Vantage FX Daily Market Update

Vantage FX

VantageFx Representative
Messages
174
bull-604x270.jpg


Good Morning Forex Peace Army!

Each morning one of our Market Analysts posts a Daily Market Update blog to the Vantage FX News Centre. We will now be sharing these posts with the Forex Peace Army community inside this thread.

We'd love to hear your opinion on any of the themes and charts discussed, so please leave a comment or just say hello.
 

Vantage FX

VantageFx Representative
Messages
174
tsipras-604x270.jpg


A Victory of the People:
Alexis Tsipras’ left-wing Syriza party has cruised into government at elections held this weekend in Greece. After polling suggested a tight race in which Tsipras was no certainty of holding onto power, Syriza has come out unassailably leading with a 35.5% share of the vote compared with 28.2% for the centre-right New Democracy party.

This victory comes despite a turbulent first term in office that has seen Tsipras oversee the implementation of a harsh Eurozone-led austerity program. The election result, while not changing things fundamentally on markets, provides stability in government which is something that we know is immensely important for traders heading forward.

“This victory belongs to the people and those who dream of a better tomorrow and we’ll achieve it with hard work.”

greekelectionstweet2.png


With the Greek economy contracting 29% since 2009, the people just want progress. It is also interesting to note that all major parties that contested the election today were committed to continuing with the current EU bailout deal. We now look ahead to the end of the year when Greece face their first review of austerity measures imposed on them.

EUR/USD Daily:
eu5.png

Click on chart to see a larger view.

As we’re all feeling, the EUR/USD chart has bigger picture things to worry about than a narrative that’s played out with little effect for months to begin the year. The most recent drop in Euro can be more accredited to ECB Executive Board member Benoit Coeure warning that the Euro had experienced a significant appreciation and that this will put pressure on Eurozone growth forecasts reaching their expected targets moving forward.

Uncertainty Trumps Cheap Money:
With the Fed holding off a rate hike for at least another month, the continued access to cheap money was expected to give stocks a boost. However, with the Fed openly expressing their concerns around the pace of global grows and in particular China, things haven’t been quite as smooth as some expected.

SP500 Daily:
sp500fibs.png

Click on chart to see a larger view.

After the Black Monday drop, ignoring everything but the technicals, we have got a healthy pull back into the 61.8% fib retracement. From here, price has rejected nicely with no close above the level and nice long wick highlighting the emergence of sellers once again.

That looks a fairly bearish reaction to me.

———

On the Calendar Monday:
“Respect for the Aged Day (敬老の日 Keirō no Hi) is a Japanese designated Public holiday celebrated annually to honor elderly citizens.”

EUR Greek Parliamentary Election
JPY Bank Holiday

USD Existing Home Sales
USD FOMC Member Lockhart Speaks
CAD BOC Gov Poloz Speaks

———-

Chart of the Day:
A pure Forex Technical setup today on NZD/USD, hitting channel resistance highlighted in our RBNZ Interest Rate Decision Preview blog post from two weeks ago.

NZD/USD 4 Hourly:
nu1.png

Click on chart to see a larger view.

As you can see, price rejected off channel resistance almost to the pip, giving the trend line a third confirmation touch. A chart of beauty for the technical analysis purists out there!

Read about the Greek Elections in the Daily Market Update on the Vantage FX News Centre.
 

Vantage FX

VantageFx Representative
Messages
174
cramer-604x270.jpg


Fed Speaker Fever:

Last night we heard from three Fed policy makers separately explaining their rationale for initiating liftoff at one of the Fed’s two remaining meetings of 2015 with the bulk of comments around unemployment, economic growth and whether international headwinds are actually a cause for concern while setting policy.

The highlight most definitely was St. Louis Fed president James Bullard’s appearance on CNBC’s Squawk Box program which saw him fire a few sarcastic parting shots at network personality Jim Cramer.

Bullard said that Cramer has more or less been cheerleading the Fed to keep interest rates near 0% because it will help the stock market. Calling this “unsavoury,” Bullard appeared clearly unhappy with Cramer’s commentary.

