Technical and Market Analysis by Vistabrokers - page 15
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USD / CADShows Vital Signs
At the end of January saw the US dollar has established nearly six-year low value against the Canadian dollar, which became possible amid the large-scale decline in oil prices (Canada is one of the largest exporters in the world), and the subsequent reduction in key interest rates of the Bank of Canada. However, with the advent of the correction oil market conditions has changed, and the last wave of growth met with a correction, which has taken the form of "triangle". This graphic figure only shows a lull, because with the advent of new vehicle, boundaries of the pattern will be overcome by the price and this will indicate priority for action. At this point, it seems that the bulls in USD / CAD began to take the upper hand, which became the cause of Friday's data on changes in retail sales in Canada. The December value has fallen by 2%, despite the fact that expectations were reduced to decrease by only 0.3%.
It should be noted that the support for quotes is still provided by the trend line which has started on December 31 and which has repeatedly made the point for bulls' purchases. However, in this case, only the output of the aforementioned triangle boundaries will give us a signal to enter. So, on top the 1.2600 mark is still tighten growth, and the 1.2360 mark is doing it below.
EUR / USD. CautiousOptimism
The main currency pair has experienced some signs of turbulence, when on Friday the weak data on business activity in the industrial sector of the region's economy disappointed the market, bringing up quotes to the earlier indicated level of support (1.1270). No less dramatic was also a rebound from this mark after it became aware of a high probability of the current bailout program for Greece extension for another 4 months, which was rumored to be from the text of the agreement. Greeks asked for more (6 months), and the details of the agreement have not yet been disclosed, as well as not yet taken, however, it can take some of the risk out of the market in the context of what the country looks set to remain in the ranks of the eurozone. Thus, at the moment the pair is trading at usual levels, with in addition of a hidden growth potential, when the details of the agreement will be known.
There is nothing more permanent than temporary, so the work in a horizontal channel (1.1270 - 1.1450) on the rebound from its borders, at the moment, is one of the most appropriate trading tactics. In this case, it is useful to use addition signals from indicators such as stochastics to confirm. At the same time, the potential after the powerful motion beyond this range is very high, and we must remember this.
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Vista Brokers: GreeceGained Time toReach aCompromise withCreditors
On Friday, EUR/USD started the day with a decline, when it became known that Germany has rejected the Greek proposal on the temporary extension of the lending program. However, as Vista Brokers analysts say, later the pair regained amid optimism about the successful completion of negotiations.
The European stock market was influenced by expectations of a positive outcome of negotiations and rose to its highest level in seven years. The main pan-European Stoxx Europe 600 Index added 0.23%. We also should recall the positive statistics of Friday: the index of business activity in industry and services in France came out better than expected, and the general index of activity showed an unexpected increase in February. The index of business activity in the euro zone from Merkit rose from 52.6 in January to 53.5 in February, which was the highest value in seven months.
In accordance with the expectations of most market participants, at the Eurogroup meeting the agreement on Greece was reached. Thus, the Internationale bailout program for the country was extended for 4 months, during which negotiations on further cooperation continue. At the same time Greece undertakes to meet its debt obligations in full, and should provide the first list of reforms on Monday.
Analysts say that the consent of the Eurogroup for a temporary extension of the program only gave Greece a temporary reprieve, but did not solve the problems of the country, so the risks of leaving the euro zone remain.
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Vista Brokers: Oil isRising amidGreek Optimism
Oil quotes on Monday morning are rising after a late Friday at the Eurogroup meeting it was decided to extent the bailout program for Greece. Vista Brokers analysts note that the long-term trend for oil is still downward, as the market is oversupplied.
In addition, the risk of a global economic slowdown persists, as the risk of Greek exit from the eurozone, because the extension of the program for 4 months is only a temporary solution. Perhaps during this time Athens will be able to negotiate with creditors to change the terms of credit. In any case, in June, the "Greek problem" will again become acute.
Analysts point out that the financial markets generally worked out a positive outcome of Greek negotiations with creditors on Friday, when the issue has become known unofficially. The euro was recovering against the dollar, stocks has reached their record highs.
