Technical and Market Analysis by Vistabrokers - page 16
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Vista Brokers: DollarDroppedagainstMajorCurrenciesafter Yellen's Speech
On Wednesday, the dollar is losing ground against its major competitors after a yesterday's speech of Janet Yellen ahead of the Senate. Vista Brokers analysts recall that prior to the speech the greenback grew against a basket of currencies, as markets expected from the Fed chairman some clear signals that the controller will begin to raise interest rates in June. The Yellen's speech was quite optimistic, as she has noted labor market recovery, the balance of risks, growing confidence in the economy. However, markets did not see those anticipated signals in its comments.
The situation resembles the reaction to the publication of the the January meeting minutes of the Fed last week. Investors and traders also expected that the minutes will show strong commitment of the Federal Open Market Committee, but instead they saw that many members are opposed to the imminent rate hike.
So yesterday Janet Yellen said that the Fed is just beginning to prepare to go to the cycle when rates could be raised, but the issue will be discussed "on a meeting-by-meeting basis". And she also commented that her words should not be taken as a signal that rates could be raised at any particular meeting.
Dollar "bulls" were disappointed, and the US currency came under pressure. On Wednesday, the dollar lost 0.2% against the yen, dropping to 118.73 yen, while on Tuesday, before the Yellen's speech, the dollar traded against the Japanese currency at a 12-day high of 119.84 yen.
Euro began Wednesday morning with a rally against the dollar. At the time of writing, the EUR / USD is at 1.3835, compared with the opening levels of 1.3382. Support for the single currency has the fact that Greece has approved with creditors a plan of reforms, which Athens are required to implement with the extension of the bailout program for 4 months.
The Australian dollar rose against the US by 0.6% to $ 0.7874, not only amid the weakness of greenback, but after it became known that the index of business activity in the manufacturing sector in China in February rose more than expected.
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Market Pulse 25.02
If Tuesday's main event was the speech of Janet Yellen ahead of the Senate, on Wednesday investors are waiting for the speech of the Fed Chair ahead of the House of Representatives. Today in China the first important statistics from the beginning of the lunar New Year celebration will be published. This is the HSBCflashmanufacturing PMI. The USA will report on the volume of home sales in the primary market.
9:30 **BBA Mortgage Approvals- January (UK)
Moderate impact on the market (GPB). Shows the number of loans for home purchase. Allows us to estimate the activity in the mortgage market in Britain, according to the largest banks.
11:35 ** BOE Deputy Governor Andrew Bailey Speaks - February (UK)
Moderate impact on the market (GPB). Andrew Bailey is included to the monetary committee which is responsible for the formation of monetary policy. His speech may clarify the next steps of the Bank of England, which could increase the volatility in markets.
15:00 *** Federal Reserve Chair Janet Yellen Testifies - February (USA)
15:00 *** New Home Sales - February (USA)
Strong impact on the market (USD). During yesterday's speech Yellen has confirmed the tendency of the Fed to this year rates hike. Probably, today she would follow the same line. With regard to the volume of home sales in the primary market, in January it is expected to decline.
16:00 *** ECB President Mario Draghi Speaks - February (euro zone)
Strong impact on the market (EUR). Comments of the ECB President Mario Draghi may have a significant impact on the market, especially at times when we expect non-standard measures and changes in the course of monetary policy from the ECB. Now Draghi comments may be particularly interesting in the context of the confirmation of the Fed monetary policy tightening plan.
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GBP / USD.ToHold orto Fix
It is a new day and a new high for the pair. Buyers seem quite accustomed after the Fed's head did not persist with the promise to keep to head for the tightening of monetary policy by all means. Nobody wants to create problems to the own economy in the absence of the main object of the struggle (inflation). All the more reason the level of interest rates on government treasury bonds in USA is almost the highest in the developed world, so the rhetoric has become generally neutral. That is what bulls needed. Now they also have some comments from the Bank of England about a possible rate hike to 1% in 2017, and the unemployment rate, which is on the minimum of the last 5 years. To date, the quotes have reached the upper boundary of the rising channel.
