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Thursday 27 March 2014

Mar 27 2014 S&P500


 S&P Futures sold-off from 1865 resistance two days in the row when the US market opened. Today it may happen similar but from 1850/1855.

Gold and Silver Slip Further While Crude Oil Cracks $100 Handle

Talking Points

  • WTI open to further gains on positive US data in session ahead
  • Gold and silver remain vulnerable to ebbing safe-haven demand
  • Copper bears cap the base metal’s gains at critical $3.00 handle

Crude oil has broken above the psychologically-significant $100 handle following some positive US economic data overnight, leaving the door open to further gains on an upside surprise to upcoming US revised GDP figures. Meanwhile, goldmay be vulnerable to further declines following a brief dip below the $1,300 mark overnight as ebbing geopolitical risks sap safe-haven demand for the precious metals.

Crude Cracks $100
Crude oil came out of the gates to a strong start in US trading overnight and continued to edge higher following a better-than-anticipated US Durable Goods Orders reading. Despite a soft inventories report from the DOE and a dip in US equities, the bulls managed to hold onto control of price direction to push the WTI contract above the $100 per barrel mark.

Positive US economic data generally bodes well for the WTI contract given the commodity’s growth-sensitive standing. Thus there is the potential for continued gains for crude oil if upcoming US revised GDP figures and initial jobless claimsdata offer upside surprises.

Gold and Silver Slip Further
Following a brief respite in Asian trading yesterday the precious metals resumed their declines during the US session. Curiously, the falls occurred alongside a weaker greenback which suggests that ebbing safe-haven demand for the commodities was the likely driver, rather than broad US dollar strength. Gold and silver have suffered as easinggeopolitical tensions in Eastern Europe cause traders to unwind fear-driven positions in the precious metals. A further abating of concerns in the region would likely continue to weigh on the gold price and prompt another dip below the $1,300 handle.

Wednesday 26 March 2014

AUD/USD - Australian Dollar Woes Over?

Talking Points:
- Australian economic data is near its apex for 2014.
- The Reserve Bank of Australia wants a weaker currency, doesn’t mean they’ll get it.
- Aussie looks to bottom versus British Pound, Euro, and US Dollar.

The Australian Dollar (AUD) was easily one of the most disliked currencies headed into 2014, after a significantly disappointing performance from April 2014 and forward, including the AUD/USD pair. As many analysts (including this one) sharpened their knives for another dismal performance by the Aussie in 2014, something funny happened: the fundamental conditions present for Australian Dollar weakness disappeared faster than most expected.

The Australian Dollar’s underperformance through the end of last year can be best explained two-fold: first, concern that a slowing Chinese economy alongside failure by the Australian economy to rebalance away from its mining activities would create significant damage; and two, the drawdown in the Federal Reserve’s QE3 stimulus program would dampen the demand for the carry trade.

While the Chinese economy may be slowing (as seen by the recent HSBC PMI Manufacturing report), economic data out of Australia has been roundly better than expected. The Citi Economic Surprise Index was holding up at +49.7 by March 24, just off the yearly high seen on March 13 at +50.6. Considering where this economic data-sentiment index was in mid-January at -19.0, it’s evident that domestically, the Australian economy is performing much better than anticipated.

One of the areas analysts were most concerned with – the labor market – has had a much stronger start to 2014 than recent trends would indicate. At +47.3K net jobs growth in February, the Australian economy added the most jobs since March 2012. This figure was well-above the 3-, 6-, and 12-month jobs averages of +13.7K, +10.7K, and +5.3K; in fact, with the short-term averages above the longer-term ones, it seems the Australian labor market is gaining momentum.

The recent shift if the fundamental factors underpinning the Australian economy may be offering a veritable turning point in the Australian Dollar more specifically, especially against the Euro and the US Dollar.
 
The AUD/USD’s recent ascending triangle formation resolved itself to the upside the past two days, and a longer-term inverse head and shoulders bottoming pattern may be the long-term play. Several former levels that proved as resistance in months (.9085, 0.9140, 0.9165/70) past have been broken, showing that the supply of sellers at these levels have been fully neutralized – the path of least resistance may now be here.

Crude Oil Teases at Break of $100, Gold Vulnerable To Fresh Declines

Talking Points

  • Gold and silver vulnerable to further declines as geopolitical risks abate
  • Copper’s bounces to critical $3.00 level on China stimulus speculation
  • $100 handle continues to cap crude oil gains ahead of inventories data

Gold has been given a reprieve in recent trading as it wavers around the $1,310 level, which follows on from Monday’s dramatic decline of over $26. Meanwhile copper has rebounded back to the key $3.00 handle with newswires attributing the bounce to speculation over fresh stimulus from Chinese policy officials. An upside surprise to US Durable Durable Goods orders data due in the session ahead may bolster demand for growth-sensitive commodities like copper. However, WTI may struggle to break the $100 handle on the back of another weak inventoriesreport.

