The drop in volatility in the EM segment has opened up opportunities for earnings

Trading 24 jan 2019 Commentaire »

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The purchase of higher-yielding currencies of the EM segment for borrowed dollars brings 8.5% from the beginning of September last year. This is due to the alleged pause in tightening the Fed policy and the achievement of a trade agreement between Washington and Beijing. Volatility in financial markets weakened, the one-month figure fell in 20 of the 23 currencies of emerging markets. The profitability indices of the game on the difference in interest rates, or carry trade, increased in all three areas.

On Wednesday, the JPMorgan Global FX volatility index fell to 7.89%.

"Against the background of the prospects of more moderate actions by the Central Bank of developed countries and pleasant economic surprises, the carry trade strategy brings good results," said global strategists at Aberdeen Standard Investments in Edinburgh.

Carry trade is reborn after last year's stakes in this strategy led to the largest losses since 2015. This was due to a significant increase in the dollar rate and an increase in expectations for interest rates. It is noted that over the past five years, the most successful opportunities for rates on the appreciation of the EM segment through the carry-trade, in February and December 2016, September 2018, coincided with peaks in the volatility of exchange rates.

Naturally, no one can guarantee that such a favorable situation will last forever, sharp fluctuations may return to emerging markets, and this is disturbing. In addition, traders who wish to earn at higher local interest rates have the bitter experience gained in November 2016, when Donald Trump unexpectedly won the presidential election. Market participants also remember August 2018 well, a wave of currency crisis hit the developing regions.

Liquidity in sight

Rabobank New York division strategists call an important aspect the level of liquidity that must always be kept in sight. Taking as a basis their predictions on the carry strategy with regard to volatility, they primarily focus on the Turkish lira, the Indonesian rupee, the Indian rupee, the Mexican peso, and the Russian ruble.

This year, buying pesos of Mexico for borrowed American dollars brings more than 3%, which is the fifth among the best results in the EM segment. A year earlier, the profitability of the strategy was twice as high. The Mexican currency was the only one with a positive yield to 2018. Now the leaders of the Russian ruble. Thus, the yield on the game on the difference in interest rates almost reaches 6%.

In Wells Fargo, the Mexican peso and the Indonesian rupee are distinguished on a par with the Russian ruble. However, they recommend being extremely careful. In their opinion, one should not hurry with large rates due to the risk of volatility returning.

Meanwhile, the ruble is oppressing the dollar, winning the mark of 66, and experts have already set their sights on 65.

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Applications for benefits in the US unemployment fell to its lowest level since 1969

Trading 24 jan 2019 Commentaire »

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The number of Americans applying for unemployment benefits fell below the 49-year low. The US labor market remains strong, and this should alleviate concerns about a sharp slowdown in economic growth. Recall that the leading global economy now faces several obstacles at once, including the partial closure of the federal government, which is beginning to undermine consumer and business confidence.

Primary claims for unemployment benefits fell by 13,000, to 199,000 applications for the week ending January 19. This is the lowest level since mid-November 1969 when 197,000 complaints were registered, the Ministry of Labor reported. However, most experts predicted an increase in the number of applications to 220,000. The four-week figure fell by 5,500, to 215,000 calls. This helped the dollar stay at the top of the basket of major currencies. There are fears that the longest government closure in history will push unemployment above 4 percent in January. In December, the unemployment rate was 3.9 percent. The number of people receiving benefits on a regular basis decreased by 24,000, to 1.71 million for the week ending January 12.

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Another reason, or why the dollar will continue to rise against the euro

Trading 24 jan 2019 Commentaire »

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The dollar received another reason for growth and jumped above the five-week high against the euro after the head of the European Central Bank, Mario Draghi, said that economic risks shifted to the downside, and short-term data is likely to be weaker than previously thought.

Recall, the ECB left its monetary policy unchanged, as expected, maintaining the intention to raise rates at the end of this year, even though the eurozone economy is experiencing the most serious slowdown in the last half-century. The euro fell 0.45 percent against the dollar and is trading at 1.1329 dollars. Those who have only recently predicted the strengthening of the single European currency to $ 1.2 will be advised to be patient, perhaps for the next two years.

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While the euro-optimists are preparing for a breakthrough, the European currency fell to 1.1308 dollars, the weakest exchange rate since December 17. The dollar index, which tracks the dollar against the euro, the yen, sterling, and three other currencies, rose by 0.33 percent, to 96.439 percentage points.

Even after the recent fall and the generally tense situation on the global financial arena, the dollar remains a tough nut to crack. Fundamental indicators do say that the "American" is overbought and overvalued, but even in this situation, there is no alternative to the dollar. Other major currencies, with the exception of the yen, are under even more serious pressure, which means the dollar will continue to stay on top.

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Dollar is in no hurry to sign up as an outsider, path to easing promises to be thorny

Trading 24 jan 2019 Commentaire »

According to analysts Saxo Bank, the movement towards a weaker dollar may gain momentum if the US Federal Reserve System (FRS) will have to completely change its course due to the slowdown of the American and global economies in the foreseeable future.

