GBP/USD Technical Analysis: November 2, 2017

The British pound against the U.S. dollar dropped for a bit during the start of the Wednesday. Soon after, the price bounced up towards the 1.33 level. This pulled back from the said level and tried to reach the level of 1.3250, which has been the focus of sterling traders. Overall, the market should proceed to move higher as it was able to achieve reach a higher level prior to that. Choppiness will also persist in the market and the market will most likely attempt to reach the level higher than 1.35. The 1.3650 level will still be the main resistance level for long-term positions. However, if this area is surpassed, the market could further go up for a longer term.

For now, it is best to take advantage of buying in the lows. If the traders successfully break the level of 1.3250, an option is to wait as this could still go down towards the level of 1.32 and if it breaks down from there, it could further go down to 1.31. It would not be long before value seeking traders would come in cases of pullbacks since there is a strong bullish pressure.

There is a possibility for the uptrend to stop when it breaks lower than the level of 1.30. Hence, this makes small trades to be the ideal position in this trade. Positions should be put on hold until another successful breakout occurs above the level of 1.3650. From here on, this serves as an investment and would be determined through the patience of traders in the current situation.

US Economy Supported by Trade and Inventories

The American economy unanticipatedly sustained the rapid momentum in Q3, as the inventory investment increased and the smaller trade deficit eased off the impact from hurricanes towards the fall in consumer expenditure and curbed in construction.

The country’s GDP gained 3.0 percent at an annualized rate during the months of July until September, which further strengthened the robust business equipment spending as mentioned by the Commerce Department on Friday. While goods inventories for sale added nearly three-quarters of percentage point growth during the previous quarter and the improved GDP underlines the economic health. This excludes the inventory investment, the economy was able to advance by 2.3 percent rate against the slow down by 2.9 percent during the second quarter. The estimates for domestic demand also declined to 2.2 percent versus 3.3 percent obtained in Q2.

The United States acquired 3.1 percent growth during the second quarter, and this was the first time that the U.S growth reached higher than 3 percent for two consecutive quarters. Forecasts from economists show that GDP will increase by 2.5 percent in the third quarter. According to the US administration, it seems difficult to determine the effect of hurricanes Harvey and Irma towards the GDP in the third quarter. Initial evaluation indicates that the subsequent storms generated losses amounted to $US10.4 billion of government-owned fixed assets and  $US121.0 billion ($A157.8 billion) worth of privately owned fixed assets.

Inventories cumulated from firms came in at $US35.8 billion in the Q3, which boosted inventory investment by 0.73 percentage point to GDP growth in the said quarter. The inventories contributed an output of more than tenth of percentage point in the previous period. While economists are expecting for a decent expansion from inventories in the last quarter. Despite the drop in the fourth quarter and surpassed the sharpest decline in imports for three years which led to a smaller trade deficit and provided four-tenths of percentage point to economic development. Trade supported the output for three quarters in a row.

USD/CAD Fundamental Analysis: October 30, 2017

The U.S. dollar against the Canadian dollar closed the week high which makes the next week trading to be awaited by traders. Initially, the dollar has been moving steadily but the negative data the previous week pushed the pair to climb above towards 1.26 level with risks imposing the possibility for a breakout towards the level of 1.27.

The movement of the trend was driven by the retail sales data from the Canada which was published in the previous week that gave out a week data and has further escalate doubts to the BOC which has an inclination to increase its rates in short-term. The loonies may have declined but with the incoming Monetary policy statement from the BOC and press conference would open the possibility to become hawkish again. Although, they have been clear in the past that the central bank would not raise their rates for the remaining months in 2017 and presumably even in the early months of the following year. This lessens the hope for it and frustrated the market which resulted to a sell-off in the loonies.

On the other side, the dollar has held steady and was further pushed by a positive GDP data that may have raised the possibility of a rate hike in December. The pair moved towards the 1.28 level and even further towards 1.29 by the end of the week. However, the prices were affected by the reports on who will be the succeeding Fed Chair with chances to be Powell. At the same time, the oil prices soared which assisted in strengthening the Canadian dollar and drove the price to close for the week.

For this week, the Canadian dollar is anticipated to rally in the beginning which includes settlement of payments in oil in the present time of the year. In the latter part of the week, the labor data from the U.S. and Canada are to be released which would have an impact on the prices of the pair. Moreover, if the results of the data are good, the USD/CAD pair would rally and this would confirm the next Fed rate hike in December.

