Daily F.X. Analysis, February 19 – Top Trade Setups In Forex – UK CPI Surprises! 

The U.S. Empire Manufacturing Index rose to 12.9 in February (5.0 expected). Later today, January reports on housing starts (an annualized rate of 1,425,000 units expected), and producer price index (+0.1% on month expected) will be released.

European stocks were broadly lower, as the Stoxx Europe 600 Index declined 0.4%. Germany’s DAX fell 0.8%, France’s CAC lost 0.5%, and the U.K.’s FTSE 100 was down 0.7%.

Economic Events to Watch Today 

 

 

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EUR/USD – Daily Analysis

The EUR/USD dropped 0.4% to 1.0796, the lowest level since April 2017. The German ZEW Current Situation Index declined to -15.7 in February (-10.0 expected) from -9.5 in January. The research institute said economic development is rather fragile at the moment, and the outlook for export-intensive sectors has deteriorated particularly sharply, citing impacts of the coronavirus outbreak.

The single currency’s vulnerability has prompted by moderate or negative growth in Germany during the last year. Moreover, data from this Monday imply that the market has not yet attained its bottom, as the Bundesbank stated in its monthly statement that there are no indications the currency position is set to improve in the opening quarter of the year, while coronavirus’ risk scores a new course of risk.

The traders eagerly anticipated the German ZEW economic sentiment, which was expected to worsen to 21.5 in February against. 26.7 reported in January. As per the recent release, the ZEW Indicator of Economic Sentiment for Germany decreased sharply in February, dropping 18.0 points to a distinct reading of 8.7 points. 

The fundamental event is thus lightly beneath its December 2019 mark. The evaluation of the economic situation in Germany has also worsened when we compare it with the previous month.

Moreover, EUR/USD currency pair near-term technical outlook also shows a bearish picture, with a test of the psychological support at 1.0800 on the cards. The traders will have their sights on the coronavirus headlines for taking fresh clues.

Daily Support and Resistance

• S1 1.0702
• S2 1.0754
• S3 1.0774

Pivot Point 1.0806

• R1 1.0826
• R2 1.0858
• R3 1.091

EUR/USD– Trading Tips

The pair appears to have formed neutral candles as the investors still didn’t find any solid reason to trigger bearish breakout at 1.0825 level. Today’s candle is also neutral, and it is pretty much likely to drive upward correction. Today, if the EUR/USD pair manages to drop below 1.0840, we may see EUR/USD prices going towards 1.0760. Let’s look for buying trade today above 1.0806. 

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GBP/USD– Daily Analysis

The GBP/USD slipped 0.1% to 1.3002. Official data showed that the U.K. jobless rate was steady at 3.8% in the three months to December as expected. Earlier today, the Sterling declined during but concerns about whether the current Chancellor of Exchequer will be ready to pass the budget on time. 

A report from U.K. Prime Minister Johnson’s spokesman confirmed that the U.K. is not asking anything distinct from the E.U. in trade discussions and that they are available to negotiate. 

Besides, the market risk-tone getting worse day-by-day mainly due to the coronavirus fears, which provides support to the greenback as a safe-haven currency. Despite lowering the pace of the death toll and infected peoples in China, the uncertainty and fears still surrounding the market.

On the forecasted views, the Bank of England’s last MPR looks for the unemployment rate to stay unchanged at 3.8% for the next 3-4 months, we look for an increase to 3.9% in December (mkt 3.8%), with the potential for another pop higher in January. 

As we already mentioned that many countries had banned travelers from China, and major airlines have delayed flights, something that China’s representative to the E.U. warned was fuelling panic and threatening attempts to resume business.

Daily Support and Resistance

• S1 1.285
• S2 1.2928
• S3 1.2964

Pivot Point 1.3007

• R1 1.3043
• R2 1.3085
• R3 1.3164

GBP/USD– Trading Tip

The GBP/USD pair slipped lower to test the next support level of 1.2960 and has formed a Doji candle around this corner before taking a sharp bullish reversal. 

The GBP/USD is trading at 1.3036, below the 1.3065 resistance level. Closings of candles below this level may help secure a sell trade around 1.3065, whereas, a bullish breakout of 1.3065 can lead the Cable towards 1.3200. The MACD and RSI are holding in the buying zone, supporting bullish bias for the GBP/USD pair. Let’s look for bullish trades above 1.3018 today. 

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USD/JPY – Daily Analysis

The USD/JPY currency pair flashing green and rose to 110.08, mainly due to the uptick in the Asian stocks. As well as the sluggish data from Japan sent the pairs higher. As of writing, the USD/JPY currency pair is currently trading at 110.06 and consolidates in the range between the 109.86 – 110.09. However, the risk-reset based on catalysts from China.

Stocks in China, Hong Kong, Indonesia, and Japan are printing moderate gains ranging between 0.20% and 0.60% after the latest improvement in risk-tone. Also representing the risk reset is the U.S. 10-year treasury yields that rise one basis point to 1.563% by the press time.

The fundamental reason behind the pair’s bullish moves is the release of Japan’s Machinery Order and Merchandise Trade Balance Reports. As well as the positive comments from China’s President Xi Jinping and the World Health Organization (WHO) that we have to stay relaxed. Whereas, the opposing statement from Moody’s Investors Service has been ignored.

Whereas Caixin Media Company Ltd. increased uncertainties regarding the reducing coronavirus infected people on Tuesday, the latest figures from Hubei showed a confused picture. According to the report, there are 1,693 new cases on February 18 against 1,807 of February 17. This report also suggests 132 new deaths compared to 93 recorded the previous day.

Moving ahead, China-related headlines will be the key to watch, the U.S. housing market numbers and the Producer Price Index data will also be essential to watch.

Daily Support and Resistance

• S1 109.26
• S2 109.54
• S3 109.7

Pivot Point 109.83

• R1 109.99
• R2 110.11
• R3 110.4

USD/JPY – Trading Tips

The USD/JPY pair has violated the sideways trading range of 110.025 – 109.500 in the wake of a stronger dollar. The couple is heading north towards the next resistance level of 110.800. On the way, the pair may find 161.8% Fibo extension resistance at 110.450. 

The RSI and MACD are crossing on the higher side, suggesting chances of further bullish bias in the USD/JPY currency pair. Alternatively, the USD/JPY can drop after testing 110.850 resistance. 

All the best for today!