Forex research

UK Opening Call from Alpari UK on 13 February 2013

Today’s UK opening call provides an update on:

• Obama uses the State of the Union address to push for higher taxes on the wealthy;
• Japanese stocks drop following G7 statement on currency devaluation;
• BoE to release its inflation report;
• US retail sales expected to be hit in January by new payroll tax.

President Obama’s State of the Union address offered nothing in the way of surprises last night.

As we’ve seen from many of his speeches recently, he used the opportunity to heap pressure on the Republicans and paint them as the unreasonable, inflexible party that are a threat to growth in the US. In reality, this is far from the truth at this stage.

Congress avoided the fiscal cliff at the end of the year when an agreement was made that included tax hikes on the wealthy and no spending cuts whatsoever. Now Obama is pushing for further taxes on the wealthy, some cuts to entitlements and more spending. This is going to make him very popular when addressing large crowds but it has no chance of getting through Congress given the concessions made by the Republicans six weeks ago.

One of the more surprising calls from Obama was to raise the minimum wage from $7.25 to $9. I fail to see what this is going to do to tackle two of the more pressing issues in the US right now, the economy and unemployment. If anything, raising the minimum wage is going to damage the latter as it doesn’t exactly encourage companies to hire and could encourage some that are just about making ends meet to lay off workers. It may go some way to growing the middle class which is something Obama focused heavily on, but you can’t grow the middle class if people aren’t working.

The markets took little from Obama’s speech, everything we heard here was largely expected, especially in relation to the economy. The simple fact of the matter is, while Congress remains stuck in a constant battle over how to reduce the deficit, the economy is going to achieve moderate growth at best.

Japanese stock pared recent gains overnight after a G7 statement was misinterpreted yesterday. The statement suggested there was no concerns over a currency war, or of countries manipulating their exchange rates for personal gain, which was seen as the green light for Japan to continue down the same path.

However, this was quickly denied and Japan was actually singled out for its recent efforts, which pushed the yen higher yesterday afternoon, with the Nikkei then dropping in the Asian session. The comments suggest that Japan won’t be able t get away with its devaluation for much longer, which means there may not be much downside left in the yen, which is close to hitting 100 against the dollar.

Bank of England Governor will provide inflation projections for the next two years this morning, before carrying out one of his final press conferences before his term ends in a few months. The report is expected to predict that inflation will rise in the medium term before falling back to 2% in two years, leaving little room for new Governor Mark Carney to manoeuvre.

King’s press conference after is going to attract the most attention, given the lack of action taken in recent months by the BoE, despite the fact that the UK now faces its first ever triple dip recession. While inflation is far from the central banks goal of 2%, it does remain within the target range so he’s likely to be questioned about the central banks’ stance on providing additional stimulus in the coming months, with some potentially even citing recent claims from the OECD that the BoE should “go the extra mile” to stimulate the economy at a time of fiscal tightening.

The economic calendar is once again pretty light today, although one release that’s going to attract some attention is January’s retail sales for the US. Consumer surveys have so far suggested that spending has been heavily cut back this month, with a combination of the new payroll tax and the post Christmas squeeze hitting disposable income.

Given how much the US relies on consumer spending, it will be interesting over the next couple of months to see if the introduction of the payroll tax is a temporary drag on spending or a more permanent issue.

The euro is trading lower against the dollar this morning. The pair is looking quite bullish though in the shorter term, since finding support earlier in the week around 1.3353, the 50% retracement of the move from this year’s lows to highs. The stochastic on the daily chart has just crossed in oversold territory which is quite a bullish signal and could prompt a move back towards this year’s highs around 1.3710. It’s currently finding resistance though around 1.3437, the 38.2% retracement of the same move which could suggest that the bullish run was temporary and there’s further downside to come. In the longer term I think the pair is going to hit 1.42 based on the size of the inverse head and shoulders that formed over the last year, however before then I think we’re likely to see some consolidation between 1.32 and 1.35.
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Sterling is trading higher against the dollar this morning. The pair broke below the ascending trend line dating back to January 2009, which has been a key level of support to this point. The daily candle closed back above here, however this could be a sign that the market has turned more bearish and we could see more breakout attempts in the coming weeks. A break below here should prompt a significant move lower, with the next target being 1.5350, based on the size of the double top formed since August last year.
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The dollar is trading lower against the yen this morning. The pair has found support so far around 93.0, however I expected to see it break below here, with the target being 92.0, where the ascending trend line dating back to 10 December crosses the 38.2 fib level, of the move from 23 January lows to this month’s highs. In the longer term, the pair still looks bullish, with the next big resistance level being 94.75.
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The euro is trading flat against the pound this morning. The pair broke back above 0.8575 yesterday, the 61.8% retracement of the move from July 2011 highs to July 2012 lows, and has since found support here this morning, which suggests the outlook is quite bullish. It is also trading back above the 200 week moving average, which would suggest the next target is 0.9082.
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Ahead of the open we expect to see...

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US Opening Call from Alpari UK on 13 February 2013

King offers hawkish tone, US retail sales up next

Today’s US opening call provides an update on:

* BoE inflation report forecasts inflation to fall close to 2% in two years;
* King comments spark sterling sell off;
* Gilt yields rise as investors unconvinced that BoE will increase asset purchases;
* Retail sales provide first evidence of consumer spending since introduction of payroll tax.

The Bank of England inflation report released this morning left investors none the wiser about BoE monetary policy this morning.

The release of the UK inflation report this morning confirmed that UK inflation will remain high in the medium term before returning to 2% in two years. Given that this was widely known, very little has been taken away from the report and Sir Mervyn Kings press conference, which came shortly after the release.

