18 / 04 / 2017 | Technical Analysis

USD/JPY Finds Support

USD/JPY may have been through something of a technical sell-off, but support has come through in the form of the 200 day moving average and the 50% retracement of the June-December ’16 rally. Failure to break higher could open the way for a return to recent lows around 108.12.

 

 
AUD/USD has moved back above the 200 day moving average, but a renewed break below here would open the way for a slide down to the 0.7450-0.7475 region reflecting recent lows and the 50% retracement of the Q1 rally.
 


This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.
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13 / 04 / 2017 | Market News

Dollar Weakness Persists

Over the last 24hours, our prop desk has closed out a long cable position and a long DAX position, both recording meaningful profits. Short US equity index trades are also still being held, whilst a foray into long AUD/CHF is yielding results, too.
 
Daily Round up
 
With the long weekend looming, the temptation today may well be to keep de-risking positions, although Donald Trump effectively talked some heat out of the greenback during yesterday’s session, so further weakness here may be reliant on the data. There’s a raft of fundamentals set for release today with some of Friday’s prints being published early and with there being a real risk that US PPI could tip into negative territory, there’s certainly the potential for volatility to persist in the near term.
 

Fundamental Analysis – Dollar Weakness Persists

Yesterday’s comments by Donald Trump that the dollar was getting too strong appeared to have the desired effect on the currency, with the greenback tumbling against the Euro at the start of the Asian session. There’s some speculation that the downside pressures may not be sustainable from jawboning alone, but combined with the current swing into risk-off trades and the questions that are mounting over the new US administration’s ability to deliver against campaign promises and the sell-off certainly looks warranted. As we move into next week, the looming French election may take the shine off the Euro, but the theme of dollar weakness could run for a little while longer yet.
 
The US PPI reading for March is due for release at 12.30pm GMT today and there’s a risk this could dip into negative territory. Again this would heap pressure on the Trump administration - and arguably call into question the Federal Reserve’s ability to keep hiking interest rates over the coming months. USD/JPY is already down at close to five-month lows having made a brief foray below 109 during the Asian session. Further weakness could well be seen here if that PPI print adds cause to concern, especially given the Yen’s safe haven allure.
 
Crude retreated marginally yesterday in the wake of a report showing US production reaching its highest level in over a year, but this is already looking o have been short lived. There’s ongoing speculation that Saudi Arabia will keep lobbying for those production quotas we saw brought in at the start of the year, whilst the risk of conflict in the Middle East should also see prices finding support.
 
Donald Trump’s talking down of the dollar has done little to lend any real support to US equity markets with the S&P again finding support around the 2340 level. Any desire to de-risk running into the weekend break could push equity indices lower still, although as noted above if the Fed’s ability to tighten monetary policy is called into question then this may be sufficient to offer stocks something of a reprieve – even if there is a push to de-risk going into the long weekend. 
 
This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.
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      13 / 04 / 2017 | Technical Analysis

      Dollar/Swissie Eyes Parity

      USD/CHF is eyeing a break back below parity and if this is seen, look for the 200 day moving average and 50% retracement of the early April run higher at 0.9950-0.9960 as being the next obvious line of support.
       

       
      USD/CAD has now made a sustained move below the 100 day moving average at 1.3280 and is eyeing a break below the 200 day MA of 1.3220. If this is successful, look for a return to the run of February closing lows around 1.3070
       
       
       
      This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.
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          12 / 04 / 2017 | Market News

          Risk Off Theme Weighs on Greenback

          Our prop desk is finding profit off the back of a long cable position opened on April 10th, whilst those short S&P trades continue to yield a profit. We are also seeing long GBP exposure having been added to in recent hours.
           
          Daily Round up
           
          The economic data is running a little thinner, although UK wage readings this morning may provide some fresh direction for the pound. The bigger story however appears to be one of risk mitigation and the greenback is under notable pressure as a result. So far we haven’t seen this filter across to US equities in any meaningful sense, but with US treasury yields cooling, there’s some concern building that the rally could be running out of steam.
           

          Fundamental Analysis – Risk Off Theme Weighs on Greenback

           
          There have been some notable declines for the US dollar in recent trade but it’s sentiment rather than fundamentals that are driving the moves in the short term. Traders still have one eye on the long weekend shut down we have approaching, but equally there’s rising concern over the geopolitical landscape – along with the fact that the much-vaunted economic revolution that Donald Trump had been talking up seems increasingly unlikely to materialise. The slide for USD/JPY below 110 – the first time we’ve seen a move down here in five months – typifies this sentiment and as it stands right now there’s little to suggest this risk off mentality won’t simply continue to build in the weeks ahead.
           
          Sterling has been a rather unlikely beneficiary of this drift away from the dollar, even with no surprises in yesterday’s inflation data. However we have UK employment and wage data both due for release at 8.30am GMT this morning and a break higher in terms of salaries here could really serve to fuel the idea that the Bank of England won’t be able to hold fire over interest rates for much longer. A sustained break above the psychological 1.2500 for cable could well follow.
           
