Analyst Articles – Forex News 24

Currency Volatility: EURUSD, USDCAD Weekly Outlook
Bullish Momentum Abates Ahead of Powell Testimony
Asian Stocks Lower As US Rate Cut Bets Pared, Focus On Fed’s Powell
Crude Oil Prices May Weaken Before Powell Testimony, FOMC Minutes
USD ASEAN Volatility Ahead, Will INR Reverse on Soft Indian CPI?
US Dollar Back Above 2018 Rising Support on NFPs, Yen May Gain
Dollar, Gold, Equities 3Q Forecast Involves Reversal Threats, Destabilizing Themes

Currency Volatility: EURUSD, USDCAD Weekly Outlook

Posted: 08 Jul 2019 03:00 AM PDT

Currency VolatilityEURUSD, USDCAD Talking Points

1D and 1W Implied Volatility

*Through calculating the 1-standard deviation estimated range, this suggests that there is a 68% statistical probability that these pairs will trade within this range.

Source: Thomson Reuters, DailyFX

Currency Volatility: EURUSD, USDCAD Weekly Outlook

Source: Thomson Reuters, DailyFX

FX Volatility Remains Subdued

This week will see the release of key US releases with US CPI and Fed Chair Powell's testimony, however, despite this, implied volatility across FX markets remains relatively subdued. That said, implied vols for the antipodean currencies (AUD, NZD) are slightly firmer this week, given that Fed Chair Powell's testimony will also be critical to the broader risk sentiment. As a reminder, last weeks better than expected NFP report saw both the AUD and NZD come under pressure from a bid in the greenback, alongside the drop in across equity markets.

EURUSD: Despite signs that a slowdown is appearing more evident within the global economy, FX volatility has remained subdued, particularly in EURUSD, which has seen back to back tightest quarterly ranges on record. Current 1-week implied vols are among the lowest this year at 4.68, while the decline in demand for Euro calls over puts has seen the risk reversal drop to a neutral 0.2. Consequently, this suggests that the range trading looks set to persist in EURUSD.

Currency Volatility: EURUSD, USDCAD Weekly Outlook

USDCAD: The focus for CAD traders will be on the Bank of Canada rate decision, in which expectations are for the central bank to maintain interest rates at 1.75%. As such, eyes will be on the monetary policy statement and whether the central bank joins the dovish global shift. Given the improving data in the Canadian economy, the BoC may refrain from joining the dovish global shift and instead upgrade its assessment of the domestic economy, thus reducing bets of easing from the BoC. Consequently, risks remain tilted to the downside for USDCAD, however, with risk reversals relatively neutral, downside could potentially be contained.

Currency Volatility: EURUSD, USDCAD Weekly Outlook

For a more in-depth analysis on FX, check out the Q3 FX Forecast

— 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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2019-07-08 09:20:00

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Bullish Momentum Abates Ahead of Powell Testimony

Posted: 08 Jul 2019 12:58 AM PDT

Gold Price Talking Points

Gold attempts to retrace the decline following the US Non-Farms Payroll (NFP) report, but the price of bullion may face a larger pullback ahead of the semi-annual testimony with Federal Reserve Chairman Jerome Powell as the bullish momentum abates.

Gold Price Forecast: Bullish Momentum Abates Ahead of Powell Testimony

The recent rebound in the price of gold appears to be have stalled ahead of the yearly-high ($1439), and the precious metal stands at risk for a larger correction as fresh data prints coming out of the US economy deter bets for a rate easing cycle.

The 224K expansion in US employment undermines the shift in forward guidanceas the economy shows little signs of a looming recession, and the development may generate a growing dissent within the Federal Open Market Committee (FOMC) as "the baseline outlook remains favorable."

In turn, market participants may pay increased attention to the semi-annual testimony with Chairman Powell as "many FOMC participants now see that the case for a somewhat more accommodative policy has strengthened," and recent remarks from the 2019-voting members suggest the central bank is on track to implement an "insurance cut" as the US and China struggle to reach a trade deal.

Image of Fed Fund futures

Keep in mind, Fed Fund futures continue to reflect a 100% probability for at least a 25bp reduction at the next interest rate decision on July 31, but it remains to be seen if the FOMC will reverse the four rate hikes from 2018 as eight Fed officials project a lower trajectory for the benchmark interest rate.

With that said, upcoming changes at the Federal Reserve should keep gold prices afloat amid the threat of a policy error, and the precious metal stands at risk of exhibiting a more bullish behavior in the second half of 2019 especially as President Donald Trump tweets "we need rates cuts, & easing."

