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Market Analysis 25/04/2014
Language English
Higher prices are not the same as inflation The Tokyo CPI for April was released overnight, giving us the first glimpse of the impact of the 3 percentage-point hike in the consumption tax in April. The CPI excluding fresh foods, the Bank of Japan’s preferred inflation measure, rose 2.7% yoy, up from 1.0% in March. In other words, retailers passed on about half the hike in the tax. Does this mean that the BoJ has achieved its goal of 2% inflation? Actually, you could look at it the other way: without the tax, prices actually fell 0.3% yoy, which makes it more likely that the BoJ eases further. More to the point, rising prices are not really the same as inflation if they are not accompanied by a rise in the money supply. Wages are actually falling while prices are rising, so all that’s really happening is that consumers’ purchasing power is being eroded. Inflation isn’t just a rise in relative prices (such as the price of goods relative to the price of labor); it’s an erosion in the overall value of money: more money chasing the same amount of goods. Broad money (M3) growth peaked in January at +4.5% yoy and has slowed since then. While it is up from the extremely low levels of recent years (it often shrank on a yoy basis during 2008 to 2012) the money supply is hardly growing any faster than the 2.2% yoy rate of growth in nominal GDP in 2013. Thus I still expect the Bank of Japan will have to take further easing measures in order to boost inflation. Former BoJ Monetary Policy Committee member Miyako Suda said recently 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.” This seems logical to me and is what I would expect to happen. That should give the yen the next leg down. In any event, the CPI figure had little impact on the markets; stocks were barely changed after the figure and so too was USD/JPY.
The situation in Ukraine continues to deteriorate. It was notable yesterday that for once, the markets actually reacted to the Ukrainian news; gold jumped and the dollar declined. I consider this issue well worth watching.
The Danish central bank exited its negative interest rate regime, raising the rate on CDs by 0.15 ppt to 0.05% (lending and other rates remain unchanged). The change comes as pressure on the DKK eases.
During the European day, the main event will be the UK retail sales for March. They’re expected to fall on a mom basis but the yoy rate of change is expected to accelerate.
Belgian business confidence is coming out late in the European day. While the market generally ignores this indicator, economists watch it closely as it has a good correlation with overall European economic activity. The reason is that Belgium is a small open economy that generally gets dragged along however the continent as a whole is going.
In the US, the Markit service-sector PMI for April is expected to rise, while the final U of Michigan consumer confidence index for April is expected to be revised up. These could support the dollar somewhat although they aren’t usually big market movers and they surely will be ignored if conditions in Ukraine worsen.
ECB’s Knot speaks again at the central bank conference in Amsterdam, while Swiss National Bank President Jordan will speak at the SNB’s annual general meeting.
Currency Titles:
EUR/USD
USD/JPY
EUR/GBP
Gold
Oil
Currencies Image Url:
http://shared.ironfx.co.uk/morning_pictures_2014/25april2014/EURUSD_25Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/25april2014/USDJPY_25Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/25april2014/EURGBP_25Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/25april2014/XAUUSD_25Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/25april2014/CLM4_25Apr2014.PNG
Currencies Text:
EUR/USD found once again support at the 1.3790 (S1) bar and moved higher. The pair continues its sideways path between that support level and the resistance of 1.3850 (R1), and as a result 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).
USD/JPY moved in a consolidative mode after finding support at 102.20 (S1). A decisive break below that barrier may indicate that the 11 - 22 Apr. advance was just a 50% retracement of the 4 - 11 Apr. decline. The MACD lies below its signal line and seems ready to fall below its zero line and turn the momentum to the downside. On the daily chart, we can identify a doji followed by a hanging man, increasing the possibilities for further declines.
• Support: 102.20 (S1), 101.85 (S2), 101.50 (S3).
• Resistance: 102.70 (R1), 103.00 (R2), 103.40 (R3).
EUR/GBP retreated after finding resistance at 0.8246 (R1). If the bears are strong enough to push the rate lower, I would expect them to challenge once again the support of 0.8200 (S1). A decisive dip below that hurdle would confirm a forthcoming lower low and may pave the way towards 0.8155 (S2). The MACD seems ready to cross below both its zero and signal lines, turning the momentum back negative.
• Support: 0.8200 (S1), 0.8155 (S2), 0.8085 (S3).
• Resistance: 0.8246 (R1), 0.8285 (R2), 0.8310 (R3).
Gold fell to find support at 1268 (S2) and then moved higher to challenge the resistance of 1295 (R1), which coincides with the 50-period moving average. An upside break of that barrier may pave the way towards the next resistance at 1315 (R2). The MACD, although in its bearish territory, remains above its trigger line, favoring further advance. On the downside, a dip below 1280 (S1) is needed to see once again the 1268 (S2) level.
• Support: 1280 (S1), 1268 (S2), 1250 (S3).
• Resistance: 1295 (R1), 1315 (R2), 1330 (R3).
WTI moved slightly higher to challenge the resistance of 102.00 (R1). An upside break of that hurdle may indicate that the recent decline was just a 38.2% retracement of the 17 Mar-16 Apr. uptrend and may pave the way towards the next resistance at 103.00 (R2). The MACD, although in its negative area, crossed above its trigger line, while the RSI is moved higher, confirming the inability of the bears to overcome the 101.40 (S1) support, which lies near the 200-period moving average. A clear dip below that support zone is needed to turn the outlook negative again and target the 50% retracement level of the 17 Mar-16 Apr. uptrend at 100.55 (S2).
• 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_2014/25april2014/benchmark.PNG
Market Summary Url:
http://shared.ironfx.co.uk/morning_pictures_2014/25april2014/table.PNG
currency tags:
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Market Analysis 28/04/2014
Language English
The market has doubts The situation in Ukraine continues to deteriorate and tensions between Russia and the West continue to rise, but the market’s reaction shows some doubts about the impact on the rest of the world. Gold finally managed to get a lift from the tension and even outperformed silver overnight, while Fed Funds rate expectations fell modestly despite good US economic indicators. RUB was the second-worst-performing currency of those we track despite a 50 bps rate hike as S&P cut the country’s debt rating to the lowest investment grade warned that more cuts may follow if sanctions worsen. But where else to find any signs that something is going on in the world? USD is barely changed against most of the G10 currencies this morning from its level Friday morning, and a 20 pip fall in USD/JPY barely counts as flight to safety – not to mention that USD/CHF is virtually unchanged and EUR/USD had a 26-pip range on Friday. And oil prices are low too. It seems that the market does not see much possibility of spillover from the crisis. The big exception seems to be wheat, which gained almost 5% last week and is up another 0.6% this morning, as Russia is the world’s 5th largest wheat exporter, followed by Ukraine. Nickel also continues to benefit as Russia is one of the world’s biggest producers of the metal. But so far, the market seems to think this is an isolated event that will not have much impact on the rest of the world. That’s also what people thought when people with subprime mortgages in the US started to default, if I remember correctly.
Japanese retail trade was up 11% yoy in March, compared with a 3.6% yoy rise in February. That’s a gauge of the impact of the hike in the consumption tax from April 1st as people rushed to stock up on goods that they would need. Large retailers’ sales rose 16.1% yoy vs only 1.3% yoy in February. We now await the April data to see how much of a payback there will be from this increased consumption – we can expect a slump in demand for the next several months.
There are no major releases today in Europe. From the US we get pending home sales for March, which are expected to be up slightly on a mom basis, compared with the decline in February. That would at least support the idea of some increase in home sales, which would be a relief for the markets. The Dallas Fed manufacturing index is forecast to rise, which could help sentiment towards the dollar.
The big event of the week will be the FOMC meeting Tuesday and Wednesday. There is no press conference after the meeting so the communique is all we will get. Recent data has largely confirmed the Fed’s forecast that the slowdown in the winter was due to unusually bad weather and as the weather improves, so too does the economy. Plus with bond yields lower and stock prices higher than when the Fed began tapering off its bond purchases in January, there is no reason for them to change course. Hence I expect them to continue reducing their bond purchases by $10bn and for the statement following the meeting to be virtually unchanged, which is likely to be neutral for the dollar. We might get some clue about what they discussed when Fed Chair Yellen speaks to community bankers in Washington on Thursday. The real excitement will come on 21 May, when the minutes of the meeting are released and we get a view of the discussion about when the Fed should start raising rates. That’s the big point of disagreement within the FOMC and the point that the market wants to clarify. There will also be a Bank of Japan Policy Board meeting on the same day; few people expect that they will make any change in policy until they’ve seen the impact of the hike in the consumption tax. The Bank of Japan will release its semi-annual outlook on the economy on the same day and BoJ Gov. Kuroda will hold a press conference. On Thursday and Friday we get the rest of the April manufacturing PMIs from around the world, including the final figures for the European countries that have released preliminary numbers. Finally, Japan begins its “Golden Week” holiday this week, while many countries have a holiday on Thursday, May Day. And on Friday we have the US employment data for April; the market expects an increase of 210k in nonfarm payrolls, which should prove positive for the dollar.
