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like usd index
Market Analysis 20/11/2014
Language English
Fed minutes: Little desire to shift the language The minutes from the Fed October 28-29 FOMC meeting showed that policy-makers saw little reason to shift the language in the post-meeting statement. Over the “considerable time” phrase there were plenty of opinions and some participants preferred to eliminate language in the statement. These participants were concerned that such a characterization could be misinterpreted as suggesting that the Committee's decisions would not depend on the incoming data. However, other participants thought that the "considerable time" phrase was useful in communicating the Committee's policy intentions or that additional wording could be used to emphasize the data dependence of the Committee's decision process. I believe that since there was no press conference following the October’s meeting, it would be difficult for the Committee to remove this phrase without giving further clarifications. This could happen at their December meeting, which is associated with a press conference.
In discussing economic developments abroad, participants pointed to a somewhat weaker economic outlook and increased downside risks in Europe, China, and Japan, as well as to the strengthening of the dollar over the period. Nonetheless, many participants suggested that the share of external trade in the US economy is relatively small, thus the effects of changes in the value of the dollar on net exports are modest. Several participants also judged that the decline in the prices of energy and other commodities as well as lower long-term interest rates would likely provide an offset to the higher dollar and the weaker global growth. They argued that the US recovery remains on a stable path.
Market reaction was limited following the minutes, the S & P 500 jumped 0.30% at the release only to retreat in the following hour and end the day virtually unchanged from TUESDAY ’s closing. Major currency pairs reacted somewhat on the news, EUR/USD touched 1.2600 but fell back to take sideways, GBP/USD bounced briefly only to set aside the gains and gyrate around 1.5670. The USD/JPY was the only currency that kept its strength breaking above 118.00.
Overnight, the preliminary HSBC China manufacturing PMI fell to 50.0, down from the October final reading of 50.4 and below expectations of a decline to 50.2. The six-month low reading, just in between contractionary and expansionary levels added to concerns over the nation’s slowdown. The NZD and AUD weakened marginally at the release of the figure, but recovered immediately in the following minutes to trade unchanged against the dollar.
As for today’s activity, PMIs will take center stage. Eurozone’s preliminary PMIs, also for November, are released just after the figures from Germany and France are announced. The bloc’s manufacturing PMI is projected to remain above its 50 line, while the manufacturing PMI from its strongest economy, Germany, is anticipated to move slightly further into its expansionary territory. Eurozone’s preliminary consumer confidence for November is also due out.
In Norway, GDP for Q3 is expected to decelerate adding to the recent batch of poor data coming from the country.
In the UK, retail sales excluding gasoline are expected to have risen in October, a turnaround from the previous month.
Later in the day, we get the US preliminary Markit manufacturing PMI for November and the Philadelphia Fed business activity index for November. Existing home sales for October are also coming out and the forecast is for the figure to show a marginal decrease. Following Wednesday’s mixed housing data, existing home sales should shed some light in the recent housing activity. The CPI for October is forecast to have decelerated, adding to concerns whether the Fed is on track to meet its inflation target. Initial jobless claims for the week ended on Nov. 15 and the Conference Board leading index for October are also coming out.
We have three speakers on Thursday’s agenda. Riksbank Deputy Governor Martin Floden, ECB Executive Board member Yves Mersch and Cleveland Fed President Loretta Mester speak.
Currency Titles:
EUR/USD finds resistance at the upper bound of the channel
GBP/JPY breaks above 185.00
NZD/USD finds support at 0.7820
Gold tumbles back near 1180
WTI in a consolidative mode
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http://shared.ironfx.co.uk/morning_pictures_2014/20november2014/CLZ4_20Nov2014.PNG
Currencies Text:
EUR/USD edged higher on Wednesday to find resistance near the 200-period moving average and the upper boundary of the blue upward sloping channel. I would stick to my neutral stance and I would treat the recovery from 1.2360 as an upside retracement of the longer-term down path. On the daily chart, although the price structure remains lower peaks and lower troughs below both the 50- and the 200-day moving averages, there is still positive divergence between both of our daily momentum studies and the price action. The positive divergence give me extra reasons to sit on the sidelines and wait for more actionable signs to convince me that the downtrend is back in force and likely to continue.
• Support: 1.2440 (S1), 1.2400 (S2), 1.2360 (S3)
• Resistance: 1.2575 (R1), 1.2620 (R2), 1.2750 (R3)
GBP/JPY continued its rally on Wednesday, exiting the sideways path it’s been trading since the beginning of the month and breaking above the psychological line of 185.00 (S1). I would now expect the move above 185.00 (S1) to see scope for larger bullish extensions and target the high of the 3rd of October 2008, at 189.00 (R1). Both our near-term oscillators violated their black downside resistance line and firmed up, designating strong bullish momentum. As long as the rate remains above the black uptrend line taken from back at the low of the 15th of October, and above both the 50- and the 200-period moving averages, the overall path of GBP/JPY stays to the upside in my view.
• Support: 185.00 (S1), 184.30 (S2), 181.00 (S3)
• Resistance: 189.00 (R1), 190.00 (R2), 192.00 (R3)
NZD/USD tumbled on Wednesday reaching the support line of 0.7820 (S1). A clear dip below that line could have larger bearish implications and perhaps open the way for our next support line at 0.7700 (S2). Our near-term momentum studies maintain a negative tone. The RSI moved lower after finding resistance slightly below its 50 line, while the MACD, already below its trigger line, obtained a negative sign. I also see negative divergence between both the indicators and the price action. In the bigger picture, the rate oscillates between the 0.7700 (S2) support zone and the resistance of 0.7980 (R1), thus I would maintain a neutral stance as far as the overall path of this rate is concerned.
• Support: 0.7820 (S1), 0.7700 (S2), 0.7660 (S3)
• Resistance: 0.7980 (R1), 0.8100 (R2), 0.8230 (R3)
Gold fell sharply yesterday, finding support near the 1180 (S1) line and the 50-period moving average. A clear move below 1180 (S1) is likely to trigger extensions perhaps towards the 1160 (S2) barrier and the lower line of the black upside channel. Taking a look at our short-term oscillators, I see that the RSI fell near its 50 while the MACD has topped and crossed below its signal line. Moreover, both of the indicators violated their black upside support lines. As for the broader trend, I still see a longer-term downtrend. Hence I would treat the recovery from 1132 as a corrective move for now. In the absence of any major bullish trend reversal signal, I would prefer to adopt a “wait and see” stance as far as the overall outlook of the precious metal is concerned.
• Support: 1180 (S1), 1160 (S2), 1146 (S3)
• Resistance: 1205 (R1), 1222 (R2), 1235 (R3)
WTI moved in a consolidative manner on Wednesday, staying between the support line of 73.35 (S1) and the resistance of 76.00 (R1). I still believe that the near-term outlook remains negative and I would expect a clear move below the support obstacle of 73.35 (S1) to confirm a forthcoming lower low and perhaps set the stage for extensions towards our next support at 71.00 (S2), defined by the lows of July and August 2010. In the bigger picture, the price structure on the daily chart remains lower peaks and lower troughs below both the 50- and the 200-day moving averages, keeping the overall downtrend intact.
• Support: 73.35 (S1), 71.00 (S2), 70.00 (S3)
• Resistance: 76.00 (R1), 78.00 (R2), 80.00 (R3)
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Market Analysis 21/11/14
Language English
Why euro hasn’t fallen yet The euro has been more buoyant than expected recently, even though the recent data from Eurozone disappointed and US data were relatively strong. I believe that in order to answer this question, we have to look at three euro-crosses, EUR/JPY, EUR/GBP and EUR/CHF. Euro/yen has been advancing since Oct. 31st when the Bank of Japan introduced further stimulus measures, to reach levels last seen in 2008. EUR/GBP moved higher following the Bank of England’s disappointing inflation report. While EUR/CHF has seen speculative selling, as the rate moved towards the Swiss National Bank floor, and the declined is attempted to be offset by purported buying by the SNB in order to defend the cross floor at CHF1.2000. All the above reasons make me believe that there is a strong appetite for euro, which make it resilient against its major counterpart, USD. The euro-bearish investors may have to rethink their stance, at least in the short-term and at least until the ECB second TLTRO allotment.
On Thursday, the US consumer prices rose 1.7% yoy in October, unhanged in pace from the previous month and above expectations of a softer 1.6% yoy print. Initial jobless claims fell to 291k from last week’s revised level of 293k, above consensus of a decline to 284k. The closely watched 4-week moving average rose to 287k from 285k a week ago, still suggesting a strong employment growth. Meanwhile, existing home sales came at 5.26 mn in October, up from 5.18 mn previously and exceeding expectations of a more or less unchanged reading. Earlier this week, housing starts declined a bit, while building permits surged in October and on top of Thursday’s existing home sales, it seems that the housing activity revives after a soft summer. A signal the market's modest recovery is supporting what appears to be growing strength in the broader economy.
