Capital Trust Markets Daily Market Commentary

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Hello Fellow Traders and Forum Members,

We are a team of Market Analysts, Traders and Technical Strategists at Capital Trust Markets. We intend to post daily market analysis and opinion based articles on this forum in hopes of sharing our insight and thoughts with our fellow trading community. We plan to share around 6-10 high quality and plagiarism-free articles daily, so it will be great if we could get a dedicated thread. Our articles will consist of signals, forecasts, technical analysis, fundamental analysis and trend identification.

Capital Trust Markets is a fully regulated and compliant online Forex Brokerage, offering a flawless trading environment to traders of all types. The world class trading infrastructure - backed up by advanced trading tools and cutting edge trading software and technology - is combined with award winning customer support to provide a highly successful blend of customized trading solutions.

 

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USDJPY flirting around critical levels; caution ahead

The demand of the safe havens increased over time, as the market seems to be investing more in safer assets, and taking money out of the risky assets such as indices in the short term. The core reasons for the same are tensions in the Ukraine, and due to shrinking economic growth in the China. The JPY has gained a lot of ground during the past two weeks, especially against the US dollar. The USDJPY pair has traded as low as 101.20 during the past week, which is a critical support zone in the medium term.

Technical analysis
There are two important trend lines, as highlighted in the USDJPY daily chart show below. These two trend lines are connecting around a same level at around the 101/101.20 area. So, this area holds a lot of importance for the USDJPY pair in the short term. A break and daily close below this critical support zone could ignite further losses in the USDJPY pair. This support region also resembles the previous swing low, which acted as a barrier for the pair and the USDJPY bears were unable to take the pair below this support region. After the 101.20 level, there is one more support level that can also play an important role for the USDJPY pair i.e. 100.70 level. This level is a spike support level from where the pair bounced several times in the past.

The 38.2% Fibonacci retracement level of the last major Bull Run from the 93.78 low 105.40 high at around the 100.95 level also sits around the same support area. So, there are tons of support around the same area, which is why any break could be a bearish call in the medium term for the pair.

On the other hand, if the USDJPY pair manages to bounce back from this support area, then it can trade back above the 102.00 level. The USDJPY pair can even trade back to the range highs at around the 102.080 level. There are major risk events lined up during the week, which can trigger a lot of volatility in the market. So, in the short term one must keep a close eye on the price action, and watch out for a break.

KEY SUPPORT LEVELS: 101.10 and 100.70
MAJOR RESISTANCE LEVELS: 101.80 and 102.60

 

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AUDCHF breaks an important resistance zone, further gains possible

The AUDCHF pair was a victim of the risk-off mood in the market during the last week. The pair traded lower in the last week, and created a classical inverted V formation on the 4 hour chart. The gains in the CHF currency were seen across the board, as one of the other pairs - EURCHF also traded lower. However, the losses in the AUDCHF pair seem to be limited in the short term, as the CHF against the US dollar is reaching critical levels.

Technical analysis
The AUDCHF pair has recently breached an important down move trend line, as can be seen in the 4 hour chart shown below. This trend line was important, as it was connecting all the major highs during the last couple of days. Before a break higher, the AUDCHF pair traded very close to the previous low at around the 0.7800 level. The AUDCHF pair has now cleared the trend line along with the swing resistance zone at around the 0.7890/95 levels.

As of writing, the AUDCHF pair is flirting with the 38.2% Fibonacci retracement level of the last down move from the 0.8048 high to 0.7824 low at around the 0.7909 level. If the AUDCHF pair manages to break and close above this level, then it might open the doors for a test of the 50% fib level at around the 0.7935 level. If the buyers get aggressive, then a test of the 61.8% fib level is also possible in the short term.

False Break?
If the break of the trend line turns out to be a false one, then the AUDCHF pair can fall back towards the 0.7880 support level. Any further bearish pressure can take the pair closer to the previous low, which would be a setback for the pair in the medium term.

Trade Strategies
We can trade both sides of the market, but preferably long. If the AUDCHF pair drops a bit lower from the current levels, re-tests the broken trend line, and fails to break it, then one can consider going long around the same zone. The stop could be placed below the 0.7870 level, and profits can vary from 50 to 80 pips. Remember, a break and close back below the trend line would invalidate this trade idea. So, keep a close eye on all important levels in the short term.

