Analyst Articles – Forex News 24

Crude Oil Price Probes One-Week High as Sellers Step Back
Sterling (GBP) Forecast – Rising Inflation and Lower Wages
Gold Price Breakout Eyes Critical Trendline Resistance Ahead of NFP
Bearish Momentum Sends USD/CAD Tumbling Through the Consolidation Zone
Will Gold Prices Rise or Fall if US Jobs Data Disappoints?
GBPUSD Eyes BoE Inflation Forecast, Brexit and US Jobs Data
Asian Stocks Gain On US-Mexico Trade Hopes But Payrolls Loom
Dollar Tests Year-Long Trend and S&P 500 Extends Divergence Ahead of NFPs
Dollar Tests Year-Long Trend and S&P 500 Extends Divergence Ahead of NFPs
Euro Chart Resistance Next Post ECB? Yen Eyes Trump Mexico Tariff

Crude Oil Price Probes One-Week High as Sellers Step Back

Posted: 07 Jun 2019 03:52 AM PDT

Crude Oil Price Chart and Analysis:

Crude oil pulls-back but the move is running out of steam.
New drivers needed for the next move.

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How to Trade Oil: Crude Oil Trading Strategies & Tips.

Crude Oil Needs a New Driver to Continue Pushing Higher

The latest, muted, push-back in the price of crude oil has seen black gold touch a fresh one-week high in thin trade. Crude is now at the bottom of a zone characterized by two sharp sell-off candles, the body of the recent move from the top of the reversal doji (May 28) at $69.40/bbl. to the five-month low (June 5) at $59.22/bbl. The top of this zone also cuts across the 200-day moving average and sits just above 50% Fibonacci retracement at $65.60/bbl. A push back above this zone is likely to need a strong impulse to drive the move.

If this zone is respected, and oil fails to close above $62.75/bbl. then bears may re-test 61.8% Fibonacci retracement at $60.63/bbl. before testing sub-$60/bbl. and the recent low. The recent up-tick has taken oil out of heavily oversold territory, but the current level still indicates weakness.

WTI vs Brent: Top 5 Differences Between WTI and Brent Crude Oil

Crude Oil Daily Price Chart (September 2018 – June 7, 2019)

Traders may be interested in two of our trading guides – Traits of Successful Traders and Top Trading Lessons – while technical analysts are likely to be interested in our latest Elliott Wave Guide.

What is your view on crude oil – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author at nicholas.cawley@ig.comor via Twitter @nickcawley1.

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2019-06-07 10:30:00

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Sterling (GBP) Forecast – Rising Inflation and Lower Wages

Posted: 07 Jun 2019 03:13 AM PDT

GBP Talking Points:

GBPUSD await key US jobs data to consolidate a direction.
UK inflation continues to rise above the 2% target rate, but GBP volatility could be playing an important role.
Unemployment is at the lowest level since 1974 but lower wages are diminishing consumer's living standards

EURGBP continues to come down from yesterday's peak seen at 0.8890 after the ECB failed to please dovish investors as a lack of data brings the pair back around the 20-day moving average. The daily RSI signals that the bullish trend is weakening, and a reversal may be in place. GBPUSD saw a small increase in volatility in the morning session as investors eye the much-anticipated Non-Farm Payrolls released at 12.30 GMT, with a possibility that weakening job creation may put downward pressure on the US dollar as markets ramp up interest rate cut expectations during the remainder of the year.

GBP long-term outlook, rate hikes may follow soon

Whilst the future of the British economy still remains Brexit-dependent, and the outcome of such continues to be very uncertain and unmeasurable, Bank of England (BoE) governor Mark Carney has remained hopeful as he pointed out that the BoE will need to raise rates if the economy continues to perform as expected. UK interest rates have remained at 0.75% since last August.

Longer-term, the Pound (GBP) continues to be under pressure as political uncertainty surrounding Tory leadership contenders and the future of Brexit continues. We can expect to see some volatility around GBP pairs as the race to become the new Prime Minister draws closer, but the direction of the Pound will depend on who is elected and what their views are on Brexit. Any news leading up to the election of a new PM and the future of Brexit will see small spikes in GBP pairs but the downward pressure on the Pound will continue until the Brexit uncertainty is resolved.

