Market Reports and Trade Recommendations by FXPRIMUS

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Dear Traders,

We at FXPRIMUS wants to provide a Safest place to trade for our client. In doing so, we always provide our clients with the best market reports and trade recommendations.

Our Senior Economist, Jimmy Zhu helps our clients understands the current market trend and keep them up to date with the latest market reports and analysis.

Why do we share our market reports and analysis? Simple, we hope to help traders with their decision making and hopefully it helps all traders to be more profitable.

Our market reports covers all the important forex related news. This is to ensure that fellow traders will be up to date with the current market news.
 

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Market Brief of the Week for 28 April 2014: Investors Favor the Safe Haven Again

Economic Insights

Riskier assets might take a break for a while, when Russia-Ukraine geopolitical risk elevated

USD ended last week mostly in narrow ranges, despite equities selling off on the tech companies’ valuation and the Russia-Ukraine concern. USDJPY forms a clear downtrend last week, as JPY was favored by the investors when the geopolitical crisis affected global haven flight, pulling USD to yield lower.

G7 has prepared sanctions on Russia that could be imposed as soon as Monday as U.S., U.K. called on Moscow to help release observers seized by rebels in eastern Ukraine. Asian Stocks Drop on Earnings because of the Ukraine tensions. The U.S. and European Union will impose new sanctions on Russia as soon as today during the detention of international observers by pro-Russian separatists.

Possible actions could affect Russian companies and individuals close to President Vladimir Putin over the escalating crisis in Ukraine. They will be looking to designate people who are in his inner circle, who have a significant impact on the Russian economy, according to White House. They will also be looking at taking measures as well with regard to the high-technology exports to their defense industry. All of this together is going to cause an impact.

The Yen held weekly gains against most of its 16 major peers as tension in Ukraine spurred investor demands for safety. The intensifying situation in Ukraine had propelled stock selling and Yen buying. Japanese markets will close down tomorrow and on the 5th-6th May for The Golden Week public holidays.

The Fed meets on 29th-30th April, when economists are predicting that the central bank will cut monthly asset purchases by another $10 billion, down to $45 billion. Policy makers will continue to taper at that pace until ending the program at the 28th-29th Oct.

30th April: Euro-area Consumer Price Index (CPI) will be released. Euro-area CPI is likely to remain below 1% for the seventh month in April. Fifteen of the eighteen countries of the Euro area were reported to have headline measures of inflation of less than 1% in March. Five nations had experienced complete deflation. The European Central Bank (ECB) forecasts the average price growth to remain below 2% through 2016. A weak inflation reading on the 30th April will probably see the president of ECB facing calls to act as soon as next week by imposing negative interest rates for the first time or pushing forward with the plans for quantitative easing.
 

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Daily Market Report for 29 April 2014: Federal Open Market Committee (FOMC) Meeting Decision Could Hurt Gold Price This Week

Economic Insights

Federal Reserve (Fed) and Bank of Japan’s decisions this week is unlikely to surprise the market

Tensions between Russia and Ukraine are escalating once more. Last week, Russian President Vladimir Putin had warned Ukraine against continuing the anti-separatist offensive that killed five rebels. This week, representatives of the 28 European Union nations will meet to impose new sanctions on Russian companies and individuals close to the Russian President Vladimir Putin.

In the face of escalating tensions, two assets have been rising – the Japanese Yen and gold. A clue can be seen from the US Commodity Futures Trading Commission (CFTC). Last week, futures traders decreased their bets that Yen will decline against the greenback. The differences in the numbers of wagers by hedge funds and other large speculators on a decline in Yen compared with those on a gain – so-called net shorts – was down to 67,243 compared with net shorts of 68,716 a week earlier. This tells us that more money managers are betting on Yen to rise.

The trend was similar in gold.

The net-long position in gold rose up 0.5% to 90,572 futures and options, the first increase since 18th March. The increase snapped a four-week retreat that was the longest in 2014. Gold has experienced wild swings since the Russia-Crimea saga started. When Russia annexed Crimea last month, gold climbed to a six-month high, touching a price of USD1391.97 an ounce on 17th March. However, it fell almost 9% thereafter on signs that peace would return.

