Daily Market Analysis by CapitalStreetFX

[CapitalStreetFX]

Pound Jumps As “Remain” Vote Of Brexit, USD Surfes – All Eyes On FOMC Minutes
Having been burdened by Brexit worries for a long time, the pound currently is witnessing a recovery as the results of the latest poll showed that the “Remain” campaign has taken the lead ahead of the British referendum on June 23.

In addition, data published earlier today by the Office for National Statistics contributed to boosting the sterling. According to today’s report, the UK Labor market still stayed firm despite an economic slowdown. The jobless rate for quarter ending in March remained unchanged at 5.1% since the beginning of this year. This marked the lowest level in more than a decade. Meanwhile, the employment rate posed a record high of 74.2% in the first quarter of 2016 as number of people in work advanced by 44,000 to a total of 31.6 million.

On a yearly basis, the average total pay for employees (including bonuses) in Great Britain rose by 2.0% to £499 per week for the three months ending in March, little changed from an increase of 1.9% in the previous three months to February.

Today, BOE Chief Economist Andy Haldane is scheduled to talk about UK benchmark rates and some clues regarding the next monetary move policy are awaited.

Yesterday, the Bureau of Labor Statistics reported that US inflation was on its way to climb toward the FED’ s target rate. Consumer price index (CPI) started the second quarter of 2016 with the largest gain in over three years. The latest data (seasonally adjusted) came in with an advance of 0.4% in April, compared with a rise of 0.1% in the month prior. Economists had forecast that the index would inch up 0.3% last month. After eliminating the costs of food and energy, the so-called CPI increased 0.2%. In March, the reading was 0.1%.

Currently, markets are focusing on the minutes from the FOMC’s April Meeting. Hints from several FED officials’ comments last week, suggest that an interest rate hike is likely to be carried out in June or July. As a result, the dollar index DXY, which tracks greenback’s strength against its peers, has continued moving upwards today. The index stands at 94.90, about 0.35% higher than the last close.

Fig. GBPUSD D1 Technical Chart

After surging to a level of 1.47689, a four-month high on May 03, GBPUSD had slid back and had moved gingerly between levels 23.6% and 50.0% of Fibonacci retracement. However, the price currently is break the level 23.6% of Fibonacci retracement, hinting a bounce back. A green arrow has appeared under the price chart since April 21, suggesting a long position. The price is expected to fly higher.

Trade suggestion

Buy at 1.45902, Stop loss at 1.45294, Take profit at 1.47152

 

[CapitalStreetFX]

EUR/GBP Drops As “Remain” Camp Leads, UK Retail Growth Solidifes

On Wednesday, the pound witnessed a sharp surge with recent opinion polls reporting that the “Remain In EU” camp has extended its lead in the upcoming UK referendum, over the last month — with 55% of sampled voters, voting for staying in and 37% for leaving. After the results were released, EUR/GBP took a sharp knock to as low as 0.76767 and finished the trading session at 0.7768, losing 0.67%.

Sterling has already found solid buying interest mid-week as UK employment and wage data beat analyst forecasts. According to the Office for National Statistics, data shows that the number of people claiming unemployment benefits actually fell by 2,400 to 737,800 while analysts had forecast a 4,300 rise. In addition, 44,000 more people were in work compared with the previous three months, bringing the number of employed to 31.58 million workers in total.

Earlier today, UK April Retail Sales reported an improvement of 1.3% compared to the last month’s figures, beating analysts’ forecast for a 0.6% rise. The better-than-expected data further relieves fears of the potential damage caused by ‘Brexit’ related uncertainty, ensuring that demand for the Pound will remain bullish for quite some time.

Meanwhile, the euro continues to suffer from inflation data that confirmed prices in the Eurozone still remained stagnant. Whereas U.S and UK inflation rates are climbing higher, negative rates of price growth in the euro zone were reported earlier today. This has increased the possibility of a future interest rate cut in Europe, weakening the euro’s strength.

With the Fed minutes now behind us, focus shifts towards today’s release of the ECB’s Monetary Policy Account from its previous meeting. This is very similar to the minutes from the FOMC meetings. The data will be closely scanned for hints on future policy opinions within the ECB. The account could boost the appeal of the Euro, if policymakers are shown to have expressed mildly dovish sentiments. Greater signs of hawkishness would undermine the likelihood of further policy easing in the near future, prompting the single currency to rally.

However, if there are continued suggestions that interest rates could go lower still, the Euro could slump across the board.

Fig EURGBP D1 Technical Chart

After plunging wildly to 0.76767, the pair seems to be continually bearish and is currently trading at 0.76608. RSI is 30.22, close to the oversold territory, indicating strong selling power. The price action is expected to continue the current downtrend until it reaches the support level at 0.75630.

Trade suggestion

Sell at 0.76636, Stop loss at 0.77069, Take profit at 0.76026

 

[CapitalStreetFX]

Gold Trading Gingerly After FOMC Minutes, Eye On G-7


Data released on Sunday by the National Bureau of Statistics in China, reported that the economy grew at a slower than expected pace in April. On yearly basis, the total output of manufacturers rose 6% last month, lower than economists’ expectation of a 6.5% increase and below the 6.8% reading for the previous month. The slowdown in industries already suffering from overcapacity such as coal and steel was supposed to be the main reason for the decline in the industrial production.

In addition, retail sales for April also failed to meet estimates of a 10.6% increase. The latest data came in t a growth rate of 10.1% compared to the same period last year. This compares with a rise of 10.5% in March.

Unexpectedly disappointing data from the world’s growth engine economy, caused investors to rush into safe-haven assets, namely the yen, swiss franc and gold.

However, the yen currently is facing the probability of further depreciation, as the Bank of Japan this week restated that the central bank may deploy more monetary easing, with to boost inflation towards its target of 2%. Hence, cash flows are moving out of Japanese yen into other markets, and gold is always considered the perennial safe haven.



