IronFX - Market Analysis - page 29
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 11/04/2014
Language English
Focus on central banks, not data I really don’t see how this works. US jobless claims fell sharply, bringing the closely watched four-week moving average down to a new low for this economic cycle. Nonetheless, the fallout from Wednesday’s FOMC minutes predominated and Fed Funds rate expectations simply collapsed – down 10.5 bps in the long end (March 2017). The stock market rout spread from tech and social media to the broader market and the S&P 500 index fell 2.1% to be down for the year, dragging 10yr Treasury yields down 4 bps, and the dollar generally weakened. It’s off its lows, actually gaining against half its G10 counterparts and many EM currencies, but the result is clear – the market is focusing on what the FOMC says, not what the numbers imply. Even the Wall Street Journal, hardly a left-wing publication, said “financial markets are in thrall to central banks rather than caring about the health of the economy.”
Similarly, the market seems to be ignoring the Eurozone data as well. Yesterday saw a slew of Eurozone CPIs for March released and they were generally lower than expected, some flirting with or moving deeper into deflation. France’s CPI slowed to +0.7% yoy from +1.1% (expected: +0.8%), Denmark’s CPI slowed to +0.4% yoy from +0.5% (expected: +0.5%), Netherland’s slowed to +0.1% yoy from +0.4% (expected: +0.3%), and Greece slipped further into deflation at -1.5% from -0.9% (expected: -1.1%), as did Portugal at -0.4% vs -0.1%. Only Ireland saw its rate of inflation accelerate to +0.2% from -0.1%. This makes it harder for the ECB to claim that below-target inflation in the region is due to differences in how they calculate prices in Germany. We will get more data on this matter today, when the final CPIs for Germany and Spain are released. I still believe that eventually the ECB will have to ease policy further, which should provide a leg down for EUR/USD. However, it’s clear that the ECB has a greater tolerance for below-target inflation than I had thought, and this is likely to take longer than expected. If the April inflation data due out on April 30th don’t show any rise in inflation, that may cause more verbal intervention at least from the ECB, but it could take a political jolt from the May elections to focus the Council’s mind on the need to promote growth. Either that, or perhaps the 40,000 Russian troops allegedly massing on the Ukrainian border will eventually impact
Same in Japan, too. I expect the Bank of Japan to come in with another round of easing later this year as the economy slows. Nonetheless, there too the BoJ seems relatively confident in its current path and is in no hurry to change course. We will probably have to wait some time there as well before the authorities decide that they need to add to their stimulus.
A light economic calendar today. We get Germany’s final CPI for March, as mentioned above. The final figure rarely varies much from the initial estimate and so normally is not a big market-mover. The market pays more attention to the preliminary figure, which comes out one day before Eurozone’s CPI estimate. Nonetheless it would confirm the inflation slowdown in Eurozone’s largest economy and in Euro-area in general.
In the US, the PPI rate excluding food and energy for March is forecast to have remained unchanged at 1.1% yoy, while the University of Michigan preliminary consumer sentiment for April is forecast to have risen to 81.0 from 80.0 in March.
We don’t have any speakers on Friday’s schedule.
Currency Titles:
EUR/USD
EUR/JPY
GBP/USD
Gold
Oil
Currencies Image Url:
http://shared.ironfx.co.uk/morning_pictures_2014/11april2014/EURUSD_11Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/11april2014/EURJPY_11Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/11april2014/GBPUSD_11Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/11april2014/XAUUSD_11Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/11april2014/CLK4_11Apr2014.PNG
Currencies Text:
EUR/USD continued moving higher and managed to overcome the 1.3880 bar yesterday. I would expect such a break to have larger bullish implications and pave the way towards the highs of 1.3965 (R1). As long as the rate is trading above the peak of 1.3810 (S3), I consider the short-term outlook to remain positive. I would ignore the overbought reading of the RSI, since it is now pointing up, indicating that the upside momentum remains strong. In the bigger picture, a clear move above the 1.3965 is needed to confirm the continuation of the longer-term uptrend.
• Support: 1.3880 (S1), 1.3845 (S2), 1.3810 (S3).
• Resistance: 1.3965 (R1), 1.4000 (R2), 1.4200 (R3).
EUR/JPY moved higher after finding support at the hurdle of 140.20 (S1). I still consider the overall picture to be neutral since the pair is not in a clear trending mode. Considering that the MACD, although in negative territory, lies above its signal line, the continuation of the upside wave is possible. On the daily chart the rate remains within a triangle formation and only a break out of the pattern could give further indications about the forthcoming long-term directional movement of the rate.
• Support: 140.20 (S1), 139.15 (S2), 137.55 (S3)
• Resistance: 141.50 (R1), 142.00 (R2), 143.20 (R3).
GBP/USD retreaded after hitting the resistance of 1.6820 (R1) to challenge the 1.6760 (S1) bar as a support this time. The short-term picture remains positive and a clear violation of the 1.6820 (R1) hurdle may trigger extensions towards the next resistance at 1.6885 (R2). However, considering that the RSI exited overbought conditions and the MACD crossed below its signal line, I would not exclude the continuation of the pullback. In the bigger picture, cable remains within the upward sloping channel, keeping the long-term outlook to the upside.
• Support: 1.6760 (S1), 1.6700 (S2), 1.6600 (S3).
• Resistance: 1.6820 (R1), 1.6885 (R2), 1.7000 (R3).
Gold moved higher to meet the resistance zone between the 1325 (R1) bar and the 38.2% retracement level of the 17th Mar. - 1st Apr. short-term downtrend, also near the upper boundary of upward sloping channel. As long as the precious metal is printing higher highs and higher lows within the short-term upside channel, the picture remains positive, but I would wait to see if the bulls are strong enough to overcome the aforementioned resistance zone before expecting further upside extensions.
• Support: 1315 (S1), 1295 (S2), 1280 (S3).
• Resistance: 1325 (R1), 1342 (R2), 1354 (R3).
WTI pulled back and is now trading slightly above the support bar of 103.00 (S1). Considering that the RSI fell below its 70 level and the MACD shows signs of toping, I would expect the price to overcome that support barrier and extend the corrective phase maybe towards 102.00 (S2). Nonetheless, the price path remains to the upside since the structure of higher highs and higher lows remains in effect.
• Support: 103.00 (S1), 100.00 (S2), 100.00 (S3).
• Resistance: 105.00 (R1), 108.00 (R2), 110.00 (R3).
Benchmark Currency Rates:
http://shared.ironfx.co.uk/morning_pictures_2014/11april2014/benchmark.JPG
Market Summary Url:
http://shared.ironfx.co.uk/morning_pictures_2014/11april2014/table.JPG
currency tags:
EUR
More...
Market Analysis 14/04/2014
Language English
Draghi gives in ECB President Draghi has signalled that the ECB is finally going to take some action against low inflation. Speaking on Saturday after the IMF meeting, Draghi said, “The strengthening of the exchange rate requires further monetary stimulus. That is an important dimension for us.” The message coming out from the meeting was that a cut in interest rates is likely at first, possibly into negative territory. Only after that would the ECB attempt a quantitative easing program. As for when the easing measures are likely to begin, press reports say that the Bundesbank is unlikely to support any moves until the ECB revises its economic forecasts in June. However, a lower-than-expected inflation print for April could prompt an earlier response, as happened last November. The preliminary Eurozone CPI for April, due to be released on 30 April, is forecast to rebound from the surprisingly low level of +0.5% yoy in March. No consensus forecast is available yet but some economists have estimated it will return to +0.9% yoy. In any event, Draghi’s comment should be the key for a weaker EUR going forward. The clear divergence between the Fed and the ECB is likely to pressure the euro and support the dollar.
The dollar is starting the week generally higher against both G10 and EM currencies, although EUR is not as weak (and gold not as strong) as one might have expected after the Draghi comments and the worsening crisis in Ukraine. EUR/GBP for example is barely changed from Friday’s opening levels, suggesting to me that EUR has further to fall. The dollar also gained against most EM currencies, although the likelihood of further easing in the Eurozone should keep carry trades in fashion and support the EM currencies vs EUR. Investors who are thinking of putting on EM carry trades should consider putting them on against EUR.
Friday’s US data were relatively positive for the dollar, continuing a string of good US numbers. The producer price index rose more than expected, hinting at a build-up in inflationary pressure that could make the Fed more willing to countenance higher rates. And US consumer sentiment hit a nine-month high. This follows last week’s better-than-expected jobless claims, which fell to a cyclical low. Jobless claims are subject to seasonal factors however and they tend to soar in the week that includes Good Friday, which is April 18th this year. So we could see a big jump in claims when this weeks’ number is released on 24 April. However, they tend to decline by a similar magnitude three weeks later, so the market may ignore the figure.
