EUR/USD: Fed’s Rhetoric Becomes More Hawkish

GROWTHACES.COM Forex Trading Strategies

Trading Postions

EUR/USD trading strategy: long at 1.1285, target 1.1500, stop-loss 1.1180

GBP/USD trading strategy: long at 1.5280, target 1.5480, stop-loss 1.5185

AUD/USD trading strategy: long at 0.7780, target 0.7930, stop-loss 0.7710

EUR/JPY trading strategy: long at 134.10, target 137.00, stop-loss 134.10

AUD/NZD trading strategy: short at 1.0610, target 1.0380, stop-loss 1.0540

Pending Orders

EUR/CHF trading strategy: buy at 1.0400, target 1.0700, stop-loss 1.0345, risk factor *

NZD/USD trading strategy: buy at 0.7340, target 0.7660, stop-loss 0.7270, risk factor **

EUR/USD: Fed’s Rhetoric Becomes More Hawkish

(stay long)

  • San Francisco Federal Reserve Bank President John Williams (voting, dovish) said the time for the U.S. central bank to raise interest rates was getting closer and closer, as he warned of the risks of the Fed falling behind the curve. Williams said the Fed might have to hike borrowing costs much more dramatically than otherwise if it waited too long, saying it was better to move sooner and raise rates “gradually, thoughtfully.”
  • Richmond Fed President Jeffrey Lacker (voting, hawkish) said the Federal Reserve should raise interest rates in June. In his opinion the U.S. economy is strengthening and that inflation will move back to the central bank’s target. Lacker has previously warned that the Fed needs to move sooner rather than later in raising rates.
  • We may ignore Jeffrey Lacker’s comments as he is the most hawkish FOMC member this year, but John Williams’ hawkish rhetoric should be interesting for the market. The reaction of the EUR/USD to the FOMC members’ comments were limited.
  • Greek Prime Minister Alexis Tsipras comfortably won a confidence vote on his plan to cancel a deeply unpopular bailout programme and challenge European leaders. Greek Finance Minister Yanis Varoufakis will present to the Eurogroup of euro zone finance ministers Greece’s demands for an end to its international bailout and a transition to a new debt restructuring deal. At his first such meeting, he will seek a bridge agreement to buy time until June for a full settlement.
  • The volatility remains low. If a compromise in Greek matter is reached the EUR will certainly move higher. On the other hand, any suggestion of talks breaking down could see a sell-off in the EUR.
  • Investors are shifting their focus towards macroeconomic releases scheduled for the end of the week. The last missing piece of information to estimate Euro zone growth for the fourth quarter is December industrial production, to be released on Thursday. Traders will be waiting also for U.S. January retail sales data and we think that market consensus of -0.5% growth mom may be too optimistic.
  • We do not change our long EUR/USD position.

EUR/USD Forex Daily Chart

Significant technical analysis’ levels:

  • Resistance: 1.1352 (10-dma), 1.1359 (high Feb 9), 1.1438 (21-dma)
  • Support: 1.1270 (daily low Feb 7), 1.1262 (low Jan 29), 1.1224 (low Jan 27)

 AUD/USD Under Pressure Despite Good Macro Data

(stay long)

  • A measure of Australian consumer sentiment surged to its highest in 13 months in February. The index reading of 100.7 was up 0.6% yoy, a marked improvement from a 9.7% yoy decline in January. It was the first time since February last year that optimists outnumbered pessimists, albeit marginally. A strong rise in consumer sentiment was a consequence of a cut in interest rates and sliding petrol prices.
  • The measure of family finances compared to a year ago jumped 12.4%, while the outlook for the next 12 months rose by 7.6%. The survey’s index for economic conditions over the next 12 months climbed 10.4% in February, while that for the next five years rose 13.4%. The index on whether it was a good time to buy a major household item edged up by only 0.5%, but that came on top of a 13.6% jump in January.
  • The Australian Bureau of Statistics said the number of home loans granted in December rose by 2.7% in December, beating forecasts of 2% increase. A 6% jump in investment loans was probably above expectations of the Reserve Bank of Australia. Let us remind that the RBA has been concerned about an acceleration in speculative borrowing. The data are supportive for our AUD/USD long position and lower the likelihood of another RBA rate cut.
  • The AUD/USD was close but did not reach the stop-loss level of our long position today.
  • The AUD/USD traders are waiting now for January jobs report (Thursday 00:30 GMT). The median forecast is at the level of 5k after a rise of 37.4k in December. The unemployment rate is expected to rise to 6.2% from 6.1% in the previous month.Another important event is the RBA Governor Steven’s speech scheduled for tomorrow 22:30 GMT.

AUD/USD Forex Daily Chart

Significant technical analysis’ levels:

  • Resistance: 0.7842 (high Feb 10), 0.7877 (high Feb 6), 0.7907 (high Jan 29)
  • Support: 0.7685 (hourly low Feb 3), 0.7627 (low Feb 3), 0.7241 (low May 2009)

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