Press review - page 467

[Sergey Golubev]

Japanese Yen Q1 2017 Forecast - Japanese Yen Poised to Gain Further For Three Key Reasons (based on the article)

Fundamental Analysis 

• "The Bank of Japan started the year in fairly dramatic fashion as it cut its benchmark interest rate into negative territory, but the BoJ went on to disappoint those looking for further monetary policy easing through the rest of the year. This fact is especially surprising given that National Japanese Consumer Price Index inflation figures showed the country re-entered deflation through the first quarter. It was almost humorous to note the Bank of Japan forecasted inflation would hit 1.7 percent in 2017 while the median private forecast pointed to 0.9 percent growth. Officials finally posted a dramatic cut in inflation and growth forecasts at their July meeting, and further policy easing seemed inevitable." 
• "Japan stands to gain if the United States’ Congress and President approve the much-heralded Trans-Pacific Partnership (TPP) trade agreement. Anti-trade sentiment has nonetheless come to the fore ahead of the US Presidential Elections in November, and ratification of the TPP is far from certain. Aggressive currency manipulation from the Japanese Government could further raise the ire of the US politicians and effectively kill the TPP in its tracks. The Japanese MoF has certainly warned it could intervene if the Yen continues to strengthen, but these political calculations make those threats considerably less credible. Failure to act would clear the USD/JPY to break and stay below ¥100." 
• "The final wildcard for the Yen is not limited to Japan but especially relevant for its currency: will global financial markets remain stable? The near-term correlation between the USD/JPY exchange rate and the USS&P 500 Volatility Index (VIX)—also known as the “fear index”—recently hit its strongest in two years. The correlation has admittedly been volatile, and the USD/JPY shows little link to the VIX when the VIX is low. The fact the JPY surges (USD/JPY declines) when the VIX spikes higher helps to highlight the fact the Yen tends to strengthen in times of financial market turmoil. The recent jump in S&P volatility coincided with Yen strength, and any similar episodes of sharp S&P declines would also likely coincide with JPY gains." 

Technical Analysis

• "USDJPY responded to a critical support confluence in the second half of the year around the 101-handle (100.71-101.26) – this region is defined by the 50% retracement of the 2011 rally, the 1999/2000 lows, former trendline resistance extending off the 1998 & 2007 highs and a median-line extending off the 2009 lows. The exchange rate could not register a weekly close below this mark and as of 12/20 the subsequent rally has marked the largest quarterly advance since Q3 1995 and the largest quarterly range (ATR) since Q4 of 2008. If this was just a zoom & retest of the 2014 breakout, the broader outlook would remain constructive while above this key threshold heading into 2017. Note that a parallel extending off the 2013 highs converges on the June high and highlights possible near-term support at 111.45."
• "The focus heading into Q1 is on a key resistance confluence at 120.18-121.12 where the 2016 open converges on the yearly high-week close, the 78.6% retracement of the 2015 decline, the upper median-line parallel of the embedded ascending structure and basic trendline resistance off the 2015 high. The current rally is at risk heading into this region and we’ll be looking for a pullback to offer favorable long-entries while above confluence support at 111.45." 

[Sergey Golubev]

Gold (XAU/USD) Q1 2017 Forecast - Gold Weakness to Subside With Fed on Hold in First-Half of 2017 (based on the article)

Fundamental Analysis 

• "After raising the benchmark interest rate in December, the upcoming rotation within the Federal Open Market Committee (FOMC) may push the central bank to retain the current policy at the next meeting in February as Chicago Fed President Charles Evans, Philadelphia Fed President Patrick Harker, Dallas Fed President Robert Kaplan and Minneapolis Fed President Neel Kashkari are slate to vote in 2017." 
• "Looking at Fed Funds Futures, market participants largely anticipate the Fed to retain the status quo throughout the first-half of the year as the central bank warns ‘market-based measures of inflation compensation have moved up considerably but still are low; most survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months.’ With that said, the FOMC meetings scheduled for the first-half of 2017 may tame the resilience in the greenback and help cushion the rapid decline in gold price, but the outlook for monetary policy continues to cast a long-term bearish forecast for bullion especially as Fed officials see three rate-hikes in the year ahead." 
• "With the longer-run interest rate dot-plot still projecting a terminal rate around 2.75% to 3.00%, Fed Funds Futures are currently pricing an 80% probability for a move in June 2017, with additional rate-hikes anticipated to come in the second-half of 2017. Expectations for higher U.S. interest rates should continue to weigh on gold prices, but the weakness may subside over the coming months as the FOMC is anticipated to keep the benchmark interest rate on hold throughout the first-half of the year." 

