USD Testing Support | Eyes on Canada’s Jobs Report

Post date: Friday, April 08 , 2016 - 10:54 UTC
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USDX Support Stands at 94.0

 

The US Dollar has remained  under pressure from the beginning of the week, after it failed to break above its 95.20’s resistance area, leading to another leg lower back to 94.0 support area, which should be watched very carefully. However, the technical indicators are heavily oversold on most of timeframes, which might be a sign of a short term correction to the upside. Yet, a break above 95.20’s is needed to confirm such a reversal. Otherwise, the downside pressure is likely to resume.

 

USDJPY Above 108.0

 

USDJPY recovered slightly from its recent lows at 107.76, trading around 108.90 earlier this morning and boosting the Asian equities after falling when they opened. However, there still appear to be no indication of intervention by the BoJ and a weekly close below 110.0 could deepen the bearish outlook. ADS Securities noted on 17th of December that the Japanese Yen is our favorite currency for the next few months, when USDJPY was trading around 122.0 area. In the meantime, we prefer to stand aside.

 

UK’s Data Disappoints

 

The UK figures came in with a disappointment earlier today, including the Manufacturing Production, Industrial Production and the Trade Balance surplus. All the datasets came in weaker than expected, which stopped GBP earlier gains.

 

The Industrial Production declined by the most in two months, declining by -0.3% in February, despite the fact that the estimates were to rise by 0.1%. Moreover, January’s reading has been revised lower to 0.2% instead of 0.3%. What’s more surprising is that the YoY Industrial Production declines by the most since August of 2013, declining by -0.5% in February after rising by 0.1% in January, while the estimates were to show 0.0%. This is also the second largest drop since 2013.

 

The Manufacturing Production declined by the most since May of 2014, declining by -1.1% in February after rising by 0.5% in January, while it had been anticipated to decline by -0.2%. Moreover, January’s reading has been revised lower to 0.5% instead of 0.7%.

 

The Trade Balance deficit narrowed slightly to -11.9B in February, but this is after revising the previous reading (January) to a deficit of -12.1B instead of -10.2B. Exports increased for the first time in three months, while Imports increased by the most since January of last year.

 

These figures will put more pressure on Q1 GDP estimates, we suspect Q1 GDP to be under the previous quarter’s average. We estimate 0.4% to 0.5% GDP for the time being.

 

GBPUSD Solid Support

 

The British Pound has stabilized above 1.4040’s since the beginning of the week, with no clear indication of a breakthrough that support. However, lower highs formation in already in place, while the technical indicators are not oversold yet, which suggests the downside pressure, more than an upside correction. A breakthrough that support would clear the way for further declines below 1.3970’s.

 

Gold Key Levels

 

Gold has been trading within a tight range since the beginning of the week, with no clear break above or under two key levels. On the downside, the 50 DAY MA stands at $1223, which remains solid, while the $1245 area represents a solid resistance. Technical indicators are still positive, which keeps the positive momentum for the time being. Yet, we prefer to stand aside ahead of the weekend.

 

Eyes on Canada’s Jobs Report

 

 

During the US session, eyes will be on the Canadian figures today including Housing Starts and the Canadian Jobs Report, which set to come up with a notable improvement. The economy is expected to add 10.4K new jobs last month while the unemployment rate is expected to remain stable at 7.3%.  USDCAD is hovering around its 50 WEEK MA since the beginning of the week, with no clear break above that resistance so far. With Crude recovery, the upside potential is weak, the pair is more likely to test 1.3050’s.

 

US & Canada Trade Deficit Rises in February

Post date: Tuesday, April 05 , 2016 - 15:10 UTC
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The US Dollar trimmed its early gains right immediately following the release of US economic figures several minutes ago. The Index eased back from the 94.80 session high all the way back to 94.65 as the trade deficit widened by more than expected in February.

 

US Trade Deficit

 

The US Trade Deficit increased by more than 2.5% in February, rising to 47.1B compared to 45.9B in January (revised up from 45.7B), while expectations were a slight rise rise to 46.2B. This is the highest trade deficit since August of last year and the third deficit increase in a row.

 

The positive news was that Exports increased by the most since September of last year, rising by 1%, the first increase after three months of consecutive declines. Moreover, Imports increased by the most since March of last year, rising by 1.33%

 

Canada’s Trade Deficit Unexpectedly Widened in February

 

The Canadian trade balance figures came in contrary to market estimates, sending the Canadian Dollar lower across the board. USDCAD saw a new session high above 1.32.

