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Daily Market Analysis By ForexTime ( FXTM )
#21
Daily Fundamental ForexTime ( FXTM )

Australian CPI sinks chances of rate rise


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The Australian dollar was thumped by the market today as CPI data missed the mark coming in at 0.6% (0.8% exp) leaving the market with a bitter taste in its month. On the back of higher oil prices and retail prices many had expected to see inflation lift and even hit the magic 2% inflation figure which might prompt the Reserve Bank of Australia into action. Sadly, it was not meant to be and the weaker figure coupled with global sentiment of weaker inflation in the mid range term means it's unlikely the RBA will get to raise rates anytime soon. So where to for the AUD? Well with the US government pushing its tax reform this could certainly boost the possibility of increasing US GDP and the USD for the most part. There has been a lot of weakness for the USD recently and that has boosted things, but for the most part it does seem realistic that they might be able to get it through. This would obviously play out well for the AUDUSD bears, especially if we continue to see weaker data in the long run.


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So far the AUDUSD bears have slashed down the charts at a blistering pace before hitting the 200 day moving average coupled with support around 0.7687 and pausing for a breather. Given the recent weakness in the commodity currencies I would not be surprised to see further falls down to the next level of support at 0.7624. Nevertheless, the AUDUSD does have a habit of bouncing back, so in the event it did I would expect the potential for it to modestly rise to 0.7748, but it would be hard pressed to get higher to resistance at 0.7821. In any case I do believe that the bears may hang around for some time yet and market traders are likely to target key support levels until they find any hope for the AUD.

The UK has always been struggling with the recent Brexit negotiations but thus far FTSE 100 traders have managed to avoid the brunt of it. Not to so much today as global equity markets took a big tumble, despite growth forecasts being upgraded in the US. Markets at the moment seem quite skitterish and we are starting to see long candles, which means traders are getting very aggressive to defend these bullish positions at times.


[Image: uk100daily_2.png?itok=qbn-MzoQ]


The FTSE 100 is a fantastic case of this as we saw an aggressive dive today, followed up by some aggressive buying shortly after to bring it back into line. Support was touched at 7436, but traders were quick to defend this level, but the bears still took considerable ground. The 200 day is moving up the chart and if we break through support at 7436 then I would expect an extension further down to this level. Resistance levels can still be found at 7551 and 7600, with the potential to breakthrough looking very remote at present. 


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#22
Daily Fundamental ForexTime ( FXTM )

Currencies stay range bound ahead of Fed’s decision


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It is a quiet Wednesday in the currency markets. Traders are favoring to remain on the sidelines ahead of multiple key risk events, including the Federal Reserve monetary policy decision later today; the Bank of England’s rate decision on Thursday; President Trump’s nomination of the next Fed Chair; the U.S. tax reform announcement and Friday’s NFP report.

Today’s FOMC meeting will not be accompanied by an update on economic projections, nor by a press conference. Traders have to act on very few amendments on a 500 words statement. The main theme is unlikely to change, and the Fed will stick to its plans of gradual tightening. However, recent economic releases have shown significant improvement in the U.S. economic activity, and GDP has grown 3% for two consecutive quarters, suggesting that we may see slight, positive changes in assessing economic activity.

Despite an uptick in headline inflation in September, core CPI continued to miss estimates, and remained below the targeted 2%. Thus, I expect little to no change on inflation assessment.

Overall, the Fed will likely meet market expectations, by keeping interest rates unchanged in November, and signal a rate hike in its final meeting in December.

President Trump’s nomination for Fed Chair on Thursday could easily overshadow today’s statement, especially if Fed Governor Jerome Powell is not his first choice. Powell has been supportive of Janet Yellen's policy of gradual tightening in monetary policy; thus, I do not expect big moves in Treasuries, or the U.S. dollar, if he is nominated. However, if Stanford University’s Professor of Economics, John Taylor, is nominated instead, expect big moves in Treasury yields and the dollar, which could appreciate sharply against its peers. According to Taylor rule, a forecasting model that determines where interest rates should be, based on targeted inflation and full employment, interest rates should be much higher the current levels.