Gold Bears Letup As Prices Stabilise
There are signs of stabilisation for the precious metals space in Asian trading today as the gold bears pause following a collapse in prices earlier in the week. Easing Ukrainian tensions and hawkish comments from Fed chair Janet Yellen have sapped demand for the fiat-money alternative over the past two weeks as shown in the chart below.

Tuesday 25 March 2014

EUR/USD Falters as Makuch Warns of ECB Action and Euro Weakness

Talking Points:

  • ECB’s Makuch warns of possible measures to avoid deflation
  • Makuch also sees potential for a weaker Euro
  • EUR/USD falls 30 pips on comments

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The Euro fell about thirty pips against the US Dollar, as European Central Bank member Makuch said the bank is preparing measures to avoid a deflation environment. Following the near 5 cent gain in the value of the Euro in terms of US Dollars since the beginning of February, Makuch said that he sees potential for a weaker Euro. Additionally, Makuch said he would not oppose quantitative easing, which would be an unprecedented action for the ECB.

Makuch’s comments reinforced Draghi’s statement earlier this month that Euro gains are increasing relevant to price stability and the ECB will counter any material risk to inflation expectations. Any further accommodative action from the ECB to fight low inflation could drive the Euro lower.
 
That’s why the Euro declined following Makuch’s dovish comments, and EUR/USD may next find support by the 2-week low at 1.3749.
 
 

Why AUD/USD may be a long term buy

Australia bears … look away now … you’re not gonna like this … :-D
A new study by Deloitte identifies 25 sectoral hotspots with the biggest potential to contribute to Australia’s prosperity over the next 20 years.
Of these 25, the five key sectors are gas, agribusiness, tourism, international education and wealth management.
  • Together, these “Fantastic Five” sectors could add $250 billion to the economy over the next two decades
  • Potentially matching mining, which now makes up about 10% of the country’s economy.
  • The nation’s output of liquefied natural gas (LNG) is expected to increase by 250% between now and 2017-18
  • “If we achieve that, we could surpass Qatar to become the world’s top LNG producer” the consulting firm said
  • More than $200 billion of gas infrastructure is under construction and up to another $180 billion in gas projects are being considered
  • If all these proposals go ahead, they could create 150,000 jobs and deliver tax revenue of $5 billion a year
  • While the study predicts that the oil and gas industry will soon make up about 2% of Australia’s economy, it also acknowledges that mining will remain “a genuine growth wave” for the economy
  • Amid predictions for continuing falls for commodities prices, Deloitte also says the sheer size of the mining sector will ensure it remains central to the national economy for many years to come
It ain’t all roses, of course.

Monday 24 March 2014

Post-FOMC Gold Price Breakdown Gathers Pace under $1320

Talking Points:
- Lack of follow-through on Eastern European concerns reduces haven demand.
- Jump in short-term US yields (<1Y) after FOMC concerning for precious metals.
- Higher US yields and stronger US Dollar will only hurt Gold prices, Silver going forward.

Gold's price has had a modest, consistent rally in 2014, breaking the downtrend from late-2012, and the viability of the recent move hinges on the continued development of these two themes: the Fed taper (or lack thereof); and Russia’s westward incursion. These influences are becoming less prominent, allowing precious metals’ prices to fall over the last several days. Evidence is mounting that the rally in Gold prices in the first quarter of the year may have been a temporary occurrence.
 
Gold’s recent source of luster – rising geopolitical tensions in Eastern Europe – has waned considerably. The destabilization of the Ukrainian government in November after a botched trade deal with the European Union didn’t prove to be a bullish catalyst at the time. But as it became clear that major players in the United States and Russia would square off diplomatically, the specter of armed conflict allowed Gold to stay in the limelight – until now.

The FOMC rate decision last Wednesday may have been the event to mark the near-term top in Gold now that geopolitical pressures have started to ease. With chatter that the Federal Reserve could hike interest rates as soon as within six months of the end of QE3 (currently on pace for the fourth quarter of 2014), a jump in short-term US yields (less than 1Y in maturity) has boosted the value of cash in the near-term – and therefore reduced the appeal of yield-less instruments like precious metals.

The philosophical underpinnings of these events must be ignored by traders – they are easy distractions and can lead to “paralysis by analysis,” or overanalyzing the conditions impacting the instrument, in this case, Gold. Questions such as “should the Fed taper” or “is Russia violating international law by annexing Crimea” are best left unanswered.

Instead, we’re looking to answer one simple question: “what is the chart revealing?” Turning to the chart will give the best insight as to what the collective opinion of the market is on these issues.
 
The bearish key reversal/engulfing candle from last Monday – the day after the Crimean elections and right before the FOMC meeting – has proved to be a meaningful reference point. Now the 2014 uptrend has been broken following the last four days of price action, we are treating the $1392 high in the bearish reversal candle cluster as the necessary level to regain full confidence in a Gold price rally.
 
A review of the H4 timeframe is rather revealing about the developing weak structure of Gold prices in the short-term. The first level of support that should have held was 1350, a level that proved as resistance earlier in March. This also coincided with the uptrend from the February 6 and March 7 lows.

