Technical analysis of NZD/USD for July 20, 2017

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Our target which we predicted in 18th July analysis has been hit. NZD/USD is expected to continue its upside movement. Although the pair posted a pullback, it is still trading above the key support at 0.7330, which should limit the downside potential. The relative strength index calls for a new upleg.

Hence, as long as 0.7330 is not broken, look for a further rise to 0.7405 and even to 0.7435 in extension.

Strategy: BUY Stop Loss: 0.7330 Take Profit: 0.7405

Chart Explanation:

The black line shows the pivot point. Currently, the price is above the pivot point which indicates the bullish position. If it is below the pivot points, it indicates the short position. The red lines show the support levels and the green line indicates the resistance levels. These levels can be used to enter and exit trades.

Resistance levels: 0.740, 0.7405, and 0.7445

Support levels: 0.7310, 0.7285, and 0.7245

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Is AUD/JPY ever going to drop? | Daily Forex Techical Analysis | 20th July 2017

AUD/JPY has been rising and rising and rising. Don't you think it's high time it starts to drop? We take a details look into the structure of AUD/JPY and perhaps, just perhaps, it's about to drop from here.

What do you guys think?

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Intraday technical levels and trading recommendations for EUR/USD for July 20, 2017

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Monthly Outlook

In January 2015, the EUR/USD pair moved below the major demand levels near 1.2100 (multiple previous bottoms set in July 2012 and June 2010). Hence, a long-term bearish target is projected toward 0.9450.

In March 2015, EUR/USD bears challenged the monthly demand level around 1.0500, which had been previously reached in August 1997.

In the longer term, the level of 0.9450 remains a projected target if any monthly candlestick achieves bearish closure below the depicted monthly demand level of 1.0500.

Currently, the EUR/USD pair remains trapped within the depicted consolidation range (1.0500-1.1450) until a breakout occurs in either direction.

Any bullish breakout above 1.1450 will probably liberate a quick bullish advance towards 1.1500 and 1.1600.

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Daily Outlook

In January 2017, the previous downtrend reversed when the Head and Shoulders pattern was established around 1.0500. Since then, evident bullish momentum has been expressed on the chart.

The next daily supply level for the EUR/USD pair is located between 1.1400-1.1520 where the price action should be watched for possible bearish rejection.

Recently, the price levels around 1.1280-1.1295 stood as an intraday resistance where recent bearish correction was initiated towards 1.1120.

The evident bullish rejection was expressed around 1.1120 where the current bullish movement towards 1.1400 was initiated.

As anticipated, the ongoing bullish momentum allowed the EUR/USD pair to pursue further advance towards 1.1415-1.1520 (Daily Supply-Zone) where a valid SELL entry can be offered if enough bearish rejection is expressed.

On the other hand, the price zone of 1.1260-1.1130 stands as a prominent DEMAND zone to be watched when a bearish pullback occurs.

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NZD/USD Intraday technical levels and trading recommendations for July 20, 2017

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Daily Outlook

The NZD/USD pair has been trending up within the depicted bullish channel since January 2016.

In November 2016, early signs of bullish weakness were expressed on the chart when the pair failed to record a new high above 0.7400.

A bearish breakout of the lower limit of the channel took place in December 2016.

In February 2017, the depicted short-term downtrend was initiated in the depicted supply zone (0.7310-0.7380).

However, a recent bullish breakout above the downtrend line took place on May 22. Since then, the market has been bullish as depicted on the chart.

The price zone of 0.7150-0.7230 (SUPPLY ZONE in confluence with 61.8% Fibonacci level) stood as a temporary resistance zone until a bullish breakout was expressed above 0.7230.

This resulted in a quick bullish advance towards the next supply zone around 0.7310-0.7380 where evident bearish rejection and a valid SELL opportunity can be offered if enough bearish rejection is expressed.

Currently, the NZD/USD pair remains trapped between the price levels of 0.7230 - 0.7310 until a breakout occurs in either direction.

Trade recommendations:

Risky traders can have a valid SELL entry at retesting of the current price zone of 0.7310-0.7400. S/L should be placed above 0.7440.

Conservative traders can wait for a bearish closure below 0.7230 then 0.7150 (61.8% Fibo level) for a valid SELL position.

