Forex Blog

March 17, 2014

Euro Annual Inflation 0.7 Percent in February

Filed under: OANDA News — Tags: , , , , , , , , — admin @ 1:40 pm

Euro area1 annual inflation was 0.7% in February 2014, down from 0.8% in January. A year earlier the rate was 1.8%. Monthly inflation was 0.3% in February 2014.

European Union annual inflation was 0.8% in February 2014, down from 0.9% in January. A year earlier the rate was 2.0%. Monthly inflation was 0.3% in February 2014.

These figures come from Eurostat, the statistical office of the European Union.

In February 2014, negative annual rates were observed in Bulgaria (-2.1%), Cyprus (-1.3%), Greece (-0.9%), Croatia (-0.2%), Portugal and Slovakia (both -0.1%). The highest annual rates were recorded in Malta and Finland (both 1.6%) and Austria (1.5%).

Compared with January 2014, annual inflation fell in seventeen Member States, remained stable in three and rose in seven. The lowest 12 month average rates up to February 2014 were registered in Greece (-1.1%), Bulgaria (-0.3%) and Cyprus (-0.2%), and the highest in Estonia (2.8%), Romania (2.6%), the Netherlands and Finland (both 2.1%).

via EuroStat

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March 13, 2014

NZD/USD – Bullish Breakout Above 0.8525 Post RBNZ Rate Hike Seen

Central Bank RBNZ delivered the rate hike that all bullish traders were looking for, raising its Official Cash Rate by 25 basis points to 2.75%. This pushed NZD/USD above the 0.85 round figure resistance and more importantly the previous high seen on 7th Mar, demonstrating a bullish breakout.

Hourly Chart

NZDUSD_130314H1

This may seem inane as it is obvious that NZD/USD will rally should RBNZ hike interest rates, but it should be noted that this rate hike has been widely expected and it is reasonable to suspect that traders may have priced in such a scenario way ahead of time. Looking at recent history where prices of AUD and EUR did not really move when their respective central banks carried out rate changes as expected, the concern that NZD may not rally higher or perhaps even start to decline isn’t without basis.

The fears that bullish reaction will be muted became even more real when we realized that NZD/USD actually traded lower during early European hours and late US session when bears should be afraid to do anything with such a huge event risk just a few hours away. This suggest that bears may still be lurking around even though rate hike expectations are high. In fact, when the news of RBNZ raising interest rates was announced, prices actually started to decline steeply, pushing below 0.845 immediately before climbing up. Hence, to say that bullish breakout is a forgone conclusion is definitely incorrect.

That being said, bullish sentiment/momentum is certainly strong, and the fact that prices has cleared the 0.8525 resistance 4 hours after the rate hike announcement is a strong testament to current bullish momentum. Nonetheless, bullish traders need to be aware of the lurking bears moving forward and significant pullbacks back towards 0.8525 or even 0.85 cannot be ignored.

Daily Chart

NZDUSD_130314D1

The same could be said for Daily Chart price action. Even though a clear breakout is happening right now, it is still considered risky for traders to go long right now if they haven’t done so previously. Entry opportunities will only appear after pullbacks have occurred, with the post pullback reaction/degree of pullback helpful to determine if this breakout is indeed genuine and more importantly will it have further legs to run higher.

Fundamentally, for all the reasons (and we do have good reasons) for NZD to get stronger, rallies in NZD/USD will continue to remain iffy as USD is not an easy pushover. Hence, traders who want to participate in the NZD rate hike narrative will be much better served seeking currencies that are heading in the opposite direction instead.

More Links:
GBP/USD – Little Movement Ahead of US Key Releases
USD/CAD – US Dollar in Holding Pattern As Markets Await Key Numbers
USD/JPY – Steady in Cautious Trading

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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 NZD/USD – Bullish Breakout Above 0.8525 Post RBNZ Rate Hike Seen appeared first on MarketPulse.

February 25, 2014

JPY Displays Stock Market Correlation

When traders want to know which way stocks are headed, they look to the Japanese yen.

Top strategists on Wall Street say the yen is set to weaken a lot further this year, and that should be a bullish sign for stocks, even with the S&P at record heights.

The dollar currently is trading at 102 versus the yen. Jens Nordvig of Nomura expects the rate to climb to 110 versus the yen in the second quarter and to 114 by year-end.

via CNBC

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February 21, 2014

ILO Warns About Youth Unemployment in China

Filed under: OANDA News — Tags: , , , , , , , — admin @ 4:42 pm

Youth unemployment has created “a generation at risk” according to the International Labor Organization, with worldwide youth unemployment forecast to rise to 12.8 percent by 2018. But these headline figures do not necessarily tell the real story given the discrepancies among different parts of the world.

In the developed economies, the youth unemployment rate – unemployment among those aged 16 to 24- is approximately 18.1 percent. While the rate of Germany stands at 9 percent, those of the UK and the U.S. are 20 percent and 16 percent, while in Spain and Greece half of the young people are jobless.

