Sellers on Gold Have Appetite for More

Buyers on Gold struggle to hold above the crucial support on 1765 USD/oz. If broken, the target is on the 1680 USD/oz and in theory, this level looks extremely solid.

Nasdaq finishes the head and shoulders pattern and is ready to break the neckline.

DAX is still fighting on pre-Covid February highs.

EURUSD with a sharp reversal but still with a positive sentiment.

NZDCAD with a potential very dangerous false bullish breakout.

EURCHF corrects the recent surge.

Two safe haven currencies, CHFJPY test the 117.7 again. As long, as we stay below, the sentiment is negative.

For a look at all of today’s economic events, check out our economic calendar.

Did Elon Musk Tweet Anything About the Euro?

Experts say, that fundamentally, many traders are anticipating rates to increases soon. Furthermore, investors are pricing in the swift recovery in the Euro Block nations.

The first instrument is the main currency pair, the EURUSD. Here, we have a beautiful inverse head and shoulders pattern. At the beginning of the week, the price broke the neckline of this pattern and later used that neckline as a support. The upswing from today’s morning, gave the ultimate confirmation and left no doubts about the long-term direction for the pair. In the short-term, we can expect a small bearish correction but in the long-term, the sentiment is definitely positive.

Now the EURCHF, where the pair is so far having one of the best weeks on record. It all started with a breakout from the symmetric triangle pattern and a breakout from the horizontal resistance at 1.087. What happened next is just pure momentum, and stop losses-activation, spiced up by the general weakness of the Swiss Franc. In the short-term some form of a correction can happen but in the long-term, the sentiment is very bullish.

I will finish this with the weekly chart of the EURJPY, where the price is above two major supports. The first one is the broken downtrend line, which was connecting lower highs from 2014 and the second one is at 127, which was respected many times as a support and resistance since 2015. As long as the price stays above those two supports, the long-term sentiment remains positive.

For a look at all of today’s economic events, check out our economic calendar.

Swiss Franc in Troubles

Gold holds above the 1765 USD/oz.

Silver on it’s way to test crucial horizontal resistance.

Nasdaq traditionally with a V-shape reversal.

DAX bounces of previous bull market highs and aims for the ATH.

The EURUSD pushes higher after the breakout of the neckline and the horizontal resistance.

The USDCHF with a long-term buy signal after major bullish breakout.

The EURCHF surges after price broke the key horizontal resistance.

The EURPLN escapes from the rectangle and aims for new mid-term highs.

For a look at all of today’s economic events, check out our economic calendar.

Weekly Round Up – February 21st, 2021

AUD/USD broke its long standing and much written line at 0.7821 and traded 57 pips to 0.7877. Above 0.7821, AUD/USD ranges between 0.7821 to the 10 year average at 0.8305 or 484 pips. Below 0.7821, AUD/USD trades 0.7821 to 0.7308 or 513 pips. Below 0.7821 exists 0.7605.

DXY last week maintained its 148 pip range between 89.95 to 91.43. Above 91.43 next targets 92.78 in a 135 pip range.

GBP as written in the last post maintains deep overbought status across all GBP pairs except GBP/NZD. Watch 1.9136 this week for best moves.

EUR/USD opens in fairly perfect neutrality however ranges continue to compress. Problem pair EUR/JPY and all JPY cross pairs maintain deeply overbought status for week 4. EUR/CAD, EUR/NZD and EUR/AUD open the week massive oversold. EUR/CAD and EUR/AUD will provide the best moves.

Stand clear EUR/CHF as AUD/CHF and NZD/CHF will provide better movements.

NZD/USD 0.7267 then 0.7356 Vs 0.7267 and 0.7990. NZD/CAD is overbought while NZD/JPY heading into week 4 maintains richter scale overbought status.

Overall, NZD/USD traded 200 pips from 0.7100’s to 0.7300’s for the past 2 months and provided support to GBP and AUD to allow both to move higher. Explains the divergence seen in EUR/NZD Vs GBP/NZD this week.

USD/JPY watch 104.97 and USD/CAD 1.2587 Vs 1.2826.

 

 

Dollar Comes Back to the Bearish Territory

Nasdaq is still below dynamic and horizontal resistance

SP500 is on a good way to break crucial levels and go higher

DAX sharply bounces from the 12960 points

Dollar Index ignores the inverse head and shoulders and creates a flag. Situation here is bearish

EURUSD are flirting with important dynamic resistance

GBPUSD are one step from breaking 1,3 – the most important level in the past few weeks

AUDUSD with a small bullish correction but the main sentiment is very negative

EURAUD makes another attempt to escape from the long-term rectangle

EURCHF breaks crucial support and later tests it as a resistance. Pretty standard price action move

Gold tries to go higher but the upper line of the pennant looks well defended

Indices Take a Break. Time for The USD to Shine

After the surge on Monday, Indices are taking a rest.

Nasdaq is creating a small head and shoulders pattern.

SP500 is drawing a wedge pattern.

FTSE is flirting with a crucial dynamic resistance.

EURUSD came back below crucial horizontal support and broke the lower line of the flag.

GBPUSD is back below 1.3.

EURCHF is attacking the lower line of the pennant.

For a look at all of today’s economic events, check out our economic calendar.

Daily Forex Briefing 29/07/2020

In today’s Daily Briefing, we found those amazing setups we thought you’d find interesting!

EUR/PLN bouncing from a crucial support on the 4,4.

Brent with a possible false bearish breakout and an upswing but still below important resistance.

EUR/USD awaits the FOMC inside of a pennant.

USD/JPY is getting ready to test the 106 as a resistance.

EUR/CHF bouncing from the upper line of the flag.

GBP/NZD with a major, long-term buy signal.

