Technical analysis of GBP/JPY for February 12, 2018

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GBP/JPY is expected to trade with bearish outlook. Though the pair is rebounding and is challenging the declining 50-period moving average, it is still capped by a falling trend line since February 6. Even though a continuation of the technical rebound cannot be ruled out, its extent should be limited.

To sum up, below 151.10, look for a new drop with targets at 148.90 and 147.80 in extension.

Alternatively, if the price moves in the direction opposite to the forecast, a long position is recommended to be above 151.10 with the target at 152.10.

Strategy: SELL, Stop loss at 151.10, Take profit at 148.90

Chart Explanation: the black line shows the pivot point. The price above the pivot point indicates long positions; and when it is below the pivot point, it indicates short positions. 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: 152.10, 152.75, and 153.20

Support levels: 148.90, 147.80, and 147.00.

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Technical analysis of NZD/USD for February 12, 2018

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NZD/USD is expected to trade with a bullish bias above 0.7225. The pair rebounded from 0.7225 after touching the rising 50-period moving average. The relative strength index is above its neutrality level at 50 and lacks downward momentum.

Hence, as long as 0.7225 is not broken, look for a further advance with targets at 0.7280 and 0.7300 in extension.

The black line shows the pivot point. Currently, the price is above the pivot point, which is a signal for long positions. If it remains below the pivot point, it will indicate short positions. The red lines show the support levels, while the green line indicates the resistance levels. These levels can be used to enter and exit trades.

Resistance levels: 0.7280, 0.7300, and 0.7340.

Support levels: 0.7200, 0.7175, and 0.7160.

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Global macro overview for 12/02/2018

The worst week from March last year was on the horizon for Crude Oil, when after the months of incoming upward news, the US production increased sharply, and there was a seasonal drop in demand from refineries. It forced the cash managers to reduce the long-standing position that is no longer possible to maintain. Although, as a result of production cuts, supply disruptions, and strong demand, fundamental forecasts have improved over the last six months, one can now ask whether USD 70 per barrel was not one step too far at this stage.

The efforts of the OPEC cartel to limit global production in order to increase prices have intensified again. Once again, the reaction from non-OPEC producers surprised the market. In the last monthly forecast, the US Energy Information Agency (EIA) raised the forecasted level of oil production in the United States. After breaking the level of 10 million barrels a day, the Administration expects that in November this year - one year earlier than expected - the US production will exceed 11 million barrels a day. The sale accelerated after the publication of the weekly inventory report in the United States, which showed an increase for the second week in a row. This is another proof that the markets are entering a period of seasonal decline in demand from the refinery due to conservation work; this period usually lasts until April. The estimated weekly oil production was increased by 332,000 barrels per day to the level of 10.25 million barrels per day, thus surpassing production in Saudi Arabia for the first time since 1990.

Despite contributing to the sharp rise in global oil prices since June last year, Saudi Arabia and other OPEC members together with Russia are now beginning to pay the price for these activities in the form of a loss of market share to non-OPEC producers. In the short-term perspective, the risk of falling prices as a result of the above-mentioned non-OPEC production is more important.

Let's now take a look at the Crude Oil technical picture at the H4 time frame. The price has dropped towards the level of 58.06 and then tried to bounce to test the golden channel lower line, but so far failed to rally higher. The technical resistance at the level of 61.08 is still too strong for bulls, even despite oversold market conditions. The main support still lies at the level of 58.55 - 59.04.

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Global macro overview for 12/02/2018

Recent weeks have brought investors in the stock market a lot of excitement, as strong increases since the beginning of the year have been wiped away in a few sessions without major problems, and the stock market has again hit the tops of news sites as a negative hero. Nevertheless, the scale and speed of the decline in US indices may be appalling, but it should be borne in mind that the market has been growing virtually uninterrupted since the beginning of December, which always raises the fear of a sudden correction. In the macro evaluation and in the consensus for the company's results in January, little has changed, and the SP500 index recorded a nearly 5.0% increase. Meanwhile, yields on the government debt market steadily increased (American 10-year-olds by around 30bps in January) and the VIX index (22.64% in January), which warranted cautiousness and led to distrust in the sustainability of growth.

