Higher Equities, Commodities, Oil & Lower USD

Post date: Tuesday, April 19 , 2016 - 10:57 UTC
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Despite the sharp decline Crude Oil experienced early yesterday the commodity managed to recover at the end of the US session, sending global equities higher in the US, and in both Asia and Europe today. This recovery could be attributable to increased optimism towards a production freeze deal in June. Today’s rally in equities and commodities, particularly in Gold and Silver, could be interpreted as an alarming signal by investors. Either equities will decline once again and commodities will continue pushing higher, or commodities will ease early gains and equities will keep pushing higher. However, today’s rally in Silver appears to be based on heavy demand, which means a decline in equities and a rally in commodities is a more likely scenario. The US Dollar Index is trading below the 94.40 support area, eyeing 94.0 in the next few hours. US equities futures are unchanged so far, despite the rallies in Europe and Asia.

 

USDX set to test 94.0

 

The US Dollar Index slid below its 94.40’s support area earlier this morning, after it failed to break above the 95.20’s resistance area as we noted previously. For the time being the downside pressure appears to have resumed, with technical indicators crossing over to the downside again. Another leg lower could possibly be seen below 94.0 to retest 93.70’s lows (last week low).

 

Silver on the Move

 

Earlier this morning, Silver soared by more than 3% so far on no major news, reaching as high as $16.73. Speculation is that there must have been a significant trade somewhere to result in such a move, or in other words, high demand.  It is worth noting that Silver is up by more than 20% YTD and 21.8% from last year lows, and by all accounts has entered a new bull market. In the meantime, the next stop could potentially be at $16.80, followed by $17.0.

 

Better than expected ZEW data

 

Germany’s ZEW Economic Sentiment came in much better than expected today, rising to the highest level in four months at 11.2 in April up from 4.3 in March-- the second monthly gain in a row-- against the estimates of a slight rise to 8.0 only. However, the Current Conditions index eased back to 47.7 in April, down from 50.7 in March, while it was expected to rise slightly to 50.8.  This represents the third monthly decline in a row and the lowest reading since February of last year.

 

In the Euro Zone, the ZEW Economic Sentiment Index has doubled rising to 21.5 in April, up from 10.6 in March, while estimates were a slight rise to 13.9 only. This is the first increase following three months of consecutive declines. This is also the highest level since January of this year.

 

EURUSD facing 1.1370 ahead

  

The Euro appears to remain very stable and strong ahead of the ECB decision later this year. The pair managed to stabilize at the end of last week, leading to another run above 1.1340 earlier this morning. In the meantime, many analysts believe that today’s fundamentals support the upside momentum. The key resistance stands at 1.1370 and 1.14 should be watched very carefully.

 

Attachments

USD Index - Daily Silver - Daily German ZEW Economic Sentiment German ZEW Current Conditions Euro Zone ZEW Economic Sentiment

Morning Note

Post date: Monday, April 18 , 2016 - 08:05 UTC
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Headline

 1.Oil producers fail to agree on output freeze       

 

1/ Oil has fallen in early trading to $40.10, the lowest in two months, on news that the world’s oil producers were unable to reach consensus on a production freeze at the Doha OPEC meeting. Asian markets quickly followed suit, with the Nikkei down 3.4% and the Hang Seng down 1.36%.

 

Market Quote

“Markets across the board will experience high volatility today despite OPEC members attempting to reassure the public that a deal on production can still be reached at the next meeting in June.  With Brent currently at $41.15,  the real test will be how US markets open and react to this news—$40.20 remains the support.”

 

Nour Eldeen Al Hammoury Chief Market Strategist, ADS Securities

 