The Kiwi was the only outperforming currency today, surging 1% against the dollar after labor market statistics showed that the cost of labor grew 1.9%, and the unemployment rate fell to a  nine-year low. If wages continue to show signs of strengthening, the Reserve Bank of New Zealand will likely start raising rates next year, as opposed to earlier forecasts of tightening in 2019.




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#23
Daily Fundamental ForexTime ( FXTM )

Markets poised for Nonfarm Payroll


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The build up has begun for tomorrows NFP announcement and the market is betting big time on a strong result of 313K; this is a very large expectation, but it makes a lot of sense when you consider the seasonal impact that Christmas has on markets. Labour markets certainly boom during this period and even part time workers are considered part of the work force. I will say one thing, with such a large number it will be hard to beat, and I'm not certain that markets will take kindly to anything below the 313K, so it could be the NFP of the year on this basis. Markets will also be digesting the recent announcement that Powell will take over from Yellen as the FED chair. The markets thus far have been positive regarding this, with a number of heavy weight finance figures speaking out in favour of him. Many had expected a hawk, but the reality is that he's likely to take over from the Yellen framework and continue it in the short to medium term until he has a good grasp of the situation.

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For the NFP traders, the metal markets is always the big calling when it comes to movements. Gold has thus far been creeping up on whatever USD weakness it can find, which is not surprising as the bulls are always there. Any NFP weakness tomorrow could see gold catapulted above the current resistance level at 1281 with the potential to even break through 1295 if it's quite bad. In the event it's a very strong result and in line with expectations then 1267 and 1247 are likely to be key levels of support for the gold market. All the moving averages at present are not likely to impact any shifts upwards or downwards so it will be a case of playing of key price levels that the market can digest at this present time.

It was also a big day for the British market as the Bank of England raised interest rates by 25 basis points, leaving the intraday banking rate at 0.5%. This move had been widely expected, but the comments afterwards helped drive the pound down and encourage the doves in the market as the Bank expected inflation to taper off (as the pound stabilised) and also Brexit would bring uncertainty to the market causing issues in the long run.  

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The big benefactor of this was of course the FTSE 100 which lifted sharply on the news as the bulls rushed in to take advantage, and as the UK oil producers showed strong earnings as well. The market is now poised to have another crack at resistance at 7600 and NFP could be a catalyst which could push it through tomorrow as well. In the event that markets fall back down support at 7551 and 7436 is likely to be key levels, and markets will be looking to stop the rot if anything does transpire. 



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#24
Daily Fundamental ForexTime ( FXTM )

RBNZ set for change on new government mandate



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The New Zealand government continues to be in the eye of traders as the current changes to the Reserve Bank of New Zealand look to be fast tracked. So far what we know is that the focus will not only be on inflation, but almost full employment for the NZ economy. This should come as no surprise given the recent elections and the want for the government to change to focus on this. Additionally, there is the need for a change on current FX policy which could have far reaching impacts on the NZ economy, as the current minor party (NZ first) wants to see the RBNZ intervene in FX markets to help drive export markets and keep the NZD lower. This has been seen as futile in the past given the RBNZ being quite small compared to world markets, so it could cause minor issues going forward. Either way markets are not currently upbeat regarding the prospects of the NZDUSD, but I believe the NZD is starting to stabilise compared to other currencies and is showing the odd signs of the bulls back in the market.


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So far the NZDUSD bull have managed to claw back a considerable amount of ground in the face of uncertainty in the NZ economy. For me resistance at 0.6960 is the current strong level that is holding back any further gains on the charts, the reason being is that no one knows the current direction of the NZ market after elections. If it was positive then I would expect a jump to 0.7029, but a potential slow down shortly after this jump. In the event we did see minor falls on the charts then support could be found at 0.6891 and 0.6834 respectively, with the ability to go lower as markets are considerably more bearish after the recent election.

