Wave Analysis by InstaForex

GBP/USD Forecast for 29 October 2018

GBP/USD

On Friday, the British pound grew by 13 points. The growth was stopped by the downward embedded line in the price channel. At the moment, the price is still testing this line with the support of the upward convergence on the chart of the lower timeframe. If the price manages to overcome this resistance, then a corrective price growth to the level of 1.2936 is possible - this is the low on October 23, and the Krusenstern line converges to this point both on the four-hour chart and on the daily chart.

The low of yesterday (1.2776) becomes the control level. Its overcoming will lead to a further decline in the price to the lower border of the channel in the area of 1.2618.






Analysis are provided byInstaForex.

EUR and GBP: The political career of German Chancellor Angela Merkel comes to an end

The euro continues to trade in the side channel paired with the US dollar on Monday, October 29. In the first half of the day, the pair fell after the results of the elections for The Christian Democratic Union of Angela Merkel in the land of Hesse, where the financial sector of Germany is mainly concentrated, was announced. Following the elections, the current government received the weakest support in its history.

As a result, German Chancellor Angela Merkel said that she would not be re-elected to the post of Chairman of the Christian Democratic Union. Let me remind you that Merkel has been heading this Union for 18 years. It is worth noting that the position of the head of the Christian Democratic Union in recent years significantly fell, as evidenced by the regional elections in various lands in Germany.

As for the support of the euro, Friday's decision of the S&P ratings agency is still fresh in the memory of traders, as well as statements made by the European Commission.

At the end of last week, S&P left Italy's credit rating unchanged, only downgrading the outlook for the rating to negative.

The European Commission's reaction to Italy's violation of budget rules also contributes to the demand for the European currency. As I noted in my morning review, the European Commission does not intend to respond with hostility to the statements of the Italian authorities, which were addressed to the EU at the beginning of last week. This will smooth out volatility in the financial markets, as well as maintain a strong position in Brussels.

Despite this, a number of investors and traders continue to be cautious, which is reflected in the EUR/USD quotes.

As for the technical picture of the EUR/USD pair, traders are currently focused on the level of 1.1430, the breakthrough of which will move the pair to a wide side channel with a larger resistance of 1.1480. Buyers also managed to hold the level of 1.1365, thus allowing the lower boundary of the rising channel, but this will only be possible after breaking the resistance at 1.1430.

The British pound continues to trade in a narrow side channel paired with the US dollar. Today's data that British consumers took less unsecured loans in September this year, led to a slight decline in the pound. However, the bears failed to resume a major downward trend.

The decline in demand for loans indicates that British households will be more careful about their spending in the future, which may affect the prospects for economic growth.



According to the Bank of England, in September of this year, unsecured consumer loans were issued in the amount of 785 million pounds against 1.2 billion pounds in August. The growth in unsecured consumer lending was 7.7%. The total amount of consumer lending, including mortgage loans, rose to 4.7 billion pounds in September against 4.3 billion pounds in August.

Analysis are provided byInstaForex.

EUR and GBP: US consumer spending will support GDP. A new bank tax was introduced in the UK

The European currency and the British pound continued to trade in a narrow sideways range on Monday. The euro's rising potential was limited by news that German Chancellor Angela Merkel has announced the end of her political career. The pound also did not show much activity, gradually falling to monthly lows, as traders expect the decision of the Bank of England on interest rates and news on Brexit. The presentation of the budget plan in Parliament by the UK finance minister also did not lead to changes in the GBP/USD pair.

In the afternoon of Monday, data was released, which indicated that Americans had increased their spending in September due to income growth.

According to the report of the US Department of Commerce, personal expenses of Americans increased by 0.4% in September this year compared to the previous month, while personal income of Americans during the reporting period increased by only 0.2% compared to the previous month. Economists had expected growth of expenses at 0,4% and income growth of 0.3%.



Given the current indicators, we can safely talk about maintaining a positive momentum in the US economy. As noted in the report, most of the expenses were related to durable goods, especially the purchase of cars. Medical expenses have also increased.

