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China is set to lower the reserve requirement ratio for banks providing support for rural economy and medium-sized enterprises, the State Council said in a statement after a meeting chaired by Premier Li Keqiang.
Policy makers will “appropriately” lower the reserve requirement and it pledged to continue a prudent monetary policy and make timely pro-cyclical fine-tuning moves. No further details about RRR were provided.
The People’s Bank of China had reduced RRR for rural commercial banks by 2 percentage points and rural cooperative banks by 0.5 percentage points in April.
Re-lending facility for smaller companies will be set up this year, it said. The council added the nation is facing “relatively big” downward pressure.
The government also said the nation will cut social financing costs and retain reasonable growth in credit.
Published: 2014-05-31 14:32:00 UTC+00
In order to stimulate Eurozone economic growth that has diminished during the crisis, structural reforms should be initiated, Yves Mersch, a member of the executive board of the European Central Bank said Saturday.
“Indeed, most estimates find that potential growth in the euro area has diminished during the crisis,” he said at meeting in Luxembourg. “This is why moving ahead with structural reform is essential.”
According to him, the best way to raise real growth in the euro area is to open up product and services markets and to reallocate resources to the most productive industries.
If the current fiscal rules are to be credible, the currency bloc needs higher growth, and that means looking deeply at how authorities coordinate structural policies across Europe.
“On our current reform-resistant course, I see a distant but distinct probability that growth in the euro area begins a secular downward drift,” Mersch said.
He observed that implementing structural reforms is a national responsibility, but authorities at the European level have not done enough to help gather momentum.
Published: 2014-05-31 12:59:00 UTC+00
The euro had rather decent week, falling initially but rescued by the weekend by poor data from the United States. The monthly performance, on the other hand, was nothing but disastrous for the currency.
The euro was rather soft for the most part of the week, mainly due to speculations about stimulus from the European Central Bank, but managed to bounce by the end of the week with help of poor macroeconomic reports from the USA, which hurt the dollar. The US currency was resilient initially but buckled later under the pressure from bad news.
The Great Britain pound was very weak, allowing the euro to gain on the British currency over the week, even though the sterling bounced at the last trading session.
The monthly performance of the euro was nothing short of disaster. The currency fell 1.0 percent against the pound, 1.7 percent versus the dollar and as much as 2.1 percent against the yen over the month.
EUR/USD closed at 1.3630 by the weekend, close to the opening of 1.3622. EUR/JPY also ended the week flat, opening at 138.82 and closing at 138.75. EUR/GBP advanced from 0.8085 to 0.8131 over the week.
If you have any questions, comments or opinions regarding the Euro,
feel free to post them using the commentary form below.
The International Monetary Fund approved $4.64 billion bailout payment to Greece after the completion of fifth review.
Deputy Managing Director of IMF, Naoyuki Shinohara said the Greek authorities have made significant progress in consolidating the fiscal position and rebalancing the economy.
The disbursements were delayed for a year amid questions over whether Greece continue its structural reforms. The lender approved the authorities’ request for rephasing three disbursements evenly over the remaining reviews in 2014.
The primary budget posted surplus ahead of schedule. However, the lender observed that several challenges remain to be overcome before stabilization is deemed complete and Greece is back on a sustainable, balanced growth path.
Public debt is projected to remain high well into the next decade, despite a targeted high primary surplus.
Shinohara said additional fiscal adjustment is necessary to ensure debt sustainability, through durable, high-quality measures, while strengthening the social safety net.
He urged Greece to continue to improve tax collection, combat evasion and strengthen expenditure control. The authorities are taking remedial actions to clear domestic arrears and expedite privatization.
Further measures are needed to remove regulatory barriers and to reform investment licensing, Shinohara said.
Published: 2014-05-31 12:23:00 UTC+00
Moody’s Investors Service lowered the rating outlook on 82 European banks to ‘negative’ as a new rule to reduce the risk of taxpayers in case of bank failure could make stakeholders more vulnerable to losses.
At the same time, the rating agency affirmed long-term ratings of 109 European financial institutions and upgraded one. It downgraded the outlook to ‘stable’ from ‘positive’ on two long-term ratings.
Downgrading the outlook, Moody’s said with the legislation underlying the new resolution framework and the explicit inclusion of burden-sharing with unsecured creditors, the balance of risk for banks’ senior unsecured creditors has shifted to the downside.
