Not only the Turkish Lira – The Indian Rupee Hits All Time Low

This week the Indian Rupee crossed 70 for the first time in its history. India’s currency crossed the psychological level on Monday and traded as high as 70.80 on Wednesday. The Rupee is just one of several emerging market currencies to come under pressure in the wake of the Turkish Lira’s collapse. However, the Rupee may be vulnerable to further weakness regardless of the weakness of the Lira.

The Turkish Lira is now down about 35% since the beginning of the year. The Argentinian Peso has lost close to 37% of its value in 2018 after the country was forced to turn to the IMF in May. Other emerging market currencies losing ground are the Indonesian Rupee, the Philippine Peso, the Brazilian Real and the South African Rand.

However, not all emerging market currencies are losing ground. The Mexican Peso has gained ground in 2018, and most South East Asian and East Asian currencies are holding their value.

Almost all the countries that have seen their currencies come under pressure are those with wide, or widening, current account deficits. In India’s case, analysts have been worried about the deficit for some time, and these fears were confirmed when the commerce ministry announced on Tuesday that it had hit a five year high of $18 billion in July.

The current account deficit is growing due to rising oil prices and a surging USD, and FDI and foreign institutional investment flows are not high enough to offset the widening deficit. The rising oil price alone could see India’s oil import bill growing by $26 billion in 2018 and 2019, and is unfortunately likely to offset any export gains due to the weaker currency.

The central bank has also raised rates twice, in June and August, the first rate hikes in four years. It may hike rates further if the currency continues to weaken, though it will be cautious about doing so if economic growth slows.

India ratings and research have also just lowered its growth forecast for the year to 7.2%, from 7.4% sighting rising inflation due to oil import costs.

USD/INR Weekly Chart (Source: Tradingview.com)
USD/INR Weekly Chart (Source: Tradingview.com)

Going forward, the most important factors to watch will be the oil price and the strength of the USD. While developments in the domestic economy will play a part, they are likely to be outweighed by these external factors. Some analysts are forecasting the Rupee to reach between 72 and 73.55 by year-end, based on current fundamentals – but these can change rapidly.

If current fears over emerging market currencies ease, the Rupee will probably retrace to an extent. Short term support may come into play at 69.70, and if that doesn’t hold, the breakout level at 69 could be retested. It seems very unlikely that the currency would strengthen below that level without a substantial change in the economic environment. A likely trading range for the remainder of 2018 may be 69.70 to 72.

While the selloff of the Turkish Lira has played its part in the weakness we are seeing in the Rupee, fundamentals are equally to blame. The Rupee is not one of the currencies that is most influenced by emerging market sentiment and domestic factors rather than speculation play more of a role in the price.

Traders should, therefore, pay as much attention to oil prices and domestic developments as they do to sentiment or technical levels.

Toxic Turkish Lira in A Free-Fall, Can Push EUR/USD to $1.04

The collapse of the Turkish lira spreads its toxic influence on the European and EM financial markets. Asian bourses have been losing more than 1% on Monday morning amid the increased demand for safe-haven assets. The futures on S&P500 lose 0.1% at the start of Monday trades, falling for the fourth trading session in a row. 

In addition, most of the emerging countries’ currencies, including the Mexican peso and the South African rand, are under pressure. The Turkish lira has lost 11% to 7.11 per dollar since the start of trading on Monday but somewhat stabilized after the country’s Minister of Finance gave an assurance that the government was working on a draft plan to stabilize the situation.

Thus, the epicenter of problems has moved from the Asian region and trade conflicts between the USA and China, the demand for the yen as a currency-haven has again increased. On Monday morning it adds to almost all the most traded currencies, including the dollar.

The technical analysis is on the side of dollar bulls. The dollar index came out of the trading range of the previous four months with a powerful movement, which is a strong signal demonstrating the continued growth of the American currency. The targets for the bulls may be near a psychologically important level of 100, which is about 4% higher than the current mark. It is possible that we can see an even more decisive offensive of the American currency.

The common currency was also hitOn Monday morning the EURUSD loses 0.2% after a decrease of 1% on Friday. The relationship between the Turkish economy, which goes down the drain following the lira, and the EU financial sector is capable of generating speculation that the ECB can change its plans to raise rates by deferring them to a later date than the summer of 2019. The EURUSD collapse last week could be a serious signal to decrease for the single currency. 

It is technically worth paying attention to the “head-and-shoulders” formation. The falling below support line at 1.15 last week marked the overcoming of the “neckline” in this technical figure, which opens the way to the area of the start 2017 lows, near 1.04.


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The strengthening of the dollar has an only limited impact on the gold. The precious metal dropped by $1208 per ounce from $1217, losing 0.8%, but by now it managed to stay above the recent lows for August at about $1205. Taking this mark can open the way to its deeper immersion. However, it is worth noting that the sale of the gold has lost its momentum, and after the consolidation, a reversal to growth can be expected. This growth can be supported not only by the seasonal demand but also by the investors’ flight from developing markets to safe-havens.

This article was written by FxPro

Markets Summer Lull Can Be Broken by Major Central Banks, Emerging Markets Currencies Under Pressure

The currencies of developed countries are moving within a narrow range at the beginning of the eventful week. The dollar index is around the mark of 94.50 and has been trading for two months in a range of slightly over 1% around this level. This quiet trading environment can be broken this week after the announcement of the decisions took by the Bank of Japan, the Fed, and the Bank of England, as well as the publication of the U.S. employment data.

