Cross Border Foreign Exchange Intermarket Analysis

When will BREXIT effect to the world financial market settle down?

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maximusc

Trader
Jun 24, 2016
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Most of the retail traders are prone to only trade with chart and technical analysis as well as frequently change their strategy setup during trading. This have caused irrelevant to one of the trading vital code of conduct that is "Plan Your Trade and Trade Your Plan". As such, majority of retail traders always be the majority of the forex donors. Concern with what is actually happen so that in this thread we will discuss about what are the mechanism that actually moves the forex price that we observed in the chart (Comprises of central bank monetary policy, stocks, commodity, bond, futures, options etc). It might be quite difficult to understand initially to understand. However, with the daily analysis (subject to market changes), weekly analysis and trade ideas that will be shared here perhaps it will make you more easier to get the whole picture of what actually happen in the forex world environment. Hence, you will be able to discover the favorable trend which will ensure you to trade with conviction and only use the chart to find the best possible level to execute position. Give yourself an opportunity to change your fortune "Analyse Like a Big Investor and Trade Like a Professional Trader". Also, please don't forget to always be safe (Risk Management) during trading by only use 2% - 5% of your capital and make sure your psychology is fit enough. Happy trading guys. Cheers!
 

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maximusc

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Jun 24, 2016
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Week In Focus 11-15 Jul 16

The latest BoE rate decision will be the highlight of the week in the wake of the UK’s decision to leave the EU.

Elsewhere, Chinese data is set to take some of the focus with the highlights coming in the form of the Q2 GDP release.

Given the decision by the UK to leave the EU, the latest BoE rate decision is highly anticipated following the recent collapse in the value of GBP relative to its major counterparts and furthermore as it is now the worst performing currency of the year. Expectations are now mixed amongst participants with some looking for an expansion of the QE program alongside a rate cut, however, some analysts have suggested that these may not occur in tandem and that the recent inflation data is not bad enough to justify some of these measures. As a reminder, there will be no press conference from the BoE at this meeting; therefore all eyes will be on their rate decision and report. The BoC are the other central bank that are set to release their rate decision on Wednesday prior to the BoE on Thursday.

Chinese data is in focus towards the end of the week, with the latest GDP reading being the highlight. Expectations are widely expected for the latest release to continue to show a slowdown in growth in the Asia heavyweight. Participants are highlighting that there will be a different methodology used to calculate the latest reading which could see a marginally higher figure; however, this is already priced into market expectations. Other key data points out of China include; foreign trade balance, retail sales and industrial production. From a US perspective, data is to include CPI and retail sales metrics while Alcoa are due to report on Monday after-market, announcing the unofficial start of earnings season.
 

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maximusc

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Jun 24, 2016
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2 days after Yen weakens on stimulus plans. While the pound enjoys another roller coaster ride...

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Keep it long... Until tomorrow European Session guys...
 

maximusc

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Jun 24, 2016
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Trend line breakout (ready for short signal).

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Short GBPJPY now.

Reason:

GBP - Waiting for retracement to go down further. Carney speaking in upbeat terms about longer term prospects for UK economy. Pound still perky with EURGBP losses to 0.8420 again underpinning GBPUSD as is GBPJPY demand in the dips.
  • low bond yields reflect hedging of downside risks not necessarily 30 years of stagnation
  • danger for financial stability is that fundamentals will reassert themselves on slope and level of UK bond yield curve
JPY - Go big or fail: Past experience showed that conventional QE did not do the trick. What may change matters is the BoJ leaves the impression of funding fiscal policy beyond the life span of a generation. In this case, Japan's households and corporates would not regard today's fiscal spending as tomorrow's tax bill. It has been Japan's high private sector savings pushing Japan's current account back into surplus and reducing local price expectations. It needs to be seen if Japan is able to develop more radical measures compared to the past to trigger necessary shifts of inflation expectations strong enough to steepen the JGB curve and to undermine JPY. We doubt that and view USDJPY rallies as providing selling opportunities.