The share of savings of American households in September was 6.2% against 6.4% in August, which also indicates the belief of Americans in the economy of their country. At the beginning of the year, this figure is at the level of 7.0%.

The issue of US government bonds this year may exceed $1 trillion.

According to the report of the US Treasury Department, the volume of debt securities issued in the 4th quarter of 2018 will be $425 billion, and in total for this year the issue will be equal to $1.338 trillion. This sharp increase is associated with a sharp increase in the budget deficit due to high public spending in the absence of growth in tax revenues. As you can see, the tax reform, which was proposed by the White House administration, has its negative sides.

According to the Federal Reserve Bank of Dallas, the index of business activity amounted to 29.4 points in October this year, while economists expected that the index will be 27 points. The production index fell to 17.6 points in October.

As for the technical picture of the EUR/USD pair, the pressure on the euro may increase significantly after the support breaks at 1.1370. Movement under this level will lead to the demolition of a number of stop orders of euro buyers, who gained long positions last Friday, and to update the lows of 1.1335 and 1.1300. The main goal of the bears will be to achieve support in the range of 1.1250 by the end of the month.

The UK and a new bank tax

Yesterday, the budget plan was presented to the British Parliament. British Finance Minister Hammond said that the era of austerity is coming to an end. UK GDP is expected to grow 1.6% in 2019 and 1.4% in 2020. By 2021, the growth will be 1.4%. Thus, the estimate was revised upwards.

Hammond also noted that public borrowing in the period from 2019 to 2020 will amount to 31.8 billion pounds, the budget deficit for the same period will be at around 1.4% of GDP.

As for the risks, according to the minister of finance, the agreement on Brexit can provide double support to the British economy and will increase public spending.

Hammond also announced changes in taxes. As it became known, the introduction of a tax on remote banking services is expected, which will come into force in April 2020. It is expected that this tax will add to the budget more than 400 million pounds per year.

Analysis are provided byInstaForex.

Intraday technical levels and trading recommendations for GBP/USD for November 5, 2018



Since September 13, the GBP/USD pair has been demonstrating a successful bullish breakout above the depicted daily downtrend line which came to meet the pair around 1.3025-1.3090.

On September 21, GBP/USD failed to demonstrate sufficient bullish momentum above 1.3296. The short-term outlook turned to become bearish within the depicted H4 bearish channel to test the backside of the broken uptrend.

Bearish persistence below the price level of 1.2970 (50% Fibo level) enhanced a further decline towards 1.2790 where the lower limit of the movement channel and 79.8% Fibonacci Level were located.

On H4 chart, the GBP/USD pair looked oversold around the price levels of 1.2700. BUY entries were suggested around the lower limit of the depicted H4 channel (1.2690).

For the bullish daily breakout scenario to remain valid, bullish persistence above 1.2790 (the depicted channel upper limit) and an early breakout above 1.3000 (50% Fibo level) are needed to maintain sufficient bullish momentum.

That's why, bullish persistence above the price zone of 1.2970-1.3000 (50% Fibonacci zone) is mandatory for a further rise towards 1.3130 and 1.3200.

On the other hand, bearish breakout below 1.2970 (50% Fibo level) allows further decline towards 1.2790 and 1.2660.

Analysis are provided byInstaForex.

Technical analysis: Intraday level for USD/JPY, Nov 06, 2018



In Asia, Japan will release the Household Spending y/y and the US will release some Economic Data such as 10-y Bond Auction, IBD/TIPP Economic Optimism, and JOLTS Job Openings. So there is a probability that the USD/JPY pair will move with a low to medium volatility during this day.

TODAY'S TECHNICAL LEVEL:
Resistance. 3: 113.88.
Resistance. 2: 113.63.
Resistance. 1: 113.43.
Support. 1: 113.16.
Support. 2: 112.94.
Support. 3: 112.72.

Disclaimer:
Trading Forex (foreign exchange) on margin carries a high level of risk, and may not be suitable for all Traders or Investors.The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

Analysis are provided byInstaForex.