KEY SUPPORT LEVELS: 0.7870 and 0.7830
MAJOR RESISTANCE LEVELS: 0.7935 and 0.7962

 

[CapitalTrustMarkets]

EUR/USD poised for long term reversal ahead of Germany, US data

EUR/USD last week faced rejection near the channel resistance of the rising wedge formation. The pair might resume the correction phase this week if the US central bank announces another cut in the stimulus on Wednesday. Ukraine tension could also incite high volatility in the pair.

Technical Analysis

EUR/USD is being traded around 1.3901 at 5:00 GMT in Asia. The pair is likely to face strong resistance near 1.3960 which is the channel resistance. An upside breakout through the channel resistance shall expose new highs above the 1.4000 milestone.

On the downside, the pair might find strong support around 1.3710 and then the channel support which is currently sitting in near 1.3630. A break and daily close below the channel support could aggravate the bearish momentum targeting the 1.3500 support area.

ZEW Survey – Economic Sentiment

On Tuesday, ZEW economic survey reports for the Eurozone and Germany are scheduled for release. According to the forecast of different analysts, the economic sentiment in Germany declined to 55.0 points during the current month compared with 55.7 points in the previous month. Similarly, the economic sentiment in the Eurozone fell to 67.3 points this month as compared to 68.5 points last month, the forecast added. Better than expected readings will be bullish for EUR/USD and vice versa.

US Inflation Data


The same day i.e. Tuesday, the US labor department is due to release the Consumer Price Index (CPI) reports for the previous month. According to the forecast, CPI or inflation in the US declined to 1.2% during February as compared to 1.6% in the previous month. On the other hand, CPI excluding food and energy prices –often considered more accurate gauge for inflation—remained steady at 1.6% last month compared with the same reading in the month before. Better (higher) than expected US CPI reports will be bearish for EUR/USD and vice versa.

Conclusion

So keeping in view the fundamental and technical analysis, selling around 1.3940-60 or selling on breakout through the channel support around 1.3630-60 could really be a great strategy for EUR/USD.

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Prepared by Usman Ahmed, Chief Currency Strategist at Capital Trust Markets

 

[CapitalTrustMarkets]

GBP/USD likely to test 1.6460 this week amid BoE, Fed monetary policies

After forming a classic double top pattern on the daily chart, GBP/USD is heading slowly and gradually towards the channel support of the upward slope. The pair looks vulnerable ahead of the Bank of England (BoE) and Fed monetary policy decisions.

Technical Analysis

As of this writing, GBP/USD is being traded near 1.6638. Resistance is being noted near 1.6717, the swing high of the Thursday’s shooting star, ahead of 1.6785-1.6822 which is the double top resistance zone. A break and daily close above the double top resistance might expose new multi-year highs above 1.6900.

On the downside, GBP/USD could find support around 1.6568, the low of last Wednesday, ahead of the channel support which is currently sitting in near 1.6460. A break and daily close below 1.6460 might open doors for a dip towards 1.6300 handle.

BoE Rate Decision

On March 19, Wednesday, the BoE is due to announce Monetary Policy Committee (MPC) decision on the benchmark interest rate. According to the forecast of analysts, the policymakers are expected to keep the rate unchanged. The same day, BoE will also release the minutes from the monetary policy meeting, a hawkish conclusion about the economy will be seen as bullish for GBP/USD and vice versa.

Fed Stimulus

The Federal Open Market Committee (FOMC) meeting is going to be held in Washington from March 18-19. The Federal Reserve will announce its monetary policy on Wednesday. The US central bank is expected to keep the cash rate unchanged however analysts believe that the bank might reduce the stimulus by $10 billion to $55 billion amid surprise jump in February nonfarm payrolls. If it happens, then it will be seen as very bearish for GBP/USD.

Conclusion

So based on the fundamental and technical analysis, I believe that buying GBP/USD around the channel support might be a good strategy for the pair in anticipation of long term target around $1.6850

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Prepared by Usman Ahmed, Chief Currency Strategist at Capital Trust Markets

 

[CapitalTrustMarkets]

Gold appears vulnerable, eyes $1307

Gold closed yesterday with a large bearish engulfing candle below the major 76.4% fib level resistance which shows considerable downside risk. The yellow metal is expected to continue the slide up to $1307 an ounce or even below amid Fed tapering optimism.

As of this writing, the yellow metal is being traded near $1360. Resistance may be noted near $1374, the 76.4% fib level, ahead of $1392 which is the swing high of the current wave. A break and daily closing above the $1392 shall accelerate the bullish momentum, opening doors for new multi-month highs above the $1400 milestone.

