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Market Analysis 06/11/2013
Daily Commentary06.11.2013, Time of writing: 03:30 GMT
The big pictureGood news for US helps high-beta currencies more than USD:
The dollar was mostly lower in early European trading Wednesday as the “risk on” trade took hold, thanks to good US data. It was sharply lower vs NZD and GBP and somewhat lower vs AUD and SEK. On the other hand, it gained modestly vs CHF and JPY. EUR/USD is virtually unchanged from Tuesday morning’s levels. Yet despite the move out of the safe havens and into the high-beta currencies, most EM currencies were lower vs USD, suggesting that this time at least a rising tide is not going to lift all boats.
There were two stories supporting USD and the risk-on trade during the US day. First, the non-manufacturing ISM came in much higher than expected (55.4, up from 54.4 vs forecast of a fall to 54.0). Moreover, the employment component surged to 56.2 from 52.7, which has analysts revising up their forecast for Friday’s non-farm payrolls. Secondly, there was also a lot of discussion about two academic Fed papers that will be presented at an IMF conference this week. The papers argue that the Fed should shift its unemployment target for exiting from the zero interest rate policy to 6.0% from the current 6.5%. These papers provide a theoretical underpinning for the common theme emerging from recent Fed speakers that they will have to begin tapering off their huge bond purchases eventually, but by way of compensation they may instead keep rates “lower for longer.” So the Fed may taper sooner but tighten later. This led 10-year Treasury yields to rise 7 bps, while stocks closed down slightly (after being down 0.7% at one point). Such a policy is likely to support the higher-yielding currencies, such as NZD and AUD.
NZD rose after employment in the country rose by 1.2% or 27,000 jobs in Q3 from Q2, more than double the market forecast of 0.5%. The unemployment rate fell to 6.2% from 6.4%. Faster job growth and rising business confidence add to the market’s view that the Reserve Bank of New Zealand will be the first G10 central bank to begin tightening policy and caused the currency to strengthen. GBP was higher on continued momentum after yesterday’s higher-than-expected services PMI. And AUD was up as the market takes the view that no matter how often Gov. Stevens tells us he doesn’t like how strong the currency is, there isn’t much he can or will do about it.
I expect with US rates remaining low indefinitely, the high-beta currencies are likely to continue to benefit. Within them, the rebalancing of the Chinese economy suggests that the NZD is likely to outperform the AUD.
Following Tuesday’s release of UK service sector PMI for October, Italy France, Germany and Eurozone as a whole take their turn on Wednesday. Italy’s number is forecast to fall. France, Germany and the Eurozone are final numbers; as usual the forecasts are the same as the preliminary numbers. In Eurozone we also get the final composite PMI for October, which again is forecast to be the same as the preliminary number. UK industrial production is estimated to rise 0.6% mom, a turnaround from -1.1% mom in August. This may boost sterling further after Tuesday’s better-than-expected services PMI. Later in the day, Eurozone’s retail sales are expected to have fallen by 0.4% mom in September vs +0.7% mom in August. Germany’s Factory orders for September are estimated to be up 0.5% mom vs -0.3% in August, a EUR-positive number. In the US, the leading index for September is estimated to have risen 0.6% mom, a slowdown from 0.7% mom in August. Canada’s building permits for September are estimated to be up 6.0% mom vs a plunge of 21.2% mom in August. We have only two speakers today: Don Kohn from the Bank of England speaks ahead of Thursday’s monetary policy committee meeting, while Fed’s Pianalto speaks on housing and economy.
The Market EUR/USD
• EUR/USD was largely unchanged from Tuesday’s opening levels despite more optimistic comments from ECB President Draghi, who said that the overall economic situation has improved slightly and Europe is gradually recovering from the financial crisis, comments that make a move at tomorrow’s ECB meeting seem less likely.
• The pair rebounded from the 50% Fibonacci retracement level of the Sept 6th – Oct 25th advance and the longer-term uptrend line. In early European trading the rate is heading towards the 1.3545 (R1) resistance level and if the longs manage overcome that hurdle, then I would consider the recent fall as a retracement of the overall uptrend and expect that the pair has returned to its previous upwards direction. The RSI escaped from its oversold zone, while the MACD lies above its trigger shifting the odds for further advance. On the daily chart the long term uptrend remains in effect since the rate is still trading above the uptrend line.
• Support: 1.3467 (S1), 1.3381 (S2), 1.3321(S3)
• Resistance: 1.3545 (R1), 1.3644 (R2), 1.3706 (R3).
USD/JPY
• USD/JPY moved higher after hitting the 98.23 (S1) support level and the blue uptrend line. The rate is currently heading toward the 98.84 (R1) resistance level to give another test. The 50-period moving average remains above the 200-period moving average, confirming the establishment of the new short-term uptrend. On the daily chart, a symmetrical triangle is identified, where the clear exit of the formation would indicate the next longer-term direction for the pair.
• Support: 98.23 (S1), 97.78 (S2), 97.00 (S3).
• Resistance: 98.84 (R1), 99.17 (R2), 99.65 (R3).
EUR/GBP
• EUR/GBP plunged yesterday, confirming the rectangle continuation pattern. The fall stopped slightly below the 0.8399 barrier. The bias remains to the downside, since the 50-period moving average seems ready to cross below the 200-period moving average and the MACD lies below its signal line, in negative territory. My only concern is that the RSI indicates oversold conditions and we might see the pair retracing before continuing its downward path. However, such a retracement would be confirmed upon the RSI’s cross above its 30 level.
• Support: 0.8339 (S1), 0.8273 (S2), 0.8224 (S3).
• Resistance: 0.8399 (R1), 0.8448 (R2), 0.8507 (R3).
Gold
• Gold continued moving sideways, remaining between the 1305 (S1) support level and the resistance of 1320 (R1). A clear downward violation of the 1305 (S1) barrier would have large bearish implications in that it would confirm that the recent advance was just a 61.8% retracement of the prior downtrend (marked with the blue downtrend line). However, both short-term studies favor an upward price movement for now, since the RSI moved away from its 30 level, while the MACD, although negative, crossed above its trigger line.
• Support: 1305 (S1), 1290 (S2), 1269 (S3).
• Resistance: 1320 (R1), 1342 (R2), 1363 (R3).
Oil
• WTI moved lower, touched the 93.61(S1) support level and then moved slightly higher. I would expect a short-term upward wave within the channel, since the RSI exited its oversold zone and positive divergence between the MACD and the price action is identified. The overall trend of WTI remains a downtrend since the price is trading within the blue downward sloping channel and the 50-period moving average remains below the 200-period moving average.
• Support: 93.61 (S1), 91.22 (S2), 89.32 (S3).
• Resistance: 96.00 (R1), 98.81 (R2), 101.00 (R3).
