IronFX - Market Analysis - page 57

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IronFX Daily Commentary | 31/08/15

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•Jackson Hole comments show little change in FOMC views: The Fed held its annual symposium in Jackson Hole, Wyoming over the weekend. Comments from officials there suggest that the members of the FOMC haven’t much changed their views on the economy and the appropriate course of interest rates despite the volatility in the markets recently. St. Louis Fed President James Bullard said the recent market volatility hadn’t changed his outlook very much. Bullard though is known to be in favor of raising rates in September and so could be expected to rationalize away the volatility. But even the extremely dovish Narayana Kocherlakota, Minneapolis Fed President (and no longer FOMC member), said the market turmoil shouldn’t cause a change in the outlook. These views from the US were echoed by Bank of England Gov. Carney, who said “developments in China are unlikely to change the process of rate increases” than that “recent events do not yet, to my mind, merit changing the MPC’s strategy for returning inflation to target.”

• The most widely noted comments were from Fed Vice Chairman Stanley Fischer, who said on Saturday that “(t)here is good reason to believe that inflation will move higher as the forces holding down inflation dissipate further.” That was taken as an indication that he believes September is still a possibility. Much will depend on Friday’s nonfarm payroll figure.

• I believe that these comments are positive for both the USD and GBP. Some doubts about tightening probably crept into investors’ minds recently as they saw the turmoil in markets, but those doubts may well be calmed by this weekend’s comments. Nonetheless, the September and December Fed funds futures contracts were unchanged. The market is now placing a 38% chance of a rate hike in September, up from 24% in the middle of last week.

• What we’ve learned from recent market activity is that EUR and JPY are being actively used as a funding currency. When investors close out long positions in stocks, they also close out their short positions in the currency that they used to fund those positions, namely EUR and JPY. Thus as confidence returns to the markets, it should also return to the short-EUR and short-JPY trades.

• Initial polls show SYRIZA lagging: Campaigning formally began over the weekend for the 20 Sept. Parliamentary elections. The initial polls show former PM Alexis Tsipras’s SYRIZA coalition in the lead, but without enough support to command a majority in Parliament. The prospect of difficult coalition talks could hinder the government in implementing the conditions set out for the country’s third bailout and endanger the financial rescue. I don’t think this issue is an immediate threat to the euro. First off, there are several weeks to go before the election, and as we saw twice in the UK this year, markets don’t get that excited about elections until they are almost upon us. Secondly, peoples’ opinions can change dramatically in three weeks. Finally, Greece is no longer investors’ major concern; China is. However, this issue could return to the euro’s detriment following the elections.

• This morning’s indicators: During the Asian day Monday, Japan’s preliminary industrial production for July fell on a mom basis instead of rising slightly as was expected. Not encouraging! But as usual, USD/JPY followed Tokyo stock prices, not economic logic, which means the pair went lower (i.e., JPY strengthened). New Zealand’s ANZ business confidence for August also fell sharply, adding to expectations of a rate cut by the RBNZ at its policy meeting Sep. 10th. NZD/USD weakened sharply on the news, as was to be expected. Further weakening may be possible tomorrow, when the official China manufacturing PMI comes out (see below).

• Today’s indicators: During the European day, Eurozone’s flash CPI for July is coming out. The forecast is for an unchanged reading, and following the unchanged German inflation rate on Friday, the likelihood that the bloc’s CPI will meet the forecast is high. Any disappointment ahead of the ECB meeting could add to expectations that the Bank will have to keep QE in place for longer, which could put EUR under selling pressure.

• From the US, only secondary importance data are to be released. The Chicago Purchasing managers’ index for August is coming out.

• Today is a bank holiday in the UK. Markets are closed.

• As for the rest of the week, we have a very eventful week ahead of us with several central bank meetings, important economic indicators, and of course, Friday’s US employment report.

• On Tuesday, the RBA meets to decide on its benchmark interest rate. At their last meeting, Bank officials kept the policy rate unchanged, but for the first time since March 2014 they didn’t explicitly mentioned that the currency was overvalued and they removed the phrase that “further fall in AUD is likely and necessary.” Although the recent turmoil in China has increased the possibility of a rate cut this week, we believe that the Bank will remain on hold again and wait to better assess the effects of the Chinese chaos on Australia’s economy before they decide to act.

• From Canada, the monthly GDP for June and the Q2 GDP figure are due out. The monthly figure is expected to accelerate, but not enough for Q2 GDP as a whole to improve, as it is expected to fall further and put the country in a technical recession. It looks like the effects of falling commodities prices on the Canadian economy are not going to fade out anytime soon. The renewed slump in oil prices is likely to put further downside pressure on CAD and BoC could act again to underpin the fragile economy. A weak quarterly growth rate could push CAD lower.

• Globally, the monthly Purchasing Manufacturers’ indices (PMIs) for August begin coming out on Tuesday, starting as usual with China’s official PMI. It’s expected to fall below 50 again for the first time since February, which is not likely to encourage anyone. AUD and NZD are most at risk from this number, and if general risk aversion results, it could boost EUR and JPY.

• On Wednesday, the US ADP employment report for August is coming out two days ahead of the nonfarm payroll release, as usual. The ADP report is expected to show a print above the crucial 200k level and that the private sector gained more jobs in August than it did in the previous month. With just few weeks before Fed’s September meeting, further improvement in the labor market could be the additional information Fed members need for a rate hike to become “compelling”.

• On Thursday, all eyes will be on the ECB meeting. Following the Jackson Hole Symposium, ECB President Draghi will be the first major central banker to address a monetary policy meeting. Both the BoE and the Fed will meet later this month. Last Tuesday, ECB Vice President Vitor Constancio said that it is too early for the ECB to react to China’s situation as it is not clear how it would impact Eurozone’s economy. We agree with him and we do not expect the Bank to take any action at this meeting. We expect it to reiterate its easing bias and once again to stress its readiness to use all instruments within its mandate to defend new downside risks to price stability. We expect the ECB to leave the door open for a possible action and will look for hints on what possible actions they could take, such as increasing the size of the monthly allotment or extending the duration of the QE program. Sweden’s Riksbank also meets Thursday. They are expected to keep rates on hold, so the focus will be on the outlook that they present and their bias for future moves.

• On Friday, the main event will be the US employment report for August. This would be the most important employment report of the year, in our view, since it’s the last one ahead of the September FOMC policy meeting. The report is expected to show a 218k increase in nonfarm payrolls, slightly above the 215k print in July. Another reading above 200k would suggest that the US labor market is still gathering momentum despite the recent turmoil in China and the collapse in equity markets worldwide. The US unemployment rate is forecast to have remained unchanged at 5.3% while growth in average hourly earnings is expected to slow somewhat, to 2.0% yoy from 2.1% yoy.

Currency Titles:

EUR/USD hits support near 1.1165

GBP/USD rebounds from fractionally above 1.5330

USD/JPY hits resistance at 121.75

WTI hits resistance slightly below 46.00

Gold trades somewhat higher

Currencies Image Url:

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Currencies Text:

• EUR/USD hit resistance at 1.1310 (R1) on Friday and tumbled to find support at 1.1165 (S1). Subsequently, the rate rebounded. The short-term trend remains negative in my view and therefore I would expect a clear break below 1.1165 (S1) to initially aim for the next support at 1.1110 (S2). Our momentum studies though give evidence that the current rebound may continue for a while before the bears decide to shoot again, perhaps for another test at the 1.1310 (R1) resistance. The RSI, although below 50, has turned up again, while the MACD has bottomed and could cross above its trigger line soon. As for the broader trend, given that on the 26th of August, EUR/USD fell back below 1.1500 (R3), I would hold my neutral stance. The move below that psychological hurdle confirmed that the surge on the 24th of the month was a false break out. Therefore, I would like to see another move above 1.1500 (R3) before assuming that the overall outlook is back to positive.

• Support: 1.1165 (S1), 1.1110 (S2), 1.1020 (S3)

• Resistance: 1.1310 (R1), 1.1400 (R2), 1.1500 (R3)

• GBP/USD continued trading lower on Friday, but hit support fractionally above the 1.5330 (S2) support defined by the low of the 8th of July and then rebounded. Although the price structure on the 4-hour chart suggests a short-term downtrend, I would expect the current rebound to continue. A break above 1.5450 (R1) would confirm the case and perhaps pave the way for another test at the psychological zone of 1.5500 (R2). Our short – term oscillators corroborate my view as well. The RSI exited its below-30 zone and is now pointing up, while the MACD, although negative, has bottomed and has just crossed above its trigger line. As for the bigger picture, the collapse on the 26th of August brought the rate back below the 80-day exponential moving average. As a result, I would maintain my neutral view as far as the overall outlook of Cable is concerned.

• Support: 1.5370 (S1), 1.5330 (S2), 1.5270 (S3)

• Resistance: 1.5450 (R1), 1.5500 (R2), 1.5540 (R3)

• USD/JPY traded higher on Friday, but hit resistance at 121.75 (R1) and then retreated. The price structure on the 4-hour chart still suggests a short-term uptrend. As a result, I would expect a break above 121.75 (R1) to open the way for our next resistance at 122.40 (R2). Nevertheless, our momentum studies support the view that the current retreat may continue for a while before buyers pull the trigger, perhaps for another test at the 120.65 (S1) support. The RSI turned down and could fall below its 50 line soon, while the MACD, although positive, shows signs of topping. As for the broader trend, the plunge on the 24th of August signaled the completion of a possible double top formation, which probably shifted the medium-term picture negative. As a result, I would treat the near-term trend as a corrective phase for now.

• Support: 120.65 (S1), 119.80 (S2), 118.90 (S3)

• Resistance: 121.75 (R1), 122.40 (R2), 123.00 (R3)

• WTI shot up on Friday, but hit resistance slightly below the 46.00 (R2) hurdle and retreated to fall back below the psychological barrier of 45.00 (R1). On the 1-hour chart, I see a short-term uptrend but the current setback is likely to continue, probably to challenge the 43.40 (S1) obstacle as a support this time. Our hourly oscillators support the notion as well. The RSI exited its above-70 territory, while the MACD has topped and fallen below its trigger line. What is more, there is negative divergence between the RSI and the price action. On the daily chart, I still see a longer-term downtrend. As a result, I would treat the near-term uptrend as a corrective phase of that major down path, at least for now.

• Support: 43.40 (S1), 42.75 (S2), 41.80 (S3)

• Resistance: 45.00 (R1) 46.00 (R2), 46.65 (R3)

• Gold traded somewhat higher on Friday after breaking above the 1128 (S1) barrier on Thursday. I still believe that the rebound may continue for a while, perhaps to test the prior uptrend line taken from the low of the 7th of August as a resistance. However as long as the metal is trading below that trend line, I would consider the short-term bias to be negative. I would treat any extensions of the current rebound as a corrective move before sellers seize control again. Our short-term momentum studies support the case of further rebound. The RSI hit support near its 50 line and turned up again, while the MACD has bottomed and crossed above its trigger line. As for the bigger picture, with no clear trending structure on the daily chart, I would hold my neutral stance as far as the overall outlook is concerned.

• Support: 1128 (S1), 1118 (S2), 1110 (S3)

• Resistance: 1146 (R1), 1156 (R2), 1168 (R3)

Benchmark Currency Rates:

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IronFX Daily Commentary | 01/09/15

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•Oil gains further The remarkable rebound in oil continued yesterday with WTI trading this morning an astonishing 7.6% higher than yesterday’s early European price, and even that was down substantially from its peak during the US day (note though that our table below shows the change from the end of one European day to the next and so has a different figure). According to Bloomberg this has been the biggest three-day rally in oil in 25 years. The reason for the rise yesterday seems to have been the expressed willingness of OPEC producers to hold talks with non-OPEC producers to get fair prices although with the caveat that it has to be on a level playing field. The US Energy Information Administration (EIA) also revised down its estimate of recent domestic oil production, while there were unsubstantiated reports of a decline in Saudi output.

• Personally I can’t see Russia, Mexico or any other non-OPEC producer agreeing to limit production, so I think this is all talk and no action. I suspect that positioning had a lot to do with the surge: with prices below $40, investors who were short and there were a lot of them rushed for the door at the same time to lock in profits and sent it soaring. That surge isn’t likely to last indefinitely.