That being said, sterling fell sharply during the press conference following King’s suggestion that despite the central banks already very accommodative policy, which as a comparison to GDP has been greater than the US, they still remain willing to do more should it be deemed necessary.

However, this has been stated many times previously by the MPC raises the question, why have we seen such a significant reaction? If anything, King came across more hawkish, claiming that there were limits to what monetary policy can do, calling for more supply side reform and stating that the MPC must also pay close attention to inflation which is two years away from falling back to 2%.

All in all, I expect to see any losses to the dollar reversed as the day goes on, just as we’ve seen in UK Gilt yields which fell shortly after the release of the statement but have since rallied to trade 8 bps higher on the day.

The US retail sales figure is one to watch this afternoon, with it being the first piece of real data that shows how consumers have coped with the new payroll tax. The consumer surveys last month suggest that people felt the pinch, which the retail sales figure should now confirm.

The big question that will follow is whether the tax will continue to impact consumer spending this year, or will people quickly adjust. Consumer spending makes up around 70% of US GDP so the greater the impact of the new tax, the more it will effect growth this year.

Ahead of the open we expect to see...

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UK Opening Call from Alpari UK on 14 February 2013

Eurozone GDP, ECB monthly report and G20 meeting today

Today’s UK opening call provides an update on:

• Bank of Japan keeps monetary policy on hold;
• Japanese contraction leaves country in recession for third quarter;
• ECB monthly report likely to highlight downside risks facing euro area;
• G20 meeting gets underway with currency manipulation top of the agenda;
• Eurozone recession expected to deepen in Q4;
• Two voting Federal Reserve members to speak today.

The Bank of Japan left monetary policy unchanged at their monthly meeting over night, despite expectations of 0% inflation this year and a new 2% inflation target. The decision was hardly surprising though, given that BoJ Governor Masaaki Shirakawa is due to step down next month after deciding to leave his post a few weeks early.

We can probably expect the same again at next months meeting, which will be Shiarakawa's last as Governor before Shinzo Abe replaces him with someone that is likely to be much more dovish.

The decision to keep policy on hold came despite the fact that Japan remained in recession for a third quarter. The country was expected to climb out of recession in the fourth quarter with growth of 0.1%, however a contraction figure of 0.1% highlighted the need for further stimulus, which is now unlikely to come for a couple more months.

The ECB monthly report will be released this morning and is likely to highlight the downside risks facing the euro area this year, and potentially suggest a longer recovery than anticipated only a month ago. There could also be a reference to the impact of a stronger euro on growth in some members of the currency union, which is likely to reduce growth forecasts in the months ahead.

The main event today though is likely to be the start of the G20 meeting, with currency wars firmly on the agenda. The comment from the G7 a few days ago hardly cleared things up, especially considering it was following by comments from officials pointing the finger at Japan and suggesting the statement had been misinterpreted.

I'm sure we'll get a much clearer message today, with finance ministers providing a much clearer statement in support of Japanese policy while in the background making it very clear to Japan officials to avoid talk of weakening the yen in the future. The simple fact of the matter is that the BoJ is not doing anything different than many other central banks, the mistake the government made was explicitly stating that they wanted to weaken the currency.

Eurozone GDP figures will be released this morning and are unlikely to provide much in the way of positives, however as long as they don’t point to worse conditions in the euro area than is expected, the knock on effect should be minimal. At this stage, we’ve become accustomed to seeing negative growth in the euro area as it goes through a transitional period, and recent improvements in business and consumer surveys are likely to overshadow the contraction figures we’re expecting.

On the flip side of that, if these GDP figures miss expectations and suggest the eurozone has fallen even deeper into recession than originally thought, we could see a very negative reaction in the markets. Especially when you take into consideration the effect a stronger euro could have on growth this year, as raised by France and the ECB in particular.

One area of concern could come from the French figures. There is growing concern that France has fallen behind in implementing reforms and reducing the deficit and this may now be having an impact on the country’s competitiveness. Recent surveys have shown manufacturing and services contracting at a faster rate than both Italy and Spain, and if the economy contracted as expected in Q4, it could now face recession, potentially quicker than expected if the previous figure is revised lower.

There’s not much in the way of economic data out of the US later on today. Jobless claims will be watched closely as always, and are expected to drop slightly to 360,000 today. Attracting more attention will be speeches from two voting members of the Federal Reserve, Daniel Tarullo and James Bullard.

Both speeches and Q&A section after will be watched closely for clues on when the Fed will begin to wind down the open-ended asset purchase program which currently stands at $85 billion per month. Recent comments have suggested it could be as early as the end of this year and further comments to support this would prompt a negative response in the markets.

The euro is trading lower against the dollar this morning. The pair found strong resistance yesterday around 1.3520 from the 200 week simple moving average. A failure to break back above here would be quiet a bearish signal for the pair, at least in the short term. Since bouncing off this level, the pair has pulled back to find resistance around 1.3437, the 38.2% retracement of the move from this year’s lows to highs. The next target for the pair looks to be around 1.3269, where the ascending trend line, dating back to July, crosses the 61.8 fib level. That being said, the next levels of support are likely to come around 1.3377 and 1.3353.
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Sterling is trading lower against the dollar this morning. The pair broke below a key level of support yesterday, the ascending trend line dating back to January 2009, which could now prompt a move back towards 1.5350. That is based on the size of the double top that formed between August 2012 and January this year. Given the significance of this break, I expect to see a pull back though, with the pair testing the trend line as a new level of resistance. The next support level for the pair is likely to come around 1.5480, followed by 1.5420.
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The dollar is trading higher against the yen this morning. The pair appears to have entered a period of consolidation recently as it awaits the catalyst for the next move higher. The longer term outlook for the pair remains quite bullish with the next target being 94.75, followed by 100. In the shorter term, I expect to see further consolidation, which is generally a bullish signal following such a strong dollar rally.
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The euro is trading lower against the pound this morning. The pair broke back above 0.8575 yesterday, the 61.8% retracement of the move from July 2011 highs to July 2012 lows, which is quite a bullish signal. The next target for the pair should now be 0.9082 in the coming months, although in the shorter term it will be 0.875, followed by 0.88. The pair is currently finding support around 0.8640, which is a previous level of support and resistance, and could now prompt the next move higher.
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Ahead of the open we expect to see...

