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EU Leaders’ Meeting to Determine Next Move in GBP/USD, FTSE

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GBP price, Brexit news and FTSE analysis:

  • EU leaders are beginning a two-day meeting of the European Council today, with the post-Brexit relationship between the EU and the UK on the agenda.
  • Trading in both GBP and the FTSE will likely be choppy as headlines emerge from the meeting suggesting progress, or the lack of it, in the EU-UK trade talks.

GBP/USD and FTSE at mercy of EU-UK trade headlines

EU leaders are gathering in Brussels today for a two-day meeting of the European Council, with the post-Brexit relationship between the EU and the UK the second item on the agenda after a discussion of the Covid-19 pandemic.

With no agreement on trade yet reached, both GBP and the FTSE 100 index of the leading London-listed stocks will likely be buffeted for the rest of the week by headlines suggesting the EU and the UK are moving closer together or further apart.

That means trading will likely be choppy as the EU leaders debate whether progress is being made and the UK Government then decides how to respond now Prime Minister Boris Johnson’s deadline of October 15, today, has passed without a trade deal.

GBP/USD Price Chart, Daily Timeframe (July 15 – October 15, 2020)

Latest GBP/USD price chart.

Source: Refinitiv (You can click on it for a larger image)

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For now, the two sides remain far apart on issues such as fisheries, fair competition and dispute resolution that need to be agreed before the current Brexit implementation period ends on December 31. However, it still seems likely that the EU and the UK will eventually reach a skeleton agreement, with the details to be worked out later.

In the meantime, both GBP/USD and the FTSE 100 could be held back by a move into safe-haven assets such as the US Dollar on the current resurgence of Covid-19 cases and fading hopes of a US fiscal stimulus package.

For GBP/USD, the key levels to watch on the upside are the highs of 1.3082 and 1.3072 reached on October 12 and October 13 respectively. To the downside the key support levels are 1.2893 from the 20-day moving average and 1.2830 from the 100-dma.

No sign of respite for the FTSE 100

Meanwhile, the FTSE 100 stock index remains under strong downward pressure. It was another 1.8% lower in early London trading today – its fourth successive daily fall. Here, the key levels to watch are the lows of 5,779 and 5,805 touched on September 21 and September 24. Note that the price is now well below the 100-dma, the 50-dma and the 20-dma, although the 14-day relative strength index (RSI) is now under the oversold level at 29.07.

FTSE 100 Price Chart, Daily Timeframe (July 15 – October 15, 2020)

Latest FTSE 100 price chart.

Source: Refinitiv (You can click on it for a larger image)



of clients are net long.



of clients are net short.

Change in Longs Shorts OI
Daily 24% -24% 3%
Weekly 14% -13% 4%

We look at currencies and stocks regularly in the DailyFX Trading Global Markets Decoded podcasts that you can find here on Apple or wherever you go for your podcasts

— Written by Martin Essex, Analyst

Feel free to contact me on Twitter @MartinSEssex





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Currency market volatility jumps before U.S. election outcome By Reuters

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© Reuters. FILE PHOTO: U.S. dollars and other world currencies lie in a charity receptacle at Pearson international airport in Toronto

LONDON (Reuters) – Gauges for implied currency swings in the $6.6 trillion a day foreign exchange markets jumped to their highest levels in nearly seven months on Wednesday as traders anticipated more volatility before the outcome of the U.S. elections next week.

Contracts for euro and Japanese yen one-week implied volatility versus the U.S. dollar expiring in a week climbed to their highest levels since early April before the U.S. Presidential elections on Nov. 3.

While general currency market volatility remains elevated this week as Europe experiences a surge in coronavirus cases, the spurt in short-end volatility indicators indicate concerns around the U.S. election outcome, even though odds have stabilised this week.

In equity markets, the widely watched VIX index () held below a June 2020 high.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Canadian Dollar Poised to Fall Ahead of Bank of Canada Rate Decision

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Canadian Dollar, CAD/JPY, USD/CAD, Bank of Canada, Covid-19 Second Wave – Talking Points:

  • A mixed day of trade during the APAC session saw the Australian and New Zealand Dollars outperform their major counterparts.
  • The Canadian Dollar could come under pressure as global market sentiment sours, ahead of the BoC interest rate decision.
  • USD/CAD eyeing a push back towards the monthly high.
  • CAD/JPY rates at risk of extended declines after snapping below key support.