Developed markets currencies are experiencing a period of low volatility after the dollar growth period from the end of April to the end of May. The closest market focus is how the Bank of Japan adjusts its policy. More hawkish tone can push down the Asian markets at a time when they are vulnerable amid the fears of trade wars.

With the meetings of the largest central banks and important statistics, the week ahead is able to open a period of increased volatility after a long period of a summer lull. Earlier, the Fed’s head made it clear that the U.S. central bank is set to tighten its policy. Market participants will closely monitor if the Fed is set to raise its rates in September while remaining committed to the 4th increase in 2018.


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The Fed’s hawkish rhetoric can increase the difference in the dynamics of developing countries’ currencies. Unlike the major world currencies, in the EM there has been a noticeable differentiation in recent weeks.

The Russian rubble enjoys the continuation of high oil prices period. The Mexican peso gains after the elections last month and on the expectations of the profitable negotiations on NAFTA.

At the same time, the Chinese yuan has been falling for the recent two months at its highest rate in many years on easing the PBC policy and on fears about the consequences of trade wars with the United States. The Turkish lira declined to all-time lows due to the threat of the U.S. sanctions and after the Turkish CB had kept the rates against a widely expected increase last week, which was perceived as a loss of independence of the local regulator. The Argentine peso is also under attack, despite the assistance from the IMF to the country. The Indian rupee is close to the historical minimum to the dollar, in spite of the strong growth of the economy.

The dividing line for the currencies of developing countries became the balance-of-payments factor. Turkey, India, and Argentina have a significant deficit and are dependent on the inflows of capital from outside. China formally has a surplus, however, the economy of the country’s regions depends on outward investment, requiring favorable investor relations.

This article was written by FxPro

Trade War or Trade Dispute, Whatever, Strong U.S. Economy Offsetting Concerns Over Trade Policy

Stocks jumped on the opening on Tuesday as investors ignored concerns over a trade war between the United States and its trading partners in China, Mexico, Canada and the European Union. Well, at least that’s what the headlines read.

Any seasoned trader should know that the trading session before the U.S. Fourth of July holiday, or for that matter the last trading session before Christmas and New Year’s Day are notoriously known for well-below average volume. And low volume usually means that like a minefield, the markets are full of danger in the form of bull and bear traps.

Momentum traders should be aware of this phenomenon because they can be unforgiving. So be careful buying strength and selling weakness today. All it takes is a bad day trade to turn into a long-term investment.



Trade Dispute Score Card

With the U.S. markets within striking distance of their all-time highs and China’s Shanghai Composite touching a two-year low while entering a bear market. I think the “trade dispute” scorecard is showing the U.S. winning so far. But there may be causalities on both sides before it’s all over so why keep score now especially with a looming July 6 deadline for an additional 25 percent tariff from the U.S. on $34 billion worth of Chinese goods from more than 800 product categories.

So far I’ve seen a lot of name calling from analysts with some classifying President Trump as a bully, but so far big money continues to flow into the U.S. Dollar and money speaks louder than words. Always follow the money.

Notice the use of “trade dispute”. We are at risk of a full-blown trade war, but this is not a trade war. And what better time to start a trade dispute when by most measures, the U.S. economy is sailing along and the stock market is holding up remarkably well despite mounting protectionist tensions between the U.S. and its trading partners.

Take for example yesterday’s release of the latest U.S. ISM Manufacturing PMI survey. It showed that the U.S. widened its lead over the rest-of-the-world economy during June. The ISM Manufacturing Index rose to 60.2 for the month of June, up from 58.7 previously. Economists were looking for a lower reading of 58.2.

Compare the U.S. report to the IHS Markit data released on Monday that confirmed the sharp slowdown in Europe’s manufacturing sector during the first six months of the year.

Essentially, the strength in the ISM Manufacturing Index in June clearly showed that at least for now, the strength of the U.S. domestic economy offset any increased concerns over trade policy.

With China’s stock market in bear territory and at a two-year low and signs that the European manufacturing sector is weakening, if Beijing and the European Union want to dig in and fight a prolonged trade war then be my guest.

Mexico – The Year of Political Shocks Rolls On

Few may have known the significance of Trump’s shock Presidential victory back in late 2016, with geopolitical risk has been more associated with South and Central America and the Middle East than in the West, where the Establishment had reigned supreme for so many years.

Since Trump’s 2016 election victory, we’ve seen the rise of populist, anti-establishment governments across Europe gather pace, with voters thinking, well, if the U.S can do it, so can we.

While France, Spain, The Netherlands, and Austria came close to a changing of the guard, Britain voted to leave the EU, Germany saw Merkel’s power materially reduce and Italy bring in a populist coalition government that is certainly going to ruffle some feathers in Brussels and, let’s not forget the bullied and now relatively silent Syriza in Greece, who to be fair did eventually manage to deliver on that much talked about debt relief.

As Trump goes about his business, forcing heads’ of states into submission over everything and everything, voters have perhaps become quite mindful of the need to have a head of state than can, not only protect their own rights, but also show the ability to stand up against the Establishment of old and now, the U.S President.

Obrador – The Mexican Trump?

Mexico voted on Sunday and the polls going into Sunday’s vote were not wrong. That’s not surprising when considering how far ahead front-runner Obrador, more commonly referred to as AMLO’s and his National Regeneration Movement (Monero) stood to go into Sunday’s polls.