*Morgan Stanley hit profit-stop today on its USD/JPY short from 106 around 103.60.
 

maximusc

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Jun 24, 2016
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Stop Lost Hit with small profit.

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Waiting for BoE event today to know whether there is a rate cut or else.

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Trade Safe guys.
 

maximusc

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Jun 24, 2016
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Sentiment Wise: What Do We have at the Moment?

USD: enjoying that "flight to safety" flow at the back of Brexit sentiment. FOMC members pushing for rate hike to happen sooner than later.

GBP: rate cut.

AUD: rate cut

NZD: rate cut. 21st July will be the focus

CHF: the wild card. Anything bad happen to Euro, expect action

EURO: rate cut

JPY: fiscal stimulus and rate cut

CAD: WTi and rate cut
 

maximusc

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Jun 24, 2016
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Sell now:

EURUSD SL @ 1.10596 TP @ 1.09699

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Buy Now:

USDCHF SL @ 0.96709, Target @ 0.99187

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Reason please refer to weekly analysis report attached earlier. Tq guys.
 

maximusc

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Jun 24, 2016
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DAILY US OPENING NEWS: Equities trade higher amid the positive risk sentiment, with the DAX also lifted higher following firm IFO survey
25th July 2016

Modest gains in European equities with the DAX further bolstered by firm post Brexit IFO survey data.
Major FX pairs trading in ranges amid a lack of tier 1 data to instigate significant price action.
The economic calendar is somewhat light today with highlights including the US Dallas Fed Manufacturing Index and a US 2-Yr Note Auction.
ASIA-PACIFIC

Asia equity markets mostly took the impetus from last week’s 4th consecutive weekly gain in US stocks, although Chinese markets slightly lagged on weak earnings and debt woes. ASX 200 (+0.6%) and Nikkei 225 (+0.3%) traded modestly higher following another record close in the S&P 500 on Friday with JPY weakness also uplifting Japanese exporter sentiment. However, Nintendo shares severely underperformed and fell nearly 20% in early Japanese trade after the Co. dismissed Pokemon Go’s potential impact on its earnings. Elsewhere, China markets are mixed with the Shanghai Comp. (+0.24%) initially negative amid debt concerns and comments from Chinese Finance Minister Lou who vowed prudence in dealing with the issue, although the index then recovered following a firm liquidity injection, while the Hang Seng (-0.2%) was weighed following reports of several profit warnings including Citic, which saw a potential 50% decline in interim results. Finally, 10yr JGBs traded higher despite positive sentiment in Japan, with the BoJ in the market for over JPY 1.2trl of government debt.





PBoC announced a CNY 150bln injection via 7-day reverse repos. (Newswires)

PBoC set CNY mid-point at 6.6860 vs. Prev. 6.6669.



BoJ Governor Kuroda said on Saturday he would ease policy further if necessary to achieve the 2% inflation target, while he also reiterated a commitment to continue with the current stimulus until prices are anchored at the target. In separate reports, some BoJ officials said to be hesitant to support further policy easing. (Nikkei)



Japanese Trade Balance Total (Jun) 692.8bln vs. Exp. 494.8bln (Prev. -40.7bln)

- Exports (Jun) -7.40% vs. Exp. -11.60% (Prev. -11.30%)

- Imports (Jun) -18.80% vs. Exp. -19.70% (Prev. -13.80%)



EQUITIES/ FIXED INCOME

Equites trade in the green this morning albeit modestly so, following on from a relatively positive session in Asia amid increased appetite for risk. Fixed income has been hit this morning with bund futures down as much as 10 ticks so far, notable outperformance has been observed in the front end, with the yield curve steepening. The German IFO data came in better than expected this morning to much surprise, given that the survey was conducted post Brexit and as such expectations had positioned themselves for a slightly weaker figure. Other than that we have seen some interesting equity specific news with William Hill up 8.8% on the news that they may be acquired by 888 holdings and Rank Group in a joint venture.



