May 10, 2019 : EUR/USD Intraday technical analysis and trade recommendations.

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Few weeks ago, a bullish Head and Shoulders reversal pattern was demonstrated around 1.1200.

This enhanced further bullish advancement towards 1.1300-1.1315 (supply zone) where significant bearish rejection was demonstrated on April 15.

Short-term outlook turned to become bearish towards 1.1280 (61.8% Fibonacci) then 1.1235 (78.6% Fibonacci).

For Intraday traders, the price zone around 1.1235 (78.6% Fibonacci) stood as a temporary demand area which paused the ongoing bearish momentum for a while before bearish breakdown could be executed on April 23.

Currently, the price zone around 1.1235-1.1250 has turned into supply-zone to be watched for bearish rejection.

On April 24-26, another bullish head and shoulders pattern was being demonstrated around 1.1140 on the H4 chart.

Moreover, the market has failed to sustain bearish pressure below the price Level of 1.1175.

That's why, conservative traders were suggested to wait for another bullish pullback towards 1.1230-1.1250 where a valid SELL entry can be offered.

Trade recommendations :

Conservative traders can look for a valid SELL entry anywhere around the price level of 1.1235-1.1250.

S/L should be placed around 1.1260.

Initial Target levels should be located around 1.1200, 1.1175 and 1.1140.

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EUR/USD: US inflation did not help the dollar

Growth data of American inflation could not support either the EUR/USD bulls or bears pair. Due to the lack of confident inflation growth, the market continued to get rid of the dollar by inertia, so that the price rose to the middle of the 12th figure. But the published figures can be interpreted in two ways, so it is too early to talk about the turn of the southern trend. In addition, today's growth of the pair is due to the fairly confident rhetoric of the ECB representative Hansson, who optimistically assessed the growth prospects of the European economy. Thus, the situation on the pair is uncertain, especially in the light of increasing tensions between China and the United States.

But let's start with macroeconomic reports. The US consumer price index did show a controversial result. In annual terms, it rose to two percent but did not reach the projected level (2.1%). On a monthly basis, the indicator showed a negative trend – instead of the expected growth to 0.5%, the index fell to 0.3%. Core inflation also turned out to be "mixed": if on an annualized basis, the figure rose to 2.1% (as predicted by experts), then on a monthly basis, the core index unexpectedly slowed down to 0.1% (instead of the expected growth to 0.2%).

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If we talk about the structure of indicators, the situation is as follows. The positive inflation dynamics is primarily due to the increase in energy prices (by 2.9%) – in particular, gasoline has risen by 5.7%. But many other products have fallen in price. Thus, for the second month in a row, the cost of clothing is reduced (in April – 0.8%, in March – 1.9%), medical services fell by 0.3%, food – by 0.1%. In other words, if energy prices begin to decline, inflation will not be able to keep the pace, as the consumer activity of Americans leaves much to be desired. In particular, the most important indicator for determining inflation – the basic price index of spending on personal consumption in the US – in March slowed immediately to 1.6%, amid weak wage growth.

Thus, today's figures have not shown a clear deceleration of the CPI, but have indicated an alarming trend. I believe that after this release, the White House will increase pressure on the Fed, pointing to weak inflationary results. Let me remind you that US President Donald Trump called on the Federal Reserve to reduce the interest rate by one hundred basis points. His Deputy – Vice President Mike Pence announced similar requirements, focusing on the weak inflation component of NonFarms. Commenting on the growth of wages, he said that the White House "does not see the economy inflationary processes."

It is worth noting that such "wishes" (which are voiced almost in an ultimatum form) has been expressed by Trump since the summer of last year. On the one hand, the members of the regulator show firmness, demonstrating independence from the White House. But on the other hand, the Fed's position has noticeably softened over the past six months: the regulator paused the rate increase process and at least until the end of the year, pledged not to tighten the monetary policy conditions. Jerome Powell, in his rhetoric, "broke away from the team," so to speak, and expressed confidence that the decrease in inflation is due to temporary/seasonal factors. But the other members of the Fed believe otherwise: in their opinion, it is a problem of a systemic nature. Today's figures can only heighten concerns about inflationary trends.

It would seem that taking into account such prospects, buyers of EUR/USD open the way to the North. But in this case, it is necessary to remember the "Chinese factor". Without waiting for the end of negotiations with China, Trump still raised duties on Chinese goods, increasing geopolitical tensions. The States accuse China of abandoning part of the agreements reached in the negotiations (in particular, it is about the reluctance to change national laws for the protection of intellectual property of companies from the United States). So far, the market is not in a hurry to react to this fact with panic, as the negotiations are still ongoing. But if next week, the anti-risk sentiment among traders will increase, the continuation of the Northern dynamics of EUR/USD can be forgotten.