Asia-Pacific Recap

It proved to be a relatively mixed Asia-Pacific trading session, with risk-associated assets pegging back lost ground late into the close after tumbling in early trade.

The Australian and New Zealand Dollars were the best performing currencies, as investors seemed to put a premium on assets from countries with a lower Covid-19 case count.

Australia’s ASX 200 index nudged 0.1% higher, while China’s CSI 300 index rose 1.1%.

The Euro lost ground against all of its major counterparts, as a record surge in coronavirus cases forced several European governments to tighten restrictive measures.

Gold and silver nudged marginally higher, while yields on US 10-year Treasuries remained unchanged at 0.76%.

Looking ahead, the Bank of Canada’s interest rate decision headlines the economic docket alongside EIA crude oil inventories for the week ending October 23.

Canadian Dollar Poised to Fall Ahead of Bank of Canada Rate Decision

Market reaction chart created using TradingView

Souring Sentiment May Hamper CAD Ahead of BoC

The cyclically-sensitive Canadian Dollar is at risk of further losses against the Japanese Yen and US Dollar, as souring market sentiment weighs on the performance of risk-associated assets.

A record surge of Covid-19 infections has forced governments across Europe to impose growth-hampering restrictions, while the number of active coronavirus cases in Canada has more than doubled in the last 30 days.

In fact, Canada’s chief public health officer Theresa Tam has warned that “as hospitalizations and deaths tend to lag behind increased disease activity by one to several weeks, the concern is that we have yet to see the extent of severe impacts associated with the ongoing increase in Covid-19 disease activity”.

Canadian Dollar Poised to Fall Ahead of Bank of Canada Rate Decision

Source – Apple Mobility Data

The tightening of restrictions in several Canadian provinces is likely to fuel regional investors’ concerns that the nation’s economic recovery is at risk of stagnating, or perhaps even reversing, as high-frequency mobility data shows all three mobility trends continuing to trend lower after peaking in early September.

However, deteriorating health outcomes may not be enough to force the Bank of Canada to adjust its monetary policy settings at its upcoming meeting, given Governor Tiff Macklem and his colleagues are expected to release upward revisions to their economic growth projections.

Moreover, Macklem has previously stated that “as much as bold policy response as needed, it will inevitably make the economy and financial system more vulnerable to economic shocks down the road”, adding that “the bottom line is that the private and public sectors together need to acutely aware of financial system risk and vulnerabilities as the economy recovers”.

Canadian Dollar Poised to Fall Ahead of Bank of Canada Rate Decision

USD/CAD comparison chart created using TradingView

This could indicate that Canadian policymakers are becoming more sensitive to the potential impact of alternative policy measures and may hesitate to do more unless it is absolutely necessary.

Nevertheless, the lack of action from the BoC may fail to underpin the Loonie in the near-term, as pre-election jitters and Covid-19 second wave concerns gnaw at market sentiment.

Therefore, the Canadian Dollar may come under pressure against its anti-risk counterparts, should the current risk-off dynamic continue to fuel haven inflows.

CAD/JPY Daily Chart – Trend Break Hints at Further Losses

Canadian Dollar Poised to Fall Ahead of Bank of Canada Rate Decision

CAD/JPY daily chart created using TradingView

From a technical perspective, the CAD/JPY exchange rate is at risk of extending its losses, after slicing through the uptrend extending from the May low (74.79).

With the RSI and MACD indicators tracking below their respective neutral midpoints, the path of least resistance seems skewed to the downside.

A daily close below the psychologically imposing 79.00 mark would probably ignite a push to test the 78.6% Fibonacci (78.46), with a break below the 50% Fibonacci (77.87) needed to bring the May low (74.79) into focus.

Conversely, if psychological support holds firm a retest of the 100-day moving average (79.56) is hardly out of the question.

USD/CAD Daily Chart – Short-Term Rebound at Hand?

Canadian Dollar Poised to Fall Ahead of Bank of Canada Rate Decision

USD/CAD daily chart created using TradingView

USD/CAD rates could be poised to rebound back towards the September 9 high (1.3260) and Descending Channel resistance, after surging away from the monthly low set on October 21 (1.3081).

