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GBP Will Arise From The Ashes? GBP leads the outsiders today, and we think it is time to buy it. The Pound is a tricky currency: it can grow even when the dollar is strong. On Monday, GBP was one of the leaders of the trades. Of course, there are all these good old GBP-negative factors, such as concerns over Brexit negotiations, the political situation in the UK and that ‘dovish’ hike by the Bank of England. All of them undermine the Pound. But, actually, the markets do not believe that the Bank of England ended with the rate hike cycle. After the last week's meeting, Mark Carney noted that the inflation level would surpass the central bank’s target level. Another policymaker told the economy might need some more rate hikes in future. Under this scenario, the markets will cheer any good reason to buy GBP. For example, at the end of the week, the UK will publish the industrial production data. Positive figures will aim the pair towards 1.3280 levels, but keep in mind a strong resistance line at the 1.3196-1.3125 area.
by HelenRush
CAD Fails To Catch Up With Oil Yesterday's star, oil, is consolidating near the higher levels with minor losses. The asset is digesting the wild and surprising events in Saudi Arabia, and the majors don't care about it at all. Let’s face it: even USD/CAD has already recovered yesterday’s losses to the 1.27 round figure. CAD is trying to catch up with crude oil prices, but a lot will depend on the USD dynamics. The buck’s positions are not too stable at the moment. USD lacks some important driver. Yes, the markets were very satisfied with the NFP data and the ISM Index published on Friday, but the happiness vanished into smoke too soon. Trump’s tax cut plan is in danger – the markets are not sure if the Republicans can do it on time by the Thanksgiving Day. All this uncertainty limits the US dollar’s upside potential. More dovish Fed and the delaying of the tax cut reform may help the Loonie. Meanwhile, the markets will be waiting for the Bank of Canada's Governor Poloz speech today. Dovish comments, in spite of some positive incoming data, will force USD/CAD to check the 1.28 area. Otherwise, the pair may retreat towards 1.26 level.
by HelenRush
JPY: Some Risk Averse Investors Wanted The JPY lost 0.6% in the morning on the back of the release of the Bank of Japan Monetary Policy Meeting Minutes. During the first half of the day, USD/JPY touched the highs at 114.73, which is the lowest level for the Japanese currency since last March. There were different reasons behind the slump, and among them, we may emphasize the impact of 10-years Treasury yields, as well as some regional issues. Firstly, Trump expressed sharp criticism of the trade relations between the US and Japan. Frankly speaking, the US president thinks little of any regional trade partnership, including the Transatlantic Trade and Investment Partnership (TTIP). Another bad news for the Yen was Mr. Kuroda’s comments. The BoJ Governor told the current monetary policy was enough to achieve 2% target level. However, the USD-bulls did not manage to keep gains, and the pair came back to its familiar range at the 114.20-25 area. If the pair closes below the 114.00 level, the bears will have a chance to test the 113.60 support level, especially, given the pullback in Treasury yields. In case of any risk aversion, the pair will move below the mentioned area.
by HelenRush
AUD: More Pressure Ahead? After quite a volatile Thursday, the overnight trade was calm and almost uneventful. The Retail Sales data set the Aussie up: the sales did not grow at all in September after having fallen by 0.6% in August. AUD/USD slid below the 0.77 area and touched the lows at 0.7669. This was a bearish sign which may lead to the consolidation in the current range 0.7670/40 at best. The last risk event for this week was the US jobs and wages data release. It is worth mentioning that this release used to be a market mover, but it has not been that important lately because it is obvious now that the problem is not the labour market, but the inflation. In October nonfarm payroll employment rose by 261,000, but the unemployment rate fell to the lowest level since 2001 at 4.1%. Even these dismal figures could not save the Aussie. We think that the NFP data will hardly influence the Fed’s intentions. This will support the US dollar, and the next bearish target for the pair is the area of August lows at 0.7420.
by HelenRush
That Moment When They Raise, But…We waited for it too long (almost 10 years, actually) and it happened. The Bank of England pushed interest rates up to the pre-Brexit levels. Over a year ago, the Bank made an emergency rate-cut from 0.5% to 0.25%. Ramsden and Cunliffe became the dissidents as expected. We agree with those who think that today’s step did not mean the start of a gradual tightening. The regulator just wanted to take back the emergency cut of the last August. Today’s event determined GBP’s destiny for the upcoming months. The Sterling had its toughie area at 1.3280-1.3300 and slumped to the lows at 1.3098 as the inflation outlook is still dovish. The Pound could not settle above the higher levels. Our next target to the downside is the October lows at 1.3020. If this area capitulates, the pair might be right back to the August lows. Let’s keep in mind two more risk factors – the announcement of the new Fed Chief and a tax bill announcement.