FX

German IFO was the only notable data release this morning, and in the wake of the Brexit vote, the market was anticipating some weakness in the numbers but were met with beats in expectation on all fronts. The EUR was unmoved on the release, but has edged higher against the USD since, though remains comfortably below 1.1000 as yet. GBP has also gained modestly against the greenback, resisting a move below 1.3100 to keep the EUR/GBP rate well contained in the mid .8300’s for now. USD/JPY attempted a return below 106.00 after rejecting 107.00 early on, but has found buyers here with a more positive FOMC and possible BoJ action eyed later in the week. CAD remains pressured alongside Oil prices, where front month WTI has moved under $44.00 again. 1.3200 a key level to watch for here, but decent offers seen ahead of this. AUD and NZD trade tight; downside momentum fading in both cases, despite the fresh calls for rate cuts in August – more so in NZ as alluded to in their impromptu economic review last week.

COMMODITIES
Heading into the North American cross, oil prices have seen muted price thus far with crude futures trending lower throughout much of the morning, in turn WTI has slipped below the USD 44.00 level. Elsewhere, gold has been pressured amid the positive risk sentiment, while copper prices were flat with the red metal failing any significant recovery from Friday’s slump.
 

maximusc

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Jun 24, 2016
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DAILY EUROPEAN OPENING NEWS

The RBA cut rates by 25bps as expected with analysts believing the door remains open to further reductions, subsequently sending AUD/USD below 0.7500

The RBA cut rates by 25bps as expected with analysts believing the door remains open to further reductions, subsequently sending AUD/USD below 0.7500Asian equities traded mostly lower amid the negative lead from Wall Street while Japanese participants await details of the nation’s stimulus packageLooking ahead, highlights include US Consumer Spending, PCE Deflator, API Crude Oil Inventories, earnings from BMW, AIG, P&G and Pfizer

ASIA

Asia traded mostly lower amid initial cautiousness ahead of the RBA rate decision and following the weakness seen in Wall St., where declines in energy to bear market territory and discouraging data dampened sentiment. This saw Nikkei 225 (-0.7%)underperform as participants also await Japan’s stimulus announcement which is expected to be around JPY 28trl, which some analysts feel may not be enough to have a sustained impact. ASX 200 (-0.6%) traded subdued with a widely expected RBA rate cut failing to provide counterbalance the commodities led weakness. Shanghai Comp (0.0%) saw indecisive amid mixed earnings, while Hong Kong markets remained closed due to a typhoon. 10yr JGBs continued to feel the repercussions from last week’s BoJ disappointment with prices down nearly a point while a poor 10yr auction, which saw the b/c and lowest accepted price decline from prior and a wider tail-in-price, further exacerbated losses in the paper.

Some details from the stimulus draft are said to have been released and include JPY 13.5trl of fiscal measures. (Nikkei)

Japan forecasts a 1.3% boost to their GDP within the next few years, according to the Nikkei. (Newswires)

Japanese govt is said to be doubtful that BoJ will achieve its 2% inflation goal and forecast inflation rising to 1.4%. (Newswires)

PBoC injected CNY 60bln in 7-day reverse repos.
PBoC set CNY mid-point at 6.6451 (Prev. 6.6277); 1st time the PBoC has weakened the reference rate for 6 sessions. (Newswires)

EUROPE/UK

Former BoE MPC member Barker has suggested that a rate cut by the bank would be a mistake as it would hamper bank profits and fail to boost household or business spending. (Times)

FX

Commodity linked currencies languished near yesterday’s lows after weakness in oil prices saw WTI crude futures briefly dip below USD 40/bbl. AUD/USD largely dismissed poor Building Approvals and Trade Balance figures as focus remained on the RBA, who cut rates by 25bps to a new record low of 1.50% as expected and resulted in AUD/USD declining to below 0.7500. USD/JPY and JPY crosses attempted to reclaim some of its recent slump, which coincided with comments from Japanese Finance Minister Aso that FX moves must be carefully monitored and FX stability is important.

RBA cut rates by 25bps to new record low of 1.50% as expected. RBA reiterated that a firmer AUD could complicate an economic transition and that there is a reduced risk of low rates overheating the housing market. (Newswires) Furthermore, given that inflation was cited as a key factor in cutting rates, many believe the door remains open to further rate reductions.

