Market Analysis by Vistabrokers

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Vista Brokers: Long-term Trend for EUR/USD Remains Bearish

On Tuesday, the euro strengthened against the dollar after the EUR/USD had reached the 11-year low at $ 1.1098 on Monday. Here, many investors preferred to take profits, and this eased the pressure on the single currency. Today, as Vista Brokers analysts say, the euro against the dollar trades at $ 1.1238.

Experts remind that a large-scale selling of the euro last week was caused by the decision of the European Central Bank to launch a quantitative easing program. Earlier this week, the bearish trend for the single currency was supported by the news about the victory of the radical forces in the elections in Greece. At the moment, the market has already taken a lead from these news and the pair came to the phase of correction. Most likely it will not last too long.

Greece will remain a factor of pressure on the euro. Investors will be watching Alexis Tsipras in anticipation of any statements and explanations of how he plans to fulfill his campaign promises. Also, some negotiations of the new Greek government with international creditors will attract investors' attention.

Recall that Tsipras and his party "Syriza" promised the electorate a significant reduction of debt and getting out of austerity. It is still unclear how radicals plan to achieve it. But the higher ranks of the European Union have already commented on this situation, saying that the cancellation of debt for Greece would be no question.

Meanwhile, analysts of world's leading banks rush to cut their forecasts for the euro. UOB Bank expects a decline in EUR/USD to 1.1000 in the coming weeks. Danske Bank predicts a drop below support level 1.1000 in the next 6 months.

The dollar on Tuesday fell slightly against the yen to 118.26 yen. Last week, the US currency was trading against the Japanese in a fairly wide range, from 117 to 119 yen.

The greenback this week may be strong influenced by the US Federal Reserve meeting, which starts today and will last two days. Investors are waiting for confirmation from the American regulator about the policy of monetary tightening.

 

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Vista Brokers: On Tuesday Oil Rose above $48

On Tuesday, oil rose above $48 per barrel, recovering positions after falling amid the weakness of the dollar against the euro.Vista Brokers analysts say that Brent crude oil has risen by 22 cents to $ 48.38 a barrel. Meanwhile, WTI is traded at $ 45.25 per barrel.

In the currency market, the euro is rising against the dollar, correcting from the punched on Monday 11-year low. Some market participants expect the Fed meeting would not justify expectations of relatively stable path to the interest rates growth.

Also the oil is supported by comments of the OPEC general secretary Abdullah El-Badri, who had said that the price of oil may even exceed $ 200 per barrel if there would be a lack of investment.

 

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Vista Brokers: Markets Wait for FOMC decision

On Thursday US stock indexes moved down under a pressure from disappointing U.S. durable goods orders data. In December durable goods orders decreased by 3.4% against the expected growth of 0.6%. The core index fell by 0.8% against the expected growth of 0.6%.

Against this backdrop, US stock indexes were down around 2%. DJI fell by 2.05% to 17,316.42. SPX - by 1.61% to 2,023.91. IXIC – by 2.09% to 4,672.06.

Vista Brokers analysts note that expectations for this year's first Fed meeting was also the factor of pressure for the US stock market. Investors look forward FOMC to express its commitment to the course of monetary tightening marked earlier. Doubts about the Fed raising rates occurred after the ECB had announced the launch of an ambitious quantitative easing program.

According to experts, any statements of the Fed about the strong US labor market will support expectations of rates growth in the middle of this year. The references about the problems of the world economy or low inflation will enhance the excitement in markets.

Using the doubts of market participants about the US dollar, the euro recovered the second consecutive day against the US currency. On Tuesday, the euro has moved up from 11-month high reached on Monday morning on the news about the Greek elections results.

On commodity markets oil and gold are rising. Brent futures on Tuesday were trading at $ 48.37 per barrel, WTI - at $ 45.47 per barrel. Spot gold rose by 0.5% to $ 1,287.30 per ounce.

 

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Market Pulse 28.01

Certainly, the most important event of Wednesday and even of the whole week for financial markets will be the announcement of the US Federal Reserve meeting results. Today FOMC will announce its decision on the basic interest rate, and then the FOMC statement will be published. Also the Reserve Bank of New Zealand will announce its decision about the interest rate.