 

The Trade Balance deficit widened by the most since October of last year, rising to -1.91B in February compared to -0.63B in January of this year, while it had been anticipated to show a surplus of 0.9B.  This would have been the first trade surplus since August of 2014.

 

US ISM Non-Manufacturing Rises in March

 

The ISM Non-Manufacturing PMI came in higher than expected, rising for the first time in four months to 54.5 in March up from 53.4 in February of this year, while it had been expected to rise toward 54.2 only. This is the highest reading in three months. Moreover, the Employment Component expanded again to 50.30 after shrinking to 49.7 in February. Finally, New Orders also increased to 56.7 up from 55.5, which is the highest reading since December of last year.

 

Attachments

US Trade Balance Canada Trade Balance ISM Non-Manufacturing PMI

USD Remains Bearish | Gold/Oil Ratio Suggests Selloff in Equities

Post date: Tuesday, April 05 , 2016 - 11:03 UTC
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USD May Test 94.20

 

The US Dollar Index failed to sustain its early Monday gains, as the index was unable to pull above 94.70’s resistance area for the second day in a row.  The Index closed lower and the technical indicators appear negative on most timeframes, keeping the bearish outlook unchanged.

 

The decline in the US dollar could be attributed to yesterday’s economic releases which came in weaker than expected. These releases included the ISM New York, Labor Market Conditions Index, Factory Orders and the Durable Goods Orders.

 

Weaker US Data

 

ISM New York posted its third monthly decline in a row, reaching its lowest level since September of 2015 at 50.4 in March vs. 53.6/ Est 54.1

 

US Labor Market Conditions Index posted the third monthly decline in a row, the likes of which we have not seen since 2009.

 

US Core Factory Orders (Ex Trans) posted the fourth monthly decline in a row, the likes of which we have not since 2014 at -0.8% vs. est -0.5%

 

US Core Durable Goods declined by the most since February 2015 -1.3% vs. est -1%

 

RBA Unchanged | Dovish Tone Remains

 

Earlier this morning, the Reserve Bank of Australia kept its current policy unchanged, leaving the cash rate at 2% as widely expected. However, the bank maintained its dovish tone, indicating that inflation is likely to remain low and that appreciation of the Aussie could potentially complicate the economic adjustment. AUD spiked slightly immediately following the decision, before quickly trimming its gains. Last week, Aussie and the Kiwi made a clear breakout on most timeframes, maintain a bullish outlook for the time being.  All indications are that the current decline is just a short-term retracement before the upside trend continues.

 

German Factory Orders Decline Sharply in February

 

The German Factory Orders unexpectedly declined by the most since August of last year, declining by -1.18% in February, despite the fact that the estimates were a rise by 0.3%. However, the previous reading (January) has been revised higher to an increase of 0.5% instead of a decline of -0.1%. The YoY Orders advanced to the highest level since November of last year, rising to 5.5% after revising the previous reading lower to 0.4% instead of 1.1%-- far from the $2.2 estimated.

 

EU Retail Sales Rises in February

 

The Euro Union Retail Sales posted the fourth monthly increase in a row, rising by 0.2% in February, in spite of expectations of no growth in February, after rising by 0.3% in January. This is the weakest increase in four months. Conversely, the YoY Retail Sales advanced to the highest level in two months, rising to 2.4% up from 2.0%, contrary to the 1.9% estimates.

 

Weaker Services PMI’s in Europe

 

Country

Actual (March)

Prior (February)

Notes

Spain

55.3

54.1

Highest since November 2011

Italy

51.2

53.8

Lowest since February 2015

France

49.9

51.2

2nd contraction in a row

Germany

55.1

55.5

Lowest since January 2016

Euro Union

53.1

54.0

Lowest since January 2015

UK

53.7

52.7

Highest since January 2016

 

BoJ Intervention Ahead?

 

Twice since the beginning of 2016 when USDJPY has traded between 110.60 -110.90 range, the Bank of Japan has directly intervened to impact the Yen’s value.  As Asian stocks slumped this morning, the Yen landed at 110.76, the lowest level in two months and speculation intensified on intervention from the BoJ.

