Forex research

UK Opening Call from Alpari UK on 4 April 2013

BoJ eases aggressively, no change expected from BoE and ECB

Today's UK opening call provides an update on:

• BoJ lives up to expectations, aggressively easing monetary policy;
• Eurozone services PMIs expected to be weaker in line with manufacturing PMIs earlier in the week;
• ECB unlikely to cut interest rates despite drop in inflation to 1.7% in March;
• UK relying on strong services PMI to avoid triple dip recession;
• No change expected from Bank of England before Mark Carney takes over on 1 July;
• US jobless claims forecast at 350,000.

With three central bank meetings on Thursday there was always going to be plenty of volatility in the markets, and the Bank of Japan has got us off to a flying start.

The BoJ, under new Governor Haruhiko Kuroda, has announced a massive bond buying program, which has without doubt lived up to market expectations. The central bank has committed to buying 50 trillion yen of government bonds annually, while changing the maturity of its purchases from below three years to roughly seven years. Bond purchases will include all maturities up to, an including, 40-year JGBs.

The yen fell more than 100 pips against the dollar shortly after the announcement, and has continued to weaken further. The next target for the pair will be last month’s highs of 96.7 and I see no reason why it won’t reach that level by the end of the week. Over the next few weeks, I expect it to extend these gains, with 100.0 now definitely being in sight.

There's going to be plenty of volatility in the euro pairs today, with the release of the services PMIs likely to shake things up before the ECB rate decision and post-meeting press conference. The services PMIs are going to be watched closely following the disappointing manufacturing PMIs earlier in the week. Any weakness here will not be well received in the markets and will be seen as a clear sign that the political uncertainty in Italy and disastrous bailout of Cyprus are weighing heavily on confidence in the region.

The main event in the eurozone on Thursday will be the ECB rate decision and press conference that follows. As always, close attention will be paid to the rate decision, although no change is expected on this occasion. Another drop in eurozone inflation in March will mean a rate cut will probably be heavily debated. However, a weaker euro over the past couple of months may lead to increased inflation risks, meaning a rate cut in the coming months is unlikely.

In the UK, the services sector will need to perform strongly if the country is going to have any chance of avoiding a triple dip recession in the first quarter of 2013. March's PMI should give the biggest indication yet about whether it will manage this. Manufacturing figures have been extremely disappointing again in the first quarter, but given that the industry only accounts for one fifth of GDP, the figures from the services sector are far more important. A weak services PMI today will all but condemn the UK to its third recession in five years.

The Bank of England is expected to keep interest rates and asset purchases on hold again this month. Despite the voting being much closer in the last couple of months, with three members including Sir Mervyn King voting in favour of another £25 billion of asset purchases, a swing in favour may be a bit much to ask. Moreover, with Mark Carney set to succeed King as Governor on 1 July, members currently against additional purchases will probably opt to wait until then before changing their mind. This is even more likely given the amendment to the BoE's mandate which will allow them to use more unconventional monetary policy, such as committing to lower interest for a certain period of time, or until a predetermined improvement is seen in either the labour market or growth.

The debt auctions in France and Spain are likely to be largely overshadowed by central bank meetings today. Spanish yields rose shortly after the inconclusive Italian election back in March but have since fallen back again, so I don't expect any surprises here. French borrowing costs have also remained low despite concerns over the state of the economy and its ability to regain competitiveness in the near future, so there should be no complications here.

In the US, weekly jobless claims are expected to fall slightly to 350,000. That being said, we saw signs of second quarter blues in the ADP figure on Wednesday, which could now also be seen in the non-farm payrolls figure on Friday. Given that the weakness in the second quarter of 2011 and 2012 was accompanied by a rise in the number of jobless claims, we should now be on standby for a jump in this figure in the coming weeks. If the number of claims remain low, it could be a sign that the country will avoid the dip in the second quarter this year and that the economic recovery is in full flow.

EURUSD

The pair appears to have become stuck in a range since breaking below a key level of support a couple of weeks ago. Having broken below the 200 day SMA and 50 fib level, I still expect the pair to fall back to the 61.8 fib level, around 1.2678, however first it will need to break its current support of 1.2750. That being said, the weekly chart may suggest otherwise. The pair appears to be finding support from the neckline of the inverse head and shoulders, which formed between February and December last year. If this continues to hold, it suggests there may still be plenty of strength left in the pair, with the target being 1.42 later this year.
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GBPUSD

Sterling is finding support again this morning around 1.51, from the 38.2 fib level. This is also the neckline of the double top which formed over the last couple of weeks, which is why it’s proving to be such a big level of support. Based on the size of the formation, a break below here should prompt a move back towards 1.49, which was previously a major support level for the pair. It should find further support along the way, around 1.5045, 1.5025 and 1.4994.
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USDJPY

Yesterday, we mentioned that the future direction of this pair was dependent on how aggressively the Bank of Japan eases monetary policy over night. Well, it would appear that they were aggressive enough, with the yen sliding more than 200 pips against the dollar already. The pair found pretty solid support from the 61.8 fib level over the past few days, which suggests that traders were expecting an aggressive approach from the BoJ and were just waiting for signal. The next question is how far will the pair go? The next clear target is 96.70, last months highs, with the pair finding resistance along the way around 95.81, 96.12 and 96.58.
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US Opening Call from Alpari UK on 4 April 2013

Will US jobless claims fall victim to Q2 blues?

Today’s US opening call provides an update on:

* Bank of Japan commit to massive bond buying program;
* No change expected from BoE and ECB;
* Eurozone services PMIs fail to impress;
* Weekly jobless claims expected at 350,000;
* Fed member John Williams warns asset purchase may be scaled back in the summer.

