Press review - page 306

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EURUSD Attempts Post News Breakout (based on dailyfx article)

  • EURUSD opens in a 73 pip range
  • Range resistance sits at 1.0720
  • A decline exposes support at 1.0647


The EURUSD has opened the trading day range bound, with the pair moving between its R3 and S3 Camarilla pivot points. Price has traversed this 73 pip range twice thus far, with price currently trading above its R3 pivot which is found today at 1.0720. Despite being range bound for most of the session, traders should continue to watch the R4 pivot found at 1.0755. Price has already attempted to break this value once this morning on worse than expected initial jobless claims data. A breakout above this value would suggest the potential for higher highs for the EURUSD.

In the event that price trades back below its R3 pivot, it opens the possibility of another move back towards values of support. Currently range support sits at a price of 1.0647 at the S3 pivot. A continued decline below the S4 pivot at a price of 1.0611 would suggest a larger reversal on the creation of a lower low.

 

EUR/USD: BNP say Greek deal unlikely by April 24, see a May deal to avoid default (adapted from forexlive article)

  • Negotiations have ground to a halt
  • The Greek government has until 20 April to present economic and fiscal reforms
  • Eurogroup meeting of finance ministers on 24 April
  • Recent comments by EU officials suggest an imminent deal to unlock the last tranche of Greece's bailout funds still looks unlikely
  • The Eurogroup meeting on 11 May is now being touted as the date of a potential deal on Greece
  • Greece facing about EUR 0.2bn in interest payments to the IMF on 1 May and a EUR 0.8bn IMF loan redemption on 12 May
  • We continue to expect the Greeks to make a last-minute U-turn to secure a deal in the not-too distant future

But ...

  • it is impossible to rule out a worst-case scenario in which a deal is not reached ... Greece does not pay the IMF and the Greek government decides to hold a referendum on the terms of an EU bailout and/or membership of currency union
  • If the outcome of a referendum were positive (ie, with the majority of Greeks agreeing to the terms of a bailout deal and/or a continuation of euro membership), this could potentially help Mr Tsipras to reshape Syriza, or form a coalition with pro-European, reform-friendly parties, such as Pasok or To Potami
  • This would be positive for the country's future relationship with the EU, but the implications of capital controls for sentiment and growth would be negative, at least in the short term, creating new problems, such as even greater funding needs.
 

AUDIO - Across the World with Vishal Subandh

Merlin welcomes trader & educator, Vishal Subandh to the show to discuss how the Indian markets have been fairing over the past few months. The duo talk about the preferred trading vehicles, and the subtle differences between the US and India. Vishal also offers his insights into the direction of the Nifty index, Crude Oil, US dollar and much more.


 

Technical Analysis for EURUSD - Elliot Wave view from Morgan Stanley (based on forexlive article)

15-year chart saying:

  • Having accelerated to a low of 1.0463, going out of the lower end of the multi-year trend channel, EURUSD didn't remain there for very long and has since rebounded to a high of 1.1036.
  • However the longer term bearish picture remains and so, should the downside momentum return, we watch for breaks of the following key levels: 1.0463, 0.9613 then 0.8565.


The analysts comes in to a 2-year timeframe:

  • EURUSD is still within a 5th wave structure of the larger Cwave.
  • The 5th wave has formed a substructure, which we would expect to complete around parity. However we expect some volatility before getting there.
  • A move above the 1.1052 level would mean that there is a larger 4th wave forming, suggesting a move towards 1.15 before the longer term downtrend continues.

10-day chart:

  • EURUSD has begun to form an impulsive structure from the high of 1.1036.
  • Currently in a 4-th wave correction, we look for the rebound to sell.
  • We put a stop just above the 1.10 high since a move above here would be out of the top end of the recent range and we would have to reassess our trading strategy at this point.
 

