Daily Forex Signals 12.07.2017

EUR/USD: Focus on Yellen testimony today

Macroeconomic overview: The dollar edged down to 14-month lows against the euro in Asian trading on Wednesday as investors, already wary ahead Federal Reserve Chair Janet Yellen's testimony, digested emails released by President Donald Trump's eldest son suggesting he welcomed Russia's help in last year's election campaign.

Emails released by Donald Trump Jr. on Tuesday showed he agreed last year to meet a woman he was told was a Russian government lawyer who might have damaging information about Democratic White House rival Hillary Clinton as part of Moscow's official support for his father.

Investors' mood turned more hopeful later in the session after U.S. Senate Republican leader Mitch McConnell announced a two-week delay in the Senate's August recess to provide more time to work on legislation and approve nominees, which could lead to progress on tax reform and fiscal stimulus.

Fed Chair Janet Yellen will give her semi-annual monetary policy testimony before Congress later on Wednesday and on Thursday, and investors will be parsing it for or clues on when the Fed will start reducing its massive balance sheet. Her remarks will follow words from Fed Governor Lael Brainard that disappointed some dollar bulls.

Brainard said that she wants to move cautiously on interest rates, carefully monitoring the rate of inflation. She believes that the Fed needs to be able to properly assess the correct sequence of rate increases and balance sheet normalization, which she says could cause spillovers through exchange rates, the latter less than the former.

Philadelphia Fed President Patrick Harker, a voter on the Federal Open Market Committee, said in an interview with the Wall Street Journal on Tuesday that if inflation did not move toward the Fed's 2% target, then this would be a reason to hold off raising rates.

Janet Yellen will probably reiterate today that further steps in the monetary policy normalization process will take place in the form of another rate hike (we expect in September) and the start of the reduction of the huge Fed balance sheet (probably in December, in our view), and that this process will be gradual. As this is largely priced in, and with German yields also holding up near this year’s highs, we do not see the Fed chair’s remarks as being a long-term game changer for the EUR/USD. But we think there is a risk of position clearing that could put pressure on EUR/USD in the short-term, especially if US inflation data later this week come in-line with market expectations or higher.

Today’s data showed that industrial production in the euro area increased by 1.3% mom for a 4.0% annual increase. This was ahead of market expectations for a 1.1% mom an 3.6% yoy rise.

Technical analysis: The EUR/USD rise extends to new high not far from May 2016 1.1494 peak and 1.1500 psychological resistance. The 7-day exponential moving average at 1.1414 is key for any pullback.

EURUSD Daily Forex Signals Chart

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TRADING STRATEGIES SUMMARY:

FOREX - MAJOR PAIRS:

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FOREX - MAJOR CROSSES:

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PRECIOUS METALS:

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How to read these tables?

1. Support/Resistance - three closest important support/resistance levels
2. Position/Trading Idea:
BUY/SELL - It means we are looking to open LONG/SHORT position at the Entry Price. If the order is filled we will set the suggested Target and Stop-loss level.
LONG/SHORT - It means we have already taken this position at the Entry Price and expect the rate to go up/down to the Target level.
3. Stop-Loss/Profit Locked In - Sometimes we move the stop-loss level above (in case of LONG) or below (in case of SHORT) the Entry price. This means that we have locked in profit on this position.
4. Risk Factor - green "*" means high level of confidence (low level of uncertainty), grey "**" means medium level of confidence, red "***" means low level of confidence (high level of uncertainty)
5. Position Size (forex)- position size suggested for a USD 10,000 trading account in mini lots. You can calculate your position size as follows: (your account size in USD / USD 10,000) * (our position size). You should always round the result down. For example, if the result was 2.671, your position size should be 2 mini lots. This would be a great tool for your risk management!
Position size (precious metals) - position size suggested for a USD 10,000 trading account in units. You can calculate your position size as follows: (your account size in USD / USD 10,000) * (our position size).
6. Profit/Loss on recently closed position (forex) - is the amount of pips we have earned/lost on recently closed position. The amount in USD is calculated on the assumption of suggested position size for USD 10,000 trading account.
Profit/Loss on recently closed position (precious metals) - is profit/loss we have earned/lost per unit on recently closed position. The amount in USD is calculated on the assumption of suggested position size for USD 10,000 trading account.

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