The correction proved to be sudden, but it does not change the year-long moderately positive attitude to the stock market, especially in Europe. In the US, the increase in the cost of money, wage pressure, and industrial inflationary pressures will begin to exert pressure on companies' margins, which will generate more negative results surprises and, as a result, a drop in analytical consensus and pressure on major indices. Recent developments in the stock market do not indicate a reversal of the trend, it is hard to reasonably expect that the almost 10-year-old boom will collapse in one month or a quarter. For this, you need a significant deterioration in macroeconomic readings and company results. Emphasizing once more, please treat the current declines as a normalization of the situation on the stock market, in the light of the anomaly of the January rally of indices.

Let's now take a look at the Dow Jones Index technical picture at the H4 time frame. The market has managed to retrace 50% of the last leg down and stopped at the level of 24,385. The growing bearish divergence suggests more upside price action as there is still a room for a longer and more complex corrective bounce. The longer time frame trend remains up. The next Technical resistance is 61% Fibo at the level of 24,548.

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The pound plays the role of a pendulum

The British pound swept the roller coaster, first taking off significantly above an important psychological value of $1.4 mark against the backdrop of the Bank of England's "hawkish" comments followed by a collapse below $1.39 due to the growing risks of the tough Brexit negotiations. According to the EU's chief negotiator, Michel Barnier, if the differences between Brussels and London continue, there can be no question of a transition period. The attention of investors has again shifted to negotiations, which makes the sterling perform the functions of a pendulum.

"Bulls" of the GBP/USD pair easily fought the resistance of their opponents, who bet on a strong dollar in the conditions of rising volatility and the collapse of the S&P 500, after the results of the February meeting of the Bank of England became known. The regulator noted that the tightening of monetary policy could go faster than currently expected markets. As a result, fixed-term contracts increased the chances of raising the repo rate in May from 38% to 70%, and the pound soared to $ 1.4065. BoE is easy to understand since the easing of inflation from 3% to 2% requires either aggressive monetary restriction or revaluation of sterling. The optimism of the Committee on Monetary Policy and its "hawkish" rhetoric can lead to the latter.

At the same time, finding unemployment in the lowest rate for the last 42 years at 4.3% and the positive forecasts of employers expecting the acceleration of average salaries from 2.6% to 3.1% in 2018, allow the Central Bank to raise the forecast for GDP for the current year from 1.7% to 1.8%. Indeed, if the gap between consumer prices and wages again becomes negative, Britain can hope not only for strong external demand but also for domestic resources, including the growth of the purchasing power of the population.

Dynamics of average wages and inflation in Britain

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Source: Trading Economics.

Alas, but the regulator's desire to accelerate the sterling is not enough. Firstly, the monetary policy normalization factor is not the only driver of changes in the GBP/USD pair. There are still concepts, such as the strength of the dollar and capital flows. Secondly, political risks continue to hang over the pound with a sword of Damocles.

Although the reports argue that the decision must be reached by the end of March. In fact, negotiations can be progressed on. If it does not appear on the horizon, the divorce will be held on the terms of the WTO. At the same time, the longer the uncertainty persists, the greater the risk of capital flight from the financial markets of the Foggy Albion, which is a bearish factor for the GBP / USD pair. Let's not forget about the macro statistics. Investors will be focused on the release of data on inflation and retail sales in the week of February 16.

Technically, it targets 161.8% on the AB = CD pattern, which can give a breather to the bulls of GBP/USD pair. A breakout of the support level at 1.3755 will strengthen the risks of the development of correction towards the area of 1.3605 and the lower limit of the upward trading channel.

GBP / USD, daily chart

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NZD/USD Intraday technical levels and trading recommendations for February 12, 2018

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Daily Outlook

In July 2017, an atypical Head and Shoulders pattern was expressed on the depicted chart which indicated 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, further bearish decline was expected towards 0.6800 (Reversal pattern bearish target).

Evident signs of bullish recovery was expressed around the depicted 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 0.7320 and 0.7390.

A quick bullish movement was expected towards the depicted supply zone (0.7320-0.7390) where evident bearish rejection and a valid SELL entry were expected.

On February 2, a bearish engulfing daily candlestick was expressed. This enhances the bearish scenario initially towards the price levels of 0.7230 - 0.7165 where price action should be watched for a possible bullish recovery.

Our suggested SELL position around 0.7390 is already running in profits. Bearish fixation below 0.7160 allows further bearish decline towards 0.7090 while S/L should be lowered to 0.7260 to secure some profits

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Intraday technical levels and trading recommendations for EUR/USD for February 12, 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 and recently above 1.2075.