Currency Titles:
EUR/USD
EUR/JPY
GBP/USD
Gold
Oil
Currencies Image Url:
http://shared.ironfx.co.uk/morning_pictures_2014/28april2014/EURUSD_28Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/28april2014/EURJPY_28Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/28april2014/GBPUSD_28Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/28april2014/XAUUSD_28Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/28april2014/CLM4_28Apr2014.PNG
Currencies Text:
EUR/USD met once again resistance near the 1.3850 (R1) bar and moved lower. The pair remains within its sideways path between the support at 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 moved lower to hit the support of 141.00 (S1). The short-term outlook remains neutral since the rate continues ranging between that bar and the resistance of 141.80 (R1). The trendless mode of the pair is also confirmed by the neutral readings of the daily MACD and the daily RSI. A decisive dip below 141.00 (S1) may target the support of 140.20 (S2), while a move above 141.80 (R1) may target the next resistance at 142.50 (R2).
• Support: 141.00 (S1), 140.20 (S2), 139.15 (S3).
• Resistance: 141.80 (R1), 142.50 (R2), 143.40 (R3).
GBP/USD remained supported by the 1.6770 (S1) barrier. Nonetheless, the negative divergence between our momentum studies and the price action is still in effect, thus I would expect further consolidation or a retracement. A clear dip below the 1.6770 (S1) support may confirm the aforementioned divergence and would probably trigger extensions towards the 1.6700 (S2) obstacle. In the bigger picture, the currency pair remains within the purple upward sloping channel, keeping the long-term uptrend intact.
• Support: 1.6770 (S1), 1.6700 (S2), 1.6600 (S3).
• Resistance: 1.6840 (R1), 1.6885 (R2), 1.7000 (R3).
Gold violated the 1295 barrier and moved higher. I would expect the bulls to continue pushing the metal higher and challenge the 1315 (R1) resistance level. A clear move above that hurdle may pave the way towards 1330 (R2). The MACD lies above both its trigger and zero lines, confirming the recent bullish momentum. Nonetheless, the RSI met resistance near its 70 level, thus some consolidation or a pullback before the development of further advance cannot be ruled out.
• Support: 1295 (S1), 1280 (S2), 1268 (S3).
• Resistance: 1315 (R1), 1330 (R2), 1342 (R3).
WTI fell below the 101.25 bar on Friday to meet support at 100.55 (S1), near the 50% retracement level of the 17th Mar – 16th Apr. advance, also near the long-term uptrend line drawn from back the 9th of January. On Monday, during the Asian morning, WTI moved slightly higher and a move above 101.25 (R1) may confirm the rebound targeting the next resistance bar at 102.00 (R2). The RSI hit its 30 level and moved higher, favoring an upside forthcoming wave. Nonetheless, the possibility for a lower high still exist and the MACD still provides bearish indications. As a result, a move below 100.55 (S1) may be a reason to reconsider our analysis.
• Support: 100.55 (S1), 99.35 (S2), 98.85 (S3).
• Resistance: 101.25 (R1), 102.00 (R2), 103.00 (R3).
Benchmark Currency Rates:
http://shared.ironfx.co.uk/morning_pictures_2014/28april2014/benchmark.PNG
Market Summary Url:
http://shared.ironfx.co.uk/morning_pictures_2014/28april2014/table.PNG
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Market Analysis 29/04/2014
Language English
Russia sanctions send opposite signal The US yesterday unveiled more sanctions against Russian individuals linked to President Putin’s inner circle, but the sanctions clearly sent a different message as the RUB rallied and Russian stocks were the best-performing major market in the world yesterday. Nickel on the other hand was down 1.5% and gold fell 0.7%.The US strategy seems to be to slowly ratchet up the heat on President Putin by changing his view of how his actions in Ukraine will affect Russia economically and him politically. However the impact is blunted as the sanctions target the Russian elite, rather than the economy as a whole, suggesting that the US wants to limit the impact on US and European businesses. Thus the markets – and President Putin too, one assumes --- see the lack of conviction behind the effort and the desire on the part of the West to minimize their own sacrifice on behalf of Ukraine. It seems to me that Russia has a lot more at stake in this game and hence is probably willing to keep it going for longer and endure more hardship than the West is. Thus I expect the conflict to drag on and even worsen. Eventually I would expect it to impact the financial markets more, but how long it will take before the damage to the Russian economy is serious enough to affect global strategy is anyone’s guess.
The FX market performance yesterday was mixed and did not conform to the usual risk on/risk off model. USD/JPY rose but USD/CHF fell. Stocks closed higher but NZD and AUD were the worst-performing currencies. AUD was hit by news that the China Banking Regulatory Commission has asked banks to report their exposure against iron ore import financing, which sent iron ore prices lower. This is potentially bearish news for a number of commodities – and therefore for AUD -- if the Chinese government starts to crack down on China commodity financing deals. The fall in NZD was harder to explain – New Zealand trade for March came out in line with expectations, with exports rising to a record amount and dairy exports in particular surging, showing no signs of a China slowdown there. There seems to be simply the feeling that everything is priced in for kiwi already. I believe this is just a bout of profit-taking after the recent RBNZ meeting and I expect NZD to outperform AUD going forward and for AUD/NZD to head lower still as a result.
The main feature today will be the preliminary German CPI for April, which is forecast to have accelerated to +1.4% yoy from 1.0% yoy. A rebound like that would be a relief for the ECB ahead of the Euro-area preliminary inflation data coming out Wednesday and the ECB meeting next week and should set the tone for EUR/USD today. ECB President Draghi told lawmakers from Germany's ruling coalition that low inflation would persist but quantitative easing remains some way off, which is what the market expects; probably they would choose to move interest rates first if they decide to loosen further. Eurozone M3 money supply is forecast to have grown at a +1.4% yoy pace in March, a slight acceleration from +1.3% yoy in February and bringing the 3-month moving average up to +1.3% yoy from +1.2% yoy. Eurozone’s final consumer confidence is forecast have remained unchanged from the preliminary estimate.
In the UK, the nation’s preliminary GDP for Q1 is estimated to have risen 0.9% on a quarterly basis, an acceleration from +0.7% qoq in Q4. This will drive the yoy rate up to +3.2% from 2.7%. Such a solid growth figure could be a reason for the pound to regain some of the momentum that it has lost recently.
In the US, the FOMC gathers for its two day meeting which ends on Wednesday. As for the US indicators, the S&P/Case-Shiller home price index is forecast to have slowed in February, while the Conference Board consumer confidence for April is forecast to have risen slightly. The figures should not have much impact on the dollar.
Bank of Canada Governor Stephen Poloz will appear before the Commons Finance Committee. In the US, the Senate Banking Committee will vote on the nominations of Stanley Fischer for Fed Vice Chairman as well as two nominees for the Board of Governors.
Currency Titles:
EUR/USD
USD/JPY
EUR/GBP
Gold
Oil
Currencies Image Url:
http://shared.ironfx.co.uk/morning_pictures_2014/29april2014/EURUSD_29Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/29april2014/USDJPY_29Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/29april2014/EURGBP_29Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/29april2014/XAUUSD_29Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/29april2014/CLM4_29Apr2014.PNG
Currencies Text:
EUR/USD emerged above the hurdle of 1.3850, the upper boundary of its recent sideways path. After the breakout, the rate returned to test that bar as a support. If the bulls are strong enough to push the pair higher, I would expect them to target the resistance bar of 1.3900 (R1). Both our momentum studies started moving higher, indicating a shift in momentum from neutral to positive. A move above the resistance of 1.3900 (R1) would confirm a higher high on the daily chart and may pave the way towards 1.3965 (R2).
• Support: 1.3850 (S1), 1.3790 (S2), 1.3695 (S3).
• Resistance: 1.3900 (R1), 1.3965 (R2), 1.4000 (R3)
USD/JPY moved higher after finding support at the 102.00 (S1) barrier. At the time of writing the rate is trading below the 102.70 (R1) resistance level, where a clear violation would confirm a forthcoming higher high and may see the next resistance at 103.00 (R2). The MACD crossed above both its trigger and zero lines, confirming the recent bullish momentum of the price action, but our moving averages still point sideways, indicating that the pair is not in a clear trending mode yet.
• Support: 102.00 (S1), 101.50 (S2), 101.25 (S3)
• Resistance: 102.70 (R1), 103.00 (R2), 103.40 (R3).
EUR/GBP moved higher to challenge once again the resistance barrier of 0.8246 (R1). A clear violation of that bar may pave the way towards the next resistance hurdle at 0.8285 (R2). The MACD remains above both its trigger and zero lines, while the RSI is moving higher, indicating positive momentum. My concern is that the rate will have to deal with the 200-period moving average on its way towards the 0.8285 (R2) resistance, if the break occurs.
