Market Analysis by Vistabrokers

[Vistabrokers]

Plunging OIL sees risk aversion as Investors flock to Yen

The Yen was buoyant today following a sharp decline in crude oil and stocks which resurfaced concerns regarding the global economy. Additionally growing fears in the Eurozone’s stability and measures to be taken against deflation have seen a more conserved side to investors.

The USDJPY dropped to 118.64 from Monday’s high of 120.68 as it distanced itself from the 7 year high of 121.86 which was reached last month. The decline in the US treasury yields also further added to the buoyant dollar against the Yen as the 10 year yields descended some 14 basis points within 2 sessions. This is expected to be a temporary drop for the US treasuries as the recent healthy outlook for the Dollar should help raise the yields back up.

The recent constant decline of OIL prices coupled with political uncertainty in Greece ahead of a snap election to be held later this month, have forced a more conservative view from investors, as the Wall Street was sent to its biggest 1 day drop in over 3 months yesterday. Constant rumors of the Eurozone losing ots first member – Greece – has further drained confidence in the single currency.

The Euro recently reached a 9 year low at 1.1856 before retracing some of those losses and currently trading around the 1.1895 levels. Pressure is on the ECB to introduce quantitative easing sooner than previously planned and skepticism has hence surrounded the single currency. European shares remained subdued in today’s early session, underpinning safe-haven flows.

 

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Dollar gains across board, Euro at fresh 9 year low

The Euro continued its decline today, falling to a new 9 year low of 1.1817 against the Dollar as fears for the Eurozone economy were kindled by data which showed the euro zone prices declining for the first time since 2009. The Eurozone consumer prices dropped lowed than expected to 0.2% per annum in December, further to the much cheaper energy we have recently seen. The recent pile on of bad news must surely put enormous pressure on the European Central Bank to take immediate measures to revive the EU economy.

Eurozone prices, excluding seasonal energy and unprocessed food, remained steady at 0.7% in December, while prices with the exclusion of Alcohol and tobacco rose to 0.8%. The initial news saw some support of the Euro as it re-cooped some losses, however this was short lived and saw the EURUSD drop to a new 9 year low. In addition, the positive news from Germany of a reduced unemployment change of -27K, some 11K less than the expected value of -16K, did not manage to suede investors in purchasing the Euro.

The Greenback rose to a 9 year high against a basket of currencies, reaching a level of 92.02. FOMC minutes, due to be released at 19:00 GMT, should see some choppy/ volatile movement in the USD. The non-farm payrolls are scheduled for later in the week, which will be very crucial this month in giving a further push or pull to the Dollar against a basket of currencies and very importantly against the Euro.

Commodities continued their decline, with Brent reaching below the crucial $50 level, marking a 5.5 year low. The much reliant Canadian Dollar dropped also to a 52.5 year low to 1.1870 against the Dollar while the Norway crown headed towards a 12.5 year low

 

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Euro continues to reach fresh 9 year lows

The Euro extended losses once again today, failing to find any significant support levels since the beginning of the year. This marks 6 days of straight losses for the single currency against the Dollar. In just over half a year, the Euro has managed to drop some 19 cents – over 13.5% of its June high of 1.3699. Investors are anticipating that the ECB will soon step in and adopt its quantitative easing stimulus in order to attempt to keep the Euro away from its current deflationary status. The pair currently trades at 1.1761 against the Dollar.

The recent decline of German industrial orders for November saw further doubt cast on the Euro, pilling on top of already existing concern that a Greek general election on January 25th may lead to turmoil between Europe and Greece over the existing austerity measures, which Greece had previously agreed to.

Currently the Euro is anticipated to continue its decline, as we come up to the ECB meeting on the 22/01 and expect more short positions to continue driving down the EURUSD pair. The next strong support level for the pair is seen at 1.1638 – the November 2005 low.

The Federal Reserve, in comparison, is expected to raise its interest rates as early as Q1 in 2015, which has further pushed the USD to gain against the Euro as the USA economy has recently shown signs of a healthy outlook. The Dollar climbed above 119.75 Yen as it moved away from a 3 week trough around 118.40, while the Dollar index remained near the 9 year high.

 

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GBPUSD has been down and with current euro zone situation might continue, have to wait for any buying opportunities.