Meanwhile, according to some clues from the G7 meeting today, instead of further rate cuts, the European Central Bank is likely to undertake some unconventional measures to stimulate the EU economy if necessary.

The precious metal is still eyeing the statements from the 2 day G7 meeting for clearer signals on future policy positions of different banks/authorities to initiate the next major price move.

In today’s trading session, the US dollar has surged higher, extending its gains for three consecutive weeks, supported by the FOMC meeting minutes released on Wednesday. The minutes from the April meeting indicated that a rate hike next month was a reasonable possibility. The dollar index DXY climbed to 95.31, the highest level since March 29. A stronger dollar may exert further downward pressure on gold prices.

Fig. GOLD D1 Technical Chart

In general, GOLD is on track to fall after edging up to the resistance of 1304.39 on May 02, the highest level in over a year. The price is anticipated to move sideways for the rest of the day awaiting clues from the G7 meeting. A bounce-back may occur if the level 23.6% of Fibonacci retracement is tested and broken. The signal trend indicator is currently encouraging a long position.

Trade suggestion

Buy at 1258.79, Stop loss at 1247.82, Take profit at 1270.61

 

[CapitalStreetFX]

Oil Price Plunges Again As Supply Concerns Re-Emerge

Brent Oil prices slid to $48.47/barrel on Monday, after hitting an 8-month high of $50.00/barrel. The supply outages in Canada and Africa are diminishing, and supply is expected to reach pre-disruption levels soon. The re-opening of eight shuttered work camps in Canada triggered energy firms to restart production.

In addition, Iran has indicated plans to raise oil export capacity to 2.2 million barrels per day by the summer and has no intention of freezing output, at the upcoming OPEC meeting on the 2nd of June. Moreover, Saudi Arabia, the key OPEC member, has also maintained its oil production levels at record highs, in order to preserve its market share against Iran and other competitors. This has led to a chronic supply glut and a collapse in crude prices, and this factor still hangs over the recent rally.

In the U.S, the number of oil rigs was reported unchanged at 318 in the week ending on the 20th of May, after an eight-week decline. With the price moving up recently, drilling will again become economical for some U.S shale producers, which is expected to boost the oil-rig count and slow down the decline in local U.S oil production and supply.

Oil prices have also suffered a loss due to a stronger dollar. Today, Flash Manufacturing PMI data is due to be reported in the US. The Purchasing Managers’ Index in May is expected to rise to 51.0 from a reading of 50.8 in the last month, a positive sign for the US economy. Also on the schedule today, St. Louis Fed President James Bullard, a voting member who is considered a hawk, will deliver a speech in Beijing. This speech is anticipated to apply further upward pressure on the dollar and in turn push down commodities denominated in USD – such as metals and energies.

Fig. Brent D1 Technical Chart

In general, Brent is on track to falling further, after hitting the resistance of 50.07 on May 17, the highest level since October 2015. RSI (14) has inched down to 62.0201, after getting into the overbought zone. The pair had rocketed into the overbought area and may pull back from this zone as the %K line (blue line) has already crossed over the %D line (red line) and has moved out of the overbought territory. However, the signal trend indicator is currently encouraging a long position. Overall, the commodity is expected to pull back slightly before any recovery.

Trade suggestion

Sell at 48.47, Stop loss at 46.33, Take profit at 49.51

 

[CapitalStreetFX]

GBP/USD Gains Before BOE Governor’s Parliament Testimony

On Tuesday, the British Pound rose against almost all of its top counterparts for the first time in three days after the results of a poll published late Monday showed that the “Remain” campaign of “Brexit” is gaining strength. According to statistics, 55% of respondents, that participated in the survey, support Britain sticking with the European Union. Meanwhile, the “Exit” vote was supported by 42% of respondents.

At the parliament’s treasury committee testimony today, the BOE Governor and several Monetary Policy Committee members shall be answering questions on inflation and the economic outlook before Parliament’s Treasury Select Committee. The market is focussed on the opinions of key policy makers on what may happen if voters opt for the UK to leave the EU in the upcoming referendum on June 23.

Overall, the BOE position is already well-known. The central bank has stayed out of the debate about the costs and benefits of EU membership over the long term and has mainly focused on the negative growth and market stability implications on the economic structure of the UK instead. Traders may still interpret their ability to toe this line convincingly, as indirect support to the “Remain” campaign, which may send the Sterling higher.

Although the pound sterling is in recovery mode against the US dollar at present, the up move remains capped, as renewed fears over a Brexit vote and its impact on the overall UK economy continues to weigh on investors’ minds and US dollar strength also keeps the gains in check.

Today, a light US economic calendar puts focus on Fed speakers. The greenback pared some of its recent losses, as a string of comments on Monday by Federal Reserve officials, and the minutes from the previous FOMC meeting have further increased the likelihood of a rate hike in June or July, with even more hawkish sentiments for the next year, given U.S. economic strength. This has helped revive the dollar, but cooled the appetite for riskier assets.

The market seems to be taking a cautious stance ahead of the Fed Chair Janet Yellen’s speech on Friday, a day on which investors will also see the second estimate of US first-quarter growth. Markets also await comments from other Fed officials this week, as well as data on new home sales, durable goods orders and consumer sentiment.

Fig. GBPUSD D1 Technical Chart

After tracing a two-day down move to as low as 1.44378, the pair is ticking up again, breaking level 23.6% of the Fibonacci retracement. RSI (14) is at 58.2338, indicating that the pair is entering a bullish market. The signal trend indicator has suggested a long position since April 21 by a green arrow under the price chart. The level 0 of Fibonacci retracement (1.47691) is anticipated to be tested.

