Yen keeps enemies close

USD/JPY bears are supported by the risks of global stock indexes correction due to trade wars

The world’s large banks are still bullish on the yen, though the USDJPY has risen up from the zone of its three-month lows. Morgan Stanley and Citigroup recommend buying the yen against the US dollar, while Deutsche Bank AG recommends buying it versus the British pound and the Chinese yuan. Bank of America Merrill Lynch expects the Japanese currency to rise against the euro. At initial stages of trade wars, investors preferred the greenback, but they are now lured to other safe-haven assets due the shift of the Fed’s policy outlook.

The yen became the best performing G10 currency in 2018; however, most of its success is associated with the first half of the year, when investors were drawing parallels with the 1970s and the 1990s. Last century, trade conflicts supported the strengthening of the Japanese currency, however the marked skipped such factors as the Fed’s aggressive monetary tightening and the strength of the US economy, supported by massive fiscal stimulus. Finally, the greenback has taken away the status of the main safe haven form the yen and has almost caught up with it at the finish. However, in 2019, it won’t benefit from the federal funds rate hike and the 3% GDP growth, affected by the tax reform. The market responds to the decline in global risk appetite in a usual way, the USD/JPY is sliding down.

With this regard, it is natural that the pair’s quotes are rising amid the recovery of the US stock indexes, as Donald Trump has proposed to delay a decision to impose tariffs on autos and auto parts, imported from the EU and Japan. I wonder how long it will be rising. The trade wars will hardly end in June, and the Japanese economy looks shaky. Japan’s GDP was up from 1.6% to 2.1% Y-o-Y in the first quarter due to the positive changes in private inventories, public expenditures and the fact that exports fell at a slower rate than imports.

Weak imports indicate weak domestic demand, which is confirmed by the fact that a smaller contribution to the GDP growth came from private consumption. The GDP rate increase doesn’t look persistent, and the situation may change a lot in the second quarter; especially since positive economic data allow the government to raise sales tax. A similar tax reform resulted in the recession in 2014.

Dynamics of the contribution of imports and net exports to Japan’s GDP

Source: Bloomberg

Along with the change in the Fed’s policy outlook, escalation of trade wars and a potential decline in the Japanese GDP, which should press global risk appetite even lower, the yen’s advantages also include investors’ willingness to boost the share of safe havens in their portfolios. They used to be too confident in a soon end of the US-China trade war and a continuous rally of global stock indexes; so, they are revising their strategies now. An increased demand for hedging is a bearish factor for the USDJPY. In addition, higher political risks in the euro area make the restoration of the USDJPY short-term downtrend be just a matter of time. I suggest selling on the rise as a main trading scenario. Initial targets might be set at 108.45 and 108.05.


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Price chart of USDJPY in real time mode

Yen keeps enemies close

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

Analysis for oil, gold and EUR/USD for 21.05.2019

Gold found a temporary support at 1275.0

USCrude – oil

Oil is retesting the strong middle-term resistance [63.46 – 63.15]. Unless it is broken out, the middle-term downtrend will continue, and the May’s low will be broken through again. If the price consolidates above the zone at two US sessions, it will be relevant to buy with a target at Target Zone 2 [66.61 – 66.30].

Yesterday, the trade opened with a gap that was covered later. Additional Zone [62.99 – 62.91] was also broken out yesterday. Although the price has been pulled back above AZ, I wouldn’t recommend looking for buy trades there.

The strong daily resistance is the new AZ [63.29 – 63.21]. If there is a sell pattern, I recommend selling oil according to the pattern with a target at Intermediary Zone [62.20 – 62.04].

If IZ is tested, the short-term trend may reverse. I suggest looking for purchases first, but, if the sellers consolidate the price below the zone, it will be relevant to sell.

 

USCrude Trading decisions for today:

  1. Sell according to the pattern from Additional Zone [63.29 – 63.21]. TakeProfit: Intermediary Zone [62.20 – 62.04]. StopLoss: according to the pattern rules.
  2. Buy according to the pattern from Intermediary Zone [62.20 – 62.04]. TakeProfit: 63.76. StopLoss: according to the pattern rules.

XAUUSD – gold

Gold found a support at 1275.0. In the longer timeframe chart, there is the middle-term downtrend, so, add to your sell positions in case of a correction.

Gold short-term trend is also downward. Sell target is Target Zone [1269.3 – 1265.9]. The trend key resistance moves to the price zone of [1292.3 – 1290.6].

To sell at good prices, I recommend expecting a correction, the higher, the better. The trend border is at IZ, so, the price can be corrected up to this zone.

Additional Zone [1283.0 – 1282.1] is also a strong resistance. Be cautious, when looking for sell positions there and enter a trade only according to the pattern.

