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Forex Weekly Outlook Nov 30-Dec 4 (based on the article)

The US dollar managed to gain some ground in the Thanksgiving week. A very busy week awaits us in the first week of the last month: 3 rate decisions with the ECB gaining a lot of traction, a full buildup to the US Non-Farm Payrolls as well as a testimony from Fed Chair Janet Yellen. Here is an outlook for these key events and more.

The U.S. economy released some positive figures such as a better growth rate, showing an annual GDP gain of 2.1% in the third quarter. Furthermore, US Jobless claims fell 12,000 last week to 260,000, beating forecast for a 273,000 reading. Not all data has been great, but it seems good enough for the Fed to proceed with a rate hike on December 16. In the euro-zone, we heard some ideas for the ECB decision, that weighed on the euro. The stabilizing of oil prices only partially helped the loonie and the Aussie only partially enjoyed the lack of appetite for a rate hike.

  1. Chinese Caixin Manufacturing PMI: Tuesday, 1:45. This independent measure from the world’s No. 2 economy always shakes the A$ but also impacts the whole world, especially after the stock market crash in August. A repeat of 48.3 points is expected for November. This reflects contraction.
  2. Australian rate decision: Tuesday, 3:30. The Reserve Bank of Australia kept the cash rate at 2% for the sixth month in a row in November, but left the door open to another cut in the next few months.  RBA governor Glenn Stevens said that the slow pace of inflation might allow further easing of policy. The decision was in line with market forecast.
  3. Mark Carney speaks: Tuesday, 9:00. Bank of England governor Mark Carney will speak about the Financial Stability Report and UK Bank Stress Testing, in London. He said that UK interest rates are expected to remain low “for some time” and that rates should remain at 0.5% until mid-2016 at the earliest. Meanwhile, the central bank monitoring groups of households to find out what impact any rate hike would have.
  4. Canadian GDP: Tuesday, 13:30. Canada’s gross domestic product expanded for a third month in a row in August, but at a slower than expected pace. GDP rose 0.1% in August from July, in line with forecasts. Economists said the August rise might contribute to a 2.5% positive growth rate in the third quarter. The August gain was driven by solid growth in manufacturing and retail sales, both rising 0.6% July, as well as a continued improvement in energy and mining output. GDP is expected to rise 0.1% in September.
  5. US ISM Manufacturing PMI: Tuesday, 15:00. The Institute for Supply Management manufacturing index declined to 50.1 in October, the lowest level since May 2013, after posting 50.2 in September. The index hangs close to the 50 point mark between expansion and contraction. The strength of the dollar as well as low oil prices weigh on manufacturers. The new orders sub-index increased to 52.9 from 50.1 in September, but export orders continued to contract. The employment index contracted in October for the first time in six months, hitting its lowest level since August 2009, suggesting more weakness in factory payrolls. Manufacturing PMI index is expected to post 50.6 in November.
  6. Australian GDP: Wednesday, 0:30. Australia expanded at the slowest pace in two years amid a sharp fall in export volumes. GDP gained 0.2% following solid 0.9% rise in the previous quarter. Analysts expected a 0.4% rise. Government and household consumption showed biggest gains while Exports of goods and services fell 3.3%. The Reserve Bank of Australia sees growth between 2.0 and 3.0% to June 2016. A growth rate of 0.7% is expected this time.
  7. US ADP Non-Farm Payrolls: Wednesday, 13:15.  U.S. private sector employment increased more than expected in October, a seasonally adjusted 182,000. The reading boosted optimism over the health of the economy and the growing chances for a U.S. interest rate hike this year. The economy created 190,000 jobs in September, downwardly revised from a previously reported increase of 200,000. Despite the volatility of this report, it does give guidance on private-sector hiring. ADP estimate for November is expected to show a job gain of  191,000.
