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Monetary policy has proven the Forex market’s top driver the past six months. That puts this week’s NFPs a market-forecasted RBA rate cut in the spotlight.
US Dollar Forecast– Dollar Breaks Bullish Record but Momentum Facing Headwind
When is ‘in-line’ a source of fundamental strength – when the economy/market/asset is already positioned as a leader.
Japanese Yen Forecast – Japanese Yen Likely to test Major Levels on Key Week Ahead
The Japanese Yen remained near-motionless against the US Dollar, but key events in the days ahead suggest the USDJPY could finally break its tight consolidative range.
British Pound Forecast – GBP/USDPreserves Bearish Momentum Ahead of BoE Meeting
The Bank of England (BoE) interest rate decision may have a limited impact on GBP/USD as the central bank is widely expected to preserve its current policy at the February 5 meeting.
Australian Dollar Forecast – Australian Dollar May Rebound as RBA Disappoints Rate Cut Bets
The Australian Dollar may launch a rebound if the RBA opts against a rate cut and maintains neutral guidance at its upcoming policy meeting.
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Fundamental Forecast for Dollar:Neutral
When is ‘in-line’ a source of fundamental strength – when the economy/market/asset is already positioned as a leader. That was the case with the Dollar this past week. Both the FOMC rate decision and US 4Q GDP resulted in status quo outcomes that cemented positions of strength. In turn, the reaffirmation would secure the US Dollar’s seventh consecutive month of advance. That is a record run for the currency going back to the true end of the Gold Standard in the 1970s. An advantage for growth, yields and safety will offer strong support for the Greenback over the medium term. However, this is far from an infallible fundamental backdrop. Should data rein rate hike speculation in or risk aversion undermine speculative interest in dollar-assets, the currency could face a healthy correction.
Amongst the fundamental themes that have leveraged the most strength from the Greenback over the past six months, the relatively hawkish bearing for the Fed has arguably proven the most productive driver. These past weeks have furthered that view. Following the introduction of QE in the Eurozone and a tangible dovish shift from the BoJ, BoE, RBNZ and BoC; the US data reinforced the Fed’s contrast. The FOMC rate decision refused to offer the dovish tone stimulus dependents were hoping for. Meanwhile, the GDP figures cooled while keeping a pace of healthy expansion and a range of Fed officials shaped support for a timely hike.
Moving forward, monetary policy speculation will remain a rudder for the Dollar. However, given the Fed is already sporting a significant premium over its major counterparts – swaps are pricing in 41 bps worth of hikes over the next 12 months and its closest peer in the BoE is looking at 6 bps – this theme may require significantly more fuel to generate gains. That is not to say that there isn’t untapped potential on this theme. Considering Fed Fund futures are still projecting a rate hike towards the very end of the year and a pace thereafter much slower than the FOMC itself expect, there is still potential in this current. It is just requires a stronger jolt to convince the skeptics.
We will confront a few high-profile event risk items that may try their hand at moving the market in the week ahead. On Monday, the Fed’s preferred inflation indicator (the PCE) for January is due. The headline, year-over-year figure is expected to slow to a five-year low 0.8 percent on the back of energy prices; but the FOMC has already tempered the impact a short-term slowdown could have had on the market with a focus on core and ‘medium-term’ time line. Subsequently, the data could carry a greater impact from an upside surprise rather than a downside. Through the week, Fed speak will help build a consensus of where the Committee stands on timing. Bullard, Mester, Rosengren, Lockhart and Kocherlakota are on tap.
Top event risk is the week-ended January NFPs. The net change in payrolls isn’t nearly as important as the ‘qualitative’ figures. The jobless rate has already touched past year milestones for rate hikes – a few years ago, then Chairman Ben Bernanke tied a first rate hike to an unemployment rate of under 6.5 percent. It is currently 5.6 percent. Perhaps the inflation aspect of the labor data is the lynchpin. Wage growth has struggled to catch traction. A particularly weak showing here, on the other hand, could reinforce the more distant timeline the market has on hikes and instead lead to a downgrade in FOMC forecasts at the March meeting.
Monetary policy is the engaged fundamental driver at the moment, but it is important for Forex traders not to take their eyes off of systemic investor sentiment. In the ‘risk on’ position, progress is slow and struggles to draw in the entire market. However, should full scale ‘risk aversion’ strike, conviction will span the financial system. As momentum picks up, the Dollar will see its haven appeal swell. Yet, in the early stages of such a dynamic shift, the same yield curve appeal the currency cultivated these past months could lead to capital outflow. Should sentiment turn, the Greenback’s bearing will depend on how hot the fire is.
