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But we don't care: USD/JPY is rushing like a tank, ignoring all the negative factors
After Friday's fall, the dollar-yen pair finds the strength to rush upward. The asset demonstrates a confident upward trend at the beginning of the week, despite the predominance of negative factors.
Recall that last Friday the USD/JPY pair underwent intense sales. The quote fell by more than 1%, being under pressure from the growing risk of foreign exchange intervention.
The Japanese authorities significantly tightened their warning of their intervention after the yen came close to a new 24-year low of 145 in the middle of the week.
Many analysts believe that this key threshold is a red line for the Japanese government. As soon as the yen crosses it, officials will move from words to deeds.
Over the weekend, the risk of actual rather than verbal intervention increased significantly. On Sunday, Deputy Cabinet Secretary General Seiji Kihara said the authorities were deeply concerned about the excessive fall in the yen.
According to him, in the near future the government should take a number of measures in order to stop the depreciation of the national currency.
At the same time, Kihara refused to give any comments on the country's monetary and credit rate. This once again confirms that at this stage, Japanese politicians are not considering the possibility of helping the yen by raising interest rates.
The only option now being discussed at the top echelon is foreign exchange intervention. But will it bring the desired result if it is one-sided?
For intervention to be effective, support from the Federal Reserve and other central banks is needed. However, right now, as major central banks fight inflation with policy tightening, global official support for the yen looks unlikely, said National Australia Bank currency strategist Rodrigo Catril.
The expert is confident that the yen will stop falling only as a result of a change in the exchange rate of the Bank of Japan.
To strengthen the currency, the central bank must abandon its ultra-soft policy and start raising the rate. Otherwise, the yen is waiting for a further collapse.
With no signs of BOJ capitulation on the horizon right now, the market has no choice but to ignore yet another warning of FX intervention.
Traders are well aware that even in the event of an actual intervention, the recovery of the yen will be very short-lived, so they resume long positions on the USD/JPY pair again.
The asset returned to the area above 143 on Monday morning.
Even the news that Japan intends to further weaken border controls when entering the country did not prevent its rise.
According to the Nikkei newspaper, the Japanese government may lift all current restrictions on foreign nationals entering the country by October.
The authorities hope that the rise in inbound tourism will help revive the fragile Japanese economy and thereby support the yen that has fallen heavily this year.
Another negative factor that the USD/JPY pair stubbornly turns a blind eye to this morning is tomorrow's release of US inflation statistics for August.
According to forecasts, the consumer price index on an annualized basis will decrease to 8.1% from the previous value of 8.5%.
It would be quite logical to expect that the weakening of inflationary pressure for the second consecutive month will force the Fed to reduce the degree of aggressiveness in relation to interest rates.
Despite a possible decline in inflation, prices still remain well above the 2% target.
Based on this, the markets continue to believe that the US central bank will raise rates by 75 bps in September. The probability of such a step is now estimated at 85%.
Traders' unwavering confidence in the Fed's determination is a key driver for the dollar, especially against the Japanese yen.
Most analysts believe that the USD/JPY asset could again demonstrate an impressive rally in the coming days, as moment X is just around the corner.
The US central bank's meeting on monetary policy issues, at which the decision on interest rates will be announced, will be held on September 20-21.
As the event approaches, hawkish expectations about the Fed's course should intensify even more. This will push the dollar to new heights, and the yen - to the next anti-records.
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US stocks closed higher, Dow Jones up 0.71%
At the close in the New York Stock Exchange, the Dow Jones rose 0.71%, the S&P 500 index rose 1.06%, the NASDAQ Composite index rose 1.27%.
The leading performer among the components of the Dow Jones index today was Apple Inc, which gained 6.06 points or 3.85% to close at 163.43. Quotes of American Express Company rose by 4.01 points (2.53%), closing the session at 162.45. Salesforce Inc rose 3.04 points or 1.87% to close at 165.63.
The biggest losers were Amgen Inc, which shed 10.07 points or 4.07% to end the session at 237.62. Home Depot Inc was up 2.23 points (0.74%) to close at 297.54, while Johnson & Johnson was down 0.07 points (0.04%) to end at 165. .64.
Leading gainers among the S&P 500 index components in today's trading were DXC Technology Co, which rose 5.98% to hit 28.36, APA Corporation, which gained 5.01% to close at 40.00, and shares of Fortinet Inc, which rose 4.20% to end the session at 55.84.