7:00 ** GfK Consumer Climate - February (Germany)

Moderate impact on the market (EUR). The GfK leading index characterizes the attitude of consumers to the economy by the beginning of the reporting month. As a rule, the growth of the index is favorable for the currency.

15:30 ** Crude Oil Inventories - January (USA)

Moderate impact on the market (USD). Changes in the level of crude oil reserves in the United States is one of the benchmarks for the oil market.

18:50 *** BOE Governor Mark Carney Speaks - January (UK)

Strong impact on the market (GPB). Comments of Carney about inflation or the labor market can quite strongly influence the pound because on their basis investors can draw conclusions about the future monetary policy of the central bank.

19:00 *** FOMC Rate Decision - January (USA)
19:00 *** FOMC Statement - January (USA)

Strong impact on the market (USD). Financial market participants expect some hints on the Fed's furtherer actions in the light of recent decisions of the ECB and the Swiss National Bank. The Fed will either confirm or not confirm its policy of raising interest rates this year. In any case, it can greatly affect the dollar.

 

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Vista Brokers: Stock Market is Recovering after Decline

On Tuesday, some US shares have declined, mainly against the backdrop of disappointing data on orders for durable goods in the United States. The most significant drop has showed the IT-companiy Microsoft, which shares have declined by 9.3% to $ 42.66 due to slow sales of the software for business. Shares of the largest engineering company Caterpillar have fallen by 7.2% to $ 79.85 amid worries about the impact of cheap oil on the work of this manufacturer of equipment for energy companies. Among the "outsiders" of the market were also Procter & Gable and DuPont Co.

Vista Brokers analysts point out that frustration on Wednesday the US stock market was replaced by more positive mood, and major indexes began to restore positions. Firstly, the expectations of the Fed meeting no longer pressured so much on markets as the day before. And secondly, some US companies brought a pleasant surprise to investors. It is, first of all, Apple Inc., which after the close of markets on Tuesday announced a net profit growth in the first quarter of fiscal year 2015 by 38%, due to the huge demand for new smartphone iPhone with larger screens. After this news Apple's stock price jumped immediately by 5%.

Interestingly, the 18 billion dollars of net profit earned by Apple for the quarter, is a world record. The previous record belonged to the oil giant ExxonMobil, which had earned in 2012 $ 15.9 billion of quarterly profit.

Also shares of Yahoo Inc increased by 6% immediately after the news that the company will provide its share of the Chinese Alibaba Group to create an independent company SpinCo. Investors approved a plan of Yahoo, especially the fact that the separation of a stake in Alibaba do not require the tax payment. Yahoo Inc shares growed despite the fact that in the fourth quarter of 2014 its profit had reduced by half.

 

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Vista Brokers: Greece May Continue to Weigh on Euro

Some analysts believe that the euro against may fall the dollar to 1 in the near future, with the development of the situation in Greece. Several months in a row the market was taking a lead from the fears that radical political forces would come to power in the country. When it occurred, the EUR/USD had fallen to a 11-year low.

Now, market participants will closely monitor the situation to see how "Syriza" is fulfilling its campaign promises. Vista Brokers analysts reminde that the party leader Alexis Tsipras voiced about the following plan of action after the elections: Greece will remain in the euro zone, but will force international creditors to cancel debts and will leave the austerity program. Over the next few weeks Tsipras will try to negotiate with the EU, ECB and IMF to revise the terms of lending, and will possibly squeeze "troika" on Greece's exit from the euro zone in case of reducing dept failure.

Experts point out that the victory of "Syriza" in Greece may lead to much more serious consequences than even the country's exit from the euro zone. Thus, other countries where radical political forces already have the large support may follow Greece. These are Italy, Spain, France.

 

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Vista Brokers: Fed Meeting Results are Positive for Dollar

On Wednesday, the most anticipated event of this week for financial markets took place - this year's first meeting of the US Federal Reserve. Iahead of it the US dollar against the euro rose in price. By 13:00 GMT the single currency was at $ 1.1355 level compared with $ 1.1381 at the close of trading on Tuesday. USD/JPY has remained stable - at 117.88 yen.

