Press review - page 286

Sergey Golubev
Sergey Golubev  
EURUSD Range Survives Yellen and Greece, What Can Break It?

Despite a round of news that reinforced a 'mid-2015' Fed hike forecast, reminded us of impending ECB QE and kept the Greece negotiations off-balance; EURUSD refused to break a range that is little more than 100 points wide. Top news through the past session was Fed Chairwoman Janet Yellen's testimony before the Senate Banking Committee. In her remarks, carefully chosen language seems to reinforce a scenario where the Fed is preparing the market for a rate hike around the middle of the year. Yet, that scenario seems to be well priced - or at least skepticism to anything but a direct warning is dug in - as the USDollar failed to break its month-long congestion. Cues for a policy-led break are dispersed widely over the coming weeks, so this market dynamic may not prove the spark for our next drive. In the meantime, if risk trends pick up the baton; a moderation move by the S&P 500 can spur a range of opportunities. We look at the Dollar and broader market in today's Trading Video.

Sergey Golubev
Sergey Golubev  
Gold Ticks Higher on Weak Dollar, Chinese Interest (based on wsj article)

The most actively traded contract, for April delivery, was recently up $9.40, or 0.8%, at $1,206.70 a troy ounce on the Comex division of the New York Mercantile Exchange.

Gold inched up from a one-month low as some investors saw a bargain while others returned to the market following Lunar New Year celebrations in China. The country is the world’s second-largest gold buyer after India, but investors there typically stay on the sidelines during the holiday.

A weaker dollar also sent some investors into gold in a bid to protect their wealth. The WSJ Dollar Index was recently down 0.2% at 85.28.

“Gold is acting more as a currency hedge at this point,” said Paul Nolte, a portfolio manager at Kingsview Asset Management in Chicago.

Gold Ticks Higher on Weak Dollar, Chinese Interest
Gold Ticks Higher on Weak Dollar, Chinese Interest
  • 2015.02.25
  • Tatyana Shumsky Tatyana Shumsky The Wall Street Journal CANCEL BiographyTatyana Shumsky @MissShumsky
NEW YORK—Gold prices rose Wednesday as Chinese buyers returned to the market from a week-long break and as a weaker U.S. dollar lent support. The most actively traded contract, for April delivery, was recently up $9.40...
Sergey Golubev
Sergey Golubev  
2015-02-25 21:45 GMT (or 23:45 MQ MT5 time) | [NZD - Trade Balance]

if actual > forecast (or previous data) = good for currency (for NZD in our case)

[NZD - Trade Balance] =Difference in value between imported and exported goods during the reported month. Export demand and currency demand are directly linked because foreigners must buy the domestic currency to pay for the nation's exports. Export demand also impacts production and prices at domestic manufacturers


New Zealand Has NZ$56 Million Trade Surplus

New Zealand had a merchandise trade surplus of NZ$56 million in January, Statistics New Zealand said on Thursday.

That topped expectations for a deficit of NZ$158 million following the downwardly revised NZ$195 million shortfall in December (originally -NZ$159 million).

Exports were worth NZ$3.70 billion - shy of expectations for NZ$3.73 billion and down from the downwardly revised NZ$4.40 billion in the previous month (originally NZ$4.42 billion).

Imports were at NZ$3.64 billion versus forecasts for NZ$3.94 billion following the upwardly revised NZ$4.60 billion a month earlier (originally NZ$4.58 billion).

Sergey Golubev
Sergey Golubev  

Gold trade coming back, if you can wait 2 years (based on cnbc article)

Gold will come under further pressure over the course of the year as the Federal Reserve moves closer to lifting rates, but prospects for the precious metal looks far more promising in the next few years, according to Bank of America Merrill Lynch.

"Right now, investors are not in the mood for holding gold because they see the Fed raising rates. So, I think in the next three months you'll see downside risk, $1,100 an ounce is likely," Francisco Blanch, commodities analyst at Bank of America Merrill Lynch told CNBC.

"But if you look out 2-3 years, things are a lot brighter for gold," he said.

Gold kicked off the year with a bang, rising around 8 percent in January. However, the yellow meal has since erased most of its gains as a stronger dollar – driven by rate hike expectations –and gains in equities dim its appeal. Spot gold last traded around the $1,210 level.

Blanch's positive longer-term outlook for gold is driven by two factors.

