Press review - page 76

[Sergey Golubev]

What Are We Trading?

When we place a trade in the forex market, we are buying one currency and selling the other. This is why forex is traded in currency “pairs.” As a visual example, we can reference the image below.

If we buy a currency pair, like the EUR/USD, we are buying euros and selling dollars. We place this trade when we believe the EUR/USD exchange rate will rise and allow us to sell back our euros for a larger amount of dollars at some point in the future.

But in the forex market, we can trade the other direction as well. So we could sell the EUR/USD, effectively selling euros and buying dollars. With that trade, we would want the EUR/USD exchange rate to fall so we can buy back the euros for less dollars than we originally sold them for.

So not only do we have a goal of buying low and later selling high, we have the option to sell high first, and then buy low later. There are no restrictions on short selling and we do not need to own any euros prior to selling the EUR/USD. This is what people refer to as a “two-way market.”

[Sergey Golubev]

GBPUSD Fundamentals

Fundamental Forecast for the British Pound: Bullish

• British Pound Soars as UK Retail Sales Rise Most in 3 Years
• Price & Time: Sell GBP/USD Next Week?

The British Pound appears to be coiling up for another run at the 1.6600 handle as the positive developments coming out of the U.K. economy raises the Bank of England’s (BoE) scope to normalize monetary policy ahead of schedule.

There’s speculation that the BoE will lower the unemployment threshold to 6.5% from 7.0% in its quarterly inflation report scheduled for February 12, and this theme presents the largest risk to the bullish British Pound forecast as market participants weigh the outlook for monetary policy. Nevertheless, Credit Suisse overnight index swaps are starting to show expectations for higher interests over the next 12-months as the BoE moves away from its easing cycle, and the shift policy outlook should continue to prop up the sterling over the near to medium-term as the central bank starts to unwind its non-standard measures.

With that said, we will continue eye the topside targets for the GBPUSD as long as it holds above the 1.6300 handle, and the rebound from key support may spark fresh highs in the pound-dollar as it continues to carve a series of higher highs paired with higher lows.

[Sergey Golubev]

NZDUSD Fundamentals (based on fxempire.com article)

The NZD/USD tumbled this week to trade at 0.8260 but continued to outpace its Tasmanian cousin the Aussie. The kiwi eased on the strength of the US dollar and concerns over China. Traders will wait to see what Graham Wheeler has to say at the RNZ meeting. The kiwi is heading for a 2% weekly gain against its trans-Tasman counterpart after data showed the divergent neighboring economies which will likely see interest rates move in New Zealand’s favor.

The kiwi rose to eight-year high 94.80 Australian cents this week, trading at 94.11. The NZD fell to 82.99. New Zealand’s economy is looking increasingly attractive to investors, with a survey this week showing business confidence at a 20-year high and house prices continuing to rise, while Australian jobs data surprised analysts with a drop in employment in December. Investors will watch New Zealand inflation figures next week to get a sense on how early central bank Governor Graeme Wheeler will start hiking rates.

Forex traders put the odds in favor that the New Zealand Reserve bank will lift interest rates 118 basis points over the coming 12 months, while the Reserve Bank of Australia is expected to cut its key rate by 7 basis points over the same period, according to the Overnight Index Swap curve.

[Sergey Golubev]

Forex Fundamentals January 20 - 24 (all majors) - based on investing.com article

The dollar rose to two month highs against the euro on Friday as U.S. data reinforced the view that the economic recovery is gaining enough traction for the Federal Reserve to continue tapering stimulus measures.

• EUR/USD fell to 1.3517, the lowest level since November 25 and was last down 0.58% to 1.3539. For the week, the pair lost 0.94%.
• USD/CHF rose as high as 0.9120, the highest since January 9 and settled at 0.9100, 0.60% higher for the day, and extending the week’s gains to 1.20%.
• GBP/USD rose to highs of 1.6310, the strongest since January 14 and was last up 0.42% to 1.6420. For the week, the pair rose 0.20%.
• Australia’s dollar ended the week at three-and-a-half year lows against the greenback after dire employment data on Thursday was seen as increasing the likelihood that the Reserve Bank will cut interest rates to bolster the economy. AUD/USD hit lows of 0.8764 on Friday, the weakest since July 2010 and was last down 0.465 to 0.8779. For the week, the pair tumbled 2.96%.
• New Zealand’s dollar was sharply lower against the greenback on Friday, with NZD/USD dropping 1.17% to 0.8251 at the close, extending the week’s losses to 1.41%.
• The Canadian dollar also ended the week sharply lower against the greenback, with USD/CAD settling at 1.0961, not far from the four year high of 1.0990 struck on Wednesday.

