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  1. #241

    Fundamental Winds like Risk Trends and Rates Shift but Don’t Die

    Talking Points:

    Risk trends is an elemental aspect to the markets that may lose drive but never truly 'breaks'
    For benchmarks like the Dollar, S&P 500 and Yen crosses; temporary dalliances should be appreciated as such
    Currently, universal sentiment trends, relative monetary policy and rising trade boundaries are key themes

    'The Dollar isn't a safe haven anymore.' This is a statement that comes up rather often in market conversations nowadays. It is very similar to other, systemic observations that have been made recently - and have been uttered across decades. In previous cycles, monetary policy has risen and fallen as a key drive, regulations had redefined the landscape and even basic economic health measures have launched speculative runs. In reality, many of these drivers are foundational in nature such that they always carry weight in the pricing of financial and physical assets. However, their primacy as fundamental drivers is not constant. Circumstance changes and so does the focus of the world's investors.

    In a strong and high-yield global economy, investors are naturally inclined to follow the competitive returns, economic paths that project greater yield and regulations that promise to expand options. In contrast, for panic-ridden markets, little else matters beyond seeking shelter. That is perhaps the environment when 'risk trends' are absolute for control over investment decisions. For the current, low-yield and high-risk world - dichotomous compared to most historical norms - we have yet another reality. Appetite for yield wins out for both the S&P 500 and Dollar, but caution overrides conviction with threats to globalization leveraging pressure on the unorthodox reality.

    Looking across a world of possibly fundamental paths the world and its markets may take (and there are many), it is important to recognize that many of the themes are perpetual and will return to prominence when the proper thresholds are correct. Monetary policy is still leading the way with performance like that championed by the Dollar as inflation expectations rise behind the Fed's second rate hike this past December. Yet, the potential for a reversion to what many presume is a defunct risk trend is exceptional high. A passive chase of slightly higher returns won't return this theme to prominence, but a plunge into fear would quickly remind traders as to the permanence of sentiment with Dollar, S&P 500 and most other assets reverting to their elemental forms.

  2. #242

    Crude Oil Drops Again as Markets Sour on OPEC Output Cut Deal

    Talking Points:

    Crude oil prices post largest 2-day drop since late October
    OPEC output cut narrative may be losing its market appeal
    Gold prices rise amid continued “Trump trade” unwinding

    Crude oil prices continued to fall. Performance so far this week has amounted to the steepest two-day decline since late October. Interestingly, the decline doesn’t seem to have followed from API weekly inventory data showing stockpiles added 1.53 million barrels last week. By the time this news came out, the WTI benchmark had settled into a choppy consolidation range after a long day of selling.

    As noted yesterday, the OPEC output reduction scheme cobbled together late last year may be losing its ability to impress investors as they consider the degree to which higher prices will lure swing producers back into the market. As if on cue, the EIA upgraded its 2017 US crude output forecast yesterday to 9m b/d from 8.78m projected in December.

    Concerns about output cut compliance in Iraq – OPEC’s second-largest producer – are hardly helping matters. Shipping data shows exports are set to increase in February (according to Bloomberg) all while the country’s oil minister says production is being scaled back. The official set of EIA inventory figures is in focus ahead, with an increase of 930k barrels expected by economists.

    Gold prices rose for a second consecutive day as Fed rate hike bets continued to moderate, mirroring yesterday’s dynamics. Investors’ commitment to scaling back exposure to the so-called “Trump trade” will be tested as comments from New York Fed President Bill Dudley cross the wires. Corrective flows have proven resilient to even somewhat hawkish rhetoric so far this week however.

  3. #243

    Trump-Focused Yen Shrugs at Punchy Leading Index

    Talking Points

    Two snapshots of Japanese economic performance bettered their highs for 2016 in November
    However, the Yen failed to make any hay on this good news
    Despite their timely reputation, even these numbers may now be too historic for markets squarely focused on Donald Trump

    The Japanese Yen failed to capitalize Wednesday on news that two measures of local economic performance held to be more timely than most hit their highest levels for 2016 in November.

    Japan’s national Leading Index came in at 102.7. That was just above the 102.6 level which markets had looked for and well above October’s 100.8 print. The index melds twelve sub-indexes focused on the current state of things like inventory ratios and machine orders.

    The Coincident Index is based on a similar composite of indicators and was released at the same time. It rose to 115.1 in November, from 113.5 in the previous month. Taken together the two suggest perhaps what markets already suspected: that the stronger US Dollar in the aftermath of Donald Trump’s election to the Presidency has been great news for Japanese exports.