The Bank of Japan stepped up to the plate in the early hours of this morning, announcing a huge bond buying program to rival that of the Federal Reserve.

The central bank will now buy ¥50 trillion of government debt per year, with the average maturity of the bonds rising from just below three years to seven years. The move by the BoJ has been talked about for months now, to the point that the yen had fallen by more than 20% against the dollar since just before Christmas. A lot of traders were cautious leading up to the announcement as they were concerned that the central bank may fail to live up to expectations, how wrong they were.

The yen fell more than 200 pips against the dollar following the announcement, while the Nikkei erased earlier losses to end the session up more than 2%. There’s still plenty more to come in both of these, and as always we’re likely to see some spill over into other markets as well. For example, Dow futures are around 40 points higher since the announcement. This could have longer term benefits for markets outside Japan as well, potentially contributing to the continuation of the rally in the US for example.

We have a couple more central bank meetings to come today, although these are likely to be a little less entertaining than the BoJ meeting over night. Neither are expected to cut interest rates, while the BoE will probably keep its asset purchases on hold at £375 billion. We are likely to see changes from both central banks in the months ahead. Today may just be a little too soon with a weaker euro bringing inflation risks that will probably deter the ECB and the appointment of Mark Carney as the new BoE Governor on 1 July likely to discourage MPC members from committing to further stimulus right now.

Things went from bad to worse for the eurozone this morning, when the services PMIs, like the manufacturing PMIs earlier in the week, disappointed. The figures for Italy and Spain were actually pretty good, under the circumstances, however the same cannot be said for France, who’s figure fell to a woeful 41.3. This is getting to a really concerning stage for France now, with the services sector being hugely important to the economy and yet contracting at a faster rate each month. German and eurozone figures also came in below expectations, falling sharply from a month earlier.

Later in the US we have weekly jobless claims out, which are expected to remain low at 350,000. That being said, we have seen some worrying numbers from services and manufacturing PMIs this week, as well as the ADP employment figure yesterday, which suggest we may be seeing another case of second quarter blues in the US. If we see disappointing jobs figures today and tomorrow, it could be seen as an early sign of another poor quarter for the US.

The interesting thing will be the reaction to the figures if they are poor. Previously, in 2011 and 2012, we’ve seen stock markets pull back in the second quarter as the economic data worsens, however worse data would probably ensure the continuation of the Fed’s massive bond buying program which could prompt a positive reaction and keep the rally going.

Comments from John Williams, president of the Federal Reserve Bank of San Francisco, could have created some unease last night, when he claimed that the $85 billion per month of asset purchases could start being scaled back as early as this summer. However, Ben Bernanke has said on numerous occasions that it won’t happen until a significant improvement is seen in the labour market and he’s likely to reaffirm this view later on, when he speaks at the Redefining Investment Strategy Education Conference in Dayton.

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Daily Market Update - 4 April 2013 - Alpari UK

0:19 BoJ announce ¥50 trillion bond buying program
1:56 BoE keeps interest rates and asset purchases on hold
2:13 UK services PMI suggests no triple dip recession in Q1
2:40 ECB keep interest rates on hold, Draghi spooks markets
4:00 Eurozone services PMIs disappoint in March
4:34 US weekly jobless claims raise concerns of Q2 slump

Daily Market Update - 4 April 2013 - Alpari UK - YouTube

Forex research: Global markets daily
 
UK Opening Call from Alpari UK on 5 April 2013

All eyes on the US, weaker jobs data expected

Today’s UK opening call provides an update on:

• Yen continues to weaken following BoJ announcement;
• Draghi comments weigh on European stocks;
• Weak US jobs report expected following disappointing ADP and jobless claims data;
• Poor jobs data could be bullish for stocks.

Attention will be back on the US on Friday, ahead of the release of the monthly jobs report.

Japan, the eurozone and the UK stole the show yesterday, with central bank decisions and key economic releases creating large amounts of volatility in the markets. The massive bond buying program announced by the Bank of Japan, for example, has seen the dollar rise more than 300 pips against the yen already, and it’s likely to rise another 300 or so in the coming weeks, albeit at a slower rate.

Mario Draghi’s bleak assessment of the eurozone shook markets later on in the day. Expectations of a recovery in the second half of the year appear to be fading, with Draghi repeatedly highlighting the downside risks to the recovery later this year. This is essentially a very unsubtle way of saying that growth will be lower than previously forecast and the recession will now stretch into 2014. There was a dovish tone to Draghi’s comments yesterday though, which suggests we could see a rate cut in the coming months.

More concerning than Mario Draghi’s, almost predictable, assessment of the eurozone economy was the jobless figures out of the US. We’ve seen a significant improvement in the employment data in the first quarter of 2013, however figures over the past couple of days may suggest were about to see the Spring downturn that has weighed on markets in each of the last two years.

The ADP employment change, which is essentially an estimate of the non-farm payrolls, came in well below expectations on Wednesday at 158,000. This was followed yesterday by a spike in the weekly jobless claims, which came in well above expectations at 385,000. More weak figures in March’s jobs report will strongly suggest that we’re going to see another slowdown in the Spring, similar to those in 2011 and 2012, however that doesn’t necessarily mean we’ll see a pull back in the markets.

There has been a lot of concern recently that the Fed will begin scaling back its $85 billion dollars a month of asset purchases, due to the improvement in the economy. This hasn’t been helped by comments from some members of the Fed, who have expressed concerns over the costs and risks associated with the large scale bond buying program.

