Market News Archives - The Industry Spread

Calm Trading Day as Investors Awaiting FOMC decision

December 18, 2018 by Nikolas Papas Leave a Comment Filed Under: Market News - European Open Tagged: AUDUSD, DAX, EUR-USD, European shares, FOMC decision, GBPUSD, global economy, Trading Day

Slowing global economy worries continue to put pressure on risky assets around the globe. Wall Street indices extended their slump as investors braced for an interest rate hike by Federal Reserve on Wednesday. The Nasdaq Composite dropped 2.27% and the S&P 500 lost 2.08% to hit its lowest since October 2017. The Shanghai Composite index dropped 1%, as did Australia’s S&P ASX . In Tokyo the Nikkei 225 index was 1.6% lower and in South Korea the Kospi dropped 0.4%. Hong Kong’s Hang Seng lost 0.9 percent.

European shares started the day in negative territory, DAX gives up 0.32 percent, the CAC is down 0.60 percent and FTSE in London loosing 0.11 percent.

Chinese President Xi Jinping offered no fresh comments to open or stimulate the world’s second-biggest economy in a keynote speech. Xi assured markets that China will control risks to the economy and will improve economic structures, expand domestic demand and support the development of the non-state economy.

On-the-Lookout: UK Prime Minister Theresa May delivered a fresh round of talking points on Brexit before the UK’s parliament on Monday, but little new developments were delivered. Italian newspaper Il Sole, reported that Italian government slashed the GDP growth estimates in the latest budget proposal for next year from 1.5% to 0.9% – 1.0%.

The Reserve Bank of Australia (RBA) board agreed that the next move in the cash rate is more likely to be an increase than a decrease but also believed there is no strong case for a near-term adjustment in monetary policy, minutes of the December 2018 meeting released soon before press time revealed. RBA increased the Expected Q3 GDP growth to be above 3 pct for the year (vs actual 2.8 pct). Meanwhile, Australia HIA New Home Sales (MoM) rose from previous -0.8% to 3.6% in November.

Trading Perspective: Markets will be focused on the pace of any further Fed tightening in 2019 as well as the FED’s assessment of the economy amid a trade conflict with China.

EURUSD commenced European trading day in positive mood and trading at the daily highs around 1.1370. US dollar weakness across the board helped the single currency to rebound from two week lows. Easing concerns regarding Italy’s budget crisis, as represented by the narrowing spread between the 10-year Italian government bond yield and its German counterpart could also put a bid under the EUR. Looking at the hourly chart, the pair reiterated the short term bullish outlook today breaking above the 200h moving average. EUR/USD will face a strong resistance at 1.14 a level that rejected the pair twice the last two weeks. On the flipside yesterday’s low at 1.1302 is the first support, and then 1.1265 previous week low will attract some buyers.

AUDUSD is trading in 30 pips narrow trading range, between 0.7170 – 0.7203 as the RBA minutes earlier failed to inspire any moves. The 100 day moving average at 0.7221 is the most important level for the pair, we are looking for a clear break above that level to enter a long position. Failure to break above the key daily moving average means that sellers remain in short -term control and it would require stronger conviction for buyers to hold a break above and justify shifting the bias in the pair to being more bullish instead.

GBPUSD is also building momentum about FOMC decision, Karen Jones, analyst at Commerzbank, comments: “While rallies remain capped by the 20 day ma at 1.2711 we will regard the market as vulnerable on the downside. Below 1.2477 targets the 78.6% retracement at 1.2109. Above the 20 day ma lies the 1.2840 current December high but while capped by the resistance line at 1.2933 it will remain offered. Only a rise above the July, September and October highs at 1.3258/1.3363 would put the June high at 1.3473 on the cards.”

Pressure on UK PM Theresa May continues to increase as Jeremy Corbyn of the UK labour party has now threatened to call for vote of ‘no confidence’ in her following her statement that MPs would not vote on her Brexit deal until the week of 14 January.”

Dollar Slides, Yen Rallies and Yields Fall Further Ahead of Fed Meet

December 18, 2018 by Michael Moran Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: AUD/USD, EUR-USD, FED, Mario Draghi, US Two-Year Bond Yield, USD/JPY

Summary: The Yen rallied as the US 10-year yield fell to 2.86% (2.89%) ahead of the Fed’s final meeting in 2018. Wall Street stocks extended their slump as trade tensions between the US and China weighed on risk sentiment. The Dollar Index, a measure of the value of the US Dollar against a basket of currencies, fell from 18-month highs, hit yesterday. The US Fed is expected to hike for the fourth time this year at the conclusion of its 2-day meeting on Wednesday (Thursday am, Sydney). Markets will be focused on the pace of any further Fed tightening in 2019 as well as the Feds assessment of the economy amid a trade conflict with China.
Sterling and the Euro climbed while the Australian Dollar was little-changed. Meantime the latest Commitment of Traders CFTC report (week ended Dec 11th) saw speculators trim net long Dollar bets in 8 of 9 currencies on the list.

Saxo Bank-Bloomberg Commitment of Traders CFTC Report – 12/18/2018

USD/JPY – The Japanese currencies led the rally against the Greenback finishing up 0.53% at 112.75 from 113.42 yesterday. The benchmark US 10-year yield fell another 3 basis points to 2.86%, just above the low last week. Japan’s 10-year JGB yield was unchanged at 0.02%. The Bank of Japan’s monetary policy rate decision is due Thursday afternoon. Governor Haruhiko Kuroda’s press conference follows shortly after.
EUR/USD – The multi-currency rallied off its overnight low of 1.12965 on the back of the generally weaker US Dollar and bond yields. The Euro closed at 1.1350 after hitting a high of 1.1358. The ECB ended its meeting last week where it announced an end to its asset purchase program. ECB Head Mario Draghi also downgraded economic projections for 2018/2019 which weighed on the Euro. It looks likely that we will remain range-bound on this currency for now.
AUD/USD – The Aussie finished little-changed at 0.7178 (0.7173 yesterday). A fall in Copper and commodity prices, as well as the risk-off sentiment, kept the antipodean and risk currencies (Aussie, Kiwi and Canadian Dollar) from any significant gains. The RBA releases the minutes of its meeting in November later today.