First, the growing phenomenon of negative-yielding bonds, which makes gold look attractive in comparison.

"There are a growing number of government bonds basically yielding zero or negative. As the number increases, I think a lot of investors are going to wonder why they are holding a liability as opposed to holding an outright asset like gold," he said.

Sergey Golubev
Sergey Golubev  
Gold 'Absolutely' A Safe Haven - BMO Analyst

Kitco News speaks with BMO’s Jessica Fung to see how she sees gold and silver set up for the coming year. Based on her research, Fung says she expects U.S. dollar strength, which has hindered upside potential for metals prices, to continue. “In this environment, where we expect the U.S. dollar to continue to strengthen, I think we’re going to maintain a very high gold-to-silver ratio,” she says, adding that this increasing ratio hasn’t allowed silver to keep up with any gold price upswings. Looking to global uncertainty, Fung says gold is ‘absolutely’ a safe-haven. “It always will be and that is what it will take to drive prices higher,” she adds. Tune in now to hear more from BMO’s commodity analyst regarding Federal Reserve rate hikes, the U.S. recovery and more from the BMO Global Metals & Mining Conference.

Video link
Sergey Golubev
Sergey Golubev  

Why You Should Have a Gold and Silver Seat Belt

Take a quick look at our financial system. Have things really improved since the entire global system almost went down in 2008?

  • Sure there have been “changes” – for example, your bank most likely has a “bail in” provision added to the fine print of your accounts, letting you know that if they go under due to their own mismanagement, you may be forced to help out with some of your hard-earned funds.
  • And try to withdraw a significant amount of money during a financial crisis – odds are you’ll be informed that you can only take out a relatively small amount per week, and oh, by the way “How do you plan to use that withdrawn money?”
  • Money market funds and “savings” accounts now pay virtually no interest, but (so far) that’s at least better than in some European countries, where hapless account holders actually have to pay the bank for the privilege of leaving money in their account.
  • Massive government debt.
  • Underfunded pension plans.
  • Trillions of dollars in artificial derivative trading vehicles created by over-leveraged banks, backstopped by Federal government printing of unlimited amounts of paper money.
  • “Official” statistics which are constantly “revised” a month or so after they have been released to the public.
  • Published inflation rates which don’t include most of the things we use and do on a daily basis. The list goes on and on.

Exchanging some of your “paper promises” (currency) for the physical financial reality of gold and silver on a regular basis makes more than just good business sense. It helps make sure that come what may in your financial life, your “financial insurance policy” will be there to help you out, when, not if, the chickens from so many years of unsound government policies come home to roost. Look toward Argentina, Venezuela, Russia and others as harbingers. Even now, the U.S. inflation rate is arguably several percent higher than the “official” figure. You would do well to pay attention and plan accordingly.

Sergey Golubev
Sergey Golubev  

Trading the News: U.S. Gross Domestic Product (GDP) (based on dailyfx article)

A marked downward revision in the U.S. growth rate may generate a short-term rebound in EUR/USD should the preliminary 4Q Gross Domestic Product (GDP) report dampen bets for a mid-2015 Fed rate hike.

What’s Expected:

Why Is This Event Important:

Despite bets for higher borrowing-costs, further weakness in the core Personal Consumption Expenditure (PCE), the Fed’s preferred gauge for inflation, may push Chair Janet Yellen to endorse a wait-and-see approach and further delay the normalization cycle as the central bank struggles to achieve the 2% target for price growth.

Nevertheless, the uptick in private wages paired with the ongoing improvement in the labor market may foster a better-than-expected GDP report, and bets for a stronger recovery may heighten the bullish sentiment surrounding the U.S. dollar as the Fed remains on course to remove the zero-interest rate policy (ZIRP) over the near to medium-term.

