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19/04/16 Market notes

Kuwait Strike props up Oil market, Iran tries hard to catch up with other oil producers.

Kuwait Strike props up Oil market, Iran tries hard to catch up with other oil producers.

Iran could reach pre-sanctions production levels within two months, said the country’s deputy minister of oil on Tuesday, confirming Tehran’s intention to ramp up production.

Iranian IRNA reported citing Deputy Oil Rokneddin Javad, Iran will be able to enter the pre-sanctions production levels by the end of the Iranian month of Khordad, or by June 20.Iran has refused to freeze production at January levels, which OPEC estimated at 2.93 million barrels per day, and wants to return to the level of 4 million barrels per day. According to the words of Javad last week production exceeded 3.5 million barrels per day.

Oil production in Kuwait  dropped to 1.5 million barrels per day, despite the indefinite strike of trade unions, said a spokesman of the industry to KUNA newspaper  on Tuesday.Thousands of workers of oil and gas industry of Kuwait went on strike on Sunday to protest against the planned reforms related to salaries in the public sector.The strike lasted for three days, and the trade unions did not report the timing of its completion.On the first day of the strike, oil production in Kuwait dropped to 1.1 million barrels per day from 2.8 million barrels per day in March.The strike in Kuwait raised world oil prices, sagging after unsuccessful negotiations black gold producers about production freeze.

Japanese yen tumbles on Tuesday while commodity currencies are rising due to the recovery in oil prices after the sharp fall in the previous session, stimulating the growth of investor sentiment.

Pair USD / JPY rose 0.49% to 109.33 with a one-week low on Monday 107.82.

On Tuesday, oil prices are seeing an increase as oil strike in Kuwait has reduced the level of production in the country by 60%, overlapping market frustration over unsuccessful negotiations between the major exporters to freeze production to support prices.Recovery in oil prices has strongly contributed to the growth of equity markets, resulting in a jump of European indices to three-month highs.

The fears of Japanese intervention to weaken the yen, force investors to remain cautious on increasing bullish pressure on Japanese currency.Japanese Finance Minister Taro Aso said on Tuesday that he will take “various measures” against  further Yen strengthening and added that the sharp fluctuations in exchange rates are undesirable.

The US dollar fell in tandem with the Canadian dollar to a minimum 1.2740, its lowest level since July, and the pair is now trading at 1.2762.The Australian dollar peaked at 0.7803 and is now trading at 0.7777, up 0.37% today, while the pair NZD / USD grew by 0.91% to 0.7011.Euro shows an increase against the dollar, the EUR / USD strengthened by 0.24% to 1.1338.The euro was also up against the yen, with EUR / JPY rose 0.71% to 123.97.

The single currency found support after data showed the continued growth of economic sentiment in Germany this month.ZEW index of economic sentiment in Germany rose to 11.2 in April from 4.3 in March, beating the forecast of 8.0.USD Index, which tracks the greenback against a trade-weighted basket of six major rivals, was down 0.13% to 94.33.Prospects for an early rise in US interest rates remains uncertain after the Federal Reserve Bank of Boston President Eric Rosengren warned on Monday that rates may be raised sooner than investors expect that at the moment.Low interest rates make the dollar less attractive to investors looking for profit.

Meanwhile, the president of the Federal Reserve Bank of New York William Dudley warned that the US central bank is likely to stick to a cautious approach to tightening monetary policy.

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15/04/16 Market notes

Dollar fails to sustain gains on weak US production figures and step back on crude market

Dollar fails to sustain gains on weak US production figures and step back on crude market

March industrial production in the US fell more than expected, battering the optimism about the health of the US economy, official data showed on Friday. The Fed report showed that in the past month, the volume of industrial production decreased by 0.6% with a seasonal adjustments, more than the expected drop of 0.1%. In February, industrial production fell by 0.6%, the figure was revised down from a preliminary estimate of 0.5%.

Processing industries production decreased 0.3% last month with taking into account seasonal adjustments, missing forecasts for growth of 0.1%, after declining by 0.1% in February, the figure was revised down from the initial estimate of growth at 0,1%. The report also showed that the capacity utilization rate fell to 74.8% in March, compared with 75.3% a month earlier. The February figure was revised down from the original estimate of 76.7%. Analysts had expected a smaller decline to 75.4%.

The EUR/USD was trading at 1.1282, up from 1.1273 in anticipation of the release of the data, the pair GBP/USD was trading at 1.4174, up from 1.4155, while the pair USD/JPY was trading at 108.90, bounced from 108.84 support earlier in the session. USD index, which shows the value of the US dollar against a basket of major currencies, was held at 94.79, down from 94.86 the day before the report. Futures on US stock indexes pointed to a lower Wall Street opening. Futures on the Dow fell 0.10%, futures on the S & P 500 fell by 0.16%, while the Nasdaq 100 futures fell 0.24%.

On the commodities market, gold futures were trading at $ 1230.70 an ounce, compared with $ 1233.00 before the release of the data, while crude oil futures were trading at $ 40.51 per barrel, up from $ 40.38. The greenback weakened in Friday against its major peers due to falling oil prices ahead of a meeting of producer countries in Doha, as well as the weak data on consumer sentiment in the US which have reduced risk appetite, causing investors to buy safe currencies such as the Japanese yen .

