Oil Ends Sharply Lower After IEA Reports Record Output

Trading 13 sept 2018 Commentaire »

Crude oil prices drifted lower on Thursday, after International Energy Agency's report said global oil supply reached a record high in August.

According to the report from IEA, global oil supply reached a record 100 million barrels per day in August, with output from OPEC countries and Russia rising to a nine-month high.

The jump in production to 32.63 million barrels per day, was due largely to higher output from Libya, Iraq, Nigeria and Saudi Arabia, said the report from IEA. Higher production in the U.S., lifted supply from non-OPEC countries by 2.6 million barrels per day, the report showed.

However, the agency said that production may drop going forward due to falling output from Iran and Venezuela.

It is still feared that hurricane Florence, which is headed towards South and North Carolina may cause flooding and power interruptions. However, it is hoped that there won't be a significant supply shortage. Crude oil futures for October ended down $1.78, or 2.5%, at $68.59 a barrel on the New York Mercantile Exchange. On Wednesday, crude oil futures ended up $1.12, or 1.6%, at $70.37 a barrel, the best settlement price in about eight weeks.

Data from U.S. Energy Information Administration that showed a notable drop in crude inventories in the U.S., and fears about the impact of hurricane Florence on oil supplies lifted crude oil futures on Wednesday.

According to the weekly report released by the U.S. Energy Information Administration, crude oil inventories dropped by 5.296 million barrels in the week ended September 7, much more than what analysts had expected. Meanwhile, supplies at Cushing, Oklahoma, were down by 1.242 million barrels last week, the EIA report revealed.

The report said that the total U.S. crude oil inventories as of last week, at 396.2 million barrels, was about 3% below the five year average for this time of the year.


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Treasuries Close Roughly Flat Following Choppy Trading Data

Trading 13 sept 2018 Commentaire »

After seeing modest strength in the previous session, treasuries showed a lack of direction over the course of the trading day on Thursday.

Bond prices spent the day bouncing back and forth across the unchanged line before closing roughly flat. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, ended the day unchanged at 2.963 percent.

The choppy trading in the bond market came following the release of a report from the Labor Department showing consumer prices rose by less than expected in the month of August.

The Labor Department said its consumer price index rose by 0.2 percent in August, matching the increase seen in July. Economists had expected prices to climb by 0.3 percent.

Excluding food and energy prices, core consumer prices inched up by 0.1 percent in August after rising by 0.2 percent for three straight months. Core prices had been expected to show another 0.2 percent increase.

The report also said the annual rate of consumer price growth slowed to 2.7 percent in August from 2.9 percent in July.

Core consumer prices were up by 2.2 percent year-over-year in August compared to the 2.4 percent increase in the previous month.

"There is no reason to suspect that the weaker increase in consumer prices in August is the start of another dip like we saw in early 2017," said Paul Ashworth, Chief U.S. Economist at Capital Economics.

He added, "With labor market conditions tight, wage growth accelerating and input prices being pushed up by capacity constraints and recently imposed tariffs, there is plenty of upward pressure on prices."

A separate report from the Labor Department unexpectedly showed a slight drop in initial jobless claims in the week ended September 8th.

The report said initial jobless claims dipped to 204,000, a decrease of 1,000 from the previous week's revised level of 205,000.

Economists had expected jobless claims to rise to 210,000 from the 203,000 originally reported for the previous week.

With the unexpected decrease, jobless claims fell to their lowest level since hitting 202,000 in December of 1969.

Trading on Friday may be impacted by reaction to key economic data, including reports on retail sales, import and export prices, industrial production and consumer sentiment.


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Gold Futures Settle Lower

Trading 13 sept 2018 Commentaire »

Despite gaining some ground early on in the session amid easing concerns about U.S.-China trade dispute, gold futures retreated and settled in negative territory on Thursday as the dollar pulled off the day's lows.

The greenback turned weak after data released by the Labor Department showed a modest increase in U.S. consumer prices in the month of August. The Labor Department said its consumer price index rose by 0.2% in August, matching the increase seen in July. Economists had expected prices to climb by 0.3%.

The lower than expected increase in inflation may prompt the Fed to stop with just one more rate hike this year, which means, there is a possibility that there won't be a rate hike in December.

However, the dollar subsequently recovered some lost ground and the yellow metal pared its gains.

Gold futures for December ended down $2.70, or 0.2%, at $1,208.20 an ounce. On Wednesday, gold futures gained $8.70, or 0.7%, a they settled at $1,210.90 an ounce, the best settlement price in two weeks.

Silver futures for December settled at $14.244 an ounce, down $0.049 from previous close.

Copper futures for December ended up $0.0070, at $2.6830 per pound.

