31 / 01 / 2018 | Technical Analysis

Technical Analysis 31.01.2018 - EUR/JPY: Ichimoku clouds

Let's look at the four-hour chart. Tenkan-sen line is below Kijun-sen, the lines are horizontal . Confirmative line Chikou Span is below the price chart, current cloud is descending. The instrument is trading between Tenkan-sen and Kijun-sen lines. The closest support level is the lower border of the cloud (134.97). The closest resistance level is Kijun-sen line (135.20).




On the daily chart Tenkan-sen line is above Kijun-sen, the lines are horizontal . Confirmative line Chikou Span is above the price chart, current cloud is ascending. The instrument is trading between Tenkan-sen and Kijun-sen lines. The closest support level is the upper border of the cloud (134.97). The closest resistance level is Tenkan-sen line (135.22).




The Technical Analysis is provided by Marshall Gittler, an external service provider of an independent analytical company. Any views and opinions expressed are explicitly those of the writer. Any information contained in the article, is believed to be reliable, and has not been verified by STO and is not guaranteed to be accurate. References to specific products, are for illustrative purposes only and are not a form of solicitation, recommendation or investment advice. Past performance is not a guarantee of future performance.

 
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31 / 01 / 2018 | Market News

Fundamental Analysis 31.01.2018 - Market Outlook

Today’s market

The main focus today will be the much-awaited first Federal Open Market Committee (FOMC) meeting of the year 2018. It’s also the last for Chairwoman Janet Yellen before Jerome Powell takes over in February 2018. The market sees little chance of a rate hike at this meeting, but considers a hike at the next meeting in March 2018 to be likely.

With no press conference after the meeting, we’ll only have the statement to go by. The statement could acknowledge that inflation has moved closer to their 2% target. As you can see from the graph, the market assumes a much slower pace of rate hikes than the Federal Reserve does (although part of the difference is the need to price in the non-negligible risk of fewer rate hikes). 


Today’s indicators

The day starts out with German unemployment data. This could be considered a second-tier series as far as the euro is concerned. It’s forecast to show a decline in the number of unemployed and a further tick down in the unemployment rate as the new year started. This could help to reinforce the view of the EU economy firmly in expansionary territory rather than recovery and boost the euro.


The headline measure of EU-wide inflation is expected to tick down, but what’s more important is that the core inflation measure is expected to tick up. That’s the one that the European Central Bank is focusing on and so that could be the one the market watches the most. Yesterday’s German Consumer Price Index also showed a slowdown in headline inflation to 1.4% yoy instead of staying at 1.6% yoy as expected. However, that’s headline, not core. If the core rate of inflation does tick up, that would probably be positive for the euro.


When the US day starts up, the ADP employment report will set the tone. It’s expected to show a healthy increase of 185k. Initial jobless claims have fallen to the lowest level since 1973, while surveys of hiring intentions have shown continued strong demand for workers. That may be why the Bloomberg “whisper” number is an even stronger 218k.


Canada’s monthly Gross Domestic Product (GDP) figure is expected to show an increase in the month-on-month rate of growth, but the year-on-year rate of growth is forecast to remain stable. Still, stable at 3.4% yoy is quite strong. It would corroborate the Bank of Canada’s comment that it expects growth “to remain above potential through the first quarter of 2018.” That could prove positive for CAD. (Note that the market usually tracks the mom figure more than the yoy figure.) 


Canadian industrial product prices (aka producer prices) comes out at the same time as the GDP figures, as they sometimes do. This is an odd data series. It is often followed by decent moves in CAD (greater than ±0.1%) but the moves often don’t have much relation to the figure itself. In any event, zero increase in prices suggests zero upstream pressure on inflation. That could be considered a negative for CAD. 


The US pending home sales for December 2017 are expected to be up slightly. This is a volatile series, and even the six-month moving average is volatile. It could be modestly USD-positive.


