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  • Forextime.com Daily Market Analysis

    Forextime.com Daily Market Analysis

    BoJ holds fire, brightens economic outlook




    As widely anticipated the Bank of Japan did not surprise markets by keeping monetary policy unchanged at its final meeting for 2016. The central bank left interest rates unchanged at -0.1% and 10-year JGB’s yield target around zero, while maintain its annual holding of bonds at 80 trillion yen.

    The 12% decline in the Yen and 13% surge in crude prices since BoJ last met on November 1, helped in providing a brighter economic outlook as exports and output picked up.

    But the extreme divergence of U.S. monetary policy was considered a risk, as series of expected rate hikes in 2017 could see capital flight from emerging economies.

    USDJPY rose 0.5% as bond yield spreads between U.S. and Japan are not expected to shrink anytime soon, but we can assume that BoJ’s next step likely to be tightening rather than easing further.

    2016 is ending with tragic incidents in Turkey and Germany, but investors have become so fast in digesting bad news, and this explains the resilience in financial markets.

    The U.S. dollar is trading in narrow ranges against most of its major peers after Monday’s rally which was supported by Yellen’s public speech in Baltimore University. Although she did not comment on Monetary policy, her views that job market is strong and wage growth picking up was sufficient to provide the greenback a boost.

    With only nine trading days remaining till end of year, investors are unlikely to take heavy positions, whether it’s in equity, fixed income or foreign exchange markets, suggesting that the narrow range trading is likely to remain until new year.


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    By Hussein Sayed, Chief Market Strategist (Gulf & MENA)

  • #2
    Forextime.com Daily Market Analysis

    Kiwi struggles after weak trade data





    The New Zealand dollar continues to be volatile for traders despite the upbeat rhetoric from the government of New Zealand and also the Reserve Bank of New Zealand. Trade Balance data today was anything but positive though as it came in at -705M (-500M exp), putting further pressure on the NZDUSD which has been under intense pressure from bears in the recent weeks. This combined with the recent drop in global dairy auctions will put pressure back on the New Zealand economy, and it will be interesting to see the view point of the Reserve Bank of New Zealand regarding this as trade balance has always been high on its agenda. However, there has been some slight wins as the housing market looks to be cooling off after enacting aggressive measures and the NZDUSD has started losing some of its value which will certainly help turn around further trade balance issues. The key focus from here will be tomorrows GDP data, with many expecting it to be a robust figure for the quarter - despite the recent natural and market events which have caused some worries.

    The NZDUSD continues to be an interesting trade with long trending runs and also large patches of ranging, but so far it has been all trend with no range as of late - a common theme across all commodity currencies since the Trump victory. The trade balance data today had little effect on the NZDUSD and the markets seemed to be positive to it; it's the USD strength though which is causing issues for commodity currency bulls. Support was certainly found at 0.6881 and traders will be looking to see if the daily candle closes out as a hammer which could indicate a swing here as USD traders may be looking to take a breather and unwind. If that is the case then resistance can be found at 0.6948 and 0.7000 as the next levels higher, however this is against the trend at present and I would expect fierce pressure around these levels from kiwi traders.

    Across the 'ditch' and the Australian dollar continues to find itself under some pressure as well against the USD, but one trade that has been quite interesting has been the trading around the AUDJPY after yesterdays Bank of Japan holding fire. Recently, the AUDJPY trended up sharply before hitting and forming a strong trend line on the daily chart which is quite bearish in nature since 2014. The clear respect of this trend line will be key for a number of traders strategies, and as the Yen continues to look to get weaker the AUDJPY may see another attempt to take a higher level here.

    The move higher on the daily chart as of today shows a strong candle trying to engulf all the recent loses after finding support at 84.754, and I would expect a further rise to also find resistance at 86.188 before looking to play of the trend line yet again.



