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17/08/16 Market notes

Pound tests local resistance at UK unemployment data but fails; European equities fall.

Pound tests local resistance at UK unemployment data but fails; European equities fall.

As official data showed on Wednesday UK jobless rate remained the same matching projections while the number of applications for unemployment benefits decreased in July, while the average salary report came in line with expectations

The Office for National Statistics reported that the unemployment rate in the UK was 4.9% for the three months to June which corresponds to the forecast.The number of applications for unemployment benefits unexpectedly fell in July by 8600 compared with expectations of increase in 9500, after rising by 900 a month earlier,

Meanwhile, average wages excluding bonuses showed 2.4% monthly growth to June matching forecasts, after increasing by 2.3% in the three months to May.Excluding bonuses wages rose by 2.3%, also in line with the consensus forecast, after the increase in the three months to June by 2.2%.The pound strengthened after the release of the data. GBP/USD pair is trading at 1.3052 dipping to 1.3014 before the release, while the EUR/GBP pair trades at 0.8630 after a rally to 0.8652 earlier in London session:

This is how reported affected GBP/USD:

Безымянный

 

Meanwhile, European stock markets continued to decline. London’s FTSE 100 index lost 0,15%, Euro Stoxx 50 fell 1.01%, France’s CAC 40 fell 0.67%, while Germany’s DAX weakened by 0.71%.

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15/08/16 Market notes

Trading signals and analytics 15.08.2016. Digesting Retail Sales data

Trading signals and analytics 15.08.2016. Digesting Retail Sales data

Hello traders,

Greenback got a crushing blow on Friday from US Advance Retail Sales report which showed weakest growth since April. The headline figure at 0.0% was 0.4% lower than medium analysts forecast triggering a rout among greenback bidders:

US Dollar futures

 

The rout, though, was quite a short-lived and the currency struggled to close the week with minimal losses as seen from the chart. Despite the offering tone resumed on Dollar on Monday, the change in FED decision futures hints Friday US Consumer report could have limited impact:

rate hike futures

As seen from the table December rate hike probability fell from 44.9% to 40.6% but still remains relatively high. Upbeat expectations on FED tighetning will provide strong support to US Dollar so any declines in currency will probably viewed as a point for bullish entry rather than supporting downward trend. Monday change in rate hike futures will help to make final gauge of impact from the report.

Gold

As seen from reaction on Gold (XAUUSD) a panic right after release of the report was quickly tamed, suggesting weak Retail Sales data had limited impact on markets. 

The signals for today:

Gold (XAUUSD)

The bullion will probably extend downside movement as high rate hike expectations imply lowered risks of global turmoil, thus higher demand of risk assets.

First target on Gold – $1,335.10, second – $1.330, Preferred lot size – 0.1 lot, TP – $1,335.10, SL $1.342.50

 

Pound (GBP/USD)

It’s a perfect moment to trade on the pair as it stays nearly post-Brexit lows. 1.29 level looks quite tough to break but it will probably yield on UK CPI or Unemployment data due on Tuesday and Wednesday. The pair is expected to climb to 1.30 once again then sink below 1.29 level on UK economic data which will probably trail below forecats.

Signal on Pound  UP to 1.3010 level then DOWN below 1.29.

First TP – 1.2990, SL  – 1.2870,

Second TP – 1.2870, SL 1.3020

Preferred lot size – 0.4 lot 

Stay tuned with Brokerarena to receive our daily fundamental analysis and signals.

If you have any questions or comments leave them in the comments section below.

Brokerarena.com

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11/08/16 Market notes

Trading signal 11.08.2016. Taking stock of EIA oil inventories report.

Trading signal 11.08.2016. Taking stock of EIA oil inventories report.

Hi Traders,

Today I would like to take a stock of crude inventories report released by US Energy Department on Wednesday. It’s widely known that the data from this report can signifcantly affect prices of Oil, but in my view, from recent time it has been considered very straightforward and shallow. Oil stockpiles rose – prices drop, stockpiles fell – prices go up. Plain and simple, but sometimes this approach hide other key trends which do really sets the tone on energy market.

So lets have a look how yesterday EIA account impacted on prices:

EIA report

 

On this 5M chart of USD/WTI  we can see that price rose but then suddenly went for a deep drop. Try to correlate it with data from EIA:

Crude EIA

Looking at “stocks” section we see that crude Oil stockpiles rose by 1.1 million barrels. But how it helps US to estimate changes in supply or demand which, in fact, main driving force on the market? Of course piling more crude in storages adds to global surplus, but it gives us no information on consumption of oil which actually reflects how demand changes.  It is better to track consumption and operable capacity of refineries which are main consumers of crude oil. As the main end product of refineries is gasoline we also need to check “gasoline stockpiles” to see changes in its consumption by us, end users.