Investors for who fluctuations within the channel are child's play, can continue to hold long positions. For those who prefer a short-term work, trying to take everything and every movement, the resistance line achieving would mean the intermediate results fixing and the possible entry to the purchase when the support line is reached. Targets remain the same - 1.5620 (the nearest resistance level), and then - 1.5800 (correction level 38.2% from a seven-month fall). Today, it is worth paying attention to revised UK GDP for the 4th quarter 2014 release.
GOLD. At theIntersection ofTwoRoads
The situation in the gold market is somewhat different - buyers feel uncertainty of bears in their course of action after reaching the support line that connects minimum values of all the ascent, we can see over the past few months. We also see daily candles without bodies and with very long shadows that in terms of the Japanese candlestick analysis language can be called "doji". This is a strong reversal pattern, especially when it appears near significant levels. On the other hand, a short-term descending channel is still relevant for us.
Taking into account the current technical picture, it is recommended to monitor the situation on a regular basis, ready to act, depending on the scenario. Given a strong support, sales are worthy of consideration only if the mark of 1190 dollars per troy ounce will be broken, while going beyond the downstream channel will give a signal to open long positions.
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Vista Brokers:CautiousStanceofFedDisappointsBulls
On Wednesday, the dollar has gotten a support after the release of statistics on the volume of home sales in the US primary market in January. Vista Brokers analysts point out that for the first month of the new year the volume of sales has declined slightly, though showing much stronger results than the market had expected. So, in percentage terms sales decreased by 0.2% against the expected 2.3%. Values for December were also revised slightly higher.
However, this positive did not keep the dollar from lower against its major counterparts after the speech of Janet Yellen ahead of the House of Representatives. Fed Chairman in her comments was again cautious, noting that wage growth and inflation have to accelerate before the Fed will raise rates, and labor market recovery is not a good reason to start this process. Fed fears that a premature rate hike could lead to negative consequences for the US economy.
Yesterday's speech was in sync with comments that Yellen has given on Tuesday ahead of the Senate. In the second day as well as in the first one after the Fed's head speech the dollar was under pressure. Thus, yesterday USD / JPY fell by 0.1% to 118.86, and the EUR / USD rose by 0.2% to 1.1362. The dollar index fell by 0.3%, to 85.20.
Analysts reminds that the next Fed meeting will be held on March 17-18. Perhaps, then, bulls will get some signals that rates will still be raised in the summer. While market participants are disappointed with the too cautious stance of the controller.
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Vista Brokers: On Thursday,Oil isTrading underPressure Again
On Thursday, oil prices are falling again after its rally on Wednesday amid the publication of data on resource production growth in the United States. Vista Brokers analysts say that Brent crude oil has decreased by 0.62% to 61.25 dollars per barrel after Wednesday gained more than 5%. April futures for WTI crude oil has fallen by 1.06% to 50.45 dollars per barrel after rising 3% in the previous trading session.
A pressure to oil prices was put by the weekly US Department of Energy review, which showed that commercial oil reserves in the country are at 80-year highs. For the week ending on February 20 this indicator has risen by 8.4 million barrels to 434.1 million barrels, while analysts expected an increase by only 3.98 million barrels.
Earlier on Wednesday, oil has gained support from several fundamental factors. Firstly, Saudi Oil Minister Ali al-Naimi said that markets had calmed down, and demand for resources had begun to gradually increase. Secondly, it was reported that manufacturing activity in China has grown much stronger than expected, and Greece approved the list of reforms with the Eurogroup. This strengthened hopes for global economic recovery, and therefore the demand for fuel. And thirdly, it was the speech of the Federal Reserve head Janet Yellen ahead of the Senate, which showed a cautious position of the controller and put pressure on the dollar.
However, these factors have not been able to support the growth of oil for too long - today the market has returned to the theme of high levels of oil production and a falling demand. Note that in the United States the production is large-scale, despite the fact that now in the oil sector the largest since 1980 workers' strike takes place. It is a strike of several thousand workers at 15 oil companies.
Analysts say that despite some increase of oil over the past few weeks, in global terms, we still have a crash by almost 50%, which is the largest decline in the oil market over the past 20 years. The main reason is that the "shale revolution" and the growth of production in the United States, together with the return of Libyan oil to the market which led to a strong increase in demand. At the same time slowing economies of the euro zone, China and Japan led to lower demand.
