Analyst Articles – Forex News 24

S&P 500, DAX Fundamental Forecast
Euro Weakness to Remain the Theme
Gold Price Outlook Fixated on Trade War Risk, FOMC Minutes
US Dollar to Rise as Fed Talks Down Rate Cuts Amid Market Turmoil

Posted: 19 May 2019 02:32 AM PDT

Equity Analysis and News

S&P 500 | Trade War Tensions Dictating Price Action
DAX | EU/US Trade Dispute is Delayed, Not Resolved

Source: Thomson Reuters, DailyFX

S&P 500 | Trade War Tensions Dictating Price Action

The S&P 500 is on course to drop over 0.5% for the week as investor angst over US/China trade wars continues to weigh on risk appetite, most notably in the US benchmarks. However, while a mid-week bounce has seen losses pared slightly since the escalation with the S&P 500 now down 3% (Prev. -5.4%), the trade sensitive sectors have maintained their losses with the US Semiconductor Index down 10% (Prev. -11%). Consequently, focus will continue to remain trade wars.

Markets Pricing in Fed Rate Cuts

The Federal Reserve have continued to maintain the mantra that they will be on hold for the foreseeable future and that there is little reason to provide a cut. However, bonds markets have continued to price in Fed easing, with money markets fully priced for a rate reduction in December. Alongside this, the 3M/10yr US yield curve has continued to dip into inversion amid the rising trade war tensions. The upcoming week will see commentary from Fed Chair Powell, however, with markets pricing in a dovish Fed, the bar is high for Powell to match those dovish expectations as was evidenced in the post monetary policy decision speech on April 24th, in which the Chair noted that soft inflation was "transitory".

Source: DailyFX, Thomson Reuters

DAX | EU/US Trade Dispute is Delayed, Not Resolved

A firm week for the DAX, which recorded gains of over 1%, among the major factors behind this had stemmed from source reports stating that the Trump Administration were to delay imposing auto-tariffs on EU imports for an additional 6-months (full story), which in turn saw the European auto names surge. The decision to delay could largely be attributed to the fact that US/China tensions have escalated. However, this is merely a delay and not a resolution. Noteworthy calendar events: ECB Draghi & Praet (Thurs), Eurozone PMIs (Thur).

DAX Price Chart: Daily Time Frame (Jan 2019–May 2019)

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— Written by Justin McQueen, Market Analyst

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2019-05-19 09:00:00

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Euro Weakness to Remain the Theme

Posted: 18 May 2019 07:01 PM PDT

EURUSD Technical Highlights:

Euro looks headed towards the April low or worse
4-hr chart has a developing structure to pay attention to

Check out the DailyFX Trading Guides page for intermediate-term forecasts, educational content aimed all experience levels, and more.

Euro looks headed towards the April low or worse

To be clear, trading EURUSD lately hasn't been an easy endeavor as low volatility conditions continue to be a headwind for traders. We've seen some movement in other majors (GBPUSD in particular) but not in the most widely traded pair. That will eventually change, but until it does we have to continue to take what is presented to us and be patient with set-ups.

With that said, the general trading bias remains the same as it has for months – lower. Trend and price action continue to be supportive of this bias. A run on the April low at 11109 or worse looks to be in store sometime in the coming sessions, but the path could be a little shaky.

Dialing in a bit closer to the 4-hr time-frame, a channel is becoming visible even if it isn't perfect, with candlestick wicks clouding the picture. A small bounce from the lower parallel may make for the best scenario, as the lower parallel's importance is further cemented and a nearby low is created in the process.

A bounce and subsequent breakdown could offer a solid structure (see 4-hr chart) for would-be shorts from both a probability and risk/reward standpoint. Selling right here at support puts one at risk of a bounce with good stop placement difficult to determine.

A bounce that carries the euro beyond 11225 will give pause to sellers and bring into play the area around 12265 (recent highs/trend-lines) and possibly become an even more attractive spot to short. The bottom line is that the Euro looks headed lower, but it may pay to sit tight and wait for a better look before entering new positions. If currently in a short from higher levels, then one could use the aforementioned highs and trend-lines to manage risk accordingly.

Check out the IG Client Sentiment page to find out how changes in positioning in major markets could signal the next price move.