EUR/JPY finishing a big inverse head and shoulders pattern.

EUR/NZD with a double bottom formation but still below important resistance.

SP500 drawing a head and shoulders pattern but buyers have an appetite for an upswing.

CAC in a slightly worse position but still fighting on a major up trendline.

For a look at all of today’s economic events, check out our economic calendar.

Trading Sniper: Three Best Setups on the Market Right Now

What counts in trading is the desirable risk to reward ratio and unfortunately buying Gold now does not have the risk/reward ratio that would thrill most traders. In addition to that, the risk of a very deep, bubble-bursting correction is quite significant. Instead of focusing on Gold, for FXEmpire viewers, we exclusively prepared three trading setups, worth looking at right here, right now.

The first one is SP500, which right now is below the crucial horizontal support on the 3235. That should have been a negative sign but I feel somehow optimistic about the future of this index. The reason why is the emerging inverse head and shoulders pattern. We are currently finishing the right shoulder and the neckline of this formation is…yes, you guessed right – 3235. Price closing a day above that resistance will be a buy signal.

A similar pattern can be spotted on DAX.  Here, we also do have an inverse head and shoulders pattern but on this German Index, it is additionally present on a combination of two crucial supports. The first one is the horizontal one on the 12800 and the second is the dynamic up trendline. As long as we stay above them, the sentiment is positive.

I will finish with the EURCHF, where I want to show You two of the best things in technical analysis. The first one is the power of the 38,2% Fibonacci and the second is the power of the false breakout. As You can see, EURCHF was testing the 38,2% many times and it was flawlessly defended as a support. This week, started with a bearish gap and a breakout.

The price reversed very sharply straight away, which left sellers only with the false breakout and losing positions. Once market participants established that the early breakout was fake, they started buying, which resulted in a bullish takeoff. The sentiment on EURCHF is definitely positive.

Tomasz Wisniewski, CEO Axiory Intelligence.

Twitter: https://twitter.com/wisniewskifx

Markets Finding it Difficult to Rebuild Bullish Momentum

Asia Pacific equities were mixed, though, of note, China, Hong Kong, Taiwan, and Indian markets rose. European bourses are down small, and US stocks have turned lower as well. Bond markets firm, though and peripheral bonds are outperforming after the results of the ECB’s TLTRO operation. The US 10-year yield is hovering around 71 bp.

The dollar has a firmer bias. The currency market showed little reaction to the Swiss National Bank and Norway’s Norges Bank leaving policy unchanged, while sterling is around 0.5% lower ahead of the Bank of England meeting outcome. Emerging market currencies are firm.

The South Korean won recouped most of yesterday’s losses, and the Indian rupee and Indian bonds shrugged off Fitch’s decision to cut its outlook to negative from stable (BBB-). Gold has edged up but is flat on the week, and oil prices are recovering from yesterday’s decline. July WTI is near $38.40, putting it up about $2 on the week.

Asia Pacific

There is too much being made of the fact that China did not appeal the WTO decision that it is not automatically a market economy. On procedural grounds, we have to recognize that the appellate process has been eviscerated by the US, blocking the appointment of new judges. On substantive grounds, nothing changes. Europe and the US act as if China is not a market economy, which means it is easier to take anti-dumping action against it.

The US tariffs, mostly still in place under the two-year Phase 1 agreement, seem to make China’s market status a moot point. While Europe has not erected new tariff barriers, it is tightening its direct investment rules, making it more difficult for (Chinese) state-owned businesses. Meanwhile, US officials have indicated they will change their WTO tariff schedule. The real take away is that in the new Cold War will be waged on many fronts, including the multilateral institutions.

Some link the demand for yen that saw the dollar fall to JPY106.70 to approach last week’s lows in early Tokyo to the news that Softbank may repatriate the proceeds from its sale of 2/3 of its holding in T-Mobile (~$20 bln). Separately, the Nikkei reported that the Japanese government may lift its economic assessment that will be issued tomorrow.

Australia’s jobs data was worse than expected. The country lost almost three times more jobs than economists projected. Employment fell by nearly 228k jobs in May. It has lost a revised 607k jobs in April. The unemployment rate was revised to 6.4% in April from 6.2% and rose to 7.1% in May. The participation rate fell to 62.9% from 63.6%. The job losses were concentrated among part-time positions (~-138k), but the 89k loss of full-time positions was greater than the total job loss economists forecast. Separately, New Zealand reported Q1 GDP contracted by 1.6% compared with forecasts of a 1% decline.

It is the seventh session that the dollar has not traded above JPY108, and today it is struggling to sustain upticks above JPY107.00. Below the JPY106.70 session low are the one-month lows set last week a little under JPY106.60. However, stronger support is not seen until closer to JPY106.00. The Australian dollar recovered from the initial selling that took it to about $0.6840.

The week’s low, seen Monday near $0.6775, and the 20-day moving average is around $0.6825 today. Resistance is seen ahead of $0.6925, where a A$530 mln option is set to expire. The PBOC set the dollar’s reference rate a little above the bank models, but the greenback is softer for a third consecutive session. Hong Kong Monetary Authority continues to intervene to support the dollar at the lower end of the band. Still, the smaller amount may be among the first signs that pressure is easing following the recent IPOs.

Europe

The Bank of England is expected to keep its base rate at 10 bp, but increase the amount of bonds it is buying. While two dissents last month favored a GBP100 bln increase, many expect a larger amount to be agreed upon shortly. Note that the earlier this week, the Bank of Japan boosted the zero-rate loans it will make to corporations from JPY75 trillion to JPY110 trillion. The Federal Reserve announced the launching of the Main Street lending facility for small and medium-sized businesses, and its corporate bond-buying program would include individual issues (not just ETFs) according to a new index it created. And then there is the ECB.

