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Daily Fundamental ForexTime ( FXTM )

This Week: U.S. Earnings, ECB meeting, Chinese GDP and final presidential debate




Asian shares reversed early gains on Monday while the greenback held steady at its highest levels in seven months in what seemed to be a slow start for a busy week

U.S. equities received a boost on Friday after three major banks reported earnings that beat Wall street estimates, offsetting a profit miss from Alcoa that rattled markets earlier in the week, but concerns over central banks policies, global growth prospects, Brexit aftermath, and U.S. elections kept investors on guard. This week those concerns will be elevated leading to more volatility in financial markets as investors try to navigate through these complexities.

81 S&P 500 companies to announce earnings

So far 76% of the 34 companies that reported earnings managed to beat profit expectations and if this trend continued we’re very likely to see corporate America ending five consecutive quarters of profit recession. This might sound optimistic and probably provide a leg higher to stocks as doubts over high current valuations will be less of a concern, but Q4 earning guidance should be the key on whether to reconsider these thoughts. The dollar index has rallied by 2.5% since H2 and multinational companies’ sales will see their margins squeezed when converted back to dollars, which will raise many concerns over the dollar strength.

Markets want an explanation from ECB

Tapering has become one of the most hated words amongst investors, and markets want reassurance that the European Central Bank isn’t considering this option any time soon after unofficial reports said policymakers at the central bank were considering winding back their asset purchase program. In fact, current conditions require an extension to the QE program that ends in March 2017 to avoid any unwanted shocks to an economy that continues to face sluggish growth and stubbornly low inflation.

I don’t expect any monetary policy changes on Thursday and believe that Mario Draghi will reiterate that ECB is ready to do whatever it takes to preserve the euro. However, an extension of the current asset purchase program could be announced in Decembers meeting after the staff release their new projections.

China’s Growth

After reporting a 10% fall in exports in September which triggered a global equities selloff last week, China will provide a snapshot on how the economy fared in Q3. Nobody wants a weak China at the moment, as this would send warning signals to global markets, especially that debt has come to be one of the biggest challenges facing the second largest economy. With China’s current debt to GDP standing at 249% according to BIS, a slowdown in economic growth has a potential to spark a banking crisis and a prolonged period of weak growth. Markets are forecasting a 6.7% growth in GDP in Q3, unchanged from previous quarter.

Trumps’ final chance!

Drug tests are no more limited to Athletes, and U.S. presidential nominees should go through the process prior to debates, at least according to Mr. Trump. With almost three weeks to the U.S. presidential election, the Republican nominee wants to use all his weapons to gain ground on Clinton after losing many of his party’s supporters due to claims of sexual assaults. With nothing to lose, Donald Trump is likely to go all in Las Vegas on Wednesday, so expect the unexpected.





Source : http://www.forextime.com/market-analysis

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Daily Fundamental ForexTime ( FXTM )

Commodity currencies in the spotlight




The Reserve Bank of Australia has been quick to speak out against the markets at present and the current view point of market economists who think that the RBA could be forced to cut rates further in the face of economic pressure. The RBA governor Philip Lowe spoke today, and believes that at present interest rates are very low and that the economy is currently rebalancing and that with the recent boost in commodity prices the economy will bounce back sooner than many predict. While ever the optimist, commodities have been quite volatile in recent times and inflation is also still lagging at present as the AUD has lifted against the USD, affecting incomes for exports and the mining sector which has boosted the economy significantly in recent times. The recent trend though in the Australian economy has had some concerned though as unemployment has been falling, but at the same time underemployment has been rising which does not bode well for household incomes in the future.

For the AUDUSD it still finds itself in a bullish position as of late despite the recent drops. The weekly chart still shows a strong bullish trend which has sustained itself in the face of bearish sentiment at times about the economy. The trend line has seen some pressure in the last month, but the AUDUSD has bounced back. One of the interesting things to note is the 100 weekly average which has been acting also as dynamic resistance in the market adding pressure for the bears and stopping future higher highs. So we are starting to see consolidation in the long run, but in the short term we are seeing each wave being weaker and weaker and it's leading to some asking how much longer until we see the AUDUSD look to break lower and test support levels at 0.7460 and 0.7328. Fixed interest trades still make the AUD a popular option, but with the US looking likely to lift interest rates it's a matter of time before it finds itself under pressure and falling.

The New Zealand dollar on the other hand has seen a sharp jump as a I write this as CPI figures q/q showed a lift of 0.2% compared to most economists predictions of 0.0%. So far resistance at 0.7180 has stopped any further gains on the charts, and it's likely with the 20 day moving average sitting there as well it won't get much further without the bears taking a swipe. This is also much lower than the previous reading of 0.4%, so while positive that the economy is not as bad off as expected, it's likely to also show that inflation is certainly lacking. The drop in the NZDUSD is sustained will give inflation a light boost as well, and may be something that the Reserve Bank of New Zealand will touch on in an effort to force it lower. I still feel though that the NDZUSD will likely look to push through the 0.70 cent support barrier in the long run, and it's only a matter of time.





Source : http://www.forextime.com/market-analysis

 

Daily Fundamental ForexTime ( FXTM )

Chinese GDP set to cause volatility





It's a big day for the Australian markets as Chinese data is set to put pressure on the AUDUSD and also the NZDUSD, but the main focus will most certainly be around the AUDUSD and how it handles the data which is due out today. GDP y/y has always been the cornerstone of how the Chinese economy is performing and the market is looking for a flat result of 6.7%. In recent times the GDP has fallen but it is still one of the best forming in the modern world and a slowdown had been predicted for some time. We also have Industrial Production due out and the market is expecting a slight up lift here, despite recent worries that the industrial sector may be struggling. Regardless of it all Australia's largest trader partner is China, which in turn leads to the likelihood of a large amount of volatility for the AUDUSD and other minor AUD pairs. For me I think the market is looking for a positive result, as the US economy has been picking up and this will have a flow on effect to the Chinese economy. The jitters after the Brexit are also starting to subside and Chinese exporters will be looking optimist around this.