The “red herring” that could deter continued gains in gold and Yen would be the policy meetings by the Fed and the Bank of Japan (BoJ) this week. Here’s why.

Federal Reserve (Fed)

The Fed meets is on the 29th and 30th April this week. There’s a high chance that the central bank will cut the monthly asset purchases by another USD10 billion down to USD45 billion. The policymakers are expected to continue tapering at that pace until ending the program at its meeting on the 28th-29th October. If the Fed does taper this week, the US dollar would receive an uplift. The knee-jerk reaction would then cause gold to fall because gold and the US dollar tend to move in the opposite directions.

Bank of Japan (BOJ)

Yen demands may be limited this week as traders sit on the side-lines and await the decisions from the central bank’s policy meeting. This will be Japan’s first monetary policy meeting since the consumption tax hike in April. BOJ has delivered unprecedented stimulus to the economy in the last two years, pledging to double base money via aggressive asset purchases to accelerate consumer inflation to 2 %.

I expect BOJ to keep its monetary policy steady this week and only step up the stimulus in the second half of the year to offset the negative drag on the economy from the tax increase. However, there is a slight possibility for BOJ to announce additional stimulus this week if figures are not up to their expectations.

I have learnt over the years that it is better to stand prepared and react to any surprise announcements from the central bankers, rather than jump the gun and pay for it with my trading account.
 

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Daily Market Report for 30 April 2014: Bank Of Japan (BOJ) Is Expected To Maintain Its Policy

Economic Insights

Bank of Japan (BOJ) is unlikely to add on any stimulus in today’s meeting

Japan’s central bank is probably not yet ready to expand its current easing size, when the Bank of Japan rolled out its strategy for quantitative easing this time last year. The most visible tactic was the purchases of 60–70 trillion Yen in assets within a year, aiming to double the size of Japan’s monetary base, and hit a 2% target for core inflation on a two-year time horizon.

The strategy has had some notable successes. Core CPI rose up to 1.3% year on year in March, a pronounced turnaround from the negative 0.4% inflation when the stimulus was launched. Inflation expectations have risen. That has helped change the behaviour, with business investment shifting from a contraction to an expansion. Most recently there are also concerns that progress has stalled. All of the gains in the Consumer Price Index (CPI) had occurred in 2013. The index has been flat for the last four months. A stronger Yen and a weaker Nikkei since the start of 2014 show market euphoria has faded. It is one of the reasons that voice for more easing increases especially since the sales tax hiked.

Tighter fiscal policy, following an increase in the consumption tax in April, threatens to dent growth. The BOJ has scope to do more. A look at the central bank’s balance sheet shows total assets that equals to about 22% of outstanding government debt. That’s less than the 27% of the U.K. gilt market owned by the Bank of England (BoE) and roughly in line with the 20% of U.S. Treasury debt held by the Federal Reserve (Fed). But Abe’s reform has not been deployed, so for in a meaningful pace, we still expect the BOJ to stay put.

However, Governor Haruhiko Kuroda said he won’t hesitate to adjust the policy if needed. An early move would have the advantage of taking the market by surprise. With the Fed taper edging up rates in the U.S., a relatively small addition to BOJ purchases could also have a huge impact. A wider difference between the rising of U.S. and the suppressed Japanese rates might stoke another period of Yen weakness, heating up corporate profits.

Still, with Kuroda apparently is confident in the current policy stance, an early move to ease seems to be an outside chance for this meeting. Policy makers probably want more time to assess the impact of the April tax increase before considering any further action.

If policy stays on hold, the focus of attention will shift to the BOJ’s Outlook Report for clues on shifts in policy makers’ thinking. Downgrades to forecasts for growth and inflation — currently at 1.4% for Gross Domestic Product (GDP) and 1.3% for core CPI in fiscal year 2014 — may pave the way for further easing in the third quarter.

Euro Zone CPI released later may show another negative result, as the confidence waned. Europe’s economic confidence gauge unexpectedly dipped this month from the three-year high touched in March.

