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Wave Analysis by InstaForex

This is a discussion on Wave Analysis by InstaForex within the Analytics and News forums, part of the Trading Forum category; Yellen's words will be fatal for the dollar Speeches by members of the Federal Reserve, Brainard and Kashkari, caused the ...

          
   
  1. #11
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    Yellen's words will be fatal for the dollar





    Speeches by members of the Federal Reserve, Brainard and Kashkari, caused the US dollar to collapse on Tuesday. Their words raised fears that the Fed will not risk raising rates anymore for this year and perhaps in the next year too.

    In the address of Fed representative, Lael Brainard, she expressed doubts that the next increase in interest rates would occur this year.She reasoned that there are fears caused by the slowing rate of inflation. Despite this, Brainard still actively advocates the beginning of the Central Bank balance sheet reduction saying that it will happen "in the near future." She said that the strong labor market indicates an acceleration in economic activity and that this chance should not be missed. It is necessary to start a smooth and, most importantly, an expected reduction in the bank balance of $4.5 trillion which was mainly accumulated during the three quantitative easing programs.

    The most radical comment came from a well-known opponent of the monetary policy tightening, Fed member, Neel Kashkari. The President of the Federal Reserve Bank of Minneapolis, Kashkari, said yesterday that the slowdown in wage growth rate indicates the absence of "overheating" in the economy. Hence, inflationary pressure is not so strong. That's why there is no reason for raising interest rates. He once again confirmed the thesis that the rate hike is a mistake and can lead to negative consequences. Kashkari is the most consistent opponent of tightening the Fed's monetary policy.

    Of course, against this background and because of today's expectations on Federal Reserve head, Janet Yellen's speech to the US Congress, the dollar on Tuesday dropped significantly against the euro and the yen. This is caused by the uncertainty in market regarding what the head of the world's biggest central bank would say.

    It can be assumed that if her speech is reasonably optimistic today, then the weakening of the dollar will soon stop and it may even grow against the euro and the yen on the wave of partial closure of long positions in these currencies. Further growth in the dollar may resume only if Friday's inflation data in the States prove to be positive. However, if Yellen expresses even some doubt that interest rates will be raised this year again, then the weakening of the dollar will continue. This will also increase the wave of inflation data that is already high, if she disappoints. Forecast of the day:

    The EUR/USD currency pair is corrected down after reaching a new local maximum, However, it can continue to decline on if the speech to the Congress of the head of the Federal Reserve, Janet Yellen, contains positive sentiment regarding the prospects of the US economy. On this wave, the price decline below the 1.1445 mark may turn lower to the 1.1385 mark and then to 1.1320.

    The USD/JPY currency pair fell on the wave of uncertain growth in the Fed's monetary policy report which will be presented today along with Yellen's speech in the Congress. However, the situation may change if the report and the speech are positive. In this case, the price can overcome the 113.60 mark and strive to the 114.25 mark.

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  2. #12
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    The U.S. Maintains Moderate Inflationary Pressure

    Data on consumer price inflation in Germany did not support the European currency, as it was fully in line with economists' forecast.

    Given the fact that the data was in line with expectations, a new trend in relation to the buying of the European currency, which was observed at the Asian session, was not formed.

    According to the statistics agency, the final consumer price index of Germany in June this year increased by 0.2% compared with May.



    Core inflation, which excludes the volatile categories of goods, also increased.

    Today, there were talks in the market that in August ECB President Mario may express the strengthening of the central bank's confidence in the eurozone economy, which could weaken its dependence on monetary stimulus.

    If the future of the current stimulus program , under with the ECB buys assets worth

    In the second half of the day, the data on US inflation was released, which was slightly different from the forecasts of economists.

    According to a report of the US Department of Labor, the indicator for the final demand in the US rose in June, indicating a moderate increase in inflationary pressure in the economy.



    In general, the technical picture in the EURUSD pair remains on the side of the US dollar buyers, and will depend much on what the chairman of the Federal Reserve Janet Yellen says, since it is her remarks that will determine the future direction in the trading instrument.

    A break of support at 1.1380 resume sales on EURUSD, which will lead to the renewal of 1.1330 and 1.1250. The return to the level of 1.1420 will serve as an opportunity to build new long positions in order to return to monthly highs in the 1.1500 area.

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  3. #13
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    The dollar remained without support

    The US dollar finished the week with large-scale sales, never seeing a single factor that could support it. The formal reason for the decline in investor confidence was the report of the Bureau of Labor Statistics on inflation, but this was not the only reason.

