Daily Market Analysis by CapitalStreetFX

[CapitalStreetFX]

AUD/USD Outlook 30th December 2015

AUD/USD is moving away from the highs in a lackluster drift in an FX space missing volume.

The backdrop of it comes with a recovery in both commodities and risk overnight, starting in European trade as it got going. US stocks were firm with the DJIA posting triple-digit gains and the S&P turning positive year-to-date, assisted by a quick, albeit, minor recovery in oil prices.

In Asia, oil started to come off and the Aussie mirrors it while copper is consolidated and gold is slightly bid. Chinese non-manufacturing and NBS manufacturing PMI’s for December are at the end of the week and year while otherwise we welcome back full markets and look to 2016 for impetus in the Central Banks and oil.

Technically, the 20 DMA remains at 0.7242 as a support below the pivot of 0.7283. On the upside, the 200 DMA at 0.7417 pressures from above on the wide and as equally wide, below the 3-month uptrend at 0.7086, level wise, the 0.7017 November low and the September low is at 0.6940.

 

[CapitalStreetFX]

Gold Outlook 31st December 2015

After declining almost a percent on Wednesday, gold sees a minor pullback in thin Asian markets with subdued volatility as we head towards end of 2015 trade.

Currently, gold trades marginally higher at 1061.50, extending the recovery from a brief dip below 1060 levels reached in the last NY session. Gold prices inch higher in Asia on the back of softness seen in the greenback against its major peers while negative global equities also lend offer some respite to the gold bulls heading towards 2016.

Looking ahead, as we close in 2015 trades, the Fed’s outlook on further rate increases and oil price movement into 2016 lurks on investors’ mind, keeping gold within the lower end of the year’s trading range.

Gold prices witness a drop of 10% in 2015 and remains poised to book third yearly loss, extending its longest slump since 2000.

The metal has an immediate resistance at 1066.88 (1h 50-SMA) and 1070 (round number). Meanwhile, the support stands at 1058.60 (Dec 30 Low), below which doors could open for 1052.70 (Dec 18 Low).

 

[CapitalStreetFX]

Attention Turns To Yellen Testimony In Coming Week

World’s largest currency hoard, Chinese foreign currency reserves shrunk by $99.5 billion to $3.23 trillion in January according to People’s Bank of China (PBOC) statement released on Sunday . The stockpile declined to the lowest since 2012 as China started selling Dollars to control the Yuan depreciation and to stem the capital outflow. However, the figure of $3.23 trillion is slightly better than the forecasted $3.21 trillion by the economic analysts.

The number of new jobs created in US increased by 151,000 in January which came lower than the forecast for 189,000, while the unemployment rate fell to the almost 8 year low at 4.9 percent against the forecast of 5 percent according to the released statement of US ‘Bureau of Labor Statistics’ .The average hourly earnings m/m rose by 0.5% against the forecast 0.3 percent. This signals a resilience in the current U.S. job market .It also helps stabilize the outlook for inflation and growth going forward, given that wage rate growth can act as a precursor to income and consumer spending growth.

Argentina has made a $6.5 billion cash offer to holders of the bonds that the country defaulted on in 2002. Argentina has been shut out of the global bond markets, since it defaulted on $100 billion of sovereign debt it owed at the time. Legal battled between the country and the investors(including large US hedge funds) has continued over the years. New Argentinian President Mauricio Macri has indicated a willingness to resolve the protracted dispute in a bid to bring the Argentinian economy back into the international fold.

Investors and traders shall be keenly awaiting any statements from a key meeting between Venezuelan Oil Minister Eulogio Del Pino and Saudi Oil Minister Ali – Al Naimi, following discussions between the Venezuelan, Omani and Qatari ministers earlier in the past week. The oil markets have been trading in a volatile range over the past few sessions based on perceptions of an emergency meeting or an OPEC led production agreement between OPEC and non-OPEC producers. The importance of this meeting becomes greater, in light of the volatility in the Crude Oil Market and the expectations attached to initiatives the market expects from producers, so that the supply demand imbalance can be addressed.

Another key event the market shall focus on in the coming week includes the testimony of Fed Chief Janet Yellen to the House Financial Service Committee at Capitol Hill. The markets shall be keen to pick insights into the future of US interest rate policy, after conflicting signals from different central banks around the world.

Technicals

EURUSD

EURUSD was strongly bullish last week as it surged 2.95 percent over the previous week .Last week , Euro posted its largest weekly gain since March,2015 against the US Dollar despite losing some ground on Friday after the release of the US labor market report.
EURUSD crossed above SMA50 on the weekly chart last week with a major spike through the average. On the daily chart the price crossed both 50 day and 200 day moving averages and Stochastic also turned up higher. The immediate resistance of EURUSD is at 1.1250 - the breakout of which would spur the current bullish momentum further. It has formed interim support at the 1.1120 level. The major support of EURUSD is at the 1.1050 level - breakdown of which would invalidate the current bullish scenario. The weekly bias is bullish. A sustained move above 1.1200 would open up the way towards the next significant resistance level at 1.1430.

