Press review - page 149

Sergey Golubev
Moderator
113476
Sergey Golubev  
Forex Fundamentals - Weekly Outlook May 12-16

US Federal Budget Balance, retail sales, inflation and employment data, Philly Fed Manufacturing Index and Prelim UoM Consumer Sentiment are the main events on Forex calendar. Here is an outlook on the highlights of this week.

Last week, Fed Chair Janet Yellen testified before the US Congress repeating her speech made earlier before the Joint Economic Committee. Yellen noted the economy is on track for solid growth and that accommodative policy will continue as long as required. The Fed will normalize interest rates when the economy improves. Yellen believes US balance sheet will return to normal in 5 to 8 years. However, despite the positive tone, there were some troubled spots such as the Russia-Ukraine conflict and the recent setback in the housing market imposing on the ongoing economic recovery. Will the positive note continue in the coming weeks?
Let’s start,

  1. US Federal Budget Balance: Monday, 18:00. US budget debt narrowed more than expected in in March, reaching $36.9 billion, following $193.5 billion posted in February. Analysts expected a more modest decline to $76.5 billion. The overall trend is positive with a rise in receipts led by 11% fiscal year-to-date increase in corporate taxes and a 7 percent increase in individual taxes and the spending side is coming down including a 6% decline in defense spending. US Budget Balance is expected to reach a surplus of $112.6 billion.
  2. German ZEW Economic Sentiment: Tuesday, 9:00. German investor confidence continued to slide in April reaching 43.2 after posting 46.6 in March. Despite the strong recovery in the first quarter, the six month outlook survey revealed growing concerns about the Russia-Ukraine crisis and its possible effects on manufacturers and exporters in Germany. German investor confidence is expected to continue its downward trend towards 41.3.
  3. US retail sales: Tuesday, 12:30. U.S. retail sales surged to a 1-1/2 –year high of 1.1% in March indicating strong recovery in the US economy after a sluggish winter. The increase was evident in all sectors and followed a 0.7% gain in February. Meanwhile Core sales, excluding automobiles edged up 0.7%, the biggest rise in a year. These impressive figures raised new hopes for a boost in growth this year. U.S. retail sales are expected to climb 0.5%, while core sales are expected to increase 0.6%.
  4. UK employment data: Wednesday, 8:30. The number people claiming jobless benefits in March declined by 30,400 reaching to 1.14 million after a 37,000 drop in the previous month, indicating an ongoing improvement in Britain’s labor market. The unemployment rate also improved to 6.9% from 7.2% in February. Average earnings in the three months to February increased by 1.7% compared with a year earlier. Chancellor of the Exchequer, George Osborne, hailed the “strong jobs numbers” as further evidence that the coalition government’s economic plan is working. The number of jobless aid seekers are expected to decline further by 31,200 pushing the unemployment rate down to 6.8%.
  5. Mark Carney speaks: Wednesday, 9:30. Mark Carney, the Governor of the Bank of England will speak in a press conference, together with other MPC members, about the Inflation Report, in London. Carney stated in March that the Bank’s 2% inflation target became ‘dangerous distraction’ for the UK’s policymakers veiling the true progress made in the UK’s economy. Market volatility is expected.
  6. US PPI: Wednesday, 12:30. U.S. producer prices edged up 0.5% in March, posting their largest increase in nine months, amid a rise in the cost of food and trade services. The increase was well above market consensus following a 0.1% fall in February. The unexpected rise may be explained by weather related factors, but the wholesale inflation is expected to settle down in April. U.S. producer prices are expected to climb 0.2% this time.
  7. Haruhiko Kuroda speaks: Thursday, 4:25. BOJ Governor Haruhiko Kuroda will speak in Tokyo. Market volatility may occur.
  8. US inflation data: Thursday, 12:30. U.S. consumer prices increased slightly more than expected in March, rising 0.2% after a 0.1% climb in the previous month, suggesting inflation is back. In the 12 months through March, consumer prices rose 1.5% after increasing 1.1% over the 12 months through February. Meanwhile, core CPI, excluding volatile energy and food components, also edged up 0.2% in March after rising 0.1% in the prior month. The central bank is expected to end the QE bond purchases later this year. Domestic demand and the labor markets are improving but a rate hike is not expected before the second half of 2015. U.S. consumer prices are expected to increase by 0.3%, while core CPI is predicted to climb 0.2%.
  9. US Unemployment Claims: Thursday, 12:30. The number of new claims for unemployment aid filed last week fell 26,000 to 319,000, indicating the setback seen in the Easter holiday was temporary and the US job market is regaining its strength. Despite the drop in the number of applications. The four-week average increased by 4,500, to a seasonally adjusted 324,750 due to temporary layoffs around the Easter holiday but it is far better than the 343,000 average for 2013. Jobless claims is expected to rise to 321,000.
  10. US Philly Fed Manufacturing Index: Thursday, 14:00. Factory activity in the U.S. mid-Atlantic region increased in April to 16.6 from 9.0 in March beating market forecast of a 9.6 reading. New orders edged up to 14.8, the highest level since October, from 5.7. The employment component improved to 6.9 from 1.7, but business conditions for the next six months fell to 26.6 from 35.4. Overall, the survey shows positive growth prospects for the US economy in the coming months. Factory activity in the Philadelphia area is anticipated to decline to13.9.
  11. Janet Yellen speaks: Thursday, 23:00. Federal Reserve Chair Janet Yellen will speak in Washington DC at the National Small Business Week. Yellen may talk about her latest testimony at the US congress. Market volatility is expected.
  12. US Building Permits: Friday, 12:30. US building permits fell by 2.4% in March reaching an annualized rate of 990,000.The reading suggests the pace of starts will increase further in the coming months. Single-family starts increased 0.2% compared to the previous year. Economists expect an acceleration in housing construction based on stronger household construction later this year and in 2015. US building permits are expected expand to an annualized rate of 1.01 million.
  13. US Prelim UoM Consumer Sentiment: Friday, 13:55. Consumer confidence strengthened in April to the highest level since July, rising to 82.6 compared to 80 in March. Improvement in the US labor market contributed to this rise. The reading was better than the 81.2 projected by analysts. Increased employment opportunities and better wages will continue to lift consumer spending as well as consumer sentiment. Consumer confidence is expected to improve further to 84.7.
Sergey Golubev
Moderator
113476
Sergey Golubev  
Trading Video: Weighing Bigger EURUSD, GBPUSD Reversals Next Week
  • EURUSD has shown monetary policy may be more than capable for leveraging volatility and trend
  • Risk trends remain a constant concern as the claims of 'bubble' growth, but we must follow active roads
  • Data in the week ahead promises substantial rate/stimulus speculation for the Dollar, Euro and Pound

