Forex research

[Alpari]

US Opening Call from Alpari UK on 16 August 2013

Expectations too high ahead of consumer sentiment reading

Today’s US opening call provides an update on:

• Focus on US data and Fed comments;
• Traders seeking shorting opportunities as September meeting approaches;
• UoM consumer sentiment expectations too high;
• Housing data potentially impacted by higher mortgage rates.

It’s been a relatively quiet morning so far in Europe, but things should pick up as we move into the US session with a number of key pieces of economic due to be released.

There’s been a lot of attention on the US this week, with economic data and comments from Fed members being picked apart ahead of the September meeting. The consensus in the markets now appears to be that the Fed will begin the first phase of its QE exit strategy at the September meeting, probably reducing its asset purchases to $60-65 billion a month, which is still a huge figure.

US Treasury yields rose to 2.8% on Thursday – the first time they have reached this level in two years – in response to the weekly jobless claims which fell to six year lows. The rise in yields coincided with a massive drop in US indices, with the Dow recording triple digit losses for the second consecutive session to end more than 200 points down on the day.

Clearly the shift of focus onto fundamentals during the corporate earnings season was only temporary and once again, the Fed dictates where the markets go. The only difference between now and before the corporate earnings season is that instead of looking for any excuse to go long, traders are going short at every opportunity, be it hawkish sounding comments from the Fed or good data.

There’s a few pieces of economic data due out this afternoon, which will be worth keeping an eye on. The UoM consumer confidence figure, as always, is extremely important given that consumer spending makes up around two thirds of US output.

Market expectations are currently for a slight improvement to 85.5 from 85.1 last month, but I struggle to see how we’re going to see this. Reports over the last month have suggested that consumers have felt the pinch as a result of higher fuel prices and mortgage rates, while consumer confidence in July unexpectedly fell further than expected.

On top of that, Wallmart disappointed yesterday when reporting second quarter earnings, with same store sales falling and sales expectations for the year as a whole being much lower than expected. All things considered, it seems very likely that the consumer sentiment figure today will fall significantly short of current expectations.

Also today we have the release of some July housing data. Housing starts and building permits are both expected higher in July, but again it will be interesting to see if falling demand due to higher mortgage rates has had an impact on these figures, like it has other housing figures recently.

Ahead of the open we expect to see the S&P up 2 points, the Dow up 3 points and the NASDAQ up 3 points.

Read the full report at Alpari News Room​

 

[Alpari]

Daily Market Update - 16 August 2013 - Alpari UK

0:09 Weekly jobless claims add to September tapering fears
0:51 US CPI leaves room for further ECB stimulus
1:40 US housing data falls short of expectations
2:18 Higher mortgage rates and fuel costs hit consumers

[video=youtube;DvPo9Yx5MvY][/video]

 

[Alpari]

UK Opening Call from Alpari UK on 19 August 2013

Investors look to FOMC minutes for tapering hints

Today’s UK opening call provides an update on:

• Markets lacking direction as investors seek more tapering clues;
• FOMC minutes on Wednesday to provide insight into views among Fed members;
• Jackson Hole to be a non-event compared to previous years;
• Retailers reporting earnings amid weaker consumer demand.

European indices are expected to open relatively flat on Monday, following a quiet session in Asia overnight that saw indices bouncing between small gains and losses.

The markets appear to be lacking any real direction at the moment, as improving data out of Europe continues to be overshadowed by increasing expectations that the Fed will begin winding down its asset purchase program in September. The improving economic data out of Europe should be providing a real boost to the markets, given that other countries have suffered over the last few years due to the ongoing slowdown in the region.

However, people are more concerned about whether the Fed will begin tapering at its next meeting in September, which is likely to continue to weigh on stocks over the next month or so. The majority in the markets appear to believe that tapering will begin in September, with the Fed testing the water with a small reduction to see what impact it has on government bond yields and then stock markets.

We may get some indication as to whether this is the case when the minutes from the June meeting are released on Wednesday evening. The minutes of the final meeting before September’s could give an indication about how many members are pushing for a rate cut in September, what conditions are necessary to convince them that September is the time to begin tapering and how much they intend to cut by.

This unsurprisingly makes the release of the minutes the key event this week. Aside from this, the economic calendar is looking a little light, with US housing data and Reserve Bank of Australia meeting minutes the only other key releases this week. The Jackson Hole symposium would ordinarily be a big occasion for the markets, given that on two occasions, Fed Chairman, Ben Bernanke, has used this as an opportunity to drop pretty big hints about the start of quantitative easing.