However, recent price action raises the risk for a larger pullback as the rebound from the start of the month fails to spur a run at the yearly-high ($1439), with the Relative Strength Index (RSI) highlighting a similar dynamic as the oscillator falls back from overbought territory.

Gold Price Daily Chart

The broader outlook for gold is no longer mired by a head-and-shoulders formation as both price and the Relative Strength Index (RSI) break out of the bearish trends from earlier this year.
However, the near-term rally in bullion appears to have stalled ahead of the Fibonacci overlap around $1444 (161.8% expansion) to $1457 (100% expansion) as the RSI falls back from overbought territory, with the oscillator flashing a textbook sell-signal as it crosses below 70.
In turn, a break/close below the $1380 (100% expansion) to $1385 (78.6% expansion) region raises the risk for a move back towards $1358 (78.6% expansion) to $1360 (61.8% expansion), with the next area of interest coming in around $1340 (61.8% expansion) to $1342 (50% expansion), the former-resistance zone.

For more in-depth analysis, check out the 3Q 2019 Forecast for Gold

Additional Trading Resources

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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.

2019-07-08 07:30:00

Asian Stocks Lower As US Rate Cut Bets Pared, Focus On Fed’s Powell

Posted: 07 Jul 2019 11:46 PM PDT

Asian Stocks Talking Points:

All major bourses were lower to start the week
Suspicions that US rates won't fall far after all did much of the damage
However, a widening spat between Japan and South Korea did not help

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 stocks were lower Monday with the re-pricing of interest rate expectations in the US weighing them down. That came about in turn thanks to strong employment data released at the end of last week, which saw market forecasts of two, quarter point cuts to the Fed funds target rate in the near future reduced to just one.

Global investors hope for more clarity on this crucial issue this week. They'll hear from numerous Federal Reserve luminaries including Chair Jerome Powell. He'll testify before the House Financial Services Committee on Wednesday and the Senate Banking Committee on Thursday.

A modest local dampener on equity markets came from South Korea and Japan. A dispute between the two over wartime forced labor has expanded to the point where Japan imposed tighter restrictions last week on the export of high-tech materials used in displays and smartphones made in South Korea. The Kospi shed more than 1.5% with Samsung especially hard hit.

In Japan the Nikkei 225 dropped 1%, with Australia's ASX 200 down by a similar amount. The Shanghai Composite fell 2.5%.

The US Dollar meanwhile rather enjoyed the Fed re-price. Bulls took it back to near three-week highs at the start of the session against major traded rivals, but it returned some of these gains as the Asian session wore on.

USDJPY has edged back up into the old trading range which formerly endured between May 31 and June 20.

Clearly however one daily-chart foray toward the range top has already failed and another one seems likely to, putting focus on the base at 107.82.

Crude oil prices went nowhere very much in Asian hours and DailyFX Senior Currency Strategist Ilya Spivak suspects the week's action will crowd around that Powell testimony and the release of Federal Open Market Committee monetary policy meeting minutes from last month, which is coming up on Wednesday.

ASIAN STOCKS, RESOURCES FOR TRADERS

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— 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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2019-07-08 06:07:00

Crude Oil Prices May Weaken Before Powell Testimony, FOMC Minutes

Posted: 07 Jul 2019 10:29 PM PDT

CRUDE OIL & GOLD TALKING POINTS:

Crude oil prices edge up on upbeat US jobs data, but resistance holds
Gold prices challenge trend support as Treasury yields, US Dollar rise
Risk-off tilt hinted before Fed Chair Powell testimony, FOMC minutes

Crude oil prices rose as upbeat US jobs data buoyed demand hopes. The move conspicuously clashed with the response from broader risk sentiment trends. The bellwether S&P 500 stock index fell on the news (though the losses were later retraced) amid worries that the outcome might trim scope for Fed interest cuts.

In fact, the latter consideration meant that gold prices tracked lower as the figures crossed the wires, sending the US Dollar higher alongside benchmark Treasury bond yields. That tarnished the appeal of non-interest-bearing and anti-fiat assets epitomized by the yellow metal.

CRUDE OIL, GOLD PRICES MAY TRACK DIVERGENT PATHS IN RISK-OFF TRADE

A quiet start to an action-packed trading week may be ahead. A relatively lackluster data docket seems unlikely to inspire follow-through one way or another for marquee commodity prices as traders withhold conviction before testimony from Fed Chair Powell and the release of June FOMC minutes on Wednesday.