Inflation remains high, but wages are not keeping up

Keeping Brexit aside, let's look at how the two traditional forces behind rate changes have been performing:

Inflation remained above the 2% target in April after it dropped slightly in the first quarter of the year. The increase in prices was in part influenced by the increase in energy prices after the price cap rate was increased in March, which was reflected as core inflation – which excludes volatile prices like energy and food – remained unchanged at 1.8%. Forecasts for the month of May, which are due to be released on the 19th of June, currently stand at 2.2%, showing that economists believe the increase in demand and consumption will continue to push prices higher. The BoE TNS Inflation Survey, released today, shows that expectations of inflation over the next 12 months are running at 3.1%, down from 3.2% in the February survey. As a rule, when inflation increases, and consistently remains above the target threshold, the BoE will employ interest rate hikes to deter consumption and bring down price pressure to a more manageable level.

For most of 2017 and 2018 the inflation rate has remained above the 2% target, reflecting the impact of a depreciating Pound which makes imports more expensive for British consumers. Periods of sustained volatility in the Pound can lead to incomplete readings of inflation. When exchange rates fluctuate the value of foreign goods to local consumers changes, and whilst small customary fluctuations do not have a long-term effect on traded goods, sustained periods of political uncertainty can distort inflation readings. If prices are increasing solely because foreign goods are more expensive then underlying consumption patterns are not changing, which in turn limits the effect of interest rate hikes, the primary tool of Central Banks to control the flow of cash in the economy. With continued Brexit uncertainty weighing heavily on the Pound, some may believe that the efficiency of the BoE's use of interest rates to control price changes may be limited.

But it is not inflation in isolation that determines the need for interest rate changes, employment also plays an important part.

The UK jobs market has been showing resilience to adverse circumstances as the unemployment rate for the three months to March fell to its lowest level since 1974 at 3.8%. But despite the employment rate hitting a high of 76.1%, there are less jobs being created than in previous months and nominal earnings growth has reverse its upward trend. Wage increases adjusted for inflation fell to 3.3% in the three months to March from a previous reading of 3.5%. If wage growth doesn't keep up with inflation the purchasing power of consumers is diminished and living standards fall. Although the effect of Brexit is likely high – March was the original Brexit date and concerns over the future would have kept businesses reluctant to offer higher wages – if wages continue to fall we could see inflation falling from current levels.

Gold on Course for Best Week Since March 2018

Amid the backdrop of raised expectations that the Federal Reserve will provide "insurance" rate cuts to insulate the US economy from adverse external events, gold prices have soared through $1300 to move within touching distance of the 2019 peak. Last week we highlighted that risks were tilted to gold upside on fueling rate cut bets (full story) after Fed Vice Chair Clarida's statement in which he had seemingly opened the door to a rate cut. Since then, a raft of Fed rate setters had signaled their openness to a easing with Chairman Powell noting that policy could be adjusted in order to sustain the expansion, while Bullard was perhaps the most explicit having stated that a rate cut could be warranted soon.

Alongside this, the trade war backdrop has also provided underlying support for the precious metal. However, in the near term, focus will be on the outcome of the US and Mexican trade discussions this weekend as recent headlines suggest that tariffs on Mexican goods could be delayed thus potentially taking the shine of some of golds recent rally if indeed this was to be the case.

NFP Report in Focus

Today's focus will lie on the US jobs report, particularly after the weakest ADP reading in 9yrs. Although, to put some context on the ADP report, typically the correlation between that and NFP is relatively weak, while the 3-month average is a rather robust 153k with the 2019 average at 188k. Alongside this, the ISM employment index had been notably firmer, which tends to be more important for NFP. Elsewhere, the wage component remains the most important metric within the report as Fed officials look for inflationary signs.

Technical Outlook | Key Trendline Resistance Remains Formidable

While gold prices have soared, questions can be raised on whether the precious metal has moved too much in such a short space of time. As such, with gold now eying critical resistance in the form of the descending trendline that has held over the past 5yrs, there is a risk of a slight pullback.

GOLD PRICE CHART: Daily Time-Frame (Feb 2013-June 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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2019-06-07 09:30:00

Bearish Momentum Sends USD/CAD Tumbling Through the Consolidation Zone

Posted: 07 Jun 2019 02:00 AM PDT

USD/CAD Price Outlook, Charts and Analysis

All eyes on NFP data release today for US Dollar.
USD/CAD shows more signs of weakness.