 

XAUUSD Trading decisions for today:

  1. Sell according to the pattern from Additional Zone [1283.0 – 1282.1]. TakeProfit: 1273.8. StopLoss: according to the pattern rules.
  2. Sell according to the pattern from Intermediary Zone [1293 – 1290.6]. TakeProfit: 1273.8. StopLoss: according to the pattern rules.

EURUSD – Euro/Dollar

The EUR/USD quotes are still going down. Remember, the first target for middle-term sell positions is the low of April, the second one is Target Zone 3 [1.1041 – 1.1025].

The eurusd is trading down in the short term. The downside target is Target Zone [1.1103 – 1.1087].

The strong resistance zones, as of today, are:

  1. Price zone of [1175 – 1.1188].
  2. Key resistance of the trend [1.1232 – 1.1224].

To sell at beneficial prices, I recommend expecting the test of either of the above two zones and looking for a sell signal.

 

EURUSD Торговые решения на сегодня:

  1. Sell from the zone of [1175 – 1.1188]. TakeProfit: Target Zone [1103 – 1.1087]. StopLoss: 1.1212.
  2. Sell according to the pattern from Intermediary Zone [1.1232 – 1.1224]. TakeProfit: Target Zone [1.1103 – 1.1087]. StopLoss: according to the pattern rules.

IZ – Intermediary Zone: responsible for the price momentum reversing

TZ – Target Zone: a zone that is 75% likely to be reached after IZ breakout.

GZ – Gold Zone: zone in the medium-term momentum.

All zones are calculated based on the average daily price of the instrument and margin requirements of the futures.


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Price chart of XAUUSD in real time mode

Analysis for oil, gold and EUR/USD for 21.05.2019

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

Dollar kills off competitors

Trade wars support U.S. status as the world’s top economy

China wanted to surpass the United States, but Donald Trump has prevented this. This is the US president’s opinion. According to HSBC projection, with the current growth pace, China’s GDP will stand at $26 trillion in 2030, while U.S. GDP will rise to $25.2 trillion. The IMF suggests that the world’s top economies will be different in 11 years. Donald Trump doesn’t seem to be a free trader. All his protectionism is nothing else but the desire to set back the US main rivals. As soon as he settles the matter with China, he will attack the EU. This not the best news bit for the euro.

The EUR/USD bulls’ positions look critical. The second half of 2018 saw the German economy rather close to a recession, as its export had been badly damaged by trade wars and a decline in foreign demand. The situation is started improving in early 2019, however the US-China conflict escalation has set it back. In addition, the euro is also pressed down by the pound, troubled by Brexit, and by the Euro-skeptics, gaining popularity. One may argue that Marine Le Pen lost the election to Emmanuel Macron in 2017, and Italian populists had to admit their plans to be unrealistic and to go begging to Brussels. Nonetheless, the European Parliament election is a special case. Ahead the vote, one may return the former ideas; especially since, there are mass protests in France, and the Italian economy is about to collapse.

It is remarkable that increased political risks in Europe doesn’t push the euro volatility up, unlike previous years. I believe the reason is the dovish rhetoric of the world’s leading central banks that assures investors of the ample liquidity. Low market volatility and a decline in global risk appetite are keeping the euro afloat due to exiting carry trades.

Dynamics of political risks and euro volatility

 

 

Source: Nordea Markets

At the beginning of the week, ending May 24, the EUR/USD seems to be sleeping because of the busy economic calendar for the second half of the week. Investors are not active, expecting the releases of the minutes of the Fed’s and the ECB’s meetings, the reports on the German and the euro-area PMIs and the European Parliament election. Although Jerome Powell claimed the US PCE slowdown to be temporary, following the FOMC meeting in May, the inflation expectations, measured by using data of Treasury Inflation Protected Security rates (TIPS), have been down to 1.82%, the lowest value since January. According to the changes in financial conditions, the Fed can afford to cut the target rate by 0.5%-0.75%.

Dynamics of Fed Funds target rate and financial conditions

Source: Nordea Markets

After all, nobody expects the ECB to be hawkish either. In April, The European Central Bank didn’t yet know about either GDP growth up to 0.4% Q-o-Q in Germany and in the euro area in the first quarter, or about inflation acceleration. The euro is pressed down by the concerns about a further decline in the PMI, as the purchasing managers knew about a new round of trade wars before. Therefore, if the support at 1.113 is broken out, the EUR/USD is getting more likely to continue declining to 1.1. The euro bulls need to draw the rate above $1.12 to get back in the game.


