EUR / USD
On December 11, the EUR / USD pair completed with an increase of 35 basis points and still made a successful attempt to break through the 23.6% Fibonacci level.
Thus, the market’s intentions to continue building a new upward trend section were confirmed. At the moment, it is identified as the next three wave. However, it can transform into a more complex part of the trend with the wave development of the structure.
Fundamental component:
On Wednesday, the news background for the euro-dollar instrument was very strong. At first, America released an inflation report for November, and according to which, the rate increased to 2.1% y / y and 0.3% m / m. Thus, the first news for the US dollar was positive.
The markets, by the way, considered it necessary to wait for the evening news from the Fed and the inflation report was ignored, although it was possible to count on a dollar increase.
Well, in the evening, the Federal Reserve System decided not to change the current range of the key rate of 1.5% –1.75% after a two-day meeting and only slightly reduced forecasts for some indicators for the periods 2019–2022. In particular, the Fed expects a systematic slowdown in GDP growth over the next three years.
At the same time, inflation forecasts remain near the target level of 2.0% without any significant changes. The increase in the result of the euro can only be caused by disappointment in the markets.
Perhaps, the currency market expected more “hawkish” statements by Jerome Powell, as well as expected that forecasts for GDP and inflation would be raised after several weeks of strong economic reports, which, in turn, would make it possible to expect monetary tightening in six months or year.
However, nothing of the kind happened, and the dollar declined, although, in my opinion, it did not deserve it. Today, markets are waiting for another meeting, and this time, in the ECB. As with the Fed, the markets do not expect any changes in monetary policy. Thus, the main focus will be on the speech of Christine Lagarde and the October report on industrial production in the EU.
Production is expected to decline by 2.3% y / y, which is unlikely to add optimism to markets after yesterday’s purchases of Eurocurrency. Meanwhile, we can hear a stream of “dovish” rhetoric from Christine Lagarde. Thus, the Euro currency may experience some pressure today.
General conclusions and recommendations:
The euro-dollar pair presumably continues to build a new upward trend section. Thus, I recommend buying an instrument with targets near the calculated level of 1.1176, which equates to 0.0% Fibonacci.
On the contrary, an unsuccessful attempt to break the level of 1.1176 may lead to quotes moving away from the highs reached.
GBP / USD
On December 11, the GBP / USD pair gained 40 more basis points and made a successful attempt at breaking through the 161.8% Fibonacci level. Thus, the construction of the upward trend section can now continue with targets located near the 200.0% Fibonacci level, within the framework of the same wave 3 or C.
If this is true, then the increase in the instrument will continue today and tomorrow. However, the future of the pound will depend not only on the wave pattern. After all, the information background will have a huge impact on the instrument in the next two days.
Fundamental component:
On Wednesday, the news background for the GBP / USD instrument was interesting, but the markets felt that the UK elections, which started today and the results of which will be announced tomorrow, are more important.
Thus, the inflation report and the meeting of the American Central Bank were ignored, like many other reports in recent weeks, when the pound sterling has been growing non-stop, waiting for the conservatives to win the extraordinary parliamentary elections.
Actually,we will find out tomorrow whether Boris Johnson’s plan to increase the presence of conservatives in Parliament will work, which will allow him to complete the Brexit procedure by approval of an agreement with the European Union by the majority of deputies.
This is exactly the outcome of the markets. Thus, the pound continues to increase, not paying attention to other news that could cause the dollar to rise.
General conclusions and recommendations:
The pound / dollar instrument continues to build an upward trend. Thus, I recommend considering new purchases of the instrument with targets located around 1.3437, which equates to 200.0% Fibonacci. I also recommend placing a limit order on possible losses under the Fibonacci level of 161.8%, since the information background can cause serious jumps of the instrument in different directions today and tomorrow.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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