Forextime.com Daily Market Analysis

Fed outlook turns hawkish




The US economy was thrown back into the spotlight today as the FOMC minutes were released and the dovish FED of the past certainly looked a thing of the past, with some of the most upbeat and hawkish minutes that have been seen in a long time. Almost all of the officials present in the meeting expected that with Trumps appointment growth was expected to pick up in line with his expansionary policies. One thing that also stood out was the FED's own expectation around inflation with expectations that it will increase to the magic 2% mark in the medium term, and the recent lift in quarterly inflation was further credit to this theory. Regardless of the trump effect the FED looks to be singing the same tune as the market and that can only be positive for the bulls in the short term. The real question will be around what Trump can actually do with congress in order to get the US economy moving again and the economy expanding further - even when it's almost at full capacity when it comes to employment.

Regardless of how you viewed the FOMC minutes, the recent economic data out of the US has been positive with the construction spending m/m lifting to 0.9% (0.5% exp) and ISM manufacturing PMI also lifting to 54.7 (53.8 exp). All of this has boded well for traders and the markets have responded accordingly with the S&P 500 lifting back up to a strong level of resistance in anticipation of tomorrows economic data due out on the employment sector and the services sector as well. Even with resistance currently sitting at 2272 the expectation of further highs is fresh on traders' minds and they will be looking to push the boundaries further in the current climate. A push upwards to 2300 is very much on the cards if the market sees further positive US economic data tomorrow.

One thing that is also worth watching out for in tomorrow's trading is oil markets, previously they have been moving quite rapidly in the low volume trading and volatility is certainly ever traders friend. The recent build up in private storage showed that perhaps oil markets still needed a little more time to correct and we saw prices fall accordingly down to the 20 day moving average before finding dynamic support. Expectations are for a decline in overall oil inventories, but after the recent private reading the market may have altered its expectations.

Technically speaking though oil is looking very strong with resistance sitting tight at 54.46, to get past this level we would need to see a large drawdown in crude oil inventories, and this may be a bit of an ask just after Christmas. Any further falls are also likely to struggle past the 20 day moving average, and even more so the 50 day moving average which is acting as dynamic support for market movements at present.


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By Alex Gurr, Guest Analyst

Forextime.com Daily Market Analysis

BoJ holds fire, brightens economic outlook




As widely anticipated the Bank of Japan did not surprise markets by keeping monetary policy unchanged at its final meeting for 2016. The central bank left interest rates unchanged at -0.1% and 10-year JGB’s yield target around zero, while maintain its annual holding of bonds at 80 trillion yen.

The 12% decline in the Yen and 13% surge in crude prices since BoJ last met on November 1, helped in providing a brighter economic outlook as exports and output picked up.

But the extreme divergence of U.S. monetary policy was considered a risk, as series of expected rate hikes in 2017 could see capital flight from emerging economies.

USDJPY rose 0.5% as bond yield spreads between U.S. and Japan are not expected to shrink anytime soon, but we can assume that BoJ’s next step likely to be tightening rather than easing further.

2016 is ending with tragic incidents in Turkey and Germany, but investors have become so fast in digesting bad news, and this explains the resilience in financial markets.

The U.S. dollar is trading in narrow ranges against most of its major peers after Monday’s rally which was supported by Yellen’s public speech in Baltimore University. Although she did not comment on Monetary policy, her views that job market is strong and wage growth picking up was sufficient to provide the greenback a boost.

With only nine trading days remaining till end of year, investors are unlikely to take heavy positions, whether it’s in equity, fixed income or foreign exchange markets, suggesting that the narrow range trading is likely to remain until new year.


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By Hussein Sayed, Chief Market Strategist (Gulf & MENA)

Forextime.com Daily Market Analysis

Chinese data set to move AUD & NZD



It's been a slow start to the global calendar today as the markets were relatively quiet from an economic data perspective but there was some slight selling of the USD across the major pairs which saw the commodity currencies take centre stage. None more so that the NZDUSD which had its housing data report come back showing housing sales down -6.0% (-14.2% prev), while visitor arrivals were also up 2%. This bodes somewhat well for the current state of the NZ economy which has also seen some political change in the last few weeks, and as the economy looks to pick up in the wake of the recent earthquake. But, it's not all doom and gloom over that side of the world and the NZD continues to be a strong currency in the wake of it all, even as the RBNZ made comments last week that the time for the NZD was now to fall.