If we do see a slowdown in the US economy in the second quarter, it could be seen a sign that the Fed will continue along the current path as the softening of the figures will be evidence that a significant improvement has not yet been seen. This is a positive for the stock market rally, given that it has been largely driven until now by the Fed’s QE3 program. In other words, a weak jobs report and overall softening of US data could be what keeps the rally going.

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US Opening Call from Alpari UK on 5 April 2013

Traders cautious ahead of US jobs report

Today’s US opening call provides an update on:

* Traders cautious ahead of US jobs report;
* Brent crude flat as concerns about US growth mount;
* Gold paring recent losses;
* Poor NFP could prompt rally in US equities.

We’re seeing a lot of caution in the markets on Friday, ahead of what is expected to be a disappointing US report.

Earlier in the week, there was a lot more optimism about March’s employment figures. However, a poor ADP figure on Wednesday, coupled with disappointing weekly jobless claims on Thursday, has raised fears that we could be seeing early signs of a second quarter downturn, similar to what we had in the last two years.

As always, the uncertainty has forced traders back onto the sidelines, leaving US futures pointing to a slightly lower open for the S&P, Dow and Nasdaq. Brent crude is trading flat so far this morning, after falling around $5 in the last few days on concerns over growth in the US. A poor payrolls figure today could weigh further on the price, pushing it back towards $100.

Gold is trading slightly higher this morning, having fallen more than $50 to around $1550 this week. A poor jobs report today could help prolong the Fed’s asset purchase program which tends be positive for Gold as it is seen as a hedge against inflation, although we’ve seen no sign of higher inflation in the US since QE3 began towards the end of 2012.

There is a good chance that a poor non-farm payrolls figure today will prompt another rally in US stocks. The rally to this point has been largely driven by the Fed’s QE3 program and signs of a second quarter slowdown are likely to ease concerns that it will be scaled back in the next six months or so. That being said, even if we do see another strong NFP figure today, I don’t envisage the Fed scaling back its $85 billion of asset purchases in the coming months as the recovery is still extremely fragile.

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UK Opening Call from Alpari UK on 8 April 2013

US corporate earnings season kicks off with Alcoa

Today’s UK opening call provides an update on:

• Alcoa to kick of US corporate earnings season;
• European stocks to recover from Friday’s NFP shock;
• Eurozone investor confidence dealt another blow in April;
• Small improvement expected in German industrial production figure.

Alcoa kick off the US corporate earnings season on Monday, as investors look for a distraction from Friday’s woeful non-farm payrolls figure.

Confidence in the US recovery was dealt a blow last week, when a number of surveys and official data pointed to another slowdown in the second quarter. The most disappointing of these came on Friday, with the non-farm payrolls figure showing only 88,000 new jobs were added in March, less than half the original forecast figure. That being said, equity futures are currently pointing to a higher open in Europe, so traders are clearly just using the dip as a buying opportunity.

The eurozone has had an awful couple of months, following a bright start to the year, and it seems Portugal now want to get in on the act. The decision by Portugal’s high court to reject some of the austerity measures that are part of the country’s bailout was yet another reminder that the debt crisis in the eurozone is not going away any time soon. On this occasion, I don’t see this escalating into anything bigger though, with the rejected austerity measures probably being replaced with other cuts.

The economic calendar is a little bit light, compared to last week, so there’s likely to be more emphasis on the start of corporate earnings season in the US. As always, Alcoa will kick things off again, reporting first quarter earnings after the close in the US. Earnings are expected to be down again for the company, which is continuing to suffer as a result of lower aluminium prices, with the consensus being $0.08 per share, down $0.02 from the same quarter a year earlier.

There are a few key pieces of economic data due out this morning. The eurozone Sentix investor confidence is expected to take another hit in April, falling back to -13.1, as concerns over Italy, France and Cyprus continue to weigh on sentiment. We saw a significant improvement in this figure at the start of the year, which was taken as a sign that we will see improvement in the region later this year. However, even ECB President Mario Draghi struggled to remain optimistic at the ECB press conference on Thursday, putting an end to any hopes of a return to growth for the eurozone this year.

German industrial production figures for February will be released shortly after and are expected to show a marginal increase of 0.3%, compared to a month earlier. This isn’t necessarily a strong figure, but it does represent yet another example of Germany’s ability to power through despite the countries around them facing another year of recession.

EURUSD

The euro is trading higher again this morning. The pair failed to close above 1.30 on Friday, despite rallying in the second half of the week. It still looks quite bullish for the pair in the short term, having broken back above the 200 day SMA on Thursday. We could actually be seeing a head and shoulders forming on the weekly chart, making 1.3341 to next target in the coming weeks. Here, the pair should also find resistance from the 61.8 fib level, prompting a move back towards the neckline around 1.29. In the shorter term, the pair should find resistance around 1.3050, 1.31 and 1.3133.
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GBPUSD

Sterling is pushing higher again this morning, after breaking back above 1.53 on Friday. The pair is currently finding resistance around 1.5337, from the 50 fib level. I still see a lot more weakness in the pound in the months ahead, so wouldn’t be surprised to see it fail to break above here. This is also a previous support level, which tends to turn resistance once it’s broken. If the pair does edge lower from here, it should find support in the short term around 1.5260, 1.5175 and 1.5150.
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USDJPY

The dollar is trading higher again this morning, having broken the previous highs of 96.70 on Friday. The next target for the pair will be 99.75, followed by 100.45. Beyond here, I see no reason why the pair can’t hit 110.66, where it will start to find more resistance. We’re not see much in the form of retracements during the move higher, however I expect to see more of this once the pair moves above 100.45 and starts to run out of steam.
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UK Opening Call from Alpari UK on 9 April 2013

NIESR offer early estimate of UK first quarter growth

Today’s UK opening call provides an update on:

• Alcoa get corporate earnings season off to a mixed start;
• Further weakness expected in UK manufacturing and industrial production;
• UK first quarter GDP estimate expected this afternoon.

