Analyst Articles – Forex News 24

Dow Jones, S&P 500, DAX 30 and FTSE 100 Price Outlook
EURUSD at Risk to Bearish Euro Sentiment and EU-US Trade War Fears
Gold Prices May Fall as Dollar Gains on Fed Policy Bets, Risk Trends
After May Fed Meeting & April NFP, Fed Speakers & April Inflation Due Up

Dow Jones, S&P 500, DAX 30 and FTSE 100 Price Outlook

Posted: 05 May 2019 03:32 AM PDT

Dow Jones, S&P 500, DAX 30 and FTSE 100 Price Outlook:

With FAANG earnings in the rearview, earnings season will lose some of its sway
With a quiet week ahead, the DAX will await trade war news
The FTSE 100 looks to Friday's UK GDP release

Dow Jones Price Outlook: Neutral

Compared to last week, the week ahead should provide relative calm for US equities. The Dow Jones remains beneath record highs unlike its S&P 500 and Nasdaq counterparts. With a lack of domestic data, commentary from the central banks of Australia and New Zealand early in the week may offer some slight influence over the index as they offer their monetary policy outlooks and offer insight on the state of global growth.

View our Economic Calendar for live data releases and event times in the week ahead.

Outside of broader macroeconomic concerns, earnings season remains a factor. Although most of the big players have already reported, Wednesday will see Disney (DIS) offer their financial findings to the market. As roughly 3.5% of the Industrial Average, the stock will have some sway – but sentiment could play a larger role.

Dow Jones Top Performers

Disney has rallied nearly 20% over the last month, doubling the performance of second place JP Morgan. An unexpected miss out of Disney could spoil the stock's recent run and weigh on the Average. Follow @PeterHanksFX on Twitter for an earnings preview and implied volatility of Disney next week.

Looking for a technical perspective on equity? Check out theWeekly Equity Technical Forecast.

Dow Jones Price Chart: 4 – Hour Time Frame (February – May) (Chart 1)

How to Day Trade the Dow Jones

S&P 500 Price Outlook: Neutral

The S&P 500 finds itself in a similar fundamental standing, but with arguably more to lose. The Index was able to print record highs last week, before slipping on a Federal Reserve that was not as dovish as many market participants would have hoped. The Index will look to the same themes as the Dow Jones, but with price at loftier levels and more earnings to come, the group of 500 should experience higher volatility than its blue-chip counterpart.

S&P 500 Price Chart: 4 – Hour Time Frame (February – May) (Chart 2)

How to Trade the S&P 500

DAX 30 Price Outlook: Bullish

Similarly, the German DAX 30 has little to go by from a domestic data perspective. Given the sparse data calendar, any trade war progress or breakdowns could carry greater weight than usual. President Trump has yet to decide on auto tariffs toward the bloc, which leaves a key uncertainty on the horizon that will eventually have to be resolved. Until then, it would seem imprudent to fight the recent price trend.

DAX 30 Price Chart: 4 – Hour Time Frame (February – May) (Chart 3)

FTSE 100 Price Outlook: Neutral

Unlike the DAX, the FTSE 100 has an important data print to look forward to. First quarter GDP is due Friday and is expected at 1.4%. Last week the Bank of England raised some concern regarding their commentary on future rate moves, so GDP will play an important role in the monetary policy path of the economy.

FTSE 100 Price Chart: 4 – Hour Time Frame (January – May) (Chart 4)

Finally, one theme may impact equities across the globe in the week ahead. After months of negotiations, the US and China are apparently approaching a resolution to their trade war. The deal was first scheduled at the end of May, but rumors have surfaced that Friday may be the date. With that in mind, trade wars will be an important theme to watch.

As the saying goes, a rising tide floats all boats, and a US-China trade deal would amount to such a tide. One caveat is the particulars of the deal. Some market participants have criticized the USMCA agreement for its lack of change from NAFTA. If few changes are inked in the US-China deal, jubilation could be limited.

