IronFX - Market Analysis - page 26
You are missing trading opportunities:
- Free trading apps
- Over 8,000 signals for copying
- Economic news for exploring financial markets
Registration
Log in
You agree to website policy and terms of use
If you do not have an account, please register
Market Analysis 26/02/2014
Daily Commentary26.02.2014, Time of writing: 03:30 GMT
The Big Picture ECB seems likely to keep policy unchanged It’s becoming more and more likely that the ECB will keep its policy unchanged at next week’s meeting. Yesterday the EU Commission lowered their inflation forecasts, cutting their forecast for this year to 1.0% from 1.4% and for next year to 1.3% from 1.5%. This is pretty much in line with the private-sector consensus, which is 1.0% and 1.4% (the consensus for 2016 is 1.8%). While that’s below the ECB’s 2% target, it’s still above the current rate, meaning that they expect inflation to move back up towards the target, rather than falling into deflation. This would corroborate recent statements by ECB members. Council member Bostjan Jazbec Monday said “I don’t see any deflation risk,” while yesterday, Ewald Nowotny was quoted as saying “Overall we see ourselves confronted with inflation levels clearly under 2% for the euro zone perhaps until 2016…so we are in a low price environment but certainly not in deflation.” He said that the deflation occurring in some of the peripheral countries is “part of a necessary adjustment process” presumably to enable those countries to become more competitive, the implication of which is that this should not be a matter of concern for the ECB. And a third Council member, Gaston Reinesch, said yesterday that “I don’t see any deflation risk at this point in time.” So unless the ECB’s economists have a distinctly different view of the world, it’s unlikely that they will come up with a scenario next week that would require the ECB to loosen policy further.
Meanwhile, the US indicators out yesterday were, generally speaking, worse than expected. The house price indicators were OK -- FHFA house price index for December came out better than expected, while the S&P/Case-Shiller was in line with expectations – but the Conference Board consumer confidence and the Richmond Fed manufacturing survey for February were two more indicators on the list of disappointing data. US bond yields remain low and the Citi US economic surprise index has now fallen for eight days in a row, moving from positive territory (indicators surprising on the upside) to negative territory (indicators disappointing), although oddly enough, that should mean a stronger dollar – believe it or not, EUR/USD has tended to move in line with this indicator, that is, the dollar has tended to strengthen vs EUR when US indicators have missed estimates and weaken when indicators beat estimates. (Note: the Eurozone economic indicator surprise index hasn’t been much better, falling six out of seven days, but EUR/USD seems to be more closely correlated with US economic surprises than European economic surprises).
Yet despite all this, EUR/USD is still trading within its recent range. Since Feb. 13th it’s been between 1.3650 and 1.3750, more or less (high was 1.3773). This suggests to me that the market is looking for new themes to establish new ranges. My assumption is that the new theme will come when the weather warms up and US indicators become more reliable. Then, assuming that they start improving, we should get a USD rally. As for the recent change in the relation between the US economic surprise index and EUR/USD, it could mean that the FX market is entering a new regime – that the relation between risk aversion and USD is changing.
Gold continued to rise. Apparently it is benefitting from Bitcoin’s problems.
The main event during the European day today will be the second estimate of the UK GDP for Q4. The initial estimate was +0.7% qoq. In Germany, the GfK consumer confidence for March is expected to remain unchanged at 8.2. In Sweden, retail sales are estimated to have risen +0.5% mom in January vs -0.8% mom in December and the Riksbank publishes the minutes from its latest monetary policy meeting. From Norway, the AKU unemployment rate for December is forecast to have remained at 3.5%.
In US, new home sales are forecast to have fallen 3.4% mom in January, a slower rate of decrease from -7.0% mom in December.
We have four speakers scheduled for Wednesday. ECB Governing Council member Carlos Costa will deliver two speeches during the day, while Bank of England Monetary Policy Committee member Ben Broadbent and ECB Executive Board member Yves Mersch will also speak. In the US, Boston Fed President Eric Rosengren will speak on the economic outlook.
The Market EUR/USD
• EUR/USD failed for a third consecutive time to overcome the 1.3770 (R1) obstacle and moved lower after finding resistance near that bar. A break above that high is now needed to signal the continuation of the short-term uptrend. On the other hand, a clear dip below the 1.3700 (S1) support could trigger further bearish extensions. I maintain my neutral view on the currency pair since the price failed once again to overcome the aforementioned high but remains well supported by the 50-period moving average.
• Support: 1.3700 (S1), 1.3650 (S2), 1.3560 (S3).
• Resistance: 1.3770(R1), 1.3810 (R2), 1.3893 (R3).
USD/JPY
• USD/JPY moved lower and rebounded once again from the lower boundary of the ascending triangle. The inability of the longs to overcome the upper boundary of the triangle at 102.70 (R1) confirms its validity as a resistance and raises concerns on whether the exit from the pattern will be to the upside. Nonetheless, a clear break of that resistance may signal that the 30th Dec. - 4th Feb. decline has bottomed and will probably open the way towards the 161.8% extension level of the triangle’s width near the resistance of 103.90 (R3). On the downside, a dip below the lower boundary of the formation and the support of 101.85 (S1) may indicate that the formation was just a pause in the prior short-term downtrend, which has resumed.
• Support: 101.85 (S1), 101.40 (S2), 100.80 (S3)
• Resistance: 102.70 (R1), 103.45 (R2), 103.90 (R3)
EUR/GBP
• EUR/GBP rebounded from the lower boundary of the upward sloping channel and moved slightly higher. I still expect the rate to overcome the 0.8260 (R1) barrier, which coincides with the 200-period moving average. However, the upside leg may be limited near the longer-term downtrend line. As long as the trend-line and the hurdle at 0.8335 (R2) are not broken, I would consider any further short-term advance as a corrective wave of the longer-term downward path.
• Support: 0.8215 (S1), 0.8167 (S2), 0.8080 (S3).
• Resistance: 0.8260 (R1), 0.8335 (R2), 0.8390 (R3).
Gold
• Gold moved higher on Tuesday after successfully testing the 1332 (S1) barrier, as a support this time. I would expect the yellow metal to continue its upward path and challenge the resistance at 1360 (R1). The price is trading above both the moving averages and above the blue support line, keeping the outlook to the upside. On the daily chart, the metal remains above the 200-day moving average, increasing the probabilities for further advance.
• Support: 1332 (S1), 1310 (S2), 1290 (S3).
• Resistance: 1360 (R1), 1376 (R2), 1395 (R3)
Oil
• WTI moved lower but the decline was halted by the blue uptrend line. The price rebounded at the trend line, confirming its validity. A clear violation of the 103.25 (R1) would signal the continuation of the uptrend and may open the way towards the next hurdle at 104.35 (R2). As long as the oil is trading above the blue support line, I consider the short-term upward path to be intact. Only a clear dip below the support level of 100.75 (S1) would be a reason to reconsider our analysis.
• Support: 100.75 (S1), 98.85 (S2), 96.50 (S3).
• Resistance: 103.25 (R1), 104.35 (R2), 108.15 (R3).
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
click here to read more
click here to read less
EUR
More...
Market Analysis 27/02/2014
Daily Commentary27.02.2014, Time of writing: 03:30 GMT
The Big Picture EM fears return EM fears have come back to dominate the market again. The crisis in Ukraine continues, with the situation made worse yesterday after Russia’s President Vladimir Putin ordered a surprise military exercises of ground and air forces near Ukraine. Russia’s assertions that the drill has nothing to do with the situation in the Ukraine did not convince many people. The situation discouraged investors about Europe and encouraged a flight-to safety into USD, something that was also seen by the decline in all European stock markets while the S&P 500 hit a record high during the day (although it closed off the highs). The problems in the Ukraine added to those in Turkey, where a purported recording of PM Erdogan supposedly discussing how to conceal illicit funds has roiled the markets. Furthermore, South African Finance Minister Gordhan and Reserve Bank Governor Marcus both called the rand a “shock absorber” and spoke enthusiastically about how the weaker currency improved the country’s competitiveness, which had the predictable impact on the currency (ZAR weakened by about 1% vs USD). Overall the dollar gained against almost all the EM currencies that we track. I would expect these gains to continue for a few days at least as the situation in Ukraine seems to be quite volatile. However I don’t expect a major collapse by any means. Note that EM stocks actually rose yesterday and today, indicating that investors are not fleeing the asset class as a whole by any means.