Talking Points:
I’ve written quite a bit about the importance of support and resistance levels for trade entries and trade exits. They play an integral part in optimizing any strategy’s trading rules. There are many ways to manually create support and resistance lines on our trading charts, but if you are like me, it is always nice to find an easier and simpler way to perform the same task. In today’s article, we take a look at the Donchian Channel, a tool that can help identify support and resistance and directly assist in placing trade entries and exits.
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How Does the Donchian Channel Work?
The Donchian Channel is an indicator built into FXCM’s Trading Station platform. It consists of two lines that are drawn at the highest and lowest prices for a specified period of time. The image below shows the Donchian Channel on an hourly chart set to a period size of 24 candles. The Upper line displays the highest price achieved in the last 24 hours and the Lower line displays the lowest price achieved in the last 24 hours.
Learn Forex: Donchian Channel – Upper and Lower Lines
(Created using Marketscope 2.0 charting package)
These lines can act as support or resistance when price comes into contact with them. The rationale is that price has already bounced off of those levels once before (when it made the previous high or low) and could bounce off those levels again in the future. I have posted my favorite settings below since they are a little bit different than the default settings.
Learn Forex: Donchian Channel Settings
Trade Entries Using Donchian Channel
The best part of this indicator is how easily it can generate actual trades. Anytime price breaks above the Upper Donchian, that is a buy signal. And anytime price breaks below the Lower Donchian, that is a sell signal. The chart below shows an example of signals that are generated using Donchian. As you can see, there are a lot of signals.
Learn Forex: Donchian Channel – Buy and Sell Signals
(Created using Marketscope 2.0 charting package)
One way to reduce the number of actionable signals we receive, is to use a direction filter alongside the Donchian Channel. My favorite direction filter is the Speculative Sentiment Index or SSI. This will limit our trading to a single direction. To learn how to use SSI, click here. The image below shows the most recent reading for SSI.
Learn Forex: Speculative Sentiment Index – DailyFX Plus
(Created using DailyFX’s SSI – Free Trial)
We would look for buying opportunities only on currency pairs where the SSI was negative and look for selling opportunities on currency pairs where the SSI was positive. However, this will still result in an excessive number of entry signals. So another other way we can reduce the amount of signals we trade is to only allow ourselves to have one trade open at a time. So once we are in a trade, we would not add more trades to our account until the first trade was closed out.
Trade Exits Using Donchian Channel
Lastly we can use the Donchian Channel to create or exit strategy by setting our stop loss on the Donchian line opposite of our trade entry. So if we were to sell on the break of the lower Donchian, we would set a stop loss to buy at the upper Donchian. And if we were to buy on the break of the upper Donchian, we would set a stop loss to sell at the lower Donchian (like in the image below).
Learn Forex: Buy Signal with Donchian Channel Stop Loss
Of course, this only manages one outcome of a trade, the losing side. So how can we manage a position if it’s a winner? Well, we use the same Donchian line, but we trail our stop as the Donchian line moves in our favor. This gives us a more intelligent type of trailing stop.
Learn Forex: Intelligent “Trailing” Stop Using Donchian Channel
The image above shows a buy signal with a stop loss placed on the opposite side of the Donchian Channel. As the lower Donchian line moves higher, we can move our stop loss higher as well. This eventually leads to a profitable trade.
With this type of money management, we combine limitless profit potential with the ability to calculate our potential loss on the trade. We are likely to have a greater number of losing trades than winners using this strategy, but a handful of the winners should be substantially larger than the average loser in terms of pips.
In Conclusion
Donchian Channel can be a great way to automatically locate support and resistance as well as generate trade entry and trade exit levels. To test this tool, feel free to paper trade these positions on aFree Forex Demo accountto practice trading currencies risk-free.
Good trading!
—Written by Rob Pasche (@RobPasche)
To contact Rob, email rpasche@dailyfx.com.
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Fundamental Forecast for Australian Dollar: Neutral
The Australian Dollar descended to the lowest level in nearly six years against its US counterpart last week. A deteriorating monetary policy outlook looked like the leading culprit behind the move: traders are now pricing in 61 basis points in easing over the coming 12 months (according to OIS-based estimates compiled by Credit Suisse), making for the most dovish lean in traders’ expectations since early May 2013.