The Fed meeting results were published at 19:00 GMT without any press conference, thus investors tried to catch hints of further steps of the US central bank between the lines of the statement.

Vista Brokers analysts note several important theses that have been made. Firstly, the Fed has marked a steady development of the US economy and the labor market, as well as the fact that the drop in oil prices has increased the purchasing power of households. Secondly, the Fed expects the decline in inflation in the short term and its growth in medium-term to the target level of 2%. Also worth noting is that the interest rate has remained in the same range.

As analysts had expected, the FOMC statement did not give any surprise. Although some experts got to see in a slightly changed text some hints at "softening". In particular, the State Street Global Advisors economist Michael Aron believes that even if inflation will grow closer to the target level, the Fed's policy remains soft for a long time.

Immediately after the publication the US stock market began to decline and the yield of US 30-year Treasuries fell to the record - 2.291%. The dollar strengthened against a basket of currencies by 0.5%.

 

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Market Pulse 29.01

8:50 *** Unemployment Change - January (Germany)
8:55 *** Unemployment Rate - January (Germany)

Strong impact on the market (EUR). Analysts expect that unemployment in Germany will remain the same - 6.5%, while the number of unemployed will fall, but less than in the previous reporting period. Excess of forecasts can support a single currency.

10:00 ** Consumer Confidence - January (euro zone)

Moderate impact on the market (EUR). The leading index, published by the European Commission, which reflects consumer confidence in the economic situation. Analysts expect lowering of confidence level by 8.5.

11:00 ** CBI Distributive Trades Survey - January (UK)

Moderate impact on the market (GPB). A report published by the Confederation of British Industry, is an indicator of short-term trends in the retail and wholesale trade in Great Britain. As a rule, the high value of the index is positive for the pound.

13:00 ** Preliminary Consumer Price Index - January (Germany)
13:00 ** Harmonised Index of Consumer Prices - January (Germany)

Moderate impact on the market (EUR). After a small increase in the previous month, on January, analysts expect lowering of inflation in the euro zone's largest economy. This can put pressure on the euro.

13:30 *** Initial Jobless Claims - January (USA)
13:30 *** Continuing Jobless Claims - January (USA)

Strong impact on the market (USD). In the accompanying statement of FOMC which has been released yesterday was a comment that labor market conditions have improved and the employment growth is "strong." In recent months, the number of claims in the US has been steadily decreasing.

15:00 ** Pending Home Sales - December (US)

Moderate impact on the market (USD). One of the most important indicators for the US real estate market, which characterizes activity in this area. High result strengthens the dollar.

 

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Vista Brokers: Fed Meeting Influenced on all Financial Markets

On Thursday, stock markets in Europe and Asia were falling amid of the dollar growth after the Fed meeting on Wednesday. The regulator has confirmed the policy of raising interest rates this year giving the US currency a considerable support.
Vista Brokers analysts note that the dollar strengthening has led to a decline in oil prices down to 6-year low, and has put a pressure on gold.
As for the European markets, they are still under the influence of the radical party "Syriza" victory in Greece. Now Greece shares are rebounding slightly after falling by 9.2% on Wednesday. But the pan-European index FTEU3% has lost 0.7%, having dropped to 1.464 points.
In Asia, the stock market declines. The Japanese major index Nikkei fell on Wednesday by 1.1%, and it is the greatest day decline over the past two weeks. Asian MSCI index lost 1.2%.
In the USA, the S&P 500 index fell by 1.4% after the announcement of the Fed meeting results. Recall that many market participants have expected that the US regulator would adjust its plans for the monetary policy after the other major central banks around the world had chosen further easing. However, the Fed confirmed the previously taken course.
Against this backdrop, the dollar index, which tracks the price against a basket of currencies, was up by 0.2%. Against the yen, the dollar rose by 0.3% to 117.87 yen. The euro fell against the greenback to $ 1.1304.
As for commodity markets, the Brent crude oil rose by 0.25% to $ 48.60 per barrel, WTI fell by 0.1% to $ 44.40. Gold has fallen in price to $ 1,279.80 per ounce.

