Analyst Articles – Forex News 24

EURUSD Brushes Off Positive Eurozone Inflation Ahead of US Nonfarm Payrolls
Retesting 2019 Lows, Eyes on NFP Report
HSBC Results Smash Forecasts, Asian Markets Focused On US Payrolls
Brazil Industrial Production May Sound Alarm on Global Growth
S&P 500 Digs Into False Break Reversal as US NFPs, Data Comes
Australian Dollar Slides On Buildiing Approvals Miss, RBA Looms
US Dollar May Rise, GBP Mute as Brexit Overhang Mutes BoE Hike Bias
EURUSD in Spotlight Ahead of EZ Inflation, US NFP
Crude Oil Price Breakdown Nears April Low, USDCAD Outlook Lifted
Retailers Warn of Impact from Strong US Dollar

EURUSD Brushes Off Positive Eurozone Inflation Ahead of US Nonfarm Payrolls

Posted: 03 May 2019 03:07 AM PDT

EUR talking points

EURUSD awaits key US data to consolidate a direction
Eurozone inflation moves higher

The Euro failed to regain support from the release of Eurozone CPI figures after trading softer throughout most of the Asian session. EURUSD's downtrend continued after figures revealed annual inflation rate in the Euro area increased to 1.7% in April, up from 1.4% in March, slightly higher than the 1.6% expected. Core inflation, which excludes volatile prices of energy, food, alcohol and tobacco, and is the figure the ECB uses for its policy decision, was 1.2% in April (Expt. 1.0%).

But despite better than expected inflation figures providing potential for a short rebound, EURUSD continues to trade near year-lows registered earlier in the week on the back of a less-dovish stance from the Fed's meeting on Wednesday May 1. The pair is still trading below the 1.12 handle as traders wait for nonfarm payrolls figures, due to be released at 13.30, to consolidate a direction. A stronger than expected jobs report has the potential to reignite the prevailing EURUSD downtrend.

DAILYFX ECONOMIC CALENDAR – EURUSD

EURUSD Brushes Off Positive Eurozone Inflation Ahead of US Nonfarm Payrolls

DailyFX Q2 Euro Forecast

EURUSD PRICE CHART: 1-MINUTE TIME-FRAME (INTRADAY – MAY 3, 2019)

EURUSD Brushes Off Positive Eurozone Inflation Ahead of US Nonfarm Payrolls

EUROZONE INFLATION

It is common for inflation to increase in the month that Easter holidays take place, especially if they fall towards the end of the month, as an increase in demand for package holidays, restaurants and hotels pushes prices higher. But keeping in mind that the Easter effect is a seasonality, inflation figures for the following months need to continue on the upside for the ECB to shift to a more hawkish stance.

As a recap of recent Eurozone data, manufacturing PMI figures released yesterday showed that figures for Spain, Italy and France were improving whilst Germany figures disappointed. Overall European Manufacturing PMI was revised upward from 47.8 to 47.9 in April, showing a small recovery from its 80-month low of 44.1 recorded in March. European CPI released today is in line with German CPI figures released on Tuesday Apr 30, showing inflation for the month of April beat expectations by 0.5 percentage points, from 1.5% expected to 2%.

IG Client Sentiment – Retail trader data shows 67.4% of traders are net-long with the ratio of traders long to short at 2.07 to 1. In fact, traders have remained net-long since Apr 12 when EURUSD traded near 1.12763; price has moved 0.9% lower since then. The number of traders net-long is 0.5% lower than yesterday and 14.7% higher from last week, while the number of traders net-short is 9.2% higher than yesterday and 20.4% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EURUSD prices may continue to fall. Positioning is less net-long than yesterday but more net-long from last week. The combination of current sentiment and recent changes gives us a further mixed EURUSD trading bias. The combination of current sentiment and recent changes gives us a further mixed EURUSD trading bias.

Gold Prices Edging Lower Since FOMC, Eyes on NFP

Gold prices have continued to edge lower since the FOMC meeting with the precious metal now eying a retest of the 2019 low ($1266). Fed Chair Powell had poured cold water on the idea of a rate cut, after stating that inflation drop had been due to "transitory" factors, consequently, bond yields have been tracking higher since the meeting, while gold prices have continued to edge lower. On the data front, eyes will be on today's NFP report, in which the risk is for an upside beat following strong ADP data, as such, another robust NFP report could push gold to fresh 2019 lows. However, as has usually been the case, focus will be on the wage components as the FOMC look for inflationary pressures.