Although in Cramer’s right of reply I was expecting more fireworks, the exchange is still gold and well worth a look this morning on their website!

With Bullard not a voting member of the FOMC, Federal Reserve Bank of Atlanta president Dennis Lockhart and San Francisco Fed President John Williams’ comments, while not as entertaining, were maybe more notable.

“I want to stress a basic point. Financial market swings per se are not my central concern. The broad Main Street economy is my essential concern.”

“In my mind, it was a close call.”

Hedging their bets and nothing we didn’t already know. Talk has become cheap and these sorts of comments don’t cause the moves that a hawkish Fed speaker or two once would have caused. Markets know it’s coming, now they just want to see action.

———

On the Calendar Tuesday:

“Autumnal Equinox Day (秋分の日 Shūbun no Hi) is a public holiday in Japan that usually occurs on September 22 or 23, the date of Southward equinox in Japan Standard Time (autumnal equinox can occur on different dates for different timezones).“

JPY Bank Holiday
AUD HPI q/q

GBP MPC Member Shafik Speaks
USD FOMC Member Lockhart Speaks

———-

Chart of the Day:
Back into the world of today, with the look at the CHINA50 index chart.

CHINA50 4 Hourly:
china50.png

Click on chart to see a larger view.

The CHINA50 is not a market that gets a lot of attention but as we’ve said before, it’s a market that obeys technical levels nicely.

With Chinese stock indices in a well publicised downtrend, it’s interesting to note the technical structure of how price has stepped down between levels. As you can see on today’s chart, each time the CHINA50 has broken a level of support, it has flagged along a trend line and failed at the re-test of previous support now acting as resistance.

Price has again formed a flag pattern after breaking the most recent level of support and is currently re-testing previous support as possible resistance. Are you looking to position yourself for the breakout?

Read more from the Fed Speakers in the Daily Market Update on the Vantage FX News Centre.
 

Vantage FX

VantageFx Representative
Messages
174
volkswagon-604x270.png

Volkswagen Vexation:
The major story with market implications overnight has come out of Germany, with Auto conglomerate Volkswagen revealing that 11 million of its diesel cars worldwide are equipped with devices that can cheat pollution tests. With huge political implications and negative publicity adding to the fraudulent claims, this story sent VW stocks tumbling and worldwide indexes along with it.

Volkswagen shares, fell 17% on Monday, followed by another 23% last night. The company’s biggest duel day slump since 2008! The latest drop on the back of news that the company is now warning that it will have to lower its profit outlook.

This scandal has dragged other car manufacturers around the world down with it as investigations are sure to be cast wider now that one has been busted for cheating on its emission tests. Either way, this story is sure to drag out and weigh on the industry for possibly years to come.

The hit was felt across the Atlantic in the US, with stocks continuing to fall away from the 61.8 Fib level that we spoke about on Monday. The impact on markets that Fed tightening would have has also not been forgotten, with renewed interest around October following this week’s Fed speakers adding fuel to the smoldering fire.

Euro in Play:
Staying in Europe, focus tonight will turn to Mario Draghi who is due to testify on monetary policy before the European Parliament’s Economic and Monetary Committee in Brussels.

Markets will be hanging out for any QE related rhetoric and opinions on fair value of the Euro relative to where we sit right now. Just remember that we are still nowhere near lows with Fed on the cards and European growth outlooks not inspiring a whole lot of confidence. Eurozone PMI numbers on the calendar tonight will add to the narrative but the greater risk looks for more falls.

EUR/USD Daily:
eu6.png

Click on chart to see a larger view.

With the deluge of European event risk coming up this session, the Euro will be well and truly in playthroughout today. While still sitting in the middle of its newly formed bullish channel, price has come back to re-test a previous swing long and point of interest. A nice solid technical zone to manage your risk around.

