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EUR/USD: BULLS FEELS CONFIDENT

05:13 15.05.2017

 

Technical levels: support – 1.0890; resistance – 1.0940, 1.0980.

 

Trade recommendations:

 

Buy — 1.0890; SL — 1.0870; TP1 — 1.0940; TP2 – 1.0980.

Reason: narrow bullish Ichimoku Cloud,  but rising Senkou Span B; a cancelled dead cross of Tenkan-sen and Kijun-sen with horizontal lines; expected a new golden cross; the prices are resistance of Senkou Span A.

 

1494825184-5974574d0f06c411e972e24d898d2

 

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AUD/USD: AUSSIE TESTED A RESISTANCE OF CLOUD

05:15 15.05.2017

 

Technical levels: support – 0.7370; resistance – 0.7420, 0.7470.

 

Trade recommendations:

 

Buy — 0.7400; SL — 0.7380; TP1 — 0.7470.

Sell — 0.7470; SL — 0.7490; TP1 — 0.7380; TP2 — 0.7340.

Reason: narrowing bearish Ichimoku Cloud, rising Senkou Span A; a new golden cross of Tenkan-sen and Kijun-sen with rising Tenkan-sen; the bulls are want to enter into the Cloud.

 

1494825315-42a68b4bfa2f0515dfbaa054e9dba

 

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MORNING BRIEF FOR MAY 15

05:56 15.05.2017

Brent oil futures jumped to $51.65 on the report from Saudi energy minister Khalid Al Galih and his Russian counterpart Alexander Novak had agreed to extend oil output cuts by OPEC and non-OPEC producers through the end of the first quarter of 2018 to shrink oil supply. The ministers from the OPEC states are due to meet May 25 in Vienna to discuss an extension of cuts. It’s not until there that any extension would be officially agreed to by OPEC. But the agreement between the two largest oil producers and exporters is a good sign for the positive result of the OPEC’s discussion at Vienna’s meeting.

 

USD/CAD slumped to 1.3675 on the announcement. Loonie might strengthen further towards the lower border of 1.3670 - 1.3790 consolidation range.

 

EUR/USD extended its Friday’s gains to 1.0930 as Merkel tightened her grip on power on Sunday. German Chancellor Angela Merkel’s party won the elections in the country’s most populous state - North-Rhine-Westphalia. This victory highlights Merkel’s backing among voters ahead of the national election scheduled for September (German Chancellor made a name for herself as a leader who can hold the European Union and Eurozone together). EUR/USD’s strong rebound is still not strong enough to shift out current neutral outlook to bullish. There is a strong resistance near 1.0980 that needs to be broken for the more pronounced upsurge. Today’s trading should be a bit subdued as the economic calendar for EUR/USD is light.

 

USD/JPY edged up to 113.40. From here, the pair will likely be trading rangebound (within 112.80 – 114.35 consolidation range). There was a cyber-attack in the weekends that might spread on Monday as soon as employees return to work turning on their computers. The investors seem to be unalarmed as we observe the weakening of risk-averse assets.

 

Aussie inched up to 0.7400 in the early Asian session. AUD/USD has steam for a further upsurge towards 0.7430/0.7440 resistances. The missing Chinese data passed by with little reaction.

 

Kiwi gained a few points following the upbeat NZ retail sales releases. NZD/USD has a room for further extension towards the nearest hurdles at 0.6885/0.6900.  

 

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GBP/USD: BULLS TRY TO RESTORE THE TREND

06:14 15.05.2017

 

On the GBP/USD daily chart, bulls retained the hold of the support at 1.286. The pin bar formation increases the risks of uptrend restoration towards1.307. There is a target 161.8% in the AB = CD. To develop a correction, the bears need to retest the upper boundary of the previous consolidation range (1.277-1.286).

 

Screenshot_2017_05_15_07_09_08.png

 

On the GBP/USD hourly chart, after the fulfillment of the Crab pattern, an inverted Shark pattern was formed. Its 61.8% target corresponds to the lower border of the previous consolidation channel 1.2935-1.2975. Once it is fulfilled, the bears regain their strength. 