The dollar index, which tracks the value of US currency against a basket of six major rivals, unwind gains after the growth over the past two days. The decrease of US currency against the yen on Friday was the largest one-day decline in more than a week. “Perhaps there is some concern about the Doha negotiations”, – said a senior currency strategist at Scotiabank in Toronto Sean Osborne. Producers of oil, led by Saudi Arabia and Russia are scheduled to meet in the Qatari capital on Sunday, April 17 to discuss the freeze of production close to current levels and solve the problem of oversupply on world markets.

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14/04/16 Market notes

Dollar halts growth, crude traders quit bullish wagers as post-Doha move is unpredictable

Dollar halts growth, crude traders quit bullish wagers as post-Doha move is unpredictable

US dollar, hungry for gains since Yellen comments from March 29, continued to rise against other major currencies In Thursday after posting a biggest leap in a month in Wednesday amid eased concerns about global stagnation.
USD Index, which tracks the US currency against a basket of six major rivals, surged more than 1.2 percent in two days from 93.80 to 95.16 (today’s session high), erasing losses after gloomy Yellen comments tried to push Dollar lower.
On Wednesday, the index rose 0.84%, retreating from an eight-month low on Tuesday after data showed that China’s exports grew for the first time in nine months in March, signaling a leg up in global economic development.
The dollar received additional impetus yesterday on hopes G20 meeting in Washington will have new coordinated stimulation measures as a result, Asian indices showed an increase on the unexpected decision of the Central Bank of Singapore to join the ranks of ECB’s “easing-club”.

The drop on EUR / USD halted at 1.1240, the pair ranges in 1.1240-1.1290 corridor, bears powers seems to be played out. Six-month high at 1.1464 was reached on Tuesday.
The dollar fell against the yen, with USD / JPY pair declining 0.16% to 109.15, though trading significantly higher than 17-month low of 107.62 on Monday.
Growth is constrained by the yen yesterday’s comments head the Bank of Japan Haruhiko Kuroda, the central bank is ready to again loosen monetary policy if needed, adding that there are “many ways” to achieve the 2% inflation target.
Earlier this year, the Bank of Japan shocked the markets by its decision to drive rates to negative zone, however, the yen continues to strengthen, baffling plans of policymakers to stimulate the growth of prices.
The pound weakened as interest rate decision and asset-purchase targets came in line with expectations – BoE left the rate at 0.50% and asset-purchase program at 375B, GBP / USD was as low as 1.4100, bouncing back to 1.4160, still below the close of previous session.
Sentiment on the pound also came under pressure after poll YouGov has demonstrated about the same number of supporters and opponents of the UK stay in the European Union on the eve of the referendum on 23 June.
Crude futures for May rose as the dollar fell after the publication of disappointing data on US inflation, but growth is restrained on the eve of Sunday’s meeting of oil producers in Doha.
WTI started with declines today but was not ready to break $41.00 level, peaked at 42.11, Brent was as low as $43.40, later meeting resistance at $44.50.

The dollar lost its gains after data showed that consumer prices in the US rose in March, less than expected. A weaker dollar increases demand for oil, making it more affordable for buyers in other currencies.
But oil growth is likely to be limited because of the doubt what will be the result of a meeting of major oil producers in the
Qatari capital on Sunday and whether it will have a significant impact on the situation in the oil market.
Russian Energy Minister Alexander Novak said earlier that any agreement will be worked out only in general terms, with a small number of specific commitments.
Iran said it would not participate in the agreement on the freezing of production, until it returns to pre-sanction levels.
On Thursday, the International Energy Agency warned that the output deal will likely to have a limited impact on world supplies and markets are unlikely to restore the balance until 2017.
On Wednesday, data showing a larger-than-expected increase in US oil inventories also increased concerns about oversupply.
The US Energy Information Administration report said that crude oil inventories rose by 6.6 million barrels last week, bringing the total amount of crude oil reserves reached 536.5 million barrels.
Analysts had expected the stockpiles will grow by 1.85 million barrels.

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13/04/16 Market notes

Dollar rallies on upbeat news from China, Oil retreat from peaks as Al-Naimi says no to output cap

Dollar rallies on upbeat news from China, Oil retreat from peaks as Al-Naimi says no to output cap

Its only few days left before output talks are starting in Doha and traders are extremely concerned about the outcome of the meeting. The most likely scenario is a “soft freeze”, which does not imply any obligation on the part of the participating players, said Jeff Curry, strategist at Goldman Sachs, in an interview with Bloomberg TV. According to his words, “no one is interested” in serious steps to limit the supply that could reduce the glut on Oil market now.