The current vote count shows that a majority 53% voted for Obrador’s left-wing Monero, leaving the rest in the dust, PAN coming in a distant second, with just 22.5% of the vote and PRI an even more distant third, with 16.4% of the vote. For the incumbent PRI party that’s some fall from grace and it wasn’t much better for the PAN party who had been in power from 2000 to 2012.

Why AMLO?

Well, plain and simple. Crime and corruption in Mexico has left the country in the hands of the cartels and the cartels certainly let their political views be known, with over 130 political figures, including candidates for various Mexican states, being murdered execution style since the beginning of the election campaign last September.

Obrador has been compared with many; the more pessimistic comparing him to Chavez and even Trump, while others have compared him to the likes of Bernie Sanders.

Whether he will become the Chavez of Mexico remains to be seen, but should he deliver on even half of his election promises, it can only be a good thing for voters and the country, as he promises to increase minimum wages without hitting voters with higher taxes, while wanting to stamp out crime and corruption to deliver economic prosperity to the needy.

While hand to mouth is certainly the main incentive for voters, stamping out corruption and violence is also a key step in bringing a better standard of living to the Mexican people.

Talks of the Mexican Wall have only increased the negative sentiment towards Mexico and the Peso, so how Obrador handles Trump and what will likely be his first test in battle, NAFTA, will be key from a global financial market perspective and the direction of the Peso and Mexico’s Bolsa.

Suggesting possible amnesty to the King Pins of the Cartels may provide him with the hope of longevity as a Mexican President looking to clamp out corruption and crime, but delivering to the poor and on NAFTA will be what voters will be looking for most, NAFTA having driven Mexico into more of a cheap labour camp than what should have been a prosperous time for the people of the world’s 15th largest and Latin America’s 2nd largest economy.

It’s ultimately the fact that Mexico has the 2nd highest degree of economic disparity between the rich and the poor amongst OECD nations and ranked 160th globally with a Gini Index of 48.2% that has led to the surge in crime and Obrador’s resounding victory.

A Gini Index of 0% reflects perfect equality, while 100% reflects maximum equality. South Africa had the highest Gini Index at 63.4%, with Brazil having the highest from Latin America at 51.3%.

The Mexican Peso took a tumble as the markets opened on Monday in response to the AMLO’s victory and, with AMLO’s Monero considered to be a left-wing, nationalist party that is anti-capitalism, there are interesting times ahead for Mexico and the Peso, with the final tally on votes yet to come on, though as things stand, it’s looking like AMLO will have his way largely unopposed, with projections giving AMLO more than 60% of the seats in the lower house and close to 55% of the Senate, controlling both houses of Congress a must to deliver the promise of change and with it an even more volatile Peso near-term.

Risk off to Start the Week as Germany’s Coalition Strains, Global Stocks in the Red

The EU Immigration deal reached last week gave a short-term boost to the risk on side but now that the dust has settled cracks have appeared in the German Coalition. The increase in the number of migrants being accepted by Germany is fracturing the government and the leader of the CSU, Seehofer, has offered to resign if his party splits the coalition.

On the Brexit front, a record 75% of companies said they were pessimistic about the outcome of leaving the EU. The UK Government’s Chief Brexit Negotiator, Oliver Robbins, has said that they have no chance of striking a bespoke trade deal with the EU.

The trade war rumbles on as US President Trump targeted the EU in his latest speech, saying they were “as bad as China, only smaller”. He highlighted the importing of EU made cars and agricultural produce saying that the trade in these areas in one-sided. Chinese equity markets are down and European futures are pointing to a lower open.

UK Gross Domestic Product (Q1) was out with a reading of 0.2% (QoQ) and 1.2% (YoY) against an expected headline number of 0.1% (QoQ) and 1.2% (YoY) from a reading of 0.1% (QoQ) and 1.2% (YoY) previously with a revision up to 1.3% (YoY). Mortgage Approvals (May) were 64.526K against an expected 62.200K from a previous 62.455K which was revised up to 62.941K. The consensus was for a reading generally in line with expectations after the previous release was down as the economic output slows. The data increased (QoQ) and has remained positive since 2012. GBPUSD moved higher from 1.31214 to 1.31830 after this data release.


Eurozone Consumer Price Index – Core (YoY) (Jun) was 1.0% against an expected 1.0% from the previous 1.0%. Consumer Price Index (YoY) (Jun) was 2.0% against an expected 2.0% from the previous 1.9%. The data exceeded expectations and matched the 2017 high which was the highest reading since 2013, showing that last month’s beat had some substance behind it. The ECB will be taking note of this increase. EURUSD moved up from 1.16389 to 1.16593 after this data release.

US Personal Consumption Expenditures – Price Index (May) were 0.2% (MoM) and 2.3% (YoY) against an expected 0.2% (MoM) and 2.2% (YoY) from 0.2% (MoM) and 2.0% (YoY) previously. Core Personal Consumption Expenditures – Price Index (May) were 0.2% (MoM) and 2.0% (YoY) against anexpected 0.1% (MoM) and 1.9% (YoY) from 0.2% (MoM) and 1.8% (YoY) previously. Personal Income (MoM) (May) was 0.4% against an expected 0.4% from 0.3% previouslywhich was revised down to 0.2%. Personal Spending (May) was 0.4% against an expected 0.4% from 0.6% previouslywhich was revised up to 0.5%. This data came in largely as expected with a slip lower in personal spending along with a lower revision. USDJPY fell from 110.737 to 110.602 as a result of these data points.