On the downside, the precious metal is likely to find support near $1336 that is the 61.8% fib level support before $1307 which is a short to medium term pivot zone for the metal. A daily closing below the pivot zone could accelerate the downside movement exposing fresh lows below $1300 handle.

FOMC Meeting

The Federal Open Market Committee (FOMC) monetary policy meeting is going to take place in Washington from March 18-19. Analysts are unanimous that the Federal Reserve will keep the cash rate steady at 0.25% on Wednesday. The central bank, however, may reduce the monthly bond purchases by $10 billion to $55 billion after more than expected increase in February nonfarm payrolls. If the bank announces tapering on the third consecutive month, it could spur huge bearish momentum in gold.

US Inflation Data

The US Bureau of Labor Statistics will release the Consumer Price Index (CPI) figures today. According to the average forecast of various economists, the CPI—a main gauge for inflation—reduced to 1.2% in February from 1.6% in January. Similarly, analysts have predicted a steady 1.6% reading in the CPI excluding energy & food prices-- relatively more accurate measure for inflation-- for the previous month. Generally speaking, high CPI readings (close to 2%) are considered good for an economy. So if the CPI data comes better than expectations, then it could cause strong bearish pressure in gold and vice versa.

So selling the precious metal around above $1360 could be a good strategy, the target should be at least $1307.

 

[CapitalTrustMarkets]

USD/CHF looks set for rallies towards 0.8900

After finding support last week near the lower channel of the long term downward slope, USD/CHF is constantly showing resilience. The pair is showing some real strength ahead of the Federal Open Market Committee (FOMC) meeting and the interest rate decision by the Swiss National Bank (SNB). The pair might test 1.8900 handle in near future, according to the technical analysis.

Technical Analysis

As of this writing, the pair is being traded near 0.8728. Resistance may be noted around the 0.8700 handle which is the channel support of the downward slope. The pair will find new sellers on a break and daily close below the channel support.

On the upside, the nearest resistance is being noted around 0.8890 which is the high of the previous upward move. A break above 0.8890 shall expose further rallies towards 0.8930 and then 0.8990. A daily closing above the channel resistance could open doors for 0.9130 or even above that level.

SNB Rate Decision

On Thursday, the Swiss National Bank (SNB) will announce its decision on the benchmark interest rate. According to the forecast of different analysts, the bank is expected to keep the rate unchanged. The same day, Swiss trade balance data is also scheduled for release. According to the median projection of analysts, the trade surplus remained $2240 million in February as compared to $2594 million in the month before. Generally speaking, high (positive) trade balance reading is considered good for the economy and vice versa. So if the trade balance data comes better than expectations, then it will be bearish for USD/CHF and vice versa.

Other Major Events

Today US labor department will release inflation reports for the previous month. Better than expected US inflation figures will be bullish for USD/CHF. Similarly, tomorrow the Fed is due to announce its decision on the pace of the monthly asset purchase program.

So in a nutshell, buying USD/CHF at the current levels could be a good strategy keeping in view the tapering expectations from Fed tomorrow.

 

[CapitalTrustMarkets]

USD/CHF looks set for rallies towards 0.8900

After finding support last week near the lower channel of the long term downward slope, USD/CHF is constantly showing resilience. The pair is showing some real strength ahead of the Federal Open Market Committee (FOMC) meeting and the interest rate decision by the Swiss National Bank (SNB). The pair might test 1.8900 handle in near future, according to the technical analysis.

Technical Analysis

As of this writing, the pair is being traded near 0.8728. Resistance may be noted around the 0.8700 handle which is the channel support of the downward slope. The pair will find new sellers on a break and daily close below the channel support.

On the upside, the nearest resistance is being noted around 0.8890 which is the high of the previous upward move. A break above 0.8890 shall expose further rallies towards 0.8930 and then 0.8990. A daily closing above the channel resistance could open doors for 0.9130 or even above that level.

SNB Rate Decision

On Thursday, the Swiss National Bank (SNB) will announce its decision on the benchmark interest rate. According to the forecast of different analysts, the bank is expected to keep the rate unchanged. The same day, Swiss trade balance data is also scheduled for release. According to the median projection of analysts, the trade surplus remained $2240 million in February as compared to $2594 million in the month before. Generally speaking, high (positive) trade balance reading is considered good for the economy and vice versa. So if the trade balance data comes better than expectations, then it will be bearish for USD/CHF and vice versa.

