IronFX - Market Analysis - page 8
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
Market Analysis 13-06-2013: And the straddle holds on
Daily Commentary13.06.2013
The Big Picture And the straddle holds on:The markets were yet again an arena of volatility, with USD/JPY forming a long-legged doji, EUR/USD reaching close to four month highs in a swinging fashion, and the Nikkei experiencing for an eighth-straight day a different directional movement compared to its previous close. Directionality, however, does not seem to be an issue in the bond markets with the prospect of central banks stepping back from loose monetary policies rocketing bond yields to new highs. The yield on the U.S. 10yr note yesterday spiked to a 14-month high of 2.23%, but it is emerging market borrowing costs that have soared the most since emerging sovereigns also suffer from their risk-off nemesis. Straddled trades seemed to be the way to go with the U.S. equities as well, with the indices gapping higher, gaining more than 0.7% on the opening, before closing on their lows. Overall directionality, however, seems to be less of an issue here with the S&P 500 experiencing its first three-day losing streak in 2013, with the three major U.S. indices closing the session yesterday with losses of around 1%. The bearish outlook in the U.S. equity markets and the winding down of carry trades, which have brought USD/JPY to pre-BoJ stimulus revamp levels, are triggering stop outs on long Nikkei trades, with the index at some point today wiping out more than 6% of its value.
Today sees the publication of the ECB monthly bulletin, which may come with revisions to eurozone growth and inflation forecasts. The Bank of England will also be releasing a report, its quarterly bulletin, which may come with market moving comments on the U.K. economy. Of greater market significance today, however, is the release of the World Bank’s global growth outlook, which was trimmed to 2.2% from 2.4%, partly due to a downward revision in China’s growth forecast. This bleak global outlook and the prevailing sentiment in global equity indices will most probably hit the European equities in their opening.
In the U.S. attention will be shifted back to the labour market with the release of the first jobless claims since the better-than-expected non-farm payrolls last week. Initial claims are set to remain steady, coming in at 345k, marginally lower than last week’s 346k. Continuing claims are expected to see a small increase from 2.952M to 2.975M. Simultaneously, retails sales and import and export prices are released thus giving the markets plentiful to absorb. The uneventful MoM import and export prices for May are set to remain unchanged, with the more significant retail sales forecast to show increases. Retail sales for May are due to increase 0.4%, adding to the 0.1% increase witnessed in April. The closely followed retail sales excluding automobiles are also expected to see an increase of 0.3%, halting two consecutive months of contracting sales. Shortly afterwards, business inventory for April are due to expand by 0.3% after having remained steady in March.
Overnight, the Bank of Japan releases the minutes to the June 10-11 policy meeting. In light of the market movements following the lack of further stimulus by the central bank, the minutes are likely to receive more attention than those following the May meeting.
The MarketEUR/USD
• EUR/USD found yesterday early morning trendline and Fibonacci resistance at 1.3340 before losing 70 pips following its inability to breakout. A rebound however led to a break of resistance with support thereafter coming at 1.3320, painting a positive picture for the continuation of the rally, which thereafter found resistance at 1.3370.
• EUR/USD is currently at a frequent Stochastics resistance level of 94, making a close above 1.3370 seem less likely. Major resistance above 1.3370 comes in the 1.3425 – 1.3440 area that sees past price action and trendline resistance. Support is concentrated with 1.3340, 1.3320 and 1.3300 being notable levels, with a breakdown likely leading to 1.3230 support.
USD/JPY
• USD/JPY found resistance at 97.05 before collapsing, finding support at 94.40, the 38.2% retracement level of the November – May rally. Weak support thereafter comes at 93.75 and 93.15, with the RSI and the Stochastics on the verge of both lying in oversold territory. The previous support levels of 94.90 and 95.30 are likely to act as resistance.
GBP/USD
• The better than expected U.K. employment report boosted cable, as it rose to a four-month high, finding strong resistance at 1.5690, the 200-day MA and the 61.8% retracement level of the rally that occurred in the latter half of 2012.
• A breakout from the current strong resistance level sees weak resistance at 1.5730, with strong resistance found at 1.5780, which sees two coinciding, significant, Fibonacci levels.
Gold
• Gold was a major gainer catching up with its underperformance relative to the dollar witnessed on Tuesday. The gains of 1.12% since yesterday morning are more than double the losses of the dollar index, but even so, with the metal merely consolidating at these levels, trying to generate a return on gold trades may turn out to be frustrating.
• $1387 is likely going to act as an initial weak support with further support at $1378. The inability to test $1400 resistance yet again should be something the longer-term longs may want to note.
Oil
• WTI was gaining yesterday on the weaker dollar, finding strong trendline resistance at $96.35, only to dive to support at $95.50 as crude inventories in fact increased when a decrease was expected. Crude is losing today on the downward revision of the global growth outlook by the World Bank.
• The breakdown from support sees next support at $94.05 and then $93.50, the 50-day MA, with resistance coming in at $95.50 and more importantly $96.30, which sees trendline resistance.
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
click here to read more
click here to read less
More...
Market Analysis 14-06-2013: Disorientation
Daily Commentary14.06.2013
The Big Picture Disorientation: Market volatility remains on a high and is likely to do so until the conclusion of the FOMC meeting next Wednesday, when investors and traders alike will be hoping for some clarifications as to the course of action the Federal Reserve intends to implement with regard to QE and interest rates. The USD continued with its slump despite the better-than-expected retail sales and jobless claims, which only led to a general short-lived rebound for the dollar versus the majors. The DXY this morning was marginally lower since yesterday morning but the index is at a 4-month low, having lost close to 5% since Bernanke mentioned on May 22nd that the Fed could start scaling down the $85 billion asset purchases should the labour market shows sustained improvements, sparking concerns the equity markets will lose some of their steam.
Today sees the release of pricing data in the Eurozone and the U.S. The Eurozone is expected to show 0.1% MoM inflation for May, having experienced 0.1% deflation in April. The revised YoY figure for May will likely not change relative to the preliminary one as is usually the case. The estimated 1.4% increase YoY increase in prices will be a substantial improvement from the 1.2% inflation figure reported in April. These signs of recovery in the Eurozone could be further populated with a halt in the decreasing number of people employed in the final two quarters of 2012. Unfortunately the employment change figures come without a forecast.