So for the charts the AUDUSD has been bullish in the long run, but has come under renewed pressure from the bears in recent times, as they look to punish the AUD on the back of its weak economy and underemployment issues which I noted yesterday. On the daily chart if we look at the high point from the 4th of August we can see a clear bearish trend in the market when it comes to previous highs and today's touch on the dynamic resistance was no different. We've failed to see sustained pressure on this level and to me it feels like the Chinese data may be the catalyst which finally sees a strong push through for the AUDUSD if we see a strong positive result. Certainly it would be a reversal of a trend which has been in play since August. If we do see a strong drop on the charts I would anticipate support around the 0.7532 region, but it would be hard going for it to break through completely given the long term bullish trend line which has been in play for some time.

Finally, with all the hype around the AUD and Chinese data the UK is also set to have a big day with the GBPUSD expected to move in the wake of retail data coming out. For me the GBPUSD has come under pressure and some are still saying it's overvalued. One thing is clear and that is any weak retail data will lead to heavy selling in the GBPUSD. While we might see a welcome boost and the GBPUSD even look to break the 20 day moving average, it feels like it may struggle to sustain that given the amount politicians are talking about Brexit and how easily the market is swaying at present.






Source : http://www.forextime.com/market-analysis

 

Daily Fundamental ForexTime ( FXTM )

Oil lifts on strong drawdown





It's been a surprising day today with the crude oil markets as they continue to find themselves facing a large amount of volatility in the wake of OPEC trying to cut a deal of production rates, but also the recent figures out from the US which paint an interesting picture. US crude oil inventories dipped to -5.25M on the back of a stronger demand for oil. This has cast the spotlight back on oil all together as it shows that the US despite showing some recent surpluses is back in the territory of seeing strong drawdown's again compared to more recent times. Coupled with the recovery of the US market and retail and labour markets looking much stronger it seems inevitable that we could see further drops in US oil reserves, which at one point were hitting record highs.

Technically speaking oil has been in a bearish uptrend for some time, but recently it had stalled as the USD looked to strengthen further and as markets were waiting on OPEC to produce tangible results that could affect the momentum of oil. Right now we are seeing oil sit around the weekly resistance level of 51.53 and it's likely we will continue to see strong pressure around this level as the market bulls are looking to break out after being contained for some time. After this major level the next long term resistance level could be found at 61.58. In the long run I would anticipate that these levels to certainly hold back momentum as they are weekly levels.

The Australian dollar managed to push higher today on the back of USD weakness, and as Chinese data came in around what was expected; bar industrial production y/y which came in at 6.1% (6.4% exp). The feeling is that the AUD can perform in the current marketplace and today's bullish lift is showing the way, despite the large amount of economic data and uncertainty at present. In the next few hours employment figures are due out and many are expecting to see a slight rise in unemployment levels, as underemployment coupled with a worsening economy continue to play havoc for the economy. A positive employment change in recent times has been categorised by a dip in full time work and a large rise in part time work, which has flow on effects for the economy in the long run.

Looking at the AUDUSD on the charts, the break out today was strong through the main level before touching resistance at 0.7733. The next level of resistance above this is 0.7754 and it's unlikely the AUDUSD can push through here unless we see a big change in the current employment figures and a drop in the unemployment rate. The real question will be if we see another wave lower, if so it's unlikely to be strongly bearish, as the most recent wave was quite bullish in nature.






Source : http://www.forextime.com/market-analysis

 

Daily Fundamental ForexTime ( FXTM )

Donald Trump failed to score points in final debate; ECB under the spotlight




With 19 days remaining to the U.S. presidential election, the republican nominee Donald Trump whose poll numbers have bottomed last week failed to score points against his opponent Hilary Clinton in the third and final debate, at least this is what the Mexican currency had declared. The Mexican Peso, widely seen as a proxy of the U.S. presidential debate rose slightly against the U.S. dollar in Asia trade and is up 6.8% since the first debate on September 26. If polls continue to show Clinton expanding her lead over Trump this will reduce market volatility ahead of the election day on November 8 and lead investors to focus mainly on the earning season which so far indicates a high possibility to exit five quarters of profit recession.

The Aussie was the biggest loser in foreign exchange markets, dropping 0.7% against the dollar to end a 6-day rally after data showed the Australian economy lost 9,800 jobs in September. The big surprise came from full-time jobs, or in other words “good quality jobs” which saw firms cutting 53,000 employees from their workforce, suggesting that the Reserve Bank of Australia should take some sort of action when they meet on November 1. The newly appointed governor Philip Lowe highlighted on Monday that there is a lot more slack in the labor market than what the unemployment rate suggests, so it will remain to be seen whether another interest rate cut is on the way.

Trader’s focus will shift into the European Central Bank meeting later today for any indication on whether the bank is considering tightening monetary policy soon. We don’t expect any action in today’s meeting but the Euro will be driven by forward guidance from Mr. Draghi who will be faced with questions related to a recent unofficial report indicating tapering asset purchases. If Mr. Draghi decides to turn hawkish on the slight improvement in recent Eurozone data, then we assume the Euro is currently trading on the lower range bound for the short run with the potential of recovering most of October’s losses. The recent rise in global bond yields will ease the pressure on the ECB to amend the rules on asset purchases, but any indication of amending those rules would suggest expanding the program beyond March 2017.






Source : http://www.forextime.com/market-analysis

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Daily Fundamental ForexTime ( FXTM )

Earnings and Macro data to drive financial markets the week ahead




A pretty robust U.S. corporate announcements last week indicated that there’s a high chance for corporate America to get out of a profit recession which lasted for five consecutive quarters. According to factset, 78% of S&P 500 companies reported earnings that beat on the bottom-line and 65% beat on the top-line.

Upside earnings surprises is way above the historic average of 66%, which could be interpreted as good news for the overstretched equities valuations, however earning guidance is not showing the same trend with 10 out of 17 S&P 500 companies issuing a negative EPS guidance so far.

Another worrying signal is the level of cash sitting on the sidelines now. According to Blackrock, $50 trillion of worldwide holdings are in cash now, showing that many investors are concerned about the markets next move whether it’s in equities or fixed income.