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US Opening Call from Alpari UK on 14 February 2013

US jobless claims up next after grim start in Europe

Today’s US opening call provides an update on:

* Eurozone economies contract faster than expected in Q4;
* Japan fails to climb out of recession at the first time of asking;
* BoJ keeps monetary policy on hold ahead of the G20 meeting;

Later in the US we have jobless claims data and speeches from two voting Fed members.
It’s been a morning of disappointing GDP figures so far, with Japan, the eurozone, Germany and France all contracting at a faster rate than expected.

GDP figures out of the eurozone this morning were far from encouraging. Just as things were starting to look up in the region, data showed this morning that both Germany and France contracted at a faster rate than expected. The eurozone as a whole also fell deeper into recession, however this wasn’t s surprise given that the release came after the German and French figures.

At this stage, I don’t think people will get too carried away with the German figure. The data out so far this year for January has been much better and the chance of it falling into recession looks slim at this stage.

France on the other hand is a different story. The manufacturing and services sectors contracted at a faster rate than in both Spain and Italy in January, which has stoked fears that the country is losing the battle to regain competitiveness and therefore faces a very difficult year. With the gap between the eurozone’s growing every month, the rest of the year may not be looking as bright for the region as originally hoped.

The reaction to the GDP figures was understandably negative, although looking at how overbought European stocks and the euro have become, people may just be using this as an excuse to get out and wait for the next opportunity to buy at a low again. Traders still appear to be cautiously optimistic at this stage, but this can quickly change as we’ve seen in the past.

Japan failed to climb out of a shallow recession at the first time of asking in the fourth quarter, despite expectations of 0.1% growth. The contraction figure was not enough to convince the Bank of Japan to ease monetary policy any further, which hardly came as a surprise given how much the country has been in the spotlight recently open-ended asset purchase program.

In fact, Japan is likely to be at the centre of discussions at the G20 meeting today, after questions were raised over the motives behind its ultra loose monetary policy. A statement released by the G7 earlier in the week suggested there are no concerns at this stage over Japan, however the comments that followed from one official in particular shows not everyone is so accepting of Japan’s actions.

Looking ahead to the rest of the day and the US in going to be in focus, starting with the weekly jobless claims which are expected to fall slightly to 360,000. Following this we’ll hear from two voting members of the Federal Reserve, Daniel Tarullo and James Bullard. With the Fed’s $85 billion of asset purchases expected to be wound up starting later this year, both of these could provide clues over when this will start.

Ahead of the open we expect to see...

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UK Opening Call from Alpari UK on 15 February 2013

Nikkei tumbles over night ahead of G20 meeting

Today's UK opening call provides an update on:

• Currency wars on the agenda at today's G20 meeting;
• Nikkei pulls back as Toshiro Muto emerges as favourite for BoJ Governor post;
• UK retail sales expected to improve significantly in January;
• US consumer sentiment watched closely this afternoon for signs of more permanent impact from payroll tax.

The two day G20 meeting gets underway today, with Japan's recent monetary policy decisions under the spotlight.

Currency manipulation will once again be discussed in depth at the G20 meeting today, as Japan continues to come under scrutiny over its open-ended bond buying program. At this stage I don't expect the G20 statement to single out Japan and condemn it for its recent actions, instead it's likely to be similar to the G7 statement in highlighting the countries commitment to market-determined exchange rates.

That being said, I'm sure the language used at the meeting won't be quite so relaxed on the subject. Japan's monetary policy actually isn't all that different to the Fed's in the US, and following a decade of deflation and the recession they find themselves in, strong action is justified. The only mistake they've made to this point is openly calling for the yen to be weakened, which they are likely to be warned to avoid in the future.

Japanese shares retreated over night ahead of the G20 meeting, with traders viewing these talks as a sign that the central bank may be forced to be less aggressive. On top of that, Toshiro Muto has emerged as Shinzo Abe's preferred candidate for the role, which is seen as a less aggressive selection than the markets were anticipating.

While Muto is an advocate of further stimulus, he's not as aggressive or radical as the markets were expecting, which has pushed the yen higher over night and weighed on the Nikkei 225.

UK retail sales are expected to have risen by 0.4% in January, easing any fears that the UK could fall into its first ever triple dip recession in the first quarter. Even this may be too conservative an estimate, based on the BRC retail sales figure earlier this month that showed a jump of 1.9%, compared to expectations of a small drop.

Over in the US, the Empire State manufacturing index is expected to improve to -2.0 this month, which is a move in the right direction and suggests we could see growth in the industry in the months ahead following six months of negative figures.

The preliminary UoM consumer sentiment figure for February will be the most closely watched economic release this afternoon. The figures has dropped significantly over the past couple of months, due to the uncertainty surrounding the fiscal cliff and then the impact of the new payroll tax on disposable income.

