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Wave Analysis by InstaForex


Technical analysis of EUR/USD for Oct 25, 2017

When the European market opens, some Economic Data will be released, such as German 10-y Bond Auction and German Ifo Business Climate. The US will release the Economic Data, too, such as Crude Oil Inventories, New Home Sales, HPI m/m, Durable Goods Orders m/m, and Core Durable Goods Orders m/m, so, amid the reports, EUR/USD will move in a low to medium volatility during this day.

TODAY'S TECHNICAL LEVEL:
Breakout BUY Level: 1.1815.
Strong Resistance:1.1808.
Original Resistance: 1.1797.
Inner Sell Area: 1.1786.
Target Inner Area: 1.1758.
Inner Buy Area: 1.1730.
Original Support: 1.1719.
Strong Support: 1.1708.
Breakout SELL Level: 1.1701.

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Technical analysis of EUR/USD for Oct 26, 2017

When the European market opens, some Economic Data will be released, such as Minimum Bid Rate, Italian 10-y Bond Auction, Private Loans y/y, M3 Money Supply y/y, Spanish Unemployment Rate, and German GfK Consumer Climate. The US will release the Economic Data, too, such as Natural Gas Storage, Pending Home Sales m/m, Prelim Wholesale Inventories m/m, Goods Trade Balance, and Unemployment Claims, so, amid the reports, EUR/USD will move in a medium volatility during this day.

TODAY'S TECHNICAL LEVEL:
Breakout BUY Level: 1.1875.
Strong Resistance:1.1868.
Original Resistance: 1.1857.
Inner Sell Area: 1.1846.
Target Inner Area: 1.1818.
Inner Buy Area: 1.1790.
Original Support: 1.1779.
Strong Support: 1.1768.
Breakout SELL Level: 1.1761.

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Daily analysis of GBP/USD for October 27, 2017

GBP/USD is piercing once again below the 200 SMA, confirming that it's trapped in between a narrow range. That's why we're no clear in which is the dominant trend across the board, but still, we're expecting a breakout lower. If the support level offered by October 20th lows give up, then we might see a decline towards the 1.3037 level.

H1 chart's resistance levels: 1.3309 / 1.3373
H1 chart's support levels: 1.3216 / 1.3037

Trading recommendations for today:
Based on the H1 chart, sell (short) orders only if the GBP/USD pair breaks a bearish candlestick; the support level is at 1.3216, take profit is at 1.3037 and stop loss is at 1.3398.

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Daily analysis of GBP/USD for October 27, 2017


EUR / USD pair
Trend analysis (Figure 1)
The downward trend prevailed last week. The market tested again the resistance line and drove downwards. The price may fend off the support line and move higher in the following week. Complex analysis will accurately show the price direction.

Fig. 1 (weekly chart).
Indicator analysis on the weekly schedule (Figure 2).
The system of indicators ADX (Figure 2).
On the last run, the fast line (indicator 5 - white) and the slow line (indicator period 8 - blue) moved up.
In this case, the trend should be determined by trend type indicators.
MACD Indicator (period 5/8/13).
The linear part of the MACD indicator. Fast line (signal) - a line of white color.
The slow line (main line) is the blue line.
The result of the MACD indicator is a downward trend (100 points down). Histogram of the MACD indicator.
Histogram - columns of black color.
The result of the histogram of the MACD indicator is a downward trend (100 points down).
Overall: the MACD indicator on the weekly chart gives a downward trend.
Middle lines of the EMA.
On the weekly chart, the following midlines are used.
1 middle EMA line - color white (first shadow).
5 the middle line of the EMA - the color is red (the first shadow).
8 middle EMA line - the color is blue (trend of the week).
13 the middle line of the EMA - the color is yellow (the trend of the week).
21 middle EMA line - brown color (trend of the week).
At the last run 8, the middle EMA line (blue) is moving down over the 13th EMA midline (yellow), which also moved down - the signal is up. At the last run 13, the middle EMA line (yellow) is moving down above the 21 middle line of the EMA (black), which moved downward - the signal gain of the upper work.
The bottom line: the EMA mid-line system on the weekly chart gives an upward signal. The probability distribution of the indicators are as follows:
- average EMA lines - 24% up;
- MACD indicator (linear part) - 38% down;
- MACD indicator (histogram) - 38% down.
Overall: on technical analysis: the price on the weekly chart should have a downward trend.
Calculation of the first shadow of the week (Monday) on a weekly chart.
The middle lines of the EMA 1/5/8 are the lower signal.
The indicator "three lines" (the direction of the lines of indicators CCI (5), RSI (5), stochastics with a period of 3/3/4) is the lower signal.
Calculation of the RSI indicator system for the first tail is the bottom signal.
The bottom line: the calculation of the weekly candle from October 30 to November 04 showed that the price movement on Monday should move downward, but the final outcome depends entirely on the daily chart. Calculation of the second shadow of the week (Friday).
The calculation for the MACD linear part showed a downward trend (100 points down).
Calculation of the MACD histogram gave a downward trend (100 points down).
The bottom line: the calculation on Friday for the technical analysis showed that the price may have a downward trend, which should be confirmed by the daily chart.


Fig. 2 (weekly chart).
Complex analysis:
- indicator analysis - down;
- Fibonacci levels - down;
- volumes - down;
- candle analysis - neutral;
- trend analysis - up;
- Bollinger lines - up;
- monthly chart - down.

Conclusion on complex analysis - up.
The entire result of the calculation of candle currency pair EUR/USD on a weekly chart indicates the weekly price would likely to have an upward trend with the presence of the first lower shadow in the weekly white candle and the presence of a second upper shadow. The upper goal is 1.1670.

GBP / USD Pair
Trend analysis (Figure 1)
The downward trend prevailed last week. The price reached the support line at 1.3087 (white thick line). Most likely, there will be an upward trend next week. The level of probability for this scenario is likely shown in a comprehensive analysis.

Fig. 1 (weekly chart).
Indicator analysis on the weekly schedule (Figure 2).
The system of indicators ADX (Figure 2).
On the last run, the fast line (indicator 5 - white) moved upward, and the slow line (indicator period 8 - blue) moved down. In this case, the trend should be determined from the indicators of the oscillator type.
Stochastic indicator (period 3/3/4) on the weekly chart gives an upward trend (Fig. 2).
The system of indicators RSI (Figure 2).
When working with the daily chart, the following periods are used in the RSI indicator system: 21 (brown), 8 (blue), 13 (yellow), 5 (red).
On the last closed candle.
The calculation of the indicator RSI (5) on properties gives up.
Calculation of the indicator RSI (8) by properties gives up.
The bottom line: the RSI indicator system gives a downward trend.
The calculation of the indicator CCI on the properties moves down.
The bottom line: the CCI indicator system gives a downward trend.
Overall: according to the indicator analysis, the price on the weekly chart should have an upward trend.
Calculation of the first shadow of the week (Monday) on a weekly chart.
Middle lines EMA 1/5/8 - the upper signal.
The indicator "three lines" (the direction of the lines of indicators CCI (5), RSI (5), stochastics with a period of 3/3/4) is a neutral signal.
Calculation of the RSI indicator system for the first tail is the upper signal.
Result: the calculation of the weekly candle from October 30 to November 04, according to technical analysis showed that on Monday there will be an upper trend, but the price movement will determine the daily schedule.
Calculation of the second shadow of the week (Friday). The calculation for the MACD linear part - gave a downward trend (100 points down). Calculation of the MACD histogram - gave a downward trend (100 points down).
The bottom line: the calculation on Friday for the technical analysis showed that there will be a lower trend, but the price movement will determine the daily schedule.

Fig. 2 (weekly chart).
Complex analysis:
- Indicator analysis - up;
- Fibonacci levels - down;
- volumes - down; - candle analysis - neutral;
- trend analysis - up; - Bollinger lines - up;
- monthly graph - up.

Conclusion on the complex analysis is an upward movement.

The total result of the GBP / USD currency pair candlestick calculation according to the weekly chart shows the weekly price would likely to have an upward trend with the absence of the first lower shadow of the weekly white candle and the presence of the second upper shadow. The initial target is 1.3336.

* The presented market analysis is informative and does not constitute a guide to the transaction.
* The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

Analysis are provided by InstaForex

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The pound collapsed amid a hike in the interest rate by the Bank of England

The British pound collapsed after the decision of the Bank of England to raise the key interest rate for the first time since 2007.

Such a market reaction might be directly related to the fact that in the BoE's statement, the central bank said that it only plans to increase the rate until the beginning of 2020. Furthermore, many major players closed their positions after the pound was growing throughout the week, which eventually led to a sharp decline even against the background of higher interest rates.

On Thursday morning, data was released, which only managed to slightly support the British pound.

According to a report from the company Markit, the index of supply managers for the construction sector in October of this year has increased to 50.8 points from 48.1 points in September, returning to a level above 50. The company said that the growth in housing construction had offset a decline in the construction of infrastructure objects.

The Bank of England raised the key interest rate to 0.5% from 0.25%, but signaled that by the end of 2020 the rate is likely to be raised only twice. According to the analysts of the bank, inflation will approach the target level of 2% only by 2020. The Bank of England also lowered their forecast for GDP growth in 2018 to 1.7% against the August forecast of 1.8%.

As expected, the central bank's comments were tied to Brexit, which has a significant impact on the British economy, and also intensifies a sharp slowdown in potential economic growth. The Bank of England is seriously concerned about the reaction of households and companies to Brexit, which is an important risk for economic prospects.

The British pound collapsed from its morning highs around 1.3300 to the support of 1.3100. In the near future, Bank of England Governor Mark Carney's outlined plan can change the alignment of forces in the market.

