Safe Haven Assets Rising, Equities Falling & Pound Below 1.30

Post date: Wednesday, July 06 , 2016 - 09:13 UTC
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Gold Above Long Term Trend Line

 

Beginning again with the assets to watch, Gold and Silver continued to rise overnight, breaking significant levels. This is especially the case for Gold, which is trading above its major long term down trend-line for the first time since 2012, rising to the highest level since March of 2014 at $1371. However, and despite the breakout, a confirmation is still needed, which would be a weekly close above $1358. Otherwise, the risk of a fake breakout is here to stay.

 

Silver Above $20

 

Silver managed to recover above $20 but remained below this week’s highs, trading around $20.50’s. The immediate resistance remains at this week’s highs around $21.20. The bullish outlook remains unchanged  as long as it stays above $18.90’s.

 

GBP Below 1.30 As Rate Cut Chances At Record High

 

Another interesting move overnight for the British Pound, which lost another 1.5% since yesterday, declining all the way to a 31 year low, reaching as low as 1.2798. In the meantime, with a weekly close below 1.30, this could put the pound at risk to lose further ground over the next few weeks as traders continue to price in further measures by the Bank of England. The future market is pricing in a 76.7% chance for a rate cut by the BoE next week on 14th of July, which could explain why the pound is declining sharply. We maintain our bearish outlook with the same potential target at 1.25 before the yearend.

 

Equities Falling Except FTSE100

 

As we outlined in our first post-Brexit article, global equities could not hold on to its temporary gains and declined back since the beginning of the week, with the notable exception of the FTSE100 in the UK. Falling equities come on the back of further uncertainty towards global growth following the referendum results, rising tensions towards Italian banks, and the fact that central banks have not intervened in the market. The FTSE 100 is stabilizing and even gaining slightly on hopes for further measures by the BoE soon. 6,600 might still be tested in the coming days in FTSE100.

 

Aussie Below 0.75

 

The Aussie also continued declining again in line with our expectations, as the RBA kept the door open for further rate cuts in the coming meetings. The Aussie is negative on the week again, but its still trading above its Moving Averages which should be watched very carefully. However, technical indicators are showing a lower low pattern which keep the bearish outlook unchanged. The next immediate support stands at 0.7379 which represents its 50 DAY MA.

 

Few Economic Releases Ahead

 

Today there are only few economic figures expected to be released throughout the day, which may have a slight impact on the markets.

 

Beginning in Europe, eyes will be on German Factory Orders, EU retail Price Index and the ECB President Draghi, who is due to deliver opening remarks at the 8th ECB statistics conference in Frankfurt.

 

In the US session, eyes will turn to Canada’s Trade Balance, US Trade Balance, US ISM Manufacturing PMI and finally the FOMC Meeting Minutes.

 

FOMC Meeting Minutes Might Be Non-Event

 

The FOMC meeting minutes may be a non-event, as these are the minutes of the meeting held just before the UK referendum. Therefore, the potential impact of a hawkish or a dovish tone is likely to be limited and/or short lived.

 

Attachments

Gold - Weekly Gold Daily Silver - Daily AUDUSD Daily

GBP Drops on Carney’s Early Surprise

Post date: Thursday, June 30 , 2016 - 18:55 UTC
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The British Pound dropped by more than 1% across the board midway through the US session today following remarks from Bank of England chairman Mark Carney, who surprised markets by saying that "the BoE will probably have to ease policy over summer."

 

This is the first time the BoE chairman hints at further easing as early as this summer.  As a result, traders will be pricing in this decision in the coming days, weeks and months. Such remarks and an anticipated decision may send GBPUSD below 1.30 in the next few days. Moreover, with the potential easing, 1.25 could be a reasonable expectation before the year end.

 

The Bank of England has wide range of options to ease its policy, including:

  1. Cutting the main rate
  2. Expanding the asset purchase facility
  3. Cutting the deposit rate

 

Whatever the decision is, it is clear that based on Carney's remarks, GBP buyers will rethink betting against the BOE.

 

Meanwhile, the FTSE 100 recovered all its post-Brexit declines, reaching another year high at 6504, which can be considered a breakout. In the meantime the momentum is strong, which may lead to another wave of gains all the way to 6600.

