GBP/USD Price Forecast – British Pound Struggles to Hang On to Gains Against Greenback

The British pound initially tried to rally during the trading session on Friday, just as it did on Thursday. However, just as we had seen on Thursday, the sellers overwhelmed the pair, and the British pound cannot hang on to gains. It looks at this point that the market is going fully into a “risk off” type of situation. I believe also that the British pound is suffering not only due to the fact that the global markets are complete mess, but the fact that the never-ending source of tension between the UK and the EU continues. Ultimately, I do think that the greenback is a bit oversold against most currencies, but the British pound will probably continue to be a little bit more insulated.

GBP/USD Video 02.03.20

If we break down below the 1.28 handle, it very well could open up the door to at least the 200 day EMA. At this point, it’s likely that the market would have a serious fight on his hand to determine the direction of the trend overall pair the market turning around and recapturing the 1.30 level though would be rather bullish and showed just how strong the British pound is in general. At that point, I would anticipate that the basing pattern would be somewhat completed, and we should go looking towards 1.35 handle. However, as things are starting to develop on the coronavirus front and the massive amount of money going into the US bond markets, that’s looking less likely by the day.

GBP/JPY Price Forecast – British Pound Gets Hammered Against Japanese Yen Yet Again

The British pound has broken down significantly during the trading session on Friday, as we continue to see a major breakdown and risk appetite. The Japanese yen is acting as a safety currency again, so having said that it’s likely that the markets will continue to drive toward the yen until the overall attitude of traders around the world stabilizes. Having said that though, it’s difficult to imagine a scenario where we will see some type of major turnaround right away. On the other side of that equation is the fact that the market is getting oversold, so a bounce is probably very likely. Even if that’s the case though, it’s very difficult to simply just jump in and buy this market because it is “cheap.”

GBP/JPY Video 02.03.20

If we break down below the ¥139 level, then the bottom will fall out of this pair and we will continue to go much lower. It should be noted that the British pound has held up a little bit better against the Japanese yen over the last several months, so this pair may have further to fall than other ones. When compared to other pairs such as the AUD/JPY and the NZD/JPY, there’s much more real estate to the downside if we do get a complete breakdown and collapse in confidence. Rallies at this point will probably be sold into unless of course something changes drastically, so we will probably have to look towards the weekly chart in order to make a bigger decision. If that’s the case, pay attention to how it breaks and of course my analysis here on longer time frames. This clearly looks very bearish at the moment though.

EUR/USD Price Forecast – Euro Roles Over As Fear Continues

The Euro rallied initially during the trading session on Friday again, but as time wore on, the market participants started selling it in order to form a rather bearish looking candlestick. Ultimately, the 1.10 level is a major area and it makes sense that resistance would show up in this area. At this point, the market looks very likely to go looking towards the lows again, because quite frankly we are in a large downtrend and quite frankly the European Union is starting to see an explosion in coronavirus cases. I do believe that the market is starting to look at the fact that the European Union is almost into a recession, and certainly looks as if it is going to head in that direction.

EUR/USD Video 02.03.20

To the upside, the market does break above the top of the candlestick for the day, then we could see a bit of a melt up, but I don’t think that’s going to be the case. Quite frankly as we go to the weekend a lot of people will have wanted to close the long position that they may have had in the Euro, as the US dollar continues to offer safety over the longer term. Granted, there was a repricing of the US dollar due to concerns about the coronavirus expanding in the United States, but at the end of the day we are in a downtrend and nothing has changed in the European Union, and therefore we should continue to see plenty of weakness.

AUD/USD Price Forecast – Australian Dollar Gets Hammered

The Australian dollar has been hammered during the trading session on Friday, but at this point it’s likely that the market will have to bounce a bit due to the fact that it is oversold. Granted, the Australian dollar is highly sensitive to the Chinese economy and what’s going on there, which of course is getting crushed by the coronavirus situation. A lack of demand for copper and other raw materials out of Australia will probably continue to suffer, so at this point I think it’s likely that the market will sell the Australian dollar is a bit of a proxy. Furthermore, the US dollar is picking up quite a bit of momentum due to the fact that the markets are completely freaking out around the world, as the coronavirus has seemingly accelerated.

AUD/USD Video 02.03.20

The market participants will more than likely sell into any rally that we get at this point, so looking for signs of exhaustion will be the way to go. I believe at this point, it’s a matter of time before you get some type of opportunity to sell this pair. Quite frankly, if we do break down below the lows of the Friday session, it is of course a selling signal, but I much prefer selling rallies Sibley because we are a bit overextended. I still believe that this pair is probably going to go looking towards the 0.63 handle, which was the bottom of the financial crisis back over a decade ago. To the upside, I believe that the 0.66 level could offer more selling, and most certainly the 0.67 level will. All things being equal it’s likely that the market could see a bit of a bounce late in the Friday session just due to short covering.

Gold Price Forecast – Did Gold Prices Peak?

