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IronFx 2015.07.03 05:10 #521

IronFX Daily Commentary | 03/07/15

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• Data does still matter Although the markets have been obsessed with Greece recently, it seems that the economic data does occasionally still matter. After the strong ADP report on Wednesday the market had been expecting a higher-than-expected nonfarm payroll figure (if that makes sense), but in the event the payrolls were a bit lower than expected and prior months were revised down. The unemployment rate did fall more than expected but that was due to a plunge in the participation rate (although there were some technicalities here related to the timing of the reference week). Fed funds rate expectations fell – end-2016 was down 5 bps at the close – and Treasury yields declined too as investors covered short positions ahead of the long weekend. As a result, the dollar was down slightly against most currencies.

• But remember that the recent pattern has been mean reversion following the NFP figures: that is, a rise on NFP day is often followed by a fall the following day, and vice-versa. So a weak dollar yesterday on the back of the NFP figure does not necessarily mean a weak dollar today. (Of course, past performance is no guarantee of future performance.)

• SEK, AUD and NOK weaken The exceptions to the weak dollar story were SEK, AUD and NOK. SEK was lower after the Riksbank unexpectedly cut rates at its meeting on Thursday. AUD was down after May retail sales disappointed this morning, rising only 0.3% mom instead of +0.5% as expected. Iron ore exports hit a record in June, but this was no cause for celebration as it just means that the price fell further. Shipments in June were up 14% yoy but prices at the end of the month were down 41% yoy, meaning that the total amount of money coming into Australia fell sharply. Meanwhile, the economy still hasn’t successfully transitioned away from mining-led growth so there is not that much to take over as income from mining falls. Nor was the currency helped by fall in the HSBC China service-sector PMI and composite PMI for June. It seems like a perfect storm for AUD – I expect it to fall further as the Chinese economy weakens and RBA cuts rates to ease the transition away from dependency on mining.

• It’s not clear exactly why NOK is lower, but with oil prices falling again yesterday it doesn’t surprise me. The sharp fall in the manufacturing PMI on Wednesday to a dismal 44.0 gave a negative bias to NOK – like Australia, here’s another country whose commodity exports are falling in price while the non-commodity sector struggles. That implies a weaker NOK too.

• Sunday’s referendum is too close to call The key point in the market of course will be Sunday’s referendum in Greece. The polls suggest that people are starting to lose their courage. As they see that being closed off from the EU means no euros coming out of the ATMs, the percent of people who say they’ll vote “no” is falling and the “yes” is rising. Nonetheless, it’s too close to call, and after the disastrous results of the polls in the UK this year nobody would trust the polls anyway. The key thing is that whether they vote “yes” or “no,” the problems will still drag on. That means there’s plenty of room for volatility next Monday!

• The constraints surrounding the negotiations When thinking about the possible scenarios after the referendum, one has to keep in mind two facts: 1) Greece is voting on whether to accept an offer that is no longer on the table, and 2) the existing bailout package from the European Stability Mechanism (ESM) has expired and they will need to negotiate a new one. It’s relatively easy to get an existing bailout package renewed, which is what Greece was trying to do previously. It just requires one approval by eurozone governments. But a new bailout package requires two decisions, each of which requires parliamentary votes in several countries, including Germany. That takes time, which they don’t really have. It also takes goodwill on the part of the other countries, which they also don’t have.

• They don’t have time because the real, final, this-is-it deadline is July 20th, when a two Greek bonds that the ECB holds totaling EUR 3.5bn mature. If Greece fails to pay the ECB, then the ECB is not going to keep this charade going. It’ll have to stop funding the Greek banking system, which means basically that the banks collapse and Greece has to institute a new currency. That means Greece has to legislate for and implement the entire reform program before July 20th and win approval for it from other countries so that it has the money to repay the ECB.

•If there’s a “yes” vote: The Finance Minister has said he would resign and the PM has hinted that he would, too. In any event, whoever is in office would immediately restart negotiations. A new government might be received more warmly in other capitals and have more chance of success than the incumbents. Nonetheless, negotiations will be difficult. The Greek economy has deteriorated considerably just in the last few weeks, so any new agreement would probably have to be harsher than the previous offers.

• The immediate attention will focus on getting the ECB to increase its Emergency Liquidity Assistance (ELA) aid to the banking system so that the banks can reopen, and negotiating a new bailout with the ESM. A new bailout will require new commitments on fiscal consolidation, structural reform, debt relief, bank recapitalization, etc. It will also require the involvement of the IMF. That’s a lot to get done – and get the necessary parliamentary approvals – in two weeks.

• If the PM doesn’t resign, then the issue of credibility comes up. After all this, will the creditors trust PM Tsipras to implement even harsher conditions than the ones he rejected?

• If there’s a “no” vote The administration has said that they would restart negotiations, but will the creditors negotiate with them again? And if the government received a mandate to reject the previous offer, they’re not likely to accept a new one with harsher conditions.

• Several – but not all – EU officials have said that a “no” vote would be tantamount to a decision to leave the Eurozone. The ECB might decide to cut off its ELA funds to the Greek banks on Sunday night, meaning the Greek banks might not have any euros to dispense on Monday morning. A SYRIZA insider told the FT that in case of a “no” vote, Greece might choose to end negotiations, leave the euro of its own accord and readopt the drachma – contrary to what Tsipras has said.

• On the other hand, they might just continue the kind of acrimonious negotiations that were taking place before the announcement of the referendum. In that case, with negotiations deadlocked and the banks still closed, a number of MPs might get fed up and leave the coalition. That could make room for a new administration to come in and reach some agreement. But again, time is limited.

• Market is still hopeful I think the market still believes that something is going to save day, probably that they’re going to vote “Yes.” The one-month risk reversal actually move up on Wednesday and Thursday, indicating less demand for protection against a plunge in EUR/USD. And in any event it’s still higher than it was back in February.

•Today’s highlights: The day is rather light on data as the US markets are closed. The main events on the schedule are the final service-sector PMIs from the countries we got the manufacturing PMIs on Wednesday. During the European day, we get the final service-sector PMIs for June for France, Germany and Eurozone as a whole. As usual, the final forecasts are the same as the initial estimates, thus the market reaction could be limited. Unless we have a huge revision from the preliminary figures. Eurozone’s retail sales for May are coming out as well.

• From Norway, the official unemployment rate for June is expected to tick up a bit. This could weaken NOK somewhat.

• The UK service-sector PMI is forecast to have increased to 57.5 in June from 56.5 in May. After the decline in the country’s manufacturing PMI and the rise in the construction PMI, a rise in the service-sector PMI is needed to keep the confidence up for a rebound in Q2 growth.

Currency Titles:

EUR/USD rebounds and hits the resistance of 1.1115

GBP/JPY trades in a consolidative manner

AUD/USD breaks below 0.7600

Gold dips below 1162

DAX futures hit resistance near 11300 and tumble

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Currencies Text:

• EUR/USD continued its rebound following the below-estimate nonfarm payrolls print. Nevertheless, the rebound was halted near the 1.1115 (R1) resistance hurdle. I still believe that the short-term bias is somewhat negative and I would expect the bears to eventually take in charge and pull the trigger for another test at the 1.1030 (S1) support barrier. But our short-term oscillators indicate that before the next negative leg, there is still the possibility for further rebound. The RSI is pointing up and is headed towards its 50 line, while the MACD has bottomed and crossed above its trigger line. In the bigger picture, I would maintain my neutral stance. I believe that a move above the psychological zone of 1.1500 is the move that could carry larger bullish implications, while a break below 1.0800 is needed to confirm a forthcoming lower low on the daily chart and perhaps turn the overall bias back to the downside.

• Support: 1.1030 (S1), 1.1000 (S2), 1.0950 (S3)

• Resistance: 1.1115 (R1), 1.1175 (R2), 1.1240 (R3)

• GBP/JPY continued trading in a consolidative manner on Thursday, staying between the support barrier of 191.30 (S1) and the resistance of 193.60 (R1). Having that in mind I consider the short-term picture to be neutral. However, given the proximity to the lower bound of the range and taking a look at our short-term oscillators, I believe that the forthcoming wave within the range will be positive. The RSI, although below 50, has turned up again, while the MACD, although negative, stands above its trigger line and points somewhat north. On the daily chart, the pair is trading well above both the 50- and the 200-day moving averages, while on Monday, it hit support at 191.30 (S1) which lies slightly above the 23.6% retracement level of the 14th of April – 23rd of June advance. These technical signs support the idea that the short-term uptrend that started back on the 14th of April is still intact and that it could resume at some point in the foreseeable future.

• Support: 191.30 (S1), 189.00 (S2), 187.75 (S3)

• Resistance: 193.60 (R1), 196.00 (R2), 197.00 (R3)

• AUD/USD tumbled today during the Asian morning after Australia’s lower-than-expected retail sales for May. The pair fell below the key support (now turned into resistance) barrier of 0.7600 (R1), and as a result I would now expect the bears to initially target the 0.7550 (S1) line, defined by the lows of the 13th and 14th of April. Our short-term oscillators detect negative momentum and amplify the case that the pair is likely to continue trading lower. The RSI turned down and could challenge again its 30 line, while the MACD stands below both its zero and signal lines and points down. As for the broader trend, I believe that a break below the psychological zone of 0.7500 (S2) is the move that would trigger the continuation of the prevailing longer-term downtrend.

• Support: 0.7550 (S1), 0.7500 (S2), 0.7450 (S3)

• Resistance: 0.7600 (R1), 0.7650 (R2), 0.7740 (R3)

• Gold fell below the 1162 (S1) barrier, but fell short of reaching the 1153 (S3) line, defined by the inside swing high of the 18th of March. The precious metal hit support at 1157 (S2) and then rebounded to trade back above the 1162 (S1) line. As long as the metal is trading below the short-term uptrend line drawn from the low of the 5th of June, I would consider the short-term picture to stay somewhat negative. However, given our momentum signs, I would take to the sidelines for now. The RSI rebounded from slightly above its 30 line, while the MACD has bottomed and appears ready to move above its trigger line at any time. What is more, there is positive divergence between both these indicators and the price action. On the daily chart, although we had a move below the prior low at 1162 (S1), yesterday’s candle looks like a hammer, which could hint at a further rebound. This is another reason I prefer to stay flat and wait for more actionable signals that the downtrend is back in force.

• Support: 1162 (S1), 1157 (S2), 1153 (S3)

• Resistance: 1170 (R1), 1175 (R2), 1180 (R3)

• Support: 1162 (S1), 1157 (S2), 1153 (S3)

• Resistance: 1170 (R1), 1175 (R2), 1180 (R3)

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IronFx 2015.07.06 04:50 #522

IronFX Daily Commentary | 06/07/15

Language English

• Greece votes “No” Greece voted decisively to say “no” in its referendum on Sunday. Now the politicians will have to start working to figure out exactly what the Greeks said “no” to, because it certainly wasn’t clear from the ballots. Moreover, even if the Greeks have said “no” to a bailout package that is no longer on offer, what about the voters in the other 18 Eurozone countries? What’s their view on how much money they should give Greece? We’ll have to see what they think, too.

•The short answer: Greece tries to negotiate, it gets nowhere, the banking system remains frozen, Greece is either forced to capitulate or leaves the Eurozone Briefly, here’s what I think will happen. Greek PM Tsipras has said he will try to use the results of the referendum to strengthen his hand in negotiations with the institutions, so I expect to see him try to restart talks. Unfortunately, Greece’s economic condition has deteriorated since the last offer, so the institutions can only make a more stringent offer now – which of course the Greek government cannot possibly accept following the referendum. Meanwhile, the ECB is likely to keep its aid to the Greek banking system frozen, which will keep the banks closed. The government will have to choose how to keep the banking system going: either a bail-in of depositors or reinstitute the drachma. It could issue a scrip to pay its bills, which would probably be seen as a precursor to leaving the euro. Any of these alternatives are likely to upset the Greeks even more. All the while, time is ticking down to July 20th, when the country has to pay EUR 3.5bn to the ECB or the ECB withdraws its aid and the Greek banking system collapses. If the vote had been less of a majority for the “no” side, then I would’ve expected a realignment in Greek politics and a change of government in order to renegotiate a bailout package. But under the current circumstances that becomes much harder. I think the odds are that we are headed towards Greece leaving the Eurozone, even if that isn’t what either side wants, because the referendum has limited the Greek government’s room for compromise.

•Market impact is yet to come EUR/USD opened with a gap lower, but in doing so is just back to almost exactly where it was a week ago after the referendum was first announced – not much change. The rate to remained well above the support zone of 1.0820/1.0950 at around the middle of the 1.0820-1.1275 range that it’s largely been trading in since early June. We would have needed to see a break of at least 1.0950 to draw people in and 1.0820 to convince investors that we would challenge the previous low of around 1.0500. However, people apparently don’t see much likelihood of that any time soon. The one-month risk reversals moved lower but nothing special.It looks to me like people do not really believe a Grexit is likely or even possible at this late stage. Either that, or they think that it doesn’t matter – that the possibility has been talked about for so long and everyone is so well prepared that it wouldn’t really matter. I’m not so sure.