Regardless of the overall positive data, the greenback failed to gain its strength and traded lower against its major counterparts. The dollar has corrected lower against most of its G10 currencies over the past few days, we believe that a structural rise in USD is taking place and the greenback could regain its strength. One possible point of concern though, as we mentioned in a previous comment, is the unseasonably extreme cold weather that could lead to adjustment of the economic data.
Oil prices moved a bit higher on Thursday and continued to advance in early European hours, as investors weighed the likelihood that at the OPEC summit on November 27, the members will cut output. OPEC members have so far resisted calls to cut output, even as oil prices have fallen approximately 25% since their June peak. The Vienna summit next week could give a better picture regarding oil, given that consensus holds among the members who have already initiated bilateral meetings. Otherwise, oil prices could decline further. (see technical part below).
Overnight, New Zealand’s credit card spending accelerated 1.3% mom in October, from +0.2% mom in September. Even though there was no major reaction at the release of the indicator, kiwi began strengthening a few minutes before the event and remained elevated a few pips below 0.7900. Since its peak in July, NZD/USD has depreciated approximately 10%. Nevertheless, since the country’s central bank in its last meeting reiterated the view that it expects further depreciation, I would expect the weakening fundamentals (low inflation rate) to weigh on the currency. However, a move below our support of 0.7660 is necessary to get more confident for further declines.
Today’s activity: We have no major events or indicators to be released from the Eurozone, the UK nor the US.
In Canada, the CPI rate for October is expected to remain unchanged at 2%, in line with the Bank of Canada target. This could prove CAD-supportive.
As for the speakers, ECB President Mario Draghi and Governor Jens Weidmann speak at the European Banking Congress.
Currency Titles:
EUR/USD slightly higher
EUR/JPY pulls back after finding resistance at 149.00
AUD/USD rebounds somewhat
Gold fails to break below 1180
WTI marginally higher
Currencies Image Url:
http://shared.ironfx.co.uk/morning_pictures_2014/21november2014/EURUSD_21Nov2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/21november2014/EURJPY_21Nov2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/21november2014/AUDUSD_21Nov2014.PNG
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http://shared.ironfx.co.uk/morning_pictures_2014/21november2014/CLZ4_21Nov2014.PNG
Currencies Text:
EUR/USD moved slightly higher on Thursday, but remained below the resistance line of 1.2575 (R1). A move above here could target our next resistance at 1.2620 (R2). Our momentum studies maintain a positive tone. The RSI rebounded from its 50 line and is pointing up, while the MACD, already above zero, seems ready to move above its trigger line. On the daily chart, the price structure remains lower peaks and lower troughs below both the 50- and the 200-period moving averages, thus I would treat the recovery from 1.2360 (S3), or any extensions of it as a corrective phase. However, I would prefer to stay on the sidelines as far as the overall trend of this pair is concerned and the main reason is because I still see positive divergence between the daily oscillators and the price action.
• Support: 1.2440 (S1), 1.2400 (S2), 1.2360 (S3).
• Resistance: 1.2575 (R1), 1.2620 (R2), 1.2750 (R3).
EUR/JPY tumbled after finding resistance at 149.00 (R1). Bearing in mind our near-term momentum indicators, I would stay cautious that the pullback may continue, perhaps to test the 146.50 (S1) line as a support this time. The RSI moved lower after exiting its overbought territory, while the MACD has topped, fell below its signal line, and is now pointing down. I also see a shooting star candle pattern on the daily chart, something that favors the continuation of the pullback. However, as long as the rate is printing higher highs and higher lows above both the 50- and the 200-period moving averages the overall trend remains to the upside in my view. A move above the 149.00 (R1) line would confirm a forthcoming higher high and perhaps target the round number of 150.00 (R2).
• Support: 146.50 (S1), 145.00 (S2), 143.40 (S3).
• Resistance: 149.00 (R1), 150.00 (R2), 151.50 (R3).
AUD/USD rebounded somewhat on Thursday to challenge the support-turned-into-resistance line of 0.8650 (R1). Although the rebound may continue a bit more, as long as the possibility for a lower high still exists, I would adopt a cautiously negative view. On the daily chart, since the rate remains below both the 50- and 200- day moving averages, I still see a longer-term downtrend, but I can also spot positive divergence between both our daily momentum studies and the price action. As a result, I would prefer to see a dip below the key line of 0.8500 (S2) before getting more confident on the downside. Such a move is likely to confirm a lower low on the daily chart and perhaps open the way for the 0.8300 (S3) area, defined by the lows of July 2010.
• Support: 0.8540 (S1), 0.8500 (S2), 0.8300 (S3).
• Resistance: 0.8650 (R1), 0.8800 (R2), 0.8900 (R3).
Gold tried to break below the 1180 (S1) line but failed to do so and rebounded to trade near the 200-period moving average. As long as the metal is trading within the black upside channel, the near-term bias remains positive in my view. Our daily momentum studies support the notion. The 14-day RSI moved higher and is now testing the 50 area, while the MACD, although negative, has crossed above its trigger and is pointing up. However, in the bigger picture, I still see a longer-term downtrend. Hence I would treat the recovery from 1132 as a corrective move for now. In the absence of any major bullish trend reversal signal, I would prefer to adopt a “wait and see” stance as far as the overall outlook of the precious metal is concerned.
• Support: 1180 (S1), 1160 (S2), 1146 (S3).
• Resistance: 1205 (R1), 1222 (R2), 1235 (R3).
WTI moved slightly higher yesterday and today during the early European morning, it appears ready to challenge the 50- period moving average and the resistance line of 76.00 (R1). A break above that line is likely to pull the trigger for extensions towards the next resistance at 78.00 (R2), defined by the high of the 12th of November. Taking a look at our momentum studies, I see that the RSI moved above 50 and is pointing up, while the MACD, crossed above its trigger and could obtain a positive sign any time soon. These signs confirm yesterday’s positive momentum and amplify the case that we may see WTI a bit higher in the close future. However, the overall price structure still suggests a downtrend, thus I would consider the current rebound as a corrective wave before sellers take the reins again.
• Support: 73.35 (S1), 71.00 (S2), 70.00 (S3).
• Resistance: 76.00 (R1), 78.00 (R2), 80.00 (R3) .
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Market Analysis 24/11/14
Language English
It is essential to bring back inflation to targetEuropean Central Bank President Mario Draghi stressed on Friday the importance to bring inflation back to target without delays as fast as possible. The ECB Chief sent a strong signal that the Bank is ready to broaden the channels through which it intervenes by altering the size, pace and composition of their purchases, if its current policy is not effective enough or further risks to the inflation outlook materialize. Even though much of his speech echoed comments that he made at the latest ECB press conference, the most significant remark in Friday’s speech was that the inflation situation in the Eurozone has become “increasingly challenging”. The urgency he signaled in getting inflation higher, shot up market expectations for aggressive easing measures and pushed EUR/USD down to end the week below 1.2400 (see technical below). Meanwhile, the ECB announced that it has started buying asset-backed securities on Friday, in order to encourage lending and revive the economy.
Elsewhere, the People’s Bank of China cut unexpectedly its benchmark lending rate on Friday for the first time in more than two years, to address the slowing domestic and global economy. The AUD and NZD that heavily depend on trade with China, surged at the news and remained supported during the Asian trading session. If China’s central bank follows up with a cut to reserve requirement ratio, this would loosen further monetary conditions by pushing liquidity into the market and by pushing the commodity currencies further up.
Today’s activity: The main event will be the German Ifo survey for November. All three indices are expected to have remained unchanged or declined. Following the unexpected surge in ZEW survey earlier this month, I believe that Ifo survey could exceed the forecast as well. This could strengthen the euro a bit as it will indicate that the bloc’s growth engine is gaining momentum again. Moreover, the ECB is expected to announce its covered-bond purchases.
In the US, we get the preliminary Markit service-sector and composite PMI for November, Chicago Fed National activity index for October and Dallas Fed manufacturing activity index for November are also coming out.
As for the speakers, the ECB Governing council member Ewald Nowotny speaks at Austrian central bank conference.
As for the rest of the week, on Tuesday, the Bank of Japan releases the minutes from its Oct. 31st policy meeting where the board voted 5-4 to expand monetary policy easing. The minutes will reveal, why the 4 members initially opposed to further stimulus. In New Zealand 2-year inflation expectation for Q4 is coming out. Following the decline in Q3 CPI to New Zealand’s central bank lowest boundary, the possibility for the Q4 expectations to fall are high, which could weigh on NZD. In Germany, the final Q3 GDP data are expected to confirm the preliminary growth figure. In the US, the 2nd estimate of the Q3 GDP is expected to show that the US economy expanded at a slower pace than initially estimated.