  8. Janet Yellen speaks: Wednesday, 13:30 and 17:25 at a conference and an official testimony on Thursday at 15:00. Federal Reserve Chair Janet Yellen recently suggested that a December interest rate increase is still on the table. Yellen said that the committee has made no decision yet but that December rate hike was still a “live possibility”. In her public appearances, the last before the December 16th Fed decision, the Fed chief can cement a rate hike and could reiterate that the next moves will be extremely gradual, something that the markets may have already been considering. She may also have early access to the NFP data on Friday, and perhaps we could interpret her tone to what is expecting us.
  9. Eurozone rate decision: Thursday, 12:45, press conference at 13:30. European Central Bank president Mario Draghi has hinted at the possibility of further QE in December. The central banker explained that the ECB would continue to purchase £60bn ($92bn) a month in assets as part of its QE program, but that amount might increase. Draghi said that the asset-purchase plans are proceeding smoothly and continue to have a favorable impact in the market. Draghi also stated that the new macro-economic projections will be read by the ECB meeting in December and would enable the committee to undertake a review of its policy stance. There is speculation about a two-tier cut in the deposit rate, but the details are unclear. According to a recent poll, expectations stand at a 10bp cut in the deposit rate to -0.30% and an increase of €15 billion in QE, from ָָ€60 to €75 billion per month. There is potential for a surprise in the interest rate, the path of least resistance. Here is the full ECB preview: Short euro and long bunds opportunities.
  10. US Unemployment Claims: Thursday, 13:30.  The number of Americans filing initial claims for unemployment benefits declined more than expected approaching to near 42-year lows as labor market conditions continue to tighten. The number of claims fell 12,000 to a seasonally adjusted 260,000 for the week ended Nov. 21. Economists expected a higher reading of 272,000. The four-week moving average of claims was unchanged at 271,000 last week. Continuing claims increased 34,000 to 2.21 million in the week ended Nov. 14. The four-week moving average of the so-called continuing claims rose 15,250 to 2.18 million. The number of weekly claims is expected to reach 269,000 this week.
  11. US ISM Non-Manufacturing PMI: Thursday, 15:00. Service sector activity in the U.S. expanded at a faster rate than expected in October, raising optimism over the health of the economy and supporting a rate hike call in the coming months. The index rose to 59.1 points in October from 56.9 in September beating forecasts for 56.6. 14 non-manufacturing industries reported growth in October. Non-Manufacturing PMI is expected to reach 58.1 in November. This serves as a hint for the NFP.
  12. US Non-Farm Payrolls: Friday, 13:30. Nonfarm payrolls increased 271,000 in October, rising sharply from 137,000 registered in August and September. The unemployment rate dropped to 5.0%. Average hourly earnings, jumped 9 cents, showing a monthly gain of 0.6% and an annualized increase of 2.5%. The average work week remained at 34.5 hours. The labor force participation rate reached 62.4%, though the decline in the total labor force slowed a bit. The Federal Reserve monitors the monthly number watching for clues about the strength of job creation and inflationary pressures, particularly from wage growth. A job gain of 201,000 is expected with  a 5% unemployment rate. Wages are expected to rise by 0.2% this time.
  13. Canadian jobs report: Friday, 13:30. Canada enjoyed a gain of 44.4K jobs in October, much better than expected. This time, a small drop of 0.7K is expected. The unemployment rate is predicted to remain unchanged at 7%. Canada is showing signs of stability despite the fall of oil prices. Is it well based?
 

EUR/USD Forecast Nov. 30 – Dec. 4 (based on article)

EUR/USD dipped to new lows but also showed hesitation, closing another week in the red. The ECB decision in which new measures are expected, is undoubtedly the big event of the week. Here is an outlook for the highlights of this week and an updated technical analysis for EUR/USD.

The ECB is warming its engines for the big decision, with a report about a two tier deposit rate as a possibility. Speculation is mounting about the decision, and so is the question: is ECB action already priced in. Data is looking better in Germany, with upbeat PMIs and a surprising rise in business confidence.

