USD/JPY Fundamental Daily Forecast – Showing Early Divergence from U.S. Stock Market Weakness

The Dollar/Yen is posting a slight recovery early Wednesday, following a combined steep sell-off the first two sessions of the week. The price action indicates a slight divergence from the major U.S. stock indexes, which could be a sign of a possible short-term bottom. Nonetheless, the overall driving force in the market will be risk aversion.

At 0812 GMT, the USD/JPY is trading 110.412, up 0.180 or +0.16%.

The eight consecutive session decline in the Dollar/Yen has been driven by several factors including speculation over the outlook for future rate hikes by the U.S. Federal Reserve in 2019, falling Treasury yields and safe-haven buying into the Japanese Yen due to plummeting U.S. equity markets.

Adding to investor worries is the partial shutdown of the U.S. government, President Trump’s constant blasting of the U.S. Federal Reserve and worries over a potential liquidity crisis due to a phone call form Treasury Secretary Mnuchin to several major U.S. banks.

Forecast

Today’s divergence from the stock market may be an early sign that concerns over a stock market crash may be softening. If this is the case then look for the USD/JPY to continue to strengthen as short-sellers begin to pare positions in preparation for a possible reversal to the upside in U.S. stock indexes. While this chart pattern will not necessarily indicate a change in trend is taking place, a sudden shift in momentum to the upside by the equity markets could trigger a strong short-covering rally in the Forex pair.

Look for the Dollar/Yen to continue to lose ground if another rapid swing to the downside by the U.S. stock market leads to another plunge in U.S. Treasury yields.

Fundamentally, Trump is likely to continue to blast the Fed and its Chairman Jerome Powell, but keep in mind that he cannot fire the Fed chief. I don’t know why this has become an issue as of late because Powell is essentially untouchable.

Mnuchin’s call to the major banks should be a concern because it brings back memories of the credit and liquidity crunches from 2008-2009. Wall Street wants to know why the call was made in the first place. Some bears thing it was a preemptive move to make sure banks have enough cash available in case of a stock market meltdown.

As far as the partial government shutdown is concerned, The U.S. Senate and the President could be expected to be deadlocked until January 3 when Congress reconvenes.

On the economic news front, the Bank of Japan’s Core CPI on an annual basis came in at 0.5%, down from 0.6%. The figures also missed the estimate.

In the U.S. on Wednesday, traders will get a chance to react to the latest report on housing from the S&P/CS Composite-20 HPI. It is expected to have risen to 4.8%, down from 5.1%. The Richmond Manufacturing Index is estimated to have risen to 16, up from 14.

Overall, keep an eye on investor appetite for risk and don’t be surprised by a stock market reversal.

GBP/USD Price Forecast – British Pound Locked In Familiar Price Levels amid Holiday Thin Market

The British Pound is also mirroring common currency’s price action today and is trading range bound near recent highs on broad based dollar weakness. The US Greenback is trading bearish against all major global currencies pressured by a cocktail of negative factors including heightened concerns over a partial U.S. government shutdown and tension between the White House and the Federal Reserve. Fears of a U.S. and global economic slowdown have sent U.S. 10-year yields tumbling by around 25 basis points in December, adding to the increasing strain on the dollar and further darkening its outlook. Moderating U.S. growth and political tensions are negative for the dollar which is expected to provide support for Pound bulls in immediate and near future market hours.

Holiday Thin Market Capped GBP Bull’s From Breaching Key Resistance Level

As of writing this article, GBPUSD pair is trading at 1.2710 up by 0.25% on the day. With the absence of the economic data and Brexit-related headlines amid holiday thin market that pair has very little volatility during today’s trading session. As year end holiday season mood is highly prevalent in market, investors maintain cautious tone despite lack of high impact news on cues which paint bearish picture for both GBP & USD once usual trading activity resumes on first week of January 2019. On release front, calendar has no major releases during US markets hours while UK markets are closed owing to Boxing Day celebrations effectively capping any chance of short term profit opportunities leaving the pair to continue its subdued price action.

When looking from technical perspective, the pair has breached major resistance level of 1.27 handle on broad based weakness but failed to breach resistance at 1.275 handle moving down significantly and is swinging on either sides of 1.27 handle during late Asian market hours. The technical oscillators including Momentum and the Relative Strength Index both remain in the neutral territory. The Slow Stochastic is elevated making a bearish crossover just below the overbought territory. The holiday-thinned session is expected to see GBP/USD remain locked in range bound price action with resistance at 1.2750 and 1.2800 handle to the upside and support at 1.2660 and 1.2600 handle to the downside respectively.

EUR/USD Forex Technical Analysis – Strengthens Over 1.1392, Weakens Under 1.1359

The Euro is trading slightly better early Wednesday as investors return to work after Tuesday’s U.S. bank holiday. Investors are still on bank holiday in Germany and Italy which may lead to light volume. However, this also leaves the currency vulnerable to exaggerated volatility due to the thin trading conditions. It’s often difficult to tell how much the major banks will influence the price action.

There is a slight edge to the Euro early Wednesday due to concerns over U.S. stock market volatility and the current government shutdown.

At 0628 GMT, the EUR/USD is trading 1.1406, up 0.0009 or +0.09%.

EUR/USD
Daily EUR/USD

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 1.1487 will signal a resumption of the uptrend. A move through 1.1270 will change the main trend to down.