Trade Suggestion:
Buy above 1.1250 with a Stop Loss at 1.1040 and Take Profit @1.1370.

GBPUSD

GBPUSD gained 1.80 percent against the Dollar last week despite trimming gains over the last two days of the week. Last week, it created a high at 1.4667 boosted by a strong rally but retreated from there after the release of ‘MPC Official Bank Rate Votes’ details on Thursday, as no MPC member voted to increase the interest rate. On Friday, it fell further on the back of the US employment report.
On the Daily chart, price still remains below SMA50 and SMA200. Stochastic started to turn up higher after having strong rallied towards the upside last week. GBPUSD completed 50 percent retracement of the selloff from 11th December 2015 to 21st January 2016 last week at the 1.4667 level. Currently SMA50 at 1.4700 is working as immediate resistance. Major support is at 1.4350 breakdown of which might resume the previous selloff. It formed interim support at the 1.4450 level. A sustained move above 1.4650 might spur further advance towards the 1.4800 level.

Trade Suggestion
Buy above 1.4675 with a Stop Loss at 1.4580 and Take Profit at 1.4770.

USDJPY

USDJPY posted the greatest weekly drop since October, 2008 as USD plunged 3.45 percent against the Japanese Yen last week. It happened just a week after the Yen weakening on adoption of negative interest rate by BOJ.
USDJPY has been strongly bearish after hitting and being rejected by the strong resistance zone at 121.67 on 29th January,2016 .It ended last week at the 116.81 level after making an abortive attempt to go higher. The weekly bias in USDJPY is strongly bearish. The next major support level is at 115.94 level which might be evacuated easily if current bearish momentum sustains. A sustained move below the 116.00 level might open the way towards 110.00.

Trade Suggestion
Sell below 115.65 with a Stop Loss at 116.80 and Take Profit at 113.50.

Gold

Gold recorded its highest weekly gain since July, 2013 last week. It climbed by 5.15 percent last week as investors are rushing towards gold as a safe haven, seeking refuge from from plunging global stocks in current fragile economic condition, as well as volatile currency markets.
On the Daily chart, price has crossed above 50 day and 200 day moving averages and stochastic has also turned higher. Price crossed above the SMA50 on weekly chart with a strong up-move last week. Gold ended higher at the 1173.06 level breaching the 1169.00 level. The next significant level is the high of 16th October, 2015 at 1191.42. If the current bullish momentum sustains, it is expected that Gold may trade above the 1200.00 level soon.

Trade Suggestion
Buy above 1170.00 with a Stop Loss at 1158.00 and Take Profit @1186.00.

Crude Oil

Crude Oil dropped 8.06 percent last week propelled by the overwhelming supply of Oil and a lack of initiatives to cut production significantly.
Crude Oil was rejected by the resistance at 34.80 last week and resumed falling lower in a choppy market. The break of interim support at 29.40 would pave the way towards the 13 year low at the 25.80 level. The weekly bias remains strongly bearish as the price was rejected from 50 day moving average on the Daily chart.

Trade Suggestion
Sell below 29.00 with a Stop Loss @30.60 and Take Profit @26.80.

 

[Option_Banque]

Pound Curbs Losses Ahead Fed Policy Review

The Bureau of Labor Statistics has announced today that the Consumer price index for February, which accounts for a majority of overall inflation, declined 0.2%, after staying unchanged in the previous month, in line with expectation. In a year, the index fell 0.4%, recorded the first time since March 2015.

The core CPI, which excludes food and energy prices, climbed more than forecast in February for the second month with 0.3% gain after rising 0.1% in January. The index has witnessed the largest gain in 10 months since May 2015.

At the same time, according to the Conference Board Inc., the CB Leading Index predicting the direction of the economy, increase consecutively in two months after falling 0.1% in December 2015.

The market is holding breath, waiting for the results from Federal Reserve (Fed) policy conference. Fed is expected not to raise interest rate due to the pressure from gloomy economic outlook, especially after negative data from China had been released. However, the potential of a rate hike in near future is growing as shown the positive employment and inflation data from the USA.

Fig: GBPUSD H4 Technical Chart

The Pound bounced back after hitting the two-week low at 1.40641. From last Friday, the pair has plunged sharply to test the 61.8 Fibonacci retracement but is heading to the 50.0 level. The RSI (14) has remained in overbought zone since yesterday, therefore, a reverse appears to begin. The bull may gain momentum as the Stochastic has just been liberated from the overbought territory and edged up.

Trade suggestion
Buy at 1.41200, Take profit at 1.41995, Stop loss at 1.40800.