Another bullish breakout above 1.2250 is being expressed on the chart. This hinders the bearish momentum allowing bullish advancement to occur towards 1.2750.

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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, 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, the market failed to apply significant bearish pressure against the mentioned zone (1.1415-1.1520).

Instead, in November, evident bullish recovery was manifested around the price zone of 1.1520-1.1415.

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

Daily persistence above 1.2470-1.2500 is needed to confirm a recent bullish flag continuation pattern with projected targets towards 1.2750.

However, a recent bearish pullback is being expressed below the price level of 1.2350. This may extend towards 1.2070 if a bearish breakdown of the level of 1.2200 is achieved on a daily basis.

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Bitcoin analysis for February 12, 2018

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The Bitcoin (BTC) has been trading upwards. The price tested the level of $8.770. Bitcoin and cryptocurrency mining has provided a consistent and growing market for the computer hardware manufacturers that produce the relevant chips for each segment. The main player on the GPU side (in contrast to ASIC mining) in 2017 was Nvidia, but even it could not anticipate the strong demand from miners as the year progressed. Technical picture looks overbought.

Trading recommendations:

According to the 30M time - frame, I found a testing of upper diagonal (resistance) of the channel, which is a sign that buying looks risky. I also found an overbought condition on the stochastic oscillator, which is another sign of weakness. My advice is to watch for potential selling opportunities. The downward targets are set at the price of $8.360 and at the price of $7.913.

Support/Resistance

$8.880 – Intraday resistance

$8.338– Intraday support

$8.360 – Objective target 1

$7.915 – Objective target 2

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Trading Plan for EUR/USD and US Dollar Index for February 12, 2018

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Technical outlook:

The EUR/USD pair seems to be just one leg away from terminating into its wave 4 of one lesser degree, from what has been projected on the daily chart. The pair might form just one more low below 1.2205 levels before turning higher again, or it is done and could continue higher from current levels. In either case please note that going long on dips remain a safe strategy for now. Immediate support comes in at 1.2161 levels, while interim resistance is at 1.2537 levels respectively. Also, note that the pair is finding support at the 0.382 fibonacci level of the 3rd wave of the same degree. Furthermore, the channel line support is also seen around current levels and hence one can expect turn soon. Looking at the bigger picture, the wave (5) rally should terminate above 1.2537 levels.

Trading plan:

Look to remain long with risk around 1.2250 levels.

US Dollar Index chart setups:

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Technical outlook:

The US Dollar Index, seem to be into its last leg rally before terminating into wave 4 of a lesser degree, as depicted on the daily chart here. With respect to the price action, the 4th wave is expected to terminate around 91.00 levels before the index drops into its wave (5) of a larger degree. Immediate resistance is seen at 91.00 levels while interim support is seen at 88.40 levels respectively. Also note that the underlying is testing Fibonacci 0.382 resistance of wave 3 drops, a common relationship for wave 4 to terminate. Furthermore, the channel line resistance is also nearby, indicating a bearish turn is close. The bigger picture reveals that the US Dollar Index should terminate its 5th wave of one larger degree, below 88.40 levels.

Trading plan:

Remain short with risk above 91.00 levels.

Fundamental outlook:

No major events lined up for the day.

Good luck!

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Analysis of Gold for February 12, 2018

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Recently, the Gold has been trading sideways at the price of $1,320.00. According to the 30M time - frame, I found that rejection of the pivot resistance 2 at the price of $1,328.00, which is a sign that buying looks risky. I also found a breakout of intraday support cluster at $1,322.00, which is a sign that sellers are in control. My advice is to watch for potential selling opportunities. The downward targets are set at the price of $1,316.55 and at the price of $1,310.40.

Resistance levels:

R1: $1,321.89

R2: $1,328.05

R3: $1,333.40

Support levels:

S1: $1,310.38

S2: $1,305.00

S3: $1,298.83

Trading recommendations for today: watch for potential selling opportunities.

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GBP/USD analysis for February 12, 2018

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Recently, the GBP/USD has been trading sideways at the price of 1.3844. According to the 30M time - frame, I found that the price has broke the upward channel in the background, which is a sign that buying looks risky. I also found a successful rejection of the pivot level (1.3860) and the doji candle, which is a sign that sellers are in control. My advice is to watch for potential selling opportunities. The downward targets are set at the price of 1.3735 and at the price of 1.3640.