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    By Alex Gurr, Guest Analyst


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    • #3
      Forextime.com Daily Market Analysis

      Fed outlook turns hawkish




      The US economy was thrown back into the spotlight today as the FOMC minutes were released and the dovish FED of the past certainly looked a thing of the past, with some of the most upbeat and hawkish minutes that have been seen in a long time. Almost all of the officials present in the meeting expected that with Trumps appointment growth was expected to pick up in line with his expansionary policies. One thing that also stood out was the FED's own expectation around inflation with expectations that it will increase to the magic 2% mark in the medium term, and the recent lift in quarterly inflation was further credit to this theory. Regardless of the trump effect the FED looks to be singing the same tune as the market and that can only be positive for the bulls in the short term. The real question will be around what Trump can actually do with congress in order to get the US economy moving again and the economy expanding further - even when it's almost at full capacity when it comes to employment.

      Regardless of how you viewed the FOMC minutes, the recent economic data out of the US has been positive with the construction spending m/m lifting to 0.9% (0.5% exp) and ISM manufacturing PMI also lifting to 54.7 (53.8 exp). All of this has boded well for traders and the markets have responded accordingly with the S&P 500 lifting back up to a strong level of resistance in anticipation of tomorrows economic data due out on the employment sector and the services sector as well. Even with resistance currently sitting at 2272 the expectation of further highs is fresh on traders' minds and they will be looking to push the boundaries further in the current climate. A push upwards to 2300 is very much on the cards if the market sees further positive US economic data tomorrow.

      One thing that is also worth watching out for in tomorrow's trading is oil markets, previously they have been moving quite rapidly in the low volume trading and volatility is certainly ever traders friend. The recent build up in private storage showed that perhaps oil markets still needed a little more time to correct and we saw prices fall accordingly down to the 20 day moving average before finding dynamic support. Expectations are for a decline in overall oil inventories, but after the recent private reading the market may have altered its expectations.

      Technically speaking though oil is looking very strong with resistance sitting tight at 54.46, to get past this level we would need to see a large drawdown in crude oil inventories, and this may be a bit of an ask just after Christmas. Any further falls are also likely to struggle past the 20 day moving average, and even more so the 50 day moving average which is acting as dynamic support for market movements at present.


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      By Alex Gurr, Guest Analyst

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      • #4
        Forextime.com Daily Market Analysis

        Asian equities retreat as investors shift to cautious mode





        After a strong start for the year, equity markets started to cool down in the second trading week of 2017. Most Asian major indices are in red today, as Wall Street failed to make new highs and the Dow retreated further from the key psychological 20,000 mark, while oil suffered a steep selloff on Monday.

        Investors who built their positions based on Trump’s victory are likely to start cashing out for the time being and shift their focus on fundamentals with the earning season kicking off later this week when U.S. big banks release their fourth quarter results. I’m not confident to call a correction yet, but certainly many investors got ahead of themselves betting on fiscal stimulus, and while business usually tends to under promise and over deliver, this doesn’t seem to be the case with the U.S. new President.

        Although Kuwait’s Oil Minister Essam Al-Marzouk who is chairing the committee to oversee compliance of OPEC’s output assured the markets that OPEC and non-OPEC members will abide to the planned cuts, still both oil benchmarks dropped 4% on Monday. This clearly indicates that it’s not just an OPEC game, and the expected increase in U.S. and Canadian supplies are likely to threaten the oil rally. Data from the U.S. on Friday showed rig counts rose for ten consecutive weeks and it’s just about some time for this to translate into additional production, suggesting that downside risk may remain in play, and rather than just focusing on implementations of OPEC production cuts, investors should be looking at the bigger picture on whether supply will meet demand in the second half of 2017.

        The U.S. dollar fell for a second day, extending its slide from the 14-year high hit on January 3. The pull back in the dollar came despite hawkish speeches from Fed officials suggesting that the central bank is getting closer to achieving its dual mandate. Both Fed presidents, Charles Evans and Patrick Harker aren’t ruling out three rate hikes in 2017, while Eric Rosengren called for stepping up the pace of interest rates hikes to prevent inflation from overshooting. However, traders are still not yet completely convinced and pricing in only two hikes for 2017 according to CME’s Fed Watch. With no tier one economic data on the calendar until Friday, U.S. bond yields will remain to be the key driver for the greenback.

