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Daily Market Analysis ForexTime ( FXTM )

Discussion in 'Fundamental Analysis' started by ForexTime FXTM, Oct 24, 2017.

  1. ForexTime FXTM

    ForexTime FXTM

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    Daily Fundamental ForexTime ( FXTM )

    Emerging markets face punishment from stronger Dollar


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    The unprecedented turnaround of fortunes for the US Dollar is continuing to leave a lasting impression on the FX markets, following the Dollar Index’s rise to above 92.80 on Monday, a new milestone for 2018. The emerging market currencies are now playing catch up with some of the excessive losses seen in developed currencies like the Euro, British Pound and Japanese Yen over the past couple of weeks, with the Dollar broadly stronger against the emerging markets at the start of the week. Asian currencies have also fallen victim to the latest round of USD buying momentum. The Japanese Yen, Singapore Dollar, New Taiwan Dollar, Korean Won, Philippine Peso, Indonesian Rupiah, Chinese Yuan, Malaysian Ringgit and Thai Baht are all suffering as a result of the USD’s strength at time of writing.

    While there will be concerns that the extended run of Dollar-buying momentum risks spelling pain for the emerging markets in ways not seen since the Federal Reserve began raising US interest rates back in 2015, emerging market investors should not panic. It must not be forgotten that we are encountering an unexpected global theme where the Dollar has become unexpectedly stronger than the overwhelming majority of its counterparts. The British Pound has nosedived 5.5% since April 17th, while the Euro has lost 3.7% during the same period.

    Rather than investors becoming concerned about the future prospects of the emerging markets, the real question to ask is - what exactly has encouraged such a turnaround in investor demand for the Dollar? Many will be inclined to look towards the 10-year US treasury yields, that are above 3% for the first time since 2014, as being the main catalyst behind the Dollar drive. Although I am personally leaning towards the view that increased interest rate differentials between the United States and its developed peers are what is causing the move in the US Dollar. Both the Bank of England (BoE) & European Central Bank (ECB) have seemingly backtracked from their own interest rate ambitions over the past couple of weeks. This has reminded investors that the Federal Reserve remains significantly beyond its developed peers when it comes to normalizing monetary policy.

    Euro hits new 2018 low

    The EURUSD has resumed its recent downward spiral by falling below 1.19 for the first time since late 2017. A new round of weak economic data has exposed further fears that the Euro area is at risk of entering another downturn. I personally feel that this view is a little unfair, considering that the Eurozone outperformed all expectations throughout the previous year. The latest EU data will however provide the ECB with more reason to remain hesitant on raising interest rates, meaning that increasing interest rate differentials between the United States and Europe risk exposing the EURUSD further to the downside.
    China and Nafta talks still in spotlight
    The first round of negotiations between the United States and China concluded at the end of last week with no breakthrough, as expected. While ongoing talks behind the scenes have eased tensions around a potential trade war between two of the largest economies in the world, investors will remain on high alert for trade threats, as long as the discussions fail to bring any tangible results.

    Oil benefits from Iran risk

    Persistent fears that President Trump will pull out of the Iran nuclear deal later this week have played a pivotal role behind the price of US Oil rising above $70 for the first time since November 2014. With Trump having referred to the Iran agreement in the past as “the worst deal ever”, it is not difficult to understand why investors are pricing in heavy risk premiums into the price of oil before Trump’s announcement on the Iran nuclear deal this evening. It does need to be remembered that there will be wider implications than the price of oil, if Trump does abandon the 2015 nuclear deal.

    Iranian President Hassan Rouhani has already warned that the US would “regret” its decision to exit the nuclear deal, and concerns over how Iran might react to the United States pulling out do not appear to have been factored into other asset classes. One of the most difficult questions to answer is what impact the United States pulling out of the deal might mean for politics in the Middle East.
    There is a likelihood of market uncertainty in the lead up to Trump’s “decision” on the Iran nuclear deal today, and I think the Japanese Yen and Gold will be sought from investors if there is a period of risk aversion in the markets.

    Ringgit weakens ahead of General Election

    Ahead of an extremely busy week for the Malaysian economic calendar, the Ringgit is showing signs of weakness against the USD.

    The intense buying momentum in the USD has probably been the main contributor to the Ringgit fluctuations, but the general election later this week will still be seen as a potential event risk. If there is unexpected uncertainty with the election in Malaysia, it can’t be ruled out that the Ringgit could find itself at risk of further selling pressure.

    Rupiah weakens as Indonesia GDP disappoints

    The Indonesian Rupiah tumbled to its lowest levels since December 2015 at 14,000, after GDP growth in Indonesia showed signs of weakness in the first quarter of 2018. The headline GDP miss has been attributed to weak consumption, and the news failed to help the Rupiah pull away from its recent rut that has seen the currency take the position of the second-worst Asian performer over the past three months.

    The slower pace of economic growth is going to make it difficult for Bank Indonesia to raise interest rates, despite calls for the central bank to take action in an effort to prevent the local currency from further weakness.



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  2. ForexTime FXTM

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    GBP and AUD continue to struggle



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    The pound has come under increased pressure over the last few weeks, as the so called Brexit continue to fail to come to any sort of conclusions at all for markets. Certainly there is a case for leaving the EU, however no politicians can come to any sort of agreement on it. Further to the downside has been UK retail sales m/m coming in at -4.2% (-0.75% exp), which is much worse than anyone expected, and a figure not seen since 1995 when records began. It's clear that off the back of this traders will be looking to offset losses and clear balance sheets.