The minor trend is also up. It will change to down on a move through the minor bottom at 1.1355. This will also shift momentum to the downside.

Daily Retracement Levels Technical Analysis

The main range is 1.1501 to 1.1216. Its retracement zone at 1.1392 to 1.1359 has been controlling the price action for over a month. Trading above this zone today is helping to support the upside bias.

The short-term range is 1.1270 to 1.1487. Its 50% level or pivot at 1.1379 is providing support.

Daily Swing Chart Technical Forecast

Based on the early price action, the direction of the EUR/USD on Wednesday is likely to be determined by trader reaction to the main Fibonacci level at 1.1392.

Bullish Scenario

A sustained move over 1.1392 will indicate the presence of buyers. If this move is able to generate enough upside momentum then look for the rally to possibly extend into the major long-term 50% level at 1.1447. Overtaking this level will indicate the buying is getting stronger with the next targets a minor top at 1.1487 and a main top at 1.1501.

Bearish Scenario

A sustained move under 1.1392 will signal the presence of sellers. This could lead to an initial labored break with potential support levels at 1.1379 and 1.1359, followed closely by the minor bottom at 1.1355.

The minor bottom at 1.1355 is the trigger point for a potential acceleration to the downside with the next major target the December 14 main bottom at 1.1270.

Basically, we’re looking for the EUR/USD to strengthen over 1.1392 and weaken under 1.1359.

EUR/USD Price Forecast – EUR/USD Range Bound amid Holiday Thin Market

EUR/USD has started the week with slight gains as dollar was weighed down owing to mix of negative factors including heightened concerns over a partial U.S. government shutdown and tension between the White House and the Federal Reserve. The market is relatively silent in Asian market hours today as majority of market is still closed on holiday celebrations. While Asian markets are open for trading today, mix of geo-political issues and concerns of economic slowdown kept lid on any serious bull move. Investors are expected to exercise cautious tone amid holiday thin market today as European markets are closed and USA is in dire situation owing to internal crisis.

Macro Data Updates To Provide Slight Volatility Towards End of Week

There is no high impact macro data releases scheduled for the day leaving no triggers to provide even short term opportunities which has also limited liquidity in market considerably. As of writing this article EURUSD pair is trading flat at 1.1402 up by 0.07% on the day. The pair is expected to continue trading with bullish bias in favor of common currency across today’s trading hours owing to broad based weaker US Greenback. On release front, investors focus now lies on US CB Consumer Confidence data and new home sales data scheduled to release during Thursday’s US market hours and German CPI data scheduled to release on Friday for short term opportunities.

When looking from technical perspective, nothing much has changed since trading session began for the week. The EURUSD pair could continue upward price action for rest of the week on broad based weaker USD but faces high level of resistance at 1.1460 handle which is unlikely to be breached ahead of New year eve owing to lack of necessary trigger and strength in market. Ahead of it, the pair has another resistance in the 1.1425 price zone. The 4 hours chart offers a neutral technical stance, with the pair bounding from its 100 and 200 SMA, both converging directionless around 1.1360 and capped by a flat 20 SMA around 1.1415. Technical indicators in the 4hr chart also remain steady near mid-lines reflecting the lack of interest supportive of range bound price action.Expected support and resistance for the pair are at 1.1360, 1.1315, 1.1280 and 1.1425, 1.1460, 1.1500 respectively.

AUD/USD Forex Technical Analysis – Could Gap Lower Due to Lower Demand for Higher-Yielding Currencies

There has been little trading in the Australian Dollar this week due to a two-day bank holiday in Australia and Tuesday’s Christmas holiday in the United States. Without the major banks and institutions trading, volume was extremely light as well as volatility.

However, when the market’s reopen on Wednesday, we’re likely to see a price gap and wide trading ranges due to the heightened volatility in the U.S. and Asian stock markets. The dollar has been getting pounded this week due to flight to safety buying into the Japanese Yen and Swiss Franc. The catalysts seem to be concerns over the U.S. government shutdown and the stock market meltdown.

At 2118 GMT, the AUD/USD is trading .7041, down 0.0007 or -0.10%. On Friday, December 21, the last full day of trading, the AUD/USD settled at .7032, down .0079 or -1.12%.

AUDUSD
Daily AUD/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .7031 will signal a resumption of the downtrend. The main trend will change to up on a move through .7247.

The AUD/USD is in no position to change the trend to up, but it is eight sessions down from its last main top which puts it in the window of time for a closing price reversal bottom. This move won’t change the trend to up, but it could trigger a 2 to 3 day counter-trend rally.

Daily Retracement Level Technical Analysis

The long-term range is .7020 to .7394. Its retracement zone at .7207 to .7163 is resistance.

The main range is .7394 to .7031. Its retracement zone at .7213 to .7255 is additional resistance.

The short-term range is .7247 to .7031. Its 50% level at .7139 is another resistance level.

Daily Swing Chart Technical Forecast

Based on last Friday’s close at .7032, the direction of the AUD/USD on Wednesday is likely to be determined by trader reaction to the October 20 main bottom at .7020.

Bullish Scenario

A sustained move over .7020 will indicate the presence of buyers. If this move can create enough upside momentum then look for the rally to possibly extend into .7139 to .7163.

