After the USD’s breakout, the EUR/USD prone to further losses below 1.1000
Economic Events April 29 – May 3, 2019
Source: Economic Events Calendar April 29 – May 3, 2019 - Admiral Markets' Forex Calendar
DAX30 CFD
As we discussed in our last weekly market outlook, the prognosis for the DAX30 CFD remained bullish coming out of the Easter weekend. And indeed, the German index kept on making new yearly highs, pushing back above 12,300 points.
That said, the outlook for the DAX30 CFD stays positive for the coming days, with a potential target on the upside around 12,450/500 points.
Nevertheless, the mode seems a little extended on the upside, and risk-reward ratios are getting a little unattractive, this goes for short-term/intraday engagements as well.
Technically speaking, a pullback finds solid support and a potential long-trigger around 12,000/030 points, but only a break and daily close below 11,800 shifts the mode from bullish to neutral.
Still, above the SMA(200) the picture stays positive, and the advantage can be found on the side of the bulls.
Source: Admiral Markets MT5 with MT5-SE Add-on DAX30 CFD daily chart (between January 15, 2018, to April 26, 2019). Accessed: April 26, 2019, at 10:00pm 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%.
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US Dollar
While we anticipated the upwards break in the USD index future in our last weekly market outlook, coming out of the break of the neckline in Gold, we finally saw the break happen at the end of the week.
With the simultaneous break of the GBP/USD below 1.3000, and particularly the EUR/USD breaking below 1.1180/1200, the outlook for the USD index future remains very positive.
With a very juicy economic calendar in the coming weeks, and with the Fed expected to remain neutral with no significant shifts in the monetary policy rhetoric, further bullish momentum in the USD is a serious option.
One potential trigger could arise from better-than-expected economic data sets being published. Nevertheless, the main driver will probably be the Fed. While a Reuters poll over the last week suggests that around one-third of all economists see at least one Fed rate-cut by the end of 2020, the Fed watch tool shows that market participants already expect such a cut, with a probability of nearly 60%.
This means, in our opinion, that most dovish expectations seem to already be priced into the USD, and any hint towards a more neutral stance in H2/2019 could trigger further bullish momentum in the USD.
So, if the break above 97.70/98.00 is sustainable, a projected target on the upside can be found 100.50 points:
Source: Barchart - U.S Dollar Index - Weekly Nearest OHLC Chart (between May 2016 to April 2019). Accessed: April 26, 2019, at 10:00pm GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.
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Euro
Finally, the Euro bears showed their claws last week and pushed the EUR/USD below 1.1180/1200. As we expected in several of our last few weekly market outlooks, the currency pair took on serious bearish momentum into the weekly close. It also seems likely that a test of the region around 1.1000 by the monthly close is an option.
As discussed in the USD subsection above, the outlook for the USD is likewise quite bullish, and we identified several potential bullish catalysts for the USD which could accelerate the downward move in the EUR/USD.
In addition to that, the Euro could see diminishing demand, too. Not only did US president Trump reinforce his threats of tariffs against the EU, after news of disappointing earnings from Harley-Davidson due to tariffs by the EU on US products.
But there are now rising fears that any trade deal struck between the US and China could negatively affect the Euro. The reason being, that the Chinese could move away from European imports and move to competitive US companies, which naturally results in lower demand for Euros matched by rising demand for the USD.
Technically, the first target on the downside can be found around 1.0900/0950, below further losses down to 1.0780/0800 are possible:
Source: Admiral Markets MT5 with MT5-SE Add-on EUR/USD Daily chart (between January 16, 2018, to April 26, 2019). Accessed: April 26, 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 EUR/USD 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
In our last weekly market outlook we discussed that the subdued positive reaction in the GBP index against the USD, after the six-month extension to article 50 and a very solid Retail Sales data set, makes the GBP/USD "[…]set for a drop below 1.3000 in the days to come."
And with the bullish performance and breakout in the USD index future (as detailed in the USD subsection above), the break did indeed happen.
While we painted quite a bullish picture for the USD, above and solid economic data with a neutral Fed could trigger further bullish momentum here in response, traders of the Pound Sterling will focus all eyes on the Bank of England this coming Thursday.
Here, the question will be regarding how dovish the BoE's announcement will be, due to the slowing economic outlook, not only globally but also in the UK, with prolonged Brexit uncertainties. Any hint that the central bank is to keep interest rates on hold deep into 2020 could trigger further GBP weakness, and activate 1.2450/2500 as an initial target on the downside.
Source: Admiral Markets MT5 with MT5-SE Add-on GBP/USD Daily chart (between January 16, 2019, to April 26, 2019). Accessed: April 26, 2019, at 10:00pm GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.
In 2014, the value of the GBP/USD 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
Despite the bullish breakout in the USD index future and the usual negative correlation between Gold and the US dollar, the precious metal did not take on further bearish momentum, but instead stabilised over the last few trading days.
In this context, the stable performance of the JPY against the US dollar should also be discussed. Gold and the JPY presenting themselves as stable against such a bullish USD is usually a critical sign which could point to potential scepticism forming among market participants, and should be carefully watched, especially by equity traders.
Nevertheless, the technical picture for Gold stays clearly bearish after the break of the neckline, and favours further losses in the days to come.
After we got to see the pullback against the neckline, a potential short-trigger was found around 1,290/295 USD, while the target on the downside around 1,230 USD stays active.
Only a push back above 1,310 USD would negate the overall bearish picture for the precious metal:
Source: Admiral Markets MT5 with MT5-SE Add-on Gold Daily chart (between January 14, 2018, to April 26, 2019). Accessed: April 26, 2019, at 10:00pm 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%.
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