Forex Signals US Session Brief, August 17th – The USD Is Charging Forward
Skerdian Meta • 3 min read
Yesterday the USD was under some heavy selling pressure in the afternoon, especially when the FOMC minutes were released. Today the situation has changed for the Buck which is helping our forex trades.
There were some positive numbers from UK and Europe this morning but they offered no help to their currencies as the Buck charged higher.
EU Inflation and UK Retail Sales Hold Up, While the Euro and GBP Continue to Slide
The UK retail sales beat expectations today when they came out at 0.3% as opposed to the expected figure 0.2%. The Eurozone inflation (CPI) and core inflation remained unchanged at 1.3% and 1.2% respectively, while the trade balance increased.
These are mildly positive numbers, but GBP and the Euro were unfazed by them and shortly after they were released the market decided to dump these two currencies.
We were short GBP/USD since last evening so we were hoping for a reverse in this forex pair, which took place this morning. The 50 SMA, that we highlighted in the previous GBP/USD update, broke pretty easily and the price hit our take profit target for that signal.
ECB Meeting Minutes Show Concern about Strong Euro
The ECB (European Central Bank) finally started jawboning the Euro. This was the most effective tool for the ECB to use to slap the Euro and keep it down over the last 2-3 years and it looks like they’re back at it.
They stopped this jawboning this year for two reasons; a) Germany hates inflation so they want a stable/strong Euro and b) Trump has been moaning about countries with trade surplus whose monetary policy is loose.
But today´s meeting minutes show concern about the strong rally in the Euro pairs. The main comments were “the ECB needs to gain more space and flexibility to adjust the policy” and “rate setters expressed concerns about possible market overshooting, particularly forex”.
You don't need any explanation for these remarks, they´re blunt and they show that the ECB is concerned about the level of the Euro against other currencies and particularly against the USD.
USD Is Back in Demand Again
The USD was roughed up yesterday after/during the FOMC minutes. It looked scary for USD buyers because the Buck has only just emerged from a long term downtrend. We have seen the USD lose 10-15 cents across the board so far this year and it only started to put up a fight over the last few weeks. Yesterday´s move brought some skeletons out of the closet for USD buyers, thinking that it might be the start of another leg of this year´s uptrend.
But this morning, everything has shifted for the USD and the market seems to love the USD again. GBP/USD is at yesterday´s lows, while EUR/USD has broken the support levels at 1.17 and 1.1680.
The US unemployment claims and Philly FED manufacturing index beat expectations, which is helping the Buck make some more gains. Hopefully, this is the start of the big reverse we have been talking about and expecting because it is long overdue.
Trades in Sight
- The intraday trend has turned bearish again
- The larger 3-week trend is still down
- The price broke below yesterday’s low which s providing resistance
- Fundamentally, the ECB turned dovish/neutral
- Couldn’t hold on to yesterday´s gains
This support level has to go if we´re to move lower
The first trade that comes to mind is in EUR/USD. We’re concentrated on this pair since we have a long term open signal. I still keep a bearish bias towards it, particularly after the 130 tumble this morning and the concerning comments in the ECB minutes.
But there´s a catch; EUR/USD has crawled back from the lows and we’re back above 1.1680 and 1.17. If this pair is to move higher, these two support levels should go for good and should get ready for 1.16, but that´s not happening at the moment.
EUR/USD is doing a pullback at the moment, but I hope the sellers return soon and the downtrend continues.
- The bigger trend is up and it is pretty strong
- A retrace was needed before the next push higher and it happened this morning
- The 50 SMA (yellow) on the H4 chart which has provided support previously is doing the same now
The 50 SMA has provided solid support
The number of technical indicators pointing up in EUR/CHF is lower, but the case for buyers is stronger than in EUR/USD right now. I would have loved to get in around the 50 SMA but I missed it earlier on. The opportunity to buy is still here though, so if your money management allows it you can go long right now with a stop below today´s lows.