Last news from TOP TRADERS - page 4
You are missing trading opportunities:
- Free trading apps
- Over 8,000 signals for copying
- Economic news for exploring financial markets
Registration
Log in
You agree to website policy and terms of use
If you do not have an account, please register
Strategic Outlook 2008: A Rocky Ride
Here at the beginning of 2008 the uncertainty about the development in the financial markets has not been higher in several years. This uncertainty has resulted in falling equity prices, lower yields on long-term government bonds and widening yield spreads. The uncertainty has been fuelled by concerns about a recession in the US as well as continuing turmoil in the banking sector and the money market.
In our assessment there is no indication that the uncertainty will disappear in the short term. Concerns about a recession the US may continue for quite some time into H1. Nervousness about further announcements of losses on the part of banks may trouble the markets. In that respect the housing market in the US, in respect of the risk of rising unemployment and falling house prices, is very important. Undoubtedly, this theme will not be exhausted in the short term. Moreover, we will see some uncertainty with respect to the development of the companies' earnings. Finally, the slowdown in growth in the US may result in concerns that the slowdown in growth may spread to the rest of the world.
The uncertainty has triggered reactions on the part of various monetary and fiscal authorities. The major central banks all over the world have attempted to calm down the turmoil in the money market by injecting additional liquidity and the money-market rates have fallen.
However, the spread between the moneymarket rates and the central-bank rates are still wide, as appears from the chart below. Most likely the spread reflects distrust on the part of the banks, and to a great extent the central banks do not have much power over these banks. This distrust will not disappear until we get a better idea of the potential losses in the financial sector.
The US central bank has been the most aggressive player to combat the turmoil. It has already lowered its interest rate by 1 percentage point and we may see further cuts. Also, the fiscal policy may be relaxed in the US, yet it applies to all these measures that they will have a limited impact on economic growth in H1.
Generally we expect that the difficult H1 will put a damper on investors' willingness to invest and thus also on the financial markets. We recommend that investors are cautious at the beginning of the year.
The prospects for economic growth in H2 are brighter as the Fed's interest-rate cut will begin to be reflected to a greater extent and housing construction is expected to stabilise. This will reduce uncertainty, and it is expected that the improved growth prospects will lead to stronger risk appetite on the part of investors.
Generally we expect an uncertain H1 in the financial markets, but this period will be followed by a more positive H2. It is expected that equity prices will recover and rise by 5-10% over the year. Also, we predict generally higher long-term yields and it is on the cards that the US dollar will strengthen. Finally, chances are that we will see decent returns on EM and commodities, while prospects are a bit more subdued with respect to corporate bonds.
Strategic Outlook 2008
The US
The US has embarked on what seems to be an uncertain and difficult year with respect to the economy. Particularly H1 will offer challenges and the risk of recession is quite considerable (40%). Chances are that economic growth will be invigorated in H2.
A number of challenges will arise, particularly for consumers, in H1. Oil prices have gone up considerably, the turmoil in the financial markets and among the banks is relatively strong and many homeowners who have taken out floating-rate sub-prime loans will be facing higher interest expenses. Moreover, we may be in for a moderate increase in unemployment and slightly lower increases in wages. Also, consumers will be under pressure from the housing market, as there is a risk of downright declines in house prices.
Basically, the corporate sector is in good form. This is important as, due to falling investment on their part, companies are often the ones that push the economy into recession. Profits are high, debts have increased to a limited degree while assets have increased quite substantially in recent years. Also, based on the short-term indicators the order books are thick and inventories are not that high. International economic growth is still reasonable and, together with the weakening of the US dollar, this will sustain exports.
Euro zone
Economic growth in the euro zone has fallen gradually since the summer of 2006. The growth rate is already at about 2%, i.e. corresponding to the long-term average. We expect that economic growth will fall further in H1 2008 and then it will recover in H2.A number of factors will have an adverse effect on economic growth over the coming months, including strengthening of the euro, declining growth in the export markets, high oil prices and the credit crisis. We expect, however, that the impact of these factors on economic growth will gradually diminish. Moreover, we expect that the strong labour market with the lowest rate of unemployment in many years will contribute to a slightly higher level of consumer spending over the year.