Since January, we’ve been calling for Gold to reach $1700 by March. Prices hit $1691.70 on Monday before reversing sharply. The massive liquidation in stocks this week may have forced a premature top in Gold.

On Monday I wrote, Gold Nears $1700 Target as Stocks Plummet. Our Gold Cycle Indicator jumped to 405 and entered maximum topping, suggesting the 6-month cycle was nearing maturity. I assumed prices would stretch a little higher, but the ensuing market liquidation proved overwhelming.

Correction Target

If the gold cycle peaked at $1691.70, then I won’t expect the next 6-month low until late April or early May. Preliminary analysis supports a decline to $1480 – $1520.

A close up of a map

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What could change our outlook? If stocks continue to plummet, then the Fed will be forced to cut interest rates, and that could put gold back on its feet. With the S&P 500 down 13.40% for the week (as I write), the Fed could announce something as soon as this weekend.

Don’t Let The Bull Throw You

Despite all the volatility, precious metals and miners are in long-term bull markets. There will be pullbacks and corrections, sometimes deep – don’t let these events shake you. The bull is powerful and will do its best to throw you. Grit your teeth, cinch down that flank strap, and decide not to be thrown.

AG Thorson is a registered CMT and expert in technical analysis. He believes we are in the final stages of a global debt super-cycle. For more information, please visit https://goldpredict.com/

 

Natural Gas Price Fundamental Daily Forecast – May Be Overcooked; Don’t Get Caught Shorting Weakness

Natural gas futures hit a multi-year low on Friday, strongly suggesting the winter heating season is over and traders are ready to move on to the spring. Besides the weather, traders are also blaming the steep losses this week on coronavirus fears.

Another catalyst behind Friday’s rout is the loss of 22.3 gas-weighted heating degree days (gHDD) from the American model over the past 24 hours, according to forecaster DTN, which adjusted its latest forecast to warmer ahead of Friday’s opening.

At 14:39 GMT, April Natural Gas is trading $1.722, down $0.30 or -1.71%. The low of the session so far is $1.642.

U.S. Energy Information Administration Weekly Storage report

On Thursday, the EIA reported that domestic supplies of natural gas fell by 143 for the week-ending February 21. Total stocks now stand at 2,200 trillion cubic feet, up 637 billion cubic feet from a year ago, and 179 billion cubic feet above the five-year average, the government said.

Going into the report, traders were looking for a larger-than-average withdrawal for the week-ending February 21.

A Bloomberg survey predicted withdrawals ranging from 145 Bcf to 165 Bcf, with a median of 156 Bcf. Polls by the Wall Street Journal and Reuters produced similar results, while NGI’s model projected a pull of 152 Bcf.

The EIA recorded a 167 Bcf draw for the similar week last year, while the five-year average withdrawal stands at 122 Bcf.

Daily Forecast

Now that the market has hit its multi-year low at $1.642 and winter has been officially put to bed (aside from a few pockets of cold weather than tend to pop up in March) speculators can kick back and relax. What this means is that a few of the major short-sellers are likely to start booking profits so there exists the possibility of a meaningful short-covering rally over the near-term.

Start watching for signs of a bottom like a lower-low, higher-close, commonly known as a closing price reversal bottom. Turning higher on a move over yesterday’s close at $1.752 can produce such a move.

Don’t get complacent if short. This market can turn higher in a hurry if the short-sellers start to take profits. The next rally may have nothing to do with the weather.

Gold Daily News: Friday, February 28

The gold futures contract lost 0.04% on Thursday, as it continued to fluctuate after retracing most of Friday’s-Monday’s rally. The daily trading range remained relatively big yesterday, as it reached over 25 dollars. It shows how high short-term volatility is. Investors were buying the safe-haven asset amid corona virus outbreak, economic slowdown fears recently. But gold has retraced a big chunk of that rally after bouncing off $1,700 mark.

Gold is 1.3% lower this morning despite stock market’s sell-off and the mentioned corona virus fears. What about the other precious metals? Silver lost 1.00% on Thursday. Today silver is 4.0% lower after breaking below January lows. Platinum lost 1.02% on Thursday, and right now it is trading 3.3% lower. The metal broke below $900. Palladium was the only gainer again, as it advanced by 1.68% yesterday. However, it is 3.9% lower this morning.

The financial markets went risk-off since last Friday, as corona virus fears came back again. Yesterday’s Durable Goods Orders release was mixed, the Preliminary GDP was in line with expectations and Pending Home Sales number was better than expected. However, stocks accelerated their sell-off and the S&P 500 index lost a stunning 4.42%.

Today we will have the Personal Spending and Personal Income numbers release at 8:30 a.m. Then at 9:45 a.m. the Chicago PMI will be released. There will also be Michigan Consumer Sentiment number release at 10:00 a.m. So a lot of news releases ahead of us this morning. However, economic data releases seem less important than the mentioned virus scare recently.

Check more of our free articles on our website – just drop by and have a look. We encourage you to sign up for our daily newsletter, too – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to our premium daily Gold & Silver Trading Alerts. Sign up for the free newsletter today!