• Support: 0.8200 (S1), 0.8155 (S2), 0.8085 (S3).
• Resistance: 0.8246 (R1), 0.8285 (R2), 0.8310 (R3)
Gold retreated after finding resistance at the 200-period moving average and the blue downward sloping resistance line. I change my view to neutral since the precious metal is currently testing the support of 1295 (S1), where a clear dip may see once again the 1280 (S2) bar. On the other hand, a rebound near that support would confirm a higher low and a break above the blue trend line may challenge the resistance of 1315 (R1). The RSI moved lower after hitting its 70 level, while the MACD fell below its trigger line, confirming the decelerating momentum of the yellow metal.
• Support: 1295 (S1), 1280 (S2), 1268 (S3).
• Resistance: 1315 (R1), 1330 (R2), 1342 (R3)
WTI moved higher but after finding resistance near the 101.25 (R1) bar and the 200-period moving average, it retraced to meet once again the support of 100.55 (S1), near the 50% retracement level of the 17th Mar – 16th Apr. advance, also near the long-term uptrend line drawn from back the 9th of January. A move above 101.25 (R1) may confirm a rebound targeting the next resistance bar at 102.00 (R2). Only a clear dip below the support bar of 100.55 (S1) would be a reason to reconsider our analysis.
• Support: 100.55 (S1), 99.35 (S2), 98.85 (S3)
• Resistance: 101.25 (R1), 102.00 (R2), 103.00 (R3).
Benchmark Currency Rates:
http://shared.ironfx.co.uk/morning_pictures_2014/29april2014/benchmark.PNG
Market Summary Url:
http://shared.ironfx.co.uk/morning_pictures_2014/29april2014/table.PNG
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Market Analysis 30/04/2014
Language English
A busy day! The dollar once again is mixed, falling against three of the G10 currencies (CAD, AUD and NZD) while gaining against four (CHF, EUR, SEK and NOK). It was more a story of the currencies rather than the dollar; CAD gained on position-cutting, while NZD was up after building permits rose much more than expected in March. CHF was probably just keeping in line with EUR, which fell yesterday on lower-than-expected German CPI.
The Bank of Japan finished its two-day policy meeting this morning and as expected, kept monetary policy unchanged. I expect them to hold off from any additional monetary easing until they can see more clearly the impact of the increase in the consumption tax on April 1st. Governor Kuroda’s view is that inflation in Japan is on a path to reach the Bank’s 2% target, so they will have to wait until that thesis is decisively disproved. We will learn more about their thinking later today when the BoJ releases its semi-annual outlook on the economy and Gov. Kuroda speaks to reporters. The nation’s preliminary industrial production for March rose 0.3% mom, below expectations of 0.5% mom but still a turnaround from -2.3% mom in February. USD/JPY was virtually unchanged.
The focus during the European day will be the preliminary Eurozone inflation figure for April. Market consensus is for it to rise 0.3 ppt to 0.8% yoy. However, Tuesday’s German CPI rate calculated on the same basis, which accounts for a substantial part of the Eurozone’s overall inflation rate, increased by only 0.2 ppt to 1.1%. That could mean a weaker-than-expected rebound in Eurozone inflation and could raise the pressure on the ECB to ease policy further, or at least increase speculation about a further easing. The rebound in inflation in Germany is due in part to the fact that Easter came late this year. Package holiday prices always rise during Easter and so part of that rise occurred in March last year but all of it was in April this year, which meant package holidays were about 10% more expensive in April this year than last year. Also, energy prices fell sharply in April 2013, making energy prices this year look higher on a year-on-year basis. We will not get a true picture of Eurozone inflation until May, when the underlying inflation drivers in both directions can take over once again and give the ECB a “clean” picture of inflation. It’s likely that the ECB would wait until then before taking any action, or even until the revisions to its staff forecasts in June. But the market is more likely to discount such action if Wednesday’s CPI data is below consensus.
Then during the US day we get the announcement of the results of the April FOMC meeting. It’s generally expected to be uneventful. There are neither updates to the forecasts nor a press conference following the meeting, just the release of the statement. Fed policy is basically on cruise control while the Committee waits to see how the economy rebounds from the cold weather, how the labor market is progressing, and whether inflation returns to more normal levels. So far, the data is good enough to allow them to keep tapering off their monthly bond purchases on schedule by $10bn a month, but neither good nor bad enough to justify a major change in their assessment of the economy. Hence I think it’s unlikely they would make any change in their view on interest rates, particularly following the major revisions that they made last month. The housing market is perhaps the one area where there is some confusion and so the statement could clarify the Committee’s view on that. No change in statement should mean little impact on USD, perhaps some boost as they will be seen to be still optimistic about the economy.
Besides the FOMC policy decision, the US will also announce the 1st estimate of US GDP for Q1. It’s expected to show a rise of +1.2% qoq annualized, a slowdown from +2.6 in Q4, while the core personal consumption expenditure index, the Fed’s favorite inflation measure, is forecast to slow to +1.2% qoq from +1.3% qoq. The slow GDP growth is likely to be attributed to bad weather and should not be a drag on USD. The ADP employment change for April is also coming out as usual two days before of the nonfarm payrolls. The report is expected to show that the private sector gained 210k jobs in April, close to the 215k NFP forecast. That should be mildly USD-positive. The Chicago purchasing managers index for April will also be released.
We have four speakers scheduled on Wednesday. Former Fed Chairman Ben Bernanke delivers the closing keynote address to a conference, while the BoC Governor Stephen Poloz will appear before the Commons Banking, Trade and Commerce Committee. BoE Chief Economist Spencer Dale and the Executive Director for financial stability Andrew Haldane will also speak.
Currency Titles:
EUR/USD
EUR/JPY
GBP/USD
Gold
Oil
Currencies Image Url:
http://shared.ironfx.co.uk/morning_pictures_2014/30april2014/EURUSD_30Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/30april2014/EURJPY_30Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/30april2014/GBPUSD_30Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/30april2014/XAUUSD_30Apr2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/30april2014/CLM4_30Apr2014.PNG
Currencies Text:
EUR/USD failed to maintain its rate above the 1.3850 bar and after the preliminary German CPI rebounded by less than expected, fell sharply to trade within its prevailing trading range between the aforementioned barrier and the support level of 1.3790 (S1). A weaker-than-expected rebound in Eurozone’s preliminary inflation data today could push the pair below the 1.3790 (S1) support and may open the way for the lows of 1.3695 (S2). The MACD fell below both its signal and zero lines, confirming yesterday’s bearish momentum.
• Support: 1.3790 (S1), 1.3695 (S2), 1.3650 (S3).
• Resistance: 1.3850 (R1), 1.3900 (R2), 1.3965 (R3).
EUR/JPY moved significantly lower after finding resistance slightly below the 142.50 (R2). The pair is back between the support of 141.00 (S1) and the resistance of 141.80 (R1). The RSI hit its 70 level and moved lower, while the MACD, although in its bullish territory, fell below its signal line, confirming the decelerating momentum of the price. On the daily chart, we can identify a shooting star candle formation, increasing the possibilities for further declines. A clear dip below the 141.00 (S1) support may trigger extensions towards the next bar at 140.20 (S2).
• Support: 141.00 (S1), 140.20 (S2), 139.15 (S3).
• Resistance: 141.80 (R1), 142.50 (R2), 143.40 (R3).
GBP/USD remained between the support of 1.6770 (S1) and the resistance of 1.6840 (R1). I would consider the short-term picture to be neutral at the moment, since the rate oscillates within the aforementioned range while the MACD lies near its zero line, pointing sideways. In the bigger picture, the currency pair remains within the purple upward sloping channel, keeping the long-term uptrend intact.
• Support: 1.6770 (S1), 1.6700 (S2), 1.6600 (S3).
• Resistance: 1.6840 (R1), 1.6885 (R2), 1.7000 (R3).
Gold remains below the blue downward sloping resistance line, between the support of 1290 (S1) and the resistance of 1305 (R1). Considering the downside slope of both our momentum studies, I would expect the precious metal to challenge once again the 1290 (S1) bar, where a dip may target the next support at 1280 (S2). Nonetheless, in the bigger picture, we can identify positive divergence between the daily MACD and the price action, indicating decelerating bearish momentum, and this could probably keep any further declines limited.
• Support: 1290 (S1), 1280 (S2), 1268 (S3).
• Resistance: 1305 (R1), 1330 (R2), 1342 (R3).
WTI violated the 101.25 barrier and reached the 102.00 resistance yesterday. But after hitting that hurdle, WTI collapse to meet support below the long-term uptrend line drawn from back the 9th of January, near the support barrier of 100.45 (S1). The MACD, already in its bearish zone, seems ready to cross below its trigger line, confirming the recent accelerating bearish momentum. A clear move below 100.45 (S1) could probably pave the way towards the next support at 99.35 (S2).
