IronFX - Market Analysis - page 47

[IronFx]

IronFX Daily Commentary | 10/04/15

Language English

• Dollar strengthens all around on good US employment outlook The dollar gained against most of the G10 currencies as well as the EM currencies that we track as the market becomes more and more convinced that the Fed is likely to hike rates this year. The spur was probably the relatively modest rise in jobless claims in the first week of April to 281,000 from the near record-low of 267,000 at the end of March. (The record low for jobless claims was 259k in April 2000, when the population of the country was 12% lower.) There are still several weeks before the claims figures will cover the survey week for the April employment, but the 4-week average of 282.85 is not far above the record low of 266.25, again set back in April 2000. This makes me think that perhaps the poor March nonfarm payrolls were an anomaly caused by the weather and we are likely to see better employment data for April, which will help to convince the doubters on the FOMC. Apparently a lot of other people think this too, because Fed funds rate expectations rose another 4.5 bps in the long end. The Fed funds futures have now totally erased all the move caused by last Friday’s nonfarm payrolls. We are back to where we were before then. It’s not surprising then that the dollar is substantially higher against most of the G10 currencies than it was before the NFP figures came out as the last USD bears capitulate.

• Are the jobless claims an indication of a turn in the US data? Mortgage applications have surged recently, auto sales rose in March and the early signs for next week’s March retail sales look better than the stagnation of the previous three months. Next week’s retail sales figures on Tuesday, Beige Book on Wednesday, housing starts & permits on Thursday, and CPI on Friday will be closely watched for indications about whether the recent US slowdown was only a temporary blip due to weather that is now past, or something more fundamental and lasting that might affect Fed thinking.

• In any event, yesterday’s US 30-year bond auction went poorly as a result of this line of thinking and 30-year yields rose 7 bps. Given the fact that the US rate advantage over Germany is already at a record high, the rise in US yields will only increase the attractiveness of US assets relative to European assets and strengthen the dollar further.

• China inflation stable China’s CPI for March stayed unchanged at 1.4%, contrary to expectations of a slight slowdown, and producer price deflation lessened a bit to -4.6% yoy from -4.8%. Most of the inflation still comes from food prices, which are rising 2.3% yoy; non-food prices are up only 0.9%. China still remains a source of deflationary pressure for the rest of the world, albeit not a worsening source this month. AUD and NZD both weakened slightly on the news, presumably because it means less likelihood of PBOC stimulus? – the “bad news is good news” theory, perhaps – but the impact quickly fades.

• Today’s highlights: During the European session, French industrial production for February is expected to fall, a turnaround from the previous month.

• In Norway, the CPI is forecast to have accelerated in March, probably due to the fact that the effect of lower oil prices is gradually fading. This could add to the country’s strong fundamentals and support the Krone temporarily. Industrial production for February is also coming out but no forecast is available.

• In the UK, industrial production for February is forecast to have risen 0.3% mom after the unexpected fall of 0.1% mom in January. A strong reading could prove GBP-positive.

• In Canada, the highlight will be the unemployment rate for March. The forecast is for the unemployment rate to rise a bit, and the employment to show no change from the month before. The rise in the unemployment rate could weaken CAD at the release.

• We have one ECB and two Fed speakers on Friday’s agenda: ECB Governing Council member Carlos Costa, Richmond Fed President Jeffrey Lacker and Minneapolis Fed President Narayana Kocherlakota speak.

• A “black flamingo” event in Cyprus You may have heard the term “black swan event.” A black swan event is one that is extremely rare and impossible to predict but has a major impact on the world. The 9/11 attack on the World Trade Center, for example, or the inexplicable 37 bps move in US 10-year Treasury yields in one day last October, which JP Morgan head Jamie Dimon singled out as an event that in theory should occur only once every 3 billion years, are examples of black swan events. The term comes from the fact that at one time, people thought all swans were white, but it only took the discovery of one black swan to disprove that theory. The concept was popularized by the writer Nassim Nicholas Taleb in his book, The Black Swan: The Impact Of The Highly Improbable. Well, now there’s been a “black flamingo event” in Cyprus. There’s a salt lake near Larnaca, Cyprus, where some 20,000 flamingos come every year to do whatever it is that flamingos do in such places. Among them was spotted this extremely rare – possibly unique -- black flamingo. I hope it isn’t a harbinger of a “black swan event” to come soon in the Greek-speaking world. You can read about it at http://www.reuters.com/article/2015/04/09/us-cyprus-flamingo-idUSKBN0MZ1

Currency Titles:

EUR/USD below 1.0700

GBP/USD broke two supports in a row

USD/JPY testing the 120.40 as a support this time

Gold breaks below 1200

WTI struggles to remain above 50

Currencies Image Url:

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/10April2015/EURUSD.PNG

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/10April2015/GBPUSD.PNG

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/10April2015/USDJPY.PNG

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/10April2015/XAU.PNG

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/10April2015/WTI.PNG

Currencies Text:

• EUR/USD fell on Thursday and broke below our support-turned-into-resistance level of 1.0710 (R1). The move was halted at our support line of 1.0650 (S1). The break below 1.0710 (R1) also signaled the break below the neckline of a double top formation, and along with the earlier break of the lower boundary of an ascending triangle formation, amplifies the case for further declines. Our short-term momentum indicators support the notion of further declines as both of them indicate accelerating bearish momentum. The RSI found resistance at its 30 line and points down, while the MACD lies below its trigger and zero lines with no signs of bottoming. A clear and decisive break of the 1.0650 (S1) obstacle increases the likelihood for another test of the 1.0460/1.0500 zone in the not-too-distant future. On the daily chart, the bigger trend remains to the downside. EUR/USD is printing lower highs and lower lows below both the 50- and the 200-day moving averages.

• Support: 1.0650 (S1), 1.0600 (S2), 1.0500 (S3)

• Resistance: 1.0710 (R1), 1.0860 (R2), 1.0950 (R3)

• GBP/USD plunged on Thursday and broke two support lines in a row. The drop found support at 1.4680 (S1) level, which happens to be near the levels Cable has been oscillating since the 19th of March. Therefore, I would wait for a clear break of that territory to get confident for further declines. The mixed picture of our momentum indicators adds to my wait-and-see stance. Despite the sharp decline, the RSI remained marginally above its 30 line and even moved sideways with it, while the MACD, already below its trigger line, moved further into negative territory. These momentum indicators support my view that it is preferable to wait for a clear break below the 1.4680 (S1) support hurdle for another leg down. Otherwise we could see a minor bounce up towards 1.4800 (R2) again.

• Support: 1.4680 (S1), 1.4630 (S2), 1.4550 (S3)

• Resistance: 1.4740 (R1), 1.4800 (R2), 1.4890 (R3)

• USD/JPY advanced further on Thursday and broke above our resistance -turned-into- support line of 120.40 (S1). During the early European morning the pair is testing the 120.70 (R1) resistance hurdle. A break above that level is needed to extend the advance, perhaps for a test of our next resistance line of 121.20 (R2). Our short-term momentum indicators support the notion for further advances. The RSI is just below its 70 line pointing higher, while the MACD lies above both its trigger and zero lines. On the daily chart the pair is trading above the 50- and 200-day moving averages, keeping the overall uptrend intact.

• Support: 120.40 (S1), 119.60 (S2), 119.10 (S3)

• Resistance: 120.70 (R1), 121.20 (R2), 121.60 (R3)

• Gold moved in a consolidative mood on Thursday, staying within the 1200 (R1) resistance and 1190 (S1) support lines. I believe that the break below the black uptrend line taken from the lows of 17th of March and the 200-period moving average has switched the near-term bias negative again. A break below the 1190.00 (S1) support line is likely to trigger further bearish extensions, perhaps towards our next support level of 1180 (S2). Looking at our momentum signs however, I would be careful about the possibility of a minor bounce up first before further declines. The RSI found support slightly above its 30 line, while the MACD shows signs of bottoming and seems willing to cross its trigger line at any time soon. Therefore we may see a test of the 1200 (R1) resistance line before the bears seize control again.

• Support: 1190 (S1), 1180 (S2), 1168 (S3)

• Resistance: 1200 (R1), 1210 (R2), 1220 (R3)

• WTI consolidated on Thursday, remaining above the 50 level and above the 50-period moving average. The restrained mood of investors is evident in our momentum studies as well. The RSI is moving along its 50 line pointing sideways, while the MACD, although below its trigger line, shows signs of bottoming near the zero level. I still believe that the next move is likely to be to the upside but I would wait for a break of the well-tested 54.20 (R2) resistance area to get confident about the possibility of further bullish extensions. In such event, we could see a confirmation of the inverted head and shoulders formation and WTI could rise to near 60 again. On the daily chart, WTI is trading above its 50-day moving average, which also keeps the near-term bias slightly to the upside. All the same, the break of 54.20 (R2) is needed to support further advances, in my view.

• Support: 49.85 (S1), 48.60 (S2), 47.00 (S3)

• Resistance: 52.20 (R1), 54.20 (R2), 55.00 (R3)

Benchmark Currency Rates:

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/10April2015/BENCHMARK.PNG

Market Summary Url:

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/10April2015/TABLE.PNG

currency tags:

EUR

More...

[IronFx]

IronFX Daily Commentary | 13/04/15

Language English

• Dollar to rally further as monetary policy diverges Those of you who trade the nonfarm payrolls should write a note about the last week in your trading notebook in red ink. The nonfarm payrolls had the biggest miss in a little over a year and yet the Fed funds futures rate expectations rose every day the following week. A week later (i.e., today) the dollar is opening higher than it was a week ago against all the G10 currencies and most of the EM currencies we track. EUR/USD reached 1.0568 in late European/early New York trading on Friday, almost taking out the recent low of 1.0458 set on March 15th, while GBP/USD did make a new low for this cycle of 1.4587 after disappointing industrial production and construction figures coupled with rising political uncertainty. The lesson is that nonfarm payrolls are important but not decisive. The FOMC has considerable discretion, so the way officials interpret the data is what matters. Friday we heard Richmond Fed President Lacker echo comments from other FOMC members that the recent weak data “may be attributable to unseasonably adverse weather.” He said that at the March FOMC meeting there was a “pretty substantial” number of people in favor of raising rates in June. The minutes said “several” people were in favor, but the Fed has never quantified how many constitute “several.” From what we hear from participants, many of them still want to start tightening at the earliest possible moment. This monetary policy divergence remains the basis of support for USD.

• Canadian statistics boost CAD temporarily CAD had a few good moments on Friday after it was reported that jobs unexpectedly rose in March, in part because of hiring in the natural resource industry – making it even more surprising. Meanwhile, housing starts were up sharply in the same month. The news adds to other recent data, such as a narrowing trade deficit in February and smaller-than-expected contraction in GDP in Q1, to ease fears expressed by the Bank of Canada that weakness in the economy might be “front-loaded” in Q1. It therefore makes it even less likely that the Bank of Canada will cut rates this week (see below).

• Incredibly disappointing Chinese exports spur stock market rally If you thought it was hard to trade the NFP, imagine trying to anticipate moves in Chinese stocks! The March trade data released today showed an unexpected collapse in exports, which fell 15.0% yoy (expected: +9.0%). The trade surplus unexpectedly fell to USD 3.1bn (expected: USD 40.1bn) as a result. The March figures are erratic and often low; for example, the country had a trade deficit in March 2013 and March 2010. Nonetheless, combined with weak exports from South Korea (down on a yoy basis each month for the first three months of the year) they suggest a weak external environment is likely to add to sluggish domestic demand and slowing investment to put pressure on the Chinese economy. Result: Shanghai stocks up 1.5%! One money manager quoted on Bloomberg explained it nicely: “The trade figures aren’t good but that’ll lead to market expectations of more stimulus.” In other words, bad news is good news. The problem is, I don’t think the government is likely to launch the kind of debt-fuelled stimulus program that the market is hoping for, and even if it tried, the marginal efficiency of additional fiscal stimulus would probably be pretty low, given how much has been done already. I expect investors to be disappointed eventually and for the market to fall back. That would have serious implications for AUD. AUD/USD fell sharply this morning after the trade figures came out. I remain bearish on AUD.

• Commitment of Traders report shows investors still bearish EUR The COT report showed that investors closed out a bit of their short EUR positions but nothing special; they remain overwhelmingly short EUR and overwhelmingly long the DXY index.

• Today’s highlights: The calendar is very light today. The only noteworthy indicator during the European day is the Swiss National Bank weekly sight deposit data, and that hasn’t been very noteworthy recently. Deposits have been steady and indeed if anything drifting lower over the past month, indicating that the SNB has not been intervening in the market.

• There are no major events or indicators released during the US session and no speakers on Monday’s agenda.