• Oil prices could come off further following the news of a further contraction in Chinese manufacturing (see below) and ahead of Wednesday’s weekly EIA report, which is expected to show a rise in US oil inventories. Until there is concrete news of production cutbacks, the glut is likely to continue and prices are likely to fall further, in my view. That prospect bodes ill for CAD, NOK, RUB and MXN. CAD was especially strong overnight and so it may show a particularly notable reaction to the reversal in oil prices during today’s trading.

• China manufacturing PMI falls to three-year low China’s official manufacturing PMI fell into contractionary territory in August, hitting a three-year low. Although the final Caixin/Markit manufacturing PMI was revised up slightly, it remains deeply in contractionary territory and so failed to offset the impact of the official figure. Virtually all Asian stock markets fell (Malaysia being the sole exception). SnP 500 stock futures were down a sharp 1.8% at the time of writing. Further risk reduction today could prove positive for EUR and JPY, two major funding currencies.

• RBA keeps rates unchanged, as expected The RBA kept its benchmark rate unchanged at 2% at its meeting Tuesday, as the market has predicted. Moreover, Gov. Stevens’ comments following the meeting were almost unchanged from last month. He maintained his neutral bias and as for AUD, he simply repeated last month’s statement that the Australian dollar is adjusting to the significant declines in key commodity prices. The fact that they are not more concerned than they were last month despite the increased weakness in the Chinese economy and the turmoil in global stock markets is slightly bullish AUD and the currency rallied somewhat, although whether it continues to do so today may depend more on the performance of stock markets – so far very weak – than carry-over momentum from the RBA.

• Today’s highlights: During the European day, we get the final manufacturing PMI figures for August for several European countries and the Eurozone as a whole. As usual, the final forecasts are the same as the initial estimates. Market reaction on these news is usually limited unless there is a huge revision from the preliminary figures. The UK manufacturing PMI for August is forecast to increase a bit, which could prove GBP-positive. Eurozone’s unemployment rate for July is also due to be released.

• From Canada, the monthly GDP for June and the Q2 GDP figure are due out. The monthly figure is expected to accelerate, but not enough for Q2 GDP as a whole to improve, as it is expected to fall further and put the country in a technical recession. It looks like the effects of falling commodities prices on the Canadian economy are not going to fade out anytime soon. The renewed slump in oil prices is likely to put further downside pressure on CAD and BoC could act again to underpin the fragile economy. A weak quarterly growth rate could push CAD lower. The RBC manufacturing PMI for August is also coming out. Market pays more attention to the Ivey PMI to be released on Friday. Thus, the reaction is usually limited at the release.

• In the US, the final Markit manufacturing PMI and the ISM manufacturing PMI both for June are also due out. The ISM index is expected to decline slightly but not enough to change anyone’s view on the economy. The ISM prices paid index however is expected to drop further to a low 39.0, which may call into question whether inflation is likely to pick up any time soon and therefore whether the Fed can hike rates in September. That could be negative for the dollar.

• Speakers include Boston Fed President Eric Rosengren, a non-voting member of the FOMC.

Currency Titles:

EUR/USD headed towards 1.1310

GBP/JPY hits support at 185.40

AUD/USD trades slightly higher following the RBA rate decision

DAX futures rebound from 10135

Gold rebounds from near 1128

Currencies Image Url:

http://shared.ironfx.com/Morning_Pictures_2015/September2015/September01/EURUSD_01Sep2015.PNG

http://shared.ironfx.com/Morning_Pictures_2015/September2015/September01/AUDUSD_01Sep2015.PNG

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http://shared.ironfx.com/Morning_Pictures_2015/September2015/September01/DAX_01Sep2015.PNG

http://shared.ironfx.com/Morning_Pictures_2015/September2015/September01/XAUUSD_01Sep2015.PNG

Currencies Text:

• EUR/USD hit the upside support line taken from the low of the 7th of August and rebounded. On Tuesday, during the Asian morning, the rate moved above 1.1260 (S1), yesterday’s high, and is now probably headed towards the 1.1310 (R1) resistance hurdle. A break above that barrier is likely to signal a short-term trend reversal and perhaps set the stage for extensions towards the 1.1400 (R2) area. Our momentum studies support that EUR/USD could trade higher in the near term. The RSI has turned up and now looks ready to cross above its 50 line, while the MACD, although negative, has bottomed and crossed above its trigger line. As for the broader trend, given that on the 26th of August, EUR/USD fell back below 1.1500 (R3), I would hold my neutral stance. The move below that psychological hurdle confirmed that the surge on the 24th of the month was a false break out. Therefore, I would like to see another move above 1.1500 (R3) before assuming that the overall outlook is back positive.

• Support: 1.1260 (S1), 1.1165 (S2), 1.1110 (S3)

• Resistance: 1.1310 (R1), 1.1400 (R2), 1.1500 (R3)

• GBP/JPY traded lower on Monday after it found resistance near 187.00 (R1). However, the decline was halted by the 185.40 (S1) barrier, marked by the low of the 28th of August. As long as the rate is trading between these two barriers, I would hold a flat stance as far as the near-term picture is concerned. A break below 185.40 (S1) is needed to extend Monday’s decline and perhaps aim for the 184.15 (S2) line, the low of the 26th of August. On the other hand, another attempt above 187.00 (R1) could trigger bullish extensions towards the 188.00 (R2) obstacle. In the bigger picture, I see that on the 24th of August, GBP/JPY found support at 183.20 (S3), which stands slightly above the 61.8% retracement level of the 14th of April – 18th of June advance. I prefer to see a clear close below that barrier before I assume further medium-term declines. For now, I would adopt a neutral stance as far as the overall outlook is concerned as well.

• Support: 185.40 (S1), 184.15 (S2), 183.20 (S3)

• Resistance: 187.00 (R1), 188.00 (R2), 190.00 (R3)

• AUD/USD traded slightly higher during the early European morning Tuesday, after the RBA left its key policy rate unchanged and reiterated that the Aussie is adjusting to lower commodity prices. I believe that the positive leg is likely to continue for a while and perhaps give another test at the 0.7200 (R1) resistance zone. Our short-term momentum studies corroborate that view. The RSI turned up and looks ready to cross above its 50 line, while the MACD, rebounded from near its trigger line and is pointing north as well. What is more, there is positive divergence between both these indicators and the price action.

• Nevertheless, although we may see the rate trading higher for a while, I would treat any possible near-term advances as providing renewed selling opportunities. On the daily chart, the completion of a head and shoulders formation and the move below the psychological zone of 0.7500 signaled the continuation of the prevailing long-term downtrend, in my opinion. The break below 0.7250 (R2) confirmed a forthcoming lower low on the daily chart, and this supports the case that AUD/USD will eventually trade lower and perhaps aim for the psychological zone of 0.7000 (S3).

• Support: 0.7080 (S1), 0.7040 (S2), 0.7000 (S3)

• Resistance: 0.7200 (R1), 0.7250 (R2), 0.7285 (R3)

• DAX futures hit support at 10135 (S1) on Monday and then rebounded somewhat. The index is still trading above the short-term downtrend line drawn from the peak of the 10th of August, but remained stuck below the 10435 (R1) resistance hurdle. A break above that resistance could challenge the10670 (R2) key obstacle as a resistance this time. The RSI is back below its 50 line and is pointing somewhat down, while the MACD, already above its trigger line, looks to be headed towards its zero line. Having in mind these mixed momentum signs, I would prefer to see a break above 10435 (R1) before getting confident on the upside. On the downside, I think that a move below the psychological zone of 10000 (S2) could change the short-term outlook. On the daily chart, the break below 10670 (R2) on the 20th of August has shifted the medium-term outlook to the downside, in my view. Therefore, I would treat any future near-term advances that stay limited below the 10670 (R2) zone as a corrective phase.

• Support: 10135 (S1), 10000 (S2), 9770 (S3)

• Resistance: 10435 (R1) 10670 (R2), 10800 (R3)

• Gold traded higher on Monday, after it hit support near the 1128 (S2) barrier. The metal is now headed towards the 1146 (R1) obstacle and the uptrend line taken from the low of the 7th of August. I believe that a move above that trend line, could shift the short-term bias somewhat positive again and could target the 1156 (R2) zone. Our short-term oscillators detect positive momentum and magnify the case that the yellow metal could continue trading higher in the short run. The RSI emerged above its 50 line, while the MACD, already above its trigger line, has just obtained a positive sign. As for the bigger picture, with no clear trending structure on the daily chart, I would hold my neutral stance as far as the overall outlook is concerned.

• Support: 1140 (S1), 1128 (S2), 1118 (S3)

• Resistance: 1146 (R1), 1156 (R2), 1168 (R3)

Benchmark Currency Rates:

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Market Summary Url:

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[IronFx]

IronFX Daily Commentary | 02/09/15

Language English

• A better day today? Stocks fell around the world yesterday, culminating in an almost 3% drop in New York. But this morning most Asian stock markets are trading slightly higher. It could be that they’re taking their lead from China, where speculation that state-backed funds were buying on the last trading day of the week helped to erase losses. In that case, we could see a retreat by EUR and JPY today and some rebound in the hard-hit commodity currencies, but so far there’s little sign of that.

• As I pointed out yesterday, EUR and JPY have been used as funding currencies recently and so as stock markets collapsed yesterday, they were the only two G10 currencies to gain vs USD. CAD on the other hand fell sharply as oil went into reverse and plunged (WTI and Brent are both down around 7% this morning from yesterday’s opening levels!) after three days of dramatic gains. The fall in CAD came despite better-than-expected June and Q2 GDP figures, with mining and oil and gas making a particularly strong contribution. CAD rallied on the GDP report but gradually lost all the gains and more. That suggests people are focusing on global factors and looking forward to weaker growth ahead, not backward at better-than-expected performance recently. NOK is lower too this morning, while RUB is the worst-performing EM currency of the ones that we track, continuing the focus on oil.

• GBP is also opening up lower this morning following yesterday’s disappointing manufacturing PMI for the UK. The action in GBP is somewhat surprising given how hawkish BoE Gov. Carney was in his Jackson Hole speech. The market may be losing faith in central bank communication as their economists banks can’t predict future economic trends any better than the private sector and their “forward guidance” has proved to be pretty worthless.

• NZD is down slightly too, despite a strong rise of around 12% at yesterday’s milk auction and further acceleration in house prices to the fastest pace in nearly eight years. The poor performance of NZD despite this favorable domestic news demonstrates how risk aversion and fears about the global economy are dominating the markets.

• The big surprise this morning is AUD, which is the worst-performing G10 currency. I said yesterday that I thought it would probably follow stock markets lower instead of being carried still higher on momentum from the RBA meeting, but even I was surprised by the pace of decline. It peaked shortly after European trading opened Monday and fell steadily during the day along with stocks. News this morning that Australian growth in 2Q was only half as strong as forecast on a qoq basis (+0.2% instead of +0.4% as expected) temporarily pushed AUD/USD below 0.70, although it quickly recovered to trade little changed. It was notable that exports were a major drag on the report; the decline in exports subtracted 0.7 percentage points from the yoy growth of 2.2%, the biggest drag of any sector. While Australia’s performance is still better than that of some other commodity-based economies, such as Canada and Brazil, the big impact of exports suggests further weakness to come and raises the possibility of RBA interest rate cuts down the line. That’s likely to keep AUD on a weakening trend, in my view.

• US data mixed The US data out yesterday was mixed. The manufacturing ISM fell sharply, well below estimates, although it remains in expansionary territory. The prices paid index meanwhile also fell, although that was as expected. Slower growth and falling prices = not the best environment for hiking rates. On the other hand, US auto sales and construction spending surprised on the upside, so clearly the US economy isn’t doing that badly by any means. Nonetheless Fed fund rate expectations fell across the curve, with everything from March 2017 onwards losing 6 bps of expected tightening. That may be due to comments by Boston Fed President Rosengren, who argued that doubts about inflation justify a “much more gradual normalization process” than occurred previously. The fact that USD generally gained despite the sharp downward revision in rate expectations though just emphasizes the fact that the fears moving the markets are global, not local, and still leave the USD in a good position relative to other countries’ currencies.

• Today’s highlights: In the UK, the construction PMI for August is expected to have risen to 57.5 from 57.1 in July. Nevertheless, having in mind that the manufacturing PMI for August unexpectedly fell, it is possible that the construction PMI is going to miss estimates as well and weigh on expectations of solid growth in Q3. This could pull the trigger for another attempt at the 1.5250 area defined by the low of the 9th of June.

