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  • The pound gets rid of the ballast

    If you get rid of the ballast, it'll be a lot more fun. Over the past few months, the policy has restrained the offensive outbursts of the bulls on the GBP/USD. While most investors sleep and see the pound rise significantly higher, political risks prevent them from starting to form long positions. In past years, the Conservative Party conference invariably turned into a collapse of the sterling, and Theresa May's statement about the impasse in negotiations with Brussels leads its fans to sad arguments.

    This time, nothing extraordinary happened at the Tory's meeting. The prime minister was not allowed to doubt the leadership. At the same time, rumors about the advancement of the Irish border issue led to a decrease in the EUR/GBP to the area of 3-month lows. Investors are playing on the contrast: while the fire of the political crisis in Italy is only heating up, in Britain, on the contrary, everything is moving towards the conclusion of an agreement. According to Reuters, London's new proposal to Brussels avoids large-scale checks on the border with Ireland, which signals progress in the negotiations.

    Not the slightest role in strengthening the pound is played by the growth of the yield of British bonds to the area of 2-year highs. If the UK manages to achieve an orderly exit from the EU, the risks of continuing the Bank of England's monetary policy normalization cycle will increase. At the same time, the threat of an acceleration in inflation forces investors to flee from local debt obligations. If we add to this London's desire to take a step from fiscal consolidation to GDP acceleration and the potential growth of bond issuance associated with it, it becomes clear why the debt market rates are steadily moving upwards. Their increase raises the attractiveness of British assets, boosts demand for them and contributes to the revaluation of the sterling.

    Dynamics of British bond yields

    At the same time, there are always two currencies in any pair, so the success of one of them does not necessarily lead to a shift in a certain direction. The dollar also looks very attractive at the moment. The futures market increased the likelihood of three acts of monetary tightening of the Federal Reserve in 2019 from 40% to 42%, the duration of employment growth outside the agricultural sector does not get tired of rewriting records (96 consecutive months), and unemployment fell to a low of almost half a century. Against this background, the rise in the yield of US Treasury bonds to the peak in the spring of 2011 should not be surprising.

    In the week to October 12, investors working with the GBP/USD will monitor the political situation in Britain, as well as the release of data on GDP of the UK for June-August and US inflation. In May-July, the economy of the United Kingdom accelerated to 0.6%, and if it continues in the same spirit, the pound will receive an additional trump card.

    Technically, after a rollback to 50% of the AD wave of the "Bat" pattern, and the rebound from the lower limit of the upward trading channel, the "bulls" on the GBP/USD launched an attack in order to update the September high. If this happens, the chances of implementing the target by 161.8% on the AB=CD pattern will increase. GBP/USD daily chart

    Analysis are provided by InstaForex

    Comment


    • Brent found the culprits

      If at the beginning of 2018 someone started talking about the fact that Brent will finish the year near the mark of $100 per barrel, they would surely laugh at him. Best case scenario. Nevertheless, over the past 12 months, the North Sea variety has added about 50% of its value, and the psychologically important mark no longer seems like an impossible dream. US economic sanctions against Iran, strong global demand, supply disruptions from Venezuela and other countries and the difficulties of US shale production pushed oil futures to the 4-year highs. And from them to $100 per barrel at hand.

      If Donald Trump wants to find those responsible for the rapid rally of Brent and WTI, then he should look in the mirror. According to Russian Energy Minister Alexander Novak, the US president's tweets bring confusion to the markets. Investors do not know how to act and what will happen in the future. In addition, Washington's actions against Tehran are too aggressive. Iranian exports before the announcement of sanctions since November were estimated at 2.5 million b/d. And if the market was initially set up with the fact that the sanctions would reduce it by 0.4-1 million b/d, then the current version of bringing the indicator to zero does not look great. At the end of the first week of October, the country exported 1.1 million b/d according to information received from tankers. The Tehran government says about 1 million b/d. In September, it was about 1.6 million b/d. Supplies are rapidly declining, but before the imposition of sanctions more time.