Other Major Events

Today US labor department will release inflation reports for the previous month. Better than expected US inflation figures will be bullish for USD/CHF. Similarly, tomorrow the Fed is due to announce its decision on the pace of the monthly asset purchase program.

So in a nutshell, buying USD/CHF at the current levels could be a good strategy keeping in view the tapering expectations from Fed tomorrow.

 

[CapitalTrustMarkets]

CAD/CHF has been on a prolonged bearish trend, yet there are several fresh technical hits that point towards a larger bullish correction. The pair traded as low as 0.7839 in March, where sellers failed to make a lower swing low on the second run, which aided in the formation of a double bottom, a potential bullish reversal pattern.

Technical outlook
With a double bottom set at 0.7839 and four highs in the 0.7926 area, CAD/CHF is currently in a very tight range and will present a breakout soon. A 4H bar close above 0.7926 should set a decent rally in motion, aiming towards the next resistance which is the price pivot zone at 0.8050.

MACD Divergence
On the 4H timeframe, MACD has been showing increased strenght, making higher lows and price has been making lower swing lows. A 4H MACD cross into positive territory coupled with a break above 0.7926 will confirm the bullish pressure.

Breakout trading is the preferred strategy at this point, since the market is respecting both the support and the resistance levels all too well. Following a close above 0.7926, buying CAD/CHF with a stop loss of 40-45 pips looks like the best trading opportunity. 0.7972 is the primary target, followed by 0.8050.

 

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GBP/USD eagerly awaits BoE, Fed monetary policies, 1.6478 eyed

GBP/USD yesterday found support near the 50% fib level as inflation in the US fell more than expectations. The pair extended gain on Wednesday ahead of the Bank of England (BoE) and the Federal Reserve monetary policy decisions. Cable might test the 1.6478 support in near future if the Fed reduces the stimulus on the third meeting in a row.

Technical Analysis

As of this writing, cable is being traded near 1.6600. Resistance can be seen near 1.6688, the 23.6% fib level and the high of the shooting star daily candle, ahead of 1.6764 which is the channel resistance of the rising wedge formation. A daily closing above the wedge shall open doors for the new multi-year highs above 1.6850.

On the downside, the pair is expected to find support around 1.6538, the 50% fib level, ahead of 1.6478 which is the channel support of rising wedge on the daily chart. A daily closing below the wedge shall push the pair into relatively stronger bearish trend, opening doors for 1.6390, the 76.4% fib level and then 1.6250, a historical resistance-turned-support for the pair.

BoE Monetary Policy

BoE is due to release the minutes from the monetary policy meeting today. Hawkish comments from the policymakers may spur huge rallies in cable. Investors will be eyeing BoE stance on the first rate hike after RBNZ landmark decision to increase the cash rate from 2.50% to 2.75%. Moreover, the central bank will also announce the Monetary Policy Committee (MPC) decision on the benchmark interest rate. According to the unanimous forecast of different analysts, all nine members of the committee are likely to vote for the unchanged rate.

Fed Monetary Policy

The two-day Federal Open Market Open Committee (FOMC) meeting is going to conclude today in Washington. The Federal Reserve will announce the decision of FOMC policymakers on the interest rate and the stimulus. Analysts have predicted no change in the cash rate however the bank may reduce the QE by $10 billion.

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Prepared by Usman Ahmed, Chief Currency Strategist at Capital Trust Markets

 

[CapitalTrustMarkets]

US Dollar breakout inevitable as Investors await FOMC

The US dollar buyers are in pain for the last several weeks now. The US dollar has consistently declined after setting a high at around the 81.30 level. Most majors, including the EURUSD and GBPUSD are on the rise and trading around multi year highs. This week also the US dollar is trading in a range, as the market is eyeing the fed interest rate decision. The investors seem to be nervous, as there are mixed projections of whether the Fed will reduce the bond purchases again in the upcoming meeting or not. Let’s look at some of the things that could impact the US dollar.

In line CPI data
Yesterday, at GMT 12:30 PM, the US inflation data was published by the US Bureau of Labor Statistics. The outcome was mostly in line with the expectations, as for all urban consumers CPI increased 0.1 percent in February on a seasonally adjusted basis as expected by the market. However, over the last 12 months, all items CPI increased 1.1 percent before seasonal adjustment, missing the expectations of 1.2%. I do not believe that this outcome will change the mood of the fed members. So, inflation at the moment is floating in line with the fed’s expectations.