 

Screenshot_2017_05_15_07_09_23.png

 

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EUR/JPY: EURO FACED WITH THE WEDGE

06:16 15.05.2017

 

Recommendations: 

 

SELL 123,6 SL 124,15 TP1 122,25 TP2 120,8, 

 

BUY 124,3 SL 123,75 TP1 125,2 TP2 128.   

 

On the EUR/JPY daily chart, bears are preparing for the counterattack to stop the rally towards 161.8% target in the Crab pattern. If they succeed, the quotes will probably roll back towards the 23.6%, 38.2% and 50% levels of the CD wave.

 

Screenshot_2017_05_15_07_09_40.png

 

On the EUR/JPY hourly chart, the expanding wedge pattern was formed. A return of quotes towards the level of 23.6% of the 4-5 wave will allow us to open short positions. In contrast, the euro upsurge towards 124.3 might lead to the uptrend restoration.

 

Screenshot_2017_05_15_07_09_59.png

 

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Key option levels for Monday, May 15th

15/05/2017

 

If you have any questions or requests fill out the feedback form.

 

EUR/USD

 

EURUSD(180).png

 

Main trend Short-term period Medium-term period

Bullish Neutral

Changes in the open interest - 209 711 ? - 621 682 ?

Closest resistance levels 1.0942; 1.0969; 1.1002; 1.1026

Closest support levels 1.0922; 1.0886; 1.0866; 1.0840

Trading recommendations

Baseline scenario Long EUR/USD above 1.0942, with target points at 1.0969 and 1.1002

Alternative scenario Moving below 1.0922 can be considered as a signal to Sell the pair, with target at 1.0886 and 1.0866

 

USD/JPY

 

USDJPY(116).png

 

Main trend Short-term period Medium-term period

Bearish Neutral

Changes in the open interest + 247 ? + 135 ?

Closest resistance levels 113.60; 113.90; 114.14; 114.46

Closest support levels 113.29; 112.92; 112.47; 112.15

Trading recommendations

Baseline scenario Short USD/JPY below 113.29, with target points at 112.92 and 112.47

Alternative scenario Moving above 113.60 can be considered as a signal to Buy the pair, with target at 113.90 and 114.14

 

USD/CAD

 

USDCAD(148).png

 

Main trend Short-term period Medium-term period

Bearish Neutral

Changes in the open interest + 203 ? + 354 ?

Closest resistance levels 1.3719; 1.3742; 1.3767; 1.3806

Closest support levels 1.3641; 1.3600; 1.3546; 1.3481

Trading recommendations

Baseline scenario Short USD/CAD from 1.3706 or from the current price, with the target points at 1.3641 and 1.3600

Alternative scenario Moving above 1.3719 can be considered as a signal to Buy the pair, with target at 1.3742 and 1.3767

 

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EUR/USD: BULLS GOING TO TEST DOWN TREND

07:44 15.05.2017

 

1494834175-bed67e60ab6ef91717627bc26657e

 

There's a "Triple Bottom", so the market is likely going to test resistance near the downtrend. However, considering the previously formed "Triple Top" and "Breakaway Gap", there's an opportunity to have a decline towards the 55 Moving Average afterwards.

 

1494834176-42024fae83fa59d9b8da7ea1ccc63

 

The price faced resistance at 1.0947, so there's a local consolidation. Meanwhile, bulls are likely going to test the next resistance during the day, which could be a departure point for a decline in the direction of the Moving Averages.

 

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GBP/USD: RESISTANCE WAITING FOR BULLS

07:47 15.05.2017

 

1494834176-8d7f8f74459dd587281d6c9b0e541

 

The 55 Moving Average has acted as support, so we've got a "Double Bottom" on this line. Therefore, the pair is likely going to rise towards the closest resistance at 1.2964 - 1.2995. If a pullback from this area happens, we should keep an eye on support near the uptrend as a bearish target.

 

1494834176-5c1b3f8b95c9a31e74f0de07b6605

 

The last "Double Bottom" has been confirmed, so the price is rising. It seems like bulls are ready to push the market even higher. The main intraday target is resistance at 1.2955 - 1.2964. If buyers stop here, bears will have a chance to some revenge.