The week ahead is very busy on the corporate front with more than third of S&P 500 companies reporting results. Many investors would like to know how many Iphones apple sold in the third quarter, while others are more interested in the Energy sector which was the main drag on earnings with companies such as Exxon Mobil and Chevron. General Motors, Alphabet, Caterpillar, P&G, Mylan, MasterCard, and Hershey are only a few among those reporting next week, so lot of data to digest.

On the macro front, third quarter GDP figures from UK and the US will be closely monitored by investors.

On Thursday, UK will offer a first glimpse into the performance of the economy after voting to leave the European Union. The flash Q3 GDP data is forecasted to show 0.3% growth compared to last year, less than half of second quarter’s 0.7%. Albeit growth is slowing, the immediate impact of the Brexit vote on the economy is far less than what had been expected, but this is likely to change if the divorce negotiations went the hard way, were a recession will be very hard to escape.

In the U.S. we’re looking for an opposite scenario, were economic activity likely picked up after a disappointing first half of 2016. Markets are looking for a 2.5% economic growth in Q3 from a 1.4% in Q2. Any figure below 2% will likely kill the idea of Fed raising rates in December, and thus pull back the dollar from its seven-month high.




Source : http://www.forextime.com/market-analysis

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Daily Fundamental ForexTime ( FXTM )

A volatile week ahead




Global stocks were resilient last week Friday with major arenas clawing back gains following the upbeat corporate earnings and stabilising oil prices which revived risk appetite. Asian shares floated into gains on Monday as the improving Japanese trade data propelled the Nikkei +0.29% higher. European markets have already commenced this week on a solid footing by borrowing Asia’s bullish momentum and this could influence Wall Street later today.

The looming event risk for stocks may be the upcoming US presidential election which may dish out extreme levels of volatility and uncertainty. Closer to the November 8th election date stocks may be vulnerable to heavy losses as the increasing uncertainty over who will claim the title of the 45th President of the United States encourages investors to scatter from riskier assets.

Dollar lurches to 8 months high

The Dollar sprung to fresh eight-month highs against a basket of currencies during early trading on Monday as expectations intensified over the Federal Reserve raising US interest rates this year. Hawkish comments from Fed President John Williams on how “it makes sense to get back to a pace of gradual rate increases” compounded to the basket of hawkish statements from Fed officials that heightened speculations of the central bank taking action in 2016. Investors may direct their attention towards key macro reports from the States this week such as consumer confidence and GDP which could offer further clarity on the health of the world’s largest economy. As of now, the sentiment is bullish towards the Dollar with bulls taking the front seat as speculators bolster bets over the Fed pulling the trigger in December.

Japan trade data displays resilience

Sentiment towards the Japanese economy was slightly uplifted during early trading on Monday following the stabilising trade data which quelled some concerns over slowing economic growth. It is common knowledge that Yen's resurgence amid risk aversion has heavily punished Japanese exports while soft global demand continues to add insult to injury. In September, Japanese exports tumbled 6.9% for the 12th consecutive month but the numbers were better than expected sparking discussions of a potential rebound in exports.

In light of this, Japanese manufacturing in October was an additional breath of fresh air as activity expanded at the fastest pace in almost nine months at 51.7 indicating that domestic demand could bolster economic growth. Although this flurry of economic data is somewhat encouraging, the major theme in Japan remains the lacklustre economic growth and tepid inflation levels which have pressured the Bank of Japan. The Yen could be poised for further gains as the looming presidential election sparks a risk of risk aversion consequently punishing Japan further.

Sterling under pressure

The toxic cocktail of political risk, persistent uncertainty and the lack of buying sentiment has made the Sterling a sellers dream. Economic data from the UK has become almost secondary with the major driver affecting the Pound revolving around hard Brexit talks. Sterling sensitivity to the downside remains a dominant theme with sellers exploiting the relief rally’s to send prices much lower. From a technical standpoint, the GBPUSD is bearish on the daily timeframe as there have been consistently lower lows and lower highs. A breakdown below 1.2200 could encourage a further decline lower towards 1.2000.

Commodity spotlight – Gold

Gold was pressured last week on Friday after hawkish comments from Fed President John Williams on how “it makes sense to get back to a pace of gradual rate increases” heightened optimism over a US interest rate increase in December. The zero yielding metal remains extremely sensitive to rate hike expectations with further losses expected if speculators boost bets over the Fed pulling the trigger this year. A resurgent Dollar could cap upside gains on Gold consequently providing an opportunity for bears to drag prices lower towards $1250.

From a technical standpoint, prices are trading below the daily 200 SMA. A daily close back below $1260 could encourage a steeper decline lower towards $1250.




Source : http://www.forextime.com/market-analysis

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Daily Fundamental ForexTime ( FXTM )

M&A activities drove equities, focus shifts to earnings




Equity markets began the week on a positive note with M&A activities, positive earnings, and better than expected manufacturing data from the Eurozone and U.S. all boosting appetite to risk.

The merger between AT&T and Time Warner was the biggest announced deal, but both companies’ stocks trader lower on Monday as Democratic and Republican presidential candidates expressed concerns. The aim of transforming the second largest U.S. telecom company to a media and entertainment conglomerate hinges on the Federal Communications Commission’s approval which seems to be a very complicated process.

U.S. regulators are not the only ones seeming tough on M&A activities, but also in Europe where Syngenta shares fell more than 9% yesterday after the EU commission said that Chinese ChemChina has not offered concessions over its $43 billion bid, which will likely delay the process up to five months according to the Commission’s spokesman.

Equity bulls would need positive earnings to resume this week and for the tech sector to take the lead from the financials with the two largest publicly traded companies, Apple and Alphabet to announce results.

Currency markets resumed their range bound trading on Tuesday, with the dollar remaining at 9-month high, and 1.7% far from its 13-year peak. The Euro traded slightly lower as traders ignored positive PMI reports yesterday which showed that the Eurozone economy had expanded at the strongest pace this year, as it seems monetary policy divergence remains the number one factor impacting currency moves. Markets are increasing their bets on a December Fed rate hike, and the closer we get to the FOMC’s December meeting, the higher the probability will go, and this is likely to continue supporting the dollar. Markets are currently pricing a 74% chance for a December hike.

