Forex research

[Alpari_UK]

[B]European indices higher despite deeper eurozone recession[/B]

Today’s US opening call provides an update on:

[ul]
[li]Eurozone remains in recession after larger than expected contraction in Q1;
[/li][li]Italy in longest recession since records began;
[/li][li]UK unemployment falls to 7.8% in March;
[/li][li]US focus remains on economic data on Wednesday.
[/li][/ul]
European indices are trading slightly higher across the board this morning, despite falling earlier after first quarter growth figures came in below market expectations.

I don’t think anyone was really expecting much from these figures this morning, given the rest of the data we’ve seen over the last few months. However, they may have been a bit of a wake-up call to those who still believe that the eurozone can pull out of recession this year, given that most fell below forecasts, with France being confirmed as in recession and Italy in its worst recession since records began.

The interesting thing about these figures is that once again we’ve seen selling in the immediate aftermath of the release, followed shortly after by bargain hunters buying on the dips. Instances like this make it very difficult to be bearish at the moment, with investors clearly showing that they couldn’t care less about the data. Poor data is merely a buying opportunity.

Things are looking much better for the UK, after data showed the unemployment rate falling back to 7.8% in the three months to March, while the number of people processing jobless claims fell by 7,300 during the same period. This in just the latest in a long list of improvements in UK economic data, which has made life very difficult for Sir Mervyn King when trying to convince the other policy makers to boost its asset purchases by another £25 billion.

Another thing which hasn’t helped his cause is the growing divergence between inflation and wage growth, which would be made even worse if the Bank of England stepped up its asset purchases. Average wages, including bonuses, rose by only 0.4% in the three months to March, less than half of what we saw in February and well below inflation which currently stands at 2.8%.

There were no surprises when the Bank of England released its inflation report, with growth seen accelerating to 0.5% in the second quarter, following a significant improvement in the economic data, while inflation is expected to reach 3.1% in the third quarter. One issue is that one of the assumptions the BoE made in making these forecasts was zero growth in the euro area, which in reality it will probably not achieve. This could negatively impact the UK figures going forward.

Looking ahead to the US session and the focus is once again going to be on economic data, with the empire state manufacturing figure expected to rise slightly to 4, from 3.05, while industrial production is seen falling by 0.2%.

Ahead of the open we expect to see…

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

[Alpari_UK]

Chief market analyst James Hughes talks about the today’s UK jobs figures as well as the poor eurozone GDP figures, and the fact France are now in recession. We also preview Big Merv’s 82nd and final inflation report.

Forex research: Global markets daily

[Alpari_UK]

[B]Further disinflation expected ahead of ECB rate decision[/B]

Today’s UK opening call provides an update on:

• Japan stocks fall despite better than expected first quarter growth;
• Eurozone CPI watched closely ahead of the June ECB rate decision;
• Further disinflation expected in the US in April;
• US jobless claims expected to remain low on Thursday.

Japan’s Nikkei 225 fell more than 1% over night, as investors locked in profits after the release of some encouraging growth data for the first quarter.

Japan’s first quarter GDP came in well above expectations at 0.9%, or 3.5% on an annualised basis, with growth being driven by both a pickup in exports and a boost in domestic spending. I think it’s safe to say that the Bank of Japan’s efforts to restore growth to the country and end a decade of deflation are having the desired effect already. The boost in exports was to be expected as a result of the falling yen, it’s the jump in domestic spending that’s the most encouraging.

There’s plenty of people that doubted whether the BoJ could actually hit its inflation target but the early signs are encouraging. Clearly there’s still a long way to go, but the fact that people in Japan are spending more suggests, at least, that they believe prices will now go up in the coming years and are therefore encouraged to spend. This change in mentality is essential if new BoJ Governor Haruhik Kuroda is going to hit his target of 2% inflation in two years.

The sell-off that we’ve seen in the Nikkei 225 and a the appreciation seen in the yen since the release is clearly just a case of traders locking in profits and waiting for the next dip. At this stage, there’s no threat of the BoJ scaling back its asset purchases, so this certainly isn’t a case of positive news potentially leading to less stimulus, which is potentially what we could see in both the US and the eurozone.

In Europe, the focus is going to be back on the economic calendar on Thursday, with particular attention being paid this morning to the CPI figure out of the eurozone. Now that the ECB has finally come round to the idea of cutting interest rates, a lot of attention is going to be paid to this figure. Any signs that it is closing in on the ECBs target of below, but close to, 2% will put an end to hopes of additional stimulus for the euro area.

With this morning’s CPI figure being for April, it will obviously not have been impacted by the decision to cut interest rates earlier this month. However that doesn’t mean it won’t have an impact on the rate decision on 6 June. There were many analysts calling for a 50 basis points rate cut at the last meeting, an option that was discussed by the ECB policy makers, which suggests we could easily see another rate cut in June.

If we see further signs of disinflation when the figure is released this morning, it could convince policy makers that the action taken in May was not enough to hit its price stability target. The CPI figure is expected to remain at 1.2% in April, which is unlikely to convince policy makers into making a further cut in June. If the figure comes in below this, we could see the euro tumble as traders begin to price in another rate cut. Core CPI is expected to fall significantly from 1.5% to 1%.

Over in the US, the April CPI figure is expected to fall to 1.3%, from 1.5% a month before. While there has been a lot of talk about the Federal Reserve’s asset purchase program in recent months, in particular when they will begin reducing purchases from the current $85 billion per month, one thing that hasn’t been a concern is inflation. Had this figure moved above 2%, there would be concerns about whether it would convince the Fed to scale back its purchases, however this is not the case. If anything, like in the eurozone, disinflation is a bigger concern which could prompt an increase in the program, rather than a decrease.

Housing data is also going to be a focus in the US, with building permits and housing starts for April being released. The housing market has been a real strong point in the US this year and it’s only expected to get better as the year goes on. The number of housing starts are expected to be slightly lower than a month earlier, at 0.985 million, but this is still a very good figure. The number of building permits are expected to increase to 0.95 million, up from 0.902 million in March.