Canadian Gross Domestic Product (MoM) (Apr) was 0.1% against an expected 0.0% from 0.3% prior. This showed that growth has flat-lined and is has managed to remain above the zero mark but is vulnerable to a drop in negative territory.  USDCAD fell from a high of 1.32592 to 1.31360 after the release.

  • EURUSD is down -0.36% overnight, trading aroun1.16395.
  • USDJPY is unchanged in the early session, trading at around 110.677
  • GBPUSD is down -0.22% this morning trading around 1.31738
  • Gold is down –0.25% in early morning trading at around $1,249.33
  • WTI is down -1.31% this morning, trading around $72.55

This article was written by FxPro

EUR/USD Firms on Report ECB Could Announce Timetable to End Quantitative Easing Program

The U.S. Dollar settled mixed on Tuesday against individual currencies, but lower against the total basket of currencies as investors sorted through a cluster of domestic reports, and increasing concerns that the United States could pull out of its trade agreement with Canada and Mexico.

June U.S. Dollar Index futures settled the session at 93.871, down 0.115 or -0.12%.

Forex

The currency that had the largest impact on the U.S. Dollar Index was the Euro. It was bolstered on Tuesday after Bloomberg, citing sources, reported that the European Central Bank could conclude its next policy meeting this month with a public announcement on when its quantitative easing program would end.

Traders believe the ECB will make a pre-emptive strike by making the early announcement ahead of the June 14 meeting to calm investors previously rattled by the political turmoil in Italy.

Investors reacting positively to the Bloomberg story, settling the EUR/USD at 1.1717, up 0.0023 or +0.20%.

Also helping to underpin the Euro was a speech by Italy’s new Prime Minister Giuseppe Conte, which reassured investors that leaving the single-currency was not on his agenda. However, investor confidence in Italy was rattled somewhat by Conte’s announcement of new government tax cuts and higher welfare. This news sent Italian bond yields higher.

The Canadian Dollar and Mexican Peso fell sharply on Tuesday against the U.S. Dollar after White House economic adviser Larry Kudlow said that President Donald Trump is considering holding separate talks with Canada and Mexico. This raised concerns that the Trump Administration may be leaning towards scraping the entire North American Free Trade Agreement (NAFTA).

Gold

A drop in U.S. Treasury yields due to trade issue concerns over the possible scrapping of the NAFTA helped boost gold futures on Tuesday. Geopolitical concerns also led to flight to safety buying into U.S. Treasuries which drove yields lower. Traders were reacting to a speech by Italy’s new Prime Minister Giuseppe Conte, who vowed to enact economic policies that could balloon the nation’s already-heavy debt load.

Crude Oil

After hitting a two-month low earlier in the session, U.S. West Texas Intermediate and international-benchmark Brent crude oil reversed course to close higher on Tuesday.

Prices were under pressure early due to concerns over rising U.S. production and fear of an increase in OPEC-led output. However, short-sellers and profit-takers covered positions aggressively late in the day after the American Petroleum Institute reported a larger-than-expected drawdown in U.S. crude inventories.

Markets Rebound as Italian Worries Subside

Reports in the Washington Post today are suggesting that US President Trump plans to announce metal tariffs on Mexico, Canada and Europe set to come into force as early as tomorrow. The deadline for the EU’s relief from US tariffs expires tomorrowJune 1st. There has been a muted market reaction to the rumor but should it be officially announced volatility can spike higher as a result. USDMXN did react by selling off from 19.82115 to 19.71140.

The Italian President has told the Populist election winners that he is ready to engage with them when they are ready. This has given the Five Star Movement and League parties a second chance at attempting to form a government. The parties heavily criticised the President after he blocked their earlier cabinet nominations. Stocks were higher yesterday as Treasury yield rose with an easing in concerns when the Populist parties insisted that they have no plans to force Italy to leave the Euro or create an Italexit of the EU. EURUSD rallied from lows around 1.15000 to 1.1711 while the Italian stock market gapped higher from 21060.00 to close at 21855.00.

German Harmonised Index of Consumer Prices (YoY) (May) was 2.2% against an expected 1.8% from a prior reading of 1.4%. Harmonised Index of Consumer Prices (MoM) (May) was 0.6% against an expected 0.3% from a previous -0.1%. This data beat the previous reading on a yearly basis, bringing the data back in line with the high from early 2017. The beat in the monthly reading brings that data back above zero. EURGBP sold off from 0.87571 to 0.87320 following this data release.

US Gross Domestic Product Annualized (Q1) was 2.2% against an expected 2.3% from 2.3% previously. This data is holding just above 2.0% although it has slipped in the last two quarters from 3.3%. Gross Domestic Product Price Index (Q1) slipped to 1.9% against an expected 2.0% from 2.0% previously. This data has dropped back under 2% after rising above that level for the past two quarters. Personal Consumption Expenditures Prices (QoQ) (Q1) came in at 2.6% against an expected 2.7% from 2.7% previously. Core Personal Consumption Expenditures Prices (QoQ) (Q1) came in at 2.3% against an expected 2.5% from 2.5% previously. Personal consumption data has been rising steadily as Americans spend more on durable goods, consumer products and services. EURUSD moved higher from a low at 1.15940 to a high of 1.16754 as a result of this data.


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Bank of Canada Interest Rate Decision and Rate Statement were released yesterday evening. The Rate Decision was left on hold at 1.25% after the Bank hiked rates in January. The Rate Statement dropped the reference to being “cautious” on rates and on the need for “monetary policy accommodation”. It said higher rates will be needed to keep inflation near the target. A gradual approach will be taken, guided by incoming data and assessment of the economy’s sensitivity to rate movements. USDCAD plunged from 1.30111 to a low of 1.28351 as a result.