The euro rose during the first half of the day after the release of data, which showed that the number of unemployed in Germany in October had decreased. According to the report of the Ministry of Labor, the number of unemployed in October of this year has declined by 11,000, while economists expected a reduction of only 10,000. The unemployment rate in October was at 5.6%.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

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NZD/USD profit target reached perfectly, prepare to sell

The price has continued to rise perfectly to our profit target. We now prepare to sell below major resistance at 0.6968 (Fibonacci retracement, Fibonacci extension, bearish divergence) and we expect to see a strong reaction from this level to push the price down to at least 0.6827 support (Fibonacci extension, horizontal swing low support).

Stochastic (55,3,1) is seeing strong resistance below 96% and also sees bearish divergence vs price signaling that a reversal is impending.
Sell below 0.6968. Stop loss is at 0.7043. Take profit is at 0.6827.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

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Pressure on the euro persists

The European currency continued to decline against the US dollar on Tuesday, November 7.

Pressure was already formed at the beginning of the European session due to the release of weak data on industrial production in Germany, which could significantly hurt the indicators of economic growth in the future.

According to the report of the Ministry of Economy of Germany, industrial production in September of this year declined by 1.6% compared to August. Economists expected a decline in production, but only by 0.8% compared with the previous month.

However, as noted by the ministry, the growth rates of industrial production as a whole remain quite good, and we can expect that in the coming months a rise in production will continue.

Data on retail sales slightly helped the European currency.

According to the report, retail sales in the euro area in September this year increased by 0.7% compared with August. Data for August was also revised downwards, as it dropped to -0.1%. Economists had expected a 0.6% increase in retail sales in September of this year.

Compared to the same period in 2016, retail sales in the euro area grew by 3.7%.

In the course of his speech, European Central Bank President Mario Draghi, did not touch on the subject of monetary policy and a tapering of the bond-buying program. Basically, his speech was focused on the problem of overdue loans.

Let me remind you that quite recently the central bank introduced new rules for handling overdue loans, which provoked a contradictory reaction.

During the course of his speech, ECB Governor Mario Draghi said the joint efforts of all participants will be needed in order to solve the problem of overdue loans. He paid special attention to the key problem of banking supervision. According to the president of the ECB, joint efforts of banks, supervisors, regulators and authorities of the countries will significantly affect the problem of loans.

As for the technical picture of the EURUSD pair, the bears are gradually moving towards their goal in the support area of 1.1540 and 1.1500, which can be achieved in the near future. As the main trade is unfolding below the level of 1.1580, we can expect that the European currency will continue to be under pressure.

It is worth recalling that the chairman of the Federal Reserve Janet Yellen will make a speech at the end of Tuesday, which can clarify the further prospects of hiking interest rates in December this year. *The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

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Gold recalled its old ties

The uncertainty surrounding the tax reform, the growth of geopolitical risks in the Middle East and the visit of Donald Trump to Asia allowed the bulls in gold to restrain their opponents who are on the offensive. There were rumors in the market that the start of the transformation of the fiscal system in the US could be postponed for a year due to the fact that the US economy is in good shape. If you add an incentive to this, it will increase the risks of overshooting inflation and a future recession. Given its current position, there is no certainty that the reform will be passed through the Congress: Democrats criticize the bill because of the losses of the middle class, while the number of dissatisfied Republicans is increasing. In general, the revision of the tax system is seen as a "bullish" factor for gold. Therefore, the problems with its implementation allows buyers of the XAU/USD to strike a counterattack.

Investors have raised their share of haven assets in portfolios, looking at events in the Middle East. The mass arrests in Saudi Arabia, the attack on Riyadh by rebels from Yemen, the conflict between Turkey and Kurdistan, and the dissatisfaction of Donald Trump with decisions of his predecessors on Iran's nuclear program have pushed up oil and bond prices. The yield of the latter is under pressure, which, due to the existing correlation, has a positive effect on precious metals.

Dynamics of gold and yield of US bonds

Source: Trading Economics.

An additional factor in supporting gold is U.S. President Donald Trump's tour in Asia. In Japan, Trump has already tickled the nerves of local businessmen, accusing them of non-commercial and non-mutually beneficial trade. In China, the US president raised the issue of ending its economic ties between Beijing and Pyongyang, which certainly provoked North Korea's discontent. Let me remind you that one of the most important drivers of almost 12% of the XAU/USD rally since the beginning of the year have been geopolitical tensions on the Korean peninsula and the US protectionist policy.

At the same time, from the point of view of macroeconomics, the precious metal's situation is not the best. While the euro area and Japan's GDP are growing above the trend, the US economy has been expanding by 3% or more for two consecutive quarters, and is also prepared to increase the rate. In the case of tax reform, investors prefer risky assets. Moreover, global inflation is characterized by sluggish growth. In this scenario, real world market rates have the prerequisites for a movement upwards, which should be considered as a "bearish" factor for XAU/USD.

In my opinion, the situation in the Middle East will soon stabilize, and the absence of conflicts with North Korea and the passage of tax reform through the Congress would raise the demand for the US dollar and return the quotes of precious metals futures for a downward short-term trend.

A technically successful test of the upper limit of the consolidation range at $1262-1281 per ounce will increase the risks of rising gold prices towards $1,299 and $1,320. On the other hand, a breakthrough of support at $1262 will allow the "bears" to count on the implementation of the targets for 161.8% and 200% for the AB=CD pattern.

Gold, daily chart

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European Commission report helped the euro

The euro rose against the US dollar after the release of a report from the European Commission, in which the forecasts for GDP growth and lower unemployment were revised in a positive way.

In the first half of the day, recent data indicated growth in Germany's foreign trade balance, even despite the decline in exports, as imports decreased even more compared to the previous month.

According to the report of the National Bureau of Statistics, Germany's exports in September 2017 declined by 0.4% compared to August, while imports fell 1.0%.

Germany's foreign trade surplus with revision amounted to 21.8 billion euros against 21.3 billion dollars in the previous month.

On Thursday, the Bank of France released a report, which indicated that the eurozone's second largest economy might grow by 0.5% at the end of this year. Good support by the end of the year can be provided by France's manufacturing sector and the services sector.

As I mentioned above, the report of the European Commission was published on Thursday, according to which the eurozone GDP is projected to grow by 2.2% in 2017 against the previous forecast of 1.7%. In 2018, the economy could grow by 2.1% against the previous forecast of 1.8%, and in 2019 predicts the growth of the eurozone's GDP at 1.9%.

There are also good moments that can be found in the labor market. Economists expect unemployment in the eurozone in 2017 to drop to the level of 9.1% against the previous forecast of 9.4%. In 2018, the same indicator should decrease to 8.5% against the previous forecast of 8.9%, and in 2019 will drop to the level of 7.9%.

According to the European Commission, at present, the eurozone is on track for its fastest economic growth in a decade, while in the labor market there is still a weak wage growth and a significant amount of unused resources.

However, everything is not so positive when it comes to inflation. The report was revised for the worse. The European Commission forecasts inflation in the euro area at 1.5% in 2017 against the previous forecast of 1.6%. In 2018, inflation is expected at 1.4% against the previous forecast of 1.3%, and in 2019 the level is set at 1.6%.

The sharp growth in the euro in the first half of this year forced economists to revise their forecasts, and the curtailment of the mitigation program and incentive measures could further hurt the inflationary picture, which the European Central Bank pays close attention to.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

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Gold emerges from sleep mode

The problems surrounding the tax reform and the related weakness of the US dollar allowed "bulls" for the XAU/USD to go into a counter-attack. Gold enjoys an increased demand for safe-haven during conditions when the risks of correction of the S&P 500 significantly grows. Indeed, the desire of Senate Republicans to connect its plan of repairing the fiscal system with the dismantling of Obamacare, appears to be ideal. To a certain degree, the chances of a compromise plan through Congress before the end of 2017 are extremely low, even though Secretary of the Treasury Steven Mnuchin and economic adviser to the President Gary Cohn claim otherwise. Along with the approaching date when the problem of the ceiling of the national debt should be solved, this factor forces investors to get rid of the shares.

The tightening of monetary policy and the reduction in the balance sheet of the Fed are "bearish" drivers for the S&P 500, which grew due to hopes of an implementation in the tax reform. Now this prize at the stock index is ready for the taking. As a result, investors flee from risk, which is clearly visible as currencies of developing countries are being sold. I do not think that the panic will last long. The Fed remains committed to an extremely slow normalization, the health of the US economy does not cause concern, and the devaluation of the dollar contributes to improved corporate earnings reports. This is not the best news for the recovery of the precious metal from the "bullish" trend in the US stock market.

For more than a month, gold traded in the range of 3.3%, the narrowest since February 2013, while its volatility is at its lowest level in the last 7 years. The yellow metal went into a sleep mode, bulls expect to support short-term drivers of growth, while the medium and long-term outlook for XAU/USD appears "bearish." When central banks move from unconventional to traditional monetary policy, and the global yield of debt markets begins to move away from the area of long-term lows, it is possible to forget about the recovery of the long-term upward trend.

Dynamics of the yield of US and gold bonds

Source: Bloomberg.
At the same time, record shows that from June 2004 to June 2006, when the federal funds rate increased to 5.25%, gold prices rose 50%. From June 1999 to May 2000, the growth rate to 6.5% allowed the precious metal to add 6% to its value. What's the problem? In my opinion, parallels are unlikely to hold parallels, because the asset reacts sensitively to real rates of the debt market, and in conditions of sluggish inflation, the increase in nominal yield will put pressure on prices. Simply put, reasons must be sought in different CPI growth rates in the 2000s and now. It is highly unlikely that the XAU/USD pair will rise above $1,500 an ounce before the US economy plunges into a new recession.

Technically, the release of precious metals beyond the downstream channel increases the risk of an activation of the "Dragon" pattern and the continuation of a downward trend in the direction of $1320 per ounce and above. In order for this scenario to turn into reality, a strike on $1302 is required.

