Market analysis and trade recommendations by FBS

[riki143]

MARKET NEWS
15 July 2014

Bloomberg poll: what will ECB do?

Bloomberg has surveyed 28 economists of the leading banks asking about their expectations of the European Central Bank’s policy. These forecasts provide a glimpse into how the market feels.

1. Rate cuts
- ECB will make no more cuts in the refi rate: 100% of respondents

- ECB will make one more cut in the deposit rate in Q1 2015: 3% of respondents

- ECB will make no more cuts in the deposit rate: 97% of respondents

2. Rate will be increased in:
- 2017: 39% of respondents

- 2016: 45% of respondents

- 2015: 13% of respondents

- 2018: 3% of respondents

3. ABS program will happen in:

- 2015: 50% of respondents

- 2014: 44% of respondents

- Never: 6% of respondents

4. The state of the European economy during the next month will be:
- Unchanged: 76% of respondents

- Improving: 14% of respondents

- Deteriorating: 10% of respondents

More:
http://fxbazooka.com/en/news/show/1461

 

[riki143]

MARKET NEWS
15 July 2014

Kuroda: tax hike doesn't threaten the economy

The Bank of Japan policy meeting brought no surprises to the markets as the expansion of the monetary base was left unchanged at 60-70 trillion yen. Following the policy announcement, the BOJ Governor Haruhiko Kuroda said that Japan's economy continued exceeding its potential growth rate and that the effect from the sales tax hike remains within expectations.

"The downturn in spending after the sales tax hike is roughly within expectations. Domestic demand, including capital expenditure, remains firm as a trend. A virtuous cycle in economic activity clearly remains in place," the governor assured. As for the inflation, BoJ still believes it will be able to reach its 2% price stability target at some stage in late 2015 or early 2016.

Quantitative easing, which is appraised as an effective measure, wouldn't be withdrawn until the 2% inflation target was reached, Kuroda stressed, adding that other adjustments would be made if needed. "If the Fed steadily heads towards increasing rates and the BoJ keeps QE in place, the JPY shouldn't rise against the USD", he said.

Danske Bank: “In the coming months it will be status quo from BoJ and we are unlikely to see any easing measures unless the JPY for some reason appreciates markedly. Hence, there is unlikely to be any impetus for a weaker JPY from Japan’s monetary policy in the short run”.

More:
http://fxbazooka.com/en/news/show/1462

 

[riki143]

MARKET NEWS
15 July 2014

Westpac: the meaning of RBA minutes

Analysts at Westpac have made the following conclusions from the Reserve Bank of Australia’s meeting minutes released today:

- There’s no evidence that the RBA is seriously considering rate cuts.

- The RBA seems comfortable with waiting for further developments before choosing a policy path.

- The RBA is not particularly worried about the emerging weakness in the consumer sector and provides strong emphasis around the sharp lift in residential investment (this view may have changed after data came out that Australian retail sales fell by 0.5%).

- The analysis of the RBA’s rhetoric shows that it may be preparing to shorten the ‘on hold’ policy stance and increase rates earlier – though for now this is just a hypothesis.

Westpac expects that the RBA will remain on hold until September 2015.

More:
http://fxbazooka.com/en/news/show/1463

 

[riki143]

MARKET NEWS
15 July 2014

GBP supported by the stong CPI

British pound strengthened in the European session as the UK inflation data came mostly better than expected. June CPI came out much better than expected at +0.2% m/m and +1.9% y/y vs. -0.1% m/m and +1.6% y/y.

GBP/USD came under bearish pressure before the release as many market players expected to see a lower CPI, but soared from the daily $1.7058 low to $1.7145 on the news. The cable has fully retraced the recent bearish correction. Investors took the data as a confirmation of UK economic recovery and a sooner rate hike.

Traders will now switch their attention to the UK labor data release on Wednesday. May unemployment rate is expected to decline from 6.6% to 6.5%, what could support the GBP. Claimant count is forecasted to contract by 27.1K in June (prior: 27.4K).