According to reports, the U.S. is in the early stages of proposing a new round of trade talks with China in the near future. The U.S. Treasury Secretary Steven Mnuchin has reportedly sent an invitation for talks to senior Chinese officials, proposing a meeting in the next few weeks.

The Bank of England and the European Central Bank announced their monetary policies today. The Bank of England's Monetary Policy Committee, led by Governor Mark Carney, voted to keep the key rate unchanged at 0.75% and to maintain the quantitative easing through asset purchases at GBP 435 billion. The MPC reiterated that any future increases in Bank Rate were likely to be at a gradual pace and to a limited extent.

The European Central Bank too kept its interest rates unchanged. The bank has maintained the forward guidance on monetary stimulus for a second policy session in a row. The main refi rate is currently at a record low zero percent and the deposit rate at -0.40%. The marginal lending facility rate is 0.25%.

The ECB has trimmed its economic growth outlook for this year and next. Speaking at a post-policy press conference, ECB President Mario Draghi said global risk factors have become more of a threat in recent months.

"Uncertainties relating to rising protectionism, vulnerabilities in emerging markets, and financial market volatility have gained more prominence recently," Draghi said.


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Dollar Falls Against European Rivals After Central Banks Maintain Rates

Trading 13 sept 2018 Commentaire »

The dollar is turning in a mixed performance against its major rivals Thursday afternoon. After a positive start to the day, the buck has turned lowered against its major European rivals following policy statements from both the European Central Bank and the Bank of England.

A report released by the Labor Department on Thursday showed a modest increase in U.S. consumer prices in the month of August. The Labor Department said its consumer price index rose by 0.2 percent in August, matching the increase seen in July. Economists had expected prices to climb by 0.3 percent.

First-time claims for U.S. unemployment benefits unexpectedly edged slightly lower in the week ended September 8th, according to a report released by the Labor Department on Thursday. The report said initial jobless claims dipped to 204,000, a decrease of 1,000 from the previous week's revised level of 205,000.

Economists had expected jobless claims to rise to 210,000 from the 203,000 originally reported for the previous week.

The European Central Bank left its interest rates unchanged on Thursday and maintained the forward guidance on monetary stimulus for a second policy session in a row, after the Governing Council's June decision to halve the monthly asset purchases after September, and to eventually end them in December.

The Governing Council, led by Mario Draghi, "expects the key ECB interest rates to remain at their present levels at least through the summer of 2019, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2 percent over the medium term," the ECB reiterated in a statement.

The bank also retained its guidance for its asset purchases.

The dollar climbed to an early high of $1.1609 against the Euro Thursday, but has since dropped to around $1.1685.

Germany's consumer price inflation held steady, as initially estimated in August, final data from Destatis revealed Thursday. Consumer price inflation remained stable at 2 percent in August, in line with the estimate published on August 30. The rate reached the 2 percent mark for the fourth consecutive month.

France's consumer prices grew at a steady pace in August, final data from the statistical office Insee showed Thursday. Consumer price inflation came in at 2.3 percent, the same rate as registered in July, and in line with the preliminary estimate published on August 31.

Bank of England policymakers unanimously decided to maintain the monetary policy stance on Thursday, after resorting to a quarter-point rate hike in August.

The committee also unanimously decided to maintain the quantitative easing through asset purchases at GBP 435 billion.

Policymakers said if the economy continues to develop broadly in line with the August Inflation Report projections, an ongoing tightening of monetary policy over the forecast period would be appropriate to return inflation sustainably to the 2 percent target.

The buck has retreated to around $1.31 against the pound sterling Thursday afternoon, from an early high of $1.3026.

UK house price balance dropped in August largely due to the weakness in London, the Royal Institute of Chartered Surveyors reportedly said Thursday. The national house price balance slid to 2 percent in August from 4 percent in July.

The greenback has risen to around Y111.865 against the Japanese Yen this afternoon, from an early low of Y111.169.

Producer prices in Japan were flat on month in August, the Bank of Japan said on Thursday. That was beneath expectations for an increase of 0.1 percent following the downwardly revised 0.4 percent gain in July.

Core machine orders in Japan surged a seasonally adjusted 11.0 percent on month in July, the Cabinet Office said on Thursday, coming in at 918.6 billion yen. That beat expectations for a gain of 5.5 percent following the 8.8 percent slide in June.


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Euro Firms After ECB Draghi Confirms Broadly Balanced Euro Area Growth Outlook

Trading 13 sept 2018 Commentaire »

The euro spiked up against its key counterparts in the European session on Thursday, after the European Central Bank President Mario Draghi gave a positive assessment to the economic outlook, saying that the risks to the euro area growth appears to be broadly balanced.

In his press conference following the monetary policy decision, the ECB Chief stressed that underlying inflation is likely to pick up towards the end of the year and increase gradually over the medium term, supported by the monetary policy measures, the continuing economic expansion and rising wage growth.