Gold, daily chart

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

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Bulls on the euro need a breather

The US dollar managed to partially restore its positions against the European currency after a major decline, which was observed for several days in a row.

Inflation data in the US slightly affected the quotes of the EUR / USD, but the statements by the officials of the Fed, which were scheduled for the second half of the day, led to the closure of a portion of long positions in the euro.

Fed spokesman Eric Rosengren said yesterday that the data favors higher interest rates in December, and low inflation gives the Fed space for a gradual increase in rates. In his opinion, a very low unemployment rate, which is likely to fall below 4%, will sooner or later push up inflation. Rosengren also believes that the banking system is now in a much better state than before the recession.

Today there will be a number of important data on the US labor market, which can confirm the forecasts of officials of the Fed.

As for the technical picture, the large resistance level 1.1855, which coincides with the upper limit of the medium-term side channel. Only its breakdown can form a new upward wave, capable of updating the annual highs.

The Australian dollar is in the middle of the last five years.

According to the Australian National Bureau of Statistics, unemployment in Australia fell to 5.4% in October, while economists expected it to remain unchanged at 5.5%. The number of employees in October increased by 3,700, while the expected growth of 19,000. The number of full-time jobs increased by 24,000.

Despite this, many analysts say that the pressure on the Australian dollar is due to weak growth in the third quarter of this year, as well as to the Central Bank's lowering of the long-term inflation forecasts, which crosses out the likelihood of an upswing in interest rates in Australia.

As for the technical picture of the AUD / USD, the trade is near important support levels located in the 0.7580 area and 0.7535, where large buyers can return to the market again. Counting on a more powerful upward momentum, 0.7675, 0.7775, which will lead to an immediate increase in the Australian dollar to the areas of 0.7675 and 0.7735.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

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The Euro used its chance

Eurozone
The euro took full advantage of the rise of political risks in the US when it passed the tax reform plan through Congress, restoring half of the losses from the reduction of the last one and a half months, but in order to question the reversal of the trend to the south, something more important is required.

Inflation in the eurozone continues to be low. The price growth in October was only 0.1%, the while growth of the core indicator slowed to 0.9% year-on-year. The weak indicators call into question the ECB's willingness to continue the policy of exiting the soft monetary policy.

The head of the ECB, Mario Draghi, speaking on Friday at a conference in Frankfurt, said that the low-interest policy does not harm the income of European banks that have remained stable over the past two years and, moreover, added that the asset repurchase program can be continued after September 2018, "if it is necessary".

The euro, therefore, immediately lost the driver to growth and went into the lateral range. Most likely, it will continue to be cautious about the direction of the movement and at the beginning of the new week due to the lack of significant macroeconomic releases. On Thursday, the report PMI Markit on the eurozone countries, the forecasts are favorable, with the production index very close to the highs of the last nine years, the service sector index lags behind insignificantly.

Given that the earlier reports released earlier by Ifo and ZEW indicated further growth of consumer confidence, the growth of Markit indices should be expected, which in turn can support the euro.

Also on Thursday, the minutes of the ECB meeting of October 26 will be published. In the light of Draghi's latest comments, the market will be looking for an answer to the question whether the probability of announcing the exact date of completion of the asset buy-back program was announced at the meeting, as the answer to this question may change the long-term expectations for the euro.

For a break above 1.1850 euros more weighty reasons are required. More likely is the consolidation at the achieved levels with the resumption of the activity of bears and the move towards support level of 1.16.

United Kingdom
The report on retail sales published on Thursday could not provide the pound any support, despite the fact that the dollar was exposed to considerable pressure. Retail sales increased by 0.3% in October; this was slightly higher than market expectations, but on an annual basis, it showed a decline of 0.3%, meaning consumer activity continues to be very low. Despite the fact that prices grew quite confidently, the physical volume of goods sold remained at the levels of a year ago, which indicates certain problems in the consumer sector.

Oil
Oil by the close of the week resumed growth, responding to the reduction of the threat of Venezuela's default and the weekly report of Baker Hughes, according to which the rise in the number of active drilling rigs stopped. The current level of quotes , apparently, by the shale industry is perceived as insufficient to significantly resume investments, and without new drilling wells it is difficult to keep production at current levels, given the high rate of their depletion.

The threat of deep correction has decreased, but the chance to update the two-year high, on the contrary, has increased. The market will catch the insider about the upcoming meeting of OPEC +, one must assume that the general background remains favorable for oil.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

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Technical analysis of EUR/USD for Nov 21, 2017

There is no Economic Data will be released when the European market opens, but the US will release the Economic Data, such as Existing Home Sales, so, amid the reports, EUR/USD will move in a low to medium volatility during this day.

TODAY'S TECHNICAL LEVEL:
Breakout BUY Level: 1.1801.
Strong Resistance:1.1794.
Original Resistance: 1.1782.
Inner Sell Area: 1.1770.
Target Inner Area: 1.1742.
Inner Buy Area: 1.1715.
Original Support: 1.1703.
Strong Support: 1.1691.
Breakout SELL Level: 1.1684.

Disclaimer: Trading Forex (foreign exchange) on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

Analysis are provided by InstaForex

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The growth potential of the pound is limited

The British pound declined against the US dollar following the release of a report, which indicated that the UK government in October this year was forced to borrow more money compared to the same period last year.

This is directly related to the acceleration of inflation, which led to an increase in the costs of debt servicing.

According to the official report of the National Bureau of Statistics, the net borrowing of the UK public sector in October 2017 had amounted to 8 billion British pounds, which is 0.5 billion pounds higher than it was in October of last year. Economists had expected that borrowings would amount to £7.5 billion.

In case the GBPUSD pair drops to catch hold of the resistance at 1.3260, pressure on the British pound would only increase in the near future, which will lead to the renewal of 1.3180 and 1.3140.

Data on the balance of foreign trade will positively affect the overall GDP of Switzerland for the 3rd quarter of this year. As noted in the report, the surplus increased due to the weakening of the Swiss franc in October this year, which had a positive impact on the foreign trade balance.

Therefore, the positive balance of foreign trade in October 2017 amounted to 2.4 billion francs, while exports grew by 2.3% compared to the same period in 2016.

The Australian dollar rose against the US dollar following a speech by the Governor of the Reserve Bank of Australia. Let me remind you that the morning minutes of the RBA, which were prepared after the last meeting, had a negative impact on the Australian dollar.

Philip Lowe said that at the moment there is no special reason to raise interest rates in the near future, and it will be more appropriate to keep rates low for quite a long time.

The growth of the Australian dollar could also occur due to the fact that some major players were afraid of hints from the RBA's governor about the possibility of further lowering of rates. However, Lowe said that in case of further improvement in the economic situation, the increase in rates is more likely than its decrease. According to the head of the RBA, in the economy of Australia there are unused capacities, while restrained growth of wages continues to subdue inflation.

As for the technical picture of the AUDUSD pair, after going beyond the large support level of 0.7630, the pressure on the Australian dollar increased, which led to the renewal of new large levels of 0.7530 with the formation of the forecast for the exit at 0.7500, where a significant profit taking on short positions will occur.

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The preparation for Brexit allocated 3 billion pounds

The EURUSD pair spent the first half of Wednesday in a narrow lateral channel, while traders were preparing for the release of the Federal Reserve's minutes.

Data on the US economy hurt the upward momentum of the US dollar.

According to the report, the number of Americans who applied for unemployment benefits for the first time has declined. This indicates a recovery of the labor market after the autumn hurricanes.

According to the US Department of Labor, the number of initial claims for unemployment benefits for the week from 12 to 18 of November fell by 13,000 and amounted to 239,000. Economists had expected the number of new applications last week to be 240,000.

A good report on the labor market was offset by weak data on orders for durable goods in the US, which fell in October, much worse than economists predicted.

Such data indicates that Americans are making less expensive purchases, which will negatively affect US manufacturers.

According to the US Department of Commerce, orders for durable goods in October 2017 decreased by 1.2% compared to the previous month, amounting to 236 billion US dollars. In September, orders rose by 2.2%. Economists predicted an increase in orders by 0.2%.

As for the technical picture of the EUR/USD pair, only a breakout of the 1.1755-60 range would lead to a larger upward wave in the trading instrument with an update of 1.1800 and a monthly peak output in the area of 1.1860. If the Fed's report contains something interesting about the prospect of tightening monetary policy in December of this year, the demand for the US dollar may rise, which will lead to a return towards the region of large levels of support at 1.1680 and 1.1640.

The British pound strengthened its position against the US dollar following the speech of the Ministry of Finance in the UK. Hammond said that the ministry is preparing for any possible outcome of Brexit, and that the preparation allocated 3 billion pounds.

Furthermore, the economic forecast was lowered, according to which the GDP of the UK for 2017 will grow by only 1.5%, and not by 2%, as predicted earlier. Forecast GDP growth of 1.4% in 2018 and 1.3% in 2019. As Hammond noted, lowering growth forecasts is due to weak labor productivity.

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Euro does not have enough momentum

The euro returned to the high of the day following the release of upbeat data for Germany and the eurozone as a whole, indicating a resurgence of economic growth in the 3rd quarter of this year.

According to the data, Germany's economy in the third quarter of this year has expanded due to growth in exports and investments of companies. The report of the National Bureau of Statistics of Germany Destatis says that the gross domestic product in the third quarter of 2017 increased by 0.8% compared to the previous quarter. Compared to the same period in 2016, GDP grew by 3.3%.

Germany's exports in the third quarter grew by 1.7% compared to the previous quarter, while investments increased by 1.5%.

The Manufacturing PMI in Germany also increased significantly, reaching 62.5 points, better than the forecasts of economists, who expected growth to reach 60.4 points.