Chart. H4 GBP/USD

More:
http://fxbazooka.com/en/news/show/1464

 

[riki143]

MARKET NEWS
15 July 2014

Negative news from the euro area

EUR/USD slid below $1.3090 as German ZEW economic sentiment came below expectations, at 27.1 vs. the forecast of 28.9 and the previous reading of 29.8. The index for the entire euro area has also missed forecasts coming at 61.8 vs. 62.3 expected, though this is higher than the previous reading of 58.4.

Yesterday the ECB president Mario Draghi echoed his comments from this month’s press conference repeating that the risks to the economic outlook are on the downside and that the regulator’s ready to use unconventional tools within mandate if needed.

More:
http://fxbazooka.com/en/news/show/1465

 

[riki143]

MARKET NEWS
15 July 2014

Yellen: ahead of the testimony

The Fed’s Chair Janet Yellen will testify to the Congress today and tomorrow at 14:00 GMT. The discussion will probably be about the period low interest rates, inflation outlook and the possibility of a guideline to the central bank’s decisions on interest rates.

According to Deutsche Bank, Yellen’s prepared remarks will largely reflect the economic assessment of the FOMC at its June meeting. Her comments could be “modestly more upbeat,” reflecting recent improved data, and “she will acknowledge that progress has been made.” Because her remarks reflect the views of the full FOMC, “there is a risk she is less dovish than what the financial markets assume are her underlying views.”

Still, however, Yellen is likely to emphasize the need to keep interest rates near 0 for a considerable period. The Fed expects to tighten only in the middle of 2015. The economic situation remains uncertain and the regulator probably won’t share much information. As a result, USD bulls might get disappointed by Yellen’s comments, while higher yielding currencies like Australian dollar increase.

Also don’t miss other important data due in the US today:

More:
http://fxbazooka.com/en/news/show/1466

 

[riki143]

MARKET NEWS

July 15: American Session

Tatiana Norkina, analyst at FBS

Mixed economic data are preventing the U.S. dollar index from growing today. Nevertheless, there is a possibility of a break through the 80.30 resistnace, under which the index has been consolidating for the past three days. Stock markets have opened positively, adding by 0.25%. Traders are awaiting FRS Chairman J. Yellen's speech, to begin at 18:00 GMT+4.

Consolidation is prevailing on the currency markets, with a bias towards strengthening of the dollar. The EUR/USD pair has remained under 1.3620 and even slid to the 1.3600 figure. USD / CHF has rebounded to 0.8930, having broken up through the five-days range. The USD/JPY currency pair has failed to break through 101.60 and is tending to decrease to the 101.40 area. Strong bullish sentiment has arisen on the GBP/USD pair after inflation data release: the rate has skyrocketed by over a figure - to the 1.7170 mark - after updating yesterday's lows.

More:
http://fxbazooka.com/en/news/show/1467

 

[riki143]

MARKET NEWS

July 16: Asian session

Asian stocks held stubbornly steady on Wednesday after China reported economic growth that was just ahead of market expectations, enough to prompt a sigh of relief from investors, but little else. China’s GDP added 7.5% in Q2 on the annual basis vs. 7.4% expected. The data confirmed the world’s second biggest economy has stabilized after a shaky start to the year but still left the global outlook cloudy, particularly given recent weakness in the euro zone.

US dollar strengthened as the market players focused on the Fed Yellen’s comment that rates could rise more quickly should the labor market continue to improve at a rapid pace. USD/JPY rose to 101.75. EUR/USD slid to 1.3556. GBP/USD edged down to $1.7130.

Australian and New Zealand’s dollars were both under pressure during the Asian session. Despite a slightly better-than-expected China’s GDP, retail sales data was slightly below the forecast. NZD/USD fell below the $0.8700 mark, extending the recent bearish correction. After a lower-priced dairy auction overnight, the New Zealand’s CPI came out lower than expected (+0.3% vs. +0.4% expected), increasing pressure on the kiwi. AUD/USD weakened into the $0.9330 area, approaching the July support at $0.9320.

More:
http://fxbazooka.com/en/news/show/1468

 

[riki143]

MARKET NEWS
16 July 2014

UK: mixed employment data

UK unemployment lowered from 6.6% to 6.5%, while claimant count contracted by 36K (forecast: -27K).