Overnight we get the Australian building approvals. Approvals surprised in November 2017, surging over 11% vs expectations of a decline. That was a one-off related to a handful of huge projects. It’s only natural that approvals should decline this month. But given the previous month’s high level, even the forecast decline could still indicate a relatively healthy construction sector and be positive for the AUD.


Finally, the Caixin manufacturing Purchasing Managers Index for China will be released. It’s expected to be unchanged. 







The Fundamental Analysis is provided by Marshall Gittler an external service provider of an independent analytical company. Any views and opinions expressed are explicitly those of the writer. Any information contained in the article, is believed to be reliable, and has not been verified by STO and is not guaranteed to be accurate. References to specific products, are for illustrative purposes only and are not a form of solicitation, recommendation or investment advice. Past performance is not a guarantee of future performance.

 

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30 / 01 / 2018 | Technical Analysis

Technical Analysis 30.01.2018 - AUD/JPY: Ichimoku clouds

Let's look at the four-hour chart. Tenkan-sen line has crossed Kijun-sen from below, the red line is directed downwards, while the blue one remains horizontal. Confirmative line Chikou Span is below the price chart, current cloud is descending. The instrument is trading below Tenkan-sen and Kijun-sen lines; the Bearish trend is still strong. One of the previous minimums of Chikou Span line is expected to be a support level (87.77). The closest resistance level is Kijun-sen line (88.10).




On the daily chart Tenkan-sen line is above Kijun-sen, the blue line is directed upwards, while the red one remains horizontal. Confirmative line Chikou Span is above the price chart, current cloud is ascending. The instrument has broken down Tenkan-sen and Kijun-sen lines. The closest support level is the upper border of the cloud (87.55). The closest resistance level is Kijun-sen line (88.10).




The Technical Analysis is provided by Marshall Gittler, an external service provider of an independent analytical company. Any views and opinions expressed are explicitly those of the writer. Any information contained in the article, is believed to be reliable, and has not been verified by STO and is not guaranteed to be accurate. References to specific products, are for illustrative purposes only and are not a form of solicitation, recommendation or investment advice. Past performance is not a guarantee of future performance.
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30 / 01 / 2018 | Market News

Fundamental Analysis 30.01.2018 - Market Outlook

Market Recap
USD is up this morning. US yields aren’t the only ones rising. Most major countries have seen their yields rise recently. German yields have risen more over the last week than US yields have (and just as much since the beginning of the year). In fact, the trigger for higher yields yesterday was a comment by the well-known European Central Bank (ECB) Governing Council hawk Klaas Knot that the ECB’s quantitative easing programme has to end in September 2018. That sent Bundy yields up and dragged Treasuries with them. But the market seems to be focusing on US yields nowadays.


This is probably due to the Federal Open Market Committee (FOMC) meeting this week. Key economic data have met the Federal Reserve's recent projections, which make it all the more likely that we will in fact get three rate hikes this year. Yesterday’s core personal consumption expenditure (PCE) deflator came in as expected at 1.5%, exactly in line with the Federal Reserve's December 2017 FOMC projection, while last week's Q4 GDP report showed growth ending 2017 at 2.5% (4th quarter year-on-year), also matching the Federal Reserve's projections. As long as the US economy is meeting the FOMC’s projections, they are likely to raise rates at their projected pace – which is faster than what the market is anticipating.

GBP fell after the EU drafted guidelines for the transition period after Britain leaves the EU in 2019. The EU wants Britain to follow its rules, including freedom of movement for EU citizens, until end-2020.

Today’s market

The focus during the European day will be on the German Consumer Price Index, the harbinger of tomorrow’s EU-wide CPI. Since Germany is the biggest economy in Europe, there’s a pretty good correlation between the two. The day starts off with the CPI for Saxony. No forecast is available, but the Saxony CPI often predicts the national CPI, which often predicts the EU-wide CPI, so the action starts right from the beginning.


In any event, the national CPI is expected to fall on a mom basis but the yoy rate of change is forecast to be unchanged – not particularly exciting and probably not particularly influential for the currency market.   


