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03/07/16 Market notes

UK stocks pare declines as precious metals surge, pound gets ready to discover new bottom

UK stocks pare declines as precious metals surge, pound gets ready to discover new bottom

Undoubtedly,  all fuss on financial markets is now about the Brexit. Investors try to calculate possible negative after-effects of the disintegration process, political shifts and the cost of independence for UK.

On currency markets, the victims of speculative pressure remain sterling and euro. There are two camps of analysts which has opposing views on future of the pound. First say that the drop seen after the Brexit and last week is largely speculative and expect the currency to quickly erase declines, while second views that dominate market sentiments is that pound has a vast space for bearish play as the costs of freedom lays on the shoulders of financial sector of UK which risks to see a slash of thousands of employees. Its well known that the assets managed by UK banks such as Barclays and Citi are located in EU financial institutions and changes in access will be made to that capital as the UK split from the bloc. Moreover there was speculations UK may lost the right to execute clearing of financial operations in Euro, what will certainly depreciate the influence of the country on financial arena.

The uncertainty with Brexit consequences is mainly related to the terms on which UK will continue to cooperate with EU in four main directions – goods, services, labor and capital. UK formally remains the member of EU until it initiates the legal process of separation by Article 50 of Lisbon Treaty. In next two years UK will need to find a balance between sacrifices and benefits it receives from the independence – trading tariffs, new banking, immigration and labor regulations. From last Brussels summit it became clear UK will not receive any privileges or special status as non-EU member and will have to keep its borders open to keep tariff-free trading with EU. Obviously it’s not acceptable offer for UK, where the purpose of referendum was exactly regaining control over its border to prevent excessive immigration and cheap labor flow. This hiccup implies long and intricate process of searching for trade-offs between two states what presents an incomplete puzzle for investors taking long time to solve.

According to Bloomberg survey majority of analysts expect pound to fall to 1.25 against US dollar to the end of this year, with some of them predicting more weakness for currency dropping to 1.20 and even lower. Throughout this week pound struggled to make up for the tremendous declines, but failed to hold on 1.34 level as BoE head Mark Carney pledged the bank is ready to extend stimulus program and cut rates to prop up the economy. Pound sunk to 1.32, lowest for 31 years.

 

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Ironically, Japan pours billions of Yens in the markets to boost economy and weaken Yen to support local export, while UK effortlessly slashes 11% from pound value and fuel local stock market just quitting EU. UK 100, which dipped on Brexit managed to quickly erase declines and surge 10% on weak sterling. Spectacular growth in precious metals such as silver, palladium nickel and others propelled sharp rebound of mining shares adding 5-8% daily in post-Brexit week.

 

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Together with yields on US, Japan and German bonds dipping to negative yield first time in the history, demand for safe heavens bodes recession will stay here for some time hamstringing global growth.

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On the other part of the globe the only thing that worries investors is US monetary policy. The Brexit has probably prompted Federal Reserve to backtrack to Rate cut, with Janet Yellen figuring out how to switch from bold two rate hikes projection to the easing idea. However UK disintegration scenario was supposedly given proper weigh in Fed plan so in next Yellen speech we expect to hear hints on at least one additional rate hike this year.

USD index, surging 3% after Brexit was trading in the range of 95.50-97.00 this week. The row of economic data on consumption, inflation, spending and construction in US paints cloudy picture on further growth. Despite survey-based upbeat Consumer Confidence at 98.0 and ISM Manufacturing at 53.2 points, Personal Consumption, Personal Income, Mortgage Applications, Pending Home Sales and Construction Spending came lower than expected. Overall bias suggests US labor market was not likely to have enough strength to recover from shocking 38K May figure so June NFP which is due next Friday won’t likely to live up to optimistic outlook.

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30/06/16 Market notes

Pound extends drop on Carney Stimulus Hints, Oil plunges.

Pound extends drop on Carney Stimulus Hints, Oil plunges.

After relatively optimistic start of the week, risk assets markets give up. Risk aversion seized commodity market in Thursday pushing crude prices down which curbed growth on European equities Euro and Pound. Both WTI and Brent lost around 3% pulling down global markets, which lost main driver of growth.
Pound traded near Wednesday close before BoE head Carney speech but tumbled after the policymaker announced Bank of England may soon cut the rates and add stimulus measures to bolster tottering economy. Investors increased their bets on rate cut which decision will be released on 14 of July. Sticking around 1.3450 level, GBP/USD sharply declined to 1.3225 as BoE stance has been known to public.

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We see little opportunity for pound to cap declines as elevated political uncertainty together with yet unclear Brexit effects on financial sector will keep outlook quite unfavorable for UK and its currency. With bond markets surging to the highs of 2008 US financial collapse what signals about very high levels of risk-aversion we can’t expect quick comeback of the bull market.

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Greenback index trim down declines made earlier this week, hitting 96.50 session peak but later receding to 96.00 zone. The growth was fueled by upbeat Chicago PMI report which was well above the forecast at 56.8 points vs. 51.0 anticipated. On the US labor market Continuing Claims came lower than expected at 2120K vs 2152K expected. Initial Jobless claims was slightly worse the forecast at 268K vs 267K estimated. The growth of US currency accelerated selloff of Oil prices, WTI tumbled 2.73% to 48.52, Brent -2.69% to 49.94, dropping below psychologically important $50 mark. Deterioration on crude market hampers advance on equity markets, which were trading near Wednesday close but surged on BoE Carney comments, encouraged by stimulus promises, DAX +0.71%, FTSE 100 +2.27%

We expect pound to resume declines after retracement to 1.33 with a target at 1.31 level. Crude prices have not enough fuel and favorable fundamental ground to climb above $50 level, what remains gloomy outlook for risk assets.