Bearish Scenario

A sustained move under .7020 will signal the presence of sellers. This could trigger an acceleration into the February 9, 2016 main bottom at .6973. This price is another trigger point for an acceleration into the January 26, 2016 main bottom at .6917.

The daily chart indicates there is even more room to the downside under .6917 with the next major target the January 15, 2016 main bottom at .6826.

Closing Price Reversal Bottom

Taking out .7031 then turning higher for the session will put the AUD/USD in a position to form a potentially bullish closing price reversal bottom. If confirmed, this could trigger a 2 to 3 day counter-trend rally.

Look for extreme volatility today due to the stock market turmoil and the geopolitical problems in the United States.

NZD/USD Forex Technical Analysis – Strengthens Over .6718, Weakens Under .6697

The New Zealand Dollar is trading flat for a second session on Tuesday due to the country’s bank holiday. The U.S. is also on bank holiday due to Christmas. This is keeping the major banks and institutions on the sidelines thereby generating low volume and low volatility.

Investors will have their hands full when trading resumes on Wednesday due to the heightened volatility in the U.S. equity markets and the U.S. government shutdown. Both events are driving investors out of higher risk currencies and into the safe-haven Japanese Yen and Swiss Franc.

At 1946 GMT, the NZD/USD is trading .6729, unchanged. On Friday, December 21, the last full day of trading, the NZD/USD settled at .6712, down 0.0063 or -0.94%.

NZD/USD
Daily NZD/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .6705 will signal a resumption of the downtrend. The main trend will change to up on a trade through .6912.

The NZD/USD is in no position to change the main trend to up, but due to the prolonged move down in terms of price and time, it is in the window of time for a potentially bullish closing price reversal bottom. This chart pattern will not change the trend to up, but it can trigger a 2 to 3 day counter-trend rally.

The minor trend is also down. A trade through .6880 will change the minor trend to up. This will also shift momentum to the upside.

Daily Retracement Level Technical Analysis

The main range is .6465 to .6970. Its retracement zone at .6717 to .6658 is currently being tested. The major retracement zone is .6697 to .6633.

Combining the two retracement zones creates support clusters at .6717 to .6697 and .6658 to .6633. Last week’s low at .6705 was hit inside the .6717 to .6697 zone.

On the upside, the main range is .6970 to .6705. Its retracement zone is at .6838 to .6869. The short-term range is .6912 to .6705. Its 50% level is at .6809. Since the main trend is down, sellers are likely to come in on a test of these retracement levels.

Daily Swing Chart Technical Forecast

Based on last week’s price action, the direction of the NZD/USD on Wednesday is likely to be determined by trader reaction to the 50% level at .6717.

Bullish Scenario

A sustained move over .6717 will indicate the presence of buyers. If this move can generate enough upside momentum over the near-term, we could see a rally into the first 50% level at .6809.

Bearish Scenario

A sustained move under .6717 will signal the presence of sellers. The first targets are the low at .6705, followed by the 50% level at .6697.

If sellers can take out .6697 then look for a possible drive into a pair of Fibonacci levels at .6658 and .6633. We could see a technical bounce on the first test of these levels if aggressive counter-trend buyers show up. However, if .6633 is taken out with conviction then look for the start of a steep plunge.

The Fib level at .6633 is a potential trigger point for an acceleration to the downside with the next major target coming in at .6465. This is the October 26 main bottom.

USD/JPY Forex Technical Analysis – Needs Dramatic Closing Price Reversal Bottom to Stop Selling Pressure

Support for the Dollar/Yen continued to erode on Tuesday will sellers taking out the September 7 bottom at 110.379. The move was fueled by safe-haven buying into the Japanese Yen in response to lower stock markets in Asia. Investors are also bracing for further weakness in the U.S. markets when they reopen on Wednesday.

At 1911 GMT, the USD/JPY is trading 110.150, down 0.302 or -0.27%.

USDJPY
Daily USDJPY (Long-Term)

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The downtrend was reaffirmed earlier in the session when sellers took out the September 7 main bottom at 110.379.

The Forex pair is in no position to change the main trend to up, but it is down eight sessions since the last main top which puts it inside the window of time for a closing price reversal bottom. At this point in the sell-off the only chart pattern that is strong enough to trigger a meaningful short-covering rally is a dramatic reversal to the upside. This chart pattern will not change the trend to up, but it could trigger a 2 to 3 day counter-trend rally.

The main range is the May 29 bottom at 108.114 to the October 3 top at 114.580. It 50% to 61.8% retracement zone at 111.347 to 110.584 is resistance.

The short-term range is the August 21 bottom at 109.770 to the October 3 top at 114.580. Its retracement zone at 112.175 to 111.607 is additional resistance.

Combining the two retracement zones creates a tight resistance zone at 111.347 to 111.607. Closing below these retracement zones is also contributing to the current downside bias.

USD/JPY
Daily USD/JPY (Short-Term)

Daily Swing Chart Technical Forecast

Based on Tuesday’s price action, the direction of the USD/JPY over the near-term is likely to be determined by trader reaction to the Fibonacci level at 110.584.

Bullish Scenario

Overtaking and sustaining a rally over 110.584 will signal the return of buyers. If this move can create enough upside momentum then we could see a strong counter-trend rally into the resistance cluster at 111.347 to 111.607.

Bearish Scenario

A sustained move under 110.584 will indicate the presence of sellers. Taking out 110.379 will indicate the selling is getting stronger.