According to EIA report crude oil refinery outputs averaged about 16.6M barrels, 255K less than the previous week, indicating capacity utlization could fell, what in turn implies less demand from refineries. But checking inputs for several previous weeks we can see that the change in last week could be normal within the normal deviation:

Crude refinery input

 

Meanwhile, Motor Gasoline in “Stocks” section in the table above indicates the stockpiles fell 2.8M barrels signaling the demand on fuel increased in US last week.

In overall the data came mixed but I would find it more positive than negative for US. First candle up on WTI after the release could be reaction to the report, while the drop after might be a selloff from important resistance level:

resistance

 

There are probably no signficant news for Oil which can put pressure on prices considering support from NZD and UK central banks in the form of monetary easing so I expect the price to head for short-term rebound back to pre-EIA report.

The signal for Oil is BUY with small lot focusing on long-term upturn.

And what’s your view on Oil? Share your analysis and suggesstions in comments so we can discuss it together!

Brokerarena.com

 

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10/08/16 Market notes

Trading signals and analytics 10.08.2016.

Trading signals and analytics 10.08.2016.

Hello Traders,

Today we have significant change in market risk appetite what has certain impact on several assets like government bond yields, Gold, Japanese Yen, Swiss Franc which are also know as “safe heaven assets”

US, German and Japan Government bond yields tumbled today, US Dollar sank against major peers and gold surged after publication of Non-Farm Productivity report, which usually has a low market impact :

Non Farm productivity

As we can see the actual reading completely missed expectations – productivity fell -0.5% while it was expected to grow 0.4%. In the run-up to FED decision on raising rates in 2016, markets became very sensitive to every piece of labor, consumer and inflation data which can point to the strength/weakenss of US growth. In case of Non-Farm productivity which indicates output per labor hour, the drop could signal serious slowdown in business growth, given that the labor costs constitute about 2/3 of average business costs in US.

Consistent growth of Average Hourly earnings in US paints much more gloomy picture of US Business outlook – labor costs grow while its productivity declines:

Labor Productivity

The divergence of actual productivity data could be also connected with lackluster growth and slack in jobs in April-June:

NFP

 

Here is how the report affected DXY (red line) and XAUUSD (candles)

US Dollar

 

I guess that  impact from the report will be probably short-term and markets will soon return to the digestion of Central Banks stimulus, increasing their wagers on risk assets. The gold is expected to retreat back to $1.340 level, while US Dollar regain positions it gave up yesterday.

GBP/USD

The pair is expected to drop below 1.30 till the rest of this week, the signal is SELL, TP – 1.29100, SL – 1.3100. Preferred lot size –  0.2 lot.

XAU/USD (Gold)

The upsurge on bullion won’t probably find support to push it for new heights so will probably retreat back to 1,340 level till the rest of this week. The signal for today is SELL, TP –  1,350 level, SL – 1,360.50. Preffered lot size – 0.1 lot

Feel free to leave your questions and comments on this article.

Brokerarena.com

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09/08/16 Market notes

Trading signals 09.08.2016

Trading signals 09.08.2016

Hi Traders,

Today we have no imporant market moving events except some data on pound. UK Statistics Bureau will release figures on industrial, manufacturing production and Trade Balance for June, which, though, came prior to UK referendum (Brexit) so probably will have little impact on prices.

GBP/USD slammed 1.30 support level during Asian without any visible struggle. Such move can be a trap for bears, though in the light of recent aggressive monetary easing of Bank of England the drop on pound appears to be logically correct. 1.30 mark became a cliff of the mountain and there can be several attempts to emerge above 1.30 though those attempts will be probably curbed.

Signal for today: Sell GBP/USD from 1.30.

Target 1.2950-1.2930. Preffered lot size – 0.3 lot. SL – 1.3030

Gold

As we mentioned yesterday gold decline will deepen with corrections as market forces push it to the monthly bottoms. Positive US jobs data and incentives from Bank of England sideline short-term risks allowing traders to boost wagers on risk assets. China CPI for July released today was in line with forecasts (growth 1.8%) damping worries about Chinese economy. Producer price index slowed decline to -1.7% vs. -1.8% estimated.

It is also important to pay attention for Chinese data tomorrow when National Bureau of Stastistics will release important macroeconomic gauges, such as Aggregate Financing and New Loans. Chinese government continues to fuel economy pumping it with cash what basically shifts solution of underlying economic problems to future. Increased amount of New Loans can boost gold prices.