 

Gold Above $1230

 

The decline in global equities resumed as Crude Oil lost more than 15% from its recent highs, leading investors to once again shift to safe haven assets including Gold, Silver and the Yen. Gold is currently trading above $1230, supported by its 50 DAY MA and well above its daily short term down trend line resistance which stands at $1227. A daily close above that resistance is needed to clear the way for further gains ahead. The next obstacle resistance stands at $1240.

 

EURUSD Nearing 1.1320 Support

 

The Euro faced strong resistance around 1.14 with no clear chance of breaking above that resistance, leading to a short term decline back to 1.1360’s at the time this report was released. However, the current decline could be considered a technical retracement, which should hold above 1.1320’s support area, before the upside trend resumes. Otherwise, a deeper correction could be seen below 1.13.

 

 

Attachments

USD Index - Daily ISM New York US Labor Market Conditions Index US Core Factory Orders US Core Durable Goods Orders German Factory Orders MoM German Factory Orders YoY EU Retail Sales MoM EU Retail Sales YoY

Lack of Fundamentals, Volatility Set To Rise

Post date: Monday, April 04 , 2016 - 13:58 UTC
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Australia’s Retail Sales Unchanged in February

 

Australia’s Retail Sales fueled estimates for further action by the RBA this week, sending the Aussie lower across the board in Asia. The probability of a rate cut by the RBA at this week’s meeting, however, remains very low with a greater likelihood of a cut in July and/or August of this year.  The MoM Retail Sales came in unchanged in February after rising by 0.3% in January, while it had been expected to rise by 0.4%.

 

Australia’s Building Approvals Rises in February

 

The Building Approvals figures in Australia came in mixed as the MoM showed a notable rise, while the YoY remains in the negative.

 

The MoM Building Approvals increased by the most in two months, rising by 3.1% in February, while the estimates were a rise of only 2.5%. Moreover, the previous reading has been revised higher to a decline of -6.6% instead of -7.5%. However, the YoY Approvals posted the fourth negative reading in a row, one we have not seen since 2012, declining by -9% in February after declining by -14.5% in January, while it had been expected to decline by -9.1%.

 

Spanish Unemployment Change Falls in March

 

The Spanish jobs report came in better than expected. The Euro however remained under pressure as EU equities recovered, following the path of US equities on Friday.

 

The Unemployment Changed declined by the most since July of last year, declining by -58.2K in March after rising by 2.2K in February of this year, while it had been expected to decline by -50K only. This is the first decline after two months of consecutive increases.

 

UK Construction PMI Stable in March

 

The UK Construction PMI came in stable in March at 54.2 , the same reading on February, despite the fact that expectations were a slight decline to 54.1. This is still the lowest reading since April of last year.

 

EU Unemployment Rate Falls in February

 

The Euro Union unemployment rate declined slightly in February back to 10.3% as widely expected. However, this followed the revision of the previous reading (January) higher from 10.3% to 10.4%. Today’s reading is considered as the lowest reading since August of 2011.

 

EU PPI Falls in February

 

The Euro Area PPI figures came in worse than expected, putting pressure on the Euro throughout the session, while EU equities remain higher by an average of 1% for each index at the time this report is released.

 

The MoM PPI declined by -0.7% in February, compared to the -0.5% estimated. Moreover, the previous reading has been revised lower to a decline of -1.1% instead of -1.0%, marking the eighth consecutive MoM decline in a row. The YoY PPI declined by the most since November of 2009, declining by -4.2% in February after declining by -3.0% in January of this year, marking the longest declining period on record.

 

USDX Bearish Outlook Remains

 

Despite today’s rally, the Dollar index failed to sustain its early gains, trimming most of its early morning gains all the way back to 94.60’s at the time this report is released. This is after it failed to regain above its 94.70’s resistance area. In the meantime, our bearish outlook remains unchanged so long as the index stays below 94.70’s and/or 95.20. On the downside view, the next obstacle support stands at 94.20’s.

 

Gold Backed By 50 DAY MA

 

Gold prices stabilized after Friday’s decline following the US jobs report. However, the prices stabilized earlier this morning well above its 50 DAY MA at $1215, which is likely to hold over the coming hours. The technical indicators are also turning higher as the price edged back to $1220. We maintain our bullish outlook as long as the price stays above $1190, looking to retest $1227 in the coming days.

