Analyst Articles – Forex News 24

USD/CAD Price Eying a Break of 1.3000 Handle
SNB Likely Wary Of Any EURCHF Floor Even If ECB Eases Again
EURUSD Vulnerable to Larger Pullback on Strong US Job/Wage Growth
Asian Stocks Trade Mostly Higher In Narrow, Pre-Payrolls Session
Nikkei 225 Bounce Endures, Longer-Term Downtrend Still Solid
How to Trade the Impact of Politics on Global Financial Markets
Key Facts to Know & Why it is Important for the Stock Market Outlook
EUR/USD Implied Volatility Drops to Multi-Year Lows
USDCAD at 2019 Lows, EURUSD Dips on ECB Dove, GBPUSD Stabilises

USD/CAD Price Eying a Break of 1.3000 Handle

Posted: 05 Jul 2019 03:27 AM PDT

USD/CAD Price Forecast, Charts and Analysis

Eyes on NFP numbers release today for US Dollar.
USD/CAD price action during this week.

Did you check our US Dollar and Gold latest forecasts? Find out more for free from Q3 main Currencies and Commodities forecasts

USD/CAD – Bearish Move with Lower Momentum

On July 3, USD/CAD tested mentioned vicinity discussed in our previous update at 1.3064-60 on Wednesday, then broke below yesterday printing its lowest level in nearly eight and a half months, however; the price closed with a Doji pattern indicating to the market's indecision .

Alongside, the Relative Strength Index (RSI) teste the oversold territory and remained flat in the last two days, indicating to the continuation of the downtrend yet with less impulse.

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

USD/CAD DAILY PRICE CHART (July 19, 2017 – July 05, 2019) Zoomed Out

USD/CAD DAILY PRICE CHART (April 2 – JULy 5, 2019) Zoomed In

Looking at the daily chart we notice USD/CAD yesterday closed for the second day in a raw in the trading zone 1.3064 -1.3008, therefore; the pair may fall towards the low end of the zone.

Further close below the low end could send the price even lower towards 1.2920, however; the weekly support levels marked on the chart need to be watched along the way.

On the flip-side, any close above the high end of the aforementioned trading zone may cause a rally towards 1.3124, although; the daily resistance at 1.3102 needs to be watched closely. See the chart for more key levels if the pair closes above 1.3124.

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USD/CAD Four-HOUR PRICE CHART (June 17 – JuL 5, 2019)

Looking at the four-hour chart, we notice on June 18 USD/CAD started a downtrend creating lower lows with lower highs, however; with less momentum since July 1. On Wednesday, the downtrend resumed creating lower lows, nonetheless; we notice a positive divergence between the price and (RSI) indicates to a possible u

pside move.

On July 1 USD/CAD peaked at 1.3145, therefore; a break above this level (the weekly high) might send the price towards the June 26 high at 1.3196, however; the weekly resistance zone marked on the chart needs to be considered.

On the other hand, any break below 1.3008 may press the price towards 1.2950, although; the weekly support level underlined on the chart should be kept in focus.

Written By: Mahmoud Alkudsi

Please feel free to contact me on Twitter: @Malkudsi

2019-07-05 10:11:00

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SNB Likely Wary Of Any EURCHF Floor Even If ECB Eases Again

Posted: 05 Jul 2019 01:35 AM PDT

Swiss National Bank, EUR/CHF Floor, Talking Points:

The ECB may either ease monetary policy this year, or commit to keeping current low rates for longer
This would probably see the Swiss Franc heading even higher against the Euro.
The SNB won't like that but may not try putting a new 'floor' under EUR/CHF

Find out what retail foreign exchange traders make of the Swiss Franc's chances right now at the DailyFX Sentiment Page.

The prospect of the European Central Bank joining what looks like a global swing toward looser monetary policy may please stock markets, but it won't bring any cheer to the Swiss National Bank.

