Forex Blog

January 23, 2014

S&P 500 – Uncertainty Abounds But No Immediate Bearish Threat

S&P 500 closed 1.06 point higher (0.06%), however as prices were weaving in and out between gains and losses, it is more apt to say that prices are trading flat rather than mildly bullish. This flat trading was a result of uneven earnings reports, which caused market to be slightly more cautious as there were already signs of overbought in Stocks given the strong bullish rally in 2013.

Interestingly, yields on US 10Y and 30Y Treasurys actually rose, while Gold prices actually traded lower. All these are the hallmark of bullish sentiment, and the fact that Stocks are trading less than bullishly is strange. Seeing that USD actually traded stronger as well, one starts to wonder if QE tapering concerns played any parts in yesterday’s mixed trade. If indeed some quarters of the market is concern over the FOMC meeting next week, then traders worrying about a fundamental shift in broad market risk sentiment can rest easier. This is because QE concerns is already out of vogue right now due to the certainty that current QE program will definitely end before we see 2016. In fact, looking at price reaction to bullish/bearish US economic numbers, we can ascertain that market is no longer concern about QE even before the 1st taper was announced in December.

Hourly Chart

November 29, 2013

Netherlands Downgraded to AA by S&P

Standard & Poor’s lowered its credit rating for the Netherlands to AA plus from AAA on Friday, while lifting its outlook for the struggling economies of Spain and Cyprus.

Moritz Kraemer, chief sovereign ratings officer at S&P, told CNBC that the Netherlands’ downgrade by the S&P ratings committee was triggered by the country’s weak economic growth prospects.

“We see that both in recent history and in our projections, that the economic dynamism of the Dutch economy will lag behind what we would usually expect for sovereign economies at that level of development and prosperity,” he told CNBC on Friday. “So this has been the immediate trigger for the ratings decision.”

The agency’s report said it expects the country’s gross domestic product (GDP) to contract by 1.2 percent in 2013, before growing by 0.5 percent in 2014 and slowly accelerating to 1.5 percent by 2016. It argued that real economic output for the country will not surpass 2008 levels before 2017.

The cut means the only euro zone countries to retain their AAA rating at S&P are Finland, Germany and Luxembourg.
via CNBC

The post Netherlands Downgraded to AA by S&P appeared first on MarketPulse.

November 18, 2013

EUR/USD Technicals – 1.35 Resistance Holding Strong

Hourly Chart

EURUSD_181113H1

The weakening of EUR/USD underlying bullish sentiment failed to establish anything significant last Friday. EUR/USD did dip below the 1.345 support briefly, but prices recovered strongly during early US session, pushing above 1.35 before settling around 1.349 before closing. As there were no major news release from Europe then (Euro-Zone CPI is not a major market mover, and in any case the numbers came in as expected), the move was all on USD weakness. This assertion can be supported by the US economic news released when the rally was at its strongest.

First off the bat we have Empire Manufacturing Index which fell to -2.21 versus an expected +5.00. Industrial Production has also shrank by 0.1% when a mild growth of 0.2% was expected. This slight disappointment might have been overlooked in the past, but market was hyper-sensitive last week due to Janet Yellen’s dovish speech. As such, it is no surprise that market reacted bullishly (bearishly for USD) on the weaker than expected economic numbers, as the chance of Fed holding off QE Taper just got slightly higher.

However, it should be noted that EUR/USD is indeed not as bullish as before. Even though ECB’s Coene suggested that the Central Bank does not feel it is “necessary to do more” (referring to further rate cuts) in an interview on Saturday, Monday did not start off bullishly for EUR/USD, with prices heading lower once again almost immediately after market opened. Technical influences shouldn’t be ignored as well, as prices did have a short push towards 1.35 which failed, opening up 1.345 as the immediate bearish target – a notion agreed by Stochastic indicator which is showing a fresh bearish cycle signal currently.

Daily Chart

EURUSD_181113D1

Long-term chart for EUR/USD continues to be bullish though. Stochastic curve continues to point higher with no sign of abating even though the 1.35 level stays strong. However, stoch curve has its own “resistance” around 40.0 to content with, and hence it should not be surprising if Stoch curve move lower from here just as 1.35 holds. But should price push above the 1.35 resistance, it is likely that  Stoch curve will push above 40.0 – making Stoch indicator here a good confirmation for both upswing and downswing scenarios. Underside of the rising trendline will be the immediate Bullish Target (close to 1.36) should 1.35 breaks early this week, while 1.34 will be the bearish target with 1.345 providing interim support (as seen from short-term chart) should 1.35 holds.

