06 / 12 / 2016 | Market News

Major currency pairs survive referendum outcome

Euro crosses have proved resilient despite the result of last weekend’s Italian referendum, although Thursday’s ECB press conference will be closely watched to see exactly what action Mario Draghi is planning. The precise terminology could lead to renewed volatility but in summary it seems that further QE is on the cards, balanced by the prospect of tapering at some point in the New Year. Despite the fact that a Fed rate hike is as good as guaranteed for next week, this combination is helping prop up EUR/USD and will likely dominate over the Eurozone data we have on the slate today, including a GDP update and retail PMI figures.
 
The pound continues to gain ground against the US dollar, with neither the judicial review over Article 50 nor the far better than expected ISM services print yesterday acting as a drag on cable. With a quiet day ahead for the UK economic calendar, the trend we’re seeing bed in here may well be able to continue as traders increasingly deem the pair to be oversold.
 
USD/JPY is looking rangebound and struggling to make a sustained break above 114. There’s a slew of US economic data out this afternoon and although factory orders (3pm GMT) may be the most obvious point to look for, low level readings like the Q3 Unit Labor Costs (1.30pm GMT) could well provide some insight, especially in light of last week’s falling wage data. Critically it’s expectations over the Fed’s activity in 2017 that will set the pace here and for now it’s difficult to plot that trajectory with any accuracy.
 
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05 / 12 / 2016 | Technical Analysis

GBP/USD and EUR/JPY in uptrend

GBP/USD may have seen some volatility overnight but there’s an ascending triangle that has remained in tact. Now eyeing a retest of Friday’s highs around 1.2740, with a break out on the downside paving the way for a return to lows around 1.2375.



Despite the overnight hiatus, EUR/JPY remains in a broad up channel, with technicals suggesting the trajectory will hold. 



Please note: The content in this daily technical analysis article should not be taken as investment advice. It comprises our personal view.
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05 / 12 / 2016 | Market News

Increased volatility with Italy’s referendum vote

So Mario Renzi lost his referendum vote over the weekend and has now stepped down as Prime Minister of Italy. Exactly what this means for markets still needs to be determined, but the uncertainty this brings certainly won’t be welcomed. However this should make the recapitalisation of Italy’s struggling banks that much harder and Mario Draghi had pledged that any volatility stemming from this could be met with further extensions to ECB bond buying. With Draghi speaking at 2pm this afternoon, these comments will be closely followed - and could lead to further Euro weakness.
 
USD/JPY has continued to make incremental gains following last week’s failed attempt to test 115. A speech in the last few hours from BoJ chief Kuroda made no reference to monetary policy and this seems to have played to the Yen’s advantage, although as the market digests the release of some disappointing Japanese household confidence data, along with comments from PM Abe pushing for ‘bolder measures’ from the central bank to meet growth targets, some dollar strength could start to play through here.
 
Cable took a hit at the start of the Asian session, gapping around 50 pips as the pound got dragged into a proxy trade with the Euro. Uncertainty as to what happens in Italy is weighing here, although it’s worth bearing in mind that UK banks’ exposure to the country has been pared significantly in recent years – this is more about read-across. However this could be a big week for the Pound with the government going to the Supreme Court as to whether it needs a parliamentary debate over triggering Article 50 to start EU exit proceedings. The hearing is expected to last 4 days, but each observation about a hard vs soft Brexit has the potential to elicit a meaningful market reaction. EUR/GBP in particular could be choppy.
 
The big politically driven agenda points seem to have the greatest potential for generating some volatility in the short term, but we also have a couple of key economic releases that could make for trading opportunities. UK Services PMI is due at 9.30am GMT and failure to produce a strong print here will raise further questions over the state of the UK post-referendum. On top of this, the ISM non-manufacturing PMI print from the US at 3pm GMT should impress, in line with many other recent readings from across the Atlantic. GBP/USD could see further weakness as a result. 
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02 / 12 / 2016 | Technical Analysis

EUR/GBP reaching new correction lows, EUR/JPY testing the 122 level

EUR/GBP has returned to the channel down we observed earlier in the week, with yesterday’s Brexit excitement almost pushing the pair out on the downside – which would have completed the almost month-long pattern. Brexit holds the keys here.