The European Commission’s economic confidence index fell to 102 points in April, down from a revised 102.5 in March and below the earlier consensus reading at 102.9 reading.

Mario Draghi insisted the central bank stood ready to act if inflation conditions in the euro zone deteriorated two weeks ago. The European Central Bank (ECB)’s governing council is unanimously behind the idea of scooping up assets via quantitative easing if inflation does not pick up. If market rates were to soar, the ECB would be ready to take other unconventional measure or same thing goes for Euro. These include cutting the rate that the ECB charges banks for parking their money in its deposit facility below zero, or extending a new round of cheap loans to lenders.

But because the governing council meets is in two weeks’ time, it won’t be an easy task. More likely, the ECB will wait until it publishes its next set of inflation forecasts, which are due in June.
 

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Daily Market Report for 2 May 2014: Loan Data and Inflation In the Euro Zone Still Call For Quantitative Easing (QE)

Economic Insights

Lending data in the Euro Zone showed a healthy improvement, but further easing is still needed

Euro dollar edged higher in the past few days as inflation and lending had picked up. The European Central Bank (ECB)’s quarterly bank lending survey was released two days ago. It will allow the hawks on the Governing Council to argue that an increase in credit to the real economy is on the horizon. The doves may argue that the survey is no longer a good indicator of credit extension. The proponents of further easing are likely to win the battle eventually, as long as inflation remains in a downtrend.

Net demand was positive for all loan categories for the first time since July 2006. The difference between the percentage of banks reporting an increase and that reporting a decline in demand stood at 2% for enterprises. The figure for loans to households for house purchases measured at 13% and that for consumer credit and other lending to households at 4%. The strength in net demand for loans for house purchases relative to the two other categories is in line with historical patterns of credit extension.

The figure on net demand for loans to enterprises recovered throughout the course of last year and yet actual loans to non-financial corporations hit new record lows in the same period. The time series from the bank lending survey appears to have previously been a leading indicator of loan growth. The story is largely the same for loans to households. Both of the time series from the quarterly bank lending survey have been recovering since 2012, while credit extension remains subdued. The survey on the access to finance of small and medium-sized enterprises in the euro area, also released yesterday by the ECB, indicated funding to those businesses is still limited. The figure on the availability of bank loans remained in negative territory at minus 4%, though that was an improvement from minus 11% in the previous reporting period.

In the U.S., Nonfarm payroll will be released tonight. Growing economic inequality amid a labour crisis requires an efficient policy response to reduce lasting risks to a new generation of workers. The long-term effects of the shock to the U.S. labour market from the Great Recession and the subsequent deterioration in the labour force have inflicted a case of hysteresis, or a permanent break, in the generational development of the U.S. labour force. The unemployment rate among those aged 16 to 24 is 14.5% compared to 6.7% in the general population.

Both figures probably underestimate the condition of the labour market because of the exit from the workforce of millions of discouraged workers and young people who have been shut out of opportunities thanks to a growing experience gap. Hysteresis demands that U.S. labour market policy shift from a passive stance, which relies primarily on unemployment compensation, to an active strategy that targets blue-collar workers and young Americans between the ages of 16 and 24 who, more than any other group, have been shut out of the recovery.

In China, its official Purchasing Managers’ Index (PMI) edged up to 50.4 in April from 50.3 in March, hovering above the 50 mark that separates improving from deteriorating conditions. Strengthening new orders provided another tentative sign of stabilisation in the manufacturing sector, arguing against a further shift in policy toward stimulus.
 

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Market Brief of the Week for 5 May 2014: Strong Payrolls since 2012 Is Not Sufficient To Alarm the Fed to Discuss the Rate Hike

Economic Insights

Dollar almost outperformed all the G10 currencies despite the concern of the U.S. labour market

U.S. employers boosted payrolls by the most in two years and the jobless rate plunged to the lowest since the financial crisis in 2008. The 288,000 gain in employment marked the biggest upside surprise since February 2012 and followed a 203,000 increase in the prior month. Unemployment dropped to 6.3%, the lowest level since September 2008. This is lower than the Federal Reserve (Fed)’s previous key threshold at 6.5%, which has been removed since March this year.

