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Euro stays strongest after jitters, EURAUD with solid upside bias

    By
    ActionForex.com
    -

    After some jitters yesterday, EUR remains the strongest major currency for the week as seen in W heatmap. Strength is apparent against USD, GBP and AUD. Meanwhile, JPY is trading as the weakest, followed closely by USD, CHF and AUD.

    Looking at EURAUD action bias table, the biases are consistent across time frame.

    And EURAUD is seen as in up trend in 6H, D and W charts. So, the current H neutral could present an opportunity to long EUR/AUD.

    An intraday strategy could be buying at PP at 1.6120 with a stop below S1 at 1.6081.

     

    DOW closed down -1.43% after 737 pts swing, rejected by 24453 resistance

      By
      ActionForex.com
      -

      DOW initially gained 244 pts to 24446.22 but reversed to closed down -344.89 pts or -1.43% at 23857.71. Considering that it hit as low as 23708.73, that was indeed a massive 737 pts swing. The reversal was mainly because tech stocks were crushed. S&P 500 lost -45.93 pts or -1.73% to 2612.62. NASDAQ suffered most and closed down -211.73 pts or -2.93% at 7008.81. Selloff continues in Asia with Nikkei down -1.8%, HK HSI down -0.9% at the time of writing.

      Technically, we’ve mentioned before (here) that there will be no change in near term direction before a break of 24453.14 resistance. That is, DOW is expected extend recent decline to 23360.29 and below. The development is no far in line with our near term bearish view.

      US consumer confidence dropped moderately in March, dollar and stock lack direction

        By
        ActionForex.com
        -

        US Conference Board consumer confidence dropped moderately in March to 127.7, missing expectation of 131.0 But it stayed close to 18 year high at 130 in February.

        Reaction to the data is muted though. Dollar rebounded earlier today, but it’s struggling to extend gain in US session so far.

        Stocks also struggle to find a direction as DOW is trading nearly flat.

        USD in counter trend rebound as buying emerges in European session

          By
          ActionForex.com
          -

          Buying emerges for USD in European session as seen in the 4H heatmap. And that also majors USD as the strongest one for the day.  H action bias of dollar also turned all up. (EUR/USD, GBP/USD, AUD/USD, NZD/USD down means USD up, just in case).

          However, it should be noted that firstly, 6H action bias of USD is all neutral. Indeed, USD is in down action bias against EUR and GBP in daily chart. USD is also in down action bias against JPY, GBP and CAD in weekly chart. Hence, the momentum across time frame is not consistent. That means, the current rebound in dollar in counter trend.

          For example, for GBP/USD’s we’d prefer to see a break of 1.4075 before weighing the chance of a near term reversal. Otherwise, GBP/USD is seen as in a correction only.

          ECB Nowotny: Could reduce asset purchase “significantly” after September

            By
            ActionForex.com
            -

            Outspoken ECB Governing Council member Ewald Nowotny commented again today. He said that the central bank will decide on the future of monetary policy in the summer. This is rather apparent as the current EUR 30b per month asset purchase program is set to end in September. Nowotny also said that “if things continue as they are, ECB will be able to reduce asset purchases significantly” after that. While he cautioned not to make any abrupt change to policy, he also emphasized not to fall behind the curve.

            Overall, Nowotny’s comments were consistent with his usual stance, which is slightly on the hawkish side of the spectrum.

            European Commission: Economic sentiment weakend in all the five largest euro-area economies

              By
              ActionForex.com
              -

              Eurozone confidence indciators generally deteriorated in March.

              The European commission noted in the release:

              Euro area developments

              In March, the Economic Sentiment Indicator (ESI) decreased markedly in both the euro area (by 1.6 points to 112.6) and the EU (by 1.9 points to 112.5).1 While this is the third consecutive drop, the indicators remain at elevated levels.