• Support: 100.45 (S1), 99.35 (S2), 98.85 (S3).
• Resistance: 101.25 (R1), 102.00 (R2), 103.00 (R3).
Benchmark Currency Rates:
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Market Analysis 1/05/2014
Language English
Central banks on hold: The news we got yesterday from the Bank of Japan, the ECB and the FOMC was the same: they are all on hold for now. Nothing suggests any need for an immediate change in central bank policy. Accordingly, we are likely to remain in current ranges for some time. The markets will follow Newton’s first law of motion: a body at rest tends to stay at rest unless acted upon by some external force.
The Bank of Japan yesterday left unchanged its forecast for core CPI to hit 1.9% in FY2015 and BoJ Gov. Kuroda said the timing on hitting their 2% target hasn’t been pushed back at all. That implies no change in their policy for the time being.
Eurozone inflation was a bit lower in April than the market had forecast, but it did indeed rise, as was expected. The figure can provide ammunition for both sides in the “to ease or not to ease” argument, which implies that the default result will be to encourage the ECB to wait at least until May, when they will get a “clean” reading on inflation free of the distortions of the Easter holiday. Or perhaps even to June, when the new forecasts will be available. Furthermore, there was some good news on bank lending from the ECB’s bank lending survey for April, which confirmed the stabilisation of bank lending conditions for loans to enterprises and households. Significantly, net demand turned positive for loans to both enterprises and households for the first time in several years, and euro area banks’ access to funding improved. Unfortunately this survey runs counter to the news from yesterday’s money supply data, which showed private-sector credit falling at an accelerating pace - -2.5% yoy, the largest decline on record (data going back to Sep. 1998). Nonetheless the rise in the CPI, the bank lending survey and the recent improvement in the PMIs can give the hawks on the ECB hope that their forecast recovery is gradually being realized and give them the patience to hang on while they wait for more data to verify their assumptions.
As expected, the Fed made no significant changes to either its policy or its message. It continued tapering down its bond purchases at the same pace. While acknowledging the weak growth in Q1 – Q1 GDP came in at a disappointing +0.1%, far below even analysts’ forecasts averaging +1.5% -- the FOMC noted that growth has picked up recently as the weather has improved. There were no additional comments about housing. It was significant that Minneapolis Fed President Kocherlakota, who had dissented from the previous statement in favor of a more dovish tone, dropped his dissent and the statement was unanimous. The FOMC is likely to remain on its current course, aiming to finish its bond purchases by either October or December at the latest. Meanwhile it will be watching the data to see when the time might be ripe to start raising rates. On that basis, it’s unlikely that they would see enough reason to change their tone for several more months, perhaps not until the fall.
With no near-term change in policy by the major central banks in sight, I expect current ranges to remain in place for the time being while the markets watch the data and pay close attention to comments from central bank officials. The technicals say largely the same thing: currencies are caught in a range. Volatility is likely to remain low for the time being. I still believe that the market is underestimating the impact that the crisis in Ukraine is likely to have on the financial world and on risk appetite in particular. The tightening of credit in China remains another potential flash point for the global economy. The market is waiting for that external force to jolt it out of its resting condition; the internal dynamics are not likely to supply it for the time being.
Overnight, the China official manufacturing PMI for April came out slightly worse than expected at 50.4, vs the consensus forecast of 50.5. Nonetheless it was still up from 50.3 in March, corroborating the slight rise in the HSBC/Markit PMI for the month.
The European day starts with the UK Nationwide house price index for April, which is expected to show house prices rising at an accelerating pace. The Bank of England mortgage approvals for March are also expected to have improved, while the UK manufacturing PMI for April is expected to be up slightly. This positive news could add to the momentum in GBP.
There is considerable US data out Thursday and most of it is expected to be good, which could boost the dollar, although the currency does not seem to be getting that much of a boost recently from good data. Initial jobless claims for the week ended on April 26 are forecast to have declined, bringing the 4wk moving average down. Both personal income and personal spending for March are expected to have accelerated. The ISM manufacturing index for April is expected to have risen, while the final Markit manufacturing PMI for the month is forecast to have been unchanged from its initial estimate.
We have two speakers on Thursday’s agenda. Federal Reserve Chair Yellen speaks one day after the FOMC decision, while BoE Deputy Governor for Financial stability speaks at a dinner in London.
Currency Titles:
EUR/USD
USD/JPY
EUR/GBP
Gold
Oil
Currencies Image Url:
http://shared.ironfx.co.uk/morning_pictures_2014/1may2014/EURUSD_01May2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/1may2014/USDJPY_01May2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/1may2014/EURGBP_01May2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/1may2014/XAUUSD_01May2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/1may2014/CLM4_01May2014.PNG
Currencies Text:
EUR/USD met strong support at the 1.3790 (S1) barrier on Wednesday and rallied to meet the highs of 1.3875 (R1). The next resistance is found at 1.3900 (R2), where a clear upward violation may pave the way towards the highs of 1.3965 (R1). The MACD crossed above both its signal and zero lines, confirming yesterday’s bullish momentum. Nonetheless, since the pair is not in a clear trending mode, I would consider the overall short-term picture to be neutral until we have more indications about the establishment of a newborn forthcoming trend.
• Support: 1.3790 (S1), 1.3695 (S2), 1.3650 (S3).
• Resistance: 1.3875 (R1), 1.3900 (R2), 1.3965 (R3)
USD/JPY fell sharply after finding resistance at the 102.70 (R1) hurdle, but the decline was halted slightly above the 102.00 support (S1). The pair remains within a sideways path between those two levels and the rebound near the 102.00 zone may challenge once again the resistance of 102.70 (R1). Both our moving averages are still pointing sideways, while both the daily MACD and the daily RSI lie near their neutral levels, confirming the non-trending phase of the currency pair.
• Support: 102.00 (S1), 101.50 (S2), 101.25 (S3)
• Resistance: 102.70 (R1), 103.00 (R2), 103.40 (R3).
EUR/GBP rebounded from the support of 0.8200 (S1) and moved slightly higher to meet the 50-period moving average. The pair remains between the aforementioned support and the resistance of 0.8246 (R1). A clear move below the 0.8200 (S1) is needed to confirm a forthcoming lower low and may trigger extensions towards the next support at 0.8155 (S2). On the upside, a move above the 0.8246 (R1) hurdle may signal the completion of a short-term double bottom and target the resistance of 0.8285 (R2).
• Support: 0.8200 (S1), 0.8155 (S2), 0.8085 (S3).
• Resistance: 0.8246 (R1), 0.8285 (R2), 0.8310 (R3)
Gold remains below the blue downward sloping resistance line. Considering the downward slope of both the RSI and the MACD, I would expect the precious metal to move lower and challenge the support level of 1280 (S1), where a break may trigger extensions towards the next one at 1268 (S2). Nonetheless, in the bigger picture, we can identify positive divergence between the daily MACD and the price action, indicating decelerating bearish momentum, and this could probably keep any further declines limited.
• Support: 1.3790 (S1), 1.3695 (S2), 1.3650 (S3).
• Resistance: 1.3850 (R1), 1.3900 (R2), 1.3965 (R3).
WTI fell below the 100.45 barrier and met the support bar of 99.35 (S1). The short-term outlook of the price action remains to the downside and a break of the aforementioned support could meet the next one at 98.85 (S2). The MACD lies below both its trigger and zero lines, confirming the accelerating bearish momentum of the price, but the RSI met support at is 30 level and moved slightly higher, thus some consolidation or a pullback before the bears prevail again cannot be ruled out.
• Support: 1.3790 (S1), 1.3695 (S2), 1.3650 (S3).
• Resistance: 1.3850 (R1), 1.3900 (R2), 1.3965 (R3).
Benchmark Currency Rates:
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Market Summary Url:
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Market Analysis 2/05/2014
Language English
NFP Day The US nonfarm payrolls for April are the focus today. This is a key indicator for all financial markets because of the importance of employment for the Fed, with its dual mandate to “promote effectively the goals of maximum employment, stable prices and moderate long-term interest rates" as well as the importance of employment as an indicator of the US economy’s health as a whole.
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The figure should help to answer the question of whether the economy is indeed recovering. NFP growth has been remarkably steady. Over the last six months the average has been 188k; over the last year, 187k; over the last two years, 178k; and over the last three years, 187k. Not much difference. The market consensus today is for a larger-than-average rise of 218k, up from 192k in March. The forecast is assuming a steady recovery in the economy coupled with some bounce-back in employment as the cold weather ends. The unemployment rate is forecast to fall to 6.6% from 6.7%.