Gold Rate Technical Analysis | Topside Resistance Holds, Retest of 2019 low

Last week we had noted that failure to at the 61.8% Fibonacci retracement could spark a retest of the 2019 low (full story), which in turn keeps the near-term outlook for gold modestly bearish. A fresh 2019 low brings the 50% Fibonacci retracement ($1262) in focus, however, the uptrend from the 2018 low is holding for now.

GOLD PRICE CHART: Daily Time-Frame (Mar 2018-May 2019)

What You Need to Know About the Gold Market

GOLD TRADING RESOURCES:

— Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX

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2019-05-03 09:30:00

HSBC Results Smash Forecasts, Asian Markets Focused On US Payrolls

Posted: 02 May 2019 10:48 PM PDT

HSBC Results, US Nonfarm Payrolls, Asian Stocks Talking Points:

HSBC posted a healthy profit rise
Asian stocks failed to reap much benefit
Australian building approval data were more disappointing

Find out what retail foreign exchange investors make of your favorite currency's chances right now at the DailyFX Sentiment Page

Crowd-pleasing results from global banking titan HSBC, which is listed in Hong Kong, New York and London, failed to lift the spirits of an Asian equity session which was becalmed by the outage of Japanese and mainland Chinese markets for holiday.

HSBC's profit rose 31% in the year's first quarter, well ahead of expectations, boosted by a big rise in its core Asian business and some successful cost cutting. Profit before tax at the largest European-based bank rose to $6.2 billion from 4.76 billion in the same quarter last year, HSBC said in a stock exchange filing. Analyst expectations had centered on a $5.58 billion turnout.

The result might spread more cheer in Europe, where more markets will be open, but it had little impact in Asia. The Hang Seng was flat, with Australia's ASX up 0.2%.

The latter may have been boosted by expectations that the Reserve Bank of Australia could cut its record-low interest rates next week after a long hiatus. On Friday Australian building approval data came in markedly weakly, the latest in a string of lackluster economic numbers. At present rate futures markets put the chance of a cut at 44%, below 50% clearly but far higher than at this time before any recent policy meeting.

AUD/USD has now faded back to the lows of early January.

The Aussie is clearly still under some duress but further decisive moves may well await the RBA's decision. It will come on Tuesday.

Currency markets elsewhere were broadly steady before the release of official US labor market statistics. Still arguably the most important single data point for global markets out of the monthly round, they will be released later. Nonfarm payrolls are expected to have increased by a probably-comforting 190,000 in April, for an unchanged unemployment rate of 3.8%. As-expected data could give Asia Pacific stocks a lift as next week gets under way, but this may be tempered by worries that US interest rates may yet rise further given the strength of the world's largest economy overall.

Clearly market focus is going to be firmly on those US payroll numbers but they're by no mains alone on the data slate. Consumer Price Index releases from Switzerland and the Eurozone are also due, as are service sector Purchasing Mangers Indexes from the US and UK. The US version of the latter from the Institute for Supply Management is coming up as well.

Resources for Traders

Whether you're new to trading or an old hand DailyFX has plenty of resources to help you. There's our trading sentiment indicator which shows you live how IG clients are positioned right now. We also hold educational and analytical webinars and offer trading guides, with one specifically aimed at those new to foreign exchange markets. There's also a Bitcoin guide. Be sure to make the most of them all. They were written by our seasoned trading experts and they're all free.

— Written by David Cottle, DailyFX Research

Follow David on Twitter@DavidCottleFX or use the Comments section below to get in touch!

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2019-05-03 05:10:00

Brazil Industrial Production May Sound Alarm on Global Growth

Posted: 02 May 2019 09:00 PM PDT

TALKING POINTS – BRAZIL INDUSTRIAL PRODUCTION, BRL, GLOBAL GROWTH, IBOVESPA

What does Brazil industrial production say about global growth?
How has US-China trade war spat benefit and hurt Brazil data?
Ibovespa and BRL trending cautiously lower amid uncertainty

See our free guide to learn how to use economic news in your trading strategy!