Technical Analysis

• "Gold prices approached a critical support confluence in late-December at 1220/30- a level defined by the 161.8% extension of the decline off the yearly highs, the 76.4% retracement of the advance off the 2015 low, the 2014 low and the lower parallel of the embedded descending parallel formation. Note that the lower-median-line parallel extending off the 2015 low comes in just below and the immediate downside bias is at risk into this key region."
• "Bottom line: heading into next quarter we’ll be looking for a relief rally to offer more favorable short-entries with a break lower risks substantial losses for gold. Such a scenario eyes subsequent support targets at the low-week close / 88.6% retracement at 1083/85 backed by the 2016 open at 1062 & the 2016 low at 1046." 

[Sergey Golubev]

Oil Q1 2017 Forecast - The Real Power of OPEC Will Be Revealed in Q1 2017 (based on the article)

Fundamental Analysis 

• "For traders who like to simplify the markets to a game of supply vs. demand, the Oil market in Q1 2017 should be their World Cup. Heading into the New Year, the OPEC and non-OPEC members will cut supply to the agreed upon amounts. Given this intent, the International Energy Agency (IEA) says recent OPEC action would place the Oil market into a supply deficit. The deficit would be engineered on a mixture of consistent demand combined with OPEC and other producers following through on their pledge to cut supply starting January 1. The view of consistent demand has been supported by consistent inventory draws reported by the Department of Energy as forecasted inventory builds were repeatedly confronted with actual inventory draws in late 2016." 
• "In Vienna, OPEC announced they anticipate ~600,000 fewerbarrels per day of production in H1, 2017. Along with this, the IEA also increased its forecast for global oil demand in 2017 by 100k bpd, stating consumption is likely to rise by 1.4% to 97.6 million barrels a day. In mid-December when non-OPEC producers like Russia, Mexico, and others aligned with OPEC to help balance the over-supply imbalance, Saudi Oil Minister Khalid Al-Falih said at the post-meeting press conference in Vienna that he is willing to cut the Saudi’s production even deeper than already promised. OPEC has agreed to reduce output by 1.2mn bpd from next year with Saudi cutting as much as 486k bpd." 
• "Lastly, while many are looking for prices to move aggressively higher, it is worth noting OPEC is not specifically targeting higher price levels, but rather market balance. Therefore, we could see an increase in production if demand is anticipated to pick up or U.S. E&P’s are seen taking too much market share, which would limit the potential upside." 

Technical Analysis

• "Crude oil price has been reacting positively to the 200 day simple moving average bouncing off the line twice during the previous quarter. This makes seven successful turns in the past 19 months with one failed pivot. Now that the moving average is trending higher, it will become more difficult for prices to hold above it. Do not be surprised to see a false break below this line in Q1."
• "The key level to watch for Bulls is around $40. Below there and the market is at risk of a greater sell-off. As long as prices are above $40, the door is open for sideways and possibly higher trade." 

[Sergey Golubev]

DAX Q1 2017 Fundamental Forecast: Bullish (based on the article)

Fundamental Analysis 

• "While U.S. stocks sit in ‘expensive’ territory, European stocks have just begun to come back to life after spending much of this year congesting. Price action in December finally brought the DAX back up to levels from last December around 11,452. With the combination of a robust ECB QE program driving liquidity for the first three months of next year, we could certainly see some continued-gains in the DAX to test those prior all-time-highs in the 12,400-vicinity." 