      Only rumors about a more friendly attitude of the US to the buyers of Iranian oil allowed the "bears" on Brent and WTI to counterattack. The United States will not put pressure on India if Delhi does not completely refuse to import oil from Tehran. However, the information has not yet been confirmed, which allows investors to return to their favorite topic. When the $100 per barrel mark is reached. Players who did not have time to jump into the train leaving for the north are trying to make money on options. Since the beginning of September, the bets made with the help of futures contracts that the psychologically important level will be reached by January have doubled. BofA Merrill Lynch speaks openly about $100 per barrel and assesses the impact on the global economy. According to the bank's forecasts, global GDP growth will lose 0.2 pp from high oil prices, while the main victims will be the eurozone, Britain and Japan. Much will depend on the US dollar. Its weakness can be a catalyst for the rally of Brent and WTI.

      Dynamics of US dollar and oil

      Support for black gold is provided by information about the approaching hurricane Michael to the coast of the Gulf of Mexico and the forecast of experts Bloomberg to raise US stocks for the third week in a row.

      Technically, the achievement of target levels at 161.8% according to the AB=CD pattern increases the risk of a rollback. At the same time, even the breakthrough of diagonal support in the form of the lower border of the ascending short-term trading channel will not allow the "bears" to breathe calmly on Brent. Until such time as the quotes are above $76.7 per barrel, the situation is controlled by the bulls.

      Brent, daily chart

      Analysis are provided by InstaForex

      Comment


      • Elliott wave analysis of EUR/NZD for October 11, 2018

        The break above resistance at 1.7847 told us that the corrective decline from 1.7929 had completed prematurely and a new impulsive rally towards 1.8030 and 1.8369 should be unfolding.

        Despite our expectation of a new impulsive rally towards 1.8030, we should be aware of the possibility of a more complex correction unfolding, but the minimum upside target should be 1.7929 if a larger flat correction is in the making.

        R3: 1.8030
        R2: 1.7960
        R1: 1.7929
        Pivot: 1.7882
        S1: 1.7835
        S2: 1.7800
        S3: 1.7774

        Trading recommendation:
        We are long EUR from 1.7847 and we will place our stop at 1.7780. Upon a break above 1.7882 will will move our stop to break-even at 1.7847.

        Analysis are provided by InstaForex

        Comment


        • GBP / USD pair: plan for the American session on October 11. Speech by Mark Carney supported the pound

          To open long positions on GBP/USD pair, you need:

          Buyers managed to stay above the support level of 1.3184, which I mentioned in the morning review, and the comments of the Governor of the Bank of England allowed traders to increase their long positions. The main task for the second half of the day is to break through and consolidate above resistance 1.3220, which will lead to the formation of a new upward movement in the pound with a maximum of 1.3269, where taking profits are recommended. In the case of a decline in GBP / USD in the afternoon, long positions can return immediately to the rebound from the support of 1.3147.

          To open short positions on GBP / USD pair, you need:

          Sellers will try to keep the pair below the resistance of 1.3220 and the formation of a false breakdown on it will lead to a larger downward trend with repeated support test of 1.3184. A break of 1.3184 will allow us to expect an increase in short positions in the GBP / USD pair by updating the lows in the area of 1.3147 and 1.3098, where taking profits are recommended. In the case of the pound rising above the resistance of 1.3220 in the second half of the day, it is best to return in short positions on a rebound from a high of 1.3269.

          Indicator signals:

          Moving Averages

          The price is above the 30-day and 50-day moving average, which indicates continuous growth of the pound.

          Bollinger bands

          The upside potential is limited by the upper line of the Bollinger Bands indicator around 1.3236. The breakthrough of which will lead to a new wave of pound growth.

          Description of indicators

          MA (moving average) 50 days - yellow
          MA (moving average) 30 days - green
          MACD: fast EMA 12, slow EMA 26, SMA 9
          Bollinger Bands 20

          Analysis are provided by InstaForex

          Comment


          • Elliott wave analysis of EUR/JPY for October, 2018

            EUR/JPY has seen a low at 129.12 and we are now looking for a break above minor resistance at 129.80 and more importantly a break above short-term important resistance at 130.51. It will confirm that blue wave (2) has completed and blue wave (3) towards 138.10 is developing.
            Support is now seen at 129.34 and then at 129.12.
            R3: 130.85
            R2: 130.51
            R1: 130.05
            Pivot: 129.80
            S1: 129.34
            S2: 129.12
            S3: 128.99

            Trading recommendation: We will buy EUR at 129.10 or upon a break above 129.80.