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28/06/16 Market notes

The lull after the worst scenario for UK spins off uncertainty: Investors extend safe plays.

The lull after the worst scenario for UK spins off uncertainty: Investors extend safe plays.

Pound fell to 31-year low against the dollar during Monday trading session due to the concerns over the possible consequences of the British decision to leave EU.
UK currency touched its lowest level since mid-1985 year-$ of 1.3151, dropping 11.5 percent compared with the close of June 23 when a referendum on Britain’s membership in the EU took place. Analysts predict pound will extend its record weakening which is already supposed to be the worst performer in this year. A drop by 3.69 percent to the greenback to 1.3194 level failed to produce bidding backlash despite assurances from British Finance Minister George Osborne that the fifth largest economy in the world will be able to cope with the upcoming challenges.

The euro extends its weakness falling 1.07% to $1.0996 with a session low at $1,0971 level. Nevertheless, the common currency was trading slightly above Friday minimum of $1.0909.
Japanese Yen strengthened its position amid increased demand for heaven assets, although the growth was restricted by the expectations that BoJ may intervene to curb the uncontrollable rally of the national currency. The dollar slipped 0.51% to 101.67 yen, holding above Friday lows of two and half year near 99 yen.
The dollar index, which tracks the U.S. currency against a basket of six other major competitors climbed 1.10 percent to 96.494 points.

Gold traded in the expansionary zone on Monday as the lack of positive or negative news spun off uncertainty forcing investors to seek for more safety. The commodity futures for August delivery traded at a price of $1,328.70 per troy ounce, rising 0.48%. Prices peaked at 1.339,30 with a potential resistance point at $1.355.60.

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10/06/16 Market notes

Russian Ruble pares down gains ahead of CBR rate decision, BNP quits the currency.

Russian Ruble pares down gains ahead of CBR rate decision, BNP quits the currency.

Russian currency declined against US dollar on Thursday, retracing after the rally at the start of this week, peaking at 63.40. Further advance runs out of steam as the currency is in the power of external factors, like greenback weakening and oil. In the near term the focus is on the meeting of Central bank of Russia in Friday where decision on the interest rate will be announced.

Brent oil traded near 52 level, about 1 percent below Wednesday’s closing level, while the rally to $52.80 in the Thursday morning supported the upsurge of the ruble to the highs of this year.
The ruble still remains under the influence of external factors, especially negative ones from the oil pullbacks, further buoyancy looks pretty fragile. According to some analysts speculative force is not enough for oil to get over $52-$53 level.

Among the other deterrents of growth is the outcome of the FED meeting next week, but the closest major event is a decision on the rate of the Russian Central Bank, which will be announced today.
Analysts expect that the key rate will be left untouched at 11 percent despite the slowdown of inflation,rising oil and the strengthening of the ruble. Though some large investors which tied up in Russian currency, such as BNP Paribas, said that it’s time for a ruble selloff as the cut in interest rates will also cut returns of ruble holders, what dampens appeal of the currency. USD/RUB has chances to soar back to 70 level.

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07/06/16 Market notes

USD/RUB & Oil correlation fades on Russia CBR interventions, Oil breaks $50.

USD/RUB & Oil correlation fades on Russia CBR interventions, Oil breaks $50.

Russia currency appreciated against US Dollar and European currency on Tuesday after hazy speech of Fed Chair, leaving unclear the prospects of rate hike in coming months.
Additional support was a breakthrough on the energy market where prices finally managed to hold their own above important 50 level.
USD/RUB declined to 64.50 level, though ruble remains undervalued possibly because of aggressive replenishment of foreign reserves by Russian Central bank, and as weak ruble is beneficial for Russian budget. Volatility gauge on the pair remain relatively low, ruling out abrupt strengthening or slack in their pair. Comparing previous periods when Oil was at $50 mark ( start of January and October 2015) correlating rate of the USD/RUB was around 61.00 level

Correlation

Brent prices hit a high at 51.30/bbl, while WTI climbed above 50$ despite gloomy outlook on OPEC and Iran discord and rebound in US shale industry. Analytical company Baker Hughes which release weekly report called “rig count” (number of working oil wells in US) showed last week that producers powered on 9 more rigs unfreezing production. Many Oil companies saw $50 level for a barrel as crucial for leveling off the energy market and resuming investments in the field.

Risk assets, such as European equities and emerging market currencies soared after Yellen stretched the period of cheap borrowing costs, leaving uncertain the timeframe for next rate hike. Basically Yellen comments reduced June rate hike odds to zero (current futures data shows 1.9% probability or liftoff “in a very extraordinary case”).

European indices such as FTSE 100 and DAX set for a continuos rally as last barrier in the form of strengthening Dollar is now lifted. In Tuesday both gained around 1 percent, Japanese index Nikkei 225 rose 0.6% as well.
Investors do not hurry to mount their bullish positions ahead of fading summer trading and the period of thin liquidity. There are expectations of temporary pullback but with a break of $50 level in Oil prices its time to say commodities entered bullish market so stimulating bets of the Central Banks around the world will be probably reduced very soon.

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07/06/16 Market notes

Yellen Conference fails to boost Dollar, though cushions gloomy NFP report.

Yellen Conference fails to boost Dollar, though cushions gloomy NFP report.

After surprisingly weak May NFP the chances of rate hike in June have almost completely vanished. But despite the markets caught unaware with abrupt drawdown on the labor market, Monday speech of Janet Yellen shows US Fed Reserve remains upbeat on the prospects of economy growth.