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Price chart of EURUSD in real time mode

Dollar kills off competitors

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

Wave analysis of major cryptocurrencies for 20.05.2019

Forecast for BTCUSD, ETHUSD, LTCUSD, EOSUSD

Wave analysis for BTCUSD

The market continues moving in the long-term descending zigzag B, with a corrective linking wave [X] forming inside. After this wave is complete, the market is highly likely to continue declining in the bearish zigzag [Z] of B. Let us see the market structure in the H4 timeframe to clarify the assumption.

The corrective wave [X] is taking the shape of a plain upward zigzag АВС that consists of three parts. After the converging horizontal triangle B had been complete, the market started rising in the impulse wave C that consists of waves [i]-[ii]-[iii]-[iv]-[v]. During this trading week, the BTCUSD is likely to be growing towards level 8504; afterwards, it may reverse and start declining. It is already too late to enter long trades, as the uptrend is at its final stage; but it is too early to enter short trades because the downtrend hasn’t yet started. Therefore, I’d rather advise to avoid trading and monitor the situation.


Wave analysis for ETHUSD

The long-term downtrend continues developing, it is taking the form of a triple zigzag. Currently, there is forming the [X] wave that is a plain bullish zigzag, consisting of three parts: (А), (В) and (С). Let us study the internal structure of the [X] wave in the four-hour timeframe to clarify the situation.

The final part of the [X] wave is apparently taking the form of an ending diagonal 1-2-3-4-5. All the determining waves of this formation, i.e. waves 1,3 and 5, are zigzags. The final part of the last upward zigzag 5 is currently emerging. The price is expected to be rising in the impulse (v) of [c] this trading week. An approximate trajectory of a possible future price movement is presented in the chart.


Wave analysis for LTCUSD

After the long-term upward impulse A had finished, the long-term downtrend B started, which is a triple zigzag. The final part of a linking wave [X] is currently developing. After it completes, the market will continue declining in the [Z] wave. Let us see the market layout in more detail in a shorter timeframe.

Supposedly, the [X] wave is taking the form of a triple zigzag (W)-(X)-(Y)-(X)-(Z), with wave (Z) of [X] that could have been complete within. Afterwards, there was the price decline in the (1) impulse, followed by a corrective wave (2). Within the wave, the market has been moving up towards level 99.70. After the ascending correction (2) completes, the market may start declining. One might look for sell positions only after the trajectory is confirmed and the initial descending impulses are formed.


Wave analysis for EOSUSD

The market is moving in the long-term downtrend that is taking the form of zigzag [W]-[X]-[Y]-[X]-[Z]. There is currently developing the [X] wave that is a double zigzag (w)-(x)-(y). After this wave is fully complete, the market will continue moving down in the next bearish zigzag [Z]. Let us see the market internal structure in more detail.

Wave [X] consists of two upward zigzags (w) and (y), joined by a linking wave (x). There is currently developing wave (y) that is taking the form of a plain zigzag ABC, with an impulse wave C forming inside. The downward corrective wave [iv], which is taking the form of a plain zigzag, is likely to be complete within this trading week. Afterwards, the market should continue rising in the [v] impulse towards a level of 6.92. Therefore, in the current situation, one might enter long positions at a level around 5.705 when the corrective wave [iv] is about to finish. The chart presents an approximate trajectory of a possible future price movement.


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Wave analysis of major cryptocurrencies for 20.05.2019

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

Will pound catch a falling knife?

Positive reports on UK inflation and retail sales data may support GBP/USD bulls

There is one step from the great to the ridiculous. The GBP, having been the G10 leader during a few consecutive months, set for a 10-day fall against the US dollar amid the escalation of political and geopolitical risks. Improved economic performance, including the UK GDP growth at 0.5% Q-o-Q in the first quarter, and the BoE hawkish rhetoric don’t provide any support to the GBP/USD bulls. Their opponents have managed to draw the pair quotes down to its 4-month low, as investors are growing more confident that Theresa May will resign as prime minister

GBPtrend

Source: Reuters

The sterling surge in 2019 can be associated with the three key drivers. First, the UK economy badly needs a rise in global risk appetite. It supports the capitals inflow into the British assets and so allows covering the current account deficit. The talks about a soon end of the US-China trade war provided a strong support to the GBP. However, following Donald Trump’s tweets about increased import tariffs in May, the situation has radically changed.

Second, following the extension of the UK withdrawal from the EU through late October, investors believed that Theresa May would at last make the Parliament adopt her plan. Nonetheless, the prime minister is getting more likely to resign, as no compromise with Labour party has been reached yet. If May is replaced by Boris Johnson, the UK former Foreign Secretary and ardent critic of Theresa May’s Brexit strategy, the GBP/USD may drop down to 1.2, according to Societe Generale.