            Analysis are provided by InstaForex

            Comment


            • GBP/USD. October 15th. Results of the day. The fate of the pound may be decided at the summit on October 17-18

              4-hour timeframe

              The amplitude of the last 5 days (high-low): 105 p-117 p-79 p-66 p-111 p.

              Average amplitude over the last 5 days: 96 PT (97 p). The British pound opened today with a large "gap" down, but managed to close it during the day.

              In principle, the technical picture of the last two days for EUR/USD and GBP/USD pairs is the same. The only difference is that the pound is more volatile. At the moment, the price has consolidated back above the Kijun-sen line, which may mean the completion of a deep correction and the resumption of an uptrend. However, the MACD indicator is still pointing down (!!!), which is due to the formation of a "gap" at the opening of the market. Thus, the indicator readings are simply incorrect now. As for the fundamental component, in addition to the report on retail sales in the US, which slightly increased the demand for the pound during the day, there is nothing to note today. Even no new rumors about Brexit has not been received. Thus, market participants are fully focused on the summit, which will be held on 17-18 October, and which is highly likely to be either signed an agreement or negotiations will fail completely. Of course, everyone, especially traders, now believe that the "deal" will be signed. But we think the odds are about 50/50. If the parties could easily concede on the Northern Ireland border, they would have done so long ago. Nobody wants to give in, and Britain needs the "deal" first. But additional concessions to the European Union will lower Theresa May's political ratings even more. Not everyone is happy with her rule and negotiations in the UK.

              Trading recommendations:

              The GBP/USD currency pair seems to have completed the correction, but the breakdown of the Kijun-sen line may be false, given the nature of the next bar. Thus, now it is recommended to hurry with the opening of new longs, it is better to wait for clarification of the situation.

              Sell positions are relevant as long as the price is below the Kijun-sen line. But MACD did not react to the upward correction and now can not signal its completion with a turn down.

              In addition to the technical picture should also take into account the fundamental data and the time of their release.

              Explanation of the illustration:

              Ichimoku indicator:

              Tenkan-sen - the red line.

              Kijun-sen - the blue line.

              Senkou Span A - light brown dotted line.

              Senkou Span B - light purple dotted line.

              Chinkou Span - green line.

              Bollinger Bands indicator:

              3 yellow lines.

              MACD Indicator:

              Red line and histogram with white bars in the indicator window.

              News are provided by InstaForex

              Comment


              • GBP/USD: turned away from the pound

                Wednesday's trading day is marked by uncertainty. The dollar is gaining momentum ahead of the publication of the latest minutes of the Federal Reserve, and the pound and defensive instruments are waiting for the outcome of the EU summit. General nervousness plays in favor of the US currency, especially after the recovery of the US stock market. The British currency, in turn, is not only under the pressure of negative rumors about Brexit, but also due to the slowdown of inflation indicators. There was no trace of yesterday's optimism, after which the GBP/USD pair headed towards the 30th figure.

                Meanwhile, there are no results of the key summit yet: only a working dinner will be held tonight, while Theresa may is holding bilateral meetings with its participants. Therefore, the main statements will be announced or closer to the night or (most likely) by tomorrow. But the pound is already getting cheaper throughout the market, as negative forecasts regarding the Brussels meeting began to prevail in the information field. For example, German Chancellor Angela Merkel said today that Germany has begun preparations for a chaotic Brexit, as the issue of the Irish border remains an insurmountable stumbling block. The head of the European Council Donald Tusk yesterday took a similar position, adding that the probability of "hard" Brexit is high as ever.