Signal for Gold Today: Sell

Preffered lot size 0.1 lot. Target $1.325, SL – $1.340

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08/08/16 Market notes

Trading signals 08.08.2016

Trading signals 08.08.2016

Non-Farm Payrolls report released last Friday soothed investors concerns regarding the health labor market in US. Two opposite extreme NFP readings in May (38K) and June (revised to 292K) kept investors puzzled whether they need to quit risk assets or extend hunting for higher yields. As US Labor department reported 255K jobs created in July, beating analysts forecasts (180K) large money received signal US labor market gained solid footing diminishing medium-term risks for second largest world economy.

Strong NFP after pretty aggressive monetary easing of Bank of England provide a basis for increasing plays in risk assets what implies reducing positions in safe heavens, such as Gold, Japanese Yen, Swiss Franc and Government Bonds of US, German and Japan. 

Signals for Monday:

XAU/USD (Gold)

Безымянный

 

On daily timeframe we see that price heads to the support level $1310 level price hit before the BoE refrained from cutting rates in July.

Signal:  Gold is in the mood to tank further to $1.325 today.

Preffered lot size – 0.1 lot. TP – $1.325, SL – $1.338

 

GBP/USD

Price touched medium-term support at 1.302 on Friday, recoiling to 1.305. Attempt for a second test failed during London start so the pair is probably heading to 1.3150 level after a bounce at 1.31.

Signal: Buy GBP/USD

Preffered lot size – 0.25 lot, TP – 1.3150, SL – 1.3010

 

WTI (US Oil) 

After highly ubpeat EIA report on gasoline stockpiles in US (reduced greatly) and upbeat NFP prices seem to have succesffully bottomed out $40 mark. We expect the price to make more gains on growing risk appetite.

Signal: Buy WTI

Preffered lot size –  50 lots. TP – $43.10, SL –  $41.90

Let us know if you have any corrections or questions.

Brokerarena.com

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05/08/16 Market notes

Trading signals 05.08.2016

Trading signals 05.08.2016

GBP/USD

Intraday support – 1.3080, resistance 1.3190. The pair is flat ahead of US Non Farm Payrolls report, but likely to go up to 1.3190.

1.3100 level seems quite strong for bears as post-BoE downward pressure failed to break it.

Preffered lot size – 0.2 lot, SL – 1.3100, target  – 1.3190

 

EUR/USD

The pair is likely to turn upwards on risk-averse move ahead of NFP. Intraday support is 1.1080 resistance at 1.1220.

Preferred lot size – 0.1 lot, SL 1.1110, Target 1.1190.

 

XAU/USD

Gold surged after Bank of England decision to cut the rate and extend stimulus program. There can be some correction to $1.360 level but the asset will extend uptrend with next target at $1,370 as Non Farm Payrolls can expand downbeat economic data which has been released in US recently.

Preferred lot size – 0.05 lot, SL $1,360, target $1,370

 

USD/JPY

The pair consolidates near 101 level getting ready for breakout to 100.50 and then to 100 level. Weakening greenback make it comfortable for bears to act.

The signal for pair is SELL, SL at 101.550, Target is 100.50. 

 

Brokerarena.com

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04/08/16 Market notes

Pound holds near close ahead of BoE, UK Gilts yield drop

Pound holds near close ahead of BoE, UK Gilts yield drop

After holding off interest rate cut in July, the Bank of England is expected to venture out for monetary easing today, first time in 7 years in response to recession risks sparked after Britain’s vote to quit EU. The country’s interest rate which currently stays at 50 b.p. can be lowered to historical low of 25 b.p., predicts majority of market experts.

The futures on BoE rate decision, which serve as a main indicator of market sentiments towards the event price in almost 100% probability of the rate cut.

Projected interest rate at 0.25% will become the lowest since foundation of BoE in 1694. The financial institution will also release revised GDP and CPI forecasts which is expected to contain no recession warnings, according to Bank of America analysts. However the figures will be probably revised towards the slump, analysts say.

The confidence in stability of UK economy was eroded after manufacturing and service PMI reports showed activity in the sectors fell to the lowest level for several years. Being a main gauge of economic potential of the country, grim PMIs forced BoE to mull seriously over easing as some risks threatening the country began to “crystallize” according to the last BoE financial stability report. Service PMI in July contracted to 47.4 points from 52.3 points in June, renewing lows of 2009 year.

Meanwhile, inflation in country which were endeavored to bring to target of 2% in 2013, may accelerate to 3% by the end of 2017, mainly due to the depreciation of the pound. According to the experts of the National Institute of Economic and Social Research UK, the UK economy is likely to grow by 1.7% in 2016, and only 1% – in 2017. Nevertheless, the Central bank provides more soothing projections – inflation in the country will climb above target level of 2% in 2018, and will reach 2.2% in 2019. In June, consumer prices rose only 0.5%.

