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KeyToMarketsUK

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EURUSD was choppy at the start of trading on Monday, but economic data outcomes are capping the rallies. In my view, dips should be well protected and could come out of the ranges in the coming weeks. The return of dollar weakness could strengthen the G10 basket.

Eurozone manufacturing sector moves closer to stagnation, according to HIS Markit. The January PMI and the other set of data points revealed that the economy is still running in lower gear led by trade concerns and political developments within Europe, especially the German economy is experiencing a downturn.

Data review:
  • The preliminary flash estimate for the fourth quarter of 2018 GDP up by 0.2% in the euro area.
  • Euro area annual inflation is expected to be 1.4% in January 2019 according to a flash estimate from Eurostat.
  • Eurozone Manufacturing PMI registered 50.5, down from 51.4 in December, unchanged from the flash estimate, according to HIS Markit.
Data preview:
German Industrial Production to be the big focus point for the euro traders this week (Feb 04-08). Back in November 2018 German IP fell by 1.9% mom, sharpest decline since 2015. Whereas we expect the IP slightly rebound in Dec 2018.
Any rebound is likely to be too weak to push industrial activity back into expansion territory, but private consumption and government expenditures should have been enough to prevent the entire economy from falling into a technical recession, according to ING.

TECHNICAL OVERVIEW

EURUSD volatility is very low over the past few months, but recent Fed’s dovish turn could be the catalyst for euro bulls. The technical landscape for EURUSD hasn’t changed since mid-November 2018.

The price recouped from 1.1215 and managed to breach the narrow range in early January 2019. Since then the new range is capped by 200MA. We believe the return of the dollar weakness is the very catalyst for the major to break higher through the new range of 1.1570-1.1270. A move beyond Jan 2019 high would unfold next leg of the rally towards 1.1680 and 1.1770 (short covering move).

We advise traders to trade with a cautious bias and follow strict stop losses below 1.1200 for longs. Last month’s impulse move has laid a foundation of higher low pattern between 1.1300-1.1270.

Ahead of the German IP data the key support finds at 1.1390 followed by 1.1300/1.1270. If the price starts moving higher, key resistance levels to watch out are 1.1500/1.1515 and 1.1570.

On the daily chart, the price is developing a bearish H&S pattern with shoulders seems between 1.1495-1.1515. If price fails to close above in a day or two, could retrace back to the neckline 1.1300.


EURUSDDaily.png


Turning to FX positioning, Since Monday, January 28, positioning has shifted slightly. Within G10, the largest short is in EUR; the largest long is now in USD according to Morgan Stanley.

In an FX Positioning Tracer note, Strategists Gek and Andrew said: “EUR positioning more short.”

They reported “A notable reduction in Japanese retail accounts’ long EUR positions drove the aggregate EUR positioning score into the more short territory. EUR sentiment improved on the margin, and we estimate that macro hedge funds were buyers of EUR, but these changes were smaller than increased short positioning by Japanese retail accounts. Significant short EUR positioning could lead to outsized positive moves as macroeconomic data stabilize”.

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KeyToMarketsUK

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  • We are taking profit on our short EURUSD trade entered on February 05 at 1.1435 targeting a move to the neckline 1.1300/1.1270. We continue to forecast EURUSD to range within the range of 1.1200-1.1515 in the coming week. We also expect a room to further downfall.
  • Dollar dominance, downshift in euro area growth, global growth revisions and local and global political unrest impacting the single currency. Recent EZ PMI surveys indicate the economy has started the new year on a flat note.
  • The week ahead brings Germany Q4 GDP, EA flash GDP, and US CPI. We also focus on a few FOMC speeches and headlines of US government shutdown from February 15.
Again, the dollar trend is likely to be the big focus point for the forex traders this week (Feb 11-15) along with other risk events around the corner. On top of these, headlines on US-China trade talks and the latest developments of Brexit are likely to keep investors busy.

Overall, this week is expected full of action with the G10 currencies, few of them namely EUR, GBP, and NZD. The headlines on the US budget will dictate near-term volatility woes.

Data review:
PMI Services Index was unmoved on December’s 49-month low of 51.2 at the start of the year, according to IHS Markit.
Germany factory orders had decreased in December 2018 to -1.6% vs. -0.2% in November 2018.
In December 2018, production in the industry was down by 0.4% from the previous month, according to Destatis.

Data preview:
Local and global political unrest impacting the single currency on an addition to this France and Italy remained the remained the primary sources of weakness, with both countries registering declines in activity during January, according to IHS Markit.