On-the-Lookout: Ahead of the FOMC meeting and Jerome Powell’s news conference, US President Donald Trump has already weighed in his opinion. Trump tweeted “It is incredible that with a very strong Dollar and virtually no inflation… the Fed is considering yet another interest rate hike. Take the victory!”
In yesterday’s data releases the US Empire State Manufacturing Index missed expectations falling 10.9 in November from 23.3 in October. Euro Zone Annual Core CPI was unchanged at 1.0% while the Trade Surplus fell to EUR 12.5 billion from a downwardly revised EUR 13 billion in October.
Today sees New Zealand’s ANZ Business Confidence Index as well as Germany’s IFO Business Climate. US Housing data are released later tonight with November Building Permits and Housing Starts.
China marks its 40^th anniversary of market reforms and will open with a speech from President Xi-Jinping later today.

Trading Perspective: The fall US bond yields will keep the Dollar offered in the Asian session. The latest COT/CFTC report saw speculators trim their net long US Dollar bets in all the Major currencies except the British Pound. While this may be the case, the market’s positioning is still long of US Dollar bets with further corrective moves possible. We look at the break-down per currency.

USD/JPY – The fall in the US 10-year yield will keep a lid on this currency pair. Immediate resistance lies at 113.00 and then 113.30. Immediate support can be found at the low of 112.70, followed by 112.40. Speculators trimmed their net short JPY bets to -JPY 97,606 contracts from the previous weeks -JPY 109,100. in the latest CFTC report. Traders will keep close to square ahead of the Fed and BOJ meetings. However, the next big move for this currency pair appears south as it corrects further.
AUD/USD – The RBA’s November meeting minutes are released later today. The Aussie traded in a tight 0.71684-0.71870 range overnight. The topside was constrained by the risk-off sentiment and lower commodity prices. Copper fell 0.75% while the New York CRB Index (Commodity Research Bureau) was down 1.3%. The CRB Index included a wider range of commodities like Crude Oil (down 2.02%). The lower US Dollar supported the Aussie and will continue to do so. Net speculative Aussie shorts were trimmed to -AUD 45,531 contracts from -AUD 50,800. Look to buy dips on this currency pair.
EUR/USD – the Euro should continue to trade within a 1.1270-1.1430 range. Germany’s 10-year Bund yield was unchanged at 0.25%. This should be supportive of the Euro given the fall in the US yields. The latest CFTC report saw net speculative Euro short bets trimmed by EUR 4,489 contracts to -EUR 56,287. Trading in this currency pair will be dictated by the general move in the Greenback, which appears headed south.
US Two-Year Bond Yield – The two-year bond yield dropped to 2.685% overnight lows from 2.73%, before closing just under 2.70%. Which is the lowest since September 6th. Short-term support should emerge at this level although a clean break would see it just under 2.6% which would be huge. Apart from the 10-year bond yield, this is a good one to watch.

Investing.Com US Two Year Bond Yield – Daily Chart – 12/18/2018

Happy trading all.

Traders Awaiting the Key Fed Decision Wednesday

December 17, 2018 by Nikolas Papas Leave a Comment Filed Under: Market News - European Open Tagged: European stocks, EURUSD, Fed Decision, FED’s decision, GBPUSD, investors, USDJPY

Investors have a week of central bank events looming with meetings of the U.S. Federal Reserve and the Bank of England likely to move markets around the globe. Asian markets gain some ground Monday morning after a tough week for global stocks. In Tokyo Nikkei225 index end the trading session 0.6% higher while Hong Kong’s Hang Seng stock index was up 0.1%, Australia’s S&P ASX 200 finished 0.9% higher.

European stocks started the week mixed with tiny gains in London, DAX trading 0.18% lower and CAC40 gives up 0.49%.

According to analysts at Danske Bank, majors will be awaiting the key Fed decision this Wednesday as the market has priced the Fed notably more dovishly recently, which suggests that risks are tilted towards a hawkish surprise. “There is a key risk that the FOMC could lower rate expectations (aka the dots) further out. For USD, it will thus be key whether Fed Chair Jerome Powell and co come across as (a) adamant to get to neutral or (b) cautious in not making policy contractionary. The former is our base case, which should be USD supportive near term.”

The Federal Open Market Committee is expected to raise its short-term interest by a quarter-point to a range of 2.25% to 2.5% after a meeting on Wednesday. This would be its ninth hike since late 2015.

EURUSD is trading higher around 1.1340, as risk appetite improves across Europe, and the USD correction across the board regains momentum. The pair facing strong resistance USD hit 19-month highs versus its main competitors at 97.71 on Friday, after Chinese economy slowdown fears intensified following weaker Chinese macro data. In Italian budget crisis, ANSA reported that the Italian coalition leaders have reached an agreement over the budget accord.

USDJPY traded to a high of 113.674 overnight which is basically where immediate resistance for today lies (113.60-70). Currently is hovering around 113.30 awaiting FED’s decision. The next resistance level is at 114.00. Immediate support can be found at 113.20 (overnight lows). The next support level lies at 112.70. Net speculative JPY shorts increased to a total of JPY 109,100 from JPY 104,800 bets. These are the largest net total of shorts since March this year.

GBPUSD is gaining bullish momentum as in early trading managed to break above the 50h moving average at 1.2591 and now is challenging the 100h moving average at 1.2614. A strong resistance is previous week top at 1.2660 where also the 200h moving average waits. The economic calendar is light today, leaving room for Brexit speculation to have its say. The chances of a second referendum are rising, but PM Theresa May rejects these calls.