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Market Analysis 07/11/2013
Daily Commentary 07.11.2013, Time of writing: 03:30 GMT
The big picture ECB, Fed policy confusion leave USD mixed:
The dollar is opening mixed again in Europe Thursday: higher vs AUD and NZD, more or less unchanged vs GBP, SEK, CHF and JPY, and lower against EUR, NOK and CAD. There was a sharp move up in EUR/USD in early US trading after Market News International ran a story saying, “The European Central Bank may avoid an immediate rate cut Thursday as Governing Council members seek to avoid the mistakes of the US Federal Reserve in reacting too quickly to fast-changing economic signals…there remains a lack of consensus as to both the appropriate timing and tools it should use to address them.” A neutral outcome seems to be in the market by now and if anything I would expect to see EUR/USD fall somewhat if ECB President Draghi comes out with the kind of dovish comments that he’s made at recent meetings. In other words, the market has already completed the “buy the rumor, sell the fact” cycle ahead of this meeting, first buying the dollar in anticipation of ECB easing and then selling it again on reconsidering the matter. Tune in again next month, when they revise their economic forecasts.
The two Fed papers that I mentioned yesterday continue to be a focus among investors in the US. Expectations for Fed Funds collapsed yesterday, with the implied interest rates on the longest-dated 2016 futures falling by 9 bps and 10-year bond yields down 3 bps as investors are now discounting the Fed remaining “lower for longer.” Wall Street Journal columnist Jon Hilsenrath said that Fed officials have been discussing such a move, but some have doubts about the kind of econometric models the Fed study is based on.
One main topic of debate is whether ending the Fed’s monthly bond purchases but leaving interest rates lower for longer would be good or bad for the high-beta risk currencies and EM currencies. A sign of the confusion over this issue is that gold finished the US session higher but copper fell, WTI rose and Brent fell, and Italian and Spanish bond yields rose (although Portuguese bond yields did fall sharply on signs the country’s fiscal situation has improved.) The problem is that if one assumes that interest rates will end up at the same place eventually, then one implication of “lower for longer” is that when the Fed does start normalizing rates in earnest, it will have to do so faster than it would have done otherwise. The net result would be a flatter yield curve for the next few years (the period while they hold rates down) and then a steeper yield curve after that (the period when they are normalizing rates). See graph of the Fed Funds futures for a demonstration of this. A steeper yield curve is not likely to be a help to EM currencies, because it makes it more profitable to put on carry trades in USD. In any event, if they taper off quantitative easing despite weak economic data then it won’t be good for risky assets, and if they taper off QE because the data supports the move, then nobody will believe the “lower for longer” scenario anyway (like in the UK, where the market is largely ignoring the forward guidance on the belief that the economy will be better than the Bank of England expects and they’ll raise rates earlier as a result.) Thus the whole argument may be a wash for the high beta currencies or even a negative if people think it will provide a justification for the Fed to end its bond purchases prematurely.
In addition to the ECB meeting, there is a Bank of England meeting today as well. Given the Bank’s forward guidance however that is likely to be a non-event. Last month when the Bank issued its meager statement, GBP/USD didn’t move at all, and I would expect the same lack of response this month as well. Then later in the day we have the advance estimate of US Q3 GDP, which is expected to be show an annualized rise of 2.0%, a deceleration from +2.5% in Q2, due to cuts in Federal government spending and sluggish spending on services, notably utilities. Given that Q3 does not include the government shut-down, I expect the figure would have less impact than usual unless it was very different from expectations (one standard deviation range = 1.7% to 2.3%). Elsewhere, German industrial production for September is forecast to show no change on a mom basis, while weekly US jobless claims are expected to be down to 335K from 340K. We have two FOMC members speaking today: NY Fed President Dudley speaks at a global economic policy forum, while Fed Governor Stein speaks on securities transactions.
The Market EUR/USD
• EUR/USD moved in a consolidative manner, remaining between the 1.3467 (S1) support and the 1.3545 (R1) resistance level. If the longs manage overcome that hurdle, then I would consider last week’s fall to be a retracement of the overall uptrend and expect that the pair has returned to its previous upwards direction. The RSI moved away from its oversold zone, while the MACD lies above its trigger shifting the odds for further advance. On the daily chart the long-term uptrend remains in effect since the rate is still trading above the uptrend line.
• Support: 1.3467 (S1), 1.3381 (S2), 1.3321(S3)
• Resistance: 1.3545 (R1), 1.3644 (R2), 1.3706 (R3).
EUR/JPY
• EUR/JPY moved higher, reaching the 133.45 (R1) resistance level. Early in the European day the pair is testing that hurdle and a decisive upward violation would drive the battle towards the next resistance at 134.27 (R2). Both momentum indicators favor such a break since positive divergence is identified between the RSI and the price action, while MACD lies above its trigger line, ready to get a positive sign. On the daily chart, a rising wedge formation is identified, suggesting that the longer-term uptrend is losing momentum.
• Support: 132.60 (S1), 132.16 (S2), 131.13 (S3).
• Resistance: 133.45 (R1), 134.27 (R2), 135.48 (R3).
GBP/USD
• GBP/USD moved higher but then reversed slightly after touching the 1.6110 (R1) barrier and the previous long-term uptrend line. If the longs find the strength to overcome that that strong hurdle, then I expect them to target once more the ceiling at 1.6260 (R2). Relying on our short-term momentum studies does not seem a solid strategy, since the RSI moved lower after finding resistance near its 70 level, while the MACD remains above its trigger line in a positive territory. The overall trend of the pair is a trading range between the 1.5890 (S2) support and the ceiling of 1.6260 (R2) as marked by the blue horizontal lines.
• Support: 1.6000 (S1), 1.5890 (S2), 1.5772 (S3).
• Resistance: 1.6110 (R1), 1.6260 (R2), 1.6375 (R3).
Gold
• Gold continued consolidating between the 1305 (S1) support level and the resistance of 1320 (R1). A clear downward violation of the 1305 (S1) barrier would have large bearish implications in that it would confirm that the recent advance was just a 61.8% retracement of the prior downtrend (marked with the blue downtrend line). However, both short-term studies lie near their neutral levels, confirming the sideways path of the price.
• Support: 1305 (S1), 1290 (S2), 1269 (S3).
• Resistance: 1320 (R1), 1342 (R2), 1363 (R3).
Oil
• WTI moved higher after rebounding from the lower boundary of the downward sloping channel and the support at 93.61 (S1). The price is currently heading towards the 96.00 (R1) barrier where a clear upward penetration would signal the continuation of the corrective wave towards the 98.81 (R2) resistance and the upper boundary of the channel. The positive divergence between the MACD and the price action remains in effect, favoring further retracement. The overall trend of WTI remains a downtrend since the price is trading within the blue downward sloping channel and the 50-period moving average remains below the 200-period moving average.
• Support: 93.61 (S1), 91.22 (S2), 89.32 (S3).
• Resistance: 96.00 (R1), 98.81 (R2), 101.00 (R3).
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Market Analysis 08/11/2013: Back to late September
Daily Commentary 08.11.2013, Time of writing: 03:30 GMT
The big picture Back to late September:
We had a very exciting day yesterday! First the Czech central bank announced it would intervene to push its currency, the koruna, lower against the euro because of low inflation and a sluggish economy. Then the European central Bank shocked the market by cutting rates. Just as ECB President Draghi started his press conference, the US preliminary estimate of US Q3 GDP came out much better than expected, increasing expectations of Fed tapering. Initially the news was extremely USD-positive and the dollar soared. However sentiment started to turn as the details of the GDP figure were less impressive than the headline number (much of the unexpected growth came from a surge in inventories, which is likely to be unwound in the future) and Draghi indicated that the move was more of a fine-tuning exercise than the start of a major shift in policy. As a result EUR/USD gradually recovered about half of its losses.