History has shown that nothing messes with that institution's plans quite like a new commitment to easy money from the Eurozone. Obviously, such doings weaken the single currency and encourage investors to seek safety instead in the Swiss Franc. This has various knock-on effects, not least a hammer blow to imported inflation as the Franc becomes wholly overmighty.

SNB Has Tried Desperate Measures Before

So overwhelming did this panic franc-buying become back in September 2011 that the SNB stunned markets by setting a floor under the EUR/CHF rate. The central bank put all its firepower behind defending a base of EUR1.20. That resolve held until 2015 when the ECB unleashed what turned out to be a EUR2.6 trillion ($3 trillion) tsunami of Quantitative Easing. This was too much of a deluge for even the SNB to hold back, and it duly abandoned attempts to do so.

Now the latest Reuters poll of economists has evinced expectations that the ECB will either cut interest rates by the end of September or, at the very least, adjust its guidance to assure markets that rates will remain at current low levels for longer.

And the poor old SNB is already in a somewhat invidious position. EUR/CHF is at lows not seen since mid-2017. Swiss inflation is running at an annualized rate of just 0.6% (the SNB's mandate is to keep it under 2%, but not that far under). The last thing it needs is another QE flood from the ECB.

Financial Relations Already Strained

Relations between Brussels and Zurich are already frayed thanks to the possibility that the European Union may remove the 'equivalence' which has governed financial arrangements between them. The EU has threatened to revoke Switzerland's right to take part in its exchanges if Zurich won't sign up to a new trade deal. The Swiss are leery, seeing in the deal threats to their high-wage economy.

Now we might debate how much the SNB, at least, would mind if the flow of Eurozone capital into Swiss stocks were halted or slowed. That might at least offer the prospect of some hiatus in the Franc's rise. However, it seems likely on balance that some deal will come, and that Zurich won't ultimately be frozen out.

So, will the SNB start thinking about putting a floor back in? For the moment that seems unlikely. The SNB will recall 2015's experience all-too well. It may prefer to rely on more conventional monetary measures. The problem there is that Swiss base rates are already deeply negative. Indeed, the key sight deposit rate has been -0.75% since the middle of 2015.

As current price action indicates, even that has not been sufficient to keep investors away from the Franc.

It's probable that this rate will have to head even lower if the ECB loosens its own policy this year. That is the more likely first response.

Only if that fails might we hear talk of a floor again. The SNB will probably be praying that an extension of forward guidance is as much as the ECB goes through with. Action would be hugely more problematic for the Swiss authorities than words.

Swiss Franc Trading Resources

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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2019-07-05 08:00:00

EURUSD Vulnerable to Larger Pullback on Strong US Job/Wage Growth

Posted: 04 Jul 2019 11:35 PM PDT

Trading the News: US Non-Farm Payrolls (NFP)

Updates to the US Non-Farm Payrolls (NFP) report may keep EURUSD under pressure as the economy is anticipated to add 160K jobs in June.

At the same time, Average Hourly Earnings are expected to pickup during the same period, and signs of a robust labor market may spark a bullish reaction in the US Dollar as the economy shows little to no signs of a looming recession.

It remains to be seen if the fresh data prints will impact the monetary policy outlook as Cleveland Fed President Loretta Mester, who does not vote on the Federal Open Market Committee (FOMC) this year, insists that "cutting rates at this juncture could reinforce negative sentiment about a deterioration in the outlook even if this is not the baseline view."

With that said, another below-forecast NFP print may produce headwinds for the Dollar as St. Louis Fed President James Bullard, who does vote on the FOMC in 2019, suggest the central bank will insulate the US economy with an "insurance cut."

Keep in mind, market conditions following the major US holiday may produce a limited reaction as participation remains thin going into the weekend.