[Sergey Golubev]

CAC 40 Q1 2017 Fundamental Forecast: Bearish (based on the article)

Fundamental Analysis 

• "French elections in April introduce a heavy-dose of political risk to this market, and we’ll likely see some element of anticipation in Q1 as we approach those elections. And while the world is coming off of two rather contentious geo-political issues in Brexit and Trump, with both being resolved by even-more gains in equities; this French election cycle comes with a dash of extra risk. Should National Front or Marie Le Pen take more prominence in the run-up to the election, we’ll likely see French stocks facing some additional element of pressure." 

[Sergey Golubev]

S&P 500 Q1 2017 Fundamental Forecast: Neutral (based on the article)

Fundamental Analysis 

• "The S&P 500 is up approximately 12% from the election-night lows. While the momentum on the recent up-trend is really attractive, it’s difficult to justify pure-long stances at current valuations. The S&P 500 could become attractive should prices fall to catch support in the zone from 2,100-2,155. Traders would want to confirm that Daily support in fact holds in this zone before looking long; but should this take place, this would be the ‘buy the dip’ strategy at work. If prices then move to break below 2,032, traders would likely want to abandon the bullish stance, beginning to look bearish on breaks below 2,000." 

[Sergey Golubev]

Nikkei Q1 2017 Fundamental Forecast: Bullish (based on the article)

Fundamental Analysis 

• "The Bank of Japan has been buying stocks for over two years now. And in September, the BoJ got unlimited-firepower for future QE-efforts by swapping to a yield-curve target rather than a rigid and set amount of bond purchases every month; and there is no end-date in sight." 
• "As long as the global ‘recovery’ continues, the Yen should remain weak as driven by the Bank of Japan’s uber-dovish policies. And with weak-Yen, Japanese stocks will likely continue to accrue in value on the basis of more earnings for exporters (weaker Yen means exporters bring back more from overseas transactions)."

[Sergey Golubev]

AUD/USD Q1 2017 Forecast (based on the article)

Australian Dollar to US Dollar forecast for January 2017.
"The forecast for beginning of January 0.72. Maximum rate 0.73, while minimum 0.71. Averaged rate for month 0.72. The exchange rate at the end 0.72, change for January 0.00%."

AUD to USD forecast for February 2017.
"The forecast for beginning of February 0.72. Maximum rate 0.74, while minimum 0.72. Averaged rate for month 0.73. The exchange rate at the end 0.73, change for February 1.39%."

Australian Dollar to US Dollar forecast for March 2017.
"The forecast for beginning of March 0.73. Maximum rate 0.73, while minimum 0.71. Averaged rate for month 0.72. The exchange rate at the end 0.72, change for March -1.37%."

[Sergey Golubev]

NZD/USD Q1 2017 Forecast (based on the article)

NZ Dollar to US Dollar forecast for January 2017.
"The forecast for beginning of January 0.69. Maximum rate 0.69, while minimum 0.67. Averaged rate for month 0.68. The exchange rate at the end 0.68, change for January -1,45%."

NZD to USD forecast for February 2017.
"The forecast for beginning of February 0.68. Maximum rate 0.69, while minimum 0.67. Averaged rate for month 0.68. The exchange rate at the end 0.68, change for February 0,00%."

NZ Dollar to US Dollar forecast for March 2017.
"The forecast for beginning of March 0.68. Maximum rate 0.69, while minimum 0.67. Averaged rate for month 0.68. The exchange rate at the end 0.68, change for March 0,00%."

[Sergey Golubev]

Hang Seng Index Q1 2017 Forecast (based on the article)

• "Underlying sentiment surrounding Hong Kong stocks has remained negative with underlying concerns surrounding competitiveness and rising yields amplified by fears over 2017 trade tensions."
• "There were further underlying concerns surrounding geo-political risks with the appointment by US President-elect Trump’s transition team of Peter Navarro to head a US council on trade increasing concerns that there would be serious tensions between the US and China over trade policies during 2017, which could have a very damaging impact on the Hong Kong economy."
• "All Hang Seng sectors were in negative territory with the Finance sector declining 0.84%. The Hang Seng China Enterprises index fell 1.41% on the day."