Thread: Daily Market Analysis from ForexMart

Tips for beginner traders in EUR/USD and GBP/USD on July 8, 2022

Economic calendar for July 8
The main macroeconomic event of the outgoing week is the report of the US Department of Labor, which predicts that the unemployment rate should remain unchanged, while 268,000 new jobs can be created outside of agriculture, which is noticeably less than 390,000 in the previous month. This indicates a loss of recovery momentum and the appearance of signs of the beginning of a deterioration in the situation in the labor market.

If expectations coincide, the US dollar may be under pressure from sellers.

Time targeting

US Department of Labor Report - 12:30 UTC

Trading plan for EUR/USD on July 8
There are only a few points left before parity, which means that the speculative hype is increasing. It is worth considering that the initial convergence with such an important psychological level can provoke traders to chaotic price jumps. This may lead to a reduction in the volume of short positions, which will lead to a technical pullback.

At the same time, holding the price below the control level may cancel a number of technical signals, which will lead to an inertial move towards the value of 0.98.

Trading plan for GBP/USD on July 8
The pound sterling rushed down through a positive correlation with the eurodollar. With the current mood of speculators, updating the local low of the downward trend is not excluded.

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

Details of the economic calendar from July 8
The report of the US Department of Labor was considered the main macroeconomic event of the past week, where unemployment remained at the same level of 3.6%. At the same time, 372,000 new jobs were created outside of agriculture, while the forecast was 268,000. US labor market data came out noticeably better than expected, but, at this time, the dollar was already heavily overbought.

Analysis of trading charts from July 8
During the inertial movement, the EURUSD currency pair came close to parity, which led to a massive fixation of short positions. As a result, the market experienced a technical pullback.

The daily trading chart shows a gradual euro depreciation since June 2021. The scale of the decline is 2,150 points, which is about 17%.

The GBPUSD currency pair, despite many attempts to resume the downward cycle, still fluctuated along the psychological level of 1.2000 (1.1950/1.2000/1.2050). This indicates an overheating of short positions, which are trying to regroup the trading forces in the stage of a change of turbulence.

On the daily timeframe, the pound sterling has been losing 16.5% of its value since June 2021, which is about 2,300 points.

Economic calendar for July 11
Monday is traditionally accompanied by an empty macroeconomic calendar. Important statistical indicators in Europe, the United Kingdom, and the United States are not expected.

Trading plan for EUR/USD on July 11
In this situation, the descending mood remains among traders. For this reason, keeping the price stable below 1.0150 increases sellers' chances for a subsequent decline (towards parity).At the same time, traders are considering the scenario of a transition from a pullback stage to a complete correction if the price holds above 1.0220 in a four-hour period.

Trading plan for GBP/USD on July 11
In this situation, all of the traders' attention is focused on the deviation levels of 1.1950 and 1.2050 since the stable holding of the price outside of one or another value, at least in a four-hour period, may indicate a subsequent price path.

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Tips for beginner traders in EUR/USD and GBP/USD on July 12, 2022

Details of the economic calendar from July 11
Monday was traditionally accompanied by an empty macroeconomic calendar. Important statistics in Europe, the UK, and the United States were not published.

Analysis of trading charts from July 11
The EURUSD currency pair, ignoring the oversold signal, continued to decline, indicating a high interest of speculators in the current market situation.

The GBPUSD currency pair, following the euro, resumed its decline. The vicious cycle along the psychologically important level of 1.2000 was interrupted, and the market saw an increase in the volume of short positions. As a result, the pound sterling has updated the local low of the downward trend.

Economic calendar for July 12
Tuesday is not much different from Monday in terms of the macroeconomic calendar. Important statistics in Europe, the UK, and the United States are not expected. Thus, traders have to keep track of the information flow and work based on the technical picture.

Trading plan for EUR/USD on July 12
Traders are now watching a historical event: the quote has come close to parity with the intention of breaking it. Holding the price below it can lead to a local acceleration of the downward cycle. After that, a sharp change in trading interest is possible, caused by an increase in the volume of long positions, which will provoke a technical pullback in the market. Variable and high volatility will remain in the market indefinitely.

Trading plan for GBP/USD on July 12
In this situation, everything points to a subsequent downward move towards the values of 1.1700–1.1500. In the work, it is worth considering that at this time, the EURUSD pair is the leading pair, and GBPUSD is the slave pair. Thus, in the event of a sharp change in trading interests in the euro, through a positive correlation, it will pull the pound sterling along with it.

