Sive Morten
Special Consultant to the FPA
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Good morning,
(Reuters) The dollar was broadly firmer on Thursday, having posted its biggest one-day gain in more than a month as an improvement in global sentiment led investors to trim bearish dollar positions.
A surprise policy easing by Singapore's central bank, citing a tougher outlook for economic growth, also boosted regional equities and gave the dollar a lift against that country's currency.
"The Singapore move was a surprise, so people jumped on the bandwagon to bid up the dollar," said Kaneo Ogino, director at foreign exchange research firm Global-info Co in Tokyo.
The dollar added about 0.1 percent against its Japanese counterpart to 109.41 yen JPY=, pulling well away from a 17-month trough of 107.63 set a few days ago.
"The dollar/yen might not go much higher for now because people are a bit knackered after covering short positions," said Global-info Co's Ogino, citing strong resistance at 110 yen.
The yen got no help from Bank of Japan Governor Haruhiko Kuroda, who said overnight in a speech in New York that the central bank was ready to expand monetary stimulus again if recent weaknesses in inflation expectations persist, stressing that there are "many ways" to do so to achieve his ambitious price target.
Kuroda made the remarks ahead of a meeting of Group of 20 financial leaders in Washington this week, where currency policy is seen high on the agenda in the face of subdued global growth.
The Federal Reserve has highlighted global uncertainty as the major bar to another hike in interest rates. So, when upbeat trade data out of China and a pick-up in commodity prices seemed to lessen the risk of a deeper world downturn, dollar bulls figured there was now more chance of a move.
Analysts at CitiFX said recent developments might serve as "foundational encouragement" for investors to warm up to the idea of pricing in more tightening.
Just this week, Richmond Fed President Jeffrey Lacker, San Francisco Fed President John Williams and Philadelphia Fed President Patrick Harker all suggested that several hikes were possible this year.
Fed funds futures are barely pricing in one hike this year, let alone multiple tightenings after recent dovish comments from core Fed members led by Chair Janet Yellen.
In an interview with Time magazine published on Wednesday, Yellen again highlighted a cautious approach to monetary policy, saying the U.S. central bank must try to avoid making "big mistakes".
An unexpected fall in U.S. retail sales in March supported Yellen's cautious approach. The disappointing data contributed to a fall in U.S. yields, yet it failed to dent the rallying dollar.
Similarly wary, the Bank of Canada warned of weaker global growth and a less favourable U.S. outlook as it held interest rates steady. It raised growth forecasts for 2016, but nudged them lower for 2017.
Other commodity currencies also ceded ground to the greenback. The Aussie AUD=D4dipped below 77 U.S. cents after coming within a whisker of its 2016 peak of $0.7723.
Even a healthy labour force report failed to lift the Aussie. The unemployment rate fell to 5.7 percent, its lowest since late 2013.
For the rest of the market, the key focus will be on China's first quarter gross domestic product and March industrial output and retail sales due on Friday.
Investors will be looking for more signs of stabilisation in the world's second-largest economy, following Wednesday's upbeat trade data.
So, guys, as breakout on EUR has been cancelled, at least in nearest perspective, JPY analysis we've made just yesterday - today it makes sense to talk on GBP. Situation here is becoming interesting.
I hope you remember where we've stopped in discussion of GBP. The major question was how far upside retracement will go and whether Cable will form H&S pattern or not.
As market was not able to complete upside AB-CD and reach neckline in 20's of March, we've said that probably H&S will not happen, but GBP has turned to some whipsaw action and we've left it for some time.
Right now signs of H&S failure are becoming brighter. GBP stands too long in the right shoulder area and it is able to show breakout. 2 days ago it was not able to reach trend line and formed bearish grabber that suggests new low. This is absolutely not typical for normal progress of H&S pattern. And significantly increases chances for futher drop to bottom of the head:
Last week when we said that situation on GBP is interesting, but it is not ready yet for trading - we mostly were watching for this consolidation. Right now now we have clear signs of its bearish breakout and this brings more confidence with possible downward continuation:
Till the end of this week GBP has chance to reach 1.40 area and take out recent lows. This will be also WPS1 and MPS1.