Finally we have weekly jobless claims, which are expected to rise slightly to 330,000. It is worth noting that this figure has come in below market expectations in four of the last five weeks, so I would expect a similar result this week. The difference on this occasion is, that a beat may be priced into the markets, meaning any miss could be quite negatively received.

[B]EURUSD[/B]

The euro is continuing to look bearish against the dollar, following the break of that double top at the end of last week. The target for the pair remains 1.28, based on the size of the double top formation which, as I mentioned yesterday, is the neckline of the big head and shoulders on the weekly chart. For now, the pair appears to have found support around 1.2850, however I don’t expect this to hold for long. Below here it could find additional support around 1.2830, before reaching that huge level around 1.28.

[B]GBPUSD[/B]

Sterling has been in a downward spiral against the dollar for the last week or so, since hitting the big 50 fib level. Yesterday’s candle though suggests that traders may be prepared to take a break from selling the pound, although that break may well be a brief one. Yesterday’s candle is a textbook spinning top, which given that it’s come following some heavy selling, is a bullish signal. On top of that, the RSI is crossing in oversold territory, if this cross is completed, it would also suggest that we’re going to see some form of retracement of the recent downtrend. That said, the pair only broke below the 50-day SMA on Tuesday, so this is likely to act as resistance now, as we saw yesterday. Today’s candle is also bearish again which means we may have already seen as much of a retracement as we’re going to. If this is the case, then the next target for the pair will be those previous lows around 1.5030, followed by this year’s lows of 1.4830. The pair should find support along the way around 1.5150 and 1.5075.

[B]USDJPY[/B]

The dollar appears to have finally run into a big resistance level against the yen, following an aggressive push above the psychologically important 100 level. The pair has found resistance around 102.6, which had previously acted as support. I now expect to see a retracement in the pair, with the 100 level potentially being tested as a new level of support. As luck would have it, the 50% retracement level, of the move from 30 April lows to yesterday’s highs, happens to fall almost exactly on that 100 level. Yesterday’s candle is a great example of a spinning top, which in this case is a bearish signal. If today’s bearish candle is at least two thirds the size of Tuesday’s bullish candle, this will result in an evening star formation, which would further support the bearish outlook.

Ahead of the open we expect to see…

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

[Alpari_UK]

[B]US stocks lower ahead of weekly jobless claims[/B]

Today’s US opening call provides an update on:

[ul]
[li]Nikkei ends lower despite strong first quarter growth;
[/li][li]Eurozone CPI unrevised at 1.2%;
[/li][li]Gold in freefall following brief retracement;
[/li][li]Weekly jobless claims, housing data and manufacturing data in focus in the US session.
[/li][/ul]
Most European indices are in the red this morning, as investors continue the pattern of taking profits early in the session before buying the dips when the US opens.

We’re seeing similar patterns in US indices as well, which has helped both the S&P and the Dow hit record highs on numerous occasions this year. Futures are currently pointing to a lower open in the US, however given the flood of economic data that’s due out, I wouldn’t be surprised to see these turn positive later, irrespective of whether the data is good or bad.

If you’re looking for a clear example of the markets currently moving in a way that is unrelated to the quality of the data, then look no further than the movement in the Nikkei over night. The Japanese index turned negative, and ended the Asian session 0.4% lower, following the release of the GDP data which came out much better than expected.

The Japanese economy grew by 3.5% on an annualised basis in the first quarter, much stronger than the 2.8% forecast figure and the 1% figure seen in the fourth quarter of last year. The economy was given a major boost by the weaker yen and also a pickup in spending domestically. These are positive early signs for the Bank of Japan, who has taken up bold, risky measures in order to return the economy to growth and end a decade of deflation. Despite receiving heavy criticism from a number of economists, it looks like “Abenomics” could actually be the answer to Japan’s problems.

It’s been a bit of a slower start to the European session this morning. The eurozone CPI came out in line with the flash estimate earlier this month at 1.2%, so there was no surprises there. Given that the ECB made its decision to cut interest rates by only 25 basis points earlier this month with this figure in mind, any revision lower would have only increased the chances of another rate cut in June.

Gold prices have continued to tumble on Thursday. Gold prices did recover much of its losses after its break of that key $1520 level last month, however as expected, traders were simply waiting for another opportunity to go short, which came at the 61.8% retracement of the move from 9 April highs to this year’s lows.

Gold is now once again in freefall, with a number of things being blamed for the drop including the sizeable outflows from Gold ETFs, a stronger dollar and the fact that the Fed is reportedly putting plans in place to phase out its asset purchases. Nothing looks like slowing the decline in Gold at this stage, although it is approaching a major support level between $1300 and $1320, which should see it slow. A break of this level should see it target $1150.

Looking ahead to the US session and the focus is once again going to be on the economic calendar, with particular attention being paid to the housing data, the initial jobless claims and the Philly Fed manufacturing index.

The initial jobless claims has been a standout performer in the US economic data this year. The fact that employers are letting fewer people go is a really encouraging sign as it suggests that businesses are optimistic about the economic outlook. Another figure around 330,000 today will be yet another sign that the US economy is improving with every month that passes, despite the economic slowdown in Europe.

Ahead of the open we expect to see…

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

[Alpari_UK]

0:09 Nikkei tumbles after posting strong Q1 growth
1:52 Eurozone inflation falls to 1.2%
2:31 US data to watch out for on Thursday
3:20 CHART – Gold ananlysis

Forex research: Global markets daily

[Alpari_UK]

Markets spooked as Fed considers QE3 exit this summer

Today’s UK opening call provides an update on:

• European futures tracks US indices lower;
• Markets spooked by talk of the Fed phasing out QE3 this summer;
• Nikkei continues its ascent following a brief pullback on Thursday;
• Eurozone construction and US consumer sentiment eyed on Friday.

Most European indices are expected to open lower on Friday, following in the footsteps of their US counterparts after the S&P ended the session in the red for the first time this week.

The economic data released in the US on Thursday was very disappointing, which under normal circumstances would have heavily weighed on the rally in the stock markets. However, this is no normal rally. Once again, the economic data was almost completely ignored and the pull back following the data was seen as a buying opportunity.