 

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GBP/USD: BANKS’ NEAR-TERM FORECASTS

10:20 15.05.2017

 

Bank of America FX Strategy Research notes that GBP has been broadly lower in the aftermath of the BoE decision with some of the main pairs having failed to break through resistance in recent weeks.

 

Sterling fell on last Thursday following the BoE’s rate announcement. The 7-1 vote to keep the rate on hold disappointed pound’s bulls. The BoE’s Governor Carney’s comments that Monetary Policy Committee might decide to raise rates faster than markets expect if the Brexit negotiations run smoothly failed to convince investors. Following the disappointing release of the American CPI figures GBP/USD rose higher. Here are the banks’ forecasts for the future exchange rate of GDP/USD.

 

Bank of America Merrill Lynch

Now the focus for traders shifts to UK data-watching with CPI release and retail sales both coming on Tuesday.

 

The Bank of America’s strategists believe that pound might meet several headwinds looking ahead. The US economic data indicates further signs of weakness. The uncertainty amid upcoming General elections also weights on the pound. Markets appear to be priced for a Conservative majority. The opposite outcome might hurt the pound.

 

The bank’s analysts suggest selling GBP/USD on rallies in the coming weeks.

 

Nomura

Nomura’s analysts hold the opposite view. The believe that the pound might gain some strength in the medium term due to the following factors:

 

the inflation premium in GBP looked overstretched.

the Bank of England will probably become less pessimistic due to a better global growth.

the difficulties associated with the Brexit process are already priced in.

The strategists indicate that the next risk event for the pound will be the 8 June general election. An outcome with the strong majority for the conservatives will be favorable for the pound.  

 

Nomura analysts expect GBP/USD to test 1.37 by year-end. Also, they recommend going long on GBP against USD, EUR, and AUD in the second half of the year. 

 

The both teams of analysts suggest focusing on the UK general election as the next risk event for pound. This event might differently affect the GBP value. It will depend on the following factors:

 

how the outcome of the elections will affect the EU-UK negotiation process and terms on which the UK leaves the single European union.

how the General Elections will change the prospect for and possible outcome of a second Scottish independence referendum; and

Going forward, it is easier to make a bet for the pound’s depreciation rather than for its upsurge with the steady ongoing deterioration in UK fundamentals, and uncertainty over the June General Elections. In the short-term the Bank of America's strategy looks attractive.

 

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EUR/USD: BULLS GOING TO TEST LAST HIGH

12:00 15.05.2017

 

1494849580-a716780f51a09a794f7a771daa138

 

The 55 Moving Average and the lower "Window" have acted as support, so we've got a "Three Methods" pattern on this line. Therefore, the market is likely going to continue moving up towards the nearest resistance level.

 

1494849580-d425bb0c7ffb972dfd88e095a11bf

 

The price has been rising since a "Hammer" formed at the last low. There isn't any reversal pattern so far, but there's an opportunity to have a local correction. Anyway, bulls are likely going to reach the upper "Window" in the short term.

 

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USD/JPY: "WINDOW" ACTING AS SUPPORT

12:05 15.05.2017

 

1494849580-67b81f37ad36aa24f9641af3772a0

 

The 21 Moving Average has acted as support, so there's a "Belt Hold" pattern on this line. In this case, the price is likely going to test the next resistance by the last "Three Methods" pattern. If a pullback from this level happens, there'll be a chance to have another decline in the direction of the lower "Window".

 

1494849580-36047e283536955795f79ac28246e

 

The market is consolidating along the "Window". Also, there's a "High Wave" pattern at the local high. Therefore, the "Window" is likely going to act as support once again. If so, bulls are going to break the high of the last "High Wave".

 

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EUR/USD: 6/8 MM LEVEL AS IMPORTANT RESISTANCE

12:16 15.05.2017

 

1494850503-d749fc661a740ecf78bdc5ffd36fe

 

6/8 MM Level is likely going to act as resistance once again. If we see another pullback from this line, wave (i) is going to be continued towards 4/8 MM Level. The critical level for this wave count is the high of wave © of [y] of 2.

 

1494850503-d449ee53fb9d2a254e4f2c8ace3bd

 

There's a possible developing zigzag in wave ii. So, bulls are going to test 8/8 MM Level in the coming hours. If a pullback from this level arrives, we could have wave of ii. The main target for this correction is 6/8 MM Level.