  1. German CPI: Monday: the states report throughout the day with the all-German figure at 13:00. In October, prices remained unchanged m/m, better than expected. The preliminary German number for November released now feeds into the all-European number and is closely watched by the ECB.
  2. Manufacturing PMIs: Tuesday: 8:15 for Spain, 8:45 for Italy, final French number at 8:50, final German figure at 8:55 and the final all-European figure by Markit is released at 9:00. Spain, the euro-zone’s fourth largest economy, saw modest growth in the manufacturing sector in October, 51.3 points. The 50 point mark separates growth from contraction. Italy, the third largest, saw 54.1 points. According to the preliminary release for November, France had modest growth at 50.8 points and Germany saw a more upbeat level of 52.6 points while the euro-zone enjoyed 52.8 points. The last three numbers will probably be confirmed now.
  3. German Unemployment Change: Tuesday, 8:55. The locomotive of the euro-area saw the number of unemployed drop by 5K jobs. The good news will likely continue.
  4. Unemployment Rate: Tuesday, 10:00. The unemployment in the euro-zone is still high at 10.8%, but continues improving and is off the highs. Did it continue sliding in October?
  5. German Retail Sales: Wednesday, 7:00. The volume of retail sales remained flat in Germany during the month of September, falling short of expectations for the second consecutive time.
  6. Spanish Unemployment Change: Wednesday, 8:00. Despite improvements, Spain still suffers a high unemployment rate. This seasonal figure rose by 82.3K in October and the fresh figure for November comes at a sensitive time: just several weeks before the general elections.
  7. CPI: Wednesday, 10:00. Inflation figures surprised to the upside in October, with the final headline inflation ticking up to 0.1% and core inflation rising to 1.1% y/y. This contrasts worries from Draghi. The preliminary numbers for November come just one day before Draghi speaks out.
  8. Services PMIs: Thursday, 8:15 for Spain, 8:45 for Italy, final French number at 8:50, final German figure at 8:55 and the final all-European figure by Markit is released at 9:00.
  9. Retail Sales: Thursday, 10:00. While the figure is released after the German and French ones, it is still watched. After a slip of 0.1% in September, a rise of 0.2% is on the cards for October.
  10. ECB decision: Thursday, 12:45, press conference at 13:30. European Central Bank president Mario Draghi has hinted at the possibility of further QE in December. The central banker explained that the ECB would continue to purchase £60bn ($92bn) a month in assets as part of its QE program, but that amount might increase. Draghi said that the asset-purchase plans are proceeding smoothly and continue to have a favorable impact in the market. Draghi also stated that the new macro-economic projections will be read by the ECB meeting in December and would enable the committee to undertake a review of its policy stance. There is speculation about a two-tier cut in the deposit rate, but the details are unclear. According to a recent poll, expectations stand at a 10bp cut in the deposit rate to -0.30% and an increase of €15 billion in QE, from ָָ€60 to €75 billion per month. There is potential for a surprise in the interest rate, the path of least resistance. Here is the full ECB preview: Short euro and long bunds opportunities.
  11. German Factory Orders: Friday, 7:00. Germany’s factory orders disappointed in September with a drop of 1.7%. A rebound of 1.3% is predicted in this volatile figure.
  12. Retail PMI: Friday, 9:10. This measure of activity in the retail sector has been steady at 51.3 points in October, reflecting slow growth. A similar number could be seen now.
 

EUR weakness: rate cuts and more easing (adapted from the article)

Morgan Stanley estimated for EUR to be in more bearish condition because of some expectation related to some main high impatected news events which will be happened in this week:

  • 2015-12-03 12:45 GMT | [EUR - Minimum Bid Rate]
  • 2015-12-03 13:30 GMT | [EUR - ECB News Conference]
  • 2015-12-03 15:30 GMT | [USD - Fed Chair Yellen Speech]



For example, the EUR/USD price will be in 'more bearish' market condition with the around 1.04 level as the real target for this week.

Morgan Stanley is expected for above mentioned news events to be a key driver for the currency with further rate cuts from the ECB and increase in QE. Anyway, it will make EUR to be a more attractive for traders for this week for example.

