Daily Market Analysis From Forexmart

American stock indices fell by 2.6-2.8%

Pressure on financial markets continues to come from growing expectations of a rapid tightening of monetary policy by the Federal Reserve System (Fed), worsening the mood of investors, already worried about the ongoing acceleration of inflation and the situation with COVID-19 in China. Traders are increasingly afraid that the Fed's cycle of raising the base interest rate could lead to a recession in the US economy.

Fed Chairman Jerome Powell, speaking Thursday at an event during the spring meetings of the International Monetary Fund and the World Bank, said that the Fed may need to move a little faster with a rate hike.

It was Powell's last public appearance before the next meeting of the Federal Open Market Committee (FOMC) on May 3-4. On the previous FOMC raised the rate by 25 basis points (bp) to 0.25-0.5%. At the same time, the last time the Fed raised the rate at two meetings in a row was in 2006, and the rise by 50 bp at once. hasn't been since 2000.

Judging by the rate futures, the market is almost certain that the Fed will increase the cost of borrowing by at least 50 bp. at each of the next two meetings - in May and June. At the same time, traders estimate the probability of raising the base interest rate by 75 bp at once at 94%. in June, according to data from CME Group Inc.

The two-year US Treasuries yielded 2.71% on Friday, the highest since December 2018.

Traders continue to follow the quarterly reports of companies, which are generally quite favorable. In the case of S&P 500 companies that have already reported for the past quarter, total earnings per share turned out to be 8.2% better than experts' forecast, according to Credit Suisse data. The performance of about 75% of companies exceeded market expectations. However, analysts fear that companies' results will worsen in the near future due to higher rates.

The Dow Jones Industrial Average fell by 981.36 points (2.82%) by the close of the market on Friday to 33,811.4 points.

Standard & Poor''s 500 fell 121.88 points (2.77%) to 4271.78 points.

The Nasdaq Composite dropped 335.36 points or 2.55% to 12839.29 points.

At the end of the week Dow Jones lost 3.9%, S&P 500 - 2.7%, Nasdaq Composite - 1.9%.

Shares of American Express Co. lost 2.8% in price on Friday, despite the fact that the quarterly report of the company, which is one of the leaders in the US plastic card market, was better than market forecasts.

The price of securities of the gold mining company Newmont Corp. fell by 3.3%. Newmont's first-quarter net income and revenue came in below market expectations due to the company's rapidly rising costs.

Share price of Verizon Communications Inc. decreased by 5.6%. The US telecom operator's adjusted earnings for the last quarter came in slightly better than the market's forecast, while revenue fell slightly short of expectations.

The price of Gap Inc. papers. collapsed by 18%. The clothing company has announced the resignation of Nancy Green as president and CEO of the Old Navy brand. In addition, Gap said it expects a larger drop in sales in the first fiscal quarter than previously thought.

Kimberly-Clark Corp stock quotes and Schlumberger Ltd., which posted strong first-quarter results, rose 8.1% and 2.5%, respectively.

 

Tips for beginner traders in EUR/USD and GBP/USD on April 28, 2022

Yesterday was a rather boring day in terms of macroeconomic statistics due to the lack of significant statistical data for the market. The only thing that was published was the index of pending home sales in the United States, which was of little interest to anyone.

Economic calendar for April 28
The first estimate of the US GDP for the first quarter is expected today. The data may reflect a significant slowdown in economic growth, which will lead to a weakening of dollar positions.

At the same time, weekly data on jobless claims will be published, which is predicted to reduce in volume. This is a positive factor for the US labor market.

Statistics details:

The volume of continuing claims for benefits may be reduced from 1.417 million to 1.403 million.

The volume of initial claims for benefits may be reduced from 184,000 to 180,000.

Time targeting

US GDP - 12:30 UTC

US Jobless Claims - 12:30 UTC

Trading plan for EUR/USD on April 28
The level of 1.0500 plays the role of a support in the market, which may lead to a reduction in the volume of short positions. As a result, a technical pullback or a full-size correction is allowed. At the same time, the inertia-speculative behavior of traders allows a breakdown of the control level, where the signal of oversold will be ignored by market participants. In this case, holding the price below 1.0500 in a four-hour period will lead to the subsequent weakening of the euro towards 1.0350.

Trading plan for GBP/USD on April 28
A stable holding of the price below the level of 1.2500 may lead to a subsequent increase in the volume of short positions. The signal about the oversold pound sterling can be ignored by speculators, who are focused on the inertial move.

The technical correction scenario is still being considered by traders, but in order to confirm it, the quote first needs to determine the pivot point.

Note that the values of 1.2500, 1.2250, and 1.2000 are considered as variable pivot points.