 

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MORNING BRIEF FOR MAY 16

06:17 16.05.2017

 

The euro extended its gains to 1.0995 on Tuesday ahead of the release of the Eurozone GDP data. The softer than expected Empire State Manufacturing Index weighed on the greenback and offered the euro a solid support. With concerns about political risks in the euro zone having receded after the win of centrist Macron in French presidential elections, focus shifted towards the outlook for monetary policy. The ECB’s board might repeat its last meeting commentary. Amid improved economic fundamentals and dissipation of political risk after the French election, the ECB’s official might introduce some changes in their guidance by removing the words “or lower” from their pledge to keep unchanged or lower interest rates for the foreseeable future. The investors will be waiting to hear the timing of QE tapering. Today, their attention will be grasped by Germany’s Zew survey which is due at 12:00 pm (MT time)

 

The yen strengthened against the USD. USD/JPY was trading lower at 113.50 from yesterday’s high at 113.85. The current move can be viewed as a part of the consolidation phase. In the near-term future, the pair will likely trade sideways within the 112.50 – 114.20 range. The yen gained on the news about Donald Trump’s disclosure of highly classified information to the Russian foreign minister and ambassador Sergei Lavrov and about the recent cyber attack that has infected more than 300, 000 countries in 150 countries. When nothing is going on the trade is to buy the dollar against the yen. Any political disturbances increase demand for JPY.  Today, housing starts and industrial production are the main data releases to focus on.

 

Commodity currencies posted some gains due to surging oil prices. The latter ones rose following the release of a joint statement from the energy ministers of Saudi-Arabia and Russia concluding that the output cut agreement will likely be extended until the March 2018. Loonie is still flexing its muscles. USD/CAD slumped to 1.3610 from Monday’s high at 1.3720.

 

Aussie was trading sideways in the morning. AUD/USD dropped following the disappointing Australian consumer sentiment release. The release of RBA Meeting Minutes left Australian dollar almost intact. Towards the end of the Asian session, the pair managed to recover some of its earlier losses haven risen to 0.7420 from 0.7400. The current rebound has the room to expand higher towards the nearest resistances at 0.7440/0.7480.

 

GBP/USD is trading at 1.2900 a little bit higher from the preceding trading sessions.  The UK CPI release is the data highlight in Europe. The market is expecting the headline and core reading to rise in last month. The inflation print should be closer to 3% for us to see a substantial move in GBP tonight.

 

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EUR/USD: "PENNANT" LED TO BULLISH RALLY

06:26 16.05.2017

 

1494915850-f16d3b45646988531917071daf6bd

 

Bulls have broken the downtrend, so the price faced resistance at 1.0991. Therefore, the market is likely going to continue moving up towards the next resistance at 1.1025 - 1.1039 in the short term. If a pullback from this area happens, there'll be an opportunity to have a decline in the direction of the nearest support at 1.0951 - 1.0910.

 

1494915850-d55d559aa3df4a1285ff817c68ab9

 

The last consolidation led to another bullish rally. The main intraday target is resistance at 1.1015 - 1.1025, which could be a departure point for a bearish correction towards support at 1.0972 - 1.0947.

 

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GBP/USD: BULLS TO DELIVER NEW LOCAL HIGH

06:28 16.05.2017

 

1494915850-f396e85e403f7899b3a8c09445856

 

The price is consolidating along the 55 Moving Average. So, the market is likely going to test the next resistance at 1.2945 - 1.2964. However, if a pullback from these levels happens, we could have a correction, so we should keep an eye on support at 1.2865 - 1.2816 as a bearish target.

 

1494915850-cae25e3a87fed6a6e47b8d0a0f5a0

 

As we can see on the one-hour chart, the pair is moving up and down between resistance at 1.2945 and support at 1.2883. It's likely that the price is going to test the closest resistance at 1.2955 - 1.2964 in the coming hours. At the same time, if we have a pullback from this area, bears will probably try to achieve support at 1.2863 - 1.2843.