However, that is not to be on this occasion, as Bernanke, along with a number of other central bank governors, will not be attending. We will hear from Janet Yellen at the symposium, one of two likely successors to Bernanke, although we’re unlikely to get anything significant from her as she’ll only be moderating a panel discussion on Saturday.

As corporate earnings season draws to a close, there may be a little more focus on the consumer this week, with a number of retailers scheduled to release second quarter earnings. Last week we saw earnings from Wallmart disappoint, with the retailer reducing its growth outlook for the year on weak consumer demand. This was also reflected in Friday’s UoM consumer sentiment figure, which was well below market expectations.

Ahead of the open we expect to see the FTSE up 3 points, the CAC down 2 point and the DAX down 14 points.

Read the full report at Alpari News Room​

 

[Alpari]

Weekly market preview – 19 August 2013

A moderately quiet week ahead for the global markets as far as economic events are concerned. The emphasis for the undoubtedly remain focused upon the timeline for Fed tapering, a resurgent eurozone, the Chinese slowdown and indecision as to the validity of BoE forward guidance.

In the UK, much of the focus will be upon the second GDP estimate for Q2 which has the potential to shock markets should we see a chance from the preliminary 0.6% figure. The US plays host to the Jackson Hole Symposium towards the end of the week, which provides the stage for potential Fed governors to stake their claim in the absence of many key central bankers. Meanwhile, in the eurozone, the release of prominent PMI figures for the French, German and eurozone economies. Markets will be watching closely to see if the recent positive sentiment brought about by recent GDP figures feeds through to another positive week for the eurozone.

In Asia, the Chinese HSBC flash manufacturing PMI figure is seeking to reverse some of the losses seen over the past three releases. Meanwhile, the Japanese markets will be geared solely towards the trade balance figure on Monday. Finally, the Australian focus will be on Tuesday, with the release of minutes from the monetary policy meeting back on 6 August.


UK

A very quiet week in terms of economic releases in the UK, where the only release of note comes in the form of the second estimate GDP release on Friday. The preliminary figure is typically the most volatile GDP release, and thus there is lessened expectations for this week. That being said, the NIESR Q2 GDP figure pointed to a potential 0.7% rise, which is above the 0.6% preliminary number provided in early August. Subsequently, with markets expecting no change, an adjustment would likely catch people by surprise and spark volatility.

US

A somewhat busier week for the US, with the major event coming in the form of the Jackson Hole symposium, FOMC minutes and home sales figures. The week begins in earnest on Wednesday, with the existing home sales figure, which is expected to show further improvements for the crucial housing sector. Market expectation is for a rise from 5.08 million to 5.15 million, which would represent a reversal after a reduction last time around. The importance of the existing figure is that this represents the majority of the total home sales data and thus is the leading indicator of housing market strength. On the whole, this release has tended to disappoint with four out of the last five figures coming in below estimates and thus the bias continues to be downward.

Also on Wednesday, the minutes from the last FOMC meeting are released. The talk of tapering within the markets have reached a crescendo over recent weeks, with speculation pointing to a potential reduction in the rate of asset purchases occurring in September. This is by no way guaranteed and thus these minutes are likely to be poured over for any indication of a timescale. Other points to look out for are hints as to the amount and type of purchases which are going to be affected.

Such tapering is expected to be largely effected by the ongoing employment data out of the US. However, given the lack of remaining rate and non-farm payroll figures until the September decision, the weekly unemployment claims figure will play a more prominent role. This week we are expecting a marginal rise from 320k to 322k, which would likely bring little in terms of response. However, be aware than any large movement away from this estimate could bring market volatility.

Finally, the week is rounded off by the annual Jackson Hole symposium, due to be held on Thursday and Friday. This is a meeting where central bankers, finance ministers, academics and alike can hold discussions away from the press. Given the 2010 speech from Ben Bernanke provided strong hints to QE2, markets will be paying close attention to any announcements this year. That being said, the notable lack of high caliber central bankers (no Mario Draghi nor Mark Carney) brings about a more domestic feel. Thus many will be looking out for speeches from the likes of Janet Yellen, whose bid to become Fed chair has been the centre of debate over the recent months.