The sentiment in the manufacturing sector of France rose in November. According to the report of the National Bureau of Statistics of France, Insee, the composite index of purchasing managers in France rose to 60.1 points in November, compared to 57.4 points in October. The Bureau of Statistics also pointed out that the broader indicator of confidence increased by two points in November, to 111 points.

The euro zone's purchasing managers index can also provide good support to the European economy, which will lead to an increase in demand for the European currency at the end of the year.

According to the research company IHS Markit, the index of supply managers in November 2017 rose to 57.5 points from 56.0 points in October.

Minutes of the ECB did not lead to a new wave of growth in the euro.

The report indicates that the ECB management at the meeting in October had differed on the timing of the completion of the quantitative easing program. However, it agreed to assess the impact of the program of buying corporate bonds. It should be noted that the European Central Bank announced that it is extending the program of bond purchasing until September 2018. However, since December of this year, the volume of monthly purchases will be reduced to 30 billion euros from 60 billion euros earlier.

As a result of the Thanksgiving holiday in the US, market volatility remains low. The technical picture remained without significant changes.

Buyers of risky assets are prepared to enter new monthly highs. However, in order for this to happen it is necessary to break through a large resistance of 1.1840, which may lead to an increase in long positions and an update to levels like 1.1880 and 1.1910.

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AUD/USD testing major resistance, time to start selling

The price is testing major resistance at 0.7629 (Fibonacci retracement, horizontal overlap resistance, channel resistance, Fibonacci extension) and we expect to see a strong drop from this level to push the price down to at least 0.7537 support (Fibonacci extension, horizontal swing low support).

Stochastic (55,3,1) is seeing strong resistance at 96% where we expect a corresponding reaction off. Correlation analysis: NZDUSD is similarly expecting a strong drop.

Sell below 0.7629. Stop loss isat 0.7670. Take profit is at 0.7537

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Technical analysis of EUR/USD for Nov 28, 2017

When the European market opens, some Economic Data will be released such as German GfK Consumer Climate, Private Loans y/y, M3 Money Supply y/y, and German Import Prices m/m. The US will release the Economic Data, too, such as Richmond Manufacturing Index, CB Consumer Confidence, S&P/CS Composite-20 HPI y/y, HPI m/m, Prelim Wholesale Inventories m/m, and Goods Trade Balance, so, amid the reports, EUR/USD will move in a low to medium volatility during this day.

TODAY'S TECHNICAL LEVEL:
Breakout BUY Level: 1.1962.
Strong Resistance:1.1955.
Original Resistance: 1.1944.
Inner Sell Area: 1.1933.
Target Inner Area: 1.1905.
Inner Buy Area: 1.1877.
Original Support: 1.1866.
Strong Support: 1.1855.
Breakout SELL Level: 1.1848

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Stress tests and forecast for world economic growth

The euro continued to decline against the US dollar on Tuesday, November 28, despite good data on lending to private eurozone companies.

According to the report, lending in October rose, indicating the recovery of the eurozone economy.

According to the European Central Bank, lending to private sector non-financial companies in October this year had increased by 2.9% compared to the same period last year. Household lending increased by 2.7% compared to the same period of the previous year. The monetary aggregate M3 in October this year increased by 5%.

Data on the optimism of German consumers slightly supported the euro during the afternoon. According to the report of the German institute GfK, the leading index of consumer sentiment remained unchanged in December compared to November and amounted to 10.7 points. Economists had expected that the index would rise to 10.8 points in December. As stated in the report, the sentiments of German households remain at a high level, as well as expectations about the future.

On Tuesday, the Organization for Economic Cooperation and Development released a report, which raised forecasts for the growth of the world economy for the next year. This happened due to a good rate of growth in the US and the euro area.

According to the data, for this year, forecasts have been raised to 2.2% for the US economy and 2.4% for the euro area economy. In 2018, it is expected that the US economy will grow by 2.5%, and the eurozone - by 2.1%. Without any changes, forecasts for the growth of China's economy remained unchanged, but the data for Canada was revised downwards.

The OECD expects the world economy to grow by 3.6% this year, while in September it was forecasting an increase of 3.5%. In 2018, world growth should be at the level of 3.7%.

The British pound declined after the release of stress tests from the Bank of England.

Stress tests of the Bank of England were conducted at Barclays, HSBC, Lloyds Banking Group, Standard Chartered. It must be noted that back in 2016, Barclays and RBS failed stress tests, but then increased their capital.

The report shows that the Bank of England decided to raise the requirements for the capital buffer to 1% by the end of 2018 from 0.5% at present. This is done primarily in order to protect the banks of the UK from the adverse effects on the part of Brexit. The Bank of England also said that the current scenario of stress tests implies risks that may be associated with Brexit, and therefore the British banking system will continue to support the economy in the event of an unorganized Brexit.

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Daily analysis of GBP/USD for December 01, 2017

The pair remains following a bullish structure above the 200 SMA at H1 chart and looks forward to testing the 1.3541 level, amid USD weakness against the Pound. Corrective moves might happen in the short-term, with the nearest target placed around the 200 SMA and the 1.3303 level. MACD indicator remains in the negative territory, favoring to the downside.

H1 chart's resistance levels: 1.3440 / 1.3541
H1 chart's support levels: 1.3303 / 1.3244

Trading recommendations for today: Based on the H1 chart, buy (long) orders only if the GBP/USD pair breaks a bullish candlestick; the resistance level is at 1.3440, take profit is at 1.3541 and stop loss is at 1.3337.

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The dollar weakens against the backdrop of political threats

Adjusted data on US GDP in the third quarter were better than expected, the growth rate was revised to 3.3%, and by all means, the US economy is recovering successfully. This is despite the fact that the Congress has not yet approved the draft of the tax reform.

However, the main factor of positive growth is not so much the growth of the economy as the growing consumer activity. According to the updated data, in the third quarter, the personal consumption expenditure index was 1.4%, and not 1.3%, as previously reported. This was released the day after the data on personal incomes in October also outperformed forecasts, with growth at 0.4% against expectations of 0.3%.

The market reacted positively to the reports, while the data on business activity in the manufacturing sector released by ISM on Friday made it possible to revise the forecast for US GDP in the fourth quarter to reach 3.5%, reflecting generally confidently positive expectations.

At the same time, it should be noted that the positive dynamics of consumer activity is not due to fundamental changes. The simplest calculations show that the growth of expenses is not based on revenue growth, but on the growth of lending, which in turn reflects certain hopes associated with the future tax reform. The growth of expenses in terms of the potentially able-bodied population is growing steadily, while personal savings are falling and have already reached the pre-crisis level of 10 years ago.

Thus, a certain revival of the consumer sector is associated with hopes for a reduction in tax pressure. If, however, the approval of the reform program in the Congress faces difficulties, then in this case one can expect a sharp decline in consumer activity and an increase in deflationary expectations.

The grounds for such fears are: On Friday, the Senate postponed the vote on the tax reform, the stumbling block was the report of the Tax Committee, from which it follows that the reform will not lead to filling the budget and the deficit will remain at the level of at least $1 trillion in a 10-year perspective. The economic analysis of the tax reform plan by the Minister of Finance Mnuchin has not yet been released. Therefore, the financial effect of the reforms may not be the same as the government represents. Before the markets closed on Friday, the final vote in the Congress did not take place, which ultimately contributed to the depreciation of the dollar.

Another reason for the fall of the dollar is that former adviser to Donald Trump, Michael Flynn, who was accused earlier of providing false information to the FBI, is prepared to testify against Donald Trump. If this news is confirmed, the opponents of Trump will have good reasons for initiating the impeachment procedure, which will automatically put an end to the tax reform program.

This scenario can lead to a rapid reduction in inflation expectations and will call into question the possibility of the Fed to implement the outlined plan for the growth rate in 2018, and the dollar will drop sharply against the yen and the euro. Fears remain hypothetical, but the dollar is losing momentum.

On Monday, the dynamics of the dollar will be determined. First of all, by political news related to the passage of the tax plan through the Congress and the development of the situation with Flynn. Acceptance of the tax plan is of fundamental importance in the light of approaching the date of December 8. Namely, before this date, the law on financing state institutions due to borrowing is in force.

On Tuesday, the ISM report on business activity in the services sector will be published, after a rapid growth in August-October, a slight slowdown is expected, but the level of PMI will remain high and can support the dollar.

In general, the dollar remains the favorite, and any positive news can contribute to a new wave of buying. However, one must assume that the probability of a smooth phased solution of all the issues at the beginning of this week is not very high, and therefore the growth of the euro to 1.20 appears quite certain.

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Pound is selected from the politics

Over the past two weeks, the British pound added 2% versus the US dollar and more than 1% versus the euro, against a background of lower political risks. Popular newspaper, like The Times, reported that London and Brussels managed to agree on the amount of compensation for the divorce, as well as on the issue of the Irish border. It seems like investors are satisfied that Theresa May is paying for a mild Brexit loss of government members. The market will closely follow the phrasing from the table of her talks with Jean-Claude Juncker and Michel Barnier, in order to understand whether it is worth selling due to the fact on initial rumors of buying.

Weekly dynamics of the pound

Source: Bloomberg.
Positive news from Brexit, the problems of promoting tax reform in the United States, as well as the surfaced story of Russia's interference in the US presidential election, helped the GBP/USD pair to rise to a two-month high. The rate of the sterling, weighted by trade, jumped altogether to a peak record in the last six months. At the same time, some people are concerned that Britain's GDP is growing much slower than its US and European counterparts. Investors win back political risk and are ready to turn a blind eye to the long-term pessimistic prospects of the UK economy in order to obtain immediate benefits. Therefore, Credit Agricole believes that the hopes for progress on Brexit will push the GBP/USD pair to 1.4, near which it traded in the first half of 2016.

