Forex research

[Alpari_UK]

[B]Spanish retail sales expected to fall for 23rd month[/B]

Today’s UK opening call provides an update on:

• Yahoo beats fourth quarter earnings expectations;
• Consumer confidence in Germany expected to improve slightly;
• Today’s corporate earnings;
• EUR/USD, GBP/USD, USD/JPY & EUR/GBP analysis;

Yahoo became the latest major company last night to beat earnings expectations for the fourth quarter, meaning slightly more than two thirds of S&P 500 companies have now beat expectations, which is slightly above average.

The S&P yesterday brought an end to eight consecutive days of gains, the longest run in more than eight years. US stock indices in particular have been rallying strongly since the start of the year, supported by a mixture of relief over the fiscal cliff deal and better company earnings driven by lower expectations.

Stock markets are long overdue a pull back, whether it be a minor one in the short term or a 20% drop in the longer term. I think for now we’re likely to see the rally maintained until the end of corporate earnings season in the US at least, however while everyone wants the rally to continue, I think everyone is beginning to feel that a correction is just around the corner.

The Gfk consumer confidence figure, released early this morning, is expected to show a slight improvement from a month earlier, rising to 5.7. Surveys out of the eurozone this month have improved significantly, which suggests economic activity could pick up this year. All of a sudden, ECB president Mario Draghi’s forecast for a recovery later this year doesn’t seem so ridiculous.

Spanish retail sales are expected to fall for a 23rd consecutive month in December as the country struggles to get back on its feet. The combination of austerity and reforms has had a similar impact on Spain to what we’ve seen in Greece, unemployment is extremely high, youth unemployment above 50% and consumer and business confidence is incredibly low.

There are a large number of companies due to report fourth quarter earnings today. Of particular interest will be Ford, Harley-Davidson and Pfizer before the opening bell in the US, followed by Amazon later on tonight.

The euro is trading flat against the dollar this morning. The pair found resistance shortly after breaking above the pennant formation on the daily chart, around 1.3490, the 50% retracement of the move from May 2011 highs to July 2012 lows. With the 200 week simple moving average providing further resistance just above here, around 1.3520, this area is likely to be a key level of resistance and a break above here looks unlikely at this stage. Instead, the pair could fall back towards the descending trend line, dating back to May 2011 highs, that it broke above in December and test it as a new area of support, thus confirming the breakout.

Sterling is trading higher against the dollar this morning. The pair fell sharply yesterday, before finding support around 1.57, where the 61.8% retracement, of the move from June’s lows to this year’s highs, crosses with the long term ascending trend line dating back to January 2009. With both oscillators on the daily chart, and the stochastic on the weekly chart, suggesting the pair is oversold, I expect to see it reverse its recent trend in the coming days.

The dollar is trading lower against the yen for a second day. The pair found resistance around 91.0 yesterday, so we may now see a small retracement as it pares some of its recent gains. The pair could find support around 90.0, the 38.2% retracement of the move from last week’s lows to this week’s highs, as this was previously a key psychological level and provided resistance over the past couple of weeks. This would act as confirmation of the break above this level, prompting a move towards 1.9475 in the coming weeks.

The euro is trading lower against the pound this morning after finding significant resistance around 0.8575, the 61.8% retracement of the move from June 2011 highs to July 2012 lows. The pair has also found support from the 200 week simple moving average, which suggests to me that the outlook may be bullish for the pair. However, we need to see a break above the 61.8 fib level, or back below the 200 week moving average to give us a better idea of the direction of the pair.

Ahead of the open we expect to…

[U][B]Read the full report at Alpari News Room[/B][/U]

[Alpari_UK]

0:39 Today’s corporate earning
1:43 Key economic data releases
2:40 Federal Reserve meeting
3:08 CHART - EUR/USD analysis

Forex research: Global markets daily

[Alpari_UK]

Today’s UK opening call provides an update on:

• Spain expected to contract for fifth quarter;
• Germany to test interest in safe haven debt as demand for equities grows;
• US GDP expected to fall to 1.1% in Q4;
• Fed expected to leave monetary policy unchanged.

It’s likely to be a volatile end to the week in the markets, starting today with the release of the US GDP figure and the Fed press conference.

While the US is going to be under the spotlight today, it’s also going to be a busy morning in Europe, as Spain gets things underway with the release of its fourth quarter GDP figure. This is expected to come in at around -0.6%, bringing the year on year figure to -1.7%.

The country is currently undergoing a brutal program of austerity that is crippling the economy and at this moment in time it’s showing no signs of turning it around. The country has now been in recession for five quarters and this is very unlikely to change this year.

We also have a couple of bond auctions in the eurozone today, which will test appetite for both safe haven bonds, given the recent move into equities, and also for higher yielding Italian debt. The German 30-year bond auction is likely to see higher yields than in previous auctions as more and more investors turn to the equity markets in search of better returns.

Meanwhile, the demand for Italian debt has improved substantially over the last six months and today’s auction is likely to be no different. We may not see the drop in yields that we have been seeing recently, with investors increasing their exposure to equities at the expense of bonds, however a yield of around 4.5% with strong interest will certainly be seen as a success.

