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GOLD

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GOLD – The commodity continues to retain its upside pressure but with caution. On the downside, support comes in at the 1,220.00 level where a break will turn attention to the 1,210.00 level. Further down, a cut through here will open the door for a move lower towards the 1,200.00 level. Below here if seen could trigger further downside pressure targeting the 1,190.00 level. Conversely, resistance resides at the 1,240.00 level where a break will aim at the 1,250.00 level. A turn above there will expose the 1,260.00 level. Further out, resistance stands at the 1,270.00 level. All in all, GOLD looks to strengthen further.

 

 

 

Sleepwalking

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Sleepwalking

With US markets closed for Presidents Day holiday, markets have done little more than moved sideways in soundless trade. With few news events to influence rates markets, it was a very dull day in the currency markets. While most assets classes were quiet but industrial metals prices soared with Iron ore showing the way trading to another multi-year high as the billet price rose three times during yesterday trading session.

Trader frustration is building as narrow trading ranges persist as contrasting market drivers confuse and the Trump headline effect is waning. While dealers spent the last few trading days sleepwalking, there are enough moving parts to keep things interesting, with European risks smouldering and Fed Minutes on tap as Fed watch is creeping back in the headlines.

Euro

EUR traded a little heavy, but with much ink spilt over the French elections, the Euro has held remarkably well, as traders donned their noise cancelling headphones, not wanting to get emotionally caught in EU political melodrama at this stage. G-10 traders are struggling to find a near-term catalyst for US dollar strength. Given the divergent market drivers, Euro political risk, and tepid dollar demand, I cannot help but think the current range-bound market will persist.

US Dollar

I sense a subtle shift from Trump headline drove risk, to a more Fed focus as the game of words should accelerate this week with the plethora of Fed speak leading up to the FOMC minutes release. However, if we are expecting the Feds to raise the March flag, you may be disappointed as it is doubtful the FOMC minutes will resolve any debate on the fuzzy USD picture. However, of concern to the dollar bulls is even after last week’s hawkish delivery the Greenback failed to rally significantly and could not even maintain it prior levels

Australian Dollar

The Australian dollar continues to trade constructively as it has done so since the last China PPI print.Last week’s profit taking move lower has run its course, and the Aussie is ready to pounce on the 77 level after another stellar performance in Iron Ore prices yesterday. With little new on offer from the RBA minutes although members did not downward pressure on inflation could be more persistent than assumed, other than an unlikely event of the Fed aggressively talking up the March rate hike, the Australian dollar should remain very much in play.However, the pair needs to make progress above the .7800 barrier to gain any significant momentum.

Japanese Yen

Mired in the 112-115 range as dollar bulls grow increasing frustrated that the dollar can not make a convincing move to 115.0. With political angst brewing in Europe, I suspect this will cap dollar upticks until greater clarity on US Fiscal and Tax policies emerges.

Daily Report: Aussie Range Round Despite Upbeat RBA Minutes

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Aussie stays in right range against the greenback despite the relatively update RBA minutes. The minutes showed that the central bank expected recovery in the global economy to list resources exports. And, “the higher terms of trade represented a boost to national income, which provided some upside risks to the domestic forecasts.” 2017 is forecast to be a good year with 3% GDP growth, “above estimates of potential growth over the rest of the forecast period.” Outside of mining, RBA expected that the rise in building approvals over the last year suggested that “non-residential building construction would contribute to GDP growth towards the latter part of the forecast period.” In addition, RBA also predicted that “recent pick-up in global inflationary pressures could flow through to domestic inflation by more than expected”. Meanwhile, RBA sounded more confident that “Chinese growth would remain resilient in 2017.” But it also warned that “China continued to be one of the main sources of uncertainty for the Australian economy.”

Japan PMI manufacturing hit 3-year high.

Japan PMI manufacturing rose to 53.5 in February, up from 52.7 and beat expectation of 52.1. That’s also the highest level since March 2014. Markit noted that “Japan’s manufacturing engine shifted into a higher gear during February, as faster increases in output, new business and employment were reported.” And, “encouragingly, with backlogs of work accumulating for the first time in 14 months, the added pressures on capacity should ensure growth will be maintained at a solid pace during at least the first half of this year.” Also from Japan, all industry activity index dropped -0.3% mom in December, below expectation of -0.2%.