    The Yen had been in a fairly tight range through Tokyo’s morning session and these data did nothing to broaden that either way. Across Asia markets seem to be hunkering down before a key speech from the US President-elect, with Japans being no exception. The speech is expected to include some of the broad-brush policy outlines for which rapt markets are clamouring across the globe. However, it will come after Asian markets close on Wednesday and investors here seem inclined to stand clear if they can, until they see the colour of Mr. Trump’s money.

    The US Dollar actually inched higher against the Yen in the aftermath of these numbers, in-line with its overall performance through the morning. USD/JPY got up to 116.117, from 116.039 just before they were released.

    Meandering before the President-elect: USD/JPY

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

  4. #244

    Pound May Rise on Carney Comments, US Dollar Eyes Trump Presser

    Talking Points:

    Pound may rise as BOE’s Carney keeps open mind on rate hikes
    US Dollar looks to Trump presser for economic policy specifics
    Yen down as Japan’s stocks rise, Aussie Dollar gains with yields

    Testimony from Bank of England Governor Mark Carney before Parliament’s Treasury Select Committee is in focus in European trading hours. Realized and expected UK inflation are on the rise and Carney will probably get grilled about why this does not warrant tightening. This may translate into a conversation about the negative effects of Brexit-related uncertainty.

    Brexiteer MPs are vocal members of the committee and have a long history of challenging Carney, who openly cautioned that exiting the EU would probably hurt economic growth ahead of the fateful referendum last year. Similar pressure this time around may see him reiterate that the BOE is prepared to pull back on stimulus if price growth appears more than transitory, which might boost the British Pound.

    Later in the day, the spotlight will turn to President-elect Donald Trump as he holds his first formal press conference in almost six months. Traders will look for details on economic plans that has been expected to ramp up inflation and speed up the pace of Fed interest rate hikes, driving the US Dollar to 14-year highs. This so-called “Trump trade” has struggled lately amid uncertainty about policy specifics.

    The Yen underperformed as Japanese shares advanced in overnight trade, pressuring the perennially anti-risk currency. The Australian Dollar outperformed against a backdrop of rising local bond yields, hinting that a modest intraday improvement in the RBA policy outlook may have accounted for gains. Still, the priced-in outlook implied in OIS rates shows markets do not expect a rate hike in the next 12 months.

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

  5. #245

    EUR/USD Jan 11, 2017

    Failed to sustain probes above the 1.0600 level and setback from the 1.0627 high see support at the 1.0500 level and 1.0480. Failure to hold the latter will trigger deeper pullback to 1.0435 support. Would need to sustain break of the 1.0600 level to shift focus to 1.0653 and 1.0670 resistance. [PL]

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

  6. #246

    USD/CHF Jan 11, 2017

    Stays in consolidation above the 1.0087 low of last week and bounce see resistance at the 1.0200/19 area. While the latter caps, risk is seen for return to pressure the downside later and trigger deeper correction of the Nov/Dec up-leg to 1.0021 support then the parity level. [PL]

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

  7. #247

    USD/JPY Jan 11, 2017

    Held firm above the 115.00 level yesterday and keep ranging action in play within the 117.50/115.00 area. However, the downside still vulnerable following setback from the 118.60 high last week. Below 115.07 and 114.74 support will trigger deeper corrective pullback. [PL]

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

  8. #248

    EUR/CHF Jan 11, 2017

    Retains upside bias from the 1.0680 low of last week though the upside still limited ahead of the 1.0762 resistance. Would need lift over this to trigger a double bottom at the 1.0680 lows and clear the way for stronger recovery to the 1.0800 level. Support now at the 1.0700 then the 1.0680 low. [PL]

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

  9. #249

    GBP/USD Jan 11, 2017

    View unchanged from this morning with recovery from last session's low of 1.2108 stalling decline to stronger support at 1.2083 with trade now a touch firmer in consolidation and only lift above 1.2278 resistance to provide the impetus for stronger rebound. [W.T]

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

  10. #250

    EUR/GBP Jan 11, 2017

    Rejection from the .8764 high seen retracing strong rally from the .8450 low and dips see support now at .8636 then the .8572, early Dec high. The latter must hold to keep bulls in control and see renewed strength later. Below the .8572 support will weaken and see return to the .8500 level and .8450 support. [PL]

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

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