And, finally, the GBP is getting less support from the Bank of England. At its last meeting, Mark Carney warned that Britain was likely to raise interest rates multiple times, and financial markets were wrong to assume otherwise. Considering the Fed’s passive attitude, the UK-US bond yield gap is indicating that the sterling should stop falling at the current levels. The matter is that the BoE will take active measures only provided that the political situation in the UK clarifies.

Dynamics of GBP/USD and UK-US bond yield gap

Source: Investing

Goldman Sachs suggests that there is too much negative in the market now. According to the bank, the odds of that Theresa May’s plan or a similar document will be approved by the UK Parliament are at 50%, the odds of no Brexit at all are at 10%, and the chance for messy Brexit is at 10%. With this regard, the GBP/USD purchases during a decline look quite promising.

I, personally, suppose that the sterling will be under pressure until Britain’s Parliament votes on a Brexit bill in early June. Investors sentiment could be deciphered based on their response to the economic data reports. If positive reports on the UK inflation and retail sales for April result in the pound strengthening, then most of the negative has been already priced and it makes some sense to buy the GBP/USD, hoping for its further rally towards 1.3 and higher. Otherwise, if the pair doesn’t grow despite the positive statistics, it may continue falling lower.


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Price chart of GBPUSD in real time mode

Will pound catch a falling knife?

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

Will pond catch a falling dagger?

Positive reports on UK inflation and retail sales data may support GBP/USD bulls

There is one step from the great to the ridiculous. The GBP, having been the G10 leader during a few consecutive months, set for a 10-day fall against the US dollar amid the escalation of political and geopolitical risks. Improved economic performance, including the UK GDP growth at 0.5% Q-o-Q in the first quarter, and the BoE hawkish rhetoric don’t provide any support to the GBP/USD bulls. Their opponents have managed to draw the pair quotes down to its 4-month low, as investors are growing more confident that Theresa May will resign as prime minister

GBPtrend

Source: Reuters

The sterling surge in 2019 can be associated with the three key drivers. First, the UK economy badly needs a rise in global risk appetite. It supports the capitals inflow into the British assets and so allows covering the current account deficit. The talks about a soon end of the US-China trade war provided a strong support to the GBP. However, following Donald Trump’s tweets about increased import tariffs in May, the situation has radically changed.

Second, following the extension of the UK withdrawal from the EU through late October, investors believed that Theresa May would at last make the Parliament adopt her plan. Nonetheless, the prime minister is getting more likely to resign, as no compromise with Labour party has been reached yet. If May is replaced by Boris Johnson, the UK former Foreign Secretary and ardent critic of Theresa May’s Brexit strategy, the GBP/USD may drop down to 1.2, according to Societe Generale.

And, finally, the GBP is getting less support from the Bank of England. At its last meeting, Mark Carney warned that Britain was likely to raise interest rates multiple times, and financial markets were wrong to assume otherwise. Considering the Fed’s passive attitude, the UK-US bond yield gap is indicating that the sterling should stop falling at the current levels. The matter is that the BoE will take active measures only provided that the political situation in the UK clarifies.

Dynamics of GBP/USD and UK-US bond yield gap

Source: Investing

Goldman Sachs suggests that there is too much negative in the market now. According to the bank, the odds of that Theresa May’s plan or a similar document will be approved by the UK Parliament are at 50%, the odds of no Brexit at all are at 10%, and the chance for messy Brexit is at 10%. With this regard, the GBP/USD purchases during a decline look quite promising.

I, personally, suppose that the sterling will be under pressure until Britain’s Parliament votes on a Brexit bill in early June. Investors sentiment could be deciphered based on their response to the economic data reports. If positive reports on the UK inflation and retail sales for April result in the pound strengthening, then most of the negative has been already priced and it makes some sense to buy the GBP/USD, hoping for its further rally towards 1.3 and higher. Otherwise, if the pair doesn’t grow despite the positive statistics, it may continue falling lower.


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Price chart of GBPUSD in real time mode

Will pond catch a falling dagger?

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

Euro is back to the beginning

Emmanuel Macron’s victory started EUR/USD uptrend in 2017, defeat of his supporters will increase the risks of EUR/USD decline in 2019

The greater evil should be warded off by the lesser evil. Donald Trump supposes that he may give up his ideas about the benefits of the weak dollar for the US economy in order to revise the trade terms with China. The US president believes that China will agree to make a deal with the US, sooner or later, because, otherwise, the Chinese economy will be badly damaged. Furthermore, the deal should provide more benefits to the U.S. than to China. During all the previous years, China was getting advantages from trade with the United States. It’s time to pay the debts now.