Similar to yesterday, emphasis will be on the U.S. due to the stream of data reported today. The MoM U.S. Producer Price Index for May is expected to show an end to deflationary pressures witnessed the previous 2 months, albeit with the narrowest of margins. Nonetheless, the 0.1% increase in producer prices will be a major improvement from the 5-month record decrease of 0.7% reported in April. The YoY figure is due to end the 2-month spell of disinflation as prices are estimated to show an increase of 1.4%, more than doubling the 0.6% inflation figure released in April. Despite these increases in the headline figures, the PPIs excluding the volatile prices of food and energy are set to remain steady, with the YoY figure due to come in at 1.7%. The preliminary consumer sentiment index for June reported by the U. of Michigan is also expected to remain steady at its 6-year high of 84.5, despite the recent downturn in the markets. The current account deficit for Q1 is forecasted to remain virtually stable at $109.7B, with the previous quarter’s reading showing net outflows of $110.4B. With investor emphasis being lately on current account deficits, albeit particularly of developing countries, the figure may receive more attention than usual. Finally, industrial production and capacity utilisation are both due to show improvements, with the former recovering somewhat from the 0.5% contraction seen in April by expanding 0.2%. Capacity utilisation is due to show the narrowest of improvements relative to April, by increasing by 0.1% to 77.9%.
The MarketEUR/USD
• EUR/USD continued to gain on the volatility as the disparity between the member state economies gives investors an array of investment opportunities that cater for a wide spectrum of risk appetites.
• EUR/USD found resistance just below 1.3400, with the pair retracing this morning having reached a typical Stochastics resistance level with the RSI also in oversold territory. Significant support comes at 1.3340, the 61.8% retracement level of the February – March plunge, with further Fibonacci support at 1.3320 and trendline support at 1.3300. Resistance comes at 1.3370, just below 1.3395 and 1.3425.
USD/JPY
• USD/JPY rebounded following the positive U.S. data, but experienced a sharp down move following the release of the BoJ minutes, which showed concerns on the increased volatility in Japanese government bond yields, concerns which the BoJ failed to address in its previous policy meetings.
• USD/JPY has continued with its technical trading, finding resistance and support at key levels. Support today is seen at 94.9, 94.40, the 38.2% retracement level of the Abe rally, and 93.75. Resistance comes at 95.30, 95.90 and 96.40.
GBP/USD
• In the U.K. the Conference Board will be releasing the leading indicators for May, with the previous three months seeing a 0.4% improvement in overall economic activity. In light of the successively improving prospects in the U.K., a further improvement is possible, though there are no official estimates to forecast this.
• The breakout from the strong resistance at 1.5690 found weak resistance at 1.5730. Strong resistance beyond this level is found at 1.5780, which sees two overlapping, significant, Fibonacci levels. Strong trendline, Fibo and 200-day MA support comes at 1.5690 with further support at 1.5650 and 1.5610, the 50% retracement level of the plunge at the start of the year.
Gold
• Gold continued trading in a consolidating fashion, coiling in a possible pennant formation, despite the dollar’s sustained weakening.
• Once again $1387 is likely to act as an initial weak resistance with further resistance below $1400. Support comes at $1378 with possible trendline support at $1370.
Oil
• WTI managed to rebound from the early losses experienced following the World Bank’s report, which revised downwards the global growth outlook. Crude benefited initially by the positive U.S. data, extending its gains as USD retraced in the later trading hours.
• Strong, well- tested trendline resistance came at $96.95. A breakout may see price head to $97.75, which sees a reversal level as well as the 61.8% retracement level of the steep decline from March to June in 2012. Trendline support comes at $96.25, with coinciding Fibo levels around $95.60 and further support at $94.50.
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
click here to read more
click here to read less
More...
Market Analysis 17-06-2013
Daily Commentary 17.06.2013
The Big Picture The main event of the week will be the FOMC meeting on Tuesday and Wednesday. The markets will be looking for greater clarity on when and how the Fed may begin “tapering off” its quantitative easing. The Fed has been trying to send the message that they might reduce their bond-buying a bit, but is frustrated because the market seems to think just in on/off, all-or-nothing terms. That’s why the rise in US bond yields and growing expected yield gap with other countries has failed to support the dollar vs many of the major currencies, although the ensuing “risk off” environment has strengthened the US currency vis-à-vis the EM currencies. With US stocks remaining fairly well underpinned (down from the highs but well off the recent lows), demonstrating continued confidence in the US economy, it’s possible that the Fed gives both confirmation of the likelihood of “tapering off” and more reassurance about the pace and the impact on the US economy. That combination could prove reassuring for the markets and set the stage for a USD rally.
GBP is likely to be in the spotlight this week after Bank of England Deputy Governor Paul Tucker announced his resignation Friday. Tucker has voted against expanding QE. UK Chancellor of the Exchequer George Osborne will appoint Tucker’s successor. As Osborne was the one who chose former Reserve Bank of Canada Gov. Mark Carney as the new BoE Governor, it’s likely that he will appoint someone with a similarly dovish view to replace Tucker. That prospect could weigh on GBP/USD, although such a move might just change the monthly Monetary Policy Committee vote to 4-5 from the recent 3-6; still not enough for a majority.
The two-day G8 meeting begins today in Northern Ireland. The summit is likely to focus on boosting trade, fighting tax evasion and increasing tax transparency, particularly with regards to mining companies and their payments to EM countries. Last year’s summit resulted in a rather bland statement with no mention of FX matters; this year’s may be similarly a non-event for FX. Greek PM Samaras meets with his two coalition partners to discuss his decision to shut the state broadcasting company, ERT. A rift in the coalition could cause a destabilizing early election, but as polls indicate that no one party has enough support to govern alone, it’s likely they will reach some compromise. ECB Board members Joerg Asmussen and Yves Mersch will be speaking; Mersch said last week that it was “conceivable” for the ECB to institute negative deposit rates “depending on the economic landscape.” This contrast with Fed policy should restrain EUR/USD. In the US, the Empire State manufacturing survey for June is expected to rise to zero from -1.43 and the NAHB housing market index to rise slightly to 45 from 44, which could help to counter the impact of last week’s disappointing US statistics.
The Market EUR/USD
• EUR/USD found support at 1.3300 following the narrower-than-expected US current account deficit, but the USD gains were short-lived as the market digested news of a record net sale of Treasuries by foreigners in April. Worse-than-expected US industrial production and capacity utilisation for May and the first decline in US consumer confidence in two months drove EUR/USD to resistance at the 61.8% retracement level of the February – March plunge.
• Friday’s hanging man candlestick formed a bearish crossover on the Stochastic oscillator, having found resistance around the common 94 Stochastic level. A down move today on a resumption of the risk-on sentiment may lead to a bearish crossover on the RSI as well, with a break of the three-week upward-sloping trendline marking a possible reversal. Fibonacci support comes at 1.3320, and 1.3230, with support in between at 1.3300. Fibonacci resistance is seen at 1.3340, with further resistance at 1.3370 and 1.3395.