Pound hovers near close at 1.3330 ahead of BoE, investors buy UK Gilts which yield fell by -0.06%. German bonds yield also fell by 32.35% to -0.045. Gold fell half of percent on expectations of monetary easing.

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03/08/16 Market notes

US Dollar extends declines as growth on Wall Street stalls, Aussie gains prove RBA impact was limited

US Dollar extends declines as growth on Wall Street stalls, Aussie gains prove RBA impact was limited

US Dollar tumbled to a six-week low against the basket of majors on Wednesday as markets continue see earthly chances of the FED raising rates this year. A downturn of the US currency extended after many of the Wall Street bulls withdrew from trading: local stocks demonstrated worst performance in this month because of lackluster economic data and falling oil prices.

US public spending rose, though investors were rather focused on weak inflation figures. Together with drop in business investments and weak GDP growth in the second quarter FED could give up an idea of rate hikes in this year.

Greenback futures hit the session low of 95.201, near a minimum of six weeks at 95.003 recorded at night. European common currency trades without sharp swings near 1.12 after rising 0.6% during the Asian session to $ 1.1233 – the highest since June referendum, where UK decided to break from the European Union. USD/JPY rose 0.32% to 101.20. The pair dropped 1.5% to three week low of  100.680 as the meeting of Minister of Finance Taro Aso and BoJ governor Haruhiko Kuroda spoiled expectations the policymakers will announce new plan to weaken the Yen. Comdolls advance on buck weakness, with AUD/USD soaring 1% during Asian trading. The pair hit a three-week peak of $ 0.7638, erasing declines despite RBA decision to lower cash rate by 25 b.p. to 1.5%

Oil traded near a 3.5-month lows, as global markets lapsed into risk-aversion mode. Oil prices failed to recover on API data which indicated crude inventories declined in the US as the pace of production outpaces the destocking. According to the API, crude oil inventories fell  by 1.34 million barrels to 518.7 million in the week ended July 29 matching forecasts. Inventories at the Cushing storage Hub in Oklahoma fell by 1.30 million barrels, API data showed.

 

Brokerarena.com

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01/08/16 Market notes

Lackluster Mfg. PMI sends CSI 300 down, greenback is under pressure ahead of ISM

Lackluster Mfg. PMI sends CSI 300 down, greenback is under pressure ahead of ISM

Chinese Manufacturing PMI fell in July to 49.9 points from 50 points a month earlier showed the data of China National Bureau of Statistics.

The indicator dropped below 50 points indicating decline in activity of the industrial sector first time in five months. Median estimate of the experts interviewed by WSJ projected an increase to 50.1 points.The reading below 50 mark indicates decrease in activity, while above 50 – expansion of the sector. Another similar index calculated by Caixin Media and Markit rose to 50.6 points in last month from 48.6 points in June.Local stock index CSI 300 fell on the data by 0.85% to 3,176.81 points.

Futures on US Dollar tumbled to a monthly low of 95.45 on Friday as lackluster GDP and Personal Consumption data dampened hopes for a rate liftoff this year. Yeat-to-Year US GDP for a second quarter rose by 1.2%, half of the median estimate at 2.5%, while the growth of Personal Consumption for the same period slackened to 4.2%, missing a forecast of 4.4%.

 

US Dollar

Despite eroded optimism on US growth, the Chairman of the Federal Reserve Bank (FRB) of San Francisco John Williams doesn’t anticipate a recession in the US economy after seven years of continuous growth.

“I’m not worried that recession risks may increase in the next year or in the future, because there are no signals that the US economy is going in this direction”, – he said, speaking in Boston.Asked about the possibility of the FED’s move to the policy of negative interest rates, he said he believes it is unlikely in the United States and expects the hike rather than the cutoff  of Fed rates in the next few years.

According to Williams, the US economy is “doing well” and close to full employment with inflation around 1.5%, close to the target of 2%.”Currently, we are in a good position in recent years we have gone through a series of riots and still making progress.” – J.Wilyams said.

He noted that the statistical data on the US economy which will be posted in the coming months, could support  both two rate hikes, one rate hike or none at all.”The flow of data, which we will see in the next couple of months, in my opinion, will be speaking in favor of the two rate increases in 2016. It may be true that this does not happen, and the data will support only one rate hike or none at all. Time will tell “- quoted J. Williams Bloomberg.

The statement of the Federal Open Market Committee (FOMC) following the meeting pointed out that the Fed is still open to consider raising rates in September.

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29/07/16 Market notes

BoJ holds additional spur for the country, weak US GDP bodes ill for rate hike outlook.

