Market analysis and trade recommendations by FBS

[riki143]

Market News

Japan may cut corporate tax

Norio Sasaki, a member of Japan’s government panel subcommittee on corporate tax reform, said that Japan could cut its corporate tax rate as early as next fiscal year by 2-3%.

Japan’s effective tax rate of about 36% is the second-highest in the G7 after the US and compares with levies of about 24% in South Korea and 23% in the UK.

The nation’s Prime Minister Abe pledged to pursue corporate tax reforms earlier this year, part of his Abenomics drive to revive the national economy. In June Abe will outline further measures to improve business conditions in Japan. Note that the tax cut will be accompanied by a rise in revenue from other sources to avoid worsening the government’s fiscal position which is already in a very bad shape.

 

[riki143]

Market News

Opinion: China economy remains stable

According to the respected China economist Yu Yongding, despite a further slowdown in Q1 (GDP +7.4%), China will not face a collapse as some pessimistic observers warn of. In his view, complexity and distinctiveness of China's economy meant gloomy predictions were pointless, and that they have repeatedly emerged in the past 30 years but never came true.

Yu dismissed concerns over the country's high leverage ratio and property bubble. China's high leverage ratio, which some believe will trigger a crisis or "hard landing", should be interpreted with other detailed factors taken into account.

China's high saving rate is positive factor for the economy. "The higher the saving rate, the less likely it is that a high debt to GDP ratio will trigger a financial crisis", Yu says.

 

[riki143]

Asian stocks erased gains after Chinese manufacturing data signaled persisting weakness in the world’s second-largest economy and Australia’s inflation rose less than expected.

USD/JPY is on the downside in the 102.70/50 area. The greenback remains near a 2-week high against the yen before US reports on manufacturing and new home sales that may add to signs the economy is improving.

AUD/USD fell to $0.9280. Australian CPI came out lower than expected (0.6% vs. 0.8% expected). In addition, a private report signaled that China’s manufacturing contracted for a fourth straight month – HSBC Flash Manufacturing PMI came at 48.3 which is once again below the threshold 50.0 level (forecast: 48.4; previous: 48.0). NZD/USD tested $0.8620, but then returned a bit below $0.8600.

EUR/USD rose to $1.3820 approaching yesterday’s high. GBP/USD is trading in the $1.6820/35 area.

 

[riki143]

Market News

China: slowdown continues

China economy remains in the centre of market attention. Today’s data showed that China HSBC manufacturing PMI improved a little in April, but remains in the contractive zone since the beginning of the year (48.3 vs. 48.0 in March and forecasted 48.4). A reading below 50 signals contraction, while a figure above 50 suggests growth.

The report followed data last week showing China’s expansion moderated to the slowest pace in 6 quarters. Economic growth slowed to 7.4% y/y in Q1, from 7.7% in the Q4 2013.

Prospects of China economic stimulus remain a topic of interest for the market. Yesterday China's central bank announced a so-called “mini stimulus”, cutting the reserve requirement ratio (RRR) for rural banks. The government negates the need for a more foreceful stimulus, but many economists believe it is a matter of time before China takes it to support the slowing economy.

Nomura analysts reiterate their forecast for a broader reserve-ratio cut for banks in May or June. “The property sector is slowing down very fast and that's the reason why we're very worried about the Q2 GDP. We think it's going to slow down," they say.

Additional China stimulus could become a supportive factor for the commodities and the commodity currencies.

 

[riki143]

Market News

Euro zone: upbeat PMIs

EUR/USD strengthened by more than 50 pips to $1.3850, supported by the upbeat preliminary euro zone PMI figures for April.

With the exception of the French results, the German and euro zone manufacturing and services PMI exceeded forecasts (see the table). Composite euro zone business activity reached a 3-year peak (54.0 vs. 53.1).

“Today’s figure buys the ECB a bit more time. With the recovery still on track there doesn’t seem to be an urgent need for strong action, though deflationary pressures still warrant attention. People expecting an imminent large-scale asset purchase program on the back of current economic figures are likely to be disappointed”, ING economists said.

 

[riki143]

Forex Analytics

T. Norkina: trade signals (Apr. 23)

Tatiana Norkina, FBS analyst

GBP/USD: buy – 1.6820; stop – 1.6800; target1 – 1.6860;

USD/JPY: buy – 102.60; stop – 102.40; target1 – 103.20; target2 – 103.60

 

[riki143]

Forex Analytics

Trade signals from Danske Bank (Apr. 23)

*Danske Bank applies trailing stop orders (moved together with the price)

EUR/USD: Long at 1.3820 with a target of 1.3906 and a stop at 1.3778

USD/JPY: Long at 102.20 with a target of 103.05 and a stop at 102.05

GBP/USD: Long at 1.6700 with a target of 1.6917 and a stop at 1.6740

USD/CHF: Look to sell from 0.8900/05

AUD/USD: Long at 0.9350 with a stop at 0.9290; look to sell

USD/CAD: Long at 1.0970 with a target of 1.1078 and a stop at 1.0940

 

[riki143]

April 24: Asian session

Asian stocks fell after an unexpected drop in US home sales signaled a housing recover in the world’s largest economy is running out of steam. MSCI Asia Pacific Index lost 0.3%. Nikkei 225 is down by 0.95%.

