IronFX - Market Analysis - page 15
You are missing trading opportunities:
- Free trading apps
- Over 8,000 signals for copying
- Economic news for exploring financial markets
Registration
Log in
You agree to website policy and terms of use
If you do not have an account, please register
Market Analysis 20/09/2013: There are signs that the dollar is beginning to slightly
Daily Commentary 20.09.2013, Time of writing: 03:30 GMT
The Big Picture There are signs that the dollar is beginning to slightly recover vs most of its G10 counterparts, while staying under a moderate amount of pressure, and for the time, continues to stay in close to the lowest point of yesterday’s post-FOMC downdraft. The Fed’s decision not to taper was unexpected by the market. Chairman Bernanke’s comments after the meeting contributed to the dollar’s difficulties by seeming to delay tapering. Bernanke also stated that most of the improvement in the unemployment rate is because of job creations, and not the reduction in the labor force participation rate. While ‘tapering’ action being the main headline of FOMC’s next meeting (29 -30 Oct.), it is apparent that US economy must achieve consistently better results for that to occur. A lot will have to change for the dollar and rise above these recent lows. It is a waiting game to see if the dollar is approaching to a longer-term low, although I think the dollar will maintain a generally negative tone in the coming sessions. In my view, the dollar will weaken further against its G10 counterparts, and it is expected to stay under pressure during the next few sessions.
The pound gave some of its recent gains against the dollar but is still up from the 1.6000 level since Wednesday’s Fed decision. The weakness yesterday follows from surprisingly weak retail sales data (-0.9% mom vs 0.4% mom exp.).
Meanwhile in Japan the trade deficit narrowed ¥960.3bn, vs the market estimate of ¥1113.8bn. The month before had showed a revised deficit of ¥1,027.9bn. The dollar was stronger throughout the day against the Japanese yen despite the improved trade data.
Later today. In Europe, Eurozone consumer confidence for September is expected to improve to -14.5 vs -15.6 from previous reading. St. Louis Fed’s President James Bullard speaks about the economy and monetary policy in NY. It will be interesting to hear what he says about Fed’s decision to keep unchanged its monthly bond-purchase program. The Bank of Canada’s core measure of CPI for August is expected to rise by 0.2% mom vs a flat figure the previous month, with the yoy rate to fall slightly to 1.3% in August from 1.4%. The German federal elections will take place this Sunday. Mrs. Merkel looks very likely to win another 4-year term as a Chancellor. Such a result should support the EUR, although it is probably discounted in the price already to a large degree.
The Market EUR/USD
• EUR/USD moved sideways yesterday, pausing after its prior rally. During the European morning the pair remains between the 1.3517 (S1) and 1.3564 (R1) levels, where a re-boost by the longs should drive the action towards February’s highs at 1.3706 (R2). The alternative scenario suggests that since the rate moved far away from the uptrend line and the RSI is probably ready to exit its overbought zone, a short-term correction towards the trend line might occur.
• Support is found at the 1.3517 (S1) level, followed by 1.3448 (S2) and 1.3400 (S3)
• Resistance levels are the level of 1.3564 (R1), followed by 1.3706 (R2) and 1.3846 (R3). The latter two found from the daily chart.
USD/JPY
• USD/JPY moved significantly higher during yesterday’s session, recovering Wednesday’s losses. The pair managed to return into the blue upward sloping channel, while the 20-period moving average found support at the 200-period moving average. At the time of writing the rate lies above the 99.13 (S1) level, and a continuation of the impulsive wave should challenge once more the psychological level of 100.00 (R1). However, during the overnight session the pair found resistance at the 61.8% retracement level of the previous corrective wave and in my opinion we should wait for an upward break of it in order to confirm the aforementioned scenario.
• Support levels are at 99.13 (S1), followed by 97.86 (S2) and 97.00 (S3).
• Resistance is identified at the psychological round number of 100.00 (R1), followed by 100.59 (R2) and 101.53 (R3).
EUR/GBP
• EUR/GBP moved noticeably higher, breaking the 0.8423 level (yesterday’s resistance). As we said in previous comments, a clear break above that level accompanied with a positive MACD value might be the beginning of a newborn correction. Currently, the pair is still in a downtrend channel and also below the 200-period moving average, but MACD’s indications alongside with the bullish cross of the rate above the 20-period moving average, increase our suspicions that the correction might have already begun.
• Support levels are identified at 0.8423 (S1), 0.8355 (S2) and 0.8323 (S3) respectively. The last one is found from the daily chart.
• Resistance is found at the levels of 0.8453 (R1), 0.8503 (R2) and 0.8551 (R3).
Gold
• Gold continued testing stubbornly the 1368 (R1) resistance level during the entire session yesterday. If bulls find the strength to overcome that barrier, upside extensions should be triggered towards the resistance levels of 1394 (R2) and 1415 (R3) respectively. The MACD oscillator lies in its bullish zone, above its trigger line, enhancing the probabilities for a further upward movement.
• Support levels are at 1337(S1), followed by 1305 (S2) and 1271 (S3).
• Resistance is identified at the 1368 (R1) level, followed by 1394 (R2) and 1415 (R3).
Oil
• WTI fell sharply after finding resistance at the 108.85 (R2) level and the blue downtrend line. In previous comments we mentioned that the downtrend was not confirmed by any other indicator, but today the MACD just poked its nose below both the zero and the trigger lines. Additionally, the price lies below both the 20- and 200-period moving averages, confirming WTI’s bearish attitude.
• Support levels are at 105.23 (S1), 103.44 (S2) and 102.62 (S3).
• Resistance levels are at 106.71 (R1), followed by 108.85 (R2) and 110.58 (R3).
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
click here to read more
click here to read less
EUR
More...
Market Analysis 23/09/2013: First the action, then the reaction
Daily Commentary 23.09.2013, Time of writing: 03:30 GMT
The Big Picture First the action, then the reaction: Following Thursday’s plunge in the dollar, Friday was a day of recovery after St. Louis Fed President James Bullard revived hopes of tapering. Many people in the market had thought that the FOMC must have had strong reasons not to begin tapering off bond purchases this month, as the group usually prefers to meet market expectations and does not like to cause confusion in the marketplace. However Bullard revealed that the decision was “borderline” and that the FOMC meeting on Oct. 29th-30th was a “live” FOMC meeting that could decide on a “small taper” if the data justifies such a move. The comments were significant in that Bullard is a centrist on monetary policy, unlike the hawkish Kansas City Fed President Esther George, who said she was “disappointed” by the decision. Thus it’s back to Square One again and we resume speculation over tapering. NOK, the big winner on Thursday, was the biggest loser on Friday and in the EM world, USD/ZAR even closed above its pre-FOMC levels. Volatility is likely to increase and each US economic indicator – particularly the weekly jobless claims and other labor market data – will be closely watched. A Bloomberg survey now indicates that a small majority of economists (24 out of 41) expect tapering to begin at the Dec. 17th-18th meeting (there is no meeting in November).
In Germany, Chancellor Merkel has won dramatic support from the voters, yet with her coalition partner FDP likely to drop out of parliament, her personal victory is not a victory for the coalition as a whole. On the contrary, the result would be a huge shift in Germany’s political structure. The FDP usually stands for some pro-growth supply-side reforms and opposes tax hikes and so its defeat will weaken the voice for liberal policies that would raise Germany’s long-term growth potential. With Germany sliding slowly backwards on reform while some other countries are shaping up (ironically, under pressure from Germany), the risk is that Germany’s economic advantage may erode a little faster than it would have with the FDP in the government. Nonetheless, a slowdown in structural reforms will only affect growth over the longer term, while short-term, with Merkel and her strengthened CDU/CSU in charge, Germany has demonstrated its overwhelming support for pro-Europe policies. Thus I expect the result to be slightly EUR-positive, although the likely result – a coalition with the SPD – is pretty much what the market had expected and thus no surprise. The market had been CDU was in coalition with SPD during her first term in office so there is not likely to be any major shift in policies. The Social Democrats favour less austerity in the peripheral countries, which could be beneficial for Eurozone growth and hence take some pressure off the ECB to ease – EUR-positive.