Trade suggestion

Buy at 1.45847, Stop loss at 1.44541, Take profit at 1.47345

 

[CapitalStreetFX]

NASDAQ Firms Up On Firm US Data, Dwindling Brexit Prospects

Yesterday (24/05), NASDAQ moved up in a session without volatility after Fed speakers reiterated a likely FED rate hike in June or July

U.S. crude oil price rocketed to close to $50 a barrel in early Asian trade Wednesday, hitting its highest level in over seven months after a survey from the Wall Street Journal indicated that U.S. crude stockpiles is estimated to fall by 2.5 million barrels in the week ended May 20. The escalation of oil price could boost the U.S inflation to reach the Fed’s objective of 2% inflation.

U.S new home sales data for April was released by the U.S Census Bureau on Tuesday. The number edged up to 619,000 (annualized rate), the highest level since 2008, with prices setting record highs. The flow of positive U.S. data as well as solid comments from Fed officials helped to strengthen the dollar and relieve investors’ suspicions that the economy might not be stable enough to weather a rate hike in the next couple of months.

Moreover, NASDAQ benefited from upbeat information from England, after the BOE Governor Mark Carney defended his viewpoint against Brexit before Parliament’s Treasury Select Committee. Latest figures indicate more than 80% support for Britain to remain in the European Union.

Investors are awaiting upcoming comments from FOMC members Harkers, Kashkari and Kaplan today on the possibility of a FED rate hike being on the table in the upcoming months. Any visibly hawkish bias in the central bank’s interest rate views will cast a shadow on these companies, and may in turn dampen the index.

Fig. NASDAQ D1 Technical Chart

On the daily chart, the index made a sharp move higher to 4460.74. The stochastics chart shows that the %K line (blue line) has reached the overbought zone far ahead of %D line (red line). The buying force is overwhelming and the index is likely to continue rising. The bullish trend is again consolidated thanks to RSI shooting to 58.7109. Nevertheless, the price is anticipated to plunge soon, as the SAR trend indicator(red arrow) still suggests a short position.

Trade suggestion

Buy Stop at 4461.00, Take profit at 4507.83, Stop loss at 4406.36

 

[CapitalStreetFX]

Sterling Surges As “Remains” Power Ahead, Oil Rally Weighs On USD
On Thursday (26/5), the pound rose for the third day in a row, reaching a three-week high against the greenback on the results of a recent poll by former Conservative lawmaker Michael Ashcroft. The poll indicated that nearly 65% of voters expressed their willingness towards the U.K remaining in the European Union after the June 23 referendum.



This figure represents an increase from the reading of 55% support in the previous poll. Moreover, following other British business executives, BT Group Plc Chairman Michael Rake commented about the referendum on EU membership. He defended his ground against Brexit and pointed out that UK economy would be adversely affected if Brexit really happened.



The Office for National Statistics has just reported the second estimate for quarterly GDP. The data shows an improvement of 0.4% in UK GDP, showing the expansion of UK economy for 13 consecutive quarters since Q1/13. Household spending climbed 0.7 percent, the fastest pace in almost a year. In contrast, preliminary business investment fell 0.5% as the expenditure on non-residential buildings stumbled



Brent oil prices moved above $50 a barrel on Thursday for the first time since November 4, 2015. Yesterday, U.S. crude oil inventories for the week ending on May 20 witnessed a bigger draw than expected. U.S crude stocks plummeted 4.2 million barrels to 537.1 million, the steepest weekly slide in seven weeks. Nevertheless, the recovery is anticipated to be short lived, since U.S shale producers will soon burst back onto the market, enhancing the U.S oil supply. This crude rally may pose a threat to the Fed’s decision on increasing interest rates in the upcoming meeting in June or July.



U.S Initial Jobless Claims in the week ending on May 20 were reported earlier today, at 268,000 people claiming unemployment insurance for the first time, compared with the forecast of 275,000. This is the most positive reading in the last 4 months, showing a strengthening labour market. Before the widely watched FED meeting next month, the Non-farm Payrolls data due next week is supposed to be the last major data that shall create a headline effect on the Fed’s rate hike decision.



However, before that, investors will be keeping a close eye on Friday’s Japanese consumer prices report and comments the same day by Fed Chair Janet Yellen for more clues about the rate outlook.

Fig. GPBUSD D1 Technical Chart


In general, GPBUSD is following an uptrend, with the pound on track to strengthen against the greenback. RSI has soared to as high as 63.7946, signaling that the bull is still overwhelming. The Stochastics chart shows %K line (blue line) has reached the overbought zone before %D line (red line). The signal trend indicator also supports the bullish trend with the green parabolics band moving beneath the price chart. The bullish force is much stronger and the pair is anticipated to climb continuously.


Trade suggestion

Buy at 1.47038, Take profit at 1.47720, Stop loss at 1.46280

 

[CapitalStreetFX]

Gold Plummets On Demand Slump, FED Rate Hike Expectations

On Thursday, data from China showed that demand for the precious metal, in one of the largest consumer markets, is slipping slightly as investors’ appetite currently is turning towards the real estate market, in the lookout for high-yielding investment instruments that have higher potential for short-term gains.

As reported by the Hong Kong Census and Statistics Department, at the start of the second quarter of 2016, China’s total imports of gold from Hong Kong stood at 74.2 metric tons, down 2.8% from the previous month. This is the first decline in three months. The net purchases by the mainland from the offshore market, fell to 56 tons in April, compared with 64.1 tons in March. Imports from Switzerland also witnessed a drop to 14 tons in April, less than half the level from the month before.

Recently, gold prices have been burdened with the rate hike outlook in the US. After last week’s release of the April FOMC meeting minutes, the gold market has been slipping. The minutes hinted that an increase in US rates is likely to occur at the June or July meeting. Some key voting members of the FOMC have also expressed their hawkish views on US benchmark rates. The opportunity cost of holding gold increases, as interest rates rise, since the precious metal is not an interest-bearing asset and has a cost of storage/holding. Today, markets are tuning into FED President Yellen’s comments later in the day. The comments may provide some clarity on the next moves with regards to interest rates and overall monetary policy.

Yesterday, the US Commerce Department released data on the total orders for long-lasting goods in April. The data reported a jump of 3.4% in orders, in comparison with an increase of 1.9%, a month earlier. After stripping away transportation items, the so-called core durable goods orders rose by 0.4% last month.