In the euro area, we keep an eye on Germany Q4 GDP number (Thu). Back in Q3 Germany economy contracted 0.2% vs. Q2. The Federal Statistical Office (Destatis) reports that, in the third quarter of 2018, the gross domestic product (GDP) shrank by 0.2% on the second quarter of 2018. This was the first decline recorded in a quarter-on-quarter comparison since the first quarter of 2015.
In Q4 we expect the growth engine could quiet at 0.1%.

Besides, in the US we will see CPI data (Wed) and a few FOMC speeches.

TECHNICAL OVERVIEW
The single currency slumped overnight on the back of dollar strength across the board. The EURUSD fell 0.40% to 1.1267 and could expect further retracement if lost 1.1200. Currently the price stands at the lower end of the range, and now it could be downgraded further to wave C.

The pair failed to cling on to its gain after a breakout above 1.1500, pulling back sharply and breaking below the significant support at 1.1400. Given the daily indicators are bearish and the daily stochastics is also downbeat, caution remains in order at the lower end of the channel.

A break below the 1.1265 Nov 28 low would drag further to 1.1240 its 100.0fe (A-B-C corrective pattern of 1.1570-1.1290-1.1515)) before retracing fully to 1.1200.

Whereas support zone at the 1.1300-1.1270 has held in recent weeks keeping the momentum in focus of large consolidation. On the downside, a break below 1.1200 may trigger losses towards 1.1060 before 1.1000. At higher time frames, the corrective structure of wave C is pointing to 1.1000 (1.1815-1.1215-1.1570).

EURUSDWeekly.png

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KeyToMarketsUK

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KTM Commodity Daily: Gold Park the brake at the support zone

Gold price failed to gain a footing above the 80.0% weekly basis triggered a retracement to the parallel support at 1320.50$. The yellow metal extended its rebound and retested the crucial hurdle at the key fib reaction. The indicator gave a mixed outlook as the stochastics about to turn bearish. Especially the RSI has been painting negative divergence, and we cautioned traders twice this week.

Support at the 1320.50$ held in Asia today a breakdown could shift the focus towards 20DMA at 1317.00$. Overall, the support zone finds between 1320.00-1317.00$. A break below the 20DMA may trigger losses to 1302.00$. To maintain the current rally, the bulls need to hold 1302$. Resistances seems to be at 1328.00$, 1335.00$ and 1350.00$
  • Bulls: As long as 1302.00$ is supporting, watch out for 1345.00$ and 1350.00$.
  • Bears: Sell on raise favors the trend with sl above 1376.00$ (closing basis) it’s July 2016 high coincides with the 38.2% fib reaction of 1920.00$-1046.00$ correction. Strong resistance zone seems between 1350.00$-1360.00$.
XAUUSDDaily.png


What if the price close above?
On the upside, protracted buying may trigger on a break above 1376.00$ (Weekly closing). In this case, the price may pave the way for higher prices through 1415.00$ and 1480.00$ levels in the coming months.

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KeyToMarketsUK

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KTM FX Daily: GBP/XXXs run through the targets

• We forecasted that the GBP setting was bullish to go beyond hurdles last week. We still expect GBP to trade with higher volatility.
• The recent rally has laid the medium-term foundation, and further impulse may probably be provided by the mid-March 2019.
• Reports of delayed Brexit deadline is a hot topic, seems GBP buyers craving for Sun.

The pound moved sharply higher with breaking the key resistances on the news “Extending Brexit Deadline.” The fresh rallies of GBP crosses and against the USD are consistent, and we are long GBP against the basket of CHF, EUR, JPY, and USD.
UK Prime Minister Theresa May said Tuesday that she’d give Parliament a chance to delay Brexit.

Vox reported that “May told Parliament on Tuesday, February 26, that if an upcoming second vote on her Brexit deal fails, members of Parliament could vote to either leave the European Union without a deal on March 29, 2019 or seek a “short limited extension” to the deadline.”.

On the back of this news, the cable jumped to a four-week high, now focus on the nearest resistance 1.3300 above here 1.3360 exists.

Now we turn our focus on the other European currencies NOK and SEK with the G10 basket. We believe the deadline delay or clouds erase over UK’s uncertainty should benefit these currencies. Besides in majors EURUSD likely to claim further headroom if settles above 1.1400.

At the closing trading hours, the GBP was up 1.30% against CHF and USD followed by CAD and NZD by a percent. Against AUD and GBP was up by 0.90%.