Commerzbank, on the contrary, is confident that investors are already sold on the factor of positive rhetoric of Brussels at the EU summit in mid-December. If they do not get what they expected, we should prepare for a selling of the sterling. On the other hand, if everything goes according to plan, then it's unlikely that the GBP/USD pair will sharply strengthen. In such circumstances, market attention can shift to macroeconomic data and not related to it, the continuation of the cycle of normalization of the monetary policy of the Bank of England. In this regard, the pound is able to respond sensitively to the release of data on business activity in the services sector, scheduled for December 5. The index of purchasing managers in the manufacturing sector has already pleased the fans of sterling. The figures from the largest sector of the economy of the UK is awaited.

The alignment of forces in the analyzed pair will be influenced by events in the United States. The Senate passed a tax reform project with 51 votes to 49, but now both chambers of Congress are required to find a compromise on the timing of its implementation and on other issues. The dollar could not benefit from the "bullish" news, as uncertainty persists. At the same time, the willingness of former National Security Adviser Michael Flynn to cooperate with the FBI can cast a shadow on the US president, which will negatively affect the USD index.

Technically, updating the November, and then the autumn peak, activates the AB = CD pattern with a target of 127.2%. It corresponds to 1.385. However, we should not rule out a retest of the upper limit of the range of the previous consolidation of 1.304-1.332.

GBP/USD, daily chart

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Fundamental Analysis of AUD/USD for December 6, 2017

AUD/USD has been quite corrective recently after a strong bearish pressure pushing the price off the 0.8150 price area. AUD had been quite mixed with the economic reports where negatives are more in quantity than positive reports for which the currency is currently struggling to gain over USD despite the current weak status of USD. Recently AUD Current Account report was published with negative figure of -9.1B from the previous figure of -9.7B though it is less than the previous figure but could not meet the expectation of much less deficit at -8.8B, Retail Sales report was published with an increase to 0.5% from the previous value of 0.1% which was expected to be at 0.3% and in the Rate Statement the Cash Rate of Australia was unchanged as expected at 1.50% which did not quite helped with the gains of AUD but was able to stop the impulsive bearish pressure in the pair. Today, AUD GDP report was published with a worse value of 0.6% decrease from the previous value of 0.9% which was expected to be at 0.7%. The worse economic report did affect the currency quite well which lead to impulsive bearish pressure today. On the USD side today, ADP Non-Farm Employment Change report is going to be published which is expected to decrease to 189k from the previous figure of 235k, Revised Non-Farm Productivity is expected to increase to 3.3% from the previous value of 3.0%, Revised Unit Labor Cost is expected to decrease to 0.2% from the previous value of 0.5% and Crude Oil Inventories is expected to show less deficit at -3.2M from the previous figure of -3.4M. The forecasts are quite mixed in nature where any better than expected economic report is expected to add to the gains of USD against AUD in the coming days. To sum up, AUD has been quite weak in comparison as it could not dominate USD in its weakest period which is expected to lead to further USD gains in the coming days if USD publishes better economic report results in the future.

Now let us look at the technical view, the price is being held by the dynamic level of 20 EMA and it has worked very well as a resistance to keep the price lower. As the price is currently quite near to the support area of 0.7500-50 the bears are expected to push the price towards the support level in the coming days and any bounce or breaks off the area will lead to further directional movement in this pair. As the price remains below the dynamic level of 20 EMA and 0.7650 price area the bearish bias is expected to continue further.


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Technical analysis of USD/JPY for Dec 07, 2017

In Asia, Japan will release the Leading Indicators and 30-y Bond Auction data, and the US will release some Economic Data, such as Consumer Credit m/m, Natural Gas Storage, Unemployment Claims, and Challenger Job Cuts y/y. So, there is a probability the USD/JPY will move with a low to medium volatility during this day.

TODAY'S TECHNICAL LEVEL:
Resistance. 3: 113.02.
Resistance. 2: 113.80.
Resistance. 1: 112.58.
Support. 1: 112.30.
Support. 2: 112.08.
Support. 3: 111.86.

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Euro and pound will be determined with direction

Eurozone
The euro area economy continues to expand at a steady pace, GDP growth in Q3 was 0.6%, at an annual rate of 2.6%, preliminary data was revised upwards, which is consistent with the overall economic trend.

Growth is primarily due to increased investment and exports. Despite the fact that household expenditures have decreased somewhat, the general level of optimism continues to improve, as indicated by the recent reports of ZEW and IFO.

On Wednesday, a report on industrial production will be released, on Thursday - PMI Markit index. This will be the latest data ahead of the ECB meeting, they will help to predict the overall tone of the commentary and the position of Mario Draghi at a subsequent press conference.

On Thursday, investors do not expect the ECB to decide to make any concrete steps, since there is no reason for this yet. However, forecasts for economic growth and inflation will be updated upwards, as indicated by both growing business activity in recent months and rising oil prices.

The euro as a reaction to the meeting of the FOMC may decline to a support level of 1.1670, growth is limited to the level of 1.1880.

United Kingdom

The pound on the eve of the meeting of the Bank of England on December 14 is seent to be positive. According to Halifax, housing prices have stabilized after more than a year of decline and activity in the construction sector decreased. The inflation forecast published by the Bank of England rose from 2.8% to 2.9%, the trade deficit instead of expanding has unexpectedly remained virtually unchanged. Sufficiently, the industry appears much better, which was clearly facilitated by the protracted period of the weak pound, which supported the export industries.

The industrial sector is growing for the sixth month in a row, on an annualized basis, growth was 3.9%, which is higher than expected

The National Institute for Economic and Social Research (NIESR) reports that, according to their calculations, UK GDP growth for the last 3 months was 0.5%, which exceeds both the indicators of the beginning of the year and 0.4% in the third quarter.

These factors increase the likelihood that the Bank of England will continue to gradually raise rates, and will also contribute to the growth of the pound. Although at the next meeting, the Bank of England will not raise the bid, the general trend is in favor of an increase, which is clearly a bullish factor for the pound.

On Friday, there was news that the UK and the EU agreed on three key points in the first phase of the Brexit talks. The border between Ireland and Northern Ireland was agreed upon, migration policies concerning the rights of EU citizens in the UK, and, most importantly, London's payment for the withdrawal from the EU. Thus, the first phase of negotiations is completed, and at the EU meeting on December 14, it will be possible to announce the progress achieved. This news will strengthen the positions of both the euro and pound.

The pound, nevertheless, will still be under pressure, since there are no serious internal drivers in the coming week. Presumably, a decline towards 1.3250 as an intermediate target and 1.2850 as a long-term goal.

Oil
China, which is the world's major oil consumer, supported the growing trend on Friday, posting significantly higher than expected trade balance data in November. Crude oil imports increased by 19.37% in November, demand remains firmly high, which, combined with a number of restrictive measures by OPEC + and significant financial losses of shale companies in the US, contribute to the formation of a stable demand against the backdrop of stable production in the context of the price war with OPEC. Together, these factors support oil, which allows us to predict a breakthrough of resistance at 63.50 for Brent in the short term.

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Date:

Pound fled from politics

A busy economic calendar and the departure of political risks into obscurity allows us to hope for the return of investors in actively trading the pound. Semiannual negotiations between London and Brussels, judging by the statements of the latter, were completed successfully, which makes it necessary to shift attention to macroeconomic data. In general, there is plenty of data at the beginning of the second week of the month for the UK. Inflation, the labor market, retail sales and the meeting of the Bank of England will satisfy even the highest demands of trade analysts on the news.

The fall of sterling in response to positive news from the negotiation table on Brexit has become a classic example of the implementation of the principle of "buy on the rumor, sell on the facts." Traders sold the GBP/USD quotes on the factor of harmonizing the conditions of the divorce between Britain and the EU, and the message that the round-the-clock work was over and the issue of the Irish border was resolved. This launched a wave of selling against the backdrop of profit taking. Moreover, popular media referring to competent sources reported that the trade deal before the spring of 2018 will not be achieved. However, the bridgehead is laid, and the bulls on sterling, including Nomura and ING, believe that the reduction of political risks of the UK will push the GBP/USD pair in the direction of 1.4 in 2018 and 1.36 in the near future.

On the contrary, "bears" criticize the agreement that was reached, blaming it for lack of details, and referred to the futures market, where the value of options to sell sterling is higher than the purchase. Derivatives are used for risk insurance, and the current dynamics of an indicator such as the risk of reversal (the ratio of premiums on call and put), indicates that investors still fear the sterling's collapse.

Dynamics of the ratio of premiums on options

Source: Bloomberg.

On the other hand, speculators in the futures market held a net long position on the pound for 6 of the last 10 weeks, although before that they acted as net sellers for 98 five-day consecutive days.

Lately, there have been too many news with political coloring, and it's time for the sterling to turn its focus on the economy. In general, the outlook for upcoming releases is moderately positive. Bloomberg experts do not expect inflation to exceed the critical level of 3%, while the acceleration of average wages from 2.2% to 2.5% y/y. In addition to that, the exit from the negative territory of retail sales inspires optimism for bulls in the GBP/USD pair. Moreover, it is beneficial for the Bank of England to maintain a strong pound with the help of "hawkish" rhetoric, and the dollar cannot take advantage of strong data on the US.

It is possible that the growth of the fiscal deficit as a result of the implementation of the tax reform, the reluctance of Donald Trump to see the US currency strong and the recovery of the economies of the competing countries will force the USD index to restore the downward trend in 2018.

Technically, the GBP/USD pair is preparing to retest the upper bound of the previous consolidation range at 1.304-1.332. Assuming that it, like the previous one, ends with the defeat of the "bears", the likelihood of a restoration of the uptrend in the sterling will then increase.

GBP/USD, daily chart

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Date:

BTC/USD reacting off our selling entry perfectly, remain bearish

Bitcoin has reached our selling area and is reacting off it nicely. We remain bearish looking to sell below 17459 resistance (Fibonacci extension, bearish price action, bearish divergence) for a drop towards at least 14739 support (Fibonacci retracement, horizontal overlap support).