        The Pound remained under pressure after Monday’s steep selloff on comments from UK’s Prime Minister Theresa May which intensified fears of “Hard Brexit”. Although the pound looks undervalued, the risk of further selloff may remain in play as we get closer to triggering article 50. Meanwhile comments from Scotland’s First Minister on BBC that she’s not bluffing about her vow to hold a second referendum on Scottish independence if Britain leaves the single market is another factor to worry about on the medium-term.



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        By Hussein Sayed, Chief Market Strategist (Gulf & MENA)

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        • #5
          Forextime.com Daily Market Analysis

          President-elect leaves dollar bulls unimpressed




          The long-awaited first press conference by President-elect Donald Trump left many investors with more questions than answers as he failed to justify the current premium priced in the dollar and equity markets.

          We already knew that Trump wants to build a border wall with Mexico, bring back U.S. production onshore, and that he’s willing to be the best job creator America ever knew, but what’s his plans on corporate tax reforms? How and when is he planning to spend on roads, bridges, and other infrastructure projects? Is he going to impose tariffs on imported goods from China, Mexico and the rest of the world? Unfortunately, no updates were revealed.

          Thus, the greenback was dragged, falling against all major currencies on Wednesday with the dollar index falling to lowest levels since Dec 14 at 101.28. The selloff continued until early Thursday suggesting that dollar bulls are no more willing to price any additional premium until we get more clarity on his promised fiscal plans.

          The continued fall in U.S. treasury yields is another factor dragging the dollar. U.S. 10 year yields have been in a down trend since Dec 14, losing 11.8% in value after spiking 42% since the election results were revealed.

          U.S. stocks were less impacted, and managed to close higher despite the volatility and sharp selloff in pharma stocks which were attacked by Trump. Whether the rally can be sustained will depend on two factors, earning growth and actions from Trump’s administration as his words and tweets are clearly starting to show less influence.

          The combination of dollar weakness, lower U.S. yields and doubts in Trump's policies offered gold a boost, with the yellow metal posting a high of 1,199. So far gold has recovered 6.8% from December lows, and trader higher in 11 out of 13 days. Fed Chair Janet Yellen’s speech will probably decide whether we’re going to see a break and hold above 1,200 today.



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          By Hussein Sayed, Chief Market Strategist (Gulf & MENA)

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          • #6
            Forextime.com Daily Market Analysis

            Sterling slides on Theresa effect





            The heightened hard Brexit fears have triggered a steep Sterling selloff during the early trading hours of Monday with the GBPUSD tumbling to a fresh three-month low at $1.1983. Although the cause behind the renewed selling pressures on the Pound was attributed to reports of Theresa May standing firm and moving forward with her hard Brexit plans during Tuesday's pending speech, the frightening low buying sentiment continues to play a critical part. It is becoming quite clear that the persistent Brexit woes and ongoing uncertainty have left the Pound vulnerable to extreme losses with anxiety over a rigid divorce from the European Union exposing the currency to further downside risks in the future.

            Sterling bears have received ample inspiration from the visible lack of clarity the UK government has provided on the Brexit steps and this continues to grate on investor sentiment. With fears on the rise over a tougher EU exit negatively impacting the UK economy, the rising risk aversion, and diminishing buying sentiment may ensure Sterling remains depressed this month. While most anticipate Theresa May to provide some clarity on Tuesday on how the UK plans to move forward with the hard Brexit scenario, there is a threat of the Sterling sinking deeper into the abyss if investors are left empty-handed instead.

            If this messy Brexit episode explodes out of control this quarter, there is a possibility of the Bank of England adopting a dovish stance which may spark a divergence in monetary policy between the Fed and BoE. As of now, Sterling weakness remains a recurrent theme with sellers exploiting the technical bounces to drag prices lower. Technical traders may observe how the GBPUSD reacts to the 1.2150 dynamic support which has the ability to transform into a resistance if the selling momentum persists.




            Dollar attempts to stabilize

            The lingering impacts of last week’s market shaking Dollar selloff can still be seen on the Dollar Index with prices hovering around 101.65 as of writing. Dollar bullish investors have lost their inspiration to propel the Greenback higher following the lack of clarity on fiscal policies at Trump's news conference. With the initial driver behind the Dollar’s appreciation pinned on the hopes of Trump boosting US growth via fiscal spending, this new cloud of uncertainty could obstruct the Dollar’s upside gains in the short term. The next major event risk for the Greenback this week will be Trump’s inauguration ceremony on the 20th which could cause price sensitivity to intensify as anxious investors are kept on edge.