 

Attachments

Australia Retail Sales MoM Australia Building Permits MoM Australia Building Permits YoY Spain Unemployment Chg. UK Construction PMI EU Unemployment Rate Euro Zone PPI MoM Euro Zone PPI YoY USDX Daily Gold Daily

Higher Jobs, Higher Wages and Higher Unemployment

Post date: Friday, April 01 , 2016 - 15:42 UTC
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The US Jobs Report came in with mixed figures and enough for the US dollar to recover in line with our expectations outlined in our NFP preview note.

 

Wages are the key and the MoM & YoY Average Earnings were positive, while the unemployment rate ticked higher despite continuous jobs growth. Despite the mixed results, the US Dollar managed to advance across the board on news that wages growth is on the rise.  Regardless the unemployment rate and the loss in manufacturing payrolls, wages growth mattered most.

 

Good Figures

 

The US economy added 215K new jobs in March, slightly higher than the 205K estimated. Moreover, the previous reading has been revised higher to 245K from 242K.

 

The Private Payrolls also came in slightly higher than expected, rising by 195K in March, while expectations were an increase of only 190K new jobs. Moreover, the previous reading was revised higher to 236K from 230K.

 

The Average Hourly Wages increased by the most in two months, rising by 0.3% in March after declining by -0.1% in February, while it had been expected to rise by only 0.2%.  The YoY Average Hourly Wages came in unchanged at 2.3% after revising February’s reading higher to 2.3% from 2.2%.

 

Weaker Figures

 

The Unemployment Rate unexpectedly ticked higher to 5.0% in March up from 4.9% in February, while it had been expected to remain stable at 4.9%. This is the first time the unemployment rate has ticked higher since June of last year. The unemployment rise can be directly attributed to the increase in the labour force participation rate to 63.0% from 62.9%.

 

The Manufacturing sector has been suffering for the past few months as more job losses were recorded in March: -22K jobs were lost in March and -18K jobs in February as well. Despite expectations that the sector would add approximately 2K jobs, this is the second monthly decline in a row.

 

USDX Retracement

 

The US Dollar rallied as we noted in our previous report, as wages growth overshadowed the increase in unemployment and the manufacturing jobs losses. The index spiked back to 95.0 at the time this report was written. However, this is likely another short term upside correction before the down trend resumes. In the meantime, the solid resistance stands at 95.20, which is likely to hold.

 

Gold Testing 50 DAY MA

 

Commodities suffered since the beginning of the day, and Gold gave up yesterday’s gains following the jobs report dat, declining to as low as $1209 at the time this report was written. Gold is still supported by its 50 DAY MA around $1210, in addition to the solid support area between $1200 and $1290. Accordingly, we would maintain our bullish outlook unless Gold closes the week below these levels.

 

USD Remains Under Pressure Despite Data

Post date: Thursday, March 31 , 2016 - 17:31 UTC
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Jobless Claims at Two Month High

 

The US Jobless Claims have come in surprisingly higher. The US Jobless claims rose by 11K to 276K last week and up from 265K the week prior. Estimates were to remain stable at 265K. This is the highest level in eight weeks and the third weekly increase in a row - one of which we have not seen since mid-2015.

 

ISM Milwaukee at The Highest Level Since November 2014

 

The ISM Milwaukee has come in much better than expected, rising to 57.7 in March, up from 55.22, while it had been anticipated to rise slightly to 56.0. This is the highest reading since November of 2014 and the fourth consecutive monthly rise and the third monthly expansion in a row (above 50 key level). The rise in the index has come mainly due to the spike in Employment and New Orders, both of which increased by the most since November of 2014.

 

Chicago PMI Above 50 Again

 

The Chicago PMI has come in much better than expected, rising to 53.6 in March,  up from 47.6 in February, while it had been anticipated to rise slightly to 50.7. This is the highest reading and the first expansion in two months and driven by employment which advanced to the highest level since April of last year.

 

Challenger Jobs Cut Spikes By 31.7% in March

 

The Challenger Jobs Cut increased by the most in two months. Challenger Jobs Cut rising by 31.7% in March, after rising by 21.8% in February, posting the third monthly increase in a row. We have not seen this since 2014 and the highest layoffs intension was in retail sector. 

