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Gold Trading Week Ahead 20th April 2015

 

Gold Trading Week Ahead – 20 April 2015

Gold treaded water last week with gold finishing the week almost identical to where it closed the previous week. Last week was all about CPI data while this week we have a number of economic, political and cultural factors that will drive sentiment.

European indices have seen sentiment begin to turn after the initial enthusiasm for Mario Dragi’s QE. Greece is also back in the spotlight, the Eurozone has a crucial meeting later this week regarding Greece. A Greek default is certainly figuring in traders’ minds, with this increased concerns I expect demand for gold to increase.

Demand from both India and China has been weak in recent trading sessions, not entirely surprising given the recent strength of the U.S. dollar and the fact that many Indian buyers have been awaiting Akshaya Tritiya which is Tuesday 21st April. I expect Indian demand will increase this week as Akshaya Tritiya is considered auspicious for starting new businesses, investments and the like.

This week is packed with economic data that could set the direction for precious metals.

Monday the Chicago Federal Reserve National Activity Index data for March is released.

Tuesday sees the Reserve Bank of Australia (RBA) meeting minutes released, if the RBA signals that is moving closer to a rate cut then we may see gold in AUD edge higher.

Wednesday will see the release of the Bank of England (BoE) minutes, Australian CPI, US Existing Home Sales and Crude Oil Inventories.

Thursday is full of economic data with Manufacturing PMI data out for Japan and China, UK Retail Sales, US New Home Sales and importantly US Jobless Claims. Westpac is forecasting a drop in Jobless Claims to 286,000, down from 294,000 as at the last reading.

Friday the Eurozone will meet to discuss Greece and its further reforms that it needs to provide by Friday. The odds of a Greek default are certainly shortening with Friday being the next critical hurdle for Greece and the Eurozone. US Durable Goods Order data is also out later on Friday, the market is expecting a rise of 0.6%.

This week also sees the release of a number of key US company announcements which will give investors a better understanding of the strength of these key companies. The companies with announcements include Wal-Mart, Yahoo, IBM, Morgan Stanley, AT&T, Boeing, Coca-Cola, Facebook, Microsoft, 3M, Procter & Gamble, Costco and Starbucks.

It could be a volatile week across all markets this week, with gold set to benefit, I expect to see gold test the US$1,220/oz resistance level, a level gold needs to consolidate above this level before moving higher.

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Courtesy of:  www.bullionindex.com.au

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EURUSD long-term risks should still be on the downside

 

Credit Agricole report “some downside risks for EUR could linger as well. In particular, uncertainty about Greece should continue to haunt the single currency, with concerns about the country’s debt-sustainability likely to escalate as the bailout extension draws to an end in June.

Long-term risks should still be on the downside, however, and we expect EUR/USD to hit parity in Q3 with the USD-rally resuming as we get closer to the Fed’s first hike”.

Source: Credit Agricole

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Gold Trading Week Ahead

 

Bullion Index report: Late last week gold managed to stem the recent losses as the dollar rally paused. An 8 day run of consecutive losses on gold came to an end on Thursday, not before posting a new 4 month low.

Last week we saw solid buying from our clients at the low US$1,150’s/oz levels.

This week is going to be a key week for gold with the Federal Reserve’s two day policy meeting Tuesday and Wednesday. The main focus will be Fed Chair Janet Yellen’s press conference following the FOMC announcement at 2pm Wednesday New York time. The price of gold is being driven almost solely by US dollar movements at the moment (dollar up, gold down or dollar down, gold up), so if any wording coming out of the Fed next week hints at a June rate rise, look to see further US dollar strength and gold soften. If the Fed notes that it still remains ‘patient’, the market is going to take that as a post June rate rise which should give gold a boost. Gold investors should also look out for any commentary from Yellen surrounding the US dollar. Traditionally the Fed would not mention the US dollar however given its stunning run it may play a factor in the Fed’s monetary policy. If it does come into play then the Fed may look to hold off tightening until later on in the year or even possibly next year.