If today’s figure is in line with expectations or even stronger, it could confirm the acceleration of the US economy from the disappointingly slow +0.1% GDP rise in Q1. US interest rates and rate expectations would probably rise, lending some support to the dollar. However, recent history shows that even a positive surprise on NFP does not guarantee a higher USD over time. Looking at USD/JPY, the pair that we find most responsive to NFP, it was actually lower a week later in three out of the last six positive surprises and unchanged once, meaning USD got a sustained rise only two out of the last six times there was a positive surprise.
On the other hand, if the rate comes in below expectations – closer to the averages or especially if it’s below average – then we could see large-scale capitulation of bullish dollar trades. Most investors are assuming that US interest rates head higher: the Bloomberg poll shows none of 69 economists forecasting that 10yr US Treasury yields will below current levels at the end Q3 or Q4 of this year (and only two forecasts for them to be lower at the end of Q2). If today’s NFP proves disappointingly low, then it will indicate only a tepid rebound from Q1 and call the whole rebound scenario into question. That would probably be negative for the dollar but, insofar as it would imply US rates remaining lower for longer, would support risk-on trades elsewhere. It would probably boost the commodity currencies and carry trade currencies within EM.
In addition to the NFP figure, we should watch two other figures in evaluating the data: average hourly earnings and average weekly hours. The hourly earnings figure is important, because Fed Chair Janet Yellen has identified wages as an important indicator of the labor market. Her reasoning is that wages will start rising once the labor market starts tightening, so the absence of wage rises means a slack labor market, which means less reason to tighten policy = bad for the dollar. The reason we watch the work week is because regardless of all the emphasis on unemployment, in fact there are a lot more people working than not working and if each one works a bit longer and therefore gets paid a bit more, that can add up to a lot of money – far more than the additional wages of those people who get jobs each month. An increase of only 0.1 ppt in the workweek adds roughly as many working hours to the economy as an increase of 350k to payrolls does.
As for the rest of the indicators, we get the manufacturing PMI data for April from several European countries and the Eurozone as a whole. As usual the forecasts for the final figures from France, Germany and Eurozone are the same as the initial estimates. Eurozone’s unemployment rate for March is also coming out and is forecast to have remained unchanged at 11.9%. Neutral releases from the Eurozone and strong US labor data may push EUR/USD down to meet once again the strong support area of 1.3790.
In the UK, the construction PMI is expected to have declined slightly to 62.2 from 62.5.
Besides the labor data, from the US we also get the factory orders for March, which are expected to have slowed slightly.
No speakers are scheduled on Friday’s agenda.
Currency Titles:
EUR/USD
EUR/JPY
GBP/USD
Gold
Oil
Currencies Image Url:
http://shared.ironfx.co.uk/morning_pictures_2014/2may2014/EURUSD_02May2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/2may2014/EURJPY_02May2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/2may2014/GBPUSD_02May2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/2may2014/XAUUSD_02May2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/2may2014/CLM4_02May2014.PNG
Currencies Text:
EUR/USD tried to emerge above the 1.3875 (R1) resistance bar but failed to do so and returned to trade slightly below it. Considering market expectations for strong US labor data, I would expect the rate to move lower, perhaps to meet once again the strong support zone of 1.3790 (S1). The MACD, although in its bullish territory, shows signs of topping and seems ready to cross below its signal line, indicating deceleration in the recent momentum of EUR/USD. On the daily chart, we can identify a shooting star formation, favoring further declines.
• Support: 1.3790 (S1), 1.3695 (S2), 1.3650 (S3).
• Resistance: 1.3875 (R1), 1.3900 (R2), 1.3965 (R3)
EUR/JPY moved slightly higher to meet resistance at 142.00 (R1). Since I cannot identify a clear trending structure, I expect the overall short-term path of the pair to remain to the sideways between the support of 141.00 (S1) and the aforementioned resistance. Both our moving averages continue to point sideways, while both the daily RSI and the daily MACD lie near their neutral levels, confirming the trendless mode of the currency pair. A break above 142.00 (R1) may target the next resistance at 142.50 (R2), while a clear dip below 141.00 (S1) may pave the way towards 140.20 (S2).
• Support: 141.00 (S1), 140.20 (S2), 139.15 (S3)
• Resistance: 142.00 (R1), 142.50 (R2), 143.40 (R3).
GBP/USD moved above the 1.6900 (R1) hurdle but failed to maintain the break and declined to consolidate slightly below that level. The rate is trading above 1.6840 (S1), the upper boundary of the range it has been trading recently, thus I consider the short-term picture to be positive. However, considering that the RSI moved lower after finding resistance at its 70 level and the fact that the MACD seems ready to fall below its signal line, I would expect the forthcoming wave to be to the downside, perhaps to test the 1.6840 (S1) bar as a support this time. In the bigger picture, the currency pair remains within the purple upward sloping channel, keeping the long-term uptrend intact.
• Support: 1.6840 (S1), 1.6770 (S2), 1.6700 (S3).
• Resistance: 1.6900 (R1), 1.7000 (R2), 1.7100 (R3).
Gold moved lower to find support at the 1280 (S1) barrier. The precious metal remains below the blue downward sloping resistance line and considering the downward slope of both the RSI and the MACD, I would consider the short-term picture to remain negative. A dip below the 1280 (S1) hurdle may trigger extensions towards the next support at 1268 (S2). Nonetheless, in the bigger picture, we can identify positive divergence between the daily MACD and the price action, indicating decelerating bearish momentum, and this could probably keep any further declines limited.
• Support: 1280 (S1), 1268 (S2), 1250 (S3).
• Resistance: 1305 (R1), 1330 (R2), 1342 (R3)
WTI fell below the 99.35 barrier to meet the support of 98.85 (S2). After touching that bar, the price rebounded to move once again above 99.35 (S1). Considering that the RSI found support at its 30 barrier and moved higher, and the fact that the MACD seems ready to cross above its signal line, I would expect the forthcoming wave to be to the upside, maybe to challenge the resistance of 100.45 (R1). Nonetheless, as long as WTI is printing lower highs and lower lows below the blue long-term uptrend line, I would consider the outlook to remain to the downside.
• Support: 99.35 (S1), 98.85 (S2), 98.00 (S3)
• Resistance: 100.45 (R1), 101.25 (R2), 102.00 (R3).
Benchmark Currency Rates:
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Market Summary Url:
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Market Analysis 5/05/2014
Language English
NFP settles nothing: Friday’s nonfarm payrolls should have been a game-changer, but in fact they caused only a temporary disruption. The dollar surged, Fed Funds expectations jumped 10 bps and 10-year Treasury yields rose 8 bps in the first few minutes, but as market participants found they couldn’t push the moves any further, everything started to correct. The correction was attributed variously to weak factory orders (doubtful), talk of a UN Security Council meeting on Ukraine (is Ukraine news all of a sudden?) or even a Wall Street Journal article on the figures that mentioned slowing productivity (unlikely). In the end long-dated Fed Funds expectations closed only 5-6 bps higher while 10yr yields actually closed off 3 bps at the lows for the year so far. And the dollar? From looking at this morning’s rates, you would’ve thought Friday was a holiday. Nothing changed. EUR/USD is opening yet again with the familiar 1.38 handle, as it has for 18 consecutive days now (well, one of those days it was with 5 pips of 1.38.) It’s a bit stronger vs AUD after Australian building approvals for March came in weaker than expected and the HSBC/Markit China manufacturing PMI for April was revised down. The yen strengthened after Bank of Japan Gov. Kuroda appeared on TV saying that the nation’s economic recovery is on track and that he expects wages to rise, comments that should surprise nobody as that’s exactly what’s written in the BoJ’s “Outlook for Economic Activity and Prices.”
Central bank week: This week brings four central banks meetings: a Reserve Bank of Australia (RBA) meeting Tuesday and European Central Bank (ECB), Bank of England (BoE) and Norges Bank meetings on Thursday. The market expects no change in rates or policy at any of them, so in all cases the focus will be on the statements and press conferences afterwards (except in the case of Bank of England, which doesn’t issue a statement if it doesn’t change rates).
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RBA: Members concluded at the April meeting that “on present indications, the most prudent course was likely to be a period of stability in interest rates,” and that seems likely to continue. They expressed some concern about the level of the exchange rate, which they said “remained high by historical standards.” AUD is virtually unchanged since then, so any change in their rhetoric around the exchange rate will be a strong signal to the market about how they feel. My guess is that they may intensify their comments in reaction to China allowing the renminbi to weaken. That could be AUD-negative.
ECB: I do not expect the ECB to change policy this week despite the slightly lower-than-expected Eurozone inflation for April. The fact is that inflation did rise a bit in April, and moreover the PMIs were good – all in positive territory for the first time since 2007 – and the April bank lending survey indicated that the credit squeeze is ending. While ECB President Draghi virtually confirmed at the April 12th IMF/World Bank meeting that the ECB would loosen policy to weaken the Euro, his more recent comments have backtracked somewhat – he said FX appreciation need not always be negative for medium-term inflation and that FX appreciation would be dealt with through “conventional policy” (which includes negative interest rates). Barring a plunge in the inflation rate in May, I expect them to wait at least until they get the updated forecasts for inflation in June before taking any steps, and it could easily be later. That may tend to keep EUR/USD in its current range for awhile longer.