From here it’s over to the US for the release of the fourth quarter GDP figure, which is expected to fall to 1.1% from a staggering 3.1% in Q3. The drop can be attributed to a number of things, including a drop in spending by both consumers and businesses due to fiscal cliff uncertainty, or even a drop in government spending following the presidential election.

We also have the release of the ADP employment change figure, which despite its new calculation, continues to be largely ignored. The new calculation is meant to give a more accurate estimate of the non-farm payrolls figure, released two days later, however so far we’re yet to see evidence of that. Until we do, it’s likely to be largely ignored.

Finally, we have the Fed press conference this evening. We’re not expecting too much from this really, the Fed have been quite open about where they stand on monetary policy recently. Unemployment is far from the 6.5% target so there’s unlikely to be much of a discussion on interest rates, especially with inflation remaining low.

Asset purchases on the other hand are not really in danger of being taken away until 2014. There was talk at the last meeting of ending the program potentially in June or at the end of the year, which was odd as it came so quickly after the Fed announced the program, however neither idea gained significant support to suggest it will happen any time soon.

The euro is trading flat against the dollar this morning. The pair has found strong resistance again around 1.3490, the 50% retracement of the move from May 2011 highs to July 2012 lows. I believe this is going to be a key level of resistance, especially given that the 200 week simple moving average is just above here around 1.3520. From here we could see a reversal in the pair back towards 1.32, where it should find support from the ascending trend line dating back to July. What we could now see is the 50 fib level create an ascending triangle with the trend line, leading to a breakout in the next couple of months.

Sterling is trading lower against the dollar this morning. The pair found strong support over the past couple of days around 1.57, where the ascending trend line dating back to January 2009 crosses with the 50% retracement of the move from June 2012 lows to this year’s highs. A break below here would be extremely bearish for the pair and could prompt a move back towards 1.5350, based on the size of the double top that the it broke the neckline of last week.

The dollar is trading higher against the yen this morning. The pair has been in a strong uptrend for a while now and is probably overdue a correction of some kind, especially given that the Bank of Japan have delayed its open-ended asset purchase program until next January. On the daily chart, the stochastic is overbought and currently in the process of crossing which is a sell signal, while on the weekly chart, we’re seeing the same thing, with the RSI also starting to point lower in overbought territory. The weekly candlestick is also quite bearish at this stage so a retracement of some kind certainly looks on the cards.

The euro is trading higher against the pound this morning. The pair has found resistance in recent days around 0.8575, the 61.8% retracement of the move from June 2011 highs to July 2012 lows, and I believe this is going to be a key level in determining the next move. A break above here would be extremely bullish, prompting a move back towards 0.9082. However, we could first see a retracement, after such a strong bullish move in the pair, with it testing either the 200 week simple moving average, or the top of the ascending channel that it broke above a couple of weeks ago, as a new level of support.

Ahead of the open we expect to see…

[U][B]Read the full report at Alpari News Room[/B][/U]

[Alpari_UK]

0:09 Spanish GDP figure;
1:01 Italian bond auction;
1:53 Today’s US session including GDP and Fed press conference;
3:23 Boeing earnings;
4:06 CHART – EUR/USD analysis.

Forex research: Global markets daily

[Alpari_UK]

[B]Bernanke warns of temporary pause in US economic activity[/B]

Today’s UK opening call provides an update on:

• Facebook shares fall despite increase in mobile ads revenue;
• Ben Bernanke warns that the pause in economic activity is only temporary;
• Fed asset purchases to continue for the foreseeable future;
• Jobless claims expected to jump slightly from five year lows;
• EUR/USD, GBP/USD, USD/JPY & EUR/GPB analysis.

Facebook shares dipped last night despite the company reporting strong profits, including a big increase in the revenue generated from mobile ads, which had been a major concern of investors since the IPO. I think at this stage, people had already priced a lot of this in, which is why we saw some profit taking here. On top of this, Facebook’s aggressive spending in 2013, while positive, is a risk at this stage.

Stock indices actually fell across the board in the US, after the fourth quarter GDP figure showed the economy contracted despite expectations of 1.1% growth. This led Bernanke to warn that economic activity had paused recently, but he believed it was only temporary.

All in all, there were few surprises from the Fed press conference. As expected the reaffirmed its commitment to low interest rates until unemployment falls back to 6.5%, while easing fears over the asset purchase program, claiming they will continue to purchase $85 billion of long term securities for the foreseeable future due to the downside risks to the economic outlook.

I don’t think at this stage there’s any risk of the Fed taking its foot off the pedal, however I think the thing we should be most concerned about is the asset bubble that’s being created as a result of the excess liquidity.

Looking ahead to today, we have a lot of key economic data to be released, starting in Europe with the retail sales figures in Germany. December’s figure is expected to show a 1.6% decline from a year earlier, which comes as no real surprise given that the economy contracted in the fourth quarter.

Unemployment in Germany is expected to have remained at 6.9% this month. We’ve seen very little change in this figure throughout the debt crisis, which shows just how robust the German economy is even in these tough economic conditions. This will be followed later by its inflation reading for January, which is expected to have fallen back to 2%.

Elsewhere in Europe, we have consumer spending data from France, PPI data out of Italy and retail sales data out of Greece. One figure which will be watched very closely is the eurozone CPI figure, which is expected to remain at 2.2%. This figure could be crucial in determining whether we’ll see a rate cut from the ECB in the coming months.

