Sergey Golubev
Sergey Golubev  

Trading the News: U.S. Durable Goods Orders (based on dailyfx article)

A 0.6% rebound in orders for U.S. Durable Goods may heighten the appeal of the greenback and spur a bearish retraction in EUR/USD as it raises the fundamental outlook for the world’s largest economy.

What’s Expected:

Why Is This Event Important:

Signs of a stronger recovery may encourage bets for a mid-2015 Fed rate hike, but the recent slew of weaker-than-expected data prints may encourage the central bank to further delay its normalization cycle in an effort to combat the ongoing slack in the real economy.

However, fading discounts along with the ongoing weakness in household spending may drag on orders for durable goods, and a dismal print may dampen the appeal of the greenback as it raises the Fed’s scope to retain its current policy beyond mid-2015.

How To Trade This Event Risk

Bullish USD Trade: Orders Rebound 0.6% or Greater

  • Need to see red, five-minute candle following the release to consider a short trade on EURUSD
  • If market reaction favors a long dollar trade, sell EURUSD 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: Demand for Durable Goods Falter
  • Need green, five-minute candle to favor a long EURUSD trade
  • Implement same setup as the bullish dollar trade, just in the opposite direction
Potential Price Targets For The Release
EURUSD Daily Chart

  • Long-term outlook for EUR/USD remains bearish, but the triangle/wedge formation may .
  • Interim Resistance: 1.0970 (38.2% expansion) to 1.0990 (50% retracement)
  • Interim Support: 1.0487 (3/13 close) to 1.0515 (50% expansion)

Orders for U.S. Durable Goods unexpectedly shrank 1.4% in February following a revised 1.9% expansion the month prior. The contraction was largely drive by a drop in transportation, with demand for non-defense aircrafts slipping 8.9% from the previous month. The slowdown in private-sector consumption may become a growing concern for the Fed as lower energy costs fail to boost household spending, and the central bank may look to further delay its normalization cycle in an effort to encourage a stronger recovery. Despite the weaker-than-expected prints, the initial market reaction was rather limited as EUR/USD struggled to hold above the 1.1000 handle during the North American trade to end the day at 1.0973.

Sergey Golubev
Sergey Golubev  

The Biggest EURUSD Resistance Test of the Year ( based on dailyfx article)

“EURUSD rolled over at slope resistance but several longer term technical observations are worthy of note; the rate found low at an important long term level (line off of 2008 and 2010 lows) and the ownership profile (as per COT) is at a record. The speculative crowd has never been more bearish…ever. Such conditions typically precede important reversals…although not necessarily right away. A break above the resistance lines (old support) would indicate that behavior has significantly changed and open up a run on 1.13.” It is decision time traders.

Sergey Golubev
Sergey Golubev  

US Dollar Fundamentals (based on dailyfx article)

Fundamental Forecast for Dollar: Bearish

  • The Dollar marked its lowest weekly and daily close in two months ahead of key event risk
  • Given how essential rate speculation has been to the Greenback’s 9 month rally, this week FOMC and GDP are crucial

The stage is set and the curtain is rising. The Dollar has wobbled these past weeks, but it hasn’t managed to turn its nine-month long bull trend. That is difficult to do when the undercurrent of the FX market maintains solid support for the benchmark currency. Economic potential, monetary policy course and disaster insurance premium all bolster the Greenback’s case for a medium-to-long term climb. Yet, that doesn’t render the currency infallible. Speculative appetite – as it has in equities and other asset classes – has likely overreached on the Dollar. But, what would unnerve such a comfortable trade? Heavy event risk.

There is a lot going on in the financial markets over the coming week. Subsequently, there will be a lot of crosswinds working on the consensus view for the Dollar. That said, we will likely see the market discount the influence of many of these catalysts in deference for the concentrated event risk on Wednesday: 1Q US GDP and the FOMC rate decision. Over the past year, one theme has commanded the reins of the broader FX market – divergent monetary policy views. The Fed has shifted from the world’s most accommodative central bank to one of the first majors to contemplate a rate hike. What has resulted from this shift is one of the most impressive runs the currency market has seen in a while.

