Sample Category Title
Trade Idea Wrap-up: GBP/USD – Buy at 1.3400
GBP/USD - 1.3525
Most recent candlesticks pattern : N/A
Trend : Up
Tenkan-Sen level : 1.3510
Kijun-Sen level : 1.3518
Ichimoku cloud top : 1.3576
Ichimoku cloud bottom : 1.3386
Original strategy :
Buy at 1.3400, Target: 1.3560, Stop: 1.3365
Position : -
Target : -
Stop : -
New strategy :
Buy at 1.3400, Target: 1.3560, Stop: 1.3365
Position : -
Target : -
Stop : -
Although cable found support at 1.3465 and has recovered, reckon upside would be limited to 1.3570 and risk of another corrective fall remains, below 1.3500 would bring test of said support at 1.3465, then 1.3430 but reckon 1.3400 would attract renewed buying interest, bring another rise later, above 1.3570 would signal the pullback from 1.3619 (yesterday’s high) has ended, bring retest of this level, then 1.3650.
In view of this, would not chase this rise here and would be prudent to buy cable on subsequent pullback as 1.3400-10 should limit downside. Only below the lower Kumo (now at 1.3385) would defer and signal a temporary top is formed, bring retracement of recent rise to 1.3350, then 1.3320-25 but 1.3300 should remain intact.
Traders Waiting for Fed Statement Tomorrow
The EUR/USD regained some lost positions during the trading session. Thus, the positivity of the bulls has assisted the report according to which the current account balance in the Eurozone has grown to 25.1 billion euro in July compared to 22.3 billion euro expected. Moreover, the German ZEW Economic sentiment index improved to 17.0 in September against predicted growth to only 12.3. We recall that the German economy is the largest on the continent. We should mention that despite parliamentary elections in Germany that will be held this Sunday, investors do not fear any surprises from it and remain calm.
American investors were cheered by the strong housing macro statistics according to which the number of building permits increased to 1.30 million in August; that is 0.08 million more than forecasted and the housing starts figure was 1.18 million in the same period which is by 0.01 million above predictions. Investors are reluctant to accumulate positions ahead of tomorrow's release of the Fed statement on monetary policy. Markets do not expect the change in interest rates by the central bank of the US, but the rhetoric concerning the possibility of the rate hike in December way provoke the sharp price movements. Hawkish words from Janet Yellen may become a trigger for the massive sell of EUR/USD after the long rally of the pair.
Among important statistics today we should pay attention to the current account balance in New Zealand, which will be published at 22:45 GMT and the trade balance report in Japan at 23:50 GMT that may also increase the volatility level.
EUR/USD
The EUR/USD price tested the resistance at 1.2000, but the bulls were short of strength to push the quotes above this psychologically important mark. In case of successful attempt to gain a foothold above 1.2000, we may see continued increase up to 1.2070. In case of the trend change to negative, the sell signal with the targets at 1.1825 and 1.1750 may become breaking through 1.1925 support line.
GBP/USD
The pound is retreating after the comments of the head of the Bank of England concerning the slow pace of possible monetary tightening in the country. Within the current descending movement, the price will be able to hit the support at 1.3400 and in the instance of fixing below it, we may see a continued drop to 1.3250 and 1.3150. The growth potential is likely to be limited by the 1.3600 mark.
NZD/USD
The New Zealand dollar demonstrates confident upward trend which may approach the closest target levels of 0.7340 and 0.7375. Yesterday investors ignored the positive news about the Westpac Consumer sentiment index to 112.4 in the third quarter vs 113.4 in the previous period. The immediate objective for the bears in case of the price pullback will be at 0.7250.
Trade Idea Wrap-up: EUR/USD – Hold long entered at 1.1970
EUR/USD - 1.1977
Most recent candlesticks pattern : N/A
Trend : Sideways
Tenkan-Sen level : 1.1980
Kijun-Sen level : 1.1964
Ichimoku cloud top : 1.1947
Ichimoku cloud bottom : 1.1913
Original strategy :
Bought at 1.1970, Target: 1.2070, Stop: 1.1935
Position : - Long at 1.1970
Target : - 1.2070
Stop : - 1.1935
New strategy :
Hold long entered at 1.1970, Target: 1.2070, Stop: 1.1935
Position : - Long at 1.1970
Target : - 1.2070
Stop : - 1.1935
Euro’s intra-day breach of indicated resistance at 1.1995-00 (previous resistance and 61.8% Fibonacci retracement of 1.2093-1.1838) adds credence to our view that the fall from 1.2093 top has ended at 1.1838 last week and consolidation with upside bias remains for further gain to 1.2030-35, then 1.2050-55, however, break of 1.2070 is needed to signal early upmove has resumed for retest of 1.2093 first.