 

Waiting For The ECB Bazooka - Credit Agricole (based on the article)

  • "The December ECB meeting will be the key event for EUR this week with recent speeches by various Governing Council members suggesting that the ECB will pull no punches when it comes to boosting the outlook for inflation in the Eurozone."
  • "When it comes to the FX markets reaction, investors have focused on the prospects for further cuts of the deposit rates. Recent media reports have suggested that the EBC may apply a two-tier deposit charge that could allow them to cut rates more aggressively so long as they could spare banks with structurally larger excess cash holding like deposit-taking retail banks."
  • "With the markets already expecting a 15bp deposit rate cut, chances are that the ECB may struggle to exceed already dovish market expectations."
  • "While we cannot exclude a test of this year’s lows ahead of the ECB, we think that EUR could squeeze higher in the aftermath of the meeting."
 

Trading News Events: European Central Bank (ECB) Interest Rate Decision (based on the article)

The European Central Bank (ECB) interest rate decision may fuel a further decline in EUR/USD amid speculation for additional monetary support but, heavy expectations for a meaningful announcement may ultimately trigger a short-squeeze in the exchange rate should the central bank disappoint.

What’s Expected:


Beyond bets for a meaningful adjust to the ECB’s quantitative easing (QE) program, market participants are looking for a further reduction in the central bank’s deposit-rate as the Governing Council struggles to achieve its one and only mandate for price stability. Efforts to further insulate the monetary union may push EUR/USD to give back the advance from the March low (1.0461) amid the deviating paths for monetary policy.

How To Trade This Event Risk

Bearish EUR Trade: ECB Expands/Extends QE & Cuts Deposit-Rate

  • Need red, five-minute candle following the policy announcement to consider a short EUR/USD trade.
  • If market reaction favors a bearish Euro trade, sell EUR/USD with two separate position.
  • Set stop at the near-by swing high/reasonable distance from cost; need at least 1:1 risk-to-reward.
  • Move stop to entry on remaining position once initial target is met, set reasonable limit.
Bullish EUR Trade: Central Bank President Draghi Attempts to Buy More Time
  • Need green, five-minute candle to favor a long EUR/USD trade.
  • Implement same strategy as the bearish euro trade, just in the opposite direction.
Potential Price Targets For The Release

EURUSD Daily


Even though the European Central Bank (ECB) stuck to its current policy in October, the Governing Council showed a greater willingness to further embark on its easing cycle as the central bank opened the door for a further reduction in deposit-rate. As the ECB pledges to re-examine its non-standard measures, the central bank may continue to push monetary policy into uncharted territory in an efforts to further insulate the monetary union . The Euro sold off as the ECB removed the floor on interest rates, with EUR/USD breaking below the 1.1200 handle following the interest rate decision to close the day at 1.1107.
 
2014-12-03 12:45 GMT | [EUR - Minimum Bid Rate]
  • past data is 0.05%
  • forecast data is 0.05%
  • actual data is 0.05% according to the latest press release

[EUR - Minimum Bid Rate]= Interest rate on the main refinancing operations that provide the bulk of liquidity to the banking system.
Short term interest rates are the paramount factor in currency valuation - traders look at most other indicators merely to predict how rates will change in the future.

==========

At today’s meeting the Governing Council of the ECB decided that the interest rate on the deposit facility will be decreased by 10 basis points to -0.30%, with effect from 9 December 2015.

The interest rate on the main refinancing operations and the interest rate on the marginal lending facility will remain unchanged at 0.05% and 0.30% respectively.

==========

EURUSD M5: 150 pips price movement by EUR - Minimum Bid Rate

 

Intra-Day Fundamentals - Non-Farm Payrolls: scenarios and trading ideas (adapted from the article)

As we are going to have USD - Non-Farm Employment Change news event today so The Royal Bank of Scotland made fundamental forecast related to this news event with the connection with the most attractive pairs to trade in any situation concerning the actual data for NFP for example. And just to remind: if actual data for NFP > forecast (200K for now) so it will be good for currency (US dollar will become more stronger).