Oil has been one of the big jumpers on the charts as markets have been quick to worry about the situation in Saudi Arabia recently. The anti corruption crackdown has taken a few high profile heads, and the markets are worried about the state of play from the world's largest oil producer. Certainly, there have been drawdown's on global oil supplies, but the shakeup of affairs could have the largest impact in the long run and drive oil prices higher in the short term.


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So far Oil bulls have charged forward and knocked out support at 56.17 as the oil markets continued to run higher. Resistance level can be found at 59.08 and 62.12 on the charts with the potential to go higher if more political uncertainty presents itself. There is also the potential for charts to dip lower and support can be found at 56.17 and 50.21 as the market looks to drift lower as news looks more promising potentially. 



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#25
Daily Fundamental ForexTime ( FXTM )

Euro bears continue to swipe


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The Euro has been a star over the previous months, but it's becoming more and more lacklustre as the ongoing Spanish drama is still a thorn in the side of the Euro-zone. While investors love a bit of volatility, the Euro-zone seems to keep battling crisis after crisis trying to hold everything together as more moles pop every month to be whacked. Is there cause for concern? Well markets seem to think so as of late, and event EU retail sales figures y/y jumping to 3.7% (2.8% exp) were not enough to fight of the bears. Additionally, the US saw a strong JOLTS job openings figure of 6.09M (6.08M) which shows that the labour market in the US continues to not be at capacity. This can also be seen in the fact that wages have not grown as fast as economists had expected, which points to slack in the labour market that can still be filled. It would seem though that we are close capacity in the next year or two in the US if there are no negative economic events.

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So for the Euro bulls it's been a tough ride over the past few weeks and the head and shoulders pattern that did occur is likely to keep going with bears taking full advantage. Target support levels for the market will be found around 1.1519 and 1.1433, with the potential for further lows if we see any further weak news on Catalonia. If we do see the bulls come back into the market I would expect to see resistance be strong around 1.1621 and 1.1719 on the charts. Additionally, the 20 day and 50 day moving average should be watched as dynamic resistance levels which daily traders have been respecting as of late. However, for the most part there is a clear trend of bearish sentiment which has the potential to continue for some time.

NZ dollar traders also went short today as the Global Dairy Index came in at -3.5%, obviously this is quite big news for traders as the Dairy industry accounts for 7% of New Zealand's GDP. But further to this we have the RBNZ rate statement due out tomorrow, and many are expecting some fireworks here. Not in the sense of a rate rise, but in the sense that change is in the wind with the new government wanting it to have stronger mandates. It will be a case of wait and see, and the prospect of a new governor is on the cards as well with the new left wing government.

[Image: nzdusddaily_50.png?itok=W6QyEpwP]

For the NZDUSD traders there has been a failure to breach anything above the 70 cent market, which continues to act as a psychological barrier at present. Markets thus far are looking bearish and swinging lower just coming up short of support at 0.6891. There is further potential for moves lower to 0.6834 and 0.6802 on the charts. I would be surprised to see it spring back up higher, but if it does the 70 cent mark is likely to be a hard stop for the pair.



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#26
Daily Fundamental ForexTime ( FXTM )

Sterling slides, Bitcoin tumbles & Investors seeking more clarity on tax reforms


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Sterling fell more than 0.5% early Monday, after the Sunday Times reported yesterday that 40 Conservative Party MP’s agreed to sign a letter of no confidence in the Prime Minister, Theresa May. While this remains short of the 48 votes needed to force a new leadership, it still creates much frustration amongst investors seeking clarity on Brexit negotiations. With May’s position being potentially at risk and no significant progress after six rounds of talks with EU, Sterling may come under increased pressure in the next couple of days, with the 1.3024 support level at risk of being breached. A leaked letter from Boris Johnson and Michael Gove pushing for Hard Brexit, add to the uncertainty as House of Commons meet on Tuesday.

