All eyes on the UK parliament – excitement in GBP and EUR crosses
This week's market outlook will provide insights for GBP and the uncertainty around the Brexit deal, comments from FED members and its impact on the USD and more.
Source: Economic Events Calendar 14 January – 18 January 2019 - Admiral Markets' Forex Calendar
DAX30 CFD
As expected in our last weekly market outlook, the DAX30 CFD saw a push towards 11,000 points.
But a push above 11,000 points couldn't be achieved. With US equities finding themselves in a significant region of technical resistance, while there's no indication of the US government shutdown ending, the comments from FED members are becoming increasingly dovish (which is usually a sign of recessive tendencies in the economy ahead). Also, considering the uncertainties around the Brexit vote in the UK parliament on Tuesday, it wouldn't come as a surprise if the DAX30 CFD saw some weaker days ahead.
In a smaller time frame, a move on the downside could accelerate if the DAX30 CFD broke back below 10,800 with the first target around 10,680/700 points and the next target to be found around 10,400 points.
If bulls can stabilise the DAX30 CFD above 10,800 points, bulls on the lower timeframes should carefully watch stints towards 11,000/050 points and probably become a little more aggressive with their stops on short-term long engagements.
Source: Admiral Markets MT5 with MT5SE Add-on DAX30 CFD daily chart (between 29 September 2017 to 11 January 2019). Accessed: 11 January 2019 at 10:00 PM GMT
Please note: Past performance is not a reliable indicator of future results, or future performance.
In 2014, the value of the DAX30 CFD increased by 2.65%, in 2015, it increased by 9.56%, in 2016 it increased by 6.87%, in 2017 it increased by 12.51%, in 2018 it fell by 18.26%, meaning that after five years, it was up by 10.5%.
US Dollar
As we noted last week due to the comments from FED chairman Powell last Friday, and despite a strong NFP dataset, the outlook for the US dollar is not really prosperous.
And indeed, with Atlanta FED member Bostic saying on Wednesday "that he is taking nothing for granted and sees no 'urgency' for the FED to move," the USD Index future broke sustainably below 96.00 points, now aiming for the next significant support on the downside around 94.80/95.00 points.
With the release of the latest economic data from the US, it only seems to be a matter of time before an attempt to break below 95.00 is due.
While the main focus when it comes to US data is the employment situation and inflation data, Retail Sales, as the backbone of the US economy and a potential economic leading indicator, could also trigger further losses for the greenback next Wednesday.
With market participants now seeing only an 18% chance for one FED rate hike until December 2019, based on the FED Watch Tool, every bad economic reading will most likely manifest a dovish outlook of the FED and USD traders will most likely keep on selling the USD.
Such selling pressures would be initiated by the potentially still elevated long exposure of big speculators in the USD Index Future. (Note that the Commitment of Traders report is slightly outdated due to the US government shutdown.)
Source: Barchart - U.S Dollar Index - Weekly Nearest OHLC Chart (between January 2016 to December 2018). Accessed: 11 January 2019 at 10:00 PM GMT
Please note: Past performance is not a reliable indicator of future results, or future performance.
Euro
The Euro might have changed course over the coming days. As we pointed out in our last weekly market outlook, the combination of the halt of the ECB QE, the usually weak Euro seasonality and the failure to break above 1.1500 in the first week of trading in 2019, means the outlook for the Euro wasn't very bright.
But thanks to a very weak USD, resulting from several dovish remarks from FED members and a slightly converging yield differential, the Euro didn't only make it back above 1.1400 but also succeeded with a break above 1.1500 last Wednesday.
While the break looks sustainable at first glance, the weekly close below 1.1500 and the ongoing uncertainty around Brexit with the outstanding vote in the UK parliament on Tuesday, we are far from being sure that the bullish momentum in EUR/USD will continue.
If the currency pair can make its way back above 1.1500 after the Brexit vote (especially after a "No"), chances are that the EUR/USD will start an attempt to reconquer the region around 1.1600/1630 and see further gains up to 1.1800 in the weeks to come.
If the EUR/USD, on the other hand, stabilises back below 1.1500, the picture switches back to neutral and further losses down to 1.1200 should be taken into account in the weeks to come.
Source: Admiral Markets MT5 with MT5SE Add-on EURUSD Daily chart (between 06 October 2017 to 11 January 2019). Accessed: 11 January 2019 at 10:00 PM GMT
Please note: Past performance is not a reliable indicator of future results, or future performance.