The Bank Recovery and Resolution Directive and Single Resolution Mechanism steps were taken by the EU with an intention to reduce the risk that bank-related contingent liabilities will crystallize on EU government in a future banking sector stress scenario.
“While Moody’s support assessments are unchanged for now, the probability has risen that they will be revised downwards to reflect the new framework,” the agency said.
Published: 2014-05-31 10:10:00 UTC+00
Talking Points:
The Speculative Sentiment Index is by far my favorite Forex trading tool. One problem however, is that this data is not published for many cross currencies that traders trade, like the EURAUD, NZDJPY, CHFJPY, etc. In this article, I explain how synthetic SSI values can be generated for these types of pairs.
Summary of SSI
SSI gives us a comparison between how many retail Forex traders are currently long and short on each major pair. We want to trade opposite of the retail trading crowd meaning it’s a “contrarian” index. The idea is that most retail traders lose money, so there could be an inherit edge in fading them or placing the opposite trade.
We can see in the image below a snapshot of what the SSI looks like, updated twice a day for free to members of DailyFX Plus. All of the major pairs are represented as well as a few CFD products for traders outside the United States.
Learn Forex: DailyFX Plus’ Speculative Sentiment Index (SSI)
(Source: DailyFX’s SSI)
But what about some of the other currency pairs that are not listed? How do we know what the sentiment is on those pairs? This is where SSI becomes “synthetic.”
Steps to Creating Synthetic SSI
This sounds complicated the first time around, but makes sense over time. I am going to start with an explanation of how this works with the following formula. I will then go through 3 examples to put it into practice.
Did you get that? Probably not, which is ok. It took me awhile before I could wrap my head around it. Let’s take a look at 3 examples using the formula above.
Example #1 – EURAUD
This is the simplest example of the group. Both currencies are the first currency in their USD pairs, so each adopt their SSI signs. Because the signs are opposite of each other, we multiply the two SSI’s together. The SSI for EURAUD is negative because the EUR has a negative SSI and it leads the pair.
Example #2 – NZDJPY
This example is a little trickier. The NZD is first in its pair so it adopts its positive SSI, but because the JPY is the 2nd currency in its pair with the USD, it adopts the opposite SSI sign, negative. The NZD and JPY SSI have opposite signs so we multiply them together. The SSI for the NZD/JPY is positive because the NZD has a positive SSI and it leads the pair.
Example #3 – CHFJPY
This example is the most difficult. Both the CHF and the JPY are the 2nd currency when paired up with the USD, this means they each adopt the opposite sign. Because both the CHF and JPY are the same sign, we must divide the larger SSI (1.85) by the smaller SSI (1.22). The SSI for CHF/JPY is positive because the CHF had the smaller SSI of the two currencies so we must adopt the opposite sign.
Synthetic Sentiment Opening the Door
This advanced technique opens the door to sentiment trading on a large amount of pairs not otherwise available and can take your trading to next level. Rather than looking at only trading currencies against the USD, we can now pair together strong and weak sentiment currencies with each other for a sentiment trade stronger than their USD-pair counterparts. To test out your SSI based trades, be sure to sign up for Free Forex Demo account.
Good trading!
—Written by Rob Pasche
To contact Rob, email rpasche@dailyfx.com.
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U.S. crude oil ended lower on Friday, with investors tracking declining equity markets while weighing demand growth prospects for oil after a more-than-expected jump in U.S. stockpiles last week and some mixed economic data.
Investors also continued to keep a close watch over developments in eastern Ukraine, even as clashes were reported between pro-Russian separatists and government forces.
Crude oil prices shed 1.6 percent for the week, while recording a 3 percent gain for the month.
Light Sweet Crude Oil futures for July delivery, the most actively traded contract, dropped $0.87 or 0.8 percent to close at $102.71 a barrel on the New York Mercantile Exchange Friday.
Crude prices for July delivery scaled a high of $103.56 a barrel intraday and a low of $102.40.
On Thursday, crude oil futures ended sharply higher, after scaling a high of $103.94 a barrel intraday, notwithstanding a better-than-expected jump in inventories.
U.S. commercial crude inventories increased by 1.7 million barrels last week, and are now in the upper half of the five-year range for this time of the year, the U.S. Energy Information Administration said yesterday.
The dollar index, which tracks the U.S. unit against six major currencies, traded at 80.35 on Friday, down from its previous close of 80.50 late Thursday in North American trade. The dollar scaled a high of 80.50 intraday and a low of 80.31.
