Technical and Market Analysis by Vistabrokers - page 2
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Plunging OIL sees risk aversion as Investors flock to Yen
The Yen was buoyant today following a sharp decline in crude oil and stocks which resurfaced concerns regarding the global economy. Additionally growing fears in the Eurozone’s stability and measures to be taken against deflation have seen a more conserved side to investors.
The USDJPY dropped to 118.64 from Monday’s high of 120.68 as it distanced itself from the 7 year high of 121.86 which was reached last month. The decline in the US treasury yields also further added to the buoyant dollar against the Yen as the 10 year yields descended some 14 basis points within 2 sessions. This is expected to be a temporary drop for the US treasuries as the recent healthy outlook for the Dollar should help raise the yields back up.
The recent constant decline of OIL prices coupled with political uncertainty in Greece ahead of a snap election to be held later this month, have forced a more conservative view from investors, as the Wall Street was sent to its biggest 1 day drop in over 3 months yesterday. Constant rumors of the Eurozone losing ots first member – Greece – has further drained confidence in the single currency.
The Euro recently reached a 9 year low at 1.1856 before retracing some of those losses and currently trading around the 1.1895 levels. Pressure is on the ECB to introduce quantitative easing sooner than previously planned and skepticism has hence surrounded the single currency. European shares remained subdued in today’s early session, underpinning safe-haven flows.
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USDCHF remains above parity
From the hourly chart we see a clear continues uptrend for the USDCHF, as it uses the 50 MA as a solid support level in its flow. The pair has been trading above parity since the beginning of this week, reaching a 4.5 year high of 1.0134 in yesterday’s closing session. The pair is currently trading above the 1.0100 level, seen by some as a critical support level, since the beginning of today’s sessions and is consolidating around the 1.0115 levels.
The economic indicators are in a neutral position, having consolidated from overbought areas; investors still expect to see the upward momentum continue for the pair, as more and more optimistic economic data continues to be absorbed by the US economy.
Scenarios
The current trend is expected to continue, with healthy consolidations, as we have seen so far. The next resistance level for the Bulls is the September 2010 high of 1.0276; which if convincingly broken may leave the pair free to rise some further 350+ pips to the August 2010 high of 1.0624.
Alternately if we see a convincing push from the Bears to not only consolidate but convincingly sustain lower levels for the pair, we may see a reversal inn trend. The current support levels, stand at 1.0100, which if broken will leave the way for a drop towards the 50 MA, which has not been broken this year, and currently sits at 1.0078.
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Dollar gains across board, Euro at fresh 9 year low
The Euro continued its decline today, falling to a new 9 year low of 1.1817 against the Dollar as fears for the Eurozone economy were kindled by data which showed the euro zone prices declining for the first time since 2009. The Eurozone consumer prices dropped lowed than expected to 0.2% per annum in December, further to the much cheaper energy we have recently seen. The recent pile on of bad news must surely put enormous pressure on the European Central Bank to take immediate measures to revive the EU economy.
Eurozone prices, excluding seasonal energy and unprocessed food, remained steady at 0.7% in December, while prices with the exclusion of Alcohol and tobacco rose to 0.8%. The initial news saw some support of the Euro as it re-cooped some losses, however this was short lived and saw the EURUSD drop to a new 9 year low. In addition, the positive news from Germany of a reduced unemployment change of -27K, some 11K less than the expected value of -16K, did not manage to suede investors in purchasing the Euro.
The Greenback rose to a 9 year high against a basket of currencies, reaching a level of 92.02. FOMC minutes, due to be released at 19:00 GMT, should see some choppy/ volatile movement in the USD. The non-farm payrolls are scheduled for later in the week, which will be very crucial this month in giving a further push or pull to the Dollar against a basket of currencies and very importantly against the Euro.