 

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Euro near 9 year low on Greek woes

The Euro remained near the 9 year low today as expectations of a European Central Bank Intervention with a quantitative easing stimulus grew. Investors are a little reserved for now, siting US jobs and unemployment data which is scheduled to be released later in the day.

European Central Bank president Mario Draghi yesterday commented that the bank’s governing council is ready to implement all conventional and unconventional measures that may be needed to lift up the recent stagnation in inflation and sustain the interest rate from going into deflation. This has risen expectations that there most almost certainly be some intervention measures introduced further to the bank’s meeting on January 22nd.

The EURUSD has traded most of today rather steadily, when comparing to past days, and is oscillating between the $1.1815 and $1.1770 levels. The Euro had as recent as yesterday reached a fresh all-time low of 1.1752, from which it has retraced. The single currency was gloomed further to figures released which showed the Eurozone’s 2 biggest economies (France and Germany) had a pessimistic figure on Industrial outlook as well as Germany’s export figures experiencing a sharp drop.

Another suppressing issue for the single currency is the Greek general elections, which will take place further to the countries prime minister – Mr. Samaras – failing to secure enough votes for his candidate, which will take place on January 25th. The elections are expected to lead to a standoff between Greece and Athens with respect to the Austerity measures which Greece had agreed to in order to receive the much needed emergency bailout.

 

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Vista Brokers: Data on the US labor market were mixed

On Friday, the market was expected the data on unemployment rate and non-farm employment change in the US.

Statistics surpassed analysts' forecasts: nonfarm payrolls increased by 252,000 in December, against a forecast of 241 000. Thus, the indicator grows the 11th consecutive month, which is the longest period of growth since 1994. Data for October and November were also revised to increase. The unemployment rate fell in December by 0.2% to 5.6%, while the experts expected a decline to only 5.7%.

Vista Brokers analysts note that while hiring in the US is growing steadily, the average hourly wage does not support this trend. Compared to the previous month in December indicator decreased by 0.2%. Nevertheless, the positive data on unemployment and non-farm payrolls forced market participants to talk about raising interest rates o the Federal Reserve.

Large banks surveyed by Reuters, believes that the rate will begin to rise in June, but the financial markets are not so sure in it. FOMC member Dennis Lockhart said that despite the strong statistics on employment, the regulator needs to exercise caution before raising rates. He believes that this question must be lifted no earlier than mid-year.

Against this background, on Friday, the US dollar fell against a basket of currencies, and US stock indexes fell nearly 1% after a two-day rally.

 

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Market Pulse 12.01

On Monday, the economic calendar is almost empty. There will be no important data, so it's likely the market will continue to take a lead from the information received on Friday. Investors' attention may be attracted with the FOMC member Dennis Lockhart speech.

14:45 ** ECB Announces Covered Bond Purchase

Moderate impact on the market (EUR). ECB announces its weekly balance sheet, from which investors and market observers conclude on the extent of securities purchases the European Central Bank makes on its balance sheet. Low values can provide support, while the expansion of purchases is a signal of greater activity of the ECB, which reduces the rate and pressures on the euro.

15:00 ** Labor Market Conditions Index - December (US)

Moderate impact on the market (USD). The indicator is calculated on the basis of 19 other market indicators. As a rule, it does not have a profound effect on the market, but can confirm earlier trends.

17:40 ** FOMC Member Dennis Lockhart Speaks - January (USA)

Moderate impact on the market (USD). Dennis Lockhart is the head of the Federal Reserve Bank of Atlanta and a voting member of the FOMC, that is, its opinion affects the monetary policy committee. Therefore, the remarks in his speech can cause volatility in the markets.

 

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USD remains strong against basket of currencies

The Dollar moved higher today as it recouped gains lost further to the dip incurred following the surprising results from US wages last Friday. Demand has been on a continuous rise for the Dollar – albeit today we saw some thinner volumes of trading due to the holiday in Japan. The Greenback was up 0.2% against the Euro and 0.25% up against a basket of Major currencies. The EURUSD has thus far taken a dip of some 50+ pips from today’s opening session to trade around the 1.1791 mark as of late, as it edges closer to the recently established 9 year low of 1.1752.

Against the Yen the Dollar dipped further in today’s opening session trading around the 118.20’s but has since in European session recovered some losses and has risen some 100 pips to trade at 119.20. Today’s holiday in Japan has seen thinner volumes in early Asian session.

