Tag: Weekly Forecast

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Forex Market Analysis

Let’s Focus on the Real Deal

Weekly Update (August 6th – 10th)
Macroeconomic Outlook
Last week was intense with multiple central banks meetings, corporate results and many macroeconomic indicators. Anyway, the final outcome for the markets

Weekly Update (August 6th – 10th)
Macroeconomic Outlook
Last week was intense with multiple central banks meetings, corporate results and many macroeconomic indicators. Anyway, the final outcome for the markets

Weekly Update (August 6th – 10th)

Macroeconomic Outlook

Last week was intense with multiple central banks meetings, corporate results and many macroeconomic indicators. Anyway, the final outcome for the markets was mixed.

  • Good in the USA
  • Regular in Europe
  • Bad in China

Overall, after what has been happening in the last weeks, there will three key factors that will influence in the future.

  1. Protectionism from the USA and its relationship with China

Even though the comments from central banks were hawkish and the corporate results were solid along with the macroeconomic indicators, the protectionism concerns have increased with the last comments on tariffs influencing in a negative way the markets.

Trump commented how they were considering raising the tariffs from an initial 10% to 25% on Chinese goods which are worth around $200B.

–          This was what concerned the markets

–          This kind of news is impossible to anticipate

o   The key is that the tone of the conversation does not get worst

o   If this happens, markets will redirect their attention to the fundamentals will put on the side the trade concerns

  1. The second factor is the technology

There were some concerns regarding the drop from Twitter and Facebook. However regarding the reports from Amazon and Apple too, leads to thinking that what is happening is that the markets are turning more demanding and it is not worried about the valuation models.

  1. The last factor is corporate results

Not only from technology companies but from banks too, which they are turning out to be really positive.

–          Within Europe, UniCredit, Commerzbank, Adidas… will report results this week

And is it is as forecasted, it is expected that markets put aside their concerns about the USA-China relationship and focus more on the current expansive economic cycle and the strong results reported from the companies, retaking the bullish inertias.

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Forex Market Analysis

More Results to Come, More Growth for the Markets

Weekly Macroeconomic Outlook (30th July – 3th August)

Last week was a really positive week for the markets.

Firstly, because of the Junker – Trump meeting
Strong quarterly results and

Weekly Macroeconomic Outlook (30th July – 3th August)

Last week was a really positive week for the markets.

Firstly, because of the Junker – Trump meeting
Strong quarterly results and

Weekly Macroeconomic Outlook (30th July – 3th August)

Last week was a really positive week for the markets.

  • Firstly, because of the Junker – Trump meeting
  • Strong quarterly results and macroeconomics inidcators
    • Mostly the American GDP which reached the 4.1% growth
  • Also, there was the ECB meeting where it was confirmed what it was previously stated in the previous meeting
    • No modifications
      • However, it gave a soft message and reiterated the importance of an accommodative monetary policy

This week, probably we’ll have again a positive tone in the markets.

  • As trade wars concerns have reduced
  • Furthermore it is a really intense week in terms of:
    • Quarterly results
    • Macroeconomic Indicators
    • Central Banks Meetings
  • Regarding corporate results, there are still a lot of companies left to publish
    • Apple, Tesla, BNP Paribas…
    • So far, in United States, 245 companies have already published
      • The average growth in EPS has been around 23% and 86% of the companies have break expectations
    • Moving to Central Banks, this week is going to be really intense too
      • 1st reference will be the FED with no modifications expected
        • Around mid-July Powell stated that two more rises in interest rates are expected in September and December in 2018 and three more in 2019
      • 2nd reference is the RBI (Reserve Bank of India) which, in this case, could really rise interest rates to 6.5%
        • It would be the second rise this year
      • 3rd reference is the BOE which is forecasted to rise the interest rates to 0.75%
        • Important to bear in mind that inflation has peaked to 2.4% and labour costs have also increased
      • 4rd reference is the Central Bank of Japan which is expected to continue with the same monetary policy however it can give a  harder message in terms of future expectations
    • Finally, it is also a very intense week in macroeconomic indicators
      • Forecasted results are rather positive

Wrapping all these factors up, it is expected a bullish week in the markets, especially indexes. Markets look good after a reduction in concerns on trade wars and protectionism plus solid quarterly results and macroeconomic indicators.