The dollar also gained against all its G10 counterparts. It was notable that the flight to safety did not include the yen or Swiss franc, which usually rise under such circumstances. CHF has only limited room to appreciate against USD when USD is appreciating against EUR, because that would mean CHF appreciating against EUR, but the Swiss National Bank is actively intervening to prevent EUR/CHF from approaching its 1.20 floor. On the other hand, USD/JPY was stable on reports that some Japanese manufacturers are going to pay higher bonuses this year, which might increase inflation. I could see USD/JPY moving lower as the EM tensions increase. AUD was the biggest loser overnight after private capital expenditure in Q4 came in at -5.2% qoq, far below market estimates of -1.3% qoq and the worst in four years. My view remains that AUD is headed lower.
Sentiment towards USD was also boosted by much better than expected new home sales for January. However that didn’t prevent bond yields from declining and the implied interest rate on 2016 Fed Funds futures from falling some 4 bps, which shows the housing data didn’t convince anyone that the economy was improving faster than they had thought.
The main event of the day will be the rescheduled testimony of Federal Reserve Chair Janet Yellen before the Senate Banking Committee. We do not expect much of a reaction to her comments, since it is expected to repeat what she said before the House Financial Services Committee. However there could be a knee-jerk reaction to buy dollars as she reiterates her intention to press on with tapering off the Fed’s bond purchase.
As for the indicators, we get the preliminary German CPI for February, ahead of Friday’s Eurozone CPI data. Germany’s inflation is forecast to have slowed to +1.1% yoy from +1.2% in January. That could give rise to speculation that the ECB might ease at next week’s meeting and could be EUR-negative, although I don’t expect them to change policy. From Germany we also have the unemployment rate for the same month, which is expected to have remained at 6.8%. From Eurozone as a whole, the M3 annual growth is expected to have accelerated to +1.1% yoy in January from +1.0% yoy in December. Nonetheless, the 3-month moving average is forecast to have slowed to +1.2% from +1.3%. Attention will also focus on lending, which continues to contract. Private sector credit has shrunk yoy for 21 consecutive months and recently has started to accelerate; it was down 2.4% yoy in December, compared with -1.6% yoy in November. Eurozone’s final consumer confidence for February is also coming out.
In US, durable goods orders for January are due out. Both the headline and the excluding transportation figures are expected to have fallen but at a slower pace than in December, which could be encouraging. We also get the initial jobless claims for the week ended on Feb 22.
Canada’s current account deficit for Q4 is expected to have widened to CAD 17.0bn from CAD 15.5bn.
Besides Yellen’s testimony, there are a large number of ECB members and other officials speaking at a Bundesbank Symposium on Financial Stability and the Role of Central Banks, including ECB President Draghi and Dallas Federal President Richard Fisher. ECB Governing Council member Erkki Liikanen speaks on the balance between markets and regulation. Finally, Atlanta Fed President Dennis Lockhart and Kansas City Fed President Esther George will speak together at the Atlanta Fed's 2014 Banking Outlook Conference.
The Market EUR/USD
• EUR/USD fell sharply on Wednesday, violating the 1.3700 barrier. The decline was halted by the 200-period moving average and the 38.2% Fibonacci retracement level of the 6th – 19th February advance, slightly above the support of 1.3650 (S1). A clear dip below that strong support zone would have larger bearish implications and may pave the way towards the 1.3560 (S2) hurdle. Both the RSI and the MACD are following downward paths, while the MACD also lies below both its trigger and zero lines, confirming the recent negative momentum of the currency pair.
• Support: 1.3650 (S1), 1.3560 (S2), 1.3480 (S3).
• Resistance: 1.3700(R1), 1.3770 (R2), 1.3810 (R3).
EUR/JPY
• EUR/JPY moved slightly lower, remaining between the key resistance of 141.25 (R1) and the support of 139.15 (S1). I consider the short-term outlook to be neutral at the moment, since only a break above the 141.25 (R1) resistance would confirm that the decline that started from the 27th of December has bottomed. The negative divergence between our momentum studies and the price action remains in effect and a clear dip below the 139.15 (S1) support will flip the bias back to the downside.
• Support: 139.15 (S1), 137.55 (S2), 136.20 (S3)
• Resistance: 141.25 (R1), 142.85 (R2), 144.35 (R3).
GBP/USD
• GBP/USD once again hit the resistance at 1.6725 (R1) and moved lower to settle near the levels we left it. The intraday bias remains neutral for now, since above 1.6725 (R1) may target once again the 1.6820 (R2) high, while a dip below the 38.2% retracement level of the 5th -17th Feb. rally, at 1.6600 (S1), may extend the correcting wave. Both momentum studies lie near their neutral levels, confirming the non-trending phase of cable. On the daily chart, the longer-term uptrend has resumed after overcoming January’s highs.
• Support: 1.6600 (S1), 1.6520 (S2), 1.6465 (S3).
• Resistance: 1.6725 (R1), 1.6820 (R2), 1.6885 (R3).
Gold
• Gold met resistance at 1345 (R1) and fell below the blue support line to find support at the 50-period moving average. Considering negative divergence between our oscillators and the price action, I would expect the precious metal to extend the corrective wave. On the daily chart Tuesday’s and Wednesday’s candles formed a bearish engulfing pattern, enhancing the probabilities for further retracement.
• Support: 1310 (S1), 1290 (S2), 1270 (S3).
• Resistance: 1345 (R1), 1360 (R2), 1376 (R3)
Oil
• WTI moved slightly higher, remaining below the 103.25 (R1) resistance level. A clear upward violation of that barrier would signal the continuation of the uptrend and may pave the way towards the next hurdle at 104.35 (R2). As long as the oil is trading above the blue support line, I consider the short-term upward path to be intact. Only a clear fall below the support level of 100.75 (S1) would be a reason to reconsider our analysis.
• Support: 100.75 (S1), 98.85 (S2), 96.50 (S3).
• Resistance: 103.25 (R1), 104.35 (R2), 108.15 (R3).
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
click here to read more
click here to read less
EUR
More...
Market Analysis 28/02/2014
Daily Commentary 28.02.2014, Time of writing: 03:30 GMT
The Big Picture Risk aversion comes back via China News that the IMF was on its way to Ukraine with a USD 15bn rescue package calmed the markets during the European and US days yesterday and brought back some risk-seeking sentiment, aided by a better-than-expected US durable goods orders figure and soothing words from Fed Chair Janet Yellen. But overnight a record decline in the renminbi turned sentiment around again and risk aversion came back, causing a flight to safety into USD. Asian stocks were mixed, with China, Japan and Australia lower. The risk-sensitive currencies such as AUD, CAD and SEK lost vs USD while the safe-haven JPY gained, aided by an above-expectations rise in the national CPI for January that takes some pressure off the BoJ. The anomaly in this pattern was NZD, which gained after the ANZ business confidence survey rose to near a 20-year high.
The CNY declined 0.83% vs USD, the biggest intra-day drop in the seven years that the current trading system has been in place. The market believes that the Chinese authorities want to inject some two-way risk into CNY trading so as to discourage people from putting on carry trades in the currency. It’s also thought that the authorities are getting ready to double the trading band for the currency as part of their program to liberalize FX controls and increase the global use of the renminbi. A weakening of the currency has the potential to inflict serious financial damage to Chinese investors who have bought structured products linked to the FX rate however, so continued losses could cause the Chinese economy to slow.
During the European day, the main event will be Eurozone’s preliminary CPI for February, which is expected to have slowed to +0.7% yoy from +0.8% yoy in January. After the slowdown in Germany’s CPI on Thursday, the market will be waiting for these figures, since a negative surprise will put pressure to ECB to take action at next week’s meeting. Eurozone’s unemployment rate is expected to have remained at 12.0% in January.
In UK, the Nationwide house price index for February slowed to +0.6% mom from +0.7% mom in January, a bit better than expected (market forecast: +0.5%). This brought the yoy rate up to +9.4% from +8.8% and helped to boost the pound. At the same time, the German retail sales for January rose 2.5% mom, beating the 1.0% mom forecast and a solid turnaround from -1.7% mom in December. The news sent EUR/USD higher.
In the US, the second estimate of GDP for Q4 is expected to be revised down to+2.5% qoq on an annualized basis from the initial estimate of +3.2% qoq. Chicago purchasing managers’ index for February is forecast to have fallen to 56.4 from 59.6, and the University of Michigan final consumer sentiment for the same month to have seen no changes. These generally negative figures may depress USD. Pending home sales for January are estimated to have risen 1.8% mom, after a large fall of -8.7% mom the previous month.
Elsewhere, Canada’s GDP for December is expected to have declined 0.3% on a monthly basis, a turnaround from +0.2% mom in November. That could add to the recent pressure on CAD.