In addition, jobless claims in the US dropped more than expected in the week ending May 20th. Data from the Department of Labor reported the number of people filling for jobless benefits stood at 268,000 last week. This is a fall of 10,000 compared with the previous reading. Jobless claims have now declined for three consecutive weeks, indicating that the US labor market is stable and improving.

The dollar index DXY today is hovering around the last close of 95.14, waiting for some clues from FED Chair Yellen. The improvement in recent data may allow Yellen to project a brighter outlook on the prospects of the next rate hike. And this may further dampen the value of the precious metal.

Fig. GOLD D1 Technical Chart

GOLD has been under downward pressure after hitting a record high of 1303.47 on May 02, and is currently approaching a two-month low. ADX (14) is at a reading of 34.0465, implying that the current trend is pretty strong. Bear power is hinted, as DI- is far higher than DI+. The price is anticipated to test the support of 1197.17. The signal trend indicator formed a red arrow over the price chart two days ago, suggesting a short position for the near future.

Trade suggestion

Sell stop at 1215.06, Stop loss at 1226.46, Take profit at 1203.66

 

[CapitalStreetFX]

EURCAD Languidly Ahead of ECB Conference and OPEC Meeting
Data released on Monday showed that Eurozone’s economy remained pretty weak and the signals for a strong recovery has not been given yet.

The Federal Statistical Office (Destatics) today reported that the index of Germany import prices in April fell by 0.1% from the preceding month, instead of increasing 0.4% as expected by analysts. On yearly basis, the index decreased by 6.6% while the export prices dropped by 2.0%. Both annual growth speed of import and export prices have witnessed declines in three consecutive months.

In France, the consumer spending index (m/m) witnessed a plunge of 0.1% in April. This data is opposite to the estimate of a 0.1% increase in household expenditure on goods. Meanwhile, the National Statistics Institute (INE) showed that flash Consumer Price Index (CPI) for May in Spain slumped by 1.0%, ticking down from the previous reduce of 1.1% in April.

Due to the slowdown in members’ economy, the euro area has not seen any brighter prospect on recovery. Hence, the common currency seems to be gingerly before the ECB Press Conference on June 02.

Canada’s economy has been suffering from the raging wildfires for several weeks. Oil producers could not operate, leading the whole country’s merchandise trade to go down. Also, ahead of OPEC meeting on June 02, oil prices have been moving in unclear trend after hitting seven-month high as concerns of whether a supply-cut can be carried out or not. Being a reliant-commodity currency, the Canadian dollar was affected adversely by oil prices.

The market is looking forward to the upcoming data releases relating to Canada economy. The Raw Materials Price Index (RMPI) in April is forecast to increase only 2.2%, well short below the data of 4.5% in the preceding month. Nevertheless, the Industrial Product Price Index is expected to inch up 0.2% in April, after sliding 0.6% previously.

Fig. EURCAD D1 Technical Chart

EURCAD has been fluctuating uncertainly for several days after testing the resistance of 1.48253. Currently, the Loonie is on way to weaken against the Euro, leading the pair EURCAD to inch up to the reading of 1.45313. The stochastics chart shows that the pair tends to be liberated from the oversold zone as the %K line (blue line) has already reversed and crossed the %D line (red line). The price is expected to retest the current resistance at 1.48253.

Trade suggestion

Buy stop at 1.45915, Stop loss at 1.44493, Take profit at 1.47070

 

[CapitalStreetFX]

FTSE Stable Ahead Of ECB Conference

Lately, the UK FTSE 100 index is in an up-move, thanks to gains in stocks of major banks and oil companies.

Last week, the IMF decided to continue with the bailout for Greece, and the euro area also gave this nation the firmest offer of debt relief. Markets may therefore be able to avoid another summer of high volatility with respect to Greece. After this statement, banks across Europe have headed up, supporting the FTSE index to surge higher.

Today, shares of Lloyds Bank Group PLC rose to 0.78287 pence per share, 0.9% higher than the close on Friday. Meanwhile, HSBC Holdings PLC and Barclays PLC also climbed 1.2% and 0.9% from the last settlement.

In addition, a rally in oil prices to a seven-month record high of $50/barrel contributed to push the commodity-reliant FTSE 100 up. Markets are eyeing the OPEC meeting, which is scheduled to be held on June 02, for any possibility of cutting output . A reduction in global supply may put upward pressure on the commodity. Consequently, oil companies such as Royal Dutch Shell and BP, 2 of the top 10 companies with the highest market capitalization, may see some positive changes in their stock prices.

The UK economy still remains subdued as indicated by recent data released. The Office for National Statistics reported last week that business investment for the first quarter in 2016 was estimated to decline 0.4% from the same period last year, to $43.1 billion. A fall in the investment activity may bring several negative effects to the manufacturing sector.

Meanwhile, ECB is on deck to hold a press conference this Thursday, with investors currently awaiting some clues and statements on what monetary policy may be deployed in the future. The “Brexit” referendum on June 23 is also in focus.

Fig. FTSE D1 Technical Chart

The level 38.2% of the Fibonacci retracement is currently acting as firm support as prices have constantly been bouncing from this threshold for more than a month. FTSE has been moving in stops and starts for several days before climbing up from this level and breaking through the 23.6% level. ADX (14) is at 31.1135 and pointing upwards, indicating that the up-move is strong. The price is expected to continue surging higher, with upward pressure from the parabolics band below.

Trade suggestion

Buy stop at 6308.32, Stop loss at 6218.77, Take profit at 6392.10

 

[CapitalStreetFX]

ASX 200 Cracks In The Midst Of Plunging Commodity Prices

On Wednesday (1/6), the commodity-reliant S&P/ASX 200 index stumbled sharply following a sharp down-move in stocks of materials companies and energy firms.

