Tag: Analisis

Euro is back on horseback: growth continues

The European currency regained optimism and showed growth. The reason for this was the commentary by the ECB President, Mario Draghi, regarding the introduction of a stimulus package. The head of the regulator emphasized that the probability of a recession is low at the moment, which also gave confidence to the European currency.

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After the unveiling of the new stimulus package, it became known that the ECB is cutting rates and restarting the strategy of quantitative easing (QE). According to M. Draghi, this is necessary to combat the economic slowdown. According to experts, the list of incentive measures is very impressive. The decision of the regulator will help stimulate the Eurozone economy and reduce the risk of recession, experts say.

Recall that after the statements of the head of the ECB, the European currency collapsed sharply. The EUR/USD pair fell by 0.8% to 1.0926–1.0927, which is a record low lately. After the press conference, M. Draghi, the tandem quickly turned upward, gaining a foothold above 1.1080. The EUR/USD pair soared more than a figure from the low of Thursday, September 12. Currently, she has overcome this mark and is growing steadily, reaching indicators of 1.1100-1.1105.

The stimulus package adopted during the ECB meeting includes five key elements. These include:

1. Reduction in interest rates by 10 bp to -0.5%.

2. Refusal of the calendar pegging of market signals.

3. Restarting the asset buyback program.

4. Changes in the TLTRO refinancing program, in particular, the liquidation of the 10 bp spread and providing banks with more favorable credit conditions.

5. The introduction of a two-level system of rates that protects part of bank capital from negative rates.

Analysts pay attention to three reasons for the reversal of the European currency. Firstly, it is an appeal to governments by the head of the ECB to strengthen fiscal stimulus. He insists on the gradual but steady implementation of this reform. Draghi is convinced that this is necessary to strengthen the potential for long-term economic growth. Secondly, it is a long-term application of the program of quantitative easing (QE), which will have a positive effect on the economy. Draghi insists on its use on an ongoing basis It is possible that an endless QE program will be of great importance for economic incentives. Thirdly, the current actions of the ECB guarantee a further reduction in the Fed rate, experts say. The rate cut should improve the European economy, and the prospect of a softening Fed policy supports the EUR/USD pair.

According to experts, the events of this Thursday marked the bottom of the EUR/USD pair. As a result, one of the largest short-term risks for the European currency was left behind. She is gaining strength and is actively growing. However, external risks remain, which include the actions of US President Donald Trump and the threat of a “tough” Brexit. The American leader considered the ECB’s decision to be a “weakening euro”, so analysts recommend not to forget about the possible response from the United States, including the introduction of tariffs.

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The material has been provided by InstaForex Company – www.instaforex.com

Analysis of EUR / USD and GBP / USD for September 13. The euro was able to complete the downward trend.

EUR / USD

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Thursday, September 12, ended for the EUR / USD pair with an increase of 55 basis points, despite the fact that the quotes decreased to the minimum of the expected wave 3, 3. Thus, the wave 5 in 3 during the day, although it turned out to be somewhat shortened, but it can be considered complete, as well as the whole wave 3. However, the questions remain: on a global level (waves 1-2-3) are part of the 5-wave structure, or is it another abc formation? In the second case, the construction of the bearish section of the trend is completed, and now, we are expected to build at least three waves up with the prospect of leaving much higher than the level of 1.1250. Thus, the readiness of the euro-dollar pair to further decline can now be determined only by a successful attempt to break through the lows of waves 3 and 5.

Fundamental component:

On the EUR / USD instrument, all the most interesting news yesterday concerned the ECB meeting and the debriefing of this meeting. As markets expected, Mario Draghi lowered the deposit rate to -0.50% and announced the launch of a new asset repurchase program worth € 20 billion per month. This program will begin in November 2019. It seems to be nothing surprising and the markets began to get rid of the euro in accordance with the plan. However, upon reaching the minimum of wave 3 in 3, there was a sharp upward turn and no less strong growth of the European currency. What could have caused this? Possibly, pending orders for the purchase of large volumes, for example, large players who were located near the level of 1.0926. Perhaps, traders in any case did not expect the pair to fall below this level and began to take profits around it. Also, maybe inflation in the USA, which fell in August to 1.7% yoy, dramatically changed the mood of the foreign exchange market. And most likely, all three factors played simultaneously.

Today, I draw attention to only one economic report, which will be released in the afternoon in the USA.

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And on one index, the University of Michigan Consumer Confidence Index.

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Retail sales in America should grow by 0.3% in August, and the consumer confidence index may increase slightly after falling by almost 10 points and reach 90.9.

Purchase goals:

1.1248 – 0.0% Fibonacci

Sales goals:

1.0893 – 161.8% Fibonacci

1.0807 – 200.0% Fibonacci

General conclusions and recommendations:

The euro-dollar pair supposedly completed the construction of the bearish wave 3. If this is true, the pair expects the construction of an upward set of waves. I recommend buying a pair with targets located about 12 figures, but so far in small volumes.

GBP / USD

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On September 12, the pair GBP / USD gained just a few basic points, and the overall market activity tended to zero. It is not surprising, since all the main attention of the Forex market was paid to a couple of euro-dollars, which had a very strong news background yesterday. The pound-dollar pair remains within the framework of constructing the proposed wave with the composition of the correction section of the trend. Wave c may already be completed, since it has gone beyond the maximum of wave a. However, it can also take a much more extended and complex form. Thus, everything will depend on the news background.

Fundamental component:

On Friday, the news background for the GBP / USD pair will not be strong. Two US reports may force markets to trade the pair more actively, but if their values are neutral, then activity will remain at the same level. In addition, markets are clearly more interested in Brexit’s hot issue, rather than economic reports from America, although Brexit-related news is not much. Boris Johnson defends Jeremy Corbyn from the opposition, but parliament is likely to regain its right to return to work through the courts. Moreover, the European Union is likely to provide a respite for Brexit. Thus, Johnson’s plans are crumbling one by one.

Sales goals:

1.2016 – 0.0% Fibonacci

Purchase goals:

1.2401 – 50.0% Fibonacci

1.2489 – 61.8% Fibonacci

General conclusions and recommendations:

The downward trend section is still considered completed. Thus, now, it is expected to continue the construction of the rising wave with targets located near the calculated levels of 1.2401 and 1.2489, which corresponds to 50.0% and 61.8% Fibonacci. I recommend buying pounds in small lots, as the wave of c may be completed in the near future.

The material has been provided by InstaForex Company – www.instaforex.com

Technical analysis of GBP/USD for September 13, 2019

Overview:

The GBP/USD pair (British Pound / US Dollar) continues to strengthen from the area of 1.2303 and 1.2394 in the 4-hour time frame.

The price spot of 1.2303 and 1.2394 remains a significant support zone. Therefore, the possibility t…