The trouble for the Dollar is that the premium afforded the currency is so-far unrealized. While there is general agreement that the Fed will lift rates over the coming year, there is considerable debate as to when the actual move will be realized. At the turn of the year, speculation for a ‘mid-2015’ move was robust with meaningful support for a June or July liftoff. However, in the past three months, the hawkish mood has soured. Data has softened and fallen increasingly short of forecasts (the Citigroup Economic Surprise Index dropped to a three-and-a-half year low). Rhetoric from central bank officials in turn has also backed off a campaign to acclimatize speculators to an earlier move. Maintaining a measure of skepticism throughout, the market has pushed back its timing of a first move through Fed Funds futures from September (at the start of the year) to January 2016 currently.

Whether or not the central bank will be forced to sit on its hands will be heavily dictated by the fundamental duo Wednesday. Chronologically, the growth report for the opening quarter of the year crosses the wires first. The forecast is already calling for a significant moderation of the economy’s pace from 2.2 percent in 4Q to a more reserved 1.0 percent clip. While many – including some Fed members – believe this could be a repeat of last year where the lull is temporary, it would likely kill any lingering hope for a June move.

As for the central bank decision, this is not one of the quarterly events where we receive updated forecasts and a press conference to work our speculative assessments off of. That said, the statement will be thoroughly processed and that is where the market derived most of its interest at the last meeting. If the group’s tone is materially more cautious or concerned on the state of the economy, inflation and global conditions, it could further dovish skepticism. Of course, the most potent outcome for the Dollar would be a combined economic slowdown and softer rhetoric.

Sergey Golubev
Sergey Golubev  

USDJPY Fundamentals (based on dailyfx article)

Fundamental Forecast for the Japanese Yen: Neutral

  • Yen Unlikely to Find Lasting Catalyst in BOJ Policy Announcement
  • Greece Funding, FOMC Rate Decision Set to Drive Yen Price Action

The Bank of Japan seems unlikely to expand stimulus at its upcoming policy meeting. Recent comments from Governor Haruhiko Kuroda suggest he sees no urgency in fighting the pullback in headline inflation played out since mid-2014. The drop played out alongside a steep slide in oil prices, suggesting weakness will dissipate once rebasing takes effect in the second half of 2015. Indeed, core inflation has been remarkably stable near the target 2 percent level for the past 12 months and price-growth bets implied in bond yields have been rising since the beginning of the year.

The policy announcement may still prove market-moving if an updated set of economic forecasts proves especially ominous, foreshadowing a larger easing effort on the horizon. Follow-through on such a development may be limited however since leading economic activity surveys have pointed to decelerating growth since January. That means only a dramatically aggressive downgrade would deliver something material enough to force a rebalancing of already priced-in expectations.

Meanwhile on the external front, potent volatility catalysts abound. The outcome of negotiations between Greece and its EU/IMF creditors at a meeting of Eurozone finance ministers and central bankers in Riga over the weekend will set the tone initially. Athens is due to present the fourth revision of a reform package designed to unlock further bailout funding.

Both sides seem vested in a successful accord. EU and IMF officials want to avoid setting a precedent for a sovereign default within the Eurozone that potentially leads Greece out of the currency bloc. Meanwhile, Prime Minister Alexis Tsipras and company surely understand that disorderly redenomination will probably compound their country’s economic woes and may cost them their jobs. On balance, the announcement of an agreement that keeps Greece afloat – even if only in the near term – is likely to boost risk appetite and weigh on the Japanese Yen amid ebbing haven demand for the safety-linked currency.

The next major inflection point comes by way of the Federal Reserve policy meeting. A rate hike seems overwhelmingly unlikely just yet, putting the onus on the statement accompanying the announcement. The central bank seemed to switch to a month-to-month guidance regime at the March sit-down. If this continues, Chair Yellen and her colleagues on the rate-setting FOMC committee are unlikely to say much beyond hinting that tightening probably won’t arrive in May.

Such a result may embolden the recent dovish shift in investors’ perceived Fed rate hike timeline. This may lead the Yen higher, considering the average value of the Japanese unit against its top counterparts has displayed an increasingly significant inverse correlation with front-end US bond yields over recent weeks.

Sergey Golubev
Sergey Golubev  

GBPUSD Fundamentals (based on dailyfx article)

Fundamental Forecast for British Pound: Bullish

  • An important improvement in interest rate prospects sends the British Pound higher
  • The British Pound’s volume profile suggests a break above $1.5150 targets $1.56

An important jump in interest rate expectations helped push the British Pound to fresh two-month highs versus the US Dollar. Yet a great deal of uncertainty surrounding upcoming UK Elections could slow gains as traders prepare for potential volatility.

