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Market Analysis 12/03/2014
Daily Commentary 12.03.2014, Time of writing: 10:10 GMT
The Big Picture EM concerns spilling over With little economic data to move the markets yesterday, the main focus was increasing fears about emerging markets. Tensions in Ukraine continue increase as German Chancellor Merkel reported called Russian actions in Crimea an annexation and said Russia must switch course in the region by next week or risk more sanctions. The EU will discuss harsher sanctions on 17 March, the day after a planned referendum in Crimea on whether to join Russia. Sanctions on Russia would no doubt be met with counter-sanctions. All in all they would be a negative for global trade and growth.
China is also troubling the markets. There were rumors that another Chinese solar company would announce a default. Central Bank Gov. Zhou suggested that the fluctuations in the yuan recently were within a reasonable range, which implies that the government is not perturbed by this volatility and it’s likely to persist. The Chinese rumors, while unconfirmed, affected the commodity markets and copper fell a further 3.25%, dragging the AUD down below 0.90 again with it.
AUD was the worst-performing G10 currency overnight as risk aversion came back into fashion, while safe-haven JPY, the reverse of that trade, was the best performing one. Otherwise USD was virtually unchanged against the G10 currencies compared with yesterday morning’s rates. On the other hand, it gained against all 15 EM currencies that we track, led by ZAR. TRY was the second-worst performing EM currency after a teenager injured during a police crackdown last year died, triggering protests in Istanbul.
The collapse in copper affected oil prices as well, and the rout in commodities dragged US stocks down too. Oil and gas were the worst-performing sector, followed by basic materials and industrials, as one would expect in a market driven by fears of a slowdown in global growth. The slowdown in Chinese growth is causing oil demand there to slow and increasing the amount of Chinese exports of refined products, which is depressing oil prices globally.
I expect that the tensions in Ukraine will only increase as the referendum approaches, while the unravelling of the Chinese credit bubble is just getting started. Hence I think these trends are likely to continue and indeed intensify. AUD seems vulnerable to me, as does CAD as oil prices start to be dragged down with metal prices. The SNB’s intervention means that JPY is likely to respond more to safe haven demand than CHF. AUD/JPY would be one way to play the slowdown in the Chinese economy.
During the Asian morning, it was announced that Japan’s Tertiary industry index rose 0.9% mom in January, beating estimates of a 0.6% mom rise. Concerns over China trumped this news however and stocks fell. In Australia, home loans were unchanged in January, disappointing expectations of a 0.5% mom rise, and perhaps contributing to the decline in AUD.
The European day today is fairly quiet. We have only the Eurozone’s industrial production for January and the US MBA mortgage applications for the week ended on March 7. Eurozone industrial production is forecast to have risen 0.5% mom in January after declining 0.7% in December, driving the yoy rate up to +1.9% from +0.5%.
Wednesday’s schedule includes four ECB speakers. The European Central Bank Governing council member Luis Maria Linde speaks in Spain, while the European Central Bank Executive Board members Peter Praet, Benoit Coeure and Yves Mersch speak at a conference on “The ECB and Its Watchers.”
Then late Wednesday, the Reserve Bank of New Zealand will hold its monetary policy meeting. This should be a landmark meeting as the RBNZ is expected to be the first G10 central bank to raise rates during the current easing cycle. It’s widely expected to raise its official cash rate by 25 bps to 2.75%. In fact another rate hike within the year is already priced in. Given the widespread expectations of a hike, the response of NZD depends on what comments Gov. Wheeler makes following the meeting and how quickly and how far he sees the rate rising.
The Market EUR/USD
• EUR/USD moved lower as expected, remaining between the support of 1.3810 (S1) and the resistance at 1.3893 (R1). Considering the downward slope of both our momentum studies and the fact that the MACD remains below its signal line, my view remains the same as yesterday. I would expect the downward corrective wave to continue, 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).
EUR/JPY
• EUR/JPY continued retracing and found support at 142.35 (S1). Considering the negative slope of our momentum indicators and the fact that the MACD remains below its trigger, a fall below that bar cannot be ruled out. Nonetheless as long as the rate is trading above the upper boundary of the recent trading range, I consider the picture to be mildly positive and the current decline as a corrective movement.
• Support: 142.35 (S1), 141.25 (S2), 139.15 (S3)
• Resistance: 143.80 (R1), 145.15 (R2), 147.00 (R3).
GBP/USD
• GBP/USD fell below the 1.6685 (R1) bar, but the decline was stopped by the 1.6600 (S1) key support, which coincides with the 38.2% retracement level of the 5th – 17th Feb. rally, and the 200-period moving average. A fall below the 1.6600 (S1) may extend the correction towards the 50% retracement, near the 1.6520 (S2) support. 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. However, a decisive break above the highs at 1.6820 (R3) is needed to confirm the resumption of the larger uptrend.
• Support: 1.6600 (S1), 1.6520 (S2), 1.6465 (S3).
• Resistance: 1.6685 (R1), 1.6760 (R2), 1.6820 (R3).
Gold
• Gold moved higher, breaking above the 1354 hurdle, but the advance was halted by the next resistance level of 1360 (R1). If the longs manage to achieve a close above the 1354 (S1) barrier, I would expect them to break above 1360 (R1) and target the area of 1370 (R2). Both our momentum studies violated their blue resistance lines, confirming that the precious metal has regained positive momentum. On the daily chart, the price remains supported by the 200-day moving average, increasing the possibilities for further advance.
• Support: 1354 (S1), 1332 (S2), 1310 (S3).
• Resistance: 1360 (R1), 1370 (R2), 1395 (R3)
Oil
• WTI fell below the 100.75 obstacle and below the 200-period moving average, completing a failure swing top formation. This confirms a forthcoming lower low and flips the short-term outlook to the downside. I would expect the price to move lower and meet support near the lower boundary of the downward sloping channel and the 98.25 (S1) support. This support coincides with the 50% retracement of the 9th Jan. – 3rd Mar. uptrend and the 161.8% extension of the pattern’s width. As long as WTI is trading within the downward sloping channel and below both the moving averages, I see a negative short-term picture.
• Support: 98.25 (S1), 96.50 (S2), 95.00 (S3)
• Resistance: 100.75 (R1), 103.25 (R2), 105.00 (R3).
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Market Analysis 13/03/2014
Daily Commentary 13.03.2014, Time of writing: 10:10 GMT
The Big Picture Dollar lower as risk seeking comes back Markets are flip-flopping based on risk-on, risk-off. The last 24 hours were risk-on and the dollar was lower against almost everything – all the G10 currencies and all 15 EM currencies that we track. As befits a risk-on environment, AUD was the biggest gainer and JPY gained the least. It was hard to see why, though; in fact, it seems to me that the tension in the Ukraine is increasing, particularly after the EU agreed on possible sanctions to take against Russia and the head of the US Joint Chief of Staffs, the top military official in the US, said that in the case of an escalation of unrest in Crimea, the U.S. Army is ready to back up Ukraine and its allies in Europe with military action. It seems to me that sentiment flipped to risk-on from risk-off after copper managed to bounce just under $3.00 a pound and staged a modest recovery, but I was unable to find out why that bounce happened, except perhaps for the technical reasons. EUR got some support from a comment by German Finance Minister Wolfgang Schäuble, who said that interest rates in the euro zone are too low from a German perspective. The statement reiterates Germany’s opposition to any new stimulus or rate cut from the ECB and reinforces the political difficulties that the ECB might have in cutting rates further. Nonetheless, yesterday’s movements overall remain a mystery to me and I would prefer not to invest based on mysteries. The reality is that the Ukraine situation is getting worse and the dynamics that have started in China have yet to play out, so I would expect more days like Tuesday – risk aversion that pushes USD up -- than like Wednesday in the near future.
