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GBP/CHF building momentum for rally extension

    By
    ActionForex.com
    -

    We talked about GBP/CHF last week (here) and its rally did extend as we expected. It’s so far reached as high as 1.3640, just inch below 61.8% projection of 1.2219 to 1.3419 from 1.2861 at 1.3647.

    While GBP/CHF is not a big mover this week, momentum is still solid. Action Bias table is upside blue all the way with some neutral bars.

    D action bias row show it’s in solid rally, which is in line with the action bias chart too. The last three neutral 6H action bias bar should it was in consolidation. But H action bias bar argues that it’s possibly building up momentum for a break out.

    Outlook in the cross stay bullish and break of 1.3647 will pave the way to 100% projection at 1.4133.

    Dollar gets no support from hawkish FOMC minutes, Dollar index breakout yet to occur

      By
      ActionForex.com
      -

      The minutes of the March FOMC meeting revealed nothing surprising. Almost all policymakers supported a rate hike even though there were a couple of them pointed to benefits of waiting a bit longer. All policymakers expected inflation to rise in the coming months, showing receding worry on the inflation outlook. Nonetheless, the pick-up in inflation is not enough to alter the projected rate path yet. Regarding the economy, it’s a consensus view that outlook has strengthened in recent month. Meanwhile, a strong majority of the members viewed escalation in trade tension and retaliation by other countries as downside risks for the economy.

      The minutes are seen as hawkish in general, but not more hawkish than expected.

      After the minutes, pricing of a June hike is little changed. Fed fund futures are pointing to over 95% chance of a June hike.

      Little change in USD’s performance too. It’s staying as the weakest one for the week.

      While dollar index weakened notably this week, it’s still staying in range above 88.25. We’d maintain that as it’s close to medium term trend line resistance, breakout is imminent. But probably a little more time is needed for selling to gather momentum.

      Gold breaking out from triangle pattern, heading to 1400?

        By
        ActionForex.com
        -

        Gold surges to as high as 1365.24 so far and is attempting to break out from recent triangle consolidation. Immediate focus is now on 1366.05 high, which is nor far away. Based on current momentum, break of 1366.05 should send gold to 61.8% projection of 1236.66 to 1366.05 from 1319.82 at 1399.78, which is close to 1400 handle.

        However, we’d pointed this out before, and would like to reiterate this point again. There are two resistance levels to overcome from a longer term point of view. Firstly, that’s 1375.15, 2016 high. Secondly, that 38.2% retracement of 1920.94 (2011 high) to 1046.54 (2015 low) at 1380.56. This 1375/80 zone is the real test for gold ahead.

        Fresh selling in USD after Saudi Arabia intercepted missiles over Riyadh, CAD follow oil higher

          By
          ActionForex.com
          -

          USD suffers another round of selloff after report that Saudi Arabia intercepted missiles over Riyadh after at least three blasts were heard in the city. WTI crude oil surges to as high as 66.82. It remains to be seen if it can sustain above key resistance level at 66.66. But momentum is promising.

          Riding on the news, USD/CAD extends recent to as low as 1.2544. It’s on course to next support level at 1.2450.

          DOW opened lower but stabilized in initial trading. It’s currently struggling around 55 H EMA, feeling heavy. Losing 24200 handle will likely prompt sellers to come out and send DOW back to 24000 handle.

          US CPI and Core CPI accelerated, But USD weak against Euro and Yen

            By
            ActionForex.com
            -

            US headline CPI dropped -0.1% mom in March, below expectation of 0.0% mom. But annual rate accelerated to 2.4% yoy, up fro 2.2% yoy and met expectation. Core CPI rose 0.2% mom, 2.1% yoy, up from 1.8% yoy in February, and met expectations.

            CPI provides little support the USD. Rising geopolitical tension in Syria is weighing market sentiments and the greenback. Trump’s attention is now temporary away from China and back to Russia, with his tweeted to warn Russia of missiles in Syria.

            USDJPY’s immediate focus in now on 106.61 minor support in early US session. Break will put 105.65 into focus.

