USDX and EURUSD February-March 2018

In short, the Euro looks ready to surge as high as 1.34 in the coming months, but the ECB is working hard to stop it. Americans say, never trade against the Fed—let’s see if the same applies to the ECB.

■ Market: Foreign Exchange

■ Assets: EURUSD, USD-X

■ EURUSD Today: 1.2350

■ Basic Forecast: EURUSD to range between 1.19-1.26 for several weeks, and then it will move considerably higher, targeting 1.34

■ Trade Signals:

(i) Long Positions if EURUSD retraces to 1.1900, or

(ii) Long positions if EURUSD manages to cross above 1.12600-1.2650 in the weekly chart

EURUSD OUTLOOK -EU and the US back in a Currency War

There are concerns within the European Central Bank that continued USD weakness could seriously hurt Europe’s economic growth. Meanwhile, the U.S. administration shows no intention of addressing rising inflation. For reference, U.S. GDP is expected to grow at an annualized rate of 4.5% in the first quarter of 2018.

In this context, a new currency war is emerging between the FED and the ECB. Here are the key moves from each side:

□ FED ACTIONS (Goal: Weaken the dollar to boost growth):

(i) Continuing with expansionary fiscal policy, financed through Treasury debt

(ii) Ignoring inflation concerns, despite a recent 2.9% annualized rise in average hourly earnings

(iii) Not addressing the growing U.S. trade deficit

(iv) Confident, with record GDP growth expected in Q1 2018

(v) Threatening more protectionism—The Trump administration imposed tariffs on solar panels in January 2018

□ ECB ACTIONS (Goal: Stop the Euro from rising):

(i) Expressing concerns over Euro volatility (January – Mario Draghi)

(ii) Tactical statements by ECB officials pushing back against USD weakness

(iii) Proposing a full banking union and deeper fiscal integration among EU members

(iv) Continuing money printing, with a long-term inflation target of 2.0%

Read more: Free Forex Trading Signals EURUSD February 2018

Forex Trading Signals: USDX July-August 2018

■ Market: Foreign Exchange

■ Asset: USDX

In our previous analysis (May-June 2018), we forecasted a broad range for the US Dollar Index between 91.00 and 95.00 points. Today, the USDX trades just below the upper boundary of this range. If it breaks above 95.05, it could rise to 97.50 and possibly reach 100.40 points by summer 2018. On the other hand, if it falls, support is likely around 91.00.

The USDX Paradox

According to Phoenix Capital, “The US Dollar was at exactly that level at the end of 2017, and it was no problem. So what changed?” The difference is that back then, the Fed planned to tighten by $10 billion per month, or $120 billion annually. Today, the Fed is withdrawing $360 billion in liquidity per year and aims to increase that to $600 billion. Meanwhile, the ECB adds €30 billion per month. Regarding interest rates, the Fed raised rates seven times from 2016 to 2018, while the ECB kept rates negative.

The next Fed rate hike is expected in September 2018. Here’s our basic forecast for the rest of the year:

□ August (1st) Meeting → No Hike

□ September (28th) Meeting → 200–225 bps (Hike)

□ November (8th) Meeting → No Hike

□ December (19th) Meeting → 200–250 bps (Probable Hike)

USDX Technical Analysis

The US Dollar Index remains strong, but resistance at 95.05 is also firm. Below is the USDX daily (D1) chart.

Chart: USDX Daily

Read more: Free Trading Signals: USDX July-August 2018

Forex Trade Signals: EURUSD October-November 2018

“Politics runs the show, with economic data playing second fiddle.”

■ Market: Foreign Exchange

■ Asset: EURUSD

Currently, EURUSD shows a relatively stable outlook, but the macroeconomic environment faces political risks. The Euro must navigate emerging political and economic challenges in Italy, including rising yields on the 10-year Italian bond. Across the Atlantic, the US economy remains strong, but the US Dollar faces uncertainty ahead of the 2018 midterm elections. The market currently expects the Democrats to win the House and the Republicans to keep the Senate. Any change to this scenario could trigger significant moves in both Forex and equity markets (election results on November 7th, 2018).

EURUSD Technical Analysis

As noted earlier, politics are driving the market right now. Still, here are some key support and resistance levels for EURUSD.

Chart: EURUSD (D1)

Read more: Free Forex Trading Signals: EURUSD October-November 2018

Forex Trading Signals: EURUSD October-November 2017

■ Market: Foreign Exchange

■ Asset: EURUSD

It seems the last quarter of 2017 marked a new macroeconomic era for the currencies of developed countries. This era involves a significant monetary shift toward the start of a global economic 'tapering.' First, let’s review our previous Forex trading signal.