FOMC Impact
The Fed rate decision is lined up later during the day. The market is broadly expecting another $10B reduction in the bond buying program. So, there are three possible scenarios:
First - $10B cut – USD positive, and the pairs to watch for a rollover are EURUSD and NZDUSD
Second – No taper – USD negative – Watch for a spike in GBPUSD.
Third - $5B reduction – Mild reaction possible, mostly USD negative – USDJPY could bounce.

Unavoidable break in the USD
The US dollar is shaping up for a big move in the coming days for sure, as can be seen in the US dollar Index chart shown below. There is a contracting triangle forming on the 4 hour chart. The resistance lies at around the 79.50 level, and support lies at around the 79.20 level. Considering the events lined up, one can expect a breakout. An upside swing could take the USD all the way back up to 79.90 level.

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Prepared by Aayush Jindal, Chief Technical Analyst at Capital Trust Markets

 

[CapitalTrustMarkets]

Fading German ZEW Economic Sentiment and Wholesale Price Index is a warning sign

Yesterday in the European session, two important data were released in Germany. First one was the German Wholesale Price Index (WPI) and the other one was ZEW economic sentiment. Both the releases disappointed the investors. The impact was not that huge in the short term for the EURUSD, but these are warning signs that things are not as good as one think. The Euro buyers are enjoying the myth that everything is fine.

German WPI
The expectation was of a 0.2 percent rise in February, but the outcome was disappointing, as from January 2014 to February 2014 the index fell by 0.1%, reported by the Federal Statistical Office. The official release also points that “the selling prices in wholesale trade were lower by 1.8% than in February 2014 in February 2013“.

The figure below illustrates change in German Wholesale Price Index over last two years:

German ZEW Economic Sentiment
Other economic data released during the yesterday’s EU session was the German ZEW Economic sentiment. The market was expecting a decline of 2.7 points in March 2014. However, the outcome was more than disappointing, as the sentiment registered a whopping 9.1 points decline from 55.7. It now stands at around 46.6. The fall was more of a result of Crimea crisis. Now, a thing to remember here is that the next reading has to improve, else it will start weighing on the market sentiment. The bulls need not to worry a lot until now, but if the market sentiment fades, then we can witness a decline in the bullish sentiment for the Euro.

EURUSD still range bound
The reaction in the EURUSD was a mild one after the data release. The pair declined, but the bulls appeared at around the 1.3880/70 support area. The pair is trading in a range of 50 pips for the last couple of days. On the upside, the 1.3960 is a crucial hurdle ahead of the all-important test of the 1.40 figure in the short term.


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Prepared by Aayush Jindal, Chief Technical Analyst at Capital Trust Markets

 

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Gold poised for deep correction towards $1280 after Yellen remarks

Gold on Wednesday slumped more than $30 an ounce following the Federal Reserve’s decision to reduce the Quantitative Easing (QE) and Yellen’s remarks on the first rate hike. The precious metal gave the yesterday closing below the 61.8% fib level as well as the channel support of the daily upward slope.

Technical Analysis

The yellow metal is being traded around $1331 an ounce at 2:45 GMT in Asia. Resistance may be noted near $1337 that is the confluence of 61.8% fib level and channel support turned resistance. A break and daily closing above the old channel could push the metal again into bullish momentum, opening doors for $1373 and then the $1400 milestone.

On the downside, the metal is expected to find support around $1307 an ounce that is the 50% fib level and then $1300 that is the 200 Daily Moving Average (DMA) and the psychological level. A daily closing below the $1300 handle might be targeting $1278 which is the confluence of 100 DMA and 38.2% fib level.

Fed Tapering

Fed yesterday kept the benchmark interest rate unchanged at 0.25% but reduced the monthly asset purchase program by $10 billion to $55 billion, a sign that the economy is growing steadily without the stimulus. It is pertinent that the minutes from the Fed January meeting showed the policymakers were planning to scrap the entire QE by the end of October this year through successive tapering.

First Rate Hike

Fed chair Janet Yellen yesterday said the central bank could increase the interest rate as soon as the next six months, the remarks which were totally surprising and against the Fed forward guidance stance. Commodities, currencies and bonds fell sharply after the Yellen remarks. The same trend is likely to continue today or may be even throughout the next week.

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Prepared by Usman Ahmed, Chief Currency Strategist at Capital Trust Markets

 

[CapitalTrustMarkets]

Canadian dollar crushed post series of events

The Canadian dollar is trading around multi-year lows against most of the major currencies. The USDCAD pair jumped to four-year high yesterday after the Fed interest rate decision. The pair traded above the 1.1260 level. There was a series of events, which hammered the Canadian dollar. The highlight was the speech from Poloz, who cautioned the investors that the economic growth in the Q1 could be on the soft side.