• It’s true that Europe is much better prepared, and also the ECB has in effect made another one of their “do whatever is necessary” pledges about containing contagion. However, there are two risks that are too big even for the ECB: 1) If there is a bail-in in Greece, will depositors in other countries fear the same thing? How will people in Spain and Portugal respond? If they or the Italians start moving money out of the banks, then it could be more than the ECB could deal with. 2) Hedging investments. If European investors in Portugal and Spain etc. Start to think about the risk of holding those countries’ assets and start hedging their currency risk – currency risk that didn’t exist before – then the ECB could be overwhelmed. It remains to be seen. I admit that currently, the market in those countries’ bonds reflects little risk, as shown by the extremely narrow spread over German Bunds. But that could also be because of the ECB’s promised purchases of those countries’ bonds.

Impact could be reflected outside EUR/USD One of the reasons why EUR/USD has been so stable may be because the market is thinking one step ahead: what does a possible Grexit imply for the Fed? The answer is that it could delay a Fed move (although the Fed is the central bank of the United States, not the Eurozone, and therefore in theory should not take its possible impact on world financial conditions into consideration when it makes its decision.) Fed funds rate expectations at the long end of the market have come down an amazing 17 bps since the better-than-expected ADP report on Wednesday. This is one reason probably why EUR/USD has so far held its recent range despite the news.

Instead, the major impact is likely to be on other currencies and on equities. If the Fed is worried about the global impact of European monetary turmoil, then maybe other economic actors who are sensitive to risk will be, too. That means less money going into emerging markets and less money going into stock markets, particularly the markets that are more highly geared to economic growth. As a result, the commodity currencies, particularly the beleaguered AUD, and several EM currencies, notably MX, TRY and ZAR, are likely to suffer. As for the euro, the tables suggests that EUR/JPY is probably more sensitive to risk than EUR/USD, which didn’t make the cut. That’s because of the safe-haven characteristics of the yen in such cases (as we saw this morning, when JPY was one of the few currencies to gain vs USD). EUR/CHF did not make the cut either, because these correlations are over the last 10 years and therefore include the period of the EUR/CHF floor. CHF also runs more risk of intervention now than JPY does. It was noticeable that early this morning, USD/JPY was lower but USD/CHF was higher. It looks like at this point, EUR/JPY is probably the best G10 pair to play Eurozone risk.

• Looking at last week’s Commitment of Traders (COT) report, EUR shorts were little changed. Speculators still have plenty of room to increase their shorts. Note that speculators are the most short NZD that they’ve been in the last five years and MXN positions are getting down there too. Will they continue to add to these positions? Also I see plenty of room for speculators to close out stale JPY shorts if risk aversion continues to push the Japanese currency higher.

• The long answer: Here are more detailed reasons why I think the above.

• The Greeks think the referendum was not about leaving the Eurozone The referendum did not mention anything about leaving the Eurozone. Moreover, PM Tsipras specifically said that a “no” vote did not mean leaving the Eurozone. That’s probably a good thing for him, because polls have shown overwhelming support in Greece for remaining in the Eurozone – somewhere around 80%. So it remains to be seen why he offered the referendum and why he wanted a “no” vote. Was it, as he said, to improve his bargaining position? If so, it seems only to have backfired – it has totally alienated his counterparts in the other European countries and will make it more difficult to reach an agreement. Or is his purpose really to engineer an exit from the Eurozone and he wants to be able to blame it on the creditors?

• In any event, PM Tsipras has said he will try to restart negotiations with the institutions. The problem of course is that the starting point is no longer the same – they are starting without an existing bailout package, following a massive run on the Greek banking system and with tax revenues down sharply. Since Greece’s economic situation has deteriorated, the institutions will have to insist on even more stringent requirements than in the previous offer. Since the Greek public voted to refuse to accept the previous offer, it’s difficult to see how the government can then sign off on a more stringent one. Yet it’s also difficult to see how the institutions can go easier on Greece now that its position has deteriorated further. The Greek government may have painted itself into a corner where the only door leads to Grexit.

• Politicians to debate; likely to leave room for a settlement but no new offer The European politicians have generally stressed that the vote is about whether Greece will remain in the Eurozone. With such a large majority for a “no” vote, Europe may simply decide that the task of keeping Greece within the group is too difficult. Merkel and Hollande agreed that the decision of the Greek people is “to be respected” and called for a Eurozone summit for Tuesday. I expect that they will not say anything to freeze Greece out, because they would probably prefer that the country remain in the Eurozone, but neither can they afford to make a better offer than the one that the Greeks just rejected, for fear of other countries trying the same stunt. So expect something tinged with regret but breaking no substantial new ground. They may offer humanitarian aid, such as funds to enable the country to import medicine, but that’s about it. “I see no credible basis to help Greece right now, none at all,” said Ingrid Arndt-Brauer, who chairs the finance committee in Germany’s lower house.

• ECB likely to remain on hold while the politicians decide what to do Meanwhile, the ECB is scheduled to meet Monday morning to decide what to do about the Emergency Liquidity Aid (ELA) to Greece. I expect that they will decide to hold the ELA funds steady at their current level, neither decreasing the aid as a penalty for the “no” vote nor increasing it as the banking system so desperately needs. At this point any cutback, increase in the haircut on collateral or the ultimate step of suspending the ELA would effectively bankrupt the banking system and would bring the country much closer to a Eurozone exit. I think the unelected members of the ECB would be loath to take such a momentous step. It’s one thing for them to rescue a country when the politicians can’t agree, but to assume responsibility for a country leaving the Eurozone would be too undemocratic even for Europe.

• Nonetheless, without more liquidity from the ECB, the Greek banking system will soon run out of money completely. Already Greek companies are frozen out of the international money transmission system and cannot transfer money abroad, meaning that they can’t import anything. Soon the banks won’t even be able to dispense the EUR 60 per day that Greeks have been allowed to withdraw. Once that happens, Greece will have three options: 1) a “bail-in,” as happened in Cyprus, in which banks seize part of the uninsured deposits to shore up their balance sheets, or 2) keep the banks closed and have the government issue a scrip with which to pay its bills. That scrip would be nominally convertible to euros once the banks reopen, but in practice would probably trade at a discount as people would assume it to be the predecessor of a new drachma. Or 3) they simply return to the drachma right away and use the new money to recapitalize the banks. Either way, a Grexit seems the logical conclusion.

•Political realignment might’ve been possible, but it would be difficult now I had thought that under pressure from the banking crisis, enough Greek politicians might switch sides to make it possible to realign the government and force new negotiations. However, with the voters approving of SYRIZA’s tactics, that way of resolving the problem is probably closed off. That too points towards Grexit.

•Is there a deal already? In a little-noticed interview Friday with RTE Radio, Greek Finance Minister Varoufakis said a deal between Athens and its creditors is “more or less done” regardless of the outcome of the vote. However, Eurogroup chairman Jeroen Dijsselbloem said the claim was “completely false.”

• Today’s data: Investors will get plenty of time to think about Greece this morning as there’s only data of secondary importance on the agenda.

• During the European day, we get the German factory orders for May.

• From Canada, we get the Ivey PMI for June. Following the rise in the RBC manufacturing PMI on Thursday, we could see a positive surprise in the Ivey figure as well. Nevertheless, the decline in oil prices in the last few weeks is likely to keep CAD under selling pressure.

• In the US, we get the labor market conditions index for June. Although not a major market mover, the LMCI index is likely to show the broader US labor conditions and whether the Fed is on track to achieve its maximum employment mandate.

• As for the speakers, BoJ Governor Haruhiko Kuroda speaks.

• Rest of the week: On Tuesday, the main event will be the Reserve Bank of Australia policy meeting. At their last meeting, the Bank kept its cash rate unchanged and maintained a neutral bias as far as their future stance. The forecast is for the Bank to remain on hold, and the focus will turn to the statement accompanying the decision for any hints regarding the future path of the rate.

• As for indicators, the UK industrial production for May is coming out. Following the disappointment in the manufacturing PMI, expectations for a broad rebound in the nation’s growth in Q2 has lessened a bit. However, the rise in the construction and service-sector PMIs, eased some of those concerns and kept the rebound scenario alive. The forecast is for the monthly industrial production figure to fall, a turnaround from the previous month, while the annual rate is expected to accelerate. Overall, a strong positive surprise in industrial production is needed to keep the scenario for a rebound in Q2 alive and keep the UK on a recovery path.

• On Wednesday, the minutes of the June FOMC meeting are to be released. At this meeting, the most important outcome was the distribution of the “dot plot”. Fed officials lowered their interest rate forecasts, which turned out to be more dovish than expected and seem to be fairly split between one and two hikes this year. This is definitely less clear than the previous FOMC forecast, where the Committee was projecting two rate hikes this year. If the meeting minutes show that the first rate hike could occur in September, the USD could regain its strength.

• On Thursday, we get China’s CPI and PPI data for June. The forecast is for the CPI rate to rise to +1.3% yoy from +1.2% yoy, while the PPI rate is anticipated to fall at the same pace as in the month before. The PBoC eased further last week by cutting rates for the fourth time since November and cutting the reserve requirement ratio (RRR)to support the weakening economy after recent indicators suggested a further slowdown in Q2. The recent sell-off of the country’s stocks could also prompt the Bank to act to ensure financial stability. As the country’s growth continues to slow, Australia and New Zealand, whose economies are heavily dependent on exports to China, could see their currencies weaken further.

• The Bank of England holds its policy meeting. There’s little chance of a change in policy, hence the impact on the market is likely to be minimal, as usual. The minutes of the meeting however should make interesting reading when they are released on 22nd of July, as members who previously voted for a rate hike have adopted a more hawkish tone recently following the upside surprise on April wage data.

• Finally on Friday, we get Norway’s CPI and Canada’s unemployment rate, both for June.

Currency Titles:

EUR/USD gaps down as Greeks vote “no”

GBP/USD find support at 1.5540

EUR/JPY gaps down but finds support near 133.75

WTI continues its tumble and hits support at 54.40

Gold hits resistance near 1175 and tumbles

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Currencies Text:

• EUR/USD gapped down on Monday after Greeks decided to reject the terms of their bailout deal. However, the rate started recovering some of its losses after it hit support fractionally above the 1.0965 (S2) line. Now EUR/USD is trading slightly above the 1.1030 (S1) barrier and I would expect it to continue higher, perhaps for a test at the resistance line of 1.1115 (R1). However, I still believe that the short-term outlook is somewhat negative and therefore, I would treat any further advances as corrective moves before the bears take control again. A clear move below 1.0965 (S2) would confirm a forthcoming lower low on the 4-hour chart and perhaps open the way for the 1.0900 (S3) territory. In the bigger picture, I would maintain my neutral stance. I believe that a move above the psychological zone of 1.1500 is the move that could carry larger bullish implications, while a break below 1.0800 is needed to confirm a forthcoming lower low on the daily chart and perhaps turn the overall bias back to the downside.

• Support: 1.1030 (S1), 1.0965 (S2), 1.0900 (S3)

• Resistance: 1.1115 (R1), 1.1175 (R2), 1.1240 (R3)

• GBP/USD traded lower on Friday and today during the Asian morning, it hit support at 1.5540 (S1). After the downside exit of the short-term range that had been containing the price action from the 23rd of June until the 1st of July, the short-term outlook has turned negative. I believe that a move below 1.5540 (S1) is likely to initially target our next support at 1.5485 (S2), marked by the low of the 15th of June. Switching to the daily chart, I see that the recent decline confirmed the negative divergence between our daily oscillators and the price action. Moreover, the 14-day RSI has fallen below its 50 line, while the daily MACD, although positive, stands below its trigger line and points north. These signs support the case that we are likely to see Cable trading lower in the short run. However, the rate is still trading above the 80-day exponential moving average, and there is still the possibility for a higher low. As a result, I would consider the overall picture to be somewhat positive and I would treat any further short-term declines as a corrective phase.

• Support: 1.5540 (S1), 1.5485 (S2), 1.5415 (S3)

• Resistance: 1.5675 (R1), 1.5800 (R2), 1.5910 (R3)

• EUR/JPY gapped down as well after Greece’s “no” vote. Nevertheless it rebounded significantly after it triggered some buy orders marginally above the 133.75 (S1) support line. I believe that the short-term outlook of the pair is still to the downside and thus, I would expect the bears to eventually take charge again and go for another test at the 133.75 (S1) area. Our short-term oscillators support the notion. The RSI fell after it hit resistance slightly below its 50 line, while the MACD, already negative, has topped and fallen below its trigger line. On the daily chart, I see that the 133.75 (S1) support area stands pretty close to the 50% retracement level of the 14th of April – 4th of June advance. I would like to see a daily close below that area before I assume that the medium-term picture has turned negative as well.

• Support: 133.75 (S1), 133.00 (S2), 131.40 (S3)

• Resistance: 135.80 (R1), 137.00 (R2), 138.00 (R3)

• WTI continued its tumble on Friday falling below the support (now turned into resistance) barrier of 56.35 (R2). On Monday, the price gapped down but after hitting support at 54.40 (S1), it rebounded somewhat to hit resistance at 55.30 (R1). After the downside exit of a sideways range on the 26th of June, WTI has been printing lower peaks and lower troughs and this keeps the short-term outlook negative in my view. I would expect a break below the support obstacle of 54.40 (S1) to set the stage for extensions towards our next support at 53.30 (S2), defined by the low of the 13th of April. On the daily chart, the break back below the psychological area of 55.00 has turned the longer-term picture negative as well. Our daily oscillators corroborate my stance. The 14-day RSI continued sliding and is now headed towards its 30 line, while the MACD lies below both its signal and zero lines, pointing south.