The ECB allotted 1.31 trillion euros in its three-year targeted lending program. The three-year loans will be at a rate of minus 100 bp if certain lending targets are achieved. The loans can also be repaid after one year. Banks rolled previous loans into this new generous facility, but there was net new borrowing of 548.5 bln euros, which was a bit more than expected (~400 bln). The ECB’s balance sheet will rise by this net figure.

The Swiss National Bank left its policy rate at minus 75 bp and underscored that its main tool to counter the franc’s strength will be intervention. The euro found support near CHF1.0660, just above the low for the month near CHF1.0650 seen last week. Norway’s Norges Bank also did not change policy and indicated that it anticipated neither asset purchases nor negative rates. However, the forward guidance it provided implies no change in rates for two years. Separately, recall that the central bank sells krone every day. Here in June, it sells NOK2.3 bln a day after NOK2.1 bln a day in May. The krone rallied after the central bank announcement.

The euro is trading in a 15-tick range on either side of $1.1245, where a 640 mln euro option expires today. Another option for a little more than 710 mln euros is struck at $1.1260 and also expires today. The narrowing peripheral bond premium over Germany coincides with a firmer euro. Yesterday’s high was a little below $1.13, and that may be sufficient to cap the single currency today. Sterling is slipping through $1.25 ahead of the outcome of the BOE meeting.

The week’s low was set Monday near $1.2455, but then it was above the 20-day moving average, which now is near $1.25, which is also the (50%) retracement objective of the rally since May 25. The next retracement is near $1.2415, but we suspect sterling will stabilize after the BOE meeting.

America

The US formally announced it was withdrawing from negotiations on efforts to coordinate a digital tax. It is important because it is a front in the US-Europe trade confrontation that is simmering below the surface. It erupted recently as part of the US decision to withdraw troops from Germany. The geopolitical signal was exaggerated. The US troops act as a tripwire, and the precise number is not so important. The importance of the move lies in how it was done (unilaterally) and the reasons (German not respecting its commitment to boost NATO spending, the gas pipeline from Russia, and unspecified German trade practices).

Most countries considering a digital tax are in Europe, but there are a few, including India, which broadened theirs a couple months ago, Indonesia, and Brazil. The US appears to be blocking efforts to coordinate under the OECD. Countries want to tax internet companies based on the sales within their borders and have a minimum global tax to minimize incentives for tax arbitrage.

While Canada and Mexico’s calendars are light, the US reports the June Philadelphia Fed manufacturing survey, which is expected to rise for the second consecutive month, and the weekly jobless claims that will likely continue to decline from still high levels. May’s Index of Leading Economic Indicators is expected to have jumped by around 2.4%. During the session, OPEC will report is compliance assessment, and it should improve now that Iraq seems to be adhering to the agreement. Lastly, we note that as anticipated, Brazil delivered a 75 bp rate cut yesterday and seemed to suggest that there was still room for another small cut. Talks between Argentina and its creditors stalled again.

The US dollar continues to trade within Tuesday’s range against the Canadian dollar (~CAD1.3505-CAD1.3625). The week’s high was set on Monday, near CAD1.3685. The intraday technicals suggest the greenback’s upside may be favored in the early North American activity. Meanwhile, the US dollar is near the middle of this week’s range against the Mexican peso (~MXN21.8950-MXN22.75), and that range is likely to hold.

Lastly, turning to the S&P 500, we note that the gap created by the lower opening a week ago remains unfilled and casts a pall over the market. The gap extends to 3181.50. Also adding to the technical caution is the fact that the five-day moving average has slipped below the 20-day moving average for the first time since early April, illustrating the corrective/consolidative phase it has entered.

For a look at all of today’s economic events, check out our economic calendar.

This article was written by Marc Chandler, MarctoMarket.

Three Great Bullish Occasions With the Euro!

Are there still any bears on the market? Will, we will give them some rest and time to reflect on the decisions they made in the past few weeks. In our videos, we warned them many times not to go against the FED. We said that they should not seek for logic or sense out there. Trading these days is crazy and we just have to adjust to the fact that markets and the strict macroeconomic approach are broken.

In today’s analysis, we will focus on the Euro, where traders have been enjoying a flawless upswing.

On the weekly chart the EURJPY created a double bottom formation, which looks very promising for long-term buyers. One long-term down trendline was already broken and currently buyers are aiming for a second one. Before they get there, they’ll have to break the horizontal resistance at the 38,2% level, which has been extremely powerful so far. Powerful enough to initiate a bearish reversal, or at least a small correction.

Next is the EURCAD, where the price is inside a long-term flag formation. It seems like that flag is coming to an end as the price doesn’t want to go lower than 1.505, which is currently a crucial support. As long, as the price stays above this area, the sentiment is positive and traders can think about a great risk to reward ratio.

We’ll end this with the EURCHF, which has been enjoying three great weeks. The price broke two crucial down trendlines and is currently aiming at a strong horizontal resistance, created by two Fibonacci levels: 23,6% and 38,2%. Furthermore, this area is strengthened by 2019 lows, so it seems like a great occasion to take profit action, for some at least.

For a look at all of today’s economic events, check out our economic calendar.

SNB stops CHF’s Growth and Breaks it as an Indicator

In this case, more than 1.2% growth in a day is probably due to the Swiss National Bank, which protects the Franc from strengthening.

The Swiss Franc against the Euro rose by 4.5% since December last year, showing equable growth during the first four months of this year. However, about a month ago, the EURCHF found its bottom in the area just above 1.05. This is slightly below the 2017 low. The last time such levels were observed about five years ago.