On Wednesday, UK’s preliminary Q3 GDP is expected to grow 0.7% qoq, unchanged in pace from Q2. Following the recent weak data and the downward revisions in the latest inflation report, market expectations for BoE tightening have been pushed back, with the timing for the first rate hike now slipping after the general elections in May. A weak growth, could push the rate hike expectations even further back. In the US, we get durable goods for October and personal income and spending for the same month. Personal spending is forecast to have rebounded, fueled probably by income gains amid a stronger US labor market. Core PCE for October is also coming out and it is expected to remain unchanged in pace from September.
On Thursday, the main event will be the German CPI for November. As usual the drama will start several hours earlier when the CPI for Saxony is released ahead of the country’s headline CPI.
Finally on Friday, we have the usual end-of-month data dump from Japan. Eurozone’s unemployment rate for October is also coming out along with the bloc’s CPI estimate for November. With less than a week before the ECB meeting, the ease in the CPI rate is expected to confirm the ECB President Draghi’s concerns that a stronger recovery is unlikely in the coming months and that the Bank should bring inflation back to target without delays as fast as possible.
Currency Titles:
EUR/USD falls on Draghi’s comments
EUR/JPY corrects lower
GBP/USD still within a short-term range
Gold challenges again the 1205 area
WTI continues higher
Currencies Image Url:
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Currencies Text:
EUR/USD collapsed on Friday after ECB President Mario Draghi said that officials will do what they must to raise inflation, leaving the door open for more drastic measures. The pair violated two support barriers in a row to find support at the 1.2360 (S1) hurdle, defined by the lows of the 6th and 7th of November, before rebounding somewhat. A clear move below that obstacle would confirm a forthcoming lower low on the daily chart and perhaps open the way for the 1.2250 (S2) area, marked by the lows of August 2012. Taking a look at our daily momentum studies, I still see positive divergence between them and the price action, something that gives me additional reasons to wait for a decisive dip below 1.2360 (S1) before getting more confident on the downside.
• Support: 1.2360 (S1), 1.2250 (S2), 1.2130 (S3)
• Resistance: 1.2400 (R1), 1.2440 (R2), 1.2500 (R3)
EUR/JPY continued pulling back after forming a shooting star candle pattern on the daily chart. Today, during the Asian morning, the pair found support near the 50-period moving average and the 145.60 (S1) line, which happens to be the 23.6% retracement level of the 16th of October - 20th November up move. Looking at our daily momentum studies, I would stay cautious that the downside retracement may continue. The 14-day RSI moved lower and exited its overbought territory, while the daily MACD shows signs of topping and could move below its signal line in the close future. However, I still believe that the overall trend remains to the upside and I still expect a test at the psychological line of 150.00 (R2) after the correction is over and the bulls manage to take control again.
• Support: 145.60 (S1), 144.70 (S2), 143.40 (S3)
• Resistance: 149.00 (R1), 150.00 (R2), 151.50 (R3)
GBP/USD continued trading in a sideways manner, staying between the support line of 1.5600 (S1) and the resistance of 1.5730 (R1). A clear break below the 1.5600 (S1) line is likely to open the way for the psychological barrier of 1.5500 (S2). On the other hand, a move above 1.5730 (R1) could target the 1.5800 (R2) barrier. Both our near-term oscillators lie near their equilibrium levels, confirming the trendless short-term bias of the rate. However, as for the broader trend, I will hold the view that as long as Cable is trading below the 80-day exponential moving average, the overall path remains to the downside.
• Support: 1.5600 (S1), 1.5500 (S2), 1.5430 (S3)
• Resistance: 1.5730 (R1), 1.5800 (R2), 1.5950 (R3)
Gold moved slightly higher and challenged once again the 1205 (R1) resistance area and the upper boundary of the black upside channel. As long as the metal is trading within the black upside channel, the near-term bias remains positive in my view. Our daily momentum studies support the notion. The 14-day RSI continued higher and moved above its 50 line, while the daily MACD remains above its trigger, pointing up. However, in the bigger picture, I still see a longer-term downtrend. Hence I would treat the recovery from 1132 as a corrective move for now. In the absence of any major bullish trend reversal signal, I would prefer to adopt a “wait and see” stance as far as the overall outlook of the precious metal is concerned.
• Support: 1180 (S1), 1160 (S2), 1146 (S3)
• Resistance: 1205 (R1), 1222 (R2), 1235 (R3)
WTI continued it’s up wave on Friday, but it found resistance at 77.80 (R1). I would expect a move above that line to pull the trigger for the psychological number of 80, which now happens to coincide with the 200-period moving average. Our near-term momentum indicators corroborate Friday’s bullish momentum. The RSI edged higher after finding support slightly above its 50 line, while the MACD, already above its trigger, obtained a positive sign. However, on the daily chart, the overall price structure still suggests a downtrend, thus I would consider the current rebound as a corrective phase at the time being.
• Support: 75.60 (S1), 73.20 (S2), 71.00 (S3)
• Resistance: 77.80 (R1), 80.00 (R2), 83.00 (R3)
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Market Analysis 25/11/14
Language English
How dovish the BoE really is Bank of England Governor Mark Carney, Deputy Governor for Financial Stability Jon Cunliffe, monetary policy member Kristin Forbes and one of the dissenting voters, Ian McCafferty testify to the Parliament’s Treasury Select Committee over their latest economic forecasts. Given the recent mixed messages on the inflation outlook, investors will be trying to decode how dovish the BoE really is. The November inflation report showed a significant downward revision of the short-term inflation outlook. The BoE members expect inflation rate to fall below 1% within 6 months and to stay below the 2% target for the next three years.
On the other hand, the minutes of the Bank’s November policy meeting, revealed that seven members who voted for the rates to remain on hold had a “material spread of views” on the balance of risks to the UK’s outlook of growth and inflation. While some of those views were focused on the possibility of weaker growth, other MPC members mentioned the potential for slack to be eroded faster than currently expected adding upward pressure on prices. Given these mixed signals by the MPC members, the hearing is likely to elucidate investors on just how dovish the BoE really is. I believe that at today’s inflation report hearing the MPC members will probably sound less dovish than they seemed in the November’s inflation report and will likely give more attention on the positive signs over the UK’s economic outlook. Even though the latest set of macroeconomic projections have pushed the timing for the first rate hike back, probably after the general elections in May, today’s hearing could strengthen GBP somewhat.
Overnight, Bank of Japan released the minutes of its Oct. 31st meeting where the board voted to expand monetary policy easing. The minutes showed that the four BoJ policymakers who opposed to last month easing, did so due to concerns that the further stimulus could hurt the Bank’s credibility and considered that it was appropriate to maintain the guidance for money market operations as before. On the contrary, Governor Haruhiko Kuroda stressed the Bank’s readiness for further stimulus to meet its inflation target, which is likely to keep JPY vulnerable.
Elsewhere, the NZD fell after the 2 year inflation expectation drop to 2.06% in Q4 from 2.23% in Q3, its lowest level since June 2013. This pushed kiwi down as it shows no urgency for the Reserve Bank of New Zealand to raise rates. Falling price expectations add to the already poor inflation outlook and will likely keep the NZD under selling pressure.
In Germany, the final Q3 GDP data confirmed the preliminary growth figure and showed that the German economy grew 0.1% qoq in Q3 a rebound from -0.1% qoq in Q2. Even though Germany barely avoided slipping into recession, the moderate growth is likely to keep EUR under selling pressure.
Today’s activity:
In Canada, retail sales for September are expected to rebound from the previous month, adding to the recent positive sentiment over the Canadian dollar and the optimistic outlook of the Canadian economy.
In the US, the 2nd estimate of the Q3 GDP is expected to show that the US economy expanded at a slower pace than initially estimated. The 2nd estimate of GDP is expected to rise at a 3.3% qoq SAAR pace, a downward revision from the first estimate of +3.5%qoq SAAR. The 2nd estimate of the core personal consumption index, the Fed’s favorite inflation measure, is forecast to have declined from the Fed’s 2% target. The Federal Housing Finance Agency (FHFA) home price index is forecast to decelerate slightly in September, while S & P/Case-Shiller house price index for the same month is expected to have rebounded from August. The Richmond Fed manufacturing index and the Conference Board leading index both for November are also coming out.
Besides BoE hearing, ECB Governing council member Ewald Nowotny also speaks.