The most closely watched data is once again going to come out of the US though. Of particular interest will be the jobless claims figure ahead of the jobs report tomorrow. In the last couple of weeks we’ve seen some very low figures here, of 335,000 and 330,000. This week we’re expected it to be slightly higher though, at around 351,000.

The euro is trading flat against the dollar this morning. The pair broke above the 200 week simple moving average yesterday, which was seen to be a significant level of resistance. If the weekly candle closes above this level, it would be a very bullish signal for the pair. Based on the size of the inverse head and shoulders, we could see the pair target 1.42 in the coming months. However, over the next couple of days, I think we’re going to see a lot of pressure on the pair, which could push it back below the 200 week moving average before the end of the week.

Sterling is trading higher against the dollar this morning. We’ve seen a small recovery in the pair over the past few days, since it found support around 1.57, from the ascending trend line dating back to January 2009. The key test now will be whether it can close back above the neckline of the double top. If it does then we could see the pair rally back towards 1.5950, however if it finds resistance here it would act as confirmation of the original break below which is a very bearish signal, and we could see the long term trend line tested once again.

The dollar appears to have entered a period of consolidation against the yen in the past few days. This has created a small pennant formation, which given the price action in the lead up to the consolidation, looks quite bullish. We should therefore see a breakout to the upside in the next 24 hours, with the pair targeting 94.75 over the next few weeks. While this pennant formation is typically bullish, it is worth noting that the stochastic and RSI on both the daily and weekly charts are giving sell signals, which could suggest we’re going to see a pull back towards 90.0, before the continuation of the move higher.

The euro is trading lower against the dollar this morning. The pair broke above 0.8575 yesterday, the 61.8% retracement of the move from June 2011 highs to July 2012 lows, which could be quite a bullish signal, especially if the weekly candle closes above here. Given that the pair has already broken above the 200 week simple moving average, I think there’s a good chance the rally is going to continue, with the next target being the 2011 highs of 0.9082. We could see the pair pull back first though, to test the 200 week moving average as a new area of support, which would confirm the original break.

Ahead of the open we expect to see…

[U][B]Read the full report at Alpari News Room[/B][/U]

[Alpari_UK]

0:09 Fed press conference
1:21 US economic data and corporate earnings today
2:52 German unemployment
4:00 CHART – GBP/USD analysis

Forex research: Global markets daily

[Alpari_UK]

[B]Eurozone unemployment to hit record highs in January[/B]

Today’s UK opening call provides an update on:

• Chinese manufacturing grows at a moderate pace in January;
• Concerns grow over France’s competitiveness as manufacturing expected to contract at a faster pace;
• Eurozone unemployment to hit 11.9% in January;
• US jobs report released this afternoon.

The day got off to a positive start, with the release of two separate pieces of manufacturing data in China. The HSBC manufacturing PMI for January improved for a fifth month to give the highest reading since February 2011. Meanwhile, the official PMI fell slightly from a month earlier to give a reading off 50.4.

Now, there’s two ways we can look at this. Firstly, the two pieces of data conflict, as one suggests the recovery has hit some speed bumps which means the first quarter may not be quite as strong as some had hoped. On the other hand, both numbers are still above 50, which suggests the industry is still growing, albeit at a moderate pace. Therefore, I think we should remain cautiously optimistic.

We also have manufacturing PMI’s from a large number of eurozone countries due out this morning, a lot of which are expected to have improved in January. The ones that will attract the most attention though will be the eurozone, German and French figures.

The eurozone and German figures are both expected to show modest improvements as they edge ever closer to growth, with expectations of 47.5 and 48.8 respectively. The French figure on the other hand is expected to fall significantly from a month ago, to 42.9 as concerns continue to rise about its competitiveness given the pace in which it is implementing the reforms and spending cuts compared to its neighbours.

Unemployment has been a key concern in the eurozone given its gradual increase over the past couple of years and the fact that it’s showing little sign of slowing. This is expected to be the case once again in December, with the figure expected to rise for an eighth month, to 11.9%.

Finally today, we have the jobs report in the US, which is one of the most closely followed releases every month. The non-farm payrolls provide the best insight into the employment situation in the US and therefore the release tends to bring with it plenty of volatility.

The consensus for today’s NFP is for an 161,000 jobs to have been added in January, however I think this may be a bit conservative. It doesn’t appear to take into account the impact of the fiscal cliff on hiring in the lead up to the new year. It’s widely accepted that companies probably held off on hiring in order to see what deal would be brokered in Congress.

As a result, we could see this backlog of hiring reflected in this month’s figure. It’s difficult to put a figure on what this could be at this stage, however if a figure of around 161,000 is priced in, I think we could be in for a surprise to the upside.

The euro is trading higher against the dollar this morning. The pair broke above a key level of resistance on Wednesday, around 1.35, which suggests that the rally is far from over. The pair could now target 1.42 in the longer term, based on the size of the inverse head and shoulders that formed over the last 12 months. However, first it will have to break through a key resistance level around 1.3832, the 61.8% retracement of the move from May 2011 highs to July 2012 lows. A break above here will be a very bullish signal for the pair.

