Fundamental Analysis by Admiral Markets

[Admiral Markets]

Dear Traders,

Forex Market, the largest financial market having $5.3 trillion of daily volume, doesn’t work on a gist. It is backed by various economic, political, environmental and other relevant factors. Fundamental analysis studies the strengths and weakness of an economy based on the economic indicators, which helps in evaluating the health of the economy, in an attempt to predict future price action.

Our fundamental reports embrace various economic and geo-political factors that are likely to affect the forex market at large. They could also indicate the aftershock expected after of such events.

In case you have any questions concerning our financial analysis - feel free to write us, we'll be happy to help you.

 

[Admiral Markets]

Fewer Economic Indicators Scheduled For The Current Week

Last week, US Dollar Index (I.USDX) witnessed a negative closing by remaining less vulnerable to important labor market details. The ECB meeting, another critical event for the week gone by, surpassed the much anticipated move of introducing negative deposit rate as the central bank announced various additional measures to fuel the euro-zone economy. Moreover, critical PMI releases from UK flashed mixed signals with Services PMI, the important from all the PMIs, surpassing the forecast and continued fuelling the GBP strength.

Following a week filled with crucial releases, market players are likely to digest the important announcements took place during the last week which can cause them to generate less volatile markets during the week carrying fewer economic indicators to release. Important labor market details from UK and Australia along with monthly reading of US Retail Sales and Preliminary version of UoM Consumer Sentiment can become catalyst for the upcoming week.

Consumer centric details from US can become a mirror of how the residents of the world’s largest economy perceive and act. US Retail Sales, scheduled for Thursday release, becomes the first important economic indicator of week from the world’s largest economy. Having increased for three consecutive months, the gauge mentioning the change in the value of sales at retail level, is again expected to rise by testing 0.5% level, against the previous figure of 0.1%. The Core retails sales that exclude automobile sales is expected to register a gain of 0.4% against no change in previous reading. Further, another signal depicting the strength of US consumer sector, Preliminary reading of consumer sentiment index by University of Michigan, scheduled for Friday release, signals additional optimism for US as the reading is expected to test highest level since July 2013 by being at 83.2 against previous reading of 81.9.

Moreover, Weekly reading of Jobless claims, scheduled on Thursday, and PPI m/m reading, scheduled to release on Friday, can become additional data points for the investors to have a look.

Stronger Retail Sales figure coupled with improving consumer sentiment can cause investors to think of acceptable advancements in the US economy in accordance with the good labor market numbers released last week. Moreover, should the figures signal weaker consumer markets, US Dollar is likely to be questioned for its strength. Hence, stronger or at par readings of retail sales and consumer sentiment become necessary to sustaining the strength of US Dollar.

Labor Market Details – Job details from UK and Australia are likely to fuel volatility in their respective currencies during the current week. The UK labor market report, scheduled for Wednesday release, is expected to show the number of people claiming unemployment-related benefits during the month of May to remain stable at -25K. The unemployment rate is expected to drop to 6.7% from 6.8% recorded in the previous month.

The Australian job market numbers, scheduled to release on Thursday, are likely to continue being better-than-expected as it did during previous three months. The Australian employment change figure is expected to be at 10.3K against the previous release of 14.2K while the unemployment rate is seen rising a ted bit to 5.9% from 5.8% in April.

Due to the presence of forward guidance by Bank of England, a weaker than expected job number isn’t likely to cause worry for GBP traders while higher than forecast results could become additional fuel for the GBP strength. Moreover, the Australian numbers are showing signs of weakness as compared to their previous releases which makes the AUD vulnerable to downside risk should the actual releases continue drifting lower.

Further, European economic calendar seems dormant during the current week. With no important releases scheduled, market players are likely to focus more on the performance of other economies in order to determine the respective strength of Euro.

