Analyst Articles – Forex News 24

EUR/USD Outlook Biased Lower With EUR/JPY Facing Flash Crash Lows
Which is More Critical Measure of Stability Amid Trade Wars?
AUD/USD Rate Outlook Hinges on RBA Amid Bets for 25bp Rate Cut
June RBA Rate Decision & AUDUSD Price Forecast
Investors Flee Risky Corporate Debt Amid Rout
What Can the Fed, ECB and BOJ do to Offset Trade Wars?
Gold Price Bullish Breakout Begins amid Topside Range Breach
Bearish Trend to Continue on Break Below 1.0008
Dollar Coiling; Euro, Pound, and Silver Price Charts for Next Week

EUR/USD Outlook Biased Lower With EUR/JPY Facing Flash Crash Lows

Posted: 31 May 2019 10:08 PM PDT

Euro Technical Forecast Talking Points

Near-term bullish signals hint EUR/USD may trade higher ahead
Medium-term EUR/USD technical signs still offer bearish outlook
EUR/JPY may fall to "flash crash" lows given bearish trading bias

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 theDailyFX Webinars. We'd love to have you along.

EUR/USDChart Outlook

This past week, the Euro continued trading within the boundaries of a Descending Triangle against the US Dollar. After the ceiling of the bearish candlestick pattern held, EUR/USD tested the floor just above 1.1110 as anticipated. In the week ahead, there may be a good chance that there will be another retest of the descending resistance line that has held since the middle of April.

That is because on the daily chart, EUR/USD left behind a bullish Morning Star that was accompanied by positive RSI divergence. The latter indicates fading momentum to the downside and can precede a turn higher. But, due to the Descending Triangle, I believe that the technical outlook in EUR/USD is bearish in the medium-term, overshadowing near-term bullish price signals.

Should there be a breakout to the upside, keep a close eye on 1.1262 as it could act as near-term resistance. Otherwise, down the road, a descent through support at 1.1110 opens the door to eventually testing lows seen back in April 2017. You may follow me on Twitter here @ddubrovskyFX for timely fundamental and technical Euro updates.

EUR/USD Daily Chart

EUR/JPYChart Outlook

Unlike EUR/USD, the Euro brushed off bullish technical signals that hinted of a bottom against the Japanese Yen. Fundamentally, this likely owed to the anti-risk behavior in the Yen as fear of trade wars overwhelmed markets towards the end of last week. The roughly 0.7% drop in EUR/JPY on Friday fell through support, overturning positive RSI divergence that was initially hinting of a turn higher.

This leaves EUR/JPY facing the "flash crash" lows seen in the beginning of the year, where prices stopped short of 118.66 before quickly recovering. These are levels not seen since April 2017 as the currency pair continue to close at new lows this year. Meanwhile, a falling trend line from the middle of April is guiding EUR/JPY to the downside.

This resistance line is a clear hurdle for the pair to overcome in the event of a turn higher. But also, there is the psychological barrier, a range between 122.40 and 122.99, that is in the way of upside progress. Those are also lows touched back in May and June of 2017. If EU/JPY continues its progress lower, keep an eye for areas where it pauses. These will likely create new key support levels.

EUR/JPY Daily Chart

* Charts created in TradingView

EUR/JPY Bearish Sentiment Signals

As EUR/JPY fell over 4.5% since the peak in mid-April, IG Client Positioning showed increased net-long positioning in the currency pair. This reflected higher bets that the currency could bottom, which is typically seen as a bearish-contrarian trading bias. This signal recently offered a stronger downside-contrarian outlook, complementing the bearish technical outlook in EUR/JPY on the next chart below.

Join me each week on Wednesday's at 00:00 GMT as I reveal what else trader positioning has to say about prevailing trends in currencies, equities and commodities!

EUR/JPY IG Client Positioning

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

http://platform.twitter.com/widgets.js
2019-06-01 05:00:00

Can you get luxurious from fx trading? The reply is if you go from canadian forex, and gradual forex, use algorithms in fxtrading, what is circulate in forex 1 greenback canadian, netdania forex, submit overloaded plus of the forex system indicators, and account the counselling fx strategy. We present win win all.

Which is More Critical Measure of Stability Amid Trade Wars?

Posted: 31 May 2019 08:48 PM PDT

Reversal Talking Points:

President Trump’s tweet about a 5 percent blanket tariff on all Mexican imports added a material sense of despair to risk Friday
As the permanent damage of an ongoing trade war sinks in, fears over the economy and effective stabilizers grows
Themes may override event risk for market influence, and the Dollar may ultimately prove the biggest victim in this scrum

See how retail traders are positioning in the Dow and S&P 500 following their tentative technical reversal along with the FX majors, other indices, gold and oil intraday using the DailyFX speculative positioning data on the sentiment page.