 

[Option_Banque]

BOE Holds Steady, Pound Surges to One-month High

Today, the Bank of England (BoE)’s Monetary Policy Commitment (MPC) voted unanimously to hold the Bank rate at 0.5 percent and maintain the size of the Asset Purchase Program at 375 billion pounds as predicted by the market. Last year, BOE expressed the intention of tightening its economy. However, what is threatening the U.K right now is not only the instability of global market, but is also the uncertain membership status of this kingdom in the European Union.

The risk from so-called “Brexit” has dampened the U.K economy outlook, and forced the central bank to “stay cool” to help England meet the 2% inflation target, as well as sustain growth and employment.

One of the biggest city of the USA – Philadelphia has announced that its manufacturing index is 12.4%, rallying surprisingly from -2.8% last month. The index measures the relative level of general business conditions in the Philadelphia Federal Reserve district.

At the same time, the unemployment report of the US Department of Labor was released with the number of people filling for unemployment insurance rose as high as 269,000, below the healthy labor market conditions. This data is 6.2% less than forecasted, helping to reduce the fear of the economic recession among investors around the world.

The US current account, which indicates the difference in value between imported and exported goods, decreased more than expected with 125 billion dollars deficit in the first quarter of 2016.

Fig: GBPUSD H4 Technical Chart

The Pound has steeply risen versus the greenback since it hit the low of $1.40607 on Monday and is heading for the resistance of $1.45473. The price crossed over the moving average (50) and keeps soaring far away from this support, showing a strong uptrend. The bull has lost a little momentum lately as the RSI has lowered to 71.48 from the peak of 74.74, signalling a correction.

Trade suggestion

Buy at 1.44920, Take profit at 1.45400, Stop loss at 1.44375

 

[Option_Banque]

EURUSD Ticked Down on Downbeat Data :22 Mar 2016

Today, according to the European Central Bank, the current account of the euro area recorded €25.4 billion surplus in March 2016, which is less than forecast of €26.3 billion. The current account refers to the difference in value between imported and exported goods, services, income flows, and unilateral transfers during the previous month.

Last week, the German Producer Price Index, which measured the change in the price of goods sold by manufacturers, was released at -0.5% while the forecast number is -0.2%. This is a leading indicator of consumer inflation – when manufacturers charge more for goods the higher costs are usually passed on to the consumer.

U.S Existing Home Sales Report published by the National Association of Realtors showed that there were only 5.08 million of homes sold in February, slightly lower than the expectation of 5.32 million. Meanwhile, Eurostat said that the Consumer Confidence Index for March deepened further in negative to minus 10, weaker than the forecast of -8 by economists, extending the below 0 period from Jan 2007.

Fig: EURUSD H4 Technical Chart

Euro has inched up a little against its American counterpart since it hit the one-and-a-half-month high at $1.13381 last Thursday. The pair hit the Parabolic SAR last candle and is likely to extend the retreat as the dot has moved above the price. The RSI (14), which has not confirmed the downtrend, edged down to 54.53 from the high of 76.14, showing that the pair may fall further to test the low of 1.12180.

Trade suggestion

Sell at 1.12445, Stoploss at 1.12620, Take profit at 1.12180.

 

[Option_Banque]

GBPUSD Deepens Losses After Security Alerts Across Europe

Today, according to the Office for National Statistics, the Consumer Price Index (CPI), which measures the change in the price of goods and services purchased by consumers, rose by 0.3%, staying unchanged from January 2016. The so-called Core CPI (excludes food, energy, alcohol, and tobacco items) has remained at 1.2 percent for 2 consecutive months.

The Producer Price Index (PPI), which estimates the price of goods bought and sold by UK manufacturers, inched up 1.1% in March 2016, compared with a fall of 1.1% in the year to February 2016. The PPI Output, which only includes goods produced domestically, inched up 0.1% in March 2016, after falling consecutively in 7 months to February.

At the same time, the Public Sector Net Borrowing, which indicates the budget deficit and includes “financial interventions”, was released with the increase of 6.5 billion euro after the 14.4 billion euro drop last month.

The Retail Price Index (RPI) stays unchanged compared with previous months at 1.3%. The index only measures goods and services bought for the purpose of consumption by the vast majority of households, and includes housing costs which are excluded from CPI.

To March 2016, the UK House Price Index, the change in the selling price of homes, increases by 7.9% from 6.7% in February. The index rose more than market forecast of 6.9%.

Fig: GBPUSD D1 Technical Chart

On chart D1, GBPUSD is falling strongly from the resistance at 1.45204, the highest level in more than 20 days. The RSI is hovering around level 47, pointing to the oversold territory, indicating that the buying power is weaker and weaker. The pair is anticipated to continue the downtrend, hitting the support at 1.40472, created on March 16.

Trade suggestion

Buy at $1.41800, Take profit at $1.42850, Stoploss at $1.41455.