Moreover, Chinese CPI and industrial production data for the month of May, scheduled for release on Tuesday and Friday respectively, becomes another important event for determining AUD moves. The CPI release is expected to jump to 2.4% against 1.8% releases previously while the industrial production is likely to rise by 8.8% against previously noted 8.7%. Should the CPI release surpasses the People’s Bank of China’s target of 2.5%, chances are higher that the dragon nation introduces monetary policy tightening to avoid threatening growth levels. Meanwhile, a weaker industrial production release can also signal for slowing economic activity and a threat for its largest supplier Australia.

Finally, monthly monetary policy meeting by Bank of Japan and Reserve Bank of New Zealand, scheduled for Friday and Thursday respectively, can provide good signals near term movement of JPY and NZD. Even though, the Bank of Japan isn’t expected to alter their monetary policy, subsequent press conference will be closely scrutinized to evaluate the impact of sales tax hike in April and the central bank's willingness to expand its economic stimulus in order to counter the sales tax hike impact.

Reserve Bank of New Zealand is expected to fuel the NZD strength by signaling the third rise of 0.25% into its official cash rate. The central bank has already hiked the cash rate by 0.50% during the current year which was expected to witness a 1.0% hike in cash rate. Should the press conference, followed by the meeting, reveals more need for near-term hike in interest rate, the NZD is vulnerable to witness a rally. However, a pessimistic economic scenario coupled with no action at the meeting can become detrimental for the NZD strength.

Original analysis is provided by Admiral Markets

 

[Admiral Markets]

Important events lined-up for the upcoming week

In a quiet week of economic data releases from the US, the retail sales data fell short of consensus expectations. The US Dollar still got a boost, driven by safe-haven buying, on the back of escalating violence in Iraq. Meanwhile on Thursday, Bank of England Gov. Mark Carney stated that the central bank's first interest-rate hike might be earlier than the markets are currently expecting and New Zealand's central bank (RBNZ) decided to raise its benchmark interest rates for third consecutive month. The surprising statement by Carney and RBNZ's rate decision turned GBP and NZD sharply higher, negating some of the strength for the US Dollar. Nevertheless, the US Dollar ended the week on a firm footing ahead of the Federal Reserve decision during the upcoming week.

This week, investors gear up for a slew of some important economic releases from the US and UK in order to determine the timing of first rate-hike from their respective central banks.

The focus would be on the FOMC decision, scheduled to be announced on Wednesday, where the central bank is expected to continue tapering its monthly bond purchase program by another $10 Billion to $35 Billion per month. This would be followed by a press conference by the Fed Chairwoman Janet Yellen. The Fed will also update its economic projection for inflation and economic growth over the next 2 years. In the economic projections the Fed might also provide new interest rate projection. Market players expect the Fed's projection for a first interest rate hike to remain on track sometimes during mid-2015.

Although the FOMC decision might not move the markets much, but market participants will closely watch for any comments from Janet Yellen on the strength of the US housing markets. This week investors will also get an update on the housing sector as the Commerce Department is scheduled to releases reports on building permits and housing starts for the month of May on Tuesday. Following a sharp surge in April, economists are expecting permits and starts to move back marginally in May to a seasonally adjusted annual rate 1.07 million and 1.04 million respectively.

Also on Tuesday, the report on consumer prices (CPI) is scheduled for release. Both CPI and Core CPI (excluding food and energy) are expected to register a month-on-month rise of 0.2%. A higher than expected rise in the inflation coupled with higher Fed's inflation outlook could possibly lead to markets building the case of an earlier rate-hike than expected.

Also watch out for the Philly Fed manufacturing index, which measures manufacturing activity in Philadelphia area and is scheduled for release on Thursday.

From UK, the minutes from Bank of England's latest monetary policy meeting and UK inflation data will be of keen interest for market players. Following the BoE Governor Mark Carney's hint of an earlier interest-rate hike, there stands a firm possibility of a non-unanimous vote for the central bank's interest rate decision, suggesting few of the MPC members are already in favor of raising benchmark interest rates. This would continue supporting the British Pound (GBP) or could even move it higher at least till the BoE decides a no policy change during its next policy meeting.