How To Trade This Event Risk

Bearish USD Trade: Growth Rate Narrows to 2.0% or Lower

  • Need to see green, five-minute candle following the GDP report to consider a long trade on EURUSD
  • If market reaction favors a short dollar trade, buy EURUSD with two separate position
  • Set stop at the near-by swing low/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 USD Trade: 4Q GDP Report Tops Market Expectations
  • Need red, five-minute candle to favor a short EURUSD trade
  • Implement same setup as the bearish dollar trade, just in reverse
Potential Price Targets For The Release
EUR/USD Daily Chart

  • Break of the triangle/wedge formation favors a continuation of the bearish trend and the approach to ‘sell-bounces’ in EUR/USD.
  • Interim Resistance: 1.1440 (23.6% retracement) to 1.1470 (78.6% expansion)
  • Interim Support: 1.1185 (23.6% expansion) to 1.1210 (61.8% retracement)
Impact that the U.S. GDP report has had on EUR/USD during the last release
Period Data Released Estimate Actual Pips Change
(1 Hour post event )
Pips Change
(End of Day post event)
3Q P
11/25/2014 13:30 GMT 3.3% 3.9% +1 +47
The preliminary 3Q U.S. GDP report showed an unexpected upward revision in the growth rate, with the economy expanding an annualized 3.9% amid an initial forecast for a 3.5% clip. Personal Consumption also increased more than initially expected as the figure climbed 2.2% during the same period, while the core Personal Consumption Expenditure (PCE), the Fed’s preferred gauge for inflation, narrowed to an annualized 1.4% from 2.1% in the third-quarter. Despite the improved outlook for growth, the disinflationary environment may push the Fed to retain its highly accommodative policy stance for an extended period of time as it struggles to achieve the 2% target for inflation. The market reaction following the better-than-expected figures was short-lived as EUR/USD climbed back above the 1.2425 region to end the day at 1.2473.

MetaTrader Trading Platform Screenshots

EURUSD, M5, 2015.02.27

MetaQuotes Software Corp., MetaTrader 5

EURUSD M5: 19 pips price movement by USD - GDP news event

EURUSD, M5, 2015.02.27, MetaQuotes Software Corp., MetaTrader 5, Demo

Sergey Golubev
Sergey Golubev  

AUDIO - Finding Great Trading Opportunities with Gabe Velazquez

Over the past week, many listeners have expressed frustration with no quality supply levels on the major market indexes. Gabe Velazquez joins Merlin to look at alternatives to trading the indexes, and talks about how he is trading these markets. The duo also look at the surge in the US Dollar and how it is impacting and creating trading opportunities with currency futures.

Sergey Golubev
Sergey Golubev  

Forex Weekly Outlook Mar. 2-6 (based on forexcrunch article)

The euro was the loser in week that saw the dollar retreat and make a comeback. The first week of the new month is packed: rate decisions in Australia, Canada, the UK and the euro-zone, GDP data from Canada and Australia and a full buildup to the US Non-Farm Payrolls. These are the main market movers on FX Calendar. Join us as we explore the highlights of this week.

Janet Yellen managed to send mixed signals and was analyzed as dovish. However, was she preparing us for the removal of forward guidance? Her colleague Bullard was quite bullish. US data came out mixed: jobless claims rose to 313,000, and CPI declined 0.7% due to continued slide in oil prices, while Core CPI surprised with a 0.2% rise and maintained a stable 1.6% y/y figure. The latter number trumped the others and allowed the dollar to make a comeback. In the euro-zone, the Greek list was approved and the crisis is off for now. Data has been somewhat upbeat. UK GDP remained supportive of the pound while in Australia, speculation mounts about an RBA cut. We’ll get lots of answers now.

