GOLD Technical Analysis - If daily price breaks 1161.66 support so we will see bearish market condition to be on this pair up to the end of this year

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Sergey Golubev, 2015.06.12 16:41

Forex Weekly Outlook June 15-19 (based on forexcrunch article)

The US dollar did not lick honey against most currencies despite some OK data. The focus now moves to the all-important Fed decision. In addition we have housing and inflation numbers in the US, rate decisions in Japan and Switzerland and the ongoing Greek crisis. These are among the main events on forex calendar for this week. Here is an outlook on the market movers coming our way.

The  released positive economic data with better than expected retail sales figures. American consumers increased their purchases in May, especially for autos, clothes and building materials, suggesting the improvement in the labor market boosted sales. Alsoconsumer sentiment for June beat expectations, but most market analysts doubt this is enough for an early rate. In the euro-zone, Greek headlines had a growing impact on the common currency as the clock is ticking. The Aussie enjoyed a good employment report while the kiwi fell sharply on a rate cut. Where will currencies move next?

1. UK Inflation data: Tuesday, 8:30. UK inflation turned negative in April, reaching -0.1%. This was the first negative figure ever recorded. Bank of England governor Mark Carney forecasted low inflation in the coming months, but expects a gradual pick up towards the end of 2015. The sharp fall in oil prices is the major reason for low inflation. However, this global trend is positive for UK households despite concerns of weaker business investments. UK inflation is expected to rebound in May and rise 0.1%.
2. German ZEW Economic Sentiment: Tuesday, 9:00. German investor sentiment plunged in May, amid the Greek debacle and lack of growth. Economic sentiment fell to 41.9 from 53.3 in April considerably lower than the 48.8 estimated by analysts. Responders were concerned about the sluggish growth data of only 0.3% growth in the first quarter compared to 0.7% in the last quarter of 2014. Furthermore, Greece’s inevitable default raises fears over the Eurozone economic outlook. German investor climate is expected to decline further to 38.6.
3. US Building Permits: Tuesday, 12:30. U.S. building permits edged up to their highest level in nearly 7-1/2 years in April, reaching a seasonally adjusted annual pace of 1.14 million units, following 1.04 million in March. Additional positive construction data suggest a possible rebound in the housing sector. The rise in demand for new houses is a positive trend following the harsh winter of 2015. The strong housing data is expected to have a positive effect on GDP growth in the second quarter. The number of building permits is expected to reach 1.10 million units this time.
4. UK Employment data: Wednesday, 8:30. The UK labor market continued to improve in April. Unemployment fell and the number of people employed continued to rise. The number of people claiming jobless benefits declined by 12,600 in April to 764,000. Government officials were pleased with the positive data, claiming their government is working. Rising demand for workers pushed regular pay growth to 2.2%. Weak inflation and higher wages are welcome news for the UK households. This will also have a positive effect on consumer spending and economic growth.
5. Fed decision: Wednesday, 18:00, press conference at 18:30. This is the first meeting that does not carry any forward guidance regarding rates. In addition, it is accompanied by fresh economic forecasts, the “dot plot” and of course, a press conference by Fed Chair Janet Yellen, all making this meeting a very big event. The baseline scenario is that the Fed will wait just a bit more before raising the rates, with economists focusing on the September meeting. However, a rate hike is possible already now and in July. On on hand, the Fed would like to start the “lift off” and prevent bubbles. On the other hand, it would not like to act prematurely, choking the recovery and having to reverse. Every word in the statement and every word that Yellen will say carry a lot of weight. Worries could send down the dollar while upbeat sentiment about the positive data in the spring could be dollar positive. A repeat of the “hike in 2015″ stance would be generally positive.
6.  NZ GDP: Wednesday, 22:45. New Zealand economy expanded 0.8% in the fourth quarter of 2014, in line with market forecast, following a 0.9% growth in the third quarter. Retail and accommodation edged up 2.3% in the last quarter of 2014 while international tourist spending increased by 15%. Retail trade also climbed 1.8%. Year-on-year, the economy grew 3.5%, the highest level since the fourth quarter of 2007. New Zealand Q1 GDP is expected to reach 0.6%.
7. Switzerland rate decision: Thursday, 7:30. The Swiss National Bank decided to keep interest rates at negative 0.75%, waiting to see the full impact of its unexpected move in January. The change in the monetary conditions was made in an effort to depreciate the Swiss franc, but had a negative effect on household savings and pension funds becoming a matter of concern for the Swiss population. SNB President Thomas Jordan noted that the franc was still overvalued and that there was room for an even lower rate in the future. The Swiss National Bank  is expected to maintain the negative rate of -0.75%.
8. US inflation data: Thursday, 12:30. U.S. inflation excluding energy costs edged up 0.3% in April amid a rise in shelter and medical care costs. Analysts expected a 0.2% climb as in March. Meanwhile, the overall CPI climbed 0.1% after rising 0.2%in March. The rise was held back by a 1.7% decline in gasoline prices and no change in food prices. April’s figures support the Fed’s decision to raise rates, showing signs that inflation was moving toward the Fed’s target. CPI is  forecasted to rise 0.5% while Core CPI is expected to gain 0.2%.
9. US Unemployment claims: Thursday, 12:30. The number new claims for unemployment benefits increased mildly last week, reaching 279,000, still remaining below 300,000. This was the 14th week that claims held below the 300,000 threshold, indicating the labor market continues to strengthen. Economists expected the number of claims will reach 277,000. The four-week average of claims increased 3,750 to 278,750 last week. The number of jobless claims is forecasted to reach 278,000 this week.
10. US Philly Fed Manufacturing Index: Thursday, 14:00. Manufacturing in the Philadelphia area weakened in May, according to responders. Philadelphia Fed’s manufacturing business outlook fell to 6.7 in May from 7.5 in April. New orders rose 0.3% following 0.7. Current shipments index also rise 3 points to a reading of 1 and Employment conditions weakened by 5 points to 6.7, from April’s reading of 11.5. The manufacturing sector in the New York region found some momentum late last week with the Empire State manufacturing survey bouncing back into positive territory. However, the 3.1 reading in May remained weaker than expected. Manufacturing sentiment in the Philadelphia area is expected to rise to 8.1.
11. Japan rate decision: Friday. the Bank of Japan voted to maintain its monetary policy stance unchanged in May and continue implementing money market operations to ensure a monetary base of JPY 80 trillion a year. The decision, which was in line with market forecast. The BOJ noted that Japan’s economy is continuing to improve. Exports increased boosting growth in the manufacturing sector and increasing business investments. However, the Bank also stated that inflation is likely to remain close to 0% in the near term due to the energy price decline. No change in rates is expected.