We're expecting to see a slight improvement in the data today, which would be a positive sign for the US, given that consumer spending accounts for more than 70% GDP in the country. Any drop here is likely to hit investor sentiment today as it wouldn't only raise the possibility of recession in the US in this quarter, but also growth for the rest of the year as it would suggest the impact of the tax on consumer spending may not be temporary as hoped.

The euro is trading higher against the dollar this morning. The pair found support again yesterday around 1.3353, the 50% retracement of the move from this year’s lows to highs, however I think there could still be some more downside left in the pair. The next level of support would likely be around 1.3269, where the ascending trend line dating back to July’s lows crosses the 61.8 fib level. This is also a previous level of resistance, which suggests a break below here is unlikely at the moment.
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Sterling is trading higher against the dollar this morning. The pair found support yesterday just below 1.55, which has previously acted as a key level of support. This could now prompt a move back towards 1.5640, with the pair testing the long term ascending trend line that it broke below on Wednesday, dating back to January 2009, as a new area of resistance. This would act as confirmation of the break below, with the next target then being 1.5350, based on the size of the double top that formed between 31 August and 18 January.
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The dollar is trading lower against the yen this morning. The pair has been dropping for most of the week, but is approaching a key level of support around 92.0, where the ascending trend line, dating back to 10 December, crosses the 38.2 fib level, of the move from 23 January lows to 11 February highs. From here I expect to see the pair continue to edge higher, with a key level of resistance being 94.75. A break above here should result in the pair targeting 100 for the first time since April 2009.
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The euro is trading lower against the pound this morning. The pair appears to be in the process of forming a double top at the moment. If it breaks back below 0.8575, the 61.8% retracement of the move from July 2011 highs to July 2012 lows, we could see it target 0.84, which would complete the formation. However, if it finds support around 0.8575, it would be quite a bullish signal, prompting a move towards 0.9082 in the coming months.
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Ahead of the open we expect to see...

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US Opening Call from Alpari UK on 15 February 2013

G20 meeting and US consumer confidence up next today

Today’s US opening call provides an update on:


  • Traders cautious ahead of G20 statement;
  • Japan unlikely to be singled out but there’s clearly division among G20;
  • UK retail sales tumble in January, as snow keeps shoppers indoors;

US consumer sentiment data in focus this afternoon.
There is an element of caution in the markets this morning, as traders await the G20 statement on currency manipulation before making the next move.

There is clearly a divide among the G20 over whether countries are intentionally devaluing their currency, and also who the guilty parties are. That was made clear earlier this week in the confusion following the release of the G7 statement, and can be seen now by the difficulties the G20 are having drawing up theirs.

Most appear to be pointing the finger at Japan, however the only difference between Japan and the rest is that they were more vocal about the damaging effects of a strong yen in the lead up to their decision. Sir Mervyn King earlier this week pointed out that on a percentage of GDP measure, the UK has been more aggressive than most, including the US.

The question now is what impact all this will have on the markets and so far, the answer appears to be very little. We’ve seen some strengthening in then yen and weakness in the the Nikkei 225, however this is simple going to be a case of traders taking profits and allowing for the correction, before getting back in at a lower price.

Retail sales in the UK took a nosedive in January, falling by 0.6% despite expectations of a 0.4% increase. The figure is likely to raise concerns once again that the UK could fall into its third recession in four years, however I’m not so sure.

January’s figures will have undoubtedly been negatively impacted by the bad weather in January, in particular the snow, as we’ve seen in the past. I’m convinced that we’ll see these figures improve in February and March, helping ensure the UK doesn’t contract again in Q1.

Looking ahead to this afternoon and the data that’s likely to attract the most attention is the preliminary UoM consumer sentiment figure. This number dipped in December and January due to the uncertainty surrounding the fiscal cliff and then the introduction of the payroll tax.

If we see improvements here over the next few months it would suggest that the payroll tax will have little impact on consumer spending over the course of the year, which is vital to US growth as it contributes to around 70% of GDP.

Ahead of the open we expect to see...

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UK Opening Call from Alpari UK on 18 February 2013

Draghi to be grilled again, US closed for Presidents Day

Today’s UK opening call provides an update on:

* Asian markets higher as G20 statement back Japanese monetary policy;
* Statement also leaves the door open to ECB rate cut;
* US markets closed in observance of Presidents Day;
* Mario Draghi speaks later in front of Economic and Monetary Committee.

Asian markets got off to a positive start over night, following the decision by the G20 not to single out Japan as currency manipulators.

The G20 statement, which was very similar to the G7 statement released earlier in the week, has therefore been viewed as a sign of support for Japan’s monetary policy, which is bullish for Japanese equities and bearish for the yen. The decision by the G20 isn’t only good news for Japan though.

With the eurozone deep in recession, Germany potentially facing a recession and inflation within the ECB’s mandate, the G20 have essentially left the door wide open for an interest rate cut from the ECB in the months ahead, which would also happen to weaken the euro to the benefit of the the southern members who’s competitiveness is being hit by a stronger currency.

Trading volume is likely to be low once again today, with US markets closed in observance of Presidents Day. As always, this isn’t necessarily a bad thing though as lower volumes tend to lead to higher volatility.

One thing that the holiday does bring though is a lighter economic calendar, with the main economic release coming early in the European session. The eurozone current account figure is a key measure of confidence in the region and has shown a gradual improvement over recent months.

December’s surplus is expected to be similar to November’s, at €13.6 billion, highlighting the fact that people believe the worst of the debt crisis is behind us. I expect to see the figures for the opening months of this year to be even better again.