Impact that the US NFP report had on EUR/USD during the previous print

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

MAY

2019

06/07/2019 12:30:00 GMT

175K

75K

+44

+63

May 2019 U.S. Non-Farm Payrolls (NFP)

EUR/USD 5-Minute Chart

EURUSD Vulnerable to Larger Pullback on Strong US Job/Wage Growth

US Non-Farm Payrolls (NFP) increased 75K in May after expanding a revised 224K the month prior, while the Unemployment Rate held steady at 3.6% for the second consecutive month. A deeper look at the report showed the Labor Force Participation also holding steady at 62.8%, while Average Hourly Earnings unexpectedly narrowed to 3.1% from 3.2% per annum in April.

The US Dollar struggled to hold its ground following the slowdown in job and wage growth, with EURUSD climbing above the 1.1300 handle to close the day at 1.1332. Review the DailyFX Advanced Guide for Trading the News to learn our 8 step strategy.

EUR/USD Rate Daily Chart

Broader outlook for EURUSD is no longer tilted to the downside as both price and the Relative Strength Index (RSI) break out of the bearish formations from earlier this year.
As a result, EURUSD stands at risk for a larger correction as it breaks out of the range-bound price action from May following the failed attempt to test the 1.1000 (78.6% expansion) handle, with the exchange rate clearing the 200-Day SMA (1.1330) for the first time since in over a year.
The pullback from the June-high (1.1412) appears to be stalling ahead of the Fibonacci overlap around 1.1270 (50% expansion) to 1.1290 (61.8% expansion) as EURUSD struggles to extend the series of lower highs and lows from earlier this week, with a move back above 1.1340 (38.2% expansion) bringing the 1.1390 (61.8% retracement) to 1.1400 (50% expansion) region on the radar.
Next area of interest comes in around 1.1430 (23.6% expansion) to 1.1450 (50% retracement), which lines up with the March-high (1.1448), followed by the 1.1510 (38.2% expansion) to 1.1520 (23.6% expansion) zone.

For more in-depth analysis, check out the 3Q 2019 Forecast for EUR/USD

Additional Trading Resources

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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.

— Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.

2019-07-05 06:30:00

Asian Stocks Trade Mostly Higher In Narrow, Pre-Payrolls Session

Posted: 04 Jul 2019 10:20 PM PDT

APAC Stocks Talking Points:

The major indexes were mostly higher, if not by very much
Lack of Wall St. impetus didn't help, neither did the wait for key US jobs numbers
Foreign exchange markets were also waiting expectantly

Join our analysts for live, interactive coverage of all major economic data at the DailyFX Webinars. We'd love to have you along.

Asia Pacific stock markets endured a predictably subdued Friday, sandwiched as they were between the US Independence Day break and crucial labor market numbers, also from the US, due later in the day.

Still, Wall Street remains close to record peaks as investors anticipate looser monetary policy ahead, from the Federal Reserve and other developed market central banks. On Friday the Nikkei 225 was green, just, in the middle of the Tokyo afternoon, up 0.05%. The ASX 200 did better, rising 0.6%, while the Shanghai Composite was down by 0.1%.

Major currencies lacked new trading impetus as those US payrolls numbers loom. Analysts are looking for 160,000 more non-farm jobs and an unchanged unemployment rate of 3.6% in June. May's rise of just 75,000 jobs shocked the market with its weakness compared to expectations of around 180,000 or so. That print saw bets rise on lower US interest rates.

Still, the US Dollar made very thin gains against the Japanese Yen through Friday.

The pair remains capped by last week's peak in the 108.51 region, which is also where it was stick for some time between late June and mid-July. Crude oil prices slipped a little further in the Asian session as investors worried about world growth prospects and likely demand for energy.

Gold prices pulled back after initially edging higher but still look set for a seventh straight weekly gain.

Asian Stocks Resources for Traders

— 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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2019-07-05 05:14:00

Nikkei 225 Bounce Endures, Longer-Term Downtrend Still Solid

Posted: 04 Jul 2019 07:13 PM PDT

Nikkei 225, Talking Points:

The rise from June's lows remains very much in place.
Channel support is still some way below the market too
However, the longer-term downtrend from late 2018 is worth watching

Join our analysts for live, interactive coverage of all major economic data at the DailyFX Webinars. We'd love to have you along.