 

Tips for beginner traders in EUR/USD and GBP/USD on April 29, 2022

Economic calendar for April 29
Today, the publication of the first estimate of Eurozone GDP for the first quarter is expected, where the data are slightly exaggerated. An acceleration in economic growth from 4.6% to 5.0% was predicted, despite the fact that the situation in the world and Europe does not favor GDP growth. Thus, there is an assumption that the data will come out worse than expected, which will negatively affect the euro exchange rate.

At the same time, data on inflation in the EU will be published, where further growth is expected from 7.4% to 7.5%. This is a negative factor for the economy, which will also put pressure on the European currency.

Time targeting

Eurozone GDP - 09:00 UTC

Eurozone Inflation - 09:00 UTC

Trading plan for EUR/USD on April 29
The technical pullback is only a temporary manifestation of the price, the downward mood persists in the market. In order for a new round of the downward cycle to occur, the quote needs to be stable below the 1.0500 level. This will lead to an increase in the volume of short positions and a movement towards the low of 1.0350. Until then, there will be a pullback in the market, which serves as a regrouping of trading forces.

Trading plan for GBP/USD on April 29
There is currently a technical pullback in the market that serves as a regrouping of trading forces. Over time, the overheating of short positions will subside. This will lead to the subsequent weakening of the pound sterling, which is in line with the main trend.

Market participants consider the psychological level of 1.2000 as a reference point for a downward trend.

 

EUR/USD: Is a trend reversal possible?

Major dollar pairs froze in anticipation of the announcement of the results of the Fed's May meeting. The EUR/USD pair was no exception here: the price settled at the bottom of the 5th figure, demonstrating low volatility. Over the past few days, both sellers and buyers have tried their hand. But they were unable to turn the tide in their favor. The EUR/USD bears failed to gain a foothold within the 4th figure in order to theoretically qualify for further decline, while the pair's bulls failed to develop a corrective movement, which bogged down near the 1.0580 target. As a result, the parties took a defensive position, waiting for the Fed's verdict.

By and large, there are only two options for the development of events: either traders will go to the bottom of the fourth figure in order to further test the support level of 1.0350 (this is the area of 20-year lows), or buyers will drag the pair into the range of 1.0660–1. 0730 (Tenkan-sen line and middle line of Bollinger Bands on D1 respectively).

Looking ahead, it should be noted that trading in dollar pairs is extremely risky now, given the fact that the intrigue around the results of the May meeting remains. On the one hand, it is quite clear that the Fed will take a hawkish stance, raising interest rates and declaring further steps in this direction. But on the other hand, there is no consensus among the expert community regarding the pace of monetary tightening.

For example, the option of a 75-point rate increase following the results of the May meeting is not at all excluded (although such a scenario is recognized as unlikely). Or the regulator may allow the rate to increase by this amount at the June meeting, if US inflation continues to show rapid growth.

In general, it doesn't matter whether the Fed raises the rate by 75 points at the May meeting, or announces such a move in the context of the June meeting: the effect will be the same. In this case, we will witness a dollar rally throughout the market, including the EUR/USD pair. This is the most hawkish scenario – it will allow the EUR/USD bears to take another step towards 20-year price lows.

The rest of the scenarios are more moderate, but all involve a 50 basis points hike in May and (probably) 50 bp in June. As for the future prospects, the regulator can leave room for maneuver, "tying" the pace of monetary policy tightening to the dynamics of inflationary growth.

Based on this, the question follows: is a corrective growth of EUR/USD possible even in the event of a 50-point rate increase? Certainly, it is possible. The fact is that the market has wound up on itself quite strongly: over the past few weeks, the hawkish expectations of traders have been growing "by leaps and bounds," thereby increasing the degree of heat. St. Louis Fed President James Bullard added fuel to the fire, who, in fact, proposed raising the rate by 75 points at once at the May meeting. The flywheel of hawkish expectations has been spinning more and more, especially during the last days – as you know, "appetite comes with eating."

That is why the US Federal Reserve may not fully justify these expectations by taking a "moderately aggressive" position. For example, if they raise the rate by 50 points and rather vaguely admit the option of a 50-point increase in the future "depending on the circumstances," that is, depending on the further growth of US inflation. At the same time, the regulator may not mention the option of a 75-point increase at all or even reject it. In this case, buyers of the EUR/USD pair will organize a fairly powerful counterattack, with targets in the range of 1.0660-1.0730.

It would be reasonable to use this corrective growth for opening short positions, with the targets of 1.0550, 1.0500. The fact is that even in the case of its "moderate aggressiveness," the American regulator will still be several steps ahead of the European Central Bank. Consequently, the divergence of the positions of the central bank will not go anywhere.