Later in the day, we’ll hear from ECB president Mario Draghi, who is due to speak before the Economic and Monetary Committee. As always, this will be watched closely for hints over the ECB’s monetary policy in the coming months.

A rate cut, from 0.75% to 0.5% is widely expected in the coming months, after data showed recently that the region isn’t necessarily recovering as quickly as hoped, with the recovery of the southern states, especially, being hampered by a stronger euro.

Obviously, following the statements from the G7 and G20, the ECB couldn’t justify a rate cut citing the damaging effects of the stronger euro on exports, but given fourth quarter data and the recession, there is some room for manoeuvre.

The GDP figures for the fourth quarter showed all countries, and the region as a whole, contracted at a faster rate than had been expected, raising questions over the regions ability to climb out of recession later this year.

The euro is trading flat against the dollar this morning. The pair has broken below 1.3353, the 50% retracement of the move from this year’s lows to highs, despite finding support here repeatedly over the last week. It should find further support now around 1.33, from the ascending trend line dating back to 13 November lows. This is also a previous level of support and resistance for the pair. Below here the pair should find further support around 1.3269, where the longer term ascending trend line, dating back to July’s lows crosses the 61.8 fib level.
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Sterling is trading lower against the dollar this morning. The pair broke below a long term ascending trend line last week, dating back to January 2009, which is a very bearish signal for the pair. Based on the size of the double top that formed between the end of August and January, the next target for the pair should now be 1.5350. However, first we may see the pair test the ascending trend line as a new area of resistance, thus confirming the breakout. Friday’s candle is a spinning top, which indicates a trend reversal, meaning we could see this over the next week or so.
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The dollar is trading higher against the yen this morning. The pair entered a period of consolidation over the past couple of weeks, however this appears to be over now as the pair has broken above the flag formation and could now target 94.75. This was previously a key level of support and resistance so a break above here would be a very bullish signal, with the next targets being 97.6 followed by 100.45.
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The euro is trading higher against the pound this morning. The pair broke back above the 200 week simple moving average and the 61.8 fib level last week which is a very bullish signal. In fact, Friday’s candle actually found support from the 61.8 fib level, which acts as confirmation of the break back above. If the pair can now break above this year’s highs of 0.8716, we could see a move towards 0.9082, the 2011 highs. First though, it should find resistance around 0.875, followed by 0.88, the 78.6 fib level and a previous level of support and resistance.
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Ahead of the open we expect to see...

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UK Opening Call from Alpari UK on 19 February 2013

Economic sentiment seen improving for third month in euro area

Today’s UK opening call provides an update on:

* Stocks flat ahead of Italian elections and sequester later this month;
* Stock rally supported by big increase in M&A activity so far this year;
* Chinese shares dip as PBOC withdraws liquidity for first time in eight months;
* ZEW economic sentiment figures suggest more optimism in the second half of the year.

Trading volumes are likely to be higher again today, as traders in the US return to their desk following Presidents Day.

Equity futures are pointing to a relatively flat open though, which is a sign that investors are opting to wait on the sidelines and see how the Italian elections and US sequester play out over the next couple of weeks before making their next move.

Given the rally we’ve seen since the start of the year, I think people are using both of these events as an excuse to take a breather and allow for a minor correction before riding the rally higher. Stocks may be overbought since the turn of the year but that isn’t discouraging anyone, the general market consensus is that there’s plenty more upside to come.

The merger and acquisition activity since the start of the year has been the biggest sign that things are improving. More than $158 billion of activity has been announced since the start of the year, which is a strong indication that businesses are optimistic about the outlook for the economy, and if businesses are, we should be too.

Moves in Asia were also limited over night, as the PBOC withdrew liquidity from the financial system for the first time in eight months. With more expected to be withdrawn this week, it will be interesting to see if the economy will continue to improve despite the recovery last year being driven in part by large central bank stimulus.

While trading volumes may be up today, the economic calendar is light again, with the ZEW economic sentiment figures for February being the key releases. Both the German and eurozone figures are expected to improve for a third month, highlighting the fact that investors and analysts believe the region turned a corner in December.

In both cases, figures in the mid-30′s are expected, which is a positive sign for the euro area and shows that confidence is finally returning to the region. Given that these tend to be an early indication of future performance, we could now see an improvement in spending and investment in the region in the months ahead.

The euro is trading flat against the dollar again this morning. The pair is trading flat for a third day, which suggests there’s significant support around 1.3350, the 50% retracement of the move from this year’s lows to highs. This could actually be quite a bullish signal at this point, especially with further support coming just below here from the ascending trend line, dating back to 13 November. If we do see a move higher, the next target will be 1.3457, followed by 1.3490.
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Sterling is trading higher against the dollar this morning. The pair has found support around 1.5460 after breaking below the long tern ascending trend line, dating back to January 2009. This has previously been a key level of support, however I expect to see it break below here, with the target being 1.5350, based on the size of the double top. We could first see a pull back though, with the pair testing the trend line as a new level of resistance, which would act as confirmation of last weeks break.
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The dollar is trading lower against the yen today. The pair has been consolidating for a couple of weeks now, following a strong upward trend, and is showing no signs at the moment of breaking out of it. The outlook for the pair is still bullish, however we may have to wait for the announcement of the new BoJ Governor, which would give an indication of how aggressive the central banks monetary policy will be in the future, before we see a further move to the upside. The next key level of resistance is still 94.75, with a break above here prompting a move towards 97.6.
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The euro is trading lower against the pound this morning. The pair appears to be struggling for direction at the minute, despite having broken above 0.8575, the 61.8 fib level, which is quite a bullish signal. I still remain quite bullish in the short term, with the next target being 0.875, however it is worth noting that just above here is a long term descending trend line, dating back to January 2009, which is likely to provide strong resistance. A break above here would be very bullish for the pair, with the next resistance levels coming around 0.88 and 0.89.
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Ahead of the open we expect to see...