Moving on to other important releases from the UK, inflation data and retail sales data are scheduled for release on Tuesday and Thursday respectively. Of late UK inflation rate has been trending lower with the headline inflation figure (CPI) dropping and remaining below the central bank's targeted CPI rate of 2.0% since the beginning of 2014. The trend is expected to continue in May, with the consensus expecting CPI to drop to an annual rate of 1.7%. Meanwhile, consumer spending, which has been the supportive pillar of UK's economic recovery, is expected to witness a downturn in May. Following a stronger-than-expected reading in April, experts this time are estimating a decline of -0.5%.

UK CPI Change over 10-years

Source: Office for National Statistics​

In addition to this, traders will also watch for some meaningful releases from other parts of the world. Few of the releases include, German ZEW economic sentiment on Tuesday, monetary policy meeting minutes from RBA and BoJ's latest meeting on Tuesday and Wednesday respectively, and New Zealand GDP growth rate for the first quarter of 2014 on Thursday. Also, the Swiss National Bank (SNB) is scheduled to release its quarterly Monetary Policy Assessment on Thursday, which will be followed a press conference by SNB Chairman and Governing Board Members.


"Original analysis is provided by Admiral Markets"

 

[Admiral Markets]

US Dollar Weakened After FOMC

Much awaited FOMC meeting, took place yesterday, generated pessimism for the US Dollar as the press conference by the Federal Reserve Chair pointed towards stable interest rates even after the Fed comes to an end of bond purchases. Further, the downgrading of inflation and economic projections became additional reason for the market to weaken the greenback. Moreover, the GBP strengthened across board as the market took serious note of the BoE meeting minutes that signaled earlier rate hike than the general expectations while the EUR, AUD and NZD continued gaining higher even with weaker economic details. With the major events, scheduled during the week, being already released, market players are likely to concentrate on Weekly Jobless Claims and Philly Fed Manufacturing Index from US in order to determine strength of the US Dollar.

On Wednesday, market players were eyeing the important event scheduled, the FOMC meeting. The actual release of the FOMC statement revealed the regular tapering of $10 billion without any change to the benchmark interest rate, as expected. However, the press conference by Federal Reserve Chair, Janet Yellen, caused US Dollar weakness as she said that the recent economic “data that we’re seeing is noisy” and the Fed expects interest rates to remain lower for “considerable time” after the end of monthly asset purchase program.

Moreover, in its release of inflation and economic projections, the Federal Reserve downgraded their forecasts for the current year while the expectations concerning 2015 and 2016 were more or less remained untouched. The Federal Reserve cut GDP forecast from 2.8% - 3.0% (March expectations) to 2.1% - 2.3% (considering the recent 1.0% drop in GDP number) while the expectations for unemployment rate were modestly lowered to 6.0% - 6.1% from 6.1% - 6.3% during the month of March. Further, the inflation expectations were increased a bit to 1.5% - 1.7% from 1.5% - 1.6%. Hence, the Federal Reserve seems cautious about its near-term economic expectations and would like to witness much strength into the economic numbers in order to be optimist.

To sum up, the FOMC revealed more of its dovish side by projecting the stable interest rate even after the completion of monthly asset purchase program, by which the central bank currently buys $35 billion of bonds and treasuries on a monthly basis. Moreover, the weaker projections of economic numbers also caused market players to worry about the strength of the economy. Hence, the US Dollar is likely to remain lower due to the pessimism caused by the event; however, the incoming economic releases can become crucial in order to determine near-term movement of the greenback.

The UK currency, which is trading at the highest level since July 2009, is taking cues from improving economic numbers and the BoE’s intimation that they may hike the benchmark interest rates earlier than the expectations. The current optimism for GBP is likely to remain intact ahead of the next BoE meeting, scheduled for July 10. Should the central bank downplays the need of the interest rate hike during that meeting; the GBP is vulnerable to liquidate its gains.