Doha Meeting - Latest Headlines

Post date: Sunday, April 17 , 2016 - 11:58 UTC
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  • OIL PRODUCERS SAID TO MAINTAIN FREEZE TALKS UNTIL JUNE
  • OIL PRODUCERS END DOHA TALKS: OMAN MINISTER
  • OMAN MINISTER SAYS OIL PRODUCERS NEED MORE TIME TO REACH DEAL
  • DOHA OIL TALKS FINISH WITHOUT FREEZE DEAL: NIGERIAN MINISTER
  • NO OPEC/NON-OPEC FREEZE DEAL WITHOUT IRAN, SAUDI PRINCE SAYS
  • SAUDI OIL MINISTER NAIMI RETURNS TO DOHA FREEZE-TALKS VENUE
  • NEW DOHA OIL-PACT DRAFT SAYS ALL OPEC MEMBERS SHOULD JOIN: RTRS
  • GENERAL AGREEMENT ON DOHA OIL OUTPUT FREEZE IN PLACE: ECUADOR
  • DOHA OIL-FREEZE PROPOSAL SAID BEING AMENDED AHEAD OF MEETING
  • DOHA OIL TALKS SAID DELAYED UNTIL AFTER VISIT TO EMIR PALACE
  • DOHA OIL MEETING DELAYED AFTER SAUDIS REQUEST CHANGES: REUTERS
  • DOHA DRAFT SAYS WOULD FREEZE OIL OUTPUT UNTIL OCT. 1: REUTERS
  • DOHA DRAFT SAYS PRODUCERS TO MEET IN RUSSIA IN OCT.: REUTERS

Fx Pre-Market 

 

Mixed US Data | USD Below 94.50

Post date: Friday, April 15 , 2016 - 15:09 UTC
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The US economic releases came in with mixed data but mostly with weaker outcome, putting an additional pressure on the US Dollar, while equities futures are still lower due to the notable decline in Crude Oil today, which is losing more than 3.3% so far.

 

Mixed US Data

 

Beginning with the good news, the Empire State Manufacturing Index soared by the most since January of last year, rising to 9.56 in April, compared to 0.62 in March, while the estimates were t rise slightly to 2.0 only. This is the second positive reading in a row, one we have not seen since the beginning of 2015.

 

The Industrial Production declined for the second month in a row, declining by -0.6% in March, while the estimates were to decline by -0.1% only. Moreover, the previous reading has been revised lower to a decline of -0.6% instead of -0.5%.

 

The Capacity Utilization Rate dropped to the lowest level since October of 2010, declining to 74.8% in March down from 75.3% (Revised lower from 76.7%), while the estimates were to remain stable at 75.3%.

 

The University of Michigan Consumer Confidence Index unexpectedly decline back to 89.7 in April (initial reading), down from 91.0 in March, despite the fact that the estimates were to rise further toward 92.0. today’s reading is the lowest level since September of last year. The Current Conditions and the Expectations index were also lower, contrary to the market expectations.

 

Q1 GDP Estimates May Fall

 

Today’s industrial production surprise declines is likely to lead to another cut in Q1 GDP estimates by the Atlanta Fed. The Industry represents almost 20% of the US GDP (Value added). The current GDP model suggests Q1 GDP at 0.1%. but with today’s -0.6% decline in industrial production, the GDP estimates may fall to 0% or below. If so, this should push the Fed Fund Futures beyond January of 2017. In return, the US Dollar may remain under pressure in the coming weeks.

 

Attachments

US Empire State Manufacturing Index US Industrial Production US Capacity Utilization Rate US University of Michigan Consumer Sentiment

Declines in Crude & Yen Overshadow China’s Positive Data

Post date: Friday, April 15 , 2016 - 12:15 UTC
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Despite positive figures from China earlier this morning, global equities are lower almost across the board.  The Japanese Yen is rallying while Crude Oil faces pressure with 2% decline thus far, just ahead of Doha meeting next Sunday.

 

China Slow Down Fears Easing

 

Today’s economic releases from China appear to confirm the impact policy makers have had in stimulating their economy. Industrial Production posted the first improvement after more than five months of continuous slowing down. Retail Sales also advanced to 10.5%, up from 10.2% in March. The Fixed Asset Investment improved for the second month in a row, rising to 10.7%, the highest reading since August of last year. However, Q1 GDP slowed down to 6.7% down from 6.8% as widely expected.

 

USD Limited Retracement

 

The US Dollar failed to sustain its gains yesterday and today, following weaker than expected inflation figures, including CPI and Core CPI (MoM & YoY). The Index faced strong resistance at 95.0 and eased back today towards 94.70’s so far. It is particularly interesting that the technical indicators advanced quickly in the past two days nearing the overbought area on the daily chart, despite the fact that the US Dollar Index rallied by only 100 pips. This appears to confirm the US Dollar weakness and that the current rally may just be another short term retracement before the downside trend resumes.