S/L should be placed above 0.7250 while T/P levels should be placed at 0.7050, 0.6970, and 0.6850.

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USD/JPY analysis for July 20, 2017

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Recently, the USD/JPY pair has been trading upwards. The price tested the level of 112.41. According to the 4H time frame, I found a broken wedge formation in the backgorund and a series of lower highs and lower lows, which is a sign that sellers are in control. Reistance at the price of 112.30 is on the test. My advice is to watch for potential selling opportunities. The downward targets are set at the price of 111.60 and 111.00.

Resistance levels:

R1: 112.25

R2: 112.40

R3: 112.55

Support levels:

S1: 111.90

S2: 111.75

S3: 111.60

Trading recommendations for today: watch for potential selling opportunities.

The material has been provided by InstaForex Company - www.instaforex.com

EUR/USD analysis for July 20, 2017

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Recently, the EUR/USD pair has been trading downwards. The price tested the level of 1.1496. According to the 30M time frame, I found a fake breakout of yesterday's low, which is a sign that selling looks risky. I found a hidden bullish divergence on the moving average oscillator, which is another sign of potential strength. My advice is to watch for potential buying opportunities. The upward targets are set at the price of 1.1540 and 1.1580.

Resistance levels:

R1: 1.1530

R2: 1.1540

R3: 1.1550

Support levels:

S1: 1.1510

S2: 1.1495

S3: 1.1487

Trading recommendations for today: watch for potential buying opportunities.

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Global macro overview for 20/07/2017

Global macro overview for 20/07/2017:

The Australian job market data were better than expected as the full-time employment surprises. According to Australian Bureau of Statistics (ABS), the latest labour force data for June 2017 shows that while total employment rose only modestly by 14k people the strong rebound in full-time employment from last month increased up to 62k people, following a revised gain of 53,4k people in May. Part-time employment fell sharply by 48k people. As a result of a rise in the participation rate by 0.1% (which monitors people that are employed or actively searching for work), the unemployment rose by 13,1k people, although the official unemployment rate was steady at 5.6% after the ABS revised it upwards by 0.1% from the May result.

Australia's job market rebounded sharply through the first half of the year after going through a soft patch for the most part of 2016. Declines in full-time employment and a surge in part-time work characterized the Australian economy last year, raising concern over the quality of jobs being created. Nevertheless, since the peak at the middle of 2015, the unemployment rate has decreased from 6.4% to 5.6% and the employment has been increasing for the last nine consequtive months. In this situation, a further improvement in the labour market conditions may encourage the Reserve Bank of Australia to change the course of monetary policy. After the better than expected mid-term inflation data and sound health of the domestic economy, the RBA might start to signal a willingness to increase the interest rate hike sooner than global investors expect. This will in return cause an appreciation of the Australian Dollar across the board.

Let's now take a look at the EUR/AUD technical picture on the daily time frame. After the decline from the level of 1.5082, the bulls have managed to bounce the price from the 50%Fibo at the level of 1.4432 and now are trying to test from below the nearest technical resistance at the level of 1.4629. A successful breakout above this level would open the road towards the next technical resistance seen at the level of 1.4782. Otherwise, the bias remains bearish.

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ECB: 12.45 and 13.30 BST

ECB: 12.45 and 13.30 BST

Morning review.

Today, the main event of the week is the decision of the ECB on monetary policy. The decision will be announced at 12.45 London time, and at 13.30 the speech of the ECB head Draghi will begin.

Interest rates of the ECB will most likely not change. The main rate will remain at the minimum level of 0%, deposit for banks minus 0.4% (this rate could be shifted to zero).

The main question is whether the ECB or Draghi will say in some way about the completion of a huge program of injecting liquidity into the markets.

Investors are almost 100% sure that such a turn of the ECB will be announced today, about the completion of the QE program or at least about the time of such completion.

Actually, the growth of EUR / USD, which continues from the beginning of the year and was + 10% to the dollar, is caused precisely by this expectation of a turn.

At the same time, there are risks for euro-bulls. Firstly, the ECB and Draghi do not want to see a new sharp rise in the euro exchange rate anywhere by 1.2000. This is bad for the euro area economy.