———

On the Calendar Wednesday:
JPY Bank Holiday
CNY Caixin Flash Manufacturing PMI

EUR French Flash Manufacturing PMI
EUR German Flash Manufacturing PMI

CAD Core Retail Sales m/m
EUR ECB President Draghi Speaks

———-

Chart of the Day:
Cheating the ‘Chart of the Day’ name a little today by showing two AUD/USD charts, but the longer time frame is needed for context.

AUD/USD Weekly:
au8.png

Click on chart to see a larger view.

Using the weekly chart as context for the trend line price is flirting with in the big picture, what I really wanted to highlight is in the daily chart to follow.

AUD/USD Daily:
au9.png

Click on chart to see a larger view.

After having broken the major weekly trend line, price came back to re-test not only the trend line, but also the short term broken support level. It’s here we get these two beautiful long wicks rejecting price off the level.

Was this the last push up by the AUD/USD bulls to comprehensively break the major weekly trend line?

Trade the Euro news in the Daily Market Update on the Vantage FX News Centre.
 

Vantage FX

VantageFx Representative
Messages
174
draghi-604x270.jpg

Draghi:
Overnight saw ECB President Mario Draghi speaking on monetary policy before the European Parliament’s Economic and Monetary Committee in Brussels.

Going by Mr Draghi’s high personal entertainment standards, last night’s speech was rather uneventful in both shenanigans and market moving material.

Draghi outlined the standard risks to Europe’s inflation and growth outlook having increased due to the emerging market slowdown but qualified the statement by stating that the central bank needs more time before deciding on the direction of any further possible stimulus and that the ECB is ready to beef up its 1 trillion+ Euro asset buying program if needed. A big hedge on the Fed if ever there was one.

He went on to say that price growth will take longer than previously expected to rise back to the ECB’s target of 2%, but more evidence is needed to conclude whether China’s slowdown, the rising Euro (see the chart below) and falling oil prices will divert inflation from its projected path.

“The asset purchase program has sufficient in-built flexibility.”

“We will adjust its size, composition and duration as appropriate, if more monetary policy impulse should become necessary.”

The deluge of PMI’s overnight didn’t alter the macro picture, but the Chinese Caixin Manufacturing PMI falling to its lowest reading in 6.5 years will continue to give central bankers soundbites.

EUR/USD Daily:
eu7.png

Click on chart to see a larger view.

The Euro bounced off the level of interest we spoke about yesterday but while price is still in the middle of that short term channel, risk management for taking short term positions is still an issue for me.

———

On the Calendar Thursday:
NZD Trade Balance

EUR German Ifo Business Climate
EUR Targeted LTRO

USD Core Durable Goods Orders m/m
USD Unemployment Claims

USD Fed Chair Yellen Speaks

———-

Chart of the Day:
With the fallout from yesterday’s Volkswagen emissions scandal starting to settle, the German DAX took quite a hit overnight during the European session.

After featuring the DAX in our chart of the day section around a month ago, we today re-visit the German Index.

DAX30 Weekly:
dax3.png

Click on chart to see a larger view.

While still in a major bullish trend, price has pulled all the way back to weekly trend line support.

DAX30 Daily:
dax4.png

Click on chart to see a larger view.

The daily has seen price kick down from where we were re-testing the short term flag support as resistance a month ago, providing a nice continuation short. Now with price back at both swing lows and major weekly trend line support, buyers surely wont be far away.

Do you see opportunity in trading the DAX at this price?

See more of what yesterday's Mario Draghi speech meant in the Daily Market Update on the Vantage FX News Centre.
 

Vantage FX

VantageFx Representative
Messages
174
yellen-604x270.jpg

Janet Yellen Health Scare:
Chair of the US Federal Reserve, Janet Yellen is okay after receiving medical attention at a speaking event at the University of Massachusetts, Amherst.

Yellen struggled to finish her speech and after coughing and stopping to re-compose herself several times as her speech came toward the end, she was forced to wrap things up early. After losing her place, she abruptly said ‘I think I will end here’ and received instant medical attention.