Increase in Wholesale Sales
On Wednesday, at GMT 13:30 PM, the Canadian Wholesale sales data was published by the Statistics Canada. The expectation was of a 1.0% rise in the wholesale sales. However, the outcome missed the expectations by 0.2%, and registered an upswing of 0.8%. Remember, this is an advance from the previous reading, and overall gain in January. So, I do not think that the data was bad at all. The statement also highlighted that “the Wholesale sales rose 0.8% to $50.0 billion in January, following a decline in December. Gains were recorded in all subsectors except motor vehicle and parts. Excluding this subsector, wholesale sales rose 1.4%”. It is worth noting that the sales were up in five provinces in January. The gains were mainly driven by the agricultural supplies industry, chemicals, allied product industry and the recyclable material industry. One more key thing to note from the release is that the inventories also rose 1.4% to $62.3 billion in January.

Highlights of BOC’s Governor Stephen Poloz speech
On Tuesday, in a speech in Halifax Nova Scotia, the Bank of Canada’s Governor Stephen Poloz said that he cannot rule out a rate cut in the medium term. The main reason for such a statement was the concern of downside risk for the CPI rate. His word of caution was enjoyed by the Canadian dollar bears, as the Canadian dollar fell sharply against most of the major counterparts. It’s hard for me to believe that they will actually deliver a rate cut in the near future. I think it’s more of a verbal intervention to push the Canadian dollar further. I still remember when the Mark Carney was the Governor, he never tried to push the Canadian dollar down. Nevertheless, the Canadian dollar sellers might soon get a reality check in the near future, in my opinion.

Fed’s tapering
One more event, which affected the USDCAD was the fed interest rate decision. The Fed decided to taper again in March and reduced the QE pace from $65B to $55B.

Fed Pace of Treasury Purchases - $30 billion
Fed Pace of MBS Purchases - $25 billion

Technical Analysis
The pair after breaking an important triangle on the monthly chart headed higher. The pair is now coming closer to an important resistance zone, in my opinion, as can be seen in the chart shown below. There is a monster trend line around the 1.1300 level, and not to forget that the pair is testing the 50.0% Fibonacci retracement level of the last major down move from 1.3063 high to 0.9420 low. A break and close above the trend line and resistance zone would call for a larger wave up in the medium term.

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Prepared by Aayush Jindal, Chief Technical Analyst at Capital Trust Markets

 

[CapitalTrustMarkets]

EUR/USD looks set for slide below 1.3650

EUR/USD yesterday closed below the daily trendline support after the announcement of monetary policy from the Federal Reserve, hence breaking the two-month old upward slope channel. The pair is expected to extend retracement towards 1.3721 or even 1.3630, according to the technical analysis.

Technical Analysis

EUR/USD is being traded near 1.3831 at 4:45 GMT in Asia. The pair is likely to face immediate hurdle near 1.3840 that is the trendline resistance. A daily closing above the trendline will push the shared currency into bullish trend, targeting 1.3950 and then the 1.4000 milestone

On the downside, the pair is expected to find support around 1.3780-3800 that is the 38.2% fib level and strong horizontal support area. A daily closing below 1.3780 shall expose 1.3750, the 50% fib level, and then the 1.3640-60 region that is the confluence of trendline support and 61.8% fib level.

US Job Data

Today US labor department is due to release the weekly jobless reports. According to the forecast of different analysts, the number of people of who applied for the unemployment incentives in the US rose to 327K during the week ended on March 14 compared with 315K in the previous week. Similarly, continuing jobless claims –the total number of people claiming jobless incentives—were standing at 2.855 million during the week ended on March 07. Generally speaking, high jobless claims signal high unemployment thus considered negative for an economy and vice versa.

US Housing Market Figures

National Association of Realtors (NAR) is due to release today the existing home sales change report for the month of February. According to the median projection of analysts, homes sales in the US jumped by 0.8% last month as compared to 5.1% decline in the previous month. In absolute term, the existing home sales declined to 4.60 million compared with 4.62 million in the month before, the forecast added. Better than expected US data will be seen as bearish for EUR/USD and vice versa.

Bank Stress Test Info

Board of Governors of Federal Reserve System are due to release today the information on major banking institutions’ capabilities to cope with stress situations. The report plays major role in the policy making.