Currency Titles:
EUR/USD rebounds and hits 1.2440
Is USD/JPY ready for a correction?
AUD/USD finds resistance near the 0.8700 line
Gold consolidates below 1205
WTI slightly lower
Currencies Image Url:
http://shared.ironfx.co.uk/morning_pictures_2014/25november2014/EURUSD_25Nov2014.PNG
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EUR/USD continued its rebound on Monday to hit the resistance line of 1.2440 (R1) and the lower bound of the short-term blue upside channel. Since the possibility of a lower high near that area is high, I would expect the forthcoming wave to be negative and target once again the support area of 1.2360 (S1), defined by yesterday’s lows and the lows of the 6th and 7th of November. A clear move below that obstacle would confirm a forthcoming lower low on the daily chart and perhaps open the way for the 1.2250 (S2) area, marked by the lows of August 2012. Taking a look at our daily momentum studies, I still see positive divergence between them and the price action, something that gives me additional reasons to wait for a decisive dip below 1.2360 (S1) before getting more confident on longer-term downtrend.
• Support: 1.2360 (S1), 1.2250 (S2), 1.2130 (S3).
• Resistance: 1.2440 (R1), 1.2500 (R2), 1.2575 (R3).
USD/JPY moved in a quiet mode staying between the support line of 117.00 (S1) and the resistance of 119.00 (R1). The RSI, although above 50, it is pointing down, while the MACD, although positive, stands below its signal line. Having in mind our momentum studies, I would expect USD/JPY to correct lower, perhaps for a test at the 117.00 (S1) barrier. A clear break below the 117.00 (S1) hurdle could extend the correction, perhaps towards the next support line, at 115.45 (S2). Switching to the daily chart, I still see a longer-term uptrend, but our daily momentum signs amplify the case for the beginning of a corrective move. The 14-day RSI is pointing down and could exit its overbought territory, while the daily MACD shows signs of topping and could cross below its trigger line in the near future.
• Support: 117.00 (S1), 115.45 (S2), 114.00 (S3).
• Resistance: 119.00 (R1), 120.00 (R2), 121.00 (R3).
AUD/USD formed a lower high near the 0.8700 (R1) area and declined to find support at 0.8570 (S1), a support line determined by the low of last Thursday. On the daily chart, since the rate remains below both the 50- and 200- day moving averages, I still see a longer-term downtrend, but I still can spot positive divergence between both our daily momentum studies and the price action. As a result, I would prefer to see a dip below the key line of 0.8500 (S2) before getting more confident on the downside. Such a move is likely to confirm a lower low on the daily chart and perhaps open the way for the 0.8300 (S3) area, defined by the lows of July 2010.
• Support: 0.8570 (S1), 0.8500 (S2), 0.8300 (S3).
• Resistance: 0.8700 (R1), 0.8800 (R2), 0.8900 (R3).
Gold moved in a consolidative manner on Monday, staying below the 1205 (R1) resistance hurdle. Shifting my attention to our near-term momentum studies, I see negative divergence between both of them and the price action. As a result, I would not rule out a short-term top near the 1205 (R1) area and a pullback towards the 1180 (S1) area or the lower boundary of the black upside channel. In the bigger picture, I still see a longer-term downtrend. Hence I would treat the recovery from 1132 as a corrective move for now. In the absence of any major bullish trend reversal signal, I would prefer to adopt a “wait and see” stance as far as the overall outlook of the precious metal is concerned.
• Support: 1180 (S1), 1160 (S2), 1146 (S3).
• Resistance: 1205 (R1), 1222 (R2), 1235 (R3).
WTI declined slightly yesterday to find support near the 75.50 (S1) line. A dip below that line is likely to extend the bearish wave perhaps towards the 73.20 (S2) zone, defined by the low of the 14th of November. The RSI moved below 50, while the MACD has topped and fell below its signal line. These signs designate somewhat negative momentum and support the case for further declines in the close future. On the daily chart, the price structure is still lower highs and lower lows below both the 50- and the 200-day moving averages, thus the overall path remains to the downside, at least for now. However, I would like to see a dip below 73.20 (S2) before trusting more that trend. Such a move would confirm a forthcoming lower low and perhaps open the way for the 71.00 (S3) area, determined by the lows of July and August 2010.
• Support: 75.50 (S1), 73.20 (S2), 71.00 (S3).
• Resistance: 77.80 (R1), 80.00 (R2), 83.00 (R3).
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Market Analysis 26/11/14
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Oil prices slide ahead of OPEC meeting With just a day ahead of the Organization of the Petroleum Exporting Countries (OPEC) scheduled meeting in Vienna, impromptu talks between member nations Saudi Arabia and Venezuela with nonmembers Russia and Mexico ended without announcing any kind of agreement. On top of this, signals sent by individual member nations thus far suggest there is little consensus on whether and how to reduce output and stabilize prices. Benchmark West Texas Intermediate crude for January delivery fell to USD 73.60 a barrel, while Brent crude oil dipped to USD 78 a barrel on these developments. What could be agreed on Thursday is stricter enforcement of the existing production quota of 30 million barrels a day. Yet this is unlikely to be enough to reverse the fall by more than 30% since June in oil prices as there are no guarantees of any production cutbacks nor it is clear how non-OPEC members will react. It looks to us as if the decline in oil prices is likely to continue, particularly against the background of a slowing Chinese economy and stagnating European economy and continued high US domestic production.
On Tuesday, data showed that the US economy grew +3.9% qoq SAAR according to the 2nd estimate of the Q3 GDP, exceeding the initial estimate of 3.5% qoq SAAR. The forecast was for the figure to be revised down to +3.3% qoq SAAR. The 2nd estimate of the core PCE rate remained unchanged from the initial estimate, at +1.4% qoq SAAR. The economy in Q2 and Q3 posted its best back-to-back growth in 11 years, offering new evidence that the US entered the final quarter with a good head of momentum. On the other hand, the US consumer confidence index declined from its highest level since October 2007 and the Richmond Fed manufacturing index declined from an almost 4 year high. The mixed data weakened the dollar against most of its major peers. However, I would continue to view any USD setbacks as providing renewed buying opportunities, since the alternatives within the G10 are becoming less and less attractive.
Today’s schedule:Sweden’s economic tendency survey for November is expected to decline marginally from the previous month.
In Norway, the AKU unemployment rate for September is forecast to have remained unchanged at 3.7%. The official unemployment rate for the same month had declined, thus the possibility for a positive surprise is high which could be a bit NOK-supportive.
In the UK, the 2nd estimate of Q3 GDP is expected to show a +0.7% qoq pace of growth, in line with the preliminary estimate, confirming a modest slowdown in the country’s growth momentum. With this release we will get the expenditure details for the first time, which will give us more information about the Q3 growth. The release as forecast should be neutral for GBP.
A busy day in the US! Today we get durable goods orders for October. The headline figure is forecast to show a 0.6% mom fall, a slower decline than -1.1% mom in the previous month. On the other hand, durable goods excluding transportation equipment are estimated to rebound from September. Personal income and personal spending for October are also due out. Personal spending is forecast to have rebounded, fueled probably by income gains amid a stronger US labor market. Core PCE for October is expected to remain unchanged in pace from September on a mom basis, in line with the unchanged 2nd estimate of Q3 core PCE in Tuesday’s GDP figures. The Chicago purchasing manager index and the final University of Michigan confidence index, both for November, are also coming out. Pending home sales and new home sales, both for October, are likely to confirm that housing sector is growing again after a soft summer. All told, the data is likely to be USD-supportive and we would expect to see the dollar rally on the news.
In New Zealand, the trade deficit for October is forecast to narrow somewhat. Following yesterday’s fall in the 2-year inflation expectation rate, which makes a rate hike less likely, the moderate narrowing in the deficit will probably not be enough to reverse the negative sentiment towards kiwi and we remain bearish towards the currency.
We have only one speaker scheduled for Wednesday, ECB Vice President Vitor Constancio speaks.
Currency Titles:
EUR/USD finds buy orders at 1.2400
GBP/JPY ready to retrace
NZD/USD dips below 0.7820
Gold still in a quiet mode below 1205
WTI falls sharply
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EUR/USD tried to move lower after finding resistance at 1.2440, but it found buyers near 1.2400 (S2) and edged higher. The RSI moved above its 50 line, while the MACD, even though within its negative territory, lies above its trigger. Bearing these momentum signs in mind, I believe that the rebound may continue a bit more. However, on the daily chart, the overall path remains to the downside and I would expect the recent rebound or any extensions of it to provide renewed selling opportunities. Since I still see positive divergence between our daily oscillators and the price action, I would prefer to see a decisive dip below 1.2360 (S3) before getting more confident on longer-term downtrend. Such a break is likely to pave the way for the 1.2250 area, defined by the lows of August 2012.
