FBS.com - Daily/Weekly Analysis / Market News

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Tatiana Norkina, analyst at FBS

 

The publication of the US past-month industrial production data, which turned out slightly better than forecasted by analysts, has contributed to strengthening of the U.S. dollar index today, after it falling to the 79.70 area. Nevertheless, the dollar is still in the red zone, losing about 0.02%, as of now. In the meantime, stock markets have opened significantly in the black. Thus, DJIA is adding about 0.60%, S&P500 - 0.30%, in expectation of the next speech by FRS Chair J. Yellen.

 

The EUR/USD currency pair has slid to the 1.3820 support area, after testing the 1.3850 mark today, while the GBP/USD pair has been supported by the labor market data. After the announcement that the unemployment rate has reduced from 7.1% to 6.9%, the pair shot to the 1.6820 area. So far, it is consolidating near the 1.6800 figure.

 

Bulls have just tried to go above the 0.8800 figure on the USD/CHF pair, which has been trading in a narrow range all day. USD/JPY has grown to 102.35 but met a strong resistance there, which can force the market to return to the 101.90-102.00 area already in the near future.

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Tatiana Norkina, analyst at FBS

 

U.S. dollar index has weakened somewhat today after yesterday's "dovish" comments by J. Yellen who acknowledged the labor market weakness and the low level of inflation in the country. The index was supported, to a certain extent, by today's data on unemployment benefits, the number of which for the past week turned out to be slightly lower than expected - 304 thousand (against the forecasted 315 thousand of applications). At the moment, the American is losing about 0.16%. Major U.S. stock indexes are moving in different directions: S&P500 has gained 0.25% so far, while DJIA is in the red zone, losing about 0.05%.

 

At the same time, the EUR/USD currency pair has slipped to the 1.3830 support, after reaching highs of the day in the 1.3865 area. The GBP/USD pair has returned to the 1.6800 figure where it is consolidating at the moment.

 

USD/CHF is trading within the 0.8780-0.8820 range for the third day in a row and is approaching its upper limit now. In the meantime, USD/JPY seems to have managed to keep above the 102.00 figure and the bulls are willing to resume the recovery.

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USD/JPY rose to 102.70. Yen fell after a report showed Japan’s trade deficit widened more than forecast last month.

 

EUR/USD remains in the $1.3810/20 area. US dollar is feeling rather well versus yen and euro as the leading US economic indicators that may back speculation the Federal Reserve will remove stimulus this year. Tense situation in Ukraine keeps affecting the market. In Europe banks are closed due to the Easter holidays. GBP/USD is in the $1.6800 zone.

 

Aussie and kiwi keep on correcting lower after peaking on April 10. AUD/USD extends the bearish retracement, consolidating in the $0.9340/20 range. NZD/USD swings in the $0.8600/8560 range. The $0.8560 support remains strong for now. The Reserve Bank of New Zealand will hold a policy meeting on Thursday – interest rate is expected to be hiked by 0.25% to 3.00%.

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CFTC: USD longs down

 

Here are the essentials of the latest Commitments of Traders (COT) report, released on April 18 by the Commodity Futures Trading Commission (CFTC) for a week ended on April 15. According to the report, net long USD positions contracted versus the other major currencies. 

 

 

EUR/USD

 

Euro positions rose after three straight weeks of declines.

 

 

GBP/USD

 

British pound net bullish positions gained for a 5th consecutive week and rose to their highest level since February 15 2011.

 

USD/JPY

 

Japanese yen short positions contracted.

 

AUD/USD

 

Australian dollar contracts improved for a sixth consecutive week.

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EUR/USD: Elliott waves (Apr. 21)

 

By Roman Petuchov

 

Weekly. EUR/USD is forming the wave (Y) of [D] of the convergent horizontal triangle.

 

Chart. Weekly EUR/USD

 

Daily. The wave mentioned above is taking form of a double Zigzag. At present, euro’s forming the final zigzag [A] - - [C].

Chart. Daily EUR/USD

 

H4. In the near term the correctional wave (4) will be over.Tthen the growth will continue within the impulse (5) as it’s shown at the picture. When the wave [C] of Y is complete, we’ll expect the market would to reverse.