  1. US ISM Manufacturing PMI: Monday, 15:00. Manufacturing activity in the U.S. expanded mildly in January, reaching 53.5, after posting 55.5 in December. The lukewarm reading raised concerns over the health of the economy. Economists expected a stronger reading of 54.9. New Orders declined 4.9 points to 52.9, Production Index was 1.2 points below 57.7 posted in December and Employment Index registered a 1.9 points decline to 54.1. The headline number for February is expected to rise to stand at 53.4 points.
  2. Australian rate decision: Tuesday, 3:30. The Reserve Bank of Australia surprised markets in February with a rate cut of 0.25% to 2.25%. This was the first change since August 2013.The RBA noted that the recent drop in oil prices were not enough to boost growth and global economy is also expanding in a moderate pace. Inflation is expected to remain slow, domestic demand is forecast to weaken and the unemployment rate is expected to increase. We think that the RBA could cut again.
  3. Canadian GDP: Tuesday, 13:30. Canada’s economy unexpectedly contracted 0.2% in November, prompting talks of a second rate cut in six weeks. Economists expected a small decline of 0.1%. Sluggish activity in manufacturing, mining oil and gas extraction lead to this decline. The BOC noted that if economic data remain weak in early 2015, it could lead to another rate cut. On a yearly base, Gross domestic product grew 1.9%, the lowest year-on-year advance since the 1.9% of March 2014. A +0.1% growth rate is on the cards now.
  4. Australian GDP: Wednesday, 0:30. Australia’s gross domestic product grew by a mere 0.3% in the third quarter, reaching a 2.7% expansion, in the 12 months to September. Economists forecast a 0.7% growth for the quarter and 3.1% for the year. However, policymakers noted the GDP was only marginally lower than expected. Despite the rise in unemployment, exports are getting stronger and will lead to expansion in 2015. Expectations stand at +0.7% q/q.
  5. US ADP Non-Farm Payrolls: Wednesday, 13:15. The U.S. private sector added 213,000 jobs in January, missing analysts’ forecasts of 224,000. December’s private payrolls were revised up to 253,000 from the previously reported 241,000. Despite the weaker than expected data economists believe that the U.S. labor market is expanding at a solid pace. A similar gain of 218K is predicted now.
  6. Canadian rate decision: Wednesday, 15:00. The Bank of Canada surprised markets by cutting its key overnight lending rate by a quarter of a percentage point to 0.75%. The ongoing decline in oil prices posed a threat to Canadian economic growth. Bank of Canada governor Stephen Poloz said the revenues from oil exports will be reduced on top of sluggish investment and employment in the energy sector. The rate cut was aimed to rebalance the economy. The Central Bank also downgraded its growth forecast for 2015, from 2.4% to 2.1% and expect a mere 1.5% growth in the first six months.
  7. US ISM Non-Manufacturing PMI: Wednesday, 15:00. The U.S. services activity remained strong in early 2015 but employment slackened. ISM non manufacturing purchasing managers index reached 56.7 in January, nearly unchanged from 56.5 in December. Analysts expected the index to reach 56.6. The majority of responders were positive towards business conditions. The new orders index increased to 59.5 from 59.2 in December. Business activity edged up to 61.5 from 58.6 but the employment component declined to 51.6 in January from 55.7. A similar figure of 56.5 points is on the cards now.
  8. UK rate decision: Thursday, 12:00. Bank of England policymakers voted unanimously to keep rates on hold in February but raised the possibility for the first time that it could cut interest rates below 0.5% if inflation weakens further. British inflation plunged to 0.3% in January, the lowest level since records began in 1989 and far below the BoE’s 2% target. The BoE noted it may cut rates below zero in the coming months. BoE policymaker Martin Weale said the bank will need to start raising interest rates sooner than investors expect as inflation recovers from current low levels. No changes are expected.
  9. Euro zone rate decision: Thursday, 12:45. The European Central Bank announced the start of a massive government bond-buying program to pump billions in new money into the euro zone economy starting from March until the end of September 2016. ECB President Mario Draghi said that by September 2016, more than 1 trillion euros will be added from quantitative easing. The ECB is trying to restore inflation to its target of just below two percent; consumer prices fell in December, but there are doubts, and not only in Germany, over whether printing fresh money will work. No change is expected now, but Draghi has a lot to talk about: the ECB’s role in the Greek crisis, how Draghi sees inflation evolving after the stabilization in oil prices, hopes for growth and more. The president of the ECB usually moves markets
  10. US Unemployment Claims: Thursday, 13:30. The number of Americans filing initial claims for unemployment benefits edged up unexpectedly last week to 313,000, from 282 in the prior week. The 31,000 rise was the biggest jump since December 2013. Economists expected claims to reach 288,000. The four-week average increased to 294,500 from a revised 283,000 the week before. Chair Janet Yellen noted in her congressional testimony this week that there are still too many unemployed, wage growth is still slow and inflation remains well below the Fed’s objectives.
  11. US Non-Farm Payrolls report: Friday, 13:30. The US economy added 257,000 jobs in January, exceeding expectations of a 230,000 jobs gain, reconfirming the strength of the US economy. The economy has created more than 1 million new jobs in the last three months and the private sector has added 11.8 million jobs over 59 straight months of job growth, extending the longest streak on record. Wages in the private sector also increased, with a rise of 12 cents in average hourly earnings to $24.75. Over the last 12 month average wages have increased by 2.2%, up from a previous estimate of 1.9%. However, despite the increase in new jobs, the unemployment rate increased slightly from 5.6% to 5.7%. Economists believe the rise may be a result of the huge surge in the labor force increasing statistical noise, but can also reflect growing optimism about the chances of gaining work. Estimations currently stand at a gain of 241K, an unemployment rate of 5.6% and a rise of average hourly earnings of 0.2% m/m.
  12. US Trade Balance: Friday, 13:30. The U.S. trade deficit widened sharply in December reaching $46.6 billion 17.1% higher than in the previous month. . It was the biggest percentage increase since July 2009. The trade gap suggested a downward revision to the fourth-quarter gross domestic product. Imports increased 2.2% to $241.4 billion, and imports of non-petroleum products edged up to a record high, a sign of strengthening in the domestic economy and a strong US dollar. Exports declined 0.8% to $194.9 billion in December. A narrower deficit of 41.6 billion is on the cards now.
Sergey Golubev
Sergey Golubev  

