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Old 09-17-13, 02:47 AM
Akriti Akriti is offline
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Default Re: Daily Market Overview by IFC Markets

US Dollar Moves Currency Market Ahead of Fed’s Decision

The US dollar index drew support line at 80.94 and bounced up to 81.32 as investors focus on FOMC meeting, expecting some asset tapering of the $85B bond buying program. In addition to that traders were collecting profits by covering short positions. We will be busy today with economic announcements but we would be cautious in our trading ahead of the Fed’s monetary policy announcement tomorrow. Therefore we expect the greenback to remain in sideways until tomorrow evening between 81.32/80.94 recently created range.

The Reserve Bank of Australia released earlier on Tuesday its September 3 meeting minutes stating that the possibility of reducing rates further is not eliminated but also a reduction is not imminent. Moreover the Central Bank considers that the exchange rate is still high and should move lower accompanying current low key rate could provide a greater degree of stimulus to the economy. The Australian dollar found resistance at 0.9385 against the greenback and dropped to 0.9284 after the RBA release of minutes but recent US dollar weakness drove the pair slightly up, it was lastly seen at 0.9319.

The USDJPY found support yesterday at 98.63 and earlier today was capped by 99.35, retreating to 99.00. The USDCAD moved in a similar way, upside barrier at 1.0332 weighed on the pair that is currently fluctuating at 1.0323. For a second consecutive day we see mainly that the US dollar is making the moves in the currency market, thus crosses continue their consolidation. We consider that the US dollar in the longer term will be underpinned as the Fed would start asset tapering.

Looking ahead, investors are monitoring on Tuesday UK CPI figures, Euro Zone ZEW Economic Confidence indicator and US inflation reading. However response to todays’ release would be mild as traders and other market participants are highly anticipating tomorrow FOMC Statement and Projections.
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Old 09-18-13, 06:55 AM
Akriti Akriti is offline
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Default Re: Daily Market Overview by IFC Markets

All Eyes on FOMC Statement and Projections

The US dollar index remains steady in 81.19/81.07 tight range ahead of the release of the two-day FOMC policy meeting outcome. It is generally expected that the Fed would start reducing its $85B program. Market consensus is that the Fed most likely will cut down purchases of the long-term Treasury securities from $45B to $35B and MBS purchases program could be tapered by $5B, falling from $40B to $35. Thus we are expecting a $10B-$15B reduction today to be announced by the Fed alongside with FOMC projections.

As you can notice on Fundamental Analysis table, US Unemployment Rate dropped from 8.1% in August 2012, just before starting MBS purchases at $40B pace per month, to 7.3% in August 2013. Indicating that the accommodative policy succeeded in increasing employment and thus economists consider that continuation would destabilize financial markets. However, recent figure on Employment has been disappointing together with the downward revision of the July employment, as a consequence uncertainty increased over how much the bond buying program would be tapered.

The single currency versus the greenback was also in sideways trading near its recently earned resistance at 1.3381 since it was underpinned yesterday by improved ZEW Economic Confidence indicator. It is likely to remain in 1.3381/1.3321 tight range until FOMS Statement.

The Bank of England is also going to release its minutes of the September 5 meeting which includes the Asset Purchase Facility votes and the key rate votes. Economists’ project is that all 9 members of the committee unanimously voted to hold policy unchanged. The British pound against the US dollar eased to 1.5887 from 8-month peak at 1.5961, weighed by key resistance and amid some profit taking. Traders are reluctant to act before Bernanke’s statement.

Lastly, the USDJPY is also fluctuating in 99.35/99.02 sideways zone looking ahead for Federal Open Market Committee announcement. Even though we have built up a consensus that Fed would modestly scale back quantitative easing we would avoid betting on that since we consider risk taking greater than potential reward.
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Old 09-19-13, 08:06 AM
Akriti Akriti is offline
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Default Re: Daily Market Overview by IFC Markets

Fed Shocks FX Markets Holding Asset Purchases Unchanged at 85B, USDIDX to 7-month Low

The Federal Reserve decided to shake the financial markets by leaving its asset purchase program unchanged in a highly surprising move. As we have previously addressed, surveys from Reuters and Bloomberg was giving more chances to asset tapering. However, FOMC committee said that “decided to await more evidence that progress will be sustained before adjusting the pace of its purchases.” Therefore the US quantitative easing remains steady at $40B purchases of mortgage-backed securities per month and $45B purchases of longer-term treasury securities per month. The interest rate would remain unchanged at 0-0.25% as long as the unemployment rate is more than 6.5% and inflation projections for the next 1-2 years are not more than 2.5%.