USD/JPY
• USD/JPY rebounded from the plummet that followed the release of the BoJ meeting minutes, which showed one policy member in favour of a two-year restriction on the unprecedented quantitative easing. Resistance came at 95.30 with the weak U.S. data causing a plunge to 94.15 support.
• The pair looks to be rebounding today as the Japanese equity indices are continuing to rebound, with resistance coming at 94.90, 95.30 and 95.90. Notable Fibonacci support is seen at 94.40 with weaker support at 94.15 and a tested low at 93.75.
GBP/USD
• Cable experienced significant downward pressures on Friday before the official resignation of Deputy Governor Tucker, breaking down from very significant support at 1.5690 which concentrated the 200-day MA, the 61.8% Fibonacci level of the June – December rally, and two overlapping, well-tested upward sloping trendlines. The weak US data that followed led to a rebound above these levels, with resistance coming at 1.5730.
• Resistance stays at 1.5730, with significant overlapping Fibonacci levels at 1.5780. Support is seen at 1.5690 again, with weak trendline support at 1.5665 and further support at 1.5610.
Gold
• Gold’s same story different day trading action (sic) continued. Some gains were witnessed on the poor industrial data, though interestingly the gains came despite an increase, albeit marginal, in the Dollar Index.
• Resistance is likely to come just below the $1400 level with further resistance at $1412 and $1423. Support comes at $1387, $1378 with possible trendline support at $1372.
Oil
• WTI was a major gainer despite the weak US industrial data, gaining as the dollar fell, breaking out from significant trendline resistance, spiking to $98.15, before retracing on the deterioration of consumer confidence consolidating at $97.75.
• With crude in a converging pattern for a number of months, identifying resistance levels following the most recent breakout involves a look back to 2012 price action. $97.75, the 61.8% retracement level of the steep decline from March to June 2012 is the key level with further resistance at $98.10 and $98.50. Trendline support comes at $96.95 and $96.25.
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
click here to read more
click here to read less
More...
Market Analysis 18-06-2013: Tricked by a tweet
Daily Commentary 18.06.2013
The Big Picture Tricked by a tweet: The markets were fairly uneventful yesterday, with no major news out during the European day. The US data (Empire State manufacturing survey and National Association of Homebuilders’ index) were much better than expected, yet Fed funds futures were not pricing in any increase in rates and the stock market was rallying nicely. Then during the New York afternoon an article appeared on the FT’s web site saying that Fed Chairman Bernanke is likely to signal that the Fed is close to “tapering down” its QE program. Although the journalist who wrote the story later sent out a tweet denying that it was a leak from Fed officials (who have a “blackout period” before meetings during which they are forbidden to talk with journalists) the message, which was more hawkish than what the Wall Street Journal had been reporting recently, caused bond yields to rise and stocks to come off their highs, while implied rates on Fed funds futures came down a basis point or two on the idea that the Fed wouldn’t raise rates even as it tapered down. The dollar weakened on risk aversion, or was it because the journalist later downplayed his own story?
As I said on 24 May, I think the markets are overreacting to the likelihood of tapering off. People should remember what Fed Chairman Bernanke said back in Dec. 2008: “I made my own mistakes, but I don’t want to make someone else’s mistakes.” He said this in reference to the Fed’s error in tightening policy too soon in the 1930s, an era that he is an expert on. He may also have in the back of his mind Japan’s too-early lifting of the zero interest rate policy in 2000 and its ending of its first attempt at QE, 2001-2006, before definitively defeating deflation. Thus even if they start tapering off QE, that only means less support for the markets, not no support for the markets. Furthermore, short-term rates are likely to remain low for some time thereafter. And finally, it all depends on the economy – if the “tapering off” puts too much strain on the economy, they are likely to taper off the tapering off. In any event, yesterday’s soaring National Association of Home Builders’ (NAHB) index suggests that the housing market – the original source of all these troubles – is recovering nicely. A Deutsche Bank survey of US builders showed that mortgage rates are having little impact on housing demand even after rising 60 bps and that rates would have to rise a further 150 bps for there to be any dampening effect. It seems that the real economy can sustain higher rates even if the financial markets can’t.
Yesterday, the top administrative court in Greece defended the PM’s decision to abruptly pull the plug on the state TV, ERT. However, the court deemed that ERT should resume operations until a more efficient broadcaster is established. The three political leaders that comprise the tri-party coalition government will meet again on Wednesday to discuss the implementation of the court ruling, with a cabinet reshuffle and improvements on the coalition’s cooperation also on the agenda in order to reduce early election risks.
The G8 meeting ends today. If last year’s communique is any guide, it won’t be particularly significant for the FX market. It’s prices day in the UK and US today. UK CPI inflation is expected to accelerate on a yoy basis. The Bank of England has already said it will ignore any rise in inflation for the time being, but higher inflation combined with an improving growth picture may make the Monetary Policy Committee more hesitant to try any extraordinary easing measures – thus being GBP-supportive. In the US, May CPI is expected to accelerate slightly on a mom basis, with core CPI close enough to the Fed’s 2% target that it would not raise fears of deflation that might prevent them from tapering off. Germany’s ZEW survey is expected to show a rise in both the current situation and economic sentiment for Germany, which could support EUR/USD, although yesterday’s Bundesbank’s monthly report suggested that the German economy might slow over the summer, but that failed to move the markets – investors are focusing on central banks and only data that might affect monetary policy. Back in the US, housing starts for May are forecast to rise sharply, but building permits, a more forward looking indicator, are forecast to be down slightly. Following yesterday’s better-than-expected NAHB index, investors are likely to give the housing market the benefit of the doubt and go with the better figure.
The Market EUR/USD
• EUR/USD had a light trading day fluctuating within a narrow trading range with lowest tick volume in more than two weeks ahead of the start to the FOMC meeting today. The highest NY Empire State Manufacturing Index in three months hardly caused a move on the pair as the components were weak, but the dollar gained following the release of the highest NAHB Housing Market Index in more than seven years. EUR/USD rallied after the FT article was played down and found resistance at 1.3380.
• The trading range is likely to stay narrow today with notable Fibonacci support at 1.3340, 1.3320 and 1.3300. Trendline resistance may come at 1.3375 with further resistance just below the 1.3400 round number.
USD/JPY
• USD/JPY gained on the rebounding Japanese stocks, experiencing moderate gains on the back of strong U.S. data. A tumble to 38.2% Fibonacci support came on the decreasing association of Fed tapering with interest rate increases, with a rebound to 94.90 resistance occurring today as the Topix index is gaining.
• Strong Fibonacci support comes at 94.40, with further support levels at 94.15 and 93.75. Resistance may come again at the tested levels of 94.90, 95.25 and 95.90.