            EURUSD doesn’t bother much about the Syira news and is on track for 1.2475.

            FOMC minutes will be the next major focus in US session. But even something hawkish there is unlikely to give USD a lift.

            JPY rebounds as Trump tells Russia to get ready for missiles

              By
              ActionForex.com
              -

              European stocks dive while JPY rebound strongly after Trump’s Syria warning.

              In his usual morning tweet, Trump wrote “Russia vows to shoot down any and all missiles fired at Syria. Get ready Russia, because they will be coming, nice and new and “smart!” You shouldn’t be partners with a Gas Killing Animal who kills his people and enjoys it!

              In the current 4H heatmap, JPY and CHF are the clear winners. GBP started to pare back recent gains after weaker than expected industrial and manufacturing production released earlier today. Commodity currencies, AUD, CAD and NZD are also pressured as risk aversion resurfaces.

              GBP pares gain as industrial and manufacturing production missed expectation

                By
                ActionForex.com
                -

                GBP/USD pares some of earlier against after disappointing data.

                • Industrial production rose 0.1% mom, 2.2% yoy in February, below expectation of 0.4% mom, 2.9% yoy.
                • Manufacturing production dropped -0.2% mom, rose 2.5% yoy, below expectation of 0.2% mom, 3.3% yoy.
                • Construction output dropped -1.6% mom in February versus expectation of 0.7% mom.
                • Visible trade deficit narrowed to USD -10.2b in February versus expectation of GBP -11.9b.

                While GBP/USD retreats after hitting 1.4222, it’s still on track to 1.4243 as long as 1.4144 minor support holds.

                RBA Lowe: No strong case for near term adjustment in interest rate

                  By
                  ActionForex.com
                  -

                  RBA Governor Philip Lowe devoted a section on monetary policy is his address to Australia-Israel Chamber of Commerce (WA) today. And, he brought out four broad points.

                  1. He expects a “further pick-up” in the Australian economy, with increased investment, hiring and exports. Inflation is also expected to “gradually pick up” with wages growth too. But there are uncertainties “lying in the international arena”. Lowe warned that “a serious escalation of trade tensions would put the health of the global economy at risk and damage the Australian economy”. And, “we also have a lot riding on the Chinese authorities successfully managing the build-up of risk in their financial system.” Domestically, the level “high level of household debt remains a source of vulnerability”.

                  2. The next interest rate move will likely be “up, not down”. And that might “come as a shock to some people”.

                  3. Inflation returning to midpoint of target zone is expected to be “only gradual”. And, “it is still some time before we are likely to be at conventional estimates of full employment.

                  4. “Reserve Bank Board does not see a strong case for a near-term adjustment in monetary policy.” Lowe reiterated that other global central banks have lower policy rates than Australia “over the past decade”. So, the situations are different.

                  Here is Lowe’s full speech.

                  Oil Price Jumped to 4 Years’ High before Profit-taking

                    By
                    ActionForex.com
                    -

                    Brent crude oil price jumped to a fresh 4- year high of US$ 71.34/bbl before settling at US$ 71.04/bbl, up +3.48%. WTI crude oil price also gained +3.3%, ending the day at US$ 65.51/bbl. The rally was driven by the broadly based improvement in risk appetite as Chinese President Xi Jinping’s speech in Boao appeared to have eased US-China trade tensions. Meanwhile, Saudi Arabia’s Energy Ministry indicated that the Kingdom would keep exports below 7M bpd and restore its inventories to “normal” level.

                    Profit-taking in both oil benchmarks on Wednesday was facilitated by the inventory report released after US market close. The industry- sponsored API estimated that crude oil inventory surprisingly increased +1.56 mmb in the week ended April 6. For refined oil products, gasoline stockpile added +2.01 mmb while distillate fell -3.85 mmb for the week. EIA, the US governmental agency, today probably reports a -0.19 mmb draw in crude oil inventory. Gasoline and distillate stockpiles might have dropped -1.43 mmb and -0.03 mmb respectively.