• As for the rest of the week, the big day is Wednesday when we have two central bank policy meetings: the ECB and the Bank of Canada. At their last meeting, the ECB announced the details of the QE program and the first month of its implementation has already been successful. The Bank achieved its 60bn target, as it bought around 50bn government bonds and another 10bn from its other programs. Therefore, expectations for new measures are limited. There could be some comments about Greece, in particular the size of Greek banks’ use of ELA. The Bank of Canada is expected to keep rates unchanged, so the market impact will depend on the tone of the statement. The recent good data could bring a more optimistic statement that would cause CAD to firm, especially given the speculative community’s short CAD position.

• On Tuesday, we get UK’s CPI for March. It’s expected to remain at zero, with the core rate expected to stay at 1.2%. As the inflation rate falls this pushes back expectations of a rate hike. Thus, a drop here could be negative for GBP. In the US, retail sales for March are coming out. Both figures are forecast to have rebounded after falling in February. The strong report could add to the greenback’s strength.

• On Wednesday besides the two central bank meetings we also have a number of important indicators from China: Q1 GDP, retail sales, industrial production and fixed asset investment for March. Q1 GDP is expected to slow to 7.0% yoy from 7.3%. This is the government’s target so it wouldn’t necessarily set off any alarm bells. However, a below-expectations growth rate is likely to weaken AUD and NZD.

• On Thursday, Australia’s unemployment rate for March is expected to remain unchanged at 6.3%, while employment is expected to increase by the same figure as in February. This could strengthen AUD a bit. In the US, we get housing starts and building permits for March. Even though the data are likely to show a mixed condition, a rise in housing starts and a decline in building permits, the overall trend is consistent with an improving housing market, which could boost US confidence and support USD.

• On Friday, UK employment data are due out. The unemployment rate for February expected to fall slightly, which normally could be GBP-positive, but at the same time the growth in average weekly earnings is expected to slow, so net net, it’s probably going to be a non-event or even GBP-negative. From the US and Canada, we get the CPIs for March.

• Finally, the G20 finance ministers & central bank governors meet in Washington on Thursday ahead of the spring meeting of the IMF. All the grandees of global finance will be there and are likely to make a lot of speeches. The US Treasury last week framed what’s likely to be a major debating point when it criticized several countries for excessive reliance on monetary policy and insufficient use of fiscal policy to stimulate demand. As a result Germany may come in for some criticism for its current account surplus, but the country is sure to ignore any such criticism, as it has up to now.

Currency Titles:

EUR/USD breaks below 1.0650

EUR/JPY tumbles below 128.00

GBP/USD looks willing to break below 1.4600

Gold hits resistance at 1210

WTI breaks the upper bound of a falling wedge

Currencies Image Url:

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/13April2015/EURUSD_13Apr2015.PNG

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/13April2015/EURJPY_13Apr2015.PNG

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/13April2015/GBPUSD_13Apr2015.PNG

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/13April2015/XAUUSD_13Apr2015.PNG

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/13April2015/CLK5_13Apr2015.PNG

Currencies Text:

• EUR/USD tumbled on Friday, breaking below the support (now turned into resistance) barrier of 1.0650 (S1). The fall was halted at 1.0580 (S1). A decisive break of that level could set the stage for another test of the psychological zone of 1.0500 (S2). After another unsuccessful attempt to move above 1.1045, the rate started sliding and on Thursday, the move below 1.0715 (R2) signaled the completion of a double top formation. Having this in mind, I would consider the short-term bias to be negative. Our daily momentum indicators detect bearish momentum and amplify the case for further declines. The 14-day RSI hit resistance slightly above its 50 line and turned down, while the daily MACD, already negative, has topped and fallen below its signal line. In the bigger picture, EUR/USD is still trading below both the 50- and the 200-day moving averages. A clear close below 1.0460 (S3) will confirm a forthcoming lower low and trigger the resumption of the larger downtrend.

• Support: 1.0580 (S1), 1.0500 (S2), 1.0460 (S3)

• Resistance: 1.0650 (R1), 1.0715 (R2), 1.0800 (R3)

• EUR/JPY collapsed, falling below the support (turned into resistance) of 128.35 (R1) and completing a double top formation. The short-term bias stays negative in my opinion, and I would expect a possible break below 127.20 (S1) to pave the way for the psychological territory of 125.00 (S2), marked by the low of the 13th of June 2013. Looking at our short-term oscillators however, I would be careful that a possible upside corrective move could be on the cards. The RSI appears willing to exit its oversold territory, while the MACD, although negative, shows signs of bottoming. As for the broader trend, I still see a longer-term downtrend. A decisive close below 127.20 (S1) would confirm a forthcoming lower low on the daily chart, and signal the continuation of the larger downtrend. My only concern is that there is still negative divergence between both the daily oscillators and the price action.

• Support: 127.20 (S1), 125.00 (S2), 123.85 (S3)

• Resistance: 128.35 (R1), 128.80 (R2), 129.45 (R3)

• GBP/USD continued sliding on Friday and today in the early European morning, it appears ready to challenge the 1.4600 (S1) support obstacle. If the bears are strong enough to overcome that line, I would expect them to trigger extensions towards the psychological zone of 1.4500 (S2), also marked by the low of the 11th of June 2010. Zooming out to the daily chart, I see that our daily oscillators detect strong downside momentum. The RSI slid after finding resistance slightly below its 50 line, while the MACD, already negative, has topped and fallen below its trigger line. The overall trend is negative as well. The break below 1.4735 (R2) signaled the downside exit of a sideways range and triggered the resumption of the larger downtrend.

• Support: 1.4600 (S1), 1.4500 (S2), 1.4400 (S3)

• Resistance: 1.4670 (R1), 1.4735 (R2), 1.4800 (R3)

• Gold raced higher on Friday, but during the Asian morning Monday, it hit resistance at 1210 (R1) and turned down. The precious metal is trading within a possible short-term downside channel, and the possibility for a lower high around 1210 (R1) still exists. Consequently, I would expect the forthcoming wave to be negative, perhaps for a test at the support barrier of 1192 (S1). Switching to the daily chart, I see that on Monday, gold formed a shooting star candle after hitting the 50% retracement level of the 22nd of January - 17th of March decline. This makes me believe that the 17th of March – 06th of April recovery was just a corrective move and that the bias is back to the downside.

• Support: 1192 (S1), 1180 (S2), 1165 (S3)

• Resistance: 1210 (R1), 1220 (R2), 1235 (R3)

• WTI raced higher on Friday, breaking above the upper line of a falling wedge formation. During the early European morning Monday, the price seems ready to challenge the resistance hurdle of 52.00 (R1). A clear move above that obstacle is likely to trigger further bullish extensions, perhaps towards the next resistance, at 52.75 (R2). Our daily oscillators indicate bullish momentum and support the notion. The 14-day RSI stands above its 50 line and points somewhat up, while the daily MACD lies above both its trigger and zero lines. Although I would expect WTI to move higher in the short run, I would adopt a flat stance as far as the overall picture is concerned. The reason is because the price has been oscillating between 44.00 and 55.00 since the beginning of the year with no clear trending structure.

• Support: 51.20 (S1), 50.30 (S2), 49.65 (S3)

• Resistance: 52.00 (R1) 52.75 (R2), 54.00 (R3)

Benchmark Currency Rates:

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/13April2015/Benchmark.JPG

Market Summary Url:

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/13April2015/Table.JPG

currency tags:

EUR

More...

[IronFx]

IronFX Daily Commentary | 14/04/15

Language English

Game may be up for Greece; UK CPI, US retail sales, China data ahead The dollar is opening generally weaker in Europe Tuesday morning with no real news that I can find behind the move. Fed funds rate expectations retreated modestly, the first fall in a week, even though San Francisco Fed President Williams said he saw less risk that the US economy might fall back into recession once the Fed starts raising interest rates. Among the G10 currencies, the dollar was higher only vs EUR, while JPY was the biggest gainer (see below).

FT says Greece preparing for default Today’s Financial Times says that Greece is preparing to declare a debt default unless it can reach a deal with its international creditors by the end of April. It says the government has decided to withhold €2.5bn of payments due to the IMF in May and June if no agreement is struck. The paper cautioned that the warning could just be a negotiating tactic, but said it nevertheless underlines the reality that the country is rapidly running out of money. “We have come to the end of the road . . . If the Europeans won’t release bailout cash, there is no alternative [to a default],” the paper quoted one government official as saying. Another Greek official denied the story, however. A default would almost certainly lead to the suspension of emergency ECB liquidity assistance for the Greek financial sector, the closure of Greek banks, capital controls and wider economic instability. The German newspaper Frankfurter Allgemeine Sonntagszeitung (FAS) said that the Euro Working Group of deputy finance ministers last Thursday gave Athens a six working day deadline (apparently until Monday, April 20th) to present a revised economic reform plan before euro zone finance ministers meet on April 24 to decide whether to unlock emergency funding to keep Greece afloat. So it seems that the moment of crisis may be at hand. If the country cannot produce an acceptable plan by next Monday, then it looks like the game may be up. Of course, “acceptable” is a flexible term. The likeliest course of events, I believe, is that the Greeks come up with something a bit more to the EU’s liking and the EU deems it sufficient in order to prevent a crisis. However, nothing is ever certain in human events.

JPY jumps on comments by Abe advisor Koichi Hamada, an advisor to Japanese PM Abe, yesterday said that “selling of the yen is coming closer to its limit bit by bit.” He said that based on purchasing power parity (PPP), 105 might be a more appropriate level for USD/JPY. That largely agrees with what the OECD calculates for Japan. Nonetheless, PPP has never been a major constraint for JPY. USD/JPY was overvalued on PPP for years, so why can’t it be undervalued for years, too? There does seem to be some political resistance nowadays in Japan to further weakening of the yen. However, the fact that the Bank of Japan has failed so completely in its attempt to reach a 2% inflation target, plus the need for Japanese exports to remain competitive, makes me believe that they will probably not only resist appreciation of the currency but also encourage further depreciation. I remain bearish on the yen.

Today’s highlights: During the European day, Sweden’s PES unemployment rate for March fell to 4.0% from 4.2%, a deeper decline than the expected 4.1%. Sweden’s CPI for March is forecast to have accelerated to +0.3% yoy from +0.1% yoy previously. On the 18th of March, the Riksbank took further steps to combat low consumer price growth. The Bank cut interest rates to -0.25% and expanded its government-bond purchase plan outside of its schedule for policy decisions. With the inflation rate moving in the right direction, I would expect the bank to remain on hold at its next policy meeting on the 29th of April, and wait to see if the positive effects of the aforementioned easing measures continue. Although the Bank does not like a strong Krona, the CPI numbers are likely to support the currency at least temporarily. Having in mind the Bank’s stance against SEK and that USD is the most attractive currency among its major counterparts, I would expect a possible decline in USD/SEK tomorrow following the CPI figures to provide renewed buying opportunities.

The ECB publishes its Bank Lending Survey for Q1 2015. This will be the first survey after the Bank initiated its QE program, so it may show whether the ECB’s efforts have boosted banks’ willingness to lend. Lending in January was down only 0.1% yoy and looks poised to move into positive territory. It’s fallen on a yoy basis every month since May 2012.

In the UK, we get the CPI for March. Both the headline and core inflation rates are forecast to have remained unchanged at 0.0% yoy and +1.2% yoy respectively. Bearing in mind the warning the Bank of England’s Inflation Report that the CPI will most likely turn negative, a dip into deflation would not be much of a surprise. This could push further back expectations of a rate hike and increase the selling pressure on sterling. As the graph shows, prices in stores are falling considerably faster than the overall inflation rate, meaning downward pressure on prices remains. I still expect GBP/USD to continue its slide and to challenge the psychological zone of 1.4500 in the near term. The UK PPI for March is also coming out.

In the US, retail sales for March are due out. Headline retail sales are forecast to have risen +1.0% mom in March, a turnaround from -0.6% mom in February. The core rate (excluding the volatile items of auto and gasoline) is expected to rebound as well to +0.6% mom from -0.2% mom. A positive figure would support the theory that the weakness in the preceding two months was mainly due to the harsh weather, and could add to the dollar’s strength. The US PPI data for the same month are also to be released.

Riksbank Governor Stefan Ingves and Norges Bank Governor Oeystein Olsen speak today.

Tomorrow morning, before the European day begins, a lot of China data for March is released: retail sales, industrial production, fixed asset investment and the all-important Q1 GDP. This is important as the January and February data is distorted by the Chinese New Year, so March is really the first month that we get to see the underlying picture clearly. Retail sales, IP and FIA are expected to grow at about the same pace as they did during the first three months of last year, showing no acceleration but no slowdown either. GDP on the other hand is expected to slow to 7.0% yoy from 7.3%. This is the government’s target so it wouldn’t necessarily set off any alarm bells. However, there may be some doubts about whether they can maintain that growth rate in the future. Bloomberg calculates an estimated GDP figure based on frequently released data and their estimate has fallen to 6.3%. So the risk to that figure, and the AUD and NZD, is probably on the downside.