There are several reasons behind the appreciation of the Franc to the Euro. The economy of the European region started slowing down right after the first volleys of trade wars. The currency market reacted even earlier, beginning to sell the Euro right after the first Trump threats. In two years, the Euro lost 12.5% to the Franc. The decline accelerated after the ECB started to soften the policy. At the same time, the SNB remained in the same positions, keeping a profoundly negative rate.

Earlier, from September 2011 the SNB introduced a ceiling for EURCHF at 1.20, which was abolished only in January 2015. Back then, this benchmark formed a pattern of behaviour of traders who bought EURCHF, earning on the interest rate difference and having the SNB as an ally on their side.

This story ended tragically for many traders and some brokers when the SNB suddenly gave up this peg. This time it operates without declaring precise support levels, but more and more traders seem to have caught the new pattern.

These SNB interventions also have other consequences. The Swiss Franc is often an indicator of demand for protective assets, showing growth at a time of high uncertainty in the markets. Extension of the Euro against the Franc pushes up the single currency, which in normal conditions corresponds to an increased demand for risks.

Now, this indicator looks broken. The current rebound of EURCHF from 1.0500 to 1.0650 may be due to the favourable market dynamics, as well as purchases of Euro and Dollar for the Franc by the country’s central bank. And it is weakly combined with the period of healthy and free moving markets, causing doubts that the markets have finally turned to growth.

by Alex Kuptsikevich, the FxPro senior market analyst.

The Currency Market Tuned for Positive

Growth in the number of cases on April 27 was the lowest in more than a month. Besides, the number of recoveries is increasing, and the number of patients in critical condition is falling. Australia, which has avoided a significant spread of the disease and many deaths, is beginning to ease restrictions for businesses.

This news spurred demand for risk assets and helped the Australian currency to rise to a 6-week high, recovering three-quarters of its decline from the peak levels of March.

Aussie

The positive dynamics of the Australian currency may be a manifestation of a broader business recovery process in the Asia-Pacific region, which was the first to suffer from the new coronavirus. Also, in 2008 AUDUSD reversed towards growth shortly before the beginning of a broader markets reversal. Then the driver for the Australian dollar was an extensive stimulus program in China. Now there are many smaller programs, but they are supported by softening of credit conditions from the People’s Bank of China. So the experience of 2009 may well apply to the current situation, making AUDUSD an indicator.

Swiss Franc

Elsewhere there is an interesting turn in the European currency market. EURCHF in the previous two weeks found its “bottom” near 1.05. Considering the nature of the movement, it was managed by the Swiss National Bank. SNB may use ceiling for EURCHF in attempt to stop the strengthening of the franc above 5-year highs against the euro. Earlier, on March 9 the USDCHF also turned sharply up from the lower bound of its 5-year trading range.

EURCHF rose yesterday by 0.8% as speculators may act on the SNB side selling the franc along with the markets. However, with tightening credit conditions on the markets, a fundamental stream may push EURCHF down again, forcing the central bank of a small country to protect its economy from an excessive strengthening of the franc.

It is interesting to know how many monetary authorities of other countries will perceive direct interventions at a time when everyone would like to push the competitiveness of their exports through currency depreciation

by Alex Kuptsikevich, the FxPro senior market analyst.

Trading the EUR as Markets Re-Focus on Economics

S&P500 futures now reside 0.8% lower, with June WTI -1.5% and this should weigh on broader Asian equity indices, even if the moves should be less dramatic than opens gone by.

Keep an eye on the ASX 200 as price action is certainly looking less favorable for bullish upside and after a solid run, we’re seeing the daily ranges contract and indecision to push price higher. A rising wedge in the mix for the pattern traders out there, married with a stochastic shift in momentum.

Can the Aussie market lead a potential reversal?

So, one to put on the radar, even if the lead from Wall Street continues to be positive, with the S&P500 closing +2.7% and the Russell 2000 +4.3%. despite a 2% closing decline in June crude.  US equity indices aside, we saw a largely unchanged move across the US Treasury curve, while breakevens (inflation expectations) fell 4bp, resulting in 5- and 10-year ‘real’ yields gaining 4 and 5bp respectively.

Gold was hit hard, with a downside move of 2% and the weekly chart closed with a rather ominous looking candle, with spot -0.3% on open today. One to watch for a kick lower that may resonate with price action traders, even if the fundamentals for gold are solid, and perhaps the Fed announcing it was halving the daily pace of bond-buying to $15b is playing into the move – recall, this is one-fifth of the initial size of Fed asset purchases.

Gold bulls will say $15b is still a huge number and ultimately the Fed’s balance sheet has moved to $6.36t, taking excess reserves to $2.64t and these actions should support gold.

Copper is 0.2% lower on open, after gaining 2.2% on Friday and is another that hasn’t gone unnoticed and the daily shows how ‘The Doc’ is at a very delicate stage in the run. I am compelled to sell this move, especially when you look at the 20-year chart and how price is pushing on the former trend.

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Is copper just following the S&P500 or did the market price in too much bad news for 2020/21?

Personally, I fail to see economics lifting the fortunes of the metal and I know many are looking at 2021 and suggesting better times are ahead. However, we are coming into the eye of the storm and as the market starts to focus less on virus headlines, or at least will be less sensitive to better news, we will focus more on the lasting effects on the economy and solvency. US earnings season should go some way to highlighting this as well.

There is little doubt that last week saw an accelerant in the debate around the disconnect between the financial markets and the real economy. Awful Chinese Q1 GDP, US retail sales, NY manufacturing, and Aussie business and consumer confidence – to name a few – and this week that view will be pushed further with traders eyeing German ZEW, EU consumer confidence, EU PMI’s, weekly US jobless claims and German ifo.

That’s ahead of US ISM and NFP’s on 2 and 8 May respectively, where I am already seeing calls for as many as 28 million job losses in April.