On the other hand, the growth of EUR / USD requires a significant correction, which will inevitably occur at some point (of course, this could be from the level of 1.2000, for example).

According to the Chicago Stock Exchange, the net long-term euro has peaked in three years.

In general, the upward trend for the euro remains but the levels are such that purchases without stops are extremely risky.

The key level is at the top of 1.1580, there is no down right level yet.

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Global macro overview for 20/07/2017

Global macro overview for 20/07/2017:

After its two-day meeting, the Bank of Japan decided to leave the interest rate unchanged at the level of -0.1%. The interest rate has been kept at this level since the beginning of 2016 and the decision was widely expected by global investors. Moreover, the central bank also maintained its purchase of Japanese government bonds so that the 10-year JGB yield remains at 0.0%. The overall value of the bond purchase program was kept at a pace of 80 trillion Yen annually with no change. In the policy statement, the BoJ pushed back the timing of reaching their 2% inflation goal to around 2019 but raised the GDP forecast to 1.8% in 2017, 1.4% in 2018, and 0.7% in 2019.

The BoJ monetary policy has been left unchanged since last September when officials shifted their focus from monetary stimulus to yield-curve targeting.The current situation indicates that the Bank of Japan has become rather lonely in its prolonged dovishness. The BoJ's inability to reduce its massive stimulus program or follow other major central banks in shifting to a tighter policy path can be mainly attributed to very soft inflation in Japan. This situation is not likely to end anytime soon, which underlines the growing policy divergence between the BoJ and most other major central banks.

Let's now take a look at the GBP/JPY technical picture on the H4 time frame. The market has been trying to test the recent swing high at the level of 148.09 with no avail, so it fell towards the level of 145.26. The price has already bounced three times from this level, so any further sell-off might easily violate this level and head towards the next technical support at the level of 144.20.

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Elliott Wave Ananlysis of EUR/NZD for July 20, 2017

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Wave summary:

No change in view here.

We countinue to look for a break above minor resistance seen at 1.5733 and more importantly above resistance at 1.5899 that will call for a continuation higher towards 1.6236 and above here too in the longer term. Only an unexpected break below support at 1.5419 will delay the expected upside pressure.

Trading recommendation:

We are long EUR from 1.5510 with stop placed at 1.5410. Buy a break above minor resistance at 1.5733 and use the same stop.

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Elliott Wave Ananlysis of EUR/JPY for July 20, 2017

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Wave summary:

No change in view here except that for a possible downside target. As the sideways consolidation in wave b drags out the likely downside target for wave c of iv, it will only make it lower to 127.22 before turning higher again in wave v towards 133.46.

Trading recommendation:

We are short EUR from 129.80 with stop placed at 129.70 and we will move our take-profit higher to 127.35.

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Trading plan for 20/07/2017

Trading plan for 20/07/2017:

The volatility during the Asian session is still very limited, with no major movements across the board. EUR/USD is at 1.1510 level, USD/JPY 112.10 level, AUD/USD is at 0.7940 level. WTI oil is higher after yesterday's inventories data, currently, the price of the barrel of oil is $47.10. No market reaction after Bank of Japan interest rate decision.

On Thursday 20th of July, the event calendar is busy with important economic releases. In the morning, the UK will present Retail Sales with Auto Fuel data, the European Central Bank will decide about the Interest Rate, Deposit Facility Rate, and Marginal Lending Facility and 45 minutes later Mario Draghi will participate in the ECB Press Conference. During the US session, Unemployment and Continuing Claims will be released, together with Philly Fed Manufacturing Index data.

EUR/USD analysis for 20/07/2017:

The most important event of the week, ECB Interest Rate Decision, and Press Conference is scheduled for release at 01:45 pm GMT and 02:30 pm GMT respectively. The market participants do not expect any change in the level of the interest rate, so it should stay at the level of 0.0%. The Deposit Facility Rate, Marginal Lending Facility, and Asset Purchase Target should all remain unchanged as well.