–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.

Other Weekly Fundamental Forecast:

Australian Forecast: Australian Dollar Could Face First RBA Rate Cut Since August 2016

GBP Forecast: Sterling (GBP) Price Outlook: Brexit Anger May Dampen Sterling Strength

Gold Forecast: Prices May Fall as Dollar Gains on Fed Policy Bets, Risk Trends

Euro Forecast: EURUSD at Risk to Bearish Euro Sentiment and EU-US Trade War Fears

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2019-05-05 10:00:00

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EURUSD at Risk to Bearish Euro Sentiment and EU-US Trade War Fears

Posted: 04 May 2019 09:16 PM PDT

Euro Price Fundamental Forecast: Bearish

Euro struggles finding momentum on improving Eurozone data
Fundamental risks appear tiled to the downside for EUR/USD
EUR/USD vulnerable to bearish contrarian sentiment signals

Trade all the major global economic data live and interactive at the DailyFX Webinars. We'd love to have you along.

Euro Weekly Wrap

Italy climbed out of a technical recession and euro-region economic growth doubled from the fourth quarter this past week. On the chart below, overall economic outcomes in Europe have been disappointing by smaller margins. Yet, EUR/USD could not find meaningful upside momentum as it spent most of the past five days trading sideways.

This was partially due to the Fed which surprised less-dovish than what the markets were expecting, leading to US Dollar gains and weakness in the S&P 500. Rounding it off on Friday, the Euro didn't pay much attention to better-than-expected April Eurozone CPI data. Rather, it tuned in to broad US Dollar weakness following a mixed local jobs report that saw bond yields fall and the S&P 500 rise in risk-on trade.

Euro Week Ahead

That the Euro was struggling to find much upside momentum last week on what has been improving regional economic data is a sign of caution. In the end, this comes down to how it can impact the ECB's monetary policy and for now, it seems that a rate hike this year looks unlikely. The path forward will depend on more consistency in rosy statistics.

Thankfully the Citi Economic Surprise Index for the nation-bloc is heading towards positive territory, meaning that improving data outcomes ahead could cool growth slowdown fears. The docket is lighter this week though, with a batch of factory orders, industrial production and trade data out of Germany. For additional highlights, keep an eye on the European Commission economic forecasts on Tuesday.

Still, this may not offer enough upside momentum given a lack of critical data and there exists plenty of external risks for the Euro in the medium-term such as the European Parliament elections this month. But in the near-term, as the US perhaps anticipates reaching a trade accord with China by Friday, across the Atlantic fears of a new one are brewing.

If US President Donald Trump shifts his tariff-oriented external policy towards the EU, with using the one with China as a frame of reference, the shroud of uncertainty encompassing global trade could yet be fully lifted. As of Friday, Mr Trump said that he is undecided on EU auto tariffs. This also comes at a time when higher crude oil prices could hurt European growth given that it is an overall net importer of petroleum.

EUR/USD Bearish Sentiment Bias

On the next chart below, retail trader data shows that 60.6% of EUR/USD traders are net-long. With positioning being further net-long than last week, the combination of sentiment and recent changes offers a stronger EUR/USD-bearish contrarian trading bias. If you are interested in this, join me every week on Wednesday's at 00:00 GMT as I uncover what positioning has to say about the prevailing market trends!

Euro Trading Resources:

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

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

Other Weekly Fundamental Forecast:

Australian Forecast: Australian Dollar Could Face First RBA Rate Cut Since August 2016

GBP Forecast: Sterling (GBP) Price Outlook: Brexit Anger May Dampen Sterling Strength

Gold Forecast: Prices May Fall as Dollar Gains on Fed Policy Bets, Risk Trends

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2019-05-05 04:00:00

Gold Prices May Fall as Dollar Gains on Fed Policy Bets, Risk Trends

Posted: 04 May 2019 03:28 PM PDT

GOLD FUNDAMENTAL FORECAST: BEARISH

Gold prices idle as FOMC, US jobs data offer divergent drivers
US CPI, Powell commentary likely to scatter Fed stimulus hopes
Global slowdown fears may drive haven demand for US Dollar

Check out the latest US Dollar forecast and see what is expected to drive prices through mid-year!

