SuperForex Analytics and Economic News

[Superfx_official]

EUR/USD Technical Analysis


The pair is trading in a corridor.

At the moment on our chart we see that our pair continues to be in the corridor 1.1270-1.1440.

Despite the expectation of the Fed raising interest rates tomorrow, the pair is showing growth. Even the current data from Germany could not deploy a pair.

Therefore, we believe that the upward movement may continue until the price reaches the upper border of the corridor, after which the downward movement can resume.

Therefore, we advise you to look for points to enter long positions and set take profits near the upper border of the corridor.

 

[Superfx_official]

Europe Prepares for Brexit

A no-deal Brexit seems more and more likely by the day.

In the United Kingdom Prime Minister Theresa May continues to try to convince enough members of Parliament to support her deal with the European Union, as there won’t be another one offered. However, due to the plan containing many points that leave-voting politicians do not support, it is widely expected the deal would flop.

On that background Europe is preparing for a hard Brexit. While the European Commission cannot have a complete plan of how everything would go after a no-deal Brexit, since not all outcomes can be anticipated, they are trying to at least plan for the key areas that would likely suffer damages. According to the current plans of the Commission, there will still be flights allowed between the United Kingdom and Europe, but UK-based airlines will not be able to manage flights that are between EU member countries. The bloc is also working on a plan to continue the cooperation with UK financial services for up to two years without changes in regulation. Moreover, the European Commission has recommended that EU countries tolerate UK citizens residing there, as long as the UK does the same for those countries’ nationals remaining in the UK.

There are many other points that need to be decided, but without a clear-cut deal and with so much doubt among British politicians, we are yet to see what would happen.

 

[Superfx_official]

What to Expect from the Fed in 2019

A new rate hike was just implemented, but what lies ahead?

Since the financial crisis of 2008, the Federal Reserve has taken a very careful approach to regulating the American economy. A few years ago they saw signs that the United States are improving, shaking off the damage done by the crisis, and so the Fed began to gradually increase interest rates in accordance with inflation growth. Under Janet Yellen’s leadership the Federal Reserve worked with a careful, predictable enough schedule that allowed investors to price in upcoming rate hikes before they even happened. Her successor, Jerome Powell also chose this approach when he inherited the post last year.

So far all of the interest rate increases have been implemented according to schedule. Investors have been able to predict them early enough based on looking at fundamental reports (such as CPIs, unemployment rate statistics, and jobless claims indices) – the same data that the Federal Reserve itself turns to for their monetary policy decisions. This permitted traders to see the path of the US Dollar clearly, even in the long term.

However, as the fourth and last for 2018 rate hike was implemented this week, Jerome Powell’s statements signalled a shift in the way the Federal Reserve will function from now on. The economy of the United States has been showing a stellar performance, with steady inflation growth and low unemployment. The Federal Reserve acknowledged that the economy is almost exactly where they want it to be optimally, which naturally calls for less regulation in the future. As the saying goes, why fix something if it’s not broken?

Nevertheless, this means that the course of future monetary policy changes in the US will become less predictable, possibly leading to increased volatility in pairs with the USD. Jerome Powell stated that perhaps up to two rate increases can be expected in 2019, if there are no significant changes in the current market trends in the United States. However, it is impossible to forecast when these hikes might occur. Next year the Federal Reserve will start considering a hike at every policy meeting, of which there are eight planned for 2019. Moreover, Powell will give a press conference after each meeting, which is a more active and transparent plan than previously. This would give the Fed Chairman the opportunity to discuss the state of the economy with the press quite often, possibly giving investors signals about policy changes in advance.

This new course for the Federal Reserve might be more difficult to gauge, but it is more flexible. It would make it possible for the central bank of the United States to be more adaptive to changes, something that might be quite necessary as the country continues to experience political shocks (mostly surrounding Donald Trump’s presidency). Furthermore, the fact that the USD is now so strong has shown to have a negative impact on developing markets. The global economic slowdown is further exacerbated by Trump’s trade war with China. All of these factors affect the future of the US economy as well, and the fact that the Federal Reserve will be able to react in a quick and timely manner is a good thing.

 

[Superfx_official]

OIL (CL/WTI): Fundamental Review and Forecast


Oil is still in search of the price minimum of the year. Amid negative sentiments on the market, it is unlikely that prices will be restored quickly. However, in the long term the deals to BUY seem the most effective.