We saw perfect examples of this twice following the release of the weekly jobless and the Philly Fed manufacturing index. Both came in well short of market expectations sparking a sharp sell-off, but within an hour and a half on both occasions, the S&P was trading above the levels seen in the lead up to the releases. On this occasion though, the strategy didn’t work too well, as two Fed members spoiled the party by discussing the phasing out of QE, potentially as early as this summer. Needless to say, the markets didn’t respond positively to this.

I think it’s worth noting here though that neither of the Fed members were voting members of the FOMC, so their opinion doesn’t carry as much weight as Ben Bernanke, or any of the other voting members. Based on the reaction on Wall Street, that clearly doesn’t matter as both of these clearly have inside knowledge on the matter. On this occasion, there was no opportunistic buying, and both the S&P and Dow ended the day down 0.5% and 0.28%, respectively.

That concern didn’t really filter through to Asia over night, where the Nikkei continued its ascent. We did see some unusual movement in the Nikkei on Thursday, when it ended the session lower despite growth data for the first quarter coming in well above market expectations. This just highlights how bizarre the markets are at the moment.

Over in Europe today, things are looking a little quieter. Clearly the prospect of Fed phasing out its asset purchases is hitting index prices in the futures market at the moment, with the CAC, DAX, IBEX and STOXXE 50 all expected to open lower. There’s very little out on Friday in respect to economic data, which is likely to leave the markets without any real direction.

The construction output figure for March may attract some attention when released at 10:00, following two consecutive months on negative figures. In the US later we have the preliminary UoM consumer sentiment survey, which will be watched very closely for signs that consumers are starting to feel the pinch as a result of the payroll tax, which rose at the start of the year. Expectations are currently for a small improvement here to 77.9 from 76.4 in May.

EURUSD

The euro is continuing to look bearish against the dollar, as it fast approaches its initial target of 1.28. This target is based on the size of the double top the pair broke below recently and the neckline of the head and shoulders on the weekly chart. We saw a brief period of dollar selling yesterday, following the release of some woeful US figures. However, this was only temporary, and the pair quickly recovered to trade slightly lower on the day. Yesterday’s candle could therefore be seen as a potential bullish signal, given that it looks like a textbook doji. However, given the way the price action reacted to the temporary dollar weakness, I remain bearish. This is highlighted perfectly on the four-hour chart, where the price action bounced aggressively off the middle bollinger band where there was clearly a combination of profit taking and sell orders.It is also worth paying attention to the death cross which we’re seeing on the daily chart, 50-day SMA crossing below the 200-day SMA. This is quite a bearish signal. Although looking back over the last five years or so, the price action immediately following the cross does quite often turn bullish briefly, before heading lower.

GBPUSD

Sterling has turned bearish again on Friday, following a brief retracement. The pair found strong resistance from the 50-day SMA, after failing to close above it on each of the last two days. This is quite a bearish signal in itself, given the direction of the pair in the lead up to those two days. It will be interesting now to see how the price action reacts to the 61.8 fib level, of the move from this year’s lows to May’s highs. Already we’re seeing some support between the 50 and 61.8 fib levels which could suggest this pull back is simply a retracement of the bullish move dating back to March. The thing that makes me doubt this is the clear resistance at the 50 fib level on the daily chart which was an incredibly bearish signal. If the pair breaks below the 61.8, it will confirm the bearish outlook for me. If the pair does continue to push lower, I expect it to find support around 1.5218, 50 fib, 1.5150, 1.5126, 61.8 fib, 1.5075 and 1.5030.

USDJPY

The dollar appears to be trading sideways against the yen, after running out of steam around 102.75, a previous level of resistance. So far, during this huge move higher in the pair, there has been a clear pattern of the pair hitting big resistance levels, before pulling back to either the 50 or 61.8 fib level. As you can see on the charts below, I have now added a fib, from the most obvious recent swing low to Wednesday’s swing high. If we do see a pull back in the pair, which we haven’t seen clear signs of yet, I think the most obvious level it will target is the 50 fib, given that it falls almost exactly on the 100 level, which previously acted as a key level of resistance for the pair. As I mentioned though, we haven’t seen signs of a pull back yet. If the pair breaks below the pennant it is currently trading in, the I expect it to pull back to the 50 fib level.

Ahead of the open we expect to see…

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

[Alpari_UK]

[B]US to open higher as traders continue to buy the dips[/B]

Today’s US opening call provides an update on:

[ul]
[li]Europe lower following comments from Fed members;
[/li][li]Minneapolis Fed President Kocherlakota’s speaks later;
[/li][li]Consumer sentiment for May watched closely on Friday.
[/li][/ul]
Stocks are under pressure early in the session, after comments from a couple of members of the Fed spooked investors yesterday evening.

European indices are trading marginally lower on Friday, after the Dow and S&P both closed lower in the US session the day before. With no noteworthy economic data out of Europe, indices are likely to continue to tread water this morning, as investors await some form of direction from the US.

The comments from Bank of San Francisco President John Williams and Dallas Federal Reserve President Richard Fisher have certainly spooked the markets. However, given that neither of these are voting members, it will be interesting to see if investors just using this an another opportunity to profit from the sell-off and buy the dip. We’re already seeing evidence of that in Europe this morning.

If we get a similar tone from Minneapolis Fed President Narayana Kocherlakota later on today, we could see further risk aversion in the final few hours of the week. Everyone knows that the Fed’s ultra-loose monetary policy won’t last forever, but I think a large proportion factored in the Fed remaining extremely accommodative until at least the end of the year.

The economic calendar is looking pretty light on Friday, so there’s going to be very little driving sentiment. The only major economic release will be the UoM consumer sentiment survey, which is expected to increase to 78.0 in May. Consumers have been helped by lower energy costs so far this year, but with the price of WTI crude on the rise, we could see consumers finally feel the pinch of the increase in the payroll tax at the beginning of the year. We could see this impact the consumer sentiment figures as early as next month.

