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EUR/USD Falls to Yearly Low as Euro, Italy Worries Take Center Stage

Price action and Macro.

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EUR/USD Falls to Yearly Low as Euro, Italy Worries Take Center Stage

- EUR/USD has fallen to a fresh yearly low to start this week’s trade, and this week sees the ongoing saga between Brussels and Rome move back into the spotlight, as tomorrow marks the due date for Italy’s revised budget. At this point, neither side looks willing to give, and that can continue to create pressure in European markets until some element of resolution is found. This was looked at in this week’s Weekly Technical Forecast for Equities, specifically focusing on an area of resistance in the DAX after last week’s recovery began to falter.

- Going along with that fresh yearly low in EUR/USD is a new high in the US Dollar via DXY. The currency gapped-higher on the open and, as of yet, hasn’t pulled back to fill that gap. This is a breakout that could be difficult to chase at this point; but the bullish structure is there and the area around this unfilled gap becomes of interest for higher-low support potential. For USD fades, a couple of markets remain interesting in NZD/USD and AUD/USD. For a continuation of USD-strength, both EUR/USD and GBP/USD remain attractive.

- 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.

A Big Week for the Euro

It’s a big week for Europe as the Italian budget saga moves back into focus. Tomorrow is the date in which the revised Italian budget is due in Brussels and, at this point, neither side looks ready to compromise. Opening the week, the Euro is falling further after last week’s reemergence of weakness. EUR/USD had started November on strong note, bouncing from the failed attempt to take-out the 1.1300 level in late-October. That bounce saw prices put in tests at 1.1448 and again at 1.1500 as buyers continued to push to higher-highs. But, as looked at last week, that 1.1500 test was what brought sellers in to the degree that 1.1330 could be threatened. And to open the week, that 1.1300 low has already been taken-out as early-week price action has continued last week’s sell-off.

EUR/USD Daily Price Chart: Fresh Yearly Lows to Start the Week

eurusd eur/usd daily price chart

Chart prepared by James Stanley

Euro Data, US and UK CPI, Powell Speeches Highlight This Week’s Calendar

Outside of tomorrow’s budget items around Italy, the economic calendar has a number of potential drivers with the likely high-points being Euro items to go along with a couple of speeches with FOMC Chair, Jerome Powell. A couple of inflation prints remain of interest, as both the UK and US are due to report October inflation data on Wednesday morning.

DailyFX Economic Calendar: High-Impact Events, Week of November 12, 2018

DailyFX Economic Calendar High-Impact

Chart prepared by James Stanley

US Dollar to Fresh Yearly High After Last Week’s FOMC

It can often take a day or two to get the full-fledged response from a rate decision; and with some scope, that Thursday FOMC meeting has appeared to drive US Dollar strength to go along with some equity weakness.

The Dollar is charging-higher to start the week, and this comes after last week’s pullback to trend-line support on the chart. USD is now trading at fresh yearly highs to go along with those fresh yearly lows in EUR/USD. The next area of interest on DXY is at 97.87, as this is the 61.8% Fibonacci retracement from the 2017-2018 major move; and the 50% marker of that study helped to cap resistance for a portion of last month before USD buyers were finally able to leave it behind after a fourth attempt.

US Dollar Daily Price Chart

us dollar daily price chart usd

Chart prepared by James Stanley

With this move taking place on around a Monday open, traders would be rightfully cautious of chasing here. But, given recent dynamics, there are a couple of areas of interest for support potential, including that 97.00 level that had previously helped to offer resistance. A bit deeper, another level exists around 96.47, as this is the 23.6% Fibonacci retracement of the 2011-2017 major move.