One may imagine that China – perhaps the world’s only economic powerhouse at this moment – would have a low youth unemployment rate. According to the official figures it does: youth unemployment stood at 4.1 percent in 2010. Yet this number must be taken with a grain of salt considering the Middle Kingdom does not use the internationally accepted metrics to measure such unemployment.

If we turn to other sources, the picture is rather different. For instance, a report prepared by the China Household Finance Survey in 2012 puts China’s youth unemployment at 8.1 percent. Others suggest that the rate to be as high as 20 percent.

via SOURCE

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January 29, 2014

Problem Solved? Lira Weakness Remain Despite Huge Jump In Central Bank Rates

Turkish Lira surged higher after an aggressive rate hike by the country’s central bank. TCMB raised the key policy Overnight Lending Rate from the already high 7.75% to 12% following an emergency meeting to address the falling Lira that has been hurting market confidence and sending foreign funds out of Turkish borders. This move is welcomed by market participants who were getting impatient following an unorthodox monetary-policy tightening measures announced during the previous monetary policy meeting. However, is this move enough to keep Lira down for long? Or will economic weakness and slowing growth rates pull TRY down once more?

EUR/TRY Daily Chart

EURTRY_290114D1

Looking at EUR/TRY chart, we can see that price is currently below the 2.98 ceiling despite the initial pullback following the post rate hike sell-off. However, price is still within the consolidation zone seen  from 1st – 14th Jan. Suggesting that bullish momentum is still intact. With stochastic readings currently dipping into the Oversold region, we should at the very least expect some form of bullish pullback especially after such a sharp move.

USD/TRY Daily Chart

USDTRY_290114D1

Price action on USD/TRY is similar to EUR/TRY – we are trading below 2.195 ceiling but above 2.16 floor. Hence the uptrend remains intact, and the likelihood of prices breaking 2.195 and continuing bullish push is high.

TRY/JPY Daily Chart

TRYJPY_290114D1

TRY/JPY is showing similar problems – albeit in opposite direction. Prices have failed to test significant resistance of 48.0, while Stochasitc readings have yet to hit Overbought, it is likely that Stoch curve will be above 80.0 should prices test 48.0 (if it even happens to begin with). The comfort for TRY/JPY is that prices have at least managed to clear above the descending trendline, and it is possible that prices may find support against any bearish pullbacks moving forward.

So that is 3 out of 3 for Lira. None of the major pairs show any significant shift in direction despite the huge increment in Lira strength. Certainly shorting Lira has been made much more expensive right now, but based on current price action, only the most aggressive/optimistic of all carry traders would dare to go long on Lira right now. Hence, even if Lira won’t depreciate from here, the likelihood of continued appreciation for the battered currency would be low in the most bullish scenario.

Problem solved? Far from it. TCMB needs to follow up this rate hike with other measures to ensure that market doesn’t claw back the gains made. The worst thing that can potentially happen is seeing Lira unable to keep its strength but seeing the rate hike hurting the economy further. Perhaps TCMB should exchange notes with Reserve Bank of India who has somehow managed to keep Rupee stable without raising the rates too much (previously at 7.75% before raising it to 8.0% yesterday, exactly the same rate as Turkish before the hike).

More Links:
GBP/USD – Resistance at 1.66 Level Stands Firm Again
AUD/USD – Rejected Again at Resistance Level at 0.88
EUR/USD – Remains Subdued Below Resistance at 1.37

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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 Problem Solved? Lira Weakness Remain Despite Huge Jump In Central Bank Rates appeared first on MarketPulse.

October 31, 2013

Inflation in Europe Falls to Four-Year Low

Euro-area inflation cooled to the slowest in almost four years in October, moving further away from the European Central Bank’s goal.

The annual rate fell to 0.7 percent, the lowest since November 2009, from 1.1 percent in September, the European Union’s statistics office in Luxembourg said in a preliminary estimate today. The median forecast in a Bloomberg News survey of 42 economists was for the rate to stay at 1.1 percent. Separate data today showed unemployment was at a record 12.2 percent in September.

The data mark the ninth straight month that the rate has been less than the ECB’s 2 percent ceiling, and they prompted BNP Paribas SA and JPMorgan Chase & Co. to forecast an interest-rate cut by the ECB in December. The central bank, which will publish new economic projections that month, has said there is a “subdued outlook” for inflation in the 17-nation euro area.

Bloomberg

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Gold below $1325 after Largest Fall in Three Weeks

Gold posted the biggest loss in almost three weeks and silver had the largest slump in more than a month as the Federal Reserve fueled speculation that it will trim U.S. monetary stimulus sooner than anticipated.

The economy shows signs of “underlying strength,” Fed policy makers said yesterday. The statement pointed to the possibility of reduced bond purchases as soon as December, Citigroup Inc. and Barclays Plc said. The dollar headed for the longest rally in eight weeks against a basket of 10 currencies.