Eight speakers are on Friday’s agenda. Bank of England Governor Mark Carney and ECB's Board Member Sabine Lautenschlaeger speak on a panel at the Symposium on Financial Stability and the Role of Central Banks. Dallas Fed President Richard Fisher speaks on US monetary policy at the Swiss National Bank, while Federal Governor Jeremy Stein, Minneapolis Fed President Kocherlakota, Chicago Fed President Evans and Philadelphia Fed President Plosser will speak on a panel discussion. Bank of England Executive Director for Financial Stability Andrew Haldane will also speak.
The Market EUR/USD
• EUR/USD moved higher after finding support at the 1.3650 (S1) barrier. Nonetheless, the rise was stopped at 1.3715 (R1). If the rate forms a lower high near that barrier, I would expect extensions back towards the 1.3650 (S1) support for another test. A clear break of that obstacle could trigger extensions towards the bar of 1.3560 (S2). The RSI is testing its blue resistance line, while the MACD, despite the price rally, holds its negative sign, indicating that the momentum remains bearish.
• Support: 1.3650 (S1), 1.3560 (S2), 1.3480 (S3).
• Resistance: 1.3715 (R1), 1.3770 (R2), 1.3810 (R3).
USD/JPY
• USD/JPY fell below the lower boundary of the ascending triangle after meeting strong resistance at the 200-period moving average. The pair is now testing the support at 101.75 (S1). A clear break could open the way for the lows at 100.80 (S3). The MACD crossed below both its trigger and zero lines confirming the recent bearish momentum of the currency pair. As mentioned in previous comment, only a violation of the 102.70 resistance (R1) would turn the picture positive.
• Support: 101.75 (S1), 101.40 (S2), 100.80 (S3)
• Resistance: 102.70 (R1), 103.43 (R2), 103.90 (R3).
EUR/GBP
• EUR/GBP moved lower and is currently consolidating slightly below the resistance of 0.8220 (R1). In my view, the pair may continue moving lower and challenge the support of 0.8167 (S1) once again. Moreover, a dip below that bar would have larger bearish implications and may target the next obstacle at 0.8080 (S2). On the daily chart, the rate remains below both the moving averages and the longer term downtrend line, thus I consider the longer-term downward path to remain intact.
• Support: 0.8167 (S1), 0.8080 (S2), 0.8035 (S3).
• Resistance: 0.8220 (R1), 0.8285 (R2), 0.8340 (R3).
Gold
• Gold moved in a consolidative mode, remaining supported by the 50-period moving average. Considering the negative divergence between our momentum studies and the price action, I would expect the precious metal to retrace further. On the daily chart Tuesday’s and Wednesday’s candles formed a bearish engulfing pattern, enhancing the probabilities for further retracement.
• Support: 1310 (S1), 1290 (S2), 1270 (S3).
• Resistance: 1345 (R1), 1360 (R2), 1376 (R3)
Oil
• WTI moved slightly lower and is now trading near the 50-period moving average and the blue short-term uptrend line. I change my view to neutral for now, since the price remained below the 103.25 (R1) for an extended period of time, while both momentum studies are moving lower with the MACD crossing below both its signal and zero lines. A clear close below 100.75 (S1) may flip to bias to the downside, while an upward violation of the 103.25 (R1) resistance is needed to signal the continuation of the uptrend.
• Support: 100.75 (S1), 98.85 (S2), 96.50 (S3).
• Resistance: 103.25 (R1), 104.35 (R2), 108.15 (R3).
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
click here to read more
click here to read less
EUR
More...
Market Analysis 03/03/2014
Daily Commentary03.03.2014, Time of writing: 03:30 GMT
The Big Picture The week is starting off with a jolt as the market focuses on Russia’s intervention in Ukraine. Risk aversion trends dominate, as one would expect. Oil is the biggest gainer on fears about European energy sources (Russia is the world’s largest energy exporter, including both oil and gas). The precious metals also gained, as did the safe-haven JPY and CHF. CAD was the biggest gainer among the G10 currencies however, probably because of its oil exports. It’s no surprise that RUB was the biggest loser of the morning, falling by around 1.5%.
The second theme in the market this morning was the slowdown in China. The HSBC/Markit manufacturing PMI for China fell to 48.5 from 49.5, while a similar gauge from the government that was released over the weekend fell to 50.2 from 50.5. Both are at their lowest point since around last June, confirming the slowdown in China. This adds to the uncertainty around the country following the renminbi’s recent unusual fluctuations. The lower PMIs hit AUD and NZD, which were the biggest losers among the G10 currencies.
I would expect the dramatic events in Ukraine to continue to dominate the market and risk aversion trades dominating until there is some resolution to the events there. That doesn’t seem likely in the near future. Moreover, the combination of heightened risk aversion and a slowdown in China is a recipe for a strong JPY. Selling AUD/JPY could be an appropriate way to play those two themes. EUR/USD is likely to move lower, in my view, as the events in Ukraine affect Europe much more than the US.
During the European day, we get manufacturing PMIs for February from several countries of Europe, the Eurozone as a whole and the US. The French, German and Eurozone’s final figures are the same as the initial estimate as usual. The UK manufacturing PMI for the month is expected to have been up to 56.9 from 56.7 in January, while the US ISM manufacturing index for February is forecast at 52.0 vs 51.3 previously.
From the UK, we also have the Bank of England mortgage approvals for January, which are estimated to have risen to 74.0k from 71.6k in December. After Friday’s improvement in the Nationwide house price index, another indicator comes to confirm the expansion in the housing sector of the United Kingdom.
Besides the ISM manufacturing index, the US personal income and personal spending for January are due out. Personal income is expected to show a 0.2% mom rise after remaining unchanged in December, while personal spending is forecast to have slowed to +0.1% mom from +0.4% mom the previous month. The personal consumption expenditure deflator, the Fed’s preferred inflation gauge, is forecast to slow a bit to +1.1% yoy from +1.2%.
Only one speaker is scheduled on Monday. ECB President Mario Draghi testifies before the Committee on Economic and Monetary Affairs (ECON) of the European Parliament in Brussels.
The rest of the week gets busier as monetary policy will take once again the center stage. On Tuesday, we have the RBA policy meeting, while on Thursday the Bank of England and the ECB decide on their interest rates. The other main event is the US Nonfarm payrolls for January on Friday. The market lowered its forecast to 150k after the last two disappointing figures. A third negative surprise may show that the cold weather was only an excuse for the previous numbers and reveal that the US labor market is really facing problems.
The Market EUR/USD
• EUR/USD surged on Friday after the better-than-expected CPI data from Eurozone, but opened Monday’s session with a gap to the downside. Nonetheless, the rate managed to stay above the 1.3770 (S1) barrier. The short-term outlook remains to the upside and I would expect another challenge near the 1.3810 (R1) area where a clear upward break may target the December’s highs at 1.3893 (R2).
• Support: 1.3770 (S1), 1.3715 (S2), 1.3650 (S3).
• Resistance: 1.3810 (R1), 1.3893 (R2), 1.4200 (R3).
EUR/JPY
• EUR/JPY also opened with a downside gap. The pair remains within its sideways range between the support of 139.15 (S1) and the key resistance of 141.25 (R1). I consider the short-term outlook to be neutral at the moment, since only a move above 141.25 (R1) would argue that the picture has turned positive. The negative divergence between our momentum studies and the price action remains in effect and a clear dip below the 139.15 (S1) support will flip the bias back to the downside. Meanwhile, both our moving averages lie close to each other and point sideways, confirming the non-trending phase of the currency pair.
• Support: 139.15 (S1), 137.55 (S2), 136.20 (S3)
• Resistance: 141.25 (R1), 142.85 (R2), 144.35 (R3).
GBP/USD
• GBP/USD moved higher and managed to overcome the 1.6725 barrier on Friday. The short-term outlook has turned positive, in my view, and I would expect the pair to target once again the 1.6820 (R1) high. A clear violation of that bar will probably signal the continuation of the longer term uptrend and that the 17th -24th Feb. decline was just a 38.2% retracement of the 5th -17th Feb. rally. The MACD lies above both its trigger and zero lines, confirming the recent bullish momentum of the price action.
• Support: 1.6725 (S1), 1.6600 (S2), 1.6520 (S3).
• Resistance: 1.6820 (R1), 1.6885 (R2), 1.7000 (R3).
Gold
• Gold rebounded near the 50-period moving average and moved higher to touch once again the resistance at 1345 (R1). A clear break above that hurdle may signal the continuation of the uptrend and target the next barrier at 1360 (R2). Nonetheless, the negative divergence between out price action and the MACD remains in effect, indicating deceleration in the metal’s momentum. As a result, I would prefer the aforementioned break to be accompanied by a move of the MACD above its blue resistance line. This would be an extra confirmation of the uptrend’s resumption.
• Support: 1310 (S1), 1290 (S2), 1270 (S3).