Sterling is trading higher against the dollar for a fourth consecutive day. The pair broke back through the neckline of the double top yesterday, which suggests a move back towards 1.5350, based on the size of the formation, looks unlikely now. The pair should now find resistance though around 1.59, from the 200 day simple moving average, which is broke below a couple of weeks ago for the first time since August. A break above here would be quite a bullish signal, while a bounce off this level would act as confirmation of the original break, which could prompt further weakness in the pair.

The dollar is trading higher against the yen this morning. The pair was trading in a pennant formation, which it broke above yesterday, to continue its move higher. The next target for the pair is still 94.75, however we are likely to find resistance around 92.40 and 93.13. At some point we should see a retracement, given that on both the daily and weekly charts, the RSI and stochastic are both suggesting the pair is extremely overbought. However, none of them are currently giving a sell signal, which suggest there could be more upside still left in the rally.

The euro is trading higher against the pound this morning. The pair has entered a period of consolidation over the past week after finding strong resistance around 0.8575, the 61.8% retracement of the move from June 2011 highs to July 2012 lows. We now have a pennant formation on the daily chart, which is typically a continuation pattern and would therefore suggest that we’re going to see a break beyond this significant resistance level. If we do, the next target for the pair will be those 2011 highs around 0.9082, with the next key level of resistance coming around 0.8665.

Ahead of the open we expect to see…

[U][B]Read the full report at Alpari News Room[/B][/U]

[Alpari_UK]

0:09 Manufacturing PMI’s from China and the eurozone;
1:43 Eurozone inflation figure and why it could lead to a rate cut;
3:07 What we can expect from the US jobs report;
3:58 CHART – EUR/USD analysis.

Forex research: Global markets daily

[Alpari_UK]

Today’s UK opening call provides an update on:

• Corporate earnings season begins to wind down this week;
• Focus turns to the euro area ahead of Italian elections;
• BoE and ECB meetings on Thursday likely to attract a lot of attention;
• EUR/USD, GBP/USD, USD/JPY & EUR/GBP analysis.

We may see a break in the recent stock market rally this week, as corporate earnings season begins to wind down and focus turns to the eurozone.

Corporate earnings season has been a major driver behind the stock market rally over the past month, and with that now coming to an end, we could now see the rally run out of steam. Economic data has been quite mixed over the past few weeks, with the fiscal cliff in the US taking its toll on everything from sentiment to consumer spending.

That being said, there has also been a lot of positives in there, including Friday’s jobs report, which despite showing unemployment rose, also contained huge upward revisions to the non-farm payrolls from the past couple of months.

The main focus over the next few weeks is likely to be back on the eurozone, with Italian elections on the 24/25th having the potential to cause a few problems in the area. As it stands, the centre left Democratic party remain firmly in the lead, however Berlusconi has starting to gather significant support in the polls which could make the final few weeks quite uncomfortable.

Last week there was a lot of attention on the US, with a combination of corporate earnings, the Fed meeting and some key economic data drawing a lot of attention. This week, Europe is likely to be the most closely watched, especially on Thursday with both the Bank of England and the ECB due to meet.

With the UK facing a possible first ever triple dip recession in this quarter, people are going to be following the BoE meeting very closely, with many anticipating a further injection of stimulus in a bid to stimulate the economy and avoid recession.

Meanwhile, at the ECB meeting, we are likely to see policy members consider a rate cut given that the economy remains in recession and the euro is getting quite strong which has the potential to damage any recovery. Last week it was confirmed that inflation fell back to 2% last month, which means there is room for further stimulus if the policy members judge it necessary.

The euro is trading lower against the dollar this morning. The pair ended last week strongly, closing easily above 1.35, which suggests it could move towards 1.42 in the coming months, based on the size of the inverse head and shoulders formed over the past year. The stochastic and RSI are both currently suggesting the pair is strongly overbought and given that the RSI is now pointing down and the stochastic has crossed on the daily chart, we could now see a retracement. The next target for the pair could be around 1.35, given that it was a key level of resistance, with the 200 week moving average providing support.

Sterling is trading higher against the dollar this morning. The pair found support on Friday around 1.57, where the 61.8% retracement, of the move from June’s lows to this year’s highs, crosses with the ascending trend line dating back to January 2009. This has previously been a key level of support and the pair looks unlikely to break below here at the moment. If it does break below, it could prompt a move towards 1.5350, based on the size of the double top formed over the past five months.

The dollar is trading lower against the yen this morning. The pair found resistance last week around 93.0, however the pair continues to look quite bullish, with the next target coming around 94.75 based on a previous key level of resistance. For now though, we may see a brief retracement, with both the stochastic and the RSI suggesting the pair is overbought. On the daily chart, the RSI is now pointing down, while the stochastic is crossing in overbought territory which can be a bearish signal.

The euro is trading lower against the pound this morning. The pair has become extremely overbought over the last month and is long overdue a retracement. Now that we’ve seen a cross on the stochastic on the daily chart, we could now see a period of selling, although the longer term outlook for the pair continues to look bullish. The pair could pull back as far as 0.85, to test the 200 week moving average as a new level of support.