 

 

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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

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

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.

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Forex Market Analysis

Weekly Technical Overview

US Dollar Index

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US Dollar Index is resuming its bullish trend. Nevertheless, even though

US Dollar Index

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US Dollar Index is resuming its bullish trend. Nevertheless, even though

US Dollar Index



 

US Dollar Index is resuming its bullish trend. Nevertheless, even though it has left behind many resistances now it is facing a horizontal resistance that will decide whether it creates a double top or breaks it and continues its run. For now, we wait to see its reaction the following week.

 

EURUSD



 

EURUSD has been moving sideways recently, mostly due to the uncertainty of the trade war between China and USA. However, in the upcoming days it should resume its bearish trend without any support ahead in the near term.

 

DAX



 

After weeks of moving sideways and without a clear direction, both fundamentals and technicals give positive reasons to be bullish at the indexes. Not only that the macroeconomic figures are forecasted to be strong but so are the quarterly results from both European and American corporations. Hence, we reopen a bullish position looking to profit the upcoming bull market.

 

GBPUSD 



 

GBPUSD is beginning the bearish trend we were waiting for. However, there is still a long way to go until it reaches the profit target. It can either resume the bearish trend or start moving sideways due to uncertainty. The next few weeks will be key to watch what happens both fundamentally and technically. For now, we remain bearish.

 

USDJPY



 

After weeks of waiting for the breakout, it is finally confirmed. Open positions have been opened waiting for the continuation of the bullish trend. It can either continue or do a retest which will eventually lead to a stronger confirmation of the breakout and the beginning of a bull run.

 

US Oil



 

Between resistances and supports there is not a clear path for oil prices apart from the many fundamental variables surrounding it. For now remain neutral awaiting a clear signal.

 

 

Categories
Forex Market Analysis

Bring the Quarterly Results In

Weekly Update (July 16th – 20th)

Macroeconomic Outlook

Among all the uncertain variables that have been defining the markets, which are protectionism, oil and politics, I would like to focus

Weekly Update (July 16th – 20th)

Macroeconomic Outlook

Among all the uncertain variables that have been defining the markets, which are protectionism, oil and politics, I would like to focus

Weekly Update (July 16th – 20th)

Macroeconomic Outlook

Among all the uncertain variables that have been defining the markets, which are protectionism, oil and politics, I would like to focus on oil.

  • In the last days, oil prices have fallen 5%
    • This has had really good repercussions, both in the micro and macroeconomy
      • From the macro view
        • The July CIP will not be under pressure that much and we will see whether it approaches the 2% target by Central banks
      • From the micro view
        • Lower energy costs will represent an increase in the profit per share
      • Therefore, these three variables have lost intensity and the immediate conclusion is that it is positive for the markets. In the short term

In the short term, two new variables surge,

  • On one hand, quarterly results
    • Throughout this week more quarterly results of 72 companies will be released in the USA and corporate results are expected to increase by 21%
    • At the same time, in 2019 and 2020, the growth figures are around 10%
      • In the end, indexes replicate the increase of corporate results
    • Regarding Europe, growth will be more modest
      • 2018 – 9%
      • 2019 / 2019 – 8%
        • In general, corporate results will sustain growth
      • On the other hand, employment volume is expected to decrease a little until the 15th of August
        • After that date, the bullish path will be resumed
      • As a conclusion, these two variables will influence the markets in a positive way

Moving to this week, there are no relevant macroeconomic indicators that will influence the markets too much. Nevertheless, even though they are forecasted to be weak, they are still better than the previous ones.

Categories
Forex Market Analysis

Markets’ Attention On Summer

Weekly Update (July 9th – 13th)

Macroeconomic Outlook
Summer is in focus now, and with it, the attention on the multiple factors that will condition whether it will be

Weekly Update (July 9th – 13th)

Macroeconomic Outlook
Summer is in focus now, and with it, the attention on the multiple factors that will condition whether it will be

Weekly Update (July 9th – 13th)

Macroeconomic Outlook

Summer is in focus now, and with it, the attention on the multiple factors that will condition whether it will be a good summer for the markets or a bad one.