According to the Fed chair comments the odds of monetary tightening in coming months are still there as “the economy pickup outweighs the threats”. Of course, weakest for six years Payrolls has considerably eroded “growth picture” but continuously declining jobless rate as well as rising inflation may argue about solid underlying momentum in the US economy. Her last note that any surprises in economic updates or changes in external risks can change views on rate hike made further Fed actions completely uncertain.

There were four factors mentioned that can hamper US growth – slowing demand and manufacturing, inflation and shaky world economy. But still Yellen noted that these factors are offset by “overall good health of US market”.
Low level of skepticism in Yellen speech shows that Fed is quite determined to raise rates if not in June than in July. According to Fed Rosengren a slump in May payrolls could be an isolated change which doesn’t fit in overall trend in US labor market so needs further investigation. Atlanta and St Louis Fed heads Dennis Lockhart and James Bullard also lean towards rate liftoff in July, though pointing to small chance for that move in this month.

 

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Quick rebound of US index suggests Fed support won’t probably let greenback fall too much and its unlikely to see the index dropping below 93.50 level. For EUR/USD respective range is 1.1300-1.1450.  Though the conference failed to provide any significant support to US currency as well. USD Index climbed above 94.00 level after hitting a low at 93.74 on Monday. EUR/USD retreated to 1.1350 after trying to test 1.14 level, USD/JPY also saw a short-lived relief bouncing form 106.50 to 107.00 level.

Both Crude benchmarks hover near $50 level, remain cautious as US production shows signs of recovery according to Baker Hughes last week release (+9 wells to rig count). Current level of Oil prices seems to be enough trigger for unfreezing US shale industry so even amid rising demand in Asia there is little chances to see prices extending current growth.
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31/05/16 Forex education

Chart Patterns: Part 2

Chart Patterns: Part 2

In continuation to our first article Chart Pattern Types: Part 1 we post main trading patterns which you can use as a basic tool in your trading or price action analysis:

Basic algorithm:

1. Pick trading pair (stock, equity, index, other instrument)
2. Pick pattern
3. Check chart history for that patterns to see their confirmation. Remember that the higher timeframe you use the more chances future price will follow the pattern. On 1M and 5M timeframes its hard to use technical patterns as what price does there is generate NOISE.
We advice you to use timeframes above 4H to examine history for the patterns.

Here you can see main patterns:

Head and shoulders

head-and-shoulders-pattern2

triple double tops&bottoms

Ascending and descending Triangles

symmetrical-ascending-descending-triangles

Rectangles

Rectangle

Flags and Pennants

Flags and Pennants


Cup and Handle

CupAndHandleChartPattern

Add this page to your bookmarks so you can quickly check  the patterns if you forget them. Fee free to ask any questions and don’t forget to share with your friends.

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30/05/16 Market notes

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

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.
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:

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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.

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24/05/16 Market notes

Crude scores win in Tuesday, European equities near monthly peaks with risk-hungry investors.

Crude scores win in Tuesday, European equities near monthly peaks with risk-hungry investors.

Wall Street opened Tuesday with gains paring losses from Monday. The growth is primarily fueled by banking sector as conviction grows Fed will go for tightening, what spurs risk appetite.
Dow 30 index rose by 1.29 percent while S&P–500 index gained 1.43 percent to 2.423, 98. Technology index Nasdaq added 2.01 percent. Wall Street displays the obvious move, following the rally on European equity market where FTSE closed with 1.35% gains, Dax + 2.18%, Euro Stoxx 50 2.5%, climbing to the monthly peaks.
Protocol of the meeting of 26-27 FOMC meeting published on Wednesday last week, showed that the regulator does not cross out new rate hikes from its “to-do” list, surprising investors who believed that the Fed will refrain from action until the end of the year.

Key event for this week is Janet Yellen speech on Friday where the Fed head will probably provide a lot of food for thoughts for investors trying to second-guess the authority decision in June, causing huge volatility moves on major USD pairs. Current odds of rate hike according to CME futures data is 30%.

Crude prices extend gains after a minor retreat on Tuesday as Qatar oil Minister and OPEC President Mohammed bin Saleh Al-Sada said in the interview that the oil market is slowly rebounding after falling sharply in the past two years, however, oil is still not trading at a “fair price“, which could stimulate the necessary investments. WTI rose 1.52% closing the spread with
Brent which gained only 0.99% to 48.81 as of the time of writing.

Al-Sada said that $ 65 per barrel is the lowest price, which is badly needed at the moment. He also believed that falling investment caused by falling prices, jeopardizing future supplies.
OPEC President gave an interview to the Agency AssociatedPress in the capital of Qatar, Doha in Tuesday. OPEC, an organization consisting of 13 oil producers is preparing for a meeting in Vienna next week.
Al-Sada did not rule out the resumption of the debate on freezing production by major producers, despite the failure of talks last month.

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19/05/16 Market notes

FOMC minutes sends rate hike odds to 34%, Dollar index surges to 7-week high

FOMC minutes sends rate hike odds to 34%, Dollar index surges to 7-week high

The situation about increasing of Federal Funds Rate in June continue to heats up – this time from very hawkish statement from Fed official from Richmond. Fed Richmond President Jeffrey Lacker blamed markets on being too downbeat about the pause which Fed will take before another rate hike.