Overnight the Reserve Bank of New Zealand (RBNZ) met and hiked the official cash rate (OCR) by 25 bps, as was universally expected. The RBNZ said it expects the OCR to rise by “about 2 percentage points” over the next two years, depending on economic conditions, although their forecast for the 90-day bill rate implies that rates continue to rise further well into 2016. The projected tightening is faster and longer than had been expected. I believe this course will distinguish NZD out of all the G10 currencies, especially as EUR and some other currencies (Sweden, Switzerland) struggle with deflation and push out the eventual start of their rate hiking cycle.
As the European day began, China announced that retail sales slowed dramatically to 11.8% yoy for January and February combined from +13.1% for all of last year (forecast: +13.5% yoy) and the nation’s industrial production for the same month also slowed more than expected to 8.6% for the two months from 9.7% in 2013 (expected: 9.5%). (January and February are reported together to offset the distortions caused by the Lunar New Year.) The news corroborates the message from the surprisingly weak trade figures China released earlier in the month and is likely to depress market sentiment.
During the European day, French CPI is forecast to have accelerated to +1.0% yoy in February from +0.8%yoy. Italy’s final CPI for the same month is also coming out. Sweden’s unemployment rate for February is estimated to have declined to 8.4% from 8.6% in January. Moreover, the ECB publishes its monthly report.
In the US, retail sales are forecast to have risen 0.1% mom in February, after remaining unchanged in January, while the excluding autos and gasoline figure is expected to have been up 0.2% mom, a turnaround from -0.2% mom the previous month. Initial jobless claims for the week ended on Mar 8 are forecast at 330k vs 323k the previous week. That would bring the four-week moving average slightly down to 334k from 336.5k.
From Canada, the new housing price index for January is expected to have risen 0.1% mom, the same as in December.
We have five speakers on Thursday’s agenda. ECB President Draghi speaks on the occasion of the awarding ceremony of the Schumpeter Award, while ECB’s Cœuré speaks on “Achieving a fully integrated banking union – the three pillars of the European Central Bank”. In the US, the Senate Banking Committee will hold a hearing to consider the nominations of Stanley Fischer, Lael Brainard and Jerome Powell for terms on the Federal Reserve's Board of Governors.
The Market EUR/USD
• EUR/USD rallied once again and managed to overcome the 1.3893 hurdle. Such a break confirms the resumption of the longer-term uptrend and I would expect the longs to target the 1.4000 (R1) key resistance first, where a break may pave the way towards 1.4200 (R2). The structure of higher highs and higher lows remains in progress and since the rate is trading above both the moving averages, the outlook remains to the upside. The MACD, already in its bullish territory, crossed above its trigger line, indicating strengthening bullish momentum. I would not rely on the overbought reading of the RSI since the oscillator is pointing up.
• Support: 1.3893 (S1), 1.3810 (S2), 1.3770 (S3).
• Resistance: 1.4000 (R1), 1.4200 (R2), 1.4550 (R3).
USD/JPY
• USD/JPY moved lower and reached the 102.70 (S1) barrier, to test it as a support this time. A rebound near that level would confirm a higher low and target once again the resistance at 103.45 (R1). The rate remains supported by the 200-period moving average and a dip below it and the 102.70 (S1) will turn the outlook neutral first. Only a dip below the previous low at 101.25 would turn the overall short term picture negative, in my view.
• Support: 102.70 (S1), 102.25 (S2), 101.65 (S3)
• Resistance: 103.45 (R1), 103.90 (R2), 104.90 (R3).
EUR/GBP
• EUR/GBP managed to violate the 0.8340 hurdle, after consolidating slightly below it. I still expect the price to reach the next hurdle at 0.8390 (R1) which coincides with the 38.2% retracement level of the 1st Aug. - 17th Feb. downtrend. The RSI remains within its overbought territory, testing the 70 barrier, thus some consolidation or a pullback before the development of further advance cannot be ruled out.
• Support: 0.8340 (S1), 0.8300 (S2), 0.8260 (S3).
• Resistance: 0.8390 (R1), 0.8460 (R2), 0.8535 (R3).
Gold
• Gold broke above 1360 and reached 1375 (R1). A clear close above that resistance may pave the way towards the next hurdle at 1395 (R2). The MACD remains above both its trigger and signal lines, pointing up and confirming the recent bullish momentum. I would ignore the overbought reading of RSI at the moment and I would expect a pullback after the oscillator exits the extreme zone. On the daily chart, the precious metal remains supported by the 200-day moving average, increasing the possibilities for further advance.
• Support: 1360 (S1), 1354 (S2), 1332 (S3).
• Resistance: 1375 (R1), 1395 (R2), 1415 (R3)
Oil
• WTI continued declining, pushed lower by news that the US would sell some 5mn barrels from the Strategic Petroleum Reserve. Although officials said this was a test of the system that had been planned earlier and had nothing to do with Ukraine, market participants saw it either as a shot across the bows for Russia – warning them that the US would hit them where it hurt, in their wallet – or a way to calm the market’s fears of what a possible reduction in Russian supplies might do to prices. It was noticeable that despite the US denials, the type of crude that they decided to sell was similar to that which Russia sells.
• WTI reached the lower boundary of the downward sloping channel, near the 98.00 (S1) support, the 50% retracement of the 9th Jan. – 3rd Mar. uptrend and the 161.8% extension of the width of the failure swing mentioned in previous comments. A clear dip below that support area may target the 61.8% retracement of the 9th Jan. – 3rd Mar. uptrend which coincides with the 200% extension of the pattern’s width, near the support of 96.50 (S2). Nonetheless, since the RSI is ready to exit oversold conditions and the price is finding support at the lower bound of the channel, I would expect an upward corrective wave before the bears prevail again.
• Support: 98.00 (S1), 96.50 (S2), 95.00 (S3)
• Resistance: 100.75 (R1), 103.25 (R2), 105.00 (R3).
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
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Market Analysis 14/03/2014
Daily Commentary14.03.2014, Time of writing: 10:10 GMT
The Big Picture Like a school of fish Have you ever watched a school of fish in an aquarium swimming along? Sometimes they swim along in one direction, then suddenly shift direction for no apparent reason (apparent to humans, at least). That’s sort of what the FX market has been like recently. On Wednesday the market shifted from risk-off to risk-on at about 10 AM New York time. Yesterday the market was in risk-on mode during European trading, then despite better-than-expected US indicators the mood suddenly shifted to risk-off at around 9:40 AM. Both times investors were left searching for an ex post facto (after the fact) explanation. As I mentioned yesterday, I found it difficult to explain a shift to risk-on, but in today’s market, there’s no shortage of explanations for a shift to risk-off. Russia announced new military operations in at least three regions along Ukraine’s eastern border, which elicited a sharp response from German Chancellor Merkel to change course or face retaliation. US Secretary of State Kerry said the US and EU would respond on Monday with a “serious series of steps” against Russia if the referendum in Crimea goes ahead on Sunday, as looks likely. To make matters worse, Reuters reported that many banks in China have cut loans to certain sectors with overcapacity, such as steel, shipbuilding and cement, by up to 20%, which will hurt growth there.
So the “risk on” tone evaporated and the market turned to a flight to safety, which nowadays means a rush into USD. The dollar gained against nearly every currency we track, both G10 and EM, the only notable exception being JPY, which gained around 1% against the surging dollar. Oddly enough some other safe havens didn’t benefit that much; USD/CHF moved slightly higher and gold fell somewhat. This is the kind of movement I had been expecting to see. This makes sense to me in the current geopolitical and economic situation. I expect risk-off trades to dominate, with the strongest military power, the US, being the ultimate safe haven. The high-beta currencies of SEK, NOK, and AUD seem particularly vulnerable while JPY is likely to be the main beneficiary, given that CHF can only rise to the extent that EUR rises, and EUR isn’t likely to rise too much (see next paragraph).