Resistance levels:

R1: 1.3955

R2: 1.4083

R3: 1.4175

Support levels:

S1: 1.3733

S2: 1.3638

S3: 1.3511

Trading recommendations for today: watch for potential selling opportunities.

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Daily analysis of major pairs for February 12, 2018

EUR/USD: The EUR/USD pair had a strong bearish movement last week, which resulted in a bearish bias. Price dropped 240 pips, to close below the resistance line at 1.2250 on Friday. The outlook on the EUR pairs is bearish for the week, and thus the bearishness in the market would continue, as price aims for the resistance lines at 1.2200, 1.2150 and 1.2100.

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USD/CHF: There was a bullish effort that was witnessed last week, though in the context of a downtrend. Unless price goes above the resistance level at 0.9500, the bias on the market will not turn bearish. A movement below the support level at 0.9300 would strengthen the recent bearish signal in the market.

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GBP/USD: Here, price has shed 450 pips since last February 2 (300 pips last week alone). There is a huge Bearish Confirmation Pattern in the market, which would continue as price journeys further towards the accumulation territories at 1.3800, 1.3750, and 1.3700. The outlook on GBP pairs is strongly bearish for this week, and thus, short signals may be disregarded.

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USD/JPY: The USD/JPY pair was choppy last week, but price ended going further southwards, closing below the supply level at 109.00. The demand level at 108.50 has been tested and will be tested again, get breached to the downside and go further southwards. The outlook on the JPY pairs is bearish for this week.

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EUR/JPY: There was a massive drop on the EUR/JPY pair. Price went southwards by 500 pips, reaching the demand zone at 132.00. On Friday, there was an upwards bounce in the market, which should turn out to be temporary, because this cross ought to continue its southwards journey this week. The demand zones at 132.00, 131.50, and 131.00 could be breached to the downside. Rallies in the market could this be ignored.

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Bitcoin analysis for 12/02/2018

French and German finance ministers are still demanding strict regulation of Bitcoin and other cryptocurrencies. According to reports, the French Finance Minister Bruno Le Maire and the Interim German Finance Minister Peter Altmaier wrote a letter to fellow finance ministers of the G20, in which they argue that cryptocurrencies are not only risky for investors but also threaten the long-term global financial stability. "Given the rapid increase in the capitalization of tokens and the emergence of new financial instruments, these changes should be closely monitored (...) Such variable tokens may have detrimental consequences for uninformed investors who do not understand the risks they are exposed to." - they write.

Of course, this sentiment can be easily interpreted as coming from authorities of traditional financial institutions, experiencing increasing pressure from the rapidly growing, and the increasingly popular cryptocurrency market, which aims to disrupt traditional financial structures. The Finance Minister Bruno Le Maire and the Interim German Finance Minister Peter Altmaier are not the only ones who are concerned about Bitcoin and other cryptocurrencies. The member of the Board of the European Central Bank Yves Mersch expressed his negative opinion on Thursday, stating that cryptocurrencies are not money, nor will they be in the foreseeable future. In addition, the head of the Agency for International Settlements Agustin Carstens expressed his deep-rooted concerns by asking the central banks to close Bitcoin, claiming that cryptocurrencies are becoming a threat to financial stability.

Let's now take a look at the Bitcoin technical picture at the H4 time frame. The bounce from the level of $5,830 was in three waves only, so the overall strength of the market might not be not that much visible, and the current wave progression is still in favor of another corrective wave to the upside. The key technical resistance is still the zone at the level of $9.146 - $9,515.

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Trading plan for 12/02/2018

We are starting a new week on the financial markets, where from the beginning we can see a mixed attitude for the American currency. The US Dollar index is traded today 0.3% lower, which gives us an EURUSD pair around 1.2300. Looking at the macroeconomic calendar, we see a typical Monday with the lack of important readings, in particular for individual economies. Therefore, markets can move according to recent trends and, in particular, respond to technical levels.

EUR/USD analysis for 12/02/2018:

At the weekly time frame of the EURUSD, the market participants can see a potential formation of a shooting star, which could lead to a drop of steam to around 1.2150, which is also the 50% Fibonacci retracement of the downward wave started in mid-2014. As can be seen in the chart below, the pair has strong support in the form of a medium-term upward trend line, so when the market falls into these areas, we can deal with the re-activation of the bulls. On the lower time frame, the price has just failed to break out higher above the technical resistance at the level of 1.2295 and now is reversing down from this level. The next technical support is seen at the level of 1.2212.The momentum is still below its fifty level, so the down move might be abrupt and sudden.