Read the full report at Alpari News Room​
 
US Opening Call from Alpari UK on 19 February 2013

Stocks boosted by huge jump in ZEW figures

Today’s US opening call provides an update on:

* European markets open higher as Italian election concerns ease;
* ZEW economic sentiment figures smash expectations for a second month;
* US futures point to flat start following the bank holiday.

Stock markets opened slightly higher in Europe this morning, a sign that investors are more interested in keeping the stock market rally going than the elections this weekend.

With no more polls being conducted in Italy between now and the election at the weekend, it’s difficult to predict what the outcome of the election is going to be. The most recent polls showed Berlusconi had closed the gap to within the margin of error meaning they’re not going to be quite as straightforward as we hoped a month ago.

Despite the PdL’s late charge, the reaction in the markets suggests that investors are cautious but not overly concerned. A coalition government between the party’s led by Pierre Luigi Bersani and Mario Monti looks the most likely outcome at this stage, which is easing concerns, however I’m sure as the election nears we’ll see more caution creeping back into the markets.

Stocks were given a boost though following the release of the German and eurozone ZEW economic sentiment figures. Both figures jumped significantly for a second consecutive month, hitting the highest levels since April 2010 and adding further weight to the argument that the region turned a corner at the end of 2012.

This is just the latest in a long list of surveys out of the eurozone which suggest 2013 is going to be the year when the region bottoms out and begins the move back towards recovery. It also all but confirms what the Bundesbank said yesterday that the German economy will not fall into recession in this quarter, despite contracting by 0.6% in Q4.

We shouldn’t get too carried away with the data though, while these surveys are positive, we are yet to see any hard data to confirm that worst is actually behind us. Once this starts to make its way out, I think we could see the start of the next phase of the equity rally, not to mention the euro’s ascent back towards 1.40.

US stock index futures are pointing to a relatively flat open at this stage, having missed very little yesterday. With the economic calendar light once again, especially in the US, we could see lower trading volumes again today, although as always, this does tend to lead to an increase in volatility.

Ahead of the open we expect to see...

Read the full report at Alpari News Room​
 
UK Opening Call from Alpari UK on 20 February 2013

UK remains in the spotlight ahead of the unemployment data

Today's UK opening call provides an update on:

• US stocks boosted by a surge in M&A activity;
• UK under the spotlight this morning as unemployment figures released;
• MPC minutes to shed light on decision to reinvest maturing Gilt funds;
• ECB rate cut could be near with German CPI expected to fall to 1.7%.

US stock markets ended the session higher on Tuesday, following news that Office Depot, the second largest US offices supplies retailer is due to merge with OfficeMax.

There has been a huge surge in M&A activity so far this year, which is an extremely positive sign that businesses are much more optimistic than they've been in a long time. The rally in the stock markets may have been driven by central bank stimulus up until this point, but this improvement in M&A activity is what's going to keep them hitting new multi-year highs.

Asian stocks edged higher over night, boosted by data out of the eurozone that showed investors are much more optimistic about the next six months in the region than they were a couple of months ago.

Gains were limited in Japan though, as the countries trade deficit hit record highs of 1.629 trillion yen in January. On a more positive note though, exports rose for the first time since May, as did exports to China which have tumbled recently due to the dispute over a small group of islands.

Attention will be back on the UK this morning, after rumours circulated yesterday that S&P were set to be the first ratings agency to strip the country of its precious triple A rating. No such downgrade happened last night, with S&P refusing to comment on the rumours. The ratings agencies are likely to wait until after the budget next month now, before deciding on whether to follow through with a downgrade after they all placed the UK on negative outlook.

Today, the focus is going to be on the unemployment figures, which have actually been a surprising bright spot in otherwise pretty awful data out the UK in recent months. The unemployment rate is expected to remain at 7.7% in December, down 0.7% from the same month a year earlier, which isn't bad considering the zero growth seen during those 12 months.

Jobless claims are expected to have fallen for a third consecutive month in January, which suggests we could see further drops in the unemployment figures in the months ahead. The minutes from the recent MPC meeting will also be released this morning, with investors wanting to know if there's been any change of heart among policy makers in respect to the asset purchase program.

There has been clear opposition to it in recent months, although the decision at the last meeting to reinvest £6.6 billion from maturing Gilts suggests attitudes may be changing, especially with the economy potentially facing yet another recession. It will also be interesting to see how many, if any, members opposed reinvesting the cash, which could also provide insight into the decision making at future meetings.

The German CPI figure will also be closely watched this morning. Head of the Bundesbank, Jens Weidmann, has openly opposed a rate cut for a long time due to impact it could have on inflation in the region.
However, with the stronger euro expected to push inflation lower in the months ahead and the German CPI figure expected to fall to 1.7%, from a year earlier, Weidmann may reluctantly give the green light to a rate cut in one of the upcoming meetings.