The Nikkei 225's impressive bounce from its June lows has continued, with its daily chart uptrend looking quite secure.

The more cautious might point to the clear reduction in daily trading ranges seen in the past few days as evidence that the bulls are becoming less sure of themselves. That may be the case, of course. But such narrowing is often seen before major holiday breaks and the US Independence Day holiday this week may well explain it.

At any rate the Japanese benchmark looks comfortably enough within its daily chart up-channel. The channel base is after all a good way below the market now, at 21,340, with more immediate support likely closer to hand at June 20's close of 21,458. That point is very close to what would be the first, 23.8% Fibonacci retracement of the overall rise since June. That comes in at 21,461.

That said the index has not yet quite managed to banish the possibility of a head and shoulders top formation, even though it looks rather less likely now than it did last week. A fundamental backdrop of record Wall Street highs and the clear post-crisis nexus between lower global interest rates and higher stock markets don't suggest that these should be bad fundamental times for the Nikkei.

Of course, technically speaking the bulls still have plenty of work to do if they are to completely erase the steep falls which took the index down from May's peaks to the lows of early June.

The fightback has been a lot more dogged and gradual than the fall, but, as long as that uptrend channel endures, it's still on.

Near-term upside targets are 21,858.4, the peak of early March, and then in the 22,030 region. That latter area would be important as it would mean that the big daily falls of May 7 and 8 had been clawed back.

It's probably worth pointing out, though, that the bulls still have quite a task on their hands of they are to convincingly break the daily chart downtrend which has seen a succession of lower highs since October, 2018.

This longer-term daily chart downtrend may be a more realistic picture of the Nikkei's position.

Nikkei 225, Resources for Traders

— 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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2019-07-05 02:00:00

How to Trade the Impact of Politics on Global Financial Markets

Posted: 04 Jul 2019 04:07 PM PDT

HOW TO TRADE GEOPOLITICAL RISKS – TALKING POINTS

The global economy is showing increasing weakness and fragility
Eroding economic fortitude exposes markets to geopolitical risks
Examples of political threats in Asia, Latin America and Europe

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

ANALYZING GEOPOLITICAL RISKS

As 2019 continues to unfold, political risks are growing increasingly relevant to watch as their capacity for inducing market-wide volatility is significantly expanding. Globally, liberal-oriented ideologies – that is, those favoring free trade and integrated capital markets – are being undermined by nationalist and populist movements. The result – though not always – is violent volatility stemming from uncertainty.

Against the backdrop of a slowing global economy and central banks pausing or reversing their rate-hike cycles, the introduction of additional uncertainty will likely create even more volatility. What makes political risk so dangerous and elusive is the limited ability investors have for pricing it in. Traders may therefore find themselves hot under the collar as the global political landscape continues to unpredictably shift.

Generally speaking, markets do not really care about political categorizations but are more concerned with the economic policies embedded in the agenda of whoever holds the reigns of the sovereign. Policies that stimulate economic growth typically acts as a magnet for investors looking to park capital where it will garner the highest yield.

These include the implementation of fiscal stimulus plans, fortifying property rights, allowing for goods and capital to flow freely and dissolving growth-sapping regulations. If these policies create adequate inflationary pressure, it could prompt the central bank to raise interest rates as a response and lead to a stronger exchange rate for the country concerned.

Conversely, if you have a government whose underlying ideological predilections go against the gradient of globalization, this may cause capital flight. Regimes that seek to rip out the threads that have sown economic and political integration usually create a moat of uncertainty that investors do not want to traverse. Themes of ultra-nationalism, protectionism and populism have frequently shown to have market-disrupting effects.