Risk Aversion May Finally Overcome Apathy to Dramatic Result

The greatest restraint on the markets these past weeks and months has not been a lack of quality technical levels nor influential fundamental themes. In fact, we have sported an abundance of both across most of the benchmarks for risk assets. The firebreak between catalyst and substantial market movement has instead been a general apathy towards changing winds that has capped meaningful moves before they could ever build a head of steam. Complacency is a difficult trait in a market to find its origin, to find its borders and to determine its breaking point. And yet, its influence is unmistakable. From what we have seen this past week, we may be experiencing the strongest bid to break the inertia that we’ve seen so far this year. The evidence of this shift in sentiment is best measured in the charts. I start with speculative benchmarks in the US indices. The Dow and S&P 500 put in unmistakable technical reversals this past week with the break of ‘necklines’ on very prominent head-and-shoulders patterns. Initial breaches have not been our trip point for new trends, but rather the like of significant follow through after the high profile move. It seemed we were heading for that familiar and frustrating pattern until Friday issued another strong and productive drive lower.

Chart of S&P 500 and Opening Gaps (Daily)

With a Friday gap lower – the 12th in the past 18 trading days – the S&P 500 and Dow made another strong push against their overt reversal patterns. That move would also close out the month of May which was the third worst monthly performance for the broader index in 7 years – and all three of those sharp losses were registered in the past 7 months. The more evidence that accumulates behind a bearish shift, the higher the probability that the sentiment swing proves permanent. Meanwhile, the breadth behind the market’s struggles has indicated trouble long before the US equity markets capitulated. Rest-of-world equities have traded at a stark discount to their US peers, particularly since this year’s recovery effort. The German DAX, French CAC, Italian FTSE MIB and Japanese Nikkei 225 all projected their pain through Friday. Junk bonds, commodities, carry trade and global government bond yields all followed suit, falling form significantly lower levels than the Dow. There is a lot to learn from the exceptions, so the fact that the EEM emerging market ETF held steadfast perhaps indicates a sense of relief found via the aggressively dovish swing in Fed rate forecasts.

Chart of Relative Performance for SPX, Carry Trade, Emerging Markets and More (Daily)

Dow or Dollar: Which is More Critical Measure of Stability Amid Trade Wars?

The progression of bearish evidence of late – from the reversal from record highs on May 1st to the head-and-shoulders ‘neckline’ break this past Wednesday to the charge of follow through on Friday – signals deepening conviction. However, even a string of technical milestones doesn’t ensure a systemic change in both bias (bullish to bearish) and intent (range to trend). Trading with a sense of caution and recognition of the probabilities is still the appropriate approach as we look for fundamental footholds to ensure the changing of the guard.

In Order of Prominence: Trade Wars; Recession Risks; Central Bank and Government Impotency

As we watch the market assess its delicate balance of risk exposure against the hope for further returns (income and capital gains), the most definitive charges of confidence or pessimism will come via key fundamental themes. At the top of the list for influence in the week ahead is the familiar trade war banner. The US-China economic conflict is still the largest notional tab – no surprise as it involves the world’s two largest economies. China’s tariff hike from 10 to 25 percent on the $60 billion in US imports took effect Saturday morning, June 1st. That was retaliation for the United States instituting the same jump in import tax for the $200 billion in Chinese goods on its list. Looking to mirror the Trump administration’s more unorthodox policies, it was also reported that the country had prepared a list of American companies it was preparing to ban and was prepared to use rare earth materials as a tool. Expect headlines between these two countries’ troubled relationships to show up unexpectedly and command further periods of volatility.

Chart of USDCNH and FXI China ETF Volatility Index (Daily)

Dow or Dollar: Which is More Critical Measure of Stability Amid Trade Wars?

Where the US-China engagement is a steadily unfolding issue, the leading edge of trade wars as a market-wide threat is the recent flare up between the United States and Mexico. Up until President Trump’s unexpected tweet on Thursday, it seemed that the North American neighbors were finally finding their way out of a self-imposed trade dispute. The White House announced it was lifting the steel and aluminum tariffs on Canada and Mexico a few weeks ago, ostensibly to move forward the USCMA (replacement for the NAFTA accord). All of that optimism came crashing down however Thursday evening when the President announced in a brief social media update that he would apply a blanket 5 percent tariff on all Mexican imports starting June 10th. We learned Friday that this was a decision made against the advisement of key senior officials (Lighthizer and Mnuchin) and that US businesses were bringing legal pressure to force a change in course. Trump stated that the move is in response to illegal immigration which has brought Legislative complaint. With all the blowback, it would seem a walk back a high probability. However, this administration has made clear it was willing to break from convention to get its point across.