by HelenRush
NZD/USD: Will Depend On FOMC... ...Even though the meeting is not going to offer a firework. The Kiwi lost almost 3 figures in the past two weeks and finally found a bottom. At least, it seems the pair has a chance to start the recovery. The Kiwi’s reaction to the employment data for the third quarter was enthusiastic. And it’s not surprising: the employment rate grew by 4.2% y-o-y. The unemployment rate dropped to 4.6% from the previous 4.8% for the first time in the last 9 years. The new government will have to try hard to “fly the flag”. You may remember that the RBNZ may suffer some changes. The ruling party may force the regulator to keep its easing policy. So, the markets cheered the data because this is a good sign for the future of monetary policy. NZD/USD surged to the area of 0.6890 and on the second try regained 0.69 level touching the intraday high at 0.6929. Curious to relate, but a lot will depend on the FOMC meeting today. If the traders send USD to the south under «buy the rumour, sell the fact» rule, the Kiwi may settle above the 0.69 level, which will confirm a bottom in the area of 0.6835.
by HelenRush
USD/JPY: Waiting For Clarification The Bank of Japan did not deliver. We all knew it, and yet we expected a miracle. The regulator did not change its stance and left its massive monetary stimulus program on hold. To the markets’ surprise, it was not an overwhelming consensus. There was one dissident – Goshi Takaoka – who voted against the decision. Anyways, the results were JPY-positive, but the currency’s reaction was sluggish. USD/JPY touched the lows near 112.95 and after that met some buying interest, which helped the pair to climb to the area of session’s high near 113.40. In broad terms, USD/JPY dynamics looks like a Pushmi-pullyu: the Yen was unimpressed with a boring press conference, the USD can’t advance amidst a political turmoil in the US. At least, on Thursday Trump may announce who will replace Yellen, and maybe some action will finally begin. During the last two months, USD/JPY was not able to regain the 115 mark. The bulls are disappointed, indeed, but the pair will probably make another try. On the other side, "buying the dips" may attract some investors, which may swing the pair. Anyhow, we do not expect any significant step from the Fed tomorrow.
by HelenRush
EUR: The Calm Before The Storm The euro had little time to get over the recent slumps provoked by dovish ECB and strong US data. On Friday, EUR/USD slid far below the 1.16 mark, but euro-bulls are trying hard to regain some ground. The Catalan crisis is still a euro-negative factor but, as a rule, the impact of such events is usually short term. Today’s US data was quite solid and reflected that US consumer spending surged to the maximum level in 8 years in September. The pair almost ignored the data, though. But, the weak German CPI weighed on the euro, and EUR/USD once again tested the very important 1.16 mark. Most of all, it seems we will have to live four more days of speculations around the next Fed Chair. US president Trump may wait till Thursday to disclose the name of the new Fed's Governor. The solid break out of the 1.16 mark will clear the path to the next target at 1.1550. In order to come back to the familiar range and offset the consequences of the recent fall, the pair has to try hard and close above the 1.17 level.
by HelenRush
USD Waiting For US GDP Yesterday’s turmoil provoked by ECB seems to fade away. Some of the Council’s members – Knot, Lautenschläger, Weidmann and Coeure - commented they were not happy with the decision. Villeroy added that the central bank made "essential step" to end QE. It will give the euro some time to take a breather. The US dollar is in a good shape today, and it is higher against its major counterparts. Yesterday the U.S. House of Representatives passed Trump’s budget blueprint. This is a big step forward on US tax reform, which may be the first one in almost 30 years. Among all the USD pairs, we should be careful of USD/CAD, since the pair has been growing for 7 days. Especially, after the Bank of Canada kept the rates unchanged on Wednesday. Actually, this was predictable but, anyways, disappointing. After two rate hikes in a row, the markets did expect another hawkish surprise. This week will end with the release of US GDP data. Given that the US data has been positive lately, there is a chance the GDP will surprise on the upside. In this case, USD/CAD may test July highs at the 1.30 area. If failed, the pair should be ready to rebound.