In view of this, we are holding on to our long position entered at 1.1970. Below 1.1945-50 would defer and risk weakness towards support at 1.1915 (yesterday’s low) but only break there wold signal the rebound from 1.1838 has ended instead, bring further fall to 1.1880.
US: Housing Starts Fall Slightly Off An Upwardly Revised Level
Housing starts fell 0.8 percent in August but starts were revised higher for July, leaving starts slightly above the consensus forecast. Permits rose a solid 5.7 percent, with all the gain in multi-family units.
Homebuilding Looked Solid Prior to the Storms
Data for August housing starts were likely only minimally impacted by Hurricane Harvey. The storm hit in the last week of August and may have cut into starts in Houston, which has long been the number one market for single-family starts and also one of the top markets for apartment construction. Overall housing starts fell 0.8 percent, with the entire decline coming in multi-family units, which fell 6.5 percent in August. Most of that drop was in apartments, which have seen a great deal of supply come on the market in many parts of the country, cooling new construction.
Single family starts rose 1.6 percent in August to an 851,000 unit pace and are continuing to trend higher. Data through the first eight months of 2017 show single-family starts running 8.9 percent ahead of their year-ago pace. By contrast, multi-family starts through August are running 9.9 percent below the pace maintained through the first 8 months of 2016.
The monthly housing starts data are reported on a seasonally adjusted annualized basis, meaning the monthly figures reflect how many homes would be built in a year if that month's pace was maintained for the entire year. Single-family starts averaged an 849,000-unit annual rate over the past three months, which is close to the pace averaged this year. We suspect single-family starts are set to slow, however. Permits for new single-family homes have been running at just an 808,000-unit pace for the past three months, or 4.8 percent below single-family starts. Hurricanes Harvey and Irma will also likely slow starts in coming months, as resources are redirected toward repairs and rebuilding efforts. Texas and Florida combined account for about 25 percent of the nation's single-family starts, so any production lost there is likely to weigh heavily on the national data.
While single-family starts appear set to weaken, multi-family starts may be primed for a rebound. Multi-family permits jumped 19.7 percent in August, to a 500,000-unit pace. Permits averaged a 461,000-unit pace over the past three months - a whopping 32.8 percent ahead of multi-family starts.
The number of homes under construction rose 1.3 percent in August to 1.082 million units, on a seasonally-adjusted annualized basis. The number of single-family homes currently being built rose 2.2 percent to 472,000, also on an annualized basis. Multi-family units rose 0.7 percent. The largest increases were in the South and West, which account for more than two-thirds of the homes being built. While the number of homes under construction rose solidly, the number completed fell 10.2 percent, with single-family completions falling a whopping 13.3 percent, or by 111,000 units in August. Hurricane Harvey appears to have held back completions. The bulk of the drop was in the South, which saw single-family completions tumble 20.8 percent in August.
US: Current Account Deficit Rises to 9-Year High in Q2
The current account deficit rose to its highest level in about 9 years in the second quarter, but the country appears to have little difficulty financing this red ink at present.
Most Balances within the Current Account Deteriorated in Q2
The U.S. current account deficit widened from $113.5 billion (revised) in Q1-2017 to $123.1 billion in the second quarter, the most red ink in the overall current account in about 9 years (top chart). There are a few factors that have acted to push the deficit higher in recent quarters. First, the deficit in trade in goods, which was largely stable between 2014 and 2016 due in part to the collapse in petroleum prices, has widened again this year as oil prices have rebounded from their multi-year lows in early 2016. The surplus in the services balance has trended higher in recent quarters, but not enough to prevent the overall current account deficit from widening.
In addition, the overall red ink in the current account grew because the income that Americans earn on their overseas investments did not rise as much as the income that foreigners receive on their U.S. investments. Furthermore, the United States made more transfer payments abroad (e.g., workers' remittances to their families in foreign countries) and received less transfer payments in the second quarter than it did in the first quarter. That said, the current account deficit, which is equivalent to less than 3 percent of GDP at present, is really not that worrying because the United States appears to have little difficulty attracting the net capital inflows that are needed to finance the red ink in the current account.
Net Capital Inflows Remain Buoyant
In that regard, foreign direct investment (FDI) in the United States remained buoyant at $81.0 billion in the second quarter (middle chart). Foreign portfolio investment in the United States was also very strong. Not only did foreign purchases of equity securities total $51.0 billion in Q2, but foreigners also gobbled up $257.0 billion worth of debt securities. Previously released monthly data show that foreign purchases of long-term corporate debt securities were very strong in the second quarter.
Of course, American investors can buy assets abroad, and their FDI purchases totaled about $100 billion in Q2 (bottom chart). They also bought $118 billion worth of foreign stocks, the largest amount in four quarters, but their purchases of foreign debt securities softened a bit in the second quarter. On net, however, more capital flowed into the country in Q2 than flowed out.