Ahead of the open we expect to see…

[U][B]Read the full report at Alpari News Room[/B][/U]

[Alpari_UK]

0:40 Key events in the week ahead including BoE and ECB meetings;
2:15 Italian elections;
4:03 CHART – EUR/GBP analysis.

Forex research: Global markets daily

[Alpari_UK]

[B]UK retail sales jump as shoppers undeterred by poor weather[/B]

Today’s UK opening call provides an update on:

• Political uncertainty in Spain and Italy drag global markets lower;
• RBA keep rates on hold at 3%;
• Chinese services PMI jumps to 54.0 from 51.7 in January;
• UK retail sales rise 1.9%, as shoppers battle the bad weather to grab themselves a bargain;
• EUR/USD, GBP/USD, USD/JPY & EUR/GBP analysis.

The political uncertainty in Spain and Italy weighed on stock markets across the globe yesterday, as the US and Asia both closed lower, with the former suffering its biggest daily losses this year.

The uncertainty surrounding the future of Spanish Prime Minister Mariano Rajoy and the rise once again of Silvio Berlusconi’s party in Italian polls, has been a dagger to the heart of the recent rally in the markets, that has seen stock indices trading at multi-year highs.

We could now see a brief return to the risk on/risk off trading that we became accustomed to last year. It appeared that we had moved away from this over the last month, with traders instead paying more attention to corporate earnings and the economic data, however this could only ever last as long as the eurozone remained stable.

Overnight, the Reserve Bank of Australia opted to keep interest rates at 3%, in its first meeting of the year. The central bank cut interest rates four times last year in a bid to stimulate the economy in a time of falling commodity prices and attempt to curb the appreciation of the Aussie dollar. Interest rates are now at record lows and unlikely to be slashed further in the coming months.

The outlook for this year in Australia is generally more positive, helped significantly by an expected return to higher growth levels in China, its largest export partner. Economic data out of China has been improving significantly over the past few months, and January has been no different with the latest Services PMI rising to 54.0 from 51.7.

The economic calendar is once again looking pretty full today, with services PMI’s for the eurozone, UK and US being released throughout the day. In the eurozone, we’re expecting these figures to show some improvement from December, in line with the recent improvements seen in economic data out of the area. Although this does not apply to France, which continues to head in the wrong direction.

The threat of a first ever triple dip recession is doing little to deter people in the UK from splashing the cash, as retail sales in January rose 1.9%, despite expectations of a 0.5% drop. The difficult weather conditions were clearly no match for the lure of the January sales, although it is worth noting that sales of premium products including tablet computer also rose. This could mean that the 49.5 forecast for this month’s services PMI may be a little pessimistic, and could fall well short of the final figure.

The euro is trading lower against the dollar this morning. The pair has become very overbought over the past couple of weeks, so this period of correction has been expected for a while. It is currently finding support from a previous key level of resistance around 1.3490, the 50% retracement of the move from May 2011 highs to July 2012 lows. If the pair trades higher from here, the next target will be 1.3832, the 61.8% retracement of the same move, with a break above here being very bullish. If it breaks below the 50 fib level, it may suggest the bull run is over, prompting a move back towards 1.32, where it will find support from the ascending trend line dating back to July.

Sterling is trading flat against the dollar this morning. The pair has found support once again over the past couple of days around 1.57, where the ascending trend line dating back to January 2009 crosses the 61.8 fib level, of the move from June’s lows to this year’s highs. This second failed attempt to break this key support level may now lead to the formation of a double bottom as long as the neckline is broken around 1.5865. This would be quite a bullish move for the pair and based on the size of the double bottom, should prompt a move towards 1.60.

The dollar is trading flat against the yen this morning. The pair looks quite bearish in the short term, following a long period of buying that has seen the pair gain more than 20% since its lows back in September. Both oscillators are also providing sell signals on the daily and weekly charts, with the stochastic crossing in overbought territory and the RSI pointing down in overbought territory. The next level of support should come around 92.0, which is a previous level of support and resistance.

The euro is trading lower against the pound this morning. The pair has broken back below 0.8575, the 61.8% retracement of the move from June 2011 highs to July 2012 lows, despite finding support here yesterday. If it manages to close back above here it would be quite a bullish signal for the pair. If not, then the next key level of support will come around 0.8525 from the 200 week simple moving average. If it breaks below here, this could suggest that the bull run has come to an end for the pair, however if it holds as a new support level, it will act as confirmation of the original break above last week, and be quite a bullish signal.

Ahead of the open we expect to see…

[U][B]Read the full report at Alpari News Room[/B][/U]

[Alpari_UK]

0:16 Eurozone services PMI’s;
1:33 Political uncertainty in Spain and Italy;
2:57 UK data and potential triple dip recession;
4:14 CHART – GBP/USD analysis.

Forex research: Global markets daily

[Alpari_UK]

[B]BoJ Governor sets earlier departure date[/B]

Today’s UK opening call provides an update on:

• BoJ Governor sets earlier departure date, paving the way for more stimulus this year;
• Moderate improvement expected in German factory orders;
• Kraft, Ralph Lauren and Visa all reporting fourth quarter earnings today;
• EUR/USD, GBP/USD, USD/JPY & EUR/GBP analysis.