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Prepared by Usman Ahmed, Chief Currency Strategist at Capital Trust Markets

 

[CapitalTrustMarkets]

GBPJPY setting up for a critical break, caution ahead

The Japanese Yen traded lower yesterday after the Fed interest rate decision. The GBPJPY pair also took the advantage of the ride, and climbed higher. However, most of the gains were limited due to the collapse of the sterling. The GBPUSD pair moved lower Intraday despite better than expected labor data, which was released yesterday. There is no economic release scheduled for the UK in the coming two days. So, mostly the GBPJPY pair will be driven by the market sentiment.

Technical Analysis
The GBPJPY has a monster triangle forming, as highlighted in the 4 hour chart shown below. Yesterday, the pair attempted a break it to the upside, but failed and moved lower again. The 169.50 is a critical resistance level, which coincides with the triangle trend line. A break and close above the triangle and resistance level might open the door for more upside towards the 171.00 level. The 171.00 handle is very crucial, as the pair has failed a number of times around the same region, as can be seen in the chart.

Crucial Ride
One important thing to note here is that the pair recently bounced from the 61.8% Fibonacci retracement level of the last leg higher from the 163.80 low to 173.50 high. This bounce came from a very technical level, which suggests that more upside is feasible in the short to medium term.

Trade Ideas
I think we should wait for a break before acting. The pair can break in any direction. However, the technical indicators point a break higher, but one should never commit to one side of the market. The RSI has breached the 50 level, and looks set to close above it, which is a positive sign. If the pair breaks higher and closes above the triangle, then one can enter a long trade with a target of around 170.20. A break lower might push the pair down towards the 76.4% fib at around the 166.16 level.


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Prepared by Aayush Jindal, Chief Technical Analyst at Capital Trust Markets

 

[CapitalTrustMarkets]

NZD/USD bears come out of hibernation

Following the Fed interest rate decision, NZD/USD dipped 110 pips to the nearest support, where action slowed down to a halt during the asian session.

The current support, priced at 0.8520, is actually a crucial level in the current uptrend. Besides being a confirmed price pivot zone where the last swing low in the uptrend ended, the bullish trendline has caught and the 200 simple moving average on 1H timeframe have finally caught up with this level.

Ahead of the US Jobs and Home Sales reports, NZD/USD sellers are already trying to stabilize the price below this support level. A successful break here will technically change the trend from bullish to bearish, opening up the way towards 0.8430 area.

Further confirmation would be a re-test of 0.8520 from below, confirming this level as resistance, which suggests a lot more downside is ahead in the days to come.

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Prepared by Alexandru Z., Chief Technical Analyst at Capital Trust Markets

 

[CapitalTrustMarkets]

Swiss Franc slammed as SNB warns of further action

On Thursday, at GMT 08:30 AM, the Swiss National Bank announced the interest rates. The outcome was in line with the expectations, as the Swiss National Bank reaffirmed minimum exchange rate of CHF 1.20 per Euro, and decided to keep the interest rates at 0 percent. No policy change was introduced, as the central bank re-iterated the need of EURCHF cap. The central bank even said that “the SNB stands ready to enforce the minimum exchange rate, if necessary, by buying foreign currency in unlimited quantities, and to take further measures as required.”

CHF Strength
The recent strength in the CHF did not go down well with the central bank, as the Chairman of the Swiss National Bank Thomas Jordan mentioned that since the Swiss Franc is considered as a safe haven, it becomes very difficult in the times of crisis to maintain the policy as required. It is worth noting that the Swiss franc recently gained a lot of traction against most of the major currencies, as the tensions in the Ukraine escalated. This becomes more problematic for the central bank. However, the central bank doesn’t think that there will be any need of intervention in the short term.

Economic projections
The central bank lowered the inflation forecast. They now expect the inflation rate to be around 0 percent, compared to previous expectations of 0.2 percent for 2014. In 2015 and 2016 the inflation rate is expected to be around 0.4 percent and 1 percent respectively. In terms of growth, the central bank now expects economic activity to pick up from the first quarter of 2014, and anticipating GDP growth of around 2 percent for 2014 as a whole.

Technical Analysis
The EURCHF traded higher after the release, as the CHF currency lost luster across the board. The EURCHF climbed higher, and broke an important down-move trend line, as highlighted in the chart shown below. However, the bull-run stalled right around another down-move trend connecting all major swing highs. The buyers struggled to take the pair higher above this resistance zone at around the 1.22 figure, which also represents the 50.0% Fibonacci retracement level of the last down-move from the 1.2298 swing high. The pair fell back sharply towards the 1.2160 support level, where buyers appeared again. The RSI is coming closer to the 50 level, which could hold in the short-term and the pair might bounce from the 1.2160 support level.