As noted above, we do not really worry about the red ink in the current account at present. As a percent of GDP, the current account deficit reached about 6 percent in 2006. It was more challenging for the country to finance its current account deficit a decade ago than it is today. Although we look for the dollar to trend lower in coming quarters as foreign central banks begin to tighten their respective policy stances, we believe U.S. assets will remain attractive to foreign investors, which will prevent a sharp decline in the value of the greenback.
Gold Flirts With the 1300 Key Zone
Gold prices continued to edge lower this week, amid a general risk-on environment. Indeed, major US equity indices continued to post fresh all-time highs this week, while safe haven assets tumbled. A potential explanation is that investors have become somewhat accustomed to the latest missile strikes from North Korea, evident by the muted market reaction after Friday's launch. In our view, as long as this geopolitical risk does not translate into military conflict, market participants may continue to place less and less emphasis on such developments. If seen in isolation, this could imply even lower gold prices in the coming days.
Not so fast though: the near-term path of gold may also depend on any major move in the US dollar. In this respect, we will keep an eye on tomorrow's FOMC decision. We see the case for the Fed to keep its "dot plot" unchanged and signal one more rate hike this year, something that could help the dollar recover somewhat. If so, this would be another factor arguing for the continuation of the recent decline in gold.
XAU/USD traded lower on Monday, breaking below the support (now turned into resistance) barrier of 1315 (R1) and the short-term uptrend line taken from the low of the 10th of July. Nevertheless, the price continues to trade above the psychological zone of 1300 (S1) and as such, we prefer to stand pat for now. A break below that key territory may trigger a short-term reversal and initially aim for our next support of 1292 (S2).
Switching to the daily chart, the fact that the yellow metal is trading above 1300 (S1) leaves the door open for a rebound, and keeps the longer-term outlook somewhat positive. A break below 1300 (S1) will bring the price back within the wide sideways range that had been in place from January until late August, and perhaps signal further declines within that range.
Trade Idea Wrap-up: USD/JPY – Buy at 110.70
USD/JPY - 111.45
Most recent candlesticks pattern : N/A
Trend : Up
Tenkan-Sen level : 111.51
Kijun-Sen level : 111.54
Ichimoku cloud top : 111.19
Ichimoku cloud bottom : 110.52
Original strategy :
Buy at 110.70, Target: 111.70, Stop: 110.35
Position : -
Target : -
Stop : -
New strategy :
Buy at 110.70, Target: 111.70, Stop: 110.35
Position : -
Target : -
Stop : -
As the greenback has retreated after rising to 111.88, suggesting minor consolidation below this level would be seen and pullback to 111.00 cannot be ruled out, however, reckon 110.60-70 would limit downside and bring another rise later, above said resistance would extend recent upmove to 112.00, then 112.20 (previous resistance) but near term overbought condition should prevent sharp move beyond 112.40-45.
In view of this, would not chase this move here and would be prudent to buy dollar on subsequent pullback as 110.60-70 should limit downside. Below the lower Kumo (now at 110.52) would abort and signal a temporary top is formed instead, risk correction to 110.30, then towards 110.00 which is likely to hold from here.
Trade Idea: EUR/GBP – Sell at 0.8955
EUR/GBP - 0.8875
Original strategy :
Sell at 0.8900, Target: 0.8780, Stop: 0.8940
Position : -
Target : -
Stop : -
New strategy :
Sell at 0.8955, Target: 0.8800, Stop: 0.8995
Position : -
Target : -
Stop : -
The single currency has rebounded this week, suggesting further consolidation above last week’s low at 0.8774 would be seen and corrective bounce to 0.8907-10 is likely, however, reckon upside would be limited to resistance at 0.8950-55 and bring another decline later, below 0.8805-10 would bring retest of said support at 0.8774, break there would signal the reversal from 0.9307 top is still in progress and bearishness remains for this fall to extend weakness towards 0.8737-43 (61.8% Fibonacci retracement of 0.8384-0.9307 and previous support) but near term oversold condition should limit downside to 0.8719 support and reckon another previous chart support at 0.8652 would hold.
In view of this, would not chase this fall here and we are looking to sell euro on further recovery as 0.8950-55 should limit upside and bring another decline later. Above previous support at 0.8982 would abort and signal a temporary low has been formed, bring retracement of recent decline to 0.9000 but price should falter below resistance at 0.9048 and bring another selloff next week.