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Paul Rejczak
Stock Trading Strategist
Sunshine Profits – Effective Investments through Diligence and Care

* * * * *

Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Price of Gold Fundamental Daily Forecast – Watch for Buyers as Market Enters Value Area

Gold prices are down over 1% on Friday as investors continued to book profits after a recent run-up in prices. The market has now give back more than half of its gains from the rally that began on February 5. Nonetheless, the precious metal is set to finish with a third consecutive monthly gain although it is likely to end the week with a loss.

At 13:25 GMT, April Comex gold is trading $1623.80, down $18.70 or -1.14%.

The weakness in gold this week has come as a surprise to some. One would think that with the global equity markets plunging over 10% in just a matter of days, gold prices would’ve soared. But that hasn’t been the case.

Gold is probably under pressure this week for a number of reasons. Firstly, it may be too costly or overpriced. Secondly, traders may have fully priced in the sooner-than-expected rate cuts from the Fed. Thirdly, some of the bigger hedge funds may be booking profits to offset some of their losses or to meet margin calls in other markets. Finally, investors may have determined that buying U.S. Treasurys for safe-haven protection is a better play due to liquidity issues in gold.

Daily Forecast

We said earlier in the week that the longer-term fundamentals for gold are bullish and that investors may not buying again when the market hits a value zone. Not everyone has the money to chase a market higher.

Gold is currently trading inside a value zone defined as $1628.10 to $1604.80. Watch the price action and read the order flow on a test of this zone to determine if buying is taking place. Ideally, we’d like to see a closing price reversal bottom, but that moves seems unlikely today unless there is a dramatic turnaround.

Gold may have to spend a few days inside the value zone, building a support base, before prices move higher.

Silver Daily Forecast – Silver Slides to 10-Week Low

Silver has lost ground for a fourth straight day. Currently, silver is trading at $17.12, down $0.64 or 3.65% the day.

Silver Approaching $17

It has been a rough week for silver. The metal is down 7.5% and is on track to post its worst week since October 2016. Silver is struggling to stay above the symbolic 17.00 level, which has held since mid-December.

As a precious metal, silver can be considered a safe-haven asset. At the same time, it also has use as an industrial component, and this aspect has sent silver prices sharply lower. For example, silver is found in photovoltaic (PV), which is a key component in the manufacture of solar panels. China boasts the largest PV silver market in the world, and the coronavirus resulted in many PV factories having to close. South Korea, another industrial hub for silver, has been hit hard by the coronavirus, as the country’s economic activity has been sapped.

Will Fed Trim Rates in Response to Corona?

Only a few weeks, ago, Federal Reserve policymakers were confidently indicating to the markets that they did not anticipate lowering rates in 2020. However, the devastating economic consequences of the coronavirus may cause the Fed to reconsider this stance.

On Thursday, Chicago Fed President Charles Evans said that the Federal Reserve was paying “close attention” to the outbreak and said that “policymakers must commit to provide extraordinary accommodation in order to meet their mandate.” If the coronavirus spreads in the U.S., the Fed may be forced to cut interest rates.

 

Silver Technical Analysis

As silver falls, support levels continues to break. The 200-day EMA is situated at 17.10 and is located at the candlesticks. This is immediately followed by the round number of 17.00. Below, we find support at 16.30, which is protecting the 16.00 level. Above, we have resistance at 17.50, with the 50-EMA at 17.81. This is followed by the key line of 18.00.

 

Oil Price Fundamental Daily Forecast – Prices May Be Too Cheap for Buyers to Ignore

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures hit multi-year lows on Friday and were set for their steepest weekly decline in more than four years as the spread of the coronavirus raised fears of a global recession and consequently lower demand for crude oil and other refined fuels.

At 12:54 GMT, April WTI crude oil is at $45.73, down $1.36 or -2.95% and April Brent crude oil is at $51.04, down $1.14 or -2.18%.

Benchmark Brent crude, which fell about 2% on Thursday, has lost around 13% this week, putting it on track for its steepest decline since January 2016. The front-month April contract expires later on Friday.

“Brent crude under $50 a barrel will be a nightmare scenario for OPEC and may well provoke a … response of some kind from the core grouping,” said Jeffrey Halley, a senior market analyst at brokerage OANDA.

Still Hope of Rebound in Demand

Some market participants are expecting the recent sell-offs to be reined in as soon as the demand fears wane. Furthermore, with coronavirus cases in China beginning to slow, the country may soon return to full production, while the spread of the virus runs its course throughout the rest of the world.

“We have to believe that the COVID-19 virus will be contained sooner rather than later. I’m optimistic we should see some positive news by mid-next week at the latest,” said Sukrit Vijayakar, director of energy consultancy Trifecta.

“Subsequently, the sudden drop in demand will rise back just as suddenly, to at least 75% to 90% of prior levels. The rise back will be spurred by current low prices.”

Daily Forecast

The markets are getting pretty close to levels that will become attractive to speculators, but there has to be a catalyst to get the markets moving higher. China’s PMI data over the week-end are expected to come in weak, but that news may already be priced into the market.

