Thin Volatility & Unfilled Gaps In The Market – April 25th Morning Brief
Arslan Butt • 3 min read
Yesterday, the market remained highly volatile due to the outcome of the French Presidential Elections. The results caused huge gaps in different forex currency pairs, indices and in the Gold as well. As discussed in our 24th of April Morning Brief, the gaps in prices are meant to be filled. Few of the trading instruments have managed to already cover their gaps, such as the Gold and USD/JPY.
It seems like the demand for haven assets is likely to remain supported as the USS Carl Vinson aircraft carrier is heading towards the Sea of Japan. Consequently, investors lowered their bets on the U.S. dollar over the increased level of uncertainty. The U.S. dollar index, which measures the greenback's strength against the basket of 6 major currencies, is trading at $99.057, down 0.04% in the Asian markets today.
Economic Events To Watch Today
- Public Sector Net Borrowing (9:30)
- New Home Sales (15:00)
- CB Consumer Confidence (15:00)
EUR/USD – The Pair In Focus
Since the victory of Macron in the first round of the French elections, the single currency Euro has attracted a lot of attention. Before this, the Euro was trading under pressure due to the uncertainties caused by the elections in the different areas of the Eurozone.
After the favorable outcome in the elections, investors jumped into the market to buy an oversold currency pair. Now, Macron is likely to encounter Le Pen in the final round of the elections, which are scheduled for May 7th.
Today, we don't have any major economic events from the Eurozone as the Italian banks will be closed in observance of Liberation Day.
EURUSD – Hourly Chart
Technical Outlook -Intraday
The EUR/USD has been stuck in a narrow trading range of $1.0830 – $1.0875. In the hourly chart, the 20 periods EMA is extending support at $1.0853 which is a crucial trading level for today.
The leading indicator RSI, which is holding at 63, is extending support to the bullish bias in the pair. The previous candle in the daily timeframe seemed quite strange as it resembled the candlestick pattern hanging man, but it's not. Nevertheless, it seems like the number of buyers and sellers are now equal and are waiting for a strong fundamental reason to determine the further movement of this pair.
Forex Trading Signal
Honestly, I would not take any position in the EUR/USD at this moment as it’s trading between the upper and lower range. However, I will enter a buy position once the prices break above $1.0875 with a small target of $1.0910.
GBP/USD – The Pair In Consolidation Mode
Since last Tuesday, the Sterling remains in consolidation mode after a great run to the upside. The GBP/USD is maintaining a sideways trend with a lower range of $1.2765 and an upper range of $1.2850.
Later this week, we are expecting President Trump's tax reform plan. I can't accurately predict how this is going to impact the market as the situation is incredibly confusing. Investors have a lot of fundamentals to focus on, such as the Eurozone Elections, the U.K general elections, and conflict between the U.S and North Korea.
GBPUSD – Hourly Chart
Technical Outlook – Intraday
I don't see much change on the technical side of the pair. The GBP/USD is still holding above a 38.2% Fibonacci retracement level, which is supporting the pair at $1.2750.
The 50 periods EMA is neutral just like the RSI, which is holding at nearly 50. The GBP/USD has to break a significant support level of $1.2750 in order to target it's next trading levels of $1.2710 and $1.2652.
Forex Trading Signal
As referenced in our previous update, Forget The Economic Events, Wait For Reversals 24 – 28 April Weekly Forecast, investors are recommended to trade the range. For example, to take a buying position at $1.2750 and selling position at $1.2820 with a minimum stop loss of 25- 30 pips.
I would recommend that investors closely monitor New Home Sales and the consumer confidence from the United States to determine further trends.