Such a position of the US administration corresponds to Trump’s campaign promises to get tougher, dealing with China, than his predecessors. On the other hand, as I have stressed many times, the USD future trend will depend on which economy will be damaged stronger by the trade war: the US or the rest of the world. The University of Michigan’s consumer sentiment for the US in early May to its highest level in fifteen years. Therefore, a decline in the US growth for the first quarter was temporary. The US consumer spending is likely to increase in Q2, which is a positive sign for the US GDP and the greenback.

Dynamics of US Consumer Sentiment Index

   

Source: Wall Street Journal.

However, Beijing doesn’t seem to be willing to continue negotiations. China believes that it has at least two advantages over the U.S. Just a word from Xi Jinping will get the PBOC to observe his recommendations and the team of professionals to stabilize China’s stock indexes and yuan; unlike Donald Trump, who has to confront with both the Fed and the financial markets. In addition, the Chinese leader can efficiently influence common people’s mind by citing the historical experience of China’s oppression of by other states. It seems that Xi Jinping will have to use his influence soon, the USD/CNY rise above the psychologically important level of 7 may bring back the case of 2015, when there was a massive capital outflow from China. Based on the volume foreigners’ holdings, the results might be much more disastrous than at that time.

Dynamics of foreigners’ holding of Chinese assets

  

Source: Bloomberg

The derivatives market is especially responsive to trade wars. The chances of the federal funds rate cut in 2019 have been up to 70%, the probability of the ECB interest-rate cut in Q1 2020 is up to 40%. In the euro area, the situation in worsened by the European Parliament election.

In France, mass demonstrations undermined the position of Emmanuel Macron’s supporters. The EUR/USD bullish trend started when he won the presidency in 2017. There are the Euro-skeptics coming up again. An Italian, Salvini, who promised to break the EU limits of 3% budget deficit, shakes hands with a French, Marine Le Pen; the Italy/Germany bond yield gap pushes out, indicating higher political risks in the euro area. In this environment, the euro’s drop below $1.1165 looks natural. The next target for the bears is to storm the support at $1.113.


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Price chart of EURUSD in real time mode

Euro is back to the beginning

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

Analysis for oil, gold and EUR/USD for 20.05.2019

Gold price continues declining. Target is to break through the lows of April and May

USCrude – oil

Oil price is retesting the middle-term resistance [63.46 – 63.15]. Unless it is broken out, the middle-term downtrend will continue, and the May’s low will be broken through again. If the price consolidates above the zone at two US sessions, it will be relevant to buy with a target at Target Zone 2 [66.61 – 66.30].

The short-term trend is upward, and the main target in the trend, Target Zone [64.07 – 63.76], has been reached. The price can further rise after TZ breakout and consolidation above. The target in this case will be Gold Zone [65.49 – 65.33].

Any downward correction should be first of all considered as an opportunity to enter short-term buy trades with a target to break through the local high. The strong supports, according to the methodology, are Additional Zone [62.99 – 62.91] and Intermediary Zone [62.20 – 62.04]. Look for purchases according to the pattern there.

If Intermediary Zone is broken out with the consolidation below, we shall sell USCrude, and the target will be at the lower Target Zone [60.63 – 60.31].

 

USCrude Trading decisions for today:

  1. Buy according to the pattern from Additional Zone [62.99 – 62.91]. TakeProfit: 63.76. StopLoss: according to the pattern rules.
  2. Buy according to the pattern from Intermediary Zone [620 – 62.04]. TakeProfit: 63.76. StopLoss: according to the pattern rules.

XAUUSD – gold

Gold middle-term downtrend continues. The key resistance [1303.7 – 1300.3] hasn’t been broken through, and the sell target is now the low of May 2.

Gold short-term trend reversed downwards last Friday. Intermediary Zone [1286.3 – 1284.6] was broken out. Now, you might look for sell trades in the correction with a target at the lower Target Zone [1269.3 – 1265.9].

The first resistance to the upward correction is Additional Zone [1284.1 – 1283.3]. After it is reached, look for a sell pattern. The second zone to look for short trades is Intermediary Zone [1293.5 – 1291.8] that is the key resistance.

 

XAUUSD Trading decisions for today:

  1. Sell according to the pattern from Additional Zone [1284.1 – 1283.3]. TakeProfit: 1275. StopLoss: according to the pattern rules.
  2. Sell according to the pattern from Intermediary Zone [1293.5 – 1291.8]. TakeProfit: 1275.1. StopLoss: according to the pattern rules.

EURUSD – Euro/Dollar

EURUSD middle-term downtrend continues developing, the target is to break through the April’s low and to reach Target Zone 3 [1.1041 – 1.1025].

