We welcome you to new trading week which promises to be a more volatile one in terms of upcoming high level events. After a period of range-bound market movements traders now brace for larger swings and potential new trends in the market. Let us be surprised.
This week starts off with the G20 Finance Ministers meeting which could weigh on the currencies and in particular on the greenback. For the euro and the pound, the key event this week will be the two-day EU Council meeting on Thursday and Friday.
On Wednesday we have the FOMC announcement where the Fed is expected to raise interest rates, so there will be no surprise. Volatility could, however, come from speculation about the chance of four rate hikes until December. The March Fed rate hike odds remain at 100%, but odds for four hikes in 2018 are still below 40%. Currently markets are pricing in additional rate hike in June and November and a 33% chance for a fourth rate hike in December. Speculation about faster Fed tightening cycle will be positive for the dollar.
There will also be updated Summary of Economic projections while Wednesday’s FOMC meeting will be Jerome Powell’s first meeting as new Fed Chairman.
The Dollar also faces the risk from political developments. The U.S. is due to implement its tariffs on imported steel and aluminum at the end of the week, while the focus is on how many or few exemptions are offered.
On Thursday, the focus shifts to the Bank of England rate decision while the probability of a rate hike is less than 10%. However, the chances of a rate increase in May have risen to almost 70% and if the language in the statement is more optimistic the pound could receive a boost with market participants pricing in a rate hike in May.
GBP/USD Still, there was no significant breakout of the cable’s narrow trading range, even though the pound was able to stabilize above 1.39. In short-term time frames we now expect the pound to fluctuate between 1.3965 on the upper, and 1.3875 on the bottom side. If the pound rises above 1.3970 we see chances of a renewed test of 1.40 and 1.4050, whereas a break below 1.3870 could spur bearish momentum towards 1.38.
GBP/USD Daily Chart
EUR/USD The euro lost ground against the dollar and dropped below its recent support at 1.2270/60. We will now wait for a sustained break below 1.2250 in order to anticipate further bearish momentum towards 1.22 but short traders should bear in mind that the pair approaches oversold territory, increasing the chances of upcoming pullbacks towards 1.2290 and 1.2350.
EUR/USD 4-Hour Chart
Here are our daily signal alerts:
EUR/USD Long at 1.2305 SL 25 TP 20, 40 Short at 1.2240 SL 25 TP 20-30 GBP/USD Long at 1.3960 SL 25 TP 30-40 Short at 1.3889 SL 25 TP 15, 40
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