If this move generates enough downside momentum then look for the selling pressure to extend into the August 21 bottom at 109.770.

The selling pressure will increase if 109.770 is taken out. This could trigger a further decline into the June 26 bottom at 109.360 and the June 18 bottom at 109.179.

The main bottom at 109.179 is very important because it is the trigger point for an acceleration to the downside with the May 29 bottom at 108.114 the next major downside target.

AUD/USD Forex Technical Analysis – Approaching Main Bottoms at .7020 and .6973, In Window of Time for Reversal Bottom

The Australian Dollar traded mostly higher on Friday but in a limited range as investors prepared for Tuesday’s Christmas bank holiday. The inside move suggests investor indecision and impending volatility. Remarkably, the Forex pair was able to remain rangebound throughout the session despite another steep plunge in the U.S. stock market and a steep drop in U.S. Treasury yields.

At 2037 GMT, the AUD/USD is trading .7044, up 0.0018 or +0.26%.

AUDUSD
Daily AUD/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The Forex pair is not in a position to change the trend, but it is inside the window of time for a potentially bullish closing price reversal bottom. So over the near-term traders should be careful when shorting weakness. Make sure you have volume on your side and an exit strategy in place.

A trade through .7031 will signal a resumption of the downtrend. The nearest main top is .7247.

The nearest retracement zone resistance comes in at .7163 to .7207. This is followed by another resistance zone at .7213 to .7255. Combining the two retracement zones creates a resistance cluster at .7207 to .7213.

Daily Swing Chart Technical Forecast

Based on Monday’s price action, the direction of the AUD/USD when trading resumes on Wednesday is likely to be determined by trader reaction to .7031.

Bullish Scenario

A sustained move over .7031 will indicate the presence of buyers. If this move creates enough upside momentum, we could see a test of a minor high at .7124. This is followed by the Fibonacci level at .7163.

Bearish Scenario

A sustained move under .7031 will signal the presence of sellers. The first target is the October 20 bottom at .7020. If this price level fails then look for a potential acceleration to the downside with the February 9, 2016 bottom the next likely downside target.

Closing Price Reversal Chart Pattern

Taking out .7031 then turning higher for the session will be a sign that the buying may be greater than the selling at current price levels. This could trigger the start of a 2 to 3 day short-covering rally.

USD/JPY Price Forecast – US dollar continues to drift lower

The US dollar has fallen against the Japanese yen again on Monday in Christmas Eve trading. There is a significant amount of resistance just above that could continue to cause issues, as we just broke down through a major uptrend line in the uptrend channel. Ultimately, rallies in this pair will probably be faded, unless of course we were to break above the ¥112.50 level. At this point, I suspect that will be the play going forward, as most of my contemporaries believe that the Japanese yen will strengthen going into 2019.

USD/JPY Video 26.12.18

As far as a stretch lower is concerned, this makes sense if we have some type of selloff of risk appetite, it makes sense that the Japanese yen would strengthen. Beyond that, the Federal Reserve seems to be a bit confused then perhaps even softer than originally expected, so I think all of this confusion will turn this market back to the downside. When you look at the longer-term charts, the ¥114.50 level has been a massive resistance barrier, and we just failed there yet again. After all of the sideways choppiness and then the subsequent break down, it makes sense that the downtrend will continue from the longer-term charts. I suspect that we will go looking towards the ¥108 level next, although the ¥110 level will probably cause a little bit of a reaction. With all of the economic headwinds and uncertainty out there, it does make sense that the Japanese yen would strengthen a bit.

GBP/USD Price Forecast – British pound slightly higher during holiday trading

The British pound rallied a bit during the trading session on Monday, reaching towards the 1.27 handle. That’s an area that has been massive support in the past, so now it should be massive resistance. At this point, I think that traders will continue to fade rallies, with the 50 day EMA just above offering quite a bit of resistance. If we do break above the 50 day EMA, then the market could go looking towards the 200 day EMA, an area that is massive resistance. It is currently hugging the downtrend line of the descending triangle that I have marked on the chart, so at this point I think it is only a matter of time before the sellers return.

GBP/USD Video 26.12.18

Ultimately, I think that the descending triangle measures for a move down to the 1.22 handle, and that something that will eventually be targeted. Overall, it makes sense that the British pound will continue to struggle due to the Brexit, and all of the uncertainty that comes with that situation. The one thing that is possibly lifting this pair a bit is short covering ahead of the holidays, and of course the Federal Reserve sounding a little bit more dovish than originally thought has had an effect as well. However, I think that it is only a matter of time before the Brexit takes the headlines again, and therefore sends this market much lower. It’s not until we break above the 200 day EMA that I would consider buying this market for a longer-term move.

GBP/JPY Price Forecast – British pound continues to struggle

The British pound rallied a bit initially during the trading session on Monday but then rolled over to show signs of weakness again. The ¥140 level should be supportive, based upon previous action, and of course the fact that it is a large come around, psychologically significant figure. I do think that we could get a bit of a bounce from here in the short term though, and that could offer a nice opportunity to short this pair again. However, if we break down below the ¥140 level, that probably since this market looking towards the ¥138 level next.

