By CentralBankNews.info The Philippine central bank raised its benchmark overnight reverse repurchase (RRP) rate by 25 basis points to 3.25 percent, as widely expected, saying it believes “a timely increase in the BSP’s policy interest rate will help arrest potential second-round effects by tempering the buildup in inflation expectations.” It is the first rate hike by Bangko Sentral ng Pilipinas (BSP) since September 2014 and the first change in rates since June 2016 when the central bank adopted an interest corridor system that shifted the policy rate to 3.0 percent from 4.0 percent. The rate hike confirms the gradual tightening of monetary policy worldwide in response to rising inflation from higher oil prices and solid economic growth. The Philippines is the fourth Asian country to tighten policy following South Korea last year, and Malaysia and Singapore this year. The rate hike was well-telegraphed by BSP officials and follows accelerating inflation in the last four months and data today that showed annual economic growth of 6.8 percent in the first quarter of this year, up from 6.5 percent in the fourth quarter last year. “The Monetary Board observed that strong domestic demand allows some scope for a measured adjustment in the policy rate without adversely affecting the country’s economic growth momentum,” BSP said. In April headline inflation in the Philippines rose to 4.5 percent from 4.3 percent in March under the new base year of 2012, and above the BSP’s target of 3.0 percent, plus/minus 1 percentage point. Under the previous 2006 CPI basket, inflation in April was 5.1 percent, up from 4.8 percent. In March the central bank forecast inflation under the new base year would average 3.9 percent in 2018 and then ease to 3.0 percent in 2019.
“In deciding to raise the policy interest rate, the Monetary Board noted that latest forecasts have further shifted higher, indicating that inflation pressures could become more broad-based over the policy horizon,” BSP said. BSP said inflation momentum had started to slow but inflation is still expected to breach its 2018 target range due to temporary supply-side factors and then return to its target in 2019. However, BSP said the balance of risks continue to lean to the upside, with price pressures from possible changes to transport fares, utility rates and wages. The Philippine peso fell slightly in response to the rate hike and was trading at 52.0 to the U.S. dollar, down 3.8 percent this year.
Bangko Sentral ng Pilipinas released the following statement:
“At its meeting on monetary policy today, the Monetary Board decided to increase the interest rate on the BSP’s overnight reverse repurchase (RRP) facility by 25 basis points to 3.25 percent. The interest rates on the overnight lending and deposit facilities were likewise raised accordingly.
In deciding to raise the policy interest rate, the Monetary Board noted that latest forecasts have further shifted higher, indicating that inflation pressures could become more broad-based over the policy horizon. While inflation momentum has started to slow down, inflation may still breach the inflation target range of 3.0 percent ± 1.0 percentage point for 2018 due primarily to temporary supply-side factors. Nevertheless, inflation is expected to return inside the target range in 2019. The Monetary Board assessed that the balance of risks to the inflation outlook continues to lean toward the upside, with price pressures emanating from possible adjustments in transport fares, utility rates, and wages.
Given these considerations, the Monetary Board believes that a timely increase in the BSP’s policy interest rate will help arrest potential second-round effects by tempering the buildup in inflation expectations. The Monetary Board observed that strong domestic demand allows some scope for a measured adjustment in the policy rate without adversely affecting the country’s economic growth momentum. In assessing the stance of monetary policy, the Monetary Board also emphasizes that it continues to closely monitor domestic macroeconomic conditions as well as the evolving global economic environment, including the potential impact of the ongoing normalization of monetary policy in some advanced economies.
Looking ahead, the BSP stands ready to undertake further policy action as necessary to ensure the achievement of its price and financial stability objectives.”
The story defining the painful depreciation of the British Sterling in recent weeks has been rapidly fading expectations over the Bank of England raising UK interest rates today.
Only one month ago, the markets were predicting a more than 90% probability of a UK interest rate increase this month. Today, this probability has evaporated to less than 15%. A crippling combination of negative economic data, disappointing growth figures and another reversal in tone from BoE Governor Mark Carney has been the driver behind these minimal expectations of a UK interest rate rise today.
With it already being a foregone conclusion that UK interest rates will probably be left unchanged, attention will be directed towards the language of the policy statement and whether there was a split in the MPC vote.
The Sterling still appears oversold and could be thrown a lifeline, if the BoE delivers a “hawkish hold” that leaves the door open for future rate hikes. Expectations over the central bank possibly taking action in August are likely to heighten, if more than two MPC members vote, or at least signal a desire for higher UK interest rates.