 

Silver Outperforming Gold

 

Back in August of last year, we notes that the Gold/Oil ratio is approaching a historical resistance area around 80 ounces, which usually leads to another notable rally in Silver. Today Silver is up by more than 16.8% YTD, while Gold is up by 15.9%.  The Gold outlook will likely remain bullish as long as it stays above $1190.

 

Yen Verbal Intervention

 

Despite the latest remarks by many members of the BoJ and Japanese government officials, the Japanese Yen managed to weaken for a few days. However, today USDJPY dropped back below 109.0 reaching as low as 108.73 at the time this report was released.  Many analysts still believe that the Japanese Yen has a long way to strength in the coming months. In the meantime, the next obstacle support appears to stand at 108.68, followed by 108.44 which may be tested later today.

 

Attachments

China Industrial Production China Retail Sales China Fixed Asset Investment USD Index Daily Gold-To-Silver Ratio USDJPY - Daily

USD Rally Continues Despite Weaker Data

Post date: Wednesday, April 13 , 2016 - 16:53 UTC
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The US Dollar continues to rally almost across the board, except against the Aussie and the Kiwi, although most of the economic releases today had come in weaker than expected. For the time being, the current rally remains within the expected upside retracement even after the technical indicators showed that the US Dollar Index is heavily oversold.

 

Retracement Levels

 

The US Dollar Index spiked to as high as 94.77, until this report is released, rising by 0.87% throughout the day. The current rally is likely to face a strong resistance at 94.80, followed by 95.20.  Both levels should be watched very carefully, as a break above those levels would confirm a larger retracement above 95.50.

 

Weaker US Data

 

US Retail Sales unexpectedly declined by the most in two months by -0.3% in March after showing no growth in February (Revised from a decline of -0.1%), while the estimates were to rise by 0.1%.

 

Core Retail Sales (Ex Auto) increased less than expected. Core Retail Sales rose by 0.2% in March, after showing no growth in February (revised from -0.1%), while it had been anticipated to rise by 0.4%. This happens to be the biggest increase in Core Retail Sales since January of this year.

 

The MoM PPI unexpectedly declined by -0.1%, posting the second consecutive monthly decline - we have not seen a decline like this in MoM PPI since Q3 of last year. This is despite the fact that the estimates were to rise by 0.2%. The YoY declined by -0.1%, while it was supposed to rise by 0.3%.

 

The Core PPI also unexpectedly declined by the most since October or last year, declining by -0.1%, while it was anticipated to rise by 0.1%. The YoY unexpectedly slowed down from 1.2% to 1.0% while the estimates were to rise towards 1.3%.

 

Finally, the Business Inventories declined by -0.1%. Moreover, the sales dropped by -0.4%.

 

Bank of Canada Decision

 

As expected, the Bank of Canada kept the current policy unchanged with a dovish tone, stating that the recent strong GDP figures are backed by temporary factors. Therefore, the Bank of Canada remains very cautious in its forecast despite the fact that it raised this year’s GDP and cut the 2017 forecast. As a result, USDCAD remains advanced above 1.28 once again. With such dovish and cautious tone, the Canadian Dollar may start to find a base around the recent lows.

 

Crude Declines after Inventories Data

 

US Crude Oil Inventories soared by the most in three weeks, rising by 6.6M, which is much higher than the estimated 0.9M. However, we are still not in a position to comment on the current situation in Crude Oil ahead of the scheduled Doha meeting next Sunday.

 

China’s Data Fuels Equities | USD Higher

Post date: Wednesday, April 13 , 2016 - 10:50 UTC
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China’s Trade Balance Surplus Eases in March

 

China’s Trade Balance surplus declined for the second month in a row, declining to $29.86B in March down from $32.59B, while it had been expected to rise toward $34.95B. This is the lowest reading since March of 2015.

 

Exports Increased For The First Time Since June 2015

 

Despite the decline in China’s trade balance surplus, the good news came was exports, which increased for the first time since June of last year and also posted the biggest one month increase since February of 2015, rising by 11.5% after declining by -25.4% in February. The question, however, remains on whether such an increase is sustainable or not.

 

Higher Global Equities

 

When China released its July export figures last year—posting the biggest decline since March of 2015—equity markets fell massively, culminating in ‘Black Monday’ on August 24th. Today, China posted its biggest increase in exports since February of last year, driving Asian equities up by more than 2%.  Europe is already up by more than 1%, as are US Futures.