The ECB is slowly moving towards normalization of monetary policy and a lack of dovish attitude in relation to the QE program is possible even in July. The reduction of the buy-back program (currently 60billion Euro per month) is unavoidable in the next few months, otherwise, the bank will lead to possessing more than 33% bonds of a given country, thereby breaking the imposed restrictions. Nevertheless, among the members of the ECB Governing Council, the direction and pace of change have not been fully agreed on yet, although recent weeks indicate that it is increasingly closer to consensus. The increase in confidence in the economic recovery has already removed the openness to lowering interest rates from the earlier ECB statements. On the other hand, however, the uncertainty about the future path of long-term inflation restraint against a more aggressive reverse in monetary policy. At the same time, the Governing Council has no interest in fueling the appreciation of the Euro and rising yields on government bonds, so at the press conference, President Draghi can look for opportunities to balance the overall message, which would cause a Euro sell-off across the board.

Let's now take a look at the EUR/USD technical picture at the H4 timeframe. The market is currently in a corrective cycle after establishing a local high at the level of 1.1583. Currently, the price is trading just above the important technical support at the level of 1.1489. Any hawkish statements from the Draghi during the press conference will result in a spike up towards the 1.1583 high and a possible breakout higher. Any dovish statements will result in a sell-off towards the level of 1.1368. Anyway, the most important technical support is still at the level of 1.1310, so as long as this level is not clearly violated, the overall bias is bullish.

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Market Snapshot: Crude Oil at the important resistance

After yesterday's stockpiles data, the price of Crude Oil has managed to get to the important technical resistance at the level of $47.30. This level is just above the 50%Fibo retracements of the last swing down which makes this zone even more interesting. The market conditions look overbought, but the momentum indicator points to the upside, so as long as the level of $46.88 holds, there is still a chance for a breakout towards the next Fibonacci level at $48.19.

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Market Snapshot: USD/JPY bounced from the support

The price of USD/JPY had bounced from the important technical support at the level of 111.64 and now is trying to test the intraday resistance at the level of 112.32. The oversold market conditions and clear bullish divergence support the bullish case and if the resistance is violated, the next important technical resistance is seen at the level of 112.74.

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Technical analysis of USDX for July 20, 2017

The Dollar index is bouncing off the 94.50 area towards 95 where we find the previous lows and the kijun-sen indicator as resistance. Trend remains bearish as long as price is below 95.80.

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Red line - resistance

Blue line - resistance (former broken support)

The Dollar index is in a bearish trend. Price is above the tenkan-sen (Red line indicator) and this implies we could see price move towards the kijun-sen (yellow line indicator) at 95.15. Cloud resistance is at 95.50-95.80. Price continues to make lower lows and lower highs. No trend reversal signal yet.

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Blue lines - bearish channel

The Dollar index remains inside the bearish channel and below both the tenkan- and kijun-sen indicators. Price is also below the 200 Day MA. Daily resistance is at 95.50-96.20 area. As long as we trade below these levels, we are in a bearish daily trend looking for a move towards 92.

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Technical analysis of gold for July 20, 2017

Gold price has stopped its rise at the short-term resistance level of $1,245. Gold price might pull back even further towards $1,230 if $1,235 is broken but overall I remain bullish looking for a move towards $1,260 at least.

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Gold price is trading above the 4-hour Kumo (cloud) and the kijun-sen indicator (now at $1,229). Trend is bullish. Price is trading below the 4-hour tenkan-sen and this implies that we could see a further pull back towards the kijun-sen. Overall I believe the Kumo (cloud) will hold it and price will reverse back upwards towards our $1,260 target.

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On a daily basis we remain below the Kumo (cloud). Long-term bulls want to see price break above $1,250-60. This will open the way for a move above $1,320. I remain long-term bullish Gold and in the short-term I believe we will see $1,250-60 area at least.The material has been provided by InstaForex Company - www.instaforex.com

Technical analysis of EUR/USD for July 20, 2017

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When the European market opens, some Economic Data will be released, such as Consumer Confidence, Spanish 10-y Bond Auction, ECB Press Conference, Minimum Bid Rate, Current Account, and German PPI m/m. The US will release the Economic Data, too, such as Natural Gas Storage, CB Leading Index m/m, Philly Fed Manufacturing Index, 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: 1.1583.

Strong Resistance:1.1576.

Original Resistance: 1.1565.

Inner Sell Area: 1.1554.

Target Inner Area: 1.1527.

Inner Buy Area: 1.1500.