News from China started the selling, and news from China is likely to ignite the rally. If you believe the data, the virus may be subsiding in China and the country may start to go back to work. Once investors know the duration of the virus then they’ll be better able to figure out when the outbreak is likely to end in the rest of the world. This will then encourage more buying in crude oil along with extremely cheap prices.

EUR/USD Mid-Session Technical Analysis for February 28, 2020

The Euro is trading lower shortly after the U.S. opening on Friday after the single currency hit its highest level since February 4 earlier in the session. The rally this week has been fueled by speculation of a sooner-than-anticipated rate cut by the U.S. Federal Reserve in the wake of the rout in U.S. equity markets and increasing fears of a global recession.

At 12:34 GMT, the EUR/USD is trading 1.0996, down 0.0004 or -0.03%.

The EUR/USD rally began to fizzle and the Forex pair turned lower after a key market gauge of long-term Euro Zone inflation expectations fell to a record low on Friday as concerns about the spread of coronavirus intensified.

The five-year forward fell to 1.1182%, its lowest level ever. It measures expected Euro Zone inflation over a five-year period, Reuters reported.

Daily EUR/USD

Daily Technical Analysis

The main trend is down according to the daily swing chart. However, momentum is trending higher. The main trend will change to up on a trade through the last main top at 1.1095. The main trend changes to down on a move through the last swing bottom at 1.0778.

The first main range is 1.1239 to 1.0778. Its retracement zone is 1.1007 to 1.1062. Today’s rally stopped inside this zone at 1.1053.

The new short-term range is 1.0778 to 1.1053. Its retracement zone at 1.0916 to 1.0883 is the next potential downside target.

Daily Technical Forecast

Based on the early price action and the current price at 1.0996, the direction of the EUR/USD the rest of the session on Friday is likely to be determined by trader reaction to the main 50% level at 1.1007.

Bearish Scenario

A sustained move under 1.1007 will indicate the presence of sellers. The next downside target is a downtrending Gann angle at 1.0995. This is a potential trigger point for an acceleration to the downside.

If 1.0995 fails as support then look for a potential break over the near-term into the short-term retracement zone at 1.0916 to 1.0883.

Bullish Scenario

A sustained move over 1.1007 will signal the presence of buyers. The first upside target is a downtrending Gann angle at 1.1029. Overcoming this angle will indicate the buying is getting stronger with potential upside targets coming in at 1.1053 and 1.1062.

Taking out 1.1062 could trigger a surge into a resistance cluster at 1.1095 – 1.1096.

Sweden Ends Its Experiment with Negative Interest Rates. Should Gold Be Worried?

In December, the Sveriges Riksbank, the world’s oldest central bank, has raised the main interest rate from -0.25 percent back to zero, ending its experiment with the negative interest rate policy, as the chart below shows.

Chart 1: Riksbank’s repo rate from January 2010 to January 2020.

This is a huge change. As a reminder, Riksbank was a pioneer of negative interest rates. As early as in 2009, it moved the overnight deposit rate below zero. Then, in 2015, the Swedish central bank cut its main interest rate, the repo rate, to -0.10, worried about the repercussions of the sovereign debt crisis in the euro zone. In 2016, Riksbank was forced to go further, setting the interest rates as low as -0.50 percent, to prevent a Japanese-style deflationary spiral in Sweden.

And now, after all these years, Riksbank abandons the negative interest rates, again being in the avant-garde of central banking, as policy interest rates are still negative in the euro zone, Japan, Denmark, Switzerland and Hungary.

Why Riksbank has ended the NIRP? One explanation is that Sweden’s inflation rate is close to the target, so the monetary tightening was necessary. In other words, the NIRP did its job and was not needed any longer. As we read in the Riksbank’s press release,

Inflation has been close to the Riksbank’s target of 2 per cent since the start of 2017, and the Riksbank assesses that conditions are good for inflation to remain close to the target going forward.

It sounds plausible, but the truth is that inflation has been hovering around the target for a few last years, as the chart below shows. So why did the Riksbank decide to hike interest rates only now – and in face of weaker economic activity?

Chart 2: Sweden’s annual CPI rate from January 2015 to December 2019.

The answer is that Sweden’s central bank has finally acknowledged what we were writing from the very beginning of the NIRP, i.e., that the costs of this policy outweigh the benefits, euphemistically speaking. Indeed, Riksbank admitted itself that concerns about the side-effects of the negative interest rates on the economy contributed to its decision. As we read in the minutes from the December meeting,

a long period of negative interest rates may have negative side effects on the economy, as the draft Monetary Policy Report commendably describes. This is a parameter that we should take into account.

In particular, the Sweden’s central bank is worried about the health of the housing market and households’ level of debt. As Governor Stefan Ingves noted,

Let me add, as I often do, that the long-term development of the Swedish housing market entails a risk to the Swedish economy in both the short and long term. There are a number of structural problems in the Swedish housing market. This creates both imbalances and risks, in the form of high indebtedness among households, and economic inefficiency, in that it will be more difficult for people to move in connection with finding a new job.