Monday, January 20

• China is to release data on fourth quarter gross domestic product, the broadest indicator of economic activity and the leading indicator of economic growth. The country is also to produce data on fixed asset investment, industrial production and retail sales.
• Germany is to produce data on producer price inflation, while the Bundesbank is to publish its monthly report.
• Markets in the U.S. are to remain closed for the Martin Luther King Day holiday.
• New Zealand is to release data on consumer price inflation, which accounts for the majority of overall inflation.

Tuesday, January 21

• The ZEW Institute is to release its closely watched report on German economic sentiment, a leading indicator of economic health.
• The U.K. is to publish a private sector report on industrial order expectations.
• Canada is to produce data on wholesale sales and manufacturing sales.

Wednesday, January 22

• Australia is to publish data on consumer price inflation and a private sector report on consumer sentiment.
• The BoJ is to announce its benchmark interest rate and publish its monetary policy statement, which outlines economic conditions and the factors affecting the bank’s decision. The announcement is to be followed by a press conference.
• The U.K. is to release official data on the change in the number of people unemployed and the unemployment rate, as well as data on average earnings and public sector borrowing. Meanwhile, the Bank of England is to publish the minutes of its most recent policy setting meeting.
• The ZEW Institute is to publish a report on economic expectations in Switzerland, a leading indicator of economic health.
• The BoC is to announce its benchmark interest rate and publish its rate statement and monetary policy report. The announcement is to be followed by a press conference.
• New Zealand is to release private sector data on manufacturing activity.

Thursday, January 23

• China is to release the preliminary estimate of the HSBC manufacturing index, a leading indicator of economic health.
• The euro zone is to release preliminary data on manufacturing and service sector activity, a leading indicator of economic health. Germany and France are also to release individual reports.
• Canada is to produce data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity.
• The U.S. is release the weekly report on initial jobless claims and a private sector report on existing home sales.

Friday, January 24

• Canada is to round up the week with data on consumer price inflation.

[Sergey Golubev]

EURUSD Fundamentals

Fundamental Forecast for Euro: Neutral

• The Euro was smacked with reality this week when 2013 German GDP came in at +0.4%.
• Incoming January PMI figures offer little reason for enthusiasm.
  

The Euro was the second worst major performer this past week, losing -0.95% to the top US Dollar, while gaining only against the beleaguered Australian Dollar, by +1.44%. By no means was this severely negative for the Euro, but no longer are the positive fundamental drivers providing the same spark – namely speaking sustained low Italian and Spanish yields and a lack of deflation appearing in regional CPI readings.

The past week showed signs of the hope and optimism that has helped carry the Euro starting to crack. It was a stark reminder that the Euro-Zone remains mired in a period of stagnation when the final 2013 German growth reading showed that the Euro-Zone’s largest economy only grew +0.4%. Euro-Zone inflation remained near multi-year lows in December (core at +0.7% (y/y) unch), showing that demand across the region remains weak. Neither screamed “buy the Euro.”

[Sergey Golubev]

GBPUSD Fundamentals January 20 - 24 - based on investing.com article

The pound rose against the dollar on Friday after data showing that U.K. retail sales rose sharply in December bolstered the outlook on the economic recovery, fuelling expectations that the Bank of England may rise interest rates ahead of other central banks.

GBP/USD rose to highs of 1.6457, the strongest since January 14 and was last up 0.42% to 1.6420. For the week, the pair rose 0.20%.

Cable is likely to find support at 1.6308, Friday’s low and resistance at 1.6500.

Monday, January 20

Markets in the U.S. are to remain closed for the Martin Luther King Day holiday.

Tuesday, January 21

The U.K. is to publish a private sector report on industrial order expectations.