A recent slip in base metals contributed to dragging down a gauge of miners within the S&P/ASX 200 index. Last month, iron ore was on course for a 24% tick-down, the worst performance in the last three years. Meanwhile, according to Argonaut Securities, steel production came closer to the record high of 2.4 million metric tons per day, causing the steel price to fall 28% in May. Consequently, materials firms such as BHP Billiton Limited, RIO Tinto Limited and Amcor Limited, 3 of the top 20 companies with highest market capitalization on S&P/ASX 200 index, today suffered setbacks of 2.86%, 1.57% and 0.80% from the previous close respectively in their stock prices.

In addition, the slide in oil prices overnight, knocked down energy companies in the S&P/ASX 200 index. West Texas Intermediate crude slipped to $48.80 a barrel, and Brent crude oil plunged to $49.96 per barrel. Oil prices were dampened into a gloomy situation as representatives of OPEC countries hinted that this Thursday’s meeting in Vienna can hardly reach an agreement to alter the ‘no limit’ production levels currently in effect. Accordingly, Woodside Petroleum Limited, Oil Search Limited 10T and Caltex Australia Limited slid down 1.86%, 1.47% and 1.04% from the last settlement.

Earlier in the Asian trading session today, according to a report from Australian Bureau of Statistics, the country’s GDP in the first quarter of 2016 advanced 1.1% from the preceding quarter, while the unemployment rate has fallen to a 2½-year low of 5.7%. These statistics also contributed to a slight increase of 0.7% in the household expenditure. A tick-up in the consumer spending may have an encouraging impact on the consumer discretionary sector. Australian Agricultural Company Limited and Tatts Group Limited were up 3.71% and 2.28% from the prior close. However, the up-move of 45 company stocks (including the consumer discretionary firms) could not offset the drop in 151 stocks in materials and energy sectors.

Investors will be keeping a close eye on the upcoming OPEC Countries meeting on June 2 and Thursday’s Australian Retail Sales data, which is forecast to come in at 0.3% for April. Trade Balance data will be released at the same time and is expected to show a deficit of Australian Dollars 2.11 B, marking almost 2 consecutive years that the trade balance has been in the negative.

Fig. S&P/ASX200 D1 Technical Chart

ASX 200 started this month with a big gap-down, extending its bearish move from a record high of 5433.92. RSI is pointing down, lower than the average, indicating that the bear is stepping in. However, the green trend signal indicator under the price chart still signals a long position. Hence, technically, the index is anticipated to tumble continuously in the near future, and enter the area around the 38.2% level of the Fibonacci retracement. It may bounce back from there and resume the uptrend to cover the gap mentioned above.

Trade suggestion

Buy limit at 5239.41, Stop loss at 5211.06, Take profit at 5289.86

 

[CapitalStreetFX]

Brent Ticks Up On Mixed Data Ahead Of OPEC Meeting

Brent crude oil has moved up slightly, and is currently trading at $50.09 per barrel on Thursday. Investors and traders are taking a cautious tone right now ahead of the result from the OPEC meeting in Vienna, which is widely expected to fail to reach any restrictions on the oil output.

Total OPEC oil production has remained flat this year, currently steady at 32.5 million barrels per day (bpd), due to unexpected attacks on oil infrastructure in Nigeria, power outages and payment problems in Venezuela along with chaos in Libya, although Iran has ramped up its output extensively.

Members of OPEC want to protect their market share, as Iran is back into the markets, after years of sanctions. Iran’s oil minister has rejected suggestions of an oil supply cap at the OPEC meeting, stating that Iran was producing 3.8 million barrels per day and would soon boost production to 4 million barrels a day following the lifting of sanctions in January.

Meanwhile, Saudi Arabia, the key member of OPEC, has said that it might join the deal, in case Iran accepts the suggestion of putting a limit to its oil supply. Libyan and Nigerian oil ministers have hinted at their attempts to lift up oil production to its full capacity. The oil price is on the edge of crashing, after weeks of rising, following no agreement at the OPEC meeting.

Manufacturing activity in China – one of the world’s largest consumers of crude oil, shows signs of steadying. The country’s manufacturing purchasing managers index (PMI) came in at 50.1 in May, beating the estimate of 50.0. However, Chinese factory activity remained weak amid soft demand at home and abroad, suggesting the country is still struggling to regain traction. This poses a threat to the demand for oil in the world’s second-largest economy, which could adversely affect the oil price.

Data from the US on Wednesday reported that manufacturing PMI rose to 51.3 in May – the third straight month of growth. This represents a significant increase from the reading in April. Additionally, according to Motor Intelligence, U.S. Total Vehicle Sales in May jumped up to 17.4 million, beating analyst expectations of 17.2 million. The positive data for the U.S economy can help advance the demand for oil and other commodities, thus helping support the crude oil market.

U.S Crude Oil Inventories are scheduled to be released today by U.S. Energy Information Administration. Total inventories are expected to fall by 2.7 million barrels in the week ending May 27, following a 4.2 million barrels decrease for the week ending May 20.

Fig. Brent D1 Technical Chart

On the daily chart, the Brent price is moving in a narrow range between 49.70 and 50.28.

RSI hovers around 63.0913, indicating that bulls still hold the edge. Moreover, the trend indicator has signalled a long position since February 24 with the green arrow under the price chart. The commodity is anticipated to climb further. The next resistance to test is 51.45.

Trade suggestion

Buy stop at 50.39, Take profit at 51.01, Stop loss at 49.32

 

[CapitalStreetFX]

NASDAQ100 suffered a steep loss with a massive 63 issues declining while only 45 issues recorded slight gains.

Tesla Motors Inc topped the list of the day’s best performance among NASDAQ 100 shares, inching up 6.2% from the last settlement, the biggest increase since February. This was brought about by investor Ron Baron’s forecast that the company will become one of the biggest companies in the upcoming decade. Additionally, thanks to investor expectations for a modest rebound in hard drive sales, shares of Western Digital Cp ticked up 3.58% from their previous close.