Alcoa kicked off corporate earnings season last night, reporting better than expected earnings on weaker revenues, due to the falling price of aluminium.

Better earnings and weaker revenues has become a common trend of corporate earnings season over the past few quarters, with companies making huge efforts to cut costs at a time when demand for their product is low, or in Alcoa’s case, the price of the product. Cost cutting has helped companies distract investors from the weaker revenues in recent quarters but that can only last so long.

The bulk of the economic data on Tuesday will come from the UK, starting with manufacturing and industrial production figures at 09.30 GMT. Both of these have been a major drag on the UK economy for years, in fact we haven’t seen a positive industrial production figure since April 2011. This isn’t expected to change in February, with manufacturing and industrial production expected to shrink by 1.5% and 2.8% respectively.

This will only spark more concerns that the UK has fallen into triple dip recession in the first quarter, even though the services sector, which accounts for around three quarters of the country’s GDP, grew at its fastest pace since August, in March. Based on the latter, I expect the UK to narrowly avoid a third recession in five years when the first quarter GDP figure is released on 25 April.

The NIESR GDP estimate should give us some insight into whether we managed to avoid recession, when the figure for the first three months of the year is released early this afternoon. This figure has been relatively accurate in the past, so any figure here that suggests the UK contracted in the first quarter will be met with a sharp sell-off in the pound and will also weigh on the FTSE.

EURUSD

The euro is trading higher for a fifth day, the longest winning streak since November. The pair closed back above 1.30 yesterday, which is quite a bullish signal. It is currently finding resistance around 1.3030, a previous level of support, which could now prompt a small retracement. The crossing of the stochastic in overbought territory on the daily chart would also support this. If the pair does pull back, it should find support around 1.30, 1.2967, 1.2944 and 1.29. In the longer term, I remain bullish, with the next major target being 1.3341, although in the shorter term, the pair should find resistance around 1.3106, 1.3133 and 1.3161.
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GBPUSD

Despite breaking higher on Friday, following the release of the non-farm payrolls, the pair appears to be edging lower again this week, which I expect to continue in the weeks ahead. The pair found strong resistance over the last couple of trading sessions around 1.5337, the 50 fib level, which suggests that this move higher is simply a retracement rather than a reversal of the downward trend. I expect to see the pair attempt to break March’s lows of 1.4830 in the coming months, with the pair then targeting 1.44 if successful. In the shorter term, the pair should find support around 1.5260, 1.5237, 1.5150 and 1.5032.
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USDJPY

The pair appears to be having a bit of a breather today, after finding resistance around 99.75. We could now see a bit of a pull back before the pair break the 100.0 level, having already rallied more than 600 pips since the BoJ announced its stimulus program. Naturally, adding a Fibonacci retracement to the chart can give an idea about where the pair will retrace to, with the next support being the 23.6 fib level around 97.98. Ordinarily I don’t use this fib level, however when a pair is moving higher so aggressively, it could only pull back a little before continuing higher. If we see the gap filled from over the weekend, that should give support around 97.82, with the 38.2 fib providing further support below here around 96.94.
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AUDUSD

There’s been a never say die attitude about the aussie over the past year or so. Every time we see what looks like a potential reversal, it jumps higher again and makes another attempt to break above the descending trend line, which dates back to July 2011. This time, the aussie didn’t fall very far, finding support from the 50 day SMA and 100 week SMA, before pushing higher early in the week, breaking through both the 200 day SMA and the 100 day SMA. That suggests we could now see yet another assault on the trend line and it’s surely only a matter of time before it breaks above. Before we see that the, the pair is likely to find resistance along the way, around 1.0450, 1.0477 and 1.05.
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US Opening Call from Alpari UK on 9 April 2013

UK set to avoid triple dip recession

Today’s US opening call provides an update on:

* Alcoa report higher earnings than a year ago, although revenues are down;
* Earnings season quiet now until the end of the week when JP Morgan and Wells Fargo kick things off for the banks;
* UK manufacturing and industrial production down again in February, from a year ago;
* NIESR GDP estimate expected to show UK avoided triple dip recession in Q1

Corporate earnings season got off to a decent start last night when Alcoa reported better than expected earnings of $0.11 per share, well above estimates of $0.08.

In keeping with the last couple of earnings seasons, the better earnings were driven largely by spending cuts, which means the company still faces difficulties ahead. Revenues in the first quarter were down 2.9% compared to the same period last year, which was largely due to the falling price of aluminium and is likely to weigh on revenues again in the current quarter.

With it being the first week of the earnings season, it is likely to be a bit quieter, with the next major earnings releases not coming until later in the week. On Friday, JP Morgan and Wells Fargo will kick things off for the banks, with both companies expected to report stronger earnings than a year ago, and as always, JP Morgan will be expected to beat expectations given its history of doing so.

So far in Europe this morning, we’ve had a few pieces of economic data released. UK manufacturing and industrial production increased slightly in February from a month earlier, by 0.8% and 1% respectively. On a year on year basis, both shrank yet again, with industrial production now recording negative figures for two years.

