Press review - page 348

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Forex Weekly Outlook Sep. 21-25 (based on forexcrunch article)

The dollar received a blow from the dovish Fed, but partially recovered. Apart from echoes from that all important decision, we have elections in Greece, Mario Draghi’s speech, US Durable goods orders, unemployment claims, GDP data and Janet Yellen’s speech. These are the main events for this week. Join us as we explore the market movers on Forex calendar.

The U.S. Federal Reserve decided to keep interest rates unchanged, amid concerns over the global economy, market instability and muted inflation in the US. Despite the dovish tone, the Fed left the door open for a rate hike later this year. Furthermore, FOMC Economic Projections released at the same time, showed 13 of 17 policymakers expected a rate hike this year, down from 15 at the last meeting in June. Will we still see a rate hike this year? The Fed’s worries probably cause worries for others as well, and we may see a dovish reaction from other central banks.

  1. Greek Parliamentary Election: Sunday. Former prime minister Alexis Tsipras resigned after seven months of his four-year term, following a strong protest from Syriza hardliners over the third bailout deal with Greece’s creditors, despite his announcement to end austerity. Tsipras announced a snap general election in hope of renewing his vote of confidence. The rebelling members formed a new party, Popular Unity, advocating Greece’s exit from Europe’s joint currency, but a recent poll shows the new party will not be able to get into Parliament. Syriza still leads the race, followed by the center-right New Democracy party. An absolute majority for either parties will be euro positive, while a hung parliament is euro negative.
  2. Chinese Caixin Flash Manufacturing PMI: Wednesday, 1:45. This independent and forward looking measure of the Chinese economy is very important for the world, especially as Yellen put an emphasis on the slowdown of the Chinese economy. After a final read of 47.3 points in August, the preliminary number for September is expected to tick up to 47.6, meaning it still remains in contraction territory, below the 50 point mark.
  3. Mario Draghi speaks: Wednesday, 13:00. ECB President Mario Draghi will speak before the European Parliament’s Economic and Monetary Committee, in Brussels. After The European Central Bank cut its inflation and growth forecasts for 2015 and the following two years Draghi hinted that another QE could be implemented to stimulate economic activity if necessary. He also admitted that inflation could turn negative in the near future. Market volatility is expected.
  4. German Ifo Business Climate: Thursday, 8:00. German business Sentiment improved in August to 108.3 from 108 in July, following a positive manufacturing data release. Economy shows continuous growth in Q2 with a 0.4% gain, following 0.3% expansion in the January-March period. Responders were more positive regarding the current situation. However, the companies were somewhat less optimistic regarding future business. Business confidence is expected to decline to 107.8 in September.
  5. US Durable Goods Orders: Thursday, 12:30.  Orders for long-lasting manufactured goods continued to improve in July, rising for the second consecutive month. New orders edged up by 2.0%, to $241.1 billion in July, following a 4.1% gain in June. Economists expected a fall of 0.4% in orders. Meanwhile, Orders for manufactured goods, excluding transportation sector, gained 0.6% to $158 billion in July, after a downwardly revised increase of 0.6% in June. This positive release suggests continued growth in Q3. Durable goods orders is expected to contract 2.0%, while core orders are expected to gain 0.2%.
  6. US Unemployment Claims: Thursday, 12:30. The number of Americans filing initial claims for unemployment assistance fell unexpectedly last week by 11,000 to 264,000, indicating continued growth in the US labor market. The four-week moving average declined to 272,500 from 275,250 in the previous week. Continuing jobless claims dropped to 2.237 million from 2.263 million in the preceding week.  The number of claims is forecasted to reach 268,000 this week.
  7. Janet Yellen speaks: Thursday, 21:00. Federal Reserve Chair Janet Yellen speaks at the University of Massachusetts. She may refer to the Federal Reserve’s decision to maintain rates and talk about a new timetable for the long awaited rate hike. Market volatility is expected as always. Yellen has kept quiet in the two months preceding the decision, but certainly had interesting things to say at the accompanying presser.
  8. US GDP data: Friday, 12:30. The U.S. economy grew by 3.7% in Q2, according to the second publication. This release was a significant improvement in comparison to the initial publication and gave a boost to the greenback. In the third and final release, this figure is expected to be confirmed.
 

USD, EUR, JPY, GBP and AUD For The Coming Week By Morgan Stanley (based on efxnews article)

USD: Bullish Despite the Fed. Bullish
"The more dovish Fed meeting does not change our bullish USD view. To us, the story for USD strength has always been much more about growth differentials than rate differentials. The Fed’s concern about global growth only highlights the extent to which this divergence continues. In the near term, there may be some short-lived retracement as markets reprice the first Fed hike, but we would use dips as a buying opportunity against EM and commodity currencies."