KEY SUPPORT LEVELS: 1.2160 and 1.2140
MAJOR RESISTANCE LEVELS: 1.22 and 1.2240


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Prepared by Aayush Jindal, Chief Technical Strategist at Capital Trust Markets

 

[CapitalTrustMarkets]

CAD/JPY poised for breakout through 4-hour triangle

CAD/JPY yesterday once again closed above the 38.2% fib level support, showing considerable strength, ahead of the Canadian inflation report. According to technical analysis, the pair is expected to take retracement and extend the upside movement towards the 92.00 handle.

Technical Analysis

The pair is being traded around 91.04 at 2:15 GMT in Asia. Resistance may be noted near 91.17, the channel resistance of the four-hour triangle formation. A break above the channel could expose the 92.00 handle that is 55 MA on the four-hour chart.

On the downside, the pair is expected to find major support around 90.89 that is a confluence of the 38.2% fib level and channel support of the triangle. A break below the channel support might threaten the 90.00 handle.

Canadian Inflation

Statistics Canada is due to release inflation data today which will be a major risk event for the pair. According to the median projection of different economists, the Consumer Price Index (CPI)—a main yardstick for inflation—dropped to 0.9% in February compared with 1.5% in the same month of the previous year. Generally speaking, high CPI reading (close to 2%) is considered good for economies.

The Bank of Canada (BoC) is also scheduled today to release the Core CPI data i.e. relatively more accurate measure for inflation. Core inflation declined to 1.1% in February compared with 1.4% in the same duration of the year before, the forecast added. Better than expected inflation data will be considered bullish for CAD/JPY and vice versa.

Higher USD/JPY keeps CAD/JPY bullish

After the Fed tapering decision, bullish trend is being observed in USD/JPY which is consequently supporting CAD/JPY positively due to weaker Japanese Yen (JPY). The same trend is likely to continue in near future because Japan’s basket is empty today because of Vernal Equinox Day vacation.

Conclusion

Buying or selling CAD/JPY on breakouts appears to be the least risky strategy, however beware of the false breakouts; ideally one should wait for a four-hour closing before making an entry.

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Prepared by Usman Ahmed, Chief Fundamental Strategist at Capital Trust Markets

 

[CapitalTrustMarkets]

Cable set to accelerate on the downside with a break of 1.6460

The Fed decision to taper has ignited volatility in the market, and one of the majors which was affected the most is the GBPUSD pair. The GBPUSD pair is under pressure for the last couple of weeks, and even better than expected labor data failed to attract the buyers. The pair is showing five swings down from the recent 1.6786 high.

Critical Channel Break Eyed
There is an important up-move channel, which has played a significant role for the pair in the short term, as plotted in the 4 hour chart shown below. The pair as of writing is flirting with the channel support region, and tested a number of times the 1.6480/60 support levels. One important thing to note here is that this support level also represents the 61.8% Fibonacci retracement level of the last leg higher from the 1.6251 low to 1.6819 high. So, this support area is a double confluence zone for the pair, and that is the reason why it holds a lot of importance in the short term. If the pair dives below the mentioned support area and closes below the same, then the sellers can take control of the situation. The sellers could eye the 76.4% Fib retracement level in that case, followed by the previous low at around the 1.6250 level.

RSI Divergence and Trend line
There is an early-warning sign developing on the RSI as of writing. There is a minor divergence noted, as highlighted in the chart as well. This divergence could well prove to be vital, and push the pair from the current levels for the sixth swing. One need to be very careful in the coming sessions/days, and should wait for some more positive signs before jumping into a trade. On the other hand, a break of the trend line on the RSI might trigger a down-move in the pair.

Moving ahead
There is no denial that the pair can bounce from the recent support level. If the pair buyers manage to push the pair higher, then the 1.6580 level is the first major hurdle for the pair. This level also coincides with the channel resistance zone. So, keep an eye on this level if you are planning for a long setup in the sessions ahead.

KEY SUPPORT LEVELS: 1.6480 and 1.6410
MAJOR RESISTANCE LEVELS: 1.6540 and 1.6580


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Prepared by Aayush Jindal, Chief Technical Strategist at Capital Trust Markets