Market analysis and trade recommendations by FBS

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Apr. 15: American Session

Tatiana Norkina, analyst at FBS

After J. Yellen's speech, the firming US dollar index tumbled unexpectedly to the 79.75 figure, thus not breaking the important 80.00 level. Negative data on the housing market contributed to the deterioration of the moods as well. U.S. stocks indexes have also slipped into the red zone. S&P500 is losing about 0.20%, DJIA - 0.15%.

At the same time, the EUR/USD currency pair has found support in the 1.3790 area and recovered to 1.3835. But here it was met by the strong resistance of the Ichimoku cloud on the hourly timeframe. The pair is returning to the 1.3800 figure at the moment.

The UK consumer prices data publication has forced the GBP/USD pair to initially sag to the strong support at 1.6655 and then recover to 1.6750. High market volatility still remains; bears are correcting the course in the 1.6715 area.

The USD/CHF pair is still trading near the 0.8800 figure, having tested the 0.8780 support today. Meanwhile, USD/JPY cannot break the 101.90-102.00 resistance. Bears have pressed the market again today and reduced the pair course to the 101.60 support.

 

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USD/JPY recovered to 102.26. Yen fell as Japanese stocks rose the most in almost two months. The Bank of Japan’s Governor Haruhiko Kuroda told parliament today the central bank will make the utmost effort to achieve 2 percent inflation. Japan’s Topix stock index rose by 2.3%, the most since Feb. 21.

AUD/USD rose to $0.9375 after dipping to $0.9336. Aussie erased an earlier loss after a report showed growth was stronger than forecast in China (7.4% vs. forecast of 7.3%, down from 7.7% in the previous quarter), the South Pacific nation’s biggest trading partner.

NZD/USD slumped to $0.8578. The New Zealand’s kiwi is down for the second day after inflation slowed and dairy prices fell.

EUR/USD edged up to $1.3825. GBP/USD is little changed in the $1.6825 area after dipping to $1.6656 yesterday. US dollar held a gain against most of its 16 major counterparts as investors sought haven assets amid tension in Ukraine and before Federal Reserve Chair Janet Yellen speaks today.

 

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Key option levels (Apr. 16)

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: $1.3700, $1.3710 (large), $1.3715, $1.3725, $1.3750 (large), $1.3770 (large), $1.3850, $1.3860, $1.3900 (large), $1.3910, $1.3925;

GBP/USD: $1.6600, $1.6650 (large), $1.6685 (large), $1.6700, $1.6715 (large);

USD/JPY: 102.00, 102.30, 102.50, (large), 103.15, 103.25, 103.30, 103.50 (large);

USD/CHF: 0.8920, 0.8925, 0.9000 (large);

AUD/USD: $0.9300, $0.9375, $0.9400, $0.9485;

USD/CAD: 1.1065 (large), 1.1100 (large), 1.1145, 1.1165 (large), 1.1250;

EUR/CHF: 1.2090, 1.2105, 1.2110;

EUR/JPY: 140.00, 141.00, 141.10, 141.15, 141.30, 143.00.

 

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Tatiana Norkina, analyst at FBS

The publication of the US past-month industrial production data, which turned out slightly better than forecasted by analysts, has contributed to strengthening of the U.S. dollar index today, after it falling to the 79.70 area. Nevertheless, the dollar is still in the red zone, losing about 0.02%, as of now. In the meantime, stock markets have opened significantly in the black. Thus, DJIA is adding about 0.60%, S&P500 - 0.30%, in expectation of the next speech by FRS Chair J. Yellen.

The EUR/USD currency pair has slid to the 1.3820 support area, after testing the 1.3850 mark today, while the GBP/USD pair has been supported by the labor market data. After the announcement that the unemployment rate has reduced from 7.1% to 6.9%, the pair shot to the 1.6820 area. So far, it is consolidating near the 1.6800 figure.

Bulls have just tried to go above the 0.8800 figure on the USD/CHF pair, which has been trading in a narrow range all day. USD/JPY has grown to 102.35 but met a strong resistance there, which can force the market to return to the 101.90-102.00 area already in the near future.