Indeed, the real estate price index has increased 33 percent since 2015 (from 180 points to 240) and doubled since the Great Recession, while the household debt-to-GDP ratio has risen from 65 percent in 2008 and 82 percent in 2015 to 88 percent in 2019. Please note that the whole Swedish private-sector debt has climbed to 285.7 percent of GDP, one of the highest rates in the OECD.

What does it all mean for the gold market? Well, the Riksbank’s recent hike confirms that the ultra loose monetary policy in general and the negative interest rates in particular do not support the real economy, but they rather zombify it instead. They also boost asset prices and debt, increasing the risk of a financial crisis.

Sweden is relatively small economy, but the ECB or the Bank of Japan are not likely to follow suit and also end their romance with the negative interest rates anytime soon. The Fed claims that it does not want to go below zero, but Trump supports this policy, so who knows…

So, the fact that Riksbank ended its NIRP should not upset the gold bulls. They still can count on other, more systematically important, central banks. One day, the unexpected negative shock arrives and it will expose the fragility of the current financial situation, so carefully cultivated under the strange world of negative interest rates. Investors would then also rediscover the safe-haven allure of gold.

If you enjoyed the above analysis and would you like to know more about the fundamentals of the gold market, we invite you to read the February Market Overview report. If you’re interested in the detailed price analysis and price projections with targets, we invite you to sign up for our Gold & Silver Trading Alerts. If you’re not ready to subscribe yet and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!

Arkadiusz Sieron, PhD
Sunshine Profits – Effective Investments Through Diligence and Care

Disclaimer: Please note that the aim of the above analysis is to discuss the likely long-term impact of the featured phenomenon on the price of gold and this analysis does not indicate (nor does it aim to do so) whether gold is likely to move higher or lower in the short- or medium term. In order to determine the latter, many additional factors need to be considered (i.e. sentiment, chart patterns, cycles, indicators, ratios, self-similar patterns and more) and we are taking them into account (and discussing the short- and medium-term outlook) in our Trading Alerts.

 

Crude Daily Forecast – Crude Slips Below $45 as Demand Slides

Crude prices continue to lose ground this week. Currently, U.S. crude oil is trading at $45.20, down $0.95 or 2.09% on the day. Brent crude oil is trading at $50.26, down $1.15 or 2.24%.

Crude Slips to 13-Month Low

As the coronavirus continues to spread, the economic fallout to the global economy is growing. This has been the catalyst behind a plunge in oil prices. Crude has declined by 14.7% this week and briefly fell below the $45 level earlier on Friday. This is its lowest level since January 2018. With analysts warning that things could worsen before they improve, oil prices will likely remain under downward pressure.

The bleak economic situation in China, with much of the industrial sector paralyzed, has led to a sharp reduction in demand for oil. China is the world’s second-largest oil producer, and the deteriorating situation is taking its toll on Saudi Arabia, which is China’s top supplier of oil. Starting in March, Saudi Arabia will sharply reduce its oil exports to China, which currently stands at about 2 million barrels per day (bpd). Analysts say that this amount could be cut significantly, perhaps as much as 300,000 bdp.  Chinese refineries have sharply cut refinery runs, leading to a growing oversupply of crude on global markets.

Technical Analysis

WTI/USD continues to fall and break below support levels this week. The pair tested support at 45.50 earlier on Friday and this line could break before the end of the trading week. The next support level is at 43.55.

On the upside, there is resistance at 47.50, followed by resistance at .$49.50, which is just below the symbolic $50 level.

GBP/USD Daily Forecast – Exchange Rate Little Changed in Week of Volatile Trading

GBP/USD saw some downside pressure around the middle of the week but momentum in the decline has slowed as buyers have held the pair above important support.

The bigger development for the UK this week has been in the equity markets rather than the exchange rate. The UK FTSE declined to fresh lows now seen since the summer of 2016 earlier today and is down more than 11% this week. The equity index is weighed by a global shift to risk aversion after it became apparent earlier in the week that the Coronavirus has started to spread at a more rapid pace outside of China.

In the currency markets, more meaningful moves are seen in commodity currencies and safe-haven currencies. The former tend to sell-off when investors turn risk-averse while the latter typically gain.

The dollar has been under pressure which seems to have limited the decline GBP/USD this week. Investors have become increasingly certain that the Federal Reserve will deliver a rate cut to combat the negative impacts the Coronavirus will have on the US economy. The CME FedWatch Tool, which tracks pricing in the Fed Fund Futures markets to determine market probabilities of interest rate changes, shows a rate cut is fully priced in for next month’s Fed meeting. The data further shows a one in five chance of the Fed delivering a 50 basis point cut rather than the typical 25 basis points.

The UK will start official trade negotiations with the EU next week which could lead to an increase in volatility in the exchange rate. The pound to dollar currency pair trades at an important technical inflection point and the direction from here will likely be driven by developments in trade negotiations.