• From the US, we get the ADP employment report for August, two days ahead of the most important NFP number of the year. The ADP report is expected to show a print above the crucial 200k level and that the private sector gained more jobs in August than it did in the previous month. With just a couple of weeks before the Fed’s September meeting, further improvement in the labor market could be the additional information Fed members need for a rate hike to become “compelling”. The Fed also releases the Beige Book, which includes a summary and analysis of current economic conditions in each district and sector. This will provide qualitative information to Fed officials on how the US economy has been performing after the turmoil in China and the collapse in equity markets worldwide. US Factory orders for July are also coming out.

• No speakers are scheduled on Wednesday.

Currency Titles:

EUR/USD finds resistance at around 1.1330

GBP/USD dips below 1.5330 following the UK manufacturing PMI

AUD/USD reaches the psychological number of 0.7000

WTI falls back below 45.00

Gold hits the trend line again

Currencies Image Url:

http://shared.ironfx.com/Morning_Pictures_2015/September2015/September02/EURUSD_02Sept2015.PNG

http://shared.ironfx.com/Morning_Pictures_2015/September2015/September02/GBPUSD_02Sept2015.PNG

http://shared.ironfx.com/Morning_Pictures_2015/September2015/September02/AUDUSD_02Sept2015.PNG

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http://shared.ironfx.com/Morning_Pictures_2015/September2015/September02/XAUUSD_02Sept2015.PNG

Currencies Text:

• EUR/USD tried to trade higher yesterday, but hit resistance at 1.1330 (R1) and then pulled back. I would like to see a break above that hurdle before I get confident on more bullish extensions. Something like that could pave the way for the 1.1400 (R2) zone. Our momentum studies detect upside momentum and support the case that EUR/USD could trade higher for a while. The RSI is back above its 50 line and it points up, while the MACD stands above its trigger line and is headed towards its zero line. However, today we get the ADP report from the US, which is expected to show improvement from the month before. This could distort the technical picture and could push the pair below 1.1260 (S1).

• As for the broader trend, given that on the 26th of August, EUR/USD fell back below 1.1500 (R3), I would hold my neutral stance. The move below that psychological hurdle confirmed that the surge on the 24th of the month was a false break out. Therefore, I would like to see another move above 1.1500 (R3) before assuming that the overall outlook is back to positive.

• Support: 1.1260 (S1), 1.1165 (S2), 1.1110 (S3)

• Resistance: 1.1330 (R1), 1.1400 (R2), 1.1500 (R3)

• GBP/USD tumbled on Tuesday, following the unexpected decline in the UK manufacturing PMI for August. The pair fell below the 1.5330 (R1) key hurdle, defined by the low of the 8th of July, but the decline fell short of reaching the 1.5250 (S2) line and hit support at 1.5290 (S1). The bias remains negative in my view. A disappointment in today’s construction PMI could push the rate for a test at 1.5250 (S2). However, given that there is positive divergence between our short-term oscillators and the price action, an upside corrective wave could also be on the cards, perhaps even back above 1.5330 (R1).

• As for the bigger picture, the collapse on the 26th of August brought the rate back below the 80-day exponential moving average. What’s more, the move below 1.5330 confirmed a forthcoming lower low on the daily chart. In my view, this shifts the overall outlook cautiously to the downside.

• Support: 1.5290 (S1), 1.5250 (S2), 1.5185 (S3)

• Resistance: 1.5330 (R1), 1.5410 (R2), 1.5450 (R3)

• AUD/USD traded lower during the Asian morning Wednesday after Australia’s weaker-than-expected Q2 GDP. Immediately following the disappointing release, the pair managed to breach the psychological zone of 0.7000 (S1) but stayed below there for less than 10 minutes. The short-term bias remains negative in my view, and as a result, I would expect a clear move below 0.7000 (S1) to initially aim for the 0.6950 (S2) line, defined by the low of the 20th of April 2009. Another break below that hurdle could set the stage for extensions towards the low of the 30th of March 2009 at 0.6765 (S3). Taking a look at our momentum studies though, I see that some profit taking, a minor bounce, could follow the challenge near the 0.7000 (S1) zone. The RSI rebounded from slightly below its 30 line, while the MACD shows signs that it could start bottoming. In the bigger picture, the break below 0.7250 confirmed a forthcoming lower low on the daily chart, and this supports the case that AUD/USD could trade below the 0.7000 (S1) territory in the foreseeable future.

• Support: 0.7000 (S1), 0.6950 (S2), 0.6765 (S3)

• Resistance: 0.7040 (R1), 0.7080 (R2), 0.7155 (R3)

• WTI collapsed on Wednesday, falling below the short-term uptrend line taken from the low of the 26th of August. Subsequently, it fell below the psychological barrier of 45.00 (R1). This has shifted the short-term bias back to the downside and therefore, I would expect the bears to challenge the 43.60 (S1) support soon. A break below that hurdle is likely to extend the declines, perhaps towards the 42.75 (S2) line. Taking a look at our hourly oscillators though, I see the possibility of a minor bounce before sellers decide to shoot again. The RSI rebounded from near its 30 line, while the MACD has bottomed and could move above its trigger line soon. On the daily chart, I still see a longer-term downtrend. As a result, I would treat the 26th – 31st of August advance as a corrective move of that major downside path.

• Support: 43.60 (S1), 42.75 (S2), 41.80 (S3)

• Resistance: 45.00 (R1) 46.00 (R2), 47.00 (R3)

• Gold traded higher on Tuesday, but found again resistance at the prior uptrend line taken from the low of the 7th of August. Subsequently, the rate retreated to find support at 1135 (S1). I still believe that a move above the aforementioned trend line could shift the short-term bias back positive. On the other hand, a break below 1135 (S1) could extent the current retreat and perhaps challenge the 1128 (S2) line. The RSI turned up from slightly above its 50 line, while the MACD lies slightly above its zero line and points sideways.

• Taking into account these momentum signs, I would hold a flat view for now and I prefer to wait for clearer directional movements. As for the bigger picture, with no clear trending structure on the daily chart, I would hold my neutral stance as far as the overall outlook is concerned as well.

• Support: 1135 (S1), 1128 (S2), 1118 (S3)

• Resistance: 1146 (R1), 1156 (R2), 1168 (R3)

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IronFX Daily Commentary | 03/09/15

Language English

• Below-consensus ADP sets market up for asymmetrical response to NPF Wednesday’s ADP employment report was slightly below estimates at 190k (market median estimate: 200k) but was still within the one standard deviation range of estimates (189k-217k). Also it must be said that August tends to be a weak month for payroll data anyway, so I’m not sure a miss would be that significant. Last year’s nonfarm payroll figure for August was a shockingly low rise of only 142k but that was followed by gains of 248k, 214k, 321k and 252k, so clearly the August shortfall didn’t signal any abrupt change in the labor market. (In fact the August 2014 figure was eventually revised up to 213k, demonstrating that even the NFP figure itself is not a very reliable leading indicator of the NFP figure.) Indeed, the somewhat weak ADP report may have inoculated the market against a weak NFP number tomorrow. That is to say, market participants may be revising down their estimate for NFP (market consensus: 217k) in light of the ADP number, so a surprise on the downside could have less impact than a surprise on the upside.

• In any event, we are starting to hear talk about a rate hike in the US at the October meeting as a possible compromise between those who hesitate to hike while the markets are in such a jittery mood and those who are pretty much committed to starting the process this year. The October meeting does not have a press conference scheduled, but Fed Chair Yellen has said in the past that that wouldn’t be an obstacle.

• Australia data adds to AUD woes The data out overnight for Australia added to the currency’s woes. Retail sales for July unexpectedly fell on a mom basis instead of rising as expected, while the June figure was revised lower. This was the first decline since May 2014 and calls into question whether domestic demand can substitute for shrinking export demand as China slows. Q2 GDP growth was only half as strong as expected and this July figure suggests Q3 is getting off to a slow start too. At the same time, the trade deficit for July was narrower than expected, but the June figure was revised to be wider than initially thought. All in all it seems only a matter of time to me before AUD/USD falls decisively below the 0.70 level.

• All eyes on ECB today During the European day, all eyes will be on the ECB. Following the Jackson Hole Symposium, ECB President Draghi will be the first major central banker to address a monetary policy meeting. Both the BoE and the Fed will meet later this month. On the 25th of August, ECB Vice President Vitor Constancio said that it is too early for the ECB to react to China’s situation as it is not clear how it would impact Eurozone’s economy. We agree with him, and we do not expect the Bank to take any action at this meeting. We do expect the Council to reiterate its easing bias and to stress again that in case of an unwarranted tightening of monetary policy or material change in the inflation outlook, “the Governing Council would respond to such a situation by using all the instruments available within its mandate.” Note that inflation expectations began to rise earlier this year, following the introduction of the ECB’s QE program, but they have been falling back recently, indicating that QE has not been successful in changing the inflation outlook. As a result, we expect the ECB to leave the door open for further action and we will look for hints on what actions they could possibly take, such as increasing the size of the monthly allotment or extending the duration of the QE program.

• Along with the policy decision, we will get a new set of staff projections for growth and inflation until the end of 2017. We believe that Bank officials are likely to lower their growth projections slightly because of the lower than anticipated Q2 GDP figure and the recent strength of EUR. The stronger EUR, alongside the recent fall in oil prices, is likely to also weigh on the near-term projections for inflation.

• Sweden’s Riksbank expected to stand pat too At their last meeting on 2 July, the Bank surprised the market by cutting its key interest rate further into negative territory and expanding its bond purchases program. Since then, the country fell back into deflation in July and the krona has become stronger than the Bank had forecast, especially as its QE program undermined liquidity in the country’s bond market and drove yields higher instead of lower. Although the market expects no change in rates at this meeting, I see the possibility for the Bank to act. That would probably weaken the krona and push USD/SEK back above the psychological zone of 8.5000.

• China on holiday China’s markets are closed for a holiday today and tomorrow. Much of the volatility in global markets has originated in the Chinese stock market, so we may have two days of relative calm – depending of course on the ECB and tomorrow’s NFP figure.

• Today’s indicators: We get the final service-sector PMIs for August from the countries we got the manufacturing data for on Tuesday. As usual, the final forecasts for France, Germany and Eurozone are the same as the initial estimates, therefore the market reaction is usually limited at these releases. Eurozone’s retail sales for July are coming out as well.

• The UK service-sector PMI is forecast to have risen slightly, to 57.7 from 57.4. Given that on Wednesday, the construction index missed estimates and that the manufacturing one unexpectedly declined on Tuesday, another miss in the service-sector PMI looks possible.

• In the US, the both the final Markit service-sector and the ISM non-manufacturing PMIs are expected to have declined. The market pays more attention to the ISM index. A possible decline in ISM non-manufacturing composite will be in line with the decline in the manufacturing index, and could push USD lower, at least temporarily. The nation’s trade balance for July and the initial jobless claims for the week ended on Aug. 29 are also coming out.

Currency Titles:

EUR/USD breaks below the uptrend line ahead of the ECB meeting

GBP/JPY rebounds from slightly above 182.50

NZD/USD trades in a consolidative manner

DAX futures hit support at 9925 and rebound

Gold falls below 1135

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Currencies Text:

• EUR/USD traded lower on Wednesday, falling below the 1.1260 (R1) hurdle and breaking below the uptrend line taken from the low of the 7th of August. I believe that this could encourage the bears to challenge the 1.1165 (S1) barrier. A dip below that barrier would confirm a forthcoming lower low on the 4-hour chart and perhaps aim for the 1.1110 (S2) line. Today, the ECB holds its monetary policy meeting. Although no change in policy is expected, we do expect the Bank to leave the door open for possible action in the future. This could be the trigger for the next bearish leg in

•EUR/USD. Our momentum studies support the notion as well. The RSI fell back below its 50 line, while the MACD, although negative, has topped and fallen below its trigger line. As for the broader trend, given that on the 26th of August, EUR/USD fell back below 1.1500, I would hold my neutral stance. The move below that psychological hurdle confirmed that the surge on the 24th of the month was a false break out. Therefore, I would like to see another move above 1.1500 before assuming that the overall outlook is back positive. On the downside, a break below the 1.0800 hurdle is the move that could shift the picture negative.

