Press review - page 128

Sergey Golubev
Moderator
113440
Sergey Golubev  

EUR/USD extends gains on dovish Fed policy meeting minutes

The dollar slid against the euro on Thursday after minutes from the Federal Reserve's March policy meeting revealed monetary authorities unanimously voted to scrap a threshold that would trigger rate hikes.

A better-than-expected report on weekly jobless claims in the U.S. cushioned losses but only slightly.

In U.S. trading, EUR/USD was up 0.25% at 1.3890, up from a session low of 1.3836 and off a high of 1.3899.

The pair was likely to find support at 1.3673, last Friday's low, and resistance at 1.3948, the high from March 17.

The Federal Reserve Board of Governors unanimously voted to scrap a threshold that would hike interest rates once the unemployment rate hits 6.5%, according to the minutes of the Fed's March policy meeting released Thursday.

In the past, the Fed had indicated rates were set to rise when the unemployment rate hits or approaches 6.5% provided that figure accompanied a 2.5% inflation rate.

Today, the headline unemployment rate stands at 6.7%, not far from the previous threshold, labor markets remain slack and inflation remains well below 2.5%.

The Federal Reserve decision to do away with its rate-hike target left markets convinced that interest rates will remain low for some time to come, even after the U.S. central bank winds down monetary stimulus programs.

Elsewhere, the Labor Department reported that the number of individuals filing for initial jobless benefits in the week ending April 4 fell by 30,000 to 300,000, the lowest since May of 2007, from the previous week's upwardly revised total of 332,000.

Analysts had expected jobless claims to decline to 320,000, though the numbers did little to boost the dollar against the euro.

In the euro zone, Greece made a successful return to the financial markets on Thursday, raising €3 billion in its first bond auction since 2010, when Athens sought its first bailout.

The euro was up against the pound, with EUR/GBP up 0.32% to 0.8276, and down against the yen, with EUR/JPY down 0.31% at 140.86.

The Bank of England left the benchmark interest rate unchanged at 0.50% earlier Thursday, in a widely anticipated move.

On Friday, the U.S. is to round up the week with data on producer price inflation and the preliminary report on the University of Michigan's consumer sentiment index.

Sergey Golubev
Moderator
113440
Sergey Golubev  

AUD/USD holds above 0.9400

Even though the AUD/USD has seen intraday volatility, the pair continues to trade above 0.9400, close to multi-month highs during the New York session.

The Aussie climbed to a fresh 5-month high of 0.9460 Thursday, underpinned by much better than expected Australian employment figures which offset falling stocks weigh. With dips contained by the 0.9400 mark, the AUD/USD has managed to hold onto gains and it is presently at 0.9420, up 0.3% on the day.

AUD/USD technical levels

In terms of technical levels, next resistances are seen at 0.9460 (Apr 10 high), 0.9480 (Nov 8 high) and 0.9500 (psychological level). On the flip side, supports are seen at 0.9400 (intraday level), 0.9370 (Apr 10 low) and 0.9334 (Apr 9 low).

Sergey Golubev
Moderator
113440
Sergey Golubev  

Dollar Plunges as Market Weighs on Federal Reserve’s Minutes (the source)



The dollar plunged to its lowest in three weeks versus the Swiss franc and the yen on Thursday. The decline was fuelled by a report of the minutes of the Federal Reserve’s policy meeting on March that indicated that a hike in interest rates won’t happen anytime soon.

The dollar was trading 0.5 percent lower against the yen at 101.41, after earlier touching 101.34, its lowest level since March 19. The U.S. currency also fell against the Swiss franc to 0.8753, a three-week low as the Treasury’s two year bonds plunged steeply. The dollar was last trading 0.4 percent lower at 0.8760 franc.
The dollar index also plunged to its 79.330, its lowest level in three weeks, which is slightly below 80.599, its strongest level in seven weeks which it hit on April 4. It fell 0.1 to 79.378 by the time the article was published.

The dollar has recorded weak performance against the yen in four out of the past five trading sessions. The currency also plunged against the Swiss franc for the fourth consecutive trading day on Thursday.

A report by U.S. Labor Department that showed that new jobless claims fell to nearly a seven-year low failed to prop the dollar. New unemployment claims declined to 300,000, well below economists’ estimate of 320,000.

"The events of the past week have tempered expectations for an early rate rise and that has undermined the dollar," Joe Manimbo, a Washington-based senior market analyst at Western Union Business Solutions told Reuters. "Prior to the Fed minutes, the market was expecting a rate increase in early 2015. Now it has been pushed back to the middle or even the second half of next year," he said.