EUR/USD Fundamental Analysis: October 26, 2017

The EUR/USD climb higher due to various reasons including the result of the meeting of the ECB, the scheduled statement and the press conference later this day. The dollar also weakened across the market which pushed euro to move higher. Moreover, today is a significant day for the week. 

The statement and announcement from the ECB are anticipated after the press conference of Draghi. As the market expects the release of the statement, the ECB would give their hints and plans related to QE tapering during the press conference. If they were able to give a definite plan and timeline, it would be a big help for the euro which is already presumed to rally after. The data from the eurozone gives out positive data and for this reason. Hence, the ECB does not have a reason to postpone the tapering but the pace of the program is still in question.

Draghi is exerting oneself not to appear hawkish in the past few months to avoid pushing the euro too high. It is yet to be known today is the policy is to be sustained. It will not be an easy task for him since the euro will most likely go up since there is no definite timeline of the QE tapering from the central bank. Other than that, the data from the U.S. in the past 24 hours has also been positive as the data on durable goods came out stronger than anticipated. As for the dollar, the GDP data would be significant which will be released from the U.S. tomorrow.

For today, consolidation is anticipated during the first half of the day while the traders are already preparing for the ECB release in the afternoon. Volatility will also be present in the trading following the announcement and the press conference. It is recommended to wait on the sidelines until everything has settled down.

Unemployment Rate in France Drop in September

The total unemployment figures of France reduce in September based on the records from the Labour Ministry issued on Tuesday. This encourages French President Emmanuel Macron to execute further efforts to improve the job market.
The number of unemployed individuals in the mainland France was lowered down by 64,800 last month, this is the largest decrease since 1996.
The 1.8 percent drop after a month and 0.5 percent within a year resulted in a total of 3,475,600 jobless people which is the lowest level from the month of April.
The improvement was achieved due to reform efforts by Macron’s leadership that created more jobs and increased growth.

President Macron is considering the reduction of unemployment in the country down to 10 percent for years, overhauling the rules of labor industry last month. This could be followed by some changes in unemployment benefits and professional training subsequently.
The business confidence of France also perked up since Macron’s victory in May elections. The French politician pro-business reform agenda tend to shift company’s activities upwards in order to manage robust demand, according to a survey published on Tuesday morning.
Moreover, the emergence of new businesses led companies to hire additional workers in October which could regulate rising backlogs, hence, this is the fastest pace recorded in a decade based on the monthly purchasing managers survey.

On the other hand, industrial firms reported that their efficiency is moving towards the highest levels prior the outset of 2008-2009 global financial crisis indicated in a quarterly survey by the INSEE statistics agency on Tuesday. The expanding number of companies seems struggling to keep up with the demand. There are 32 percent of managers who admitted facing some congestion in the production system. This could be a positive indicator for the job markets considering that companies are forced to take more laborers in order to cope the demands of the client, therefore, reducing the unemployment rate.

World Economy’s Best Performance in Ten Years Boosted by China

The strong economic development of China boosted the global economy that has been perking up on its most excellent performance in 10 years. The world’s second-largest economy announced on Thursday the expansion of 6.8 percent during the third quarter, after central bank governor Zhou Xiaochuan contemplated about the 7 percent pace for the second half over the weekend. Moreover, due to hints about the prospect of a sharp decline in 2018 could fade away, the economists of Goldman Sachs upgraded their projection by 6.5 percent increase next year.
Indications of growth were clearly seen in Asia on Thursday, as the central bank of South Korea further raise its economic growth outlook for the current year, and exports from Japan attained double digits for three months straight in September, while the unemployment rate in Australia reduced surprisingly.  The International Monetary Fund (IMF) has lifted its forecast for the United States, China, Europe, and Japan, stating that the global economy is performing at its fastest pace in a decade.

The Washington-based IMF predicted the world economy will expand by 3.6 percent in 2017 and 3.7 percent in 2018, showing growth of 0.1 percentage point against the earlier estimate, with the Asian region contributed 63.3 percent for the development.

The renewal of China’s import demand became the major support throughout Asia, coupled with the strong recovery in Asian exports to EU and US that made an upswing around the globe, according to chief Asia-Pacific economist Klaus Baader from Société Générale SA.