Starting from FX markets, we saw yesterday the US dollar losing substantially against its major peers with its index sharply dipping to support at 80.03 from earlier level at 81.15, losing more than 1.3%.



The Euro jumped to a new 7-month high against the US dollar taking advantage of the shocking Fed decision to maintain monetary policy. The EURUSD gained more than 1.5% as penetration of key resistance at 1.3451 triggered more buy orders. The other European currency, the GBPUSD also moved sharply to fresh 8-month high, hovering above key psychological resistance at 1.60 and reaching as high as 1.6161.

Concerning Federal Reserve Projections, the 2013 GDP growth was downgraded to 2.0-2.3% compared to June projection of 2.3-2.6%. Perhaps the decision to hold asset purchases at $85B was to support growth, while inflation is projected to be between 1.1-1.2% in 2013. For 2014 Inflation was downgraded to be between 1.3-1.8% in Sep.18 report compared to 1.4-2.0% in June 19 projections. Lastly, one of the key thresholds for key rates increase, the unemployment rate was projected to be between 7.1-7.3% in 2013 and ranging in 6.4-6.8% in 2014, almost the same compared to June report. Most members of the committee are expecting that the timing of key rate rising would be in 2015, where the highest of projected unemployment rate is at 6.3%, growth estimated to be above 3.0% and inflation approaching its 2.0% target.

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Old 09-20-13, 08:07 AM
Akriti Akriti is offline
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Default Re: Daily Market Overview by IFC Markets

Major Pairs Go into Narrow Trading after Volatile 2-day Sessions

FX markets extend into sideways following an eventful week. Previously we saw the Fed refraining from asset purchases reduction and as consequence US dollar was lost broadly against its major peers on Wednesday US evening session and continued its slide on Thursday as well. Although contrary to other major currencies the Japanese Yen has been under selling pressure yesterday due to risk-on. In addition, a member of BOJ board said that monetary stimulus might expand further since inflation target of 2.0% is still far away.

The USDJPY therefore after drawing a support line at 97.76 started recovering back previous lost ground and rose even higher than before Fed’s announcement achieving resistance at 99.59.



On Thursday evening a series of positive US data was announced and perhaps that was another reason for USDJPY’s upside unexpected performance. US Jobless Claims stood at 309K the previous week up compared to two weeks ago but well below expectations of 331K claims.

Moreover, Existing Home Sales for August was stronger and Philly Fed Manufacturing Index for September was doubled compared to estimations suggesting that demand in US spending, investments and demand is strengthening more than estimated. Thus, in our opinion USDJPY would continue higher and the US dollar index bottomed at 80.03 likely providing a nice buy opportunity for the longer term, with data improvement of course. Fed has reiterated that is data dependent, thus we get closer to asset tapering with every positive surprise.

Now let’s check other major pairs like the EURUSD which is consolidating in 1.3565/1.3506 tight zone after advancing by 1.58% from 1.3353 to top of the last 7-months at 1.3565. On Monday EZ PMI Manufacturing indicators would be released and we are alerted for that. We saw the GBPUSD rising to 8-month cap at 1.6161 but was weighed by sluggish Retail Sales in August retreating to 1.6024. A technical correction is always welcome as it gives the chance for further positioning in the market and indicates a healthy up trend.
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Old 09-23-13, 07:48 AM
Akriti Akriti is offline
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Default Re: Daily Market Overview by IFC Markets