The NZDUSD has not fallen, in fact today it rallied strongly on the back of USD selling to touch a strong level of resistance at 0.7180 before pausing and failing to maintain any further momentum. The net level above at 0.7222 is looking all the more cautious, but at present further USD selling could propel the kiwi much higher at this rate. Support levels are also keenly watched and none more so than 0.7113, which has held up any further movements lower. Just below this key support level is the 200 day moving average which the NZDUSD has been respecting quite frequently, and I would expect hold back any further bearish movements in the event of a swing lower.

The NZDUSD may have some of the spotlight but it's not hard to look past the AUD as well as Chinese data is due out shortly in the day and as usual it will have a large impact. Traders will be sharply focused around the Industrial Production reading at present, but also the Australian data due out on business confidence with expectations low for a strong reading given the recent turmoil that Australia has endured from an economic perspective.

On the charts the AUDUSD continues to be a mixed bag and looks very similar to the NZDUSD when it comes to patterns. So far resistance around 0.7490 has been quite strong and the market is looking for further direction from the economic events from today before looking to move either higher or lower. I would expect the 100 and 50 day moving average may look to slow traders who are quite bullish, but it's no guarantee when it comes to such important economic data. The 20 day moving average has thus far managed to act as dynamic support I would expect that to remain the case as the USD weakness continues in the marketplace. However, overall the bullish trend is pointing upwards and it may be a matter of time before the AUD looks to take charge again against the USD bulls.


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[B]By Alex Gurr, Guest Analyst[/B]

Forextime.com Daily Market Analysis

Japanese data sets the tone for week



There has been no major moves economically speaking in the market, but there is plenty on the horizon and markets will shortly be focused on data out of Japan with household spending likely to be the main focus. Japan's ability to spend has been sharply in the microscope under Abenomics as he tries to break the culture of saving and push Japanese to be more consumer friendly with their cash to boost GDP but also to help increase tax revenue. It's likely that the market will be looking for weaker numbers here and expecting the market to rally further against the Yen, which has recently clawed back some ground against the USD.

Technically speaking the USDJPY ran out of steam at resistance at 114, as the market started to unwind some of its positions to take profit. Since then we have also seen it push down to support at 111.843 before failing to find any further legs for the bears, this is a bullish signal for the most part and the market may look to restart further moves higher as a result. If we did see further drops I would expect the 20 day moving average to finally play catch up and act as dynamic support for the USDJPY. Expectations around the bulls breaking higher will find the next level of resistance at 116.591.

On Thursday I spoke about the Canadian dollar and it continues to struggle to find any ground other than through the current OPEC meetings. There is however a number of Canadian economic events on the horizon which will have some impact, and I am expecting this to flow onto the market. It will be hard to beat the current USD strength though without some sort of major data boost or an OPEC deal (a struggle at this time). Certainly with the Trump dollar in full force and markets looking forward not backwards the USDCAD could certainly still remain in the territory of the bulls for the time being.

The obvious correlation between oil and the CAD has so far helped it not further erode anymore ground to the USD and support at 1.3402 continues to be a major level which has prevented further drops on the charts. One thing that is worth noticing is the 50 day moving average which is creeping up the charts and looking very imposing as a possible catalyst for dynamic support, after future touches on the daily chart were met with strong buying. In the even the bulls do manage to regain control the market is likely to jump back up to 1.3542, but with the USDCAD long term horizons always need to be careful as the pair is known to range.