Also, Zhou mentioned that the impetus for China’s acceleration in the second half is derived from the household consumption which was indicated in the statistics issued yesterday. While the retail sales grew by 10.3 percent last month earlier this year. Aside from consumption, the Chinese data includes government expenditure that provided 64.5 percent growth from Q1 to Q3 of 2017 which shows 2.8 percentage points higher versus the same period in 2016.

Fed Sees Modest to Moderate Growth in US Economy

The American economy had a modest to moderate pace of expansion in September until earlier in October. This occurred amid the hurricanes that hit the some U.S. regions, while the Fed stated that the latest readings of the US economy were issued yesterday, but still showed several hints of rising inflation.

Moreover, the Federal Reserve said that the surge of hurricanes Harvey and Irma happened during the polling period which might have an unfavorable effect towards the economic growth in third quarter. As the report shows three out 12 Fed’s districts, including Atlanta, Dallas, and Richmond, suffered from major disaster from the storms. The Fed Reserve of Dallas, particularly, Houston, was badly affected and did not anticipate for a critical disruption in the long-term.

Moreover, the report further underlined the Fed’s major issue which is the insufficient evidence for the increasing inflation amid the need of finding competent laborers.

Excess demands were very drastic in healthcare and service positions, construction, skilled manufacturing, and transportation. Hence, these shortages constrain the growth of the business, according to the Fed. Nevertheless, it failed to lift wages higher and further resulted in slight changes in the overall selling prices in some regions, indicating an increase in manufacturing input costs.

As for the Fed, there is nothing new about rumors on strong economic development and employment, however, there are widespread price pressures that followed which triggered probability that inflation will be fixed at the low level as the policymakers did not understand clearly the reasons behind.

The current target inflation of the Fed downgraded to 1.3 percent versus the initial objective at 2 percent. On the other hand, Fed Chair Janet Yellen is expecting inflation to bounce back while the central bank is in the process of raising interest rates again by the end of the year.

ECB Asset Purchases Refused by the Court of Germany

The appeal for an injunction to prevent the Bundesbank in participation to the asset purchase program of the European Central Bank has been turned down by the Constitutional court of Germany, according to the recent statement of the court. The program is worth 2.3 trillion euro or $2.7 trillion.

As observed previously, the German court was reticent when it comes to the asset purchases in the past. The ruling is now left in the hands of the European Court of Justice which has sided with the ECB when bond buying was put into question.

GBP/USD Fundamental Analysis: October 17, 2017

The British pound against the U.S. dollar has touched on the level of 1.3300 during the Monday session yesterday. It dropped along the trend and declined as the dollar gains strength during this period of time. The pair was not that influenced following the release of a mixed data from the U.S. on Friday. Although the happening on Monday did had a minor effect to the pair.

It is assumed that the current stand of the U.K. Prime Minister Theresa May would have an impact on the currency to the Brexit talks in Brussels but it did not go this way. Looking to the major reports, there will be several data scheduled to be publicized this week which includes the retail sales data and the inflation data. The market is about to position themselves considering the news on Monday which induced choppiness and weakened the market as seen yesterday.

Looking back on Friday session, it seems that the market has put aside the mixed data and rally at a higher price compared to almost all currencies. This was triggered but the reports where the candidate John Taylor was supported by U.S. President Trump to replace the current Fed Chair, Janet Yellen. He is recognized to be hawkish and has favored rate hikes at multiple events and if in case he was appointed, this would have a good effect to the U.S. dollar. Consequently, investors have begun positioning their assets which strengthened the dollar in the latter part of yesterday’s trading. 

For today, the CPI inflation data from the UK as well as the scheduled speech of the BOE Governor Carney which are presumed to cause volatility in the GBP/USD pair. A breakout at the level of 1.33 would result in a surge of 200 pips and could work similarly when it reaches the level of 1.3200 and maintains the consolidation.

USD/CAD Technical Analysis: October 17, 2017

During the daytime trading on Monday, the American dollar traded sideways versus the Loonie dollar, followed by a break through the 1.25 handle. Eventually, the markets contained high volatility but the positive thing about this move is the reversed flow against the oil sector. The oil markets tend to rally as well as the U.S dollar but this appeared to be unusual which could give a negative sign for the CAD.