Evaluating Our Previous Trading Signal

In our previous trading signal (August 2017), we forecasted a bearish US Dollar market, stating: “The USDX trend is clearly bearish. The key support area for USDX is NOT close. Currently, USDX trades at 95.48, and the support zone starts at 90.80 (S1).” Indeed, the US Dollar Index quickly dropped from 95.48 to below 91.00, finding support around 90.95 points. This confirmed our previous signal.

EURUSD Outlook — Politics Lead, Economy Follows

Recently, the Euro climbed to 1.209, its highest level since early 2015. After the German elections and the unexpected rise of the far-right, the Euro lost some gains. A Deutsche Bank Asset Management team argues that politics now drive currencies, not the economy or interest rate differences. One thing is clear: developed countries’ currencies are more sensitive to politics than ever.

Currently, EURUSD is in a bearish trend likely to reach 1.148-1.144 (S1). However, the last month of the year is traditionally bullish for EURUSD. So, we expect the bearish trend to continue for a few weeks, followed by a strong reversal—probably in late November.

EURUSD Technical Analysis and TCI Chart

The following EURUSD chart (D1) includes a TCI chart for the same period (October 2015 – October 2017). The Trading Center Indicator (TCI) is a technical indicator developed by TradingCenter.

🔗 Link: » More About TCI

Read more: EURUSD October-November 2017

Free Forex Trading Signals: USDX May/June 2018

■ Market: Foreign Exchange

■ Asset: USDX (US Dollar Index)

Economic growth continues despite political instability, stock market volatility, rising tensions in the Middle East, and climbing oil prices—creating one of the most complex and controversial macroeconomic environments in recent years.

Macroeconomic Outlook

The economy is growing on both sides of the Atlantic, but political instability in the U.S., conflict in the Middle East, rising bond yields, and the surge in oil prices are making investors uneasy. This is the kind of environment that fuels extreme volatility in global money and capital markets.

At a glance, here’s the current macroeconomic outlook for the U.S. and the Eurozone:

US Inflation and FED Interest Rate Hikes in 2018

In its recent meeting, the FED kept interest rates unchanged and confirmed that inflation is now close to its 2.0% target. According to the FED, inflation over the next 12 months is expected to “run near” this target. The next rate hike is expected in June 2018. Overall, three (3) more hikes are likely in 2018. The current target rate is 150–175 bps. Here’s the basic forecast for the rest of the year:

□ June (13th) Meeting → 175–200 bps (Hike)

□ August (1st) Meeting → No Hike

□ September (28th) Meeting → 200–225 bps (Hike)

□ November (8th) Meeting → No Hike

□ December (19th) Meeting → 200–250 bps (Probable Hike)

Eurozone’s Inflation and Growth Rate

In April, inflation in the Eurozone was 1.2%, still below the ECB’s 2.0% target. The Eurozone ended 2017 with its strongest growth in nearly seven years, but growth has slowed in 2018. In Q1, the economy grew by 0.4%, compared to 0.7% in the previous quarter. On a yearly basis, growth reached 2.5%. Even so, the Eurozone is still outperforming the UK, which grew just 0.1% in Q1 2018. “This was the fifth out of seven consecutive quarters that the euro zone grew faster than the UK following the EU referendum,” said Barret Kupelian of PricewaterhouseCoopers.

Read more: Forex Trading Signals USDX May-June 2018

Forex Trading Signals: EURUSD and USDX July-August 2017

After President Draghi’s hawkish speech in late June, Forex investors turned bullish on the Euro. Draghi said no further Euro rate cuts would be needed, signaling a possible shift in the ECB’s monetary policy. As a result, the Euro gained strongly against major currencies (USD, CHF, JPY, and GBP). However, EURUSD has now entered an accumulation phase expected to last until early August 2017.

■ Market: Foreign Exchange

■ Assets: EURUSD | USD-X

Macroeconomic Outlook

In June, the Fed raised the federal funds target rate to a range of 1.00% to 1.25%, marking the third consecutive quarterly increase. This is the highest US funds rate since the 2008 financial crisis. The move reflects record US job growth and the lowest unemployment rate in 16 years. The Fed also announced plans to reduce its large bond portfolio. After three rounds of quantitative easing, the Fed holds $4.5 trillion in bonds (including $1.8 trillion in mortgage securities). Meanwhile, EURUSD rose as President Draghi signaled a monetary policy change and the possibility of a stronger Euro.

US Dollar Index (USDX) Technical Analysis

This is the weekly chart of the US Dollar Index (Futures Contract). As shown, the USDX trend is bearish. The key support area for USDX is not nearby. Currently, USDX trades at 95.48, with the support zone starting at 90.80 (S1) and extending to 86.90 (S2). Note that S2 is based on the A2 trend line, which provides general support. On the resistance side, strong supply is expected at 100.5 (R1), and especially at 104.80–105.00 (R2). The R2 point is based on the A1 trend line, which offers general resistance.

Chart: US Dollar Index (Futures Contract -Weekly)

Read more: EURUSD, USD-X July-August 2017