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    Looking at the GBPUSD it's clear to see that that the daily char reflects a number of key points, the first being that Brexit continues to be a major topic and that the initial positivity of a quick solution has quickly failed. Further to this economic data continues to be a mixed bag as can be seen from the retail sales figures above, which will put further pressures on UK businesses. For me the defining technical movement is of course resistance at 1.3575 holding up very strongly to any pressure at present and preventing anything but bearish movements from happening. The market as a result is looking increasingly like it may look to move lower to support at 1.3314 if the bearish pressure continues in the short term. However, a push down here may provoke a very strong bearish pressure.

    The Australian dollar can get no breaks as of late, as it continued its bearish run against the USD even further today. This comes as no surprise as the trend has been quite bearish, but also retail sales m/m came in at 0% (0.2% exp), showing that the consumer sector is weaker than expected. While not largely off the market it continue to show that the Reserve Bank of Australia will struggle to lift rates in the near future if the status quo continues.

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    Looking at the AUDUSD on the charts it's clear to see the bearish trend that has been in effect for the last month and looks set to continue in these circumstances. The AUDUSD has cracked through support at 0.7472 and is now looking lower on the charts in the face of bearish pressure, to the potential support level at 0.7371 as the bears look to target lower lows. In the event we do see any bullish pressure in the market expect 0.7472 to be the key area that will either allow the bulls to take control or reaffirm the bearish trend in this market, as the AUDUSD continues to be a bearish story in the interim.



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  3. ForexTime FXTM

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    AUD struggles in market enviroment

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    The Australian dollar got some positive news for a change as it faced off against the USD and won a round for the bulls after a month of bearish pressure. This has been positive on the fact that the Australian economy in the employment sector has performed better than most expected with Australian employment coming in at 22.6K ( 20K exp) and the unemployment rate lifting to 5.6% (5.5% prev) on the charts as a result. For now the Australian dollar continues to find itself under pressure, with the labour market being the only strong point. Despite all of this the Reserve Bank of Australia continues to look for positives for the future, with inflation being a key compontent for any future rate rises.

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    The AUDUSD continues to climb high, but only on the back of weaker currencies as of late. The AUDUSD failed to make it through resistance at 0.7506 as traders are quite bearish above that level of pace that the AUDUSD continues to go through. Traders will be looking ot see if the market can indeed pressure here and breakthrough, but in reality it could be another bearish test followed by further pressure on 0.7472. I would expect in the long run that we could potentially see an extension to 0.7371 on the charts if the USD strength continues to be a mainstay for the market. All in all the AUDUSD finds itself in a unique position and I would expect to see further bearish pressure unless anything radical comes about in the markets.

    The other key mover has been EURUSD which has struggled to find its feet under immense pressure from the USD but also weakness in Europe surronding Iran and Italy. The market has been looking for strong words from the EU and how much the Italian goverement changes will influence the EU, but so far it has shown little promise of anything radical in the way of changes. Despite all of this the EURUSD is always a favourite for traders and has slid down the charts reflecting USD strength. If we do see futher politiacl pressure we could see the EUR drop further against all major pairs.

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    One of the key areas has been support has been 1.1760 which has so far defending againt any and all bearish movements lower on the charts. It's unlikely this key level will hold in the long run and we could see further slippage down into the low 1.10 levels if the USD strengthening continues. I would expect that any movements higher are likely to find strong resisstance at 1.1825 on the charts as this level has come under pressure in the past.



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    CAD lifts on rate rise prospects, EUR also in focus


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    The Canadian economy has been the big talking point of this afternoon with the Bank of Canada (BoC) keeping rates flat at 1.25%. The major change though was the removal of dovish wording from the monetary policy statement, and now starting to align that wording with their American counterparts the Federal Reserve. The odds now of a hike at the next meeting in July have increased drastically as a result and this should not come as to much of a surprise, given that inflation has been running at 2% recently which gives the bank the mandate to look to move rates higher from the artificial lows they've been sitting at for some time. The only thing that could derail things is upcoming GDP figures which are expected to be slightly weaker, though analysts may change this in the wake of the Bank of Canada's confidence, and NAFTA - which continues to drag on with the US and Mexico. However Canada has said it won't cut a deal which negatively impacts Canada's main industries.

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    For the USDCAD some serious movement has taken place and the bears were quick to capitalise on the USD sell off today and the CAD's strength. So far the USDCAD has moved below the 1.2881 level on the charts and if it can remain below this support level we could see some further selling pressure and potentially a move to 1.2693 on the next leg. At the same time if we close above this key support level then potentially it's a sign that the bulls think the USD still has plenty in the tank to run with and we could see another leg back up to 1.3041. All in all, it's looking quite bearish, and we could get another few days on the back of the BoC announcement.

    The other major talk of the town today was the complete U-turn in Italian politics. With the President and PM coming together to allow more time for the government to set up its coalition, and also the 5 star movement asking that Savona not be nominated for the finance/eco minister role for Italy. This of course still has its challenges, but at the same time it removes a major euro sceptic from a key position in the goverement and euro bulls were quick to rally as a result. There are a number of challenges ahead, but at the same time it could in theory lead to a more stabilised, yet progressive Italian government, that won't be so aggressive towards the euro-zone.

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    The EURUSD as a result has rallied strongly eclipsing all of yesterday's losses, but has failed to capitalise on the follow days candle. This to me is a strong sign that perhaps markets are positive but being cautious here. Resistance at 1.1719 will be interesting, with markets likely to look for some sort of political relief before extending further to the next level at 1.1824. At the same time if the bears are serious in the market, they may look to jump on the news and push the Euro down to 1.1482 in the long run.