Chart of USDMXN and 20-day Moving Average (Daily)

Dow or Dollar: Which is More Critical Measure of Stability Amid Trade Wars?

Trade may be the most overt theme, but it isn’t the only one to keep track of next week. Economic activity is a theme slowly gaining traction against the backdrop of sentiment and data. Most of the official 1Q GDP figures have already crossed the wires and now we are due less official monthly figures like PMIs and NFPs in the week ahead. With Fed surveys, consumer sentiment reports and business groups all warning of economic strain under the burden of range of issues, the trade wars seem a point of unnecessary provocation. And, the more likely a stall or correction in the global economy seems, the greater the interest in stabilizing forces. Governments’ in-fighting while countries find themselves increasingly at odds with each other, a true reliance on something like the US infrastructure spending program should worry. Monetary policy is a more familiar and actively-used tool, but it has been used to the point of disrepair. Anticipation of further easing by the major authorities when we are already at or close to emergency settings should raise serious concerns.

Systemic Fears Vs Scheduled Event Risk for the Dollar, Euro, Pound and Yen

Pulling back from the market-wide issues, there are a host of crucial fundamental issues for which FX traders and regional investors should be mindful. The Euro and Pound have been in something of a holding pattern of late, but that could very well change in the week ahead. For the world’s second largest economy, the ECB rate decision and Eurozone unemployment rate are just a few of the data-oriented updates we are due. My real interest is in the scale of tension between Italy and the European Community moving forward. The country’s leadership has made clear it intends to breach financial restrictions with Deputy Prime Minister Salvini warning the EU could fine Italy 3 billion euros for the transgression. The EC is due to review the country’s financial position on Wednesday. As for the British Pound, Parliament is due back from recession and the Conservative Party has to step up its leadership decision with Prime Minister May due to step down on Friday. Most believe that the PM resignation and EU Parliamentary election results significantly raises the risk of a ‘no-deal’ Brexit that hurts local markets.

Chart of EURGBP (Daily)

Dow or Dollar: Which is More Critical Measure of Stability Amid Trade Wars?

As the risks mount and distinct caveats alter the shape of the market’s landscape, the need for appropriate safe havens grows more important. One of the currencies which seems to draw a defacto simple haven moniker – a designation ill-deserved – is the Japanese Yen. Historically, this currency correlates to risk aversion flows as speculative interests are unwinding carry trade funded through a short Yen position, but there isn’t much carry trade to burn at the moment. Nevertheless, my equally-weighted Yen index has extended a remarkable two-month drop to trade at lows not seen since the January 3rd flash crash with a low not seen since November 2016 on a closing basis. Another unusual haven of interest to me is the Swiss Franc. This currency is similarly loaded with fundamental flaws, but it also happens to be a familiar unit with substantial liquidity without the troubling connection to full-tilt trade wars (Dollar), systemic stability risks (Euro) or crashing through a delicate economic separation (Pound). Then there is of course Gold which is the alternative to risk aversion that happens to come alongside a recognition of broad financial instability. It was hard to miss the Friday surge from the metal above $1,300.

Chart of Equally-Weighted Yen Index (Daily)

Dow or Dollar: Which is More Critical Measure of Stability Amid Trade Wars?

Perhaps one the most conflicted but important currencies to monitor moving forward is the US Dollar. The currency is still a safe haven owing to the unmatched size of its economy and the depth of its markets – particularly Treasuries and money markets. When the markets are crashing, appetite for these anchored assets will bolster the Dollar as it facilitates the foreign purchases. However, short of a systemic wipe out, the Dollar has unmistakable issues. Its economic forecast is dropping quickly and the rate forecast for the Fed shows an official Fed Funds futures outlook for three cuts through the end of next year but reliable bank teams are starting to favor multiple cuts before this year is out. That would be an extreme course reversal, so if that is your baseline, it would likely also accompany some significant degree of financial crisis. The most important consideration for the Greenback moving forward – one that will also be overlooked as it is more abstract – is the gradual faltering of the benchmark currency owing to its position at the center of so many trade and political conflicts. Trade partners are increasingly forced to find alternatives to transacting in the Dollar. With the Mexico tariff move, the risk of a collective retaliation has risen sharply (China was always going to struggle with mustering sympathy). We discuss all of this and more in this weekend Trading Video.