The coming week will be an important one for the UK and broader financial markets as national agencies release British and US Gross Domestic Product (GDP) growth figures for the first quarter, while a highly-anticipated US Federal Reserve policy meeting and Nonfarm Payrolls report will likewise drive market volatility.

Last week we argued that fundamental strength could fuel a sustained GBP reversal, and indeed recent developments suggest the British Pound could claw back further losses through upcoming trade. The key caveat is that any number of top-tier economic data releases and events in the coming two weeks could change outlook. Any large surprises out of upcoming UK GDP figures could have an especially significant impact for Sterling pairs. And the US Fed decision as well as NFPs results always threatens major moves in USD currency pairs.

The true test for the Sterling may ultimately come in the following week as there remains a great deal of uncertainty surrounding UK Elections. A sharp jump in GBPUSD volatility prices/expectations underlines the risk, and it remains especially difficult to predict the outcomes of the elections and much less implications for the GBP itself.

We remain cautiously bullish the British Pound as recent Bank of England rhetoric suggests that domestic interest rates may rise sooner than expected. Yield-seeking investors continue to favor currencies with higher rates of return, and interest rate differentials remain one of the most important drivers of exchange rate volatility. The key question is whether upcoming data and/or political uncertainty can derail what seems to be the start of a larger reversal for the UK currency.

Sergey Golubev
Sergey Golubev  

AUDUSD Fundamentals (based on dailyfx article)

Fundamental Forecast for Australian Dollar: Neutral

  • AUD/USD Continues to Flirt with Important Behavior Change
  • AUD/USD Holds April High (0.7841) Despite Stronger-Than-Expected Australia Core CPI

AUD/USD is likely to face increased volatility in the week ahead amid the key developments coming out of the U.S. economy, but fresh commentary coming out of the Reserve Bank of Australia (RBA) may continue to heighten the appeal of the higher-yielding currency as Governor Glenn Stevens appears to be in no rush to further embark on the easing cycle.

The advance U.S. Gross Domestic Product (GDP) report is expected to show the growth rate climbing an annualized 1.0% after expanding 2.2% during the last three-months of 2014, and fears of a slowing recovery may push the Federal Open Market Committee (FOMC) to further delay its easing cycle as a growing number of central bank officials adopt a more cautious tone for the region. With that said, the fresh developments coming out of the Fed’s April 29 interest rate decision may show little evidence for a June rate hike, and the near-term weakness in the greenback may turn into a larger correction should Janet Yellen and Co. show a greater willingness to carry its current policy into the second-half of the year.

Even though the RBA keeps the door open to further reduce the official cash rate, Governor Glenn Stevens may continue to endorse a wait-and-see approach next week at the Australian Financial Review Banking & Wealth Summit amid sticky price growth in the $1T economy. The unexpected uptick in the core rate of inflation may keep the RBA on the sidelines at the May 5 policy meeting and the central bank may soften its dovish tone for monetary policy as record-low borrowing costs raise the risk for housing market imbalance.

In turn, the rebound from earlier this month may spur a test of the March high (0.7987) on the back of dismal developments coming out of the U.S. economy, but the policy divergence should continue to foster a long-term bearish outlook for AUD/USD as the Fed remains on course to raise its benchmark interest rate. Moreover, the aussie remains at risk of facing additional headwinds over the near-term as the RBA retains the verbal intervention on the local currency.

Sergey Golubev
Sergey Golubev  

GOLD Fundamentals (based on dailyfx article)

Fundamental Forecast for Gold: Neutral

  • Gold 1174 Could Provide Support
  • Gold Sinks to Pivotal Support, SPX 500 Waiting for Direction Cues

Gold prices fell for a third consecutive week with the precious metal off more than 2.17% to trade at 1177 ahead of the New York close on Friday. The decline marks the largest weekly loss in seven as equity markets probed fresh record highs alongside a pullback in the dollar. Bullion looks to close the week just above key near-term support with major US data on tap next week.

Heading into next week, traders will be closely eyeing key US event risk with the release of 1Q Advanced Gross Domestic Product (GDP) & the FOMC policy decision on Wednesday. Consensus estimates are calling for an annualized read of 1.0% for the first quarter, down from 2.2% in 4Q. The GDP report may ultimately fall short of market expectations as seasonal factors are blamed for the recent batch of soft data and a set of weak prints may press the Fed to carry its highly accommodative policy stance through the second-half of 2015. As such, look for the release to impact interest rate expectations with a stronger print likely to weigh more heavily on gold.