Things could look a little better for the UK later though. The NIESR GDP estimate is expected to show that the UK narrowly avoided its third recession in five years, with marginal growth in the first quarter. This is hardly an achievement for the government, however avoiding the country’s first ever trip recession will spare them yet another embarrassment, so quickly after the country lost its AAA rating for the first time in its history.

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UK Opening Call from Alpari UK on 10 April 2013

Eurozone industrial output figures in focus this morning

Today’s UK opening call provides an update on:

• China reports a rare trade deficit in March;
• Small improvement expected in French industrial output;
• Fed minutes could show increasing support for less stimulus.

China’s trade balance, released over night, showed a rare deficit in March, the first deficit figure since February last year. A lot of questions have been raised about the Chinese trade data recently, based on the surprisingly strong export figures seen in the first two months of the year, which is why the impact on global markets is surprisingly minor.

However, one positive that can be seen in the data is the improvement in imports which suggests domestic consumption is continuing to pick up. This is essential if China is going to maintain its high growth rates in the years to come as it makes the transition to more consumption driven growth rather than being overly reliant on its exports. Exports in China are continuing to rise, but the figure in March was much smaller, and more realistic, than those seen in January and February.

The economic calendar is looking a little light again today, with early economic releases coming in the form of industrial output figures from France, Spain and Italy. France is expected to be the only one of the three to record an increase in industrial output in February, which is a bit of a shock based on recent figures out of the country.

In Italy, a drop of 0.5% is expected, compared to a month earlier, which is hardly a surprise give the austerity that we’re still seeing in the country. Italy made huge strides with reforms under Mario Monti’s government over the past year to improve competitiveness and boost its export market, but it’s still likely to be a while before we see this pay off. A reduction in spending on home soil though is what’s responsible for these poor figures, both by the government and the consumer, but this is to be expected at times of austerity and change. I don’t expect much of an improvement any time soon.

In the US later, the main focus is going to be on the release of the minutes from the last Fed meeting. There’s been a few grumblings among certain Fed members recently about the risks and costs of its QE3 program, which has led to suggestions that the $85 billion of asset purchases could be scaled back as early as this summer.

Fed Chairman, Ben Bernanke, has repeatedly claimed that no changes will be made until we see a sustainable improvement in the labour market, however given the improvements seen here in the first quarter of the year, this has done little to ease concerns in the market. What did help, was the poor non-farm payrolls figure for March, as this suggested that the labour market is not improving as much as figures earlier this year suggested.

The only problem is that March’s figure may just be a one-off, so people will be paying close attention to the minutes today to see if there’s any talk of scaling back the purchases in the near future and if so, how much support it has. One of the interesting things about Friday though was the reaction the employment figures in the stock market. Just as we saw Gold rally, as the data supported the need for prolonged stimulus, a similar reaction was expected in the equity markets.

However, instead we saw them pull back, which suggests that fundamentals are playing a bigger part in the rally now than we saw previously. If the minutes today appear more hawkish and we see a similar reaction in the markets, it could encourage those calling for a reduction in stimulus as it could be a sign that the positive effects of QE3 are fading, and the costs are no longer justified.

EURUSD

The euro traded higher for a fifth day against the dollar on Tuesday. I expect to see the pair pushing higher again on Wednesday, despite trading pretty flat so far this morning, with the next major resistance level coming around 1.3113. This is where the 50 day SMA crosses with the 38.2 fib level, which could prompt a pull back in the short term. If we do see a pull back, the pair should find support around 1.3070, 1.3040 and 1.30.
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GBPUSD

Sterling is continuing to push higher again this morning, but is finding resistance for a fourth day from the 50 fib level. A break above here should prompt a move towards 1.5458, the 61.8 fib level, with the pair finding resistance along the way around 1.5392, a previous level of support. If the pair fails to break above here, it should find support around 1.5250, which has previously acted as a key level of support and resistance. Below here it should find further support around 1.52, 1.5157 and 1.5032.
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USDJPY

There’s been some consolidation in this pair over the past couple of days, since it found resistance around 99.65 earlier in the week. We could still see a retracement before it breaks through 100.0 and pushes towards 110.0. If we do see a retracement, then as always I have added a Fibonacci retracement to see where it could possibly fall to. Based on the aggressive move higher that we’ve seen so far since Thursday, I don’t expect a large retracement if we do see one, which means the 23.6 or 38.2 fib may be the next major support level. Alternatively, this could just be a brief period of consolidation, as you can see on the hour chart with the formation of a pennant over the past couple of days. If this is correct then the pair has already broken out and could break through the 100.0 level as early as today.
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UK Opening Call from Alpari UK on 11 April 2013

Attention on jobless claims for evidence of US decline

Today’s US opening call provides an update on:

  • US weekly jobless claims expected to improve slightly;
  • Another miss could act as confirmation of a second quarter slowdown;
  • Inflation falls again in Germany and France in March;
  • ECB rate cut likely as Greek unemployment hits 27.2% in January.

European markets are up across the board on Thursday ahead of another batch of employment data out of the US.

Employment figures last week were pretty dire, by recent standards, which has raised concerns that the US is facing another decline in the second quarter. Last week’s initial jobless claims figure was much higher than people were expecting, so it would be a real boost if we see a figure below 350,000 this afternoon.

A figure below here would suggest that last week’s jump was just a blip and that labour market in the US is still improving. On the other hand, if we see another miss this week, it could be seen as confirmation that the US is facing a slowdown in the second quarter, which will weigh heavily on the markets. Expectations are currently for 365,000, which by recent standards is still pretty high.