EUR: Still Supported from Risk. Neutral
"We remain bearish on EUR over the medium term but see reason for some support in the near term. EURUSD has been supported in the immediate aftermath of the Fed’s decision to keep rates on hold, benefiting from its inverse relationship with risk appetite. Eventually, we believe the effects of ECB policy and other bearish factors will push EUR lower, but we are not maintaining any shorts currently in our portfolio." 

JPY: Expect Strength on Crosses. Neutral
"We see upside to USDJPY as limited and believe there is scope for JPY to strengthen on the crosses. The S&P downgrade is likely to have limited impact on the currency, with most debt held domestically and Japanese pension fund reallocation largely completed. Market expectations for further BoJ easing are still high, but our economists are not expecting such a development. Rather, they see focus on building domestic inflationary pressures, rather than importing it via weaker FX."

GBP: Risk-Appetite Driven. Bearish
"We maintain our long bearish GBP view and like to sell against USD and JPY. We note that GBP is highly sensitive to risk appetite as can be seen by its high correlation with our global risk demand index (GRDIIDX). For this reason we continue to monitor the equity market reaction in this Fed-dependent environment. With inflation remaining low and the BoE not changing its tone in the recent minutes, we remain watchers of rate expectations too."

AUD: A Relative Outperformer. Bearish
"We see scope for AUD to outperform in the near term, but prefer to play this via long AUDNZD or long AUDCAD positions, given our generally bearish view on commodity and EM currencies. Scope for fiscal stimulus from China should offer some support to the currency as well. On top of this, with a new prime minister, political uncertainty should be reduced somewhat, offering further support."

 

Goldman Calls It: No Rate Hike Until Mid-2016 (based on zerohedge article)

Q: Is October on the table?

A: Not really. We believe that Chair Yellen’s baseline since the June meeting has been a December liftoff, and it would be very unnatural for her to pull forward given the information received in the meantime. Besides, there is only one  round of monthly economic data on the calendar before then. Last but not least, the logistics are daunting. There will not be a fresh SEP, and the committee would need to announce an impromptu press conference in the October 29 FOMC statement announcing the rate hike itself; an earlier addition of a press conference to the calendar does not work because this would lead the market to conclude that the FOMC has decided to hike, without any room for explanation at that point. This all seems too sudden and dramatic for a Committee that, we think, would like the first hike to be as unexciting as possible.

Q: What could shift the liftoff into 2016?

A: Although we expect the conditions for liftoff regarding employment, inflation, and financial conditions to be in place by December, there is some risk of disappointment in each of them. Missing on any one of them would call December into question, missing on more than one would almost certainly shift liftoff into 2016. Regarding growth and employment, the data looked quite solid until recently but the early information for September has been weak so far. As shown in Exhibit 1, the average of the New York Empire State and Philly Fed index in September fell to the lowest level since the 2011 recession scare, and consumer sentiment also weakened significantly. These are all volatile indicators that could bounce back quickly, but we would put at least a bit of weight on the possibility that they indicate a larger-than-expected drag from the recent tightening in financial conditions and the weakness in global growth.

Finally, regarding financial conditions, our baseline expectation is an easing but the uncertainty is significant as always. And at least so far, the response of the financial markets to the FOMC—especially the sharp selloff in the stock market—has probably disappointed the committee’s expectations.

 

EUR/USD: Choppy Sideways Consolidation - by UOB (based on efxnews article)


  • "EUR/USD surged to a high of 1.1458/63 before reversing quickly to close on Friday almost 150 pips lower from the high."
  • "Only a move back above 1.1350 would indicate that the downward pressure has eased."
  • "The current outlook is deemed as neutral and we expect to see a period of broad and choppy sideways consolidation. Key levels are at 1.1170 and 1.1460."
 

Trade ideas for EUR/USD by UBS (based on efxnews article)


EUR/USD: "In the short term, the pair may have come a bit too far in low volumes during the late US/early Asia trading hours, but we prefer playing the short side, looking to add around 1.1350, with an intraday stop at 1.1425."

 

Trade Ideas For EUR/USD by UBS (based on efxnews article)


EUR/USD: "The first hurdle on the way lower is 1.1150/55, and if that breaks we think the pair may test the low of 1.1090 from the previous US payrolls release. We do not want to be short at these levels, but would get involved on any move closer to today's high of 1.1206, with a stop at 1.1255."