The 1.25 region below is projected to continue its attractiveness for the price but there is a possibility for the rally to resume according to the skeptical actions by the Canadian dollar.
A break over the 1.2250 mark even on the daily close will enable the market to keep on moving upwards or may be an attempt to reach the 1.2750 mark.

The markets would certainly be volatile due to the instability of oil industry along with some back and forth movements. Considering the massive volume of volatility, it is much preferred to gradually establish a position.

A break down underneath the 1.24 mark does not necessarily indicate a bearish tone again since dealing with the recent action seems difficult. While the markets would likely try to generate some kind of base. Moreover, the oil markets are moving nearer to the massive resistance which could further provide lots of bearish pressure towards the Loonies.

Take note that the Bank of Canada increased its interest rate and suddenly mentioned that the rate hikes should be considered as automatic. With this regard, the market appears to completely turn around against the CAD.

Finance Minister Le Maire Confident for Optimistic French Economy

Finance Minister Bruno Le Maire is present in the conference with central bankers and Group of 20 finance ministers led by the International Monetary Fund. He met with JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon and U.S. Treasury Secretary Steven Mnuchin on Thursday. During the meeting held in Washington,  Le Maire told officials his confidence towards the expected economic performance of France. Considering the determined behavior of Macron administration in implementing reforms. According to Le Maire, the main purpose of President Emmanuel Macron’s leadership is to give France a new and improved economy. There are different projections about French GDP but currently predicted to increase by 1.7 percent in 2017, which indicates the country’s strongest development after six years.

The French Ministry of the Economy and Finance reported the continuous expansion with the same pace in 2018,  however, the Finance Minister stated that it could possibly jump beyond official outlook.

After Macron’s five months in the position, he successfully put into effect complex labor laws reform which enables companies to have more flexible environment working period and implementation of job cuts. Moreover, the French leader began to discuss with associations and corporate groups the intention to revamp employee training and unemployment-insurance system.

The government also prepared the national budget for 2018 that will reduce taxes and public expenditures, Le Maire said.

EUR/USD Fundamental Analysis: October 13, 2017

There is a consolidation in during the trading session of the EUR/USD pair as it fluctuates up and down for the day without specific trajectory. The Resistance area is found close to the 1.18880 and it cannot be determined yet the market will be able to break this area or its direction for short-term.

The price moved headed to the level mentioned and it seems that there will be a lot of selling to take place which would result in a minor correction. Although, there is choppiness present in the pair and it might be best to stay on the sidelines. The data from the U.S. particularly the PPI has no big impact on the movement of the pair and move sluggishly but steadfastly.

The dollar is moving behind with the NFP data came in weaker anticipated in the previous week. The FOMC minutes also gave a hawkish sentiment as awaited by the market. The trend is hinting for an uptrend of the EUR/USD pair to persist both for short and medium term while the question remains if the Federal Reserve will raise the rate for December and continue to affect the market.

Today, the market may get answers as the CPI data from the U.S. will be released later this day which put the Fed member at a worrisome state while dollar bulls are hoping for a positive output for today and keep open the possibility of a rate hike in December. Other than the CPI data, the retail sales data is also scheduled to be released for today which would greatly influence the short-term activity of the pair.

USD/JPY Technical Analysis: October 12, 2017

The U.S. dollar declined at the outset of Wednesday’s trading session, however, the bucks were able to find support on top the 112 handle to conduct a reversal, showing active existence.
The American dollar must keep on finding lots of support at 112 level because every pull back will provide plenty of support from that region. It is better when it offered some “floor” but a break down underneath there would offer a massive support below the 111 mark. With this, buyers will return to the market in a short period of time except when the Federal Reserve rejected the proposed interest rate hike.

The issue about rate hike has been the talk of the town for some time and maybe it’s time for the Fed to have at least some hints about their position regarding this matter, as the market really needs to see some progress or else they might lose their credibility. Many are intrigued on how many times the Fed will increase its rates which most participants would search within the Meeting Minutes. Hence, it will take some time to get a clear answer but this idea was already established within the marketplace and probably there is no any reason to conduct such rally.
The Bank of Japan remains to be soft which makes it reasonable to enter the 114.50 region. This level is the top of the longer-term consolidation. It appears that market imposes a “buy only” mode.

