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.
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
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.
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
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.
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
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
“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
“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
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
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.