The Bank of England’s figures on mortgage approvals are expected to come in lower. The 2.5% mom drop that’s forecast (green) is much less of a fall than the 7.4% decline in the UK Finance actual (purple). This unusually wide gap between the two series could suggest that in fact there could be a negative surprise. The hike in slowdown occurred because interest rates rose in November 2017.


EU-wide GDP is expected to come in slightly below the last two quarters’ rate. Nonetheless, the expect +0.6% qoq rise

Note though that the qoq and yoy rates of change are derived from different data pools. There are 50 estimates for qoq and only 37 for the yoy. Moreover, the qoq figures are tightly clustered around 0.6, whereas the yoy are more widely distributed, with a number at 2.6 and 2.8. Thus it’s possible for one to be in line with expectations but the other to miss.

In any case, the figure should show that the EU economy has moved from “recovering” to “expanding,” which may prove positive for the euro.


US Conference Board consumer confidence is forecast to rise slightly. This is in contrast to the actual result from the University of Michigan, which as you can see fell during the month. The two don’t always move in line on a month-to-month basis however so this is quite possible. A rise in the Conference Board index when the University of Michigan version was negative could prove positive for the dollar. 











The Fundamental Analysis is provided by Marshall Gittler an external service provider of an independent analytical company. Any views and opinions expressed are explicitly those of the writer. Any information contained in the article, is believed to be reliable, and has not been verified by STO and is not guaranteed to be accurate. References to specific products, are for illustrative purposes only and are not a form of solicitation, recommendation or investment advice. Past performance is not a guarantee of future performance.

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30 / 01 / 2018 | Market Outlook

Marshall Gittler's Market Outlook 29.01.2018 - 02.02.2018

Themes of the week: State of Union Speech, FOMC meeting, ADP & NFP indicators, US PCE defaltors, German and EU inflation indicators
 


The market outlook video is provided by STO’s external service provider Marshall Gittler. Any views and opinions expressed are explicitly those of the video’s broadcaster. Any information contained in the video, is believed to be reliable, and has not been verified by STO and is not guaranteed to be accurate. References to specific products, are for illustrative purposes only and are not a form of solicitation, recommendation or investment advice. Past performance is not a guarantee of future performance.
 
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29 / 01 / 2018 | Technical Analysis

Technical Analysis 29.01.2018 - EUR/JPY: Ichimoku clouds

Let's look at the four-hour chart. Tenkan-sen and Kijun-sen lines have merged, the red line is directed downwards, while the blue one remains horizontal. Confirmative line Chikou Span has crossed the price chart from above, current cloud is going to reverse from ascending to descending. The instrument has entered the cloud. The closest support level is the lower border of the cloud (134.65). The closest resistance level is Kijun-sen line (135.39).




On the daily chart Tenkan-sen line is above Kijun-sen, the lines are horizontal . Confirmative line Chikou Span is approaching the price chart from above, current cloud is ascending. The instrument is trading between Tenkan-sen and Kijun-sen lines. Kijun-sen and Tenkan-sen lines have become support (134.81) and resistance (135.40) levels respectively.




The Technical Analysis is provided by Marshall Gittler, an external service provider of an independent analytical company. Any views and opinions expressed are explicitly those of the writer. Any information contained in the article, is believed to be reliable, and has not been verified by STO and is not guaranteed to be accurate. References to specific products, are for illustrative purposes only and are not a form of solicitation, recommendation or investment advice. Past performance is not a guarantee of future performance.


 
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29 / 01 / 2018 | Market News

Fundamental Analysis 29.01.2018 - Market Outlook

Market Recap

USD is starting the week lower against most G10 currencies than it was Friday morning 26th January 2018 this time. The exception is EUR, where it’s more or less unchanged, and GBP. On Friday 26th January 2018, US Treasury Secretary Steven Mnuchin tried to change his comments about the weak dollar, saying they were “completely taken out of context” and he wasn’t “intending to endorse it or encourage it in any way,”.

