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  1. #291

    UK Economy: Can Trump Fuel A GBP Recovery?

    There has been no respite for the pound today, even though UK manufacturing production posted its largest increase for two years. GBP/USD dipped below 1.21 earlier, marking a fresh low for 2017, as weak trade data proved to be more important for the sterling market on Wednesday.
    Trade before manufacturing
    The UK's trade balance for November was pretty dreadful at –GBP 4.1bn, vs. –GBP 3.5bn expected, and reversing a minor improvement for October. The market is getting picky about what UK economic data it is paying attention to, manufacturing data appears to be second tier these days, possible because, as the ONS said, non-services sectors of the UK economy have been ‘erratic and far more subdued' in recent months. Thus, it is no wonder that the deterioration in the trade balance weighed on the pound this morning.
    Current account fears also weigh on GBP
    The widening of the trade balance was due to a surge in imports of transport equipment such as ships and aircraft, which have to be a one-off, so we would expect the trade balance to show some improvement for December. But this still does nothing to increase confidence about the UK's dire current account position. The deficit was -5.05% of GDP in the third quarter, and this is likely to deteriorate further in Q4 2016 on the back of today's trade data.
    Carney's comments on economic strength ones to watch
    Overall, the mixed bag of UK economic data is, on balance, unlikely to stem the decline in the pound, which remains a hostage to its Brexit premium. The key risks for the UK today are Mark Carney's testimony to politicians at 1415 GMT. We don't expect Carney to rock the boat, however, it will be interesting to look out for his comments on the Bank of England's forecasting record, and the surprising strength of the UK economy since last June's Brexit vote.
    Can Trump fuel a GBP recovery?
    In our view, Donald Trump's first press conference since his election victory two months' ago will be more important for the pound than Mark Carney or today's economic data. If Trump fails to excite the markets and unleash another leg of the recent stock market and dollar rally, then it could be the pound's best chance of a recovery. Of course, if he does excite animal spirits later this afternoon, and send the Dow Jones above 20,000 then GBP could be toast, and life below 1.20 for GBP/USD could become reality very quickly.

  2. #292

    6 Recent Brexit-Related Events You May Have Missed

    Hello, forex friends! Despite positive economic reports, the pound has been sliding across the board lately, thanks to renewed Brexit jitters. And if you somehow missed the recent major Brexit-related events, or maybe you just want a rundown, then today’s write-up is just what you need.
    1. Sir Ivan Rogers Quits

    Back on the 3rd of January, Sir Ivan Rogers, the U.K.’s ambassador to the E.U., announced his resignation. That’s obviously a disappointing event. But even more disappointing (and devastating to the pound) was Rogers’ leaked “I’m quitting” email to his staff, since it put Theresa May’s government in a bad light, especially with regard to Brexit.
    To be more specific, Rogers told his staff at the U.K. Representation to the E.U. (UKRep) that:

    “I hope you will continue to challenge ill-founded arguments and muddled thinking and that you will never be afraid to speak the truth to those in power.”

    This was a subtle jab at Theresa May’s government. However, Rogers also took shots directly at Theresa May’s government, namely through the following statements:

    “We do not yet know what the government will set as negotiating objectives for the UK’s relationship with the EU after exit.”

    “The government will only achieve the best for the country if it harnesses the best experience we have – a large proportion of which is concentrated in UKRep – and negotiates resolutely.”

    “The structure of the UK’s negotiating team and the allocation of roles and responsibilities to support that team, needs rapid resolution.”

    In short, Rogers very heavily implied that Theresa May’s government is still unprepared for Brexit, despite plans to trigger Article 50 of the TEU by March, which is just a couple of months away.
    2. Theresa May Implies “Hard” Brexit

    In her first televised interview of the new year, British PM Theresa May was interviewed by Sky News on Sunday (January 8), and she took the opportunity to counter Rogers’ allegations. Namely, May said that the government’s thinking “is not muddled at all” and that her government already has clear objectives.