From a technical standpoint, gold broke below slope support on Friday, opening up a decline targeting the 61.8% retracement of the advance off the yearly lows at 1173 (key support). Note that a median-line extending off the monthly high converges on this level into the start of next week and we’ll reserve this region as our bullish invalidation level with a break below risking a decline back into critical weekly support at 1150/51. Interim resistance is eyed at 1191 with a breach above 1200 needed to shift our attention back to the long-side of the trade. That said, we’ll take a neutral stance heading into next week while noting that the short bias remains at risk above keys support at 1173.

Sergey Golubev
Sergey Golubev  

EURUSD forecast for the week of April 27, 2015, Technical Analysis (based on fxempire article)

The EURUSD pair initially fell during the course of the week but found enough support to turn things back around and form a hammer. However, we recognize that the 1.10 level above is still resistive, so therefore it’s difficult to take a longer-term trade. In fact, we are comfortable with longer-term trades until we are well above the 1.15 level, which is something that we are obviously not going to see anytime soon. With that, we remain on the sidelines as far as long-term trades are concerned, but will pay attention to the shorter-term daily chart.

Sergey Golubev
Sergey Golubev  

Forex - Weekly outlook: April 27- May 1 (based on article)

The dollar ended the week lower against the other major currencies on Friday, the second consecutive weekly decline as fresh economic data underlined concerns that the recovery is losing momentum.

The Commerce Department reported Friday that orders for durable goods, excluding aircraft, fell 0.5% in March, after a downwardly revised 2.2% drop in February.

The headline figure rose 4.0%, beating expectations for a 0.6% gain, but investors focused on underlying weakness in the report.

The data came after recent weak reports on home sales, retail sales and industrial production, adding to signs of a slowdown in economic growth since the start of the year.

The weak data added to pressure on the dollar which has been hit as investors pushed back expectations on the timing of an initial rate hike by the Federal Reserve.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was last down to 97.07 late Friday. The index ended the week down 0.62%.

EUR/USD was up 0.48% to 1.0874 in late trade, to end the week with gains of 0.61%.

The single currency was held in check as concerns over Greece’s debt negotiations continued. Euro area finance ministers said Friday that Greece must present a full economic reform plan by early May in order to access any further funding.

The dollar was also lower against the yen, with USD/JPY down 0.51% to one-week lows of 118.98.

Sterling also pushed higher against the weaker dollar, with GBP/USD adding 0.88% to trade at 1.5188 late Friday. The pound shrugged off uncertainty over the outcome next month’s U.K. general elections.

In the week ahead investors will be looking to Wednesday’s Fed statement for clues on the possible timing of a rate increase. Investors will also be focusing on Wednesday’s preliminary reading on U.S. first quarter growth as well as reports on inflation, consumer confidence and manufacturing.

Central bank meetings in Japan and New Zealand will also be in focus, as will Thursday's preliminary data on euro zone inflation.

Monday, April 27

  • Markets in New Zealand will remain closed for a holiday.
  • The U.K. is to release private sector data on industrial order expectations.

Tuesday, April 28

  • Reserve Bank of Australia Governor Glenn Stevens is to speak at an event in Sydney.
  • Japan is to release data on retail sales.
  • The U.K. is to publish preliminary data on first quarter economic growth.
  • Bank of Canada Governor Stephen Poloz is to speak at an event in Ottawa.
  • Later Tuesday, the U.S. is to release private sector data on consumer confidence.

Wednesday, April 29

  • New Zealand is to produce reports on the trade balance and business confidence.
  • Markets in Japan are to remain closed for a holiday.
  • In the euro area, German y is to release preliminary data on consumer inflation.
  • The U.K. is to release a private sector report on retail sales.
  • The U.S. is to publish preliminary data on first quarter economic growth in addition to a report on pending home sales.
  • Later in the day the Federal Reserve is to announce its monetary policy decision and publish its rate statement.

