USDJPY Fundamentals (based on dailyfx article)
Fundamental Forecast for Yen: Neutral
The fundamental event risks lined up for the final
full-week of April may heighten the appeal of the Yen and spark a
further decline in USD/JPY as the Japanese economy gets on a firmer footing.
With Japan expected to post a trade surplus for the
first time since June 2012, prospects for a stronger recovery in 2015
may encourage the Bank of Japan (BoJ) to retain a wait-and-see approach
at the April 30 interest rate decision as Governor Haruhiko Kuroda
remains confident in achieving the 2% inflation target over the policy
horizon. In turn, Japanese officials may continue scale back their
verbal intervention on the local currency, and the bearish sentiment
surrounding the Yen may continue to diminish over the near to
medium-term as the central bank turns increasingly upbeat on the
In contrast, the recent weakness in the U.S. may
further dent expectations for a Fed rate hike in June, and another
series of weaker-than-expected data prints may spark a larger correction
in the greenback as interest rate expectations get pushed back. Despite
expectations for a 0.6% rebound in U.S. Durable Goods, it seems as
though lower energy prices are failing to drive private-sector
consumption amid the ongoing weakness in retail spending, and another
unexpected decline in demand for large-ticket items may trigger a larger
correction in the greenback as it drags on the outlook for growth and
inflation. In turn, we may see a growing number of Fed officials show a
greater willingness to retain the zero-interest rate policy beyond
mid-2015 at the April 29 meeting.
With that said, the improving terms of trade for
Japan paired with the ongoing slack in the U.S. economy may prompt a
further decline in USD/JPY, and the pair may continue to give back the
rebound from March (118.32) amid the shift in the policy outlook.
GBPUSD Fundamentals (based on dailyfx article)
Fundamental Forecast for British Pound: Bullish
Impressive UK employment data helped push the British Pound sharply higher versus the US Dollar and other major counterparts, and the recent reversal in fortunes leaves us in favor of continued GBP gains through the foreseeable future.
The FX market is a question of relative performance,
and the fact that US economic data and interest rate expectations have
been notably better than their UK equivalents helps explain why the
British Pound/US Dollar exchange rate recently fell to five-year lows.
Yet things have turned for the US currency as a recent tumble in
domestic yields have left it at a lesser advantage versus the British
Pound and others. The difference between UK and US 2-year government
bond yields now stands near its smallest since November, 2014, and the GBP/USD exchange rate has moved higher in kind.
Traders will look to upcoming Bank of England Monetary Policy Committee
minutes to drive moves in UK interest rates, while a relatively empty
US economic calendar suggests broader market volatility may slow through
the coming week. The key question is whether recent improvements in UK
economic data will be enough to force the Bank of England into action
sooner than currently expected.
Headline UK Consumer Price Index inflation printed
at exactly 0.0 percent through March—well-below the BoE target of 2.0
percent. This fact in itself suggests the central bank will be in no
rush to raise rates through the foreseeable future. And yet recent
employment numbers show domestic unemployment has fallen to seven-year
lows, while broader consumption and economic activity data points to
strong growth through 2015. All else remaining equal, the improvement in
the data should have been enough to send the British Pound even higher.
The critical point remains that political
uncertainty surrounding UK elections on May 7 have hurt the British
Pound against major counterparts. Derivatives markets show that GBP/USD
volatility prices/expectations trade near multi-year highs given clear
indecision in UK electoral poll figures. Ultimately, however, fears over
post-election political disarray may be overdone. And indeed further
improvements in economic data and interest rate expectations could fuel a
larger British Pound recovery versus the US Dollar and other major FX
AUDUSD Fundamentals (based on dailyfx article)
Fundamental Forecast for Australian Dollar: Neutral
The Australian Dollar is on pace to produce the
first series of back-to-back weekly gains in three months. The currency
shrugged off losses sustained early in the week on the back of
disappointing Chinese trade figures following an impressively strong
March jobs report. The decidedly upbeat outcome weighed against RBA
interest rate cut speculation. Traders now price in a 58 percent
probability of a 25bps cut at next month’s central bank policy meeting,
down from 78 percent at the start of the week.
Looking ahead, first-quarter CPI figures will
continue to inform investors’ RBA outlook. The benchmark year-on-year
inflation rate is expected to decline to 1.3 percent, the lowest in
almost three years. As with many of its G10 counterparts however, the
RBA has been reluctant to fight short-term price growth weakness.
Policymakers have argued that downside pressure will dissipate with
rebasing as the impact of last year’s sharp drop in energy costs is
unwound, leaving medium-term trends targeted by central banks intact.
