Forex Blog

April 23, 2014

GBP/USD – Pound Dips After BOE Minutes

GBP/USD has reversed directions on Wednesday, dipping below the 1.68 line. In UK releases, the BOE minutes from its last policy meeting pointed to disagreements over the economy. Public Sector Net Borrowing pointed to a smaller deficit, while Industrial Order Expectations dropped sharply. In the US, New Home Sales slipped badly, dropping to an eight-month low.

There is no arguing that the British economy has enjoyed a strong recovery, but that does not mean that policymakers at the BOE see eye-to-eye on the health of the economy or inflation. The minutes of the previous policy meeting indicated that Monetary Policy Committee members were “uncertain” about the amount of spare capacity in the economy and the medium-term inflation outlook. Importantly, the MPC voted unanimously to maintain the benchmark interest rate at 0.50%. With the unemployment rate down to 6.9%, there is growing speculation that we could see a rate hike as early as next spring, although the BOE has done its best to dampen expectations of a rate increase.

In the US, New Home Sales was a disaster, as the key indicator plunged to 384 thousand in March, down from 440 thousand in the previous release. The weak reading was nowhere near the estimate of 455 thousand, and marked an eight-month low for the key housing indicator. The housing sector is showing signs of weakness, as both New Home Sales and Existing Home Sales have been on a sustained downward trend.

The markets haven’t reacted to events in Ukraine so far, but that could change if the violence in the east of the country worsens. Russian President Vladimir Putin has threatened to act on his “right” to invade Ukraine, and has also given the country an ultimatum regarding its gas debt. The gas supply from Russia to western Europe is in danger, and if the situation spills out of control, we could see a sharp response from the markets. US Vice-President Joe Biden is in Kiev for a symbolic visit. The West doesn’t have many cards to play against Russia, so every move by Putin will be scrutinized and could impact on the markets.

 

GBP/USD for Wednesday, April 23, 2014

Forex Rate Graph 21/1/13

GBP/USD April 23 at 14:30 GMT

GBP/USD 1.6788 H: 1.6836 L: 1.6781

 

GBP/USD Technical

S3 S2 S1 R1 R2 R3
1.6549 1.6705 1.6765 1.6896 1.7000 1.7210

 

  • GBP/USD has dropped below the 1.68 line, wiping out Tuesday’s gains. in Tuesday trade.
  • 1.6765 has weakened as the pound has lost ground. The next support line is 1.6705, which is protecting the 1.67 line.
  • 1.6896 is a strong resistance line, protecting the key 1.70 level.

Further levels in both directions:

  • Below: 1.6765, 1.6705, 1.6549 and 1.6416
  • Above: 1.6896, 1.70, 1.7210 and 1.7374.

 

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in short positions on Wednesday. This is consistent with the movement of the pair, as the pound has posted losses against the dollar. A large majority of the open positions in the GBP/USD ratio are short, indicative of a trader bias towards the dollar continuing to post gains.

The pound has lost ground on Wednesday. The pound remains under pressure in the North American session.

 

GBP/USD Fundamentals

  • 8:3o MPC Asset Purchase Facility Votes. Estimate 0-0-9. Actual 0-0-9.
  • 8:3o MPC Official Bank Rate Votes. Estimate 0-0-9. Actual 0-0-9.
  • 8:30 British Public Sector Net Borrowing. Estimate GBP 8.9 billion. Actual GBP 4.9 billion.
  • 10:00 British CBI Industrial Order Expectations. Estimate +7 points. Actual -1 point.
  • 13:45 US Flash Manufacturing PMI. Estimate 56.2 points. Actual 54.4 points.
  • 14:00 US New Home Sales. Estimate 455K. Actual 384K.
  •  14:30 US Crude Oil Inventories. Estimate 2.6M. Actual 3.5M.

*Key releases are highlighted in bold

*All release times are GMT

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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 GBP/USD – Pound Dips After BOE Minutes appeared first on MarketPulse.

UK Government Borrowed 107.7 GBP Very Close To Budget

The UK government borrowed £107.7bn in the financial year to April 2014, lower than the £115.1bn amount it borrowed the previous year.

In the Budget, the Office for Budget Responsibility (OBR) had estimated a deficit for the full year of £107.8bn.

The government wants to eliminate the budget deficit by 2017-18.