In its turn oil yielded positive mood on Monday. The price of Brent has reached $ 60.34 per barrel and the price of WTI - $ 50.87. However, the oil market remains below the level of the previous week due to its oversaturation, which has a pressure on oil in the long run.
On Friday, Goldman Sachs has issued a forecast that in the fourth quarter of 2015, growth in oil production will be 440,000 barrels per day compared to the same period last year. Production in the United States at the beginning of the year slowed slightly, but bank's experts believe that the process is temporary.
By the way, Goldman Sachs expects that the rise on the oil market will soon rise stop again and oil prices may fall to $ 39 per barrel. Recall that in mid-January the oil market has rebounded after falling to a six-year low. Last week, Brent crude added almost $ 20, approaching the level of $ 63.
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Market Pulse 23.02
Monday is not full of information. Perhaps the market will be too busy with working out the news that Greece has come to a compromise in negotiations with international creditors. In Germany, the portion of indicators from the IFO institute will be released, in the UK – the retail sales data.
9:00 *** Ifo Business Climate - February (Germany)
9:00 ** IFO - Current Assessment - February (Germany)
9:00 ** IFO - Expectations - February (Germany)
Strong impact on the market (EUR). Expectations on IFO institute indexes are very optimistic - recently confidence in the German economy is growing, and these data can strengthen it.
11:00 ** CBI Realized Sales - February (UK)
Moderate impact on the market (GPB). The indicator of the activity in retail sales is based on a survey of retail and wholesale companies on the dynamics of sales. Growth or exceeded forecast is favorable for the pound.
15:00 ** Existing Home Sales - January (USA)
Moderate impact on the market (USD). An important indicator of the the housing market health in the US, has a tendency to affect the markets. The excess of the forecast is favorable for the dollar. In January, the indicator is expected to decline.
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GOLD.Is Trend our FriendAgain?
While buyers are catching the bottom, the caravan slowly goes southward. As a result, not only the next final frontier was reached - the support line drawn through the last few months minimums, but also the first and probably not the last attempt to overcome it was made. Quotes remain within the downtrend channel of last few weeks, and moving averages confirm the priority of short positions. Despite the lack of the direct influence of fundamental publications in different countries, the today's speech of the Fed head Yellen ahead of the Senate could make adjustments to the current balance of power in the gold market.
It is recommended to open the order to sell from the last local minimum breakthrough at 1190.00 or when approaching the trend line. The next target is the January minimum (1167 dollars per ounce).
USD / CAD. AboutGraphicFigures inContext ofFundamentalEvents
We continue to monitor the situation in USD / CAD, where has recently formed a graphic shape of consolidation "triangle". Note that to "score" this pattern, we needed a previous trend with clear graphic boundaries and also we needed the price to come through one of these boundaries subsequently. In last 24 hours first two terms have added the third - bulls attempted to break through the upper boundary of the figure, breaking the previously designated threshold level 1.2600. It is likely that in recent days the loonie was pressured by reduction of oil prices, as well as very weak fundamental data recently published in relation to the Canadian economy.
There is a high probability that the dollar will continue to build up an advantage in USD / CAD, but today's speech of the Fed head ahead of the parliamentary committee in the Senate may be a stumbling block. Note that this event takes place only twice a year, so the impact on the market can be overwhelming. Investors are advised to carefully open position after this event (unless, of course, it would be appropriate in the context of Yellen statements), but for the short-term speculators it is an opportunity to buy just now, defending their positions by fairly short stops.
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Market Pulse 24.02
On Tuesday there will be a series of central banks' representatives speaking in different countries. In the UK, the head of the Central Bank Mark Carney and several members of the MPC will speak, in the euro zone, the United States and Canada - the heads of central banks will talk. Markets will be looking for any signals in monetary policy changes in their comments.