The Brazilian Real and benchmark Ibovespa equity index will be watching for upcoming industrial production data. Since April 2018, the data for this particular indicator has been showing broad weakness with an overall downward trajectory. Global composite PMI is showing a similar trajectory after world growth prospects were shattered from the pain of trade wars and Fed tightening.

Relationship Between Global Composite PMI, Brazil Industrial Production

Brazil is the second-biggest exporter of iron ore – a key input in global production – and a top supplier of a range of other raw materials, making its assets sensitive to changes in the worldwide business cycle. If there are signs that global growth is slowing, the economies that are positioned in the beginning of the global supply chain will be the first ones to feel the pain and may therefore serve as canaries in the coal mine for potential headwinds in the future.

Brazil is also the largest economy in South America. If indicators are showing weakness there, the implications for regional growth prospects are brought into question. This may then make investors with exposure to emerging market assets twitch. Much like Australia and New Zealand, Brazil exports cycle-sensitive commodities, and therefore changes in global risk appetite are in part reflected in Brazilian asset prices.

During the height of the US-China trade war, despite Brazil indirectly benefiting from higher soybean exports, slower Chinese growth led to declining iron ore exports out of the power node of South America. Consequently, performance in Brazilian economic indicators is also a reflection of growth prospects out of China, one of the largest economies in the world.

Brazil-China Iron Ore Trading Relationship

Domestically, President Jair Bolsonaro's pension reform have also been a key driver of Brazilian asset price action because of the long-term implications it has for the Brazilian economy. If producers anticipate the structural reforms will not pass – consequently leading to poorer growth prospects – the pessimism will be reflected in the indicators. To keep up to date on these key reforms, be sure to follow me on Twitter @Zabelin.Dimitri.

Looking ahead, year-on-year industrial production is expected to fall 4.8 percent, erasing its previous rise of 2.0 percent from the month before. Meanwhile, the Brazilian Real continues to trade lower against the US Dollar as the Ibovespa is cautiously trending sideways, with what looks like a downward-facing bias. To find out why, be sure to read my comprehensive outlook on the Real and Ibovespa.

Ibovespa Futures, BRL/USD

Note: Usually Brazilian Real-US Dollar crosses are quoted as "USD/BRL".

FX TRADING RESOURCES

— Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter

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2019-05-03 03:30:00

S&P 500 Digs Into False Break Reversal as US NFPs, Data Comes

Posted: 02 May 2019 07:41 PM PDT

NFP Talking Points:

The S&P 500 holds the course of a false-break-reversal pattern, but follow through is unnervingly absent
Fed policy, Hong Kong GDP and US-China trade questions will find a US reflection in data Friday (NFPs, trade, ISM service activity)
Oil proved one of the global market’s biggest movers, but motivation matters far more in the hold or break of the 200-day SMA

What do the DailyFX Analysts expect from the Dollar, Euro, Equities, Oil and more through the 2Q 2019? Find our forecasts for the quarter in the DailyFX Trading Guides page.

The Rare Situation Where A Threatening Technical Pattern Can Override Fundamental Themes

Though I believe in both the major analytical techniques – fundamentals and technicals – each seems to play a more common role in the development of general market trends. Given that my baseline belief is that the price we experience is the reflection of the collective views of the many participants to a market, fundamentals usually draw my evaluation of conviction and thereby intent. While there are many speculators that operate through the charts alone, large markets like those of the FX, global equities and yield find far greater swaths of wealth being directed by financial institutions, management funds, central banks and other longer-duration and probability-dependent participants. Therein lies my logic for determining the top fundamental themes that can draw the most attention and capital flows to track ebb and flow. From there, the technicals play the role of offering milestones for which progress can be measured, reasonable objectives can be evaluated from historical activity and viable stops placed behind areas where it seems there is effort to beat back further development of trend. Yet, sometimes the balance of power flips. There are times when technicals themselves can exert inordinate power and override fundamental focus. We may be facing just such a period.