    And according to the PM, the government’s plan is to pursue a “really good, ambitious trade deal.” Although she also said that the details will be released “in the coming weeks.” When asked if she plans to lead the U.K. completely out of the E.U., May responded by saying that she has no plans to “keep bits of membership.”

    The interviewer also asked May on whether May prioritizes regaining control over immigration or access to the E.U. single market, and May replied as follows (emphasis mine):

    “We are leaving, we are coming out, we are not going to be a member of the E.U. any longer. We will have control of our borders, control of our laws, but we still want the best possible deal for U.K. companies to trade with and operate within the European Union and also European companies to trade with and operate within the U.K.“

    May was clear that she wants to follow the will of the British people by taking the U.K. out of the E.U., but she was also equally clear that she wants to do her best to get a good trade deal for both the U.K. and the E.U.

    However, her statements were interpreted by market analysts (and the market as well apparently) as being a sign that the U.K. is headed for a so-called “hard” Brexit, which is a Brexit wherein the U.K. is shut out or only has limited access to the E.U. single market.
    3. Theresa May Denies “Hard” Brexit

    Theresa May had a speech mainly about social reforms and funding for people suffering from mental health issues on Monday (January 9). However, she ended up getting swamped with Brexit-related questions during the Q&A portion.

    As for specifics, May was asked about her Sunday speech and the pound’s resulting slide due to “hard” Brexit fears. And the irritated PM blamed the media for that while denying that Brexit must have a “hard” and “soft” dichotomy.

    “Well, I’m tempted to say the people who are getting it wrong are those who print things saying I’m talking about a ‘hard’ Brexit, [that] it’s absolutely inevitable it’s a ‘hard’ Brexit. I don’t accept the terms ‘hard’ or ‘soft’ Brexit.”

    The PM then rephrased what she said on Sunday:

    “What we are doing is going to get an ambitious, good, the best possible deal for the United Kingdom in terms of trading with and operating within the single European market. But it will be a new relationship because we won’t be members of the EU any longer. We will be outside the European Union, and therefore we will be negotiating a new relationship across not just trading but other areas with the European Union.”

    4. Merkel Threatens the U.K. with “Hard” Brexit

    A couple of hours after Theresa May’s Monday speech, German Chancellor Angela Merkel had a little speech of her own. And Merkel used the said speech to overtly threaten the U.K. by saying that there should be no “cherry picking” and that “access to the single market can only be possible on the condition of respecting the four basic freedoms. Otherwise one has to talk about limits.”

    For the newbies out there, the “four basic freedoms” that Merkel mentioned, includes freedom of movement of people. This directly conflicts with the U.K.’s desire to regain control over its borders and will very likely be a major source of disagreement when negotiations for an actual Brexit finally do start.
    5. Trump Effect to reach the U.K.(?)

    On Tuesday (January 10), U.K. Foreign Secretary Boris Johnson gleefully announced that he and Trump’s team had a meeting of the minds. Or maybe they agreed because Johnson and Trump have similar hairstyles? I dunno. Anyhow, Johnson also announced that the U.K. will be “first in line to do a great free trade deal with the United States.”

    This is in stark contrast to outgoing U.S. President Obama’s April threat that the U.K. would be at the “back of the queue” if the British people vote for a Brexit.
    6. A New Challenger Appears

    The U.K. High Court is set to rule on the government’s authority to trigger Article 50 of the TEU without the approval of Parliament next Thursday (January 19). However, before Theresa May’s government can surmount this challenge, a new challenger has appeared, led by at least one of the same lawyers who mounted the first challenge. And the hearing for this new challenge is also scheduled for next Thursday.

    This time, the legal challenge is that Article 50 of the TEU is required to leave the E.U. itself, but leaving the single market requires that Article 127 of the European Economic Area (EEA) must also be triggered separately. And triggering the said legislation requires the approval of Parliament. Basically, the same as the first challenge, but applied to a different treaty.