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At the same time, it is worth noting that Friday's controversial release helped the EUR/USD bulls to gain a foothold above the resistance level of 1.1220 (the average line of the Bollinger Bands indicator). This suggests that the EUR/USD pair has the potential for its further recovery unless concerns about US-China trade relations return to the market. On the technical side, the pair is fixed above the middle line of the Bollinger Bands indicator. Also, the price is above the Tenkan-Sen and Kijun-Sen lines, which are under the Kumo cloud, thus forming a "Golden Cross" signal, which signals the increased probability of a trend change from the South to the upward one. The nearest resistance level is 1.1275 – the lower boundary of the Kumo cloud. The support is located at the base of the 12th figure, where the middle line of the Bollinger Bands coincides with the Kijun-Sen line.

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EURUSD medium-term trend technical analysis

EURUSD is trying to break out and above the downward sloping bearish channel. Bulls are challenging the upper channel boundary around 1.1260. As long as price remains below the 1.1260 level trend will remain bearish.

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Red lines - bearish channel

Green rectangle -short-term support

Blue rectangle - horizontal resistance

EURUSD is challenging previous short-term highs and the upper channel boundary at 1.1250-1.1260. A rejection here could pull back prices towards 1.12 or lower. However a break above the resistance will open the way for a move towards 1.13-1.1350 where the big test will be. In the short-term price has an upward momentum after bottoming around 1.11. In the medium-term price remains inside a bearish channel making lower lows and lower highs. For this sequence to stop and trend to reverse to bullish, we will need to see prices break above 1.1330.

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Short-term technical analysis of Gold for May 10, 2019

Gold price is trading at its weekly highs and above last week's highs. Gold price has found support at $1,266 and is now challenging important short-term resistance and previous top at $1,290 resistance area.

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Red rectangle - major confluence zone

Blue line- important short-term resistance trend line

Blue rectangle - short-term support

Gold price is challenging the blue trend line resistance once again. A break above it will be a bullish sign. The resistance level is the recent high at $1,290 and support is found at the $1,276 area. Holding above the $1,276 level keeps hopes alive for a move above $1,300 or even to new highs above $1,350. Breaking below $1,276 opens the way for a steep decline towards $1,250-20.

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What to expect from the euro and the pound?

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Further prospects for the single currency largely depend on the outcome of the US-China trade negotiations. The EUR/USD pair reacted weakly to Donald Trump's Sunday "tweets", the jump of the Japanese yen turned out to be moderate. It is possible that investors continue to believe in the deal between Beijing and Washington. As for the introduction of tariffs, this news brought down excessive optimism and returned traders to a balanced state.

The US-China trade relationship plays an important role in the global economy, and the completion of negotiations (regardless of their outcome) will increase the volatility of the main pair. Failure will result in the escalation of a trade war. If some countries can benefit from it, Europe is definitely not included.

Meanwhile, the news about the deal will support the growth of risk appetite and will be an optimistic signal for the euro bloc economy. This situation is helping to narrow the growing gap between the United States and Europe in the coming quarters. The EUR/USD pair may reach $1.16 in the third quarter and $1.18 in the fourth quarter.

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As for the short-term outlook, on Thursday, the quotes of the pair rose and reached the level of $1.1213 after the publication of a block of statistics from the US with negative coloration, which cast a shadow on the expected inflation rate today. However, such a rapid reaction to the data of secondary importance indicates an excessive reaction of the markets after a long flat. Currently, quotes are in a reversal range for a subsequent decline, but as Donald Trump said, no one knows how today will.

About the pound

Since the beginning of the week, the GBP/USD pair has lost more than a hundred points. Optimism about concluding an agreement Brexit almost dried up. British politicians are still far from compromise, the country's Prime Minister Theresa May is trying to develop a new version of the agreement. She also openly plans her own resignation as a last resort. At the EU summit, at which representatives of England were not present, the question of Brexit was not discussed.

On Friday, a large block of macroeconomic statistics was published in the UK, including the first estimate of GDP growth for the first quarter. However, the expected surge in volatility did not happen, market participants are still deprived of arguments in favor of buying a pound. The pair GBP/USD moves around $1.30. The risk of resumption of the downward movement increases. At the same time, only a breakthrough and subsequent fixation of quotations under the level of $1.2970 will make it possible to seriously consider the downward trend.

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May 10, 2019 : GBP/USD Intraday technical analysis and trade recommendations.

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On March 29, the price levels of 1.2980 (the lower limit of the newly-established bearish movement channel) demonstrated significant bullish rejection.

This brought the GBPUSD pair again towards the price zone of (1.3160-1.3180) where the upper limit of the depicted bearish channel as well as the backside of the depicted broken uptrend line demonstrated significant bearish rejection.

Since then, Short-term outlook has turned into bearish with intermediate-term bearish targets projected towards 1.2900 and 1.2850.

Last week, a bullish pullback was executed towards the price levels around 1.3035 - 1.3070 (50% - 61.8% Fibonacci levels) where temporary bearish rejection was demonstrated.

However, by the end of Friday's consolidations, significant bullish momentum was initiated around 1.3000.

Hence, a bullish breakout above 1.3075 was temporarily being demonstrated until bearish breakdown below 1.3035 (50% Fibonacci level) was achieved earlier this week.

Currently, The price zone of 1.3030-1.3060 turned to become a prominent supply-zone to be watched for bearish entries.