Nevertheless, the 2.5% slump in the biotech index, the steepest daily drop since May 11, outweighed the upbeat stocks, dragging the NASDAQ 100 shares into negative territory.

The worst performing NASDAQ 100 component on the day was Biogen Inc. (BIIB), with shares trading down 12.76% to $252.81. The slide in the biotechnology company’s stock was caused by the recent failure of its new experimental drugs in improving the health of multiple sclerosis patients.

Another NASDAQ 100 component making a significant down-move was Alexion Pharmaceuticals Inc. After the company announced on Monday (6/6) that its Soliris drug to treat a rare neuromuscular disease could not meet its primary goal in clinical trials, its shares slipped by 10.88% to $137.84.

Along with an unstable economy, and pessimistic data from the labor market, the risks being taken with new experimental drugs within the bio-tech sector seem to have frayed investor nerves and driven them away from NASDAQ 100 companies.

The dollar index, which tracks the value of the greenback against a basket of currencies, continues to hover around a one-month low of 93.73 after the NFP report for May was released on Friday. Despite the FED President stating on Monday that the central bank is still on course with its plan to increase interest rates this year, markets are pricing very low odds of an increase in rates in June or July.

Fig. NASDAQ100 D1 Technical Chart

NASDAQ100 has been moving in a narrow range between 4475.75 and 4546.11 since the end of May. Two moving averages, which lie under the price chart, still support the index by acting as support areas below. The price is expected to resume its up-move as indicated by the trend indicator, after spending some time consolidating. The level 38.2% of Fibonacci retracement is acting like a solid support for the price.

Trade suggestion

Buy stop at 4554.98, Take profit at 4579.85, Stop loss at 4526.56

 

[CapitalStreetFX]

Bulls Power NZDUSD To 1 Year High After RBNZ Keeps Rate Unchanged

On Thursday (9/6), the NZ dollar soared to a one-year high against its US counterpart after the Reserve Bank of New Zealand decided to hold the benchmark rate unchanged at 2.25% for the straight third month.

New Zealand’s housing prices have recently been climbing rapidly, due to low interest rates, high levels of immigration and supply shortages. This has rung alarm bells over the possibility of a housing market bubble, which would hurt the country’s financial system adversely. With an aim to control rallying house prices, Reserve Bank governor Graeme Wheeler signaled that more lending restrictions could be imposed on property investors. These RBNZ moves contributed to the significant 2% surge in the kiwi to $0.71472.

According to data from Statistics New Zealand on Wednesday (8/6), the volume of total manufacturing sales fell by 1.2% in the first quarter, with meat and dairy product manufacturing volumes falling 7.8%. Meanwhile, inflation, which is currently at 0.4%, still runs below the central bank’s annual inflation objective range of 1%-3%. The possibility of an interest rate cut at the August meeting is still on the table with the market pricing in the odds of a cut at 40%.

In the U.S, yesterday, the Labor Department reported Job Openings and Labor Turnover Summary for April. The number of job openings came in at 5.79 million, beating the estimate of 5.67 million. The increase in available jobs raises hopes that hiring could rebound this summer after the spring slowdown and relieves the worries over labor market slack.

However, recent positive statistics can hardly alter investors’ expectation for no rate hike at the FED’s monetary policy meeting next week. In the Asian trading session on Thursday, the dollar index DXY, which tracks the value of the greenback against a basket of currencies, lingered around a one-month low of 93.48.

Markets are keeping a close eye on US Prelim Consumer Sentiment data and Inflation Expectations data which will be published on Friday (10/6). The FED policy meeting is still in the spotlight for clues on the FED’s projections for the US economy and its stance on rate hikes.

Fig. NZDUSD D1 Technical Chart

On the daily chart, the kiwi is soaring strongly against the greenback, pushing the pair to a one-year high of 0.71472. RSI (14) is climbing to 71.8112, signaling that bullish power is dominant. ADX (14) is up to 36.1916 along with DI+ staying above DI-, consolidating the up-move. The trend indicator supports a long position with a green arrow appearing under the price chart. The pair is anticipated to continue climbing for some time.

Trade suggestion

Buy stop 0.71415, Take profit at 0.71749, Stop loss at 0.70932.

 

[CapitalStreetFX]

Longs Recommended – Gold Near Three-Week High On Fed Caution And Brexit

On Friday, gold eased slightly as the dollar edged up from recent lows, but the metal remained near a three-week high and was on track for a second straight weekly rise.

The dollar pulled out of a two-day decline today as a report showed jobless claims in the US unexpectedly fell and a stronger-than-expected rise in wholesale sales in April. The data soothed some concerns about the US economy decelerating in the second quarter. The dollar index, which is a strong indicator of gold’s next move because of a the strong negative correlation between the safe haven asset and the greenback, stood at 94.185, pulling away from a trough near 93.400.

However, investor demand is expected to remain strong in the short term, as expectations for Fed rate hikes eased and results of various Brexit polls continue to fuel risk aversion. Gold is highly sensitive to rising interest rates, which lift the opportunity cost of holding non-yielding bullion while boosting the dollar, in which it is priced.

Since last Friday, bullion has been on an upswing and has risen nearly two percent this week following last week’s shockingly weak U.S. jobs data and the subsequent cautious tone by Yellen.

The possibility that the United Kingdom may leave the European Union, inviting financial market and economic volatility, also bolstered the yellow metal. According to economists, a Brexit could see gold push towards $1,400 an ounce.

Further, UK and German sovereign debt yields have fallen to record lows, as well as the expansionary, low or negative interest rate monetary policies being pursued in Japan and Europe, added some momentum to the precious metal ‘s rally.

Holdings in the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.71 percent to 887.38 tonnes on Thursday, the highest since October 2013.

Fig. GOLD D1 Technical Chart

On the daily chart, spot gold is under strong upward pressure, and is currently trading at 1267.42. ADX of 27.41, combined with DI+ above the other lines, indicates continued gains. RSI (14) is almost 60, showing that the buying power is overwhelming. The price is expected to climb even further. The resistance to test is 1281.16.