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    Trade war fears to dominate market moves this week


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    Intense G7 meeting

    After imposing tariffs on steel and aluminum imports on its closest allies, the U.S. will be facing enormous criticism at the G7 summit on Friday in Quebec or, as the French Finance Minister Bruno Le Maire likes to call it, “G6 plus one.”

    “When you’re almost 800 Billion Dollars a year down on Trade, you can’t lose a Trade War! The U.S. has been ripped off by other countries for years on Trade, time to get smart!” Donald Trump
    Whether President Trump is playing a smart strategic game or is seriously considering getting into a trade war remains unknown, but the probability of a full-blown trade war has undoubtedly increased significantly.
    The summit is due to take place after the U.S. and China trade negotiations ended on Sunday without any significant progress made. In fact, China warned the U.S. that any move to implement tariffs on Chinese products would ruin the negotiations.

    Although markets in Asia are rallying after the U.S employment report released on Friday showed a robust surge in numbers and new elections were avoided in Italy, this optimism will soon disappear if the Trump administration pulls the trigger on the threatened tariffs on $50bn worth of Chinese exports. So, keep a close eye on Trump’s Twitter account for updates.


    Europe’s Politics and data to be in focus

    The Euro struggled last week, with Italian and Spanish political turmoil sending the single currency to its lowest level since July 2017. The compromise reached between the Italian President and the populist coalition prevented further losses as a new election seems to be off the cards for now. This relief was reflected in Italian bonds where 2-year yields fell 200 basis points from Tuesday’s high. However, the Euro’s recovery may be short-lived if the new Italian government moves ahead with its proposed massive spending agenda and tax reductions. These actions will not only create conflict with Brussels but will also invite credit rating agencies to cut their debt ratings.

    On the data front, the Eurozone Services PMI is likely to confirm that the economy continued to slow down as it entered Q2. Another round of negative economic releases will lead the ECB to postpone ending QE and thus drag the Euro further. The UK services PMI, Germany’s industrial production and factory orders will also be in focus this week.



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    Oil slips further ahead of OPEC meeting


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    Oil markets have suffered another blow today as US oil inventories showed an increase of 2.07M barrels (-2.1M exp), while at the same time US gasoline inventories also showed a strong increase to 4.6M (0.5M exp). This has come as a bit of surprise for the market which had been expected drawdown's and probably more so for OPEC and its allies, as they look to ramp up production to find an equilibrium and maximize profits from the high oil price we have at present. Certainly the OPEC meeting due out on the 22nd of June will be very interesting, where it is expected that Saudi Arabia and Russia will continue their ramping up of prices. Many are expecting that with Iran out of the picture this does give the Saudis and Russia the chance to put production up even if the price if oil is not doing well.

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    On the charts it has been very bearish for oil as of late. So far we saw a peak for oil at 72.81, followed by oil falling back down to earth in a hurry - not surprising given that oil trending very hard, and it does not always continue. This bullish buy hit resistance at 65.75 when trying to claw back some ground against the bears and it really does look like it may struggle to breakthrough this level in the interim. For bearish traders feasting off the data the next levels of support can be found at 64.17, with the potential to extend even lower to 62.65 in the long run. I would also focus on the long term potential trend line as well, which could propel oil to something further in the long. Looking at the bulls however resistance as mentioned above can be found at 65.75 and 67.45 in the long run, but it may take some cracking to get them through given the OPEC meeting.
    One of the other key winners today was the NZD which enjoyed the risk sentiment of the market as it started. So far the despite positive data the US market has enjoyed, it has translated into more foreign investment outside the US in other currencies and the NZD and AUD were no exception today.

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    Looking at the charts we can see that the NZD has cracked through the important 70 cent barrier mark and is climbing higher, but has stumbled against resistance at 0.7035. With bullish traders looking to assert themselves it would seem that the NZDUSD could end up taking on the next level of resistance at 0.7171 if the bulls stay in control. On the flip side support still remains at 0.6966 and 0.6819 in the long run.



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    Trade war fears ease… but for how long?



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    Global stocks have bounced back to life after China’s central bank calmed markets by urging investors to “stay calm and rational”.

    While this move by the People’s Bank of China (PBOC) could support risk sentiment and push equity markets higher in the short term, gains are likely to be limited. With trade war fears still a recurrent market theme that continues to weigh on sentiment, investors may start questioning the sustainability of the stock market rally. Markets are likely to remain cautious with any signs of escalating trade tensions between the United States and China potentially sparking a renewed wave of risk aversion.


    Bank of England policy meeting in focus


    Today’s main event risk for the British Pound will be the outcome of the Bank of England policy meeting, which is widely expected to conclude with monetary policy left unchanged.
    With the BoE expected to keep interest rates on hold, investors will most likely closely scrutinize the policy statement and MPC vote count for insight on rate hike timings beyond June. The Pound could weaken if the central bank expresses concerns over Brexit related uncertainty and political risk negatively impacting growth. Pound weakness may remain a dominant market theme if Brexit uncertainty results in the BoE repeatedly delaying monetary policy normalization.

    Taking a look at the technical picture, the GBPUSD is bearish on the daily charts. The solid daily close below 1.3200 could invite a further decline towards 1.3130 and 1.3100, respectively.

    Currency spotlight – Dollar

    The Dollar has scope to extend gains against a basket of major currencies amid market expectations over the Federal Reserve raising US interest rates at least two more times this year.
    Away from the fundamentals, the technical picture remains heavily bullish with prices hovering near an 11-month peak as of writing. There have been consistently higher highs and higher lows, while prices are trading firmly above the 200 daily Simple Moving Average. A firm daily close above the 95.00 level could open a path towards 95.35 and 96.00, respectively.