Friday the 26th January 2018's weaker-than-expected Q4 GDP report didn’t help matters, although the fact that the GDP price index beat expectations may have ameliorated some of the damage. Other US economic news was similarly mixed:  the US trade deficit also widened more than expected, but durable goods orders far exceeded expectations.  Nonetheless, USD could rebound today on higher US Treasury yields.

The reason for the weakness of EUR is unclear, as there were some EUR-positive comments Friday 26th January 2018 from European Central Bank (ECB) Executive Board member Benoît Coeuré. He contradicted ECB President Mario Draghi on several important points; for example, he said “we are in talks” about changing the ECB’s forward guidance, whereas Mario Draghi said that discussion will take place sometime in the future. Benoît Coeuré also said inflation and wages were “ticking up,” whereas Mario Draghi said they were “broadly stable and subdued.”  The weakness of EUR may be due to buying of JPY against the crosses.

JPY gained Friday 26th January 2018 after Bank of Japan Governor Haruhiko Kuroda commented at Davos that the country is seeing progress on wages and prices and that “we are finally close to the target” of 2% inflation. The market interpreted that as a change in the Bank of Japan’s view on inflation. Bank of Japan officials quickly reported that this was no different from the Bank’s official view, which is that Japan will hit the target “around fiscal 2019,” the year beginning April 2019. JPY has lost about half the gains after that clarification. It could weaken further today as significantly higher US yields widen the interest rate gap with Japan.

Crossrate movement may also explain the weakness of GBP.  Bank of England Governor Mark Carney also spoke Friday 26th January 2018 at Davos. While nothing in his comments moved the markets immediately, gilt yields began to rise after he finished speaking. That should’ve supported GBP somewhat, but instead the currency is the weakest of the G10 this morning.

The weekly Commitment of Traders (COT) report Friday 26th January 2018 showed that speculators resumed buying EUR and have once again equaled their record long positions, not just for the last five years (as the table below shows) but going back to the start of the euro.



Note from the graph below that the record long position in EUR (+145k contracts, net) is much smaller in absolute value than the record short position (-227k contracts, net) in March 2015.



Similarly, investors may be near the longest they’ve been in GBP for the last five years, but that’s only because they’ve been mostly short the currency for that time. They’ve had bigger short positions during that time, and going back further, they’ve had long positions more than double what they currently hold.


In fact, if we add up all the current positions in the COT report, speculators still have a relatively small net short USD position overall.


Today’s market

The item on the agenda during the European morning is the EU27 ministers meeting to adopt new negotiating directives for the Brexit negotiations. The directives will set out the EU position on the transition period. This is a key issue for Britain. One sticking point is that Britain is demanding to have some way of influencing EU rules during the transition period if they are changed to the detriment of Britain. But the EU has clearly stated that the UK will no longer participate “in the institutions and the decision-making of the EU” after Brexit.

When the US opens up, the personal income and personal spending figures will be released, together with the crucial personal consumption expenditure (PCE) deflators.

Although the personal income and spending figures are important from an economic standpoint, my research has shown little correlation between them and the subsequent movement of the currency after they’re announced. Certainly the income figures have virtually no connection with currency movements.


The important part of this release, in my view, is the Personal Consumption Expenditure (PCE) deflator and its sub-unit, the core PCE deflator. That’s what the Federal Reserve uses as its inflation target.

The yoy rate of the headline PCE deflator is expected to nudge down a tic, but the more important one – the core deflator – is expected to remain the same. The market looks at the core index more than the headline. In that case, I’d say this indicator too should give little impetus to trading if it comes in as expected. It doesn’t show inflation getting any closer to the Federal Reserve’s 2% target, but it doesn’t show inflation falling, either.


Next up is the Dallas Federal Reserve manufacturing index. This is one of the second-tier regional Federal Reserve indices. Although the dollar does often have big moves after the index, they aren’t closely correlated to the index itself, unlike the Empire State or Philadelphia Federal Reserve index. Probably that’s because Dallas is home to the oil industry and so isn’t representative of the economy as a whole. In any event, it’s expected to be down slightly, as were both the Empire State and Federal Reserve Bank of Philadelphia indices. This could be a dollar-negative.