Economic data out of the eurozone this morning has been a little mixed. The CPI figures out of German and France both showed inflation fell yet again in March to 1.4% and 1.1%, respectively. These figures surely ease any inflation concerns that members of the ECB had, including any inflationary impact that a weaker euro could have. I really see no reason why we won’t see a rate cut now at the next meeting in May.

The euro area is in desperate need of stimulus, with it being in recession and unlikely to come out of it this year. You just have to look at the unemployment figure out of Greece this morning to see that the countries are in need of a boost. Unemployment rose to 27.2% in January, up 1.5% from a month earlier. The only question now is will a 25 basis points rate cut be enough or should the ECB be more bold?

Ahead of the open we expect to see...

Read the full report at Alpari News Room​
 
UK Opening Call from Alpari UK on 12 April 2013

Cyprus top of the agenda at today’s eurogroup meeting

Today’s UK opening call provides an update on:

• Finance ministers meet in Dublin to discuss Cyprus, Greece, Ireland and the ESM;
• Eurozone industrial production expected to increase by 0.1% in February;
• US PPI could ease concerns of Fed monetary tightening;
• Retail sales and consumer spending expected to fall in the US.

Finance ministers will meet in Dublin on Friday and Saturday, which is going to attract a lot of attention in the markets. These events rarely produce anything in terms of market moving announcements, but when they do, the move tends to be quite significant. All you need to do for that is look at the impact from the meeting last month when the Cypriot bailout was announced.

There are a number of items on the agenda at this eurogroup meeting, so there is a good chance that there will be an impact on the markets. The main topic will be the Cypriot bailout, which is yet to be ratified by the eurozone lenders or in Cyprus. Also on the agenda is the next tranche of Greece’s bailout which the country was hoping to have wrapped up by today, however negotiations continue now on Monday between the country and the Troika. There will also be discussions on the payment of the next tranche of Ireland’s bailout as well as further talks on the role of the ESM in recapitalising banks, as they continues to work towards the formation of a banking union in the euro area.

Once again it’s looking pretty light on the economic calendar on Friday, with most of the major releases coming out of the US later. The one piece of eurozone data to keep an eye out for is the industrial production figure, which is expected to increase by 0.1% in February, although compared to a year earlier this is still lower by 2.5%.

In the US, we have a few key pieces of data being released shortly before the opening bell. The PPI inflation figure is expected to show a drop of 0.2% in March, bringing the year on year figure down to 1.4%. This should help keep the official CPI inflation figure down, easing any concerns that the Fed will soon begin to tighten monetary policy. Especially when you also consider the decline in the labour market last month which saw only 88,000 jobs added and the worst participation rate in more than 30 years.

Both retail sales and core retail sales are expected to be flat in March, down from 1.1% and 1%, respectively, the month before. This could be further evidence of a slowdown in the US as it approaches the second quarter. There’s been a real deterioration in the economic data in the second quarter in each of the last two years, followed by a dip in the stock markets. Given that we’re seeing early signs of history repeating itself, the rally in the markets could be on borrowed time.

Finally, we have the UoM consumer sentiment figure which is expected to be slightly worse than in March, at 78.5. Although, based on the retail sales figure we’re expecting, and the other disappointing figures we had out of the US last week, I wouldn’t be surprised to see this fall short of expectations, coming in at around 72 instead. This would again act as further confirmation of the downturn in the US.

EURUSD

The euro is slightly higher against the dollar this morning, although it is finding strong resistance around 1.3113, where the 50 day SMA crosses the 38.2 fib level. This could prompt a pull back in the euro rally which has seen it rise almost 300 pips in little over a week. The crossing of the stochastic in overbought territory supports the bearish outlook, the only question is whether we’ll see a temporary pull back or a continuation of the downtrend which started on 1 February. The weekly chart suggests it could be the former, with the pair forming a pretty textbook head and shoulders over the past seven months. In order for the pair to complete this bearish formation, it will need to rally towards 1.3341 in the coming weeks, the 61.8 fib level, before continuing the downtrend.
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GBPUSD

The recent weakness in the US dollar is continuing to push the pair higher, despite most people in the market appearing to be more bearish in the longer term. I think all we’re seeing here though is a bigger retracement than originally expected, rather than a reversal of the bearish trend. I still believe the pair is going to retest 1.49, it may just be in the coming months rather than the coming weeks. The next potential reversal point will be 1.5456, the 61.8 fib level. The stochastic on both the daily and weekly charts suggest the pair is overbought, although neither are crossing yet which suggests there could still be more buying to come. The next levels of resistance will come around 1.5415 and 1.5436.
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USDJPY

The dollar is pulling back slightly against the yen, after finding strong resistance this week around 100.0, a major psychological level. This is also the 50 fib level, of the move from June 2007 highs to October 2011 lows, so it’s no surprise to see this providing such strong resistance. At this stage, it looks like we’ll see consolidation in the pair, as opposed to a retracement, before it continues to move higher. This can be seen more clearly on the four hour chart by the formation of a pennant, which is a very bullish pattern, following such a strong uptrend. The next big resistance level for the pair will be 101.50, which was previously a big level of resistance.
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Ahead of the open we expect to see...

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US Opening Call from Alpari UK on 12 April 2013

JP Morgan kicks off earnings season for the banks

Today’s US opening call provides an update on:

* JP Morgan and Wells Fargo kick off earnings season;
* US retail sales and consumer spending in focus;
* Eurogroup meeting watched closely.