            Commodity spotlight – Gold

            The rising Trump fueled uncertainty, persistent Brexit woes and a weak Dollar have elevated Gold prices closer to $1210 during trading on Monday. This yellow metal has unexpectedly regained its safe-haven glimmer in the first trading month of the New Year with further gains expected in the short term if uncertainty becomes a dominant theme. With anxiety and risk aversion set to heighten this week ahead of the inauguration ceremony in the United States, investors may flock to safe-haven assets which should keep Gold buoyed. From a technical standpoint, Gold could explode into further gains towards $1230 if bulls manage to conquer the $1210 resistance level.




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            By Lukman Otunuga, Research Analyst
            Last edited by FXTM Official; 01-18-2017, 07:04 AM.

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            • #7
              Forextime.com Daily Market Analysis

              Aussie dollar cracks major levels




              The Australian dollar swung heavily today as US bulls finally looked to sell off in the wake of economic uncertainty around the United Kingdom. Volatility was most certainly the key player for the day, and traders took full advantage. Yesterday there were strong comments that the AUD was currently overvalued, but it would seem that the market had other ideas as it raced up the charts knocking out some key levels along the way. The market is further poised for today consumer sentiment, which will give some indication if the Trump effect has spread to Australia in the wake of recent events. Expectations have previously been very low and I would expect this to be the theme going forward but with the possibility of a surprise in economic data as we have previously seen.

              For the AUDUSD traders resistance was not a problem today as it smashed through 0.7531 on the charts and looked to climb even higher, coming up just short of 0.7567. The 0.7567 level is very strong and I would expect to see some stiff resistance unless we see some positive fundamental data come out in the next few hours. In the event of a pullback I would expect that the 100 day moving average could act as dynamic resistance if it is a strong pullback, otherwise I would anticipate that former resistance level at 0.7531 looking to hold out in the long run.

              One of the interesting things about a stronger USD has been the flow on effect to metals, none more so than silver which has so far seen a solid bullish trend appear in the short term and has briefly pushed through resistance at 17.133. The strong sell off today in USD certainly had a big impact in helping making this progress, but the real test is set to come as it sizes up resistance at 17.308, which I would expect to be a very strong level. The 200 day moving average is also intersecting with this strong level of resistance and has previously acted as a strong dynamic level for market movements. However, the trend is certainly your friend and this could be the case as silver looks to climb higher in the build up to Trumps inauguration on Friday.

              Lastly, the NZDUSD has managed to also climb up the charts, but recent reports around the dairy auction paint a messy picture that shows that New Zealand's economy may not be as strong as recent economists had predicted. The jump higher today to resistance at 0.7222 has shown there is strong demand during patches of weakness, however this level has proved time and time again to also fight back and push prices lower.



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              By Alex Gurr, Guest Analyst

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              • #8
                Forextime.com Daily Market Analysis

                Trump vs Yellen & Draghi vs Weidmann




                The U.S. dollar has been on a roller-coaster this week. After dropping by more than 1% on Tuesday the dollar index recovered 0.9% from its lows. The steep drop in the currency came after comments from Donald Trump suggesting that the dollar is too strong, and this led some traders to believe the recent rally could have come to an end, but comments from Fed Chair Janet Yellen on Wednesday brought back hopes to the bulls.

                Ms. Yellen did not specify the timeline or the pace of projected interest rates hikes, but she indicated the Fed will raise rates few times a year until 2019 and warned of a nasty surprise if the central refrained from acting. Although there’s no precise definition of “few” but reasonably means two to three times a year, which leave many central banks behind.

                Recent economic data supports Yellen’s views as inflation rose in 2016 at fastest pace in five years. U.S. CPI jumped 0.3% in December to breach the 2% benchmark, and if oil prices held above $50 the trend is not likely to reverse. This leaves only the Fed's preferred gauges of inflation, the PCE and Core PCE Price Index below 2%. However, there is a high risk of these indices overshooting the Fed’s target if fiscal policies came into play and the Fed will be left with little options but to fasten the pace of monetary policy tightening, thus keep supporting the dollar.