Meanwhile, today at a conference in Lausanne, the heads of major energy market traders companies (Trafigura, Gunvor, Mercuria, Castleton, Glencore and Vitol) almost unanimously declared that the world oil market can return to balance by the end of 2016. Information on this matter appeared in Financial Times newspaper. The fall of oil prices occurred after the oil minister of Saudi Arabia, Ali al-Naimi has lowered the probability of freezing production on following meeting on Sunday.
According to Reuters, which cites the commentary of the local newspaper in Saudi Arabia, where oil minister Al-Naimi was asked about the reduction of production in the country, he said that should “forget about this”. The comments came a day after it became know that Russia and Saudi Arabia have reached a consensus to limit production on the eve of the meeting on Sunday. Analysts have warned that the planned meeting of major Oil producing nations will have only a limited impact on the capping of global overproduction. There has been strong volatility on Oil market recent days. Daily swings widened as much as $3/bbl per day.

Hedge funds are building up bullish wagers in anticipation of further recovery of oil prices after the forthcoming meeting in Doha. However, from a technical point of view, Brent has risen too sharply, so the short-term growth potential is exhausted. Today, the focus of the attention of traders are also Energy Information Administration data on stocks in US storage tanks, which will be released today.

EIA report released today showed U.S. commercial crude oil inventories rose 6.6 million barrels for the week ending April 8. At 536.5 million barrels, U.S. crude oil inventories are at historically high levels for this time of year.  Oil prices extended declines after the release. As at 10:37 ET on the WTI crude oil for May delivery was down 79 cents, or 1.87%, to trade at $ 41.44 a barrel. Brent crude fell 62 cents to $ 44.05.
Greenback reached a two-week peak against the euro on Wednesday on the strengthening of global stock markets and upbeat data from China which made risky bets attractive to investors compared with the low-yielding currencies in Europe and Japan.

US advanced Retails sales data missed expectations (-0.3% vs 0.1% projected), managed to bar the Dollar rally, but US currency continues to show a positive trend breaking 1.13 level, finding resistance at 1.1270. USD rose 0.64 percent against the yen to 109.23 yen from Monday’s low at 107.61 yen. Euro was as low as  $ 1.1272.

“It is obvious that under the best of moods and speculation (in respect of interest), the euro and the yen should weaken,” – said the chief investment officer Sun Global Investments Sanjeev Shah.

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12/04/16 Market notes

Commodity market recovers, WTI gains ahead of Doha event, gold adds in price

Commodity market recovers, WTI gains ahead of Doha event, gold adds in price

Gold futures rose in US trading session on Monday.On the COMEX, division of the New York Mercantile Exchange, gold futures for delivery per troy ounce  rose 1.17% trading at a price of $ 1.258,30. Session highs was 1.260,50 USD per troy ounce. At the time of writing the material gold found support at $ 1.217,60 and resistance at 1.260,50 dollars.USD index showing the value of US dollar against a basket of six major currencies, was down 0.28% and trading at 93.96 USD.

As for other commodities traded on the COMEX, silver futures for May delivery rose 3.71%,  reaching US $ 15.955. per troy ounce, while copper futures with delivery in May rose 0.05% reaching the level $ 2,088. per pound.
WTI futures rose during the American session on Monday.

On the New York Mercantile Exchange WTI crude oil futures for May delivery traded at a price of $ 40.52/bbl rising 2.01% at the time of writing.The price peaked at  40,65 dollars/bbl. At the time of writing material WTI Oil found support at 36.43 and the resistance at 40.65 dollars.

As for other commodities traded on the ICE, Brent oil futures for delivery in June rose by 2.50%, reaching 42.99 dollars per barrel. The price difference between contracts for Brent and WTI crude oil was $2.47 per barrel. Natural gas futures were down during the US session on Monday. On the New York Mercantile Exchange, natural gas supply mmBtu for May delivery, fell 3.57% trading at a price of $1,919.The session low  was $1,908. Support  was found at $1,892 and resistance at 2,044 dollars.

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08/04/16 Market notes

Yellen defends her decision of December rate hike, stresses the need of delay for next liftoff

Yellen defends her decision of December rate hike, stresses the need of delay for next liftoff

The American economy is developing steadily, showing signs of inflation, so the Fed maintains a further plans to increase the key rate, said Fed Chair Janet Yellen at New-York conference, defending her decision to tighten policy at the end of last year.

In the framework of discussions in New York, which were attended by three previous FED heads, Yellen said that seven years after the severe financial crisis, the US labor market is close to the peak of its development. She also said again that inflation won’t be held back for a long time by strong dollar and low oil prices.

“The US economy continues to recover at a satisfactory pace. We continue to see a good level of employment, some signs of inflation – those were our expectations when we raise rates in December,” – Yellen said in a speech in the building of public organization “International House”.

“Therefore – yes, our monetary policy is an element of adaptation, however, we think that the policy of gradual rate increase would be acceptable.”, – Said Yellen, noting that the Fed will continue to follow the “reasonable way”.

The Fed has raised rates in December, marking the first increase in nearly a decade. The range of rates was set at between 0.25 and 0.5 percent.

The subject of debates was also the  US election campaign, in which Republican candidate Donald Trump has criticized the US regulator for the support of “bubbles” of assets.

“I definitely would not call the economy “bubble “,” – said Yellen, mentioning “healing”  labor market, where current unemployment  is 5 percents, i.e. approximately at the level the Fed seeks for.