(Reuters) The dollar was broadly firmer on Thursday, having posted its biggest one-day gain in more than a month as an improvement in global sentiment led investors to trim bearish dollar positions.
A surprise policy easing by Singapore's central bank, citing a tougher outlook for economic growth, also boosted regional equities and gave the dollar a lift against that country's currency.
"The Singapore move was a surprise, so people jumped on the bandwagon to bid up the dollar," said Kaneo Ogino, director at foreign exchange research firm Global-info Co in Tokyo.
The dollar added about 0.1 percent against its Japanese counterpart to 109.41 yen JPY=, pulling well away from a 17-month trough of 107.63 set a few days ago.
"The dollar/yen might not go much higher for now because people are a bit knackered after covering short positions," said Global-info Co's Ogino, citing strong resistance at 110 yen.
The yen got no help from Bank of Japan Governor Haruhiko Kuroda, who said overnight in a speech in New York that the central bank was ready to expand monetary stimulus again if recent weaknesses in inflation expectations persist, stressing that there are "many ways" to do so to achieve his ambitious price target.
Kuroda made the remarks ahead of a meeting of Group of 20 financial leaders in Washington this week, where currency policy is seen high on the agenda in the face of subdued global growth.
The Federal Reserve has highlighted global uncertainty as the major bar to another hike in interest rates. So, when upbeat trade data out of China and a pick-up in commodity prices seemed to lessen the risk of a deeper world downturn, dollar bulls figured there was now more chance of a move.
Analysts at CitiFX said recent developments might serve as "foundational encouragement" for investors to warm up to the idea of pricing in more tightening.
Just this week, Richmond Fed President Jeffrey Lacker, San Francisco Fed President John Williams and Philadelphia Fed President Patrick Harker all suggested that several hikes were possible this year.
Fed funds futures are barely pricing in one hike this year, let alone multiple tightenings after recent dovish comments from core Fed members led by Chair Janet Yellen.
In an interview with Time magazine published on Wednesday, Yellen again highlighted a cautious approach to monetary policy, saying the U.S. central bank must try to avoid making "big mistakes".
An unexpected fall in U.S. retail sales in March supported Yellen's cautious approach. The disappointing data contributed to a fall in U.S. yields, yet it failed to dent the rallying dollar.
Similarly wary, the Bank of Canada warned of weaker global growth and a less favourable U.S. outlook as it held interest rates steady. It raised growth forecasts for 2016, but nudged them lower for 2017.
Other commodity currencies also ceded ground to the greenback. The Aussie AUD=D4dipped below 77 U.S. cents after coming within a whisker of its 2016 peak of $0.7723.
Even a healthy labour force report failed to lift the Aussie. The unemployment rate fell to 5.7 percent, its lowest since late 2013.
For the rest of the market, the key focus will be on China's first quarter gross domestic product and March industrial output and retail sales due on Friday.
Investors will be looking for more signs of stabilisation in the world's second-largest economy, following Wednesday's upbeat trade data.
So, guys, as breakout on EUR has been cancelled, at least in nearest perspective, JPY analysis we've made just yesterday - today it makes sense to talk on GBP. Situation here is becoming interesting.
I hope you remember where we've stopped in discussion of GBP. The major question was how far upside retracement will go and whether Cable will form H&S pattern or not.
As market was not able to complete upside AB-CD and reach neckline in 20's of March, we've said that probably H&S will not happen, but GBP has turned to some whipsaw action and we've left it for some time.
Right now signs of H&S failure are becoming brighter. GBP stands too long in the right shoulder area and it is able to show breakout. 2 days ago it was not able to reach trend line and formed bearish grabber that suggests new low. This is absolutely not typical for normal progress of H&S pattern. And significantly increases chances for futher drop to bottom of the head:
Last week when we said that situation on GBP is interesting, but it is not ready yet for trading - we mostly were watching for this consolidation. Right now now we have clear signs of its bearish breakout and this brings more confidence with possible downward continuation:
Till the end of this week GBP has chance to reach 1.40 area and take out recent lows. This will be also WPS1 and MPS1.