 

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USD/CHF: BULLS NEED TO ARM THEMSELVES WITH PATIENCE

06:36 16.05.2017

 

Recommendation: BUY 1,0085 SL 1,003 TP 1,02.

 

On the USD/CHF daily chart, the bulls failed to consolidate above the upper border of the downward trading channel. This tells us about their weakness. To restore the long-term uptrend, the upper border of the triangle near the 1.0085. mark should be broken. Then, the bulls will be able to hit a target in the "Wolf Wave" pattern.

 

Screenshot_2017_05_16_07_34_10.png

 

On the USD/CHF hourly chart, there can be a rebound from current levels (61.8% of the last downward wave + historical support). But for this to happen the bulls should arm themselves with patience. 

 

Screenshot_2017_05_16_07_34_24.png

 

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USD/JPY: YEN TAKES UP THE RUNNING

06:37 16.05.2017

 

Recommendation: BUY 111,95 SL 111,4 TP 114. 

 

On the USD/JPY daily chart, the implementation of the intermediate target in the "Shark" inverted pattern may lead to the pullback towards 23.6%, 38.2% and 50% levels of the CD wave. In this case, we will talk about the transformation of the Shark pattern into 5-0. The strongest support is located near 111.95. There is the upper border of the previous downward trading channel.

 

Screenshot_2017_05_16_07_33_42.png

 

On the USD/JPY hourly chart, a successful test of the supports at 113.15 and 112.9 may lead to the correction towards 112.3 and 111.5. There are several targets on the Crab pattern.

 

Screenshot_2017_05_16_07_33_57.png

 

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Key option levels for Tuesday, May 16th

16/05/2017

 

If you have any questions or requests fill out the feedback form.

 

GBP/USD

 

GBPUSD(136).png

 

 

Main trend Short-term period Medium-term period

Bearish Bearish

Changes in the open interest - 32 ↓ + 421 ↑

Closest resistance levels 1.2922; 1.2957; 1.2996; 1.3023

Closest support levels 1.2907; 1.2879; 1.2853; 1.2834

Trading recommendations

Baseline scenario Short GBP/USD below 1.2907, with target points at 1.2879 and 1.2853

Alternative scenario Moving above 1.2922 can be considered as a signal to Buy the pair, with target at 1.2957 and 1.2996

 

 

USD/JPY

 

USDJPY(117).png

 

 

Main trend Short-term period Medium-term period

Bearish Neutral

Changes in the open interest + 89 ↑ + 297 ↑

Closest resistance levels 113.75; 114.03; 114.23; 114.52

Closest support levels 113.53; 113.16; 112.94; 112.66

Trading recommendations

Baseline scenario Short USD/JPY below 113.53, with target points at 113.16 and 112.94

Alternative scenario Moving above 113.75 can be considered as a signal to Buy the pair, with target at 114.03 and 114.23

 

 

AUD/USD

 

AUDUSD(23).png

 

 

Main trend Short-term period Medium-term period

Neutral Bearish

Changes in the open interest + 150 ↑ + 156 ↑

Closest resistance levels 0.7430; 0.7462; 0.7488; 0.7522

Closest support levels 0.7402; 0.7371; 0.7347; 0.7316

Trading recommendations

Baseline scenario Short AUD/USD below 0.7402, with the target points at 0.7371 and 0.7347

Alternative scenario Moving above 0.7430 can be considered as a signal to Buy the pair, with target at 0.7462 and 0.7488

 

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US DOLLAR OUTLOOK FROM MAJOR BANKS

10:44 16.05.2017

 

The US dollar was lower against most of its major peers since the very start of the week, pressured by a round of disappointing economic data and by gains made by commodity-sensitive currencies as crude oil futures spiked to its highest level since late April. Saudi Arabia and Russia said they would extend the production cut agreement for another nine months.

 

The greenback fell after the Empire manufacturing index posted a massive drop to -1.0 from the prior month reading of 5.2. That data came after the missing retail sales and below estimates CPI data released last Friday. The US dollar index was down for the fourth day. It is near 98.44 of writing from last-Thursday’s high at 99.77.

 

1494931418-5c244a97a4e972606e4e039be26a3

 

Source: Investing.com

 

Strategy research teams of major banks commented the recent weakening of the USD and indicated underlying factor that will influence the US currency in the near-term future.