              The deterioration of euro-area sentiment resulted from drops in industry, services and retail trade. Confidence among consumers remained unchanged, while it increased among construction managers. The ESI weakened in all the five largest euro-area economies; significantly so in Germany (-2.4), Italy (-1.8) and Spain (-1.2) and, less so, in the Netherlands (-0.5) and France (-0.4).

              EU developments

              The marginally stronger decrease of the headline indicator for the EU (-1.9) was mainly due to the marked deterioration of sentiment in the largest non-euro area EU economies, the UK (-4.2), and Poland (-2.0). In line with the euro area, confidence deteriorated strongly in industry, services, and retail trade, while it increased slightly in the construction sector and remained unchanged among consumers. The fall in EU confidence in the financial services sector was slightly less pronounced than in the euro area.

              By contrast to the euro area, EU managers’ employment expectations improved in retail trade, while they remained broadly stable in services. Price expectations differed from the euro area mainly in retail trade, where they decreased markedly.

              Full release here.

              ECB Liikanen assures no abrupt sudden changes when QE ends

                By
                ActionForex.com
                -

                ECB Governing Council member Erkki Liikanen spoke on monetary policy today:

                • “We have been careful in our communication,” and “we said we’re extending net asset purchases until September and beyond if needed.”
                • “And our monetary policy is and will be data dependent. So we must follow fresh incoming data every time,”
                • “A gradual tightening of monetary policy will rest on a more solid basis when indications of inflation rates to potentially temporarily exceed two percent become more prominent in inflation expectations,”
                • “The euro area inflation rate is sustainable when the ECB’s price stability objective can be met even without an exceptionally accommodative monetary policy,”
                • ” If the economy will be stronger and more convergence will take place, the role of the net asset purchase program will be smaller. And at the same time the other three elements will gain more importance especially forward guidance.”
                • But, “there will be no abrupt sudden changes even if one day the net purchases will be finished.”
                • “Downside risk is mainly political. We must follow that attentively,”

                BoE FPC report: Existing crypto-assets did not currently pose a material risk to UK financial stability

                  By
                  ActionForex.com
                  -

                  BoE just released the record of the Financial Policy Committee (FPC) meeting on March 12.

                  Here are some points to note:

                  Regarding the risks of disruption to UK financial services arising from Brexit:

                  The FPC

                  • Reviewed progress on the checklist that it published in November, of actions that would mitigate risks of disruption associated with Brexit to important financial services used by households and businesses. It judged that since November, in the United Kingdom, progress had been made. Nonetheless, material risks remained, particularly in areas where actions would be needed by both the UK and EU authorities. The FPC re-emphasised the importance that preparations continue to be made and actions taken by relevant authorities to tackle these risks.

                  Regarding Crypto-assets:

                  The FPC

                  • Reviewed the financial stability risks from crypto-assets. It recognised the potential benefits of the technologies underlying crypto-assets and of their potential to create a more distributed and diverse payments system. It judged that existing crypto-assets did not currently pose a material risk to UK financial stability. The FPC made clear that it would act to ensure the core of the UK financial system remained resilient if linkages between crypto-assets and systemically important financial institutions or markets were to grow significantly.

                  Full report can be found here

                  EUR/GBP rally drags down GBP/JPY and GBP/USD

                    By
                    ActionForex.com
                    -

                    EUR/GBP spikes higher in early European session, after clearing 0.8750. A major reason is believed to be Bundesbank’s monthly purchase for UK’s contribution to EU membership. Today’s move could be exaggerated by thinner holiday liquidity. Also EUR/GBP bearish could be finally giving up after the cross failed to sustain below 0.8686 last week. But it’s worth a watch to see if the rebound is turning into something sustainable. For now, based on current momentum, it could be heading back to 61.8% retracement of 0.8967 to 0.8666 at 0.8852 with a short term based formed.

                    The move in EUR/GBP is also affecting other pairs. GBP/JPY dip notably lower after hitting 150.48.

                    GBP/USD also dips after hitting 1.4243.

                    On other hand, EUR/USD is staying firm after edging higher to 1.2475.