EUR/USD was depressed by comments from ECB President Draghi, who seems to have become increasingly concerned about the level of the currency. Speaking in Vienna, he said that the currency’s strength was “becoming increasingly relevant in [the ECB’s] assessment of price stability”. He argued that the ECB’s forward guidance would push down real interest rates, presumably by raising the expected level of inflation. That would narrow the gap between real interest rates in the Eurozone and elsewhere and thereby depress the value of the euro. This echoed comments by ECB Executive Board Member Cœuré, who signalled earlier that the ECB would ease policy if real interest rates remained at current levels. Draghi perhaps is concerned that the market didn’t get the hint from last week’s ECB press conference, when he mentioned that the exchange rate is “very important for growth and price stability,” particularly in this case because a high euro puts downward pressure on prices. With such verbal intervention, I expect that it will be difficult for EUR/USD to break through 1.40 and see it moving somewhat lower, particularly if the action in Europe’s eastern backyard starts to heat up.
The calendar is relatively light during the European day. The UK trade deficit is forecast to have widened to GBP 2.2bn in January from GBP 1.0bn in December. Germany’s final CPI for February is also coming out.
In the US, the PPI excluding food and energy is forecast to have slowed to +0.1% mom in February from +0.2% mom in January. Nonetheless, this would bring the yoy rate up to +1.4% from +1.3%. The University of Michigan preliminary consumer sentiment for March is expected to be marginally up to 82.0 from 81.6.
Two speakers from the Riksbank are scheduled on Friday, the Governor and Deputy Governor.
The Market EUR/USD
• EUR/USD fell after ECB President Mario Draghi said that the Bank is monitoring the euro gains for deflation risk. The pair fell back within the channel after trying to break the upper boundary, and is once again below December’s highs of 1.3893 (R1). The MACD is back below its signal line, while negative divergence is identified between the study and the price action. Thus we may experience further declines, perhaps a challenge of the 1.3810 (S1) support. Nonetheless, the structure of higher highs and higher lows remains in progress and since the rate is trading within the upward sloping channel, I consider the decline as a corrective wave, at the moment.
• Support: 1.3810 (S1), 1.3770 (S2), 1.3715 (S3).
• Resistance: 1.3893 (R1), 1.3965 (R2), 1.4000 (R3).
EUR/JPY
• EUR/JPY collapsed as tensions in Ukraine increased. The pair is back below the 141.25 barrier but the fall was halted by the 61.8% retracement level of the 3rd – 7th March advance and the 200-period moving average. I adopt a neutral stance
• For now since the rate is above the blue trend line and a dip below the low of 139.15 (S1) is needed to turn the short-term outlook negative.
• Support: 139.15 (S1), 137.55 (S2), 136.20 (S3)
• Resistance: 141.25 (R1), 142.35 (R2), 143.80 (R3).
GBP/USD
• GBP/USD moved significantly lower after failing to overcome the 1.6700 (R1) bar. The pair is back near the key support of 1.6600 (S1), which coincides with the 38.2% retracement level of the 5th – 17th Feb. rally, and the 200-period moving average. A fall below 1.6600 (S1) may extend the correction towards the 50% retracement, near the 1.6520 (S2) support. 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. However, a decisive break above the highs at 1.6820 (R3) is needed to confirm the resumption of the larger uptrend.
• Support: 1.6600 (S1), 1.6520 (S2), 1.6465 (S3).
• Resistance: 1.6700 (R1), 1.6760 (R2), 1.6820 (R3).
Gold
• Gold moved in a consolidative mode, remaining below the 1375 (R1) resistance barrier. A clear close above that hurdle may pave the way towards the next bar at 1395 (R2). Nonetheless, since the RSI exited its overbought territory, further consolidation or a pullback cannot be ruled out before the longs take control again. On the daily chart, the precious metal remains supported by the 200-day moving average, increasing the possibilities for further advance.
• Support: 1360 (S1), 1354 (S2), 1332 (S3).
• Resistance: 1375 (R1), 1395 (R2), 1415 (R3)
Oil
• WTI moved in a narrow range, remaining near the near the 98.00 (S1) support, the 50% retracement of the 9th Jan. – 3rd Mar. uptrend and the 161.8% extension of the width of the failure swing mentioned in previous comments. A clear dip below that support area may target the 61.8% retracement of the 9th Jan. – 3rd Mar. uptrend which coincides with the 200% extension of the pattern’s width, near the support of 96.50 (S2). The RSI exited its oversold conditions, while the MACD, even though in its negative zone, crossed above its trigger line. As a result, an upward corrective wave before the bears prevail again is possible.
• Support: 98.00 (S1), 96.50 (S2), 95.00 (S3)
• Resistance: 100.75 (R1), 103.25 (R2), 105.00 (R3).
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MARKETS SUMMARY
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Market Analysis 17/03/2014
Daily Commentary17.03.2014, Time of writing: 10:10 GMT
The Big Picture Crimea votes, market yawns The results of the Crimean referendum were no surprise. So now the question is how Russia decides to recognize and act on the vote that determines whether the conflict between Moscow and the West intensifies or calms down. This decision lies with Russian President Putin. The US and European response to the referendum, as well as its impact on Russian political and financial interests, will certainly influence his decision. The remaining issue -- the Western desire to see Russia back off from the countries on its borders -- remains unclear. In the meantime, Russia has given itself room to back down on the threats that it makes, including those concerning Crimea, as it waits to see whether the West will compromise or stand its ground. Putin has good reasons to compromise; as long as Crimea is a part of Ukraine or at least is not fully independent, Russia has leverage over the West, but it would lose that leverage once it annexed the area. Nonetheless, Putin may believe that things have gone too far for him to back down now and that he has to send a serious message to the West about Russia’s resolve.
According to Reuters, Crimea's appeal to join Russia will first be sent to President Putin. If approved, the appeal then goes to the upper and lower houses of parliament, which will work on a treaty to be signed between Russia and the new state. Under the treaty, a transitional period could be set for the new subject to be integrated into Russia’s economic, financial, credit and legal systems. Following its signing, Russia's constitutional court should then verify the treaty. It should then be voted on by both houses of parliament, the Duma and the Federation Council.
In any event, it looks like the next deadline is Friday, March 21st. The Ukrainian and Russian defense ministries have agreed to a truce in Crimea until then. Also on that day, Russian lawmakers are scheduled to consider legislation that would allow Russia to incorporate parts of countries where the central authority isn’t functioning and local residents want to secede, according to Bloomberg. While that is clearly aimed at Crimea, it could in theory be used to allow Russia to annex other Russian-speaking parts of Eastern European countries. There were pro-Russia demonstrations in Donetsk, a city in Eastern Ukraine. This is perhaps the biggest fear of the West: that President Putin’s goal is not just to take a warm-water port, one of Russia’s perennial geopolitical goals, but also to rebuild the Soviet Union. That’s why US Vice President Biden is going to Poland and Lithuania today for talks. EU foreign ministers meet today and are likely to impose asset freezes and visa bans on those involved and EU leaders will meet Thursday and Friday in Brussels to discuss further measures.
Apparently the situation was well discounted in the market, because it doesn’t seem to be having that big an impact. Japanese stocks are down sharply, but elsewhere in Asia markets are generally higher, led by a rise in Chinese stocks. US Treasury yields are little changed. As for currencies, the dollar is unchanged to lower against most currencies, with AUD showing the biggest gains among the G10 currencies. Among the EM currencies that we track, the only one to lose ground against the dollar was the CNY, which fell after the People’s Bank of China announced over the weekend that it was doubling the currency’s trading band in a move to let market forces determine its value. Gold and silver were showing some reaction to the Ukraine situation however.
With little on the schedule for today, events surrounding Ukraine will take center stage. The final Eurozone CPI for February is coming out. As usual, the forecast is the same as the initial estimate and the market does not pay the same attention to the final figure as it does to the preliminary data, since they come out a couple of days ahead of the ECB meeting.