Hot forecast for GBP/USD on 13/07/2022

What is happening with the pound should now be considered exclusively through the single European currency, the behavior of which determines the development of events in the foreign exchange market. And in general, everything happened exactly as predicted - as soon as the euro reached parity, a rebound immediately began. Confused only by the scale of the rebound. Less than a hundred points. And this despite the fact that the dollar is simply unimaginably overbought. So it is quite possible that a second attempt will be made today. Moreover, the single currency is again moving towards parity.

With that in mind, the just-released UK industrial production figures are irrelevant. Although its growth accelerated from 0.7% to 1.4%. Whereas, a decline of 0.3% was called before. But there was no reaction.

Industrial production (UK):

Today's attempt at a rebound will be more successful due to the fact that this time its implementation will be helped by a rather serious reason. The US will release its inflation report, which should accelerate from 8.6% to 8.8%. And if earlier the growth of inflation contributed to the dollar's growth, now the situation is somewhat different. Rising consumer prices forced the Federal Reserve to raise interest rates, the expectation of which just contributed to the dollar's growth. Now everything is clear with the increase in the refinancing rate - the US central bank will raise it until the middle of next year. So the only thing that reflects inflation now is only a further deterioration in the state of affairs in the economy and the approach of a recession.

Inflation (United States):

The GBPUSD currency pair, through a positive correlation with EURUSD, has similar price fluctuations. After the next update of the local low of the downward trend, the quote slowed down around the value of 1.1800, where a rollback eventually occurred.

The technical instrument RSI H4 and D1 is moving in the lower area of the 30/50 indicator, which indicates a high interest of traders in the downward move. RSI H1 in the rollback stage locally crossed the middle line 50 upwards.

The moving MA lines on the Alligator H4 and D1 indicators are directed downwards, which corresponds to the direction of the main trend.

Expectations and prospects

In this situation, everything will depend on speculators' behavior on the correlating euro/dollar pair. In the event of a transition to the stage of a full-size correction, the pound will also be able to strengthen its position towards the values of 1.1950-1.2000. Otherwise, we will update the local low of the downward trend again.

Comprehensive indicator analysis signals a buy in the short term due to a pullback. Technical instruments in the intraday and medium-term periods signal sell due to price movements within parity.

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Hot forecast for EUR/USD on 14.07.2022

As the market had been looking forward to the US inflation data, it neglected the report on the EU industrial production. Remarkably, the data was surprisingly strong. The EU industrial output was expected to rebound by 0.4% in May on year following a contraction of 2.0% in April. Nevertheless, the data for April was downgraded to -2.5%. The actual score for May was much better than expected at 1.6%. Thus, even despite the downward revision, the red-hot reading for May was beyond expectations. However, the single European currency again moved towards the parity level.

EU Industrial Producion, y/y

Interestingly, immediately after the release of the US CPI, the market was petrified and cameto a standstill. The thing is that the annual rate of consumer inflation surged to 9.1% following 8.6% a month ago. A faster inflation rate was recorded in November 1981. Analysts had projected the CPI at 8.8% in June. Such elevated inflation rates dispelled doubts that the US economy is firmly on the path to recession. Such warnings have been made by a good many economists. After the market had revived after the initial shock, the US dollar tumbled. It looked like a long-awaited drop. Nevertheless, an hour later, the US dollar reversed abruptly upwards and the single European currency again returned to the parity level. Indeed, inflation acceleration bears grave economic risks and forces the US Fed to raise interest rates more aggressively. Hot on the heels of the inflation report, analysts came up with their forecasts. They project that the US Fed will raise the funds rate by 100 basis points at a time at the nearest meeting. So, the federal funds rate will increase from 1.75% to 2.75%. Such forecasts pushed the euro back to parity.

US Consumer Price Index, y/y

It goes without saying that the US dollar is overbought. The market obviously needs at least acorrection. Still, it has not happened yet. We assume that the euro should go below the parity level with the dollar for a start. Perhaps the US factory inflation data which is due today could push the euro down. The US PPI could have logged an uptick to 10.9% from 10.8%. It would mean that the odds are against a slowdown in consumer inflation at least in the near future. Besides, it will reinforce expectations about the aggressive pace of rate hikes by the US Fed. By and large, the US dollar could push the euro below the parity level and even settle below it.

US Producer Price Index, y/y

Yesterday, EUR/USD was able to gain some ground but it was not enough to change a trend.As a result, the currency pair again retreated to the parity level and got stuck within a narrow range.

The H4 RSI could not grasp the buying interest. The indicator is still hovering in the lower area of 30/50. It means the prevailing selling interest. The D1 RSI is moving in the oversold area which means that short positions are overheated.

Moving averages on the H4 and D1 Alligators are directed downwards according to the overall bearish trend. The H1 Alligator has multiple intersections of moving averages, thus indicating a flat market.