In Europe, Italy’s central bank chief warned on Sunday that risk of spiraling deflation in the Euro zone should not go unaccounted for. The EU economy is currently in a very fragile condition with Greece expected to put in place a member of the Siriza party as the country’s next president, which would most likely oppose the current austerity measures that are put in place in the debt ridden country.

 

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Vista Brokers: Oil continues to fall in price

On Monday, oil prices renewed their declines, falling below $ 49 a barrel. Thus, the decline continues for seven straight weeks, and both Brent and WTI are now around their lowest since April 2009: 48.82 and 47.24 dollars per barrel, respectively.

Vista Brokers analysts note that Goldman Sachs experts have lowered their quarterly and annual forecasts on the oil market. The three-month forecast for Brent was reduced from 80 to 42 dollars per barrel, and for WTI - from 70 to 41 dollars per barrel. The forecast for 2015 also decreased to 50.40 and 47.15 dollars per barrel, respectively.

Meanwhile, Saudi Arabia, the largest oil exporter in the world, continues to refuse demands of OPEC to cut production, to keep the price drop.

 

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Vista Brokers: on Monday Dollar was Traded under Pressure

The US dollar declined against the euro and the yen amid US stock market falling. Also traders continued to follow the mixed data on the US labor market, published on Friday.

Vista Brokers analysts note that the average hourly wage decreasing by 0.2% in the United States led investors to think about if the Fed would raise rates when the labor market still has some problems.

Another important reference point for the regulator is the inflation, and the situation with this indicator is not too optimistic. According to the forecasts the consumer price index in the US, which will be released this Friday, can show decline by 0.3% in December.

Seizing the moment of weakness of the dollar, the euro rebounded slightly and walked away from the 9-month low of $ 1.1753.

The analysts remind that this week the market will be waiting for the decision of the European Court of OMT program - scheme of bond purchases, and it may have a strong influence on the ECB actions. If the court makes a negative decision, the volume of quantitative easing may be limited in the future. And considering that the stimulation is already put in the price of the euro, the market reaction may be strong.

 

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Market Pulse 13.01

Tuesday's economic calendar will not be too crowded. A large portion of statistics will be released in the UK, so volatility of the British pound trading can increase.

9:30 *** Consumer Price Index — December (UK)
9:30 ** Core CPI — December (UK)
9:30 ** Retail Price Index — December (UK)
9:30 ** Producer Price Index Input — December (UK)
9:30 ** Producer Price Index Output — December (UK)
9:30 ** Producer Price Index Output Core — December (UK)

Strong impact on the market (GPB). Inflation is one of the key indicators for financial regulators. In December a slight increase is expected in consumer prices, after the declining in the previous month by 0.3%. In general, the data for all indices are expected to be moderately positive.

15:00 ** JOLTs Job Openings — November (USA)

Moderate impact on the market (USD). Measures the level of vacancies in the private sector at the end of the month (in thousands). The growth reflects the improvement in the labor market of the country, showing a high demand for workers.

18:01 ** 10-y Bond Auction — January (USA)

Moderate impact on the market (USD). US Treasury allocates its debt obligations. 10-year bonds are the reference in terms of reflecting the demand in the markets and in the form of an indicative yield.

 

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Vista Brokers: Yen is Supported by Uncertainty in the Market

On Tuesday, the Japanese currency hit a one-month high against the dollar, supported with the growth of safe assets amid the falling of the oil prices. Investors go into "safe havens" due to the fear that the decline in oil prices will lead to an even greater slowdown in economic growth and inflation in the world economy.

Vista Brokers analysts point out that for the Japan's economic the oil price declining can be a positive, as well as for the other major importers.

Today, managing director of currency research at Nomura Holdings Inc. Jens Nordvig said that the fall of oil by 45% would reduce Japan's trade deficit by $ 500 million. In November, Japan's trade deficit amounted to $ 7.6 billion.

 

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Market Pulse 14.01

On Wednesday, market participants' views will be glued to the euro zone, where during the day will be a lot of important events. In particular, the European Court of Justice ruling for ESM and fiscal compact will be published. Also on this day the German Chancellor Angela Merkel, ECB President Mario Draghi, BOE Governor Mark Carney and BOE Deputy Governor for financial stability Jon Cunliffe will speak. In addition, the following information will be released.

10:00 ** Industrial Production - November (Euro zone)

Moderate impact on the market (EUR). Often, the production is a small contribution to GDP, but it allows to predict the dynamics of interest rates. In November, zero growth is expected on a monthly basis and a decrease year on year.