 

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Vista Brokers: Fed Statement Put Pressure on Gold

On Wednesday, the price of the precious metal fell. At the end of trades on СОМЕХ gold for February delivery fell by 0.5% to $ 1.285.90 per ounce. Vista Brokers analysts note that the reason for the decline of gold was that the US Federal Reserve had confirmed its adherence to the policy of raising rates in the second half of this year. March silver futures closed unchanged at $ 18.09 per ounce.

In its accompanying statement, the Fed has noted a "solid growth" of the economy and the labor market. Thus the regulator has expressed an optimistic attitude to the current state of the economy. Also, the Fed has repeated that inflation is likely to reach a level of 2%, although not in the short term.

Analysts remind that the day before the market price of precious metals rose after weak data on orders for durable goods in the United States. Disappointing statistics put pressure on the stock market, which in turn led to an increase in demand for safe-haven assets.

 

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Vista Brokers: US Jobless Claims Reached 15-year Low

On Thursday it became known that one of the key indicators of the US labor market showed the best results since April 2000. For the week ending on January 24, the number of jobless claims fell by 43 000 to 265 000. Most experts were expected a decline to only 300,000.

These data provided the yet another confirmation of the US labor market rapid recovering, and supported expectations that the Fed would start to raise interest rates later this year.

However, Vista Brokers analysts say that yesterday the market took the strong data on jobless claims in stride. The dollar has not received much support, firstly because of the fact that this statistics is strongly influenced by seasonality. And secondly, because market participants expected data on home sales in the United States. As a result, the euro even rose against the dollar.

By the way, data on pending home sales did not make investors happy. In December, the indicator decreased by 3.7% against the expected growth by 0.6%. It is worth noting that the level of sales is still quite high, and indeed against other major world economies the United States looks like an oasis of stability.

Actions of the central bank of Switzerland and the European Central Bank have a strong influence on the European region. Regulators of other countries are forced to cut rates to prevent the strong growth of their national currencies against the euro. In particular, the central bank of Denmark for the third time in the last two weeks has lowered its deposit rate.

 

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Vista Brokers: USD/JPY Remains within Narrow Price Range

From Thursday to Friday Japan has published a large portion of statistics, and the data were highly controversial.

The consumer price index in December rose slightly larger than analysts had expected - by 2.4% vs. 2.3%, and this is probably due to the increase in sales tax. Inflation excluding volatile food prices rose by 2.5% vs. 2.6%.

Production in Japan is slowly but surely recovering. In December, the industrial output in the country increased by 1% mom and by 0.3% yoy, which is slightly less than it was expected. Exports to the USA grew due to the increased stability of the US economy.

Vista Brokers analysts note that weak consumer spending and low inflation make the achievement of inflation target difficult for the Bank of Japan. Although the decline in oil prices can be a positive factor for the country, because Japan is exporting almost all of the fuel.

Labor market data came out positive. In December, the unemployment rate in Japan fell to the lowest in more than 15 years - 3.4%. The number of employees has grown, including both employed in full-time and employed part-time. Despite this, the income of households in September rose by 2.1% compared to the last year, when adjusted for inflation corresponds to a decline in real income by 0.8%.

Analysts say that the yen against the dollar for the second week in a row is trading in a tight range of 117.3-118.8. The pair can leave these boundaries only due to the influence of such a factor as different vectors of monetary policy of the Fed and the Bank of Japan. The Japanese regulator continues the program of quantitative easing, while the Fed is aimed at tightening monetary policy. Against this background, USD/JPY has all the prerequisites for the restoration of the uptrend.

Meanwhile, the Bank of Japan is waiting. The Prime Minister Shinzo Abe fears that new stimulation measures can lead to excessive reduction of the national currency.

 

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Vista Brokers: Aussie Fell to 5.5 Years Minimum

It is expected that the next week the Reserve Bank of Australia will cut interest rates. It puts pressure on the Aussie, and on the morrow of it, on the other currencies of commodity producers.

Vista Brokers analysts note that the last trading day the currency has finished at $ 0.7794. From the beginning of the year, the Australian dollar has fallen by 4.7%, and this is the third consecutive monthly fall.