Outlook and trading tips

Despite the fact that the euro is heavily oversold, traders are still interested in selling EUR/USD. The ongoing flat market is viewed as the process of gaining momentum. Once the flat market is over, the trading instrument will burst into sharp price moves. In case the price settles below the parity level on the 4-hour chart, the market will resume the downward cycle, neglecting some technical signals. Under this scenario, we expect the pair to develop an inertial speculative move so that the euro could weaken by another 150-200 pips.

At the same time, traders do not rule out a full-fledged correction bearing in mind the euro'soversold status. To generate the first buy signal, the euro has to recover to levels above 1.0100 on the 4-hour chart.

Complex indicator analysis provides mixed signals for intraday and short-term trading amid the ongoing range-bound market. Technical instruments signal selling in the medium term because the currency pair is still moving at around the parity level.

Hot forecast for EUR/USD on 19/07/2022​​​​​​​

The long-awaited correction has finally come true. Although we are not talking about a full-fledged correction, but only about a local one. But even this is quite enough for the market to somewhat correct the resulting imbalances. So the market has prepared for the upcoming meeting of the board of the European Central Bank. But today the single European currency will have to decline somewhat, under pressure from inflation data. The growth rate of consumer prices may accelerate from 8.1% to 8.6%. Given that the issue of raising the refinancing rate has already been closed in principle, inflation data only plays the role of a parameter characterizing the general state of the economy. And judging by the fact that inflation continues to rise, nothing good is happening. Moreover, taking into account the experience of Great Britain, where the Bank of England began to raise the refinancing rate at the end of last year, that the increase in interest rates, all the more so modest, and the ECB plans to raise it from 0.00% to 0.25%, is not much more than will help. Another thing is that today we are talking about the final data, in general, already taken into account by the market at the time of the release of preliminary estimates. So the decline in the single currency will be limited.

Inflation (Europe):

The euro strengthened by more than 200 points against the US dollar from the local low of the downward trend. Despite the scale of price changes, the euro is still oversold in the medium term, this is indicated by a number of historical values in which the quote is currently located.

The oversold status was removed in the short-term and intraday periods, this is indicated by the RSI H1 and H4 indicator, which is moving within the 70 line.

The moving MA lines on the Alligator H4 indicators locally changed direction from downward to upward, which corresponds to a rollback-correction in the market.

On the trading chart of the daily period, there is a subtle rebound of the price from the area of the parity level. Downward interest in the structure of the medium-term trend is still considered the main direction.

Expectations and prospects

The volume of long positions decreased at the moment when the price hit 1.0150, as indicated by the stagnation. For the subsequent growth of the euro's value, it is necessary to return above the level of 1.0150. Otherwise, there may be a gradual recovery of dollar positions, with the price returning to the parity level.

Complex indicator analysis has a buy signal in the short-term and intraday periods due to a rollback. Technical instruments in the medium term signal a sale due to price movement within the parity level.

The dollar is in conflict with oil, and the euro is optimistic before the ECB meeting

The US currency had to slow down a bit, giving way to the European one, which spread its wings ahead of the European Central Bank meeting. However, the euro should not be in euphoria, and the dollar should not be self-confident, analysts believe. At the same time, the dynamics of the latter is in contradiction with oil quotes, causing concerns about the raw materials market.

The greenback partially surrendered its positions on Wednesday, July 20, allowing the euro to move up. The latter was given strength by the upcoming ECB meeting, at which a decision on the interest rate is expected. According to ABN Amro economists, the markets expect the ECB to raise the key rate by 25 bps. In addition, two important issues will be raised at the meeting – the further trajectory of rate hikes and consideration of a new tool to combat fragmentation.

The ECB has doubts about the future rise in interest rates, namely in September 2022. However, ABN Amro believes that "the September increase will be a step of 50 bps" if the medium-term inflation forecast remains at the same level. At the same time, in the autumn and until the end of this year, a "gradual but steady increase in rates" by 25 bps is possible.

The current situation contributed to the euro's steady growth, which had soared by 1% a day earlier on statements that the ECB leadership would discuss the possibility of increasing the key rate by 50 bps at once. The EUR/USD pair was trading at 1.0234 on Wednesday morning, July 20, playing back previous failures. To date, the pair has exceeded the psychologically important level of 1.0200, increasing its weekly growth to 1.50%.

According to preliminary data announced by Reuters, the ECB will consider both options: raising rates by 25 bps and 50 bps. At the last meeting, the ECB allowed the rate to rise by 25 bps in July and the possibility of further increases in September. However, market participants and analysts do not rule out a more aggressive tightening of the monetary policy amid a rapidly growing inflation. Recall that in the first month of summer, consumer prices in the eurozone soared by 8.6% year-on-year after rising by 8.1% in May.