Lacker, known for his hawkish views, who is not a voting member this year of the FED, also told Bloomberg that he supported raising the rate at the April meeting and that it would be prudent to pick it up in March.
Of the members with voting rights, only the Fed President of the Kansas City Esther George disagreed with the rest of FOMC board, saying that she would prefer to raise the target rate range to 0.50% -0.75%.
Lacker added that there is “usual diversity of opinions”, but supposed there are strong fundamental grounds for raising borrowing costs in June.
His views are supported by the strong pickup in US labor market. For example, the number of Americans wishing to obtain first-time unemployment benefit was reduced last week to 278 thousand from 294 thousand, according to the report of US labor department. The pace of decline in the number of applications have become the highest since early February this year.

Experts interviewed by Bloomberg, on average, had predicted a decrease in the number of applications last week to 19 thousand. Consensus forecast of the experts interviewed by MarketWatch had anticipated a drop by 24 thousand.
A week earlier the number of applications peaked in this year and a significant decline is a signal that US labor market remains strong, experts say.

The average number of applications for the past four weeks, less volatile indicator, rose to 275.75 thous. with 268.25 thous. a week earlier.Meanwhile, the number of Americans who get unemployment benefits for the week ending 7 may, declined by 13 thousand – to 2.152 million. The figure for the previous week were revised to 2.165 million from 2.161 million.
As the rally of US Dollar extends, commodities and safe heavens suffer. In Thursday gold futures fell to a three-week low during morning American trades, as investors are trying to second-guess the likelihood FED rate increase in the next month.

Gold tumbled 1.71% to $1.252 per troy ounce, the steepest decline for recent months. The move looks like a pure speculation as rate hike odds are still low and Janet Yellen was too wary on her last meeting about the possibility of changes in June. But April 26-27 FOMC minutes released on Wednesday showed that the Central Bank will likely increase rates in June if US economic data from second quarter will show show rising inflation and employment levels.
As of Thursday morning, federal funds futures indicate 34% probability of raising rates in June, compared to 16% before the release of the protocol.

The growing likelihood of a rate increase in June prompted the dollar to 7-week highs. The USD index, which tracks the US currency against the dynamics of trade-weighted basket of six major competitors increased by 0.21% to 95.40, peak March 29.
A strong United States dollar usually puts pressure on gold, since it reduces the appeal of the metal as an alternative asset and makes dollar-priced goods more expensive for holders of other currencies.

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17/05/16 Market notes

Goldman sachs baffle markets with its new supply forecasts

Goldman sachs baffle markets with its new supply forecasts

Brent crude price climbed to $ 49 per barrel on Monday, for the first time since November 5 last year.
ICE Futures Exchange benchmark for July delivery hit a new high of this year at $ 49.03 a barrel, or 3.01% at 13:54 GMT on Monday.
WTI futures rose to $ 47.70 a barrel or 3.22 percent.
Experts say the main reason for the growth of prices is the publication of Goldman Sachs report, which said that the oil market is experiencing a shortage of supply amid supply disruptions from Nigeria and Canada and strong demand in China and India.

The prospect of exports of liquefied natural gas (LNG) from the United States to Asia and Europe, coupled with oversupply in the market will help to bring the price of natural gas in the world’s major hubs and weaken the binding gas prices to oil prices, according to a survey by the international rating agency Fitch.
The first shipment of LNG from the United States to Europe has been made by Cheniere Energy Sabine Pass factory in Portugal at the end of April.

“It is not clear how much more gas to Europe will be delivered soon. But in any case, the gas export from the United States should increase liquidity in the global market for LNG, including the fact that contracts generally allow for a flexible approach to the geography of deliveries. As a result, substantial and lasting differences between price levels in different hubs must be reduced, especially in markets where LNG would be an alternative to the gas pipeline, “, the statement said.
Narrowing spread between prices will reduce the possibility of regional suppliers affect pricing, so it’ll become harder for them to bind the gas prices to oil prices. This process is already well under way in Europe, where consumer pressure has forced companies such as Statoil (OL: STL) and Gazprom, to increase the share of gas sales, sold on the spot or by hybrid contracts regarding contracts with binding to oil prices, say analysts of the Agency.
However, this process is unlikely to lead to the single global market due to infrastructure constraints and the high cost of transporting LNG compared to oil.

“The Lowest gas prices in Europe will put pressure on the profitability of exporters, however, in comparison to other options, delivery in Europe can help suppliers already contracted volumes to minimize their losses,” reported in a Fitch review.
The company, purchasing gas from Chenierefor further reselling to the end-users, paying 115% of the LNG producer price Henry Hub, plus a fee for liquefaction of up to $ 1 million for 3.5 British thermal units (BTU).
However, the fee for liquefaction is a contractual obligation of the buyer, and the need for the exemption does not depend on the amount of the selected Strip. So American supplies of gas to Europe may be economically justified, while the cost of this gas in the United States, as well as costs for transportation and regasification will be lower than European spot prices.
“According to our estimations, such margin costs now account for about $ 4 per 1 million BTUS compared with spot prices in the UK (National Balancing Point) $ 4.3 per 1 million BTU,” the statement said.
Europe is a more attractive market for LNG from the United States than Asia, as the costs of transporting to Asia from the United States is much higher.

The impact of these trends on gas producers will be different. For the Qatari RasGas and Qatargas new supplies from the United States, is unlikely to be a significant threat because of their competitive positions and long-term contracts for their production
Lowest gas prices in Europe will continue to put pressure on earnings of Gazprom , especially if it decides to protect its market share, but the possible negative effect of this will be partly offset by the low cost of gas production and significant untapped capacity.