While I was impressed with how quickly the ECB reacted to the fall in inflation in September, it wasn’t a unanimous decision, the ECB thinks the risks for inflation are now balanced, and it’ll take a lot more to get them to move again. Clearly they would move again if necessary – Draghi said as much – but if the decision wasn’t unanimous this time, then it will be even harder to get agreement the next time. Nonetheless, it looks to me like we’re back to where we were before the US government shut-down at the beginning of October. The ECB has eased and has promised to remain loose for at least another year and a half at least. On the other hand, with the Fed, it’s just a matter of when they tighten, not whether. This dichotomy of central bank position is likely to be a major driver of the foreign exchange market again. I think it will push the dollar higher against most other currencies that do not have a similar tightening bias – which is most currencies at the current time. In particular, I think it is likely to push EUR/USD lower.
USD/JPY was the exception to the strong dollar: it moved sharply lower as the Nikkei futures dropped sharply during New York trading, apparently due to disappointment with the Japanese government’s failure to achieve full deregulation of internet sales of over-the-counter medicine, calling into question PM Abe’s plans for revitalizing the economy. (Tokyo stocks opened down 1.8% this morning.) Nonetheless I don’t think JPY can go its own way for too long – I think this could be a good opportunity to go long USD/JPY from a fundamental point of view. (Beware: the technicals say otherwise, however.)
Today we have yet another big event: the US non-farm payrolls and the unemployment rate for October. The payrolls are expected to rise 120K, below the 148k rise in September, and the unemployment rate is forecast to rise 7.3% from 7.2%. The unemployment rate will be affected by the government shut-down in October, since someone who isn’t at work is considered unemployed even if they’re still getting paid. Therefore people will pay more attention to the payroll figure and less attention to the unemployment rate this month. During the European morning we have French industrial production for September which is expected to be up 0.1% mom, a deceleration from +0.2% mom in August. In Canada, housing starts are expected to show a decrease in October to 190.8k from 193.6k, while the unemployment rate for October is estimates to be up to 7.0% from 6.9%. US personal income and personal spending for September are expected to rise, but at a slower pace than in August. University of Michigan consumer confidence for November is also expected to rise. That would be very positive for the dollar, as it would show that the government shut-down didn’t dampen confidence. Finally, Fed Chairman Ben Bernanke speaks at the International Monetary Fund with the former Bank of Israel Governor Stanley Fisher and the former US treasury secretary Lawrence Summers. Fed’s Lockhard speaks on the economy. ECB’S Asmussen speaks at a bank union event and ECB’s Mersch speaks in Athens.
The Market EUR/USD
• EUR/USD collapsed yesterday after the ECB cut the main refinancing rate by 25 bps down to 0.25%. The plunge was stopped by the 1.3321 (S1) support and the pair managed to recover about half its losses. The bias remains to the downside since the rate violated the long-term uptrend line (blue). In my opinion, the bears will attempt to challenge once more the 1.3321 (S1) barrier. The 50-period moving average crossed below the 200-period moving average, while the MACD crossed below its signal line in the negative zone, completing the bearish picture of the price action.
• Support: 1.3321 (S1), 1.3240 (S2), 1.3115 (S3)
• Resistance: 1.3467 (R1), 1.3545 (R2), 1.3644 (R3).
EUR/JPY
• EUR/JPY also fell after the surprising decision of the ECB but the movement was halted by the 131.21 (S1) barrier. Early in the European day the pair is trading between that support and the resistance of 132.16 (R1). The bias of the rate remains to the downside since the MACD is negative and lies below its trigger, while the 50-period moving average seems ready to cross below the 200-period moving average. However, the RSI is testing its 30 level, thus I would expect some consolidation, before the bears prevail again. On the daily chart the rate broke below the lower boundary of the rising wedge formation, suggesting further decline.
• Support: 131.21 (S1), 130.00 (S2), 129.30 (S3).
• Resistance: 132.16 (R1), 132.60 (R2), 133.45 (R3).
GBP/USD
• GBP/USD moved lower after the BoE kept its policy unchanged but soon afterwards returned higher to challenge once more the 1.6110 (R1) resistance. The longs do not seem strong enough to overcome that hurdle and this is confirmed by our momentum studied. The RSI is moving lower while the MACD, although in a bullish territory, is ready to cross below its signal line. The overall trend of the pair is a trading range between the 1.5890 (S2) support and the ceiling of 1.6260 (R2) as marked by the blue horizontal lines.
• Support: 1.6000 (S1), 1.5890 (S2), 1.5772 (S3).
• Resistance: 1.6110 (R1), 1.6260 (R2), 1.6375 (R3).
Gold
• Gold continued moving within the range that it’s been in since Friday between the 1305 (S1) support level and the resistance of 1320 (R1). A clear downward violation of the 1305 (S1) barrier would have large bearish implications in that it would confirm that the recent advance was just a 61.8% retracement of the prior downtrend (marked with the blue downtrend line).
• Support: 1305 (S1), 1290 (S2), 1269 (S3).
• Resistance: 1320 (R1), 1342 (R2), 1363 (R3).
Oil
• WTI moved slightly lower remaining near the 93.61 (S1) support. A decisive dip below that level would trigger extensions towards the next support barrier at 91.22 (S2). WTI remains in a downtrend, in my view, since the price is trading within the blue downward sloping channel and the 50-period moving average remains below the 200-period moving average. However, the positive divergence between the MACD and the price action remains in effect, indicating that the downtrend is losing momentum.
• Support: 93.61 (S1), 91.22 (S2), 89.32 (S3).
• Resistance: 96.00 (R1), 98.81 (R2), 101.00 (R3).
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
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Market Analysis 11/11/2013
Daily Commentary11.11.2013, Time of writing: 03:30 GMT
The big picture The stronger-than-forecast U.S. payroll data released last week strengthened USD against a range of currencies. Data released on Thursday showed that U.S. economy grew at its fastest pace in a year in the third quarter. The strong data fanned expectations that the Federal Reserve may soon decide to start winding down its $85 billion-a-month bond-buying programme. The Canadian dollar touched a two-month low against its U.S. counterpart. Canadian employment figures came in close to expectations. The Euro was lower against the U.S. Dollar following European Central Bank decision to cut interest rates last week in a move some investors say was intended in part to curb the euro after it soared to its highest level since 2011. France's credit rating downgrade by Standard & Poor's briefly weighed on the currency. After the statement from the Reserve Bank of Australia indicated another rate cut was possible the Australian dollar was boosted from Chinese trade data showing strong rises in both exports and imports in October. The Australian dollar weakened slightly on Monday as September home finance data rose more than expected, but showed the lowest proportion of first home buyers since March 2004.The yen recovered ground against the dollar in mid-day trade on Monday following better than expected current account data and solid Chinese data releases at the weekend that highlight growth prospects in Asia.