                    DOW surged in late hour, Nikkei and HSI follow, JPY paring recent gains

                      By
                      ActionForex.com
                      -

                      Risk aversions receded much as markets, in the end, responded rather positively to news of trade talks between the US and China. For now, it seems both countries will hold fire first, and come back to the table.

                      After struggling below 24000 handle for most of the session, DOW finally made up its mind in the last two hours and surged sharply. DOW ended the day up 669.40 pts or 2.84% at 2420.60. S&P 500 gained 70.29 pts or 2.72% to close at 2658.55. NASDAQ also rose 227.87 pts, or 3.26% to 7220.54.

                      Still, for now, DOW is limited below 24453.14 minor resistance and thus, there is no change in the near term direction yet. It’s still more likely to revisit 23360.29 support then not.

                      Asian markets follow with Nikkei trading up over 1.6% at the time of writing. Hong Kong HSI is up 0.9%.

                      From D heatmap, JPY is extending this week’s fall in Asian session while Canadian Dollar is picking up some steam.

                      The W heatmap shows JPY as the weakest one, consistent with the daily developments. But holding above last week’s low against all but GBP only. Euro and GBP are the strongest ones for the week so far.

                      Also, note that EUR/JPY is held well below 132.40 resistance. GBP/JPY also stays below 150.92 resistance. Current rebound in JPY is more seen as a corrective move. The picture suggests that intraday or swings traders could ride on improved sentiments to sell JPY for quick profits. But for position traders, it could be an opportunity to buy JPY once the rebound loses steam.

                      Goldman Sachs bullish on gold price, and our technical view on XAU/USD

                        By
                        ActionForex.com
                        -

                        Goldman Sachs published a note that’s bullish on gold price yesterday and expected it to outperform over the coming months. It’s forecasting four Fed hikes this year, which is one more than FOMC’s own projection. And the bank admitted that its upbeat view on gold is “counter-intuitive”.

                        However, the report pointed to empirical data for the past six tightening cycles of Fed, and found gold has “outperformed post rate hikes four times”. And according to their analysts, “the dislocation between the gold prices and US rates is here to stay”.

                        It added that the bullish view was also driven by higher inflation, rising EM wealth and increased risk of equity correction. Also, it’s a likely a function of investors “waiting on the sidelines” and the becoming interested in Gold again once the tightening “catalyst” has passed.

                        Our technical view

                        From our technical view, gold’s recent jump from 1307.32 suggests that consolidation pattern from 1366.05 has completed. And, rise from 1236.66, and the larger choppy up trend, is ready to resume. Based on the near term pattern, Gold will likely target 100% projection of 1236.66 to 1266.05 from 1307.32 at 1436.07.

                        However, bear in mind that gold is now close to an important long term fibonacci level. That is, 38.2% retracement of 1920.94 to 1046.54 at 1380.56. Gold failed this fibonacci resistance once back in 2016. And felt heavy approaching it twice since then. Add that to the fact that rise from 1122.81 is clearly not impulsive looking. For now, we’d be skeptical on gold bullish momentum ahead. And 61.8% projection of 1236.66 to 1266.05 from 1307.32 at 1386.88 is the hurdle to overcome.

                        Fed Mester supports gradual rate hike, against a steep path

                          By
                          ActionForex.com
                          -

                          Cleveland Fed President Loretta Mester she supports gradual rate hike “this year and next year”. At the same time, she’s “against a steep path” in tightening because “we want to give inflation time to move back to goal”. She sounds optimistic saying that “this year is shaping up to be another good year for the economy.” And for monetary policymakers, the task is to “calibrate policy to this healthy economy so that the expansion is sustained.”

                          The government’s tax cut poses “some upside risk” to the forecast, and Mester expects a better read on household spending “over the next several months”. Globally, she noted that “for the first time in many years, economic activity around the world is picking up and forecasts for global growth are being revised up.” And, “this should have a positive feedback effect on the U.S. economy via exports.”

                          Meanwhile, she warned that trade developments are a “risk to the forecasts”. And the uncertainty “may not be resolved quickly”. But it didn’t change her outlook for the over economy yet.