Commodities continued their decline, with Brent reaching below the crucial $50 level, marking a 5.5 year low. The much reliant Canadian Dollar dropped also to a 52.5 year low to 1.1870 against the Dollar while the Norway crown headed towards a 12.5 year low
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USDJPY looks to consolidate in short term
Looking at the 1 Hour chart of the USDJPY pair we see that the short to midterm trend for the USDJPY is in a range, if not slightly bearish. The pair has been trading steady around the 119.80 levels following a sharp rise of over 500 pips since the 16[SUP]th[/SUP] of December, which saw the pair find strong resistance around the 120.80 levels.
The New Year has seen the pair drop from the 120.80’s to 118.13, whilst the last few days have seen it recoup some of those losses as it now trades at the 61.8% Fibonacci retracement level – a point which has still to be convincingly broken by the Bulls.
Scenarios
In the short term we may see a consolidation in the USDJPY, having reached the 61.8% Fibonacci retracement level, with support at S1, which marks the 50 MA. Additionally indicators show that currently we are in/ heading towards an overbought level, as such a correction is expected. Should S1 be convincingly broker, we expect strong support at S2 – a level which is quite critical in not allowing the pair to freefall and wipe out the momentum of the Bulls.
Alternately we may see the current short range uptrend continue, in which case we expect the Bulls to meet strong resistance at the R1 level which has been tested twice so far, at 120.72
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Euro continues to reach fresh 9 year lows
The Euro extended losses once again today, failing to find any significant support levels since the beginning of the year. This marks 6 days of straight losses for the single currency against the Dollar. In just over half a year, the Euro has managed to drop some 19 cents – over 13.5% of its June high of 1.3699. Investors are anticipating that the ECB will soon step in and adopt its quantitative easing stimulus in order to attempt to keep the Euro away from its current deflationary status. The pair currently trades at 1.1761 against the Dollar.
The recent decline of German industrial orders for November saw further doubt cast on the Euro, pilling on top of already existing concern that a Greek general election on January 25[SUP]th[/SUP] may lead to turmoil between Europe and Greece over the existing austerity measures, which Greece had previously agreed to.
Currently the Euro is anticipated to continue its decline, as we come up to the ECB meeting on the 22/01 and expect more short positions to continue driving down the EURUSD pair. The next strong support level for the pair is seen at 1.1638 – the November 2005 low.
The Federal Reserve, in comparison, is expected to raise its interest rates as early as Q1 in 2015, which has further pushed the USD to gain against the Euro as the USA economy has recently shown signs of a healthy outlook. The Dollar climbed above 119.75 Yen as it moved away from a 3 week trough around 118.40, while the Dollar index remained near the 9 year high.
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Gold Daily Chart
Gold has been trading towards a falling wedge formation on the daily chart since mid-November as per the diagram below. The chart shows a struggle between the Bulls and Bears as the Bulls have managed to push the price up and give an intraday up trend to Gold since November, however the prevailing longer term trend is down as we can clearly see the push the Bears have enforced since July, dropping the price an unprecedented $210+ since.
Investors are waiting to see results from today’s NFP report, as volumes drop in anticipation of this. The figure is expected to show around 241K extra jobs created in the month of December for the USA – a forecast which if spot on would likely see limited deviation, in the longer term, of the Gold and we should expect the Gold to continue towards the yellow highlighted triangle below before a break out is seen.
Scenarios:
On the daily chart we favor the longer term trend, which is a hawkish view as seen by the downward wedge. Significant support lines are seen at 1166.9 and 1143.6, the two main points which align the lower part of the wedge. We also expect some support to be seen at the 50 MA, which currently sits at 1195.30.
Alternately, a upward break of the wedge could see the price head towards 1239.24, before any major resistance, with significantly more meaningful resistance at 1255.3 – the point at which the wedge began forming, from back in October of 2014.
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Euro near 9 year low on Greek woes
The Euro remained near the 9 year low today as expectations of a European Central Bank Intervention with a quantitative easing stimulus grew. Investors are a little reserved for now, siting US jobs and unemployment data which is scheduled to be released later in the day.
European Central Bank president Mario Draghi yesterday commented that the bank’s governing council is ready to implement all conventional and unconventional measures that may be needed to lift up the recent stagnation in inflation and sustain the interest rate from going into deflation. This has risen expectations that there most almost certainly be some intervention measures introduced further to the bank’s meeting on January 22[SUP]nd[/SUP].