• Support: 1.1165 (S1), 1.1110 (S2), 1.1020 (S3)

• Resistance: 1.1260 (R1), 1.1330 (R2), 1.1400 (R3)

• GBP/JPY traded higher yesterday, after it found support slightly above Tuesday’s low of 182.50 (S2). Subsequently, the rate emerged above the resistance (now turned into support) line of 184.30 (S1). The price structure on the 4-hour chart still suggests a short-term downtrend, but taking a look at our oscillators, I see the possibility that the rebound may continue for a while. The RSI edged higher after finding support slightly below its 30 line, while the MACD has bottomed and crossed above its trigger line. What is more, there is positive divergence between these two indicators and the price action. On the daily chart, the completion of a double top formation has shifted the medium-term bias negative in my view. However a break below 182.50 (S2) is needed to confirm a forthcoming lower low, something that could open the door for the 181.40 (S3) area.

• Support: 184.30 (S1), 182.50 (S2), 181.40 (S3)

• Resistance: 185.40 (R1), 186.25 (R2), 187.00 (R3)

• NZD/USD traded in a consolidative manner on Wednesday, staying between the support of 0.6310 (S1) and the resistance of 0.6400 (S2). On the 4-hour chart, I still see a lower peaks and lower troughs, hence I would expect a decisive dip below 0.6310 (S1) to open the way for the 0.6200 (S2) zone. The RSI turned down after it hit resistance slightly below its 50 line, but the MACD, although negative, stands above its trigger line and points up. These mixed momentum signs give evidence that a minor bounce could be looming, and enhance my view to wait for a break below 0.6310 (S1) before betting more confident on the downside. On the daily chart, the overall path of NZD/USD is still to the downside. As a result, I would treat any possible near-term advances as providing renewed selling opportunities.

• Support: 0.6310 (S1), 0.6200 (S2), 0.6100 (S3)

• Resistance: 0.6400 (R1), 0.6500 (R2), 0.6565 (R3)

• DAX futures rebounded after finding support slightly below the 9925 (S1) barrier and they currently look ready to challenge the 10135 (R1) barrier. The index is still trading above the short-term downtrend line drawn from the peak of the 10th of August and as a result, I would expect a break above 10135 (R1) to open the way for the next resistance at 10305 (R2). The RSI has turned north and now appears ready to move above its 50 line, while the MACD, although negative, has crossed above its trigger line and could turn positive soon. On the daily chart, the break below 10670 on the 20th of August has shifted the medium-term outlook to the downside, in my view. Therefore I would treat any future near-term advances that stay limited below the 10670 zone as a corrective phase.

• Support: 9925 (S1), 9770 (S2), 9540 (S3)

• Resistance: 10135 (R1) 10305 (R2), 10435 (R3)

• Gold slid yesterday and fell below the support (turned into resistance) barrier of 1135 (R1). I would now expect the metal to challenge the 1128 (S1) line, where a break is likely to open the way for the next support at 1118 (S2). Our short-term oscillators detect negative momentum and amplify the case that further declines could be on the cards. The RSI fell below its 50 line and is now pointing down, while the MACD has topped and fallen below both its zero and signal lines. As for the bigger picture, with no clear trending structure on the daily chart, I would hold my neutral stance as far as the overall outlook is concerned.

• Support: 1128 (S1), 1118 (S2), 1110 (S3)

• Resistance: 1135 (R1), 1146 (R2), 1156 (R3)

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IronFX Daily Commentary | 04/09/15

Language English

• Draghi lays the groundwork for increasing QE ECB President Draghi sent EUR lower yesterday as he announced that the worsening economic outlook (they downgraded their growth and inflation forecasts) and market turmoil had increased the downside risk and as a result, they were increasing the limit for buying individual bonds to 33% of each issue from 25%. The move is not entirely unexpected; the original QE announcement said that “the limit will initially be set at 25% for the first six months of purchases and subsequently reviewed by the Council.” The announcement does not mean any immediate increase in the ECB’s purchases, as it isn’t even close to hitting this limit yet. However, the move does free up room in case the Council decides to expand or extend the QE program. And in fact Draghi did confirm that the “horizon, size and parameters of QE” can all be adjusted.

• Draghi noted several times the problems in EM, which he said “have the potential to further affect growth.” He may have been warning us that if conditions worsen, the ECB could act at the next meeting (Oct. 22nd) or the one after that (Dec. 3). Falling commodity prices, weaker EM currencies that make it harder to repay USD-denominated debt, or a further slowdown in EM growth rates are all points to watch, in my view.

• In any event, Draghi’s comments were exactly the kinds of hints about possible future actions that we were looking for and it was no surprise that EUR weakened as a result. I expect it to weaken further as more and more investors use EUR as a funding currency.

• US employment report in the spotlight: The main event today is the US employment report for August. This could be the most important employment report of the year, in our view, since it’s the last one ahead of the September FOMC policy meeting and may determine whether they raise rates at that meeting. NY Fed President Dudley said on Aug. 26th that the case for a September rate hike has become less compelling following the recent panic in equity markets. However, he added that a hike could become more compelling by the time of the meeting as they get additional information about the state of the economy. Therefore, a strong employment report, coming after the recent upward revision to the Q2 GDP figure, could bring forward expectations of a September hike, which would probably boost the greenback across the board.

• The report is expected to show a 217k increase in nonfarm payrolls, slightly above the 215k print in July. Another reading above 200k would suggest that the US labor market is still gathering momentum despite the recent turmoil in China and the collapse in equity markets worldwide. The unemployment rate is forecast to have declined to 5.2% from 5.3% while average hourly earnings are expected to rise 2.1% yoy, the same pace as in the previous month.

• However as we pointed out yesterday, August has been the least reliable month for the NFP data in recent years. Not only has August been the weakest month for NFP, it also has around twice the average revision (76k vs the average 41k, or 38k if we exclude August). What this may mean is that if the figure is weak, the market will make excuses for it, while if it’s strong, the market will take it as increasing the likelihood of a rate hike this year. That gives us asymmetric risk to the figure today. In any event, yesterday’s non-manufacturing ISM employment index for August stayed relatively high at 56.0, which combined with the ADP estimate of 190k jobs added suggests that the market consensus estimate is achievable.

• Other indicators: As for the rest of the indicators, Germany’s factory orders are expected to have fallen 0.6% mom in July after rising 2.0% mom in June. French consumer confidence for August is also coming out.

• In Canada, the unemployment rate for August is expected to remain unchanged at 6.8%. However, the net change in employment is expected to show a 5.0k decline, after a 6.6k increase in July. Following the recent plunge in oil prices and the reluctance of investors to push CAD higher after the better-than-expected GDP data

• On Tuesday, I would expect the currency to come under additional selling pressure at the release.

• Besides the indicators, Finance ministers and central bank chiefs from G-20 nations meet in Ankara, Turkey. They will hold discussions on coordinating policy responses to financial market risks including slowing Chinese economy, Greece’s debt turmoil and possible Fed tightening.

• We also have four speakers scheduled on Friday. During the Asian morning, Minneapolis Fed President Narayana Kocherlakota repeated his usual calls for the Fed to refrain from hiking rates this year. No surprise there. During the European day, we have speeches from Richmond Fed President Jeffrey Lacker, ECB Governing Council member Ewald Nowotny, and Riksbank Deputy Governor Skingsley.

Currency Titles:

EUR/USD plunges after Draghi’s remarks

USD/JPY breaks below 119.20

GBP/USD breaks below 1.5250

WTI hits resistance at 48.40 and tumbles

Gold continues lower and breaks below 1128

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• EUR/USD plunged on Thursday after Draghi’s comments at the press conference following the ECB policy meeting. The pair fell below the support (now turned into resistance) barrier of 1.1165 (R1) and hit support slightly above the 1.1075 (S2) line. As long as the rate is trading below the uptrend line taken from the low of the 7th of August and below the downtrend line drawn from back the peak of the 24th of August, I would still see a negative short-term picture. I believe that a break below 1.1075 (S2) would extend the near-term downtrend and perhaps open the way for the 1.1020 (S3) zone. The MACD stands below both its trigger and signal lines and points down, indicating downside momentum. Nevertheless, the RSI rebounded from slightly above its 30 line, raising concerns that a minor corrective bounce could be looming before the next negative leg.

• As for the broader trend, given that on the 26th of August EUR/USD fell back below 1.1500, I would hold my neutral stance. The move below that psychological hurdle confirmed that the surge on the 24th of the month was a false break out. Therefore, I would like to see another move above 1.1500 before assuming that the overall outlook is back positive. On the downside, a break below the 1.0800 hurdle is the move that could shift the picture to negative.

• Support: 1.1110 (S1), 1.1075 (S2), 1.1020 (S3)

• Resistance: 1.1165 (R1), 1.1200 (R2), 1.1260 (R3)

• USD/JPY tumbled on Thursday, and today during the early European morning fell below the 119.20 (R1) hurdle. As long as the rate is trading within the downside channel that has been containing the price action since the 28th of August, I would consider the short-term trend to be negative. I would expect the move below 119.20 (R1) to aim for the 118.75 (S1) support line. Another break below that line could see scope for extensions towards 118.25 (S2). Our oscillators detect negative momentum and support the notion. The RSI slid after hitting resistance slightly above its 50 line, while the MACD, already negative, has topped and fallen below its trigger line. As for the broader trend, the plunge on the 24th of August signaled the completion of a possible double top formation, which probably shifted the medium-term picture negative.

• Support: 118.75 (S1), 118.25 (S2), 117.00 (S3)

• Resistance: 119.20 (R1), 120.65 (R2), 120.70 (R3)

• GBP/USD continued falling yesterday, breaking below the support (turned into resistance) hurdle of 1.5250 (R1). The price structure on the 4-hour chart still suggests a downtrend, therefore I would expect the negative move to continue and perhaps challenge the 1.5185 (S1) support, defined by the low of the 5th of June. Our short-term momentum indicators support the notion as well. The RSI just fell back below its 30 line, while the MACD, already negative, looks ready to move below its signal line. As for the bigger picture, the collapse on the 26th of August brought the rate back below the 80-day exponential moving average. What is more, the move below 1.5330 confirmed a forthcoming lower low on the daily chart. In my view, this shifts the overall outlook cautiously to the downside.

• Support: 1.5185 (S1), 1.5090 (S2), 1.5000 (S3)

• Resistance: 1.5250 (R1), 1.5330 (R2), 1.5410 (R3)

• WTI traded higher yesterday, but hit resistance at 48.40 (R2) and then tumbled to fall back below 47.00 (R1). Since the price is still trading below the uptrend line taken from the low of the 26th of August, I would still see a negative short-term picture and I would expect the decline to continue and initially aim for the 45.70 (S1) line. A break below that barrier could extend the decline perhaps towards the 44.70 (S2) zone. The RSI stands near its 50 line but points sideways, while the MACD, although positive, lies below its trigger line and points down. This supports the case that WTI could trade lower in the short run. On the daily chart, I still see a longer-term downtrend. As a result, I would treat the 26th – 31st of August advance as a corrective move of that major downside path.

• Support: 45.70 (S1), 44.70 (S2), 43.40 (S3)

• Resistance: 47.00 (R1) 48.40 (R2), 49.30 (R3)

• Gold continued trading lower and managed to fall below the 1128 (R1) support (now turned into resistance) barrier. I would now expect the metal to continue lower and perhaps challenge the next hurdle at 1118 (S1), where a break is likely to open the way for the 1110 (S2) zone. Our short-term oscillators detect negative momentum and amplify the case for further declines. The RSI edged lower, but found support slightly above its 30 line. The MACD stands below both its zero and signal lines. The fact that the RSI rebounded from near its 30 line makes me believe that a short bounce could be looming before the bears prevail again. As for the bigger picture, with no clear trending structure on the daily chart, I would hold my neutral stance as far as the overall outlook is concerned.

• Support: 1118 (S1), 1110 (S2), 1105 (S3)

• Resistance: 1128 (R1), 1135 (R2), 1146 (R3)

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IronFX Daily Commentary | 07/09/15

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•Mixed NFP brings no further clarity Friday’s much-awaited nonfarm payrolls (NFP) were expected to settle the question of whether the Fed would hike in September, but in the event they were neither good enough to guarantee that the Fed would move nor bad enough to rule out a hike. The headline figure disappointed at only 173k (expected: 215k), but the unemployment rate fell further than expected (including the U6 measure, the Fed’s favorite measure of underemployment), average working week rose, and average hourly earnings continued to rise at the same annual pace as before. Net net, the Fed funds rate expectations were unchanged out to July 2016, meaning that the market thought the figures had little implication for near-term monetary policy. The confusion in the FX market can easily be seen by looking at a minute-by-minute chart: the high of the day for EUR/USD, 1.1189, was set at exactly 8:30 AM New York time, when the NFP headline hit the wires, while the low for the day, 1.1090, was set two minutes later at 8:32 after traders had had a chance to digest the rest of the numbers. EUR/USD bounced somewhat off the lows but stayed below the level prevalent before the figure came out.

