13 / 12 / 2016 | Market News

Dollar targets to 120 Yen, markets eye on Fed’s policy outlook for 2017

We have seen a break down in the up-trend for major Yen crosses in recent hours, but this retracement appears to be driven very much by the technical rather than any fundamental change. As such, there’s a real chance this will be nothing more than a brief pause for breath although we do have some key data releases in the next couple of days that could be instrumental in directing USD/JPY. Obviously the tone of the Fed’s policy outlook for 2017 will be critical, but we also have the Q4 Tankan surveys due at 11.50pm GMT tonight and any signs of a theme that the numbers are running hotter than expected should again play to the Yen. Into the New Year and 120 may remain the target, but in the short term and the next move could feasibly be lower.

AUD/USD has once again met with resistance around the 0.7500 level, and that’s despite better than expected retail sales and industrial production data coming out of China overnight, numbers which should typically prop up the Aussie dollar. We’ve also seen a slowing of house price growth for Australia, but again there’s a real risk the markets are overreacting here. Assuming the economy does at least flirt with recession in the New Year, then reducing the potential size of any credit bubble has its merits. Obviously the FOMC outlook could act as a driver here, but otherwise we’re going to be waiting for Australian unemployment data at 12.30am GMT on Thursday before we get the next handle on the country’s economic fortunes.

Looking ahead, the big trading opportunity in the short term would seem to be UK Inflation data, due at 9.30am GMT and the risk appears to be very much hanging on the downside here. Given the uncertainty of how the UK economy will fare in the medium term under Brexit, any signs of enthusiastic inflationary pressures in the short term could be welcomed by policymakers as building uoa buffer in the economy. On the flipside, anything under forecast has the potential to send another shockwave through the market – especially with cable sitting within striking distance of 1.2700.
...
read more
12 / 12 / 2016 | Technical Analysis

EUR/GBP unstable, EUR/JPY rallies higher

EUR/GBP has drifted back into the channel down that we have been watching in recent weeks, although as it stands, this lacks conviction. Failure to break higher however would open the way for 0.8200.



The EUR/JPY rally has paused for breath since the start of the month but we now seem to be eyeing another move higher. Political risk remains a big factor but this aside, the 38% retracement of the big sell-off from the last two years remains the target, somewhere beyond 125.50.



Please note: The content in this daily technical analysis article should not be taken as investment advice. It comprises our personal view.
...
read more
12 / 12 / 2016 | Market News

Italy in focus as EUR/USD recovers

So it’s all eyes on Italy as the new trading week gets underway as the struggling lender Monte dei Paschi battles ahead with a refinancing plan to avoid sliding into state ownership. Again there’s a strong political element in play here – the Italian President has asked a close ally of Renzi to form a new government, which is seen as helpful as the bank’s plans need buy-in from domestic regulators. EUR/USD is off recent lows and more encouraging noises here should help drive the pair a little higher in the short term. Critically we also have two Italian bond auctions scheduled for this morning (10.15am and 10.35am GMT), the outcomes of which will be closely followed.
 
We have a relatively quiet day ahead in terms of economic data so the overnight release of some sluggish UK house price data may act as a brake on Sterling crosses this morning. There’s been little fall-out in the Asian session but it’s one to be aware of, especially as given those bearish calls on cable, even 1.26 looks toppy.
 
Some marginally hotter than expected inflation data out of Japan last night has created a degree of volatility for the Yen, although as the dust settles, USD/JPY is sitting clear of 115 and talk again is of pushing out as far as 120. Expectations are building that the Fed could be in a hawkish mood on Wednesday – the rate hike this month is as good as assured, but it’s the outlook for policy management in 2017 that holds the key. Suggestions that inflation will be an issue that needs to be addressed has the potential to drive the dollar higher across the board.
 
That agreement by non-Opec members over the weekend to cut oil output served to drive crude prices around 4% higher at the start of the Asian session. The market is however pricing in a lot of expectation and these agreements don’t include the US. On the basis that legislation has been changed to permit exporting of US oil, the potential upside would seem to be limited – although many oil producing nations will certainly be comfortable with crude closing out the year around the $55 level.
...
read more
09 / 12 / 2016 | Technical Analysis

EUR/JPY and AUD/USD in ascending triangle

Yesterday’s ECB statement certainly destroyed any last vestige of hope over the EUR/JPY up channel, although there’s still a trend line in play. Add this to recent resistance levels and we have a meaningful ascending triangle forming with an upside target of around 123.00.