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06/04/16 Market notes

Surprising EIA data boost crude, triggers Dollar selloff. Global markets turn the corner.

Surprising EIA data boost crude, triggers Dollar selloff. Global markets turn the corner.

After a step back made by global markets yesterday the growth was resumed today mainly due to upsurge on energy market. Oil futures resumed growth, boosted by surprising API crude inventories report which received confirmation by EIA release. WTI gained 4.35% and keeps on growing, Brent futures added 4.83% erasing yesterday losses.

EIA weekly account showed crude inventories in US shrunk 4.94M barrels to 529.9M total reserves on the week ending 1 April. Analysts surveyed by Bloomberg expected crude reserves will renew records rising by 3.2M barrels.

A prime of crude rebound was API release in Tuesday forecasting a decrease by 4.9M barrels.  The comments of Kuwait representative in OPEC claiming Doha meeting will have the freeze deal in results  also provided a leg up for prices. Prices managed to rebound from $35.50 vicinities to 37 level, then saw a powerful push to $38 by EIA report.

The upsurge in crude didn’t pass unnoticed on currency markets. USD/JPY saw abrupt breakout to 109.50 level, retreating to 109.70 level, EUR/USD soared to 1.14300 struggling for further advance, USD/RUB fell 0.90% below 68 level, AUD/USD benefited from fragile Dollar gaining 0.8%. The confirmation from EIA was a “big trigger” for markets, signaling the turmoil is over and investors can resume bidding to risky assets. We will probably see expansion on European equity markets tomorrow amid rallying commodity shares which will drag the gauges up.

US Stocks halts three days losing stretch on news US government bars $160B takeover of Allergan by Pfizer as well as pickup on crude market. S&P 500 gains 0.61%, Dow 30 adds 0.39%.

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06/04/16 Market notes

Commodity selloff deepens, investors turn risk-averse

Commodity selloff deepens, investors turn risk-averse

Greenback demonstrated moderate gains against overseas majors in Tuesday as investors are now more disposed for safety plays amid commodities downturn. EUR/USD swung in the range of 1.1350 – 1.1400, relatively stable comparing to other major currency pairs. The bias of most traded currency pair is still unclear as traders are trying to guess whether US Dollar has a room for further depreciation on rate hike delays or optimistic economic updates from US give ground to increase bidding on the currency. Minutes from 15-16 March FOMC meeting will probably supply traders with more ideas on further FED actions, but still the report won’t have profound impact on greenback.

GBP/USD decreases as pound can’t get rid of pressure associated with Brexit risks. Major part of UK nation see country independent from European bloc while Premier Cameron tries to urge Britons to vote for saving the union. Online polls carried out by different magazines and online journals like recent The Telegraph poll have marked impact on UK currency.
Soared demand for safe heaven assets amid growing risk-aversion on global markets sent USD/JPY down to the lows of October 2014. The pair slammed seemingly shellproof support of 110 level, hitting new low of 109.95 rebounding to 110.30 on Asian session in Wednesday. In case Oil selloff worsens the pair bears will arguably head the gauge below 110 level.
Swiss Franc continues to gain attention as heaven asset as investors are losing confidence over further growth prospects and opt for reducing their risk exposure in risky assets. The pair has chances to extend declines if rout on equity markets will gain momentum.

Energy market which caved into depression after discouraging message of Saudi Prince tries to find and price in bidding signals, though “big bulls” seems to have left the market and now crude prices have chances to test $35 level again. WTI dropped -0.22% to $36.47 in Asian session in Wednesday, Brent fell 0.31% to 38.30. Wednesday EIA report will probably shore up price if crude inventories report will post declines, though there is no reason for US to decrease imports of cheap Oil.
Gold hit local peak of 1237.40 then retreated to 1231.50, the bidding on precious metal increases.

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04/04/16 Market notes

Commodity rout deepends, Russia increases Oil production.

Commodity rout deepends, Russia increases Oil production.

Traders and investors are massively dashing their bids on crude as rumors and expectations can not anymore underpin the market. Saudi Arabia ruined the hopes for fundamental improvements after prince Mohammed Al-Saud hit the wires in Friday saying current disunity between Iran and other Oil producing nations makes it impossible to freeze output. The news left energy market without footing, sparking off volatility and sending prices down 4 percents in Friday. The drop deepened in Monday, WTI lost 2.88 percents, Brent tumbled 2.48 percents.

Now markets don’t expect anything positive from Doha talks which will be held on 17 April. Iran Oil Minister Bijan Zanganeh said he’ll attend meeting in Doha if he “finds time” meaning country will stand its ground on production freeze matter. The country already has boosted output over 2M barrels with 250K growth in March comparing to February production pace. The efforts of Russia and Saudi Arabia to stabilize market by freezing output on January levels he called a “positive step” which should help to balance prices.

Some analysts was repeatedly warning that rally is not fundamentally supported and markets will inevitably fall into retracement after it. Current decline could be a correction to fundamentally grounded levels which are, considering a drop in US production, should be somewhere $35.

