Thursday, 21 March 2019
Overview of 4-hour charts GBP/USD, USD/JPY
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EUR / USD
On Thursday, the EUR / USD currency pair is trading with a decline, as part of a correction that develops on the market after the highs of more than six weeks of trading were updated.
The reasons for the corrective decline are mainly due to the technical factors. On updated local highs, some investors have begun to fix long positions in EUR / USD.
If we look at the situation for a longer perspective, the EUR / USD pair yesterday received a rather strong support factor, which will help strengthen the instrument, even against the background of high economic and geopolitical risks in the EU. Investors believed in the strength of the American economy and took into account in the price the further implementation of a fairly tough policy by the Fed. Decisions made yesterday on adjusting forecasts for economic growth and monetary policy will lead to large-scale reductions in long positions on the dollar, which will inevitably be accompanied by a weakening of the dollar against other major currencies.
Locally, one of the main risk factors for the European currency remains the uncertainty associated with Brexit, so the focus of investors today will be on the EU summit, which will discuss the issue of postponing the UK exit dates. Also on the market remain the strong influence of yesterday's decisions of the Fed, which will more pressure on the dollar.
On the chart from the level 1.1450 a downward correction began, that has already reached its main target, located at the level of 1.1400. At this level, one can expect a significant increase in the buyers' trading activity and a reversal to the upward price movement. Shorts will again be relevant only after fixing the price below 1.1400. In this case, we can expect the return of quotations to 1.1350.
Our recommendations: longs from 1.1400.
GBP / USD
The pair GBP / USD is trading this morning with a decline, amid reports of a possible rejection of the UK request to postpone Brexit to June 30. According to the Telegraph, the EU leaders will insist on a postponement of Brexit until May 22, so that the official release of the United Kingdom takes place before the elections to the European Parliament. This decision can significantly complicate the task of Teresa May to promote her Brexit project through the country's parliament.
According to media reports, German Chancellor A. Merkel wants to initiate another EU summit, in case Teresa May fails to convince parliament to adopt her Brexit plan.
Retail sales for February were announced in the UK today. Sales (m / m) increased by 0.4%, while the forecast was a decline by the same number. Changes for the year are + 4.0%, with the forecast of 3.3%. In general, the published report can be assessed very positively, but, according to the recently appeared tradition, the market ignores the data of internal statistics, fully concentrating its attention on news related to Brexit. For the same reason, today we should not expect a strong market reaction to the meeting of the Bank of England.
On the chart, the 1.3200 mark was broken, the currency pair continues to decline, increasing pressure on the next local support level of 1.3150. Breaking of this level will open new targets towards 1.3050. The alternative scenario provides the resumption of price growth, in case of the formation of a false breakthrough of the level 1.3150.
Our recommendations: outside the market
USD / JPY
The USD / JPY pair continues to move down today, which was provoked yesterday, by unexpected statements of the Fed. Significant easing of the Fed’s rhetoric and the actual completion of the rate hike cycle have seriously weakened the dollar’s position on the world stage. Trump's statements about the possible preservation of increased duties on Chinese goods, even after the signing of a trade agreement, added fuel to the fire. For Trump, these sanctions will be a kind of guarantee that China will fulfill its obligations under a bilateral agreement. These statements can significantly slow down the process of settling the trade conflict, as it was previously reported that the Chinese side intends to seek additional guarantees from the United States that the previously imposed duties will be canceled after the trade agreement is signed. The high geopolitical uncertainty in the world and the growing problems in the global economy significantly reduce investor risk appetite and increase the demand for traditional defensive assets such as gold and the Japanese yen.
On the graph we can see the working out of the reversal formation, which was previously formed in the region 111.80. Yesterday quotes failed to overcome local resistance at 111.60, from which there was a strong pullback. Now the price is testing the strength of a fairly strong intermediate support level of 110.40, from which we can expect the formation of a rolling back movement, the immediate target for which will be the level of 110.80.
Our recommendations: shorts from 110.80
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