Bank of Japan Governor, Masaaki Shirakawa, announced over night that he will leave his position earlier than planned in order to make way for his successor.

The decision by Shirakawa has fuelled speculation that the central bank will no longer wait until January next year to implement its open-ended asset purchase program. New Prime Minister, Shinzo Abe, has made no secret of his views that the central bank should be doing more to stimulate the economy, and this move suggests that he is unwilling to wait until next year to see results.

This now paves the way for Abe to appoint a much more dovish Governor who is now unlikely to delay the process of hitting the new 2% inflation target until next January. The decision has put further pressure on the yen, which has now fallen more than 20% against the dollar since September.

It’s looking pretty light on economic data today, with the German Factory orders for December being the main piece that stands out. We’re expecting to see a small improvement here compared to November, however what’s more telling is the year on year figure, which is expected to show a drop for the twelfth consecutive month.

Germany’s finally started showing signs of being dragged down by the debt crisis in 2012, as highlighted by this data, culminating in the economy contracting in the fourth quarter. However, an improvement in the data so far this year suggest it will easily avoid a recession and is looking at a stronger 2013.

Corporate earnings season may be coming to a close, however there are some noteworthy companies still due to report. Today we’ll get fourth quarter earnings from Kraft Foods and Ralph Lauren before the opening bell in the US, followed by Visa and Yelp after the close.

So far earnings season has been largely positive, with more than 70% of S&P 500 companies beating earnings expectations. This is probably due to lower expectations coming into the season, however clearly this isn’t a concern to investors at this stage, with them more focused on keeping the stock market rally going.

The euro is trading lower against the dollar this morning. The pair found resistance over the past few days, from the 200 week simple moving average which had previously acted as a level of resistance. If the weekly candle closes above this level, it would be quite a bullish signal for the pair, prompting a move towards 1.3832, the 61.8% retracement of the move from May 2011 highs to July 2012 lows. The next target for the pair continues to be 1.42, based on the size of the inverse head and shoulders that formed between February and December last year.

Sterling is trading lower against the dollar this morning. The pair found support yesterday around 1,5630, from the ascending trend line dating back to January 2009, before recovering slightly later in the session. It had previously found support around 1.57, the 61.8% retracement of the move from June’s lows to this year’s highs, however it broke below here yesterday which is quite a bearish signal for the pair as it suggests from we’re seeing now is a bearish trend reversal, rather than a retracement from the uptrend dating back to June. We could now see more pressure on the long term trend line, with a break of this level prompting a move back towards 1.5350, based on the double top which formed between August and January.

The dollar is trading higher against the yen this morning. The rally is showing no signs of easing up at this stage, however the pair has become extremely overbought, so it’s worth keeping an eye on the oscillators for early signs of a reversal in the trend. This may come around 94.75, which is a previous key level of support and resistance for the pair. However, if the pair does break above here then the next targets should be 97.6 and 100.45.

The euro is trading lower against the pound this morning. The pair found support over the past couple of days around 0.8575, the 61.8% retracement of the move from June 2011 highs to July 2012 lows, which is quite a bullish signal. The next target for the pair should be those June 2011 highs, around 0.9082, however in the shorter term it should find resistance around 0.8750, followed by 0.88 and 0.89. However, it’s worth noting that the RSI and stochastic are suggesting the pair is overbought are close to giving sell signals which could provide an early indication of a retracement.

Ahead of the open we expect to see…

[U][B]Read the full report at Alpari News Room[/B][/U]

[Alpari_UK]

0:12 Bank of Japan Governer to step down early
1:31 Caution in Eurozone ahead of tomorrow’s EU Summit and ECB statement
2:15 CHARTS - USD/JPY and GBP/USD

Forex research: Global markets daily

[Alpari_UK]

[B]OECD urges Bank of England to go “the extra mile”[/B]

Today’s UK opening call provides a update on:

• Bank of England expected to keep interest rates and QE on hold;
• OECD insists the BoE should do more to stimulate the economy;
• ECB unlikely to cut interest rates at this meeting;
• EUR/USD, GBP/USD, USD/JPY & EUR/GBP analysis.

Focus is back on the central banks today, with both the BoE and the ECB expected to keep monetary policy on hold.

There are strong arguments for additional stimulus from both central banks, in particular the Bank of England given that the UK is at threat of falling into its first ever triple dip recession. This was backed up yesterday by the OECD, who put the onus on the central bank to do more for the economy, claiming it should go “the extra mile” in order to allow the government to stick to its deficit reduction program.

The advice is likely to fall on deaf ears over at the BoE, where policy makers appear convinced that the asset purchases are having little positive impact on the economy. Instead they’re likely to stick by the Funding for Lending scheme which they insist is doing more for the real economy than the entire £375 billion of stimulus we’ve seen in the form of QE.

What may be of more interest is Mark Carney’s testimony to the Treasury Select Committee. First and foremost, people want to know whether he’s more dovish or hawkish when it comes to current monetary policy. Also, following his recent comments that the bank should also have a growth target, we could see quizzed on how the bank would achieve this without creating inflation risks.

The ECB is also likely to keep interest rates on hold today. It’s looking more and more likely that the bank will cut interest rates at some point over the coming months, but the consensus appears to be that it won’t be today. However, it’s difficult to see what will be gained by waiting a few extra months, especially with inflation now at 2%.