    Commodity spotlight – Oil


    There is a growing sense of uncertainty mounting ahead of Friday’s OPEC meeting, with markets now re-evaluating if an output increase could still be on the table.

    While Saudi Arabia and Russia are pushing OPEC and its allies to raise production, other members including Iran, Iraq, and Venezuela have opposed such a move. With Iran already stating that it was likely to reject any agreement that raised output, this could be a fractious meeting between oil producers in Vienna. Whatever the outcome of the OPEC meeting, it could have a lasting impacting on oil prices.



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    Pound comes under pressure after Brexit resignations


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    The Pound has been in the spotlight today after two cabinet resignations of key Brexit leavers shook the Tory government up. What some were calling a political crisis seems to have subsided so far, and the markets will be looking to see how the new appointments handle the outgoing ministers and if they can bring anything new to the table. However, all the uncertainty drags on the pound and the drop today was mainly on the back of Boris Johnston's resignation, as he has been a key vocal enemy of any soft Brexit. Regardless of the politics the UKs government remains deeply divided over the customs union and the Irish border, and it seems ever likely that they will be forced to potentially ask the EU for an extension if things don't progress much more rapidly. For the Pound this could mean heavy pressure in the coming months, but for now the bulls are doing their best to stave off the bears.

    Looking at the GBPUSD in particular and it's clear to see that the bulls are trying to push it away from the bullish trend line and back up, as the USD stalls on its epic run of late. Bullish traders will now be looking to aim for resistance at 1.3432 on the charts, with the potential to go further higher if they can get some positive Brexit news. In the even though that we do see the bears flood back into the market, then I would expect strong pressure on support levels at 1.3171 and the trend line just below that, which will act as dynamic support. For all it's worth though GBPUSD traders are likely to be short term holders though in the current market environment so I would expect plenty of whiplash in the markets as they pivot on news from the media.

    Good and bad news out the US today as US consumer credit has lifted to 24 billion (12 billion exp) for this month. This is the largest deviation since 2016 and the markets will be looking to see if it's a pattern that will continue or it's just US consumers enjoying the summer season. Equity markets on the consumer side will be the most affected at this stage I feel as US consumable companies will benefit the most from the tax benefits and also US consumers spending far more.

    After support was found at the 100 day moving average the S&P 500 has benefited greatly from a bullish run coming up just short of resistance at 2787, if market conditions continue we could see a further push to 2835. In the event we see some bearish pressure I would expect support at 2741 to be the first candidate followed by the 100 day moving average acting as dynamic support. However, what might be the most curious will be when the 100 day and 200 day moving average cross, and how markets react to this technical signal. For now though the bulls are in charge of the market.



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    Bank of Japan unwilling to shift gears yet


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    After weeks of speculation that the Bank of Japan may begin to adjust its stimulus program, the central bank once again decided not to join the global trend towards tighter policies.

    The BoJ left its overnight interest rates unchanged at -0.1% and reiterated that it would resume buying Japanese Government Bonds to keep the 10-year yields around 0%. The bank may allow for more flexible movement on the 10-year bonds, however this isn’t considered a significant shift in policy.

    The BoJ also made tweaks to its ETF purchases, as it increased the composition of TOPIX-linked ETFs while shifting slightly away from the Nikkei 225 Index, but maintained its annual pace of ETF buying.

    It seems the Bank of Japan will be the last major central bank to pull the trigger on tightening policy as the Japanese economy continues to struggle with stubbornly low inflation levels. This should allow further widening in spreads between Japan’s bonds and other global bonds towards year-end, suggesting that the Yen is likely to remain under pressure for the near future.

    The Federal Reserve is next in line to announce policy on Wednesday. That’s why today’s Core Personal Expenditure figures carry significant importance. If Core PCE came in at 2% or above, it would reinforce expectations for two more rates hikes in 2018. Many traders want to know whether President Donald Trump’s criticism of the Fed will lead to a change in language; I believe there will be no change in guidance and the Fed will continue sending the message that more rate hikes are on the way.

    We also have inflation and Q2 GDP numbers from the Eurozone. Consumer Price Index figures are expected to rise 2.0% y-o-y in July, remaining unchanged from June. Meanwhile, GDP growth is expected to see a 0.3% fall from a year ago, towards 2.2%.

    In equity markets, the tech sector continued to weigh on sentiment. Shares of Facebook, Twitter and Netflix plunged further on Monday, as investors started to become more worried about their business models after they announced their latest earnings results. Amazon and Alphabet were also dumped. Meanwhile, all eyes will shift to Apple earnings today in the hopes of providing some support for FAANG stocks.



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    Gold slips ahead of non-farm



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    The US labour market has continued to impress as of late as US initial jobless claims came in strong at 218K (220K exp), showcasing the labour market surging ahead. However US durable goods orders continued to be less upbeat than expected coming in at 0.2% m/m (0.5% exp), this is not likely to be a big mover for the USD however as the labour market continues to be the key FOMC focus as well as inflation additionally. With all this in mind it looks likely that interest rates will continue to rise, and coupled with the USD flight we've seen lately that the USD will continue to be the dominate currency in financial markets at present.



    One of the key movers as outlined yesterday has been of course gold, which has been suffering for some time now. So far today we've seen a very strong break through support at 1213 as gold looks to push down to the psychological level at 1200. I feel this is not likely to hold given the current market sentiment and a more realistic target may be support at 1189, which has been a long term support level in the past. If gold did reverse then resistance levels at 1240 and 1258 would be key targets for traders in this market. However, I feel the 20 day moving average is likely to be the main level of dynamic resistance in this market at present, given how badly gold bugs are feeling at present.

