Press review - page 466

[Sergey Golubev]

Intra-Day Fundamentals - EUR/USD and GBP/USD: U.S. Gross Domestic Product

2016-12-22 13:30 GMT | [USD - GDP]

• past data is 3.2%
• forecast data is 3.3%
• actual data is 3.5% according to the latest press release

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

[USD - GDP] = Annualized change in the inflation-adjusted value of all goods and services produced by the economy.

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From official report:

"Real gross domestic product increased at an annual rate of 3.5 percent in the third quarter of 2016, according to the "third" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 1.4 percent."

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EUR/USD M5: 22 pips range price movement by U.S. Gross Domestic Product news events

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GBP/USD M5: 30 pips range price movement by U.S. Gross Domestic Product news events

[Sergey Golubev]

West Texas Intermediate (WTI): What analysts expect from oil prices in 2017 (based on the article)

Bank of America/Merrill Lynch

"Bank of America/Merrill Lynch, for example, sees crude jumping 46% by next June, hitting $69 per barrel. Fueling that outlook is the fact oil and gas investments are down $300 billion, or 41%, since peaking in 2014, which should lead to shrinking supplies. Further, the bank's analysts see the persistently lower prices over the past several years driving healthy demand growth. These two factors could lead to the biggest gap between supply and demand in five years, which could push crude prices higher."

Goldman Sachs

"Goldman Sachs seems to be taking the middle ground. It recently increased its oil price forecast by predicting that WTI crude will rise to $57.50 per barrel by the second quarter, before settling around $55 per barrel in the second half of the year. Analysts at the World Bank, likewise, have a $55 oil price forecast for 2017 due to OPEC's moves to cut output and rebalance the oil market."

 

By the way, if we look at the weekly price of WTI so it is located below 200 period SMA in the bearish area of the chart.

• AB=CD developing pattern is forming by the price for the bearish trend to be continuing;
• price is on ranging within narrow s/r levels: 54.48 resistance for the rally to be started or 51.91 for the bearish trend to be continuing.

Bullish reversal point is located near 200 SMA at 71.00 so if the price breaks this level to above - we may see the long-term bullish trend for whole the 2017 for example.

[Sergey Golubev]

Credit Suisse forecast for EUR/USD in 2017: core target remains in 1.01 (based on the aricle)

• "EUR/USD bounced back as of late as it consolidated recent losses. However, we expect the 1.0506/31 “breakdown point” to cap to keep the trend directly lower. Removal of the 1.0352 recent low can see further downside to test 1.0342/36 next."
• "We maintains a short EUR/USD position."
• "However, although we would expect an initial hold to be seen here, we continue to look for a break in due course for a move to 1.01."

[Sergey Golubev]

GBP/USD Intra-Day Fundamentals: U.K. Current Account and 32 pips range price movement

2016-12-23 09:30 GMT | [GBP - Current Account]

• past data is -22.1B
• forecast data is -28.3B
• actual data is -25.5B according to the latest press release

if actual > forecast (or previous one) = good for currency (for GBP in our case)

[GBP - Current Account] = Difference in value between imported and exported goods, services, income flows, and unilateral transfers during the previous quarter.

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From official report:

"The UK’s current account deficit was £25.5 billion in Quarter 3 (July to September) 2016, up from a revised deficit of £22.1 billion in Quarter 2 (April to June) 2016. The deficit in Quarter 3 2016 equated to 5.2% of gross domestic product (GDP) at current market prices, up from 4.6% in Quarter 2 2016." 

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GBP/USD M5: 32 pips range price movement by U.K. Current Account news event

 

[Sergey Golubev]

USD/CAD Intra-Day Fundamentals: Canada's Gross Domestic Product and 38 pips range price movement

2016-12-23 13:30 GMT | [CAD - GDP]

• past data is 0.4%
• forecast data is 0.1%
• actual data is -0.3% according to the latest press release

if actual > forecast (or previous one) = good for currency (for CAD in our case)

[CAD - GDP] = Change in the inflation-adjusted value of all goods and services produced by the economy.

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From official report:

• "After increasing for four consecutive months, real gross domestic product was down 0.3% in October. Widespread decreases in manufacturing output and lower oil and gas extraction were the major contributors to the decline."
  
• "Goods-producing industries contracted 1.3% as manufacturing, mining, quarrying, and oil and gas extraction, construction, utilities and the agriculture and forestry sector all declined in October."
• "Service-producing industries edged up 0.1%, mainly due to increases in real estate and rental and leasing as well as retail and wholesale trade. The public sector (education, health and public administration combined) also edged up. The finance and insurance, administrative services, accommodation and food services and transportation and warehousing services sectors declined."

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USD/CAD M5: 38 pips range price movement by Canada's Gross Domestic Product news event

 

[Sergey Golubev]

Weekly EUR/USD Outlook: 2016, December 25 - January 01 (based on the article) 

 

EUR/USD dipped to new lows but rebounded ahead of the Christmas holiday. The week between Christmas and New Year’s is quite light. Here is an outlook for the highlights of this week.