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"The Fed seems to gradually come to understand the reality, in which the crackdown and a strong dollar are less consistent with financial stability, it is not surprising that the beginning of 2019 was marked by a sharp shift in the rhetoric of the regulator," representatives of the financial institute said.

"However, the Fed may still take a long time to fully unfold the course, and the lack of reasons for optimism in the global economy can make the path to a steady weak dollar in 2019 rather thorny. The difficulty lies in the fact that greenback and US national debt are the most liquid instruments in times of global instability, "they added.

"If we are moving towards a further decline in world markets, primarily due to concerns about a slowdown in global and American GDP growth, it is possible that the dollar exchange rate will make sharp jumps from time to time," noted Saxo Bank currency strategies.

According to experts, the tactical right decision in such circumstances seems to be the transfer of capital into instruments with greater protective properties than the dollar. In particular, the Japanese yen can claim this role.

Meanwhile, according to a consensus forecast of economists recently surveyed by Bloomberg, the main favorite among the G10 currencies in 2019 may be the Norwegian krone, which is expected to strengthen against the dollar by more than 9%. If over the past few years, the difference in the courses of the Fed and the Norwegian Bank played into the hands of the "American", the situation may change radically this year, which will allow us to expect a decrease in the USD / NOK pair to 8.2.

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BITCOIN Analysis for January 24, 2019

Trading 24 jan 2019 Commentaire »

Bitcoin has been trading sideways between $3,500 and $3,600 for a few days in a row. The price is currently residing at the edge of $3,600 area, but yet to break above it with a daily close. The Kumo Cloud resistance is quite wider above $3,800-$4,000 which is expected to act as strong resistance for the price while pushing higher in the future. The dynamic levels in the daily chart are also higher than the price formation which is expected to work as resistance as well. As for the current price formation, BTC is likely to trade higher, but the path towards $4,000 area will not be easy because of several resistance levels which should be broken first before the price can establish a strong impulsive bullish trend. As the price remains above $3,000, the bullish bias is expected to continue, though with minor downward corrections and higher volatility along the way.

SUPPORT: 3,000, 3,500

RESISTANCE: 3,600, 4,000, 4,250,

BIAS: BULLISH

MOMENTUM: VOLATILE

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Control zones of USD/CAD pair 01/24/19

Trading 24 jan 2019 Commentaire »

After a two-week exit beyond the monthly CZ of January, the pair returned to its limits, which indicates the need to keep open purchases and consider new ones in the event of a decline.

The upward movement of the pair is a weekly impulse. The fixation above 1/2 CZ of 1.3290-1.3279 allowed to open a long position. Yesterday's testing of 1/4 CZ of 1.3307-1.3302 made it possible for those who work more conservatively to enter. The purpose of the growth is the weekly CZ of 1.3402-1..3382. Achieving this zone will allow you to close most of the purchases and consider the option of forming a reversal model in the event of a large offer.

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Purchases from current levels are not profitable, since the model is already realized by 90%. On the higher timeframe, the downward movement still remains a long-term impulse.

An alternative model should be considered in case the pair can break through and consolidate above the level of 1.3402 at one of the US sessions. This allows considering of a medium-term change of movement to ascending. The probability of implementing this model is 30%, thus, without confirmation of the purchase at the highs of the current week are an unprofitable investment.

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Daily CZ - daily control zone. The area formed by important data from the futures market that change several times a year.

Weekly CZ - weekly control zone. The area formed by marks from important futures market which change several times a year.

Monthly CZ - monthly control zone. The area is a reflection of the average volatility over the past year.

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GBP / USD pair: a plan for the American session on January 24. Optimism regarding Brexit fades away, as does the British

Trading 24 jan 2019 Commentaire »

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

As expected, the buyers failed to maintain the demand for the British pound and keep the morning support level of 1.3064, to which I paid attention. Optimism regarding the Brexit deal is gradually fading away and at the moment it is best to consider long positions after forming a false breakdown around 1.3013 or to rebound from a larger area of 1.2950. However, in order to save the uptrend, it is best to return to the resistance level of 1.3064, above which the highs of 1.3127 and 1.3177 will be available.

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

Bears coped with the morning task of returning to the level of 1.3127, which expectedly led to the sale of the pound and the test of support at 1.3013. In the second half of the day, a breakthrough of this range is also required, which will strengthen the downward impulse and will lead to a minimum of 1.2950 and 1.2894, where I recommend taking profits. In the case of an upward trend in the second half of the day, one can take a closer look at sales at the next unsuccessful consolidation above 1.3064 or at a rebound from the maximum of 1.3127.

More in the video forecast for January 24

Indicator signals:

Moving averages

Trade is conducted in the area of 30- and 50-day moving, which indicates a possible change in the bull trend.