Brent crude rose and rebounded from a four-month trough after Iran and six world powers were unable to reach an agreement. An agreement probably would have reduced prices. Gold futures ended Friday’s session at a three-week low, after stronger-than-expected U.S. nonfarm payrolls data. Gold prices held steady on Monday in early Asian trade, recovering slightly from a sharp drop last week.
The European morning starts with news from Italy and Norway. Italy’s industrial production for September is estimated to be up 0.2% mom, a turnaround from -0.3% mom in August, while Norway’s CPI for October is forecast to rise 0.1% mom vs +0.5% mom in September. Low inflation in Norway could put further downward pressure on the NOK. There are no major indicators out from the US or Canada. Overnight, Japan releases its Tertiary industry index for September. The index is expected to have risen 0.2% mom, a slowdown from 0.7% in August. UK RICS house price balance for October is forecast to increase to 58% from 54% in September. We have only one speaker today: Dallas Fed President Richard Fisher gives a speech on US Approach to monetary policy and Economic growth. As for the rest of the week, Tuesday is a CPI day. Germany, Italy, Sweden and UK publish their data, all for October. On Wednesday Japan’s machinery orders for September make the start during the Asian morning. Later in the day, we get UK unemployment data for September and the Bank of England’s quarterly inflation report. Those are both important releases for the UK. Eurozone releases its industrial production for September. On Thursday preliminary GDP figures for Q3 are coming out from Japan, France, Germany and Eurozone as a whole. Japan also publishes its final industrial production for September, UK its retail sales for October and US its trade balance for September. Finally, during Friday we get Eurozone’s final CPI for October, while in the US the Empire State manufacturing survey for November, Industrial production for October and wholesale inventories for September are released.
The Market EUR/USD
• EUR/USD moved lower Friday and after touching once more the 1.3321 (S1) support moved slightly higher. If the bears are strong enough to push the price lower and violate that obstacle, I expect them to challenge the next support at 1.3240 (S2).The bias remains to the downside as indicated by the purple downward sloping channel and by the bearish cross of the moving averages. My only concern is that positive divergence is identified between the RSI and the price action, indicating that the downtrend’s momentum is decelerating.
• Support: 1.3321 (S1), 1.3240 (S2), 1.3115 (S3)
• Resistance: 1.3467 (R1), 1.3545 (R2), 1.3644 (R3).
EUR/JPY
• EUR/JPY moved significantly higher and found resistance near the 132.60 (R1) barrier. Since the rate is printing lower highs and lower lows within the purple downtrend channel and the 50-period moving average crossed below the 200-period moving average, I would expect the pair to move lower, challenging once more the 131.21 (S1) support level. On the daily chart the rate violated the lower boundary of the rising wedge formation, suggesting further decline.
• Support: 131.21 (S1), 130.00 (S2), 129.30 (S3).
• Resistance: 132.60 (R1), 133.45 (R2), 134.27 (R3).
GBP/USD
• GBP/USD moved lower after the longs’ inability to overcome the 1.6110 (R1) resistance hurdle. At the time of writing, the pair is testing the psychological support of 1.6000 (S1), where a decisive dip would have larger bearish implications targeting the 1.5890 (S2) floor. Both momentum studies support that possibility, since the RSI lies within a downward sloping channel and the MACD crossed below both the zero and the trigger lines. For now, the overall trend of the pair is a trading range between the 1.5890 (S2) support and the ceiling of 1.6260 (R2) as marked by the blue horizontal lines.
• Support: 1.6000 (S1), 1.5890 (S2), 1.5772 (S3).
• Resistance: 1.6110 (R1), 1.6260 (R2), 1.6375 (R3).
Gold
• Gold fell sharply Friday, breaking below the 1305 and 1290 barriers (Friday’s support levels). Currently the yellow metal is trading slightly below the 1290 (R1) barrier and if the bears continue their momentum, I expect them to drive the battle towards the 1269 (S1) hurdle. The MACD oscillator lies in its negative territory, below its trigger line, confirming the bearish picture of the metal. However, the RSI indicates oversold conditions, thus an upward wave within the channel should not be ruled out.
• Support: 1269 (S1), 1251 (S2), 1221 (S3).
• Resistance: 1290 (R1), 1305 (R2), 1320 (R3).
Oil
• WTI moved sideways, remaining between the 93.61 (S1) support and the resistance of 96.00 (R1). WTI remains in a downtrend, in my view, since the price is trading within the blue downward sloping channel and the 50-period moving average lies below the 200-period moving average. However, the positive divergence between the MACD and the price action remains in effect, indicating that the downtrend is losing momentum. The RSI is following an upward path, thus I would expect the price to move upwards and challenge once more the 96.00 (R1) barrier.
• Support: 93.61 (S1), 91.22 (S2), 89.32 (S3).
• Resistance: 96.00 (R1), 98.81 (R2), 101.00 (R3).
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
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Market Analysis 12/11/2013
Daily Commentary 12.11.2013, Time of writing: 03:30 GMT
The big picture The euro rose against the dollar for the first time since the single currency briefly touched an eight-week low last Thursday. Norway’s krone erased a decline versus the dollar as Consumer price inflation in Norway rose last month. The Australian dollar weakened further on Tuesday as a National Australia Bank survey of business confidence and conditions indicated that a high exchange rate is affecting business prospects. Emerging-market currencies fell after a typhoon swept across the Philippines. The dollar practically kept pressure on emerging Asian currencies, reflecting concerns about capital outflow and curbing appetite for emerging-market assets. Russia’s ruble headed for the weakest level in two months. In U.K. RICS house price balance rose to 57%, from 53% in the preceding month. The major focus for sterling this week is the Bank of England's inflation report due on Wednesday. The Canadian dollar rose after the release of data last week that exceeded economists’ forecasts. A report this week is projected to show Canadian housing prices rose in September. Asian shares slipped on Tuesday and attention is focused on any details from a meeting of senior Chinese leaders setting policies for the next decade, which is set to end Tuesday.
Gold prices eased marginally in early Asian trade on Tuesday, continuing a decline from overnight. Crude oil prices slipped in early Asian trade on Tuesday, giving back some of the gains oil made overnight after talks between Iran and Western failed to reach deal on Tehran's nuclear program.
Today is a CPI day. We have Germany’s and Italy’s final figures for October; as usual the forecasts are the same as the preliminary numbers. Sweden’s CPI for the same month is estimated to be up 0.1% mom, a slowdown from +0.4% mom in September. In the UK, CPI and PPI for October will be released. The CPI release is expected to come out at 0.3% mom, a deceleration from 0.4% mom in September, which would bring the yoy rate down slightly to 2.5% from 2.7%. This is still well above the Bank of England’s 2% target but certainly moving in the right direction. The Output PPI is forecast to have remained unchanged on a mom basis in October, from a modest decline of 0.1% in September. Overnight, Japan’s machinery orders for September are forecast to have fallen by 1.8% mom vs +5.4 % mom in August. Australia Westpac consumer Confidence is coming out; no forecast is available. As for speakers, Fed's Kocherlakota speaks on monetary policy and will take questions following his address. On the 17th of October he said that officials should do whatever it takes for a faster full employment return and keep inflation near 2%, including the possibility for more stimulus. Fed's Lockhart speaks on the economy; on Nov 8 he said that the Fed will consider tapering at next month’s policy meeting. ECB’s Nowotny gives a keynote address on monetary policy and takes part in a panel discussion, while ECB’s Asmussen speaks at European conference organized by UBS.