Borrowing in March fell to £6.7bn from £11.4bn a year earlier, excluding financial interventions, the Office for National Statistics (ONS) said.

Meanwhile, the figure for February was revised down from £9.3bn to £8.8bn.

via BBC

The post UK Government Borrowed 107.7 GBP Very Close To Budget appeared first on MarketPulse.

EUR/USD – Gains As Eurozone, German PMIs Point Up

EUR/USD has posted gains in Wednesday trading, as the pair has climbed to the mid-1.38 range in the European session. Eurozone and German PMIs beat their estimates, although the French releases fell short of expectations. In economic news, Eurozone and German PMIs beat the forecast, but French PMIs did not keep pace, missing expectations. In the US, today’s major event is New Home Sales. The markets are expecting a stronger March reading from the key indicator.

US inflation levels have been lukewarm, but so far the Federal Reserve has done little more than point out that it would like to see inflation move closer to the Fed’s target of 2%.  The House Price Index, a gauge of activity in the housing sector, rose a respectable 0.6% last month, matching the forecast. It’s a different tale in the Eurozone, where inflation continues to be persistently low and there is real concern about deflation, which could inflict serious damage on the fragile Eurozone economy. The ECB has balked at taking any action to deal with inflation, but its hand may be forced if inflation levels don’t show some life.

The markets haven’t reacted to events in Ukraine so far, but that could change if the violence in the east of the country worsens. Russian President Vladimir Putin has threatened to act on his “right” to invade Ukraine, and has also given the country an ultimatum regarding its gas debt. The gas supply from Russia to western Europe is in danger, and if the situation spills out of control, we could see a sharp response from the markets. US Vice-President Joe Biden is in Kiev for a symbolic visit. The West doesn’t have many cards to play against Russia, so every move by Putin will be scrutinized and could impact on the markets.

 

EUR/USD for Wednesday, April 23, 2014

Forex Rate Graph 21/1/13

EUR/USD April 23 at 11:15 GMT

EUR/USD 1.3842 H: 1.3855 L: 1.3801

 

EUR/USD Technical

S3 S2 S1 R1 R2 R3
1.3585 1.3649 1.3786 1.3893 1.4000 1.4149

 

  • EUR/USD has posted gains in Wednesday trade.
  • 1.3786 continues to provide support. 1.3649 is a stronger support level.
  • On the upside, 1.3893 has weakened as the euro has moved higher. This is followed by the key level of 1.40.
  • Current range: 1.3786 to 1.3893

Further levels in both directions:

  • Below: 1.3786, 1.3649, 1.3585, 1.3410 and 1.3335
  • Above: 1.3893, 1.4000, 1.4149 and 1.4307

 

OANDA’s Open Positions Ratio

EUR/USD ratio is pointing to short positions in Wednesday trading. This is not consistent with the movement we are seeing from the pair, as the euro has posted gains. The ratio is made up of short positions, indicative of the dollar reversing its downward trend and moving higher.

EUR/USD has moved higher in Wednesday trading and the dollar remains under pressure in the European session.

 

EUR/USD Fundamentals

  • 7:00 French Flash Manufacturing PMI. Estimate 51.9 points. Actual 50.9 points.
  • 7:00 French Flash Services PMI. Estimate 51.5 points. Actual 50.3 points.
  • 7:30 German Flash Manufacturing PMI. Estimate 53.9 points. Actual 54.2 points.
  • 7:30 German Flash Services PMI. Estimate 53.5 points. Actual 55.0 points.
  • 8:00 Eurozone Flash Manufacturing PMI. Estimate 53.0 points. Actual 53.0 points.
  • 8:00 Eurozone Flash Services PMI. Estimate 52.7 points. Actual 53.1 points.
  • 13:45 US Flash Manufacturing PMI. Estimate 56.2 points.
  • 14:00 US New Home Sales. Estimate 455K.
  •  14:30 US Crude Oil Inventories. Estimate 2.6M.

*Key releases are highlighted in bold

*All release times are GMT

 

Get OANDA’s exclusive weekly Market Pulse FX

Email Address: Preferred Format: HTML Text

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 – Gains As Eurozone, German PMIs Point Up appeared first on MarketPulse.