It’s hard not to think this week’s data will be ugly though, and with so much data out of Europe this week, it’s fitting that we also get a Eurozone Head of State meeting (23 April). Expectations for this meeting to be a volatility event are low, with a focus on near-term clues around debt mutualisation. There is also speculation (source: FT) that the ECB is pushing for a so-called bad bank, which would ring-fence the bad loans on the balance sheets of EU banks. Whether this gets much airplay at this meeting is yet to be seen, but with the EU Stoxx bank index at such precarious levels, it is something EUR traders will be keen to watch.

As will be the case for Italian debt, with a new fiscal stimulus expected from the Italian govt, and narrative from the credit rating agencies, with S&P and Moody’s due to review on Friday and 8 May respectively. Few expect a sovereign ratings downgrade at this juncture, but any widening of the BTP-German bund yield spread could weigh on the EUR.

Trading the EUR this week

Trading the EUR will be interesting this week then, especially when taken into context of the debate being had as to where to for the USD. Funding markets aside, you still pay carry to be short the USD and that often gets overlooked.

Options markets often give good insight, and I see EURUSD 1-week risk reversals (1-week call volatility minus 1 week put vol) headed into -0.84. This shows a slight increase in put vol buying, which offers sentiment that traders are seeing modest downside risks. 1-month RR sit at -0.94 and shows a rising belief in downside potential. Spot EURUSD has found sellers into the 20-day MA and the bears need EURUSD to clear 1.0816 for a test of the 1.0766 swing. It’s a tough pair to trade now, and EURCHF is perhaps the cleaner trade – that is, if bearish EU assets.

Certainly, we’re seeing that in risk reversals (white line), where options traders are big relative buyers of EURCHF downside volatility. The moves in spot into the low 1.05 shows the momentum here and options traders are betting on greater downside…the question is whether this is too much of a consensus trade. Price will tell, of course, although I have no position at this stage, but a number of savvy traders have told me they are expecting a bullish reversal this week.

Sign up here for my Daily Fix or  Start trading now

Chris Weston, Head of Global Research at Pepperstone.

(Read Our Pepperstone Review)

Why Euro Is So Strong?

A lot of people are wondering why the Euro is surging in the past few weeks. Coronavirus is spreading heavily across the Old Continent and nobody really have a strong plan how to stop it. What is more, many of the leading European companies will be heavy hit by the situation in China, where for example the demand for the new cars absolutely collapsed. And what is Euro doing here? Climbing to the highest levels since July.

Sometimes movements on the market does not really have an explanation. It is foolish to assume that every market movement needs to have a reason. Sometimes it is a combination of various factors. In the media, the recent strength of the EURUSD is contributed to the few factors.

First one, it is a weakness of the USD itself. FED cut rates and traders are expecting that it will cut those rates even further in the nearest future. On the other hand, ECB is doing nothing, saying that the stimulus to fight the virus should be fiscal, not a monetary one.

What is more, some traders are saying that it comes from the fact that investors from Wall Street are taking profits, selling stocks and in the same time, planning to move part of their capital outside of the US.

In addition to this, some experts say that rising Euro has to do with the reverse of the carry trades. During happy times, traders often engage in the carry trades, so buying currencies with higher rates (usually EM currencies) and selling those with lower rates (Euro in this case). Now, in times of uncertainty, traders want their money back and they are simply closing those trades, so in consequence, buying back the Euro. Good example of this can be seen on the Euro with Mexican Peso.

Furthermore, I would add a technical reason here. This week, EURUSD managed to break two major, long-term down trendlines, which definitely triggered some pending orders, accelerating the original movement.

On the other hand, Euro did not become a safe haven asset overnight. Some part of the movement can be contributed to the escape towards liquidity but Euro did not replace the Swiss Franc or Yen. At least for now and this can be clearly seen on the EURJPY and EURCHF charts, which are still close to the long-term lows.

Not all Safe Havens Equal Amid Coronavirus Outbreak

Gold has certainly lived up to its billing as a safe haven asset, testing the $1690 resistance level after having surged to levels not seen since Q1 2013. At the time of writing, Gold has advanced by about eight percent so far this year.

Bullion bulls have only gotten more tenacious over the past week, as the coronavirus’ spread outside of China prompts market jitters about the duration and global footprint of this outbreak.

Ultimately, market participants would want to know how much the coronavirus would impact global economic growth. Until the spread of the coronavirus is contained, investors are likely to continue seeking shelter in Gold until the Covid-19 storm clouds disperse.

Coronavirus-related concerns to keep EURCHF’s downward trend intact

Covid-19 has given the Swiss Franc yet another reason to strengthen against the Euro, with EURCHF finding a floor around the 1.06 long-term support level for the time being. Serving as a barometer of risk sentiment on the continent, the currency pair has weakened by over two percent so far in 2020. The Franc also boasts of a year-to-date advance against all G10 currencies except for the US Dollar.

With the China-dependent EU economy struggling to overcome these global challenges, it is unlikely that the Euro can stage a meaningful rebound against the safe haven CHF, which suggests that EURCHF is expected to remain suppressed over the near-term.

Covid-19 erodes Yen’s safe haven status

However, Covid-19’s spread in Japan has eroded the Yen’s status as a safe haven asset, with JPY having weakened against all G10 and Asian currencies so far in February, except for the Malaysian Ringgit. Although USDJPY has moderated since breaching the psychological 1.12 level, the pair is still trading around levels not seen since May 2019.

With the number of confirmed cases in Japan now exceeding 130, the coronavirus is compounding Japan’s economic outlook. Investors will closely scrutinize Japan’s latest data on inflation, industrial production, jobs, and retail sales, all due this Friday, and set usd/jpythem against the latest domestic developments around Covid-19, in determining the Yen’s next move.

