Forex Blog

February 20, 2014

US Stock Indices Turn Positive After Flash PMI – risk on preferred

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US Flash Manufacturing PMI bolsters modest tapering

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January 7, 2014

USD/INR Technicals – Heading Towards 62.4 As INR Weakens

Rupee remains steady against Greenback despite yesterday’s sudden weakness in USD during early US session which drove AUD/USD, EUR/USD and GBP/USD higher. Even stranger is that USD/INR actually rallied higher during the time, suggesting that that Rupee actually weakened even more than Greenback, highlighting the bearishness of India’s currency which has weakened more than 1% against USD since the turn of the year.

The culprit for the weakness seen in INR comes from the weakening Sensex, which has seen  4 consecutive days of decline and is likely to chalk one more today. With stock prices declining there is very little reason for investors to keep their funds in India since inflation rates have far outgrown deposit rates, resulting in the devaluation of Rupee.

Hourly Chart

USDINR_070114H1

Currently USD/INR is mostly flat, trading within a band between 62.1 – 62.5. However, without the weaken USD, one wonders if USD/INR would be able to climb much higher and may have even pushed beyond 62.5 already. Stochastic readings have been flat but a new trough has just been formed with Stoch curve crossing the Signal line from below, suggesting that the bullish cycle that started during early US trading session yesterday may be resuming, allowing price to hit towards soft resistance of 62.4 in the near term.

Weekly Chart

USDINR_070114W1

Long-Term direction agrees with a bullish push in line with what fundamentals with a weak India economy vs strong US economy narrative. Also, even if we were to consider that prices have breached into the rising Channel and hence should open up mid-term bearish target of Channel Bottom, it should be noted that prices are in the midst of a rebound off 61.3 support and a retest of Channel Top is equal if not more likely. This is in line with what Stochastic tell us, where stoch curve is pointing higher, suggesting that we are currently in a bullish cycle whose starting point coincide with the rebound off 61.3.

More Links:
EUR/USD Technicals – Bears Maintain Pressure Despite Bullish Pullback Yesterday
AUD/USD Technicals – Bears Ignoring Improved Trade Balance, Higher Stock Prices
Gold Technicals – Mild Bearish Sentiment Seen After Sudden Plunge

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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 USD/INR Technicals – Heading Towards 62.4 As INR Weakens appeared first on MarketPulse.

Gold Technicals – Mild Bearish Sentiment Seen After Sudden Plunge

Gold prices have stabilized after the flash sell-off during US session where a singular trade of 4,200 contracts was made, sending gold tumbling lower by $30 per ounce which triggered a 10 second trading halt. Prices recovered quickly within the same minute, but the bearish damage has been done with market getting jittery and pushing lower in the next half a dozen hours that followed.

Hourly Chart

XAUUSD_070114H1

This subsequent decline broke the rising Channel that has been in play since the start of 2014 and suggest that bullish momentum may be reversing. Prices did recover for a 2nd time but this bullish push has been rebuffed by Channel Bottom, affirming the bearish bias. Currently we are on our way to test the Channel Bottom once again but the likelihood of it succeeding is low especially since bulls will be squaring off with the 1,245 resistance level on top of Channel Bottom this time round. Stochastic indicator also favor a bearish push Stoch curve appearing “toppish” and seems likely to push below the 80.0 level and trigger a bearish cycle signal. 1,235 is the first obvious S/T bearish target but prices can realistically go all the way to the opening levels of 2014 should if the bullish pressure is indeed invalidated.

Daily Chart

XAUUSD_070114D1

August 22, 2013

US Market Roundup: Stocks Lower after FOMC Minutes

So much for the recovery of Tuesday. US Stock prices headed lower once more yesterday, with S&P 500 losing 0.58% and the more bearish Dow 30 0.70% lower. The return of bears yesterday is widely attributed to the FOMC Meeting Minutes, which revealed that many Fed voting members are “comfortable” with a tapering move by end of 2013. This make sense, as an increased likelihood of QE Taper in 2013 will result in less stimulus money pushing equities higher, which most market watchers think are extremely overbought. In fact, the 4-day decline that was only broken on Tuesday was the result of sudden increase in Tapering fears, hence one can simply put 2 and 2 together and come to the conclusion that Stock prices heading lower must be due to the latest FOMC minutes.