U.S. Nonfarm payroll & U.S. unemployment rate



Source: Bloomberg


The winter “noise” still has some effect here, as the economy is gathering momentum after the bad winter. Surprisingly, stocks fell this time. Concern about early tightening fears and escalating tension in Ukraine had overshadowed the jobs report. Safe haven is in favour again, yield on the benchmark 10-year treasury note fell to 2.59% and USDJPY fell below 102 this morning.

The jobs figures corroborate the Fed’s view that the economy is rebounding from the weakest growth rate in a year, indicating central bankers will keep trimming stimulus. But due to the earlier winter effect, it’s still too early to call for when the soft patch is over, and the strong U.S. recovery will continue.

Falling unemployment shouldn’t reflect resilient macro fundamentals yet. The drop in the unemployment rate from March’s 6.7% came as the labour force shrank by more than 800,000 in April. The participation rate, which indicates the share of working-age people in the labour force, decreased to 62.8%, matching the lowest level since March 1978, from 63.2% a month earlier.

In China, its manufacturing contracted for a fourth month in April, according to the HSBC manufacturing final Purchasing Managers’ Index (PMI), raising the concern of the economy’s slowdown is deepening. PMI was at 48.1%. That compared with the preliminary reading of 48.3% and March’s 48%. Shanghai and Hong Kong stocks extended declines on the report, when the policymakers may have a bigger tolerance level for the growth this year, after property construction plunged last quarter and expansion cooled.

The stimulus size is relative small so far in China, and we expect this pace could be extended to June at least. The State Council has outlined a package of spending on railways and housing and tax relief to support growth and pledged extra efforts to aid exporters. The central bank has also lowered the reserve-requirement ratio for some rural banks by as much as 2 percentage points.



Top News This Week

New Zealand unemployment rate

I expect figures to come in at 5.9%

RBA Cash Rate decision

I expect figures to come in at 2.5% unchanged
 

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Daily Market Report for 6 May 2014: Australia Trade Data And RBA Policy Are Likely To Press Aussie Lower Against Kiwi

Economic Insights

RBA rate decision is due today, expected at 2.5% unchanged

Australian Bureau of Statistics released its trade report earlier today. Exports fell 2% from month earlier, and it could be due to the recent higher currency. Imports had little change from month earlier. Lower exports growth reduced the March trade balance to A$731 million, from a revised A$1.257 billion surplus in Feb. Little price change from the Aussie dollar as investors are waiting for the rate decision and statement from the RBA.


Australia trade balance (yellow) vs. AUDUSD (white)

Source: Bloomberg


Rising commodity price may offer some confidence of the recovery in Australia, when Thomson CRB commodity index rose by 9.66% since beginning of the year. However, fading inflation number and strong Aussie had refrained the central bank to offer the signal to hike its OCR in 2014. In the swap market, low bets on rate hike by end of the year are now seen since middle of March, currently standing around 10%. Treasurer Joe Hockey is going to deliver the budget estimates in a week, an above A$120 billion deficit is expected, this is certainly not advising the RBA to appear to be hawkish when more revenue needs to be generated from the country in the coming years besides tax increases and expenditure cuts. In other words, it is too early for the RBA to learn from the RBNZ, by normalising the key interest rate.

Bond investors do not believe the monetary policy tightening in the near term, when the Australia/U.S. 10 year spread narrowed to 125.8357 bps from 158.4876 bps in Oct last year. However, spread between Australia and New Zealand refused to carry on its uptrend since Sep last year reduced the possibility of further rate cut by the RBA.


Australia / U.S. 10 year spread

Source: Bloomberg


New Zealand / Australia 10 year spread

Source: Bloomberg


Its neighbour New Zealand, may hike the interest rate by another 50-75 bps throughout 2014, as its meaningful fundamental recovery. But in this stage, we do not hike at end of the year. Stronger AUD and fiscal deficit concern are the best reasons for the central bank to wait for a while. Besides that, the RBA is likely to wait for a few more inflation numbers before the next move.
 

