View Full Version : EURUSD: Bearish Trend May Be Over Despite Today's USD Recovery

GROWTHACES.COM Trading Strategies:
Taken Positions
EUR/USD: long at 1.0750, target 1.1000, stop-loss 1.0630, risk factor **
NZD/USD: long at 0.7390, target 0.7590, stop-loss 0.7310, risk factor ***
AUD/USD: long at 0.7680, target 0.7900, stop-loss 0.7580, risk factor ***
EUR/GBP: long at 0.7175, target 0.7375, stop-loss 0.7080, risk factor **
EUR/JPY: long at 129.00, target 132.00, stop-loss 127.50, risk factor ***
EUR/CHF: long at 1.0570, target 1.0990, stop-loss 1.0400, risk factor **

Source: Growth Aces Forex Trading Strategies

EUR/USD: The Bearish Trend May Be Over Despite Today's USD Recovery
(long under threat)
The U.S. central bank removed a reference to being "patient" on rates from its policy statement. The Fed sharply reduced its forecasts for economic growth through 2017 from its December projections and reduced forecasts of interest rates, as expected. Read more about the Fed statement in our yesterdays Trading Strategies Update.
The USD plunged across the board after the Fed statement. The USD posted its largest one-day fall in six years against the EUR and the GBP. However, the depreciation of the USD was very short-lived and early in the morning of the European session the EUR/USD rate was at the level from before yesterdays Fed decision.
Despite todays fast USD recovery the long-term bearish EUR-USD may be over. Further strengthening of the USD would limit rise in U.S. inflation rate and may be a reason for delaying rate hikes in the USA. The Fed signaled in yesterdays statement that it needs to see higher inflation before it raises interest rates from record lows. The Fed needs also further strengthening in economic activity and improvement in the labor market and stronger USD could be a hurdle for the economic revival. Moreover, we stressed many times that this-year FOMC composition is much more dovish than the previous one, so the pace of monetary tightening may be slow.
We expect first rate hike in the USA in September. In our opinion the Fed rate will be raised by 50 bps this year.
On the other hand, ECBs QE programme has been priced in for long time and the potential for further fall in European bonds yields is limited. QE may result in better macroeconomic figures in the Euro zone, which will support the EUR bulls. We should note that ECBs QE and recovery in commodities prices, the main source of deflation, may push Euro zone inflation at higher levels pretty soon, so the quit from ultra-loose monetary policy in the Euro zone could be not the very distant future as it is currently expected.
We switched our strategy to EUR/USD long at 1.0750 yesterday. However, market volatility exceeded our expectations and our long is under threat now. The EUR/USD fell to 1.0631 today, just one pip above the stop-less level of our position.
We have got long also on the EUR/GBP at 0.7175, as political uncertainty surrounding the upcoming UK general elections is likely to weigh on the GBP.

EUR/CHF: The SNB Intends To Keep Interest Rates Steady For Now
(weve got long for medium-term target of 1.0990)
The Swiss National Bank kept its target range for the three-month Libor at -1.25 to -0.25%, in line with expectations. The Swiss National Bank kept a charge on some cash deposits steady at -0.75%. The SNB said it would remain active in foreign exchange markets to weaken a "significantly overvalued" franc.
Governing Board Chairman Thomas Jordan said the SNB intends to keep interest rates steady for now. In his opinion current interest rate level will continue to support the weakening of the CHF.
The SNB released updated macroeconomic forecasts. What is the most important, inflation was previously seen turning positive in the fourth quarter of 2015 but it is now not seen positive until the first quarter of 2017. The SNB expects inflation to amount to -1.1% in 2015 (vs. -0.1% previously), -0.5% in 2016 (vs. 0.3% previously) and 0.4% in 2017. The SNB halved this-year economic growth forecast from 2% to 1%

The Swiss government cut its growth forecasts for 2015 and 2016. It saw the economy expanding 0.9% this year and 1.8% in 2016. Before the CHF cap ended, it had expected growth of 2.1% this year and 2.4% next year. It forecast consumer prices would fall 1.0% this year before rising 0.3% in 2016.
Swiss exports fell at an annual rate of 3.9% yoy in February in real terms. Sales of drugs and pharmaceutical ingredients, machinery and electronic equipment were hard hit.
The CHF strengthened after the SNB decided not to cut interest rate further below zero. The outlook for the Swiss economic growth is very weak now and we expect long-term trend of the CHF depreciation against the EUR even without support from the SNB. The CHF is likely to weaken also on carry trading and improving global risk appetite.
We got long on the EUR/CHF at 1.0570 and set the medium-term target at 1.0990. The stop-loss is set below lows from February, at 1.0400.

Significant technical analysis' levels:
Resistance: 1.0700 (hourly high Mar 19), 1.0730 (high Mar 10), 1.0760 (high Mar 6)
Support: 1.0545 (low Mar 16), 1.0518 (low Mar 13), 1.0414 (low Feb 9)