The Fed is facing one of its biggest decisions since the GFC, they do not want to go too early or too late when it comes to raising interest rates.

The other events of the week that gold traders should be aware of include; ECB President Mario Draghi’s speech on Monday, US Building Permits and Housing Starts on Tuesday, Swiss National Bank Monetary Policy Decision and Philadelphia Fed Manufacturing Index both on Thursday.

I do not expect to see any further big moves on gold until after Yellen’s press conference on Wednesday. Between the open on Monday and her press conference I expect to see investors adding to long gold trades on any dips.

Investors have been showing more interest in platinum in the past week as they look for value, platinum has recently hit lows not seen since mid-2009.

Gold closed at US$1,158.60oz in New York on Friday, down US$10oz on the week.

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Courtesy of:  www.bullionindex.com.au

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Credit Agricole remain short EUR/USD

 

In a note to clients, Credit Agricole report that “in order to push EUR/USD considerably lower from current levels Fed rate expectations may need to rise further. As there seems to be scope for the Fed to consider higher rates as soon as mid-year, we anticipate further diverging monetary policy expectations to the detriment of the pair.

We remain short EUR/USD targeting a move towards 1.06″.

Source: Credit Agricole

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ANZ buy spot gold on dips to US$1180

 

ANZ, the Australian Bank saying while they see no clear impetus to push gold significantly higher or lower in the near-term they suggest to clients to ‘buy spot gold on dips to USD1,1180/oz’. They expect gold to trade over the next 12 months in the USD1,150/oz to USD1,300/oz noting that gold has a tendency to trough well before the USD peaks suggesting we may have seen the bottom of the gold price in this current cycle.

Source: ANZ

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US dollar far from overvalued – SwissQuote

 

SwissQuote report that “although the recent rise in the value of the greenback has been impressive, valuation are far from overvalued. Indeed, looking at some fundamental measures like PPP, long-term valuations do not suggest any
significant exaggeration in the value of the US dollar. However, given that the ECB’s QE and part of the Greek uncertainties are behind us, most of these Euro negative factors are now discounted. As a remaining big driver
for Euro weakness is the timing of the Fed’s tightening cycle, which remains very uncertain, the appreciation of the US dollar is likely to slow in the near-term. However, if our June scenario is correct and given the more dovish stance from the markets, we continue to favour a mediumterm bullish view on the US dollar index. Any decline near 91.0 should be seen as a very attractive entry point”.

(Source: SwissQuote)

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EUR/CHF to be choppy on the upside

 

SwissQuote report the “EUR/CHF’s spike above 1.05 at Swiss open fueled speculations that the SNB might be behind the move. The money markets show limited reaction, we see no particular stress on euroswiss interest rate futures. As EUR/CHF tops, real money names and business owners will increasingly be tempted to sell EUR verse CHF on futures and derivatives markets to set FX hedges vis-à-vis the risky EUR. Therefore we expect choppy upside at 1.05/1.10 area.

The impact of EUR/CHF debasing is heavily felt in Swiss everyday life. The grocery shops, supermarkets, furniture, clothing shops give sensibly high discounts in order to prevent clients from buying across borders. This being said, the labor market is now under important contraction pressures. In the canton of Geneva, the negotiations for 50% unemployment are already on the wire. We expect significant price adjustment in the real market over the months ahead, which in turn should cool-off buying pressure in franc”.

(Source: SwissQuote)

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USDCHF eyes 0.9529 as gold referendum looms

 

Capital Trust Markets reports “the US Dollar (USD) extended upside movement against the Swiss Franc (CHF) on Thursday, increasing the price of USDCHF to more than 0.9630 ahead of the Swiss Gold Referendum. The short term sentiment remains bearish due to Lower High on the daily chart thus the pair is expected to print a Lower Low below the 0.9529 support area.

Technical Analysis

As of this writing, the pair is being traded around 0.9635. A hurdle can be noted around 0.9660, the 61.8% fib level ahead of 0.9691, the 76.4% fib level and then 0.9740, the swing high of the last upside rally as demonstrated in the following chart.