What would be seen as a major threat to the Sterling resuming its horrific downward spiral is if the BoE issues a downbeat policy statement, suggesting a downgrade in UK economic growth, and a potential change in inflation forecasts limits the need to raise UK interest rates. This would likely to spell more pain for the Pound.
Taking a look at the technical picture, the GPUSD is firmly bearish on the daily charts. Previous support around 1.3750 could transform into a dynamic resistance that encourages a decline towards 1.3500 and 1.3440, respectively.
Malaysia election shock rocks offshore Ringgit
Malaysian bonds tumbled while the Ringgit received punishment, after the opposition claimed a shocking victory in the nation’s general election. Mahathir Mohamad, who will become the world’s oldest elected leader at 92 years old, pulled off an unexpected victory on Wednesday, overthrowing Prime Minister Najib Razak’s ruling coalition, Barisan Nasional.
International investors are certainly going to be surprised at the election outcome, especially considering that it was not priced in that Najib’s ruling coalition would be delivered with such a stunning defeat.
There is likely to be a period of heightened uncertainty in Malaysia following the surprising election results. The Ringgit is going to be at threat to domestic political uncertainty, and the onshore market could find itself vulnerable to downside losses when the market reopens as expected at the beginning of next week.
It will also be interesting to monitor how both international investors and ratings agencies react to the developments in Malaysia. The new leader has promised to abolish a controversial GST tax in Malaysia, and although this would improve sentiment domestically as a result of no more GST being added to items, it does present a risk to reduced government revenues.
Dollar softens ahead of US CPI
The Dollar retreated from 2018 highs on Thursday as investors engaged in a bout of profit-taking ahead of the US inflation report scheduled for release this afternoon.
US Consumer prices are expected to rise 2.5% in April, while core inflation is forecasted to remain unchanged at 2.1%. The argument in favour of higher US interest rates is likely to strengthen if inflation figures exceed market expectations.
Taking a look at the technical picture, the Dollar Index is firmly bullish on the daily charts. Prices are trading above the daily 200 SMA while the MACD has crossed to the upside. With the widening interest rate differential in favour of the Dollar, prices have scope to venture higher and even challenge fresh 2018 highs. A breakout and daily close above 93.20 could encourage an incline higher towards 93.50 and 94.00, respectively.
Emerging market currencies feel the burn
It is shaping up to be a miserable trading week for emerging market currencies, which have fallen victim to an appreciating Dollar and heightened geopolitical risk. With the Dollar poised to appreciate further amid US rate hike expectations and uncertainty denting appetite for risk, most EM currencies could be exposed to further downside risks.
Currency spotlight – EURUSD
The EURUSD tumbled to a fresh 2018 low at 1.1823 on Wednesday, thanks to a strengthening Dollar.
Although the currency pair has recovered some its losses this morning, the outlook remains heavily bearish. Taking a look at the technical picture, there have been consistently lower lows and lower highs on the daily charts. Previous support around 1.1900 could transform into a dynamic resistance that encourages a decline towards 1.1810 and 1.1770, respectively. Alternatively, a breakout above 1.1900 could trigger a technical rebound which pushes prices back towards 1.1970.
Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.
The U.S. dollar was seen maintaining the gains from the earlier part of the week. Investors digested news of the U.S. pulling out of the Iran nuclear deal with oil prices continuing to rise to fresh highs.
On the economic front, the RBNZ was seen holding interest rates steady at 1.75%. The central bank did not waver from its previous forward guidance and maintained that rates will remain supportive in the near term.
Looking ahead, the economic calendar for the day will be dominated by the Bank of England monetary policy meeting. The central bank is expected to hold the interest rates steady at this week’s meeting but there is potential to announce a next rate hike by August.
The manufacturing and industrial production figures from the UK will also be released today with forecasts pointing to a 0.2% decline in manufacturing production. The U.S. economic data will see the monthly inflation figures coming out. The median estimates show that consumer prices might have increased 0.3% on the month in April while core inflation rate is expected to rise 0.2%.
EURUSD intra-day analysis
EURUSD (1.1863): The EURUSD currency pair closed with a spinning bottom pattern yesterday just after closing below the main support level of 1.1960 – 1.1920. The spinning bottom pattern signals a potential turning point in prices in case we see a bullish close on the day. However, with price below the support level, a convincing close above this level is required in order for price action to post a corrective move. To the upside, the EURUSD could be seen rising to the next main resistance level of 1.2200 level. To the downside, further declines could push the common currency down to 1.1730 where the next support resides.
