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USD/JPY testing major downside pivot (based on dailyfx article)
Trading the News: U.K. Consumer Price Index (based on dailyfx article)
Slowing inflation in the U.K. may spur a larger correction in the GBP/USD as it allows the Bank of England (BoE) to retain its highly accommodative policy stance for an extended period of time.
What’s Expected:
Why Is This Event Important:
The BoE may further delay its exit strategy in an effort to address the ongoing slack in the U.K. economy, but Governor Mark Carney may show a greater willingness to normalize monetary policy sooner rather than later as the central bank anticipates a stronger recovery in 2014.
Easing input prices paired with the slowdown in private sector credit may prompt businesses to offer discounted prices to U.K. households, and a weaker-than-expected inflation print may generate a larger pullback in the GBP/USD as it raises the BoE’s scope to retain its highly accommodative policy stance for an extended period of time.
Nevertheless, the resilience in household consumption along with the pickup in wage may encourage U.K. firms to raise consumer prices, and a stronger-than-expected CPI print may heighten the bullish sentiment surrounding the British Pound as it fuels interest rate expectations.
How To Trade This Event Risk
Bearish GBP Trade: U.K. CPI Slows to 1.6% or Lower
- Need red, five-minute candle following the release to consider a short British Pound trade
- If market reaction favors selling sterling, short GBPUSD with two separate position
- Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward
- Move stop to entry on remaining position once initial target is hit, set reasonable limit
Bullish GBP Trade: Headline & Core U.K. Inflation Exceeds Market Expectations- Need green, five-minute candle to favor a long GBPUSD trade
- Implement same setup as the bearish British Pound trade, just in opposite direction
Potential Price Targets For The ReleaseGBP/USD Weekly
GBP/USD H4
February 2014 U.K. Consumer Price Index
GBPUSD M5 : 24 pips price movement by GBP - CPI news event :
The YoY figure for U.K. CPI came in at 1.7% as expected and the MoM figure at 0.5%. The Pound saw a move to the upside that was quickly retraced, but the GBPUSD pair ended the day up 45 pips from the release. As for insight into this print, if we do see CPI come in under market expectation it is likely that we may see GBP weakness. This may be especially pronounced in the context of a possible double top and resurgence of USD strength post-Retail Sales that came in better than expected on Monday morning in NY.
2014-04-14 14:00 GMT (or 16:00 MQ MT5 time) | [USD - Business Inventories]
if actual < forecast = good for currency (for USD in our case)
==========
U.S. Business Inventories Rise 0.4% In February, Less Than Expected
Business inventories in the U.S. rose by less than expected in the month of February, according to a report released by the Commerce Department on Monday, although the report also showed a notable rebound in business sales during the month.
The report showed that business inventories rose by 0.4 percent in February, matching the increase seen in January. Economists had expected inventories to increase by about 0.6 percent.
The increase in business inventories was partly due to higher inventories at manufacturers, which rose by 0.7 percent in February after edging up by 0.2 percent in January.
Inventories at merchant wholesalers also increased by 0.5 percent in February after climbing by 0.8 percent in the previous month.
On the other hand, the report said inventories at retailers came in unchanged in February after rising by 0.3 percent in January.
Meanwhile, the Commerce Department also said business sales increased by 0.8 percent in February after tumbling by 1.1 percent in the previous month.
Sales by manufacturers rose by 0.9 percent in February after falling by 0.7 percent in January, while sales by both retailers and merchant wholesalers increased by 0.7 percent.
With inventories and sales both rising, the total business inventories/sales ratio was unchanged from the previous month at 1.31. The ratio came in at 1.28 in the same month a year ago.
Palladium Price Highest Since 2011 Due To Russian Worries, South African Strike
Palladium futures hit their highest level since 2011 on Monday as heightened geopolitical tensions surrounding Russia and Ukraine have exacerbated supply worries at a time when a major strike is occurring in South Africa.
Some analysts look for further gains over the longer term, while others described themselves as constructive but offered caution with so much bullish news already factored into prices.
As of 10:37 a.m. EDT, palladium for June delivery was $9.20, or 1.1%, higher to $816 per ounce on the New York Mercantile Exchange. It traded as high as $817, which is the strongest level since August 2011 on a futures continuation chart. Sister metal July platinum was up $7.70, or 0.5%, to $1,470.30 an ounce.
The news flow boosting prices is largely the same as in recent weeks – the Ukraine-Russia geopolitical crisis and strikes in South Africa — but the metal keeps stair-stepping higher as both news stories continue to play out.
“It’s worries about the supply side,” said one North American trader. He said the premium on sponge, which is metal in a powder form used for industrial purposes, is up to around $12 an ounce for palladium and around $4 to $5 an ounce for platinum.