Overnight, New Zealand releases its trade data. The figure isn’t seasonally adjusted, as you can see from the graph, so what’s more important than the actual figure is what it would do to the 12-month moving average. In this case, the average deficit has been widening for the last two months and is forecast to continue to widen in December 2018, which could be negative for NZD.



Also Japan starts its usual end-of-month data dump with the jobless rate, job-offers-to-applicants ratio, and retail sales.

Unfortunately, the correlation between the employment data and the currency movement is pretty tenuous, as it is for most Japanese economic indicators. It’s better for the unemployment data than the job offers. Even then, since the unemployment data is in line with expectations about half the time, it doesn’t always have much of an impact. And when it does, oddly enough the yen tends to weaken when it beats expectations and strengthen when it misses. The unemployment rate is forecast to be unchanged while the job-offers-to-applicants ratio is forecast to continue its gradual tic-by-tic climb. I wouldn’t expect the data to have much impact on the yen. 













The Fundamental Analysis is provided by Marshall Gittler an external service provider of an independent analytical company. Any views and opinions expressed are explicitly those of the writer. Any information contained in the article, is believed to be reliable, and has not been verified by STO and is not guaranteed to be accurate. References to specific products, are for illustrative purposes only and are not a form of solicitation, recommendation or investment advice. Past performance is not a guarantee of future performance.

 

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26 / 01 / 2018 | Technical Analysis

Technical Analysis 26.01.2018 - AUD/JPY: Ichimoku clouds

Let's look at the four-hour chart. Tenkan-sen line is below Kijun-sen, the red line is directed downwards, while the blue one remains horizontal. Confirmative line Chikou Span is below the price chart, current cloud has reversed from ascending to descending. The instrument has been corrected to the Tenkan-sen line. The closest support level is Tenkan-sen line (88.00). The closest resistance level is the upper border of the cloud (88.18).




On the daily chart Tenkan-sen line is above Kijun-sen, the blue line is directed upwards, while the red one remains horizontal. Confirmative line Chikou Span is above the price chart, current cloud is ascending. The instrument is trading between Tenkan-sen and Kijun-sen lines. The closest support level is the upper border of the cloud (88.02). The closest resistance level is Tenkan-sen line (88.36).




The Technical Analysis is provided by Marshall Gittler, an external service provider of an independent analytical company. Any views and opinions expressed are explicitly those of the writer. Any information contained in the article, is believed to be reliable, and has not been verified by STO and is not guaranteed to be accurate. References to specific products, are for illustrative purposes only and are not a form of solicitation, recommendation or investment advice. Past performance is not a guarantee of future performance.
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26 / 01 / 2018 | Market News

Fundamental Analysis 26.01.2018 - Market Outlook

Market Recap
Yesterday the USD recovered following comments from US President Donald Trump that  “…the dollar is going to get stronger and stronger. And ultimately, I want to see a strong dollar”. The dollar’s biggest gains were against GBP, which plunged on US President Donald Trump statement. It’s been recovering somewhat ever since, though. In a mirror image statement to what United States Secretary of the Treasury Steven Mnuchin said, UK Chancellor of the Exchequer Philip Hammond said that the UK is “very happy with where the currency is at the moment,” but owing to its strength, not its weakness. He explained that the stronger pound will help to reduce inflation and boost real wages. 




CHF continued to move higher. Swiss National Bank (SNB) President Thomas Jordan has continued to warn that the currency is overvalued and the SNB will intervene if necessary to keep it from appreciating further. 




European Central Bank (ECB) President Mario Draghi was non-committal on what the ECB would do and when they would do it. He said he sees very little chance of a rate hike this year, something that’s already implied in their forward guidance. Nonetheless market expectations of a rate hike by December 2018 fell to 38% from 44%, although that didn’t stop EUR from appreciating.