• Support: 1.2440 (S1), 1.2400 (S2), 1.2360 (S3)
• Resistance: 1.2500 (R1), 1.2575 (R2), 1.2620 (R3)
GBP/JPY failed to print a higher high and found again resistance near the 186.00 (R1) line. Today, during the early European morning, the rate is trying to break below the black uptrend line, taken from back at the low of the 15th of October. In my view, a dip below the 184.00 (S1) support is likely to reaffirm the case and perhaps signal the beginning of a downside corrective phase. Our momentum signs corroborate the possibility of such a move. The RSI moved lower and is now approaching its 50 line, while the MACD, although positive, stands below its signal line. Furthermore, I can spot negative divergence between both these indicators and the price action. On the daily chart, I still see a longer-term upside path, but our daily oscillators reveal upside weakness as well. The 14-day RSI exited its overbought conditions and moved lower, while the daily MACD shows signs of topping and could fall below its trigger any time soon.
• Support: 184.00 (S1), 181.00 (S2), 180.00 (S3)
• Resistance: 186.00 (R1), 189.00 (R2), 190.00 (R3)
NZD/USD fell below the support (turned into resistance) line of 0.7820 (R1) to complete a possible short-term “head and shoulders” pattern and to confirm the negative divergence between our momentum indicators and the price action. Although the pair found support at 0.7765 (S1) and rebounded afterwards to challenge 0.7820 (R1) as a resistance this time, I believe that one more down leg is looming and I would expect another test near the support area of 0.7700 (S2) after the bears pull the trigger. In the bigger picture, the rate oscillates between the 0.7700 (S2) support zone and the resistance of 0.7980 (R2), thus I see a sideways path longer-term.
• Support: 0.7765 (S1), 0.7700 (S2), 0.7660 (S3)
• Resistance: 0.7820 (R1), 0.7980 (R2), 0.8100 (R3)
Gold continued its consolidative mode on Tuesday, staying below the 1205 (R1) resistance hurdle. With negative divergence between both of our near-term momentum studies and the price action, the possibilities for a short-term peak near the 1205 (R1) area are high. A possible pullback from the metal’s current levels could target the 1180 (S1) area or the lower boundary of the black upside channel. In the bigger picture, I still see a longer-term downtrend. Hence I would treat the recovery from 1132 as a corrective move for now. In the absence of any major bullish trend reversal signal, I would prefer to adopt a “wait and see” stance as far as the overall outlook of the precious metal is concerned.
• Support: 1180 (S1), 1160 (S2), 1146 (S3)
• Resistance: 1205 (R1), 1222 (R2), 1235 (R3)
WTI fell sharply yesterday on expectations that OPEC won’t cut output at its meeting Thursday, breaking below the 75.50 line, but the decline was halted above our support line of 73.20. On the daily chart, the price structure is still lower highs and lower lows below both the 50- and the 200-day moving averages, thus the overall path remains to the downside, at least for now. A clear move below the 73.20 (S2) support hurdle would confirm a forthcoming lower low and perhaps open the way for the 71.00 (S3) area, determined by the lows of July and August 2010.
• Support: 73.20 (S1), 71.00 (S2), 70.00 (S3)
• Resistance: 75.50 (R1), 77.80 (R2), 80.00 (R3)
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Market Analysis 27/11/14
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Oil hits 4-year low ahead of OPEC meetingToday’s meeting of the Organization of the Petroleum Exporting Countries (OPEC) is unlikely to reach a convincing agreement to cut production, in my view. In October the group pumped 30.974mn barrels a day (b/d), according to Bloomberg estimates. This is already almost 1mn b/d over their self-imposed quota of 30mn b/d. Saudi Arabia increased its output during October by 100k b/d and cut its prices for Asian delivery for the fourth month in a row even as the OPEC reference price fell 13% during the month. In order for OPEC to cut its overall output even just back to its quota, Saudi Arabia would have to resume its historical role as the swing producer and cut its output dramatically. Its recent behavior though has been quite the opposite. It seems intent on driving prices down, perhaps to force expensive US shale oil producers out of the market and to punish the Russians, who are supporting the Assad regime in Syria.
I expect oil prices to fall further There is already a surplus of some 600k b/d in the world oil market. Demand for oil usually falls by around 900k b/d in Q1 because of seasonal patterns. Thus OPEC would have to cut production by around 1.5mn b/d just to balance supply and demand at current prices. Moreover, with Europe stagnating and growth in China slowing, the relatively strong growth in the US is not enough to boost overall demand as US energy usage has been falling even while domestic production has been increasing. On top of which, the strong dollar increases the price of oil for consumers outside the US and further dampens demand.
Eventually, OPEC will have to cut production, but it may take more pain to get to that point. OPEC’s own forecast envisions demand for OPEC oil of only 29.2mn b/d during 2015 as non-OPEC producers pump more oil. This means the group will have to cut some 1.8mn b/d eventually or see prices fall further. The group has in the past been able to impose discipline when it was absolutely necessary. Most OPEC countries need oil above 100 dlrs/b in order to balance their budget, so eventually prices should force them to the negotiating table. Furthermore, the production cuts would probably fall mostly on those producers that can best afford it – Saudi Arabia, Kuwait and the UAE. However, it is my view that Saudi Arabia probably wants to see the price fall further for its own strategic reasons and therefore it is far too early to see a market-affecting compromise. The best that the group can hope for at today’s meeting is probably a reaffirmation of its current quota, but unless it can convince the market that it is going to cut back production to that level and stick to it, the news is not likely to boost prices significantly.
Cheaper oil is a boon to many countries In the US, families with income below USD 50,000 a year spend an average of 21% of their income on energy. Every 10 cent drop in the price of gasoline translates to annual savings of some USD 120 for them. Thus lower oil prices should help consumption in the US and in other oil-consuming countries. European consumers may not benefit as much, because taxes account for at least half of retail gasoline prices and thus the retail price is not as closely tied to the wholesale price of oil. Many EM countries that import oil, such as Turkey, Thailand, Korea, South Africa and Poland will also be beneficiaries. Of course the currencies of oil-producing countries, CAD and NOK in particular, are likely to suffer, as may RUB and MXN.
The schedule: The OPEC meeting starts at 0900 GMT and the press conference to announce the results begins at 1500 GMT.
Yesterday’s market: US data yesterday generally disappointed, with durable goods unexpectedly dropping in October, personal income and spending both missing estimates, Chicago PMI below estimates (although still quite high on an absolute basis), final U of M consumer confidence index for November revised down, and initial jobless claims exceeding forecasts. Fed funds rate expectations fell again, the ninth decline in 10 days. So it was only natural that the dollar would decline against most of its peers. The only exception was NOK, which depreciated after the country’s AKU unemployment rate for September failed to decline as the official unemployment figure had done for the same month. Lower oil prices may also be holding NOK back; CAD, the other major energy currency, was the next weakest unit (although it did gain marginally vs USD).
Today’s (other) events: With the US on holiday today (Thanksgiving), USD weakness may continue in the absence of any USD-positive news coming out. The key event today will probably be ECB President Draghi’s speech in Finland. However, he has spoken several times recently and surprised the market with his dovishness already. It’s hard to imagine that he has anything left to reveal. ECB Governing Council member Jens Weidmann also speaks in Germany; it will be interesting to contrast his comments with Draghi’s.
The main release during the European day will be the German CPI for November. As usual, several of the Lander release their figures before the national figure is released. We would look at the larger ones for guidance on where the headline figure is likely to come in at. The consensus is for a softer figure than last month, which could push down estimates for Eurozone CPI to be released on Friday. Also, the German unemployment rate for November is expected to remain unchanged from October.
Eurozone’s M3 money supply is forecast to have risen 2.6% yoy in October, a slight acceleration from 2.5% yoy in September. This would push the 3-month moving average higher, although the ECB is putting little significance on money supply nowadays. The bloc’s final consumer confidence for November is expected to remain unchanged from the preliminary print.
In Canada, current account deficit for Q3 is forecast to remain more or less at the same levels as in Q2.
The markets are closed in the US due to the Thanksgiving holiday.
In New Zealand, building permits for October are coming out.
Currency Titles:
EUR/USD above 1.2500 again
USD/JPY corrects lower
GBP/USD hits 1.5800
Gold pulls back after consolidating below 1205
WTI dips below 73.20
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EUR/USD continued rising yesterday, moving back above 1.2500 again, but the advance was stopped at 1.2530 (R1). Our momentum studies suggests that the rebound may have not ended yet. The RSI edged up after finding support at its 50 line, while the MACD entered its positive field. However, on the daily chart the overall path remains to the downside and I would expect the recent rebound or any extensions of it to provide renewed selling opportunities. Since I still see positive divergence between our daily oscillators and the price action, I would prefer to see a decisive dip below 1.2360 (S3) before getting more confident on longer-term downtrend. Such a break is likely to pave the way for the 1.2250 area, defined by the lows of August 2012.