13:30 *** Retail Sales - December (UK)
13:30 *** Core Retail Sales - December (UK)
13:30 ** Retail Sales Excluding Auto & Gas - December (UK)

Strong impact on the market (GPB). In December, analysts expect growth in all indicators, but growth is projected to be less than in the previous month.

13:30 ** Import Prices - December (USA)

Moderate impact on the market (USD). Changes in prices of imported goods for the month. May be an early warning sign of inflationary trends change, or their confirmation. In December, the indicator is expected to decline.

19:00 ** Beige Book - January (USA)

Moderate impact on the market (USD). Review of the 12 Federal Reserve Banks of the United States about the local economy. Considering the market's expectations about the future monetary policy of the Fed, the publication may cause an interest among traders.

 

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Vista Brokers: Dollar Rose against Currency Basket

On Tuesday, the US dollar rose against its major competitors. Market participants finished to take a lead from the Friday ambiguous data on US labor market and shifted their attention to the fact that the US economy is in clearly better situation than another world major economies. In this regard, investors expect that this year the Fed will raise interest rates.

The dollar has risen against a currency basket in seven of the last eight trading sessions and has a good chance to finish a fourth straight week with the growth. Vista Brokers analysts point out that the positive investor tone against the dollar is limited by the reduction in oil prices, which in June, 2014 hav lost more than 50% of the value. Today, oil futures were traded at six-year lows, and fears of further decline still reserved.

However, it seems that the dollar at the moment remains a better investment than most other major currencies. On Tuesday, the euro was traded at 9-month lows against the dollar. The additional pressure on the single currency had an expectation of further economy stimulation steps by the ECB.

Also Deutsche Bundesbank lowered its forecasts for the euro. Now the regulator expects the single currency to reduce to $ 1.10, $ 1.00 and $ 0.90 by the end of 2015, 2016 and 2017, respectively.

 

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Vista Brokers: Investors Prefer Safe Assets

On Wednesday, the dollar came under pressure after the disappointing data on the volume of retail trade in the US. In December, the indicator fell by 0.9% including auto and 1% excluding auto. The index excluding auto and gas decreased by 0.3%.

Vista Brokers analysts point out that for retail trade it is the worst performance in the last 11 months, and it has reminded investors about their fears over global economic growth and inflation. The market expects that in June of this year, the Fed will raise interest rates, but the poor statistics can delay the process.

After the data on retail sales release the dollar fell to 116.07 yen, having lost 1.6%, but then oil suddenly rose in price in anticipation of US Department of Energy data on oil reserves. It stabilized the market and the dollar recovered to 117.35 yen. The euro rose by 0.1% to $ 1.1783 after trading near $ 1.1847 during the session.

On Wednesday, the copper price fell to a more than five-year low, and it sent concerned investors to safer assets such as US Treasuries and Japanese currency.

 

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Market Pulse 15.01

On Thursday, the market will be interested in data on GDP changes in Germany over the past year, as well as an important US statistics. Now investors are closely watching the US data, as they help to judge about the future behavior of the Fed with respect to monetary policy.

9:00 *** Real GDP Growth - 2014 (Germany)
9:00 *** Public Finances Balance-GDP Ratio - 2014 (Germany)

Strong impact on the market (EUR). Annual GDP is calculated based on preliminary data and is published before the data for the last quarter, so however, market participants keep a close watch in the time of publication. Unexpectedly strong data can support the euro, while the weak may cause currency sales and the risky assets refusal.

10:00 ** Trade Balance - November (Euro zone)

Moderate impact on the market (EUR). The trade balance is the difference between the value of exported and imported goods for the month. Strong data can be positive for the euro.

13:30 *** Producer Price Index - December (USA)
13:30 ** Core PPI - December (USA)

Strong impact on the market (USD). Change in the producer price index may be an early warning sign of inflationary trends change, or their confirmation. In general, the PPI growth contributes to the strengthening of the currency.

13:30 *** Unemployment Claims - January (USA)
13:30 ** Continuing Claims - January (USA)

Strong impact on the market (USD). This weekly indicator is becoming increasingly important due to the fact that the labor market is one of the main landmarks for the Fed. According to forecasts, during the reporting week the index rose more than a week earlier.