Oil prices in quite trading after slipping by around 2% the previous week, but remained under pressure from oversupply and concern over the prospects for global economic growth and fuel demand. Saudi Arabia, the world’s biggest oil exporter, will release its budget for next year. It needs prices to climb beyond $80 a barrel to balance it, according to Fitch Ratings.

Dollar Rallies to an 18-month High as Rivals Tumble, Yields Fall

December 17, 2018 by Michael Moran Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: 10 year yield, AUD/USD, Brexit, EUR-USD, NZD/USD, USD/DXY

Forex Factory US Federal Budget 12/17/2018

Summary: A big miss on China’s November Retail Sales and Industrial Production pushed the Aussie, Chinese Yuan,and Asian currencies lower. The Euro tumbled as French, German and Euro-zone manufacturing and services data were weaker than forecast. Sterling surrendered gains made late last week as PM May struggled to get fresh concessions from the EU for her Brexit deal. The Dollar Index (USD/DXY) rallied to fresh 18-month highs on the fall of its Rivals even as the US November Federal Budget Deficit blew out to over US$ 200 billion. Wall Street Stocks slumped as risk mood soured. The DOW fell 1.89%.

AUD/USD – It led resource and Asian currencies after China reported much weaker than expected industrial production and retail sales for Chinese industrial production was the weakest since May 2016. The Aussie plummeted from 0.7220 to 0.7151 lows following the release before rallying to settle at 0.7175 at Friday’s NY close. The US Dollar jumped against China’s Offshore Yuan (USD/CNH) to 6.9050 from 6.8800 Friday. The Kiwi (NZD/USD) dropped to 0.6795 from 0.6860. Asian EM currencies were lower.
EUR/USD – The weaker than forecast Euro – area manufacturing and services data sank the multi-currency to 1.1270 (1.1365 Friday). France’s measure fell below the 50 boom/bust EUR/USD managed to cut its losses and climb to 1.1300 at the close. The Euro was already on the defensive following the ECB’s dovish growth outlook on Thursday. US Flash Markit Manufacturing and Services PMI’s didn’t fare much better with both weaker than expected. This should limit the Euro’s downside.
USD/DXY – this currency pair rallied to fresh 1.1/2 year high at 97.711 not so much on inherent Dollar strength but every other currency is weakening. This is the Dollar’s dilemma and one of the reasons it will struggle to maintain gains, let alone rally much further. The Federal Reserve will most likely raise rates for the last time when they meet this week (early Thursday morning Sydney time, December 20). The hike is expected to be 0.25% although there is a possibility of 0.15% which would be dovish.

On the Lookout: The week ahead sees the last FOMC meeting (Thursday morning, Sydney) for the year. Thursday, December 20 also sees the Bank of Japan and Bank of England final rate policy meetings for 2018. Today sees the Eurozone Headline and Core CPI for November as well as US Empire State Manufacturing data.
The focus will be on the Fed FOMC meeting with a press conference by Head Jerome Powell following immediately. Market participants have anticipated a dovish Fed rate hike which may not turn out the case. The Fed’s outlook for 2019 is what the market wants to see. Dovish comments from several Federal Reserve Heads and a slowdown in the economy have led to lower expectations of rate hikes next year. The previous Fed decision (September rate hike) was unanimous. Any dissent for this meeting could / will send the Greenback lower. Jerome Powell’s press conference starts half an hour after the release. Powell is more straightforward than his predecessor Janet Yellen and his assessment could trigger more volatility.
This is the last full week ahead of Christmas. Tuesday sees crucial US Housing data with Building Permits and Housing Starts. The minutes of the RBA’s last policy meeting as well as New Zealand’s ANZ Business Confidence data are due on Tuesday morning. German IFO Business Climate for November round out Tuesday’s data.
Markets will continue to monitor the US-China trade dispute. While positive steps were made last week, a resolution is still far away. The mood was soured by the weak Chinese data although authorities will continue their stimulus measures.

Trading Perspective: While the Dollar ended on a strong note, it’s strengthening was the result of a weakening of its Rivals. Inherently the Greenback needs fresh legs to stand on. Without yield support this is difficult. The benchmark 10-year US Treasury yield fell two basis points to 2.89%. Other global yields also dropped. Market positioning remains well long of Dollar bets versus all the Major currencies, which will also limit any significant Dollar gains. We look at the latest Commitment of Traders CFTC report’s release tomorrow.

Trading Economics – One Year Trading Chart 12/17/2018

AUD/USD – – Slip-sliding away, This currency pair led Asian and risk/resource currencies lower. The catalyst was the weaker Chinese data. AUD/USD traded to a low of 0.7151 before a meek bounce to 0.7175, the lowest close since October. The strong run-up for the Aussie is over with and we can expect initial downside tests. Initial resistance for today is at 0.7200. The next resistance lies at 0.7230. Immediate support can be found at 0.7140/50 followed by 0.7100. A break of 0.7100 could see the low 0.7000s tested. The last CFTC report saw a mild reduction of net speculative Aussie shorts to -AUD 50,800 from -AUD 53,900. While the shorts remain near 4-year highs, the downside of the Aussie is limited.
EUR/USD – Weaker than expected, Euro area PMI’s pushed the Euro lower 1.1270 overnight lows. The Euro bounced to close at 1.1300. Immediate resistance lies at 1.1330/40. Immediate support lies at the lows in late November (1.1265). A break of this level, which is immediate support would see 1.1200. The yield on Germany’s 10-year JGB fell 3 basis points to 0.25%. Speculative market positioning remains short of Euro bets to their highest total since March 2017.
USD/JPY – The only currency to gain versus the Greenback due to the market’s risk-off stance. The fall in the US 10-year yield also added to downside pressure of USD/JPY although Japan’s 10-year JGB note slipped to 0.02% from 0.05%. The Dollar traded to a high of 113.674 overnight which is basically where immediate resistance for today lies (113.60-70). The next resistance level is at 114.00. Immediate support can be found at 113.20 (overnight lows). The next support level lies at 112.70. Net speculative JPY shorts increased to a total of -JPY 109,100 from JPY 104,800 bets. These are the largest net total of shorts since March this year. The BOJ is not expected to change its monetary policy at its last meeting of 2018. The Japanese central bank is expected to keep its title as the most dovish central bank in the developed world. However, a move to expand the bank around the 10-year yield target may surprise and see a lower USD/JPY.

