Cable’s spike could deceive

A flashing spike characterized today’s opening session with the GBP/USD brought, even for a small time, to the 1.3060 level, and coming down a few moments later, trading at +0.02% at 1.3022 at the time of writing.

The almost complete erosion of this initial gain is a consequence of the correlation to the Oil price action, particularly keeping in mind the OPEC news, for which they reached an agreement on the price of the commodity. At the same time the US Dollar is moving generally up on the back of improved durable goods data (0% against -1.5% expected) and the Yellen’s speech, which led to the Cable weakness.

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Today’s session will be characterized by the release of a big number of important data to keep an eye on, first of all the German’s labour market, the English Consumer credit and Mortgage approvals data and US GBP data.

Level to consider following the technical analysis for the GBP/USD cross see the first resistance positioned @ 1.3058, today’s session high tested after the initial spike and which could represent a first hurdle to the upside. Broken this first level the Cable could have open road to reach 1.3125 (22 September high).

 

Brent and WTI volatility: effects on USD/CAD

It is a moment of high volatility for Oil markets on both side of the Atlantic: during Asian session both moved up after the drop in the US Oil inventory and relative products, but now they are in negative territory yet.

At the time of writing Brent is trading down 0,21% at $46.12bbl while WTI is making a negative performance of 0,67% at $44,61bbl after having touched the $45.08bbl level.

 

The American Petroleum Institute (API) data showed a drop in the US Oil inventory of 752,000 barrels against all expectations which saw ad increase of almost 3 million barrels. Distillates on the other hand experimented the first inventory drop in seven weeks with a 343,000 barrels decrease. Also Gasoline inventory went down 3.7 million barrels.

Looking at the currency that is most influenced by the US Oil price, the USD/CAD cross find a good support @ 1.3192 and at the moment is traded positively of .18% @ 1.3222.

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The cross still remains fairly bid, despite difficulties to extend gains above the 1.3250 barrier due especially to the slowdown of the Oil price decrease after the API report.

Another element to fuel the pair price action is the recent slowdown of the US Dollar against its major peers, which let the USD/CAD to be capped.

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Looking at the chart the first significant resistance is seen @ 1.3250 (psychological level) after which we can find another psychological one at 1.3300. On the opposite side the first hurdle to the downside is seen @ 1.3192.

All the eyes are now facing Algeria where the meeting could (unlikely) lead to a production freeze agreement. Traders have to pay attention to the US Government weekly inventory data too, which could fuel unexpected movements of the cross. Not to forget the US economic data and the Yellen’s speech.

 

The exceptional BOJ decision boosts USD/JPY

The debate over the American elections continues while effects on the Greenback, particularly against the Japanese Yen, boosts the USD/JPY cross bringing it to test the 100.75 level and boosting futures too.

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Despite the Trump-Clinton rivalry is one of the most important market mover at the time of writing, on the Asian market more powerful forces could fuel stocks and currencies, with the BOJ on the forefront and with the release of the minutes for the 28-29 July (that you can find HERE).

The Central Bank governor  Haruhiko Kuroda, moreover, gave explanations on the “strengthen the existing framework for monetary easing” by introducing price control to the Japanese bond market.

After the fairly good success of the Japanese Quantitative Easing and despite a positive turnaround  “the price stability target of 2% had not been achieved”, bringing Kuroda to a frank conclusion:

“it is necessary to dramatically change people’s outlook for prices”.

The solution to this problem, always according to the governor, came after a comprehensive revision of the monetary policy. The most effective way to overcome the problem is “facilitate the formation of a yield curve which is deemed most appropriate for achieving the price stability target of 2% through the appropriate combination of a negative interest rate and Japanese Government Bond (JGB) purchases”.

An innovative maneuver which promises to be the principal market mover for the Yen price, and not just that.

In addition to the Trump-Clinton debate, however, today’s session will see a lot of attention to the US Consumer Confidence data expected in late afternoon.

 

 

 

BOJ unprecedented move not enough to boost the USD/JPY

The USD/JPY pair continue its slow recovery from the 4-weeks low tested a few days ago, and seems to consolidate its positive movement while it remains on hold to receive fresh incentives from the Fed in order to boost its gains.

The cross finally gains the 101,00 level in the early London session with an upside move reaching the 101,25 level and at the time of writing moving sideways with a stable performance of 0.30%.