Original Support: 1.1489.

Strong Support: 1.1478.

Breakout SELL Level: 1.1471.

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 material has been provided by InstaForex Company - www.instaforex.com

Technical analysis of USD/JPY for July 20, 2017

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In Asia, Japan will release the BOJ Press Conference, All Industries Activity m/m, BOJ Policy Rate, BOJ Outlook Report, Monetary Policy Statement, and Trade Balance data, and the US will release some Economic Data, such as Natural Gas Storage, CB Leading Index m/m, Philly Fed Manufacturing Index, and Unemployment Claims. So, there is a probability the USD/JPY will move with low to medium volatility during this day.

TODAY'S TECHNICAL LEVEL:

Resistance. 3: 112.43.

Resistance. 2: 112.21.

Resistance. 1: 112.01.

Support. 1: 111.73.

Support. 2: 111.51.

Support. 3: 111.29.

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 material has been provided by InstaForex Company - www.instaforex.com

EUR/USD dropped perfectly towards profit target, prepare to buy

Price has dropped absolutely perfectly from our selling area and is fast approaching our profit target. We prepare to buy above major support at 1.1491 (Fibonacci retracement, horizontal pullback support) for a push up to at least 1.1583 resistance (Fibonacci extension, horizontal swing high resistance).

Stochastic (21,5,3) is seeing strong support above 6% where we expect a corresponding bounce from.

Buy above 1.1419. Stop loss is at 1.1430. Take profit is at 1.1583.

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The material has been provided by InstaForex Company - www.instaforex.com

USD/CHF bouncing perfectly from our buying area, remain bullish

The price has reached our buying area and bounced off it perfectly. We remain bullish looking to buy above strong support at 0.9527 (Fibonacci extension, bullish price action, channel exit potential) for a push up to at least 0.9593 resistance (Fibonacci retracement, horizontal pullback resistance).

Stochastic (34,5,3) is seeing strong support above 3.6% and has good upside potential for USDCHF's further rise.

Buy above 0.9527. Stop loss is at 0.9500. Take profit is at 0.9593.

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NZD/USD dropping nicely from our selling area, remain bearish

The price has started to react off our selling area quite nicely. We remain bearish looking to sell below major resistance at 0.7367 (Fibonacci extension, horizontal swing high resistance, Elliott wave theory, Bearish divergence) for a drop from this level towards at least 0.7300 support (Fibonacci retracement, horizontal overlap support).

Stochastic (55,5,3) is dropping nicely from our 94% resistance and also displays bearish divergence vs price, signaling that a drop is impending.

Sell below 0.7367. Stop loss is at 0.7391. Take profit is at 0.7300.

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GBP/USD approaching major resistance, remain bearish

The price is approaching major resistance at 1.3170 (Fibonacci extension, long term swing high resistance) and we expect to see a reaction off that level for a drop to at least 1.2820 support (Fibonacci retracement, horizontal overlap support).

Stochastic (34,5,3) is seeing major resistance below 95% and we expect to see a drop from here.

Sell below 1.3170. Stop loss is at 1.3257. Take profit is at 1.2820.

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AUD/JPY continues to test resistance, remain bearish

The price continues to test major resistance at 89.11 (Fibonacci extension, swing high resistance) and we expect to see a reaction off this level for a drop to at least 87.52 support (Fibonacci retracement, horizontal swing low support).

Stochastic (34,5,3) continues to test our 98% resistance where we expect a drop from.

Sell below 89.11. Stop loss is at 87.52. Take profit is at 89.61.

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The material has been provided by InstaForex Company - www.instaforex.com

USD/JPY making a nice bounce, remain bullish

The price has finally dropped to our buying level which is major support at 111.77 (Fibonacci retracement, Fibonacci extension, Elliott wave theory, horizontal overlap support) and we expect a bounce above this level for a push up to at least 114.32 resistance (Fibonacci extension, horizontal swing high resistance).

Stochastic (34,5,3) is approaching major support at 1.2% which corresponds with the bounce we're expecting at price.

Buy above 111.77. Stop loss is at 110.88. Take profit is at 114.32.