Global Equity Markets Turn Dovish Over Weak Macro Data

December 14, 2018 by Karthik Subramanian Leave a Comment Filed Under: Market News - US Open Tagged: Brexit, Capital Markets, ECB, economy, financial institutions, Financial markets, foreign exchange, global equity markets, monetary policy, trade war, trading

Global Equity Markets Dovish Over Weak Macro Data

Global Equity markets which saw considerable positive price action this week have suffered significant downward price action on last trading session of the week pressured by geopolitical woes and weak macroeconomic data which hints at a global economic slowdown.

Summary: Stocks worldwide tumbled in Asian and early European market hours after weak economic data from China and Europe fanned concerns of a global economic slowdown and left investors fretting over the wider impact of a still-unresolved Sino-U.S. trade dispute. Eurozone business ended the year on a weak note, expanding at the slowest pace in over four years as new order growth all but dried up, hurt by trade tensions and violent protests in France, a survey showed. Data out of Europe added to weak readings from China, where November retail sales grew at the weakest pace since 2003, and industrial output rose the least in nearly three years underlining risks to the economy as Beijing works to defuse a trade dispute with the United States.

Although hopes of progress in U.S.-China talks and cheap valuations are supporting the market, for now, we have lots of potential pitfalls. Analysts and Investors alike believe that the recent inversion curve in the US treasury yield hints at a slowdown in the economy which will be confirmed if the US Fed decides to stop the rate hike for 2019. The macro data outcome provides clear signs that economic growth is slowing down in Asia and Europe which goes to show that the global economy, on the whole, is losing growth pace thereby inspiring cautious investor sentiment. This combined with local and international political woes across major global markets has resulted in equity markets across the globe turning dovish on the last trading session of the week.

The dollar index DXY which is used to measure the strength of US Greenback against a basket of six major global currencies is currently at 97.54 up by 0.46% on the day as the rout in the equity market has boosted demand for USD in broad market as safe haven instrument.
Asian and European equity markets face dovish influence not just from local macro data but on international frontiers as well. Investor sentiment is turning dovish in Asia as political tension between Canada and China escalate owing to China’s retaliation in form of arrest of Canadian businessman on suspicion of harming China’s security, while European markets are affected owing to France protest-related headlines and ECB President Draghi’s dovish comments cautioning slowdown in economy with risk skewed to downside.
Oil prices fell as investors cashed in gains of more than 2% made during the previous session on concerns that demand may decrease amid slowing economic growth, but analysts still expect that the recent supply cuts from the producer cartel will support price action in the broad market.
Precious metals trade range bound as demand for safe-haven assets owing to risk-averse investor sentiment keeps the volatility in favor of bulls, but upside move is capped as USD demand is also boosted owing to Greenback being considered as a primary safe-haven asset in the current market.

On The Lookout:

Brexit deal stalls
Brexit & EU Summit – PM May’s attempts to renegotiate the Brexit deal during EU summit yesterday failed as representatives were clear with their intentions stating there is no more room for further negotiations or another deal leaving approval of Brexit draft to hardline Brexiteers. Meanwhile, early today morning President of the European Commission Jean-Claude Juncker announced that the European Union would begin publishing all information concerning a no-deal Brexit scenario and preparations for such an event will begin on December 19^th, 2018 making his stance clear that this deal is best that the UK is going to get on their table.
French Woes – According to macro data released today French business activity plunged unexpectedly into contraction this month, retreating at the fastest pace in over four years in the face of violent anti-government protests. Meanwhile, another yellow vest protestor died today in an accident caused by the protestors roadblock making it the sixth death in relation to yellow vest protest. While French President Macron has taken some measures to calm down protestors and ease public worries, many protesters have expressed disappointment at the measures and are proposing more protests across France on Saturday.
EM Currencies – Emerging market currencies are suffering significantly owing to economic slowdown woes. This was further aggravated on weak Chinese economic data and increasing demand for USD as a safe-haven asset on equity routs. Korean won poised to lose nearly 1 percent this week and Indian rupee on track for the second week of heavy declines, while Philippines Peso weakened after the central bank left its benchmark interest rate on hold at 4.75%.
Economic Data Release and Events – European markets saw the release of Eurozone, French and German Manufacturing, Markit Composite & Services PMI data all of which had a bearish outcome. Moving forward, US markets will see release of Retail sales data, Industrial and manufacturing production data, Manufacturing & Services PMI data updates during North American market hours.