GBP/JPY  Video 26.12.18

The pair is highly sensitive to risk appetite globally, and with stock markets around the world getting hammered, it makes sense that we will continue to see negativity over here. I believe that the ¥145 level above is the current “ceiling” in the market, backed up by the 200 day EMA just above that level. I believe in fading rallies and think that we will get plenty of opportunities to short this pair on these bounces. In fact, I have no scenario in which a willing to buy this pair unless of course there is some type of Brexit agreement signed, because we have the “double whammy” of the Japanese yen being a safety currency, while the British pound of course is shunned because of all of the drama around the Brexit. If you are patient enough, you should get a nice exhaustive candle to take advantage of and start selling again.

EUR/USD Price Forecast – Euro bounces slightly during holiday trading

The Euro rallied a bit during the trading session on Monday, showing signs of strength again. I believe this point we will probably struggle to get above the 1.15 handle, an area that has been massive resistance in the past. Ultimately, we have been grinding a bit higher, so I think we are starting to see market participants short the US dollar overall. There is a massive barrier between the 1.15 level and the 1.16 level, so it’s going to be difficult to break above it. But if we do break above there, the market could go to the 1.18 level after that.

EUR USD Forecast Video 26.12.18

I believe at this point the market is probably focusing on the fact that the Federal Reserve is starting to soften its stance a bit. That being the case, it is perhaps a bit overdone when it comes to the US dollar being bought. Ultimately, this is a market that is going to be noisy and therefore I think that the trade here would be for a longer-term move, as short-term trading is going to be very choppy. The 61.8% Fibonacci retracement level does look as if it is trying to hold at this point, but I don’t think that buying this market is going to be the easiest thing to do. It is a big sloppy mess essentially, so I believe at this point the EUR/USD pair is probably one of the least attractive pair is out there.

AUD/USD Price Forecast – Australian dollar fails to hold gains in thin trading

The Australian dollar initially tried to rally during the trading session on Monday but found enough exhaustion above to turn around to form a slightly negative candle. We are decidedly in a downtrend and that makes sense considering that the Australian dollar is so highly levered to the Chinese economy. The Chinese economy is struggling a bit as the global slowdown continues. The tariff or between the Americans and the Chinese certainly won’t help as well. I think at this point; the Australian dollar is trying to build up the necessary momentum to break through the 0.70 level but it will take a certain amount of wherewithal to make that happen.

AUD/USD Video 26.12.18

In the meantime, I suspect that it’s easier to fade rallies as they occur, with the 0.7250 looked at as the “ceiling” in the market. The more economic and global headlines that spell trouble, the worst this pair is going to do. The Australian housing market is slowing down, and perhaps that is a sign that the Australian economy itself is starting to struggle. I believe that overall the market will continue to be choppy and volatile, but as long as there are concerns out there, the negative and downside should be what you’re looking for. If we do break down below the 0.70 level, the market will probably go looking towards the 0.68 handle, which has been supportive in the past on longer-term charts. A break down through there opens the door to a much bigger move.

EUR/USD Mid-Session Technical Analysis for December 24, 2018

The Euro is trading higher against the U.S. Dollar with demand driven by concerns over the shutdown of the U.S. government. Buyers are also responding to a slight drop in U.S. Treasury yields. However, due to thin pre-holiday trading conditions, we have to take each move today with a grain of salt because the major banks are on the sidelines.

At 1300 GMT, the EUR/USD is trading 1.1407, up 0.0039 or +0.34%.

EURUSD
Daily EUR/USD

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The trend turned up last week when buyers took out 1.1444. The move was reaffirmed when the next swing top at 1.1474 was taken out, however, the buying stalled at 1.1487, just short of the main top at 1.1501.

The major long-term retracement zone is 1.1447 to 1.1185. The market has been trading inside this zone for over a month. Trader reaction to this zone will likely determine the longer-term direction of the Forex pair.

The main range is 1.1501 to 1.1216. Its retracement zone at 1.1359 to 1.1392 is also a major area to watch. The EUR/Usd has straddled this zone for over a month. Earlier today it found support inside this zone.

Daily Swing Chart Technical Forecast

Based on the early price action and the current price at 1.1407, the direction of the EUR/USD the rest of the session is likely to be determined by trader reaction to the Fibonacci level at 1.1392.

Bullish Scenario

A sustained move over 1.1392 will indicate the presence of buyers. If this move gains traction over the next few days, we could see a surge into the 50% level at 1.1447. Overcoming this level will indicate the buying is getting stronger with the next upside targets last week’s high at 1.1487, followed by the main top at 1.1501.

Bearish Scenario

A sustained move under 1.1392 will signal the presence of sellers. This could lead to a labored break with targets coming in at 1.1379, 1.1359 and 1.1355.

We could see an acceleration to the downside if 1.1355 fails as support. The daily chart indicates there is plenty of room to break with 1.1270 the next major downside target.

Forex Overview 2018

The trade war between the US and China, Brexit and the whole European political landscape were some of the major events that marked the year. At the end of 2018, these events will leave us in an undefined state, as they are still awaiting their conclusions.

To begin with, the Dollar had a somewhat troubled start of the year – and it is still in rebound from Trump’s new policies of 2017. The currency depreciated until February of almost 6 percent against the Euro, and its index depreciated at the same time, just over 5 percent. Its recovery began later in March and it then initiated the Commercial War with China, where Trump imposed rates of 50B.