    The people who mounted the new challenge have launched Single Market Justice and are apparently settling in for a fight, since they’re asking for donations to fill up their war chest. There is therefore a good chance that Brexit negotiations may get delayed, and the pound tends to react positively to that. I guess we’ll see next week.

  3. #293

    Dollar Edges up to 116 Yen, Trump Press Conference Next

    Dollar Edges up to 116 Yen, Trump Press Conference Next

    USD/JPY has posted slight gains in the Wednesday session. In North American trade, the pair is trading at 116.20. On the release front, Japan's current surplus is expected to narrow to JPY 1.48 trillion. There are no major US events on the schedule. On Thursday, the US releases unemployment claims, with the indicator expected to rise to 266 thousand.
    With only a handful of events on the Wednesday schedule, the markets will be keeping a close eye on Trump show later in the day. Trump will host a press conference out of the Trump Towers in New York City. Trump hasn't spoken formally with the press in six months, choosing instead to send pithy comments on his Twitter account. The president-elect had plenty to say about the ills of the US economy on the campaign trail, but was short on specifics. He has gone on record promising tax cuts and significant fiscal spending to repair the country's infrastructure. Trump has said he will implement protectionist policies, which has lessened investors' appetite for risk. The markets will be hoping for more specifics about economic policy, with just over a week until Inauguration Day. The US dollar has climbed sharply since mid-November, as the US economy sails full steam ahead in 2017.
    Japanese consumers remain pessimistic about the economy, but there was a silver lining from the latest Consumer Confidence indicator, which rose to 43.1 points in December. This figure beat expectations and marked the indicator's highest level since September 2013. Will the economy improve in 2017? There are some positive signs as we enter 2017. A weaker Japanese yen has boosted exports, and the Bank of Japan has given the economy a cautious thumbs-up, raising its growth projections. If improving consumer confidence translates into stronger consumer spending, we could see improved readings from key Japanese indicators.
    The US released key employment numbers on Friday and USD/JPY responded with sharp gains. Wages rebounded in December, as Average Hourly Earnings climbed 0.4%, edging above the estimate of 0.3%. This marked a strong turnaround after the November reading of -0.1%. The news was less positive from Nonfarm Payrolls, which dropped to 156 thousand, well off the estimate of 175 thousand. This marked a 3-month low, but the dollar still posted gains.

  4. #294

    Markets Turn to Trump for Clarity

    The rising uncertainty and growing unease ahead of Wednesday's news conference by President-elect Donald Trump has left financial markets on high alert. Global stocks could be pressured further by depressed oil prices while investor jitters should limit upside gains today. Although Asian shares were mostly positive on Wednesday, there is a threat of European markets falling victim to risk aversion amid the anxiety. Wall Street may turn to Trump for further clarity this evening on how his fiscal policies could boost US economic growth. With Donald Trump already labelled as a renowned market shaker, market participants should keep diligent and be prepared to expect the unexpected.
    Sterling remains vulnerable
    There is a risk of the hard Brexit fears becoming the dominant theme that ensures Sterling remains depressed for prolonged periods. Although UK economic data continues to display resilience against the Brexit turmoil, the persistent Brexit induced uncertainty has effectively dented investor attraction towards the Sterling. Investors may direct their attention towards the UK manufacturing production report which may provide additional clarity on how the industry has fared against Brexit. While a positive manufacturing production figure may provide the Pound bulls with a temporary lifeline in the short term, sellers may exploit this opportunity to install renewed rounds of selling. The heightened fears over the UK experiencing a rough exit from the European Union have made bears ruthless this week with sellers eyeing 1.2100 and 1.2000 respectively on the GBPUSD.
    Currency spotlight - EURUSD
    When dealing with the EURUSD it's all about the divergence in monetary policy between the Federal Reserve and European Central Bank. This currency remains fundamentally bearish and technicals on the daily charts also fulfil the prerequisites of a downtrend. Uncertainty and political risks in Europe should subdue the Euro while prospects of higher US rates have made the Dollar king. Technical traders could exploit the breakdown below 1.0500 to attack the EURUSD back towards 1.0350.
    Commodity spotlight - Gold
    Gold edged higher during early trading on Wednesday as uncertainty ahead of Trump's news conference attracted investors to safe-haven investment. A touch of Dollar weakness has also provided some inspiration for bullish investors to send prices higher towards $1188 as of writing. Although the yellow metal has the ability to experience further short term gains depending on the outcome of today's news conference, the bias still points to the downside. Gold remains gripped by rate hike expectations in the medium to longer term with the current technical bounce seen as an opportunity for longer term bears to attack.