On the whole, we expect economic growth of 1.8% in 2008. This implies a fairly pronounced slowdown in growth relative to 2007, for which its seems that growth came to 2.6%. The economic growth rate will, nevertheless, be close to the long-term average.
Due to the slowdown in growth, the inflation pressure will be alleviated somewhat. However, the growth rate will still be so high that the ECB sees a risk of rising inflation over the coming months. This must be viewed in the context that high oil and food prices have currently resulted in an overall inflation rate above 3%. The ECB fears that this will spread to the inflation expectations on the part of the companies and the consumers and thus result in a more permanent inflation problem.
We expect, however, that due to the more uncertain growth prospects the ECB will maintain its interest rate at 4% over the coming months despite the risk of inflation. The uncertainty with respect to that estimate is to the upside.
We expect that inflation will fall over the year and at the end of the year the inflation rate will be at about the target of 2%. Due to the expectations that the economic growth will recover at the same time, there are also prospects that the ECB will maintain its interest rate at 4% in H2. The uncertainty with respect to this estimate is to the downside, primarily because we see a strong risk of recession in the US.
Strategic Outlook 2008: A Rocky Ride - Forex Trading, Currency Forecast, FX Trading Signal, Forex Training Course, Education, Tutorial, FX Book, Forex ebook, Learn to Trade Forex, FX Guide, Pivot Points, Currency Rates, Forex Secret, Forex Brokers, C
The fear of recession affects the interest-rate markets at the beginning of the year. The longterm yields have fallen over the past six months, yet with interruptions and counterreactions. Undoubtedly the uncertainty will still be considerable. We also expect that 2008 will offer considerable and fast-paced changes in sentiment. We expect that H1 will see the lowest levels of the market rates.
Later on new hopes of economic progress will result in increases in the long-term interest rates. In that respect, it will be decisive how the market players assess the inflation prospects. Due to increases in energy, commodity and food prices, the current inflation rate is fairly high. We may see periods in H2 when the market becomes nervous about the inflation prospects.
Since the summer of 2007, the short-term money-market rates have been unusually high relative to the central banks' interest rates. The decisive thing for normalisation of the interest rates is that confidence is again established among the market players. The central banks may help by playing an active role in the daily realignment of liquidity, but it is difficult for them to affect confidence among banks. A higher degree of confidence among the parties in the money market is decisive for normalisation of short-term rates. Most likely, it will be quite some time into 2008 before the problems in the money market are solved.
Over a period, we have seen considerable fluctuations in the market rates and we expect this trend to continue in H1. The considerable fluctuations result in a wide spread between the expected highest and lowest interest-rate level. Below we have outlined the expected interest-rate development in the euro zone and a more or less similar development is expected in the US.
21.01.2008
EUR-USD
1.4615. N/A
USD-CHF
1.0996. While below 1.1014 or 1.1030 it could fall towards below 1.0965 or 1.0933. After which a corrective/consolidation activity is expected.
USD-JPY
106.64. There is bearish potential for a fall to 106.13 or 105.62 while 107.12 - 107.37 resist. After this fall a recovery up to 107.12 or 107.37 is expected.
GBP-USD
1.9543. Market should meet resistance at 1.9594. We expect then an extended move down to 1.9521 -1.9389 area.
EUR-CHF
1.6069. There is bearish potential for a fall to 1.6026 while 1.6103 - 1.6124 resist. After this fall a recovery up to 1.6124 or 1.6145 is expected.
EUR-JPY
155.87. There is bearish potential for a fall to 155.12 or 154.36 while 156.83 - 157.21 resist. After this fall a recovery up to 156.83 or 157.21 is expected.
EUR-GBP
0.7478. A corrective/consolidation activity between 0.7432 and 0.7542 is likely for a while.
AUD-USD
0.8801. It should be subject to more sell off towards 0.8717 or 0.8633. Corrective upward swings should face resistance around 0.8849 area. A break of 0.8903 is bullish.