Statoil’s business in the field of natural gas are highly dependent on spot prices in Europe, however, the Group’s consolidated companies increasingly dependent on oil prices.
“We believe that the natural gas market in the United States is too large and well-supplied that LNG exports led to a substantial increase in the price of natural gasin the United States”, said in the Fitch report

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11/05/16 Market notes

Gold retreat from bounce, Oil prices surge on upbeat EIA and supply outage in Nigeria

Gold retreat from bounce, Oil prices surge on upbeat EIA and supply outage in Nigeria

Oil prices rose on Wednesday amid the return of worries about supply outages as Shell announced the closing of a key pipeline in Nigeria.
Brent futures strengthened 4 percents to $ 47.34 per barrel, WTI futures rose 3.45 percent to $ 46.20 per barrel.
Shell Petroleum Development Co., a unit of Royal Dutch Shell in Nigeria, announced force majeure associated with Bonny Light oil exports, after the closure of the pipeline Nembe Creek Trunk line (NCTL) for repairs.
In this regard, the country‘s oil production could fall to a minimum of more than twenty years.
News from Nigeria have changed the trend of oil price which declined earlier in the session, as the production in Canadian oil sands region started to recover from outages related to forest fires.

The energy information Administration (EIA) of the United States reported an unexpected fall in crude inventories last week, surprising analysts, which projected growth.
According to the EIA, crude oil reserves declined in the week ending on May 6, by 3.41 million barrels to 539.9 million barrels, while analysts were expecting a growth by 0.71 million barrels.

According to the American Petroleum Institute (API) published in Tuesday, stocks in the United States increased by 3.45 million barrels to 543.1 million for the week ending May 6, whereas analysts had assumed that they grow up to 714,000 barrels.
Gold price bounced from a two-week lows on Wednesday, as the dollar rally was interrupted, while European shares fell, stoking investors ‘ appetite for the precious metal.

The dollar fell to 0.3 percent against a basket of major currencies.
Analysts consider the level of $ 1,300 per ounce as a price ceiling in the short term because the metal has already increased by 20 percent since the beginning of the year due to the strengthening of the commodity market and cooling expectations of FED rate hike in the United States in June.
Gold is supported mainly by traders‘ expectations that the next increase in interest rates will only happen later this year, because the FED is mindful of the difficult global economic environment.
The current situation is favorable for gold, but its hard to call it too favorable as the economy of the United States proved to be generally in good shape.

Goldman Sachs also sees limited growth potential of gold prices, given that the FED is unlikely to surprise by decline in rates, the dollar is almost nowhere more to fall and its hard for China to strengthen its currency so as to substantially weaken the dollar.
However, Goldman increased its price forecasts for gold on 3, 6 and 12 months to $1,200, $ 1.180 and $ 1,150 per ounce, respectively from $ 1,100, $ 1,050 and $ 1,000 per ounce, referring to the strong position of investors – speculators.

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09/05/16 Market notes

Yen drops on intervention rumors, Dollar surges as Fed Dudley is optimistic on Rate hikes

Yen drops on intervention rumors, Dollar surges as Fed Dudley is optimistic on Rate hikes

Japanese yen dropped to a two weeks low against the dollar on Monday after Japan’s Finance Minister warned that Tokyo is ready to intervene in the foreign exchange market if necessary.

USD/JPY hit 108.38, highest level from April 28, and swayed around near 108.20 during Monday session, up 1.03% for the day. Last week, the dollar fell to 105.05 level, 18-month low against the Japanese Yen .
The USD index, which tracks the US currency against the changes of trade-weighted basket of six major currencies, rose by 0.14 percent to 93.96, bouncing off from lows Friday of 93.00 floor.
The Finance Minister Taro Aso hit the wires on Monday saying that Tokyo was ready to intervene in the foreign exchange market, if excessive strengthening of Yen will affect trade statistics and economic indicators of the country. Though, most traders still don’t expect monetary measures by Japanese authorities towards weakening of the yen.

At the end of last month the Treasury United States added Japan to the list of countries which are monitored for the policy of adjusting foreign exchange rates. It means that United States are worried about current monetary stance of BoJ and Japanese government, which lack of action or overly interventions may create problems on foreign exchange market.
In his report, the Minister of Finance noted that the current market of US Dollar – Japanese Yen is “well regulated ” and reiterated that all countries should abide by the commitments of the G20 and G7 on exchange rate policies. Markets saw in this statement a call for limiting currency intervention on the part of Japans government.
The yen strengthened after the outcome of the April meeting on determining monetary policy, where Bank of Japan refrained from implementing fresh quantitative easing, contrary to market expectations.

The strengthening of yen threatens the goals of BoJ to stimulate prices growth.
A demand for US dollar also rose after the head of Fed Reserve Bank in New York William Dudley said in Friday that it is reasonable to expect two more rate hikes this year, despite data showing that the growth in the number of new jobs in the United States in April was the lowest in the past seven months.
The yen also fell sharply against the euro, the EUR/JPY pair rose 1.05 percent to 123.43.
The single currency hardly changed against the dollar, the EUR/USD traded near key 1.14 level. Risk sentiments among EU investors and analysts have improved slightly in May, data showed on Monday, but worries about the prospects of the world economy continue to mount pressure.

Investor confidence index grew 1.2% from 5.7 to 6.2 in April, beating expectations of the growth to 6.1.
A separate account showed that in March the volume of orders in German industry rose more than forecast, at 1.9%, showing the largest increase since June due to high international demand.

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05/05/16 Market notes

Iran reaches pre-sanctions level of production, Canada outage in supply boost oil prices

Iran reaches pre-sanctions level of production, Canada outage in supply boost oil prices

Oil production in Iran will reach 3.8 million barrels per day over the next few days said to Bloomberg Roknoddin Javadi, deputy oil minister and managing director of state-owned National Iranian Oil Company. It is obvious that Iran’s intention to return to pre-sanctions levels of oil production at a rate of about 4 million barrels per day remain quite serious.

