Forex Signals Brief for July 13th – Central Bankers Ready To Play Again!
Arslan Butt • 3 min read
Thanks to the FED & BOC the global financial markets are taking us on a roller coaster ride. Our signal on the Nikkei was looking good, but due to new technical levels, it hit the stop loss. On the other hand, our gold signal worked out well and secured us nice profits.
Bank Of Canada – Rate Hike
Seems like, the central bankers are competing in the race of rate hikes. The BOC decided to raise interest rates by 25 basis points to 0.75% on the back of robust economic growth and a foreseen pickup in inflation.
During the press conference, the BOC officials also recognized that inflationary pressures have lessened recently, but reiterated that “the factors following the low inflation seem to be temporary.” They also forecasted to hit the 2% inflation target by the mid of the year 2018.
Fed Chairperson Yellen Testimony
Yellen lowered the Sep rate hike sentiment by sharing a well-balanced assessment on the outlook for the U.S. economy. She confirmed the strategy of tight monetary policy as the gradual increase in the interest rates seems appropriate. But, she sounded a bit concerned about the U.S inflation which seems to be a point which can force the FED to put rates on hold.
That is why we saw huge fluctuations in the market such as a sharp dip in the buck and a dramatic bullish trend in Gold and global stock indices.
We are expecting few speeches from the U.S central bank officials, which may have high impact. Let's take a look.
U.S – Fed Chair Yellen is due to testify on the Semiannual Monetary Policy Report to the Senate Banking Committee, in Washington at 14:00 (GMT) for the second day. Yesterday, she moved the market, hopefully, she will do the same today.
In addition, FOMC Member Evans is also due to speak about the economy and monetary policy at the annual Rocky Mountain Economic Summit, in Idaho at 15:30 (GMT). Whereas, FOMC Member Brainard will be speaking right after Evans at 17:00 (GMT).
After having such a response to Yellen's remarks, do you think the words from these two FOMC members worthy? A definite YES, but, the spice of the recipe is the questions and answers session. Lastly, the U.S unemployment claims will be in focus at 12:30 (GMT) and these are expected to be better than before.
USDCAD – The Oversold Currency Pair
After the release of the rate statement from the BOC, the Loonie plunged more than 250 pips to place a low of $1.2679. Recalling my previous analysis report, the idea was to stay in selling below $1.2935 with a target of $1.2810. The pair traveled even more! Awesome, Right?
Despite the fact that the BOC was hawkish yesterday, during the question-answer session, Poloz sounded ambiguous about his future plans. He reemphasized that the oil price concerns are following them and these need to be addressed.
Forex Trading Signal – Idea
At this point, I'm not in a favor of sell position as the market is already at its lows and we may see investors taking profits. Therefore, the having a Buy position above $1.2700 with a stop loss below $1.2650 and a take profit at $1.2800 seems to be a good idea.
USDCAD – Hourly Chart – Oversold Pair
The bearish trend of USDCAD isn't solely supported by fundamentals, but the technicals are also placing downward pressure. Such as, on the daily timeframe, the pair has formed a bearish engulfing candle which signifies a strong selling sentiment of investors. Learn more about candlestick analysis and trading strategies here.
On the other hand, the 50 periods moving average is keeping the pair bearish, but the gap between the candle and the moving average is extensive. It's nearly 180 pips on the hourly timeframe, which means the pair may pull back a bit to give investors another chance to ride the selling trend.
After taking volatility into consideration, here I have formulated new levels to trade.
The global market instruments are trading near their new highs and lows. Most of them are likely to retrace, thus, we need to make sure proper risk management is in place by setting minimum stop losses to avoid stabbing in anti-trend trades.