Treasuries Close Roughly Flat After Pulling Back Off Early Highs

Trading 07 nov 2018 Commentaire »

After moving higher early in the trading day on Wednesday, treasuries pulled back over the course of the session before closing roughly flat.

Bond prices pulled back well off their highs in afternoon trading, ending the day near the unchanged line. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by less than a basis point to 3.213 percent.

The pullback by treasuries came following the release of the results of the Treasury Department's auction of $19 billion worth of thirty-year bonds, which attracted below average demand.

The thirty-year bond auction drew a high yield of 3.418 percent and a bid-to-cover ratio of 2.06, while the ten previous thirty-year bond auctions had an average bid-to-cover ratio of 2.32.

The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.

Today's thirty-year bond auction came after the Treasury sold $37 billion worth of three-year notes on Monday and $27 billion worth of ten-year notes on Tuesday.

The early strength among treasuries came as the results of the highly anticipated midterm elections on Tuesday came largely in line with expectations.

Democrats are projected to retake control of the House for the first time since 2010, as Democratic candidates managed to flip a number of suburban districts across the country.

Control of the House will give Democrats subpoena power, potentially leading to numerous investigations of President Donald Trump's administration.

House Democrats will also play a much larger role if Trump hopes to achieve any major legislative accomplishments in the next two years.

Meanwhile, Democrats did not fare as well as in the Senate, as Republicans appear poised to expand their majority in the upper chamber.

Republican candidates won Democratic Senate seats in Indiana, Missouri, and North Dakota and are leading in tight races in Florida, Arizona, and Montana.

The GOP had been seen as likely to maintain control of the Senate due to the tough map faced by Democrats, who were defending 26 of the 35 seats on the ballot.

With Republicans expanding their majority, Trump will likely have an easier time pushing through more controversial judicial nominees.

Despite Republicans losing control of the House, Trump described the night as a "tremendous success" in a post on Twitter.

Trading on Thursday is likely to be driven by reaction to the Federal Reserve's monetary policy announcement due tomorrow afternoon.

The Fed is widely expected to leave interest rates unchanged, but traders will keep a close eye on the accompanying statement for clues about an expected rate hike in December.


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New Zealand Holds Official Cash Rate Steady At 1.75%

Trading 07 nov 2018 Commentaire »

The Reserve Bank of New Zealand on Thursday kept its Official Cash Rate at the record low of 1.75 percent for the 14th straight meeting.

The decision was in line with expectations following a 0.25 percent rate cut in November 2016.

The central bank has pared a collective 0.50 percent from its benchmark in the last 22 months, lowering the rate in six of the last 21 meetings after six straight sessions with no change.

GDP growth is expected to pick up through 2019 and the OCR is expected to be unchanged through next year and into 2020, RBNZ Governor Adrian Orr noted.

"Monetary stimulus and population growth underpin household spending and business investment," Orr said. "Government spending on infrastructure and housing also supports domestic demand. The level of the New Zealand dollar exchange rate will support export earnings."

Some downside risks persist, he added - including geopolitical risks and unexpected policies pertaining to major trading partners.

"Downside risks to the growth outlook remain," Orr said. "Weak business sentiment could weigh on growth for longer. Trade tensions remain in some major economies, raising the risk that trade barriers increase and undermine global growth." Core consumer prices are expected to gradually rise to the mid-point of the central bank's target range at 2 percent - although upside risks to the inflation outlook also exist.

"We will look through this volatility as appropriate," Orr said. "We will keep the OCR at an expansionary level for a considerable period to contribute to maximizing sustainable employment and maintaining low and stable inflation."


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Thirty-Year Bond Auction Attracts Below Average Demand

Trading 07 nov 2018 Commentaire »

Finishing off this week's series of long-term securities auctions, the Treasury Department sold $19 billion worth of thirty-year bonds on Wednesday, attracting below average demand.

The thirty-year bond auction drew a high yield of 3.418 percent and a bid-to-cover ratio of 2.06.

Last month, the Treasury sold $15 billion worth of thirty-year bonds, drawing a high yield of 3.344 percent and a bid-to-cover ratio of 2.42.

The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.

The ten previous thirty-year bond auctions had an average bid-to-cover ratio of 2.32.

Today's thirty-year bond auction came after the Treasury sold $37 billion worth of three-year notes on Monday and $27 billion worth of ten-year notes on Tuesday.


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Analysis of GBP / USD Divergences for November 7th. Pound sterling continues to catch up

Trading 07 nov 2018 Commentaire »

4h

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On the 4-hour chart, the GBP / USD currency pair continues the growth process and completed the close above the Fibo level 61.8% - 1.3066. Thus, the growth of quotations can be continued on November 7 in the direction of the correction level of 76.4% - 1.3157. Rebounding the course of the pair from the Fibo level of 76.4% will allow traders to expect a reversal in favor of the US dollar and a slight decline in the direction of the correctional level of 61.8%. There are no ripening divergences today. Fixing the pair above the Fibo level of 76.4% will work in favor of continuing growth in the direction of the next correction level of 100.0% - 1.3297.