Meanwhile Russia continue to add efforts in a fight for market share, producing 10,912M barrels in March which is 0.3% more than in February. Its the biggest output level not seen from 1987 year (11,5M barrels).
Baker Hughes weekly report showed 10 Oil wells were stopped in US last week, with total 362 rigs operating. US continues to cut down production capacities increasing imports of cheap Oil EIA report showed last week.
Tomorrow crude market will be waiting for API data which will show the change in US Crude inventories. Further growth of crude reserves will worsen oversupply concerns and probably pave the downward way for Oil prices.
To the other news.

US Dollar decline resumes in Monday as traders shrug off after strong NFP release. EUR/USD gains 0.11%, GBP/USD +0.40%, USD/CHF +0.05%. AUD/USD drops 0.92% due to rout on commodity markets, USD/JPY -0.44% as Yen rallies on increasing risk concerns. USD/RUB rallies 1.37% though there are too many ruble bidders trying to wait through the Oil pullback. Withdrawal from ruble support may cause abrupt spike of the pair above 70 level.

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02/04/16 Market notes

NFP report helps Dollar turn the corner, WTI drops on news from Saudis

NFP report helps Dollar turn the corner, WTI drops on news from Saudis

The losing streak of US Dollar against major overseas currencies halted after upbeat economic figures released by US labor department sparked off substantial demand on greenback. After Fed Chair Yellen scattered hawks with overly dovish commentaries on prerequisites for rate hikes, Dollar went into steep decline which slowed down only today.

Non-Farm Payroll change showed 215K jobs were added in March though median analysts estimate was 205K jobs. Average hour earnings increased 2.3% vs 2.2% anticipated mainly because of minor unemployment rate growth – 5.0% vs 4.9%. We can’t say labor data was too strong and could be the trigger for some substantial labor market changes in US but its release results in unprecedented volatility burst and spurred mighty U-Turn in Dollar pairs especially in EUR/USD.  The pair tumbled for Friday peaks of 1.1433 by 90 pips to 1.343   gradually returning to the growth after traders shrugged off from abrupt selloff.

 

Screen Shot 2016-04-01 at 3.41.59 PM

Here what’s happened with EUR/USD

Other USD pairs had  similar backlash on news from US, GBP/USD plunged 1.03% from 1.4327 to 1.4175, managed to rebound to 1.4215 level, AUD/USD fell from 0.7676 to 0.7616 bouncing back to pre-NFP level.

Manufacturing ISM report released after NFP outstripped the expectations with 51.8 points in March vs 50.7 points expected. Report shows manufacturing industry in US is set for further expansion.

As US economy continues to show consistently positive changes, Fed chair will be probably urged to retreat or at least review her posture towards rate hike. As major part of the board voted for earlier rate hike,  further buoyant development  in US will possible foster the change to hawkish rhetorics on  next Yellen conference.

The statement of Saudi Arabia prince that output cap accord is unfeasible without Iran consent was a bolt out of the blue for commodity markets. The hope that OPEC and Non-Opec countries will freeze output on January levels fueled upward movement of Oil prices. Crude prices erased weekly gains turning bearish despite optimistic figures released by EIA in Wednesday. WTI and Brent tumbled more than 2.5%, headed for testing of $35 level.

On next week Dollar is expected to extend bullish momentum  fueled by speculation of earlier rate hike. Eroded confidence on commodity markets left Oil without driver for growth, so further declines are anticipated.

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30/03/16 Market notes

US Dollar loses footing on Fed Chair comments, commodity markets advance

US Dollar loses footing on Fed Chair comments, commodity markets advance

US Dollar tumbled against its overseas peers after dovish comments of Fed Chair Janet Yellen which diverted attention of investors from US economic improvements to the economic issues abroad. As the dissent in Fed panel increases (regional Fed officials vote for earlier rate hike, while Yellen prefers more discreet posture), the last word is up to FED head. And Yellen proved she holds situation under control announcing clear-cut plan for next rate hikes.
In her speech at Economic Club in New-York she advised investors to turn their focus on economic growth of developing countries and the risks of global slowdown with depressed Oil prices and deflation in some countries. When situation will be improved enough to avoid adverse effects from monetary tightening, it will be appropriate to discuss next rate hike.
The other reason to postpone the liftoff is a strong US Dollar that hurts exporters and transnational corporations (despite positive changes in US economy in almost every aspect – labor, inflation, manufacturing etc., corporate earnings report showed decline for last three months)
The most pessimistic forecast is that next rate hike may happen only in 1-2 years – the time needed for oil market to recover and stagnation in EU and Japan to recede. But major part of market sentiments the opposite – according to CME Group futures data, the probability of rate hike to 0.75 in April is 4.6%, In June it is 25%, and in December it overweighs other expectations with 40.8%. Upbeat economic figures from US for last 3 months demonstrate that the economy is stable enough to weather global economic storm that may be caused by next rate hike (though its also very unlikely and current Janet posture looks like exceptional cautiousness).
So after Yellen revealed the Fed position towards rate hike policy, there was no other option for US Dollar but to experience another severe selloff which extended to today’s trading session. EUR/USD was as high as 1.1365 today, rocketing from 1.1196 yesterday level, now the pair stabilized with 0.30% gains at 1.1324 level. GBP/USD saw upward spike to 1.4459 as well but later was subdued to 1.4388. USD/JPY floated in a range of 112.02 – 112.60% currently placated at 112.59 level. ADP employment change report released today (195K estimate, 200K actual) led to a brisk bidding impulse on US Dollar which wore off quite quickly.