by HelenRush
ECB: A little Bit More Bearish Than ExpectedIt has been all about ECB these days. The markets were ready to catch any signal from the regulator about the tapering. Actually, the really important thing is not today’s meeting results, but the timing of the next ECB’s rate hike. We don’t expect this until the springtime of 2019. The appreciation of the euro is the last thing that ECB wants, so Draghi should be very careful during his speech. In the morning, EUR/USD traded in the range beyond the 1.1800 level. The pair touched intraday highs at 1.1833. This was probably the last time we saw EUR at these higher levels, at least short term. The European regulator did not deliver any surprise and decided to keep the status-quo on rates as expected. But the extension of QE was a little bit more bearish - to September 2018 and "maybe beyond". This was disappointing news for the euro bulls. The euro went into free fall, and EUR/USD approached the strong support line at 0.1750. This is the area of swing lows, and the bears need more arguments to push the pair through it. Draghi will deliver some details and we may soon see the euro at 1.1740.
by HelenRush
AUD: The Bulls Are Really Disappointed The Aussie marked the fourth day of falling. Actually, that is what usually happens when the CPI Index of a country falls instead of growing. Especially if the data comes far below central bank’s expectations of 2-3%. In fact, AUD/USD has been losing its positions since September. But the traders think there is still a good chance of a rate hike from RBA taking into account situation on Australia’s housing market. It is worth mentioning it probably will not happen until the end of 2018. The markets are used to RBA’s cautiousness. Most of all, the central bank told not once but repeatedly it was not going to take any measures but it seems this time the markets finally believed the regulator. So, AUD's growth potential has been depleted. The pair is nearing the 0.7700 round figure. The Aussie will probably try to form the bottom below the area (and also in case of the clear break out of the level). If it happens the things may take a turn for the worse for AUD/USD and the next bearish target will be the 0.7400 area.
by HelenRush
Keep The Faith, Kiwi! While all euro pairs are waiting for the ECB meeting on Thursday, which will unlikely impress the EUR, the Antipodes are losing their positions. The strongest pair for today seems to be EUR/USD, but the bulls are still favouring the USD. Yet there is still some kind of nervousness since the markets are waiting for the announcement of a new Fed Chief this week. The US dollar has some room to take revenge. The New Zelanian prime-minister (still designate though) did exactly what she was supposed to: she called for the reforms on the Central Bank and announced plans to cut immigration. Most of all, the new Kiwi government is set to ban the foreign purchases of New Zealand property. Pity. The drop in capital inflows can’t be any good for a small island country. The Kiwi slumped to almost 6-months lows area at 0.6910 and is nearing the 0.6900 round level. What shall we expect from the RBNZ’s monetary policy after the reforms? Apparently, more easing measures. The bears’ firmness may lead NZD/USD to the May’s support line at 0.6860-85. The next target is the May,11 support area at 0.6817.
by HelenRush
JPY: That Monday Morning Feeling Japanese general elections took place on Sunday. According to exit polls, PM Abe’s party is going to celebrate the victory. These were not good news for the Yen, definitely. This means the Central Bank will continue its ultra-easy monetary policy. And, indeed, the government is going to hasten the process of Abenomics. It is not surprising USD/JPY opened with a gap up of 50-pips and refreshed month’s highs at 114.10. The “action” has already eased by now but the pair still can’t fill the gap. The initial surge seemed to be short-term and USD/JPY is under some minor bearish pressure near the 113.70 area. At the same time, USD is getting a good support because the markets are still welcoming the Republican-controlled Senate's approval of a 2018 budget blueprint. The USD-bulls don’t have any significant resistance ahead of 114.00 level. In case of this level’s capitulation, the next bullish target will be the 114.50 area without any serious counter-arguments from the bearish side.
by HelenRush
Oil: Friday Party It’s getting more and more difficult to predict the dynamics of oil prices. The asset does everything but follows the logic. The black gold started the day at the mid-57.00 area but during the European morning started sinking. Everything is fine in terms of the fundamentals. OPEC and its allies will probably extend their collective cuts beyond March 2018. US inventories continued to fall, according to the official data. But yesterday Brent closed a little bit below October, 5 and 6 highs at 57.25 which meant a bearish reversal for the benchmark. So, today's slump was caused by the technical correction: the commodity failed several times at the 59.00 round figure and the traders, tired after the week, started taking profit. One of the main drivers of lower oil prices today was USD growth. The buck received a solid support in the morning amidst US Senate had approved Trump’s $4 trillion budget plan for 2018. There is a good chance we will see a long-awaited tax reform come true. I hope it's in this life. As for the oil, as long as the $57 support level holds, the short-term downside is limited. If some new triggers appear, the markets may use the opportunity to go long on the retracement.