Nevertheless, all these factors that unnerve investors are reaching a final outcome.

  • Last week, the markets performed better as the matters that block them improved slightly.
    • European policy and German politics have reached an outcome.
    • Then oil, which is still a problem.
    • And protectionism which is something more bilateral between China and USA rather than global.
      • When the market realises that, it will care less about it.

We were expecting a hard summer, however, the markets are starting to react in a positive way sooner than expected.

This week has three main references:

  • On Tuesday, the German ZEW Economic Sentiment which is expected to be negative again for the fourth month in a row.
    • It is relevant enough to watch out for but nothing especially important as the overall German economy has been increasing recently at 2.5% in the last trimester, which is really good.
  • On Thursday, there is US Core CPI which is forecasted to rebound from 2,2 to 2,3. This issue depends mostly on oil prices.
    • Over-inflated data may hurt bonds, nevertheless structurally it will not be a real matter which could be solved in 2 or 3 months.
  • And the third reference is American corporate results which start, among the big ones, on Tuesday with Pepsi Co.
    • And on Friday, three big banks publish results
      • Citi / +23%
      • JP Morgan / +30%
      • Wells Fargo / +11% and with some legal problems
    • They are expected to be really solid which will support markets.

Hence, this week looks like where a more positive sentiment towards markets can be consolidated.

  • German political turmoil looks clearer than before.
    • Even though it will come back in October with the elections.
  • Regarding oil, American pressures regarding an increase in production are graspable which will lead to Saudi Arabia producing more, and reducing oil prices.
    • This will reduce inflation related concerns.
  • Then, there is the protectionism which is mostly between the USA and China, being something more local rather than something global.
    • So that, when the market realises that along with strong corporate results, a good economic growth and a lot of liquidity, it will lead to an overall favourable economic cycle which will support the markets.
Categories
Forex Market Analysis

Breaking Down the Charts

Technical Analysis

  • US Dollar Index



After a fake breakout in the bearish trend and a bounce back from the resistance, it is back on track to approach the take profit target again. For now, we hold the position.

 

  • EURUSD



The Euro continues its low but consistent downfall against the US Dollar. Recently it has been moving slightly sideways however it remains in the green. After the recent small correction, a continuation of the bearish trend is expected.

 

  • GBPUSD



The British Pound initiated the expected downtrend, nevertheless, a small correction has taken place against the US Dollar. The next days will be key to see whether it continues the downtrend or it reverses and breaks the resistances. For now, we hold expecting a continuation.

 



USDJPY is finally approaching the monthly downtrend resistance we have been waiting weeks for. In the case of a close above it and a breakout, a long position will be opened. If not, we’ll wait to see from which side it decides to break the monthly triangle, it has been moving sideways for months.

 

  • Crude Oil



After breaking abruptly upwards, there is not a clear direction for oil in the next short/medium term. The rational thing, considering Trump’s comments on oil production and concerns about inflation, is that the price should go down. However, technically there is not a clear direction. For now, we do not take any unnecessary risks and wait for a confirmation.

 

  • DAX



After breaking the bullish trend strongly and breaking an important support, DAX is now facing uncertainty and continues moving sideways. First the breakout and then the retest confirm a continuation of this bearish trend which will face many supports. For now, we just wait to reach the first one.

 

Categories
Forex Market Analysis

Markets Going Through Short-term Obstacles

Weekly Update – July (2nd– 6th)

  • Macroeconomic Outlook

The overall context for this week is not all bad, but also not at all good. However, the possible absence of bad news in the upcoming weeks will allow markets to rebound from the recent sell-off. As it as has been seen last Friday, markets do not need too much news to rebound and improve. This means that in the end, the fundamentals of the market are still solid and short-term obstacles are what’s blocking them to move forward.