Let me remind you that the ECB still doubts the advisability of tightening monetary policy in the foreseeable future. In particular, the vice-president of the European regulator, Luis de Guindos, in one of his interviews a few days ago, stated that the ECB Governing Council "did not discuss any predetermined way to raise rates." According to him, much will depend on macroeconomic data in June. At the same time, market expectations are opposite: the first increase is expected at the July meeting, while the ECB should raise rates by 70–90 points by the end of the year.

In addition, the dollar is supported by the external fundamental background. First of all, we are talking about geopolitical tensions in Eastern Europe and around Taiwan, as well as another outbreak of coronavirus in China. The euro, in turn, is under pressure from "its own" factors. These are issues of energy security of the European Union, as well as the risks of stagflation.

All this suggests that it is advisable to use any corrective pullbacks for the EUR/USD pair as a reason to enter sales. The downward targets in the medium term are 1.0550 (if following the results of the meeting, the upward impulse will follow in the area of the 6th figure), 1.0500, 1.0450.

 

Tips for beginner traders in EUR/USD and GBP/USD on May 5, 2022

Economic calendar for May 5

Today, the focus is on the meeting of the Bank of England, where they expect the fourth consecutive increase in interest rates by 25 basis points. Annual inflation in the UK reached a 30-year high of 7% in March, so the regulator has no choice but to continue tightening monetary policy.

Will the pound sterling react to the news about the rate hike? Possible, but in a local form, in view of the fact that the event is expected in the market.

During the American trading session, data on jobless claims in the United States will be published, where figures are expected to remain unchanged. Thus, if the forecasts are confirmed, then no one will pay attention to the data on applications.

Time targeting

BoE meeting result - 11:00 UTC

US Jobless claims - 12:30 UTC

Trading plan for EUR/USD on May 5

The slowdown of the upward cycle around the value of 1.0636 led to the formation of a consolidation of versatile Doji-type candles. This threatens with new speculative manipulations in the market. For this reason, two possible scenarios should be considered at once.

The first scenario comes from the tactic of a rebound from the level of 1.0636, where holding the price below 1.0600 can restart the sellers' positions. This will cause the price to return to the support level of 1.0500.

The second scenario considers the formation of a full-length correction, where holding the price above 1.0655 can lead to a move towards 1.0700-1.0800.

Trading plan for GBP/USD on May 5

At the moment, most of the recent impulse has been won back, the quote has returned to the boundaries of the earlier amplitude movement. In order for the downward move to get a new round of activity, the quote needs to stay below 1.2450. In this case, the medium-term downward trend will again be prolonged to new price levels. Otherwise, another turbulence is possible within the values of 1.2460/1.2600, which may be facilitated by the results of the Bank of England meeting.

 

Tips for beginner traders in EUR/USD and GBP/USD on May 6, 2022

Economic calendar for May 6
The main macroeconomic event on Friday is considered to be the report of the United States Department of Labor, which predicts by no means bad indicators. The unemployment rate could drop from 3.6% to 3.5%, and 385,000 new jobs could be created outside of agriculture. We have a strong US labor market, which could support the US dollar.

Time targeting

US Department of Labor Report - 12:30 UTC

Trading plan for EUR/USD on May 6
The downward cycle is still relevant among traders. The strongest increase in the volume of short positions will occur when the price holds below the level of 1.0500 in a four-hour period. In this case, the sellers will have a high chance of prolonging the downward trend towards the local bottom of 2016.

Otherwise, the amplitude of 1.0500/1.0600 may continue to form, delaying the stage of building a downward trend.

Trading plan for GBP/USD on May 6
Such an intense downward movement last day led to a local overheating of short positions, which caused a short-term stagnation at 1.2324. At the same time, the downward mood among traders remains. After a short stop or pullback, the downward cycle will resume movement. The level of 1.2250 can become a variable point of support on the sellers' way. The strongest point of support is at the psychologically important level of 1.2000.

 

Tips for beginner traders in EUR/USD and GBP/USD on May 11, 2022

Economic calendar for May 11
US inflation data is expected to be published. The consumer price index is expected to decline for the first time since the summer of 2021. This is a positive signal for the US economy, and will also indicate confirmation of the Fed's action in tightening monetary policy.

How will this news play on the market?

In the beginning, it can play on the dollar exchange rate in terms of its local strengthening. After that, the US dollar may come under pressure if the Fed softens the requirements for tightening monetary policy. In simple words, the Fed's subsequent comments with the gradual normalization of inflation may already be more restrained. From the rhetoric, the statement about the interest rate hike by 0.75% will disappear at first. After that, they can lower the bar for a one-time increase from 0.5% to 0.25%. In this case, the above text is just a reflection of possible scenarios for reducing inflation. The prospect is medium-term.