Merkel Goes For Third Term, Euro in Range Due to No Surprises

Following German elections outcome, the Euro did not move much against the US dollar and still remains in 1.3565/1.3506 tight range since the previous week. The currency pair rose just slightly from 1.3520 to 1.3539. Merkel’s Christian Democratic Union (CDU/CSU) won 42% of the votes, winning the majority as expected. Social Democrats (SPD) are second in popularity with 26% of votes while CDU/CSU partners in the previous government Free Democrats secured just 4.7% down from 14.7% four years ago and did not make it into parliament. Now Merkel would need to form a new coalition, analysts expect that the most probable scenario is that the SPD would agree coalition with the CDU/CSU. Should the latter is achieved would rule out any uncertainty and support the common currency.



Less importantly but usually with major impact on financial markets, the Chinese Manufacturing PMI for September stood 51.2, higher than estimated and up from previous month. That supports risk appetite and suggests that China is picking up. As a virtue of that, we saw the Aussie bouncing up from support at 0.9382 to 0.9436 as the Australian raw material exports would be benefited by improving Chinese manufacturing, since China is the biggest Aussie trade partner.

At the same time, asset tapering is still on the table and speculation for the next Fed meeting would start soon again. The US dollar index remains in 80.52/80.26 tight range for the time being ahead of Manufacturing PMI data. The US dollar against the Japanese Yen slipped lower to support at 98.91 and we would expect the USDJPY to move as low as 50.0% of 97.76 to 99.65, at 98.63. Lastly, the sterling versus the greenback seem like it finished its corrective move after worse than expected UK Retail Sales pushed the pair to support at 1.5988 and is now hovering again above 1.60.

To close, market participants are focusing today on European Manufacturing PMIs and in the evening on the US PMI indicators, all are estimated to improve.
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Old 09-24-13, 06:10 AM
Akriti Akriti is offline
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Default Re: Daily Market Overview by IFC Markets

Modest Changes in Currency Markets, Uncertainty over Fed Tapering in October

Currency markets remain mostly steady from yesterday trading with the US dollar still in 80.52/80.26 tight range following FOMC member Dudley speech. Dudley said that two tests need to be passed for the asset purchases tapering to begin, firstly evidence that labor market has shown improvement and secondly “forward momentum” creating confidence that labor market improvement would continue after tapering.

The FOMC member added that even though unemployment rate dropped from 8.1% to 7.3% in the last year that is overstating actually labor improvement, since other indicators are not so optimistic. Concerning “forward momentum” the test is not yet passed because Dudley is not yet confident about growth sustainability due to fiscal uncertainties. Lastly, the independence between asset purchases tapering and interest rates lifting was emphasized once more.

Thus, uncertainty increased in financial markets whether the Fed is going to slow down its bond purchases pace in October, since another FOMC member, Bullard, said on Friday that decision not to start unwinding was a close call. Thus greenback remained steady and the Japanese Yen got weak with the USDJPY bouncing above 99.00. Technically, found support around 50.0% of 97.76 to 99.66, at 98.64 suggesting that corrective move is finished and upside is resuming shifting focus to next resistance at 99.38.



Elsewhere, the Aussie eased against the US dollar after drawing resistance line at 0.9456 with the Australian dollar upside bias losing momentum since there are not any supportive events, thus the pair is dependent on US dollars’ performance. Concerning US data, investors are focusing on Consumer Confidence later today and S&P Case-Schiller HPI. The Euro versus the US dollar did not change much with mixed PMIs yesterday not providing significant support, the pair is currently at 1.3510. Technicals are bullish for the EURUSD since it is fluctuating in a potentially “flag” pattern suggesting that uptrend would continue.

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Old 09-25-13, 08:45 AM
Akriti Akriti is offline
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Default Re: Daily Market Overview by IFC Markets

US Dollar Index Steady Below 80.59, Wary on US Monetary Path and Debt Ceiling

FX currency pairs are mainly moving on news events and central banks releases with the rest of the time doing sideways. Like yesterday when the US dollar rose slightly to resistance at 80.59 on positive Housing sector data and then continuing its range trading below that resistance.