  • Last Friday, as soon as there was a principle of agreement about immigration within the Eurozone, this has allowed us to see a more constructive future and release pressure over Germany and its immigration policy.
    • Indeed, one of the three short-term obstacles of the markets is the German policy over immigration which in reality, if the policy of the European Union, as with many other countries like Spain, Italy or Austria are also facing similar problems.
    • Second factor is oil prices, which increase the concerns of inflation.
    • Third factor is protectionism.

1.- Hence, there should not be any bad news this week. Indeed, the government coalition in Germany, after the semi-agreement about immigration in the Eurozone and the stronger sense of state by political forces, can take more shape.

  • At the end, the sense of state will be imposed in Germany and this variable will be disappearing, reducing the threat of instability of the markets.

2.- Regarding oil, there is always new news that will lead to an increase in prices. This increase in price is affecting inflation and is providing a strong support to bonds, making them overvalued.

  • At first, this is bad for the markets since the cash flow of money always goes to safe havens, feeling more secure in bonds ahead of these types of events.
  • It gives the impression that concerns over oil prices will not be possible to solve during the upcoming weeks, however, it will not also get worse.

3.- Then, we have protectionism. It is in a similar situation to oil, it does not have a better outlook towards the future. However, we already know it is something mostly bilateral between the United States and China rather than global.

  • Over time, more controversial news will be released because the import will rise to 50bn to 200bn for example but will not happen immediately.

This week, with this improvement in the fundamental background of the markets due to the apparent absence of bad news, it is necessary to bear in mind that:

  • This Wednesday is a holiday in the United States, which lowers the activity in the markets.
  • On Thursday and Friday, there will be a convention meeting of Central Banks in Austria where the most hawkish bankers will probably have the word.
    • This will probably lead to bonds not being that comfortable and retrace slightly, and in the absence of bad news, the markets should perform better.
  • The third reference of the week is the American wages and unemployment rate.
    • The Unemployment Rate should not weight as much as everyone know it is going really well.
      • The rate is forecasted to remain at 3.8% and creation of employment probably would be under 200k.
      • Regarding wages, the indicator can reach 2.8% coming from a previous 2.7%. Any figure close to 3% can increase the concerns on inflation.
      • Nevertheless, at the same time, concerns of inflation can affect bonds, and whatever influences bond gives some breath to the markets.

Therefore, considering the current context with all these factors and references, it appears to be good for the markets in absences of bad news and strong fundamentals.

  • Short-term will remain hard and nothing will be solved quickly, nonetheless, looking to the medium-term, investors should remain calm and follow the triple P rule:
    • Positioning
    • Perseverance
    • Patience

 

 

 

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Forex Market Analysis

Confident Central Banks Push Markets Up

Weekly Update (June 18th – 24th)

Macroeconomic Outlook

As expected, last week was an intense week full of activity, especially by the Central Banks.

–          Central Banks decisions last week should calm the markets in the following months

o   Fed is raising rates at a normal rhythm

o   ECB has planned to finish its unconventional asset purchase plan by 2019

o   Central banks do this at a time where inflation is rising

  • So, they are not that worried about inflation
  • Apart from the fact that is a transitory inflation influenced by excessive oil prices

o   At the end of the day, Central Banks make clear decisions which are good for bonds

–          Fed wants to raise interest rates two more times this year and a couple more times in 2019, ending around 3.25%

o   Reduce balances

o   Finish a process of normalisation

  • Normalisation is good and stable

–          ECB will retire the unconventional measures in 2019

o   Interest on deposit and credit will rise becoming positive by 2019

o   This is highly positive for the economy

This week we have Central Banks news as references

–          Sintra meeting

o   Annual meeting of central banks

  • With what happened last week not much will be observed here

–          OPEC meeting

o   Will increase production

o   Reduce oil prices

  • Fear over inflation will fall

Hence, the situation should improve within an environment where corporate results are still increasing and inflation starting to fall along with good unemployment rates and less political risk. Therefore, this week and the ones ahead should be positive for the markets.

 

Technical Outlook

US Dollar Index


 

US Dollar Index just broke with power, a critical monthly resistance totally reversing the bearish trend it has been following in the last months. We may see a small retest, but it will only serve to confirm the beginning of a bullish trend. Therefore, it is a good moment to buy, putting the SL just under the minimum of the last session and the TP above the last resistance. With this position, we should catch the new bullish trend.