Today’s news should also be USD-supportive. Retail sales excluding auto and gasoline for March are forecast to have accelerated to +0.4% mom from +0.3% mom, bringing good news about consumption. As for the rest of the week, tomorrow we get the CPI for March, which is expected to accelerate on a yoy basis. That may change some peoples’ view of how quickly the Fed is likely to raise rates. Speeches by Fed Chair Janet Yellen on Tuesday and Wednesday will of course be closely watched for any clues on this matter, and particularly if she clarifies the confusion over whether the FOMC’s stock phrase that “a highly accommodative policy will remain appropriate for a considerable time after asset purchases end” means six months, a number that did not show up in the recent FOMC minutes.. On Wednesday we also get the Fed’s Beige Book, which will give the first hints of how the FOMC is likely to view the economy at its meeting on April 30th.
There are no major European indicators out today, only Italy’s final CPI for March and Eurozone’s industrial production for February. Eurozone’s IP is forecast to have risen 0.2% mom after falling by the same pace in January. The figure is not usually market affecting, however.
There are two speakers today: French Central Bank Governor Christian Noyer and Fed Governor Daniel Tarullo speak at the Europlace Financial Forum at the New York Stock Exchange.
As for the rest of the week, on Tuesday, the Reserve Bank of Australia releases the minutes from its latest meeting. During the European day, we have the German Zew survey for April and UK’s CPI data for March. On Wednesday, we have UK employment data for February and Eurozone’s final CPI for March. Meanwhile the Bank of Canada holds its policy meeting. On Thursday, we get Canada’s CPI for March and on Friday we have Japan’s Tertiary industry index for February.
Currency Titles:
EUR/USD
EUR/JPY
GBP/USD
Gold
Oil
Currencies Image Url:
http://shared.ironfx.co.uk/morning_pictures_2014/14april2014/EURUSD_14Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/14april2014/EURJPY_14Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/14april2014/GBPUSD_14Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/14april2014/XAUUSD_14Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/14april2014/CLK4_14Apr2014.PNG
Currencies Text:
EUR/USD opened the Asian day with a downside gap after ECB President Mario Draghi said “the strengthening of the exchange rate requires further monetary stimulus”. The pair met support near the 1.3845 (S1) barrier and since the possibility for a higher low still exists, the short-term technical outlook has turned neutral for now. Considering that the RSI exited overbought conditions while the MACD, although in its positive territory, fell below its trigger line, we may experience the continuation of the decline for a test at the 1.3810 (S2) hurdle, near the 38.2% retracement of the 4th–11th Apr. advance. On the upside, a clear break above the 1.3900 (R1) is needed to signal the continuation of the upside path and may pave the way towards the highs of 1.3965 (R2).
• Support: 1.3845 (S1), 1.3810 (S2), 1.3695 (S3).
• Resistance: 1.3900 (R1), 1.3965 (R2), 1.4000 (R3).
EUR/JPY also opened with a bearish gap on Draghis comments, but the rate met support at the lower boundary of the triangle formation, identified on the daily chart. I still consider the overall picture to be neutral since the pair is not in a clear trending phase and this is also confirmed by the daily MACD and RSI, which lie near their neutral levels. A clear break below the hurdle of 140.20 (S1) may signal the exit from the formation may have larger bearish implications.
• Support: 140.20 (S1), 139.15 (S2), 137.55 (S3).
• Resistance: 141.50 (R1), 142.00 (R2), 143.20 (R3).
GBP/USD fell below the 1.6760 bar and is now trading between that resistance and the key support of 1.6700 (S1). A rebound near that area would confirm a higher low and may challenge once again the highs of 1.6820 (R2), where an upward violation may trigger extensions towards the next resistance at 1.6885 (R3). In the bigger picture, cable remains within the upward sloping channel, keeping the long-term outlook to the upside.
• Support: 1.6700 (S1), 1.6600 (S2), 1.6540 (S3).
• Resistance: 1.6760 (R1), 1.6820 (R2), 1.6885 (R3).
Gold rebounded once again from the lower boundary of the short-term upward sloping channel and moved above the 1325 bar. As long as the precious metal is printing higher highs and higher lows within the channel, I consider the short-term picture to remain positive and I would expect the longs to trigger extensions towards the 1342 bar. My only concern is that the RSI met resistance at its 70 barrier, thus some consolidation or a pullback cannot be ruled out.
• Support: 1325 (S1), 1315 (S2), 1295 (S3).
• Resistance: 1342 (R1), 1354 (R2), 1392 (R3).
WTI rebounded from the 103.00 (S1) support level and moved significantly higher. I would expect the bulls to continue driving the price higher and challenge the highs of 105.00 (R1). A clear violation of that hurdle will confirm a forthcoming higher high on the daily chart and may have larger bullish implications. As long as WTI is printing higher highs and higher lows above both the moving averages, the price path remains to the upside.
• Support: 103.00 (S1), 102.00 (S2), 100.00 (S3).
• Resistance: 105.00 (R1), 108.00 (R2), 110.00 (R3).
Benchmark Currency Rates:
http://shared.ironfx.co.uk/morning_pictures_2014/14april2014/benchmark.PNG
Market Summary Url:
http://shared.ironfx.co.uk/morning_pictures_2014/14april2014/table.PNG
currency tags:
EUR
More...
Market Analysis 15/04/2014
Language English
The dollar firmed against most major currencies on Monday after strong U.S. retail sales data emerged. Retail sales rose +1.1% mom in March exceeding expectations for a +0.9% mom gain, while February’s rate was revised up to +0.7% mom from +0.3% mom. Retail sales excluding the volatile items of auto and gasoline rose 1.0% mom beating estimates of +0.4% mom. Strong retail sales and Citigroup’s quarterly earnings release that beat expectations helped Wall Street bounce from a sharp selloff in recent days. Asian shares also edged higher in early trade on Tuesday after Wall Street rebounded on solid data.
The euro remained under pressure following weekend comments from European Central Bank officials, including ECB President Mario Draghi signaling more easing in the Eurozone.
The Australian dollar eased after the Reserve Bank of Australia released the minutes of its April meeting. The Bank reiterated that it sees further signs of low interest rates supporting domestic activity, while it repeated that the exchange rate of AUD is high by historical standards.
Tensions in the Ukraine increased the precious metal's safe-haven appeal. Yesterday Gold remained near three-week highs, but declined after strong economic data from the U.S.
Nickel traded near a 14-month high despite Indonesia's ongoing ore export ban, now in its third month, and prospects of tougher sanctions on Russia.
In Asia on Tuesday crude oil prices eased on profit taking after gains made on geopolitical tension in the Ukraine.
The main economic release during the European day will be the German ZEW survey for April. The current situation index is forecast to rise slightly to 51.5 from 51.3, while the expectations index is forecast to be down to 45.0 from 46.6. Last month, the common currency fell after both indices missed estimates, with the expectation index falling far below its February reading. A further decline in the expectations index may hurt the euro.
In the UK, the nation’s CPI for March is forecast to have slowed to 1.6% yoy from 1.7% yoy, which would be the lowest since October 2009.
In the US, the headline CPI is forecast to have accelerated to 1.4% yoy in March from 1.1% yoy in February, while the core inflation rate (excluding food and energy) is expected to have remained unchanged at 1.6% yoy. After the faster-than-expected rise in the nation’s PPI on Friday, a higher headline figure would confirm the upward pressure on inflation and make the Fed more willing to consider higher rates. The Empire State manufacturing survey for April is forecast to rise to 8.00 from 5.61, while the National Association of Home Builders (NAHB) housing market index for the same month is expected to rise to 50 from 47. Numbers like these would continue the string of good data for the US and perhaps help to change views on when the Fed is likely to tighten.
We have three speakers scheduled on Tuesday. Fed Chair Yellen speaks at the Atlanta Fed Financial Markets Conference. The market will listen closely for any comments on the famous “six months” time frame she introduced after the last FOMC meeting as the “considerable time” for increasing rates after the Fed finishes its bond purchases. We saw that in the Fed minutes they made no reference to that timeframe. Philadelphia Fed President Charles Plosser and Boston Fed President Eric Rosengren will also speak.