Today’s indicators include the preliminary manufacturing and service-sector PMIs for China, France, Germany and the Eurozone as a whole for September. China got the ball rolling overnight with a higher-than-expected 51.2, up from 50.1 in August. The manufacturing PMIs for Europe are all expected to improve and to be over 50, showing that the Eurozone economy continues to expand, which could be EUR-positive. In the US, the Markit preliminary manufacturing PMI is coming out for September, but that isn’t as closely watched as the ISM index (due out 1 Oct) is. The market will be focusing today on speeches by several Fed officials: NY Fed President Dudley, Atlanta Fed President Lockhart and Dallas Fed President Fisher. The dovish Dudely (1 on the Reuters 1-5 scale) will probably be the most closely watched of these speeches, especially as the other two are not voters. Also, ECB President Mario Draghi speaks at European parliament in Brussels. The main items on the agenda for the week are the possible announcement of the next Fed Chairman and any news about a US budget agreement (or lack thereof), which could be seriously USD-negative.
The Market EUR/USD
• EUR/USD continued moving sideways, remaining between the 1.3517 (S1) and 1.3564 (R1) levels. As Europe opens Monday the pair is testing the 1.3517 (S1) support, where a clear downside break should signal a short-term correction towards 1.3448 (S2) and the blue uptrend line. On the other hand, if the bulls manage to break above the barrier of 1.3564 (R1), I expect them to trigger extensions towards February’s highs at 1.3706 (R2). The former possibility seems more likely however as both oscillators show signs of weakness, since the RSI just exited its overbought area and the MACD crossed below its trigger line.
• Support is found at the 1.3517 (S1) level, followed by 1.3448 (S2) and 1.3400 (S3)
• Resistance levels are the level of 1.3564 (R1), followed by 1.3706 (R2) and 1.3846 (R3). The latter two are found from the daily chart.
EUR/JPY
• EUR/JPY moved lower during Friday’s session, after finding resistance at the 134.69 (R1) level and the upper boundary of the blue uptrend line. In my opinion the downward pullback might continue towards the 132.63 (S2) support, which coincides with the 38.2% Fibonacci retracement level of the previous impulsive wave. Weakness is also indicated by both oscillators, since the RSI exited its overbought area and the MACD poked its nose below its trigger line. However, I consider the overall trend of the pair to be an uptrend since the price is still trading into the blue uptrend channel and the 20-period moving average lies above the 200-period moving average.
• Support levels are at 133.34 (S1), followed by 132.63 (S2) and 131.70 (S3).
• Resistance is identified at 134.69 (R1), followed by 135.64 (R2) and 136.74 (R3). The latter two are found from the weekly chart.
GBP/USD
• GBP/USD moved lower after finding resistance at the 1.6160 (R1) level. At the European opening the pair is testing the psychological support of 1.6000 (S1), where a clear downward break might signal the beginning of a short-term correcting phase. On the other hand, if the bulls manage to maintain the rate above that critical level, bullish extensions should be triggered towards new short term highs. The MACD oscillator favors the first scenario since it lies below its trigger line, providing weakness indications for the price action.
• Support levels are identified at the psychological level of 1.6000 (S1), 1.5892 (S2) and 1.5840 (S3) respectively.
• Resistance is found at the levels of 1.6160 (R1), followed by 1.6300 (R2) and 1.6380 (R3), both found from the daily chart.
Gold
• Gold plunged Friday after finding resistance at the 1368 (R2) level. The yellow metal managed to break below the 1337 level (Friday’s support) and returned back into its downward sloping channel. Currently the price is heading towards the barrier of 1305 (S1) and if the bears continue their momentum breaking below it, I expect them to challenge the next support at 1271 (S2). The MACD oscillator lies near its zero line, not confirming the negative momentum, but it crossed below its trigger line, favoring a potential entry in its bearish territory.
• Support levels are at 1305 (S1), followed by 1271 (S2) and 1245 (S3).
• Resistance is identified at the 1337 (R1) level, followed by 1368 (R2) and 1394 (R3).
Oil
• WTI continued falling, breaking below the 105.23 level (Friday’s support). The price is currently finding support at the 104.21 (S1) level, which coincides with the lower boundary of the downtrend channel. A clear break below that strong hurdle should target the next support levels of 103.44 (S2) and 102.21 (S3) respectively. The 20-period moving average just crossed below the 200-period moving average and alongside with MACD’s bearish indications, it confirms the negative picture for WTI.
• Support levels are at 104.21 (S1), 103.44 (S2) and 102.21 (S3).
• Resistance levels are at 105.23 (R1), followed by 106.71 (R2) and 108.85 (R3).
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
click here to read more
click here to read less
USD
More...
Market Analysis 24/09/2013
Daily Commentary 24.09.2013, Time of writing: 03:30 GMT
The Big Picture The dollar turned in a mixed performance overnight as global stock markets turned negative and risk aversion set in, sending the growth-sensitive currencies down against the dollar while boosting the yen. SEK and NZD were the largest decliners. The CAD ran counter to the trend though ahead of today’s retail sales figure, which are expected to show a turnaround from the previous month’s decline. A tentative buyout deal for Blackberry may also have boosted the Canadian currency. The dollar gained against most EM currencies, although MXN and BRL managed to gain.
It appears that we have seen the lows in the dollar for now following last week’s Fed shock. It’s noticeable that despite the better-than-expected composite PMI for the Eurozone yesterday, EUR/USD has moved back below 1.3500, for example. This even though US Treasury yields have come down by some 15 bps from right before the Fed news (and down 30 bps from the peak in early September). The lower rates should be supporting stock markets and growth-sensitive currencies. But the various Fed speakers who have spoken after the recent FOMC meeting have expressed such a wide variety of views about the economy and the likely start of tapering that confusion, not confidence, seems to be the main result. Moreover, there is still the possibility of another lurch downward in the dollar as the struggle over the US budget goes down to the wire. New York Fed President William Dudley said the obvious yesterday: that fiscal uncertainties “loom very large” as the US Congress tries to avoid a government shutdown and raise the nation’s debt ceiling. If that happens, there would no doubt be a huge risk-aversion trade. Thus the lack of a clear trend. I expect that the budget problem will be solved, as usual, and the growth trade will win out for now. That would tend to favour buying AUD and NZD against USD or JPY, or selling USD/SEK or USD/CAD.
There is an incredible slate of central bank speakers today: five ECB, four Bank of England, two Fed and one Bank of Canada speakers. If the recent Fed speakers are any guide, we can expect considerable volatility as they contradict one another. As for the data, the main event in Europe today is the Ifo survey for September. Both the current assessment and the expectations indices are expected to be higher, which may support EUR/USD. In the US, we have the Case/Shiller and Federal Housing Finance Agency house price indices, both of which are expected to show a rise in house prices at around the same pace as in the previous month. That would demonstrate that higher rates aren’t dampening the housing market and therefore would be bullish USD. On the other hand, there are some potentially USD-negative indicators as well: The Richmond Fed manufacturing index the Conference Board consumer confidence index are both expected to fall. In Canada, retail sales for July are forecast to show a rise, a turnaround from the previous month.
The Market EUR/USD
• EUR/USD moved lower and managed to break below the 1.3512 level (yesterday’s support), confirming the weakness provided by our oscillators in yesterday’s analysis. Currently the pair is testing the 20-period moving average and a cross below it should indicate the continuation of the pullback towards the blue uptrend line or further down to the critical level of 1.3400 (S1). However, I still consider the rate moving in an uptrend since it is trading above the uptrend line and the moving averages still hold a bullish cross.
• Support is found at the well tested level of 1.3400 (S1), followed by 1.3321 (S2) and 1.3232 (S3)
• Resistance levels are the level of 1.3512 (R1), followed by 1.3564 (R2) and 1.3706 (R3). The latter two are found from the daily chart.
USD/JPY
• USD/JPY found resistance near the 61.8% Fibonacci retracement level of the 11th-18th Sept. wave and moved lower breaking below the 99.15 level (today’s resistance). At the time of writing the pair is testing the blue uptrend line and if the bears manage to drive the price below it and break the support of 98.52 (S1), we should concern for trend reversal signals. Both the RSI and MACD oscillators are moving downwards, increasing the odds for further downward movement.
• Support levels are at 98.53 (S1), followed by 97.87 (S2) and 97.00 (S3).
• Resistance is identified at 99.15 (R1), followed by 99.66 (R2) and the psychological round number of 100.00(R3).