Eurozone

A particularly strong period for the eurozone recently comes back into question this week, with the release of crucial PMI figures for France and Germany, along with the region as a whole. Of those, it is the German manufacturing PMI reading which hold the most importance given the size of German industrial exports and the value that adds to the eurozone as a whole. This figure is expected to push further into expansion, from 50.7 to 51.1. Meanwhile, the other notable single release is the French manufacturing PMI, which is predicted to move out of contraction and into expansion, with a shift from 49.7 to 50.4. Overall, it is worth noting both releases in particular, but it is the overall movement of the full six figures which are likely to move the wider market. An out-performance across the majority of surveys will bring a notably positive tone for the prospects of the region and that is what I expect to occur given recent strength within the single currency.

Asia & Oceania

The major event of the week from a Asian perspective comes in the form of the Chinese HSBC flash manufacturing PMI figure for August. The importance of this figure is derived from the clear unreliability of Chinese data, with manipulation seemingly rife and difficult to quantify. Subsequently, the HSBC figures have tended to provide a more objective reading into the strength of the economy and in particular the key manufacturing sector. It is worth noting that the sizable spread between the HSBC and official manufacturing PMI readings are partly associated with the larger weighting given to small or medium sized firms in the HSBC measure. Nevertheless, this release is highly significant and the ability to reverse the recent decline would be an important step in convincing the world that the recent slowdown is coming to an end. Market expectation is for a rise from 47.7. to 48.3, which if attained would be notable. Overall the markets will be looking to at least see this figure moving in the right direction after a disappointing last month.

The Japanese week is likely to be fairly quiet, with the trade balance representing the only notable release. The importance of this figure will be whether the exports show significant strength given the relative weakness of the yen in 2013. The imposition of a sales tax has been hotly discussed over recent months and thus increased signs of international competitiveness would provide extra leeway for such a tax. It is also worth noting that Bank of Japan governor Haruhiko Kuroda will be speaking at the Jackson Hole summit later in the week where analysts will be looking out for any potential change in direction in policy.

Finally, the Australian markets will be looking towards the release of crucial RBA monetary policy minutes on Tuesday. This comes off the back of a reduction in the headline interest rate from 2.75% to 2.5% at the 6 August meeting. Overall, the discussions of a 50 basis point cut will be what people are keeping an eye out for. The reduction of the Australian dollar is key for the RBA and given the muted effect within the fx markets from this recent decision, people are looking ahead to see if another reduction could be discussed for future meetings.

Read the full report at Alpari News Room​

 

[Alpari]

US Opening Call from Alpari UK on 19 August 2013

Markets lacking direction ahead of FOMC minutes

Today’s US opening call provides an update on:

• Markets lacking direction;
• Retailers report second quarter earnings;
• FOMC minutes to provide clues on tapering;
• Jackson Hole symposium a non-event this year.

US futures are pointing to a relatively flat open on Monday, following a mixed session in Asia over night and negative start to the week in Europe.

Markets are lacking any real direction at the moment, with the prospect of the Fed reducing its asset purchases in September having a bigger impact than anything else. Investors don’t really have too much else to focus on, with the corporate earnings season drawing to a close and the economic calendar looking very light.

We could see investors turn their attention back to earnings season briefly this week, with some major retailers due to report second quarter earnings. Consumer spending makes up around two thirds of US GDP so these earnings are actually very important.

If like Wallmart last week, retailers revise down their expectations for the year, it would suggest that analysts and the Fed have once again overestimated how the economy will perform. This must have an impact on the Fed’s decision in September and is yet another reason why they shouldn’t seriously consider tapering until December, when the data will confirm whether or not the recovery is sustainable.

We will get some insight into the thinking of the FOMC on Wednesday, when the minutes from the meeting in July are released. There is no meeting in August so this was the final meeting before the one in September, when the majority in the markets expect the Fed to announce a small reduction in asset purchases.

The minutes could also give an indication on how the Fed will reduce its asset purchases, including how much it will reduce it by and whether it will reduce purchases of both government bonds and asset-backed securities, or just focus on one to begin with.

Aside from this, the week is looking a little quiet. The Jackson Hole symposium on Friday is going to be a bit of a non-event this year, with many central bankers not attending, including Fed Chairman, Ben Bernanke. Bernanke has used this event to drop big hints around quantitative easing previously. Without Bernanke there, and with Janet Yellen, Bernanke’s potential successor, only moderating a panel discussion, I don’t expect the event to attract too much attention this year.