                On the shorter run, Trump will remain the center focus for traders and his inauguration on Friday will play a major role in the dollar’s direction. It’s highly unlikely to reiterate that the strong dollar is hurting the economy, but if his speech contains more of protectionist policies than stimulus measures, it could harm the dollar, at least in short term.

                The European Central Bank is meeting today and most likely keep monetary policy unchanged after the central bank extended and reduced the monthly bond purchases to €60 from €80 in their last meeting. Although it might be considered a non-event, we’ll be carefully listening to Draghi to see if the recent improvement in Eurozone data especially when it comes to inflation, will force the ECB to start considering unwinding their QE policies.

                PMI’s across the Eurozone reached 5.5 years high in December and inflation climbed to 1.12, the highest since August 2013. Meanwhile German inflation jumped to 1.7%, thanks to higher oil prices. This will undoubtedly create a battle between Bundesbank's Weidmann and Draghi on when to end the loose monetary policy. Of course, Mr. Draghi has his reasons, especially that political risks will intensify in the next couple of months with presidential elections in France, Germany and Netherland’s, but once we’re over it, I believe the ECB will start ending their untraditional QE policies. This suggests the Euro is likely to remain under pressure until probably mid-2017.



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                By Hussein Sayed, Chief Market Strategist (Gulf & MENA)

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                • #9
                  Forextime.com Daily Market Analysis

                  The Week ahead: Politics to take center stage




                  Donald Trump is finally in power, a new era has arrived, and his policy plans in the first couple of weeks will override fundamentals. Markets spent more than two months pricing in growth policies promises, lowers corporate taxes, and deregulations, now it is time to deliver as markets will no more move on words but actions.

                  U.S. dollar bulls were not really impressed in the new Presidents’ inauguration speech, as it was focused more on protectionism and lacked any concrete plans to drive growth. Repealing Obamacare, building a Mexican border wall, and withdrawing from the Trans Pacific Partnership are not the kind of news investors want to hear, they need to know when pro-growth fiscal policies will come into play and more importantly whether congress will approve them.

                  The days and weeks ahead will likely see volatility increase in equities, fixed income, and currency markets. Investors are already buying exchange-traded products that track volatility, this explains the level of expected uncertainty going forward.

                  The week ahead will also see U.S. earnings season move into high gear with more than 20% of S&P 500 companies reporting fourth quarter results including Alphabet, Amazon, Microsoft, McDonald’s, Verizon, Johnson & Johnson, Boeing, EBay, and AT&T. According to Factset, 61% of the companies that reported results so far managed to beat profit estimates, while only 47% managed to beat on revenues.

                  On the U.S. economic data front, all eyes will be on Friday’s U.S. Q4 GDP release. Growth is anticipated to slow significantly from Q3 3.5% to only 2.2%, as net trade expected to turn negative. Homes sales, services PMI’s, trade balance, and durable goods are also on the agenda for next week.

                  It will also be an interesting week for sterling as U.K.’s supreme court will eventually deliver its ruling on Tuesday on whether Prime Minister Theresa May can activate the process for Brexit without parliamentary approval. We highly expect that the court will rule in favor of Parliament’s approval to trigger article 50, but any spike in sterling likely to be short lived.



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                  By Hussein Sayed, Chief Market Strategist (Gulf & MENA)

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                  • #10
                    Forextime.com Daily Market Analysis

                    Yen continues to strengthen





                    Despite all the global economic indicators and central bank movements the Yen continues to be one of the major players in the FX market. So far the Bank of Japan has been keen to hold off any further action as the market continues to offer up a stronger USD, which in turn helps push their agenda of weakening the exchange rate. While not ever country in the G8 is in agreement with the tactics taken by Japan previously, this lends weight to the US economy forcing the changes, and it's likely we will continue to see strong fluctuations in the USDJPY. The only major thing this week on the Japanese side is the CPI data, with market expecting below average CPI compared to what Abenomics has so far promised - so there is potential for movement if it beats estimates.