Bollinger bands

In the case of a pound increase, sales can be viewed from the middle line of the Bollinger Bands indicator around 1.3064 or to rebound from the upper border in the area of 1.3100.

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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

Control zones of NZD / USD pair 01/24/19

Trading 24 jan 2019 Commentaire »

The growth of the pair again led to the test of the monthly control zone of January. This suggests the possibility of closing all buy positions made at the beginning of the current week. The option with the formation of a reversal model comes to the fore.

Now, a controversial situation is formed. The pair has been a reversal growth model in the recent timeframe, however, it happened this month, which may impede further growth. In such moments, it is recommended to use the timeframe. The price is 70%. This must be considered when building a trading plan. This must be considered when building a trading plan.

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Going beyond the monthly CZ will increase the probability of a downward model forming up to 90%. Therefore, the implementation of an upward intraday upward impulse will not give the necessary advantage in the distance.

An alternative growth model may continue, but opening a long position from current levels is no longer profitable. The best option is to find a false breakdown when updating the weekly high, which will allow you to find good prices to open a short position. It is important to understand that in order to complete a transaction, the formation of an absorption pattern is imperative.

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Daily CZ - daily control zone. The area formed by important data from the futures market that change several times a year.

Weekly CZ - weekly control zone. The area formed by marks from important futures market which change several times a year.

Monthly CZ - monthly control zone. The area is a reflection of the average volatility over the past year.

The material has been provided by InstaForex Company - www.instaforex.com

ECB: ECB leaves rates unchanged and is ready to reinvest profits from QE

Trading 24 jan 2019 Commentaire »

Weak data, released in the eurozone in the first half of the day, pushed the European currency together with the US dollar. Particularly alarming for the manufacturing sector in Germany, whose index pointed to a slowdown in growth rates of activity.

According to the data, the PMI Purchasing Managers Index for the manufacturing sector in Germany in January 2019 fell below the key level of 50 points. Although the data are preliminary, this state of affairs indicates a decrease in activity in the sector.

As stated in the IHS Markit report, in January this year, the German manufacturing PMI was 49.9 points. The main pressure on the index came from the situation with new orders, as well as the weakness of the automotive industry.

The preliminary PMI Purchasing Managers Index for the manufacturing sector in France in January of this year, on the contrary, increased and managed to pass over the mark of 50 points, reaching 51.2 points. Back in December 2018, the index was at the level of 49.7. Economists had expected the index to not exceed the level of growth and will be at around 49.9 points.

As for the same indicator for the euro area as a whole, the report shows that the economy continues to slow down at the beginning of this year, which will certainly be noted at the press conference of the President of the European Central Bank, which will be held this afternoon.

According to the submitted IHS Markit data, the composite index of PMI supply managers in the eurozone, which includes an indicator of activity in the manufacturing sector and the service sector, in January 2019 fell to 50.7 points from 51.1 points in December. Let me remind you that the index value below 50 indicates a decrease in activity.

The preliminary PMI Purchasing Managers Index for the Eurozone manufacturing sector in January fell to 50.5 points from 51.4 points in December.

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Today, it also became known that the European Central Bank left the refinancing rate unchanged, at the level of 0.0%. The deposit rate also remained at the same negative level of -0.40%. The ECB expects rates to remain at current levels for at least this summer inclusive. The European regulator also assured that it would completely reinvest the profits from QE over a long period after the first rate increase, which again upset traders who are putting more of a more aggressive monetary policy tightening.

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EUR / USD pair: plan for the American session on January 24. Euro may remain under pressure

Trading 24 jan 2019 Commentaire »

To open long positions on EURUSD you need:

Buyers are clearly leaving the market before the meeting of the European Central Bank. While the intermediate support is provided by the lower limit of the side channel at 1.1339, after its test, there is no demand for European currency as we can see on the chart. Everything will depend on the statements made by the President of the ECB. In the case of a breakout and decline scenario of the euro below the level of 1.1339, it is best to return to long positions after testing the minimums of 1.1307 and 1.1272. The main task of buyers for the second half of the day will be a return to the resistance level of 1.1376 with an update of the maximum of 1.1411. In this scenario, you can count on a larger upward correction in euros as early as next week.

To open short positions on EURUSD you need:

After the speech of the ECB President Mario Draghi, a repeated test and breakthrough of 1.1339 level will be a signal to open short positions in EUR / USD with access to new minima in the area of 1.1307 and 1.1272, where I recommend to take profits. An unsuccessful return to the resistance level of 1.1376 in the second half of the day may also lead to another euro sale. In the event that Draghi signals to maintain the monetary policy rate, the euro may rise. In this scenario, it is better to return to short positions from the highs of 1.1411 and 1.1451.

More in the video forecast for January 24

Indicator signals:

Moving averages

Trade is conducted in the area of 30- and 50-medium moving, which indicates the lateral nature of the market.

Bollinger bands

The volatility of the Bollinger Bands indicator is low, which does not give signals to enter the market.

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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