Technical Analysis

Support at 1.2859 has held the exchange rate higher on two attempts now since yesterday. Beyond the level, there is further support near 1.2820 which stems from the lower bound of a declining trend channel.

GBPUSD 4-Hour Chart

GBP/USD appears to be on the verge of a breakdown as it continues to hold below a major horizontal level at 1.2961. Further, the pair has also been holding below its 200-week moving average since dropping below it in the early month. The technical outlook suggests the pair is reversing trend from the bullish run that began in September.

Over the near-term, resistance is seen at 1.2924 followed by 1.2961.

A weaker dollar is helping to keep Sterling supported. In this context, any communication from the Fed regarding a potential upcoming rate cut will be important in addition to developments in EU trade negotiations.

Bottom Line

  • GBP/USD bulls are holding the pair above technical support at 1.2859 which continues to be a hurdle for bears over the near-term.
  • Volatility is likely to increase next week once trade negotiations with the EU commence.

EUR/USD Bulls Steamroll Over 1.0950 Zone

Dear traders, the EUR/USD broke above the key resistance zone at 1.0950. The breakout and strong bullish impulse invalidated the bearish outlook. What is next for this pair?

4 hour chart

EUR/USD 4 hour chart

The EUR/USD made a close and reverse. The confirmation of the bullish reversal took place after price action was able to break above the channel resistance (dotted red) and long-term trend line (dotted red). Price could now be in a bullish wave C (green). The bearish swing has probably completed a wave C (purple). More upside is likely at the moment.

1 hour chart

EUR/USD 1 hour chart

The EUR/USD break seems to be a wave 3 (orange) pattern. After completing a sideways correction in wave 4 (orange), price broke again to the upside. The next target could be as high as 1.11. Eventually a bearish retracement is expected to take place. If pullback is mild, then more upside is expected.

EUR/USD

Good trading,

Chris Svorcik

The analysis has been done with the help of SWAT method (simple wave analysis and trading)

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EUR/USD Daily Forecast – February Losses Nearly Wiped in Six-Day Rally

The week started with a decline of 3.3% in the S&P 500 (SPY), but unlike other times the index dropped sharply, buyers have failed to step in to support the index. Rather, the downside momentum has been accelerating and risk sentiment has been deteriorating across the markets on concerns that the Coronavirus has become a real threat this week for countries aside from China.

Gold has been an exception to the shift in sentiment as the yellow metal peaked after a notable rally to start the week. In the Forex market, however, currencies are showing a textbook shift to risk aversion. The Japanese yen, known as a safe-haven currency, has advanced nearly 3% against the greenback in the week thus far. The Swiss franc also falls into this category and has made notable gains.

The euro showed a somewhat delayed reaction to the recent shift but has advanced as market participants wind down risky trades for which the single currency is often used for funding. Further aiding EUR/USD is a weaker dollar after the futures market signaled that a US rate cut might come as soon as next month.

At the start of the week, the CME FedWatch Tool indicated a roughly 50% chance of a rate cut in June. The data now shows a quarter basis point fully priced in for the March meeting and a roughly one in five chance of a 50 basis point cut.

Meanwhile, European Central Bank President Christine Lagarde downplayed the potential impact of the virus on Thursday. Lagarde commented that policymakers need to determine if the virus will become a “long-lasting shock” and further said, “we are certainly not at that point yet.” Her view was confirmed by ECB member Vasiliauskas earlier today who added that the ECB could set an extraordinary meeting if need be.

Technical Analysis

EURUSD Daily Chart

Two things stand out in the current rally in EUR/USD. First, there is a lot of momentum behind the move, and second, the rally follows a momentum-driven decline that dominated most of the month.

Implied volatility is at a one-year high and the fact that most of the losses from the first three weeks of the month have been wiped out suggests there is a strong conviction behind the upward move. Combine that with developments in other markets, and the general shift to risk aversion, and there is little reason to step in the way of the current bullish trend in the currency pair.

Having said that, there are some notable technical hurdles that bulls may face in the session ahead. The 100-day moving average comes into play at 1.1052 and the 200-day moving average currently falls at 1.1098. In between the two moving averages, a horizontal level is seen at 1.1075.

To the downside, support is found at 1.1000 which is a level that acted as major support between November and January.

Bottom Line

  • Developments in other markets point to an acceleration in risk aversion while EUR/USD implied volatility has reached a one-year high. This type of scenario favors trend continuation strategies rather than mean reversion strategies.
  • Several areas of technical resistance come into play in the session ahead, buyers might look to step in at 1.1000 if the resistance areas trigger a pullback.

When Investors Are Panicking, Yen flexes Muscles

This week on global stocks was absolutely brutal. We dropped from almost all-time highs to the lowest levels since October. Almost 4 months of rises wiped out in a week. That has to hurt. On the Forex Market, we have the dominance of safe heaven currencies: CHF and JPY. In this analysis, I will analyze the situation on the Japanese Yen.