Currency Titles:
EUR/USD
EUR/JPY
GBP/USD
Gold
Oil
Currencies Image Url:
http://shared.ironfx.co.uk/morning_pictures_2014/15april2014/EURUSD_15Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/15april2014/EURJPY_15Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/15april2014/GBPUSD_15Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/15april2014/XAUUSD_15Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/15april2014/CLK4_15%20Apr2014.PNG
Currencies Text:
EUR/USD fell below the 1.3845 hurdle but the decline was halted by the 1.3810 (S1) support, near the 38.2% retracement level of the 4th-11th Apr. advance. I would maintain my neutral view since no signs of reversal are provided yet. However, a clear dip below the 1.3810 (S1) may trigger extensions towards the lows of 1.3695 (S2). On the upside, a clear break above the 1.3900 (R2) is needed to signal the continuation of the upside path and may pave the way towards the highs of 1.3965 (R3).
• Support: 1.3810 (S1), 1.3695 (S2), 1.3650 (S3).
• Resistance: 1.3845 (R1), 1.3900 (R2), 1.3965 (R3).
EUR/JPY moved in a consolidative mode, remaining supported by the lower boundary of the triangle formation, identified on the daily chart. The overall picture of the currency pair remains neutral since the rate is not in a clear trending phase and this is also confirmed by the daily MACD and RSI, which lie near their neutral levels. A clear break below the hurdle of 140.20 (S1) may signal the exit from the formation and may have larger bearish implications.
• Support: 140.20 (S1), 139.15 (S2), 137.55 (S3).
• Resistance: 141.50 (R1), 142.00 (R2), 143.20 (R3).
GBP/USD moved slightly lower yesterday to meet support at the 1.6700 (S1), near the 50 period moving average. The rate is trading between that support and the resistance of 1.6700 (R1). Although both our momentum studies follow downward paths, it’s too early to argue for a trend reversal and I would consider any further declines as a corrective phase. On the upside, a break above the highs of 1.6820 (R2) is needed to revive the positive short-term picture. In the bigger picture, cable remains within the upward sloping channel, keeping the long-term outlook to the upside.
• Support: 1.6700 (S1), 1.6600 (S2), 1.6540 (S3).
• Resistance: 1.6760 (R1), 1.6820 (R2), 1.6885 (R3).
Gold fell below the lower boundary of the upward sloping channel after finding resistance at 1330 (R1). The precious metal is now heading towards the support of 1315 (S1), near both the moving averages. A clear dip below the support zone would confirm a short term lower low and may pave the way towards the next hurdle at 1295 (S2). Negative divergence is identified between the MACD and the price action, while the RSI fell below its blue support line after finding resistance at its 70 barrier, confirming the weakening momentum of the short-term uptrend.
• Support: 1315 (S1), 1295 (S2), 1280 (S3).
• Resistance: 1330 (R1), 1342 (R2), 1354 (R3).
WTI failed to reach the 105.00 (R2) barrier and met resistance at 104.40 (R1). The price is now heading towards the support bar of 103.00 (S1). Considering the negative divergence between the MACD and the price action and the fact that the indicator fell below its signal line, we may experience the continuation of the retracement, perhaps towards the 102.00 (S2) support level. On the daily chart, we can identify a shooting star candle formation, increasing the possibilities for further correction.
• Support: 103.00 (S1), 102.00 (S2), 100.00 (S3).
• Resistance: 104.40 (R1), 105.00 (R2), 108.00 (R3).
Benchmark Currency Rates:
http://shared.ironfx.co.uk/morning_pictures_2014/15april2014/benchmark.PNG
Market Summary Url:
http://shared.ironfx.co.uk/morning_pictures_2014/15april2014/table.PNG
currency tags:
EUR
More...
Market Analysis 16/04/2014
Language English
The dollar received little support from US economic data on inflation. In the US, the core consumer price index for March accelerated to +1.7% yoy from +1.6% yoy, suggesting that consumer demand in the world's largest economy is reheating. However, at the same time we had the Empire State manufacturing survey for April which fell below its previous readings and did not leave much room for the greenback to appreciate against most of the other G10 currencies.
The euro was virtually unchanged after the German ZEW survey for April. The current situation index rose to 59.5 from 51.3, beating estimates of 51.5 by far, while the expectations index fell to 43.2 from 46.6, missing forecasts of 45.0.
Commodity currencies were the biggest decliners among the majors. The main loser was the New Zealand dollar after New Zealand’s CPI for Q1 slowed to +1.5% yoy from +1.6% yoy. The kiwi fell to its lowest in over a week.
China reported economic growth a touch above forecasts, a relief for investors. The Aussie was trading lower but recovered after the release of the data.
Bank of Japan Governor Haruhiko Kuroda on Wednesday affirmed his upbeat view of the economy, stressing that growth will pick up around mid-year.
In commodities, gold tumbled about 2% on Tuesday. On Wednesday, during the Asian morning, the precious metal recovered some of its lost ground. Brent crude fell for the first time after the China data release.
Today, the UK unemployment rate for February is expected to have declined to 7.1% from 7.2%, while the UK jobless claims for March are forecast to have fallen by 30.0k after a 34.6k decline in February. Eurozone’s final CPI for March is also coming out. As usual, the forecast is the same as the initial estimate.
In the US, the Fed releases its Beige Book survey, two weeks before the FOMC meeting. As for the US indicators, industrial production for March is forecast to have slowed to +0.5% mom from +0.6% mom in February. Housing starts are forecast to have improved in March, while building permits for the same month are estimated to have declined. The MBA mortgage applications for the week ended on April 11 are also coming out.
In Canada, we have the Bank of Canada interest rate decision. The market expects the Bank to maintain its policy rate unchanged at 1.00%, so the focus will fall on the Bank’s updated outlook for economy and inflation. A press conference by Governor Poloz will follow.
Besides BoC Governor Poloz, we have four Speakers scheduled on Wednesday. Fed Chair Yellen speaks to the Economic Club of New York. Atlanta Fed President Dennis Lockhart, Dallas Fed President Richard Fisher and Fed Governor Jeremy Stein will also speak.
Currency Titles:
EUR/USD
EUR/JPY
GBP/USD
Gold
Oil
Currencies Image Url:
http://shared.ironfx.co.uk/morning_pictures_2014/16april2014/EURUSD_16Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/16april2014/EURJPY_16Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/16april2014/GBPUSD_16Apri2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/16april2014/XAUUSD_16Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/16april2014/CLK4_16Apr2014.PNG
Currencies Text:
EUR/USD moved slightly lower but met support near the 200-period moving average, and the 50% retracement level of the 4th-11th Apr. advance. I still consider the recent decline as a correcting phase since the possibility for a higher low still exists and as a result I would maintain my neutral stance as no signs or reversal are provided yet. A dip below that support zone may trigger extensions towards the lows of 1.3695 (S2). On the upside, a clear break above the 1.3900 (R2) is needed to signal the continuation of the upside path and may pave the way towards the highs of 1.3965 (R3).
• Support: 1.3790 (S1), 1.3695 (S2), 1.3650 (S3).
• Resistance: 1.3845 (R1), 1.3900 (R2), 1.3965 (R3).
EUR/JPY tried to break below the lower boundary of the triangle formation, identified on the daily chart, but met strong support at 140.20 (S1) and moved significantly higher. The rate has oscillated between that support and the resistance of 141.50 (R1) since the 8th of April, thus I still consider the short-term outlook to remain neutral. The non-trending mode is also confirmed by the daily MACD and RSI, which still lie near their neutral levels.
• Support: 140.20 (S1), 139.15 (S2), 137.55 (S3).
• Resistance: 141.50 (R1), 142.00 (R2), 143.20 (R3).
GBP/USD remained supported by the 1.6700 (S1) and the 50-period moving average, after an unsuccessful attempt to break below that support zone. The rate moved in a consolidate mode and this is also confirmed by the neutral readings of both our momentum studies. A rebound near that support zone may challenge once again the highs of 1.6820 (R2), where a clear break may reinforce the positive short-term picture. In the bigger picture, cable remains within the upward sloping channel, keeping the long-term outlook to the upside.
• Support: 1.6700 (S1), 1.6600 (S2), 1.6540 (S3).
• Resistance: 1.6760 (R1), 1.6820 (R2), 1.6885 (R3).
Gold fell below the 1315 barrier and reached the support of 1295 (S1). The precious metal confirmed a lower low and turns the picture negative, in my view. If the bears are strong enough to drive the battle below 1295 (S1), I would expect them to target the next hurdle at 1280 (S2). The MACD crossed below its zero line, confirming the recent bearish momentum, but the RSI met support at its 30 barrier and moved higher. Thus, some consolidation or an upward corrective wave, before the bears prevail again, cannot be ruled out.