 

Safe Haven Assets Continue Rising & Oil Soars By 5% in Two Days

Post date: Thursday, June 30 , 2016 - 08:48 UTC
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USD Index Downside Retracement

 

The U.S. Dollar Index failed to break above its 200 DAY MA in the past few days, leading to another short term retracement inline with our estimates. The technical indicators appear to be in overbought territory, which likely eases the chances of a breakout above that resistance anytime soon. A short term retracement to the downside is more likely before the upside trend resumes. For the time being, a stabilization below 95.80’s could lead to further declines possibly toward 95.24, which represents its 100 DAY MA where buyers are likely to appear.

 

Mixed U.S. Economic Releases

 

U.S. economic releases were mixed yesterday as the Core PCE Price Index in line with market estimates and Personal Spending increased by 0.4%, while Personal Income increased slightly less than expected. Pending Home Sales figures came in surprisingly lower, declining by -3.65% in May, the most since 2010.

 

Crude Oil Soars By 5%

 

Good news for Oil came from the U.S. Crude Oil Inventories, which declined sharply showing a deficit of -4.1M, the biggest weekly decline since mid-May. WTI and Brent Crude added more than 5% in the past two days, rising by more than 3% yesterday and 2% the day before, but continue to trade in a range around the $50 mark.

 

Silver Outperforming Most Assets

 

Silver has been outperforming Gold since August of last year, rising by more than 33% YTD while Gold added more than 25% so far.

 

As noted our latest interview with CNBC Europe, Gold and Silver still appear to be underpriced following the Brexit event, with Gold adding around 2% and Silver around 5%. To view the full interview, please click here.

 

What happens next? For the time being we have key supports to look at. For Gold the solid support stands now at 1300- 1290 and as long as it stays above that area, the bullish outlook remains unchanged with a slight possibility of further declines ahead, while the next possible target might be another high of the year.

 

Silver reached another high for this year above 18.30’s , which confirms the breakout above 17.80 key resistance area, which opens the way for the major resistance area that stands at 18.50.

 

The Day Ahead

 

In the day ahead, there are many economic releases set to have a notable impact on the markets.

 

Beginning with Europe we will be waiting for German Retail Sales, Inflation and consumer spending data from France, as well as the German Jobs Report, UK Current Account Deficit and the Final GDP reading. Finally, we will be watching for further inflation data from the Euro zone and Italy.

 

In the U.S. session we will be watching for Canada’s MoM GDP, U.S. Jobless Claims and finally the Chicago PMI.

 

Attachments

USD Index - Daily US Pending Home Sales US Crude Oil Inventories Assets YTD Gold Daily Silver Daily

Equities Recovering on Stimulus Hopes | Eyes on US Data Today

Post date: Wednesday, June 29 , 2016 - 09:01 UTC
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Global Equities Rebounds

 

The global equities in Europe, the U.S. recovered, and Asian equities followed suit earlier today. Europe closed yesterday’s trading higher with more than 2.5% gains in each index, while U.S. equities added more than 1.5%.  In Asia, Nikkei added 1.55% so far, Shanghai Composite Index is up by almost 0.5% and finally Hang Seng +0.85%.

 

However given the likelihood that this current rally comes on the back of stimulus hopes from global central banks following the U.K. referendum results, many traders will continue to view the markets with caution.

 

USD Index Stuck Below 200 DAY MA

 

The U.S. Dollar Index traded slightly lower yesterday, remaining below its 200 DAY MA for the fourth trading day in a row, which represent a solid resistance in the short and medium term at 96.50’s.  This will be watched very carefully as a break above that resistance may strengthen the bullish outlook, especially that the technical indicators are still bullish on most time frames. On the downside view, the immediate support stands at 95.90’s.

 

Mixed U.S. Data

 

Yesterday’s economic releases in the U.S. were mixed, as the Q1 Final GDP reading has been revised higher to 1.1% instead of 0.8%, while the estimates were to grow by only 1.0%. This is still the weakest growth rate since Q1 of last year, and the third slow down in a row.

 

The Consumer Consumption has been revised lower to 1.5% instead of 2.0%, which is also the weakest growth rate since Q1 of 2014.