BoJ holds additional spur for the country, weak US GDP bodes ill for rate hike outlook.

Greenback tumbled to a fresh one-month low against majors as gloomy GDP figures erode outlook for US growth slashing chances FED will raise rates this year. Bank of Japan benights markets keeping the size of stimulus program unchanged resulting in a sharp upsurge of JPY and downward swing in local stocks. USD/JPY fell 103.50 on the announcement of JPY policy rate with Yen growth accelerating after release of US GDP data, touching lower bound of 102.50 level.

Bank of Japan held policy rate unchanged at negative 10 b.p. while announcing an increase in the volume of purchases of securities exchange-traded funds (ETF), retained the goal of increasing the monetary base by 80 trillion yen per year, supporting plans to buy other assets.

Obviously, Kuroda doesn’t want to break off with other central bankers who took wait-and-see position, trying to delay easing as much as possible till potential Brexit fallout shows up. This could provide a respite for traders bidding on risk assets as short-term risk diminished, according to FED.

Although a new chapter of global risk-aversion can be opened by BoE decision in next week which is expected to boost stimulus and cut rates.BoJ decision disappointed investors who had expected more decisive measures after the pledge of Prime Minister Shinzo Abe at the start of this week.

Greenback fell sharply as 2Q GDP growth slowed to 1.2% falling short of medium estimate of 2.5%. Personal consumption grew 4.2% in second quarter below forecast of 4.4%.Crude oil prices extended declines, US Oil fell below $41 to 40.60 level on hedge funds building their bearish wagers, oversupply issues.

Brokerarena.com

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28/07/16 Market notes

Crude prices test new lows as EIA shocks with rising stockpiles, $40 is on the way

Crude prices test new lows as EIA shocks with rising stockpiles, $40 is on the way

Oil prices fall on signs the market continue to drawn into supplies, with Brent falling below $43 per barrel, first time since 20 April.

Brent futures traded on ICE exchange found support at $42.99 per barrel in Thursday trading.WTI also renewed bottom, falling to $ 41.77 per barrel.

Heavy bearish signal was produced by US Department of Energy reporting that oil reserves in the country rose by 1.67 million barrels last week, while gasoline reserves increased by 452K, hurting refineries. Analysts projected a decline in crude oil inventories by 2million barrels, gasoline – by 700K barrels.

What rises most concerns is that gasoline reserves in the US are growing during the peak of summer driving season which is very unusual for this time of a year, given the fact that the consumption of fuel by motorists is at the highest level in decades.

Stockpiles at biggest US storage hub Cushing  in Oklahoma rose to 65.2 million barrels. In addition, oil production in the US grew at the end of the third week in a row, to 8.52 million barrels per day.

Meanwhile, Goldman Sachs analysts point out that the main negative factor for the oil market is not excess fuel but strengthening of the US dollar. The US currency rises in expectations of further divergence in the direction of monetary policy between the United States and other major economies of the world. If the Fed, on the expectations of many experts, will raise its key interest rate until the end of the year, the central banks of Britain, Japan and the euro zone may soon also announce the expansion of stimulus measures.

Investors damped bidding on Dollar after FED stance regarding timeframe of rate hike remained unclear with growing bias for delay. USDX tumbled 1$ to 96.35, partly regaining its position during Thursday trading with uptick to 96.50. Sterling and Euro rose, while emerging market currencies fell.

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26/07/16 Market notes

Oil prices recoil ahead of API, Dollar sinks ahead of FED.

Oil prices recoil ahead of API, Dollar sinks ahead of FED.

Crude saw modest rebound on Tuesday during the Asian trading session after bearish forecasts sent prices deeper on Monday and now investors are waiting for the estimate of oil reserves in the United States.

Today, the American Petroleum Institute (API) will release its weekly estimate of crude oil reserves and petroleum products in the United States. The report certainly won’t be passed unnoticed producing some good volatility on UK and US Oil benchmarks as traders are desperately looking for new catalysts for growth or downward breakout.

On the NYMEX WTI futures for September delivery rose 0.21% to $43.22 a barrel. On the ICE Futures Exchange Brent oil with settlement in October rose 0.29% to $45.26 a barrel.

Yesterday oil prices fell sharply to its lowest level in three months due to angst consumption fails to keep pace with supplies growth and strengthening of the greenback

At the weekend, analysts at Morgan Stanley have issued serious warnings about oversupply of oil products as gasoline stocks rose to the highest level in five years. Last week gasoline reserves increased by 0.91 million barrels, distillates stockpiles jumped by 4.1 million barrel what became the biggest increase in more than five months. Recent trends have heightened fears that refineries will reduce the pace of purchases of oil in the next few weeks, triggering a drop in oil prices.