Bank of England: No change means no comment, which should mean no market movement either, although in fact there has been some volatility around the meeting recently. For example last month there was a 20 pip drop in GBP/USD right after the meeting.
Norges Bank: Since the last meeting in March, the Norwegian economy and the currency have performed largely as expected, with the data on the strong side (retail sales up, industrial production up, unemployment down) and inflation rising a bit. At the same time, banks have reduced their lending rates, which should boost growth somewhat. This suggests that if there is any change in tone, it is likely to be more optimistic and hence NOK-positive.
Federal Reserve: No meetings, but Fed Chair Janet Yellen will testify to the Joint Economic Committee of Congress on Wednesday and the Senate Budget Committee on Thursday. In the Q&A she may reveal more about the FOMC’s thinking on the recent labor data, whether they are on course to discontinue bond purchases entirely by the end of the year, and when they might start tightening policy.
Schedule for today: During the European day, Sweden’s industrial production for March is expected to have slowed, while Eurozone’s PPI rate for March is expected to have remained unchanged at -1.7% yoy.
In the US, we get the final Markit service sector PMI and the ISM non-manufacturing index, both for April. No forecast is available for the Markit figure, while the ISM index is expected to have risen to 54.1 from 53.1 in March.
We have only one speaker scheduled on Monday. ECB’s Executive Board member Yves Mersch speaks at a conference.
Currency Titles:
EUR/USD
USD/JPY
EUR/GBP
Gold
Oil
Currencies Image Url:
http://shared.ironfx.co.uk/morning_pictures_2014/5may2014/EURUSD_05May2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/5may2014/USDJPY_05May2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/5may2014/EURGBP_05May2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/5may2014/XAUUSD_05May2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/5may2014/CLM4_05May2014.PNG
Currencies Text:
EUR/USD declined on Friday but after finding support at 1.3815 (S1), near the 200-period moving average, recovered to reach once again the resistance of 1.3875 (R1). The next resistance is at 1.3900 (R2), where a clear break may have larger bullish implications and may pave the way towards the highs of 1.3965 (R3). The MACD lies within is positive territory and seems ready to cross above its trigger line, indicating bullish momentum for now. Nonetheless, since the rate remains in a trendless mode I would consider the short-term outlook neutral.
• Support: 1.3815 (S1), 1.3790 (S2), 1.3695 (S3).
• Resistance: 1.3875 (R1), 1.3900 (R2), 1.3965 (R3).
USD/JPY fell sharply after hitting the resistance at 103.00 (R3) immediately after the nonfarm payrolls Friday and this morning managed to move below the hurdle of 102.00, the lower boundary of the recent sideways path the pair was trading. I would expect such a break to extend the decline and perhaps target the support bar of 101.50 (S1). Our short-term momentum studies follow downward paths, while the MACD fell below both its signal and zero lines, confirming the negative momentum of the price action.
• Support: 101.50 (S1), 101.25 (S2), 100.75 (S3).
• Resistance: 102.00 (R1), 102.70 (R2), 103.00 (R3).
EUR/GBP rebounded once again from the support of 0.8200 (S1), maintaining its rate within the sideways range between that bar and the resistance of 0.8246 (R1). A clear move below the 0.8200 (S1) is needed to confirm a forthcoming lower low and may trigger extensions towards the next support at 0.8155 (S2). On the upside, a move above the 0.8246 (R1) hurdle could signal the completion of a short-term double bottom and target the resistance of 0.8285 (R2).
• Support: 0.8200 (S1), 0.8155 (S2), 0.8085 (S3).
• Resistance: 0.8246 (R1), 0.8285 (R2), 0.8310 (R3).
Gold surged on Friday, violating the blue downward sloping resistance line drawn from back the 17th of March. The rally was halted at the resistance bar of 1305 (R1). A clear upward violation of that line would signal the completion of a short-term double bottom formation and would pave the way towards the highs of 1330 (R2). It’s possible that it will violate that line, because positive divergence is identified between both our momentum studies, while the MACD crossed above both its signal and zero lines, confirming Friday’s positive momentum. On the weekly chart we can identify two consecutive hammer candles, increasing the possibilities for further advance.
• Support: 1280 (S1), 1268 (S2), 1250 (S3).
• Resistance: 1305 (R1), 1330 (R2), 1342 (R3).
WTI moved slightly higher, remaining between the support of 98.85 (S1) and the resistance of 100.45 (R1). The structure of lower highs and lower lows below both the moving averages remains in effect, thus I still see a negative picture. Nonetheless, the MACD, although in its bearish territory, crossed above its signal line. Thus I would expect the upside corrective wave to continue. On the daily chart, we can identify a bullish engulfing candle formation, favoring the continuation of the retracement.
• Support: 98.85 (S1), 98.00 (S2), 97.00 (S3).
• Resistance: 100.45 (R1), 101.25 (R2), 102.00 (R3).
Benchmark Currency Rates:
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Market Summary Url:
http://shared.ironfx.co.uk/morning_pictures_2014/5may2014/table.PNG
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Market Analysis 06/05/2014
Language English
Commodity currencies gain on Ukraine fears Markets were stuck in narrow ranges Tuesday. UK markets were closed Monday and Hong Kong and Seoul are off on Tuesday, diminishing activity. While yesterday’s US data was good – the ISM non-manufacturing index beat expectations and rose to an eight-month high – it boosted stocks only a little and pushed up 10yr Treasury yields by 2 bps. The dollar is opening mixed in Europe, up against SEK and NOK but down against the three commodity currencies, NZD, AUD and CAD, as rising tensions in Ukraine boost the price of commodities where Russia has a major market share, such as nickel, wheat and palladium. Other G10 currencies are largely unchanged.
NZD continues to strengthen. It’s opening higher in Europe for the fifth consecutive day, having opened higher nine out of the last 11 days. This morning’s strength was aided by comments from NZ PM John Key, who said the NZ economy is heading in the right direction and that the national budget will show a small surplus in the 2014-15 year and increasing surpluses thereafter.
AUD strengthened modestly after the Reserve Bank of Australia (RBA) published its Monetary Policy Decision, but quickly lost the gains. There was no significant difference from last month in the comments about the exchange rate, which this time read: “The decline in the exchange rate from its highs a year ago will assist in achieving balanced growth in the economy, but less so than previously as a result of the rise over the past few months. The exchange rate remains high by historical standards.” Again, the RBA said that “On present indications, the most prudent course is likely to be a period of stability in interest rates.” Some investors may have been initially relieved that the RBA did not take a stronger stand against FX appreciation in light of the slowing demand from China and the recent weakness in the renminbi. The unchanged FX stance countered any impact of a fall in Australia’s trade surplus to AUD 731mn in March from AUD 1.2bn in February (expected: AUD 1.0bn). I continue to expect that they will eventually become more vocal about the exchange rate and will try to talk it down, which is one reason why I expect NZD to continue to outperform AUD. The different impact of the slowdown in China on the two countries also makes it likely that NZD will outperform AUD; New Zealand exports food whereas Australia exports commodities industrial commodities such as iron ore and coal.
The European day is PMI day. This time we get the April service-sector PMIs from several European countries and Eurozone as a whole. As usual the final forecast for France, Germany and Eurozone is the same as the initial estimate, while in the UK, the index is expected to have risen slightly to 57.8 from 57.6. From Eurozone, we also have retail sales for March, which are expected to have declined 0.2% mom, a turnaround from +0.4% mom in February.
In Norway, the unemployment rate for April is forecast to have declined to +2.8% from +2.9%.
Later in the afternoon, the US trade deficit is expected to have narrowed to USD 40.0bn in March from USD 42.3bn in February. We find that a positive surprise for this indicator has little impact on the market in the first hour after the data release, but a negative surprise does appear to weaken the dollar significantly during that time period.
No speakers are scheduled on Tuesday.
Currency Titles:
EUR/USD still trendless
EUR/JPY not choosing a direction
GBP/USD ready to challenge 1.6900 again
Gold completes a double bottom
Oil meets strong resistance near 100.45
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http://shared.ironfx.co.uk/morning_pictures_2014/6may2014/EURJPY_06May2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/6may2014/GBPUSD_06May2014.PNG
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Currencies Text:
EUR/USD moved in a consolidative mode remaining slightly below the highs of 1.3900 (R1). A clear move above that resistance bar is needed to trigger bullish extensions and could pave the way towards the next obstacle at 1.3965 (R2). The rate remains above both the moving averages, while the MACD still lies within its bullish territory, keeping the momentum positive for now. Nonetheless, since the rate is not in a clear trending structure, I view the overall short-term outlook as remaining neutral.