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Vista Brokers: S & PDowngradedOutlook forEconomicGrowth in China and Japan
On Thursday, it was reported that the international rating agency Standard & Poor's lowered its forecasts for 2015 - 2016 years in Japan and China. At the same time, as Vista Brokers analysts say, the forecast for India was improved.
Thus, Standard & Poor's experts expect that by the end of 2015 Japan's GDP will grow by only 0.7% instead of 1.3% as it had been expected in earlier forecasts. The next year it is expected to grow by 1.3% against 2.1%. As for China, the forecast for GDP growth in 2015 was lowered by S & P from 7.1% to 6.9%, and in 2016 - from 6.7% to 6.6%. The rating agency has kept the rating of Chinaat the same level "AA-" with a stable outlook.
With regard to India, Standard & Poor's has revised its forecasts upstairs. Thus, for the fiscal year ending in March 2016, India's economy is expected to grow by 7.9% versus 6.2% previously expected. In the next fiscal year it is projected to grow by 8.2% instead of 6.6%.
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Market Pulse 26.02
Thursday will be a day with a highly charged fundamental background. Important statistics will be published in Germany, UK, USA, Canada, the euro zone, so that the market can be extremely volatile.
8:55 ** Unemployment Change - February (Germany)
8:55 ** UnemploymentRate - February (Germany)
8:55 ** Unemployment Data Released by Federal Labor Agency - February (Germany)
Moderate impact on the market (EUR). Data for Germany are expected to be quite positive - analysts suggest that the number of unemployed people in February, will reduce by 10K and the unemployment rate will remain the same.
9:30 *** Second Estimate GDP - Q4 (UK)
Strong impact on the market (GPB). The UK GDP growth in the final quarter of the last year is expected to reach 0.5% month on month and 2.7% year on year.
10:15 *** ECB Announces Allotment in 4-years TLTROs - February (euro zone)
Strong impact on the market (EUR). The value indicates the amount of loans that the ECB has issued to commercial banks. The large volume indicates an increased demand for liquidity from the ECB and may put pressure on the euro.
13:30 *** Consumer Price Index - January (Canada)
13:30 *** Core CPI - January (Canada)
Strong impact on the market (CAD). Analysts expect that the consumer price index in January in Canada has fallen by 0.3%, while the core index has risen by 0.1%. Not too optimistic forecasts for the economy and the actual data can be even worse if the Canadian dollar will be under pressure.
13:30 *** Consumer Price Index - January (USA)
13:30 *** Core CPI - January (USA)
13:30 *** Durable Goods Orders - January (USA)
13:30 *** Core Durable Goods Orders - January (USA)
13:30 *** Unemployment Claims - February (USA)
13:30 ** Continuing Claims - February (USA)
Strong impact on the market (USD). Such a large portion of statistics can seriously affect the dollar. The market attention will likely be turned to the data that are reference points for the Fed: the consumer price index and unemployment claims.
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GBP / USD.Close-in Objective
In the last review, we noted the fact that prices had reached the channel line of the current uptrend and a correction from achieved levels is probable. Actually, that is what has happened, and the formal start of reducing put quite projected data on the revised value of the UK GDP for the 4th quarter (0.5%). It is likely that the role in the doubt of buyers played another quarterly statistics on the volume of capital investments in the country (-1.4% against the expected growth of 2%). Anyway, the fall was limited by the achievement of the rising channel lower boundary, where the situation has stabilized.
This situation can be regarded as a godsend, because the market made it possible to build up a long position in the framework of the trend with a rather short stop. So, we recommend to open long positions, limiting the possible loss by the minimum value of yesterday's trading - 1.5392. As an interim target of purchases we can name 1.5620 mark, where is one of the important resistance levels. It is probably that in this area the price will reach the opposite border of the channel.