• Support: 54.40 (S1), 53.30 (S2), 51.75 (S3)

• Resistance: 55.30 (R1) 56.35 (R2), 56.75 (R3)

• Gold gapped up on Monday, but gave back all its gains after hitting resistance marginally below the 1175 (R2) hurdle. The precious metal is now trading below 1170 (S1) and I would expect it to continue lower to initially challenge the 1162 (S1) barrier. A break below that line could pave the way for another test of 1157 (S2). Taking a look at our short-term oscillators, I see that the RSI, already below its 50 line, has turned down, while the MACD, already negative, shows signs of topping and could fall below its trigger line soon. On the daily chart, the move below the 1162 (S1) level on the 2nd of July confirmed a lower low on the daily chart and kept the overall outlook of gold cautiously negative.

• Support: 1162 (S1), 1157 (S2), 1153 (S3)

• Resistance: 1170 (R1), 1175 (R2), 1180 (R3)

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IronFx 2015.07.07 05:40 #523

IronFX Daily Commentary | 07/07/15

Language English

• Greece: confusion reigns Following the “no” decision in Sunday’s referendum, the confusion and disarray around Greece has only deepened. While Greek PM Tsipras said that a “no” vote would strengthen his hand in negotiations, the ECB tightened the screws on Greek banks by increasing the “haircut” on Greek government bonds pledged as collateral for the Emergency Liquidity Assistance (ELA), the ECB-supplied funds that are keeping Greece’s banks afloat. The cut reportedly reduces the remaining cash available to the Greek banks by two-thirds, meaning that they are all the closer to shutting down. (The bank holiday was extended by two days in any case.) The move was a surprise as most observers, including me, had thought that the ECB would take a strictly neutral stance and hold its policy steady until the political leaders made a decision at their meeting today. The move increases the pressure on Greece to reach a settlement at today’s meeting. The ECB meets again on Wednesday; if the Board increases the haircut again, then the Greek banks would apparently be unable to cover even the liquidity that they have already drawn, meaning that they would have to shut down.

• Greece’s new Finance Minister Euclid Tsakalotos and Prime Minister Alexis Tsipras will attend the meeting of EU leaders in Brussels today and propose a new deal based on the most recent set of proposals published by the European Commission. Most of the Greek political leaders yesterday signed a joint statement insisting that they want Greece to remain in the Eurozone. The problem, which I highlighted yesterday, is that the economy has deteriorated because of the turmoil and the capital controls, meaning that a larger fiscal adjustment is needed than before. But since the referendum gave the government a mandate only to reject the previous conditions, it makes it impossible for them to accept stricter conditions. At the same time, their counterparts are getting fed up. The Greek newspaper Kathimerini quoted sources in Brussels as saying that 16 of the other 18 Eurozone countries are in favor of letting Greece leave the Eurozone.

• EUR has remained fairly well supported, but if Greece does exit the Eurozone, I would expect to see it fall much further. JPY and CHF could be two of the major beneficiaries as risk-off would probably grip the currency markets. The high-beta currencies on the other hand should be the ones to suffer as risk aversion rises and commodity prices fall further

• RBA keeps rates unchanged, as expected The statement from the Reserve Bank of Australia (RBA) following the meeting was virtually unchanged from the previous month, including the usual statement on the currency (“Further depreciation seems both likely and necessary, particularly given the significant declines in key commodity prices”) and the outlook for rates (we’ll watch the data). I expect that as commodity prices fall further and the economy struggles, the RBA will have to cut rates further later this year. That's likely to keep the currency under pressure.

• While Greece grabbed all the attention, China was undergoing its own drama While Greece and its €316bn in debt captivated the attention of world markets, over $3tn or almost 10x as much money has evaporated from the Chinese stock market over the last three weeks or so. The Chinese government has announced several measures to shore up prices, including suspending IPOs, central bank support for margin-trade financing, and even stock purchases by state-run financial firms. And that’s only the direct aid – the indirect aid through macro policy changes include cuts in both interest rates and banks’ Reserve Ratio Requirements. Nonetheless the measures provided only a brief fillip to the market before the downturn continued – the Shanghai index is off another 2.6% this morning and Shenzhen down 5.5%. While many people may say the market was a bubble to begin with – 4.4mn new stock trading accounts were opened the week of 29 May, after which the statistics were discontinued – and say “easy come, easy go,” the fact is that a crash like this is likely to dampen consumer confidence, not to mention restricting companies’ ability to reduce leverage by increasing their share capital. Moreover, the decline is being taken as a sign that perhaps the Chinese economy may be in worse shape than people had thought, although historically there is little connection between growth and Chinese stock prices.

•Oil collapses on China, Greek problems, likely Iran deal Oil prices have been creeping lower recently and finally broke out of their recent range on Friday. Apparently investors had been waiting for a breakout one way or the other, because the move triggered a collapse yesterday. Some of the factors behind the collapse include: 1) China’s inability to restore confidence. A weak Chinese economy is bad for all commodity prices -- copper and nickel, the two metals that are most exposed to Chinese demand, down sharply on Friday. 2) Iran talks seem to be progressing, although the negotiators keep missing deadlines. 3) Saudi Arabia cut its selling price to Asia. 4) Although US inventories may have fallen in the latest week, supplies remain high – US production is still at a record level despite the decline in the rig count. The fall in oil prices is more bad news for the commodity currencies – it’s no surprise that NOK and CAD were the two worst-performing G10 currencies, while RUB is also falling again. There’s probably more pain to come for these currencies.

• Today’s highlights: During the European day, investors focus will be again on politics as the EU leaders hold an emergency summit at which Greek PM Tsipras will present the country’s newest proposals. Ahead of the leaders’ summit, Eurozone finance ministers will meet as well but it is not known what they will discuss. The new Greek finance minister, Euclid Tsakalotos, could divulge the new proposals earlier at the finance ministers meeting.

• As for indicators, German industrial production for May are due to be released.

• The UK industrial production for May is also coming out. Following the disappointing manufacturing PMI, expectations for a broad rebound in the nation’s growth in Q2 has lessened a bit. However, the rise in the construction PMI and service-sector PMI eased some of those concerns and kept the rebound scenario alive. The forecast is for the monthly industrial production figure to fall, a turnaround from the previous month, while the annual rate is expected to accelerate. Overall, a strong positive surprise in industrial production is needed to keep the scenario for a rebound in Q2 alive and keep the UK on a recovery path.

• In the US, only data of secondary importance are coming out. The Job Opening and Labor Turnover Survey (JOLTS) report for May is due out and the forecast is for a moderate decline in the number of job openings. This survey will also bring the “quit rate,” a closely watched indicator of how strong the job market is. The US trade balance for May is also coming out.

Currency Titles:

EUR/USD headed towards 1.1000

GBP/JPY recovers but hits resistance at 191.60

AUD/USD stays virtually unchanged following the RBA decision

DAX futures near 10800 again

Gold hits resistance fractionally below 1175

Currencies Image Url:

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Currencies Text:

•EUR/USD recovered to fill most of the opening gap on Monday, but today during the Asian morning it retreated again and looks now to be headed towards the round figure of 1.1000 (S1). I still believe that the short-term outlook is somewhat negative and therefore, I would expect a move below 1.1000 (S1) to initially challenge the 1.0965 (S2) barrier. A break below that hurdle would confirm a forthcoming lower low on the 4-hour chart and is likely to open the way for our next support area of 1.0900 (S3). In the bigger picture, I would maintain my neutral stance. I believe that a move above the psychological zone of 1.1500 is the move that could carry larger bullish implications, while a break below 1.0800 is needed to confirm a forthcoming lower low on the daily chart and perhaps turn the overall bias back to the downside.

•Support: 1.1000 (S1), 1.0965 (S2), 1.0900 (S3)

•Resistance: 1.1115 (R1), 1.1175 (R2), 1.1240 (R3)

•GBP/JPY raced higher on Monday, but the advance was halted by the 191.60 (R1) barrier. In my opinion, the short-term outlook remains negative and I would treat yesterday’s recovery as a corrective move. I would expect sellers to take control around 191.60 (R1) and aim for another test at 189.40 (S1). A break below that support would confirm a forthcoming lower low on the 4-hour chart and perhaps see scope for extensions towards the next support at 187.75 (S2). Today the UK industrial production for May is coming out, and expectations are for a decline. This could encourage sellers to pull the trigger. On the daily chart, the pair has rebounded from near the 50-day moving average yesterday, and still trades well above the 200-day one. This supports that medium-term trend is positive, and as a result, I would treat any short term declines as a corrective move of that uptrend.

•Support: 189.40 (S1), 187.75 (S2), 186.00 (S3)

•Resistance: 191.60 (R1), 193.60 (R2), 196.00 (R3)

•AUD/USD slid on Monday, but the decline was limited slightly above the 0.7460 (S1) support. The RBA today decided to keep its benchmark interest rate unchanged at 2%. The decision was anticipated and AUD/USD traded virtually unchanged afterwards. Taking a look at our short-term oscillators, I see signs that a minor rebound could be in the works. The RSI looks able to exit its oversold territory, while the MACD has bottomed and could cross above its trigger line soon. However, the short-term trend is negative, thus I would expect the bears to eventually take control and drive the battle lower. A break below the 0.7460 (S1) line would confirm a forthcoming lower low on the 4-hour chart and perhaps set the stage for extensions towards the 0.7330 (S2) territory, determined by the low of the 6th of May 2009 and the inside swing highs of the 14th and 15th of April 2009. On the daily chart, the move below the psychological zone of 0.7500 signaled the continuation of the prevailing long-term downtrend, in my opinion.

•Support: 0.7460 (S1), 0.7330 (S2), 0.7250 (S3)

•Resistance: 0.7530 (R1), 0.7585 (R2), 0.7650 (R3)

•DAX futures traded lower after hitting the key resistance line of 11000 (R2) and fell again below 10870 (R1), which happens to be the 38.2% retracement level of the 16th of October – 10th of April advance. However, the index hit support at the 10800 (S1) hurdle and then rebounded somewhat. Although DAX futures may continue to recover, perhaps for another test at the 11000 (R2) area, I would consider the outlook to remain negative. The index is trading below the longer-term uptrend line taken from the low of the 16th of October, and within the downside channel that has been containing the price action since the last days of March. I would expect sellers to eventually take control and aim for another dip below the 10800 (S1) hurdle. Such a move is likely to set the stage for extensions towards the 10600 (S2) territory, marked by the lows of the 9th and 10th of February.

•Support: 10800(S1), 10600 (S2), 10300 (S3)

•Resistance: 10870 (R1) 11000 (R2), 11115 (R3)

•Gold traded a bit lower on Monday morning, but it triggered some buy orders near the 1162 (S1) line and rebounded to hit resistance slightly below the 1175 (R1) barrier. Subsequently, the metal slid again. I still see a cautiously negative near-term outlook, thus I would expect the metal to continue and target again the 1162 (S1) zone. A break below that level could pave the way for the 1157 (S2) obstacle, defined by the low of the 2nd of July. On the daily chart, the move below the 1162 (S1) level on the 2nd of July confirmed a lower low on the daily chart and kept the overall outlook of gold cautiously negative. Our daily oscillators also support the case that the metal could trade lower at least in the near term. The 14-day RSI stands below its 50 line and points down, while the daily MACD lies below both its zero and signal lines.

•Support: 1162 (S1), 1157 (S2), 1153 (S3)

•Resistance: 1170 (R1), 1175 (R2), 1180 (R3)

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IronFx 2015.07.08 05:30 #524

IronFX Daily Commentary | 08/07/15

Language English

• China hurts as well as Greece I’ve been focused on the Greek drama and only yesterday wrote about what’s going on in China. But if you look at the financial world, it seems that the troubles in China are having more of a global impact than the Greek issues. It’s true that virtually all European stock markets were down yesterday, while US stocks were higher – indicating particular pressure on Europe. But there was also a total rout in the commodities market – oil, every metal and most of the soft commodities were lower (orange juice and hogs being the main exceptions – breakfast for some is a little bit more expensive). Meanwhile the commodity currencies are doing the worst among the G10 over the last week, with AUD and NOK down 3.3% in just five days. That’s probably the influence of China. This morning too, all the major Asian stock markets are down, led by Chinese stocks.

• SEK falling too Nestled among the list of losing currencies is one outlier: SEK. It comes right in the middle of what is otherwise a list of commodity currencies. Why would SEK be so weak? My guess is two-fold. On the one hand, the surprise loosening at last week’s Riksbank meeting is still reverberating in the market. Secondly, there is the underlying reason why the Riksbank eased at the last meeting, which is Sweden’s dependency on Europe. About half the country’s exports go to the Eurozone (62% to the EU as a whole) and so it is very much exposed to a weak European economy and weak euro. But does Eurozone weakness explain why SEK should be weaker than the euro itself? Apparently yes. Looking at the correlation between the currencies and the Eurostoxx 50 over the last 10 years, EUR/USD has a correlation of 0.23 while USD/SEK is -0.40 – almost twice as high. EUR/SEK is also higher than EUR/USD at -0.35. SEK also has a higher correlation with oil than EUR does, indicating closer reliance on global growth. With a current account surplus of 6.8% of GDP last year (vs 2.1% for the Eurozone) Sweden is more dependent on foreign trade. In short, while it is not a commodity currency it is highly exposed to the global economy in general and the European economy in particular and thus may be particularly vulnerable when problems in Greece and China threaten simultaneously.