However, if we look at the play by play price action, it seems that the situation isn’t so straight forward. S&P 500 prices actually rallied after the Minutes has been released despite dipping lower initially. Prices hit a high of 1,656.6, close to 10 points higher than the 1,648 level when the Minutes was released. This rally was also spotted on Dow 30, and hence suggest that it is market sentiment rather than individual asset idiosyncrasy distorting price actions.  Looking at Gold and other USD pairs, the retracement wasn’t as pronounced, with USD ultimately settling stronger at the end of the hour unlike Stock prices which traded lower but ended up higher instead. Treasury Note prices were more straight forward, with prices dipping sharply following the Minutes and pushed lower from there without looking back. Based on the reaction, we can see that Bond traders are rather clear on how to interpret the Minutes, followed by FX Traders, who are a little bit confused with Equities Traders being totally confused as to whether tapering is a good thing or not.

This is not saying that Equities Traders are lesser than their fellow trading brethren, but simply showing that most equities traders may not agree on the long-term impact of QE Tapering. A cut in QE purchases may be bad, but it is akin to weaning off a recovering patient from painkillers. Taking it off may cause slight discomfort, but getting addicted or growing a dependency on painkillers is definitely bad for your long-term health. Equities traders are basically at a loss at which is more important now – short term loss or long-term gain – resulting in the confusing price action yesterday.

S&P 500 Hourly Chart

http://forexblog.oanda.com/mserve/SPX_220813H1.PNG

Well, at least for this round it seems that short-term pain triumphed, as Stock prices did ultimately trade lower. But one wonders if technicals play a large part in the bearish move yesterday. When fundamentals are unclear, technicals tend to be stronger, and it should be noted that yesterday’s rally was stopped just around the known ceiling of this week. Prices was also unable to break the overhead Kumo cleanly, resulted in added bearish pressure just when traders are unable to decide which way to go.

However, when Kumo was broken towards the downside, bearish acceleration resulted in the 1,643 floor breaking, bringing out more technical bears resulting in where we are currently. Stochastic readings are currently Oversold, and considering that there is no clear fundamental mandate, a pullback of some sort may be possible.

Dow 30 Hourly Chart

http://forexblog.oanda.com/mserve/DJI_220813H1.PNG

The same goes for Dow 30 which was unable to break the 15,000 round figure, and hence resulted in strong bearish movement. Similar to S&P 500, Stochastic readings are bullish with readings already crossed the Signal line. However, a full bullish reversal signal is not formed and hence traders should not simply go long from here based on this alone. Furthermore, the overall direction since last week has been down, and therefore a long position here would be considered counter-trend, and require must stronger reasons/conviction to enter.

More Links:
AUD/USD – Falls to Two Week Low Through Key 0.90 Level
EUR/USD – Falls Back Heavily through Key 1.34 Level
GBP/USD – Pushes to New Two Month High above 1.57

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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.

Chinese Yuan has Dodged the Emerging Market Rout

While the violent selloff in emerging market currencies has spared few, there’s one currency that has emerged from the storm unscathed: the Chinese yuan.

Over the past month, the yuan has bucked the downdraft, rising 0.3 percent against the dollar – a stark contrast from peers such as the Indian rupee and Indonesia rupiah that have fallen between 7-7.5 percent over the same period amid escalating fears around the Federal Reserve winding down its monetary stimulus.

The country’s trade surplus and improving economic data are luring investors back into the currency, as concerns of a hard landing in the world’s second largest economy fade.

CNBC

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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.

China flash HSBC PMI hits four-month high in August

Activity in China’s key manufacturing sector recovered strongly in August, a preliminary survey of factory managers showed on Thursday, helped by a rebound in new orders.

The HSBC flash manufacturing Purchasing Managers Index (PMI) hit a four-month high of 50.1 in the month from a final reading of 47.7 in July, moving above the 50 threshold that demarcates expansion of activity from contraction.