The biggest losers were The Mosaic Company, which shed 6.76% to close at 52.44. Shares of Amgen Inc lost 4.07% to end the session at 237.62. Quotes of CF Industries Holdings Inc decreased in price by 4.05% to 99.48.
Leading gainers among the components of the NASDAQ Composite in today's trading were Neurobo Pharmaceuticals Inc, which rose 101.30% to hit 0.56, InMed Pharmaceuticals Inc, which gained 70.42% to close at 18.78, and also shares of Ventyx Biosciences Inc, which rose 64.98% to end the session at 38.11.
The biggest losers were Tuesday Morning Corp, which shed 31.19% to close at 0.19. Shares of WeTrade Group Inc lost 30.19% and ended the session at 1.11. Akari Therapeutics PLC was down 27.88% to 0.75.
On the New York Stock Exchange, the number of securities that rose in price (2,360) exceeded the number of those that closed in the red (764), while quotes of 160 shares remained virtually unchanged. On the NASDAQ stock exchange, 2431 companies rose in price, 1384 fell, and 259 remained at the level of the previous close.
The CBOE Volatility Index, which is based on S&P 500 options trading, rose 4.74% to 23.87.
Gold futures for December delivery added 0.43%, or 7.45, to $1.00 a troy ounce. In other commodities, WTI crude for October delivery rose 1.36%, or 1.18, to $87.97 a barrel. Brent oil futures for November delivery rose 1.44%, or 1.34, to $94.18 a barrel.
Meanwhile, on the Forex market, EUR/USD rose 0.81% to hit 1.01, while USD/JPY edged up 0.21% to hit 142.82.
Futures on the USD index fell 0.60% to 108.08.
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Hot forecast for EUR/USD on 14/09/2022
Inflation in the United States of course slowed down, but not to 8.1%, but to 8.3%. At the same time, in monthly terms, it increased by 0.1%, while it was expected to decline by 0.2%. In addition, the core inflation rate, instead of remaining unchanged, accelerated from 5.9% to 6.3%. Monthly data on the core inflation rate showed an increase of 0.6%, while the forecast was 0.4%. After that, everyone immediately started talking about the fact that in just a week the Federal Reserve would raise the refinancing rate by 100 basis points. And the single currency literally fell below parity in the blink of an eye.
Inflation (United States):
The situation is aggravated by the fact that until next Wednesday, when the meeting of the Federal Open Market Committee takes place, representatives of the Fed will not make any official statements. They can't even comment on the situation with inflation. Internal rules forbid it. In other words, market participants will be able to focus only on macroeconomic statistics and its interpretation by various media. Data on producer prices will be released today, the growth rate of which seems to be slowing down from 9.8% to 8.9%. If these forecasts are confirmed, then it will be possible to assume that inflation will still gradually slow down, and then a rebound is possible, and the euro's return above parity. But if the producer price index declines even a little less, then the market will panic again, and the dollar will further strengthen its positions.
Producer Price Index (United States):
The EURUSD currency pair fell over 200 points in the course of speculative operations during the past day. This movement led to the return of quotes below the parity level.
Technical instruments RSI H1 during the intensive weakening of the local euro fell below 22. This signal indicated a high level of oversold in short-term time periods. RSI H4 and D1 are moving in the lower area of the 30/50 indicator, which corresponds to a downward trend.
The MA moving lines on Alligator H4 changed direction from top to bottom, this was caused by sharp price changes a day earlier.
Expectations and prospects
The overheating of euro short positions led to a technical rollback, which is considered a common phenomenon in the market in case of inertial movement. A gradual recovery of the euro exchange rate is possible, but only in case prices are stable above the parity level. Under this scenario, growth in the direction of 1.0050-1.0120 is possible.
An alternative scenario for the development of the market considers the continuation of the downward cycle, in which the technical signal of oversold will be ignored by traders. In this case, keeping the price below 0.9950 will eventually lead to a new low of the downward trend.
Comprehensive indicator analysis in the short-term and intraday periods indicate a downward cycle, due to the inertial price movement. In the medium term, technical instruments have a sell signal, which corresponds to a downward trend.