USD/MXN
• The peso came under pressure as risk-averse traders exited carry trades. It pared its losses somewhat after President Enrique Pena Nieto said he’s negotiating with lawmakers to break the state monopoly over oil and gas exploration and production this year. That would be a huge move for Mexico.
• Strong support currently comes in the 12.600 – 12.700 area that sees four notable Fibonacci levels, the 200-day MA and past trendline support. A breakdown from support sees the next notable support level at 12.440, with further 50-day MA support at 12.330 and then 12.190. Initial resistance comes at 12.900 with strong 0verlapping Fibonacci resistance seen at 13.000, with further resistance at 12.310.
Gold
• Gold had a typical day of late, trading at its 20-day MA, marginally losing on a resumption of the risk-on atmosphere that has seen notable gains for the emerging market currencies. Trendline resistance comes at $1395 with resistance thereafter at $1412. Weak pennant trendline support may be seen at $1375 with further support at $1363.
Oil
• WTI reached a four-month high reversal level of $98.65 on the political turmoil in Turkey and Syria, before retracing to $97.75, spiking to $97.40, on speculation the Fed will cut down on its stimulus. Resistance currently comes at $98.10 and $98.50, with data tomorrow expected to show a decrease in stockpiles. Fibonacci support is seen at $97.75, with trendline support at $96.95, and $96.25.
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
click here to read more
click here to read less
More...
Market Analysis 19-06-2013: D-day?
Daily Commentary19.06.2013
The Big Picture D-day?The big event of the day will be when the Federal Open Market Committee (FOMC) announces its decision on monetary policy and then Fed Chairman Bernanke meets the press to clarify any misunderstandings. And misunderstandings galore there are. When will they begin “tapering off” their quantitative easing? What will the pace be? Will they shut off the taps all at once, or simply supply fewer funds to the market? And while they’re busy roiling the long end of the fixed income market, what will they be doing at the short end? All markets have been fixated on this issue over recent weeks, ever since Mr. Bernanke conceded that they could start tapering off in the next few meetings. His explanation of the timing, pace and method of tapering will be crucial for the development of new trends.
The summary of the Fed’s new economic projections, with forecasts from FOMC members for unemployment, growth, inflation and interest rates, will also be closely examined. The Fed is forecasting GDP growth of 2.55% for this year (2.3%-2.8% range) and 3.15% next year, above the consensus of 1.9% this year and 2.7% next year (using Bloomberg’s data). It also forecasts that unemployment will average 7.4% this year (7.3%-7.5% range) and 6.85% next year, a bit more optimistic than the consensus of 7.5% and 7.0% respectively. How the Fed revises these numbers will be critical for projecting how they are likely to change their quantitative easing. The forecasts are not so far out of line as to be untenable, so they might not be revised much. The one place where they may be out of line is with regards to core PCE deflator, where the range of their forecasts for this year was 1.5%-1.6%, whereas the measure is currently running at 1.1%. They may well lower their forecast for the 2013 inflation as a result.
The CPI data reported yesterday in the U.S. do show that inflationary pressures are low despite the relentless asset-purchases by the Fed, with the MoM figure for May missing a forecasted inflation rise of 0.2%, by increasing 0.1% as the fuel oil CPI component saw a 2.9% decrease. The headline YoY metric, however, and the one excluding food and energy both were reported in line with forecasts, as 1.4% and 1.7% price increases were seen relative to last year. The building permits and housing starts data for May also came in softer than expected, with the former deteriorating and the latter coming in lower than the 6-month average, tarnishing somewhat the seeming recovery in the housing market.
The MarketEUR/USD
• The mixed ZEW Survey for June hardly moved EUR/USD, as the improved German and Eurozone economic sentiment was counterbalanced by Germans’ less optimistic outlook with regard to the current situation. The overall weaker than anticipated U.S. data was followed by a 75 pip increase in EUR/USD, ahead of today’s much awaited conclusion to the FOMC meeting.
• Trading is likely to be limited to short timeframe technical trading ahead of Bernanke’s press conference. Resistance is seen yet again just below 1.3400 with 1.3425 – 1.3440 being a likely resistance area, with the latter level seeing weak trendline resistance, which extends from the two most recent EUR/USD peaks the past couple of years. Weaker resistance levels are seen thereafter at 1.3470, 1.3510 and 1.3575. Weak support comes at 1.3375 with Fibonacci and tested trendline support seen at 1.3340. The 1.3320 and 1.3300 support levels still hold with Fibonacci support thereafter at 1.3230.
USD/JPY
• Japanese equities are trading higher today, albeit on low volumes in light of the FOMC meeting, boosted by a surge in exports in May on the weaker yen. The 10.1% increase in YoY Japanese exports beat estimates of a 6.5% increase, leading to a lower than expected, albeit the third largest ever, trade deficit,.
• Support is currently seen at 95.30 and 94.90 with strong Fibonacci support at 94.40. Resistance comes at 95.90, 96.40 and 97.05.
GBP/USD
• Cable was a major loser yesterday as the much higher-than expected U.K. CPI of 2.7% for May, which is thrice the rate of basic pay growth, gives the BoE less room to manoeuvre by stimulating the economy with further stimulus should it be warranted.
• Strong support is seen at 1.5610 with further tested support in the 1.5550 – 1.5570 area and thereafter significantly lower at 1.5500. Resistance comes at 1.5665, 1.5690, which sees the 200-day MA and a notable Fibonacci level, and 1.5730. Although we have confirmed bearish crossovers on both the RSI and the Stochastic oscillator, the significance of the news that will come out of Bernanke’s mouth today diminishes the significance of these technical signals.
Gold
• Gold tumbled despite the dollar’s depreciation as the lower than expected U.S. MoM CPI data and the fairly low inflationary pressures reduced the appeal of holding an inflation hedge. Selling pressure for the precious metals, though, also occurred on the possibility the Fed will announce today a tapering of its stimulus on account of economic recovery that reduces the need to hold a zero coupon haven asset.
• Having broken down from the shorter term pennant, support is now seen at $1363 and the $1348 - $1353 area, with the latter area seeing pennant support that extends from the April low. Resistance comes at $1375, $1387 and $1395.
Oil
• WTI reached its nine-month high on decreasing stockpiles, with the EIA expected to report today a decline by 0.5m barrels.
• Resistance is seen at $98.50, $99.35 and just below $100, with weak support at $98.10, Fibonacci support at $97.75 and trendline support at $96.95 and $96.25.
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
click here to read more
click here to read less
More...