For more information, please visit: FXTM

Written on 02/25/20 08:00 GMT by Han Tan, Market Analyst at FXTM


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Not All Safe Havens Equal Amid Coronavirus Outbreak

Gold has certainly lived up to its billing as a place of refuge, surging to levels not seen since Q1 2013 and is now testing the $1660 resistance level. Using the price action from 2012-2013 as reference, another leg up may bring the $1690 region into focus.

Bullion bulls have only gotten more tenacious since last week, as the coronavirus’ spread outside of China prompts market jitters about the duration and global footprint of this outbreak. Ultimately, market participants would want to know how much the coronavirus would impact global economic growth.

As things stand, Gold is on course for five consecutive days of gains, having climbed over nine percent so far this year. Until the spread of the coronavirus is contained, investors are likely to continue seeking shelter in Gold until the Covid-19 storm clouds disperse.

Coronavirus-related concerns to keep EURCHF’s downward trend intact

Covid-19 has given the Swiss Franc yet another reason to strengthen against the Euro, with EURCHF now testing the 1.06 psychological mark. Serving as a barometer of risk sentiment on the continent, the currency pair has weakened by some 2.3 percent so far in 2020. The Franc also boasts of a year-to-date advance against all G10 currencies except for the US Dollar.

With the China-dependent EU economy struggling to overcome these global uncertainties, it is unlikely that the Euro can stage a meaningful rebound against the safe haven CHF over the near-term.

Covid-19 erodes Yen’s safe haven status

Covid-19’s spread in Japan has upended the Yen’s status as a safe haven asset, with JPY having weakened against all Asian currencies so far in February, except for the Malaysian Ringgit. Although USDJPY has moderated since breaching the psychological 1.12 level, the Yen is still trading around its weakest levels against the US Dollar since May 2019.

With the number of confirmed cases in Japan now exceeding 130, the coronavirus is compounding Japan’s economic outlook. Investors will closely scrutinize Japan’s latest data on inflation, industrial production, jobs, and retail sales, all due this Friday (Feb 28), and set them against the latest domestic developments around Covid-19, in determining the Yen’s next moves.

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Markets Saw “Glass Half Full” In Recent Data

A quarter earlier, this slowdown was seen as a strong enough reason to sell out in the markets. Observers are now paying attention to signs of stabilization, as the growth remains at 6.0% YoY for the second consecutive quarter, also noting that industrial production and retail sales accelerated in December.

Chinese yuan got a new boost from this data. The USDCNH pair declined to 6.85, its lowest value since July 2019. Among the significant movements, it is also worth noting that the pair USDJPY has overcome the 110 mark – a psychologically substantial round level, as well as 29000 for Dow Jones.

On the currency market, it is worth noting the dynamics of the Swiss franc. On Friday morning, USDCHF and EURCHF rolled back from multimonth lows. The rally of the franc this week held on speculation that the SNB will reduce the scale of the FX interventions, curbing CHF growth. However, this rally moved against the stream amid declining prices for “safe” assets. Therefore, the reversal of the franc on Friday may turn out to be a more stretched move, rather than just a Friday’s profit-taking.

GBPUSD continue its struggle for the levels around 1.3000. The pair got support after the decline at the start of the week, despite the weak data. The retail sales figures, which will be published later today, may both bring the pair back to decline, confirming the weakness of the British economy, or contribute to the strengthening of purchases in case of retail activity recovery.

This article was written by FxPro

Chapter 6 “Expanding Trade.”

The Story?

But if there a story to be told, its the Phase One trade deal brings with it several issues for global trade. First, existing tariffs on the majority of Chinese goods remain in place. More importantly, if the overly ambitious purchase targets are reached, it suggests other countries will lose out as Chinese demand for their products rotates towards the US.

Still, the questions around the US tech in the supply chain remains unanswered. So, can China realistically hit these targets, especially when US firms are more motivated to produce abroad while China is trying to wean itself off a dependence on US technologies? Or does it even matter?? But it’s all here in black and white The Trade Agreement  chapter 6 is worth a read.  

But Phase one is not BAD  for risk and should boost global growth, plus the Feds will add all the money in the world to keep risk sentiment afloat, and when the ship lists, remember its an election year when US policy always turns positive. So onwards and upwards!!

China Credit

China December aggregate financing CNY2,100.0 bn vs. CNY1,650.0 bn consensus. December new yuan loans CNY1,140.0 bn vs. CNY1,200.0 bn consensus. December M2 money supply +8.7% y/y vs. +8.3% consensus. No noticeable impact on the forward market so far, although rates could nudge a little bit higher.

Asia currency markets

Fading short-term trade-war concerns and evaporating geopolitical risks continue to bolster global equity and credit markets. However, FX markets are more cautious; the rally in Asian currencies took a breather today.

The Chinese Yuan 

There was a test lower for USDCNH on the open, but no follow-through.

As we anticipated on this morning note, some clients are taking profit on their USD/EM downside positions, mainly in USDCNH and USDKRW, on the signing of the trade deal. I also think the proximity to LNY (I know it’s a week away) is causing traders to pare back risk as we know RMB liquidity will be sparse. With bullish targets reached, it’s unlikely we will see any significant move lower for no other reason than P2 discussion are unlikely to start until the LNY has passed.

My clients were asking me why I closed out of CNH so early, partly because I think we’ve hit a temporary floor on USDNCH, but primarily I don’t want to end up paying through the nose on a one-week funding squeeze carry. It could ease, but then again, it might not.