• Resistance: 1345 (R1), 1360 (R2), 1376 (R3)
Oil
• WTI also moved higher, after rebounding from the blue uptrend line. The price broke above 103.25 and found resistance at 104.65 (R1). I consider the short-term outlook to be bullish and I would expect a probable break above the 104.65 (R1) resistance to pave the way towards the next one at 108.15 (R2).The MACD rebounded from its zero line and moved higher, above its signal line, providing bullish indications. On the daily chart, the subsequent advance upon the completion of a double bottom formation remains in effect.
• Support: 103.25 (S1), 100.75 (S2), 98.85 (S3).
• Resistance: 104.65 (R1), 108.15 (R2), 110.75 (R3).
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
click here to read more
click here to read less
EUR
More...
Market Analysis 04/03/2014
Daily Commentary04.03.2014, Time of writing: 03:30 GMT
The Big Picture Ukraine dominates markets The economic news yesterday was mostly positive, but the markets weren’t paying attention to economics – politics and the drama unfolding in Ukraine were the main focus of trading. Markets were in typical risk aversion mode: stocks down, bonds up. Better-than-expected purchasing managers’ indices from Europe did nothing to support European stock markets, which were down a sharp 3% overall. Similar outperformance in the US ISM index did not impress investors; 10-year Treasury yields fell 4 bps and Fed Funds expectations for 2016 were down 3.5 bps nonetheless. Yet the dollar gained against most currencies despite the lower rates, perhaps because European yields were down even more (10yr Bund yields -7 bps) as money flowed out of stocks and into bonds.
Looking at the last time there was such an event – Russia’s incursion into Georgia in 2008 – the dollar gained against most currencies then, too. It’s natural when military uncertainty arises that the strongest military power should be considered the safest of the safe havens. On the other hand, it’s notable how the safe-haven JPY and CHF are not rallying. USD/JPY was effectively unchanged during the European and US days yesterday, then actually moved higher in Tokyo trading this morning as Tokyo stocks gained modestly and Bank of Japan Gov. Kuroda said there is “momentum” spurring the yen carry trade. It could be that the Japanese authorities are getting uncomfortable as USD/JPY approaches 100 again and want to ensure that it stays above that level. As for CHF, that was even less likely; EUR/CHF actually moved higher on the day, which is not at all what one would expect with the market moving into risk aversion. Nonetheless, the action in CHF is also what happened when Russia went into Georgia in 2008. USD/JPY moved lower on safe-haven flows then but USD/CHF moved higher, in line with other currencies. We will have to wait for the data to see what role the Swiss National Bank might be playing in these moves. I expect the SNB’s intervention will make JPY a better safe-haven play than CHF, although USD may be the best of all in this case.
RUB was fairly steady after the central bank hiked interest rates “temporarily” by 1.5 percentage points. There was apparently considerable intervention, estimated at around USD 10bn. The other Eastern European currencies however lost very much, such as PLN and HUF. There is no doubt some contagion as investors pull out of Eastern European equity funds and EM equity funds in general, hitting other, smaller markets as well as Russia. This too is consistent with what happened in 2008, when the other Eastern European currencies fell by more than the RUB. They should rebound eventually as the decline is not due to any inherent problem of theirs, but for now they are hostage to events outside their control.
The turmoil in Ukraine seems to have stopped the upward momentum in EUR/USD, and with good reason: the troubles there have the capacity to affect the EU much more than the US. Europe depends on Russia for 30% of its gas supply. About half of these imports, or 15% of total EU gas supply, is transported through Ukraine. Any interruption would be quite disruptive, although so far there flows have not been reduced. Things could be worse; we are past the peak winter demand period and gas storage levels across Europe are unusually high thanks to the mild European winter. Nonetheless, it’s quite reasonable that EUR/USD should have more of a risk premium given what’s going on. I would expect the pair to move lower.
As for other markets, Ukraine is also a major agricultural producer and consequently any disruptions to the country’s exports could affect the global supply of crops such as corn (3rd largest exporter) and wheat (6th largest exporter).
Elsewhere, AUD gained modestly against the dollar on a higher-than-expected building approvals number, but lost some of the gains after the RBA statement said that the currency “remains high by historical standards.” I remain bearish on AUD.
During the European day, the UK construction PMI for February is expected to have fallen to 63.2 from 64.6 in January and Eurozone’s PPI is estimated to have fallen 0.1% mom in January from +0.2% in December. This will push the yoy rate lower to -1.3% from -0.8%.
In the US, the Senate Banking Committee holds confirmation hearing on Federal Reserve Board Nominees
We have five Speakers on Tuesday’s schedule. Former Federal Reserve Chairman Ben Bernanke, former US Treasury Secretary Lawrence Summers and South Korea's central bank Governor Kim Choong Soo speak to the Global Financial Markets Forum in Abu Dhabi. Richmond Fed President Jeffrey Lacker speaks at the Council for Economic Education's economic summit and Bank of England Deputy Governor Jon Cunliffe speaks on the euro-area crisis.
The Market EUR/USD
• EUR/USD moved lower and is once again below the 1.3770 level. The possibility for a higher low near the 1.3715 (S1) support still exists, but considering the negative divergence between our momentum studies and the price action, also a bearish engulfing candlestick formation on the daily chart, I would keep a neutral stand for now. A clear dip below the previous low at 1.3650 (S2) is needed to confirm a reversal in the short-term uptrend. On the upside a rebound near 1.3715 (S1) would confirm a higher low and may target once again the 1.3810 (R2) hurdle.
• Support: 1.3715 (S1), 1.3650 (S2), 1.3560 (S3).
• Resistance: 1.3770 (R1), 1.3810 (R2), 1.3893 (R3).
USD/JPY
• USD/JPY moved higher yesterday after finding support at the 101.25 (S1) barrier. The rate is now trading slightly below the resistance of 101.75 (R1). Nonetheless, the structure of lower highs and lower lows upon the dip below the lower boundary of the triangle remains in progress. As a result, I would consider the recent advance as a corrective wave before the bears prevail again. The MACD, although in its bearish territory, seems ready to cross above its signal line, thus further retracement should not be ruled out. On the daily chart, a clear move below the 100.80 (S2) support may signal the completion of a failure swing to the downside and have larger bearish implications.
• Support: 101.25 (S1), 100.80 (S2), 100.00 (S3)
• Resistance: 101.75 (R1), 102.30 (R2), 102.70 (R3).
EUR/GBP
• EUR/GBP moved in a consolidative mode, remaining between the 200-period moving average and the support at 0.8220 (S1). Both our momentum studies follow upward paths, while the MACD lies above both its trigger and zero lines. However, I would expect any further advance to be limited near the longer term downtrend line (light-blue line).
As long as, that trend line is not broken, the longer-term downward path remains intact, but only a clear dip below the strong support of 0.8167 (S2) would signal its continuation.
• Support: 0.8220 (S1), 0.8167 (S2), 0.8080 (S3).
• Resistance: 0.8285 (R1), 0.8340 (R2), 0.8390 (R3).
Gold
• Gold moved higher and managed to overcome the highs of 1345 (S1). I still expect the price to challenge the resistance of 1360 (R1), where a clear violation may trigger further extensions towards the next hurdle at 1376 (R2). Both our momentum studies crossed above their resistance lines, confirming the recent momentum of the precious metal. On the daily chart, the price remains above the 200-day moving averages, increasing the odds for the continuation of the uptrend.
• Support: 1345 (S1), 1310 (S2), 1290 (S3).
• Resistance: 1360 (R1), 1376 (R2), 1395 (R3)
Oil
• WTI moved higher but the advance was halted by the 105.00 (R1) resistance. The outlook of WTI remains to the upside since the price is still printing higher highs and higher lows above both the moving averages and the blue trend line. However, since the RSI lies within its overbought territory, ready to cross below its 70 barrier, I would expect a pullback, perhaps to test the 103.25 (S1) barrier as a support this time. On the daily chart, the subsequent advance upon the completion of a double bottom formation remains in effect.
• Support: 103.25 (S1), 100.75 (S2), 98.85 (S3).
• Resistance: 105.00 (R1), 108.15 (R2), 110.75 (R3).
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
click here to read more
click here to read less
EUR
More...
Market Analysis 05/03/2014
Daily Commentary05.03.2014, Time of writing: 03:30 GMT
The Big Picture So much for that crisis: Russian President Putin’s talk yesterday in which he said he saw no immediate need to invade Ukraine appeared to end the crisis as far as the markets were concerned, even though he left open the possibility of using force. Russian stocks, which were down about 11% on Monday, rose 5% or nearly half of their losses, while the RUB also recovered some (but not all) of its recent losses. Gold fell, oil fell, US 10-year bond yields rose 10 bps and the S&P 500 made a new record high, demonstrating that the global “risk off” trade was firmly reversed. The VIX index fell back to where it was on Friday, before the Russian movements.