  5. #295

    Can Trump Live Up to High Market Expectations?

    Can Trump Live Up to High Market Expectations?

    US futures are edging higher ahead of the open on Wednesday, as attention turns to Donald Trump's press conference which comes just over a week before his inauguration.
    Markets have been buoyed in recent months by the prospect of growth friendly stimulus measures promised by Trump during the election campaign including tax cuts and fiscal stimulus. The negatives associated with a Trump administration including a trade war with China leading to protectionism have so far been brushed to one side which could be a big downside risk for the markets this year.
    Investors Seek Assurance from 'Rookie' Trump
    With markets having priced in so much already from the Trump administration despite there being a serious lack of detail on the matter, and having overlooked the risk factors, there may well be potential for Trump to fail to live up to expectations in today's press conference. Trumps speech immediately following the election brought calm to concerned investors as he focused on togetherness and the need to spend more and create higher quality jobs. He barely mentioned the protectionist measures that had been a substantial part of his campaign and had worried investors in the lead up to the election.
    Should he tread a similar line today then markets may once again be buoyed by his focus on growth friendly policies as opposed to populist measures that threaten to destabilize and inhibit global trade and growth. Should he focus on protectionism it will be very interesting to see how markets respond because they have strongly bought into growth friendly policies. It will also be interesting to see whether he remains committed to the kind of fiscal stimulus that markets are now expecting, given that many have questioned the need for such measures at this stage of the recovery. Should he backtrack on this promise at all then things could start to unravel quickly in the markets after months of stimulus induced rallies.
    Turkish Lire Tanks in Asia
    While Trump's press conference is likely to make the headlines today and be the main driver of market sentiment, we will also hear from an FOMC policy maker and get UK GDP and oil inventory data. William Dudley is due to speak later on in today's session and may provide some colour on what Trump's comments affect his own outlook, if at all. NIESR will provide their GDP estimate for the UK in the final quarter of 2016, which could offer some insight into how the economy performed at the tail end of a turbulent year. EIA will also release inventory numbers for last week which will be of interest following last week's draw of more than seven million barrels and after API yesterday reported a small increase.

  6. #296

    London Session Forex Recap – Jan. 11, 2017

    U.K. industrial production m/m: 2.1% vs. 1.0% expected, -1.1% previous
    U.K. industrial production y/y: 2.0% vs. 0.7% expected, -0.6% previous
    U.K. manufacturing production m/m: 1.3% vs. 0.5% expected, -1.0% previous
    U.K. manufacturing production y/y: 1.2% vs. 0.4% expected, -0.5% previous
    U.K. construction output m/m: -0.2% vs. 0.3% expected, -0.6% previous
    U.K. goods trade balance: -£12.2B vs. -£11.2B expected, -£9.9B previous

    Price action was rather choppy during today’s morning London session. However, the euro was clearly and broadly in retreat. Meanwhile, the Greenback was broadly advancing, supposedly on speculation that Trump will give a pro-growth message later.
    Major Events/Reports:

    U.K. industrial output jumps – After dropping sharply in October, total industrial production in the U.K. surged by 2.1% month-on-month in November, which is more than double the expected 1.0% rebound. The increase in November is the fastest in six months and also ends three straight months of negative readings.