Chart of DXY Dollar Index and Implied Fed Funds Futures Yield for Dec 2020 (Daily)

Dow or Dollar: Which is More Critical Measure of Stability Amid Trade Wars?

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

2019-06-01 03:28:00

AUD/USD Rate Outlook Hinges on RBA Amid Bets for 25bp Rate Cut

Posted: 31 May 2019 03:20 PM PDT

Australian Dollar Talking Points

AUD/USD appears to be stuck in narrow range ahead of the Reserve Bank of Australia (RBA) meeting on June 4, but fresh developments coming out of the central bank is likely to shake up the near-term outlook for the Aussie Dollar exchange rate amid bets for a 25bp rate-cut.

Fundamental Forecast for Australian Dollar: Neutral

AUD/USD holds above the monthly-low (0.6865) despite signs of slowing activity China, Australia's largest trading partner, and the exchange rate may continue to congest over the coming days as the RBA insists that 'a further decline in the unemployment rate would be consistent with achieving Australia’s medium-term inflation target.'

It remains to be seen if the RBA will reduce the official cash rate (OCR) to a fresh record-low as recent data prints indicate a robust labor market, and Governor Philip Lowe & Co. may merely attempt to buy more time as 'the central forecast scenario remained for progress to be made on the Bank’s goals of reducing unemployment and returning inflation towards the midpoint of the target.' In turn, more of the same from the RBA may ultimately keep AUD/USD afloat as the central bank appears to be in no rush to reestablish its rate cutting cycle.

However, it seems as though it will only be a matter of time before Governor Lowe & Co. take additional steps to insulate the economy as officials retain a dovish forward-guidance and insist that 'without an easing in monetary policy over the next six months, growth and inflation outcomes would be expected to be less favourable than the central scenario.'

With that said, the RBA may take a preemptive approach in managing monetary policy especially as the U.S. and China struggle to reach a trade deal, but the recent rebound in AUD/USD appears to be shaking up market participation, with retail sentiment coming off an extreme reading.

The IG Client Sentiment Report shows65.9%of traders are now net-long AUD/USD compared to 69.4% earlier this week, with the ratio of traders long to short at 1.94 to 1. In fact, traders have been net-long since April 18 when AUD/USD traded near 0.7160 even though price has moved 3.4% lower since then.

The percentage of traders net-long is now its lowest since Apr 19 when AUDUSD traded near 0.71507. The number of traders net-long is 3.1% lower than yesterday and 12.3% lower from last week, while the number of traders net-short is 10.4% higher than yesterday and 65.7% higher from last week.

The tilt in the sentiment index offers a contrarian view as AUD/USD continues to track the bearish trend from late last year, but the jump in net-short position suggest the retail crowd is positioning for range-bound conditions as the exchange rate fails to extend the rebound from the monthly-low (0.6865).

AUD/USD Rate Daily Chart

Keep in mind, the AUD/USD rebound following the currency market flash-crash has been capped by the 200-Day SMA (0.7130), with the exchange rate marking another failed attempt to break/close above the moving average in April.

In turn, AUD/USD remains at risk of giving back the rebound from the 2019-low (0.6745) as the wedge/triangle formation in both price and the Relative Strength Index (RSI) unravels, with the Fibonacci overlap around 0.6850 (78.6% expansion) to 0.6880 (23.6% retracement) still on the radar the exchange rate struggles to push back above the 0.6950 (61.8% expansion) pivot.

Next downside hurdle comes in around 0.6730 (100% expansion), but will keep a close eye on the RSI as the oscillator bounces back from oversold territory, with the development raising the risk for a larger rebound in the aussie-dollar exchange rate.

Additional Trading Resources

Are you looking to improve your trading approach? Review the 'Traits of a Successful Trader' series on how to effectively use leverage along with other best practices that any trader can follow.

Want to know what other currency pairs the DailyFX team is watching? Download and review the Top Trading Opportunities for 2019

— Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong.

2019-05-31 22:00:00

June RBA Rate Decision & AUDUSD Price Forecast

Posted: 31 May 2019 12:48 PM PDT

RBA Rate Decision Talking Points:

The Reserve Bank of Australia meets on Tuesday, June 3 at 04:30 GMT; rates markets are pricing in a 38% chance of a 25-bps rate cut.
Price action in AUDUSD has been choppy of recent, and now the downturn in place since mid-April may be coming to an end.
Retail tradershave remained net-long since April 18 when AUDUSD traded near 0.71738; AUDUSD price has moved 2.2% lower since then.