It is also a busy week on the UK’s economic data front, with Consumer Price Index, Producer Price Index, labour data and retails sales due to release. However, politics are likely to remain the dominant factor moving the pound this week.

For investors finding the low volatility environment boring, have a look at Bitcoin.  The cryptocurrency lost more than quarter of its value after reaching a high of $7,888 on Nov 8. The cancellation of a plan to increase the bitcoin’s block size “Segwit2x” on Wednesday, is what to be blamed for the price crash, but given that prices rallied $400 on Monday it seems the news has been digested. We have seen similar steep falls in Bitcoin throughout the year; specifically in June and September, but every time a considerable decline occurs, new investors jump in to experience the new asset class. The increasing investor interest in the cryptocurrency market has pushed CME Group to announce the launch of a bitcoin derivative soon, indicating that more fund managers and professional investors will become involved. Although Bitcoin might not be a suitable asset for conservative investors due to its volatility, I still see a great potential ahead.

Given that the earnings season has come to an end, equity investors will shift their attention to the U.S. tax reform plans. There is a considerable difference between the Senate and the House on how to proceed, and if no clear path evolves, I expect a further pullback in equities. The Senate’s proposed delay of the tax cut until 2019 is definitely not what President Trump is looking for, so it remains to be seen whether he can push Republicans to unify when he returns from his Asia tour.



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#27
Daily Fundamental ForexTime ( FXTM )

Equity markets looking increasingly unhinged



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It should be all good news for global equity markets at present as the global recovery continues to tick along nicely. So far profits are up and the market has been bullish, especially around developed labour markets. However, have we overextended at present? If you've been watching some of the major indexes you might very well think that. Recent trends in global markets have so far been bearish which is a surprise, but when you consider the level of uncertainty and the fact that rates are on the move higher it does make for some interesting thoughts and trading ideas. So far yields are looking like they're increasing in the long run, which bodes well for investors looking to move out of equities.

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The S&P 500 has come up short of the magical 2600 mark at present, this despite the recent news off the wire about NAFTA renegotiations being positive. PPI was also positive today, but once again markets were not having a bar of it, and looked to sell off. So far the S&P 500 has held up on support around 2580 where it has managed to sit above over the last few days, the 20 day moving average is also providing some additional support. Further movements lower are likely to hit key levels of support at 2565 and 2545. Just looking at the daily movements, it's very hard to say if this is the time for a correction. Certainly, markets are feeling like one is overdue, and historically data says that is the case. The question here is when and how bad, but for now the bulls have the trend and market corrections are rare for the S&P 500.

A quick glance across the Atlantic at the UK equity market and it's a similar story, just this time the market is being dominated by politics and of course the Brexit debacle. Mark Carney must have been breathing a sigh of relief today as CPI was not as strong as the previous month at 3% y/y, thus taking the pressure of the needs for any further rate rises at this time. Markets, however, were not so interested as the FTSE 100 dropped on the news and continued to be weighed down by global sentiment around equity markets.

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FTSE 100 traders will be looking to extend the trend lower if with the bears, but so far we've seen weaker and weaker candles which is a sign of caution from them. There is the possibility of the bulls swinging back into the market here and potentially pushing for resistance at 7436 and 7486 on the charts.  If the bears do extend lower than the 200 day moving average, it will be key to watch here to see if traders respect it. With weaker candles that could be very much the case. Support levels below this can be found at 7377 and 7319 for the bears.