Trade suggestion

Buy at 1267.80, SL at 1241.80, TP at 1281.16.

 

[CapitalStreetFX]

Copper In A Meltdown As Supplies Pile Up All Around

Last Wednesday, data from China reported that imports of copper edged up 19.4% to a total volume of 430,000 tons in May, compared with the same period one year earlier. For the first five months of 2016, China’s copper concentrate imports advanced to 6.7 million tons, rising 34% on a yearly basis. A strong increase in copper imports by volume has had a significant impact on the market. At the start of the second quarter of this year, total exports from China reached a two-year peak of 32,000 tons, bringing the year-to-date total to 75,500 tons.

Meanwhile, cash copper’s premium over the forward contract has retreated to a three-and-half month low, down more than 2% and hitting a low of $4,585 per ton. This has happened due to fresh supplies of 43,000 tons of metal arriving into the warehouses of Asian Commodity Exchanges.

The London Metal Exchange on June 09 also reported that the inventory hit a record high since February to hit a record level of 213,225 tons.

The week ending on June 10 was a tough one for copper bulls due to the negative data from around the globe on the supply side. However, the commodity has opened this week with an up-move, thanks to a softer US dollar, ahead of the FOMC meeting on June 15. Markets are pricing that the US central bank is not likely to raise its benchmark rate even in July, as a slowdown in the US labor market has raised some red flags. The dollar index has been testing the support at 94.44 today, down 22 points from its last close.

Fig. COPPER D1 Technical Chart

COPPER is inching up slightly from a four-month low of 2.0095, which was formed on Thursday. The Stochastics chart shows that the %K line (blue line) has already crossed over the %D line (red line), in an attempt to get out of oversold territory. The commodity is expected to mount a corrective bounce back in the short-term and may resume its downtrend thereafter, as indicated by the trend indicator.

Trade suggestion

Sell stop at 2.0314, Stop loss at 2.0588, Take profit at 1.9975

 

[CapitalStreetFX]

GBPUSD At The Edge Of A Major Selloff As Brexit Polls Raising Nervousness

On Tuesday (14/6), the British pound remained fragile near a two-month low against the dollar on worries over U.K leaving the European Union.

On Monday (13/6), four polls from three pollsters put the “Leave” campaign ahead of the “Remain”, and this has swayed the markets aggressively. Two new polls by ICM showed the “Leave” side mounting a 5%-point lead over the “Remain” camp. A YouGov online survey reported the “Leave” camp at 46% and the “Remain” at 39%, while an ORB poll put “Leave” at 49% and “Remain” at 48% among those certain to vote. Additionally, the Sun, Britain’s biggest-selling newspaper, supported a so-called Brexit on its front page.

These factors have put pressure on the sterling, and it has fallen to $1.41567 on Tuesday after closing at $1.42568 on Monday, the weakest settlement since April 19.

Earlier Today, The Office for National Statistics released the consumer price inflation report for May. Consumer prices rose by 0.3% in May, against expectations for an increase of 0.4%. The core CPI in May maintained the same pace of growth at 1.2%, compared with the figure for April. This represents a slight decline from economists’ estimate of 1.3%. British inflation has been below the Bank of England’s target objective of 2% for more than two years. Moreover, the British Input PPI in May rose by 2.6%, surpassing the reading of 0.9% in April. However, in the upcoming meeting, BoE policymakers may not put too much weight on the inflation data, given the uncertainty ahead of next week’s referendum on Britain’s European Union membership.

In the U.S, there is no doubt that the Fed will not act in its two-day policy meeting starting from Tuesday. The U.S Non-Farm Employment Change has created nervousness over the strength of the U.S economic recovery. In addition, the slipping crude oil price, which sagged back below $50 a barrel, is preventing inflation from reaching the target goal of 2%. The odds of a move by the FED in July have dropped to 16%, from a level of 53% at the end of May. The dollar index .DXY, which measures the greenback’s strength against a trade-weighted basket of six major currencies, stumbled to 94.36, down 0.03% from the previous settlement of 94.39.

Later today, the U.S Census Bureau will release retail sales data for May.It is estimated to come in at 0.4%, indicating consumers are becoming more apprehensive about spending. Markets are paying great attention to the FED’s policy meeting which is going to continue throughTuesday and Wednesday.

Fig. GBPUSD D1 Technical Chart

On the daily chart, the pair is continuing its downtrend and has hit a two-month trough at 1.40497. Continuing from a breakout recorded at the end of last week, GBPUSD is falling sharply out of the ascending range which had contained the pair for more than 3 months. RSI (14) is ticking down to 34.5380, while ADX has surged past the 20 threshold, signaling that the bearish trend is strong. The selling force is too strong and the currency pair is anticipated to fall further.

Trade suggestion
Sell stop at 1.41350, Take profit at 1.41080, Stop loss at 1.42220

 

[CapitalStreetFX]

Shorts Working Well – Brent Slips On Supply Concerns, EU Recession On Brexit

Brent crude price is down for a fifth day to as low as 49.47, after hitting the record high level of 52.98, formed on June 9, 2016.

Prices started to tumble when industry group Baker Hughes Inc. reported that oil rigs operating in the U.S. hit 328 in the week ending on June 10, an advance of 3 rigs and a sign that rising prices are luring shale producers back to the oil fields.

The oil market is now in balance thanks to unplanned outages in Nigeria, where regional militants have blown up pipelines, and Libya, which is struggling to emerge from conflict. Nevertheless, this equilibrium will tip into surplus again, especially as oil production in Iran climbed to five-year record high of 3.8 million barrels per day as shipments to Europe recovered to near pre-sanctions level. Moreover, the growing number of U.S shale producers poses a big threat to the current stability.