Trading Perspective:

EURUSD – EUR/USD is currently trading near the 1.1300 handle after hitting an intra-day low of 1.12864. The pair which was already under pressure following European Central Bank President Mario Draghi’s dovish comment was further pushed into sharp bearish slide following the dovish outcome of Eurozone, French and German Flash PMI data release. In regards to the near future, the pair faces no technical support as low as the 1.1260 level. Also, the continuation of Brexit turmoil is set to beat the Euro down ahead of US FOMC update suggesting that short-term picture is dovish for the common currency.
USDJPY – The USD/JPY pair edged lower during the Asian session, as risk aversion took over the FX board. However, as both currencies are perceived as safe-havens in times of turmoil, the pair held within familiar levels locked inside an intraday range between 113.41 and 113.64. While the price action shows consolidation near the upper end of the weekly range dollar’s broad strength is being neutralized by increased demand for US government bonds. The 4 hours chart shows that the price is continuing to developing well above 100 and 200 SMA’s which run parallel around 113.20. The Momentum indicator continued retreating which suggests the lack of follow-through hinting at an upcoming slide, while the RSI indicator consolidates around 59 all of which maintains the downward limited. To the upside, a recovery past 114.00 could send the pair up to the 114.40/50 price zone.
AUDUSD – The Australian dollar was sharply lower in Asian and European market hours pressured by weaker than expected China’s IP and retail sales data that pressured riskier assets. Australian mining-based economy is quite dependent on the Asian giant, which consumes most of its production resulting in the Australian economy suffering significantly whenever the Chinese market is hit. The pair is now on track for the second consecutive bearish weekly close, after last week’s weekly bearish engulfing pattern generated a strong bearish signal.

Asian Markets take a hit after Economic Data

December 14, 2018 by Nikolas Papas Leave a Comment Filed Under: Market News - European Open Tagged: Asian Markets, Bank of China, Capital Markets, ECB, economy, EUR-USD, European trading, European Union, Financial markets, financial services, Forex, GBPUSD, monetary policy, trade war, trading session, trading volume

Asian Markets take a hit after two days of gains as macro data from China disappointed investors. China’s industrial-production growth slowed to 5.4% in November, the lowest number since the start of 2016 and the retail-sales increase was 8.1%, the least in 15 years. China’s National Bureau of Statistics (NBS) is reporting that global economic growth continues to decline, with an increasing number of uncertainties impacting the impetus for growth, and that weaker industrial production, and slowing retail growth shows that downward pressure on China’s domestic economy continues to increase largely due to the US-China trade war.

In Tokyo, the Nikkei225 index ended down 2.2% with Topix index declining -1.40% for Friday trading session. Singapore STI index joins others in falling 1.3% and the Hang Seng index fell 1.6%.

European markets and U.S. equity futures followed Asian stocks lower after data showed continued weakness in China’s economy. London stocks fell in early trade on Friday, the FTSE was 0.70% the DAX30 losing 1.50% and CAC40 started 1.32% lower.

ECB yesterday lowered its growth projections for 2018 to 1.9% vs +2.0% previous and 1.7% for 2019 vs +1.8% prior. Meanwhile, the yearly inflation rate for 2018 was revised higher to 1.8% from 1.7% previous but was largely offset by a weaker outlook for 2019, now seen at 1.6% vs. 1.7% prior.

EUR/USD making new monthly low breaking the 1.13

EURUSD started the European trading session making new monthly low breaking the 1.13 as German and French PMI’s missed analyst’s expectations, The slowdown of the economic activity in the Eurozone was broad-based with new business inflows almost stalling, job creation slipping to a two-year low and business optimism deteriorating. Mario Draghi reaffirmed a dovish shift by the ECB, forcing investors to scale back expectations for a rate hike next year, a key point that we mention in our yesterday’s daily report. According to the Eurozone money market futures, investors are now pricing in roughly 60% probability for the ECB to hike rates next year, which marks a heavy drop from around 75% probability seen yesterday.

EUR/USD currently trading at 1.1290 breaking the support at 1.13 and the 50h moving average, now a level for traders to watch is 1.1275. A clear break of that level will drive the price down to yearly low at 1.1215. On the flipside, the 1.1375 yesterday’s high is the immediate resistance point. Karen Jones, analyst at Commerzbank, suggests that the EUR/USD remains underpinned very near term by the 1.1321 support line and further gains to the November high at 1.1500 are on the cards and 1.1530/1.1622 (the 2018 downtrend and 16th October high). “This will need to be overcome to negate downside pressure. Dips lower will ideally be contained by 1.1300 and while above here the market will be viewed as bid. This guards the 1.1216 November low.

Below the 1.1216 November low lies the 61.8% Fibonacci retracement of the 2017-18 advance at 1.1186. Failure there would put the late May and June 2017 lows at 1.1119/10 on the cards.”

GBP/USD

GBPUSD today canceled the positive momentum that built yesterday as the rally stalled at 1.2670 area. The break of 100h moving average (red line) earlier today accelerated the selling pressures for sterling sending the price down to 1.2580. The 1.2560 is the first support for the pair today a break below that level will give bears the control and the pair can end at the 1.2485 level. The volatility is likely to remain over the coming days as Theresa May updated Brexit plan was swiftly rejected by the European Union.

Another victim of weak China macro data was AUDUSD which penetrated the 100d moving average entering the bearish phase.

Gold is trading lower for the second consecutive day at $1238 as retracement from 5 month top continues. The bullish momentum for the precious metal is still intact but we can’t rule out a move down to 1234 horizontal support. On the flip side, the $1242 level now seems to act as first resistance, which if cleared might lift gold back towards $1249-50 highs.

ECB Ends Bond Purchases, Euro Holds Steady, Dollar Flat

December 14, 2018 by Michael Moran Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: AUD/USD, Dollar index, EUR-USD, GBP-USD, Mario Draghi, USD/DXY

Summary: Markets settled into a quiet morning in Sydney following a volatile week. The Euro held steady following the ECB’s announcement to an end of its asset purchase program. A slightly downbeat assessment on Euro area growth by the European Central Bank saw the Euro trade lower before rallying to end little-changed in New York at 1.1365. Sterling edged higher as British PM May prepared to get her Brexit deal through Parliament. The Dollar Index (USD/DXY) closed flat. US Weekly Unemployment Claims beat forecasts, falling to the lowest since September.

