Forex analysis review
Forex analysis review |
| Posted: 23 May 2021 04:31 AM PDT
What to say about the pound ahead of the new trading week? For the pound/dollar pair, a fairly strong and confident upward movement continues. The price last week stopped just 7 points from its 3-year high and is likely to break it next week. All the factors that brought the pound/dollar pair so high and allow it to continue trading at these levels remain in force. Thus, we still expect the upward movement to continue. At least, at the moment, there is no reason to assume even a significant correction in the pound. Moreover, the pair could not correct a couple of months ago against the global upward trend of 2,800 points. The bears are now very weak, so we do not expect a strong downward movement. Perhaps it could be expected if the fundamental background somehow changed and the markets generally paid attention to it. But now all the fundamental and macroeconomic data have only a local impact on the market. Nothing changes globally. Of course, if Scotland holds an independence referendum tomorrow, in which 80% of Scots vote "yes" to leave, this could put a lot of pressure on the pound's position. But we remind you that even now the "foundation" is not in favor of the British currency. Both economically and geopolitically. But, unfortunately for the dollar, the US government and the Fed continue to pour huge amounts of freshly printed money into the economy, so it is unlikely that a strong dollar growth should be expected until this process ends. And it is unlikely to end in 2021. Plus, do not forget that the pound has also changed to an upward trend in global terms. The last one took 13 years. Thus, although the British economy is recovering much more slowly than the American one, the pound is still growing. The next week will be stunningly boring for the British pound. In addition to the macroeconomic statistics in the States, where there will be a couple of reports that deserve attention, nothing more interesting is planned. The UK calendar is empty. There will also be a couple of absolutely minor reports and a couple of speeches by representatives of the Bank of England, just like in the Eurozone. Nothing else. However, the British currency still does not need all these "statistics" and "foundation". Thus, the American markets can pay attention to these data and even work them out. But it is unlikely that this will somehow affect the overall upward trend. Thus, we expect further growth of the pair regardless of the fundamental background of the next week. It should also be noted that the Bank of England is now the most militant among the central banks of the European Union and the United States. It was the head of the Bank of England who said that he would not allow inflation to exceed 2.5%, which the markets immediately interpreted as a hint of a possible rate hike, although a few months ago there was talk of reducing this rate to a negative area. From our point of view, such rhetoric from Bailey is not quite true. Simply put, the British regulator recently considered additional stimulus, and when official statistics do not yet give any reason to conclude a strong recovery, the Bank of England hints at a possible tightening of monetary policy. And, for inflation to go above 2.5% in the UK, you need to try very hard. Recall that the latest report of the consumer price index showed inflation of 1.5%. What does this have to do with the low base factor (the weak inflation rate in April last year), and the energy price growth factor (as noted by Andrew Bailey himself). If the inflation in the United States rose to 4.2% and caused concern among investors, then in the UK there is absolutely nothing to fear. And in any case, what impact does the hawkish tone in Andrew Bailey's rhetoric have on the pound? Beneficial? So the pound shows just a record growth over the past 14 months without it. Thus, the "hawkish" rhetoric of representatives of the Bank of England (although recently Silvana Tenreyro hinted at a possible weakening of monetary policy) may provide additional support for the pound. However, it is growing well without it, and other factors are more important for the British currency.