Currency Titles:

EUR/USD hits support slightly above 1.0500

EUR/GBP completes a double top formation

GBP/JPY appears ready to move below 175.50

Gold trades near the 200-period EMA

WTI hits resistance at 53.00

Currencies Image Url:

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/14April2015/EURUSD_14Apr2015.PNG

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/14April2015/EURGBP_14Apr2015.PNG

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/14April2015/GBPJPY_14Apr2015.PNG

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/14April2015/XAUUSD_14Apr2015.PNG

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/14April2015/CLK5_14Apr2015.PNG

Currencies Text:

EUR/USD continued trading lower on Monday, but hit support slightly above 1.0500 (S1) and rebounded somewhat. Taking a look at our momentum studies, I would be watchful that the bounce may continue for a while before the next leg down. The RSI exited its oversold territory, while the MACD has bottomed and crossed above its trigger. Today, US retail sales for March are forecast to have rebounded. This could be the trigger for the next leg down and perhaps a test at the psychological zone of 1.0500 (S1). Having I mind that the break below 1.0715 (R3) signaled the completion of a double top, I would consider the short-term bias to stay negative. In the bigger picture, EUR/USD is still trading below both the 50- and the 200-day moving averages. A clear close below 1.0460 (S2) will confirm a forthcoming lower low and trigger the resumption of the larger downtrend.

• Support: 1.0500 (S1), 1.0460 (S2), 1.0360 (S3).

• Resistance: 1.0600 (R1), 1.0650 (R2), 1.0715 (R3).

EUR/GBP traded lower yesterday and broke below the support (now turned into resistance) hurdle of 0.7220 (R1) to complete a double top formation. The short-term bias is therefore to the downside and I would expect the rate to challenge our support line of 0.7160 (S1). A break below that obstacle is likely to pave the way for our next support at 0.7100 (S2). Nevertheless, today we get the UK CPI for March, and there is a chance for the headline rate to turn negative. Having that in mind, I would stay cautious of a possible corrective bounce above 0.7220 (R1) before the bears seize control again. On the daily chart, the completion of the aforementioned double top confirms that the 11th of March – 3rd of April recovery was just a 38.2% retracement of the 16th December – 11th of March decline, and that the overall downtrend is gaining momentum again.

• Support: 0.7160 (S1), 0.7100 (S2), 0.7030 (S3).

• Resistance: 0.7220 (R1), 0.7275 (R2), 0.7315 (R3).

GBP/JPY slid after hitting resistance at 176.50 (R1). During the early European morning Tuesday, the rate is heading towards the support line of 175.50 (S1), where a clear break could open the way for a test at our next support territory of 174.00 (S2). A negative UK CPI rate could be the catalyst for such a breach. Our daily momentum studies detect strong downside momentum and magnify the case for another leg down. The 14-day RSI hit resistance slightly below its 50 line and turned down, while the daily MACD, already negative, has crossed again below its signal line. As for the bigger picture, the rate has moved well below the 200-day moving average. Moreover, a daily close below the 175.50 (S1) line could complete a 5-month failure swing top and perhaps turn the overall outlook negative.

• Support: 175.50 (S1), 174.00 (S2), 173.00 (S3).

• Resistance: 176.50 (R1), 177.55 (R2), 178.40 (R3).

Gold slid on Monday, but the decline was stopped near the 50- and the 200-period moving averages. The precious metal is still trading within a possible short-term downside channel, thus I would consider the short-term picture to be cautiously negative. I still expect another test at 1192 (S1), where a clear break could open the way for our next support zone at 1180 (S2). Switching to the daily chart, I see that on the 6th of April, gold formed a shooting star candle after hitting the 50% retracement level of the 22nd of January - 17th of March decline. This makes me believe that the 17th of March – 06th of April recovery was just a corrective move and that the bias is back to the downside.

• Support: 1192 (S1), 1180 (S2), 1165 (S3).

• Resistance: 1210 (R1), 1220 (R2), 1235 (R3).

WTI raced higher on Monday, hit resistance at 53.00 (R1), pulled back and rebounded from near the 51.80 (S1) zone. Having in mind that on Friday, WTI broke above the upper line of a falling wedge formation, I would expect the price to trade higher at least in the short run. A clear move above the 53.00 (R1) hurdle is likely to pull the trigger for the 54.00 (R2) zone, defined by the highs of the 7th of April. Our daily oscillators indicate bullish momentum and support the notion. The 14-day RSI stands above its 50 line and up, while the daily MACD lies above both its trigger and zero lines, pointing north as well. Although I would expect WTI to move higher in the short run, I would adopt a flat stance as far as the overall picture is concerned. The reason is because the price has been oscillating between 44.00 and 55.00 since the beginning of the year with no clear trending structure.

• Support: 51.80 (S1), 51.00 (S2), 50.30 (S3).

• Resistance: 53.00 (R1) 54.00 (R2), 55.00 (R3).

Benchmark Currency Rates:

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/14April2015/Benchmark.JPG

Market Summary Url:

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/14April2015/Table.JPG

currency tags:

EUR

More...

[IronFx]

IronFX Daily Commentary | 15/04/15

Language English

Weak US data calls US recovery theory into question US retail sales have fallen for the last three months in a row, so with the market recently thinking that the US economy was gradually recovering, expectations were for a recovery in retail sales. However the figures, while higher, missed expectations and the previous two months’ figures were revised down. Small business confidence also fell. On top of which, the IMF revised down its US growth estimates for this year and revised up its estimates for the Eurozone. As a result, Fed funds rate expectations fell back and USD bulls threw in the towel, at least temporarily. The only G10 currency to weaken vs USD was AUD, owing to the weak Chinese data (see next). The oil-related currencies (NOK, CAD, RUB and BRL) were the strongest ones as WTI jumped more than 2%. Our technical analysis suggests oil is likely to move still higher (see below), so these currencies may well have further to go.

China data misses expectations, except GDP The slew of Chinese data out this morning showed continued growth, albeit weaker than expected. Industrial production in particular was below expectations, in fact weaker than all 40 estimates in the Bloomberg survey, while retail sales and fixed asset investment missed slightly. GDP however was spot on the market consensus at 7.0% yoy, exactly at the government’s target. However, if GDP is 7.0% in Q1, then it has to be at least 7.0% every other quarter in order to meet the target for the year. With output, consumption and exports weak, is that likely to happen? Significantly, Chinese stocks fell sharply on the news, in contrast to the good response to Monday’s weaker-than-expected export data. With the weak export data, hopes of government stimulus gave rise to a “bad news is good news” response, but the reaction was different today – perhaps an acknowledgement that the slowdown is more than can be rectified through yet another round of fiscal stimulus? While I expect the government to step in to some degree, officials are determined to restructure the economy and to reduce pollution, and that will require a change in the growth model. Some slowdown seems inevitable. That’s likely to weaken AUD and, to a lesser degree, NZD.

Hamada: I didn’t say what I said Koichi Hamada, an advisor to Japan PM Abe, Monday said JPY was too weak and USD/JPY at 105 would be “appropriate.” Or did he? Tuesday he “clarified” that 120 was “acceptable” and that he would not object to further easing by the BoJ. Looks like someone got on the phone to him and told him what the party line is! As I said yesterday, I still think the Japanese authorities will encourage further yen depreciation. Hamada’s quick backpedalling is a good indication of what they’re really thinking. We’ll learn more when PM Abe addresses the US Congress on April 29th.

Today’s highlights: During the European day, the main events will be the ECB and the Bank of Canada policy meetings.

The ECB meetings last year were the big days for EUR/USD. EUR/USD was usually much more volatile than average on ECB meeting days. Note from the graph how volatile the market was in January, when they announced the details of the QE program, but it was just business as usual for the FX market during the March meeting. With no changes in the Bank’s policy likely for the time being, I would expect the FX market’s performance to be more like it was in March rather than January.

The big question last month was whether the ECB would be able to find EUR 60bn of bonds to buy each month, but the first month of the QE program has been successful. Expectations for new measures are limited. It’s been discussed whether the ECB might cut the deposit rate further, since it will not purchase bond yielding less than the deposit rate. I believe that something like that is unlikely, at least at this early stage. Another cut would just lead to bond yields declining towards the new rate, meaning that the ECB would simply have to buy bonds at higher prices without necessary having more to purchase.

There could be questions about whether the ECB might begin tapering its QE program earlier than scheduled if, as it now projects, inflation rises back above 1.0% at the beginning of 2016 as the effects of low energy prices drop out of the annual rate of change. I expect Draghi to emphasize that the ECB is planning to continue its easing programs as scheduled. He has argued that “the Governing Council will take a holistic perspective when assessing the path of inflation. It will evaluate the likelihood for inflation not only to converge to levels that are closer to 2%, but also to stabilize around those levels with sufficient confidence thereafter”. The “taper tantrum” in the US showed that even talking about tapering can send rates up, which could halt the recovery as it is getting started.

It is likely that we will hear again questions about Greece. Greece did not get much attention last time, as the focus was on the QE details. This time I expect questions about the appropriate conditions for the ECB to re-start financing the Greek economy and the limits to ELA. Finally, there could be some questions about the sharp drop in the euro, but the ECB’s view has always been that they do not target the euro and so it is not for them to discuss.

The Bank of Canada surprised the market in March by keeping rates unchanged and saying that “the risks around the inflation profile are now more balanced.” Accordingly, the market looks for no move at today’s meeting. The Canadian dollar and oil prices have been fairly stable since the last meeting. The BoC said it expects that that “most of the negative impact from lower oil prices will appear in the first half of 2015,” but several recent statistics (employment, housing starts, trade) have surprised on the upside. I too expect them to keep rates steady. With no change in rates, the market impact will depend on the tone of the statement and the Bank’s inflation and growth projections. I expect an optimistic statement. Moreover, some people could be positioned for a cut. I would therefore expect a further decline in USD/CAD (i.e., CAD to firm). CAD may well be more volatile today than EUR.

As for today’s economic indicators, the final figure of Germany’s CPI for March is coming out, and as usual is expected to confirm the preliminary release. The French CPI rate is expected to exit deflationary conditions and to show no changes in consumer prices. Eurozone’s trade balance is also coming out.

In the US, the Empire State manufacturing index is expected to show that business conditions for NY manufactures have improved in April, while the US industrial production for March is expected to have declined after ticking up in February. That could put further pressure on USD after yesterday’s disappointing retail sales numbers. The NAHB housing market index is for April is also coming out, while the Federal Reserve releases the Beige Book.

Besides Draghi and Poloz, BoJ Governor Haruhiko Kuroda and St. Louis Fed President James Bullard speak.

Currency Titles:

EUR/USD firms up and hits resistance near 1.0715

USD/JPY rebounds from 119.00

USD/CAD trades lower ahead of the BoC policy meeting

Gold find support near the lower line of a downside channel

WTI breaks above 53.00

Currencies Image Url:

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/15April2015/EURUSD_15Apr2015.PNG

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/15April2015/USDJPY_15Apr2015.PNG

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/15April2015/USDCAD_15Apr2015.PNG

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/15April2015/XAUUSD_15Apr2015.PNG

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/15April2015/CLK5_15Apr2015.PNG

Currencies Text:

EUR/USD raced higher yesterday after the US retail sales rose by less than anticipated in March, while the US PPI fell 0.8% yoy following a 0.6% yoy decline in the preceding month. Nevertheless, the shoot up stopped fractionally below the 1.0715 (R1) resistance hurdle, which is the 38.2% retracement level of the 6th - 13th of April decline. I believe that yesterday’s move was just a corrective move for a test at the neckline of the double top, and that we are likely to see the pair trading lower in the near future. A clear dip below the 1.0600 (S1) line could set the stage for extensions towards the psychological zone of 1.0500 (S2). Today’s movement will depend largely on ECB President Draghi’s comments at the press conference following the ECB policy decision. In the bigger picture, EUR/USD is still trading below both the 50- and the 200-day moving averages. A clear close below 1.0460 (S3) will confirm a forthcoming lower low and trigger the resumption of the larger downtrend.

• Support: 1.0600 (S1), 1.0500 (S2), 1.0460 (S3).

• Resistance: 1.0715 (R1), 1.0800 (R2), 1.0890 (R3).