The probability that the central bank of Australia will really cut interest rates on the next meeting on 3 February is very high. Futures on bonds imply a 70 percent probability of such a scenario.
Morgan Stanley has already advised its clients to sell the Australian dollar against the Japanese yen at 85.00 with a stop-loss order placed at 94.00.

 

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Vista Brokers: Rising Oil Hardly Supported Loonie

The Canadian dollar is increasingly weak against the US currency. After January 21, when the Bank of Canada has unexpectedly cut interest rates, the country's national currency fell to six-year low, and since then is gradually losing ground.

Vista Brokers analysts note that last Friday, the Canadian dollar has gotten a little support amid rising oil prices. March WTI futures on the Comex per day increased by 8.3%, to 48.24 dollars per barrel. Brent futures in London rose by 6.6%, to 52.50 dollars per barrel. Apparently, the reason of oil rising was the data on declining production in the United States that has the potential to reduce the amount of produced oil. Also, many market participants have closed short positions on oil futures on the last day of the month.

Let's go back to the Canadian dollar - at the end of the last week, it was worth 79.87 cents, and some experts expect a further decline even to 75 cents. On Friday, the International Monetary Fund gave some comments on the situation in Canada. According to the IMF, the main inland risk for the country is a possible "shock in the housing market", and the external one is tightening of the Fed monetary policy. Factors affecting the Canadian economy are the economic slowdown in the world and the decline in oil prices.

 

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Market Pulse 02.02

On Monday, some European countries and Canada will publish data on the PMI index for the manufacturing sector. During the US trading session, the USA will publish the manufacturing index ISM.

8:15 ** Manufacturing PMI - January (Spain)
8:45 ** Manufacturing PMI - January (Italy)
8:50 ** Manufacturing PMI - January (France)
8:55 ** Manufacturing PMI - January (Germany)
9:00 ** Manufacturing PMI - January (euro zone)

Moderate impact on the market (EUR). According to analysts, data on the index of purchasing managers in manufacturing in substantially all euro zone countries in January will be released at the level of the previous month. Growth or overachievement of the indicator may be favorable for the single currency.

9:30 *** Manufacturing PMI - January (UK)

Moderate impact on the market (GPB). According to analysts, in January, the index of purchasing managers in manufacturing in the UK rose slightly. Growth or overachievement of the indicator may be favorable for the pound.

13:30 ** Core PCE Price Index - December (US)
13:30 ** Personal Spending - December (US)
13:30 ** Personal Consumption Expenditure Deflator - December (US)

Moderate impact on the market (USD). Personal consumption expenditure deflator shows the annual growth rate of prices for consume goods and services for Americans. The Fed has long been tracking this particular indicator as inflation.

15:00 *** ISM Manufacturing PMI - January (USA)

Strong impact on the market (USD). It is expected that in January the index has shown a slight decline. Growth or overachievement of the indicator may be favorable for the currency.

 

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Vista Brokers: Dollar Takes a Lead from Weak GDP

On Monday, the yen has reached a 2-week high against the dollar amid commodity currencies falling. Concerns about the economic situation in China put pressure on these currencies.
Vista Brokers analysts point out that today, in early trade, the dollar has fallen against the Japanese currency to a minimum from January 16 - 116.64 yen. For comparison, at the close of trading on Friday, USD/JPY was trading at 117.52.

According to analysts, the dollar now looks vulnerable against the yen and it is also due to the weak GDP data for the 4th quarter, published in the US on Friday. US economic growth was lower than the market had expected – 2.6% versus 3.0%. Today, investors will wait for the data on ISM manufacturing index in the United States which can attest to the weakness of the dollar or help greenback to regain lost ground. So far, analysts expect the index to decline in January.

 

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Vista Brokers: EUR/USD Remains in Narrow Range

At the end of the last week, the EUR/USD has stabilized, and on Monday the pair has remained in the same range of about 80 points. Monday trades passed with a slight increase of the pair.

Vista Brokers analysts note that mostly all statistics published the first trading day was positive for the euro. Eurozone PMI index for the manufacturing coincided with the forecast of 51.0 against 50.6 a month earlier. Thus, the indicator showed the strongest monthly growth in the last six months due to the increase in new orders. In Italy and Spain PMI index for the manufacturing surpassed market expectations, while in Germany and France the index came out worse than forecast.