DBRS downgraded Brazil to BB with trend negative. (Newswires)

COMMODITIES

WTI crude futures saw sideways trade overnight, trading above USD 40/bbl after falling 20% from its June highs. Gold () was pressured at the open of markets in China with the precious metal down by over 3 bucks, with a lack of participants in Hong Kong attributed to the downside. Elsewhere, copper remains subdued with prices remaining near yesterday’s lows amid the cautious tone in the region.

BP's Whiting refinery is to slow down the reformer due to an operational problem, according to sources. (Newswires)

Marathon Petroleum have reportedly had an unexpected shut down of their crude unit at the Robinson, Illinois refinery, which produces 210,000bpd, according to sources. (Newswires)
US

UST’s initially came under pressure ahead of the open on Wall Street yet foun
d some relief after the initial volatility. Screen volume was below average as participants look ahead to the two risk events of the week in the form of the BoE rate decision and NFPs at the end of the week. The curve ended up steeper as a result with the 10y Sep’16 future settling at 132.25+, lower by 8 ticks where as some of the downside was also linked to a new USD 19.25bln debt offering from Microsoft, being the third biggest corporate debt deal of 2016, or the fifth largest of all time.

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maximusc

Trader
Jun 24, 2016
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New York Session Forecast

Sentiment Update:
During the Asia-Pacific session the main event was the RBNZ rate decision which saw the RBNZ cut rates by 25 basis points as expected. The RBNZ did state that policy is to stay accommodative and that further easing is likely to be necessary. RBNZ Assistant Governor McDermott stated that projections show one more rate cut is likely, but added that there is a possibility for more. Although no specific time frame for additional easing was provided, McDermott did suggest that November is most likely.

There has been little in terms of economic data or news during today's London session. GBP has saw further weakness with cable now firmly below 1.3000 and EURGBP briefly breaking 0.8600. Pressure on GBP amongst a lack of news or data only goes to highlight the markets bearish bias in GBP, however key support is likely to be found as we approach post 'Brexit' lows.

Today's Forecast:
In today’s session we expect the strongest currency to be USD as USD has seen a slight recovery during today's London session from its recent negative sentiment, however due to the lack of risk events or news for today, our view is based on a fundamental perspective which should ultimately see USD strengthen against its fundamentally weaker counterparts. Therefore we will be looking to buy USD on retracements which simply provide better levels to buy from.

The weakest currency is expected to be GBP as amongst a lack of economic data or news, GBP has managed to once again break to fresh session lows with GBPUSD firmly below 1.3000 and EURGBP briefly breaking above 0.8600.

Today's New York session is likely to be light with no major data of note. The next market moving event will be New Zealand Retail Sales in the Asia-Pacific session.

The GBPUSD pair is currently priced at 1.2959.

There are several levels including the current price level which can be considered for selling opportunities:

The price levels below could be used to sell from as price retraces into them:

1.3000, 1.3100, 1.3170

The price level below could be used to sell from as the price breaks out below:

1.2900

Long Term Fundamental Update:

*New updates to the fundamental section will be left in bold for 24 hours*

USD: The Federal Reserve are most likely to leave their current policy unchanged at their next meeting as inflation continues to show little evidence of reaching the Fed's target of 2% in the foreseeable future. If the bank did change its policy in the next 3 months then the move would most likely be a rate hike with many Fed members looking to increase rates once economic data warrants further action. This gives the USD currency an overall bullish tone for the next 3 months.

EUR: The ECB are most likely to leave their policy unchanged at their next meeting because they have already cut their main rates heavily over recent years and they are at what many experts consider to be an ultimate low. If the bank did conduct a policy change within the next 3 months then the most likely move is an increase in its QE programme, because it is still battling low inflation alongside low interest rates, so more powerful action could be needed. This gives the EUR currency an overall dovish bias over the next 3 months.