On the downside, the pair is expected to find a support around 0.9610, the 38.2% fib level ahead of 0.9579, the 23.6% fib level and then 0.9529, the swing low of the recent downside move.

Gold Poll

Switzerland seems to be in the eye of a storm lately, as several indications have resulted in a code red situation. The Swiss Franc is trading at its highest level versus the Euro since 2011 when the central bank had to intervene in the forex market to safeguard its purchasing power. The USD/CHF exchange rate is also vital for the Swiss economy, and the Swiss National Bank needs to keep a very close eye on this exchange rate as (unfortunately for Switzerland), the CHF is still widely being considered as a safe haven. Back in 2011 the fear for the collapse of the Eurozone was absolutely real and investors were scrambling to get their hands on Swiss Francs in a flight to safety.

 Trade Idea

Keeping in view the overall technical and fundamental outlook, selling the pair around the current levels still appears to be a good strategy in short to medium term. The trade should however be stopped out on a daily closing above the 0.9741 resistance area”.

(Source: Capital Trust Markets)

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Australian dollar against Japanese yen set for gains in the near term

 

Capital Trust Markets reports “the Aussie dollar has shown a lot of resiliency against most major currencies recently, raising the case of more upside in pairs like AUDUSD and AUDJPY.

Technical Analysis

There are a couple of important trend line formed on the 4 hour chart of the AUDJPY pair, which are likely to act as a support for the pair moving ahead. The pair recently climbed towards 102.80 area where it found sellers, and is currently trading lower. There is a chance that the pair might spike lower towards the first bullish trend line, which is also sitting around the 23.6% Fibonacci retracement level of the last leg from the 98.05 low to 102.83 high. Moreover, there is one more bullish trend line, connecting lows sitting just below the first trend line. So, there is a lot of support around the 101.80-60 area where buyers are likely to take a stand. If the pair continues to trade higher from the current or lower levels, then initial hurdle is around the last swing high of 102.83, followed by the all-important 103.00 area.

AUDJPY 11.24.2014

On the other hand, if the AUDJPY pair breaks the highlighted support zone, then it is likely to head towards the 100 simple moving average (SMA) – 4H, which is around the 50% fib retracement level.

Moving Ahead

There is no major release in Australia in the coming sessions, but in Japan the BOJ monetary policy meeting minutes will be released during the next Asian session. We need to see how the Yen pairs react after the release. Overall, buying dips is a good idea in AUDJPY moving ahead”.

(Source: Capital Trust Markets)

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AUDUSD broke important support – heavy downside expected

 

Capital Trust Markets reports “recent market sentiment suggests that the AUDUSD pair might head lower in the near term as the US dollar might gain traction moving ahead.

Technical Analysis

There was a monster trend line on the 4 hour chart of the AUDUSD pair, which was breached earlier during the Asian session. The most important point to note from the charts is the fact that the pair is now trading below all three key simple moving averages (100, 200 and 50). This might add pressure on the Aussie dollar buyers. Currently, the pair is trading around the 50% Fibonacci retracement level of the last leg from the 0.8540 low to 0.8795 high. So, there is a chance of a correction in the near term towards the broken support area which might act as a resistance now. Immediate resistance is around the 50 SMA, followed by the 100 SMA. The 4H RSI is well below the 50 level, which could encourage the Aussie sellers to take the pair lower moving ahead.

AUDUSD 11.19.2014

On the downside, initial support can be seen around the 0.8600 area. A break and close below the mentioned area might call for a move towards the 0.8550 level”.

(Source: Capital Trust Markets)

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Dovish Bank of England a negative for GBP

 

ANZ report “the BoE was unambiguously more dovish in its November Quarterly Inflation Report. There was a notable downgrade in the bank’s inflation forecast and softening in the outlook for GDP growth.

• Wages are responding to the employment gains of the past year or so as spare capacity shrinks. In part due to its weaker inflation outlook, the BoE looks for real annual earnings growth of around 2% by the end of 2015.