Ahead of the open we expect to see the S&P down 2 points, the Dow down 15 points and the NASDAQ up 2 points.

Read the full report at Alpari News Room​

 

[Alpari]

Daily Market Update - 19 August 2013 - Alpari UK

0:10 Markets quiet with little driving volatility
0:27 Japanese trade balance strengthens Abe's policy stance
1:52 Looking ahead to FOMC minutes on Wednesday

[video=youtube;jI_3d8JOQr0][/video]

 

[Alpari]

Technical Analysis from Alpari UK on 20 August 2013

EURUSD

This pair remains stuck in a range between 1.32 and 1.34. Last week we saw a breakout attempt on both sides but both failed, highlighting the fact that the markets are really lacking direction over the last month. On the weekly chart, the descending trend line dating back to May last year is continuing to provide resistance for the pair after it once again closed below here last week. Last week’s candle was also a spinning top, which typically signals a reversal of the current trend and is therefore bearish in this case. The 200-week SMA is also providing significant resistance for the pair, while the stochastic is in the process of crossing in overbought territory, both of which are also bearish. All in all, the weekly chart certainly suggests we’re due some dollar strength. The daily chart also highlights a general lack of direction at the moment. The fact that the price action is flattening off can be read in two ways. Either we’re seeing some consolidation ahead of a continuation of the uptrend, or the bulls have lost momentum and the bears are creeping back in. I think the latter is true, although I’ll need to see some confirmation of this. As you can see on the daily chart below, we have an incomplete head and shoulders formation, and the pair appears to be headed back towards the neckline. If we get a close below here, this should prompt a more aggressive move lower, which could then break through 1.32, taking any stops with it.

GBPUSD

Cable is long overdue a correction, having closed higher on five of the last six weekly candles. However, that doesn’t necessarily mean it will happen now. The pair has broken some key levels over the last week or so, including the descending trend line dating back to the start of the year, the 200-day SMA and the 50-week SMA, so the uptrend doesn’t appear to have lost any momentum yet. That said, it’s worth keeping an eye on the key resistance levels as these could give an indication about where the reversal will occur. The pair is currently finding resistance around 1.5650, a previous level of resistance on numerous occasions, however I expect it to push on further with the next key level of resistance coming around 1.5750. This has previously been a key level of support and resistance, while the 200-week SMA should also provide significant resistance at this level.

USDJPY

We’re continuing to see consolidation in the dollar yen pair, following the aggressive push higher in the final quarter of 2012 and the first quarter of 2013. The pair looks to be nearing a breakout, however we may have to wait a few weeks yet, with it possibly coming in September if the Fed confirms its intentions to taper. For now though, I expect further consolidation, with the pair now targeting 95.76 again, after breaking below an ascending trend line (blue), before retesting it and failing to break back above. The pair is currently finding support around 97, a previous level of support, but I expect it to break below here in the coming days before finding support from the ascending trend line, dating back to 25 February, which also coincides with that previous low, around 95.76.

Read the full report at Alpari News Room​

 

[Alpari]

US Opening Call from Alpari UK on 20 August 2013

Investors uneasy ahead of FOMC minutes on Wednesday

Today’s US opening call provides an update on:

• Investors uneasy ahead of FOMC minutes on Wednesday;
• FOMC minutes unlikely to contain tapering clues;
• Stocks and bonds to remain under pressure as markets hate uncertainty;

With the September meeting of the Federal Reserve fast approaching, we’re seeing a lot more unease in the markets, with Treasury yields currently above 2.8% and money pouring out of emerging markets.

Clearly the markets are preparing for the announcement from the Fed that they will begin scaling back its asset purchases, and the recent response in the markets suggests the majority think that will come in September.

We’re seeing a lot more risk aversion in the markets now, with Asian indices plummeting over night and European stocks following suit this morning. With very little data out over night and again today, investors are clearly preparing themselves ahead of the Fed minutes which will be released on Wednesday.

I’m not convinced at this stage that we’ll learn too much from the minutes that we don’t already know. The Fed is unlikely to set thresholds that must be met in order to taper in September, and they’re unlikely to have discussed how much they plan to taper because that, like the decision itself, is probably heavily dependent on the data.

That has never stopped the markets panicking in the past and doesn’t look like stopping them now. The markets hate uncertainty, especially when it is likely to have a significant impact on the markets.