Stochastic (34,5,3) is seeing major resistance below 98% and also displays bearish divergence vs price, signaling that a reversal is impending.

Reason for the trading strategy (fundamentally):

Bitcoin January futures (which are contracts that let investors buy or sell something at a specific price in the future) price are about $17,800 which is rather close to where we forecast major resistance. This is in line with the immediate resistance we're seeing on the technical side so it would be safe to start looking to short Bitcoin for a correction.

Sell below 17459. Stop loss is at 18770. Take profit is at 14739.

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Date:

British income levels drop

The British pound did not pay attention to data on pay cuts in the UK from August to October of this year, and this could negatively affect retail as well as GDP growth.

Let me remind you that the fall in real incomes of citizens started last year, when the UK decided on a vote to leave the EU. According to the report, from August to October 2017 compared with the same period of last year, real wages fell by 0.4%. The unemployment rate in the UK for the same period remained unchanged at 4.3%. Economists expected a drop in the unemployment rate by 0.1 percentage points.

As for the pound's immediate prospects, much of it will depend on the decision of the Bank of England on Thursday. Although it is projected that the regulator will leave interest rates unchanged. It will be important to know how the members of the Committee on Monetary Policy will vote for constant interest rates and quantitative easing.

If the Bank of England mentions good progress in Brexit talks during the comments, it will also benefit the British pound, which can significantly strengthen its positions against the US dollar.

As for the technical picture of the GBP/USD pair, further growth is directly dependent on the breakthrough of a large resistance located in the area of 1.3375. Levels that are above 1.3425 and 1.3480 are considered good. In the event of a channel breakout in the lower limit of 1.3300, one can expect an increase in pressure on the pound with a decline towards 1.3225 and 1.3150.

Inflation data in Germany slightly affected the quotations of the European currency during the first half of Wednesday, as it coincided with the forecasts of economists.

According to a report of the statistics agency, the final consumer price index of Germany in November this year increased by 0.3% compared with October. Economists also expected the index to increase by 0.3%. As for the same period for 2016, prices have increased by 1.8% overall.

As for the important events in the afternoon, attention should be focused on the Fed hiking the interest rate, as well as a signal about what will be the acceleration of the normalization of monetary policy next year.

As for the technical picture of the EUR/USD pair, the bulls managed to win back Tuesday's euro decline in the afternoon and returned to the intermediate level of support 1.1740 without much difficulty. While the trade is going above this range, we can count on a further upward trend for the euro with an update of 1.1775 and an exit to weekly highs around 1.1810.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

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ECB leaves rates and economic forecast unchanged

The euro met with minimal hesitation at the key decision of the European Central Bank this week.

According to the data, the European Central Bank left the refinancing rate unchanged at 0.0%, while stating that interest rates will remain at current levels for a long time after the end of the asset purchase program.

Many experts expected that the ECB would make hints on the gradual tightening of monetary policy by the time of the completion of the curtailment of the asset repurchase program, which is scheduled for the end of next year. However, as we can see, this is not included in the plans of the ECB and there are a number of objective reasons for this. At the very least, this is the missing price pressure, which is kept quite low for quite a long time even after good economic growth in the second and third quarters of this year. The labor market in the euro area also shows growth but the rate of increase in wages is far from ideal.

The ECB also revealed that they will reinvest funds received from the redemption of bonds for a long period after the completion of the curtailment of the asset purchase program.

In the morning, preliminary data on the PMI supply managers' index for France's manufacturing sector for December came out. It rose significantly to 59.3 points versus 57.7 points in November. Economists had expected PMI for the manufacturing sector to be at 57.1 points.

A similar preliminary index of supply managers PMI for Germany's manufacturing sector for the month of December this year rose to 63.3 points against 62.5 points in November. Economists expected the index to fall to 62.1 points.

As for the euro area as a whole, the preliminary composite index of supply managers for the euro zone's PMI in December this year increased to 58.0 points with a forecast at 57.3 points, which is slightly lower than the November figure of 57.5 points. In the second half of the day, data on the US labor market came out.

According to a report by the US Department of Labor, the number of Americans who applied for unemployment benefits last week declined. Thus, the number of initial applications for unemployment benefits for the week of December 3 to 9 decreased by 11,000 and amounted to 225,000. Economists predicted that the number of applications would be at 235,000.

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Technical analysis of EUR/USD for Dec 18, 2017

When the European market opens, some Economic Data will be released, such as German Buba Monthly Report, Final Core CPI y/y, Final CPI y/y, and Italian Trade Balance. The US will release the Economic Data, too, such as NAHB Housing Market Index, so, amid the reports, EUR/USD will move in a ... volatility during this day.

TODAY'S TECHNICAL LEVEL:
Breakout BUY Level: 1.1805.
Strong Resistance:1.1798.
Original Resistance: 1.1787.
Inner Sell Area: 1.1776.
Target Inner Area: 1.1748.
Inner Buy Area: 1.1720.
Original Support: 1.1709.
Strong Support: 1.1698.
Breakout SELL Level: 1.1691.

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Elliott wave analysis of EUR/JPY for December 19, 2017

Wave summary:
EUR/JPY is back testing the broken minor support-line, which now acts as resistance. This former support, now resistance, is expected to cap the upside for more downside pressure towards the pivot point at 131.14, which needs to be broken to confirm that wave (D) completed at 134.50 and wave (E) now is developing towards the ideal target seen at 123.43.

Short-term a break below minor support at 132.10 confirms more downside pressure towards 131.14.

R3: 133.89
R2: 133.76
R1: 133.00
Pivot: 132.10
S1: 131.70
S2: 131.14
S3: 130.56

Trading recommendation:
We are short EUR from 133.40 with stop placed at 133.80.

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AUD/JPY reversing nicely below major resistance

The price has started to form a really nice reversal pattern with bearish divergence being formed. We look to sell below major resistance at 86.67 (Multiple Fibonacci retracements, horizontal overlap resistance, bearish divergence) for a push down to at least 84.69 support (Fibonacci extension, horizontal swing low support).

Stochastic (55,3,1) is seeing major resistance below 98% where we expect a corresponding drop from. We're also seeing bearish divergence vs price signaling that a reversal is impending.

Sell below 86.67. Stop loss is at 87.34 Take profit is at 84.69.

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Elliott wave analysis of EUR/JPY for December 21, 2017

Wave summary:
The break above resistance at 134.50 told us that wave (D) still is developing and more upside towards the "old" 137.37 target should be expected to complete wave (D) and set the stage for the final decline within the huge triangle consolidation, that has been developing since July 2008. Support is now seen at 134.40 and again at 133.84. The later should be able to protect the downside for more upside closer to 137.37.

R3: 136.05
R2: 135.75
R1: 134.90
Pivot: 134.40
S1: 133.84
S2: 133.57
S3: 133.24

Trading recommendation:
We will buy EUR at 134.10 and place our stop at 133.40.

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The US dollar returns to the game

Data in the first half of the Thursday exerted pressure on the European currency, not allowing it to get beyond its weekly highs against the US dollar. According to the report of a statistics agency, the level of confidence in the manufacturing sector in France in December of this year declined. Thus, the index of sentiment of companies in the manufacturing sector was at 112 points against the November value of 113 points. Despite this, a high level of confidence supports the economic growth of France. Restrained demand for the euro is also associated with early parliamentary elections, which took place in Catalonia. It is expected that the majority of seats in parliament can go to parties that advocate integrity, and which are against the independence of Catalonia. Coupled with another result, the pressure on the European currency may rise again. Weak data on the annual growth of US GDP in the 3rd quarter of this year did not allow the US dollar to further strengthen its positions against the European currency in the afternoon at the beginning of the US session. According to the report of the US Department of Commerce, the US economy in the third quarter of this year expanded by 3.2% compared with the same period in 2016, which is lower than the previous estimate. According to the previous estimate, the annual growth of US GDP in the third quarter was 3.3%. Economists forecast that GDP will remain unchanged at the level of 3.3%.

The main reason for the decline in the indicator was consumer spending, which dropped further during the reporting period than previously thought. Growth was noted in company investments and exports.

As for the technical picture of the EURUSD pair, an unsuccessful attempt to get beyond the resistance level of 1.1885 led to the expected downward correction in the trading instrument, which will likely be limited to support levels around 1.1830 and 1.1805.

The British pound rose after data on reduced borrowing of the UK public sector. According to the report, in November of this year, the net borrowing of the UK public sector decreased and amounted to 8.7 billion pounds compared to the same period of last year. As noted in the report, borrowing declined due to increased tax revenue.

As for the technical picture of the GBPUSD pair, it is likely that the pressure on the pound will continue and that will lead to a decline in the trading instrument towards the lower border of the channel to the area of 1.3330 and 1.3300, from which it was possible twice to see the return to the market of large buyers of the British pound.

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Inflation continues to grow in Japan

Weekends and holidays are always accompanied by a low volume of trades against the background of lack of important fundamental statistics.

Most likely, serious and purposeful movements will not be formed in the pairs EUR/USD and GBP/USD before the end of this year.

Some leading experts expect that the growth of the US economy next year will significantly accelerate due to the approved program of tax cuts, and also due to an increase in government spending. Do not forget that at the end of last week, US President Donald Trump signed a new tax bill with a total cost of $ 1.5 trillion, which the budget will not be counted on.

According to economists of Goldman Sachs, the measures taken by the White House administration will lead to a larger GDP growth in 2018. According to the data, the US GDP in 2018 will grow by 2.6%, and 1.7% in 2019. These data were revised upwards by 0.3% and 0.2%.