• In such a subdued environment for inflation, it is difficult for the BoE to justify a normalisation in policy rates in the near term. Prospects for a H1 2015 rise in the bank rate have been reduced. This is negative for sterling near term and will act as a constraint on GBP vs USD, AUD and NZD”.

(Source: ANZ)

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A technical take on precious metals – SwissQuote

 

 

Long-term technical structures call for further weakness on precious metals reports SwissQuote.

Looking at long-term price configurations of precious metals, three (gold, silver, platinum) out of four have validated multi-months distributive patterns since September. The duration of these bearish patterns and the implied downside risks suggest that a bottom in this commodity segment has likely not been made yet. Palladium has also declined sharply since September but the long-term succession of higher lows remains intact, as can be seen by the rising trendline. However, a break of the resistance at $811 is needed to alleviate concerns of an upcoming second leg lower.

Gold likely to decline towards $1045
The bearish breakout at $1181 in gold has validated a 16-month declining triangle formation, calling for a decline towards the key support area between $1045 (05/02/2010 low) and $1027 (29/10/2009 low). In the shorter term, the recent rebound has thus far been unimpressive. As a result, the resistance at $1194 (given by the 50% retracement from the October high at $1255) is likely to curb any prices appreciation.

Monitor the short-term price action of Platinum
The short-term technical configuration of Platinum is worth monitoring as prices are challenging the key support at $1190 (06/10/2014 low). A decisive break lower would confirm the downside risk at $1072 implied by the recent validation of its multi-months distributive pattern. It would also not bode well for the short-term performance of gold and silver.

swissquote gold nov14

(Source: SwissQuote)

 

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USDCAD finally stops recored breaking winning run

 

Capital Trust Markets reports “the US Dollar (USD) extended downside movement against the Canadian Dollar (CAD) on Wednesday, dragging the price of USDCAD to less than 1.1350 following the emergence of a bearish pin bar on the weekly timeframe. The long term bias however remains bullish due to Higher High on the daily chart.

Technical Analysis

As of this writing, USDCAD is being traded around 1.1345. A hurdle can be seen near 1.1465, the swing high of the bearish pin bar as demonstrated in the following daily chart. A break and daily closing above the 1.1461 resistance area could incite renewed buying interest, validating a fresh rally above the 1.1500 handle.

On the downside, the pair is expected to find a support around 1.1310, the 23.6% fib level ahead of 1.1215, the 38.2% fib level and then 1.1138, the 50% fib level as demonstrated in the above chart. The bias will remain bullish as long as the 1.1300 support area is intact.

Dollar Plunges

The US Dollar came under a renewed selling pressure yesterday as many of the oversold currencies and commodities pulled back, halting the record breaking winning streak by the US Dollar. The correction phase might continue in the coming days since many pairs are currently being pulled back from the key levels.

Trade Idea

Keeping in view the overall technical and fundamental outlook, selling the USDCAD pair around the current levels appears to be a good strategy in short to medium term. The trade should however be stopped out on a daily closing above the 1.1465 resistance area”.

(Source: Capital Trust Markets)

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NZDUSD Buyers nervous ahead of RBNZ’s Wheeler keynote speach

 

NZDUSD sellers enjoyed selling the pair recently as buyers struggled to break the 07810-20 resistance area. Captial Trust Markets reports “if the RBNZ sticks with the dovish tone, then more losses cannot be denied moving ahead.

Technical Analysis

There are a couple of important bearish trend lines formed on the 4 hour chart of the NZDUSD pair. One of the trend lines recently acted as a barrier for the Kiwi buyers, which also coincided with 50% Fibonacci retracement level of the last drop from the 0.7977 high to 0.7660 low. So, a failure to move above the mentioned confluence area can be seen as a completion of correction. The NZDUSD pair is now trading below all three key simple moving averages – 100, 200 and 50. We can consider this as another bearish sign, which might encourage sellers in the near term. The 4H RSI is just floating around the 50 level, and if it breaks it, then it will add to the bearish pressure on the pair.