In the currency market, the safe-haven flows into the dollar also partially reversed as the US currency lost ground against the high-beta G10 currencies (NOK, SEK, AUD and NZD), although the even safer-haven JPY and CHF were the main losers among the G10. Most EM currencies gained somewhat against the dollar as well as the fears about EM went into reverse. RUB was the biggest gainer, with HUF and PLN not far behind. Yet EUR/USD was virtually unchanged, perhaps owing to lingering concerns about Thursday’s ECB meeting or perhaps due to a widening interest rate differential in favor of the US.
I’m not sure we’ve seen the end of this crisis, but it appears that the market has already gone back to worrying about the ECB and non-farm payrolls. Late yesterday there was other news that suggested the situation is still tense. US Secretary of State Kerry outlined some steps that the US might take and Russia said it would retaliate against any sanctions, while there were further reports of troop movements, but the market totally ignored the news. I expect the US data to improve gradually and for the dollar to gain as a result.
I’m not sure we’ve seen the end of this crisis, but it appears that the market has already gone back to worrying about the ECB and non-farm payrolls. Late yesterday there was other news that suggested the situation is still tense. US Secretary of State Kerry outlined some steps that the US might take and Russia said it would retaliate against any sanctions, while there were further reports of troop movements, but the market totally ignored the news. I expect the US data to improve gradually and for the dollar to gain as a result.
Australia’s GDP for Q4 accelerated to +0.8% qoq from +0.6% qoq, beating estimates of +0.7%. AUD initially soared on the news, but then lost all the gains when the February HSBC/Markit service sector PMI for China came out at 51.0, up only a little bit from 50.7.
During the European day we have the service-sector PMIs for February from several European countries and the US. Both the UK service-sector PMI and the US ISM non-manufacturing composite index are forecast to have declined in February. The final data for the same month are coming out from France, Germany and Eurozone as a whole, alongside with the final Eurozone composite PMI.
From the Eurozone, we also get retail sales for January and the second estimate of the region’s GDP for Q4. Retail sales are estimated to have risen in January, after declining in December. As usual, the forecasts for Euro-area GDP are just the preliminary estimates.
In the US, the ADP employment change for February is coming out, two days ahead of the month’s Nonfarm payrolls. The report is expected to show that the private sector gained 155k jobs in February, close to the 150k NFP forecast. Although a lot of times there is a big gap between the two reports, the ADP figure is the best indicator we have for Friday’s number. Also the Federal Reserve publishes its Beige Book survey, two weeks before the FOMC meeting.
In Canada, we have the Bank of Canada interest rate decision. The market expects the Bank to maintain its policy rate unchanged at 1.00%, thus the focus will fall on comments about inflation. At the last meeting, the central bank lowered its inflation projections throughout 2014. It was noted that inflation has been lower than expected and might not return to its ideal target for about two years. The Bank will publish its updated outlook for the economy and inflation on April 16.
Two speakers are scheduled for Wednesday: Former Federal Reserve Chairman Ben S. Bernanke and Bank of England Executive Director for Financial Stability Andrew Haldane.
The Market EUR/USD
• EUR/USD moved higher but after hitting the resistance at 1.3770 (R1) returned to settle once again slightly above the 1.3715 (S1) support. Considering negative divergence on our momentum studies and the price action, a bearish harami candlestick formation on the daily chart and the inability of the bulls to break above 1.3770 (R1), I would expect the currency pair to continue retracing and fall below 1.3715 (S1). However, a clear close below the 1.3650 (S2) support is needed to signal a short-term trend reversal.
• Support: 1.3715 (S1), 1.3650 (S2), 1.3560 (S3).
• Resistance: 1.3770 (R1), 1.3810 (R2), 1.3893 (R3).
EUR/JPY
• EUR/JPY is still trading within its sideways range, between the support of 139.15 (S1) and the key resistance of 141.25 (R1). I maintain my neutral view for the short term outlook at the moment, since only a move above 141.25 (R1) would mean that the picture has turned positive. Both our momentum studies continue moving below their blue resistance lines and a clear dip below the 139.15 (S1) support will flip the bias back to the downside. Meanwhile, our moving averages lie close to each other and point sideways, confirming the non-trending phase of the currency pair.
• Support: 139.15 (S1), 137.55 (S2), 136.20 (S3)
• Resistance: 141.25 (R1), 142.85 (R2), 144.35 (R3).
GBP/USD
• GBP/USD fell back below the 1.6725 barrier. The pair is once again trading within the range between the support of 1.6600 (S1), which coincides with the 38.2% retracement level of the 5th -17th Feb. rally, and the resistance at 1.6725 (R1). The short-term bias is turned back to neutral and this is confirmed by our momentum studies, which lie near their neutral levels. In the bigger picture, as long as the rate is trading above the long-term uptrend (light blue line), I consider the major upward path to remain intact.
• Support: 1.6600 (S1), 1.6520 (S2), 1.6465 (S3).
• Resistance: 1.6725 (R1), 1.6820 (R2), 1.6885 (R3).
Gold
• Gold reached 1354 (R1) and moved lower to meet support at 1332(S1), near the blue uptrend line and the 50-period moving average. A rebound near that strong support area may target the 1360 (R2) resistance first, where a clear violation may trigger further extensions towards the next hurdle at 1376 (R3). My only concern is that alongside with the higher high of the price, the MACD formed a lower high and crossed below its trigger line, indicating deceleration in the momentum of the uptrend.
• Support: 1332 (S1), 1310 (S2), 1290 (S3).
• Resistance: 1354 (R1), 1360 (R2), 1370 (R3)
Oil
• WTI pulled back to test the validity of the 103.25 (R1) support as expected. The price is now trading near that support bar, slightly above the blue uptrend line and the 50-period moving average. A possible rebound will perhaps challenge once again the 105.00 (R1) hurdle, where a clear move above it may have larger bullish implications and target the 108.15 (R2) resistance. The outlook of WTI remains to the upside since the price is still printing higher highs and higher lows and on the daily chart, the subsequent advance upon the completion of a double bottom formation remains in effect.
• Support: 103.25 (S1), 100.75 (S2), 98.85 (S3).
• Resistance: 105.00 (R1), 108.15 (R2), 110.75 (R3).
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
click here to read more
click here to read less
EUR
More...
Market Analysis 06/03/2014
Daily Commentary06.03.2014, Time of writing: 03:30 GMT
The Big Picture Risk on as Ukraine fears fade further European data once again outpaced US data, but the market hardly noticed. Eurozone service sector PMIs were revised up, with the composite Eurozone PMI approaching a three-year high, and Eurozone retail sales showed the sharpest month-on-month increase in nearly 13 years. On the other hand, the US service-sector ISM fell, and within that, the employment PMI collapsed to a worrisome 47.5, below the 50 boom-or-bust line. Plus the ADP report also came in below expectations even though the previous month was revised down sharply. Yet there was little reaction to the news in the markets, and in fact US 10-year bond yields edged slightly higher, as did Fed funds expectations. Are the weak US data once again being attributed to the weather? The summary of the Beige Book mentioned weather 25 times and it seems that as a result, expectations for tomorrow’s non-farm payrolls are being revised down – many of the new forecasts are in the 120k-130k range, vs 150k-180k for forecasts made two weeks ago. That may make for a weaker USD today but it lowers the hurdle for USD outperformance on Friday.
As for currencies, it seems to be back to risk on – JPY and CHF lost ground against the dollar while most other currencies gained, EUR being the notable exception. The market is probably hesitant ahead of today’s ECB meeting. While the preliminary Eurozone CPI for February was slightly higher than expected, which takes some of the immediate pressure off the Bank, the 2016 inflation projections will be introduced at this meeting. Should the projections suggest inflation will still be significantly undershooting the 2% target on the 2-year projection horizon, then the ECB is likely to easy policy further. Such a forecast is unlikely, as the private sector forecast for 2016 is 1.75%, which would satisfy the ECB. Nonetheless, the possibility of some change in policy was boosted yesterday by a comment on an IMF blog arguing that not only deflation but also low inflation can be a problem for the Eurozone, particularly for the troubled peripheral countries, which it said “argues for a more pre-emptive approach by the ECB.” Comments by ECB members suggest that the most likely measure is to stop sterilizing the EUR 177bn holdings within its Securities Market Program (SMP) portfolio. That move is probably already discounted in the market so if that’s all they do, EUR/USD is likely to rise on a “sell the fact” response, in my view. As usual, attention will focus on the press conference by ECB President Mario Draghi after the central bank announces its rate decision.