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#28
Daily Fundamental ForexTime ( FXTM )

USD stages comeback on CPI and retail data



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It's been a positive day for US economic data as retail sales surprised analysts lifting to 0.2% (0.0% exp). This shows a strong build up in the period before Christmas where retail sales is generally quite strong as well, and will bode well for the economy and the FED which is a big follower of the consumption based economy that is the USA. Further adding to fuel to the fire was of course CPI data which I touched on yesterday with Core CPI y/y coming in at 1.8% (1.7%) exp. While not the magic 2% mark the FED does chase it was certainly a positive reading and shows that the economy is turning over nicely in America. The real question will now be if fiscal policy from the Trump administration and can translate into real gains for the economy, or if his legislation will continue to struggle through the house and senate in America. It would be a strong mover of the dollar is something was passed with tangible gains in the near future, but so far the market is in wait and see mode on the fiscal front.

One of the major losers as a result of the USD boost was of course the Australian dollar which has lost ground after last night's economic data which showed wage growth being underwhelming. With the wage index coming in at 2% y/y (2.2% exp), showcasing that while the job market is strong wage growth is not following it and inflation will cause issues in the long run for the Australian economy if wage growth does not catch up. With the AUD now pushed against a wall traders have been of course waiting on the employment figures due out. Of course they've not been the best with employment dropping sharply to a reading of 3.7k+ (18.8k+ exp), but the unemployment rate falling to 5.4% accordingly adding some consolation for AUD bulls at present.  

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On the charts the AUDUSD has not been this low since July and markets will be looking to see support at 0.7566 on the charts or if it will struggle to extend any lower and we see the predictable bounce in the AUDUSD. As the employment data is bad markets have overreacted and driven the AUD lower to support at 0.7566 where it has looked to take a breather at this key level. If the bulls do come back into the market - and it's really a maybe - then resistance levels can be found at 0.7624 and 0.7687 with the respective movements if things became worse from a fiscal point of view. Reality is however, that the bears are likely to have another crack and potentially force it down to the 0.7500 key level at present with the potential to fall further at this present time. 



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#29
Daily Fundamental ForexTime ( FXTM )

US tax bill send equities soaring



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The Tax bill has been talked about for some time, and today was the day for it. Obviously, it cleared the US house easily enough and is now on its way to the senate; where the republicans have control as well. What does this mean for markets? Well put simply it cuts corporation tax from the current 35% to 20% - a very large jump - which means US companies are likely to record larger profits which of course will have a flow on effect for the economy. The real question here is if the republicans in the senate will be able to push it straight through or will look to make amendments. They are after all different creatures in the senate and the tend to be more heavy handed when it comes to clearing large bills like this through government. However, with a two seat advantage it looks like it may just shine through and Trump will be able to sign it all off before Christmas - giving him his first major win of his presidency.

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For equity markets the rally has been pretty sharp as a result of the tax bill. Traders are betting that in the long run this tax bill will unleash the corporate machine that is America and record profits will accordingly flow through. The S&P 500 today was a prime candidate for this as a I previously noted, and accordingly has rallied sharply. Resistance at 2580 was no match for traders looking to enjoy the rally today and now it's a case of targeting 2600 for many bulls in the market. If the senate does indeed push the bill through then 2600 may be a support level as the market will jump sharply I feel - given it's the last hurdle. With a tax reform like this the possibility of even pushing the 3000 mark becomes all the more realistic. If we see the bill struggle then we could see sharp drops on the charts to support levels at 2565 and 2545, with the potential to go further as it feels a lot is riding on this bill in the equity markets.

The Australian dollar was one I also touched on yesterday and while the unemployment rate fell to 5.4% (5.5% exp) the participation rate was lower, and accordingly the creation of new jobs only came in at 3K so it was disappointing for traders in reality. I still feel that the AUD will struggle in the long run given the pressure on the economy, and as the USD continues to find favour with traders again.

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The AUDUSD on the charts currently has been trading between resistance at 0.7462 and support at 0.7566, with market expectations of potential falls lower. The 0.7500 psychological level is currently likely to be the largest target if the trend continues. However, we could see a bounce here and a retest of resistance levels at 0.7624 and 0.7687 on the charts.



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