FOREX-Dollar stumbles as rate hike expectations pushed back | Reuters
  • uk.reuters.com
* Fed minutes taken as dovish, U.S. yields drop * Drop in U.S. jobless claims fails to lift dollar NEW YORK, April 10 (Reuters) - The dollar dropped to three-week lows against the yen and the Swiss franc on Thursday, sliding for a second day after minutes of the Federal Reserve's March meeting disappointed investors who had been positioned for...
Sergey Golubev
Moderator
113440
Sergey Golubev  

2014-04-10 22:45 GMT (or 00:45 MQ MT5 time) | [NZD - Food Price Index (FPI)]

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

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New Zealand March Food Prices Dip 0.3%

Food prices in New Zealand eased 0.3 percent on month in March, Statistics New Zealand said on Friday.

That follows the 1.0 percent decline in February and the 1.2 percent gain in January.

On a yearly basis, food prices climbed 1.2 percent after adding 0.2 percent in February and 0.9 percent in January.

The 1.6 percent fall for grocery food was influenced by price falls across most of the subgroups.

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NZD/USD Forecast April 11, 2014, Technical Analysis

The NZD/USD pair fell after initially trying to rally during the session, showing that perhaps we are going to pull back slightly. The area between here and the 0.85 level should offer plenty of support, and as a result we are willing to buy a supportive candle between the two levels. We believe that a supportive daily candle would be reason enough to serve buying as is market would be going higher eventually as the upward momentum is ready to continue. We ultimately believe that the 0.90 level is the target, and that the New Zealand dollar will eventually head to that area.



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NZD/USD Fundamental Analysis April 14, 2014 Forecast

The NZD/USD  fell to trade at 0.8642 on more lackluster Chinese economic data. Data this morning showed that Chinese inflation eased to 2.4% and the producer’s price index also printed lower than expected. Last month the Reserve Bank embarked on a tightening cycle, lifting interest rates 25 basis points to 2.75 percent as it tries to stem inflationary pressure in the economy. Food prices make up almost 19 percent of the consumer price index, the inflation measure used by the central bank. First-quarter CPI is due for release next week.

REINZ, the most up to date source of real estate data in New Zealand, announced today that there were 7,315 dwelling sales in the month of March, down 10.0% on March last year, but up 19.4% compared to February. The national median price reached a new record high of $440,000, which was an increase of $44,000 compared to March 2013, and an increase of $25,000 from February. Auckland and Canterbury/Westland both recorded new high median prices of $637,000 and $401,000, respectively.

The food price index fell 0.3 percent in March following a 1 percent fall in February, according to Statistics New Zealand. Food prices rose 1.2 percent on an annual basis, the first time all five components of the index increased since September 2011.

Sergey Golubev
Moderator
113440
Sergey Golubev  

2014-04-11 01:30 GMT (or 03:30 MQ MT5 time) | [CNY - CPI]

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

==========

China Inflation Rises 2.4% On Year In March

Inflation in China was up 2.4 percent on year in March, the government said on Friday.

That was in line with expectations and up from 2.0 percent in February.

Among the individual components, food prices jumped 4.1 percent on year, while non-food prices added 1.5 percent.

The data also showed that producer prices remained stuck in deflation, contracting 2.3 percent on year. That missed forecasts for -2.2 percent following the 2.0 percent decline in the previous month.

Sergey Golubev
Moderator
113440
Sergey Golubev  
Trading the News: U. of Michigan Confidence (based on dailyfx article)

A rebound in the U. of Michigan Confidence survey may spur a larger pullback in the EUR/USD as it raises the outlook for the U.S. economy.

What’s Expected:


Why Is This Event Important:

Indeed, positive developments coming out of the world’s largest economy may put increased pressure on the Federal Open Market Committee (FOMC) to normalize monetary policy sooner rather than later, but it seems as though Fed Chair Janet Yellen remains reluctant to move away from the zero-interest rate policy as the central bank head continues to highlight the ongoing slack in the real economy.

The resilience in private sector consumption along with the pickup in consumer credit may generate a meaningful rebound in household sentiment, and an upbeat print may generate a bullish reaction in the USD as it limits the Fed’s scope to retain its highly accommodative policy stance for an extended period of time.

However, subdued wage growth paired with the persistent slack in the real economy may spark a further downturn in consumer confidence, and a dismal development may heighten the bearish sentiment surrounding the greenback as the FOMC retains a rather cautious outlook for the region.