• Meanwhile, the dollar was higher almost across the board even though US interest rates continued to decline and Fed funds rate expectations retreated further. The only exceptions were JPY, which benefitted even more than the dollar from the flight to safety, and RUB – perhaps because of the late bounce in oil?

• Why is the Chinese market crashing? Yesterday someone asked in our morning meeting why the Chinese market is crashing. To me, that’s not the right question. The right question – one to which I have no good answer – is, why was it rising to begin with? Check out the graph to the left, which shows the movement of the market vs the expected earnings of the companies listed on the market. Then look at the graph on the right, which shows the number of new accounts being opened – a series that peaked at 4.2mn in one week in May! As Sir Isaac Newton (who also lost a fortune in the stock market) said, “I can calculate the motion of heavenly bodies, but not the madness of people.”

• Greece gets Sunday deadline It’s rather amazing that the new Greek finance minister failed to present any new proposals at yesterday’s meetings. His counterparts apparently got fed up and set a deadline of Thursday (evening, apparently) to make a new proposal including detailed reform plans. The other EU leaders (including the non-Eurozone members) will then consider it on Sunday. That’s it. “Tonight I have to say loud and clear -- the final deadline ends this week,” said EU President Tusk. “Inability to find an agreement may lead to bankruptcy of Greece and insolvency of its banking system.” What I take this to mean is that if they don’t reach an agreement by Sunday night, the ECB will cut off aid to the Greek banking system, leading to its insolvency and the introduction of a new currency in Greece. EC President Juncker was clear: “we have a Grexit scenario prepared in detail” if they fail to reach a deal.

• This means Greece has to accept the previous EU proposal and probably go a little further to compensate for the deterioration in the economy since then, or else the rest of the group will eject Greece. However, an acceptable compromise still looks difficult. German Chancellor Merkel is still insisting that a debt write-off is out of the question, while a debt write-off remains the Greek’s main goal.

• A Greek government official said the country would present Wednesday the “common ground” for a viable agreement with its creditors, taking into account the result of the referendum, Greek political leaders’ positions and the creditors’ proposals. The government’s proposal is for an “arrangement” until the end of the month in order to prepare a bigger, viable agreement. The official said that the Eurogroup would hold a conference call Wednesday to review the “common ground.” I wonder though whether the rest of the group will really be interested in another short-term fix while the endless negotiations drag on further.

• Would a Greek default be harmless? Not quite! The market is assuming that a Greek default and exit from the Eurozone would be relatively harmless. The international banking system has almost negligible exposure to Greece: most of Greece’s liabilities have been transferred to the public sector, while banks are much better capitalized than they were when the crisis began in 2009. Hence the risk of a systemic banking crisis has almost disappeared. But that doesn’t mean there are no costs – it only means the costs are distributed differently than before. Barclays Bank had a useful table giving the costs for each country of a Greek default (see below). It comes out to 3.4% of Eurozone GDP – a substantial figure, but probably manageable for most countries (although certainly not helpful for European growth prospects).

• Barclays also highlights several things that could go wrong with the Grexit, including:

- The backstops are not entirely infallible The new banking union, with its EUR 55bn resolution fund, is still 95% unfunded and there is still no pan-European deposit insurance. The ECB’s “Outright Monetary Transactions” program, meant to defend countries that are struggling to issue bonds, comes with significant conditionality and in any event has never been tested.

- It establishes a new precedent Greece would establish a new precedent that a country can leave the Eurozone. Would investors extend that possibility to other countries in financial difficulty, such as Portugal and Spain? What about France, whose cumulative deficit is similar to what Greece’s was several years ago?

- The political risks remain unknown The Greek default of 2012 was sold as a one-off event. If it’s followed several years later by another, bigger default, then not only the right-wing parties that have always objected to bail-outs but also even the more moderate parties may question the bail-out mechanisms. The smaller countries too, such as the Baltics, would be asked to bear a larger burden of Greece’s default, relative to their GDP, than Germany or the other wealthy core countries. This might give rise to a considerable backlash against further support for peripheral economies, not to mention the increased mutualization of risk that is essential for the monetary union to develop into fiscal union as well.

• Thomas Piketty on Germany and debt: Economics Prof. Thomas Piketty, author of the best-selling Capital in the Twenty First Century, said, “When I hear the Germans say that they maintain a very moral stance about debt and strongly believe that debts must be repaid, then I think: what a huge joke! Germany is the country that has never repaid its debts. It has no standing to lecture other nations. ... Germany is really the single best example of a country that, throughout its history, has never repaid its external debt. Neither after the First nor the Second World War. However, it has frequently made other nations pay up, such as after the Franco-Prussian War of 1870, when it demanded massive reparations from France and indeed received them. The French state suffered for decades under this debt. The history of public debt is full of irony. It rarely follows our ideas of order and justice.”

• Today’s highlights: Wednesday is rather light on data. There are no major indicators on the agenda during the European day.

• In the UK, Chancellor of the Exchequer George Osborne announces a revised budget following the Conservative Party’s victory in the May election. His previous budget, announced in March, was constrained by having to govern in conjunction with the Liberal Democratic Party. Today’s budget will set out the Tories’ plans for taxes and spending for the rest of this Parliament.

• The highlight of the day will be the minutes of the June FOMC meeting. At this meeting, the most important outcome was the distribution of the “dot plot”. Fed officials lowered their interest rate forecasts, which turned out to be more dovish than expected and were fairly split between one and two hikes this year. This was less clear than the previous FOMC forecast, when the Committee was projecting two rate hikes this year. Fed members also lowered their economic growth projections while raising their forecast for the year-end unemployment rate. We believe that despite the lowered interest rates forecasts and the downward revision of the economic outlook, September remains the most likely lift-off month, assuming that the US economic outlook continues to improve. However the probability has declined somewhat as the Fed is aware of its international responsibilities and is likely to take Greece’s debt crisis into account when formulating its plans.

Currency Titles:

EUR/USD rebounds from 1.0915

EUR/GBP within a sideways range

USD/JPY within a wedge formation

WTI rebounds after hitting support at 50.60

Gold collapses and hits support at 1147

Currencies Image Url:

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Currencies Text:

• EUR/USD continued trading lower yesterday, but hit support at 1.0915 (S1) and rebounded strongly to find resistance at 1.1050 (R1). Subsequently the rate retreated somewhat. On the 4-hour chart, the price structure remains lower peaks and lower troughs, hence I still believe that the short-term outlook is negative. I would expect the forthcoming wave to be negative and aim for another test at the 1.0915 (S1) support zone. In the bigger picture, I would maintain my neutral stance. I believe that a move above the psychological zone of 1.1500 is the move that could carry larger bullish implications, while a break below 1.0800 is needed to confirm a forthcoming lower low on the daily chart and perhaps turn the overall bias back to the downside.

• Support: 1.0915 (S1), 1.0865 (S2), 1.0820 (S3)

• Resistance: 1.1050 (R1), 1.1115 (R2), 1.1175 (R3)

• EUR/GBP raced higher yesterday but remained trapped within the sideways channel between the support barrier of 0.7060 (S1) and the resistance of 0.7135 (R1). Having in mind that the rate has been oscillating between these two hurdles since the 29th of June, I would consider the short-term picture to be neutral for now. Our short-term momentum indicators had been gyrating around their equilibrium lines, but they now stand within their bullish territories. This shows that an upside exit of the range is more likely than a downside. On the daily chart, the pair has been trading in a non-trending mode since mid-March. Therefore, I would consider the overall outlook to be neutral. I would like to see a clear close below the psychological figure of 0.7000 (S3) before I assume the continuation of the prevailing long-term downtrend.

• Support: 0.7060 (S1), 0.7025 (S2), 0.7000 (S3)

• Resistance: 0.7135 (R1), 0.7165 (R2), 0.7200 (R3)

• USD/JPY traded lower yesterday and is once again testing the key support zone of 122.00 (S1). The rate has been trading within a falling wedge formation since the last days of May, and therefore, I would consider the short-term outlook to be neutral. Our short-term oscillator though detects negative momentum, and this supports the possibility that the rate could still fall below 122.00 (S1), perhaps to test the lower line of the wedge, or the 121.45 (S2) support barrier. The RSI turned down after hitting resistance slightly below its 50 line, while the MACD stands below both its zero and signal lines, pointing down. As for the broader trend, I still see a major uptrend. In the absence of any major bearish reversal signals, I would treat the wedge or any possible further short-term declines as a corrective phase of the long-term upside path.

• Support: 122.00 (S1), 121.45 (S2), 120.60 (S3)

• Resistance: 122.65 (R1), 123.20 (R2), 123.75 (R3)

• WTI continued its tumble on Tuesday, but it triggered some buy orders near 50.60 (S1) and rebounded to hit the resistance obstacle of 53.40 (R1). After the downside exit of a sideways range on the 26th of June, WTI has been printing lower peaks and lower troughs and this keeps the short-term outlook negative in my view. However, having in mind that there is positive divergence between our hourly oscillators and the price action, I would be careful that WTI could continue correcting higher. On the daily chart, the break back below the psychological area of 55.00 has turned the longer-term picture negative as well. Our daily oscillators corroborate my stance. The 14-day RSI continued sliding and fell below its 30 line, while the MACD continued lower, below both its signal and zero lines.

• Support: 51.65 (S1), 50.60 (S2), 50.00 (S3)

• Resistance: 53.40 (R1) 54.00 (R2), 54.75 (R3)

• Gold collapsed on Tuesday, but the fall was halted at around 1147 (S2). Then the metal rebounded and is now trading slightly above the 1151 (S1) line. I still see a negative short-term outlook, but our momentum studies give evidence that a corrective bounce could be on the cards before sellers shoot again. The RSI appears ready to exit its oversold territory, while the MACD, although negative, shows signs that it could start topping. In the bigger picture, yesterday’s plunge confirmed a forthcoming lower low on the daily chart and kept the overall outlook bearish as well. Our daily oscillators support the notion. The 14-day RSI continued lower and is now headed towards its 30 line, while the daily MACD lies below both its zero and signal lines, pointing down.

• Support: 1151 (S1), 1147 (S2), 1142 (S3)

• Resistance: 1157 (R1), 1162 (R2), 1170 (R3)

Benchmark Currency Rates:

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IronFx 2015.07.09 05:10 #525

IronFX Daily Commentary | 09/07/15

Language English

• Back in June, the Fed was still on track to tighten later this yearThe minutes of the mid-June FOMC meeting revealed that the Fed was still on track to begin raising interest rates later this year, although there was no urgency and the view was that the risk of tightening too early was greater than the risk of tightening too late. “Most participants judged that the conditions for policy firming had not yet been achieved; a number of them cautioned against a premature decision,” according to the minutes. One member was even ready to hike rates at that meeting. However that was June 17th, before Greece went to the brink, the Shanghai stock market fell 28% and the May payrolls were revised down by 26k. The Committee members may not be thinking the same as they were then. In any event, the minutes were deemed dovish and Fed funds rate expectations fell a further 4-5 bps

• Fed Chair Janet Yellen will be speaking on the economic outlook tomorrow and then will deliver her semi-annual congressional testimony next Wednesday and Thursday. Markets will put a lot more weight on what she has to say now, particularly if Greece is booted out of the euro-zone/EU this weekend. Assuming that the global financial system hasn’t collapsed, I still expect the Fed to start raising rates in September, but the market sees only around a 50% chance of a hike by then.

• Commodity prices rebound as Chinese stocks stabilize There was a total reversal in the commodity markets yesterday, with all the base metals and energy markets and most soft commodities rising. Precious metals were the only losers. Apparently the fact that the Chinese government continues to unveil more and more market support measures has given some people hope. The Shanghai market was up 1.3% this morning and Shenzhen up 2.9%, not much after a near-30% fall, but up is up.

• About 70% of China’s stock market has been frozen, with more than 1,300 companies halting or suspending share trading. It’s notable that most of the suspensions happened at the request of the companies themselves. That’s apparently because many small/mid-cap stocks, especially ones with a limited free float, used their own stock as collateral to obtain bank loans. Following this sharp decline, the banks could now call the loans and start unwinding the collateral. If that happens, it will only add to the unwind of margin lending positions to cause a real collapse in share prices. However, the news that turned things around Thursday is that banking regulators announced that they will allow banks to roll over loans backed by shares and adjust their collateral requirements in order to limit the contagion from falling prices. That has acted as a circuit breaker and helped the market to stabilize, at least temporarily. I still expect that investors will unwind their leveraged bets on the market, but with fewer forced sales, it may be a slower process and the sales may be more easily absorbed.