                          DOW feels heavy around 24000, Euro gains upside momentum

                            By
                            ActionForex.com
                            -

                            DOW opened notably higher today and breached 24000 handle to 24044.39. But it quickly lost momentum. For the moment, it’s feeling heavy from 24000. Current fall from 25449.15 is seen as resuming the decline from 26616.71 to 23360.29. Ideally, if our view is current, any interim recovery should be brief and there should be near them downside acceleration through 23360.29 support. And, break of 24453.14 resistance is needed to indicate bottoming. Otherwise, DOW will more likely have a take on 23360.29 than not.

                            In the currency markets, after some strong momentum in early US session, Euro is now trading as the strongest one for today, overtaking NZD.

                            In particular, EUR/USD’s breach of 1.2445 resistance is now setting up the pair for a test on 1.2555 high.

                            EUR/AUD has met upside target of 61.8% projection of 1.5130 to 1.5976 from 1.5621 at 1.6130 first. With current solid momentum, it should be on track to 100% projection at 1.6444.

                            Moody’s updates view on Brexit: Uncertainty prevails before conclusive final agreement

                              By
                              ActionForex.com
                              -

                              Moody’s, the credit rating agency, acknowledge the positive impact of the Brexit transition deal announced last week. However, it remained cautious that risks will prevail until a final agreement is made.

                              Here are some highlights of the report:

                              • The agreement reinforces Moody’s view that the impact of Brexit will be manageable for rated UK corporate issuers, despite increased bureaucracy costs under an FTA.
                              • For UK banks the agreement is mildly positive to the extent that it reduces downside risks to growth and revenues.
                              • As far as the risk of a disorderly withdrawal is somewhat mitigated, the agreement reinforces Moody’s central scenario of gradually moderating growth in the UK.
                              • Uncertainty concerning the terms of UK’s future long-term relationship with the EU will prevail until a conclusive final agreement is reached.

                              EUR and GBP builds upside momentum, Yen retreats on stablizing market sentiments

                                By
                                ActionForex.com
                                -

                                Yen clearly weakens broadly today with stabilizing market sentiments. Fear of trade war seems to fade mildly on report that the US and China are now in dialogue. At the time of writing, FTSE is trading up 0.3%, DAX up 0.5% and CAC up 0.3%. US futures also point to triple digit gain at open, as markets digest Friday’s steep loss.

                                Euro and Sterling both showing extra strength entering into US session. Both EUR/USD and GBP/USD surges through last week’s high.

                                Meanwhile, for now, both NZD/JPY and GBP/JPY are having more than 1% gain for today.

                                Bundesbank Weidmann: It’s important to start to end QE soon

                                  By
                                  ActionForex.com
                                  -

                                  Bundesbank President, Jens Weidmann, a known ECB hawk, called for ending stimulus again today.

                                  He painted an upbeat picture of Eurozone economic outlook and hailed that “the upswing is now everywhere on broad feet; the growth rates of the Member States are now scattering noticeably less. The unemployment rate has fallen to 8.6 percent, its lowest level since the end of 2008. The sentiment indicators continue to move at very high levels. This indicates that the favorable economic development continues for the time being.

                                  ECB economists projected 2.4% GDP growth in 2018, 1.9% in 2019 and 1.7% in 2020. Also, They forecast inflation to be at 1.4% in 2018 and 2019, and then rise to 1.7% in 2020. And to Weidmann, that is “a level that is broadly consistent with our medium-term definition of price stability.” With this background, “it is not surprising that the financial markets have been expecting net bond purchases to end in 2018.” He also emphasized that “the end of net purchases is only the beginning of a multi-year process of monetary normalization. That’s why it’s so important to actually start soon.”

                                  Regarding interest rates, Weidmann said that “the markets see a first rate hike around the middle of the year 2019, which is probably not entirely unrealistic.”