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By Alex Gurr, Guest Analyst

Forextime.com Daily Market Analysis

Markets consolidate as Trump reality sinks in




Global stocks were noticeable mixed during trading on Monday as bullish investors took a break from the Trump fueled market rally. Asian shares casually floated between losses and gains, pressured by a resurgent Dollar and rising US rate hike expectations that could spark further outflows from emerging markets. European stocks were contaminated by the lack of direction in Asia with the absence of momentum potentially trickling into Wall Street later today. It is becoming clear that market participants have digested the Trump reality with most waiting for further news relating to Trump's economic team which could provide additional clarity on how he plans to lead the U.S economy.

Dollar bulls unstoppable

The market shaking Dollar appreciation has highlighted how the combination of Trump’s presidential triumph and heightened hopes of a US rate hike in December can provide the foundation needed for bulls to attack incessantly. Sentiment towards the Dollar is extremely bullish and the optimism towards Donald Trump’s presidency bolstering US economic growth has ensured the greenback remains buoyed. With economic data in the States repeatedly pointing to economic stability and Fed officials all singing a similar hawkish chorus, the Dollar has become a buyers dream. Much attention may be directed towards Wednesday’s FOMC meeting minutes which could provide the final piece of clarity needed to cement expectations of a US rate increase in December.

From a technical standpoint, the Dollar Index is bullish on the daily timeframe as there have been consistently higher highs and higher lows. Previous resistance around 100.50 could transform into a solid support which could provide bulls encouragement to send prices back towards 102.00.

Sterling bears here to stay

The ongoing Brexit episode may have irritated traders with the battle of words between financial heavyweights on how to handle the hard Brexit scenario adding to the nasty cocktail of uncertainty. Sterling remains heavily weighed down by this anchor known as Brexit with steeper declines expected if buying sentiment towards the currency continues to deteriorate. With expectations rising over the Fed raising US rates in December, the bearish combination of Sterling weakness and Dollar strength could spark a sharp decline on the GBPUSD. The weekly close below 1.240 on the GBPUSD may have sealed the deal for bears to drag prices lower towards 1.220.



WTI commences the week positively

WTI Crude staged a miraculous rebound during trading on Monday with prices rallying to $47 as expectations were revived over OPEC members securing a freeze deal at the November 30th formal meeting. Comments from Iran’s oil ministers and Russian President Vladimir Putin on their optimism of OPEC agreeing to a proposed supply cut coupled with the Trump effect has renewed some investor attraction towards oil. While the abrupt short-term gains are undeniably impressive, WTI still remains dogged by the overwhelming oversupply woes. The current technical bounce could act as an opportunity for sellers to pounce if OPEC repeats the events of Doha at the formal November meeting.

Currency spotlight – EURUSD

The EURUSD descended deeper into the abyss last week with prices closing below 1.060 as a dovish Draghi coupled with concerns revolving around political instability in Europe swiftly haunted investor attraction towards the Euro. Expectations remain elevated over the ECB extending its monetary policy amid the uncertainty while a strengthening Dollar from rising US rate hike expectations continues to enforce downside pressures on the EURUSD. Mario Draghi is due to testify before the European Parliament in Strasbourg today with any further dovish hints potentially leaving the Euro vulnerable to further losses. From a technical standpoint, the EURUSD is heavily bearish on the daily timeframe as there have been consistently lower lows and lower highs. Previous support around 1.075 could transform into a dynamic resistance which could re-open a path back below 1.060.





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By Lukman Otunuga, Research Analyst

Forextime.com Daily Market Analysis

Emerging market currency sell-off accelerates




The emerging market currency sell-off has accelerated throughout trading in Asia on Friday, including the Indonesian Rupiah sinking to levels that prompted the Bank Indonesia (BI) to intervene and stabilise the market. While the Indonesian Rupiah has so far led the headlines after a plunge in currency value, the Malaysian Ringgit has also suffered from an extreme round of weakness and the offshore Chinese Yuan looks set to continue its course of hitting further historic lows against the Dollar.

While the declines seen in Asian currencies are being linked to the impact of trade throughout the continent if Donald Trump enforces protectionist trade policies, the return of expectations that the Federal Reserve will still raise US interest rates in December is strengthening the Dollar and also pressuring the emerging market currencies. If the Federal Reserve do not raise US interest rates in December as they have been preparing the markets towards for months following such a spectacular rebound in stocks after the victory by Trump, it will raise questions over credibility and concerns that they are worried about Donald Trump taking over office in January.