          We have the Opec monthly report set for release at 11am GMT today and this could provide some meaningful direction at least in the short term. Crude pries continue to march higher in light of concerns over how the potential for conflict in the Middle East could impact distribution, but anything that suggests a lack of conformance with the production quotas introduced at the end of last year may be sufficient to initiate a degree of profit taking.
           
          At 2pm GMT the Bank of Canada releases its quarterly monetary policy report which will include projected growth forecasts for the country. There’s no suggestion that we will see any change in interest rates this month, but anything that serves to talk up the idea of tightening monetary policy in the near term will likely drive support for the Loonie, especially against the greenback. Economic data out of Canada is improving, whilst the steady rise in oil prices will also offer encouragement.
           
          This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.
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            12 / 04 / 2017 | Technical Analysis

            EUR/AUD Eyes 200 Day MA

            EUR/USD is continuing the higher trend that has been in play for almost two months. Next big target would be convergence with the 200 day moving average, currently at 1.4360.
             

             
            EUR/GBP posting a run of lower daily highs, and now eyeing a move towards the 50% retracement of the post-Brexit vote rally and recent support around the 0.8400-0.8410 range.
             

             
            This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.
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            11 / 04 / 2017 | Market News

            Yellen Fails to Move Dollar

            Our prop desk is relatively quiet for now – we still have some profitable ongoing positions in play including the short S&P and long USD/CHF. We have also seen a long CAD/CHF trade opened, whilst some attempts are being made at playing a rally on the DAX.
             
            Daily Round up
             
            Janet Yellen’s speech last night had the potential to convey a lot, but the market failed to bite, with neither the greenback nor the US equity indices wavering from their recent course. Geopolitical risks remain high, with the French elections as well as the threat of military action both in the Middle East and against North Korea casting a shadow over markets, so today could well end up being one where many traders elect to remain on the sidelines – with one eye being firmly on risk mitigation ahead of the long weekend break.
             

            Fundamental Analysis – Yellen Fails to Move Dollar

             
            Last night, Janet Yellen made a speech that had the ability to hold some significance, given it was the first Fed statement since the payrolls fell short of expectations at the end of last week. The Fed’s stance may be unmoved – more interest rates are coming and leaving aside the new jobs created, the labour market is seen as at capacity. The reaction by the greenback to this news was however rather muted and it does seem as if the risk off trades continue to win out. Geopolitical uncertainty is driving cash to safe havens, leaving USD/JPY to drift lower, whilst gold continues to find favour. With the long weekend looming, more risk mitigation is to be expected and this in turn will likely continue to lend support here.
             
            Oil prices are plotting a steady course higher as concerns mount over what happens next in the Middle East. The next big trigger here should be tomorrow’s meetings in Moscow by US Secretary of State Rex Tillerson, and the objective here must surely be to try an diffuse an already hostile situation. Failure to deliver is likely to drive oil prices higher, again with the market having one eye on its inability to trade out of positions over the long weekend break.
             
            UK inflation data is set for release at 8.30am GMT today and the expectation here is that the figure will again come in above the 2% mark, raising speculation that the Bank of England will soon be forced to come in with a rate hike. With oil prices alone – in GBP terms – sitting around 50% higher than they were a year ago, it’s easy to see where the inflationary pressures are coming from. Cable certainly has the scope for some reasonable gains on the upside if it becomes clear that the Bank of England is running out of time.
             
            German ZEW economic sentiment for April is set to be released at 10am GMT and further improvements are expected to be posted. EUR/USD is languishing at one month lows with the French election casting something of a shadow over sentiment and even if we do see a good print from Germany, the fact that the race to become President remains wide open – and that the outcome will genuinely mean something for the future of the European Union – even a bumper figure today is only likely to deliver a short term boost. 
             
            This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.
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            11 / 04 / 2017 | Technical Analysis

            Gold Poised to Break Higher?

            XAU/USD failed to make a meaningful break below the $1250 level during yesterday’s session and is once again eyeing a move higher. Look for resistance at previous highs around $1260 then   $1267.50.
             

             
            GBP/USD is seeing thin volumes although technicals offer little room to argue for a rally from here. Look for support at recet lows of 1.2365.
             

             
             
            This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.
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              10 / 04 / 2017 | Market News

              French Elections Squarely in Focus

              Our prop desk has now closed those long USD/CHF positions out for some healthy profits, whilst short term DAX and oil trades have also come good. Long EUR/USD trades placed ahead of the weekend break are however proving frustrating. 
               
              Daily Round up
               
              We have a relatively quiet session ahead in terms of economic data although meetings between the US and Russia will be in focus to see what happens next following the US missile launch on a Syrian air base ahead of the weekend break. There’s also words expected from Janet Yellen later in the day that will be closely followed given those disappointing payroll figures from Friday, whilst further developments in terms of US military deployments around the Korean peninsula could again direct markets.
               

              Fundamental Analysis – French Elections Squarely in Focus

               
              The Euro has started the week on the back foot after weekend polling saw the French election race thrown wide open once again. With two of the front runners both seen as being against the EU, there’s a real chance that the European project could be facing another major blow. To this extent, the expectation is that we’ll see a significant uptick in the volume of Euro hedging flows over the next two weeks. In the event that it starts looking like we could end up with a run-off being called between Melenchon and Le Pen, then it would seem inevitable that the Euro would take another plunge lower and parity with the greenback would have to be seen as a possibility.
               