    The other big loser at present in the markets has been of course the Australian dollar which finds itself under pressure constantly. The services index was released today and showed a sharp decline to 53.6 - still showing expansion, but not anywhere near the previous reading of 63. Markets when focusing on the AUDUSD will now be clearly focused on non-farm payroll figures due out tomorrow which could add further pressure to the AUDUSD which has been bearish for some time now. I'm apprehensive about any bullish movements in the current market, as the USD continues to strengthen.



    On the charts the AUDUSD has continued to be bearish and shows no sign of letting up. We've so far seen sharp falls and support at 0.7310 is looking to be the next major target. On the flip side, if the AUDUSD was to rise it would find strong resistance at 0.7377 and with the 50 day moving average as well - with a potential trend line in play as well, but we've not seen any real tests on this level. All in all though, it feels like the AUDUSD is likely to spiral further lower.




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    Is Trump truly winning the trade war?



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    Escalating trade tensions between the U.S. and China remain the financial markets’ hottest topic. President Trump seems to be celebrating winning the first battle of this war, saying that “tariffs are working big time” in a Tweet on Sunday. He believes that they will enable the U.S. to start reducing the large amount of debt accumulated throughout Obama’s administration. Trump also cited that the steep fall in Chinese equities as evidence that tariffs are working. In his opinion, they will make the U.S. much richer than it currently is and that “only fools would disagree”.

    The tariffs so far are approximately on $85 billion of imported goods. Assuming a 25% tariff, it would raise $21.25 billion. This number represents 1.33 % of the $1.6 trillion in additional debt President Trump has accumulated since taking office in 2017 and only 0.1% of the current $21 trillion in total debt. So, it doesn’t seem the imposed tariffs would reduce the American debt substantially.

    In my opinion, a large portion of the tariffs will be paid by U.S. consumers and I also expect CPI figures to begin reflecting these higher prices, especially if Trump’s administration imposes additional tariffs on $200 billion of Chinese goods. Rising inflation leads to higher U.S. interest rates, translating into higher cost of borrowing and debt servicing. Several U.S. companies have cut their profit forecast as a result of these tariffs, especially car makers; shares of GM, Ford, and Fiat Chrysler fell sharply after announcing their results. Other U.S. companies affected by Trump’s global trade war include Tyson Foods, Harley Davidson, United Technologies, Caterpillar and Coca-Cola, among several others.

    This explains why the S&P 500 failed to reach a new record high, despite 81% of companies so far managing to beat their profit forecast in one of the best earning seasons in history. Given that we’re almost at the end of earning season, trade wars will return to dominate the headlines. The next big risk is likely to be the U.S. midterm elections in November. I think there’s a high chance that the Democratic Party will take over the U.S. Congress and end the Republican single-party control. This won’t be good news for equities, and I expect to see rotation to non-cyclical stocks and an increase of cash in investors’ portfolios.




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    NZD falls on RBNZ dovish stance



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    It's been an exciting morning for the Reserve Bank of New Zealand as they announced that they see rates being held at 1.75% until 2020 in the current market environment . This pails in regards to previous assumptions from economists that we would see a rate rise in early 2019, and with that thrown out of the window the NZD has fallen accordingly. There is hope that the NZ economy will see moderate growth to say the least, and that core inflation will also pick up in the long run, however all things considered and a trade war going on, it may be a hard ask to say the least. One thing is very clear though, and that is the RBNZ has taken a very dovish stance and provided some stern guidance on expectations and as a result markets will be looking to price this in.

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    For the NZDUSD it has been a case of free fall at this stage with the NZDUSD crashing through support at 0.6712 and heading down towards support at 0.6600. Certainly this is what the RBNZ is hoping for as a weaker kiwi dollar leads to higher export prices for producers. If the NZDUSD is able to swing things around and actually be bullish then resistance at 0.6755 is likely to be the main focus, with the 20 day moving average hovering around there. Beyond this there is a strong resistance band at 0.6833 and 0.6859 which will likely contain any bullish ambition. All in all though, it's likely the bears that will remain in control on the back of all this news.

    The other big mover today has been oil as it shot down the charts on some bearish swings. The catalyst of course was oil inventory data which showed a weaker than expected drawdown of -1.35M barrels (-3M exp) and a surge in gasoline inventories as well to 2.9M (-1.9M exp). All of this has taken the heat of the oil market which had been looking stronger on the back of Iran sanctions.

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    Looking at the movements of oil on the charts, it's clear to see that it has shot down lower and hit support around 66.03 in this instance, before seeing a small retreat. If we continue to see bearish pressure here then I would expect a fall to 63.98, but more importantly there is the trend line which could create an even bigger hurdle given it's bullish. If the bulls are able to come back in then resistance at 67.45 and 69.38 are likely to be the key targets, with the market seemingly being a little unsure on oil being over 70 dollars a barrel.





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  13. ForexTime FXTM

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    USD bulls put pressure on Oil and Sterling



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    USD bulls have continued their strong run globally, as weakness in overseas market continues, but also strong economic growth continues to be a major factor. US retail sales m/m were very strong today coming in at 0.5% (0.1% exp), showcasing that consumers are not worried about tariffs or the high USD for that matter and currently are out spending. If consumption is a good indicator of economic health it may also bolster inflation expectations as retailers feel they can increase prices slightly during periods of expansion without fear of losing to many customers. So while economic growth is strong so far the markets will be looking to the FED to see if it changes its mind about anything and if more future rate hikes are coming in the long term.