    
EUR/JPY is challenging those pre-Brexit referendum highs around the 122 level. A successful take of this would open the door the further upside on the technicals.


Please note: The content in this daily technical analysis article should not be taken as investment advice. It comprises our personal view.
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02 / 12 / 2016 | Market News

Dollar back close to 114 as Yen slide continues

After a volatile 24 hours, USD/JPY is back close to the 114 we were trading at as the European session got underway yesterday. There’s clearly a divide as to whether the rally here has run its course and 115 is being met with some formidable resistance.

The best chance of a pop higher here would be an inflation-rousing non-farm payrolls print this afternoon as by all accounts the most obvious big unknown factor going into 2017 is going to be the pace of US rate hikes – we’re confident that a quarter point will be added this month, but how feisty will inflation be in the New Year. With two FOMC members speaking later in the day, any hints here may well give something meaningful to trade.
 
Sterling crosses started the month with a punch higher after the EU hinted that a soft Brexit may be on the table. The pound did give back most of the gains over the common currency – EUR/GBP traded as low as 0.8375 before returning to 0.8450 – but there’s been some more lasting support over the greenback with 1.2600 seemingly looking safe for now. UK PMI data yesterday fell short of expectations so the construction print at 9.30am GMT this morning will be closely followed, too. Brexit woes will be weighing here but we expect the number to still come out comfortably ahead of the break even 50 mark.
 
AUD/USD picked up a little support from a marginally better than expected Australian retail sales print overnight, but the gains have been looking relatively tenuous. Metals prices have been coming off a shade of late, having admittedly taken a big leg up off the back of good Chinese data and the hopes of a US infrastructure boom and this isn’t helping the Aussie’s fortunes. With the non-farm payrolls expected to impress too, 0.7500 is likely to provide some impervious resistance unless we see a sharp jump in commodity prices.  
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01 / 12 / 2016 | Technical Analysis

AUD/USD recovers to 38%

AUD/USD is targeting 0.7460 the 38% retracement of the run higher in the first quarter of the year.



Rising commodity prices are supporting the loonie, with USD/CAD eyeing those late October lows around 1.3360, followed by early October highs of 1.3300.



Please note: The content in this daily technical analysis article should not be taken as investment advice. It comprises our personal view.
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01 / 12 / 2016 | Market News

Major currency pairs in uptrend despite volatility

Month-end volatility has been rather notable in overnight trade with GBP/USD seemingly coming out as something of a winner. Cable is back at three week highs and attention will now be focused on the UK PMI readings that are due for release at 9.30am GMT to see if the upward momentum can be maintained. Cable has certainly suffered from a degree of inertia in recent weeks, although there’s also a theme of broader dollar weakness emerging right now, which could help sterling find more meaningful support as we now look to the year end.
 
EUR/USD continues to nudge higher too, despite the potential uncertainty of this weekend’s Italian referendum. Looking ahead, we do have a series of country specific PMI readings from Eurozone member states this morning, along with the headline EU unemployment reading, and although this may create some short term trading opportunities here, the potential direction is going to be limited by that threat of further QE if we see an adverse market reaction to the Italian referendum at the start of next week.
 
Earlier in the week we saw US GDP upgraded by a meaningful chunk whilst yesterday’s ADP payroll print served to impress the market as well. We have ISM manufacturing PMI data at 3pm GMT which again is tipped to impress, although it’s worth bearing in mind that if the higher oil price sticks, this will hamper both consumption and consumer sentiment.  The jury is still out as to just how the Federal Reserve will need to act next year – could this month’s anticipated hike be “one and done” or will inflationary pressures need more active management? This will be critical to the dollar’s fortunes and is precisely the sort of sentiment that could propel USD/JPY beyond 115.
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