Euro stays soft on political worries

Euro turns softer again as markets are cautious on French election in April and May. Some analysts point to the face that investors are on the defensive as the world was full of political surprises last year. And that could be a trend that upset the current order further. A poll by Paris-based political research group Opinionway showed on Monday that Marine Le Pen, the anti-Euro far-right candidate, has gained more support in her campaign. Le Pen could win 27% in the first round of vote in April, but without a majority. At this point, centrist Emmanuel Macron and conservative Francois Fillon are favorite to face Le Pen in the run-off in May. But the situation was clouded by agreement between leftist candidates to join force. And in addition to France, the Netherlands, Germany and possibly Italy too will have elections later this year.

PMI data to highlight the day

PMI data will be the main focus today. Eurozone, Germany and France will release both manufacturing and services PMI in European session. Swiss trade balance and UK public sector net borrowing will be featured. US will also release PMI manufacturing and services.

Daily Pivots: (S1) 0.7643; (P) 0.7677; (R1) 0.7699; More…

AUD/USD is staying in tight range below 0.7731 and intraday bias remains neutral for the moment. Outlook is unchanged. With 0.7605 minor support intact, further rise cannot be ruled out yet. However, considering bearish divergence condition in 4 hour MACD, we’d expect strong resistance from 0.7777/7833 resistance zone to limit upside and bring near term reversal. On the downside, break of 0.7605 support will indicate that rise from 0.7158 has completed already and turn bias back to the downside for 55 day EMA (now at 0.7539) first.

In the bigger picture, we’re still treating price actions from 0.6826 low as a correction. And, as long as 38.2% retracement of 0.9504 to 0.6826 at 0.7849 holds, long term down trend from 1.1079 is expected to resume sooner or later. Break of 0.6826 low will target 0.6008 key support level. However, firm break of 0.7849 will indicate that rise from 0.6826 is developing into a medium term rebound, rather than a sideway pattern. In such case, stronger rise should be seek to 55 month EMA (now at 0.8186) and above.

AUD/USD 4 Hours Chart

AUD/USD Daily Chart

GMT
Ccy
Events
Actual
Consensus
Previous
Revised
0:30
AUD
RBA Minutes

0:30
JPY
PMI Manufacturing Feb P
53.5
52.1
52.7

4:30
JPY
All Industry Activity Index M/M Dec
-0.30%
-0.20%
0.30%

7:00
CHF
Trade Balance (CHF) Jan

3.03B
2.72B

8:00
EUR
France Manufacturing PMI Feb P

53.5
53.6

8:00
EUR
France Services PMI Feb P

53.9
54.1

8:30
EUR
Germany Manufacturing PMI Feb P

56
56.4

8:30
EUR
Germany Services PMI Feb P

53.6
53.4

9:00
EUR
Eurozone Manufacturing PMI Feb P

55
55.2

9:00
EUR
Eurozone Services PMI Feb P

53.7
53.7

9:30
GBP
Public Sector Net Borrowing (GBP) Jan

-14.4B
6.4B

14:45
USD
Manufacturing PMI Feb P

55.2
55

14:45
USD
Services PMI Feb P

55.8
55.6

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Foreign Exchange Market Commentary

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EUR/USD

The dollar received a vote of confidence late last week, advancing against most of its major rivals with the clear exception of the JPY, as data released during these last few days indicated a rebound in inflation and economic activity, whilst FED’s head Yellen hawkish testimony before the Congress, boosted chances of a rate hike in March. The common currency, on the other hand, remained undermined by political woes, as adding to the upcoming elections were rising concerns about Greece, still struggling to meet austerity requirements to get bailouts. This upcoming week will start with a banking holiday in the US, anticipating some choppy trading across the board, although next Tuesday, the release of February preliminary PMIs figures in both economies could set the tone for the whole week.