    On the markets though today oil was for me one of the more interesting trades as it hit the bullish trend line and beat a retreat shortly after. US oil inventories once again showed much more stronger figures than anyone expected with a surplus of 6.8M (-2.5M exp), with only gasoline registering a drawdown on stockpiles. Oil has also struggled against a robust USD at present which has managed to hold back the oil bulls as well, but with OPEC holding back supply it's likely we could see prices remain elevated.

    [​IMG]

    Looking at oil on the chart we've hit the sweet spot for bullish support here with the trend line coming into play and also support at 63.98. Technically I would expect the bulls to be stronger here as the market has a chance to push back against the recent trend, however at present it's still looking a bit weak. With that weakness in mind I would be careful of a push through here to support at 61.93; if we did see that happen then the bears are likely to really take hold of things in the current market climate. If the bulls do however wrestle back control resistance can be found at 66.03 and 67.45.

    The pound has continued to come under large pressure from markets as the Brexit debate continues to rage and the prospect of a hard Brexit looks to impact markets. I would expect more impactful debate on Brexit from the UK government after the summer break, nevertheless the major sticking points have no solutions and it looks like it could get drawn out for much longer than anyone expected and markets won't be loving it.

    [​IMG]

    For the GBPUSD the fall is likely to continue with the uncertainty and support at 1.2652 has so far stopped any further movements lower. If we a see a breakthrough at this level then I would expect to see it fall as low as 1.2461 and even potentially further lower if markets feel a no deal Brexit is coming. On the flip side, if the bulls can push back then resistance can be found at 1.2798 and 1.2958 as well.





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  14. ForexTime FXTM

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    Quiet market before Powell Jackson Hole speech



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    There is a lower level of market volatility at the end of the week, with investors on stand-by mode before Federal Reserve Chair Jerome Powell speaks at Jackson Hole later today.

    Traders are probably on the edge of their seats wondering whether Powell will respond at all to the criticism from President Trump towards US interest rate policy earlier in the week, but the most market-friendly way to respond to such comments would be to ignore them. The Federal Reserve does remain set on raising US interest rates once again next month, and there is no reason for the Fed to deter from this path. I personally doubt that he would acknowledge the comments made by President Trump during Jackson Hole.

    Powell might be able to create some volatility for traders is if he highlights the potential impact the ongoing trade tensions is a risk to the global economy. There are indications that the global economic outlook is slowing when compared to this time last year, and the latest FOMC Minutes release from this week did create a picture that Federal Reserve policymakers are concerned about the prolonged trade tensions. If Powell suggests that these concerns over trade tensions could also weaken the US economic outlook, this would represent a risk for the Dollar.

    Elsewhere a threat for financial market volatility would be if Jerome Powell takes an unexpected turn towards offering monetary guidance on what the outlook for 2019 could bring. The market is already pretty much set-on for the Federal Reserve to raise US interest rates next month with the door also remaining open for a potential US interest rate increase before the year concludes, but there isn’t much guidance on what to expect next year. It might be a little premature at this stage to speculate, but if Powell suggested that 2019 would bring a less active approach towards raising US interest rates this would be seen as a negative for the US Dollar.





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  15. ForexTime FXTM

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    Global risk appetite increases on US and Mexico deal



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    It has been an incredibly bullish day for the US markets after the US and Mexico agreed in principal on a trade deal to replace NAFTA. While Mexico has agreed in principal around this deal the main issue for many has been the exclusion of Canada thus far, with a separate agreement looking to be reached in the long run for Canada and the US and Mexico. This move however will need approval by congress and the senate but markets believe it will happen and as a result and we've seen some very bullish moves at the start of the week globally.

    [​IMG]

    Looking at the S&P 500 it is clear that investors thus far believe that any trade deal that has been agreed will favour the US economy heavily, as Trump has been a staunch opponent of the current NAFTA deal and the effect it had on blue collar workers. While protectionism of certain industries is not ideal in any situation the equity markets believe that in this case it may be warranted and have pushed the market to a record high of 2900. With this being a key level of resistance for the market we're waiting to see if the market has further legs and can lift to 2925 at present. In the event that it does not have the movement that was envisioned then a potential fall back to support at 2877 could likely be on the cards. With further falls in the long run to 2847 and 2818. However, the US equity markets continue to be upbeat so I am looking at this as very bullish in the long run.

    One of the other moves at the start of the week and one to watch has been the New Zealand dollar which has crept up the charts thus far. Markets I feel have not been expecting this one, but some recent weakness in the USD has given it a bit of a reprieve and we've seen some small gains. In the long run though, the New Zealand economy is still suffering and it may be a very long time until we see any sort of rate rises in the current market environment.

    [​IMG]

    Looking at the NZDUSD on the charts it has been quite the aggressive mover as of late and the bears have taken a big chunk out of it. Resistance at 0.6712 has so far held back any bullish movements as I feel markets are cautious over any rises. However, there is further potential to rise to 0.6755 and 0.6833 in the long run if bullish sentiment continues. If the bears take back control then support levels can be found at 0.6600 and 0.6560 at present.





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  16. ForexTime FXTM

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    BoE inflation report hearings in focus, Dollar powers higher



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    A sense of gloom was evident across financial markets today as worries over rising trade tensions and emerging market weakness weighed heavily on global sentiment.

    Looming U.S. tariffs set to be imposed on $200 billion worth of Chinese goods as soon as Thursday brings on oppressive feelings, while uncertainty over NAFTA negotiations has compounded anxieties. Caution can be reflected across global equity markets, with Asian stocks concluding mixed while European shares struggle for direction.