 

Richmond Fed Manufacturing Index came in with a negative surprise, declining by the most since January of 2013 and posting the second monthly decline in a row.

 

The good news came in from the CB Consumer Confidence figures which increased to their highest level since October of 2015.

 

GBPUSD Stabilizing But Negative Sentiment Remains

 

Looking quickly at the British Pound, the pair stabilized during yesterday’s trading and advanced for some time to retest 1.34 areas. However, it failed to stabilize and declined all the way back to 1.33 earlier this morning. So far the sentiment remains negative and is likely to continue over the next few days with a possibility to test this week’s lows.

 

The Day Ahead

 

In the day ahead, there are few economic releases expected from Europe or the U.S.. Their impact is likely to be limited and the Brexit effect will likely continue to overshadow any new positive or negative data.

 

In Europe, inflation data from Germany and Spain is expected, in addition to the net lending to individuals from the UK figures. Finally, it is probable that the EU summit will conclude its second day with a strong statement on Brexit, which may have an impact on the markets.

 

In the U.S., both traders and the Federal Reserve will be watching the Core PCE Price Index, Personal Spending, Personal Income and the Pending Home Sales figures.

 

Crude Oil Inventories

 

Finally, U.S. Crude Oil Inventories will be released today with estimates pointing to a deficit of -2.3M barrel last week, which would explain yesterday’s rally in both West Texas and Brent Crude.

 

Attachments

USD Index - Daily US GDP QoQ US Personal Consumption US Richmond Fed Manufacturing Index US CB Consumer Confidence GBPUSD Daily

Brexit Effect Continues | UK Loses AAA Rating

Post date: Tuesday, June 28 , 2016 - 09:17 UTC
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No Signs Of Stabilization

 

Volatility is still on the rise as the Brexit effect persists, with no signs of volatility diminishing anytime soon.  Breaking news continues to hit the markets every six hours, with marked impact.

 

UK Loses Its AAA Rating

 

Yesterday, S&P and Fitch credit rating agencies cut the UK AAA rating and revised the future outlook to negative, a move that did not surprise many following Thursday’s referendum. Many are expecting that these downgrades could lead to action from the Bank of England, which may be the reason behind today’s rally in European equities.

 

Mixed Asian Session

 

In Asia, equities were mixed; Nikkei managed to recover and ended the day higher with 0.38% of gains. The Shanghai Composite Index also closed slightly higher with +0.58% of gains. However, the Hang Seng closed the day with -0.32%.

 

Brexit Impact In Control | GBP To Lose More Ground

 

The British Pound remains under pressure, reaching another 31 year lows at around 1.3120’s, but recovered somehow at the end of yesterday’s trading toward 1.3290’s. Moves of more than 250 pips each day have become the norm for Sterling since Friday’s vote results.

 

For the time being, markets appear to be looking for further declines ahead, and in the meantime, there is no solid support before 1.30 psychological level, which could be seen later today despite the fact that there are few economic releases across the board.

 

Safe Haven Assets Might Be Underpriced

 

Looking quickly at safe haven assets, despite the Brexit vote Gold and Silver movement appears very limited compared to previous black sawn events like that of the Swiss National Bank. Following yesterday’s downgrades by Fitch and S&P, Gold and Silver are likely to add more gains over the coming days and weeks. The technical indicators remain bullish and given Gold made a clear breakout from this year’s resistance area at 1300 with a clear close above, this increases the chances for further gains ahead possibly to test Friday’s high in the coming days.

 

EURUSD Bullish Outlook Eased

 

Moving to the Euro Euro, the impact of the Brexit vote appears limited compared to other currencies. However, the Euro is now trading below its entire moving averages and below its trend line support on the daily chart, which eases the bullish outlook on the medium term, with a possibility to retest Friday’s lows.

 

S&P500 May Test 1965

 

As noted previously, we are still watching the US equities for another leg lower with the catalyst being the Brexit vote.  The S&P500 is trading below its entire moving average, which deepens our bearish outlook over the coming weeks, with a possibility to test 1965.

 

The Day Ahead

 

In the day ahead, there are only few economic releases across the board which are likely to have limited impact on the markets as the focus remains on the UK. In Europe, we wait for the German Import Prices, UK CBI Realized Sales and the EU economic summit, at which important comments on the Brexit event are highly likely.