Of course a stronger dollar is not good news for oil prices, however this wasn’t the main driver of crude. Comments from Iraq’s oil minister that his country should be exempted from the output curbs, brings the question who else would request the same? We think oil prices will remain volatile in the next couple of weeks but within limited ranges until we get more clarity on November 30 when OPEC delivers its plan.





Source : http://www.forextime.com/market-analysis

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Daily Fundamental ForexTime ( FXTM )

Oil slides on OPEC uncertainty





WTI Crude received a pummelling on Tuesday with prices sinking below $49.50 after reports displayed an inflated rise in U.S inventories which revived concerns over the excessive oversupply in the markets. Oil’s selloff was complimented with anxiety towards Russia not joining the OPEC supply curb which raised questions over the success of the pending meeting in November. With Iraq requesting an exemption from the output curbs after Iran, Nigeria and Libya this just throws a spanner into works consequently pressuring oil even further. It is becoming quite clear that OPEC members have exploited the market sensitivity to generate speculative boosts in prices and such may come at a painful cost if investors are left disappointed on November the 30th.

Sentiment remains bearish towards oil with this horrible combination of uncertainty and oversupply fears creating a firm foundation for sellers to drag oil prices lower in the short-term. From a technical standpoint, a breakdown below $49 could open a path lower towards $47.50.

Sterling struggles to keep afloat

Sterling displayed its sensitive status in the foreign exchange markets during trading on Tuesday by stumbling over 1% ahead of Carney's testimony, only to shock investors by staging a remarkable rebound mid-way through Carney's speech. Traders were swift to attributing Sterling’s decline to comments from U.K Chancellor of the Exchequer Phillip Hammond, but the sheer lack of liquidity and gloomy mood amid the persistent hard Brexit fears could have played a key role in the selloff. In October the pound has depreciated roughly 6% against the Dollar with further declines expected as mounting hard Brexit fears spark renewed rounds of selling. It’s the terrible amalgamation of political uncertainty, fears over the UK losing its access to the European single market and anxiety over the future of the UK economy after the article 50 is invoked which have made Sterling a sellers dream.

From a technical standpoint, the GBPUSD is struggling to keep afloat on the daily timeframe. Prices are trading below the daily 20 SMA while the MACD has also crossed to the downside. The break below 1.2200 could encourage a further decline towards 1.2000.

Dollar bulls on tea break

Dollar edged lower during early trading on Wednesday as investors exploited Tuesday’s soft U.S economic data to take profit on the currency’s recent rally. The consumer confidence in the States declined to 98.6 in October from 103.5 in September which sparked concerns over households maintaining a cautious stance as the presidential election loomed. Despite the soft economic release, the bullish sentiment towards the Dollar remains unchanged with the Fed-fund futures showing a 78.5% probability of a rate increase in December. Investors may direct their attention towards Friday’s GDP report for the States which if exceeds expectations could act as another key chest piece for a rate hike in December.

The Dollar Index is heavily bullish on the daily timeframe as there have been persistently higher highs and higher lows. Previous resistance around 98.00 could transform into a dynamic support which invites a further incline towards 99.50.

Draghi on the defence

Mario Draghi was defensive on Tuesday in Germany's capital when he insisted that the ECB’s aggressive bond buying and ultra-low interest rates had not harmed German households. Although the concerns from German banks on how low rates have eroded their portfolios were acknowledged, it seems likely that Draghi’s defensive comments may fortify expectations over the ECB bolstering its 1.7 trillion euro bond-purchase program at its December policy meeting. The EURUSD remains under noticeable pressure on the daily timeframe and is currently fundamentally bearish as the expected monetary policy divergence between the ECB and Fed encourage bears to install repeated rounds of selling.

Commodity spotlight – Gold

Gold bulls exploited the instance of risk aversion on Tuesday to propel prices towards $1275. Regardless of the short term gains, the metal remains pressured by renewed US rate hike expectations while a strengthening Dollar’s ensures upside gains are capped. The current technical correction on the daily timeframe could offer an opportunity for bears to attack. From a technical standpoint, bears should be able to maintain control below $1285 with a breakdown below $1260 sparking further declines.





Source : http://www.forextime.com/market-analysis

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Daily Fundamental ForexTime ( FXTM )

Equities investors are becoming hard to satisfy




Uninspiring earnings projections from giant U.S. companies are weighing on Asian equities this morning after Wall Street stocks fell for a second day. When looking at the bigger picture, earning season wasn’t really disappointing so far with more than 75% of companies beating bottom line forecasts that would likely lead to profit growth for the first time in five quarters. However, investors need to see more solid growth in order to justify the overstretched valuations of their equity holdings.

Another factor weighing on Asian equities today was the drop in Chinese industrial profits growth which grew 7.7% YoY in September from 19.5% in August, suggesting that policy makers will face more challenges to keep growing the economy at the desired pace.

The investment environment is becoming more challenging nowadays especially with the drop in equities coinciding with higher yields on bonds leaving traditional investors with little options to diversify their portfolios. With more uncertainty ahead whether its U.S. elections, Fed raising rates, hard Brexit negotiations, and limited tools from major central banks, I continue to see alternatives such as gold are a must have as an insurance policy.

U.S. crude inventories vs OPEC

Oil bulls received a pleasant surprise yesterday after inventories unexpectedly fell 553,000 barrel in the week to October 21. The EIA data which has become somehow the nonfarm payrolls of energy markets sent U.S. oil from a 2% loss to green territory for a short timeframe before falling back 1.6%. Oil traders have been clearly ignoring fundamental factors most recently and driven mainly by comments from OPEC members and this will remain the case until November 30. We expect prices to remain volatile but within tight ranges for the next couple of weeks, so a sideways trading strategy could work in this situation.

UK not in a recession

UK’s third quarter GDP later today will show how the economy fared in the immediate aftermath of the Brexit vote. Although the data will likely show that growth slowed from the previous quarter it’s still not as gloomy as many had predicted earlier. If the figure managed to beat the 0.3% expected growth, this will end speculations on further easing in monetary policy and provide some short term relief for the pound.