 

USD Rally

 

The US Dollar has been rising since the beginning of the day, as risk and fears toward China’s economic performance have eased following today’s figures. Moreover, the technical indicators for the US Dollar Index still appear heavily oversold, which suggest a potential upside retracement. The index is trading around 94.50 at the time this report was released, and the next resistance area stands at 94.70 followed by 95.20.

 

Attachments

China Trade Balance China Exports YoY USD Index Daily

UK Core Inflation at Highest Since 2014

Post date: Tuesday, April 12 , 2016 - 09:33 UTC
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The UK inflation data was largely positive, with better than expected results on CPI, Core CPI and the RPI, while PPI and HPI came in slightly weaker. However, it is likely that the core inflation outcome could prompt hawks to return to the MPC council again. GBPUSD spiked above 1.43 on the news, while the key resistance stands at 1.4370.

 

CPI MoM

 

The CPI MoM increased by the most since August of 2014, rising by 0.4% in March after rising by 0.2% in February-- the second monthly increase in a row and first since the beginning of 2015. Estimates, by contrast, were a rise of only 0.3%.

 

CPI YoY

 

The YoY CPI advanced to the highest level since November of 2014, rising to 0.5% in March up from 0.3% in February, while the estimates were a rise of only 0.4%. This is also the fifth monthly increase in a row, and the first since 2014.

 

Core CPI YoY

 

The Core CPI advanced to the highest level since October of 2014, rising to 1.5% in March up from 1.2% in February, while it had been expected to rise slightly to 1.3%. The Bank of England target remains at 2.0%, or 0.5% off from the current levels. Accordingly, today’s reading may be the beginning of inflationary pressure, which could result in a change of tone from the BOE at its next meeting.

 

Retail Price Index

 

The Retail Price Index advanced for the second month in a row, rising by 0.4% in March after rising by 0.5% in February, exceeding the initial estimates of a rise by only 0.3%. Moreover, the YoY Retail Price Index advanced to the highest level since December of 2014, rising to 1.6% up from 1.3%, beating expectations of an increase toward 1.4%.

 

PPI

 

The PPI Output also came in higher than expected, rising by 0.3% in March after rising by 0.1% in February, while the estimates were to rise by 0.2%. This is the biggest increase since January of 2014. The YoY came in slightly better than expected, declining by -0.9% after declining by -1.1% during the same period, while it had been anticipated to decline by -1.0%, this is the weakest decline since December of 2014.

 

Core PPI

 

The Core PPI figures came in slightly weaker than expected but MoM figures advanced by 0.1% in March, after a revision of the previous reading lower to 0.1% instead of 0.2%. This represents the fourth monthly increase in a row. The YoY advanced slightly less than expected as well, rising to 0.2% up from 0.1% (revised from 0.2%), while the estimates were a rise towards 0.3%. However, today’s reading remains the highest level since October of last year.

 

GBPUSD Above 1.43

 

The British Pound continued to rise following today’s inflation figures, rising to as high as 1.4314, trading above its 50 DAY MA which stands at 1.4261. Technical indicators are advancing higher, which could signal further gains ahead. However, a stabilization above 1.43 could clear the way for further gains to test its daily trend line resistance, which stands at 1.4370, where sellers are likely to appear again.

 

Attachments

UK CPI MoM UK CPI YoY UK Core CPI YoY UK Retail Price Index UK Core PPI MoM UK Core PPI YoY GBPUSD - Daily

Eyes on UK Inflation Data

Post date: Tuesday, April 12 , 2016 - 08:11 UTC
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Fed Fund Futures Indicate Low Likelihood of Rate Hike this Year

 

The US Dollar continued its decline yesterday on lack of fundamentals across the board, reaching as low as 93.70’s before recovering slightly and closing the day above the 94.0 support area. The technical indicators appear to remain heavily oversold, which could maintain the likelihood of an upside retracement in the coming hours. Accordingly, investors will likely exercise caution in shoring USD at current levels. It is also worth pointing out that a look back at the performance of Federal Fund Futures over the past two years potentially identifies a direct correlation—as the futures drop so too do the chances of a federal Reserve Rate Increase.