First, Yen Index. First signs of power appeared on Monday, when the index confirmed the false breakout below important mid-term support (827). Other steps were made on Wednesday and Thursday, when the price broke the mid-term down trendline and the horizontal resistance on the 837. Yesterday’s candle just made everything clear – buyers are fully controlling the situation at the moment. Sentiment for Japanese currency is currently positive.

Now, USDJPY, which we analyzed recently. In our previous analysis we pointed out the giant symmetric triangle and the breakout to the upside. In theory, that was a great buy signal. Just in theory though as in practice, the price met a worthy opponent – highs from the 2019. This is were the price reversed and created a false breakout pattern. Now we are back below the upper line of the triangle, which is a very negative signal for the nearest future.

Now, everyone’s favorite, one and only – GBPJPY. Here, the situation is pretty clear. The price broke the 141 support, which automatically switched the sentiment into a negative one. This level was a crucial resistance from October to December 2019 and later a crucial support, till yesterday. Price staying below this area is definitely pessimistic.

Crude Oil Price Update – Major Buyer Could Be Lurking Between $45.92 and $43.55

U.S. West Texas Intermediate crude oil futures finished sharply lower on Thursday and in a position to challenge its December 24, 2018 main bottom at $45.92. The market is also poised to move lower for sixth straight session on Friday, while remaining on track to close the week more than 12% lower. This would mark its biggest weekly decline in more than four years.

On Thursday, April WTI crude oil settled at $47.09, down $1.64 or -3.37%.

Daily April WTI Crude Oil

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through $45.88 will reaffirm the downtrend.

The nearest resistance is the main top at $54.66. A trade through this price level will change the main trend to up. This is highly unlikely, however.

Today’s session begins with the market down six sessions from its last main top at $54.66. Typically, we start to look for potentially bullish closing price reversal bottom between 7 and 10 days from the last main top. So start looking for bottoming action next Monday through Thursday.

Short-Term Outlook

Lower tops and lower bottoms are the definition of a downtrend. Lower highs and lower lows define a downswing. Taking out Thursday’s low at $45.88 will confirm the current downswing. If this move is able to generate enough downside momentum then look for the selling to possibly extend into the January 20, 2016 main bottom at $43.55.

Although we typically look for closing price reversal bottoms in 7 to 10 days from a top, due to the huge loss in price on the current downswing, we’re not going to ignore a closing price reversal bottom on the sixth day down. So pay attention to yesterday’s close at $47.09. It’s going to begin Friday’s session as resistance, but overcoming this level on an intraday basis could spook some of the weaker short-sellers into covering their positions. This move would be an early indication of a short-term bottom.

E-mini S&P 500 Index (ES) Futures Technical Analysis – Nearing Major Retracement Zone at 2876.75 – 2753.75

March E-mini S&P 500 Index futures finished sharply lower on Thursday after taking out a number of swing bottoms. The sell-off was primarily fueled by a combination of profit-taking and protective sell stops being executed. Given the downside momentum, I’m sure some of the selling was driven by computer algorithms. For those who keep track of these sort of things, the index is down over 10% from its last major top, which puts it in correction territory.

On Thursday, March E-mini S&P 500 Index futures settled at 2957.00, down 153.25 or -5.18%.

Daily March E-mini S&P 500 Index

Daily Technical Analysis

The main trend is down according to the daily swing chart. The main trend will change to up on a move through 3397.50. This is highly unlikely, however.

The market is also down six days from its most recent top at 3397.50. Usually we start looking for closing price reversal bottoms after seven sessions especially when a market is testing a major 50% to 6.18% retracement zone. So we’re going to wait until Monday before we start fishing for a bottom especially with China expected to release its Manufacturing and Non-Manufacturing PMI reports at 01:00 GMT on Saturday. This report could make or break this market on Monday.

The main range is the contract low at 2356.00 from December 24, 2018 and the contract high at 3397.50 from February 20. Its retracement zone is 2876.75 to 2753.75. Trader reaction to this zone should determine the direction of the March E-mini S&P 500 Index into the close on Friday.

Daily March E-mini S&P 500 Index

Early Forecast

We’re seeing some relatively light selling pressure early Friday. If this is able to generate enough downside momentum then look for the selling to extend into the main 50% level at 2876.75. We could see a technical bounce on the first test of this level.

If 2876.75 fails as support then look for the selling to possibly extend into the series of main bottoms at 2855.00, 2818.75 and 2787.00. These are followed by the main Fibonacci level at 2753.75 and another main bottom at 2741.75. Watch for buying at these levels also.

The Fib level at 2753.75 is also the trigger point for a potential acceleration to the downside.

We’re going to learn a lot about how investors feel about this market by how they react to 2876.75 to 2753.75. I know it’s a day early, but I wouldn’t be surprised by a major reversal to the upside following a test of this value zone. It there is no reversal then we could see an attempt to build a support base.

We’re not issuing a buy signal. We’re just saying that a test of 2876.75 to 2753.75 could bring in the bargain-hunters.