The Fibo grid is built on extremes from September 20, 2018, and October 30, 2018.

1h

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On the hourly chart, the currency pair made an increase to the correction level of 76.4% - 1.3125. On November 7, the bearish divergence at the CCI indicator is brewing. The education will allow us to count on a turn in favor of the US currency and a slight drop in the direction of the Fibo level of 61.8% - 1.3044. Reversing quotes from the correction level of 76.4% will similarly work in favor of the American currency. Fixing the pair above the Fibo level of 76.4% will increase the likelihood of continued growth in the direction of the next correction level of 100.0% - 1.3257.

The Fibo grid was built on extremums from October 12, 2018, and October 30, 2018.

Recommendations to traders:

New purchases of the GBP / USD currency pair can be made with the target of 1.3357 and a Stop Loss order under the correction level of 76.4% if the pair closes above 1.3125 (hourly chart).

Selling of the GBP / USD currency pair will be possible with a target of 1.3044 and a Stop Loss order above the level of 76.4% if the pair bounces off the correction level of 1.3125 (hourly chart), especially in conjunction with the bearish divergence.

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The British Parliament stands in the way of pound growth

Trading 07 nov 2018 Commentaire »

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The market is optimistic about the conclusion of an agreement on Brexit, against this background, the pound shows growth, and analysts predict a further strengthening of the course. Sterling this month scored about 3% of the cost and went above $ 1.31. Paired with the euro, it went up by 1%, reaching 87.24 pence.

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However, there is a serious risk that will stop the process of strengthening sterling. A single agreement with Brussels is not enough; it is necessary that the deal is approved by the British Parliament, which can go into denial.

In this scenario, Theresa May will again have to sit at the negotiating table with EU officials. The country will be forced to hold a second referendum or even a general election, which will provoke the fall of the pound.

The largest European fund, BlueBay Asset Management, considers the current situation to be an excellent reason to sell British currency.

"The ratio of the risk-profit ratio favors the opening of a short position in the pound. We do not expect any transaction to easily pass through the House of Commons. Ultimately, there are good chances for a general election in the next 6 months, before or after Brexit," says Mark Dowding of BlueBay, which manages $ 60 billion in assets.

Mathematics of the Parliament of Great Britain

In order to approve the divorce agreement between Britain and the EU, the House of Commons requires that a greater number of deputies voted in favor. There are 650 people in the parliament. The root of the problem is here.

The fact is that May does not have a majority vote. In addition, legislators, supporters or opponents of Brexit, can go into opposition to the government. On Tuesday, the opposition Labor Party announced that it did not intend to vote for a deal involving only the temporary preservation of the country in the Customs Union.

If the deputies fulfill their threat and do not approve the deal, then Britain is likely to leave the group in March just like that.

This is what Rabobank strategists write about this:

"We think that market expectations will shift towards the hard Brexit, and sterling will fall sharply with the growth of the euro/pound to 0.95," said in a note. Banking analysts also do not exclude the "rise of the euro/pound to parity."

Volatility is gaining momentum

The outcome of the exit of Britain from the EU is still difficult to predict, so some analysts recommend selling sterling on the rise or buying on volatility.

Disapproval of the deal by parliament will provoke a second vote, which can be positive or for Brexit without an agreement. The latter will hit a pound.

Investors in the options market prepared to increase fluctuations in sterling. At the moment, the indicator of one-month volatility is close to the peak level since February. It is noted that even the maximum for 8 months, the price of a contract for the purchase of volatility can go into profit.

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*U.S. Crude Oil Inventories Jump 5.8 Million Barrels In Week Ended 11/2

Trading 07 nov 2018 Commentaire »

U.S. Crude Oil Inventories Jump 5.8 Million Barrels In Week Ended 11/2


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Fundamental Analysis of AUD/USD for November 7, 2018

Trading 07 nov 2018 Commentaire »

AUD/USD has been quite impulsive with recent bullish gains which lead the price towards 0.7300 resistance area from where certain bearish pressure might be observed in the coming days. Despite the unchanged Cash Rate and neutral economic readings, AUD gained momentum while USD is struggling fundamentally.

Recently Australian AIG Services Index report was published with a decrease to 51.1 from the previous figure of 52.5, MI Inflation gauge decreased to 0.1% from the previous value of 0.3%, and ANZ Job Advertisement showed an increase to 0.2% from the previous value of -0.7%. The Cash Rate was left unchanged at 1.50% as expected. Besides, RBA Rate Statement justifies leaving the cash rate unchanged. This encourages more gains for AUD. Today, AIG Construction Index report was published with a decrease to 46.4 from the previous figure of 49.3, which did not quite affect AUD gains. Ahead of RBA Monetary Statement on Friday, certain volatility may be observed. On the other hand, FOMC Policy Statement and Fed policu update may lead to certain correction in the pair or counter impulsive pressure.