 

Silver Posts Biggest One Day Gain Since October

 

Silver posted the biggest one day gain since October of last year, rising by more than 4% yesterday, reaching as high as $15.97, which could ease chances for a potential head and shoulder pattern on the daily chart. A break above 16.0 may still be needed to clear the way for further gains.

 

GBP Bids on the Rise

 

The British Pound soared on no news, rising to as high as 1.4287 testing its 50 DAY MA on the daily chart, but closed the day below that resistance. The technical indicators turned higher again, which could maintain the likelihood of further gains ahead. These gains, however, could potentially be limited below 1.4370’s, which represent its short term down trend line. The catalyst for such a spike may come from today’s inflation figures.

 

Alcoa Q1 Earnings Fall by 92%

 

Alcoa Inc earnings came in with much weaker than expected with earnings falling by 92% in Q1 of this year. The company reduced its 2016 outlook , projecting growth of 6% to 8%, compared to the 8% to 9% previously estimated. This news will be considered by many as a negative start to the earnings season. It appears that investors, concerned about weaker than expected earnings news, are shifting to safe haven assets ahead of further announcements later this week from JP Morgan Chase, Bank of America, Wells Fargo & Co and Citigroup.

 

EURUSD Stabilizing Above 1.1370

 

The Euro continued to stabilize above the 1.1370 support area for the seventh trading day in a row, with no clear break below that support and/or above 1.1450’s resistance area. The technical indicators still appear heavily overbought, which could maintain chances of a downward retracement. Many investors will likely wait for a retracement before going long again.

 

USD Heavily Oversold | Upside Correction More Likely

Post date: Monday, April 11 , 2016 - 10:36 UTC
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USD Index Technical View

 

The daily, weekly and the monthly chart for the US Dollar Index remains bearish. The technical indicators, however, appear to be heavily oversold, which raises the likelihood of a short-term retracement to the upside in the coming days. Such retracement would likely be limited below 95.20 and a break above those levels would be needed in order to confirm a bigger correction to 95.50’s, which appears unlikely at the moment.

 

China’s Inflation Unchanged

 

Earlier today in Asia Chinese economic releases were mixed. The CPI stabilized at 2.3% in March despite the fact that the estimates were a rise further to 2.4%. Despite this, it is still the highest level since 2014.  The PPI declined by less than expected, declining by -4.3% in March after declining by -4.9% February while the estimates were a decline of -4.6%. Such figures potentially reaffirm current estimates for more measures by the PBoC at the coming meetings.

 

Japan’s Core Machinery Orders Rises in February 

 

In Japan, Core Machinery Orders also came in slightly better than expected, though it declined by -9.2% in February after rising by 15% in January, while the estimates were a decline by -11.8%. This is the biggest monthly decline since November of last year. The YoY Orders fell by less than expected, declining by only -0.75%, while the estimates were a sharp decline of -2.4%. These declines follow an increase of 8.4% in February.

 

Australia’s Home Loans Rises in February

 

In Australia, Home Loans increased by less than expected, rising by 1.5% in February after declining by -4.4% in January, while it had been expected to rise by 2.1%. This is the biggest increase in two months.

 

Italian Industrial Production Declines in February

 

Earlier this morning, the Italian MoM and YoY figures came in weaker than expected. Industrial Production declined by the most since June of last year, declining by -0.6% in February after rising by 1.7% in January, while the estimates were a decline by -0.9%. YoY Production slowed down to the lowest level in two months, declining back to 1.2% down from 3.8%, while  estimates were a slow down toward 1.4% only. Despite such reading, Q1 GDP appears to remain on track to grow by 0.8%.

 

Fed Discount Rate Decision

 

There are no economic figures scheduled during the US session today. However, Treasury Secretary Lew and New York FOMC member William Dudley will be speaking today. Analysts do not anticipate any significant news from and accordingly, the market impact is likely to be minimal. Yet, eyes will be on today’s Federal Reserve discount rate decision, which is set to remain unchanged at 1.0%. A surprise move to raise the rate by 10bps could be the catalyst for a USD upside correction.

 

Gold Above $1250

 

Gold prices spiked earlier this morning, trading above its $1242 resistance area, rising to as high as $1254, which appears to strengthen the current bullish outlook. A stabilization above $1250 over the next few days could potentially ensure sustainable gains over the next few weeks. The next solid resistance stands at $1257 followed by $1260.

 

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