    The main drivers for the surge in output were the 10.3% surge in crude and natural gas output and the 1.3% increase in total manufacturing output, which respectively added 1.00% and 0.91% to total industrial output.

    Year-on-year, industrial production jumped by 2.0%, a four-month high. In addition, the reading is significantly better than the expected 0.7% rate of increase. And looking at the breakdown, the 1.2% rise in manufacturing output was the primary driver, adding 0.83% to total industrial output. This is followed by the 7.1% growth in the water sector, which includes water treatment and supply, and adds 0.54% to total industrial output. The 4.9% growth in electricuty and gas production came in third, adding 0.47% to total industrial output.

    U.K. trade disappoints – The U.K.’s trade deficit in November was £4.2 billion, which is £2.6 billion wider than the deficit that was reported in October. The wider trade gap was due to primarily to the wider deficit in trade in goods (-£12.2B vs. -£11.2B expected, -£9.9B previous).

    However, exports in goods actually grew by 2.8% month-on-month to £27,011 million. It just so happens that imports from the E.U. grew significantly more, by 8.4% to £39,174 million to be more exact. With regard to trade with the E.U., exports to the E.U. grew by 8.70% to £13,368 million while imports grew by 9.40% to £21,954 million. The U.K. is therefore still a net importer to the E.U. while the E.U. is a net exporter to the U.K.

    U.K. construction output falls – Construction output in the U.K. fell for the second consecutive month, dipping by 0.2% in November, instead of recovering by 0.3% as expected. According to the construction output report, the dip was “largely due to a contraction in non-housing repair and maintenance.” New work, meanwhile, increased, “with new housing output continuing to grow.”

    Risk appetite sticks around – After making a comeback yesterday, risk appetite stuck around for another day, so European equity indices were well supported.

    The pan-European FTSEurofirst 300 was up by 0.21% to 1,442.34
    Germany’s DAX was up by 0.18% to 11,603.75
    The U.K.’s FTSE 100 was up by 0.18% to 7,288.50

    Market analysts say that the upbeat mood was due to positive reports for retailers, which boosted other retail stocks and improved overall risk sentiment.
    Major Market Movers:

    EUR – The risk-on mood took its toll on the lower-yielders, with the euro getting the brunt of it, since the euro was the worst-performing currency of the session.

    USD – The Greenback steadily took ground against its peers during the morning London session. There were no apparent catalysts for the Greenback and U.S. bond yields were mostly in the red. However, some market analysts attributed demand for the Greenback to speculation that Trump will give a pro-growth message in his press conference later.
    Watch Out For:

    2:15 pm GMT: BOE Guv’nah Mark Carney and company will testify before Treasury Select Committee
    3:00 pm GMT: NIESR U.K. GDP estimate (0.4% previous)
    3:30 pm GMT: U.S. crude oil inventories (0.9M expected, -7.1M previous)
    4:00 pm GMT: The Donald has a press conference at Trump Tower
    6:20 pm GMT: New York Fed President William Dudley has a speech