The Gold breakdown has appeared to gain credibility the past several sessions, with price breaking through 1320, a level that served as support in Gold’s rally in early-March. Gold is now exposed for a larger correction back towards 1260/1280 (support and resistance on multiple occasions from June 2013 to present).

Where do the fundamental stories fit in with these levels? Another bout of tension foreshadowing military action in Eastern Europe has proven to be a bullish catalyst; inaction or no further breakdown in diplomacy is bearish (currently playing out). Even as the Fed tapers, markets are forward looking and therefore will be looking for signs about future policy – for now, the price of Gold may be indicating that a more hawkish Fed has spoken.

Euro Sinks on Soft PMIs, May Fuel ECB Stimulus Bets

Euro Sinks on Soft PMIs, May Fuel ECB Stimulus Bets
Talking Points:
•German-Services PMI 54.0 in March vs. 55.5 Flash Results 
•Eurozone Manufacturing, Services and Composite PMIs In-Line with Estimates 
•Euro at Risk for Further Losses on ECB Stimulus Expansion Bets


Preliminary sets of March German and Eurozone PMI figures were released earlier in the European session. German PMI data greatly disappointed as service-sector activity fell to a 2-month low, and factory-sector activity fell to a 4-month low. Consequently, Flash Germany Composite Index reported at 55.0 in March, down from 56.4 in February. 


Eurozone PMI data reported in-line with flash estimates and showed service- and factory-sector activity growth slowed for the first time in four months. Flash Eurozone Services PMI Index reported at 52.4 (2-month low) in March and Flash Eurozone Manufacturing PMI Index came in at 53.0 in March (3-month low).
As a result the result the Euro may come under pressure on ECB stimulus expansion bets. Nonetheless, as the PMI index does not directly affect monetary policy follow through may be limited.


Wednesday 19 March 2014

EUR/USD Triangle Outcome Contingent on FOMC’s Next Steps

Talking Points:
- EURUSD holding above 2008-2011 downtrend, now in ST triangle.
- USDJPY stuck in sideways range despite rally in global equities – US Dollar neutral here.
- US Dollar has struggled in wake of prior tapers.

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The Federal Reserve’s March policy meeting today should help relieve frustrated FX traders from the recent swoon in volatility. Another $10B cut to QE3 is widely expected, given the downward pressure on the unemployment rate (now 6.7%) and the steady pace of jobs growth (12-month average now +179.8K). As a result, this FOMC meeting as a bit of a wrinkle that could spur significant price action, depending upon the outcome.

The main issue facing the FOMC right now is what to do about forward guidance as the unemployment rate hits the 6.5% circuit breaker, at which point the Fed had first indicated it could begin to raise short-term interest rates. But commentary in recent weeks has suggested a more concerted shift towards qualitative guidance, in which the FOMC promises to keep interest rates low beyond the 6.5% unemployment rate threshold.

With a $10B taper as the baseline scenario – and therefore a neutral outcome – market participants will be eying the changes to forward guidance and the unemployment rate circuit breaker for bias. A dovish outcome would see the FOMC remove the 6.5% circuit breaker and promise to keep rates low beyond the complete wind down of QE3. This would indicate the first rate hike would likely come in the first half of 2015. A hawkish outcome could be as simple as the FOMC not changing its forward guidance policy.

As traders await the FOMC meeting to conclude, the EURUSD is engaged in a consolidation pattern that can often precede a breakout (as is the USDJPY). Today is a perfect storm of fundamental event risk and actionable trade setups.

EURUSD Daily Chart: August 6, 2013 to Present

Tuesday 18 March 2014

Copper Elliot wave count

Mar 18 2014 Copper
Decline on copper is looking impulsive, so we suspect that market will remain bearish. Resistance for fourth wave comes in around 3.0300-3.0600.

EURUSD Retains Bull Trend as Dollar Risks More Losses on Slowing CPI

U.S. Consumer Price Index to Slow for First Time in Four-Months
- Core Inflation to Hold Steady at Annualized 1.6%

Trading the News: U.S. Consumer Price Index

A slowdown in the headline reading for U.S. inflation may prompt further declines in the dollar as it dampens the interest rate outlook for the world’s largest economy..
 
 
Why Is This Event Important:

Even though the Federal Open Market Committee (FOMC) is widely expected to discuss another $10B taper in March, the central bank remains poised to introduce a ‘qualitative approach’ for monetary policy, and a dovish twist to the forward-guidance may heighten the bearish sentiment surrounding the reserve currency as Fed Chair Janet Yellen remains reluctant to halt the zero-interest rate policy (ZIRP).
 
 
 
Expectations: Bearish Argument/Scenario
Release
Expected
Actual
Producer Price Index (YoY) (FEB)
1.2%
0.9%
Consumer Credit (JAN)
$14.000B
$13.698B
Consumer Confidence (FEB)
80.0
78.1

Slowing input costs paired with the downturn in consumer confidence may prompt businesses to engage in discounting, and a dismal CPI print may trigger a bearish reaction in the USD as it raises the threat for disinflation.