The euro traded higher against the dollar at $1.3638 on Friday, as compared to its previous close of $1.3602 late Thursday in North American trade. The euro scaled a high of $1.3650 intraday and a low of $1.3600.
In economic news from the U.S., data from the Commerce Department showed consumer spending to have declined by a seasonally adjusted 0.1 percent in April. Meanwhile, personal income rose 0.3 percent in April as expected, rising for the fourth straight month. Economists expected spending to rise by 0.2 percent compared to the 0.9 percent increase originally reported for the previous month.
A report from MNI Indicators, showed Chicago-area business activity unexpectedly rose to a seven-month high in May, climbing to 65.5, from 63.0 in April. The increase surprised economists, who had expected the barometer to dip to 61.0.
Thomson Reuters and the University of Michigan also released a report showing a slight upward revision to their reading on consumer sentiment in May. The final reading on the consumer sentiment index for May came in at 81.9, reflecting a modest upward revision from the mid-month reading of 81.8. Nonetheless, the index remained well below the final April reading of 84.1 and short of economist estimates of 82.5.
Published: 2014-05-30 19:51:00 UTC+00
Gold futures dropped for a fifth straight session to end at a near four-month low on Friday, with investors tracking declining equity markets after some some mixed economic data out of the U.S., despite the dollar weakening against a basket of major currencies.
Gold futures shed 3.5 percent for the week, and declined 3.9 percent for the month.
Gold for August delivery, the most actively traded contract, dropped $11.10 or 0.9 percent to close at $1,246.00 an ounce on the Comex division of the New York Mercantile Exchange on Friday.
Gold for June delivery scaled an intraday high of $1,260.60 and a low of $1,242.20 an ounce.
On Thursday, gold futures ended lower on some mixed economic data out of the U.S.
Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, remained unchanged at 785.28 tons on Friday from its previous close.
The dollar index, which tracks the U.S. unit against six major currencies, traded at 80.36 on Friday, down from its previous close of 80.50 late Thursday in North American trade. The dollar scaled a high of 80.50 intraday and a low of 80.31.
The euro traded higher against the dollar at $1.3637 on Friday, as compared to its previous close of $1.3602 late Thursday in North American trade. The euro scaled a high of $1.3650 intraday and a low of $1.3600.
In economic news from the U.S., data from the Commerce Department showed consumer spending to have declined by a seasonally adjusted 0.1 percent in April. Meanwhile, personal income rose 0.3 percent in April as expected, rising for the fourth straight month. Economists expected spending to rise by 0.2 percent compared to the 0.9 percent increase originally reported for the previous month.
A report from MNI Indicators, showed Chicago-area business activity unexpectedly rose to a seven-month high in May, climbing to 65.5, from 63.0 in April. The increase surprised economists, who had expected the barometer to dip to 61.0.
Thomson Reuters and the University of Michigan also released a report showing a slight upward revision to their reading on consumer sentiment in May. The final reading on the consumer sentiment index for May came in at 81.9, reflecting a modest upward revision from the mid-month reading of 81.8. Nonetheless, the index remained well below the final April reading of 84.1 and short of economist estimates of 82.5.
Published: 2014-05-30 18:58:00 UTC+00
The dollar weakened on Friday, giving back some recent gains versus the euro ahead of next week’s crucial European Central Bank Meeting.
The ECB is widely expected to inject substantial cash into the euro zone economy in an attempt to combat deflation.
Still, the euro managed to steady amid a flurry of economic news from around the globe.
The dollar eased to $1.3636 from a 3-month peak near $1.3580 against the euro.
Germany’s retail sales fell unexpectedly in April after rising for three consecutive months, Destatis said. Retail sales turnover declined by a real 0.9 percent from March, when it was up 0.1 percent. Sales were expected to rise 0.2 percent.
The buck turned away from a 2-month peak against the sterling, slipping to $1.6760 from $1.6710.
Choppy dealing left the dollar slightly lower at Y101.75 versus the yen, although the buck managed to stay away from a recent 4-month low near Y101 this week.
Inflation figures released today lowered expectation for the Bank of Japan to offer stimulus this summer.
Japan’s first nationwide inflation figures following a sales tax increase showed stronger-than-expected price growth.
core consumer-price index rose 1.5 percent from a year earlier in April, excluding the impact of a three-percentage point sales-tax increase to 8 percent.