EUR/GBP
• EUR/GBP moved lower yesterday, after finding resistance at the 0.8462 (R2) level and slipped below the support level of 0.8422 (today’s resistance).During the European morning though, bulls regained some momentum, not letting the rate form a low lower than the previous one. If they continue moving the pair to the upside and break once more above the 0.8422 (R1), I expect the correcting phase I mentioned in previous comments to continue.
• Support levels are identified at 0.8355 (S1), 0.8324 (S2) and 0.8270 (S3) respectively. The latter two are found from the daily chart.
• Resistance is found at the levels of 0.8422 (R1), followed by 0.8462 (R2) and 0.8504 (R3).
Gold
• Gold managed to break once more above the upper boundary of the downtrend channel, forming a higher low. At the European opening the yellow metal is trading between the 1316 (S1) and 1335 (R1) levels and a break above the second one should enhance my suspicions that the downtrend might have come to an end. Both the RSI and the MACD oscillators lie in relatively neutral levels, providing no clues for the next directional movement of the precious metal.
• Support levels are at 1316 (S1), followed by 1291 (S2) and 1273 (S3).
• Resistance is identified at the 1335 (R1) level, followed by 1368 (R2) and 1394 (R3).
Oil
• WTI continued testing the lower boundary of the downtrend channel. If the price manage to rebound at that level and breaks above the 103.49 (R1) resistance, a correction might begin towards further resistance areas. The RSI favors the aforementioned scenario since it tested successfully its 30 level and moved upwards. Nonetheless, WTI’s trend is still considered to be a downtrend since the price is still trading into the downward slopping channel and the 20-period moving average lies below the 200-period moving average.
• Support levels are at 102.23(S1), 100.65 (S2) and 99.12 (S3).
• Resistance levels are at 103.49 (R1), followed by 104.40 (R2) and 106.06 (R3).
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
click here to read more
click here to read less
More...
Market Analysis 25/09/2013: Reversal in Fed expectations hasn't led to a reversal in
Daily Commentary 25.09.2013, Time of writing: 03:30 GMT
The Big Picture The risk unwind that began shortly after the FOMC decided to hold pat continued yesterday despite further falls in US interest rates. At the short end, implied interest rates on Fed funds futures were down across the board, with the yield on the August 2016 contract lower by 7.5 bps, while at the long end, 10yr bond yields fell around 5 bps – now off 20 bps from the pre-FOMC level. Yet the assault on the risk-sensitive currencies continued, with NZD as big a loser as its compatriots fighting for the America’s Cup. NOK and AUD also suffered notable declines. In EM, only CZK and PLN were modest gainers among the 15 currencies that we track; IDR was off a stunning 3.6% and MXN down over 1%, suggesting that while the Fed’s talk of tapering was bad for EM currencies, the delay is not necessarily going to be good for them. In this context, the only G10 currency to make modest gains against USD was the yen as investors took off risk.
Why has the reversal in Fed expectations not led to a reversal in market behaviour? Probably because some of the data shows that the Fed’s caution was warranted. Yesterday’s Ifo business climate survey was slightly weaker, while in the US, consumer confidence fell in September and the Richmond Fed survey was much weaker than expected. Rather than encouraging investors to continue with risk extension trades, the Fed’s caution may have made them worry about weakness in the US economy and by extension the global economy. They may start believing that New York Fed President William Dudley was correct when he said on Monday that the US has yet to show “any meaningful pickup” in momentum. The change in view on growth is reflected in the US stock market: ahead of the FOMC meeting, the S&P 500 was up 11 days out of 12, but following the meeting it’s been down for four days in a row. My expectation is that this is just a “soft patch” for the data and that as more robust data comes out in the next several weeks, the risk-sensitive currencies should pick up again. But we shall have to see.
Today in Europe, French business confidence and Italian consumer confidence for September are coming out. Both are expected to rise slightly, which could support EUR/USD. There are two ECB speakers today: Mr. Asmussen speaks in Frankfurt and Mr. Weidmann speaks in Dusseldorf. Will they clarify or further muddy the discussion about what the ECB may or may not do? In the US, the headline durable goods orders figure for August is forecast to be down -0.2% mom, a notable improvement from July’s -7.3% mom fall. The headline number is still being distorted by large airplane orders, however. Excluding transportation equipment, orders are forecast to show a robust increase of 1.0% mom, a turnaround from -0.6% the previous month. That could prove to be USD-supportive. New home sales are forecast to have risen to a 420k annualized pace in August from 394k. That would also be a positive sign as it would show that higher mortgage rates had not dampened demand. Mercifully, there are no Fed speakers scheduled to confuse us further today.
The Market EUR/USD
• EUR/USD continued moving lower, breaking below the 20-period moving average. Currently the pair is ready to test the blue uptrend line where a clear break below it should bring the bears face to face with the well tested level of 1.3400 (S1). If they are strong enough to overcome that hurdle, I expect them to extend their moves towards the 1.3321 (S2). Both the RSI and the MACD oscillator indicate neutral momentum, giving no clues for the forthcoming direction. Nonetheless, a bullish cross of the moving averages is remains in effect, and I still consider the recent downward movement as a short term correction.
• Support is found at the well tested level of 1.3400 (S1), followed by 1.3321 (S2) and 1.3232 (S3).
• Resistance levels are the level of 1.3512 (R1), followed by 1.3564 (R2) and 1.3706 (R3). The last one is found from the daily chart.
USD/JPY
• USD/JPY managed to break below the blue uptrend line and at the time of writing the pair is testing the 98.53 (S1) support. If selling pressure drives the price below that barrier, I believe that the move might continue towards the 97.87 (S2) level. Additionally, the 20-period moving average lies at the same level as the 200-period moving average, ready to cross below it and to confirm the bearish attitude of the rate. Both the RSI and MACD oscillators continued their downward path, increasing the odds for further downward movement.
• Support levels are at 98.53 (S1), followed by 97.87 (S2) and 97.00 (S3).
• Resistance is identified at 99.15 (R1), followed by 99.66 (R2) and the psychological round number of 100.00(R3).
GBP/USD
• GBP/USD didn’t manage to stay above the psychological level of 1.6000 and during the European opening is trading slightly below it. In previous comments, we mentioned that a break below that level might signal the end of a 5th Elliot wave and the beginning of a correcting phase. The correcting phase is also favored by the ADX reading being above 20, pointing upwards, with the –DI lying above the +DI. Signs of weakness are also provided by MACD’s value being less than its trigger’s and by the fact that the price crossed below the 20-period moving average.
• Support levels are identified at 1.5890(S1), 1.5840 (S2) and 1.5715 (S3) respectively.
• Resistance is found at the psychological level of 1.6000 (R1), followed by 1.6160 (R2) and 1.6276 (R3) (daily chart).
Gold
• Gold moved sideways yesterday, remaining between the 1316 (S1) and 1335 (R1) levels. A break above the latter level should confirm my suspicions that the downtrend might have come to an end, since the yellow metal will complete the formation of a higher low. The alternative scenario would be that the price might find resistance at that level and continue its prior downtrend. Both the RSI and the MACD provide mixed indications and we should wait for the picture to get clearer in order to determine the direction.
• Support levels are at 1316 (S1), followed by 1291 (S2) and 1273 (S3).
• Resistance is identified at the 1335 (R1) level, followed by 1368 (R2) and 1394 (R3).
Oil
• WTI continued its downward bias, but it was stopped by the support level at 102.23 (S1). During yesterday’s European evening the price returned back to the channel and at today’s opening is found testing the 103.53 (R1) resistance level. In my opinion, an upward penetration above that level should signal an upside pullback towards the next resistance areas. The probability of an upside pullback is also indicated by the RSI, which exited its oversold area, and by the MACD, which is ready to cross above its trigger line. Nonetheless, WTI is still in a downtrend, in my view, since the price is still trading into the downward slopping channel and the 20-period moving average lies below the 200-period moving average.
• Support levels are at 102.23(S1), 100.65 (S2) and 99.12 (S3). The last two are identified on the daily chart.
• Resistance levels are at 103.53 (R1), followed by 104.40 (R2) and 106.06 (R3).
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
click here to read more
click here to read less
USD
More...