The EUR/USD pair closed on Friday at 1.0610, pretty much flat when compared to its previous weekly close, and is technically poised to extend its decline during the upcoming days, given that in the daily chart, advances were contained by a bearish 100 DMA, around 1.0680, whilst the Momentum indicator maintains a strong bearish slope within negative territory, and the RSI indicator resumed its decline after a tepid upward correction, also developing within bearish levels. In the 4 hours chart, the price settled a few pips below a flat 20 SMA, while the RSI indicator turned flat around 44 and the Momentum indicator retreats from overbought readings, still above its 100 level. The key for the upcoming days is the Fibonacci support at 1.0565, as renewed selling interest below the level will open doors for an extension sub-1.0500. 

Support levels: 1.0590 1.0565 1.0520

Resistance levels: 1.0650 1.0680 1.0720

USD/JPY

The USD/JPY pair trimmed all of its previous week gains after a failed attempt to surge beyond 115.00, resuming the bearish trend that began with the year. The pair topped at 114.95 last Wednesday, when a hawkish FED’s Yellen opened doors for a rate hike in March. And while US stocks surged to record highs, US yields were unable to hold on to gains, and finished the week near February lows. Also, supporting the yen is the ongoing political uncertainty in Europe and the US that at the end of the day pushes speculative interest into safe-haven assets. From a technical point of view, the daily chart shows that the pair is holding a few pips above its 100 DMA currently around 112.45, while a major Fibonacci support comes at 111.95. In the same chart, technical indicators have turned south around their mid-lines, but lack enough downward momentum to confirm a bearish extension. In the shorter term, and according to the 4 hours chart, the bearish bias is firmer, as indicators maintain their sharp bearish slopes within negative territory, whilst the price has settled below bearish 100 and 200 SMAs, with the shortest acting as dynamic resistance around 113.40.

Support levels: 112.45 112.10 111.60

Resistance levels: 113.00 113.40 113.85

GBP/USD

After spending the week struggling to regain the 1.2500 level, the GBP/USD pair plunged on Friday, following the release of much worse-than-expected UK Retail Sales figures. Sales declined 0.3% in January, while excluding fuel, rose by 0.2% in the month, well below market’s expectations. Year-on-year, sales rose by 1.5% against the 3.4% advance expected, while ex fuel sales grew by just 2.6%. December readings suffered downward revisions, adding to evidence that rising inflation is finally affecting consumption in the UK. The daily chart for the pair shows that it settled below 1.2430, the 38.2% retracement of the latest bullish run, while technical indicators resumed their declines within negative territory. Early attempts to break higher were contained by a now modestly bearish 20 SMA, currently at 1.2510. In the 4 hours chart, the price is also developing below its 20 SMA which converges with a horizontal 200 EMA around 1.2460, while the Momentum indicator turned lower within neutral territory, but the RSI heads south around 36, maintaining the risk towards the downside. February low at 1.2346, at the 50% retracement of the mentioned rally, is the level to break to confirm a new leg lower sub-1.2200 for these next few days.

Support levels: 1.2380 1.2345 1.2300

Resistance levels: 1.2430 1.2460 1.2510

GOLD

Spot gold closed with gains for a third consecutive week, although off its February highs as the dollar gained momentum ahead of the weekly close. The bright metal settled at $1,235.57 a troy ounce, posting a solid recover from a low of 1,1216,64, which followed Yellen’s statement. The upward momentum seems to be slowing, as in the daily chart, the commodity has settled a double top around 1,244.00, with the neckline of the figure being the mentioned low, whilst technical indicators head modestly lower, within positive territory. A bullish 20 DMA offers support a few cents above the mentioned low, all of which suggests that bulls won’t give up as long as the 1,215.00 region holds. In the 4 hours chart, the metal presents a bullish stance, as the 20 SMA heads north around 1,233.90, while indicators have pared their declines well above their mid-lines and after correcting overbought conditions. A break above 1,244.60, however, will favor an extension up to 1,255.10, the 61.8% retracement of the post-US election slide.