Once again there isn’t any major economic news coming out from Euro-Zone this week. We do have some flash Purchasing Manufacturing Index and German ZEW Economic Sentiment but these numbers tended not to move EUR/USD  unless they are way off expectations. Hence all eyes will be on USD related news once more. Should market remain high-strung with regards to QE Taper possibilities, then we may see wild swings in EUR/USD, which may actually result in the break of all the above mentioned support/resistance levels due to volatility. If this happens, traders can look at the post announcement reactions (e.g. after US Retail Sales announcement or Existing Home Sales) and gauge market sentiment from there once more. It bears mentioning that even though S/T underlying sentiment seems to favor bears now, but considering that market is feeling jittery now, everything can change in a heartbeat.

More Links:
Week in FX Americas – Market Unfazed By Yellen Comments
Week in FX Europe – BoE Shifting The Goal Posts?
Week in FX Asia – Is Abenomics Working? Exports and GDP Offer Insights

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This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

The post EUR/USD Technicals – 1.35 Resistance Holding Strong appeared first on MarketPulse.

November 7, 2013

EUR/USD Technicals – Minor Bearish Bias Ahead of Bullish ECB Event

Hourly Chart

EURUSD_071113H1

EUR/USD is trading just under the 1.3525 resistance a few hours before the ECB Rate Decision (07:45 am EST). Current bias is bearish due to the strong bearish bias that has been in play since last week’s decline. Stochastic readings agree with a Stoch top forming around Stoch “resistance” band between 65.0 – 80.0. This opens up a potential move towards 1st bearish target of 1.3480, and perhaps even the lower end of current consolidation range around 1.3450.

However, ECB event is highly expected to be bullish for EUR, as the Central Bank is expected to keep rates on hold (Index swaps are pricing in a 4% chance that ECB will cut rates today). Hence, the likelihood of prices breaking 1.352 and pushing beyond 1.3550 in the short-term is high if ECB expectations are met. Nonetheless, should prices rally in the immediate aftermath but revert lower below 1.352 and preferably below 1.35, the likelihood of a move towards 1.345 increases and we could even see prices breaking the support level for a new bearish extension.

Conversely, should ECB cut rates/ introduces easing measures unexpectedly yet prices stay above 1.345, forward bias will turn towards bullish, and traders should look out for strong acceleration should 1.352 and 1.355 resistances are broken subsequent.

More Links:
AUD/USD – Bearish Floodgates Waiting To Open After Dismal Job Numbers
GBP/USD – Consolidates around 1.61
WTI Crude – Slightly Higher But S/T Bearish Pressure Remains For Now

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This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

The post EUR/USD Technicals – Minor Bearish Bias Ahead of Bullish ECB Event appeared first on MarketPulse.

September 23, 2013

WTI Crude Technicals – 105.5 Resistance Holding Despite Chinese Cheers

Crude prices continue to push lower, giving up all the gains from last week’s better than expected DOE implied demand and FOMC’s non-tapering event. It is clear that market is extremely bearish from the get go this week, with prices gaping lower on open this morning, sending prices below the key 105.5 level. Prices has recovered a little, but is still staying mostly under the 105.5 key support. Even a stronger than expected Chinese Manufacturing PMI failed to inspire bulls to push higher, suggesting that the underlying bearishness is highly strong.

Hourly Chart

http://forexblog.oanda.com/mserve/WTI_230913H1Retry.PNG

From a technical perspective, prices is facing additional bearish pressure from the descending trendline on top. Stochastic readings are pointing higher, but it is possible that readings may be able to reverse from the 20.0 level and lend affirmation to the 105.5 bearish breakout.

Weekly Chart

http://forexblog.oanda.com/mserve/WTI_230913W1.PNG

Weekly Chart is more bearish, with a bearish cycle signal formed coinciding with a re-entry back below 108.5 – 109.0 ceiling. Should the bearish cycle enters into full flight, we could easily see prices eventually hitting 100.0 or even sub 100.0 levels, but right now the immediate bearish target will be the 103.0 consolidation floor. Should Stoch levels manage to push below 60.0 coinciding with a 103.0 break, further bearish targets then can be contemplated.

September 11, 2013

US10Y Technicals – War Or No War, Yields Are Climbing

Hourly Chart

http://forexblog.oanda.com/mserve/10Y_110913H1.PNG

Treasury prices found support from the 124.0 round figure, with price bouncing up higher to 124.3 during US session. As there wasn’t any news released during the period, the strong push from 124.0 to 124.3 within such a short while can only be attributed to technical behaviors. This is especially true when we consider that risk appetite was bullish (as evident via US stocks) during that time, which should actually drive yields higher and hence prices lower. The fact that the bullish rebound got capped by the 124.3 mark lends credence to the assertion that it is technicals that is in charge right now.