Pro-Russian protestors are still occupying government buildings in eastern Ukraine after a government deadline passed for the demonstrators to leave. The world is watching to see what the Ukrainian and Russian governments do next in the aftermath of Russia’s annexation of the Crimean region of Ukraine.
The potential for further Russian involvement adds to worries about potential Western trade and economic sanctions against Russia, which is the world’s largest palladium producer.
“It’s such an unknown and it creates uncertainty,” said Bill O’Neill, one of the principals with LOGIC Advisors. “I see no evidence of any kind of supply interruption (from Russia) at this point, but that’s the fear the market has.”
In particular, traders wonder if Russia’s Norilsk Nickel , a major nickel company but also the world’s largest palladium producer, will have trouble selling metal and funding exploration and production down the road, said Bart Melek, head of commodities strategy with TD Securities.
“This (palladium) is a market already in a fairly large (supply) deficit, and this just makes it worse,” Melek said.
The Russian worries come during a lengthy disruption of supplies of platinum group metals as a result of a strike by the Association of Mineworkers and Construction Union against three major producers in South Africa. The labor action began in late January.
The Russian and South African concerns caused an outsized move on a small market such as palladium since most of the world’s metal come from just two countries, O’Neill pointed out. According to the Johnson Matthey data last year, Russia provided 2.6 million ounces of global palladium mine output in 2013 and South Africa accounted for 2.3 million. Third and fourth places on the list were far behind – North America with 930,000 ounces and Zimbabwe with 310,000.
Goldman Sachs, in a report released Sunday, said Western nations may be most likely to impose sanctions against Russian exports of metals that make up a small portion of the global supply, such as copper and aluminum. However, the bank also said there is potential for Russia to withhold metals such as palladium in “counter sanctions,” since it commands so much of the world’s supply of a metal essential to the global auto market due to its use in catalytic converters.
The bullish news flow comes after two palladium-backed exchange-traded funds were launched in South Africa this spring, taking more metal off of the open market. The ETFs trade like stocks but are backed by palladium put into storage. The two ETFs had inflows of some 270,000 ounces, or 7.6 metric tons, during their first two weeks, according to a morning metals report from TDS.
TD Securities forecasts a 2014 palladium supply deficit of 1.6 million ounces. Earlier this month, HSBC forecast a supply deficit of 959,000 ounces.
Gold prices finished the U.S. day session higher and hit a three-week high Monday. The market was boosted on safe-haven buying interest, technical buying and short covering. The escalation of the Russia-Ukraine conflict prompted the safe-haven bid, while the improving chart picture for gold caused the technical buying and short covering. June gold was last up $8.60 at $1,327.60 an ounce. Spot gold was last quoted up $9.20 at $1,328.00. May Comex silver last traded up $0.049 at $19.995 an ounce.
Russia-Ukraine tensions are back on the front burner. During the weekend Ukrainian troops were mobilized to counter a surging pro-Russia movement by protesters who have tried to occupy some Ukraine cities. Ukraine government officials have accused Russia of instigating and even arming the protesters. Meantime, Russian troops are still massed on the Russia-Ukraine border. The NATO secretary-general last week those troops appear ready to move on short notice. This situation has flared up and once again has become a potential geopolitical flash point. There are also questions regarding how the U.S. will react to the latest developments in the region. It’s very likely this conflict will remain a major markets-moving factor for at least the rest of this week. This will at the least limit selling interest in gold for the near term, if not be outright supportive for upside price action.
In other news Monday, European Central Bank president Mario Draghi said Saturday the recent strength of the Euro currency could prompt fresh easing of ECB monetary policy, in order to keep deflationary pressures on the EU economy in check. This news dropped the Euro and supported the U.S. dollar index.
The featured U.S. economic report of the day was retail sales data for March, which came in better than expected, but had little impact on the precious metals.
Technically, June gold futures prices closed nearer the session high Monday and hit a fresh three-week high. Bulls and bears are now back on a level near-term technical playing field, but the bulls have momentum on their side. The gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,350.00. Bears’ next near-term downside breakout price objective is closing prices below solid technical support at $1,300.00. First resistance is seen at Monday’s high of $1,331.40 and then at $1,340.00. First support is seen at Monday’s low of $1,318.70 and then at Friday’s low of $1,314.00. Wyckoff’s Market Rating: 5.0
May silver futures prices closed nearer the session high on tepid short covering in a bear market. The bears have the overall near-term technical advantage. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at last week’s high of $20.40 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at the March low of $19.575. First resistance is seen at today’s high of $20.14 and then at $20.25. Next support is seen at Monday’s low of $19.72 and then at last week’s low of $19.60. Wyckoff’s Market Rating: 3.0.
May N.Y. copper closed up 5 points at 304.20 cents Monday. Prices closed nearer the session low. Bears have the overall near-term technical advantage. Copper bulls’ next upside breakout objective is pushing and closing prices above solid technical resistance at 310.00 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at last week’s low of 297.65 cents. First resistance is seen at Monday’s high of 306.15 cents and then at last week’s high of 308.00 cents. First support is seen at 302.50 cents and then at 300.00 cents. Wyckoff’s Market Rating: 3.5.