In the US, the Empire State manufacturing survey is forecast to have risen to 6.6 in March from 4.5 in February, while the industrial production for February is expected to have risen +0.2% mom, a turnaround from -0.3% in January. The National Association of Home Builders (NAHB) housing market index for March is estimated to rise to 50 from 46 in February. Positive data coming out from the US will confirm that the slowdown in the recent economic data was mainly due to cold weather
Two speakers are scheduled on Monday. ECB Governing council member Jens Weidmann speaks about external imbalances in the euro area and BoE Deputy Governor Cunliffe speaks about global financial markets.
As for the rest of the week, the main event will be the FOMC meeting on Wednesday. The market expects the Fed to remain on their tapering path with a further USD 10bn reduction in bond purchases.
The Market EUR/USD
• EUR/USD rebounded near the 50 period moving average on Friday and moved higher to break once again above 1.3893. The MACD remains below its trigger line, while the negative divergence between the study and the price action is still in effect, thus some consolidation or a retracement cannot be ruled out. Nonetheless, the structure of higher highs and higher lows remains in progress and since the rate is trading within the upward sloping channel, I would consider any possible decline as a corrective wave at the moment.
• Support: 1.3893 (S1), 1.3850 (S2), 1.3810 (S3).
• Resistance: 1.3965 (R1), 1.4000 (R2), 1.4200 (R3).
USD/JPY
• USD/JPY met support at the low of 101.25 (S1) and moved slightly higher. I maintain my neutral view since the pair is not in a trending mode and as mentioned in previous comments, a dip below the low of 101.25 (S1) is needed to turn the short term picture negative. Nonetheless, since the RSI seems ready to exit oversold conditions and the MACD may be bottoming, I would expect the forthcoming wave to be to the upside and we may see the rate above the resistance of 101.65 (R1).
• Support: 101.25 (S1), 100.75 (S2), 100.00 (S3)
• Resistance: 101.65 (R1), 102.25 (R2), 102.70 (R3).
EUR/GBP
• EUR/GBP moved higher, after rebounding near the 0.8340 (S1) support area. I still expect the rate to reach the hurdle of 0.8390 (R1) which coincides with the 38.2 % retracement level of the 1st Aug. - 17th Feb. downtrend, where I expect the rate to meet strong resistance. As long as the rate is trading above the prior downtrend line and above both the moving averages, the short-term outlook remains positive. My only concern is that on the daily chart, the rate is finding resistance near the 200-day moving average.
• Support: 0.8340 (S1), 0.8300 (S2), 0.8260 (S3).
• Resistance: 0.8390 (R1), 0.8460 (R2), 0.8535 (R3).
Gold
• Gold moved higher, breaking above the 1375 barrier. I still expect the precious metal to challenge the resistance at 1395 (R1), where an upward violation may trigger further bullish extensions towards the next hurdle at 1415 (R2). Nonetheless, since the RSI exited its overbought territory, further consolidation or a pullback cannot be ruled out before the longs take control again. On the daily chart, gold is trading above the 200-day moving average, increasing the possibilities for the continuation of the uptrend.
• Support: 1375 (S1), 1354 (S2), 1332 (S3).
• Resistance: 1395 (R1), 1415 (R2), 1435 (R3)
Oil
• WTI moved higher after consolidating near the 98.00 (S1) support, the 50% retracement of the 9th Jan. – 3rd Mar. uptrend and the 161.8% extension of the width of the failure swing mentioned in previous comments. As long as the price remains within the downward sloping channel, I consider the recent advance as an upward corrective wave. If the bears are strong enough to regain control near the upper boundary of the channel, I would expect them to drive the battle below the 98.00 (S1) support and target the 61.8% retracement of the 9th Jan. – 3rd Mar. uptrend which coincides with the 200% extension of the pattern’s width, near the support of 96.50 (S2). Only a break above the previous high at 103.00 (R2) may indicate that the recent decline was just a 50% retracement of the prior uptrend.
• Support: 98.00 (S1), 96.50 (S2), 95.00 (S3)
• Resistance: 100.75 (R1), 103.00 (R2), 105.00 (R3).
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Market Analysis 18/03/2014
Daily Commentary18.03.2014, Time of writing: 10:10 GMT
The Big Picture Speak softly and carry a small stick The US and EU Monday unveiled a set of sanctions in response to Crimea’s action in breaking away from Ukraine. Both governments limited the scope of these initial sanctions to travel restrictions and asset freezes targeting specific Russian, Ukrainian and Crimean leaders. Washington and Brussels did not sanction the same officials, however. The discrepancy illuminates the wide difference between the two partners. The US targeted 11 people while the EU targeted 21, but only four people were on both lists, of whom only two are Russian. The US sanctions target senior members of the Russian elite, while the EU’s sanctions hit less significant individuals, many of whom are Ukrainian or Crimean, which doesn’t really matter to Russia. Plus the Russian officials targeted are less important than those targeted by the US.
The weakness of this initial move was a relief to the market and the risk premium in the market eased. The VIX index fell, US bond yields rose, gold and oil collapsed and the dollar generally weakened. The best performing currency was the RUB as Russian stocks soared around 4%. In the G10, most currencies gained vs USD except for the safe-haven JPY, which lost some of its appeal. SEK and NOK, currencies of two countries that sent most of their exports to Europe, performed the best within the G10.
The discrepancy between the US and EU sanctions highlights the different risks that both sides are running. Europe is much more exposed to any countermoves by Russia: it gets half of its gas and oil from Russia, Germany has large industrial investments in Russia, and there is an enormous amount of Russian capital in London. Europe’s main concern right now is to manage its economic problems, and a rise in tension with Russia and disruption of energy supplies would be a significant setback. The US on the other hand sees an opportunity to curb Russia’s recent resurgence in its periphery and prove to Eastern Europe that it is a reliable foreign policy partner. Getting back at Russia for the Snowden affair must also be tempting.
Washington and Brussels both said that yesterday’s sanctions were an initial round. They will reconsider their response after hearing what President Putin has to say today and how things develop. The leaders of the EU meet on Thursday and Friday and will reconsider their response. It remains to be seen whether Washington and Brussels can close the gap between their positions and present a united front with more significant sanctions, or whether Russia will successfully play off the different interests that the two sides have. We haven’t heard the end of this drama by any means.
Today is the first day of the March FOMC meeting, the first chaired by the new FOMC Chair, Janet Yellen, and her first press conference as FOMC head. I would guess that nobody expects any change in the “tapering” process, that is, the Committee is likely to reduce its monthly bond purchases by another USD 10bn. There is likely to be a change in the presentation of the FOMC’s forward guidance, much like occurred in the UK. I expect them to drop the line in the statement that says they will keep rates at their current level “as long as the unemployment rate remains above 6 1/2 %” and instead replace it with some fuzzier criteria on unemployment and inflation. However, the Committee will want to do this without giving the market any reason to think that rates will be hiked sooner than previously thought, so they will probably emphasize that they continue to expect it will be quite some time before they start to hike rates and that when they do start, they will do so slowly and cautiously – much like what the Bank of England said. Nonetheless the experience of the BoE shows that this change could support the dollar.
The main event during the European day will be the German ZEW survey for March. The current situation index is forecast to rise to 52.0 from 50.0 in February, while the expectation index is expected to be down to 52.0 from 55.7. Last month the current situation index was better than expected, while the expectations index missed estimates. EUR/USD responded to the expectations index and declined 15 pips. Separately, Eurozone’s trade surplus is expected to have risen slightly to EUR 13.9bn on a seasonally adjusted basis, from EUR 13.7bn in February.
In the US, the FOMC starts its two day meeting, which ends on Wednesday. The meeting will be associated with a summary of Economic projections and the first press conference held by the new Chairperson Janet Yellen. As for the US indicators, the CPI is forecast to rise 0.1% mom in February, the same as in January, driving the yoy rate down to +1.2% from +1.6%. Both the housing starts and building permits for February are expected to have improved.