 

EURUSD


 

After attempting the retest, it has dropped even further continuing the weekly bearish trend it formed previously. Short positions should remain open as for now, it has clear path downwards.

 

GBPUSD


 

After a fake breakout, it has broken down again, against the two supports that were supporting the upward movement. Hence, we open a new short position that has now supported the remaining ahead.

 

USDJPY


 

After moving sideways between two key support and resistance for weeks, the USDJPY is now approaching the resistance above. However, it is necessary to wait for now until it confirms whether it will test it and come down, or it will break it for once and for all. Thus, for now, we wait until we have a confirmation of the breakout.

 

USOIL


 

After breaking and retesting the upward trendline, it confirms the continuation of the bearish trend that began weeks ago and that we are joining again. Without notable supports ahead it should continue going down.

 

DAX


 

DAX has been tumbling the last few months, but after breaking the resistance it has been playing with lately, it has followed a clear path upwards. For now, we hold as fundamentals from last week support the markets even more.

 

 

Categories
Forex Market Analysis

Too Much To Handle?

 

Macroeconomic Outlook

Ahead there is a complex week full of powerful references

–          Apart from the fact that we start from an inconclusive G7

o   More like a G6 + 1

Regarding the references and what needs to be considered

–          Central Banks

o   Fed will raise rates this week to 2% (already discounted)

  • And how many more increases there will be this year
  • Probably one more but open to speculation

o   ECB

  • When will it finish its asset purchase program?

o   Issue of Italian debt

o   Extremely important

  • It will condition what ECB will do

o   Bank of Japan

  • Will repeat with -0.1%

–          Prices

o   Industrial Prices in USA

  • Increase to 2.9 from 2.6

o   European Inflation

  • Remain at 1.9

–          USA – North Korea Meeting

o   Just speculation and news

Bearing in mind all this, it is going to be a hard week, and the best position is to wait on the sidelines to see what the outcome is of all these events and then consider a more clear position.

 

Technical Analysis

US Dollar Index


It is in a danger zone between two monthly bearish trends. Possible rebound from the support one on its way. In the next days, it will clear and show whether it confirms the bounce and breaks the resistance above it or if it is just testing and continuing the monthly bearish trend.

EURUSD


Undecisive, presently, going sideways. For now, we remain bearish as long as it remains below the monthly resistance which it is approaching now. In case it approaches it, we´ll see whether it is just a retest or a breakout creating a bullish trend.

GBPUSD


After breaking out the two resistances, it confirms the creation of a new bullish trend. Hence, we open a new long position looking for a long trend after breaking through the resistances and retesting them afterwards.

USDJPY


As explained in the previous weeks. USDJPY has been and will be going sideways without a clear direction. However, the sideways space is narrowing, and soon, it will be forced to take a side, whether long or short. For now, we wait while the resistances and support get closer to each other.

DAX


It could not close above the resistance we based in our long position. So, this week it will be key to know whether it can close above at some point, eliminating all the fears of a possible bearish trend. In case it does not close above and confirms the retest we will close the position and open a bearish one.

Crude Oil


After breaking the bullish resistance it was holding on to, it is now retesting it. This retest confirms the continuation of the recent bearish trend. For now, we remain bearish.

 

 

Categories
Forex Market Analysis

Slight Change of Context

Weekly Update (June 4th – 10th)

Macroeconomic Outlook

Two main factors need to be considered initially this week-

–          Outcome in Italy

o   More expected

–          Outcome in Spain

o

Weekly Update (June 4th – 10th)

Macroeconomic Outlook

Two main factors need to be considered initially this week-

–          Outcome in Italy

o   More expected

–          Outcome in Spain

o

Weekly Update (June 4th – 10th)

Macroeconomic Outlook

Two main factors need to be considered initially this week-

–          Outcome in Italy

o   More expected

–          Outcome in Spain

o   Less likely to happen

  • The bond spreads of Spain and Italy have had a notable increase over the German ones

However, the midterm elections in the USA are more worrying, which are taking place in November.