American statistics did not please investors. At first it was reported that US consumer spending fell in December, which means Americans are cautious and in no hurry to spend money, despite the decline in gasoline prices and a steady growth in the labor market. Personal spending fell by 0.3% compared to the previous month and the forecast of 0.1%. Recall that consumer spending accounts for about 70% of economic activity in the United States and is a key factor in the growth.

Later came the index of business activity in the US industry from the ISM, which disappointed investors who had expected 54.9 in January. Index fell more than expected - to 53.5, although the value above 50 indicates that economic growth continues.

 

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Market Pulse 03.02

Early Tuesday morning in Australia came out a large portion of important data, including building approvals, trade balance, the RBA interest rate decision, together with the accompanying statement. Between publications that are only scheduled to be released, the most important may be called PMI index for the UK construction sector.

9:30 *** Construction PMI - January (UK)

Strong impact on the market (GPB). The situation in the construction industry in Britain is closely monitored, so the publication can affect markets. Analysts predict a slight decline of the index in January.

13:30 ** Raw Materials Price Index - December (Canada)

Moderate impact on the market (CAD). A leading indicator of price pressure in the country. Important for Canada, as it exports a lot of raw materials. Disappointing data may put pressure on the Canadian dollar.

15:00 ** Factory Orders - December (US)

Moderate impact on the market (USD). The change in volume of production orders is often a leading indicator of the industrial production dynamics for several months.

 

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Vista Brokers: RBA Decision was Unexpected

On Tuesday, February 3, the Reserve Bank of Australia has announced the next interest rate cut - to the value of 2.25%. The decision was a real surprise for the market, because most analysts had expected that the regulator woukd keep interest rates at 2.50% for quite a long time.

Vista Brokers analysts identified factors that RBA Governor Glenn Stevens has called causes of rates reducing. They are contained in the accompanying statement. Thus, the rate of economic growth in Australia is low, demand is weakening, inflation is low, the Australian dollar is still overvalued, the real estate market raises fears, peak in unemployment may be higher than had been expected previously. Among other reasons Stevens has called the fact that monetary policy in the major economies of the world is becoming more stimulative, obviously referring to the ECB.

Leaders of the central Australian bank hopes that the rate cut will support the demand, will help to achieve inflation targets in 1-2 years, will reduce the rate of the Australian dollar, which is necessary for balanced economic growth.

Market reaction to the RBA rate cut followed immediately. The Australian dollar fell sharply against the dollar to 0.7750, where the pair stabilized. The New Zealand dollar followed the aussie. Analysts say that a further decline in AUD/USD is likely, because 130 points is a slight decrease for such news. In comparison, when the Reserve Bank of New Zealand only hinted at mitigation, kiwi fell by 240 points. After the ECB's decision to launch QE, the euro/dollar fell by more than 500 points.

 

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Vista Brokers: Greek Debt Plan Brought EUR/USD out of Hibernation

On Tuesday, world's stock markets rose amid news about debt restructuring plan proposed by Greece. Constructive proposal of the new Greek authorities caused positive sentiments towards the euro zone. The US dollar was trading under pressure.

In last two weeks the world's media were actively discussing further development of the situation in Greece, where as a result of recent parliamentary elections the radical party "Syriza" has come to power. Representatives of international financial institutions and European countries vie stated that the debt remission is impossible for the EU, the ECB and the IMF. Everyone was waiting that Athens submits such requirements and use its possible exit from the euro zone as a blackmail.

But it seems that the Greek government has taken a different tack, offering international lenders to conduct a partial exchange of existing bonds for so-called "growth-linked" bonds. Greek finance minister Janis Varufakis explained that part of the debt, which currently stands at more than 300 billion euros, Athens offers to swap into bonds linked to the level of the economic growth. Another part was proposed to swap into "eternal" bonds. When the proposal was announced, Greek stocks rose on average by 4.6%. European stocks also began to rise. At the same time, the dollar index fell against a basket of currencies by 0.6%.

As Vista Brokers analysts sat, news that Greece will negotiate with international lenders, rather than give up the debt, brought EUR/USD out of hibernation, where it was in the last days, and caused a rally of the single currency.