The rapid downward trend formed in October 2018 continues. A few months ago almost nobody assumed a drop in prices below $50, but this psychological mark was successfully overcome after a month of testing.

Today on the market we can see extremely pessimistic sentiments. Now the cost of oil is affected not only by the increase in oil production in the US and the formation of an overabundance in the market, but also the overall geopolitical situation. In addition, the pause in the trade conflict between China and the United States did not calm investors, but rather caused uncertainty and increased risks upon investing in raw materials and commodity currencies, which caused a new wave of sales. More and more analysts agree that the conflict will not be resolved after the truce, but will resume with renewed force. In this situation, the negative long-term forecasts about the slowdown of the world economy and the new global economic crisis are getting more and more support. Investors in this situation have taken a wait-and-see position or prefer “safe assets”. The situation is aggravated by the rapid decline of stock markets. Companies, with a decrease in the value of their shares, will be less willing to invest in their development, which will negatively affect global demand.

All of the OPEC+ attempts to return investors' interest in oil, expressing their readiness to further reduce oil extraction, remain unnoticed in these conditions. The only factor that allows us to expect an increase in the cost of oil is the current already extremely low level of prices. At the moment, a barrel of CL/WTI oil costs only 42.97 dollars. Oil was cheaper only for a few months in the period from October 2015-February 2016, after which oil recovered in price to 53 dollars, and then to $74 in 2018. Perhaps the situation will repeat again, given that no one is interested in further price cuts. Even in the US, the current low price level makes shale oil extraction unprofitable and motivates producers to reduce it. Oscillators (RSI, MACD, Stochastic) that do not take into account all the fundamental factors unanimously signal the oversold zone and the probability of a price correction, but in general there are no signs of a trend change. The most optimal in this situation would be the deals to SELL in short-term trades, but in the long term, profit can be made with the deals to BUY.

 

[Superfx_official]

The Year in Review: 2018

A look back at the key events of this year.

As another year is around the corner, we thought it would be a good idea to take a look back at some of the most important developments in 2018, since the future is always influenced by the past. Here are some of the major topics that had investors at the edge of their seats this year.

Trade Wars
Hardly anyone would argue that the trade war that Donald Trump started by unilaterally imposing tariffs on imports from other countries is likely the most defining event in terms of economics in 2018. With countries responding with tariffs on their own in retaliation, most notably from China, this year’s trade wars officially began. The full impact of the trade dispute is far from clear, but even a few months into the tariffs, growth started slowing down globally, struggling markets suffered even worse losses, and the demand for oil dropped as industrial activity staggered.

The United States and China agreed to a temporary (90-day) truce to last between January and March 2019, during which they would not impose further tariffs on each other and focus on negotiations instead. However, as the two countries engaged in such talks on and off multiple times in 2018 to no avail, investors are not exactly optimistic about the two leading economies managing to resolve all of their crucial differences in such a short amount of time.

The Crisis of Developing Markets
Developing countries such as Argentina and Turkey had a very rough year. As is the case with many such economies, they have large international debts in USD. But with the economic climate improving constantly in the United States, the Federal Reserve had to hike rates four times this year alone. This led to a very strong dollar, making developing countries’ debts worth way more than they used to be. Argentina had to ask for a bailout by the IMF, while Turkey’s lira crashed dramatically.

Even stronger economies, such as Europe’s Italy and France, have a dark shadow of stagnant growth looming over their shoulder in this economic climate.

Brexit
The issue of the United Kingdom leaving the European Union has been on investors’ minds for over a year now, but with the March 29 deadline approaching fast and no deal in sight, it has become a particularly hot topic. The UK’s Prime Minister Theresa May even survived a vote of no confidence which came after she delayed the vote on the deal she negotiated with the European Union, once it became clear how strongly the UK Parliament opposes this agreement. The EU has not offered anything better and a vote on this deal will happen in January, though a win is not likely. In that case the United Kingdom will have 21 days to offer a new deal. Nevertheless, the European Union has been firm in their terms, so there isn’t much else the United Kingdom might bring forward to the discussion table that the bloc might consider.