A risk-off tilt is hinted in futures tracking key Wall Street equities benchmarks however. That might cap yields and underpin gold prices, at least for now. Cycle-sensitive oil prices might meander lower in the meanwhile, though a breach of the prevailing near-term range probably has to wait.

Get the latest crude oil and gold forecasts to see what will drive prices in the third quarter!

GOLD TECHNICAL ANALYSIS

Gold prices are pressuring trend line support guiding them higher since late May. A break below it opens the door to challenge a series of back to back resistance-turned-support levels running through 1346.75. Resistance remains at 1433.85, marked by the August 2013 top and the underside of support stretching back to December 2016. A breach above that targets north of the $1500 figure.

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices are retesting support-turned-resistance at 57.88. A daily close above this barrier sets the stage to challenge the 60.39-95 zone anew. The lower bound of immediate support is at 54.55, with a breach below that targeting the 50.31-51.33 region thereafter.

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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2019-07-08 05:00:00

USD ASEAN Volatility Ahead, Will INR Reverse on Soft Indian CPI?

Posted: 07 Jul 2019 08:34 PM PDT

ASEAN Fundamental Outlook

ASEAN FX mostly resilient despite best week for USD this year
Indian Rupee gains on budget deficit may be offset by soft CPI
Will Bank of Malaysia sink MYR? Can Fed speak boost USD?

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

US Dollar Soars as ASEAN Currencies Mostly Remain Resilient

Looking at DXY, the US Dollar experienced its best week against its major counterparts this year thus far. But, this was not enough to compel similar performance against some of its ASEAN and South Asian peers. The backdrop of strength in USD was due to the aftermath of the G20 Summit and a solid jobs report from the United States. The latter helped cool aggressive Fed rate cut bets for July.

A notable outperformer from the region was the Indian Rupee, with USD/INR extending its downtrend as anticipated. A few fundamental developments likely lead to this. Frist, Indian courts allowed ArcelorMittal, a multinational steel-producing company, to proceed with purchasing Essar Steel India Ltd. This likely fueled capital inflow bets as this would open the company to entering a major steel-producing nation.

The decision for ArcelorMittal to proceed with purchasing the financially-struggling company may be challenged in higher courts. Meanwhile, the Rupee extended gains after India's government announced a smaller-than-expected budget deficit target of 3.3% of GDP for fiscal year 2020, cooling concerns about higher bond yields. Yet, the Nifty experienced its worst day in weeks as Finance Minister Nirmala Sitharaman also announced taxes on gas and oil while also raising them for high-income earners.

USDMYR Eyeing Bank of Malaysia

Ahead, the Malaysian Ringgit is looking to the next central bank monetary policy announcement. The Bank of Malaysia is widely anticipated to keep the overnight policy rate unchanged at 3.00% after cutting it back in May. Inflation is still low in the nation with palm oil, a key source of revenue for the country, down almost 10% (futures) since the beginning of this year. A hint that the central bank may yet cut rates again risks weakening MYR.

Chinese Economic Data

The week ahead also contains a couple of important Chinese economic data. The first of which is CPI and PPI for June on Wednesday. Then, on Friday we will get trade data for the same month. Relative to economists' expectations, data outcomes are still tending to increasingly disappoint in the world's second-largest economy.

If this pattern persists, it may continue to fuel concerns about the health of the global economy. This also poses a risk for regional trading partners such as the Philippines and Singapore. For the Singapore Dollar, it may look past local second quarter GDP data when comparing it against the US Dollar. USD/SGD tends to closely trace the Greenback compared to some of its ASEAN peers.

Indian Rupee Eyeing CPI Data

Meanwhile, the Indian Rupee will be nervously eyeing local inflation data. In June, Indian CPI is anticipated to clock in at 3.2% y/y, up from 3.05% in May. Yet, this is below the central bank's 4% price target and is part of the reason why the Reserve Bank of India cut rates three times this year thus far. As such, a softer outcome may fuel further easing bets and depreciate INR.

USD Eyes Fed Speak, CPI and FOMC Minutes

There is plenty of event risk abroad from the United States that may also impact MYR, PHP, INR, SGD and IDR. After last week's jobs report and US-China trade truce, markets will be looking to commentary from Fed members such as James Bullard, Charles Evans and Chair Jerome Powell. Expectations of a cut in July are still fully priced in with more expected to come.

If policymakers err on the side of caution and show any signs of hesitation of acting too quickly and aggressively, that could fuel risk aversion and a premium for liquidity. That stands to potentially boost the haven-linked US Dollar. However, a disappointing headline CPI report and FOMC minutes, also due this week, that keep chances of cuts this year on the table might just do the opposite.