• The figures create a dilemma for the Fed The new forecasts that will be presented at the September meeting are likely to revise growth up and revise unemployment down. That means the economy is doing better than they had expected back in June. In that case, what do they do with the dots? In particular, what do they do with the 2015 dot and the graph of the appropriate timing of policy firming, given that there will only be two more meetings in 2015? I would expect them to revise down their forecasts for interest rates further out, in 2016, 2017 and the long run, because lower oil and commodity prices will help keep inflation low. But keeping rates unchanged while the economy is now turning out even better than they expected would require some explanation.

• That explanation would have probably to do with market turmoil. Although stabilizing financial markets is not among the Fed’s mandate, the Committee does seem to take such factors into account. Looking back to 1990, the highest the VIX was at the time of a Fed rate hike was 25.4 , it’s now 27.8. The VXO index, a VIX-type index on the SnP 100, goes back to 1986; the highest that’s been when the Fed hiked was 28.8, while the index today is at 28.04. In other words, market volatility is also at the point where it may become a salient factor in the Committee’s thinking.

• Stocks and commodities were the big losers Friday, may recover today The biggest losers Friday were the stock market, which closed down about 1.5%, and commodity prices, with both copper and oil down sharply. This probably had less to do with the NFP than with just a general retreat from risk ahead of the long US weekend and with questions about how China would reopen today. That probably explains why the longer-dated Fed fund rate expectations declined. However, I would expect to see a reversal in risk appetite today as Chinese stocks are re-opening higher, following some reassuring words from Chinese officials at the G20 meeting about how China is committed to continuing structural reforms and to supporting economic growth. That could mean some recovery today for the AUD and NZD as well as commodity prices, while it would tend to be negative for the euro, which is used as a funding currency.

• On Monday, we have a very light calendar. Germany and Norway release their industrial production for July, but neither is usually a major market mover. US markets are closed for the Labor Day holiday.

• On Tuesday, we get China’s trade balance for July. The country’s trade surplus is expected to rise, but that’s only because imports are expected to fall at a faster pace than exports – still a negative factor for AUD, NZD and commodity-based EM currencies. Meanwhile, the fall in exports is another sign of the slowdown in global trade that’s hurting the other EM countries.

• Japan’s final estimate of Q2 GDP will also be released. It’s expected to be revised down to -1.8% qoq SAAR from the initial -1.6%. Having in mind China’s economic slowdown and its impact over the globe, I see little chance of a positive surprise here. The confirmation of the contraction in Q2 increases the chances that the BoJ will take further stimulus measures in order to meet its targets when it reviews its long-term projections in October. The nation’s current account balance for July is also coming out.

• During the European day, Eurozone’s final Q2 GDP is forecast to confirm the preliminary estimate and show that Euro-area’s economy expanded by only 0.3% qoq.

• In the US we get the labor market conditions index for August. This is a monthly index that draws on a range of data to produce a single measure to gauge whether the labor market is on the whole improving. Although not major market mover, the LMCI index will show the broader US labor conditions following the US employment report to be released today.

• The NFIB small business optimism index for the same month is also due out. This indicator is worth watching because of the Fed’s emphasis on employment, as small businesses employ the majority of people in the US. With less than two weeks to go before the September FOMC meeting, I believe that these two indicators will attract more attention than usual as they could affect expectations of a September rate lift-off.

• On Wednesday, the main event will be the Bank of Canada rate decision. At its last meeting on July 15th, the Bank reduced its growth forecasts sharply and cut rates by 25bps. It also left the door open for further rate cuts as it said that the depressed outlook for Canada’s growth has increased the downside risks to inflation. Although Canada’s CPI accelerated in July, Canadian oil prices are 11% lower than where they were back then and lumber prices are down 19%. We don’t expect any action at this meeting, but we expect the Bank to reiterate its dovish stance and keep alive the scenario for further cuts in the foreseeable future. That could weaken CAD. Canada’s housing starts for August and building permits for July are also coming out.

• From the UK, we get industrial production for July. The manufacturing PMI increased somewhat in July, but both the construction and service-sector indices declined, driving the composite PMI lower. Industrial production was down 0.4% mom in June. Therefore, the PMI prints for July increase the likelihood for another slump. The UK trade balance for July is also coming out.

• In the US, the Job Opening and Labor Turnover Survey (JOLTS) report for July is due out . This survey will also bring the quit rate, a closely watched indicator of how strong the job market is.

• The 23rd of July was the second consecutive time the RBNZ cut its interest rates. They also said that “some further easing seems likely. Since then, business confidence has fallen, unemployment has risen, producer prices remain in deflation and the trade deficit has widened – although at the same time dairy prices rose and the terms of trade improved. Nonetheless, inflationary pressures remain weak, with the CPI rising only by 0.3% yoy in Q2, well below the Bank’s target range of 1%-3%. What is more, the country’s growth faces risks related to the fall in the prices of the key commodities it exports. Therefore, we expect another 25bps rate cut at this meeting on the back of muted inflation and policy makers’ preference for a weaker NZD.

• On the other hand, the Bank of England is once again expected to remain on hold, as it has been since March 2009. But now the minutes of the meeting are released at the same time as the meeting, which makes meeting days more exciting than before. The number of the dissenting votes is the key point. At the last meeting on the 6th of August, sterling suffered as only Ian McCafferty voted for a rate hike. This surprised the market as most observers were expecting the formerly hawkish Martin Weale to join him in voting to raise rates. Furthermore, the Inflation report said the Bank expects inflation to pick up a bit more slowly than previously thought, because of the recent slump in oil prices. Although BoE Governor Carney recently stated that China’s turmoil will not affect the Bank’s plans, we believe it’ll be hard for any other members to join McCafferty at this meeting. Personally, I wouldn’t be surprised even if he steps back. We could therefore see GBP weaken after the meeting.

• As for the indicators, China’s CPI and PPI data for August are coming out. The forecast is for the CPI rate to rise to +1.9% yoy from +1.6% yoy, while the PPI rate is expected to fall at a faster pace than the previous month. The recent Chinese chaos and the plunge in the globe’s equity markets reflects investors’ concerns over the country’s growth prospects. As the country’s growth continues to slow and the demand for commodities decline, Australia and New Zealand, whose economies heavily depend on exports to China, could see their currencies weaken further. Australia’s unemployment rate for August is also to be released.

Currency Titles:

EUR/USD fell following the strong US jobs report

USD/JPY stays below 119.65

GBP/USD found some buy orders near 1.5165

WTI found support at the uptrend line

Gold locked in a consolidation mode

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Currencies Text:

• EUR/USD plunged on Friday following the strong US jobs report, to find support near 1.1090 (S1). The pair moved somewhat higher during the early European morning Monday, but is still trading below the black downtrend line. As such, I would still see a negative short-term picture. I believe that a break below 1.1090 (S1) would extend the near-term downtrend and perhaps open the way for the 1.1025 (S2) zone. Looking at our short-term oscillators however, we may see the rate trading higher for a while but I would treat any possible near-term advances as a corrective move. The MACD has crossed above its trigger line and is pointing up, while the RSI rebounded from slightly above its 30 line, raising concerns that a minor corrective bounce could be looming before the next negative leg.

• As for the broader trend, given that on the 26th of August EUR/USD fell back below 1.1500, I would hold my neutral stance. The move below that psychological hurdle confirmed that the surge on the 24th of the month was a false break out. Therefore, I would like to see another move above 1.1500 before assuming that the overall outlook is back positive. On the downside, a break below the 1.0800 hurdle is the move that could shift the picture to negative.

• Support: 1.1090 (S1), 1.1025 (S2), 1.0965 (S3)

• Resistance: 1.1200 (R1), 1.1245 (R2), 1.1315 (R3)

• USD/JPY stayed below our 119.65 (R1) resistance line despite the strong US employment report on Friday. As long as the rate is trading within the downside channel that has been containing the price action since the 28th of August, I would consider the short-term trend to be negative. I would expect the failure to move above 119.65 (R1) to aim once again for the 118.75 (S1) support line. A break below that line could see scope for extensions towards 118.25 (S2). As for the broader trend, the plunge on the 24th of August signaled the completion of a possible double top formation, which probably shifted the medium-term picture negative.

• Support: 118.75 (S1), 118.25 (S2), 117.00 (S3)

• Resistance: 119.65 (R1), 120.65 (R2), 121.35 (R3)

• GBP/USD continued to tumble but the pair found some buy orders near the 1.5165 (S1) support line. The price structure on the 4-hour chart still suggests a downtrend, therefore I would expect the negative move to continue and perhaps challenge the 1.5090 (S2) support zone. Our short-term momentum indicators support the notion as well. The RSI found resistance at its 30 line, while the MACD, already negative, looks ready to move below its signal line again.

• As for the bigger picture, the collapse on the 26th of August brought the rate back below the 80-day exponential moving average. What is more, the move below 1.5330 confirmed a forthcoming lower low on the daily chart, which shifts the overall outlook cautiously to the downside, in my view.

• Support: 1.5165 (S1), 1.5090 (S2), 1.5000 (S3)

• Resistance: 1.5250 (R1), 1.5330 (R2), 1.5410 (R3)

• WTI traded lower on Friday, but found support at the crossroad of the 45.15 (S1) support line and the uptrend line taken from the low of the 26th of August. Since the price is still above that line, I would see a cautiously positive short-term picture. A break above the 46.05 (R1) resistance zone is needed to extend the advance, perhaps towards the 47.00 (R2) level. Our short-term momentum studies show a neutral bias with both indicators near their equilibrium levels pointing sideways. Therefore, I would prefer the momentum studies to support the move in the price structure in order to trust further advances. On the daily chart, I still see a longer-term downtrend. As a result, I would treat the 26th – 31st of August advance as a corrective move of that major downside path.

• Support: 45.15 (S1), 44.15 (S2), 43.15 (S3)

• Resistance: 46.05 (R1) 47.00 (R2), 48.40 (R3)

• Gold remained locked in a consolidation mode, within a tight range between the 1128 (R1) resistance line and the 1118 (S1) support level. I believe that a break in either direction is likely to determine the forthcoming near-term bias. Looking at our short-term oscillators, I believe that the next wave is most likely to be lower. The RSI found resistance slightly below the 50 level and turned down, while the MACD, already below its zero line seems ready to cross below its trigger line. These momentums support my view that the next move could be to the downside. As for the bigger picture, with no clear trending structure on the daily chart, I would hold my neutral stance as far as the overall outlook is concerned.

• Support: 1118 (S1), 1110 (S2), 1105 (S3)

• Resistance: 1128 (R1), 1135 (R2), 1146 (R3)

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[IronFx]

IronFX Daily Commentary | 08/09/15

Language English

• China’s trade figures show weak demand all around China’s trade balance soared in August as both exports fell and imports fell sharply. Imports in particular were down 13.8% yoy, almost double the expected pace, although that’s nothing new; they averaged -14.4% yoy each month this year before the August figures were released. Exports were down 5.5% yoy. The figures demonstrate how demand is softening all over the world: both domestic demand in China as construction and investment slow, and demand for China’s exports elsewhere in the world. The figures are bad news for Australia and New Zealand, which count China as their major export market, as well as any number of EM countries that export commodities to China. Weak global demand is likely to increase pressures on all of them to maintain their share of a shrinking pie.