In 2014, the value of the EURUSD fell by 11.9%, in 2015, it fell by 10.2%, in 2016 it fell by 3.2%, in 2017 it increased by 13.92%, 2018 it fell by 4.4%, meaning that after five years, it was down by 16.5%.
GBP
Over the next few days, all eyes will be on the Brexit vote in the UK parliament on Tuesday. In fact, at the time of writing there is still speculation about whether Prime minister Theresa May will delay the vote around her Brexit deal again, mainly because chances are high that she will lose with her negotiated deal with the EU.
But even if the vote goes through and May loses, the uncertainty will remain. The reason is that last Friday news hit the wire that Brexit looks increasingly likely to be delayed beyond the scheduled exit on March 29.
With this expected uncertainty in mind, it comes as no big surprise to see the GBPUSD stabilise around 1.2800/2830 despite the weakness in the US Dollar after the comments from FED member Bostic last Wednesday.
In fact, another push towards and below the current yearly lows around 1.2430, marked after the JPY flash crash on January 2 seems likely, if the vote comes out as a "No". Uncertainties are rising and the GBPUSD is most likely targeting the region around 1.2100.
On the other hand, a push back above 1.2800/2830 could be triggered by the combination of the currently weak US Dollar, with a possible move back towards 1.3000 and higher in the days to come.
Source: Admiral Markets MT5 with MT5SE Add-on GBPUSD Daily chart (between 02 October 2017 to 11 January 2019). Accessed: 11 January 2019 at 10:00 PM GMT
Please note: Past performance is not a reliable indicator of future results, or future performance.
In 2014, the value of the GBPUSD fell by 5.9%, in 2015, it fell by 5.4%, in 2016 it fell by 16.3%, in 2017 it increased by 7.4%, in 2018 it fell by 5.6%, meaning that after five years, it was down by 22.9%.
Gold
With the still bearish outlook for the USD, the outlook for Gold stays positive in the days to come.
While the bullish seasonal pattern for the yellow metal is about to end on Thursday, the next bullish seasonal pattern for Gold is about to start today.
In fact, from Monday, January 14 until February 5, in 15 of the last 20 years Gold saw an average gain of 30.61 USD/ounce, while in the losing five years, it lost on average 12.86 USD/ounce.
But before adding blindly to an existing Gold long position, Gold bulls should be careful: Gold saw some heavier selling around 1,300 USD/ounce, avoiding a breakthrough on the upside in the last days of trading. The reason for that is probably that lots of bad and dovish news are already priced into the US Dollar, limiting the chance of easy gains on the upside.
On the other hand and as pointed out in our technical piece last Friday, as long as we trade above 1,275/277 USD/ounce, our target of at least 1,308/310 USD/ounce on the upside for Gold remains active.
Source: Admiral Markets MT5 with MT5SE Add-on Gold Daily chart (between 06 November 2018 to 11 January 2019). Accessed: 11 January 2019 at 10:00 PM GMT
Please note: Past performance is not a reliable indicator of future results, or future performance.
In 2014, the value of Gold fell by 1.7%, in 2015, it fell by 10.4%, in 2016 it increased by 8.1%, in 2017 it increased by 13.1%, in 2018, it fell by 1.6%, meaning that after five years, it was up by 6.4%.
Disclaimer: The given data provides additional information regarding all analysis, estimates, prognosis, forecasts or other similar assessments or information (hereinafter "Analysis") published on the website of Admiral Markets. Before making any investment decisions please pay close attention to the following:
- This is a marketing communication. The analysis is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
- Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the Analysis.
- Each of the Analysis is prepared by an independent analyst (Jens Klatt, Professional Trader and Analyst, hereinafter "Author") based on the Author's personal estimations.
- To ensure that the interests of the clients would be protected and objectivity of the Analysis would not be damaged Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.
- Whilst every reasonable effort is taken to ensure that all sources of the Analysis are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis. The presented figures refer that refer to any past performance is not a reliable indicator of future results.
- The contents of the Analysis should not be construed as an express or implied promise, guarantee or implication by Admiral Markets that the client shall profit from the strategies therein or that losses in connection therewith may or shall be limited.
- Any kind of previous or modelled performance of financial instruments indicated within the Publication should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
- The projections included in the Analysis may be subject to additional fees, taxes or other charges, depending on the subject of the Publication. The price list applicable to the services provided by Admiral Markets is publicly available from the website of Admiral Markets.
- Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, you should make sure that you understand all the risks.
