Forex Market Analysis

Strong Results, Markets Up

Macroeconomic Update – Weekly Outlook (July 23 – 27)

It is expected from the markets to follow the results from the quarterly reports.

–          This week, one-third of the companies from the S&P500 is expected to report results.

Some assumptions should be considered:

  1. Results should be strong
  • led by the energy sector with a 20% growth with sales representing 8%
  • Oil companies, due to increase in oil prices, add almost 3 points of inter-annual growth
  • Industrials and technology should be solid too, with an estimated growth of over 20% and 30% respectively
  1. Even though results themselves are strong, the impact of the tax reform will prolong this strength two quarters more until next year, when results will start to normalize.
  2. Even at a global level, it will not be as high, in Europe, results will grow by 7.5% and in Emerging Markets by 15%.
  • In Europe, even though results were downgraded by 2%, the effect of a strong US Dollar can generate some surprise.

Thus, hopefully this will put trade wars in the background. Although, it is hard with what measure Tump will come up it is forecasted to reach an agreement before November.

  • Also, the measure taken by Trump to start using the oil reserves will lower oil prices that will reduce inflation concerns, creating a positive impact

Hence, recommendation for the week and summer period, with the Eurostoxx trading in a range of 400 points it will be key to pay attention during the next weeks in case the index approached the bottom of this range when it will create some investing opportunity.

Forex Market Analysis

Macro & Fundamentals 1st, Trade Deals 2nd

Macroeconomic Update – Weekly Outlook (July 23 – 27)

Markets closed with positive returns since they had a positive start due to the strong quarterly results reported by companies along with the optimistic tine by Powell, president of the Fed.

  • However, it started losing momentum as Trump stated he was considering in implementing new tariffs to Chinese goods increasing the concerns on trade wars and protectionism

o   This also led to the Yuan to depreciate to new low levels

So, this contrast between a solid earnings report from companies and the tension between commercial policies will guide the markets next week.

  • Starting with the macroeconomic indicators, they are forecasted to have a positive tone this week.

o    Among the main indicators in Europe, PMI & IFO are expected to be lower than the previous months but will hold in good levels

  • On Thursday, it will be the meeting of the ECB which is expected just be transition meeting confirming the end of the conventional program of asset purchases at the end of 2018
  • Regarding the United States

o   On Friday, GDP of the second quarter will be released which is expected to reach 4%

  • Hence, this acceleration will confirm the expansive cycle
  • Another fact that should support the markets is the quarterly results making this week possibly the year

o   180 companies are reporting earnings this week, and the outlook is positive

  • So far, regarding the ones that already have reported, have averaged a earnings growth of 20,8%, slightly above expectations

Due to these strong fundamentals both from the macro perspective and from the earnings report, trade tensions could be placed in the background.

  • Nevertheless, on Wednesday Yunker and Trump are meeting.

o   Yunker will meet with some proposals regarding the trade deals and tariffs on automobiles

o    It will provide some hints on what is the outlook regarding the trade deals of United States with the rest

Hence, it is a week to be patient and hold the long positions in the markets since the macro and fundamentals remain strong and positive.

Forex Market Analysis

Global Markets Update

Markets continue to focus their attention on the same factors that have been the focus of attention for weeks. This has led to a continuous sideways move in most of the indexes during the last weeks. Hence, these factors such as the trade worries continue to influence negatively on the markets.

  • On one side, there is the commercial dispute between the US and China along with the EU.
  • On the other side, the evolution of energy prices and their potential impact on inflation figures.

This weekend, if everything goes as expected, Trump will impose tariffs which are worth over $35bn on Chinese goods.

  • A little bit more from the initial $50bn announced.

It is thought to be a measure to pressure the counterparty and gain a more favourable position in the trade deal.

  • The main problem with this is that it is a large procedure and one which does not look to end in the near future, and further to not finish before the mid-term elections in November.

These factors, along with the higher rate of interests in the USA and a stronger dollar, are hurting emerging markets.

