Global macro overview for 18/01/2018

The Bank of Canada hiked the overnight rate from 1.00% to 1.25% yesterday, just as expected by the market consensus. This interest rate hike was previously priced in by market at 90%. In the BoC Rate Statement, the bank stressed that the economic situation justifies further increases, but high private indebtedness and growing concerns about the future of NAFTA agreement are the main factors to slow down the rate of normalization. Therefore, this rate hike was very familiar to last Bank of England interest rate hike, which was a "dovish" and conditional hike.

There is no question that the Canadian economy, in general, has improved significantly on field of the retail sales, GDP growth, CPI, and employment activity over the last couple of months, nevertheless the BoC had more options than to raise interest rates immediately such as signaling plans to tighten in March – a "hawkish" hold. It will be very interesting to watch the BoC decision next time as there is still a possibility of a cut if the economic conditions worsen.

Let's now take a look at the USD/CAD technical picture at the H4 time frame. After an initial spike, the market reversed back to the consolidation zone and it still sits there today. None of the important levels was violated and the momentum has switched to neutral. The nearest technical support is seen at the level of 1.2350 and the nearest technical resistance is seen at the level of 1.2556.

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Global macro overview for 18/01/2018

The recent ECB comments regarding the further interest rate hike has left a lot of the traders confused. The period of easy EUR/USD gains has just ended and market participants are returning to the tactical field survey. On the one hand, the market remains convinced that it is right and believes that the ECB will end the QE in September, and then soon pass interest rate hikes. However, the central bank itself does not want the EUR to quickly reflect those expectations (which may be met), because excessive appreciation will dismiss this scenario if it harms the inflation areas. The ECB confirmed with various channels yesterday that there will be no change in the message at the next week's meeting. Regarding the dovishness of President Draghi, it might not be surprised if in the statement ECB will dissipate any optimism about the economic situation in order to the fears of the strength of the euro and to extinguish the rally of the currency. The medium-term portfolio capital continues to prefer EUR appreciation, but now it may wait for a move back to 1.2100 zones. Daytraders, however, have a shorter investment horizon and after an unsuccessful attempt to break the price over 1.23, they may now be tempted to reverse their position. Another cautious comment of ECB members and new "leaks" or rumors are not out of the question, so it will be better to prepare for more increased volatility and more price swings.

Let's now take a look at the EUR/USD technical picture at the H4 time frame. The market has hit the level of 1.2321 and pulled-back with three 120 pips swings. It looks like it is being traded inside of a descending channel, just above the technical support at the level of 1.2193. If the channel resistance will hold, the next technical support is seen at the level of 1.2150.

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Fundamental Analysis of EUR/GBP for January 18, 2018

EUR/GBP has been impulsive with retracements recently inside the tight corrective structure above the support area of 0.8750. Due to recent positive economic reports on the GBP side, EUR has been struggling to keep up with the mixed economic reports to push the price higher. Today, the UK RICS House Price Balance report was published with a significant increase to 8% in value from the previous value of 0% which was expected to be negative at -1%. The positive economic report provided GBP with the required pressure to sustain the recent gain against EUR that is expected to continue further. On the EUR side, today German Buba President Weidmann spoke about the interest rates and monetary policies. His speech was quite neutral in nature and was not enough to support the EUR gains against GBP. As for the current scenario, GBP has turned the table suddenly inside the volatile and corrective structure. GBP is expected to dominate further in the coming days until the eurozone provides better than expected economic reports or events, signalling further notable economic recovery in the long term.

Now let us look at the technical chart. The price is currently residing below the dynamic level of 20 EMA after a recently bounce off the trend line resistance at 0.89 area. The price action squeeze is currently signaling a bearish pressure which is more probable to break below it in the coming days to head much lower below the 0.8750 area with a target towards 0.8550. As the price remains below 0.8900, which is the trend line resistance, the bearish pressure is expected to continue further.

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Bitcoin analysis for January 18, 2018

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Bitcoin (BTC) has been trading sideways at the price of $11.700. Chicago Board Option Exchange (Cboe) historic bitcoin futures market has had its first month, and results are decidedly mixed depending on the analyst. Some see the experiment as a dud, while others champion the mainstreaming of the cryptocurrency. So far, bears are trouncing bulls. The technical picture looks bearish.

Trading recommendations:

According to the 4H time - frame, I found that Bitcoin started to rally but the rally may be limited since the strong resistance is awaiting at the price of $12.615. The trend is still bearish and my advice is to watch for potential successful testing of resistance and then watch for selling opportunities. The downward target is set at the price of $8.185.