The biggest problem with Brexit has been that the politicians pushing for the leave vote expected to have a perfect Brexit, negotiate the best possible conditions whereby the United Kingdom gets to enjoy the benefits of the EU (free access to their single market, etc.) without any of the negatives (free movement of people), which was never a real possibility in reality. The European Union wants to make this divorce difficult to discourage any other member states from thinking about leaving.

At this moment in time, a no deal Brexit seems the most likely. This makes the United Kingdom a major source of uncertainty in Europe.

Oil Prices Collapse
Oil prices were climbing steadily in 2017 and this year managed to reach levels from 2014 near $80. However, the lower demand due to the economic slowdown in many countries and the trade war between the US and China, as well as the United States’ continued effort to increase oil production led to another state of oversupply on the market. OPEC members managed to agree earlier this month on another production cut, but unfortunately, this did not stabilize prices much. This week oil slumped below $50, undoing most of the hard work of the past two years to increase oil prices.

In other words, 2018 was quite a busy year, but it seems many of the trends started this year are yet to produce results, so we need to look to 2019 for their resolution.

 

[Superfx_official]

Yen Surges after Market Scare

Apple shares dropped massively, sending investors scrambling.

Last night the Japanese yen experienced a flash crash, whereby it rose in price dramatically in a very short period of time. The rapid increase was due to international traders suddenly trying to buy the yen as a safety asset after news from Apple Inc. that their profits shrank in December much more than anticipated. Apple shares dropped 8%, causing a massive upset on the stock markets, which pushed investors to look for better assets. The issue was made worse by the fact that Japan was just emerging from its New Year’s holiday break and liquidity was limited.

The stock markets experienced an all-around shock. We saw losses in the Dow Jones, Dow futures, the S&P 500, and Nasdaq 100, as well as the European Stoxx 50.

In other news, today we expect the Democrats in the United States to try to pass a budget for the government, but since their proposal does not include funds for Trump’s infamous wall, the vote is not likely to succeed. We expect the US government shutdown to continue.

 

[Superfx_official]

EUR/USD Technical Analysis


The dollar weakens.

Among the significant events of today, we expect the release of data regarding the US labor market. The data currently released from the EU did not show the best performance.

Despite this, the momentum of the pair received an upward boost and at the moment it has overcome the level of 1.1440.

In view of the concerns about the Federal Reserve lowering the interest rate the reserve currency shows a decline and the dollar index is below the 95.50 mark.

Our technical indicators are multidirectional and we do not have a clear signal. We believe that at the moment it’s worth looking for points to enter long positions based on the support levels of 1.1410 and 1.1440. Consider the targets near the levels of 1.1490 and 1.1530.

 

[Superfx_official]

EUR/USD Technical Analysis


We are looking for entry points.

During yesterday's trading session the pair managed to gain over 100 pips and exceeded the 1.1540 level.

During the negotiations between the US and China the market was optimistic and American indices grew, while the dollar showed a decline. The dollar index fell below the 95.00 mark.

The data released this week showed a decline in business activity in the US, as well as a decrease in the number of vacancies in the labor market below the projected level.

In the EU the unemployment rate fell, while data from individual countries of the bloc showed multidirectional dynamics.

At the current moment we are seeing a corrective movement in the pair. However, we expect that the pair will face a strong support level at the 1.1510 mark during the downward movement.

Therefore, we advise you to look for a point to enter long positions. Consider the marks near the 1.16 and 1.1660 levels.

 

[Superfx_official]

Trump vs. the Shutdown


For three weeks now the conflict over the US budget has been ongoing.

Although articles by different news agencies have tiptoed around it in their work on the topic, there is no other way to put it, really: President Trump is holding the US government hostage. In a situation which has been going on since late December, Donald Trump continues to stall the efforts of Congress to pass a budget to fund governmental activities for 2019. Here is the what, how, and why of it all.

What:
The partial government shutdown began on December 22. It affects nine divisions of government with around 800,000 employees who are currently either working without pay or taking forced unpaid leave off of work. Under normal circumstances, Congress will pass a bill outlining the federal budget for the following year and that bill will be approved by the US President. However, President Trump has been vetoing all proposed budgets so far because he insists that $5.7 billion of funding be included in order to build a 200-mile wall that will cover about 10% of the border with Mexico. Since Congress has not provided a budget plan that contains the funding for the wall, Trump has not approved of the budget. This has left almost a million of workers in the public sector without pay for a couple of weeks now. Just this week it became known that the Food and Drug Administration, one of the most important governmental agencies that has a real impact on the health of Americans, will only be operating at half of its capacity due to the shutdown.