The AUD continued rallying even with the RBA’s concern that the stronger domestic currency is harmful for the economy. Market players are likely to await for the Chinese HSBC Flash Manufacturing release, scheduled during the next week, and the upcoming RBA meeting, scheduled on July 1st, in order to determine the strength of the AUD. The NZD, which also signals considerable strength, is bearing the fruits of three consecutive interest rate hikes together with improved economic numbers. The incoming economic indicators can become near term signals for the NZD ahead of next RBNZ, scheduled for July 24th. Should the RBNZ continue with the interest rate hike, which is least expected after the three consecutive increases in interest rates, the NZD can surpass its record levels against its US counterpart.

Meanwhile, the Euro region currency remained strong versus majority of its counterparts even with absence of major economic releases. However, recent rate cut by ECB and fears of deflation being shown during the press conference by the ECB President can continue to become a major negative for the regional currency.


“Original analysis is provided by Admiral Markets”

 

[Admiral Markets]

Overview of Weekly Events

Last week, the much awaited FOMC spread pessimism amongst USD traders as press conference by the Federal Reserve Chair signaled stable interest rates even after the Fed comes to an end of bond purchases. Further, the downgrading of inflation and economic projections became additional reason for the market to weaken the greenback. These announcements caused the US Dollar (I.USDX) to test the lowest level in nearly a month in addition to witnessing a negative closing on a weekly basis. The Euro gained even with no major economics to track while the early rate hike speculations, caused by BoE meeting minutes, fuelled the GBPUSD towards the highest level since October 2008.

Having witnessed the Chinese HSBC Flash Manufacturing PMI, in addition to various Manufacturing and Services PMIs from EU nations, during early Monday, this week’s economic calendar is left with lesser releases to track. US GDP, financial stability report by Bank of England, Ifo Business Climate, Consumer Climate and Preliminary CPI from Germany and releases relating to retail sector from Japan can become the key highlights of the week. Further, geo-political tensions in Iraq can continue to fuel the safe haven demand of the risk-free asset classes while an acute step by US can provide additional support to these asset classes.

US Economic Releases

With the FOMC already vanished expectations of early rate hike, market participants are more likely to be driven by the incoming economic releases in order to determine the near-term movement of the USD. The final version of Q1 2014 GDP, scheduled to release on Wednesday, and the CB Consumer Confidence, scheduled for Tuesday release, are the two important events that can fuel volatility into the pairs connected to USD. Moreover, Existing Home Sales and New Home Sales, scheduled for Monday and Tuesday respectively, Durable Goods Orders, scheduled for release on Wednesday, and Weekly Jobless Claims scheduled for Thursday release, are some of the additional events that can continue making traders busy during the current week.

US Final GDP q/q is likely to continue spreading the pessimism with the forecasts favoring a 1.7% decline into the figure against the preliminary reading of -1.0% while the CB Consumer Confidence is expected to test 83.6 level, the highest since January 2008 against the previous reading of 83. The Existing and New Home Sales figures are likely to continue depicting rosy picture of US Housing Market, the Durable Goods Orders bears the forecast of testing the lowest levels since February reading while the weekly reading of Jobless Claims is expected to remain nearby its previous reading.

To sum up, the US economic calendar is more likely to bend towards optimist readings. However, should there be a surprise in actual readings that reflects weakness into the world’s largest economy, the US Dollar may extend its last week’s negative trading.

Europe

As the ECB President has clearly denied any expectations of a rate hike in near future with their recent monetary policy actions, the Euro region currency is likely to continue bearing the fruits of excessive money supply. However, should the incoming data plots optimism for the region, the Euro can rally. During the early Monday, the Manufacturing and Services PMIs from France, Germany and Euro-zone signaled pessimism as all of them lagged behind their market consensus. Moreover, the French reading became disappointing one.

Moving forward, the European economic calendar is only left with German readings, namely, Ifo Business Climate on Tuesday, GfK Consumer Climate on Wednesday and Preliminary CPI reading on Friday. The Business and the Consumer Climate Indices are likely to remain at the previous levels while the Preliminary CPI reading is expected to test the highest level in 3 months. Should the actual reading of German CPI matches the market expectations, Euro can rally on the back of the expectations that the largest economy of Europe can be reflecting the inflation hike in entire Euro-zone. Alternatively, a weaker number drawing below 0.0% levels can continue to spread the fears of deflation into the EU nations which in turn is likely to continue hurting the Euro strength.