Support levels: 1,233.90 1,222.50 1,216.60

Resistance levels: 1,244.60 1,255.10 1,261.60

WTI CRUDE

Crude oil prices closed the week marginally lower but still within familiar ranges, with West Texas Intermediate futures settling at $53.73 a barrel. Rising US stocks and production offset the optimism surrounding the so far, successful OPEC’s output cut, leaving the commodity directionless for one more week. News on Friday showed that the number of active oil rigs increased by 6, up to 597, the highest number since early October 2015. Ever since the OPEC announced its agreement, US rigs increased by 120. The technical picture for US crude futures remains neutral, as in the daily chart, the price rests above a flat 20 DMA, while technical indicators head nowhere around their mid-lines. In the 4 hours chart, the commodity also presents a neutral stance, as moving averages remain horizontal and within a tight range, whilst technical indicators continue hovering around their mid-lines with no certain directional strength.

Support levels: 53.00 52.60 52.00

Resistance levels: 54.40 55.20 55.70

DJIA

Wall Street advanced modestly on Friday, but it was enough for the three major indexes to end at all-time highs. The Dow Jones Industrial Average closed the week at 20,624.05, adding 4 points on Friday and 1.75% for the week. The Nasdaq Composite ended at 5,838.58, after adding 23 points or 0.41%, while the SP finished at 2,351.16, after adding roughly 4 points on Friday. Within the Dow, Verizon Communications was the best performer, up 1.51%, followed by Boeing that added 1.11%. Energy and banking-related equities were in the losing side, with Exxon Mobil down 0.66% and JPMorgan Chase shedding 0.33%. Technically the daily chart shows that the index held above far above a bullish 20 DMA, whilst technical indicators have turned flat within overbought territory, limiting chances of a downward move. In the 4 hours chart, the benchmark stands above a bullish 20 SMA, the RSI indicator holds flat around 69, but the Momentum indicator diverges lower, heading sharply lower around 100 and presenting a bearish divergence still to be confirmed.

Support levels: 20,552 20,506 20,467

Resistance levels: 20,652 20,700 20,750

FTSE 100

The FTSE 100 added 22 points or 0.30%, to close the week at 7,299.96, with food-related equities offsetting banks and mining equities´ declines, after Kraft Heinz Co. announced a merger proposal that Unilever decline. The bid was of £112 billion, the fourth-biggest in corporate history, resulting in Unilever adding 13.43% to top winners’ list. Coca-cola followed through, up 4.03%. In the losing side, Standard Chartered was the worst performer, down 4.36%, followed by Rolls Royce that shed 3.97% and Royal Dutch Shell that closed 1.80% lower. From a technical point of view, the benchmark presents a bullish stance, as it is holding above a bullish 20 SMA, while the Momentum indicator heads higher within positive territory, and the RSI indicator consolidates around 64, this last reflecting the limited intraday ranges seen lately rather than suggesting upward exhaustion.

Support levels: 7,291 7,254 7,208

Resistance levels: 7,354 7,390 7,430

DAX

The German DAX closed flat at 11,757.02 last Friday, as the banking sector underperformed over growing uncertainty, while mining and energy equities also edged lower. Volkswagen was the worst performer, down 1.81%, while Deutsche Bank lost 1.16% and Commerzbank 1.15%. Encouraging earnings reports, on the other hand, provided net support to the index, which ended the week up by 0.77%. Technically, the index presents a neutral-to-bullish stance, given that in the daily chart, the benchmark held above a modestly bullish 20 SMA, but technical indicators continue to lack directional strength. In the 4 hours chart, the index closed the week with a modest positive tone, as it settled a few points above a bullish 20 SMA, whilst technical indicators have entered positive territory, with clear upward slopes. A recovery beyond 11,800 will open doors for a retest of this year high at 11,891.

Support levels: 11,728 11,694 11,640

Resistance levels: 11,800 11,848 11,891

Daily Report: Forex Markets Tread Water With Focus on FOMC Minutes and Trump

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The forex markets are generally staying in range as another week starts. FOMC minutes will be the main focus of the week. Recent comments from Fed officials were generally hawkish, maintaining the general view of three rate hikes this year. And there are some comments that raised the probability of a March hike mildly. The markets will look into the minutes of January 31 – February 1 meeting to confirm that it’s a consensus among FOMC minutes. Meanwhile, it’s generally expressed that fiscal policies were not taken into account in Fed’s last projections, due to lack of details available. US president Donald Trump has promised to deliver “phenomenal” tax reforms within two or three weeks. And it’s about time for Trump to deliver. And the announcement of Trump’s tax overhaul could overwhelm the markets.