• Support: 1295 (S1), 1280 (S2), 1265 (S3).
• Resistance: 1315 (R1), 1330 (R2), 1342 (R3).
WTI met support at the 103.00 (S1) bar and moved higher. The price remains between that support and the resistance of 104.40 (R1). Considering that the negative divergence between the MACD and the price action is still in effect, I would maintain my neutral stance. A dip below the 103.00 (S1) hurdle would confirm the weakness signs provided by our momentum studies and may pave the way towards 102.00 (S2). On the upside, a break above 104.40 (R1) would confirm a forthcoming higher high and may revive the bullish case.
• Support: 103.00 (S1), 102.00 (S2), 100.00 (S3).
• Resistance: 104.40 (R1), 105.00 (R2), 108.00 (R3).
Benchmark Currency Rates:
http://shared.ironfx.co.uk/morning_pictures_2014/16april2014/benchmark.PNG
Market Summary Url:
http://shared.ironfx.co.uk/morning_pictures_2014/16april2014/table.PNG
currency tags:
EUR
More...
Market Analysis 17/04/2014
Language English
The numbers speak louder than Yellen The dollar trended largely lower after US Fed Chair Janet Yellen emphasized the Fed’s flexibility on when to raise interest rates rather than reiterating her previous comment that they could start raising rates six months or so after they end quantitative easing. Speaking to the Economic Club of New York, Yellen said, “We need to be alert to what is happening in the economy and to respond to what we see happening, and not a fixed idea that we perhaps held at some earlier time about what will come to pass.” Instead, she said how long the Fed would keep the current target range for Fed Funds would depend on how far employment or inflation are from their targets. Currently, the unemployment rate is 6.7%, which is more than 1 percentage point higher than the top end of the FOMC’s estimate of full employment, while the core personal consumption expenditure deflator, the Fed’s favored inflation gauge, is only rising 1.1% yoy, about half the target of 2.0%. At the same time she also said that the causes of low inflation are only temporary and the Fed expects to meet these two goals by the end of 2016. That comment, plus stronger-than-expected industrial production for March and comments in the Beige Book that indicate the economy is indeed on track, sent the implied interest rates on the Fed Funds futures up 5.5 bps in the long end. In short, interest rate expectations moved higher regardless of Yellen’s comments about flexibility.
Nonetheless the dollar was generally lower against both the G10 currencies and the EM currencies.
Investors should remember that while the Fed nowadays gives forward guidance, it usually leaves itself some wriggle room in case the economic situation changes. For example, even now the Fed emphasizes that the monthly reductions in its bond-buying program are not a preset course, but in fact they are on a preset course, or rather they follow Newton’s first law of motion, which says that a body in motion tends to stay in motion unless acted upon by some external force. In other words, the “tapering” of the Fed’s bond buying program is on a preset schedule unless something occurs to interfere with it, and we know from statements by officials that that “something” would have to be quite serious. With tightening too, the FOMC has a schedule in mind and will probably stick with it so long the members believe the economy is on track to meet their forecasts, in my view. That should eventually start to underpin the dollar as the moment of policy turning approaches.
The Fed Funds futures are now forecasting a 0.5% Fed Funds rate by October 2015. That would be a year before the Fed hits its targets. It’s reasonable to expect the Fed to start normalizing rates before it reaches its targets, with the idea that it might be somewhere around a normal, neutral level of rates when it reaches its targets. The current Fed Funds futures forecast that Fed Funds will hit 1.8% at the end of 2016, when the Fed forecasts reaching its targets. This would still be a negative real rate, which is quite stimulative historically; the average real Fed Funds rate (including periods of recession) was 1.7% before the 2008 financial crisis, which would imply a nominal Fed Funds rate closer to 3.7% or almost double what the market is forecasting. While the Fed has said that “economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run,” I wonder if this includes a negative real rate for Fed Funds. I expect the market to continue to revise up its expectations for US rates and that this will support the dollar.
In Canada however the Bank of Canada held rates unchanged at 1.0%, as was generally expected, and reaffirmed its concern over the low level of inflation, currently running around 1.1% yoy vs the target of 2.0%. The Bank also revised down its growth forecast and noted that growth prospects hinge critically on a rise in exports, which in turn depends in part on a weaker CAD. As a result, CAD was one of the few currencies to ease vs USD and I would expect it to continue to lose ground further. Watch today’s CPI for March, which is expected to accelerate to +1.4% yoy from +1.1% yoy.
A relatively light calendar follows on Thursday. The European day starts with Germany’s PPI for March, which is expected to be down 0.7% yoy after falling 0.9% yoy in February.
In the US, initial jobless claims for the week ended on April 12 are expected to rise to 315k vs 300k the previous week. Nonetheless this will bring the 4wk moving average down to 314k from 316.25k, a level last seen back in 2007. Continuing claims for the week ended on April 5 are expected to have risen slightly to 2778k from 2776k. The Philadelphia Fed Business activity index for April is also coming out and is expected to rise.
ECB Executive Board member Yves Mersch speaks in a press conference.
Currency Titles:
EUR/USD
EUR/JPY
GBP/USD
Gold
Oil
Currencies Image Url:
http://shared.ironfx.co.uk/morning_pictures_2014/17april2014/EURUSD_17Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/17april2014/EURJPY_17Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/17april2014/GBPUSD_17Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/17april2014/XAUUSD_17Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/17april2014/CLK4_17Apr2014.PNG
Currencies Text:
EUR/USD moved slightly higher to challenge the resistance bar of 1.3845 (R1). A clear move above that hurdle may confirm the rebound from the 1.3790 (S1) bar and probably challenge the resistance of 1.3900 (R2). A break above those highs would signal the continuation of the upside path and perhaps pave the way towards the 1.3965 (R3) obstacle. Our momentum studies provide mixed signals. The RSI started following an upward path, but the MACD remains near its neutral line.
• Support: 1.3790 (S1), 1.3695 (S2), 1.3650 (S3).
• Resistance: 1.3845 (R1), 1.3900 (R2), 1.3965 (R3).
EUR/JPY moved higher but found resistance at 141.75 (R1) and retreated. The rate continues its sideways path and this is confirmed by the neutral readings of the daily MACD and the daily RSI. The non-trending mode is also confirmed by both the moving averages, which are pointing sideways. In the bigger picture, the rate remains within the triangle formation identified on the daily chart.
• Support: 140.20 (S1), 139.15 (S2), 137.55 (S3).
• Resistance: 141.75 (R1), 143.20 (R2), 143.80 (R3).
GBP/USD rallied to meet and break the barrier of 1.6820. Such a move confirms a forthcoming higher high and I would expect the rate to move higher and challenge the resistance of 1.6885 (R1). The MACD lies above both its trigger and zero lines, confirming the recent bullish momentum. In the bigger picture, cable remains within the upward sloping channel, keeping the long-term outlook to the upside.
• Support: 1.6820 (S1), 1.6760 (S2), 1.6700 (S3).
• Resistance: 1.6885 (R1), 1.7000 (R2), 1.7500 (R3).
Gold moved in a consolidative mode, remaining slightly above the support of 1295 (S1). If the bears are strong enough to drive the battle below 1295 (S1), I would expect them to target the next hurdle at 1280 (S2). The MACD remains below both its trigger and zero lines, keeping the momentum to the downside. As long as the precious metal is trading below both the moving averages and the resistance bar of 1315 (R1), the short-term outlook remains negative.
• Support: 1295 (S1), 1280 (S2), 1265 (S3).
• Resistance: 1315 (R1), 1330 (R2), 1342 (R3).
WTI moved higher to meet the key resistance of 105.00 (R1). This confirms a higher high and keeps the uptrend intact. However, considering that the negative divergence between our momentum studies and the price action remains in effect, and the fact that the last time WTI touched 105.00 (R1) it fell sharply, I would wait for a clear move above that bar to expect further extensions. A move above 105.00 (R1) may have larger bullish implications targeting the 108.00 (R2) area. On the downside, a move below 103.00 (S1), would confirm the aforementioned divergence and may target the 102.00 (S2) bar, first.
• Support: 103.00 (S1), 102.00 (S2), 100.00 (S3).
• Resistance: 105.00 (R1), 108.00 (R2), 110.00 (R3).