9:10 ** MPC Member Kristin Forbes Speaks - February (UK)
10:00 ** Treasury Select Committee Hearings - February (UK)
10:00 *** BOE Governor Mark Carney Speaks - February (UK)
10:00 ** BOE Deputy Governor for Monetary Policy Ben Broadbent Speaks - February (UK)
10:00 ** MPC Member David Miles Speaks - February (UK)
10:00 ** MPC Member Martin Weale Speaks - February (UK)
Strong impact on the market (GPB). From the Bank of England markets expect hints at monetary policy tightening in the foreseeable future, so investors will closely monitor comments of the Monetary Policy Committee members and draw their own conclusions.
10:00 ** Consumer Price Index - January (euro zone)
10:00 ** Core CPI - January (euro zone)
Moderate impact on the market (EUR). The Consumer Price Index is one of the key indicators, and the benchmark for central banks. In January, analysts expect a decline in consumer prices in both mom and yoy values.
14:00 *** ECB President Mario Draghi Speaks - February (euro zone)
Strong impact on the market (EUR). Draghi's comments about the slowing economy and low inflation can put pressure on the euro, while confidence in the economic situation, on the contrary, can support a single currency. However, the latter is unlikely.
15:00 *** CB Consumer Confidence - February (USA)
15:00 *** Federal Reserve Chair Janet Yellen Testifies - February (USA)
Strong impact on the market (USD). In February, analysts expect a decrease in the indicator of consumer confidence, which can put a pressure on the dollar, although the statistics may still surprise. The indicator is based on a survey of households on the confidence in the future of the US economy. As for the speech of Janet Yellen, evidence of the tougher Fed monetary policy is expected.
19:00 *** BOC Governor Stephen Poloz Speaks - February (Canada)
Strong impact on the market (CAD). Traders and investors listen carefully to the speeches of the runners, as they may contain allusions to change the course of monetary policy, or to change the Bank's assessments of the economic outlook. Tougher stance on inflation and improving the prognosis is favorable for the Canadian dollar. Concern risks and ignoring inflation - negative for the exchange rate.
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Vista Brokers: Ifo Indexes Disappointed Market Participants
On Monday, the euro fell from Friday's highs of around 1.1450 reached after a preliminary agreement of Greece with international lenders. Vista Brokers analysts note that stock markets, meanwhile, are reaching new highs amid optimism about the "Greek problem".
A pressure on the single currency had the data on Germany from the Ifo institute, which has come out weaker than expected. Thus, the business climate indicator rose in February by 0.1 vs. 0.7 expected. The current assessment indicator fell from 111.7 to 111.3, while analysts had expected growth to 112.5. Indicator of economic expectations rose also much weaker than expected.
After the release of statistics euro lost 0.64% to the level of 1.1303. A key theme again was negotiations of Greece – having worked out the optimism after their completion, the market focused on a report on the reforms that Athens are now required to provide. List of reforms that Greece is committed to implement, should be given today, although unofficial sources say that it had been already agreed with the Eurogroup.
According to the Greek government, the list will include reforms to combat tax evasion and corruption, as well as some public sector reforms.
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Vista Brokers:MarketexpectsYellen'sspeech
On Monday, the US dollar rose against the euro and other competitors amid expectations of speech of the Federal Reserve head Janet Yellen ahead of the US Congress. Vista Brokers analysts point out that the Yellen's speech will be devoted to the economic situation in the country and monetary policy, so that is of great interest for investors. The dollar index against the basket of currencies yesterday rose by 0.3%, to 85.62, its highest level since February 11.
Thus, on Tuesday the Fed head will speak first ahead of the Senate Banking Committee, and on Wednesday – ahead of the Finance Committee of the House of Representatives. The market will expect from Yellen evidence that the Fed will raise interest rates this year, for the first time since 2006. Earlier, according to the results of the January Federal Open Market Committee meeting investors caught signals of Fed readiness to raise interest rates, as there was mentioned a significant recovery of the labor market. This gave a support to the dollar - if rates rise, the US currency will become increasingly attractive to investors.