–          Which means Trump will put more pressure on trade with other countries.

o   This lead to uncertainty and lower growth in global terms

o   However, also they are useful to clarify ideas

For now, we can rely on the rebound that happened on Friday, due to two things that need to happen this week.

  1. The Italian Government should be formed and avoid other elections which can be interpreted as a danger to the Euro.
  2. In Spain, the budget program should go forward, and there should not be any surprise from the government.

Anyway, we cannot rely on this too much as the protectionism will still grow. In general terms, the investment strategy should not change.

–          We should be still exposed to markets

o   We still are within an expansive economic cycle

–          We elevate the perspective looking to 2019

o   Due to the current change of context to a worst one, returns will be slightly lower but that will not change the overall direction of the markets

 

Technical Outlook

US Dollar Index


After taking profits, the US Dollar Index is hanging between the resistance it just touched and the support it previously broke. So, for now, we´ll wait until it breaks one of them and position in the right direction.

 

EURUSD


EURUSD remains in the green, and there is not any support or resistance that signals a change of trend. Hence, for now, we remain short.

 

GBPUSD


GBPUSD is hanging on a key after breaking the first resistance. Now, it is facing the second monthly resistance. In case it does not break it we´ll remain short. However, if it closes above the bearish trendline that is now facing, we might consider changing the strategy to a more bullish position.

 

USDJPY


It remains in the same situation as we left it. It is going sideways between resistances and supports. Recently it has touched the support confirming it and possibly now it can go up to the resistance. However, for now, the movements are too small to care about them, so we remain on the side, looking at how it behaves and waiting for a clear breakout.

 

CRUDE OIL


US Oil just broke a strong monthly support which creates a strong entry to join the recently formed bearish trend. We captured the initial movement and now can be a good opportunity to join again after this last breakout of a resistance.

 

DAX


As analysed in the macroeconomic outlook, the fundamentals remain solid and the technicals too. If it does not close below the support, it is now facing we´ll remain as bullish as we are now. However, if it breaks the support and retests it, we might change to short, but for now, everything is in place for a low but positive uptrend.

Categories
Forex Market Analysis

Transitioning Week

Macroeconomic Outlook

Bearing in mind the  current situation of the markets, it would be necessary to take positions in line with the three P strategy:

  • Priority
  • Preserve
  • Patience

It is still a good moment to take long positions, to buy banks after sell-offs, to buy retail companies and to buy industrials and technologies.

As references, this week we have:

  • Oil Price: Risk that inflation goes up with oil prices again as Central Banks act in a very dovish way every time there is a risk. Markets in the short term will be conditioned to this risk.
  • Geopolitics: Politics, tariffs and trade deals will condition the markets.

o   In the end, this situation will lead to observe if the USA realises that it does not need China as an intermediary for North Korea which will put pressure on the markets in the short term.

o   On the other side, it is politics. European politics are making a bigger noise with the uncertainty about the Italian government which is not that big, and the risk of a vote of no confidence in Spain.

o   So, bearing this in mind, the immediate influence over the markets is high. Therefore the markets slow down. However, it should not concern us that much as politics have less weight on the economies with time.

Moving to macroeconomics, there are a couple of indicators this week. Most relevant are:

  • Wednesday we have American GDP which should remain at 2.3%
  • Thursday, we have European inflation that should increase to 1.6%
  • Then on Friday, we have American wages which should go to 2.6% – 2.7%

o   Ideally 2.6%

The probability that all this happens is low plus New York and London are closed on Monday leading to a slow start. It will be a week of transition, observing all this information and digesting it to know what the reaction of the markets will be. It will be intense in the short term, but as said in the beginning, it is important to persist, have patience and remain where we are.

  • Indexes should be the place where we should remain since the expansive economic cycle continues, politics have low influence on economics, and we are in a period where global growth is happening in a positive synchronised way.

 

Technical Outlook

 

US Dollar Index


 

As expected, the US Dollar Index retested the recent resistance it broke it, confirming the bull trendline. For now, as we got the retest as confirmation, we remain with our bullish position.