 

Canada's GDP Double Than Forecast

 

The Canadian GDP figures have come in much better than expected, easing the chances for further measures by the BoC anytime soon. The MoM GDP soared by double than what was estimated, growing by 0.6% in January, compared by a growth rate of 0.2% in December of last year. This is the biggest MoM increase since July of 2013.

 

The YoY GDP advanced more than expected as well, rising to 1.5% in January, while it had been anticipated to rise to 1.1% only. The previous reading has been revised higher from 0.5% to 0.6%. This is also the highest YoY growth rate since January of 2015.

 

USDCAD declined initially following the news, reaching as low as 1.2858 before spiking back all the way to 1.2970's, until this report is released, as Crude Oil eased back. However, the technical indicators area heavily oversold on most timeframes, which indicates the possibility of an upside retracement in the coming days. Yet, 1.30 is seen as a solid barrier ahead of the US Jobs Report tomorrow.

 

EURUSD Below 1.14

 

The Euro continued to rally throughout the day, posting more than 11 hours of consecutive gains and reached as high as 1.1412. However, the pair failed to break above that resistance, until this report is released, easing back to 1.1380's so far. The figure 1.14 represents a solid resistance area, which is likely to hold ahead of the US jobs report. We suspect a short term retracement back to 1.1360's in the coming hours.

 

Gold Struggling Below $1240

 

Gold tried to break above $1240 throughout the day without a chance. As noted in our previous report, $1240 represents its short term down trend line resistance. In the meantime, we suspect a range trading ahead of the US Jobs Report tomorrow. Although, the bullish outlook remains as long as it stays above $1200.

 

Attachments

US Jobless Claims ISM Milwaukee Chicago PMI Challenger Jobs Cut Canada GDP MoM Canada GDP YoY Gold - Daily

USD Decline Resumes| Equities in Red

Post date: Thursday, March 31 , 2016 - 11:41 UTC
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Markets across Europe reacted negatively on Euro area economic releases from France, Germany, Italy and the UK, as well as S&P’s credit rating action against China and Hong Kong, with equities giving up most of yesterday’s gains.  The Euro was up and Gold recovered above $1230 so far.

 

Mixed Inflation Data in Europe

 

The biggest news in today’s session came in the form of Euro Zone CPI and Core CPI figures, which came in with mixed outcomes.

 

The YoY CPI Flash Estimates declined by -0.1% in March after declining by -0.2% in February, posting the second monthly decline in a row in line with market estimates.

 

The YoY Core CPI Flash Estimate advanced by more than expected to 1.0% in March, the highest reading in two months, up from 0.8% in February of this year. 

 

French CPI also experienced the greatest increase since March 2013, rising by 0.7%, while Spanish CPI increased by the most since October of last year, rising by 0.6% in March.

 

German Figures Disappoints

 

Figures from Germany today, including the Retail Sales and Jobs Report, were disappointing. The Euro, however, spiked all the way to 1.1370 as YoY Core CPI advanced, exceeding expectations.

 

The MoM Retail Sales declined by the most since August of last year, falling by -0.4% in February, far from the +0.4% estimated. Moreover, the previous reading (January) has been revised sharply lower to a decline of -0.1% instead of a rise of 0.7%, posting the second monthly decline in a row for the first time since Q1 of last year.

 

The good news came from the YoY data, as YoY Retail Sales advanced to the highest level since June of last year, rising by 5.4% in February-- double the 2.2% estimated. Moreover, the previous reading has been revised lower to a decline of -1.2% from -0.8%.

 

The German Unemployment Change was also disappointing as it remained unchanged in March, despite the fact that the estimates were a decline of -6K. Moreover, the previous reading (February) has been revised to a decline of -9K instead of -10K. As a result, the Unemployment Rate remains unchanged at 6.2%.

 

Higher UK GDP and Record Current Account Deficit

 

British data also came in mixed today, including the final Q4 GDP and the Current Account deficit, leading the British Pound to trade within a tight range – almost unchanged on the day.

 

The Q4 Final GDP has been revised higher to 0.6% in Q4 of last year, despite expectations that it would remain unrevised at 0.5%. The YoY GDP has been revised as well to 2.1% up from 1.9%, the lowest YoY growth rate since Q3 of 2013.

 

The Current Account deficit spiked to a record high at -32.7B in Q4 of last year, while estimates were a slight widening to -21.2B, compared to a deficit of -20.1B in Q3 of last year (revised from -17.5B).