Our preferred count is that, after forming a major top at 0.9805 (wave V), (A)-(B)-(C) correction is unfolding with (A) leg ended at 0.8400 (A: 0.8637, B: 0.9491 and 5-waver C ended at 0.8400. Wave (B) has ended at 0.9413 and impulsive wave (C) has either ended at 0.8067 or may extend one more fall to 0.8000 before prospect of another rally. Current breach of indicated resistance at 0.9043 confirms our view that the (C) leg has ended and bring stronger rebound towards 0.9150/54, then towards 0.9240/50.
Trade Idea: USD/CAD – Stand aside
USD/CAD - 1.2290
Trend: Down
Original strategy :
Sold at 1.2240, stopped at 1.2240
Position: - Short at 1.2240
Target: -
Stop: - 1.2240
New strategy :
Stand aside
Position: -
Target: -
Stop:-
The greenback has jumped again today and broke above resistance at 1.2240, suggesting a temporary low has possibly been formed at 1.2061 earlier and upside risk remains the rebound from there to bring retracement of recent decline, above 1.2335-40 would bring further gain to 1.2390-00 but reckon resistance at 1.2425-30 would hold from here, bring retreat later.
In view of this, would not chase this rise here and would be prudent to stand aside for now. Below 1.2220-25 would bring weakness to 1.2170-75 but only break of support at 1.2121 would signal the rebound from 1.2061 has ended, bring retest of this level later, break there would extend recent decline has resumed and extend weakness towards psychological support at 1.2000. We are keeping our count that wave v as well as wave (C) ended at 1.3794 and impulsive wave (i ii, i ii) is now unfolding with minor wave iii ended at 1.2414, followed by wave iv correction ended at 1.2778, wave v has reached our indicated downside target at 1.2100 and may extend to 1.2000.
To recap, wave B from 1.3066 is unfolding as an a-b-c and is sub-divided as a: 1.2192, b: 1.2716 and wave c is a 5-waver with i: 1.1983, ii: 1.2506, extended wave iii with minor iii at 1.0206, wave iv ended at 1.0781 and wave v as well as wave iii has ended at 0.9931, hence the subsequent choppy trading is the wave iv which is unfolding as (a)-(b)-(c) with (a) leg of iv ended at 1.0854, followed by (b) leg at 1.0108 and (c) leg as well as the wave iv ended at 1.0674. The wave v is sub-divided by minor wave (i): 0.9980, (ii): 1.0374, (iii): 0.9446, (iv): 0.9913 and (v) as well as v has possibly ended at 0.9407, therefore, consolidation with upside bias is seen for major correction, indicated target at 1.3700 and 1.4000 had been met and further gain to 1.4700 would be seen later.
Canada: Factory Sales Take a Tumble in July
Canadian manufacturing sales fell again in July, down 2.6% month-on-month. While the price of goods sold was down, so too was the volume of goods, which fell 1.4% in July. Data for the prior months was also revised slightly lower with today's release.
Both durable and non-durable goods output fell, but it was the durable goods sector that led the way, down 4.6% on the month. This pullback was down largely due to the transportation equipment sector, which saw output fall 13.8%. Statistics Canada reported that this was the result of summer shutdowns at vehicle assembly plants that were longer and more concentrated in July than is typical. (It is normal for these operations to shut down for retooling, and Statistics Canada's seasonal adjustment attempts to correct for the 'typical' summer shutdown).
Regionally, Ontario (-6.1%) had the largest impact on the headline figure, consistent with the vehicle assembly impacts. However, the remaining provinces saw generally weak performances as well, with only Nova Scotia, Quebec, and Saskatchewan reporting gains in July.
Inventories ticked down just a notch (-0.2%), which was outpaced by the overall decline in sales, leaving the inventory-to-sales ratio at 1.40 in July (from 1.37 in June). Forward looking indicators were not encouraging, as unfilled orders fell for a third month (-1.7%). New orders also saw a decline of (1.7%), driven by the motor vehicle and aerospace industries.
Key Implications
The July manufacturing output data was less than encouraging, to put it mildly. The second month of declines in both value and volumes suggests that momentum may be fading somewhat at Canadian factories. To be sure, with a shift in the shutdown schedule at auto plants contributing significantly to the pullback, a rebound may be in store next month as these assembly lines come back to life. But with the forward-looking indicators down again in July, rebound expectations should be tempered.
Indeed, the weakness of the past few months looks significant enough to impact the overall growth figures. While the overall growth momentum into the third quarter was solid, today's report takes some wind out of the sails, and pushed the tracking a touch lower, to a still above-trend 2.3%.
For the data-dependent Bank of Canada, today's report will not be encouraging, but nor is it likely to hold too much weight. Yesterday's speech by Deputy Governor Tim Lane emphasized the desire to assess how the July and September interest rate increases are affecting the economy. Given the noise of the data and that it likely only partially reflects the first rate increase, we expect that it will be later data that will play a bigger role in their decision making.