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.

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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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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

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

Keep Calm, Less Than 24 Hours To Go.

I have no details at this time, but like yesterday’s opening narrative, I expect this to be the norm as we will be on heightened risk alert around possible rogue or proxy escalations given that  the increased level  of Anti-US sentiment is  running thick amid  Iran’s crescent of influence

Other than the widely expected announcement that a Chinese trade delegate led by Vice Premier Liu is heading Washington to sign in to affect the P1 trade deal, there hasn’t been a great deal else for markets to feed off. So, today’s critical payroll data comes as a most welcome distraction and will provide an essential update on the pace of US job gains. With US economic growth mostly dependent on the consumer, a healthy labor market is crucial to any constructive “risk-on” narrative. 

With the market backdrop remaining supportive – namely, improving macro, central bank easing, and receding tail risk around Trade, Brexit, and the Middle East, the path of least resistance remains up. 

If truth be told, I can’t wait for this hectic week to end, And I don’t think I’m alone in that view, so traders will be excused if they decided to sit this one out electing to do little more their pre NFP position housekeeping chores.

Oil markets

Oil markets are trying to stage a come back after prices continued to sell off hard in the wake of President Trump’s de-escalation White house address. And what seems to happen so often in oil markets, when things turn upside down, they head south in a big way. This week’s additional piling-on to the crude market was the EIA inventory data showing a surprise build in oil and more substantial than expected builds in gasoline and distillates.

The compounding effects have been pretty gnarly for oil bulls over the past 48 hours. And while it is challenging to quantify what, if any, residual risk premium is left priced into crude markets for political risk. However, given prices had retraced back to mid-December levels overnight. I think that infers that there is now very little risk premia left to sell-off.

The precedent of the attack on Abqaiq in September was the template the market has chosen to model this week with low 70’s on Brent capping out buying appetite and the initial price response reversing despite the lingering geopolitical effect likely to persist for a few months. So, with Brent at $65, the market is probably not fully pricing in supply risk factors. And with this risk skewed to the upside with the chance of proxy or rogue threat of disruption to physical supply still elevated, we could see a floor start to build around current levels. At the same time, traders will now turn the focus back on the relatively pedestrian views around trade and data, which remain positive for oil. 

Gold Markets

A key factor driving gold was the turnaround in oil as both commodities remain highly correlated to middle east geopolitical risk. But for gold, unlike oil markets, a variety of underlying uncertainties around data, trade, the Fed on hold narrative, and even the lingering effects of the middle east fracas has cushioned further losses so far. In addition, with the house in gridlock, President Trump has two areas of policy control under the commander in chief powers – trade and military policy. So, it could be wise to assume these areas will remain in the market’s focus for some time. And the uncertainty around these shifting dynamics given the President’s mercurial nature will likely support gold for the time being.

With that said, it might be worth keeping an eye on the new war powers measures legislation tabled by Pelosi, which would limit Trump’s power to take military action against Iran.

However, with a stronger USD, surging equities, and higher US yields greeting Asia market this morning it makes for a compelling reason to sell not buy gold.

Despite the fast money meltdown to $1541 oz on the back of a considerable “risk-on” cross-asset move, yesterday’s net flows were still into buying territory, so it seems like the technical levels appear to be good contrarian entry points for gold bulls. On the technical scrim, look for $1550/oz pivot with $1530 the next primary level of support.

Critical to that long gold view, traders are keeping an eye on the US dollar, which is currently being viewed as the global barometer of risk Finally, we could traders adopt a wait and see approach as the market pivots to tonight’s critical NFP report.

Currency markets

FX flows this week have been characterized by risk-on buying of USD.

One notable exception that I’m a bit puzzled by is CHF, which is trading very bid as large flows are going through the market during European hours despite the risk-on tone. Other than to suggest hedge funds view the franc as fair value at current levels and an excellent hedge against all the ills of the word, I’m a bit perplexed.

The Euro and Swiss Franc 

None the less, there has been a lot of interest in EURCHF topside structures. The feeling here is that since the Swissy benefitted disproportionately from recent tensions in the Middle East, perhaps because Japan’s dependency on oil imports from the Persian Gulf (c. 85%) made the yen an unreliable haven. So, as the middle east tensions de-escalated, the EURCHF could fly on a more pronounced long CHF unwind. But it hasn’t worked out that way so far. 