At this point the sell-off after the BOJ and Fed disappointment, has been half recovered, while the risk-sentiment remains poor.

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We have to keep in mind that the new BOJ policy of acting on yields on the curve, seem to have introduced a significant change, trying something new which could be effective. The attempt, by the way, seems still shy remaining linked to the old method (acting on the quantity of asset purchased and the expansion of the monetary base).

With these prespectives the cross will continue to follow the market sentiment, with the price which could be influenced mainly by the US dollar and by the late-day events such as Manufacturing PMI, rig count and the Fed members Harker, Mester, Lockhart speech at Philly.

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Taking a look at the chart, technical analysis suggests that the first resistance could be seen at 101,50 (psychological level), broken which the street could be free to reach the 101,82 level (50-DMA). In case the cross should revert his movement, on the other hand, the first significant support is seen @ 100,70 (4-weeks low).

 

 

The US inflation affair, and the EUR/USD movement

During the last session of last week, the EUR/USD broke the schemes, violating the range that characterizes last week after slightly better than expected US CPI data, fueled by rents and medical services.

The technical analysis have little to do about it: the 5-day moving average has fallen under the 20-days one and this is exclusively explained by a market reaction.

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The retracement which led the cross trading at $1.1150 represents the 50% of the gains made in mid-July and the next hurdle on the downside will be 61,8% but first the pair have to overcome some important levels, like $1.1145 and $1.1120, both tested in early-September.

If we take a look at the US Macro situation, moreover, we can see that the inflation level is still under the Fed Target (from 51 months).

This is in contrast, however, with the growth of the service costs (+3,2% y/y), of the medical care costs (+5,1% y/y) and with the shelter costs (+3,4% y/y), while the Fed level still remains @ 1,6%.

Interesting and controversial story: there’s no inflation on good prices, but high inflation on service prices. Recently CPI data didn’t push the Fed to make a move on the rate in September, but in December the story could be different. In this scenario the only parameter who still remains high is the feared (or loved) VOLATILITY.

Gold: a boring one

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While US Treasury yields are slightly making losses, the Gold extends his lateral movement, started in the late Asian session and which is continuing even in the early London ones.

The precious metal price fund an hurdle at the $ 1.318 level and at the time of writing we are seeing a retracement which is bringing the commodity to trade at the actual $ 1.313 level.

Looking at the movement of the US Treasury, which is closely linked to the Gold price, we can see small one-basis-point losses for the 10, 5 and 2 years, which are not helping the precious metal to maintain his bid tone. Another relevant fact that could affect the upper move of the Gold is the gain of the Asian equity.

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Looking at the chart, however, for today, a possible broke of yesterday’s low at 1.309,43 could mean a downside to the 100-DMA at $ 1.305 followed by the round number, $ 1.300.

On the other side, like i said before, the first hurdle to overcome is seen at $ 1.319, already tested, but not broken yet.

Today’s session will be characterized by important event in the US market, like the CPI and the U. of Michigan Confidence index. Without any doubt to keep an eye on!

 

 

JPY analysis – A BOJ possible move next week

It is difficult for the USD/JPY cross to reach the 103 level, while is still continuing the speculation over a possible move from the BOJ next week.

This morning we saw a little spike which led the price to 103.20 preceded by a drop mainly related to the news that the BOJ is about to bring the interest rate further in negative territory during the next week’s meeting.

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In addition, following a recent survey by Bloomberg, the majority of the economists see the BOJ extending his monetary stimulus program next week. More specifically the 53% see a further cut in the interest rate, while just the 35% predicted an increase in the government bond purchase.

Recent offers for the cross still continue to cap his movement, despite the recovery in the US treasury yields and the uncertainty on the major central bank’s monetary policy which are influencing the investors sentiment. At the moment the USD/JPY is traded positively of 0,38% at 102,95 and this morning we’ve seen a decrease on the industrial production figure, from -3,8% to -4,2%.

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Today the eyes of the market will be looking at likely movements on the global yields for the majors and for the RO-RO trend in order to anticipate further moves of the principal currencies. Main events for next week however will be the US retail sales and CPI data.

In terms of technical analysis, the first obstacle on the upside is seen for sure at 103,20 recently tested, but not broken, and which represent the six-days high. In case the cross would broke it we could assist to an upside move towards the 103,61 level.