                    On the charts the USDJPY continues to show case a strong trending mentality. So far the bears looking to be taking control and forcing it down the chart in a strong channel which has so far faced very little resistance. The 20 day moving average has also been acting as dynamic resistance in the market so far, preventing any further movements higher and I would expect this to remain the case until USD strength looks to continue on a global scale. Any movements lower however, are likely to find support quite strong at 112.442 and 111.688 - with market expectations looking very strong after the recent reversal in the previous days.

                    Regardless of all the global attention the US economy has been getting the S&P 500 has so far been one of the largest benefactors with it set to make a large move if technical patterns are anything to go off. New home sales and consumer sentiment are likely to help drive the market in the coming days, and the market will be looking for further positive news to help push the S&P 500 higher, despite it touching record highs as of late.

                    Technically speaking the S&P 500 is looking very strong as of late from a bullish perspective, with the 20 day moving average acting as dynamic support all the way up on the daily chart. The tightness of the current band on the chart gives weight to the fact that a breakout is set to occur and I would be looking at the bulls for them to take control. However, resistance at 2278 continues to impede the bulls from rallying higher and may cause further issues in the coming days until we see further positive data.


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                    By Alex Gurr, Guest Analyst

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                    • #11
                      Forextime.com Daily Market Analysis

                      Equity markets hit new heights





                      Equity markets have been the major benefactor market movements today with the Dow finally breaking above the 20K mark for the first time. The S&P 500 has also rallied heavily today and is just shy of the magic 2300 mark which I've talked about in previous articles - which is of course a big benefactor of the Trump effect which is going through the markets at present. 2017 could very much be the year of the bull, but it will take time and a wait and see approach to see if it all comes true, as it is very much early days for equity markets in the new year. Equity markets in the US still have hurdles to jump through from a fundamental point of view as unemployment claims is due out tomorrow, and consumer sentiment will also be released the following day after that. All of these have the power to impact equity markets sharply, but the spotlight will most certainly fall on anything that Trump has to say at present.

                      Right now resistance for the S&P 500 is around the 2300 mark, with the market looking to move sharply further higher if given the right opportunities. This key psychological level is likely hold in the short term, but for any movements higher a move to 2350 and 2400 is likely to be the next major levels of resistance in the long run, as it's very much uncharted territory. Any movements lower are likely to find dynamic support on the 20 day moving average, which continues to trend up with the market and is likely to be the first line of defence of any brave bears do come into the market.

                      The New Zealand economy has managed to hit rock star economy status as usual, with the CPI figures coming in better than expected at 0.4% Q/Q (0.3% exp). Helping to push the annual figure to 1.3%; still below the 2% mark but nevertheless moving back in the right direction and something the Reserve Bank of New Zealand will have to take into consideration. Many economists are now expecting that the RBNZ will likely hold rates at steady at present as inflation is lifting, and if it continues to do so though then the RBNZ may even be forced to increase the OCR quicker than anticipated.

                      As previously mentioned the NZDUSD has been very bullish on the charts, and the trend is very much still the markets friend. Expectations still are quite bullish with the results seen today, and with a weaker USD I would expect the NZD to continue to resistance levels at 0.7343 and 0.7402. If it can continue to gather momentum, we could see it breach through the 80 cent level, however the market may look to claw back some gains well before then and the Trump effect on the USD can be quite strong as well.


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                      By Alex Gurr, Guest Analyst

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                      • #12
                        Forextime.com Daily Market Analysis

                        AUD leads Asian trading session






                        The Australian dollar is taking the spotlight as the Reserve Bank of Australia is set to have its decision about the current interest rate levels, and the market thus far is not expecting anything much from the RBA. With the interest rate held at 1.50% it still remains one of the highest in the developed world, but the Australian economy is currently waiting to see what the outcome will be from the Trump effect, and while things have been rocky it does seem that the economy is starting to look slightly better. However, yesterdays retail sales showed that it's not all smooth sailing as it dipped to -0.1% m/m (0.3% exp), this result lends weight to the fact that the RBA may touch on the consumer economy not picking up as expected. But the real weight will be focused I feel on the economy as a whole and the commodity sector which has been recovering in recent months in anticipation of the global economy picking up.

