Cool Cat Bounce:
Another week begins with a fresh round of calls that the Oil bottom is in.
As I’ve said each time oil prints a single daily bullish candle and the headlines roll through my stream, zero technical damage has been done to the chart. This is a small bounce in a BIG bear market. Just make sure you continue to see it for what it is.
For the Original information go to Vantage FX website to see more.
Fundamental Decoupling Between China and Risk?
Welcome back to our local traders following the Australia Day public holiday. I hope you had a relaxing day, celebrating in whichever way you see fit.
But the show that is world markets stops for nobody and yesterday saw some of the mixed swings that we have become accustomed to in 2016. The Shanghai Composite Index (China’s major stock index) fell to a 13 month low, with a 6.4% decline at the close. The US S&P 500 put in a nice up day, continuing the market’s bounce off its weekly trend line that we have been speaking about.
Finally, a quick overnight recap wouldn’t be complete without a look at WTI Crude Oil, and yet more premature calls of a bottom. Did WTI have an up day? Yes. Did WTI break any resistance levels? No. Is there any conviction or momentum in this SINGLE DAY’s buying? No. Just make sure you continue to see these moves for what they are.
For more RISKScheck on our website
Steady in Gondor: RBNZ and the Fed Updates
As you were.
With the Federal Reserve decision this morning largely a non event, stock indices and the USD both saw some buy the rumour sell the news type price action. Think of it as markets trying to position for the possible big news spike if there were any surprises, but then snapping back into line after an as you were type of release.
The Fed was happy to take a wait and see approach on global economic issues (read China) and see how this theme will affect domestic growth outlooks.
They flagged slowing economic growth concerns, highlighting that it had slowed since their last meeting in December when we got lift-off on a new rate raising cycle. The fact that economic growth was subdued meant that inflation stayed subdued and there was no way that they were going to risk making a consecutive move in this type of environment.
For more about RBNZ and the Fed Updates check out our website
Oil Bluff:
Crude Oil and risk assets were again top of the headlines last night, with WTI rallying on both short covering after coming off so much, and headlines hitting the newswires surrounding possible production cuts.
It all kicked off as the Forex world transitioned between the London and New York sessions, when Russia flagged the idea of cutting production in Oil by trying to drop Saudi Arabia into it. All headlines here from Reuters:
“RUSSIAN ENERGY MINISTER NOVAK SAYS SAUDI ARABIA PROPOSED TO CUT OIL PRODUCTION BY EACH COUNTRY BY UP TO 5 PCT”
“RUSSIAN ENERGY MINISTER NOVAK SAYS PROPOSAL ON OPEC AND NON-OPEC MEETING MEANT FOR ENERGY MINISTERS, NO FIRM AGREEMENT REACHED”
For more about OIL trend check out on our website
BoJ Negative Rates Seeping Through:
Confession: I wasn’t in the office for the Bank of Japan negative interest rate decision. It was Friday afternoon in Sydney, I had some errands I had to run and thought what was the harm of giving myself an early mark…BOOM!
For more about our information click on our website here
First RBA Tuesday of 2016:
In not a great sign for both the Australian and world economies, yesterday saw the Chinese manufacturing sector expand at its slowest pace in 3 years.
“CNY Manufacturing PMI (49.4 v 49.6 expected)”
With both the primary manufacturing number as well as the second tier non-manufacturing reading both missing market expectations, RBA Governor Stevens and his board will have had a little cringe thinking about future effects that the continued Chinese slowdown will have, but it shouldn’t have changed their thinking about today’s decision.
For more about information Click here to view our website.
[B]CAD’s Slow Reaction to Oil Weakness:[/B]
Something slightly different this morning, with a look at a comparison between OIL and USD/CAD.
The last two OIL daily candles have been big, red, bearish candles. Price once again couldn’t crack long term trend line resistance which just happened to line up with a short term swing low that was previous support and now acting as resistance, meaning that the positive Oil headlines talking about buying have been yet more hot air.
Click here for full article on CAD & Oil
USD Dumped:
A big night for Forex markets overnight, with some HUGE moves across the board in US Dollar pairs. The USD was dumped left right and centre with most of the majors posting close to 2% gains since yesterday’s trading session began.
“USD ADP Non-Farm Employment Change (205K v 193K expected)”
“USD ISM Non-Manufacturing PMI (53.5 v 55.1 expected)”
A slight beat in the notoriously unreliable ADP employment number was overshadowed by non-manufacturing ISM missing expectations. The ISM is viewed as a leading indicator for Friday’s NFP number and historically when this reading drops, so does the subsequent payrolls number.
Read more USD analysis at Vantage FX
[B]NFP Friday:[/B]
Heading into US Non-Farm Payrolls tonight, the pain for USD longs hasn’t eased. The USD was dumped courtesy of the Fed’s Dudley’s comments which were way more dovish than the market has positioned for. Dudley’s comments hit home with markets and were interpreted that things just got real in terms of the Fed delaying future rate hikes if the domestic and global economies didn’t pick up from their current trajectory.
According to Bloomberg News, economists are expecting Non-Farm Payrolls to rise by 189K, for the Unemployment Rate to remain steady at 5% and the Average Hourly Earnings to increase to 0.3%… Full Non-Farm Payrolls article at Vantage FX
[B]NFP Touchdown:[/B]
Friday’s NFP number out of the US missed market expectations, but combined with a lift in Average Earnings and a fall in the Unemployment Rate, the miss was not enough to dampen a USD rally as the market re-priced itself on some much needed positive news.