1. Monetary data: Thursday, 9:00. The European Central Bank monitors the money in circulation and growth in loans. While these have both recovered, October’s numbers were something of a setback. M3 Money Supply decelerated to 4.4% while private loan growth remained stuck at 1.8%. M3 is projected to remain unchanged but loans carry expectations for a tick up to 1.9%.
2. Spanish Flash CPI: Friday, 8:00. Just before New Year’s celebrations, Spain releases preliminary data for inflation. This stood at an annual rate of 0.7% back in November and an acceleration to 0.9% is on the cards. The rise in consumer prices is attributed to the diminishing effect of falling oil prices.

[Sergey Golubev]

What can we expect in 2017? Interview with FXStreet (based on the article)

What emerging trends or issues should traders prepare for in 2017?

"The easy answer is growing impact from politics: Trump’s first year in office, as well as elections in France and later Germany, will keep us busy. This makes central bankers somewhat less important than they used to be. They will no longer be “the only game in town” but will not disappear in the shadows either. In Europe, some fiscal stimulus could replace austerity on an election year and in line with other countries. Britain could also join in. This could be the year when we talk about “inflation lifting its ugly head” more often than worries about deflation which have dominated beforehand. Inflation could come from China rather than from the US."

 

Which will be the best and worst performing currencies in 2017 and why? 

"The US dollar could reverse its gains as the dust settles in after Trump’s inauguration. Like with many politicians, promises are meant to be broken and a Republican Congress is where the buck could stop. The pound could extend its falls as Brexit reality bites in, something that has not happened so far. The winners could be the euro, that may fall early in the year but recover on fiscal stimulus and more mainstream election results. Another winner could be the Australian dollar, which could enjoy Chinese efforts to maintain its growth."

 

Which under-the-radar currency pair do you expect to make a big move in 2017? 

"USD/CAD could make a big move to the upside due to two reasons. The first is oil prices unable to rise and this could weigh on the loonie. Another reason is a lack of US demand due to less stimulus. Both factors could trigger a rate cut. The BOC has already told us that the lower end for rates is -0.50%, a full percentage point under the current level. The Canadian dollar has scope for falls, something that may eventually help the Canadian economy, but not in 2017."

 

What will you be focused on next year? 

"I will be focused on politics and their impact on markets. Central bankers are still important but have somewhat less influence, and they are less exciting than the impact of politics on currencies. This is not limited to the elections but also to policy, which could certainly be on the move."

[Sergey Golubev]

US Dollar Q1 2017 Forecast - Dollar Draws on Many Sources to Extend 14-Year High (based on the article)

Fundamental Analysis 

• "While the US economy is not on a runaway pace, it has nevertheless proven robust over the years while other major economies have wavered. In this environment where appetite for return is so prominent, a competitive economic pace can draw capital as readily as a central bank rate hike – and critically, more consistently. The promise of fiscal stimulus targeting infrastructure could significantly augment the pace of expansion and further draw contrast to those countries that have stagnated. The approval and details of the program remain to be seen, but a degree of speculative anticipation is already priced in." 
• "While the promise of a more robust economy is a draw for investment and thereby lever for the currency, it is speculation of interest rate hikes that provides the practical expectation for return. The Federal Open Market Committee (FOMC) hikes rates for the second time in its very nascent hawkish regime on December 14th. That represented a 12-month gap between moves, but the second increase was full expected. Heading into the two-day meeting, the market had fully priced in the hike. The hawkish winds were further lifted by the forecasts for interest rates over the coming three years. In particular, the group increased its expectation for hikes in 2017 from two to three 25 basis point moves. That was the first time in 18 months that the central bank had increased its forecasts." 
• "Though it hasn’t evoked this role in some time, it is important to remember that the Dollar is an ultimate safe haven asset. Yet, to truly take advantage of that position, the collapse in sentiment would need to be market-wide and intense. As it happens, a moderate degree of speculative flight would likely hurt the Greenback as it would curb rate expectations. In fact, through the past two years, the correlation between the DXY Dollar Index and VIX has flipped its traditional correlation to an unusual inverse relationship. A steady course for the global financial system and economy would bode well for the Dollar through rate speculation while intense risk aversion could recharge a long-dormant and significantly undervalued theme. In between these extremes though, the currency could very well struggle." 

Technical Analysis

• "The DXY rally has now pushed above the 61.8% retracement of the 2001-2008 decline (101.80). From my perspective, the time element of the cycle is most interesting. The rally from March 2008 is now in its 105th month (as of December 2016). There have been 2 longer USD cycles; the 1992-2001 rally lasted 106 months and the end of Bretton Woods to 1978 decline lasted 109 months."
• "Finally, the shape of the rallies from 1992 and 2008 are similar and the wave counts might end up as identical. Proposed wave C now subdivides into 5 waves which indicates high risk of a top. It’s noted too that wave 5 already equals wave 1 (in points…not %) at 103.32. The angle of the rallies on the monthly log chart are defined by the B-2 line. The median lines for both sequences were support for waves 4 of C. After the 2001 top, the median line was support on the first leg down and the break of the ML signaled the onset of the bear." 