US Dollar Fundamentals (based on dailyfx article)

Fundamental Forecast for Dollar: Neutral

  • The PCE inflation gauge and NFPs will shape rate speculation that still has market pricing October hike
  • Expected easing efforts by the ECB, RBA and BoC can leverage the Dollar’s outlook for rate hikes

The Dollar received a jolt of volatility this past week in a rally that followed the CPI inflation report, but the currency was unable to escape the bounds of a month-long range. It will be increasingly difficult to maintain a range going forward however. Not only are major themes like US rate forecasts and risk trends developing, but we have a range of high profile event risk. While US indicators like the February NFPs will provide a clear connection to Dollar activity; policy decisions by some of the Fed’s largest counterparts – the ECB, BoE, RBA and BoC – can generate considerable indirect force.

For Dollar traders, the outlook is steeped in two key fundamental themes: monetary policy and speculative sentiment. It is the former that has fed the Greenback’s bullish trend these past nine months (the ICE Dollar Index secured an eighth consecutive rally – a record- while the Dow Jones FXCM Dollar Index closed the month slightly lower). Yet, just as clear as the ‘relative’ hawkish outlook for the Fed has generated such a resounding performance, we can also see its limitations shaped through the month-long consolidation pattern the benchmark established through February.

Compared to the ECB and BoJ (who are executing quantitative easing programs) or the RBA and BoC (which have recently cut their benchmark rates), the FOMC is exceptionally hawkish. Though it is still plotting the time frame for its first hike in a controlled normalization regime, a tightening move offers drastic contrast. Much of this has been priced in however. Currently, the market expects a first and second rate hike in 2015 – something the other majors cannot claim. To leverage further gains on this view though, the lead needs to be extended.

According to Fed Fund futures, the first move by the Fed is expected around the October 28 meeting. Alternatively, surveys for economists, analysts and primary dealers pegs it around June 17 or July 29. That opens the door for more progress. A few particular data points stand out over the coming week that can up the market’s expected time frame – or push it back depending on the outcome. At the start of the week, we have the PCE inflation measures. Given that this is the Fed’s preferred price gauge, a surprise here could generate a greater market response than the heft Dollar bid that followed last week’s CPI release. At the end of the week, the February labor data will be a media and speculative focus. While the payrolls and jobless figure are important, we know the general trend of the past five years. The missing puzzle piece for hikes is inflation. And that leverages the importance of the average hourly wages component which last month posted the biggest monthly jump since December 2008.

A change in tide and intensity of the US rate forecast is the most direct means to motivate the Dollar, but don’t write off the strengthening or weakening of its collective counterparts as a capable impetus. The ECB is set to activate its stimulus program while the RBA and BoC are expected to each supply a consecutive interest rate cut. There is plenty of room to broaden or close that gap.

There will be plenty on the docket – and no doubt newswires – to occupy our attention in the week ahead. Yet, it is important to maintain a firm grasp of the ‘big picture’. The view of US monetary policy compared to its conterparts is a node, but how collective monetary policy influences global investor sentiment is a central pillar. ‘Risk appetite’ has not contributed much to the Dollar’s cause – bullish or bearish – recently as it has not moved with conviction (regardless of what it seems the S&P 500 is doing). It is difficult to instill confidence of a robust extension of already mature risk accumulation trends. In contrast, the correct spark can ignite an explosive value gap to risk aversion and deleveraging. When this reallocation hits, the Dollar will gain at the extremes.