• On the other hand, the sharp fall in imports made for a near-record trade surplus in China ($60.24bn vs the record $60.62bn in February – although that was distorted by the Lunar New Year). That should help to cover any financial outflows and take off some of the downward pressure on the yuan. Paradoxically, it may therefore be beneficial to the Asian currencies that China competes with, at least in the short run. China’s foreign reserves fell a record USD 93.9bn in August as the country intervened to support its currency despite a devaluation during the month. Given the large trade surplus during the month, this indicates huge capital outflows, which means demand for USD. Also, selling reserves means selling US bonds, which is likely to push up US interest rates, making USD more attractive

• Japan GDP not as bad as was thought Japan’s Q2 GDP fell only 1.2% qoq SAAR in Q2, not as much as the initial estimate of -1.6%. The market had expected the figure to be revised down to -1.8%, so it was a big surprise. But the main contribution to growth was private inventories, meaning that companies are finding it difficult to sell all the goods that they make. This may impede growth in the future. Together with the poor China import data, this led to a decline in the Tokyo stock market. USD/JPY as usual tracked the stock market, meaning that the yen strengthened. Also note a higher-than-expected current account surplus for Japan in July – this may also add to yen strength for some time.

• While I expect the yen to remain a fundamentally weak currency, for now it appears that the EUR may be taking over the yen’s place as a funding currency. That could develop into a period of yen strength until Japanese investors increase their purchases of foreign assets, which I expect will happen once the Fed starts tightening and US bond yields rise.

• Oil down sharply (again) Oil prices fell sharply as Russia ruled out cooperating with OPEC to reduce production. At the same time, several diplomats said sanctions on Iranian oil were likely to be lifted within the first three months of 2016, adding to the global glut. Oh, and China’s oil imports fell 13.4% mom in July, albeit that June was a record level. In any event, it seems to me that oil prices are still extremely vulnerable and therefore so too are the oil currencies, particularly CAD ahead of tomorrow’s Bank of Canada rate decision.

• Today’s highlights: During the European day, Eurozone’s final Q2 GDP is forecast to confirm the preliminary estimate and show that Eurozone’s economy expanded by only 0.3% qoq. Therefore, the market reaction could be minimal at this release, unless we have a huge revision.

• In the US we get the labor market conditions index for August. This is a monthly index that draws on a range of data to produce a single measure to gauge whether the labor market is on the whole improving. Although not major market mover, the LMCI index will show the broader US labor conditions following the US employment report to be released today. The NFIB small business optimism index for the same month is also due out. Even though this indicator is not a major market mover, it is worth watching because of the Fed’s emphasis on employment, as small businesses employ the majority of people in the US. With less than two weeks to go before the September FOMC meeting, I believe that these two indicators will attract more attention than usual as they could affect expectations of a September rate lift-off.

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Currency Titles:

EUR/USD in a sideways path

USD/JPY still below 119.65

GBP/USD heads towards the key resistance of 1.5330

WTI found support at the uptrend line

Gold still in a consolidation mode

Currencies Image Url:

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Currencies Text:

• EUR/USD remained locked in a consolidative mode on Monday, trading within our 1.1090 (S1) support line and the 1.1200 (R1) resistance line. Even though the price moved somewhat higher towards the 1.1200 (R1) resistance line, I still see a negative short-term picture. I believe that a break below 1.1090 (S1) would extend the near-term downtrend and perhaps open the way for the 1.1025 (S2) zone. Looking at our short-term oscillators, the MACD, although above its trigger line, has topped slightly below its zero line and seems willing to move lower. The RSI stands just below its 50 line pointing down. These momentum signs support the notion that the next move is most likely a decline.

• As for the broader trend, given that on the 26th of August EUR/USD fell back below 1.1500, I would maintain my neutral stance. The move below that psychological hurdle confirmed that the surge on the 24th of the month was a false break out. Therefore, I would like to see another move above 1.1500 before assuming that the overall outlook is back positive. On the downside, a break below the 1.0800 hurdle is the move that could shift the picture to negative.

• Support: 1.1090 (S1), 1.1025 (S2), 1.0965 (S3)

• Resistance: 1.1200 (R1), 1.1245 (R2), 1.1315 (R3)

• USD/JPY stayed below our 119.65 (R1) resistance line and is stalling right around the middle of the downslope channel. As long as the rate is trading within that channel that has been containing the price action since the 28th of August, I would consider the short-term trend to be negative. I would expect the failure to move above 119.65 (R1) to aim once again for the 118.75 (S1) support line. A break below that line could see scope for extensions towards 118.25 (S2).

• As for the broader trend, the plunge on the 24th of August signaled the completion of a possible double-top formation, which probably shifted the medium-term picture negative.

• Support: 118.75 (S1), 118.25 (S2), 117.00 (S3)

• Resistance: 119.65 (R1), 120.65 (R2), 121.35 (R3)

• GBP/USD broke above our resistance-turned-into-support of 1.5250 (S1) and during the early European trading session, the pair heads towards the key resistance of 1.5330 (R1). A break above that level is needed to trigger further extensions towards our next resistance of 1.5410 (R2). Our short-term momentum indicators support the notion as well. The RSI broke above its 50 line and moved higher, while the MACD, already above its trigger line, poked its nose above the zero line.

• As for the bigger picture, the collapse on the 26th of August brought the rate back below the 80-day exponential moving average. What is more, the move below 1.5330 (R1) confirmed a forthcoming lower low on the daily chart, which shifts the overall outlook cautiously to the downside, in my view. This is why I need a break above that level to trust that further advances could be looming.

• Support: 1.5165 (S1), 1.5090 (S2), 1.5000 (S3)

• Resistance: 1.5250 (R1), 1.5330 (R2), 1.5410 (R3)

• WTI traded lower on Monday, breaking below our support (now turned into resistance) of 45.15 (R1) and the uptrend line taken from the low of the 26th of August. Since the price broke below that line, I would shift my view to neutral now and wait for a break below 44.15 (S1) to signal further declines. A break below that hurdle is needed to extend the decline, perhaps towards our next support of 43.15 (S2). Our short-term momentum studies detect a negative momentum amplifying the case for a leg lower. The RSI fell below the 50 line and moves towards the 30 level, while the MACD, stands below its trigger and zero lines.

• On the daily chart, I still see a longer-term downtrend. As a result, I would treat the 26th – 31st of August advance as a corrective move of that major downside path.

• Support: 45.15 (S1), 44.15 (S2), 43.15 (S3)

• Resistance: 46.05 (R1) 47.00 (R2), 48.40 (R3)

• Gold is still moving within a sideways path, within a tight range between the 1128 (R1) resistance line and the 1118 (S1) support level. I believe that a break in either direction is likely to determine the forthcoming near-term bias. Looking at our short-term oscillators, I believe that the next wave is most likely to be lower. The RSI found resistance slightly below the 50 level, while the MACD, already below its zero line, seems ready to cross below its trigger line. The momentum evident in these indicators supports my view that the next move could be to the downside. A break below the 1118 (S1) hurdle is likely to target our next support at 1110 (S2).

• As for the broader trend, with no clear trending structure on the daily chart, I would hold my neutral stance as far as the overall outlook is concerned.

• Support: 1118 (S1), 1110 (S2), 1105 (S3)

• Resistance: 1128 (R1), 1135 (R2), 1146 (R3)

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[IronFx]

IronFX Daily Commentary | 09/09/15

Language English

• Risk comes back into fashion The relief rally that I had expected on Monday actually took place on Tuesday, as European stocks closed higher, US investors continued the rally, and Asia continued the party, with Japanese stocks up 5% this morning. Despite yesterday’s announcement of disappointing Chinese trade data, commodity prices soared – copper for example was up 5.1% and WTI up 4.4%. Naturally the commodity and oil-related currencies rose, such as NZD, AUD, CAD, ZAR, RUB and MXN. GBP was in there too, perhaps because of merger-related flows. On the other hand, the safe-haven JPY and CHF took the biggest hit.

• Copper, often seen as a tradable proxy for Chinese growth, gained after China’s imports of copper ore and concentrate jumped 19% mom in August. The head of Rio Tinto Group’s copper and coal operations said signs of improvement in the Chinese property market were boosting the prospects for the metal and that he has “confidence there’s demand for our product” in China. Also, Glencore became the third major copper producer to announce mine closures, thereby bringing supply more in line with demand. I believe the price is limited in the long run, as there is more new capacity coming onstream next year, but that is several months down the road.

• Germany hits record trade surplus: While attention yesterday focused on the Chinese trade figures, Germany’s trade surplus hit a record high of EUR 25.0bn, and for much better reasons than China’s booming trade surplus: strong exports (+2.4% mom vs +2.2% mom for imports). That’s quite surprising given the weakness of global trade as a whole, and is a testament to German companies’ ability to dominate their market niches. The country’s current account surplus is enough to push the Eurozone as a whole well into surplus too. One question must be, how will Germany use this surplus? It’s likely that their taste for lending money abroad has been dented by the Greek crisis and the weakness of EM economies. Another possibility is that they lend it at home: maybe we can expect a real estate boom in Germany? However, if Germany fails to recycle the money abroad or invest it at home, then by definition either their current account surplus would fall or the euro would strengthen, or perhaps the current account surplus would fall because the euro strengthens. That’s perhaps the major risk to my forecast of a lower euro, aside from a risk-off environment that causes investors to close out short EUR positions.

• The Mummy walks again: Like the dead risen from the grave in an old horror story, we are starting to hear talk of another US government shut-down! To keep the government running, Congress has to pass 12 separate spending bills for various agencies and programs and get them all signed by the president by Sep. 30th each year. In fact, Congress has failed to do so for the last 18 years. Instead, they have passed a series of temporary funding measures — called "continuing resolutions" — and then wrapped most of the funding into a single "omnibus" spending package. Congress failed to accomplish even this in 2013 and most of the government had to shut down for two weeks as a result. This year, the House has passed a handful of spending bills that President Obama has threatened to veto for various reasons, while the Senate has passed none. The reason is that the Republican Party is trying to use the issue to force the government to stop funding Planned Parenthood, a private organization that focuses on women’s health issues, including abortions. Several of the Republican candidates for President (there are an estimated 18 of them) are trying to use this issue to raise their popularity with voters who oppose abortion, so it may be difficult for Republican Party officials to stop them. Given the difficulties that these candidates are having in distinguishing themselves in such a crowded pack, they may be willing to take more and more extreme positions. It could be dangerous!

• Today’s highlights: During the European day, the highlight will be the Bank of Canada rate decision. At its last meeting, the Bank reduced its growth forecasts sharply and cut rates by 25bps. It also left the door open for further rate cuts as it said that the depressed outlook for Canada’s growth has increased the downside risks to inflation. Even though Canada’s CPI accelerated in July and GDP, trade and employment data were all surprisingly improved, Canadian oil prices are much lower than where they were in July and lumber prices are down 19%. As such, we don’t expect any action at this meeting, but we expect the Bank to reiterate its dovish stance and keep alive the scenario for further cuts in the foreseeable future. That could leave CAD vulnerable. As for indicators, the country’s housing starts for August and building permits for July are also coming out.

• From the UK, we get industrial production for July. The manufacturing PMI increased somewhat in July, but both the construction and service-sector indices declined, driving the composite PMI lower. Industrial production is expected to rise in July, a turnaround from the month before, which could strengthen GBP. However, the disappointing PMI figures for July increase the likelihood for another slump. In such case, GBP is likely to come under renewed selling pressure. The UK trade balance for July is also coming out.

• In the US, only data of secondary importance are coming out. The Job Opening and Labor Turnover Survey (JOLTS) report for July is due out and the forecast is for a moderate increase in the number of job openings. This survey will also bring the “quit rate,” a closely watched indicator of how strong the job market is.

• The Reserve Bank of New Zealand will hold its policy meeting at the end of the European day. As we said on Monday, expectations are for a 25bps rate cut, which could put further downward pressure on NZD. See Monday’s comment for more details.

• Minneapolis Fed President Narayana Kocherlakota and RBA Deputy Governor Philip Lowe spoke overnight. Today, ECB Executive Board member Peter Praet will participate in a discussion on “Mitigating the impacts of lasting low interest rates for the financial sector” at the Eurofi Financial Forum.

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Currency Titles:

EUR/USD in a sideways path

GBP/USD above the key level of 1.5330

USD/JPY above 120.00

WTI to test the uptrend line as a resistance

Gold still in a consolidation mode

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Currencies Text:

• EUR/USD made one or two attempts to rally on Tuesday but none of them found much support and the pair is now back within our 1.1090 (S1) support line and the 1.1200 (R1) resistance line. Even though the price moved somewhat higher and breached temporarily the 1.1200 (R1) resistance line, the failure to overcome that level keeps the short-term picture negative. I believe that a break below 1.1090 (S1) would extend the near-term downtrend and perhaps open the way for the 1.1025 (S2) zone. Looking at our short-term oscillators, the MACD has topped slightly above its zero line and moved lower below its trigger line. The RSI stands just below its 50 line pointing down. These momentum signs support the notion that the next move is most likely a decline.