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Tips for beginner traders in EUR/USD and GBP/USD on September 15, 2022
Details of the economic calendar for September 14
Annual inflation in the UK fell to 9.9% in August, with forecast of growth to 10.6% from 10.1%. The change is small, but this is a positive factor because the Bank of England at the upcoming meeting may well indicate a slowdown in the rate of inflation, which will affect the revision of the rate of increase in the refinancing rate.
Euro area industrial production declined to -2.4% YoY in July from the previous month's growth of 2.2%. Forecasts assumed growth of 1.7%. This is a negative factor, but the euro has already been heavily oversold. For this reason, there was no proper reaction on the market.
US producer prices recorded a decline from 9.8% to 8.7%. The market almost did not react to these statistics.
Analysis of trading charts from September 14
The EURUSD currency pair, despite the characteristic sign of oversold, continued to tread within the base of the recent downward momentum. As a result, a range of 50/60 points was formed.
The GBPUSD currency pair reached 1.1588 at the stage of a pullback from the value of 1.1480, where there was a demand for dollar positions. As a result, the quote rushed back to the recent support level.
Economic calendar for September 15
Today the market is expecting data on the United States, where not the best indicators are predicted, which may have a negative impact on dollar positions.
US retail sales may fall from 10.3% to 9.0% YoY, while the volume of industrial production may slow down from 3.9% to 3.5% YoY. The negative for the US will not end there, as the weekly data on claims for benefits may reflect an increase.
Statistics details:
The volume of continuing claims for benefits may increase from 1.473 million to 1.475 million.
The volume of initial claims for benefits may increase from 222,000 to 226,000.
Time targeting:
US Retail Sales 12:30 UTC
US Jobless Claims 12:30 UTC
United States Industrial Production 13:15 UTC
Trading plan for EUR/USD on September 15
In this situation, there is a process of accumulation of trading forces, which, in principle, restrains the quote from a full-scale pullback. The optimal trading tactic is considered to be the method of the impulse coming from the range of 0.9955/1.0010.
We concretize the above:
The downward move will be relevant after the price holds below 0.9950. This step may lead to an update of the low of the downward trend.
An upward movement in the currency pair is considered in case of a stable holding of the price above the value of 1.0030 in a four-hour period.
Trading plan for GBP/USD on September 15
In this situation, the signal for a subsequent decline will be the price holding below the 1.1480 mark in a four-hour period. This step is highly likely to lead to touching the 2020 low.
In your work, it is worth taking into account the factor of overheating of short positions in the pound sterling, where the recent pullback could not lead to a regrouping of trading forces. In this case, the lack of holding the price below 1.1480 may lead to a movement towards the values of 1.15881.1600.
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USD/JPY: is black swan event possible?
USD/JPY traders are awaiting the policy meetings of the Federal Reserve and the Bank of Japan this week. For many market players, the outcome of these meetings is obvious. However, some analysts do not rule out an unexpected turn of events.
Market expectations
Last week, the US dollar found strong support in US CPI data for August.
According to the report, inflation in the US decreased to 8.3% in August from 8.5% in July, falling short of expectations.
Inflation in the US remains above the Fed's target level of 2% and continues to be persistent, increasing expectations of more aggressive Fed monetary tightening.
The markets are currently pricing in an 81% probability of a 75 basis points hike. Some market players even believe the Federal Reserve could increase interest rates by 100 bps at its next meeting on September 20-21.
Both scenarios would fuel the US dollar's upward momentum against other major currencies, particularly against the Japanese yen.
Since the beginning of 2022, the yen decreased by 20% against the dollar due to a growing monetary policy gap between the Bank of Japan and the Federal Reserve.
While Fed policymakers are actively fighting inflation by rapidly hiking interest rates, their Japanese counterparts keep interest rates at very low levels.
Many traders now expect the BOJ to maintain their ultradovish policy course this week.
Recent decisions by the Bank of Japan suggest the regulator remains committed to its dovish course. Last week, the BOJ increased bond purchases twice to keep yields at their low level.
The BOJ's policy meeting is concurrent with the Fed meeting in the US. If decisions of both central banks match market expectations, it would send USD/JPY skywards once again.
Both events could give redoubled support to the instrument in the next few days. Many analysts predict significant upward movement for the pair in the short term.