Did we get it right with our US Dollar forecast? Find out more for free from ourQ2 USD and main currencies forecasts

Join our analyst Christopher Vecchio as he covers US NFP Data release and its impact on the markets in our live webinar at 12:15 GMT.

USD/CAD – Breaks Below the Congestion Area

On June 5, USD/CAD resumed its bearish price action testing the lower end of the wide trading range (1.3377 – 1.3517). However, the bears succeeded in their second attempt on the following day to force a close below 1.3377.

The relative Strength Indicator (RSI) remained below 50 highlighting the bearishness outlook of USD/CAD.

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

USD/CAD DAILY PRICE CHART (Jan 25, 2019 – JUN 7, 2019) Zoomed In

USD/CAD DAILY PRICE CHART (MAR 2, 2018 – JUN 7, 2019) Zoomed Out

Looking at the daily chart we notice today that USD/CAD has tested the May 22 low at 1.3357 eying the April 11 Low at 1.3335. If the bears continued selling the pair could fall towards 1.3286.

A further bearishness sentiment may send the price towards 1.3218. Weekly Supports at 1.3274 the April 17 Low and 1.3250 the March 19 low must be watched.

On the other hand, a close above 1.3377 would return USD/CAD to its old trading range mentioned above. Weekly resistance levels at 1.3410 and 1.3457 need to be in focus.

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

USD/CAD Four-HOUR PRICE CHART (April 10, 2019- JUN 7, 2019 )

Looking at the four-hour chart, today the price printed its lowest level in nearly seven weeks at 1.3346. Any bearishness below the April 22 Low at 1.3335 may lead the price to swing lower towards 1.3286. However, weekly and daily supports at 1.3317 and 1.3306 are worth monitoring.

On the flipside, a break above 1.3377 could start a rally towards 1.3410. Weekly resistance at 1.3400 needs to be considered.

Written By: Mahmoud Alkudsi

Please feel free to contact me on Twitter: @Malkudsi

2019-06-07 08:30:00

Will Gold Prices Rise or Fall if US Jobs Data Disappoints?

Posted: 07 Jun 2019 01:24 AM PDT

GOLD & CRUDE OIL TALKING POINTS:

Gold prices up as ECB-driven EURUSD rise broadly hurts the Dollar
Crude oil prices jump on hopes for resolution in US-Mexico trade spat
Disappointing US payrolls data may not necessarily bode well for gold

Gold prices rose despite a cautious rise in bond yields, which might've been expected to weigh on the non-interest-bearing metal. Support came from a weaker US Dollar, which spoke to gold's anti-fiat appeal. The currency weakened as a rise in the bellwether EURUSD exchange rate courtesy of the ECB policy announcement echoed more broadly to its other crosses.

Crude oil prices leapt higher toward the end of the trading day as Mexican officials hinted at progress in trade talks with the US. This follows President Donald Trump's threat of imposing tariffs on Mexico's imports unless and until it ends the flow of illegal immigration across the US' southern border. Markets have worried that trade tensions will erode energy demand.

WILL GOLD PRICES RISE OR FALL IF US JOBS DATA DISAPPOINTS?

May's US jobs data is now in focus. A rise of 175k in nonfarm payrolls is expected. That than the prior month's 263k increase, but not catastrophically so. In fact, with the jobless rate expected to hold at a 50-year low of 3.6 percent while wages continue growing at a healthy pace of 3.2 percent on-year, the smaller jobs gain might be seen to reflect a tighter labor market rather than something negative.

Having said that, US data flow has tended to undershoot baseline forecasts over the past four months, warning that analysts' models are overstating the economy's vigor and opening the door for a downside surprise. At face value, such an outcome might boost Fed rate cut bets and send gold higher as yields and the Greenback fall in tandem. Sentiment may even firm as stimulus prospects grow, lifting crude oil.

Markets are already priced for dramatic easing however, with Fed Funds futures implying that one 25bps cut is a foregone conclusion while the probability of 50bps in stimulus stands at a hefty 82.6 percent. Even a 75bps reduction now commands better-than-even odds at 51percent. That might leave relatively little room for a further dovish shift.