The are 3 main scenarios for NFP:

1. Actual data is 225k and above (with 200K forecasting ones): The most attractive pair to trade in this case is AUD/USD: the strong case with Australian dollar will be finsihed and we can consider for this pair to be in more bearish market condition.
Sell AUD/USD. 


2. Actual data is 150-225k. This data is something to be around 200K forecasting so we should consider the ranging market condition for most of the pairs. The only pair may be attractive to trade is GBP/USD which will be stapped with secondary ranging in intra-day for good breakdown possibilities.
Sell GBP/USD.


3. 150k and below. As we know - the long-term projections for EUR/USd is the bearish market condition. But this is the opposite short- term situation when actual data for NFP is less than forecasting 200K: EUR/USd price will be going to be more bullish in intraday basis.
Short-term: Buy EUR/USD.
Long-term: Sell EUR/USD.

 
2014-12-04 13:30 GMT | [USD - Non-Farm Employment Change]

[USD - Non-Farm Employment Change]= Change in the number of employed people during the previous month, excluding the farming industry.
Job creation is an important leading indicator of consumer spending, which accounts for a majority of overall economic activity.

==========

Total nonfarm payroll employment increased by 211,000 in November, and the unemployment rate was unchanged at 5.0 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in construction, professional and technical services, and health care. Mining and information lost jobs.

==========

EURUSD M5: 60 pips range price movement by Non-Farm Employment Change news event:


 

Forex Weekly Outlook December 7-11 (based on article)

The euro surged on Draghi’s disappointment and it also had some collateral damage for the dollar against other currencies. What’s next? The highlights of the week before the rate decision are: rate decisions in Switzerland, New Zealand and the UK, employment data in Australia, retail sales Producer Prices and Consumer sentiment from the US. These are the main events on forex calendar. Join usas we explore the highlights of this week.

The Draghi Decision was dramatic as always, but not in the expected direction: the ECB made the minimal rate cut, the minimal QE extension and no increase in monthly buys. Despite the option to do more and and reinvesting proceeds, the ECB just failed on its own expectations, sending EUR/USD over 400 pips higher. In the US, the job market posted a solid gain in November adding 211,000 jobs, beating market forecast. This positive reading was preceded by a 298,000 job addition in October, paving the way for a rate hike this month. This release comes a day after Fed Chair Janet Yellen stated that the conditions for a first rate hike have been met.