At present, many of the critical fundamental themes for which we have kept track are still unresolved. That said, there is also a lack of direction and momentum to their evolution. From the health of the economy – or ‘growth’ – we continue to register troubling signals of an relinquishing course of deceleration. The most recent example of this was Hong Kong’s 1Q GDP reading (0.5 percent) which hit an approximate decade low pace to add further concern over Asia’s health. Then again, many of the forecasts we have seen from central banks and governments have been raised, while the US has teased hope/enthusiasm with the revived discussions of a $2 trillion infrastructure spending program. Trade wars are still in place, the EU has a few open threats against it from the US and President Trump is due to make some call on auto tariffs on March 15th. Then again, there is very clear insinuation that a deal could come in the US-China negotiations by end of next week. As for monetary policy, the improbability that they can staunch any future fires hasn’t changed, but the pressure they are facing to test this has nevertheless eased. This leaves us in a state of uncertainty though still burdened by anxiety. It is in this environment where a meaningful speculative shift can leverage far more market movement of its own volition than what it normally would be capable.

Thus, the technical position of the S&P 500 leverages an unusual amount of potential. The most heavily-traded (via derivatives and cumulative spot) equity index in the world, in the most popular asset class in the world, from the largest country in the world; the US benchmark is already sporting inordinate levels of influence. Having outperformed its most prominent counterparts across region and asset class this past decade, it only furthered its standing as the baseline for risk trends. Now, as we see the effort to break and explore record highs fall apart and a subsequent reversal take hold, we are seeing an idol of sentiment itself falter at the threshold of unconstrained bullishness and follow a path of least resistance back into a wide range that can carry with it more sense of risk aversion that we would otherwise expect from it alone. The stakes are high and attention is intense.

Chart of the S&P 500 and the 20-day Moving Average (Daily)

A US Docket That Will Manage to Reflect on Growth, Trade and Monetary Policy Themes

Already, the US has found itself in a position of inflated influence this week between the global reach of the FOMC rate decision Wednesday and the precious situation the S&P 500 finds itself. Yet, we may see this pressure further intensify through the final trading session of the week given the top listings on the US economic docket. There are events that will cover all three of the aforementioned systemic themes in one form or another. Obviously, the top listing for headlines and immediate market-moving potential will be the monthly employment report. The change in NFPs is a favorite for financial media given its familiarity, its direct connection to economy and its influence over monetary policy. Given the surprise language from Powell on Wednesday and the market’s reaction to his rhetoric, I’ll be evaluating the event for the monetary policy perspective. In fact, the jobs data is good for both nodes of the Fed’s dual mandate: steady inflation and healthy employment. The unemployment rate is near its natural low of the cycle and it will take time to truly reverse. Wage figures are the more sensitive measure on inflation with Powell’s remarks freshly in mind.

Chart of Historical NFPs, ADP and the Difference Between the Two

S&P 500 Digs Into False Break Reversal as US NFPs, Data Comes

On the topic of trade wars, we are waiting to see if the engagement between the US and China breaks while simultaneously keep a wary eye out for auto and European tariffs. In the meantime, we can measure the impact of the growth headwinds on the economy thus far through data that directly reflects the influence. The March advanced goods trade deficit is expected to widen even further to a -$73 billion shortfall. As for the general state of growth, there is still an afterglow from the 1Q GDP beat last week. It has certainly helped lift forecasts in certain important areas of the financial system. We have had some initial PMI figures from Markit for April that give the first steps into second quarter health, but the ISM’s service sector activity report will offer greater weight than most other measures in this timely capacity. This non-manufacturing area accounts for more than three-quarters of economic activity and employment. Where goes services, so goes the US economy. While this will all fight the twilight hours of liquidity for the week, it will struggle to mount a serious Dollar movement. However, a significant reading from any of these three reports could generate far larger moves than traders may anticipate.

Chart of AUDUSD (Daily)

S&P 500 Digs Into False Break Reversal as US NFPs, Data Comes

Crude Oil Takes Another Jog Lower and the Prospect of Reversal Materially Increases

For sheer anticipation, the British Pound held perhaps the most pressing interest among the major markets this past session owing to the Bank of England’s (BOE) rate decision. The event would offer the policy decision, Governor Carney’s press conference and the so-called Quarterly Inflation report. That makes for the Super Thursday that holds greater capacity to generate monetary policy-derived market movement. While there was no surprise from the fact that the central bank held its policy course unchanged, forecasts were unexpectedly shifted to the hawkish side. The GDP forecast for 2019 was raised from a 1.3 percent expansion to 1.6 percent. On monetary policy, Governor Carney – amid caution over the uncertainty posed by Brexit – said the market may underestimate the capacity of rate hikes moving forward. He said they could hike rates more than once over the coming three years as is being priced.