Gold prices struggled for direction last week, torn between competing influences from the FOMC monetary policy announcement and April's US jobs report. The former sent prices lower as Chair Powell signaled the central bank's outlook is firmly set at "neutral", pushing back against recently growing speculation about a rate cut on the horizon. The latter offered a mixed view of the labor market, allowing for a bounce.

While headline payrolls growth registered north of expectations, the jobless rate seemingly fell for the wrong reason as labor force participation shrank and wage inflation printed slower than analysts projected. The markets seemed to focus on the downbeat aspects of the data set, with gold rising as a parallel drop in bond yields and the US Dollar bolstered the relative appeal of non-interest-bearing and anti-fiat assets.

This selective reading probably reflects a built-in desire for retracement before the week-end. The FOMC produced a sizable down move and placed prices squarely at trend support. An unmistakable signal from the jobs data was likely needed to deliver a decisive breakout, especially just ahead of the weekly close. Without such conviction, a correction may have been the de facto default response.

GOLD MAY FALL ON US CPI, POWELL SPEECH, GLOBAL SLOWDOWN FEARS

As the new week begins however, it is the Fed that is likely to have offered prices the longer-lasting catalyst. Scheduled commentary from Mr Powell may reinforce the central bank's dubious stance on easing. That might be reinforced by incoming CPI data. It is expected to show that the headline and core measures of inflation moved to 2.1 percent in April, putting them close enough to target for the FOMC to stand aside.

Meanwhile, external news-flow may stoke global slowdown fears. Monetary policy decisions from the RBA and the RBNZ are likely to strike a downbeat tone. Chinese PMI numbers may underscore sluggish performance in the world's second-largest economy. Finally, the European Commission looks likely to downgrade official EU economic forecasts.

On balance, all this bodes well for the Dollar, and thereby threatens gold. Worries about a downshift in the business cycle might animate de-risking, and the greenback will have relatively little to keep it from capitalizing on haven flows if the Fed is thought to eschew stimulus (at least in the near term). A stronger Greenback is anathema to the yellow metal, a go-to alternative to paper currency.

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

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

US DOLLAR TRADING RESOURCES

Other Weekly Fundamental Forecast:

Australian Forecast: Australian Dollar Could Face First RBA Rate Cut Since August 2016

GBP Forecast: Sterling (GBP) Price Outlook: Brexit Anger May Dampen Sterling Strength

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2019-05-04 22:00:00

After May Fed Meeting & April NFP, Fed Speakers & April Inflation Due Up

Posted: 04 May 2019 02:50 PM PDT

Fundamental Forecast for the US Dollar: Neutral

– After the May Fed meeting and the April US jobs report, odds of a 25-bps rate cut in 2019 by the Federal Reserve have fallen to exactly 50%, per Fed funds futures contracts.

– A slew of Fed policymakers will hit the lecture circuit this week, while the only 'high' rated data release is the April US inflation report due on Friday;

– The IG Client Sentiment Indexshows that retail traders remain mostly net-short the US Dollar.

See our long-term forecasts for the US Dollar, Euro, Gold, Crude Oil, and more with the DailyFX Trading Guides.

US Dollar Rates Week in Review

What appeared to be a strong end to the month of April for the US Dollar (via the DXY Index) faded away into a weak start at the beginning of May. The US Dollar lost ground against all but two of the other major currencies this past week, posting modest gains against the Australian and New Zealand Dollars (AUDUSD -0.34%, NZDUSD -0.23%).