Benchmark Currency Rates:
http://shared.ironfx.co.uk/morning_pictures_2014/17april2014/benchmark.PNG
Market Summary Url:
http://shared.ironfx.co.uk/morning_pictures_2014/17april2014/table.PNG
currency tags:
EUR
More...
Market Analysis 18/04/2014
Language English
Financial markets in Europe and the US are among those that are closed today. The Good Friday session sees markets in Japan, China and South Korea open.
The greenback rose against a basket of peers after yesterday’s data showed manufacturing in the Philadelphia region grew at the fastest pace in seven months, and jobless claims reports showed that the number of Americans filing for unemployment insurance payments hovered near a seven-year low. Yesterday’s data helped the dollar erase losses against most major currencies.
In Canada, the nation’s CPI rate rebounded to +1.5% yoy in March from +1.1% yoy in February, exceeding estimates of +1.4% yoy. The loonie strengthened against the dollar at the time of the release, but gave back its gains a few hours later. I expect the loonie to weaken in the near future given that the Bank of Canada said that a weakening local currency would support the nation’s exports.
The AUD headed for its biggest weekly loss since January.
The yen slipped after United States, Russia, Ukraine and the European Union called for an immediate halt to violence. The worries about tension in the Ukraine has prompted some safe-haven buying of the yen.
Currency Titles:
EUR/USD
EUR/JPY
GBP/USD
Gold
Oil
Currencies Image Url:
http://shared.ironfx.co.uk/morning_pictures_2014/18april2014/EURUSD_18Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/18april2014/EURJPY_18Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/18april2014/GBPUSD_18Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/18april2014/XAUUSD_18Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/18april2014/CLK4_18Apr2014.PNG
Currencies Text:
EUR/USD tried to overcome the 1.3850 (R1) bar but failed to do so and moved lower. The rate is trading within a narrow range between that resistance and the support of 1.3790 (S1). The readings of both our momentum indicators are near their neutral levels, while both the moving averages are pointing sideways. This confirms the consolidative mode of the currency pair. A break above 1.3850 (R1) may challenge the resistance of 1.3900 (R2). A violation of the later bar would signal the continuation of the upside path and perhaps pave the way towards the 1.3965 (R3) obstacle.
• Support: 1.3790 (S1), 1.3695 (S2), 1.3650 (S3).
• Resistance: 1.3850 (R1), 1.3900 (R2), 1.3965 (R3).
EUR/JPY moved slightly higher to trade once more slightly below the 141.75 (R1) resistance. The rate continues its sideways path and this is confirmed by the neutral readings of the daily MACD and the daily RSI. The non-trending mode is also confirmed by both the moving averages, which are pointing sideways. In the bigger picture, the rate remains within the triangle formation identified on the daily chart.
• Support: 140.20 (S1), 139.15 (S2), 137.55 (S3).
• Resistance: 141.75 (R1), 143.20 (R2), 143.80 (R3).
GBP/USD failed to maintain its rate above the 1.6820 (R1) bar and moved lower. Considering negative divergence between our momentum studies and the price action, I would expect the correcting phase to continue. On the daily chart we can identify a shooting star candle formation, increasing the probabilities for the continuation of the retracement. Nonetheless, in the bigger picture, cable remains within the upward sloping channel, keeping the long-term outlook to the upside.
• Support: 1.6760 (S1), 1.6700 (S2), 1.6600 (S3).
• Resistance: 1.6820 (R1), 1.6885 (R2), 1.7000 (R3).
Gold continued moving sideways, remaining supported by the 1295 (S1) bar. At the time of writing, the precious metal is testing that support and if the bears are strong enough to drive the battle below it, I would expect them to target the next hurdle at 1280 (S2). The MACD remains below both its trigger and zero lines, keeping the momentum to the downside. As long as the precious metal is trading below both the moving averages and the resistance bar of 1315 (R1), the short-term outlook remains negative.
• Support: 1295 (S1), 1280 (S2), 1265 (S3).
• Resistance: 1315 (R1), 1330 (R2), 1342 (R3).
WTI moved higher after finding support near the blue uptrend line. The price is heading for another test at the 105.00 (R1) obstacle, where an upward violation may have larger bullish implications and target the 108.00 (R2) area. As long as WTI is printing higher highs and higher lows above the blue uptrend line and above both the moving averages, I consider the short-term uptrend to remain intact. However, the negative divergence between both our momentum studies and the price action remains in effect, indicating decelerating upside momentum. A move below 103.00 (S1) would confirm the divergence and may target the 102.00 (S1) bar.
• Support: 103.00 (S1), 102.00 (S2), 100.00 (S3).
• Resistance: 105.00 (R1), 108.00 (R2), 110.00 (R3).
Benchmark Currency Rates:
http://shared.ironfx.co.uk/morning_pictures_2014/18april2014/benchmark.PNG
Market Summary Url:
http://shared.ironfx.co.uk/morning_pictures_2014/18april2014/table.PNG
currency tags:
EUR
More...
Market Analysis 21/04/2014
Language English
JPY falls in quiet holiday trading
With many trading centers closed Friday and many in Europe closed today as well, trading is light and the dollar is little changed in early European trading Monday. It was higher against JPY, CAD and NZD, and in the EM currencies, higher vs TWD, HUF and TRY, while the RUB gained. Elsewhere the dollar was less than ±0.1% changed compared with Friday morning. I would expect to see a similar lack of movement during the European day today, at least until US trading begins.
The main change, such as it was, was in JPY, which weakened on news of a wider-than-expected trade deficit in March as exports barely grew (+1.8% yoy vs +6.5% expected) while imports soared (+18.1% vs +16.2% expected). The small growth in exports compared with February (+9.8% yoy) could be just a function of the rise in the consumption tax, which boosted domestic demand in March (department store sales were up an astonishing 25.4% yoy, compared with +3.0% yoy in February). Some companies may have diverted shipments to the domestic market rather than overseas. Yet overall, the data show why I expect the yen to continue to weaken over the medium term.
Many economists blame the rise in imports on the fact that the country’s nuclear power plants are shut down, but in fact that only accounted for 4.9 percentage points of the 16.2% yoy growth in imports in February (using 12m moving sum). More importantly however, we should not lose track of the fact that a country’s current account balance is ultimately the difference between its savings and investment. PM Abe’s program is lowering the country’s savings, because prices are rising but salaries aren’t. So in order to keep their consumption steady, people have to cut back their savings. This might be offset by the rise in the consumption tax, which will increase government savings (or more accurately, reduce government dissavings, since the government is a borrower). However this year at least the rise in the consumption tax will be offset by a rise in government spending, and in the future too, I expect the government will find it impossible to hold its spending steady. Investment on the other hand will have to increase in order to make up for the decline in the workforce as the country ages. In my view, the result is likely to be further contraction in the current account surplus, probably eventually shifting it into deficit, at which point the yen will be in serious, serious trouble.
CAD also weakened despite Friday’s news of a higher-than-expected inflation rate in March of 1.5% yoy, up from 1.1% in February. While the news initially triggered some CAD buying on Friday, it quickly ran its course and the currency weakened. Bank of Canada Gov. Poloz has said he will dismiss faster inflation this year as temporary, because of slack in the economy, so at least for now higher inflation numbers are only going to lower Canadian real yields and therefore weaken the currency.
The news calendar is quite light today. In the US, the Conference Board leading index for March is estimated to have accelerated to +0.7% mom from +0.5% mom in February.
As for the rest of the week, on Tuesday we have Switzerland’s unemployment rate for March and Eurozone’s preliminary consumer confidence for April. In the US, we have the Federal Housing Finance Agency (FHFA) house price index for February and the existing home sales for March. The Richmond Fed manufacturing Activity index for April is also coming out. The former Fed Chairman Ben Bernanke speaks at the Economic Club of Canada. On Wednesday, during the Asian morning, we get Australia’s CPI data for Q1 and China’s HSBC preliminary manufacturing PMI for April. The European day continues with the preliminary manufacturing and service-sector PMIs from France, Germany and Eurozone as a whole. The Bank of England releases the minutes of its latest policy meeting. On Thursday, the Reserve Bank of New Zealand holds its monetary policy meeting. It’s widely expected that the Bank will raise its official cash rate by another 25 bps to 3.00%. In Europe, the German Ifo survey for April is coming out, while the ECB President Mario Draghi speaks at a conference. From the US we get durable goods orders for March. Finally on Friday, from Japan we get the national CPI for March and the Tokyo CPI for April. We also have the UK retail sales for March and the US University of Michigan final consumer sentiment for April.