                                  China’s WTO embassador Zhang Xiangchen: “Lock this beast back into the cage”

                                    By
                                    ActionForex.com
                                    -

                                    Zhang Xiangchen, China’s Deputy International Trade Representative and WTO embassador urged the organization complained about US unilateral tariffs at a WTO meeting today. He criticized that “US is setting a very bad precedent by bluntly breaching its commitment made to the world” as it has agreed not to apply such tariffs without TWO approval. And he urged WTO members to jointly “lock this beast back into the cage of the WTO rules”.

                                    He added that “unilateralism is fundamentally incompatible with the WTO, like fire and water. In the open sea, if the boat capsizes, no one is safe from drowning.” And, “we shouldn’t stay put watching someone wrecking the boat. The WTO is under siege and all of us should lock arms to defend it.”

                                    Intensive talks of Irish Border in Brexit negotiation starts

                                      By
                                      ActionForex.com
                                      -

                                      The UK and EU start intensive talks on the most troublesome topic in Brexit negotiation today, the Irish Border. Both sides agreed, back in December, on the principle of avoiding a hard border between Ireland and Northern Ireland. However, there are key differences on the way to fulfil this principle. And there seems to be no agreeable solution yet. The negotiation team will try to address areas like customs, food safety, animal health and regulations of goods and come up with something for next EU summit in June.

                                      Last month, EU proposed a backstop option if there will be no solution on Irish border. And that is, Northern Ireland will remain in the customs union. But that was bluntly objected by UK Prime Minister Theresa May.

                                      Brexit Secretary David Davis reiterated that position on Sunday. Davis said that while UK agreed to a “backstop”, it will not be the one as proposed by the EU. He remained optimistic and said it’s “overwhelmingly likely” to solve the problem in the context of a trade and customs agreement. And he added, “there are ways of dealing with this. You can’t just say ‘we haven’t done it anywhere else’ – we haven’t attempted to do it anywhere else.”

                                      IMF Lagarde proposes “rainy-day fund” to Eurozone as “temporary cushion”

                                        By
                                        ActionForex.com
                                        -

                                        In a speech titled, “A Compass to Prosperity: The Next Steps of Euro Area Economic Integration”, IMF managing director Christine Lagarde outlined her recommendations. She focused on three of the reform areas for Eurozone officials to consider in the review in the coming months. The ares include a modernized capital markets union, an improved banking union, and a move toward greater fiscal integration, starting with the creation of a central fiscal capacity.

                                        In particular, she mentioned IMF’s proposal of a “rainy-day fund” for building up assets in good times. During a downturn, countries could receive funding to help offset budget shortfalls. And, in extreme cases, ” the fund would be allowed to borrow, however any borrowing would be repaid by members’ future contributions.” Though, she emphasized that ” it will be a temporary cushion  and not a permanent pillow.”

                                        The full speech is available here.

                                        Mnuchin in “very productive conversations” with China on trade agreement to avert Section 301 tariffs

                                          By
                                          ActionForex.com
                                          -

                                          US Treasury Secretary Steven Mnuchin said in a Fox News Sunday interview that the US is having “very productive conversations” with China. And he’s “cautiously hopeful we can reach an agreement” to avert the tariffs on USD 50-60b announced last week. Mnuchin noted that both countries agreed on reducing the US trade deficit to China. And, they were trying “to see if we can reach an agreement as to what fair trade is for them to open up their markets, reduce their tariffs, stop forced technology transfer.”

                                          But Mnuchin emphasized that the US is still on track to impose the Section 301 tariffs unless there is an “acceptable agreement” for Trump to sign off on. He also noted that “we’re not afraid of a trade war, but that’s not our objective.” And, “in a negotiation you have to be prepared to take action.”

                                          Separately, the WSJ reported that Mnuchin and US Trade Representative Robert Lighthizer sent a letter to Chinese Vice Premier Liu He last week, detailing the list of specific request for China. And the list is reported to include reduction of Chinese tariffs on US vehicles, purchases of semiconductor products and larger access to China’s financial markets.

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