Where anticipation was low but actual market movement was extreme, crude oil suffered another sickening lurch lower. The commodity tumbled through 62.50 and undisputedly took out support on the rising channel defining 2019’s market trend. While it is still a stretch to say a full-blown bear trend is underway, it is more difficult to argue against and a stretch to say this is a mere waver in a persistent bullish trend. There was plenty of supply-side talk to draw on for justification. An approximate 10-million-barrel jump in US supplies to the highest levels since 2017 while US production nudged up to a record 12.3 million barrels per day. On the other end of that talking point, the end of the Iranian wavers and ongoing output crunch on Venezuela theoretically imposes lift. Is this selective drive or perhaps something else? I believe the slip from the S&P 500 and other risk assets likely carries more weight in this equation. Commodities are a particularly growth-sensitive risk asset, but they have speculative connections nonetheless. That said the USCI commodity index has dropped for 13 straight trading days – the longest I have on record. It may not be a clear trend, but it is leaning in a different direction and gaining traction. We discuss all of this and more in today’s Trading Video.

Chart of Crude Oil Overlaid with the S&P 500 (Daily)

S&P 500 Digs Into False Break Reversal as US NFPs, Data Comes

Chart of USCI Commodity Index and Consecutive Day Moves (Daily)

S&P 500 Digs Into False Break Reversal as US NFPs, Data Comes

If you want to download my Manic-Crisis calendar, you can find the updated file here.

2019-05-03 02:34:00

Australian Dollar Slides On Buildiing Approvals Miss, RBA Looms

Posted: 02 May 2019 07:05 PM PDT

The Australian Dollar was hit by news that domestic building approvals slumped last month. The chance of lower Australian interest rates last week remains very much in play.
2019-05-03 01:37:00

US Dollar May Rise, GBP Mute as Brexit Overhang Mutes BoE Hike Bias

Posted: 02 May 2019 05:04 PM PDT

Asia Pacific Market Open Talking Points

US Dollar eyeing uptrend resumption in the aftermath of less dovish Fed
Sentiment-linked crude oil prices sink after OPEC commentary with S&P
GBP/USD ignores BoE Mark Carney hawkish tilt, Brexit uncertainty looms

Trade all the major global economic data live as it populates in the economic calendar and follow the live coverage for key events listed in the DailyFX Webinars. We'd love to have you along.

FX News Thursday

The US Dollar outperformed against its major counterparts on Thursday, building on gains from yesterday's less dovish-than-expected Fed monetary policy announcement. The Greenback's appreciation picked up pace during the European trading session as S&P 500 futures turned lower as anticipated. Weakness prolonged with an uninspiring earnings report from Caterpillar Inc.

Sentiment-linked crude oil prices also followed suit after a delayed reaction to the Fed, clearing a major rising trend line that has increased the odds of a bearish reversal. Just as the commodity embarked on its journey lower, OPEC Secretary General Mohammad Barkindo noted that the cartel is working to avoid an energy supply crisis given the situation in Venezuela.

Oil Sinks with S&P 500

Chart Created in TradignView

The British Pound showed a muted reaction to the Bank of England monetary policy announcement even though Governor Mark Carney talked up interest rate hikes. The uncertainty that looms over the United Kingdom, Brexit, was cited as a concern which inherently saps the appeal of Sterling given geopolitical risks.

US Dollar Technical Analysis

On a daily chart, DXY appears to be making an attempt to retest late-April highs after bouncing on former resistance-turned-support at 97.52. The US Dollar thus sits right under June 2017 highs and under the psychological barrier between 98.15 and 98.33. On the whole, the US Dollar has been slowly trending higher this year, guided by rising support from late September 2018.