Otherwise, with signs of a potential positive Brexit breakthrough coming late in the week, the British Pound was able to lead the way higher versus the greenback (GBPUSD 1.99%). US Dollar weakness after the April US jobs report also filtered through in preventing a major breakdown in gold prices for the time being.

In Aftermath of May Fed Meeting, 2019 Rate Cut Odds Fall

At the press conference following the May Fed meeting on Wednesday, Fed Chair Jerome Powell said that low inflation was "transitory" and not "persistent." Market participants have largely interpreted this as a sign that the likelihood of a 25-bps rate cut this year is lower than previously expected. At their peak following the March Fed meeting, rates markets were pricing in a 58% chance of a 25-bps rate cut in September; now, odds of a September cut are only 26%. To this end, Fed funds are only pricing in a coin flip's chance of a cut in 2019.

Fed Speeches to Watch For

Now that the May Fed meeting is in the rearview mirror, the blackout period for Fed policymakers is over and several will hit the lecture circuit in the week ahead. On Monday, May 6, Philadelphia Fed President Patrick Harker will give a speech on the US economic outlook. On Tuesday, May 7, Dallas Fed President Robert Kaplan will speak at a panel in Beijing, China. On Wednesday, May 8, Fed Governor Lael Brainard will make the opening remarks at the `Fed Listens’ event.

The second half of the week is backloaded with Fed speakers as well. On Thursday, May 9, Fed Chair Powell will give the opening remarks at a Fed community development conference. Chicago Fed President Charles Evans will speak at the same event later in the day, as will Governor Brainard on Friday, May 10. Also, on Friday, New York Fed President John Williams will speak at a breakfast event in New York City.

April US Inflation Data Due Friday; Inflation Expectations Have Stabilized

The April US Consumer Price Index on Friday is due to show another small rebound in price pressures, not much of a surprise given the rise in oil prices since the start of 2019. According to Bloomberg News, headline CPI is expected in at 2.1% from 1.9%, and core CPI is due in at 2.1% from 2% (y/y). Overall, the readings are due right at the Federal Reserve's medium-term target of +2% – supporting Fed Chair Powell's assessment at the May Fed meeting that low inflation seen earlier this year was "transitory."

But with the oil price rebound moderating over the past few weeks, inflationary gains are due to be limited. Crude oil prices fell by -1.8% between April 5 and May 3, down from 63.08 to 61.94. In turn, medium-term US inflation expectations, as measured by the 5y5y inflation swap forwards, are off by -0.3-bps from 2.260% to 2.257% over the past month.

US-China Trade War Talks Update

US President Donald Trump ended the week saying that the US-China trade war negotiations were going "very well," noting that "we're getting close to a very historic, monumental deal." While certainly a boost of optimism that investors surely liked to hear, the US president also said in the same breath that "if it doesn't happen, we'll be fine too. Maybe even better."

These comments come on the heels of interim White House Chief of Staff Mick Mulvaney saying on Tuesday, April 30 that the US-China trade war negotiations would be resolved "one way or the other in the next couple weeks."

Traders may want to keep on eye on USDCNH prices as a litmus test in the near-future: China has used devaluation as a tool to ward off the effects of the tariffs, so Chinese Yuan strength (USDCNH weakness) may be interpreted as a sign that the trade talks are nearing a positive resolution; Chinese Yuan weakness (USDCNH strength) may be interpreted as a sign that the trade talks are nearing a negative resolution.

US Dollar Futures Positioning Remains Net-Long

Finally, looking at positioning, according to the CFTC's COT for the week ended April 30, speculators increased their net-long US Dollar positions to 29K contracts, up from the 28.8K net-long contracts held in the week prior. Net-long US Dollar positioning has barely wavered since the start of the year: traders held 32.4K net-long contracts on January 1; and positioning remains below its 2018 high set during the week ended November 13 at 40.5K net-long contracts.

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, email him at cvecchio@dailyfx.com

Follow him in the DailyFX Real Time News feed and Twitter at @CVecchioFX

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2019-05-04 16:00:00