UK

Britain doesn’t have more number of economic indicators to shake the forex market during the current week except the twice in a year release of financial stability report together with a speech by BoE Governor, Mark Carney, scheduled for Thursday release. Due to the recent hints by the BoE, the market players are more likely to scrutinize any hints for the near term rate hike, Should there be a strong signal for the nearest rate hike, the GBP can rally against its major counterparts. However, absence to deliver a hint relating to near term rate hike, is unlikely to cause worry for GBP pairs. Moreover, should the BoE Governor, signals the need to wait for witnessing higher interest rates, the GBP can witness a pull back into its recent rally.

Asia

After witnessing the first advance during previous six months into the Chinese HSBC Flash Manufacturing PMI, the Asian economic calendar seems empty with only fewer retail sector releases from Japan. The Household Spending, Tokyo Core CPI and the Retail Sales, scheduled for Friday release, are the only events from Japan that can become important for the pairs connected to JPY. While the Household spending and Retail Sales are likely to depict the lesser harm of sales tax hike, the CPI figure is expected to remain at the current level. Should the Spending and Retails Sales weaken further from the previous levels, the BoJ is likely to infuse Japanese monetary markets with additional measures; on the other hand figures matching the forecast or even rising above the forecast levels can fuel the JPY strength.



“Original analysis is provided by Admiral Markets”

 

[Admiral Markets]

Gold Prices Trading Near Two-Month High

Gold prices rallied during the previous week by completing third consecutive weekly gain and securing nearly 6% of price increase during the current month. Multiple factors, ranging from technical breakout to the geo-political tensions in Iraq and weaker US Dollar, played their role in order to support this up-move. Currently, the yellow metal is trading near $1311, near to its two month high of $1325.70 tested during the early week.
Also Read: Can US Dollar move out of its recent range?

Amongst the factors that are considered to be the fuel for current price hike, geo-political tensions in Iraq together with weakness in USD gain the maximum bids. Recently, the final reading of US Q1 2014 GDP signaled that the economy contracted at 2.9% rate, the most in five years, as against the 2.6% increase in economic activity during the Q4 2013. The US Dollar has started weakening ever since the Fed Chair, in her press conference following the recently FOMC meeting, said that the interest rates are expected to remain low for the considerable time even after the completion of monthly asset purchase program. Further, the downgrading of economic and inflation projections for the current and upcoming year, in FOMC’s inflation and economic forecast, provided additional weakness to the US Dollar.

Geo-political tensions in Iraq continued to gain the headlines and supporting the safe haven demand of the yellow metal. Recently, Syrian warplanes bombed Sunni militants’ positions inside Iraq. The UN said to take the serious view of the situation while the US secretary of state, John Kerry, conveyed fear of this position and suggested that other nations should stay out of it.

In addition to these factors, economic improvements in Asian courtiers like India and China continued to arouse expectations that these countries, being the world’s largest gold consumer, can reverse the heavy price liquidation took place during last year. Chinese HSBC Flash Manufacturing PMI, released earlier this week, tested the highest level in 6 months by surpassing the 50 level while the recent shift in Indian government, during the general elections, spurred expectations that the new government will ease some of the rigid gold import norms levied during the last year. Recently, the China Gold Association signaled that they want more of the local benchmarking of gold prices rather than accepting the London prices for gold. Moreover, they also conveyed their plans to introduce gold exchange in order to promote the gold trading into the nation.

Looking towards the recent statistics of the gold market, Syria sold nearly 200 tons of Secret gold to Iran while the Chinese import of gold via Hong Kong fell to 65.4 tons in April compared to 80.6 tons in March and 75.9 tons in April 2013. Moreover, gold imports by India during the month of May dipped by 72% in value terms to $2.19 billion, as against $7.7 billion in May 2013. During the last week, holdings of the gold into SPDR Gold trust, the world’s largest bullion backed ETF, increased by 2.4 tons to 785.02 tons while the holdings into the iShare’s Gold trust remained at 163.20 tons.

