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  1. #261

    EUR/USD after Donald Trump's press conference: temporary weakness on the USD?

    Donald Trump’s press conference helped to smash the US Dollar across the board, as the US president-elect didn’t say anything about key topics that investors were looking for. Trump kept its pro-Putin’s rhetoric and his promice to build a wall across the Mexico-USA border. Such comments favored to weaken the Mexican peso against the greenback and in the case of major pairs, all competitors won ground against the USD, as it was heavily sold during and after the press briefing from the Trump Tower in NY.

    Our technical analysis at EUR/USD for H1 chart still keeps a bullish-recovery tone in the short-term, as the pair managed to rebound above the 200 SMA and if it does a breakout above the 1.0603 level, then it can test the 1.0655 zone. However, that resistance area could help to cap further gains in the pair and eventually, we can witness a strong pullback to test levels below the moving average mentioned above.

    [Only registered and activated users can see links. ]Important Forex News Daily.-2-png

  2. #262

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

    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.-target-trading-partners-vs-usd-2017-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

    At the very least, as this policy is debated over coming weeks, in our view this will be a lingering factor which reduces market appetite to be short USD.

  3. #263

    EUR/USD approaches high resistance on Donald Disappointment – levels

    EUR/USD is on the up and up, trading at 1.0630 and heading towards the “flash surge” highs. 1.0650 is the next cap, a level that was reached during the holidays, thanks to low liquidity.

    The reason for the current upswing is much more substantial. The US dollar is down on a disappointment from Donald Trump’s press conference. The President-Elect, due to enter the White House in 8 days, has not been presidential, to say the least.

    Trump was quite brash with treating the media, behaving as if he was still on the campaign trail and did not convince anybody by transferring the management of the company to his sons. But the message for markets was more significant.

    Financial markets were inspired by his campaign promises to build roads and bridges, infrastructure investment that could give the US economy a shot in the arm. However, in the press conference, there was no mention of that. Even tax cuts, which are the easier path for his fellow Republicans to stimulate the economy, did not receive a mention.

    The economic message that did emerge from the gathering was related to trade: he promised to bully more companies to keep manufacturing in America. This style of trade war talk is worrying. The optimism of markets also stems from hope that slapping new tariffs was only campaign talk.

    The end result was a big fall in the US dollar, albeit from high levels.

    EUR/USD dropped sharply ahead of the event, sliding all the way to 1.0450, below the 1.0460 resistance line. From there, it quickly bounced above 1.05, and the trend continued.

    Above 1.0650, we find further resistance at 1.0710 and 1.0820. 1.0520 is weak support, followed by 1.0460 and strong support at the 14-year trough of 1.0340.

    [Only registered and activated users can see links. ]Important Forex News Daily.-21-jpg

  4. #264

    Yen Gains Continue After Trade Data Beat

    Talking Points

    Japan scored a bigger-than-expected trade surplus in November
    The overall Balance of Payments rose for a 29th straight month
    USD/JPY was already slipping, these data won’t have helped.

    The Yen continued to gain on Thursday after the release of supportive Japanese trade data, but the trend was already for USD/JPY weakness after US President-elect Donald Trump’s Wednesday press conference, and it is hard to gauge the data’s precise impact.

    All we can say is that the numbers would probably have been Yen-supportive even without the focus on Washington.

    November’s trade balance was revealed to have been in surplus to the tune of ¥ 313.4 billion ($2.72 billion) as imports fell much faster than exports, leaving the old question marks over the country’s internal demand very much in place.

    That surplus was well above than the ¥250 billion expected but below the ¥587.6 billion scored in October. However, the broader current account was in the black for a 29th straight month, to the tune of¥1.415 trillion, up 28% on the year. Numbers released at the same time showed that bank lending rose by a punchy 2.6% in December.

    USD/JPY had already trickled down from the 115.50 area as trade got under way in Tokyo, and it had got down as far as 114.96 in the wake of the data.

    The overall foreign exchange market was already tending towards a little rethink of recent US Dollar strength after Mr. Trump failed to offer much in terms of concrete policy plans at his first substantive meeting with journalists in the US on Wednesday.

    Heading lower anyway: USD/JPY
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  5. #265

    Yen Ticks Down as Economy Watcher Sentiment Sours

    Talking Points

    The Yen slipped a little after a less-upbeat December assessment from Japan’s “economy watchers”
    However, the previous month had marked 2016’s highs, so there was probably room for a pullback
    The Asia session’s general US Dollar weakness is already creeping back to USD/JPY

    The Japanese Yen ticked lower against the US Dollar following the release of a slightly more downbeat assessment of economic conditions in the world’s number three economy.
    The December “Economy Watchers” index out of Japan scored the economic outlook at 50.9. This was below November’s 53.0 print. Current conditions, meanwhile, were assessed at 51.4. That was the same as the previous month’s revised score, but well below the initial assessment of 52.5.

    This survey aims to get an accurate grip on Japanese activity by polling workers whose jobs tend to closely align to the economic cycle. These include retail employees, restaurant workers and the like. December’s numbers were a clear step back, but it’s probably worth bearing in mind that November’s assessment of current conditions was the highest score for 2016.