On the USD side, despite relatively positive employment reports recently, USD is still struggling to gain momentum. Ahead of the Federal Funds rate report to be published on Thursday, which is expected to be unchanged at 2.25%, USD is expected to inject certain momentum, leading to higher volatility in the pair.

Meanhwile, the pair is set to trade with higher volatility in the coming days as high impact economic reports are yet to be published in the US and Australia. Though AUD is currently the dominating side, if RBA Statement shows any dovish indication, AUD may lose some grounds against USD while having unchanged Federal Funds Rate result.

Now let us look at the technical view. The price has been quite impulsive with the bullish gains while also residing above the dynamic level of 20 EMA. Currently the price is pushing lower having Bearish Divergence alongside which is expected to lead to certain bearish pressure towards 0.7150-0.7200 area before it starts to push higher towards 0.7300 and later towards 0.75 area in the coming days. As the price remains above 0.70 area, the bullish bias is expected to continue.

SUPPORT: 0.70, 0.7150, 0.7200

RESISTANCE: 0.7300, 0.7450, 0.7500

BIAS: BULLISH

MOMENTUM: IMPULSIVE and NON-VOLATILE

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Opinion: Oil market rally will resume in mid-November

Trading 07 nov 2018 Commentaire »

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Analysts of one of the largest banks in Sweden, Skandinaviska Enskilda Banken (SEB), believe that a little more than a week is left before the resumption of the rally in the oil market.

"We expect that by this time, the speculative sale, which is based on the behavior of US stocks, will end, and the effect of the restoration of US sanctions against Iran will become more noticeable, which will manifest itself in reducing raw materials in the second half of November," representatives of the financial institution said.

"In addition, Saudi Arabia will no longer be in favor of Donald Trump to put pressure on the cost of oil, since the so-called "mid-term elections" have already taken place. Thus, verbal interventions by the Saudis or their OPEC allies should stop," they added.

"Below $ 70 per barrel, oil quotes are unlikely to fall already, although a short-term fall in prices to $ 60 per barrel should also not be ruled out. However, this corresponds to normal market fluctuations," noted SEB experts.

According to them, the main factors that contributed to the decline in the value of black gold from the beginning of October were the American stock market and statistics showing a steady increase in the volume of raw materials in the US for six weeks in a row.

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Oil prices jumped to rise after falling the day before

Trading 07 nov 2018 Commentaire »

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The cost of Brent crude on the world market moved to an increase to $ 73.50 a barrel after falling to $ 71.30 the day before. Quotes of American oil WTI rose to $ 62.77 per barrel. The driver of their rise was the message that OPEC + is discussing the possibility of reducing oil production in 2019.

Yesterday, the price of oil fell after the news of the provision of a number of countries temporary exclusion from oil sanctions against Iran. Additional pressure on the quotes had a report from the American Petroleum Institute (API), reflecting the growth of stocks of crude oil in the US by 7.8 million barrels.

Saudi Arabian Energy Minister Khalid al-Falih said that OPEC + intends to sign an agreement on indefinite cooperation in December, and all countries will be able to set new indicators to reduce oil production for next year.

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GBP / USD: plan for the US session on November 7. Slowly but surely

Trading 07 nov 2018 Commentaire »

To open long positions on GBP / USD, you need:

Buyers continue to push the pound up. The breakthrough of the level of 1.3133 and consolidation above allows us to count on the continuation of the upward trend with the update of the maximum near 1.3186 and 1.3233, where I recommend fixing the profit. In the case of a decrease in the pound in the afternoon, the formation of a false breakdown in the support area of 1.3133 will also be a signal to buy. Otherwise, it is best to open long positions to rebound from 1.3077.

To open short positions on GBP / USD, you need:

Only an unsuccessful consolidation and return below the resistance level of 1.3186 can lead to the formation of a downward correction in the GBP / USD pair, otherwise short positions can be opened for a rebound from the maximum of 1.3233. The main task of the sellers in the afternoon will be the return and consolidation under the support of 1.3133, which will lead to a larger decline of the pound to the minimum area of 1.3077 and stop the uptrend.

Indicator signals:

Moving Averages

Trade is conducted above the 30- and 50-day average, which maintains the upward potential in the British pound.

Bollinger bands

The break of the middle border of the Bollinger Bands indicator near 1.3130 will lead to a downward correction of GBP / USD.

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Description of indicators

  • MA (moving average) 50 days - yellow
  • MA (moving average) 30 days - green
  • MACD: fast EMA 12, slow EMA 26, SMA 9
  • Bollinger Bands 20
The material has been provided by InstaForex Company - www.instaforex.com