Technical analysis: Intraday Level For EUR/USD, Nov 07, 2018



When the European market opens, some Economic Data will be released such as German 10-y Bond Auction, Retail Sales m/m, Italian Retail Sales m/m, and German Industrial Production m/m. The US will also release the Economic Data such as Consumer Credit m/m, 30-y Bond Auction, Crude Oil Inventories, and Mortgage Delinquencies, so amid the reports, EUR/USD will move in a low to medium volatility during this day.

TODAY'S TECHNICAL LEVEL:

Breakout BUY Level: 1.1524.
Strong Resistance:1.1517.
Original Resistance: 1.1506.
Inner Sell Area: 1.1495.
Target Inner Area: 1.1467.
Inner Buy Area: 1.1439.
Original Support: 1.1428.
Strong Support: 1.1417.
Breakout SELL Level: 1.1410.

Disclaimer:
Trading Forex (foreign exchange) on margin carries a high level of risk, and may not be suitable for all Traders or Investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

Analysis are provided byInstaForex.

EURUSD: lack of retail sales growth is a bad sign for the eurozone economy

The European currency continued its gradual growth against the US dollar, as well as the British pound, after today the division of the US Congress became known. As I noted in the morning review, Democrats gained a majority in the House of Representatives, and Republicans retained a majority in the Senate, which creates a number of problems for US President Donald Trump, who will find it increasingly difficult to implement his political ambitions and plans. We are talking about further tax reform, as well as a trade war with China.

It is possible that the division of Congress could critically interfere with the US president's plans for a further active trade war with China by introducing new duties on Chinese goods.

On the other hand, the risks of impeachment to the current US president have seriously decreased. Even if the Democratic party is able to obtain a majority of votes, further hearings should be held in the Senate, where the advantage is on the side of the Republicans. And impeachment requires the votes of two-thirds of senators.

Fundamental data

The data on the German economy released in the first half of the day and forecasts on its growth rates supported the European currency.

According to the report, industrial production in Germany in September this year increased by 0.2% compared to August, while a number of economists expected that production, on the contrary, will decrease by 0.2%. Let me remind you that industrial production showed an increase of only 0.1% in August. Economists had expected production to remain unchanged. As for the manufacturing industry, the production did not show any change, but the construction sector grew by 2.2%.



Compared to the same period in 2017, industrial production in Germany increased by 0.8% in September this year. Gradually, the increase will have a positive impact on the overall economic growth for the 3rd quarter of this year.

Today, a report from the Council of Economic Experts was published, in which Germany's GDP growth in 2018 was revised in a positive direction. The economy is expected to grow 1.6% in 2018 and 1.5% in 2019. As for the main risks for Germany, they are focused around the escalation of the trade conflict, the hard Brexit and the resumption of the crisis in the eurozone. The Council also believes that the problems can create a late turn of monetary policy by the European Central Bank.

Data on retail sales in the eurozone, which came out in the first half of the day, were ignored by the market. According to a report from the statistics agency, retail sales in the eurozone in September this year remained unchanged compared to August, while economists had expected an increase of 0.1%. Compared to the same period in 2017, retail sales increased by 0.8%. Data for August were revised. The growth was 0.3% compared to July.



The weak report once again shows that the eurozone economy is beginning to show signs of a slowdown in the 3rd quarter of this year, which may seriously affect the plans of the European Central Bank, which is going to resort to significant changes in monetary policy next year. This is a bad sign for the growth of the European currency in the medium term.

Analysis are provided byInstaForex.

The Fed's November meeting: waiting for hints about the December hike

After the announcement of the first results of the elections to the US Congress, the dollar was under considerable pressure, as the lower and upper houses of the legislature were divided between Democrats and Republicans. The dollar index slipped to 95.55 points, reflecting the weakening of the currency in all dollar pairs. The possible imbalance of the American political system has frightened traders - especially against the background of loud statements of Democrats concerning new investigations concerning the president, as its results could even lead to impeachment.

However, during the US session, the situation was unexpectedly smoothed by Donald Trump himself. He expressed readiness to cooperate with the Democratic party, expecting relevant legislative proposals on the development of health care and infrastructure from their representatives. The main message of yesterday's speech was that the White House (as well as the Republican party as a whole) is ready for constructive negotiations and effective cooperation.