JP Morgan and Wells Fargo kick off the corporate earnings season this morning for the major banks, with another strong quarter expected.

US banks are expected to be one of the strongest performing sectors in the current earnings season, although they may not necessarily be quite as strong as the last few quarters. That being said, JP Morgan has a history of easily beating earnings forecasts so I expect a strong start today.

One thing to be aware of with JP Morgan in particular is its tendency to easily beat earnings expectations. What this usually means is people buy the stock in the week leading up to the earnings (currently trading up more than 5% this week) and then sell shortly after.

Also in the US today, we have some major economic data releases, most notably retail sales in March. These are expected to be slightly weaker than what we saw in February, at 0%. This could act as further confirmation of the slowdown in the US, with consumer spending making up a large part of GDP.

We could get further confirmation of the slowdown shortly after when the UoM consumer sentiment figure is released for April. Only a small pullback is expected to 78.5 this month, although I wouldn’t be surprised to see this miss based on the figures we’ve had out the US in the last week, especially if we see another miss in March retail sales.

A lot of attention will also be on the eurozone, with finance ministers meeting to discuss a number of issues including the Cypriot bailout and the release of bailout payments to Greece and Ireland. Also on the agenda will be the ESM and how the eurozone plans to move towards forming a banking union.

These meetings don’t usually produce much in terms of market moving announcements, although they’re always worth keeping an eye on because when they do, the moves tend to be significant. A prime example of this was the Cypriot bailout announcement last month.

Ahead of the open we expect to see...

Read the full report at Alpari News Room​
 
UK Opening Call from Alpari UK on 15 April 2013

Corporate earnings season continues with Citigroup

Today’s UK opening call provides an update on:

• Corporate earnings season continues with Citigroup;
• Manufacturing expected to slow in March in the US;
• Chinese growth falls back to 7.7%;
• Industrial production falls in China on the back of lower fixed asset investment.

Corporate earnings season will be in focus again this week, starting with Citigroup on Monday, who is expected to announce slightly better earnings than the same quarter a year ago.

JP Morgan and Wells Fargo kicked earnings season off for the banks on Friday, reporting higher earnings than expected and beating those from the same quarter in 2012. Revenues on the other hand were lower than last year, which suggests that banks, like other companies, are still struggling in the current economic environment but are managing to cover over the cracks with higher earnings driven by efficiency savings. This is clearly unsustainable so it will be interesting to see if companies get away with it again in this quarter.

Earnings season will start to get into full swing this week, with a number of high profile companies reporting, including Coca Cola, PepsiCo, Google, Microsoft and General Electric. First up though will be Citigroup, who is expected to announce earnings of $1.16 per share in the first quarter, compared with $0.95 a year earlier. Following misses from the two banks that reported on Friday, attention will also be on revenues here, although the company is expected to report a higher number than the first quarter of last year.

The economic calendar is looking pretty light on Monday, although this will pick up a little as the week goes on. The main economic release comes from the US this afternoon in the form of the empire state manufacturing index. Given the pull back in the majority of the data recently, it’s hardly surprising to see that we’re expecting a similar result here today. A figure of around 7.2 is expected, although I wouldn’t be surprised to see this, like many of the other releases, fall below expectations.

We’ve already had a long list of disappointing data out of China in the early hours of this morning, although this hasn’t stopped futures pointing to a higher open in most European stock indices. First quarter growth in China was much lower than the 8% figure that had been expected, coming in instead at 7.7%. This suggests that the improvement seen in the fourth quarter of last year was a one-off and we could be heading for slower growth this year as we saw for the majority of 2011 and 2012.

The upside to this though, is that slower growth figures would make it difficult for the PBOC to scale back its monetary stimulus as it could lead to renewed fears of a hard landing in China. I don’t see that happening at this stage, however one thing is clear from this data and that is that the recovery in China is nowhere near as strong as we thought it was. This is more than a little concerning for those hoping China would be able to lead the global recovery, especially given the slowdown which we’re now seeing in the US.

Other parts of the data were also a little concerning, such as the industrial production figure for March, which showed the lowest amount of growth since August. This reduction though may be driven by a drop in fixed asset investment, which fell back to 20.9% in March, compared with 21.2% in the first two months of the year and expectations of 21.3%.

EURUSD

The euro is trading lower against the dollar this morning, after finding strong resistance earlier around 1.3113, the 38.2 fib level. We may see a bit of a pull back now over the next couple of days, following a pretty strong rally over the past week and a half. However, I still think there’s some more room to the upside here, with 1.3341, 61.8 fib level, still being the target. That’s if we’re going to see the completion of a head and shoulders formation over the coming months. The pair is currently finding support around 1.3065, if it continues to edge lower, it should find further support around 1.3050, 1.3035 and 1.30.
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GBPUSD

Sterling is looking quite bearish once again, following that brief move higher. The pair found resistance last week around 1.54 before edging lower. We could now see a continuation of the bearish move from the start of the year. The stochastic on the daily chart supports this, having crossed in overbought territory at the end of last week. The weekly chart also looks quite bearish, with last weeks candle forming a perfect doji. If the candle was red it would be even more bearish, however even as it is, it suggests the bullish move has run out of steam. If the pair does continue to push lower, then the next target will be 1.4830, last month’s lows, with a break below here prompting a move back towards 1.44. In the shorter term, the pair should find support around 1.5291, 1.5250, 1.52 and 1.5157.
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USDJPY

The pair filled last weekend’s gap overnight, before pushing higher early in the UK session. This could now be a sign that we’re going to see a continuation of the move higher, with 100.0 providing the next major level of resistance. The next phase of the rally is likely to be much slower than the last one, with the move towards 110.0 probably taking weeks, if not months, compared to the move from 92.70 to 100.0, which took a little over a week. If the pair continues to edge higher this morning, it should find resistance around 98.39, 98.58 and 99.10.
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Ahead of the open we expect to see...