EOS, Ethereum and Ripple’s XRP – Daily Tech Analysis – 28/02/20

EOS

EOS rose by 2.31% on Thursday. Partially reversing a 13.10% tumble from Wednesday, EOS ended the day at $3.6174.

A mixed start to the day saw EOS fall to an early morning intraday low $3.3900 before finding support.

Steering clear of the first major support level at $3.2070, EOS rallied to a late afternoon intraday high $3.7399.

Falling short of the first major resistance level at $3.9899, EOS fell back to $3.50 levels before finding late support.

At the time of writing, EOS was up by 0.63% to $3.6402. A bullish start to the day saw EOS rise from an early morning low $3.6163 to a high $3.6812.

EOS left the major support and resistance levels untested early on.

EOS/USD 28/02/20 Daily Chart

For the day ahead

EOS would need to move back through the morning high $3.6812 to support a run at the first major resistance level at $3.7749.

Support from the broader market would be needed, however, for EOS to break out from Thursday’s high $3.7399.

Barring a broad-based crypto rally, however, the first major resistance level would likely leave EOS short of $3.90 levels.

Failure to move back through to $3.6812 levels could see EOS fall back into the red.

A fall back through the morning low to sub-$3.5820 levels would bring the first major support level at $3.4250 into play.

Barring an extended crypto sell-off, however, EOS should continue to steer clear of sub-$3.30 levels.

Looking at the Technical Indicators

Major Support Level: $3.4250

Major Resistance Level: $3.7749

23.6% FIB Retracement Level: $6.62

38% FIB Retracement Level: $9.76

62% FIB Retracement Level: $14.82

Ethereum

Ethereum rose by 1.72% on Thursday. Partially reversing a 9.25% tumble from Wednesday, Ethereum ended the day at $227.63.

A bearish start to the day saw Ethereum fall to an early morning intraday low $209.26.

Ethereum fell through the first major support level at $217.57 and second major support level at $211.63 before finding support.

Tracking the broader market, Ethereum rallied to a late afternoon intraday high $239.00 before easing back to sub-$230 levels.

Coming up against the first major resistance level at $240.14, Ethereum fell to $222 levels before wrapping up the day at $227 levels.

At the time of writing, Ethereum was up by 1.92% to $231.99. A bullish start to the day saw Ethereum rise from an early morning low $226.61 to a high $234.90.

Ethereum left the major support and resistance levels untested early on.

ETH/USD 28/02/20 Daily Chart

For the day ahead

Ethereum would need to break back through the morning high $234.90 to bring the first major resistance level at $237.75 into play.

Support from the broader market would be needed, however, for Ethereum to break back through to $235 levels.

Barring a broad-based crypto rebound, the first major resistance level at $237.75 should leave Ethereum short of $240 levels.

Failure to move back through the morning high could see Ethereum give up the early gains.

A fall through back through to sub-$229 levels would bring the first major support level at $218.75 into play.

Barring an extended crypto sell-off, however, Ethereum should steer clear of sub-$210 support levels.

Looking at the Technical Indicators

Major Support Level: $218.75

Major Resistance Level: $237.75

23.6% FIB Retracement Level: $257

38.2% FIB Retracement Level: $367

62% FIB Retracement Level: $543

Ripple’s XRP

Ripple’s XRP rallied by 3.81% on Thursday. Partially reversing a 9.15% tumble from Wednesday, Ripple’s XRP ended the day at $0.23846.

A bearish start to the day saw Ripple’s XRP fall to an early morning intraday low $0.22431 before making a move.

Steering clear of the major support levels, Ripple’s XRP rallied to a late afternoon intraday high $0.24725.

Falling short of the first major resistance level at $0.2490, Ripple’s XRP fell back to sub-$0.24 levels to limit the upside on the day.

At the time of writing, Ripple’s XRP was up by 1.52% to $0.24209. A bullish start to the day saw Ripple’s XRP rise from an early morning low $0.23839 to a high $0.24450.

Ripple’s XRP left the major support and resistance levels untested early on.

XRP/USD 28/02/20 Daily Chart

For the day ahead

Ripple’s XRP will need to break back through the morning high $0.24450 to support a run at the first major resistance level at $0.2490.

Support from the broader market would be needed, however, for Ripple’s XRP to break out from Thursday’s high $0.24725.

Barring a crypto rebound, resistance at $0.2450 would likely leave Ripple’s XRP short of the first major resistance level.

Failure to move through the morning high $0.24450 could see Ripple’s XRP fall back into the red.

A fall back through the morning low $0.23839 to sub-$0.2370 levels would bring the first major support level at $0.2261 into play.

Barring an extended crypto sell-off, however, Ripple’s XRP should steer clear of sub-$0.22 levels on the day.

Looking at the Technical Indicators

Major Support Level: $0.2261

Major Resistance Level: $0.2490

23.6% FIB Retracement Level: $0.3638

38.2% FIB Retracement Level: $0.4800

62% FIB Retracement Level: $0.6678

Please let us know what you think in the comments below.

Thanks, Bob