 

[Option_Banque]

USDCHF Tests Old Support In Thin Volume

Yesterday, the Flash Manufacturing Purchasing Managers’ Index (PMI) released was at 51.4.It was up fractionally from 51.0 in February, indicating industry expansion, but still well below the post-crisis average. The index measures the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories.

The Richmond Manufacturing Index is at 22. This is the highest level in about 5 years, though forecast to be below 0. This indicates improving level of business conditions including shipments, new orders, and employment.

Today, the ZEW Economic Expectations has risen by 8.4 points in March 2016 to a reading of 2.5 points, after 2 consecutive months staying below zero. The indicator shows the response of institutional investors and analysts about the relative 6-month economic outlook for Switzerland.

The US New Home Sale, which annualized number of new single-family homes sold during the previous month, is predicted to reach 512,000 in March 2016.

Fig USDCHF D1 Technical Chart

USDCHF extended the recover in 3 consecutive days and now dims at 0.97296, after witnessing strong drop from as high as 1.00926, the highest level in more than a month. The pair is in downtrend currently, with the dot band formed above the price movement. It is expected to retest the support at 0.96469.

Buy at 0.9758, Take profit at 0.9798 and Stop loss at 0.9728

 

[Option_Banque]

Gold Bounces Back, Awaiting U.S data

Gold hit its lowest in a month on Monday, as the dollar firmed ahead of new U.S. economic data and speeches by Federal Reserve officials that may signal more interest rate increases than anticipated.

Last week, the US GDP, which measures the annualized change in the inflation-adjusted value of all goods and services produced by the economy, witnessed 1.4 percent annualized pace from a previously estimated 1 percent. The Final GDP Price Index was also released with 0.9% annual change in the price of all goods and services included in GDP, unchanged compared with last quarter.

The market is waiting for the announcement of the Core PCE Price Index from the US Bureau of Economic Analysis. The index is forecasted to rise 0.2% after the 0.3% gain last month, the highest level in more than 4 years. Core PCE differs from Core CPI in which it only measures goods and services targeted towards and consumed by individuals.

The personal spending, which shows the change in the inflation-adjusted value of all expenditures by consumers, is expected to gain 0.2% this month. This is one of the most important gauges of economic health due to the vast ripple effect consumer buying creates in the economy.

Today, oil prices rose after a three-day break, but volumes were thin as a number of markets remain closed on account of Easter.

Fig: GOLD D1 Technical Chart

GOLD retreated from the resistance at 1285.04 but its still in the uptrend from the beginning of the year. The commodity inched up at 1217.14, gaining 0.87% compared with the opening price. RSI is now hovering below level 50, indicating that no clear direction has been confirmed for the commodity yet.

Trade suggestion

Buy at 1218.25, Take profit at 1231.00, Stop loss at 1210.00.

 

[Option_Banque]

Greenback Flies Ahead of President Yellen’s Speech

Yesterday, according to the US Bureau of Economic Analysis, the Core PCE Price Index, which measures goods and services targeted towards and consumed by individuals, increase 0.3% while being forecasted to remain unchanged compared to the previous month.

The US Personal Spending, which accounts for a majority of overall economic activity, was also released with 0.5% rise in March. This is one of the most important gauges of economic health due to the vast ripple effect consumer buying created in the economy.

The Goods Trade Balance, which is the difference in value between imported and exported goods during the reported month, showed negative number (-62.9 billion dollars), posing the consequence of strengthened U.S dollar that caused more goods to be imported than exported.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 3.5 percent in February from a downwardly revised 105.4 in January. The index measures the change in the number of homes under contract to be sold but still awaiting the closing transaction, excluding new construction.

Investors are looking for the speech of Fed President Janet Yellen today for more hints of rate hike potential. U.S dollar has been supported lately thanks to hawkish stance of FOMC officials, which signaled for a tightened moved in April meeting.

The market is waiting for the Raw Materials Price Index (RMPI), the change in the price of raw materials purchased by manufacturers, to be released today. The index is expected to witness 0.8% decline in February. Besides, the Industrial Product Price Index (IPPI) published by the Statistics Canada, is forecasted to decrease 0.2% compared with 0.5% rise the month before.

In the USA, the S&P/CS Composite-20 HPI increasing pace is expected to stay unchanged at 5.7%. This is a leading indicator of the housing industry’s health because rising house prices attract investors and spur industry activity.

Fig: USDCAD H4 Technical Chart

USDCAD is on track to rise as high as 1.32041 after witnessing a slight drop from the resistance at 1.32997. ADX is now 35.6 with DI+ beginning to move above DI- and RSI hovering above 50, indicating that a strong uptrend has been confirmed. The pair is expected to continue going up and hit the resistance at 1.32997, formed on March 24.

Trade suggestion

Buy at 1.32100, Stop loss at 1.31736, Take profit at 1.32602.

