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lukepearson

Market Moving Fundamental News

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Oil sticks near $50, shorts positions drop to June 2015 low

 

 

Oil prices fell to $49 area on Monday as Iraq increased target level of exports in anticipation of the OPEC meeting, while production in the Canadian oil sands region should recover from large-scale wildfires.

 

Attention turned to the OPEC meeting in Vienna this week, although most analysts do not expect any changes in the oil cartel.

 

Member countries could not agree on freezing production in an attempt to support prices while Iraq became another manufacturer in the Middle East which announced boosting export to 5 million b/day in June.

 

2016-05-30_23-26-57.png

 

WTI Oil futures were traded at $ 49.29 a barrel, falling 0.1 percent at the close of London session.

 

Futures on Brent decreased 0.1 per cent to $ 49.27.

 

Impact on the quotes also had a strengthening US dollar on the background of rising expectations of an interest rate increase in the United States in the near future.

 

Crude short positions decreased to less than 60K in May versus 160K in the beginning of March when price was at $32/barrel, signaling markets make light of the possibility of collapse on the energy market:

 

2016-05-30_23-26-57.png

 

However, trading volumes were limited due to public holidays in Britain and the United States, where Memorial Day, which is celebrated in Monday, is considered the beginning of the summer season, with rising demand on gasoline due to an increase in automotive traveling.

 

Vienna-based JBC Energy consulting company reported that global oil demand in the January-April 2016 year grew by 1.5 million barrels per day compared with the previous year, surpassing most forecasts thanks to strong consumption in the United States, China and India.

 

Oil production in the United States declined to a minimum since September 2014 year after the number of drilling rigs has dropped the ninth week of the last ten, despite the recent rally in oil prices.

 

Expected recovery of oil production in the Canadian oil sands region also had its pressure on WTI. Suncor Energy plans to increase production at its oil fields in Alberta this week after the suspension of works previously in may due to large forest fires.

 

Supply disruptions due to fires in Canada and unrest in Libya and Nigeria pushed oil to seven-months peaks in recent weeks.

 

 

Source : Market News and Analytics

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Gold dips to a $1,200 level, while greenback surges on Yellen

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Japanese Yen breached a 111.00 level in Asian session on Monday. The currency erased gains from the surprising move of the Bank of Japan, which decided to abandon a round of QE at the end of April.

 

USD/JPY was as high as 111.45, receding to a nearly 111.00 mark. Positive retail sales reports released on Monday signalled consumption in Japan recovers.

 

Precious metals were also hit by greenback strengthening as investors damp low-yield assets chasing for higher gains. A losing streak on Gold was held up on a $1,201 level as the steep decline triggered a strong backlash from the bulls near the four-month low. The bullion bounced to $1,210 remaining under a threat of further selloff.

 

Palladium, Platinum and Silver also declined to the lows of April 8-10.

 

Yellen speech in Harvard last Friday didn’t have any news for markets, though cleared doubts on whether the Fed chair is in line with other board members about prospects of the US growth. Yellen reiterated that the rate hike in the coming month could be appropriate. USD index has soared to 95.00 after the speech but bounced off to 94.71 on Monday. Despite firming confidence in the possible rate hike in June, the probability of it decreased to 28.1%, reflecting low expectations of the rate hike priced on the markets.

 

Oil sticks to a 49.00 zone, though attempts to repeat the hike above the $50 mark are in vain. According to COT reports, Oil short wagers have contracted from 200K peak in February to only 60K in May, showing that pessimism in growth outlook is rapidly shrinking. The prospects of reaching output cap agreement are unclear, as stances of Iran and Saudi Arabia remain mixed on this matter. There were statements from Iran’s oil officials that the country is interested in orderly market, while Saudi Arabia heats competition refusing to curb the pace of drilling.

 

In the first quarter, France GDP (YoY) rose 1.4% vs. 1.3% projected improving outlook of the EU on the fight with deflation. European indices remain nearly unchanged and trade with reduced volatility due to bank holidays in the UK and US. Asian equities advance on weakening Yen helping exporters to boost profits as well as PBOC loosening its fixing of USD/CNY rate by 0.45%. Nikkei +1.39%, TOPIX +1.19%, Hang Seng +0.26%, CSI 300 +0.14%.

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Asian Stocks Rise Before U.S. Payrolls Data as Yen, Kiwi Gain

 

Asian equities rose and the Japanese yen climbed toward a three-week high before U.S. jobs data that will shape expectations for the timing of the Federal Reserve’s next interest-rate hike. New Zealand’s dollar strengthened and Brent crude traded near $50 a barrel.