Trading the News: U.S. Consumer Price Index (CPI) (based on dailyfx article)

  • U.S. Consumer Price Index (CPI) to Retain Slowest Pace of Growth Since 2009.
  • Core Rate of Inflation to Hold at Annualized 1.7% for Second Month.

The U.S. Consumer Price Index (CPI) may prop up the greenback and spark a near-term decline in EUR/USD should the inflation report highlight sticky price growth in the world’s largest economy.

Why Is This Event Important:

Despite signs of a slower recovery, the Federal Open Market Committee (FOMC) may continue to prepare U.S. households and business for higher borrowing-costs as Chair Janet Yellen remains confident in achieving the 2% inflation target over the policy horizon.

How To Trade This Event Risk

Bullish USD Trade: U.S. Headline & Core CPI Highlight Sticky Price Growth

  • Need to see red, five-minute candle following the release to consider a short trade on EUR/USD.
  • If market reaction favors a bullish 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 Price Index Falls Short of Market Forecast

  • Need green, five-minute candle to favor a long EUR/USD trade.
  • Implement same setup as the bullish dollar trade, just in reverse.

Potential Price Targets For The Release

  • Long-term outlook for EUR/USD remains bearish, but the failure to push back below the 1.5000 handle may continue to foster range-bound prices over the near-term.
  • Interim Resistance: 1.0970 (38.2% expansion) to 1.0990 (50% retracement)
  • Interim Support: 1.0487 (3/13 close) to 1.0515 (50% expansion)
 
2015-04-17 13:30 GMT (or 15:30 MQ MT5 time) | [USD - CPI]

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

[USD - CPI] = Change in the price of goods and services purchased by consumers. Consumer prices account for a majority of overall inflation. Inflation is important to currency valuation because rising prices lead the central bank to raise interest rates out of respect for their inflation containment mandate.

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U.S. Consumer Prices Rise 0.2% For Second Straight Month In March

While the Labor Department released a report on Friday showing another modest increase in U.S. consumer prices in the month of March, prices rose by slightly less than economists had anticipated.

The Labor Department said its consumer price index edged up by 0.2 percent in March, matching the increase seen in February. Economists had expected the index to rise by 0.3 percent.

The continued increase in prices was partly due to another notable increase in energy prices, which rose by 1.1 percent in March after climbing by 1.0 percent in February.

The gasoline index showed its biggest increase since February of 2013, surging up by 3.9 percent, while the fuel oil index also jumped by 5.9 percent.

However, the increase in energy prices was partly offset by a drop in food prices, as the food index fell by 0.2 percent in March after rising by 0.2 percent in February.

 

Forex Weekly Outlook April 20-24 (based on forexcrunch article)

Inflation data in New Zealand and Australia, Poloz and Stevens’ speeches, German ZEW Economic Sentiment and German Ifo Business Climate, US Unemployment Claims and Durable Goods Orders are the highlights of this week. Here is an outlook on the top events on Forex calendar.

Last week, US data disappointed with weaker than expected housing and employment data as well as soft retail sales.  Jobless claims rose 12,000 to 294K, building permits came reached 1.04 million while forecasted 1.08 million and housing starts hardly recovered with 0.93 million. Retail sales registered a 0.9% increase, below the 1.1% rise predicted and Core sales gained 0.4% far below the0.7% expected. However, the Philadelphia Fed Manufacturing Index surprised with 7.5 points vs. 5 in the previous months exceeding forecasts for a 6.5 points reading. Will the US data stabilize this week?