NZDUSD - 11.11.2014

On the upside, initial resistance can be seen around the 50 SMA, followed by the first bearish trend line which is just sitting below 100 and 200 SMA’s. In short, there are several hurdles on the way up for the pair as it approaches major risk events.

NZ Financial Stability Report

New Zealand Financial Stability Report will be released by Reserve Bank of New Zealand during the upcoming Asian session. It would be interesting to see what the central bank has to say about the soundness and efficiency of the New Zealand financial system. Any negative remarks to weigh on NZDUSD moving ahead”.

(Source: Capital Trust Markets)

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USD/JPY Breaks resistance – new target 117.50

 

Capital Trust Markets reports “market participants are showing renewed interest in selling JPY across the board, with USD/JPY already priced above a major resistance level.

Technical Analysis

USDJPY11thNovember

Late last week, USD/JPY showed several weakness signals post-NFP, forming a double top reversal pattern over the course of two days. This weakness was followed by a moderate drop down to 113.82, approximately 170 pips from top to bottom; as a result we cannot complain that pattern didn’t pan out as planned, at least in intraday trading.

Since the 10th/11 U.S. trading session, however, buying momentum began building again at a steady pace, lifting USD/JPY up to last week’s resistance and ultimately above. Spot is currently trading around 115.60, as the pair is about the re-test 115.50 from above. If this level holds and USD/JPY continues to trade above resistance, traders will focus on 117.50/60 next, a price pivot level dating back to 2007, which could also be an intermediary target on the way towards 120.00 in the long term.

Stochastic is warning of extreme overbought conditions on all major timeframes, but with no price action signs confirming a correction and while the Higher Highs & Higher Lows swing configuration holds, buying dips and resistance breakouts remains the preferred strategy”.

(Source: Capital Trust Markets)

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Australian house price data set for release Monday evening

 

A few hours after the markets close in the US on Monday, the latest house price index and NAB business confidence data will come out of Australia.

Capital Trust Markets reports “both releases are effective headliners, and a surprise in either could catalyze considerable volatility in the value of the Australian dollar versus its major counterparts. However, at present, the house price index is likely to have the most impact. Why? Because the property sector is considered fundamentally overvalued at present in Australia, and markets are looking for signs that either a – that this overvaluation is justified or b – that there is enough retail and consumer demands to support it. With this in mind, what are the levels to keep an eye on as we head into the release, and how can we profit from anything unexpected on either side of the consensus forecast? Here is what you need to know.

So, what’s going on in Australia at present? Well, there are two sides to the coin. The Chinese economy has cooled considerably this year, which has translated to a decline in mining sector output in Australia. This – in turn – has led to a decrease in employment across the sector – which accounts for a large proportion of Australian GDP. In response, the Australian government has held interest rates at record lows in order to boost the property market and shift some of the nation’s reliance on mining towards this sector. It worked, and now house prices are at levels that some call a bubble. However, other areas of the Australian economy are not as advanced as the real estate market. Employment is relatively low, and some are suggesting that a large shift of baby boomers towards retirement could put further pressure on Australia’s ability to maintain sustainable growth. For this reason, markets will be looking for strong housing data to suggest that the property sector can maintain its buoyancy while the rest of the economy catches up. If it doesn’t, and we see a sharp decline in house prices amid a relatively unstable fundamental economy, we could see some serious weakness in the Australian dollar. So what are the levels to keep an eye on? Take a look at the chart below.

AUDUSD

As is so often the case in the markets, the levels we have been watching for a few weeks remain the relevant levels in the AUD USD as we head into the upcoming release. 0.8595 and 0.8761 of levels to keep an eye on. Consensus forecasts the house price index figure to show a 1.6% increase in prices – a small decline on the previous release of 1.8%. If we get anything above this, despite the fact that it would maintain that house prices are growing unsustainably, markets will likely see this as a positive thing for the Australian dollar. With this in mind, look for anything above 1.6% to validate aforementioned in term resistance as an initial upside target, with October highs at 0.8910 the level to watch if we get a close above resistance. Conversely, weak data would bring 0.8595 into play, with a break below this level validating 0.8552 medium-term”.