Support/Resistance

$11.821 – Intraday resistance

$10.470 – Intraday support

$8.185 – Objective target

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BITCOIN Analysis for January 18, 2018

Bitcoin has been come under bearish pressure recently which led the price to fall towards $9,200 price area, from where the price bounced off in an aggressive price action, quickly rejecting the bears off to reside above $11,000 price level. The volatility of the bitcoin has been high due to the recent regulatory and coin exchange ban issue, so that bitcoin made the deepest pullback since its November bullish gains. The effect of such volatility cannot be only explained by the regulatory and exchange ban but also by the recent introduction of bitcoin futures trading which enabled investors to play on the both sides of the market. Meanhwile, bears made a fortune selling it in an impulsive manner. As for the current scenario, the bullish divergence still exists in the bitcoin market where the price is expected to head higher towards $15,500 price area in the coming days if the price remains above $10,000 price level with a daily close.

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GBP/USD analysis for January 18, 2018

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Recently, the GBP/USD pair has been trading sideways at the price of 1.3882. According to the 30M time - frame, I found a bullish breakout of the pivot point at the price of 1.3840. I also found a broken horizontal base, which is another sign of strength. My advice is to watch for potential buying opportunities. The upward targets are set at the price of 1.3927 and at the price of 1.4025.

Resistance levels:

R1: 1.3928

R2: 1.4028

R3: 1.4114

Support levels:

S1: 1.3742

S2: 1.3656

S3: 1.3556

Trading recommendations for today: watch for potential buying opportunities.

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NZD/USD Intraday technical levels and trading recommendations for January 18, 2018

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Daily Outlook

In July 2017, an atypical Head and Shoulders pattern was expressed on the depicted chart which indicated an upcoming bearish reversal.

As expected, the price level of 0.7050 failed to offer enough bullish support for the NZD/USD pair. That's why the further bearish decline was expected towards 0.6800 (Reversal pattern bearish target).

Evident signs of bullish recovery were expressed around the recent low (0.6780). An inverted Head and Shoulders pattern was expressed around these price levels.

The price zone of 0.7140-0.7250 (prominent Supply-Zone) failed to pause the ongoing bullish momentum. Instead, a bullish breakout above 0.7250 was expressed on January 11.

That's why the current bullish movement extended towards the price levels of 0.7240 and 0.7320.

A quick bullish movement is expected towards the depicted supply zone (0.7320-0.7390) where price action should be watched for evident bearish rejection and a valid SELL entry.

Trade Recommendations:

Conservative traders should be looking for a valid SELL entry anywhere around the depicted supply zone (0.7320-0.7390).

S/L should be located above 0.7450. T/P levels should be located around 0.7230, 0.7150 and 0.7090.

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Analysis of EUR/USD for January 18, 2018

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Recently, the EUR/USD pair has been trading sideways at the price of 1.2245. According to the 30M time frame, I found a fake breakout of yesterday's low at the price of 1.2195, which is a sign that selling looks risky. I also found a valid breakout of pivot level (1.2228), which is a sign that buyers are in control. My advice is to watch for potential buying opportuntiies. The upward targets are set at 1.2278 and 1.2370.

Resistance levels:

R1: 1.2279

R2: 1.2374

R3: 1.2425

Support levels:

S1: 1.2133

S2: 1.2082

S3: 1.1987

Trading recommendations for today: watch for potential buying opportunities.

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Intraday technical levels and trading recommendations for EUR/USD for January 18, 2018

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Monthly Outlook

In January 2015, the EUR/USD pair moved below the major demand levels near 1.2050-1.2100 (multiple previous bottoms set in July 2012 and June 2010). Hence, a long-term bearish target was 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.

However, the EUR/USD pair has been trapped within the depicted consolidation range (1.0500-1.1450) until the current bullish breakout was executed above 1.1450.

The current bullish breakout above 1.1450 allowed a quick bullish advance towards 1.2200 where recent evidence of bearish rejection was expressed (Note the Monthly candlestick of last September).

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Daily Outlook

As anticipated, the ongoing bullish momentum allowed the EUR/USD pair to pursue further bullish advance towards 1.1415-1.1520 (Previous Daily Supply-Zone).

The daily supply zone failed to pause the ongoing bullish momentum. Instead, the evident bullish breakout was expressed towards the price level of 1.2100 where the depicted Head and Shoulders reversal pattern was expressed.