FX insights:
  • GBPUSD: Resistance 1.3300 and 1.3360, run through the 1st target.
GBPUSDDaily.png

  • GBPNZD: Resistance 1.9285, it’s 50.0% fib reaction while traced out a triple top (so far). Above here 1.94050 are the next key barrier.
GBPNZDDaily.png

  • GBPJPY: pauses at the 20MA (monthly) above here 147.80, 148.40 and finally 149.70 could be possible. Run through the 1st target.
  • GBPAUD: Traced out a double top pattern (so far) at 1.8520 above here 1.8730 in focus.
  • GBPCHF: Run through the second target. The resistance between 1.3270-1.3300 above here 1.3330-1.3350 its 200MA (Weekly) are in focus. Overall, limited headroom in the near term but the medium term could expect 1.3440.
  • EURGBP: Support finds at 0.8550 its 200EA (Weekly) coincides with the 80.0 fib reaction.
  • EURGBPWeekly.png
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KeyToMarketsUK

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KTM Commodity Daily: Taking profit on Platinum long trad

  • The Platinum metal prices have seen a superb rally 5% in the past two weeks, ran through the second target we set in mid- February.
  • Above 200MA for the first time since March 2018; Continued to rally this week too, with breaking the two-month range.
  • We continue to favor being long, and now the price has facing still parallel resistance at 876$ and 886$ its 20MA (Monthly).
We now decided to take partial profit on that long trade entered on February 22 at 831$ targeting a move to 844$, 875$ and 900$ levels. On Wednesday the price printed a high at 872.50$ and the time of writing currently trading at 868$. We exit the trade at 866$ for a profit of nearly 5.00%.
We continue to forecast Platinum to head higher to 885$ and 900$ in the near-term. So we wait for another better opportunity to return to long.

XPTUSDDaily.png


The daily indicators are close to overbought territory whereas the weekly and monthly are remaining upbeat. On the upside, the trend is supportive, but the market needs to take out the early November high 876.50$ to confirm the direction once again, additional resistance seems to be at 886$ its 20MA (monthly).

XPTUSDWeekly.png

The flip side, the price has been well supported at 845$ and 830$ a break below 830$ may pave the way for lower prices back to the lower end of recent range.

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KeyToMarketsUK

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  • The dollar recouped since last week’s low and managed to close the month on a positive note in February.
  • Besides the EURSUD manages to hold the 1.1300 again and we believe the setting for EURUSD cast on this week’s ECB meeting.
  • European Central Bank monetary policy meeting among top-tier data/event to keep euro traders busy.
Data review:
  • Final Eurozone Manufacturing PMI at 49.3 in February vs. Flash: 49.2 and January Final: 50.5, according to IHS Markit. The reading is slipping below 50.0 for the first time since June 2013.
  • Euro area annual inflation is expected to be 1.5% in February 2019, up from 1.4% in January, according to a flash estimate from Eurostat.
Data preview:

ECB:
It’s unlikely that the interest rate will move so all eyes on the Draghi’s communication during the press conference. As we noted earlier, there is a chance of a significant downgrade to growth and inflation. Moreover, economists expect debate on TLRO (Targeted Long-term Refinancing Operation) which is going to expire in June 2020.

“The central bank will likely focus on replacing the long-term refinancing operations. Downgrades to the macro path should provide the backdrop for an announcement of extra bank funding, either at the upcoming March meeting or in April” Said analyst team at Morgan Stanley in a note.

Moody’s analytics team forecast that the central bank will be revised down the GDP to 1.3% in 2019 and 1.6% in 2020, respectively.
“We are penciling in that the bank’s GDP and inflation forecasts for 2019 will be revised down; core inflation has hovered around 1% for a long time, which means that the ECB’s expectation that it will average 1.4% in 2019 looks fanciful” Moody’s Analytics reported.

TECHNICAL OVERVIEW
The price action has been trading in a tight range of 1.1220-1.1570 for last four-months (November 2018-February 2019), The consolidation last extended to the same-months on December 2016-March 2017 followed by a big break higher. This time we are not expecting a big break higher unless the rate differential supports.
EURUSDMonthly.png


Well the daily RSI lacks the conviction to move higher, and the oscillator has turned bearish. These settings suggest a continuation of range trading again in this week.

On Monday, March 04 the price was rejected at the major moving averages 50MA and 100MA that are placed between 1.1380-1.1390, suggesting strong resistance zone on the higher side. Ahead of the ECB meeting (March 07) sustained trade above 50MA-100MA will resume the up move taking the single currency higher towards the next crucial resistance 1.1440.
Whereby it has to go beyond significant resistance of 1.1440 for heading north towards 1.1500 initially followed by 1.1700/1.1740.
EURUSDH4.png


Besides, a close below the strong support 1.1200 will push prices lower to 1.1150 initially before touching 1.1100.
View: We remain cautiously NEUTRAL as we continue to study the action.