Wires have reported that after seeing medics, Janet is now fine and has continued on with her daily commitments. Fed officials have stated that Janet felt dehydrated after a long speech under bright lights and that she felt fine afterwards.

Either way, at 69 and under the obvious stresses that chairing the Fed brings with it, this scare is not a matter to be taken lightly.

Inflation Dynamics and Monetary Policy:
I’ve taken a few key quotes out below:

“the US economy will remain strong and inflation pressures low, which would make raising rates possible.”

“Most FOMC participants, including myself, currently anticipate that achieving these conditions will likely entail an initial increase in the federal funds rate later this year, followed by a gradual pace of tightening thereafter.”

While maybe the markets reacted to Yellen’s health more than the content of her speech, she has made it clear that the Fed doesn’t expect to continue with a policy of near-zero interest rates much longer and may raise rates before year’s end.

USDX Daily:
usdx5.png

Click on chart to see a larger view.

Technically, I’m a little wary of USD longs. What Yellen has said about raising rates before years end is largely priced in. I think there’s still a squeeze down to come before we get the USD rally everyone is looking for.

———

On the Calendar Friday:
USD Fed Chair Yellen Speaks

USD Final GDP q/q

———-

Chart of the Day:
When posting a USDX chart, I always like to try to then post a chart of one of the Forex majors for comparison. Analysis on the USDX chart is such a powerful tool when used in conjunction with any of the majors.

Even if not trading the USDX directly, I definitely recommend keeping one open on an MT4 Demo for reference.

EUR/USD Daily:
eu8.png

Click on chart to see a larger view.

Price has bounced off our EUR/USD level of interest from earlier in the week. In conjunction with the USDX chart above, I do like the idea of playing for a squeeze before we continue down.

With the bottom of the short term channel creeping closer with each day of sideways trading, the level is available to manage risk around.

Do you see opportunity in EUR/USD?

Read the full Janet Yellen speech in the Daily Market Update on the Vantage FX News Centre.
 

Vantage FX

VantageFx Representative
Messages
174
volkswagengermany-604x270.png

In yesterday’s Daily Market Update (Draghi and ‘de DAX’), the Chart of the Day section featured two German DAX30 charts.

“The DAX is a stock index that represents 30 of the largest and most liquid German companies that trade on the Frankfurt Exchange.”

Naturally the Volkswagen emissions scandal has had an effect on the DAX and I wanted to take a look at the charts in more detail here.

DAX30 Weekly:
dax3.png

Click on chart to see a larger view.

The weekly chart sees the dominating technical theme being the major bullish trend that has been in play for years now. After getting a little parabolic, more recently we’ve seen price pull back down to test the trend line that we have drawn from 2011 and 2014 lows.

With price testing trend line support for the 4th time, the bulls are starting to look a little shaky. The fact that the 4th test of the level is so close to the 3rd just adds to the case that the bears are starting to take control.

DAX30 Daily:
dax5.png

Click on chart to see a larger view.

Zooming into the daily chart, we have seen price break down through a short term channel/flag, and then re-test broken support as resistance. It was here that the Volkswagen scandal hit and price has quickly dropped down to major trend line support once again.

I found it interesting that Deutsche Bank has also revised its DAX forecast for both 2015 and 2016, now expecting the index to end the year at 10300. This is significant because it is 1000 points lower than its previous forecast for the year, but an expectation that the major weekly trend line will hold.

Do you expect buyers to come into the market at these levels, or are we going to get a hard breakout to the downside?

Do you trade indices on MT4 with Vantage FX?
 

Vantage FX

VantageFx Representative
Messages
174
catalonia-604x270.jpg

Featured Image: ‘AOP Press‘

Catalan Independence: Is it a Big Deal?
Over the weekend, Separatist parties won an absolute majority of seats in Catalonia’s regional parliamentary elections. Regional independence is an issue that has divided Spain for decades and this latest election has put further pressure on the central government in Madrid.