Analysts believe that its fair price plays in favor of the euro, while the dollar becomes overbought. This prevents the latter from growing and conquering the next peaks. The greenback's dynamics is under pressure from being overbought, experts emphasize. In the coming week, analysts expect a correction of the US currency, against which market participants will expect further actions by the Federal Reserve on the rate. The current forecasts regarding the Fed's interest rate hike are the main driving force of the market.

In case of a rise in the price of the greenback, the raw materials sector is experiencing the greatest difficulties. The recent downward trend recorded in the hydrocarbon market demonstrates investors' fear of a possible recession. Market participants fear that the current downturn in the economy will lead to a reduction in demand for raw materials. Experts consider the fact that most commodities are valued in dollars to be another important reason for the decline in the oil market. Take note that the price of benchmark Brent oil peaked in June, and in dollar terms, raw material prices increased by 59%.

As the USD rises in price, the global commodity market also increases in value, increasing pressure on demand. Strengthening the greenback not only increases the cost of buying raw materials outside the US, but also encourages foreign producers to sell stocks. The reason is that after converting dollars into national currencies, the incomes of oil producers are steadily growing.

The rapid rise of the US currency is able to bring down the hydrocarbon market, experts believe. The current conflict between the USD and the commodity sector is a confirmation of this difficult relationship. According to analysts, the correlation of greenback and oil has always been accompanied by difficulties. Such disagreements put significant pressure on demand. According to International Energy Agency (IEA) estimates, a strong USD, combined with record-high fuel prices, is helping to reduce demand in developing countries.

Hot forecast for GBP/USD on 21/07/2022

The intrigue is that investors have no idea what to expect from today's board meeting of the European Central Bank. Of course, the refinancing rate will be raised, but what's next is completely unclear. What exactly ECB President Christine Lagarde will say about the pace and extent of the tightening of monetary policy parameters will determine the further development of events. This uncertainty is the reason for the apparent stagnation in the market. The pound ignored even the data on consumer prices, the growth rate of which accelerated from 9.1% to 9.4%. That turned out to be slightly less than the forecast of 9.5%. And this can be interpreted as a sign of a possible slowdown in inflationary processes. Which of course is an extremely positive thing.

Inflation (UK):

So, the ECB today for the first time since July 2011 will raise the refinancing rate. It should be raised from 0.00% to 0.25%. The very fact of the first increase in interest rates in more than ten years will, of course, spur the market and lead to the growth of the single European currency. Through the dollar index, it will pull other currencies with it. So it will be like a global weakening of the dollar. But what happens after that depends solely on Lagarde's rhetoric.

Refinancing rate (Europe):

It is necessary to take into account the fact that quite recently everyone was sure that the refinancing rate would be raised by 50 basis points, that is, up to 0.50%, and then expectations were significantly reduced. In addition, the head of the Bundesbank recently announced the need for an extremely cautious approach to the issue of raising interest rates, as this will lead to an increase in the yield of government bonds of all countries in the euro area. The debt burden of which is already incredibly high. So they may find themselves in a situation of inability to service their own debts. From all this, a simple conclusion follows - Lagarde will announce just an extremely slow increase in interest rates, and that the next increase may occur in just one meeting. Or something like that. And if this is exactly what happens, then after a slight upward jump, the single currency will again begin to gradually lose its positions and move towards parity. Pulling the pound along.

If Lagarde's rhetoric turns out to be more hawkish, and a large-scale tightening of monetary policy is announced, then the subsequent weakening of the dollar will be much more impressive, and most importantly, prolonged.

The correction move for the GBPUSD pair slowed down within the area of the psychological level of 1.2000. As a result, a range of 1.1950/1.2050 emerged, which indicates the process of accumulation of trading forces, which can lead to new price jumps.

The RSI H4 technical instrument is moving in the upper area of the 50/70 indicator, which indicates a continuing corrective move in the market. RSI D1 ignores the correction, the main reference is the downward trend.

The moving MA lines on the Alligator H4 indicator are directed upwards, which corresponds to a corrective move. While the MA lines on Alligator H1 have a lot of intersections with each other, which indicates congestion.

Expectations and prospects

In this situation, the method of outgoing momentum from the current range of 1.1950/1.2050 is considered the most optimal trading tactic.

We concretize the above into trading signals:

Long positions on the currency pair are taken into account after keeping the price above the value of 1.2060 in a four-hour period.

Short positions should be considered after keeping the price below 1.1920 in a four-hour period.

Complex indicator analysis has a variable signal in the short-term and intraday periods due to stagnation. Technical instruments in the medium term give a sell signal due to a downward trend.