To sum up, the recent rally in gold prices was mainly the reason of weaker US Dollar due to the FOMC and the rising geo-political tensions in addition to the technical breakout above $1300.

Looking forward, it can be said that the near-tem movement of gold is likely to be determined by the US Dollar movement. Should the Federal Reserve continue curbing the chances of interest rate hike, market players are unlikely to put their bets on buying the greenback while the weaker economic indicators continue to dent the US Dollar strength which in turn can be a supportive factor for gold prices. Also, geo-political tensions in Iraq can continue to support the up-move of gold prices.

Moreover, improved economic numbers from China together with expectations that the Indian government can release the import norms for gold can become additional fuel for the gold prices to rally.



“Original analysis is provided by Admiral Markets”

 

[Admiral Markets]

A Look At Some Important Economic Events Lined Up For The Week


Last week, the US Dollar posted a second week of losses against other major currencies primarily led by sharper-than-expected downward US GDP revision. The Department of Commerce revised the first-quarter US GDP lower to show the economy contracting by 2.9%. Also, contributing to the US Dollar weakness was greater-than-expected fall in durable goods orders for May. Meanwhile, the US housing sector continued showing signs of improvement with both existing home and new home sales posting better-than-expected monthly gains. Nevertheless, downbeat US economic data fueled worries that the economy growth in 2014 might be trailing, even below the Federal Reserve's lowered estimate of 2.1% to 2.3%.

With historic low level of volatility prevailing in the market, investors will now be looking forward to some top tier economic releases, scheduled at the beginning of a new month, which could possibly trigger a meaningful trend in the Forex market and could also generate some volatility.

The center of attraction from this week's busy economic calendar is the release of June NFP data and ECB monetary policy decision, both scheduled on Thursday. The US employment reports (NFP) for June will be released on Thursday due to the Independence Day holiday on Friday.

NFP data has traditionally been known for generating substantial volatility in the market. Given that consensus are estimating an addition of 211,000 jobs in the month of June, which is even lower than the previous release of 214,000, US jobs report could possibly be considered as a non-event by market participants. Meanwhile, the unemployment rate is expected to remain unchanged at 6.3%. Only extremely surprising NFP number or a sharp change in unemployment rate could lead to some lasting effects in the Forex market.

Preceding the official jobs report, ADP report, which shows the number of private-sector jobs addition, would provides an early estimate for the government's report and is scheduled for release on Wednesday. The ADP report is expected to show private-sector employment pick-up in June with the addition of 206,000 new jobs.

Other important economic data featuring this week's US economic calendar include ISM manufacturing and ISM non-manufacturing PMI figures for the month of June, scheduled for release on Tuesday and Thursday respectively, and are expected to better the previous readings. Investors will also have a look at the trade balance for the month of May, which is also scheduled for release on Thursday. Trade deficit is expected to decline marginally to $45.1 Billion from the previous reading of $47.2 Billion.

Any disappointment on the economic data front, couple with either a disappointing or even matching consensus forecast jobs report, could further dampen the demand for the US Dollar.

Along with the US NFP data, this week's ECB monetary policy decision announcement on Thursday and subsequent press conference by ECB President Mario Draghi will also be on investors radar. Following its decision to lower benchmark interest rates to 0.15% and cutting the deposit rate into negative territory (-0.1%) in the June meeting, there is little expectation in terms of any further steps to be announced by ECB. However, Draghi's comments on ECB governing council's outlook to refrain from further rate cut is likely to spark some meaningful appreciating moves for the Euro-zone currency.

Meanwhile, RBA's monetary policy decisions, scheduled to be announced on Tuesday, could possibly a non-event for the market. Market players are expecting the central bank to maintain status-quo monetary policy stance, leaving the key benchmark interest rate steady at 2.5% held since August 2013.

Other highlights from this week's economic calendar, that could have a material impact on the Australian Dollar, include PMI figures for the month of June from Australia's largest trading partner, China. Notable economic releases from China includes the official manufacturing and non-manufacturing PMI data, scheduled for release on Tuesday and Thursday respectively. Also, HSBC's China manufacturing PMI, scheduled for release on Tuesday, is expected to continue holding in expansion territory and come-in at 50.8.