Source : http://www.forextime.com/market-analysis

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Daily Fundamental ForexTime ( FXTM )

NZ bounces of key support levels




NZ trade balance data rattled the NZ economy yesterday as it came in below expectations at -1.436B NZD. This was much larger than the market anticipated and reflected on worse than expected export data to 3.47B (3.52B exp), imports were also up to 4.90B helping to make the trade balance figures worse than expected. The market's reaction was bearish in nature, and came in the face of some USD weakness as well which meant a dip for the NZDUSD. Despite all of these movements it seems unlikely that the Reserve Bank of New Zealand will step in just yet - in fact with commodity prices looking all the more stable I would not be surprised to see them wait and see how things turn out just yet. What is apparent is that the NZDUSD continues to be overvalued and jaw boning no longer does the trick for market anymore, with very little action from the RBNZ in the past to back up the talk it's hard to even pay attention to it anymore.

The NZDUSD from a technical perspective is held up firmly on support levels at present, after shooting down the chart 0.7113 continues to be a major level, on the H1 chart we can see that the market is very aggressive at defending this level and this does reflect the current trend we are also seeing on the AUDUSD. A push through this level seems unlikely and I would need to see another daily candle break through and hold its ground against any movements lower for further bearish trend to be confirmed. Looking at the daily chart the 200 day moving average would be for me a very strong dynamic support level as well and something that should not be ignored. Trending upwards resistance is likely to be found at 0.7180, with this major level likely to be tested extensively if the trend plays out as expected.

Oil markets have also been key trenders after OPEC meetings continue to be back and forth, with very little in the way of concrete agreements and the entire OPEC board looking all the more fragmented after every meeting. If anything is to come from it, it may require further burning of cash reserves and an actual agreement, regardless Americas own oil producers are very much continuing to pump oil and are looking all the more likely to deliver production rather than vanish as was expected.

On the charts Oil hit resistance at 52.22 and has so far looked to trend further back down, as the market continues to look all the more likely to hold its ground at this level unless OPEC comes through with something. So far it has found support at 48.96 and is likely to trend lower and find further support levels which are likely at 46.46 and 43.47. So far movements/waves have been large, so I don't expect to see much in the way of ranging from oil markets which have very little history of doing so in recent times.





Source : http://www.forextime.com/market-analysis

 

Daily Fundamental ForexTime ( FXTM )

Week Ahead: Central Banks meetings, U.S. NFP, more earnings





After the U.S. and U.K. economies showed better than expected growth in the third quarter, investors turn their attention to monetary policy actions. Four major central banks will meet the coming week (Fed, BoE, BoJ, and RBA), and while most of them remaining accommodative or planning to ease further, only the Federal Reserve is set to swim against the tide. Here’s what to watch the week ahead:

The Fed to send a clear message

With 9 days remaining to the U.S. presidential election, the Fed is expected to keep markets calm and stand pat on rates when they announce policy on Wednesday. The two-day meeting will most likely set the tone for December where markets are pricing more than 70% chance for a hike.

Latest round of economic releases supports the idea of tightening policy with growth bouncing back from a weak first half in 2016, jobs added to the economy averaging at 191,000 in the last three months, and more Americans buying new homes. The improvement in data will likely keep the dissenters from October’s decision in favor of hiking, but I think it’s very unlikely for other members to join.

I believe the statement that follows the meeting will indicate a clear signal that a rate hike in December is coming, similarly to what we saw in October 2015 when the Fed stated “In determining whether it will be appropriate to raise the target range at its next meeting, the Committee will assess progress both realized and expected toward its objectives of maximum employment and 2 percent inflation.”

Another strong jobs report to support Fed’s view

Several U.S. economic reports are due next week including personal consumption expenditure, ISM manufacturing and non-manufacturing, factory orders and trade balance, but Friday’s jobs report will have the most significant impact on markets. The economy is expected to add 175,000 jobs in October versus 156,000 in September, and unemployment to tick down to 4.9% from 5%. Wages are no less important with average hourly earnings expected to climb to 2.6% from a year ago suggesting that inflation will return sooner than later.

Earning season remains in full swing

Earnings season will continue with heavyweight companies to announce results including Facebook, Alibaba, Starbucks, Pfizer, Time Warner, Qualcomm, and Warren Buffett’s Berkshire Hathaway. So far 74% of S&P 500 companies managed to beat profit estimates while 58% beat on revenues, and it became clear that U.S. companies are out of profit recession which lasted 5 quarters with earning growth for S&P now standing at 1.6% according to Factset.




Source : http://www.forextime.com/market-analysis

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Daily Fundamental ForexTime ( FXTM )

Market pauses for AUD data





It's a big day for the Australian economy as it continues to find movements from fundamentals rather than technical's. In this case, the cash rate statement and the rate statement are likely to take centre stage for the AUDUSD. Many had expect the Reserve Bank of Australia to hold back in the short term, as it has been unclear if the Australian economy will recover on the back of the boost in commodity prices in the metals sector. For myself it seems like it will, but it seems all the more long term rather than short term, and this will lead to issues in the short term as many Australians expect positives rather than negatives from the uptick in commodity prices. With Capex decreasing and employment looking more repressed than ever the Australian economy continues to struggle and it's likely to remain that way.

The AUDUSD on the charts has tried to remained bullish in the short term, but the bears are starting to take control. Every wave has so far been much weaker, and I expect that to continue in the long run. The 100 day moving average has acted as dynamic support in the past, and is likely to remain that way as well. Many are expecting any further resistance higher to occur at 0.7616 and 0.7643 which have held out against further movements higher. But it's also worth acknowledging the bullish trend line that has been in play for some time, and is likely to hold up any further movements lower, so AUDUSD traders will be taking stock of this trend line and the potential it has to ruin the bears day.

It has been a topsy turvey day for gold markets as they continue to buck the trend and look to climb higher on the back of political risk which continues to be a major force for US traders. Many are expecting a democratic victory, but with the uncertainty at hand some are wondering what the next step may be. So for gold markets this has been somewhat of a bullish market as of late, and in the fact of positive economic data and interest rates likely to be pushed higher.

Gold has previously failed to break below support at 1249 after repeat attempts, and this looks to be a strong level despite what many are saying. I would expect gold to trend higher in the short term above resistance at 1295 as US political risk increases and the election continues to find itself under further pressure from outside sources. Further levels higher for resistance can be found at 1323 on the charts.