    Consumer prices remained unchanged in June while annual inflation slowed to 1.6% from 1.9% a month earlier. Both indicators were worse than expected.



    Also an unpleasant surprise was the decline in retail sales for the second month in a row. Experts expected a slight increase. The slowdown in consumer activity is an alarming factor as it indicates that incoming signals, one after another, about slower economic growth are not accidental and will likely cause a crisis to develop.

    The preliminary value of the consumer confidence index according to the University of Michigan was significantly lower than expected at 93.1 points in July against the forecast of 95.0 points and last month's figure of 95.1 points. The subindex of expectations are declining at the fastest rate, indicating that consumers are preparing for a deterioration in the outlook for the coming months.

    The GDPNow model from the Federal Reserve Bank of Atlanta forecasts the US GDP growth for the second quarter at 2.4%. This is higher than the result of the first quarter but significantly below expectations. The first estimate, which was presented in May, came out at 4.3%. At the time, it seemed that the positive momentum in the economy will develop but for two months in a row, the key macroeconomic indicators are worse than forecasts.



    The Federal Reserve Bank of New York expects that GDP growth will be at 1.9% in Q2. However, this estimate may be too optimistic. At any rate, Fed Chairman Janet Yellen, speaking in Congress, said that achieving an economic growth of 3% "will be pretty hard." Recalling the basic scenario by the Congressional Budget Office (CBO), the average annual growth is set at 4%. Even in this case, the budget deficit in the next ten years will grow to 1.5 trillion dollars and reach a GDP of 5.2%. Weaker growth will significantly accelerate the development of a negative scenario. It can only be overcome through swift and decisive reforms while the situation develops in the opposite way. As indicated in the report of the Ministry of Finance published on Thursday, the budget deficit in June amounted to 90.233 billion dollar within the nine months of the current fiscal year. The negative balance grew by 31% and reached 523 billion. There is no reason to expect that the situation may change as the collection of taxes is reduced. Against the background of a drop in consumer activity, there is no chance of an increase of tax collection.

    Actually, it was the reassessment of the player's prospects for the development of the situation that caused the dollar to fall sharply on Friday. It's not just a matter of low inflation. The fact is that even optimistic models (and the optimistic CBO forecast) do not see good exit scenarios. The Fed may begin to reduce the balance sheets in the coming months. In any case, the preparation of public opinion for this step is being carried out purposefully. Yesterday, the head of the Federal Reserve Bank of Dallas, Robert Kaplan, said that it is necessary to start reducing the Fed's balance sheet "very soon", possibly in September. Low inflation, in his opinion, is temporary. He also added that the achievement of full employment will contribute to higher prices.

    The beginning of the reduction in the balance of the Fed means terminating the practice of refinancing revenues. In other words, the Fed will gradually reduce the repayment of government debts which, against the background of a growing budget deficit and a reduction in the collection of taxes, can have extremely unpleasant consequences for the Trump administration. In September, the government should already receive a result regarding the level of borrowing from the Congress. This will exhaust the latest resources for financing current activities and will make them face the prospect of technical default. However, in order for the Congress to meet Trump and raise the ceiling of national debt, it will be necessary to convince him of the feasibility plans for reforming the tax and health policies. It is necessary to present these plans formally.

    Thus, for the dollar, there is still no reason to resume growth.

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  4. #14
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    Technical analysis of EUR/USD for July 18, 2017



    When the European market opens, some Economic Data will be released, such as ZEW Economic Sentiment and German ZEW Economic Sentiment. The US will release the Economic Data, too, such as NAHB Housing Market Index and Import Prices m/m, so, amid the reports, EUR/USD will move in a low to medium volatility during this day.

    TODAY'S TECHNICAL LEVEL:
    Breakout BUY Level: 1.1528.
    Strong Resistance:1.1521.
    Original Resistance: 1.1510.
    Inner Sell Area: 1.1499.
    Target Inner Area: 1.1472.
    Inner Buy Area: 1.1445.
    Original Support: 1.1434.
    Strong Support: 1.1423.
    Breakout SELL Level: 1.1416.

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  5. #15
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    Technical analysis of NZD/USD for July 19, 2017



    Overview:
    The NZD/USD pair is showing signs of strength following a breakout of the highest level of 0.7307. On the H1 chart. the level of 0.7307 coincides with 61.8% of Fibonacci, which is expected to act as minor support today. Since the trend is above the 61.8% Fibonacci level, the market is still in an uptrend. So, major support is seen at the level of 0.7307. Furthermore, the trend is still showing strength above the moving average (100). Thus, the market is indicating a bullish opportunity above the above-mentioned support levels, for that the bullish outlook remains the same as long as the 100 EMA is headed to the upside. Therefore, strong support will be found at the level of 0.7307 providing a clear signal to buy with a target seen at 0.7372. If the trend breaks the minor resistance at 0.7372, the pair will move upwards continuing the bullish trend development to the level 0.7400 in order to test the daily resistance 1. However, it would also be sage to consider where to place a stop loss; this should be set below the second support of 0.7287.

