Daily F.X. Analysis, November 12 – Top Trade Setups In Forex – Spotlight on ECB, BOE & FED! 

On the news side, the eyes will remain on the U.K. Prelim GDP q/q, which is expected to have improved from -19.8% to 15.8% previous month, and it may support the Sterling today. Later in the day, the speeches from the ECB President Lagarde, BOE Gov Bailey, and Fed Chair Powell will remain under the spotlight. All three officials are due to participate in a panel discussion about monetary policy at the ECB Forum on Central Banking via satellite. Lastly, the U.S. CPI figures can also trigger some price action during the U.S. session today; let’s keep an eye on it. 

Economic Events to Watch Today  

 

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EUR/USD – Daily Analysis

The EUR/USD closed at 1.17786 after placing a high of 1.18325 and a low of 1.17453. The Euro dropped on Wednesday against the U.S. dollar as the European Central Bank (ECB) policymakers continued signaling further easing, though they downplayed the prospect of further interest rate cuts.

At the ECB forum on central banking in Frankfurt, the ECB President Christine Lagarde said that the coronavirus crisis had produced a highly unusual recession, and recovery is likely to be uneven. She also warned against excessive optimism over the short-term impact on the economy from a vaccine.

Lagarde continued that as the latest news on vaccine looked encouraging, the chances were still there. The economy could face frequent cycles of accelerating viral spread and tightening restrictions until widespread immunity was achieved. On Monday, the U.S. drugmaker Pfizer said that its vaccine’s last stage trials had shown a high level of success in preventing reinfection. Lagarde signaled that the central bank would almost certainly loose monetary policy in the next meeting as the Eurozone economy risks falling back towards recession. She told lawmakers that ECB was ready to take further easing actions. These comments from ECB President weighed on the single currency Euro and dragged the pair EUR/USD on the downside on Wednesday.

Lagarde said that the ECB would keep its interest rates at 0.0%, and it has an asset purchase program in place worth 1.35 trillion euros. She said that bond-buying and pumping extra cash into the financial system were the best ways for the central bank to support the economy.

According to Lagarde, while all the other options were on the table, the PEPP and TLTRO’s have proven their effectiveness in the current environment. Therefore, they will likely remain the main tools for adjusting monetary policy.

According to the latest forecast, the Eurozone GDP in the fourth quarter is likely to decline by roughly 2% as the renewed lockdowns have affected the economic activities. All these updates kept the single currency Euro under pressure and, ultimately, the EUR/USD pair on the downside.

On the U.S. front, the U.S. dollar was high onboard due to the rising hopes of a quick economic rebound and less need for stimulus measures from the FED after the latest optimism from the vaccine front. 

The U.S. Dollar Index rose by about 0.3% on Wednesday and supported the U.S. dollar’s upward trend that ultimately added pressure on the EUR/USD pair. Meanwhile, there was a Bank Holiday in the U.S. and France that kept the macroeconomic data out of the table and left the EUR/USD pair on the mercy of market mood and Lagarde’s speech.

Daily Technical Levels

Support   Resistance

1.1738      1.1827

1.1697      1.1875

1.1648      1.1917

Pivot point: 1.1786

EUR/USD– Trading Tip

The EUR/USD is trading with a bearish bias at the 1.1780 level, having violated the double bottom support level at 1.1800. The same support level was also extended by an upward trendline pattern on the hourly timeframe. At the moment, the EUR/USD has formed a downward channel, which extends resistance at the 1.17800 level. On the lower side, the support holds around 1.1743 level. The MACD and EMA are also turning bearish; therefore, we may see selling below the 1.17800 mark today.

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GBP/USD – Daily Analysis

The GBP/USD closed at 1.32237 after placing a high of 1.33133 and a low of 1.31912. The GBP/USD pair dropped on Wednesday after placing gains for four consecutive days on the back of rising concerns over the Brexit deal and the broad-based U.S. dollar strength.

On the Brexit front, the U.K. and E.U. are still far apart on fisheries and the flow of goods between Ireland and Northern Ireland. However, hopes were still high that talks between both sides were moving positively as there had been no public finger-pointing by both parties in the preceding few weeks. Despite this, it cannot be said that a deal will surely reach as when it comes to Brexit, there is nothing sure.

Another unofficial deadline for reaching a deal has been set by both sides: the European Summit on November 19. If a settlement is not reached by then, the chances are high that the U.K. will leave the E.U. on December 31 without a trade deal and will bound to follow WTO rules. As the new deadline was reaching closer, these latest concerns raised the fears of no-deal Brexit and weighed on the British Pound that ultimately dragged GBP/USD pair on the downside.

Furthermore, on the U.S. front, the greenback was strong across the board as the Fed’s need for further stimulus dropped after releasing the latest vaccine news. The U.S. Dollar Index rose by about 0.3% and weighed on GBP/USD pair. Moreover, traders’ eyes will be upon the release of the third quarter GDP from Great Britain. Investors believe that the economy will post a strong rebound in Q3 as the coronavirus pandemic caused a sharp decline in GDP in Q2 when it fell by 19.8%. The third-quarter GDP is expected to stand at 15.3%, and any figure within the expectations will prove bullish for GBP. U.K. will also release monthly GDP for September that is projected to decline by 1.5% down from August’s 2.1%.