How:
The President of the United States cannot pass a law without support from Congress, and Congress usually cannot pass a bill without support from the President. Congress has shown they have a desire to move past this and work out a budget for 2019 and even managed to vote in support of one, led by House Speaker Nancy Pelosi, but Trump has exercised his right to veto it since his demands for a wall have not been met.

Instead of working with the Senate and the House of Representatives to provide enough funding for key parts of the federal government, the President has opted to wage a media war against the Democrats, placing the blame on them, making this a story about border security. According to Trump, the Democrats don’t want to have a safe border. Still, the President has refused to acknowledge that walls and fences alone have proven ineffective in preventing immigration, nor that his own plan will leave 90% of the border still open. His plan is flawed and although he insisted in an impromptu press-conference about the issue yesterday that he has the full, united support of the Republican party on this, that might not be necessarily the truth. A couple of Republican representatives recently voted to move past the shutdown, while several others have also spoken about ending this situation.

Why:
Donald Trump is not a politician, despite being the President of the United States. Most people in Congress have at least a law degree – they understand the Constitution and the way the government works. Trump, on the other hand, handles things as if he is a CEO with absolute power. His message regarding the shutdown essentially boils down to: “either we do things my way, or we don’t do them at all,” completely neglecting the damage that the shutdown can cause nationwide. He believes himself to be invincible – that as long as he keeps vetoing the proposals of Congress, they won’t be able to move on, and will eventually get tired of arguing with him.

However, Congress can actually get past a presidential veto. If they have a strong enough majority, with a two-thirds of the vote they can pass legislation that has been vetoed by the President. The reason why it hasn’t happened yet is that the Senate (which is one of the two chambers of Congress) is still under Republican majority, meaning the Democrats have to negotiate and try to swing several more senators their way in order to pass the vote successfully.

What now?
Trump has ruled out the possibility of a compromise. Even though he used the word in his speech yesterday, it seems that in his opinion a compromise would have to be made from the Democrats’ side, not his own. If Congress continues to resist, Trump has threatened to declare a state of national emergency.

Trump’s legal team has assured him that he has the right to call an emergency, but critics have argued that this will likely not go unchallenged in court. In effect, Trump will have to prove that there is an emergency so that he can act without Congress’s approval. Moreover, he would not have access to the full budget of the United States, but simply to the military construction portion of it, which is in total around $10 billion – but some of that money is pledged to other projects. It is unclear how much Trump can get out of it, even if he succeeds in declaring an emergency.

The current shutdown, going strong for 21 days, is tied for the longest ever in the history of the United States. While Congress seems poised to refuse Trump time and time again, it appears that the only wall the President will be building is one that separates him from his government.

 

[Superfx_official]

EUR/USD Technical Analysis & Daily Chart


The pair is in a tough spot, but today we can place buy orders.

Today we would take a look at the EUR/USD currency pair. The pair recently went through a brief recovery period, before turning bearish once more.

The euro is still having a hard time rallying. Last week it managed to push the EUR/USD pair up to 1.15 but then it began retreating again due to disappointing fundamentals from the eurozone. This week we are set to learn more regarding whether the euro would weaken further or begin to strengthen as we expect key inflation data on Thursday. If inflation rates continue to lag behind, this will be a signal for the ECB to remain dovish in their policy, postponing the interest rate hike that investors initially hoped for in the middle of 2019 even further.

The American dollar is also under the influence of monetary policy sentiments. Federal Reserve Chairman Jerome Powell through his recent appearances has convinced investors that there might not be another interest rate increase this year at all. Though that might seem like a dovish turn, Powell ensured investors it might not be so, as their goal would be to just maintain the neutral rate and optimal inflation (around 2%). This week we expect a lot of data from the United States, including the trade balance, inventories, industrial production, and more, so the USD will have many occasions to rise.

In terms of the daily chart, today we have a pivot point for the pair located at 1.1457, with the price currently slightly below it. The daily support levels lie at 1.1442 and 1.1424. The daily resistances are located at 1.1475 and 1.1490. The indicators of technical analysis point to a strong buy recommendation.