“The demand for crude oil is lower than demand for petroleum products for the first time in three years — Morgan Stanley analysts wrote. -Refineries — real oil consumers, and oil demand is more important to balance the oil market than demand for petroleum products. Given the glut at the oil products market, reducing the margin of oil refineries and changes linked to economic cycles, we expect that the demand for crude oil will fall in the next few months.”

As a result, analysts predicted that demand for oil will increase by 625K barrels per day in 2016. It is much smaller than the International Energy Agency forecast of consumption growth by 1.3 million barrels per day. WTI oil rose from its lowest for 13 years of $26.05, which it touched in mid-February, partly due to signs that the imbalance between supply and demand began to decrease.

Investors were pricing in the news from Libya, where the Commander “Libya Petroleum Facilities Guard”, Ibrahim Dzadran said that the guard is ready to stop the prolonged blockade of three key ports of the North African country.

DXY declined 0.23% to 97.06 ahead of FED meeting in Wednesday as traders flee from US Dollar ahead of uncertainty related to FED comments toward further monetary policy. Pound tumbled 0.50% despite Dollar weakness as traders cut their exposure in risk assets.

 

Brokerarena.com

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25/07/16 Market notes

Crude prices sink on strong Dollar, traders wager on further drop

Crude prices sink on strong Dollar, traders wager on further drop

Oil prices have accelerated the slump during late London session renewing two-month low due to concerns about persisting market glut and lower demand of crude oil by refineries.The rig count according to Baker Hughes rose by 14 rigs to 371 signaling US Shale producers expand drilling activity for the 4th consecutive week, spurring worries additional supplies from US will worsen the glut.On Monday WTI fell 2.06% to 43.28 per barrel, Brent declined 1.71% to 45.30 level. Worries on global oversupply slashed 4% from Brent price last week and 3.8% from WTI futures.

Net position on Crude Oil has been declining consecutively ten weeks according to the CFTC and fell by 5.2K to 289.6K from 294.8K signaling traders continue to build wagers on the fall. $40 floor look appealing for traders though upbeat API and then EIA data may trigger the bounce as it was seen last week as traders are looking for growth drivers despite gloomy sentiments.

Greenback index hit 97.62 on Monday as employment, housing and PMI data points on a stable footing of US economy, fanning speculations FED may return to hawkish rhetorics. Later during Monday trading the index erased gains returning to 97.41, though showing no significant bearish interest to the currency. Traders will focus on Fed Statement on Thursday to understand if FED sees headwinds in Brexit for the growth of US or turns focus on domestic data.

We expect US Dollar to extend growth ahead of the FED event as recent data shows traders increase bets on rate hike in this year and wait for confirmation from the US policymakers.

Brokerarena.com

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22/07/16 Market notes

Gold extends decline on appeal to risk assets, ECB hold the policy unchanged.

Gold extends decline on appeal to risk assets, ECB hold the policy unchanged.

Gold futures slid on Friday as upbeat economic data from US released in Thursday supported greenback, while ECB left the door open for stimulus in future.On Thursday prices fell to three-week low at $1,314, recapturing $15 in New-York session. Downturn resumed on Friday though second attempt to break the support is likely to be reserved for next week.

 

Screen Shot 2016-07-22 at 1.30.16 PM

Market sentiments started to heat as ECB President Mario Draghi said on Thursday that European markets have successfully coped with the volatility as a result of Brexit, showing “encouraging stability”, but reiterated that the Central Bank is ready to act, using all tools within mandate.The comments came after the ECB kept interest rate unchanged at a record low 0.0%, tallying with forecasts.

US Dollar gained support on positive employment figures posted in Thursday which boosted optimism about the U.S. economy.

The data showed that existing home sales in the United States unexpectedly rose in June by 1.1% to 5.57 million units, while a separate report showed that the number of aplications for unemployment benefit in the United States unexpectedly fell last week to 253000 (-1000). The USD index, showing how good greenback performs against the basket of other majors rose sharply by 0.23% to 97.16. Futures on US interest rate price in only 1.2% probability of rate hike on next meeting at Wednesday, July 27.

Gloomy UK Composite PMI released on Friday added pessimism to post-Brexit UK economic outlook. The headline figure at 47.7 missed median estimate of 48.5, signaling economic contraction could be faster than expected.

Brokerarena.com

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21/07/16 Market notes

Upbeat EIA report help oil to bounce from two-month low, gasoline stocks in US saw biggest gain for five months.

Upbeat EIA report help oil to bounce from two-month low, gasoline stocks in US saw biggest gain for five months.