Join me on Mondays at 7:30 EDT/11:30 GMT for the FX Week Ahead webinar, where we discuss top event risk over the coming days and strategies for trading FX markets around the events listed below.

06/04 TUESDAY | 04:30 GMT | AUD RESERVE BANK OF AUSTRALIA RATE DECISION

Since the last Reserve Bank of Australia rate decision on May 7, economic data trends have proved disappointing. The Citi Economic Surprise Index for Australia, a gauge of economic data momentum, fell from 43.9 on May 7 to 26.9 on May 31. While there was neither a GDP nor an inflation report released, the data that did come out proved middling at best. March Australia retail sales grew by 0.3% after adding 0.9% in February (m/m), while the April Australia jobs report showed a strong topline figure that was undercut by a surprise rise in the unemployment rate.

In the interim period since the last RBA meeting in May, rates markets have continued to pull forward expectations of a 25-bps rate cut into the first half of 2019. After the May RBA meeting, there was a 59% chance of a 25-bps rate cut in June; currently, those odds sit at 93%.

Given that market pricing is very tight as is –there is a 70% chance of a second 25-bps rate cut by September (overall, a 79% chance of two cuts in 2019) – it will take a lot for the RBA to not disappoint steep dovish expectations. When a policy decision is priced-in this far in advance, it shouldn't be a surprise if the corresponding currency (in this case, the Australian Dollar) doesn't respond with a significant price reaction.

Pairs to Watch: AUDJPY, AUDNZD, AUDUSD

AUDUSD Technical Analysis: Daily Timeframe (June 2018 to May 2019) (Chart 1)

A technical analysis overview of AUDUSD prices showcases a currency pair that may be attempting to bottom. Price is currently enmeshed in the daily 8-, 13-, and 21-EMA envelope; AUDUSD has closed below the daily 21-EMA since April 22. But with the daily 21-EMA being tested for the first time in five-weeks, there is tangible technical evidence that a turn may be in the midst of its early stages (helped by broad US Dollar weakness).

A move back above the daily 21-EMA at 0.6944 would increase the likelihood of a return back to the former 2019 closing low established in January at 0.6982. Otherwise, if AUDUSD were to fall below 0.6899 (the low during the last week of May), then traders may want to rethink the perspective that prices are bottoming out.

IG Client Sentiment Index: AUDUSD Price Forecast (May 31, 2019) (Chart 2)

AUDUSD: Retail trader data shows 77.7% of traders are net-long with the ratio of traders long to short at 3.49 to 1. In fact, traders have remained net-long since April 18 when AUDUSD traded near 0.71738; price has moved 2.2% lower since then. The percentage of traders net-long is now its highest since Apr 25 when AUDUSD traded near 0.70185. The number of traders net-long is 9.5% higher than yesterday and 7.7% higher from last week, while the number of traders net-short is 16.8% lower than yesterday and 4.8% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests AUDUSD 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 AUDUSD-bearish contrarian trading bias.

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

http://platform.twitter.com/widgets.js
2019-05-31 19:30:00

Investors Flee Risky Corporate Debt Amid Rout

Posted: 31 May 2019 12:11 PM PDT

S&P 500 Outlook:

S&P 500 Outlook: Investors Flee Risky Corporate Debt Amid Rout

The risk appetite of investors is waning as the S&P 500 and Dow Jones continue to slide. On Wednesday, the HYG ETF – which grants exposure to high yield corporate debt – registered its largest daily net outflow in 2019. The outflows effectively double down on the same theme that has sparked an unwillingness for many market participants to maintain exposure in riskier trades like Tesla and Uber.

Investors Shed High Yield Corporate Debt Exposure

Data source: Bloomberg

Wednesday's outflow of -$700 million was the largest on a single-day basis since December 21, when traders reduced their exposure to HYG by -$864 million. In the year-to-date, the HYG ETF has returned 5.11% – compared to roughly 10% for the S&P 500. During this period, HYG has seen its net flows total $884 million, despite shedding -$1.06 billion this week alone. Interestingly, investor allocation to the largest broad-market tracking funds has shrunk in the year-to-date.

Broad Market Exposure Cast Aside

Data source: Bloomberg

While investors have expressed demand for the riskier HYG fund for the year, net capital flows for the largest Index-tracking funds have dwindled in 2019. SPY, IVV and VOO, which boast a collective $536 billion in assets under management, have seen a total of -$6.3 billion leave their coffers in the first five months of 2019. Prior to May, the funds registered inflows nearing $10 billion – but a total net outflow of -$16.3 billion in the last month has shattered the capital allocation trend.