“China’s manufacturing growth has started to stabilize on the back of modest improvements of new business and output. This is mainly driven by the initial filtering through of recent fine-tuning measures and companies’ restocking activities, despite the continuous external weakness,” Hongbin Qu, chief economist, China & co-head of Asian Economic Research at HSBC said.

CNBC

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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.

July 25, 2013

Analysts Believe Spanish Banks are Safe Now

Analysts are starting to see value in Spanish banks for the first time in years, despite anticipating further earnings downgrades and heavy regulatory headwinds later on this year.

Spain’s main lenders post earnings on Thursday and are expected to report more pressure on profits despite being granted 100 billion euros of European aid.

However, John-Paul Crutchley, European bank analyst at UBS said while Spain’s economy remains challenging, there are signs of improvement in unemployment and consumption, and he believes the debate has moved on from balance-sheet issues.

“We expect the sector to book virtually no profits in the second quarter excluding one-offs to meet provisioning needs. The outlook for the second half remains challenging,” he said. “But since the beginning of the year, we have become gradually less negative on Spanish banks… We are starting to see some value in several banks for the first time in years.”

Crutchley believes earnings for Spain’s banking sector could soon bottom out.

BBVA is Crutchley’s top pick out of Spanish banks because of its exposure to the Mexican market. He predicts the stock, which is down 7 percent so far this year, will rise 18 percent in the next 12 months. Crutchley upgraded the stock earlier this week to a “buy” from “neutral” with a price target of 7.60 euros.

CNBC

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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.

October 13, 2011

Forex Market Outlook 10/13/11

Filed under: Forex News — Tags: , , , , , , , , , , , , , — admin @ 6:51 am

Yesterday’s release of the FOMC meeting minutes was a complete dud and market hopes that the Fed was close to QE3 went unrealized.  Part of that hope came from Bernanke’s speech to the Joint Economic Committee earlier this month, but it seems as though that mention of further easing was intended to keep the markets from falling off a cliff.

Yet they are no closer to QE3 then previously thought, so the “free money trade” will have to wait for another day or for the economy to worsen dramatically, which is not out of the realm of possibility if the EU fails to meet their deadline on the debt crisis resolution.  The clock is ticking.

News out of Europe this morning showed that German CPI was slightly higher than expected though not enough of a gain to cause the ECB concern.  What was more of a concern though was the ECB’s monthly report for October which was largely negative.  Citing “moderate to lower growth”, reduced outlooks, and the like, the ECB essentially confirmed what we already know.  

What was more concerting to the market though was a report out of China that showed that their gains in exports declined more than expected, showing a gain of only 17.4% vs. an expected 20.5%.  While they will cry that the strengthening Yuan is hurting them, no one else will shed a tear as their trade surplus came in at $14.5B, which contrasted with the US trade deficit of 45.6B makes them look silly.  The Senate passed the Bill to impose tariffs on China if they don’t move to revalue their currency, which could ignite a trade war and is likely not going to help the global economy recover.  I’ve discussed an alternate solution to tariffs in this morning’s video.

However there was some good news for those with risk appetite, as Australia added 20.4K jobs to their economy vs. an expected 10K, which helped push their unemployment rate down to 5.2% from the expected and previous 5.3%.  While the Aussie has pulled back on general risk aversion, the slight decline may reverse throughout the day.

Additionally, the Bank of Japan released the minutes from their rate policy meeting which called for additional monetary easing to attempt to weaken the Yen.  Citing problems in Europe to global economic stability, prolonged Yen strength will harm exports though recent economic data in Japan has been better than expected.

Here in the US, initial jobless claims figures came in as expected, with 404K newly unemployed.  400K has been the “norm” which is unfortunate as we are not adding enough jobs to move the needle.  Perhaps the passage of the Free Trade Agreements that have been sitting around for over 4 years will help, but structural reform is more likely needed.

Since the President’s “jobs” bill was rejected by the Senate, we are likely going to have to wait for the debt “super committee” to attempt to reduce our deficit and provide confidence to the markets.  This is a big task and much like the Euro commission that is charged with finding the resolution to the Euro debt crisis, essentially puts us in a holding pattern until then.