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UK Opening Call from Alpari UK on 16 April 2013

Inflation data shifts attention back to central banks

Today's UK opening call provides an update on:

• UK inflation likely to remain unchanged at 2.8%;
• Another drop in eurozone inflation could prompt ECB rate cut;
• US inflation expected to fall, easing the pressure on the Fed to tighten monetary policy;
• Economic sentiment in the eurozone could fall well below expectations;
• US housing data forecasts point to another strong month in March;
• Surge in volatility expected as a number of big companies report first quarter earnings.

Central banks are going to be back in focus on Tuesday, with the release of inflation data from the UK, eurozone and US likely to spark fresh debate over monetary policy in the coming months.

In the UK, the Bank of England is unlikely to ease monetary policy before Mark Carney's arrival on 1 July. However, with the voting so close at the last few meetings, this is far from guaranteed. As a result, March's CPI figure will be watched closely, with a surprise drop prompting talk of increase in the asset purchase facility. With sterling already looking pretty weak again, this could prompt a move back towards 1.50 against the dollar.

The ECB is far more likely to vote in favour of more stimulus in the coming months, with inflation currently at near three year lows of 1.7%, according to the flash estimate earlier this month. If this is confirmed this morning, it could convince the ECB that more stimulus is necessary at the next meeting on 2 May. This would be very welcome in the euro area, which faces at least a few more quarters of recession, with recent data suggesting it'll probably be longer.

In the US, inflation has remained low despite the very accommodative stance from the Federal Reserve. The CPI figure, released this afternoon, is expected to show inflation fell again in March to 1.7%. This should ease any concerns, for now, that the Fed will begin to tighten monetary policy. Especially when you consider the weakness seen in the other economic data in March, in particular the employment and consumer spending figures.

Also today, we have the release of the ZEW economic sentiment for the eurozone and Germany, both of which are expected to fall sharply back from the figures seen in March. These figures tend to be quite volatile at the best of times, so I would be very surprised if we don't see figures here well below market expectations. Expectations for the German and eurozone figures are currently 42.0 and 31.5, respectively, which I think is far too conservative.

In the US later, we also have some housing data out for March. Housing starts are expected to be slightly improved at 0.93 million, while building permits are expected to fall back slightly to 0.94 million. Again, I think we're setting ourselves up for disappointment here, with the poor weather conditions already being blamed for the drop in things like consumer spending. If that is the case then we should also see it reflected in today's housing data.

Finally today, we have probably the biggest day so far in terms of corporate earnings, with quite a few major companies reporting first quarter profits. Goldman Sachs earnings should be watched very closely, following the strong earnings seen so far from JP Morgan, Wells Fargo and Citigroup. Other major earnings to keep an eye on today include Coca Cola, Johnson & Johnson and Yahoo. With all these major companies reporting earnings today, we could see a surge in volatility in the markets.

EURUSD

The euro is trading higher again this morning, despite yesterday’s candle looking very bearish. Friday’s and Monday’s candles actually formed a bearish engulfing pattern, which usually marks the end of the uptrend. On top of that, the stochastic has crossed in overbought territory, another bearish indicator. So far this morning, the pair is finding resistance around the 50 day SMA, which suggest that this morning’s move is simply the euro paring some of yesterday’s losses and the pair is in fact back in a downtrend. If that’s the case then we may not see it complete the head and shoulders that was forming on the weekly chart. On the other hand, it could just be a temporary pull back, with the pair continuing it’s move towards 1.3341 later this week.
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GBPUSD

The pair has had a difficult start to the week, falling around 100 pips to end yesterday back below 1.53. This morning, it is finding resistance around this level, which is quite a bearish signal. The stochastic also crossed in overbought territory over the past couple of days, which again is quite bearish for the pair. If it continues to find resistance around 1.53, we could see further losses, with the pair finding support initially around 1.5260. That being said, on the 4-hour chart, the pair actually looks quite bullish, having bounced off the 38.2 fib level, while the stochastic crosses in oversold territory. If this is the case, we could see the pair move back towards last weeks highs of 1.5410, with it finding resistance along the way around 1.5340, 1.5362 and 1.5380.
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USDJPY

This pair is looking quite bullish this morning, having found support in the area between the 50 and the 61.8 fib levels. It also failed to close below 96.70, which was previously a major level of resistance. This again, is quite a bullish signal. We should now see the pair target 100.0 once again, with a break above here prompting a move towards 101.50. This will be a major level of resistance for the pair having previously been a big support level. In the shorter term, the pair should find resistance around 97.55, 98.20 and 98.58.
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AUDUSD

The aussie made huge losses against the greenback yesterday, before finding support around 1.0292, the 61.8 fib level. This morning, the aussie is paring some of those losses, but still appears pretty weak. It’s currently finding resistance around 1.0367, a previous level of support. If it breaks above here, it should prompt a move towards 1.0390, where it should find further resistance from the 200 day SMA. This was also previously a level of support for the pair. However, if the pair fails to break above the current resistance level, we could see a move back towards March lows of 1.0114. The stochastic on the weekly chart supports this bearish outlook, having crossed in overbought territory recently. For this to happen though, it will need to break below to 50 and 100 week SMAs which are currently providing support for the pair.
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