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GBP/USD: Elliott waves (Apr. 21)

 

By Roman Petuchov

 

Weekly. During the last 8 months the market has been growing within an ascending impulse [C] of B. Consider the layout of the bullish trend.

 

Chart. Weekly GBP/USD

 

Daily. The chart shows the layout of the rising impulse. The pair’s currently forming correctional wave (IV).

 

Chart. Daily GBP/USD

 

H4. GBP/USD is forming the wave (IV) which takes the form of a Zigzag. Once the upward impulse (5) of [C]is complete, the pair will start declining within the impulse C. The estimated trajectory is shown at the picture.

Chart. H4 GBP/USD

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USD/JPY: Elliott waves (Apr. 21)

 

By Roman Petuchov

 

Daily. USD/JPY is forming the long-term corrective wave IV. When this wave is complete, we’ll see a new uptrend, which will be the wave V.

 

Chart. Daily USD/JPY

 

H12. The more detailed markup tells us that the wave IV is complete. This complex wave took the form of a Double Three.

 

Chart. H12 USD/JPY

 

H4. The wave [y] took the form of a plane wave. In the last section we see the beginning of growth in the wave V. It’s too early to make the layout of this wave, but we can say that this week we expect the pair to rise.

Chart. H4 USD/JPY

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AUD/USD: Elliott waves (Apr. 21)

 

By Roman Petuchov

 

Weekly. The global emerging structure is a Zigzag. The correctional wave which is a part of it is complete. In the coming months we expect the pair to rise.

 

Chart. Weekly AUD/USD

 

Daily. Downward impulse is complete . In last section  we saw growth in the first wave of the new uptrend.

Chart. Daily AUD/USD

 

H4. The figure shows a detail layout upside impulse, the fourth wave of which took the form of an extended oblique triangle. Next week we expect correctional decline in the wave (2).

Chart. H4 AUD/USD

 

More:

http://www.fxbazooka.com/en/analitycs/show/1436

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GBP/USD is able to go higher

 

By Mark Jensen

 

GBP/USD keeps trading in the $1.6800 area. On Thursday the pair touched the highest level since 2009 on the dovish comments from the Fed’s Chairwoman Janet Yellen, while pound was boosted by the UK’s strong jobs and wages data released on Wednesday.

 

It seems that Yellen has decided to calm investors who were worried of sooner monetary tightening as US economy is gaining momentum. So far, the economic data in the US is strong, but not too strong, so the Fed still is able to make the market calm down. In Britain the unemployment rate fell from 7.2% to 6.9%, while average earnings index rose by 1.7% vs. 1.5% expected. This strengthened the expectations for the Bank of England’s rate hike in the first quarter of 2015. Although British central bank may not be entirely happy with such an advance in GBP, it’s not likely to somehow make the national currency go lower. On Wednesday the BoE will publish the MPC meeting minutes, so the regulator’s attitude might become a bit clearer. As the UK economy looks really good, GBP/USD can test even higher levels – $1.6900 and $1.7040 don’t look unrealistic. To break above we need a move above $1.6877 (Nov. 2009 high). Still, a move to 2009 highs will likely be the final increase.

 

As for the near term there’s was a small shooting star candle on Thursday. Support lies at $1.6750, $1.6685 and $1.6600 ahead of $1.6475. The pair may be trading mainly in the $1.6800/6700 in the near term.

 

Chart. Daily GBP/USD

 

More:

http://www.fxbazooka.com/en/analitycs/show/1438

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April 22: Asian session

Most Asian stocks rose as US equities capped their longest stretch of gains since October and the yen extended losses, boosting the outlook for Japanese exporters. Markets in Australia, New Zealand and Hong Kong resume trading after holidays, ahead of a report on Chinese manufacturing due tomorrow. MSCI Asia Pacific Index added 0.1%.

 

USD/JPY is trading in the 102.55/70 area. The greenback remains supported before data forecast to show continuing improvement in the US economy. Today America will release existing home sales data (14:00 GMT).

 

Both AUD and NZD gained a little ground, with AUD/USD rising by 40 pips to $0.9355 and NZD/USD touching $0.8590. Looking ahead, Australian inflation numbers, China’s manufacturing PMI and the RBNZ policy meeting over the next two days will attract market attention. Gold is trading under a slight bearish pressure around $1287.5.