Wall Street stocks were mixed. The DOW rose 0.20 while the S&P 500 slipped 0.10%. The yield on the US 10-Year bond was unchanged at 2.91%. Other global yields were little-changed.

EUR/USD – traded to a high of 1.13933 after the ECB announced an end to bond purchases. The Euro then dipped to a low of 1.13312 after Mario Draghi said that the balance of risks had shifted to the downside for Euro area. The multi-currency then rallied to close little-changed at 1.1365.
GBP/USD – After PM May survived the leadership challenge, Sterling slipped back to 1.2605 after it’s strong rally to 1.2670. May’s survival was then seen as allowing her to negotiate more generous terms for Britain in its exit from the EU by traders who lifted the Pound higher to 1.2655.

Wall Street Stocks were mixed with no fresh developments on US-China trade issues following an optimistic outlook yesterday. The S&P 500 closed at 2645, slightly lower than 2652 yesterday.
Dollar Index (USD/DXY) – ended flat at 97.065 (97.065 yesterday). The Greenback had mixed fortunes, flat against the Euro, while lower against the Pound. USD/JPY edged higher to 113.59 (113.22 yesterday). The Aussie grinded higher to 0.7225, up 0.26%.

On the Lookout – The market shifts its focus on Chinese data today with the trifecta of Industrial Production, Retail Sales and Fixed Asset Investment. Expectations are for an improvement in Retail Sales and Fixed Asset Investment. Industrial Production is expected to remain steady. If expectations are met, they will alleviate worries on a slowdown in China’s economy and boost risk sentiment. The should also take pressure away from the Chinese Yuan. Japan’s Tankan Manufacturing and Non-Manufacturing Index are also due for release this morning. Though the pace is slowing, Japan’s economy is expected to continue to expand. Data out of Europe see Euro-area and Eurozone Flash Manufacturing and Services PMI’s. US November Headline and Core Retail Sales round up today’s data.

Trading Perspective – While the Dollar Index was mixed, the ability of the Euro to keep its gains coupled with Sterling’s gains should see a weaker Greenback. Speculative market positioning is well long of US Dollar bets and a corrective move lower may be on the cards.

EUR/USD – this currency pair has held the 1.1300 level well and looks poised to test the 1.1400/30 resistance zone. The overnight high traded was 1.1393, which is initial resistance. Today’s Euro area (Germany, France, Italy) Flash Manufacturing and Services PMI’s are mostly expected unchanged from the previous month. A slight improvement is forecast for the Eurozone data. A break of 1.1430 would see 1.1480-1.1500. On the downside the 1.1330 low should hold, or we could see a downside test first.
GBP/USD – While Sterling has rallied somewhat, the Pound is not out of the woods yet. PM May faces an uphill climb to get her Brexit bill through Parliament. There were reports that the EU were set to preparing to discuss the Irish backstop which would help May get her deal through. GBP/USD has immediate resistance at 1.2685 (overnight high) followed by 1.2720. Immediate support can be found at 1.2625 and 1.2605.
AUD/USD – the Aussie extended its grind higher in true Oz fashion touching a high of 0.72465 on optimism built after some progress between China and the US to resolve their trade dispute. Chinese importers resumed buying US soybeans and US President Trump’s comments were upbeat on trade talks. AUD/USD closed at 0.7225, up 0.11% from 0.7214 yesterday. The base is slowly moving higher, a break of 0.7250 could see 0.7300 again. On the downside the support at 0.7200 is formidable.

USD/DXY (Dollar Index) – ended flat at 97.065 with a high of 97.292 and a low traded of 96.878. The highs have edged lower over the past two trading sessions while the support has held at 96.87. A break of 96.87 could see us back to this week’s low of 96.38 on Tuesday. The topside resistance of 97.30/50 should contain any rallies.

Its Draghi Day, Today

December 13, 2018 by Nikolas Papas Leave a Comment Filed Under: Market News, Market News - European Open Tagged: Brexit, ECB, EURUSD, GBPUSD, Mario Draghi

Asian stocks record a positive day as trade tensions may continue to ease further, boosting the outlook for global economic growth. President Trump also informed markets yesterday that China has agreed to restart purchases of American Soybeans and reduce the tariff on American car imports. China’s government and senior policy advisers are drafting the replacement for Made in China 2025 which would allow greater access for foreign companies, according to the Wall Street Journal.

In Tokyo, the Nikkei rose 1%, Hong Kong stocks have jumped again, outperforming others across Asia. The Hang Seng Index rose 1.2%, and Australia’s ASX 200, which also gained more than 1% yesterday, ended the day just 0.1% higher.

European stock markets started the day in quite note as traders are watching the Brexit and Italy related news. Italy’s Finance Minister Tria is scheduled to travel to Brussels for budget talks with the European Union, having proposed yesterday a revised budget deficit target of 2.04 percent. The spread between the 10-year Italian government bond yield and its German counterpart could continue to narrow in the near future.

In forex markets ,GBPUSD rallied from 20 month lows at 1.2475 to 1.26 after May survived a party no-confidence vote. The pair has reached the first resistance that we mention in yesterday’s report at 1.2667, trading above the 50h and 100h moving averages thus giving a sign of life for the bulls, the 200h moving average is still a strong resistance point at 1.2682. High volatility is expected also for today as Brexit-related headlines might continue to influence sentiment surrounding the Sterling and infuse volatility across GBP forex pairs.

The upbeat mood is also helping to lift EURUSD early morning at the daily high 1.1393. The pair has regained the bullish momentum after it crossed successfully the 200h moving average. Draghi will set the tone for the pair today as the ECB is expected to end its EUR2.6 trillion stimulus package and communicate next growth and inflation forecasts. Italy budget crisis is a risk for the ECB rate decision and might affect the commitment to maintain low interest rates until summer 2019. Analysts at Rabobank offer a sneak peek at what to expect from the final European Central Bank (ECB) monetary policy decision

“The ECB will maintain the risk assessment of “broadly balanced”, and recent solid wage data will probably be Mr. Draghi’s key argument when selling the ECB’s economic outlook. Forward rates guidance is likely to remain unchanged at “through the summer of 2019”, the end of net asset purchases is likely to be confirmed, reinvestment modalities will highlight flexibility, and there will be no explicit maturity extension (i.e. no Twist).