GBP/USD: the recovery of Friday’s drop seems harder than expected

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The Cable – GBP/USD – seems to be ready to return to the 1.33 level, while the US Dollar remains under pressure after the recent comments of the Fed Official Kashkari, which has been not completely priced by the market yet.

At the time of writing the cross is trading @ 1.3270, making a modest +0.01% and the recovery of the Friday’s +50pips drop seems harder than expected. The upper move should certainly benefit from the actual USD weakness against his major peers fueled by the Fed uncertainty on the interest rate side.

Latest news coming from Minneapolis, moreover, have seen the Fed official Kashkari adding fuel to the fire, facilitating the Cable upper move and renewing the downside pressures to the Greenback.

The positive movement of the cross however, still remains limited by the persistent risk-off of the market, which is weighing  on high-yield currencies (just like GBP). This week promises to be very interesting for major currencies, with UK CPI datas and the BOE decision, while in US it will be interesting to see the retail sails data.

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Interesting levels to keep an eye on see the first immediate resistance for the Cable positioned at 1.3290 (5-DMA) beyond which the cross could go touching the 7 September high at 1.3334.

On the opposite side, the first level to consider is certainly at 1.3223 (20-DMA) which could be a support for a rebound.

ECB non-move is still ok (for now)

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The EUR/USD cross is extending his recovery at the opening of the London session after the calm is returned following the ECB disappointment. The market focus seems to be on China now, where overnight data led the market to a risk-off sentiment.

At the moment the price is at 1.1281 (+0,19%) after yesterday’s spike followed by a drop which led the pair to touch the 20-DMA before closing positively at 1.1260.

The actual recovery, however, seems to be mainly driven by the US Dollar correction towards his main peers. A movement justified by the drop in the treasury yields after the uncertainty on the timing of the next Fed move on the interest rate. The Fed index still continue to go down (-0,18%) and is now almost at the session low at 94,84.

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Yesterday’s session was characterized by the ECB non-move, which decided to maintain his monetary policy without any change, disappointing market expectations of an extension of the bond program until March 2017. Despite president Draghi was pretty clear in specifying that moves in the coming months will be unlikely, i continue to think that the ECB have to adjust his QE program until the end of the year and yesterday’s move was exclusively the “easy” thing to do at the moment: after Brexit everyone was expecting a worsening in the European economy, which at the moment following datas and predictions, has not happened yet.

Under my point of view hence i still remain of the idea that Eurozone growth and inflation data will soon disappoint expectations and ECB consensus bringing the Central Bank to an extension or a change in the QE program.

Today the market will have a close look to the German trade data even if the Fed member Rosengren’s speech could attract investor’s attention in case there will be news on the US interest rate.

 

RBA leaves interest rate unchanged

 

australian-regulationAs expected nothing new from the RBA which decided not to change both interest rate, at 1,5%, and the Official Cash Rate (OCR).

“Taking account of the available information, and having eased monetary policy at its May and August meetings, the Board judged that holding the stance of policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.” – from the RBA notes.

Reasons for this non-move the slow bot continuous growth of the global economy at a worse than expected pace. Despite some developed Countries have registered during last year an improvement of the economic conditions, a big number of Emerging Countries still have big economic difficulties. In addition Chinese policymakers decisions supported the growth of the Country, but at a moderate pace.

In Australia, recent data suggest that the growth is still continuing, despite a large decrease in investments, but particularly fueled by the increase in demand and export. The labour market still continue to give conflicting signals, even if there are the basis for an increase in the employment in the near term. On the inflation side, it still remains limited, with a slightly growth of the labour market costs helped by low costs pressures from all around the world.

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At the moment the AUD/USD cross is traded with a negative performance of 0,54% at 0,7624 after having experimented an opening spike which led the pair to reach the weekly high at 0,7637.

Despite the small actual retracing the downside still remains limited, after RBA’s statement and better than expected macro data earlier in the day. The Q2 Current Account has decreased to -$15.5bn versus an expectation of -$20bn.

The eyes of the market for the moment still remains on the US LMCI and ISM data during later NY session which could give a slight direction to the AUD/USD cross too.

Pay attention to the resistance positioned at 0,7663 which could be the first hurdle on which the pair could stop and reverse.