Currently, price is rebounding off 124.3 once again after a push from 124.0 during early Asian session. It is important to note that even this morning’s speech by Obama failed to push prices lower, highlighting the strength of the 124.0 level despite strong bearish winds. Hence, even if we move lower from here, we could still see 124.0 holding especially if there isn’t any proper fundamental reasons fueling current drop.

Fundamentally, with war in Syria most likely not happening in the immediate future, there is even less reason for investors to seek safer assets. Therefore, should technical influence stop, we could easily see prices falling down heavily in line with the broad bearish sentiment. Even though a September tapering action could have been mostly priced in already, we could actually see such a scenario potentially be the catalyst to let technical bulls lose their grip and hence result in broad selling in the few months leading to the end of 2013.

More Links:
AUD/USD – Moves Through Resistance Level at 0.93 to Two Month High
EUR/USD – Consolidates under short term Resistance at 1.3270
GBP/USD – Within Reach of Three Month High near 1.5750

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This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

USD/INR Technicals – Continue To Move Lower With 63.0 In Sight

Hourly Chart

http://forexblog.oanda.com/mserve/USDINR_110913H1.PNG

Has the new Governor Guv Raghuram Rajan done it? Rupee has been steadily increasing without any significant pullback since he took over on 4th September. The latest proof that USD/INR is in a bear trend can be found via the recent bullish push just a few hours ago – when Obama announced that he is seeking diplomacy rather than military intervention to coerce Syrian leader Assad into submission. This resulted in a sudden strengthening in USD, the end product of risk flows pushing USD/JPY higher and Gold lower.

However, that is not enough to inspire new bullish impetus, with price failing to push beyond 64.50 – the swing high of yesterday. Prices did manage to trade above the descending Channel Top but that only lasted for a moment before bears took over and send price below once again. This suggest that bearish momentum is still strong, and opens up the possibility of price heading back towards Channel bottom from here. Stochastic readings agrees with Stoch curve showing a top where recent peaks have been seen. Furthermore, there is a divergence spotted where current peak is higher than the preceding one despite price failing to reach previous highs. This suggest that this morning’s rally towards Channel Top is too fast too furious, and hence increasing the likelihood of a bearish pullback, adding weight to the push to Channel Bottom.

Fundamentally, nothing much has changed in India, and hence it seems as though market is simply pushing Rupee higher by giving Rajan advance credit. If Rajan doesn’t deliver, we could see stronger revenge bearishness coming out which will send USD/INR potentially to 70.0 and beyond. Right now, with no evidence that current momentum is fading, Rupee bulls can expect to enjoy the ride for a little while more.

More Links:
AUD/USD – Moves Through Resistance Level at 0.93 to Two Month High
EUR/USD – Consolidates under short term Resistance at 1.3270
GBP/USD – Within Reach of Three Month High near 1.5750

Get OANDA’s exclusive weekly Market Pulse FX

Email Address: Preferred Format:

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

July 2, 2013

Much Noise And No Direction For EURO

This market is expected to ease into a cautious gear, especially after some of yesterday’s sharp gains, and more specifically, ahead of some key events later this week. Economic fundamentals are unlikely to play a pivotal role ahead of the ECB and BoE rate announcement on Thursday and Friday’s granddaddy of economic indicators, Non-Farm Payrolls. This week, this month, even this quarter is all about the US employment situation for June. The big question is whether employment is gaining enough momentum for the Fed to start thinking about slowing quantitative easing. It’s believed by many that a healthy consistent gain of over +200k is needed for this to happen. How else are you going to get an unemployment rate to print sub +7% by next year?

Has the Fed won “half” the battle? Risk assets reacting positively to strong US manufacturing data on Monday (PMI 50.9) is rather telling. Investor’s fears of reduced Fed bond buying or tapering and an eventual interest rate hike seems to be waning. Perhaps the market is now trading on the fact that “good news is actually good news”? Last month, a strong release like a solid US ISM print would have been the signal for the market to sell off aggressively. The “proof is in the pudding” and that will come with this Friday’s US jobs report. If it’s a strong number, and this market continues its rally, then ‘helicopter’ Ben and his fellow cohorts, have gone a long way in reassuring investors that QE will only be reduced once the US economy continues to improve.

As noted, economic releases are thin on the ground today with the most influential being the Euro-zones PPI and UK construction PMI. Stateside has little else to offer apart from US factory orders and vehicle sales. On a minor yet relieving note, was the number of registered job seekers in Spain falling this month (-127k) for the fourth consecutive time – Is this suggesting that the recession may be over for Europe’s fourth largest economy?