Risk: Bullish Argument/Scenario
Release
Expected
Actual
Advance Retail Sales (MoM) (FEB)
0.2%
0.3%
Average Hourly Earnings (YoY) (FEB)
2.0%
2.2%
Personal Income (JAN)
0.2%
0.3%

However, U.S. firms may raise consumer prices amid the pickup in wage growth along with the resilience in private sector spending, and a stronger-than-expected inflation print may generate a near-term bounce in the greenback as it puts increased pressure on the Fed to normalize monetary policy sooner rather than later.
 
 

Gold and Silver Lose Lustre In Absence of Escalation In Eastern Europe



                                                                                                           
 
                                                                                                                                                                        
Talking Points

  • Gold retreats to $1,360 as traders look past Ukrainian turmoil
  • Crude oil dips as supply disruptions appear less likely
  • Precious metals reaction to US CPI data may be muted with FOMC in focus

Crude oil has resumed its downward trajectory alongside declines in the precious metals space as traders look past the ongoing standoff between Russia and the West. Upcoming German ZEW figures may prove noteworthy for the commodities space given their potential impact on risk trends, while US CPI data may elicit a limited response from goldas traders likely focus on the upcoming FOMC rate decision.

Precious Metals Dip As Geopolitical Risks Abate
Gold has dropped back to the $1,360 level during the Asian session today as traders shift out of safe-haven plays and into high-yielding instruments. The pullback comes following a dramatic run-up in the precious metal culminating in a six month high near $1,400 on Friday. The bull-run was likely driven by heightened geopolitical concerns surrounding Eastern Europe.

The relatively peaceful passing of a referendum to return Crimea to Russia over the weekend has likely eased investor fears of the potential for armed conflict and thus dampened safe-haven demand for gold. However, with a resolution to the standoff seemingly out of reach, a fresh sparkmay stand to quickly dampen investor sentiment and drive traders to back to the precious metals.

Limited Risk To Energy Supply Disruptions
Crude oil traders have likely seen the most recent developments in Eastern European as posing a limited risk to energy supply disruptions from Russia, which may havecontibributed to WTI’s fall below $98.00 in recent trading.

Upcoming German ZEW survey data may prove noteworthy for the growth-sensitive commodities like copper and crude oil given their potential to influence risk-trends. The gauge of expectations for economic growth in the largest eurozone member has steadily improved over the past year, and an upside surprise to the latest reading may bolster risk sentiment and help support crude oil.

US Inflation Data On Tap
As gold traders look past geopolitical tensions their gaze may turn to upcoming US inflation data set to cross the wires in the session ahead. A higher-than-anticipated CPI reading may feed firmer Fed policy expectations and strengthen the US Dollar, which in turn could weigh on gold. However, the potential impact of the release may be limited as traders are likely hesitant to alter their positioning ahead of the highly-influential FOMC meeting set to conclude later in the week.

Monday 17 March 2014

Forex Trading - Federal Reserve, Canadian CPI to Fuel Volatility This Week

Talking Points:
•Federal Reserve expected to taper asset purchases by $10B on Wednesday
•Swiss National Bank forward guidance is key for CHF pairs in light of any ECB action
•Reserve Bank of New Zealand hikes rates, but data moving forward is key


After last week’s limited U.S./European data sessions, attention and volatility will most likely shift back from Asia. Kicking off this week we have seen the Yen lose some gains from the last few sessions and we’ve already gotten European CPI data that came in a tenth of a percent below expectations. The MoM print came in at 0.3% vs. 0.4% and -1.1% prior while the final figure for February stands at 0.7%.

Gold Retreats Towards $1,375 As Traders Overlook Ukrainian Tensions

Talking Points

  • Gold’s upside momentum fades as traders discount Ukrainian concerns
  • Copper finds support while WTI struggles to reclaim $100.00
  • Silver faces test of key resistance level near $21.50

Gold’s recent bull run is showing signs of slowing in early European trading as investors discount geopolitical concerns and shift out of safe-havens. Meanwhile copper is showing tentative signs of a recovery as fresh negative news-flow from China remains absent.

Traders Weigh Crimea Vote
The continued stand-off between Russia and Ukraine helped bolster safe-haven demand for gold during the past week which likely contributed to its break above $1,380 on Friday. Considerable uncertainty still remains regarding how the stand-off may be resolved, which has been complicated by a vote to return Crimea to its former master over the weekend.

Despite the weekend’s developments gold is struggling to climb higher in early European trading. This likely comes as investors weigh the prospect of escalating geopolitical tensions against the opportunity to capture yields in equities and high-yielding currencies like the Australian Dollar. Additionally, some profit-taking may be partly attributable to today’s pullback, given the dramatic run-up in the gold price to a six month high.

However, with Moscow showing little regard to threats of sanctions from the West, there remains the possibility of a resurgence in risk aversion which could quickly send traders back to gold in the coming week.

Pressure Eases On Copper while Crude Oil Flounders
Following last week’s dramatic declines in copper on the back of discouraging economic data from China, the base metal has seen some stabilization around $2.930. With few major economic releases scheduled from the Asian giant in the session ahead, an absence of fresh negative news-flow may lead to some profit-taking on short positions and a bounce for copper.