The Japanese Yen 

Long USDJPY has worked out well, and I still don’t see any reason not to play if from the long side. The markets should remain in buy on dip mode with stop losses getting moved up to 108.50 now. On the topside, I expect a lot of two-way interest to come in around 110, but it looks like a matter of time before we test it.

The Australian dollar and the Yuan 

If you were looking to get into the global growth for 2020 trade, it could be worth looking at the divergence in CNH and AUD as the Aussie has been hammered over the past four days on bushfires and Iran fears while the Yuan has remained firm. With the CNH likely to bounce after signing of the trade deal positively, the AUD shouldn’t be that far behind, and the correlation could play some significant catch up in the days ahead. Even more so with risk on lights flashing green

The Malaysian Ringgit 

With regional risk sentiment improving and the US-China trade deal still on course to be signed January 15, despite softer oil prices, the Ringgit will likely coattail the Yuan positive skew into the P1 trade dea

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

EUR/CHF is Bearish Below 1.1050

Dear Traders,

The EUR/CHF has reached the bearish trend line confluence and the price is overbought with ecs.Oscillator so we might see a drop.

1.1035-55 is the zone where the price should reject if it still wants to remain bearish. 1.1062 held the price from going up, and we could see a rejection — trend line with ecs. Oscillator dot show rejections so pay attention to 1.1022 as the first target. 1.1008 and 1.0994 are next if the trend holds. Only above 1.1080 we might see a deeper correction in the pair that might jeopardise the bearish trend.

The analysis has been done with the CAMMACD.MTF template.

For more daily technical and wave analysis and updates, sign-up up to our ecs.LIVE channel.

Many green pips,
Nenad Kerkez aka Tarantula FX
Elite CurrenSea

Key Risk Events for June

I hope it helps put a few key events on your radar I feel could shape the narrative.

Chart to watch

EURUSD (daily chart) – It’s hard to be long EURUSD with the ECB meeting in play tomorrow (21:45aest), but price is currently testing the neckline of the double bottom (1.1264), and with triple divergence, one of the best reversal indicators, potentially playing out, we could be eyeing a technical long for a move above 1.1400 shortly. This could have far-reaching implications for global markets, albeit a bit more work needs to take play out in the move. 

Looking ahead at the key risk events for June

ECB rate decision (6 June)

In reality, no one expects the ECB to change interest rates, but we could easily see Mario Draghi, once again, push out the banks forward guidance on when rate hikes are expected to go up. Currently, the bank has committed to keeping interest rates at current levels until at least the end-2019. However, the risk is that this guidance is pushed out into 2020, or we could even see the calendar-based guidance removed altogether. But a failure to push out its view on rates could be seen as a EUR positive.

EURCHF weekly – Will this bounce off or crash through key support?

If we look at EU inflation expectations (see chart below), an input the ECB look at closely, we can see expectations have fallen to 1.31% and the lowest levels since 2016. So, one questions how the ECB can be anything but dovish and is a growing consideration for the ECB, with the market questioning if we get colour on the ECB’s appetite to restart its asset purchase program. There will also be focus on any further clarity on the targeted liquidity program to European banks.
 
The ECB aggressively lowered its growth forecasts in the March meeting to 1.1%, so it would surprise if they went downgraded expectations again, but the market will be keen to assess any new changes to its growth and inflation forecasts.

(Source: Bloomberg)

May Nonfarm Payrolls (7 June 12.30 GMT)

US Nonfarm payrolls US Unemployment rate

Forecast 183,000

Previous 263,000

Forecast 3.60%

Previous 3.60%

Traders always anticipate the US non-farm payrolls report as a potential volatility event and given the growing calls for tougher economic conditions in the US, the last thing the USD bulls want to see is an unexpected deterioration in the labour market. We can see that the consensus estimate sits at a healthy 183,000 net jobs (economist range 215,000 to 80,000) created in May, which is a slight discount to the six-month average of 209,000 and one-year average of 214,000. As always, the magnitude of moves in the USD and US equity markets will be driven by the extent of the beat/miss relative to this consensus figure.