Wednesday, January 22

The U.K. is to release official data on the change in the number of people unemployed and the unemployment rate, as well as data on average earnings and public sector borrowing. Meanwhile, the Bank of England is to publish the minutes of its most recent policy setting meeting.

Thursday, January 23

The U.S. is release the weekly report on initial jobless claims and a private sector report on existing home sales

[Sergey Golubev]

GBP/USD in consolidation mode after Friday’s huge gains

GBP/USD is trading around 200SMA at 1.6417, rebounding from Friday’s high at 1.6457, but not ready to go below 1.64.

The Pound may get some more fuel, but later

The pair got huge support from the recently released UK retail sales adding almost 150 pips during the hour of the release. Nevertheless, we wouldn’t be too optimistic about the record rise of the numbers. According to ONS, there might be the case of seasonal effect, thus we may see significant revisions next month. As for this week, we will get some quite important reports for digestion, and the labor data scheduled for Wednesday is one of them. We expect quite positive developments in this sector, thus, the pair has good potential to go higher. The released today Rightmove house price index met the expectations, and there is no more UK data scheduled for today, thus we expect tight ranges during the whole Monday close to 1.6420 area.

What are today’s key GBP/USD levels?

Today's central pivot point can be found at 1.6393, with support below at 1.6359 (S1), 1.6318 (S2) and 1.6277 (S3), with resistance above at 1.6511 (R1), 1.6552 (R2), and 1.6594 (R3). Hourly Moving Averages are largely bullish, with the 200SMA at 1.6417 and the daily 20EMA flat at 1.6410. Hourly RSI is neutral at 55.

[Sergey Golubev]

NZD/USD outlook down this week

Weak NZ inflation and housing data plus broad US dollar strength should hurt NZD/USD this week, notes Imre Speizer, FX Strategist at Westpac.

Key Quotes

"NZ’s Q4 CPI release may alarm some with its low headline quarterly rate, although familiar observers will note Q4 is seasonally weak."

"Similarly, a fall in the pace of house sales may cause a rethink regarding the expected date of the first RBNZ rate hike."

"We expect housing weakness to be temporary and not dissuade the RBNZ from proceeding."

"Still, NZD markets may take a negative view of the above and sell NZD/USD, particularly against a backdrop of US dollar strength."

"The 0.8400 area last week provided a formidable obstacle, unlikely to be broken in the near term. Rather it should provide the launching pad for a multi-day period of NZD selling, down to 0.8165 and possibly 0.8110."

"Looking further ahead, though, by mid-2014 NZ’s strong fundamentals should be even more evident, increasing interest rate differentials taking NZD/USD towards 0.8600. The main risk to this outlook is that US fundamentals exceed our expectations, causing the US dollar to outperform instead."

[Sergey Golubev]

2013-01-20 02:00 GMT (or 03:00 MQ MT5 time) | [CNY - GDP]

• past data is 7.8%
• forecast data is 7.6%
• actual data is 7.7% according to the latest press release

if actual > forecast = good for currency (for CNY in our case)

==========

China's Economic Growth Slows to 7.7%

The nation's economy grew 7.7% in the fourth quarter from a year ago, slower than the 7.8% it posted in the third quarter, according to data released Monday by China's National Bureau of Statistics. For the year it also posted 7.7% growth, matching the revised pace it recorded in 2012.

"There was steady economic progress [last year] and this was no small achievement," the bureau said in a statement. But it added that the Chinese economy still faces imbalances, while "fundamentals of the economic recovery are still not stable."

The fourth-quarter increase was higher than a median 7.6% gain forecast by 13 economists in a Wall Street Journal survey.

"We don't see any areas that would support an economic rebound in the first quarter," said Ma Xiaoping, economist with HSBC Holdings PLC.

[Sergey Golubev]

E&Y Item Club Urges BoE To Tie Rate Hike To Real Wage Growth (based on rttnews article)

The Ernst and Young Item Club on Monday urged the Bank of England to tie interest rate hike to real wage growth as unemployment target is set to be achieved this year.

In the latest quarterly forecast, the think tank said unemployment will fall below the threshold 7 percent in the first half of the year.