• Support: 1.2440 (S1), 1.2400 (S2), 1.2360 (S3).
• Resistance: 1.2530 (R1), 1.2575 (R2), 1.2620 (R3).
USD/JPY started correcting lower on Wednesday and during the early European morning it is heading towards the 117.00 (S1) support line. I expect the rate to challenge that barrier. If selling pressure is strong enough to break it, the correction could extend towards the next support line at 115.45 (S2). Our short-term momentum studies maintain a bearish tone. The RSI slid below 50 and is pointing down, while the MACD, already below its trigger, has just obtained a negative sign. Switching to the daily chart, I still see a longer-term uptrend, but our daily momentum signs amplify the case for further retracement. The 14-day RSI is pointing down and looks ready to exit overbought territory, while the daily MACD has topped and fallen below its trigger line.
• Support: 117.00 (S1), 115.45 (S2), 114.00 (S3).
• Resistance: 119.00 (R1), 120.00 (R2), 121.00 (R3).
GBP/USD firmed up on Wednesday, breaking above 1.5730 (S1), the upper boundary of the short-term sideways range it’s been trading since the 13th of the month. Based on our momentum signals, I still think that the up leg may continue. On the 4-hour chart, both the RSI and the MACD follow upside paths as marked by the black upside support lines. On the daily chart, the 14-day RSI rebounded from its 30 line and moved higher, while the daily MACD, although negative, crossed above its trigger line and is pointing north. A break above 1.5800 (R1) is likely to extend the bullish wave, probably towards the next resistance zone at 1.5950 (R2). Nonetheless, as for the broader trend, the price structure remains lower peaks and lower troughs below the 80-day exponential moving average, thus I would consider the overall picture of GBP/USD to be negative. I would treat the recovery from the 1.5600 (S2) area or any extensions of it as a corrective phase for now.
• Support: 1.5730 (S1), 1.5600 (S2), 1.5500 (S3).
• Resistance: 1.5800 (R1), 1.5950 (R2), 1.6020 (R3).
Gold moved lower on Wednesday after consolidating slightly below the 1205 (R1) resistance hurdle. That move confirms the negative divergence between our momentum oscillators and the price action. Moreover, the RSI dipped below 50 and is pointing down, while the MACD, even though positive, stays below its trigger line. Taking these momentum signals into account, I would expect the pullback to continue and perhaps target the 1180 (S1) area or the lower boundary of the black upside channel. In the bigger picture, I still see a longer-term downtrend and would therefore treat the recovery from 1132 as a corrective move for now. In the absence of any major bullish trend reversal signal, I would prefer to adopt a “wait and see” stance as far as the overall outlook of the precious metal is concerned.
• Support: 1180 (S1), 1160 (S2), 1146 (S3).
• Resistance: 1205 (R1), 1222 (R2), 1235 (R3).
WTI extended its fall on Wednesday and during the Asian morning today it broke below the support (turned into resistance) of 73.20 (R1). Such a move confirms a lower low on the daily chart and opens the way for further declines, perhaps towards the 71.00 (S1) area, determined by the lows of July and August 2010. Looking at the near-term momentum indicators, the RSI moved lower and is now testing its 30 line, while the MACD lies below both its zero and trigger lines, pointing south. These signs corroborate the negative picture of WTI. On the daily chart, the price structure is still lower highs and lower lows below both the 50- and the 200-day moving averages, thus I believe that the overall path remains to the downside.
• Support: 71.00 (S1), 70.00 (S2), 67.00 (S3).
• Resistance: 73.20 (R1), 75.50 (R2), 77.80 (R3).
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Market Analysis 28/11/14
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By doing nothing, everything is done OPEC simply kept its production ceiling unchanged at its meeting yesterday, as expected, setting off a further decline in oil prices. As I said yesterday, I expect oil prices to continue to fall as Saudi Arabia pursues its strategy of pushing US shale producers out of the market and punishing Russia for its support of Syrian President Assad.
Which currencies are likely to be hit by lower oil prices? The table here shows some of the major currency pairs’ correlation with oil prices. Clearly, the currency pairs that are most likely to be hit by falling oil prices are USD/CAD, AUD/USD, AUD/JPY, USD/NOK and USD/RUB. It’s noticeable that although AUD/JPY is very high up the list, USD/JPY is virtually uncorrelated.
Lower oil prices means lower inflation around the world and bond yields fell further in Europe yesterday, with German and French 10-year yields hitting record lows (0.70% and 0.99%, respectively). ECB President Draghi yesterday reiterated that he is open to expanding asset purchases to prevent deflation, which is now occurring in only two of the Eurozone countries but may be coming closer anyway – German headline inflation slowed to only 0.5% yoy in November, according to yesterday’s figures. While low inflation may delay the Fed and the Bank of England from starting the process of normalizing interest rates, the ECB is clearly worried about falling into deflation. Although the euro has fallen, oil prices have fallen even faster, leaving energy prices a big negative for European inflation. Lower oil prices should be good for the Eurozone economy, although probably not as helpful as in the US, where energy taxes are lower. But it will make managing monetary policy more difficult.
Japan’s inflation slowed again in October for the third month in a row while retail sales fell from the previous month, demonstrating the difficulty that the government is having in producing the virtuous circle of higher inflation leading to higher consumption and a more vigorous economy in Japan. However, industrial production unexpectedly rose from the previous month, hinting that perhaps the strategy of yen depreciation is finally starting to have an effect on exports. If so, look for the government to continue to emphasize what’s working. While I can’t see the Bank of Japan taking any further steps in the near future, I can see the government quietly encouraging the yen lower. I remain bearish JPY.
Lower inflation also means less need for gold as a hedge against inflation and indeed gold prices fell yesterday. This weekend Switzerland holds its gold referendum and the indications from the latest poll are that it will not pass. A recent poll had 47% voting “no” and only 38% “yes,” with 15% no answer or undecided. This makes it quite unlikely that the measure will pass. Without the promise of large-scale buying from Switzerland, gold investors have little to look forward to in the immediate future. I would expect the price to fall further on disappointment if and when the measure does fail.
Today’s data: During the European day, the main event will be the Eurozone’s estimate CPI for November. With just a week ahead of the ECB’s crucial December meeting, the low inflation confirms President Draghi’s concerns that a stronger recovery is unlikely in the coming months and reinforces my opinion that the euro has plenty of room on the downside.
From Canada, GDP for September is expected to have accelerated from the previous month. Nonetheless, the forecast for September is not enough to cause GDP for Q3 as a whole to accelerate. That could eat into some of the Canadian dollar’s recent gains. CAD has been strengthening against the dollar since early November and a GDP figure as forecast may prove CAD-negative. On top of which, OPEC’s decision to leave its ceiling unchanged is likely to keep CAD under selling pressure.
As for speakers, ECB Governing Council members Carlos Costa and Jens Weidmann speak. The Bundesbank President spoke on Thursday as well and said that solid state finances are needed to assist the Bank to concentrate on its mandate of price stability.
Currency Titles:
EUR/USD slides after finding resistance at 1.2530
GBP/JPY struggles near 186.00
AUD/USD slightly below 0.8500
Gold ready to challenge the 1180 area again
WTI plummets below 70 on OPEC decision
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EUR/USD tumbled after finding resistance at 1.2530 (R1). During the early European morning Friday, the pair is heading towards our support line of 1.2440 (S1), where a dip is likely to challenge the 1.2400 (S2) line once again. Both our near-term momentum studies have turned negative, confirming yesterday’s bearish momentum. The RSI fell below 50 and is pointing down, while the MACD crossed below its trigger and looks ready to obtain a negative sign. On the daily chart, the overall trend of EUR/USD stays to the downside, but given the positive divergence between our daily oscillators and the price action, I would prefer to see a decisive dip below 1.2360 (S3) before getting more confident on longer-term downtrend. Such a break is likely to pave the way for the 1.2250 area, defined by the lows of August 2012.
• Support: 1.2440 (S1), 1.2400 (S2), 1.2360 (S3)
• Resistance: 1.2530 (R1), 1.2575 (R2), 1.2620 (R3)
GBP/JPY moved slightly higher on Thursday. During the early European morning Friday it looks willing to challenge the 186.00 (R1) resistance line for the fourth time in eight days. If the bulls are strong enough to overcome that strong resistance zone this time, I would expect them to pull the trigger towards the 189.00 (R2) hurdle. However, although the overall trend of this pair is to the upside, our daily momentum indicators still indicate the possibility of a retracement before the longs take the reins again. I see negative divergence between the 14-day RSI and the price action, while the daily MACD has topped and just crossed below its signal line.