A new capital key will likely only be applied to asset re-investments, there will be no active re-balancing of the ECB’s portfolio, and only minor changes to the forward guidance, with no provisional to-be end-date specified. In terms of LTROs, they expect no announcement in December, but potential hints to pave the way for these in 2019 Q1.

Put another way, ECB monetary policy is now as fantastically complicated as in China; but put more simply, they are going to stop QE with CPI well below target, growth slowing, and politics looking messy, and then keep their fingers crossed it isn’t a huge policy error, leaving EU citizens and markets to cry “Despicable them!”

1.1350 is the immediate support for the pair and 1.1325 is the next point, of previous week support the 1.1305 is the more important one as it formed a double bottom the past two weeks. A clear break below that area could trigger more bearish pressure testing 1.1250 area. On the flip side, bulls are looking for the 1.14 region where the pair has already rejected three times the last two weeks. 1.1445 is the December high until today.

The policy statement is due at 1:45 p.m. Central European Time, or 7:45 a.m. Eastern, with Mario Draghi’s news conference at the ECB’s Frankfurt headquarters set for 2:30 p.m. CET, or 8:30 a.m. ET.

Pound Roars Back, PM May Survives Leadership Challenge

December 13, 2018 by Michael Moran Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: EUR-USD, GBP-USD, US S&P 500, US Ten-year Bond Yield, USD/DXY

Summary: The British Pound roared back in typical fashion as UK Prime Minister May survived a crucial leadership challenge. After plummeting to a fresh low not seen since April 2017 (1.2477), Sterling jumped to finish in New York at 1.2630. The Euro climbed back to the higher end of its recent range ahead of tonight’s ECB policy rate meeting, the last for 2018. The Dollar Index (USD/DXY), where the Euro and Sterling carry a combined weight of 69.5% slid 0.40% to 97.065 (97.455 yesterday). US Headline and Core CPI for November matched expectations.
Wall Street led global stocks higher lifted by a more positive trade outlook. Donald Trump said he would use his influence to calm the Huawei executive’s arrest as part of a deal with China. The DOW ended 1.27% higher while the S&P 500 gained 1.25%.

GBP/USD – true-to-form as one of the world’s most volatile major currencies, Sterling roared back 1.2%. PM May won the confidence vote with the numbers required for a simple majority (200 for, 177 against). The Pound which hit a high of 1.2670 just ahead of the confirmation, slipped back to 1.2615 immediately following the news of her survival. However, May still faces an uphill battle to get her Brexit deal through Expect more volatility ahead.
EUR/USD – the Euro bounced back to finish at 1.1365 after testing the lower end of its recent range at 1.1315. EUR/USD traded to an overnight high of 1.13873. The ECB meets on monetary policy for the last time this year. The European Central Bank is expected to confirm its plan to end Quantitative Easing at the end of the year. Traders are still at a query as to when Mario Draghi and his colleagues will lift ultra-low interest rates. The Main Refinancing Rate is expected to stay at 0.00%. The yield on Germanys 10-year Bund rose 5 basis points to 0.28%.
US Ten-Year Bond Yield – rose 3 basis points to 2.91%. Other global yields were also higher. The Federal Reserve has its final policy meeting next week. Despite a recent dovish tilt, policymakers are expected to raise the Fed Funds rate another 25 basis points. The 10-year yield saw a low close of 2.85% earlier this week where it has since pulled back. Any bounces will be limited to 2.95-3.0 %.

On the Lookout: Markets will watch for further developments on the trade and Brexit fronts. Meantime the risk of a US government shutdown grows as President Trump is at odds with leading Democrats over the funding of his plans to build a border wall with Mexico. Every December, this threat of a US government shutdown (for whatever reasons) occurs.
Events and economic data releases today are: UK RICS House Prices, German Final CPI (November), Swiss National Bank’s Monetary Policy Assessment Meeting and Libor Rate (expected to stay at -0.75%), ECB Main Refinancing Rate and Press Conference and finally US Weekly Jobless Claims.

Trading Perspective: Expect more range trading in the Dollar Majors with Sterling still likely to remain the most volatile. Market positioning will figure more prominently as traders jockey to adjust positions into the year-end ahead of the Christmas holidays.

GBP/USD – Sterling managed a high of 1.2670 before dropping as PM May survived the confidence vote to 1.2615. She faces an uphill battle to convince her party as well as those in the opposition to accept the Brexit deal she struck with the European Union. After yesterday’s big move, we can expect some consolidation, albeit within a wide range. Immediate support can be found at 1.2600 and 1.2550. On the topside, initial resistance lies at 1.2670 and then 1.2720. Lets not forget that the speculators are short of Sterling. If the 1.2500 level holds, and we see a weaker overall US Dollar, we could see a squeeze higher in the Pound. Expect more volatility ahead.
EUR/USD – The downside test of 1.3515 held with the Euro falling short of 1.1400. With the differential between European and US rates narrowing, and the prospect for more, EUR/USD has found a base at 1.1300. The Euro was boosted by news that Italian PM Conte proposed a 2.04% deficit target for 2019. The focus will be on the ECB’s plans to nudge up it’s ultra-low interest rates at its meeting later today. Most traders are expecting no new guidance on the ECB’s first rate hike. Expect the Euro to hold the 1.1300 support zone on the back of generally weaker Dollar and a short speculative Euro market.
US S&P 500 – with a more positive trade outlook, stocks had a strong rally before easing at the close. The S&P 500 traded to a high of 2685 before slipping to close at 2663 (2645 yesterday). Technically any bounces should be limited to 2680. A break on the topside of 2700 could yield 2740. The 2640 level should hold and a rally to the 2700/40 level is likely. Preference is to sell the rally to 2740.