  7. #297

    Dollar Stabilises as Trump Conference Looms

    Dollar Stabilises as Trump Conference Looms

    The Greenback glided higher on Wednesday as investors prepared for Donald Trump's anticipated formal news conference. With today's press conference the first official one since the market shaking presidential victory in November, financial markets could turn volatile. Uncertainty still remains a key issue when dealing with Trump while concerns linger over the President-Elect saying something which could negatively impact the Dollar.
    A multitude of events have taken place since Trump's victory and such may translate to an influx of questions from the reporters, something investors will pay close attention towards. Markets are also expecting Trump to reiterate his economic policies for fiscal spending and how he plans to make America great again. With Trump repeatedly sharing his views on trade and China on social media, attention may be directed towards his thoughts on global trade and relations with China in the formal conference.
    Emerging markets await Trump
    Emerging markets could come under renewed pressure if U.S President-Elect Donald Trump reiterates his protectionist trade views during this evening's news conference. The Mexican peso has already tumbled to historical lows amid fears of Trump discarding a key trade agreement with Mexico while the Chinese Yuan is on the defence. The growing threat of Trump maintaining a harsh stance on China trade and scrapping the Trans Pacific Partnership (TPP) could expose Asian currencies to further downside risks.
    Market participants may observe if Trump provides additional clarity on how his proposed fiscal stimulus will boost US economic growth. The Greenbacks aggressive appreciation has punished emerging market currencies considerably with speculations of higher US rates sparking capital outflows. A situation where President-Elect Donald Trump repeats his plan to boost US growth via tax cuts and infrastructure spending could elevate the Dollar consequently pressuring EM currencies further.
    Currency spotlight - USDJPY
    A strengthening Dollar has been the engine behind the USDJPY incredible gains on the daily charts. This pair is heavily bullish as there have been consistently higher highs and higher lows. Bullish investors may exploit a breakout above 116.500 to send the USDJPY towards 117.500 and potentially higher. Bulls remain in firm control as long as prices can keep above the 114.50 higher low.

  8. #298

    Bad’ Versus ‘Good’ USD Rally; What Does It Mean For USD Trade? – Morgan Stanley

    The USD advance witnessed early last year was EM focused and in this sense, it was a ‘bad’ rally. When the USD rallies against EM,global economic costs tend to be high, as opposed to a ‘good’ rally where the USD rallies against low-yielding currencies such as the EUR and JPY.

    The BIS has shown that EM currency weakness that pushes local funding costs higher by reducing EM access to international funding pools creates growth-reducing second-round effects. Seeing the USD higher against low-yielding currencies is supportive of global growth. This applies especially in the current situation, with low-yielding sovereign curves still tradingnear levels which we classify as leaving yield curves in ‘exhausted’ positions. EUR and JPY weakness is beneficial as it allows the ECB and BoJ to push local real yield levels down to desired levels. In this respect, low-yielding currency weakness against a rising USD is what we would call ‘good USD strength’.

    Recent USD strength has been ‘good USD strength’. China’s currency is in a more difficult position. As low-yielding currencies fall, the RMB’s TWI trades higher unless China allows USDCNY to break higher. A higher RMB-TWI provides an unwanted decline in China’s relative competitive position, but a higher USDCNY may make it more difficult to keep capital outflows at bay.Failing to contain capital outflows may push RMB funding costs higher. China is clearly impacted by the USD rallying against low-yielding currencies,hence USD investors need to keep China’s currency moves in focus.

    Border adjustment supportive of USD. Another USD bullish factor over the coming weeks and months will be the threat of protectionist measures by the new administration. As we wrote before the holidays the House Republicans have proposed converting the corporate income tax into a destination-based cash flow taxation system that would ‘border adjust’ by not taxing revenues from exports and disallowing dedication for the cost of imports. This would essentially have the same impact as an export subsidy and import tariff in equal size (20% based on the new corporate tax rate being proposed). USD would have to rise 25% on a trade weighted basis in order to offset the impact of these provisions on USD exporters and importers (which is what proponents of the plan argue will happen). We are more skeptical but still think this will be a big deal for USD; we believe a 10-15% rise in USD on the back of the policy is reasonable…

    [Only registered and activated users can see links. ]Important Forex News Daily-123-png

    Even though we have our doubts that the policy will be ultimately implemented, we think the market is too complacent around the issue (and broader protectionist measures). House Republicans and the Trump administration have stayed with the plan despite large political pushback and it seems to be a policy which can fulfill Trump’s plans to boost US manufacturing that the Republicans can more readily support (as opposed to tariffs). Despite this, USD has barely moved since the markethas become more aware of the provision and much of USD previous gains were consistent with widening interest rate differentials. Therefore, we think the market is pricing a very low probability this plan is passed. As the market increases the probability of this occurring, USD should rall

