EUR/USD Long Target Raised To 1.0950
Growth Aces | Mar 23, 2017 08:54AM ET
EUR/USD long target raised to 1.0950
Macroeconomic overview
The EUR/USD held under 1.0800 for a second day on Thursday as investors awaited a vote on Republican healthcare plans seen as a litmus test of President Donald Trump's ability to legislate in Congress.
Dallas Federal Reserve Bank President Robert Kaplan said the Federal Reserve should raise interest rates two more times this year and continue work on a plan to gradually trim its massive balance sheet. "We are still accommodative and I think it’s very appropriate for us to be accommodative," he said. If inflation rises above the Fed's 2% target for a brief period, it is not going trigger faster rate hikes as long as it is not a persistent trend, he said.
Kaplan also said he is "mindful" that some of the policies expected under President Donald Trump's new administration, including changes to immigration and trade policies and changes to health insurance, could slow economic growth or hurt consumer spending. He and his staff have been trying to figure out why some of the latest readings on consumer spending already suggest some sluggishness, and will keep a close eye on those figures going forward.
But, he said, he will not be factoring in impacts from Trump's new policies, including those like tax reform that may boost growth, until he is pretty sure they will be enacted.
The final of the ECB's TLTRO2 operations will be conducted today and while the consensus sits around EUR 110-125 billion. Theoretically demand can be above EUR 1 trillion. There are two factors which suggest an above consensus outcome. First, it is the final opportunity to secure cheap 4-year funding, and second, the backdrop of rate ECB hike/exit expectations. This suggests to us that demand will be higher than consensus, and we are looking for an allocation of around EUR 150 billion. Clearly the bigger market impact will come from an above consensus outcome for TLTRO2 as this will increase the overall thrust of monetary stimulus and thus act as an added encouragement to exit what is currently an emergency policy setting.
We are likely to see the first stage of this exit plan in action at the June meeting when we expect the ECB to drop the reference to "or lower" on its rate guidance. It won't be until after the September German election that we see phase two of the exit with a signal at the October meeting that QE will be tapered starting from the beginning of 2018.
We look for QE to be tapered at a rate of EUR 15 billion at every meeting. The risk is that QE will be tapered at a much slower pace and a rate hike will be delivered during this time.
Technical analysis
The EUR/USD remains above positively-aligned 7-day exponential moving average, which highlights the bullish structure. The EUR/USD has already tried twice to break above the 38.2% fibo of 1.1616-1.0340 move – in February and yesterday, but the resistance is still too strong. A close above this level would open the way to 1.0976, 50% fibo of that move.
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Trading strategy
We have raised our EUR/USD long target to 1.0950 and locked in profit at 1.0765. We think that current levels are still a good opportunity to open a long position. We will consider a long-term position with the ambitious target of 1.1125.
NZD/USD: RBNZ keeps rates unchanged, as widely expected
Macroeconomic overview
The Reserve Bank of New Zealand stuck firmly to its stance of keeping interest rates at a record low of 1.75% at its meeting to set the official cash rate and reiterated that it would stay on hold for a "considerable" period of time.
RBNZ governor Graeme Wheeler said in a statement accompanying the decision:
Numerous uncertainties remain, particularly in respect of the international outlook and monetary policy may need to adjust accordingly.
Just last month the central bank indicated that rates could remain unchanged for as long as two years, with external rather than domestic factors determining the outlook. The RBNZ still considered the domestic economy resilient despite surprisingly soft gross domestic product growth last quarter, citing temporary factors.
The NZD/USD reaction to the RBNZ decision was limited.
Technical analysis
Technical situation has not changed a lot since yesterday. The NZD/USD remains still above 7-day exponential moving average and above 23.6% fibo of February-March fall, but the doji candlestick on Thursday represents indecision on the side of both buyers and sellers. A close above 0.7076 (38.2% fibo) would be a sign of continuation of the NZD/USD recovery.
Trading strategy
Yesterday’s widely-expected RBNZ decision has not changed our view on the NZD/USD. In our opinion the outlook remains slightly bullish, but recent falls in equity markets are still weighing on commodity currencies.
TRADING STRATEGIES SUMMARY:
FOREX - MAJOR PAIRS:
FOREX - MAJOR CROSSES:
PRECIOUS METALS:
It is usually reasonable to divide your portfolio into two parts: the core investment part and the satellite speculative part. The core part is the one you would want to make profit with in the long term thanks to the long-term trend in price changes. Such an approach is a clear investment as you are bound to keep your position opened for a considerable amount of time in order to realize the profit. The speculative part is quite the contrary. You would open a speculative position with short-term gains in your mind and with the awareness that even though potentially more profitable than investments, speculation is also way more risky.
In typical circumstances investments should account for 60-90% of your portfolio, the rest being speculative positions. This way, you may enjoy a possibly higher rate of return than in the case of putting all of your money into investment positions and at the same time you may not have to be afraid of severe losses in the short-term.
How to read these tables?
1. Support/Resistance - three closest important support/resistance levels
2. Position/Trading Idea:
BUY/SELL - It means we are looking to open LONG/SHORT position at the Entry Price. If the order is filled we will set the suggested Target and Stop-loss level.
LONG/SHORT - It means we have already taken this position at the Entry Price and expect the rate to go up/down to the Target level.
3. Stop-Loss/Profit Locked In - Sometimes we move the stop-loss level above (in case of LONG) or below (in case of SHORT) the Entry price. This means that we have locked in profit on this position.
4. Risk Factor - green "*" means high level of confidence (low level of uncertainty), grey "**" means medium level of confidence, red "***" means low level of confidence (high level of uncertainty)
5. Position Size (forex)- position size suggested for a USD 10,000 trading account in mini lots. You can calculate your position size as follows: (your account size in USD / USD 10,000) * (our position size). You should always round the result down. For example, if the result was 2.671, your position size should be 2 mini lots. This would be a great tool for your risk management!
Position size (precious metals) - position size suggested for a USD 10,000 trading account in units. You can calculate your position size as follows: (your account size in USD / USD 10,000) * (our position size).
6. Profit/Loss on recently closed position (forex) - is the amount of pips we have earned/lost on recently closed position. The amount in USD is calculated on the assumption of suggested position size for USD 10,000 trading account.
Profit/Loss on recently closed position (precious metals) - is profit/loss we have earned/lost per unit on recently closed position. The amount in USD is calculated on the assumption of suggested position size for USD 10,000 trading account.
Source: GrowthAces.com - your daily forex trading strategies newsletter
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