Currency strategists at the Goldman Sachs see the yen fall to 155 against the dollar. An outlook by Rabobank predicts that JPY could slide down to 150, while RBC Capital Markets forecast a decline to 147. HSBC Holdings predicts that the yen could decrease to 145 against the US dollar.
What could go differently
Many analysts warn that USD/JPY would be highly volatile this week.
There are numerous factors listed above that could push the US dollar up. However, a Japanese yen rally should not be ruled out.
The most obvious driver for the Japanese yen is a currency intervention. Last week, high-ranking Japanese policymakers have repeatedly raised the topic of a possible currency intervention.
If the yen once again approaches the key mark of 145 before or after policy meetings of the Fed and the BOJ, this could trigger an intervention by the Japanese government.
A less obvious scenario that could halt the uptrend of USD/JPY would involve the Bank of Japan giving up its current stance.
So far, few believe that the Bank of Japan could amend its policy, but their number is steadily increasing. According to reports by Reuters, swap rates betting on a shift in policy have sharply increased over the past several days as the regulator stopped referring to inflation as "temporary".
The Bank of Japan stopped labeling inflation as "temporary" in its transcripts and minutes of the policy meetings in July.
That month, Japanese core CPI hit 2.4%, the highest level in more than 7 years.
Inflation in Japan has exceeded its target level of 2% for a fourth consecutive month.
Furthermore, most BOJ policymakers expect core consumer prices to rise to 3% in October, Reuters reported.
This inflation surge could be driven by rising food prices. According to a survey by private research firm Teikoku Databank, about 80% of Japanese food companies plan to raise prices next month.
This price hike would affect more than 20,000 food items, which are expected to go up by 14% on average.
As a result, many BOJ policymakers have revised their inflation outlooks upwards, Reuters reported. It remains to be seen when the Bank of Japan will express its concern over price growth.
Some experts believe the first signs of such a shift could happen at the next BOJ policy meeting.
If the Bank of Japan begins to lose its sticky deflationary mindset and acknowledges that price growth is an issue that must be resolved, this would be regarded as the first hawkish signal by the market.
Such an event would pose a threat to USD/JPY rally.
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Hot forecast for EUR/USD on 22/09/2022
Of course, the growing tension and confrontation in Europe, caused by the decision to hold referendums on joining the Russian Federation of four more regions, as well as the partial mobilization announced yesterday by Vladimir Putin, put pressure on the single European currency. And not only on it, but on almost all financial instruments. In fact, there is now a massive flight of capital to the United States, which leads to even greater strengthening of the dollar. The Federal Reserve's decision to raise the refinancing rate by 75 basis points, and the subsequent statement by Fed Chairman Jerome Powell about the justification for further tightening of monetary policy, only strengthens this process. Yes, Powell acknowledged the fact that inflation is slowing down, but noted that this is happening much more slowly than expected. Therefore, it is necessary to continue to raise interest rates. From this follows the conclusion that during the next meeting of the Federal Open Market Committee, the refinancing rate will again be raised by 75 basis points.
Refinance rate (United States):
Nevertheless, we should not forget about the excessive overbought dollar. So for its further growth, the market needs to release steam, in the form of a noticeable rebound, or a local correction. It is quite possible that this is what will happen today. The reason will be the Bank of England's decision on the refinancing rate, which can be raised by 50 basis points. Such results of the central bank's meeting can certainly push the pound to grow, and given the market's need for a rebound, it will pull the single currency along with it.
Refinancing rate (UK):
The EURUSD currency pair, after walking along the 0.9900 level for 3.5 weeks, managed to stay below it in the daily period. This difficult step led to the prolongation of the long-term downward trend, where the quote was again at the levels of July 2002.
The RSI H4 technical instrument, due to the intense downward movement of the price, turned out to be below the level of 30, which indicates a signal about the oversold euro.
The MA moving lines on Alligator H4 and D1 are directed downwards, which corresponds to the trend direction.
Expectations and prospects
In this situation, there is an overheating of short positions in the euro, which from the point of view of technical analysis can lead to a price pullback. In this case, a reverse move to the previously passed 0.9900 level is possible.
A comprehensive indicator analysis in the short term indicates a long position due to a pullback emerging in the market. Indicators in the intraday and medium-term periods are focused on a downward trend.