    USD/JPY managed a mild rise just after the figures, in an Asian session that has been generally hard going for the US currency. President-elect Donald Trump failed to answer many of the markets’ burning questions about his policy agenda when he met the press in the US on Wednesday, with greenback weakness the result across the region.

    That weakness already seems to be reasserting itself very soon after the figures, although USD/JPY did get up to 114.761 after the Japanese data, from 114.616 before their release.

    Modest gains in a tough USD session. USD/JPY
    [Only registered and activated users can see links. ]Important Forex News Daily.-34-jpg

  6. #266

    GBP: A ‘Tricky’ Start For 2017: 2 Major Risk Events Ahead – Credit Suisse

    GBP/USD reached new lows at the 1.20 handle, but bounced quickly, thanks to Trump. What’s next?
    2017 has already struck a shrill chime for the pound. The market interpreted PM May’s interview on Sunday as a re-alignment with her tough tone at October’s Conservative Party conference, and a move away from the softer stance hoped for after she discussed the possibility of a transitional deal in December. May’s apparent reluctance for “keeping bits of the EU” (such as single market access) and her focus on ensuring “the right relationship, but when outside the EU” helped push GBPUSD back to October 2016 lows this week below 1.22. However we note that GBPUSD implied volatility and risk reversal skews have only modestly moved through this week’s episode – and there are tentative signs that even GBPUSD spot is stabilizing, at least for the very short-term.

    Uncertainty ahead of other two important political events could be the cause of this pause – both of which have no date set but are due by the end of January.

    The more impactful of these will be PM May’s much-anticipated speech detailing steps after triggering Article 50; here it seems particularly difficult to guess the likely scenarios or reactions.

    As for the UK Supreme Court’s Brexit case verdict, while this may generate some brief noise, we expect it to broadly be a non-event in the grand scheme of things Brexit. Firstly, the UK Government has now had ample time to prepare for a verdict in either direction, with some officials already suggesting a quick and calculated response is in the pipeline. Secondly, the fact that UK Parliament has already informally hinted that it would vote through the triggering of Article 50 suggests little material impact from this one event. Even if the UK Government were to lose the court case, this episode may only prove to be a minor irritant that may not necessarily delay the timelines already set.

    [Only registered and activated users can see links. ]Important Forex News Daily.-gbpusd-tricky-2017-watch-png


    The market seems most uncertain on exactly what to expect from PM May’s upcoming speech. If her reaction after Sunday’s interview is a hint to go by, she could choose to take a more cautionary approach in her next speech by consciously staying vague – and simply refraining from mentioning any isolated topics like single market access. While it is true that a ‘vague scenario’ is unlikely to trigger an aggressive GBP reaction, we still expect a negative asymmetry for the pound even if PM May keeps her cards close to her chest. The risk is that the market now becomes more frustrated or impatient – or even begins to question the UK Government’s competency in agreeing on any credible Brexit strategy.

    What seems harder to envisage is how GBPUSD could rally on such a speech, especially when PM May has faced strong criticisms for being indecisive and flippant in her narrative. With a major shift in tone unlikely, some more subtle bullish scenarios could be if single market access is now mentioned by name, or if there a higher degree of clarity about a transitional deal, or if she now talks more about trade than immigration.

    In the most bearish scenarios, we would not rule out the risk that PM May tries to emphasize controlling immigration as her absolute top priority. GBP has scope to weaken further particularly because we do not believe positioning is especially stretched on all accounts. As Figure 16 shows, broader indications of positioning (such as central bank FX reserve allocations and foreigners’ gilt holdings) have still offer scope for reduction. And if history offers any guide, we would not be surprised if such a tone starts a move lower in GBPUSD towards the 1.10 or 1.12 level in 6 months if still higher odds of “hard Brexit” are priced in. This is roughly the 1 standard deviation downside move in cable over a 180 day period since 1990.

  7. #267

    Eur/usd

    Back to pressure the upside following bounce from the 1.0454 low yesterday. Probes above the 1.0600 level still shy of the 1.0627 resistance. Clearance here needed to see lift to retest 1.0653/70 area then the 1.0800 level. Support now at 1.0511/00 area. [PL]

    [Only registered and activated users can see links. ]Important Forex News Daily.-1-gif

  8. #268

    Usd/chf

    Saw spike to 1.0248 high overnight but failure to hold gains above the 1.0200 level see pressure returning to the downside and the 1.0100 level and 1.0087 low of last week back in focus. Break will trigger deeper retracement of the Nov/Dec up-leg to 1.0021 support then parity level. [PL]
    [Only registered and activated users can see links. ]Important Forex News Daily.-2-gif

  9. #269

    Usd/jpy

    Break of the 115.00 level keep focus on the downside and see scope for retest of the 114.25 low. Below this and the 114.00 level will see followthrough to target 113.13/112.88 area. Upside see resistance now at 116.05. [PL]
    [Only registered and activated users can see links. ]Important Forex News Daily.-3-gif

  10. #270

    Eur/chf

    Bounce from the 1.0705 low keep upside bias in focus and see scope to retest the 1.0762 resistance. Clearance will trigger a double bottom at the 1.0680 base area and clear the way for stronger recovery to the 1.0800 level. Support at the 1.0700 then the 1.0680 low. [PL]
    [Only registered and activated users can see links. ]Important Forex News Daily.-4-gif

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