Market Analysis 20-06-2013: The foot off the pedal
Daily Commentary20.06.2013
The Big Picture The foot off the pedal: Bernanke yesterday reiterated that the Fed is prepared to increase or decrease the pace of its bond-buying as the outlook for labour and inflation change. However, citing the diminished labour market risk since autumn Bernanke saw it possible that the Fed would “moderate” its pace of purchases later this year, with the tap that floods markets with stimulus possibly closing in the middle of 2014. Notwithstanding the above, Bernanke stressed in his press conference repeatedly that the accommodative policies are tied to the economic data, with weak future data delaying tapering. In his attempt to appease the markets, particularly the bond markets with the rising yields that have “puzzled” the FOMC, Bernanke clarified that tapering is similar to lifting your foot off the gas pedal, not applying the brakes. He stated that the brakes, i.e. an interest rate hike, will be applied “far in the future”, with 15 out of 19 FOMC members not seeing a rate increase before 2015. In the meantime, the Fed will be hoping that the stock of assets on its balance sheet continues to have an accommodative impact in spite of a taper or end to the purchases. Although this is consistent with economic theory in terms of supply and demand, the bond markets have not really had a textbook response to the tapering as treasuries lost severely, with the yield on the 10-year note increasing from yesterday’s low to today’s high by 9.6%.
The initial market reaction to the FOMC statement saw major dollar gains, as the improved economic outlook and the lowering of unemployment projections for both 2013 and 2014, with the latter’s range of 6.5% to 6.8% including the 6.5% threshold level set for a possible rate hike, increased tapering expectations hitting emerging market currencies. The dovish monetary policies implemented by the Fed had investors seek yield in higher-yielding assets, particularly in emerging markets, with a slowdown in stimulus and expectations of a rate increase making long positions in emerging market currencies less appealing. As a consequence, the Mexican peso, the Brazilian real and the South African rand plummeted, inter alia, versus the greenback, with the Dollar Index gaining 0.92% since yesterday morning. Concern for low inflation, with the core PCE projections being revised downwards, was a moderating factor in yesterday’s press conference but the news did not do much to curb tapering speculation. Low forecasted inflationary pressures, however, substantially tarnished the appeal of Treasury Inflation-Protected Securities (TIPS) and precious metals, with gold and silver losing since yesterday morning 1.43% and 1.61%, respectively. U.S. equities remained initially resilient displaying volatility but a sell-off materialised towards the close with the S&P 500 shedding 1.4%.
As if the markets did not have enough to absorb following the end of the crucial two-day FOMC meeting, today sees the flash PMI day for June. China kicked-off with a much worse-than-estimated contractionary HSBC reading of 48.3 when analysts were expecting around 49.1 to 49.4 (depending on the survey), similar to May’s 49.2 figure. The weak figure follows downgrades to China’s growth forecast, as the seven-day repo rate reached a seven year high as the central bank refrained from providing the financial system with further funds. The Eurozone PMIs for June are expected to show improvements both with regard to manufacturing and services. The French Manufacturing PMI is set to come in at 47.0, a 14-month high, from the 46.4 figure reported in May. The Services PMI is forecasted to increase from 44.3 to 44.8, a 6-month high. German manufacturing PMI is due to continue with its rebound, climbing to 49.8 – 49.9 from 49.4, with the 50.0 figure in services placing a halt to the two consecutive months of contraction. The Eurozone PMI Composite is also due to improve from 47.7 to 48.1, with the manufacturing PMI increasing from 48.3 to 48.6 and the services PMI from 47.2 to 47.5. The U.S. manufacturing PMI is also set to rise from 52.3 to 52.7 – 52.8, with the Philly Fed Manufacturing survey improving, moving from -5.2 to -0.2, a day after Bernanke stressed the need for positive U.S. data in order to initiate stimulus tapering.
The U.S. data, however, do not end there with the initial jobless claims anticipated to show a slight increase from 334K to 340K, whilst staying below the 5-week average of 349K. The Conference Board leading indicator for May is due to rise by 0.2%, albeit at a slower pace than the 0.6% increase witnessed in April. The pace of existing home sales for May is set to remain steady at +0.6%, increasing the home sales from 4.97M to 5.00M.
The U.K. releases today its retail sales figures for May, with broad improvements expected. The MoM sales will likely expand by 0.8%, having shrunk 1.3% in April, with the MoM and YoY figures excluding fuel also set to show stark improvements. The headline YoY figure, though, will likely show an expansion at a slower pace of 0.2%, having increased by 0.5% in the previous month. Shortly afterwards, the Confederation of British Industry will release its survey on industrial trends, with the June figure improving relative to May from -20 to -15.
Lastly, the Eurozone is likely to attract market attention over the next couple of days with the Eurogroup and Ecofin meetings. Today the Euro-area finance ministers may come to an agreement on the €500Bn European Stability Mechanism, the Eurozone’s lender of last resort fund, which will permit the direct recapitalisation of banks, starting from fall 2014. A key issue under discussion in the summit today will be whether banks can be recapitalised via the mechanism retroactively, thus erasing some debt from struggling peripheries. Aside from the meetings, the Eurozone will be releasing its preliminary consumer confidence for June, with pessimism expected to fall to an 11-month low of -21.5, an improvement from the -21.9 May reading.
The MarketEUR/USD
• EUR/USD’s breakdown from notable support at 1.3300, with bearish crossovers at overbought levels on the Stochastic and the RSI, sees next notable Fibonacci support at 1.3230, with weak support levels thereafter at 1.3200 and 1.3160. Significant, well tested support comes at 1.3115 with 1.3075 concentrating the 50- and 200-day MAs. Initial resistance comes at 1.3300, with further resistance at the tested Fibo levels of 1.3320 and 1.3340.
USD/JPY
• USD/JPY was a major gainer following the FOMC announcement with resistance coming at the well-tested 97.05 level. A breakout sees next resistance significantly higher, in the 97.90 – 98.15 area, with weak trendline resistance at 98.70. Support comes at 96.40 with stronger support at 95.90.
GBP/USD
• Cable broke down from multiple levels yesterday, losing considerably today as well. Having penetrated and tested the Fibo level at around 1.5500, the next notable level comes at 1.5420 with 50-day MA support at 1.5370, weak support at 1.5345 and tested Fibo support at 1.5315. Resistance above 1.5500 comes at 1.5550.
Gold
• Gold broke down from its pennant formation, testing trendline resistance thereafter. Weak support comes at $1340 with $1322 being the low following the April crash. Notable support thereafter comes in the $1285 - $1300 area. Resistance levels are $1353 and $1363.
Oil
• WTI broke down from $97.75 support following an unanticipated increase in crude stockpiles and the Fed’s policy announcement. Having violated the $96.95 support trendline, the next level is seen at $96.15 and thereafter at $95.65. Resistance may be seen at the previous support level of $96.95 and thereafter at $97.75.