Economists of J.P. Morgan also expects more significant growth in consumer spending, which will stimulate the economy of the country, adding to the previous forecast of 0.2%. In J.P. Morgan forecasts, the US GDP growth of 2.1% next year.

As for the technical picture of the EUR/USD pair, it did not change significantly compared to the forecast at the end of last week. Only a confident exit to the resistance level 1.1880 will lead to the formation of a new upward wave, with an update of the monthly highs of 1.1900 and 1.1935.

The data on consumer price growth in Japan did not lead to significant changes in the USD/JPY pair, even despite the increase in the index which is a positive sign for the Bank of Japan.

According to the report of the Ministry of Internal Affairs and Communications of Japan, the base consumer price index in November rose by 0.9% compared to the same period of the previous year after an increase of 0.8% in October. While economists expected the index to grow by 0.8%.

The general consumer price index rose by 0.6% in November after rising to 0.2% in October this year. Economists predicted an increase of 0.5%.

Despite the lack of strong impetus, prices continue to grow for 11 consecutive months, which makes the Bank of Japan feel more relaxed.

The index, excluding the prices of fresh food and energy, rose by 0.3% compared with the same period in 2016 after an increase of 0.2% in October.

Today, the unemployment rate in Japan in November 2017 fell to 2.7% from 2.8% in October, as the number of jobs increased. As indicated in the report, there were 100 applicants in November who had 156 jobs compared to 155 in October.

* The presented market analysis is informative and does not constitute a guide to the transaction.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

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Prepare to sell below major resistance

The price is approaching major resistance at 113.76 (76.4% Fibonacci retracement, Fibonacci extension, horizontal overlap resistance) and we expect a strong reaction off this level to push the price down to at least 112.13 support (Fibonacci retracement, multiple horizontal swing low support).

Stochastic (55,3,1) is dropping nicely from our 97% resistance with good downside potential.

Sell below 113.76. Stop loss is at 114.54. Take profit is at 112.13.

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Wave analysis of the EUR / USD currency pair for December 28, 2017

Analysis of wave counting:
In a thin inter-holiday market, the EUR/USD pair was able to add about 60 pp in price and re-tested to the level of the 19th figure in the second half of yesterday. It can be assumed that the currency pair has reached the final stage of the formation of the wave c, in b, in c, in a, in (C). If this is the case, the pair can resume reduction quotes and mark the beginning of a future wave in a, and in (C) after virtually reaching the highest level achieved yesterday or after the growth to the level 1.1920-1.1930.

Objectives for building a downward wave:
1.1736 - 38.2% by Fibonacci
1.1666 - 23.6% Fibonacci retracement
Goals for building an upward wave:
1.1900
1.1918 - 11.4% Fibonacci retracement

General conclusions and trading recommendations:
The construction of the downward trend section continues, as well as the construction of the assumed wave b, in c, in a, in (C). If this assumption is correct, the quote will resume its increase with targets around 19 figures and the mark of 1.1918. Hereinafter, a decline in quotations may resume with the targets located near the calculated marks of 1.1736 and 1.1666, corresponding to 38.2% and 23.6% Fibonacci, and lower.

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Wave analysis of the USD / JPY currency pair. Weekly review

Analysis of wave counting:
At the end of last week, the pair USD / JPY still began to decline, losing about 90 pp and was able to work out the mark of 112.50 in the middle of the Friday session. Thus, it seems that the currency pair has attempted to confirm the transition to the stage of formation taking a rather complex form of the waves c, b, a, (C). If this is the case, then in the process of the development of the wave structure of this wave c, b, a, (C), the currency pair can continue the already identified downward movement in the direction of the levels of the 111th or even 110th figure.

Targets for the downward wave option:
111.01 - 50.0% of Fibonacci
110.14 - 61.8% of Fibonacci

Targets for the upward wave option:
115.43 - 61.8% of Fibonacci
116.32 - 76.4% of Fibonacci

General conclusions and trading recommendations:
The pair USD / JPY continues to build the upward wave (C). Thus, the increase in quotations may continue within the wave c, a, (C) with targets located near the estimated levels of 115.43 and 116.32, which corresponds to 61.8% and 76.4% of Fibonacci (these goals will be reviewed). The assumed wave b, a, (C) can resume its construction, complicating its internal wave structure.

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Traders are waiting for the Fed's Minutes

Data on the good condition of the German labor market slightly supported the European currency, which began to gradually lose its positions paired with the US dollar after the pre-New Year rally that was observed in the entirety of the previous week.

According to the report of the Federal Ministry of Labor of Germany, the number of applications for unemployment benefits in Germany in December 2017 decreased by 29,000, while economists had expected a decrease in the number of applications by only 10,000.

Data for November were revised. The final report indicates a decrease in the number of applications for 20,000, not 18,000, which was previously announced. The unemployment rate in December was 5.5%.

While the market is just beginning to "swing" after the New Year holidays, all investors' attention today will be directed to the publication of the Fed's minutes from the meeting that took place last year on December 12 and 13. It should be noted that it decided to raise federal funds rates by a quarter of a percentage point to the range of 1.25% -1.50%.

In the minutes, it will be more significant to expect further interest rate increases early in 2018. Analysts predict at least three of such increases. The timing of the next rate increase will also be important. If it is the 1st quarter of this year, it is possible that the demand for the US dollar may return, as there are no plans to change the policy of the European Central Bank until spring.

Retail sales, according to The Retail Economist and Goldman Sachs, fell after the Christmas week. According to the report, for the week from December 24 to December 30, the sales index in US retailers fell by 2.3% compared to last week. In comparison with the same period in 2016, the sales index in US retail chains grew by 3.9%.

As for the technical picture, the attempt of the bulls in the morning to reach on an important level of resistance in the area of 1.2070 was unsuccessful. As a result, the scenario began to develop in line with a bearish forecast. Now you can expect the support in the area of 1.2000 and 1.1955. Talk about the resumption of the upward trend in the euro will be possible after consolidation above 1.2055.

The British pound, though not immediately, but began to decline gradually against the US dollar after a weak report in the construction sector of the UK.

According to the statistics agency,, the index of supply managers for the construction sector of the UK in December 2018 fell to the level of 52.2 points from 53.1 points in November. It should be noted that the value above 50 points indicates the retention of activity, despite the decline in the index.

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Euro and pound win back their positions against the US dollar

Good data for the euro area and the UK in the first half of the day led to a slight strengthening of the European currency and the British pound after yesterday's decline, which was noticed after the publication of the Fed's protocols.

According to the IHS Markit report, the composite PMI of the euro zone's supply managers rose to 58.1 points in December from 58.0 points. This once again confirms the fact that economic activity in the eurozone at the end of 2017 remained at a fairly strong level. This allows you to count on excellent indicators for GDP growth. Also, it is most likely that in early 2018, the current growth rate of activity will continue due to the flow of new orders.

As for the technical picture of the EURUSD pair in the short term, the exit beyond the level of 1.2035, which I recommended to pay attention to in the morning review, led to the resumption of purchases of the European currency. The next target is a break above the monthly highs, which will lead to the renewal of new resistance levels of 1.2125 and 1.2170.

The British pound strengthened its position against the US dollar against the backdrop of good data on the service sector, which accounts for a significant portion of the UK GDP.

According to IHS Markit's report, PMI's supply managers index for the UK services sector increased to 54.2 points in December 2017 against 53.8 points in November. Economists had expected the index in December to be at 54.0 points. The IHS Markit report noted that business growth accelerated at once in all regions of the UK.

Today, the number of approved mortgage loans in the UK was published for November which increased compared to October. Despite this, growth is gradually slowing down, indicating a decrease in activity in the housing market.

So, according to the Bank of England, the number of approved mortgage loans in the UK in November 2017 was at 65 140 against 64 890 in October. Meanwhile, the average for the last 6 months was at 66 562, indicating a likely decrease in activity. According to the Nationwide Building Society, housing prices in the UK in December last year rose by 2.6% compared with the same period in 2016.

Unsecured consumer lending in the UK also began to gradually slow down.

According to the same Bank of England, unsecured consumer lending in November 2017 grew by only 1.4 billion pounds, while economists expected a 1.6 billion pounds increase in lending. Compared to November 2016, lending grew by 9.1%.

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NZD/USD approaching major resistance, prepare to sell

The price is testing major resistance at 0.7188 (Fibonacci retracement, horizontal overlap resistance, bearish divergence) and a strong reaction could occur at this level to push the price down to at least 0.7041 support (Fibonacci retracement, horizontal pullback support). However, we are also in a bullish ascending channel and only a break of this channel would confirm further downside move.

Stochastic (34,5,3) is seeing major resistance at 94% and also displays bearish divergence vs price signaling that a reversal is impending.

Sell below 0.7188. Stop loss is at 0.7280. Take profit is at 0.7041.

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European Economics Preview: Eurozone Economic Confidence Data Due

Economic confidence and retail trade from euro area and factory orders from Germany are due on Monday, headlining a busy day for the European economic news.

At 2.00 am ET, Destatis is scheduled to issue Germany's factory orders data. Economists forecast orders to fall 0.2 percent on month in November, reversing a 0.5 percent rise in October.

In the meantime, industrial production data from Norway is due.

At 3.00 am ET, the Czech Statistical Office releases industrial and construction output and foreign trade figures. Also, Hungary's industrial output and retail sales reports are due.

At 3.15 am ET, the Swiss Federal Statistical Office publishes inflation data.

At 4.30 am ET, Eurozone Sentix investor confidence data is due. The indicator is forecast to rise slightly to 31.2 in January from 31.1 in December.

At 5.00 am ET, the European Commission publishes Eurozone economic sentiment survey results. The index is seen at 114.7 in December versus 114.6 in November.

In the meantime, Eurostat releases retail sales data. Economists forecast euro area retail sales to grow 1.2 percent on month in November in contrast to a 1.1 percent fall in October.