15:00 *** Philly Fed Manufacturing Index - January (USA)

Strong impact on the market (USD). Philadelphia Fed index is based on manufacturing companies survey. Values greater than zero reflect an improvement in business conditions, less than zero - deterioration.

 

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Vista Brokers: Australian Dollar Rose only to Fall even Further

On Thursday morning, the currency get the stimulus to growth after the publication of the unemployment rate and the employment change in Australia for December. So, for the first winter month, unemployment rate fell from 6.2% to 6.1%, while analysts expect its growth to 6.3%. The number of employees has grown much stronger than expected by 37.4K vs. forecast 5.3K.

Vista Brokers analysts note that the Australian dollar rally was short enough. The labor market data did not help the Australian dollar to recover from fears associated with the commodity market fall, which put a pressure on it. This week not only oil updated fresh lows, but also copper, on which the Australian economy depends on, has fallen dramatically in price.

 

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Vista Brokers: National Bank of Switzerland Refused the 1.20 Franc per Euro Cap

On Thursday, the National Bank of Switzerland shocked the market, refusing the hard franc per euro cap at a level of 1.2, which was holden since 2011. Also the interest rate was reduced to -0.75%.
Vista Brokers analysts note that immediately after the announcement of the Bank of Switzerland franc rose by more than 30% against the dollar and the euro. Then, the rate stabilized at around +14%.
In the head of the Swiss regulator Thomas Jordan's statement it is said that the central bank has made such an unexpected decision, seeking to comply with changes in the monetary policy of the largest central banks: the Federal Reserve and the ECB. Analysts remind that the ECB may announce the launch of the quantitative easing program and the expansion of its balance sheet by 1 trillion euros during the next meeting on 22 January. As for the Fed, the US regulator plans to tighten monetary policy. Perhaps the Fed will tighten interest rates this summer.

Among the Thursday statistics may be noted the weak labor market data and the Philadelphia Fed manufacturing index in the US. For the latest reporting week the number of initial claims for unemployment benefits rose to 316K instead of expected 299K. Continuing claims also rose more than analysts expected. As for the Philadelphia Fed index, it fell in January to 6.3 points versus revised 24.3 in December and expected 20.3.

 

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Market Pulse 16.01

On Friday, the market will wait for data on сonsumer price index in the euro area and in the United States, as well as for the Prelim University of Michigan Consumer Sentiment in the USA.

10:00 ** Final Consumer Price Index - December (Euro zone)
10:00 ** Final Consumer Price Index - Core - December (Euro zone)

Moderate impact on the market (EUR). Inflation is one of the key indicators, because the monetary policy usually depends on it. In December, experts expect a decrease of the index by 0.2%.

13:30 *** Consumer Price Index - December (US)
13:30 *** Core CPI - December (US)
13:30 ** Consumer Price Index - December (US)
13:30 ** Consumer Price Index Core Index - December (US)

Strong impact on the market (USD). In December, analysts expect a decrease of the consumer price index in the US by 0.3%. The index excluding prices for food and energy, according to the forecast, has increased by 0.1%. Exceeding the forecasts will be favorable for the dollar.

14:15 ** Capacity Utilization Rate - December (US)
14:15 ** Industrial Production - December (US)

Moderate impact on the market (USD). The level of capacity utilization allows us to estimate how much free capacity the economy has, or whether it is "overheated". Excess of 80% is considered to be dangerous for the development of inflationary pressures, ie the growth of the indicator supports the currency.

14:55 *** Prelim UoM Consumer Sentiment - January (USA)

Strong impact on the market (USD). The consumer confidence index from the University of Michigan. Allows us to estimate the confidence of consumers in the current and future state of the economy. Is a very important leading indicator of future costs. Exceeding the prognosis is favorable for the currency.

 

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Vista Brokers: IEA Comments Supported Oil

Futures for Brent crude oil on Friday rose above $49 per barrel after the International Energy Agency had mentioned that the trend may still turn. However, analysts agree that in the near future, such a reversal is hardly possible, because the world production continues to exceed demand. Also concerns about the economic growth slowing remain.

Vista Brokers analysts reminde that oil prices have dropped by more than half since last June. Although the IEA experts believe that the trend reversal is possible in the current year, but it is nobody knows how much more the price can drop until it begins to rise. Nevertheless, Brent, which was traded on Thursday at $ 48 per barrel, was supported by comments of the International Energy Agency.