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 planning to phase out QE3
0:36 Traders in European continue to buy the dip
1:19 Consumer sentiment data eyed this afternoon
2:27 EURUSD charts

Forex research: Global markets daily

[Park_Trader]

[QUOTE=“martinkay;491753”]Last Friday USD/JPY closes with a Weekly white body. For the past 10 Weekly candlestick bars, there are 5 white candles versus 5 black candles. For the past 50 Weekly candlestick bars, there are 27 white candles versus 23 black candles with a net of 4 white candles.
Three Weekly white candles has formed during the last three Weekly bars. Although these candles were not big enough to create three Weekly white soldiers, the steady upward pattern is bullish.
Prices has set a new 14-period high while the RSI has not. This is a BEARISH DIVERGENCE and the Momentum Oscillator is in an overbought condition.
The close is currently
ABOVE its 200 weekly moving average
ABOVE its 50 weekly moving average
ABOVE its 20 weekly moving average
The current market condition for US Dollar / Japanese Yen is Very Bullish
On 17/05/2013, US Dollar / Japanese Yen closed above the upper Bollinger Band by 1.4%. This combined with the steep uptrend suggests that the upward trend in prices has a good chance of continuing. However, a short-term pull-back inside the Bollinger Bands is likely. Bollinger Bands are 106.32% wider than normal. The large width of the Bollinger Bands suggest high volatility as compared to US Dollar / Japanese Yen’s normal range. Therefore, the probability of volatility decreasing and prices entering (or remaining in) a trading range has increased for the near-term. The Bollinger bands have been in this wide range for 20 weeks. The probability of prices consolidating into a less volatile trading range increases the longer the Bollinger Bands remain in this wide range.
The present wave patterns are:
fast amplitude (8%): bullish wave C
moderate amplitude (13%): bullish wave 1
US Dollar / Japanese Yen is long term Bullish as the 144 days moving average of 86.02 is increasing. The Relative Strength Index is at 83.12 in the overbought territory. The Relative Momentum Index is at 95.71 in the overbought territory. An important indicator for Elliott waves, the Elliott oscillator is at 9.12, in positive territory; this is a bullish sign. An equally important indicator, the STORSI is at 36.67. This value is in the neutral territory.
All wave counts are based on the high low price in this commentary!

*** Intra-Daily Trading Strategy: BUY USD/JPY
Buy Target: 103.6347
Buy Stop: 101.7263
Enter BUY on OPEN and exit BUY at Target price or at Stop price. Do not reverse.
This is a recommendation for INTRA-DAY TRADING only!!![/QUOTE]

Just had a look at this price movement quite a good trade

[Alpari_UK]

[B]Europe to open higher ahead of Italian data[/B]

Today’s UK opening call provides an update on:

• European indices tracks US counterparts higher on Monday;
• US consumer sentiment highest since July 2007;
• Italian industrial orders to fall again in March;
• Fed’s Charles Evans speaks later in Chicago.

European markets are forecast to open higher on Monday after the S&P and the Dow posted to record highs again on Friday.

US markets rallied on Friday following the release of the UoM consumer sentiment figure, which rose to its highest level since July 2007. This is extremely encouraging for the US, especially when you consider how much consumer spending contributes to GDP. On top of that, there have been concerns that we may see a pull back in consumer spending as a result of the rising oil prices.

Until now, consumers haven’t really felt the full impact of the payroll tax increase, due to the fact that it was accompanied by a fall in energy prices. There is a strong possibility that once these energy prices hit last year’s levels again, consumers will feel the pinch and this number will be one of the earliest warning signs. For now at least, this is clearly not an issue, which is why US stocks hit record highs on Friday and indices in Europe are tracking them higher.

The economic calendar is looking pretty empty this week, leaving very little to drive market sentiment. On Monday, the only noteworthy economic release will be Italian industrial orders and sales for March. Orders are expected to have fallen by 2.5% from a month earlier, with sales down 1%. Compared with a year earlier, this represents a staggering fall of 7.9% and 4.7%, respectively. Given these figures, it’s no surprise the country is now in its worst recession since records began.

Given the light economic calendar and the Fed’s apparent willingness to phase out its asset purchases, potentially as early as this summer, there’s likely to be a lot of attention on Federal Reserve Bank of Chicago President Charles Evans later, when he speaks at the CFA Society in Chicago. Comments from two non-voting members last week really spooked the markets. If Evans suggests that these comments are correct, we’re likely to see a very negative reaction in the US markets, in particular.

Aside from that, there’s going to be very little driving market sentiment today, although that doesn’t mean there won’t be direction. What we could see, as we saw last week, is investors using any signs of weakness as an opportunity to buy on the cheap and continue to drive the markets higher. While markets were pushed to all time highs on Friday off the back of positive data, negative data appears to produce similar results, with investors instead just buying the dips and waiting for them to inevitably move back into the green. That said, that can’t go on forever and eventually investors are going to get burned.

Ahead of the open we expect to see…

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

[Alpari_UK]

0:11 Quiet day on the markets
0:28 Indices rise higher, yet caution remains
2:26 Japanese comments cause yen to rise
3:15 Markets look to Charles Evans for potential next steps for FOMC
3:45 USD/JPY chart review

Forex research: Global markets daily

[Alpari_UK]

[B]UK inflation expected to fall ahead of Carney’s arrival[/B]

Today’s UK opening call provides an update on:

• European indices to open lower on Tuesday;
• Voting FOMC member Evans supports ultra-loose monetary policy;
• Rally expected to continue as investors move from defensive to cyclical stocks;
• UK inflation expected to fall in April, opening the door to more stimulus from BoE.

European equity indices are expected to open slightly lower on Tuesday, following in the footsteps of their US counterparts which ended slightly lower, despite both the S&P and Dow hitting new all time highs earlier in the session.

US equities shed earlier gains following comments from Chicago Fed President Charles Evans, who appeared to support the need for ultra-loose monetary policy from the central bank, in the near term at least. These comments essentially go against those from two non-voting members last week, who suggested that a plan could be put in place to begin phasing out the asset purchases this summer. Given that Evans is a voting member, his comments carry much more weight.