Check out the DailyFX Trading Guides page for quarterly forecasts, educational content and more.

The lack of demand – despite an overall market gain of roughly 10% – highlights the shift in the perceived risk-reward ratio of the stock market at current valuations. With trade wars and slowing global growth, yield curve inversions and surprise tariffs, the optimism of many investors has been battered. Until some of these headwinds are resolved or there are newfound reasons for optimism, the "Sell in May and Go Away" theme is poised trickle into June.

–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.

http://platform.twitter.com/widgets.js
2019-05-31 19:00:00

What Can the Fed, ECB and BOJ do to Offset Trade Wars?

Posted: 31 May 2019 11:35 AM PDT

Central Bank Weekly Talking Points

As the US-China trade war has escalated, the PBOC has reverted to boosting the USDCNH exchange rate to offset the impact of the Trump tariffs.
Central banks like the BOJ and SNB have to be more clever in trying to intervene in markets, unlike the PBOC.
Meanwhile, if the Fed or the ECB were to act, it would likely be along the interest rate channel rather than directly in FX markets.

Looking for longer-term forecasts on the US Dollar? Check out the DailyFX Trading Guides.

Trade tensions are rising in every corner of the globe. At the center of every issue seems to be the United States, be they issues with China, the European Union, Canada, or Mexico. As the specter of trade wars rises, we've started to see policymakers take steps – some concrete, others less so – in order to shore up their economies from downside risks.

Not all central banks are created equally, however, and therefore the tactics that they've used, they're currently using, and they will use in the future will all differ slightly.

People's Bank of China Reverts to Currency Intervention

The People's Bank of China is unique relative to G7 or developed economies' central banks insofar as it does not respect the 'non-direct FX intervention' policy followed elsewhere. Accordingly, USDCNH has become one of the most reliable tools for distilling sentiment about the US-China trade war: we've previously detailed how a Chinese Yuan depreciation can effectively offset the negative economic impact of the Trump tariffs.

Other Degrees of Central Bank Interference

With other central banks bound to no direct intervention in FX markets, policymakers at some of the major central banks need to be creative in how they approach markets.

Due to the soft growth and inflation environment that persists in countries like Japan and Switzerland, for example, market participants are well-versed in the knowledge that interest rates maintained by the Bank of Japan and Swiss National Bank will be staying at or below zero for an extended period.

In turn, surprise actions like what the SNB did with the EURCHF floor in September 2011 and January 2015 tend to be the most effective way to impact markets.

How Will the Fed Respond to Trade Wars?

But for central banks like the Federal Reserve or European Central Bank, there is too much global reliance on the stability of asset prices in order to dramatically surprise market participants. Instead, these central banks move at a more glacial pace: once every three months, new growth, inflation, and jobs forecasts are produced that yield guidance on the forward path of interest rates. Policy is more predictable.

If the Fed is going to get involved in trade wars, then it is highly likely that it will do so along the interest rate route rather than directly intervening in USDCNH like the PBOC or making a surprise policy announcement akin to the BOJ or SNB. To this end, traders would be wise to watch how US rates markets have evolved in recent days as trade war concerns have skyrocketed.

Fed Funds Pricing Two Potential Rate Cuts in 2019

The probability of a rate cut in 2019 has increased in a materially significant over the past week. Ahead of the May Fed meeting, there was a 68% chance of a 25-bps rate cut by the end of the year; now those odds have risen to 91%. In fact, Fed funds futures are pricing in a 71% chance of a cut by September and a 63% chance of a second cut by December.

Federal Reserve Rate Hike Expectations (May 31, 2019) (Table 1)

We can measure whether a rate cut is being priced-in by this time next year by examining the difference in borrowing costs for commercial banks over a one-year time horizon in the future. Over the past two weeks, rate expectations have been rapidly pricing in a cut, with rates markets discounting -66-bps by June 2020; this is a 16-bps increase from this time last week.

Eurodollar December 2019/2020 Spread: Daily Timeframe (October 2018 to May 2019) (Chart 1)

Rate pricing has changed dramatically since the end of April. After oscillating around pricing in one 25-bps rate cut for several weeks, the Eurodollar June 2019/2020 contract spread collapsed dramatically in May, particularly over the last week of the month. Whereas one 25-bps rate cut was priced-in at the start of May, now two cuts (or 50-bps) are priced-in; rates markets are quickly leaning into pricing in three 25-bps rate cuts transpiring between now and June 2020.