Dollar drop

EUR/USD spike after Yellen speech

Commodity currencies appreciated against the greenback, fueled by growth on energy markets. WTI futures spiked to $40 level, but failed to hold its own under the thrust of bears, enjoying 0.91% gains as of 4:16 GMT. EIA data was in line with preliminary readings of API institute which predicted growth of 2.3M barrels of US crude inventories (the estimate was 3M barrels).

Screen Shot 2016-03-30 at 7.53.44 PM

  WTI declined after EIA release though the readings was in line with expectation

Stocks also advanced, the catalyst of course was weakened greenback, energy and mining shares scored best wins (Anglo American +11.81%, Rio Tinto +5.90%, Glencore +5.39%, Royal Dutch Shell +3.42%)

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28/03/16 Market notes

Morocco joins global easing efforts, Oil pares down last week losses.

Morocco joins global easing efforts, Oil pares down last week losses.

Central Bank of Marocco lowered key rate, joining the club of “monetary easing banks” which now numbers 46 countries.
For this year there were 15 cuts of interest rates indicating slowing global economy needs all-round support of central banks from different countries.
The trend was set by ECB which tries to expand QE extension, keeping on lowering rates and carry out massive buyout on bond market.
In contrast US Federal reserve is moving indifferent direction, striving to increase rates despite numerous warnings of slowdown if borrowing costs will become too expensive for the world.
In Thursday EZ March inflation data will be published which will indicate the pace of contraction of European economy. Prices are expected to extend February declines.
In Friday NFP report will throw light on further FED measures, analysts expect the expansion of US labor market will remain on February level or even increase.
There is growing controversy between statements of US Fed officials – dovish rhetorics of Fed head Janet Yellen on 16 March press conference mixes with hawkish promises of other officials, so position of the committee is quite unclear.
To the other news.
Europe is on holidays today, so most markets are closed. GBP/USD rose 0.24% to 1.4159 as Brexit risks are sidelined, USD/RUB and EUR/RUB decline, as commodity currencies mirror Oil advancement. WTI and Brent, two most traded benchmarks rose 0.53% and 0.17% respective after steep decline in last week on gloomy EIA data, showing stockpiles increased more than 3 times than projected (9.31M versus 3.1M barrels). Oil imports also increased in US last week.
US stocks closed in red on Friday, reducing risk exposure ahead of holidays.

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25/03/16 Market notes

Baker Hughes data help Oil to trim down losses, bears may be in a trap.

Baker Hughes data help Oil to trim down losses, bears may be in a trap.

Oil prices pared down losses on Thursday New-York session as drilling capacities in US resumed declines this week. Oil rig count dropped by 15 to 372, reports Baker Hughes, after it added 1 rig on the previous week. Now the number of rigs is the lowest for 6 years, losing more than 65% from the peak of October 2014.In contrast gas Oil rigs increased by 3 to 92 this week, total number of energy rigs fell 12 to 464.

The data released is quite controversial with current increase of US crude inventories by whopping 9.31M barrels this week reports EIA, versus 3.1M anticipated. Reducing Oil rig count implies that production of Oil in US should drop, while Production of Oil in US leveled off in August 2015 when efficiency per rig peaked then turned to decline as more and more Oil rigs have been idled.

Weekly-Total-US-Oil-Rig-Count-vs-Crude-Oil-Production-1-13-16

With Oil rig count dropped by 70%, production decreased only by 5%

WTI, propped up by Baker Hughes data, pared down 1.5 percent loss from 2 percent steep decline closing at $39.59, Brent managed to get out of red figures, closing with 0.02% gains at 40.44.
After publication of downbeat EIA data and wave of bullish support rendered to US Dollar Oil prices dropped more than 2%, WTI touched 38.50, while Brent was as low as 39.30.

Today is Good Friday Holiday so European and US markets are closed.

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22/03/16 Market notes

Exchange Rates Are To Be Pushed Down Deeper By ECB & BOJ

Exchange Rates Are To Be Pushed Down Deeper By ECB & BOJ

The negative interest rates are used by the European Central Bank and Bank Of Japan in order to push down their currencies value deeper. However, there are certainly limits to the effectiveness of such rates. At the moment where rest of the world is not growing normally, pushing down the exchange rate has become essential.

Nonetheless, The ECB and BOJ representatives argued that the aiming for weaker currencies with policies aimed at bolstering growth and inflation is not a deliberate matter. Earlier this month, ECB President Mario Draghi said that it is true that some of the measures have obviously a spillover on the foreign-exchange market. However, he also stated that the ECB is not in the war at all and denied that it is intent on manipulating the Japanese currency.

In the G-20 meeting last month that took place in Shanghai, global finance ministers and central bankers reiterated their past commitment to hold back from such thing as competitive currencies devaluations.