EURUSD


 

After catching the first bearish wave, we are capturing the second one. We were waiting for a retest of the support for confirmation, but we did not even need it as it continued falling without chance of retesting the support. Remain bearish for now unless unexpected circumstances arise.

 

GBPUSD


 

After breaking the strong monthly support on Friday, it opens space for a short position. We were waiting for a rebound, but instead of that, we got a strong breakout which gives us the confirmation of the strength of the bearish trend. Hence, it would be convenient to change the position into a bearish one with a huge risk-reward. As for now, we leave the profit taking open until the next monthly support.

USDJPY


 

We will remain on the side this week as USDJPY is in a dead space between supports and resistance. Hence, we do not take any position, remain neutral and await what direction it takes.

Crude Oil


 

We took profits and now it is time to wait on the sides to see what happens. We’ll look closely to see which trendline it gets closer to if it continues the bullish run or breaks any near support. Looking at its reaction, we’ll take another position next week.

DAX


 

Retest confirmation is on its way creating another good time to enter. We remain bullish as there is nothing to be concerned about for now.

 

Categories
Forex Market Analysis

USA VS China Trade, Inflation and Quarterly Results

 

Macroeconomic Outlook

Three references for the markets this week

1)      Trade relation between China and USA

  1. Last Friday it was agreed what it could be the beginning of talks that will take time
  2. Rather a constructive agreement than a bad one

2)      Inflation

  1. American inflation is the key variable this week
  2. It is expected to increase to 2.5% from previous 2.4%
  3. Currently is above the 2% target and this creates certain anxiety and can have some effect on bonds
  4. Might consider the option of a lower than expected inflation (<2.4%)
  5. Payrolls data, which was published on Friday, was 2.6% instead of 2.7% moving away from the 3% barrier
  6. The option of a lower inflation rate provides a less stressful outlook

3)      Quarterly Results

  1. Really good so far in the USA
  2. Partly because of the tax reform
  3. EPS had increased to an average of 24,8% when at the beginning it was expected to be around 17%
  4. Good so far too in Europe
  5. More European companies will publish results this week

Hence, bearing in mind a decent agreement between USA and China, the possibility of lower inflation and good corporate results, the markets should bounce and rise a little this week.

Furthermore, if the inflation turns out to be lower, it could be good for bonds and could contribute to a weaker US Dollar wich has increased significantly recently.

 

Technical Analysis

US Dollar Index

Daily Chart

It is possible to appreciate how the US Dollar Index, after tumbling for a couple of weeks, broke all the resistances and increased significantly. The most important resistances generated from its monthly bearish trend have been broken in one strong movement upward. Including, also, its 200-day EMA which is retesting right now. The only significant resistance that is facing now is at the 93.5 which will be the next target leaving some space for a longer run.

EURUSD

Daily Chart

After testing for the third time the bearish trend line on the top it dropped,  strongly breaking its two supports below it. Not only it fell after testing its resistance and breaking the upcoming supports but also, on Wednesday it broke below the third support which is currently retesting. This can be either a fake breakout or another shorting opportunity.

 

GBPUSD

Daily Chart

After breaking the support, which has been holding price during its bullish trend line, it is eyeing the next solid resistance which is at a level of 1.34 more or less. After breaking the 200-day EMA, it is taking a rest. It may either retest the recent support broken which is hard as the bullish trend was really steep or test the next resistance which is closer and extending the bearish move.

 

USDJPY

Daily Chart

The dollar broke both resistances after doing a fake breakout and bouncing back from the monthly support. It has created a small bullish trend in the short term where it can be holding on until it reaches its next target which is the monthly bearish trend, currently situated at a level of 111.5. Either that or starts going sideways for the next days until it breaks one of the monthly trends.

Crude Oil

Daily Chart

Recent geopolitical events and tensions in Syria have created volatility in the markets, and consequently, the price of oil has been on the rise. After holding to the bullish trend line and breaking above $65 it did a retest of the recent resistances it just broke above. Without more resistances ahead, it has just reached the expected target of $70 per barrel. There are not any significant resistance above which leaves the door open for a longer bullish run.