DXY INDEX TECHNICAL ANALYSIS: DAILY PRICE CHART (JUNE 2018 TO MAY 2019) (CHART 2)

The dramatic shift in Fed rate cut expectations in recent days has proven cumbersome for the US Dollar (via the DXY Index). On approach back to its May and yearly highs, the DXY Index rally has been cut down ahead of resistance and thus price remains in its five-week long sideways range.

The timing of the recent developments comes poorly for the DXY Index, which is now looking a retest of the rising trendline from the March 2018 lows – the backbone of the entire bull move. Should the DXY Index price drop below 97.55 in the coming sessions, odds would increase for a range break some time in June.

FX TRADING RESOURCES

— 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

http://platform.twitter.com/widgets.js
2019-05-31 17:50:00

Gold Price Bullish Breakout Begins amid Topside Range Breach

Posted: 31 May 2019 08:11 AM PDT

Gold Price Talking Points:

– Gold 1-month implied volatility hit a fresh all-time closing low yesterday, but the fact that Gold prices haven't dropped any lower may be a good omen.

– Since the gold price breakout in mid-May failed, price has remained into the 1266.18 to 1288.58 range from first entered on April 15.

– Changes in retail traders positioning suggest that Gold prices may turn higher yet.

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

With global risk assets falling in tandem as the week and month come to a close, gold prices have attracted significant positive attention. The aggregate fall in US equity markets, US Treasury yields, and the US Dollar has boosted demand for gold. Rising uncertainty around global trade continues to plague investor sentiment, and questions over meager US growth conditions have once again started to provoke speculation over a Federal Reserve rate cut this year.

For gold prices, this is perhaps the perfect concoction of news flow and cross-asset market reactions for a near-term turn to the topside. With US real yields dropping (nominal Treasury yields are falling while inflation hasn't moved) and the denominated currency (US Dollar) pulling back from its yearly highs, there are substantive fundamental reasons for gold prices to be trading higher.

GVZ (Gold Volatility) Technical Analysis: Daily Price Chart (May 2018 to May 2019) (Chart 1)

As was noted yesterday, perhaps the best development for gold prices in the near-term has been how gold volatility and gold prices have interacted in recent days. Even as gold volatility fell to an all-time closing low earlier this week, gold prices did not follow suit; we suggested that this was a bullish sign for bullion. Now, with gold volatility rising again, gold prices have seen a surge to the topside.

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

Gold Price Bullish Breakout Begins amid Topside Range Breach

Now that gold prices have traded above 1288.58, we are topside break of the consolidation as well as the downtrend from the February and March 2019 highs. To this end, while the forecast has shifted in a bullish direction, gold prices now need to clear 1303.21, the May high, in order to cement their bullish breakout move. Ultimately, if gold prices have been consolidating in a bullish falling wedge since January, then the terminal price target would be for a return to the 2019 high at 1346.61.

IG Client Sentiment Index: Spot Gold Price Forecast (May 31, 2019) (Chart 3)

Gold Price Bullish Breakout Begins amid Topside Range Breach

Spot gold: Retail trader data shows 73.4% of traders are net-long with the ratio of traders long to short at 2.76 to 1. The percentage of traders net-long is now its lowest since May 15 when it traded near 1296.78. The number of traders net-long is 12.5% lower than yesterday and 10.7% lower from last week, while the number of traders net-short is 15.7% higher than yesterday and 14.6% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests spot gold prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current spot gold price trend may soon reverse higher despite the fact traders remain net-long.

FX TRADING RESOURCES

— 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

http://platform.twitter.com/widgets.js
2019-05-31 15:00:00

Bearish Trend to Continue on Break Below 1.0008

Posted: 31 May 2019 06:11 AM PDT

USD/CHF Price Outlook, Charts and Analysis

US Dollar looking ahead to PCE figures and two FED members speeches today.
Looking at USD/CHF price action since mid-May

Find out more about what is likely to move market prices through mid-year, and download for free Q2 main currencies and commodities forecasts

To learn more about data releases for this week check outDailyFX Economic Calendar

USD/CHF– Trading Lower

On May 13, USD/CHF began a downtrend after carving out a lower-low at 1.0050.The pair continued even lower after failing four times in a row to break above 1.0121, but rebounded on May 24 from the level discussed in our previous article, 1.0008. However, price rallied after and failed to overtake 1.0098, effectively capping any positive momentum.

Alongside this development RSI remained below 50, emphasizing the strength of bearish momentum.