Recommendations for the GBP/USD pair: The pound/dollar pair on the 4-hour timeframe at the end of last week, when approaching its 3-year high, frankly slowed down and began to correct. The price managed to gain a foothold below the critical line, so in principle, the correction may continue on Monday and Tuesday. But we remind you that now the factors that support the pound are much more and they are very strong. Thus, with a probability of 80%, the growth of the British currency will continue with the targets of the resistance levels of 1.4263 and 1.4360. Explanation of illustrations: Price levels of support and resistance (resistance/support) – target levels when opening purchases or sales. You can place Take Profit levels near them. Ichimoku indicators, Bollinger Bands, MACD. The material has been provided by InstaForex Company - www.instaforex.com |
| Posted: 23 May 2021 04:31 AM PDT
The European currency paired with the US dollar continues to grow. On the 24-hour timeframe, it is visible that a new round of the global upward trend has been going on for almost two months and there was only one more or less significant correction. Thus, as we said earlier, macroeconomic and local fundamental factors, such as the speech of Christine Lagarde or Jerome Powell, have an impact on the movement of the pair. For example, this Friday, the head of the ECB finally began to talk about monetary policy and the prospects of the economy (before that, several of her speeches did not give any new information to the markets at all). And this caused the fall of the European currency. But along with this, the pound also fell on Friday, although the words of Christine Lagarde had nothing to do with the British currency. The euro fell because of the openly "dovish" rhetoric of Christine Lagarde and the "formally hawkish" rhetoric of the Fed. In the case of the Fed, you can see a radically opposite picture, since no specifics were contained in the protocol. However, formally, he was still more "hawkish" than before. So it turned out that this week the euro currency declined only on the Fed minutes and the statement of Christine Lagarde. All other days, the euro grew, maintaining an upward trend. Therefore, now "macroeconomics" and "foundation" have an impact only locally. For example, markets may react to a particular event or report. However, this reaction is not too strong and does not break the main trend in any way. Let's figure out what to expect from the "foundation" and "statistics" next week. The calendar of macroeconomic events for the next week in the European Union does not include a single important event. There will be some minor macroeconomic publications and some minor speeches by ECB representatives. And nothing else. Perhaps the situation will change on Monday or Tuesday. In any case, you need to pay attention to the calendar. As for the United States, it will publish an indicator of consumer confidence on Tuesday, on Thursday – applications for unemployment benefits, GDP for the first quarter and orders for durable goods, and on Friday – data on personal spending and income of the American population. What can be distinguished from this small list? Market participants are already familiar with the GDP data. If the previous value of + 6.4% is not very different from the next estimate, then there is no need to wait for a reaction. Orders for durable goods? It is extremely rare to cause at least some reaction from traders. The other reports have even less significance and degree of significance. It turns out that the next week will be extremely boring, and the euro/dollar pair will be traded exclusively on "technology". Of course, fundamental events may still appear. Therefore, perhaps next week will not be as boring as it seems now. The most important thing now is different. All the "macroeconomics" and "foundation" still have a very weak and indirect influence on the movement of the pair. And the "global factors" that we constantly talk about continue to work. But what can you do if it is these "global factors" that have the greatest impact on the movement? Before the pandemic crisis and the epidemic itself, things were somewhat different. The trends for the currency pairs were slightly different, and the factors that influenced them also worked differently. But in the last year, everything has changed and now the question is, when will everything be the same as before? Judging by the statements of the Fed and the ECB, "as before" will not be soon. At least the two largest central banks are simultaneously talking about the need to continue monetary stimulus. Consequently, the markets will be affected for a long time by the imbalance between the money supply. As for the latest rhetoric of the Fed and the ECB, Christine Lagarde continues to press that the European economy is weak and therefore continues to demand monetary stimulus. Consequently, the PEPP program will continue to work and stimulate the economy. And no one is even talking about the rates in the European Union right now. They have been at ultra-low levels in recent years. However, now the situation is much worse than in 2016-2019 when the ECB rate was already 0%. And all the macroeconomic indicators of the European Union suggest that Christine Lagarde is not lying when she talks about the weakness of the European economy. Recall that in the last two quarters, the EU recorded a contraction in the economy. At a time when the American economy was growing at a high rate, the European economy was shrinking. Consequently, in the EU, exactly the stimulus will be weakened after similar actions from the Fed. In the United States, only the latest Fed minutes contained a micro-hint that in the future (it is not known when) the Fed members may begin to discuss the curtailment of the quantitative stimulus program if the economy continues to recover at a high pace. Even in the US, where the recovery is really fast, they are not even thinking about reducing the stimulus yet.
Trading recommendations for the EUR/USD pair: The technical picture of the EUR/USD pair on the 4-hour chart is unambiguous. The upward trend continues. However, the price on Friday was fixed below the critical line, so a pullback or correction is possible. The pair may try to go down to 1.2084 (Senkou Span B line). In general, we see that the movement is not too strong now, with frequent and rather deep corrections. A kind of "swing", but with a clear upward slope. Therefore, it is recommended to trade for a buy on the 4-hour timeframe when the price returns above the Kijun-sen line. Recall that the pair is already very close to its local and 3-year highs. Most likely, they will be overcome. Explanation of illustrations: Price levels of support and resistance (resistance/support) – target levels when opening purchases or sales. You can place Take Profit levels near them. Ichimoku indicators, Bollinger Bands, MACD. The material has been provided by InstaForex Company - www.instaforex.com |
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