Market Analysis 26/09/2013: Shut-down looming
Daily Commentary26.09.2013, Time of writing: 03:30 GMT
The Big Picture Shut-down looming: The dollar was mixed against the G10 currencies and generally lower vs the EM currencies Thursday morning in Europe. There did not seem to be much of a pattern to the dollar’s movements; it gained vs JPY, a typical risk-on trade, yet lost vs CHF, a risk-off trade. The NOK and SEK both lost, while EUR and GBP both gained. (EUR/GBP moved slightly lower.) Yesterday’s US indicators had no lasting impact on the currency market. The headline durable goods orders number for August was slightly above expectations, but core orders (non-defense orders excluding aircraft) missed. New home sales for August were above expectations though and the MBA mortgage applications showed some signs of recovery after the recent move lower in interest rates. That could encourage the Fed to begin tapering next month, or it could confirm to them that the decision to delay tapering and keep interest rates down was the correct one.
In any event, it looks like the possible shut-down of the US government is starting to have an effect on the market. US Treasury Secretary Lew said yesterday that the government would run out of money by Oct. 17th if Congress didn’t raise the debt ceiling. It looks to me like the Fed is likely to delay tapering again next month, meaning it will be December at the earliest before they can begin. That means another 2 ½ months of low interest rates. Low rates should in theory encourage investors to move into the higher-beta currencies, but concern over the impact of the US debt problem would probably have the exact opposite effect.
This morning we have French consumer confidence for September and Italian retail sales for July. Neither is a major market mover, but they are worth monitoring. French consumer confidence is expected to rise slightly, while Italian retail sales are forecast to decline but at a slower pace than the previous month. Eurozone M3 annual growth is expected to accelerate slightly to 2.3% yoy in August from 2.2% yoy. In UK, the final Q2 GDP will be released; no change from the initial estimate is expected. The current account deficit for Q2 is forecast to have narrowed to GPB 11.0bn from GBP 14.5bn. In the US, weekly jobless claims are expected to rise to 325k from 309k as the computer problems get fixed. US pending home sales are forecast to fall by 1.0% mom in August vs -1.3% mom in July. Overnight, we will get Japan nationwide CPI for August. It’s expected to accelerate slightly to +0.8% yoy from +0.7% yoy, which some may claim is a success for PM Abe’s reflationary policies, but the rise is due to higher energy prices, which are deflationary not inflationary. Core CPI (excluding energy and fresh foods) is expected to remain in deflation at -0.1% yoy, unchanged from July. Again there are a large number of central bank speakers: five Fed speakers, four ECB speakers, two Bundesbank speakers and a speech by the new Indian central bank governor. Most of the Fed and ECB speakers have spoken recently however so they are not likely to surprise the market.
The Market EUR/USD
• EUR/USD moved once again above the 1.3512 level after rebounding from the blue uptrend line. At the European opening the pair is trading slightly above that level and if the longs are strong enough to continue their momentum, I expect them to challenge once more the 1.3564 (R1) resistance. A clear break above that hurdle should drive the rate towards new short-term highs. The MACD oscillator entered its bullish territory, ready to cross above its trigger line, increasing the odds for the continuation of the uptrend.
• Support is found at the well tested level of 1.3512 (S1), followed by 1.3400 (S2) and 1.3321 (S3).
• Resistance levels are the level of 1.3564 (R1), followed by 1.3706 (R2) and 1.3745 (R3). The last one is found from the daily chart.
USD/JPY
• USD/JPY achieved a break below the 98.53 level, but during the early European morning a big white candle drove the price higher for another test on the blue uptrend line. If buying pressure continues to push the price higher and it manages to break above the 99.15 (R1) level, I believe that the pair will return back to its uptrend path. On the other hand, if it fails to do so and returns back to the 98.53 level, I expect bearish extensions towards lower support levels. The moving average favors the latter scenario since a bearish cross of the 20-period moving average below the 200-period moving average has already occurred.
• Support levels are at 98.53 (S1), followed by 97.87 (S2) and 97.00 (S3).
• Resistance is identified at 99.15 (R1), followed by 99.66 (R2) and the psychological round number of 100.00(R3).
EUR/GBP
• EUR/GBP moved lower after finding resistance at the 0.8462 (R1) level, which almost coincides with the 38.2% Fibonacci retracement level of the previous downward wave. During the European opening, the pair is testing the 0.8408 (S1) support, where a clear downward break should target the 0.8355 (S2) level. On the daily chart, a downward violation of the latter support might be the first sign of a newborn long-term downtrend (EUR/GBP has not traded below it since January).
• Support levels are identified at 0.8408 (S1), 0.8355 (S2) and 0.8320 (S3) (daily chart).
• Resistance is found at 0.8462 (R1), followed by 0.8504 (R2) and 0.8552 (R3) respectively.
Gold
• Gold managed to move higher yesterday, after testing successfully the 1316 (S1) support level. Currently the yellow metal lies slightly below 1335 (R1), where a clear upward break should trigger bullish extensions towards the 1368 (R2) level. However, both our oscillators are lying at their equilibrium levels, not providing any indication for the next direction of the price.
• Support levels are at 1316 (S1), followed by 1291 (S2) and 1273 (S3).
• Resistance is identified at the 1335 (R1) level, followed by 1368 (R2) and 1394 (R3).
Oil
• WTI moved lower yesterday, reaching once more the strong support of 102.23 (S1). At the European opening the price is testing that level and a clear break below it should drive WTI towards new short-term lows. On the other hand, if the bulls take the opportunity and increase their positions near that level, WTI would probably correct into its blue downtrend channel.
• Support levels are at 102.23(S1), 100.65 (S2) and 99.12 (S3). The latter two are identified on the daily chart.
• Resistance levels are at 103.53 (R1), followed by 104.40 (R2) and 106.06 (R3).
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
click here to read more
click here to read less
GBP
More...
Market Analysis 27/09/2013: Dollar stronger despite higher US political risk
Daily Commentary27.09.2013, Time of writing: 03:30 GMT
The Big Picture Dollar stronger despite higher US political risk: The dollar had a generally strong day. It was unchanged to higher against most G10 currencies and almost all the EM currencies that we track. NZD and NOK were the only G10 currencies to show any significant gains vs USD. The strength in NZD was notable in that AUD on the other hand was one of the losers; the RBA meets next Tuesday and they have a dovish tone, in contrast to the distinctly hawkish RBNZ. Short AUD/NZD seems like one of the purest monetary policy divergence trades available nowadays.
The strength of the dollar seems odd considering that the US government seems to be on track for disaster. The one-year CDS on US government debt has approximately tripled in the last week to 31 from 11.4 (although this is down from 57.5 on Monday!). On an absolute scale this is still not very high (for Italy it’s 115, for example) nonetheless it shows increasing fears about the game of chicken that the Republican Party is playing. Plus, yesterday’s economic data was mixed; while jobless claims fell, pending home sales slowed for the third consecutive month.
While politics in the US are worrisome, there are problems in the Eurozone as well. Italian bond yields jumped 10 bps yesterday after former PM Berlusconi’s allies in the Senate threatened that “if Berlusconi is expelled, we all declare ourselves expelled,” as one said. The coalition government in Italy depends on Berlusconi’s allies and could therefore collapse. EUR/USD may be trapped in a range due to the political problems on both sides, but that shouldn’t prevent other pairs from benefiting. CHF seems likely to strengthen further on safe-haven inflows in response to the problems, but we would point out that EUR/CHF at 1.2268 has limited downside – the SNB has reaffirmed its commitment to the 1.20 floor. At least we know where the bottom is likely to be. Selling USD/CHF would probably be the way to play this while looking for the opportunity to switch out and go long EUR/CHF.
The European morning starts with news from UK with a rise expected in the Nationwide house price index for September. That could bolster GBP. Later in the day, the German EU harmonized CPI preliminary number for September is expected to remain at +1.6% yoy, which would not have any market impact. Norwegian September unemployment is expected to fall; on Wednesday, NOK fell sharply when the Labor Force Survey unemployment rate for July came out higher than expected, so today’s fall could help to strengthen the NOK further (although this series is not seasonally adjusted, unlike Wednesday’s). In the US, growth in personal income and spending are expected to have accelerated in August and the final U of Michigan consumer confidence index for September is forecast to be revised up. These two indicators could be a USD-supportive. There are three Fed and two ECB speakers today. ECB President Mario Draghi and Bank of Italy Governor and ECB Council VP Visco speak in Milan during the European morning. Draghi has recently been dovish and while he may not say anything new, EUR/USD is likely to move lower if he repeats the same comments. Later in the day, the voluble New York Fed President William Dudley speaks for the third time this week. Chicago Fed President Charles Evans speaks on current economic conditions and monetary policy at a Norges Bank conference, and Boston Fed President Eric Rosengren speaks in New York analyzing the stability of funding.