 

[CapitalStreetFX]

Oil Struggles to Escape Bearish Market On Iran’s Talk

Yesterday, in the meeting with the Economic Club of New York, Federal Reserve Chair Janet Yellen said it is appropriate for policy makers to cautiously raise interest rates because the global economy shows heightened risks.

Today, according to a person familiar with Iran policy, the nation will attend talks with OPEC members and Russia in Qatar on April 14 without joining the proposal to freeze crude oil production. Iran announced to maintain its policy of regaining market share lost during years of sanctions so will not accept limits on its output, the person said.

The market is waiting for the Crude Oil Inventories data released by the US Energy Information Administration today. The data has influence on the price of petroleum products which affects inflation, but also impacts economic growth as many industries rely on oil for production. It is forecasted to increase by 3.1 million barrels after rising by 9.4 million to 532.5 million barrels last week, the historical highs at this time of year.

Fig BRENT H4 Technical Chart

BRENT fell consecutively from the resistance at 42.96 formed on March 18. At the moment, the commodity current price is 40.31, retreating from the support level at 39.43. RSI is hovering around 43, pointing to the overbought zone, indicating that the current rise will last more. The price is anticipated to rally up and test the resistance at 40.84 soon.

Buy at 40.25, Stop loss at 40.00, Take profit at 40.70.

 

[CapitalStreetFX]

EURUSD Trades in a Thin Range Ahead a Batch of Data

According to provisional results of the Federal Statistical Office, the German Retail Sales witnessed 0.4% decline. The previous forecast predicted a rise 0.3% in February 2016. The data measures the change in the total value of inflation-adjusted sales at the retail level. However, automobiles and gas stations are excluded.

German joblessness stayed unchanged in March, after declining for five consecutive months, signaling that Europe’s largest economy may be struggling to absorb a wave of refugees. The data, which is the change in the number of unemployed people during the previous month, was predicted to witness drop by 6,000.

According to the US Department of Labor yesterday, the number of individuals who filed for unemployment insurance for the first time is 276,000. This number was 4.15% more than the last month stats at 265,000. The number of unemployed people is a very important signal of the overall economic health. This is due to the fact that consumer spending is highly related with labor-market conditions.

In today’s speech at the FOMC meeting, New York Fed President William Dudley gave a relatively political viewpoint that aimed to explain and defend the way the central bank operates. No comment were made on interest rates or the state of the economy on his behalf.

The Spanish Manufacturing PMI, measuring the level of a diffusion index based on surveyed purchasing managers in the manufacturing industry, is about to be announced today. The indicator is predicted to be 53.8% indicating industry expansion.

In the USA, the number of employed people during the previous month, excluding the farming industry, is expected to increase 206,000. This is an important leading indicator of consumer spending, which accounts for a majority of overall economic activity. The market is now awaiting for the data to be released today.

Fig: EURUSD D1 Technical Chart

EURUSD is on track to rise as high as 1.13845 with the support of the two EMAs below, both in long-term and short-term. RSI is now above level 68, indicating that the buying power is very strong. The pair is expected to go straight to the overbought zone, hitting the resistance at 1.14902, formed on October 15, 2015.

Trade suggestion

Sell limit at $1.14760, Stop loss at $1.15017, Take profit at $1.12570.

 

[CapitalStreetFX]

Central Bank Meeting Minutes in Focus for Clues on Next Policy Move

Last Friday, U.S stocks advanced considerably, extending the rally to seven consecutive weeks after March Non-farm report had shown positive signals of domestically economic recovery without posing any threat of Fed to raise interest rate in April meeting.

The U.S. Department of Labor said that there were 215,000 more jobs created in the previous month, following a gain of 245,000 new workers in February and above the forecast of 210,000 by economists. Average hourly earnings, which is published at the same time, increased by 0.3 percent after unexpectedly dropped 0.1 percent in February.

After two months enjoyed the unemployment rate at eight-year lows of 4.9 percent, the percentage of U.S work force that is unemployed and actively seeking employment mildly rose to 5.0 percent. The increase was due to the fact that more Americans entered the labor market and pushed the labor force participation rate to surge to 63 percent, the highest since March 2014.

With the unemployment rate came back to the level of 5.0 percent, not to mention the speech of President Janet Yellen on Tuesday that Fed’s policy makers would have to consider slowing the pace of rate hike, this upcoming April meeting is widely expected to have no surprise. However, the U.S economy are witnessing signals of improvement as many Americans are pulled back to the workforce, underscoring a solid growth in labor sector.

Another report on Friday which was ISM Manufacturing PMI also pointed to positive. The Institute for Supply Management said that its manufacturing gauge for March expanded for the first time since October, 2015. The readings was much better than expected with 51.8 points, fuelled by the highest number of new orders since November 2014.

Next week, the market will look for ISM Non-manufacturing PMI due on Tuesday, which is forecasted to pose expansion at the level of 54.1 points, before drawing attention to the FOMC meeting minutes published a day after.