On the other hand, the risk-on trade favoured the AUD, which was also boosted by news that the country’s trade surplus in January rose to the most in 2 ½ years and retail sales for that month rose three times faster than economists had forecast. With AUD/USD now over 0.90, I think the Reserve Bank of Australia is likely to get concerned about its impact on the economy and I would expect to start hearing more comments about it being overvalued. Investors who have been waiting for the timing to start shorting the currency may want to take a look.
CAD also gained after the Bank of Canada maintained its benchmark rate unchanged at 1.00% and reiterated that the next move depends on the progress of the economic data. The Bank said that “On the whole, the fundamental drivers of growth and inflation in Canada continue to strengthen gradually, as anticipated,” which was somewhat more confident than the phrase that they used after the last meeting in January. They also softened their concern about low inflation. I still expect CAD to weaken as oil prices come off.
For today, in addition to the ECB meeting there is also a Bank of England meeting. It is likely to be another non-event. All economist surveyed by Bloomberg unanimously expect the Bank to keep its policy unchanged.
As for the indicators, we get factory orders for January for both Germany and the US. German factory orders are forecast to have risen 0.9% in January, a turnaround from -0.5% in December, while the US figure for the month is expected to be down 0.5% vs -1.5% in December. From the US, we also get the initial jobless claims for the week ended on March 1, which they are forecast to be down to 336k from 348k previously.
Elsewhere, Canada’s building permits for January are forecast to have risen 1.7%, after falling 4.1% in December.
Besides President Draghi, we have two Fed speakers scheduled during the day. New York Fed President William Dudley will be interviewed by the Wall Street Journal’s Jon Hilsenrath and Philadelphia Fed President Charles Plosser speaks on “Exiting Unconventional Monetary Policy.”
The Market EUR/USD
• EUR/USD remained well supported by the 1.3715 (S1) barrier and thus the picture remains the same as yesterday. Considering negative divergence on our momentum studies and the price action, a bearish harami candlestick formation on the daily chart and the inability of the bulls to break above 1.3770 (R1), I would expect the currency pair to continue retracing and fall below 1.3715 (S1) under normal circumstances. However, today’s movement will depend on the ECB decision later in the day and the comments by the President Mario Draghi in his press conference.
• Support: 1.3715 (S1), 1.3650 (S2), 1.3560 (S3).
• Resistance: 1.3770 (R1), 1.3810 (R2), 1.3893 (R3).
USD/JPY
• USD/JPY rallied and is currently testing the strong resistance at 102.70 (R1). A clear break above that would confirm a higher high and may trigger extensions towards the next hurdle at 103.45 (R2) where I expect the price to meet strong resistance. The MACD lies above both its trigger and zero lines, confirming the recent bullish momentum of the price action. A failure of the bulls to achieve such a break may turn investors’ eyes to the 101.25 (S3) low for another test.
• Support: 102.25 (S1), 101.65 (S2), 101.25 (S3)
• Resistance: 102.70 (R1), 103.45 (R2), 103.90 (R3).
EUR/GBP
• EUR/GBP moved lower but remained within the range between the support at 0.8200 (S1) and the resistance at 0.8260 (R1). I see a neutral short term picture since the rate oscillates between those boundaries. Relying on our momentum studies does not seem a solid strategy, since the RSI is pointing up, while the MACD lies below zero pointing down. In the bigger picture, as long as the longer-term downtrend line (light blue line) is not violated, the major downward path remains intact, but only a clear dip below the strong support of 0.8167 (S2) would signal its continuation.
• Support: 0.8200 (S1), 0.8167 (S2), 0.8080 (S3).
• Resistance: 0.8260 (R1), 0.8285 (R2), 0.8340 (R3).
Gold
• Gold continued consolidating slightly at the support of 1332 (S1), near the near the blue uptrend line and the 50-period moving average. A rebound near that strong support area may target the 1360 (R2) resistance first, where a clear violation may trigger further extensions towards the next hurdle at 1370 (R3). The only grey spot in the metal’s picture is that the negative divergence between the MACD and the price action remains in effect, indicating that the momentum of the uptrend is decelerating.
• Support: 1332 (S1), 1310 (S2), 1290 (S3).
• Resistance: 1354 (R1), 1360 (R2), 1370 (R3)
Oil
• WTI fell below the 103.25 bar and the blue uptrend line. A break below the 100.75 (S1) support would confirm a lower low and flip the near-term outlook to the downside. The MACD, already below its signal line, obtained a negative sign, indicating bearish momentum for now. Nonetheless, since the RSI found support at its 30 level, some consolidation or a corrective bounce near the 100.75 (S1) support cannot be ruled out.
• Support: 100.75 (S1), 98.85 (S2), 96.50 (S3)
• Resistance: 101.25 (R1), 105.00 (R2), 108.15 (R3).
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
click here to read more
click here to read less
EUR
More...
Market Analysis 07/03/2014
Daily Commentary07.03.2014, Time of writing: 03:30 GMT
The Big Picture Once again the ECB disappointed market expectations and failed to make any changes in its monetary policy. It didn’t even stop the sterilization of its EUR 177bn holdings within its Securities Market Program (SMP), as had been broadly hinted before the meeting. ECB President Draghi’s comments were largely the same as in the previous several meetings. The market has learned that comments like “we will consider all policy options” and that “all options remain on the table” really mean that they have not decided to use any of those options yet. Moreover it turns out that the ECB’s forecast for inflation at end-2016 is conveniently 1.7%, which is just near enough to their target of “close to but below 2%” that the ECB is not compelled to make any changes in policy. As a result, the EUR hit a new high for 2014 against the dollar (as did AUD, NZD and SEK; GBP hit a new closing high). This was despite a lower-than-expected jobless claims number and rising interest rates in the US (although factory orders did fall more than expected). In EM, the market continues to believe that the Ukrainian crisis is over; EM stocks rose and the dollar lost ground against almost all the EM currencies we track (the exceptions being BRL and RUB).
Today will be another day of waiting, this time for the US non-farm payroll figures for February. The market consensus forecast has fallen to 149k after the last two disappointing figures, but probably the real consensus is lower – the average forecast includes ones that were made a couple of weeks ago, while the median of forecasts made in the last two days is 136k. Forecasts on Twitter are even lower; the median there is 122k. So it’s hard to say what will be a surprising figure. A third negative surprise in a row for the NFP could convince people that the cold weather was only an excuse and reveal that the US labor market is really facing problems. That could be negative for the dollar, because people would start to wonder if the Fed will continue tapering off its bond purchases, and interest rates would probably fall as a result. EUR/USD has moved higher over the following week after four of the last six times that the NFP missed estimates (it was unchanged once and lower once). I’m not sure it makes much difference though, because the results when the figure beat estimates were largely the same. When the figure beats estimates, the pair with the biggest increase in volatility is USD/JPY, followed by USD/NOK and USD/DKK, then GBP/USD and finally EUR/USD. On negative surprises the increase in volatility is much less. The biggest increase is again in USD/JPY, followed by USD/CAD and USD/CHF. Other G10 pairs see no major increase in volatility.
The US unemployment rate for February is forecast to have remained unchanged at 6.6%. At the same time, we get the US trade data for January, but I expect the figure to pass unnoticed.
In Germany, industrial production for January is expected to have risen 0.8% mom, a turnaround from a 0.6% mom fall in December. Switzerland’s unemployment rate for February is forecast to have remained at 3.2% on a seasonally adjusted basis, while the country’s CPI for the same month is expected to touch zero on a yoy basis vs +0.1% yoy in January. Finally, Canada’s unemployment rate for February is expected to remain at 7.0%.
Two speakers are scheduled on Friday. Former Federal Reserve Chairman Ben Bernanke will address a conference on energy industry, while the New York Fed President William C. Dudley will speak on the economy at Brooklyn College.
The Market EUR/USD
• EUR/USD rallied yesterday after ECB President Mario Draghi introduced the Eurozone GDP and inflation projections for 2016. The pair violated two resistance levels in a row and is now trading below December’s highs at 1.3893 (R1). The RSI seems ready to exit its overbought territory thus I would expect a corrective wave before the bulls prevail again. The structure of higher highs and higher lows remains in progress thus I see a positive short-term picture. In the bigger picture, a clear close above the 1.3893 (R1) would signal the continuation of the longer-term uptrend and have larger bullish implications.
• Support: 1.3810 (S1), 1.3770 (S2), 1.3715 (S3).
• Resistance: 1.3893 (R1), 1.4000 (R2), 1.4200 (R3).