The euro is trading higher against the dollar this morning. The pair found support over the last few days around 1.3350, where the ascending trend line dating back to 13 November crosses with the 50 fib level, of the move from this year’s lows to highs. If it continues to edge higher over the next few days, it should find strong resistance around 1.3490 and 1.3530, from the 50 fib level, of the longer term move from May 2011 highs to July 2012 lows, and the 200 week moving average respectively.
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Sterling is trading higher against the dollar this morning. The pair found strong support yesterday around 1.5425, which has previously bee a key level of support, and is now starting to edge higher. I’m still quite bearish in the longer term, however we may now see some form of retracement, with the pair potentially testing the trend line as a new level of resistance. However, it looks unlikely at this stage that the retracement will be so big. Instead we could see it edge higher towards 1.55, a previous level of support, before continuing its move lower, with the next target being 1.5350, based on the size of the head and shoulders that formed between August and January.
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The dollar is trading lower against the yen this morning. The pair entered a period of consolidation over the past couple of weeks after reaching a key resistance level around 94.75. I expect to see it continue to trade in the range for a few more sessions yet, potentially finding support in the coming days from the ascending trend line, dating back to 11 December. I remain bullish in the long term, with a break above 94.75, prompting a move towards 97.6.
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The euro is trading higher against the pound this morning. The pair is finding resistance again around 0.87, from the ascending trend line, dating back to January 2009. A break above here would be very bullish for the pair, prompting a move towards 0.9082 in the longer term. In the short term, it should find further resistance around 0.875, followed by 0.88. If the pair fails to break above this level of resistance, then it could form a double top over the coming weeks if it falls back towards 0.8440, which would be quite a bearish signal if it broke the neckline.
timthumb.php


Ahead of the open we expect to see...

Read the full report at Alpari News Room​
 
US Opening Call from Alpari UK on 20 February 2013

BoE minutes hint at more stimulus, Fed minutes up next

Today’s US opening call provides an update on:

* Three MPC members vote in favour of additional QE in February;
* Sterling tumbles to eight month lows against the dollar following the release of the minutes;
* ECB rate cut may now get Weidmann backing as German inflation falls to 1.7%;
* FOMC minutes released this afternoon may shed light on asset purchase program.

An increase in the asset purchase program is back on the table in the UK, as minutes from the meeting earlier this month shows three members voted in favour of more QE.

One of those who voted in favour was outgoing Governor Sir Mervyn King, who has clearly decided to go out with a bang. The minutes were much more dovish than the markets had priced in, as seen by the reaction shortly after with the pound tumbling to eight month lows against the dollar and 16-month lows against the euro.

The FTSE recovered some earlier losses following the minutes to trade around 10 points higher, while UK Gilt yields dropped around 6 basis points immediately following the release. While these minutes are much more dovish than the markets expected, it’s far from a foregone conclusion that we’ll therefore see additional stimulus in the months ahead.

Clearly, despite the downturn seen over the last five months, there are still six members who aren’t convinced that the positives associated with QE outweigh the inflation risk, with inflation now at 2.7%. I don’t expect two more members to climb on board by the next meeting, so we could wait a couple more months yet for additional stimulus.

Staying on the subject of central banks, people will be watching the ECB even more closely in the coming months, after the German CPI figure for January fell to 1.7%, curbing inflation fears for the Bundesbank should the ECB decide to cut interest rates.

If anything, this drop in inflation could get Jens Weidmann on board a rate cut, although given that would take the pressure off those countries who need to regain competitiveness through austerity and reforms, that may be too much to ask.

Looking ahead to the rest of the day and we have some key economic releases out of the US, including PPI data which is expected to show inflation fell in the first month of this year, compared to the same month in 2012.

There’s also housing data which has been a real strong point in the US economy in recent months. Building permits and housing starts are expected to remain at high levels in January, rising by 0.915 million and 0.925 million respectively, with the former rising for a fourth consecutive month.

The main release in the US though is going to be the FOMC minutes, which could provide insight on policy makers views on the open-ended asset purchase program. There have been discussions in recent months over when the Fed will start to reduce the asset purchase program, so there’s likely to be a reaction in the markets to any change of timeframe.

Ahead of the open we expect to see...

Read the full report at Alpari News Room​
 
UK Opening Call from Alpari UK on 21 February 2013

Europe lower on hawkish Fed minutes, Euro PMI’s up next

Today's UK opening call provides an update on:

• US stocks plummet as Fed minutes show unease among Fed members over asset purchases;
• Torrid couple of days for the UK could end on a positive note with the first negative borrowing figure in six months;
• German services expected to return to growth after 12 months of contraction;
• US CPI expected to fall, easing fears of inflation risks of QE.

European stock indices are expected to open lower on Thursday, tracking the US indices which recorded decent losses over night after the Fed minutes from this month suggested a number of members were looking for an alternative to $85 billion of asset purchases per month.

There's due to be a larger discussion at the next meeting in March, which many people are now seeing a sign that the program is going to be reduced at the very least. There were a number of other suggestions as well, although anything
other than the continuation of the program is likely to rejected by the markets which have been rising under the assumption that the purchases would continue until we see a significant improvement in the labour market.

Yesterday there was a lot of negativity surrounding the UK, after minutes from the BoE meeting showed more members, including Sir Mervyn King, voting in favour of more QE. This would suggest the economy is in a worse state than has been suggested, and followed rumours the day before that S&P were preparing to strip the country of its triple A rating. Hopefully we'll see some better news today when the public sector net borrowing figure is released, which is expected to be negative for the first time in six months.

The eurozone will be back in focus today, with the release of the manufacturing and services PMI's this morning. The German and eurozone figures are expected to be largely positive once again, with the German manufacturing PMI actually returning to growth territory for the first time in a year.

The eurozone PMI's are also expected to be much improved, with both forecast to be within touching distance of growth territory. The data has been improving at a good pace over the last few months, adding weight to suggestions that we could see the region pull itself out of recession later this year.