• Support: 184.00 (S1), 181.00 (S2), 180.00 (S3)
• Resistance: 186.00 (R1), 189.00 (R2), 190.00 (R3)
AUD/USD moved lower after finding resistance near the 0.8600 (R1) line. Now it’s back below 0.8500 and is heading towards the support obstacle of 0.8480 (S1), determined by the low of Wednesday. As long as the rate is printing lower peaks and lower troughs within the near-term downside channel, I consider the short-term picture to be negative. A break below 0.8480 (S1) is likely to open the way for the 0.8300 (S3) area, defined by the lows of July 2010. Our oscillators support the notion. Both of them stand within their negative territories and below their black downside resistance lines. On the daily chart, since the rate remains below both the 50- and 200- day moving averages, I still see a longer-term downtrend. Moreover, the 14-day RSI and the daily MACD fell below their upside support lines, designating that the downtrend is gaining back momentum.
• Support: 0.8480 (S1), 0.8300 (S2), 0.8100 (S3)
• Resistance: 0.8600 (R1), 0.8700 (R2), 0.8800 (R3)
Gold continued its tumble on Thursday but the decline was halted marginally above the 1180 (S1) support zone. I still expect the metal to challenge that zone or the lower boundary of the black upside channel. If the yellow metal continues its slide below the lower bound of the channel, this would be a first sign that the recovery from 1132 was indeed a corrective phase of the longer-term downtrend. I would expect such a move to trigger extensions towards our next support line of 1160(S2). Both our oscillators stand within their negative fields and stand below their black downside resistance lines, designating bearish momentum.
• Support: 1180 (S1), 1160 (S2), 1146 (S3)
• Resistance: 1205 (R1), 1222 (R2), 1235 (R3)
WTI extended its decline yesterday after the OPEC decided to keep its official production ceiling unchanged at 30 million barrels a day. The plummet ignored our support line of 71.00 and the round number of 70.00 and stopped at 67.65 (S1). A clear break below that line is likely to target our next support line of 65.00 (S2), marked by the lows of September 2009. On the daily chart, the price structure is still lower highs and lower lows below both the 50- and the 200-day moving averages, and this keeps the overall path of WTI to the downside.
• Support: 67.65 (S1), 65.00 (S2), 62.70 (S3)
• Resistance: 70.00 (R1), 71.00 (R2), 73.20 (R3)
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Market Analysis 01/12/14
Language English
Swiss voters said “No” to Gold Gold‘s most awaited event has come and gone and the result is that the Swiss voters overwhelmingly rejected the “Save our Swiss gold” initiative. The referendum, which would have forced the Swiss National Bank to hold some 20% of its reserves in gold was rejected by 77% of voters. The precious metal fell as much as 3.3% after the markets were opened. Even though the market was prepared for the “No” side to dominate as shown in polls ahead of the referendum, what came as more of a surprise was the huge gulf between the two sides. This marked the gold issue in Switzerland finished and showed weak appetite among the public for gold as a reserve asset. Now that the Swiss vote is out of the way, gold could weaken further. (see technical below).
Overnight, China’s manufacturing PMI declined in November suggesting that the economy is still losing momentum. Even though the unexpected interest rate cut in late November is yet to be seen in data, in order to maintain annual growth at around 7.5%, the Chinese authorities may need to introduce further stimulus measures to boost their economy.
Today’s activity: In Europe, we get the manufacturing PMI figures for November from several European countries, including the UK, and the final figure for the Eurozone as a whole. As usual, the final forecasts for the French, the German and Eurozone’s figures are the same as the initial estimates. The UK manufacturing PMI is estimated to slightly decline to 53.0 from 53.2.UK’s mortgage approvals for October are also to be released.
From Canada, the RBC Manufacturing PMI for November is expected. This has only been published for three years and so the market doesn’t pay that much attention to it. No forecast is available.
In the US, the final Markit manufacturing PMI and the ISM manufacturing index both for November are also to be released.
We have one ECB and two Fed speakers on Monday’s agenda: ECB Governing Council member Carlos Costa, New York Fed President William Dudley and Fed Vice Chairman Stanley Fischer speak.
As for the rest of the week, the ECB policy meeting on Thursday and the Friday US employment report will be the focus. In addition, there are several other central bank meetings and data releases that will be closely watched.
On Tuesday, the Reserve Bank of Australia is universally expected to keep policy rates unchanged. Last time, the Bank stopped saying that the exchange rate “remains high by historical standards” and just said that it “remains above most estimates of its fundamental value.” The question is whether the 2% depreciation since their last meeting will cause them to tone down their comments further.
On Wednesday, the final service-sector PMIs for the countries we got the manufacturing figures on Monday are coming out. From Australia we get the Q3 GDP. In the US, we have the ADP employment report as usual two days ahead of the NFP release. The ADP report is expected to show that the number of jobs gained in November decreased a touch from October. The Bank of Canada is expected to keep its benchmark interest rate unchanged. Even though Canadian inflation is rising and the recent batch of data suggest that the economy has strong momentum, declining oil prices are likely to keep BoC on hold for longer than it would otherwise, leaving CAD vulnerable.
On Thursday is the much-awaited ECB meeting. Last week, ECB President Draghi stressed the need to bring inflation up to target without delay. But following the decline in inflation in November, the ECB is facing renewed pressure to fight the threat of deflation.
In addition to the ECB, Bank of England meets to decide on its policy rate. The BoE is unlikely to change policy and therefore the impact on the market as usual should be minimal. The minutes of the meeting however should make interesting reading when they are released on 17th of December.
Finally on Friday, the major event will be the US non-farm payrolls for November. The market consensus is for an increase in payrolls of 225k, up from the unexpectedly low increase of 214k in October. At the same time the unemployment rate is forecast to remain unchanged at 5.8%, while average hourly earnings are expected to accelerate on a yoy basis. Such figures would be consistent with the FOMC view of a gradually improving labor market and could push up Fed funds rate expectations, thereby supporting the dollar.
Canada’s unemployment rate for November is also coming out. The net change in employment is no longer following the switching pattern it did in the recent months.
Currency Titles:
EUR/USD in a consolidative mode
GBP/USD near the 1.5600 line again
Gold plummets after Swiss “No” vote
WTI keeps falling
EUR/JPY near 148.00
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Currencies Text:
EUR/USD moved in a consolidative manner on Friday between the support line of 1.2430 (S1) and the resistance of 1.2490 (R1). As long as the rate stays below the black downside resistance line taken from back at the high of the 15th of October, I would consider the near-term bias to be to the downside and I would expect the rate to challenge again the 1.2400 (S2) line in the close future. On the daily chart, the overall trend of EUR/USD stays to the downside, but given the positive divergence between our daily oscillators and the price action, I would prefer to see a decisive dip below 1.2360 (S3) before getting more confident on longer-term downtrend. Such a break is likely to pave the way for the 1.2250 area, defined by the lows of August 2012.
• Support: 1.2430 (S1), 1.2400 (S2), 1.2360 (S3).
• Resistance: 1.2490 (R1), 1.2530 (R2), 1.2575 (R3).
GBP/USD slid after finding resistance near 1.5800 (R2). Today, during the Asian morning, the rate found support again near the 1.5600 (S1) line. I would expect a clear and decisive dip below that support obstacle to pull the trigger for the psychological zone of 1.5500 (S2). Shifting our attention to our short-term oscillators, I see that both of them dipped below their black upside support lines. Moreover, the RSI declined to hit its 30 line, while the MACD fell below both its zero and signal lines. These signs designate negative momentum and amplify the case that we are likely to see Cable lower in the near future. As for the broader trend, the price structure remains lower peaks and lower troughs below the 80-day exponential moving average, thus I would consider the overall picture of GBP/USD to stay negative.
• Support: 1.5600 (S1), 1.5500 (S2), 1.5430 (S3).
• Resistance: 1.5730 (R1), 1.5800 (R2), 1.5950 (R3).
Gold gapped down on Monday after Swiss voters rejected a measure in a referendum that would have required the Swiss National Bank to boost its gold reserves. The metal tumbled below the support-turned-into-resistance hurdle of 1160 (R1) and the decline was halted a few dollars below our support line of 1146 (S1). This confirms my view that the 7th – 21st of November recovery was indeed a corrective phase of the longer-term downtrend. I would now expect a clear close below the 1146 (S1) obstacle to pull the trigger for the 1132 (S2) line, determined by the low of the 7th of November. Taking a look at our daily momentum oscillators, I see that the 14-day RSI moved below its 50 line and is now pointing south, while the MACD has topped within its negative field and currently looks ready to move below its trigger line.