However, the figures are not so positive as it may seem: average earnings index growth slowed from 0.8% to 0.3% (forecast: 0.5%). markets are disappointed as they didn't get any confirmation of growing inflationary pressures on the economy.

GBP/USD reacted with a tiny dip to $1.7115, but holds around $1.7130 as of writing.

More:
http://fxbazooka.com/en/news/show/1470

 

[riki143]

MARKET NEWS
16 July 2014

What to expect from Yellen?

BNPP: "Our economics team does not expect today’s message to differ notably from what was communicated in the statement, press conference and FOMC minutes (of June 18). While jobs data has beaten expectations, GDP components have been generally weak. With asset purchases not expected to end until the October meeting, the FOMC likely sees no reason to clarify its intentions on the timing of rate hikes at this time".

Goldman Sachs: "We do not expect a major shift in tone from her press conference following the June FOMC meeting. We would not be surprised to hear her give some additional acknowledgement to improving labor market conditions following June's further decline in the unemployment rate. It is possible that she will receive some questions about the recent firming of inflation, which she downplayed in the June press conference".

More:
http://fxbazooka.com/en/news/show/1472

 

[riki143]

MARKET NEWS

July 17: Asian session

USD/JPY slid to 101.45. Yen strengthened as demand for it as a safe haven increased after the US imposed extra sanctions on Russia over Ukraine.

In general US dollar was near the 4-week high as economists said US data will show housing starts and a measure of manufacturing rose. After dipping to $0.9350 AUD/USD rose to $0.9380. NZD/USD hit $0.8680, but then recovered a bit to the $0.8700 area. New Zealand’s currency dropped for a sixth day as traders pared bets on higher interest rates.

EUR/USD is trading on the downside, in the $1.3520 area. Euro is under pressure before a report forecast to confirm inflation stayed below the ECB’s goal. GBP/USD is little changed in the $1.7140 zone.

More:
http://fxbazooka.com/en/news/show/1475

 

[riki143]

MARKET NEWS

Key option levels (July 17)

Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (14:00 GMT).

Here are the key options expiring today:

EUR/USD: $1.3500 (large), $1.3550 (large), $1.3570/75, $1.3590, $1.3600 (large), $1.3605 (large);

USD/JPY: 101.50/60 (large), 0.9340/50 (large);

USD/CAD: 1.0770, 1.0780, 1.0800 (large), 1.0850;

NZD/USD: $0.8625 (large);

EUR/GBP: 0.7910, 0.7955;

EUR/CHF: 1.2160.

More:
http://fxbazooka.com/en/news/show/1477

 

[riki143]

MARKET NEWS
17 July 2014

US expands sanctions against Russia

US administration announced new, tougher sanctions against Russia on Wednesday, stressing that Russia was responsible for the continuing support of separatists battling government forces in Ukraine. New measures target major Russian banks, energy companies (such as Rosneft) and individuals.

“The expanded sanctions in our view are likely to have a further damaging effect on the Russian economy", analysts at Danske Bank say. "We believe that the Russian economy is already in recession and the continued downturn in the economy is likely to put renewed pressure on the Russian markets”.

More:
http://fxbazooka.com/en/news/show/1478

 

[riki143]

MARKET NEWS
17 July 2014

Bank of Canada and impact on CAD

USD/CAD spiked up to 1.0794 yesterday before easing down to 1.0730 today.

The Bank of Canada kept the overnight rate unchanged at 1.0%. The BOC Governor Stephen Poloz refrained from commenting on strength of the national currency as he said the economy won’t reach its full potential until the middle of 2016 – that’s about 3 months later than the bank projected in April. According to Poloz, the increase of annualized inflation above the central bank’s target of 2% has been caused by one-time gains in energy and import prices, not changes in economic fundamentals. The Bank of Canada also cut its Canada’s GDP growth forecast from 2.3% to 2.2% this year.

All in all, this position of the BOC is surely negative for Canadian dollar. Still, many analysts thought that Poloz will do more to talk down CAD. We didn’t see much of the sell-off of this currency as the market players await Canada’s inflation data due tomorrow – this release should provide some hints whether the surge in inflation is temporary as the BOC says or not. If not, the regulator will probably have to adopt a more hawkish stance in order to stop prices from soaring.