With that in mind, traders will probably focus on
the “trimmed mean” CPI measure, a metric that aims to strip out up- and
down-side price growth volatility extremes to get at the core inflation
trend. This is expected to hold at 2.2 percent, unchanged from the
fourth quarter. That would mark a break from disinflation seen in the
second half of 2014, which may further reinforce perceptions that the
RBA is in no hurry to top up stimulus and boost the Australian unit.
Chinese news-flow represents another significant
inflection point. The Aussie overlooked dismal industrial production
figures from the East Asian giant last week, with the release seemingly
overshadowed by a concurrently published first-quarter GDP report that
printed in line with forecasts. The week ahead will bring a timelier
measure of the business cycle in Australia’s top export market via the
flash estimate of April’s HSBC Manufacturing PMI measure. Accelerated
contraction in factory-sector activity is expected, which may cap the
Aussie’s upside potential.
GOLD Fundamentals (based on dailyfx article)
Fundamental Forecast for Gold: Neutral
are softer for a second consecutive week with the precious metal off
nearly 0.27% to trade at $1204 ahead of the New York close on Friday.
Price action has been uninspiring over the past few sessions despite
broader volatility in equity markets, with S&P posting its largest single-day decline since March 25th.
The March US Consumer Price Index (CPI) released on
Friday was mixed with the headline year-on-year print showing a
contraction of 0.1% while the core rate increased from 1.7& to 1.8%
y/y. The data offered little assistance to the battered greenback with
the dollar trading heavier against all of its major counterparts heading
into the close of the week. Gold looks to close the week within the
initial weekly opening range with prices continuing to contract after
failing to breach above the March highs earlier in the month.
Economic data will be light next week with US Durable Goods Orders
on Friday highlighting the docket. The broader picture for gold remains bearish as
expectations for a Fed interest rate hike this year continue to weigh on
demand for non-yielding assets. However, the Fed now runs the risk of
further delaying its first interest rate hike in nearly a decade as
growing geopolitical concerns, strength in the dollar and soft inflation
continue to limit the central bank’s scope to begin the normalization
cycle. As such gold may continue to see a reprieve with the momentum
profile suggesting more upside may be on the cards before the resumption
of the broader down trend.
From a technical standpoint, the near-term outlook
remains clouded as the monthly range continues to compress. Key support
rests at 1173/77 and we will reserve this threshold as our medium-term
bullish invalidation level. Interim resistance is eyed at 1214 (April
high day close) backed by the 50% retracement of the 2014 range /
200-day moving average at 1225/29. Key resistance stands at 1245/48 with
a breach above targeting objectives into 1300. That said, we’ll be
looking for a break of the monthly opening range to validate our
near-term bias with the broader outlook weighted to the topside while
EUR/USD Weekly Fundamental Analysis, April 19 – 24, 2015 – Forecast (based on fxempire article)
soared to a near term high at 1.0808 after the release of inflation
data and strong comments from Mario Draghi on Thursday. USD outlook has
become more balanced which is likely to drive near‐term USD weakness
but over the medium term the USD should still be supported. The DXY USD
index is flirting with a break below its 50‐day MA, a level it hasn’t
traded through since July, accordingly technically the USD index is
shifting and a close below here today would be important. The
fundamental side has likely caught up to the data surprises, which have
continued to be disappointing for the US.
The euro is stronger, having rallied back above 1.08 and moving
towards its 50‐day MA. Fundamental data was essentially as expected with
inflation in line with the flash estimate. Greece continues to be a
core focus, with April 24th’s Euro‐Area meetings particularly important.
German and French yields continue to fall, driving an increased focus
on the risks around bond scarcity for the ECB QE program.
Data released this week showed the Eurozone is fighting its way out
of deflation, as prices rose for the second month straight, easing fears
it could enter into a prolonged period of price falls. The single
currency area’s annual inflation rate rose to -0.1 per cent in March, up
from -0.3 per cent a month earlier, according to its official
statistics agency. This was in line with analysts’ expectations.
Weekly outlook: April 20 - 24 (based on investing.com article)
The dollar ended the week lower against a basket of other major
currencies on Friday as investors pushed back expectations for higher
U.S. interest rates after a recent run of soft economic data dampened
optimism on the recovery.
The dollar shrugged off data on Friday showing that U.S. consumer prices were higher for a second successive month in March.
The Labor Department reported that the consumer price index edged up
0.2% last month, matching a similar gain in February. On a
year-over-year basis, consumer prices dipped 0.1% in March after
remaining flat in February.
Core consumer prices, which exclude food and energy costs increased
0.2% in March for an annual increase of 1.8%, the largest since October.
The report came after data earlier in the week showed that U.S.
retail sales for March came in below expectations. Another report,
showing a larger-than-forecast drop in industrial output pointed to a
slowdown the first quarter.
The dollar was lower against the yen for a sixth straight session on Friday, with USD/JPY at 118.93 in late trade. The pair ended the week down 1.06%.