USD/JPY declined to 102.25, but is above yesterday’s low at 102.16. Yen held its first gain in nine days versus the dollar on speculation data tomorrow will show Tokyo inflation quickened the most in more than two decades, dimming prospects the Bank of Japan will expand stimulus.

New Zealand dollar was the mover, jumping on the RBNZ meeting outcome. As it was widely expected, RBNZ announced a rate hike by 0.25% to 3.00%. Regulator showed that more hikes are to come, but the timing remains uncertain. NZD/USD rose by more than 50 pips, touching $0.8635. AUD/USD consolidates in the $0.9285/9300 range. Gold slowed the downside over the past 2 days, recovering some ground to $1285.5.

EUR/USD rose to $1.3825, but is below yesterday’s peak at $1.3854. Euro remained higher before a report today forecast to show a gauge of German business conditions climbed to a 2-year high. GBP/USD edged up a bit to $1.6790.

 

[riki143]

Market News

Draghi: high EUR hurts the economy

EUR/USD fell by more than 40 pips to $1.3790 as the ECB President Mario Draghi flagged the bank could make asset purchases to fight the threat of deflation. Draghi added that negative deposit rates remain an option for the government.

The ECB head admitted that a strong euro reflects return of confidence in euro zone, but a higher euro could derail euro zone recovery.

 

[riki143]

Market News

Apr. 24: American Session

Tatiana Norkina, FBS analyst

Orders for durable goods in the U.S. rose by 2.6% last month instead of the forecast of 2.0%. It caused the dollar index to jump to the highest mark in the last few days 80.05. However, the subsequent unemployment data (number of applications for unemployment benefits last week rose to 329 thousand, instead of the expected 310 thousand) had a negative impact on the market: the dollar index fell to around 79.90 and is currently losing about 0.10%. Stock markets also opened with a reduction. S&P500 is losing about 0.15% and the DJIA - about 0.05%.

In currency markets volatility increased during the occurrence of specified data. Thus, the pair EUR/USD had fallen to around 1.3790 mark from 1.3830 after another speech of Draghi, who reiterated the reluctance to see an expensive euro, but at the moment it newly recovered to the area of 1.3815. Currency pair GBP/USD tested the 1.6770 support and rose to the 1.6800 figure.

USD/CHF pair fell to 0.8820 support after forming the maximum in the area of 0.8855 today. The pair USD/JPY is testing yesterday support 102.10-102.15 again, after the jump to 102.60.

 

[riki143]

Market News

April 25: Asian session

USD/JPY rose to 102.50, but then returned by 20 pips lower. Japanese yen remained near the strongest level in a week against the dollar as tensions between Russia and Ukraine increased demand for safety. US Secretary of State John Kerry warned that Russia was running out of time to comply with an accord aimed at de-escalating the situation in its neighbor. Tokyo core inflation came at 2.7% the most in more than two decades, though was slightly lower than the forecast of 2.8%. Asian stocks fell, MSCI Asia Pacific Index dropped by 0.4%.

Commodity currencies have regained some ground in Asia. It was a holiday in New Zealand and Australia, so there is basically no news from the region. AUD/USD found support at $0.9250 and recovered to $0.9280. Aussie is consolidating at the lower border of the April bearish channel. NZD/USD met buyers at $0.8545 and rebounded to $0.8570. Gold consolidates at $1293,3.

EUR/USD is trading in the $1.3830 area. GBP/USD is just above $1.6800.

 

[riki143]

Market News

Key option levels (Apr. 25)

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: $1.3775, $1.3800;

GBP/USD: $1.6600;

USD/JPY: 101.00 (large), 101.50 (large), 102.00 (large), 102.15 (large), 102.55-65 (large), 102.70 (large), 103.00 (large), 103.10 (large);

AUD/USD: $0.9280, $0.9300, $0.9335 (large);

USD/CAD: 1.0900, 1.0915, 1.0930, 1.0940, 1.0950, 1.0965, 1.1000, 1.1095, 1.1100 (large);

AUD/JPY: 95.00;

EUR/GBP: 0.8300.