That means the markets might well onboard soft US jobs data on pure sentiment grounds, with a risk-off tilt triggered as investors fret about belated spillover of a global economic slowdown ongoing since early 2018. The US Dollar may catch a haven bid in this version of events, weighing on gold. Meanwhile, crude oil prices might track lower alongside slumping equities.

Did we get it right with our crude oil and gold forecasts? Get them here to find out!

GOLD TECHNICAL ANALYSIS

Gold prices are grinding toward resistance marked by February's swing high at 1346.75. Breaking above that exposes a trend-defining barrier in the 1357.50-66.06 area. Alternatively, a move back below resistance-turned-support at 1323.40 opens the door for a retest of the 1303.70-09.12 zone.

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices put in a Bullish Engulfing candlestick pattern on a test of support in the 50.31-51.33 area, hinting that a bounce may be ahead. A daily close above support-turned-resistance at 55.75 exposes the 57.24-88 area. Alternatively, a sustained move below 50.31 sets the stage for a decline to challenge support in play from September 2016 in the 42.05-43.00 zone.

COMMODITY TRADING RESOURCES

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

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

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2019-06-07 04:00:00

GBPUSD Eyes BoE Inflation Forecast, Brexit and US Jobs Data

Posted: 06 Jun 2019 11:35 PM PDT

TALKING POINTS – GBPUSD, US JOBS DATA, BREXIT LATEST, THERESA MAY REPLACEMENT

GBP volatility ahead of race for UK Prime Minister position
Why may UK inflation data not significantly impact the BoE?
US jobs data in focus – Global growth pressuring Fed hawks

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

The Bank of England's (BoE) inflation expectation survey may stoke volatility in Sterling as the UK continues to wrestle with Brexit. Today, Prime Minister Theresa May will be stepping down from her post, triggering the beginning of the race for her position. GBP traders will be eyeing the competition closely and monitoring each candidate's performance and their policies on how to break the Brexit gridlock.

The leader of the Conservative Party is expected to be chosen in the week of July 22, the politically-induced volatility from polls and commentary will certainly keep Sterling on its toes. More immediately, the upcoming inflation expectation from the BoE will be eyed, though it is unclear how much of an impact it will have on monetary policy expectations.

The central bank's approach thus far has been to wait for greater clarity over the outcome of Brexit. As such, the fate of monetary policy for the UK continues to be closely tied to the outcome of Brexit. This is because the UK-EU divorce will have a substantial impact on the UK's economy, and therefore tightening or loosening credit conditions before such a ground-breaking development is materialized may destabilize local financial markets.

The uncertainty and cautious approach from the BoE mirrors a broader trend in monetary policy from many central banks in the developed world. Uncertainty about the future of global growth continues to prod policymakers along with increasing premonitions of an incoming recession. Monetary authorities are therefore taking a cautious approach to policy lest they tighten credit conditions at a time when the economy is slowing.

One of the most-watched central banks that is displaying this kind of wait-and-see approach is the Fed. This may be why critical data such as the upcoming US Non-farm payrolls garners so much attention of light of the Fed's neutrality: it has the capacity to tilt the central bank toward a more hawkish or bearish disposition. Since over 80 percent of all global transactions are conducted in the US Dollar, what happens to the Greenback is a concern to investors everywhere.

CHART OF THE DAY: GBP SUFFERS AGAINST ANTI-RISK YEN, USD, CHF AS BREXIT, EUROPEAN-BASED RISKS RISE

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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2019-06-07 06:30:00

Asian Stocks Gain On US-Mexico Trade Hopes But Payrolls Loom

Posted: 06 Jun 2019 10:55 PM PDT

Asian Stocks Talking Points:

Those bourses that were open Friday managed to rise, tracking Wall Street
Trade hopes and the prospect of lower interest rates for longer helped sentiment
The coming set of US employment data could be very important for near-term direction

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

Asia Pacific stock markets put in a mixed performance to end their trading week, with the approach of important US employment data keeping a lid on risk appetite, as it often does.

Mainland China and Hong Kong were out for a holiday, but the better Wall Street risk appetite engendered by some hopeful commentary around the possible delay of US tariffs on Mexico rubbed off on the Nikkei 225 and Australia's ASX.

Thursday's news that the European Central Bank will delay its first post-crisis interest rate rise until at least the middle of next year also gave stock markets a boost. Investors seem far from certain that a hike will really come even then though.