Today’s market

The day starts out with French consumer and manufacturing confidence data. These two don’t normally come out on the same day. They show an impact on EUR/USD, that is, the currency often moves more than ±0.1% after they come out, however, there doesn’t seem to be any correlation between the data and the subsequent currency move (that is, EUR doesn’t necessarily appreciate when the figure beats expectations, and vice-versa). In this case, consumer confidence is expected to be a bit higher and manufacturing confidence unchanged at nearly the highest level since the Global Financial Crisis, which could be positive for EUR.




The UK GDP figures are expected to show that qoq growth was the same in Q4 as it was in Q3, which could be supportive for the pound – at least it’s not slowing. The yoy rate of growth is expected to slow because of the unusually strong -- +0.7% qoq – growth in Q4 2016. Note that the two figures are compiled using different data pools (50 estimated for the qoq figure vs only 42 for the yoy). 




Canada’s consumer price index (CPI) is expected to fall from the previous month. It isn’t seasonally adjusted, so this is pretty frequent. The yoy rate is expected to decline slightly, to just below 2% -- the midpoint of the Bank of Canada’s 1%-3% target range.




US Q4 GDP forecasts have been inching up over the last few days. The growth rate is now expected to be 3.0% qoq SAAR, almost unchanged from Q3, which would represent three consecutive quarters of above-trend growth. It could beat estimates as the Atlanta Federal Reserve Bank’s GDPNow estimate is 3.4% and the NY Federal Reserve Bank’s Nowcasting forecast is an even higher 3.9%.




Inflation data comes out at the same time. Indeed, research suggests that on a five-minute and a one-hour horizon, EUR/USD’s subsequent movement is more closely correlated with the surprise in the GDP price index than it is with the surprise in the GDP figure itself. The relationship with the core personal consumption expenditure (PCE) deflator can’t be estimated, because it usually comes in on target. Also, this time the core PCE deflator, which is the Federal Reserve’s preferred inflation gauge, is forecast to be almost at their 2% target. This could be USD-positive.




In any event, the picture will be complicated this month by the fact that the US durable goods figure comes out at the same time. While there are several different measures that are released at the same time, my research has shown that the subsequent movement of EUR/USD is overwhelmingly linked to the headline durable goods figure.
 













The Fundamental Analysis is provided by Marshall Gittler an external service provider of an independent analytical company. Any views and opinions expressed are explicitly those of the writer. Any information contained in the article, is believed to be reliable, and has not been verified by STO and is not guaranteed to be accurate. References to specific products, are for illustrative purposes only and are not a form of solicitation, recommendation or investment advice. Past performance is not a guarantee of future performance.

 

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25 / 01 / 2018 | Technical Analysis

Technical Analysis 25.01.2018 - EUR/JPY: Ichimoku clouds

Let's look at the four-hour chart. Tenkan-sen line is below Kijun-sen, the lines are horizontal . Confirmative line Chikou Span has crossed the price chart from above, current cloud is ascending. The instrument has entered the cloud. The closest support level is the lower border of the cloud (134.65). The closest resistance level is the lower border of the cloud (135.60).




On the daily chart Tenkan-sen line is above Kijun-sen, both lines are directed upwards. Confirmative line Chikou Span is above the price chart, current cloud is ascending. The instrument is trading above Tenkan-sen and Kijun-sen lines; the Bullish trend is still strong. The closest support level is Tenkan-sen line (135.45). One of the previous maximums of Chikou Span line is expected to be a resistance level (136.00).




The Technical Analysis is provided by Marshall Gittler, an external service provider of an independent analytical company. Any views and opinions expressed are explicitly those of the writer. Any information contained in the article, is believed to be reliable, and has not been verified by STO and is not guaranteed to be accurate. References to specific products, are for illustrative purposes only and are not a form of solicitation, recommendation or investment advice. Past performance is not a guarantee of future performance.


 
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