  9. #299

    European Open Briefing

    European Open Briefing

    Global Markets:

    Asian stock markets: Nikkei down 0.95 %, Shanghai Composite gained 0.15 %, Hang Seng declined 0.10 %, ASX lost 0.08 %
    Commodities: WTI Oil at $52.15 (-0.17 %), Brent Oil at $55.09 (-0.02 %), Gold at $1196.85 (+0.02 %), Silver at $16.85 (+0.12 %)
    Rates: US 10-year yield at 2.34, UK 10-year yield at 1.34, German 10-year yield at 0.25


    News & Data:

    Japan BoP Current Account Balance (JPY) (Nov): 1415.5bn (est 1460.0bn, prev 1719.9bn)
    Japan BoP Current Account Adjusted (JPY) (Nov): 1799.6bn (est 1870.4bn, prev 1928.9bn)
    Japan Bank Lending Ex-Trusts (YoY) (Dec): 2.60% (est 2.50%, prev 2.40%)
    Japan Trade Balance BoP Basis (JPY) (Nov): 313.4bn (est 254.4bn, prev 587.6bn)
    New Zealand ANZ Commodity Price Index (MoM) (Dec): +0.7% (prev rev to +3.2% from +2.70%)
    Brazil cut Selic rate by 75bps to 13.00% (est. 13.25%, prev. 13.75%)
    Dollar loses altitude, Asia shares at 11-week top – RTRS
    Oil dips on rising U.S. crude inventories, plentiful global supplies – RTRS
    Dollar slumps after Trump offers no details on economic policies – RTRS


    Markets Update:
    The US Dollar weakened sharply after the press conference held by US President-elect Donald Trump. The market was anticipating some details about Trump’s economic plans, but received none, which led to covering of USD long positions.
    Heavy selling was seen in USD/JPY, which fell to a low of 114.27 at one point. It recovered slightly later, but ran out of momentum above 115.50 and eventually declined back to 114.40 in Asia.
    EUR/USD rallied above 1.06, but once again failed to take out resistance at 1.0620. Key support is now seen at 1.0565/70, and a break below would confirm the third rejection off 1.0620, suggesting the Euro is heading back towards 1.04.
    GBP/USD rallied as far as 1.2270 yesterday, but retraced back to 1.2170 in Asia. On-going concerns about a hard Brexit will likely continue to prevent any larger gains in the near-term.
    The Australian Dollar is looking strong. AUD/USD rallied from 0.7430 to 0.7470 in Asia, and resistance is now seen in the 0.7500-20 area. A break above would signal a move towards 0.78.
    Upcoming Events:

    09:00 GMT – Italian Industrial Production
    10:00 GMT – Euro Zone Industrial Production
    12:30 GMT – ECB Meeting Minutes
    13:30 GMT – US Initial Jobless Claims
    14:15 GMT – Bank of England Governor Carney speaks
    17:30 GMT – FOMC Member Lockhart speaks
    18:15 GMT – FOMC Member Bullard speaks
    18:45 GMT – FOMC Member Kaplan speaks

