10 / 04 / 2017 | General

Successful Signals March 29th-April 5th


29th March AUD/USD called lower from 0.7635 to 0.7525. Level hit April 7th


 

 
March 31st GBP/USD called lower from, 1.2460 to 1.2430 then 1.2410. Levels hit April 4th & April 7th


 

 
April 3rd EUR/AUD called higher from 1.4035 to 1.4170. Level hit April 7th


 

 
 
April 5th USD/CAD called higher from 1.3400 to 1.3450, level hit April 6th


 

 
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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07 / 04 / 2017 | Market News

US Attacks on Syria Spike Commodity Prices

Our prop desk is currently picking up some long EUR/USD positions as well as short AUD/USD. A short oil position was closed out at a loss overnight, although there may be a reluctance to build further positions ahead of the non-farm payrolls.
 
Daily Round up
 
The first Friday of a new trading month typically brings with it the volatility off the back of the US non-farm payrolls, but this could well be overshadowed by the current geopolitical agenda. We’ve seen the US launch missiles against the Syrian military, Russia would be expected to make at least a verbal statement in response to this, and we also have the on going summit between US and Chinese leaders that could produce some additional direction in the near term.
 

Fundamental Analysis- US Attacks on Syria Spike Commodity Prices

Gold prices spiked higher overnight in the wake of news that the US had launched a barrage of missiles at the Syrian air base that was alleged to have been the source of the chemical weapons strike from earlier in the week. So far, this single strike has been the extent of international reaction to the situation, although with Russia seen as siding with the current Syrian regime, further developments regarding this situation over the coming days and weeks will be closely followed. We could yet see further price reaction for the precious metal.
 
Oil followed a similar pattern, with US front month contracts moving higher off the back of the news of the missile launch. Although we’ve seen a modest retreat from overnight highs above $53/barrel, with unrest in the Middle East having the clear potential to further disrupt oil flows, there’s little to suggest we’ll see a quick return to the sub-$50 levels that dominated March’s trade.
 
There’s a flurry of data due for release from London at 8.30am GMT this morning, including the trade balance print and manufacturing production for February. The latter number is expected to show a return to positive territory, although critically markets don’t seem to be responding to the generally upbeat data we’re seeing from the UK of late. The Bank of England is however playing it cool when it comes to the discussion of managing inflationary pressures with monetary policy, so with Mark Carney due to speak at 9am GMT, any shift in his stance here could prove more influential for the pound’s fortunes than the numbers themselves.
 
At 12.30pm GMT we have the release of the US non-farm payroll figures for March and there’s little reason why these shouldn’t deliver the usual bout of volatility. Expectations are for a slightly slower rate of new jobs being added than we saw last month, but it’s likely to show that the US economy remains in good health. Last night’s missile strike on Syria has had little lasting bearing on US equity index futures, so again anything that plays up the idea of a more hawkish stance from the Fed could see profits being booked rather quickly here.  
 
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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07 / 04 / 2017 | Technical Analysis

EUR/AUD Still Trending Higher

EUR/AUD continues the uptrend that has been in play for the last six weeks. A break above 1.4180 paves the way for a return to last month’s highs around 1.4300.
 

 
NZD/USD is trading in a well-formed channel down with support potentially not being seen before the recent lows around 0.6890.
 

 
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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06 / 04 / 2017 | Market News

FOMC Minutes Knock Dollar, but not by Much

Our prop desk remains in a relatively subdued mood with those short S&P positions as well as long USD/CHF trades still in play. We’ve seen some short interest in the Aussie dollar emerge in the last few hours, whilst a long GBP/JPY position has been closed out at a meaningful profit.
 
Daily Round up
 
Big picture macroeconomic and political issues remain very much front of mind. Donald Trump is wading into the Syrian conflict in a move that has the potential to force his relationship with Vladimir Putin, whilst meetings with the Chinese Premier also loom large. Yesterday’s FOMC meeting minutes managed to serve up a double whammy of simultaneously knocking some dollar crosses and equity markets and the same time, whilst today the ECB will be busy with a raft of policymakers speaking at assorted events as well as the release of their latest meeting minutes being scheduled. The run into the weekend has the potential to be highly volatile and calling direction is going to be a challenge.
 

Fundamental Analysis – FOMC Minutes Knock Dollar, but not by Much

 
Yesterday’s release of the March FOMC meeting minutes may have presented a little weakness for the dollar, but overall this seems to have been short lived. There was a cautionary note included to point out how the latest rate hike wasn’t indicative of any upgrade to the longer-term policy outlook, but the only major cross to show a meaningful response here has been USD/JPY, retreating back towards fresh lows for the year.
 