In the future, the role of the central banks will somewhat ignite a debate due to the scope in which central banks mandates have eventually expanded, often by default to deal with crisis. In such particularly uncertain world as it is now, an intelligent and collective respond to it has become the utmost importance and necessity.

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22/03/16 Market notes

April Rate Increase Still In The Business, Dollar Climbs

April Rate Increase Still In The Business, Dollar Climbs

US Dollars has soared for two consecutive days as The Fed officials hinted that the interest rate hike would take place as early as April, resulting a boosting of assets appeal denominated in the US currency. The officials post-meeting statement sounds to be reiterating Chair Janet Yellen statements that the rate would hike in April.

The US Dollars rose against most of its major peers as recent economic data may give grounds for additional policy tightening following the first rate hike in nearly a decade last December.

A great momentum is believed to be occuring in term of justfying the increase as it is shown in the economics report. Head of foreign-exchange trading and research at Aspen Trading Group, Dave Floyd, has said that they are apparently “the prettiest of the ugly” from the interest rate and central banking point of view, which gives the Dollars a favor. San Francisco Fed chief John Williams also said that if the data continues to come in the expected way, April or June would be the potential, ideal time to rise the rate.

As how it stands, the inflation rate, which is currently behind The Fed’s 2 percent target, could significantly get closer to the target when the oil prices bottom out.

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18/03/16 Market notes

World Crude Oil Price, Next Rumor In April

World Crude Oil Price, Next Rumor In April

Questions on when the world oil producers will held a meeting regarding oil problems are answered. The meeting of the Organization Petroleum Exporting Countries (OPEC) and other oil producing countries will take place on April 17 in Doha. However, the list of attending countries is yet to be announced.

In the last few weeks, the oil price has soared due to the expectation that the oil producers would freeze production as an attempt to cut the supply off the market and lift the price. Qatar, as the head of OPEC, has given its best effort to support the freezing of oil production. Its representative has said that the proposal received immensely huge support not only from the OPEC, but from the non-OPEC as well, including Saudi Arabia and Russia.

Russia and Saudi Arabia have agreed to hold production to the level of last January. Nevertheless, the deal comes along with certain conditions. Most importantly, both said, they have an expectation that other oil producers will take the same path as they do.

The issue regarding the low price of world crude oil has not seemed to be over. The OPEC deal in which the production would be cut off in order to elevate the oil price has found itself some obstacle as Iran is having a policy where the production is not cut at all after a sanction aimed at the country. Iran said that the deal is a pure joke and even have increased production after the lifting off of the international sanction.

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17/03/16 Market notes

The Dovish Fed, Where Would US Dollars Go?

The Dovish Fed, Where Would US Dollars Go?

The Fed’s statement last night sounded like a dovish tone. The Fed is believed to be in need of further confirmation if an interest rate is about to hike. One of the The Fed’s considerations is the labor market as The Fed is still waiting for the strengthening of the labor market in order to state that US economy is in line with the recovery target.

The other considerations are the inflation and the slow going growth of global economy. Will the inflation rate hit the target this year? Prior to The Fed’s rate hike last December, it was believed that 2% of inflation rate would be hardly achievable, even until 2017. However, should The Fed not rise the interest rate, risks, such as bubble asset, would come.

The global economy growth is estimated to keep going on a moderate level. The fairly low price of crude oil would still hugely contribute to it, not to mention the China economy condition. The currency war among countries such as the Europeans, China, and Japan has not brought any significant outcome to each one of them.

In such condition, where would the US Dollars go? Will it rise or will it fall? For now, the strengthening of USD could lead to the decline of US export number and it would give an impact on the employment which has become one of the concerns. On the other hand, the weakening of USD has not been on top of the The Fed ‘s to-do list. In 2015, the EURUSD was staying between the range of 1.15 and 1.05 and it is generally possible that it would stay that way. The USD and other currencies do not possess any reason to form a long term trend. At the moment, investors still have their assets on stocks and gold. The fairly low interest rate brings a big hope that the stock market would keep on going on a rally, while the generally similar conditions of economy among big countries give the investor no choice but to hold the gold instead of allocating their money on a certain currency.

Thus, is our open position in line with the ongoing trend of currency trade? In fairly small amount, yes, it is.

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16/03/16 Market notes

GBPUSD Weekly Outlook

GBPUSD Weekly Outlook

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Earlier this week, GBPUSD was opened on 1.4379 level. On a daily basis, this particular pair is in an uptrend. The rise of GBPUSD started on February 28th 2016 where the GBPUSD was right on its lowest point on 1.3835 level. At the moment, this pair is strengthening to 1.4326. Will it keep getting stronger? What exact price could this pair actually reach?

When the Bollinger Bands indicator (20 period) is applied, it is seen that the upper band is nearly hit, while the breakout level is on 1.4045 level. Compared to current price, it has reached 2% from the breakout level and is going through its 11th day. Is the GBPUSD saturated already in terms of rising? Currently, it becomes relative to say that GBPUSD is in a saturated condition because on a daily trend basis, it can be seen that the pair has had a quite big rise these past two weeks while in weekly term, it clearly shows that GBPUSD has been in a bearish condition for a fairly long period of time. Thus, there comes a possibility that in mid term, a correction would occur in this pair.