(Source: Capital Trust Markets)

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Outlook for AUD/USD exchange rate – CBA

 

CBA forecast AUDUSD to fall over the next 12 months, they reason -

  • „ Strong demand for the USD vis-à-vis the JPY and EUR will continue to lower AUD/USD. AUD cannot remain immune.
  • „ However, Australia’s terms of trade are also falling as commodity prices, particularly the iron ore price, declines.
  • „ Australia’s two-year bond yield is below the RBA’s cash rate and the Australia-US two-year bond spread is narrowing.
  • „ A firmer USD, declining commodity prices and narrowing Australia-US yield spreads will further guide AUD/USD lower.
  • „ While the Australian trade-weighted index is holding up much better, it too risks edging lower on the above factors.
  • „ Our forecast for AUD/USD depreciation next year is occurring earlier than anticipated. The USD is not correcting lower.

 

Our current AUD/USD forecasts are tabled below. They have the AUD declining to 0.8500 in September 2015. While the AUD typically undertakes a 20.5% annual trading range (it has averaged this every year since the currency floated in December 1983), the forecasts provide guidance of the likely medium-term direction. We are forecasting the AUD lower. But the speed of the decline has been aided by the current USD bid in the market vis-à-vis the JPY and EUR. The rapidly declining Australian terms of trade and the downward pressure on the Aus-US interest rate spreads have only added to the depreciation pressure on the AUD being brought forward”.

cba aud nov 14

(Source: CBA)

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Silver 8-year pivot $14.60 could offer support for bounce

 

Capital Trust Markets reports “the US Dollar rose again against a basket of currencies on Wednesday, increasing bearish pressure on Gold and Silver. This slide lower is expected to continue for a few more days.

Technical Analysis

Silver5thNovember

Silver has experienced an incredibly fast and aggressive sell-off since early July this year. Price is showing no signs of stopping or correcting higher, despite shedding nearly 29% of its value during this period, down from $21.56 to current Spot price at $15.40.

Despite slowing down to a halt throughout October, Silver kept a very bearish profile, unable to correct higher on inexistent buying pressure. Sell-off resumed on 30th October, with price quickly tumbling $16.66 and ultimately exceeding our forecast at $16.00. Lacking any bullish bounces, Silver appears to be heading straight to $14.60, where we can identify a huge support level also acting as a pivot zone. A temporary bounce, possibly even a medium-term recovery, should be expected starting from this support area.

Stochastic is located in extremely oversold territory on Daily, Weekly and Monthly timeframes. That being said, traders should remain patient before loading up on long positions, since there are no price action confirmations for a bottom”.

(Source: Capital Trust Markets)

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AUDNZD sellers looking to break 1.1200

 

Following two failures to overcome the resistance at 1.1300, Capital Trust Markets reports “traders have now turned their attention towards the support at 1.1200.

Technical Analysis

While recent price action indicated a strong bullish momentum buildup for AUD/NZD, the pair has been trading within a very large range since late July, with significant boundaries located at 1.1300 (resistance) and 1.0925 (support). Spot is currently trading around 1.1225, down for a second consecutive day. Sellers will most likely take another shot at 1.1200 tonight, with a successful break potentially paving the road for more losses.

AUDNZD4thNovember

A dip below 1.2000 will invalidate last week’s Higher Low and a four day range, triggering a cluster of stop losses accumulated from long positions. This should push AUD/NZD lower, at a minimum down to 1.1100/37 (large price pivot area strengthened by 200 Simple Moving Average on 4H and 50-Day SMA). Stochastic is turning lower from overbought territory on Daily, confirming a potential top followed by a correction lower. Even lower and traders will set their targets on 1.1000 support trendline and potentially a large crossroad for the long-term technical landscape.

Based on the rejection off the resistance at 1.1300, the uptrend will only be reactivated on a clean break and daily close above this level”.

(Source: Capital Trust Markets)

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USDCAD buyers looking for more gains

 

Capital Trust Markets reports “USD/CAD uptrend continues to accelerate despite a ballooning U.S. trade deficit, underlining investors’ confidence in the greenback.