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The material has been provided by InstaForex Company - www.instaforex.com

Technical analysis of USD/CHF for July 20, 2017

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Overview:

  • This week, the USD/CHF pair fell from the level of 0.9665 to bottom at 0.9523 yesterday. The USD/CHF pair has faced strong support at the level of 0.9523 (the double bottom).
  • So, the strong support has been already faced at the level of 0.9523 and the pair is likely to try to approach it in order to test it again and form a double bottom.
  • Hence, the USD/CHF pair is continuing to trade in a bullish trend from the new support level of 0.9523; to form a bullish channel.
  • According to the previous events, we expect the pair to move between 0.9523 and 0.9665. Also, it should be noted major resistance is seen at 0.9665, while immediate resistance is found at 0.9590. Then, we may anticipate potential testing of 0.9665 to take place soon.
  • Moreover, if the pair succeeds in passing through the level of 0.9665, the market will indicate a bullish opportunity above the level of 0.9665. A breakout of that target will move the pair further upwards to 0.9746.
  • Buy orders are recommended above the area of 0.9523 with the first target at the level of 1.9590 and continue towards the levels of 0.9665 and 0.9746. On the other hand, if the USD/CHF pair fails to break out through the resistance level of 1.9590; the market will decline further to the level of 0.9453.
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Technical analysis of NZD/USD for July 20, 2017

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Overview:

  • Pivot point: 0.7307.
  • The NZD/USD pair is showing signs of strength following a breakout of the highest level of 0.7307. The level of 0.7307 coincides with 61.8% of Fibonacci, which is expected to act as minor support today. Since the trend is above the 61.8% Fibonacci level, the market is still in an uptrend. So, major support is seen at the level of 0.7307. Furthermore, the trend is still showing strength above the moving average (100). Thus, the market is indicating a bullish opportunity above the above-mentioned support levels, for that the bullish outlook remains the same as long as the 100 EMA is headed to the upside. Therefore, strong support will be found at the level of 0.7307 providing a clear signal to buy with a target seen at 0.7372. If the trend breaks the minor resistance at 0.7372, the pair will move upwards continuing the bullish trend development to the level 0.7400 in order to test the daily resistance 1. On the other hand, it would also be sage to consider where to place a stop loss; this should be set below the second support of 0.7287 (50% of Fibonacci retracement levels).
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Daily analysis of USDX for July 20, 2017

The index has been capped by the resistance zone of 94.85 and it would be likely to see a decline towards the support zone of 94.16. The 200 SMA at H1 chart still points to the downside and the preferred scenario remains in favor of the bears. Next targets should be the 94.16 and 93.29 levels. MACD indicator is turning neutral, favoring for sideways' moves in USDX.

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H1 chart's resistance levels: 94.85 / 95.57

H1 chart's support levels: 94.16 / 93.29

Trading recommendations for today: Based on the H1 chart, place sell (short) orders only if the USD Index breaks with a bearish candlestick; the support level is at 94.16, take profit is at 93.29 and stop loss is at 95.02.

The material has been provided by InstaForex Company - www.instaforex.com

Daily analysis of GBP/USD for July 20, 2017

The pair has been in a consolidation tone since Wednesday's session and looks for a catalyst that triggers longs. We're expecting such scenario due to the current position of the 200 SMA at H1 chart and if that happens, then we would like to see an advance towards 1.3106. If it manages to break above it, the next target should be the 1.3238 zone.

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H1 chart's resistance levels: 1.3106 / 1.3238

H1 chart's support levels: 1.3026 / 1.2968

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 1.3106, take profit is at 1.3238 and stop loss is at 1.2971.

The material has been provided by InstaForex Company - www.instaforex.com

Trump, Fed, and the dollar: the end is coming

The second attempt by US President Donald Trump to cancel some of the key provisions of the health insurance program, also known as Obamacare, once again failed. All democrats, as well as four representatives of the Republican party, voted against the amendment leading to the defeat of Trump. Opponents of the program cancellation explained their decision saying that they first need to develop an alternative before cancelling the old system, and not vice versa, as proposed by Trump.

The defeat turned into a fall in the dollar index because it indicates the weakness of the administration's positions.