GBP: The BoE have now officially entered an easing cycle by announcing on August 4 a 25 basis point cut to the Bank Rate and a surprise 60 billion increase in their Asset Purchases. Along with the surprise increase in QE the BoE also stated "the majority of the MPC expect rates to be near 0% by the end of the year" which would imply that another rate cut of 25 basis points can be expected before the year end. Given the BoE latest monetary policy decisions and expectations for further easing this year, we maintain a bearish bias for GBP.

AUD: There is a strong possibility that the RBA will ease policy again during 2016 as many economist believe the door for further easing remains open due to continued low inflation in Australia. As such inflation data for Q3 will be key in regards to future policy expectations, Q3 CPI is not released until October and therefore although the RBA will likely leave policy unchanged at their September meeting, further easing in later meetings remains a strong possibility especially if Q3 CPI disappoints. This therefore maintains our bearish bias for AUD.

NZD: Although the RBNZ have only just reduced rates to new record lows of 2%, most economists and the RBNZ believe additional rate cuts will be necessary before the end of 2016. According to RBNZ Assistant Governor McDermott, November is seen as the most likely meeting for additional cuts. Despite rates in New Zealand now at a record lows, NZD still holds the highest interest rate of all the major currencies and therefore NZD longs will remain attractive as carry trades. Although this may see NZD supported at times, with the RBNZ expected to ease in the coming months we would ultimately expect NZD to weaken against fundamentally stronger currencies and therefore maintain a bearish bias for NZD.

CAD: The BoC are most likely to leave monetary policy unchanged at their next meeting as Canadian inflation is within the BoC’s target range of 1-3% with the economy also supported by accommodative fiscal measures. If the BoC did conduct a policy change within the next 3 months it would likely be a rate cut based on concerns over Canada’s competitiveness since CAD’s appreciation throughout the year. Although this gives CAD a slightly bearish fundamental bias, with most central banks currently in easing cycles CAD has a comparatively neutral bias.

JPY: The BoJ will most likely need to ease policy further in the near future as the increases made to its ETF purchases and USD lending programmes will likely be insufficient in helping inflation reach its target of 2%. Furthermore Kuroda’s pledge to "conduct a comprehensive assessment" of economic and price developments when the BoJ next meet highlights that further easing is still on the table. With further easing by the BoJ likely we continue to maintain a fundamentally bearish view on JPY, however due to its status as a safe haven currency JPY will likely strengthen in times of risk off sentiment.

CHF: The SNB are most likely to leave their policy unchanged at their next meeting as interest rates in Switzerland already remain at a record low of -0.75%. If the SNB were to change policy in the next 3 months it would likely be a rate cut as inflation continues to remain far below the SNB’s target. This gives CHF an overall bearish tone.
 

maximusc

Trader
Jun 24, 2016
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When LIBOR is released by the BBA and when nations, through their top bankers, release their own rates, this is called fixing. Fixing times occur many times throughout any trading day and represent at times trading opportunities. BBA fi xings represent one time and one fix, the external unsecured borrowing rate for a nation’s bank doing business in London, while each nation must set its own fi x to represent its internal unsecured borrowing rate. All times for the internal fix of nations are different due to the various time frames in which nations trade. Because these rates are the shortest and most sensitive of all interest rates, trading opportunities may occur based on new bids and offers.

For example, the fact that Tokyo releases its fixing rates one hour after the Japanese stock market opens is constructive for short-term gains. Markets will reflect LIBOR immediately. Central banks that experience an interest-rate change are another trading opportunity, because all interest rates short and long must be reflected in the market through financial instruments because the cost to borrow, lend and liquidity needs changed. What is important is that LIBOR must be priced to the currency.

BBA LIBOR and internal nations’ LIBORs must be viewed as an offshore and onshore interest rate. The offshore rate allows business and trading to be conducted overseas in a nation’s currency at a particular BBA rate while the onshore rate is the rate priced to the currency in the home market. To factor an interest rate for the home market, take BBA LIBOR and divide it by the internal rate to obtain an effective interest rate. That rate will be the basis to trade a currency pair in the home market while the market is open. If a nation has two internal interest rates, as is the scenario among the major pairs, divide the two internal rates to obtain an effective rate.