• Support: 1.3815 (S1), 1.3790 (S2), 1.3695 (S3).
• Resistance: 1.3900 (R1), 1.3965 (R2), 1.4000 (R3).
EUR/JPY met resistance at 142.40 (R1) and moved lower to trade once again near the moving averages. Since I cannot identify a clear trending structure, I expect the overall short-term path of the pair to remain sideways between the support of 141.00 (S1) and the aforementioned resistance. Both our moving averages continue to point sideways, while both the daily RSI and the daily MACD lie near their neutral levels, confirming the trendless mode of the currency pair. A break above 142.40 (R1) may target the next resistance at 143.40 (R2), while a clear dip below 141.00 (S1) may pave the way towards 140.20 (S2).
• Support: 141.00 (S1), 140.20 (S2), 139.15 (S3).
• Resistance: 142.40 (R1), 143.40 (R2), 143.50 (R3).
GBP/USD rebounded from the short-term blue support line and at the time of writing is heading for another test at the resistance of 1.6900 (R1). If the bulls are strong enough to achieve a successful break this time, I would expect them to trigger extensions towards the psychological barrier of 1.7000 (R2). As long as the rate is trading above the blue support line and above both the moving averages, I see a positive short-term picture. On the daily chart, the currency pair remains within the purple upward sloping channel, keeping the long-term uptrend intact.
• Support: 1.6840 (S1), 1.6770 (S2), 1.6700 (S3).
• Resistance: 1.6900 (R1), 1.7000 (R2), 1.7100 (R3).
Gold emerged above the 1305 hurdle, completing a double bottom formation and confirming the positive divergence between the price action and the two momentum studies. I would expect such a break to have larger bullish implications and target the resistance of 1330 (R1). However, considering that the RSI hit its 70 level and moved lower, I would not rule out some further consolidation or a pullback before the bulls prevail again. On the weekly chart we can identify two consecutive hammer candles, increasing the possibilities for further advance.
• Support: 1305 (S1), 1280 (S2), 1268 (S3).
• Resistance: 1330 (R1), 1342 (R2), 1354 (R3).
WTI moved slightly higher, but after finding resistance near the 100.45 (R1) bar it fell sharply to meet the support zone of 98.85 (S1). A clear dip below that level will confirm a forthcoming lower low and may see the next hurdle at 98.00 (S2). The structure of lower highs and lower lows below both the moving averages remains in effect, thus I still see a negative picture. Nonetheless, my concern is that our momentum studies started to follow upward paths, indicating decelerating bearish momentum.
• Support: 98.85 (S1), 98.00 (S2), 97.00 (S3).
• Resistance: 100.45 (R1), 101.25 (R2), 102.00 (R3).
Benchmark Currency Rates:
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Market Analysis 07/05/2014
Language English
It was a year ago…Not necessarily by the calendar (in fact, it was May 22nd ) but it was when previous Fed Chairman Bernanke gave his testimony on the economic outlook to the Joint Economic Committee of the US Congress last year. He didn’t actually use the word “taper,” according to the transcript of the event. What he said was, “If we see continued improvement (in the labor market) and we have confidence that that is going to be sustained, then we could in the next few meetings, take a step down in our pace of purchases.” That was what sent US 10-year bond yields back above 2% (they haven’t been below there since), reversed the flow of money that had been pouring into emerging markets and changed the global investment landscape. Nonetheless the US stock market has continued higher since then along with bond yields. Investors will be watching tonight to see what the new Fed Chair, Janet Yellen, has to say on the same subject. The unemployment rate this month fell below the 6.5% trigger that the FOMC used to say would trigger a rethink of its interest rate policy, so her thoughts on the matter will be of great interest to investors. I expect her to remain fairly cautious about when rates might start going up. She has emphasized other measures of tightness in the labor market, such as wage growth, which remains tepid. I do not expect her to repeat her previous exegesis of “six months” for the “considerable period of time” between ending QE and raising rates.
Yesterday’s US trade figures showed some narrowing in the trade deficit as exports rebounded, but imports also rose, which will depress the already low Q1 GDP figure. That weighed on the dollar and the US currency made new lows for the year against several currencies (GBP, NOK and NZD). We may see further new 2014 lows against other currencies too if Yellen sows doubts about whether the Fed will end its QE program on schedule later this year or tries to push back the market’s expectations of when tightening will begin. The only G10 currencies that the dollar has gained on this year are CAD and SEK.
On the other hand, GBP was supported overnight by a story in the FT saying that “with unemployment now below the BoE’s 7% threshold, the Bank is no longer bound by its guidance last August to keep interest rates at a historic low of 0.5%. Monetary policy committee members predict greater dissent among their ranks.” While no change is expected at tomorrow’s meeting, “the BoE’s quarterly forecasts and inflation report next week are likely to signal a further shift towards earlier rate rises,” the article said. Yesterday the market failed just 4 pips short of 1.70; another attempt looks increasingly likely and likely to succeed.
The weakest currency overnight was the NZD, which as we mentioned yesterday has been rising and rising recently. The reversal came after RBNZ Gov. Wheeler said the rising currency could become a factor in their consideration when setting interest rates and that continued strength of the currency despite weakening prices for exports might justify intervention. The comment came on the same day as the price of New Zealand whole milk powder fell for the sixth straight auction. It’s now down 22% since the 5 February auction. Also, NZ unemployment was a bit higher than expected in Q1. Nonetheless, I still believe that the market has it in mind to keep buying NZD as the country’s budget shifts into surplus, a rare condition in the G10, so I expect the NZD rally to resume after a period of consolidation.
The RUB was the strongest currency among the ones we track as tensions in Ukraine subsided a bit, or at least as attention to the tensions in Ukraine subsided a bit.
The European day starts with Switzerland’s unemployment rate for April, which is expected to have remained unchanged at 3.2% (SA). Germany’s factory orders are estimated to have slowed in March, while French industrial production is expected to have accelerated in the same month.
In Canada, building permits for March are forecast to have risen +4.0% mom after plunging 11.6% mom in February. Last month, the loonie was down 0.15% 20 minutes after the negative surprise was out and recovered within 60 minutes.
Currency Titles:
EUR/USD above 1.3900
USD/JPY bears take control
Is EUR/GBP ready to exit its recent range?
Gold pulling back
Oil rebounds again
Currencies Image Url:
http://shared.ironfx.co.uk/morning_pictures_2014/7may2014/EURUSD_07May2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/7may2014/USDJPY_07May2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/7may2014/EURGBP_07May2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/7may2014/XAUUSD_07May2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/7may2014/CLM_07May2014.PNG
Currencies Text:
EUR/USD surged on Tuesday, violating the hurdle of 1.3900 and reaching 1.3950. In my view, the violation of the 1.3900 barrier changes the short-term outlook from neutral to positive and I would expect buyers to challenge the 13th of March highs at 1.3965 (R1). A decisive break above that resistance may see the 1.4000 (R2) critical bar. Nonetheless, considering that the RSI exited its overbought zone I would expect some further consolidation or a pullback before the development of further advance.
• Support: 1.3900 (S1), 1.3815 (S2), 1.3790 (S3).
• Resistance: 1.3965 (R1), 1.4000 (R2), 1.4100 (R3).
USD/JPY continued plunging after breaking the 102.00 bar and reached the support barrier of 101.50 (S1). The short-term picture is back to the downside and clear break below 101.50 (S1) may challenge the next support at 101.25 (S2). The MACD lies below both its signal and zero lines, confirming the bearish momentum of the price action. However, the RSI met support near its 30 level, thus I would not rule out an upside corrective wave before the bears prevail again.
• Support: 101.50 (S1), 101.25 (S2), 100.75 (S3).
• Resistance: 102.00 (R1), 102.70 (R2), 103.00 (R3).
EUR/GBP moved lower and at the time of writing is testing once again the floor of the sideways path it’s been trading recently, at 0.8200 (S1). A clear dip below 0.8200 (S1) will turn the bias to the downside and may trigger extensions towards the next support at 0.8155 (S2). The MACD fell below its signal and zero lines while the RSI continues its downward path, favoring further declines. On the upside, a rebound near 0.8200 (S1) will keep the rate within the range and maybe target its ceiling at 0.8246 (R1).
• Support: 0.8200 (S1), 0.8155 (S2), 0.8085 (S3).
• Resistance: 0.8246 (R1), 0.8285 (R2), 0.8310 (R3).
Gold moved slightly lower to challenge the 1305 (S1) bar as a support this time. The possibility for a higher low still exists and since the precious metal is trading above both the moving averages and above the prior downtrend line, I still see a positive picture. However, considering that the RSI hit its 70 level and moved lower, I would not rule out some further consolidation or further pullback before the bulls prevail again. On the weekly chart we can identify two consecutive hammer candles, increasing the possibilities for further advance.