There is also no support from macroeconomic data. The Federal Reserve Bank's index of manufacturing activity grew by 9.8p in July, which is significantly lower than the 19.8p of the previous month. The Ministry of Labor's report on import and export prices also confirmed the general slowdown of inflation. At this rate, it is quite possible to expect the return of deflationary risks in a few months.

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On Monday, US Treasury Secretary Steven Mnuchin said that the tax system facilitates the withdrawal of huge funds abroad because companies do not want to pay taxes at inflated rates. Mnuchin actually outlined the transition to achieve actions to promote the tax reform plan promised by Trump during the pre-election race. After the announcement of the main provisions in April, investors has since been waiting for a detailed plan which seems to be approaching.

The Trump administration has very little time left to get a positive result before the end of the current financial year. As most experts believe, the Fed will continue the policy normalization even against the threat of slowing inflation and the impending September meeting where the Fed can announce the beginning of the reduction of balance sheets. This process should begin after the release of a detailed tax reform because the reduction of balance sheets by the Fed implies a simultaneous reduction on both assets and liabilities. And if everything is clear with the assets (the Fed presented a plan for gradual reduction of the balance sheets of MBS and Treasuries at the last meeting), then the only way to reduce liabilities is to return excess reserves to commercial banks.

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This means that the method introduced in 2008 to raise funds for the implementation of quantitative easing of programs in the form of increased rate on excess reserves of commercial banks should be changed so that the banks can start withdrawing their resources from the Fed's corresponding accounts. And if the tax reform does not get a specific look by this time, then the commercial banks will simply withdraw their reserves into instruments with appropriate profitability and reliability instead of financing the US re-industrialization program. Who will guarantee that these funds, which they currently have more than 2 trillion of, will remain in the US?

Adding in a decrease in tax collection and rapid increase in budget deficit, which threatens the the new fiscal year beginning October 1, the administration will have to meet simultaneously with the onset of technical default. The limit of the national debt has been exhausted in the spring that's why financing the current activities of the government may be suspended in the next two months. To resolve the issue of the ceiling of borrowing, there must be a positive decision from the Congress which is likely to require a detailed plan for tax reform at the outset.

Thus, the second half of the summer promises to be hot. The dollar is under strong pressure which will persist until there is clarity on the issues mentioned above.

The material has been provided by InstaForex Company - www.instaforex.com

Fundamental Analysis of EUR/GBP for July 19, 2017

EUR/GBP has been in a corrective volatile structure after a non-volatile bullish move towards 0.8850 resistance level and currently struggling at the edge of 0.8850. Recently EUR has been struggling with its mixed and unchanged economic reports which stopped the bullish momentum against GBP where GBP has been struggling to get over the Brexit and the economic uncertainty. Yesterday, the UK released a series of downbeat economic reports including CPI report which showed a worse value at 2.6% which was expected to be unchanged at 2.9%. On the EUR side, today German 30-y Bond Auction report was published at 1.29|1.8 which previously was at 1.02|2.0. The economic report enabled EUR to gain some momentum over GBP. Tomorrow is a big day for both EUR and GBP as a large number of high impact economic reports will be published. Tomorrow, EUR Minimum Bid Rate report will be published which is expected to be unchanged at 0.0%, along with ECB Press Conference. As of the recent hawkish comment of ECB President Draghi, the rate is expected to show some positive result tomorrow and help EUR to gain over GBP. On the other hand, GBP Retail Sales report is also going to be published tomorrow which is expected to show a positive result at 0.4% which previously was at -1.2%. To sum up, though EUR/GBP is struggling at 0.8850 level currently, higher volatility is expected to hit the market tomorrow amid a flood of macroeconomic statistics which will provide hints about upcoming directional movement in this pair. EUR is expected to have an upper hand over GBP in the coming days due to the market sentiment and hawkish behavior of ECB recently.

Now let us look at the technical chart. The price is currently struggling to break above the resistance level of 0.8850. The price has already rejected and had a false break recently above the level which does signal the strength of the bears in the current market situation. Though the price has been supported by 20 EMA along the way towards 0.8850 but recently a good amount of volatility is indicating the presence of bears in the market to take the price further down towards 0.8530 support level. As the price remains below 0.8850 with a daily close the bearish bias is expected to continue in this pair.

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The material has been provided by InstaForex Company - www.instaforex.com