But the main reason for the recovery was also the continuation by the EDF of raising the benchmark interest rate. On March 21 it increased from 1.50 percent to 1.75 percent, thus starting the first of four rate increases from 1.50 percent to 2.50 percent in December 2018. This was the time of the strongest recovery of the dollar from -4.6 percent at the end of to 1.70 percent at the end of May, on the Dollar index, and consequent recovery against the Euro, which went from 5.6 percent to close to -2.8 percent.

All of this is also due to the large improvement in the state of the US economy which peaked in some sectors which had not seen such changes since the 1970s. At the moment we have the lowest unemployment rate in the last 30 years at 3.7 percent, with the product gross domestic product at 3.5 percent, despite having already been at 4.2 percent this year. This also leads to an improvement in the inflation rate, which despite being higher than in January’s 2.1 percent, now stands at 2.2 percent, which is lower than the rate in June, which was 2.9 percent and very close to 2 percent market ideas. All this shows us that this is the economy with the greatest recovery of 2018, but also raises the question of whether it will have the strength to continue like this.

Jerome Powell, governor of the Fed, has already shown that he wants to continue to increase rates by at least another 2 times in 2019, indicating that it expects the economy to remain strong and stable. The Dollar thus ends 2018 with an appreciation being the index, at the moment, to 3.5 percent with the price of 96.56, and in the EUR/USD to -3.66 percent, with the price to 1.1424.

The Pound was the largest depreciation currency within the Majors. Brexit continues to negatively influence the currency which, despite the excellent start of the year, ends with a sharp drop. Starting the strong year, the Pound index appreciates to almost 7 percent until February, even breaking the value, if only for a short time in May. This was due to the fact that the British economy is recovering too, showing a marked improvement in GDP and also a drop in the unemployment rate. At this point, Brexit would be controlled with all deadlines already set. A demonstration of the good momentum of the UK economy is the rise in the interest rate by the Bank of England which passed on 2 August from 0.50 percent to 0.75 percent.

Even at this point the Pound already depreciated strongly against all the problems that Brexit was beginning to raise, namely the agreement with the European Union that seemed quite difficult. This prompted the market to see Mark Carney’s rate rise an inappropriate measure which led the pound to depreciate to near -5 percent in mid-August, a 12 percentage point drop from the year’s high. When it was hoped that it could not get any worse, and even after Theresa May had reached an agreement with the EU, the British Parliament did not approve this agreement, raising major problems for the United Kingdom. At the moment there is a great lack of definition as to what will happen and all scenarios are possible. A new referendum, elections, new agreement (the most difficult of all) and an exit without an agreement. This makes the Pound the currency which will probably be the hardest to analyze in 2019 and the future does not seem easy at all. The Pound’s index ended the year depreciating by -5.40 percent despite having already been down (-6.92 percent) and depreciating by -5.2 percent against the Dollar, is in the price of 1.2660 at the moment.

The Euro had a somewhat similar behavior to the Pound. It started the year off very well but is ending in depreciation. The strong appreciation of the Dollar in the face of Brexit’s problems, as well as the political problems experienced in Europe, has greatly devalued the Euro, which thus reaches the end of the year with the index depreciating at -5.38 percent so far. Despite economic growth, which is also visible in the eurozone with an inflation rate at 1.9 percent and the unemployment rate at 8.1 percent – which has only been lower in 2008 – the Euro fell during this year.

Mario Draghi goes on to say that it is too early to change monetary policies, only finalizing during the month of December the APP (asset purchase program) that began in 2014 and maintaining the benchmark rate at 0.00 percent. Draghi has warned that he does not expect changes in 2019. In political terms, Europe is going through great revolutions with the problems now experienced in France and the confrontation between Italy and Brussels apparently already solved. The future is therefore also uncertain for the Euro and we will have to wait for the beginning of 2019 to know what might happen.

Last note for the other majors that are ending the year is the depreciation compared to the beginning of 2018 with the Canadian Dollar index at -7.24 percent, the Australian at -9.46 percent and New Zealand at -5.19 percent at this time, thus revealing all majors during 2018 expects the US Dollar.

This article was written by Dercio Pires 

Disclaimer: Materials, analysis, and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. The author’s opinion does not represent and should not be construed as a statement or investment advice made by TeleTrade. All Indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.

USD/CAD Daily Porice Forecast – USD/CAD Stable Above Mid 1.35 Handle Despite Political Woes in US Markets

Following last week’s impressive rally, which caused the pair to record its highest weekly close since May of 2017, the USD/CAD pair started the week quietly amid the choppy action in the FX markets ahead of the Christmas holiday. As of writing, the pair was trading at 1.3579 down 0.23% on the day daily basis. The government shutdown in the U.S. seems to be weighing on the greenback on Monday. Although it’s nothing significant, the US Dollar Index, which tracks the greenback against a basket of six currencies, is recording losses in the day ahead of the day’s only macroeconomic data release, Chicago Fed’s National Activity Index. As of writing, the DXY is down 0.2% on the day at 96.75.

Crude Oil Price Supports Loonie Bulls

On the other hand, hopes of OPEC+ deepening oil output cuts following the United Arab Emirates’ energy minister’s, Suhail al-Mazrouei, comments on Sunday seems to have a provided a small boost to the commodity-sensitive currencies such as the loonie. Nevertheless, the barrel of West Texas Intermediate hasn’t yet staged a rebound but doesn’t extend its losses either. Moving forward the pair is expected to retain its bearish price action in last two trading sessions of the week and first week of January as new congress swears in on January 3, 2019 which is expected to further aggravate tensions in US as the house will stand divided on Trump’s request for funds to build border wall.