USD/JPY edged up yesterday after hitting support at 119.00 (S1), near the lower bound of an upward sloping channel that had been containing the price action since the 26th of March. I believe that the short-term bias is positive and I would expect the bulls to challenge the psychological zone of 120.00 (R1) soon. A break above that key barrier is likely to extend the bullish wave, perhaps towards the next resistance at 120.80 (R2), defined by the high of the 13th of April. On the daily chart, the rate is trading near the 50-day moving average, well above the 200-day one, also above the upper line of the triangle formation that had been containing the price action since November. This keeps the overall uptrend intact, but given that there is still negative divergence between the daily oscillators and the price action, I would prefer to stand aside for now as far as the overall picture is concerned.

• Support: 119.00 (S1), 118.35 (S2), 118.00 (S3).

• Resistance: 120.00 (R1), 120.80 (R2), 121.20 (R3).

USD/CAD fell sharply yesterday after the disappointing US data and hit support at 1.2440 (S1) before rebounding somewhat. Today the BoC meets to decide on its benchmark interest rate. While no change in policy is expected, the recent good data coming out from Canada could bring a more optimistic statement. This could cause the bears to pull the trigger for another test of 1.2440 (S1). A downside break is likely to extend the bearish wave, perhaps towards 1.2385 (S2), defined by the lows of the 26th of February and the 8th of April. Zooming out to the daily chart, I see that the rate has been oscillating between the 1.2385 (S2) and 1.2800 barriers since the 26th of January. Moreover, there is negative divergence between both our daily oscillators and the price action. Therefore, I prefer to take to the sidelines as far as the overall picture of this pair is concerned.

• Support: 1.2440 (S1), 1.2385 (S2), 1.2300 (S3).

• Resistance: 1.2520 (R1), 1.2565 (R2), 1.2650 (R3).

Gold traded lower on Tuesday, but after finding support near the lower line of the short-term downside channel, it rebounded somewhat. As long as the precious metal is still trading within the aforementioned channel, I would consider the short-term picture to stay negative. I believe that we are likely to see another test of the lower bound of the channel and the 1180 (S1) support area. Our short-term oscillators support the notion. The RSI, already below its 50 line, has turned down, while the MACD stands below both its signal and zero lines. Switching to the daily chart, I see that on the 6th of April, gold formed a shooting star candle after hitting the 50% retracement level of the 22nd of January - 17th of March decline. This makes me believe that the 17th of March – 06th of April recovery was just a corrective move and that the bias is back to the downside.

• Support: 1180 (S1), 1165 (S2), 1150 (S3).

• Resistance: 1200 (R1), 1210 (R2), 1220 (R3).

WTI continued to trade higher on Tuesday, and managed to break above our resistance (now turned into support) of 53.00 (S1). Having in mind that on Friday, WTI broke above the upper line of a falling wedge formation, I would expect the price to continue to trade higher at least in the short run. I would expect a test at the 54.00 (R1) area, a resistance zone defined by the highs of the 7th of April. An upside break above that resistance could aim for the psychological zone of 55.00 (R2). Our daily oscillators indicate bullish momentum and support the notion. The 14-day RSI stands above its 50 line and points up, while the daily MACD lies above both its trigger and zero lines, pointing north as well. Although I would expect WTI to move higher in the short run, I would hold my flat stance as far as the overall picture is concerned. The reason is because the price has been oscillating between 44.00 and 55.00 since the beginning of the year with no clear trending structure.

• Support: 53.00 (S1), 51.80 (S2), 51.00 (S3).

• Resistance: 54.00 (R1) 55.00 (R2), 55.70 (R3).

Benchmark Currency Rates:

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/15April2015/benchmark.JPG

Market Summary Url:

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/15April2015/Table.JPG

currency tags:

EUR

More...

[IronFx]

IronFX Daily Commentary | 16/04/15

Language English

BoC standing pat doesn't mean the end of the USD rising cycle ECB President Draghi was about as dovish as he could be yesterday. He brushed aside concerns that the Bank’s QE program might taper down or even end earlier than expected. No, the ECB wasn’t having problems finding paper to buy and no, it wasn’t considering reducing its purchases. It would keep them going at the same pace at least until the scheduled ending date of Sep. 2016 and maybe even longer if necessary. The only thing he might have done but didn’t was to lower the deposit rate, currently -0.2%, so that the ECB could buy paper trading at even deeper negative yields. He didn’t say anything about the euro, but his comments that real interest rates might go lower because the ECB would tolerate a move higher in inflation left no doubt that he is not concerned about the level of the currency. I expect that EUR/USD can move to parity and below without any official resistance.

BoC very confident = follows Singapore in not tightening In contrast, the Bank of Canada was in a relatively confident mood about the outlook. “Underneath the effects of the oil price shock, the natural sequence of stronger non-energy exports, increasing investment, and improving labour markets is progressing…the anticipated recovery in growth means that the output gap will be back in line with its previous trajectory later this year.” That means much less need, if any, for further loosening this year. CAD soared as a result and, with the further rise in oil prices, is likely to continue to rise for some time.

Does this mean the end of the USD rising cycle? No! So Canada joins the Monetary Authority of Singapore, which Tuesday kept its monetary policy unchanged, following Australia and India (both on Apr. 7th). Is this the end of the global rate cutting frenzy, which has seen 47 countries (counting the Eurozone as 19 countries) cut rates so far this year? It could at least mean a slowdown in the rate-cutting trend, as oil prices are now some 25% off their lows of just a month ago. Nonetheless, it doesn’t mean the dollar is likely to decline. The monetary policy divergence still exists, just not as aggressively as before. For example, overnight Richmond Fed President Lacker, a voting member of the FOMC, said he saw “a strong case” that rates “should be higher right now.” (Lacker is a known hawk who said on April 10th that he favors hiking rates in June, the earliest date they could do it.) In the last two major US dollar upcycles, the dollar didn’t peak until after US interest rates peaked, and so far short-term US rates haven’t even started to rise, while 10-year yields are still far below where they were even a year ago. I believe the dollar is still in the early stages of its upcycle. It has much much further to go, in my view.

Oil prices soar on smaller-than-expected rise in inventories Even though there were two central bank meetings, it was the oil market that dominated market attention as US inventories rose a much smaller-than-expected 1.3mn barrels in the latest reporting week. This compares with an average of 6.9mn barrels a week YTD before the figure. Moreover, US production fell slightly (-20k b/d). The figures raised hopes that the oil glut in the US is coming to an end as the number of oil rigs in use falls 53% in six months and the market is settling more into balance. Personally I doubt it and still anticipate a surge in production in June, but technically the market seems to be switching direction (see technical section below) and so I would expect to see further temporary gains by the oil-related currencies – NOK and CAD especially – in the next few days.

Australian unemployment falls more than expected Australia’s unemployment unexpectedly fell in March to 6.1% from 6.3% despite a rise in the participation rate while both part- and full-time employment rose more than expected. The news takes some pressure off the RBA to loosen rates and AUD rose sharply to be the 2nd best-performing G10 currency over the last 24 hours, after NOK. AUD was probably boosted too by the fact that Shanghai stocks were up 1.8%, more than erasing yesterday’s 1.2% fall on weak Q1 GDP and weaker-than-expected March industrial production. AUD too may be in for a temporary reversal of its recent downtrend, but I don’t think the situation in China is really likely to turn around so quickly and therefore I remain bearish on AUD over the medium term.

Today’s highlights: During the rest of the day we get data only from the US. Housing starts for March are forecast to return to above 1mn, indicating that February’s decline was probably due to the harsh winter. However building permits, the more forward-looking of the two indicators, are forecast have declined a bit. Nonetheless, the overall trend is consistent with an improving housing market, as indicated by yesterday’s higher-than-expected National Association of Homebuilders (NAHB) index and the rise in mortgage applications over the last several weeks. This could keep the greenback somewhat supported. Initial jobless claims for the week ended on April 11th are expected to come more or less unchanged from the previous week at a relatively low 280k. This would bring the 4-week moving average down to 279k from 282k. This is the week used for the nonfarm payrolls survey and so is likely to support the view that the poor March nonfarm payrolls were an anomaly caused by the weather and we are likely to see better employment data for April, which will help to convince the doubters on the FOMC (and the market). The Philadelphia Fed business activity index for March is forecast to increase a bit.

We have one ECB speaker and four Fed speakers on Thursday’s agenda. During the European day, ECB Vice President Vitor Constancio speaks, while during the US day Fed Vice Chairman Stanley Fischer, Atlanta Fed President Dennis Lockhart, Boston Fed President Rosengren and Cleveland Fed President Loretta Mester speak.

Currency Titles:

EUR/USD shoots up after Draghi’s remarks

USD/JPY hits support at 118.80

AUD/USD rallies on Australia’s better-than-expected job data

Gold breaks above the upper bound of a downside channel

WTI breaks above 55.00

Currencies Image Url:

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/16April2015/EURUSD_16Apr2015.PNG

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/16April2015/USDJPY_16Apr2015.PNG

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/16April2015/AUDUSD_16Apr2015.PNG

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/16April2015/XAUUSD_16Apr2015.PNG

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/16April2015/CLK5_16Apr2015.PNG

Currencies Text:

EUR/USD climbed higher yesterday as ECB President Mario Draghi said that easing initiative has contributed to a further improvement in euro area’s economic outlook. The rate printed a higher low at around 1.0575 (S1) and rallied to print a higher high at around 1.0735 (R1). Having this price development in mind, I would switch my view on the short-term picture cautiously to the upside. This is also supported by our short-term oscillators as well. The RSI edged above its 50 line, while the MACD, already above its signal, is getting closer to its zero line and could obtain a positive sign soon. However, given our proximity to the upper bound of a possible upside channel, I would be careful that a pullback could be in the works. In the bigger picture, EUR/USD is still trading below both the 50- and the 200-day moving averages. Therefore, I would treat any possible near-term advances as corrective moves of the larger downtrend. A clear close below 1.0460 (S3) will confirm a forthcoming lower low and trigger the resumption of the larger downtrend.

• Support: 1.0575 (S1), 1.0500 (S2), 1.0460 (S3).

• Resistance: 1.0735 (R1), 1.0800 (R2), 1.0890 (R3).

USD/JPY traded lower yesterday, but the decline was halted at 118.80 (S1), slightly below the lower line of an upward sloping channel that had been containing the price action since the 26th of March. Subsequently the rate rebounded back within the channel. I believe that the short-term bias is to the upside and I would expect the bulls to challenge the resistance zone of 119.65 (R1). A break above that barrier could target the psychological barrier of 120.00 (R2). On the daily chart, the rate is trading below the 50-day moving average, but well above the 200-day one, also above the upper line of the triangle formation that had been containing the price action since November. This keeps the overall uptrend intact, but given that there is still negative divergence between the daily oscillators and the price action, I would prefer to stand aside for now as far as the overall picture is concerned.

• Support: 118.80 (S1), 118.35 (S2), 118.00 (S3).

• Resistance: 119.65 (R1), 120.00 (R2), 120.80 (R3).

AUD/USD shot up during the Asian morning Thursday, after Australia’s unemployment rate unexpectedly fell to 6.1% in March from 6.3% the preceding month. The break above 0.7725 (S1) signaled the completion of a double bottom in my view and confirmed the positive divergence between our short-term oscillators and the price action. I believe that this shifts the short-term bias to the upside and amplifies the case that we are likely to experience a test at 0.7800 (R1) any time soon. A break above here could challenge our next resistance at 0.7835 (R2). Although I believe we are likely to experience further upside extensions in the near term, I maintain my neutral view as far as the overall outlook is concerned. First, the rate has been oscillating between 0.7550 and 0.7900 since the end of January, and second, there is still positive divergence between our daily momentum indicators and the price action.

• Support: 0.7725 (S1), 0.7680 (S2), 0.7650 (S3).

• Resistance: 0.7800 (R1), 0.7835 (R2), 0.7880 (R3).

Gold traded higher on Wednesday, breaking above the upper bound of a near-term downside channel, and above the 1200 (S1) barrier. Although our momentum studies have turned positive, gold would have to overcome the 1210 (R1) hurdle to confirm a forthcoming higher high and perhaps turn the short-term outlook somewhat positive. For now, I prefer to take the sidelines. On the daily chart, the price is still trading below the 50% retracement level of the 22nd of January - 17th of March decline. This still makes me believe that the 17th of March – 06th of April recovery was just a corrective move. However, I would prefer to see a clear close below 1180 (S2) to get confident on the downside again.

• Support: 1200 (S1), 1180 (S2), 1165 (S3).

• Resistance: 1210 (R1), 1220 (R2), 1235 (R3).