US Dollar Four-Hour Price Chart

us dollar usd four hour price chart

Chart prepared by James Stanley

GBP/USD: Cable Gaps Down, and then Keeps Going

GBP/USD put in a gap upon this week’s open that, up to this point, remains unfilled. Sellers have continued to push through early-week price action, and GBP/USD has already taken-out the 1.2900 level while making a run at 1.2800. At this point, the pair looks oversold on a short-term basis and traders looking to on-load short-side positions may want to wait for a pullback. Given the unfilled gap with last week’s close taking place right at the 50% marker of the recent major move, the 1.2965 area would be a point-of-interest to follow for such a development.

GBP/USD Two-Hour Price Chart: Remaining Unfilled Gap for Resistance Potential

gbpusd gbp/usd two hour price chart

Chart prepared by James Stanley

Support Tests in AUD/USD, NZD/USD for USD Fades

On the other side of the US Dollar, NZD/USD and AUD/USD remain of interest, as each of these markets retain some element of a bullish quality despite the Dollar’s very noticeable top-side run. For traders looking to fade this recent run of US Dollar strength, those options would likely remain as a bit more attractive than looking for reversals of the pain seen in EUR/USD or GBP/USD.

AUD/USD Tests Confluent Support

In AUD/USD, a confluent area on the chart has already come into play to start the week, and this area runs between two longer-term Fibonacci levels around the .7200 level. Prices have, at this point, respected last week’s higher-low, keeping the door open for bullish strategies in the pair. Given this bullish indication seen on shorter-term charts, traders looking to trade reversals of this USD-strength would likely want to look in this direction as opposed to a pair that’s plunging down to fresh yearly lows.

AUD/USD Daily Price Chart: Holding Higher-Low Support Despite USD Breakout

audusd aud/usd daily price chart

Chart prepared by James Stanley

NZD/USD Tests .6725, Prior Resistance as New Potential Support

On a similar note, NZD/USD retains some bullish structure despite this continued breakout in the US Dollar. NZD/USD rose to a fresh three-month-high last week, catching a bit of resistance at the Fibonacci level at .6819. The pair pulled back after RBNZ and FOMC on Wednesday and Thursday, and to open this week, a level of note has already come into play. This takes place around .6725, with .6717 serving as the 61.8% retracement of the 2015-2017 major move, and had also helped to mark the late-August swing-high in the pair.

NZD/USD Eight-Hour Price Chart: Testing Higher-Low Support at Prior Resistance

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




Euro, Pound Suffer as Markets Eye Busy Week for European Politics

Fundamental analysis, economic and market themes.

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TALKING POINTS – EURO, POUND, BREXIT, ITALY, US DOLLAR, CANADIAN DOLLAR

  • British Pound drops as UK PM May struggles for Brexit plan support
  • Euro down before Italy vs EU clash, Sweden votes on new government
  • US Dollar may be joined by Yen, Franc on the upside in risk-off trade

The Canadian Dollar outperformed in Asia Pacific trade, in move seemingly linked to a spirited recovery in crude oil prices. That followed from OPEC+ comments over the weekend hinting that the cartel and its allies may reduce output in 2019.

The US Dollar likewise rose, deftly pivoting from Friday’s haven demand-driven rally to a renewed focus on the Fed rate hike prospects. A recovery in risk appetite buoyed Treasury yields while the priced-in rate hike outlook implied in Fed Funds futures steepened.

Meanwhile, the British Pound slumped as progress on Brexit negotiations continued to disappoint. UK Prime Minister Theresa May is struggling to convince the cabinet to back her strategy for country’s post-separation relationship with the EU, with further resignations hinted after Friday’s departure of Jo Johnson.

EU POLITICS WEIGH ON EURO, POUND AND BROAD MARKET MOOD

A dull offering on the European data docket is likely to keep sentiment trends in focus from here. S&P 500 futures continue to point higher ahead of the opening bell on Wall Street but conviction seems to be ebbing as worries about several concurrent EU-based flashpoints preoccupy investors.

Beyond the Brexit stalemate, Italy on course to collide with regional bloc authorities about its budget and Sweden is still struggling to produce a government after months of fruitless haggling following inconclusive elections. A Moderate-led minority government will be pitched to parliament later this week.