Daily chart of the USD index/USDX

 
The unemployment rate is probably the more influential variable to the Fed though, given the importance of the labour market for Fed thinking. Again, it seems unlikely to concern traders too much unless the unemployment rate comes in above of 3.8%, which would be a surprise and one would then have to consider the influence of the participation rate here. The fact that the US unemployment rate sits at a multi-decade low unemployment rate is simply not resulting in significant wage pressure, which is the backbone of the Fed’s assessment of inflation. With this in mind, keep an eye on average hourly earnings which is expected to remain at 3.2% and again, if this comes in hotter or colder could have an influence on the USD.

  • White histogram – Net monthly change in US payrolls
  • Red line – average hourly wages (YoY)

Source: Bloomberg

EU Summit (20 June)

With Mario Draghi due to step down as ECB president on 31 October, there is much speculation as to who could be Draghi’s replacement. The market has seen time-and-time again that when it comes to producing dovish surprises, Draghi wears the crown as king of the central bank doves. It has become almost too predictable that the EUR will fall in the wake of Draghi’s speeches. There is some market chatter that we could get an announcement of Draghi’s successor at this EU Summit, and with monetary hawk, Jens Weidmann considered a front runner, perhaps this Summit could prove to be a volatility event for the EUR and German DAX.

With genuine concern that the ECB lacks have the monetary toolkit to navigate the Eurozone through another major economic downturn, who leads this organisation really matters to FX pricing.

G20 meeting (28/29 June)

With trade relations at the epi-centre of markets, and Trump seemingly taking on all comers, the market is looking for a circuit breaker, and an excuse to cover shorts and put risk back on the table. While it hasn’t been confirmed, there is much speculation President Trump and Xi could meet face-to-face in Japan, with the risk skewed that we finally see some convergence in the narrative and a bond to achieve a deal. At this stage, Trump’s action is breeding huge uncertainty not just in markets, where the talk has moved from ‘if’ to ‘when’ we will see the first rate cut in this cycle from the Fed. But, more prominently at a corporate level, so how Trump interacts with Xi, should it play out makes this event a must-watch.

OPEC meeting (Vienna – 25/26 June)

Oil markets have been savaged since 23 April, with traders focused on poor China demand indicators, amid the backdrop of broad negative financial market sentiment, better supplied US inventories and supply dynamics driven by risks in Iran, Libya and Venezuela. Compounding the poor sentiment towards crude, Russian authorities have raised concerns about its ongoing commitment for production curbs of production.
 
With WTI crude (XTIUSD) eyeing a possible test of $50 and Brent $60, the market will be keen to assess if OPEC tries and get in front of the move lower and support prices. How crude tracks from here will not just have huge implications for equities, but, in FX markets, a lower oil price means headwinds for the NOK, CAD and a lower USDJPY, given the impact oil has on US inflation expectations. And, vice versa.

Source: Bloomberg

The June Federal Reserve meeting (19 June)

Arguably the marquee event through June, and an event risk for most of Pepperstone’s tradable markets. It’s incredible how quickly things have deteriorated, with US interest rates now pricing 2.5 rate cuts this year. While some would say the move in rates pricing has gone a little too far, we head into the June FOMC meeting with the implied probability of a cut now set at 20%, although it feels far too early to really expect a cut and we look at the 31 July FOMC meeting as a truly ‘live’ meeting, with expectations for a cut currently at 62%.

The influence US interest pricing is having on USDJPY

  • Red line – Interest rate cuts (basis points) priced between June and December 2019
  • Yellow line – USDJPY

Fed vice chair Richard Clarida offered insight in a speech (on 30 May) that the US economy “is in a good place”, however, he did caveat that by saying that should inflation remain below target and global conditions change, then the Fed should assess its policy stance. St Louis Fed president James Bullard went one further with narrative (on 3 June) that “a downward policy rate adjustment may be warranted soon to help re-centre inflation and inflation expectations at target and also to provide some insurance in case of a sharper-than-expected slowdown.”

Importantly, we have also heard from Fed governor Powell (4 June), who detailed “closely monitoring the implications of these developments for the US economic outlook and, as always, we will act as appropriate to sustain the expansion, with a strong labour market and inflation near our symmetric 2% objective.”