In economic news from the U.S., personal income rose in line with economist estimates in the month of April, but an unexpected drop in personal spending for the month hurt the dollar.
Consumer sentiment in the U.S. deteriorated by slightly less than initially estimated in the month of May, according to a report released by Thomson Reuters and the University of Michigan on Friday.
The report showed that the final reading on the consumer sentiment index for May came in at 81.9, reflecting a modest upward revision from the mid-month reading of 81.8.
Meanwhile, MNI Indicators released a report on Friday showing that its reading on Chicago-area business activity unexpectedly rose to a seven-month high in May.
MNI Indicators said its Chicago business barometer climbed to 65.5 in May from 63.0 in April, with a reading above 50 indicating an increase in activity.
Published: 2014-05-30 17:54:00 UTC+00
US Dollar Rally at Clear Risk as Key Events May Disappoint
The US Dollar rally showed signs of slowing as the DJ FXCM Dollar Index failed to hold multi-month highs. Traders look to a critical European Central Bank decision and US Nonfarm Payrolls report to decide direction in Dollar pairs through the week ahead.
Traders Betting Big on Euro Losses, but Caution Warranted Ahead
The Euro showed signs of life as it bounced off of fresh multi-month lows and ended a three-week losing streak. Yet traders await a critical European Central Bank interest rate decision to drive volatility in the week ahead.
GBP/USD Carves High Low in May – BoE Dissent Favors Bullish Outlook
The GBP/USD looks poised to resume the bullish trend carried over from the previous year as the Bank of England (BoE) shows a greater willingness to normalize monetary policy sooner rather than later.
Australian Dollar to Look Past RBA, Focus on Key US Data
On the domestic front, the spotlight is on a policy announcement from the Reserve Bank of Australia. The central bank is expected to keep the benchmark lending rate unchanged at 2.50 percent.
Gold Fun Points to New Lows in June – Bearish Sub 1270
Gold prices are virtually unchanged on the week with prices off by a mere 0.1% to trade at $1291 ahead of the New York close on Friday.
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Fundamental Forecast for Gold:Neutral
Gold prices are virtually unchanged on the week with prices off by a mere 0.1% to trade at $1291 ahead of the New York close on Friday. Prices have continued trade within a tight range despite ongoing strength in the US dollar and broader equity markets. Nevertheless, gold remains at a critical juncture and the technical picture continues to suggest that a break of a multi-week consolidation pattern is imminent as we head into the close of May trade.
In light of the recent strong demand for US Treasuries, it’s disconcerting that although gold has largely moved in tandem Treasuries since the start of the year, it has been unable to participate in the bond rally since April. This condition suggests that the gold market remains vulnerable in the near-term and with the long bond coming off key near-term resistance at the 61.8% retracement from the decline off the 2012 record highs, further weakness in Treasuries could put added downside pressure on gold prices.
Looking ahead, the preliminary 1Q GDP print highlights the biggest event risk for the week ahead with consensus estimates calling for a downward revision to reflect an annual contraction of 0.5% q/q. With that said, a dismal growth read may dampen the appeal of the US Dollar and spur increased demand for gold as interest expectations get pushed out. Watch for developments in the bond market and the greenback for guidance with the recent price action in gold warning of a decisive move heading into the monthly close.
From a technical standpoint, our outlook remains unchanged from last week. “Gold has continued to trade into the apex of a multi-week consolidation pattern off the April highs and a break-out ahead of the May close is in focus. A break below 1260/70 is needed to put the broader bearish trend back into play targeting $1216/24 and the 2013 lows at $1178. Interim resistance and our near-term bearish invalidation level stands at $1307/10 with a move surpassing $1327/34 shifting our broader focus back to the long-side of gold. Bottom line: look for a decisive break of this pattern next week with a move surpassing the May opening range to offer further clarity on our medium-term directional bias. The broader outlook remains weighted to the downside sub $1334. -MB
Fundamental Forecast for Australian Dollar: Bearish
On the domestic front, the spotlight is on a policy announcement from the Reserve Bank of Australia. The central bank is expected to keep the benchmark lending rate unchanged at 2.50 percent. That will put the focus on the statement released following the sit-down.
A dovish tone in minutes from May’s meeting undermined speculation about forthcoming interest rate hikes, sending the currency lower. Australian economic data has increasingly underperformed relative to market expectations since then, suggesting Glenn Stevens and company will be in no hurry to change their tune.