GBPUSD intra-day analysis
GBPUSD (1.3564): The British pound continues to consolidate near the support level but we expect to see a bottom in the prices being formed. To the upside, the major trend line is likely to act as dynamic resistance with the potential for price action to correct toward 1.3900 level eventually. The declines are likely to be limited in the near term. However, a decline below 1.3530 level of support could potentially keep GBPUSD biased to the downside. Further declines can be expected on a break down below 1.3500 level.
XAUUSD intra-day analysis
XAUUSD (1313.96): Gold prices have turned flat in the short term with price action repeatedly testing the support level between 1311 and 1307 region. However, with this support level holding out for the moment, we expect the upside momentum to push gold prices slightly higher. The next main resistance level at 1325 remains a key level that could be tested for resistance.
Dow Theory non-confirmations attend the start of every big bear market
By Elliott Wave International
Dow Theory is a time-honored market analysis tool. Its name comes from Charles H. Dow, co-founder of The Wall Street Journal.
In fact, The Wall Street Journal provided a capsule summary :
Dow Theory holds that any lasting rally to new highs in the Dow Jones Industrial Average must be accompanied by a new high in the Dow Jones Transportation Average …. When the transport average lags, it can presage broader stock declines.
In the Wall Street classic Elliott Wave Principle, Frost and Prechter called Dow Theory the “grandfather” of the Wave Principle:
Both [the Wave Principle and Dow Theory] are based on empirical observations and complement each other in theory and practice.
Critics of the theory say it’s no longer relevant. They argue that today’s economy is less dependent on transportation and more on technology.
But EWI’s analysts say this historical indicator is still highly useful to investors.
The Elliott Wave Theorist showed charts of two historic bear markets, and both sported dramatic Dow Theory non-confirmations. Here’s the first one (N/C stands for non-confirmation):
You’ll notice that in 1999-2000, the transports topped about eight months ahead of the Industrials. Starting in January 2000, the Industrials slid some 40% through October 9, 2002.
In 2007, the transport’s peaked about three months before the Industrials. The 2007-2009 bear market was the worst since the Great Depression. The Dow Industrials lost 54%.
A Dow Theory non-confirmation does not accompany every stock market downturn, but the historical record shows that it does attend the start of every big bear market.
If you are prepared to take the next step in educating yourself about the basics of the Wave Principle — access the FREE Online Tutorial from Elliott Wave International.
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This article was syndicated by Elliott Wave International and was originally published under the headline How This Classic Market Theory Can Warn You of Big Turns. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.
In a move that dealt a painful blow to global sentiment, President Donald Trump declared on Tuesday that the United States will be pulling out of the “defective” Iran nuclear deal.
U.S stocks ended mixed on the news while oil prices fluctuated in each direction, as investors considered the potential negative ramifications of Trump’s decision. The U.S President adopted a very aggressive rhetoric during the announcement and failed to hold back from his view that the 2015 agreement was “defective” at its core.
While it was widely anticipated that Trump would pull out of the Iran agreement, what is likely to leave a lasting impact on the markets is the threat that he would also penalize those who help Iran. These overall risks are encouraging traders to price in some new geopolitical risk premium, and his threat can potentially be seen as a blow for U.S allies. There is a threat of Trump’s stark tone questioning U.S relations with its European allies, especially given that the likes of France and the United Kingdom had appealed for Trump not to withdraw.
It should also be noted that both China and Russia are also part of the 2015 Iran nuclear agreement. Relations between Trump and both these nations have been questionable in recent weeks. What this all likely means to the financial markets is that anxiety could be heightened over a new round of geopolitical tensions. This will not have been helped by Iran immediately stating that it was preparing to restart uranium enrichment, which is key for making nuclear weapons.
The prospect of heightened geopolitical tensions in the Middle East following Trump’s departure from the nuclear deal is seen as encouragement for risk aversion. A risk-off environment is likely to attract the flight to safety mindset from traders, where both Gold and the Japanese Yen would be seen as potential beneficiaries.
Dollar jumps to fresh 2018 highs
It is shaping up to be another heavily bullish week for the Dollar, which has sprinted above 93.25, its highest level this year against a basket of major currencies.
Thanks to a hawkish Federal Reserve, interest rate differentials are moving in favour of the Dollar. Price action suggests that bulls are back in town, with further upside on the cards amid growing expectations of higher U.S interest rates. Taking a look at the technical picture, the Dollar Index remains firmly bullish on the daily charts. A decisive breakout and daily close above 93.00 could encourage an incline higher towards 93.50.