After regaining market share, which the country controlled before the introduction of international sanctions, Iran is ready to discuss joint actions in the oil market with other OPEC members added Rokneddin Javadi. As reported by Bloomberg, Iran may join OPEC quota in one or two months after increasing output to pre-sanctions level of oil production and exports.

In April Iran exported an average of 2.1 million barrels of oil per day the deputy minister noted.
Crude futures of Brent and WTI sorts are trading in positive territory on the background of disruption in oil supplies due to forest fires in Canada and the escalation of military clashes in Libya but is moved away from session highs.
The boost of production in Iran is a matter for worries for one of its major export competitors in the Middle East –  Saudi Arabia. As it became known yesterday crude output in Saudi Arabia has already reached 10.15 million barrels per day.

The fire which led to the evacuation of all 88,000 dwellers of the oil center – Fort McMurray in Canada and destroyed 1,600 buildings, now threatens local airport and southern part of the city, officials said on Wednesday.
Some areas of the city in the southeast of Alberta, in the heart of Canada’s oil sands region, already lay in ruins.
As we move to the south of the fire, authorities announced a mandatory evacuation of the settlements, located 50 kilometers south of Fort McMurray.

According to officials, there is no victims of the calamity, but it is known of at least one car accident in the course of the evacuation.
A huge cloud of black smoke can be seen at a distance of more than 60 kilometers from the city, the fire can not stop the fire.
“We may lose a significant part of the city”, – said Scott Long, a spokesman for Emergency Management Agency Alberta.
The main oil facilities are located outside the fire spread, however, companies are trying to help and evacuate employees and protect conduits, which led to a cut in production.

Premier of Alberta Rachel Notley said that the Fort McMurray destroyed about 1,600 buildings. The province declared a state of emergency. Canadian Prime Minister Justin Trudeau said that the military could send planes into the city, if necessary. International Airport Fort McMurray suspended all commercial flights.
The consequences for oil production are still unclear, but the Canadian company Suncor Energy said on Wednesday the suspension of work on its core deposit on oil sands may result in a cut of 350,000 barrels/day  in output. Production on the rest of oil fields was decreased as well.Oil futures gained about three percents on supply outages from Canada, WTI rose to $45/barrel, while Brent floats near $45.50/barrel.

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04/05/16 Market notes

PBOC stages another round of Yuan devaluation, US ADP report disappoints

PBOC stages another round of Yuan devaluation, US ADP report disappoints

US Dollar drops against the euro after the publication of weak data in US ADP employment report.
According to released on Wednesday ADP report, the number of jobs increased by 156 thousands in April. The growth rate for March was revised from 200 thousands to 194 thousands. Economists surveyed by Bloomberg expected the rise by 195 thousands in April.
However, the dollar index rises from the lowest level for the year as two heads of the Federal Reserve System (FRS) drew attention to the understated market expectations for US interest rates Central Bank, Bloomberg reported.
On Tuesday, the head of the Federal Reserve Bank (FRB) of Atlanta Dennis Lockhart and his colleague from the Federal Reserve Bank of San Francisco John Williams announced that the current state of the US economy justifies the rise of interest rates at the meeting on 14-15 June. In their view, the market is too conservative about the prospects of the US economy, and raising rates.
According to the data of futures contracts, the likelihood of Fed rate hike does not exceed 12% in June.
Euro rose to $1.1526 compared with $ 1.1496 at the close of the previous session in New York, for which the dollar has risen in price by 0.3%.
The dollar fell against the Japanese currency during Wednesday session to 106.27 yen from 106.60 yen yesterday. Yen decreased slightly against the euro – to 122.49 yen against 122.55 yen.

The People’s Bank of China (PBOC, the central bank of the country) lowered the reference rate of the yuan against the US dollar by 0.59% to 6.4943 yuan on Wednesday. The rate of the Chinese national currency was cut the with the fastest pace from August 13 after the strengthening of  US currency on Tuesday, reports Bloomberg.
Since the beginning of 2016, the value of the yuan against the dollar has not changed much, but the yuan has fallen by 4.3% against a basket of currencies of major trading partners of China – to the lowest level since November 2014.

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03/05/16 Market notes

Gold surges to January 2015 high, Apple declines 8 days in a row as Icahn sells his stake.

Gold surges to January 2015 high, Apple declines 8 days in a row as Icahn sells his stake.

Gold futures fluctuate around the key level of $1,300 during the morning US trading, as investors track the movement of currency market in anticipation of the comments of officials of the Federal Reserve System.
Gold for June delivery traded on the Comex division of the New York Mercantile Exchange rose to a session high of $ 1303.85 per troy ounce, then retreated to $ 1299.70, up $ 3.90, or 0 3%.

On Monday, gold rose in price to $ 1,306.00, the highest since January 2015.

Weak US dollar usually supports gold as it boosts interest to the commodity  as a safe heaven asset and decrease prices of dollar-denominated commodities for holders of other currencies.
Today  US dollar was down against a basket of currencies to a minimum 91.98, the lowest level since January 2015, and is now trading at 92.73, +0.22% today.
In early trading session Japanese yen rose to a fresh 18-month high against the dollar trading in tandem with the US currency at 105.57, while the euro reached its peak in August last year, $ 1.1600.

This year the USD index fell more than 6% due to lower expectations that the Fed will normalize interest rates due to concerns about the global economic downturn.
Traders will focus on the performances of officials of the Federal Reserve System, to get an idea about the balance of opinions in the Central Bank on further rate hikes.
At 14:30 GMT the Federal Reserve Bank of Cleveland President Loretta Mester led a discussion on the impact of monetary policy on market liquidity.
At 23:00 GMT the head of the Federal Reserve Bank of Atlanta Dennis Lockhart will speak about the economic outlook and monetary policy of the USA.