                    UK CBI: Don’t diverge from EU rules after Brexit

                      By
                      ActionForex.com
                      -

                      The Confederation of British Industry published a report showing that UK business overwhelming prefer to stay with EU rules after Brexit. Carolyn Fairbairn, CBI Director-General, said the report comes from “heart of British business” and it provides “unparalleled evidence to inform good decisions that will protect jobs, investment and living standards across the UK.” She urged “major acceleration” in the partnership between businesses and the government to deal with Brexit issues.

                      She warned that “it’s vitally important that negotiators understand the complexity of rules and the effects that even the smallest of changes can have. Deviation from rules in one sector will have a knock-on effect on businesses in others, and divergence from rules in one part of a production process will have consequences for market access throughout entire supply chains.”

                      Fairbairn added that “it’s hard to overstate the importance of the decisions that will be taken over the next six months. Put simply, for the majority of businesses, diverging from EU rules and regulations will make them less globally competitive, and so should only be done where the evidence is clear that the benefits outweigh the costs.”

                      CBI devised three principles for further Brexit negotiations:

                      • Where rules are fundamental to the trade or transport of goods, the UK and EU must negotiate ongoing convergence.
                      • In the negotiation of the new relationship, both sides should look to set a new international precedent in the trade of services and digital products.
                      • Alignment will need to come with mechanisms for influence and enforcement that benefit both sides.

                      Here is the 114-paged reported titled “Smooth operations: An A-Z of the EU rules that matter for the economy“.

                      China PBoC Yi outlines specifics on opening financial market access at Boao

                        By
                        ActionForex.com
                        -

                        New People’s Bank of China Governor Yi Gang pledged to further open the financial markets in the Boao Forum for Asian in China. And some specifics were offered by Yi too.

                        Firstly, the government will remove foreign ownership caps on Chinese banks by the end of June.

                        Secondly, foreign securities and life insurance companies will be allowed to hold majority stakes in their Chinese counterparts. That is, ownership could be raised from 49% to 51%. And such restriction will also be abolished in three years.

                        Thirdly, by the end of June, the permitted business scope for foreign insurance agents will be expanded.

                        Fourthly, the daily quota for foreign investors to buy Chinese stocks and for Chinese investors to buy Hong Kong traded stocks will be quadrupled.

                        In addition, by the end of 2018, China will launch a trading link between Shanghai stock markets to London’s.

                        Separately, Yi also said that China won’t devalue Yuan as part of the moves of trade war with the US.

                        Oil price surges as Syria decision imminent

                          By
                          ActionForex.com
                          -

                          Brent crude oil surged above 70 yesterday partly as USD depreciated. But more importantly, Trump’s decision on Syria in imminent as geopolitical tensions in the Middle East escalates.

                          Similar picture is seen in WTI crude oil. As seen in the continuation chart, WTI drew strong support from 55 day EMA and rebounded, closing at 65.51 yesterday. 66.66 high is now back in radar. Based on current momentum, this resistance could be taken out very soon.

                          More importantly, 66.66 is close to long term fibonacci resistance of 50% retracement of 107.68 to 26.05 at 66.87. A strong break of the level will pave the way to 61.8% retracement at 76.50 and above. And that might give USD/CAD another push down towards 1.2 handle.

                          DOW, S&P 500, NASDAQ not out of the woods yet despite relief rally

                            By
                            ActionForex.com
                            -

                            Major US equity indices followed other global indices and rebounded strongly overnight on easing trade war fear. DOW closed up 428.90 pts or 1.79% at 24408.00. S&P 500 rose 43.71 pts or 1.67% to 2656.87. NASDAQ also gained 143.96 pts or 2.07% to 7094.30.

                            However, we’d like to note that all three indices are bounded in recent consolidative pattern started last March/early April.

                            DOW, despite yesterday’s rise, is staying below last week’s high at 24622.26, below 55 day EMA at 24591.41. It’s also limited below near term falling trendline at around 24722.90. This 24600/700 zone is the key resistance zone to overcome for the near term. As long as it holds, current rebound is seen as part of a consolidation pattern from 23344.52. Once this consolidation completes, there will be another decline through 23344.52 to resume the fall from 26616.71. Firm of the 24600/700 zone will delay the immediate bearish case and bring stronger rebound back towards 25800.35 first.