April 22, 2014

Oil Drops After Higher Inventories Expected

West Texas Intermediate crude declined from its highest closing level in seven weeks on estimates that U.S. supplies rose last week. Brent slipped as U.S. Vice President Joe Biden met with Ukrainian leaders.

Crude stockpiles in the U.S., the world’s biggest oil consumer, probably increased for the 13th time in 14 weeks, a Bloomberg News survey shows before Energy Information Administration data tomorrow. Russia and the U.S. traded blame for failing to rein in extremists in Ukraine as a diplomatic accord, reached last week to ease the crisis, neared collapse. Vice President Biden is meeting with officials in Kiev today.

“U.S. stocks are up massively, U.S. production is further on the rise,” Eugen Weinberg, head of commodities research at Commerzbank AG, said by e-mail. “Other than Ukraine there are not so many factors to support.”

WTI for May delivery, which expires today, slid as much as $1.13 to $103.24 a barrel in electronic trading on the New York Mercantile Exchange, and traded for $103.39 at 1:30 p.m. London time. The more-active June future was 96 cents lower at $102.69. The grade closed at $104.37 yesterday, the highest settlement since March 3. It was at a discount of $6.72 to Brent on the London-based ICE Futures Europe exchange.

Brent for June settlement slipped 55 cents to $109.40 a barrel on ICE. The contract climbed 42 cents to $109.95 yesterday, also the highest close since March 3. The volume of all futures traded was about 25 percent below the 100-day average for the time of day.

via Bloomberg

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April 21, 2014

Oil Falls After Ukraine Premium Is Discounted

Brent crude fell for a second day amid speculation that the biggest weekly rally since February on tension between Ukraine and Russia may be excessive. West Texas Intermediate was steady.

Futures dropped as much as 0.6 percent in London. The U.S. and its European allies urged Russia to help calm the Ukraine crisis after four-party talks produced an accord aimed at easing the worst standoff with Russia’s government since the Cold War. WTI’s discount to Brent shrank as President Barack Obama’s administration said it will postpone a ruling on the Keystone XL pipeline that would bring Canadian crude south to the U.S.

“The reaction in the market was overdone,” Tom James, managing director at consultancy Navitas Resources, said by phone from Dubai today. “The last thing Russia will do is to cut exports. The Ukraine tension is hyped up, but if I ask what the market is looking at, it is clearly monitoring that situation.”

Brent for June settlement declined as much as 64 cents to $108.89 a barrel on the London-based ICE Futures Europe exchange and was at $109.27 at 1:52 p.m. in London. The front-month contract rose 2.1 percent last week, the most since Feb. 7. The volume of all futures traded was about 74 percent below the 100-day average. Prices are down 1.4 percent this year.

West Texas Intermediate for May delivery, which expires tomorrow, decreased 17 cents to $104.13 a barrel in electronic trading on the New York Mercantile Exchange. The more-active June future was 12 cents lower at $103.25. Trading on both Nymex and ICE was closed on April 18 for the Good Friday holiday.

via Bloomberg

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US Vice President Arrives in Ukraine

Vice President Joe Biden is heading to Ukraine to meet with leaders of the turbulent country.

Biden’s visit comes a day after violence erupted in eastern Ukraine, despite an agreement last week aimed at easing tensions. A shootout at a checkpoint in eastern Ukraine manned by pro-Russia insurgents left at least three dead and Ukrainian and Russian officials trading accusations of blame.

Biden arrives Monday in the capital, Kiev. On Tuesday he plans to meet with the acting Ukrainian prime minister and president. He also is scheduled to meet with legislators and democracy activists before returning to Washington Tuesday night.

Biden’s office says discussions will cover international efforts to strengthen Ukraine’s economy and energy security and help with constitutional reforms, including next month’s presidential election.

via Kitco

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USD/JPY – Big Week for Japan

USD/JPY is bid on another fall in trade data in the overnight session. Japan’s bigger-than-expected rise in its March trade deficit ($14b deficit)– imports surge and exports remain subdued — has encouraged investors to sell the yen. It seems that some are happy to treat the latest disappointment in the Japanese trade balance as reason enough for more speculation over the Bank of Japan (BoJ) turning less neutral in favor of more easing.

Japan’s March trade deficit is four times higher than last year’s print. Exports showed a negligible rise of +1.8%, year-over-year — well below the +6.5% consensus — while imports spiked by +18.1%, year-over-year, mostly due to another double-digit rise in shipments of crude oil.