DAX

Daily Chart

It bounced back from the monthly bearish trend which was the strongest one and consequently in the recent run it has just broken both two bearish weekly resistances. Last Friday it closed above the last resistance which leaves the door open for a continuation, possibly at less slow pace, of the recent bullish trend formed from testing the resistances and breaking the supports.

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Forex Market Analysis

EURUSD forecast for week of April 22nd, 2018

EURUSD

I am using Renko to analyze the current price action of the EURUSD pair. Renko very clearly shows the price action by reducing the ‘noise’ that Japanese candlesticks can often cause in a consolidating market. We can easily observe that we are forming a wedge on the chart. The consistent series of lower highs and higher lows has been a continued trend since the beginning of the year. The key identifier for a breakout at this level will be where the oscillator levels are in relation to the location of price near these wedge lines.

I think it is important to observe the behavior of the RSI and price when the price is near the upper or lower band: prices reverse if the oscillator is near an overbought or oversold condition. However, the end of the trading day on Friday showed price coming closer to the bottom wedge line, but RSI was not exhibiting an oversold condition. Neither was it oversold. Due to the nature and behavior of this bottom wedge line, we can expect the price to bounce from this area, but the bounce should be limited. There is more weakness to higher prices than there is to lower prices. A break of the wedge should be expected during the next trading week, if there is not a break, expect a continued range trade between the two wedge lines.

EURUSD

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Forex Market Analysis

WEEKLY FORECAST 5th – 9th February 2018.

Weekly Forecast Hot Topics:

  • NZD – Waiting for the optimism of the market to be replicated with the decision of the RBNZ.
  • AUD – No big expectations in the next monetary policy decision.
  • CAD – Continuity in the strengthening of the labour market.

Weekly performance

This week, the best performer was the Euro <EUR> (0.22%), pushed by the positive data on inflation and industrial activity. The worst performer was Aussie <AUD>,  its losses reach¡ng 2.22% due to weak inflation Australian data and the stronger US employment data. Those led to boost the Dollar <DOLLAR> (0.17%) and reverse the losses that were dragging in the week.

 

NZD – Waiting for the optimism of the market to be replicated with the decision of the RBNZ.

Last week the New Zealand Trade Balance (MoM) reported a historic surplus of $640M, the highest value since March 2015. The main factor contributing to this increase has come from dairy products exported to their principal trading partner, China.

This week, the leading data for the Kiwi will come from the employment indicators (QoQ) and the RBNZ interest rate decision. The unemployment figure is expected to increase slightly from 4.6% in October 2017 to 4.7%. As for the interest rate decision, no big surprises are expected, analysts expect the RBNZ to keep the interest rate at 1.75%.

Technically, we expect more downside moves for the Kiwi. In EURNZD we observe a bullish continuation that could reach 1.7174 before it starts a bearish sequence.

EUR-NZD 4-hour chart ( click on the image to enlarge)

AUD – No big expectations in the next monetary policy decision.

During the last trading period, inflation data (YoY) was published, which was expected to be equal to or higher than 2%. However, it did just reach 1.9%, baffling the market and removing the possibility of a new increase in the interest rate by the RBA.

For this week, the most expected event for the Aussie will be the monetary policy decision, in which no changes are expected in the current rate that is set at 1.5%.

On the technical level, we still expect weakness in the Aussie group before starting a new strengthening of the oceanic currency. In the EURAUD, we expect the price to reach the 1.6026 level, where it could complete a higher grade connector and start a new bearish cycle.

EUR-AUD daily chart ( click on the image to enlarge)

 

CAD – Continuity in the strengthening of the labour market.

This week will end with the publication of the Canadian employment data. Continuity in the strengthening of the labour market is expected, in the unemployment rate the estimated consensus is a slight increase that reaches 5.8%; however, current levels of unemployment are the lowest of four decades.

Technically, we continue to expect new lows for the Loonie, which could even lose the psychological support of 1.20, a large bearish cycle which started in January 2016.

USD-CAD daily chart ( click on the image to enlarge)