Furthermore, investors seem increasingly convinced that the start of the easing cycle is already at hand, with the implied probability a 25 basis point reduction at next week’s RBA meeting swelling to 65 percent. That is the first central bank sit-down to carry a greater-than-even chance of a reduction in borrowing costs in 18 months.
Fading realized and expected inflation readings seem to be behind building rate hike bets. Data published last week showed the benchmark year-on-year CPI growth rate slowed to 1.7 percent in the fourth quarter, the weakest since mid-2012. Meanwhile, Australia’s one-year breakeven rate – a measure of expected inflation derived from bond yields – has tumbled to project prices will be expanding at a pace of less than 1 percent by early 2016. That is a far cry of the RBA’s 2-3 percent objective.
The likelihood that the central bank validates the markets’ pro-stimulus posturing depends on its view of the forces bearing down on inflation. Not surprisingly, a formative factor has been the sinking price of oil. Indeed, the aforementioned CPI report showed the “transport” sub-group of index accounted for the largest downdraft in the fourth quarter, of which the most significant contribution was made by a 6.8 percent slide in the price of automotive fuel.
Faced with similar circumstances, some central banks have appeared sanguine. The Federal Reserve and the Bank of England have both chalked up recent disinflation to transitory forces that don’t necessarily have a strong bearing on medium-term price stability. Others have gone the other way: the RBNZ conspicuously backed off the hawkish rhetoric on display as recently as December in last week’s policy announcement.
Leading surveys of activity growth in the manufacturing and services sectors point to some loss of momentum since the second half of 2014 but the economy’s overall trajectory seems to remain positive. Realized data outcomes have also increasingly outperformed relative to consensus forecasts since the last RBA outing in December. If this encourages the RBA to look through near-term price declines and fall in with the Fed/BOE side of the argument – catching markets off-guard with another neutral policy statement – a swift Aussie Dollar rebound is likely in the cards.
Fundamental Forecast for Japanese Yen: Neutral
The Japanese Yen remained near-motionless against the US Dollar, but key events in the days ahead suggest the USDJPY could finally break its tight consolidative range.
A highly-anticipated US Nonfarm Payrolls data print could ultimately provide the spark necessary for a larger Dollar break versus the Japanese Yen, and current signs favor the downside on the USDJPY and broader JPY pairs. Indeed we recently highlighted heavily one-sided retail FX trader positioning as a key reason the Dollar could break lower against key counterparts. A sharp drop in US interest rates and Treasury Yields may likewise keep downside pressure on the yield-sensitive USDJPY absent a material reversal of trends. Thus all eyes turn to the highly-market-moving NFPs print as it could potentially set the stage for a larger USD correction.
There is comparatively little foreseeable economic event risk out of Japan and as such eyes will remain on the US economy and broader market sentiment. The correlation between the USDJPY and the Nikkei 225 index has weakened notably as of late; recent gains in Japanese equities have not been enough to lift the exchange rate. Yet a further rise in equity market volatility would likely restore said link, and we’ll keep a close eye on global equity markets as the US S&P 500 registers its second-consecutive monthly decline. Continued losses could be enough to send the USDJPY through key support.
Gold is reacting lower from levels close to longer term downward channel top. It is crossing below the upper Bollinger Bands and has reached a weekly pivot high at 1255.60. This is the upper end of a weekly range that supported price in June and acted as resistance in October last year. The longer term weekly trend is down but in the medium term the price is trending higher. The last week’s candle is now a pivot high and therefore a resistance.
Gold, daily
The uptrend now broken Gold dropped lower from the sideways move and has now found some support, which should lead to a return move closer to the 1280 area. This level is a pivot candle low from 22 January and a likely resistance. The support levels are: 1255.50, 1240 and 1204 area. The 38.2% Fibonacci level coincides with 1240 support. Stochastics are close to oversold levels and with price reacting higher from this level it supports the view that a move higher could be in the cards.
Gold, 240 min
Over the last couple of days Gold has trended lower in descending trend channel. Now this move became over extended as it moved below the channel line and has since then retraced, reversing at 1255 region. There was a 4h Momentum Reversal candle indicating that the downside momentum was about to reverse. The nearest resistance level is at 1272 with the next one being right above it at 1279.