 

S&P Credit Agency Revises China & Hong Kong Outlook

 

The S&P Credit Agency surprised markets earlier this morning by revising its outlook for China and Hong Kong to negative from stable, but affirmed their credit rating would remain unchanged. Such action kept safe haven assets on the bid, while the European equities gave up their gains. Market fears of China’s economic slow-down could once again resurface though investors will most likely be focused on the US Jobs Report expected on Friday.

 

EURUSD Testing 1.1370’s

 

The Euro has finally stabilized above 1.1330’s resistance area following the European figures earlier this morning. The pair is testing its 1.1370 resistance area, which will likely be broken over the next few hours. The next resistance area stands around 1.14. However, traders should be aware that another downside correction could be seen from that level, as sellers will try to defend that resistance.

 

Gold Adding $10 So Far

 

Gold prices spiked on the back of the S&P credit rating agency’s action towards China and Hong Kong, reaching as high as $1236 at the time of the release of this report. As we noted in our previous updates, Gold outlook remains bullish even after yesterday’s decline, which we believe to be a short term profit taking wave ahead of the US figures on Friday. In the meantime $1240 represents its short term down trend line, which should be watched very carefully throughout the day. A break above that resistance may grant further gains above $1245 and potentially even $1250.

 

Attachments

EU CPI YoY EU Core CPI YoY German Retail Sales MoM German Retail Sales YoY UK GDP YoY UK Current Account QoQ EURUSD Daily Gold - Daily

US Private Sector Employment Increased By 200K

Post date: Wednesday, March 30 , 2016 - 14:04 UTC
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The only economic releases during the US session today came in slightly better than expected, keeping the estimates higher for a better jobs report on Friday. Yet, the US Dollar remains negative on the day, while the US equities opened higher with more than 0.5% of gains for both S&P500 and DowJones Industrial average as Janet Yellen effect continues.

 

ADP Non-Farm Employment Change

 

The ADP Non-Farm Employment Change came in at 200K in March while the estimates were to rise by 195K. This is the lowest reading in two months. However, the previous reading has been revised slightly lower to 205K instead of 214K.

 

EURUSD Failed At 1.1330’s

 

As we noted in our previous report, the Euro tested its 1.1330’s solid resistance area earlier this morning. However and so far, the pair has failed to break above that resistance, which should be watched very carefully in the coming hours. A break above that resistance is needed to clear the way for further gains above 1.1370’s. Otherwise, a triple top formation could be in place, which may lead to another leg lower below 1.10 over the coming weeks.

 

 

Attachments

US ADP Non-Farm Employment Change EURUSD - Daily

Fed slashes rate hike forecast

Post date: Wednesday, March 30 , 2016 - 10:15 UTC
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The Federal Reserve Chairwoman Janet Yellen surprised markets yesterday with a decidedly cautious view on the global economy, diminishing the likelihood of a rate hike this year and sending the US Dollar lower, while Equities and metals soared notably. This rally extended to Asia earlier today and to Europe, where equities are adding more than 1.5% each.

 

Yellen’s dovish tone

 

Janet Yellen’s speech at the New York Economic Club yesterday exhibited an even more dovish tone than that of the FOMC statement, referring to uncertainty in inflation figures. Global economic uncertainty, Yellen said, meant that the Fed would adopt a more cautious approach towards raising rates this year . The big surprise in Yellen’s speech was her acknowledgment of considerable scope for stimulus and that if needed, the Fed could deploy forward guidance and QE.  Why would the Fed introduce the prospect of easing when they raised rates just a few months prior? It is hard to explain why the Fed was able to raise rates in December and maintain a hawkish tone yet currently, the likelihood of a rate hike at least until November of this year is low, according to the Fed Fund Futures.

 

USD in line with our expectations

 

As we noted in our previous report, buying interest towards the US Dollar is losing steam with each passing day. The Dollar Index broke below the 95.0 support area and is now testing its 94.80 support area. As technical indicators turn lower and the probability of a rate hike until November lessens, the US Dollar Index may test 94.0 in the coming days.