Speculators' interest in overwrought risk trends is intensifying as talk of bubbles is even infecting the bullish camp. Given the exceptional impact a change in risk appetite can have given the underlying circumstances of our current bearing, we cannot afford to look away. However, active trades on the theme should wait for the change in tide. In the meantime, EURUSD and GBPUSD are forging progress on another front: monetary policy expectations. From rate hikes to stimulus programs, we are widely divergent programs and a docket loaded with important data next week. We take our current bearings and discuss what lies ahead in the weekend Strategy Video.



Sergey Golubev
Moderator
113476
Sergey Golubev  
The Week Ahead: A New Bond Bull Market?

It has been a rough few months in the stock market especially after the steady rise of stock prices in 2013. At the end of last year, it was my view that 2014 would be a more difficult market, but so far, it has been even choppier than I thought it would be.

The investment pros, as measured by hedge fund performance, have also had a tough time, with negative returns in both March and April. Global hedge fund assets rose to a new record in the 1st quarter, but I would imagine some of those investors are having second thoughts.

The decline in interest rates in 2014 has also been a surprise to many especially in the past few weeks as the economic data, including the sharply higher employment numbers, would typically cause rates to move higher.

The yield on the 30-year T-bond has fallen from the December 31 close of 3.964% to 3.415% early Friday. The yield on the 10-year T-note closed 2013 at 3.026% and is now at 2.618%. So is this the start of a new bond bull market as some are predicting?

The Dominant Chart Pattern
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Learn how relative performance, or RS analysis, can be used over multiple time frames by investors and traders to identify the market’s strongest and weakest sectors.
Sergey Golubev
Moderator
113476
Sergey Golubev  

USDJPY Fundamentals (based on dailyfx article)

Fundamental Forecast for Japanese Yen: Bearish
  • Why is forex volatility so low, and why does it affect the Yen?
  • Technical forecasts for the USDJPY point to sideways moves


The Japanese Yen trades at critical resistance versus the US Dollar (USDJPY trades at support). Given extremely low volatility expectations it seems unlikely we see a major USDJPY breakdown, but any major surprises out of upcoming Japanese data could force sharp currency swings.

FX traders sent 1-month volatility prices on USDJPY derivatives to their lowest levels on record, and it’s obvious that very few expect to see big things through the foreseeable future. Our forex technical forecasts as well as sentiment-based outlook subsequently favor a USDJPY bounce off of the lows. Yet expectations often beget disappointment; what could force a major Japanese Yen breakout?

Top economic event risk comes from Japan’s Q1 GDP Growth numbers due Wednesday night/Thursday morning, and any surprises could shake the currency from its tight trading range. Consensus forecasts call for a substantial 4.2 percent annualized rate of economic growth in the first quarter. Such lofty expectations arguably leave risks to the downside for the data itself and the Japanese currency. But why is the JPY stuck in such miniscule trading ranges across the board?

Put simply, forex volatility is near record-lows as risky asset classes continue to outperform. Yen volatility may trade to further lows if the US S&P 500 and Japanese Nikkei 225 continue to trade onto fresh peaks.

In that sense it will be important to watch how Japanese equities respond to key economic data; any Nikkei 225 losses might actually result in Yen strength (USDJPY weakness) regardless of the economic implications of the news results.

The absence of any major surprises in upcoming event risk would likely leave the status quo intact. It’s important to note that the Yen has historically fallen in times of low volatility, and indeed we would argue that a further compression in vols should keep the USDJPY above key support. The risk is that material disappointments in data could force equity market tumbles and, by extension, a USDJPY breakdown.