Commodity spotlight – WTI Crude
Oil bulls entered the scene on Wednesday morning after Trump deserted the Iran nuclear deal. WTI Crude has scope to venture higher in the near term, as fears of heightened geopolitical tensions in the Middle East fuel concerns of potential supply disruptions.
Taking a look at the technical picture, WTI Crude remains firmly bullish on the daily charts. There have been consistently higher highs and higher lows while the MACD trades to the upside. A solid daily close above the $70.00 level could invite an incline higher towards $71.10. Alternatively, if bulls are unable to keep prices above $70.00, the next key level of interest will be at $69.30.
Gold punished by strengthening Dollar
An aggressively appreciating U.S Dollar is likely to continue punishing Gold this week.
Although the yellow metal was initially boosted by market jitters following Donald Trump’s Iran announcement, gains were later capped by a strengthening Dollar. Gold remains vulnerable to downside losses, especially when considering how Dollar strength remains a dominant market theme.
Taking a look at the technical picture, previous support around $1324 could transform into a dynamic resistance that encourages a decline towards the psychological $1300 support level.
Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.
The pound has come under increased pressure over the last few weeks, as the so called Brexit continue to fail to come to any sort of conclusions at all for markets. Certainly there is a case for leaving the EU, however no politicians can come to any sort of agreement on it. Further to the downside has been UK retail sales m/m coming in at -4.2% (-0.75% exp), which is much worse than anyone expected, and a figure not seen since 1995 when records began. It’s clear that off the back of this traders will be looking to offset losses and clear balance sheets.
Looking at the GBPUSD it’s clear to see that that the daily char reflects a number of key points, the first being that Brexit continues to be a major topic and that the initial positivity of a quick solution has quickly failed. Further to this economic data continues to be a mixed bag as can be seen from the retail sales figures above, which will put further pressures on UK businesses. For me the defining technical movement is of course resistance at 1.3575 holding up very strongly to any pressure at present and preventing anything but bearish movements from happening. The market as a result is looking increasingly like it may look to move lower to support at 1.3314 if the bearish pressure continues in the short term. However, a push down here may provoke a very strong bearish pressure.
The Australian dollar can get no breaks as of late, as it continued its bearish run against the USD even further today. This comes as no surprise as the trend has been quite bearish, but also retail sales m/m came in at 0% (0.2% exp), showing that the consumer sector is weaker than expected. While not largely off the market it continue to show that the Reserve Bank of Australia will struggle to lift rates in the near future if the status quo continues.
Looking at the AUDUSD on the charts it’s clear to see the bearish trend that has been in effect for the last month and looks set to continue in these circumstances. The AUDUSD has cracked through support at 0.7472 and is now looking lower on the charts in the face of bearish pressure, to the potential support level at 0.7371 as the bears look to target lower lows. In the event we do see any bullish pressure in the market expect 0.7472 to be the key area that will either allow the bulls to take control or reaffirm the bearish trend in this market, as the AUDUSD continues to be a bearish story in the interim.
Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.
By CentralBankNews.info Argentina’s central bank left its monetary policy rate at 40 percent after three sharp rate hikes in 12 days and said it expects to keep real interest rates at a significantly higher level than in the past as long as inflation remains above its forecast for this year and emerging markets are facing a scenario of greater instability. The Central Bank of the Argentine Republic (BCRA) has raised its key rate by a massive 12.75 percentage points since April 27 in an effort to shore up the exchange rate of the peso and force down inflation that is far in excess of the government’s target for 2018 of 15 percent. After the latest 675 basis point rate hike on Friday, May 4, there were signs of peso stabilization but earlier today it continued to tumble until Argentina’s president, Mauricio Macri, announced on television that his government was seeking a line of credit from the International Monetary Fund (IMF) to “avoid a crises like the ones we have faced before in our history.” Macri’s decision to turn to the IMF will bring back memories for many Argentines who still blame the Washington D.C.