• China wholesale, retail inflation going in different directions China’s CPI rose 1.4% yoy in June, accelerating from 1.2% in May and faster than expected, but the PPI fell 4.8% yoy, also faster than -4.6% in June. The rise in the CPI hints at some upturn in consumer demand, but it’s questionable how long that will last with so many people getting margin calls.

• Greece: no news is bad news Not much to report about Greece today. That’s not good, because with the deadline so close they should be making more progress. The country has formally requested a three-year loan from the European Stability Mechanism while extending the bank holiday and capital controls. PM Tsipras made a speech in the European Parliament in which he pledged to submit today the “credible” reforms that Greece’s creditors have been pushing for, but gave no details. The proposals are due in Brussels by midnight today. The big question remains: in order to satisfy the creditors, he’ll have to make deeper cuts than in the previous proposal, but that would run counter to the referendum, in which the voters rejected the previous proposal as too harsh. One way out of this conundrum might be if the creditors offered long-term debt restructuring or write-offs, in which case he might decide it’s worth it to accept more short-term pain for longer-term gain.

• Australia employment beats expectations The unemployment rate stayed at 6.0% in June instead of rising to 6.1% as expected, while the number of people getting jobs also beat expectations. AUD moved higher following the report, although I would think right now what’s going on in China is more important for the country than last month’s employment data.

• Today’s highlights: During the European day, German trade surplus for May fell a bit more than expected while the current account surplus was significantly lower.

• From Sweden, the PES unemployment rate for June rose to 3.9% from 3.7%. Even though this is not a major market mover, it could show the direction of the official unemployment rate to be released next week.

• In the UK, the Bank of England holds its July policy meeting. There’s little chance of a change in policy, hence the impact on the market is likely to be minimal, as usual. The minutes of the meeting however should make interesting reading when they are released on 22nd of July, as members who previously voted for a rate hike have adopted a more hawkish tone recently following the upside surprise on April wage data.

• In the US, initial jobless claims for July are due to be released.

• We have several speakers on Thursday’s agenda. ECB Governing Council member Christian Noyer, Minneapolis Fed President Narayana Kocherlakota, Fed Governor Lael Brainard and Kansas Fed President Esther George speak.

Currency Titles:

EUR/USD continues higher

GBP/JPY triggers buy orders at 185.00

AUD/USD trades higher after Australia’s employment data

DAX futures fall below 10800

Gold hits 1147 again and rebounds

Currencies Image Url:

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Currencies Text:

• EUR/USD continued to race higher on Wednesday. It broke above the upper line of the short-term downside channel and is now trading slightly below the 1.1100 (R1) resistance line. A clear move above barrier could confirm a higher peak on the 4-hour chart, and perhaps turn the short-term picture somewhat positive. Something like that is likely to see scope for extensions towards our next resistance area of 1.1175 (R2). Our short-term oscillators now detect upside momentum and increase the likelihood that the rate could trade higher for a while. The RSI emerged above its 50 line, while the MACD stands above its trigger line and is headed towards its zero line. It could obtain a positive sign any time soon. I believe that a move above the psychological zone of 1.1500 is the move that could carry larger bullish implications, while a break below 1.0800 is needed to confirm a forthcoming lower low on the daily chart and perhaps turn the overall bias back to the downside.

• Support: 1.1060 (S1), 1.0970 (S2), 1.0915 (S3)

• Resistance: 1.1100 (R1), 1.1175 (R2), 1.1240 (R3)

• GBP/JPY continued falling on Wednesday, but hit support at the psychological figure of 185.00 (S1) and then rebounded. Although the price structure still suggests a short-term downtrend, taking a look at our short-term oscillators, I would expect the corrective bounce to continue for a while. The RSI has bottomed and looks ready to exit its below-30 territory, while the MACD has bottomed as well and could cross above its trigger line soon. A break above the 187.00 (R1) resistance zone is likely to confirm the continuation of the rebound and perhaps challenge the 188.00 (R2) line. On the daily chart, I see that the 185.00 (S1) psychological zone stands pretty close to the 50% retracement level of the 14th of April – 24th of June rally. As a result, I would still treat the decline started on the 24th of June as a corrective move of the long-term uptrend.

• Support: 185.00 (S1), 184.00 (S2), 182.75 (S3)

• Resistance: 187.00 (R1), 188.00 (R2), 189.40 (R3)

• AUD/USD traded higher during the European morning Thursday on the better-than-expected Australian employment data. The pair rebounded from the support of 0.7390 (S1) on the news to test again the resistance of 0.7475 (R1). Looking at our short-term oscillators I see signs that the rebound could continue. The RSI raced higher after hitting its 30 line, while the MACD has bottomed and moved above its trigger line. What is more, there is positive divergence between the RSI and the price action. A clear break above 0.7475 (R1) will confirm the case and perhaps pave the way for the next resistance at 0.7535 (R2). On the daily chart, the completion of a head and shoulders formation and the move below the psychological zone of 0.7500 signaled the continuation of the prevailing long-term downtrend, in my opinion. As a result, I would treat any further short-term advances as a corrective move of that long-term downside path.

• Support: 0.7390 (S1), 0.7330 (S2), 0.7250 (S3)

• Resistance: 0.7475 (R1), 0.7535 (R2), 0.7585 (R3)

• DAX futures traded lower yesterday, breaking below the psychological zone of 10800 (R1). I would now expect the bears to continue pushing the price lower and to challenge the support area of 10600 (S1), marked by the lows of the 9th and 10th of February. As long as the index is trading below the longer-term uptrend line taken from the low of the 16th of October, and within the downside channel that has been containing the price action since the last days of March, I would consider the outlook to be negative. Our daily oscillators support the notion. The RSI raced lower and looks to be headed towards its 30 line, while the MACD, already negative, has topped and fallen below its signal line.

• Support: 10600 (S1), 10300 (S2), 10150 (S3)

• Resistance: 10900 (R1) 11000 (R2), 11115 (R3)

• Gold traded lower yesterday, but it once again hit the support barrier of 1147 (S2) and then rebounded to find resistance near 1165 (R1). As long as the metal is trading within the short-term downside channel, I still see a negative short-term outlook. A decisive move below the 1155 (S1) support barrier could open the way for another test at the 1147 (S2) hurdle. In the bigger picture, Tuesday’s plunge confirmed a forthcoming lower low on the daily chart and kept the overall outlook bearish as well. Our daily oscillators support the notion. The 14-day RSI continued lower and is now headed towards its 30 line, while the daily MACD lies below both its zero and signal lines, pointing down.

• Support: 1155 (S1), 1147 (S2), 1142 (S3)

• Resistance: 1165 (R1), 1175 (R2), 1180 (R3)

Benchmark Currency Rates:

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Determining Expert Advisor parameters Overview of Copy functions Error fixing and debugging

IronFx 2015.07.10 05:30 #526

IronFX Daily Commentary | 10/07/15

Language English

• Good news all around! Greece seems ready to compromisev The Greek government submitted its reform plan to its creditors Thursday evening. The plan includes a package of reforms and spending cuts, such as pension savings and tax increases, similar to the one presented by creditors last month. Signs are that the proposal goes a long way towards meeting their requirements, which is another way of saying that it goes against the wishes of many members of PM Tsiprias’ SYRIZA coalition. Indeed in some respects it may even go further than the proposal that the Greek nation rejected in the referendum last Sunday. The PM can perhaps sell it nonetheless as the necessary price for a new three-year bailout that would avert the collapse of the Greek banking sector and the dreaded Grexit. The big question is whether it can get any debt write-offs, which most participants now seems to agree is economically necessary although many still think it is politically impossible.

• The reform plan was approved by the Greek cabinet a few hours before the midnight Thursday deadline. Some members of his SYRIZA coalition raised objections that the plan crossed “red lines,” which is a good sign in that it means the Greeks are moving towards the creditors’ positions. It may be difficult for Tsipras to get parliamentary approval for anything that the creditors eventually approve of. He may be able to do it with a different coalition, ie some of his party’s members vote against but the opposition votes for.

• The country’s creditors now have 48 hours to evaluate the plan before turning it over to eurozone finance ministers on Saturday. They will then decide whether it goes far enough to warrant launching negotiations on a third bailout that could amount to more than EUR 70bn. If they decide that it does not go far enough, then the leaders of all the EU will meet on Sunday to prepare for Greece’s exit from the euro. There seems to be some difference of view between France, which is trying to keep Greece in the euro, and Germany, which appears resigned to having the country leave. Nonetheless, it appears to me that with these concessions on the part of Greece, the odds of Grexit have fallen back below 50%. It’s still possible, but as neither side thinks it is desirable (yet), they may still be able to reach a compromise.

• People may think that this whole Greek crisis has been a disaster arising from bad planning in the construction of the euro, but actually this is the way the Eurozone was designed to work. Jean Monnet, the EU's godfather, argued that Europe “will not be built all at once, or as a single whole: it will be built by concrete achievements which first create de facto solidarity.” He said bluntly that “Europe will be forged in crises, and will be the sum of the solutions adopted for those crises.” There’s a valid psychological reason for that: “People only accept change when they are faced with necessity, and only recognize necessity when a crisis is upon them.” That may explain why Greece, after voting against concessions to its creditors, might agree only a week later to accept even harsher conditions.

• Resolution of Greek issue could boost EUR/CHF, EUR/JPY If the Greek issue is resolved without a Grexit, then we could expect the euro to rally further, although perhaps not against the dollar, where Fed rate expectations dominate. On the other hand, the safe-haven CHF and JPY might come off as demand for safe haven investments waned. That suggests investors who expect a successful resolution of the talks this weekend should consider buying EUR/CHF or EUR/JPY. Those who expect yet another impasse however might want to consider selling these pairs, particularly EUR/JPY, since the Japanese authorities are less likely than the Swiss to intervene to prevent the cross from falling.

• China stocks continue to rally Chinese stocks continued yesterday’s rally, rising another 4%-5% this morning. That makes a double-digit rise in the last two days. Almost all Asian stock markets are higher as well. Some fund managers are now arguing that with all the government support measures, the worst is now over and the market is a buy. However, I would point out that 1,422 companies or 49% of the number listed are still suspended from trading down only slightly from 1,439 yesterday. I think the government measures may have acted as a circuit breaker, but I think overall the market remains overvalued on a fundamental basis. With momentum traders now nervous about getting in, I think it’s more likely that it resumes a slow decline.

• Risk-off moves reverse With Greece suddenly making concessions and Chinese stocks rallying, the risk-off move of the last few days reversed. Most commodities gained, especially oil, which got a boost on signs that the Iranian nuclear talks would once again miss their deadline. As a result, the dollar lost most against the commodity currencies and gained only against the two safe-haven currencies, JPY and CHF. Whether you think this trend will continue depends on what you think will happen this weekend and in China in coming weeks.

• Today’s highlights: During the European day, we get French industrial production for June.

• In Norway, CPI for June is coming out. The country’s CPI rate rose to 2.1% yoy in May vs 2.0% yoy in April, close to the central bank’s 2.5% target. Norway’s central Bank nonetheless cut its key policy rate to 1% in June and maintained the likelihood for further cuts, therefore, a decline in the CPI rate could put NOK under renewed selling interest.

• From Canada, we get the unemployment rate for June. The forecast is for the unemployment rate to rise a bit, and the employment to decline from the month before. The rise in the unemployment rate could weaken CAD at the release.

• In the US, we get the wholesale inventories for May.

• As for the speakers, Fed Chair Janet Yellen will discuss the Fed’s economic outlook. This is her first appearance following the June FOMC meeting and just few days ahead of her semi-annual testimony to Congress. We will be looking for hints if the Fed is still on track to raise rates this year.

Currency Titles:

EUR/USD rebounds from around 1.1000 after Tsipras presents a bailout program

GBP/USD rebounds from 1.5330

EUR/JPY could extend higher

Is WTI ready for a short-term reversal?

Gold hits the upper bound of a downside channel

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http://shared.ironfx.com/Morning_Pictures_2015/July2015/July10/GBPUSD_10July2015.PNG

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Currencies Text:

• EUR/USD declined on Thursday but hit support above the upper bound of the short-term downside channel, slightly below the psychological barrier of 1.1000 (S1). Subsequently the rate rebounded and it now seems to be headed towards the 1.1115 (R1) resistance hurdle. The rebound came after Greek PM Tsipras sent a reform plan to the country’s Eurozone creditors three hours before the expiration of a midnight deadline. A clear move above the 1.1115 (R1) resistance could confirm a higher peak on the 4-hour chart and perhaps turn the short-term picture positive. Something like that is likely to see scope for extensions towards our next resistance area of 1.1175 (R2). Our short-term oscillators detect upside momentum and increase the likelihood that the rate could trade higher in the near term. The RSI emerged back above its 50 line, while the MACD, already above its trigger line, has just obtained a positive sign. As for the bigger picture, I maintain my flat stance. I believe that a move above the psychological zone of 1.1500 is the move that could carry larger bullish implications, while a break below 1.0800 is needed to confirm a forthcoming lower low on the daily chart and perhaps turn the overall bias back to the downside.