The Market EUR/USD
• EUR/USD moved higher yesterday but the advance was halted by the upper boundary of the downward sloping channel. During the early European morning, the rate is testing the boundary again and an upward break would confirm the downtrend’s decelerating momentum indicated by the positive divergence between both the oscillators and the price action. However, the bias remains to the downside, since the pair is trading within the channel and a bearish cross of the moving averages is still in effect.
• Support: 1.3321 (S1), 1.3240 (S2), 1.3115 (S3)
• Resistance: 1.3467 (R1), 1.3545 (R2), 1.3644 (R3).
USD/JPY
• USD/JPY moved significantly higher and penetrated the 99.00 barrier, retracing the whole previous downward wave of the same degree. Currently the pair is testing the 99.60 (R1) hurdle, where an upward break would drive the battle towards the key resistance of 100.00 (R2). Nonetheless, I would expect a corrective wave towards the support of 99.00 (S1), before the bulls prevail again, since the pair moved away from its blue support line. On the daily chart, the rate is trading above the upper boundary of a symmetrical triangle formation, suggesting a stronger pair in the next few weeks.
• Support: 99.00 (S1), 98.00 (S2), 97.50 (S3).
• Resistance: 99.60 (R1), 100.00 (R2), 100.60 (R3).
EUR/GBP
• EUR/GBP broke above the upper boundary of the downward sloping channel and moved higher. The price was stopped by the resistance of 0.8399 (R1) and moved slightly lower. A decisive violation of that hurdle would target the next barrier at 0.8448 (R2). Both momentum indicators favor further advance, since the MACD lies above its trigger, ready to enter the positive territory, while the RSI follows an upward path.
• Support: 0.8339 (S1), 0.8300 (S2), 0.8273 (S3).
• Resistance: 0.8399 (R1), 0.8448 (R2), 0.8476 (R3).
Gold
• Gold continued declining, following the lower boundary of the purple channel. At the time of writing the precious metal is heading towards the support of 1269 (S1). However, since the RSI indicates oversold conditions and the MACD, although in a bearish area, seems ready to cross above its signal line, an upward wave within the channel should not be ruled out.
• Support: 1269 (S1), 1251 (S2), 1221 (S3).
• Resistance: 1290 (R1), 1305 (R2), 1320 (R3).
Oil
• WTI continued moving sideways, remaining between the 93.61 (S1) support and the resistance of 96.00 (R1). WTI remains in a downtrend, in my view, since the price is trading within the blue downward sloping channel and the 50-period moving average lies below the 200-period moving average. However, the positive divergence between the MACD and the price action remains in effect, indicating that the downtrend is losing momentum. The RSI is following an upward path, thus I would expect the price to move upwards and challenge once more the 96.00 (R1) barrier.
• Support: 93.61 (S1), 91.22 (S2), 89.32 (S3).
• Resistance: 96.00 (R1), 98.81 (R2), 101.00 (R3).
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Market Analysis 13/11/2013
Daily Commentary 13.11.2013, Time of writing: 03:30 GMT
The big picture The dollar enjoyed support overnight amid ongoing expectations for the Federal Reserve to begin scaling back its USD 85bn monthly bond purchases. Investors will be looking for any comments from Treasury secretary Jack Lew during his series of leadership meetings in Asia and from Fed Chair appointee Janet Yellen at Thursday's Senate confirmation hearing on her nomination. The euro extended Monday's gains against the dollar on Tuesday after investors continue to view the single currency as oversold versus the dollar as CPI fell less than expected last month in Germany and Italy. Italy’s borrowing costs fell at an auction of 12-month government notes on Tuesday. Euro gains may be halted if data to be released this week shows the region’s factory output dropped and growth slowed, fanning speculation the European Central Bank will take more measures. The Swedish krona fell after a report showed industrial production stagnated in September and Swedish CPI fell -0.1% mom vs a rise of 0.1% mom in August, giving rise to expectations that the central bank will cut interest rates to stimulate the economy. The yen gained against the dollar, despite core machinery orders falling a surprise 2.1% mom in September. In Asia investors sold off Chinese shares on Wednesday, disappointed by a lack of details in the reform plan coming out of the Central Committee meeting and its apparent reluctance to overhaul the state-owned sector. The pound softened after U.K.'s annual inflation rate slowed to 2.2% in October and producer price inflation declined for the third consecutive month. The pound might get a lift if the BoE brings forward the point at which it sees UK unemployment hitting 7%, the level at which it would consider raising rates, in the new forecasts that it will issue today. The Australian dollar weakened in Asian trade on Wednesday as third quarter wage-price index data rose less than expected. The weaker data may give some scope for a further cut in the Reserve Bank of Australia's cash rate.
In commodities markets, gold was slightly higher but remained not far from the previous session's four-week low. Oil prices gained in Asia on Wednesday edging up recovering from weakness.
Today the leading role is for the UK. The Bank of England publishes its new economic forecasts in its quarterly inflation report after the release of UK employment data. The unemployment rate is expected to have fallen to 7.6% in September from 7.7% in August, while the jobless claims change for October are estimated to fall by 30.0K, a slower pace of decline than 41.7K in September. Governor Carney will publish the new projections at a press conference a couple of hours later. Eurozone’s industrial production for September is estimated to have fallen 0.3% mom, a turnaround from +1.0% mom the previous month. Besides Governor’s Carney speech, we have two other speakers today: Cleveland Fed President Pianalto and Riksbank Governor Stefan Ingves. It will be interesting to see if Ingves makes any comments on Tuesday’s inflation data. Overnight Japan releases its preliminary Q3 GDP figures. The initial estimate is expected to show a rise of 1.7% qoq annualized, a slowdown from +3.8% in Q2. Japan’s final Industrial Production for September is also coming out; no forecast is available.
The Market EUR/USD
• EUR/USD violated the upper boundary of the downward sloping channel, confirming the positive divergence between the momentum indicators and the price action. During the European morning, the rate is trading below the 1.3467 (R1) resistance level, which coincides with the value of the 50-period moving average. An upward break of that hurdle might trigger extensions towards the 1.3545 (R2) level to give another test near the area of the previous uptrend line. Both momentum studies continue advancing, while the MACD seems ready cross above the zero line.
• Support: 1.3321 (S1), 1.3240 (S2), 1.3115 (S3)
• Resistance: 1.3467 (R1), 1.3545 (R2), 1.3644 (R3).
USD/JPY
• USD/JPY consolidated near the 99.65 (R1) resistance level and moved lower. In my opinion the corrective wave will continue, because the RSI found resistance at its 70 level and moved lower, while the MACD, although in bullish territory, seems ready to cross below its signal line. However the bias remains to the upside, and after the bulls prevail again, I expect them to target the 100.00 (R2) key resistance level. On the daily chart, the rate is trading above the upper boundary of a symmetrical triangle formation, suggesting a stronger pair in the next few weeks.
• Support: 99.00 (S1), 98.00 (S2), 97.50 (S3).
• Resistance: 99.65 (R1), 100.00 (R2), 100.60 (R3).