Meanwhile, crude oil seems unresponsive to the positive shift in sentiment taking place in early European trading as it continues to flounder below the psychologically-significant $100.00 handle. With investors seemingly discounting Ukrainian turmoil and the potential for energy supply disruptions from Russia, there may be few catalysts to bolster the oil price in the session ahead.

Thursday 13 March 2014

GBPUSD Intraday

Mar 12 2014;
 Five waves down suggests a reversal in price. I am keeping an eye on potential five wave rally from the lows that would allow me to long the pair at 1.662.

Wednesday 12 March 2014

Gold Breaks Out While Oil and Copper Dip as China Jitters Continue

Talking Points

  • WTI falls below $100.00 with technicals hinting at further declines
  • Gold advances on $1,360 following a breakout in Asian trading
  • Risk trends and China data to offer further guidance on copper and crude

Crude oil and copper resumed their descent during US trading overnight as ongoing jitters surrounding China likely weighed on investor sentiment. Meanwhile gold has broken above the $1,351 mark in Asian trading with the precious metal benefiting from safe-haven flows.

WTI Slips Below $100.00
Following a stabilisation of prices during Asian trading yesterday the crude oil bears emerged during US hours and pushed the WTI contract back below the $100.00 handle. Broad-based risk aversion was likely a contributor given that declines were also witnessed in US equity indices.

Upcoming inventories data may provide the commodity further directional cues. The DOE’s Weekly Petroleum Status Report is expected to reveal a build in crude inventories of 2,000K barrels - according to the median estimate from economists. This would make it the 8th consecutive weekly gain for the measure and may reflect lower demand for crude oil. Newswires have attributed the build in inventories to seasonal factors including more moderate weather on the US East Coast and lower demand from refineries.

Geopolitical Risks Remain
Gold has spiked towards the $1,360 level in early Asian trading as nervous investors are likely moving away from the equities space and looking towards the precious metal as a potential safe-haven. Elevated geopolitical tensions in Eastern Europehave helped drive gold to its current levelsas the Ukrainian-Russian stand-off continues. Indeed, the chart below illustrates that the yellow metal tends to strengthen during periods of heightened geopolitical risk. Thus a further escalation in Ukraine would likely bode well for gold.

Tuesday 11 March 2014

GBPUSD; Three Legs Down To 1.6550

March 11 2014

GBPUSD turned down yesterday, through the lower side of an upward channel that suggest now a completed wave B. As such price is now heading down in wave C final leg of corrective pattern that may look for a support around 1.6550 later this week. Keep in mind that larger trend is still up, and that retracement from 1.6822 is just temporary.

Sunday 9 March 2014

Forex: Australian Dollar Facing Conflicting Domestic, External Forces

Fundamental Forecast for Australian Dollar: Neutral

  • Upbeat Jobs Data May Reinforce Positive Shift in the RBA Policy Outlook
  • Fading Doubts About Fed “Taper” Continuity May Undermine the Aussie
  • Help Time Key Turning Points for the Australian Dollar with DailyFX SSI

The Australian Dollar launched a brisk recovery last week, pushing to the highest level in three months against its US counterpart. While the RBA monetary policy announcement repeated the now-familiar status quo, a round of supportive economic data proved to be a potent catalyst. The central bank once again argued in favor of a sustained period of stability in monetary policy. That has re-framed speculation to focus on which direction rates are likely to go once that period runs its course, and last week’s news-flow seemed to argue for tightening.

The fourth-quarter GDP report topped economists’ forecasts, showing the year-on-year growth rate accelerated to 2.8 percent and marked the highest reading since the three months through December 2012. Meanwhile, retail sales unexpectedly jumped 1.2 percent in January to yield the largest increase in 11 months. Investors’ RBA policy expectations notably shifted following these upbeat outcomes, with a Credit Suisse gauge of the priced-in outlook jumping to a three week high. While an outright interest rate hike is still not being telegraphed over the coming 12 months, a meaningful hawkish shift in the underlying bias for what the RBA’s next move will be is clearly perceptible.

Looking ahead, speculation will be further informed by February’s employment figures. The economy is expected to have added 15,000 jobs, which would amount to the largest gain since November. Data from the Australian Industry Group showed hiring in the service sector, which employs close to three quarters of the labor force, expanded for the first time in three months in February. This increases the probability of an upbeat outcome, bolstering bets on a rate hike cycle to be initiated after the current standstill. A strong-enough result may even hasten the timeline for its expected commencement in the minds of investors. Needless to say, such a scenario would bode well for Aussie.

External factors remain an important consideration however and may undermine the Australian unit’s prospects. The US economic calendar is expected to yield a pickup in retail sales and an improvement in consumer confidence. On the “fed-speak” docket, the spotlight will be on Senate confirmation hearings for Stanley Fischer, Lael Brainard and Jerome Powell. The former is nominated for Fed Vice Chair while the latter two are to be Governors.