                        Markets have been very much a fan of commodity currencies in recent weeks, with global risk appetite picking up the demand for yield has lead to large jumps in the NZD and of course the AUD, with the AUD looking very much the stronger of the two. So far the AUDUSD has been on a very bullish trend and it certainly has not seemed to lose any steam at present. The 20 day moving average has acted as dynamic support as it has moved up the chart, and this looks likely to be the first real test as comes under pressure. After all markets can't remain bullish forever, especially when it comes to FX markets. At the same time resistance at 0.7680 has so far stifled the bulls in there run up the charts, but the recent bearish movement has found strong bullish sentiment so expectations are building for further movements past this level onto the next major level at 0.7730.

                        Global up turn has so far been talked about, but not come through just yet. However, oil markets have been looking more and more uncertain when it comes to direction for the majority of traders. One thing that does remain clear is that oil is coming under further pressure in the markets to find some direction. At present the 20 day moving average continues to act as dynamic support and is pushing the bears out of the market as it looks to take on the key level of resistance at 54.46. As the two come together expectations will build for a bullish breakout, or if we had a reversal we could see some strong bearish pressure. Pressure will build though, and the bulls have the advantage in this sort of scenario and fundamentals starting to lean in their favour.




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                        By Alex Gurr, Guest Analyst

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                        • #13
                          Forextime.com Daily Market Analysis

                          Traders look to hedge in Gold




                          The world and the markets continue to struggle to focus on economic data as Trumps economic policies take centre stage. This should come as no surprise these days given the power one man can wield on an economies; as we saw with Abenomics. But that was just Japan and the US market is the world's largest free market and is Trump is throwing his weight around, which in turn has led to strong movements and volatility being one of the major themes of the market. Commodities have so far been a mixed bag for most traders in the market, however trending is become a key theme and the metals market is looking tradable in its present form.

                          Gold has been on the upside in the recent weeks as Trump continues to put pressure on the market, especially around his comments on currencies and the fact that a number of countries should stop manipulating their currency. There is further speculation that Trump may in fact also start a currency war globally, however how that would look is still unknown and also comes with large risks for the US economy - large fluctuations might be good for traders, but for an established economy it can cause a world of pain. If exports are winners in the long run, then importers and the general consumer are worse off and vice versa.

                          Gold has so far but in a very bullish trend for a few weeks and it looks set to continue as people look for a hedge in the event of a currency war. Resistance at 1245 held up quite nicely when pushed over the last few days, but after the quick drop gold has found support on the 100 day moving average. Any further drops for Gold are likely to find support at 1208, but even before that the 20 day moving average would also be something to consider and watch. If Gold continues to run higher then I would expect the next major level of resistance to be found at 1262 and it may look to take a breather at this key level.

                          Oil has also been another major player in the market that everyone is taking a tough look at, after last week's oil inventory data shocked the market coming in at 13.83M barrels (2.53M exp). This was a quite a large inventory build up and was somewhat unexpected after the recent cuts from OPEC back a few months to help bolster prices. Additionally America picking up pace was also expected to cause further increases in demand.

                          Technically speaking, Oil on the charts though has so far failed to breach through the resistance level at 54.46 and unless we see further cuts of even a pick-up in demand then it could actually slide further down the charts. So far the 20 day moving average and the 50 day moving average have been slowing down any bearish movements, but it's only a matter of time before it slips lower unless we see some changes.



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                          By Alex Gurr, Guest Analyst

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                          • #14
                            Forextime.com Daily Market Analysis

                            WTI bulls struggle above $52.50





                            WTI Crude breached $53 during trading on Tuesday after industry data pointed to a potential ninth straight week of inventory builds which revived some oversupply concerns. Although OPEC members have made an effort to stabilizing the oil markets by cutting output, the growing threat of U.S shale ramping up production continues to limit gains on the commodity. While oil markets may be seen to be trapped in a fierce tug of war, a resurgent Dollar from the prospects of higher US rates could expose WTI to further downside shocks. From a technical standpoint, WTI Crude bulls are struggling around $52.50 with weakness below this level opening a path towards $51.50.