Currency Titles:
EUR/USD
USD/JPY
EUR/GBP
Gold
Oil
Currencies Image Url:
http://shared.ironfx.co.uk/morning_pictures_2014/21april2014/EURUSD_21Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/21april2014/USDJPY_21Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/21april2014/EURGBP_21Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/21april2014/XAUUSD_21Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/21april2014/CLK4_21Apr2014.PNG
Currencies Text:
EUR/USD moved in a consolidative mode, remaining between the support of 1.3790 (S1) and the resistance of 1.3850 (R1). Both the RSI and the MACD lie near their neutral levels, while both the moving averages are pointing sideways, confirming the sideways path of the currency pair. A clear move above 1.3850 (R1) could probably challenge the resistance of 1.3900 (R2), where a break would confirm a forthcoming higher high and perhaps pave the way towards the 1.3965 (R3) obstacle. On the downside, a dip below the support of 1.3790 (S1) may have larger bearish implications and target the lows of 1.3695 (S2). On the daily chart, we can identify a series of indecisive candlesticks, adding to the neutral picture of the rate.
• Support: 1.3790 (S1), 1.3695 (S2), 1.3650 (S3).
• Resistance: 1.3850 (R1), 1.3900 (R2), 1.3965 (R3)
USD/JPY rebounded from the support bar of 102.35 (S1) and moved higher to meet resistance at the 102.70 (R1) obstacle, which coincides with the 50% retracement of the 4-11 Apr. decline. A break above that bar may challenge the next resistance at 103.00 (R2), near the 61.8% retracement of the aforementioned decline. The RSI follows an upward path, while the MACD lies above both its signal and zero lines, confirming the recent bullish momentum of the price action. On the daily chart, the pair is in a sideways mode between 101.20 and 104.00.
• Support: 102.35 (S1), 101.85 (S2), 101.50 (S3)
• Resistance: 102.70 (R1), 103.00 (R2), 103.40 (R3).
EUR/GBP is trading slightly below the resistance barrier of 0.8235 (R1). If the bears are strong enough to maintain the rate below that resistance, I would expect them to drive the battle lower and challenge the support of 0.8200 (S1). The MACD, although in bearish territory, lies above its trigger line, thus some consolidation before the bears prevail again cannot be ruled out. The rate lies below both the moving averages, keeping the outlook mildly bearish for now.
• Support: 0.8200 (S1), 0.8155 (S2), 0.8085 (S3).
• Resistance: 0.8235 (R1), 0.8285 (R2), 0.8310 (R3).
Gold fell below the 1295 hurdle to find support slightly above the 1280 (S1) bar. A break below the 1280 (S1) support level may trigger further extensions towards the next support at 1265 (S2). The MACD remains below both its trigger and zero lines, keeping the momentum to the downside. However, the RSI is testing its 30 barrier, thus some consolidation or a corrective wave cannot be ruled out. As long as the precious metal is trading below both the moving averages and below the resistance bar of 1315 (R2), the short-term outlook remains negative.
• Support: 1280 (S1), 1265 (S2), 1250 (S3).
• Resistance: 1295 (R1), 1315 (R2), 1330 (R3)
WTI failed to reach the 105.00 (R1) resistance this time and moved lower. The price remains above both the moving averages and the blue uptrend line, keeping the uptrend intact. Nonetheless, I would keep a neutral stance for now since the negative divergence between our momentum studies and the price action remains in effect. A dip below the 103.00 (S1) support would confirm the divergence and may challenge the 102.00 (S2) bar. On the upside, only a clear break above 105.00 (R1) may have larger bullish implications and will probably pave the way towards the 108.00 (R2) area.
• Support: 103.00 (S1), 102.00 (S2), 100.00 (S3)
• Resistance: 105.00 (R1), 108.00 (R2), 110.00 (R3).
Benchmark Currency Rates:
http://shared.ironfx.co.uk/morning_pictures_2014/21april2014/benchmark.PNG
Market Summary Url:
http://shared.ironfx.co.uk/morning_pictures_2014/21april2014/table.PNG
currency tags:
EUR
More...
Market Analysis 22/04/2014
Language English
The week starts in earnest Yesterday’s becalmed market reflected another holiday session in Europe. The day’s range in EUR/USD was only 0.11%, compared to an average over the last year of 0.64%. Today we should see more volatility as traders come back to the market.
The dollar is generally opening higher this morning, although still in a narrow range against most currencies. It’s up against CHF, SEK and EUR and down vs AUD and NZD. There was no clear catalyst for the move in AUD and NZD, except perhaps a rise in Australian stocks and bond prices.
The RUB continued to fall on the increasing tension in Ukraine. The spillover from that crisis however seems quite well contained as most other Eastern European currencies remained little affected. Gold was only marginally higher.
We seem to be in a period of equilibrium with regards to many FX rates, which are stuck in narrow ranges. This may be because central bank rates are also stuck in a narrow range and there seems to be little anticipation of any change in central bank policy for the next two years at least outside of New Zealand and Australia. Former Bank of Japan policy board member Miyako Suda said yesterday that “the BOJ will probably maintain its bullish price forecast for as long as possible and keep policy unchanged until it becomes absolutely impossible to continue arguing that its price target can be met. But once he feels something must be done, I think Governor (Haruhiko) Kuroda will do something quite extraordinary because small steps won't work.” We might well say the same about ECB President Draghi, although it’s harder to imagine what large steps he might be able to make, given the legal constraints on ECB buying of government bonds. In any event, the FX market continues to look to central banks for direction.
During the European day, the Swedish unemployment rate is expected to fall slightly to 8.0% from 8.1% on a seasonally adjusted basis. There seems to be some demand for SEK during European time, as it was higher during the European day yesterday, so this could help to drive it higher as well. At the end of the European day, the EU will release the final version of its April consumer confidence figure, which the market is expecting to be unchanged from the preliminary version.
Canadian wholesale trade is expected to slow in February to +0.6% mom from +0.8% in the previous month. CAD has been rather weak recently – it fell on Friday despite higher inflation – and signs of softness in the economy could continue that trend.
In the US, the FHFA house price index is expected to rise 0.5% mom in February, the same as in January, while existing home sales for March are expected to be slightly lower at a 4.55mn annualized pace, down from 4.60mn in February. The existing home sales figure may not cause much of a splash however as there has been a lot of talk recently about the lack of inventory as banks slow their pace of foreclosure. A slowdown in sales could just reflect a lack of supply rather than a lack of demand. The Richmond Fed manufacturing index for April is expected to rise to 2 from -7, which could give USD a little boost.
The only speaker on the schedule is Former Fed Chairman Bernanke, speaking at the Economic Club of Canada on “Eight Years of Crisis Management at the Federal Reserve and the Way Forward.”
Overnight, Australia will release its consumer price index for 1Q. It’s expected to be 3.2% yoy, up from 2.7% in Q4 2013 and above the Reserve Bank of Australia’s 2%-3% target. The RBA has said it is fairly neutral for now, but if inflation remains over its target level, it could be forced to tighten. That thought is likely to support AUD for the time being.
Currency Titles:
EUR/USD
EUR/JPY
GBP/USD
Gold
Oil
Currencies Image Url:
http://shared.ironfx.co.uk/morning_pictures_2014/22april2014/EURUSD_22Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/22april2014/EURJPY_22Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/22april2014/GBPUSD_22Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/22april2014/XAUUSD_22Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/22april2014/CLK4_22Apr2014.PNG
Currencies Text:
EUR/USD moved slightly lower to meet the support of 1.3790 (S1), near the 200-period moving average. The pair remains between that barrier and the resistance of 1.3850 (R1), thus I maintain my neutral view. Both the moving averages are pointing sideways confirming the recent non-trending phase of the currency pair. A clear dip below the support of 1.3790 (S1) may have larger bearish implications and target the lows of 1.3695 (S2). On the upside, a clear move above 1.3850 (R1) could probably challenge the resistance bar of 1.3900 (R2).
• Support: 1.3790 (S1), 1.3695 (S2), 1.3650 (S3).
• Resistance: 1.3850 (R1), 1.3900 (R2), 1.3965 (R3).
EUR/JPY moved slightly higher to hit once again the resistance barrier of 141.75 (R1). A clear break above that hurdle may challenge the next resistance at 142.50 (R2). The rate remains supported by both the moving averages, while both our momentum studies follow upward paths, thus I would consider the bias mildly to the upside. In the bigger picture, the pair is not in a clear trending mode and this is confirmed by the neutral readings of both the daily MACD and the daily RSI.