Strangely, US futures are pointing to a flat open, despite the reactions seen in Asia and Europe. This could be just a technical pull back after indices yesterday ended the session half a percentage point lower, or a reaction to the slight pull back in Treasury yields which fell to 2.81% on Tuesday after hitting highs of 2.88%.

Whatever the reason, I expect equities and Treasury prices to remain under pressure in the coming weeks, whether or not the minutes tomorrow spark any selling. While I’m still of the opinion that the data hasn’t been good enough to justify tapering in September, the majority in the markets clearly disagree. For now, the latter is all that matters.

Ahead of the open we expect to see the S&P up 1 point, the Dow up 12 points and the NASDAQ flat.

Read the full report at Alpari News Room​

 

[Alpari]

Daily Market Update - 20 August 2013 - Alpari UK

0:10 Markets tumble ahead of FOMC minutes
0:49 Bundesbank comments ruffle markets after ECB forward guidance comments
1:51 RBA minutes provide dovish stance following rate cut
2:33 RBNZ comments cite NZD as overvalued

[video=youtube;BxDf3XENoWM][/video]

 

[Alpari]

UK Opening Call from Alpari UK on 21 August 2013

Markets expecting too much from FOMC minutes

Today’s UK opening call provides an update on:

• Investors seek tapering clues from FOMC minutes this evening;
• Small improvement expected in existing home sales in July;
• UK government borrowing improving as economy picks up;
• UK mortgage approvals expected to continue steady rise.

All eyes are going to be on the US on Wednesday, with housing data out shortly after the opening bell and more importantly, minutes from the Fed meeting in July being released this evening.

For about a year now, the way the financial markets have behaved has been dictated by the Federal Reserve, with quantitative easing inflating equity and debt prices not just in the US, but in Europe, Asia and the emerging markets. Ever since Fed Chairman, Ben Bernanke, suggested in May that the Fed could start reducing its asset purchases from the current level of $85 billion dollars a month later this year, the markets have been trying to guess exactly when this will be and by how much.

The markets quickly narrowed it down to one of two meetings, September or December, as these were the only two remaining meetings this year when Bernanke holds a press conference afterwards. The Fed have previously saved the big decisions for such meetings. Over the last few months, the consensus has shifted repeatedly between these two dates, but not the majority in the markets seem convinced that the Fed will begin to taper in September.

I am still not among the majority as I don’t believe the data has been indicative of a sustainable recovery in the US. On top of that, the rise in rates that would come with tapering in September could severely damage the recovery in the housing market, which has thus far underpinned the recovery in the economy as a whole.

That said, the markets suggest the majority do not share that opinion, which is why we’ve seen so much caution in the markets over the last couple of days. The minutes of the July meeting, the final one before September’s, will be released this evening and could provide some key clues around the Fed’s decision to reduce its asset purchases, including what improvement they’ll need to see in the data in order tapering to begin, when they’d be looking to start and how much they will taper by.

While all this could be in the minutes, I think the best we can hope for is to get an indication about what the numbers were like in terms of the voting in July and whether any of the more dovish members were coming around to the idea of tapering in September. We’ve heard from a number of Fed members since the meeting and the camp seems split pretty evenly on the matter, which again, to me, suggests tapering in September is unlikely.

As I mentioned earlier, the recovery in the housing market really has contributed hugely to the economic recovery as a whole in the last year. However, the recent rise in Treasury yields, and therefore mortgage rates, does appear to be having an impact on this. While we haven’t seen a dramatic reduction in the number of those buying properties, we have seen an impact and it’s still early days. Housing data, including today’s existing homes sales, will be watched closely in the coming months for further signs that the recovery has been damaged by these rising rates.

It’s going to be relatively quiet again in Europe this morning with very little economic data due out. Public sector net borrowing is expected to have fallen by £5.6 billion in July, which based on past data isn’t that uncommon. UK mortgage approvals will also be of interest to the markets, given that, like the US, the UK is attempting to start a recovery in the housing market in the hope that it provides a boost to the wider economy, through schemes such as “Help to Buy” and “Funding for Lending”. So far, the efforts appear to be working, the economy has picked up significantly this year, as has the housing market, with mortgage approvals rising steadily over the last year.

Ahead of the open we expect to see the FTSE down 3 points, the CAC down 2 point and the DAX down 5 points.

Read the full report at Alpari News Room​