World Bank Cuts Growth Projections in India

The Gross Domestic Product (GDP) of India may decline to 7.0 percent for this year versus 8.6 percent in 2015 due to concerns in demonetization and the Goods and Services Tax (GST). As per the forecast from the World Bank, controlled private investment brought by internal bottlenecks could impose downside pressure towards India’s potential growth.

On Wednesday, The International Monetary Fund (IMF) had revised lower the country's growth outlook at 6.7 percent in the current, this shows 0.5 percentage point lower than the two previous forecast and weaker than the 6.8 percent by China.

As indicated in the biannual economic update from South Asia Economic Focus, the economic development of India was greatly affected by the issues regarding the withdrawn banknotes and risks involving the GST. Therefore, resulting to an expected slow growth.

The growth could increase by 7.3 percent next year through implementing fair policies in balancing public expenditure with private investment. It is projected that sustained growth could lead to further poverty alleviation and more attention is necessary to help the informal economy gain benefits, according to a report issued prior the annual meeting of the World Bank and the IMF.

Moreover, the reduction on India’s economic growth also weighed down to South Asia, which resulted to a tip over the second rank followed by the East Asia and the Pacific.

On the other hand, both public and private expenditure have faster pace after the approval of the Seventh Central Pay Commission (7th CPC). And also because of the recovery in the rural demand subsequent to the agricultural impetus and normal monsoon. Meanwhile, the aggregate demand decline as public investment begin to weaken.

The bank mentioned that GST is forecasted to stall economic progress earlier next year, however, there is a tendency that momentum may raise. There are indications that shows manufacturing, post-GST and services could possibly decrease sharply.

The economic activity could sustain within a quarter in stabilizing the GDP rate at 7.0 percent in 2018.

Politically Impelled Depreciation of New Zealand Dollar

A decline in the local dollar is anticipated as warned by the leader of the small nationalist party which will determine the next government of the country following the uncertain outcome of the general election. The New Zealand dollar dropped to its lowest value since the latter part of May on Monday after the final counting of votes at the weekend which exhibits the opposition of the Labour-Green bloc leading paired against the ruling National party. Although, the National party occupies a greater number of seats.

After the final counting of numbers, there is a market speculation that the New Zealand first leader , WInston Peters, has to receive support from both parties to reach sufficient supporters to oversee the proportional representation system of the country and would be easier to work together along with the center-left Labour-Green bloc, inducing investors to sell their assets in New Zealand.

Peters negotiated with both Labour and National parties on Tuesday. He has previously served the ruling party headed by both political bodies. Once the election has ended, he was anticipated to publicize with the party would he be associated with on October 12. Yet,  reports from media say that he was not ready to announce his preferred coalition by Thursday and cannot decide if there will be an announcement on Friday.

The New Zealand currency plunged by 3.7 percent since the election on September 23rd. It reached a four-month low of $0.7052 on Monday then rose the following day traded at $0.7063.

Consequently, exporters will find this news a good event being an export-reliant nation as said by Winston Peters after its meeting with Labour when he was being interrogated about the depreciation of the currency.

The nationalist party supports the arbitration of the Reserve Bank of New Zealand in the foreign exchange market and the kiwi is ranked as 11th eleventh in the currency market in 2016. On the other hand, the Labour party supports some revisions in the mandate of the central bank related with inflation. The Labour party has more commonality with the protocols of NZ First and putting more pressure in the market regarding the changes in policies since the National has more control over 10 years. At the same time, both parties also favor the adjustments in immigration, foreign proprietorship, and renegotiation of some trade deals. Peters has not given any decisions but he mentioned that control in foreign ownership will be his focus on most of the talks.

NZD/USD Technical Analysis: October 10, 2017

There is volatility present in trading the NZD/USD pair as it reached a lower limit in the opening on Monday where this will be reversed and fill the gap and proceed with a decline again. There is a possibility for this to reach the level of 0.70 where there will most likely be a support level. This area has been supportive in the past which was also resistive and anticipates volatility around that number. Take into consideration that the New Zealand is highly sensitive to commodities as well as the global risk appetite. It can be noted that the stock market is performing well although, there is less liquidity in the New Zealand dollar compared to other currencies. Hence, there will most likely be more volatility than other markets.

