GROWTHACES.COM Trading Positions
EUR/USD: short at 1.2550, target 1.2400, stop-loss 1.2620
USD/CHF: long at 0.9560, target 0.9760, stop-loss 0.9530
EUR/CHF: long at 1.2025, target 1.2095, stop-loss 1.1995
EUR/GBP: short at 0.7990, target 0.7840, stop-loss 0.8060
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EUR/USD: PMIs Expunged Dovish Minutes’ Impact
(short, the target is 1.2400)
The Fed released minutes of Federal Open Market Committee yesterday. The minutes were not as hawkish as expected.
The FOMC participants expected soft inflation in near-term, then rising toward target. A few worried inflation could be below target for "quite some time". The FOMC members observed that the committee should remain attentive to evidence of a possible down shift in longer-term inflation expectations. The Fed kept a pledge to keep interest rates low for a "considerable time" in October. Although some members said that they wanted "considerable time" removed from the statement only one member voted for the action.
Despite more dovish minutes U.S. short-term interest-rate futures traders were still betting on a first Federal Reserve rate hike by September next year.
The Euro zone PMI Composite, which measures business activity in the manufacturing and services economies, fell from 52.1 in October to 51.4, its lowest since July of last year. New orders fell for a third successive month in manufacturing, dropping at the fastest rate since May of last year, while inflows of new business in the services sector slowed to near-stagnation, registering the smallest rise since August of last year. Employment stabilized after falling marginally for the first time in 11 months in October. Businesses generally remained reluctant to add to staffing numbers in the face of economic uncertainty and weak demand.
There are still no signs of inflation pressure in the Euro zone. PMI showed that selling prices fell again in both manufacturing and services.
In Germany, growth of business activity slowed to the weakest since July 2013, but still France remained a key area of weakness, suffering a drop in business activity for a seventh consecutive month.
Euro zone PMI indicates that GDP is likely to have risen by 0.1-0.2% in the fourth quarter. Weaker PMI readings will add to pressure for the ECB to launch additional measures to boost the economic activity. The likelihood of full blown quantitative easing in the first quarter 2015 is rising.
We got short on the EUR/USD at 1.2550 yesterday. The EUR/USD rose just after the release of more dovish than expected FOMC minutes yesterday. The rate broke above 1.2600, but the rise in the EUR/USD was short-lived. The EUR/USD opened the Asian session near 1.2550 and traded near 1.2510 after the release of Euro zone PMIs.
At GrowthAces.com we keep our short position with the target at 1.2400.
Investors are focused on today's U.S. CPI figures and tomorrow's speech of ECB President Draghi in Frankfurt (8:00 GMT).
Significant technical analysis’ levels:
Resistance: 1.2596 (30-dma), 1.2602 (high Nov 19), 1.2617 (high Oct 31)
Support: 1.2485 (10-dma), 1.2442 (low Nov 18), 1.2398 (low Nov 14)
USD/JPY: Profit Taken, Get Long Again At 117.30
(slight JPY recovery possible, but medium-term outlook for the USD/JPY is bullish)
The flash Japan Manufacturing PMI fell to a seasonally adjusted 52.1 in November from a final 52.4 in October. The output component of the PMI index reached an eight-month high which means that manufacturing output grew at the fastest pace since March. New orders and new export orders both rose but at a slower rate.
Japanese exports grew in October at the fastest pace in eight months. The 9.6% annual rise was much higher than the median forecast of 4.5% yoy. Japan's exports jumped in October due to higher shipments of cars, ships and electronics. Exports to China slowed to a 7.2% rise in October from an 8.7% in September, but shipments to the United Stated rose 8.9%, double September's rate. Trade deficit amounted in October to JPY 710 bn, less than the median forecast of JPY 1050 bn.
The USD/JPY broke a key resistance level at 117.95 yesterday, as we expected. The rate reached the target of our long position at 118.50 and a day's high at 118.96. We took profit on our long USD/JPY position (115.00-118.50).
In our opinion the JPY is likely to recover slightly, but the medium-term outlook for the USD/JPY is still bullish. We are looking to get long again at 117.30.
Significant technical analysis’ levels:
Resistance: 119.00 (psychological level), 119.77 (high Aug 9, 2007), 119.84 (high Aug 8, 2007)
Support: 117.89 (session low Nov 20), 117.00 (psychological level), 116.81 (low Nov 19)
GBP/USD: The GBP Survived This-Week Events Relatively Strong
(we stay sideways)
Retail sales volumes rose 0.8% mom and 4.3% yoy after a fall of 0.4% mom in September. The reading was higher than the market consensus of 0.3% mom rise.
Investors are now expecting a rate rise in the second half of next year and today's data are unlikely to change the expectations significantly. However, the GBP cut losses against the USD and hit a day's high against the EUR after the release of better-than-expected retail sales data for October.
Let us notice the GBP remained relatively strong after this-week UK CPI data, BOE minutes and finally UK retail sales data. We stay sideways on the GBP/USD, but keep our short position on the EUR/GBP. We believe tomorrow's ECB President Mario Draghi's speech is likely to weaken the EUR.
Significant technical analysis’ levels:
Resistance: 1.5720 (high Nov 19), 1.5737 (high Nov 17), 1.5740 (10-dma)
Support: 1.5590 (low Nov 19), 1.5563 (low Sep 6, 2013), 1.5556 (low Sep 4, 2013)