Source : http://www.forextime.com/market-analysis

 

Daily Fundamental ForexTime ( FXTM )

RBA starts to sound hawkish




Today's market revelations from the Reserve Bank of Australia regarding interest rates were an interesting turn to say the least. Many traders have been expecting the easing bias to continue for the RBA in the long term, given the state of the economy. But instead, they found themselves listening to a much more hawkish RBA than anyone expected and it would seem that interest rate cuts may be completely off the table for now. In line with the statement the RBA also believes that inflation is likely to pick up as well, and commodity prices are recovering albeit a struggle at times. For some time now we have seen a reserved approach from the RBA so for traders this was very much a bullish signal and the AUDUSD responded in turn jumping higher. However, the RBA still considers the AUDUSD to be too high and complicating the current recovery of the economy. Sadly if you're going to suddenly turn hawkish then markets are likely to look for further yield out of the Australian economy when all others are lagging.

On the charts the AUDUSD has been showing weaker waves than ever before with a pattern of lower highs every time we see a jump. It will be interesting to see if this can be maintained in the long run given the hawkish tone that has occurred. Any retreat downwards is likely to find dynamic resistance around the 100 day moving average mark, but also at 0.7616. I previously was slightly bearish, but less likely to be so these days unless we see the Chinese economy struggle and inflation continue to be sluggish for the Aussie economy. Any jumps higher looking for resistance are also likely to find it solidly at 0.7730, which will be a touch and go point to see if the AUDUSD can sustain new heights on the charts.

Across the water in the US market and oil continues to show surplus build ups with social media reporting a build up of 9m barrels before the official release, which is naturally in turn causing selling in oil all together. With OPEC failing to come to any sort of agreement, it feels very much the case that we will see oil prices continue to dip and slide lower on all this news. Only a sustained agreement could genuinely stop the bears from coming back into the market and taking a swipe every time the oil inventory data shows a build-up.

Oil has slid aggressively down the charts and has held up on support at present at 46.19 with the market now looking to position itself for the official data due out on Thursday, which will likely cause some strong swings in the market. So far we've also seen very little profit taking, which means we could see a bullish candle at a major support level in the near future. I would take this as caution around a reversal and focus on the trend which continues to be one of the stronger points of trading oil in the present climate.





Source : http://www.forextime.com/market-analysis

 

Daily Fundamental ForexTime ( FXTM )

Markets in early stage of panic as Trump leads




Investors are dumping risk assets this morning as latest ABC News/Washington post tracking poll showed Trump ahead of Clinton for the first time. Trump odds for winning the U.S. elections increased after FBI reopened its investigation into Hillary Clinton's use of a private email and he will maximize his leverage on the case with less than a week remaining to the election date.

Most major Asian equity indices fell by more than 1%, as Wall Street’s fear index “VIX” soared above 20 levels for the first time since September 12. The Mexican peso which has become the popular election proxy also fell this morning, declining by more than 4.3% for the past six trading days.

The dollar was also hit, plunging to three weeks low versus the euro and one month low against the swiss frank as U.S. 10-year treasury yields fell 7 basis points from yesterday’s highs.

Neither earnings nor economic data will provide market direction and it’s going to be a roller coaster ride for the next couple of days as a Trump win appears similar to a Brexit style reaction and probably more severe.

The post Brexit vote market reaction is still fresh in investors’ memory and no one wants to be caught on the wrong side of the trade, it will only take another one or two polls showing a Trump lead to boost markets anxiety and thus a steep sell off in equity markets and high beta currencies.

Gold is likely be the most wanted asset to hedge against political risks, and although it jumped 4% from October’s low, there still much potential to go higher from current levels.

The Fed is expected to stand pat on rates when they announce policy later today, and while recent round of economic data justifies a rate hike, the Fed doesn’t want to influence the presidential election outcome either way. In a recent report, I expected the Fed to deliver a strong signal on raising rates in December by reiterating a similar sentence from October’s 2015 statement:

“In determining whether it will be appropriate to raise the target range at its next meeting, the Committee will assess progress both realized and expected toward its objectives of maximum employment and 2 percent inflation.”

Although I still believe it’s possible, chances now stand at 50%.




Source : http://www.forextime.com/market-analysis

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Daily Market Analysis

FTSE 100 crushed as Pound leaps higher




While the impending US election vote is continuing to drive all headline attention, the FTSE 100 concluded the week losing over 1.4% and dipping below the psychological 7000 milestone level as a result of the British Pound surging higher following optimism that the UK Government have hit a wall following the recent High Court ruling in their attempts at speeding up the UK’s exit from the European Union.

With the High Court ruling that the process of exiting the European Union can’t begin with the vote of Parliament, previous concerns that the UK was going to be led to a “Hard Brexit” from Prime Minister Theresa May have been dashed to the side for now. I still expect buying interest in the Pound to be subdued as the ruling simply puts the brakes on the previous concerns that the UK Government would rush ahead to leave the EU, but the indications that the divorce is not being accelerated is providing support to the UK currency.

What I personally find interesting when monitoring the investor reaction to this news, is that it is becoming clearer and clearer that the FTSE 100 and British Pound are mirroring each other’s movements in an opposite direction in the same way we have experienced in the Nikkei and Japanese Yen for years. The High Court ruling should actually be seen as a positive for the UK economy, and as such for the FTSE 100 but investors are driven in the modern era by different types of yields and it looks like the FTSE 100 and British Pound are being hedged against each other.

WTI Oil below $45

We can call this going full circle. The price of WTI Oil has now returned below the levels of the shock at a preliminary agreement being reached nearly two months ago, as a result of a lack of confirmation that OPEC will confirm a change in production this month. Investors have now taken all profits off the table when it comes to Oil, and the credibility of the OPEC Committee is being called into question as a result of the ongoing lack of clarity over whether there will be a change in production output this month.

These losses for the Oil markets are getting more and more violent, we might even be at risk to entering another bear market. The situation with OPEC is to be polite, just confusing and a failure to carry through with the previously announced preliminary cut will likely continue to alert sellers to drive the commodity even lower down the charts.

Despite the aggressive selling, there is still some faint optimism that OPEC will be able to set an output quota at its next meeting and confirmation of this is needed to bring investor attraction back towards oil.