The main argument for a rate cut at this moment in time is the strength of the euro. French President Francois Hollande, in particular, has voiced his concerns repeatedly about how a strong euro is likely to damage the recovery in the eurozone. Unfortunately for Hollande, at the moment Germany and the ECB don’t appear as concerned about it so a rate cut for this reason appears to be off the table.

The euro is trading flat against the dollar this morning. The pair has found support around 1.3520, from the 200 week simple moving average. If the weekly candle closes above here it will be a very bullish signal as it will act as confirmation of last week’s break above it. Based on the size of the inverse head and shoulders that formed since February last year, we could see the pair target 1.42, although it is likely to face significant resistance around 1.3832, the 61.8% retracement of the move from May 2011 highs to July 2012 lows.

Sterling is trading higher against the dollar this morning. The pair found strong support over the past few days from the ascending trend line, dating back to January 2009, which could now prompt a move higher. However, it also broke below 1.5692 earlier in the week, the 61.8% retracement of the move from June 2012 lows to this year’s highs. This is usually quite a bearish signal, so the next big test for the pair will be breaking back above here. If it fails to do that, we could see another assault on the ascending trend line, with a break below that potentially prompting a move back towards 1.5350, based on the size of the double top that formed between August and January.

The dollar is trading flat against the yen this morning. The pair found resistance over the past couple of days around 93.60, a previous level of support and resistance, which has resulted in yesterday’s candle forming a perfect doji. Given that both the stochastic and the RSI suggest the pair is overbought, we could now see a pull back in the pair, with the likely target being 91.05, where the ascending trend line, dating back to 11 December crosses with the 50 fib level, of the move from 23 January lows to yesterday’s highs.

The euro is trading higher against the pound this morning. The pair has found strong support over the past few days around 0.8575, the 61.8% retracement of the move from July 2011 highs to July 2012 lows. This is a very bullish signal for the pair, especially considering it also recently moved back above the 200 week simple moving average. The next target is therefore those July 2011 highs of 0.9082, however it is likely to find resistance along the way, around 0.875, 0.88 and 0.89. It is worth noting though that the RSI and stochastic on the weekly chart are both offering sell signals in overbought territory, so we could see another pull back, potentially testing the 200 week moving average as a new level of support before continuing its move higher.

Ahead of the open we expect to see…

[U][B]Read the full report at Alpari News Room[/B][/U]

[Alpari_UK]

[B]Cautious start in Europe ahead of BoE and ECB decisions[/B]

Today’s US opening call provides an update on:

[ul]
[li]OECD put pressure on BoE to do more to boost the economy;
[/li][li]Mark Carney’s testimony gets underway;
[/li][li]ECB unlikely to cut interest rates, but press conference could bring volatility;
[/li][li]Jobless claims expected at 360,000 after returning to normality last week.
[/li][li]There’s an element of caution in the markets this morning ahead of the BoE and ECB monetary policy decisions.
[/li][/ul]
The BoE will decide today on whether to take the advice of the OECD and go “the extra mile” to aid the recovery in the UK at a time when the government is cutting spending. The OECD yesterday heaped pressure on the MPC, claiming the government is right to stick to its deficit reduction plan and the onus should be on the central bank to pick up the slack, with further asset purchases.

The view is unlikely to be shared by the policy members at today’s meeting, who have recently questioned the effectiveness of the government bond purchases. However they have yet to try more unconventional policy similar to that seen in the US, with the purchase of mortgage backed securities, ultra low interest rates or the linking of interest rates to unemployment levels.

This may be something we may have to wait until later this year for, following the appointment of Mark Carney as the new Bank of England Governor. Carney, who is currently being questioned by the Treasury Select Committee, takes over on 1 July and has shown in the past that he’s willing to try these more unusual measures.

We could get hints about Carney’s approach during his testimony, which is why in many ways it is likely to be a much higher impact event today than the BoE’s interest rate decision.

Following this, the ECB’s press conference is also likely to attract more attention than normal, in particular the Q&A. If we see no rate cut, as expected, there’s likely to be questions raised about the strength of the euro and whether it’s likely to damage the recovery this year.

Over in the US today, we have jobless claims data which is expected at 360,000 after returning to normality last week, following two weeks in which it hit five year lows.

Ahead of the open we expect to see…

[U][B]Read the full report at Alpari News Room[/B][/U]

[Alpari_UK]

0:15 BoE rate decision;
1:37 Mark Carney’s testimony before the Treasury Select Committee;
3:04 ECB rate decision and press conference.

Forex research: Global markets daily

[Alpari_UK]

[B]Chinese recovery continues as exports jump by 25%[/B]

Today’s UK opening call provides an update on:

• Chinese imports and exports jump again in January;
• Inflation a concern in China following a second high monthly reading;
• Wall Street lower as Draghi effect hits global sentiment;
• EUR/USD, GBP/USD, USD/JPY & EUR/GBP analysis.

Stock index futures are pointing to a higher open in Europe this morning, following some positive data out of China.