Three speakers are scheduled on Tuesday. Bank of England Governor Mark Carney, ECB Supervisory Board Chairman Daniele Nouy and Bank of Canada Governor Stephen Poloz.
The Market EUR/USD
• EUR/USD found support near the 1.3893 (S1) barrier and moved higher. The pair remains below the 1.3965 (R1) resistance, where a clear upward break may trigger bullish extensions towards the next hurdle at 1.4000 (R2). Even though the MACD managed to cross above its trigger line, the negative divergence between the MACD and the price action remains in effect, thus a possible pullback in the near future cannot be ruled out. The structure of higher highs and higher lows remains in progress and since the rate is trading within the upward sloping channel, I still consider the short-term picture to be positive.
• Support: 1.3893 (S1), 1.3850 (S2), 1.3810 (S3).
• Resistance: 1.3965 (R1), 1.4000 (R2), 1.4200 (R3).
EUR/JPY
• EUR/JPY rebounded near the 61.8% retracement level of the 3rd – 7th March advance, the 200-period moving average and the blue uptrend line. The pair is once again above the 141.25 bar and if the bulls are strong enough to overcome the next obstacle at 142.35 (R1), I would expect them to target the next resistance at 143.80 (R2). The MACD crossed above its trigger line but remains within its bearish territory. I would wait for a cross of the indicator above its zero line to confirm a possible break above 142.35 (R1).However, the possibility for a lower high near that bar still exists, thus I maintain my neutral view for now.
• Support: 141.25 (S1), 139.15 (S2), 137.55 (S3)
• Resistance: 142.35 (R1), 143.80 (R2), 145.15 (R3).
GBP/USD
• GBP/USD moved in a consolidative mode, remaining between the support of 1.6600 (S1), which coincides with the 38.2% retracement level of the 5th – 17th Feb. rally, and the resistance of 1.6700 (R2). The short term picture remains neutral in my view, since both the moving averages are pointing sideways, while both the RSI and the MACD lie near their neutral levels, confirming the non-trending phase of the price action. 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. However, a decisive break above the highs at 1.6820 (R3) is needed to confirm the resumption of the larger uptrend.
• Support: 1.6600 (S1), 1.6520 (S2), 1.6465 (S3).
• Resistance: 1.6700 (R1), 1.6760 (R2), 1.6820 (R3).
Gold
• Gold moved lower and is currently trading near the 50-period moving average, slightly above the 1354 (S1) support. Both our momentum studies follow downward paths, while the MACD, although in its bullish territory, crossed below its trigger line, confirming the deceleration in the metal’s momentum. On the daily chart, the daily RSI exited overbought conditions, while the daily MACD seems ready to fall below its signal line, favoring further declines. However, as long as the low of 1332 (S2) holds I would consider any downward wave as a retracement.
• Support: 1354 (S1), 1332 (S2), 1310 (S3).
• Resistance: 1392 (R1), 1415 (R2), 1435 (R3)
Oil
• WTI moved lower on Monday and is once again near the 98.00 (S1) support, the 50% retracement of the 9th Jan. – 3rd Mar. uptrend and the 161.8% extension of the width of the failure swing mentioned in previous comments. I still expect the bears to drive the battle below 98.00 (S1) and target the 61.8% retracement of the 9th Jan. – 3rd Mar. uptrend which coincides with the 200% extension of the pattern’s width, near the support of 96.50 (S2). As long as the price is trading within the downward sloping channel and below both the moving averages, the short-term outlook remains negative.
• Support: 98.00 (S1), 96.50 (S2), 95.00 (S3)
• Resistance: 100.75 (R1), 103.00 (R2), 105.00 (R3).
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Market Analysis 19/03/2014
Daily Commentary 19.03.2014, Time of writing: 10:10 GMT
The Big Picture Is it over already? The politicians may not think so, but as far as the markets are concerned, the crisis in Ukraine is effectively over. Russian President Putin yesterday signed the accession treaty to allow Crimea to join Russia, but he also said that Russia did not intend to move into other regions of Ukraine, stating “we don't want division of Ukraine.” At the same time, Ukrainian officials tried to defuse the situation, saying they wanted to build “good neighbour relations” with Russia and pledging that Ukraine would not join NATO, a move that would be seen as highly provocative in Moscow.
The market apparently assumes that the clash between Ukraine and Russia has now reached an equilibrium and the affair is effectively over, with the worst-case scenario avoided. Stocks in Europe and the US rallied (Russian stocks were up another 4% or so), VIX back to where it was before the crisis began, and gold fell. USD made a new 2014 low against SEK, NZD and AUD. Personally, I would wait until Friday after the EU leaders’ meeting to see exactly what the final reaction of the Europeans is going to be, although so far they have not shown much stomach for a major fight. The G7 meeting next week may also take some action. The other as-yet unknown is what kind of response, if any, Moscow will make to the sanctions that the West put on it, although the sanctions announced so far are so toothless that they may not bother responding. I have a hard time believing that something that upsets the world political order like this can end so quickly and with so little disruption, but perhaps I’m just pessimistic.
The big loser of the day was the CAD, which fell after Bank of Canada Gov. Poloz said he can’t rule out an interest-rate cut if the economy worsens. He also said Q1 growth may be a bit softer than forecast because of the harsh weather. If we are indeed back to normal, CAD may be the new currency to sell, so long as there are no more tremors out of China to disturb AUD. JPY could return to its previous weakening trend.
Today it is a big day for normal macro-economic events, which are likely to take center stage unless there are some surprises from Ukraine. The UK budget is due to be announce by Chancellor Osborne. He will announce new growth and deficit forecasts and outline tax changes and spending initiatives. The existing forecasts by the Office for Budget Responsibility (OBR) are not so out of line with market forecasts and so there is not likely to be a major revision to the forecasts. As for fiscal policy, the next Budget after this one will be a few months before the next election, so the government may want to put in place some new policies that will help it at the polls. However, I can’t see a major change in direction away from the fiscal austerity that has been the major thrust of their policy up to now, so I would expect any popular reductions in taxes to be largely offset elsewhere in the budget. The Bank of England releases the minutes from its latest meeting. At the same, the UK unemployment rate is forecast to have remained unchanged at 7.2% in January, while the Jobless claims for February are expected to fall by 25.0k after a 27.6k decline in January.
In the US, the FOMC ends its two-day meeting. As we mentioned yesterday, the focus is expected to be on any changes in the phrasing of their forward guidance as the tapering of asset purchases is likely to be maintained at its current steady pace. The Fed will probably discard its 6.5% unemployment threshold and adopt qualitative guidance for signaling when it will consider raising the Fed Funds rate. Fed Chair Yellen will hold her first press conference as Chair following the FOMC decision and the release of economic projections earlier in the day.
Besides Yellen, we have five more speakers scheduled on Wednesday. During the Asian morning, Bank of Japan Governor Haruhiko Kuroda speaks on a panel at the International Financial Symposium and the Bank of Japan Board Member Takahide Kiuchi speaks at a meeting with business leaders. The Bank of Japan Board Member Takehiro Sato speaks at the Japan Society on "Recent Developments in Japan's Economy and Monetary Policy. During the European day, the Riksbank Governor Stefan Ingves speaks on financial stability and the Swiss National Bank President Thomas Jordan speaks on a panel.
The Market EUR/USD
• EUR/USD remained between the 1.3893 (S1) support and the resistance of 1.3965 (R1). A clear break above that bar may trigger bullish extensions towards the next hurdle at 1.4000 (R2). The structure of higher highs and higher lows remains in progress and since the rate is trading within the upward sloping channel, I still consider the short-term picture to be positive. Nonetheless, the negative divergence between the MACD and the price action remains in effect, thus the possibility for a pullback in the near future still exists.
• Support: 1.3893 (S1), 1.3850 (S2), 1.3810 (S3).