FX Trading Resources

— 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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2019-07-08 03:30:00

US Dollar Back Above 2018 Rising Support on NFPs, Yen May Gain

Posted: 07 Jul 2019 04:10 PM PDT

Asia Pacific Market Open Talking Points

Non-farm payrolls fueled US Dollar back above 2018 rising support
S&P 500 trimmed losses, markets adjusted timing of Fed rate cut bets
Anti-risk Japanese Yen may gain if APAC stocks see tepid declines

Not sure where the US Dollar is heading next? We just released the third quarter Dollar fundamental and technical forecast!

US Dollar Gains on Jobs Report

The US Dollar outperformed against its major counterparts on Friday in somewhat illiquid conditions in the aftermath of the US Independence Day holiday. Its strength picked up pace prior to Wall Street open on the latest non-farm payrolls report where the country added 224k jobs in June versus 160k expected. While the unemployment rate ticked higher unexpectedly, so too did labor force participation.

Us front-end government bond yields rallied, propelling the US Dollar as aggressive dovish Fed rate cut bets seemed to have ebbed and stocks fell. Looking at Fed funds futures, chances of a 50 basis point cut in July dropped to nearly nil. However, prospects of a further 25bps reduction grew for September. As such, this looked more like an adjustment in timing for rate cuts rather than lowering expectations of them altogether.

This may have been why equities recovered in the aftermath. After a gap lower, the S&P 500 ended at 2990 (0.18 percent to the downside) after rising from peak lows at 2967. Meanwhile, the Canadian Dollar outperformed in the aftermath of a local employment report as well. While the country lost 2.2k jobs in June, hourly wage growth for permanent employees clocked in at 3.6%, the best growth in over a year.

DXY Technical Analysis

This still left DXY ending its best week this year as prices rose back above the rising support channel from September 2018. Yet, resistance held at 97.52 as the Greenback gave up some gains towards the end of Friday's session. Near-term support, aside from the rising channel, is a psychological barrier between 96.86 and 96.75. Confirming another close above this area may result in an extended recovery to May highs.

DXY Daily Chart

*Charts Created in TradingView

Monday's Asia Pacific Trading Session

Still, S&P 500 futures were left pointing lower by the end of the day which could translate into timid weakness in Asia Pacific equities at the start of the trading week. As such, weakness in stocks may boost the anti-risk Japanese Yen as it tunes into sentiment behavior that may take the attention away from a speech from Bank of Japan's Governor Haruhiko Kuroda. The central bank is still committed to its easing mode.

FX Trading Resources

— 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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2019-07-07 23:00:00

Dollar, Gold, Equities 3Q Forecast Involves Reversal Threats, Destabilizing Themes

Posted: 07 Jul 2019 05:50 AM PDT

Yen Supported by Two Huge Uncertainties; USDJPY Downtrend May Extend

The Japanese Yen has headed into a new calendar quarter on a high note, with its customary haven role underscoring demand which has brought USD/JPY down to its 2019 lows.

US Dollar Q3 Forecast: Dollar Feeling Weight of Fed, GDP and Trade Wars

The US Dollar was heading into the second half of 2019 in an uncomfortable state of uncertainty and it seems the technical boundaries are starting to come under existential strain.

British Pound Q3 Forecast: Sterling Fundamentals – Volatility Set to Rise as Brexit D-Day Nears

Sterling (GBP) is likely to become more volatile as the clock ticks down to the latest Brexit deadline – October 31st.

Equities Q3 Forecast: Stock Markets Aim Higher Balancing Trade Wars and Monetary Policy

Global shares rebounded in the first quarter as dovish monetary policy was able to overcome global growth concerns and US-China trade war fears were reduced by the prospects of a deal.

Gold Price Q3 Forecast: Gold Outlook Bullish on Imminent Fed Rate Cut

Gold took out the 2014 high ($1392) after the Federal Reserve altered the forward guidance for monetary policy.

Crude Oil Price: Will Global Growth Fears Overwhelm OPEC?

Crude oil price outlook over the third quarter looks set to be broadly overwhelmed by slowing global GDP growth, yet OPEC+ supply cuts and political risks pose upside risks.

Q3'19 Euro Forecast Sees Economic, Political Uncertainties Back on the Rise

Euro technical positioning looks inconclusive at the mid-year mark as political issues have been a slow burn in Europe over the past several months while the economic growth picture in Europe could be characterized as charitably-mild.

2019-07-07 12:30:00