When looking from technical perspective, technical indicators on the daily chart point to near-term overbought conditions and seemed to be the only factor keeping a lid on any further up-move. However, any profit-taking slide might attract some dip-buying near 100-hour SMA and should limit the downside near a short-term ascending trend-line. Moreover, oscillators on the 1-hourly chart have also cooled off from overbought conditions and thus, support prospects for an extension of the positive move. The pair could face the initial resistance at 1.3600 ahead of 1.3670 and 1.3720 handles to the upside while on the downside support is available at 1.3500-1.3490 followed by 1.3445 and 1.3410 handles respectively.

GBP/USD Price Forecast – GBP/USD Range Bound Ahead of Holiday Thin Market

The GBP/USD pair had a good two-way price action on Friday and was solely influenced by the US Dollar price dynamics. After an initial uptick to the 1.2700 neighborhood, mixed UK macro data – the final GDP print and current account numbers, coupled with resurgent USD demand dragged the pair to an intraday low level of 1.2618. The UK final reading for the third-quarter GDP confirmed the previous estimate of 0.6% Q/Q increase and 1.5 % y/y, while the UK current account deficit rose more than expected to £26.5 billion in the third quarter. From the US, the third quarter GDP growth was revised down to 3.4% from 3.5%, though did little to provide any provide any meaningful boost to the pair.

Market To Close Early On Account of Christmas Eve

The pair finally ended the day in red, through managed to post modest weekly gains and snap five consecutive weeks of losing streak. As of writing this article, GBP/USD pair is trading at 1.2666 up by 0.17% on the day. The Sterling heads into a thin Monday London market session with nothing meaningful on the economic data docket, seeing a free and clear economic calendar for the day. The pair is locked inside familiar levels for now as it continues to struggle to develop meaningful gains into the 1.2700 handle. Meanwhile the pair will continue to be driven by Brexit headlines as January will see a wealth of high impact news from GBP all of which currently point to high chance for downward price action. Market is expected to close early today on event of Christmas eve and will remain closed for next two days on account  of Christmas and Boxing day celebrations.

When looking from technical perspective, the pair has been oscillating in a broader trading range over the few trading sessions, forming a rectangular chart pattern on short-term charts. With global markets set for the year-end holiday season, the pair seems more likely to hold within the mentioned trading range amid relatively thin liquidity conditions. Hence, any further up-move might continue to confront some fresh supply near the 1.2700 handle, above which the pair is likely to aim towards testing the 1.2730 resistance zone. On the flip side, immediate support is pegged near the 1.2600 handle, which if broken might turn the pair vulnerable to head back towards testing the 1.2545-40 intermediate support en-route the key 1.2500 psychological mark.

EUR/USD Price Forecast – EUR/USD Range Bound Near Friday Lows Amid Holiday Think Market

EUR/USD is catching some mild bidding action into 1.1390, winding through Monday’s early trading session, after the pair got knocked sharply lower late last week. Monday has opened on the moderate side, though gains have been limited. The Euro slipped from recent highs near 1.1485 late last week as investor sentiment continues to get knocked back by spiraling economic data and traders who remain fearful of a continued slowdown across the board impeding progress.

Risk-off sentiment soared last week and US equities had their worst week in a decade as political and economic risks mount on both mainland Europe, in the UK and the USA. As of writing this article, EURUSD pair is trading at 1.1391 up by 0.18% on the day.

Concerns of Global Economic Slowdown Has Trapped the Pair Inside A Wide Price Band

Moving forward this week, the market is currently in holiday mood which means low liquidity in the market across major FX centers.  On the release front, the economic calendar is free and clear of EU data at the start the new week ahead of Christmas holiday slated for tomorrow. US markets will see release of Chicago Fed’s National Activity Index, slated to come in at 0.24% and focus on other major releases of the week scheduled to release on Thursday and Friday – US CB consumer confidence, new home sales data and pending home sales data as equity and forex markets in major European markets are closed for Christmas till Wednesday. When looking from a technical perspective, the pair seems to be trapped in wider price band with lower limits above mid 1.25 handle and the upper limit at 1.15 handle amid concerns of a global economic slowdown.

The pair faces a risk of medium-term trend resumption following its price reversal on Friday. Immediate support lies at the 1.1300 level where a violation if seen will aim at the 1.1250 level. A break below here will aim at the 1.1250/1.1200 levels. Further down, support comes in at the 1.1150.

On the upside, resistance resides at 1.1400 levels with a breakthrough at said level opening the door for further upside towards the 1.1450 level. Further up, resistance comes in at the 1.1500 level where a violation will expose the 1.1550 level. In immediate trading hours though, the path with least resistance seems to be on the downside.

USD/JPY Fundamental Weekly Forecast – Focus Remains on Stock Market Volatility, Safe-Haven Demand

Last week, the Dollar/Yen plunged sharply lower as investors made major adjustments to their portfolios due to an unexpected shift in Fed policy and safe-haven demand fueled by a steep drop in U.S. equity markets.

For the week, the USD/JPY settled at 111.205, down 2.189 or -1.93%.