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
click here to read more
click here to read less
More...
Market Analysis 21-06-2013: How low is “low”?
Daily Commentary21.06.2013
The Big Picture How low is “low”?The carnage in the markets triggered by Bernanke’s statements that the Fed’s asset-buying stimulus programme may come to an end mid-2014 should the U.S. data, particularly with regard to employment be positive, has yet to come to an end. Moribund gold experienced yesterday its biggest one-day decline since the two-day April crash, losing 5.4% from yesterday morning; U.S. equities plummeted with the S&P500 losing 2.5%, breaking its upward sloping trendline that held since November, moving below its 50-day MA and closing on its lows with the third highest volume in more than 3 months, whilst the futures saw the highest volume in 20 months; Crude plunged with WTI shedding 3.1% and Brent 3.3% since yesterday morning; emerging market currencies continued to take a beating with the Brazilian real, Mexican Peso, and South African Rand losing 3.48%, 3.17%, and 1.99% respectively; higher-yielding developed nation currencies also plunged, indicated by the Aussie’s 2.53% and Kiwi’s 2.27% decline versus the greenback, with China’s economic slowdown adding insult to injury, although China’s cash crunch woes seem to have subsided following the intervention by the People’s Bank of Chiina.
The euro managed to remain afloat, losing only [sic] 1.04% since yesterday morning, less than the dollar index’s gains of 1.18%. The generally better than expected preliminary PMIs for June in the Eurozone, with the greater than expected contraction in the German manufacturing PMI being somewhat offset by the surprise expansion in services, served to taper the pace of EURUSD’s decline. The common currency thereafter was able to capitalise on the larger-than-expected increase in U.S. jobless claims, which came in at 354K, 5K above the 5-week average. The simultaneous release of worse-than-expected Conference Board leading indicators, which showed a 0.1% rise, contrary to the 0.2% expected and much lower than April’s 0.8%, and the highest Eurozone consumer confidence reading in 22 months triggered a rebound from 1.3160 support. This occurred despite the concurrent announcement of the Philly Fed manufacturing survey for June that equalled the highest reading in 15 months, and the boost in existing home sales, which came in at 5.18M unit annual rate, the most in 28 months. However, with borrowing rates, including mortgages, soaring the past 6 weeks on anticipation the Fed will scale down its stimulus, the housing market is destined for a slowdown, indicated by the reduction in mortgage applications, placing a resistance on house price increases. Should the slowdown see a drop in house prices, then this in combination with the plunging equities and the payroll tax hikes is likely to severely impact consumer sentiment, with people consequently spending less following the decrease in their perceived wealth as theorised by the wealth effect of consumers; this would go contrary to what the Fed’s accommodative policy have aimed to do. Therefore, should this bleak scenario starts acting out it will likely set the stage for intervention of some sort, either material or verbal.
The day is surprisingly light in terms of economic data with no figures reported from the U.S. In the early hours, BoJ Governor Kuroda will be giving a speech at the annual meeting of the National Association of Shinkin (Cooperative) Banks held in Tokyo, with the event serving as a first chance opportunity to calm the markets from the recent volatility.
Canada will be releasing its CPI figures for May, with the YoY headline inflation rate set to show an increase form 0.4% to 0.9%, with core CPI also increasing from 1.1% to 1.2%. The MoM CPI is set to rebound from the deflationary 0.2% figure reported last month, showing a 0.4% increase in prices.
In the U.K. the public sector net borrowings for May are set to come in at the highest level since November, with the £13.750B being more than 50% higher than April’s £8.035B.
In the Eurozone the seasonally adjusted current account is reported for April with no forecast available. The Ecofin summit is also taking place with the finance ministers set to discuss the establishment of a framework for the recovery and resolution of credit institutions and investment firms. Greece is set to return to the forefront, with a re-emergence of periphery risk, as the country is likely facing a funding shortfall of €3Bn – €4Bn, coupled with an increased possibility of snap elections following disagreements between the coalition parties on the closure of the state broadcaster.
The MarketEUR/USD
• EUR/USD found support yesterday at 1.3160. Current support comes at the 1.3230 Fibonacci level with support below this level coming at 1.3200 and 1.3160, with notable Fibo support at 1.3115.
USD/JPY
• USD/JPY retraced from resistance at 98.25, with resistance today likely coming in the significant 97.90 – 98.15 area, which sees the 23.6% retracement level of the November – May rally. Further, concentrated resistance comes at 98.85, 99.15, the 50-day moving average, and 99.35. Support is seen at 97.05, 96.40 and 95.90.
GBP/USD
• Cable rebounded from the overlapping Fibonacci levels found at 1.5420, with support then coming at 1.5500 which saw the next notable Fibonacci level. Resistance is seen in the 1.5550 – 1.5570 area with resistance thereafter at 1.5610. A break of 1.5420 support sees support at 1.5370, which sees the 50-day MA, with support thereafter concentrated at 1.5345 and 1.5315.
Gold
• Gold reached a low of $1269, but then rebounded, climbing above the notable 38.2% Fibonacci level of the 10-year rally from 2001 to 2011 found at $1285. Weak support below the current low is seen substantially lower at $1228. Resistance above $1285 comes at $1300 and $1330.
Oil
• WTI tore through all supports closing on its low finding past trendline and Fibonacci support at $94.50, with significant support thereafter at the 50-day MA of $94.05, with a break below $93.50 possibly triggering a breakdown towards $92.35. Resistance comes at $95.65 and $96.10.
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
click here to read more
click here to read less
More...
Market Analysis 24-06-2013: Scanty Scandi
Daily Commentary24.06.2013
The Big Picture Scanty Scandi: Markets have had three working days plus a weekend to come to grips with the changes in Fed policy revealed last week. We expect that some calm will be restored now that markets have had an opportunity to consider what is likely to happen. China too has taken measures to calm its markets through targeted injections of funds, helping to reduce worries from that front as well. But the question of the pace of “tapering” and its impact remains in the air and the general tone is likely to be less risk-seeking than before.
The dollar gained against virtually all currencies, the only notable exception being the BRL. Gains were especially strong against the Scandis. NOK in particular has weakened sharply after last Thursday’s Norges Bank meeting adopted an easing bias. The movement in SEK, which had been gaining broadly until recently on good economic data, seems to be largely a catch-up move after the sharp decline in NOK. The moves show how central bank policy is determining currencies nowadays and how the Fed’s almost unique status as a central bank with a tightening bias is likely to underpin the dollar (and undermine other currencies).
