8th February 2019 - The worries about the global growth dominate

Walid Salah Eldin

Active member
214 1
The worries about the global growth slowdown could contain the market sentiment by the end of this week weigh down on the risk appetite and the demand for the industrial metals and energy.

After European Commission revised down its forecast for EU GDP growth in 2019 to only 1.3%, after it was forecasting 1.9% last November expecting growth in Germany this year by only 1.1% after it was expecting last November growth by 1.8%.

After The ECB signaled last month that the risks surrounding the EU growth have turned to the downside meanwhile.

EURUSD kept a dovish behavior this week trading now near 1.1340. after starting the week near 1.1450 following failure to maintain a place above 1.15 psychological level by the end of last week.

While The uncertainty surrounding UK Brexit could raise again GBP volatility this week driving to retest 1.30 psychological level on hope for reaching deal between UK and EU.

As both sides have shown rapprochement tendency to reach a deal, as Brexit coordinator Guy Verhofstadt said that No Deal is not an option, while UK PM May indicated that she believes that there will be Irish backstops.

The higher optimism on Brexit could prop GBPUSD up, after falling to 1.2854 on BOE announced UK GDP growth lower forecast to only 1.2% from 1.7% it was expecting last November, expecting growth in 2020 by only 1.5% from 1.7% it was expecting last November.

  • BOE expected also UK CPI retreating could temporarily below its 2% yearly goal in the coming months amid growth decelerating and lower energy prices.
  • After MPC voted unanimously to leave the benchmark interest rates unchanged at 0.75%, holding BOE’s APF at Stg435b re-investing the cash flows associated with the redemption of the gilt held in the Asset Purchase Facility.
In Australia the interest rate outlook has fallen forming continued pressure on AUDUSD to be traded currently during the Asian session near 0.7060.

After RBA has highlighted earlier this week its worries about the global demand for commodities amid lower global economic expansion expectations and the fear of the trade war influences between US and China which has grown yearly by only 6.5% in 2018 Q3 to have the lowest yearly expansion rate since the beginning of 2009.

USDCAD could easily rebound for trading currently near 1.3320 on worries about the global demand for energy drove WTI down for trading currently near $52.50 per barrel

USD came this week versus the USD currencies after it has been depressed by The Fed's pretty softer than expected stance last week dampened the interest rate outlook in US.

As The FOMC has finally omitted last week from its released economic statement that some further gradual increases would be warranted placing that the Fed would be patient in evaluating the health of the economy.

The committee said also it is prepared to slow or even reverse the steady course of selling of its held portfolio of Treasuries and mortgage bonds which has been uploaded during the credit crisis for propping up the economy.

The Fed's economic assessment clarified its current worries about sluggish inflation in US which has consistently fallen below its 2% yearly goal.

The committee adopted patience stance could bolster demand for equities and commodities, before coming under pressure this week with this dovish market sentiment dominating, amid lower hopes to reach trade deal between US and China.

As White House top economic adviser Larry Kudlow signaled that we are still away of reach a deal the equities markets started to be priced in the recent weeks.

S&P 500 corrected below 2700 level and its future is still referring to existence below this psychological level in intersection with its daily SMA100, while UST 10yr yield resided to just below 2.65%, after failure to hold above 2.70%, amid the current increasing demand for safe haven and lower interest rate outlook made Gold favorable instrument to be trading currently near $1310 per ounce, after its ability to hold above $1300 despite the greenback strength.


XAUUSD is now trading near $1310, after it could have higher footing this week above $1300 psychological level to keep its higher lows series on until now.

Gold could reach $1326.27 per ounce dropping $1325.91 resistance, after gaining higher upside momentum on breaking of above $1300 psychological level following stepping on $1276.65 per ounce.

The gold surpassed $1300 psychological level, following forming series of higher lows started with $1160.24 on last Aug. 16 and drove it above its daily SMA50, its daily SMA100 and its daily SMA200.

XAUUSD is trading now in its eleventh days in a row above its daily Parabolic SAR (step 0.02, maximum 0.2) which is reading today $1302.

The daily chart of XAUUSD shows that its RSI-14 is now inside reading 60.434 coming down from its overbought area above 70.
XAUUSD daily Stochastic Oscillator (5, 3, 3) which is more sensitive to the volatility is also having now its main line inside its neutral territory reading 24.268 to be closer to intersection with its signal line which is still higher in the same region at 24.976 above the oversold area below 20.

Important levels: Daily SMA50 @ $1275, Daily SMA100 @ $1245 and Daily SMA200 @ $1245
The Closest Experienced S&R:
S1: $1302.83
S2: $1276.65
S3: $1253.46
R1: $1326.27
R2: $1366.06
R3: $1375.20

Have a good day

Kind Regards

Global Market Strategist of FX-Recommends

Walid Salah El Din
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