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KeyToMarketsUK

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KTM FX Weekly: Economic calendar (March 11-15); Chart of the week: GBPUSD

The dollar index fell on Friday and but gained 0.90% during the week. The kiwi dollar bucks the trend on Friday with 0.7% on Friday and gained 0.15% last week among G10 currencies. Besides GBP lost 1.70% and the EUR lost 1.2% followed by CAD 0.95% and JPY and CHF by 0.90% each.

On March 08, the U.S dollar across the board on mixed February non-farm payroll. Total nonfarm payroll employment changed little in February +20,000, and the unemployment rate fell by 0.2% to 3.8%, the U.S. Bureau of Labor Statistics reported whereas the average hourly earnings have increased to 3.4%.

On the back of the mixed data, USD down across the board, flip side Silver rose nearly 2.00% and Gold by 1.30%. The Dow Jones futures were down by a percent and later rebound strongly by the end of the day.

Overall the dollar index (KTM: DXY) suggested bullish bias but failed to breach mid-Dec 2018 high. The index requires a strong foot above 98.00 to extend is a new move towards the significant number 100.00 and 100.60. Whereas the flip side, support exists at 96.90 then 96.30.

USDXDaily.png

Turning to precious metals, Gold rallied to 1300.75$ nearly completed my target. Now support exists at 1290.00$ and 1280.00$. The RSI is slowly picking up, and the oscillator has been turned to bullish. Based on these facts, we could expect recovery towards the resistance 1303.00$ ahead of 1312-1314$ its 20MA and 50.0% fib reaction. But selling on rising favors the trend.

The broader G10 currencies are closed to their lower ranges and continue to remain in ranges for the week (March 11- 15) expect GBP. GBPUSD weekly pivotal finds at 1.2880 below here focus shifts to 1.2770 its 61.8% fib reaction then 1.2660.
GBPUSDDaily.png



This morning in Asia, dollar edges up higher marginally after Friday’s fall.

Week ahead:
It is a crucial week ahead for Brexit, the House of Commons will vote on Theresa’s May Brexit deal.
“Reaching a deal cannot be ruled out, but an extension of the 29 March deadline looks more likely.” Nordea Markets reported.
Danske Bank said “If the government loses the vote, there will be a vote on Wednesday on whether to rule out leaving the EU without a deal. If the Commons vote to take no-deal off the table, there will be a third vote on Thursday on whether to ask the EU for an extension of Article 50. We judge that there is a 15% probability that May’s deal will pass on Tuesday”.

On top of the Brexit headlines, UK January GDP will be in focus. Turning to EZ, we will get February CPI on Friday.
“We expect the CPI report to confirm that inflation rose slightly to 1.5% y/y at the middle of the second quarter from 1.4% in January.” Moody’s Analytics reported.

Elsewhere in the US, we will get Retail sales, IP and CPI.

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KeyToMarketsUK

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Parliament vote to reject no-deal Brexit

The pound recouped its Tuesday losses in the overnight trade and managed to breach the February high. Against the G10 basket, the pound gained between 1.50-2.00% while the EURGBP manage to hold the 0.8470 Tuesday’s low.
We still believe that the stage is very much set to delay its deadline as the UK Parliament rejected no-deal Brexit. Today on Thursday Parliament will again vote on delaying Brexit.

“That vote will take place on Thursday, and if it is passed – and the EU agrees to it – the UK will not leave the EU as planned on 29 March. Mrs. May said there could be a short delay to implement a deal agreed in the next few days, or a longer delay if no agreement is reached.” BBC reported.

The cable spikes through the February 2019 high at 1.3350, rallies to 1.3380 shies at 50.0% fib reaction 1.3390/1.3400. It seems the stage is very much set up for the cable to go beyond 1.3400 level. Last three days price action has laid the support at 1.2960. A move beyond 1.3400 would unfold next leg of the rally towards 1.3580/1.3620 its 61.8% fib reaction.

We more focus on the daily RSI, which has been traced out a double top pattern. The RSI breakout needed to forecast a successful and safe rally further higher.

GBPUSDDaily.png


Besides, the euro cross EURGBP manages to hold the 0.8470 Tuesday’s low. There is a Brexit vote story going on which develops some sharp GBP moves. It will be interesting to see if we close below 0.8470-0.8450 zone by today. Note that the daily RSI has been stabilizing around 35 levels, based on this fact we expect the downside risk is limited to 0.8400/0.8380 levels (two-day forecast).
EURGBPWeekly.png


The resistance stands at 0.8560 and 0.8650/0.8675.