You wouldn’t have guessed that from the overall reaction in the markets though. What we saw yesterday was clearly another example of the markets ignoring the news and reacting how they wish. The good news for those who remain bullish equities, is that investors do appear to be moving away from defensive stocks and back into cyclical stocks, which suggests the rally is far from over.

Today, I expect to see more of what we saw last week, with investors taking full advantage of the dip in the markets to buy on the cheap and continue to push equities to record highs. There’s very little data out on Tuesday to provide any direction for the markets, although even if there was, it would probably be largely ignored and instead just used to keep the rally going, irrespective of the quality of the data.

One piece of data worth keeping an eye on is the UK CPI figure which is due to be released at 9.30 BST. Expectations are for a slight drop to 2.6%, down from 2.8% a month earlier, with the core inflation figure falling to 2.3%. Ordinarily, this would raise expectations for some additional easing from the Bank of England at its meeting next month. However, given that this is Sir Mervyn King’s last meeting as Governor, I think this is unlikely.

What it will do is give Mark Carney more room to manoeuvre when he takes over from King on 1 July, although even he may have a tough time convincing other policy makers to provide additional stimulus. The minutes from May’s meeting should provide some insight into what we can expect from the BoE in the coming months, when they are released tomorrow.

Ahead of the open we expect to see…

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

[Alpari_UK]

[B]Fall in UK CPI, leads to sell-off as market indecision dominates[/B]

Today’s US opening call provides an update on:

[ul]
[li]UK CPI inflation falls more than expected yet may be too late for further QE
[/li][li]Lack of market movement signals disconnect between markets and fundamentals
[/li][li]RBA minutes disclose reason for rate cut, leading to market selloff
[/li][li]FOMC board member Charles Evans favours continuation of loose monetary policy
[/li][/ul]
The US markets are expected to open lower off the back of yesterday’s record breaking push in global markets. This follows on from the European markets which have shown significant indecision today off the back of yesterday’s strong performance.

The main event of the day was always set to be the UK CPI rate of inflation, which was widely expected to fall from 2.8% to 2.6%. However, the surprise reduction to 2.4% sent shockwaves across the currency markets, sending cable lower by 30-40 pips. The importance of this rate of inflation is that the CPI level is utilised by the Bank of England as the core target in setting their future policies. Subsequently, a reduction towards the 2% target provides increased room for manoeuvre and the potential for additional asset purchases from the MPC which have remained at GBP375 billion since July 2012.

Rumours within the UK that the ability of incoming BoE governor Mark Carney to make any meaningful impact will be lessened owing to the stifling effects of inflation will no doubt subside somewhat. This move closer towards the target rate is a shift which was a necessary prerequisite to any further consequential expansive policies. However, while many turned to the UK indices in expectation of a major boost off the back of increased expectation of monetary loosening, this simply did not happen.

The already buoyant FTSE100 proceeded to turn to the downside and has since lost 12 points, returning closer to parity over the day so far. This inability to gather the momentum for a further move to the upside could be related to a market where sellers are perhaps seeking highs to sell on more than where buyers are looking for dips to buy into. Subsequently an inverse relationship is born where positive news sends markets lower and negative news brings a boost to the markets. All in all, this points to an ever more unstable and irregular rally that we are currently exhibiting.

Earlier this morning, the RBA released minutes from two weeks ago, which was interestingly the meeting where the cash rate was cut to a record low. Interestingly, the value of the Australian dollar was cited as a key reason for the rate cut, which was utilised as a tool to boost businesses in the face of worsening trade terms. What is interesting about this is that the AUD rate is clearly inversely correlated with the RBA cash rate and subsequently, the recent devaluation of the dollar is likely to point to a lower likeliness of lower interest rates in June.

Lastly, FOMC member Charles Evans disclosed that he remains highly dovish with regards to the current Fed standpoint on asset purchases, with no end date or ‘tapering’ suggested for now. Evans is relevant owing to the fact that he is a voting member whereas some of those whom discussed a potential tapering last week did not have the same voting power. Markets are now looking forward towards tomorrow’s speech from Ben Bernanke to gauge which side of the fence Big Ben sits on.

US markets are expected to open…

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

[Alpari_UK]

James Hughes talks about this morning’s better than expected CPI reading, the UK economy taking centre stage this week and looks at the GBPUSD charts.

Forex research: Global markets daily

[Alpari_UK]

[B]All eyes on the UK ahead of BoE minutes and retail sales[/B]

Today’s UK opening call provides an update on:

• UK in focus ahead of BoE minutes and retail sales;
• Two Fed members ease fears that asset purchases will be phased out this summer;
• All eyes on Bernanke later for his take on the Fed’s purchases;
• BoJ leaves monetary policy unchanged but raises economic outlook.

Attention is going to be back on the UK on Wednesday, with minutes from the Bank of England meeting earlier this month and retail sales data for April both due to be released.

On Tuesday, the CPI figure for April came in well below expectations at 2.4%, which essentially leaves the door wide open to additional easing from the BoE at future meetings. Although, nothing is expected at the next meeting in June, which will be Sir Mervyn King’s last as BoE Governor, before Mark Carney takes over in July.

The minutes from the BoE meeting always attract a lot of attention, and these will be no different. We may not be looking for hints of additional easing at the next meeting in June, but any signs that policy makers that voted against more asset purchases will ease their stance if inflation falls, will only increase expectations for meetings in July and August.

That isn’t to say that further easing is off the table at the meeting in June. However, based on the voting and minutes of the last few meetings when King was unable to convince most policy makers to join him in the “yes” camp, despite the fact that the UK was facing a potential triple dip recession, it is extremely unlikely. If anything, not that recession has been avoided, I wouldn’t be surprised if the voting has swung more in the favour of no more quantitative easing, at say 7-2.

UK retail sales will also be watched closely this morning, for more signs that the UK recovery is gathering pace in 2013. UK data has exceeded expectations on numerous occasions recently, which has probably led to slightly increased expectations today. Retail sales are expected to be flat in April, from a month earlier, which represents a 2% improvement compared to April last year.