Technical Analysis

A fresh Higher High is being pursued by USD/CAD bulls now that price has successfully rallied above 15thOctober high at 1.1384. Only last week price broke above the resistance of a bearish channel (temporary consolidation in the shape of flag pattern on Daily timeframe), and in less than three days the pair has successfully recovered all losses from previous weeks. This solidifies the uptrend configuration while paving the way for more gains in the near future.

USDCAD4thNovember

Spot is currently trading at 1.1405, stabilizing above last month’s resistance. Although buying pressure is showing no signs of decreasing, overbought conditions are likely to take their toll soon. We expect rallies to continue towards 1.4160/70, with a possible dip soon afterwards in order to re-test 1.1382 and confirm this level as support.

Long term targets towards the upside include 1.1600, currently the resistance of a bullish channel dating back to 2012, with an even larger target at 1.1750, where a multi-year price pivot zone should be the ultimate target for long-term buyers”.

(Source: Capital Trust Markets)

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Credit Agricole client FX flow

 

Credit Agricole report “significant THB buying.

Looking at consolidated net flows, our weekly snapshot of flow z-score ranking shows the largest three net client purchases were CZK(1.42), NZD(1.86) and THB(1.91) while the largest three net client sales were SEK(-0.73), HUF(-1.12) and CHF(-1.63).

In terms of their consolidated 4-week z-score position ranking, the largest three client long positions were MXN(0.99), NZD(1.08) and ILS(1.48) while the largest three short positions by z-score were CHF(-0.65), HUF(-1.63) and SEK(-1.66).

In terms of latest client shifts in core currency positioning as a percentage of volume, EUR longs rose (3%), JPY longs rose (18%) and USD shorts fell (-6%), while their recent trends (as measured by their 4-week change) show EUR longs rose (2%), JPY shorts rose (3%) and USD longs fell (-2%) during the past four weeks”.

(Source: Credit Agricole)

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OCBC Bank on the week ahead for forex markets

 

OCBC Bank on the week ahead report “friday turned out to be a perfect storm for the markets as a confluence of
headlines drove the dollar higher and JPY weaker across the board. The BOJ’s surprise (earlier than expected) easing on Friday shocked the markets into action with the JPY slumping across the board while the dollar (already bolstered by the FOMC earlier in the week) also gained broadly against its peers in the wake of the better than expected 3Q ECI, October Chicago PMI, and October U of Michigan consumer confidence print outs.

Although chatter had been circulating in previous days, the GPIF announcement also exacerbated JPY weakness on Friday. On other fronts, the EUR found little support after the disappointing German September retail sales while weakness in the CAD was also compounded following the weaker than expected GDP readings for August.

Over the weekend, China’s official October manufacturing PMI disappointed with a 50.8 reading, down from 51.1 the previous month. Note that the antipodeans have gapped lower late Sunday/early Monday in Asia compared to late Friday in NY. At its latest MPC, the Bank of Japan on Friday sprang a (largely) surprise move by increasing its annual monetary base expansion to JPY80tn from JPY70tn. Note that the central bank today also reduced its core CPI forecasts for the current and next fiscal year while noting “substantial downside risks” to the forecasts. At the press conference, BOJ governor Kuroda’s subsequent comments were also decidedly dovish, noting that monetary policy was not aimed at currencies and that the weak yen so far has been net positive for the economy. In a week when the Fed has terminated its taper, the BOJ’s latest move only heightens the policy dichotomy between the two central banks.

This week, the excitement may not let up with the swath of global PMIs due at the beginning of the week including US Oct ISM and the HSBC Oct China manufacturing and non-manufacturing PMIs today) and the stream of global services PMIs mid-week. In addition, if central bank commentary this week continues to run on a tangent with the Fed’s, expect the USD to derive further traction ahead of the US nonfarm numbers on Friday (mkts: +231k).