FBI U-turn to encourage market rebound?

The major news as we head into an historical week is that Federal Bureau of Investigation (FBI) Director James Comey has stated that a review of new evidence provides no reason to change its earlier decision that Hilary Clinton should not face charges related to the use of her private email server. This has provided encouragement for the markets to begin a rebound away from the losses last week, most noticeably resulting with the Dollar charging higher across the FX markets.

Investors might be tempted to price this news as encouragement that Hilary Clinton will be declared as victorious and this why the markets are expected to continue pointing higher as trading gets underway in other trading sessions on Monday.

I would personally add that this news does not confirm that Clinton will win, and there be a risk that some damage has been done to credibility following this ongoing drama being in the headlines for such a long time and with voters probably deciding already who they will elect as the new US President. Either way, I am expecting further swings for the markets with this possibly being in either direction until the outcome of the US election is confirmed.

USDCNH resumes gains

The Chinese Yuan has been one of the biggest losers from the resumption in Dollar strength overnight following the news from the FBI over Hilary Clinton. The USDCNH appears on its way to returning to milestone highs close to 6.80 at the time of writing.


Source : http://www.forextime.com/market-analysis

By Jameel Ahmad, VP of Corporate Development & Chief Market Analyst

 

Daily Fundamental ForexTime ( FXTM )

Commodity currencies jump on US fears




The Australian dollar has jumped higher again on the back of USD weakness, as non-farm payroll data was much weaker than expected coming in at 161K. But the main feature that has been disrupting the market is the US election with many worried about the likely outcome of the election over Trump vs Hillary. So far many have been calling for a Hillary win, but many are concerned that a number of Trump supports have not admitted to polls that they will indeed vote for Trump. The likelihood for the markets is a drop in the USD if Trump is elected, or a rise for the market if Hillary is elected. Back in Australia though things have been a little different, with retail sales beating estimates in the previous week to 0.6% (0.4% exp). However unemployment continues to be an issue with full time jobs losing ground over temporary ones, and now some analysts are expecting two rate cuts in 2017 if the data does not improve. I believe this is very much likely on the basis that does not seem to be improving, and also that the AUD continues to be a painful topic for Australian exports, as fixed interest investors continue to hunt for yield in the repressed market.

The AUDUSD has risen high on the charts in recent days and has touched on a strong level of resistance at 0.7730 and has started to slip backwards, however this wave forward goes against the recent bearish trend and for me is a bullish signal with profit taking at this level of resistance. Going forward a pull back to support at 0.7695 looks like a strong possibility before a push higher in the face of non-action from the Reserve Bank of Australia. Further resistance levels though above 0.7730 can be found at 0.7754 and 0.7791.

Oil has found itself under technical pressure in the market after the recent pressures caused by surpluses appearing in the US market after last week's came in strongly at 14.42M (1.51M exp). This in turn has caused a run on the oil market which has seen the bears take complete control and look to push it much lower than previously expected. With OPEC still struggling with infighting and lack of direction, it looks all the more likely that this will be drawn out for some time when it comes to cutting back on production. I would anticipate that some deal will be struck, but the timeframes around it are some time off.

Oil does like to bounce and support at 43.47 was all the market needed to do exactly that, with traders looking to find the floor in the market and hitting it square on. With that drop the bulls have looked to regain some control but resistance at 46.19 seems a little far off, and the reality of surpluses and aggressive oil traders is that the bears are likely to come back in swinging, it's more likely they are waiting to trade of the result of the US election in the next few days.






Source : http://www.forextime.com/market-analysis

 

Daily Fundamental ForexTime ( FXTM )

The music of Trump leading resulted in investor shock




Recent history has once again repeated itself, and by this I mean that investors were caught completely off guard by not pricing in the reasonable possibility that Donald Trump could become the President of the United States. This is the exact same thing that happened during the EU referendum vote, when investors sided substantially towards pricing in a remain outcome and they were left in complete shock earlier in trading as a result of Donald Trump gaining momentum.

The beat to the drum of music that Donald Trump could win this election has got louder, resulting in chaos throughout the financial markets as a result of investor uncertainty. The markets crashed earlier in Asia trading with investors transitioning to full-on “risk off” mode as a result of the shock of Trump going into the lead.

So what has happened in the markets?

Investors moved into complete “risk off” mode with major stock markets crashing, including the Dow Jones Index losing over 600 points at one point. A period of “risk off” is bad news for the stock markets and Trump momentum is seen as dangerous news for the stock markets. It must be pointed out to investors that Donald Trump has not won the election at this point and Clinton has now taken the lead in dramatic fashion, although the markets did crash earlier in Asia as a result of investor shock.

“Risk off” basically means investor appetite towards riskier assets is diminished, meaning a massive negative for emerging market currencies. Both the Mexican Peso and Chinese Yuan weakened to record levels against the Dollar during trading so far in Asia. Why the Peso? Donald Trump is clearly anti-Mexico and Trump winning is seen as extremely bad news for the Mexican economy with this resulting in the Peso nosedive as a result of Trump momentum.

While Donald Trump has also displayed some very negative views on China in the past, as he has done with a multitude of other matters to be honest, it is possible that the swing towards Trump did contribute towards the offshore Renminbi hitting another record-low against the Dollar. The USDCNH crashed through 6.80 but suddenly pulled back to 6.76 within minutes, before later consolidating around 6.79.

This move was probably manipulated by election nerves sending investors flying away from riskier assets, but we can’t rule out the possibility that the People’s Bank of China (PBoC) might have pushed the buzzer to intervene and protect the Yuan from further losses as it reached 6.80. This is by no means confirmed, but it is one of the options that we can’t rule out of the equation.

The price of Oil has been another loser to the previous sudden twist of momentum towards Donald Trump. While this hasn’t been touched upon very much, Trump winning would have negative consequences on the price of oil. Forget about the ongoing OPEC drama, the threat of growth forecasts being downgraded at least over the short-term due to investor uncertainty in theory weakens demand for commodities like oil.

So who are traders currently favoring?

It has been proven time and time again that when there is uncertainty in the markets that the Japanese Yen proves itself as a best friend to investors and this is happening once again. The Bank of Japan (BoJ) will be in complete dismay if Trump pulls this off because it is going to send the USDJPY towards gravity, after already pulling back from 105 to just below 102 during trading in Asia this morning.