Comments from Mr Fischer – until recently the Governor of the Bank of Israel and formerly a high-ranking official at both the IMF and the World Bank – will be in focus. He has vocally supported US monetary policy normalization in recent months, suggesting he will add to the chorus of pro-“taper” rhetoric from other Fed officials. Taken together, the arrival of these catalysts on the heels of Friday’s upbeat US payrolls data has scope to significantly reduce speculation about a possible deceleration of the QE cutback cycle. That may undermine risk appetite, weighing on the Aussie in the process

Thursday 6 March 2014

Canadian Dollar Reaches a 2-Week High on an Improved PMI

Canadian Dollar Reaches a 2-Week High on an Improved PMI
Talking Points: 
•Canada Ivey PMI significantly beats expectations at 57.2
•Canadian building permits rise 8.5% in February
•Canadian Dollar rises to a 2-week high

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The Canadian Dollar has reached a new 2-week high against the US Dollar, as two separate Canadian economic releases both beat expectations and rose to multi-month highs. 

The Ivey Purchasing Managers Index was reported at 57.2 in February, which was a 4-month high and significantly beat expectations for a dip to 53.1 from 56.8 in January. It was only the second consecutive month that the index was reported above 50.0, indicating expansion in activity according to surveyed purchasing managers. Also reported on Thursday morning, Building Permits rose 8.5% in February, beating expectations for a 1.7% rise and a reversal from the revised 4.8% decline in permits issued in January. 

Just yesterday, the Bank of Canada announced after its March meeting that the next rate change direction will depend on new data. Last week, Canadian GDP for Q4 was reported at 2.9% and economic growth was revised higher for Q1 and Q2 of 2013. Therefore, continued flow of improved economic data may allow arguments for a BoC rate increase down the line. 

The Canadian Dollar has rallied about 70 pips against the US Dollar since the first Building Permits release, and USD/CAD may next find support by a monthly low at 1.0910.
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Gold turns down from 1st res.

Gold turns down from 1st res. in w. 5 after RSI trendline holds. Now looking towards 1325, 1319.

Euro Vulnerable to ECB 2016 Projections- Key Top in Place at 1.3800?

- European Central Bank (ECB)to Publish 2016 Economic Projections
- Governing Council Sees Headline 2015 Inflation at 1.3%

Trading the News: European Central Bank Interest Rate Decision

According to a Bloomberg News survey, 40 of the 54 economists polled see the European Central Bank (ECB) retaining its current policy in March, but the broad range of market speculation (rate cut, negative deposit rates, verbal intervention, unsterilized bond purchases, Long-Term Refinancing Operation) may produce increased volatility around the interest rate decision as market participants weigh the outlook for monetary policy.

What’s Expected:
Time of release: 03/06/2014 12:45 GMT, 7:45 EST
Primary Pair Impact: EURUSD
Expected: 0.25%
Previous: 0.25%

Crude Oil Plunges Below $102, Focus Turns To Upcoming US Data

Talking Points

  • WTI Tumbles As Geopolitical Tensions Ease
  • Gold Stabilizes on Weaker US Dollar
  • Focus Turns To Upcoming US Economic Data

Crude oil has suffered its most dramatic decline since January 2nd as concerns over Eastern Europe abate and US crude inventory levels rise further. Meanwhile, gold and silver have stabilised as a weaker greenback has likely benefited the precious metals.

WTI Tumbles as Geopolitical Tensions Ease
Easing Ukrainian turmoil has quashed fears over potential supply disruptions for energy commodities and has likely caused traders to unwind long positions in crude oil. Separately, an inventories report from the Department of Energy released during US trading contributed to a plunge in the price of the WTI contract below the $102.00 handle. The US government agency reported that crude inventories rose for the seventh week in a row with newswires attributing the build to lower demand from refineries.

Gold Stabilises on Weaker US Dollar
The continued declines for crude have not extended to gold and silver, which had also rallied on fear-flows surrounding the Ukraine. The precious metals have likely benefited from weakness in the greenback which fell overnight on the back of disappointing US non-manufacturing data.

Investor Optimism Vulnerable To NFP Miss
As Eastern Europe moves off traders’ radars, upcoming US economic data may give the commodities space further directional guidance. Recent disappointing economic readings from the world’s largest economy have failed to dent investor optimism, as newswires point to temporary weather-related factors as a possible cause.

However, sustained weak data prints, may raise concerns over the strength of the US economic recovery. Upcoming initial joblessclaims may prove noteworthy as an interim gauge of labour market conditions ahead of the critical Non-Farm Payrolls figure due at the end of the week. Another disappointing reading may cause investor sentiment to sour, which in turn may weigh on growth-sensitive commodities like crude oil and copper.



CRUDE OIL TECHNICAL ANALYSIS Crude’s recent turnaround has negated several previously bullish technical signals for the commodity. Prices have broken below the 20 SMA and trendline support suggesting a shift to a downtrend. Additionally, A Dark Cloud Cover candlestick pattern on the daily has received confirmation via successive down day. Combined with a break below buying support at the psychologically-significant $102.00 level (aslo the 23.6% Fib Retracement mark), we are left with a bearish technical bias for WTI.