WTI accelerated higher on Wednesday, after the US Energy Information Administration said that US crude oil inventories rose by less than expected in the week ended on April 10th. WTI surged and broke above the key resistance (now turned into support) barrier of 55.00 (S1), but the advance was halted at 56.65 (R1). A break above that line could extend the bullish wave towards 57.60 (R2), a resistance marked by the peak of the 23rd of December. Our daily oscillators detect accelerating bullish momentum and support the notion. The 14-day RSI continues higher and is getting closer to its 70 line, while the daily MACD lies above both its trigger and zero lines, pointing north. In my opinion, the break above 55.00 (S1), signalled the completion of a double bottom formation on the daily chart, something that could carry larger bullish implications.

• Support: 55.00 (S1), 54.00 (S2), 53.00 (S3).

• Resistance: 56.65 (R1) 57.60 (R2), 58.55 (R3).

Benchmark Currency Rates:

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/16April2015/Benchmark.JPG

Market Summary Url:

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/16April2015/Table.JPG

currency tags:

EUR

More...

[IronFx]

IronFX Daily Commentary | 17/04/15

Language English

Weak US data hits USD The dollar bulls were assuming that the US economic data would improve along with the weather, but so far that doesn’t seem to be happening, at least not uniformly. The range of forecasts for US housing starts was unusually wide and yet all 80 economists missed – the figure came in below the lowest forecast. Building permits missed expectations as well. This was despite the fact that March temperatures were average or above average in most of the country, so there should have been a relatively strong number after the sharp fall in February. Jobless claims were also above consensus, but it’s more important to watch the four-week moving average owing to the Eastern holiday. That was nearly unchanged. The Philadelphia Fed index rose more than expected, however.

Oil prices rally Oil prices fell during the European day on news that Saudi Arabia had expanded its output dramatically during March to the highest it’s been in three decades. It appears that the Kingdom really wants to keep the financial pressure on US firms (and Russia?) in order to push them out of business. But prices came back later in the day after Al Qaida captured an oil terminal in Yemen that exports an average of 120,000 to 140,000 b/d. I expect Saudi Arabia wants to keep oil prices depressed so I don’t think rally has much further to go.

Fed views mixed; market moves to easier Fed Vice Chair Stanley Fischer was fairly hawkish yesterday. He downplayed the recent weak NFP figure, saying that “there’s one weak employment report and five or six spectacular ones before it” and saying that he expects the Fed to start hiking rates this year. Cleveland Fed President Mester, a non-voter, said the economy was near full employment and she “would be comfortable with liftoff relatively soon” if the data show growth regaining momentum. But other officials were less certain. Atlanta Fed President Lockhart said he wanted to see “more confirming evidence” and that he would prefer “a later liftoff date,” while Boston Fed President Rosengren, a non-voter, said that data would have to improve in order to meet the Fed’s conditions for raising rates. The market’s verdict? Fed funds rate expectations down 3.5 bps and 5yr Treasury yields slightly lower. That also helped to weaken the dollar.

Greece bonds blow up Greek debt has blown up in the last couple of days – the spread of 5yr bonds over Germany is up 284 bps in just 3 days, over 100 bps just yesterday, even while 9-year Bund dip their toes into negative territory. Why? In fact nothing’s happening, but that’s just the problem. Greece doesn’t have enough time to do nothing. Negotiations between the technical teams in Athens only just restarted yesterday following the Easter break and the Troika will reportedly reconvene today. Greek PM Tsipras said he is “firmly confident” that his country will reach a deal with creditors by the end of April and highlighted several points of agreement: tax collection, corruption and redistributing the tax burden. But he also conceded that the two sides disagreed on four major issues: labor rules, pension reform, VAT and privatizations. So more areas of disagreement than agreement even at this late hour. The creditor side was more blunt: the headline in yesterday’s FT was “Nobody expects a solution, says Schauble”. Greece was supposed to present its reform proposals on Monday so that they could be considered at a meeting of the Eurozone finance ministers on Thursday, although the Thursday deadline seems to have been put off till the next meeting on May 11th. But with a EUR 747mn payment to the IMF due on May 12th, a meeting on the 11th may be too late to unlock the funds necessary to keep Greece from defaulting.

Today’s highlights: The UK unemployment rate for February is forecast to have ticked down to 5.6% from 5.7% in the preceding month, while average weekly earnings are expected to have risen at the same annual pace as previously (+1.8% yoy). Bearing in mind that the inflation rate declined to 0.0%, a steady increase in nominal wages implies an acceleration in real wages. This, accompanied by a decline in the unemployment rate, could support the pound.

Eurozone’s final CPI data for March are coming out. As usual, they are expected to confirm the preliminary figures.

In the US, both the headline and core CPI rates for March are expected to have remained unchanged at 0.0% yoy and +1.7% yoy respectively. Since the core rate stands near the Fed’s target of 2.0%, this suggest that the low energy prices are the main reason behind the low headline figure. The Fed has said that this is just a transitory effect, and so it may look through it. Therefore the impact on USD is likely to be minimal. The recent rise in oil prices makes it likely that headline CPI could show a rise in April. The preliminary University of Michigan consumer sentiment index for April is expected to tick up from the previous month. The surveys of 1-year and 5-to-10 year inflation expectation outlook are also coming out.

We get the March CPI data from Canada as well. Both the headline and the core rates are forecast to have remained unchanged. A positive surprise and a further rise in oil prices could add to the positive sentiment towards CAD following the optimistic monetary policy statement on Wednesday. The nation’s retail sales for February are also coming out and they are expected to have rebounded from January.

Two speakers are scheduled: ECB Governing Council member Jens Weidman and German Finance Minister Wolfgang Schaeuble speak at a press briefing.

Currency Titles:

EUR/USD hits resistance slightly above 1.0800

NZD/USD rally halted at 0.7700

EUR/GBP struggles near 0.7220

Gold enters a sideways mode

WTI hit resistance at 57.35 and pulls back

Currencies Image Url:

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/17%20April%202015/EURUSD_17Apr2015.PNG

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/17%20April%202015/NZDUSD_17Apr2015.PNG

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/17%20April%202015/EURGBP_17Apr2015.PNG

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/17%20April%202015/XAUUSD_17Apr2015.PNG

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/17%20April%202015/CLK5_17Apr2015.PNG

Currencies Text:

EUR/USD pulled back on Thursday, but after hitting support at 1.0625 (S2), it rebounded to break above 1.0735 (S1) and to hit resistance slightly above the 1.0800 (R1) barrier. As long as the rate is trading within the near-term upside channel, the bias remains to the upside in my view. This is also supported by our short-term oscillators. The RSI rebounded from near its 50 line, while the MACD, already above its trigger line, obtained a positive sign. However, given our proximity to the upper bound of a possible upside channel, I would be careful that a pullback could be in the works. In the bigger picture, EUR/USD is still trading below both the 50- and the 200-day moving averages. Therefore, I would treat any possible near-term advances as corrective moves of the larger downtrend. A clear close below 1.0460 will confirm a forthcoming lower low and trigger the resumption of the larger downtrend.

• Support: 1.0735 (S1), 1.0625 (S2), 1.0575 (S3).

• Resistance: 1.0800 (R1), 1.0890 (R2), 1.0965 (R3).

NZD/USD surged on Thursday, breaking above the resistance (now turned into support) of 0.7630 (S1). However, the advance was halted by the resistance of 0.7700 (R1) and the rate retreated somewhat. Taking into account that on the 15th of April, the rate exited a possible triangle formation, I would consider the short-term bias to be positive. A clear move above 0.7700 (R1) is likely to set the stage for larger upside extensions, perhaps towards our next resistance at 0.7785 (R2). Nevertheless, if we look at our short-term oscillators, I see signs of a possible corrective move before the next leg up. The RSI hit resistance at its 70 line and turned down, while the MACD, although positive, shows signs that it could start topping. On the daily chart, a close above 0.7700 (R1) could confirm a forthcoming higher high and perhaps turn the medium term picture positive.

• Support: 0.7630 (S1), 0.7585 (S2), 0.7550 (S3).

• Resistance: 0.7700 (R1), 0.7785 (R2), 0.7850 (R3).

EUR/GBP traded in a consolidative manner, staying between the support line of 0.7160 (S1) and the resistance of 0.7220 (R1). The move below the 0.7220 (R1) hurdle on the 13th of April signaled the completion of a double top formation, so I believe that the short-term picture is cautiously negative. I would like to see a clear move below 0.7160 (S1) before getting confident again on the downside. Such a move is likely to pull the trigger for further declines, perhaps towards the 0.7100 (S2) territory. For now, I am a little bit worried that a minor bounce could be on the cards before the bears seize control again. The reason is because I see positive divergence between both our short-term oscillators and the price action. Moreover, the RSI is testing its 50 line and could move above it soon, while the MACD stands above its trigger, pointing north. On the daily chart, the completion of the aforementioned double top confirms that the 11th of March – 3rd of April recovery was just a 38.2% retracement of the 16th December – 11th of March decline, and that the overall downtrend is gaining momentum again.

• Support: 0.7160 (S1), 0.7100 (S2), 0.7030 (S3).

• Resistance: 0.7220 (R1), 0.7275 (R2), 0.7315 (R3).

Gold traded lower on Thursday, after hitting resistance at 1210 (R1). I believe that now the metal has entered a sideways mode between that resistance and the support zone of 1190 (S1). Therefore, I would consider the short-term picture to be neutral for now. The 50- and 200-period moving averages both point east, supporting the notion. A move below 1190 (S1) is needed to shift the bias back to the downside and perhaps trigger extensions towards our next support at 1180 (S2). On the daily chart the price is still trading below the 50% retracement level of the 22nd of January - 17th of March decline. This still makes me believe that the 17th of March – 06th of April recovery was just a corrective move. However, I would prefer to see a clear close below 1180 (S2) to get confident on the downside again.

• Support: 1190 (S1), 1180 (S2), 1165 (S3).

• Resistance: 1210 (R1), 1220 (R2), 1235 (R3).

WTI continued to trade higher yesterday, but after hitting resistance at 57.35 (R2), it pulled back to sit on the minor-term blue uptrend line. I believe that the short-term picture remains positive, but given that there is negative divergence between both our hourly oscillators and the price action, I would be careful that a further pullback could be in the works. Therefore, I would prefer to stand aside and wait for price and momentum alignment. A decisive move above 57.35 (R2) could reinforce the short-term trend and perhaps aim for the high of the 22nd of December, at 58.50 (R3). Our daily oscillators detect bullish momentum and support the short-term trend. The 14-day RSI continues higher and is getting closer to its 70 line, while the daily MACD lies above both its trigger and zero lines, pointing north. In my opinion, the break above 55.00 (S2) signalled the completion of a double bottom formation on the daily chart, something that could carry larger bullish implications.

• Support: 55.70 (S1), 55.00 (S2), 54.00 (S3).

• Resistance: 56.65 (R1) 57.35 (R2), 58.55 (R3).

Benchmark Currency Rates:

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/17%20April%202015/Benchmark.JPG

Market Summary Url:

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/17%20April%202015/Table.JPG

currency tags:

EUR

More...

[IronFx]

IronFX Daily Commentary | 20/04/15

Language English

Greece: the end of the road? It looks like the end of the Greek drama is rapidly approaching. Reuters quoted Greek finance officials as saying that the country will need to tap all the remaining cash reserves across its public sector -- a total of EUR 2bn -- to pay civil service wages and pensions at the end of the month. That leaves no money to repay the IMF or refinance maturing T-bills in May.

Over the weekend, senior European officials said that while the Greek debt situation was dire, they still believed an agreement would be reached, according to the New York Times (NYT). However, it was hard to see the outlines of that agreement even now. “We still do not have a comprehensive, detailed plan,” one of Greece’s senior-most creditors said. “Plus, the numbers just don’t add up.”

The markets were reassured a few weeks ago when Finance Minister Varoufakis flew to Washington to meet with IMF President Lagarde. At that time he said publicly that Greece intended to meet its obligations. The statement was taken as a commitment by Greece to do whatever it takes to pay the IMF and thereby avoid an official default. The NYT reported that privately, however, Mr. Varoufakis told colleagues in Washington that he purposely used the word “intend” instead of “will,” meaning that it is possible that they might not pay.

Greece's deputy prime minister Yiannis Dragasakis Sunday refused to rule out the possibility of new elections or a referendum if talks with its creditors remained deadlocked. Personally, I think this looks like the most likely result. The administration is trapped in a “impossible trinity” in which it is trying to do three things, only two of which are possible: renegotiate the debt, remain in the euro and stay in office. The only way out that I can see is to put together a proposal that will meet the requirements of the creditors, take it to the voters, and ask them which do you prefer: this or leave the euro?

According to the Greek newspaper Kathimerini, “At this point, the administration looks as if it is trying to buy more time for negotiations by mobilizing all available resources. Some say the goal may be to include the pending reforms in a new, more attractive agreement, containing debt relief measures. The government could take this deal to the people via a referendum or even call new elections. All in all, the government’s strategy is not clear to the market and others.”