• Support: 1.1000 (S1), 1.0915 (S2), 1.0650 (S3)

• Resistance: 1.1115 (R1), 1.1175 (R2), 1.1240 (R3)

• GBP/USD rebounded after hitting support at 1.5330 (S1) and today during the early European morning it is headed towards the resistance line of 1.5415 (R1). Although the short-term trend still seems negative, I would expect the forthcoming wave to be positive. A decisive move above 1.5415 (R1) would confirm further rebound and perhaps open the way for the next obstacle at 1.5485 (R2). Our short-term momentum studies corroborate my view and amplify the case that the next leg is likely to be bullish. The RSI exited its below-30 territory and is now pointing up, while the MACD, although negative, has bottomed and crossed above its trigger line. Switching to the daily chart, I still see the possibility for a higher low, and I see that the bulls look willing to push Cable back above the 80-day exponential moving average. As a result, I would consider the overall picture to stay somewhat positive and I would treat the short-term downtrend as a corrective phase, at least for now.

• Support: 1.5330 (S1), 1.5275 (S2), 1.5200 (S3)

• Resistance: 1.5415 (R1), 1.5485 (R2), 1.5540 (R3)

• EUR/JPY traded higher on Thursday, and today during the Asian morning it managed to break above the short-term downtrend line taken from the high of the 22nd of June. A clear break above 135.75 (R1) is likely to shift the short-term outlook somewhat positive and perhaps target initially the 137.00 (R2) obstacle. Shifting my attention to the oscillators, I see that both of them reveal upside momentum and support the notion. The RSI emerged above its 50 line and is pointing up, while the MACD has bottomed and crossed above its trigger line. On the daily chart, I see that the 133.30 (S1) support area stands marginally below the 50% retracement level of the 14th of April – 4th of June advance. I would like to see a daily close below that area before I assume that the medium-term picture has turned negative.

• Support: 133.30 (S1), 131.40 (S2), 130.65 (S3)

• Resistance: 135.75 (R1), 137.00 (R2), 138.00 (R3)

• WTI traded higher after hitting again support near 50.90 (S2). Today, during the early European morning, the price appear ready to challenge the 53.40 (R1) resistance line, where a clear upside break is likely to signal the completion of a minor-term double bottom formation, and perhaps set the stage for extensions towards the psychological zone of 55.00 (R2). The 14-hour RSI rebounded from its 50 line and now lies slightly below 70, while the hourly MACD, already positive, has crossed again above its trigger line and points north. These indicators detect positive momentum and magnify the case that WTI is likely to trade higher for a while. On the daily chart, the medium-term trend remains negative, and as a result I would consider any short-term advances as a corrective phase of that downside path.

• Support: 52.40 (S1), 50.90 (S2), 50.00 (S3)

• Resistance: 53.40 (R1) 55.00 (R2), 56.60 (R3)

• Gold traded higher yesterday, but hit resistance at the upper line of the short-term downside channel, slightly above the 1165 hurdle, and then retreated somewhat. As long as the metal is trading within the short-term downside channel, the short-term outlook remains negative. However, our oscillators give evidence that the metal could trade higher and perhaps break the upper line of the aforementioned channel. The RSI has turned up and looks willing to make another attempt to break above 50, while the MACD stands above its trigger line and is headed towards its zero line. A break above the resistance of 1165 (R1) would confirm the case and perhaps set the stage for extensions towards our next resistance territory of 1175 (R2). Our daily oscillators support the notion as well. The 14-day RSI rebounded from slightly above its 30 line, while the MACD, although negative, has bottomed and could move above its signal line soon.

• Support: 1155 (S1), 1147 (S2), 1142 (S3)

• Resistance: 1165 (R1), 1175 (R2), 1180 (R3)

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Determining Expert Advisor parameters Comparative testing of implementations Error fixing and debugging

IronFx 2015.07.13 05:40 #527

IronFX Daily Commentary | 13/07/15

Language English

• Greece fights against a temporary Grexit plan Eurozone leaders have talked through the night over the Greek crisis, and we still await a final outcome. Only few details of what seems to be a compromise proposal are available, which show two points Greece is resisting. Greece is against the involvement of the IMF in the post 2016 rescue package, even though it is the only institution that recognizes the need of a debt relief. This is probably politically necessary for the Greek PM Tsipras to gain the approval of the reforms by the parliament. The second point Greece resists is the creditors’ demand for transfer of EUR 50bn in valuable state owned assets to an external fund for eventual privatisation to pay down the debt.

• The Greek drama seems to be a matter of trust, as the country’s creditors demand even more hard reforms than before as they don’t trust the Greek government. Greece has to pass key reforms by 15 July in order to rebuild trust, followed by further contentious reforms by 20 July as a precondition for negotiations. Last Thursday, Greece asked for a new three year bailout program of EUR 53.5bn. But in their assessment for Eurozone finance minister, the European Commission, ECB and IMF put the financing needs of Greece up to EUR 82-86 bn, largely because they need to recapitalize Greek banks in the wake of the economic damage and the capital flight in the recent months. However, even if the Eurozone leaders agree on an interim agreement, negotiating a new bailout will be difficult as some national parliaments could still oppose the plan. Finland is almost certain to reject another bailout for Greece, but most importantly, the agreement could be even rejected by the Greek parliament.

• As for the rest of the week, the spotlight will be on Fed Chair Janet Yellen’s twice-a-year report on monetary policy to Congress (the House of Representatives on Wednesday and the Senate on Thursday). We will be looking to see if there are any comments to indicate that the Fed is still on track to raise rates. The minutes of the June FOMC meeting revealed that the Fed was still on track to begin raising interest rates later this year, most likely in September, but more recent international developments in Greece, China, Puerto Rico and even the US labor report for June could mean that it would be wrong to read too much into what officials were thinking in June. Market participants will put a lot more weight on what Yellen has to say now, particularly depending on what happens with “Grexit”.

• On Tuesday, we get the UK CPI for June. In May, the country just barely exited deflation as the headline CPI rate rose to +0.1% yoy. It had been -0.1% yoy in April, the country’s one month in deflation. The figure was in line with market consensus and in line with BoE expectations of a short-lived dip into deflation. Nevertheless, the core rate missed expectations, which suggests that the low inflation is not merely a matter of low oil prices, and prices may not rise even when the effects of low oil prices fade from the data. Therefore, the focus will be again on the core figure and on any signs of positive upside momentum in prices. In Germany, the ZEW survey for July is coming out. The forecast is for another decline in the indices in July, which could add to the evidence that the German economy is losing momentum. However, the impact on the currency was minimal the last few times as the market focus was on the political developments around Greece rather on the economic data. Assuming that Greek crisis ends with a successful agreement, I would expect the market to start paying attention to the economic data again.

• Wednesday is a big day for central banks: In addition to Fed Chair Yellen, we have two central bank meetings Wednesday: Bank of Japan and Bank of Canada. Market expectations are for no change in BoJ policy at this meeting and the focus will most likely be on Governor Haruhiko Kuroda press conference afterwards. After the recent Greek drama, JPY strengthened across the board as it’s considered a safe-haven currency. A default by Greece would probably cause it to appreciate it even more. The BoJ could boost its monetary stimulus to address any surge in JPY in the event of a Grexit. What’s more, Bank officials will know the results of this year’s wage negotiations and the MPC members will update their forecasts again. In case they lower further their forecasts and push back their expectations of reaching the 2% inflation target, this also could cause the Bank to increase its stimulus program. As for the Bank of Canada, the forecast is for the Bank to cut rates by 25 bps. Coming on top of the lower oil prices in the last few weeks and the contraction of GDP in April, the Bank could act again to revive growth.

• On Thursday, the most important event will be the ECB policy meeting. No changes in policy are expected so the focus will be on the press conference after the meeting. Much will depend on what will happen with Greece talks. As ECB President Draghi said “this time it’s really difficult”.

• Finally on Friday, we get the headline and core US CPI rates for June. The headline figure is expected to rise after an unchanged reading in May, while the core rate is forecast to have accelerated to +1.8% yoy from +1.7% yoy. Since Fed Chair Janet Yellen speaks the days before, investors will be probably be watching for how she views the current inflation outlook and the market reaction could be limited on the news, unless we have a strong surprise. We get the June CPI data from Canada as well.

Currency Titles:

EUR/USD gaps down following EU demands on Greece

GBP/USD trades higher and hits resistance near 1.5540

EUR/JPY extends higher

Gold trades in a consolidative manner

WTI hits resistance at 53.80 and then tumbles

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Currencies Text:

• EUR/USD opened the day with a gap down after Eurozone leaders demanded that Greece must pass key reforms within three days before negotiations on aid can begin. Nevertheless, the rate hit support at around 1.1085 (S1) and rebounded to cover the gap. The price structure on the 4-hour chart still suggests a short-term uptrend, but I see the possibility of a possible pullback before the bulls take control again, perhaps for another test at the support of 1.1085 (S1). Our momentum studies support somewhat the case that a retreat could be in the works before the next positive leg. The RSI hit resistance at its 70 line and then turned down, while the MACD shows signs that it could start topping. As for the bigger picture, I maintain my flat stance. I believe that a move above the psychological zone of 1.1500 is the move that could carry larger bullish implications, while a break below 1.0800 is needed to confirm a forthcoming lower low on the daily chart and perhaps turn the overall bias back to the downside.

• Support: 1.1085 (S1), 1.1000 (S2), 1.0915 (S3)

• Resistance: 1.1200 (R1), 1.1240 (R2), 1.1285 (R3)

• GBP/USD traded higher on Friday but the advance was halted by the resistance barrier of 1.5540 (R1). Subsequently, the rate traded in a consolidative manner staying between the aforementioned hurdle and the support line of 1.5465 (S1). The short-term bias looks somewhat positive now, and therefore I would expect a clear move above 1.5540 (R1) to pull the trigger for the next resistance at 1.5630 (R2). The RSI, although it points sideways, still stands above its 50 line, while the MACD lies above its trigger line and appears ready to challenge its zero line soon. These momentum signs support somewhat my view that Cable could still trade higher, at least in the short run. Switching to the daily chart, I see that Cable printed a higher low at around 1.5330 (S3), and that is back above the 80-day exponential moving average. As a result, I would consider the overall picture to stay somewhat positive and I would treat the 18th of June – 8th of July decline as a corrective phase, at least for now.

• Support: 1.5465 (S1), 1.5415 (S2), 1.5330 (S3)

• Resistance: 1.5540 (R1), 1.5630 (R2), 1.5675 (R3)

• EUR/JPY raced higher on Friday to hit resistance fractionally below the 137.35 (R1) line. On Monday, the rate gapped down on Greece’s developments, but found support near 135.50 (S1) and subsequently it rebounded. I would expect the rate to continue to trade higher in the near-term and perhaps challenge once again the 137.35 (R1) barrier. A break above that line is likely to pave the way for the next hurdle at 138.00 (R2). Taking a look at our short-term oscillators though, I see signs that a minor corrective move could be looming before the next positive leg. The RSI declined after it hit resistance slightly below its 70 line, while the MACD shows signs that it could start topping. On the daily chart, I see that the 133.30 (S2) support area stands marginally below the 50% retracement level of the 14th of April – 4th of June advance. I would like to see a daily close below that area before I assume that the medium-term picture has turned negative.

• Support: 135.50 (S1), 133.30 (S2), 131.40 (S3)

• Resistance: 137.35 (R1), 138.00 (R2), 139.15 (R3)

• Gold traded in a consolidative manner on Friday, staying near the upper line of the short-term downside channel, and below the resistance barrier of 1165 (R1). As long as the metal is trading within the short-term downside channel, the near-term outlook remains somewhat negative. The RSI has been oscillating around its 50 line, confirming Friday’s sideways action. The MACD lies above its trigger line and is headed towards its zero line, providing evidence that the metal could trade higher and perhaps break the upper line of the aforementioned channel. Something like that could bring the metal above the 1165 (R1) resistance line and is likely to open the way for the 1175 (R2) resistance barrier. Our daily oscillators support the notion as well. The 14-day RSI rebounded from slightly above its 30 line, while the MACD, although negative, has bottomed and could move above its signal line soon.

• Support: 1155 (S1), 1147 (S2), 1142 (S3)

• Resistance: 1165 (R1), 1175 (R2), 1180 (R3)

• WTI tumbled on Friday after it hit resistance at 53.80 (R3). Currently, the price is trading slightly below the 52.25 (R1) and there is the possibility for further downside extensions, perhaps for another test at the 50.90 (S1) area. Our hourly oscillators corroborate my view. The 14-hour RSI moved lower after finding resistance near its 50 line, while the hourly MACD stands below both its zero and signal lines. On the daily chart, the medium-term trend remains negative, and as a result I would consider any short-term advances as a corrective phase of that downside path. A clear break below 50.90 (S1) would confirm a forthcoming lower low and perhaps open the way for the psychological zone of 50.00 (S2).