TVC:UKOIL
by HelenRush
The Kiwi Is In Trouble New Zealand finally made it. After more than three weeks of blandishments, NZ First leader, Winston Peters, made his choice and announced a coalition government with the NZ Labor Party. NZD has already been under some pressure since the 25th of September when the markets opened with a gap lower on the day after elections. During the European morning today, NZD/USD touched 5-day lows around 0.7801. News about the new government triggered NZD selloff driving the currency to May,26 lows near 0.7014, and the pair lost almost a figure for the day. Why did Kiwi bulls give a hostile reception to the new government? First, uncertainty. The Labor party leader untested, and there is no understanding if it’s good or bad for economy. Second, recent comments of Peters again reminded of the overvalued kiwi, and made the market await for more dovish stance on the RBNZ. AUD/NZD played its cards right and grew to the 1.1215 area. Some Aussie-positive news may push the pair through key resistance at 1.1300 last seen in 2013. What we saw today was just the tip of the iceberg. The aftermath of this coalition seems to have more long-term impact on NZD.
by HelenRush
USD/JPY: Time To Take Profit? Yesterday USD/JPY hardly gave any signs of life. The pair touched 112.47 high, but finished the day back around the open levels. Both Japanese calendar and US docket failed to impress the market. On Monday, USD weakness sent USD/JPY to the 3-week lows. Anyways, USD still has its three trumps – rates, tax reform and the next Fed chairman. Trump may announce the new Fed Head by November,3. There are 5 candidates for this position. Two of them – Kevin Warsh and John Taylor - are “dollar-positive options” since they both are considered to be the hawks. Another one, Jerome Powell, has a more dovish stance on monetary policy. If Janet Yellen gets a second chance, it triggers the dollar rally. And the last but not the least, Gary Cohn, is a dark-horse candidate. USD almost ignored today’s housing data and is still making its way to the north. The bulls now are struggling around 113.00 mark. If USD/JPY takes this level, will it threaten the 114.00 round figure? Unlikely. Now we’re waiting for Japanese export and import data. We expect USD/JPY to return to the mid-112.00 area and wait for some really good triggers.
by HelenRush
GBP Is Galloping Along…Towards The South Despite quite hawkish commentaries by Mark Carney, GBP/USD started falling. What's wrong with the pound? The UK CPI index matched estimates at 3.0% yoy and 0.3% mom. Core inflation index, excluding food and energy, came in at 2.7% yoy. This data has not impressed the markets. However, GBP/USD made a good move touching today’s highs at 1.3280, but later retreated to 1.3258 area. This was just the beginning of the pound’s selloff. Also noteworthy is the fact that two of the MPC members made really dovish remarks on monetary policy. Silvana Tenreyro said the MPC was far from the point when it would unwind QE. Her colleague sir David Ramsden emphasized no QE reduction should be expected until the bank rate reaches a higher level. Still, the markets looked at Mark Carney who, on the one hand, told the rate hike would be appropriate in the upcoming month, but on the other highlighted that the depreciation of GBP was the sole reason for the rise in inflation. So, the regulator is painted into a corner and will have to make a choice between inflation and further economy stimulus. The GBP has already reached the 1.3180 levels where the pair may find some bids. If not, the next target is September, 11 lows near 1.3160. And only a clear break of 1.33 will erase the current bearish sentiment.
by HelenRush
Oil Made The Day Oil broke higher to open the week with a gap. During the weekend the governmental forces of Iraq entered the city of Kiruk and took under control minefields in the region. The disputed city of Kirkuk has always been a ‘bingo’ for the Kurdish region. They regarded it as an integral part of Kurdistan. But Bagdad regards it with similar intensity. Kirkuk has always had the unresolved status. The current conflict may not only move the oil prices but also deep the turmoil in this region. Iraq supplies about 14% of total OPEC production. A conflict in the north of the country had an immediate impact on oil markets. The fear of disruptions in supply sent Brent crude 1.7% higher to September, 28 highs at $57.90 for a barrel in the morning. The commodity is unstoppable and is nearing September, 22 highs at $58.40. Another positive factor for oil is US unilateral potential sanctions against Iran. Given the current bullish trend there are good chances the benchmark will break the $60 round figure till the end of the year.