In any event, it’s clear that the Greek problems are starting to impact other markets. The DAX was down 2.6% on Friday as Greek bank stocks continued their collapse. These stocks were not so high before and they lost about 20% last week alone! The problem is the large decline in Greek domestic bank deposits (down EUR 25.4bn or 14.3% in the last three months) has in effect been funded by the other central banks of the Eurozone through the ECB’s payment system and shows up as a growing asset on their balance sheets. That asset will have to be written down if Greece leaves the Eurozone, in addition to the ECB’s shared exposure to Greek bonds. In other words, there definitely would be repercussions across the Eurozone. I expect the Greek problem to be one of the main themes in financial markets this week.

China cuts RRR The People’s Bank of China (PBOC) cut the reserve requirement ratio over the weekend for the second time this year. The move is not a huge surprise, given the slowdown in the economy. Moreover, one of the main reasons why China has such a high RRR (now 18.5%) is in order to sterilize the nation’s FX market intervention, but now that it’s no longer intervening to weaken the currency, this sterilization is less necessary. AUD gapped higher at the opening on the news, but in my view the move is a reaction to the slowdown that’s already happened and not a harbinger of higher growth to come. The tepid response in the stock market (up 1%) suggests that domestic investors are happy but not overjoyed. Thus the rally in AUD is likely to prove only temporary, in my view.

NZ inflation falls New Zealand’s prices fell at an accelerating pace on a qoq basis in Q1and were almost unchanged yoy. There was little impact on the currency however.

Today’s highlights: There is little on the schedule today. In the US, the Chicago Fed national activity index for March is expected to improve.

ECB’s Constancio speaks at the European Parliament in Brussels, while New York Fed President Dudley speaks on the economy and policy in New York, and later in the day, RBA Gov. Stevens will deliver a speech in New York.

This week: The main focus this week should in theory be the European finance ministers’ meeting Friday, when they are supposed to take a decision on the Greek reform proposals that are supposed to be submitted today. However since the proposals will probably not be submitted, they will have nothing to vote on. Still, the markets will be waiting to hear their comments, if any, on the situation.

As for indicators, the big day will be Thursday, when the April PMIs for the major countries are announced. This is as usual the first data for the current month every month and so sets the tone. The HSBC PMI is expected to fall further into contractionary territory. Following the disappointing Chinese industrial production for March, that could be bad for AUD and NZD.

There are no central bank meetings this week, but we do get the minutes of two recent meetings. On Tuesday, Reserve Bank of Australia releases the minutes from its latest policy meeting of April 7th. We may get more clarification on the Bank’s decision to maintain its benchmark rate at 2.25% even though in the statement officials said that “further easing of policy may be appropriate over the period ahead”. We could also get more hints about what they think the appropriate level for Aussie is. On Wednesday the BoE releases the minutes of its latest meeting. It’ll be interesting to see the view of Bank officials now that the inflation rate is at zero. The minutes from the previous meeting showed that two of the nine members thought the decision to hold rates steady in March was “finely balanced.” What do they think now?

The biggest US indicator of the week is probably durable goods orders for March on Wednesday. The big thing would be if nondefense capital goods excluding aircraft orders, referred to as “core capital goods orders,” managed to rise after falling for seven of the last eight months. A rise would be seen as the possible start of a turnaround in business investment and would be considered very bullish for the dollar. We also get existing home sales for March on Wednesday and new home sales on Thursday.

Aside from the PMIs, the other big Eurozone indicators during the week are the ZEW survey for April on Tuesday and the Ifo index on Friday. For the ZEW survey, both the current situation and expectation indices have been climbing higher since November. This could be the 6th consecutive month of an increase, which would confirm the firming momentum of Germany’s economic recovery. But even if this is the case, I would expect any EUR/USD rebounds to be short-lived and provide renewed selling opportunities.

The only major UK indicator next week is retail sales for March on Wednesday. The headline figure is expected to show a rise again, although not as big as in February. In any event, I wonder if GBP is still going to move on economics or is it mostly political concerns as we near the election.

On Wednesday, we get Australia’s CPI data for Q1. New Zealand CPI came in lower than expected on Monday and it had little impact on the market; I wonder if the Australian CPI will have as much impact as usual.

Currency Titles:

EUR/USD hits resistance slightly below 1.0860

AUD/USD gaps up after China’s reserve ratio cut

GBP/JPY finds resistance at 178.70

Gold continues sideways

WTI stays above 55.00

Currencies Image Url:

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/20April2015/EURUSD_20Apr2015.PNG

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/20April2015/AUDUSD_20Apr2015.PNG

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/20April2015/GBPJPY_20Apr2015.PNG

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/20April2015/XAUUSD_20Apr2015.PNG

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/20April2015/CLK5_20Apr2015.PNG

Currencies Text:

EUR/USD traded somewhat higher on Friday, but hit resistance marginally below the 1.0860 (R1) line and the 200-period moving average, and pulled back. As long as the rate is trading within the near-term upside channel, the short-term bias remains to the upside in my view. This is also supported by our daily oscillators. The 14-day RSI is now testing its 50 line and could move above it soon, while the MACD, although negative, has crossed again above its trigger line. However, given our proximity to the upper bound of the upside channel, I would be careful that a pullback could be in the works. In the bigger picture, EUR/USD is still trading below both the 50- and the 200-day moving averages. However, a clear close below 1.0460 is needed to confirm a forthcoming lower low and trigger the resumption of the larger downtrend. On the other hand, a close above 1.1045 (R3) could signal the completion of a double bottom and perhaps set the stage for larger bullish extensions.

• Support: 1.0735 (S1), 1.0625 (S2), 1.0575 (S3).

• Resistance: 1.0860 (R1), 1.0965 (R2), 1.1045 (R3).

AUD/USD gapped higher on Monday, after the People’s Bank of China lowered its reserve-requirement ratio during the weekend. Having in mind that the break above 0.7725 (S2) signaled the completion of a double bottom, I would consider the short-term bias to stay to the upside. I believe that a clear move above 0.7845 (R1) is likely to target our next resistance at 0.7880 (R2). Nevertheless, taking a look at our short-term oscillators, I would be careful of a possible pullback before buyers seize control again, perhaps to test the 0.7760 (S1) support line. The RSI hit resistance at its 70 line and turned down, while the MACD has topped and could move below its trigger any time soon. Although I believe we are likely to experience further upside extensions in the near term, I maintain my neutral view as far as the overall outlook is concerned. First, the rate has been oscillating between 0.7550 and 0.7900 (R3) since the end of January, and second, there is still positive divergence between our daily momentum indicators and the price action.

• Support: 0.7760 (S1), 0.7725 (S2), 0.7680 (S3).

• Resistance: 0.7845 (R1), 0.7880 (R2), 0.7900 (R3).

GBP/JPY traded lower after hitting resistance at the 178.70 (R1) line, which happens to be the 38.2% retracement level of the 27th of February – 14th of April decline. The rate is now trading near the support line of 177.60 (S1), where a break could pave the way for our next support at 176.70 (S2). Our short-term oscillators amplify the case for something like that. The RSI hit resistance marginally below its 70 line and turned lower, while the MACD shows signs of topping and that it could move below its trigger line soon. As for the bigger picture, the rate is now trading back near the 200-day moving average. I would like to see a clear and decisive daily close below the 175.70 (S3) line to turn the overall outlook negative. Such a move could complete a 5-month failure swing top.

• Support: 177.60 (S1), 176.70 (S2), 175.70 (S3).

• Resistance: 178.70 (R1), 179.30 (R2), 180.00 (R3).

Gold traded somewhat higher on Friday, staying between the support of 1190 (S1) and the resistance of 1210 (R1). Therefore, I would consider the short-term picture to be neutral for now. The 50- and 200-period moving averages both point east, supporting the notion. A move below 1190 (S1) is needed to shift the bias back to the downside and perhaps trigger extensions towards our next support at 1180 (S2). On the daily chart the price is still trading below the 50% retracement level of the 22nd of January - 17th of March decline. This still makes me believe that the 17th of March – 06th of April recovery was just a corrective move. However, I would prefer to see a clear close below 1180 (S2) to get confident on the downside again.

• Support: 1190 (S1), 1180 (S2), 1165 (S3).

• Resistance: 1210 (R1), 1220 (R2), 1235 (R3).

WTI traded sideways on Friday, and today during the early European morning, it is testing the resistance line of 56.65 (R1). Given that the price is trading above the short-term uptrend line taken from the lows of the 10th of April, I believe that the short-term picture remains positive. A move above 56.65 (R1) would aim for another test at the next resistance of 57.35 (R2). Our daily oscillators detect bullish momentum and support the short-term trend. The 14-day RSI continues higher and is getting closer to its 70 line, while the daily MACD lies above both its trigger and zero lines, pointing north. In my opinion, the break above 55.00 (S2) signalled the completion of a double bottom formation on the daily chart, something that could carry larger bullish implications.

• Support: 55.70 (S1), 55.00 (S2), 54.00 (S3).

• Resistance: 56.65 (R1) 57.35 (R2), 58.50 (R3).

Benchmark Currency Rates:

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/20April2015/Benchmark.JPG

Market Summary Url:

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/20April2015/Table.JPG

currency tags:

EUR

More...

[IronFx]

IronFX Daily Commentary | 21/04/15

Language English

What would you do if you lived in Greece? The Greek government Monday decreed that state bodies, with the exception of pension funds, must transfer their reserves to the Bank of Greece for the state’s use. “State bodies” includes everything from hospitals to local governments. Estimates are that the move will provide EUR 1.2bn to EUR 2bn, which should allow the government to pay civil servants’ salaries and pensions this month. The government is then hoping that a Eurogroup summit on May 11 will release EUR 1.9bn in profits from Greek bonds held by the Eurosystem. That would allow the government to meet a EUR 747mn payment due to the IMF the following day. Nonetheless, with EUR 2.8bn in maturing T-bills during the month, things will still be tight during May. And the June debt repayment schedule is even heavier.

The problem though as I see it is the populace’s reaction to the move. On the one hand, regional authorities were said to be planning legal action against the decree. At the same time, ordinary citizens may see this as the first step towards capital controls and confiscation of their bank accounts, as happened in Cyprus. What would you do with your money if you lived in Greece? I expect that this will simply hasten the outflow of funds from Greek banks and the collapse of the banking system. ECB Vice President Constancio yesterday noted that introducing capital controls in a country doesn’t mean that the country has to leave the euro, as the example of Cyprus shows – something that will hardly reassure the average Greek saver. To make matters worse, Constancio was not particularly supportive of the Greek banking system. “I cannot promise that we will fund Greece whatever the situation,” he said. He pointed out that the ECB’s rules allow it to supply funds only to banks that are solvent and have acceptable collateral. Just FYI, here are the share prices of several major Greek banks, with the prices at this time in 2009 – near the bottom of the Lehman Bros. collapse – in parenthesis. You can judge for yourself whether the market thinks these banks are solvent:

o National Bank of Greece €1.00 (€54.59)

o Alpha Bank €0.21 (€2.15)

o Piraeus Bank €0.23 (€27.85)

The Greek situation seems to be heading towards a conclusion. Even if the market expects a successful conclusion, it has to price in at least the possibility of a disaster. I expect that possibility to weigh increasingly on the euro until the uncertainty is over.

AUD reverses AUD had a good day in the morning yesterday after China cut its reserve requirement ratio, but that proved to be the high point and the currency was the biggest loser among the G10 over the last 24 hours. RBA Gov. Stevens reminded people that further policy easing is “on the table” and said he thought AUD “will very likely fall further yet, over time.” To some degree this is only repeating what the RBA already said; the statement after its last meeting noted that “further easing of policy may be appropriate over the period ahead.” The market is already pricing in about a 75% chance of a rate cut at the RBA’s May meeting. Nonetheless, reminding everyone of this fact helped to weaken the currency. Later, the minutes of the recent RBA meeting were released. They omitted any reference to the currency being too high, but repeated the usual line about a further drop being likely because of the decline in commodity prices. I agree, especially as Chinese growth slows, and expect the AUD to weaken further. Note that Kaisa Group Holdings Ltd., a Chinese real estate developer, missed $52mn in interest payments yesterday. Who’s next?

Poloz is more confident about US than Dudley New York Fed President William Dudley was relatively cautious yesterday. He said he was “not reasonably confident right now” but that “hopefully” the data will support a rise in rates later this year. But he added that he thinks he will be “reasonably confident in the future”! Bank of Canada Gov. Poloz on the other hand was more optimistic about the US economy; he pointed to a strong US economy as the biggest risk to his forecasts. “The US economy has great fundamentals,” he said. In any event, the US policy divergence remains and should underpin the dollar going foreward.