The Market EUR/USD
• EUR/USD moved lower after finding resistance at the 1.3536 (R1) level and achieved a break below the blue uptrend line. At the European opening the pair is heading towards the 1.3461 (S1) support, where a clear downward break should trigger extensions towards the well-tested support of 1.3400 (S2). The recent weakness is also confirmed by MACD which moved lower and crossed below its trigger line. However, since the 20-period moving average holds above the 200-period moving average, I would consider any downward movement as a short-term correction
• Support is found at 1.3461 (S1), followed by 1.3400 (S2) and 1.3321 (S3).
• Resistance levels are the level of 1.3536 (R1), followed by 1.3564 (R2) and 1.3706 (R3) (daily chart).
EUR/JPY
• EUR/JPY moved sideways yesterday, remaining between the 132.70 (S1) and 134.00 (R1) levels. At the beginning of the European morning the rate is tending to move slightly lower towards the former level. If the bears are strong enough to overcome that hurdle, I expect them to target the lower boundary of the uptrend channel and the support at 131.92 (S2). However, the overall trend of the pair remains an uptrend since the price follows the channel’s path and a bullish cross of the moving averages is still in effect.
• Support levels are at 132.70 (S1), followed by 131.92 (S2) and 130.96 (S3).
• Resistance is identified at 134.00 (R1), followed by 134.66 (R2) and 135.63 (R3). The latter one is found from the weekly chart.
GBP/USD
• GBP/USD also moved sideways, remaining slightly above the psychological level of 1.6000 (S1). It seems that we have a big battle near that level and we should wait for the winner in order for the picture to get clearer. If the bears win, I expect them to trigger the correcting phase mentioned in previous comments. On the other hand, a victory by the bulls should drive the rate towards the highs we last saw at the beginning of January.
• Support levels are identified at 1.6000 (S1), 1.5890 (S2) and 1.5840 (S3)
• Resistance is found at 1.6160 (R1), followed by 1.6276 (R2) and 1.6376 (R3) respectively. The latter two are found from the daily chart.
Gold
• Gold moved slightly lower after finding resistance at the 1335 (R1) level. The yellow metal remains between the support of 1316 (S1) and the aforementioned resistance. I consider gold’s bias neutral, since buying pressure does not seem strong enough to extend the move towards the previous peak’s level. This is also confirmed by the RSI and MACD which both lie at their neutral levels.
• Support levels are at 1316 (S1), followed by 1291 (S2) and 1273 (S3).
• Resistance is identified at the 1335 (R1) level, followed by 1368 (R2) and 1394 (R3).
Oil
• WTI rebounded once more at the strong floor of 102.23 (S1) and remained between the aforementioned support and the resistance level of 103.53 (R1). The selling pressure does not seem enough to drive WTI below the 102.23 (S1) support, and an upside pullback into the channel should not surprise us. Nonetheless, the short term trend remains a downtrend, marked by the downward sloping channel and confirmed by the bearish crossover of the moving averages.
• Support levels are at 102.23 (S1), 100.65 (S2) and 99.12 (S3). The latter two are identified on the daily chart.
• Resistance levels are at 103.53 (R1), followed by 104.40 (R2) and 106.06 (R3).
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
click here to read more
click here to read less
More...
Market Analysis 30/09/2013: Tomorrow is the day you are worrying about today
Daily Commentary30.09.2013, Time of writing: 03:30 GMT
The Big Picture Tomorrow is the day you are worrying about today: Rarely have I seen such a confluence of independent crises. In the US, the government is about to shut down at midnight local time unless some miracle happens. Does that make it more or less likely that they can reach an agreement to raise the debt ceiling by the time the money runs out on Oct. 17th? We don’t know. In Europe, the Italian government is near collapse after former PM Berlusconi pulled his ministers from the Cabinet. PM Letta said he will request a confidence vote for Oct. 2nd to try to save his administration and avoid the need for another election, but in the meantime, this adds to the uncertainty on this side of the Atlantic while German Chancellor Merkel is trying to put together a coalition as well. In Japan, the government is planning to announce on Tuesday an increase in the consumption tax to 8% from 5% to help fix the country’s long-term fiscal problems, coupled with a stimulus package to offset the short-term deflationary impact.
With such a risky background, it’s no surprise that the dollar is opening lower against CHF and JPY, the two usual “risk off” trades in G10. The dollar gained against AUD and SEK however as well as most EM currencies as the high-beta trades fell back. Note how on Friday EUR/USD moved higher despite the absence of any EUR-positive news. This was probably due to Swiss National Bank intervention on the EUR/CHF exchange rate. As the SNB slows the fall of EUR/CHF but not USD/CHF, EUR/USD naturally rises. The same effect today is likely to push EUR/USD higher, in my view, as I would expect safe-haven inflows into CHF and JPY to continue.
In addition to the political problems, we have a very busy calendar of economic events this week. The highlights will be three central bank rate decisions (Australia on Tuesday, Eurozone on Wednesday and Japan on Friday), the Bank of Japan’s tankan short-term survey of economic conditions plus the manufacturing PMIs from many countries on Tuesday, and the US non-farm payrolls on Friday (assuming that the government doesn’t shut down. If it does, the NFP will probably be delayed).
Much of the action will occur during the European night. In Japan’s tankan survey for Q3, the large manufacturers’ DI is forecast to rise to 7 from 4 with the forecast for Q4 expected to be 10. That’s a sign of diminishing expectations in Japan; when the June tankan came out, the forecast for September was 10. It remains to be seen however whether any negative effect from the tankan outweighs any positive effect from the stimulus package, or indeed whether Japanese or global factors dominate trading in JPY. I suspect global factors will dominate and JPY is likely to strengthen temporarily regardless of domestic events.
Next is China’s official manufacturing PMI for September. It’s expected to rise to 51.6 from 51.0, although the final HSBC/Markit manufacturing PMI for September announced this morning was revised down to 50.2, below the preliminary figure of 51.2 and up only 0.1 point from August. Another limited rise would continue to depress AUD.
Then the RBA meets. No one looks for a change in rates, but rather the focus will be on whether any change in their bias will be evident in the statement. At the September meeting, the statement dropped the phrase “some scope to ease policy further” that it had included previously, leading the market to believe that the RBA had shifted to a neutral stance. However the minutes of the meeting revealed that members agreed “the Bank should again neither close off the possibility of reducing rates further nor signal an imminent intention to reduce them.” This suggested that they retained their easing bias, insofar as there was no mention of raising rates, either. Comments that a further decline in the exchange rate would be “helpful” also indicated that the bias remains towards easing. They could make further comments about the exchange rate, seeing as AUD/USD has risen slightly to 0.93 from 0.90 before the September meeting. AUD has been declining ahead of the meeting and there is the possibility of a “sell the rumor, buy the fact” reaction, but I expect the RBA to make some concrete statement reaffirming its easing bias and for AUD to weaken further as a result.
As for the European/US day, in the Eurozone, the CPI for September is expected to have slowed to 1.2% yoy from 1.3% yoy -- well below the ECB’s target rate but not far enough below to get them worried about deflation (yet). German retail sale are expected to rise in August by 0.8% mom, a turnaround from a revised -0.5% mom in July. UK mortgage approvals are expected to rise to 61.0k in August from 60.6k. Later in the day, Canada’s GDP is expected to be up 0.5% mom in July, a turnaround from a 0.5% mom decline in June. In the US, the Chicago purchasing manager’s index is forecast to be slightly up for September (54.3 vs 53.0). Soon afterwards, the Dallas Fed Manufacturing activity is coming out; no forecast is available.