  1. New Zealand Inflation data: Sunday, 23:45. Consumer prices in New Zealand declined by 0.2% in the fourth quarter of 2014, amid lower oil and vegetables prices. This was the first decline since the fourth quarter of 2012. Analysts expected rates to remain unchanged and expected an annual growth of 0.9% rather than the 0.8% reported. However, international air fares edged up 7.3%, while domestic air fares expanded 8.3%. Housing costs were also a positive contributor to inflation in the December quarter. Consumer prices are expected to decline once more by 0.2%.
  2.  Stephen Poloz speaks: Monday, 15:05. BOC Governor Stephen Poloz is scheduled to speak in New York. Poloz may talk about the central bank’s decision to keep its key overnight lending rate unchanged and about his bright forecast for Canadian growth despite the current slowdown forced by the oil price collapse.
  3. Glenn Stevens speaks: Monday, 17:30. RBA Governor Glenn Stevens is expected to speak in New York. He may refer to The RBA’s decision to leave the cash rate unchanged at 2.25%, despite talks of a rate cut.
  4. Eurozone German ZEW Economic Sentiment: Tuesday, 10:00. German investors’ sentiment remained positive in March, climbing for the fifth time to 54.8 from 53 in February amid rising domestic demand. However concerns about Greece and Ukraine clouded future outlook. Analysts expected a higher figure but predict optimism will grow in the coming months after the fog, surrounding Greece and Ukraine, clears. Investors sentiment is expected to rise to 56.
  5. Australian inflation data: Wednesday, 2:30. Australian inflation in the last quarter of 2014, rose 0.2% following 0.5% rise reported in Q3. The reading was below expectations reflecting lower prices for transport, due to the ongoing decline in oil prices, as well as for healthcare. Falling fuel prices are the main cause for the tame inflation in the fourth quarter. But Core inflation a more precise measure posted a 0.7% gain reaching an annual 2.3% just above the bottom of the RBA’s 2-3% target range. CPI is forecasted to gain 0.1%.
  6. US Unemployment Claims: Thursday, 13:30.  The number of Americans filing initial claims for unemployment aid increased by 12,000 to 294,000, rising for the second straight week. However, the number of jobless workers is still low. The four-week average, edged up by 250 to 282,750, nearly the same as in the prior week. The total number of Americans seeking aid declined to 2.27 million, the lowest in more than 14 years. The number of claims is expected to reach 90,000 this week.
  7. Eurogroup Meetings: Friday. The Eurogroup meetings attended by Finance Ministers from the euro area will be crucial for Greece. Unless a funding agreement is reached, Greece will not get the third aid program from the ECB, resulting in a default. Athens has not received bailout aid since August last year and has been hard pressed to cover payments amid a cash crunch, resorting to measures such as borrowing from state entities to tide it over.
  8. Eurozone German Ifo Business Climate: Friday, 9:00. German Ifo business climate edged up to 107.9 in March from 106.8 in February, beating forecast for 107.3. Optimism about current conditions rose as well as six months outlook. Strong growth and low oil prices boosted domestic demand. Ifo economists believe expansion will continue in the coming months.
  9. US Core Durable Goods Orders: Friday, 13:30. Orders for long lasting goods declined in February by 1.4% contrary to forecast of 0.3% gain. Meanwhile, core orders fell 0.4% posting the fifth straight monthly decline. The weak figures suggest softening in domestic demand despite growth in employment. However, economists expect growth will increase in the coming months.
 

EURUSD tests resistance again (based on forexlive article)

The EURUSD - like the AUDUSD (and also the USDCAD) - has seen the price action complete a full lap in trading today. The price moved higher in London morning session, but subsequently fell all the way down to the days lows when NY traders entered.  




The weekend flows can wreck havoc. Greece will be in play over weekend (and going forward).  As a result geo-political risk have the potential to lead to more squaring up and choppy trading action -especially in the next hour.

 

EUR/USD: Momentum Shifts - BTMU (based on efxnews article)

EUR/USD is still trading within the 1.05-1.10 range that has been mainly intact for most of March and April, and in that sense the best bias to have for the week ahead is probably neutral, notes Bank of Tokyo Mitsubish (BTMU).

"The momentum though appears to be shifting back toward a higher move with EUR/USD moving that way in the aftermath of the monetary policy press conference by President Draghi. While the ECB is a little more upbeat we do not think that will help the euro," BTMU adds.

