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GBP/USD in Focus as Brexit Grabs Attention; USD Pullback Continues

Price action and Macro.

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GBP/USD Talking Points:

- Volatility remains in the British Pound and that will likely continue in the near-term as Brexit is a focal point for global markets at the moment. The Pound popped-higher yesterday on news that negotiators had come to a deal proposal, and now Theresa May needs to gain the approval of her cabinet, which remains to be seen. Resolution on this item today can keep the door open for the later-month EU-UK summit to further iron out details on what a finalized Brexit might look like.

- The US Dollar continues to pull back after the earlier week breakout to fresh yearly highs. There may still be a bull trap lurking here, however, as a portion of unfilled weekend gap remains, and a support bounce that started around yesterday’s Tokyo open has come under pressure as sellers came into offer lower-high resistance on the currency.

- DailyFX Forecasts on a variety of currencies such as the US Dollar or the Euro 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.

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

GBP/USD In Focus as Brexit Comes into Further View

It’s a big day in the UK and we will likely see updated headlines throughout the session. Brexit negotiators have come to an agreement on a proposed deal, and at this point Theresa May needs to sell it to her cabinet to gain approval. This appears to be a big ‘if’ at this point, but if successful, the door remains open for the later-month summit between the EU and the UK to further iron out details. This is far from a certainty, and given the volatility in UK markets around this theme yesterday, we may still be in for a bumpy ride.

Sterling initially popped-higher as news that negotiators had come to a resolution. But, as the draft of that deal leaked, optimism faded and prices soon moved back down to the 1.2900-handle. At this point, GBP/USD has had a rather active past few days of price action in both directions, and Theresa May is currently pitching this proposal to her cabinet.

GBP/USD 30-Minute Price Chart: Two-Way Volatility This Week as Driven by Brexit Headlines

gbpusd gbp/usd 30 minute price chart

On a longer-term basis, GBP/USD continues in a rather aggressive range that’s been in play for almost four months now. Prices in the pair were on a bee-line lower from April and into July, but in mid-August ran into a key Fibonacci retracement that finally helped to stem the bleeding. This level takes place at 1.2671, and this is the 23.6% Fibonacci retracement of the Brexit move in the pair, taking the June, 2016 high down to the October, 2016 low.

Since that support came into play in mid-August, prices have been displaying an element of mean reversion with both lower-highs and a slightly higher-low coming into play. This can complicate trend strategies on shorter-term charts given lack of recent sustainable trends. But – it can also highlight levels of interest that may come into play for longer-term strategies; with bulls looking for topside breaks through levels like 1.3117 or, perhaps a bit further away at the three-month-high of 1.3306 to usher in topside strategies on the pair.

GBP/USD Daily Price Chart

gbpusd gbp/usd daily price chart

US Dollar Fills Some Gap, But Trap Potential Remains

In yesterday’s webinar, I looked at the US Dollar as there was a potential bull trap in the making. Prices in the currency gapped-higher to start this week’s trade, and after a really strong Monday continued to push away from that price. As I discussed yesterday, markets will have a tendency to fill those gaps, and the fact that it hadn’t kept the door open for deeper pullback potential.

That led into some downside run in USD until prices pushed down to a fresh weekly low. A portion of that weekend gap has been filled, but a small amount of gap remains, and the currency may not yet be in a spot for bullish strategies after the aggressively bullish move of the week prior. Deeper support potential remains around the 96.47 level, which is the 23.6% Fibonacci retracement of the 2011-2017 major move in DXY.

US Dollar Hourly Price Chart

us dollar usd hourly price chart

EUR/USD Tests Resistance at Prior Support

On the long side of the US Dollar, few markets have been as attractive as EUR/USD so far this month. As worries remain with the Italian budget issue garnering greater attention, bears have remained fairly active in the pair, pushing from a 1.1500 resistance test last week down to a fresh yearly low set on Monday of this week. Sellers pulled up just shy of a key Fibonacci level at 1.1212, which is the 61.8% retracement of the 2000-2008 major move in the pair.

Since that Monday low, prices have been pulling back in the pair and a bit of resistance has shown off of that prior support level at 1.1300.

EUR/USD Four-Hour Price Chart

eurusd eur/usd four hour price chart

On shorter-term charts, buyers haven’t yet shown a sign of letting up. Prices pushed above 1.1300 temporarily yesterday before a pullback developed. But, around this morning’s European open bulls returned to show higher-low support, indicating that we may see continued drive-higher to a deeper level on the chart. The level I looked at in yesterday’s webinar is around the 1.1355 area.

EUR/USD Hourly Price Chart

eurusd eur/usd hourly price chart

NZD/USD Remains Attractive for Short-USD Strategies

Perhaps a bit lost in the shuffle with all of the major items on the wires out of Europe and the UK has been the development of a respectable bullish trend in NZD/USD. I started looking at the pair for short-USD strategies last month, and since then prices have pushed up to fresh three-month-highs. Despite the fact that USD has continued to push up to fresh yearly highs, NZD/USD has continued to push-higher; and if markets do bring a bigger sell-off or reversal or pullback in the US Dollar, this pair remains attractive.

Buyers came in to show higher-low support above the .6700 handle on Monday, and prices are now making a fast approach towards those fresh three-month-highs. This pair can, at the least, avoid a bit of the headline-driven flow emanating from Europe as issues around Brexit and the Italian budget continue to push prices in either direction.