The EURUSD has traded most of today rather steadily, when comparing to past days, and is oscillating between the $1.1815 and $1.1770 levels. The Euro had as recent as yesterday reached a fresh all-time low of 1.1752, from which it has retraced. The single currency was gloomed further to figures released which showed the Eurozone’s 2 biggest economies (France and Germany) had a pessimistic figure on Industrial outlook as well as Germany’s export figures experiencing a sharp drop.
Another suppressing issue for the single currency is the Greek general elections, which will take place further to the countries prime minister – Mr. Samaras – failing to secure enough votes for his candidate, which will take place on January 25[SUP]th[/SUP]. The elections are expected to lead to a standoff between Greece and Athens with respect to the Austerity measures which Greece had agreed to in order to receive the much needed emergency bailout.
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EUR/USD – Bearish Push!
Daily Trading
The EUR/USD, as we expected from our last analysis on the 5[SUP]th[/SUP] of January remained under pressure and broke below the 1.1801 which was the 2006 low, finding finally resistance at 1.1754. At that level we saw a small reaction of the Bulls but we don’t know for how long as the Bearish trend still seems to be very strong and hard for the Bulls to reverse it. Price now is trading 100 pips above the bottom and indicators already are reaching the overbought areas.
Scenarios
Bears are leading the last months, a possible break below the S1 will most probably guide the price to lower levels close to 1.1640 which is the next important support level. If we notice a break above the R1 then we can only start thinking that Bulls wake up and start pushing but it will only be an alert and not a signal. They need to much effort to reverse the existing trend.
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Vista Brokers: Data on the US labor market were mixed
On Friday, the market was expected the data on unemployment rate and non-farmemploymentchange in the US.
Statistics surpassed analysts' forecasts: nonfarm payrolls increased by 252,000 in December, against a forecast of 241 000. Thus, the indicator grows the 11th consecutive month, which is the longest period of growth since 1994. Data for October and November were also revised to increase. The unemployment rate fell in December by 0.2% to 5.6%, while the experts expected a decline to only 5.7%.
Vista Brokers analysts note that while hiring in the US is growing steadily, the average hourly wage does not support this trend. Compared to the previous month in December indicator decreased by 0.2%. Nevertheless, the positive data on unemployment and non-farm payrolls forced market participants to talk about raising interest rates o the Federal Reserve.
Large banks surveyed by Reuters, believes that the rate will begin to rise in June, but the financial markets are not so sure in it. FOMCmember Dennis Lockhart said that despite the strong statistics on employment, the regulator needs to exercise caution before raising rates. He believes that this question must be lifted no earlier than mid-year.
Against this background, on Friday, the US dollar fell against a basket of currencies, and US stock indexes fell nearly 1% after a two-day rally.
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Market Pulse 12.01
On Monday, the economic calendar is almost empty. There will be no important data, so it's likely the market will continue to take a lead from the information received on Friday. Investors' attention may be attracted with the FOMC member Dennis Lockhart speech.
14:45 ** ECB Announces Covered Bond Purchase
Moderate impact on the market (EUR). ECB announces its weekly balance sheet, from which investors and market observers conclude on the extent of securities purchases the European Central Bank makes on its balance sheet. Low values can provide support, while the expansion of purchases is a signal of greater activity of the ECB, which reduces the rate and pressures on the euro.
15:00 ** Labor Market Conditions Index - December (US)
Moderate impact on the market (USD). The indicator is calculated on the basis of 19 other market indicators. As a rule, it does not have a profound effect on the market, but can confirm earlier trends.
17:40 ** FOMC Member Dennis Lockhart Speaks - January (USA)
Moderate impact on the market (USD). Dennis Lockhart is the head of the Federal Reserve Bank of Atlanta and a voting member of the FOMC, that is, its opinion affects the monetary policy committee. Therefore, the remarks in his speech can cause volatility in the markets.
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