 

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Tatiana Norkina, analyst at FBS

U.S. dollar index has weakened somewhat today after yesterday's "dovish" comments by J. Yellen who acknowledged the labor market weakness and the low level of inflation in the country. The index was supported, to a certain extent, by today's data on unemployment benefits, the number of which for the past week turned out to be slightly lower than expected - 304 thousand (against the forecasted 315 thousand of applications). At the moment, the American is losing about 0.16%. Major U.S. stock indexes are moving in different directions: S&P500 has gained 0.25% so far, while DJIA is in the red zone, losing about 0.05%.

At the same time, the EUR/USD currency pair has slipped to the 1.3830 support, after reaching highs of the day in the 1.3865 area. The GBP/USD pair has returned to the 1.6800 figure where it is consolidating at the moment.

USD/CHF is trading within the 0.8780-0.8820 range for the third day in a row and is approaching its upper limit now. In the meantime, USD/JPY seems to have managed to keep above the 102.00 figure and the bulls are willing to resume the recovery.

 

[riki143]

Tatiana Norkina, an analyst at FBS


In the absence of major market players (most countries of the world celebrate Good Friday) trading on the currency markets are proceeded very moderately in the lateral direction today.


Thus, the currency pair EUR/USD stopped at 1.3820, after a morning rebound from 1.3800 figure. GBP/USD is consolidating in the range of 1.6770-1.6800.


USD/CHF has recovered to around 0.8830 after testing support 0.8820, USD/JPY corrected to 102.40.

 

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USD/JPY rose to 102.70. Yen fell after a report showed Japan’s trade deficit widened more than forecast last month.

EUR/USD remains in the $1.3810/20 area. US dollar is feeling rather well versus yen and euro as the leading US economic indicators that may back speculation the Federal Reserve will remove stimulus this year. Tense situation in Ukraine keeps affecting the market. In Europe banks are closed due to the Easter holidays. GBP/USD is in the $1.6800 zone.

Aussie and kiwi keep on correcting lower after peaking on April 10. AUD/USD extends the bearish retracement, consolidating in the $0.9340/20 range. NZD/USD swings in the $0.8600/8560 range. The $0.8560 support remains strong for now. The Reserve Bank of New Zealand will hold a policy meeting on Thursday – interest rate is expected to be hiked by 0.25% to 3.00%.

 

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CFTC: USD longs down

Here are the essentials of the latest Commitments of Traders (COT) report, released on April 18 by the Commodity Futures Trading Commission (CFTC) for a week ended on April 15. According to the report, net long USD positions contracted versus the other major currencies.

EUR/USD

Euro positions rose after three straight weeks of declines.

GBP/USD

British pound net bullish positions gained for a 5th consecutive week and rose to their highest level since February 15 2011.

USD/JPY

Japanese yen short positions contracted.

AUD/USD

Australian dollar contracts improved for a sixth consecutive week.

 

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EUR/USD: Elliott waves (Apr. 21)

By Roman Petuchov

Weekly. EUR/USD is forming the wave (Y) of [D] of the convergent horizontal triangle.

Chart. Weekly EUR/USD

Daily. The wave mentioned above is taking form of a double Zigzag. At present, euro’s forming the final zigzag [A] - - [C].

Chart. Daily EUR/USD

H4. In the near term the correctional wave (4) will be over.Tthen the growth will continue within the impulse (5) as it’s shown at the picture. When the wave [C] of Y is complete, we’ll expect the market would to reverse.

 

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GBP/USD: Elliott waves (Apr. 21)

By Roman Petuchov

Weekly. During the last 8 months the market has been growing within an ascending impulse [C] of B. Consider the layout of the bullish trend.

Chart. Weekly GBP/USD

Daily. The chart shows the layout of the rising impulse. The pair’s currently forming correctional wave (IV).

Chart. Daily GBP/USD

H4. GBP/USD is forming the wave (IV) which takes the form of a Zigzag. Once the upward impulse (5) of [C]is complete, the pair will start declining within the impulse C. The estimated trajectory is shown at the picture.

Chart. H4 GBP/USD

 

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USD/JPY: Elliott waves (Apr. 21)

By Roman Petuchov

Daily. USD/JPY is forming the long-term corrective wave IV. When this wave is complete, we’ll see a new uptrend, which will be the wave V.

Chart. Daily USD/JPY

H12. The more detailed markup tells us that the wave IV is complete. This complex wave took the form of a Double Three.

Chart. H12 USD/JPY

H4. The wave [y] took the form of a plane wave. In the last section we see the beginning of growth in the wave V. It’s too early to make the layout of this wave, but we can say that this week we expect the pair to rise.