    Emerging market currencies witnessed further weakness on global trade tensions and Dollar strength. No prisoners were taken as the Turkish Lira, Argentina Peso, South African Rand and many other EM currencies felt the burn. The outlook for EM currencies remains gloomy, especially when considering the turmoil in Turkey and Argentina, trade war fears and prospects of higher US interest rates all present downside risks ahead.

    The British Pound had a rocky start to the week after Brexit negotiator Michel Barnier warned that he “strongly” disagreed with key sections of Theresa May’s Brexit proposal. Sellers attacked the Pound further this morning on reports that UK construction activity slowed in August.

    Much attention will be directed towards the UK’s inflation report hearings where Mark Carney and several MPC members are set to testify before parliament. Investors will be paying very close attention to any comments around monetary policy, economic outlook and ongoing Brexit developments. Will he stay or will he go? This remains a recurrent question on the mind of many investors. Lawmakers are likely to use this opportunity to quiz Carney about his future plans. The battered Pound could receive a knock out blow if Carney strikes a dovish tone and talks down rate hike prospects.

    In the currency markets, the Dollar was King as concerns over escalating US-China trade tensions boosted safe-haven demand for the currency. Another key driver behind the Greenback’s healthy appreciation is speculation over higher US interest rates this year. Taking a peek at the technical picture, the Dollar Index punched above the 95.50 level. A solid daily close above this region could inspire a move towards 95.80.

    Gold bears were back in action on Tuesday thanks to a broadly stronger US Dollar. With the mighty Dollar set to dim Gold’s shine and US rate hike expectations denting appetite for the zero-yielding metal further, the outlook remains tilted to the downside. Sustained weakness below the $1,200 psychological level could open a path towards $1,180.




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  17. ForexTime FXTM

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    Sterling weakens despite wage growth surprise



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    There was appetite for the British Pound on Tuesday morning following official data that showed UK wage growth accelerating faster than expected. However, gains were later surrendered as investors redirected their focus back toward Brexit developments.

    UK wage growth surprised to the upside by rising 2.9% in the three months to July while the unemployment rate remained steady at 4% - its lowest level since March 1975. Although the jobs report illustrates an encouraging picture of the UK economy, this is unlikely to convince the Bank of England to raise interest rates anytime soon. The central bank is poised to remain on hold until the thick smog of uncertainty created by Brexit fully dissipates.

    Sterling’s extreme sensitivity to Brexit headlines has clearly become a dominant market theme. The explosive price action witnessed yesterday following encouraging comments from the EU’s chief Brexit negotiator is a testament to this fact. While a renewed sense of optimism over a Brexit deal possibly secured within 6-8 weeks could push Sterling higher, any hiccups during the talks are likely to expose the currency to downside shocks.

    Looking at the technical picture, the GBPUSD is turning bullish on the daily charts. Prices are trading above the daily 20 Simple Moving Average while the MACD is in the process of crossing to the upside. Bulls will remain in control as long as the GBPUSD is able to keep above the 1.3000 level. However, a breakdown below 1.3000 could inspire a decline back towards 1.2940.

    Across the Atlantic, the Dollar rebounded against a basket of major currencies as rising global trade tensions boosted its safe-haven demand. The Dollar is likely to remain king across currency markets on the back of US rate hike expectations and the bullish sentiment towards the US economy. Taking a peek at the technical picture, the Dollar Index could challenge 95.80 once bulls are able to secure a solid daily close above 95.50.




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  18. ForexTime FXTM

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    Chinese Yuan shows resilience, despite emerging markets pressured by trade concerns


    [​IMG]



    Conflicting indications over the status of trade talks between the United States and China has contributed towards a subdued opening of the week for financial markets.

    Reports that President Donald Trump will most likely impose tariffs on $200 billion worth of Chinese goods have collided with other reports that Beijing was considering rejecting trade talks with Washington. This collectively resulted in a cautious start to the trading week for investors, where they prefer to remain on the side-lines and await clarity on this ongoing issue before deciding what step to take next with their portfolios.

    The atmosphere of caution and confusion has been reflected across the emerging market space with equities tumbling 1% while most EM currencies depreciated against the Dollar.

    The Indian Rupee was a clear casualty of the uncertain external environment as it depreciated roughly 0.90% against the Dollar. It has been a painful year thus for the Rupee which has tumbled 12% against the Dollar (YTD), making it one of the world’s worst performing currencies this year. A heavily depressed Rupee will have significant ramifications on the Indian economy, especially when considering how the nation is a major energy importer. With a depreciating Rupee potentially stoking inflationary pressures, the Reserve Bank of India could be forced to hike interest rates for the third time this year.

    Elsewhere, the Turkish Lira tumbled roughly 1.96% against the Dollar as concerns resurfaced over President Recep Tayyip Erdogan’s grip on the economy. It seems the “feel good” effect from last week’s bold rate hike by Turkey’s central bank has worn off with traders refocusing on the political and economic developments within the Turkish economy. Investors will be keeping an eye out for the Turkish government’s new medium-term program (MTP) to be announced on Thursday which could provide insight into the direction of Turkish economic policy. The Lira could roar back to life if the (MTP) shows signs of the authorities embracing a tighter fiscal program to support growth.

    In China, the Yuan fought back against the Dollar despite escalating trade tensions weighing on market sentiment. The Yuan’s resilience could be based on Dollar weakness, or that investors may be directing more of their energy to attacking currencies belonging to markets with high current account deficits. Looking at the technical picture, the USDCNY has the potential to challenge 6.8290 if bears are able to secure a daily close below 6.8500.