EUR/GBP
• EUR/GBP violated the 0.8399 hurdle (yesterday’s resistance) and climbed above 0.8448. At the time of writing, the pair is heading towards the 0.8476 (R1) which coincides with the 61.8% Fibonacci retracement level of the recent decline. I expect the rate to find strong resistance near that area and perhaps consolidate there, since the advance seems overextended and the RSI is now testing its 70 level.
• Support: 0.8448 (S1), 0.8399 (S2), 0.8339 (S3).
• Resistance: 0.8476 (R1), 0.8512 (R2), 0.8574 (R3).
Gold
• Gold continued declining, following the lower boundary of the purple channel. The yellow metal reached the 1269 (S1) barrier, where the price found support. The overall short-term trend remains a downtrend since the metal is trading within the downward sloping channel and the 50-period moving average lies below the 200-period moving average. Nonetheless, since the RSI indicates oversold conditions and the MACD, although in a bearish area, seems ready to cross above its signal line, an upward wave within the channel should not be ruled out.
• Support: 1269 (S1), 1251 (S2), 1221 (S3).
• Resistance: 1290 (R1), 1305 (R2), 1320 (R3).
Oil
• WTI found resistance at the 95.36 (R1) level and moved lower, reaching the support of 93.14 (S1). A decisive dip below that barrier may have larger bearish implications and target the next obstacle at 91.22 (S1). WTI remains within the downtrend channel and the bearish cross of the moving averages is still on hold. However, the positive divergence between the MACD and the price action remains in effect, while the RSI rebounded from its 30 level.
• Support: 93.14 (S1), 91.22 (S2), 89.32 (S3).
• Resistance: 95.36 (R1), 98.81 (R2), 101.00 (R3).
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Market Analysis 14/11/2013
Daily Commentary 14.11.2013, Time of writing: 03:30 GMT
The big picture The Dollar was broadly supported yesterday despite Fed Chairman-designate Yellen's introductory remarks that suggested the U.S. central bank might not be near scaling back its stimulus. The euro hit one-week high against the dollar, having erased most of the losses it had suffered a week ago, even though industrial production in the euro zone fell more-than-expected in September. Italy’s borrowing costs fell to the lowest level since March 2010 at an auction of three-year government bonds on Wednesday. The yen weakened against the dollar as its preliminary Q3 GDP data showed Japan's growth rate had slowed, signaling aggressive monetary easing would continue. The pound strengthened against the dollar on Wednesday after the unemployment rate ticked down to 7.6% in September from 7.7% in August. Analysts had expected the jobless rate to remain unchanged.
Gold staged a small rally in Asia trade on dovish Yellen remarks. Oil prices rose on hopes for bullish U.S. supply reports.
Today is GDP day. France, Germany, Italy and Eurozone as a whole release their preliminary data for Q3. France’s output is estimated to be at 0.0% qoq in Q3 from +0.5% in Q2, while Germany’s is estimated to have slowed to 0.3% qoq from 0.7% qoq in Q2. Italy’s figure is forecast to be down 0.1% qoq, which would be an improvement from -0.3% qoq in Q2.GDP for the Eurozone as a whole is estimated to be up 0.1% qoq, a deceleration from +0.3% qoq in Q2. In the UK, retail sales excluding autos are forecast to be down 0.1% mom after the 0.7% mom advance in September. Nonetheless, this would bring the yoy rate of change up to 3.1% from 2.8%. Sweden's unemployment rate for October is estimated to decline to 7.4% from 7.5%. This may be a relief for the Krone after the bad CPI figures on Tuesday. In the US, weekly jobless claims are forecast to fall to 330K from 336K, while the nation’s trade deficit is estimated to have held relatively steady at USD 39.0bn in September vs USD 38.8bn in August. Elsewhere, Bank of Canada releases its quarterly review on the Canadian economy and central banking. As for speakers, Janet Yellen testifies today before the Senate Banking Committee regarding her nomination; BoE's Andrew Gracie speaks in London and David Miles speaks at the Federal Reserve Bank of Dallas; Fed’s Charles Plosser speaks on monetary policy and ECB’s Liikanen speaks on financial stability and resilience of financial institutions.
The Market EUR/USD
• EUR/USD moved slightly higher, breaking the 1.3467 level (yesterday’s resistance). At the time of writing the pair is trading near that barrier and if the bulls manage to maintain the price above it, I would expect them to trigger extensions towards the 1.3545 (R1) level, to give another test near the area of the previous long-term uptrend line. Both momentum studies favor further advance, since the MACD crossed above its zero line and the RSI continued moving upwards.
• Support: 1.3467 (S1), 1.3389 (S2), 1.3321 (S3)
• Resistance: 1.3545 (R1), 1.3644 (R2), 1.3782 (R3).
USD/JPY
• USD/JPY continued its retracement and after rebounding from the 99.08 (S1) level moved higher to reach once more the 99.65 (R1) resistance. This time I believe that the longs will manage to overcome that hurdle and target the key barrier of 100.00 (R2). On the daily chart, the rate is trading above the upper boundary of a symmetrical triangle formation, suggesting a stronger pair in the next few weeks.
• Support: 99.08 (S1), 98.00 (S2), 97.50 (S3).
• Resistance: 99.65 (R1), 100.00 (R2), 100.60 (R3).
EUR/GBP
• EUR/GBP fell sharply yesterday after the UK unemployment data and the BoE’s quarterly inflation report. The move was halted by the 0.8399 (S1) support, slightly above the lower boundary of the upward sloping channel. The bias remains to the upside since the rate is printing higher highs and higher lows. We would reconsider our analysis upon a violation of the channel’s lower boundary. Both momentum studies lie near their neutral levels, giving no clues for the next directional movement.
• Support: 0.8399 (S1), 0.8339 (S2), 0.8301 (S3).
• Resistance: 0.8451 (R1), 0.8476 (R2), 0.8512 (R3).
Gold
• Gold moved upwards yesterday confirming our expectation of an upward corrective wave. The yellow metal is currently trading below the 1290 (R1) resistance level and we might see it reach the upper boundary of the downtrend channel. However, the short-term trend of gold remains a downtrend as indicated by the purple channel and the bearish cross of the moving averages.
• Support: 1269 (S1), 1251 (S2), 1221 (S3).
• Resistance: 1290 (R1), 1305 (R2), 1320 (R3).
Oil
• WTI moved slightly higher failing once again to violate the 93.14 (S1) support barrier. The bears have tried unsuccessfully to push the price through that level twice in the past two days. Their failure confirms the positive divergence between our momentum indicators and the price action. Nonetheless, WTI remains in a downtrend as indicated by the blue downward sloping channel and by the fact that the 50-period moving average remains below the 200-period moving average.
• Support: 93.14 (S1), 91.22 (S2), 89.32 (S3).
• Resistance: 95.36 (R1), 98.81 (R2), 101.00 (R3).