 

Stocks

 

The MSCI Asia Pacific Index was up 0.2 percent as of 1:50 p.m. Tokyo time. Benchmarks in Hong Kong, Singapore and Indonesia climbed to one-month highs, while those in India and Thailand were headed for their best closes since at least October. The Shanghai Composite Index was set for its first weekly gain in more than a month. Japan’s Topix lost 1.4 percent this week as Prime Minister Shinzo Abe failed to provide details of a fiscal stimulus package when he announced a delay to a sales-tax increase.

 

Noble Group Ltd. tumbled 13 percent in Singapore after the commodities trader announced a rights issue to raise about $500 million at a 63 percent discount to Thursday’s close.

 

Currencies

 

The yen rose 0.3 percent versus the greenback, extending this week’s advance to 1.6 percent. The kiwi strengthened 0.3 percent, set for a 1.8 percent weekly gain, as ANZ Bank New Zealand Ltd. said its commodity price index climbed 1 percent in May.

 

The Bloomberg Dollar Spot Index was down 0.2 percent for the week. Investors are paying close attention to U.S. data after Fed officials indicated a potential interest-rate hike as soon as this summer was contingent on continued improvement in the economy. Figures released Thursday by the ADP Research Institute indicated 173,000 workers were taken on last month in America, while filings for unemployment benefits declined for a third consecutive week, according to separate data.

 

The British pound was poised for a 1.4 percent weekly loss. The currency sank in recent days as successive polls indicated British voters are becoming more inclined to vote in favour of leaving the EU. The yuan was set for a fifth weekly loss, its longest losing streak since December.

 

Commodities

 

Brent crude was little changed at $50.03 a barrel. The third drop in U.S. crude inventories in four weeks tempered the impact of OPEC’s decision to stick to a policy of unfettered production, turning down a proposal to adopt a new ceiling on output.

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Brexit Wins: New Targets For GBP/USD, EUR/GBP - BTMU

Source : EFXNews

 

While the Brexit vote was a shock (we attached a 40/45% probability), we are not surprised by the initial currency market reaction. Cable still remains within our forecasted one-month range between 1.3000 and 1.5000.

 

In our previous base case scenario assuming that the UK voted to remain within the EU we were expecting cable to stabilise in the year ahead at around the 1.5000-level. However, the initial sharp pound weakness following the Brexit vote is fundamentally justified and is not overshooting in the near-term. The heightened political uncertainty in the UK including today’s resignation from Prime Minister Cameron with a new Conservative leader to be elected in early October, will continue to weigh heavily on the pound. The increased risk of recession in the UK and looser BoE policy in the year ahead justify a weaker pound. Capital inflows into the UK will also be dampened making it more challenging to the finance the UK’s elevated current account deficit requiring a weaker pound.

 

In these circumstances, we expect cable to fall into the mid-1.2000’s in the second half of this year before rebounding modestly back above the 1.3000- level in 2017 as heightened uncertainty gradually eases. The pound is already significantly weak according to our long-term valuation models which should help to dampen further downside unless there is a run on the pound.

 

We expect further more modest upside for EUR/GBP as well rising towards the mid to high 0.8000’s in the second half of this year before falling back towards the 0.8000-level in 2017. It is consistent with our alternative Brexit scenario outlined prior to the release of the referendum results.

 

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Here Is How To Position If BoJ Convenes An Emergency Meeting To Ease

 

  • EURUSD: Upticks are seen as an opportunity to sell at better levels. We are bearish and look for resistance in the 1.1130 area to cap a move lower towards initial targets near Friday’s 1.0910 lows and then the 1.0840 area. Beyond there we are looking towards 1.0710.
  • USDJPY: We are bearish and would prefer to fade upticks towards the 103.55 former range lows. Our targets are back to Friday’s 99.00 lows and further out towards the 94.80 area.
  • GBPUSD: We are overall bearish and would look to use upticks as an opportunity to sell at better levels. The 1.3505 former range lows are expected to provide selling interest for a move lower towards targets near 1.3015 and then the 1.2750 area.
  • AUDUSD: We are bearish and would use upticks towards 0.7520 as an opportunity to sell at better levels. A move below our initial targets near 0.7285 would signal lower towards the 0.7145 lows.
  • NZDUSD: We would prefer to fade upticks in range towards resistance near 0.7175 and look for a move below our initial targets near 0.6960 to confirm downside traction. Our next targets are towards the 0.6810 area.
  • USDCAD: We are cautiously bearish given the increased volumes on upticks and would fade upticks towards 1.3190. A move below targets near 1.2655 would signal lower towards the 1.2460 year-to-date lows.