The dollar fell to two-week lows against the Swiss franc, with USD/CHF sliding 0.43% to 0.9519.
The euro was up 0.43% to 1.0808 late Friday, bringing the week’s gains to 1.89%.
The single currency strengthened in spite of concerns that Athens is
no closer to reaching an agreement on economic reforms for bailout funds
with its creditors, fuelling fears that Greece could be forced out of
the euro zone.
The pound also gained ground against the dollar, with GBP/USD hitting one-month highs of 1.5054 on Friday, before pulling back to 1.4958 in late trade.
Sterling’s gains were held in check amid uncertainty over the outcome of parliamentary elections due to take place on May 7.
The U.S. dollar index,
which measures the greenback’s strength against a trade-weighted basket
of six major currencies, was last down to 97.62 late Friday. The index
ended the week down 1.9%.
In the week ahead, investors will be looking ahead to reports on the
U.S. housing sector and data on durable goods orders for further
indications on the strength of the recovery.
In the euro zone, Tuesday’s ZEW report on German economic sentiment
and Thursday’s reports on private sector activity will be in focus.
Monday, April 20
Tuesday, April 21
Wednesday, April 22
Thursday, April 23
Friday, April 24
EUR/USD weekly outlook: April 20 - 24 (based on investing.com article)
The dollar was lower against the euro for a fourth consecutive
session on Friday as expectations for higher U.S. interest rates waned,
despite data showing an uptick in inflation in March.
EUR/USD was up 0.43% to 1.0807 in late trade and ended the week with gains of 1.89%.
The string of weak data added to the view that the Federal Reserve
could push back hiking interest rates until late 2015 from midyear.
The single currency gained in spite of concerns that Athens is no
closer to reaching an agreement on economic reforms for bailout funds
with its creditors, fuelling fears that Greece could be forced out of
the euro zone.
Earlier in the week European Central Bank President Mario Draghi said
the bank expects to fully implement its trillion-euro quantitative
easing program. He also played down concerns that the asset purchase
program will struggle to find enough euro zone bonds to buy.
EURUSD Fundamentals (based on dailyfx article)
Fundamental Forecast for Euro: Neutral
The Euro treaded water last week, losing ground
against half of its major counterparts and gaining a bit more against
the other three. The worst performance came against the Swiss Franc (EURCHF -0.91%), while the best performance came against the US Dollar
(EURUSD +1.87%). In a week ripe with strife – be it on the political
front, with more debt bantering with Greece, or on the monetary front,
in the form of the European Central Bank’s third policy meeting of the
year – the Euro fared reasonably well, all things considered.
With respect to the ECB meeting, President Mario
Draghi has made it quite clear that market-borne talk of the QE program
being tapered ahead of its projected September 2016 finale are premature
at best, and misguided at worst. Before asset purchases cease, the ECB
needs to see a stabilization in both actualized and expected inflation,
which haven’t happened yet: core inflation resides at a mere +0.6% y/y;
and the 5y5y inflation swaps closed the week at 1.693%, right at the
four-week/20-day average of 1.678%. ‘Taper talk’ probably becomes more
realistic once core inflation crosses the +1.2% y/y threshold, or if the
5y5y inflation swaps move above 1.800%.
For now, the Euro remains a weak buy against a
basket of its major counterparts due to its deflating yield appeal and
further crystallization as a funding currency. The Euro has lost and
continues to lose its appeal as a growth currency as the differential
between the short-end and the long-end of the yield curve (in Germany
the 2s10s spread fell to 0.347% on Friday from 0.638% on January 1)
decreases; and its appeal as a funding currency increases as rates
towards the long-end drop into negative territory (German yields out to
9-years are negative).
The drop in sovereign yields decreases the demand
for Euros. With nominal yields falling and inflation expectations
holding stable (and even slightly rising), real returns on fixed income
investments are decreasing; in turn, this fuels demand for higher
yielding/riskier EUR-denominated assets like equities; or forces
Euro-Zone-based investors to look outside the region for opportunity –
which means capital needs to be converted from Euros into foreign
currencies. This is the “portfolio balancing channel” effect that ECB
President Mario Draghi has been discussing since the beginning of the
Forex technical analysis (VIDEO): EURUSD starts the week more bearish. Can it continue? (based on forexlive article)
The EURUSD started the day at the highs and wandered lower in trading as
the week got started. Will the bearishness continue this week? What
levels will keep the bears in control.
Weekend Edition with John O'Donnell (based on fxstreet article)
4 days worth of market gains erased with one single day! What caused it? Europe? China? Earnings? John O’Donnell joins Merlin Rothfeld
for a look at how they perceived this week’s trading opportunities. The
duo looks at Gold, equity markets, the new rule changes in China, and
the serious issues facing retirees in America!