                            Similarly, S&P 500 also stays below last week’s high at 2672.08, as well ass 55 day EMA at 2685.16.

                            NASDAQ breached last week’s high of 7112.38 but didn’t close above. It’s also limited below 55 day EMA at 7159.69.

                            While US stocks rebounded, they’re not out of the woods yet.

                            CADJPY, AUDJPY, NZDJPY, which is our preferred choice to go long?

                              By
                              ActionForex.com
                              -

                              AUD/JPY, NZD/JPY and, CAD/JPY are the clear winners for the day on easing risk aversion. These three pairs are in the top 10 movers across time frames. But which one pair is the better one to go long?

                              Let’s take a look at respective Action Bias.

                              A quick glance at AUD/CAD. The cross is clearly in persistent downside D action bias table. And there is no sign of a turn in both 6H and H action bias. This is consistent with smooth decline as seen in the D action bias chart.

                              The action bias table of AUD/NZD looks even worse with downside biases seen all over the place across 6H, D and W time frame. H neutral action bias suggests the decline might be slowing temporarily. But there is no sign of a reversal. This could also be reflected in the D action bias chart too, that the cross is in a clear down trend.

                              So, while AUD/JPY is the top mover for today, it seems that NZD/JPY and CAD/JPY will have a better advantage.

                              How about NZD/CAD? The action bias table shows it’s having persistent blue bars in W time frame and persistent red bars in D time frame. But red bars of downside bias are not apparent in 6H and H time frames. Looking at the D chart, NZD/CAD has been in a solid up trend since December, but turned into correction/consolidation since mid March.

                              So, for quick intraday trade, there is not much difference between NZD/JPY and CAD/JPY. But for position trading, NZD/JPY is slightly preferred as our choice to go long.

                              The NZD/JPY action bias table showed persistence upside bias blue bars in H and 6H time frame. This also pushes D action bias to upside side blue too. Taking into consideration that 78.61 resistance is taken out decisively today to confirm near term reversal. NZD/JPY presents long opportunity for 81.55 resistance in near term.

                              AUD & NZD strong on risk appetite, but EUR overtaking

                                By
                                ActionForex.com
                                -

                                The financial markets are generally on risk on mode today as Chinese President Xi Jinping’s speech in Boao eased the fear of immediately escalation of trade tension with the US. Nikkei closed up 0.54%, HSI closed up 1.65%. At the time of writing, DAX is up 0.8%, CAC up 0.5% and FTSE up 0.55%. US futures also point to higher open.

                                In the forex markets, it’s typical in such risk on mode that Aussie and Kiwi are strong while Yen is weak, as seen in the D heatmap. But it also revealed that USD is getting no support from investors’ optimism. And the USD is somewhat dragging down CAD too.

                                The top movers table revealed pretty much the same picture. In particular, NZDJPY is the among the top 10 across time frame. Both AUDJPY and NZDUSD have their top 10 places in 4H bar overtaken by EUR pairs.

                                 

                                EURUSD powers through 1.2344 resistance heading into US session

                                  By
                                  ActionForex.com
                                  -

                                  EUR/USD soars sharply as markets are heading into US session. While some might point to sluggishness in USD/JPY as argue that risk appetite is not but. But they missed the point that USD/JPY is usually not the best pair that correlates with risk sentiment. Just like today, JPY and USD are the two weakest ones.

                                  Back to EUR/USD, the break of 1.2344 minor resistance now invalidate the case of medium tem reversal in the pair. It’s too early to judge whether rise from 1.2214 is resuming the larger up trend or it’s another leg in the sideway pattern from 1.2555. But in either case, further rise should be seen back to 1.2475 and above in near term.

                                  BoE hawk McCafferty: Don’t dally when tightening modestly

                                    By
                                    ActionForex.com
                                    -

                                    BoE known hawk Ian McCafferty urged his fellow policymakers not to “dally” when it comes to tightening policy modestly.