  • EURUSD is up 0.14% overnight, trading around 1.16778.
  • USDJPY is down -0.15% in the early session, trading at around 108.747
  • GBPUSD is up 0.18% this morning trading around 1.33076.
  • Gold is up 0.16% in early morning trading at around $1,303.25
  • WTI is down -0.25% this morning, trading around $68.0

This article was written by FxPro

Equity Markets and USD Rise as US Could Tolerate NAFTA Deadline in 2019 for the Right Deal

US Treasury Secretary Steve Mnuchin gave an interview on NAFTA over the weekend where he said that President Trump is “more determined to have a good deal than he’s worried about any deadline”. He spoke about the US acceptance of the deadline slipping into 2019 once the right deal for the US is achieved. USDCAD is trading around 1.28735 with USDMXN trading around 19.90000. There is an element of “Risk on” this morning as equity markets moved up and USDJPY pushed to new highs. Gold has slipped lower while WTI Oil is higher, trading around $71.89.

Mnuchin also mentioned the US-China trade war and declared that it is currently ‘on hold’.

Canadian Consumer Price Index (MoM) (Apr) was 0.3% versus an expected 0.4% against 0.3% previously. Consumer Price Index (YoY) (Apr) was 2.2% versus an expected 2.3% against 2.3% previously.

Canadian Retail Sales ex Autos (MoM) (Mar) were -0.2% versus an expected 0.5%. Retail Sales (MoM) (Mar) were 0.6% against an expected 0.3% from 0.4% previously which was revised up to 0.5%. Retail sales exceeded expectations after missing expectations for the December and January readings with a higher revision welcome. USDCAD moved higher from 1.27961 to 1.28838 after the data release.


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Baker Hughes US Rig Count numbers matched the previous release last Friday, which showed that there were 844 Oil rigs in operation. With Oil at the highest levels in recent times, on the back of a bigger than expected draw in inventories on Wednesday; this data can set the tone for traders as they look to the week ahead.

Japanese Exports (YoY) (Apr) were released, coming in at 7.8% against an expected 8.1% from 2.1% previously. Imports (YoY) (Apr) were also released, coming in at 5.9% against an expected 9.6% from -0.6% previously. Merchandise Trade Balance Total (Apr) came in at ¥626.0B against an expected ¥405.6B. This data shows a fall in both Imports and Exports but an increase in the Trade Balance.

  • EURUSD is down -0.18% overnight, trading around 1.17475.
  • USDJPY is up 0.55% in the early session, trading at around 111.343
  • GBPUSD is down -0.14% this morning trading around 1.34378.
  • USDCAD is down -0.07% overnight, trading around 1.28715
  • Gold is down -0.49% in early morning trading at around $1,286.41
  • WTI is up 0.60% this morning, trading around $71.89

This article was written by FxPro

Dollar Rallies after Draghi Signals Normalization Would Be Gradual

The U.S. Dollar rose against a basket of major currencies with the exception of the Canadian Dollar on Thursday. The rally was primarily driven by a nearly 1 percent drop in the Euro.

March U.S. Dollar Index futures settled at 90.156, up 0.549 or +0.61%.

U.S. Dollar Index
Daily March U.S. Dollar Index

On Thursday, the European Central Bank (ECB) dropped its easing bias, fueling expectations that it will normalize monetary policy in the Euro Zone.

ECB President Mario Draghi said Thursday that the solid economic recovery in the region supported the decision to remove the so-called easing bias.

“Incoming information…confirms the strong and broad-based growth momentum in the Euro Area economy, which is projected to expand in the near-term at a somewhat faster pace than previously expected,” Draghi said.

Late in the session, President Trump imposed import tariffs on steel and aluminum, while softening his stance by announcing exemptions for Canada and Mexico, and leaving open the chance for other countries to obtain their own. This helped boost the Canadian Dollar and Mexican Peso.

U.S. Economic News

In the U.S., Challenger Job Cuts fell 4.3%, down from the previous -2.8%. Weekly Unemployment Claims rose to 231K, higher than the 220K forecast and 210K previous read.

Comex Gold
Daily April Comex Gold

Gold

Gold prices fell on Thursday as the U.S. Dollar rebounded from near a three-week low against the Euro after ECB President Mario Draghi signaled that any policy normalization in the Euro Zone would be very gradual. The Euro gave up all of its early gains against the dollar to finish lower after Draghi said monetary policy would remain “reactive” and that measures of underlying inflation were still subdued.

WTI Crude Oil
Daily April West Texas Intermediate Crude Oil

Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil finish lower on Thursday, led by several factors including signs of an inventory build at the U.S. futures delivery hub in Cushing, Oklahoma, surging U.S. crude production and investor concerns about a potential trade war.

Natural Gas
Daily April Natural Gas

Natural Gas

Natural gas prices finished lower on Thursday after the U.S. Energy Information Administration reported that domestic supplies of natural gas fell by 57 billion cubic feet for the week-ended March 2.

Draghi: “Eurozone economy is robust but…”

Speaking at the Frankfurt European Banking Congress, ECB President Mario Draghi, commented that “although the Eurozone economy was robust” recovery was still heavily reliant on stimulus from the European Central Bank. He stated that positive economic growth alone was not enough to allow the ECB to increase the pace of monetary policy normalization. The current lackluster inflation growth is causing a withdrawal of stimulus to be slow. He commented that “Despite this progress on the real side of the economy, from a monetary policy perspective our task is not complete, as we have not yet seen a sustained adjustment in the path of inflation”.