European index futures are pointing to a higher open this morning, after two more voting FOMC members, James Bullard and William Dudley, appeared to suggest that the Fed has no intention of phasing out its asset purchases this summer. Fears were raised last week when two non-voting Fed members suggested that a plan was being put in place to taper purchases as early as this summer, although this appears to have been quashed now after numerous voting members suggested otherwise.

The final word on this, for now any way, will probably come from Fed Chairman Ben Bernanke later this evening when he testifies before the Congressional Joint Committee. If Bernanke joins Bullard and Dudley in supporting the need for accommodative policy, it should pretty much put an end to speculation, for now at least.

Staying with central banks, the Bank of Japan left monetary policy unchanged over night, in a move that surprised no one. It was only two months ago that the BoJ announced its huge stimulus program, any changes are unlikely to come for at least a couple more months until we see what impact the asset purchases have had. So far, they seem to have had a positive impact, which is why we saw the central bank raise its economic outlook.

[B]EURUSD[/B]

We’ve seen a strong rebound in this pair after it reached its 1.28 target on Friday, which was based on the size of the double top it broke below a couple of weeks ago and the fact that it’s the neckline of the longer term head and shoulders. Where the pair goes from here is crucial, as a break of the 1.28 neckline could prompt a move back towards 1.18, based on the size of the head and shoulders on the weekly chart. So far we have seen the pair bounce off this support level, however the rally in the euro may be short lived. As always, the best way to judge whether we’re seeing a retracement or trend reversal is through using the Fibonacci retracement levels. If you add a fib from the most recent clear swing highs to swing lows, you can see that the 50 fib level falls very close to 1.30, a key psychological level for the pair. If the pair finds resistance here, we could see another attempt at a break below the neckline in the coming weeks.

[B]GBPUSD[/B]

Sterling continued its downward spiral yesterday after April’s inflation figure came in well below expectations, leaving the door open to further monetary easing in the coming months. The pair did find support yesterday around the 61.8 fib level, which may suggest that the downtrend we’re seeing is simply a retracement of the uptrend which began back in March. If this is the case, we could now see a push to the upside, with the next resistance levels coming around 1.5172, 1.52 and 1.5280. On the other hand, if we see this level broken, it would suggest that what we’re seeing is a continuation of the longer term downtrend which began at the start of the year. This is supported by the fact that the pair broke below the bearish flag formation a couple of weeks ago. If we do see the pair break through the 61.8 fib level, the next levels of support should come around 1.5075 and 1.5030.

[B]USDJPY[/B]

The dollar has been trading pretty flat against the yen over the last week or so, following some pretty mixed messages in relation to the yens weakness out of Japan. This period of consolidation following such an aggressive move higher, resulting in a pennant formation, is generally quite a bullish signal. If we see a break above the pennant, the pair should find additional resistance around 102.87 and 103.30, both previous levels of resistance. The next target for the pair will then be 103.75, a previous major support level, followed by 105.57, 61.8 fib and also a previous level of support and resistance. Alternatively, we could see a bigger retracement before the pair resumes its move higher. As always, the 50 and 61.8 fib levels would be worth watching if we do see this.

Ahead of the open we expect to see…

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

[Alpari_UK]

[B]US futures flat ahead of Bernanke testimony[/B]

Today’s US opening call provides an update on:

[ul]
[li]All eyes on Bernanke this afternoon;
[/li][li]FOMC meeting minutes attract attention this evening;
[/li][li]MPC vote remains at 6-3 against more QE in May;
[/li][li]UK retail sales data disappoint in April.
[/li][/ul]
US futures are pointing to a flat open on Wednesday, ahead of a closely watched Bernanke speech and the release of the Fed minutes from earlier this month.

There has been a lot of confusion in the markets recently about when the Fed will begin to phase out its asset purchase program. This hasn’t been helped by mixed comments members of the Fed, some of which have suggested a plan is being put in place to phase it out starting this summer, while others have suggested no such plan exists, and purchases will continue as they are until we see further improvement in the economy.

Clearly both of these can’t be true, which is why we’re seeing little direction ahead of Bernanke’s speech later. When you’re getting mixed messages from other members of the Fed, you can always rely on Bernanke to drop a pretty clear hint about what to expect next. So far, Bernanke has remained pretty dovish, which is what I expect more of today. However, any hawkish undertones from Bernanke could spark some panic in the markets.

I think it’s pretty clear at this stage that the main reason for the rally in the stock markets this year, that has seen both the Dow and the S&P hit all time highs, has been the large amounts of liquidity that has flooded the financial markets, in the form of QE3. The first clear sign that the Fed is prepared to scale back its purchases from the current level of $85 billion per month, will surely mark the end of the rally and the beginning of the long overdue correction.

It’s no wonder then that there’s a cautious tone in the markets ahead of Ben Bernanke’s speech and the release of the minutes from earlier this month. The minutes could provide additional clues as to when we can expect to see the Fed taper its purchases, with some members clearly becoming concerned about the costs and risks associated with such aggressive monetary policy.

They’re not the only ones concerned about the risks of ultra-loose monetary policy. I think it’s safe to say that there will be no increase in the asset purchase facility at the next Bank of England meeting in June, after the minutes from the May meeting showed that Sir Mervyn King failed once again to convince even one more policy maker to vote in favour of additional stimulus.

In the past, King has not had anywhere near as much trouble convincing the other policy makers to increase the asset purchase facility. Either the BoE Governor is losing his touch, or the other policy makers have lost interest with the same old response to the flat economy, and are waiting for Mark Carney to offer an alternative when he takes over as BoE Governor in July. Whatever the reason, it seems King will not get his way this time around.

Carney’s first meeting in July should be extremely interesting though. The UK economy is once again showing signs of weakness, with retail sales in April falling by 1.3% against expectations of flat growth. At the same time, inflation fell significantly in the same month, to 2.4%, down from 2.8% in March. The only question now is whether Carney will do a better job of getting the other policy makers on his side, than his predecessor has managed recently. Carney’s vote after all, is only one of nine, so he is still reliant on other policy makers to get his ideas through.