 

EUR/USD is right under $1.3800, while GBP/USD is just below $1.6800.

 

More:

http://www.fxbazooka.com/en/news/show/1203

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 NZD/USD this week: ahead of RBNZ

 

By Elizaveta Belugina

 

The Reserve Bank of New Zealand will conduct a meeting tomorrow evening (21:00 GMT). According to the forecasts, RBNZ will raise its benchmark interest rate by 25 bps to 3.0% within its current tightening cycle – all 17 economists polled by Reuters expect this outcome.

 

As RBS puts it, it’s hard to sell the currency whose central bank is raising rates when so many others are still glued close to the zero bound and when the Fed makes dovish comments. Still, the specialists underline that New Zealand’s dollar is the world’s most expensive currency in REER terms (real effective exchange rate). In their view, the rallies of NZD/USD to the $0.8700/9000 area should be used for opening short positions on the pair. NZD/USD is currently trading in the $0.8555/8600 area.

 

There actually are reasons for the central bank not to hurry with a rate hike. These reasons include lower inflation which fell to 1.5% in the first 3 months of the year from 1.6% in Q4 and falling dairy prices which lowers New Zealand’s exports revenue. Even if there’s a hike, traders will be examining the accompanying statement as it may contain comments about foreign exchange rates and general economic outlook and searching for some softer tone coming into the central bank’s next meeting in June. ANZ says that the rate hike expectations are already fully priced in the NZD. This reduces NZD’s chances to jump on the rate hike and increases its potential slide if the RBNZ disappoints.

 

Before the RBNZ decision pay attention to Australian inflation data (01:30 GMT) and China’s HSBC flash manufacturing PMI (01:45 GMT) earlier on Wednesday.

 

Chart. Daily NZD/USD

 

More:

http://www.fxbazooka.com/en/analitycs/show/1439

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USD/CHF: trade within the wedge

 

By Mark Jensen

 

USD/CHF moves up for a second week, approaching the 2013-2014 downward-sloped trend line (currently around $0.8900). US dollar gained some ground on the back of rather positive statistics. However, the upside will likely be limited until the geopolitical tensions in Ukraine end.

 

Technically, USD/CHF is trading in the “falling wedge” pattern since April 2013. Break above the 0.8860 resistance will open the way towards the wedge resistance around 0.8900, but this level is expected to cap for now. If the buying pressure isn’t strong enough, the pair will stay within the wedge and slide to 0.8600 in a few weeks.

 

However, a drop below 0.8600 looks unrealistic. Strong currency has already hurt the Swiss economy in Q1 and the government won’t let the things worsen. Last month the IMF advised the Swiss National Bank to introduce negative interest rates on the banks’ excess reserves in case of renewed strong pressures on the franc. 

 

Trade ideas

 

Short-term: Buy at 0.8860 with a target of 0.8900 and a stop at 0.8840

 

Medium-term: Sell limit at 0.8900 with a target of 0.8620 and a stop at 0.9005

 

 

Chart. H4 USD/CHF

 

More:

http://www.fxbazooka.com/en/analitycs/show/1440

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Key option levels (Apr. 22)

 

Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (14:00 GMT). 

 

Here are the key options expiring today:

 

EUR/USD: $1.3700, $1.3710, $1.3760, $1.3765 (large), $1.3780 (large), $1.3800 (large), $1.3850;

 

GBP/USD: $1.6685, $1.6710;

 

USD/CHF: 0.8850 (large);

 

AUD/USD: $0.9270, $0.9300;

 

USD/CAD: 1.0925, 1.1030 (large), 1.1075 (large), 1.1100 (large), 1.1110 (large);

 

NZD/USD: $0.8600, $0.8675, $0.8700 (large).

 

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Market News

 

Goverment needs a cheeper AUD

 

The Australian government has recently expressed its concern with regards to the RBA recent shift to 'neutral' in policy stance, Financial Review website says. 

 

As AFR notes: "The Reserve Bank of Australia’s move to a “neutral bias” on monetary policy has angered the Abbott government, which believes any upward pressure on the dollar will make it harder to manage the economy." Government believes that the current neutral bias by the RBA was the main factor leading to the currency appreciation.

