Forex Fundamental Analysis – L. Mester sends a dollar to the knockout


EURUSD trading plan:

Cleveland Fed President L. Mester, stated that she would favor slowing down the balance sheet normalization process. Recent signs of economic weakness, including the largest decline in retail sales in nine years, have forced FED to reverse course from a previously more aggressive stance in favor of policy tightening. Investors are disappointed with the dollar. It was the actions of the FOMC that provided great support to the US currency in 2018. Dollar weakness usually benefits gold, as it boosts the metal’s appeal as an alternative asset. Euro and gold have a direct correlation.

Trading recommendation: Buy 1.1330 and take profit 1.1385.

GBPUSD trading plan:

The U.K. unemployment rate held steady at a multi-decade low, while wage inflation, including bonuses, held steady. Average earnings, excluding bonuses, continued to rise at their fastest pace since the financial crisis over 10 years ago. The Bank of England has said it will need to raise interest rates gradually to offset inflation pressures from rising pay. This is a good signal for the UK currency. U.K. Prime Minister Theresa May is scheduled to meet today with EU commission president Jean-Claude Juncker. UK PM spokesman, James Slack, said that the meeting is ‘significant’.

Trading recommendation: Buy 1.3051 and take profit 1.3101.

USDJPY trading plan:

Two days of negotiations between deputy-level officials began on Tuesday, led by Deputy U.S. Trade Representative Jeffrey Gerrish on the U.S. side. The talks are aimed at "achieving needed structural changes in China that affect trade between the United States and China. Investors hope for a good outcome of the negotiations. Traders buy shares on American, European and Asian exchanges. USDJPY and S&P500 have a direct correlation. Bank of Japan governor Haruhiko Kuroda indicating that the central bank was ready to ramp up stimulus if the strength of the Japanese currency hurt the economy. This is a good signal for the bulls.

Trading recommendation: Buy 110.47 and take profit 111.00.

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