[Sergey Golubev]

Euro Q1 2017 Forecast - EUR/USD Enters 2017 Positioned for More Downside (based on the article)

Fundamental Analysis 

• "On the US Dollar’s side, the decision in December 2016 to signal three rates in 2017 – as opposed to the market-priced two ahead of the policy statement – has sent US Treasury yields higher. As a gauge of long-term growth and inflation expectations, the US Treasury yield curve steepening is a reflection of the market's belief that tighter monetary policy is coming in the near-term." 
• "On the Euro side, the European Central Bank’s decision in December 2016 to alter its QE program proved significant. In our Q4’16 forecast, we said “The ECB will very likely be forced to remove the -0.40% barrier (allowing more German bunds to be purchased), or to remove the capital key restriction (allowing more peripheral sovereign debt to be purchased).” By going the former route as opposed to the latter, the ECB has primed the Euro to be in a disadvantageous position if interest rates elsewhere continue to rise." 
• "By the end of Q1’17, traders should start to pay more attention to European politics. On March 15, 2017, the Dutch elections will be held, the first of four significant elections in 2017. After the dramatic ‘No’ result on the December 4 constitutional referendum, Italy will likely head to the polls again by mid-2017. Luckily, for the Euro, the lack of reform that cost Matteo Renzi his job as prime minister may keep the Italian political system broken enough to prevent the Five Star Movement from ever achieving enough power to pull Italy out of the European Union. In April and May 2017, French presidential elections will be held, and the country will face its own populist threat in Marine Le Pen. Later in 2017 (date TBD), German elections will be held amid an environment in which Angela Merkel’s popularity Is quickly sliding (at five-year lows in December 2016) thanks to her immigration policy and an expanded terrorism threat in Europe. Needless to say, for those who thought 2016 was a year of surprises and shocks, 2017 is sure not to disappoint." 

Technical Analysis

• "We were looking for signs of a turn higher in Q4’16, but that didn’t happen. Instead, EUR/USD broke lower in a significant way. In our Q4’16 EUR/USD forecast, we wrote about the extremely coiled environment persisting in the pair, noting, “according to the measure, EUR/USD is the most coiled in history. It’s been 81 weeks since the last 52-week high or low. The previous record was 77-weeks, which ended with the breakout in May 2002.” Furthermore, “if the March 2015 lows break, then the call for a bottom is wrong and focus would shift to 0.9450-0.9550 (historical inflection point and measured objective).” This zone is in play in Q1’17 and is reinforced by the 61.8% retracement of the 1985-2008 rally at 0.9608."
• "Strength through the median line from the bearish channel, which was resistance throughout 2016, would trigger a major bearish trap and shift focus to the downtrend line in the mid-1.2000s later in the year (fitting with the idea of the US Dollar rising then falling over the course of 20170." 

[Sergey Golubev]

British Pound Q1 2017 Forecast - Pound to Chart Disparate Path vs. Major Currencies in Early 2017 (based on the article)

Fundamental Analysis 

• "Much of what happens to the British Pound in 2017 will depend on implementation of the outcome of the Brexit referendum. Markets will have ample fodder for speculation, from the formal initiation of the process pulling the UK out of the European Union and the subsequent negotiation to the indirect influence of uncertainty on the economy." 
• "The markets will probably spend the first three months of the year trying to divine what all of this will look like. Against this backdrop, the UK economy will likely start to show the impact of post-referendum uncertainty. This will overlay the political aspects of the situation with speculation about the direction of Bank of England policy." 
• "At this stage, investors seem to be trying to game how much inflation has to overshoot the BOE’s target for the central bank to dial down stimulus. If recent UK data proves to have foreshadowed a slump, speculation will instead be focused on how likely it is that Mark Carney and company will have to ease conditions further." 

Technical Analysis

• "Heading into the fourth quarter, I had highlighted the GBP/USD range between 1.2800 and 1.3600. The prevailing trend was certainly bearish, but further extending the already-extreme move would require increasingly exceptional conviction. An unexpected Pound flash crash in early October and a renewed Dollar rally after US Presidential election however, struck the correct cord. The question heading into 2017 is whether we can keep stretching the Cable further and further. Looking at the quarterly chart of the pair, we can see how statistically difficult that would be."
• "We need to look at a chart with this scale of historical context to appreciate the fact that we are at a three-decade low. Beyond that, we find that GBP/USD has dropped for six consecutive quarters – only the third time this has occurred and each previous instance marked a significant turning point. Furthermore, this drive represents a decline that is more than two-standard deviations below the 20-quarter (5-year) average."