So I’m going to focus on corporate earnings here in the US, which if the majority come in better than expected, could revive risk appetite in the markets.  The general mood surrounding the markets seems to positive, though that could be derailed by the Europe failing to resolve by their self-imposed dead-line, or more of the same Washington DC gridlock.

The inverse correlation between the S&P 500 and  the US dollar is still pretty high, so the risk trades are still intact and could be driven by stocks rather than perceived global economic risk in the near-term.

October 12, 2011

Forex Market Outlook 10/12/11

This morning has started with risk appetite driving markets higher, with Dollar and Yen weakness acting as either a by-product or catalyst of the move.  Regardless of who or what is leading the charge, a sense of calm is starting to return to the markets and they looked poised for a 4th quarter rally into the end of the year.

Positive sentiment surrounding the resolution of the debt crisis has not been derailed by Slovakia delaying their vote on the EFSF expansion agreed to in principle on July 21st as the market believes that the Franco-Prussian solution which Sarkozy and Merkel have promised is coming in early November will like supercede that package.  The “Troika” has already agreed to Greece receiving the next tranche of money despite the uncertainty surrounding the vote of whether Greece has done enough to receive it, with the hope that whatever is offered in early November is enough to wipe the whole slate clean.

So the pressure is on to come up with a resolution that not only deals with the problem but is also something that is agreeable to all of the Euro zone members as well as the markets in general.  Call me skeptical but I’m not certain if such a solution exists.  Today a plan to re-capitalize European banks will be proffered which is a step in the right direction.

Meanwhile in the UK, policy-maker Posen has claimed that the BOE is prepared to ease further and the unemployment rate has ticked higher to 8.1% from 7.9% and an 8% expectation, yet the Pound is trading higher and hit our last week’s target of 1.57 vs. USD and then some.  GDP estimates came in better than expected for September calling for .5% for last month vs. .2% for the previous month.  Also to note is that even though the official unemployment rate rose, the number of new jobless claims came in lower than expected at 17.5K vs. an expected 24K.

Both the Aussie and the Kiwi are tracking higher with the former trading back above parity vs. USD.  Related home sales and price figures show that there is moderate growth, and Australian consumer confidence figures came in better than expected.  Australian employment figures are due out tomorrow.

Also adding to the risk trade is the machine orders figures that were reported by Japan that came in much better than expected, showing a monthly gain of 11% vs. an expected 3.9%.  This has helped rally the Nikkei and caused some Yen selling and tonight’s release of the BOJ meeting minutes may show how close they are to intervening in the currency which could provide for additional risk taking.

Speaking of meeting minutes, the release of the September FOMC will be out later today and will definitely show how close Bernanke and Co. are to QE3.  While he floated the idea at the JEC briefing earlier this month, it may have been in response to tanking markets and not any serious policy discussion.  If on the other hand they are close to QE3, then this could push markets higher on the free-money trade.

US corporate earnings season is upon us and was kicked off by worse than expected numbers out of Alcoa, yet the S&P 500 has rallied to above 1200.  The bar has been set so low for many of these companies that the beats should be more than the misses.

Also to note is that the Senate did not pass Obama’s “jobs bill” which was a more of political statement than a credible plan.  This means that more money is not added to the deficit and taxes are not raised in the near-term, and we are likely to have to wait for the deficit reduction committee to take action before anything gets done.

Yet the mood surrounding the markets appears to be positive and I think we will definitely see that 4th quarter rally that investors desire.  Business can only sit on the sidelines for so long and if they start to believe that there may be a change in Washington DC in the next election cycle to more pro-business policies, then they may start to invest.

While I don’t think this will solve our unemployment problem in the near-term, if we can get the needle moving in the right direction then that could instill some confidence which is ultimately what this economy is sorely lacking.

So keep an eye out for the Fed release later today as it has the ability to create volatility as the market dissects the Feds intentions.  Any hint at the “free money” trade could send markets even higher!

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