Safe-haven appeal for Gold is also being driven through the roof with the precious metal rallying from just above $1265 to marginally above $1320 on investor uncertainty.


Source : http://www.forextime.com/market-analysis

By Jameel Ahmad, VP of Corporate Development & Chief Market Analyst

 

Daily Fundamental ForexTime ( FXTM )

Trump triumph sparks global selloff




Risk aversion swept across the financial markets during early trading on Wednesday after the unexpected Trump presidential victory soured investor risk appetite. Global sentiment was dealt a frightening blow with most major stocks sold off savagely as uncertainty repelled investors from riskier assets. The polls pointing to a Clinton victory were completely wrong, consequently catching participants off guard and this may come at a heavy price moving forward. With risk-off sentiment amid the Trump victory becoming a dominant theme across the board, stock markets could be left depressed for prolonged periods.

The S&P 500 futures have already slumped by as much as 5% following Trump's victory with the bearish contagion dragging European stocks 2% lower on Wednesday. Wall Street may be contaminated by the negativity with further declines expected in the coming days as the toxic combination of uncertainty and sliding oil prices provide a foundation for bears to install repeated rounds of selling. There is a strong possibility that today’s presidential results spark a fresh era of risk aversion with investors turning to safe-haven assets for protection against the pending chaos.

What a Trump victory means…

Uncertainty and Donald Trump seem to have a symbiotic relationship and this continues to weigh heavily on global sentiment. Concerns remain elevated over Trump potentially triggering a global and political disruption in a fragile financial landscape that is already entangled in a losing battle with investor anxiety. The persistent threats from Trump to discard major trade agreements have kept participants on edge, while his anti-Mexico rhetoric continues to pressure both the Peso and Mexican economy. Emerging markets may be in store for a nasty surprise moving forward as risk-off encourages another brutal selloff. Many questions remain unanswered in this sensitive period of uncertainty with more explosive movements expected as markets attempt to digest the Trump reality.

Dollar bears rampage

The Dollar experienced heavy losses during early trading on Wednesday with the Dollar Index sinking to the lows of 95.91 following the unexpected Trump presidential victory. Dollar weakness may be a recurrent theme moving forward as the awful combination of uncertainty and heightened concerns over the future of the US economy entices sellers to attack incessantly. In the aftermath of Trump’s victory, expectations have already diminished over the Federal Reserve raising US interest rates in December with the current odds below 50% which should pressure prices further. Despite the sharp rebound, which has taken the Dollar Index back towards 97.65 as of writing, bears remain in control with the Index sinking towards 96.00 as speculators reduce bets on a US rate hike.

Sterling scheduled for further declines

Sterling bulls received false encouragement on Wednesday with the GBPUSD lurching towards 1.2545 on the back of Dollar weakness. This technical correction simply provided a fresh opportunity for bears to install repeated rounds of selling on a currency that is heavily poisoned by hard Brexit fears. Previous talks of the high court announcing that the Brexit cannot proceed without the vote to Parliament did little to keep Sterling buoyed with further losses expected as investors come to term with the Brexit reality. The GBPUSD could be poised for steeper declines once bears conquer the 1.2350 support. From a technical standpoint, a breakdown below 1.2350 could open a path towards 1.2200.

WTI pressured by risk-off

WTI Oil fell below $44 on Wednesday as Donald Trump’s unexpected victory in the U.S presidential election sparked a wave of risk aversion. Oil prices were already pressured by the fading expectations towards OPEC securing a freeze deal in November’s meeting with this period of risk-off ensuring the commodity remains depressed. The amalgamation of oversupply woes and mounting concerns over demand diminishing amid slowing global growth could guide WTI crude back below $43. Some attention may be directed towards the pending crude oil inventories report which could send oil lower if there is a buildup in inventories.

Commodity spotlight – Gold

Gold surged with ferocity on Wednesday as Trump’s victory triggered risk aversion which encouraged investors to frantically pile into safe-haven assets. Markets have been flooded with renewed uncertainty consequently bolstering Gold’s allure. Dollar’s weakness amid dimming US rate hike expectations always played a key part which saw Gold prices clipping the highs of $1337. Buyers could be back in town with further gains expected as the mixture of Dollar weakness and uncertainty attracts investors to safe haven assets. From a technical standpoint, Gold is bullish on the daily timeframe as there have been consistently higher highs and higher lows. A breakout and decisive close above $1308 could encourage a further incline towards $1320.





Source : http://www.forextime.com/market-analysis

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Daily Fundamental ForexTime ( FXTM )

Emerging market currency sell-off accelerates




The emerging market currency sell-off has accelerated throughout trading in Asia on Friday, including the Indonesian Rupiah sinking to levels that prompted the Bank Indonesia (BI) to intervene and stabilise the market. While the Indonesian Rupiah has so far led the headlines after a plunge in currency value, the Malaysian Ringgit has also suffered from an extreme round of weakness and the offshore Chinese Yuan looks set to continue its course of hitting further historic lows against the Dollar.

While the declines seen in Asian currencies are being linked to the impact of trade throughout the continent if Donald Trump enforces protectionist trade policies, the return of expectations that the Federal Reserve will still raise US interest rates in December is strengthening the Dollar and also pressuring the emerging market currencies. If the Federal Reserve do not raise US interest rates in December as they have been preparing the markets towards for months following such a spectacular rebound in stocks after the victory by Trump, it will raise questions over credibility and concerns that they are worried about Donald Trump taking over office in January.

There is also a prolonged threat to emerging market currencies that once Donald Trump completes his inauguration early next year that he will publically encourage higher US interest rates during the course of his presidential term. While the Federal Reserve is independent to any political party or government, the expectations that Trump will encourage faster monetary policy normalization is a real threat to the emerging markets.

Overall the combination between the initial response that fiscal stimulus encouraged by Trump should provide a boost to the US economy and also encourage increased interest rates in the United States should in theory result in projections that the Dollar Index could break the psychological level at 100.



Source : http://www.forextime.com/market-analysis

By Jameel Ahmad, VP of Corporate Development & Chief Market Analyst