Conclusion
We now have a resistance area above at 1272 to 1280 that coincides with the weekly upper Bollinger Bands. I am therefore looking for short term (intraday to swing) shorting opportunities (Momentum Reversal Signals) at these levels with 1240 being a target level to cover the shorts. Those looking to add Gold to longer term positions might consider to do so at levels closer to 1200. Please remember to read the market and price action instead of trading blindly on someone else’s analysis. This applies to even my analysis even though it has been rather successful over the last four months. Only trade if the analysis agrees with your own observations.
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
Janne Muta
Chief Market Analyst
HotForex
The market has been pushing lower aggressively after breaking below the major DEMAND LEVELS around 1.2100 and 1.2000 where historical bottoms were previously established back in July 2012 and June 2010.
The pair has lost almost 800 pips since the beginning of 2015. Moreover, theoretical long-term bearish targets would be located near 0.9450, especially if the current monthly breakout below 1.2000 maintains its bearish momentum until the end of January.
During the past few weeks, EUR/USD bears have been challenging historical lows that were established back in 2005 and 2003. Some bullish recovery is finally being witnessed this week.
On the daily chart the market looks oversold below the price level of 1.2000 and 1.1900 (prominent psychological SUPPORT and the lower limit of the movement channel on the daily chart).
As it was suggested in the previous articles, conservative traders should be waiting for a bullish pullback looking for better prices to SELL the pair off (R1 at 1.1550 and R2 at 1.1700).
The price zone of 1.1540-1.1600 is a recently established SUPPLY zone. Short-term SELL positions can be taken there. Stop loss should be placed slightly above the price level of 1.1680.
On the other hand, persistence below 1.1385-1.1400 (previous daily HIGHs) exposes the recent lows around 1.1110 for retesting.
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Performed by Michael Becker, Analytical expert InstaForex Group © 2007-2015 |
The previous consolidation movement extended between the price levels of 1.5550 and 1.5770, it represented a period of indecision of the market after such a long bearish rally that started off 1.7100 and 1.6500.
Bearish breakout below 1.5550 directly exposed lower targets. Bears have already reached the price levels of 1.5050 and 1.4960 which have not been visited since July 2013.
As it was suggested in the previous articles, conservative traders should wait for a bullish pullback towards the recent SUPPLY zone around 1.5370-1.5450 for a low-risk SELL entry.
The market has already pushed further below the price level of 1.5140 (projection target of the previous bearish breakout) reaching the lower limit of the depicted bearish channel around 1.5000.
On January 8, the GBP/USD pair has shown initial bullish recovery off the price level of 1.5050. Since then, the pair has trapped within a consolidation zone ranging between 1.4960 and 1.5230.
The daily closure below 1.4960 renders the current movement as a bearish FLAG pattern similar to what happened back in December 2014. Projection targets would be located around 1.4750.
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Performed by Michael Becker, Analytical expert InstaForex Group © 2007-2015 |
Show full picture
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Overview:
The daily closure below the recent bottoms located around 1.5540-1.5560 rendered the previous consolidation range as a bearish flag pattern with projection target at 1.5300.
The market has already pushed further below this level reaching down to 1.5030-1.4980 where the lower limit of the channel has been providing support for the pair over the past few weeks.
Earlier this week, bullish recovery was manifested on the daily chart. A temporary bullish breakout above the upper limit of the short-term flag pattern took place.
The H4 chart shows transition into a sideway movement with mild bearish tendency, maintained within the depicted sideway channel.
The key-support level for today is the price level of 1.5030 (yesterday’s low). Breakout below 1.5025 exposes the lower limit of the current ranging movement located around 1.4920 where bullish recovery should be anticipated.
Trading recommendations:
A short-term LONG position may be considered at retesting of price zone of 1.4920-1.4900. Target Levels should be located at 1.5030, 1.5100 and 1.5150.
Mohamed Samy is taking part in the “Analyst of the Year” award organized by MT5.com portal. If you like his article, please vote for him.
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Performed by Mohamed Samy, Analytical expert InstaForex Group © 2007-2015 |
Show full picture
Show full picture
Overview:
The USD/CAD pair established previous consolidation zone between the price levels of 1.1560 and 1.1670. This price zone roughly corresponds to 61.8% prominent WEEKLY Fibonacci level. Bullish breakout above it allowed bulls to reach new highs around 1.2560.
The market looks quite overbought since bulls have pushed further above the upper limit of both depicted bullish channels. Hence, a coming bearish correction should be anticipated.
Wednesday’s bullish engulfing daily candlestick invalidated the preceding Hanging-Man candlestick.