If a state undergoes an ideological realignment,traders will assess the situation to see if it radically alters their risk-reward set up. If so, investors may then reallocate their capital and re-formulate their trading strategies that tilt the balance of risk to reward in their favor. However, in doing so, volatility will likely follow as the reformulated trading strategy is reflected in the market-wide redistribution of capital across various assets.

EUROPE: EUROSCEPTIC POPULISM IN ITALY

In Italy, the 2018 election roiled regional markets and eventually rippled almost throughout the entire financial system. The ascendancy of the anti-establishment right-wing Lega Nord and ideologically-ambivalent 5 Star Movement was founded on a campaign of populism with a built-in rejection of the status quo. The uncertainty accompanying this new regime was then promptly priced in and resulted in significantly volatility.

The risk premium for holding Italy's assets rose and was reflected in an over one-hundred percent spike in Italian 10-year bond yields due to investors demanding a higher return for tolerating what they perceived to be a higher level of risk. This was also reflected in the dramatic widening of the spread on credit default swaps on Italian sovereign debt due to increased fears that Italy could be the next epicenter of another EU debt crisis.

EURUSD, EURCHF Plummeted as Mediterranean Sovereign Bond Yields Spiked Amid Fears of Another Eurozone Debt Crisis

The US Dollar, Japanese Yen and Swiss Franc all gained at the expense of the Euro as investors re-directed their capital to anti-risk assets. The Euro's suffering is being prolonged by the dispute between Rome and Brussels over the former's budgetary ambitions. The government's fiscal exceptionalism is a feature of their anti-establishment nature that in turn introduced greater uncertainty and was then reflected in a weaker Euro.

LATIN AMERICA: NATIONALIST-POPULISM IN BRAZIL

While President Jair Bolsonaro is generally characterized as a fire-brand nationalist with populist underpinnings, the market reaction to his ascendency was met with open arms by investors. His appointment of Paulo Guedes – a University of Chicago-trained economist with a penchant for privatization and regulatory restructuring – boosted sentiment and investor's confidence on Brazilian assets.

Ibovespa – Daily Chart

Since June 2018, the benchmark Ibovespa equity index has risen over 46 percent compared with only a little over 9 percent in the S&P 500 over the same time period. During the election in October, the Ibovespa rose over 12 percent in one month as polls revealed that Bolsonaro was going to triumph over his left-wing counterpart Fernando Haddad.

Ibovespa Spiked Almost Five Percent After October 7 Vote and Polls Showed Bolsonaro in the Lead

Since Bolsonaro's ascension to the Presidency, the oscillations in equity markets and rate of capital inflow frequently move in tandem with the level of progress on his market-disrupting pension reforms. Investors are anticipating these structural adjustment will be strong enough to pull Brazil's economy away from the precipice of a recession and toward a strong growth trajectory, unburdened by unsustainable public spending.

ASIA: HINDU NATIONALISM IN INDIA

The re-election of Prime Minister Narendra Modi was broadly welcome by markets, though lingering concerns were raised about the effect of Hindu nationalism on regional stability. However, Modi also has a reputation of being a business-friendly politician. His election lured investors into diverting a significant amount of capital into Indian assets following his ascendancy to the presidency.

However, the optimistic outlook from investors could be undermined if risk appetite sours amid rising tensions in the region. In the first breathes of 2019, India-Pakistan relations drastically escalated amid a skirmish over the disputed Kashmir region. Ever since the 1947 partition, the hostility between the two nuclear powers has always remained a regional risk.

India Nifty 50 Benchmark Equity Index, S&P 500 Futures and AUDJPY Fall Amid Political Volatility

Nationalist campaigns and governments are embedded with political risk because the very nature of such a regime relies on displaying strength and frequently equates compromise with capitulation. In times of political volatility and economic fragility, the financial impact of a diplomatic breakdown is amplified by the fact that a resolution to a dispute will likely be prolonged due to the inherently stubborn nature of nationalist regimes.

