economic outlook. Alongside this, the bid in equity markets has also come at time when market volumes have been somewhat lighter.

As such, further upside for risk markets (equities) may be somewhat limited going forward, which has also been signalled by the Baltic Dry Index (typically seen as a gauge for the world economy). Consequently, as fears over a global slowdown rise, pushing risk markets lower, the JPY may see safe-haven flows begin to support.

JPY Repatriation at Fiscal Year End

Elsewhere, seasonal factors may begin to support JPY, which tends to benefit from repatriation flows ahead of the Japanese fiscal year end. On average, over the past 5 years, USDJPY has dropped 3.76% in Q1, making it the worst performing quarter. Repatriation flows include profits from overseas units as well as dividend and interest income, meaning notable JPY buying. Given that USDJPY has typically moved over 3.7% in Q1, this could see USDJPY test the mid 105s.

USDJPY Technical Levels

Resistance 1: 110.00

Resistance 2: 110.15

Resistance 3: 111.25

Support 1: 109.27

Support 2: 108.50

Support 3: 107:90

USDJPY Bearish Amid Repatriation Flows, Return to Flash Crash Levels

--- Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX

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Dimitri Zabelin , Junior Currency Analyst

Dimitri Zabelin
My Picks:  Bearish EUR/USD
Expertise:  Global Political Economy
Average Time Frame of Trades:  3-6 months

EURO TALKING POINTS – EUR/USD, ITALY RECESSION, BREXIT STALEMENT

  • EUR/USD – short-term congestion ahead?
  • Effects of recession in Italy still to be seen
  • Investors holding steady on Brexit outcome

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The Euro – and broadly speaking European assets – have been under pressure from Brexit and forecasts of sluggish growth against the backdrop of continental ideological re-alignment. Italy recently slipped into a technical recession and Brexit has been in a stalemate since the House of Commons voted on amendments to the Prime Minister’s new plan.

EUR/USD has lost almost 10 percent of its value since April, illustrating the profound effect trade wars and regional political unrest have on the currency. Since January 10, the pair was closing below a resistance that was broken on January 25. The pair rose 0.92 percent and has since continued to trade higher until it reached 1.1478.

Underlying momentum and optimism for the Euro’s potential upward trajectory failed to gain traction, and EUR/USD closed lower at 1.1456.

EUR/USD – Daily Chart

Chart of EUR/USD (Daily)

In the short-term, the Euro may trade between 1.1505-1.1478 as investors scan the geopolitical landscape and endeavor to forecast the risks associated with Italy’s recession and the outcome of Brexit. Hope – but not sturdy confidence – of upward movement is illustrated with the wicks on the candles on January 30 and 31 that reached as high as 1.1514.

Until more is known, and the potential risks are more understood, the Euro may trade cautiously between 1.1505-1.1478. However, fundamental forecasts – and comments from the ECB – indicate that risks in the European economy are mounting on the downside as time progresses.

EUR/USD TRADING RESOURCES

--- Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter

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