Other important economic indicators from Australia, which includes Australian trade balance on Wednesday and retail sales data on Thursday, could also lead to an eventful week for the Australian Dollar.

Meanwhile, negligible reaction to geopolitical instability in Iraq has lead to additional risk of a knee-jerk reaction in case of any further escalation in the prolonged conflict. This could be the only possible reason for some renewed investor interest to buy the US Dollar.



“Original analysis is provided by Admiral Markets”

 

[Admiral Markets]

Fewer Economic Releases To Restrict Big Moves In The Forex Market


Last week's stronger US economic data sparked the US Dollar recovery against most of its major counterparts, except for the British Pound and Canadian Dollar. The week began with better-than-expected pending home sales data and the momentum continued with both the ISM manufacturing and non-manufacturing PMIs continuing to show expansion. This was further supported by narrowing US trade deficit data and strong employment growth as was reflected in the ADP report and official jobs report. Surprisingly stronger-than-expected US employment growth and a drop in unemployment rate to 6.1% supported the optimistic view that the US economic recovery is on track barring a distortion at the beginning of the year led by extreme weather conditions.

After last week's stellar jobs report, will the minutes of the Fed's last policy meeting help US Dollar continue with the trend? Minutes of the Fed's June policy meeting is scheduled for release on Wednesday. Market participants are expecting the minutes to continue expressing confidence in the US economic recovery and would now be looking for some hints to build a case of considering an earlier interest rate hike by the Fed.

Apart from the release of the Fed minutes, this week's US economic calendar remains virtually devoid of any important economic releases and offers very little in terms of triggering any big moves for the US Dollar.

However, employment data from Australia along with CPI and trade balance data from China might continue to probe some volatile moves for the Australian Dollar (AUD) in the upcoming week. This week's Australian employment report for the month of June, scheduled for release on Thursday, is likely be key driver for AUD. The latest read on employment is expected show unemployment rate ticking higher to 5.9% in June. Meanwhile, the number of employed people during the month of June is expected to show a strong turnaround with the consensus estimates forecasting the figure to come-in at 12.3K after a surprise drop of -4.8K in the previous month. Any positive surprise from the Australian employment reports is likely to spark some near-term meaningful rally for the Australian Dollar.

This week's important Chinese economic data that could also materially impact AUD includes CPI data and trade balance data, scheduled on Wednesday and Thursday respectively.

Meanwhile, BoE's monetary policy decision could possibly set the pace and provide some momentum in the Forex market. The central bank is widely expected maintain status-quo monetary policy and hold the benchmark interest rates at 0.5% and maintain the asset-purchase facility target at 375 Billion Pound. However, the focal point for market participants would be the release of policy statement, if any, accompanying the monetary policy decision announcement. The rate statement contains the economic outlook that influenced MPC monetary policy decision and provide hints to the future votes on interest rate decision and other policy measures.

With very little in terms of economic data releases scheduled in the week ahead, the Forex market seems to move-back to its recent low-volatility, range-bound moves.



“Original analysis is provided by Admiral Markets”

 

[Admiral Markets]

Precious Metals Remain Elevated

After witnessing heavy liquidation on last Thursday, due to the optimistic US labor market numbers, precious metal prices continue to remain elevated during the current week. Gold prices increased by nearly 1.15% while the Silver prices have gained around 1% since the start of the week. The precious metal prices are heading towards completing sixth consecutive week of price acceleration as recent FOMC minutes coupled with geo-political crisis kept supporting their safe haven demand.