There’s an ascending triangle forming on AUD/USD which has the potential to head towards 0.7500, where we’ve seen repeated resistance over the last four weeks. 



Please note: The content in this daily technical analysis article should not be taken as investment advice. It comprises our personal view.
...
read more
09 / 12 / 2016 | Market News

EUR/USD slides after Italian announcement

Yesterday’s distinctly dovish announcement by Mario Draghi knocked EUR/USD back to the low 1.06’s and notably there has been no attempt at a rebound since the event. The outlook for the Eurozone remains weak, as underlined by the expansion of the scale of the QE program, and the fact that we’ve seen the end-date pushed out to December 2017. It’s really a case of waiting for next week’s FOMC verdict now and although we’re still some considerable way from parity – and that’s before we consider the psychological barrier this will face – if Janet Yellen paints a hawkish picture for 2017 then further losses here should be anticipated.
 
The release of some upbeat Chinese inflation data overnight appears to have lent support to AUD/USD, with the Aussie dollar continuing to display these proxy qualities. However further gains on the pair are likely to be hampered, both by the recurrent resistance we’ve seen posted by the 0.7500 level and also the reality that there’s a US rate hike coming next week – along with the likelihood of more hawkish news from Washington in the New Year. This possible infrastructure boom in US could lend support in the longer term, but again we need better clarity as to precisely the scale of the activity before thinking too much about the lift this might offer commodity prices – and in turn just how this might translate into benefits for AUD.
 
USD/CHF jumped higher yesterday off the back of Draghi’s statement, again propelling the pair close to ten-month highs and with the safe haven status of the Franc clearly providing limited appeal right now. Again however next week’s FOMC could be critical for the pair – any hints of uncertainty from Janet Yellen and the quality of the Swiss Franc could shine through.
 
Oil prices are drifting higher once again amidst hopes that non-Opec member countries will also agree to production cuts at a meeting being held in Vienna over the weekend. We are however still sitting a little way below recent highs for crude and this evening’s Baker Hughes rig count from the US could be telling. If the mere prospect of the Opec cuts is translating into more production coming on stream across the Atlantic, can the coordinated actions of other non-member states really have the impact the market has priced in?
...
read more
08 / 12 / 2016 | Technical Analysis

EUR/JPY meets resistance at 122.30

EUR/JPY up channel has run out of steam, meeting resistance around the May ’16 support level of 122.30. We are still looking for 124.70 on the upside, followed by 125.70 – the 38% retracement of the long term sell-off – with support eyed at recent lows in the 119-120 range.  



EUR/USD is currently pushing up against resistance from the mid-November highs around 1.0800, with a break above here opening up the way to 1.0860. On the downside look for recent lows at 1.0530.



Please note: The content in this daily technical analysis article should not be taken as investment advice. It comprises our personal view.
...
read more
08 / 12 / 2016 | Market News

Sterling faces uncertainty in the midst of Brexit aftermath

Sterling took a hammering yesterday in the wake of the notably worse than forecast manufacturing and production data release for October. This is set to impact GDP readings for the UK in the last quarter of the year and does little to play to the fact that with the pound still reeling after June’s Brexit referendum, even significantly cheaper exports aren’t providing that much material help here. We have seen a modest bounce back off yesterday’s lows on GBP/USD with the parliamentary debate over the Brexit timetable providing a little more certainty here, but sustaining this rally given the lingering uncertainty of the supreme court legal challenge may leave the medium term risk on the downside.
 
Some better than expected Chinese trade data – notably with imports running far hotter than had been forecast – has helped bolster support for the Aussie dollar in overnight trade, although prints like this have to be taken in the context that the country is threatening a slide into recession in the New Year. Trade deficit data for Australia came in far worse than expected last night, too, suggesting that the latest gains for AUD/USD could be left looking rather tenuous – especially given the fact that next week’s FOMC ought to offer more clues over the US rate trajectory for 2017.
 