 

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Market News

 

Opinion: Sakakibara on JPY

 

Former Ministry of Finance official Eisuke Sakakibara, known as “Mr. Yen” for his efforts to influence exchange rates in the late 1990s, said that Japanese yen will weaken as the Fed’s tightening its bond-buying program.

 

“It is more likely that the dollar will rise toward 110 yen than for it to break below 100,” said Sakakibara.

 

According to the median estimate of more than 50 analysts in a Bloomberg poll, USD/JPY will rise to 109 by the year-end.

 

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Market News

 

Japan may cut corporate tax

 

Norio Sasaki, a member of Japan’s government panel subcommittee on corporate tax reform, said that Japan could cut its corporate tax rate as early as next fiscal year by 2-3%.

 

Japan’s effective tax rate of about 36% is the second-highest in the G7 after the US and compares with levies of about 24% in South Korea and 23% in the UK.

 

The nation’s Prime Minister Abe pledged to pursue corporate tax reforms earlier this year, part of his Abenomics drive to revive the national economy. In June Abe will outline further measures to improve business conditions in Japan. Note that the tax cut will be accompanied by a rise in revenue from other sources to avoid worsening the government’s fiscal position which is already in a very bad shape. 

 

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Market News

 

Opinion: China economy remains stable

 

According to the respected China economist Yu Yongding, despite a further slowdown in Q1 (GDP +7.4%), China will not face a collapse as some pessimistic observers warn of. In his view, complexity and distinctiveness of China's economy meant gloomy predictions were pointless, and that they have repeatedly emerged in the past 30 years but never came true.

 

Yu dismissed concerns over the country's high leverage ratio and property bubble. China's high leverage ratio, which some believe will trigger a crisis or "hard landing", should be interpreted with other detailed factors taken into account. 

 

China's high saving rate is positive factor for the economy. "The higher the saving rate, the less likely it is that a high debt to GDP ratio will trigger a financial crisis", Yu says.

 

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Asian stocks erased gains after Chinese manufacturing data signaled persisting weakness in the world’s second-largest economy and Australia’s inflation rose less than expected.

 

USD/JPY is on the downside in the 102.70/50 area. The greenback remains near a 2-week high against the yen before US reports on manufacturing and new home sales that may add to signs the economy is improving.

 

AUD/USD fell to $0.9280. Australian CPI came out lower than expected (0.6% vs. 0.8% expected). In addition, a private report signaled that China’s manufacturing contracted for a fourth straight month – HSBC Flash Manufacturing PMI came at 48.3 which is once again below the threshold 50.0 level (forecast: 48.4; previous: 48.0). NZD/USD tested $0.8620, but then returned a bit below $0.8600.  

 

EUR/USD rose to $1.3820 approaching yesterday’s high. GBP/USD is trading in the $1.6820/35 area.

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Market News

 

China: slowdown continues

 

China economy remains in the centre of market attention. Today’s data showed that China HSBC manufacturing PMI improved a little in April, but remains in the contractive zone since the beginning of the year (48.3 vs. 48.0 in March and forecasted 48.4). A reading below 50 signals contraction, while a figure above 50 suggests growth.

 

The report followed data last week showing China’s expansion moderated to the slowest pace in 6 quarters. Economic growth slowed to 7.4% y/y in Q1, from 7.7% in the Q4 2013.

 

Prospects of China economic stimulus remain a topic of interest for the market. Yesterday China's central bank announced a so-called “mini stimulus”, cutting the reserve requirement ratio (RRR) for rural banks. The government negates the need for a more foreceful stimulus, but many economists believe it is a matter of time before China takes it to support the slowing economy.

 

Nomura analysts reiterate their forecast for a broader reserve-ratio cut for banks in May or June. “The property sector is slowing down very fast and that's the reason why we're very worried about the Q2 GDP. We think it's going to slow down," they say.  

 

Additional China stimulus could become a supportive factor for the commodities and the commodity currencies. 

 

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Market News

 

Euro zone: upbeat PMIs

 

EUR/USD strengthened by more than 50 pips to $1.3850, supported by the upbeat preliminary euro zone PMI figures for April.

