US Session Forex Brief, Feb 18 – The Pullback Continues for the USD While Cryptos Finally Make a Move

Posted Monday, February 18, 2019 by
Skerdian Meta • 4 min read

The economic data today has been really light and the price action has been slow. With the US in holiday for President’s Day, I expect the price action to get even slower as the European session heads towards close, although there have been some developments in the markets today. Gold is threatening highs at $1,325 right now as the USD continues to retrace lower. Speaking of the USD, it was on a bullish trend for most of last week but we saw a bearish turnaround on Friday which is continuing today as well. Not sure if the emergency plan that was triggered by Donald Trump is having an impact on the Buck though.

Stock markets are little changed today after the bullish run at the end of last week. but the cryptocurrencies are feeling regenerated today. ETHEREUM is leading the way for cryptos as they climb higher. Ethereum will release the Constantinople hard fork on March 1 and they are also pushing to get listed on the futures market, which seems to have had some positive impact on the crypto market. BITCOIN has broken above the 100 SMA on the H4 chart which has been providing resistance for two months.

The Brexit saga continues with the EU refusing to renegotiate the agreement that they reached with the British Prime Minister May and things have become more complicated as a number of Labour MPs have left the Party and gone independent. The first projections of the European Parliament seats after the elections later in May show a surge in right wing parties, but the Euro and the GBP are not affected by such news as they continue to grind higher against the USD.

  • ECB’s Villeroy Acknowledges the Economic Weakness – The ECB member Francois Villeroy spoke on Reuters earlier and he seemed sort of concerned for the economy. Villeroy said that the timing of rate hike hinges on whether or not the current slowdown is a blip and the key question will be if the slowdown is temporary or more durable. There is a strong convergence about sequencing next policy steps. The economic outlook is clouded by the threat of protectionism and Brexit, so ECB would be pragmatic in use of its main policy tools.
  • 7 Labour MPs Leaving the Party – Seven Labour MPs decided to go on their own and form The Independent Group because apparently they didn’t like the leadership of the Party. The members are Luciana Berger, Chuka Umunn, Chris Leslie, Ann Coffey, Angela Smith, Gavin Shuker and Mike Gapes. Jeremy Corbyn didn’t look too distressed by it and the GBP continued to grind higher, which means that it didn’t really care for this event.
  • Bundesbank Doesn’t Look Optimistic for H1 of 2019 – Bundesbank released its monthly report and they expect the economic slowdown in Germany to continue during the H1 at least. The pace of underlying growth is expected to remain subdued, there are no signs of slowdown morphing into a downturn, and falling business expectations could curb investments which will make things worse for Germany and the Eurozone.
  • EU to React Swiftly to US Car Tariffs – The US tariffs on European cars are coming, as I have highlighted many times recently, and the EU is preparing for a trade battle with the US. The European Commission said earlier today that the US will face swift action on a tit-for-tat retaliation. Although for now, they remain committed to positive trade agenda with the US.
  • EU Repeats that the Agreement Won’t be Renegotiated – Another reminder that the EU won’t/can’t offer legal assurance to the backstop. They’re happy to clarify the situation on Brexit deal, but the risk of a no-deal Brexit is increasing. The EU is intensifying contingency work for no-deal scenario.

The US Session

  • UK Continues to Claim Changes to the Backstop – The UK Brexit secretary, Stephen Barclay, will be flying to Brussels today to negotiate on the Irish backstop. He said earlier that he will be meeting EU’s Barnier to discuss solutions to the Irish backstop, but I’m sure he will get nothing in return.
  • The Irish are Quick to Respond The Irish Minister of Foreign Affairs Simon Conevey said that they won’t allow changes to the backstop. Ireland feels like the UK is trying to steamroll them into making changes to the Irish backstop but will stand its ground. The responsibility to resolve the problem needs to lie where the problem is, which is in London, not Dublin. He continued that we would be very foolish if we allowed the onus to solve that problem and to switch away from Westminster to Dublin, and the Irish will not be steamrolled in this process. So, there you go Barclay.
  • US Bank Holiday The US markets are closed today for the President’s Day, so there is no economic data being released during the US session. I expect the price action in the markets to die out as we head towards the European close.

Trades in Sight

Bearish US Crude WTI Oil

  1. The trend has been bullish for more than two weeks
  2. Fundamentals point down
  3. The 20 SMA is providing support on the H1 chart
  4. The 100 SMA has been broken on the daily chart

The 20 SMA is holding the uptrend in place for US crude Oil

Crude Oil retraced lower during the first week of February after the bullish reversal during January. Although, that pullback lower is complete and Oil has resumed the bullish trend. In the last week, the 20 SMA (grey) has been providing support for US Crude Oil and it did so again today, so that moving average looks like a good place to look for longs on the H1 chart. Oil has also broken above the 100 SMA on the daily chart which provided resistance a couple of weeks ago, so now the upside is open for buyers until $60.

In Conclusion

The US Dollar has been sliding lower during the European session but it seems like the decline has stopped now. EUR/USD and GBP/USD are not moving anymore while USD/JPY is a little higher in the last hour. As I said, I think this was it for the price action today and the volatility is expected to diminish as we head towards the end of the European session in a couple of hours.

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