Gold prices have risen nearly 22% this year. The delay in raising interest rates tends to encourage demand for gold, as the costs of holding the asset are staying low, guaranteeing investors a higher profit.
In addition, silver futures for May delivery fell 6.6 cents, or 0.37%, to a price of $17.59 per troy ounce.
Copper fell 2.6 cents, or 1.17%, to $2,240 per pound increased against the background of concerns about the health of the Chinese economy after the country’s manufacturing activity declined in April, the 14th straight month.
Earlier, data showed that manufacturing in China by Caixin index dropped to 49.4 in April from 49.7 in the previous month, although expected to rise to 49.9 points.

Apple closed the eighth straight session with declines which was anti-record for the company since 1998, but premarket action points to weak growth.
Californian technology giant’s shares were down four sessions in a row, before the company reported on April 26 on the first decline in iPhone sales in the company’s history.
Apple’s stock continued to decline when investor Carl Icahn said the CNBC on April 28 he sold his entire stake in the company because of risk concerns about China.
Falling stock prices last week was the worst for the company since 2013 and the company closed Monday session decline by 0.11%, extending decline for eight sessions in a row what was the worst reading since July 1998 and was the fourth time in history the of the company. According to Bloomberg, Apple lost $79 billion market capitalization over the past eight sessions.
However, the fall may be coming to an end, as the company’s shares indicate 0.37% rise in premarket trading.

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02/05/16 Market notes

Oil prices recede on boost of production from OPEC, Draghi speech is in focus

Oil prices recede on boost of production from OPEC, Draghi speech is in focus

Oil prices are falling on Monday, because the monthly increase in output in the Organization of Petroleum Exporting Countries offset the drop in US production and the recent weakening of the dollar, which were main propeller for recent growth of the prices.
WTI crude for delivery in June traded on the New York Mercantile Exchange fell 39 cents or 0.81% to $45.55/barrel.
Brent crude, traded at ICE exchange in London fell 1.27%, to $46.79.
OPEC oil production in April rose to record highs in recent history a Reuters poll showed on Friday, as the increase in production in Iran and Iraq offset strike in Kuwait and other delays in deliveries.
According to the survey the April OPEC production rose to 32.64 million barrels/day from 32.47 million barrels/day the previous month, reinforcing concerns about oversupply in the global energy markets.

Trading volumes remained fragile due to the celebration of May Day in many countries.

Oil has risen more than 75% from 12-year lows in January amid signs that low prices are beginning to resist the growth of output due to high production costs, resulting in ease of the glut.
On Sunday, the head of the International Energy Agency, Fatih Birol said that oil prices may have bottomed out, provided that the global economy will keep the current momentum of development.

US Energy Secretary Ernest Moniz said Monday that it expects to restore the balance of supply and demand of oil in the world market for about a year.
This year, oil production in the US could drop by 600,000 barrels per day on an annual basis, as producers respond to lower prices, said Moniz.

European stock indexes show mixed performance as the markets are still under the influence of the Bank of Japan’s decision to leave its monetary policy unchanged, while today investors awaited speech European Central Bank President Mario Draghi.
During European morning trade, EURO STOXX 50 fell 0.25%, France’s CAC 40 rose 0.18%, while Germany’s DAX 30 added 0.44%.
Markets still fluctuate after last Thursday, the Bank of Japan decided to leave its monetary policy unchanged, contrary to market expectations, preparing for additional mitigation.
The decision was made the next day after the Federal Reserve on Wednesday left interest rates unchanged near zero and almost did not give hints on future hikes.

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30/04/16 Market notes

US indices closed the week with declines, Amazon surprises investors with earnings report.

US indices closed the week with declines, Amazon surprises investors with earnings report.

The US stock market closed trading in Friday with declines amid negative dynamics in the health care sector, technology and finance.
Dow Jones fell by 0,32% at the close, S&P 500 index dropped 0,51%, NASDAQ Composite Index fell 0.62%.

The leaders of growth among the Dow Jones index components in Friday were the shares of Home Depot Inc., which rose  0.87%, closing at 133.89. Stocks of the Travelers Companies Inc rose 0.68%, ending trading at 109.90. Shares of Nike Inc rose 0.68%, closing at 58.94.
Worst performers were the shares of Wal-Mart Stores Inc., which price fell 2.96%, ending the session at around 66.87. In technology sector the shares of Intel Corporation rose 2.67% to 30.28, Cisco Systems gave way by 1. 68% and finished trading at around 27.49.

The S&P 500 top performers at the end of Friday trading were the shares of Monster Beverage 1990 Corp, which rose by 12.81% to 144,22, Freeport-McMoran Copper & Gold Inc, which scored 10.76%, to 14.00, and shares of Amazon.com Inc, which rose by 9.57%, ending the session at around 659.59 after a release better-than-expected corporate earning reports, with cloud services as a main driver for growth.