Market participants are uncertain whether the Fed would taper its monthly asset purchases in October meeting after mixed messages from FOMC members, which lead investors to seek safer currencies like the Japanese Yen. In addition, concerns are increasing regarding US debt ceiling as the US policymakers would need to approve a higher debt limit than the current of $16.7B by mid-October. US economy runs the risk of credit-rating downgrade as the Congress delays decision on raising borrowing limit. US equities reflected that risk by closing lower with S&P 500 falling by 0.26% and Dow Jones Industrial Average losing by 0.43%.

Furthermore, NIKKEI 225 was also under selling pressure due to investors being wary over US Government funding and direction of Fed monetary path. The Japanese major index dipped by 0.76% adding selling pressure on the USDJPY that is heading back towards 61.8% of 97.76 to 99.66, at 98.48.

Therefore we have a situation where risk appetite is mildly squeezed, the US dollar in range, USDJPY potentially could go lower, AUDUSD falling and has just breached support at 0.9366. Thus we would consider the AUDJPY could weaken further should the USDJPY also breach its key support at 98.48. At the time being the cross currency pair is down trending suggesting in technical terms is bearish.



Elsewhere, the common currency remains under pressure against the greenback, gradually falling to 1.3464 and remaining in descending flag formation, which technically means that it remains in a bullish pattern.



Looking ahead, market participants are focusing on US Durable Goods orders and US New Home Sales, both are expected to improve compared to previous reading.
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Old 09-26-13, 06:28 AM
Akriti Akriti is offline
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Default Re: Daily Market Overview by IFC Markets

US Dollar Slightly Higher Ahead of Second Quarter Growth Data

The greenback is gaining ground against its major peers on Thursday morning as previously Moody’s said that US economy credit rating would not be affected during talks of increasing Debt ceiling and they expect that eventually lawmakers would approve enhancement of borrowing limit. Thus, fears over another debt ceiling crisis are fading with the US dollar index trading higher early on Thursday, advancing by 0.18%, rising from 80.25 to 80.40. We are slightly cautious today due to risk of second quarter final growth data in the evening projected to be at 2.7% mildly higher than previous reading at 2.5%.

In Asian trading on Thursday the Euro versus the greenback eased from resistance at 1.3536 to support at 1.3510, perhaps as investors were collecting profits from yesterday upside following upbeat German Consumer Confidence indicator. In addition, the EURUSD was fading due to greenback getting stronger, although in technical terms the pair in the medium term remains bullish and could revisit 7-month highs at 1.3568.

The British pound surged by 0.75% to 1.6087 against the US dollar this morning and maintained its ground as the US dollar was strengthening indicating that British pound remains strong, supported by stronger than projected CBI realized Sales yesterday. Investors are monitoring later today UK second quarter final growth data expected to confirm previous reading at 0.7%.

Global equities were under selling pressure due to risk-off triggered by US budget talks and expectations that Fed would taper assets by end of October with S&P 500 falling for a fifth consecutive day to 1692.77 and Dow Jones Industrial Average losing 0.40%. Asian stocks followed with Hang Seng declining by 0.15% and Shanghai losing by 1.91%, however NIKKEI 225 gained by 1.22%, backed by renewed talks that the Japanese government may cut corporate tax. Therefore, as demand was increasing for Japanese equities the Yen as a safer currency was losing ground with the USDJPY bouncing up from 98.26 to 99.08.

The Aussie on the other hand corrected against the US dollar yesterday to as low as 0.9341 and early today resumed its upside reaching 0.9940. The AUDJPY cross was largely benefited by bullish AUDUSD and USDJPY in recent trading, climbing from 92.03 to 93.01, providing a 1.08% upside. We would expect the pair to consolidate somewhat below 93.01 before it resumes its upside with possible target around 93.47.

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Old 09-30-13, 08:29 AM
Akriti Akriti is offline
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Default Re: Daily Market Overview by IFC Markets

Risk Aversion Due to Italy’s Political Turmoil, U.S Probable Shutdown, CNY Disappointing PMI

Monday opening was not boring for sure as many global events have moved the FX market. To begin with, Italy went into a political turmoil during the weekend as five ministers members of the former Prime Minister Silvio Berlusconi party resigned from Enrico Letta’s current government. Letta decided to seek for confidence vote on October 2 from the parliament to remain in power.