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  6. #16
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    Technical analysis of USD/JPY for July 20, 2017



    In Asia, Japan will release the BOJ Press Conference, All Industries Activity m/m, BOJ Policy Rate, BOJ Outlook Report, Monetary Policy Statement, and Trade Balance data, and the US will release some Economic Data, such as Natural Gas Storage, CB Leading Index m/m, Philly Fed Manufacturing Index, and Unemployment Claims. So, there is a probability the USD/JPY will move with low to medium volatility during this day.

    TODAY'S TECHNICAL LEVEL:
    Resistance. 3: 112.43.
    Resistance. 2: 112.21.
    Resistance. 1: 112.01.
    Support. 1: 111.73.
    Support. 2: 111.51.
    Support. 3: 111.29.

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  7. #17
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    Technical analysis of USD/CHF for July 21, 2017



    Overview:

    The USD/CHF pair.
    Pivot: 0.9590.
    The swissy fell from the level of 0.9665 to bottom at 0.9523. The USD/CHF pair has faced strong support at the level of 0.9523 (the double bottom). Current price is around the spot of 0.9520. So, the strong support has been already faced at the level of 0.9523 and the pair is likely to try to approach it in order to test it again and form a double bottom. Hence, the USD/CHF pair is continuing to trade in a bullish trend from the new support level of 0.9523; to form a bullish channel. According to the previous events, we expect the pair to move between 0.9523 and 0.9665. Also, it should be noted major resistance is seen at 0.9665, while immediate resistance is found at 0.9590. Then, we may anticipate potential testing of 0.9665 to take place soon. Moreover, if the pair succeeds in passing through the level of 0.9665, the market will indicate a bullish opportunity above the level of 0.9665. A breakout of that target will move the pair further upwards to 0.9746. Buy orders are recommended above the area of 0.9523 with the first target at the level of 1.9590 and continue towards the levels of 0.9665 and 0.9746. However, if the USD/CHF pair fails to break out through the resistance level of 1.9590; the market will decline further to the level of 0.9453.

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  8. #18
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    NZD/USD Intraday technical levels and trading recommendations for July 24, 2017



    Daily Outlook

    The NZD/USD pair has been trending up within the depicted bullish channel since January 2016.

    In November 2016, early signs of bullish weakness were expressed on the chart when the pair failed to record a new high above 0.7400.

    A bearish breakout of the lower limit of the channel took place in December 2016. In February 2017, the depicted short-term downtrend was initiated in the depicted supply zone (0.7310-0.7380).

    However, a recent bullish breakout above the downtrend line took place in May 22. Since then, the market has been bullish as depicted on the chart.

    The price zone of 0.7150-0.7230 (SUPPLY ZONE in confluence with 61.8% Fibonacci level) stood as a temporary resistance zone until a bullish breakout was expressed above 0.7230.

    This resulted in a quick bullish advance towards the next supply zone around 0.7310-0.7380 which is being temporarily breached to the upside.

    Now the price zone of 0.7310-0.7380 turns to be a newly-established demand-zone to be watched for possible bullish rejection if any bearish pullback occurs.

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  9. #19
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    AUD/USD prepare to sell on break of key support

    The price is hovering above key support at 0.7871 (Fibonacci retracement, horizontal swing low support) and we prepare to sell once price breaks this key level. Our profit target is a push down to next key support level at 0.7741 (Fibonacci retracement, horizontal pullback support).

    RSI (55) is seeing bearish momentum within its bearish descending channel.

    Sell below 0.7871. Stop loss is at 0.7937. Take profit is at 0.7741.



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  10. #20
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    USD/CHF profit target reached perfectly, prepare to sell

    The price has shot up perfectly and reached our profit target from yesterday. We prepare to sell below major resistance at 0.9530 (Fibonacci retracement, Fibonacci extension, horizontal pullback resistance) for a push down to at least 0.9436 support (Fibonacci extension, horizontal swing low support).

    Stochastic (55,5,3) is right on major resistance at 95%.

    Sell below 0.9530. Stop loss is at 0.9563. Take profit is at 0.9436.



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