Meanwhile, GDP figures are set to show the pace of output growth accelerated in the first quarter and China’s PMI data is expected to reveal a pickup in the pace of factory-sector activity in May. That is likely to keep stimulus expansion bets at bay, helping to cement the status quo wait-and-see setting of monetary policy both in practice and in the minds of investors.
Sizing up the macro landscape, a critical mass of high-profile event risk informing the outlook on Federal Reserve policy looms ahead. As we’ve discussed previously, the fate of the FOMC’s effort to “taper” QE asset purchases with an eye to end the program this year – paving the way for interest rate hikes – has been a formative catalyst for the markets this year.
While last week’s US GDP data revealed more dismal first-quarter performance than was previously expected, Janet Yellen and her colleagues on the policy-setting FOMC committee have regularly dismissed the first three months of the year as a temporary soft patch. US economic data began to steadily improve relative to consensus forecasts in early April, seemingly supporting the central bank’s position.
Manufacturing- and service-sector ISM figures, the Fed’s Beige Book survey of regional economic conditions and the obsessively monitored Nonfarm Payrolls report are all due to cross the wires in the coming days. Continuation of the supportive trend in US news-flow may help scatter any lingering doubts about the approaching end of asset purchases and subsequent tightening. That may narrow the Aussie’s perceived yield advantage and drive broader risk aversion, all of which bodes ill for the currency. -IS
Fundamental Forecast for Pound:Bullish
The GBP/USD looks poised to resume the bullish trend carried over from the previous year as the Bank of England (BoE) shows a greater willingness to normalize monetary policy sooner rather than later.
Indeed, the BoE policy meeting highlights the biggest event risk for the British Pound as there appears to be a growing rift within the Monetary Policy Committee (MPC), but the sterling remains vulnerable ahead of the June 5 interest rate decision as U.K. Mortgage Applications are expected to slow further in April.
Nevertheless, it seems as though BoE board member Martin Weale may make a greater push to raise the benchmark interest rate ‘sooner rather than later’ as he sees borrowing costs increasing by a full percentage-point over the next 12-months, while Mr. Charles Bean appears to be turning increasingly hawkish as the Deputy Governor anticipates real wage growth to ‘gradually’ increase in the second-half of the year.
With that said, the BoE Minutes due out on June 18 may reveal a growing dissent with the central bank as Governor Mark Carney remains in no rush to normalize monetary policy, but the rate decision may have a limited impact in driving near-term price action for the GBP/USD should the central bank once again refrain from releasing a policy statement.
As a result, a further shift in the BoE policy outlook should heighten the appeal of the British Pound, and the GBP/USD appears to be on course for a higher-high as the Federal Reserve remains reluctant to move away from its zero-interest rate policy (ZIRP). – DS
Fundamental Forecast for Euro: Bearish
The Euro showed signs of life as it bounced off of fresh multi-month lows and ended a three-week losing streak. Yet traders await a critical European Central Bank interest rate decision to drive volatility in the week ahead.
Recent futures data showed large speculators headed into the week at their most short Euro since it bottomed in July of last year. Traders were likely increasing their bets on Euro weakness as the ECB is widely expected to cut interest rates in their coming meeting. Expectations often beget disappointments, however, and a rush towards Euro selling warns that the single currency may bounce on any ECB surprises.
All eyes turn to central bank President Mario Draghi as he said the ECB was “ready to act” at its next meeting. A Bloomberg News survey shows the majority of economists polled believe the bank will cut its Main Refinancing Rate to further record-lows and push its Deposit rate into negative territory. If the ECB fails to cut either rate it seems obvious that the Euro might rally. Beyond that, however, likely outcomes seem much less clear.
Derivatives traders have pushed forex volatility prices near record-lows across the majority of US Dollar and Japanese Yen pairs. And yet EURUSD 1-week prices have spiked near their highest levels of the year.
Any unexpected results from the European Central Bank would likely be the catalyst for important Euro moves, while end-of-week US Nonfarm Payrolls data could likewise spark significant EURUSD swings. – DR
Talking Points:
There are many advantages to trading strong trends. Trend traders look for directional markets to bias their trading decisions and look for new entries. Below we can see a prime example of a trending market. Currently the EURJPY has declined as much as 582 pips since its March 2014 high, which stands at 143.78.