Today’s highlights: The calendar is relatively light today. During the European day, the main event will be the ZEW survey for April. Both the current situation and expectation indices have been climbing higher since November. This could be the 6th consecutive month of an increase, something that would confirm that Germany, Europe’s growth engine is gaining steam. In such an event, EUR/USD could rebound a bit but any bounces are likely to be short-lived and provide renewed selling opportunities. Eurozone’s debt-to-GDP for 2014 is also coming out.

In Sweden, official unemployment rate for March is coming out. The PES unemployment rate for March declined last week, but the two only move in the same direction 57% of the time so that may not imply much for the official rate. Nevertheless, even though the Riksbank doesn’t have a specific SEK rate in mind, the weak currency is needed to support the country’s economic recovery. Thus, we remain bearish on SEK.

As for the speakers, Riksbank Deputy Governor Henry Ohlsson and ECB’s Nouy speak; Canada's Finance Minister will deliver the government's long-delayed pre-election budget.

Currency Titles:

EUR/USD trades lower

USD/JPY rebounds from 118.70

GBP/USD fails to sustain above 1.5000

Gold still trendless

WTI rebounds from 55.00

Currencies Image Url:

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/21April2015/EURUSD_21Apr2015.PNG

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/21April2015/USDJPY_21Apr2015.PNG

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/21April2015/GBPUSD_21Apr2015.PNG

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/21April2015/XAUUSD_21Apr2015.PNG

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/21April2015/CLK5_21Apr2015.PNG

Currencies Text:

EUR/USD traded lower on Monday, but remained within the near-term upside channel. This keeps the near-term outlook somewhat positive, but bearing in mind our momentum indicators, I would prefer to stand aside for now. The RSI moved lower and now looks ready to cross below its 50 line, while the MACD, although positive, has turned down and fell below its signal line. These signs suggest that yesterday’s decline may have not come to an end yet. In the bigger picture, EUR/USD is still trading below both the 50- and the 200-day moving averages. However, a clear close below 1.0460 is needed to confirm a forthcoming lower low and trigger the resumption of the larger downtrend. On the other hand, a close above 1.1045 (R3) could signal the completion of a double bottom and perhaps set the stage for larger bullish extensions.

• Support: 1.0700 (S1), 1.0625 (S2), 1.0575 (S3).

• Resistance: 1.0860 (R1), 1.0965 (R2), 1.1045 (R3).

USD/JPY traded higher after triggering some buy orders slightly below the 118.70 (S2) support line. The rate has moved above the resistance (now turned into support) line of 119.25 (S1), something that could trigger extensions towards 119.70 (R1). A break above that resistance could pave the way for the 120.15 obstacle. Our short-term oscillators detect bullish momentum and amplify the case for the occurrence of the aforementioned scenario. The RSI raced higher and crossed above its 50 line, while the MACD moved above its trigger, points north and is headed towards its zero line. On the daily chart, the rate is trading below the 50-day moving average, but well above the 200-day one, also above the upper line of the triangle formation that had been containing the price action since November. This keeps the major uptrend intact, but given that there is still negative divergence between the daily oscillators and the price action, I would prefer to stand aside for now as far as the overall picture is concerned.

• Support: 119.25 (S1), 118.70 (S2), 118.35 (S3).

• Resistance: 119.70 (R1), 120.15 (R2), 120.80 (R3).

GBP/USD hit resistance near 1.5050 (R2) on Friday, but failed to maintain its upside strength and slid back below the psychological barrier of 1.5000 (R1). After that, I believe that we are likely to see the rate trade lower. During the early European morning Tuesday, Cable seems ready to challenge the 1.4875 (S1) support line, where a clear dip could set the stage for downside extensions towards the 1.4800 (S2) line. Our short-term oscillators support the notion. The RSI tumbled after hitting resistance at its 70 line, while the MACD has topped and fallen below its trigger line. Zooming out to the daily chart, I see that Cable is still trading below the 80-week exponential moving average, which keeps the large downtrend intact. However, there is positive divergence between our daily oscillators and the price action. I prefer to see momentum and price align before getting confident again on that large downward path.

• Support: 1.4875 (S1), 1.4800 (S2), 1.4700 (S3).

• Resistance: 1.5000 (R1), 1.5050 (R2), 1.5165 (R3).

Gold traded lower on Monday and hit support marginally above the 1190 (S1) barrier. The precious metal is still trading between that support and the resistance of 1210 (R1). Therefore, I would consider the short-term picture to be neutral for now. The 50- and 200-period moving averages both point east, supporting the notion. Our daily oscillators do so as well. They both oscillate around their equilibrium lines. A move below 1190 (S1) is needed to shift the bias back to the downside and perhaps trigger extensions towards our next support at 1180 (S2). As for the bigger picture, the price is still trading below the 50% retracement level of the 22nd of January - 17th of March decline. This still makes me believe that the 17th of March – 06th of April recovery was just a corrective move. However, I would prefer to see a clear close below 1180 (S2) to get confident on the downside again.

• Support: 1190 (S1), 1180 (S2), 1165 (S3).

• Resistance: 1210 (R1), 1220 (R2), 1235 (R3).

WTI traded lower yesterday, but after triggering some buy orders near the psychological line of 55.00 (S2), it rebounded to find resistance slightly below the 57.35 (R2) hurdle. WTI has been oscillating between those barriers since the 15th of April. Thus, I would switch my stance to flat as far as the short term is concerned. Nevertheless, for the broader trend, the break above 55.00 (S2) signalled the completion of a double bottom formation on the daily chart, something that could carry larger bullish implications in the not-too-distant future. A move above the upper bound of the short-term range, at 57.35 (R2), could challenge as a next resistance the 58.50 (R3) line, determined by the high of the 22nd of December.

• Support: 55.70 (S1), 55.00 (S2), 54.00 (S3).

• Resistance: 56.65 (R1) 57.35 (R2), 58.50 (R3).

Benchmark Currency Rates:

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/21April2015/Benchmark.JPG

Market Summary Url:

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/21April2015/Table.JPG

currency tags:

EUR

More...

[IronFx]

IronFX Daily Commentary | 22/04/15

Language English

Greek problems continue to pressure EUR The Greek drama continues. Now the talk is that the ECB is getting worried about the solvency of the Greek banks, as I mentioned yesterday, and may increase the collateral haircut for the banks. The total collateral that Greek banks have submitted in order to get Emergency Liquidity Assistance (ELA) from the ECB is estimated at around EUR 140bn. The total ELA financing is estimated at EUR 74bn, so this implies a haircut of around 50% already. Assuming they raise this to 75%, it would mean the Greek banks need another EUR 35bn in collateral. It’s unclear (to me at least) if they have this much extra collateral available. Some sources say that they can. Without it, it’s also unclear to me how they would deal with any further withdrawals of funds from the banking system. Bloomberg reported that the Bank of Greece keeps a buffer of some EUR 3bn in ELA funds in reserve, but with Greek residents pulling around EUR 8bn a month out of the banking system, that wouldn’t last for long. Greek PM Tsipras will meet with German Chancellor Merkel Thursday in Brussels in an effort to secure a statement of political support from Berlin. Good luck!

As the Greek endgame approaches, it is clearly weighing on the currency. EUR/USD recently has been hitting its daily lows during London trading hours and then hitting its daily high during US trading hours, as the market in Europe reacts to headlines about Greece and then US traders play the daily range.

Negative EUR rates The 3-month EURIBOR rate went negative for the first time yesterday, meaning banks are paying each other to take money off their hands. Paying another bank -0.01% is better than paying the ECB -0.2%, I guess. The EURIBOR futures see it remaining below zero until after the ECB’s QE operation ends in Sep. 2016. US rates on the other hand are seen increasing steadily. This monetary policy divergence is what’s driving the market and will continue to drive it, in my view.

Oil falls; look for weak CAD, NOK today Saudi Arabia ended its bombing in Yemen, which reduces tensions in the Middle East slightly, while the API reportedly said crude oil inventories rose 5.5mn barrels last week. Oil market participants expect today’s US government data on US crude oil inventories to show a rise of 3.2mn barrels. The combination sent oil prices sharply lower, particularly Brent. This is likely to weaken CAD and NOK today. Note though that Saudi Arabia also ordered the national guard to take part in the Yemen operation, so it clearly isn’t over – only the part that was attracting international criticism.

Australia inflation sends AUD/USD higher What’s Australia’s inflation rate? Do you want the CPI? The weighted median rate? The trimmed mean rate? The seasonally adjusted rate? Quarter-on-quarter change? Year-on-year change? With four different measures, each of which is released in two different ways, it’s hard to tell exactly what the market was looking at. Some measures were lower than expected and some showed a decline from the previous quarter, while others were higher than expected or showed an acceleration. From my point of view, the headline CPI, which is what the Reserve Bank of Australia targets, fell to 1.3% yoy from 1.7% yoy. This is way below the RBA’s target of 2%-3% and therefore should increase the likelihood of an easing. But the weighted median measure accelerated on both a qoq and yoy pace, and that must have been what caught the market’s eye, because AUD/USD popped about 40 pips on the news, in contrast to the lack of any major move on Monday when New Zealand CPI came out lower than expected. The market now places a 59% likelihood of a rate cut at the next meeting on May 5th, down from 68% yesterday. RBA Gov. Stevens Monday reminded us that further policy easing is “on the table,” so I would not dismiss the possibility entirely.

Today’s highlights: During the European day, the Bank of England releases the minutes of its latest policy meeting. It will be interesting to see if other MPC members besides the previously hawkish MPC member Ian McCafferty worry about the possible impact of the low inflation outlook on wage deals. In such an event, rate hike expectations could be pushed further back and GBP could weaken.

In the US, FHFA housing price index for February and existing home sales for March are due to be released. The housing starts and building permits released last week were consistent with a firming housing market. If the existing home sales are in line with a strong housing sector, this may be USD-supportive.

We have no speakers on Wednesday’s agenda.

Currency Titles:

EUR/USD breaks below the lower line of an upside channel

USD/CAD finds resistance near the 1.2300 obstacle

AUD/USD shoots up

Gold remains trendless

WTI hits support at 55.00 again

Currencies Image Url:

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/22April2015/EURUSD_22Apr2015.PNG

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/22April2015/USDCAD_22Apr2015.PNG

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/22April2015/AUDUSD_22Apr2015.PNG

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/22April2015/XAUUSD_22Apr2015.PNG

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/22April2015/CLK5_22Apr2015.PNG

Currencies Text:

EUR/USD continued trading lower on Tuesday, falling below the lower line of the black upside channel. Nevertheless, the slide was halted at 1.0660 (S1) and then the rate rebounded to hit resistance at 1.0780 (R1). I will continue to stand on the side lines, since a break below 1.0660 (S1) is the move that would confirm a forthcoming lower low on the 4-hour chart and perhaps turn the short-term outlook negative. Such a move is likely to target our next support line of 1.0575 (S2). In the bigger picture, EUR/USD is still trading below both the 50- and the 200-day moving averages. However, a clear close below 1.0460 is needed to confirm a forthcoming lower low and trigger the resumption of the larger downtrend. On the other hand, a close above 1.1045 could signal the completion of a double bottom and perhaps set the stage for larger bullish extensions.

• Support: 1.0660 (S1), 1.0575 (S2), 1.0500 (S3).

• Resistance: 1.0780 (R1), 1.0860 (R2), 1.0965 (R3).

USD/CAD traded higher yesterday, but hit resistance near 1.2300 (R1), which happens to be the 38.2% retracement level of the 13th – 17th of April collapse. Then the pair slid somewhat. My opinion is that even if we experience further advances, I believe that the outlook for USD/CAD is somewhat negative. I would expect any further bullish extensions to stay limited below the 1.2385 (R2) key hurdle. A clear move below the 1.2215 (S1) barrier would confirm my view and perhaps pull the trigger for the next one at 1.2145 (S2). As for the broader trend, the downside violation of the 1.2385 (R2) key barrier confirmed the negative divergence between our daily oscillators and the price action, and turned the medium-term bias to the downside in my view. I believe that the recovery from 1.2085 (S3) is just a corrective move and that sellers will eventually take control again.

• Support: 1.2215 (S1), 1.2145 (S2), 1.2085 (S3).

• Resistance: 1.2300 (R1), 1.2385 (R2), 1.2440 (R3).