It underwent a downtrend in the past few days which signifies the continuation of a bearish pressure. It’s too early to say if the market will break lower than 0.70 region and if it does, this would not be a good sign. Hereinafter, the market will look for the 0.68 level below as the next target support level based on the long-term charts.  Moreover, the Australian dollar is dropping which usually moves in the similar direction as the New Zealand dollar. It will either move up or be sold unless a breakout happens higher than the 0.7125 region and look at higher levels which is most likely above the 0.72 level. Volatility will not be surprising in this pair and seller will consider the riskier currencies in the present.

USD/JPY Technical Analysis: October 4, 2017

The U.S. dollar against the Japanese yen surged but then it declined towards the level of 113.25. It declined to the area of 112.75 with a bit of support. Hence, the market will attempt to rally from this level and resume the general uptrend recently. After some time, the price will further move up due to the risk of appetite from traders. Moreover, there is a possibility for the Federal Reserve to increase its rates or at least the be stricter with the monetary policy. Therefore, the market will move towards the 113.25 level then towards 114.50 and higher. The market will test the peak of the whole consolidation which sways to and fro. If the market successfully breaks higher than the 115 handle, the market would move much higher which is presumably towards 118 level.

If the price pullbacks from the said level, there would be more opportunities present to resume the value. It seems that the 112 will be largely supportive and the floor of consolidation will be seen at the level of 108. A pullback would open buying opportunities considering the support below. Eventually, both sellers and buyers will gain profits with the presence of volatility in the market if given sufficient time.

Notably, the market is influenced by the general stock market which is another indicator that must be monitored besides the S&P 500 and the DAX etc. Nevertheless, the stock market will climb higher as it is in a good condition. 

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GBP/USD Fundamental Analysis: October 3, 2017

The British pound against the U.S. dollar pair had a high volatility at times. A few days back, the bulls were dominating the market and various resistance levels were surpassed. This was supported by a strong data from the U.K. and moves from the both the Bank of England and the government of U.K. which further supported the British pound. This kept the pound afloat amid the uncertainty brought by the Brexit process and pushed the currency even much higher.

Last week, the pound is undergoing correction at a faster rate in reaction to the good performance in the past few weeks. The U.K. prime minister is saying that she anticipates the Brexit will be settled after a few more years which is not what the market is expecting whilst majority expects to it materialize sooner. There are also speculations that the government spearheaded by the Prime minister Theresa May will eventually collapse.

On the other hand, the Bank of England is uncertain on deciding its next move. Moreover, it seems that the data from the U.K. is also sliding down in the past few weeks with the manufacturing data from the UK yesterday clearly depicting that. This resulted in a decline of the GBP/USD pair and dropped more than 120 pips during the day while the dollar rallied dominating the market.

For today, the construction PMI data from the UK will be released but there’ll be no major data coming from the U.S. The dollar will continue to rise but poses a threat to change the trend. At the same time, this will keep the GBP/USD under pressure for the day as the market wait for a larger data to come out later in the week.

GBP/USD Fundamental Analysis: October 2, 2017

The GBP/USD pair showed some choppiness in the past couple of days without any definite direction. The British pound was able to recover in the previous weeks, considering the fact that it is one of the strongest currency in the market. However, the Sterling was also affected by the dollar buying, forcing the Cable pair for a correction over the 1.35 level to trade beneath the 1.34 region in the past few days. Previously, the pound-dollar pair failed to broke the 1.3420 area after certain attempts which the pair did during the USD weakening.

In case that this pattern keep on going, it would likely cause further weakness in the GBP and could push the pair downwards. Moreover, we are waiting for a bundle of data from the United States later this week, which could possibly manage the greenback well bid in the near-term. These events when combined would likely place the sterling in the pressured area in the short-term.

On one side, the sterling pound was supported by the Bank of England (BOE), as the bank did not lose the possibility for a rate hike despite the ongoing Brexit process. Primarily, the market expected that the BoE will remain quiet during this kind of precarious scenario but the most recent meeting of the UK central bank clearly announced that they will only take action if necessary. This has provided support to the GBP, considering that British government showed optimistic views regarding the retention of the free market access to the European Union.

Ultimately, the manufacturing PMI data from the United Kingdom and the United States which could probably enough volatility. While it is essential for the bulls to break 1.3420 mark in the near-term for the completion of an upward trend.