But uncertainties relating to rising protectionism, vulnerabilities in emerging markets, and financial market volatility have gained more prominence recently, he cautioned.

The ECB has cut its growth forecasts for this year and next due to a somewhat weaker contribution from foreign demand. For 2018 and 2019, it predicts a 2 percent and 1.8 percent growth, slightly down from previous forecasts of 2.1 percent and 1.9 percent, respectively.

The European Central Bank has left its key rates unchanged, keeping its main refi rate at a record low of zero percent and the deposit rate at -0.40 percent. The marginal lending facility rate is 0.25 percent.

"The Governing Council expects the key ECB interest rates to remain at their present levels at least through the summer of 2019, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2 percent over the medium term," the ECB said in a statement.

The euro rose against its major counterparts in the Asian session, barring the franc.

The euro was 0.6 percent higher against the greenback, touching a 2-week high of 1.1695. This follows a low of 1.1609 seen at 5:00 am ET. The pair had ended Wednesday's trading at 1.1626. The euro is seen finding resistance around the 1.19 mark.

Data from the Labor Department showed a modest increase in U.S. consumer prices in the month of August.

The Labor Department said its consumer price index rose by 0.2 percent in August, matching the increase seen in July. Economists had expected prices to climb by 0.3 percent.

The euro added 1.0 percent to hit a 2-week high of 130.50 against the yen, up from a low of 129.26 touched at 8:00 pm ET. At yesterday's close, the pair was valued at 129.34. Next key resistance for the euro is seen around the 133.00 region.

Data from the Bank of Japan showed that Japan producer prices were flat on month in August.

That was beneath expectations for an increase of 0.1 percent following the downwardly revised 0.4 percent gain in July.

After falling to a 3-day low of 1.1262 against the Swiss franc at 2:15 am ET, the euro reversed direction and appreciated 0.5 percent to a 2-day high of 1.1315. The euro had finished Wednesday's trading at 1.1282 versus the franc. The euro is poised to find resistance around the 1.14 mark.

Having fallen to 0.8892 against the pound at 7:00 am ET, the euro bounced off and was trading higher at 0.8930. The pair had closed deals at 0.8909 on Wednesday. Continuation of the euro's uptrend may take it to a resistance around the 0.91 region.

Data from the Royal Institute of Chartered Surveyors showed that U.K. house price balance dropped in August largely due to the weakness in London.

The national house price balance slid to 2 percent in August from 4 percent in July.

The single currency advanced to a 2-day high of 1.5195 against the loonie, reversing from a low of 1.5102 touched at 5:00 am ET. The euro-loonie pair was quoted at 1.5107 when it ended deals on Wednesday. Further uptrend may take the euro to a resistance around the 1.53 level.

The euro bounced off to 1.6206 against the aussie and 1.7777 against the kiwi, coming off from a 6-day low of 1.6137 and a 3-day low of 1.7706, respectively hit earlier in the day. On the upside, 1.63 and 1.80 are possibly seen as the next resistance levels for the euro against the aussie and the kiwi, respectively.

Looking ahead, U.S. monthly budget is due at 2:00 pm ET.


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ECB Trims Eurozone Growth Forecast As Draghi Warns On Protectionism Again

Trading 13 sept 2018 Commentaire »

The European Central Bank on Thursday lowered its growth forecast for the euro area for this year and next as the bank's chief Mario Draghi again warned about the risks from the rising protectionism.

Earlier in the day, the Governing Council left its interest rates, asset purchases and forward guidance unchanged. The bank confirmed that the asset purchases will be halved to EUR 15 billion this month and plan to wind them down at the end of this year "subject to incoming data confirming our medium-term inflation outlook."

"Uncertainties relating to rising protectionism, vulnerabilities in emerging markets and financial market volatility have gained more prominence recently," Draghi said in the introductory statement.

"Significant monetary policy stimulus is still needed to support the further build-up of domestic price pressures and headline inflation developments over the medium term."

During the post-decision press conference, Draghi announced the latest Eurozone macroeconomic projections from the ECB Staff that revealed a downgrade to growth projections for this year and next, which was mainly due to the possible weaker contribution from foreign demand. Inflation outlook was left unchanged.

The growth forecast for this year was lowered to 2 percent from 2.1 percent. The projection for next year was lowered to 1.8 percent from 1.9 percent. The outlook for 2020 was maintained at 1.7 percent.

Risks surrounding the euro area growth outlook are assessed as broadly balanced, Draghi said.

"Uncertainty around the inflation outlook is receding," Draghi said. The bank maintained its inflation projection for this year, next and 2020 at 1.7 percent.

The bank expects core inflation to pick up towards the end of the year and thereafter to increase gradually.