Chart. H4 USD/JPY

 

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AUD/USD: Elliott waves (Apr. 21)

By Roman Petuchov

Weekly. The global emerging structure is a Zigzag. The correctional wave which is a part of it is complete. In the coming months we expect the pair to rise.

Chart. Weekly AUD/USD

Daily. Downward impulse is complete . In last section we saw growth in the first wave of the new uptrend.

Chart. Daily AUD/USD

H4. The figure shows a detail layout upside impulse, the fourth wave of which took the form of an extended oblique triangle. Next week we expect correctional decline in the wave (2).

Chart. H4 AUD/USD

More:
http://www.fxbazooka.com/en/analitycs/show/1436

 

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EUR/USD: weekly prospects

Authored by Kira Iukhtenko

EUR/USD spent the past week in the sideways $1.3790/3865 channel. The market demand for the euro remains subdued – the currency holds below the April 11 high at $1.3905.

This week we expect the greenback to take over in this battle. The recent strong figures from the US and the persisting expectations of the ECB policy easing are limiting EUR/USD upside. Technically, the 2008-2014 resistance and the top of the monthly Ichimoku still remain a strong barrier for the euro bulls (around $1.3820 as of writing). The next medium-term resistance lies at $1.3965, $1.4000 and $1.4240.

However, the euro buyers won’t give up so easily. The passive ECB remains a supportive factor for now. Evidently, any regulator’s "dovish" words will trigger a mass EUR/USD selloff. Watch the ECB Draghi speaking on Thursday. Technical support for the pair lies at $1.3670, $1.3600 and $1.3475.

In condition of the subdued Easter-related activity we recommend staying out of the market for now. I would recommend selling the euro on a break of the $1.3800/3780 area. A bunch of interesting statistics will be released on Wednesday (EU PMIs, US new home sales) and Thursday (German business confidence, Draghi speech, US labor data).

Chart. Daily EUR/USD

 

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GBP/USD is able to go higher

By Mark Jensen

GBP/USD keeps trading in the $1.6800 area. On Thursday the pair touched the highest level since 2009 on the dovish comments from the Fed’s Chairwoman Janet Yellen, while pound was boosted by the UK’s strong jobs and wages data released on Wednesday.

It seems that Yellen has decided to calm investors who were worried of sooner monetary tightening as US economy is gaining momentum. So far, the economic data in the US is strong, but not too strong, so the Fed still is able to make the market calm down. In Britain the unemployment rate fell from 7.2% to 6.9%, while average earnings index rose by 1.7% vs. 1.5% expected. This strengthened the expectations for the Bank of England’s rate hike in the first quarter of 2015. Although British central bank may not be entirely happy with such an advance in GBP, it’s not likely to somehow make the national currency go lower. On Wednesday the BoE will publish the MPC meeting minutes, so the regulator’s attitude might become a bit clearer. As the UK economy looks really good, GBP/USD can test even higher levels – $1.6900 and $1.7040 don’t look unrealistic. To break above we need a move above $1.6877 (Nov. 2009 high). Still, a move to 2009 highs will likely be the final increase.

As for the near term there’s was a small shooting star candle on Thursday. Support lies at $1.6750, $1.6685 and $1.6600 ahead of $1.6475. The pair may be trading mainly in the $1.6800/6700 in the near term.

Chart. Daily GBP/USD

More:
http://www.fxbazooka.com/en/analitycs/show/1438

 

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April 22: Asian session

Most Asian stocks rose as US equities capped their longest stretch of gains since October and the yen extended losses, boosting the outlook for Japanese exporters. Markets in Australia, New Zealand and Hong Kong resume trading after holidays, ahead of a report on Chinese manufacturing due tomorrow. MSCI Asia Pacific Index added 0.1%.

USD/JPY is trading in the 102.55/70 area. The greenback remains supported before data forecast to show continuing improvement in the US economy. Today America will release existing home sales data (14:00 GMT).

Both AUD and NZD gained a little ground, with AUD/USD rising by 40 pips to $0.9355 and NZD/USD touching $0.8590. Looking ahead, Australian inflation numbers, China’s manufacturing PMI and the RBNZ policy meeting over the next two days will attract market attention. Gold is trading under a slight bearish pressure around $1287.5.

EUR/USD is right under $1.3800, while GBP/USD is just below $1.6800.