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Press review

Sergey Golubev, 2015.06.17 19:42

• past data is 0.25%
• forecast data is 0.25%
• actual data is 0.25% according to the latest press release

if actual > forecast (or previous data) = good for currency (for USD in our case)

[USD - Federal Funds Rate] = Interest rate at which depository institutions lend balances held at the Federal Reserve to other depository institutions overnight. Short term interest rates are the paramount factor in currency valuation - traders look at most other indicators merely to predict how rates will change in the future.

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"The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. This policy, by keeping the Committee's holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions."

"When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run."

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XAUUSD, M5, 2015.06.17

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XAU/USD M5: price movement by USD - Federal Funds Rate news event

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Press review

Sergey Golubev, 2015.06.18 10:16

BNP Paribas - 'What USD Bulls Need Post-FOMC?' (based on efxnews article)

The Fed’s June statement and press conference failed to provide a catalyst for renewed USD gains and the currency has weakened in the aftermath of the meeting, notes BNP Paribas.

"Market participants seemed to focus on the shift lower in the Fed’s projection for the Fed funds rate, with the average “dot” for end 2015 falling to 57bp from 77bp. In her press conference, Chair Yellen noted that the conditions for justifying policy tightening were not yet in place and that, once tightening began, the pace of hikes would be very gradual," BNPP adds.

"However, we would emphasize that, according to the projections, a majority of FOMC members continue to anticipate at least two rate hikes before the end of 2015," BNPP argues.

"Moreover, the message from the Fed is clearly one of data dependency—if data continues to improve over the summer, markets will be forced to bring forward pricing for Fed hikes closer to our September forecast for lift-off," BNPP projects.