On the other hand, H4 bullish breakout above 1.3075 enhances a quick bullish visit towards 1.3150 and 1.3200 where the most recent top was established on May 3.

Trade Recommendations:

Conservative traders should be waiting for signs of bearish reversal around the depicted price levels (1.3035-1.3070) as a valid SELL signal.

T/p levels to be located around 1.2950 and 2880.

Any bullish breakout above 1.3080 invalidates this bearish scenario.

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The euro raised its head

While investors' attention was focused on the trade conflict between the US and China, the EUR/USD bulls took advantage of the disappointing statistics on US producer and consumer prices and returned the pair's quotes to the boundaries of the medium-term trading channel 1.12-1.15. By the end of April, CPI rose by 0.3% against the forecast of + 0.4% m/m, core inflation – by 0.1% (consensus estimate of + 0.2%). At a press conference following the FOMC meeting in May, Jerome Powell tried to convince the markets of the temporary nature of the slowdown in inflation, but if its weakness continues, the Fed will have grounds to lower the Federal funds rate. It is not good news for the US dollar.

The dynamics of US inflation and the Fed rate

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In 2018, the trade wars caused many troubles to the single European currency. At first, investors were selling EUR/USD amid growing interest in safe-haven assets, then against the background of a slowdown in Chinese GDP. The reduction in foreign demand for German exports nearly plunged the eurozone's leading economy into recession, while rumors of an agreement to end the trade war allowed the euro to grope its feet. At first glance, the mutual exchange of blows from China and the United States in the form of increased duties should have worsened the position of the regional monetary unit. In fact, the yen is the main funding currency for carry-trade due to the low cost of borrowing in Japan and the Old World. The closing of positions by players on the difference provides support to "bulls" on EUR/USD. How long will it last?

Expectations of positive statistics on Germany's GDP for the first quarter (forecast + 0.4% q/q) is able to push the quotations of the main currency pair towards resistance at 1,1265 and 1,1325 even with the failure of trade talks between Washington and Beijing. Another thing is that the success of the euro is likely to be temporary. EUR/USD will start selling on the rise on expectations of a slowdown in the economies of China and the eurozone. On the contrary, if the States and China manage to reach an agreement on the falling flag, the V-shaped recovery of China's GDP and the currency bloc will allow counting on the implementation of the consensus forecast of Bloomberg experts on the euro. At the end of this year, it is $1.18.

In the event of a new round of trade wars under the influence of growing international risks and pressure from the White House, the Fed can ease monetary policy, even if inflation does not want to slow down further. In this scenario, the potential of the rally EUR/USD will increase, although it is unlikely to be long. We've all seen how the central banks and competitors responded to the Federal Reserve's worldview at the beginning of the year. I do not think that in the face of growing fears about the future of the eurozone, the ECB will sit idly by.

Technically, the return of the pair's quotes within the medium-term consolidation range increases the risks of activation of the "deception-release" pattern. To do this, the "bulls" need to storm the resistance at 1.1325. As a result, they will have hope for the implementation of the subsidiary and parent model of the "Wolf Wave".

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Dollar ready to take off

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According to Donald Trump, Friday will be "a very cool day." The wait is not long, the countries will converge in the second round of negotiations today. The US President reassured the markets a bit, announcing the receipt of a "beautiful" letter from Xi Jinping. Although Washington has already launched the process of raising tariffs on Chinese imports, it can cancel everything at any time.

In addition, D. Trump appeared in the hands of a new trump card. The data for March showed that the trade balance deficit with China without adjustments decreased to $20.7 billion. This is the lowest value in the last 5 years. Supplies of goods to China rose by 23.6%, while imports fell by 6.1%. The owner of the White House can now safely talk about the correct impact of fees. As we remember, in July last year, the US imposed them on supplies of $50 billion from China, in September the taxable base was increased by $200 billion at a rate of 10%, from May 2019, the tariff rose to 25%.

While the whole world is waiting for the story to end with the escalating conflict, the sellers of the EUR/USD pair cannot receive tangible benefits. Carry-traders close positions and go into funding currencies, including the euro. Moreover, the report on producer prices in the US for April allowed buyers to consolidate above $1.12. Investors are worried about inflation, as indicators have not reached forecasts. If inflation continues to slow, the Fed will be forced to lower rates. The inflation report is expected to be published today. The dollar will be supported by an increase in the growth rate of the indicator, and the main pair, as a result, will be under pressure.

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Recently, the belief in easing the Fed policy has been growing. The May poll of The Wall Street Journal showed that 51% of respondents adhere to this point of view, whereas in April it was about 44%, in March – only about 19%. Less is said about the coming recession in the US, this topic has become irrelevant.

I must say that the above figures very accurately outline the problem facing the Federal Reserve. Is it necessary to reduce the rate in the conditions of rapid economic growth and sluggish inflation? Perhaps a hint should be expected from the US and China talks.

If the deal is not reached and trade friction resumes with renewed strength, the dollar will receive support, but short-term. There is no need to be surprised. Later, the US currency will start losing ground due to expectations of monetary easing in the United States under the influence of growing international risks.

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