There is also a prolonged threat to emerging market currencies that once Donald Trump completes his inauguration early next year that he will publically encourage higher US interest rates during the course of his presidential term. While the Federal Reserve is independent to any political party or government, the expectations that Trump will encourage faster monetary policy normalization is a real threat to the emerging markets.

Overall the combination between the initial response that fiscal stimulus encouraged by Trump should provide a boost to the US economy and also encourage increased interest rates in the United States should in theory result in projections that the Dollar Index could break the psychological level at 100.



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By Jameel Ahmad, VP of Corporate Development & Chief Market Analyst

Forextime.com Daily Market Analysis

Markets bounce as investors accept Trump reality



Global stocks staged an awe-inspiring rebound during late trading on Wednesday as investors came to terms with the shocking Trump presidential victory. Asian shares rallied in the early sessions of Thursday with the Nikkei lurching close to 7% as participants re-evaluated the global impacts of Donald Trump’s severely mispriced election win. European markets may receive a welcome boost from Asia’s bullish momentum and the positive domino effect could support Wall Street later today. Although the short-term gains in stocks are impressive, investors should keep diligent especially when markets have been infected by jitters. Stocks remain depressed in the medium term with steeper declines expected as uncertainty grips risk sentiment.

Dollar bulls relentless…

The Dollar appreciated with aggression on Wednesday afternoon following Donald Trump’s presidential speech which effectively eased some concerns over his economic policies. Pledges of massive U.S fiscal spending have heightened expectations of Trump implementing fiscal stimulus measures, including tax cuts which may bolster profit growth consequently boosting inflation. Dollars resurgence was also complimented by the renewed speculations of the Federal Reserve raising US interest rates in December that encouraged buyers to attack. This week’s aggressive Dollar rebound may be fully Trump driven with more time needed for the Greenback to find some normality.

Some attention may be directed towards Thursday’s unemployment claims report which may reinforce some expectations of a December rate increase if unemployment claims recede.

WTI bears eye $44.00

WTI Oil lurched towards $45.92 during late trading on Wednesday as markets embraced the Trump reality. This feeling was short lived on Thursday when prices sunk back towards $45 following the ongoing oversupply fears that haunted investor attraction. Oil continues to be dogged by persistent oversupply concerns while fears over slowing global growth have sparked discussions of a potential decline in demand. This terrible combination of oversupply anxieties and tepid demand concerns may be the ingredients needed for sellers to send WTI back below $40. Investors have clearly maintained a cautious stance ahead of the November 30th pending OPEC meeting with expectations periodically diminishing over a successful freeze deal. From a technical standpoint bears need to conquer $44 for a further decline towards $43.

Currency spotlight – EURUSD

The EURUSD was explosively volatile on Wednesday with prices whipsawing within a near 400 pip trading range and the culprit was a chaotic Dollar. With the Greenback potentially strengthening further amid renewed US rate hike expectations, the EURUSD could be exposed to steeper losses as bears install repeated rounds of selling. From a technical standpoint, prices have turned extremely bearish on the daily timeframe as the candlesticks are trading below both the 20 and 200 SMA. A decisive breakdown below 1.0900 could encourage a further selloff towards 1.0850 and potentially lower.


[img]http://www.forextime.com/images/maa/eurusddaily_79.png?itok=7aL9-PUt[/img]


Commodity spotlight – Gold

The erratic movements Gold dished out on Wednesday was out of character with most investors left bewildered as the precious metal surged over $60 before crashing back down. Risk aversion amid the uncertainty should clearly support Gold but market sensitivity continues to direct investors to riskier assets consequently leaving the zero-yielding metal vulnerable to losses. Gold may maintain ground in the new trading week as participants reassess the conditions of the global financial landscape. From a technical standpoint, bulls must break back above $1285 for a further incline towards $1308.