The Market EUR/USD
• EUR/USD moved higher Friday but on Monday opened the European session with a bearish gap. The pair is trading in a short term sideways range between the support level of 1.3461 (S1) and the resistance of 1.3564 (R1) since the Sept. 18th. Both the RSI and the MACD oscillators lie at their neutral levels, confirming the consolidative mood of the price action. Therefore, in my opinion, we should wait of a clear break out of the sideways range in order to determine the forthcoming direction of the pair.
• Support is identified at 1.3461 (S1), 1.3400 (S2) and 1.3321 (S3) respectively.
• Resistance levels are the level of 1.3564 (R1), followed by 1.3655 (R2) and 1.3706 (R3) (daily chart).
USD/JPY
• USD/JPY also opened the session with a bearish gap, breaking below the 97.87 level (Friday’s support). At the time of writing the rate lies slightly below that level, and if the bears are strong enough to continue their momentum, I expect them to target the well-tested level of 97.00 (S1). The MACD oscillator supports the notion, since it lies below both the zero and its trigger lines. Furthermore, I believe that the short term trend of the pair has reversed to a downtrend (lower highs and lower lows) as it is confirmed by the blue trend line and by the bearish cross of the 20-period moving average below the 200-period moving average.
• Support levels are at 97.00 (S1), followed by 96.38 (S2) and 95.81 (S3).
• Resistance is identified at 97.87 (R1), followed by 98.53 (R2) and 99.15 (R3). The latter one is found from the weekly chart.
EUR/GBP
• EUR/GBP also opened the European morning with a gap to the downside, breaking below the 0.8356 level (Friday’s support). Currently the rate is trading slightly below that level and if selling pressure continues to push the pair lower, extensions should be triggered towards new short-term lows. Our studies confirm the bearish attitude of the pair, since the 20-period moving average lies below the 200-period moving average and the MACD’s value is negative, also below its trigger.
• Support levels are identified at 0.8319 (S1), 0.8273 (S2) and 0.8224(S3). All are found from the daily chart.
• Resistance is found at 0.8356 (R1), followed by 0.8418 (R2) and 0.8462 (R3) respectively.
Gold
• Gold moved higher during Friday’s trading activity, breaking above the resistance level of 1335 (current support). Early Monday European time, the precious metal lies slightly above that level. If the longs manage to maintain their momentum, they should drive the battle towards the next hurdle at 1368 (R1). The MACD oscillator poked its nose above the zero line, indicating bullish momentum.
• Support levels are at 1335 (S1), followed by 1316 (S2) and 1291 (S3).
• Resistance is identified at the 1368 (R1) level, followed by 1394 (R2) and 1415(R3).
Oil
• WTI managed to break the critical barrier of 102.23 (Friday’s support) and is now heading towards the 100.72 (S1) support level, where a downward violation should target the barrier of 99.18 (S2). Moreover, the 20-period moving average lies below the 200-period moving average and alongside with the negative value of MACD, they increase the probabilities for the continuation of the downward bias.
• Support levels are at 100.72 (S1), 99.18 (S2) and 98.00 (S3). Identified on the daily chart.
• Resistance levels are at 102.23 (R1), followed by 103.53 (R2) and 104.40 (R3).
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
click here to read more
click here to read less
EUR
More...
Market Analysis 01/10/2013: Today is the tomorrow you worried about yesterday
Daily Commentary01.10.2013, Time of writing: 03:30 GMT
The Big Picture Today is the tomorrow you worried about yesterday: The US government moved inexorably down to the wire and over the cliff, but meanwhile there was better news out of Italy and Japan. That leaves the US as the biggest train wreck in town for now and is likely to weigh on the dollar while boosting JPY and CHF. The picture is mixed for the high-beta currencies: lower US interest rates should in theory boost them, but risk aversion is likely to weigh on them.
Political analysts say that a shutdown of two to five days is likely, but one to two weeks is entirely possible. Shutdowns are in fact quite normal in the US; the Federal government has closed 17 times since 1976, although this is the first time it’s happened since 1995. Usually US Treasuries are the ultimate “safe haven” investment and even during a government shut-down I would expect US bond yields to decline (indeed, the savings that result from less government spending make Treasuries more attractive!) Moreover a shutdown makes it more likely that the Fed will continue with its asset purchases through the October meeting. For example, the implied interest rate on longer Fed Funds futures was down 3 bps yesterday, possibly as a result of such thinking. Lower rates could help to boost risk assets around the world and prove positive for high-beta, relatively high interest rate currencies such as AUD and NZD. Historically, the dollar has declined ahead of shutdowns and recovered afterwards so if the debt ceiling problem is resolved, there may be only a delay, not a disruption, of the recent USD rally.
What is new this time though is the struggle to raise the debt ceiling, which until the advent of the Tea Party was a routine event that attracted no attention. The risk of the shutdown segueing into the fight over the debt ceiling, the ultimate “third rail” of US politics, adds an unpredictable element to the crisis. As far as I know it has never happened that the US has been unable to pay interest on its debt before.
It remains to be seen whether US Treasuries and USD will still be a safe haven if there is a risk that the government may not be able to make its coupon payments. If that were to happen, it could have a devastating effect on the perceived creditworthiness of the US government, add a risk premium that would push US interest rates permanently higher, thereby lowering the US growth rate, and reduce the dominance of the USD as the world’s reserve currency. The possibility of such an intensive “risk off” scenario is likely to boost JPY and CHF in the first instance and to weigh on the growth currencies, although we should note that as one of the few AAA-countries left, Australia could benefit from the crisis after all. EM currencies remain vulnerable to risk aversion and a flight to safety if the US hits the debt ceiling. BRL, ZAR, INR, TRY and INR – dubbed the “fragile five” by the financial world – are probably the most vulnerable currencies.
In Italy, there are reports that former PM Berlusconi is considering softening his stance against the government after some 20 senators from his PDL party may break away unless he does so. PM Letta would need at least 24 votes from PDL or 5-Star Movement members to survive tomorrow’s no-confidence vote. The report has diminished the risk from Italy and left the US as the most troubled nation – may boost EUR/USD.
In Japan, the tankan far exceeded expectations, with the diffusion index (DI) for large manufacturers rising to 12 in September from 4 in June. This exceeded market expectations of 7 and was even higher than manufacturers’ own predictions in June that it would rise to 10. Unfortunately they forecast that it will ease 1 point to 11 in Q4, but that doesn’t seem to be weighing on sentiment as the survey showed improvement in many sectors, both in manufacturing and non-manufacturing. The stock market is up slightly on the news, waiting to hear from PM Abe on his plans for the consumption tax. If he raises the tax to 8% from 5% and offsets it for the first year at least with a fiscal stimulus package, as expected, this should prove fairly neutral or even positive for USD/JPY insofar as the stock market would be likely to rally further. At the same time, I think it’s more likely that international factors, not domestic factors, will dominate JPY and the global risk aversion caused by the US government shutdown is likely to cause JPY to appreciate temporarily at least.
The Reserve Bank of Australia (RBA) held rates steady at 2.5%, as was universally expected. The key point was that the statement following the meeting said the full effects of easing up to now “are still coming through, and will be for a while yet.” That implies no need to ease further. AUD strengthened as a result. As mentioned above, it’s likely that lowered expectations for US interest rates could prove beneficial for AUD for the near future.
Following the announcement of China’s manufacturing PMI overnight (51.1, below estimates of 51.6 and up only 0.1 point from August), we have PMIs from several European countries and the US today. Italian manufacturing PMI for September is forecast to fall slightly from 51.3 to 51.1, while the UK manufacturing PMI is expected to rise slightly to 57.5 in September from 57.2. The market expects no change in the final PMIs for France, Germany and the EU as a whole compared to their preliminary estimates, which were 49.5, 51.3 and 51.1, respectively. (The EU preliminary figure was down from 51.4 in August, so no upward revision could prove EUR-negative.) In the US, the Institute of Supply Management (ISM) manufacturing PMI is coming out today along with the Markit global PMIs. The more closely watched ISM PMI is forecast to fall to 55.1 in September from 55.7, which added to the fiscal shenanigans that are threatening US growth, could send USD lower.
The Market EUR/USD
• EUR/USD moved higher, covering yesterday’s opening gap. The pair has remained in a short-term sideways range between the support level of 1.3461 (S1) and the resistance of 1.3564 (R1) since Sept. 18th. The MACD oscillator lies slightly above zero, shifting the odds for an upward break of the 1.3564 (R1) ceiling. However, in my opinion, we should wait for the clear break out of the sideways range in order to determine the forthcoming direction of the price.