• Resistance: 1.3965 (R1), 1.4000 (R2), 1.4200 (R3).
USD/JPY
• USD/JPY found resistance at the 101.85 (R1) bar and moved lower to meet once again support at the low of 101.25 (S1). A dip below that hurdle may target the next support at 100.75 (S2), where a break will probably extend the move towards 100.00 (S3). Nonetheless, the RSI exited its oversold territory and is pointing up, while the MACD, although in its bearish territory, lies above its trigger line, thus I would expect the forthcoming wave to be to the upside, maybe for another test near the 101.85 (R1) resistance.
• Support: 101.25 (S1), 100.75 (S2), 100.00 (S3)
• Resistance: 101.85 (R1), 102.25 (R2), 102.70 (R3).
EUR/GBP
• EUR/GBP moved higher and found resistance at 0.8400 (R1), slightly above the 38.2% retracement level of the 1st Aug. - 17th Feb. downtrend. I expect the price to meet strong resistance near that area and since negative divergence is identified between the RSI and the price action, a downward corrective wave is possible. However, as long as the rate is trading above the prior downtrend line and above both the moving averages, the overall short-term outlook remains positive, for now.
• Support: 0.8340 (S1), 0.8300 (S2), 0.8260 (S3).
• Resistance: 0.8400 (R1), 0.8460 (R2), 0.8535 (R3).
Gold
• Gold moved in a consolidative mode, remaining slightly above the support level of 1354 (S1). The MACD, already below its trigger line, obtained a negative sign indicating bearish momentum. On the daily chart, the daily RSI exited overbought conditions, while the daily MACD crossed below its signal line, favoring further declines. However, as long as the low of 1332 (S2) holds I would consider any possible downward wave as a retracement.
• Support: 1354 (S1), 1332 (S2), 1310 (S3).
• Resistance: 1392 (R1), 1415 (R2), 1435 (R3)
Oil
• WTI moved higher after failing to overcome the strong support area near the 98.00 (S1) hurdle, which coincides with the 50% retracement of the 9th Jan. – 3rd Mar. uptrend. The price violated the upper boundary of the downward sloping channel. A clear break above the 200-period moving average, followed by a break above 100.75 (R1) may confirm that the 3rd-18th decline was just a 50% retracement of the prevailing uptrend. Moreover, positive divergence is identified between our momentum indicators and the price action, while the MACD is approaching its zero line, where a break will confirm the recent positive momentum.
• Support: 98.00 (S1), 96.50 (S2), 95.00 (S3)
• Resistance: 100.75 (R1), 103.00 (R2), 105.00 (R3).
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Market Analysis 20/03/2014
Daily Commentary 20.03.2014, Time of writing: 10:10 GMT
The Big Picture The dollar held its biggest gain in seven months versus a basket of its peers after Federal Reserve policy makers signaled interest rates could rise sooner and faster. Yellen said Fed could start raising interest rates around six months after its current asset purchase program ends. Central-bank officials estimated the benchmark rate target will be 1% at the end of 2015 and 2.25 percent a year later. Policy makers also reduced monthly bond-buying by $10 billion to $55 billion. The Fed discarded its 6.5% unemployment threshold for considering when to raise the Fed Funds rate and said it will look at a wider range of data.
The New Zealand dollar weakened after data showed nation’s economic growth slowed in the fourth quarter and to 0.9% in the fourth quarter from a revised 1.2% percent in the July-September period.
The UK unemployment rate remained unchanged at 7.2% in January, while jobless claims fell more than anticipated in February. At the same time the Bank of England published the minutes of its 5-6 March meeting. Policy makers said that the appreciation of sterling puts downward pressure on inflation and there is risk of further increases as the economy recovers. Later in the day, the Chancellor of the Exchequer George Osborne presented the UK budget to the House of Commons. He said that the economy continues to recover and recovers faster than forecast. He also said that the Office for Budget Responsibility revised up its forecast for economic growth.
The People’s Bank of China lowered its reference rate to 6.146 per dollar, the weakest level since Nov. 6 and the yuan fell for a fifth day.
Brent crude price rose on Thursday after the U.S. Federal Reserve meeting. In addition, geopolitical tensions also supported prices.
West Texas Intermediate traded at the highest price after U.S. government data showed that inventories dropped for a seventh week, at the delivery point for benchmark crude contracts. In Asia crude oil prices were flat after overnight gains.
Gold prices eased further in Asia on Thursday following the Federal Reserve’s announcement.
On Thursday, the Swiss National Bank meets to decide on interest rates; there’s virtually no question that it will leave rates along and maintain the EUR/CHF floor at 1.20.
In the US, the initial jobless claims for the week ended on March 15 are forecast at 322k vs 315k the previous week. That would bring the four week moving average slightly down to 328k from 330.5k. The Philadelphia Fed business activity index for March is forecast to rise to 3.2 from -6.3 in February, while the Conference Board US leading index for February is estimated to have slowed to +0.2% mom from +0.3% mom in January. The existing home sales for the same month are expected to be down 0.4% mom, after declining 5.1% mom in January.
Three Speakers are on Thursday’s schedule: The Bank of Japan Governor Haruhiko Kuroda, the ECB Executive Board member Sabine Lautenschlaeger and the BoE monetary policy member Martin Weale.
The Market EUR/USD
• EUR/USD collapsed on Wednesday, after Federal Reserve policy makers signaled they’ll probably raise interest rates by the middle of next year. The pair violated two support barriers in a row but the decline was halted by the lower boundary of the upward sloping channel and the 1.3810 (S1) support. A rebound near that area followed by a break above the resistance of 1.3850 (R1) will keep the rate within the upward sloping channel and may target once again the highs of 1.3965 (R3). On the other hand, a clear dip below the lower boundary of the channel and the 1.3810 (S1) support may be a first indication that the short term uptrend has ended. The MACD oscillator obtained a negative sign, confirming the bearish momentum of the price action.
• Support: 1.3810 (S1), 1.3770 (S2), 1.3715 (S3).
• Resistance: 1.3850 (R1), 1.3893 (R2), 1.3965 (R3).
EUR/JPY
• EUR/JPY remained supported by the 200-period moving average and the blue uptrend line. An upward violation of the 142.35 (R1) resistance would confirm the rebound and may trigger extensions towards the next hurdle of 143.80 (R2). On the downside, a break below the blue trend line and the support of 141.00 (S1) may pave the way towards the 139.15 (S2) bar. The MACD, although in its bearish territory, crossed above its trigger line, confirming the inability of the bears to drive the battle lower, for now.
• Support: 141.00 (S1), 139.15 (S2), 137.55 (S3)
• Resistance: 142.35 (R1), 143.80 (R2), 145.15 (R3).
GBP/USD
• GBP/USD also fell after the FOMC decision. The pair moved below the 1.6600 barrier and met support at 1.6520 (S1), near the longer term uptrend line. The outlook seems mixed, since the price follows a short-term downward path, but in the bigger picture, it remains supported by the longer-term trend line. I would maintain my neutral view until we have more indications about the forthcoming direction. The MACD oscillator, already in a bearish territory, crossed below its trigger line, confirming the strengthening bearish momentum of the price action.
• Support: 1.6520 (S1), 1.6465 (S2), 1.6380 (S3).
• Resistance: 1.6600 (R1), 1.6700 (R2), 1.6760 (R3).
Gold
• Gold fell below 1354 and moved lower to reach the support at 1332 (S1) and the 200-period moving average. A break below that level may signal a short-term reversal and have larger bearish implications. Nonetheless, since the RSI exited oversold conditions and is pointing up, an upward wave cannot be ruled out, maybe to challenge the 1354 (R1) as a resistance this time.
• Support: 1332 (S1), 1310 (S2), 1290 (S3).