EUR / USDBids its Time
We state qualitative changes in the balance of forces in the market - bears went on the offensive, and not without the influence of the Greek factor (today the German parliament will vote as for the Greek bailout approval for four months), as well as market awareness of the differences in the monetary policy of the Fed and the ECB. So if the Fed this year is expected to rise rate (which is manifested in the growth of government treasury bonds yields), the profitability of some European market (for example, German) – is currently in the negative zone. In the United States growth is still in a good level, which was confirmed by yesterday's data on orders for durable goods, while the eurozone is waiting for a long period of quantitative easing.
At the moment, the price has reached the lower limit of two downstream channels in which the slope is relatively flat. Here, from a technical point of view, the fate of the pair's future direction should be decided. In case of yesterday's low break we should await for the quotes to reach January lows (1.1098), whereas the pullback in the channels' depth may ultimately lead to the achievement of its upper limit (1.1350-1.1400). We still have more questions than answers, but the situation is changing and this is positive. Today it is recommended to draw attention to the publication of the US GDP for the 4th quarter, which perhaps, will be a decisive argument for toe market.
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Vista Brokers: Strong statisticsReturnedConfidence in FedRateHike in June
It looks like already forgotten a speech of the Fed chairman Janet Yellen, in which she has expressed caution regarding the premature rate hikes. On Thursday, on the agenda was positive statistics from the US, which returned strength to bulls and optimism to the market. Vista Brokers analysts say that the data on inflation and orders for durable goods in the US returned to investors confidence that the Fed will rise interest rates in June.
After the release of statistics the US dollar began to strengthen across the market. Against the yen greenback has immediately rushed to 119.11 yen against 118.85. Euro loss was even more significant: in couple of hours EUR / USD lost 0.7%, dropping to 1.1281 dollars from 1.1317 in anticipation of the data.
So, the main impetus for the growth of the dollar was the data on the consumer price index excluding prices for food and energy prices, which rose in January by 0.2% vs. 0.1%. This indicator, rather than the overall consumer price index, is a benchmark for the Fed, so that the stormy reaction of the market is clear. Another pleasant surprise for investors was the data on durable goods. In January, the index rose by 2.8% against the expected 1.7%.
In such strong data, market participants saw a signal that the Fed will raise rates in the near future, as they reflect the recovery of the US economy.
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Vista Brokers: Dollarwas Supportedby Statistics and FedRemarks
On Friday morning, the dollar slowed the rally that it had began yesterday after strong US data and remarks of Fed representatives. Vista Brokers analysts say that amid publication of inflation data and orders for durable goods, which were better than expected, the dollar index rose to a basket of currencies by 1.1%.
Today DXY fell by 0.2% to around 95.130 against 95.357 month high reached on Thursday. The euro rebounded by 0.1% to $ 1.1213, while remaining near-month low at $ 1.1184 reached during yesterday's dollar rally. Against the yen, the dollar fell by 0.2% to 119.15.
Strengthening of the US dollar on the one hand was caused by the statistics. Thus, the consumer price index, excluding the prices of food and energy prices in the US rose by 0.2% against 0.1%, which had been expected. The overall consumer price index fell slightly more than forecast, but this is due mainly decline in oil prices. Furthermore, the core CPI which does not include products with the most volatile prices, is the benchmark for the Fed. Orders for durable goods in January rose by 2.8% against the expected 1.7%.
The market reaction to these two indices was so stormy that investors even ignored the fact that the data on the number of initial and counting unemployment claims came out worse than expected.
A positive factor for the dollar on Thursday also were several Fed comments. We note the key moments of FOMC members' speeches.
The Dallas Fed President Richard Fisher said that the US economy is clearly showing a strong growth and absence of inflation and suggested that the Fed could raise short-term rates at first and watch the reaction of the market.
The head of the Federal Reserve Bank of Cleveland Loretta Mester believes that the US GDP growth this year will be 3%. It supports the consideration of a rate increase in June. In her opinion, it is better to start the slow process earlier rather than sharply raise interest rates later, causing shock in the markets.
San Francisco Fed President John Williams expects that the level of "full employment" will be reached this year, and inflation will come to the 2% target by the end of next year. He noted that the Fed could start raising rates in the summer or fall.
Thus, statements of FOMC members were consonant with Janet Yellen remarks and sounded quite optimistic.
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