In other words, on the one hand, he admitted the defeat of the Republicans in the House of Representatives, but on the other hand, hinted that now the Democrats have legislative levers that should be used not for their political purposes ("digging" for the Republican President), but "for the benefit of the American people." The willingness of Trump to dialogue pleased the traders, after which the dollar regained its position - in particular, the EUR/USD pair moved away from daily highs (1,1500) and ended the trading day at 1.1425.

In my opinion, Trump's speech from yesterday has the character of a political prop. He was forced to curtsy to the Democrats and "pass the ball" on their field, shifting the responsibility for the further actions of the Lower House of Congress. However, such a broad gesture is unlikely to reduce the intensity of the confrontation between the Democratic party and the White House – especially after the "donkeys" took control of the house of representatives from the "elephants". Of course, the Democrats will not be able to block absolutely all of Trump's legislative initiatives (because in the end it can play against them), but this fact does not prevent them from conducting new investigations against the American president, thereby reducing the likelihood of his re-election for a second term.



Having come to this conclusion, traders again reduced interest in the dollar, after which its growth has been suspended throughout the market. The greenback remained under the background pressure in anticipation of the main event of today - the November meeting of the US Federal Reserve. Although this meeting is considered to be a "walkthrough", its results can cause quite strong volatility among dollar pairs. The fact is that the market is beginning to gradually focus its attention on the future prospects of monetary policy, as the probability of a December rate hike is already at 76%. The slowdown in September inflation and weak wage growth are unlikely to affect the determination of Fed members to raise in December, but at the same time may affect the tone of their rhetoric.

Let me remind you that after today's meeting, there is no press conference for Jerome Powell, so traders will have to "settle for" only an accompanying statement. However, the text of this statement can give answers to many questions – for example, how high is the probability of a rate hike at the spring meeting, taking into account the latest trends in the US economy. And it's not just the slowdown in consumer prices. There are other reasons for concern, which the regulator can turn its attention to (but again – only in the context of future prospects).

In particular, we are talking about the weak dynamics of consumer spending, as well as the decline in the US housing market: in September, the pace of housing construction in the US significantly decreased, and the corresponding figures fell to three-year lows in the southern states. Activity in the country's manufacturing sector also decreased: the number of new orders fell to 1-a-year lows. Thus, in October, the ISM index fell to 57.7 points, while in September this indicator came out at the level of 59.8. Strong Nonfarm, on the one hand, speak about the strengthening of the labor market, but, on the other hand, there is its own "fly in the ointment". An analysis of the Fed's recently published Beige Book suggests that there is a shortage of labor (especially skilled labor) in many regions of the country. Although this nuance is secondary, it can still be taken into account by Fed members.

Thus, the results of the November meeting of the Federal Reserve should: a) confirm the intention of the members of the regulator to raise the interest rate in December; b) outline the future prospects of monetary policy. And if the first point is indicated more or less clearly in the accompanying statement, then the outlines of the long-term prospects will have to be "deciphered" by the traders themselves on the basis of the general tone of the text.

Analysis are provided byInstaForex.

Technical analysis: Intraday level for USD/JPY, Nov 12, 2018



In Asia, Japan will release the Prelim Machine Tool Orders y/y and PPI y/y, and the US will not release any Economic Data today. So there is a probability that the USD/JPY pair will move with a low to medium volatility during this day.

TODAY'S TECHNICAL LEVEL:
Resistance. 3: 114.55.
Resistance. 2: 114.32.
Resistance. 1: 114.10.
Support. 1: 113.83.
Support. 2: 113.60.
Support. 3: 113.38.

Disclaimer:
Trading Forex (foreign exchange) on margin carries a high level of risk, and may not be suitable for all Traders or Investors.The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

Analysis are provided byInstaForex.

EUR/USD. The euro is under pressure, but Brexit could be an unexpected ally

The euro/dollar pair touched the 1.1240 mark today - the last time the price was at such lows was in the summer of the previous year, within the upward trend from the area of historical lows (when the pair was in the area of the third-fourth figure).