"The IMF/G20 gathering in Washington may well result in some comments on the dollar – a G20 statement may refer to FX in a slightly different way and this is a risk to the upside for EUR/USD. Any sense that officials are getting more worried about the speed of dollar strength may prompt selling. However, this is unlikely to be sustained for long – the reality is that monetary policy divergence is set for some considerable time," BTMU argues.

"Greece will remain an issue and given the risk that this could go right to the wire, this is a clear downside risk for EUR/USD if there’s a sense next week of no progress being made toward a resolution and the release of additional funds for Greece," BTMU adds.

 

US Dollar Fundamentals (based on dailyfx article)

Fundamental Forecast for Dollar: Bearish

  • The USDollar suffered its second largest weekly decline in a year this past week, but conviction was uneven
  • Inflation and Fed talk offered a little more traction for USD selling, but key risk in 1Q GDP and FOMC is further out


The Dow Jones FXCM Dollar Index (ticker = USDollar) dropped 1.1 percent this past week while the ICE Dollar Index tumbled 1.8 percent. That represents the second worst week for the even-weighted measure (USDollar) in 12 months and the second worst performance for the EURUSD-heavy gauge in 22 months. Have speculators over-reached on this advantaged currency? The recent stumble after two months of consolidation alongside speculative positioning suggests that may be the case. However, as market participants weigh the impetus for correction against the tangible fundamental appeal the currency holds over the longer-term; progress will lean heavily on meaningful catalysts to motivate a counter-trend move. And, this week’s docket will struggle for the high profile drivers while the period after is overstocked with redefining updates.

From a fundamental perspective, it is important to establish the longer-term position for the Greenback. Treasury Secretary Jack Lew at the G-20 noted the United States’ economic dominance when he remarked that it was not ‘sufficient’ that the US be the lone driver of global growth. That bodes well for investor returns (and thereby capital inflow) alongside the first-mover advantage the Fed seems to be taking with its relatively hawkish monetary policy standing. Furthermore, in the event of a global financial slump; the Dollar will likely revert back to its ‘haven’ status – after a certain intensity is reached. Medium to long-term, the currency looks well positioned to advance further. Yet, that doesn’t preclude it to interim corrections.

A ‘correction’ is what lurks for the Greenback. Nine-months of steady climb in the most rapid move since the early 1980’s mixes both fundamental reasoning and speculative exuberance. It is the faction that participated to take advantage of momemtum rather than hold positions to realize long-term developments that pose the currency short-term risk. It is difficult to establish exactly how much excess could be worked off, but positioning measures can act as a proxy. The CFTC’s Commitment of Traders (COT) report this past week showed a continued reversal from the record net-long exposure set in January. Now at its lowest level since the end of December, there is still plenty of room for moderation as we’ve only seen a 13 percent retreat from the bullish shift that began in 2012.

The most capable driver for the Dollar in its long and short-term course is monetary policy. This past Friday, a range of inflation measures bolstered the persistent doubt of near-term FOMC rate hikes. The headline CPI reading for March slipped back into negative territory (-0.1 percent), a real average weekly earnings figure retreated from its series high to a 2.2 percent clip and price forecasts from the University of Michigan confidence survey posted sharp declines. Caveats of robust core measures and the general trend of the wage numbers factor in, but viability of a near-term hike is certainly diminished. According to Fed Fund futures, the first hike is once again not fully priced in until January 2016.

Moderated rate expectations reinforced by tepid data, but it’s capability as a fundamental driver is diminished considering the time frame yields imply and the persistent buoyancy of the Dollar – a rate hike may come later but it is still a hike among QE programs. Sentiment may simply tip out of favor for the Greenback and pull it lower, but the most effective means would by through key event risk to focus the selling effort. For the coming week’s docket, there is limited high-profile event risk to hit all traders’ radars. And, marking a meaningful distraction, there are very high profile events in the following week (FOMC decision and GDP amongst others).

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