    Gold sparkled in the background as escalating trade tensions supported the flight to safety. A softer Dollar stimulated appetite for the yellow metal further with prices punching above the psychological $1200 level. While Gold could appreciate further in the near term, gains remain threated by key fundamental themes. With the Greenback heavily supported by “safe-haven” demand and the Fed poised to raise interest rates this month, Gold is destined for further pain.

    King Dollar tumbled into the trading week losing ground against a basket of major currencies despite global trade developments denting investor confidence. There is a possibility that the weakness observed could be on the back profit taking ahead of the possible announcement of additional tariffs on China. Technical traders will continue to closely observe how the Dollar Index behaves above the 94.50 support level. An intraday breakdown below this region could inspire a move towards 94.10.





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  19. ForexTime FXTM

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    Investors ignored the latest round of tariffs; For how long?



    [​IMG]



    Equity markets do not seem to be concerned over the latest phase of the U.S.-China trade war. Investors have been pricing negative news for months which has led several emerging markets into bear territory. The 10% tariffs imposed by the U.S. on $200 billion worth of Chinese goods seemed to be a relief rather than a catastrophe given that markets were bracing for a 25% figure. Similarly, the Chinese response was a softer hit than anticipated after announcing that the nation won’t engage in currency devaluation.

    There’s no doubt that China’s economy will take a bigger hit if tensions escalated further. After all, China had a trade surplus of $375 billion with the U.S. in 2017. If China’s exports decline- significantly, the economy’s growth may slow down to 6% by 2019. However, there are no signs that Chinese officials are willing to wave the white flag anytime soon, especially with the U.S. mid-term elections being less than two months away.

    When looking at the performance of global stock markets this week, investors still seem to believe that a deal between the largest two economies will be struck instead of a further escalation of trade tensions. However, with President Trump in office I have doubts that an agreement will be reached.

    Although China cannot go toe-to-toe with the U.S. in a retaliatory tit-for-tat tariff war, they still have options to support their economy and hit back at the U.S. with non-tariffs weapons. China may simply put its deleveraging efforts on hold and begin a new round of fiscal and monetary stimulus to offset the damage created by trade. A reduction in corporate tax rates on manufacturing and other industries along with keeping interest rates low and a further cut in Reserve Requirement Ratio to support credit growth will keep the economy well supported for the foreseeable future.

    A gradual depreciation in the Renminbi is another tool to offset tariff impacts. The CNY has dropped more than 5.2% against the dollar so far this year, so it requires less than 5% depreciation to offset the current 10% tariffs imposed by the U.S. Despite Premier Li Keqiang vow not to pursue a policy of currency devaluation, officials can blame market conditions on the fall of the currency.

    Beijing still seems to be playing defensive so far, but if China decides to move on the offensive a new strategy will be followed. This may include boycotting U.S. products, increasing taxes on earnings of U.S. companies in China, refusing to grant approvals for M&A involving U.S. businesses, and reducing its U.S. debt holdings. Any signs of China following this path will be damaging for investors’ confidence and that’s what could lead to a steep selloff in global equities.




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  20. ForexTime FXTM

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    Could the Dollar be turning the corner?



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    Currencies throughout Asia have welcomed the news that the Dollar has tumbled to a near 3-month low. A number of different currencies in the region have advanced against the Greenback, with the weakening momentum for the Dollar benefiting the Indian Rupee the most at time of writing. The indications that the market is turning more negative towards the Greenback would represent very positive news for emerging market currencies in particular, which have received a pounding over the past couple of months in response to the prolonged Dollar strength in the market. This can be seen during trading on Friday with the Thai Baht, Chinese Yuan, Philippine Peso, Indonesian Rupiah, Malaysian Ringgit and Indian Rupee all strengthening.

    The exact catalyst behind why the Dollar is weakening is not easy to point out, but the main contender is that fading fears over trade tensions are providing traders with a reason to take profit on Dollar positions that have been building for months. Another round of reassuring comments from authorities in China indicating that the Chinese Yuan will not be used as a weapon in the trade tensions has also been looked upon positively by the market.

    It does overall go without saying that the prospects for more potential weakness in the Dollar moving forward would of course be widely welcome news for a long list of currencies across the globe.

    As we head into the conclusion of trading for the week the South African Rand has benefited the most from weakness in the Greenback. The Rand has strengthened above 4% over the past five days, with traders looking very positively on the news that the South African Reserve Bank (SARB) were able to leave monetary policy unchanged yesterday. The news that inflationary pressures in South Africa unexpectedly eased in August earlier this week allowed the SARB to maintain resilience and not follow the recent path of both the Russian and Turkish central banks to raise interest rates, which was needed in both the cases of Russia and Turkey to ease inflationary pressures and defend both the Ruble and Lira from further weakness.

    It is not surprising that the Turkish Lira remained volatile and has shifted between both gains and weakness in the aftermath of Turkey’s finance minister announcing his plan to combat the Lira currency crisis. The market as you would expect has looked upon the announcement negatively that there has been a sharp downgrade in GDP growth forecasts for both 2018 and 2019. Growth is now expected to slow below 4% this year and narrowly above 2% in 2019, which is a sharp contrast to the overall growth at 7.4% that the economy enjoyed last year.

    I would keep a very close eye on the British Pound over the upcoming sessions despite the news that the Cable has rallied to its highest levels in nearly three months. Traders appear to have repositioned in recent sessions that there will eventually be a breakthrough in the UK and EU negotiations over Brexit, but the latest summit in Salzburg failed to result in a positive outcome and the rally in the Pound can fall like a house of cards if the markets begin to reprice into the market a potential hard-Brexit eventuality.




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