Last week, US job numbers, namely NFP and Unemployment Rate, spurred speculations that the US Federal Reserve should start thinking for the interest rate hike as the economy has continued showing strength of the labor market. The NFP release was 288K which re-tested the May 2014 level which was the highest since June 2010 while the Unemployment rate declined to 6.1%, the lowest since October 2008. The precious metal bucket started responding to the news and the gold prices liquidated more that 0.50% while silver prices declined nearly 0.10% on the same day. However, yesterday’s release of minutes from the recent FOMC meeting proved to be US Dollar detrimental as it failed to signal any hints for the near term rate hike, which the market players were eagerly waiting for, in addition to signaling the probable end of the tapering to the monthly monetary asset purchase program during this October. Precious metal prices again responded to the news with a great vigour and the gold & silver prices are up by more than 1% during the day.

Geo-political tensions in Ukraine and Iraq continued fueling the safe haven demand of the precious metals. Recently, Israel initiated military actions near Gaza Strip while the Russia detained a Ukrainian pilot who is an officer in the army, making the nation susceptible to the linkages with the terrorists in Ukraine.

Recent improvements into the Chinese economic numbers and the expectations of easing gold import norms from the India’s new government have also provided additional fuel to the precious metal prices. However, recent release of India’s annual budget remained silent about the alteration into the gold import norms, which can become a cause for worry as India is the second largest consumer of gold and the continuation of rigid gold import norms, levied last year, can hurt their domestic demand. Meanwhile, Chinese import of gold via Hong Kong fell to 65.4 tons in April compared to 80.6 tons in March and 75.9 tons in April 2013. Moreover, gold imports by India during the month of May dipped by 72% in value terms to $2.19 billion, as against $7.7 billion in May 2013.

Gold holdings in the SPDR Gold Trust, world’s largest bullion backed ETF, increased by nearly 10 tons during the current week to 800.28 metric tons on Tuesday, which was 2 tons higher than the end of 2013. Ever since the Federal Reserve signaled its intention to continue with lose monetary policy even after the completion of tapering, the ETF continued rising slowly. Currently, the gold holdings into the ETF have risen strongly signaling a probable reversal of the heavy downpour registered during the previous year.

In addition to the aforementioned fundamental factors, sustained trading above key technical levels could also be considered as a trigger for the precious metal prices to remain elevated.

Hence, the precious metal prices remained elevated as the Federal Reserve’s intention to continue with lose monetary policy and the geo-political crisis in Iraq and Ukraine together with improvement in Chinese economy continued supporting the demand.

During the upcoming days, it can be expected that the gold prices remain vulnerable to policy actions by FOMC in addition to the geo-political crisis while the silver prices could gain additional effect of Chinese economic numbers as the white metal is also an industrial metal. Should the Federal Reserve provides any signal to near term rate hike, the yellow metal can witness a considerable decline. Moreover, deteriorating conditions in India and China can also cause damage to precious metal prices.



“Original analysis is provided by Admiral Markets”

 

[Admiral Markets]

Even as the BOJ lowered its outlook on economic growth on Tuesday, USDJPY currency pair struggled to find a dominant direction and continues with its recent range-bound trade. The central bank now expects the economy to grow by 1.0%, as against its previous forecast of a 1.1% expansion, during the current financial year.

Source: Bank of Japan

Meanwhile, absence of a downward revision to BOJ's inflation projections suggest lower chances of immediate additional stimulus measures, possibly hinting towards an upcoming near-term strength for JPY.

However, considering the prospects of the Fed accelerating its plan to hike interest rates should the recent improvement in the US labor market and economic conditions remain on track as suggested by the Federal Reserve Chair Janet Yellen's during her semi-annual testimony on monetary policy, enhance the chances of continuing the near-term range-bound trade for the pair.

On technical chart the pair is indicating an upcoming bearish move by forming a descending triangular pattern and decisively trading below 200-day and 100-day SMAs. However, the bearish trend would only be confirmed once the pair breaks below the horizontal line support of the triangular pattern near 101.00-100.80.

Meanwhile, the upper trend-line of the descending triangular chart pattern and important moving averages seems to contribute towards formation of a strong resistance near 102.00-102.15 zone. A move above this confluence region might negate the short-term bearish outlook.

Hence, before taking a dominant directional call investors should wait for a decisive break either below the floor or a move above the top of the triangular chart pattern.


“Original analysis is provided by Admiral Markets”