 

GBP/USD forecasts from the Toronto-Dominion Bank

The TD strategists note that USD was hit by Friday’s disappointing releases of US retail sales and CPI data.

 

TD recommends buying USD dips against GBP from current levels into 1.29. They expect a softer retail sales headline (the figures will be released on Thursday at 11:30 am MT time), which is likely to make sterling vulnerable in the near term. The bank’s analysts remain sellers of GBP as the positive outcome of the UK general elections is already priced in and Britain’s data starts deteriorating.

 

US dollar forecast from Credit Agricole CIB FX Strategy Research

Credit Agricole analysts believe that the missing US CPI data validates the flatness of the front end of the yield curve and thus prevents USD from going higher. It also offers a solid support to the risk environment and emerging market currencies.

 

 The CA’s analysts note that this week is very light in terms of economic data, so the USD might see some further selling pressure.

 

US dollar forecast from BTMU FX strategists

BTMU FX strategists outline the three factors that are working together against USD:

 

The European political risk premium has shrunk following the Macron’s win in French presidential election and Merkel’s party success in German regional elections.

Trump reflation trading optimism has eased.

Central banks throughout the world have started to shift their guidance suggesting their counterparts will soon follow the tightening path initiated by the Fed’s officials.

The analysts are bearish on the USD. They expect a 4% drop in the DXY index at the end of the Q1 2018. They believe that Fed’s multiple hikes will unlikely provide much support for the USD as other central banks are determined to limit the scope for any shift in yield spread in favor of the greenback.

 

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EUR/USD: "WINDOW" GOING TO ACT AS RESISTANCE

10:46 16.05.2017

 

1494931419-baafc9ba8f9f213876ba06750bf7f

 

We've got a bullish "Three Methods" pattern, so the price is likely going to test the upper "Window". If any bearish pattern arrives afterwards, there'll be an opportunity to have a downward correction.

 

1494931419-98aef22d606aa614aac61e493506d

 

Bulls have broken a "Window", so the price is rising. Also, there isn't any reversal pattern so far, which means we could have the market even higher. However, if a pullback from the closest resistance happens, bears will probably try to deliver a correction.

 

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USD/JPY: LAST HIGH GOING TO BE BROKEN

10:48 16.05.2017

 

1494931420-72d3eeed6effbd75c2912c2e7848b

 

The 21 Moving Average is acting as support, so the price is likely going to test the nearest resistance. If a pullback from this level arrives, there'll be a green light for a local decline.

 

1494931419-f0ec731697b540280a786eaacc25e

 

There's a bullish "Harami", which has been confirmed. In this case, the last high is likely going to be broken soon. If any reversal pattern forms, later on, bears will have a chance to test the nearest support levels.

 

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EUR/USD: BULLS GOING TO TEST 7/8 MM LEVEL

11:57 16.05.2017

 

1494935771-acca7fd5b68fda6bd575b11677175

 

As we can see on the Daily chart, wave 1 has been ended on 1/8 MM Level. Therefore, if a pullback from 7/8 MM Levels happens, there'll be a sign that wave 2 may have finished. If so, we should keep an eye on 4/8 MM Level as the next bearish target.

 

1494935771-a1454ca7f72be228d1fb704b14f52

 

There's a developing double zigzag in wave 2. It seems like a bullish impulse in wave © of [y] is going to end in the coming hours. The main intraday target is 7/8 MM Level, which could be a departure point for wave (i).

 

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CANADIAN DOLLAR NEAR-TERM OUTLOOK

12:55 16.05.2017

 

The Lonnie has strengthened against the USD on Monday as oil prices spiked to their highest level since late April after the large oil producers – Russia and Saudi Arabia – agreed to extend the supply cut deal for another nine months.

 

OPEC-led output curbs and talks over extension of the current production cut agreement will further support oil prices and commodity-sensitive CAD (the historically close link between the Canadian dollar and oil prices has strengthened in recent weeks).