Political insecurity reignited in Greece a year after the formation of the tri-party coalition government, with bond yields spiking and the Athens Stock Exchange losing 6.1% on Friday, as the smallest coalition partner defected over the closure of the state broadcaster and the layoff of public sector employees. This turn of events has necessitated a cabinet reshuffle, whilst leaving the coalition with a slim majority of 153 seats in the 300-member Parliament, though support may come from a further 4 independent MPs who are inclined to vote in favour of the two ruling parties. Populace unrest, however, is likely to remain a prevalent feature as two-thirds of Greeks oppose the closure of the public broadcaster with the latest opinion polls showing that the two coalition parties currently have the support of 27.7% of voters.
The data in Europe today is confined to the Ifo survey for June, which is forecast to show the Business Climate index staying at 105.7, with the current assessment of business conditions marginally deteriorating from 110.0 to 109.5. Expectations, however, are forecast to rebound to 102.0 from the 101.6 reported the two previous months. In the US, the Chicago Fed National Activity Index for May is forecast to improve to -0.15 from -0.53 and the Dallas Fed Manufacturing Business Index for June is forecast to improve to -1.0 from -10.5. A speech by Dallas Fed President Fisher on US monetary policy may be more important however as he may try to clarify further the Fed’s intentions. Fisher is an ultra-hawk, scoring 5 out of 5 on the Reuters/Thompson Dove/Hawk scale (the most hawkish). As such he is more likely to confuse things in comparison with Chairman Bernanke’s more dovish point of view (2 out of 5).
The MarketEUR/USD
• EUR/USD plunged further on Friday and opened with a small 30 pip downward gap as the dollar’s across-the-board gains continued. Strong support currently comes at 1.3075, which concentrates the 38.2% Fibonacci level of the July – February rally as well as the 50- and 200-day MAs. Weaker support thereafter comes at 1.3030 and just above 1.3000 with further tested levels at 1.2980 and 1.2955. Tested resistance is seen at the 1.3115 Fibonacci level with a strong rebound seeing resistance at 1.3160. The 5-day Stochastic is well into oversold levels but the 14-day and the RSI still have some room to go before reaching extremes.
USD/JPY
• USD/JPY managed to break today the significant resistance found in the 97.90 – 98.15 area despite the head of the $1.14 trillion Japanese Government Investment Fund having his doubts with regard to the achievement of the 2% inflation target set by the BoJ. The pair may have been buoyed by news that Japan’s ruling Liberal Democratic Party (LDP) and its coalition partners won nearly two-thirds of the seats in an election in Tokyo over the weekend, which bodes well for the LDP’s performance in the Upper House election in July and hence the ability of PM Abe to achieve his legislative goals for economic reform. The 97.90 23.6% retracement level of the November – May rally is likely to act as a strong support now with initial resistance at 98.85 and thereafter concentrated at 99.15, which is the 50-day MA, and 99.35, with a breakout seeing resistance just below the 100-mark.
USD/SEK
• USD/SEK furthered its gains on Friday breaking out from its 200-day MA, before retracing from key tested, resistance at 6.7150, which also sees the upper Bollinger band. A breakout from 6.7250 sees next key resistance significantly higher at 6.8000, the November 2012 high, which also sees the 50% retracement level of the June 2012 – February 2013 plunge. Weak resistance thereafter likely comes at 6.8740. Support may be found at 6.6550, with stronger Fibonacci and 200-day MA support at 6.6200.
Gold
• Gold’s disastrous week ended with a minor rebound to $1302 resistance, cutting down its weekly losses to 6.8%. A breakout from resistance may see a short-lived rally to $1320. Key support comes at $1285 with further support at the recent low of $1269. A breakdown from the low sees weak support around $1228.
Oil
• WTI and Brent both lost 1.9% since Friday morning making them the biggest losers of the dollar gains, behind the Swedish Krona. Crude has also been impacted by the increasing signs of a Chinese slowdown. 50-day MA resistance comes at $94.05 with $93.50 having some support though strong support comes around $92.35, which sees the 200-day MA and two notable Fibonacci levels. A rebound may find resistance at $94.50.
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
click here to read more
click here to read less
More...
Market Analysis 25-06-2013: Dovish hawks
Daily Commentary 25.06.2013
The Big Picture Dovish hawks:The debate over QE continues, but now with a more dovish tilt. Dallas Fed President Richard Fisher, who is considered an ultra-hawk (5 out of 5 on the Thomson/Reuters/ Hawkometer) reiterated Bernanke’s comments of a “dial back” of stimulus should the economic data permit and refrained from making further hawkish comments. On the contrary, he said “an exit is still way out in the future" and stressed the need for “more incentives from fiscal policy makers” for the economy to reach full employment. Minneapolis Fed President Kocherlakota, a non-voting FOMC member (dove/hawk rating: 4), said it was a “mis-perception” that the FOMC had taken a hawkish turn and he also stressed that monetary policy will remain loose “for a considerable time” after the bond-purchasing comes to an end. Fed funds expectations for 2016 were up 9 bps at one point during US trading but ended the day flat after these comments. With even these hawkish FOMC members trying to downplay the immediate implications of the Fed’s “tapering off,” it was no wonder that the USD weakened somewhat.
Yet the US currency did manage to gain against some currencies, notably the SEK, NOK, NZD and CAD. These currencies were also big losers Friday, suggesting that momentum traders have detected a trend here. Look for further weakening of these currencies if the smart money perceives that they are vulnerable. The commodity currencies certainly look so, given the concerns about growth in China.
In the Eurozone, only second-tier data today: French business confidence and Italian retail sales. There are a number of speakers from the ECB today, including President Draghi and Council members Coeure and Liikanen. When Draghi speaks, he usually emphasizes that they still have more they can do to support policy, so this may be negative for the euro. In the UK, the BBA loans for house purchases is forecast to have risen slightly in May. Outgoing Bank of England Gov. King will testify to the Treasury Committee on the May inflation report. In the US, durable goods orders are expected to be up 3.0% mom in May, a decline from +3.5% mom in April, while non-defense capital goods excluding aircraft is expected to be up 0.5%, a slowdown from the +1.2% pace in April. There are also several housing indicators due, including the S&P/Case Shiller house price index and the Federal Housing Finance Agency house price index, which are expected to show house prices continuing to rise, as well as new home sales for May. Finally, Conference Board consumer confidence for June is forecast to show a small decline. All in all the figures are likely to show that the US economy is still on the upward path, but as we saw yesterday, the market is looking more at central banks’ reaction function than the data itself.
The Market EUR/USD
• EUR/USD tested 20-day lows on the announcement of improved Chicago Fed National Activity and Dallas Fed Manufacturing Business indices. A rebound above 1.3115 resistance materialised on Fisher’s comments.