• As for the broader trend, given that on the 26th of August EUR/USD fell back below 1.1500, I would maintain my neutral stance. The move below that psychological hurdle confirmed that the surge on the 24th of the month was a false break out. Therefore, I would like to see another move above 1.1500 before assuming that the overall outlook is back positive. On the downside, a break below the 1.0800 hurdle is the move that could shift the picture to negative.

• Support: 1.1090 (S1), 1.1025 (S2), 1.0965 (S3)

• Resistance: 1.1200 (R1), 1.1245 (R2), 1.1315 (R3)

• GBP/USD broke above the key resistance-turned-into-support of 1.5330 (S1) and moved higher to test our next resistance of 1.5410 (R1). A strong and clear break above that level is needed to trigger further extensions perhaps towards our next resistance of 1.5460 (R2). Our short-term momentum indicators however support a minor correction before the next leg higher. The RSI found resistance twice near the 70 line and points down, while the MACD, already above its zero and trigger lines, seems to have topped and could move a bit lower.

• As for the bigger picture, the collapse on the 26th of August brought the rate back below the 80-day exponential moving average, which is a bearish move in my view. However, the move above the key 1.5330 (S1) barrier has shifted the broader trend to neutral for now, as further advances could be on the cards.

• Support: 1.5330 (S1), 1.5250 (S2), 1.5165 (S3)

• Resistance: 1.5410 (R1), 1.5460 (R2), 1.5500 (R3)

• USD/JPY broke above our resistance-turned-into-support barrier of 119.65 (S1) and above the upper boundary of the of the downslope channel. Since the rate is trading above that channel that has been containing the price action since the 28th of August, I would consider the short-term trend to be slightly positive. A break above the 120.65 (R1) barrier could see scope for extensions towards our next resistance at 121.35 (R2). Our short-term momentum studies support this notion. The RSI found support at its 50 line and bounced up, while the MACD, already above its trigger line, moved higher into positive territory.

• As for the broader trend, the plunge on the 24th of August signaled the completion of a possible double-top formation. Even though this keeps the overall picture somewhat to the downside, a break above the 120.65 (R1) resistance level is likely to shift the bias to neutral.

• Support: 119.65 (S1), 118.75 (S2), 118.25 (S3)

• Resistance: 120.65 (R1), 121.35 (R2), 121.80 (R3)

• WTI traded higher on Tuesday after it found some buy orders near the 44.15 (S2) support hurdle. During the early European trading session Wednesday, the price is making an attempt to break above the 46.20 (R1) resistance line. A break above that level is likely to push the rate towards our next resistance of 47.00 (R2) and for a test of the uptrend line taken from the low of the 26th of August as a resistance this time. Since the price broke below that line and could test it as a resistance, I would shift my view to neutral for now. I would prefer to see a clear break above 47.00 (R2) to trust further advances, or a failure to break it to push the price lower again. Our short-term momentum studies support my neutral stance, as both of them lie near their equilibrium levels pointing sideways.

• On the daily chart, I still see a longer-term downtrend. As a result, I would treat any short-term advances as a corrective move of that major downside path.

• Support: 45.15 (S1), 44.15 (S2), 43.15 (S3)

• Resistance: 46.20 (R1) 47.00 (R2), 48.35 (R3)

• Gold is still moving within a sideways path, within a tight range between the 1128 (R1) resistance line and the 1118 (S1) support level. I believe that a break in either direction is likely to determine the forthcoming near-term bias. Looking at our short-term oscillators, I believe that the next wave is most likely to be lower. The RSI found resistance slightly below the 50 level, while the MACD, already below its zero line, show signs of topping and seems ready to cross below its trigger line. The momentum evident in these indicators supports my view that the next move could be to the downside. A break below the 1118 (S1) hurdle is likely to target our next support at 1110 (S2).

• As for the broader trend, with no clear trending structure on the daily chart, I would hold my neutral stance as far as the overall outlook is concerned.

• Support: 1118 (S1), 1110 (S2), 1105 (S3)

• Resistance: 1128 (R1), 1135 (R2), 1146 (R3)

Benchmark Currency Rates:

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[IronFx]

IronFX Daily Commentary | 10/09/15

Language English

• Turns and roundabouts Yesterday saw amazing mean reversion. On Tuesday it was risk on all the way: stocks soared, with the Nikkei showing the largest gain in several years; copper and oil rose sharply; and most EM currencies gained. Yesterday it all reversed during US time as there was a massive bout of derisking for reasons that remain obscure. Reuters said it was because “hopes of further stimulus measures in China faded,” but I wonder. I think the rally on Tuesday and during the European day Wednesday is what was questionable. The rally was probably caused by “hopes” of further China stimulus, plus the rally in Japan caused by talk of a cut in corporate tax rates, not to mention the market-specific factors that caused copper prices to rebound, which I mentioned yesterday. But perhaps these factors only caused momentary covering of short positions, after which people realized that the fundamental picture hadn’t or wouldn’t change. There was no big change in Fed fund rates expectations. Personally, I doubt that we are going to see any moves in China large enough to turn things there around – at best they may try to slow the slowdown, not reverse it. Large-scale investment funded by a huge increase in debt is just no longer possible there. The slide in stocks (and risk in general) accelerated as the Apple event went on, although correlation is not the same as causation.

• In any event, the US stock market closed down 1.4%, commodity prices down (oil in particular off over 5%) and EM currencies largely fell. EUR rose, as is usual nowadays on risk-off days, but it was notable how little it rose relative to the big moves in stocks and commodities. That may be because the dollar gained sharply vs the commodity currencies.

• Bank of Canada stays on hold The Bank of Canada (BoC) remained on hold at its meeting Wednesday, as we expected. The statement focused on headline inflation, which at 1.3% yoy is close to the bottom of its 1%-3% target range. Core inflation however has been at or slightly above the 2% midpoint of its target range for the past 12 months. They expressed concern about the Chinese economy and the effects of increased market volatility and lower commodity prices. On the other hand, they also noted that “the stimulative effects of previous monetary policy actions are working their way through the Canadian economy” and that exchange-rate sensitive sectors are regaining momentum, while they refrained from mentioning “elevated” vulnerabilities associated with household imbalances. On the whole, they seem to be satisfied with the impact of their recent reduction in rates and happy to remain on hold for some time. As for the currency, they mentioned approvingly that the fall in CAD is “helping to absorb some of the impact of lower commodity prices” and “facilitating the adjustments taking place in Canada’s economy.” That shows they are happy with the fall in the currency and so are not at all going to fight any further weakness. With monetary policy on hold for a while, I would expect oil prices to determine the direction of CAD for now and therefore expect it to drift lower for the time being.

• RBNZ cuts rates, as expected The Reserve Bank of New Zealand (RBNZ) cut its official cash rate (OCR) by 25 bps at its meeting Thursday, also as expected. Importantly, it also retained its easing bias. It explained that the outlook had been revised down due to weaker activity in the developing economies, plus headline inflation remains below target. A reduction in the OCR is warranted by the softening in the economy and the need to keep future average CPI inflation near the 2 percent target midpoint, it explained. At this stage, some further easing in the OCR seems likely… As for the currency, it said that further depreciation is appropriate, given the sharpness of the decline in New Zealand’s export commodity prices. All told this seems to be a negative picture for the NZD: more rate cuts to come and a central bank that would welcome further depreciation in its currency. I expect to see NZD weaken further, particularly as the Chinese economy slows further (see next item).

• China CPI inflation accelerates, but so does PPI deflation China’s CPI rate accelerated to 2.0% yoy from 1.6% yoy, beating estimates of 1.8% yoy, while PPI deflation also accelerated to -5.9% from -5.4%, also beating estimates of -5.6%. The acceleration in CPI is not significant for monetary policy, as it’s caused by higher food prices, and raising interest rates will not cause more pigs to be born. The weak PPI is what’s important for global markets, as it indicates that Chinese companies remain under pressure. This implies that growth will continue to slow and imports to decline = negative for AUD, NZD and the EM currencies.

• Australia unemployment falls to 6.2% from 6.3%, in line with expectations.

• Today’s highlights: During the European day, the main event will be the Bank of England monetary policy meeting. No change in policy is expected while consensus for vote split is 8-1 with Ian McCafferty to maintain his call for a rate rise. The minutes of the meeting are released at the same time as the meeting, which makes meeting days more exciting than before. The number of the dissenting votes is the key point again, with market participants eagerly expecting to see if the formerly hawkish Martin Weale will join McCafferty in voting to raise rates. Even though BoE Governor Carney recently stated that China’s turmoil will not affect the Bank’s plans, we believe it’ll be hard for any other members to join McCafferty at this meeting. Any signs that the MPC members are reacting to international events, could leave GBP vulnerable. Furthermore, it will be interesting to see what will be the newly appointed member’s Gertjan Vlieghe stance and view regarding interest rates and inflation.

• Sweden’s CPI and CPIF for August are due to be released. Even though the country is expected to remain in deflation, the Sweden’s Riksbank maintained its benchmark interest rate unchanged and the monthly pace of bond purchases intact at its meeting last week. Unless we see a huge fall into deflation, the Bank is unlikely to alter its stance. However, given that the Bank remains willing to act, I would treat any short-term strength as a correction of SEK longer-term downtrend.

• Norway’s CPI for August is also coming out. Last time, NOK plunged after the country’s headline CPI decelerated from the previous month, falling back below the Norges Bank’s 2.5% target. It immediately recovered however and gained a bit, as the underlying rate came in line with market consensus of 2.6%. Therefore, the focus is most likely to be on the underlying rate again, which is expected to accelerate. This could prove NOK-supportive and ease expectations for further action by the Norges Bank at its end of September meeting.

• In the US, we get initial jobless claims and wholesale inventories for July.

• We have several ECB speakers on Thursday’s agenda. ECB Executive Board members Yves Mersch, Benoit Coeure and Peter Praet speak at the Eurofi Financial Forum in Luxembourg.

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Currency Titles:

EUR/USD broke above 1.1200

GBP/USD stays above the key level of 1.5330

USD/JPY above 120.00

WTI broke two support lines in a row

Gold slightly above 1100

Currencies Image Url:

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http://shared.ironfx.com/Morning_Pictures_2015/September2015/September10/GBPUSD.PNG

http://shared.ironfx.com/Morning_Pictures_2015/September2015/September10/USDJPY.PNG

http://shared.ironfx.com/Morning_Pictures_2015/September2015/September10/WTI.PNG

http://shared.ironfx.com/Morning_Pictures_2015/September2015/September10/XAUUSD.PNG

Currencies Text:

• EUR/USD moved higher on Wednesday to find resistance at 1.1245 (R1). The pair made two attempts to break above that territory, which coincides with the 100-period moving average, but none of them found much support and the pair remained slightly below that level. A break above that zone is likely to trigger further extensions, perhaps towards our next resistance of 1.1315 (R2). I would like to see a clear break above that hurdle to shift my view to the upside. Looking at our short-term oscillators they both lie near their equilibrium levels. The MACD has topped slightly above its zero line and is pointing sideways, while the RSI stands just above its 50 line pointing down. These momentum signs support the case to wait for a break above 1.1245 (R1) to trust the next leg higher.

• In the bigger picture, given that on the 26th of August EUR/USD fell back below 1.1500, I would maintain my neutral stance. The move below that psychological hurdle confirmed that the surge on the 24th of the month was a false break out. Therefore, I would like to see another move above 1.1500 before assuming that the overall outlook is back positive. On the downside, a break below the 1.0800 hurdle is the move that could shift the picture to negative.

• Support: 1.1130 (S1), 1.1090 (S2), 1.1025 (S3)

• Resistance: 1.1245 (R1), 1.1315 (R2), 1.1390 (R3)

• GBP/USD traded somewhat lower on Wednesday following the disappointing industrial production for July, but stayed above the support barrier of 1.5330 (S1). Ahead of the Bank of England policy meeting today, I would prefer to take a neutral stance and wait for a break of the 1.5330 (S1) support line or the 1.5410 (R1) resistance zone to determine the near-term bias. Given that no change in policy is expected and the consensus is that the vote will once again split 8-1, I believe that Cable could strengthen on the relief that MPC members are not reacting to China’s recent turmoil. A strong and clear break above the 1.5410 (R1) level is needed to trigger further extensions, perhaps towards our next resistance of 1.5460 (R2). As for the bigger picture, the collapse on the 26th of August brought the rate back below the 80-day exponential moving average, which is a bearish move in my view. However, the move above the key 1.5330 (S1) barrier has shifted the broader trend to neutral for now, as further advances could be on the cards.