EUR/JPY
• EUR/JPY also rallied on Draghi’s comments, breaking above the upper boundary of the sideways path it was trading recently. Nonetheless the jump was stopped at the resistance of 142.85 (R1).The short-term outlook has now turned positive and a clear break above the 142.85 (R1) may target the next one at 144.35 (R2). However, since the RSI lies above 70, pointing down, I would expect a downward corrective wave before the development of further advance.
• Support: 141.25 (S1), 139.15 (S2), 137.55 (S3)
• Resistance: 142.85 (R1), 144.35 (R2), 145.15 (R3).
GBP/USD
• GBP/USD moved slightly higher on Thursday and is now trading just below the 1.6760 (R1) resistance hurdle. I expect the pair to continue moving higher and challenge the recent highs at 1.6820 (R2). The RSI follows an upward path, while the MACD lies above both its signal and zero lines, increasing the possibilities for further advance. On the daily chart, as long as the rate is trading above the long-term uptrend (light blue line), I consider the major upward path to remain intact.
• Support: 1.6685 (S1), 1.6600 (S2), 1.6520 (S3).
• Resistance: 1.6760 (R1), 1.6820(R2), 1.6885 (R3).
Gold
• Gold rebounded from the support of 1332 (S1), near the blue uptrend line and the 50-period moving average, and reached once again the recent highs at 1354 (R1). I still expect the price to challenge the 1360 (R2) resistance, where a clear violation may trigger further extensions towards the next hurdle at 1370 (R3). The MACD, already in its bullish territory, crossed above its trigger line, indicating that the metal gained momentum. As long as the price is trading above both the moving averages and above the blue uptrend line, the short-term outlook remains positive.
• Support: 1332 (S1), 1310 (S2), 1290 (S3).
• Resistance: 1354 (R1), 1360 (R2), 1370 (R3)
Oil
• WTI found support at the 100.75 (S1) barrier and moved slightly higher. As mentioned in previous comments, a break below that bar is needed to confirm a lower low and flip the near term outlook to the downside. The price is trading below the 50-period moving average, but remains supported by the 200-period one, thus a downward violation of the latter moving average may be an additional negative sign and increase the possibilities for further declines.
• Support: 100.75 (S1), 98.85 (S2), 96.50 (S3)
• Resistance: 101.25 (R1), 105.00 (R2), 108.15 (R3).
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
click here to read more
click here to read less
EUR
More...
Market Analysis 10/03/2014
Daily Commentary 10.03.2014, Time of writing: 10:10 GMT
The Big Picture NFP fail to turn USD sentiment aroundFriday’s US employment data was much better than expected, with the growth in non-farm payrolls exceeding expectations, previous months revised up, and average earnings rising. The gains came despite the fact that the figures were depressed by the unusually cold weather, which kept many more workers from work than usual. That suggests the payroll figures should be even better in March, once the weather improves. A small rise in the unemployment rate was actually a welcome sign of more confidence in the labor market, which is drawing previously sidelined people back in looking for jobs.
Nonetheless the surprisingly good data did little to help the dollar. Ten-year Treasury yields jumped on the news but lost much of their gains to end only 5 bps higher (and they’re down 2 bps from that level in early European trading this morning). Implied rates on Fed Funds futures gained nearly 9 bps though as the Wall Street Journal’s Fed reporter said that the Fed might change its forward guidance approach at the next meeting. Stock prices hit a record high in the US but closed off their best levels. Yet this morning the dollar is substantially higher against only CAD, AUD and NZD, currencies that had their own reason to weaken (see below) and indeed is lower against SEK, CHF and EUR. The dollar did gain against most EM currencies though, but whether that was due to the US data or renewed tensions in Ukraine was hard to tell.
In fact, the muted reaction is hardly surprising. Looking at the last six times the NFP have beaten estimates, EUR/USD was on average 0.6% higher a week later than it was the day before the figure, GBP/USD was 0.4% higher, and USD/JPY was 0.3% lower. Nor is this just a case of a few large numbers distorting the averages, as most of the time the dollar was indeed weaker a week later despite the beats.
In any event it seems that it will take more than one better-than-expected figure for the market to change its view on the USD, particularly in the light of weaker data from China. I still believe the weakening trend in AUD and CAD are the most likely plays in the market. The failure of GBP to make a new high for the year vs USD is worrisome, although I am not yet changing my view on the currency. CHF and JPY have diverged; CHF cannot weaken vs USD unless EUR weakens vs USD as well, so investors who are more confident than I am in the outlook and want to play a reduction in risk aversion might go considering buying CHF vs JPY.
Copper hit a new low for 2014 on Friday after the default of Shanghai Chaori Solar Energy Science & Technology Co., the first default in China’s onshore bond market. That may signal a change in stance by the authorities that means troubled companies won’t be bailed out in the future. Copper continued falling in Asian trading this morning as disappointing Chinese trade figures for February released over the weekend added to the gloom. Exports fell 18.1% yoy, a marked contrast to the +7.5% gain that the market had expected. Taking January and February together to reduce the impact of the Lunar New Year, exports were down 1.6% yoy. To make matters worse, the Chinese central bank lowered its fixing for the yuan by the most since July 2012. Since a lot of Chinese companies have pledged metals as collateral for loans, it’s likely that a credit crunch there and further defaults are likely to cause more distressed sales of metals and commodities, putting downward pressure on the entire asset class.
CAD was the biggest loser among G10 currencies as the market ignored the much better-than-expected trade data for January (a CAD 0.18bn deficit rather than CAD -1.2bn that was expected, largely because imports declined) and focused on the continued weakness in employment. The unemployment rate stayed at 7.0% but that was only because of a drop in the participation rate as there was a net decline in employment, rather than the gain that was expected
USD/JPY was relatively unchanged despite a weaker-than-expected revision to Q4 GDP (+0.7% vs initial estimate of +1.0% and expected +0.9%) and a slightly wider trade deficit than expected in January. This is worth noting, because risk aversion has in the past trumped negative news on the domestic economy to push JPY higher, especially with the stock market down. We could be at the start of a renewed bout of JPY weakness. That too would suggest CHF gaining on JPY.
During the European day, both the French and the Italian industrial productions are forecast to have risen on a month-on-month basis in January, after falling in December.
Norway’s CPI for February is expected to have risen 0.5% mom after remaining unchanged in January.
Canada’s housing starts are forecast to have been up to 190k in February from 180k in January.
Two Fed speakers are scheduled on Monday. Philadelphia Fed President Charles Plosser speaks on "Monetary Policy and Banks and the Rise of Global Protectionism" and Chicago Fed President Charlie Evans will deliver a speech at Columbus State University.
The Market EUR/USD
EUR/USD is trading slightly below December’s highs at 1.3893 (R1). A clear upward violation of that barrier may trigger extensions towards the next resistance at 1.4000 (R2). Nonetheless, the RSI still lies near its 70 barrier, while the rate is trading near the upper boundary of the upward sloping channel, thus a corrective wave before the bulls prevail again cannot be ruled out. The structure of higher highs and higher lows remains in progress thus I see a positive short-term outlook. In the bigger picture, a clear close above the 1.3893 (R1) would signal the continuation of the longer-term uptrend and have larger bullish implications.
• Support: 1.3810 (S1), 1.3770 (S2), 1.3715 (S3).
• Resistance: 1.3893 (R1), 1.4000 (R2), 1.4200 (R3).
EUR/JPY
EUR/JPY managed to break above the 142.85 hurdle, but then moved lower. I still expect the rate to challenge the next resistance at 144.35 (R1), since the outlook has turned positive upon the violation of the 141.25 bar. The RSI lies within its overbought territory pointing down, while the MACD seems to be topping, thus further retracement before the development of further advance is likely. On the longer time frames, a clear close above the 145.15 (R2) highs is needed to confirm the resumption of the major uptrend.
• Support: 142.85 (S1), 141.25 (S2), 139.15 (S3)
• Resistance: 144.35 (R1), 145.15 (R2), 147.00 (R3).
GBP/USD
GBP/USD moved in a consolidative mode on Friday, remaining between the resistance of 1.6760 (R1) and the 1.6685 (S1) support. The pair failed once again to close above the 1.6760 (R1) resistance, thus I would consider the short-term picture to be neutral. On the daily chart, as long as the rate is trading above the long-term uptrend (light blue line), I consider the major upward path to remain intact. However, a decisive break above the highs at 1.6820 (R2) is needed to confirm the resumption of the larger uptrend.
• Support: 1.6685 (S1), 1.6600 (S2), 1.6520 (S3).
• Resistance: 1.6760 (R1), 1.6820(R2), 1.6885 (R3).
Gold
Gold failed for a second time to overcome the 1354 (R1) resistance and after hitting that level moved lower to meet the support at 1332 (S1). A clear break below that hurdle may signal the completion of a short term double top formation and target the support at 1310 (S2). The negative divergence between both our momentum studies and the price action confirm the inability of the longs to drive the metal higher for now.