U.S. Federal Reserve Impact

After a steady opening last week, the Dollar/Yen plummeted after the U.S. Federal Reserve raised its benchmark interest rate 25 basis point in a widely expected move. What spooked the markets, however, was the news that the central bank now forecasts two hikes next year, down from three rate hikes previously projected. Traders had priced in as many as 1 or fewer rate hikes in 2019.

Furthermore, the Fed also said it would continue to include in its monetary policy statement that further “gradual” rate hikes would be appropriate. Federal Reserve Chairman Jerome Powell also said the balance sheet reduction program will continue to proceed as planned.

Stock Market Sell-off and Safe-Haven Buying

The steep plunge in U.S. equity markets also drove investors to seek shelter in the safe-haven Japanese Yen last week. The biggest drop occurred on Thursday, December 20 when the USD/JPY fell to its lowest level since September 7 as Treasury yields plummeted and stocks fell sharply.

U.S. Government Shutdown

The U.S. government shutdown on Saturday. However, it’s not expected to have too much influence on the market unless it remains shutdown beyond January 4.

Bank of Japan Monetary Policy Decision

The Bank of Japan maintained its ultra-loose monetary policy on December 20 and reaffirmed its view the economy is on a solid footing, even as fears of slowing global growth jolt markets and lowered prospects for hitting its 2 percent inflation target.

Forecast

The USD/JPY could be rangebound early in the week due to bank holidays on Monday and Tuesday. The U.S. markets are closed only on Tuesday. Nonetheless, if you choose to trade then be prepared for well-below average volume and exaggerated moves in either direction.

Later in the week, the U.S. will release its Conference Board Consumer Confidence report. It is expected to come in at 133.0, lower than the previously reported 135.7.

Due to the bank holidays this week and the next week, economic data may not have much of an influence on the price action until January 4th’s U.S. Non-Farm Payrolls report.

Stock market volatility and the government shutdown are likely to grab most of the headlines this week. Additionally, investors will get the opportunity to react to remarks from Bank of Japan Governor Kuroda on Thursday as well as a slew of minor economic reports including housing starts, unemployment rate, BOJ Summary of Opinions, Preliminary Industrial Production and Retail Sales.

AUD/USD and NZD/USD Fundamental Weekly Forecast – Stock Market Volatility, Government Shutdown Will Be Headline Grabbers

A number of factors contributed to the Australian and New Zealand Dollars plunge last week including a less-dovish U.S. Federal Reserve, preparation for the U.S. government shutdown, weaker-than-expected domestic data, a drop in the Chinese Yuan and flight-to-safety buying into the Japanese Yen. Trading conditions could slow this week due to low volume because of the Christmas holiday on Tuesday and next week’s New Year’s holiday. Typically, volume is extremely low during this time period which means we could see exaggerated meaningless moves in either direction.

For the week, the AUD/USD settled at .7032, down 0.0143 or -2.00% and the NZD/USD finished at .6712, down 0.0088 or -1.29%.

U.S. Federal Reserve Impact

After a steady opening last week, the Aussie and New Zealand Dollar plummeted after the U.S. Federal Reserve raised its benchmark interest rate 25 basis point in a widely expected move. What spooked the markets, however, was the news that the central bank now forecasts two hikes next year, down from three rate hikes previously projected. Traders had priced in as many as 1 or fewer rate hikes in 2019.

Furthermore, the Fed also said it would continue to include in its monetary policy statement that further “gradual” rate hikes would be appropriate. Federal Reserve Chairman Jerome Powell also said the balance sheet reduction program will continue to proceed as planned.

Domestic Woes

In Australia, the Reserve Bank of Australia monetary policy meeting minutes hinted at a softer tone about the economy when it issued warnings about the housing market and consumption. Some traders went as far as saying the next move on interest rates by the RBA will be lower. Later in the week, the labor market news was mixed with the Employment Change coming in higher than expected at 37.0K and the Unemployment Rate rising slightly to 5.1%.

In New Zealand, quarterly GDP was weaker than expected at 0.3%, well below the 0.6% forecast. This news also prompted investors to increase bets on a Reserve Bank of New Zealand rate hike.

Weaker Chinese Yuan

Last week, the Australian and New Zealand Dollars were also pressured by a drop in the Chinese Yuan, which fell to its lowest level since December 11 against the U.S. Dollar.

U.S. Government Shutdown

The U.S. government shutdown on Saturday. However, it’s not expected to have too much influence on the market unless it remains shutdown beyond January 4.

Stock Market Sell-off and Safe-Haven Buying

The steep plunge in U.S. equity markets also drove investors to seek shelter in the safe-haven Japanese Yen last week. On Friday, traders raced into the U.S. Dollar which contributed to steep losses in both the Aussie and Kiwi.

Forecast

The AUD/USD and NZD/USD could be rangebound early in the week due to bank holidays on Monday and Tuesday. The U.S. markets are closed only on Tuesday. Nonetheless, if you choose to trade then be prepared for well-below average volume and exaggerated moves in either direction.

Later in the week, the U.S. will release its Conference Board Consumer Confidence report. It is expected to come in at 133.0, lower than the previously reported 135.7.

Due to the bank holidays this week and the next week, economic data may not have much of an influence on the price action until January 4th’s U.S. Non-Farm Payrolls report.

Stock market volatility and the government shutdown are likely to grab most of the headlines this week.