EURUSD Daily Chart (April low, 11000s could be soon)

EURUSD 4-hr Chart (Channel/Bear-flag)

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—Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at@PaulRobinsonFX

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2019-05-19 02:00:00

Gold Price Outlook Fixated on Trade War Risk, FOMC Minutes

Posted: 18 May 2019 12:42 PM PDT

Gold Price Outlook Fixated on Trade War Risk, FOMC Minutes

GOLD PRICE OUTLOOK – TALKING POINTS

Gold has potential to rebound sharply from its recent stretch of weakness if looming risks intensify
XAUUSD might continue to face short-term weakness from the threat of recovering risk appetite and potentially hawkish Fed minutes
Read about How to Trade Gold or download the free DailyFX Q2 Gold Forecast for additional insight

On Thursday we highlighted how spot gold prices dropped from a 1-month high as yields rebounded along with risk appetite. Gold faced further weakness during Friday's trading session as short-term interest rates climbed higher along with the US Dollar in response to a robust Consumer Sentiment report. Gold was subsequently dragged lower considering American consumers reportedly feel the most optimistic in 15 years with rebounding inflation expectations – a development that may help keep Fed rate cut prospects at bay.

GOLD PRICE (XAUUSD) CHART: 1-HOUR TIME FRAME (MAY 10, 2019 TO MAY 17, 2019)

The risk that markets are overpricing the probability that the Fed cuts rates this year could weigh negatively on gold if reversed. Wednesday's release of the latest FOMC meeting minutes could trigger traders to develop a more hawkish perception of the Fed which would threaten XAUUSD due to the prospect of higher future interest rates. This in additional to weak gold chart technicals merges with the possible further weakness in the Chinese Yuan – all of which could serve as headwinds to gold.

Although, markets will likely obsess over US China trade war developments next week which will likely fuel risk appetite. Ultimately, this looks to largely dictate whether or not gold can catch a safe-haven bid from traders fleeing risk which could push XAUUSD higher.

– Written by Rich Dvorak, Junior Analyst for DailyFX

– Follow @RichDvorakFX on Twitter

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2019-05-18 19:00:00

US Dollar to Rise as Fed Talks Down Rate Cuts Amid Market Turmoil

Posted: 18 May 2019 05:14 AM PDT

US DOLLAR FUNDAMENTAL FORECAST: BULLISH

US Dollar gains with Treasury bonds as financial markets turn defensive
EP elections, OECD outlook update may recommit traders to risk-off bias
Running official commentary on US-China trade war remains a wildcard

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The US Dollar accelerated higher last week. A five-day winning streak marked the longest run of consecutive gains in two months, bringing the currency's value against an average of its major counterparts within a hair of the 2019 high.

The advance ran parallel to rising Treasury bonds while the priced-in 2019 Fed policy outlook moved to a more dovish setting, signaling the markets now see a higher probability of a cut (now pegged at 75 percent). That points to haven demand against the backdrop de-risking as the impetus for gains.

The escalation of the US-China trade war stands out as investors' top immediate concern. It compounds existing geopolitical uncertainties linked to Brexit, the European Parliament (EP) elections and growing tensions between the US and Iran. It also amplifies an existing slowdown in global growth.

USD MAY RISE AS FED TAKS DOWN RATE CUT PROSPECTS IN RISK-OFF TRADE

The week ahead will see these risks reiterated. Voting in the next crop of MEPs has been positioned as a referendum on the merits of the EU as a whole, with markets nervous as eurosceptics of every stripe angle for a greater mandate. Meanwhile, the OECD will probably downgrade its global economic outlook.

The Fed might unnerve investors further by reiterating that hopes for a lifeline from monetary policy are almost certainly misplaced in the near term. A speech from Chair Powell and minutes from May's FOMC meeting will probably hammer home officials' preference for a "wait-and-see" approach.

On balance, this bodes well for the Greenback. Another round of market-wide de-risking is likely to put a premium on the benchmark currency's unrivaled liquidity, sending it higher. While yields are not the top concern in this scenario, a Fed in stasis while other central banks plan easing surely doesn't hurt.

US-China trade talks remain a wildcard. Prices have proven to be responsive to the running commentary on negotiations from media outlets linked to the government in Beijing as well as US President Donald Trump's Twitter account. Soundbites from either camp might inspire kneejerk volatility.

— Written by Ilya Spivak, Sr. Currency Strategist for DailyFX.com

To contact Ilya, use the comments section below or @IlyaSpivakon Twitter

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2019-05-18 12:00:00