                                    He is seeing no labor market slack in the economy. In addition, there are modest upside risks to wage growth forecasts presented in the February Quarterly Inflation Report. He added that “It’s not wages suddenly bursting away, but it gives you a modest upside risk.” Also, McCafferty is concerned on whether import price inflation would fade as the central bank forecasted.

                                    On the other hand, he acknowledged that Brexit uncertainty will be a permanent feature of the economic landscape of the UK. While it may hamper long term investments, the impact on short term projects or exports would be small.

                                    ECB Nowotny: It’s time for gradual normalization as inflation pressure will eventually materialize

                                      By
                                      ActionForex.com
                                      -

                                      European Central Bank (ECB) Governing Council member Ewald Nowotny spoke in the European Money and Finance Forum (SUERF) today. .

                                      Regarding monetary policy, it reiterated that “it is time for a gradual normalization” as inflation pressure will eventually materialize. But he also emphasized that “this normalization requires a delicate balancing of measures as well as careful sequencing in time.” He noted that ECB is now at an “important turning point”. While the Eurozone has very strong economic expansion, it’s an unequal one.

                                      He stressed that the ECB framework is well equipped to cope with the evolving inflation debate. But still, exit is complex due to the large amount of stimulus in place. Nowotny also repeated all other central bankers have said over time. That is, tightening too soon would stifle recovery. Falling behind the curve would risk creating bubble in assets.

                                      On the topic of trade war, Nowotny warned of the “negative effects for all involved”. And, “the direct effects might be on the exchange rate side but this is difficult to see or to forecast because today we have so many linkages, we have long production chains… It might have negative effects on financial stability, but effects on monetary policy are not very clear.”

                                      China offered to cut surplus to US by USD 50b??

                                        By
                                        ActionForex.com
                                        -

                                        Bloomberg reported citing a “person familiar with the situation” regarding US-China trade tension. That “person” said China Vice Premier Liu He rejected US request to stop subsidizing business related to its “Made in China 2025” initiative.

                                        Request from the US came after China offered to lower it’s trade surplus to US by USD 50b. And that would be done by China buy more liquefied natural gas, agricultural products, semiconductors and luxury goods from the US. China’s proposal also include opening the financial sector at a faster pace, giving US companies more access to the e-commerce markets.

                                        In addition, that “person” said Liu said that President Xi Jinping is ready to fight back in Trump wants a trade war. And China is open to talks but won’t initiate it.

                                        Our views

                                        It’s yet another Bloomberg report with information from a “person”. Bloomberg didn’t even specify that it’s from a Chinese government official. So, there is no way for us to judge whether is information is indeed from the US or from China. Even so, is it something that leaked, or made up, from Trump’s own team?

                                        For now, we don’t believe that China has offered to cut the surplus to US by USD 50b. There is no urgency for China to offer anything. It takes from now to May 22 for Trump to collect public input on the tariffs on that USD 50b. What will the end-list be? It’s a big unknown, not to mention that list of USD 100b of goods. Even if China would offer something eventually, would Xi want to drag the negotiation beyond the mid-term election in the US?

                                        Dallas Fed Kaplan: Trade rhetoric could have chilling effect

                                          By
                                          ActionForex.com
                                          -

                                          Dallas Fed President Robert Kaplan reiterated his expectation for two for rate hikes this year. And, 2018 is seen a a relatively solid year for growth to him. But Kaplan also noted that it is going to be watching the yield curve “very carefully”. And he won’t “blindly” support rate hikes if yield curve keeps flattening.

                                          In addition, like other Fed officials, Kaplan said it’s “too early to judge” how the trade spat between the US and China is going to affect the economy. But he warned that if the rhetoric goes on for long enough at this level, it is “having somewhat a chilling effect”.

                                          He added that “I’m still hopeful when we look back a year or two from now you’ll see very little actually done in the way of tariffs that were implemented”. And, “that would be my base case, and I think we are in the early innings of this.”

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