                Representatives of other countries are less categorical, but most of them are wary of the upcoming negotiations. Increasingly, there are thoughts that the parties need a time gap until November, December or even January. It is difficult to say whether the rhetoric of the Europeans is a "strategic maneuver" on the eve of the main negotiations, but, apparently, the parties do not really expect any breakthrough from the October meeting.

                According to a number of experts, there is an elementary "game of nerves": despite the fact that the parties planned to reach a compromise in September, the so-called "red line" is still relatively far away. Therefore, so far it is possible to exhaust each other with threats of chaotic Brexit with all the ensuing consequences. Such behavior is a risk, as after another failure in Brussels under Theresa May could once again stagger the prime minister's chair, not only in opposition to the labour, as there are many representatives of the Conservative Party who oppose her.

                However, according to other experts, Theresa May is in no hurry to make a deal at this summit. The fact is that at the end of October, the British Parliament will adopt the country's budget for the next year, in connection with which the prime minister needs the votes of deputies. In turn, representatives of the Democratic Unionist Party (May's coalition ally) threatened the prime minister that they would not support the adoption of a financial document if it made concessions on the Irish border. Therefore, Theresa May can delicately circumvent this problem by postponing the signing of the agreement for November.

                Thus, the preliminary information background does not bode well for the bulls of the GBP/USD, and today's weak data on inflation offset the positive effect of yesterday's release on the labor market (where a significant increase in wages was recorded).

                The dollar, for its part, is also beginning to exert pressure: the US currency again began to be in demand against the backdrop of an uncertain geopolitical situation. Yesterday, several Republican congressmen called for sanctions against Saudi Arabia if information about Riyadh's involvement in the disappearance of an opposition journalist is confirmed.

                In addition, the minutes of the September meeting, published today, can also support the dollar. Although this meeting took place before the release of rather weak inflation data in the US, the rhetoric of the document is important for the market. Here it should be recalled that the Federal Reserve in September not only raised the rate, but also excluded from the text of the accompanying statement the definition of "stimulating" in relation to the monetary policy.

                Although in the future, Fed officials (including Powell) stressed that the actions of the regulator are still mild and not deterrent. The minutes of the meeting can clarify this situation, thus outlining the prospects of monetary policy next year. In other words, today's release may, firstly, increase the probability of a hike in December, and secondly, increase/decrease the probability of accelerating the pace of monetary policy tightening in 2019. If the "hawkish" notes will prevail, the dollar will get another reason for its growth.

                From a technical point of view, the situation with the GBP/USD pair has not changed: the price is still clamped in the range of 1.3105-1.3280, where the support level is the middle line of the Bollinger Bands indicator, which coincides with the Tenkan-sen line on the daily chart, and the resistance level is the top line of the Bollinger Bands on the same timeframe. Depending on the outcome of the EU summit, the pair will go to one of the boundaries of the range, followed by its breakdown.

                Analysis are provided by InstaForex

                Comment


                • EUR/USD: illusive hopes and pressing problems

                  The euro-dollar pair has not managed to break out of the price range of 1.1460-1.1620, although today the price has approached its lower limit. But the bulls again seized the initiative and did not allow it to gain a foothold in the 14th figure. However, the upward dynamics also did not receive its continuation, so the pair was stuck in the flat in anticipation for new information impulses.

                  The fundamental background of the pair is very contradictory: the events of the last day do not have an unambiguous "black and white" color, so it is difficult for traders to determine the vector of further movement. For example, the initial signals from the EU summit significantly disappointed the market, after which the pound and the euro lost their positions. But today there is information that Brussels has offered London to extend the period of the transition period - approximately one year. And the British, apparently, supported this idea - at least the rhetoric of Theresa May (which, however, allowed the prolongation "for a couple of months") eloquently testifies to this. Later, there were also unofficial comments of high-ranking officials of Britain, which also confirm such intentions.

                  In other words, even if the parties do not have time to agree on key positions before March 2019, Britain will remain within the single market and within the customs Union for almost three years – that is, until December 2021. Such prospects calmed the markets a bit, but it is too early to "relax" – after all, today is the second day of the summit (the most intense in the context of multilateral negotiations), so the participants of the meeting can still present surprises - both of a positive nature and vice versa.