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Market Analysis 15/11/2013
Daily Commentary 15.11.2013, Time of writing: 03:30 GMT
The big picture Janet Yellen's dovish remarks defended the U.S. central bank's stimulus, boosted risk appetite and Wall Street reached record highs on Thursday. The U.S. trade deficit widened to USD41.8 billion in September from a deficit of USD38.7 billion in August. The dollar had mixed fortunes against other currencies. The euro was knocked lower against dollar after weak euro zone GDP. Data showed third quarter growth of a miserly 0.1 percent. Finance ministers will meet in Brussels for a second day to outline plans to deal with banks still in difficulty. The British pound was under pressure after disappointment from UK retail sales data on Thursday. Retail sales fell 0.7% in October, against expectations for a 0.1% gain. The stock rally hurt the yen, which hit a 2-mth low vs USD, 2-wk low vs EUR, and 4-yr low vs GBP. The yen weakened further after Finance Minister Aso said the country would retain currency intervention as a policy tool. Canada’s trade deficit narrowed more than expected in September to CAD 0.44 billion from a deficit of CAD1.09 billion in August. Following the release of the data, the Canadian dollar remained lower against its U.S. counterpart.
In commodity markets, Brent crude oil rose a third straight on worries about crude supply disruptions in Libya. Gold prices eased slightly in Asia on Friday, with investors taking gains from an overnight jump on expectations of continued easy monetary policy in the US.
A quiet calendar today compared to Wednesday and Thursday. The Eurozone’s final CPI for October is estimated to be up 0.7% yoy, the same as the preliminary number. In the US, the Empire State manufacturing survey for November is expected to rise to 5.00 from 1.52 and Industrial production for October to be up 0.2% on a mom basis, a slowdown from 0.6% in September. We have only two ECB speakers today. ECB’s Liikanen speaks on monetary policy, while ECB’s Mersch speaks at the 6th annual CFA institute European investment conference.
The Market EUR/USD
• EUR/USD moved sideways yesterday, remaining near the 1.3467 (R1) level. At the time of writing, the pair is trading slightly below that level. A break below the light-blue support line may trigger extensions towards the next support areas. The MACD seems ready to cross below its trigger, while the RSI’s slope is to the downside, confirming the weakness of the rate to overcome the 1.3467 (R1) level.
• Support: 1.3389 (S1), 1.3321 (S2), 1.3257 (S3)
• Resistance: 1.3467 (R1), 1.3545 (R2), 1.3644 (R3).
USD/JPY
• USD/JPY moved significantly higher, violating two resistance barriers in a row. During the early European morning the pair is trading between the 100.00 (S1) key level and the resistance of 100.60 (R1). I would expect the bulls to drive the battle higher and to challenge the 100.60 (R1) barrier, however my only concern is that RSI suggests overbought conditions. In my opinion, we may experience some consolidation or a short-term corrective wave before the advance resumes. On the daily chart, the rate is trading above the upper boundary of a symmetrical triangle formation, suggesting a stronger pair in the next few weeks.
• Support: 100.00(S1), 99.65 (S2), 99.08 (S3).
• Resistance: 100.60 (R1), 101.44 (R2), 102.40 (R3).
GBP/USD
• GBP/USD moved higher yesterday but the move stopped slightly below the 1.6110 (R1) resistance barrier. If the price breaks above that obstacle, the next resistance is found at the ceiling of 1.6260 (R2). However, the rate is printing lower highs and lower lows, thus the trend appears to be a downtrend. Momentum studies cannot be relied on currently as they provide mixed indications.
• Support: 1.6000 (S1), 1.5890 (S2), 1.5772 (S3).
• Resistance: 1.6110 (R1), 1.6260 (R2), 1.6375 (R3).
Gold
• Gold continued the upward wave and at the time of writing is testing the resistance level of 1290 (R1). A decisive break of that level followed by a break of the upper boundary of the channel may be the first warning for a further advance. However, the short-term trend of gold remains a downtrend as indicated by the purple channel and the bearish cross of the moving averages.
• Support: 1269 (S1), 1251 (S2), 1221 (S3).
• Resistance: 1290 (R1), 1305 (R2), 1320 (R3).
Oil
• WTI gave another test to the 93.14 (S1) barrier and moved slightly higher. The bears' inability to overcome that hurdle confirms the positive divergence between our momentum indicators and the price action. Nonetheless, WTI remains in a downtrend as indicated by the blue downward sloping channel and by the fact that the 50-period moving average remains below the 200-period moving average.
• Support: 93.14 (S1), 91.22 (S2), 89.32 (S3).
• Resistance: 95.36 (R1), 98.81 (R2), 101.00 (R3).
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Market Analysis 18/11/2013: USD lower as data backs up Yellen
Daily Commentary 18.11.2013, Time of writing: 03:30 GMT
The big picture USD lower as data backs up Yellen
The dollar was broadly lower Monday morning against both G10 and EM currencies after Friday’s weak US data corroborated Fed Chairman Designate Janet Yellen’s emphasis on the need for Fed policy to remain accommodative. The Empire State manufacturing survey for November fell to -2.21 from +1.52, confounding market expectations of a rise to +5.00, while US industrial production declined slightly in October instead of rising modestly as the market had expected. Within the IP figures, the fall in capacity utilization despite an increased in factory output may reassure the Fed that there is no risk of overshooting its inflation target and the risks to keeping rates lower for longer are minimal. As a result, Fed Funds expectations continued to decline and the dollar came off further.
The main support to the dollar has been changing expectations for monetary policy elsewhere. The ECB has certainly taken a more accommodative stance with its surprise cut in rates recently, while the market expects the Bank of Japan to ease further at some point as growth there slows. By contrast, the pound is likely to be well supported after the Bank of England last week revised up its growth and, crucially, its employment forecasts. That combination suggests GBP/JPY is still worth looking at from a fundamental point of view.
The economic calendar is quite light today. In the EU, the trade and current account balance for September will be announced; the trade surplus is expected to rise to EUR 13.0bn from 12.3bn in October (SA); there’s no forecast for the current account balance. This indicator is not particularly market affecting but in fact the region’s large current account surplus (now averaging EUR 15.8bn a month) is probably one of the main reasons EUR/USD has been so remarkably steady this year. In the US, the National Association of Homebuilders market index for November is expected to remain steady at 55. The Treasury International Capital data on US capital flows for September will also be released.
For the week as a whole, the highlight is likely to be Wednesday, when the minutes from the most recent FOMC and Bank of England meetings will be released and Fed Chairman Bernanke will speak. Thursday will also be busy with a Bank of Japan Policy Board meeting and the preliminary purchasing managers’ indices for November for China, the Eurozone, Germany, France, and the US. The ZEW and Ifo indices, plus the revised and more detailed Eurozone GDP figures, may affect views on the euro during the week, while in the US, retail sales and consumer prices, the JOLTS labor market survey and existing home sales are among the data highlights.
The Market EUR/USD
• EUR/USD moved higher on Friday reaching the key 1.3500 (R1) level near the prior long-term uptrend line. Currently the pair is finding resistance at that area. If the bears are able to maintain the price below 1.3500 (R1), they might extend their move, breaking the light-blue support line. On the other hand, if the bulls achieve a break above that critical level, they may drive the battle to the next resistance at 1.3600 (R2).
• Support: 1.3389 (S1), 1.3321 (S2), 1.3257 (S3)
• Resistance: 1.3500 (R1), 1.3600 (R2), 1.3700 (R3).