The French figures have been the most concerning in recent months, with figures in both manufacturing and services dropping so low that both industries are currently contracting at a faster rate than both Spain and Italy.

The figures are likely to improve slightly in February, however a small increase is unlikely to ease concerns that the country is falling behind in its austerity and reform efforts, which will ultimately lead to it losing competitiveness in the future, something we're already seeing signs of.

There's plenty more data out of the US as well this afternoon, including the January CPI figure which is expected to fall to 1.6% from a year earlier, while the core CPI figure is also expected to fall to 1.8%. This should go some way to easing fears among members of the Fed about the inflation risks associated with its open-ended QE program.

There's also a couple of pieces of manufacturing data out for February, the Market PMI which is expected to fall slightly to 55.5 and the Philly Fed index which is expected to recover following its dip back into negative territory in January, with a reading of 1.1. All in all, they're both decent figures which is a positive sign for the industry following a tough 2012.

Finally we have some more housing data in the form of existing home sales, which are expected to remain strong at 4.89 million, and the weekly jobless claims which are expected to rise slightly to 355,000. We may also get a revision to last week’s number after it unexpectedly dropped to 341,000 so it's worth keeping an eye on that.

The euro is trading lower against the dollar this morning.The pair closed below the ascending trend line yesterday, dating back to 13 November, and is now trading below the 61.8 fib level which is very bearish. A close below here today should prompt a move back towards 1.30, with the pair finding support along the way around 1.3135 and 1.30. At the moment the pair is finding support around 1.3250, previously a key level of resistance, and if this holds we could see it move back above the 61.8 fib level before the end of the day.
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Sterling is trading lower against the dollar this morning. The pair took an absolute beating yesterday, falling almost 200 basis points, and is still continuing in the same direction this morning. The pair took out a number of support levels yesterday, including the 1.5350 target from when the pair broke below the double top formation. This morining though, it’s now finding support around 1.5150. The next big support levels below here are 1.50 and 1.49, however I expect to see some form of retracement before we hit these.
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The dollar is trading flat against the yen this morning. The pair has been consolidating for a couple of weeks now, which given the rapid appreciation of the dollar before this is quite a bullish signal. A break above here over the next couple of weeks should push the pair through 94.75, which has been a key resistance level so far. The next target after this will be 97.6, followed by 100.45.
timthumb.php


The euro is trading higher against the pound this morning. The pair is currently finding resistance around 0.8725, from the descending trend line, dating back to January 2009. A break above here would be very bullish for the pair, potentially prompting a move towards June 2011 highs of 0.9082. The next levels of resistance though will come around 0.875, 0.88 and 0.89.
timthumb.php


Ahead of the open we expect to see...

Read the full report at Alpari News Room​
 
US Opening Call from Alpari UK on 21 February 2013

Today’s US opening call provides an update on:

* Fed minutes weigh on stock indices;
* Gold a major casualty of Fed tightening, death cross signals further selling;
* Eurozone PMI’s miss across the board;
* Jam packed economic calendar for the US this afternoon.

Stock markets have plummeted on Thursday in reaction to February’s hawkish Fed minutes and worse than expected eurozone PMI’s.

The Fed minutes have been particularly disappointing, given that the Fed previously gave the impression that as long as inflation remains under control, which it is, the ultra loose monetary policy would continue until we see a big improvement in the labour market, which we haven’t seen.

The markets have priced in another 12 months or so of highly accommodative policy from the Fed, so if they pull the plug at this early stage you can wave goodbye to the S&P 500 and Dow 30 hitting those all time highs. The interesting thing now will be to see how much of the rally has been supported by central bank stimulus and how much by an actual improvement in the economic outlook.

Gold has been one of the biggest casualties of the Fed minutes, falling more than $37 dollars yesterday before hitting a technical support level at $1,565. With the Fed now looking increasingly likely to start wrapping up the $85 billion of asset purchases every month, probably gradually over the next 10 months or so, I expect Gold to break through this level now, with the next big support levels coming around $1,485 and $1,430.

The fact that we’re now seeing a death cross, 50 day simple moving average crossing below the 200 day simple moving average, also suggests we could still see further downside yet.

The eurozone manufacturing and services PMI’s this morning did little to improve sentiment this morning. The German PMI’s, despite missing expectations, were both in growth territory for the first time since February last year, which is a positive.

Unfortunately though, the run of monthly improvements in the eurozone PMI’s came to an end, with both missing expectations. We have still seen an improvement in recent months so we shouldn’t get too down about the February figures, although if we don’t see an improvement next month there may be cause for concern.

The most concerning figures continue to come from France though. We did see a slight improvement in the manufacturing figure, rising to 43.6, however the services PMI fell one again. What this means is that both industries have now contracted at a faster rate than those in Spain and Italy for a second month, which suggests that we’re already seeing signs of the French losing competitiveness compared to those reducing spending and adopting reforms more aggressively.

Looking ahead to this afternoon and the focus is going to be entirely on the US. There’s plenty of economic data to get stuck into, including the CPI figure, which is expected to fall to 1.6%, from a year earlier, which suggests this isn’t one of the risks that certain members of the Fed referred to.

This will be followed by the weekly jobless claims which are expected to return closer to the average, around 355,000, after a big drop last week back to 341,000. We also have more housing data today, with existing home sales expected to remain solid at 4.9m and finally two pieces of manufacturing data, both of which are expected to point to further growth in February.

Ahead of the open we expect to see...

Read the full report at Alpari News Room​
 
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