• Support is identified at 1.3461 (S1), 1.3400 (S2) and 1.3321 (S3) respectively.
• Resistance levels are the level of 1.3564 (R1), followed by 1.3655 (R2) and 1.3706 (R3) (daily chart).
EUR/JPY
• EUR/JPY surged the European evening yesterday, also covering the bearish gap and breaking above the 132.70 barrier (yesterday’s resistance). At the time of writing the rate lies between the aforementioned level and the resistance of 134.00 (R1), where, if the bullish bias continues, I expect the rate to face strong resistance. The overall trend of the pair remains an uptrend, since the price is still trading into the upward sloping channel and the 20-period moving average lies above the 200-period moving average.
• Support levels are at 132.70 (S1), followed by 131.92 (S2) and 130.96 (S3).
• Resistance is identified at 134.00 (R1), followed by 134.66 (R2) and 135.63 (R3). The latter one is found from the weekly chart.
GBP/USD
• GBP/USD moved higher after the completion of a flag continuation pattern, breaking the 1.6160 hurdle (yesterday’s resistance). During the European morning the pair is heading towards the next resistance at 1.6276 (R1), where a clear penetration should target areas we last saw at the beginning of January. Other technical studies favor the aforementioned scenario, since the rate is trading above both the 20- and 200-period moving averages and the MACD lies above both the zero and the trigger lines.
• Support levels are identified at 1.6160 (S1), 1.6000 (S2) and 1.5890 (S3).
• Resistance is found at 1.6276 (R1), followed by 1.6376 (R2) and 1.6470 (R3). The latter two are found from the weekly chart.
Gold
• Gold moved lower yesterday, confirming that it is slowly losing its status as a safe-haven asset. The precious metal is trading in a consolidative path between the 1316 (S1) and 1343 (R1), which is also confirmed by the neutral values of both the MACD and the RSI oscillators. Therefore, I believe we should wait for a clear violation of either level in order to have a better picture of Gold’s forthcoming direction.
• Support levels are at 1316 (S1), followed by 1291 (S2) and 1273 (S3).
• Resistance is identified at the 1343 (R1) level, followed by 1368 (R2) and 1394 (R3).
Oil
• WTI moved higher to test once more the critical level at 102.23 (R1). The price found resistance at that level and is currently trading slightly below it, confirming that the bears are ready to extend their moves towards the 100.72 (S1) support. Moreover, WTI lies below both the 20- and 200- period moving averages and alongside with the negative value of MACD, they increase the probabilities for the continuation of the downward bias.
• Support levels are at 100.72 (S1), 99.18 (S2) and 98.00 (S3). Identified on the daily chart.
• Resistance levels are at 102.23 (R1), followed by 103.53 (R2) and 104.40 (R3).
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
click here to read more
click here to read less
EUR
More...
Market Analysis 02/10/2013: What me worry?
Daily Commentary02.10.2013, Time of writing: 03:30 GMT
The Big Picture What me worry?The dollar was mixed Wednesday morning in Europe, gaining against some of its G10 counterparts but easing against a few, too. It was mostly higher vs EM. There was no consistent pattern. On the contrary, there were some noticeable divergences: with regards to the “safe haven” currencies, USD gained vs CHF but fell vs JPY, while vs the high-beta commodity currencies it gained vs NZD and CAD but fell (slightly) vs AUD. That suggests individual country stories, such as the fall in the TOPIX index overnight and yesterday’s RBA statement, were as important as the overall sentiment towards the dollar. There were no significant developments in the US budget impasse overnight. While several Republican Congressmen have criticized their more intransigent colleagues for holding out for an impossible deal, others (in particular, former Vice President candidate Rand Paul) have said that the current disagreement is just a “prequel” for the real fight over the debt ceiling in a couple of weeks. So that story probably has further to run.
The political stand-off does not seem to be disturbing US investors that much, however. Perhaps they agree with US Senator John McCain, who said “I've seen this movie before, and I know how it comes out.” All major US stock indices closed higher on the day, with the NASDAQ and small cap equity indices both making new highs for the year. Gold on the other hand collapsed, falling even more than silver, which is notable as silver is usually more volatile than gold is (the average 1m historical volatility of silver has been double that of gold over the last three years). Gold’s inability to rally despite lower US rates and a weaker dollar demonstrates that its role as the ultimate safe-haven investment is over for now. Either that, or it shows that investors aren’t that worried about the US political standoff and there will not be a major flight to safety. (Although in that case, I would expect the EM currencies to be doing better.)
There are two major events on the schedule for today. First, Italian PM Letta will speak in Parliament about the outlook for the government. He is expected to call a vote of confidence, which would be a crucial moment for the Eurozone. Press reports suggest that Letta has managed to convince former PM Berlusconi’s People of Liberty (PDL) Party to back him and now has enough votes to secure a majority in both houses of parliament. The idea sent Italian stocks up 3.1% yesterday, while Italian bond yields fell 15 bps. Nonetheless it’s noticeable that EUR/USD is lower this morning than it was this time yesterday, which implies that the FX market isn’t that concerned about Italian politics either way. In any case, even if Letta were to lose the vote, it’s hard to imagine that the situation would be worse than it was when the current mess began following the election on Feb. 24th. EUR/USD only dropped 2 cents from the day before the election to the bottom in the following week. Since then, the nihilistic 5-Star Movement has lost some momentum and so the range of possibilities, although not wonderful, is probably better than it was then.
Also the European Central Bank (ECB) Governing Council meets. As no one expects a change in rates, the focus will be as usual on the press conference by ECB President Mario Draghi after the meeting. We expect he will repeat his guidance that interest rates would remain “at present or lower levels for an extended period of time.” One key point will be whether the phrase “or lower” appears again. By doing so, Draghi will try to support growth in Eurozone, which lately has showed some signs of improvement. He may also clarify whether the ECB is considering offering a replacement for its expiring 3-year long-term refinancing operations towards the end of the year. His dovish comments are usually negative for EUR/USD and so that is the direction I would expect the market to take. With that, USD/CHF may continue to recover as well.
In the UK, the construction PMI is forecast to rise in September. Halifax house price index may also be released; it too is forecast to rise. Higher house prices = higher GBP.
In the US, the ADP employment report is expected to show that the private sector gained 180k jobs in September, about the same as 176k in August. The ADP report takes on new importance because the US non-farm payroll figures will not be released on Friday if the government is still shut down. Last month the ADP report undershot estimates of 184k and came in at 176k but the dollar gained nonetheless; however the NFP also disappointed, rising only 169k vs estimates of 180k, and the dollar came back down.
The Market EUR/USD
• EUR/USD tested once more the 1.3564 (R1) ceiling and moved lower, remaining in its short-term consolidative range between the support level of 1.3461 (S1) and the resistance of 1.3564 (R1). The MACD oscillator remains above zero but below its trigger line, confirming the weakness of the upward pressure on EUR/USD. In my opinion, we should wait for a clear break out of the sideways range in order to determine the forthcoming direction of the price.
• Support is identified at 1.3461 (S1), 1.3400 (S2) and 1.3321 (S3) respectively.
• Resistance levels are the level of 1.3564 (R1), followed by 1.3655 (R2) and 1.3706 (R3) (daily chart).
USD/JPY
• USD/JPY moved lower after finding resistance at the 98.50 (R1) barrier. In early European trading the pair is testing the 97.73 (S1) support, where a clear downward violation should signal the completion of a failure swing and the bears should target the critical 97.00 level. The bearish cross of the moving averages alongside with the downward slope of the oscillators increases the probability for such a downward movement.
• Support levels are at 97.73 (S1), followed by 97.00 (S2) and 96.38 (S3).
• Resistance is identified at 98.50 (R1), followed by 99.15 (R2) and 99.66 (R3).
EUR/GBP
• EUR/GBP moved higher yesterday and is currently testing the resistance of 0.8356 (R1). A bulls’ victory at that hurdle should target the next resistance at 0.8418 (R2), while if the bears prevail, they are likely to extend the prior downward path of the rate. I would consider any upward movement as a pullback or a short term correction, since the pair is still trading in the blue downtrend channel, with the bearish cross of the moving averages and the negative value of MACD confirming the whole bearish picture.