The European Central Bank is to publish the minutes of its most recent policy meeting. Later in the same day, ECB President Mario Draghi is due to speak at an event in Portugal.

On Monday, investors may eye on British Construction PMI and Eurozone Unemployment rate. Last week, Sterling was the worst performer on the back of a lower-than-anticipated manufacturing PMI report. The more important U.K. PMI Services report is scheduled for release on Tuesday, not to mention Industrial Production report due on Friday. Upbeat data may fuel a losing-momentum Pound to rise against U.S dollar.

In the last trading day next week, the Loonie will come insight as Statistics Canada will report the change in the number of employed people during March and its Unemployment Rate at 1:30 GMT. Currently, Canadian dollar has been in a mixed bag with the volatility of the crude price.

On commodity market, oil price is heading down with both the benchmarks settled down lower for two weeks in a row. Crude futures are posing sharp declines after report that Saudi Arabia will not agree to a comprehensive production freeze later this month unless Iran also pledges to cap its output. This is quite likely a notification of death to attempts of other producers in OPEC and Russia to push crude price to inch up.

Gold also plunged on Friday but closed higher last week as expectation of U.S tightening its policy has been fading so far this year. The yellow metal is sensitive to the greenback as a rise would lift the opportunity cost of holding non-yielding assets such as bullion.

 

[CapitalStreetFX]

Dollar Strengthened Although Rate Hike Outlook Faded

Last Friday, the US non-farm payrolls reported that the created jobs in March was at 215,000, a little higher than expectation. However, the unemployment rate rose slightly to 5.0 percent from an eight-year low of 4.9 percent. The buck is still on way down as the Fed President Yellen noticed that the central bank may pay cautious attention on the rate hike road. This morning, the US dollar performed the deeper losses against the yen and the euro.

The University of Michigan last week announced that the US’s consumer sentiment index for March eased to 91 from 91.7 in the previous month due to the weak data from the economic growth. The market is expected a level 2.7% of this country’s inflation rate this year, up from 2.5% in the two previous months.

The dollar index, which tumbled to the five-month bottom of 94.32 on last Thursday, has just inched up slightly to 94.69 on this session.

Investors are thinking that the European Central Bank’s economic tonic is starting to work, and coming to efficiency. Today, the EU’s sentix investor confidence is released, showing an increase marginally to 5.7, from the reading 5.0 in February. The Eurozone sees bright signals for strengthening.

Fig. EURUSD H4 Technical Chart

After heading up to the resistance of 1.14384 on last Friday, the six-month highest since October 2015, the pair is inching down, under the downward pressure from the dots band above. RSI has just escaped the overbought territory and now is standing at 63.0579, indicating that the bull is still dominant. EURUSD is anticipated to move sideways in short-term and then reverse to downtrend.

Trade suggestion

Sell at 1.13530, Stop loss at 1.13946, Take profit at 1.13258.

 

[CapitalStreetFX]

Pound Weakens Against Stronger U.S Dollar

Yesterday, according to the Markit, the Construction Purchasing Managers’ Index remained unchanged from February’s 10-month low at 54.2 in March at 54.2, after being forecasted to be 54.3. The data shows the rate of respondents about the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories.

The US Labor Market Conditions Index was also released at -2.1 compared with -2.5 last month. This index is designed to estimate labor market activity and available spare capacity by combining reading of 19 labor market indicators related to unemployment rate, labor force participation rate, private payroll employment, average weekly hours, average hourly earnings, hiring rate, quit rate, and jobs hard to fill.

The Service PMI is forecasted to be 53.9, up 2.28% in comparison with last month, indicating expectations of industry expansion. The index measures the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories.

In the US, the number of job openings during February excluding the farming industry is expected to be 5.57 million. This has impact on the market because job openings are a leading indicator of overall employment.

The market is awaiting for the Crude Oil Inventory, which has effects on inflation and growth as many industries rely on oil to produce goods. Last week, the data was released with 2.3 million barrels of crude oil held in inventory by commercial firms during the past week.

Fig: GBPUSD D1 Technical Chart

On the daily chart, GBPUSD is currently traded at 1.42266. The pair has witnessed steep drop from the resistance at 1.56356 with the short-term moving average above. RSI is hovering below level 50 and heading to the oversold territory, signaling continuous bearish market. The pair is anticipated to continue the downtrend, hitting the support level at 1.40329, created on March 16.

Trade suggestion

Buy at 1.42453, Stop loss at 1.41660, Take profit at 1.42805.

 

[CapitalStreetFX]

Greenback Extends Gains After Taking A Short Break

Yesterday, according to the Statistics Canada, the country’s exports fell 5.4% to $43.7 billion in February, after reaching a record high in January, while imports dropped 2.6% to $45.6 billion. The trade balance, which measures the difference in value between imported and exported goods, was released at -$1.9 after being forecasted to be $0.9 billion. This negative number indicates that more goods were imported than exported.