                  Although the euro follows the pound in many ways (especially when the Brexit issue is discussed), the single currency is not as focused on the summit as the British. Therefore, today the bulls of the EUR/USD focused on the rhetoric of the ECB representative Olly Rehn (head of the Central Bank of Finland). He voiced his expectations about the growth of the interest rate - according to him, the European central bank will consider this issue in the fourth quarter of next year. Naturally, if the dynamics of the eurozone economy will maintain the current pace.

                  Despite the fact that we are talking about very long-term prospects, traders reacted with optimism to such intentions. Moreover, the position of Rehn sounded simultaneously with the rhetoric of ECB Board member Ewald Nowotny, who said that he sees Jens Weidmann, the head of the Bundesbank, as the successor of Mario Draghi. Let me remind you that Weidmann has long and consistently advocated the tightening of monetary policy. If he really will head the European Central Bank (and it is called the main candidate) next year, then the pace of the rate hike can be significantly revised.

                  In other words, the fundamental factors that supported the euro today relate to too distant prospects. Therefore, the reaction to them was short-term, and the pair returned to more pressing issues. In particular, the problem of the Italian budget remained in limbo. According to a number of publications, the European Commission next week will reject the draft budget with a deficit of 2.4%, and its revision will take at least a month and a half. That is, this issue may be delayed until December, thus putting background pressure on the euro.

                  Another factor of uncertainty is the local elections in Germany. Let me remind you that Angela Merkel's partner in the Christian-Social Union coalition suffered a serious defeat in the elections to the Bavarian Parliament. 37% of Bavarians voted for the CSU, whereas five years ago this figure was almost 50%.

                  For the first time in 60 years, CSU representatives lost a single-party regional government. In addition, an impressive result was shown by the far-right party "Alternative for Germany", whose representatives took 22 seats in the local Parliament. According to some experts, the elections in Bavaria reflected the current political preferences of the Germans – that is, the growth of anti-European sentiment and the decline in the popularity of Merkel. At the end of October (28th) another regional elections will be held -in Hesse, where Angela Merkel is in charge of the "Christian Democratic Union". If the far right will press the CDU there, it will be a very alarming signal for Brussels.

                  Thus, the euro can not count on the support of the fundamental background, since the news "with a plus sign" are long-term, and "minus sign" is more estimated. In addition, the dollar is also not losing ground – published on Wednesday, the minutes of the last meeting of the Federal Reserve showed the "hawkish" attitude of the majority of regulator members, after which the probability of a hike in December again increased to 80%. Of course, the published opinions of officials are somewhat "overdue" in time – after all, the September meeting was held before the release of the latest inflation data (very weak) and before the events in the stock markets. But in general, the regulator kept a bullish attitude and did not disappoint market participants.

                  In summary, it should be noted that EUR/USD traders should closely monitor the level of 1.1460 (the lower line of the Bollinger Bands indicator on the four – hour chart) - when it breaks, the pair can sharply gain momentum and go to the bottom of the 14th figure, where the nearest support level is located (the lower line of the above indicator on the daily chart). The technical picture has a further decline (in particular, this is evidenced by the bearish "Parade of lines" signal of the Ichimoku Kinko Hyo indicator on D1).

                  Analysis are provided by InstaForex

                  Comment


                  • Elliott wave analysis of EUR/NZD for October 22, 2018

                    EUR/NZD dipped to 1.7356 (just below our possible downside target at 1.7357). We will now be looking for a break above the resistance-line near 1.7495, and more importantly, a break above the resistance at 1.7557 to confirm that the red wave ii/ has completed and the red wave iii/ towards 1.8345 is developing. Support is now seen at 1.7381 and at 1.7356.

                    R3: 1.7598
                    R2: 1.7557
                    R1: 1.7495
                    Pivot: 1.7475
                    S1: 1.7450
                    S2: 1.7409
                    S3: 1.7381

                    Trading recommendation:
                    We will buy a break above the resistance at 1.7495, while our stop will be placed at 1.7345.