AUD/USD shot up during the Asian morning Wednesday after the release of the Australia CPI data and emerged above the resistance (now turned into support) line of 0.7760 (S1). That move keeps intact the double bottom completed upon the upside violation of 0.7725 (S2). Thereafter, I would see a cautiously positive near-term picture. I would expect the rate to continue higher and challenge the 0.7825 (R1) area. Our short-term oscillators corroborate my view. The RSI rebounded from its upside support line and edged above its 50 line, while the MACD, already positive, shows signs of bottoming and that it could move above its trigger soon. Although I believe we are likely to experience further upside extensions in the near term, I maintain my neutral view as far as the overall outlook is concerned. The rate is still trading between 0.7550 and 0.7900 since the end of January. There is also positive divergence between our daily momentum indicators and the price action.

• Support: 0.7760 (S1), 0.7725 (S2), 0.7680 (S3).

• Resistance: 0.7825 (R1), 0.7880 (R2), 0.7900 (R3).

Gold traded higher on Tuesday after finding support marginally above the 1190 (S1) barrier. The precious metal stays between that hurdle and the resistance of 1210 (R1). Therefore, I would consider the short-term picture to be neutral for now. The 50- and 200-period moving averages both point east, supporting the notion. Our daily oscillators do so as well. They both oscillate around their equilibrium lines. A move below 1190 (S1) is needed to shift the bias back to the downside and perhaps trigger extensions towards our next support at 1180 (S2). As for the bigger picture, the price is still trading below the 50% retracement level of the 22nd of January - 17th of March decline. This still makes me believe that the 17th of March – 06th of April recovery was just a corrective move and that we will see gold trading lower in the not-too-distant future.

• Support: 1190 (S1), 1180 (S2), 1165 (S3).

• Resistance: 1210 (R1), 1220 (R2), 1235 (R3).

WTI traded lower on Tuesday, but hit support again at the key barrier of 55.00 (S1). WTI has been oscillating between that support and the resistance of 57.35 (R3) since the 15th of April. Thus, I would maintain my flat stance as far as the short term is concerned. Nevertheless, for the broader trend, the break above 55.00 (S2) signalled the completion of a double bottom formation on the daily chart, something that could carry larger bullish implications in the not-too-distant future. A move above the upper bound of the short-term range at 57.35 (R3) could challenge as a next resistance the 58.50 line, determined by the high of the 22nd of December.

• Support: 55.00 (S1), 54.00 (S2), 53.00 (S3).

• Resistance: 55.70 (R1) 56.65 (R2), 57.35 (R3).

Benchmark Currency Rates:

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/22April2015/Benchmark.JPG

Market Summary Url:

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/22April2015/Table.JPG

currency tags:

EUR

More...

[IronFx]

IronFX Daily Commentary | 23/04/15

Language English

• Dollar firms as bond markets reverse It may have been comments by star bond market investor Bill Gross that shorting Bunds was the trade of a lifetime that sent bond yields higher yesterday. Bund 10-year yields duly rose 7 bps, as did 10-year Treasury yields. Eurozone peripherals were not affected however and spreads over Bunds narrowed. Apparently some investors fear that the rally in core markets was overdone and used Gross’ comments as an excuse to take profits. Yesterday’s strong US existing home sales figure may also have helped to cement the view that rates were too low. Higher yields in these markets would be normal, in my view, but would not be healthy for the struggling EM currencies, which are likely to suffer in any case from the slowdown in China (see below). Gold also had a bad day because of higher rates and is likely to come under further pressure if core market rates continue to head higher (see technical comment for more details).

• CHF worst-performing currency on extension of negative rates CHF, so far this year the best-performing G10 currency, was the worst performing currency over the last 24 hours after the Swiss National Bank said it would extend negative interest rates to all public entities. When the SNB instituted a negative deposit rate of 75 bps in January, it exempted some public entities (including the SNB’s own pension fund!), but this led to complaints about unequal treatment. It’s a mystery why this had such a big effect on the currency, as the move applies just to a few tiny accounts and has no policy implications. Probably it just served as an occasion for profit-taking and the currency is likely to resume its gradual appreciating trend in the near future.

• NZD second-worst performer on monetary policy comments NZD was also weaker, partly because of the disappointing Chinese PMI (see below) but more likely because of the comments from Assistant Gov. Dr. John McDermott, who said that monetary policy would remain stimulatory to support output growth above potential. I inferred from what he said that the bias to rates was on the downside, although he did not state this outright and the market’s forecast of the likelihood of a future rate cut barely budged. He also complained about the value of NZD, presumably against AUD: “The fact that the exchange rate has appreciated while our key export prices, such as dairy, have been falling, is unwelcome,” he said. AUD/NZD almost hit parity on Tuesday; I expect it to do so at some point.

• GBP outperforms on BoE minutes On the other hand, the pound was the best performing G10 currency after the minutes of the latest BoE meeting showed that all MPC members agreed that the next move in rates is more likely to be an increase. Ten-year Gilts yields soared 14 bps. I had been bearish GBP based on the view that the rising political uncertainty as the election approaches would scare off investors, but apparently people are focusing on the strong economic fundamentals. A gridlocked Parliament might not be so bad if they can’t accomplish anything and therefore let the economy alone. Nonetheless I would expect to see GBP weaken after the election, once the reality of the political difficulties sink in.

• Chinese stock market rally truly scary I mentioned in an early post how I thought the rally in Chinese stocks, fuelled by new, inexperienced traders, was likely to come to grief much like it did in 2007. For those who want further evidence, I present this graph that the Wall Street Journal got from Macquarie Securities. Not only are there millions of new accounts opening (average of 1.5mn a week for the last month), but they are buying on margin. People often misjudge the size of the Chinese stock market, because the market capitalization figures are much larger than the free float figures – a lot of stock is held by the government, which will never sell. According to this graph, margin lending is now an incredible 8% of the value of the free float of stock. That’s OK when prices are going up, but what happens when prices start coming down and all these buyers get a margin call? That’s when AUD really starts to suffer. I don’t know when that might be, but if 2007 is any guide, it could be in the next six months. Until then, trading in these exchanges is dominating the world. Turnover in Shanghai and Shenzhen during March was the largest of any stock exchange in the world that month, eclipsing even the NYSE. Turnover exceeded RMB 1tn on Monday, but unfortunately the exchange’s software is not designed to display numbers that big so it couldn’t show the number properly!

• Today’s highlights: Today is PMI day. This is of course the first data for the current month every month and so sets the tone. China’s preliminary HSBC manufacturing PMI started out badly – it had been expected to be unchanged at slightly below the 50 boom-or-bust line, but instead fell further to 49.2. Following the disappointing industrial production for March, that indicates a serious slowdown. There was some speculation that March was still distorted by the Chinese New Year, but nobody is talking about April being distorted by it too. Japan too fell into contractionary territory for the first time in almost a year. The weakness in manufacturing in these two major exporting countries augers ill for the EM currencies and the commodity currencies. I would expect to see AUD, CAD and NZD underperforming today, as well as some of the EM countries with balance of payments problems, such as Turkey and South Africa.

• During the European day, the preliminary manufacturing and service-sector PMI data for April from several European countries and the Eurozone as a whole are coming out. The market is likely to look for additional signs that the Eurozone economies have started to gain momentum. This could strengthen EUR, at least temporarily. One could play this either through the currency or the DAX index. Later in the day we get the Markit manufacturing PMI for the US.

• In the UK, retail sales excluding volatile items for March are forecast to decelerate a bit. This could prove GBP-negative as it could cause some profit-taking after yesterday’s good run.

• In the US, new home sales for March are due out. Following the better-than-expected existing home sales released on Wednesday, if the new home sales are also in line with a firming housing sector, this could strengthen USD. Initial jobless claims for the week ended April 18 are also to be released.

• As for the speakers, ECB Executive board member Peter Praet speaks during the European day.

Currency Titles:

EUR/USD hits 1.0800 and tumbles

USD/JPY struggles around 120.00

EUR/GBP tumbles below 0.7160

Gold breaks below 1190

WTI finds resistance at 57.20 and slides

Currencies Image Url:

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/23April2015/EURUSD_23Apr2015.PNG

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/23April2015/USDJPY_23Apr2015.PNG

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/23April2015/EURGBP_23Apr2015.PNG

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/23April2015/XAUUSD_23Apr2015.PNG

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/23April2015/CLK5_23Apr2015.PNG

Currencies Text:

EUR/USD traded higher on Wednesday, but hit resistance at 1.0800 (R1) and slid back down. I will maintain the flat stance I adopted yesterday, since a break below 1.0660 (S1) would be necessary to confirm a forthcoming lower low on the 4-hour chart and perhaps turn the short-term outlook negative. Such a move would be likely to target our next support line of 1.0575 (S2). Our short-term oscillators support a somewhat negative picture. The RSI just fell below its 50 line, while the MACD just obtained a negative sign. Also, they both stand below their respective downside resistance lines. In the bigger picture, EUR/USD is still trading below both the 50- and the 200-day moving averages. However, a clear close below 1.0460 is needed to confirm a forthcoming lower low and trigger the resumption of the larger downtrend. On the other hand, a close above 1.1045 could signal the completion of a double bottom and perhaps set the stage for larger bullish extensions.

• Support: 1.0660 (S1), 1.0575 (S2), 1.0500 (S3).

• Resistance: 1.0800 (R1), 1.0860 (R2), 1.0965 (R3).

USD/JPY continued to trade higher on Wednesday but the advance was halted fractionally below our resistance of 120.15. The short-term bias remains to the upside, thus a break above 120.15 (R1) is likely to see scope for extensions towards the next hurdle at 120.80 (R2). Our short-term oscillators detect bullish momentum and amplify the case for the occurrence of the aforementioned scenario. The RSI continues in a rising mode as marked by the upside support line, while the MACD stands above both its zero and signal lines, pointing north. On the daily chart, the rate is back above 50-day moving average, also stays above the upper line of the triangle formation that had been containing the price action since November. This keeps the major uptrend intact, but given that there is still negative divergence between the daily oscillators and the price action, I would prefer to stand aside for now as far as the overall picture is concerned.

• Support: 119.75 (S1), 119.30 (S2), 118.70 (S3).

• Resistance: 120.15 (R1), 120.80 (R2), 121.20 (R3).

EUR/GBP fell sharply yesterday after the minutes of the latest BoE meeting revealed that policy makers see an improved chance that inflation could bounce back strongly later this year. The rate broke below the key support (now turned into resistance) of 0.7160 (R1), and this opens the way for a test at 0.7100 (S1), in my view. A move below 0.7100 (S1), is likely to set the stage for larger bearish extensions, maybe to challenge the low of the 12th of March, at 0.7030 (S2). Taking a look at the RSI, I see that, since the 31st of March, it rebounded from its 30 line 5 times, without falling within its oversold territory. Now the indicator is testing again the 30 barrier and this makes me cautious that a corrective bounce could be looming before the next leg down. On the daily chart, the completion of a double top on the 13th of April confirms that the 11th of March – 3rd of April recovery was just a 38.2% retracement of the 16th December – 11th of March decline, and that the overall downtrend is gaining momentum again.

• Support: 0.7100 (S1), 0.7030 (S2), 0.7000 (S3).

• Resistance: 0.7160 (R1), 0.7220 (R2), 0.7275 (R3).

Gold slid yesterday and violated the lower bound of the sideways range it had been trading since the beginning of the month. This shifts the short-term bias to the downside in my view, and magnifies the case that we are likely to see a test at 1180 (S1) in the near future. However, taking a look at our short-term momentum studies, I see that we may experience a minor corrective bounce, perhaps back above 1190 (R1), before the bears shoot again. The RSI rebounded from slightly above its 30 line and is now pointing north, while the MACD shows signs that it could start bottoming. As for the bigger picture, the price is still trading below the 50% retracement level of the 22nd of January - 17th of March decline. This still makes me believe that the 17th of March – 06th of April recovery was just a corrective move and that we will see gold trading lower in the not-too-distant future.

• Support: 1180 (S1), 1165 (S2), 1150 (S3).

• Resistance: 1190 (R1), 1210 (R2), 1220 (R3).

WTI hit resistance at 57.20 (R2) and then tumbled somewhat yesterday. WTI seems to be trading within a short-term downside channel and this prints a negative intraday picture. A move below 55.75 (S1) could trigger more declines, perhaps for another test at the psychological barrier of 55.00 (S2). Nevertheless, on the daily chart, I still see a positive medium term outlook. The break above 55.00 (S2) signalled the completion of a double bottom formation, something that could carry larger bullish implications in the not-too-distant future. A possible move above 58.80, a resistance defined by the peak of the 16th of April, could open the way for the round figure of 60.00.

• Support: 55.75 (S1), 55.00 (S2), 54.55 (S3).

• Resistance: 56.55 (R1) 57.20 (R2), 58.05 (R3).

Benchmark Currency Rates:

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/23April2015/Benchmark.PNG

Market Summary Url:

http://shared.ironfx.co.uk/Morning_Pictures_2015/April2015/23April2015/Table.PNG

currency tags:

EUR

More...