USD/JPY
• USD/JPY moved sideways, remaining between the key 100.00 (S1) level and the resistance of 100.60 (R1). I would expect the price to move lower before the prevailing uptrend continues. The RSI exited its overbought area and the MACD, although positive, crossed below its trigger, favoring such a pullback. On the daily chart, the rate is trading above the upper boundary of a symmetrical triangle formation, suggesting a stronger pair in the next few weeks.
• Support: 100.00(S1), 99.65 (S2), 99.08 (S3).
• Resistance: 100.60 (R1), 101.44 (R2), 102.40 (R3).
GBP/USD
• GBP/USD moved higher, breaking above the upper boundary of the purple channel and violating the 1.6110 barrier (Friday’s resistance). If buying pressure continues pushing the price higher, I would expect the longs to find resistance at the ceiling of 1.6260 (R1). The MACD oscillator lies above its trigger line in its bullish territory, shifting the odds for further advance.
• Support: 1.6110 (S1), 1.6000 (S2), 1.5890 (S3).
• Resistance: 1.6260 (R1), 1.6375 (R2), 1.6442 (R3).
Gold
• Gold moved sideways, remaining below the 1290 (R1) barrier and reaching the upper boundary of the downward sloping channel. A decisive break above that area would be the first warning for further advance. However, the short-term trend of gold remains a downtrend as indicated by the purple channel and the bearish cross of the moving averages. Both momentum studies lie near their neutral levels, confirming the sideways move of the metal.
• Support: 1269 (S1), 1251 (S2), 1221 (S3).
• Resistance: 1290 (R1), 1305 (R2), 1320 (R3).
Oil
• WTI remained above the 93.14 (S1) support level and we should wait for a dip below that floor before making any assumptions for the continuation of the downtrend. The bears’ inability to overcome that hurdle confirms the positive divergence between our momentum indicators and the price action. Nonetheless, WTI remains in a downtrend as indicated by the blue downward sloping channel and by the fact that the 50-period moving average remains below the 200-period moving average.
• Support: 93.14 (S1), 91.22 (S2), 89.32 (S3).
• Resistance: 95.36 (R1), 98.81 (R2), 101.00 (R3).
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Market Analysis 19/11/2013: Dollar stabilizing as market discounts “lower for longer”
Daily Commentary19.11.2013, Time of writing: 03:30 GMT
The big pictureDollar stabilizing as market discounts “lower for longer”
The dollar showed signs of stabilizing overnight. It was higher vs four of its G10 counterparts (NZD, NOK, GBP and AUD) while falling vs four (SEK, JPY, CHF and EUR) and unchanged vs CAD. The distribution is worth noting: the commodity currencies were generally lower, while the safe-haven currencies were higher. Commodities themselves were also generally lower, as oil, copper and the precious metals all fell. This despite Wall Street ending little changed and Asian bourses finishing mixed, indicating that risk-taking sentiment has by no means disappeared.
The National Association of Home Builders’ index for November was unchanged at 54, indicating that the slowdown in the housing market that began in the summer has persisted. This may be of concern to the Fed. However the survey was taken at the height of concerns about the government shut-down, so there may have been some bounce-back since then. We now wait for the delayed housing starts and permits data for September and October, which is scheduled to be released on Nov. 26th.
New York Fed President Dudley said he is “more hopeful” about growth in his speech yesterday and the decline in Fed Funds expectations slowed, with implied yields on the long-term contracts falling by only half a basis point yesterday. This suggests to me that after several days of adjusting to the “lower for longer” tone set by Fed Chairman Designate Janet Yellen, the market is reaching an equilibrium. Thus I think the dollar could be in for a recovery for the next few days. USD/JPY is the pair most likely to benefit from such a shift, in my view, as the technicals there align with the fundamentals (see below). EUR/USD should therefore pause from a fundamental point of view, but the technicals say otherwise, giving rise to a cloudy outlook for the pair.
Reserve Bank of Australia (RBA) released the minutes of its Nov. 5th meeting. Policy makers said there was “mounting evidence” that interest rate cuts were working, but it retained the prerogative to loosen further if necessary. While that’s no change in their stance, the fact that they remain on an easing bias is probably one reason why AUD is under pressure today and may continue to be under pressure for the next few days.
The only major indicator out today is the ZEW survey for November. Both the current situation and expectations indices are expected to show gains. That could give a modest boost to EUR/USD.
The Market EUR/USD
• EUR/USD moved slightly higher yesterday, overcoming the 1.3500 barrier. The rate is now testing the prior long-term trend line. A clear upward break would signal the continuation of the advance. The bias remains to the upside, since the rate is following the light-blue support line. Only a dip below it would be a reason to reconsider our analysis. Both momentum studies are advancing, giving no weakness signs for now.
• Support: 1.3500 (S1), 1.3389 (S2), 1.3321 (S3)
• Resistance: 1.3600 (R1), 1.3700 (R2), 1.3782 (R3).
USD/JPY
• USD/JPY moved lower and after finding support at 99.55 (S1) moved slightly higher. If the buying pressure continues driving the pair higher, I would expect a challenge of the 100.43 (R1) resistance barrier. The rate is printing higher highs and higher lows, above both the moving averages, thus the short-term uptrend remains in force. On the daily chart, the rate is trading above the upper boundary of a symmetrical triangle formation, suggesting a stronger pair in the next few weeks.
• Support: 99.55 (S1), 99.08 (S2), 97.95 (S3).
• Resistance: 100.43 (R1), 101.44 (R2), 102.40 (R3).
GBP/USD
• GBP/USD touched the 1.6147 (R1) level and moved slightly lower. If the longs maintain their recent momentum and manage to drive the rate above that level, they might target the next resistance at 1.6260 (R2). However, the RSI found resistance at its 70 level while the MACD, although in a bullish territory, seems ready to cross below its signal line, thus further consolidation before the advance resumes should not be ruled out.
• Support: 1.6000 (S1), 1.5890 (S2), 1.5772 (S3).
• Resistance: 1.6147 (R1), 1.6260 (R2), 1.6375 (R3).
Gold
• Gold moved lower after hitting the 1290 (R1) resistance level and the upper boundary of the downward sloping channel. Currently the price is trading slightly above the 1269 (S1) support barrier, where a decisive dip would have larger bearish implications, targeting the next obstacle at 1251 (S2). The MACD lies below both its zero and trigger lines, favoring further decline. The short-term trend remains a downtrend since the metal is trading within the channel, below both moving averages.
• Support: 1269 (S1), 1251 (S2), 1221 (S3).
• Resistance: 1290 (R1), 1305 (R2), 1320 (R3).
Oil
• WTI moved lower, breaking below the 93.14 level (yesterday’s support). In early European trading the price is slightly below that barrier. I expect the bears to target the 91.22 (S1) support. The RSI violated its blue support line and the MACD lies below its trigger, in negative territory, confirming the bearish momentum of WTI. The trend remains a downtrend as indicated by the blue downward sloping channel and by the fact that the 50-period moving average remains below the 200-period moving average.
• Support: 91.22 (S1), 89.32 (S2), 87.62 (S3).
• Resistance: 93.14 (R1), 95.36 (R2), 98.81 (R3).
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
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