 

The Canadian dollar’s outlook was less optimistic last week when Moody’s Investors Service downgraded the 6 nation’s banks for the first time in more than four years. Moody’s provided a rationale for their actions in their statement accompanying the decision to lower the long-term debt and deposit ratings. Moody’s noted that Canadian private sector debt amounted to 185% of the country’s GDP at the end of the last year. House prices soared despite the government’s desperate efforts to cool the market. A marked growth in Canadian consumer debt and heightened housing prices make consumers and Canadian banking industry more vulnerable to downside risks the nation’s economy face, Moody’s analysts note. Canadian government holds an opposite view. According to Canadian policymakers, the country’s financial sector is resilient and well-capitalized. The six downgraded banks have strong capital and liquidity, supported by their profitability, so there is no reason for Canadians to worry about their assets.

 

Another negative factor that affects Lonnie’s performance is growing concerns over the US protectionism that may lead to the disruption of US-Canada trade relationships developed under the North American Free Trade Agreement.

 

The following factors won’t allow the CAD to strengthen against its major peers in the near-term and long-term future. The recent appreciation of the Loonie will likely be short-lived. So, we would rather bet for a modest depreciation of the Canadian dollar in the upcoming months, than going long on CAD.

 

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MORNING BRIEF FOR MAY 17

06:14 17.05.2017

 

US dollar weakness extended in the course of the Asian session with DXY dropping to 97.93 and giving up all of the gains it made after Trump’s election victory last year. This came after the New York Times spared the details of James Comey’s memo. The former FBI Director wrote that Trump asked him to drop an investigation into ties between Michael Flynn (former White House security advisor). The following news deepened a political crisis for Trump’s administration by introducing the possibility that the president may have obstructed justice which is an impeachable offense. Donald Trump is already reeling from scalding criticism of his revelation of highly classified intelligence information to Russian ambassador, the recent news only aggravated the situation. 

The market perceived the information about Comey's memo and Trump's offense potentially leading to impeachment as yet more uncertainties that tax cuts, fiscal stimulus are delivered in the forseable future.

The euro spiked above 1.1100 in the Tokyo morning. European data continues to be positive. Yesterday we received upbeat German ZEW index that rose to 20.6 from 19.5. Trade balance data came in better than expected. The dissemination of risk surrounding the French presidential election gave rise to speculation that the ECB might tilt its guidance to a hawkish side and remove the words “or lower” from its monetary policy statement.

Aussie dipped to 0.7420 in the hours of the Asian session. Quarterly wage data is still at record low level. It undermines consumer spending. Monthly consumer confidence data from Australia confirmed the weaker readings on the weekly consumer sentiment. Today, the market will be waiting for the Eurozone annual inflation figures coming at 12:00. The consensus forecast is the final CPI remaining at previous month inflation rate (at around 1.9%).

Kiwi rose above 0.6910 against USD following the upbeat release of quarterly PPI input/output figures. The outlook for NZD/USD currency pair is still neutral. Kiwi is expected to trade within the range of 0.6850 – 0.6950.

UK CPI that we received yesterday was stronger than expected. But the pound’s reaction was subdued given the Bank of England’s content to allow inflation figures to its coveted target. Today’s focus will be on Britain’s average hourly earnings, claimant count change and unemployment rate all released at 11:30 am.

USD/CAD went lower to 1.3590 ignoring the increase in US crude inventories. Keep an eye on Canadian monthly manufacturing sales and crude oil inventories that will be released at 3:30 pm and 5:30 pm (MT time) respectively.

 

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USD/CAD: LOONIE GOT A FREE RIDE ON WOLF WAVE

06:36 17.05.2017

 

Recommendations:

hold shorts (SELL 1,365 SL 1,3705 TP1 1,3525 TP2 1,337),

BUY 1,3435 SL 1,338 TP 1,365. 

On the USD/CAD daily chart, "Wolf Waves" pattern is in the process of realization. The main scenario is to develop correction towards  50% or 61.8% levels of the CD wave with a subsequent rebound. To continue the downward movement bears need to test the support at 1.3435.

 

Screenshot_2017_05_17_07_16_51.png

 

On the USD/CAD hourly chart, the breakout of support at 1.365 increased the risks for implementation of 161.8% target in the Crab pattern. It corresponds to the lower border of the upward trading channel.

 

Screenshot_2017_05_17_07_17_07.png

 

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