Global Equities Take on Positive Tone Sino-U.S. Trade Talk Optimism

December 13, 2018 by Karthik Subramanian Leave a Comment Filed Under: Market News - US Open Tagged: Crude Oil, Dollar index, European stock markets, investor sentiment, risk appetite, USD/JPY

China-U.S. talks Asian and European stock markets are trading in green as global investor sentiment and risk appetite got positive boost on headlines that improved optimism surrounding Sino-U.S. trade talks. However caution surrounding geo-political issues continues to keep investors on their toes.

Summary: Equity markets which started off on dovish tone for the week as headlines hinted that tension between China & US was on rise owing to issue of Huawei executive being arrested in China on request from US government and investors expected the trade negotiations had a chance to fall apart. However equity markets started turning positive during European market hours on Tuesday supported by positive macro data and news that representatives from China & USA were discussing future route for trade negotiations to progress over phone calls. News that Huawei arrest had little to no-impact on trade talks greatly boosted investor appetite resulting in Asian and European equities opening positive and trading with significant gains during Wednesday’s market hours. Optimism surrounding Sino-U.S. trade talks was further boosted as US President Donald Trump told Reuters that he is optimistic about trade deal and negotiations were preceding in favorable direction. He also mentioned that he would meet with Chinese President Xi Jin Ping if requirement arises and was willing to interfere with Justice Department’s case against Huawei executive if it would benefit national security interests or help create a favorable trade deal with China.

The US Dollar index (USD/DXY) which measures the strength of dollar against six major -global currencies is currently trading at 97.39 down by 0.06% on the day as positive comments from US President Trump on Sino-U.S. trade negotiation weakened US Dollar in broad market which was already pressured on dovish Fed rate hike forecasts.
Following positive headlines from China & U.S.A and increased risk appetite in broad market, Asian and European equities traded with significant bullish momentum and key indices in Asian and European markets saw over 1% increase in value.
Crude Oil Price saw positive price action in Asian and European market hours as increased risk appetite and positive price action in Asian markets along with news of easing tensions between China & U.S. hinted at possibility for demand to increase in Asian markets.
Precious metals continue to trade sideways despite increased risk appetite in global markets as investors continue to maintain some level of caution owing to uncertainties surrounding European politics in form of Brexit and Italian Budget Woes resulting in some demand for safe haven assets amid subdued US Greenback’s value in broad market.

On The Lookout:

Brexit – PM Theresa May pulled out approval of Brexit deal in parliament fearing a rout angering many members from her own conservative party. While EU representatives continue to stress there is no more room for re-negotiation, Lawmakers in Britain’s Conservative Party triggered a “no confidence” vote against PM May to which she responded that she would not resignand warned lawmakers that ousting her will not make getting a Brexit deal any easier. The vote over the prime minister’s fate will take place later today evening.
Italian Budget – While news from early in the week hinted that EU & Italy were nearing a compromise on budget plans, France’s yellow vest protest put a dent in EU’s negotiations with Salvini and Di Maio refusing to agree to a 2019 deficit below 2.1%on news of President Macron’s promise for increased spending which went unopposed by EU. Meanwhile Italy could see an election in early half of 2019 as Salvini seeks to gain upper hand and break free from existing coalition agreement between League& Five Star citing ongoing budget crisis as reason.
Sino-U.S. Trade talks – Optimism surrounding Sino-U.S. trade talks in on rise as news hit market that US President Donald Trump in his interview with Reuters stated that negotiation was proceeding in favorable direction and he is ready to intervene in Huawei executive’s fate if it would lead to benefit for American National Security or help come to agreement with China on a favorable trade deal. Also headlines from China indicates that the government is considering cutting import tariffs on American-made cars to 15 percent from the current 40 percent.
Economic Data Release and Events – The calendar is relatively silent in major markets today. European market saw release of Industrial production data which saw positive outcome and now investors await Core CPI & Crude Oil Inventories Data from US market.

Parliament Uk Trading Perspective:

US Indices – US stock market opened positive on Tuesday but the gains in major indices were capped on news of meeting between President Donald Trump and Democratic leaders Nancy Pelosi and Charles Schumer saw heated argument which led to Trump threatening to shut down government if no agreement on border security is reached. While S&P 500 and DOW 30 closed in red, NASDAQ managed to close positive for the day on gains made by heavy weights such as Amazon and Alphabet Inc shares. US indices are likely to take cues from international market and trade positive given high level of risk appetite in market today which is supported by positive macro data outcome.
AUD/USD – The pair trimmed a major part of its early modest gains to fresh weekly tops but has still managed to hold just above the 0.7200 handle. Renewed optimism over improving US-China trade relations has been one of the key factors lending some support to Australian Dollar. However recovery rally is likely to lose momentum soon as upside move has faced resistance on repeated attempts indicating that bearish pressure might still be far from over.Weakness below the 0.7200 handle will find some support near the 0.7185-80 region (50-day SMA) below which the pair is likely to fall sharply towards 0.7150-45 support area, while the 0.7230 region acts as an immediate hurdle.
USD/JPY – The pair holds in green for the third straight day as it continues to extend its rally from 112.23 to 113.51(week’s high) while US yields swing around depending on risk sentiment. Technical indicators are developing within positive ground and near daily highs albeit lacking directional strength. The positive tone is being reinforced by the fact that the pair has bounced sharply from its 100 DMA after a second attempt to break lower. Buying interest is now aligned at around 113.00, with the bearish potential set to increase only on a break below 112.55 handle.