• Support: 1.5330 (S1), 1.5250 (S2), 1.5165 (S3)

• Resistance: 1.5410 (R1), 1.5460 (R2), 1.5500 (R3)

• USD/JPY found some sell orders slightly below our 121.35 (R1) resistance area and moved lower, but the move was halted marginally above our 119.80 (S1) support zone. Given that the pair remained above the upper boundary of the downslope channel that has been containing the price action since the 28th of August, I would consider the short-term trend to be slightly positive. Looking at our momentum studies, they detect positive upside momentum, and support the notion that the next move is most likely to be higher. The RSI found support at its 50 line and bounced up, while the MACD stands above both its zero and trigger lines.

• As for the broader trend, the plunge on the 24th of August signaled the completion of a possible double-top formation. Even though this keeps the overall picture somewhat to the downside, a break above the 121.80 (R2) resistance level is likely to shift the bias to neutral.

• Support: 119.80 (S1), 118.75 (S2), 118.25 (S3)

• Resistance: 121.35 (R1), 121.80 (R2), 123.00 (R3)

• WTI plunged on Wednesday, breaking two support lines in a row, only to find some buy orders near the 43.15 (S1) obstacle. A break below that area, which happens to lie near the 61.8% Fibonacci retracement level of the end of August advance, is likely to hold larger bearish implications and push the price towards our next support at 41.85 (S2). Our short-term momentum indicators support the case for further declines. The RSI fell below its 50 line and is pointing down, while the MACD, already below its trigger line, moved deeper into its negative territory.

• On the daily chart, I still see a longer-term downtrend. As a result, any short-term advances are likely to be corrective moves of that major downside path.

• Support: 43.15 (S1), 41.85 (S2), 40.00 (S3)

• Resistance: 44.15 (R1) 46.20 (R2), 47.00 (R3)

• Gold plunged on Wednesday, breaking below the tight range that had been containing the price action since the 3rd of September. The move was halted near the 1103 (S1) support area, and if the bears prove strong enough, they could challenge our next support of 1095 (S2). Our short-term momentum studies however, favor a minor upside correction before the next wave lower. The MACD, although below its zero and trigger lines, show signs of bottoming and could move a bit higher, while the RSI, slightly below its 30 line seems willing to cross above it again. Therefore, we could see a test of the support-turned-into resistance zone of 1110 (R1) before the next leg down.

• As for the broader trend, with no clear trending structure on the daily chart, I would hold my neutral stance as far as the overall outlook is concerned.

• Support: 1103 (S1), 1095 (S2), 1085 (S3)

• Resistance: 1110 (R1), 1118 (R2), 1128 (R3)

Benchmark Currency Rates:

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Market Summary Url:

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[IronFx]

IronFX Daily Commentary | 11/09/15

Language English

• "Washing machine" markets continue volatile Markets continue to be increasingly volatile without much news behind it. Today it was back to “risk on” in what could be characterized as a “washing-machine market” – going back and forth violently but not really going anywhere. WTI was up 4.5% over the last 24 hours. That follows -5.3%, +4.4% and -3.6%. WTI has moved an average of 4.2% a day one way or the other over the last two weeks. Oil rallied Thursday despite a large rise in inventories and the success of the Iranian nuclear accord in the US Senate because the Energy Information Agency (EIA) reported that US oil production fell to nearly a one-year low in August and was likely to keep falling well into next year.

• Adding to the favorable sentiment was a Wall Street Journal article by their esteemed Fedwatcher, Jon Hilsenrath, saying that “divisions and uncertainty” among FOMC members may restrain them from hiking rates next week. “A middle-ground choice now could involve signalling more strongly the Fed’s intent to raise rates this year once officials become comfortable recent market moves aren’t a sign of deeper problems in the global economy.” Personally, I think that the Fed is the central bank of the US, not the world, and so it do what it sees necessary for the US economy, not the global economy. I think they could hike rates to 25 bps with a statement reassuring the markets that this was not going to happen at every meeting, that the pace of rate increases will be extremely gradual and the terminal rate will be well below the historical norm. In my view that would actually reduce tensions in the market as everyone could stop wondering about the timing of the first Fed rate hike. It would also reassure the markets that the Fed was confident about the strength of the US recovery. But then again, I’ve never spoken directly with any FOMC members, so this is just my guess against his view. In any event, Fed funds rate expectations were unchanged across the curve yesterday, suggesting that Hilsenrath’s view is what the market is expecting anyway.

• In China, the source of much volatility now, the People’s Bank of China (PBOC) appears to be trying to drive the CNH down so that it’s equal to the CNY. They apparently want the two currencies to converge so that central banks can fix the value of their RMB assets on one clearly defined price. That would aid in having the CNY included in the SDR when the SDR composition is reviewed in November. The idea that China is still trying to accomplish this goal suggests that they are going to work towards stability, although of course they may need to use substantial reserves to achieve that stability and that has implications for the US Treasury market as well as the domestic monetary base. Nonetheless this was another factor adding to the risk-on sentiment.

• As greed conquered fear, oil-related currencies, such as NOK and RUB, did best, followed by other commodity currencies such as AUD and ZAR. There was generally good demand for EM currencies. The exception to both rules was BRL, which plunged after S+P downgraded the country’s bonds to non-investment grade. The safe-haven JPY also did poorly as nobody was interested in safety. The dollar was down in this environment, even against the EUR, which runs somewhat counter to my theory of EUR being used as a funding currency during risk-on events.

• During the Asian day, New Zealand’s BusinessNZ manufacturing PMI for August rose to 55.0 from 53.5

• Today’s highlights: During the European day, we get the final German CPI data for July. As usual the final figures are forecast to confirm the preliminary estimates, thus the reaction in the market is likely to be modest.

• From Sweden, the final GDP for Q2 is expected to confirm the preliminary reading, and show that the economy grew 1.0% qoq in Q2. Following the country’s further dip into deflation on Thursday, any upward revision in GDP is likely to keep SEK strength limited. Sweden’s official unemployment rate for August is also coming out. The PES unemployment rate rose yesterday, which increases the likelihood that the official rate could rise as well.

• In the US, the PPI data for August are coming out. The headline rate is forecast to have turned negative, while the core PPI, excluding food and energy is expected to have slowed. These data increase the risk of a decline in the CPI coming out on the 16th of September. The headline CPI rate is currently at +0.2% yoy and a possible negative PPI could increase the risk for a negative CPI. The preliminary U of M consumer sentiment index for September is also coming out along with the surveys of 1-year and 5-to-10 year inflation expectations.

• As for the speakers, ECB Executive Board member Benoit Coeure and BoE MPC member Kristin Forbes speak.

Currency Titles:

EUR/USD broke above 1.1245

GBP/USD broke above 1.5410

USD/JPY in a consolidative mode

GBP/JPY

DAX futures hit support at 10135

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http://shared.ironfx.com/Morning_Pictures_2015/September2015/September11/GBPUSD.PNG

http://shared.ironfx.com/Morning_Pictures_2015/September2015/September11/USDJPY.PNG

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http://shared.ironfx.com/Morning_Pictures_2015/September2015/September11/US_PPI.JPG

Currencies Text:

•EUR/USD moved higher on Thursday and broke above our resistance-turned-into-support level of 1.1245 (S1). On the daily chart, this happens to be a break above the 200-day simple moving average, which makes it an important level. So if the bulls prove strong enough and aim for another attempt to push the rate higher, we could see EUR/USD testing the 1.1360 (R2) resistance zone anytime soon. However, the fact that the advance was halted few pips below our 1.1315 (R1) resistance zone make me take a wait-and-see stance for a break above that level to support the case for further advances. Our short-term momentum studies detect positive momentum and support the case for a move higher. In the bigger picture, given the fall on the 26th of August below 1.1500 and the advance on Thursday above the 200-day moving average, I would maintain my neutral stance. The move below that psychological hurdle confirmed that the surge on the 24th of the month was a false break-out. Therefore, I would like to see another move above 1.1500 before assuming that the overall outlook is back to positive. On the downside, a break below the 1.0800 hurdle is the move that could shift the picture to negative.

• Support: 1.1245 (S1), 1.1200 (S2), 1.1130 (S3)

• Resistance: 1.1315 (R1), 1.1360 (R2), 1.1390 (R3)

• GBP/USD broke above the resistance-turned-into-support of 1.5410 (S1), after the Bank of England’s optimistic message that the recent financial markets turmoil and the Chinese slowdown does not fundamentally change their view of the economy. Following the break, there were two attempts to surge above the 1.5460 (R1) hurdle, but none of them found the necessary strength and the pair fell back below it. It is worth mentioning that the aforementioned level coincides with the 80-day exponential moving average that had been a reliable tracker of the price action since August 2013. A strong and clear break above the 1.5460 (R1) resistance zone is needed to trigger further upside extensions.

• As for the bigger picture, the collapse on the 26th of August brought the rate below the 80-day exponential moving average, which is a bearish move in my view. Therefore, we need a strong break above the 1.5460 (R1) area to shift the broader trend somewhat to positive.

• Support: 1.5410 (S1), 1.5330 (S2), 1.5250 (S3)

• Resistance: 1.1.5460 (R1), 1.5500 (R2), 1.5560 (R3)

• USD/JPY remained locked in a consolidation mode, within a range between the 121.35 (R1) resistance zone and the 119.90 (S1) support territory. I believe that a break in either direction is likely to determine the forthcoming near-term bias. Our momentum studies detect positive upside momentum and support the case for another attempt to move higher and test the 121.35 (R1) hurdle. The RSI found support at its uptrend line and points up, while the MACD appears to have bottomed above its zero line and is willing to cross above its trigger line.

• As for the broader trend, the plunge on the 24th of August signaled the completion of a possible double-top formation. Even though this keeps the overall picture somewhat to the downside, a break above the 121.80 (R2) resistance is the level that could shift the bias to neutral.

• Support: 119.80 (S1), 118.75 (S2), 118.25 (S3)

• Resistance: 121.35 (R1), 121.80 (R2), 123.00 (R3)

• GBP/JPY surged following the Bank of England rate decision on Thursday but the move was halted slightly below our 187.60 (R1) resistance zone. The pair subsequently retreated, to test the 186.00 (S1) obstacle as a support this time. Given that the MPC members showed little concern over the recent international events and kept their upbeat view of the UK’s economy, I would expected GBP/JPY to advance again, at least for another test of the 187.60 (R1) area. A break above that level could trigger further upside extensions, perhaps towards our next resistance of 188.50 (R2). This would print a higher high on the 4-hour chart, and shift the short-term picture slightly to the upside, in my view. Our short-term momentum studies support the notion for further advances. The RSI found support at its 50 level and bounced up, while the MACD, already in its positive territory, seems willing to cross above its trigger line. As for the broader trend, as long as the pair is trading above the black uptrend line taken from the low of 10th of October 2013, I would keep my view to the upside. Given the negative divergence between our daily momentum studies and the price action however, another leg down for a test of that uptrend line cannot be ruled out.

• Support: 186.00 (S1), 184.60 (S2), 183.90 (S3)

• Resistance: 187.60 (R1), 188.50 (R2), 189.80 (R3)

• DAX futures plunged after failing to break above the 10525 (R2) resistance area, to find support around the 10135 (S1) zone. The index currently look ready to challenge the 10135 (S1) barrier again but given the positive sentiment overnight with the US and Asian shares modestly higher, a rebound to test the 10400 (R1) resistance zone again cannot be ruled out. I would expect a break above 10400 (R1) to open the way for the next resistance at 10525 (R2). The RSI has found support near its uptrend line and now appears ready to move above its 50 line, while the MACD, is positive and could cross above its trigger line anytime soon. On the daily chart, the break below 10670 (R3) on the 20th of August has shifted the medium-term outlook to the downside, in my view. Therefore I would treat any future near-term advances that stay limited below that zone as a corrective phase.

• Support: 10135 (S1), 9965 (S2), 9780 (S3)

• Resistance: 10400 (R1) 10525 (R2), 10670 (R3)

Benchmark Currency Rates:

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Market Summary Url:

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