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Daily Market Report for 7 May 2014: Fundamentals vs. Policymakers’ Rhetoric

Economic Insights

RBNZ Wheeler may prepare to intervene the currency market

New Zealand has been enjoying a economic recovery with a solid momentum in the past months, and just reporting a solid labor market report this morning. However, Kiwi became the worst performer among the G10 currencies, fuelled by the RBNZ Wheeler’s speech on possible intervention.

New Zealand employers added more manpower in the 1Q this year, more than the earlier analysts estimate. Besides that, increasing people joined the workforce again, as the participating rate rebounded. The participation rate rose to 69.3 percent from 68.9 percent in the fourth quarter, reaching the all time high.

New Zealand labor market participating rate

Source: Bloomberg


Employment change increased 0.9 percent, by 22,000 jobs added. The jobless rate was unchanged at 6 percent, even with the participating rate improved. Under this perspective, this type of trend even shows more healthy signs than the labor market in the United States, sending the message to the market that the recovery of the labor market in New Zealand sets to be sustainable. According to the official data, the increase of the manpower was mainly from retail hospitality and construction sectors. Economists forecast 68.9 percent.

But Wheeler’s speech made Kiwi become the worst performer among the G10 currencies today. Wheeler said the bank may be more prepared to sell the nation’s currency if the exchange rate fails to respond to a continued weakening of export prices, it would become more opportune for the Reserve Bank to intervene in the currency market to sell New Zealand dollars.

Shall we care? Yes and No. Based on those previous rhetoric from the RBNZ, the effect usually not sustainable. Even now, higher inflation and improving labor market further support the RBNZ to hike the rate for another 3-4 times in 2014. It will be positive for the Kiwi. If we stick to this perspective, we may ignore the Wheeler’s speech today, and it might even be an opportunity for investors to pick up the kiwi at a better price.

On the other hand, factors to curb the Kiwi rally are also seen nowadays. Its exchange rate could be expected to weaken if the U.S. economy continues to improve after a bad 1Q due to the weather effect. Its dairy prices has been lowered by 13.57% since the peak level in Feb this year.

New Zealand Dairy price index

Source: Bloomberg


All in all, we think the chance for a real intervention in the currency market is very low. But Wheeler’s speech today has lowered the chance for the RBNZ to hike the rate by another 25 bps in June’s meeting. Short term rhetoric from the policymaker is unlikely to press the Kiwi lower in a longer period, unless the RBNZ changes its rates normalization regime to be adjusted, but the inflation and rising housing market prices not allowing the central bank to do so.
 

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Daily Market Report for 8 May 2014: Yellen’s Testimony Lifted the U.S. Equities, But Not Greenback

Economic Insights

Mixed signal in the U.S. Treasuries market tells you the reason why the greenback has little reaction on Yellen’s speech

Federal Reserve (Fed)’s Chair of the Board of Governors, Janet Yellen made it clear that she believes the economy still requires a sizable stimulus because the labour market and inflation are well short of the Fed’s goals. Unemployment rate dropped to 6.3% last month but participating rate had also dropped. A high degree of monetary accommodation remains warranted, which is offered by Yellen in the Joint Economic Committee of Congress. Inflation is still well below the central bank’s 2% target, according to the Personal Consumption Expenditures (PCE) gauged by the Fed. In her point of view, weaknesses in the labour market exist as long as the numbers of long-term unemployed remains despite the economic outlook improves. The Treasury market yield curve steepened after her comments tempered expectations among some of the investors for a faster pace of interest-rate increases. Bonds market with the different tenor showed a very interesting message. Shorter tenor’s yield decreased as the immediate tightening fears eased. The 30-year bond yield increased as much as three basis points to 3.41% before trading at 3.4%. An increase in longer-term yields indicates investors see inflation is accelerating. The mixed signal could well explain why the U.S. dollar is refusing to go down.