On Friday, data from the US Census Bureau showed that the rate of new home construction in the US rose sharply in October. New Housing Starts rose a healthy 13.7% in October (from September), as the negative impacts of the summer hurricanes appear to have been overcome. The annualized rate climbed to 1.29 million, beating forecasts of 1.19 million. The increase ended 3 consecutive monthly declines. The more forward-looking dataset of New Home Permits rose 5.9% to a rate of 1.3 million, indicating that the housing industry is growing at a healthy pace as the US economy is strengthening.

Statistics Canada released data on Friday showing the consumer price index was up 1.4% in October compared with a year ago, following a 1.6% increase in September. The Bank of Canada, which uses a 2% inflation target in setting monetary policy, raised its key interest rate target twice this year following strong economic growth to start the year. The markets expect growth for H2 to come in at a slower pace and the BoC has suggested that while further rate hikes are likely, they will be cautious and pay close attention to the incoming economic data. The markets do not expect a rate hike until the end of Q1 next year at the earliest.

Officials from the US, Canada, and Mexico have been meeting in Mexico City for the 5th of 7 planned rounds to update the North American Free Trade Agreement (NAFTA), from which President Donald Trump has threatened to withdraw. The US Administration has, apparently, made demands that other members have deemed unacceptable. With negotiations ongoing, it appears that all sides are far from agreement, which is likely to cause, in particular, volatility in MXN as Mexico appears to be the largest economic loser if the US does indeed withdraw.

EURUSD is 0.2% lower in early Monday trading at around 1.1768.

USDJPY is little changed from Friday’s close, currently trading around 112.05.

GBPUSD is 0.1% lower in early session trading at around 1.3247.

USDMXN is 0.14% higher, currently trading around 18.9350.

USDCAD is 0.2% higher in early Monday trading at around 1.2790.

Gold is 0.16% lower, currently trading around $1,291.75.

WTI is little changed in early trading at around $56.61.

Major data releases for today:

At 18:00 GMT, ECB President, Mario Draghi, is scheduled to provide an introductory statement at the ECON Hearing of the European Parliament in Brussels, Belgium.

This article is written by FxPro

USD/MXN Breaks the Triangle but has 38.2% Ahead

Trading on Monday is mixed, there is no clear trend on the market. USD against some instruments is stronger and against the rest of them are much weaker. The dollar index does not give a clear direction either. In this environment, we have a nice opportunity on the USDMXN, which starts this week on the front foot with a possibility for a mid-term buy signal.

USDMXN Daily Chart
USDMXN Daily Chart

Since the middle of the July, the pair is in the uptrend but before that, we were witnessing a strong drop (since the end of January), so we can say that the last few months are just a correction here. To be precise, in the past few months, buyers managed to retrace only 38,2% of the downswing, so technically we are still in the negative territory here.

Most recently, the price created a symmetric triangle (black lines). Our optimistic view on this instrument is based on the fact that this week starts with the bullish breakout from the triangle. That, itself is promising but is not enough to trigger a buy signal here. For that, we need to see the price breaking the 38,2% Fibonacci. When we look at the longer term we can see that this level was important many times starting from the March. As long, as we stay below, there is no buy signal here yet – we need to see a daily close above. The positive scenario will be denied once the price will break the purple support, which is slightly below the triangle.

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

Gold ends the bearish correction. USDCHF and USDMXN wait for the signal

Gold finally broke the 50% Fibonacci around the 1282 USD/oz, which was a strong resistance since the 23rd of October. After that, the price defended it as the closest support and made new mid-term highs. According to the price action principles that should trigger a buy signal on this instrument.

USDMXN is forming a symmetric triangle right below a very important long-term resistance. Triangles are always good trading opportunities but signals are created only after the breakout of the support or the resistance. So now we have to patiently wait…

A similar situation is present on the USDCHF. Here we do have both: symmetric triangle and the rectangle pattern. Breakout from the triangle alone should not be significant enough to open a position. It would be better to wait for the breakout of one of the horizontal orange areas.

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

Bitcoin Price: Market Law and a Bit of Sentiment

Cryptocurrency market is a highly volatile one. This is one of its key features that lures so many new investors to the digital currency world. How is a digital coin priced? This is a question asked by any a cryptocurrency newcomer. To answer this question, however, you should first and foremost remember that digital currencies are ‘virtual’, they are not backed by any material assets and not regulated by any authority.

In fact, the only thing Bitcoin price depends on is supply and demand. This market law is king here, and it always governs the cryptocurrency price. The more attention is driven towards the digital currency market, the more Bitcoin is spread as an asset or payment option, and the higher goes its price.

Digital coins are as much volatile as they lack transparency. Nobody has a clue of the total amount of Bitcoins in the market and who they belong to. This is critical, as a few pumpers (investors who hold a large amount of an asset) agreeing upon a few actions could be sufficient to artificially create any market trend. As for the high risk, traders get large earning opportunities as a reward in case the market follows their direction.

There are, however, some secondary factors influencing digital coin prices. These are, for instance, increased financial awareness among general public and free access to cryptocurrency market news and events. The more attention digital assets get, again, the more is the demand, and the higher the price. Cryptocurrency infrastructure improvements, such as adding more deposit options, ways of making transaction, converting options, etc, also have some positive influence on cryptocurrencies demand. The easier you can enter and exit the market, the better for you.