The bearish target for the depicted Head and Shoulders pattern extends towards 1.1350. However, to pursue towards the mentioned target level, the significant bearish pressure was needed to be applied against the mentioned zone (1.1415-1.1520).

However, In November, recent price action around the price zone of 1.1520-1.1415 indicated evident bullish recovery.

This hindered further bearish decline which allowed the current bullish pullback to occur towards the price level of 1.2100 which has failed to pause the ongoing bullish momentum so far.

Daily persistence above 1.2150-1.2200 confirms the depicted bullish continuation pattern with projected targets towards 1.2500.

Otherwise, bearish pullback will be expected towards 1.2070 before further bullish advancement can take place.

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Hard times for the dollar

The dollar is making desperate attempts to stop the fall, but the result cannot yet be called as satisfactory. The pound has already faced all forms of declined since June 2016 while the euro has renewed a three-year high. Even the yen is trying to strengthen, as it is under pressure due to the general growth of raw materials and energy prices.

The dollar falls against the backdrop of the growth in the main indicators from the U.K. and the confidence of the players that nothing will prevent the Fed from sustaining the announced plan for normalizing the rate. The growth of industrial production in December was 0.9% which is a repetition of the best monthly result since May 2017. Although it must be admitted that for industrial production in the overall structure of US GDP continues to decline.

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The "Beige Book" published on the eve also reflects a quite optimistic outlook on the economic outlook. There are difficulties in finding a skilled workforce, improving business conditions where almost all districts have noted the growth of the economy and hope for a rise in prices in retail and real estate.

The Treasury reported on foreign capital flows through November indicating the trend is also confidently positive. The demand for treasury is again in the positive zone, and the capital inflow to the stock market contributes to record growth of stock indices.

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As for the forecasts for the Fed rate, the market is almost certain the probability of the event of another increase will take place in March, according to the CME futures which are more than 75%. Confidence is facilitated by a slightly higher than expected inflation and a number of hawkish comments from the Fed leadership. Markets are also confident that this year the rate will be raised three times in the amount of 0.75%, and the Fed will retain the status of the most aggressively set up by the Central Bank.

There are first signs that Trump's team manages to turn the tide in its favor. Yesterday, Apple made a number of statements about investing in the US economy, guided by changes in tax legislation. Apple says that they will invest $ 350 billion in the US economy over the next five years, which will create 20,000 new jobs and pay about 38 billion in taxes. Moreover, Apple is likely to return most of its offshore funds to the U.S. and this is a very significant amount since the company had cash reserves of $ 252 billion, according to data for September 2017.

Apple, the first sign and in addition, the largest, would face the first fruits of the policy of repatriation of capital, which is persistently pursued by Trump as it starts to be enacted.

By all accounts, the dollar should be in high demand yet in practice, the situation looks exactly the opposite. The reason may be that markets cannot ignore the weak growth rates of real incomes of the population, which is reflected in the low growth rates of the average wage. Other factors include the reduction of the purchasing power of the population, and the main competitor of the USA, Europe, preferably. For example, car sales in Europe and the US have a multidirectional trend. In Europe, sales in 2017 reached a 10-year high, while in the US the year-to-year decline in the car market was recorded by the end of the year, which just indicates trends in real incomes are clearly not in favor of the US.

Of course, one must also bear in mind the anomalously severe freeze established in a large part of the US territory, which will inevitably lead to a decrease in retail sales and GDP growth rates in Q1 and as a result will put pressure on the dollar. Although, the dollar has no good reason to continue the decline in the long run. Factors such as inflation, budget deficit, repatriation of capital and new investment projects, will soon determine the demand for the dollar, which is likely to attempt a recovery in the coming days.

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Bitcoin analysis for 18/01/2018

As Bitcoin trading is becoming the new main market in Japan, leading financial companies are entering to offer services that help preserve their market share. MUFG, the largest bank in the country, is currently planning to launch its own stock exchange and cryptocurrency.