The idea the Fed will act as “appropriate” is interesting and while it doesn’t suggest the bank are looking at cutting anytime soon, if economics do respond then we will see cuts. The June FOMC meeting should explore this in more detail with the help of additional data.

Chris Weston, Head of Research at Pepperstone

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PrimeXBT Bridges the Divide Between Crypto and Traditional FX, Indices and Commodities Markets

As the demand for more sophisticated trading features grows within cryptocurrency markets, and as traditional traders continue to explore the unique opportunities present within digital currencies, PrimeXBT is now positioned as a global bridge between these two groups of asset classes.

PrimeXBT already provides unprecedented access to advanced cryptocurrency-based features and functionality such as the ability to short the top crypto-assets, ultra-fast order execution and aggregated liquidity from 12 sources concurrently.

The inclusion of traditional financial instruments signals the expansion of the platform’s offering to include access to opportunities at the cross-section between traditional and crypto-asset markets.

These new listings are now live at PrimeXBT and include:

Forex 

With global trading volumes of over $5 Trillion daily, PrimeXBT has tapped into the largest money markets in the world and now provides crypto-asset traders with access to global forex pairs, all within a single interface.

Forex has a low correlation with crypto-asset markets, providing traders with alternative trading options during downwards digital currency trends.  This allows traders to diversify strategies and holdings and provides a robust risk-balancing mechanism for portfolio selection.

PrimeXBT now lists forex trading pairs for:

  • USD (AUD/USD, EUR/USD, GBP/USD, USD/CAD, USD/JPY, USD/CHF)
  • EUR (EUR/AUD, EUR/CAD, EUR/CHF, EUR/GBP, EUR/JPY, EUR/USD)
  • AUD (AUD/USD, AUD/CHF, AUD/JPY, AUD/USD, EUR/AUD, GBP/AUD)
  • GBP (GBP/AUD, GBP/CAD, GBP/CHF, GBP/JPY, GBP/USD, EUR/GBP)
  • CHF (AUD/CHF, EUR/CHF, GBP/CHF, USD/CHF)
  • JPY (AUD/JPY, EUR/JPY, GBP/JPY, USD/JPY)
  • CAD (CAD/USD, EUR/CAD, GBP/CAD)

Unlike crypto, forex markets are low volatility. So to maximize profit potential PrimeXBT offers up to 1000x leverage to all FX trading pairs.

In addition to this, spot contracts for Spot Gold USD (XAG/USD) and Spot Silver USD (XAU/USD) are also now available on PrimeXBT.

Commodities

Further cementing PrimeXBT’s entry into global traditional markets, commodities trading has now also been incorporated into the platform.

The start of this year has already seen strong growth in oil prices, and the addition of further non-cryptocurrency-correlated financial instruments, such as these, provide traders with additional opportunities to monopolize on divergences between the asset classes.

PrimeXBT has now added CFDs for the following commodities:

  • UK Brent Oil (BRENT/USD)
  • US Crude Oil (CRUDE/USD)
  • US Natural Gas (NAT.GAS/USD)

Indices

Complimenting the integration of forex and commodities, many of the world’s leading stock markets are now also accessible directly via PrimeXBT.

Flexible and agile redistributions of funds between crypto-assets such as Bitcoin and national stock indices allow for the development of investment and trading strategies that expose significant new opportunities.

PrimeXBT now offers access to the world’s leading indices with leveraging of up to 100x:

  • US Tech 100 (NASDAQ)
  • US SPX500 (SP500)
  • Germany 30 (GER30)
  • Hong Kong 50 (HK-HSI)
  • Australia 200 (AUS200)
  • Japan 225 (NIKKEI)
  • UK 100 (UK100)

Despite PrimeXBT’s debut as a crypto trading platform the team’s broad experience originally stems from within traditional financial markets. A Prime XBT spokesperson explains:

“Although we got our start in the cryptocurrency market, we built PrimeXBT on decades of experience from traditional financial markets. Traders are starting to see that experience come through on our platform now through these new financial instruments, allowing traders to try their hand in new markets and further diversify their investment portfolios.”