Wednesday 5 March 2014

AUD/USD 6/3/2014

Taking a AUDUSD short here at 0.8985, with 0.9025 stops. Target is 0.8870. 4hr setup. Trading on on Aussie economic news.

USD/JPY March Seasonality

March is the fiscal year end in Japan and there tends to be a significant amount of repatriation of foreign earnings as companies look to window dress their balance sheets. This leads many investors to believe that USD/JPY will have a downward bias this month. However taking a look at how USD/JPY has behaved in March between 2001 and 2013, we can see that seasonality has very little impact on the currency pair. In fact over the past 6 years, USD/JPY appreciated 5 times in March. Therefore while seasonality is interesting, it should not be blindly traded.

January ADP Employment Change Data Revised Lower, February Misses

Talking Points:
-ADP Employment Change (FEB) comes in at 139K vs. 155K est.
-January figure revised from 175K to 127K
-Initial USD weakness

The February ADP Employment Change print came in at 139K vs. 155 estimates while the January figure was revised from an impressive 175K to a dismal 127K. The delayed release of the January revision helped push USD/JPY initially lower, but as is usually the case with ADP we saw that move retrace within minutes.

This ADP figure contributes to poor data out of the U.S. in 2014, but we will need to see confirmation of poor NFP data on Friday for any market follow through. We have greater event risk moving forward with ISM Manufacturing as well as the Bank of Canada Rate Decision at 15:00GMT.

USD/CHF Elliot wave count for correction back to rally

March 05 2014

USDCHF is recovering in five waves from the lows, so looks like price is at the start of a bigger minimum three waves rally. From a trading perspective, a three wave retracement back to 0.8830/50 area could be nice set-up for long opportunity.

USDJPY Elliott Wave Analysis: Corrective Rally

It seems that USDJPY has finally found the base at 101.17 where we labeled a completed wave (b) and that price is now heading to the upside within wave (c). Notice that reversal from latest swing low was fast and sharp so we see it as impulsive bounce that is part of current bullish sentiment. Based on minimum expectations we expect a break above 102.82 high, but ideally rally will reach 103.43 figure.

Aussie Dollar Jumps on GDP Data But Gains Short-Lived

Talking Points:

  • Australian GDP expanded 2.8% y/y in 4Q vs. 2.5% Excepted, 2.3% Prior
  • Australian dollar jumped against US Dollar amid RBA Policy Bets
  • Gains proved short-lived as souring sentiment likely weighed on the Aussie

The AUD/USD rose after Australia reported that its Gross Domestic Product expanded at 2.8 percent year over year in the fourth quarter, exceeding forecasts of 2.5 percent, and 2.3 percent prior. The two largest contributors to growth for the year were household spending which increased by 0.8 percent and exports which grew by 2.4 percent.

The Aussie jumped by roughly 50 pips immediately following the release, from 0.8947 to 0.8996. The knee-jerk reaction likely reflected a firming of expectations for a period of stability for interest rates in Australia, which bodes well for the AUD/USD’s interest rate advantage. However, the pair was unable to hold onto gains as a general weakening in risk-assets shortly afterwards likely sapped demand for the high-yielding currency.

Risk-trends are likely to remain an important driver for the Aussie over the remainder of the week with the potential for a souring of investor sentiment to strengthen safe-haven demand for the US Dollar, which in turn would weaken the AUD/USD.

Tuesday 4 March 2014

Dollar Gains on Euro and Emerging Markets, Conviction Still Soft

Dollar Gains on Euro and Emerging Markets, Conviction Still Soft

Emerging markets were rumbling and global equities dove to open the new trading week and month…and the dollar would certainly reap the benefits. The building appetite for safety and liquidity lent the greenback notable buoyancy versus most of its counterparts and the Dow Jones FXCM Dollar Index (ticker = USDollar) rose 16 points off its 18-month rising support. Looking more broadly to the ‘risk’ profile of the markets, the FX-based volatility index posted its biggest jump since September 30 (rising 0.5 ‘vols’ to 8.22 percent) while the equity favorite VIX lurched 2 vols higher to 16 percent for the biggest swell in a month. Furthermore, ‘liquidity’ demand was measured in the developed world’s sovereign bonds. For US Treasuries, the 10-year note’s yield gapped lower on the open and is now at 2.61 percent.

As far as uniform ‘risk off’ assessments go, this was a complete one. The trouble – as it has been for some time – is the conviction in the move. Like a bolder on a plateau, it is difficult to build enough momentum behind a deleveraging effort to make the trend self-sustaining. The newest bout of international financial stability concerns originating with the standoff between Russia and the West over Ukraine (more on that below), certainly command the headlines. Yet, volatility sellers have seen too many false dawns in the past few years to be so easily shaken from attempting to reap the short-term gains they have frequently found after jumps like these. We could still tip the scales; but the pressure would have to be sustained, losses would have to stack up or another catalyst would have to kick in to add traction.