  • Also bearing in mind that the Latin markets are being influenced by the political elections.
    • Recent elections in Mexico
    • Brazilian elections after summer

Thus, Chinese markets are suffering from all these. However more interesting is the 5% appreciation of the Yuan against the US Dollar in just one month.

  • This, on one side, indicates a lower growth expectation. However, it signals the way to free the trade war, through competitive devaluations.

On the other hand, the overall market is ignoring some positive figures like the ISM Manufacturing Index which was published last Monday and reached 60.2 points.

  • This indicates expansion and growth apart from reflecting on how the level of interest of investors is at February levels.
Forex Market Analysis

Are The Global Indices Bouncing Back?

Global Indices

In the last week, we have seen some bullish momentum come into the US Equity indices. We have experienced a bullish week and for now, this appears likely to extend into next week. What is interesting to note from a technical perspective is that we have now seen over the last week is a major structural break to the upside, albeit at different times with the Nasdaq leading the way, followed by the SP500 and then the DJ30. Despite all of the concerns about the global equity space, we are very close to all-time highs once more, these are definitely markets to watch over the coming weeks. Elsewhere in the global equity space, the FTSE has been the star performer and is currently trading very close to its all-time high around the 7790 level as we observe a fairly straight linear move to the upside from the 6852 lows back in March.


This week has seen USD bulls give back some of the territory they conquered over the past few weeks. At this stage, it looks like the move lower in the USD is a correction and will likely provide better levels to consider longs from in the near term. When observing this pullback, we can identify two significant levels of key resistance in EURUSD, firstly, around the 1.2072 and then the more important level of 1.2155, if the price gets that far. It is also worth noting that the 1.2155 level marked the significant breakout point of consolidation a few weeks back.


In contrast, the USDJPY has not really behaved like many other of the major dollar pairs, meaning both the dollar and the yen are both weak.  Looking at the chart below, we can see the consolidation between 108.61 and 110.04. So, the next step for this market is to be patient and wait for the breakout of either the upside level of 110.04, which is the higher probability trade or a structural failure back below the 108.61, either way, it could prove a decent trading opportunity.  However, it would take a move above 110.04 to confirm a resumption of the uptrend in this market.


Cable is also looking vulnerable and the recent consolidation has taken on the appearance of a bear flag which, if correct, signals an extension lower. Sterling is also likely to remain vulnerable near-term following the BOE decision last week not to hike rates. Furthermore, the recent double top confirmation further highlights the potential for a continuation of the bearish technical outlook.


It might also be worth keeping an eye on the USDCHF market as well, which has this week traded back above parity at the 1.0000 level. It is also interesting to note that the EURCHF continues to hover below 1.2000, a level which the Swiss National Bank defended resolutely for so long until they removed the 1.2000 peg at 9am on the 15th Jan 2015. A break of this level to the upside any time soon would be significant and further highlight the bearish CHF outlook across the board.


Gold has pulled away from its range base around $1303 as USD bullish pressure eases. Price actions suggest that the range based on $1303 is somewhat exposed, meaning a confirmed break below $1303 would represent a significant technical break for the yellow metal. If alternatively, gold continues to push higher next week, then we would need to consider the possibility of a move towards the top of the range around the $1357 level instead, however, a bit of patience right now is probably the wisest option.

Crude Oil

Crude oil has extended trend gains this week aided by Donald Trump’s decision to pull the US out of the Iran nuclear deal. For now, the ability for this market to hold prices above the $70 level provides an overall bullish technical signal.  We all know the current OPEC and Non-OPEC agreement till December 2018, is designed to restrict the supply of oil on a global basis in order to push the price of oil higher.  The Saudis, we believe are looking for prices to push to the $80-$85 level so don’t be surprised if we see these prices before the end of the year.

US 10 Year Note

To conclude, this weekly round-up, we should look at what is happening with the US 10-Y note, which has largely consolidated over the last couple of weeks. With yields in the US breaking above the 3% level, we are likely to see the price of the 10-year note push lower at least in the short term. The key bear trigger again is a move below the April low of 118.95, this is a market to watch over the coming weeks.