USD-CAD
1.0274. Corrective dips should ideally halt near 1.0266 or 1.0246 for one more thrust upwards towards 1.0291 - 1.0315 area or 1.0356 in extention. Fall below 1.0225 puts it back on a downward path.
Gbp/usd 22.01.2008
Current level-1.9468
The pair has reversed at 2.1167 and the technical indicators are falling and convergent. Trading is situated below the 50-day MA, projected at 2.0521 and the 200-day SMA, at 2.0078.
With the recent low at 1.9337 was completed the downtrend since 1.9792 and probably the whole slide from the 2.1165 top has been finalized, so we expect an uptrend to emerge, targeting 1.9791 and 2.0101 later on. Intraday allow brief corrective phase below 1.9525 before breaking above it towards 1.9791.
Resistance Support
intraday intraweek intraday intraweek
1.9956 2.0263 1.9441 1.9190
2.0101 2.0575 1.9337 1.8880
Forex Technical Analytics----- CHF-----
The pre-planned buyers' positions from the key support range have been realized with overlap of main assumed targets. OsMA trend indicator having marked the relative rise of bullish activity supports the preservation of bullish priorities for today but with a negative moment of current strengthening of sales' activity. Hence we assume a possibility of pair return to supports 1.1000/20, where it is recommended to evaluate the activity development according to the charts of shorter time interval. For short-term buys on condition of formation of topping signals the targets will be 1.1060/80, 1.1110/30 and/or further breakout variant up to 1.1170/90, 1.1210/30. An alternative for sales will be below 1.0960 with the targets 1.0900/20, 1.0840/60, 1.0800/20.
Eur 22/01/2008
The pre-planned breakout variant for sales has been realized with overlap of minimal assumed target. OsMA trend indicator marked the break of the key support with a formation of several reversal bullish signals that is the negative factor concerning the perspectives of further rate fall but with the preservation of relative bearish advantage and because of chosen strategy there are no grounds to change planning priorities in favor of buyers. At present taking into account the ascending direction of indicator chart, we assume a possibility of pair return to resistance range 1.4460/80, where it is recommended to evaluate the activity development according to the charts of shorter time interval. For short-term sales on condition of formation of topping signals the targets will be 1.4400/20, 1.4360/80 and/or further breakout variant up to 1.4300/20, 1.4240/60, 1.4180/1.4200. An alternative for buyers will be above 1.4500 with the targets 1.4540/60, 1.4580/1.4600.
Jpy 22/01/2008
The assumed test of the key support range has been confirmed but the relative rise of sales' activity revealed by OsMA indicator did not dispose to realization of the pre-planned buyers' positions. At present taking into account the relative progress of bullish activity as well as pattern activity parity of both parties, we assume a possibility of range movement of the rate with a test of resistance range 106.70/90, where it is recommended to evaluate the activity development according to the charts of shorter time interval. For short-term sales on condition of formation of topping signals the targets will be 106.10/30, 105.60/70 and/or further breakout variant up to 105.00/20, 104.40/60, 104.00/20. An alternative for buyers will be above 107.60 with the targets 108.00/20, 108.60/80.
Gbp 22/01/2008
The pre-planned breakout variant for sales has been realized with overlap of minimal assumed target. OsMA trend indicator having marked the oversold factor with activity fall of both parties is not a positive moment concerning the perspectives of further rate fall but because of chosen strategy it allows to preserve bearish planning priorities for today. Hence we assume a possibility of pair return to resistance range 1.9450/70, where it is recommended to evaluate the activity development according to the charts of shorter time interval. For short-term sales on condition of formation of topping signals the targets will be 1.9390/1.9410 and/or further breakout variant below 1.9360 with the targets 1.9300/20, 1.9240/60, 1.9200/20. An alternative for buyers will be above 1.9530 with the targets 1.9570/90, 1.9620/40.