DXY Daily Chart

Chart Created in TradingView

Friday's Asia Pacific Trading Session

Aside from Australian building approvals, Friday's Asia Pacific economic docket is relatively light. On top of this, markets are eagerly awaiting the US jobs report at the end of this week. With S&P 500 futures trading little changed, there may be a brief period of consolidation before critical data crosses the wires.

FX Trading Resources

— Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

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2019-05-02 23:00:00

EURUSD in Spotlight Ahead of EZ Inflation, US NFP

Posted: 02 May 2019 02:40 PM PDT

EURUSD CURRENCY VOLATILITY – TALKING POINTS

Although expected EURUSD price action has fallen slightly with GDP data in the rearview mirror, overnight implied volatility remains elevated with Eurozone inflation and US nonfarm payrolls slated for release tomorrow
Spot EURUSD trades back below the 1.12 handle following a relatively hawkish Fed yesterday, but upcoming data could help the Euro rebound back above this technical level or reinforce the dollar's dominance
Take a look at this article for information on the How to Trade the Top 10 Most Volatile Currency Pairs or download the free DailyFX 2Q USD Forecast for comprehensive fundamental and technical insight on the US Dollar over the second quarter

EURUSD overnight implied volatility appears relatively high at 6.17 percent ahead of Eurozone inflation and US nonfarm payroll data due for release tomorrow. This compares to the average of 4.93 percent during April and 5.69 percent year-to-date.

FOREX MARKET IMPLIED VOLATILITY AND TRADING RANGES

Forex Market Volatility Chart EUR, USD, CAD, JPY, GBP, CHF, NZD, AUD

Spot EURUSD trades below the 1.12 handle once again after the latest Fed meeting revealed a less-dovish tilt which casted a shadow over bullish prospects for this currency pair. With GDP data, FOMC and Powell presser risk now in the rearview mirror, forex traders will likely turn to high-impact economic indicators expected during Friday's session to reassess positioning biases.

FOREX ECONOMIC CALENDAR – EURUSD

EURUSD Economic Calendar

Visit the DailyFX Economic Calendar for a comprehensive list of upcoming economic events and data releases affecting the global markets.

Eurozone year-over-year core CPI for April is forecasted to cross the wires at 1.0 percent. If this inflation measure undershoots estimates, EURUSD could slide further seeing that a soft number would likely underpin the ECB's easing bias. On the other hand, a better than expected reading could help the Euro recover from its recent downside.

As for the greenback, another robust US jobs report has potential of reigniting the long-prevailing EURUSD downtrend. Conversely, a materially worse-than-expected number could jeopardize the dollar's recent advance.

Other economic indicators worth watching out of the US included the change in unemployment rate, average hourly earnings and the ISM Services Index.

EURUSD PRICE CHART: 4-HOUR TIME FRAME (MARCH 20, 2019 TO MAY 02, 2019)

Judging by EURUSD overnight implied volatility, forex traders might expect the currency pair to trade between 1.1145 and 1.1217 with a 68 percent statistical probability. However, bearish technical indicators could pose headwinds to EURUSD upside.

For example, support-turned-resistance at the 1.12 handle and the 23.6 percent Fibonacci retracement level drawn from the high and low recorded on March 20 and April 26 respectively might hinder spot prices from advancing.

EURUSD TRADER SENTIMENT PRICE CHART: DAILY TIME FRAME (NOVEMBER 05, 2018 TO MAY 02, 2019)

EURUSD Price Chart Client Positioning Trader Sentiment

Check out IG's Client Sentiment here for more detail on the bullish and bearish biases of EURUSD, GBPUSD, USDJPY, Gold, Bitcoin and S&P500.

According to client positioning data from IG, 54.9 percent of EURUSD traders are net-long with the ratio of traders long to short at 1.22 to 1. While the number of traders net long is 3.5 percent higher than yesterday and 19.5 percent lower than last week, the number of traders net-short is 6.7 percent higher than yesterday and 45.4 percent higher than last week.

TRADING RESOURCES

Whether you are a new or experienced trader, DailyFX has several free resources available to help you: a comprehensive education center, a proprietary indicator for monitoring trader sentiment; informativetrading guides and forecasts; analyticalwebinars held daily, and much more.