• Support: 50.90 (S1), 50.00 (S2), 48.15 (S3)

• Resistance: 52.25 (R1) 53.00 (R2), 53.80 (R3)

Benchmark Currency Rates:

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Determining Expert Advisor parameters Initialization Error fixing and debugging

IronFx 2015.07.14 05:40 #528

IronFX Daily Commentary | 14/07/15

Language English

• Expectations of a Fed rate hike are back in focus The dollar was strong on Monday after Greek debt crisis talks finally ended with an agreement and allowed the market to shift its attention back on Fed rate hike expectations. With Grexit seemingly averted, investors will focus on the semi-annual testimony by Fed Chair Yellen and whether she will give any hints regarding the timing of a rate lift-of. However, the Greek drama has still to enter its final act as the Greek PM must pass a series of unpopular legislations. In addition, he must set EUR 50bn of “valuable” public sector assets aside to be sold off under the supervision of foreign lenders and get the whole package through parliament by Wednesday before talks on a new bailout program begin. But to pass the proposals through the parliament the Greek PM will have to rely on support from pro-European opposition parties as its coalition partner said they will not support the bills. In a sign of how hard it may be to convince his own party to accept the deal, Labor Minister Panos Skourletis said the terms were unviable and would lead to new elections this year.

• Overnight we had a pretty quiet session the FX market with AUD the only exception. The Australian dollar strengthened after the country’s NAB business conditions and business confidence indices both increased in June from the previous month. Nevertheless, given the slowdown in the Chinese economy, Australia’s biggest trading partner, and the lower iron ore prices, I would expect any advances in AUD/USD to be short-lived and the rate could resume its broader downtrend anytime soon.

• Today’s highlights: During the European day, we get the German ZEW survey for July. The survey for June added to the weak data coming out from the country with both indices falling below market expectations. The market consensus is for another decline in the indices, which could add to the evidence that the German economy is losing momentum. However, the impact on the currency was minimal the last few times as the market focus was on the political developments around Greece rather on the economic data. Assuming that the Greek uncertainty has diminished somewhat, I would expect the market to start paying attention to the economic data again.

• In the UK, the House of Commons Treasury Committee questions BoE Governor Mark Carney, Deputy Governor Jon Cunliffe and MPC members David Miles and Ian McCafferty on the Bank's May Inflation Report. The Bank cut its growth forecast for this year and the next one but reiterated that the CPI will return to target in 2 years, thus the testimony is unlikely to reveal anything new for the markets other than the next move in rates is more likely than not to be an increase.

• As for the indicators, the UK CPI for June is coming out. In May, the country just barely exited deflation as the headline CPI rate rose to +0.1% yoy. It had been -0.1% yoy in April, the country’s one month in deflation. The figure was in line with market consensus and in line with BoE expectations of a short-lived dip into deflation. Nevertheless, the core rate missed expectations, which suggests that the low inflation is not merely a matter of low oil prices, and prices may not rise even when the effects of low oil prices fade from the data. Therefore, the focus will be again on the core figure and on any signs of positive upside momentum in prices.

• In the US, retail sales for June are expected to decelerate. May’s figure was strong, while April’s reading, even though revised up a touch, was disappointing. This frustrated investors who have been looking for signs that the soft Q1 patch is coming to an end. Overall, the data for Q2 show a moderate improvement from the previous quarter, which could support growth somewhat. A positive surprise in June’s figure is needed to keep confidence up and USD supported. The NFIB small business optimism for June is expected to have increased a bit. While this indicator is not particularly market-affecting, it’s well worth watching because of the Fed’s emphasis on employment.

Currency Titles:

EUR/USD hits resistance slightly below 1.1200 and then plunges

EUR/GBP falls after a short-term double top

USD/JPY breaks a downtrend line and hits the resistance of 123.75

Gold trades lower after hitting the upper bound of a channel

DAX futures escape from a downside channel

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Currencies Text:

• EUR/USD raced higher on Monday but hit resistance fractionally below the 1.1200 (R2) resistance hurdle. Subsequently the rate plunged, fell below the short-term uptrend line taken from the low of the 7th of July, and found support at 1.0975 (S1). The intraday bias has now turned negative and therefore I would expect a move below 1.0975 (S1) to set the stage for extensions towards our next support hurdle of 1.0915 (S3). Our oscillators detect negative momentum and corroborate my stance that further declines could be on the cards. The MACD, already below its trigger line, has just obtained a negative sign, while the RSI has fallen below its 50 line. Nevertheless, the RSI has now turned somewhat up, giving evidence that a minor bounce could be looming before the bears take in charge again. As for the bigger picture, I maintain my flat stance. I believe that a move above the psychological zone of 1.1500 is the move that could carry larger bullish implications, while a break below 1.0800 is needed to confirm a forthcoming lower low on the daily chart and perhaps turn the overall bias back to the downside.

• Support: 1.0975 (S1), 1.0915 (S2), 1.0870 (S3)

• Resistance: 1.1085 (R1), 1.1200 (R2), 1.1240 (R3)

• EUR/GBP tumbled on Monday, completing a minor-term double top formation. Currently the rate is trading slightly below the support barrier of 0.7110 (R1), and thus I would expect further bearish extensions, perhaps towards the 0.7070 (S1) zone. Looking at our short-term oscillators, I see that the MACD stands below both its zero and signal lines, pointing south, but the RSI, although below 50, has turned somewhat up. This reveals that a minor bounce back above 0.7110 (R1) is possible before sellers seize control again. As for the bigger picture, although the rate printed a lower low on the 29th of June, I see positive divergence between both the daily momentum studies and the price action. As a result, I prefer to stay flat as far as the broader trend is concerned. I would like to see a clear close below the psychological zone of 0.7000 (S3) before I get confident that the prevailing long-term downtrend is back in force.

• Support: 0.7070 (S1), 0.7020 (S2), 0.7000 (S3)

• Resistance: 0.7110 (R1), 0.7150 (R2), 0.7200 (R3)

• USD/JPY traded higher yesterday, breaking above the downtrend line taken from the peak of the 5th of June. Nevertheless the advance was halted by the 123.75 (R1) barrier, marked by the high of the 2nd of July. As long as USD/JPY is trading above the aforementioned downtrend line, and above the short-term uptrend line taken from the low of the 8th of July, I would see a positive near-term picture. I would expect a decisive break above 123.75 (R1) to open the way for the next resistance at 124.45 (R2). Nonetheless, taking a look at our oscillators, I see the likelihood of a pullback before the bulls shoot again. The MACD stands well above both its zero and trigger lines, indicating positive momentum, but the RSI hit resistance near its 70 line and turned down. Switching to the daily chart, I believe that the recent rally is a first sign that the 5th of June – 8th of July decline was just a corrective phase and that the longer-term uptrend is gearing up again.

• Support: 122.90 (S1), 122.00 (S2), 121.55 (S3)

• Resistance: 123.75 (R1), 124.45 (R2), 125.00 (R3)

• Gold traded lower on Monday after hitting resistance at the upper bound of the short-term downside channel, and slightly below the resistance barrier of 1165 (R2). As long as the metal is trading within the short-term downside channel, the near-term outlook remains somewhat negative. I would now expect the negative leg to continue, perhaps for another test at the support barrier of 1147 (S1). A break below that hurdle would confirm a forthcoming lower low and is likely to challenge the 1142 (S2) line, defined by the lows of the 1st of December and 17th of March. Our short-term momentum studies have now turned bearish, supporting the notion. The RSI moved below its 50 line, while the MACD, already negative, has topped and fallen below its trigger line.

• Support: 1147 (S1), 1142 (S2), 1132 (S3)

• Resistance: 1158 (R1), 1165 (R2), 1175 (R3)

• DAX futures continued climbing higher on Monday, and managed to break above the upper bound of the downside channel that had been containing the price action since the last days of March. I would now expect a test at the 11600 (R1) zone, and if the bears are strong enough to overcome it, I believe that we are likely to experience extensions towards 11800 (R2). Our near-term momentum indicators detect strong upside speed and support the case. The RSI raced higher and now looks able to move above its 70 line, while the MACD stands well above both its zero and signal lines, pointing north. Plotting the daily chart, I see that the move out of the channel is a first sign that the 10th of April – 8th of July decline was just a corrective phase of the prior uptrend. What is more, the recent rally also confirmed the positive divergence between our daily oscillators and the price action.

• Support: 11370 (S1), 11250 (S2), 11140 (S3)

• Resistance: 11600 (R1) 11800 (R2), 11900 (R3)

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IronFx 2015.07.15 05:50 #529

IronFX Daily Commentary | 15/07/15

Language English

• US indicators weak, Fed funds expectations retreat, USD falls Yesterday’s US economic news was generally disappointing. Retail sales unexpectedly declined in June and the May increase was revised down. At the same time, small business optimism fell sharply, with nine of the indicator’s ten components falling. “Not a recession signal, but not supportive of an optimistic view of growth in the second half,” according to the National Federation of Independent Business, which compiles the indicator. Fed funds rate expectations for next year and beyond fell 2.5 bps-4.0 bps. Nonetheless, the Atlanta Fed’s GDPNow model forecast for real GDP growth Q2 was 2.4% (qoq SAAR) on July 14, up from 2.3% on July 7.

• As Fed funds expectations retreated, the dollar weakened against most currencies, the notable exceptions being NOK and SEK. NOK weakened sharply on the Iranian nuclear settlement. It recovered somewhat as oil prices rebounded, but still remained below its previous-day levels. The rebound in oil prices was due to expectations that it will take some time for Iranian oil to hit the market (true, but in any event it’s less profitable to buy oil now and hold it for future delivery, which should bring down both spot and future prices.) SEK weakened yesterday on lower-than-expected inflation numbers (more accurately, deeper-than-expected deflation numbers) and while it too recovered somewhat of its losses, failed to recover all.

• The currency’s course today will depend on what Fed Chair Yellen says (see below). The market is still much less hawkish than she is – while she is talking about at least one rate hike this year, the market is expecting that normalization won’t start until next year. Thus there is still plenty of room for market expectations to change and the dollar to strengthen.

• China growth beats expectations, but stock market doesn’t care The several Chinese economic indicators that came out this morning all beat expectations, but the stock market didn’t care – stocks were down anyway. Second-quarter GDP rose 7.0% yoy, the same as in Q1 and higher than the market’s expectation of a slowdown to +6.8% growth. Retail sales, industrial production and fixed asset investment for June were all higher than in May, beating market forecasts. The data suggests that the government’s stimulus measures are starting to have an effect in helping to boost growth. Yet Chinese stocks were down around 2.4% this morning. One possible explanation is the old “good news is bad news” theory – that since the data were good, the government may slow down further stimulus measures. In any case, the contrast highlights the long-standing disconnect between Chinese stocks and economic fundamentals.

• BoJ stands pat as it maintains ridiculous forecast The Bank of Japan kept its quantitative and qualitative easing (QQE) program unchanged Wednesday morning as it maintained its (probably unattainable) inflation forecast. The Bank lowered its FY2016 inflation forecast slightly to 0.7% yoy from 0.8% yoy but kept the FY2017 forecast at 1.9% yoy, thereby allowing it to maintain the fiction that it would achieve its 2% yoy inflation target on schedule. (The current inflation rate according to that measure is 0.1% yoy, just barely above deflation.) Although the recent output and export data has been disappointing, officials expect the relatively tight labor market to push up wages and thereby cause inflation to accelerate. We’ll see what happens in October, when the BoJ updates its twice-yearly Outlook for Economic Activity and Prices, where its formal forecasts appear.

• My view on the Greek settlement I think the Greek settlement was a lose-lose proposition. On the one hand, the attempt to eject a euro member weakens the strength of monetary union by turning it back into just another version of the Exchange Rate Mechanism, with all the weaknesses of that system. Moreover, Greece was humiliated. On the other hand, as Gideon Rachman so perceptively pointed out in the FT, once again Germany went to the last minute of negotiations and folded – it may have added a bunch of restrictions and humiliations, but at the end of the day it did agree to bail out Greece. In that respect, this round of negotiations went exactly like all the previous rounds, and so perhaps the market was correct in pricing in little risk of a Grexit.

• Still don’t believe that things are going according to plan? On Friday I mentioned that this kind of crisis was the way the Eurozone was expected to work. Jean Monnet, the EU's godfather, argued that “Europe will be forged in crises, and will be the sum of the solutions adopted for those crises.” He explained why: “People only accept change when they are faced with necessity, and only recognize necessity when a crisis is upon them.” This idea was corroborated by former US Treasury Secretary Tim Geithner, who related the following story in his book Stress Test:

• A few days later , I flew to meet Wolfgang Schäuble for lunch during his vacation…He told me there were many in Europe who still thought kicking the Greeks out of the eurozone was a plausible — even desirable — strategy. The idea was that with Greece out, Germany would be more likely to provide the financial support the eurozone needed because the German people would no longer perceive aid to Europe as a bailout for the Greeks. At the same time, a Grexit would be traumatic enough that it would help scare the rest of Europe into giving up more sovereignty to a stronger banking and fiscal union. The argument was that letting Greece burn would make it easier to build a stronger Europe with a more credible firewall. (emphasis added)

• Everyone knows about Greece I just returned from a trip to London. When going through Immigration, the immigration officer asked me my occupation. “Economist,” I said. “And what are you doing in the UK?” she asked. “I’m going to appear on Bloomberg TV Monday morning,” I replied. She laughed and said, “I’ll bet you’re going to talk about Greece!” You know a financial story is big when people who have no relation to the financial world know all about it.