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Tips for beginner traders in EUR/USD and GBP/USD on September 23, 2022
Details of the economic calendar for September 22
The Bank of England, as expected, raised the rate by 50 basis points to 2.25%. At the same time, the regulator lowered its inflation forecast. According to their expectations, it may reach 11%, and inflation will peak in October.
The market reaction was zero, because the rate increase by 50 bps has already been taken into account in the quotes. The pound sterling began to weaken.
During the American trading session, weekly data on jobless claims in the United States were published, which recorded a decrease in their total volume. This is positive news for the US labor market.
Statistics details:
The volume of continuing claims for benefits fell from 1.401 million to 1.379 million.
The volume of initial claims for benefits rose from 208,000 to 213,000.
What is pushing the market?
The first is the results of the September Fed meeting, where the regulator clearly indicated that the main goal is to curb inflation, and it is ready to further tighten monetary policy.
The second factor is the Russia-Ukraine situation, where, at the moment, there is a large flow of information that puts speculators into action.
Analysis of trading charts from September 22
The EURUSD currency pair, in the stage of a pullback from the low of the downward trend, locally returned to the previously passed level of 0.9900, where the price rebounded with a reverse move.
The GBPUSD currency pair, after a short pullback, which was caused by a strong overheating of short positions, again moved to the decline. This movement indicates the prevailing downward sentiment among market participants who are in a stage of inertia.
Economic calendar for September 23
Today, a preliminary estimate on business activity indices in Europe, the United Kingdom and the United States is expected to be published. Indices, except for the USA, are expected to decrease. Thus, the dollar may well receive support in the market.
Time targeting:
EU business activity indices 08:00 UTC
UK business activity indices 08:30 UTC
US business activity indices 13:45 UTC
Trading plan for EUR/USD on September 23
With the opening of European platforms, a new round of depreciation of the euro emerged, which led to the price holding below 0.9800. As a result, the speculative-inertial move continues to form, which allows the rate to decline to the subsequent control value of 0.9650, where the lower border of the flat 0.9650/1.0000 passed earlier in history.
It should be noted that the market is already experiencing overheating of euro short positions, which allows for a new technical pullback.
Trading plan for GBP/USD on September 23
The pound sterling, following the euro, continued to decline, which resulted to the breakdown of the level of 1.1200. A stable hold of the price below this level allows the subsequent weakening of the British currency towards the psychological mark of 1.1000. Also, do not forget about the overheating of short positions and possible technical pullbacks.
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Tips for beginner traders in EUR/USD and GBP/USD on September 26, 2022
Details of the economic calendar for September 23
Last week ended with the publication of preliminary data on business activity indices in Europe, the United Kingdom and the United States. The indices came out badly, except for the US.
Eurozone manufacturing PMI fell from 49.6 to 48.5 points, while services PMI fell from 49.8 to 48.9 points.
UK manufacturing PMI rose from 47.3 to 48.5 points, while services PMI recorded a decline from 50.9 to 49.2 points. The composite index fell from 49.6 to 48.4 points.
In the United States, the picture is reversed, with the manufacturing PMI up from 51.5 to 51.8. Services PMI rose from 43.7 to 49.2 points.
The publication of an anti-crisis plan to rescue the UK economy was considered the key event on Friday. The largest tax cut in 50 years, the removal of the 45% surcharge for the highest paid workers, and a sharp reduction in taxes on dividends are expected. Not only that, but the plan includes a long-term freeze on household electricity rates, which experts estimate will cost around £60bn over the six months starting in October.
All these actions are reminiscent of all-in tactics, where huge borrowings will be needed to cover the budget deficit.
This news brought down the value of the British currency by about 8% against the US dollar. Simultaneously with the fall of the pound sterling, the British stock market also collapsed.
This pivotal decision has raised doubts in economic and political circles about the future sustainability of the UK economy and concerns about whether the UK's new economic approach is sustainable.
Media
"The UK is behaving a bit like an emerging market turning itself into a submerging market," former U.S. Treasury Secretary Larry Summers told Bloomberg TV. "Britain will be remembered for having pursued the worst macroeconomic policies of any major country in a long time."
Analysis of trading charts from September 23
Since Friday, the euro has lost more than 250 points in value against the US dollar. As a result, the quote peaked at 0.9553, last seen in June 2002.