• Support: 141.00 (S1), 140.20 (S2), 139.15 (S3).
• Resistance: 141.75 (R1), 142.50 (R2), 143.40 (R3).
GBP/USD hit once again the 1.6820 (R1) and moved lower. Considering that the negative divergence between our momentum studies and the price action is still in effect, I would expect further retracement. On the daily chart we can identify a shooting star candle formation, increasing the probabilities for the continuation of the corrective wave. Nonetheless, in the bigger picture, the currency pair remains within the upward sloping channel, keeping the long-term outlook to the upside.
• Support: 1.6775 (S1), 1.6700 (S2), 1.6600 (S3).
• Resistance: 1.6820 (R1), 1.6885 (R2), 1.7000 (R3).
Gold moved in a consolidative mode, remaining between the support of 1280 (S1) and the resistance of 1295 (R1). A clear break below the 1280 (S1) hurdle may trigger bearish extensions towards the next support at 1265 (S2). The MACD remains below its zero line, keeping the momentum to the downside, but is ready to cross above its signal line. Thus, some further consolidation or a corrective wave cannot be ruled out. Nonetheless, as long as the precious metal is printing lower highs and lower lows below both the moving averages, the short-term outlook remains negative.
• Support: 1280 (S1), 1265 (S2), 1250 (S3).
• Resistance: 1295 (R1), 1315 (R2), 1330 (R3).
WTI moved sideways to reach the blue uptrend line. This keeps the short term uptrend intact, but considering the negative divergence between our momentum studies and the price action, a violation of the trendline may see a test of the support of 103.00 (S1). A break below that barrier would confirm a forthcoming lower low and will probably turn the short-term outlook to the downside. On the upside, only a clear break above 105.00 (R1) would have larger bullish implications and would perhaps pave the way towards the 108.00 (R2) area.
• Support: 103.00 (S1), 102.00 (S2), 100.00 (S3).
• Resistance: 105.00 (R1), 108.00 (R2), 110.00 (R3).
Benchmark Currency Rates:
http://shared.ironfx.co.uk/morning_pictures_2014/22april2014/benchmark.PNG
Market Summary Url:
http://shared.ironfx.co.uk/morning_pictures_2014/22april2014/table.PNG
currency tags:
EUR
More...
Market Analysis 23/04/2014
Language English
Double whammy for AUD: The AUD got a double hit overnight. First the Q1 inflation figure came in well below expectations at +2.9% yoy vs a market consensus of +3.2%. While this showed some acceleration from +2.7% in Q4 2013, it was still within the RBA’s 2%-3% target range. AUD/USD had been rising into the figure as investors discounted the inflation rate going above the RBA’s range, but it collapsed about 50 cents on the news. Then a few minutes later the HSBC China manufacturing PMI for April came in as expected at 48.3, the fourth consecutive month of contraction, and AUD continued its decline. NZD also fell, but nowhere near as much AUD, and NZD remains higher vs USD on the day. I would expect AUD to continue to decline, especially after RBA Board member Edwards said he would prefer to see the AUD weaken, a sentiment that I believe other board members still hold.
Both new export orders and employment contracted in the HSBC PMI, indicating that there are further downside risks to growth in China. I expect slowing China growth to be one of the major issues for the market. The yuan also weakened further on the news, and oil prices collapsed, giving some indication of what future trends could be.
By contrast, the news out of the US continues to be good. The Richmond Fed manufacturing index for April rose more than expected, while existing home sales in March were little changed from February, and the National Association of Realtors, which assembles the data, expects to see a pickup in sales in coming months. Zillow, a real estate pricing agency, estimated that house prices in more than 1,000 US cities would exceed their pre-2008 levels within the year. The implied interest rate on Fed Funds futures rose by 4 bps and short-end yields also rose.
Oddly enough, the continued good news on the US economy did not do much to support USD against the other G10 currencies, as it fell against all but AUD and CAD. The Citi US economic surprise index bottomed on April 7th and has been trending higher since then. US yields have followed along, as usual, but that hasn’t given the dollar the support that it used to get in the past. My guess is that some investors may be pulling their money out of dollars to avoid getting caught in any US sanctions.
On the other hand, the dollar rose vs most EM currencies as the weakness in the Chinese economy and the fall in the yuan dampened sentiment for EM currencies. ZAR continued to decline. On the other hand, HUF and CZK managed to gain vs USD despite – or because of? -- news that the US was sending troops to Poland and the Baltic countries to reassure NATO allies.
The news of US troop movements did nothing to shore up gold. The metal’s recent low was 1,277.79 on April 1st. It briefly broke through that level yesterday, hitting 1,277.69, in the face of a higher dollar and higher US yields. The fundamental news is doing nothing to support gold while the technical picture looks poor (see below).
The PMIs will be the focus for the rest of the day. The Eurozone manufacturing PMI is expected to be unchanged while the service sector PMI is forecast to be a bit higher. Somehow the composite index is forecast to be slightly lower; I’m not sure how that happens, probably different people making the forecasts. German manufacturing PMI is also forecast to be unchanged. In the US, the Markit PMI is expected to be higher, although attention usually focuses on the ISM index.
The UK CPI trends survey is forecast to show improvement in orders and optimism, which may add to the recent enthusiasm for GBP.
In Canada, retail sales for February are forecast to have slowed relative to January, in contrast to Tuesday’s strong rise in wholesale trade sales during the month. CAD has been struggling recently; it fell vs USD overnight despite the higher-than-expected wholesale trade figures. Weak retail sales are likely to give it another kick down, in my view.
Finally, US new home sales for March are forecast to be up slightly from February’s pace, contrary to the decline in existing home sales.
Currency Titles:
EUR/USD
USD/JPY
EUR/GBP
Gold
Oil
Currencies Image Url:
http://shared.ironfx.co.uk/morning_pictures_2014/23april2014/EURUSD_23Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/23april2014/USDJPY_23Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/23april2014/EURGBP_23Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/23april2014/XAUUSD_23Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/23april2014/CLM4_23Apr2014.PNG
Currencies Text:
EUR/USD moved slightly higher after finding support at 1.3790 (S1), near the 200-period moving average. I maintain my neutral view as the pair continues to oscillate between that barrier and the resistance of 1.3850 (R1). Both the moving averages are pointing sideways, confirming the non-trending phase of the price action. A clear dip below the support of 1.3790 (S1) may have larger bearish implications and target the lows of 1.3695 (S2). On the upside, a clear move above 1.3850 (R1) could probably challenge the resistance bar of 1.3900 (R2).
• Support: 1.3790 (S1), 1.3695 (S2), 1.3650 (S3).
• Resistance: 1.3850 (R1), 1.3900 (R2), 1.3965 (R3)
USD/JPY remained below the resistance obstacle of 102.70 (R1), which coincides with the 50% retracement level of the 4-11 Apr. decline. A break above that bar may challenge the next resistance at 103.00 (R2), near the 61.8% retracement of the aforementioned decline. The RSI fell below its blue support line, while the MACD crossed below its trigger line, thus I would expect some further consolidation or a downward corrective wave, before the bulls prevail again. On the daily chart, the pair is in a sideways mode between 101.20 and 104.00.
• Support: 102.35 (S1), 101.85 (S2), 101.50 (S3)
• Resistance: 102.70 (R1), 103.00 (R2), 103.40 (R3).
EUR/GBP moved lower to meet the support of 0.8200 (S1). If the bears are strong enough to drive the price below that bar, I would expect them to target the next support at 0.8155 (S2). The structure of lower highs and lower lows remains in effect and as long as the pair is trading below both the moving averages, the outlook remains negative. Nonetheless, since the RSI met support near its 30 level, an upside retracement is possible before the continuation of the short-term downtrend.
• Support: 0.8200 (S1), 0.8155 (S2), 0.8085 (S3).
• Resistance: 0.8235 (R1), 0.8285 (R2), 0.8310 (R3).
Gold declined slightly to find support at the 1280 (S1) level. A clear break below that obstacle may extend the decline towards the next support at 1265 (S2). As long as the precious metal is printing lower highs and lower lows below both the moving averages, the short-term outlook remains negative. Nonetheless, considering that the RSI once again met support at the 30 level and moved higher, I would expect a corrective wave before sellers take control again.
• Support: 1280 (S1), 1265 (S2), 1250 (S3).
