GROWTHACES.COM Trading Positions
EUR/USD: short at 1.2440, target 1.2250, stop-loss 1.2340
USD/JPY: long at 116.50, target 119.80, stop-loss 118.10
GBP/JPY: long at 183.70, target 186.50, stop-loss 184.30
GROWTHACES.COM Pending Orders
USD/CAD: buy at 1.1540, target 1.1740, stop-loss 1.1480
AUD/USD: sell at 0.8260, target 0.8100, stop-loss 0.8320
NZD/USD: sell at 0.7810, target 0.7630, stop-loss 0.7880
EUR/CHF: buy at 1.2010, target 1.2090, stop-loss 1.1995
EUR/USD: Landscape After The Fed
(short, the target is 1.2250)
[ul]
[li] The Fed dropped a pledge to keep interest rate near zero for a “considerable time”, as we expected and offered a strong signal that it was on track to raise interest rates sometime next year.
[/li][li] The U.S. central bank said it would take a “patient” approach in deciding when to bump borrowing costs higher. Fed Chair Janet Yellen said at a conference that “patient” meant the policy-setting Federal Open Market Committee was unlikely to hike rates for “at least a couple of meetings,” meaning April of next year at the earliest. Yellen said that even with a sharp drop in energy costs, the Fed felt confident that inflation would eventually turn higher and approach the central bank’s 2% target, and she suggested officials would feel comfortable raising rates as long as other economic signals stayed strong and expectations of future inflation held firm.
[/li][li] U.S. policymakers continue to expect the economy to grow between 2.6% and 3.0% next year. The Fed acknowledged that headline inflation was likely to slow next year to between 1.0% yoy and 1.6% yoy, the result of a cratering in oil prices. Core inflation, which excludes volatile items like food and energy, is projected to dip only slightly next year and reach the Fed’s target by the end of 2016. The median projected federal funds rate was 1.125% for the end of 2015, a 0.25 percentage point drop from the last projection.
[/li][li] Yesterday’s data showed U.S. CPI fell 0.3% mom, the largest decline since December 2008, after being flat in October. The CPI increased 1.3% yoy, the smallest gain in nine months, after advancing 1.7% yoy in October. A fall by 0.1% mom and rise by 1.4% yoy was expected. Gasoline prices have recorded their biggest drop since December 2008. Stripping out food and energy prices, the so-called core CPI edged up 0.1% mom and 1.7% yoy after rising 0.2% mom and 1.8% yoy in October.
[/li][li] European Central Bank board member Benoit Coeure said ECB policymakers are discussing how best to act to revive the euro zone economy rather than whether to do so. He said: “I see a broad consensus around the table in the Governing Council that we need to do more” and added that sovereign bond purchases were the “baseline option”.
[/li][li] Germany’s Ifo business climate index rose to 105.5 in December from 104.7 in November. The median forecast amounted to 105.4. With the current conditions index steady at 110, the rise from the previous month was driven by an increase in the expectations index from 99.8 to 101.1. The breakdown by sector showed an improvement in the manufacturing sector, perhaps reflecting the fall in the EUR/USD that improved competitiveness in the short term.
[/li][/ul]
[ul]
[li] We got EUR/USD short at 1.2480 yesterday anticipating hawkish statement of the U.S. central bank. The EUR/USD dropped strongly yesterday (to about 1.2400) after ECB’s Coeure’s comments suggesting further steps of the European Central Bank to revive economic growth. We lowered stop-loss of our short-position to 1.2460 after his comments to save our profit just in case of dovish FOMC statement. The Fed dropped the “considerable time” wording, as expected, but the EUR/USD went up on profit taking and disappointment resulting from lowered projection of U.S. interest rates by policymakers. Our stop-loss was reached but we’ve got short again at 1.2440 (in fact, the statement was not dovish enough to prompt strong USD selling). That was a good decision. Investors perceived the Yellen press conference to be hawkish an took the EUR/USD down to 1.2320. The fall of the rate deepened today in the morning of the European session after the SNB took its rates into negative territory. In our opinion the outlook for the EUR/USD is bearish due to the divergence between market forecasts of further ECB’s and Fed’s steps. That is why we’ve lowered the target to 1.2250, just above the 1.2247, 28-month low on December 8. We’ve lowered also the stop-loss level to 1.2340.
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Significant technical analysis’ levels:
Resistance: 1.2391 (10-dma), 1.2516 (high Dec 17), 1.2570 (high Dec 16)
Support: 1.2247 (low Dec 8), 1.2242 (low Aug 10, 2013), 1.2167 (low Aug 3, 2012)
GBP/USD: Strong Retail Sales Gave The GBP A Boost
(profit taken, stay sideways)
[ul]
[li] Retail sales volumes rose 1.6% mom to show 6.4% growth yoy, the fastest annual growth since May 2004. A rise by 0.3% mom was expected.
[/li][li] The Office for National Statistics added that much “Black Friday” related spending in 2013 took place in December rather than November that created a low base for yoy rate. This year electrical stores recorded a 32% yoy increase in sales volumes in November and department stores reported sales up by more than 15% - both the biggest increases since records began in 1988.
[/li][li] It is worth noticing that falling prices for food and fuel are boosting the amount of goods that consumers can afford to buy, and wages have finally started to grow faster than inflation. Official data on Tuesday showed that annual consumer price inflation fell to a 12-year low of 1% in November, and figures on Wednesday showed annual wage growth in October picking up to 1.8% from 1.5% in September.
[/li][li] We got short on GBP/USD yesterday at 1.5720. The rate fell to 1.5539 after Janet Yellen’s comments (just above our target of 1.5530). Strong retail sales data helped the GBP bounce back after the Fed. The GBP/USD hit a day’s high of 1.5664 and the rate reached the stop-loss of our short position. We took profit at 1.5610. We stay sideways now.
[/li][/ul]
Significant technical analysis’ levels:
Resistance: 1.5680 (21-dma), 1.5753 (high Dec 17), 1.5785 (high Dec 16)
Support: 1.5539 (low Dec 17), 1.5507 (low Sep 2, 2013), 1.5462 (low Aug 30, 2013)
EUR/CHF: The SNB Intoduces Negative Interest Rates
(buy at 1.2010)
[LIST]
[li] The Swiss National Bank said it would impose negative interest rates on cash held by other banks at the central bank, seeking to discourage safe-haven buying by investors. The SNB said it would impose an interest rate of -0.25% on sight deposit account balances of over CHF 10 mn and expand its three-month Libor target range to -0.75% to 0.25%. The measures will take effect from January 22. The SNB said in its statement: “The introduction of negative interest rates makes it less attractive to hold Swiss franc investments, and thereby supports the minimum exchange rate.”
[/li][li] The SNB is clearly looking to pre-emptively protect EUR/CHF from the prospect that ECB easing will create additional safe-haven demand for CHF. The next ECB meeting is scheduled for January 22.
[/li][li] SNB Chairman Thomas Jordan said the Swiss National Bank could take further measures to defend its cap on the franc, including reducing interest rates further or lowering the threshold on which the negative deposit rate is charged.
[/li][li] The EUR/CHF rose to as much as 1.2098 and the USD/CHF rose to 0.9848 (a level not seen since August 2012). We took profit on our EUR/CHF long (at 1.2040) and USD/CHF long (at 0.9770) positions. The recovery of the EUR/CHF rate was short-lived and the rate traded below 1.2040 soon.
[/li][li] In the opinion of GrowthAces.com the SNB is likely to adopt a more aggressive stance toward cutting rates further into negative territory in the new year as EUR/CHF fails to lift itself from the 1.20 floor.
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Thank you for reading
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