A bullish crossover on the MACD indicator, in tandem with the RSI holding above 40, suggests that the path of least resistance could be higher.

A daily close above confluent resistance at the trend-defining 50-day moving average (1.3236) could signal a potential shift in sentiment and generate a push back towards the June low (1.3316), with a break and close above the 100-DMA (1.3328) needed to invalidate the bearish continuation pattern.

Having said that, with price tracking below all four moving averages, a topside push may prove to be a mere short-term correction.

With that in mind, continuation of the primary downtrend looks likely if price fails to breach the 38.2% Fibonacci (1.3328), with a daily close below the 1.3100 mark needed to carve a path to test the yearly low (1.2994).

Canadian Dollar Poised to Fall Ahead of Bank of Canada Rate Decision

Retail trader data shows 70.49% of traders are net-long with the ratio of traders long to short at 2.39 to 1. The number of traders net-long is 6.45% higher than yesterday and 3.92% higher from last week, while the number of traders net-short is 17.51% lower than yesterday and 26.94% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USD/CAD prices may continue to fall.

Positioning is more net-long than yesterday but less net-long from last week. The combination of current sentiment and recent changes gives us a further mixed USD/CAD trading bias.

— Written by Daniel Moss, Analyst for DailyFX

Follow me on Twitter @DanielGMoss

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Gold Price Coils Up in Tight Range. Will US Election Trigger Breakout?

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GOLD PRICE OUTLOOK:

  • Gold prices ranged above a key support level at US$ 1,900 amid souring sentiment
  • The US election may serve as a catalyst for gold trading next week
  • 79% of the retail gold traders (within IG)are in long positions, slightly higher than a week before

Gold prices consolidated at above US$ 1,900 this week amid souring market sentiment due to a resurgence in coronavirus cases around the globe. The absence of geopolitical catalysts and a relatively muted US Dollar index have led gold prices to consolidate within a tight range between US$ 1,900 – 1,910. Some traders may prefer to sit on the sidelines until the political skies are cleared after the US election, which is only one week from now.

Although Democratic presidential candidate Joe Biden appears to have a comfortable lead in national polls, the potential tail risk of a Trump-win scenario can’t be neglected. This renders the risk-averse US Dollar susceptible to a strong haven bid should the election outcome derails from the poll forecasts. A strengthening US Dollar is likely to weigh on precious metal prices, especially when ‘risk off’ sentiment is prevailing.



of clients are net long.



of clients are net short.

Change in Longs Shorts OI
Daily -1% 4% 0%
Weekly 5% -4% 3%

The medium-term outlook, however, appeared biased towards the upside as the Fed continued to expand its balance sheet, albeit at a much slower pace compared to earlier this year (chart below). The Federal Reserve balance sheet hit an all-time high of 7.177 trillion in October, surpassing the previous record seen in early June. Ample liquidity and ultra-low interest rates may buoy the medium-term outlook for precious metal prices, albeit short-term pressure remains.

Gold Price Coils Up in Tight Range. Will US Election Trigger Breakout?

Source: Bloomberg, DailyFX

Technically, gold prices came off the all-time high (US$ 2,075) in early August and have since entered a three-month consolidation. Prices attempted to stabilize since end September after finding a strong support at US$ 1,870 (the 76.4% Fibonacci retracement).

Gold prices have also formed a few bearish harmonic pullbacks (highlighted in black straight lines) before entering into an “Ascending Channel” in October. Immediate support levels can be found at US$ 1,900 (50-Day SMA), followed by US$ 1,883 (lower Bollinger Band). A narrowing Bollinger Band width suggests that tight range-trading may continue.

Gold PriceDaily Chart

Gold Price Coils Up in Tight Range. Will US Election Trigger Breakout?

IG Client Sentiment indicates that retail gold traders are heavily leaning towards the long side, with 79% of positions net long, while 21% are net short (chart below). As gold prices consolidate, retail traders have trimmed long (-1%) positions and added short (+7%) bets overnight. Compared to a week ago, traders have added to both long (+4%) and short (+1%) exposure.

Gold Price Coils Up in Tight Range. Will US Election Trigger Breakout?

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— Written by Margaret Yang, Strategist for DailyFX.com

To contact Margaret, use the Comments section below or @margaretyjy on Twitter





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