The party at the centre of things is secessionist group ‘Junts pel Si’ which in English means ‘Together for Yes’. Junts pel Si won 62 seats of the 135 available, while a smaller leftist party also pro Catalan independence ‘CUP’ also won another 10 seats. Jointly, this means that parties who are pro Catalan independence won 47.33% of the vote and as Acting Catalan regional government head, Artur Mas put it:

“Catalans have voted yes to independence!”

The timeline to unilaterally declare independence from Spain that both parties campaigned on is 18 months.

EUR/USD 5 Minute:
eu9.png

Click on chart to see a larger view.

With only a small gap down after the weekend’s Catalan election results, the market isn’t getting carried away with headline whipsaws. Being only a local election with the possibility of an independence vote that Spain will likely reject in court, things are still quiet.

I do however expect this narrative to continue to gain some traction and a further cloud of uncertainty to once again cast a shadow over the Euro.

More Fed Speakers
We ended the week with soundbites in favour of liftoff from Fed speakers Bullard and George.

This of course followed up from Janet Yellen’s most recent hawkish speech which saw her receive medical treatment after becoming light headed. Without trivialising a serious health issue, I’m sure you can see the irony in this…

Bullard reiterated the case made in earlier speeches and interviews for the normalisation of monetary policy:

“I’d like to get going. For the committee it is always hard to have made a big decision at one meeting and then come back at the next meeting. What kind of data did you get in the intervening period that changed your mind?”

He went on to say that it was not clear if other policymakers will have enough new data in hand by October to support a rate hike, suggesting December.

Known hawk George’s comments also had a hawkish tone, alluding to the fact that she believes the Fed should raise rates soon in order to be able to keep subsequent rate hikes gradual.

“You cannot afford to get into a state of paralysis around looking for data that might continue to reassure you. So when conditions warrant, as I believe they do today, I think interest rates need to adjust.”

Just keep in mind that Bullard does not have a vote in 2015 but will be a voting Committee member in 2016, while George has not been a voting FOMC Committee member since 2013 but will regain the right as the Kansas City district head once again in 2016.

The fact that the Fed was so dovish coming out of their September meeting last week but now all of a sudden everyone spruiking a hawkish tone is what frustrates traders the most. So much for smooth guidance.

———

On the Calendar Monday:
NZD Daylight Saving Time Shift

USD FOMC Member Dudley Speaks

While Dudley’s Hilsenrath interview for the WSJ is the most market sensitive, we also get a few more Fed speakers tonight with Tarullo, Evans and Williams all on the card. Add MPC Member Cunliffe (GBP) and we have a full house!

———-

Chart of the Day:
Today’s chart of the day is a follow on from last week’s NZD/USD 4 hour channel setup.

NZD/USD 4 Hour:
nu8.png

Click on chart to see a larger view.

Friday’s daily candle once again touched the Kiwi channel (yes, again to the pip) we have been following, giving the level its 4th touch. But with Monday’s gap down, price has still rejected the level… for now.

With each touch and subsequent failure to make a lower low, the sellers are absorbed. The breakout is near.

Read more about Catalan Independence in the Daily Market Update on the Vantage FX News Centre.
 

Vantage FX

VantageFx Representative
Messages
174
skyline-604x270.jpg

Playing the Ranges:
Forex market volumes mildly ticked over last night, with the Yen and Euro catching a bid while the commodity currencies continued to see decent selling.

US stocks continued to buck the US Dollar correlation, tumbling toward Black Monday swing lows. This drop saw the SP500 Index close at a 1 month low, Bloomberg blaming the rout on commodity prices and biotech sector woes.

“The Standard & Poor’s 500 Index fell 2.6 percent to 1,881.77 at 4 p.m. in New York, down for a fifth consecutive session to the lowest since Aug. 25.”

Focusing on the lower trending US Dollar, testing the fortitude of bulls amid the suddenly hawkish Fed environment that we seem to have stumbled into.

GBP/USD Daily:
gu4.png

Click on chart to see a larger view.