                            Gold pressured by rate hike expectations

                            Gold was exposed to further downside losses during early trading on Wednesday as expectations heightened over the Federal Reserve raising US interest rates next week. A strengthening Dollar from the improving sentiment towards the United States has fuelled the metals selloff with prices trading around $1213 as of writing. From a technical standpoint, Gold is under pressure on the daily charts with sellers eyeing $1200. Previous support around $1220 could transform into a dynamic resistance that offers that encourages a selloff towards $1200 and potentially lower.



                            EURUSD bears eye 1.0500

                            The growing political risks in Europe have left the Euro vulnerable to sharp losses. Although the economic fundamentals of the Eurozone continue to look encouraging, it is the uncertainty revolving around the French elections that has haunted investor attraction towards the currency. Market participants may direct their attention to Thursday ECB meeting which most anticipate concluding with the central bank leaving monetary policy unchanged. From a technical standpoint, the EURUSD is bearish on the daily charts. The downside momentum could encourage bears to drag prices towards 1.0500 in the short term and 1.0350 in the medium to longer term.



                            GBPUSD struggles above 1.2200

                            Sterling remains gripped by the Brexit developments and the rising anxiety ahead of the Article 50 invoke should create a foundation for bears to install repeated rounds of selling. In a technical perspective, prices are trading below the daily 20 SMA while the MACD has crossed to the downside. With the pair creating lower lows and lower highs on the daily charts, the prerequisites of a bearish trend have been firmly achieved. Technical traders may observe how prices react below 1.2200 with further weakness opening a path towards 1.2100 and 1.2000 respectively.



                            GBPJPY breaks below 139.00

                            The bearish combination of Sterling weakness and Yen's resurgence from risk aversion has left the GBPJPY vulnerable to heavy losses this week. This pair may come under renewed selling pressures in the medium to longer term as uncertainty heightens from the Brexit developments. From a technical standpoint, the pair is bearish on the daily charts as prices are trading below the 20 simple moving averages. A decisive break down below 138.50 could open a path lower to the next relevant support level at 137.00.




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                            By Lukman Otunuga, Research Analyst

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                            • #15
                              Forextime.com Daily Market Analysis

                              U.S. equities touch new highs, still boring!




                              The best way to describe recent market price action is boring. Although S&P 500 touched a new record-high on Tuesday, the index has been trading in a range of less than 0.5% for the past ten days, and when excluding the rise of 0.41% on 5th May, it was a trading range of less than 0.2%.



                              Low volatility indicates that investors seem to be relaxed for now. Although they’re not willing to take much risk, they aren’t worried about a sharp correction. Multiple factors may explain the low volatility: steady earnings, stable economic indicators, and a decline in equities correlation, limiting a one-sided move. One of the questions I hear all day, is how long can this prolonged period of low volatility last? But the more important question should be, what direction are equities going to take when volatility returns?



                              First, let’s examine how markets reacted in the immediate aftermath of historic low volatility levels:



                              July 1993: The VIX fell to 9.11, S&P 500 gained 3.6% in the following eight weeks.



                              December 1993: the VIX dropped to a low of 8.89, four weeks later the S&P 500 surged 2.6%, then fell by more than 7% in two months.



                              December 2006: the VIX fell below 10. S&P 500 posted gains of 3.25% in ten weeks, followed by a 6.7% correction.



                              The takeaway from these samples is that for the most part, when the VIX falls below the 10 benchmark, equities make short-term gains, followed by a correction. On the longer-term, it’s much different. For example, in 1995 the S&P 500 surged 37.2% and in 2008 crashed 36.55%, suggesting that the VIX is a poor indicator of long-term trends.



                              A period of very low volatility doesn’t persist for long, and it only needs little surprises, whether it's macro factors, a change in earnings expectations, or a political shock to change investors’ behavior.



                              I still believe that valuations are overstretched, and if not supported by stronger earnings in the next two quarters, it will be hard to justify current price levels, especially considering that fixed income instruments will become more attractive as the Fed and other central banks start tightening monetary policies. I will also keep a close eye on oil prices, although I believe that we’ll be ending the year above $50. Any sharp move to the downside from current levels will drag equities with it.


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                              By Hussein Sayed, Chief Market Strategist (Gulf & MENA)

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