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The graphic shows the GBPUSD on weekly period with MA 10, MA 25, and MA 50 indicators on. It can be seen that the Bollinger Bands are widening, as it is known that it is Bollinger Bands nature to widen and then narrow afterwards. In such widening condition, there is a huge possibility that GBPUSD will rise. At the moment, it is also attempting to penetrate the MA 10 and once it happens, the GBPUSD will make its way to the MA 25 (Bullish Target).

In such condition, GBPUSD trading scenarios could be applied for both long and short positions. Here they are:

LONG POSITION

In order to take a long position on GBPUSD with a quite high risk/reward ratio, stop loss order on level 1.4116 could be placed, as well as a profit target on 1.4909 level. In such scheme, the targeted profit is counted to be near 593 pips while the loss on the stop loss point would be around 200 pips. In the meantime, a certain scenario in which the firstly mentioned scenario does not take place should wisely be prepared. For the open position of plan B, the stop loss point should be used as the position where the sell order should be placed. With such position, a target of roughly 280 pips from 1.4116 to 1.3838 could be achieved.

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SHORT POSITION

At the moment, the risk/reward ratio for the selling scenario is around 1.36. The sell position could be ordered at the current price of 1.4326 with 1.3838 as the target, making around 488 pips as the profit target. The stop loss point would better be on 1.4669 (around 343 pips). Once the stop loss point is hit, a position of sell should be opened on the exact same price with 1.4909 as the profit target (around 240 pips).

Considering both scenarios, at the moment it is believed that the long position is more profitable even though the GBPUSD is seemingly high enough. On a daily trend basis, it surely has been going on for 11 days. However, in weekly terms it has already started the bearish trend since last November, resulting the trend considered to be saturated and could lead to the beginning of bullish trend.

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15/03/16 Market notes

Investors Expecting Bank Of Japan’s Policy

Investors Expecting Bank Of Japan’s Policy

What would BOJ do following the easing and negative interest rate policy earlier this year? BOJ might not implement any significant policy two months in a row. At the moment, witnessing the impact of the implemented policy has become a priority as investors being eager to see BOJ’s view on its own policy.

By now, Japanese Yen is being traded on 113.75 per USD. Market’s reaction is quite similar to what happened during the ECB’s interest rate cut. Without any new policy coming, does it mean that Japanese Yen is strengthening? Technically speaking, this currency is in saturated condition in terms of selling on weekly period basis as the widening Bollinger Bands indicator signifying that the accumulation phase is about to take place. The weakening target of Japanese Yen on US Dollars is to around 116.271, where the 50% retracement level of Fibonacci lies.

a

In daily period, the Japanese Yen is in an accumulation phase and a major movement is about to happen. This movement would not occur until the very best moment, which is this week. Fundamentally, the currency could continue its uptrend as it becomes one of the most wanted currencies when the global economy is being challenged by the decreasing of global demand, China’s growth slowdown, and low energy price.

How do we place an open position safely in USDJPY? At the moment, sell position has a higher reward ratio than buy position. With 2.29 reward ratio, we could sell USDJPY on the current price (113.347) along with a stop loss of around 100 pips on breakout level of 114.405 and taking profit on 111.019 (around 235 pips). If the stop loss price is hit, a buy order should be placed on the exact same price with 116.271 as the profit target.

b

Therefore, short position is generally considered as a safe position in spite of a possibility in which the pair would hike after the consolidation phase. We might not be able to predetermine where the price would move to but surely we could create scenarios for all movement possibilities.

P.S : In the education section, basic to intermediate level of information regarding  how to make a technical analysis will be discussed further.

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14/03/16 Market notes

US Stocks Keep On Rising

US Stocks Keep On Rising

Last Friday, DJIA was closed on 17213.31 level. In other words, it had 1.3% of rise. On the other hand, S&P 500 rose to 1.6% or 2022.19. The closings of both indices were recorded to be on the highest level since last 2015.

The rise of S&P 500 was pushed by the energy sector as it advanced to 2.2%. Not only by it alone, but it was also supported by the increase of oil price that reached the highest level of last three months.

Chevron became the stock with the highest rise after advancing to 7.6% on last week trade. Meanwhile, safe haven assets, such as gold and risk-free asset, had a correction. Gold futures fell 1% into 1258.70 per ounce.

The US stocks rise was followed by other major indices, such as Russell 2000 (2.22%), Global Dow (1.89%), Nikkei 225 (0.51%), and Stoxx Europe 600 (2.62%). Stoxx Europe 600 had the highest increase that was caused by ECB’s action last Thursday in which the interest rate was cut.

In such condition, stock investors are advised to anticipate the interest rate hike rumor. It is so to mitigate the risk of leaving the portfolio of risky assets for portfolio of fixed-income assets. At the moment, regarding the attempt to achieve the desired level of inflation rate, The Fed is still concerned about the labor payroll. However, a number of investors are certain that the hike would eventually take place in mid-year.

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