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Market Snapshot: SPY bounces from the trendline

The price of SPY (SP500 ETF) has bounced from the golden trend line at the level of 253.43 and retraced just over 50% of the last leg down. There is a clear bullish divergence formed between the price and the momentum indicator, so it might be the time form another corrective bounce higher. Only a sustained breakout above the level of 272.83 would change the bias from bearish to bullish again.

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Market Snapshot: DAX bounces from support

The price of German DAX index has bounced from the technical support at the level of 11,995 and gaped up towards the level of 12,318, which is an important technical resistance level. There is a clear bullish divergence formed between the price and the momentum indicator, so it might be the time form another corrective bounce higher.

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Ichimoku cloud indicator analysis of USDX for February 12, 2018

The Dollar index made a double top at 90.60 and got rejected. The price, however, still remains above the Ichimoku cloud. Bears will need to break below 89.60 for another leg down towards 87, while bulls need to keep prices above 89.60 and produce a higher low before resuming their upward bounce.

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The price is above the 4-hour cloud. Short-term trend is bullish. Support is at 90 and at 89.60-89.50. The second support by the Kumo (cloud) is the most important one. We could see a pull back towards that level today or tomorrow. Resistance at 90.60 if broken will push price towards 91-91.50.

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The daily candles in the Dollar index show rejection signs at the important kijun-sen (yellow line indicator) resistance. Support is at the tenkan-sen (red line indicator) at 89.60. A daily close below it will increase the chances that the bounce was short-lived and we are heading to new lows.

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Ichimoku cloud indicator analysis of gold for February 12, 2018

The Gold price as expected is bouncing towards the broken neckline resistance of $1,326. Support at $1,310-$1,307 held and produced this bounce. It is important for bears to see a rejection today and a break below $1,312 otherwise bulls could be preparing for a higher high and a break towards next important resistance of $1,337-40.

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Magenta line - long-term resistance

Blue line - neck line resistance

The Gold price has made a Head and shoulders pattern, broke below the neckline and is now backtesting it. I expect the price to get rejected at current levels. Support is at $1,312 and next and most important one at $1,307. Break below it and we are off towards $1,290.

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On a daily basis, the Gold price remains below the tenkan-sen (red line indicator). Resistance by the tenkan-sen is at $1,329. As long as we see daily close below it, I expect the Gold price to move towards the daily cloud support of $1,290.

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Breaking forecast 02/12/2018

Breaking forecast 02/12/2018

EURUSD: We are looking forward to a breakthrough.

The calendar has almost no news. There is no development that is significant. Some recovery might be brought by inflation data to the US, which will be released on Wednesday 14 February.

The turmoil in the markets caused by the rapid correction in the US stock market last week ended is believed to have reached its end.

The market is returning to the previous direction.

We expect the euro to grow.

Buy for the breakthrough of 1.2300, stop at 1.2255, profit at 1.2400.

Alternative: sell from 1.2205, stop at 1.2250, profit at 1.2100.

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Daily analysis of USDX for February 12, 2018

The last chance for the bulls to resume the bullish bias in the index lies at the 90.63 level, where a breakout should open the doors to visit the 91.75 zone. However, we're still following the bearish idea, as the level of 89.36 remains as a critical area across the board and if it gives up, then the next target would be the 87.88 level.

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H1 chart's resistance levels: 90.63 / 91.75

H1 chart's support levels: 89.36 / 87.88

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 89.36, take profit is at 87.88 and stop loss is at 90.81.

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Daily analysis of GBP/USD for February 12, 2018

GBP/USD already broke to the downside in order to post another fresh low across the board. Below the 200 SMA at the H1 chart, the pair remains under pressure and it seems that we could expect a breakout of the 1.3753 level that should take it towards the 1.3604 zone. MACD indicator is entering the neutral territory, calling for a lower low pattern formation.

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H1 chart's resistance levels: 1.3939 / 1.4078

H1 chart's support levels: 1.3753 / 1.3604

Trading recommendations for today: Based on the H1 chart, sell (short) orders only if the GBP/USD pair breaks a bearish candlestick; the resistance level is at 1.3753, take profit is at 1.3604 and stop loss is at 1.3903.

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Technical analysis of EUR/USD for Feb 12, 2018

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Today the Eurozone & the US will not release any Economic Data, so, amid this fact, EUR/USD will move in a low volatility during this day.