The third biggest economy of the Euro-zone enters into political crisis and may need to go for elections again in less than a year time. Political uncertainty increases risk of sovereign debt management in Italy with Italian 10-Year yield climbing from 4.53% on Friday to 4.73% today. The EURUSD became heavier just below resistance at 1.3569 and retreated early today at 1.3479, overall remains in 1.3569/1.3464 range and likely to continue like that as both Euro and greenback are slashed by negative developments.

We consider key drivers of the currency markets this week, the previously addressed Italian political crisis, probable U.S government shutdown and Non-Farm Payrolls on Friday preceded by ADP Employment Report on Wednesday, as well as major economies’ PMI indicators during the week. Therefore, this week is perceived a risky one and volatile week to be, so we are going to trade with caution.

First of all US Government is likely not to have money to pay federal workers from tomorrow, although interest payments are prioritized to receive payments and avoid default, because the lawmakers did not agree to raise borrowing limit. In any case, we expect to see a last minute development in the Congress and eventually avoid shutdown. In addition to that earlier today Chinese HSBC Manufacturing PMI stood at 50.2 down from expected and previous figure at 51.2, disappointing market participants and further increasing risk aversion.

The USDJPY slipped lower since the Japanese Yen is considered safe haven, thus attracting investors’ attention. The pair dropped to support at 97.69, breaching rising trend line of the symmetrical triangle against projections of an up rise break through, thus weakness may prevail in the following trading.



To close, risk aversion was also reflected on the Aussie vs US dollar currency pair, falling earlier today to a two week low at 0.9284, maintaining its recently established downtrend that started after peaking at 0.9521. Moreover, the safer swissy was gaining ground as investors were seeking for safer currenies, thus the USDCHF began on monday open in negative trading, easing from 0.9067 to 0.9045 .
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Old 10-01-13, 06:14 AM
Akriti Akriti is offline
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Default Re: Daily Market Overview by IFC Markets

U.S Government Closes, 2014 Fiscal Budget Fails, USDIDX Drops to Fresh 7-month Low

U.S. government goes into shutdown mode because Republicans and Democrats failed to agree on spending bill for 2014. Thousands of workers would remain home and many government services would not operate and should that continued would hurt business and consumer confidence. Moreover, could have a multiplied effect on GDP with economists projecting that a 21-day close down like the previous one, 17-year ago, could reduce the growth by 0.9-1.4%.

Almost two weeks ago the Fed decided to hold its asset purchases to support weak recovery until further evidence of a sustainable growth appear and now the lawmakers seem like they live in a different country, failing to agree to fund government operations. The US dollar index as of writing dipped below key support at 80.00, confirming its downtrend and moving to fresh 7-month lows, with next stop likely at 79.66.



Elsewhere, the RBA decided to maintain its record low key rate at 2.50% as expected, saying that a below trend growth persists as the economy adjusts to weaker mining sector, unemployment rate increased and Australian currency is still high. AUDUSD pair jumped during the Asian session from support at 0.9284 to running level now at 0.9419, underpinned by stronger Aussie Retail Sales and further lifted by greenback’s weakness.

In Japan, NIKKEI 225 was rising in contrary to other global equity indices as Prime Minister Shinzo Abe said that Sales Tax would increase as planned from 5% to 8%, driving the USDJPY pair higher to cap at 98.71. The latter, was interpreted by market participants as a forward move to counter fight surging debt. However, risk averse due to U.S. failing to approve a budget for 2014 fiscal year and lower than projected Chinese Manufacturing PMI induced USDJPY pair to give back more than half of its previous gains, heading back towards 97.49 and was lastly seen at 97.98.



Eyes today would be on U.S budget talks, while decision deadline to take further measures to avoid hitting Debt Ceiling looming on Oct.17. Back to today’s news European PMIs fill the European session followed by US ISM Manufacturing PMI just before US open.
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