  1. Haruhiko Kuroda speaks: Tuesday, 9:06. BOE Governor Haruhiko Kuroda is scheduled to speak in Tokyo. Kuroda has dismissed calls to go slow on hitting the central bank’s 2% inflation target. Some policy makers warned that pushing up prices too quickly could hurt consumption and have called for the central to give itself more time to achieve its inflation target. Kuroda told business leaders that a slower process would also hurt wage adjustments. Only a bold move could fight deflation. Market volatility is expected.
  2. US JOLTs: Tuesday, 15:00. This measure of the jobs market is eyed by the Fed, despite being a lagging one. It provides a broader picture of the economy. A level of 5.59 million is expected in October after 5.39 in September.
  3. New Zealand rate decision: Wednesday, 20:00. The Reserve Bank of New Zealand maintained its Official Cash Rate at 2.75%, amid concerns for slower growth in China and in East Asia. A steep decline in diary prices since early 2014 continues to weigh on domestic income. However, inflation is expected to get back on track by early 2016. To ensure that future average CPI inflation settles near the middle of the target range, some further reduction in the OCR seems likely. The central bank is expected to cut rates to 2.50% this time.
  4. Australian employment data: Thursday, 0:30. Australia’s unemployment rate declined unexpectedly to 5.9% in October, its lowest reading since May beating forecasts for 6.2%. The job market added 58,600 new positions nearly four times more than expected. The majority of new jobs (40,000) were full time positions, while part time jobs increased by 18,600. The participation rate rose to 65.0% from 64.9% in September. The strong reading suggest the Australian labor market rebounded after the shift from mining to services sector, personal and business services. The labor market is expected to lose 10,000 jobs while the unemployment rate is predicted to rise to 6.0%.
  5. Switzerland rate decision: Thursday, 8:30. Switzerland’s central bank continued its policy of negative interest rates on its September meeting, leaving rated at minus 0.75%. The bank sought to devaluate the unjustifiably strong Swiss franc, but predicted a deflation due to low oil prices. The Swiss National Bank stated that, despite a slight depreciation, the Swiss franc is still too strong and Switzerland’s export-reliant economy has had to adjust to a surge in the franc’s value this year after the SNB abruptly abandoned its 1.20 francs per euro cap on Jan. 15.
  6. UK rate decision: Thursday, 12:00. Bank of England governor Mark Carney stated in November that interest rates will not be raised in the UK before the end of the year and the majority of policy makers believe the bank should wait a few months before the hike. However, borrowing costs may well be changed affecting mortgages for second homes or other loans. Carney warned about the growth in personal loans and the boom in buy-to-let lending driving up property prices.
  7. US Unemployment Claims: Thursday, 13:30. The number of applications for unemployment benefits in the U.S. increased last week by 9,000 to 269,000, maintaining a four-decade lows in the number of claims. There are fewer layoffs and a sense of Job security, enabling stronger consumer spending during the holidays. The four-week average of claims dropped to 269,250 from 271,000 the week before. The number of jobless claims for this week is expected to reach 266,000.
  8. US Retail sales: Friday, 13:30. U.S. retail sales inched up 0.1% in October amid an unexpected decline in automobile purchases, showing a slowdown in consumer spending. Economists expected retail sales would increase 0.3% after a previously reported 0.1% rise in September. Sales at automobiles fell 0.5% after rising 1.4% in September. Meanwhile, retail sales excluding automobiles rose 0.2% after posting minus 0.3% in the previous month. Economists forecasted core retail sales would rise 0.4 %. Retail sales are expected to gain 0.2% and Core sales are predicted to rise 0.3%.
  9. US PPI: Friday, 13:30. U.S. producer prices declined in October for a second straight month down 0.4% after registering minus 0.5% in the previous month, the poor readings suggest subdued inflation pressures that might postpone the Federal Reserve raising interest rates in December. In the 12 months through October, the PPI declined 1.6% t, the largest drop since the series started in 2009. Producer inflation is likely to remain weak in the coming month. Producer prices are expected to remain flat this time.
  10. US Consumer Sentiment: Friday, 13:30. U.S. consumer optimism edged up to 93.1 in November, rising for the second straight month, a good sign before the holiday season. Economists predicted the index would rise to 91.3. The outlook index rose to 85.6 from 82.1 in October, up 7.1% from a year ago. The positive reading suggests consumers are feeling reassured by low gas prices, an improving labor market. Consumer’ inflation expectations were low for the near and long term. The National Retail Federation expects holiday sales will rise 3.7%, only slightly less than last year’s 4.1% gain. Consumer sentiment is expected to reach 92.3 in December.
 

We like short GBP/USD more than short EUR/USD in Q1'16 - Societe Generale (adapted from the article)

Societe Generale made a forecast for EUR/USD compare with GBP/USD telling that both the pairs will be on bearish condition for Q1'16. And GBP/USD will be in more bearish related to EUR/USD. Let's review this forecast with technical point of view.



As we see from the charts above - both pairs are located below 100 period SMA and 200 period SMA in the primary bearish area of the chart ranging within key support/resistance levels:

Instrument
Bearish Target
RSI
Chinkou Span
Absolute Strength
EUR/USD
1.0520
ranging bearish
ranging bearish
ranging
GBP/USD
1.4565
strong bearish
strong bearish
ranging for direction

The price for GBP/USD is having more signs to be bearish in Q1/16 than EUR/USD, and that is why Societe Generale is expecting more bearish for GBP/USD compare with EUR/USD for example.

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