US Oil stalls near $46 mark after staging rebound from $44.5 on positive crude inventories report released by EIA in Wednesday.
WTI futures for September delivery gained 0.35% consolidating below weekly resistance level of $46. Brent futures saw bidding activity rising 0.38% to 47.35 per barrel.
Prices tumbled to two-month low in Wednesday before rapid recovery due to higher than expected contraction of US Oil stockpiles and substantial increase in gasoline reserves.

Screen Shot 2016-07-21 at 11.25.14 AM
EIA said in its weekly report commercial oil stocks in the country decreased to 2.342 million barrels during the week from 9 to 15 July. United States oil inventories now average 519.5 million barrels and are at historically high levels for this time of year. Investors expect stockpiles to decline by 2.1 million barrels with the American Petroleum Institute in Tuesday claiming reservers shrank by 2.3 million barrels. It is worth to note that US oil reserves have been declining for nine consecutive weeks signaling about resurgence of crude output in US.
Oil reserves in biggest storage of US, Cushing rose by 189K barrels although it was expected to shrink by 100K.
While gasoline stocks rose by 0.91 million barrels, distillate stocks declined slightly, by 0.21 million barrel. A week earlier, stockpiles of distillates in the country jumped more than 4.0 million barrels, which was the biggest growth in more than five months. Analysts had expected gasoline stocks to decline by 0.5 million barrels.
Meanwhile, the volume of oil production in the United States rose slightly by 9K to 8.494 million barrels per day. Oil production in the country is still more than 1 million barrels a day less than last summer, when it peaked at 9.604 million barrels per day, record high level for 44 years.

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18/07/16 Market notes

Crude prices stall amid no market-moving events, risk assets grow as investors quit safe assets

Crude prices stall amid no market-moving events, risk assets grow as investors quit safe assets

Crude futures stall in Asian trading on Monday halting the growth from last week as traders are gradually shrugging off after coup attempt in Turkey, while slack in US Dollar and upbeat economic data from the United States provided minor support to the energy prices.

Brent futures rose 0.17% to $47.70,  US Oil gained 0.02 percent to $ 46.66 level.

Prices dipped on investors’ safety move after military coup attempt in Turkey which threatened to cause instability in the region and break supplies through Bosphorus strait which accounts for about 3 percent of global supplies. Some loading ports in Caspian Sea halted operation in Friday but reopened for servicing tankers in Saturday after rebellion were curbed.

Greenback sank to a basket of currencies in early trading as intraday appeal to the risk assets grows amid no gloomy events due on Monday. Upbeat economic data from the United States and China – the world’s largest economies, published on Friday also supported prices on risk assets.

Retail sales in the United States in June grew by 0.6 per cent compared with the previous month, industrial production also added to optimism towards recovery of US economy with 0.6% growth in June, reported the Ministry of Commerce and the Federal Reserve. However, Morgan Stanley fueled worries regarding longer-term forecast of oil consumption, stating in the report that the demand for petrochemical products instead of fuels, such as diesel and gasoline, worsens the outlook for oil demand. Prices saw no sizable response to the report.

Brokerarena.com

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13/07/16 Market notes

Asian stocks rise on weaker Yen and China export&import data, US stocks keep at record levels.

Asian stocks rise on weaker Yen and China export&import data, US stocks keep at record levels.

Asian shares rose in Wednesday with markets waiting for data on the foreign trade in China which will set trading sentiments for today. Nikkei 225 rose by 1.29%, S&P/ASX 200 closed with 0.43% gains. Earlier today, the index of consumer sentiment in Australia from Westpac in July fell to  -3.0% from -1.0% in May. Next meeting of the Reserve Bank of Australia will be held on August 2. “We expect that the policymakers will cut the interest rate to 1.5 percent”, said Westpac Chief Economist Bill Evans.

Chinese shares rise for the third consecutive day following the growth on American and European market. Shanghai Composite rose by 0.37%, while the Hang Seng advanced 0.54%.The people’s Bank of China raised the reference rate of the Yuan against the greenback from 6.6950 to 6.6891. It is expected that the trade surplus in China will total $46.64 billion. Imports in June fell by 4.1% year-on-year and exports fell by 5.0%.

Dow Jones Industrial Average reached a new record intraday peak and the closing level. S&P 500 Composite set new records for the second consecutive day as crude oil futures jumped in price by 4%, rebounding from the lowest level for almost two months. Foreign investors are buying up stocks on Wall Street due to the collapse of the yen.

The Dow finished the day at 18.347 level, after rising for the session by 120.74 (0.66%) and beating the previous record set in May 2015. After falling by more than 850 points in two days after the British decision to withdraw from the EU, the Dow rose nearly 1300 during the large-scale global equity gain.