 

With the exception of the French results, the German and euro zone manufacturing and services PMI exceeded forecasts (see the table). Composite euro zone business activity reached a 3-year peak (54.0 vs. 53.1).

 

 “Today’s figure buys the ECB a bit more time. With the recovery still on track there doesn’t seem to be an urgent need for strong action, though deflationary pressures still warrant attention. People expecting an imminent large-scale asset purchase program on the back of current economic figures are likely to be disappointed”, ING economists said. 

 

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Forex Analytics

 

T. Norkina: trade signals (Apr. 23)

 

Tatiana Norkina, FBS analyst

 

GBP/USD: buy – 1.6820; stop – 1.6800; target1 – 1.6860; 

 

USD/JPY: buy – 102.60; stop – 102.40; target1 – 103.20; target2 – 103.60

 

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Forex Analytics

 

Trade signals from Danske Bank (Apr. 23)

 

*Danske Bank applies trailing stop orders (moved together with the price)

 

EUR/USD: Long at 1.3820 with a target of 1.3906 and a stop at 1.3778

 

USD/JPY: Long at 102.20 with a target of 103.05 and a stop at 102.05

 

GBP/USD: Long at 1.6700 with a target of  1.6917 and a stop at 1.6740

 

USD/CHF: Look to sell from 0.8900/05

 

AUD/USD: Long at 0.9350 with a stop at 0.9290; look to sell

 

USD/CAD: Long at 1.0970 with a target of 1.1078 and a stop at 1.0940

 

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April 24: Asian session

 

 

Asian stocks fell after an unexpected drop in US home sales signaled a housing recover in the world’s largest economy is running out of steam. MSCI Asia Pacific Index lost 0.3%. Nikkei 225 is down by 0.95%.  

 

USD/JPY declined to 102.25, but is above yesterday’s low at 102.16. Yen held its first gain in nine days versus the dollar on speculation data tomorrow will show Tokyo inflation quickened the most in more than two decades, dimming prospects the Bank of Japan will expand stimulus.

 

New Zealand dollar was the mover, jumping on the RBNZ meeting outcome. As it was widely expected, RBNZ announced a rate hike by 0.25% to 3.00%. Regulator showed that more hikes are to come, but the timing remains uncertain. NZD/USD rose by more than 50 pips, touching $0.8635. AUD/USD consolidates in the $0.9285/9300 range. Gold slowed the downside over the past 2 days, recovering some ground to $1285.5.

 

EUR/USD rose to $1.3825, but is below yesterday’s peak at $1.3854. Euro remained higher before a report today forecast to show a gauge of German business conditions climbed to a 2-year high. GBP/USD edged up a bit to $1.6790.

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Market News

 

Draghi: high EUR hurts the economy

 

EUR/USD fell by more than 40 pips to $1.3790 as the ECB President Mario Draghi flagged the bank could make asset purchases to fight the threat of deflation. Draghi added that negative deposit rates remain an option for the government.

 

The ECB head admitted that a strong euro reflects return of confidence in euro zone, but a higher euro could derail euro zone recovery.

 

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Market News

 

Apr. 24: American Session

 

Tatiana Norkina, FBS analyst

 

Orders for durable goods in the U.S. rose by 2.6% last month instead of the forecast of 2.0%. It caused the dollar index to jump to the highest mark in the last few days 80.05. However, the subsequent unemployment data (number of applications for unemployment benefits last week rose to 329 thousand, instead of the expected 310 thousand) had a negative impact on the market: the dollar index fell to around 79.90 and is currently losing about 0.10%. Stock markets also opened with a reduction. S&P500 is losing about 0.15% and the DJIA - about 0.05%.

 

In currency markets volatility increased during the occurrence of specified data. Thus, the pair EUR/USD had fallen to around 1.3790 mark from 1.3830 after another speech of Draghi, who reiterated the reluctance to see an expensive euro, but at the moment it newly recovered to the area of 1.3815. Currency pair GBP/USD tested the 1.6770 support and rose to the 1.6800 figure.

 

USD/CHF pair fell to 0.8820 support after forming the maximum in the area of 0.8855 today. The pair USD/JPY is testing yesterday support 102.10-102.15 again, after the jump to 102.60.