-based institution for letting the country’s debt soar and trigger the 2001 debt crises by allowing it keep an exchange rate that pegged the peso to the U.S. dollar. Macri, who is facing election in October 2019, took office in December 2015 promising to end the country’s isolation from international financial markets, tackle high government spending on subsidies, and lower the fiscal deficit and inflation. Christine Lagarde, IMF managing director, welcomed Macri’s statement and said discussions had been initiated with Argentina on how its economy could be strengthened and “these will be pursued in short order.” After spiking to 23.14 to the U.S. dollar, the peso ended today around 22.35 to the dollar, down 9.4 percent since April 26, the day before the first of three rate hikes. Compared with the start of this year the peso has lost 16.8 percent and compared with the start of 2017 it is down almost 30 percent. In today’s longer-than-usual statement, the central bank noted the recent instability in the currency market, saying the normal menu of options available to a central bank include allowing the currency to depreciate, carry out interventions to avoid a currency overreaction by investors and raising interest rates to moderate the inflationary impact. BCRA noted its initial decision was to intervene in the foreign exchange market to contain the depreciation followed by letting the peso slide as it became convinced the pressure on the peso was not just an isolated episode but part of a deeper shock to emerging market currencies. At the same time, the central bank raised its monetary policy rate by 1,275 basis points until it reached the current rate of 40 percent in three steps, starting on April 27, then May 3 and then May 4. In addition, the central bank also widened the interest rate corridor to allow domestic assets to move more freely and was active in the secondary paper market. Given the unusual situation and the use of exceptional tools, the central bank said it was appropriate to share its vision about the near future. First, the BCRA confirmed that its monetary policy regime is based on interest rates with a floating exchange rate that absorbs external shocks, with interventions only in exceptional cases when the movements can be disruptive to the process of lower inflation. Secondly, as the market stabilizes, the central bank will normalize its operations and return to a narrower corridor that allows the policy rate to be automatically transmitted to other interest rates. Thirdly, with regard to the reference rate, the central bank considers that it will be necessary for the level of real interest rates to be significantly higher than before recent changes when inflation is above that forecast for 2018 and when there is a situation of greater instability in emerging markets. The current bout of peso weakness and investor nervousness stems from Macri’s decision on Dec. 28, 2017 to push back the goal of lowering inflation to 5 percent by one year to 2020 and raise the inflation target to 15 percent from a previous 8-12 percent. On Jan. 9 and Jan. 23 the central bank then lowered its key rate in two steps by a total of 150 basis points, arguing the rise in inflation is transitory and it will continue its downward trend once the one-off impact of a higher in regulated prices dissipates. But inflation is still rising and rose to 25.6 percent in March from 25.4 percent in February.
Although the depreciation of the peso is likely to impact local prices, the central bank said many of its trading partners have also seen their currencies depreciate, moderating some of that impact.
The latest survey showed a rise in 2018 inflation expectations to 22 percent from 20.3 percent for headline inflation and to 19.8 percent from 18.1 percent for core inflation, BCRA said.
Investors should expect an increase in market volatility and ensure that they are properly diversified, warns the senior analyst at one of the world’s largest independent financial advisory organizations.
The warning from Tom Elliott, International Investment Strategist at deVere Group, comes as U.S. President Donald Trump announced Tuesday that the United States will exit the Iran nuclear deal and impose “powerful” sanctions.
Mr Elliott comments: “Investors should expect an increase in market volatility following Trump’s announcement that he is quitting the Iran nuclear deal.
“There will be global stock market sell-offs as the world adjusts to the news.”
He continues: “Due to the severity of the U.S. President’s approach, in the shorter term at least it is likely gold and the U.S. dollar may rally on growing fears of further conflicts in the Middle East breaking out; and risk assets, namely stocks and credit markets, may weaken. Oil may rally strongly.
“We will need to wait for the full Iranian response. However, I expect that they will try to continue to appear the reasonable partner and work with Russia and the Europeans, playing them off against the U.S. If they take a more aggressive stance, oil, gold and the dollar will go considerably higher.”
Mr Elliott concludes: “Geopolitical events such as these underscore how essential it is for investors to always ensure that they are properly diversified – this includes across asset classes, sectors and geographical regions – to mitigate potential risks to their investment returns.”
deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients. It has a network of more than 70 offices across the world, over 80,000 clients and $12bn under advisement.
It could be said that there is a cautious vibe across the financial markets on Tuesday, as investors brace for President Donald Trump’s announcement on the Iran nuclear deal later today.
Asian shares were mostly higher as Chinese trade data exceeded estimates, while European stocks edged lower amid the cautious trading mood.
Although President Trump is widely expected to withdraw the United States from the 2015 nuclear deal, lessons from the past have repeatedly taught investors that the US administration can be highly unpredictable.