• Support: 1146 (S1), 1132 (S2), 1125 (S3).
• Resistance: 1160 (R1), 1180 (R2), 1205 (R3).
WTI continued declining on Friday, breaking below the support-turned-into-resistance line of 67.65 (R1). The decline was halted by the 64.00 (S1) line, where a clear downside break is likely to set the stage for extensions towards our next support hurdle, at 62.70 (S2), determined by the low of the 29th of July 2009. Our near-term momentum studies corroborate the negative outlook of WTI. The RSI, already within its oversold zone, found resistance at its 30 line and moved lower, while the MACD, already below both its zero and signal lines, continued falling. On the daily chart, the price structure is still lower highs and lower lows below both the 50- and the 200-day moving averages, and this keeps the overall path of WTI to the downside.
• Support: 64.00 (S1), 62.70 (S2), 60.00 (S3).
• Resistance: 67.65 (R1), 70.00 (R2), 71.00 (R3).
EUR/JPY edged higher on Friday, breaking above the resistance (turned into support) line of 147.50 (S1). Today, during the early European morning, the pair is trading near 148.00 and I would expect the bulls to aim for the resistance of 149.00 (R1), determined by the high of the 20th of November. Our momentum indicators support the notion. The RSI moved higher after finding support at its 50 line, while the MACD has bottomed near its zero line and moved above its trigger. As long as the price structure remains higher peaks and higher troughs above both the 50- and the 200-day moving averages, I would consider the bias to be to the upside and I would expect a move above 149.00 (R1) to see scope for extensions towards the psychological zone of 150.00 (R2).
• Support: 147.50 (S1), 146.40 (S2), 145.60 (S3).
• Resistance: 149.00 (R1), 150.00 (R2), 151.00 (R3).
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Market Analysis 02/12/14
Language English
RBA remains on hold The Reserve Bank of Australia kept the official cash rate unchanged, as was universally expected, and repeated that the exchange rate “remains above most estimates of its fundamental value.” In the statement accompanying the decision, the Bank said that recent data on prices confirmed that inflation is running between their 2%-3% but unlike their previous statement they seemed less confident that this is likely to continue. The change in their stance may be attributed to the lower oil prices. On the other hand, they kept their concerns over the labor market which has some time yet before it declines consistently. AUD/USD strengthened following the decision but the move was halted just below 0.8530. The pair has depreciated approximately 2.3% since their last meeting and seems not enough to tone down their comments over an overvalued rate. As mentioned in the statement “A lower exchange rate is likely to be needed to achieve balanced growth in the economy”. The decline in iron ore prices and the downward pressure on prices from the falling oil give me enough reasons to remain bearish on AUD.
As for the country’s data releases ahead of the policy meeting, the current account deficit narrowed a bit in Q3 while building approvals rebounded strongly in October. Both releases exceeded estimates, yet they had a limited impact on the rate that traded stable until the rate decision.
With no other major economic releases overnight, USD remained subdued against most of its peers. It was lower the most against NOK and CAD, which gained following the moderate rebound in oil prices.
On Monday, Moody’s Investors Service downgraded Japan’s credit rating, citing heightened uncertainty over the country’s ability to cut its fiscal deficit after Prime Minister Shinzo Abe decided to delay the next tax increase scheduled to take effect next year. Moody’s downgraded Japan’s debt by one notch to A1 from Aa3, the first downgrade since 2011. USD/JPY surged to a seven-year high of 119.14 following the downgrade, but fell immediately to trade at lower levels than before the announcement and moved sideways since then. Despite the move lower, we maintain our long-term USD/JPY bullish view and could see the current setback as providing renewed buying opportunity.
As for today’s activity, we have a relatively quiet calendar day: Eurozone’s PPI for October is expected to fall at a decelerating pace, still indicating that the deflation risk persists in the region.
From the UK, construction PMI for November is expected to decline a bit. Although it is expected to remain above the 50 level, the overall decline could be attributed to the tighter lending conditions as seen in mortgage approvals released on Monday.
As for the speakers, Fed Chair Janet Yellen gives welcoming remarks to students in Washington and Fed Vice Chairman Stanley Fischer speaks again. Fischer along with the New York President William Dudley who spoke on Monday at separate events, stressed the positive impact from the low oil prices. As for the concerns that lower oil prices will lead to lower inflation, Fed Vice Chairman Fischer said that this is going to be temporary.
Currency Titles:
EUR/USD slightly higher
AUD/USD still within a downside channel
Gold shoots up
WTI corrects higher
GBP/JPY breaks above 186.00
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Currencies Text:
EUR/USD moved slightly higher yesterday but the advance was halted by the black downtrend line taken from back at the high of the 15th of October. As long as the rate stays below that trend line I would still see a negative near-term picture. On the daily chart, the overall trend of EUR/USD stays to the downside, but given the positive divergence between our daily oscillators and the price action, I would prefer to see a decisive dip below 1.2360 (S3) before getting more confident on longer-term downtrend. Such a break is likely to pave the way for the 1.2250 area, defined by the lows of August 2012.
• Support: 1.2430 (S1), 1.2400 (S2), 1.2360 (S3).
• Resistance: 1.2490 (R1), 1.2530 (R2), 1.2575 (R3).
AUD/USD moved higher after finding support at the 0.8415 (S2) barrier and the lower boundary of the black downside channel. As long as the rate is printing lower peaks and lower troughs within that near-term downside channel, I consider the short-term picture to be negative, and I still expect AUD/USD to challenge the 0.8300 (S3) area, defined by the lows of July 2010, in the not-to-distant future. Nevertheless, taking a look at our momentum studies I would stay cautions that yesterday’s rebound may extend a bit more. The RSI is pointing up and appears able to challenge its 50 line any time soon, while the MACD, although below zero, has crossed above its trigger line. I can also spot positive divergence between the MACD and the price action. On the daily chart, since the rate remains below both the 50- and 200- day moving averages, I still see a longer-term downtrend.
• Support: 0.8480 (S1), 0.8415 (S2), 0.8300 (S3).
• Resistance: 0.8600 (R1), 0.8700 (R2), 0.8800 (R3).
Gold shot up yesterday ignoring three resistance barriers in a row. The rally was halted marginally below our resistance hurdle of 1222 (R1) and the metal pulled back to find support near 1205 (S1). With no clear trending conditions in the near-term I would prefer to adopt a neutral stance for now. A dip below 1205 (S1) is likely to extend the pullback, perhaps towards 1180 (S2). On the other hand, a move above 1222 (R1) could set the stage for another upside leg and target our resistance of 1235 (R2). On the daily chart, the yellow metal found resistance near the downtrend line taken from back the high of the 10th of July, and this keeps the longer-term downtrend intact. However, the 14-day RSI moved back above its 50 line, while the daily MACD, already above its trigger, appears ready to challenge its zero line in the close future. These momentum signs give me extra reasons to sit on the sidelines, at least for now.
• Support: 1205 (S1), 1180 (S2), 1165 (S3).
• Resistance: 1222 (R1), 1235 (R2), 1255 (R3).
WTI rebounded on Monday and today, during the early European morning, it is trading slightly below the psychological line of 70.00. Taking a look at our momentum studies, I would stay cautious that the rebound may continue a bit more. The RSI exited its oversold territory and moved higher, while the MACD, although negative, has bottomed and moved above its signal line. However, on the daily chart, the price structure remains lower peaks and lower troughs below both the 50- and the 200-day moving averages, which keeps the overall path of WTI to the downside. Therefore, I would expect the yesterday’s rebound or any extensions of it to provide renewed selling opportunities.
• Support: 64.00 (S1), 62.70 (S2), 60.00 (S3).
• Resistance: 70.00 (R1), 73.20 (R2), 75.50 (R3).
GBP/JPY moved slightly higher on Monday and broke above the resistance (turned into support) line of 186.00 (S1). In my view, such a break could open the way towards the resistance area of 189.00 (R1) hurdle, near the highs of the 3rd of October 2008. Our near-term momentum studies maintain a positive tone. The RSI moved higher after finding support near its 50 line, while the MACD has topped marginally above zero and poked its nose above its trigger line. These signs designate bullish momentum. As long as the pair is trading above both the 50- and the 200-period moving averages, I would consider the overall trend of GBP/JPY to stay to the upside.
• Support: 186.00 (S1), 184.00 (S2), 181.00 (S3).
• Resistance: 189.00 (R1), 190.00 (R2), 192.00 (R3).
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