The GBPUSD currency pair did not just collapse by almost 1,000 points (about 8.5%), the quote also broke through all possible levels and updated the lows. History has never seen such low price values.
The cause and effect of the fall is described above.
Economic calendar for September 26
Today, the macroeconomic calendar is empty, the publication of important statistical data is not expected. It is worth noting that the tense information background persists, and market participants will focus on it.
Trading plan for EUR/USD on September 26
At the moment, the formation of a technical pullback is observed on the trading chart, which, under current circumstances, is considered justified in the market due to overheating of short positions in the euro. It is worth noting that the speculative mood prevails in the market, which sets in motion an inertial course. Thus, it is impossible to exclude from the possible scenario the subsequent depreciation of the euro after the pullback, where technical signals will be ignored.
Trading plan for GBP/USD on September 26
The minimum price value that has arisen since the opening of a new trading week is 1.0345. There was a technical pullback relative to it, approximately by 3.8% (400 points), which, like the euro, is justified on the market due to the catastrophic overheating of short positions in the pound sterling. In this situation, despite the historical values, the market retains a high interest in the downward cycle. Speculators, on the occasion of inertia, can still continue to decline, ignoring technical signals. In this case, we can see the price approaching parity1.0000.
The situation could improve if the BoE postpones planned bond sales and the Treasury is forced to announce a medium-term fiscal consolidation plan to restore market confidence.
In this case, the pullback may turn into a full-scale correction, restoring the exchange rate of the British currency.
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Tips for beginner traders in EUR/USD and GBP/USD on September 27, 2022
Details of the economic calendar for September 26
The macroeconomic calendar was empty; no important statistics were published. Investors and speculators worked out the information flow of the past week.
The UK Treasury yesterday commented on everything that is happening in the country's economy, the main theses:
- The medium-term financial plan will be presented on November 23.
- The budget plan will set out additional details, including ensuring that the share of UK debt to GDP falls in the medium term.
At the same time, the Bank of England made its comments:
- We closely monitor the market for significant revaluation of financial assets;
- We will not hesitate to raise the interest rate to bring inflation back to the target level of 2.0%.
According to media reports, traders are waiting for an unscheduled rate hike by the Bank of England amid the collapse of the national currency. Perhaps this was the reason for such a significant pullback. There is no confirmation of rumors regarding an unscheduled rate hike. If the regulator does not take any drastic action, the pound will continue to decline.
Analysis of trading charts from September 26
The EUR/USD currency pair opened a new trading week with an update of the low of the downward trend. As a result, the quote reached the levels of June 2002, at 0.9553, relative to which the stage of technical pullback occurred.
The GBP/USD currency pair has set several records at once. The absolute low was updated, the quote overcame the level of 1985, eventually reaching the value of 1.0345. The scale of the pound's collapse from last Friday to the beginning of Monday's trading amounted to almost 1,000 points, while the pullback caused by the fatal overheating of short positions on the pound was about 550 points.
Economic calendar for September 27
Today, data on orders for durable goods in the United States will be published, which may decrease by 0.9%. This is a fairly strong reduction, which foreshadows a noticeable decline in consumer activity, which is the locomotive of the American economy. As a result, these negative data, if confirmed, can put pressure on dollar positions.
Also, U.S. Federal Reserve Chairman Jerome Powell and ECB President Christine Lagarde are scheduled to give a speech. It is worth listening to what they will say, although everything has already been said before.
Time targeting:
Fed Chairman Jerome Powell Speech 11:30 UTC
ECB President Christine Lagarde Speech 11:30 UTC
U.S. Durable Goods Orders (August) 12:30 UTC
Trading plan for EUR/USD on September 27
At the moment, there is a characteristic stagnation, where the pullback stage has slowed down its formation despite the continuing technical signal about the oversold euro. In order for the pullback to be prolonged and become the starting point for a full-size correction, the quote first needs to stay above the value of 0.9700 for at least a four-hour period.
At the same time, the downward scenario will become relevant again as soon as the current low is updated.
Trading plan for GBP/USD on September 27
In this situation, there is still a speculative rush on the market, which allows new price jumps. In order to prolong the current pullback, the quote needs to stay above the high of the previous day at 1.0928. At the same time, the scenario of further decline will be considered by traders if the price holds below 1.0630.
