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Daily Market Analysis from ForexMart

KostiaForexMart

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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.
 
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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.
 

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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.
 

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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.
 

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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.
 

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EURUSD bears lure opponents into a trap

Taking advantage of the hawkish rhetoric of the ECB and Hungary's stubborn resistance to the Russian oil embargo, the EURUSD bulls, as expected, went on the counterattack and inflated the quotes of the main currency pair above 1.05. For a long time, the positions of the euro looked hopeless, but any trend, no matter how strong it may be, needs correction. Why not now?

Such a rapid fall of the single European currency was clearly not part of the ECB's plans. In such a scenario, an increase in import prices further accelerates inflation and slows down economic growth. In this regard, the words of Bank of France Governor Francois Villeroy de Galhau look like a verbal intervention. The authoritative official said that the ECB is closely monitoring the situation on Forex, and the fall of the euro contradicts the goals of price stability.

The faster growth of eurozone GDP in the first quarter by 0.3%, rather than 0.2% QoQ, added fuel to the fire of the bulls' counterattack on EURUSD. The currency bloc's economy is recovering from the pandemic faster than previously expected. If it were not for the armed conflict in Ukraine, it could have outstripped its American counterpart, which would have led to the breakdown of the downward trend in the main currency pair.

Eurozone GDP dynamics

However, work on Forex does not tolerate the subjunctive mood. Due to the fact that the Fed will tighten monetary policy faster than the ECB; the US economy has recovered faster from COVID-19, and the eurozone is closer to the epicenter of hostilities in Eastern Europe, the EURUSD bears dominate the market and can afford to play cat and mouse with their main opponent.

Investors are looking forward to the speeches of Christine Lagarde and Jerome Powell. Lagarde's alleged "hawkish" rhetoric is one of the drivers of the euro pullback. The derivatives market predicts that the deposit rate will rise by 90 bps in 2022, which is equivalent to 25 bps at three or four meetings of the Governing Council. Out of the 48 Reuters experts, 26 said that borrowing costs will rise by 50 bps by the end of the third quarter, another 18 see +25 bps, and two said +10 bps. More than 90% of respondents expect to see zero or positive rates by the end of the year. Note that at present it is -0.5%.

Hungary's resistance to the EU's plan to embargo Russian oil is also lending a helping hand to EURUSD bulls. 65% of oil imports to this country come from the Russian Federation. And in order to abandon it, it is necessary to redo the entire infrastructure, which Budapest estimates at €15–18 billion. No ban on oil supplies—no higher prices—no retaliatory sanctions from Moscow. This means that the risks of a recession in the eurozone are reduced. Good news for the euro.

Technically, the return of EURUSD to the boundaries of fair value indicates the seriousness of the intentions of the bulls. Closing the trading day above 1.053 will increase the risks of a correction in the direction of 1.06 and 1.066. In this regard, the longs formed at the break of resistance at 1.0435 are still holding and watching the closing price.
 

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Hot forecast for GBP/USD on 18/05/2022

The correction that began on Monday ended quite quickly. It was supposed that at best, Federal Reserve Chairman Jerome Powell's words would stop it, but in fact, it happened long before that. Namely, at the very opening of the US trading session. The fact is that US macroeconomic reports suddenly turned out to be noticeably better than forecasts. And instead of slowing down the main indicators, they accelerated each other.

The growth rate of retail sales increased from 7.3% to 8.2%, although they expected a decrease from 6.9% to 4.2%. That is, not only did the new data turn out to be significantly higher than the forecast, but also the previous ones were revised up. Unlike industrial production, whose previous results were revised from 5.5% to 5.4%. But its growth rate accelerated to 6.4%, instead of slowing down to 2.0%. And judging by these data, the American economy is doing just great. Especially when you consider that the data were published for April.

Retail Sales (United States):

But if macroeconomic statistics have completed the corrective movement, then Powell's words indicate the resumption of the trend for the strengthening of the dollar. Despite the recent slowdown in inflation, Powell did not say a word about the possibility of any revision of plans to raise interest rates. Powell once again stated that the central bank will raise the refinancing rate until inflation falls to target levels. That is, up to 2.0%. Given that it is now above 8.0%, then at least until the end of this year, during each meeting of the Federal Open Market Committee, the refinancing rate will be raised by at least 0.25%. So by the end of the year, it is likely to be above 2.00%. But in general, there is nothing new in this, and Powell only confirmed the previously announced plans, regarding the implementation of which there were some doubts. Powell dispelled them.

But if Powell's words were not enough to immediately start the process of strengthening the dollar, then British inflation coped with this task perfectly, which rose from 7.0% to 9.0%. And this is the biggest value in more than forty years. But the Bank of England has recently assured everyone that in April, and the data were published for this month, inflation will peak, after which it will gradually decline. That's just according to the forecasts of the British central bank, it should have reached the level of 7.2%. But the reality turned out to be noticeably worse. And there is no doubt that such a high level of inflation will have an extremely negative impact on the economy of the United Kingdom. Yes, it already does. As a result, after a small local rebound, the market returned to the long-familiar trend of strengthening the US dollar.

The GBPUSD currency pair formed a correction by more than 300 points, eventually returning the quote to the level of 1.2500. The subsequent price slowdown indicates an overheating of long positions.

The RSI H4 technical instrument entered the overbought zone during the acceleration. This signal confirms the overheating of long positions in the short term.