Yen Lower as Trade Surplus Shrank

Yen trades mildly lower today as trade deficit narrowed to JPY 0.16T in January, below expectation of 0.28T. Exports rose 1.3% yoy, much weaker than expectation of 4.7% yoy. That’s, nonetheless, the second month of import growth, following 14 straight months of contraction. Some economists noted that’s in line with strengthening global demand. However, the outlook ahead is unclear thanks US’s trade policies. In particular, Donald Trump’s protectionist policies could be a blow to Japanese exporters, in particular auto manufacturers.

Also released today so far, New Zealand PPI inputs rose 1.0% qoq in Q4 while PPI outputs rose 1.5% qoq. UK Rightmove house price rose 2.0% mom in February. Germany will release PPI today. UK CBI trends total orders, Eurozone consumer confidence and Canada wholesale sales will be featured. US in on bank holiday today.

FOMC Minutes, RBA Minutes and Eurozone PMIs and German Ifo to highlight the week

For the week ahead, FOMC and RBA minutes are the main feature. Meanwhile, Eurozone PMIs and German Ifo will be closely watched too. Euro is so far the second weakest major currency this month, next to Kiwi. The common currency is weighed down by political uncertainties in Europe. The closer ones include French election and Brexit negotiations. The PMIs and Ifo could be a gauge to see how sentiments in business are being affected by those uncertainties. Here are some highlights for the week:

  • Monday: New Zealand PPI, Japan trade balance; German PPI; Eurozone consumer confidence; Canada wholesale sales
  • Tuesday: RBA minutes; Japan PMI manufacturing, all industry index’ Swiss trade balance; Eurozone PMIs; US PMIs
  • Wednesday: Australia wage cost; German Ifo, Eurozone CPI final; UK GDP revision: Canada retail sales; US existing home sales, FOMC minutes
  • Thursday: Australia private capital expenditure; German GDP final, Gfk consumer sentiment; US jobless claims
  • Friday: UK BBA mortgage approvals; Canada CPI; US new home sales

Daily Pivots: (S1) 0.7643; (P) 0.7677; (R1) 0.7699; More…

Intraday bias in AUD/USD remains neutral for the moment. With 0.7605 minor support intact, further rise cannot be ruled out yet. However, considering bearish divergence condition in 4 hour MACD, we’d expect strong resistance from 0.7777/7833 resistance zone to limit upside and bring near term reversal. On the downside, break of 0.7605 support will indicate that rise from 0.7158 has completed already and turn bias back to the downside for 55 day EMA (now at 0.7534) first.

In the bigger picture, we’re still treating price actions from 0.6826 low as a correction. And, as long as 38.2% retracement of 0.9504 to 0.6826 at 0.7849 holds, long term down trend from 1.1079 is expected to resume sooner or later. Break of 0.6826 low will target 0.6008 key support level. However, firm break of 0.7849 will indicate that rise from 0.6826 is developing into a medium term rebound, rather than a sideway pattern. In such case, stronger rise should be seek to 55 month EMA (now at 0.8186) and above.

AUD/USD 4 Hours Chart

AUD/USD Daily Chart

GMT
Ccy
Events
Actual
Consensus
Previous
Revised
21:45
NZD
PPI Inputs Q/Q Q4
1.00%
0.90%
1.50%

21:45
NZD
PPI Outputs Q/Q Q4
1.50%
0.60%
1.00%

23:50
JPY
Trade Balance (JPY) Jan
0.16T
0.28T
0.36T
0.33T
0:01
GBP
Rightmove House Prices M/M Feb
2.00%

0.40%

7:00
EUR
German PPI M/M Jan

0.30%
0.40%

7:00
EUR
German PPI Y/Y Jan

2.00%
1.00%

11:00
GBP
CBI Trends Total Orders Feb

4
5

13:30
CAD
Wholesale Sales M/M Dec

0.40%
0.20%

15:00
EUR
Eurozone Consumer Confidence Feb A

-4.9
-4.9

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