The Nikkei added 0.6% with robot-maker Fanuc gaining nicely as focus grows on automated goods-handling systems. The ASX 200 was up 0.6% with Seoul's Kospi up by 0.3%.

Nikkei bulls are making a fight of it but the benchmark remains just below its short-term downtrend line.

Unless that line can be topped the danger of a bearish 'lower low' will still threaten and may continue to do so even if it can.

Friday's session will bring news of US nonfarm payroll growth for May. A rise of 175,000 is expected. That result would be significantly below April's 236,00 rise and in any case may be overly optimistic now given that the ADP National Employment Report already released shoed the weakest monthly private-sector hiring gain in more than nine years, 27,000.

The US Dollar remained under pressure against a basket of its major traded peers, with suspicions growing that a weak payroll figure might set the seal on lower US interest rates, possibly as soon as July. The Australian and New Zealand Dollars drifted as investors looked to those job numbers.

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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2019-06-07 05:15:00

Dollar Tests Year-Long Trend and S&P 500 Extends Divergence Ahead of NFPs

Posted: 06 Jun 2019 09:05 PM PDT

Risk Trend Talking Points:

The Dow and S&P 500 extended their climb through the past session as most other risk lags and/or shows no intent of following along
Monetary policy – the principle feeder for risk appetite – is on hold while trade wars and growth prospects still pose obvious risk
NFPs is top event risk Friday which could cater well to the Dollar’s present technical layout

Do you trade on fundamental themes or event risk? See what live events we will cover on DailyFX ahead (including the ECB rate decision and NFPs) as well as our regular webinar series meant to help you hone your trading.

Risk Trends Remain Uneven as Optimism is Speculative and Theoretical

Once again, if we were marking our assessment of market health by the benchmark US indices – reflecting the world’s most popular assets in the largest economy – it would seem we were on the cusp of returning to a self-sustaining optimism. Yet, actual sentiment fails to reflect that borderline enthusiasm as systemic risks persist and most other speculative assets flounder from deeper discounts. While most major US indices have performed well through this past session, the S&P 500 and Dow continue to play the idyllic leaders. Having retaken the ‘neckline’ of their respective head-and-shoulders patterns earlier this week, the indices effectively curbed a cascade in speculative stability which could turn break to trend to crisis with the proper motivation. That said, reversing a technical breakdown is not the same thing as reversing a trend to sustained momentum. Far from it. Is it reasonable with the fundamental backdrop and the contrast of global counterparts to assume the Dow can return to record highs? Against such odds could a new bull persist to forge new record highs?

S&P 500 with 200-day Moving Average and 3-Day Rate of Change (Daily)

One critical point for skepticism for the momentum in US equities – much less systemic risk appetite – is the unrelenting struggle for so many other assets that have rooting in speculative interest. As close a cousin to the S&P 500 in the risk spectrum as we can reasonably come, the VEU rest of world ETF showed none of the effort its US counterpart has made recently and a severely restricted reference to the charge since the regional measure made since the beginning of the year. Emerging markets attached to trade wars notably refused to conform but there was some modest appeal in high-yield bond yields perhaps suggesting US-centric appetites. When the growth-sentiment combination was scrutinized more closely, commodities firmed modestly (the USCI edged up from a series low); but the aggregate of global bond yields pushed to a fresh multi-year low. This is hardly a roaring endorsement of ‘risk on’ heading into the twilight hour of trade this week.

Dow Jones Industrial Average Versus Aggregate of Key Government Bond Yields (Daily)

Dollar Tests Year-Long Trend and S&P 500 Extends Divergence Ahead of NFPs

To set the markets to a true bullish or bear trend, we need a fundamental theme by which market participants can agree to set their conviction. The most promising fuel for resurgent speculation would be monetary policy. There is little missing the dovish shift from the world’s largest central banks, but their progress has been relatively modest and questions of effectiveness are raised at each step. The RBA’s cut earlier this week was proven unique as the ECB decision this past session curbed expectations that all the major players were committed to get ahead of the curve while upgraded forecasts registered as dubious optimism. From trade wars, there have been reports that discussions between the US and Mexico were registering progress, but at the end of the day, President Trump said he still intended to move forward with the 5 percent blanket tariff on Monday. For the China relationship, the White House said a decision on $300 billion more in Chinese imports would be made after the G20 summit. As for the outlook for economic activity, there is little basis for even speculative optimism.