• Support levels are identified at 0.8319 (S1), 0.8273 (S2) and 0.8224(S3). All are found from the daily chart.
• Resistance is found at 0.8356 (R1), followed by 0.8418 (R2) and 0.8462 (R3).
Gold
• Gold collapsed yesterday, penetrating two support levels in a row (today’s resistance). The fall seems to complete a bearish flag continuation pattern which, combined with our negative short term studies, favors the bearish picture of gold. The 20-period moving average lies below the 200-period moving average while the MACD oscillator lies below its trigger line in a negative territory. However, the RSI’s reading is a cause for some concern as it seems ready to exit its oversold zone, and as a result, an upside pullback is possible. It is important to note that the precious metal is near the critical floor of 1273 (S1). A clear downward break of that important levell would be likely to trigger extensions towards new short-term lows.
• Support levels are at 1273 (S1), followed by 1242 (S2) and 1208 (S3).
• Resistance is identified at the 1291 (R1) level, followed by 1316 (R2) and 1343 (R3).
Oil
• WTI tested for a second consecutive day the 102.23 (R1) barrier and moved lower. During the European opening the price is trading below that level and it seems that the bears are ready to extend their moves towards the 100.72 (S1) support, where a clear break should challenge the next floor at 99.18 (S2). Moreover, WTI lies below both the 20- and 200- period moving averages and alongside with the negative value of MACD, they increase the probabilities for the continuation of the downward bias.
• Support levels are at 100.72 (S1), 99.18 (S2) and 98.00 (S3). The latter two are identified on the daily chart.
• Resistance levels are at 102.23 (R1), followed by 103.53 (R2) and 104.40 (R3).
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
click here to read more
click here to read less
EUR
More...
Market Analysis 03/10/2013
Daily Commentary03.10.2013, Time of writing: 03:30 GMT
The Big Picture The dollar was lower across the board this morning as investors woke up to the possibility that not only might the budget stalemate drag on, but also it could continue into the fight over the debt ceiling – a possible Financial Armageddon. US stocks were lower yesterday (although Asia was mostly higher this morning as China’s non-manufacturing PMI rose sharply), while 10yr bond yields fell 3 bps and the implied interest rates on Fed Funds futures continued to fall on the assumption that the political fighting would prevent the Fed from tapering any time soon. The lower rates are apparently supportive for EM currencies, which mostly gained vs USD, but I think if the stalemate drags on, the prospect of lower growth in the US will outweigh the prospect of lower US rates for these currencies and EM currencies are likely to fall back.
Indeed, it will be almost impossible for the Fed to come to a conclusion on policy because so much of the data that it depends on – particularly the labor market data – will not be published. The Bureau of Labor Statistics won’t even be collecting data while the government is shut down. In fact no government data will be released while the shutdown is going on, only private-sector data. With luck, the shutdown will be over soon – the median length of time is three days, the average six, and the longest ever so far is 21 – and the data flow won’t be disrupted for long.
However, the polarization between the parties is even worse now than it was in the past and some of the Republicans see the two fights (the budget and the debt ceiling) converging. Moreover, some apparently see this as a good chance to press even more demands on the view that the Democrats will not let the country default – big mistake! "I don't even know if they realize the impact of what it means to default," said Representative Peter King of New York, a moderate Republican. On the contrary, at yesterday’s meeting between President Obama and Congressional leaders, the President said he would not negotiate at all until Republicans agreed to fund the government and to increase the debt ceiling. It looks like the stalemate is set to continue, further disrupting markets. Against that background, I think the dollar is likely to decline further and the safe-haven currencies – CHF and JPY – are likely to benefit. EUR should also benefit from the Swiss National Bank’s intervention in EUR/CHF, as well as from yesterday’s resolution of the Italian political crisis. It’s a sad day for the US when US politics look bad in comparison with Italy’s.
The economic calendar today starts with the European service sector PMIs for September, including the UK and Italian ones and the final readings from France, Germany and the Eurozone. The Italian PMI is forecast to rise, while in UK the market expects no change. No change is expected in the final PMIs for the EU, France and Germany from the preliminary versions, but it’s not clear whether economists actually prepare forecasts for the final version. Later in the day, Eurozone retail sales for August are expected to rise. ECB’s Coeure speaks in Toulouse. In the US, jobless claims and factory orders for August are scheduled to be released, but they apparently won’t be, because of the government shutdown. The only US data will be the ISM non-manufacturing composite for September, which is forecast to fall to 57.0 from 58.6 – another USD-negative factor. Finally, there are four Fed speakers: San Francisco Fed President Williams, Dallas Fed President Fisher, Fed Governor Powell (speaking at conference on community banking) and Atlanta Fed President Lockhart speaking on “Recent Developments in the US Labor Market.” Overnight the focus will be on the Bank of Japan, which will conclude a two-day Policy Board meeting; BoJ Governor Kuroda will hold a press conference afterwards. It will be interesting to hear what he has to say about monetary policy in the context of the government’s decision to raise the consumption tax.
The Market EUR/USD
• EUR/USD moved higher yesterday after Italian Prime Minister Enrico Letta won a vote of confidence in parliament. The pair broke above the upper boundary of its short-term consolidative formation at 1.3564 and in early European trading is heading towards the next hurdle at 1.3654 (R1), where a clear break should challenge February’s highs at 1.3706 (R2). Our short term studies confirm the notion, since the MACD oscillator lies in its bullish zone, above its trigger, while the rate is trading above both the 20- and the 200-period moving averages.
• Support is identified at 1.3564 (S1), 1.3461 (S2) and 1.3400 (S3) respectively.
• Resistance levels are the level of 1.3654 (R1), followed by 1.3706 (R2) and 1.3800 (R3). All are found from the daily chart.
USD/JPY
• USD/JPY moved lower on what looks to be ‘safe haven’ flows, breaking below the 97.73 support level (today’s resistance) and completing a failure swing to the downside. However, during the early European morning the price returned to test the aforementioned level once more. I would consider any upward move as a pullback, since the rate remains below both moving averages and the blue downtrend line. Both the RSI and MACD oscillators support the notion since they continue following their downward sloping path.
• Support levels are at 97.00 (S1), followed by 96.38 (S2) and 95.81 (S3).
• Resistance is identified at 97.73 (R1), followed by 98.50 (R2) and 99.16 (R3).
GBP/USD
• GBP/USD rebounded from the 1.6160 (S1) support level and moved slightly upwards with little GBP-specific news to push price the either way. In early European trading the pair lies between that barrier and the ceiling of 1.6276 (R1). If the bulls are strong enough to overcome that level, I expect them to trigger extensions towards January’s highs at 1.6376 (R2). The rate lies above both the moving averages, while the MACD oscillator lies in its positive territory, confirming that the uptrend is still in effect.
• Support levels are identified at 1.6160 (S1), 1.6000 (S2) and 1.5890 (S3).
• Resistance is found at 1.6276 (R1), followed by 1.6376 (R2) and 1.6570 (R3). The latter two are found from the daily and weekly charts.
Gold
• Gold also surged as some safe-haven demand finally hit the precious metal, pushing it through the 1291 barrier once more. Overnight gold hit the 1316 (R1) ceiling and moved slightly lower. I believe that the recent upward bias is just a correction of Tuesday’s plunge before the price continue its downtrend. The 20-period moving average remains below the 200-period moving average and alongside with MACD’s negative value, they confirm the bearish picture for the yellow metal.
• Support levels are at 1291 (S1), followed by 1273 (S2) and 1242 (S3). The latter one is found from the daily chart.
• Resistance is identified at the 1316 (R1) level, followed by 1343 (R2) and 1368 (R3).
Oil
• WTI surged yesterday, breaking above the 102.23 and finding resistance at 104.14 (R1). However, since the price remains in its downward sloping channel I consider the upside move as a pullback before the bears prevail again. The 20-period moving average remains below the 200-period moving average, confirming the validity of the downward path.
• Support levels are at 102.23 (S1), 101.02 (S2) and 99.18 (S3). The latter one is identified on the daily chart.
• Resistance levels are at 104.19 (R1), followed by 106.06 (R2) and 108.13 (R3).
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
click here to read more
click here to read less
EUR
More...