Euro short-term trend reversed downwards on Friday via Intermediary Zone [1.1183 – 1.1175] breakout and consolidation below. Now, the main downside target is Target Zone [1.1103 – 1.1087].

I recommended looking for purchases on the correction up to the broken-out zone, or to the key resistance [1.1238 – 1.1230].

 

EURUSD Trading decisions for today:

  1. Sell form Intermediary Zone [1183 – 1.1175]. TakeProfit: Target Zone [1.1103 – 1.1087]. StopLoss: 1.1212.
  2. Sell according to the pattern from Intermediary Zone [1.1238 – 1.1230]. TakeProfit: Target Zone [1.1103 – 1.1087]. StopLoss: according to the pattern rules.

IZ – Intermediary Zone: responsible for the price momentum reversing

TZ – Target Zone: a zone that is 75% likely to be reached after IZ breakout.

GZ – Gold Zone: zone in the medium-term momentum.

All zones are calculated based on the average daily price of the instrument and margin requirements of the futures.


P.S. Did you like my article? Share it in social networks: it will be the best “thank you” 🙂

Ask me questions and comment below. I’ll be glad to answer your questions and give necessary explanations.

Useful links:

  • I recommend trying to trade with a reliable broker here. The system allows you to trade by yourself or copy successful traders from all across the globe.
  • Telegram channel with high-quality analytics, Forex reviews, training articles, and other useful things for traders https://t.me/liteforex

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Price chart of XAUUSD in real time mode

Analysis for oil, gold and EUR/USD for 20.05.2019

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

Economic calendar for the week 20.05 – 26.05.2019

Overview of the main events of the Forex economic calendar for the next trading week from 20.05.2019 to 26.05.2019

Trading on key Forex news: we expect the publication of important macro statistics from Japan, UK, New Zealand, Canada, USA, Eurozone, as well as the publication of the minutes from the May Fed meeting (FOMC minutes)

The dollar ended the past week with a decent gain. At the beginning of the US trading session last Friday, futures for the dollar index DXY reflecting the value of the dollar to a basket of 6 major currencies traded near the mark of 97.70. Thus, the dollar actually won back the fall in the previous two weeks, when Trump announcedan increase in import duties on Chinese goods in his Twitter.

Last week was marked by increased volatility in the financial markets. However, investors prefer the dollar again, which looks more attractive than other currencies due to the greater stability of the American economy in the face of uncertainty and escalation of international trade wars.

The British pound was again an outsider last week. Against the backdrop of the uncertainty caused by the likelihood of a new prime minister being appointed, the British pound has hit its lowest levels against the US dollar and the euro since February.

British Prime Minister Theresa May said last Thursday that she will present a plan for her resignation when Parliament holds an important Brexit vote expected in early June. The fourth vote, which is expected to take place during the week of May 28 – June 3, is likely to be the last for Teresa May.

The most important events of the upcoming week are the publication of important macro statistics from Japan (GDP), the UK (consumer price indices), New Zealand, Canada (retail sales), the USA, the Eurozone (PMI indices), and the publication of the minutes from the May Fed meeting (FOMC minutes).

As always, this trading week we expect a number of important macroeconomic indicators and some important news.

*GMT time

 

Sunday, May 19

23:50 JPY Japan’s GDP for the 1st quarter of 2019 (preliminary release)

GDP is considered an indicator of the general state of a country’s economy and assesses its rate of growth or recession. The report on gross domestic product published by the Cabinet of Ministers of Japan expresses in monetary terms the total value of all final goods and services produced by Japan for a certain period of time. The growing trend of GDP is considered a positive factor for the national currency (yen), and a low result is negative (bearish).

Forecast: GDP growth in Japan in Q1 was 0% (-0.2% in annual terms). In the previous 4th quarter of 2018, GDP growth was +0.5% and +1.9%, respectively. Thus, the data indicate a slowdown in the Japanese economy, and this is a negative factor for the yen and the Japanese stock market.

If the data turns out to be even weaker, then the yen could decline significantly in the short run. Data better than the forecast will strengthen the yen.

Monday, May 20

No important macro statistics planned to be released. 

However, traders should pay attention to the speech by the Fed Chairman Jerome Powell scheduled for 23:00. Volatility may increase on financial markets if he touches on the Fed’s monetary policy. Powell’s comments may affect short-term USD trading. A more hawkish position regarding the Fed’s monetary policy is seen as positive and strengthens the US dollar, while a more cautious one is evaluated as negative for the USD.