Thursday, April 30

  • The Reserve Bank of New Zealand is to announce its benchmark interest rate and publish its rate statement. New Zealand is also to release data on building consents.
  • Japan is to release preliminary data on industrial production. The Bank of Japan is to announce its monetary policy decision and release its rate statement. The announcement is to be followed by a press conference.
  • Germany is to report on retail sales and unemployment, while Spain is to release data on inflation and economic growth. The euro zone is also to release preliminary data on consumer prices and the unemployment rate.
  • Later in the data Canada is to publish its monthly report on economic growth.
  • The U.S. is to publish data on initial jobless claims.

Friday, May 1

  • Japan is to release a string of reports on inflation, household spending, average earnings and unemployment.
  • Markets in China are to remain closed for a holiday. Beijing is still to release data on manufacturing and service sector activity.
  • Australia is to release data on producer price inflation.
  • In Europe markets in France, Italy, Germany and Switzerland are to remain shut for holidays. Meanwhile, the U.K. is to release data on manufacturing activity.
  • The U.S. is to round up the week with a report for the Institute of Supply Management on Manufacturing activity and revised data on consumer sentiment.
Sergey Golubev
Sergey Golubev  

EUR/USD Forecast Apr. 27 – May 1 (based on forexcrunch article)

EUR/USD had a choppy week, feeling some pressure but not falling too far. Inflation data stands out just before the May 1st holiday. Here is an outlook for the highlights of this week and an updated technical analysis for EUR/USD.

Greek headlines drifted between deteriorating conditions and Grexit talk to optimism or at least a deadline delay. This had a growing impact on the common currency. For a change, most euro-zone figures fell short of expectations and that also took its toll. In the US, data began looking better, with existing home sales beating expectations. But it’s far from looking rosy and as the week advanced, the dollar was hit by weak data. All in all, it’s a mixed picture with quite a lot of action.

  1. German Import Prices: Wednesday, 6:00. Prices of imported goods also feed into inflation calculations and are impacted by the exchange rate. A surprising jump of 1.4% was seen in February. Another rise of 0.4% could be seen now
  2. German CPI: Wednesday, state data released during the morning with the all-German read coming at 12:00. The largest economy in the euro-zone saw prices rising by 0.5% in March, a second consecutive beat of expectations. A drop of 0.1% is expected in the early release for April.
  3. ECB monetary data: Wednesday, 8:00. The European Central Bank has made a lot of efforts to pump money, and this is bearing fruit. The annual rise in the M3 Money Supply stands at 4%, after long months of a very slow rise in the amount of money in circulation. 4.3% is predicted now  Private loans are still contracting on a y/y basis, at 0.1% in February. The figures for March are expected to show an improvement, especially on the background of QE implementation with an annual rise of 0.2%.
  4. French Consumer Spending: Thursday, 6:45. The zone’s second largest economy has enjoyed 4 consecutive months of growing spending by consumers, but the figure for February fell short of predictions by rising only +0.1%. A drop of 0.5% is on the cards now.
  5. Spanish Flash GDP: Thursday, 7:00. As one of the first countries that releases in GDP data, this will be closely watched. The country enjoyed a strong growth rate of 0.7% q/q in the last quarter of 2014. According to government officials, growth could even be stronger now: 0.8%.
  6. Spanish Flash CPI: Thursday, 7:00. Growth is partially built on a fall in prices. The zone’s fourth largest economy suffered from one of the worst levels of deflation, but this seems to be waning off. For March, a fall of 0.7% was seen in CPI. The same annual drop in prices is expected in the preliminary number for April.
  7. German Unemployment Change: Thursday, 7:55. Germany enjoyed many months of drops in the number of unemployed. In February, Germany saw a drop of 15K and the unemployment rate stood on 6.5%. Another similar drop is on the cards: -14K.
  8. ECB Economic Bulletin: Thursday, 8:00. The data in this report is what the governing council of the central bank sees before making its monetary decisions. In the April rate decision, no policy change was announced and Draghi shrugged off talk about QE tapering despite the economic improvement. This could give some more insight into the current conditions.
  9. Inflation data: Thursday, 9:00. The euro-zone remained in deflation in March, with a drop of 0.1% in prices, but this was better than expected. Core inflation stood on 0.6% and showed that the underlying weakness – it is not only oil prices. Headline CPI carries expectations for a flat 0% while core CPI is expected to stand at 0.6% once again.
  10. Unemployment Rate: Friday, Thursday, 9:00. After a few signs of falls in unemployment, the situation isn’t too good. At 11.3%, the old continent has a long way to go. A small drop is on the cards now for March, to 11.2%.