Time targeting

US inflation - 12:30 UTC (prev. 8.5% ---> forecast 8.1%)

Trading plan for EUR/USD on May 11
The stagnation stage will end soon, the existing amplitude in the values of 1.0500/1.0600 will play the role of a lever for speculators. In this case, the optimal trading strategy is considered to be a breakdown of one or another stagnation border.

We concretize the above into trading signals:

Buy positions on the currency pair are taken into account after holding the price above the value of 1.0636 in a four-hour period.

Sell positions should be considered after holding the price below 1.0470 in a four-hour period due to the repeated storming of the 1.0500 border.

Trading plan for GBP/USD on May 11
Price movement within the framework of stagnation is a local manifestation of the market. In this situation, the key values are considered to be: 1.2250 (support level) and the peak of the recent eye at 1.2405. Holding the price outside one or another control value may well indicate a subsequent quote path.

 

Analysis and trading tips for EUR/USD on May 12

EUR/USD reaching 1.0555 led to a buy signal in the market, but having the MACD line far from zero limited the upside potential of the pair. Similarly, the downside potential was limited because the indicator was also far from zero when the pair tested the level again and prompted a sell signal. The test of 1.0532 in the afternoon also led to losses because the MACD line was still far from zero. No other signal appeared for the rest of the day.

CPI data from Germany did not help euro yesterday because the figure completely coincided with economists' forecasts. Similarly, the speech of ECB President Christine Lagarde did not change the balance in the market even though her statements hinted that rates may increase in July. US data on CPI for April also showed further increases, returning demand for dollar.

Most likely, EUR/USD will continue declining today as there are no scheduled statistics for the Euro area. The US will also release reports on jobless claims and producer prices, which, if shows sharp increases, will lead to a further rise in dollar demand. The upcoming speech of Fed member Mary Daly will also provide support for USD.

For long positions:

Buy euro when the quote reaches 1.0520 (green line on the chart) and take profit at the price of 1.0570 (thicker green line on the chart). A rally is quite unlikely because demand for dollar returning. Nevertheless, when buying, make sure that the MACD line is above zero or is starting to rise from it. It is also possible to buy at 1.0489, but the MACD line should be in the oversold area as only by that will the market reverse to 1.0520 and 1.0570.

For short positions:

Sell euro when the quote reaches 1.0489 (red line on the chart) and take profit at the price of 1.0446. Pressure will most likely return after the release of data on the US economy in the afternoon. But note that when selling, make sure that the MACD line is below zero, or is starting to move down from it. Euro can also be sold at 1.0520, however, the MACD line should be in the overbought area, as only by that will the market reverse to 1.0489 and 1.0446.

 

Tips for beginner traders in EUR/USD and GBP/USD on May 13, 2022

Economic calendar for May 13

Today the macroeconomic calendar is practically empty. The only thing you can pay attention to is industrial production in the EU, where a decline is predicted.

Time targeting

The volume of industrial production in the EU - 09:00 UTC

Trading plan for EUR/USD on May 13

In this situation, the convergence of prices with the local bottom of 2016 may well lead to a slowdown in the downward cycle. This will lead to a slowdown or a full-length pullback.

An alternative development scenario considers the continuation of the inertial course in the market, where the signals about the oversold euro will be ignored by traders. In this case, holding the price below 1.0325 in a four-hour period will restart short positions.

Trading plan for GBP/USD on May 13

If the current stagnation serves as a regrouping of trade forces, then a local acceleration may soon occur. In this case, the optimal trading tactic is an outgoing momentum relative to the boundaries of stagnation.

 

Tips for beginner traders in EUR/USD and GBP/USD on May 16, 2022

Economic calendar for May 16

Monday is traditionally accompanied by a blank macroeconomic calendar. Nevertheless, stable information and news flow will continue to play on the nerves of speculators, which allows new jumps in the market.

Trading plan for EUR/USD on May 16

In this situation, the pullback was replaced by stagnation, where the values of 1.0350/1.0420 serve as variable boundaries of the amplitude. The optimal trading strategy is considered to be a breakdown of one or another stagnation border.

We concretize the above into trading signals:

Buy positions on the currency pair are taken into account after holding the price above the value of 1.0450 with the prospect of a move to 1.0500.

Sell positions should be considered after keeping the price below the local low of 2016, at 1.0325.

Trading plan for GBP/USD on May 16

Despite the slowdown, the pullback stage is still relevant in the market. In order for the downward cycle to resume, the quote must first return to the pivot point of 1.2150. This price move will indicate an increase in the volume of short positions, which will lead to the breakdown of the variable support and the trend prolongation.

An alternative market development scenario considers the price transition from the pullback stage to a full-scale correction. This movement can be indicated by a long stay of the price above 1.2250 in the daily period.