 

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Tech Targets: EUR/USD, GBP/USD, AUD/USD, NZD/USD, USD/JPY - UOB

 

EUR/USD: Bearish: Diminished bearish momentum but downside risk is still clearly intact.

The rebound from last Friday’s low of 1.0909 has been more resilient than expected as EUR touched a high of 1.1155 yesterday. However, most indicators are still in bearish territory and the greater risk still lies of the downside. The 1.0909 low is acting as a major support but a break of this level could lead to a rapid drop the mid-March low of 1.0820. Only a move above 1.1210 would indicate that a short-term low is in place.

 

GBP/USD: Bearish: A move to 1.3000 would not be surprising.

 

We view the current movement as a short-term consolidation phase that is expected to lead to an attempt lower to take out the post-Brexit low of 1.3120/25 (for a move to the major 1.3000 level). However, it has been a week since Brexit and the lack of follow through has dented the downward momentum somewhat but confirmation of an interim low is only upon a break above 1.3600.

AUD/USD: Neutral: Expect choppy trading between 0.7305/0.7510. [No change in view]

 

AUD is rebounding quickly from the 0.7325 low seen on Monday. While the up-move appears to have scope to extend higher and test the strong 0.7510 resistance, a clear break above this level is not expected. In other words, we are holding on to our neutral view for now and expect AUD to continue to trade choppily within a 0.7305/0.7510 range
.

 

NZD/USD: Neutral: In a broad 0.6975/0.7170 range. [No change in view]

 

NZD came close to the major 0.6975 support on Monday (low of 0.6971) but rebounded sharply. The up-move is viewed as part of a broader consolidation and not the start of a sustained rally. That said, a test of the major resistance at 0.7170 would not be surprising. Overall, we continue to hold a neutral view and expect further range trading between 0.6975/0.7170.

 

USD/JPY: Neutral: In a broad 101.00/105.00 range.

While USD has been edging higher over the last several days, the up-move is lacking in momentum and the movement is viewed as part of a consolidation phase and not the start of a sustained rally. The outlook remains mixed, even from a short-term perspective and market seems undecided about what to do with this pair. Overall, we expect further range trading that is likely contained within a 101.00/105.00 range.

 

Best Regards

fxlogo-blue.png

 

Market Commentary Team

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EUR/AUD has lost most ground, butwe expect that cross in particular to outperform in the coming weeks.

 

On the Aussie leg, we expect another disappointing CPI print for Q2 will compel the RBA to cut the cash rate in August. Our local economists have penciled in a core inflation print of 1.5% y/y, well below the target band, and think this will be sufficient for the RBA to act. Moreover, the risk to this call is likely skewed to the downside considering that currency strength in Q2 also had a greater disinflationary impact in New Zealand than most long-term models predicted. With the rates market still sitting on the fence at ~13bps priced, a soft CPI print should see significant follow-through in the currency.

 

As for the euro leg, we consider the market too dovish in pricing a ~7bp lower depo rate by year-end. This week’s meeting should make it clearer that the ECB won’t panic over Brexit and, if necessary, would likely prefer to adjust QE in the autumn. But that prospect should be less bearish for the euro than a rate cut, and the meeting thus poses some upside risk to the euro. In the US and Japan, by contrast, currency-bullish policy re-pricings won’t likely happen before September. Over the summer, the Fed will likely remain reluctant to hint at any tightening by year-end, and the Abe administration should manage to keep alive some market expectations of a large fiscal stimulus in the autumn.

 

...In valuation terms, lastly, the euro is just as well protected against the Aussie as the yen, having struggled for years to undershoot PPP by more than 20%.

 

b11.PNG?v578f8729

 

 

fxlogo-blue.png

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EUR/USD: If 1.0930 Fails, Downside To Be Limited To 1.08

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We saw more USD strength last week, which I think partly reflects lingering global growth concerns, due to Brexit and what not. I would not fight the USD now. Especially so, as with the recent few weeks of strong US data, we could still get the Markets reprice the Fed back to more than the current 45% chance of one 2016 hike. If only August 5th payrolls is strong!