              There was some real disappointment out of the US ahead of the weekend break with the non-ram payrolls coming in well short of expectations. Many are looking to deflect the downside here by pointing at the overall low jobless rate and at least so far the Fed has made it clear that minor fluctuations won’t shift its opinion over policy tightening. However, tonight’s comments from Janet Yellen at 8pm GMT will be under scrutiny to see if this reading provides any fresh direction on the unwinding of QE. The greenback appears resilient regardless, but anything that counters last week’s threat over the end of cheap money could well give US equity markets another reason to climb.
               
              We have seen some notably weaker than expected lending data out of Australia overnight, with home loans posting a notable contraction in February. The country’s overheating housing market has been something of a cause for concern at the central bank for a number of years so readings like this are understandably welcome and they give the RBA one less reason to think about tightening monetary policy. AUD/USD has given up the 0.7500 handle as a result, but the bigger concern here is whether this reflects any wider concern over confidence amongst consumers. Thoughts of recession may be off the cards, but if spending stops abruptly then the debate could easily resurface.
               
              We have UK BRC retail sales readings set to be released at 11pm GMT tonight and with Sterling’s recent pattern of reacting fairly abruptly to each new data point, this print will be very much in focus. Expectations are for another decline to be posted as confidence begins to wane in the face of the uncertainty that the Brexit process will bring. With the pound edging higher in early trade against the dollar and euro, this could simply be priming the currency for profit taking in a few hours time. 
               
              This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.
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              10 / 04 / 2017 | Technical Analysis

              AUD/USD Still Falling

              AUD/USD is eyeing the 50% retracement of the run higher than we saw through the first quarter of 2017. Look for support at 0.7460, then 0.7400.
               

               
              On a longer term chart, EUR/JPY is weighted on the downside. The channel down has been running for four weeks now and the pair has broken below the 200 day moving average. Look for support around last summer’s highs of 116.50.
               

               

              This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.
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              10 / 04 / 2017 | General

              Beyond Forex - Metals, Oils, Indices, Bonds, Equities April 10th

              Keep up to date with metals, oils, indices, bonds, equities and agricultural commodities in our Beyond Forex analysis. With a lot of news coming out of the United States and the UK, there have been some observable trends developing; some more beneficial than others. Also visit our economic calendar to learn about this week’s latest and most significant economic events.
               
              Treasuries
               
              April 13th sees the next meeting of the Bank of England’s MPC. With expectations building that we will see a rate hike out of London in the next 12 months as the country battles rising inflationary pressures, anything that serves to support this hawkish stance will push UK treasury yields higher, in turn eroding the underlying price. Critically, any view that rates will rise before the end of 2017 would likely have an abrupt impact on pricing.
               
              Soft Commodities
               
              Could coffee prices could be on the up, breaking from the downward trend we’ve seen since the start of the year? Reports show that with stockpiles running thin during the Asian harvest season and rejection rates rising too, farmers are becoming ever more reluctant to sell what’s left. On top of this there are suggestions that Brazil – the world’s largest grower – is considering the unprecedented move of importing coffee, as it runs out of stock. Storm damage and cycling into more resilient crops is clearly having an effect.
               
              Gold
               
              Precious metals are always seen as a safe haven in times of geopolitical uncertainty. Is the Trump regime close to taking definitive steps over North Korea? Any suggestion that we see a move to ‘boots on the ground’ could precipitate a rally for gold and although the timing of this is an absolute unknown, the deployment of the US naval fleet to the area will again add to the scope for another rally here. However, with an almost-global shut down of financial markets scheduled for the Easter weekend, the asset could prove to find popularity with those looking to mitigate risk.
               
              Indices
               
              The UK’s FTSE-100 could find itself in the spotlight this week, with April 11th seeing the release of the latest UK inflation data. An upbeat reading here will serve to fuel speculation of a quick interest rate hike in the UK, driving borrowing costs up and also bolstering the pound. Since the Brexit vote last summer we’ve seen UK equity valuations consistently lifted by sterling’s decline, so any reversal here could leave the blue chip index sitting in the red.
               
              Equities
               
              JP Morgan reports results before the US market opens on April 13th and this will be worth watching. Last week’s news that the Federal Reserve was thinking about paring back the QE package was badly received by some banks, most notably Goldman Sachs, but the removal of cheap money shouldn’t be universally bad. Higher interest rates make it easier for the banking sector to make money, so the reaction to Thursday’s announcement will be worth watching.
               
              Oil
               
              Prices of late have been largely directed by inventories, but once again the geopolitical situation in the Middle East is climbing up the agenda, with the Trump administration running short of patience with Syria. As we have seen in the last few days, US intervention here is hugely complicated given Russia’s position in the situation and the fact that all sides are aligned in their fight against IS. However, any further military deployment in the region would certainly have the potential to disrupt the movement of crude and in turn could end up overshadowing the downside pressures from excess US shale based production.  

              This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.
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