• Support: 1332 (S1), 1310 (S2), 1290 (S3).
• Resistance: 1354 (R1), 1360 (R2), 1370 (R3)
Oil
WTI moved slightly higher, remaining below the resistance of 103.25 (R1). A lower high near that area followed by a dip below the 100.75 (S1) support will signal the completion of a failure swing and may flip the bias to the downside. The price remains supported by the 200-period moving average, thus a downward violation of the moving average may be an additional negative sign and increase the possibilities for further declines. On the upside, a break above the highs at 105.00 (R2) is needed to signal the resumption of the prior uptrend.
• Support: 100.75 (S1), 98.85 (S2), 96.50 (S3)
• Resistance: 103.25 (R1), 105.00 (R2), 108.15 (R3). (R3).
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
click here to read more
click here to read less
EUR
More...
Market Analysis 11/03/2014
Daily Commentary 10.03.2014, Time of writing: 10:10 GMT
The Big Picture China news temporarily revives risk sentimentWith little news to move markets yesterday, currencies largely just reversed recent trends. The dollar gained against most of the G10 currencies and about half the EM currencies that we track. Although this section is called “The Big Picture,” there was not much of a big picture yesterday, just a lot of little ones. Most of the movement took place during the European day or in early US trading.
NOK was the biggest gainer among the G10 currencies over the last 24 hours after the CPI rose sharply in January, while GBP was the biggest loser after Bank of England Deputy Governor Charlie Bean said that the current level of sterling was “fine,” but that a stronger pound would “not be particularly helpful,” which is British for “disastrous.”
Chinese stocks rebounded after money market rates fell for the fourth consecutive day and the yuan strengthened, ending a two-day decline. The rebound in sentiment helped copper futures to regain some of their losses from Friday. But iron ore extended its decline, falling over 8%, indicating that the destocking associated with the liquidity crunch in China is far from over yet. With inventories recently at record levels, I expect that troubled speculators will be desperate to unload their stocks and repay loans coming due, which is likely to push commodity prices – and the AUD – down further. AUD gained somewhat along with Asian stocks, but was still below its levels of 24 hours ago. NZD on the other hand rose on several better-than-expected economic indicators, including a sharp rise in credit card spending in February and a month-on-month increase in the REINZ house price index. I still expect AUD/NZD to move lower.
The Bank of Japan kept its policy unchanged at its meeting today. The statement after the meeting said the economy “has continued to recover moderately,” which would mean no need to take any immediate action. The Bank lowered its assessment of exports, saying they have “recently levelled off more or less,” and raised its assessment of industrial output and investment. (Yes, exports have levelled off, but imports haven’t!) At the time of writing we still await Mr. Kuroda’s press conference, but it seems clear that they have decided to wait to see the impact of the consumption tax hike before taking any further measures. The downgrading of exports suggests that they wouldn’t mind seeing a weaker yen, but the upgrading of investment suggests that they think liquidity is adequate at the moment, so I expect them to stay put for some time. JPY weakened almost exactly in line with CHF, suggesting that it may have been the rebound in Chinese stocks and copper prices bringing back risk-seeking sentiment rather than any evaluation of BoJ policy that was moving JPY.
Among EM currencies, it was noticeable that RUB gained while PLN, HUF and CZK eased. There could be some profit-taking among short RUB trades, as several of the other currencies that had declined along with it, such as ZAR, also strengthened. But in my view, the weakness in the other Eastern European currencies shows continued doubts about the situation in Ukraine and suggests that the RUB strength is likely to be only temporary (unless it’s being engineered by the central bank, which has about USD 470bn in firepower to impress its views on the market.) The general pattern is for these currencies to trend largely together.
As for the European day, Germany’s trade surplus rose to EUR 15.0bn from EUR 14.2bn, exactly in line with forecasts, while the nation’s current account surplus is declined to EUR 16.2bn from EUR 23.5bn (higher than the expected 15.3bn). There was no major move from EUR. Italy’s final GDP for Q4 is also due out.
In the UK, industrial production is estimated to have slowed to +0.2% mom in January from +0.4% mom in December. Nonetheless, this would drive the yoy rate higher (+3.0% from +1.8%), while the manufacturing production for the month is forecast to rise with the same pace as in in December, driving the yoy rate up to 3.3% from 1.5%.
Sweden’s Public Employment Service (PES) unemployment rate fell to 4.5% in February from 4.6% in January, as forecast. There was no market reaction as traders are waiting for the country’s CPI for February, which is forecast to have declined 0.2% yoy, the same as in January. This would be the official stamp that the country is facing deflation. The Riksbank has indicated that it will watch inflation closely, thus such a decline may increase the chances that the Bank will proceed with a rate cut at the next meeting. That could hurt SEK and I would expect EUR/SEK to be one of the main beneficiaries, considering the recent EUR-positive sentiment.
Finally, in the US, wholesale inventories for January are forecast to be up +0.4% mom from +0.3% mom in December.
Besides Governor Kuroda, Bank of England Governor Mark Carney, Markets Director Paul Fisher, and Monetary Policy Committee members David Miles and Martin Weale give evidence and take questions at a hearing of Parliament's Treasury Committee on the central bank's February Inflation Report. This suggests that GBP is likely to be the most volatile currency again today.
The Market EUR/USD
EUR/USD moved in a consolidative mode, remaining below Decembers highs at 1.3893 (R1). The RSI fell below 70, while the MACD, even though in positive territory, crossed below its trigger line. These movements strengthen my conviction that we are likely to see further consolidation or a downward corrective wave, perhaps to test the 1.3810 (S1) area as a support this time. However, the structure of higher highs and higher lows remains in progress thus I consider the short-term path to be to the upside. In the bigger picture, a clear close above the 1.3893 (R1) would signal the continuation of the longer-term uptrend and have larger bullish implications.
• Support: 1.3810 (S1), 1.3770 (S2), 1.3715 (S3).
• Resistance: 1.3893 (R1), 1.4000 (R2), 1.4200 (R3). (R3).
USD/JPY
USD/JPY is trading slightly below the resistance at 103.45 (R1). In previous comments we said that we expected the price to meet strong resistance near that level. The longs tried to overcome that barrier but didn’t achieved a daily close above it and moved lower to settle slightly below it. Considering the downward slope of the RSI and the fact that the MACD has crossed below its trigger line, I would expect the forthcoming wave to be to the downside. However, the short-term outlook remains to the upside since the rate is trading above the 102.70 (S1) support, which acted as a key resistance in the recent past.
• Support: 102.70 (S1), 102.25 (S2), 101.65 (S3)
• Resistance: 103.45 (R1), 103.90 (R2), 104.90 (R3)
EUR/GBP
EUR/GBP surged after consolidating near the longer term downtrend line and reached the resistance at 0.8340 (R1). A clear break above that barrier may pave the way towards the next hurdle at 0.8390 (R2), which coincides with the 38.2% retracement level of the 1st Aug. - 17th Feb. downtrend. Nonetheless, since the RSI lies within its overbought territory, ready to cross below 70, while the MACD seems to be topping, I would expect a pullback, maybe for a test near the 0.8300 (S1) area, before the bulls take advantage again.
• Support: 0.8300 (S1), 0.8260 (S2), 0.8200 (S3).
• Resistance: 0.8340 (R1), 0.8390 (R2), 0.8460 (R3). (R3).
Gold
Gold moved slightly higher, remaining within the sideways path between the support at 1332 (S1) and the resistance of 1354 (R1). Since the metal is not in a trending phase, I keep a neutral stance until we exit the trading range one way or the other. A break above the 1354 (R1) bound may pave the way towards the 1370 (R3) area, while a dip below the range’s floor at 1332 (S1) is likely to trigger extensions towards the 1310 (S2) zone. The negative divergence between both our momentum studies and the price action confirm the inability of the longs to drive the metal higher for now.
• Support: 1332 (S1), 1310 (S2), 1290 (S3).
• Resistance: 1354 (R1), 1360 (R2), 1370 (R3)
Oil
WTI formed the lower high mentioned in previous comments and moved lower to settle once again near the 100.75 (S1) support. A clear dip below that hurdle will signal the completion of a failure swing and may flip the bias to the downside. The price remains above the 200-period moving average, thus a downward violation of the moving average may be an additional negative sign and increase the possibilities for further declines. On the upside, a break above the highs at 105.00 (R2) is needed to signal the resumption of the prior uptrend.
• Support: 100.75 (S1), 98.85 (S2), 96.50 (S3)
• Resistance: 103.25 (R1), 105.00 (R2), 108.15 (R3).
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
click here to read more
click here to read less
EUR
More...