Plus, I’m weighing the odds of going dollar strategically long for only the 2nd time vs. the CNH since October 11. I think there is more risk tail risk than meets the eye, but no rush to trade given EM Asia vols continue moving lower across the board with the selloff accelerating in the last two days. One-month USDCNH is now at 3.9 from 4.6 at Wednesday’s open, 1m USDKRW at 6.0 from 6.6

The Korean Won

USDKRW is trading bid, with chatter on the street of corporate buying going through at the onshore fix market in the morning

The Indonesian Rupiah

Indonesian President Jokowi giveth and taketh after USDIDR gapped down to new lows as local bonds rally. President Jokowi hit the IDR rally pause button, saying a quick rupiah appreciation may hurt exports, so they must be cautious of rapid currency gains. Which immediately raised the yellow intervention flags and one-month USDIDR trades to 13700 from 13650 on this.

G10 Currency Markets

There has been a ton of USD selling across the board in the past 24 hours, but the market reaction has been “Meh.”

The Swiss Franc

Yesterday was the first day this year massive USD selling against EUR and CHF went through. The Euro flow is entirely uninteresting, given the tight follow-through ranges. But the fact there is any CHF buying at these lofty levels is the surprise indicating a considerable break down in the correlation with risk asset, which is both odd and bewitching. After all, positioning does seem to be the wrong way, but the resilience is unlikely to be offset by the SNB after the US Treasury report.  

British Pound 

Weaker UK inflation data yesterday has helped nudge market expectations of a BoE rate cut this month to above 65%. However, the UK PMIs on January 24 will remain important ahead of the MPC meeting on January 30. But I continue skeptical about building shorts as if we get a UK rate cut, it would not be the start of a cycle, but instead, a one-and-done insurance move before Mark Carney clocks out.

Despite the dovish BoE retort and weak data, policy transmission to FX markets has been poor lately. But the market could be getting that sense of déjà vu all over again that the opportunity of capital flows drifting back to the UK in 2020 is too big to ignore.

UBS Strategist Lefteris Farmakis suggests Governor Carney, rubberstamps a return to the ‘old normal’ for sterling, where the influence of economic data on monetary policy is its primary driver, and there you have it apparently  

Gold markets

The Stone Roses “Fools Gold” long hedge unwind trade is trying to unfold as gold is down around $5.00 buck from entry, although nothing to get excited about until the market clears the chunky stack of bids at $1550. So far, the 50 and 200 EMA have given way, but the bids are reasonably impressive down here.

Although we saw large dollar selling yesterday, there was a limited reaction, and at the heart of the trade deal, in my view lies a mildly positive dollar outlook on the margins over the short term. And I think this will be slightly negative for gold, but ultimately for gold, it’s where yields go and how the economic data evolves.

Time for the Stone Roses Trade, long gold hedge unwind “Fools Gold”?

Not all signals are aligned as risk sentiment endures, and while the long-term outlook for gold remains constructive, still, I’m struggling with the long gold strategy at the current price levels (1557-1558). In my view, the approach remains completely ill-defined at the moment, especially with S &P 500 making record highs. Until the yield on 10-year Inflation-indexed Treasuries starts to flash buying signals, bid on a deep dips remains a preferred strategy.

CTA’s are maxed long gold in their gold strategies, ETF positioning is stretched as is the IMM and given the Big gold trading banks’ ability to ramp up a gold paper and free up margins, the market could be ripe for a reversal if US bond yields don’t move lower quickly. It wouldn’t be the first time we’ve seen this set up in the last 4-6 weeks.

This article was written by Stephen Innes, Asia Pacific Market Strategist at AxiTrader

Strong Swiss Franc Might Become Tougher Challenge for SNB

The Swiss Franc strengthened beyond 1.075 per Euro for the first time since April 2017 on Wednesday after the U.S. Treasury put the nation back on its currency watch list and urged the country to adjust its macroeconomic policies.

In its report, the Treasury called on Switzerland to “more forcefully support domestic economic activity.” It said the country has been under using fiscal policy to spur growth. Switzerland has interest rates of minus 0.75%.

“As monetary policy approaches its limits, Treasury urges Switzerland to use its ample fiscal space…to cut taxes and pursue structural reforms to spur investment,” the report said.

On Thursday at 05:22 GMT, the EUR/CHF is trading 1.0755, up 0.0007 or +0.06%.

EURCHF
Monthly EUR/CHF

Swiss National Bank Responds

Some say Washington’s complaints over Switzerland’s currency policy may actually make it harder for the Swiss National Bank (SNB) to stay out of the foreign-exchange market. According to Bloomberg, strategists say Switzerland’s growth and inflation data may leave the SNB no choice but to buy foreign currency in an effort to curtail the Franc’s advance.

SNB data in August suggested the bank had pumped billions of Francs into markets, buying foreign currency in an effort to curb the Franc’s strength. A stronger Franc can make it harder for Swiss companies to export their products.

In response to Washington’s declaration, the SNB said on Tuesday that its interventions were designed only to offset the ill effects of too strong a currency. The interventions, which aren’t aimed at giving the nation a competitive advantage, are disclosed in an annual report, the SNB said in a statement.

“They are not aimed at conferring advantages on Switzerland by undervaluing the franc,” the SNB said.

Traders Bracing for Volatile Swiss Franc Swings

In the aftermath of the U.S. Treasury Department’s announcement on Monday, Forex traders are bracing for swings in the Swiss Franc in the weeks ahead. One-month implied volatility in the Euro/Franc Forex pair climbed to its highest level in nearly two months on Wednesday, up by as much as 11 basis points to 4.27%, according to Bloomberg.

Traders Challenging SNB to Make a Move

The U.S. decision “encouraged market participants to test the SNB’s appetite to keep intervening to dampen Swiss Franc strength,” said Lee Hardman, a strategist at MUFG Bank Ltd. in London. “We still think the SNB will continue to intervene after the U.S. Treasury announcement, but it has created some additional uncertainty in the near-term which the market is testing now.”

