What Happened Yesterday
The Euro was up 0.7% at 1.2264 after hitting a high of almost 1.2300, adding to gains made last week after the ECB said it could revisit its communication stance in early 2018. That heightened expectations policymakers were preparing to reduce the stimulus programme.
Hopes that a pro-European governing coalition is set to form in Germany have also boosted confidence in the continent.
Still, with the Euro at three-year highs, some analysts said that its strength would soon worry the ECB, encouraging it to talk down the currency.
The British pound continued to rack up highs not seen since the June 2016 vote to leave the European Union. The pound added to Friday’s surge – triggered by a report that two EU member states wanted Britain to remain as close as possible to the EU after its exit – and traded as high as 1.3819.
Against the Yen, the USD slipped to its lowest since mid-September as comments from the head of the Bank of Japan highlighted Japan’s economic recovery.
The USD was last down 0.4% at 110.50.
The Canadian dollar strengthened to a nearly one-week high against the USD of 1.2398 as the USD broadly fell and traders braced for a potential interest rate increase by the Bank of Canada this week even as uncertainty around the fate of the North American Free Trade Agreement lingers.
Central Bank Sentiment
The market has interpreted recent ECB minutes as a positive sign that the ECB maybe getting ready to start tapering their massive stimulus program.
Focus now turns to the ECB meeting on the 25th January.
Technical Set Up – What’s Happening with the Majors
It’s one way activity for the USD at the moment. To me the Euro is the ‘raw nerve’ that is driving everything.
Continues to climb on general USD weakness. Broke 0.7930 resistance and looks set for higher levels.
Continues to climb with general USD weakness. A few recent NZ tier 3 economic data releases have been weak so that may slow the upward move slightly.
Drifting lower with the overall USD weakness. It’s minding it’s own business so to speak & continues to build a nice technical picture.
It’s full steam ahead as the market has embraced the prospect of the ECB starting to taper it’s massive stimulus program. More topside to come!
It looks like Sterling has won the lottery. It should continue to drive higher with general USD weakness but be wary of random Brexit updates that may send it either way very quickly.
Another day another 50 points lower. It’s not exactly running away to the downside but it is under pressure all the same.
Strong Oil & general USD weakness are driving the pair lower. The big event coming up is the BOC meeting Wednesday.
Today’s Fundamental Drivers
What’s the Plan for Today?
The plan like everyday is to isolate the pairs that have clear direction & then try and find the best entry levels OR upcoming economic data releases.
Quite often when the currencies make a charge in oine direction we’re left with no ‘short term’ entry levels. So you either have to wait it out or bite the bullet and jump in.
NOTE: The second option has a higher risk profile so be sure of your levels before you do rush in. It’s very easy to lose structure here and run into problems if you’re just momentum trading in the middle of nowhere!
If there are no trendlines then the ‘economic data’ becomes the entry level & that’s why we focus on them.
Today the major focus will be the UK CPI data as it has major implications for future rate moves by the BOE. Plus Sterling is surging higher so a strong result could realistically see GBPUSD easily above 1.3900.
So my plan is to go through all the GBP crosses and see if I can find good entries on those as well as GBPUSD.
Keep an eye on the German CPI data as that may be bit of a precursor to tomorrow’s Eurozone CPI. This is obviously a major event as everyones talking about ECB tapering.
If there’s no inflation in Europe then the ECB is less likely to ‘taper’.
Tune up your charts and prepare like every other day… you never know what gems you might find.
Today’s Focus – Major Currencies in Play
You need to follow the economic data releases & best technical set ups to work out where the majority of action and interest will be.
Technical Set Up: No close technical levels anywhere.
Fundamental Driver: UK CPI & Brexit
Potential Strategy: All momentum is up so the best trade is with a strong CPI release.
Check our Next Best Trades list for full details.
Join us for the live release of the Eurozone CPI
This data has major consequences for the ECB and for any tapering plans they may have to their stimulus program.
With EURUSD surging to 3 year highs this is sure to be a lively event, so tune in and get yourself ready to trade.
I’ll be running through my analysis and covering all potential trading opportunities after the release.
When: January 17th
The webinar will go for around 20-30 minutes – short and to the point!
Check the T4T Webinar calendar for more details or click on the link below to register.
Plan the Trade, Trade the Plan!
The idea of our “Market Insight” is to give you some guidance into your daily preparation.
Your Daily Analysis needs to become habitual – For full guidance on our daily routine click here.
Make sure you don’t waste unnecessary time in front of the screens.
Remember you need to be fresh, confident and ready to trade and by sitting aimlessly in front of your screens you will become stale and uncertain.
The key to your sucess: Isolate the opportunities that work for you and focus on them.
Don’t worry about things that you can’t make…..chasing them will only cause problems (tiredness & irrational behaviour will take over).
Tune up your charts & get ready to trade…..see you in the 247 Trade Zone!