Meanwhile, the GBP/USD pair’s losses remained limited as the risk sentiment in the market continued supporting the risk perceived GBP. The risk sentiment was supported by the latest optimism about the vaccine development from Pfizer and BioNtech on Monday. However, the British Pound was also under pressure due to the victory of Joe Biden in the U.S. election last week. Biden has said that he will not make a trade deal with the U.K. after its transition period ends if it failed to reach a deal with the E.U. Now the pressure has been increased in the U.K. for securing a trade deal with the E.U., which has also exerted pressure on local currency British Pound that has been weighing on GBP/USD pair since Biden’s victory.

Daily Technical Levels

Support   Resistance

1.2997      1.3222

1.2851      1.3301

1.2771      1.3448

Pivot point: 1.3076

GBP/USD– Trading Tip

On Thursday, the GBP/USD is consolidating with a neutral bias at 1.3210 level ahead of the UK GDP figures later today. The GBP/USD is holding over the resistance becomes a support level of 1.3159. At the moment, the Cable may find immediate support at the 1.3208 level, and below this, Sterling can dip until the 1.3140 level. As you can see on the hourly timeframe, the Cable is stuck in a very narrow range, and there is likely to be an excellent trade opportunity in the market upon breakout. Let’s consider selling below the 1.3190 level and buying above the same area today. 

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USD/JPY – Daily Analysis

During Thursday’s Asian trading session, the USD/JPY currency pair failed to extend its early-day recovery streak and edged lower around below the 105.30 level. Selling bias could be associated with the risk-off market sentiment, which underpins the safe-haven Japanese yen and contributes to the currency pair losses. Therefore, the market trading sentiment was being pressured by the increasing market concerns about the possible economic fallout from the second wave of continuous. 

Across the pond, the broad-based U.S. dollar selling bias, triggered by the optimism over a potential vaccine for the highly infectious coronavirus pandemic, could also be considered as one of the key factors that dragged the currency pair lower. In the meantime, the U.S. dollar losses were further bolstered by the renewed hopes for substantial U.S. fiscal stimulus measures. On the contrary, the optimism over a potential vaccine and the progress surrounding the Brexit talks keep challenging market risk-off mood and become the key factor that helps the currency pair limit its deeper losses. On the flip side, the currency pair mostly ignores the second-tier data from Japan. At this particular time, the USD/JPY currency pair is currently trading at 105.31 and trading in the range between 105.22 – 105.47.

The market trading sentiment failed to extend its previous day’s positive performance. It started to flash red on the day as the resurgence of (COVID-19) cases still not dispensing any sign of slowing down in the U.S. and Europe, which keep fueling the worries over the global economic recovery. As per the latest report, the U.S. keeps reporting record cases daily, more than 100K per day. Even all U.S. states representing a worse status report of the COVID-19, which was backed by the record hospitalizations and daily cases. As in result, New York has declared a 10 p.m. curfew on bars, gyms, and restaurants to curb the virus spread. It is also worth mentioning that the COVID-19 hospitalizations in the U.S. exceeded 60,000. 

In addition to the U.S., Europe also imposed lockdown again last week, threatening to weaken the economic recovery. As per the latest report, Sweden declared a partial lockdown is shutting down bars and restaurants for the 1st-time since the virus started. Thus, the back to back lockdowns restrictions will have an instant negative effect on global economic recovery.

Moreover, the market risk-off sentiment was further bolstered by the reports suggesting that the Dragon Nation takes one more trade-negative measure for Aussie. As per the latest report, the Dragon Nation extended its anti-Aussie bias while suspending the Victorian timber logs. The dragon nation has already lifted bars for Australian wine, iron ore, and barley after the Pacific inquiry alleging the Asian leader’s negligence caused the coronavirus (COVID-19) outbreak. Apart from this, the bearish market sentiment could also be associated with the long-lasting US-China tussle, which continuously picks the pace. As per the latest report, the U.S. National Security Adviser Robert Charles O’Brien recently threatened the Dragon Nation over its responsibility to trigger Hong Kong freedom violations.

Daily Technical Levels

Support   Resistance

103.82      106.29

102.27     107.21

101.35     108.75

Pivot point: 104.74

USD/JPY – Trading Tips

The USD/JPY is trading sideways, maintaining a narrow range of 105.63 – 104.835 ever since it has violated the descending trendline at 104.950 area. The USD/JPY pair is trading choppy as investors seem to brace for the U.S. inflation figures later today. The USD/JPY pair needs to violate the 104.900 level to continue trading bearish, and below this, we may see the USD/JPY pair falling until the 104.220 level, and a further breakout can lead it towards 102.400. However, we may see buying over 104.950 levels today until 105.600. Good luck!