Moreover, the USD/CAD bulls defended the recent INTRADAY SUPPORT around 1.2300. Hence, a new bullish swing is being established without further retesting of 1.1950.
The nearest resistance levels to meet the USD/CAD pair are located around 1.2820, then 1.2930 where previous WEEKLY highs were established back in 2009.
Trading recommendations:
It’s recommended to stay out of the market until the next destination of the USD/CAD pair becomes obvious, but, anyway, try to look for signs of bearish reversal around such historically high prices (1.2850-1.2900).
Mohamed Samy is taking part in the “Analyst of the Year” award organized by MT5.com portal. If you like his article, please vote for him.
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Performed by Mohamed Samy, Analytical expert InstaForex Group © 2007-2015 |
Talking Points:
- AUD/USD Holds Monthly Low Ahead of RBA Interest Rate Decision.
- Gold Fails to Retain Bullish RSI Momentum- Former Support in Focus.
- USDOLLAR Topside Targets Still Favored Despite Weaker-Than-Expected 4Q GDP.
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AUD/USD
Chart – Created Using FXCM Marketscope 2.0
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USDOLLAR(Ticker: USDollar):
Chart – Created Using FXCM Marketscope 2.0
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— Written by David Song, Currency Analyst
To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.
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Talking Points
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Daily Volume Chart: EUR/USD
Charts Created using Marketscope – Prepared by Kristian Kerr
Daily Volume Chart: USD/JPY
Charts Created using Marketscope – Prepared by Kristian Kerr
Daily Volume Chart: AUD/USD
Charts Created using Marketscope – Prepared by Kristian Kerr
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— Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com
To contact Kristian, e-mail kkerr@fxcm.com. Follow me on Twitter @KKerrFX
Talking Points:
Last week I highlighted the potential for a pullback in GBPNZD, one which never materialized. However, we now have an interesting development at hand which suggest odds for a pullback are high. The current move up beginning on January 9th, thus far, is showing some near identical characteristics when compared to the rise during last September. There are two other rallies worth noting in this comparison as well…
Stats:(Intra-day high to low)
September – 1692 pips in 16 trading days (9/8-9/29)
Current rally – 1595 pips, today is the 16th trading day (1/9–??)
October/November – 837 pips in 17 trading days (10/15-11/6)
November/December – 922 pips in 16 trading days (11/18-12/9)
It is unclear exactly why symmetries like this exist, and it’s a subject with way too much depth to cover for purposes of this posting, but I will say this; in my experience they are more prevalent than many realize. During the next couple of sessions I will be watching for signs of a reversal between current levels and the September high of 21054, with eyes set on a pullback towards the 20200-20400 area.
GBPNZD – Daily:
— Written by Paul Robinson, DailyFX Research
To contact Paul, you can email him at probinson@fxcm.com
Talking Points:
Despite the 4th quarter’s unemployment rate falling below the long-term average, Hungary’s Economic Sentiment Index has dropped to the lowest level in 5 months. With GDP expected to expand at an annual rate of just 2.0% (down from 3.2% in 2014) both business and consumer confidence has faded, dragging the overall index down to
-2.9.
Business Confidence was nearly halved in January, dropping from 8.1 to 4.4. Within the business sphere, the Construction Index fell to its lowest point in 10 months while the Trade Index declined more sharply in January than in December. The change in consumer confidence was more drastic; the index fell to -23.8—a level similar to that of fall 2013. The nation’s financial situation and savings capacity were assessed as worse by consumers while thier unemployment concerns increased. The latter concern perhaps out of place given the 4th quarter‘s employment results.
Headline unemployment fell 1.8pp to 7.1% in the 4th quarter, contributing to the 2.5% decline in the annual unemployment rate (7.7%). Year-over-year all age groups within the index saw the following improvements: ages 15-24 unemployment fell by 5.8%, ages 25-54 unemployment fell by 1.7%, and ages 55-64 unemployment fell by 1.5%.
Chart Created by Walker England Using MarketScope2.0
Talking Points:
- Headline annualized GDP figure comes in at +2.6% versus +3.0% expected, from +5.0%.
- Net-exports and government spending (via defense spending) the big drags on growth.
- USDOLLAR Index heads back towards yearly highs.
The US economy continued chug along at a modest pace of growth in Q4’14, culminating what was the strongest stretch of growth seen since 2004. The headline growth figure of +2.6% capped off the third year in a row in which growth came in near it’s long-term trend average (depending upon time series, roughly 2.5-3% annualized), and there were aspects of the report that should keep optimism around the US economy (at least relative to the rest of the world) elevated through early-2015.