“USD Average Hourly Earnings m/m (0.5% v 0.3% expected)”
“USD Non-Farm Employment Change (151K v 189K expected)”
“USD Unemployment Rate (4.9% v 5.0% expected)”
As we spoke about last Friday, the market got its jump in Average Hourly Earnings (the biggest increase since 2009 mind you) and pounced all over it with the expectation that the Fed will use the figure in future rhetoric as we head toward lift-off number two… Read all about the NFP aftermath at Vantage FX
[B]Tremoring Tuesday:[/B]
Here we were thinking that with China on holidays all week and a relatively light calendar in terms of event risk that could cause a major repricing in the market, that we’d be able to cruise through the week without any dramas. Ha!
But just how dire are things looking? Surely not as dire as our friends over at CNBC are reporting? Full risk sentiment analysis at Vantage FX
Following the BoJ’s negative rates decision, how content Kuroda and his men must have been as the Yen instantly repriced itself and weakened considerably.
“Job done!”
Okay that might have been using a bit too much journalistic license but either way, the point is that they would have been VERY happy with where the Yen was headed following their shock announcement.
Fast forward just a week later and carnage has hit Japanese markets as the Yen goes gang-busters against the USD, sending Japan’s major stock index the Nikkei225 down with it… More analysis & charts at Vantage FX
Stock Market Enigma:
“It all has a 2008 global crisis feel about it, without the underlying causes. Shares in the big four local banks fell by a surreal 4 per cent to 5.2 per cent on Tuesday.”
This extract from the Sydney Morning Herald’s Malcolm Maiden this morning resonated with me. It’s been like a slow moving train that you can see in the distance while you just stand still on the tracks watching the light getting closer and closer… full coverage of the market rout at Vantage FX
Yellen and the Fed Assessing Risk:
Testifying on the semi-annual monetary policy report before the House Financial Services Committee in Washington DC, Janet Yellen more than suggested that the balance of risks that confront the US economy are further shifting for the worse.
Of course it was only December, barely 2 months ago that the Fed raised its short term interest rates off zero, hoping to signal the beginning of a new rate raising cycle and return to the normalisation of monetary policy. Yellen described risks to the economy as balanced and that prospects for economic growth outweighed the negative risks surrounding raising rates too early… Full summary of the monetary policy report at Vantage FX
Friday Night, Game On!:
With all major markets sitting at key levels, it’s game day. Oil, US stocks, The Yen etc etc. Every chart I flick through on my Vantage FX MT4 platform seems to be sitting at some sort of major make or break, higher time-frame level.
As we spoke about yesterday on the @VantageFX Twitter account, USD/JPY approached and then broke through major weekly trend line support… JPY, Oil and more at Vantage FX
Stocks Battle Out Bore Draw:
“How many times can you buy support before you get burned?”
Well, it would seem at least once more…
I had high expectations for breakouts across Indices markets on Friday, but with strength coming out of the S&P 500 support level in the chart above, it just wasn’t to be.
With US markets closed tonight for Presidents Day, tonight isn’t the night. I set the week up for a big finale to the major trend line support across indices narrative that I’ve been running on the blog, and it just didn’t happen. Take a deep breath and respect the major levels… more on the indecision in equities at Vantage FX
Stocks and Gold:
Will markets and traders ever learn?
The lead paragraph on the major markets Guardian article today was as follows:
“Mario Draghi, president of the European Central Bank, has helped calm jittery financial markets by saying he would not hesitate to take fresh action to boost eurozone growth and inflation.”
Hmm, where have we heard that before…?
Mario Draghi and the ECB are the markets definition of the boy who cried wolf! Over and over the same scenario plays out. Mario Draghi gives markets the ‘whatever it takes‘ spiel and then when the time comes, fails to deliver… More on the ECB & Draghi at Vantage FX
[B]Oil: First Steps Taken Toward a Coordinated Supply Effort:[/B]
With futures markets now completely pricing out any chance of a rate hike from the Fed for the entirety of 2016, tomorrow’s FOMC Minutes are expected to sound dovish in the wake of continued equity weakness.
As traders, we always have to think about market expectations and where the greatest risk comes from if expectations aren’t quite met. This would obviously be any rhetoric stating that the Fed plan to go full steam ahead with further rate increases. This just isn’t going to happen, but the risk is skewed to anything interpreted as hawkish. ANYTHING else is going to see the USD sell off and that’s what I’d be more inclined to position for… USDCAD, Oil and more at Vantage FX
[B]Headlines and Correlations:[/B]
Another wild, down-up session overnight in the US certainly is keeping things interesting for the Indices day traders on our book!
See more about trading correlations on the Vantage FX News Centre.
Sterling Sojourn:
“GBP Second Estimate GDP q/q (0.5% v 0.5% expected)”
Pound Sterling received some respite from the relentless Brexit related selling as domestic fundamentals at least showed some sort of positive after GDP printed as expected at 0.5%.
Business spending did fall and flags have been raised about the balance of the economy. Questions remain around whether the headline number actually hides the part time, low wage nature of the growth experienced and how sustainable the growth can be long term.
But for now GBP has earned respite from the Brexit risk uncertainty, backed up by the technical barrier on the chart below.
to check out more GBP/USD correlations go to our website’s news centre.