When looking at the chart below, it is important to notice the series of lower highs and lower lows printed on the graph. With the EURJPY trending downwards, this makes the currency pair a prime candidate for traders to initiate new sell positions. Today we will discuss trading breakouts with the trend. Let’s get started!
Learn Forex – EURJPY Daily Downtrend
(Created using FXCM’s Marketscope 2.0 charts)
Trading Breakouts
After establishing the current low in a downtrend, trading a breakout comes down to entry placement as well as risk management. By definition of a trend, the EURJPY must create a new low in order for the trend to continue. Knowing this, breakout traders will set entry orders under the current low to await execution. Entry orders are an effective way to prepare for a market breakout. An entry order can be set through the FXCM Trading station and allows you to set an order at a preset price. In the event that the market trades through that price, your order will be executed and your trade triggered into the market.
Using this methodology, we first need to find the standing low on the EURJPY. Currently the low stands at 137.96 and traders should plan on setting entries below this value. Aggressive traders can set their entries as close as one pip below the low. Conservative traders however may wait for a candle close, or set their orders further away from the point of breakout prior to market entry.
Learn Forex – EURJPY Breakout
(Created using FXCM’s Marketscope 2.0 charts)
Stops and Limits
After setting your entry order, traders should consider how to manage risk. There are many ways to do this when trading breakouts in trending markets. One of the easiest methodologies includes setting a stop order above the previous low. In a downtrend like the EURJPY, traders can again turn toward the current low at 137.96 handle for this task. Stop values can be placed above this point to exit positions in the event of a false breakout.
Once a stop is set, traders can then manage their profit targets by using a positive risk: reward ratio of their choosing.
Now that you are more familiar with trading a breakout methodology, you can practice what you have learned using a demo account. You can get started by registering for a Free Forex Demo with FXCM. This way you can develop your trading skills while continuing to track the market in real time.
—Written by Walker England, Trading Instructor
To contact Walker, email WEngland@FXCM.com . Follow me on Twitter at @WEnglandFX.
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Weekly
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
Automate trades with Mirror Trader
-“The weak momentum profile is not suggestive of a strong bull.” Weekly momentum is just as telling. The most recent top is accompanied by RSI divergence with RSI < 60. This is exceptionally bearish. A similar RSI pattern occurred in July 2008. If the rate does trade to a new high, then a drop back into the range would be required in order to create a tradable high (complete an ending diagonal from 1.3294…highlighted). It’s worth mentioning that important tops have formed in April/May in recent years. A 1.3750 break would ‘announce’ that a downtrend has commenced.”
-EURUSD made a new high and the sharp reversal supports the ending diagonal (wedge) interpretation. Diagonals are often fully retraced (sometimes quickly), which yields a target of 1.3294. Recent developments put to rest the idea that EURUSD has broken the line that extends off of the 2008 and 2011 highs. Rather, a failed breakout and top would keep with the pattern of 3 year cycle tops. 1.3750 is an important reference point (year open) but 1.3722 is now important to the integrity of the near term downtrend.
-Near term, EURUSD has bounced from the top of a well-defined 1.3560/90 support zone. Friday’s rally stalled at former support (5/15 low) but respect potential for a bigger bounce next week.
Weekly
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
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-GBPUSD is showing signs of a top. The rally failed the week that ended 5/9 just above the August 5, 2009 close (high day for the entire move off of the 2009 low). The ensuing decline was sharp and found support at the line that extends off of the November, February, and March lows. That line broke this week (can be seen on the daily) and provides the best (not earliest) evidence yet of a broader shift.
Weekly
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
Automate trades with Mirror Trader
-AUDUSD failed just above .9400 (and just shy of cited resistance at .9412/23) last week and saw its 2nd largest weekly decline of the year. Weekly RSI failed just above 60 in April and just below 60 last week. Since the 2011 top, each RSI failure near 60 has led to a top or topping process (range for several weeks then a breakdown…that appears to be the case now).
Weekly
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
Automate trades with Mirror Trader
-“Don’t forget about the line that extends off of the 1996 and 2007 highs. That line crosses through the 2008, 2011, and highs as well. In 2011 (record free float high), the rate surged through the line in late July before topping on August 1st.”
-After trading primarily between .8500 and .8700 for the last 6 weeks, NZDUSD topped right at the mentioned line from 1996. The top also came in just above the August 1, 2011 close (that was the day of the free float record). The weekly key reversal and follow through this week bolsters the idea that NZDUSD has topped. .8600 and just above is resistance.