But the last week January meeting minutes were published and they have reflected FOMC sentiment more accurately. It became clear that the Committee is not so determined to act. Some members of the Committee insisted on caution and spoke about the risks that too strong dollar can bring the US economy, as well as about a slowdown in the world economy. In general, the Fed sentiment was much more "dovish" than had been expected and the dollar declined after the minutes.
Now the market expect signals for the tendency to tougher Fed policy from Janet Yellen. Investors will also pay attention to some statistics, which will be released in the US this week, in particular, the data on the consumer price index for January and GDP for Q4 2014. Analysts expect that any of Yellen's comments or statistics can be a catalyst for the dollar and push currency pairs out of their usual ranges.
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GBP / USDMovestoNewHeights
A speech of the Fed's head ahead of the Senate Banking Committee gave the "cable" an additional impetus through the weakening of the US dollar. So, Yellen did not give reasons to doubt that the tightening of monetary policy sooner or later will happen (though it is certainly not going to happen at the next two meetings), but it seems that markets were set to more bellicose rhetoric of the main figure for financial markets in this context. Whatever it was, the pair has broken another resistance level (1.5480), which only confirms the hypothesis about the development of a full-scale correction of more than six months GBP / USD falling.
Now, when the last correctional Fibonacci level 61.8% of the decline in December 2014 - January 2015 has left behind, we should consider opening long positions with an interim target 1.5620, where is the value of the nearest resistance level. Well, the first strategic target is 1.5800, where is a correction 38.2% of the decline in the period of July 2014 - January 2015.
USD / CAD. TheWeather isChanging...
Yesterday a growth was a priority scenario (due to the upper border of the graphic pattern "triangle" overcome). However, yesterday's speeches of two most significant for the USD / CAD figures, namely the Fed chairman and the head of the Bank of Canada, have turned upside down ideas about further actions of these central banks. From Yellen the market has expected a tougher approach to interest rate policy, while Poloz has surprised markets, specifically making it clear that in the near future we should not expect rates cutting. A stormy reaction was expected, but now we have a new approach to the current situation. Thus, the false breakout of the above-mentioned figure backfires and dumps long positions by market participants. Now all the attention is drawn to the pair's dynamics and to the fact whether conditions be able to predict the start of a unprecedented in its scale correction of all the January movement.
At this point it is recommended to be out of the market, waiting for a possible overcome of a designated support line, which was more than once a decisive argument in favor of the bulls. If the breakthrough is destined to be, the price can quickly reach the recent local minimum at 1.2360 and then - the 38.2% Fibonacci retracement (1.2325), which together form a zone of support. Further reduction will give strong arguments in favor of that targets, corresponding to the next levels of correction of 50% (1.2180) and 61.8% (1.2030), will be achieved.
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Vista Brokers: Yellen did notMeetMarketExpectations
Of course, the most anticipated event of Tuesday was the speech of the US Federal Reserve Janet Yellen ahead of the Senate Banking Committee. Vista Brokers analysts note that investors have expected from Yellen some signals that the Fed intends to raise rates this year, and the speech left a mixed impression.
Hopes that the Federal Reserve during the summer or autumn will raise rates for the first time since 2006 are quite large. However, Yellen did not give any clear signals about the propensity of Fed to rise rates so soon.
In her speech ahead of the Senate Yellen used to talk about the future plans of the Federal Reserve, and she said that the regulator will gradually move to the phase in which the Fed will consider interest rate hikes "on a meeting-by-meeting basis". The Fed chief gave no clear predictions, but only said that soon Federal Open Market Committee will have more space to maneuver, and they will be able to act according to their judgments about the economic situation.
We note a few points that Janet Yellen has made in her speech:
- the US housing market has not yet recovered as expected, but will rise with economic recovery;
- the Fed sees risks for the economy as balanced, their confidence in the economy has grown;
- the labor market is not completely recovered, but household incomes are rising, thanks to the growth of employment;
- the Fed will raise rates when will be absolutely confident in the economic recovery, starting the process too early is risky;
- the Fed is inclined to think that they need to consider two things: the labor market and inflation.
Overall, the performance was in an optimistic way, but it did not gave a support to the dollar as investors had expected some clear signals.
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