An unexpected scenario, in which Trump announces that the US will remain in the nuclear deal, should be warmly welcomed by investors. Alternatively, risk aversion may intensify if he moves forward with the “nuclear option”, which reimposes all sanctions on Iran and pulls the US out of the deal. Whatever the outcome of Trump’s “decision”, we are not ruling out ramifications on the financial markets. Global stocks, Oil and safe-haven assets are just a few of the instruments that could be impacted.
Oil markets wait for Trump
WTI Crude eased slightly lower on Tuesday, with prices dipping towards $69.80 as investors positioned themselves ahead of Donald Trump’s Iran announcement later today.
WTI bulls could be injected with fresh inspiration to boost oil prices higher, if Trump withdraws from the nuclear agreement.
Taking a look at the technical picture, WTI Crude remains bullish on the daily charts. There have been consistently higher highs and higher lows while the MACD trades to the upside. A solid daily close above $70.00 could encourage an incline higher towards $71.00. Alternatively, a failure for bulls to keep prices above $70.00 could encourage a decline to $69.00.
Currency Spotlight – USDJPY
The USDJPY could be injected with explosive levels of volatility today depending on how markets react to Donald Trump’s pending announcement. If risk aversion intensifies following Trump’s “decision” on the Iran deal, the flight to safety could boost the Japanese Yen. Focusing on the technical picture, the USDJPY is firmly bullish on the daily charts. Prices are trading within a daily bullish channel while the MACD has crossed to the upside. Prices have scope to challenge the 109.70 level, if bulls are able to defend 109.00. Alternatively, a breakdown below 109.00 could invite a decline towards 108.40 and 107.80.
Commodity spotlight – Gold
An appreciating US Dollar has punished Gold today, with prices sinking towards $1309 at the time of writing.
The fact that the yellow metal remains under pressure despite market caution ahead of Trump’s announcement highlights a lack of buying sentiment. There is a suspicion that market expectations of higher US interest rates will remain a risk to Gold.
Taking a look at the technical picture, prices are coming under increasing selling pressure on the daily and weekly charts. Previous support around $1324 could transform into a dynamic resistance that encourages a decline towards the psychological $1300 support level.
Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.
The markets were seen trading subdued on the day with price action staying rather flat. Economic data on Monday was quiet with only the Fed member speeches from Bostic and Barkin.
The Eurozone Sentix investor confidence was seen easing back for the fourth consecutive month, while the German factory orders report showed another month of decline at 0.9%. The previous month’s data was seen to be revised higher.
Looking ahead, the economic calendar for the day will see the release of the Swiss unemployment figures. Forecasts show no change to the Swiss unemployment rate which is expected to remain steady at 2.9%.
The German industrial production figures will be coming out later today with expectations pointing to a 0.8% increase on the month following a 1.6% decline the month before. German trade balance numbers are also expected during the day.
The Fed Chair, Jerome Powell is expected to speak early in the day. Powell will be speaking at a conference in Zurich. His speaking engagement comes a week after the Federal Reserve left interest rates unchanged.
Australia’s annual budget release is expected later although it is unlikely to be a major market moving event. In the U.S. President Trump announced that his administration would announce its decision whether or not to pull out of the Iran nuclear deal. Oil prices have risen steadily in anticipation of a U.S. pullout from the deal.
EURUSD intra-day analysis
EURUSD (1.1931): The EURUSD was seen continuing to trade weaker but with price action trading in the support zone of 1.1960 – 1.1920, we could expect to see a reversal at this level. In the event that price action breaks below this support level, then we expect the declines to push lower toward the next main support level at 1.1730. Alternately, with the Stochastics currently showing a higher low against the lower low in price, we could expect a rebound. This can be confirmed on a daily close above 1.1954 level.
GBPUSD intra-day analysis
GBPUSD (1.3549): The British pound was seen consolidating near the support level for the past few days. We expect this sideways price action to remain in place heading into this Thursday’s BoE meeting. With the Stochastics showing a hidden bearish divergence, there is a strong possibility for GBPUSD to break down below the support level at 1.3530. In this case, further declines could push the GBPUSD lower to the 1.3000 round number support. To the upside, a close above the previous highs of 1.3580 is required in order to support any upside move.
XAUUSD intra-day analysis
XAUUSD (1311.62): Gold prices gave up the modest gains logged in the previous day as price action was seen falling back to the support level of 1311 – 1307 region. We expect prices to remain consolidating at this support level. A rebound in gold prices could signal a possible move to the upside. The resistance level at 1325 is likely to be the upside target, unless gold prices breach the current support. A break down below the support level could send gold prices falling toward the 1300 level.