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Tips for beginner traders in EUR/USD and GBP/USD on September 28, 2022
Details of the economic calendar for September 27
Orders for durable goods in the United States decreased by 0.2% during the period of August. This is not the best indicator, but they expected a reduction of 0.9%. The divergence of expectations served as a stimulus for the growth of dollar positions. At the same time, data on new home sales in the US were also published, which recorded a strong growth of 28.8% in August.
In addition to macroeconomic statistics, there were quite a lot of comments from the Fed, where everyone unanimously talks about the risks associated with inflation.
Chicago Fed President Charles Evans:
- The average forecast for the interest rate at the end of the year is between 4.25%4.5% and 4.6% by the end of next year.
- For us, task number 1 is to bring inflation under control.
- The tightening of monetary policy will continue for some time.
- 4.5% unemployment in the United States is still a good level.
- At some point in time there will be a need to reduce the rate of interest rate increases. But now it needs to be further improved.
- This year, our forecasts for an objective increase in interest rates by another 100125 basis points.
- We see long-term inflation expectations at acceptable levels.
- I expect that the level of inflation will noticeably decrease within two years.
- I expect a slight increase in GDP this year.
Former New York Fed President William Dudley:
- The Fed has made it clear that it intends to fight inflation.
- During the September meeting, the regulator clearly indicated that they are ready to raise the interest rate in order to return inflation to an acceptable level.
- Based on the forecasts of the Fed, GDP growth is expected in the coming years.
- It looks like there is no clear consensus among the Fed representatives on how long they will continue to fight inflation.
St. Louis Fed President James Bullard:
- We have serious problems with inflation in the country.
- The credibility of the inflation targeting regime is under threat.
- The labor market is very strong, which gives us the opportunity to fully focus on inflation.
- We must correctly and timely respond to inflation.
- At subsequent meetings, we certainly must continue to raise the interest rate.
- The possible maximum interest rate is about 4.5%.
- We'll probably have to stick with the high stakes for a while.
Minneapolis Fed President Neel Kashkari:
- We believe that the markets understand what the Fed is doing.
- Representatives of the Fed are united and committed to reducing inflation.
- We are moving at a fast pace, it is dangerous.
- The Fed is working to bring inflation back to 2%. We need to keep raising interest rates.
- We need to further tighten monetary policy to see evidence that we are succeeding in reducing inflation, and move on to slow down.
- I'm not sure that the current monetary policy is tight enough.
Philadelphia Fed President Patrick Harker:
- We are working to achieve an acceptable level of inflation in the country.
- The housing market is a key segment in the growth of inflation
- Inflation in the country is very high in many categories
San Francisco Fed President Mary Daly:
- Our goal is to return inflation to the level of 2.0%.
- The level of inflation is very high, we must properly assess the current situation.
Conclusion based on the comments of the Fed representatives
Based on the above material, a clear "hawkish" approach is visible. The regulator intends to fight high inflation by all possible means, which they point out in their statements. For this reason, we see a further decline in the US stock market, as well as an increase in the value of the dollar against other currencies.
Analysis of trading charts from September 27
The EUR/USD currency pair resumed its decline after a short pullback. As a result, the local low of the downward cycle at 0.9553 was updated, which indicates the prolongation of the main trend.
The GBP/USD currency pair ignores the fact that it is treading water at historical lows. In fact, the technical signal of oversold is covered by a high rush for short positions on the part of speculators.
Economic calendar for September 28
Today the macroeconomic calendar is empty, all hope is for the information flow, where speeches by the Fed and ECB representatives are expected again.
Trading plan for EUR/USD on September 28
Stable price retention below 0.9550 will lead to a subsequent decline. In this case, the technical signal about overheating of short positions can be ignored by market participants. A possible prospect of a move is a decline towards the lows of 2001 and 2000.
An alternative scenario of market development is considered by traders in the form of another price rebound from the 0.9550 value area, as it happened at the beginning of the trading week.
Trading plan for GBP/USD on September 28
In this situation, keeping the price below the 1.0600/1.0630 area in a four-hour period may well lead to a subsequent decline towards the recent local low. It is worth noting that with such overheating of short positions, spontaneous consolidations may occur, which, in turn, will lead to a technical pullback.
Until the quote is stable below the control area, the risk of the subsequent formation of the amplitude of 1.0630/1.0930 remains.