NZD/USD Eight-Hour Price Chart

nzdusd nzd/usd 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 for Q4 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




Pound, Euro May Overlook UK CPI and EZ GDP with Politics in Focus

Fundamental analysis, economic and market themes.

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TALKING POINTS – POUND, EURO, CPI, GDP, BREXIT, ITALY, SWEDEN, US DOLLAR

  • British Pound may look past UK CPI, all eyes on Brexit deal
  • Euro is likely to focus on political turmoil in Italy and Sweden
  • US Dollar may rise on inflation rise, hawkish Powell speech

UK CPI data headlines the economic calendar in European trading hours. The headline on-year inflation rate is expected to tick up to 2.5 percent in October, rebounding from a three-month low at 2.4 percent set in the prior month.

Economic data flow out of the UK has increasingly deteriorated relative to forecasts recently, opening the door for a downside surprise. Such a result may have relatively limited implications for the British Pound however with BOE policy on hold through mid-2019 and all eyes on a possible Brexit breakthrough.

Prime Minister Theresa May has reportedly won “grudging” support among cabinet ministers for the accord she struck with Brussels, according to The Sun. Sterling may get a boost if that is confirmed following a government meeting today.

Eurozone GDP data may also fade into the background as the Euro likewise reflects political developments. Italy and EU authorities are clashing over a budget that Brussels says violates the regional bloc’s fiscal rules. Meanwhile, Sweden is still struggling to form a government.

US CPI is due later in the day. Here too, a rise to 2.5 percent is expected in October, up from a seven-month low of 2.3 percent previously. In this case however, an upside surprise may be in store. That coupled with dependably hawkish comments from Fed Chair Powell may boost rate hike bets and the US Dollar.

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

ASIA PACIFIC TRADING SESSION

Economic Calendar - Asia Pacific Trade

EUROPEAN TRADING SESSION

Pound, Euro May Overlook UK CPI and EZ GDP with Politics in Focus

** All times listed in GMT. See the full economic calendar here.

FX TRADING RESOURCES

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter




Brexit Headlines Driving GBP Prices Up, OPEC Sinks Crude Oil Hard

Classic technical analysis, macro and economic themes.

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Asia Pacific Market Open – Crude Oil, US Dollar, Brexit, GBP, Australian Dollar, Canadian Dollar

  • Wall Street little changed despite reduced US China trade war fears, culprit seemed to be crude oil
  • Oil declined by the most since 2016 on an unfavorable OPEC demand outlook. Yet, USD/CAD fell
  • AUD/USD looks to Australian wage and key Chinese economic growth data as Asia stocks may rise

Check out our 4Q forecast for crude oil prices in the DailyFX Trading Guides page

Market optimism from Tuesday’s Asia Pacific trading session failed to transpire into more meaningful progress on Wall Street. In what began as a cooldown in US China trade war fears, it ended in pessimism as Crude Oil plunged by the most since February 2016. The commodity entered its 12th consecutive day of losses as OPEC warned that it sees demand for its stockpiles easing for the road ahead.

As crude oil continued to build on its worst consecutive losing streak since at least 1984, the Canadian Dollar followed the commodity lower. At times, the Loonie often moves in positive correlation with oil given that it is a key source of revenue for Canada. But, CAD still managed to gain ground against the greenback by the end of the day.

This is mainly thanks to losses in the US Dollar during the APAC session and late Wall Street trade. In the former, demand for safe havens waned and the anti-risk Japanese yen suffered. During the latter, reports that UK Prime Minister Theresa May and her Brexit draft could be approved sent the British Pound rallying. Broad gains in Sterling weighed down on the greenback.

As we look to Wednesday’s Asia Pacific trading session, S&P 500 futures are pointing notably higher perhaps due to Brexit optimism. This could translate into regional stock market exchanges rising for the day. Such an outcome would bode ill for the Japanese Yen while bolstering the pro-risk Australian and New Zealand Dollars.

Speaking of, the Aussie Dollar awaits local wage price data followed by key economic growth statistics from China. That includes retail sales and industrial production data and I will be covering said events as well as the Aussie Dollar reaction live beginning at 1:45 am GMT on Wednesday. While this data may have limited implication for RBA monetary policy bets, it would be more meaningful for global growth speculation. Especially with China’s economy moving along at its slowest since 2009.

Meanwhile, crude oil prices could continue adding momentum to its downtrend should US CPI data inspire Fed rate hike bets over the next 24 hours. The Euro was also rather quiet after Italy’s government stuck to a 2.4% budget deficit. But there may be more risks ahead for EUR/USD from Sweden. Our Analyst Dimitri Zabelin will be covering the significance of political gridlock in that country later at 4:00 GMT after the Chinese data.

Crude Oil Prices Versus a Canadian Dollar Index

Brexit Headlines Driving GBP Prices Up, OPEC Sinks Crude Oil Hard

Chart created in TradignView

US Trading Session

Brexit Headlines Driving GBP Prices Up, OPEC Sinks Crude Oil Hard

Asia Pacific Trading Session

Brexit Headlines Driving GBP Prices Up, OPEC Sinks Crude Oil Hard

** All times listed in GMT. See the full economic calendar here

FX Trading Resources

--- Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter




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