US President Donald Trump and Modi employ a similar brand of strong rhetoric both on the campaign trail and within their respective administrations. In a rather ironic way, their ideological similarity may in fact be a force that causes a rift in diplomatic relations. Tensions between the two have escalated recently with markets worrying that Washington may start another trade war in Asia – only this time it will be with India.

WHY POLITICAL RISKS MATTER FOR TRADING

Countless studies have shown that a significant decline in living standards from war or a severe recession increases the propensity for voters to occupy radical positions on the political spectrum. As such, people are more likely to deviate from market-friendly policies – such as capital integration and trade liberalization – and instead focus on measures that turn away from globalization and are deleteriously inward-facing.

The modern globalized economy is interconnected both politically and economically and therefore any systemic shock has a high probability of echoing out into the world. During times of significant political volatility amid inter-continental ideological changes, it is crucial to monitor these developments because within them are opportunities to set up short, medium and long-term trading strategies.

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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2019-07-04 23:00:00

Key Facts to Know & Why it is Important for the Stock Market Outlook

Posted: 04 Jul 2019 02:11 PM PDT

Earnings Season Talking Points:

What is Earnings Season?
Why is it Important to Look at Company Earnings?
Bellwether Stocks
Earnings Recession
Top 10 stocks Across US and Europe

Earnings Season

Earnings season is a period within the year, usually lasting several weeks, where the majority of listed companies announce their latest financial accounts. An earnings report consists of revenues, net income, earnings per share (EPS) and forward outlook, which provides investors with insight in regard to the current health and outlook for the company.

As such, earnings season helps market participants trade the company they are monitoring and the broader index, depending the impact the company has i.e. strong Apple (AAPL) earnings report may see investors buy Nasdaq 100 futures.

When is Earnings Season?

Earnings season takes place a few weeks after each quarter ends (December, March, June, September). In other words, earnings seasons begins around January-February (Q4 results), April-May (Q1 results), July-August (Q2 results) and October-November (Q3 results), with the unofficial start of earning season confirmed when the major US banks report. This typically coincides with an increase in the number of earnings being released, while the unofficial end of earning season is roughly around the time that Walmart (WMT) announce their earnings report.

Why is it Important to Look at Company Earnings?

Corporate earnings are among the most important fundamental drivers of individual stocks and by extension the broader stock market over the long run. Additionally, in the short term, there is not an awful lot that impacts stocks and provides the possibility of large price swings than earnings.

While for the broader index, if the majority of companies within an index, particularly those that a market leader, are reporting earnings that are better than expected, investors typically have a more positive/bullish outlook with regard to not only the individual stocks but also the index. While on the flipside, corporate earnings that underperform expectations would see investors grow more cautious/bearish over the stock market outlook than they otherwise would have been. Consequently, given the importance over earning season, volatility tends to be more elevated around this period.

What to Look Out for During Earnings Season

1. Bellwether Stocks Key to Economic Outlook

When analyzing company earnings, it is important to look out for "bellwether" stocks which can be used as a gauge for the performance of the macro-economy. While the status of a bellwether stock can change overtime, the largest and most well-established companies are typically considered a bellwether stock.

Examples of Bellwether stocks

FedEx (FDX): Ships goods for consumers and businesses across the globe.
Caterpillar (CAT): World's largest heavy-duty maker has been viewed as a bellwether given its large exposure to construction, manufacturing and agricultural industries, particularly in China.
3M (MMM): Gauge for the health of the manufacturing sector.
Apple (AAPL): Among the world's largest company. Important for key suppliers, in particular, chipmakers.

2. Earnings Recession

An "earnings recession" is characterized as two consecutive quarters of y/y declines in company profits. However, while earnings are an important factor in stock market returns over the long term, an earnings recession does not necessarily coincide with an economic recession. The chart below shows that in the past six earnings recessions witnessed in the US, only two had coincided with an economic recession.

Source: Thomson Reuters, DailyFX. Red circles = earnings & economic recession. Blue Circles = earnings recession without economic recession.