2014-04-15 08:30 GMT (or 10:30 MQ MT5 time) | [GBP - CPI]
if actual > forecast = good for currency (for GBP in our case)
==========
Slight fall in Inflation to 1.6% in March 2014
The rate of inflation faced by households fell to 1.6% in the year to March 2014. The Consumer Prices Index (CPI) – the headline measure of inflation – grew by 1.6% in the year ending March 2014, down from 1.7% in February. Putting the CPI figure into context, a basket of shopping that cost £100.00 in March 2013 would have cost £101.60 in March 2014.
CPIH, the measure which includes owner occupiers’ housing costs, grew by 1.5%, down from 1.6% in February. RPIJ, the improved variant of the Retail Prices Index (RPI) calculated using formulae that meet international standards, grew by 1.8%, down from 2.0%.
The slowdown in inflation came primarily from the price movements of motor fuels. Petrol prices were unchanged between February and March this year compared with a rise of 2.2 pence per litre between the same two months a year ago. Diesel prices fell by 0.4 pence per litre this year compared with a rise of 1.9 pence per litre in 2013.
Other smaller downward effects came from clothing and furniture & household goods. In each case, prices rose between February and March 2014 but by less than between the same two months a year ago.
The most notable, partially offsetting, upward effects came from the restaurants & hotels and alcohol & tobacco sectors. With the former, prices for accommodation services rose by more between February and March 2014 than between the same two months of 2013. With the latter, the upward contribution came principally from spirits.
It is also worthwhile thinking about the sectors that contribute to the actual rate of inflation (i.e. what makes up the 1.6%) in addition to the sectors that contribute to changes in the rate (i.e. what made inflation change from 1.7% to 1.6%). For most recent months, prices in the housing, water, electricity, gas & other fuels sector have been the largest contributor to the inflation rate and currently account for a quarter of inflation. On the other hand, motor fuels are currently having a downward pull on inflation with prices down by 6.6% in the year to March. Average petrol prices were around £1.29 per litre in March 2014 compared with over £1.38 per litre a year earlier.
Forex Trading Video: EURUSD Drops and GBPUSD At-Risk On Monetary Policy Focus
The strong risk aversion of the last two weeks was on a weak footing to start this new trading period. In its absence, we find rate speculation more than capable of taking its place. Responding to a very clear threat, the Euro dropped Monday against all of its major counterparts. Clearly unnerved by the currency's strength, ECB President Draghi upgraded his threat to forcibly drive the Euro down via monetary policy channels. Ahead, we will see whether the US Dollar and Pound will exploit the unfavorable position of their counterpart or join it with important inflation readings. The risk theme is still in play, but our attention must now be split with interest rate speculation. We look at both drivers and their trade implications in today's Trading Video.
German ZEW falls to 43.2 points – EUR/USD pressured under 1.38
ZEW disappointed in the headline but surprised in the current situation component. The headline Economic Sentiment figure dropped to 43.2 points while the Current Situation actually improved to 59.5 points. The important German ZEW Economic Sentiment Index for April was expected to remain at similar levels to last month’s 46.6 points. The “Current Situation” sub component was predicted to remain around 51.3 points. The all European figure was expected to tick down from 61.5 points and it did: to 61.2 points. The German figure is of higher importance.
EUR/USD was pressured towards the release, trading just under 1.38. It immediately fell to new lows of 1.3789, but recovered back to the round number of 1.38. It seems unable to retake previous levels, but the numbers are not too bad to trigger an extension of the fall.
2014-04-15 09:00 GMT (or 11:00 MQ MT5 time) | [EUR - German ZEW Economic Sentiment] :
2014-04-15 12:30 GMT (or 14:30 MQ MT5 time) | [CAD - Manufacturing Sales]
if actual > forecast = good for currency (for CAD in our case)
==========
USDCAD M5 : 25 pips range price movement by CAD - Manufacturing Sales news event :
2014-04-15 12:30 GMT (or 14:30 MQ MT5 time) | [USD - CPI]
if actual > forecast = good for currency (for USD in our case)
==========
U.S. Consumer Prices Rise Slightly More Than Expected In March
Consumer prices in the U.S. rose by slightly more than expected in the month of March, according to a report released by the Labor Department on Tuesday, with the growth largely reflecting higher prices for shelter and food.
The Labor Department said its consumer price index rose by 0.2 percent in March after inching up by 0.1 percent in each of the two previous months. Economists had been expecting another 0.1 percent increase.
The core consumer price index, which excludes food and energy prices, also rose by 0.2 percent in March after ticking up by 0.1 percent for three straight months. Core prices had been expected to inch up by 0.1 percent once again.