Sergey Golubev
Moderator
113476
Sergey Golubev  

GOLD (XAUUSD) Fundamentals (based on dailyfx article)

Fundamental Forecast for Gold: Neutral
  • Gold Churns on Near Term Fibonacci Retracement
  • Gold Exposed To Easing Ukrainian Concerns, Crude Oil Cracks $100


Gold prices are softer for the second consecutive week with the precious metal off by nearly 1% to trade at $1287 ahead of the New York close on Friday. The losses come on the back of a broad-based USD rally that saw the Dow Jones FXCM USDOLLAR index reverse off fresh 6-month lows, paring the entire April decline by the end of the week. The index is now virtually unchanged since the monthly open and traders will be looking ahead to next week’s docket as the US data front picks back up.

The calendar was light for the US this week with gold prices giving up early gains after Fed Chair Janet Yellen noted in her testimony before congress that the central bank’s accommodative stance was warranted given the relative strength of the labor markets and subdued inflation metrics. The greenback regained its footing with a rather dovish ECB President Mario Draghi on Thursday further supporting the dollar rebound. The subsequent rally has continued to weigh on gold prices which look to close the week just off the low.

Looking ahead to next week, US data will be back in focus on the heels of this week’s Yellen testimony with Retail Sales, the Consumer Price Index (CPI) and Industrial Production on tap. Inflation figures on Thursday may prove pivotal for bullion with consensus estimates calling for a slight increase in the y/y and m/m prints with core CPI expected to fall to 0.1% from 0.2% m/m and hold at 1.7% y/y. Should the data show a faster-than-expected pace of price growth, look for gold prices to come under pressure as expectations for a 2015 Fed rate-hike take root.

From a technical standpoint, gold completed a 100% Fibonacci extension off the April lows with this week’s push into the $1310 barrier. The subsequent reversal has continued to be supported by the 100-day moving average, currently around $1287 and a break below this level puts back into focus key support at $1260/70 (bullish invalidation). That said, we cannot discount another assault on the highs as we continue to hold within the initial May opening range with a breach above $1310 suggesting that a more significant low may have been put in last month. Such a scenario looks back to a region defined by last month’s high and the 50% retracement of the March sell-off at $1327/34. With the current positioning and key US inflation data on tap next week, we will maintain a neutral stance into the open with the Sunday/Monday opening range likely to offer further clarity on a near-term directional bias.

Sergey Golubev
Moderator
113476
Sergey Golubev  
Nikkei forecast for the week of May 12, 2014, get technical Analysis

The Nikkei as you can see fell during most of the week, but the ¥14,000 level offered enough support to turn things background inform a hammer. We believe that this area should offer quite a bit of support, so a break above the top of the hammer which is at the ¥14,500 level, that would in fact be a signal to start buying as we should head to ¥15,250 level. Above there, we would more than likely head to the recent highs again. Going forward, we fully expect this market to have buyers.



Sergey Golubev
Moderator
113476
Sergey Golubev  
DAX forecast for the week of May 12, 2014, Technical Analysis

The DAX initially fell during the week, but found enough support at the €9400 level to turn things back around and form a nice-looking hammer. This hammer sits below the €9700 level, which is an area we need to see cleared in order to start going long again. We believe that a breakout above the €9800 level does all but completely guarantee a move to €10,000, and we do ultimately believe that this breakout will happen. Because of this, we have no interest in selling this market as we see a significant amount of support all the way down to the €9000 handle.




Sergey Golubev
Moderator
113476
Sergey Golubev  
NASDAQ forecast for the week of May 12, 2014, Technical Analysis

NASDAQ as you can see had a back-and-forth week, but continues to respect the 4000 level as support. Because of this, we believe that ultimately this market will probably go higher, but recognize that there is a significant amount of resistance just above as well, with that being the theme of the last month. Because of this, we think that this market will continue to sideways, but ultimately will breakout to the upside in a move above the 4200 level should begin the next leg higher, which could be much higher.




Sergey Golubev
Moderator
113476
Sergey Golubev  
CAC forecast for the week of May 12, 2014, Technical Analysis

The Parisian index went back and forth during the course of the week, testing the €4400 level for support, while testing the €4500 level as resistance. With that, it appears that the market is trying to breakout above the top of the two shooting stars from the previous weeks. That being the case, and the fact that the market ended up forming a bit of a hammer, we believe that will see a massive breakout above the €4500 level, and as a result the market will then head to the €5000 level. Selling is not an option.




Sergey Golubev
Moderator
113476
Sergey Golubev  
S&P 500 forecast for the week of May 12, 2014, Technical Analysis

The S&P 500 as you can see initially fell during the week, and then bounced off of the 1860 level. That being the case, it appears that the market has formed a hammer for the week, but now it is obvious more than ever that the 1900 level needs to be overcome in order to start going long on a longer-term basis. We believe that will ultimately happen, so therefore on a move above that level we would not hesitate to get involved. Pullbacks all the way to the 1820 level should be supportive as well, as we see plenty of support between here and there.