 

Gold & Silver may test last month’s highs

 

Gold and Silver spiked yesterday following Janet Yellen’s remarks, with Gold passing $1240 and Silver trading above $15.40. The technical indicators turned higher after being heavily oversold in the last several days, which should confirm a continuation of this year’s Bull Run. In the meantime, Gold is set to test $1250 and $1270 solid resistance areas in the coming days, with a possibility to break above both levels in the coming weeks. Silver also showed a clear bullish candle on the daily chart yesterday, which suggests another attempt to break above 15.70’s resistance area.

 

EURUSD at 1.1330 solid resistance level

 

The Euro also edged higher yesterday following Yellen remarks, trading above 1.13 earlier this morning, while the technical indicators are turning higher again as are most currencies against the US Dollar, which suggests another Bull Run in the coming hours. However, traders need to keep an eye on the 1.1330 resistance area, as a break above that resistance is needed to clear the way for further gains. Otherwise, the Euro will be at risk of forming a triple top on the daily chart, which may lead to another leg lower below 1.10. However, we believe that a breakout above that resistance is more likely.

 

Eyes on ADP Non-Farm Employment change

 

During the US session today, all eyes will be on the ADP Non-Farm Employment change, which should give us an indication of the NFP report on Friday. The estimates are that 195,000 new jobs will have been added in March, which would keep the market estimates for a good jobs report on Friday. In the meantime, however, Yellen’s remarks are likely to remain the main driver of the day.

 

USD Higher, Gold and Equities Lower

Post date: Thursday, March 24 , 2016 - 11:25 UTC
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The US Dollar advanced across the board yesterday on the back of two factors, the New Home Sales figures and hawkish commentary from Federal Reserve member James Bullard.   Bullard’s statement that the April meeting could be a good time for another rate hike resulted in a sharp rally in USDX above 96.0, while US Equities and Commodities declined until the end of the session.

 

USDX Testing Trend Line Resistance

 

The US Dollar Index advanced above its 95.20 resistance area to as high as 96.20’s, which represents its short term down trend line resistance on the daily chart. Despite this, the technical indicators are turning higher which suggests that the upside retracement may continue in the next several hours. Theoretically, if this is a short term upside correction, its likely to be limited below its 50% - 61.8% retracement from the latest decline, which stands at 96.58 and 97.05.

 

Gold Failed To Stabilize

 

For the past two weeks, Gold prices have not been successful in breaking above $1270 resistance area. Moreover, Bullard’s remarks yesterday were enough for Gold to break through its upward trend line on the daily chart, easing the current bullish outlook. However the $1200 / $1190 support area remains the key. So long as gold remains above these levels, the bullish outlook is here to stay.

 

Crude Declines on Higher US Inventories

 

Both WTI and Brent fell back below $40 yesterday on both the USD rally and on news of a sharp increase in US Crude Oil Inventories.  Crude lost more than $2 as US Crude Oil Inventories soared by the most in 4 weeks, increasing by 9M barrels, despite estimates of a 2.5M rise. WTI declined exactly from its 61.8% Fibo from the latest decline (from $51 in October to 26.05 low in February). Moreover, the technical indicators are heavily overbought, suggesting a short term downside retracement before the trend resumes. The next immediate support stands at $38.53.

 

UK Retail Sales Declines in February

 

The UK Retail Sales declines in February. However, the decline came in less than the market estimates for both MoM and YoY as well. The British Pound remains weak on the back of the growing fears toward a potential Brexit.

 

The MoM Retail Sales declined by -0.4% in February after rising by 2.3% in January, while estimates anticipated a decline of -0.7%. This represents the most significant decline in two months. The YoY sales slowed down to 3.8% in February, down from 5.4% in January (Revised from 5.2%), while it had been expected to slow down to 3.9%.

 

The MoM Core Retail Sales (Ex Auto Fuel) declined by just -0.2% in February, compared to a rise of 2.3% in January of this year, while it had been expected to decline by -1.0%. The YoY Core Sales slowed down to 4.1% in February down from 5.1% (Revised from 5.0%), while estimates were a slow down to 3.5%.

 

GBPUSD Remains Weak

 

The British Pound remains weak despite retail sales data, as growing fears toward a Brexit maintain bets against the currency. In the meantime, 1.4050 and 1.40 are solid supports, which may hold for some time. Otherwise, the pair may be heading below 1.40 in the coming days.

 

Attachments

US Dollar Index - Daily GBPUSD Daily WTI Crude - Daily GBPUSD - Daily UK Core Retail Sales MoM US Retail Sales MoM

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