Just getting started?See our Beginners' Guide for FX traders

USD/CHF DAILY PRICE CHART (FEB 4, 2019- May 31, 2019)

A closer look at the USD/CHF daily chart shows the bears trying to retake initiative. However, any move lower is contingent on breaking and closing below the May 24 low at 1.0008. This development could lead price to a lower multi-day trading range (0.9920- 1.0008), with an increased likelihood of seeing the lower end of the range. Weekly support zones of 0.9995-0.9988 and 0.9977 – 0.9971 (61.8% Fib) should be monitored. Additionally, key supports levels at 0.9958 and 0.9939 also need to be considered.

A close above 1.0130 could mean the beginning of a bullish move towards 1.0215. Weekly and daily resistances at 1.0147, 1.0166, 1.0186 and 1.0201 should be watched closely.

Having trouble with your trading strategy?Here's the #1 Mistake That Traders Make

USD/CHF Two-HOUR PRICE CHART (May 21– 31, 2019)

Looking at the 2-hr chart, today USD/CHF tested the neckline of a double-top pattern at 1.0049 three times, however, it rose after. If the price breaks and remains below 1.0049 it could trade towards the May 24 low at 1.0008. The daily support level at 1.0024 should be in focus as well. A break below 1.0008 could lead the pair to trade towards the zone of 0.9995 – 0.9988.

A break above 1.0085 could lead USD/CHF towards the May 22 high at 1.0099. If the pair breaks the aforementioned high price might edge even higher towards the May 21 peak at 1.0120. Weekly resistance at 1.0108 should also be watched closely.

Written By: Mahmoud Alkudsi

Please feel free to contact me on Twitter: @Malkudsi

2019-05-31 13:00:00

Dollar Coiling; Euro, Pound, and Silver Price Charts for Next Week

Posted: 31 May 2019 04:54 AM PDT

The Dollar continues to remain generally constructive, with the DXY working on building a wedge of sorts that could lead the Greenback higher next week. The Euro is of course looking opposite the DXY index, while GBPUSD presents an interesting case for at least bouncing off long-term trend support. Gold price is coming to life again off the August trend-line, but the silver chart is actually more appealing here as it hugs an important trend-line.

Technical Highlights:

The US Dollar Index (DXY) coiling up into a wedge
Euro stuck in downtrend, next move looks lower
GBPUSD is at an interesting long-term spot
Silver hugging important trend-line

See where our team of analysts see your favorite markets and currencies headed in the in the DailyFX Trading Forecasts.

The US Dollar Index (DXY) coiling up into a wedge

The US Dollar Index (DXY) over the past month has been carving out an ascending wedge that has it positioned towards higher prices at the moment. These patterns can result in breakouts in the opposite direction but it is a lower probability scenario given the overall trend. Given the proximity to the apex of the wedge a breakout could come at any time. Watch the top-side trend-line near 99 as the next level of resistance on a rally.

US Dollar Index (DXY) Daily Chart (building a wedge)

Find out where our analysts see the Dollar heading in the coming weeks based on both fundamental and technical factors – Q2 Dollar Forecast

Euro stuck in downtrend, next move looks lower

The Euro has been a choppy mess, but in reverse of the DXY it is posting a descending wedge pattern. There are longer-term underside trend-lines to think about on a breakdown, but a drop through 11000 would help clear a path to much lower prices. The French election gap from 2017 at 10724 is still in mind as a target.

EURUSD Daily Chart (looks headed lower)

Find out where our analysts see the Euroheading in the coming weeks based on both fundamental and technical factors – Q2 Euro Forecast

GBPUSD is at an interesting long-term spot

GBPUSD is trading around a trend-line dating back to the October 2016 flash-crash low. This t-line has other important connecting points, which makes it an important one. At this time there isn't any type of bullish response which means it may want to slide on through but can't rule out a strong bounce even if only short-lived. In either case, look for volatility to pick up here.

GBPUSD Daily Chart (long-term trend-line)

Find out where our analysts see the Pound heading in the coming weeks based on both fundamental and technical factors – Q2 Pound Forecast

Silver hugging important trend-line

Gold is a bit of a difficult handle right at the moment, but turning to silver the chart is cleaner with it hugging the trend-line off the February high. It is a 'line-in-the-sand' that keeps silver pointed towards 14. A break above the trend-line and 14.64 could be a strong reason to flip the script from short to long.

Find out where our analysts see Gold heading in the coming weeks based on both fundamental and technical factors – Q2 Gold Forecast

Silver Price Daily Chart (hugging t-line)

Resources for Forex & CFD Traders

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

—Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX

http://platform.twitter.com/widgets.js
2019-05-31 11:43:00