Leaders of falling were shares of Stericycle Inc., which fell in price by 21.50% to 95.56. Shares of Seagate Technology PLC lost 19.07% and closed the session at 21.77. Shares of Western Digital Corporation decreased by 11.28% to 40.87.
The leaders of growth among the NASDAQ Composite index components were the shares of Globus Maritime Ltd, which rose by 200.00% to the level of 1,2900, Paragon Shipping Inc, who scored 50.86 % to 2.6400, as well as shares of KBS Fashion Group Ltd, which rose by 30.42% and closed the session at around 0.4043.
Leaders of falling were the shares of Park-Ohio Holdings Corp, which fell in price by 36.42% to close at 25.45. Shares of the company Golar LNG Limited lost 23.24% and closed the session at 16.58. Quotes Stericycle Inc decreased in price by 21.50% to 95.56.
Volatility Index also know as CBOE Volatility Index, which is based on options trading indicators on the S&P 500 rose by 4.14% reaching 15.85 points.
Gold futures for June delivery added 2.39%, or 30.25, reaching $ 1.296,65 for troy ounce. As for other commodities, the price of oil WTI with delivery fell by 0.11% in June, or 0.05, to $ 45.98 a barrel. Brent crude oil futures for July delivery fell 0.82%, or 0.39, to $ 47.38 a barrel.
Meanwhile, in the Forex market EUR/USD pair rose by 0.86% to 1.1450, and the quotation USD / JPY fell 1.57%, reaching 106.41.
USD index dropped by 0.76% to 93.02.

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30/04/16 Market notes

Libya destroyed Petroleum industry seeks ways for recovery

Libya destroyed Petroleum industry seeks ways for recovery

Libya National Oil Corporation (NOC) has set an ambitious goal – restore production to the levels at which it was before the civil war in 2011, and which had fallen during the years of violence and disruptions in production, officials said.
Oil production in Libya is now less than a quarter of the 1.6 million barrels per day, that country produced before the fall of Muammar Gaddafi’s regime, and the NOC, based in Tripoli, hopes to quickly increase it with the support of the new government of national unity.
However, full recovery may take years due to strikes of petroleum industry workers, political squabbles and militant attacks of “Islamic state”.

Over a year ago the jihadists attacked the fields of Al-Ghani Al-Mabrouk and Dahr in the Sirte Basin, forcing the NOC to declare a state of emergency on 11 fields.
The representative of the NOC in Tripoli told Reuters that as a result of attacks on deposit in the western basin of Sirte – the richest in Libya – production fell by about 200,000 barrels a day.
NOC may take some time before the end of 2017 or beginning of 2018, to restore the old power fields, the official said, if corporations have enough money to repair.
The first phase consists of three stages of the recovery plan will be implemented within three months, another representative of the NOC said in Tripoli that will return the deposit to the El Sharara and the Elephant, a total capacity of 430,000 barrels per day.

However, the restoration of other fields, especially those which was under directly strikes, as well as supplying the largest shipping terminals Libya – Ras Lanuf and Es Sidr – it may take more time, he added.
It may take years for the restoration of destroyed infrastructure in the ports, delaying the start of fields supplying them.
“All these plans are dependent on safety if proper and reliable protection of oil facilities will not be provided, our plans will be jeopardized”, – said the second official.
However, industry sources do not expect to increase production above the level of 600,000 barrels per day in the next few months.

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28/04/16 Market notes

Fed sees US economic outlook more stable, BoJ leaves QE volume unchanged

Fed sees US economic outlook more stable, BoJ leaves QE volume unchanged

The US Federal Reserve has remained its key monetary benchmark in the range of 0.25-0.50 percent, but made clear that it is confident in the prospects for the US economy, leaving the door open to raise borrowing costs in June.
The Federal Open Market Committee said that the situation on the labor market continues to improve, despite the recent economic slowdown, and that it keeps a close eye on the inflation.
The watchdog added that the situation in the global economy remains on its radar, but didn’t say it presents a risk for United States.

“The Committee continues to closely monitor the indicators of inflation and the dynamics of the world economy and finance”, – was said in the report on results of the Fed’s two-day meeting.
Federal Reserve for the first time in nearly a decade lifted the rate in December last year. Now the regulator but expected number of hikes from four to two, one of them is certainly expected in December.

Yesterday’s Fed statement is the third in a row in which the regulator is not talking about the balance of risks to the economy.
However, the Fed noted that despite a slight slowdown in household spending, their real income is increasing by “solid pace”, and consumer sentiment stays at a high level.
Inflation in the US has accelerated somewhat recently, but the Fed said that it will remain low in the short term, partly due to the recent decline in energy prices. However, the regulator added that it was confident that inflation will accelerate to a guideline of 2 percent over the medium term.

The Fed also reiterated that the situation in the US economy will develop in a way that ensures “a gradual increase” of the interest rate.

The yen has strengthened against the dollar and the euro on Thursday after Kuroda’s team left monetary policy unchanged, dissipating speculations that the watchdog can expand the already large-scale easing program.
The Japanese central bank kept the rate at minus 0.1 per cent, despite the challenges of the global economy, strong yen and weak consumption.
US dollar is down 2.84 percent to 108.28 yen. USD/JPY rose to 111.80 in the last week on speculations that the Bank of Japan is considering the spread of its policy of negative interest rates on loans to banks.

Shares on the Tokyo Stock Exchange fell sharply, Nikkei 225 fell to 3.61%, after the Bank of Japan decided not to change interest rates despite the fact that its inflation target of about 2% faces will be quite hard to reach.

The market expected the BoJ would yield to temptation to extend QE after Bloomberg had reported that the results of Thursday meeting should be extension of the policy of negative interest rates, introduced in January.

Household spending in Japan fell 5.3% in March year on year, missing expectations of 4.2% decline. The nationwide core consumer price index in March fell 0.3% year on year versus a projected drop of 0.2% and the unemployment rate dipped to 3.2% despite the estimate of 3.3% .
The volume of industrial production in Japan in March rose by 3.6% on monthly basis, while expected to grow by 2.9%, while the volume of retail sales fell by 1.1% year on year, although it was expected to drop to 1.5% .

 

 

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