With an in-depth approach, we can find yet another digital currency price driver, although its influence is more indirect. This is inflation rate in ‘traditional’ economy. Bitcoin, Litecoin and other digital coins price depend on how many coins have already been issued. A digital coin is a sort of finite resource, as the source code would allow issuing a limited number of course. However, Bitcoin is not connected to inflation in any way, as it is not backed by anything. Thus, cryptocurrency is becoming a kind of safe haven for investors who want to avoid inflation-related losses.

There are many more secondary factors influencing digital currencies, such as geopolitical events, number of active buyers and sellers, total cryptocurrency volume, speculators’ sentiment, etc. The political factor can be easily traced when comparing digital currency price with emerging markets currencies, such as Mexican Peso, Turkish Lira, or Russian Ruble.

Speculative market players do deserve some special attention. The digital currency market has just started developing, with its volume constantly growing, but intraday values still allowing speculators to artificially create an ascending or descending trend. We have already mentioned that above: a few investors with large amounts of cryptocurrency can make the price rise or fall.

The sentiment is another factor that should not be underrated. Market panic or hype may both cause the prices to fall and make the skyrocket. Everything here depends on market reactions to specific events at some point in time. In case the sentiment is positive and the investors are inclined to buy an asset, the price of such asset will be going up.

Anyway, when you invest in cryptocurrencies you should always remember that past performance does not guarantee future results, while the risks will be growing as long as the cryptocurrency market becomes more and more volatile.

RoboForex is a group of companies that offers brokerage services to clients in various countries over the world. The group provides traders from the Forex and stock markets with access to its proprietary trading platforms. 

Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex bears no responsibility for trading results based on trading recommendations described in these analytical reviews.

NAFTA Negotiations Extension Drives Mexican Peso, Canadian Dollar Higher

There were no major U.S. reports on Tuesday, but there were major events that drew the interest of traders.

Trade officials said Tuesday they were extending the negotiations towards a new NAFTA trade deal into next year. This was good news for the Mexican Peso and Canadian Dollar which posted solid gains against the U.S. Dollar.

The two foreign currencies were pressured earlier in the session amid reports that Canada and Mexico would not agree to U.S. demands. However, rather than walk away from the table, negotiators announced they would schedule rounds to discuss revamping the North American Free Trade Agreement, into 2018.

For weeks, investors had been pricing in the possible end of the NAFTA agreement after the U.S. pushed for higher wages for Mexican workers, more U.S. parts in automobiles and changes to Canadian dairy subsidies. However, prices reversed with Tuesday’s positive headline about an extension of the negotiations.

The financial markets also responded to reports that President Donald Trump appeared to signal his support for a tentative deal in Congress to stabilize insurance markets by extending cost-sharing reimbursements for two years – just days after Trump announced that the subsidies, known as CSRs, would be eliminated.

Lawmakers also continued to discuss tax reform, a process which may not be completed until early 2018.

E-mini Dow Jones Industrial Average
Daily December E-mini Dow Jones Industrial Average

U.S. Equity Indexes

The major U.S. stock indexes finished mixed on Tuesday with most of the focus on the blue chip Dow Jones Industrial Average.

The Dow broke above 23,000 for the first time on an intraday basis before settling just shy of this psychological level. It was just 76 days ago that the Dow first crossed 22,000.

A good start to earnings season is also helping to contribute to the market’s strong gains. According to Thomson Reuters, as of Tuesday morning, 82 percent of the companies that had reported topped Wall Street earnings estimates, while 76 percent had surpassed revenue estimates.

Gold
Daily December Comex Gold

Gold

Gold prices continued to retreat on Tuesday as a stronger U.S. Dollar encouraged investors to take profits after the recent rally drove gold to multi-week highs. Losses may have been limited, however, by concerns over geopolitical tensions in the Middle East and the Korean peninsula.

The dollar was supported by reports that President Donald Trump was favoring a monetary policy hawk as the next head of the U.S. Federal Reserve.

In other news, Boston Fed President Eric Rosengren said the Fed will probably need to raise interest rates in December and then three or four times “over the course of next year”, assuming the U.S. unemployment rate continues to fall and inflation rises.

Crude Oil
Daily December West Texas Intermediate Crude Oil

Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil finished slightly lower after a mixed trading session on Tuesday. Traders reacted to expectations of high U.S. production and exports offset concerns that fighting between Iraqi and Kurdish forces could threaten the country’s crude output.

USDMXN ready to take profits, EURJPY to go lower and USDCAD to break from the sideways trend

Three technical setups on Tuesday:

  • USDMXN – We can see first signs of the exhaustion here. After breaking the upper line of the triangle, the price surged higher. Now we are approaching the 38,2% Fibonacci where we can get a taking profit action form the buyers. That resistance is additionally strengthened by the highs from March, April, and May.

  • EURJPY is very close to triggering a major sell signal after the price broke the up trendline and increased the pressure on the 131.85 support. A breakout here should increase the odds for a further drop.
  • USDCAD is ignoring a great sell opportunity caused by the head and shoulders pattern and is heading higher to test the down trendline and the upper line of the recent sideways trend. Patience wins the day here and we should wait for the breakout before opening any position.

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

USDMXN is not going to climb up forever right?