TODAY'S TECHNICAL LEVEL:

Breakout BUY Level: 1.2324.

Strong Resistance:1.2317.

Original Resistance: 1.2305.

Inner Sell Area: 1.2293.

Target Inner Area: 1.2264.

Inner Buy Area: 1.2235.

Original Support: 1.2223.

Strong Support: 1.2211.

Breakout SELL Level: 1.2204.

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.

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Technical analysis of USD/JPY for Feb 12, 2018

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Today, Japan and the US will not release any Economic Data. So there is a probability the USD/JPY will move with a low volatility during this day.

TODAY'S TECHNICAL LEVEL:

Resistance. 3: 109.24.

Resistance. 2: 109.03.

Resistance. 1: 108.81.

Support. 1: 108.55.

Support. 2: 108.34.

Support. 3: 108.12.

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.

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USD/CHF testing major resistance, prepare to sell

The price is testing major resistance at 0.9446 (Multiple Fibonacci retracements, horizontal pullback resistance, bearish ichimoku cloud) and we expect a strong reaction from here for the price to drop further to 0.9264 support (Fibonacci extension, horizontal swing low support).

Stochastic (34,5,3) is seeing major resistance below 98% where a corresponding reaction could occur.

Sell below 0.9446. Stop loss at 0.9572. Take profit at 0.9264.

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USD/CAD forming a really strong reversal, remain bearish

The price is now testing major resistance at 1.2654 (61.8% Fibonacci retracement, 61.8% Fibonacci extension, Impulsive Elliott wave structure, horizontal overlap resistance, bearish price action) and a strong reaction could occur at this level to push the price down towards 1.2270 support (Fibonacci extension, horizontal swing low support). We have to keep a watch out on intermediate support at 1.2382 (Fibonacci retracement, horizontal overlap support) where another bounce might occur.

Stochastic (55,5,3) is seeing major resistance at 96% where a corresponding reaction could occur.

Sell below 1.2654. Stop loss at 1.2766. Take profit at 1.2270.

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The rout in the markets continues

The protracted period of growth of stock indices is over. The last correction which was two years ago have passed and since last year, the market has not grown much on real recovery indicators as opposed to expectations.

The reason for the fall, however, is quite rational and it lies in the fears about the rising cost of money. Over the past two years, the inflation rate has been moderate which has created the illusion of steadily stable economic growth. However, the Fed chose the path of outrunning growth rates, preferring to form market expectations, rather than follow them.

The Fed has used 3 ways to manage expectations. First, there are verbal interventions with a constant reference to the "Phillips curve" indicating that a steady decrease in unemployment leads to an increase in the average wage which automatically raises inflation. Both processes are known to accompany economic growth.

In fact, it is well known that in modern conditions, the Phillips rule does not work. For example, in Japan, the unemployment rate is significantly lower than in the US. In the first quarter, it fell to 2.8% but the growth rate of the average wage is consistently below 2% per year for many years. Thus, unemployment has no positive impact on inflation. Similarly in Switzerland, unemployment is at 3.3% and the annual inflation rate is - 0.8%.

Nevertheless, this deception partly helped raise inflation expectations, which is clearly seen in the dynamics of the yields of 5-year bonds tips which was protected from inflation.

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The second method consisted of a purposeful increase in the interest rate, which has been stable for the third consecutive year despite the low inflation. It is obvious that the Fed raises the stake according to the plan and not the real market indicators since corporate incomes were at a very low level only recently. Problems with the budget are increasing, which means that the economic recovery was not so strong in reality.

The third factor is the reduction in the balance of the Fed. The process itself has a clear propagandistic meaning and in the remainder it creates additional pressure on the budget as the Fed stops the practice of refinancing revenues and gets rid of Treasuries.

All these factors had to convince the market sooner or later that the recovery was proceeding at a high pace and finally, this moment came. And then a chain reaction is triggered: the markets are waiting for higher rates of rate growth on the part of the Fed, the yield on 10-year bonds is confidently approaching 3%, and all points to the fact that money will go up.

The rise in the price of money will occur against the backdrop of a sharp increase in the budget deficit as Trump's reforms reduce the income from taxes. Closing the deficit can either be a sharp increase in activity in the economy or the growth of public debt.