The Euro is going to be very much in focus today with the ECB rate decision due at 12.45pm GMT, followed by Draghi’s press conference 45 minutes later. Expectations are that we will see an extension to the bond buying program, although as has already been noted there’s a risk that the bank is running out of appropriate assets to buy. We may also see a token signal as to when this program will be wound down, although how much credence markets would offer a datapoint like this is debatable, given the ‘ongoing’ nature of the campaign so far. Last weekend’s Italian referendum certainty hasn’t proved as damaging as may have been thought, although again any word from Mr Draghi over this could again offer fresh direction.
 
Oil prices continue to slide from recent highs with yesterday’s mixed – but predominantly bearish – US inventory report doing little to help here. There’s scepticism creeping in over the effectiveness of the Opec lead production cut and whether shale oil producers will simply look to jump in and pick up any shortfall. The EIA’s natural gas storage report this afternoon at 3.30pm GMT could provide some price reaction for crude, although forecasts are for a bullish assessment here which could leave crude open to testing fresh lows for the month. 
...
read more
07 / 12 / 2016 | Technical Analysis

EUR/JPY holds uptrend, GBP/USD in bearish mode

EUR/JPY is still holding that channel up and again the May highs of 124.70 look to be the obvious target.



GBP/USD broke out of the ascending triangle yesterday and taking a bearish assessment is looking at support around 1.2395 and 1.2310.



Please note: The content in this daily technical analysis article should not be taken as investment advice. It comprises our personal view.
 
...
read more
07 / 12 / 2016 | Market News

AUD/USD plummets with news from Australia

There was some disappointing economic data out of Australia overnight with a notable shortfall in the Q3 GDP reading being posted. There’s growing concern that the Australian economy is headed into recessionary territory during 2017 and if the current quarterly growth rates are maintained, this will certainly be the case with contraction of -0.5% having been reported. AUD/USD dropped 40 pips off the back of the news and it will now be a case of watching for the trade balance data (12.30am GMT tomorrow) for further news here as signs of a growing deficit would do little for confidence.
 
Yen crosses remain on the back foot after a speech from the deputy BoJ governor underlined that there would be no shift away from money printing, playing to PM Abe’s stated desire to see bold moves being made by the bank to hit growth targets. The need for more to be done here was played out with a fractionally lower than expected leading index figure, although attention will now be on revisions to Q3 GDP, due for release at 11.50pm GMT. An uptick in the annualised rate would certainly be seen as welcome and may lend the Yen some support.
 
After making a couple of buds to jump higher, the pound is floundering once again. Uncertainty over the outcome of this week’s judicial review into the EU exit process is still lingering and that will likely be the case not only until the hearing concludes tomorrow, but until final judgement is made – probably into the new year. In the shorter tem however, we have UK GDP estimates for November due at 3pm GMT. Given some of the uncertainty we’ve seen elsewhere on the economic calendar, this could offer fresh cause for concern and underline the bearish stance many are adopting over cable.
 
Oil inventories are due for release at 3.30pm GMT and with crude having stalled around the highs we’ve hit repeatedly over the last year and a half, a big draw here may be sufficient to offer prices another leg higher. However although forecasts suggest that crude stocks will be falling, questions remain over the implementation of the Opec production cut agreed last week. Until we see this filtering through, prices could remain reluctant to push out to fresh highs.
...
read more
06 / 12 / 2016 | Technical Analysis

GBP/USD and EUR/JPY hold strong

GBP/USD has continued with the up trend we identified yesterday, with the summer lows of 1.2850 next in focus. 



The channel up for EUR/JPY remains just about in tact, with a retest of the May highs around 124.70 the next target. 



Please note: The content in this daily technical analysis article should not be taken as investment advice. It comprises our personal view.
...
read more



Risk Warning:  CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68.77% of retail investor accounts lose money when trading CFDs with AFX Markets Ltd. You should consider whether you understand how CFDs work and whether you can afford to take the risk of losing your money.

TRADE NOW RISK FREE DEMO