How To Trade This Event Risk

Bullish USD Trade: Household Sentiment Rises to 81.0 or Higher

  • Need to see red, five-minute candle following the release to consider a short trade on EUR/USD
  • If market reaction favors a long dollar trade, sell EUR/USD 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
Bearish USD Trade: Consumer Confidence Survey Disappoints
  • Need green, five-minute candle to favor a long EUR/USD trade
  • Implement same setup as the bullish dollar trade, just in the opposite direction
Potential Price Targets For The Release

EUR/USD H4


  • Outlook Remains Bullish After Carving Higher Low around 1.3650-60
  • Break of Bearish Trend Favors Topside Targets as RSI Preserves Long-Term Upward Momentum
  • Interim Resistance: 1.3960-70 (61.8% expansion)
  • Interim Support: 1.3650 (78.6 expansion) to 1.3660 (23.6 retracement)

March 2014 U. of Michigan Confidence Survey

AUDUSD M5 : 26 pips price movement by USD - Michigan Consumer Sentiment news event :


GBPUSD M5 : 38 pips price movement by USD - Michigan Consumer Sentiment news event :


NZDUSD M5 : 26 pips price movement by USD - Michigan Consumer Sentiment news event :


The University of Michigan Confidence survey missed estimates last month to come in at 79.0 vs. 82.0 as surveyed by economists. The figure has been on the general decline since hitting a high over summer not seen since 2007. February’s reading led to a slight uptick in the EUR/USD, but small move did not hold into the close.

Sergey Golubev
Moderator
113440
Sergey Golubev  

Forex: Greenback Bulls On The Run

Dollar bulls expecting to score on the back of diverging rates between a hawkish Federal Reserve and dovish European Central Bank (ECB) are now in full retreat.

With the release of the dovish Federal Open Market Committee’s March meeting minutes, and Fed Chair Janet Yellen’s recent remarks highlighting “considerable slack” in the economy, many long-dollar positions are being squeezed as the market drastically prices out an early rate hike by the Fed.

Economically, the U.S. is sound and much further ahead of Japan and Europe. According to the International Monetary Fund, the U.K. is the European Union’s outlier on the growth front, while China, with its questionable economic data, (this week it was weaker Chinese export data) is everyone’s problem. These are the ingredients that have U.S. Treasurys looking like the better bid. U.S. 10′s touched a four-week low yesterday (+2.65%), as traders dampened their enthusiasm and bets for U.S. policymakers to move aggressively toward a hike in interest rates.

Chinese Economy in a Lull

Weaker Chinese data will always boost the safer-haven demand of a number of other assets like bonds (specifically Bunds, Treasurys, and Japanese Government Bonds) and currencies like the yen. Traders’ wagers on the futures exchange yesterday put the likelihood that the Fed will start raising rates in July 2015 at +63%, for June the percentage actually fell to +41% compared with +54% projected last week. The fixed-income market is basically re-pricing the curve, pushing out the “lower for longer” theme.

Yesterday’s and this morning’s asset moves have only served to confuse. Equities are falling and the Treasury market is rallying — this is technically the norm, as investors shift cash flows from equities into a safer-haven asset class like bonds. But, the dollar also has come under pressure, printing a number of new quarter lows versus its Group of Seven counterparties. The recent sharp selloff in equities provided a supportive climate for safe-haven securities but did not include the USD this time around. Dealers noted that currencies were currently diverging from traditional risk barometers.

Why? Forex volatility is at a historically low level courtesy of extremely “easy” monetary policies from the developed economies. The combination of low volatility, Fed quantitative easing, and a weaker “net savings” position has the USD underperforming (a distinct long-term competitive disadvantage to other G-7 members). This has led to other central banks like the Reserve Bank of Australia, Bank of Canada, Norges Bank and now the ECB to change policy guidance to counter a tightening of their monetary conditions from stronger currencies versus the USD. All central bankers can hope for is that the U.S. economy will recover enough for Fed guidance to be challenged, and that the front-end U.S. Treasury yield curve to finally break higher, giving G-7 central banks some relief. Otherwise, investors and dealers will be trading in the new “norm” of low forex volatility and contained intraday ranges.

Treasurys Gain on Fed Forecasts

The U.S. Treasury curve has priced in +100bp of rate hikes for the next three years, with the first hike in 2015. According to the Fed and fixed-income watchers, historical examples of Fed rate ‘normalization’ suggest the process can be significantly more aggressive. In the forex market, volatility remains subdued, handcuffed mostly by central bank actions. Currently, forex volumes are pricing sharply lower the cost of more rapid Fed tightening. When there is a need to re-price anything differently, the short-term forex volumes should be capable of rising from their current ultra-low levels, moving both spot forex and cross positions for a brief period.