 

Overall, my feeling is that the Markets expect too much from global central banks – so far, the BoE has “disappointed”, the ECB has “disappointed”, and BoJ will “disappoint” next week?... While consensus is for rate cuts and more QE, I really feel the idea “lower rates are no good for economy” is getting traction among central bankers . Even BoJ Kuroda’s comments, who also shrugged off helicopter money again at G20 meeting, are in that direction. Looking at how negatively the Markets react to lower rates... I side with this view (no. more. "easing". please.) But at the same, I worry the Markets will get cold shower if central banks don't deliver as expected.

 

 

Central banks not as easy as we wish HAS to be coupled with worse/worsening global data to get a proper “risk off”, just like last December with Fed. Looking at the leading indicators, the slowdown seems inevitable, also in Europe, and the summer equity Markets have been ignoring it for now. Me? Sit on the cautious bench for the time being.

 

The EURUSD has corrected, and if 1.0930 fails, we could see 1.08 – but that would likely be it, assuming no major crisis/recession in Europe, China or US (baseline).

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when i saw theese six JPY pair, i found all of them already formed a sell pattern,

ussually i never trade with h4 because it is long term time frame.

but let us see

 

I am waiting theese news

 

news_zpsi5ur3kbq.png

Here we go, sell All JPY

 

FXMartSellAllJPY_zpsvc8uaha7.png

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Tech Targets: EUR/USD, GBP/USD, AUD/USD, NZD/USD, USD/JPY

 

fxlogo-blue.png

 

EUR/USD: Shift from neutral to bullish: Target a move to 1.1280.

 

The expected recovery in EUR was more robust and resilient than expected. The ease of which the 1.1150 resistance was taken out suggests further upside pressure. At this stage, the potential appears to be limited to 1.1280. Stop-loss for the bullish view is at 1.1060

 

GBP/USD: Neutral: Undertone has improved but 1.3320 is a major resistance.

 

The neutral phase in GBP that started more than 2 weeks ago is still intact. As highlighted in recent updates, while shorterterm upward momentum has improved, a sustained up-move in GBP is likely only if there is a clear break above the strong 1.3320 resistance. At this stage, the odds for a break of this level are not high even though they have increased considerably. Overall, the positive undertone would continue to improve as long as GBP stays above 1.3100.

 

AUD/USD: Neutral: Bullish if daily closing above 0.7600.

 

AUD is currently pressuring the top end of our expected 0.7440/0.7600 sideway trading range. Upward momentum has improved considerably and a daily closing above 0.7600 would indicate that a move towards 0.7675/80 (and possibly beyond) has started. Overall, this pair is expected to stay underpinned in the next few days with solid support at 0.7490.

 

NZD/USD: Shift from neutral to bullish: Overbought but room to extend higher to 0.7325.

 

We clearly underestimated the recent NZD strength as it continues to surge higher. The outlook has shifted to bullish but shorter-term indicators are severely overbought. That said, further extension to 0.7325 would not be surprising. Strong support is at 0.7150 but only a break below 0.7080 would indicate that the bullish expectation is wrong.

 

USD/JPY: Shift from neutral to bearish: Severely oversold but room to extend further 101.10.

 

The 3% plunge in USD last Friday has shifted the outlook to bearish. However, the rapid drop is clearly oversold but based on the current momentum, further extension to 101.10 would not be surprising (next support is at July’s low of 100.00/05). In order to maintain the current momentum, any rebound should not move back above 104.20.

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"USD/JPY: Shift from neutral to bearish: Severely oversold but room to extend further 101.10."

Getting to a nicely undervalued position, can be quite tempting to get in with current price level. What do you think about JPY prospects?

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USD/JPY, EUR/USD: What The Yield Spread Says?

 

The US/Japanese real 10year yield spread moved back out to 50bp after the payroll data, but just eye-balling the yield spread and USD/JPY suggests we’d need a 20bp move up in US real yields to have any chance of seeing USD/JPY 110. My hopes of that happening haven’t revived on these figures, and as for the 50bp move in relative yields that would point the way to USD/JPY120... that’s going to take better US data and a massive change of heart by the BOJ. Maybe a risk-friendly set of US numbers is enough to keep USD/JPY from breaking 100 for now, but the most we can hope for is that a 100-105 range is enough to give the Nikkei a bid...

 

The EUR/USD chart isn’t any more encouraging. The 10-year real yield differential, at 1.02%, is exactly at the average of 2016, and did I mention that the EUR/USD average this year is 1.1150? ½% below that is probably a fair discount for the Eurozone’s proximity to the UK. I’d rather get my duration kick in the Eurozone than the US (or the UK for that matter, though that’s not exactly working out at the moment).

 

C33_zps7xrcwivd.png

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