Notably, personal consumption increased by +4.3% in Q4’14, above both the estimate (+4.0%) and the prior reading (+3.2%). Even though the headline missed the consensus forecast from Bloomberg News, the drags on growth came from a decline in government spending (-2.2%, thanks to a -12.5% drop in national defense spending) and net-exports (exports +2.8%, imports +8.9%). Evidently, the strong US Dollar and weaker oil prices are reducing the energy import bill as well as making foreign goods more appealing to the American consumer.
See the DailyFX Economic Calendar for Friday, January 30, 2015 for an overview of today’s market-moving data releases.
EURUSD 1-minute Chart: January 30, 2015 Intraday
The reaction around the report proved to be initially USD-negative; but once the internals of the report were digested, the greenback was able to claw back most of its losses. EURUSD traded at $1.1315 ahead of the report, before rallying as high as $1.1337 in the first few minutes, then to dive right back down to $1.1300. At the time this report was written, EURUSD was quoted at $1.1314.
Read more: Month-end Rebalancing Leaves USD Especially Vulnerable to Q4 GDP
— Written by Christopher Vecchio, Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
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The US dollar went down against the Japanese yen today after a disappointing report about US economic growth. The currency was still able to gain on the euro and the Great Britain pound.
The US economy grew just 2.6 percent in the fourth quarter of 2014 from a year ago, trailing the consensus analysts’ forecast of 3 percent. The growth was also slower than in the previous three months (5 percent). Not all news from the United States was bad as the Chicago Business Barometer rose this month unexpectedly.
The mixed data resulted in mixed performance of the dollar. The currency fell versus the yen during the current session and will likely close near this week’s opening level. The greenback gained on the pound and the euro but still headed to weekly losses against those currencies.
EUR/USD dipped from 1.1316 to 1.1295 as of 17:18 GMT today. GBP/USD dropped from 1.5065 to 1.5030 while USD/JPY declined from 118.30 to 117.50.
If you have any questions, comments or opinions regarding the US Dollar,
feel free to post them using the commentary form below.
The Canadian dollar sank to new multi-year lows against its US counterpart today due to negative economic data from Canada. While analysts expected poor performance from the Canadian economy, it fared even worse than forecasts.
Canada’s gross domestic product fell 0.2 percent in November. The actual reading was even worse than the pessimistic forecast of a 0.1 percent decline. The report said that the economic slowdown was “largely the result of declines in manufacturing, mining, and oil and gas extraction.”
The loonie fell to the lowest level since March 2009 against the greenback even though the GDP report from the United States was disappointing too. The Canadian currency also slipped to the lowest since March 27, 2014, against the Japanese yen. The poor performance of Canada’s economy was just another of many reasons for the weakness of CAD.
USD/CAD climbed from 1.2616 to 1.2746 (1.1 percent) as of 14:41 GMT today, and its daily high was at 1.2798. EUR/CAD advanced from 1.4277 to 1.4417, touching the high of 1.4489 intraday. CAD/JPY sank from 93.73 to 92.33, falling to the low if 91.72 earlier.
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The Russian ruble plunged today after the Bank of Russia made a surprise decision to cut its key interest rate. The cut was rather significant though not as big as the interest rate hike in December.
The Russian central bank announced a reduction of its main interest rate from 17 percent to 15 percent. The bank explained its decision by “the shift in the balance of risks of accelerated consumer price growth and cooling economy”. The decision followed an even bigger rate hike in December.
USD/RUB jumped from 68.7632 to 70.4169 as of 14:19 GMT today, rising as high as 72.0528 intraday.
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Technical outlook and chart setups:
Gold has dropped around the levels of $1,250.00 as expected and discussed earlier and probably resumed pullback. It was recommended to initiate long positions around the levels of $1,250.00, and further longs can also be added here. Please note that the metal has hit support at Fibonacci 0.382 levels and that it can continue rallying to fresh highs from here. However, a break below the levels of $1,250.00 would further test $1,220.00 before resuming rally. Immediate support is seen at $1,225.00 followed by $1,205.00 and lower while resistance is seen at the levels of $1,295.00 followed by $1,307.00 and higher, respectively. Bulls should remain in control untill prices remain above the levels of $1,170.00.
Trading recommendations:
Initiate fresh long positions here, stop is at $1,245.00, target is $1,340.00/50.00.
Good luck!
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