The largest Japanese bank and the fourth largest in the world, has already informed the Financial Services Agency (JFSA) about the opening the division of the cryptocurrency exchange - ExchangeMitsubishi UFJ Financial Group, Inc. (MTU). It is known that the bank is also working on the release of its own cryptocurrency. The plan, it seems, is that by controlling the stock exchange in which people will be able to trade MUFG, the bank can suppress drastic fluctuations in its price so that it can be used for purchases, settlements, and remittances. The new cryptocurrency will be maintained at around one yen, but it is not yet determined at the advanced level. One of the interesting options is the possibility of using it in transactional pairs on stock exchanges, similar to USDT. During the introduction of the cryptocurrency exchange, the bank is reportedly working on another service for Japanese crypto dealers. MUFJ Trust will keep customer portfolios on accounts that can connect to other exchanges. As in the case of segregated accounts protecting forex traders, it can secure clients' funds in a bank in the event of a commercial company's bankruptcy or bankruptcy. The service will also monitor accounts against suspicious activities and unusual transactions.

Let's now take a look at the Bitcoin technical picture at the H4 time frame. The bears did not manage to go below the level of $9,100, so the projected target at the level of $8,602. There is still a chance for another leg down to the projected target level, but the local resistance at the level of $12,024 must not be violated first.

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Trading plan for 18/01/2018

The Asian part of the session was marked by the growing US Dollar weakness across the board. Only the Canadian Dollar was behaving relatively neutral to USD and finished the night at -0.1%, and that was only because of comments made by Donald Trump about the renegotiation of NAFTA decisions. The Reuters agency clearly draws attention to the rather aggressive approach of the US president to talks, as the baseline scenario is the break of the trade pact with Mexico and Canada.

On Thursday 18th of January, the event calendar is busy with many important economic releases. The Chinese (GDP) and Australian (Employment Change) data are now done, so what's left are Canadain data (ADP Non-Farm Employment Change) and US data (Building Permits, Housing Starts, Philly Fed Manufacturing Index, Unemployment Claims and Crude Oil Inventories).

AUD/USD analysis for 18/01/2018:

The recently released data package from the Chinese economy did not disappoint those who expected slightly stronger economic growth in the last quarter of last year. Read at 6.8% y/y (consensus: 6.7 percent) is only partly due to stable trends in industrial production. It should be remembered that the authorities of China are artificially maintaining a substantial GDP dynamics due to above-average high infrastructure expenditures, which is to compensate for the side-effects associated with moving towards the service model of the economy.

The biggest winner of yesterday data from the labor market partly turned out to be the Australian Dollar (0.1%). The significant change in employment (34.7k, consensus: 15k) effectively eliminated the higher unemployment rate, which increased to 5.5% against the previously reported 5.4%. (consensus: 5.4%).

Let's now take a look at the AUD/USD technical picture at the H4 time frame. The market made another marginal higher high at the level of 0.8022, but the bulls did not manage to break out of the ascending channel. After the spike up the price reversed and now is back in the consolidation zone. The nearest technical support is seen at the level of 0.7935 and it might be tested soon as the growing bearish divergence supports the downward bias.

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Market Snapshot: Gold breaks below the support

The price of Gold has broken below the technical support at the level of $1,331 and now is testing another technical support at the level of $1,322.The momentum looks weak and the market seems to be finally reacting to the bearish divergence between the price and momentum. In a case of the drop extension, the next support is seen at the level of $1,313.

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Market Snapshot: SPY made a Double Top?

The price of SPY (SP500 ETF) did not manage to break out above the all-time high at the level of 280.10 and made a possible Double Top formation. If this will turn out to be the top for this market, then the price must break through the golden trend line support now. Clear bearish divergence supports the negative outlook.

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Technical analysis of NZD/USD for January 18, 2018

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Overview :

  • The NZD/USD pair continues to move upwards from the level of 0.7258. Yesterday, the pair rose from the level of 0.7258 (the level of 0.9866 coincides with a ratio of 61.8% Fibonacci retracement) to a top around 0.7309. Today, the first support level is seen at 0.7258 followed by 0.7236, while daily resistance 1 is seen at 0.7331. According to the previous events, the NZD/USD pair is still moving between the levels of 0.7258 and 0.7355; for that we expect a range of 97 pips (0.7355 - 0.7258). On the one-hour chart, immediate resistance is seen at 0.7331. Currently, the price is moving in a bullish channel. This is confirmed by the RSI indicator signaling that we are still in a bullish trending market. The price is still above the moving average (100). Therefore, if the trend is able to break out through the first resistance level of 0.7331, we should see the pair climbing towards the second daily resistance at 0.7355 to test it. It would also be wise to consider where to place stop loss; this should be set below the second support of 0.7214.
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Technical analysis of USD/CHF for January 18, 2018

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Overview:

  • This week, the USD/CHF pair didn't make important movement yesterday. There are no changes in my technical outlook. The price is still move around the spot of 0.9646. The bias remains bearish in nearest term testing 0.9553 or lower. Today, the USD/CHF pair continues to move downwards from the level of 0.9745. Yesterday, the pair dropped from the level of 0.9745 (this level of 0.9745 coincides with the ratio of 38.2% Fibonacci retracment levels) to the bottom around 0.9602. Today, the trend had rebounded from the bottom of 0.9602 to climp toward the level of 0.9650. Moreover, the first resistance level is seen at 0.9691 followed by 0.9745, while daily support 1 is seen at 0.9602. According to the previous events, the USD/CHF pair is still moving br, tetween the levels of 0.9691 and 0.9553; for that we expect a range of 138 pips (0.9691 - 0.9553). If the USD/CHF pair fails to break through the resistance level of 0.9691, the market will decline further to 0.9553. This would suggest a bearish market because the RSI indicator is still in a positive area and does not show any trend-reversal signs. The pair is expected to drop lower towards at least 0.9553 with a view to test the daily pivot point. However, if a breakout takes place at the resistance level of 0.9745, then this scenario may become invalidated.
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Daily analysis of major pairs for January 18, 2018

EUR/USD: This pair has consolidated so far this week, and it is possible that it would remain as such until the end of this week. A movement to the upside or to the downside is possible, but price would need to break the resistance line at 1.2200 or the support line at 1.2150. Normally, since the dominant bias is bullish, a movement to the upside is much more likely.

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USD/CHF: The USD/CHF pair has consolidated so far this week, having gone bearish last week. The bias on the market is bearish, and when volatility returns to the market, it is much more likely that it would be in favor of bears. Some fundamental figures are expected today and they may have impact on the markets.

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GBP/USD: There is a huge Bullish Confirmation Pattern on the Cable. Price has been making some bullish effort since last week, and it is possible that the distribution territories at 1.3850 and 1.3900, which had been previously tested, would be tested again. Price would even go beyond those distribution territories.

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USD/JPY: This trading instrument has experienced an upwards bounce in the context of a downtrend. Unless the supply level at 112.00 is breached to the upside, the upwards bounce would turn out to be good opportunities to sell short at great prices. The demand levels at 111.00 and 110.50 could still be tested before the end of this week.

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EUR/JPY: This market has been rough and choppy this week. Nevertheless, the bias on the market is bullish. The EMA 11 is above the EMA 56, and the RSI period 14 is above the level 50. The market may be able to reach the supply zones at 136.00, 136.50, and 137.00 before the end of this week. The supply zone at 136.00 has been tested and it would be tested again.

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Ichimoku cloud indicator analysis of USDX for January 18, 2018

The Dollar index bounced yesterday, but price remains below the 4-hour kijun-sen. For a bigger bounce to come, we should see a break above yesterday highs. Trend remains bearish but with some reversal warnings.

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Blue line - resistance

The Dollar index is challenging the kijun-sen. Trend is bearish as price is below the 4-hour Ichimoku cloud. Support is at 90.19 and resistance at 91. Breaking above the resistance will push price towards 91.80. Breaking below support will push price towards 89.50.

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Blue line - long-term resistance

The Dollar index is in a weekly bearish trend. The weekly candle so far is shaping up to be a bullish reversal hammer. We have to more trading sessions including today so traders need to be patient and see where the week closes. A weekly close above 90.80 would be a bullish sign. A weekly close near or below 90.30 will be a bearish sign.

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Ichimoku cloud indicator analysis of gold for January 18, 2018

The Gold price is making lower lows but Ichimoku cloud trend remains bullish as price remains above the 4hour cloud. Key technical and cloud support remains at $1,309 and as long as we are above it, the trend remains bullish.

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Red lines - bearish divergence signs

Green line - support trend line

Short-term support is at $1,319 at the upper cloud boundary. Short-term resistance is at $1,333 where we find the tenkan- and kijun-sen. Price has broken below the two indicators and this is a first warning sign.

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Magenta line - resistance

Blue line - long-term support

We warned that there are many chances of a rejection of the magenta trend line resistance. Gold price could pull back towards the weekly kijun-sen support (yellow line indicator) at $1,297. A weekly close below that level will push price towards the weekly cloud at $1,250.

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Four drivers of gold growth

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

Dynamics of precious metals and gold

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Source: Financial Times.

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

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

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

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

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

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

Gold, daily chart

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