More:
http://www.fxbazooka.com/en/news/show/1203

 

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NZD/USD this week: ahead of RBNZ

By Elizaveta Belugina

The Reserve Bank of New Zealand will conduct a meeting tomorrow evening (21:00 GMT). According to the forecasts, RBNZ will raise its benchmark interest rate by 25 bps to 3.0% within its current tightening cycle – all 17 economists polled by Reuters expect this outcome.

As RBS puts it, it’s hard to sell the currency whose central bank is raising rates when so many others are still glued close to the zero bound and when the Fed makes dovish comments. Still, the specialists underline that New Zealand’s dollar is the world’s most expensive currency in REER terms (real effective exchange rate). In their view, the rallies of NZD/USD to the $0.8700/9000 area should be used for opening short positions on the pair. NZD/USD is currently trading in the $0.8555/8600 area.

There actually are reasons for the central bank not to hurry with a rate hike. These reasons include lower inflation which fell to 1.5% in the first 3 months of the year from 1.6% in Q4 and falling dairy prices which lowers New Zealand’s exports revenue. Even if there’s a hike, traders will be examining the accompanying statement as it may contain comments about foreign exchange rates and general economic outlook and searching for some softer tone coming into the central bank’s next meeting in June. ANZ says that the rate hike expectations are already fully priced in the NZD. This reduces NZD’s chances to jump on the rate hike and increases its potential slide if the RBNZ disappoints.

Before the RBNZ decision pay attention to Australian inflation data (01:30 GMT) and China’s HSBC flash manufacturing PMI (01:45 GMT) earlier on Wednesday.

Chart. Daily NZD/USD

More:
http://www.fxbazooka.com/en/analitycs/show/1439

 

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USD/CHF: trade within the wedge

By Mark Jensen

USD/CHF moves up for a second week, approaching the 2013-2014 downward-sloped trend line (currently around $0.8900). US dollar gained some ground on the back of rather positive statistics. However, the upside will likely be limited until the geopolitical tensions in Ukraine end.

Technically, USD/CHF is trading in the “falling wedge” pattern since April 2013. Break above the 0.8860 resistance will open the way towards the wedge resistance around 0.8900, but this level is expected to cap for now. If the buying pressure isn’t strong enough, the pair will stay within the wedge and slide to 0.8600 in a few weeks.

However, a drop below 0.8600 looks unrealistic. Strong currency has already hurt the Swiss economy in Q1 and the government won’t let the things worsen. Last month the IMF advised the Swiss National Bank to introduce negative interest rates on the banks’ excess reserves in case of renewed strong pressures on the franc.

Trade ideas

Short-term: Buy at 0.8860 with a target of 0.8900 and a stop at 0.8840

Medium-term: Sell limit at 0.8900 with a target of 0.8620 and a stop at 0.9005

Chart. H4 USD/CHF

More:
http://www.fxbazooka.com/en/analitycs/show/1440

 

[riki143]

Key option levels (Apr. 22)

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: $1.3700, $1.3710, $1.3760, $1.3765 (large), $1.3780 (large), $1.3800 (large), $1.3850;

GBP/USD: $1.6685, $1.6710;

USD/CHF: 0.8850 (large);

AUD/USD: $0.9270, $0.9300;

USD/CAD: 1.0925, 1.1030 (large), 1.1075 (large), 1.1100 (large), 1.1110 (large);

NZD/USD: $0.8600, $0.8675, $0.8700 (large).

 

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Market News

Goverment needs a cheeper AUD

The Australian government has recently expressed its concern with regards to the RBA recent shift to 'neutral' in policy stance, Financial Review website says.

As AFR notes: "The Reserve Bank of Australia’s move to a “neutral bias” on monetary policy has angered the Abbott government, which believes any upward pressure on the dollar will make it harder to manage the economy." Government believes that the current neutral bias by the RBA was the main factor leading to the currency appreciation.

 

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Market News

Opinion: Sakakibara on JPY

Former Ministry of Finance official Eisuke Sakakibara, known as “Mr. Yen” for his efforts to influence exchange rates in the late 1990s, said that Japanese yen will weaken as the Fed’s tightening its bond-buying program.

“It is more likely that the dollar will rise toward 110 yen than for it to break below 100,” said Sakakibara.

According to the median estimate of more than 50 analysts in a Bloomberg poll, USD/JPY will rise to 109 by the year-end.