Dollar Tests Year-Long Trend and S&P 500 Extends Divergence Ahead of NFPs

Dollar Stands Threateningly at Channel Support as Rate Forecasts Fall and NFPs Approach

Looking ahead to the final trading day of the week and given the uneven backdrop for systemic issues, we likely face better potential for short-term volatility in very specific areas of the market. Event risk better caters to reliable shocks of price action versus unreliable updates to open-ended themes. If I were to isolate one currency with the potential of confluence between fundamentals, technicals and market conditions, it would be the US Dollar. Despite what the Dow may suggest, congestion tinged with skepticism is the baseline setting for the markets. From a chart perspective, the DXY Index made a very conspicuous hold at channel support this past session. The gradual bullish trend (backed by a 50% Fib and 200-day moving average) is the type of pattern that would take a serious conviction to override. On the fundamental side, the top event risk on the global calendar is clearly associated to the Greenback. The May NFPs are scheduled for their typical 12:30 GMT Friday release. The wages component has recently taken the most prominent position in the run of labor data owing to its inflationary implications for Fed policy decisions. However, after the dramatic miss in the ADP private payrolls (27,000 versus 187,000 expected) earlier this week, the headline figure is now set against a serious discount.

NFPs vs ADP Payrolls

Dollar Tests Year-Long Trend and S&P 500 Extends Divergence Ahead of NFPs

Among the other major currencies due updates through the financial session of the week, the Canadian Dollar could leverage the innate interest afforded to the US currency. Due for release at the same time as the NFPs, the Canadian employment report is also staged with expectations of a tepid figure for May. The 5,500 job cull projected by economists is a similar flavor to the post-ADP view of the US Dollar. That can complicate USDCAD, but it carries a similar discount for other Loonie crosses (CADCHF, EURCAD, AUDCAD, etc). Two other currencies on my radar that are less dependent on scheduled event risk are the Euro and Pound. In the case of the former, German trade and industrial production are economically important but not reliably market moving. The ECB rate decision this past session was a reminder of the extreme accommodation the central bank is making as well as the deflated impact of further efforts. From the Sterling’s perspective, Brexit is still an overriding issue, but we will not return to earnest UK-EU negotiations for some time. First, we need to establish the next leader of the conservative party and thereby the Prime Minister. That only starts next week.

Chart of DXY Dollar Index and 200-Day Moving Average (Daily)

Dollar Tests Year-Long Trend and S&P 500 Extends Divergence Ahead of NFPs

Gold as a Signal of Financial Concerns Beyond Simple Risk

Outside the unique pull of the major currencies, there is value in following those growth-dependent or similarly atypical assets that can provide unique signal on risk appetite. Global government bond yields are my preferred sanity check on the conviction behind sentiment. While central banks’ intent to cut benchmark rates may be strong, their capacity to lower the threshold is exceptionally low such that further cuts are construed as stronger indication of systemic problems than they are reassurance for short-term speculative fulfillment. As for crude oil – the fuel for global GDP – the commodity’s overdue bounce registered more as relief than a committed reversal in demand. The record-breaking swell in US inventories is a strong check to any supply-side ambitions crude traders may develop.

If there was one asset that I would refer to as a gauge of intensity for sentiment in the broader capital markets, it would be gold. The precious metal made a high-profile, intraday reversal Wednesday as speculative appetite firmed and a sense of stability return for the FX market. Yet, that sizable ‘wick’ – largest since April 2018 – didn’t prevent follow through in Thursday’s session. The metal would make a run to compete with Wednesday’s intraday high this past session, but on a close-over-close basis, the metal climbed for a seventh consecutive session – the longest climb since January 2018. The interest in this metal is very particular; and in these circumstances, very indicative. Rather than a traditional ‘haven’, gold plays the role of a financial harbor against devalued sovereign assets like government bonds. If the commodity $1,350 – and certainly $1,360 – market participants far and wide should take note. We discuss all of this and more in today’s Trading Video.