S&P 500  reached the record intraday peak of 2.155,40 closing at a record level of 2.152,14, making 14.98 points (0.70%). Eight out of ten sectors from the index ended the day in positive territory, with the best results shown by raw material and energy sectors, gaining more than 2%. High yield stocks of telecommunications and utilities, known as defensive assets declined during the session. The NASDAQ Composite rose by 0.69%.

Brokerarena.com

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12/07/16 Market notes

Crude prices surge 4 percent on easing pledged from Central banks, though output outlook remains gloomy

Crude prices surge 4 percent on easing pledged from Central banks, though output outlook remains gloomy

OPEC’s crude output rose by 300 thousand b/d to the record high level of 32.73 million b/d since August 2008 year, reports S&P Global Platts as a result of a survey of cartel representatives and industry experts.

The largest increase in production recorded in Nigeria at 150 thousand b/d. However, it is rather about restoring previous production levels, because the country’s production dropped to a minimum for 30 years in May because of military attacks.

Output in Libya has increased by 60 thousand b/d to 310 thousand b/d, but production facilities are loaded less than a quarter from their capacity (1.6 million b/d).

Iran boosted its oil production to a record high 3.63 million b/d close to pre-sanctions level. Since December last year, the country boosted production by 740 thousand b/d.

Meanwhile production in Venezuela in June collapsed by 120 thousand b/d to the lowest since February 2003 of 2.15 million b/d. Decline of production is a result of insufficient investment, high cost, debt and reducing the country’s oil and gas companies drilling activity.

Platts S&P analysts note that production in Venezuela is not expected to recover soon.

Iraq has reduced production by 20 thousand b/d due to decline in the southern oil fields.

According to preliminary data the total volume of oil production in the world in June compared to May grew at 0.4 million barrels per day up to 94.33 million barrels. While production in the countries of the Organization of petroleum exporting countries (OPEC) increased by 264 thousands and in countries outside the organization – by 0.13 million barrels per day. This is stated in a July OPEC report on Oil output and consumption.

The document stated that an important factor in the growth of oil prices in June were disruptions in supply worldwide, “resulting in international oil futures rising in June, despite the outcome of the referendum on British membership in the EU,” the report said.

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11/07/16 Market notes

Crude extend declines, pound tests 1.2850 ahead of BoE decision.

Crude extend declines, pound tests 1.2850 ahead of BoE decision.

Consumer prices index (CPI) YoY rose by 1.9% in June, according to the latest data of the National Bureau of statistics of China. Inflation slowed to the lowest level since January.The reading was slightly above the forecast as market experts polled by the Wall Street Journal had median estimate at 1.8%. Consumer prices in China rose by 2% in May.The drop in inflation was mainly caused by slowing growth on food prices to 4.6% from 5.9% a month earlier. Prices of nonfood products rose by 1.2% in June 0.1% higher than in May.

It’s important to note that inflation in China remains considerably below the PBOC’s  target at 3%, giving the Central Bank opportunity to maintain soft monetary policy amid the continued weakening of global economic recovery.

Producer prices index (PPI) decreased last month by 2.6% annually, after falling to 2.8% in May. Producer prices in China have been falling continuously for more than four consecutive years, although lately they drop significantly slowed. Slowdown in the decline of producer prices can be a sign of rebound in Chinese industrial sector.

Greenback soared in Monday after unexpectedly strong payroll data released last Friday with 267K headline reading, well above expected 180K. In may there were only 38K jobs created in US, worse since 2010 which, however, was considered as a statistical deviation. June data proved that it was quite imprudent to judge about the growth of US economy taking into account the drop in May.

USDX rose 0.45% to 96.74 with EUR/USD dropping 0.16%, but GBP/USD going below 1.29 level. CFTC positions on 8th of July showed net positions on pound decreased to -49K vs. -42.7K from previous week. It could mean that traders build their bearish positions ahead of BoE interest rate decision where traders price in 79% of chance of rate cut in UK which is likely to push pound lower.

gbp

USD/JPY saw eased bearish pressure as ruling party of Japan won elections in the upper parliament and monetary easing speculations.

Crude prices dived deeper below $45 on stronger US Dollar, WTI -1.56% at 44.70, Brent -1.43% at 46.09. Investors quit commodity market and move into defensive assets which could be a warning bell for risk-hunters and traders seeking for a bullish entry. CFTC reports indicated large speculator cut their long positions while mounting short ones.

 

oil

Prices are expected to extend declines to $40 psychological barrier as post-Brexit risks concerns are growing and global oil surplus show the signs of worsening, what makes difficult for Oil bulls to remain optimistic.

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