Regarding the rate hike time table, Yellen said that there is no mechanical formula for when that will occur. We think the rate will stay near zero for a “considerable amount of time” after the Fed end its bond-purchase program intended to spur growth, and it will be longer than six month. Gains in household wealth from rising home prices, less drag from federal and state and local budgets, and stronger growth abroad should be the major reasons for the Fed to finish the tapering program by end of the year. But the slowdown in U.S. housing, along with “heightened geopolitical tensions” and financial stress in emerging markets will stop the Fed to discuss the rate hike planning at this moment.

China’s exports and imports unexpectedly rose in April, easing the worries on a sharp slowdown in its 2Q growth. Overseas shipments increased by 0.9% from the previous year, when figures were inflated by fraudulent invoicing same time last year. Imports gained by 0.8%, leaving a trade surplus of $18.46 billion. The strength of trade may affect chances that leaders will resort to monetary-policy easing or larger-scale stimulus rather than railway spending and tax breaks, after first-quarter growth that was the slowest in the past six periods. China will implement measures to stabilise the country’s “severe and complicated” foreign-trade situation, the cabinet said last week. Local share market immediately rose after the trade data was released, as clearer picture of the second quarter stabilisation is more warranted.

China exports year over year (YoY) (white) vs. China imports YoY (yellow)

Source: Bloomberg


Most of the Equities indices in Asia this morning edged higher from a disappointing session yesterday. Japan Nikkei was trading 1.09% higher at this moment, and HK HSI was up by 0.71%. In the currency market, most of the currencies remain unchanged comparing to the overnight session, except for the Aussie buoyed by the higher than expected exports number in China.
 

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Daily Market Report for 14 May 2014: Is It A Right Time To Pick Up On Chinese Stocks?

Economic Insights

Chinese officials intend to accelerate the lending as the property market called for the “help”

China’s central bank called on the nation’s biggest lenders to accelerate the granting of mortgages, a sign that the government intends to set a floor on the growth in 2014. The People’s Bank of China told 15 banks yesterday to “improve efficiency of service, give timely approval and distribution of mortgages to qualified buyers,”. It also urged lenders to give priority to families buying their first homes and strengthen their monitoring of credit risks. Premier Li Keqiang is seeking to put a floor under a slowdown in the world’s second-largest economy. The housing market has become a drag on growth as developers, facing a surplus of empty units and dropping sales, put the brakes on new construction. Home sales fell 18% in April from the previous month, according to data from the National Bureau of Statistics. Some loose monetary policy and stimulus has been expected by us earlier of the year in 1Q, as we have mentioned lots of time that the officials won’t sacrifice the social stability for pushing the agenda of reform. It helps our clients to know the right time for “In and Out”. The Shanghai Stock Exchange Property Index, which rose 0.5% in the morning trading session, trimming this year’s decline to 4.3%.

Factory production rose 8.7% in April from a year earlier, according to the data yesterday, down from 8.8% in March. Fixed-asset investment excluding rural households increased 17.3% in the first four months of the year, the slowest for the period since 2001.

China’s stocks fluctuated in the morning trading session, when many investors still wants to pick up the stocks if the benchmark index has the chance to retrace to the level near 2,000. Real-estate companies rose after the central bank asked major lenders to accelerate the granting of mortgages. China Vanke and Poly Real Estate Group climbed more than 2% after the People’s Bank of China urged lenders to give priority to families buying their first homes. It’s a sign of easing in the property sector and we need to see more follow-up measures such as the loosening of purchase restrictions to fuel a broad-based rally for stocks. Apart from that, there is nothing that can sustain the gains fundamentally.

Overnight in the United States, spending at U.S retailers held steady in April after a surge in the previous month that put economic growth on track to pick up in the second quarter. Purchases increased 0.1% to $434.6 billion following a revised 1.5% jump in March that marked the biggest gain in four years. The better than previously estimated reading at the end of the first quarter as the world’s largest economy recovered from unusually harsh winter weather will help the expansion rebound after growth stalled to start of the year. More employment opportunities would further invigorate the household spending that is benefiting those large retailers.

In Europe, German investor confidence fell for a fifth month in May in a sign of growing concern that threats from low inflation to a strong euro may undermine the recovery. EURUSD fell as low as 1.3690, the supported level we mentioned in our weekly webinar 2 days ago.
 
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