The combination of fundamental factors puts pressure on the EUR/USD: the dollar is growing against the background of the hawkish Fed meeting, the euro falls amid panic fears of chaotic Brexit. The Italian question and the soft comments of the ECB representatives only aggravate the gloomy picture. In other words, such a powerful price decline is quite justified – the past weekend did not bring any detente, but, on the contrary, in many respects complicated the situation in many issues.

Let's start with Italy. Last Friday it became known that the Italians will not revise the state budget for the next year and, accordingly, will not reduce the level of its deficit. In fact, Rome ignored the demands of the European Commission, after which Brussels is forced to respond to such a demarche. Tomorrow is the three-week deadline, during which the Italians had to significantly revise the main financial document of the country, while fulfilling the requirements of the EC. The decision of the Italians is already known, so tomorrow the ball will be on the side of Brussels. There is no doubt that the EU leadership will react to the current situation. Otherwise, other European countries may follow the Italian example, thus undermining the financial and political stability of the eurozone.

Therefore, with a high degree of probability we can say that on November 21, members of the European Commission will launch a disciplinary procedure against Italy. The first step in this process will be the publication of a report on the financial condition of the country – this document is necessary for the codification of violations committed by Italian authorities. After that, Brussels will have grounds for the application of financial sanctions: experts believe that the amount of the fine will be about 1.7 billion euros (i.e. 0.2% of GDP). However, this amount may double if the Italians continue to "resist". The implementation of the disciplinary procedure will last for months, so the European currency will remain under the background pressure of this factor for a long time - if, of course, Rome does not make concessions.

However, so far Italy has demonstrated not only a principled, but also a very belligerent attitude. So, the head of the Italian Foreign Ministry said today that Rome can block the adoption of the EU budget, "if European bureaucrats will continue to fool around." Similar threats had previously been expressed by the deputy prime minister. It is worth noting that such intentions are not voiced by Italian leaders in the context of a budget conflict, but because of the failure to provide assistance from Brussels on the issue of illegal migrants. But this fact all the same indicates that the parties are in a state of political clinch, the release of which is not yet in sight.

Thus, the European currency has no power to oppose the dollar, being trapped in the European conflicts - Brussels with London and Brussels with Rome. Today, the greenback is growing throughout the market by inertia, as American trading floors are closed - Veterans Day is celebrated in the United States. The producer price index published on Friday was better than expected: on a monthly basis, it updated the annual high, increasing to 0.6% (with a forecast of 0.2%), and in annual terms increased to 2.9% with a forecast of 2.5%.



This indicator is an early inflation indicator, so such figures caused a considerable resonance among dollar bulls. After the disappointing release of the consumer price index for September, inflation indicators are mainly in the "green zone", increasing the likelihood of tightening monetary policy at the December Fed meeting. Optimistic expectations overshadowed the negative impressions of the elections to the US Congress, especially against the background of Trump's readiness to cooperate with Democrats in the field of the legislative process.

So, the euro-dollar pair has updated the annual low against the background of the "black and white" fundamental background: almost all factors speak in favor of the growth of the US currency and almost all - against the recovery of the European one. In this situation, the potential for the pair's further decline is obvious, and from a technical point of view, the path is open up to the 10th figure (the lower line of the Bollinger Bands indicator on the monthly chart). But there is one "but" that should alert traders, which is the current dynamics of the pound. The GBP/USD pair is trading in the range of one hundred points - the low was marked at 1.2826, the high - at 1.2946.

The British currency reacts to the contradictory news background, which then plunges traders into a state of panic, then returns them to hope for a "soft" Brexit. If London and Brussels will still be able to find a common denominator, then there will be a "squeezed spring effect" on the market: a rising pound will help the EUR/USD pair to recover against general optimism. Therefore, when opening short positions, you should always remember that an unexpected and quite sharp jump may follow – stop loss can be placed at 1.1324, this is the opening price of today's trading day.

Analysis are provided byInstaForex.