The above Cable chart stands out for having clear ranges that we can trade around. But with price clearly at the bottom of one such range, selling here probably isn’t the smartest play. The point is, don’t just look to long USD at the first hint of a hawkish Fed headline, try to hit the edge of ranges in the majors and play from there.

Overnight we did see headlines from Tarullo, Dudley and Evans. All 3 are known doves which adds to the temptation to close your eyes and click buy. The highlight being this morning’s WSJ Pro Central Banking’s Breakfast Interview with William Dudley: Full Video

It’s for pro-account holders only so if you still aren’t on board with the concept of online newspaper pay-walls, ForexLive have a great little summary of what Dudley said here.

dudley.gif


“OH NO HE DIDN’T!”

———

On the Calendar Tuesday:
USD CB Consumer Confidence
GBP BOE Gov Carney Speaks

———-

Chart of the Day:
We’ve dug up an old Technical Analysis blog post from August where we went through some Gold shorting scenarios. Scroll down to the final chart on that post and compare it to where price now sits.

XAU/USD Daily:
gold3.png

Click on chart to see a larger view.

As you can see, price has come back up to re-test the horizontal SR zone that we had marked as a point of interest in the previous post. With some short term trend line confluence also playing a role, price hasn’t been able to make a new high.

This area offers a clear level to manage your risk around for a trend continuation play.

Gold Trading – Do you see opportunity?
 

Vantage FX

VantageFx Representative
Messages
174
singapore-604x270.jpg

A Look at Relative USD Performance:
Mimicking the calendar, Forex price action has experienced a relatively quiet start to the week. But with tonight’s data sure to throw up a few surprises as well as today being the final day of the month/quarter, things aren’t expected to stay quiet for long. End of month/quarter flows are sure to play a role in today’s price action so just remember to be alert, not alarmed.

This little lull gives us a chance to take a look at some perceptions and then the actual performance of the US Dollar. If you’re only following the majors, you’ve surely seen and read that the USD hasn’t performed that well over the last few weeks. Taking a look at the USDX chart, you can see that while still in a major bullish trend, the trend line has been breached and price has basically traded sideways in consolidation mode.

USDX Daily:
usdx6.png

Click on chart to see a larger view.

Nothing special here, this all looks to back up the general view.

However, if you turn your attention beyond the majors to the exotics, you will find a whole different tale being told. With new milestone highs being reached across the exotics board, we have turned our focus to the Singapore Dollar.

USD/SGD Daily:
us1.png

Click on chart to see a larger view.

This chart is vastly different to the heavily weighted US Dollar Index, showing the HUGE bullish trend still well and truly intact while price continues to make new highs all over the place! USD not strong?

While not so much an exotic, USD/CAD is another USD pair which has bucked perception. Climbing to fresh 11 year highs overnight, the pair has now printed 9 days without a single bearish candle. Its longest streak in 4 years!

USD/CAD Daily:
uc5.png

Click on chart to see a larger view.

Most of the better performing USD pairs are due to weaknesses in commodity prices on the back of a slowdown in Chinese demand. This has seen many smaller, less diversified economies hit hard, weakening their own currencies.

Check out some of the exotic /USD pairs that Vantage FX have on their MT4 platform. Click here and check out the full Forex Pairs list.

“There is no such thing as overbought!”

———

On the Calendar Wednesday:
NZD ANZ Business Confidence
AUD Building Approvals

GBP Current Account

USD ADP Non-Farm Employment Change
CAD GDP
USD Fed Chair Yellen Speaks

———-

Chart of the Day:
For a few weeks now, social media has been abuzz with the consolidation triangle that USD/JPY has been printing.

USD/JPY 4 Hourly:
uj2.png

Click on chart to see a larger view.

We have been watching this USD/JPY triangle for a few weeks ourselves and I must say that the price action has been largely disappointing from a trader’s viewpoint.

Price never really broke down after re-testing the broken trend line as resistance, instead just petering out into more sideways chop. The upper trend line is still being respected, but this is the sort of price action prone to fake outs.

Do you see opportunity in trading the US Dollar?
 
Top