Prices charged by Euro-zone manufactures fell for the third consecutive month in May (-0.3%), again suggests that Draghi and the ECB will be facing limited upward pressure on consumer price inflation over the summer months. Last month Euro CPI rose again and is now closer to the ECB’s target rate. The Central bank meets Thursday and rising inflation, despite still being below target, is likely to be an obstacle for Euro policy makers to add further stimulus to an ever-weakening Euro economy. For PPI, the pressure came from energy prices falling -0.8% month-to-month or -1.8% year-over-year.

New BoE Governor Mark Carney’s second day on the job and he should be satisfied with what he fundamentally sees ahead of his first BoE meet this week. Activity in the UK’s construction sector expanded for a second consecutive month in June (51), aided by Prime Minister Cameron’s housing market initiatives – the “help-to-buy” program. This is surely another data point that can be added to the list of upbeat indicators that would suggest a healthy Q2 for the UK? More importantly, the new orders in house building is creating new jobs, the first time in four-months.

Most of last nights market noise came from ‘down-under’. Not unexpected was the RBA keeping its policy rate unchanged at +2.75%. Analyst’s note that the key final paragraph of the statement was unchanged from the last meet – the “RBA maintains a bias to ease.” A change from the June statement is that language about the RBA’s desire for AUD depreciation became more explicit – hence, the market’s lack of interest to wanting to own the AUD. The Aussie’s new Prime Minister, Kevin Rudd, highlighting the end of a China-led mining boom could lead to a recession certainly does not support a strong currency. China is Australia’s largest trading partner and data releases like last weekend’s Chinese PMI in line at a lower level (50.1) can only be of concern to the antipodean nation as well as globally.

This market will try to remain out of harms way until they are given clearer direction. Euro money markets do not expect the ECB to be cutting rates again this week. A surprise rate cut is possible, however, improved PMI data and inflation ticking up may suggest otherwise. The market majority expects a post meeting accommodative statement. All investors require is that Draghi speaks more “clearly”. At the moment, there is much noise and no direction. The EUR has settled into a small range after holding last week’s lows at 1.2991/85. Immediate resistance appears at 1.3100, and a market cap here would keep the immediate risks lower. Through last week’s lows, speculators are expected to target the trend line backing at option-supported areas (1.2940-50). Below this area it opens up a test of the bottom end of the range sub-1.2900.

For the Yen, the dollar has crept closer to the psychological ¥100 mark (last crossed in early May), and has lead to another fresh round of buying of Japanese equities. The markets inability to break through this 61.8% retracement of the May- June fall will have short-term momentum swinging towards a dip back from it, towards ¥98.80-00. However, the immediate risks higher through ¥100.46 could allow this market consider retesting this year’s high at ¥103.74.

Forex heatmap

Other Links:
Euro Moves Up as Eurozone PMIs Point Higher

Dean Popplewell, Director of Currency Analysis and Research @ OANDA MarketPulseFX

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This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

May 16, 2012

BoE Sees Inflation and Weaker Growth In UK

The Bank of England (BoE) said in its report today that the UK’s inflation is likely to remain above its 2 percent target for at least another year, while growth will be subdued and vulnerable to the euro zone debt crisis. The central bank sees inflation at about 1.6 percent in two years time.

The Bank’s forecasts represent a much slower fall in inflation than it predicted back in February as well as a weaker growth outlook. It said that the UK growth is likely to remain subdued in the near term, due to the government’s fiscal squeeze, the pace of the global economy and tighter credit conditions. The euro zone debt crisis remains the biggest threat to Britain.

Reports this month indicated that UK manufacturing and services weakened in April after the economy shrank 0.2 percent in the first quarter.

Britain’s economy suffered its biggest contraction since the 1930s in the wake of the 2008 financial crisis, and had recovered less than half the output lost before it slipped back into recession at the end of 2011. The BoE said that total GDP would not get back to its pre-crisis level before 2014.

On a positive side, the UK’s jobless rate decreased slightly to 8.2 percent in March, pointing to some underlying resilience in the economy. According to the Office for National Statistics, the number of Britons without a job fell by 45,000 in the three months to March to 2.625 million.

The BoE held its key rate at a record low of 0.5 percent in May and kept its bond-purchase target at 325 billion pounds. Many economists do not expect further quantitative easing in the immediate future, but this could change if the conditions in the euro zone deteriorate. The Bank said that despite the changes in the near term outlook, the fundamental policy remained the same.