 

[riki143]

Market News

Apr. 25: American Session

Tatiana Norkina, FBS analyst



U.S. dollar today looked weaker against most world currencies before the publication of the index of consumer sentiment according to the University of Michigan. However, the data were better than expected - 84.1 vs. expected 83.00 . This allowed a little strengthen the dollar index, but it is still in the red zone, losing about 0.08 %. Stock trading opened in a very serious disadvantage: S&P500 losing about 0.52%, and the DJIA - 0.60%.

EUR/USD pair reached up to around 1.3850 mark, but with the arrival on the market of U.S. players it reduced in the area of 1.3830. Currency pair GBP/USD is consolidating just above the 1.6800 figure after testing important level of 1.6825.

USD/CHF pair shows weakness the third day, falling today to 0.8800 figure. But USD JPY dropped below 102.00 figure.

 

[riki143]

Market News

April 28: Asian session

Japanese and Chinese stocks fell on Monday amid increasing tension in Ukraine, which pressure the risk appetite and support the safe-haven assets. China President Xi Jinping disappointed the markets, saying economy doesn’t need additional monetary stimulus.

USD/JPY has recovered a little, strengthening to 102.25. Nikkei 225 lost almost 1% in the session despite the upbeat Japan retail sales data. AUD/USD strengthened to $0.9305, facing resistance there. NZD/USD consolidates around $0.8575. Gold met sellers at $1306.4. EUR/USD dipped to $1.3815 before recovering to $1.3835. GBP/USD is testing the Friday highs around $1.6830.

 

[riki143]

Forex Analytics

EUR/USD: wave analysis (Apr. 28)

Authored by Roman Petuchov

Weekly. The pair is now forming a horizontal triangle. The question is where the bullish corrective wave [D] ends.

Daily. Wave[D] is a complex corrective wave with (y) of [D] being a double zigzag. The second zigzag is now coming to an end.

H4. We expect the wave (5) to be built in the nearest future. After that the market will reverse to the downside.

More:
http://www.fxbazooka.com/en/analitycs/show/1456

 

[riki143]

Forex Analytics

GBP/USD: wave analysis (Apr. 28)

Authored by Roman Petuchov

Weekly. The pair has been forming a rising impulse channel for more than a year.

Daily. The market is now forming a corrective wave (IV).

H4. Corrective wave В seems to be complete. This week we expect a bearish move to begin.

More:
http://cdn.fbs.com/sites/default/files/image/analysis/2014/April/28/gbpusd3.jpg

 

[riki143]

Forex Analytics

USD/JPY: wave analysis (Apr. 28)

Daily. Final bullish impulse of (V) is now being formed.

H12. Corrective wave IV was a complex one. In our view, rising impulse V has already begun.

H4. We expect to see a new bullish trend after the corrective wave [2] will be over. However, this pair is not so evident these days. We'd better avoid trading on USD/JPY in the near term.

More:
http://www.fxbazooka.com/en/analitycs/show/1458

 

[riki143]

Forex Analytics

AUD/USD: wave analysis (Apr. 28)

Weekly. Rising impulse [c] is about to begin.

Daily. Market is correcting to the downside in the wave (2).

H4. This week the pair will form a corrective bearish channel.

more:
http://www.fxbazooka.com/en/analitycs/show/1459

 

[riki143]

Market News

April 29: Asian session

Asian markets were mixed with investors trading cautiously. Concerns about Ukraine persist: US, EU, Canada and Japan announced fresh sanctions on Russian officials. US Federal Reserve starts a two-day policy meeting on Tuesday.

USD/JPY is trading in a tight 10-pips range around 102.50. Liquidity is thin on Tuesday as the Japanese market is closed due to public holidays. Bank of Japan will announce its policy decision on Wednesday.

Demand for commodity currencies is subdued. AUD/USD extended the decline, testing $0.9220 in early Asia. Falling iron ore prices keep on pressuring the Aussie. NZD/USD followed the AUD, weakening to $0.8520. New Zealand March trade balance came in line with expectations (920M), while the February reading was revised down to 793M.

EUR/USD strengthened to $1.3865, but remains below the yesterday’s $1.3880 peak. GBP/USD consolidates around $1.6815 after hitting a 4.5-year high yesterday. Markets are looking forward to the German CPI and the UK Q1 GDP in the European session.

More:
http://www.fxbazooka.com/en/news/show/1223

 

[riki143]

Forex Analytics

T. Norkina: trade signals (Apr. 29)

Tatiana Norkina, FBS analyst

GBP/USD: buy – 1.6820; stop – 1.6800; target1 – 1.6860; target2 – 1.6890.

USD/CHF: sell – 0.8790; stop – 0.8810; target1 – 0.8760; target2 – 0.8730.

More:
http://www.fxbazooka.com/en/analitycs/show/1461