Market Update – April 5, 2018

Market Update – April 5, 2018

Impressive ranges hold for the entire 2018 so far. Now that the fourth quarter started, the FX market still doesn’t go anywhere.

 

Despite having some important economic events so far, no move seems to be decisive. The EURUSD tells the story perfectly.

 

It started the year with a bullish tone. After consolidating for a bit around the 1.22 level, it jumped to 1.25, breaking out of a continuation pattern that seemed like a pennant.

 

However, it made a double top around 1.2530 and came back to the original breaking point at 1.22. Those levels defined the range we still see today: the price founds support at 1.22 and resistance above 1.25. What next?

 

Fake Breaks

 

The ECB March meeting was of some importance. Both bulls and bears wanted something, with the price action prior to the press conference being bullish.

 

However, Draghi came and, despite the overall positive economic data, the EURUSD bears won. It was only an illusion.

 

The Fed in the United States hiked again. In the first FOMC with Powel leading, the Fed hiked the federal funds rate with yet another 0.25 basis points.

 

Defying gravity, the EURUSD pair rose, not fell. Such sharp the move was, as it completely erased the ECB dropped.

 

Fast forward a couple of weeks, and the Fed’s move now is completely retraced. The EURUSD is now back at the 1.22 level, more or less where it started the year.

 

Trade Wars

 

A lot of talking goes about the U.S and China trade war. The Chinese responded with vengeance to Trump’s administration trade wars, sending the stock market in a downward spiral.

 

While everyone panicked, and the business news announcing the financial apocalypse, the focus should stay on the big picture. At the end of the day, this is nothing but a healthy correction for the DJIA and the U.S. equity market.

 

In fact, a close look at the monthly chart tells us that similar corrections in the past were nothing but…corrections.

 

Even super strong bullish trends experience powerful corrections, so this would be nothing but a bump in the road when compared with the staggering rally that took place in the last years.

 

Conclusion

 

It remains to be seen if April will break the current ranges. The NFP tomorrow may bring some volatility, but it may be that the market will wait yet for next week’s CPI and Fed Minutes to finally push the dollar one way or the other.

 


Also published on Medium.

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