Against this backdrop, the Euro is quickly emerging as the second-worst performing currency on the day after Sterling. The spread between German and Italian bond yields has tellingly widened, reflecting the growing risk that markets see associated with lending to Rome versus Berlin.

The Greenback seems to have taken the shifting market mood in stride yet again, finding renewed support from safety-seeking capital flows. If the pendulum swings to a risk-off setting in earnest, it will probably be joined on the upside by the perennially anti-risk Japanese Yen and regional haven Swiss Franc.

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

ASIA PACIFIC TRADING SESSION

Asia Pacific Trade Economic Calendar

EUROPEAN TRADING SESSION

Euro, Pound Suffer as Markets Eye Busy Week for European Politics

** 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




Crude Oil Prices Eye Weekend OPEC Meet, Asia Stocks May Boost JPY

Classic technical analysis, macro and economic themes.

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Asia Pacific Market Open – Japanese Yen, British Pound, Brexit, S&P 500, Crude Oil, OPEC

  • Anti-risk Japanese Yen gained as Asia, Europe and US stocks tumbled. US Dollar appreciated
  • Brexit woes sent the British Pound depreciating, crude oil prices await weekend OPEC meeting
  • S&P 500 following through on bearish reversal warning, Asia Pacific stocks may weaken next

We just released our 4Q forecasts for currencies like the US Dollar in the DailyFX Trading Guides page

The anti-risk Japanese Yen appreciated across the board on Friday as stocks declined in Asia, Europe and in the US. This followed Thursday’s Fed rate decision where the central bank stoked December rate hike bets, boosting the US Dollar. The S&P 500 dropped an early warning sign that Friday’s session was about to take a turn for the worst.

Indeed that was the case, the S&P 500 ended the day about 0.92 percent lower. The NASDAQ Composite fared worse, tumbling about 1.65%, weighed down by tech shares. US government bond prices rose as yields fell, signaling a flight to safety reminiscent of what we saw back in October. Back then, Wall Street wiped out all the progress it made in 2018 up to that point.

Meanwhile the British Pound was weighed down by unnerving news in regards to Brexit ordeals. Jo Johnson, UK’s Minister for Transport, resigned as he stated that the country is “barreling towards an incoherent Brexit.” This resulted in EUR/GBP’s best performance in a single day since September 21st as was anticipated. However, more gains are needed to overturn the dominant downtrend.

As we begin this week’s trading session, crude oil prices are flirting with an eleventh consecutive day of losses. That would be its longest losing streak since at least 1984. Last week, OPEC said that members will be discussing output cuts for 2019 which may slow the weakness seen in crude oil lately. In regards to this, keep an eye on how OPEC+ nations discussed this over the weekend at a meeting in Abu Dhabi. While there may be a correction due in the near-term, there are more downside risks ahead.

Monday’s Asia Pacific trading session is notably lacking critical economic event risk. As such, we may be in for a rather quiet trading session. With that said, the Nikkei 225 and other regional indexes may echo the weakness seen on Wall Street Friday. This may lead the anti-risk Japanese Yen higher.

S&P 500 Technical Analysis

Following the formation of a Bearish Harami Cross candlestick pattern, the S&P 500 fell by the most in a single day in exactly one week. The pattern does indicate indecision and more closes under it can confirm a pronounced decline to come. As such, near-term support is eyed between 2,676 and 2,801 before exposing the October 29th low at 2,603.

S&P 500 Daily Chart

Crude Oil Prices Eye Weekend OPEC Meet, Asia Stocks May Boost JPY

Chart created in TradingView

US Trading Session

Crude Oil Prices Eye Weekend OPEC Meet, Asia Stocks May Boost JPY

Asia Pacific Trading Session

Crude Oil Prices Eye Weekend OPEC Meet, Asia Stocks May Boost JPY

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

Technical Forecast

AUD/USD Bullish Breakout Attempt Fell Short, AUD/JPY Risks Falling

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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