 

In the US session, we will be watching the US final GDP figures, CB Consumer Confidence and finally the Richmond Fed Manufacturing Index.

 

Attachments

GBPUSD - Daily Gold Daily EURUSD Daily S&P500 Daily

Black Friday In The UK & The World

Post date: Friday, June 24 , 2016 - 15:26 UTC
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Global markets were acutely hit earlier this morning following surprising results of the Brexit referendum. UK voters have voted to leave the European Union, leading to panic in markets across the board. This panic has dramatically hit UK equities and especially the banking sector, which lost an average of 30% of its share value at the opening bell.  The British Pound has also declined to the lowest level in 30 years. Earlier this morning, UK Prime Minister David Cameron announced his resignation, saying he would step down in October.

 

What’s Next

 

The impact of a UK departure from the EU is significant. The UK’s credit rating is at risk of being downgraded in the coming hours or days, and several credit rating agencies have already put the UK on watch negative.

 

Many business will now be planning to relocate operations out of the UK, which puts the economy at risk of a recession by as early as the end of the year. The housing market in the UK is also at risk of losing 30% of its value over the coming months.

 

The Bank of England is likely to intervene in the coming weeks and months, increasing its stimulus package in anticipation of a slowdown that could hit the economy very quickly. There is a strong possibility that the BoE will cut interest rates once again to zero or below in the coming year.

 

Safe Haven Assets Leading

 

Gold, Silver and the Japanese Yen advanced sharply across the board following the referendum results, as investors appear to be scrambling for safety. This run is likely to continue as long as the risk of recession remains. Gold now has a chance to surpass $1400 in the coming days, while Silver could potentially test $20. However, the Japanese Yen may hold at the current levels with the Bank of Japan blocking its way to rise further.

 

Central Bank Intervention

 

Central banks around the globe are faced with the growing challenge of stabilizing markets after seeing today’s reaction and following the UK’s decision to leave the EU. It is likely that Currency Swaps will be activated, and rates are unlikely to rise anytime soon, even in the US. Central Banks are likely going to be very active in the coming days, weeks and months.

 

For the time being, many investors will be holding off on major moves until markets fully digest the implications of the UK decision.

 

Markets Rising on Bremain Polls

Post date: Thursday, June 23 , 2016 - 13:10 UTC
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Global equities have been on the rise since the beginning of the week as the latest polls suggest that Bremain campaign is leading with more than 55% support, while support for the leave campaign has eased back to 45%.

 

Global equities across Asia and Europe, as well as US futures are up at the moment, while the FTSE100 is cautiously up by 0.6% so far. The performance of traditional safe haven assets are also suggesting that Brexit fears are fading. Gold has declined by -0.43% so far and is trading below $1260, while Silver is slightly higher at $17.30. The Japanese yen is weakening across the board, and USDJPY is trading well above 105.50’s.

 

The British Pound is leading currencies with gains of more than 2% across the board, rising the most against the Japanese Yen with +2.5% of gains. GBPUSD has been rising since the beginning of the day, reaching as high as 1.4950’s, but the price action remains incredibly volatile.

 

With just over half the day's voting completed, it appears that traders and investors are optimistic  with Bremain sentiment controlling markets. It is still early, however, and the next few hours should give us clearer view.

 

For the time being, it can be said that Bremain is almost priced in to the market, and while at the moment we do not see significant upward gains in equities, this is likely to happen gradually in the next few days. However, if Brexit campaigners succeed, traders may need to brace for panic moves.

 

Dovish Fed | USD Slightly Lower

Post date: Wednesday, June 15 , 2016 - 19:31 UTC
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The tone from the Federal Reserve has softened following the June meeting, indicating a possibility for one rate hike this year instead of two.  While the statement did not explicitly mention the possibility of a July rate hike, Chairwoman Janet Yellen referenced July as an option once during the press conference, but only IF the economic slow down passes. The Fed also provided a mixed picture of the U.S. economy, highlighting both an uptick in GDP but a slowdown in job growth.

 

The Fed Fund Futures is now pricing in the next rate hike around August/September of next year. The possibility of a July rate hike is now at 7.7%, September at 23.6%, November at 25.2% and December at 40.9%.