Looking ahead to the rest of today and the focus is likely to shift to the US, starting with the release of existing home sales, which are expected to show an increase of 1.5% in April. This comes following a 0.6% drop in March which may prove to be just a temporary blip in an otherwise strong recovery in the US housing market. Bernanke will then testify before the Congressional Joint Committee at 3pm EST, before the release of the Fed minutes from April at 9pm.

Ahead of the open we expect to see…

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

[Alpari_UK]

0:10 UK retail sales disappoints
0:44 MPC QE votes remain
2:24 Looking forward to Bernanke and FOMC comments
3:52 EURGBP chart

Forex research: Global markets daily

[Alpari_UK]

[B]Eurozone PMIs and UK GDP in focus on Thursday[/B]

Today’s UK opening call will provide an update on:

• Chinese manufacturing falls back into contraction territory for the first time since September;
• Eurozone manufacturing and services PMIs in focus on Thursday;
• UK first quarter GDP figure potentially facing downward revision;
• Strong US data could mark an end to the rally in the stock markets.

European stock indices are expected to open more than 1% lower this morning, after data showed China’s manufacturing sector fell into contraction territory in May, following months of slowing growth.

The HSBC manufacturing PMI released over night came in well below expectations at 49.6, raising further doubts about the recovery seen in China over the last six months. Falling demand in the eurozone and the US is clearly having a major impact on Chinese exports, which is in turn, weighing on the manufacturing sector. The figure is also going to raise doubts about whether domestic demand can take up the slack from the rapidly falling external demand for Chinese exports. Recent data suggests it can’t, which is a big worry for Chinese growth going forward.

A lot of attention will now be paid to the flash manufacturing and services PMIs out of the eurozone this morning. These figures have been extremely disappointing for quite a while now and are showing little sign of improvement.
We’re expecting only a marginal improvement in these figures in May, which is likely to lead for further calls for a rate cut from the ECB next month. All except the German services PMI are expected to remain deep in contraction territory, leaving little chance of growth in the near future.

The eurozone consumer confidence figure for May isn’t going to be much better. We’re expecting another slight improvement here, to -21.8, but this is still well below the level that separates optimism from pessimism. It’s no surprise though that this figure is so deep into negative territory, given the incredibly high levels of unemployment in the euro area, not to mention the fact that many countries are stuck in a deep recession.

The first revision of the UK Q1 GDP figure will be watched closely this morning, after the initial estimate caught the markets off-guard last month, coming in well above expectations. Forecasts were originally for marginal growth at best, and given the other data seen in the first quarter, I wouldn’t be surprised to see this figure revised lower this morning.

In the US there’s a large amount of data out on Thursday, which should create some volatility in the markets. Especially now that the Fed is considering scaling back its purchases, potentially over the next few months, as confirmed by Fed Chairman Ben Bernanke yesterday.

The interesting thing on Thursday will be the reaction to the data on the markets. What we could now see, following Bernanke’s comments yesterday, is positive data weighing on stocks and poor data contributing to the rally. If we continue to see an improvement in the weeks ahead, this could mark the end of the rally.

US weekly jobless claims are expected to fall back below 350,000 today, following a spike in the figure last week which saw it hit 360,000. If the figure does fall back below 350,000 today, it would suggest that last weeks’ figure was just a blip in the data. We could also see a downward revision to the figure which would suggest that the labour market is still holding strong.

The reaction to this figure will be the first test of how investors are likely to react in the coming months. If we see a figure below 350,000, accompanied by a downward revision to last weeks’ number, it would point to an ongoing improvement in the labour market, which could therefore prompt a sell-off in equity markets and buying in the dollar.

Another miss could suggest that we are seeing weakness once again in the labour market and companies are not as optimistic as first thought, and are therefore starting to lay people off. However, this could help push stocks higher as it would suggest that we haven’t seen the permanent improvement in the labour market that the Fed is looking for before it begins tapering its asset purchases.

Finally today, we also have the US manufacturing PMI for May, which is expected to have fallen to 51.8. This figure has been gradually falling since the start of the year and is getting dangerously close to the 50 level that separates growth from contraction. On a brighter note, housing data is expected to remain strong in April, with new home sales rising to 425,000, up around 8,000 from the month before.

[B]EURUSD[/B]

We saw some huge moves in this pair yesterday, particularly during Ben Bernanke’s testimony, when he first suggested that the Fed would continue with the current level of asset purchases, before confirming they could be tapered in the next few months. Bernanke aside, we saw a great example yesterday of the huge role that technicals play in all of this, with the pair bouncing off the 50 fib level, almost exactly to the pip, before crashing back to trade below 1.2850. The 50 fib level was always going to be a major resistance level, with 1.30 being a key psychological level for the pair, but also the fact that on that daily chart, it coincided with where the 200-day SMA crosses the middle bollinger band. We should now see another assault on the neckline of the head and shoulders on the weekly chart, around 1.28. A break below here would be extremely bearish for the pair, prompting a move back towards 1.18, based on the size of the formation.

[B]GBPUSD[/B]

We saw dollar gains across the board yesterday, including in the cable pair, although this did find strong support just above 1.50, a key resistance area. As highlighted yesterday, this is going to be a major support level for the pair. If this level is broken, it should prompt a move back towards this years’ lows of 1.4830, with the next target after that being 1.44. With the Fed now threatening to pull the plug on QE, I only see the dollar getting stronger in the longer term. As a result, I’m even more bearish on this pair than I was before. We’re seeing a little bit of consolidation at the moment around that 1.50 level, however I don’t expect it to hold for long. The consolidation could lead to a flag formation, but in my view that will only delay the inevitable break of this level. If we do see a break in this level, then the pair should find support below here around 1.4980, 1.4940 and 1.49.