• Resistance: 1354 (R1), 1392 (R2), 1415 (R3)
Oil
• WTI continued moving higher and reached the resistance of 100.75 (R1). A clear break above that obstacle may confirm that the 3rd-18th decline was just a 50% retracement of the prevailing uptrend and may trigger bullish extensions towards the next resistance at 103.00 (R2). The price confirmed the positive divergence between our momentum studies and the price action, while the MACD entered its positive territory, indicating positive momentum for the price action.
• Support: 98.00 (S1), 96.50 (S2), 95.00 (S3)
• Resistance: 100.75 (R1), 103.00 (R2), 105.00 (R3).
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Market Analysis 21/03/2014
Daily Commentary 21.03.2014, Time of writing: 10:10 GMT
The Big Picture The U.S. dollar continued to benefit from Fed Chair Janet Yellen’s statement and has strengthened against eight of its 10 developed-nation counterparts this week, with only the Australian and New Zealand dollars climbing. The focus today will be on comments from three Fed speakers. U.S data released yesterday added to dollar’s gains. The Philadelphia Fed Survey rose to 9.0 in March from -6.3 the previous month. Employment data released on Thursday showed weekly jobless claims for the week ended on March 15 rose by 5k to a seasonally adjusted 320k. Analysts had expected jobless claims to rise by 10k.
Yesterday, the euro reached a two-week low. There was more pressure on the common currency after the statement of European Central Bank Executive Board Member Sabine Lautenschlaeger about interest rates. She stated that rates will remain low for an extended period or even go lower.
The Australian dollar advanced after Citigroup Inc.’s Economic Surprise Index indicated that economic reports have been exceeding economist estimates. This index measures the gap between data reports and analyst estimates.
Crude oil prices fell in Asia on Friday as U.S. oil inventories rose for a ninth week. Gold advanced on speculation that the Federal Reserve statement about interest rates would boost physical demand for the precious metal.
On Friday, Eurozone’s preliminary consumer confidence for March is forecast to rise to -12.3 from -12.7 in February.
In Canada, retail sales are estimated to have risen 0.7% mom in January after falling 1.8% mom in December, while Canada’s CPI is forecast to have slowed to +1.0% yoy in February from +1.5% yoy in January.
Three Fed speakers are scheduled on Friday. St. Louis Fed President James Bullard speaks on the topic "Debt and Incomplete Financial Markets: A Case for Nominal GDP", Dallas Fed President Richard Fisher will deliver a speech titled “Forward Guidance: Fad or the Future of Monetary Policy", while Minneapolis Fed President Narayana Kocherlakota speaks on "Transitional and longer-term challenges for monetary policy".
The Market EUR/USD
• EUR/USD continued declining and fell below the 1.3810 barrier and the lower boundary of the downward sloping channel. The rate met support at the 1.3770 (S1) level near the 200-period moving average. A clear break below that support zone, may trigger extensions towards the next hurdle at 1.3715 (S2). Nonetheless, the RSI found support at its 30 bar and moved higher, thus I would expect the upward corrective wave to continue, maybe to challenge the 1.3810 (R1) resistance.
• Support: 1.3770 (S1), 1.3715 (S2), 1.3650 (S3).
• Resistance: 1.3810 (R1), 1.3850 (R2), 1.3893 (R3).
USD/JPY
• USD/JPY moved higher on Wednesday, breaking above the 101.85 barrier and reaching the resistance of 102.70 (R1). A clear break above the 102.70 (R1) hurdle, may target the next one at 103.40 (R2). Nonetheless, since the pair is not in a clear trending phase, I consider the overall outlook to remain neutral. On the daily chart, both the daily MACD and the daily RSI lie near their neutral levels, confirming the sideways path of the currency pair.
• Support: 101.85 (S1), 101.25 (S2), 100.75 (S3)
• Resistance: 102.70 (R1), 103.40 (R2), 103.75 (R3).
EUR/GBP
• EUR/GBP moved lower after finding resistance at 0.8400 (R1). The decline was halted by the support of 0.8340 (S1). The negative divergence between our momentum studies and the price action is still in effect, thus further decline cannot be ruled out. A dip below 0.8340 (S1) may target the next support at 0.8300 (S2), near the 38.2% retracement level of the 17th Feb. – 18th Mar. advance. On the other hand, a rebound near the support of 0.8340 (S1) may challenge once again the 0.8400 (R1) key resistance.
• Support: 0.8340 (S1), 0.8300 (S2), 0.8260 (S3).
• Resistance: 0.8400 (R1), 0.8460 (R2), 0.8535 (R3).
Gold
• Gold moved in a consolidative mode, remaining supported by the 200-period moving average. As mentioned in previous comments, a break below that support zone may signal a short-term reversal and have larger bearish implications. The RSI moved higher after exiting its oversold territory, while the MACD seems ready to cross above its trigger line, thus I would expect the forthcoming wave to be to the upside, maybe to test the resistance of 1354 (R1).
• Support: 1330 (S1), 1310 (S2), 1290 (S3).
• Resistance: 1354 (R1), 1392 (R2), 1415 (R3).
Oil
• WTI moved lower after finding resistance at the 100.75 (R1). Intraday bias is neutral for now since the possibility for a higher low still exist but only a break above the 100.75 (R1) would trigger further advances. On the downside, a break below the 98.00 (S1) support, may flip the outlook back negative. Both the RSI and the MACD remain above their blue support lines, for now.
• Support: 98.00 (S1), 96.50 (S2), 95.00 (S3).
• Resistance: 100.75 (R1), 103.00 (R2), 105.00 (R3).
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Market Analysis 24/03/2014
Daily Commentary 24.03.2014, Time of writing: 10:10 GMT
The Big Picture Last week the dollar strengthened versus most of the major developed-nation currencies.
Today, the yen slid against the euro and the dollar ahead of Japan’s Deputy Governor Kikuo Iwata speech. During his speech he warned that if inflation remains below 1% for a long period of time, it will increase the risk of deflation.
The preliminary China’s purchasing manufacturing Managers’ Index for March from HSBC and Markit Economics dropped to 48.1 from 48.5 in February and, missing market estimates of 48.7.Numbers below 50 signal contraction.
During the Asian morning, Australia’s currency weakened against most of its 16 major peers after China’s factory data. However it erased the losses and gained even more within the following hours.
Gold prices eased further in Asia on Monday after the China HSBC Flash Purchasing Managers Index data. Brent oil and West Texas Intermediate fell after a gauge of factory production in China contracted for a third month.
More March PMIs are due out during the European day. We have the preliminary figures for both the manufacturing and service sectors from France, Germany and Eurozone as a whole. France’s manufacturing PMI is forecast to be slightly down, while the service-sector PMI is expected to rise. Both Germany’s PMIs are estimated to be lower. Eurozone’s preliminary manufacturing PMI for March is expected to decline while the preliminary service sector figure is expected to remain unchanged.
In the US, the preliminary Markit manufacturing PMI for March is estimated to decline to 56.5 from 57.1 in the previous month, while the Chicago Fed national activity index is forecast to have risen to 0.10 in February form -0.39 in January.
We have three speakers scheduled on Monday. Federal Reserve Governor Jeremy Stein gives welcoming remarks at a Fed conference, while the ECB governing council member Erkki Liikanen speaks at a press briefing. Bank of Canada Deputy Governor Tim Lane will also speak.
The Market EUR/USD
• EUR/USD moved slightly higher after finding support at the 1.3770 (S1) bar, near the 200-period moving average and the 38.2% retracement level of the 3rd Feb. – 13th Mar. short-term uptrend. A clear break below that support zone may trigger extensions towards the next hurdle at 1.3715 (S2), near the 50% retracement of the prevailing uptrend. Nonetheless, the RSI continued moving higher after finding support at its 30 barrier, while the MACD, although in its bearish territory, seems ready to cross above its signal line. As a result, some consolidation or further upside correction cannot be ruled out.
• Support: 1.3770 (S1), 1.3715 (S2), 1.3650 (S3).