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by HelenRush
USD: Inflation Is Answer The dollar got up on the wrong side of the bed. Its last chance is the CPI release. Let’s be honest: even the positive data could hardly help USD to move to the green zone this week. It is not surprising. Trump’s tax reform has proven to be just a distraction, as expected. And the mystery around the next Fed Chair has also disappointed the USD bulls. Although Nikkei hit a 2-decade high, JPY leads in the markets. USD/JPY touched its daily highs just above its open level at 112.30 and started moving lower. The current low is at the 111.85 area but the key support at 112.00 is still a challenge for JPY, as the breakout is not confirmed. The pair may test 111.50, especially, if the USD CPI data disappoints the traders. Otherwise, the buck may struggle for this Wednesday highs at 112.50. The low inflation therein lies the rub. That is why some FOMC members may hesitate over a choice on December’s meeting. Yesterday’s PPI data was fine, but CPI report may bring some surprises. Especially, considering the tough weather conditions in September.
by HelenRush
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GBP Dealing With Divorce “Brexit talks have reached deadlock”, told Barnier today. These are probably the last words one wants to hear when discussing any negotiations. At the beginning of the day, GBP/USD advanced to 1.3265. But, no news on Brexit negotiations is bad news for the Pound. The British currency plummeted 100-pips and now is struggling near the support area at 1.3130. The bears need a piece of luck (and also a trigger) to push the pair towards its next relevant support around 1.3030 seen early September. FOMC minutes were generally bullish. It’s better to say, there was nothing exciting there. The markets have already priced in the rate hike, and now only something special may surprise them. The only problem is the subdued inflation – some of the policymakers think that this “illness” is not just provisional. Will have a chance to check it when the USA release the PPI figures. Dollar-positive data, i.e. stronger index, will help the pair to break through the mentioned support area. If the Fed’s worries on weak inflation are wrong, GBP will try to recover the ground and continue its short-term bullish trend towards 1.3250, early August highs.
by HelenRush
USD And Its Sword Of Damocles The key event for today is the FOMC minutes. The markets have already priced in the rate hike before the year-end. Under these circumstances, the traders will be very interested in the central bank's stance over the coming months. FYI, in the last meeting 12 of 16 FOMC’s members were ready for at least one more rate hike in 2017. The Fed will probably discuss the risks for the financial stability, the inflation rate and the shrinkage of a balance sheet. What we have now is the lowest unemployment in 16 years but a subdued inflation. Almost all the majors keep their ranges today. During these last days, USD lost some ground against EUR. The pair refreshed 2-week highs at 1.1850. To our surprise, actually. Well, probably the reason is Catalonia left the door open for negotiations yesterday, which made the life easier for euro. One never knows. The area 1.1850-1.1900 is a good opportunity to start buying the buck. But be careful since only the close above this last mark will diminish the dollar’s bullish stance.
by HelenRush
EUR/USD Is Between Scylla And Charybdis USD started its fall today at the end of the Asian session. There were no specific fundamentals behind the pull-back. The exhaustion of the bulls and the plunge of the treasury yields did their modest bit. Besides, the risk-aversion triggered by North Korea that declared its possession of ballistic missile that would be able to reach the US territory soon. EUR has its own troubles. In spite of the fact the pair surged up to 1.1788 today, the situation is quite shaky. It seems like the markets don’t know what to do and what to expect at the moment, so they just go with the stream. Euro may receive a painful kick from the parliamentary meeting in Catalonia. By hearsay, Spain prepares forces in order to rein in Puigdemont, if he does declare independence. Under these circumstances, USD positions are stronger than euro’s. Yes, North Korea offered one more reason to worry about. But hasn’t the markets already got used to it? Catalan crisis, if aggravated, will make the pair break through the key support level at 1.1730. This will probably depend on the reaction of Madrid, which may be tough.
by HelenRush
GBP: In The Middle of Game Of Thrones Today is good opportunity to take advantage of thin liquidity amid some holidays in USA and Canada. GBP finally received a much-needed respite. Last week the pair lost almost 3 figures and tested 1.30 handle. There was a reason to worry - Theresa May’s unstable political position. It seems that today the clouds dissipated for the prime minister, as the jitters on a potential Cabinet reshuffle appeared. Mrs. May may now “brush off” Boris Johnson from the Secretary of State for Foreign and Commonwealth Affairs. That’s sad, but at least better than uncertainty. Most of all, the inflation in the UK has been growing since the end of 2016 from the zero and is now nearing 3% mark. Finally, there is a good possibility of a rate hike from Bank of England. So, the sterling may see the light at the end of the tunnel. But, let’s wait for today’s Theresa May’s speech. Any positive commentaries from the PM will help the pair to test the September 8th highs at 1.3220. If Mrs. May disappoints the markets, investors will send GBP to test the critical support area 1.3000.
by HelenRush