In the USA, the economic growth has shown further weak in the first quarter after the trade deficit released widened more than expected in February, as a rebound in exports was offset by an increase in imports. The deficit was 47.1 billion, worse than economists’ forecasts for a reading of $46.3 billion.

The Institute for Supply Management also announced the Non-Manufacturing Purchasing Managers’ Index at 54.5, up 0.7% compared with the number expected, indicating the industry expansion. The indicator rates the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories

The market is waiting for the Ivey Purchasing Managers’ Index (PMI) to be released today, which measures the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories. This indicator is expected to be 54.9, up 2.81% in comparison to last month.

According to the US Energy Information Administration, the number of crude oil barrels held in inventory by commercial firms during the past week is forecasted to rise at 3.1 million barrels after staying at 2.2 million the week before. Despite being a US indicator, this most affects the loonie as the Canadian energy sector is sizable.

Investors are paying much attention on the Federal Reserve’s minutes of the last meeting to find clues on the prospect of U.S rate hike pace after tons of conflicting comments from Fed’s officials.

Fig: USDCAD H4 Technical Chart

The pair is paring its losses in Asian trading session after hitting the 61.8 Fibonacci retracement at 1.31201. The greenback has tried breaking the down trend before but it didn’t work. However, with the strong bullish momentum lately as the RSI (14) has surged to 59.68, the pair is much likely to make a breakout and head for the high of 1.32842 recorded on March 28.

Trade suggestion

Buy Stop at 1.31780, Stop loss at 1.31176, Take profit at 1.32564

 

[CapitalStreetFX]

EURUSD Fluctuates In Wide Range Ahead ECB Minutes

According to the Markit, Eurozone Retail PMI, which tracks the monthly changes in the retail sales in the bloc’s biggest three economies combined, dropped from February’s 50.1 to 49.2 in March. The indicator has decreased in 5 consecutive months since December 2015, despite German retailers recording their strongest rise in sales since 7 months ago.

The U.S. government reported a surprise fall in domestic crude stockpiles yesterday. U.S. crude inventories fell 4.9 million barrels last week, according to data from the Energy Information Administration on Wednesday. Before that, while analysts expected an increase of 3.1 million barrels. The data has strong influences to the economy due to its effects on inflation and growth as many industries rely on oil to produce goods.

Futures market traders currently expect only one rate hike in 2016, likely in December, while Fed policymakers predict about two moves before the year ends. Cleveland Fed President Loretta Mester, a top Federal Reserve official, repeated on Wednesday she expected a gradual series of interest rate hikes this year as the US economy continue giving strong signals.

Today, the market is waiting for the number of US individuals who filed for unemployment insurance for the first time during the past week. The data is forecasted to be 271,000, down 1.8% in comparison with the week before. The number of unemployed people is a major consideration for those steering the country’s monetary policy

ECB President Draghi is going to speak about the economic and financial situation in Europe at the Portuguese President’s Council. As the head of the ECB, which controls short-term interest rates, he has large influence over the euro’s value than every other people. For this reason, investors await his speech to take clues regarding future monetary policy.

ECB’s last meeting minutes will be also due today. It is wildly expected to provide more explanation for the act of the central bank to deploy more easing measures into the Eurozone.

Fig: EURUSD H4 Technical Chart

EURUSD is on track to rise as high as 1.14126, the highest level from the beginning of the year. The uptrend is likely to last more as RSI is 59, heading to the overbought territory. The short-term and long-term moving averages keep moving below the price movement, signaling the continuous bullish market. The price is expected to hit the overbought zone before witnessing a reversal.

Trade suggestion

Sell at 1.13776, Stop loss at 1.14044, Take profit at 1.13379

 

[CapitalStreetFX]

Oil Plunges in Response to Weak Data from China’s economy

China’s consumer-price index (CPI) for March increased 2.3% compared with the same period in 2015. These numbers were released by the National Bureau of Statistics’ data on Monday. The producer-price index (PPI), which registered at 4.9% in February, tumbled 4.3% last month from the previous year. The World Bank today issued the forecasts for China’s economic growth. The expected reading for 2016 and 2017 were 6.7% and 6.5%, respectively due to the danger of expanse in this nation’s government debt. The weak data from the second economy brought drawbacks to global energy demand.

In Japan, the consumer confidence went down as shown in the BOJ’s quarterly opinion survey for the first 3-months. According to the poll, there are 75.7% of about 2150 people thought that prices in a year will be higher than they currently are. This was lower than the reading of 77.6% in the December survey. This survey marked the three-year low since March 2013 of Japan’s inflation expectations. The Bank of Japan’s enlarged stimulus is showing its limited effects on the economy as the yen reached against the buck for three consecutive weeks. It hit a high of 108.28 in Asian trading.