Today’s analysis will focus on the USDMXN, which we discussed very often in our trading sniper videos during September. Back then, the price was locked inside the symmetric triangle pattern (orange lines) and we were waiting for a breakout. As anticipated, the breakout happened and it was bullish. What is more, it was very strong so the triangle did its job.

Is the situation still bullish here? When we look only at October, we have to say yes. A long position on the USDMXN was one of the best trades on the market. If we look in a bit longer term, we can see that the price is approaching a very important resistance, which may trigger a bearish reversal (taking profit action). It is the 38,2% Fibonacci retracement along with the resistance created by the tops from March, April, and May. After such a strong upswing, the take profit action is more than welcomed here and the blue area looks like a perfect place to do it.

USDMXN Daily
USDMXN Daily

Currently, the short-term sentiment is positive. It looks like the gravity will act and the price will eventually reach the 19.23 mark. What will happen after that is currently random and depends on the price action there? Breakout will open a way to the 50% Fibonacci. Bearish reversal pattern should trigger a correction.

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

Gold and Black Gold Heading Higher

Stocks try to recover today from the heavy blow that they received yesterday. American Dollar is significantly weaker and the focus of the market participants slowly shifts towards the ECB decision on Thursday. In few hours we will get a small aperitif from the BoC with their rate statement.

Gold is doing what is generally expected – climbing higher. In addition to that, the upswing is very technical, especially with yesterdays bounce from the support created by the highs from 29th of August and 1st of September. 1380 USD/oz is on the horizon.

Potentially lucrative trading opportunity is emerging on the USD/MXN chart where the price is forming a long-term symmetric triangle pattern. A breakout here should show a direction and trigger a mid-term trading signal.

Bullish sentiment on the Oil was described on our twitter account on Monday. Since that, the price rose almost 2 USD/bbl and broke the 50% Fibonacci resistance. The next target is the 61,8% Fibo above the 50 USD/bbl.

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

Few Trading Occasions Before the FOMC: AUD/USD, GBP/JPY and USD/MXN

That would be it about the local strength of the American Dollar. Well, at least till the FOMC, which will definitely influence the markets today. In this surroundings we do have three nice setups for you.

First one is the AUDUSD, which is in a long-term up trend after breaking the upper line of the symmetric triangle. We do have a local correction here, which is a rectangle. That promotes a further upswing especially that we just bounced from the lower line of this formation.

Second one is the GBPJPY, which is back above a local support again. The movement is driven by the inverse head and shoulder pattern and the main trend. Sentiment is positive and with that breakout above the horizontal support we do have a buy signal here.

Last one is USDMXN, which is creating a shooting star on a daily chart. Formation itself should not be the only reason to go short. Here, the localization is important. It happens on a local resistance and the 38,2% Fibonacci. That makes it a decent trading occasion.

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

The Mexican Peso (USD/MXN) is Reversing Once Again

The Technical View

It was on this blog that we posted on the 22nd of January a post called “USDMXN: Multiple signs point to a reversal” and predicted that the USDMXN was finally about to reverse the 3.5 year old wild uptrend that brought it up, all the way to the 22 handle. Consider this blog post another “warning” that the Peso’s move is actually now mature enough to expect at least a correction to the move lower that followed our 1st post.

USD/MXN Daily Chart
USD/MXN Daily Chart

The USDMXN has spent the past 3 months forming a descending wedge that is currently breaking to the upside. The initial signs were already there and included a momentum slow down and a false break below the 1 year low before reversing higher as well as an apparent RSI divergence on the daily chart. We also want to stress out that a daily close above 18.31 will mark a higher high after a long time. An optimistic objective for this reversal is a retest of the 19.40 level which is in the middle of a support / resistance area that has proved its significance multiple times in the past. The R/R under such a scenario is extremely appealing to ignore and enough for us to consider an attempt to “catch a falling knife” worthwhile.

USD/MXN Daily Chart
USD/MXN Daily Chart

The Macro Perspective

The Mexican Peso has been in the spotlight for over a year now, since it started becoming apparent that Trump actually had a chance of winning the US elections. His views regarding Mexico were controversial to say the least and he was always very vocal about his neighboring country.

The week after the election result the USDMXN spike nearly 15%. Trump’s pre-election campaign was filled with “war on Mexico” promises and this led to a natural decline in the Peso. Companies like Ford jumped on the bandwagon and announced production moves from Mexico to the US, much to the President’s approval. However, the Trump administration has so far failed to follow through on its promises and there have been no concrete steps taken. This has led USDMXN to give back practically all of the post-election gains.

It’s worth noting that the Mexican central bank is quick to respond when it needs to defend its currency. Proof of this is Banxico’s frequent FX interventions following the US election, but also its interest rate hikes in 2017. Having said that, the markets are not expecting Banxico to tighten much further from here, so this should be it rate-wise in the short term.

We now stand at an important crossroad for USDMXN. The Peso has recovered but is still vulnerable as the Dollar tries to turn on its recent drop. Attention has shifted away from the US-Mexico relationship but as we well know it only takes one Trump tweet to get sentiment to move from one extreme to the other. Tread carefully when trading the Peso as shifts in sentiment – and potentially in fundamentals – can happen very quickly.

This article was written by one or more of the following contributors: Blake Morrow, Nicola Duke, Grega Horvat, Steve Voulgaridis and Stelios Kontogoulas. They are all analysts at ForexAnalytix which provides macro & technical analysis for various financial instruments. Forex Analytix primary goal is to educate traders of all experience levels and to provide a wide range of tools which can help with their trading decisions.