The Aussie dollar has been under renewed pressure in recent trade with more jawboning from the RBA helping suppress the value of the currency. Deputy Governor Debelle has been highlighting how a number of changes are set to drive currency flows out of the country, including a dividend exodus from the commodity stocks, whilst changes in bank funding are going to drive up US dollar inflows. The result has been to drive AUD/USD lower once again, although tomorrow’s US non farm payrolls could prove to be the catalyst for something of a reversion if this print should come in short of expectations.
 
The Euro found no upside from yesterday’s reported dollar weakness but that could change with a slew of ECB-backed comments during the day ahead. The highlight will by all accounts be the release of the latest meeting minutes, which could hold further clues over the timing of any rate hike and with EUR/USD currently wallowing around three-week lows, there’s certainly the potential for some upside to be found here if hawkish tones emerge.
 
Yesterday’s ADP payroll survey came in above expectations and served up a slug of enthusiasm for equity markets, but this didn’t last long, with the detail in the FOMC meeting minutes disclosing that the Fed wanted to start withdrawing QE later in the year taking a big toll. The punch bowl that many see to have fuelled the equity market rally through an abundance of cheap money is being taken away, although it’s worth noting that losses for the likes of the S&P have been measured. Yesterday evening’s 25 point sell off came to an abrupt end - the Fed is clearly mindful of making any withdrawal in a hugely measured way.

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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06 / 04 / 2017 | Technical Analysis

AUD/NZD Exposed

Short term technical analysis suggests downside pressure from the Kiwi against the Aussie dollar, with recent lows of 1.0790 the next target, followed by 1.0740.
 

 
 
USD/CAD looking at further gains with a break above Tuesday’s highs paving the way for resistance to be found at 1.3515 then 1.3580.
 


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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05 / 04 / 2017 | Market News

Markets Muted Ahead of Key Developments

In line with the market as a whole, our prop desk is largely sitting on the sidelines. A slew of long EUR/USD positions have been closed out overnight providing a modest return, whilst some profits have also been booked on long gold. Those USD/CHF trades remain in play, too.
 
Daily Round up
 
Markets seem to be eyeing up the calm before the inevitable storm right now – limited economic data over the last 24 hours combined with a raft of political and economic events between now and the end of the week has left many traders sidelined, but this could be about to change. FOMC meeting minutes, the latest oil inventory data and ISM manufacturing prints from the US could all have some significant bearing on both the dollar and equity indices, whilst developments in the talks between China and the US at the end of the week will be under scrutiny to see how this might drive safe haven trades.
 

Fundamental Analysis – Markets Muted Ahead of Key Developments

Major currency pairs have shown little movement over the last 24 hours, with many traders left sitting on their hands ahead of key developments due between now and the weekend break. To put the lacklustre conditions into context, the stand-out moved was in response to yesterday’s surprise Canadian trade deficit. This served to push USD/CAD around 50 points higher in the short term, but this proved short lived and the pair has been left little changed as a result.
 
The summit between Chinese and US premiers that’s due to take place tomorrow and Friday is seen as key in determining where markets will go next. Not only are Trans-Pacific trade ties up for debate, but so is the subject of North Korea, with Trump set to be pushing China for intervention here. The  latest comments from the US Secretary of State Rex Tillerson – that the US has nothing more to say on the matter – certainly ratchets up the pressure although we’re not even seeing any real favouring of risk-off trades as a result. Gold has retreated from recent highs and the waiting game looks set to continue.
 
UK PMI data is due for release at 8.30am GMT and this could provide some meaningful direction for the pound. The currency is still struggling to find support given the huge questions that lie ahead in terms of Brexit negotiations, so with traders wary, any shortfall in the readings could trigger another leg lower for GBP. In the immediate wake of last summer’s referendum, economic data has been better than expected but more evidence to show that the upside is running out here will do little to help prop up the pound.
 
At 6pm GMT we have the latest FOMC meeting minutes due for release here and the tone could provide some meaningful direction for the market. In recent months the expectation had been that stimulus policies from Donald Trump would underpin US rate hikes. The slow pace of reform may be threatening to take some inflationary pressures out of the market, but any suggestion that the Fed is looking beyond this could give the dollar another shot in the arm – and unsettle equities. Higher borrowing costs without accompanying tax breaks would again raise questions over these sky-high corporate valuations we’re seeing.

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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05 / 04 / 2017 | Technical Analysis

GBP/JPY Trending Lower

GBP/JPY has been trending lower for almost two years and is looking to threaten a break below the 200 day moving average. Look for support at year to date lows of 136.45.
 

 
After yesterdays’ brief foray higher, USD/CAD still looks to have potential on the upside. Resistance likely at recent highs around 1.3450 and 1.3515.
 

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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04 / 04 / 2017 | Market News

Risk-off Trade see Yen Charge Ahead

Our prop desk has seen those short S&P500 trades come back on side, whilst the long USDCHF positions from last week also remain in play. Long exposure to gold is also proving profitable.
 