– Written by Rich Dvorak, Junior Analyst for DailyFX

– Follow @RichDvorakFX on Twitter

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2019-05-02 21:30:00

Crude Oil Price Breakdown Nears April Low, USDCAD Outlook Lifted

Posted: 02 May 2019 02:05 PM PDT

Talking Points:

– Crude oil prices have snapped their uptrend from the December 2018 low, and in the process have broken through their April low as well.

– The Canadian Dollar is already backpedaling, and a fresh wave of near-term weakness in oil prices could pave the way for more USDCAD strength.

– Recent changes in trader positioning suggest that oil prices may continue lower in the days ahead.

Looking for longer-term forecasts on Oil prices? Check out the DailyFX Trading Guides.

After initially finding a positive catalyst in supply concerns around Venezuela, the tables have turned on oil prices in the second half of the week amid inventory data out of the United States. Last week, crude oil stockpiles have risen to their highest level since September 2017, while at the same time data showed that US production hit an all-time record high at 12.3 million barrels per day.

Trump’s Impact on Oil Prices

While there may have been lingering concerns around the Trump administration's decision to end waivers for countries importing Iranian oil – part of its strategy to see Iran's oil exports eliminated altogether – it seems that the US president is already working Gulf allies to prevent undersupply concerns from coming back into the picture. This is an effort to prevent the undersupply threat from pushing oil prices higher ahead of the commuter-heavy summer season (typically the period of the year with the strongest demand for oil and gasoline).

Earlier, US President Donald Trump said he has communicated with Saudi Arabia "and others" about offsetting the supply impact from Iran, noting that "all are in agreement"; per the most recently available data, this would mean that OPEC+ (including Russia) would need to increase their production by 1.4 million barrels per days (not a difficult task).

Crude Oil Technical Analysis: Daily Price Chart (February 2016 to May 2019) (Chart 1)

The timing of the supply developments for oil prices couldn't be worse, as the technical outlook was already on unsteady ground and now critical support appears to be giving way. Earlier this week it was noted that "Failure to continue the rally here would suggest that oversupply concerns may be becoming more prominent on traders' minds."

Concerns about oversupply appear to be gaining the upper hand. If so, crude oil prices may be biased lower in the coming days now that price has been rejected on its attempt to get back above the trendline from the February 2016 and June 2017 lows.

Crude Oil Technical Analysis: Daily Price Chart (April 2018 to May 2019) (Chart 2)

In our last update we said that "failure to rally here could prove to be a technical death knell for oil prices: a move below last week's low at 62.26 would constitute several key breaks, including: the daily 21-EMA; the uptrend from the December 2018 low; and decisive rejection from the trendline from the February 2016 low. Either way, we're at a key inflection point in the oil market." These "several key breaks" did indeed occur, and momentum is now pointed to the downside.

Now, compounding the initial break in oil prices, the April 5 bullish outside engulfing bar low is under pressure at 61.79. A move below this critical level has increased the likelihood of a return to the April monthly low at 60.08.

IG Client Sentiment Index: Crude Oil Price Forecast (May 2, 2019) (Chart 3)

Oil – US Crude: Retail trader data shows 54.2% of traders are net-long with the ratio of traders long to short at 1.18 to 1. The number of traders net-long is 21.4% higher than yesterday and 27.4% higher from last week, while the number of traders net-short is 27.3% lower than yesterday and 16.6% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Oil – US Crude prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger Oil – US Crude-bearish contrarian trading bias.

And, per the report from earlier this week, USDCAD's Failed Breakout Attempt Hinges on Next Crude Oil Price Move, we finally may be finding resolution now that oil prices are attempting a breakdown.

USDCAD Technical Analysis: Daily Price Chart (September 2018 to May 2019) (Chart 4)

USDCAD price has reversed higher, and it now appears that the recent pullback was simply a retest of former resistance dating back to the yearly high; a symmetrical triangle may have been forming in recent months. Ahead of the US Nonfarm Payrolls report tomorrow, the USDCAD technical outlook has improved in a meaningful way. A retest of the April high at 1.3514 shouldn't be ruled out in the coming days.