On this front, look to the RBA policy meeting on Tuesday and the BOE/ECB on Thursday for potential event risks. Note that all eyes are now on the ECB after the BOJ’s latest gambit last Friday”.

(Source: OCBC Bank)

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EURCHF to get pushed lower

 

SwissQuote report the “EURCHF continues to grind lower, increasing the speculation that it’s only a matter of time till the SNB will have to step-up and defend the EURCHF “floor”. On the fundamental front, given the erosion in European economic data it’s increasingly likely that the ECB will engage in some type of policy that will debase the EUR (potentially expanding the banks’ balance sheet by as much as €1 trillion). The recovery of Swiss KoF leading
indicator to 99.8 from 99.1 indicates that pace of economic cooling remains mild. Finally, despite the FOMC ending QE, guidance indicates that the zero interest rate policy would remain “for a considerable time”,
meaning the upward moment in USD should taper. Overall, it’s unlikely that strength in USD will outweigh weakness in the EUR hence creating demand pressure on the CHF (pushing EURCHF to 1.20).

Domestic Savers holding CHF
While safe-haven flows have eased according to SNB data, the CHF remains in uncomfortable high demand. With strong domestic demand keeping the CHF elevated vs EUR, the SNB will have a difficult time protecting EURCHF floor with any other tool except direct FX intervention. Negative interest rates, the most likely second response to any threat against the minimal exchange rate, becomes politically difficult when directed against domestic savers and when not targeted at foreign speculators. Changing domestic investor’s liquidity choice is a significantly problematic proposition. Particularly when global yields provide little natural incentive to lure investors out of the relative safety of CHF. In addition, we don’t know in the context of global low yields how effective driven rates negative would actually be, but perhaps would only drive domestic investors into an already white hot real estate market. Options available to the SNB are becoming scarcer and the reality of a collision between the market and the SNB is growing. Watch for EURCHF to head lower”.

swissquote eurchf nov14

(Source: SwissQuote)

Forex Chart

Swiss PMI out Monday morning

 

Shortly before the markets open in the US on Monday, we will get the latest SVME PMI data out of Switzerland.

Capital Trust Markets reports “after the release of the KOF economic indicator yesterday, it looks as though the Swiss economy is set to remain relatively stable over the coming quarters and as we head into early 2015. However, the situation in the wider Eurozone cannot be ignored, and some leading analysts suggest that the stable outlook is flawed and that Switzerland cannot insulate itself entirely from the ongoing turmoil that surrounds it. Which of these biases is likely to play out, and what are the implications for the Swiss franc in either scenario? Markets will be looking to the upcoming release in order to gain insight into these questions, and this scrutiny could offer up considerable volatility in the value of the Swiss franc versus its major counterparts if we get anything unexpected from the release. So, what does consensus forecast the data at, and what are the levels to keep an eye on as we head into Monday morning? Let’s take a look.

First, let’s take a quick look at the Swiss economy. The aforementioned KOF economic indicator release showed the index rising 0.5 points during October to 99.8, beating expectations of 97.7. The release puts the indicator just shy of its long-term average, and offers up the suggestion that the Swiss economy is likely to expand moderately throughout the last few months of this year. However, Eurozone demand accounts for more than 50% of total Swiss exports, and if – as expected – Eurozone economies contract, this demand could weaken quickly. Weakening demand could put pressure on Swiss GDP – and in turn – its currency. So what are the levels to keep an eye on? Take a look at the chart below.

swissy

As the chart shows, the Swiss franc lost strength versus its US counterpart throughout yesterday’s session and early today’s – primarily as a result of strong data out of the US. This strength puts in term support at 0.9542 and resistance at 0.9620 as the levels to keep an eye on. Trading above the 200 period SMA, the initial technical bias is to the upside, but this could change if we get a strong release out of Switzerland on Monday. Consensus forecasts the release at 51.5, so look for anything above this to catalyze a return to the bearish momentum in the USD CHF, with aforementioned in term support an initial downside target. Conversely, if we get weak data look for a run towards 0.9620 – with a close above this level validating 0.9683 longer-term”.

(Source: Capital Trust Markets)