It seems that bad news is still good news for USD/JPY as more QE is eyed by a percentage of the market.

There is event risk later this week for the pair:

  • Obama visits Japan on Wednesday with the TransPac trade talks on his agenda.
  • Large corporate earnings reports (fiscal year end March 31st)
  • Tokyo April CPI on Friday

Tokyo’s CPI: The market expects a 2.8%, year-over-year inflation print in the Tokyo region – a reading well above the BoJ’s +2% target. It seems that the implementation of the sales tax hike on April 1 will have somewhat artificially boosted Japan’s inflation headline prints (companies passing on the sales tax hike to customers).

The BoJ has already recognized this and will adjust April’s inflation print downward by -1.7% to reflect a truer picture of inflationary pressures in the region. The problem is that the uptick in Japan’s inflationary pressures has been mostly due to yen weakness, and with no “fresh” weakness for months, the price of the CPI basket can only be expected to stall.

According to the techies the “long” USD/JPY positions remain in good shape – especially now that the pair has pierced the 21-DMA and tested the 50% Fib of the ¥104.13 – 101.32 range (¥102.72).

The Daily RSI continues to provide “positive” momentum. The lack of pullbacks would suggest that the market is not yet overbought. The medium term longs are still looking to penetrate the psychological ¥103 handle.

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Gold Drops On ETF Sales and Strong USD

Gold fell to a two-and-a-half-week low in choppy and thin holiday trade on Monday, hurt by sharp outflows from the world’s biggest bullion-backed exchange-traded fund (ETF) and a stronger dollar.

The metal was also impacted by a spurt of technical selling after it was unable to hold on to the $1,300-an-ounce level hit early in the trading session. Spot gold fell to a two-and-a-half-week low of $1,281.40, before pruning the losses to trade down 0.7 percent at $1,284.

Gold Trust, the world’s top gold ETF and a good measure of investor sentiment, saw outflows of 9.3 tonnes last week. Before last week, the fund – closely watched due to the size of its holdings – had gained 6.2 tonnes from the beginning of 2014. Last year, huge outflows from the fund were partly responsible for the 28 percent drop in gold’s price. Investors shifted money to better-performing equities as the U.S. Federal Reserve began to unwind its monetary stimulus.

via CNBC

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April 17, 2014

Putin Gives Ukraine A Month To Settle Energy Debts

Russian President Vladimir Putin warned of possible disruption to Europe’s gas supply on Thursday, as the U.S. confirmed it would send additional non-lethal military support to Ukraine.

Speaking at an annual televised question-and-answer session in Moscow, Putin said Russia would give Ukraine a month to pay off its gas debts, but would then switch to a “complicated” pre-payment scheme which could disrupt supply.

Gas giant Gazprom, in which the Kremlin has a majority stake, claims Ukraine owes it more than $2.2 billion.

“It’s a complicated settlement and might lead to disruption of supply of gas to our European consumers. We can cut it off right now. But we will wait another month,” Putin said.

The unfolding dispute between Ukraine and Russia has led to fears of a disruptions in gas supply to Europe, given that Russia supplies around a third of the continent’s natural gas, and that some of that supply is delivered through pipelines running through Ukraine.

via CNBC

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Indian Elections Boost Stock Market And Rupee

Indian markets are riding high as investors bet that an election and new administration will cure some of the country’s economic ills.
Mumbai’s benchmark Sensex index has trounced its Asian peers in recent months, hitting a record high last week and gaining 7% since the start of the year. The rupee has strengthened too, clawing its way back from a dismal performance in 2013.

Much of the optimism hinges on forecasts that India’s 815 million voters will make Bharatiya Janata Party candidate Narendra Modi the next prime minister.
Victory for a Modi-led coalition would end the Congress Party’s dominance, and create an opening for a new government to implement economic reforms.

Analysts say India would benefit greatly from changes to its tax code, a reduction in excessive bureaucracy and more efficient agricultural policies. Momentum on these long-promised reforms stalled under the leadership of the Congress Party.

India’s potential for growth was once mentioned in the same breath as that of China. But the world’s second most populous nation and biggest democracy has failed to deliver and its economy is just a fifth the size of its Asian rival.

via CNN

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