Draghi expressed concern over the high government debt in some countries and urged them to rebuild fiscal buffers. He stressed that full adherence to the Stability and Growth Pact is critical for safeguarding sound fiscal positions.

Regarding the health of the financial system 10 year since the global financial crisis, Draghi said banks are stronger today, but there was no room for complacence, especially as lots of business has migrated from banks to non-banks.


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Global macro overview for 13/09/2018

Trading 13 sept 2018 Commentaire »

In line with the broad market consensus, the Bank of England (BoE) decided not to raise its main interest rate and keep it at 0.75%, which was unanimously adopted by the nine-member composition of the British Monetary Policy Council. However, the institution announced an increase in its forecasts for the gross domestic product (GDP), and the pound sterling responded to the Super Thursday decision with a gentle strengthening to rebound at the next moment from the new session highs.

BoE's monetary policy statement said that the official interest rate was maintained at the highest level of 0.75% in almost a decade, the target level of asset purchase at GBP 435 billion, and corporate bond purchase at GBP 10 billion. The decision makers of the institution also stated that the recent economic situation allows an increase in the quarterly GDP projection (Q3 2018) to 0.5% q / q from 0.4% q / q reported in August. Once again, the bank confirmed that further monetary policy tightening is necessary, alleviating hawkish comments with the statements about the need to track macroeconomic data and the need for "gradual and limited" interest rate hike. Compared to the last month's statement, it is difficult to find significant changes in the BoE rhetoric, and the unanimous decision to keep interest rates in check confirms that the bank has no intention of normalizing its policy in the next few months.

Let's now take a look at the GBP/USD technical picture at the H4 time frame. The markets were afraid that the Bank of England will focus on potential risks related to Brexit, but this topic has not been given too much attention, so the meeting of the institution can be described as a non-event, which does not bring a stronger confusion on the market. Currently, the market is moving higher towards the next technical resistance at the level of 1.3191 and if this resistance is violated, then the trend will likely change to up trend.

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Global macro overview for 13/09/2018

Trading 13 sept 2018 Commentaire »

The Turkish Lira is experiencing dramatic moments recently. In connection with the rise in inflation to almost 18% and uncertainty regarding the future monetary policy of the country, its value against the US dollar has fallen by 40%. As it turns out, the Turks had the opportunity to strengthen their currency and took advantage of this opportunity.

Although a few hours before the planned publication could be seen an increase in uncertainty associated with the statement of President Erdogan, who announced that in his opinion Turkey should lower interest rates and not raise them, then finally the government did what it belonged to him. Despite the already optimistic forecasts assuming an increase in the interest rate to 22% from 17.75% so far, it was finally raised as much as 24%. So it turns out that the Central Bank of Turkey has not been scared of its leader. In today's statement on monetary policy, we can read, among other things, that the Bank does not rule out further interest rate increases if it is necessary. It is necessary to tighten monetary policy considerably until inflation prospects improve.

The big problem now, however, is whether the central bank will be able to maintain its independence in the light of dovish comments by Erdogan. If only the TCMB will be able to maintain its monetary policy path, it will be a big change that could strengthen the Turkish Lira. However, if Erdogan continues to insist that interest rates should be lower, this can only be a short-lived relief.

Let's now take a look at the USD/TRY technical picture at the H4 time frame. The market reaction to this decision was immediate. Turkish Lira significantly gains in value as a result of which USDTRY currency pair pairs have reached the lowest levels since August 27 this year.

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Analysis of EUR/USD for September 13, 2018

Trading 13 sept 2018 Commentaire »

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Recently, the EUR/USD pair has been trading upwards. The price tested the level of 1.2700. Anyway, according to the M15 timeframe, I found that the price rejected from the resistance 2 (1.1694), which is a sign that buying looks very risky at this stage. I also found overbought conditions on the stochastic oscillator, which is another sign of weakness. My advice is to watch for potential selling opportunities. The downward targets are set at 1.1650 and 1.1615.

Trading recommendations for today: watch for potential selling opportunities due to overbought conditions.

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GBP/USD analysis for September 13, 2018

Trading 13 sept 2018 Commentaire »

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Recently, the GBP/USD pair has been trading upwards. The price tested the level of 1.3123. Anyway, according to the M15 time – frame, I found that buyers got exhausted near resistance 2 (1.3137), which is a sign that buying at this stage looks risky. I also found the overbought condition on the stochastic oscillator, which is another sign of weakness. The downward targets are set at the price of 1.3036 and at the price of 1.3000.

Resistance levels:

R1: 1.3091

R2: 1.3137

Support levels:

Daily pivot – 1.3036

S1: 1.2994

Trading recommendations for today: watch for potential selling opportunities due to overbought condition.

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