• The break of 1.3115 resistance saw resistance just 20 pips higher, failing to test 1.3160 resistance adding to the bearish outlook for the pair. Support below 1.3115 comes at the 1.3075 Fibonacci level that also concentrates the 50- and 200-day MAs, with support thereafter at 1.3030 and just above 1.3000. Resistance comes at 1.3160 and 1.3200.
USD/JPY
• Concerns in Asia surrounding China’s slowdown have triggered a return to the safe-haven yen as Asian equities slump further, with MSCI Asia ex Japan losing 2.8% since yesterday.
• Resistance comes in the well-tested 97.90 – 98.15 area that sees the 23.6% retracement level of the November – May rally with a breakout likely testing resistance at 98.80, though weak trendline resistance may come at 98.45. Further resistance may be seen in the 99.15 – 99.35 area. Support may be found at 97.05 and 96.40.
USD/NOK
• USD/NOK is continuing with its rally having broken out from 13-year old trendline resistance as seen on the weekly chart, breaking out from the triangle pattern formation that has been developing the past 5 years, which sets a long-term price target just below 8.0000. Currently, selling pressures seem to compound just below the July 2012 high of 6.1995, which is the highest the pair has been in more than 2 ½ years.
• Resistance above 6.1995 may come at 6.3150 and thereafter at 6.5300. Support may come at 6.0000 and thereafter at the trendline at 5.8600.
Gold
• Gold, as shown in this 4-hour chart, continued consolidating around $1285, the 38.2% retracement level of the 10-year rally from 2001 to 2011. Nonetheless, the lowered forecasts for the metal by Morgan Stanley, which followed those of other investment banks such as UBS, Goldman Sachs, and BNP Paribas, added to the negative outlook as the bank slashed its 2013 price prediction from $1487 to $1409.
• Support is seen in the $1269 - $1275 area with a move below the recent low likely triggering a breakdown with weak support at $1228 and Fibonacci support at $1160. Resistance comes at $1285 and $1302.
Oil
• WTI rebounded yesterday ahead of the API crude oil inventories released today, with the DOE inventories tomorrow scheduled to show a 2.0M barrel reduction in stock as the driving season is well under way. Resistance came at the overlapping Fibonacci levels found at the well tested level around $95.65 as shown in this 4-hour chart.
• Support for the day comes at $94.50 with further support at $94.05, $93.50 and $92.65. Resistance above $95.65 may be seen at $96 and thereafter at $96.95.
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
click here to read more
click here to read less
More...
Market Analysis 26-06-2013: ECB’s turn
Daily Commentary 26.06.2013
The Big Picture ECB’s turn: After several days of focus on what the Fed was going to do, yesterday it was the turn of the ECB. Benoit Coeure, the ECB Council member responsible for money markets and executing ECB monetary policy, said that the ECB’s stance “will remain accommodative for as long as needed” and that the ECB has “an open mind” about non-standard policy tools. These are the usual comments that we’ve heard from ECB Council members recently. He also made the point that the ECB is watching the entire term structure, not just short rates. This tied in with ECB President Draghi’s comments; he said that outright monetary transactions (OMT), the ECB’s pledge to buy up the bonds of troubled countries if necessary, “is even more essential now as we see potential changes in the monetary policy stance with associated uncertainty in other jurisdictions of the integrated global economy.” In other words, the ECB stands ready to depress long-term yields if necessary to keep the Eurozone economy on a recovery path while the Fed “tapers off” QE. Given the relatively good correlation between EUR/USD and the real two-year bond spread between Bunds and Treasuries, this suggests a lower EUR/USD going forward. The single currency could come under some pressure ahead of next week’s ECB council meeting.
Fears of a melt-down in China were relieved somewhat yesterday after the People’s Bank of China (PBOC), the nation’s central bank, stepped in to alleviate the crunch in the money market and Shanghai stocks closed almost flat. This may have helped to reverse some recent risk-off behavior and the biggest gainers overnight were the currencies that have been among the biggest losers recently, namely SEK, NOK, and AUD. But today the Shanghai market is again down today even after the PBOC said it will use tools to safeguard stability in the money markets, suggesting that not everyone in China is reassured.
There are no major economic indicators out today, only the final figures for French and US GDP.
The Market EUR/USD
• The dovish statements from ECB Council members, combined with much higher-than-expected durable goods orders in the U.S. for May saw EUR/USD retrace from resistance. The higher than expected S&P/Case-Schiller Home Price Index and the most new home sales since the post-Lehman era, ahead of today’s MBA mortgage applications, confirmed the strength of the US housing market rebound, with Conference Board consumer confidence rising to a 5 ½ year high. The data added to the signs of a US recovery that have market participants anticipating a scale back of quantitative easing, driving EUR/USD to notable 1.3075 Fibonacci and 50- as well as 200-day MA support.
• Having broken 1.3075 we have entered an area of concentrated past price action that holds till 1.2875. Fibonacci resistance comes at 1.3075 and 1.3115 with weak support at 1.3055, 1.3030, 1.3005, and 1.2980.
USD/JPY
• USD/JPY rebounded from 97.05 support on the across-the-board strong U.S. data and the lessening of concerns in China following soothing words by the PBOC. However, a retracement from trendline resistance at 98.20 occurred following a run to havens as the Shanghai Composite is shedding more than 1.5% today, having crashed in June losing 16% whilst breaking down from key 4 ½-year low support at 1950.
• Resistance above the Fibonacci 97.90 level comes at 98.20, thereafter at 98.8 and later in the 99.15 – 99.35 area that also sees the 50-day MA. Support comes at the tested 97.05 level and thereafter at 96.40 with a possible divergence occurring between the price increases and the downward sloping Stochastic oscillator.
USD/CAD
• USD/CAD is continuing to rally following the breakout from its three-year old triangle formation, currently testing an almost two year highs, with spike resistance at 1.0650.
• The longer term price target set by the triangle breakout is 1.13, which is a long way from the current levels. 1.0470 is a tested support level with trendline support at 1.0415.
Gold
• Gold moved lower following the release of strong US data that increase the likelihood of an end to Fed stimulus by mid-2014. The break of the $1269 recent low triggered a breakdown with support coming at the weak $1244 level.
• Former $1269 support is likely to turn resistance with resistance thereafter in the $1285 – 1289 area. Support below $1244 may come at the formerly tested $1228 level, with key support at $1160.
Oil
• WTI retraced from $96.05 resistance as the dollar strengthened following the better than expected US durable goods orders, with the only slight decrease in API crude inventories not affecting the price. WTI looks to be breaking down from $94.50 Fibonacci support, despite data today due to show a 1.75M barrel decrease in DOE inventories. Further support comes $94.05, $93.50 and $92.65, with resistance at the former support levels of $95.65 and $96.05.
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
click here to read more
click here to read less
More...