Tuesday, May 21

01:30 AUD Minutes from the last meeting of the RB of Australia

This document is published two weeks after the meeting and the decision on the interest rate. If the RBA positively assesses the state of the labor market in the country, GDP growth rates, and also shows a hawkish attitude towards the inflation forecast in the economy, the markets regard this as a higher likelihood of a rate hike at the next meeting, which is a positive factor for the AUD. Soft rhetoric of the bank regarding inflation, above all, puts pressure on the AUD.

Market participants believe that the RBA will not raise interest rates until 2020. Salaries continue to grow slowly, and household debt has grown to a record high, which also postpones the increase in interest rates to a more distant future.

According to the head of the RBA Philip Lowe, “there are no serious arguments in favor of tightening monetary policy in the short term”. In his opinion, “some time will pass before the interest rate are increased”.

02:15 AUD Speech by the head of the RBA Philip Lowe

In his speech, Philip Lowe will assess the current situation in the Australian economy and point out further plans for the monetary policy of his department. Any signals from him regarding changes in the plans of the monetary policy of the RBA will cause a sharp increase in volatility in the AUD trading and in the Australian stock market. If he does not touch on the topic of monetary policy, the market’s reaction to his speech will be weak.

GBP Inflation report

Sometime after 08:30 (GMT), the Governor of the Bank of England and members of the Monetary Policy Committee of the Bank of England will comment on the current economic situation and the outlook for the economy. At this time, the volatility in the pound trading may rise sharply. One of the main benchmarks for the Bank of England in terms of monetary policy prospects in the UK, in addition to GDP, is the level of inflation. If the tone of the report is soft, then the British stock market will receive support, and the pound will decline. Vice versa, harsh rhetoric of representatives of the Bank of England regarding the containment of inflation implying a rise in interest rates in the UK will lead to a strengthening of the pound.

22:45 NZD Report on retail sales for the 1st quarter

The retail sales report is published by the Statistics Bureau of New Zealand. Changes in retail sales are usually considered an indicator of consumer spending. In general, a high value of the indicator is a positive factor for the NZD, and a low one is a negative factor. Forecast: In Q1, growth in retail sales was 0% (versus 1.7% growth in the previous quarter), which may negatively affect the NZD.

Wednesday, May 22

08:30 GBP Consumer Price Index. Core CPI

Consumer Core Index (CPI) reflects the dynamics of retail prices for a group of goods and services that are part of the British consumer basket. CPI is a key indicator of inflation. Its publication causes major movement of the pound on the foreign exchange market, as well as the index of the London Stock Exchange FTSE100.

In the previous month (in March), consumer inflation rose by +0.2% (in annual terms, inflation in March was +1.9%).

Forecast for April: +0.3% (+2.0% in annual terms). This value is likely to have a positive effect on the quotes of the pound, since rising inflation will put pressure on the Bank of England to tighten monetary policy. Indicator indicator below the forecast and the previous values ​​may trigger a weakening of the pound.

Core Consumer Core Index (CPI) is published by the Office of National Statistics and determines the price change of a selected basket of goods and services (except for food and energy) over a given period. It is a key indicator for assessing inflation and changing consumer preferences. A positive result strengthens the GBP, a negative one weakens it.

In March, Core CPI (in annual terms) increased by +1.8% (against +1.8% in the previous month). Probably, the publication of the indicator will positively affect the pound if its value for April is higher than the previous value. Indicator indicator below the forecast and the previous values ​​may trigger a weakening of the pound.

12:30 CAD Retail Sales Index

Retail Sales Index is published monthly by Statistics Canada and estimates total retail sales. The index is often considered an indicator of consumer confidence and reflects the state of the retail sector in the near term. Index growth is usually a positive factor for theCAD; a decrease in the rate of a negative impact on the CAD. The previous value of the index (for February) was +0.8%. If the data for March is weaker than the previous value (growth is expected at +0.4%), then the CAD may decrease.

18:00 USD Minutes from the May meeting of the Federal Open Market Committee (FOMC Minutes)

The publication of this document is extremely important to determine the current Fed policy and the prospects for the interest rate raises in the United States. The volatility of trading in financial markets at the time of publication of the minutes usually increases because the text of the minutes often contains either changes or clarifying details regarding the outcome of the last FOMC meeting of the Fed.

Recently, Fed officials have been increasingly giving statements implying the Fed’s inclination to adopt a wait-and-see attitude regarding further interest rate increases in order to be able to calmly assess the economic situation in the US against the background of insufficiently strong inflation pressure and worsening global economic outlook.

A soft tone of the minutes will have a positive effect on stock indices and a negative effect on the US dollar. A harsh rhetoric of Fed officials regarding the prospects for monetary policy will push the dollar to further growth.