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Elliott wave analysis of EUR/NZD for January 9, 2018

Wave summary:
EUR/NZD has declined nice and is now close to the first support near 1.6571. This support is expected to protect the downside for at least a corrective rally closer to 1.6800 and maybe even turn prices higher trough important resistance at 1.7025 for the next impulsive rally towards 1.7777.

R3: 1,6890
R2: 1.6800
R1: 1.6701
Pivot: 1.6630
S1: 1.6571
S2: 1.6447
S3: 1.6298

Trading recommendation:
We are short EUR from 1.6795. We will book half profit here at 1.6675 for a nice profit of 120 pips and we will move our stop lower from 1.7085 to 1.6835 on the rest of the position.

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Good data on the labor market did not help the euro

Good data on industrial production in Germany, as well as on the labor market in the euro area, did not provide the expected support to the European currency, which continued to decline in Tuesday's trading against the US dollar. The single currency was affected by discussions related to the increased likelihood of verbal intervention from the European Central Bank.

Let me remind you that yesterday there were rumors that the ECB could opt for an intervention in order to weaken the current high rate of the European currency, thus preventing the fall in economic growth rates and the decline in the trade surplus due to the appreciation of exports.

In the first half of the day, data showed that industrial production in Germany in November 2017 increased by 3.4% compared with October, significantly exceeding the forecasts of economists. Compared to the same period in 2016, production increased by 5.6%. Economists had expected that in November 2017 industrial production in Germany would grow by only 1.9%.

Production in the manufacturing industry of Germany in November increased by 4.3%, and in construction by 1.5%.

As expected, in 2017 the labor market in the euro area continued to strengthen.

According to the report of the statistics agency, the unemployment rate in the euro area in November 2017 decreased and amounted to 8.7% against 8.8% in October. The increase was 107,000 jobs.

Regardless, some experts believe that an overly early winding up of the bond repurchase program by the European Central Bank could negatively affect the main factors that positively affect the euro area economy, which will lead to a slowdown in the decline in the unemployment rate. However, this forecast does not affect the first half of 2018, as, according to the results of the December survey of manufacturing companies, it is expected to increase the rate of hiring of labor.

On Tuesday, it was also announced that France's trade deficit in November increased. This happened due to the reduction of energy exports and transport equipment.

Thus, according to the report of the French government, the foreign trade deficit in November 2017 amounted to 5.7 billion euros against 5.3 billion euros in October. The current account deficit in the balance of payments in November was 3.3 billion euros against 2.6 billion euros in October.

The British pound also continued to decline against the US dollar after the release of data from the British Retail Consortium. Thus, retail sales excluding volatile categories of goods in the 4th quarter of last year decreased by 1.9%, compared to the same period in 2016, the fall was 1.4%.

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Protocols of the ECB helped the euro

The euro did not receive serious support from investors after the release of good data on industrial production in the euro area. However, the publication of the minutes from the December meeting of the European Central Bank forced traders to change their view of risky assets.

In the first half of the day, it became known that Germany's economy in 2017 grew at a slower pace than expected. According to the report of the Federal Bureau of Statistics of Germany, Germany's gross domestic product grew by 2.2% last year. Despite this, economists expected a more serious growth rate in the region of 2.3%. The surplus of the country's budget in 2017 amounted to 1.2% of GDP.

Given the economic indicators demonstrated by Germany in 2017, it is not surprising that this country is the basis of the eurozone and the European Union as a whole. However, given the difficulties now faced by German Chancellor Angela Merkel in her post, it can be assumed that it is political problems that indirectly affect the main financial indicators in early 2018.

As I noted above, the industrial production of the eurozone completes the year with an excellent upward trend. According to the report of the EU statistical agency Eurostat, industrial production in November 2017 increased by 1.0% compared to the previous month and by 3.2% compared to the same period of the previous year. Economists predicted that growth will be at 0.6% compared to the previous month and 2.9% compared to the same period of the previous year.

The publication of the minutes of the meeting of the European Central Bank provided substantial support to the euro, as many investors found in them a hint of a possible curtailment of the asset repurchase program by the Central Bank this fall.

The minutes indicate that the ECB can change its attitude to the credit policy in case the state of the economy continues to improve in 2018. The leaders also agreed that the policy should change gradually so as not to affect the recovery of the euro area economy.

Weak data on the US labor market exerted even more pressure on the US dollar. According to the report of the US Department of Labor, the number of initial applications for unemployment benefits for the week of December 31 to January 6 increased by 11,000 and amounted to 261,000. Economists had expected the number of applications to be 245,000.

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Elliott wave analysis of EUR/JPY for January 15, 2018

Wave summary:
The corrective rally from 133.09 spikes just above our upper target at 135.25 and should now be ready to turn lower again for a decline towards 131.11 before another corrective rally is expected towards 134.10.

Short-term a break below minor support at 134.79 will be a strong indicator that the corrective rally from 133.09 has completed and the expected decline to 131.11 has begun.

R3: 136.64
R2: 136.05
R1: 135.66
Pivot: 134.79
S1: 134.25
S2: 133.65
S3: 133.09

Trading recommendation:
We sold EUR at 134.74. We will place our stop at 136.75, but expect to move it lower soon. Upon a break below 134.79, we will move the stop lower to 135.75.

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Date:

Elliott wave analysis of EUR/JPY for January 16, 2018

Wave summary:
We continue to regard the rally from 133.01 as corrective and is looking for a break below minor support at 135.36 and more importantly a break below support at 135.00 as confirmation that this correction has completed and a new decline 131.11 is developing.

At no point should a break above 136.64 be seen under this count.
R3: 137.37
R2: 136.64
R1: 136.32
Pivot: 135.36
S1: 135.00
S2: 134.80
S3: 134.35

Trading recommendation:
We are short EUR from 134.75 with our stop placed at 136.75. Upon a break below 135.00 we will lower our stop to 136.15.

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Date:

Technical analysis of USD/JPY for Jan 17, 2018

In Asia, Japan will release the Core Machinery Orders m/m data, and the US will release some Economic Data such as TIC Long-Term Purchases, Beige Book, NAHB Housing Market Index, Industrial Production m/m, and Capacity Utilization Rate. So, there is a probability the USD/JPY will move with a low to medium volatility during this day.

TODAY'S TECHNICAL LEVEL:
Resistance. 3: 110.97.
Resistance. 2: 110.76.
Resistance. 1: 110.54.
Support. 1: 110.27.
Support. 2: 110.06.
Support. 3: 109.84.

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Date:

Four drivers of gold growth

Precious metals became the main beneficiary of the weakness of the US dollar. The impressive growth of the world economy allowed palladium to hit record highs near $1,140 per ounce. From the beginning of the year, platinum added almost 8% and is one of the leaders of the commodity market. Gold managed to break through to the September peaks, and it appears that the bulls are determined to continue the rally. However, the EUR/USD movement stalled near the 1.23 mark against the backdrop of the ECB's "dovish" rhetoric, so it's too early to talk about the final defeat of the dollar.

Dynamics of precious metals and gold

Source: Financial Times.

The fact that the "greenback" is not at ease and does not react to the growing likelihood of the US GDP being dispersed under the influence of tax reform, or to strong macroeconomic data for the United States, is of paramount importance for the XAU/USD. However, it would be wrong to only talk about a single driver of growth.

The rapid rally in Brent and WTI increases the risks of accelerating consumer prices in the US and other countries. At the same time, central banks, including the Fed, prefer a slow normalization of monetary policy. These circumstances pose serious obstacles to the real yield of treasury bonds, which is a "bullish" factor for gold.

Let's not forget about political and geopolitical risks. On January 19, the US government could be temporarily shut down. More than four years ago, this resulted in a serious slowdown in the US GDP. Yes, the Republicans prepared a draft of its interim financing until February 16, but it looks raw and leads to an emergence of new enemies, which creates problems in the Senate voting. In Germany, negotiations between the bloc of Angela Merkel and the Social Democrats are unlikely to be as easy as initially intended. The Berlin wing of the SPD protested against the coalition, and until the party's congress on January 21-22, uncertainty will loom in the markets. Once again, US Secretary of State Rex Tillerson reiterated the threat of North Korea and urged China and Russia to implement sanctions more actively.

Thus, a weak dollar, growing risks of accelerating inflation and a fall in the real yield of US Treasury bonds, political uncertainty in the United States and Germany, as well as the possibility of an escalation of the conflict over North Korea lay a powerful foundation for the continuation of the XAU/USD rally. Positions of "bears" look hopeless, however history shows that the trends often unfolded at a time when the crowd firmly believed in their continuation.

In my opinion, the "bulls" for EUR/USD brought the pair too far. Its long-term prospects appears positive, but it is not yet time to win back the factor of normalization of the monetary policy of the ECB, and the presence of political risks in Germany and Italy raises doubts about the validity of current levels. If the euro goes into a correction, the growth of the USD index will help lower the price of gold.

Technically, reaching a target of 88.6% for the "Shark" pattern enhances the risks of pullback in the direction of 23.6%, 38.2% and 50% of the CD wave. Gold, daily chart

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Date:

Technical analysis of EUR/USD for Jan 19, 2018

When the European market opens, some Economic Data will be released such as Current Account and German PPI m/m. The US will release the Economic Data too, such as Prelim UoM Inflation Expectations and Prelim UoM Consumer Sentiment, so, amid the reports, EUR/USD will move in a low to medium volatility during this day.

TODAY'S TECHNICAL LEVEL:
Breakout BUY Level: 1.2420.
Strong Resistance:1.2404.
Original Resistance: 1.2377.
Inner Sell Area: 1.2350.
Target Inner Area: 1.2286.
Inner Buy Area: 1.2222.
Original Support: 1.2195.
Strong Support: 1.2168.
Breakout SELL Level: 1.2152.

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