 

EUR/USD Daily Outlook (based on actionforex article)


  • "Intraday bias in EUR/USD remains on the downside for 1.1086 support. Break will resume the decline from 1.1713 and would target 1.0807 key near term support, which is close to 100% projection of 1.1713 to 1.1086 from 1.1459. Also, noted that whole corrective rise from 1.0461 has completed at 1.1713, ahead of 38.2% retracement of 1.3993 to 1.0461 at 1.1810. Break of 1.0807 would pave the way back to 1.0461. On the upside, above 1.1206 minor resistance will turn bias neutral first."
  • "In the bigger picture, overall price actions from 1.6039 long term top is viewed as a corrective pattern with fall from 1.3993 as the third leg. Price actions from 1.0461 are viewed as correction to fall from 1.3993. Such correction could have completed ahead of 38.2% retracement of 1.3993 to 1.0461 at 1.1810. Break of 1.0461 will extend the decline from 1.3993. On the upside, break of 1.2042 support turned resistance is needed to be the first sign of trend reversal. Otherwise, we'll stay bearish and expect a new low below 1.0461 at a later stage."
 

Trading the News: U.S. Durable Goods Orders (based on dailyfx article)

A 2.3% decline in demand for U.S. Durable Goods accompanied by a weakening outlook for business investments may produce near-term headwinds for the greenback as it fuels speculation for a further delay in the Fed liftoff.

What’s Expected:


Why Is This Event Important:

The Federal Open Market Committee (FOMC) may continue to endorse a wait-and-see approach at the October 28 interest rate decision as the central bank adopts a more cautious outlook for the region, and signs of a slower recovery may encourage Chair Janet Yellen to preserve the zero-interest rate policy (ZIRP) throughout 2015 in an effort to further insulate the real economy.

On the other hand, the ongoing expansion in building and service-based activity may spur greater demand for durable goods, and a positive data print may keep the central bank on course to raise the benchmark interest rate in 2015 as Chair Yellen remains confident in achieving the Fed’s dual mandate for full-employment and price stability.

How To Trade This Event Risk

Bearish USD Trade: Orders Contract 2.3% or Greater in August

  • Need to see green, five-minute candle following the release to consider a long trade on EURUSD.
  • If market reaction favors a bearish dollar trade, buy EURUSD with two separate position.
  • Set stop at the near-by swing low/reasonable distance from entry; look for at least 1:1 risk-to-reward.
  • Move stop to entry on remaining position once initial target is hit; set reasonable limit.
Bullish USD Trade: Demand for Large-Ticket Items Beat Market Forecast
  • Need red, five-minute candle to favor a short EURUSD trade.
  • Implement same setup as the bearish dollar trade, just in the opposite direction.
Potential Price Targets For The Release

EURUSD Daily


  • EUR/USD may face a larger rebound as it fails to retain the recent series of lower-highs and preserves the monthly-opening low (1.1086); need a break of the bullish RSI formation carried over from March to favor a resumption of the long-term downward trend.
  • Interim Resistance: 1.1760 (61.8% retracement) to 1.1810 (38.2% retracement)
  • Interim Support: Interim Support: 1.0790 (50% expansion) to 1.0800 (23.6% expansion)
 

EUR/USD: Levels & Targets - UOB (based on efxnews article)


  • "The wild swing has resulted in a mixed outlook for today. In other words, the 1.1105 low seen two days ago is the extent of the current down-move and the 1.1085 target is not met."
  • "From here, we hold a neutral view and expect the recent volatile to persist for a while more. Expected range; 1.1085/1.1300."
 

Here Are The Trades We Like - SocGen (based on efxnews article)

Societe Generale is forecasting the ranging market condition for EUR/USD and USD/JPY, short for CHF/SEK and long-term short in GBP/JPY. In the short-term situation: shorts for USD/CAD and EUR/NOK.



  • "Market volatility has been elevated following the Chinese FX regime shift and has remained so despite the Fed delaying its rate lift-off. Pressure on risk assets have persisted, and the fragile market sentiment is restraining G3 bond yields, which are in turn constraining EUR/USD and USD/JPY in tight ranges."
  • "We like shorts in CHF/SEK as the case for such negative rates in Sweden slowly fades."
  • "We like long-term shorts in GBP/JPY as the UK growth rate crests and Brexit risk flares higher."
  • "Being short the G10 economies with the biggest current account deficits appeals too. USD/CAD and EUR/NOK are too oil-sensitive to have conviction about here. For choice, we like to be short NOK and CAD in the very short-term."
  • "As for EUR/USD, it’s barely worth trading. It fell this week with the VW share price, and having a view on where it goes next is way outside my skill set."
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