• Resistance: 1295 (R1), 1315 (R2), 1330 (R3)
WTI collapsed on Tuesday, breaking two support barriers in a row and confirming the negative divergence between our momentum studies and the price action. The price is now heading towards the support of 101.40 (S1), which coincides with the 38.2% retracement level of the 17 Mar. -16 Apr. uptrend, and a clear break may challenge the 50% retracement bar at 100.55 (S2). The MACD fell below its zero line, confirming the bearish momentum of the price action.
• Support: 101.40 (S1), 100.55 (S2), 99.35 (S3)
• Resistance: 102.00 (R1), 103.00 (R2), 104.00 (R3).
Benchmark Currency Rates:
http://shared.ironfx.co.uk/morning_pictures_2014/23april2014/benchmark.PNG
Market Summary Url:
http://shared.ironfx.co.uk/morning_pictures_2014/23april2014/table.PNG
currency tags:
EUR
More...
Market Analysis 24/04/2014
Language English
NZD in focus as main currency pairs remain trendless: USD was mixed, gaining vs GBP and NOK and lower vs CHF, SEK, JPY and especially NZD. The main currency pairs remain relatively trendless. Our technical assessment for example gives no sense of direction for EUR/USD, GBP/USD or EUR/JPY. It seems there’s probably more to go for in EM than in the G10 at this point, as EM currencies are more volatile (but not necessarily more predictable).
The Reserve Bank of New Zealand (RBNZ) raised its Official Cash Rate (OCR) to 3.0% from 2.75%, a move that should have surprised absolutely no one. What may have surprised people however was how bullish the RBNZ is on the economy. The statement accompanying the decision said that “New Zealand’s economic expansion has considerable momentum” and that “spare capacity is being absorbed, and inflationary pressures are becoming apparent.” “Headline inflation is moderate, but inflationary pressures are increasing and are expected to continue doing so over the next two years,” which means that they will have to raise interest rates further. However, there were some concerns about the strength of the NZD; Gov. Wheeler said that “the Bank does not believe the current level of the exchange rate is sustainable.” The statement introduced some reflexivity between the exchange rate and the level of interest rates as he repeated the statement from the previous meeting that “The speed and extent to which the OCR will be raised will depend on economic data and our continuing assessment of emerging inflationary pressures” and added the new phrase “including the extent to which the high exchange rate leads to lower inflationary pressure.” In their last Monetary Policy Statement in March, the RBNZ said they thought “that the OCR will need to rise by about 2 percentage points over the next two years for inflation to settle around target.” The new addition to the statement may be a qualifier for that assessment, implying that they could raise the OCR by less than 2 percentage points if the high exchange rate were dampening inflation in the tradable goods sector. It’s hard not to have some sympathy with Mr. Wheeler’s view; the NZD is the most overvalued currency in the G10 based on consumer or producer prices, although on the OECD’s rankings, which are based on a different methodology, it’s only in the middle of the pack. (It’s relatively cheap based on the Big Mac index, but that’s to be expected in a country with such a big agricultural sector.) NZD gained on the news and I would expect it to continue to rally as the only G10 currency whose central bank has taken such an overtly hawkish view. The main risk to NZD is when the Fed starts to get more aggressive, but that would seem to be some time away still.
Yesterday’s US new home sales for March shocked the market, falling to a 384k annual pace from 440k in February. The news caused investors to reassess the outlook for Fed policy and implied interest rates on Fed Funds futures came down 4 bps in the long end. However, the housing data is quite volatile, especially during the winter, and that might have affected the figures. Also there just aren’t that many new houses to sell. The current inventory, 193k, is only a bit higher than the historical low of 144k set in May 2012 and is lower than any other period in previous business cycles going back to the late 1960’s. The average going back to 1963 is 314k, and remember that back then the population of the US was much smaller than it is now - around 180mn, only 57% of the current population of 314mn. It may be that one reason new home sales are low is because there aren’t many new homes to sell. Thus this indicator may be less relevant to economic policy than it used to be.
In the oil market, US crude stocks rose to their highest levels since 1931. Apparently the current refinery maintenance season is limiting demand as supply continues. Nonetheless WTI was little changed, but it’s likely that without the problems in the Ukraine, the price would be considerably lower.
During the European day today the main indicator will be Germany’s Ifo index, which once again is expected to be mixed: current assessment higher but expectations index lower. It remains to be seen which one the market puts more emphasis on. French business confidence is also coming out. Three members of the ECB Council, including President Draghi, are speaking today.
Then from the US we have durable goods orders for March. The consensus is for a 2.0% mom rise, a bit below the 2.2% rise in February, but the durable goods ex transportation orders, which is also closely watched, should be much higher than in February, so it may outweigh the impact of a lower headline number. Initial jobless claims are expected to rise to 315k from 304k, but that would leave the four-week moving average unchanged and so be neutral. Thus on balance the US economic news should be USD-positive and we look for a stronger dollar during the day.
Currency Titles:
EUR/USD
EUR/JPY
GBP/USD
Gold
Oil
Currencies Image Url:
http://shared.ironfx.co.uk/morning_pictures_2014/24april2014/EURUSD_24Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/24april2014/EURJPY_24Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/24april2014/GBPUSD_24Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/24april2014/XAUUSD_24Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/24april2014/CLM4_24Apr2014.PNG
Currencies Text:
EUR/USD hit the resistance of 1.3850 (R1) and then retreated. The pair continues its sideways path between the support of 1.3790 (S1) and the aforementioned resistance, thus I still see a neutral short-term picture. Both the moving averages are pointing sideways, while both the RSI and the MACD lie near their neutral levels, confirming the non-trending phase of the price action. A clear dip below the support of 1.3790 (S1) may have larger bearish implications and target the lows of 1.3695 (S2). On the upside, a clear move above 1.3850 (R1) could probably challenge the resistance bar of 1.3900 (R2).
• Support: 1.3790 (S1), 1.3695 (S2), 1.3650 (S3).
• Resistance: 1.3850 (R1), 1.3900 (R2), 1.3965 (R3).
EUR/JPY tried to emerge above the resistance of 141.75 (R1) but failed to do so and returned back below it. The rate remains in a sideways mode between that hurdle and the support of 141.00 (S1). Considering the neutral readings of the daily MACD and the daily RSI and the fact that we can identify a doji candle on the daily chart, I will adopt a neutral stance. A decisive move above 141.75 (R1) may target the next resistance at 142.50 (R2), while a dip below 141.00 (S1) may pave the way towards the support of 140.20 (S2).
• Support: 141.00 (S1), 140.20 (S2), 139.15 (S3).
• Resistance: 141.75 (R1), 142.50 (R2), 143.40 (R3).
GBP/USD failed once again to maintain its rate above the hurdle of 1.6820 (R1) and declined to meet the support of 1.6775 (S1). Considering that the negative divergence between our momentum studies and the price action is still in effect, I would expect further retracement. A dip below 1.6775 (S1) may challenge the 1.6700 (S2) obstacle. Nonetheless, in the bigger picture, the currency pair remains within the upward sloping channel, keeping the long-term uptrend intact.
• Support: 1.6775 (S1), 1.6700 (S2), 1.6600 (S3).
• Resistance: 1.6820 (R1), 1.6885 (R2), 1.7000 (R3).
Gold moved slightly higher after finding support at the 1280 (S1) bar. I would expect the corrective phase to continue maybe for a test at the 1295 (R1) hurdle. The MACD, although in its bearish territory, lies above its signal line, while the RSI is pointing up, increasing the possibilities for further upside retracement. On the downside, a dip below the 1280 (S1) barrier would signal the continuation of the short-term downtrend and could probably challenge the next support at 1265 (S2).
• Support: 1280 (S1), 1265 (S2), 1250 (S3).
• Resistance: 1295 (R1), 1315 (R2), 1330 (R3).
WTI moved in a consolidative mode on Wednesday, remaining supported by the 200-period moving average and the 38.2% retracement level of the 17 Mar. -16 Apr. uptrend. A clear dip below that support zone may see the 50% retracement level of the aforementioned advance at 100.55 (S2). The MACD remains below both its zero and signal lines, keeping the momentum to the downside.
• Support: 101.40 (S1), 100.55 (S2), 99.35 (S3).
• Resistance: 102.00 (R1), 103.00 (R2), 104.00 (R3).
Benchmark Currency Rates:
http://shared.ironfx.co.uk/morning_pictures_2014/24april2014/benchmark.PNG
Market Summary Url:
http://shared.ironfx.co.uk/morning_pictures_2014/24april2014/table.PNG
currency tags:
EUR
More...