Weekly
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
Automate trades with Mirror Trader
-“USDJPY has bounced from the line that extends off of the February and 3/14 lows. The rally from the February low channels in a corrective manner and makes 104.12 important from a bigger picture bearish perspective.”
-“There is an Elliott case to be made for a return to the 4thwave of one less degree. The range spans 93.78 to 96.55. Of course, the path to get to that level is far from clear.” Near term, the failed run at the lows gives scope to additional ranging between 101.35 and 103.25.
Weekly
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
Automate trades with Mirror Trader
-Measured objectives from the breakout above the 2011 high range from 1.1680 to 1.1910. The Jul 2009 high rests in this zone at 1.1724 and the 2007 high is near the top of the zone at 1.1875.
-From an Elliott perspective, it’s possible that the rally from the 2012 low composes a ‘3rd of a 3rd (or C)’ wave from the 2007 low.
-Action since the January high may compose a complex correction (triple zigzag in this case). The rate is hugging channel support…this is a good place for a turn higher.
Weekly
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
Automate trades with Mirror Trader
-The same momentum considerations that apply to EURUSD apply to USDCHF (the March price low occurred with RSI above 30). Weekly RSI has been unable to register an ‘oversold’ reading despite the market declining for almost 2 years.
-“Patter wise, the decline from the 2012 high ‘fits’ well as a 3 wave correction with wave C as an ending diagonal. When (if) this market turns is up in the air.” Did we get our answer? USDCHF is above the line that extends off of the July 2013 and January 2014 highs. .8803 is important to the integrity of the reversal. Beware of resistance from the February 2013 low at .9020.
Talking Points
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Weekly Foreign Exchange Price & Time at a Glance:
Weekly Price & Time Analysis: EUR/USD
Charts Created using Marketscope – Prepared by Kristian Kerr
Weekly EUR/USD Strategy: Like the short side while under 1.3755.
Weekly Price & Time Analysis: USD/JPY
Charts Created using Marketscope – Prepared by Kristian Kerr
Weekly USD/JPY Strategy: We like tactical short positions in USD/JPY while below 104.40 on a weekly close basis.
Weekly Price & Time Analysis: GOLD
Charts Created using Marketscope – Prepared by Kristian Kerr
Weekly XAU/USD Strategy: Square.
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— Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com
This publication attempts to further explore the concept that mass movements of human psychology, as represented by the financial markets, are subject to the mathematical laws of nature and through the use of various geometric, arithmetic, statistical and cyclical techniques a better understanding of markets and their corresponding movements can be achieved
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Talking Points:
- USDOLLAR Eyes Former Support; Non-Farm Payrolls to Climb 219K
- EUR/USD Coming Up Against Former Support Ahead of ECB Rate Decision
- USD/CAD Fails to Break Out Despite Weak Canada 1Q GDP; BoC Meeting in Focus
The Dow Jones-FXCM U.S. Dollar Index (Ticker: USDollar) may continue to work its way back towards former resistance (10,470) ahead of the highly anticipated Non-Farm Payrolls (NFP) report as the bearish break on the Relative Strength Index (RSI) gathers pace.
Indeed, the recent weakness in the dollar may turn into a larger decline as the reserve currency carves a lower-high in May, but a rate cut by the European Central Bank (ECB) paired with another 200+K rise in U.S. NFPs may spur a material shift in the technical outlook should the key event risks deviate from market expectations.
With that said, we will retain a prudent approach going into June as we’ll be watch the monthly opening range take shape, and we may see a sharp rise in market volatility throughout the summer months amid the prospects for a more material shift in the policy outlook.
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Read More:
First Quarter Growth Disappointment Drives the Canadian Dollar Lower
USDOLLAR Daily
Chart – Created Using FXCM Marketscope 2.0
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The Australian dollar fell today versus the euro and the Japanese yen, staying flat against its US counterpart at the same time. It is a puzzling behavior as today’s economic report was good, while yesterday’s data was bad but did not prevent the Aussie’s rally.
Today’s data about private sector borrowing showed an increase by 0.5 percent in April, while analysts expected a 0.4 percent increase — the same as in March. Growth of private borrowing is considered to be good for an economy as usually the more consumers borrow, the more they tend to spend. Yesterday’s report showed that total new capital expenditure dropped by 4.2 percent in the first quarter of 2014 from the previous three months on a seasonally adjusted basis.