Thursday, May 23

07:30 EUR PMI of business activity in the manufacturing sector of the German economy according to Markit Economics (preliminary release)

PMI of business activity in the manufacturing sector of the German economy is an important indicator of business conditions and the general state of the German economy. This sector of the economy forms a significant part of Germany’s GDP. A result above 50 is regarded as positive and strengthens the EUR, one below 50 is negative for the euro. Previous values: 44.0 in April, 44.1 in March, 47.6 in February and 49.7 in January, which indicates an increase in the negative trend in this sector of the German economy and is a negative factor for the euro. The growth rate will support the euro (in the short term).

08:00 EUR Composite PMI of business activity in the manufacturing sector of the economy of the Eurozone according to Markit Economics (preliminary release)

PMI of business activity in the Eurozone’s manufacturing sector is an important indicator of the state of the entire European economy. A result above 50 is regarded as positive and strengthens the EUR, one below 50 is negative for the euro. Forecast (preliminary release): 51.8 in May (against 51.5 in April, 51.6 in March, 51.9 in February and 51.0 in January), which is likely to have a positive effect on the euro in the short term.

Friday, May 24

12:30 USD Orders for capital goods (ex defense and aviation)

The indicator reflects the value of orders received by manufacturers of capital goods (capital goods are durable goods used to produce durable goods and services) that imply large investments. Goods produced in the defense and aviation sectors of the US economy are not included in this indicator. The high result strengthens the USD. In March, the indicator came out with a value of +1.3%. If data for April is weaker, the dollar may decline. Data better than the previous value will strengthen the dollar.

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Price chart of EURUSD in real time mode

Economic calendar for the week 20.05 – 26.05.2019

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

Dollar pulled out a golden fish

Donald Trump’s wishes come true. For the time being. 

The tale’s a lie but it’s got a hint…Donald Trump’s life reminds more and more of the tale about the golden fish. He wished to be a billionaire – done! The US president – no problem! The ruler of financial markets – welcome! But what if the intention to reshape a whole civilization to please another civilization leaves Trump with a broken trough? Or brings about a catastrophe, as Xi Jinping called it. These two are like 2 women who smile to each other and think to themselves: “You, bitch!” 

Love and hate are just one step apart. The Australian dollar and the Japanese yen will help you make sure it’s true. The former was considered to be a dark horse – a potential leader among G10 currencies – after the improvement of U.S.– Chinese relations at the beginning of the year. The latter had been gloomily falling until Trump tweeted about raising taxes on $200 billion worth Chinese imports from 10% to 25% in May. Both deeply shook financial markets: first, stock indexes moved together downwards due to the escalation of a trade conflict between 2 biggest global economies. Then, they attempted to steady after the President said an agreement would be signed earlier than expected. Remembering oil collapsing by 3% amidst Trump’s appeals to OPEC to increase output, one realizes the golden fish can make wishes come true for real.  

Indeed, Donald Trump is fond of gabbing, but the Americans knew whom they were electing. In 2016, the presidential candidate didn’t have to say “You’ll get to know me better soon, I’m, sorry”. Back then already, some didn’t like him, some laughed at him… now they listen to him.  Not only ordinary people or businessmen, but financial markets too. True, most investors made an appointment with an oculist as they don’t see any sense in what Trump is doing, but truth can’t be escaped: his twitter is sometimes more important than corporate reports or macroeconomic statistics. C’est la vie! Nothing is set in stone.  In our modern world, to post a couple of words on a social network would be enough to set tongue wagging; one doesn’t need to make a speech in front of the public. It’s used to be otherwise.  Even SMSs were used to be delivered with written acknowledgement of receipt. 

The USA’s and China’s exchange of strikes in the form of raising import tariffs seem to bring us back to the year 2018. The same charming smiles on the outside and mutual hostility inside. Thanks God, they smile to each other at least. Beijing ran away from negotiations, confirming its unwillingness to talk at gun point. Even if its own economy suffers, China won’t waver. China has seen a great deal of wars throughout its history, and it will survive another war – a trading one – for sure. That’s what Xi Jinping meant. Donald Trump should probably think well before continuing to apply his stick and carrot policy excluding the carrot. However, the stronger the idiocy is getting,  the closer the broken trough is.


P.S. Did you like my article? Share it in social networks: it will be the best “thank you” 🙂

Ask me questions and comment below. I’ll be glad to answer your questions and give necessary explanations.

Useful links:

  • I recommend trying to trade with a reliable broker here. The system allows you to trade by yourself or copy successful traders from all across the globe.
  • Telegram channel with high-quality analytics, Forex reviews, training articles, and other useful things for traders https://t.me/liteforex

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Price chart of USDJPY in real time mode

Dollar pulled out a golden fish

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.