On the other hand, after a chain of opinion polls reported the “Leave” campaign being ahead of the “Remain” camp, the influential Sun newspaper also came out in support of Britain leaving the EU with a passionate front-page plea in favor of Leave. If England exits the European Union after the British referendum next week, investors fear the bloc could slip into a recession very quickly, which would undermine oil demand.

According to the report published by the U.S. Commerce Department on Tuesday (14/6), U.S retail sales ticked up by 0.5% in May, compared with analyst expectations for a rise of 0.3%. Furthermore, core retail sales, which exclude automobile sales, climbed up by 0.4% in May, in line with forecasts. As a result, the dollar surged strongly as the report indicated that the world’s largest economy was gaining steam despite a sharp slowdown in job creation. The rise in the value of the greenback also puts pressure on the crude oil price, as it makes dollar priced crude oil expensive for consumers.

Later Today (15/6), U.S. crude oil inventories will be published. Markets are still in a wait-and-see mode ahead of the British referendum on June 23 and the two-day FED meeting that ends later today.

Fig. BRENT D1 Technical Chart

On the daily chart, the Brent price plunged sharply from the resistance at 52.98, heading downwards to level 23.6% of the Fibonacci retracement. The stochastics show that the %K line (blue line) has reached the oversold zone far ahead of %D line (red line). This represents strong selling power and confirms that the price will not reverse soon. However, the trend indicator still suggests a long position(since February 24) with the green arrow under the price chart. The commodity is expected to reach level 23.6% of the Fibonacci retracement before bouncing back.

Trade suggestion

Sell stop at 49.19, Take profit at 48.40, Stop loss at 49.87

 

[CapitalStreetFX]

USDCHF Longs Favored – SNB Indicates Negative Rates To Continue

In the first Press Conference this year, the Swiss National Bank (SNB) announced that its expansionary monetary policy shall remained deployed as before. The interest rates for sight deposits were maintained at -0.75% and the target range for the three-month Libor stayed unchanged from -1.25% to -0.25%.

At the meeting on Thursday the central bank stated that if there is any turbulence due to the “Brexit” possibility, intervention in the foreign exchange market will be conducted immediately to offset it.

A continuation of the negative interest rate and SNB’s stance on financial markets may continue to cast a shadow on the Swiss franc, making the currency less attractive versus its rivals.

Meanwhile, in the Federal Reserve meeting that concluded yesterday, the benchmark rate was left unchanged in June as dark clouds hover over the US labor market. The referendum on continued British membership of the European Union is another key reason that made the FED’s decision harder, given the potential for global financial instability in the event of Britain exiting the EU. The central bank yesterday indicated that the US benchmark rate will be increased more than once this year, but investors currently still hold doubts on the probability of this happening.

The Bureau of Labor Statistics released Consumer Price Index (CPI) data for May earlier today. The data came in with an increase of 1.2% in comparison with the reading for April. The index advanced an annualised rate of 1% last month. The core CPI, which eliminates the cost of food and energy, inched up 0.2% in May.

In the week ending on June 10, initial jobless claims were at 277,000, higher than the expectation of 267,000. In the week prior, the number of people filing for unemployment benefits was at 264,000. The latest data show that the US labor market is still sluggish and continues to weigh on overall economic growth.

Tomorrow, building permits for May will be published by the Census Bureau. Permits are forecast to come in at 1.15 million, a little higher than the previous reading of 1.12 million in April.

Fig. USDCHF D1 Technical Chart

The greenback is on track to advancing against the swissie after falling to break the support of 0.95680. The 23.6% Fibonacci retracement is currently acting as a firm resistance for prices. However, RSI (14) is edging up, indicating that the bull is stepping in. The pair USDCHF may surge higher, breaking out from the 23.6% level and may pull back once if it cannot sustain above the 38.2% level.

Trade suggestion

Buy stop at 0.96962, Stop loss at 0.96308, Take profit at 0. 97694

 

[CapitalStreetFX]

Longs Favoured On Natural Gas As Weak USD, Strong Demand Data Supports

According to a report released earlier today, US demand for airconditioning is lower this year, relative to last year, but overall consumption levels remain strong. The demand is much higher than the long-run average so far this year, coming in with a differential of 30 Bcf on weekly injection figures, due to rising temperatures all over the world.

Average consumption for the week ending on June 15, as estimated by the PointLogic, rose by 2%. Demand was driven by an increase of 5% in consumption of natural gas for electric power generation, which offset a fall of 2% in the residential and commercial sectors.

Meanwhile, on the supply side, according to Baker Hughes, the natural gas rig count in the US rose by 3 in the week ending on June 10, raise the total number of rigs to 85. The Energy Information Administration (EIA) on June 07 also predicted that US production of natural gas is likely to surpass domestic consumption soon.

Early last week, data from China showed that Chinese natural gas output increased at an annualized rate of 4.3% in May, to 10.8 billion cubic meters

For the last several days, the US dollar has plunged significantly, due to dovish comments from the Federal Reserve Bank on rate hikes and the overall economy. Concluding remarks from the FED’s June meeting indicated that the central bank would not raise the benchmark rate this summer and no accurate timing for another rate hike was indicated. James Bullard, a voting member of the FOMC also commented on Friday that the odds of increasing interest rates this year were pretty low as most key economic indicators were only around acceptable levels.

The dollar index DXY, which measures the strength of the greenback against a basket of its rivals, declined to 93.68 in today’s trading session, far below the last close of 94.32.

Currently, investors are turning their focus onto the “Brexit” referendum on June 23, which may create significant volatility and uncertainty in the global markets for most of this week.

Fig. NAT.GAS D1 Technical Chart

Natural gas opened this week with a small gap-up, extending its up-move from the bottom of 1.663, which was formed on March 04. ADX (14) is heading up to the level of 53.2271 with a large distance between DI+ and DI-, indicating that the bullish power is very strong. A long position on this commodity is signaled by the trend indicator.

Trade suggestion
Buy stop at 2.745, Stop loss at 2.614, Take profit at 2.876