Slim Pickings

However, removing China from the currency manipulator list, a thorny issue for the mainland , eliminates one of the significant obstacles in the way to the next phase of the comprehensive agreement.

On the more one-sided tails for Asian FX, particularly in the more trade/ growth/tech-oriented North. China is expected to toe the line on any weakness in the RMB as we move forward to negotiating Phase Two.

Meanwhile, a more on the nose surprise, like an explicit roadmap for a further rollback in tariffs, could open the way for more definite appreciation where the CNH and the KRW will shine.

The market is more convinced about the direction of travel than it is about the shape and form of the next step of the deal, so market momentum will be critical to sustaining the rally as will trade calming headlines. Of course, none of this would have been made possible without the Fed’s dovish impulse, and given the lack of policy uncertainly as we move through 2020, the “low for longer” narrative will continue to support risk markets.

So far, so good from corporate America with earnings beats from both JPMorgan and Citi. JPMorgan’s net income for 2019 rose 12% after making $8.5 bn in the fourth quarter, far better than the $7.45 bn expected by analysts who submitted forecasts to Bloomberg. Trading revenues rose 56% y/y to $5 bn, led by an 86% rise in fixed income.

Citi, meanwhile, posted quarterly revenue of $18.4 bn, well ahead of the $17.9 bn that Wall Street had expected and up 7% from a year ago.

Oil markets

After falling for the past few sessions, on the continued perception of easing tensions in the Middle East, Oil prices initially moved gingerly higher overnight on trade deal optimism. As well, traders received new bullish fundamental news from the demand side, with Chinese customs data showing crude imports were up 10% in 2019. And despite some base effect in the overall Import/Export data, overall, the data points to the domestic Chinese economy in a continuing uptrend helping sentiment ahead of the signing of a phase 1 trade deal today.

Investors are incredibly concerned about the well documented non-OPEC supplies coming to market in 2020, and those worries came to the fore as oil prices headed lower after a bearish to consensus inventory build was reported early this morning.

Gold markets

Safe-haven assets are again under pressure, with treasuries weaker across the curve. Gold weakens as risks recede but continue to find buyers on dips, and the thought of resurfacing of threats continues to support prices, but for the next little while, it’s hard to see gold markets trade anything but sideways.

Gold markets eased on the cusp of the “phase one” trade agreement between the US and China as equities are holding firm, and the USD remains stable in G-10.

No impulse for gold from the US CPI data as the inflation trend was broadly neutral for gold. According to the Commerce Department, headline CPI rose 0.2% m-o-m in December, which was just below consensus expectations of 0.3% (Bloomberg). Core CPI rose 0.1% m-o-m, which was also just below consensus expectations of 0.2%

Currency markets

The Euro

With all the demand for Yuan, why isn’t the EUR higher? This is the most asked question from my clients that are for the most part left scratching their heads as to why the USD is not weaker in G-10

US government’s public consultation on EU tariffs has closed, and the Trump administration’s action is imminent, which could end up one of the more significant tail risks for the Euro in months ahead. Bloomberg reported it best that the U.S., EU Square Up for Trade Brawl After Trump’s China Deal,” With that in mind. Europe’s trade chief flew into Washington yesterday for talks; ties have frayed over issues from French tax to aircraft

The Japanese Yen

Overall, nothing has changed, and buying on dips is still the way forward. Expect the buyer in around 109.80 with more interest ahead of 109.50 and only a break of 109.00 to change the current scenario. As for short term dynamic, USDJPY touched 110.22 yesterday on Fixing demand before giving way to export seller as 110 continued to be a fundamental psychological level for both exporters and speculator market participants

I was twitting to my Tokyo based FX trading followers yesterday as everyone was trading USDJPY, which is excellent to see.!! When I was trading forex USDJPY for Sumitomo Bank, there is a well-known but still amazingly persistent tendency for USDJPY to go down in Tokyo, possibly due to exporter and reversion selling and up in New York on speculative demand.

With Japanese investors very much involved again in USDJPY since the turn of 2020. And primary using reversion strategies, so it will be worth keeping an eye on this tendency. The USDJPY massive volumes going through the big Japanese domestic retail brokers very much influence USDJPY in Asia.

Euro Swissy cross

EURCHF spot has seen big selling on the US Treasury’s semi-annual report, which put Switzerland back on the monitoring list for currency manipulation, and gamma continues to go better bid. A lot of market participants are caught long and wrong EURCHF, but stops are thought to be 1.07 level.

The Yuan

The move has run further than most bullish expectations anticipated based on the current level or anticipated level of tariff rollback, suggesting markets could base and probably consolidated in the near term. But equity inflows have caught more than a few traders by surprise. However, yesterday Inflows into the onshore stock market slowed, and if this continues, it may take some pressure off of funding, and USDCNH could gravitate 6.9 level.

With funding, a bit tight due equity inflows, and possible CNH overshoot, as a result, Traders will be on the lookout for potential PBoC injections ahead of the Chinese New Year holidays. Because of the overshoot, profit-taking was always on the cards and provided an excellent level for long USDCNH defensive positioning as the market pivots to phase 2 with stops just below 6.85

The Ringgit

The Ringgit will continue to track the underlying movement of the Yuan, but inflows have dried up a bit on the cusp of the phase one deal as there remains a lot of uncertainty about the road map for step 2 in the trade deal process. But on a positive note, China is expected to toe the line on any weakness in the RMB as we move forward to negotiating Phase Two, which should provide a floor on any MYR weakness

This article was written by Stephen Innes, Asia Pacific Market Strategist at AxiTrader