Chart of Gold and Consecutive Candle Count (Daily)

Dollar Tests Year-Long Trend and S&P 500 Extends Divergence Ahead of NFPs

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

2019-06-07 02:02:00

Dollar Tests Year-Long Trend and S&P 500 Extends Divergence Ahead of NFPs

Posted: 06 Jun 2019 08:29 PM PDT

Risk Trend Talking Points:

The Dow and S&P 500 extended their climb through the past session as most other risk lags and/or shows no intent of following along
Monetary policy – the principle feeder for risk appetite – is on hold while trade wars and growth prospects still pose obvious risk
NFPs is top event risk Friday which could cater well to the Dollar’s present technical layout

Risk Trends Remain Uneven as Optimism is Speculative and Theoretical

S&P 500 with 200-day Moving Average and 3-Day Rate of Change (Daily)

Dollar Tests Year-Long Trend and S&P 500 Extends Divergence Ahead of NFPs

Dow Jones Industrial Average Versus Aggregate of Key Government Bond Yields (Daily)

Dollar Tests Year-Long Trend and S&P 500 Extends Divergence Ahead of NFPs

Dollar Stands Threateningly at Channel Support as Rate Forecasts Fall and NFPs Approach

NFPs vs ADP Payrolls

Dollar Tests Year-Long Trend and S&P 500 Extends Divergence Ahead of NFPs

Chart of DXY Dollar Index and 200-Day Moving Average (Daily)

Dollar Tests Year-Long Trend and S&P 500 Extends Divergence Ahead of NFPs

Gold as a Signal of Financial Concerns Beyond Simple Risk

Chart of Gold and Consecutive Candle Count (Daily)

Dollar Tests Year-Long Trend and S&P 500 Extends Divergence Ahead of NFPs

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

2019-06-07 02:02:00

Euro Chart Resistance Next Post ECB? Yen Eyes Trump Mexico Tariff

Posted: 06 Jun 2019 04:37 PM PDT

Asia Pacific Market Open Talking Points

Euro finds support on a less-dovish ECB as the US Dollar takes a hit
EUR/USD still facing a medium-term descending range of resistance
Asia markets may sour as US said to raise tariffs on Mexico Monday

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.

Euro Rallies on Less-Dovish ECB

The Euro outperformed against its major counterparts on Thursday, owing to a less-dovish-than-expected ECB monetary policy announcement. Anticipation of a rate cut by the end of this year dropped from about a 47% probability yesterday to 37% as German front-end government bond yields rallied. As a side-effect, the US Dollar took a hit and depreciated against its peers given that Fed rate cut bets are on the rise.

President Mario Draghi envisioned holding rates through at least the first half of 2020, compared to the end of 2019 prior. But, near-term growth and inflation expectations were revised higher. This year, they are looking at regional economic expansion of 1.2% from 1.1% with CPI at 1.3% from 1.2%. While the central bank remains confident in their baseline assessment of the economy, risks are still tilted to the downside.

Euro Technical Analysis

EUR/USD closed above near-term horizontal resistance at 1.1262 after days of struggle, rising as anticipated. But, my medium-term outlook is still biased to the downside. From here, the currency pair is eyeing a descending range of resistance going back to the beginning of this year. Just above it is also a critical psychological barrier between 1.1302 and 1.1324. If these are cleared, it exposes reversing the dominant downtrend.

EUR/USD Daily Chart

Chart Created in TradingView

The ECB was felt not just regionally, but externally as well. S&P 500 futures fell alongside the DAX and Euro Stoxx 50. However, sentiment recovered, especially after reports crossed the wires that the US was weighing delaying Mexican tariffs after attempts to reach a deal fell apart yesterday. But, that optimism appears short-lived after US Vice President Mike Pence hinted that the levies will take effect on Monday.

Friday's Asia Pacific Trading Session

As such, we aren't in the clear yet for a confidence-inspiring recovery in risk trends. US President Donald Trump still has to make his decision on additional Chinese tariffs that will encompass virtually all imports. He has said that the choice will come as we get to the G20 Summit occurring in Osaka, Japan, at the end of this month. I believe that in the medium-term, the US Dollar is poised to benefit if aggressive risk aversion ensues.

In the meantime, S&P 500 futures are now pointing lower after the US-Mexico trade talk developments. Even though we saw a rally on Wall Street, Asia Pacific equities may struggle to find much upside follow-through as they did yesterday. In Australia, shares of BHP Group, a major mining company, look like they are hinting of a top to potentially come in the ASX 200 as trade war fears risk heating up. The anti-risk Japanese Yen may rise.

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

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

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2019-06-06 23:00:00