The first scenario is unlikely and the markets behave in strict accordance with this conclusion. The probability of four rate increases this year suddenly became topical for a reason. On January 31, Janet Yellen held her last meeting as chairman of the Fed and on February 6, Jerome Powell, who has the reputation of a hawk, officially joined the post. It was his inauguration that raised a wave of panic regarding four rate increases this year.

The head of the Federal Reserve Bank of New York supported these fears on Thursday, saying that "the US economy is growing faster than the trend."

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So, the panic is a gap between the real growth rates of the US economy and fears that the rise in the price of money will lead to a decrease in economic activity. The rate of GDP growth will decline and if the inflation continues to grow against this background, the United States will cover another economic crisis.

On February 14, there will report on retail sales and consumer inflation for the month of January. The forecasts are neutral and any deviation from the forecast values can intensify the panic. The closing enthusiasm last Friday did not add any value. The trend of flight from the risk is increasing, which may well correspond to the plans of the US financial authorities, seeking to create conditions for the flow of capital into the country.

The chances of continuing the growth of the dollar under current conditions are minimal. Panic, of course, led to its strengthening but it is more likely to grow against the yen and the franc. The dollar index will probably remain stable with a downward trend on Monday.

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Euro and Pound Test Key Support

Eurozone

The euro makes weak attempts to stay above 1.22, but success is possible only if the wave of panic in the stock and debt markets goes down, taking the form of correction, although deeper.

On Wednesday, the consumer inflation index will be published in Germany in January. It is expected to show a decline from 1.6% to 1.4% relative to December, but according to the forecast, the HICP index should remain unchanged at 1.4%. Also on Wednesday, Eurostat will publish an estimate of the eurozone's GDP in the fourth quarter, and there are no reasons for concern either - the PMI Markit and ESI economic activity indicators calculated by the European Commission are growing at a record pace, which, given the high correlation between PMI and GDP, which makes it possible to look at economic growth with optimism.

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The problem for the eurozone is something different - the growing surplus of foreign trade leads to the need to seek the use of surplus capital. At the same time, the growth of inflation in the eurozone is not sufficient to force the ECB to begin the unwinding of its monetary policy. The spread between the yields of European and American securities is growing, and the capital from the eurozone will be in demand by investors in the US if rates in US banks continue to grow, especially since the threat of four rate hikes in the current year suddenly became real.

Monetary authorities of the eurozone will not prevent the outflow of excess capital, since this process will allow the euro to be controlled, but if the panic in the markets continues and it comes to a serious crisis, the euro may significantly weaken. Correction of the EUR USD pair is not yet completed, it is possible to decrease to 1.21, but the chances to stay above this support are still high. On Monday, the euro could return to zone 1.2305 / 20, further dynamics will be determined by whether a wave of panic that has covered the markets will develop.

United Kingdom

The pound last week has undergone multidirectional pressure. On Wednesday, the Bank of England supported the pound, leaving the rate unchanged and at the same time hinting that it could accelerate the process of raising rates due to higher economic growth rates.

Updated forecasts suggest GDP growth in 2018 at 1.8%, which, however, is below the growth rates in the US and the euro area, the equilibrium unemployment rate is reduced from 4.5% to 4.25%, and inflation by 2020 will be 2.2%, which is higher than the target 2%, which means an increase in the rate is required.

At the same time, as can be seen from the report, the growth of inflation occurred due to other goods, that is, most likely due to imports. The strengthening of the pound eliminates this factor in the coming months.

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However, on Friday, the pound's declined resumed after the EU negotiator Michel Barnier stated that the Brexit agreement might not be reached. It is obvious that Brexit still remains the main factor of influence on the pound rate.

On Tuesday, data for January on retail sales and consumer inflation will be published. The forecasts are neutral and meet the expectations of the Bank of England. Determining the dynamics of the pound will continue to be based statements on Brexit, as well as the development of the situation with sales in the stock and debt markets. At the level of 1.3700/30 is the key support level, the pound has a chance to stay higher, the breakdown will worsen the technical picture and will contribute to a rapid decline on the background of flight from risk.

Oil

The weakening of oil looks like a rout, which is expected, based on the development of the situation in the markets. Oil reacts to the threat of slowing the growth of global GDP and the development of a full-scale crisis, and this is the main driver of decline.

Another factor contributing to the decline is the production growth in the US. In addition, Baker Hughes reported a sharp increase in the number of drilling last week by 29 pcs, which indicates an increase in investment in the industry.

Support for Brent resisted until 60.98, the channel is still up, so growth attempts after the formation of the bottom are not ruled out.

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