Daily round up
 
A risk off mindset is gripping the market right now, with a mix of geopolitical and economic uncertainty in play. This situation isn’t expected to improve before the weekend break either, although once the US payroll data is released on Friday then the mood may become a little more relaxed. Oil is also worth watching as US front month contracts continue to plot a course back to $50/barrel – the support here is looking short lived.
 

Fundamental Analysis – risk-off trade see Yen charge ahead

 
Some misses in the economic readings yesterday, that explosion in St Petersburg and fears over what the back end of the week may hold with events ranging from Donald Trump’s meeting with the Chinese president through to US non-farm payrolls has left traders scratching around for safe havens in recent trade – and it’s the Yen that has been a notable winner. USD/JPY is pushing back towards last week’s lows around the 110 level, although with little economic data due from Japan in the near term, breaking below that psychological barrier may prove difficult.
 
Another beneficiary of the risk-off trade has been the traditional safe haven of gold, with the precious metal pushing back towards the year to date highs. This also plays towards the idea that gains for the US dollar may be close to having run their course, with falling Treasury yields adding further support to that argument. US factory order data could provide some fresh direction here when we see that released at 2pm GMT – expectations are for a modest decline but anything that comes in below the forecast 0.9% could well pave the way for further greenback weakness.
 
Mario Draghi speaks at the ECB at 1.30pm GMT this afternoon and in light of last week’s falling Eurozone inflation reading, expect his words to be closely followed. The idea of policy tightening from the ECB has been pushed onto the back foot since the middle of last week, with EUR/USD around 250 points lower as a result. There’s certainly scope for something of a reversion to be seen in the near term, if a more hawkish tone can be detected.
 
The Aussie dollar took another leg lower overnight after comments from RBA Governor Philip Lowe were taken as talking up weakness for the currency. There was certainly no surprise in terms of interest rates being left at their record low of 1.5%, but the explicit statement that a stronger currency would complicate the nation’s economic adjustment has sent a pointed message to the market. Quite how this will be received in Washington remains to be seen, but it should certainly do its bit to keep inflation ticking over. Again, an absence of data from Australia could also serve to limit the potential for any snap back here.

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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04 / 04 / 2017 | Technical Analysis

Cable still unwinding?

GBP/USD is selling off apace with 1.2375, the 50% retracement of the November – January sell-off acting as the next natural line of support.
 

 
USD/JPY is looking exposed to further weakness with the 50% retracement of the post-election rally and the 200 day moving average both providing support around the 109 level.
 


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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03 / 04 / 2017 | Market News

EUR/GBP losing streak not over yet

The start of a new trading month will bring with it the usual flurry of economic releases but there’s not all that much that stands out of note on the calendar for today. The disappointing figures from Australia serve up another alarm bell over the RBA’s recent bullish calls about the economic outlook for the country, whilst whether the pound can sustain its run higher will also be under review with today’s PMI data. The next couple of weeks do however seem to offer some degree of respite from turbulence on the political agenda, although with French elections looming, the risk this poses will never be far away.
 
The Traders’ View
 
Our prop desk has been buying up some long EUR/USD positions in the last few hours, whilst there’s also another move afoot to line up some short exposure to the S&P index. Long USD/CHF positions remain in play and profitable, but an ill-timed AUD/JPY long ahead placed ahead of the Australian data is proving costly.
 

Fundamental Analysis – EUR/GBP losing streak not over yet

 
March was categorised by some modest losses for EUR/GBP with the pair retreating by 300 points over the month. In the last few days, the ECB’s dovish tone, combined with some generally better than expected UK economic data has been driving support, with EUR/GBP managing a brief spell below 0.8500 over the weekend break. There has however been something of a reversion during the Asian session and the UK PMI figure due for release at 8.30am GMT is very much in focus. A lukewarm reading here – even if it’s fractionally above the break even 50 level – would probably be sufficient to keep the pair trading above this psychological level in the short term, although other Eurozone prints are also on the slate this morning, including both unemployment and PPI readings at 10am GMT. Even if the UK data isn’t all that great, upside could be limited by the picture emerging from the continent.
 
The Aussie dollar slumped during the Asian session after retail sales figures dipped into negative territory and despite rampant house price growth. The timing here is significant as the RBA will announce their latest interest rate position at 4.30am GMT tomorrow – there’s no expectation that the headline rate will change, but it could lead to some jawboning over the possibility of some kind of stimulus measures, especially depending what the Q1 inflation data looks like when that’s released towards the end of the month.
 
After last week’s respite, oil prices are trending lower once again with Friday’s Baker Hughes rig count showing another uptick in the number of producing wells in the US. Front month US crude remains above $50/barrel for now, but maintaining this psychological level could prove challenging. It’s going to require some fresh impetus which that’s likely to be thin on the ground ahead of Wednesday’s weekly inventory release, whilst there’s growing disquiet that some of the producing nations who cut output will start to edge back in rather than blindly giving so much share to US shale producers.
 
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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