It is surprising to see that the Australian dollar demonstrated a strong rally after the bad data but was falling after the good report. The potential reason for today’s drop may be profit-taking after yesterday’s big gains. Whatever the case, the Aussie was still heading for a weekly gain.
AUD/USD was at 0.9304 as of 18:34 GMT today after rallying from 0.9235 to 0.9306 yesterday. EUR/AUD advanced from 1.4612 to 1.4658. AUD/JPY dropped from 94.72 to 94.43 intraday but bounced to 94.65 by now.
If you have any questions, comments or opinions regarding the Australian Dollar,
feel free to post them using the commentary form below.
The Canadian dollar edged today as economic data from Canada, including a very important report about economic growth, was rather poor, meaning that it is unlikely for the Bank of Canada to tighten its monetary policy in the near future.
Canada’s gross domestic product expanded 0.1 percent in March, in line with expectations, slowing from February’s growth of 0.2 percent. GDP grew 0.3 percent in the first quarter of 2014 after rising 0.7 percent in the fourth quarter of 2013. This was the smallest increase since the fourth quarter of 2012.
The Industrial Product Price Index declined 0.2 percent in April, while analysts predicted an increase at 0.4 percent — the same rate as in the previous month. The Raw Materials Price Index increased 0.1 percent, yet the increase was significantly below the forecast of 1.2 percent.
USD/CAD wad up from 1.0836 to 1.0852 as of 17:04 GMT today. EUR/CAD climbed from 1.4738 to 1.4803. CAD/JPY dipped from 93.90 to 93.48 before trading at 93.75.
If you have any questions, comments or opinions regarding the Canadian Dollar,
feel free to post them using the commentary form below.
Overview:
USD/JPY is expected to trade in a higher range. It is underpinned by the yen-funded carry trades amid improved investor risk sentiment (VIX fear gauge eased 0.94% to 11.57, S&P 500 closed up 0.54% at all-time high 1,920.03 overnight) as larger-than-expected 27,000 drop in U.S. jobless claims to 300,000 in week ended May 24 (versus 319,000 forecast) overshadowed smaller-than-expected 0.4% on-month increase in U.S. April pending home sales index to 97.8 (versus +2.0% forecast), with investors brushing aside worse-than-expected downward revision in U.S. 1Q GDP growth to -1.0% from +0.1% (versus -0.6% forecast) due to harsh winter weather and inventories. USD/JPY is also supported by the demand from Japan importers and rebounding U.S. Treasury yields. But USD/JPY gains are tempered by the Japan exporter sales and positions adjustment before weekend. Daily chart is mixed as MACD is bullish, but stochastics is in bearish mode.
Technical Comment:
Daily chart is mixed as MACD is bullish, but stochastics is turning bearish.
Trading recommendation:
The pair is trading above its pivot point. It is likely to trade in a higher range as far as it remains above its pivot point. As far as the price is above its pivot point, a long position is recommended with the first target at 102 and the second target at 102.35. In an alternative scenario, if the price moves below its pivot points, short positions are recommended with the first target at 101.40. A breach of this target will push the pair further downwards and one may expect the second target at 101.20. The pivot point is at 101.55.
Resistance levels:
102
102.35
102.55
Support levels:
101.40
101.20
101.05
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Performed by Ahsan Aslam, Analytical expert InstaForex Group © 2007-2014 |
Overview:
USD/CHF is expected to trade in a lower range. It is supported by the franc sales on buoyant EUR/CHF cross and dovish Swiss National Bank’s monetary policy stance. But USD/CHF gains are tempered by the franc demand on rebounding CHF/JPY cross and positions adjustment before the weekend. The daily chart is positive-biased as MACD is bullish, stochastics stays elevated in the overbought zone, five and 15-day moving averages are advancing.
Trading recommendation:
The pair is trading below its pivot point. It is likely to trade in a lower range as far as it remains below its pivot point. Short position is recommended with the first target at 0.8935. A breach of this target will move the pair further downwards to 0.8920. The pivot point stands at 0.8990. In case the price moves in the opposite direction and bounces back from the support level, and then it moves above its pivot point. It is likely to move further to the upside. In that scenario, a long position is recommended with the first target at 0.9015 and the second target at 0.9030.
Resistance levels:
0.9015
0.9030
0.9065
Support levels:
0.8935
0.8920
0.89
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Performed by Ahsan Aslam, Analytical expert InstaForex Group © 2007-2014 |