[B]USDJPY[/B]

Yesterday’s rally in the dollar saw the pair make further strides in its move towards the next major target of 105.57, the 61.8 fib level of the move from June 2007 highs to October 2011 lows. The initial target of 103.75, a previous level of support, was hit yesterday and is now providing strong resistance for the pair. Now we’re seeing a retracement, which could see the pair come back to test that key 100 level as a new area of support. The fib levels, particularly the 50 and 61.8 levels, tend to give a good indication of where the pair will pull back to and as you can see on the 4-hour charts, 100 falls between these two levels. Before we see that though, we’ll need to see a close below 102, a previous level of support and resistance, which is currently providing support for the pair. Below here the pair should find additional support between 101.25, a previous level of support, and 101.15, the 38.2 fib level.

Ahead of the open we expect to see…

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

[Alpari_UK]

0:08 Reaction to Bernanke comments and Fed minutes
2:17 Asian markets overnight – Nikkei down 7%
4:42 Eurozone manufacturing and services PMIs
5:04 What to look out for this afternoon

Forex research: Global markets daily

[Alpari_UK]

[B]Europe to open higher as calm returns to the markets[/B]

Today’s UK opening call provides an update on:

• Nikkei stocks trade higher early in Asian session as dust settles on the events of the last 24 hours;
• Calm returns to US markets as traders look to buy the dip;
• German data in focus this morning, ahead of Weidmann speech later;
• US durable goods orders watched closely later.

A sense of calm returned to the markets over night, as the Nikkei pared some of its huge losses from the night before, and US indices ended the session only slightly in the red after trading well into negative territory shortly after the opening bell on Thursday.

We appear to be seeing the calm after the storm so far on Friday, with Asian markets returning somewhat to normality, and equity futures pointing to a slightly higher start in Europe. It’s not surprising to see the Nikkei make solid gains over night, after losing 7.3% the night before.

Usually these sell-offs are overdone due to a combination of people’s stops being hit, traders liquidating their positions to cover losses made elsewhere, for example in this case as a result of the volatility in JGBs, as well as a number of other reasons. What’s going to be interesting now is whether the rally will continue in the coming weeks once this is put behind us. I see no reason why it won’t, as long as the Bank of Japan continue to flood the markets with liquidity.

The same goes for the rally in the US. US stocks recovered a lot of their losses during the afternoon session on Thursday, after opening much lower earlier in the day. Once the dust settled on the events of the last 24 hours, it became very apparent that even if the Fed begins to taper this summer, they will still be injecting huge amounts of liquidity into the financial system. And that is a big if, a phasing out of asset purchases is in no way a guarantee. We may see a lot more caution from traders over the coming months, with many more small corrections than we’ve become accustomed to recently, but I still think this rally has some way to go yet.

In terms of economic data, we have a quiet day ahead of us. The focus will be on Germany this morning, starting with the release of the first revision of the Q1 GDP figure. This is expected to be unchanged, with the eurozone’s strongest economy narrowly avoiding recession with 0.1% growth. At the same time, we have the release of the Gfk consumer confidence survey, which is expected to remain at 6.2, following a gradual increase since the start of the year.

This will be followed later on this morning by the release of the Ifo business climate figure for May, which is expected to show a slight improvement on last month, although companies are clearly still very uncertain about the outlook for this year. Finally we’ll hear from Bundesbank head Jens Weidmann, who is also thought of as the most hawkish member of the ECB board. Today, people will be looking for another clear hint over whether we’ll see more rate cuts at the meeting next month.

Finally, over in the US, we have durable goods orders data for April. This is generally seen as a reliable indicator of how the economy is performing so a lot of attention is paid to it. Last month we saw a surprising 5.7% fall here, which was later revised down to -6.9%. These figures can be volatile though so I don’t think that’s a major concern at this stage. In April, we’re expecting a slight improvement of 1.5%, although this number does have a tendency to surprise on the upside so I wouldn’t be surprised to see this come out above market expectations.

[B]EURUSD[/B]

We may have seen a rally in this pair on Thursday, but I’m yet to see anything to change my bearish outlook. In order for this to change, I’ll need to see a significant break above 1.30, a huge resistance level for a number of reasons. Firstly we have the 50 fib level, which the pair bounced perfectly off on Wednesday, which suggests there was a large number of profit taking and sell orders at this level. Around this level we also have both the 50 and 200-day SMAs, a break above which would be extremely bullish for the pair. Finally we have the middle bollinger band on the daily chart, which has also previous acted as a key support and resistance level. This morning the pair appears intent on pushing higher again so we could see another test of this major level. For this to happen though, we’ll need to see it break above 1.2955, a previous support turned resistance. Another failure to break above 1.30 would be quite bearish for the pair. If it does break above here, then it could mark the start of the next uptrend, with the next target being the upper end of the range it traded in last month, around 1.32.

[B]GBPUSD[/B]

Sterling is trading back around 1.51 against the dollar this morning, after finding support around 1.50 yesterday. The pair is continuing to look bearish for me, especially after it found resistance from the 61.8 fib level that it broke below on Wednesday, following a brief move higher. The middle bollinger band also provided additional resistance, which suggests we’re going to see another push to the downside. While the middle bollinger band hasn’t been the best level of support and resistance in the past on the 4-hour chart, I think it’s clear on this occasion that traders are treating this as a key resistance level. I think the next target for the pair is this years’ lows around 1.4830, however there is clear support around 1.50 still. If we see it break below 1.50, then we could see quite a rapid move towards this years’ lows.

[B]USDJPY[/B]

We’ve seen a lot of volatility in this pair over night, with the pair once again finding support around 101.15, the 38.2 fib level. Another pull back was always on the cards for the pair, given the pace of the rally over the last month or so. I personally still think there’s more of a pull back to come, with the 100 handle being the most likely target. This falls between the 50 and 61.8 fib levels, which are usually worth keeping an eye on when we’re seeing a retracement like this. The move from 100 to 101 was extremely aggressive, so we could see a similarly aggressive move back to 100 once the current support level is broken. I will be very surprised to see the 100 level broke though, as I expect a lot of traders will take profits on their short positions here, while others will use this level as an opportunity to go long again. I remain bullish in this pair, with the next target being 105.57, although the move higher is likely to be a much slower one than we’ve become accustomed to.

Ahead of the open we expect to see…

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