Any shocks from a re-pricing of the Fed’s reaction are expected to be fleeting in the current environment, leaving longer dated maturities well anchored as policymakers focus on the short end. It’s up at the “front” where Yellen and company will be busy guiding and smoothing expectations and helping to form forex trends. These trends will again smooth out volatility as investors buy on dips using forex to overshoot Fed-tightening expectations. Now, all this market requires is a break in the lower for longer cycle. For any hardcore reaction, the forex and fixed-income market need a tightening Fed, otherwise it’s back to watching paint dry. Today’s low levels of forex and equity volumes are “historically a sign of extreme leverage and poor capital allocation.” A Fed on the move will break this – the more the Fed’s policy drains cheap USD liquidity, the stronger the USD becomes. For now, the lower for longer argument is hurting the greenback at least until investors become fixated on something else.


Sergey Golubev
Moderator
113440
Sergey Golubev  

China’s March Producer Prices Beat Market Estimates


China’s consumer price index surged 2.4 percent in March from a year ago, up from an increase of 2 percent in February, reported the National Bureau of Statistics today. This exceeded the median estimate of a growth of 2 percent in a Reuters poll of economists.

The surge in prices was mainly attributed to fresh food prices, as vegetable prices rose 12.9 percent and fruit prices were up 17.3 percent. However, economists said that food prices are showing signs of cooling down. Prices of pork meat plunged 6.7 percent from a year earlier.

Producer prices plunged on year-to-year basis for the 25th consecutive month, falling 2.3 percent, which was more than estimated.

"Overall, we expect inflation pressures to remain benign amid tepid domestic demand," said economists at Barclays in a report.

The results add to the list of weak data that the Chinese economy has posted this year. So far, Beijing has said it won’t roll out any major stimulus to bolster the economy, although it has crafted smaller measures such as lowering taxes for small businesses.
"The current environment in some ways serves as a litmus test for the government's commitment to allowing a more "decisive" role for market forces in the economy - market forces would drive up the cost of scarce resources, raising CPI inflation," Bill Adams, a senior international economist for PNC Financial Services told Reuters in an e-mail.

Consumer price index jumped 2.3 percent in the three months ending March from the same quarter a year ago, which was less than the government’s target of less than 3.5 percent for this year. While Chinese consumer prices have gradually increased, producer prices recently plunged by their steepest margin in March, mostly due to a fall in metal and mining prices.

China consumer prices rise, but industry deflation persists
China consumer prices rise, but industry deflation persists
  • www.reuters.com
Reuters) - China's consumer inflation rate increased in March as fresh food prices jumped, but persistent deflation in the industrial sector was another signal of weak demand and slowing growth in the world's second-largest economy. The consumer price index (CPI) rose 2.4 percent in March from a year earlier, the National Bureau of...
Sergey Golubev
Moderator
113440
Sergey Golubev  

Technical Analysis for Majors (based on dailyfx article)

  • EURUSD, GBPUSD, USDCHF momentum is absent
  • USDJPY ‘priced’ at channel
  • USDCAD trend resumption

- EURUSD was never able to drop under 1.3642, finding low after NFP at 1.3672. Momentum wise, I am looking for a top. RSI at each top since December has been below 70. This weak momentum profile is not suggestive of a strong bull.
- 1.3909 is possible resistance before the high. If the rate does trade to a new high, then a drop back into the range would be required in order to create a tradable high. It’s worth mentioning that important tops have formed in April/May in recent years.

USDCAD Bull Trend Resumption Opportunity
USDCAD Bull Trend Resumption Opportunity
  • Jamie Saettele, CMT
  • www.dailyfx.com
EURUSD was never able to drop under 1.3642, finding low after NFP at 1.3672. Momentum wise, I am looking for a top. RSI at each top since December has been below 70. This weak momentum profile is not suggestive of a strong bull. -1.3909 is possible resistance before the high. If the rate does trade to a new high, then a drop back into the...
Sergey Golubev
Moderator
113440
Sergey Golubev  

USDCNH Fundamentals (based on dailyfx article)

Fundamental Forecast for the Renminbi: Neutral
  • A rebound for the Yuan faltered quickly this past week and put the currency back at 12-month lows versus the dollar
  • Risk trends are a key aspect for this currency, but it isn’t as sensitive as other emerging market counterparts
  • 1Q GDP will be this week’s top scheduled event risk, but financial measures should be paid an equal mind



Forex: Australian Dollar Outlook Hinges on Jobs Data, FOMC Minutes
Forex: Australian Dollar Outlook Hinges on Jobs Data, FOMC Minutes
  • Ilya Spivak
  • www.dailyfx.com
Monetary policy expectations are in focus for the Australian Dollar. The aftermath of Friday’s disappointing US Non-Farm Payrolls release proved quite telling. The Aussie rose even as stocks fell and the Japanese Yen – a currency traditionally on the opposite end of the risk sentiment spectrum from Australian unit – launched a formidable...