                    Analysis are provided by InstaForex

                    Comment


                    • [B]GBP/USD. Pound stumbled over Brexit again

                      The pound paired with the dollar after a slight recovery has once again collapsed into the area of the 29th figure, reacting to the negative news background around Brexit.

                      The immediate reason for the decline in the GBP/USD was the news that the deputies from the Democratic Unionist Party (DUP) together with the conservatives (or rather – some of them) will vote for the draft law that will make the EU proposals on the Irish border illegal. In this case, negotiations on Brexit are highly complicated, and the probability of a chaotic "divorce" from the EU without a deal will increase.

                      Let me remind you that Brussels is lobbying for the idea of leaving Northern Ireland within the framework of a single European market and a customs union – temporarily, until the parties come to a compromise on this issue. In Britain, many do not agree with this scenario – according to some conservatives, such a decision would be contrary to the constitutional principles of the country and would de facto violate its territorial integrity. Theresa May and the deputies who support her are also not happy with this idea, but are discussing this option among others. Therefore, representatives of the most "hawkish" wing of the Parliament plan to exclude such a scenario at the legislative level. Previously, only a few dozens of conservatives were discussed, but today it has become known that the Democratic Unionist Party will support this legislative initiative.

                      The DUP is an ally of the conservatives in Parliament, as the Tories were forced to form a coalition after losing the majority in the early elections. The Unionist party has the so-called "golden share" : they have only ten representatives in the Parliament (out of 650), but they provide the majority that allows making legislative decisions. Therefore, May cannot ignore their opinion about the prospects of Brexit. According to one version, for this reason, the October EU summit failed – the prime minister did not rush into compromises (which one way or another, but would have to go), so that the unionists could not block the draft British budget.

                      Therefore, when the DUP's position on the draft law became public today, the pound collapsed throughout the market. The situation can be divided into two parts. First, the new law will significantly complicate the negotiation process, the deadline of which is December of this year. The second part of the problem is broader. The fact is that many experts again voiced doubts about whether Theresa May will be able to consolidate British politicians to make a compromise decision that is so necessary for the deal? Constant political squabbles, threats of impeachment, destructive legislative initiatives are all signs of London's "incompetence". Today, this fact again reminded itself, putting significant pressure on the pound.

                      By the way, talks about the possible resignation of Theresa May again began to be actively discussed in the market. One of the British journalists published a letter of a Deputy of the Conservative party, in which he urged his colleagues to express no confidence in the prime minister and to re-elect the party leadership. Similar letters have emerged before, but their authors were members of the so-called "rebel group", who have been advocating impeachment for almost a year.

                      But in this case, according to the journalist, the author of the appeal is a centrist who previously supported the actions of May. After that, concerns arose in the market that the centrists of the Conservative Party would also support a relatively small group of "rebels". In this case, the likelihood of a resignation will really increase – as well as the probability of Brexit without a deal, because the possible successor of Theresa May is Boris Johnson, who is an uncompromising supporter of a "hard" divorce from the European Union.

                      The British currency is very sensitive to the news noise regarding the prospects of Brexit. Therefore, the lack of coordination and numerous internal party conflicts against the background of the possible resignation of Theresa May led to the expected result - the pound/dollar pair turned around and tested the 29th figure again.

                      But in technical terms, bears have not yet confirmed the priority of a downward movement. Now we are dealing with a impulsive price decline, but to talk about a further decline, the pair needs to consolidate below 1.2930 - at this price point, the lower line of the Bollinger Bands indicator coincides with the lower border of the Kumo cloud on the daily chart. If the price overcomes this barrier, the Ichimoku Kinko Hyo indicator will form a bearish "Parade of lines" signal – in this case, the price may fall to the level of 1.2760 (the lower line of the Bollinger Bands on the weekly chart) and even in the area of annual lows (the middle of the 26th figure).

                      It is worth noting that today Theresa May can encourage market participants with a statement that the deal is ready by 95% - but optimism is unlikely to be long-term. Even one inconsistent percentage can destroy all other agreements, therefore, the upward price pullbacks of the GBP/USD pair should be treated with caution.

                      Analysis are provided by InstaForex

                      Comment

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