Note: for a more detailed, short-term, scalping point of view, as well as the IG Client Sentiment index update for USDCAD prices and positioning ahead of the US Nonfarm Payrolls report, see Currency Analyst Michael Boutros' latest piece, Canadian Dollar Price Outlook: USD/CAD at Weekly High as Loonie Dives.

FX TRADING RESOURCES

Whether you are a new or experienced trader, DailyFX has multiple resources available to help you: an indicator for monitoring trader sentiment; quarterly trading forecasts; analytical and educational webinars held daily; trading guides to help you improve trading performance, and even one for those who are new to FX trading.

— Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher Vecchio, e-mail at cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

View our long-term forecasts with the DailyFX Trading Guides

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2019-05-02 20:32:00

Retailers Warn of Impact from Strong US Dollar

Posted: 02 May 2019 01:26 PM PDT

Stock Market Update:

Foreign exchange has been the top cited negative impact on earnings calls according to FactSet
The US-China trade war and other trade uncertainties have also helped to complicate corporate outlooks
See how IG Clients are positioned on the S&P 500 with Retail Sentiment Data

Stock Market Update: Retailers Highlight Impact from Strong US Dollar

Alongside a few key tech companies, US retailers have highlighted the adverse impact from a strong US Dollar in their first quarter earnings. According to FactSet, concerns around a strong Dollar have only increased from the quarter prior, and the trend could be set to continue if Greenback strength persists.

Source: FactSet

Nike

At the company level, Nike is one retailer that has highlighted headwinds due to foreign exchange rates. "It is important to note that we expect roughly 6 points of FX headwindsin Q4 which would result in low single-digit reported revenue growth. As you may recall in Q4 of last year, we delivered 8% currency-neutral revenue growth with 13% reported revenue growth" Nike CFO Andy Campion said on their March 21, third quarter earnings call.

While Nike warned of an FX headwind as their 2019 fiscal year concludes, the 2020 outlook was more optimistic. "We also see the disparity between currency-neutral and reported revenue growth peaking in Q4 before narrowing significantly as we enter fiscal year 2020 based on current FX rates. As a result, we currently expect the FX headwind on reported revenue to largely dissipate as we enter fiscal year 2020" Mr. Campion continued. Interestingly, Nike's FX outlook contrasts with that of Google's which warned of a stronger Dollar in the coming months.

Hanes

Elsewhere, Hanes Brands had similar findings on the state of FX. "Adverse foreign currency exchange rates for the year are expected to reduce net sales as reported by approximately $115 million compared with last year, up from previous expectations of approximately $60 million" read a company filing of their first quarter earnings – released today. Despite the headwind, Hanes was able to deliver results above expectations – but saw its stock price falter after it revealed a bad debt charge from Heritage Sportswear.

VF Corporation

Like Nike and Hanes, VF Corporation, which owns US brands like Vans, the North Face and Timberland also noted a strong Dollar. In their most recent earnings report, VF financial statements reveal the company's profit was reduced by $681,000 due to currency headwinds – compared to a profit of $737,000 in the year prior. While the $1.5 million swing is unlikely to make or break VF Corporation, it demonstrates the impact of Dollar strength on corporate profits over time.

Trade War Concerns Subside

Unlike FX, US corporations seem to be coming to terms with tariffs and trade wars. Compared to 4Q 2018, fewer firms have thus far warned of adverse impacts from the ongoing economic conflicts. On Thursday, conflicting statements came out of official Chinese media and the Commerce Department of the United States. While the former said the talks may have reached an impasse, the latter was optimistic a deal was near. The two sides will meet again in Washington next week for further talks.

US Dollar, S&P 500 Outlook

With May's FOMC decision in the rearview, it will now look to Friday's release of US Non-Farm Payroll data for guidance. As for the S&P 500, a key technical break and a neutral Fed could mark troubled times ahead. For a deeper look at the S&P 500, Dow Jones and Nasdaq 100 join my equity webinar on Friday.

–Written by Peter Hanks, Junior Analyst for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX

DailyFX forecasts on a variety of currencies such as the US Dollar or the Euro are available from the DailyFX Trading Guides page. If you're looking to improve your trading approach, check out Traits of Successful Traders. And if you're looking for an introductory primer to the Forex market, check out our New to FX Guide.

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2019-05-02 20:10:00