Daily Comment

Daily Comment,

The dollar liquidation continues without firms arguments to see a correction.

An already touched greenback did not favor the statements from the US Treasury Secretary Steven Mnuchin, confirming that a weak dollar is good for the American economy. This has been the edge that was missing the greenback to further deepen the freefall that accumulates about 4% so far this year, surprising even the most bearish, in a scenario where the currencies have decoupled from the monetary policies and the political factors are now influencing moves in currency markets.

The 1.2350 break in the EURUSD has accelerated the movement in an exaggerated way, trading this morning above 1.2450, levels not seen for three years, also highlight the spectacular rise of the GBPUSD that in almost 10 sessions has appreciated close to 6.5%

We think that these exaggerated movements may bring be a good oporunity to accumulate USD longs waiting to see a correction in the next sessions.

Today all eyes in the European Central Bank meeting. No significant change is expected in the current monetary policy and a direct message to the European currency, wich appreciation further complicates the achievement ot the inflation target. We will see if Mario Draghi is able to stop this upward movement that responds more to a fall in the USD than to an appreciation of the EUR.
We also have today the first meeting of the year of the Central Bank of Norway where no changes are expected and which keeps the tone of the December meeting.

In terms of data, the German IFO and the new housing data in the USA. the macro references to watch.

Watching carefully the USDCNH Vs EURUSD, highly correlated

A weekly close in USDJPY below the Ichimoku cloud (109.10) would be a bearish signal

Stop loss in long USDCAD position at 1.2350 opened at 1.2450

Note: This analysis is a personal opinion based on my experience, not a professional signal service. For trading, you must base your decisions on your own criteria

Daily Comment

Daily Comment,

Impressive round-trip movement of the USD during the Asian session.

The Steve Bannon subpoena by Attorney General Mueller and the fears of a possible "shutdown" due to the lack of agreement of the American Congress, caused a new wave of sales of the USD that has led to mark new highs in the EURUSD at 1.2323 and lows in USDJPY at 110.20, a move that has been quickly corrected to return to the levels of yesterday's session.

The psychological barrier of 110 in the USDJPY has served as support especially after the statements of the Japanese government showing some concern for the appreciation of the JPY

It seems that the upward movement in the European currency begins not to satisfy the ECB that is coming to the fore in different ways in recent days trying to relax expectations. According to sources from the monetary authority, they do not plan to modify the "forward guidance" at the next week meeting. In addition, french Villeroy commented that the strength of the currency is a factor to be taken into account in order to achieve the inflation target. On the other hand, Weidmann said in an interview that a rise in mid-2019 could be appropriate (compared with the expectations that are at the beginning of 2019) and Constancio this morning has stressed that it is still far from achieving the inflation targets of the 2%.

Therefore, we recommend caution after the rally seen at the start and end of last year in the single currency, which could have overreacted with a clear divergence in monetary policy between Europe and the US, with a EUR long positioning at hisorial highs, that could lead investors to take profit.

The Central Bank of Canada meeting will be carefully watched today. The market discounted today`s rise with an 85% probability and another three additional ones until the end of the year, which would make it the more "hawkish" Central Bank. We could find today an upward movement in rates but a "dovish" message for the market to reduce its expectations, which will cause a strong impact on the CAD that against the USD that has left more than 3% in the last month.

Take profit in short USDJPY at 110.25 opened at 112.90
Long USDCAD at 1.2435 - TP 1.2750 - SL 1.2350


Note: This analysis is a personal opinion based on my experience, not a professional signal service. For trading, you must base your decisions on your own criteria

Daily Comment

Daily Comment,

The upward trend of the EURUSD continues after a movement that started on Wednesday with the publication of the ECB minutes from the december meeting.

The single currency managed to break the 2017 highs at 1.2090 after the agreement reached in Germany to form a new government. The positive data published on Friday in the United States of inflation, a tenth higher than expected, and the upward revision of the retail sales did not support the dollar doing three years low at the American close for the DXY Index, and with the EURUSD breaching the 1.22 level.

Note that the movement is weak USD and not so strong EUR, as can be seen in crosses such as the EURGBP which maintains the levels of last week or against crosses such as AUD or NZD that have corrected, but are still far from the december highs.
The GBP was also strongly demanded against the USD, with levels not seen since the night of the Brexit, breaking the last year highs at 1.3660.
Finally the USDJPY, which also has drilled the low of november last year with the gazes placed on the psychological barrier of the 110.

Part of the weakness of the American currency comes from the movement of the Chinese Yuan that continues to appreciate returning to two-year highs. Measures adopted last week, seemed aimed at stabilizing the currency, finally ended the week with a rise of 2%.

USDCNH vs EURUSD (Inverse) - great inverse correlation

German Weidmann's statements at the end of the European session on Friday, which justifies a gradual withdrawal of stimulus, but noting that the upward movement in rates is still far away, seems a message intended to try to reduce the strength of the euro, and lower expectations with some analysts anticipating the first rise of the ECB by the end of this year.
These levels of the European currency could cause some concerns and see a more aggressive language from the members of the monetary authority to avoid a quick appreciation.

Technically the break of the 2017 highs would lead us to the long-term bearish trend in the area of ​​1.25 / 26 now becoming 1.20 in the important support.

EURUSD Weekly - long term downside trend 

Today, bank holiday in the United States, we have a session without relevant data.

Long USDCAD at 1.2435 - TP 1.2750 - SL 1.2350
Short USDJPY 112.90 - TP 110.25 - SL 114.25


Note: This analysis is a personal opinion based on my experience, not a professional signal service. For trading, you must base your decisions on your own criteria

Daily Comment

Daily Comment,

After several unsuccessful attempts to overcome the 1.21 level in the EURUSD we are now in a correction / consolidation phase that should find support at the 1.1940 levels and lower at 1.1880.

This correction of the euro is also favored by the fall and break of important levels against some crosses such as the AUD, the NZD (which return to November levels), the JPY or the GBP, with a generalized drop in the volatility that returns to 2014 levels for the case of the year in the EURUSD. Additionally, the long speculative positioning on euros has reach the highs of 2013, which is another obstacle for the bulls in the European currency.

During the night the USDJPY has corrected more than half a figure after being reported the cut in the JGB (Japanese bonds) purchasing program of 10bn JPY in 0-25 years and 25-40 tenors. Some investors interpret this movement as a first signal towards a gradual exit from the QE of the BoJ.

Highlight Bostic statements (with voting rights), its base scenario is two to three additional hikes this year also highlighting some prudence for low inflation.

Another pending issue within the Fed is the White House's vice president's nomination. Apparently Richard Clarida and Mohamed El-Erian would be the most likely candidates to succeed Fischer.

The day comes without considerable macro data highlighting the appearance of Kashkari of the Fed (16: 00h without the right to vote).

Buy USDCAD at market 1.2435 - TP 1.2750 - SL 1.2350
Sell USDJPY at market 112.90 - TP 110.25 - SL 114.25

Note: This analysis is a personal opinion based on my experience, not a professional signal service. For trading, you must base your decisions on your own criteria

Summary of the year

Here you have the annual P&L of our recommendations. There have not been many but  the profitability obtained seems very acceptable.

* P&L is calculated with 1M Euros spot trades

Will try to make more next year....

Good luck for 2018!

Note: This analysis is a personal opinion based on my experience, not a professional signal service. For trading, you must base your decisions on your own criteria