• Support: 1305 (S1), 1280 (S2), 1268 (S3).
• Resistance: 1330 (R1), 1342 (R2), 1354 (R3).
WTI met strong support near the 98.85 (S1) support zone and moved higher. Since WTI failed to form a lower low, I change my view to neutral. During the early European morning, the price is heading towards the resistance of 100.45 (R1) where an upside break may see the 101.25 (R2) resistance and the prevailing blue long-term uptrend line. Both out momentum studies continue their upside paths, while the MACD seems ready to obtain a positive sign, indicating that the recent upward wave is probably not over yet.
• Support: 98.85 (S1), 98.00 (S2), 97.00 (S3).
• Resistance: 100.45 (R1), 101.25 (R2), 102.00 (R3).
Benchmark Currency Rates:
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Market Analysis 08/05/2014
Language English
Janet Yellen: a bodhisattva? Fed Chair Janet Yellen’s testimony to the Joint Economic Committee was much awaited but settled little. FX rate movements during the speech were more in the nature of vibrations than gyrations and by the close the day’s range was actually narrower than normal for the major currency pairs (e.g., 0.2% for EUR/USD vs 0.5% average for the year). In that respect it was similar to last week’s nonfarm payrolls, which caused only a brief blip. Yellen was dovish on some points, such as housing, and hawkish on others, such a financial stability. But former US President Harry Truman, who once exclaimed “Give me a one-handed economist!,” would have disliked her intensely. Many of her answers had so many “on the one hand, on the other hand” implications that she seemed to be imitating a Senju Kannon Bodhisattva, the Buddhist goddess of mercy with 1,000 arms. She largely stuck to the text of the FOMC statements and gave no new clues as to what the Committee would do and when they would do it. The implication is that the FOMC’s decisions depend on the data, which does not put us in a much better place to predict the path of rates than we were before. She did say that she favors reviewing the labor data over three or six months, which may be why the market did not respond strongly to the better-than-expected April NFP figure. She also acknowledged that the participation rate is trending lower and said that a sideways trend would represent a reduction in slack. This implies that a further fall in the unemployment rate is not necessarily going to trigger a tightening and adds to the difficulty of predicting the FOMC’s reaction to future NFP reports. She did say that the labor market has “improved appreciably,” which may be why USD didn’t make any new lows for the year on her remarks. We are back to watching the data and waiting.
My view is that the US data are improving and, as Yellen said, the US economy is gathering momentum, and as a result I expect the market to begin moving up its expectations for rate hikes in the US, which now anticipate the first hike coming around September 2015. But this rethink will only occur gradually over the next several months.
Russian President Putin may have had more impact on the markets yesterday than Yellen. Following a meeting with Organization for Security and Co-operation in Europe (OSCE) Chairman and Swiss President Didier Burkhalter, Putin called for separatists in southeastern Ukraine to postpone their referendums on independence scheduled for May 11 to allow for dialogue. Moreover, he relaxed his opposition to Ukraine's plan to hold a presidential election May 25 and referred to the election as a move "in the right direction." According to the political analysis firm Stratfor, Putin's statements are part of a broader negotiation in which Russia essentially has said that decentralization will occur in Ukraine -- either via referendum and the east's refusal to recognize decisions in Kiev or in a mutually acceptable diplomatic framework. For now, it appears that Russia is trying to steer Ukraine toward the latter course, which would be much better for the markets. However Western authorities said they saw no sign of a Russian pullback from the border. Talk is much cheaper than action. Nonetheless RUB was the best performing currency that we track, gaining about 1.25%. I would expect to see a continued improvement in risk sentiment based on hopes for a peaceful resolution (subject to change without notice). That should be good for the commodity currencies (AUD was the best-performing G10 currency overnight) and negative JPY and CHF as well as gold and palladium, which are down sharply this morning.
Today we have three central bank meetings: ECB, Bank of England and Norges Bank. I outlined my view on these meetings on Monday and so will not repeat that analysis. Long EUR positions have been cut since the peak in March but they still remain relatively long, meaning that the market probably is anticipating no change. Thus given that I expect no change, I think the likelihood is for less volatility than usual on an ECB day. Probably there is more room for action in NOK today. I believe that the Norges Bank could change its tone to be more optimistic, which might boost NOK. Bank of England should be a non-event, as usual.
As for the indicators, Germany’s industrial production is forecast to have slowed in March, while Switzerland’s CPI is forecast to have risen 0.1% yoy in April from an unchanged figure in March.
In the US, initial jobless claims for the week ended on May 3 are forecast to have declined to 325k from 344k the previous week. Nonetheless, the 4wk moving average is forecast to have risen to 326 from 320.
Canada’s housing starts are also coming out.
In addition to central bank press conferences, we have no fewer than five Fed speakers scheduled on Thursday. Federal Reserve Chair Janet Yellen testifies to the Senate Budget Committee on the economic outlook, while Philadelphia Fed President Charles Plosser, Chicago Fed President Charles Evans, St. Louis Fed President James Bullard and Fed Governor Daniel Tarullo will also speak.
Currency Titles:
EUR/USD pulling back ahead of the ECB meeting
EUR/JPY still trendless
Are GBP/USD bulls willing to prevail?
Gold is back below 1300
Oil ready to challenge 101.25
Currencies Image Url:
http://shared.ironfx.co.uk/morning_pictures_2014/8may2014/EURUSD_08May2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/8may2014/EURJPY_08May2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/8may2014/GBPUSD_08May2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/8may2014/XAUUSD_08May2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/8may2014/CLM4_08May2014.PNG
Currencies Text:
EUR/USD moved lower on Wednesday to meet support slightly above the 1.3900 (S1) barrier. The structure of higher highs and higher lows above both the moving averages remains in effect, thus I would consider the recent decline as a temporary pullback. Under normal circumstances, a rebound near the 1.3900 (S1) zone could trigger bullish extensions towards the highs of 1.3965 (R1). However, much of the pair’s forthcoming direction will depend on President Draghi’s comments at the press conference following today’s ECB meeting.
• Support: 1.3900 (S1), 1.3815 (S2), 1.3790 (S3).
• Resistance: 1.3965 (R1), 1.4000 (R2), 1.4100 (R3).
EUR/JPY continued its consolidative mode remaining between the support of 141.00 (S1) and the resistance of 142.40 (R1). Both our moving averages continue to point sideways, while both the daily RSI and the daily MACD lie near their neutral levels, confirming the trendless mode of the currency pair. A break above 142.40 (R1) may target the next resistance at 143.40 (R2), while a clear dip below 141.00 (S1) may pave the way towards 140.20 (S2).
• Support: 141.00 (S1), 140.20 (S2), 139.15 (S3)
• Resistance: 142.40 (R1), 143.40 (R2), 143.50 (R3).
GBP/USD moved lower after finding resistance a few pips below the 1.7000 (R1) hurdle. The RSI crossed below 70, while the MACD, although in its bullish territory, crossed below its trigger line, favoring the continuation of the decline. Nonetheless, as long as the rate is printing higher highs and higher lows above the short-term blue support line and above both the moving averages, I still see a positive picture and I consider the current decline as a pullback before the bulls prevail again.
• Support: 1.6900 (S1), 1.6840 (S2), 1.6770 (S3).
• Resistance: 1.7000 (R1), 1.7100 (R2), 1.7200 (R3).
Gold fell sharply yesterday as tensions in Ukraine eased and is back below the 1305 barrier. I would keep a neutral stance for now, since the decline was halted above the blue downtrend line and the possibility for a higher low still exists. A rebound above the aforementioned trend line may challenge once again the 1305 (R1) obstacle. On the other hand a dip below 1280 (S1) could extend the decline towards 1268 (S2). Both our momentum studies continued their decline with the MACD obtaining a negative sign, confirming the yesterday’s bearish momentum.
• Support: 1280 (S1), 1268 (S2), 1250 (S3).
• Resistance: 1305 (R1), 1315 (R2), 1330 (R3)
WTI moved higher after crude inventories fell for the first time since March in the US. The price managed to break above the 100.45 hurdle. I would maintain my neutral view since I still expect the price to meet resistance near the 101.25 (R1) barrier and the prevailing blue long-term uptrend line. Both out momentum studies continue their upside paths, while the MACD entered its positive territory confirming the recent positive momentum. A move above 101.25 (R1) could revive the bullish case and may see the next resistance at 102.00 (R2).
• Support: 100.45 (S1), 98.85 (S2), 98.00 (S3)
• Resistance: 101.25 (R1), 102.00 (R2), 103.00 (R3).
Benchmark Currency Rates:
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Market Summary Url:
http://shared.ironfx.co.uk/morning_pictures_2014/8may2014/table.PNG
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