“The tapering has to come at some point and will be sooner than later,” David Lee, a vice president at Heraeus Precious Metals Management in New York, said in a telephone interview. “The dollar’s strength is working against gold.”

Bloomberg

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EUR/GBP drops sharply to 0.8460 as EU Inflation Slows

The pound jumped more than 1 percent against the euro, the biggest gain in six months, after euro-area inflation slowed and the jobless rate climbed to a record, boosting demand for alternatives to Europe’s shared currency.

Sterling advanced for a second day versus the euro as the reports spurred speculation the European Central Bank will cut interest rates as soon as its meeting next week to revive growth. The pound may extend gains, according to UBS AG. U.K. government bonds fell as an index of U.S. business activity expanded at the fastest pace since March 2011, damping investor appetite for safer assets.

“There’s a very sharp decrease in the euro-region inflation rate and the market is pricing in the ECB might take some more action,” said Lutz Karpowitz, a senior currency strategist at Commerzbank AG in Frankfurt. “That’s reflected in a weaker euro.”

Bloomberg

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Obama to Focus on Attracting Investment Capital

President Barack Obama is seeking to counter competition for investment from emerging economies by putting the federal government at the center of a coordinated campaign to bring new capital to the U.S.

At a Commerce Department investment summit in Washington today, Obama outlined what the White House is calling an “all hands on deck effort” to attract investments and jobs from foreign companies, a job traditionally carried out by governors and mayors.

“I want to make sure we can doing everything we can” to encourage companies “to set up shop” in the U.S., Obama said at the first SelectUSA investment summit, kicking off a government-wide initiative to showcase the benefits of investing in the U.S. economy.

Bloomberg

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September 3, 2013

AUD/USD – Bulls Unable To Hold Onto Post RBA Rally

RBA held rate at 0.25% in this latest round of decision making, meeting broad expectations of analysts. However, the bullish reaction that followed is indeed surprising, as market did not really expect RBA to slash rates to begin with, pricing in a mere 15% probability that a rate cut will happen. So in this case, broad market sentiment agrees with analysts, with only a minority of the market getting it wrong and hence needing to cover their short positions. Bare in mind that as the rate decision met expectations, it is unlikely that traders and speculators will buy on this outcome. If this assertion is correct, then the post announcement rally would simply be the result of short covering, not a good basis for a long-term  AUD/USD rally.

Hourly Chart

http://forexblog.oanda.com/mserve/AUDUSD_030913H1.PNG

This hypothesis is important as price is currently trading just under the newly formed rising Channel. Generally when price hits Channel Top, there can be 3 possibilities – breakout higher, rebound lower, or trading around the same region/straddling trendline slowly higher. With the filter mentioned earlier, the likelihood of price rebounding lower becomes that much higher, and we could see a potential move back towards 0.90 and/or Channel Bottom – whichever comes first.

From a pure technical point of view, a case for bearish pullback is not established fully – Stochastic readings are still pointing higher despite peeking into the Overbought region. Hence, we may need to see some further bearish movement, potentially in the form of 0.902 broken for a stronger bearish signal to be formed. However, that only leaves us with around 20 pips away from the significant support of 0.90, which may not seem very attractive for the risks involved. Hence, traders seeking higher risk/reward ratios may wish to wait for a breakout scenario of 0.90/Channel Bottom confluence instead which may open up 0.89 as ultimate bearish target with 0.892 and 0.896 as interim supports.

Daily Chart

http://forexblog.oanda.com/mserve/AUDUSD_030913D1.PNG

Daily Chart shows prices facing significant resistance from Kumo. If prices are unable to clear the Kumo, the likelihood of a false break-in of Channel increase. However, if we are able to continue trade marginally higher until Kumo is breached, the chances to push back towards 0.93+ Channel Top increases. Stochastic readings support a bullish scenario, but that is a counter-trend signal, and as such we need to be more prudent before assuming that the signal is valid.

Fundamentally, RBA is appearing to distance itself from further rate cuts in the immediate future, with Governor Stevens saying that RBA expects monetary conditions to ease further with previous rate cuts continuing to work through the economy. Funnily, that sort of stance did not stop RBA from cutting rate twice in 2013, hence we should not assume that RBA’s rate cutting action is all over yet. In any case, AUD/USD may still remain bearish even without further rate cut action. USD continues to look strong in the long term thanks to the end of QE in 2014, while Australia’s own economic fundamentals continue to deteriorate. Hence even if short-term pressure may be higher for now, do not simply expect price to be able to climb back to its former glories of above parity without any significant changes to the aforementioned fundamentals.

More Links:
USD/SGD Technicals – Steadily Lower Towards 1.27
GBP/USD – Settles Around 1.5550
EUR/USD – Settles Just Below Key Level of 1.32

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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.

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