This morning, several analysists stated that oil supply from OPEC (ex. Iran) and Russia still remained close to the 2016 average annual forecast of 40.5 million barrels per day. This means that the output freeze prospects are far-away.

The market is eyeing on some Fed officials’ comments today. The dollar index DXY inched up and registered at 94.24, increasing 0.07% from the last close.

Fig. WTI H4 Technical Chart

WTI is reversing to downtrend after a green candle with long upper shadow, testing the resistance of 41.29. The stochastics chart shows that the commodity has dived in the overbought territory and is pulling back as the %K line (blue line) has already lied under the %D line (red line). The price is anticipated to dim further.

Trade suggestion

Sell Limit at 40.375, Stop loss at 40.730, Take profit at 39.845

 

[CapitalStreetFX]

Negative Data from US Manufacturers Leads The Buck Lower

The UK on Tuesday reported that its retail sales for March slid 0.7% compared to March 2015. However, for the first quarter of 2016, this index increased 1.4%, in line with the one-year average. The online sales of non-food products in March rose 9.5% on a one-year basis while store sales grew 0.9% versus a year earlier.

Today, the Office for National Statistics released positive data for the UK economy. According to the report, output prices in the manufacturing sector for March 2016,, witnessed a decline of 0.9%. The pace of decline was lower than the 1.1% decline in February 2016.

Input prices also witnessed a slower pace of decline at 6.5%, compared with a reading of 8.2% in February, year on year. After excluding the more volatile food, beverage, tobacco and petroleum products, the core output and input prices showed a brighter picture for the UK economy.

Increases in air fares and clothing prices gave the consumer prices index (CPI) support to inch up 0.5% in the year to March 2016. The gauge for inflation has extended its gradual ascent in the last 6 months.

House prices in the UK for February were up 7.6% versus a year earlier, down slightly from the level of 7.9% in the preceding month.

In the US, Alcoa Inc. announced that its first-quarter profits plunged to $16 million from $195 million a year earlier. Alcoa’s earnings are widely considered the unofficial start of the earnings season. So the market is now building in pessimistic views regarding the pace of Federal Reserve interest-rate hikes as weak economic data comes in.

Investors are betting that the central bank may hike rates only one more time this year, instead of twice, as stated/expected previously. The dollar index DXY yesterday reached its lowest level since August 2015, reading at 93.92, and continues to drop today.

Fig. GBPUSD H4 Technical Chart

After heading down to the support of 1.40052 last Wednesday, GBPUSD is gaining upside momentum from the two SMA lines moving under the price chart. ADX is standing at 49.19754, implying that the current trend is very strong. The buying position is suggested as DI+ is at 28.2524, far higher than the reading of 6.0633 for the -DI.

Trade suggestion

Buy Stop at 1.42827, Stop loss at 1.42257, Take profit at 1.43397.

 

[CapitalStreetFX]

LOONIE DIMS AGAINST US DOLLAR AHEAD OF BOC MEETING
Today, the Department of the Treasury released the Federal Budget Balance, with a $108.0 billion dollar deficit, less than the $192.6 billion number published in February. The data measures the difference in value between the federal government’s income and spending during the previous month.

Core US retail sales data will be released later today. It measures the change in the total value of sales at the retail level, excluding automobiles. It is expected to witness a 0.4% rise in March. The forecast is for a higher number, compared with 0.1% decline in February.

The Producer Price Index (PPI) data is also due to be released later today. It is a leading indicator of consumer inflation, and is forecast to rise 0.3% after dropping 0.2% the month before. The index measures the change in the price of finished goods and services sold by producers.

Further, data on consumer spending in the retail sector in March is also on schedule. It is expected to witness the first monthly increase in 2016. Investors expect retail sales to rise 0.1% after dropping 0.1% in February. However, even if the forecast holds up, the yearly trend will still be hovering near the most sluggish growth rate since last November.

The Core CPI reading, which is also a part of the data to be released, measures the change in the price of finished goods and services sold by producers, excluding food and energy. It is predicted to inch up by 0.1% for March.

The most awaited event of the day is Bank of Canada’s interest rate decision and its forecast about the economy, which follows the strong bull market witnessed in the Canadian dollar. The market expects no change in the interest rates. However, the meeting will be tracked closely for every attempt to talk the currency down. Bank of Canada Governor Stephen Poloz is expected to talk about the increasing economic risks in the current environment.

Fig: USDCAD H4 Technical Chart

USDCAD extended the recovery from the support level at 1.27412 to as high as 1.28028. RSI is now hovering at around level 32, signaling that the price is about to escape from the oversold territory. Though the short-term moving average is putting pressure overhead, the pair is anticipated to gain further and hit the resistance level at 1.28483.

Trade suggestion

Buy Stop at 1.28122, Stop loss at 1.27817, Take profit at 1.28529.