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KeyToMarketsUK

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KTM FX Weekly: Global economic calendar (March 18-22)

FX market this week: Central Bank monetary policy meetings (FOMC and BOE) among top-tier data/events to keep forex traders busy.
Central bank meetings are likely to be the big focus point for the forex traders in this week (March 18-22) along with other top-tier macro data points across the globe. On top of these, the latest developments of Brexit are likely to keep investors busy.

Central bank meetings: FOMC, BOE, SNB and Norges Bank.
Except for Norges Bank all the central banks are likely to keep its policy path reasonably unchanged.
Overall, this week is expected full of action with the G10 currencies, few of them namely AUD, CAD, CHF, EUR, GBP, USD, and NZD.

Review: Last week the dollar surrendered against the G10 counterparts with the US, 10Yr Yields closed at 2.59, the lowest level since January 03, 2019.

The following are the top-tier data releases and events that will keep forex traders busy:
  • AUD: RBA Monetary Policy meeting minutes (Tue) and February Labour Force data (Thu)
  • CAD: Inflation number month-on-month (Fri)
  • CHF: SNB Monetary Policy Assessment (Thu) followed by a Press Conference
  • EUR: German ZEW Economic Sentiment (Tue) and EZ PMIs (Fri)
  • GBP: CPI Yoy (Wed) and BOE Monetary Policy summary (Thu)
  • USD: FOMC meeting followed by a press conference (Wed)
  • NZD: Current account (Tue) and GDP (Wed)
Central Bank Meetings preview: Global economic growth has slowed, and downside risks to growth have increased in the past few months. In a recent communication, major central banks have changed the tone. Back in January 2019, the Fed changed the tone to dovish followed by ECB. Now the market is expecting a rate cut from RBA.

Here is a gist of what analysts anticipate from central bank meetings.

FOMC: Market participants focus on the Fed’s dots lot. We expect another hike will take place in either September 2019 or in December 2019. In case of continued dovish bias could open the G10 currencies to squeeze especially AUD, EUR, and NZD.
Westpac said, “The FOMC’s March meeting will not only provide an updated qualitative assessment of the outlook, but also the first set of revised quantitative economic forecasts since the Committee’s collective dovish turn at the start of this year.”

Norges Bank: The market is waiting for the second rate hike, which we expect to happen this week by 25bps. In December 2018 meeting, Governor Øystein Olsen said: “Our current assessment of the outlook and the balance of risks suggest that the policy rate will most likely be raised in March 2019.”
Danske bank: we expect Norges Bank to raise its policy rate by 25bp to 1.00% and signal one further rate hike this year.
Morgan Stanley said, “We expect Norges Bank to hike by 25bp and keep its policy path relatively unchanged as strong domestic data offset the weaker external environment.”

BOE: The BOE will keep on hold until clouds over Brexit cleared.
Westpac said “Since the BOE’s last update, economic activity has remained middling. Importantly, there’s been no real progress on Brexit negotiations. Parliament intends to seek an extension to the negotiation period, but for businesses, this means the continuation of the economic uncertainty that has been a significant drag on investment plans. Against this backdrop, there’s no chance of a change in the Bank Rate this month, and the BOE will emphasize the conditionality of its forecasts.”

SNB: We expect the Swiss National Bank set to keep the interest on hold at -0.75%.

Chart of the week: AUDCHF

AUDCHFDaily.png


As long as 0.7040 is supporting (double bottom) , watch out for 0.7260, note that 200MAs spread between 0.7165-0.7180.

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KeyToMarketsUK

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KTM FX Dialy: AUDUSD technical overview

The outlook remains favorable for the cross, which has already rebounded strongly since early March low at 0.7000. A small ascending channel has formed in the daily chart, and the daily indicators are very upbeat.

Under these conditions, keep an eye on the resistance zone between 0.7180-0.7200, as a breakout above this zone would strengthen the upward momentum, with a new target the resistance levels around 0.7240 and 0.7290.

Note that, 200MAs spread between 0.7215-.07240.
Flipside supports located at 0.7095, 0.7040 and 0.7000.

Interestingly the cross pauses the rally at the higher end of the 14-month descending channel, which coincides with 100MA. Lack of local macro economic data until the end of the month, the near-term trend depends on the USD action.

Further dollar weakness could push the cross above the bearish channel.

AUDUSDDaily.png


It is important to always keep in mind the risks involved in trading with leveraged instruments.
What is your Technical View?
Do you have a different idea? Please leave us a comment and get an answer from our professional analysts.

 

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