The Chinese trade data showed a significant increase in both imports and exports compared to a year ago, suggesting that what we saw in the fourth quarter of last year may not have been a blip in a longer term down trend. The data has continued to improve so far this year, with manufacturing continuing to grow at a faster pace and the increase domestic consumption picking up the slack from falling export demand from the US and the eurozone.

One concern may be inflation though, which for the majority of last year was well below the 4% target. The improvement seen in the economy over the past six months has been largely driven by large amounts of stimulus, which could be reduced if inflation continues to rise as it has been in the last couple of months.

Over on Wall Street, stock markets followed the lead from Europe, as traders took profits following the slight change in tone from Mario Draghi at the ECB press conference. Draghi suggested the recovery in the eurozone would begin later in the year, rather than in the second half, which he predicted a month ago. This is only a slight change of tone, but markets were quick to pick up on it.

It has become very clear that fear has crept back into the markets recently. Traders are very aware that stocks are very overbought at the moment and while everyone is willing the rally higher, we’ve seen a few cases of panic selling now at the first sign of trouble. This isn’t necessarily a bad thing though, what it could lead to is a very gradual correction, rather than the sharp selloff that people appear to be waiting for.

The economic calendar is looking pretty light as the week comes to a close. There is trade balance data out of Germany this morning, which is expected to remain solid, with both imports and exports picking up in December. We then have industrial output data out of Italy which is expected to show a drop of 7.2% from a year earlier, although on a more positive note, we’re expecting a small increase compared to November.

The euro is trading higher against the dollar this morning. The pair fell significantly yesterday, breaking below a key area of support between 1.3490 and 1.3520, before finding further support around 1.34, where the 100 day simple moving average crosses with the 50 fib level, of the move from the end of December lows to January’s highs. With the last two weekly candles now forming a bearish engulfing pattern and both the RSI and the stochastic giving sell signals, the short term outlook for the pair is quite bearish. If it continues to edge lower in the coming sessions, it should find further support around 1.3270, where the ascending trend line, dating back to July, crosses with the 61.8 fib level of the same move.

Sterling is trading higher against the dollar this morning. Yesterday, the pair closed back above 1.57, the 61.8% retracement of the move from June 2012 lows to this year’s highs, after finding support earlier in the week from the ascending trend line, dating back to January 2009. If the weekly candle closes above here it could be quite a bullish signal, suggesting that what we’ve seen recently is simple a retracement of the longer term bullish move dating back to June. If that is the case, the pair should target this year’s highs of 1.6380 over the next few weeks, with the next key level of resistance coming around 1.5823.

The dollar is trading lower against the yen this morning. The pair is starting to look quite bearish following the formation of two doji candles on the daily chart, which may suggest we’re about to see a long overdue retracement. If we do see a pull back, we could see it target 91.0, where the ascending trend line, dating back to 11 December, crosses with the 50 fib level, of the move from 23 January lows to this week’s highs. In the shorter term, the next level of support is likely to come around 93.14, followed by 92.50.

The euro is trading lower against the pound this morning. The pair broke below 0.8575 yesterday, the 61.8% retracement of the move from June 2011 highs to July 2012 lows, which has recently been a key level of support. It has found further support just below here though, around 0.8528, from the 200 week simple moving average. If the weekly candle closes above here, it would be quite a bullish signal for the pair. However, the RSI and stochastic are giving sell signals, which suggests we could see more of a retracement over the next few sessions, with the next level of support coming around 0.8465, followed by 0.8440.

Ahead of the open we expect to see…

[U][B]Read the full report at Alpari News Room[/B][/U]

[Alpari_UK]

Today’s US opening call provides an update on:

[ul]
[li]Chinese imports and exports rise significantly in January;
[/li][li]Substantial rise in exports to US and eurozone encouraging;
[/li][li]EU leaders agree on a budget deal for the next seven years.
[/li][/ul]
European stock markets have been boosted this morning by surprisingly strong Chinese trade balance data.

Chinese data is once again driving sentiment this morning, pushing European stock indices higher early in the session. Investors are easing their way back in after Mario Draghi yesterday offered a more pessimistic outlook for the year ahead, claiming the recovery would kick in later in the year rather than in the second half.

The finer details in this morning’s trade balance figures is what traders are really latching on to. Exports rose by 25% compared to a year earlier, which included a 14.5% increase to the US and a 5.2% increase to the eurozone, the highest figures in 10 months and 13 months respectively.

I have so far been pessimistic about Chinese economic growth this year, with its two largest export markets facing strong headwinds and domestic demand being relatively low. However this data is very encouraging, especially when you also take into consideration the rise in imports which suggests domestic demand is also picking up.

It would appear that EU leaders have finally agreed on a budget framework for the next seven years. On the face of it, the deal looks like a huge win for David Cameron, but the problem with these deals is that there’s so many technicalities that each leader is going to head home with their own “victory”.

David Cameron will surely be one of those declaring the negotiations as a win for the UK, after securing the first net reduction in spending in the history of the EU. The payments figure was finally agreed at €908.4 billion, with the headline figure being €960 billion.

Ahead of the open we expect to see…

[U][B]Read the full report at Alpari News Room[/B][/U]

[Alpari_UK]

0:09 Chinese trade balance data
2:40 EU budget deal
4:10 CHART – USD/JPY analysis

Forex research: Global markets daily