Chart. Daily USD/CAD

More:
http://fxbazooka.com/en/news/show/1479

 

[riki143]

MARKET NEWS
17 July 2014

Central banks buy Treasuries

Analysts at Wells Fargo Securities point out that US Treasuries are becoming more popular among foreign reserve fund managers in comparison with what was in 2013. In the past 4 months, the net purchases of Treasuries by central banks have increased $16.8 billion per month on average. Wells Fargo underlines, that this is more than enough to offset the decrease in purchases which happens as the Fed tapers QE. This partly explains why 10-year Treasury yield slid to 2.40% in May.

Source: United States Department of the Treasury and Wells Fargo Securities, LLC

More:
http://fxbazooka.com/en/news/show/1480

 

[riki143]

MARKET NEWS

July 18: Asian session

EUR/JPY touched the lowest level since February at 136.70 as investors sought haven assets after a Malaysia Airlines plane was shot down over Ukraine and amid escalating tension in the Gaza Strip.

USD/JPY rose from the lows in the 101.10 area to 101.40. The Bank of Japan released its monetary policy meeting minutes, according to which the central bank will keep QE program as long as necessary while most members are agreed that the impact is firmly on track.

The greenback remains high versus its counterparts before a report today that may show a measure of US consumer confidence climbed this month.

AUD/USD rose to $0.9366 after dipping to $0.9335. NZD/USD dipped to the 55-day MA in the $0.8650 area before recovering to $0.8680.

EUR/USD is fluctuating around $1.3520. GBP/USD is trying to hold at $0.7100 after yesterday’s decline.

More:
http://fxbazooka.com/en/news/show/1482

 

[riki143]

MARKET NEWS

Key option levels (July 18)

Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (14:00 GMT).

Here are the key options expiring today:

EUR/USD: $1.3500 (large), $1.3525 (large), $1.3530 (large), $1.3550, $1.3575/80, (large);

GBP/USD: $1.7090/7100 (large);

USD/JPY: 101.30;

AUD/USD: $0.9300, $0.9450;

USD/CAD: 1.0700 (large), 1.0725, 1.0740/45 (large), 1.0750, 1.0770/75 (large), 1.0780/90 (large);

EUR/JPY: 138.00;

EUR/GBP: 0.7900, 0.7950 (large), 0.8050.

More:
http://fxbazooka.com/en/news/show/1484

 

[riki143]

MARKET NEWS

July 21: Asian session

Trading wasn’t very active in Asia as it’s a bank holiday in Japan and amid concerns that geopolitical tensions could flare up at any time.

USD/JPY slid to 101.19. EUR/USD rose to $1.3548. GBP/USD edged up and is trading just below $0.7100.

AUD/USD consolidates in a narrow $0.9400/9380 range. The $0.9400 mark has been acting as a resistance since Friday. Buying interest remains subdued due to some disappointing Chinese headlines. NZD/USD opened with a gap up and strengthened to $0.8710.

More:
http://fxbazooka.com/en/news/show/1487

 

[riki143]

MARKET NEWS

Key option levels (July 21)

Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (14:00 GMT).

Here are the key options expiring today:

EUR/USD: $1.3500 (large);

GBP/USD: $1.7075, $1.7175;

USD/JPY: 100.95, 101.20, 101.50 (large), 101.75-80 (large), 102.00 (large);

AUD/USD: 0.9250, 0.9395, 0.9400 (large);

USD/CAD: 1.0745, 1.0800 (large);

EUR/GBP:0.8000 (large).

More:
http://fxbazooka.com/en/news/show/1488

 

[riki143]

MARKET NEWS
21 July 2014

CFTC: USD longs slightly down

According to the latest CFTC report, released on July 18, large traders and speculators slightly decreased their US dollar bullish bets on the week ended July 15. The overall USD long position declined from $10.34 billion on July 8 to $9.94 billion on July 15.

Large speculators iraised their bets on JPY, CHF, CAD, AUD and NZD, while there were weekly decreases for EUR and GBP.

More:
http://fxbazooka.com/en/news/show/1489