• Lots more negotiations to come Note by the way that Greece’s economy minister said the €50bn in assets that Greece is supposed to pledge to privatize “obviously do not exist,” and added, “I don’t think we will proceed with real privatizations.” Moreover, the IMF has said that it might not be able to participate in the new bailout program if European creditors don’t offer Athens substantial debt relief, because the organization’s rules forbid it from participating in a bailout if the country’s debt is deemed unsustainable and there’s no prospect of it returning to the bond market for funding. But Germany has steadfastly opposed further debt relief, so this would be politically difficult if not impossible. Somehow I think we haven’t heard the last of Greece.

• Today’s highlights: The highlight today will be the Fed Chair Janet Yellen’s twice-a-year report on monetary policy to Congress (the House of Representatives on Wednesday and the Senate on Thursday). We will be looking for confirmation that the Fed is still on track to raise rates later this year. Yellen said on Friday that “(b)ased on my outlook, I expect that it will be appropriate at some point later this year to take the first step to raise the federal funds rate and thus begin normalizing monetary policy.” But one hike or two? And how does the resolution of the Greek crisis (for now) affect her thinking? What’s her view on inflation? While the annual rate of core Personal Consumption Expenditure (PCE) inflation, the Fed’s preferred measure, has slowed, the month-on-month change has accelerated and has averaged 1.7% annualized over the last three months – near the Fed’s 2% target. What’s her view on this? Stay tuned!

• The Bank of Canada meets today. The forecast is for the Bank to cut rates by 25 bps. Coming on top of the lower oil prices in the last few weeks and the contraction of GDP in April, the Bank could act again to revive growth. The Bank will also release its monetary policy report with updated economic forecasts and Governor Poloz will hold a press conference following the rate decision. Even if the Bank remains on hold, given that the outlook of the Canadian economy has deteriorated somewhat, CAD is likely to come under renewed selling pressure, in our view.

• In the UK, we get the unemployment rate for May. Another decline in the rate and acceleration in the growth of average weekly earnings, could bring the BoE’s hawks out in force and strengthen GBP. With UK inflation rate back to zero, market participants will be closely watching the labor data for signs of demand-pull inflation. Coming on top of BoE Gov. Carney’s comments, the time for a rate increase is moving closer. We expect GBP to remain well supported.

• In Sweden, Riksbank releases the minutes of its July policy meeting. At this meeting, the Bank surprised the markets and cut its key rate further into negative territory and expanded its bond purchases program. Given that the country’s inflation rate dipped back into deflation on Tuesday, thinking retrospectively the decision seems correct.

• In the US, industrial production for June is expected to rebound from the month before, while the Empire State manufacturing index is expected to show that business conditions for NY manufacturers have improved in July. Although a rebound in industrial production could prove USD-positive, investors are likely to put more attention on Yellen’s testimony.

Currency Titles:

EUR/USD hits resistance at 1.1085 and then slides

AUD/USD rebounds after China’s GDP data

GBP/JPY continued higher ahead of the UK employment data

WTI trades in a sideways range

Gold trades in a consolidative manner below 1158

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Currencies Text:

• EUR/USD traded higher during the European morning Tuesday, but the advance was halted by the 1.1085 (R1) territory and then the rate tumbled again. This printed a lower high. Combined with the fact that the rate remains below the short-term uptrend line taken from the low of the 7th of July, I consider the short-term outlook to stay negative. A decisive move below 1.0975 (S1) is likely to set the stage for extensions towards our next support hurdle of 1.0915 (S2). In Yellen’s testimony today, market participants would be looking to see if the Fed is still on track to raise rates and if she considers September still the most likely month to do so. If so, this could encourage the bears to push the rate below 1.0975 (S1). Our oscillators continue to show negative momentum and support the case that further declines could be looming. The MACD stands below both its zero and signal lines, while the RSI declined after hitting resistance at its 50 line. As for the bigger picture, I maintain my flat stance. I believe that a move above the psychological zone of 1.1500 is the move that could carry larger bullish implications, while a break below 1.0800 is needed to confirm a forthcoming lower low on the daily chart and perhaps turn the overall bias back to the downside.

• Support: 1.0975 (S1), 1.0915 (S2), 1.0870 (S3)

• Resistance: 1.1085 (R1), 1.1200 (R2), 1.1240 (R3)

• AUD/USD traded higher during the Asian morning Wednesday following the better-than-expected Q2 GDP data from China. Looking at our short-term oscillators I see signs that the rebound could continue, perhaps even above the psychological zone of 0.7500 (R1). The RSI emerged above its 50 line, while the MACD stands above its trigger line and is headed towards its zero line. What is more, there is positive divergence between both these indicators and the price action. A clear move above the 0.7500 (R1) barrier could initially target the next resistance at 0.7535 (R2). Another break above that could pave the way for the 0.7585 (R3) hurdle. On the daily chart, the completion of a head and shoulders formation and the move below the psychological zone of 0.7500 signaled the continuation of the prevailing long-term downtrend, in my opinion. As a result, I would treat any further short-term advances as a corrective move of that long-term downside path.

• Support: 0.7435 (S1), 0.7380 (S2), 0.7330 (S3)

• Resistance: 0.7500 (R1), 0.7535 (R2), 0.7585 (R3)

• GBP/JPY continued to trade higher on Tuesday and now is headed towards the 193.60 (R1) resistance obstacle. As long as the pair is trading above the prior downtrend line and above the short-term uptrend line, I would consider the short-term picture to stay positive. A decisive break above the 193.60 (R1) line is likely to set the stage for extensions towards our next hurdle of 194.60 (R2). Today we get the UK employment data for May and expectations are for average weekly earnings to have accelerated. That could be the trigger for the aforementioned break. Our short-term oscillators detect strong upside speed and support the notion as well. The RSI continued higher and just poked its nose above its 70 line, while the MACD stands above both its zero and signal lines, pointing north. On the daily chart, I see that the 185.00 psychological zone stands pretty close to the 50% retracement level of the 14th of April – 24th of June rally. As a result, I would treat the 24th of June – 8th of July decline as a corrective phase, and I believe that the longer-term uptrend is gearing up again.

• Support: 192.00 (S1), 190.70 (S2), 189.25 (S3)

• Resistance: 193.60 (R1), 194.60 (R2), 195.80 (R3)

• WTI traded higher yesterday, but the advance stayed limited below the 53.80 (R1) resistance line. WTI has been oscillating between that barrier and the support hurdle of 50.90 (S3) since the 6th of July. As a result, I would consider the short-term picture to be neutral. Taking a look at our hourly oscillators, I see that the 14-hour RSI hit resistance at its 70 line and turned down, while the hourly MACD, although positive, has topped and could fall below its trigger line soon. These signs support the idea that the next leg is likely to be negative and that the price will stay within the range. Only a decisive move above 53.80 (R1) could signal the upside exit from the range and could initially target the 54.70 (R2) barrier. On the daily chart, the medium-term trend remains negative, and as a result I would consider any short-term advances as a corrective phase of that downside path. A clear break below 50.90 (S1) would confirm a forthcoming lower low and perhaps open the way for the psychological zone of 50.00 (S2).

• Support: 52.65 (S1), 52.00 (S2), 50.90 (S3)

• Resistance: 53.80 (R1), 54.70 (R2), 55.20 (R3)

• Gold traded in a consolidative manner yesterday, staying below the resistance line of 1158 (R1) and within the short-term downside channel that had been containing the price action since the 18th of June. As long as the metal is trading within that channel, the near-term outlook remains somewhat negative in my view. I would expect sellers to eventually push the rate for another test at the support barrier of 1147 (S1). A break below that hurdle would confirm a forthcoming lower low and is likely to challenge the 1142 (S2) line, defined by the lows of the 1st of December and 17th of March. Our short-term momentum studies stand near their equilibrium lines and point sideways, confirming yesterday’s trendless mode. Nevertheless, both these indicators are still within their bearish territories, supporting somewhat that the yellow metal is possible to trade lower in the near term.

• Support: 1147 (S1), 1142 (S2), 1132 (S3)

• Resistance: 1158 (R1), 1165 (R2), 1175 (R3)

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Determining Expert Advisor parameters Error fixing and debugging Comparative testing of implementations

IronFx 2015.07.16 07:30 #530

IronFX Daily Commentary | 16/07/15

Language English

Currency Titles:

EUR/USD breaks below 1.0975 and hits 1.0915

GBP/USD hits resistance at 1.5675 and pulls back

EUR/JPY appears ready to challenge 135.00

DAX futures are headed towards 11600

Gold breaks below 1150

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Currencies Text:

EUR/USD tumbled on Wednesday, fell below the support (now turned into resistance) of 1.0975 (R1), and reached our next hurdle of 1.0915 (S1). This confirmed a forthcoming lower low on the 4-hour chart and kept the short-term picture negative. A decisive move below 1.0915 (S1) is likely to extend the negative wave and perhaps pave the way for our next support at 1.0870 (S2). Our momentum studies detect negative momentum and support the notion. The RSI hit resistance marginally below its 50 line and raced lower, while the MACD stands below both its zero and signal lines, pointing down. However, I believe that much of today’s movement will depend on the press conference following the ECB policy meeting. The market will focus on how the ECB may respond after Greece accepted the reforms needed to get a third bailout package. As for the bigger picture, I maintain my flat stance. I believe that a move above the psychological zone of 1.1500 is the move that could carry larger bullish implications, while a break below 1.0800 is needed to confirm a forthcoming lower low on the daily chart and perhaps turn the overall bias back to the downside.

Support: 1.0915 (S1), 1.0870 (S2), 1.0820 (S3)

Resistance: 1.0975 (R1), 1.1035 (R2), 1.1085 (R3)

GBP/USD traded lower on Wednesday after the UK unemployment rate rose in May, and after average weekly earnings for the same month accelerated less than expected. The rate hit resistance at 1.5675 (R1) and after the releases, and tumbled to find support slightly below the 1.5600 (S1) line. Subsequently, it recovered some of its losses. As long as Cable is trading above the downtrend line taken from the peak of the 22nd of June and above the uptrend line drawn from the 9th of July, I would consider the short-term path to be positive. A clear break above the 1.5675 (R1) barrier could open the way for our next resistance hurdle of 1.5735 (R2). Nevertheless, taking a look at our oscillators, I see signs that another pullback could be on the cards before the bulls decide to pull the trigger again. The RSI has turned down after hitting resistance near its 70 line, while the MACD has topped and could fall below its trigger line soon. Switching to the daily chart, I see that Cable printed a higher low at around 1.5330, and that is back above the 80-day exponential moving average. As a result, I would consider the overall picture to stay somewhat positive and I would treat the 18th of June – 8th of July decline as a corrective phase.

Support: 1.5600 (S1), 1.5550 (S2), 1.5465 (S3)

Resistance: 1.5675 (R1), 1.5735 (R2), 1.5775 (R3)

EUR/JPY slid yesterday after hitting resistance at the 136.35 (R1) barrier. The rate is now headed towards the psychological zone of 135.00 (S1), where a decisive dip is likely to pull the trigger for the well-tested support area of 133.30 (S2). Shifting my attention to our momentum indicators, I see that the RSI fell below its 50 line and points down, while the MACD lies below its trigger line and is headed towards its zero line. These momentum signs corroborate my view and amplify the case for further declines, at least in the short run. On the daily chart, I see that the 133.30 (S2) support area stands marginally below the 50% retracement level of the 14th of April – 4th of June advance. As a result, although I expect some further short-term declines, I would like to see a daily close below that area before I assume that the medium-term picture has turned negative as well.

Support: 135.50 (S1), 133.30 (S2), 131.40 (S3)

Resistance: 137.35 (R1), 138.00 (R2), 139.15 (R3)

DAX futures traded somewhat higher yesterday, getting closer to our resistance zone of 11600 (R1). As long as the index is trading above the upper bound of the downside channel that had been containing the price action from the last days of March until the 10th of July, I would consider the outlook to stay somewhat positive. If the bears are strong enough to overcome the 11600 (R1) zone, I believe that we are likely to experience extensions towards 11800 (R2). Nevertheless, looking at our near-term momentum studies, I see signs that a corrective pullback could be looming before buyers take in change again. The RSI hit resistance near its 70 line and turned down, while the MACD has topped and could fall below its trigger line soon. Plotting the daily chart, I see that the move out of the channel on Monday is a first sign that the 10th of April – 8th of July decline was just a corrective phase of the prior uptrend. What is more, the recent rally also confirmed the positive divergence between our daily oscillators and the price action.

Support: 11370 (S1), 11250 (S2), 11140 (S3)

Resistance: 11600 (R1) 11800 (R2), 11900 (R3)

Gold slid on Wednesday, falling below the 1150 (R1) barrier and hitting support fractionally above our support line of 1142 (S1). As long as the metal is trading within the short-term downside channel that had been containing the price action since the 18th of June, I would consider the short-term outlook to remain negative. I would expect a break below the 1142 (S1) barrier to pull the trigger for our next support area of 1132 (S2), defined by the low of the 7th of November 2014. The RSI, already within its bearish territory, continued lower and now lies near its 30 line, while the MACD, already negative, has topped and fallen below its signal line. On the daily chart, the tumble towards 1142 (S1) confirmed another forthcoming lower low and kept the overall picture of the yellow metal somewhat negative.

Support: 1142 (S1), 1132 (S2), 1120 (S3)

Resistance: 1150 (R1), 1158 (R2), 1165 (R3)

Benchmark Currency Rates:

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Market Summary Url:

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currency tags:

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