  10. #300

    Market Morning Briefing

    Market Morning Briefing

    STOCKS
    While Dow and Dax still look positive over the medium term, Nikkei could possibly be on the verge of breaking below crucial support which could confirm on further Yen strength.
    The Dow Jones (19954.28, +0.50%) has risen sharply but is unable to reach the 20000-mark that the markets are expecting. There could be some chances of testing 20000 or even higher in the next couple of weeks. We may not look for a down move just now while the 19720 support holds.
    Dax (11646.17, +0.54%) made a fresh high near 11692, levels last seen in Aug’15. If it is able to move above 11680 in the near term, it could rally towards 11820 in the next 1-2 weeks.
    Nikkei (19165.92, -1.03%) has come off a bit, breaking the lower limit of the 19870-19257 range mentioned yesterday. But while the important support at 19000 holds, there could be some chances of a bounce back in the near term. In case the Japanese Yen (114.78) strengthens more towards 113-112 in the coming sessions, it could pull down Nikkei with itself to levels near 198750 or even lower.
    Shanghai (3137.40, +0.02%) came off from 8175-resistance seen on the daily charts. Above that weekly resistance is visible near 8200. Overall the 8175-8200 band could prove to be an important resistance zone which could push prices towards 3100 again in the near term. Only on a break above 8200, can we focus on levels near 8300-8400 (looks less likely in the next 4-5 sessions)
    Nifty (8380.65, +1.11%) rallied sharply breaking above the 8300 mark we have been mentioning for quite some time now. It could move up towards 8500-8550 in the coming sessions. A possible correction from 8440 is also on the cards before it advances towards 8500-8550. Near to medium term looks bullish.
    COMMODITIES
    Precious metals gain as Dollar Index saw fresh losses. But this could be temporary as the Dollar could start moving up soon if support near 100.90/95 holds in the near term.
    Gold (1197.49) has come to test our expected 1200-levels. Immediate resistance is seen near 1205 which if holds could push back the prices towards 1180-1170 in the coming sessions. For Gold to break above 1200-1205, we need to see a sharp break on Dollar Index below 100.90 and if that happens, Gold could rally towards 1230. We need to keep a close watch on 100.90 on Dollar Index and 1200-1205 on Gold.
    Silver (16.83) is headed towards 17.00-17.20 levels as mentioned yesterday. We could a dip back towards current levels from 17.20.
    WTI (52.18) and Brent (55.04) rose back from levels near 50.75 and 53.67 respectively as Dollar weakened on news that Saudi Arabia had cut exports to Asia and on the news conference by Donald Trump. But the crude prices, may remain choppy and could fall back again in case the Dollar sees fresh strength.
    The GOLD-WTI ratio (22.90) has risen well from levels near 21 and could see a small dip to 22 before again rising afresh towards resistance near 25.
    FOREX
    Trump's press conference led to Dollar weakness by the end. There's been a sharp decline in Dollar-Yen (114.72) and rise in the Euro-Dollar (1.0602). The Pound (1.2192) is only modestly higher. The Dollar Index (101.46) has slipped quite a bit, but may find Support near 101. Recent weakness in the Dollar is explained well by the decline in US yields. Please see the Interest Rates section below.
    The Yen (114.72) has seen the strongest gains, breaking below the support at 115.00 cited yesterday and seriously denting chances of a rise towards 119.00. Instead, the focus shifts to 113 on the downside, where the 21-Moving Average on the 3-day chart may provide some Support.
    The Euro-Yen (121.64) has also seen a sharp break below 122, after failing to rise past 124 through the whole of December.
    The Euro (1.0602) may have some more room up to 1.0650 in the near term. Looking at the Weekly Candles, one can talk of even higher levels near 1.08 but that might not come easily or fast.
    The Aussie (0.7459) has been seeing a strong rise since the beginning of January, but may run into profit-taking near current levels now.
    Dollar-Rupee quotes near 68.14/19 on the NDF. Suggests that the 68.30-40 Resistance we've been mentioning, might be holding well enough.
    INTEREST RATES
    US Yields are coming off, with the US 30Yr (2.93%) finding good trendline Resistance near 3.2% since 12th Dec.
    The decline in US yields has brought down the US-Japan 10Yr Spread to 2.3% from levels near 2.52% and has been instrumental in pushing Dollar-Yen (114.72) lower.
    Strong correlation is seen between the German-US 2Yr Spread (-1.89%) and the Euro (1.0602), both rising lock-step with each other since 28th Dec.

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