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By Lukman Otunuga, Research Analyst

FXTM Daily Market Analysis

Trump triumph sparks global selloff



Risk aversion swept across the financial markets during early trading on Wednesday after the unexpected Trump presidential victory soured investor risk appetite. Global sentiment was dealt a frightening blow with most major stocks sold off savagely as uncertainty repelled investors from riskier assets. The polls pointing to a Clinton victory were completely wrong, consequently catching participants off guard and this may come at a heavy price moving forward. With risk-off sentiment amid the Trump victory becoming a dominant theme across the board, stock markets could be left depressed for prolonged periods.

The S&P 500 futures have already slumped by as much as 5% following Trump's victory with the bearish contagion dragging European stocks 2% lower on Wednesday. Wall Street may be contaminated by the negativity with further declines expected in the coming days as the toxic combination of uncertainty and sliding oil prices provide a foundation for bears to install repeated rounds of selling. There is a strong possibility that today’s presidential results spark a fresh era of risk aversion with investors turning to safe-haven assets for protection against the pending chaos.

What a Trump victory means…

Uncertainty and Donald Trump seem to have a symbiotic relationship and this continues to weigh heavily on global sentiment. Concerns remain elevated over Trump potentially triggering a global and political disruption in a fragile financial landscape that is already entangled in a losing battle with investor anxiety. The persistent threats from Trump to discard major trade agreements have kept participants on edge, while his anti-Mexico rhetoric continues to pressure both the Peso and Mexican economy. Emerging markets may be in store for a nasty surprise moving forward as risk-off encourages another brutal selloff. Many questions remain unanswered in this sensitive period of uncertainty with more explosive movements expected as markets attempt to digest the Trump reality.

Dollar bears rampage

The Dollar experienced heavy losses during early trading on Wednesday with the Dollar Index sinking to the lows of 95.91 following the unexpected Trump presidential victory. Dollar weakness may be a recurrent theme moving forward as the awful combination of uncertainty and heightened concerns over the future of the US economy entices sellers to attack incessantly. In the aftermath of Trump’s victory, expectations have already diminished over the Federal Reserve raising US interest rates in December with the current odds below 50% which should pressure prices further. Despite the sharp rebound, which has taken the Dollar Index back towards 97.65 as of writing, bears remain in control with the Index sinking towards 96.00 as speculators reduce bets on a US rate hike.

Sterling scheduled for further declines

Sterling bulls received false encouragement on Wednesday with the GBPUSD lurching towards 1.2545 on the back of Dollar weakness. This technical correction simply provided a fresh opportunity for bears to install repeated rounds of selling on a currency that is heavily poisoned by hard Brexit fears. Previous talks of the high court announcing that the Brexit cannot proceed without the vote to Parliament did little to keep Sterling buoyed with further losses expected as investors come to term with the Brexit reality. The GBPUSD could be poised for steeper declines once bears conquer the 1.2350 support. From a technical standpoint, a breakdown below 1.2350 could open a path towards 1.2200.

WTI pressured by risk-off

WTI Oil fell below $44 on Wednesday as Donald Trump’s unexpected victory in the U.S presidential election sparked a wave of risk aversion. Oil prices were already pressured by the fading expectations towards OPEC securing a freeze deal in November’s meeting with this period of risk-off ensuring the commodity remains depressed. The amalgamation of oversupply woes and mounting concerns over demand diminishing amid slowing global growth could guide WTI crude back below $43. Some attention may be directed towards the pending crude oil inventories report which could send oil lower if there is a buildup in inventories.

Commodity spotlight – Gold

Gold surged with ferocity on Wednesday as Trump’s victory triggered risk aversion which encouraged investors to frantically pile into safe-haven assets. Markets have been flooded with renewed uncertainty consequently bolstering Gold’s allure. Dollar’s weakness amid dimming US rate hike expectations always played a key part which saw Gold prices clipping the highs of $1337. Buyers could be back in town with further gains expected as the mixture of Dollar weakness and uncertainty attracts investors to safe haven assets. From a technical standpoint, Gold is bullish on the daily timeframe as there have been consistently higher highs and higher lows. A breakout and decisive close above $1308 could encourage a further incline towards $1320.


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By Lukman Otunuga, Research Analyst