Sources: Bloomberg and Reuters

January 16, 2012

Compass Directions Monday, 16 January 2012

Filed under: Forex News — Tags: , , , , , , , , , , , , — admin @ 7:11 am

Standard and Poor’s has cut France’s AAA credit rating and the credit rating of eight other eurozone nations. S&P’s Managing Director of European Sovereign ratings has said that European leaders are divided and are falling behind in their response to the debt crisis. Austria also lost its AAA rating while Italy, Portugal, Spain and Cyprus had their ratings cut by two notches. The cut in credit ratings may reduce the ability of the bailout fund to raise capital to finance aid and exacerbate the region’s troubles. The EUR fell to its lowest levels since August 2010 at 1.2624 today and, not surprisingly, is the worst performing currency so far this year. The common currency is still well above its average of 1.2050 since its inception and clearly has much more room to fall. Pimco’s Bill Gross hasn’t helped with the sentiment in Europe by saying that a default in Greece is imminent.

The elephant in the room, China, may also cause dismay in the markets this week as GDP may rise at its slowest pace since the second quarter of 2009 amid increasing signs that that the world’s second largest economy is slowing with exports rising the least in two years and inflation easing to a 15 month low. Furthermore, the International Monetary Fund is due to release its revised global projections this week which are expected to show zero growth in Europe and a significant reduction in the fund’s most recent estimate of 4% for the global growth in 2012. The Australian dollar opens the week down recovering the 1.03 level in Europe after trading as low as 1.0250 during the Asian session.

Asian equity markets recorded a poor start to the week as the move by S&P to strip France of its top credit rating weighed on investor sentiment. The Nikkei fell 1.43% to 8,378 while the Hang Seng lost 1% to close at 19,012. However, the underlying trend in US corporate earnings remains good as the US Citigroup Economic Surprise Index, a measure of how much reports exceed or miss economists experts rose to a 10 month high this month. Today, the US is on holiday. Early in Europe, the markets are relatively flat as the markets await the results of the latest bond auction in France where it will look to raise as much as EUR 8.7 billion. Tomorrow, the EFSF will look to raise EUR 1.5 billion.

Commodity prices recovered from the falls experienced last week. WTI crude prices rose by more than 0.7% to $99.40 as Iran said that a blockade of crude supplies through the Strait of Hormuz would cause a shock to the markets that “no country” could handle. This followed warnings from Iran’s OPEC Governor that any embargo of Iranian oil would be a “dangerous political game. Precious metals rose with gold gaining 1% to $1,646 while silver finished 1.4% higher at $29.92. Soft commodities were mostly closed for trading while copper gained 1%.

AUD/USD performed extremely well for the last 4 weeks since finding its support level at 0.9860 on Dec 15. However given Friday’s ratings downgrade of the Eurozone nations, the Aussie may use this as an excuse to retrace back towards 1.0230 in the very short term (50% retracement from 1.1079 to 0.9386).  Immediate resistance is seen at 1.0380 with short term stops above this level.  If this happens and momentum continues we may see 1.0432 as a good opportunity to go short.  Until Tuesday’s key GDP out of China, AUD/USD may range trade between 1.0348 and 1.0230.  In the meantime note the symmetrical triangular formation taking place – breakout trades may be fruitful with tight stop losses.

As noted above EUR/USD has an average rate of 1.2050 since its inception so Euro may still have a few more hundred pips on the downside to go supported by negative fundamentals and that’s not hard to find.  Our view is to sell on rallies with tight stops above the resistance trend line.  For the immediate future R1 and R2 is seen at 1.2680 and 1.2720 respectively.  For the strong hearted, support may be seen at 1.2586 (21 Aug 2010) to form a double-bottom but you may have to bite the bullet with that trade.  With the US market celebrating Martin Luther King Jr’s birthday and as the market awaits for more reasons to sell the Euro we may see the range for the US time zone to be 1.2580 – 1.2680.

GBP/USD has been declining consecutively for the last 4 weeks and one wonders where it will stop, at least for the short term. If last week is anything to go by this could be at 1.5230.  Again with the US session not in play due to the holiday GBP/USD may take a breather today to range trade between 1.5230 – 1.5330.  On an hourly chart Cable seems to claw back well after initial sell off which suggests that players are not giving up on the Pound as yet.  However on the daily chart, it seems more prudent to sell on rallies…just like its neighbour.

USD/JPY looks solid at 76.60 due to intervention threats by Japan and the top side limited by events of the world.  Perhaps opportunity could be gain by going with the flow and trading like a beginner.  Until new information is known and if we must trade this pair, look at support at 76.50-76.60 and resistance at 77.20.  Perhaps like many patient traders staying on the sideline may be a good idea for this pair for the moment and look for break outs on the downside instead (even with the threat of intervention).

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