This past session’s docket added further data (manufacturing activity rose, personal income and spending grew, and the PCE inflation figure ticked higher) to secure the steady Taper path for the Fed. Yet, that is already market reality. We need something more tangible to leverage the dollar’s relative appeal. Perhaps speculative of the first Fed rate hike may leverage the dollar like it the BoE’s outlook ramped the pound. Meanwhile, the Senate Banking Committee’s confirmation hearings for Fischer, Brainard and Powell have Today have been postponed.

Emerging Markets Slip, Russian Markets Plunge
Rather than cool over the weekend, tensions over Ukraine’s political situation intensified. That in turn generated significant waves for the financial system. With reports that pro-Russia forces have moved in and taken control of the Crimea region of Ukraine, European and US officials among others have threatened sanctions against Russia for intervening with a military presence. For a country that has a high requirement for foreign capital to support its economy, that proposition is more than troubling. The fear of capital flight was felt as the Russian Ruble dropped to a record low, leading the Bank Rossii (the country’s central bank) to dump a reported $10 billion in the market to halt its own currency’s tumble. Russian ETF’s suffered bearish gaps on Monday’s open and the largest – Market Vector – suffered a near 7.0 percent drop on the heaviest volume in the product’s record. The risk is that this situation will evolve and metastasize into a global situation. Yet, to this point, the spread has proven uneven. While Russian markets collapsed, global equities stumbles and a number of Emerging Market currencies fell sharply (Zloty, Forint, Rand, Lira); the MSCI EM ETF itself fell less than 1 percent. Furthermore, neither dollar nor yen have surged.
Australian Dollar Retreats after RBA Refuses Rate Hike Speculation
The Australian dollar has already waded through a dense round of event risk, and there is plenty more moving forward. The top event risk so far was the RBA rate decision this morning. Though the market fully expected no change to the group’s policy bearings, there was nevertheless a negative reaction to the absence of a timeline for a shift to hikes as well as the reiteration that the currency was ‘expensive’ on a historical basis. None of this is particularly new, so follow through implications are limited. Tomorrow, we follow up with 4Q GDP figures.

Euro Market Hit the Worst on Russia Stand Off
Sorting the majors for performance Monday, the Euro offered the worst numbers Monday. The currency closed in the red versus all of its major counterparts; and its capital markets suffered the sharpest declines. Where the euro slide was relatively restrained (ranging between 0.8 percent versus the yen to virtually unchanged against the pound), the benchmark Euro Stoxx equity Index collapsed 3 percent. While there were a few Euro-data based headlines and Draghi warnings into Thursday’s decision, this is likely economic proximity to the Russia standoff. 

British Pound A Safe Haven?
With capital seeking more robust moorings than European periphery debt has to offer during these increasingly volatile times, we’ve seen some capital flight to the region’s financial harbor: the UK. The 10-year UK gilt yield slipped below 2.65 percent to its lowest level in four months, the appeal doesn’t seem universal. GBPUSD dropped 0.5 percent Monday as the market continues to process BoE expectations through data.

Yen Crosses Drop, but Where is the Momentum?
If concern over the Russia-West standoff were turning into a global financial risk concern, the fear would spread from the Emerging Market measures directly to the yen crosses and then on up the ‘risk scale’. Yet, these over-priced and under-paying carry currencies offered limited retreat Monday. As we wait for the BoJ’s QE decision next month, volatility and risk correlation are the keys to the yen cross bearings.

New Zealand Dollar: Yields Continue to Slip, A Worry for Kiwi and RBNZ?
How much further can we go? That is the question that kiwi hawks/bulls are asking themselves. We have seen the market already fully price in the RBNZ’s first rate hike next week as well as the total tightening expected over the next two years. Now, further gains on rate speculation have to be found above and beyond. Now, it is easier to disappoint than impress. A dangerous proposition with 10 year NZ rates near 6 month lows.

Monday 3 March 2014

Personal Income and Spending Beat, but Risk Driving Price Action

Talking Points:
-US Personal Income (Jan) comes in at 0.3% vs. 0.2% est. and 0.0% prior
-US Personal Spending (Jan) comes in at 0.4% vs. 0.1% est. and 0.1% revised prior
-Little change in FX as markets await US equity market open and ISM Manufacturing Data at 15:00GMT

Personal Income and Spending data out of the U.S. kicked off the session and added to chop in the foreign exchange market as we approach the open of equity markets and key ISM Manufacturing, ISM Prices Paid and US Construction Spending data at 15:00GMT. PCE Core and Deflator data also released at 13:30GMT came in in line with expectations, although the Deflator YoY figure beat by a tenth of a percent.

Although in normal market conditions these better than expected figures would be viewed favorably- especially in the context of weak U.S. data as of late- continued market uncertainty surrounding the Ukraine and state of global markets remains the key driver of price action. At the current juncture we are seeing U.S. futures, yields and USD/JPY trading lower ahead of the equity market open. 10yr yields as of 8:50AM EST are standing at 2.6065% (lows not seen since early February) and commodities are higher across the board. Wheat and corn on the CBOT are seeing moves higher on the day in excess of 2 and 4 percent respectively as the Ukraine serves as a large exporter of the crops.