This experience has lead to PrimeXBT’s value proposition consistently reflecting what traders truly want and need. Traditional traders are gravitating towards lucrative crypto investment opportunities, likewise, crypto-asset traders and markets are maturing to incorporate more advanced techniques and strategies.

PrimeXBT simultaneously provides traders with tight spreads (on average 0.7 pips), with the highest leverage allowance and some of the lowest commission fees (just 0.5% to all trades and assets).

What’s more, there are no KYC verifications or sensitive data required to set up a full-featured trading account.  This is unheard of within traditional financial brokerages and acts to significantly lower the barrier to enter into the world’s most popular and profitable investment opportunities.

To learn more about PrimeXBT and the favorable trading conditions it presents, head to https://PrimeXBT.com.

EURCHF With a Fresh Buy Signal. GBPUSD Drops From the Local Highs

Traders were hesitating but the demand finally won. For a while, the bullish sentiment was under heavy pressure. That happened during the ECB conference but eventually, buyers won that battle. The reversal is a part of a bigger double bottom formation on the crucial long-term horizontal support (green). The buy signal is ON here!

Now Cable, which was pretty busy during all those votes in the UK Parliament. The sentiment yesterday was quite positive but the American session brought us a stronger reversal. GBPUSD managed to break the short-term support and later, the dynamic up trendline (black). Price Action is strong here, broken up trendline is today being tested as a resistance. With the price staying below, the sentiment is negative.

The last instrument in this short report is Gold. What a great performance from the buyers! We were expecting that for the past few weeks. After the breakout of the crucial resistance on the 1307 USD/oz, the buyers are fully controlling the situation. 1307 USD/oz should be now the closest support. The aim is on the 1357 USD/oz. Chances that we will get there are pretty high!

This article is written by Tomasz Wisniewski, a senior analyst at Alpari Research & Analysis

Technical Overview USD, EUR, AUD & CAD: 24.01.2019

USD/CHF

USDCHF’s pullback from 0.9935 can’t be considered as a sign of its strength unless the pair clears 1.0005-10 horizontal-region on a daily closing basis, which in-turn highlights the importance of 50-day SMA level of 0.9920 and 0.9900, including 200-day SMA as immediate supports. However, pair’s declines past-0.9900 might not hesitate recalling the 0.9860 and the 0.9800 on chart. In case prices rally beyond 1.0010, the 1.0040 and the 1.0085 could quickly appear as quote. Additionally, pair’s successful rise above 1.0085 can flash 1.0130 on buyers’ radar.

EUR/CHF

Unlike USDCHF, the EURCHF bounces off the near-term support-line, at 1.1270 now, which in-turn highlights the importance of 1.1315 and the 1.1355-60 resistance-region. Given the pair’s sustained rally after 1.1360, the 1.1390, the 1.1405 and the 1.1435 are likely consecutive resistances to gain market attention. Meanwhile, break of 1.1270 could trigger the pair’s dip to 1.1240 and then to 1.1210 whereas the 1.1190 and the 1.1180 might entertain sellers then after.

AUD/CHF

Failure to clearly cross the 50-day SMA seem dragging the AUDCHF to 0.7030 support, breaking which 0.6960 and the 0.6930 can offer intermediate halts during its drop to 0.6880-70 area. If at all the pair keep trading southwards under 0.6870, the early-month low of 0.6675 may become Bears’ favorite. Alternatively, 50-day SMA level of 0.7130 may restrict the pair’s adjacent rise prior to escalating its recovery to 0.7190 and the 200-day SMA level of 0.7240. Though, eight-month old resistance-line, at 0.7325, could challenge the Bulls past-0.7240, if not then 0.7400 might please them.

CAD/CHF

CADCHF still follows the “Rising Wedge” break indicating the pair’s slump to 0.7340-45 support-zone but 0.7415 & 0.7375 can act as buffers. Should prices slid below 0.7340, the 0.7300, the 0.7245 and the 0.7175 may be aimed if holding short positions. On the upside, 0.7490 and the 0.7515 could confine the pair’s immediate rise. Given the pair’s ability to surpass the 0.7515 barrier, the 0.7550 and the 0.7585 may lure the optimists.