• Resistance: 1.3810 (R1), 1.3850 (R2), 1.3893 (R3).
EUR/JPY
• EUR/JPY seems to follow a sideways path between the support level of 141.00 (S1) and the resistance at 142.00 (R1). The pair remains well supported by the 200-period moving average and an upward violation of the 142.00 resistance would confirm the rebound and may trigger extensions towards the next hurdle at 143.20 (R2). On the downside, a dip below the 200-moving average and the support of 141.00 (S1) may pave the way towards the 139.15 (S2) bar.
• Support: 141.00 (S1), 139.15 (S2), 137.55 (S3)
• Resistance: 142.00 (R1), 143.20 (R2), 143.80 (R3).
GBP/USD
• GBP/USD fell below the 1.6520 barrier and met support at the lower boundary of the downward sloping channel and the support of 1.6465 (S1). As long as the rate is trading within the downward sloping channel and below both the moving averages, I consider the short-term outlook to be negative. However, since the RSI found support at its 30 level, while the pair remains supported by the lower bound of the channel, an upward corrective wave within the channel cannot be ruled out.
• Support: 1.6465 (S1), 1.6380 (S2), 1.6260 (S3).
• Resistance: 1.6520 (R1), 1.6600 (R2), 1.6700 (R3).
Gold
• Gold moved higher, but after finding resistance at 1342 (R1) moved lower to meet once again the 200-period moving average. A break below the moving average may signal the completion of a failure swing and extend the decline towards the next support at 1310 (S2), where a clear dip may pave the way towards the 1290 (S3) barrier which coincides with the 50% retracement level of the 20th Dec.- 14th Mar. advance. On the daily chart, the daily MACD fell below its trigger line and moved lower, favoring further declines.
• Support: 1325 (S1), 1310 (S2), 1290 (S3).
• Resistance: 1342 (R1), 1354 (R2), 1392 (R3)
Oil
• WTI moved lower after finding resistance at the 100.00 (R1) key hurdle. A clear break above that obstacle may challenge the next resistance at 101.00 (R2). The RSI remains above its blue support line while the MACD still lies above both its trigger and zero lines. As long as the price is printing higher highs and higher lows within the purple uptrend channel, the picture remains positive.
• Support: 98.30 (S1), 97.30 (S2), 96.50 (S3)
• Resistance: 100.00 (R1), 101.00 (R2), 103.00 (R3).
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
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Market Analysis 25/03/2014
Daily Commentary 25.03.2014, Time of writing: 10:10 GMT
The Big Picture Higher US rate expectations fail to support USD US interest rate expectations continue to edge higher post-FOMC, but the dollar is losing ground nonetheless as fears over Ukraine recede and short-term rates in many other countries rise as well, albeit not by as much as they have in the US. The implied interest rates on Fed Funds futures continued to move higher, as did 5-year yields (although 10yr Treasury yields are below their post-FOMC highs). Fears of higher policy rates seem to be affecting US stocks and gold, which declined, yet the dollar isn’t getting much support. Worries about Ukraine are receding as US Secretary of State Kerry holds meetings with his Russian and Ukrainian counterparts and a survey of Germans showed a majority think the West should accept Russia’s annexation of Crimea.
As a result, the dollar is opening lower this morning against most of the currencies that we track. Copper and oil are the biggest gainers as risk sentiment returns and Chinese stocks rallied, while among currencies, AUD, NOK and CAD are doing the best among the G10 currencies and ZAR, RUB and INR have followed CNY higher in the EM world. CNY rose to a one-week high after the central bank raised the currency’s fixing for a second day in a row, which countered much of the negative sentiment from yesterday’s lower-than-expected HSBC China manufacturing PMI. It seems to me that risk appetite is on once again and unless and until either the Ukraine situation heats up again or people get more concerned about Chinese growth, we can expect the commodity currencies to continue to gain, contrary to what I had expected.
The main event on the agenda today will be the German Ifo survey for March. The business climate index and expectations index are forecast to have declined, while the current assessment index is expected to be up slightly. Last month, all three indices came out better than anticipated with EUR/USD rising about 20 pips at the time of the release.
From the UK, the nation’s CPI is expected to have risen 0.5% mom in February vs -0.6% mom in January, driving the yoy rate down to 1.7% from 1.9%. BBA mortgage approvals for February are expected at 50000, not much of a change from 49972 in January.
In the US, the Federal Housing Finance Agency (FHFA) house price index and the S&P/Case-Shiller home price index for January are expected to show a slowdown in the pace of increase in house prices. New home sales are expected to have declined in February, after rising in January. The Conference Board consumer confidence index for March is expected to have risen to 78.5 from 78.1 in February, while the Richmond Fed manufacturing survey for the same month is expected to be up to 4 from -6. This mix of indicators is overall slightly US-positive, although sentiment may prove stronger than facts in determining the course of the currency.
Two speakers are scheduled on Tuesday. ECB President Mario Draghi and Atlanta Fed President Dennis Lockhart.
The Market EUR/USD
EUR/USD moved significantly higher on Monday and tried to reenter in the upward sloping channel. But after finding resistance near the 1.3880 barrier, it moved lower to settle once again below the lower band. I adopt a neutral stance for now, since a break below the support of 1.3770 (S2) and the 200-period moving average is needed to confirm a forthcoming lower low. On the other hand, a break above the highs of 1.3965 (R2) may confirm that the recent decline was just a 38.2% retracement of the 3rd Feb. – 13th Mar. short-term uptrend.
Support: 1.3810 (S1), 1.3770 (S2), 1.3715 (S3).
Resistance: 1.3880 (R1), 1.3965 (R2), 1.4000 (R3).
USD/JPY
USD/JPY moved in a consolidative mode, remaining below the resistance of 102.70 (R1). A clear break above the 102.70 (R1) hurdle may target the next one at 103.40 (R2). Nonetheless, since the pair is not in a clear trending phase, I consider the overall outlook to remain neutral. Both the moving averages are pointing sideways, while on the daily chart, both the daily MACD and the daily RSI lie near their neutral levels, confirming the sideways path of the currency pair.
Support: 101.85 (S1), 101.25 (S2), 100.75 (S3).
Resistance: 102.70 (R1), 103.40 (R2), 103.75 (R3).
EUR/GBP
EUR/GBP moved higher after rebounding near the 50-period moving average and is now trading slightly below the 0.8400 resistance barrier. A break above that level may have larger bullish implications and target the next resistance at 0.8460 (R2), which coincides with the 50% retracement of the 1st Aug. - 17th Feb. downtrend. My only concern is that we can identify negative divergence between both our momentum indicators and the price action, signaling that the upside momentum is decelerating, for now.
Support: 0.8340 (S1), 0.8300 (S2), 0.8260 (S3).
Resistance: 0.8400 (R1), 0.8460 (R2), 0.8535 (R3).
Gold
Gold fell below the 1325 barrier and reached the support level of 1310 (S1). A decisive dip below that support may pave the way towards the 1290 (S2) bar, which coincides with the 50% retracement level of the 20th Dec. - 14th Mar. advance. The RSI seems ready to exit oversold conditions, thus an upward corrective wave before the bears prevail again cannot be ruled out.
Support: 1310 (S1), 1290 (S2), 1265 (S3).
Resistance: 1325 (R1), 1342 (R2), 1354 (R3).
Oil
WTI failed once again to break above the resistance of 100.00 (R1). However, the price remains within the purple upward sloping channel and a break above 100.00 (R1) may challenge the next resistance at 101.00 (R2). Only a break below the 98.30 (S1) support may indicate the recent advance has ended. Relying on our momentum studies does not seem a solid strategy for now, since the RSI met support at its blue support line, while the MACD seems ready to cross below its signal line.
Support: 98.30 (S1), 97.30 (S2), 96.50 (S3).
Resistance: 100.00 (R1), 101.00 (R2), 103.00 (R3).
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
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