 

The Fed will continue to watch future data, specifically the upcoming jobs report. For the time being, the U.S. Dollar bearish outlook remains unchanged as long as the index stays below the previous top around 96.0. On the downside view, there is a possibility to test 94.0 over the next few sessions. Tomorrow's inflation data may be the catalyst.

 

Metals may continue gaining, and Gold may test $1300 over the next few days, while Silver might test 17.70's.

 

 

NFP May Fuel June Rate Hike Estimates

Post date: Friday, June 03 , 2016 - 11:26 UTC
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The US Jobs Report will be released today at 12:30 GMT / 16:30 Abu Dhabi time. The report will include data on new jobs created in the non-farm, private and manufacturing sector. The unemployment rate, MoM average hourly earnings and the YoY average hourly earnings will also all be released today.

 

Today’s report could be seen as key to the Federal Reserve's upcoming decision this month.  Regardless developments in markets and economies globally, today’s figures could be an indication whether or not the Fed may raise rates one more time later this year.

 

Economists are expecting the US economy to add around 159K new jobs in May after adding 160K in April. The unemployment rate is set to decline back to 4.9% down from 5.0%.

 

The focus, however, will be on the Average earnings data. The MoM earnings are set to rise by 0.4% while the YoY may stabilize at 2.5%.

 

Traders need to be cautious today should the NFP data be disappointing.  If wages continue to show further improvement, the impact on the US dollar will likely be positive.  In short, wages growth will overshadow any positive or negative outcome from the NFP and the unemployment rate.

 

A look at the US dollar index from a technical point of view shows that the index recovered some of its declines in the past few days, but remains within a tight range around 95.50’s areas. However, the technical indicators remain bearish after crossing over to the downside and reaching overbought territory. With today’s data, the technical picture likely remains bearish as long as the index stays below 96.10, which represents its 100 DAY MA and its 61.8% Fibo retracement.

 

Attachments

USD Index - Daily

USD Testing Resistance | S&P500 Bearish Outlook Remains

Post date: Friday, May 20 , 2016 - 10:14 UTC
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USD Trimmed Gains

 

The US Dollar trimmed some of its gains yesterday but remains firmly higher since the release of the FOMC meeting minutes.  The Index however is still testing its 95.20’s resistance area with no clear break above that resistance which also represents its 50% retracement from the recent drop. We maintain our bearish outlook for the time being as long as it stays below that resistance and below 96.03 which represents its 61.8% Fibo from the recent drop as well. The technical indicators appear heavily overbought, which keeps our bearish outlook unchanged.

 

Mixed US Economic Releases

 

The US economic releases came in with mixed outcomes yesterday. The Jobless Claims declined by more than expected back to 278K after rising to the highest level in a year at 294K the week before. However, the Philly Fed Manufacturing Index was disappointing, declining to -1.8 in May compared to -1.6 in April, despite the fact that the estimates were to rise to 3.2. this is also the second monthly decline in a row. The good news came in from the leading index, which increased by the most since June of last year, rising by 0.6% in April.

 

S&P500 Falls To 2025

 

Looking at the S&P500, the index declined to 2025 inline with our estimates mentioned in our previous report, before rising and closed the day around 2040. Yet, the bearish outlook remains unchanged with a possibility now to test 2011 which represents its 200 DAY MA on the daily chart, which could be seen in the next few days.

 

The Day Ahead

 

Looking at today’s fundamentals, there are several economic figures which will be released throughout the day. Beginning with Europe we wait for the German PPI, Euro Zone Current Account and the UK CBI Industrial Order Expectations. In North America, we will be waiting for Canadian inflation data and retail sales figures, while in the US we wait for the Existing Home Sales only, which is expected to rise further to 5.40 up from 5.33M.

 

Gold Testing 50 DAY MA

 

Gold prices broke through 1260 support area yesterday, declining all the way to $1254. However, it managed to close yesterday’s trading above its 50 DAY MA, which remains solid since the beginning of the year. The technical indicators are close to appearing oversold, which keeps the bullish outlook unchanged as long as it stays above $1240. On the upside view, $1272 remains the next obstacle resistance.

 

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