The moving MA lines on the Alligator H4 indicator are directed upwards, which corresponds to a corrective move in the market. The Alligator D1 indicator still signals a downward trend in the medium term. The moving MA lines are directed down.

Expectations and prospects:

Price stagnation within the level of 1.2500 signals the process of accumulation of trading forces. It will end soon and lead to subsequent price spikes.

If we assume that the correction is coming to an end, then keeping the price below the 1.2420 mark will lead to a full-fledged rebound of the price from the 1.2500 level. This step, in turn, will restart short positions.

An alternative scenario sees the current slump as an opportunity for a realignment of trading forces that would remove the overbought status from the pound. In this case, keeping the price above 1.2520 in a four-hour period allows for the subsequent formation of a corrective move.

Complex indicator analysis has a buy signal in the short-term and intraday periods due to the correction. Indicators in the medium term give a sell signal due to the main trend.
 

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Tips for beginner traders in EUR/USD and GBP/USD on May 19, 2022

Economic calendar for May 19

Today, of interest, there are only claims for unemployment benefits in the United States, where they are predicted to decrease in their volume. This is a positive factor for the US labor market.

Statistics details:

The volume of continuing claims for benefits may be reduced from 1.343 million to 1.320 million.

The volume of initial claims for benefits may be reduced from 203,000 to 200,000.

Time targeting

US Jobless Claims - 12:30 UTC

Trading plan for EUR/USD on May 19

In this situation, only a stable holding of the price below the level of 1.0500 can indicate a signal about the completion of the correction. Otherwise, the scenario of variable turbulence within the boundaries of 1.0500/1.0600 will still be relevant on the market.

Trading plan for GBP/USD on May 19

The subsequent increase in the volume of short positions is expected at the time of holding the price below the value of 1.2300 in a four-hour period. This move may lead to further weakening of the pound in the direction of the local bottom on May 13 at 1.2155.

An alternative scenario will be considered by traders if the price returns to the resistance level. So the correction will have a second chance for a prolongation.
 

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US stocks closed lower, Dow Jones down 0.75%

At the close of the New York Stock Exchange, the Dow Jones fell 0.75% to hit a 52-week low, the S&P 500 fell 0.58% and the NASDAQ Composite index shed 0.26%.

UnitedHealth Group Incorporated was the top performer in the Dow Jones Index today, up 7.17 points or 1.52% to close at 478.55. Boeing Co rose 1.62 points (1.29%) to close at 127.14. Home Depot Inc rose 0.90% or 2.58 points to close at 287.76.

The losers were shares of Cisco Systems Inc, which lost 6.64 points or 13.73% to end the session at 41.72. The Travelers Companies Inc was up 2.88% or 5.02 points to close at 169.30 while Walmart Inc was down 2.74% or 3.36 points to close at 119. .07.

Leading gainers among the S&P 500 index components in today's trading were Synopsys Inc, which rose 10.25% to 300.52, MarketAxess Holdings Inc, which gained 7.10% to close at 267.94, and shares of General Holdings Inc, which rose 6.62% to end the session at 223.69.

The biggest losers were Under Armor Inc C, which shed 15.76% to close at 8.18.

Leading gainers among the components of the NASDAQ Composite in today's trading were NeuroMetrix Inc, which rose 76.28% to hit 5.50, VivoPower International PLC, which gained 47.64% to close at 1.58, and shares of Neuroone Medical Technologies Corp, which rose 29.57% to end the session at 0.79.

The biggest losers were Bright Green Corp, which shed 67.35% to close at 15.70. Shares of Visionary Education Technology Holdings Group Inc lost 39.00% and ended the session at 3.05. Quotes of Molecular Data Inc decreased in price by 27.50% to 0.10.

On the New York Stock Exchange, the number of securities that rose in price (1645) exceeded the number of those that closed in the red (1538), while quotes of 108 shares remained virtually unchanged. On the NASDAQ stock exchange, 2069 companies rose in price, 1679 fell, and 235 remained at the level of the previous close.

The CBOE Volatility Index, which is based on S&P 500 options trading, fell 5.20% to 29.35.

Gold futures for June delivery added 1.29%, or 23.46, to hit $1.00 a troy ounce. In other commodities, WTI July futures rose 1.78%, or 1.90, to $108.94 a barrel. Brent futures for July delivery rose 1.94%, or 2.12, to $111.23 a barrel.

Meanwhile, in the Forex market, EUR/USD rose 1.14% to 1.06, while USD/JPY shed 0.35% to hit 127.78.

Futures on the USD index fell 0.93% to 102.89.
 

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Tips for beginner traders in EUR/USD and GBP/USD on May 20, 2022

Economic calendar for May 20

UK retail sales dropped by 4.9% YoY in April replacing 1.3% growth in March. Analysts assumed a decline of 7.2%. The discrepancy in the forecasts delayed the rapid weakening of the pound sterling.

Trading plan for EUR/USD on May 20

In this situation, a price rebound from the border of 1.0600 is possible, which will lead to a reverse move towards the level of 1.0500. This movement can form a flat.

An elongated correction scenario will be considered by traders if the price holds above 1.0636 in a four-hour period.

Trading plan for GBP/USD on May 20

The subsequent increase in the volume of short positions is expected at the time of holding the price below the value of 1.2300 in a four-hour period. This move may lead to further weakening of the pound towards the May 13 local bottom at 1.2155.

An alternative scenario will be considered by traders if the price returns to the resistance level. So the correction will have a second chance for a prolongation.
 
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Currency
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1.06755
USD / JPY
127.115
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0.96361
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