EUR / USD: Euro expected to decline amid lack of good news

Trading 29 jan 2019 Commentaire »

Euro made an attempt to grow in the first half of the day amid a good report on consumer confidence in France. However, there was no support from the major players, which led to a decrease in the trading instrument closer to the North American session.

According to the statistics agency report, consumer confidence index in France in January of this year turned out to be much better than economists' forecast and rose again, which will necessarily affect the country's economic growth in the future. According to the report, consumer confidence reached 91 points in January of this year against 86 points in December. The consumer confidence index in France in January was projected at 88 points. It can be seen that consumers are optimistic about the future, which will necessarily affect their costs.

Today's absence of important fundamental statistics also allows bears to form the necessary pressure on the European currency.

Today's speech by US Treasury Secretary Mnuchin benefited the American dollar, although it was more informative in nature.

The official said that he did not see signs of a recession on the horizon, which economists like to talk about so much lately, and, in his opinion, the growth of the US economy in 2018 will reach 3%. Mnuchin also believes that there are good reasons for GDP growth in 2019 to reach 3%.

As for the trade war, then talk about the fact that the US president can go to the abolition of all import duties, not supported by anything. This was also mentioned today by the US Treasury Secretary. He noted that his department would make a recommendation on duties only after reaching an agreement with China, which American President Donald Trump is counting on.

As for the suspension and resumption of government work, Mnuchin evaded the answer to this question, only making it clear that the US president wants to reach a fair agreement on the financing of the wall on the border with Mexico to ensure border security.

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Today, data came out that showed that the rise in house prices in the USA in November 2018 continued to slow down. According to a Case-Shiller report, the national housing price index in November 2018 increased by 5.2% compared with the same period of the previous year, after rising by 5.3% in October. It should be noted that the high-interest rates on mortgages directly affected the purchasing power of the population, which also led to a drop in sales in the secondary market due to lower housing affordability.

As for the technical picture of the EUR / USD pair, it remained unchanged compared with the morning forecast. The only point is that the market was taken over by bears, who are expecting a reversal of events precisely according to the support breakdown scenario of 1.1420 with a decrease in the trading instrument to areas of 1.1380 and 1.1340.

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Shares of NVIDIA fell by 13%

Trading 29 jan 2019 Commentaire »

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The cost of shares of the largest manufacturer of graphics accelerators and processors of NVIDIA Corporation fell by more than 13% to $ 138 amid lower forecasts for reporting for the fourth quarter of 2018.

The company lowered its quarterly revenue forecast from $ 2.7 billion to $ 2.2 billion due to weaker than analysts predicted, sales of game consoles and data center platforms.

Representatives of Nvidia explained that the forecast was worsened due to the slowing growth of the global economy, especially in China. The annual financial report will be published on February 14th.

On Tuesday, January 29, as of 15:22 London time, the value of shares decreased by 13.82%, to $ 138.01 per security.

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Euro picks up speed due to a fair wind

Trading 29 jan 2019 Commentaire »

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The euro boosts attractiveness, taking advantage of the expectations of the Fed's "pigeon" rhetoric, hopes for progress in the trade negotiations between Washington and Beijing. The comments of Mario Draghi, who convinced the market that the economic affairs in the European block are not as bad as it seems at first glance, came to the court. At least, gloomy prospects do not require additional monetary incentives.

Recall, after the recent meeting of the European Central Bank, the EUR / USD pair has undergone sales. There were rumors about the launch of the LTRO long-term refinancing program, and the phrase "balanced risks" was replaced with "downside risks." If Draghi removes the idea of expanding monetary incentives, and the regulator, having reduced his forecasts, returns to the formulation of "balanced risks," the situation will improve. This is not a significant improvement, but there's no need to panic. Traders can easily switch to other topics, for example, to a slowdown in the US economy and to a pause in the Fed rate hike.

The US government stood idle for 35 days, which will cost the country's economy $ 3 billion in the fourth and $ 8 billion in the first quarter. In addition, Mike Malvani, the White House's chief of staff, said the day before that Donald Trump was ready to again suspend the work of the federal government if Congress leaders could not agree on a budget agreement that includes funding the wall.

US GDP in the first quarter of this year will grow in annual terms by 2.1%, although it could expand by 2.5%. Morgan Stanley cut its forecast from 2.5% to 1.7% in the first quarter and increased from 1.8% to 2.1% in the second.

In order not to worsen the situation and prevent a repetition of the story with the collapse of the stock market, members of the Fed have planned a long pause in the normalization of policies. Here we have in mind not only the federal funds rate but also the balance. Investors are discussing among themselves the fact that the combination of a large-scale issue of debt obligations by the Ministry of Finance and the cessation of reinvestment of Central Bank revenues flushes liquidity from other markets and increases turbulence.

As for tomorrow's meeting of US and PRC officials, then, despite the numerous disagreements of the parties, progress is expected in the negotiations. This was announced by the Secretary of the Treasury Steven Mnuchin. According to a senior American representative, the Celestial Empire expressed readiness to significantly increase purchases of agricultural products in the States. At the same time, the Chinese do not want to make major changes in the system of subsidizing state-owned enterprises. Inside the country, there is an opinion that the Celestial should solve non-existent problems.

Be that as it may, the markets are determined to perceive the news from the negotiating table as positive, as long as the parties continue the dialogue. With this development, the euro has every chance to continue the rally. At least, Euro currency is quite able to range in the range of $ 1.146-1.1485.

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Gold vs dollar: the struggle for investors continues

Trading 29 jan 2019 Commentaire »

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Last week, for the first time since May 2018, the price of gold overcame the level of $ 1,300 per ounce and is still above this psychological level.

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"The uncertainty surrounding Brexit, the "shutdown" in the US, trade wars are only part of the problems by which the price of gold should have shown much greater growth. However, at first, weak data on the economy of the Middle Kingdom, and then a statement by IMF representatives about the slowdown of the global economy, greatly worried investors, who began to consider the US currency as a defensive asset, as a result of which the demand for it increased markedly," the experts noted.

"Now there is a struggle between gold and greenbacks for investors who want to save their savings, and the US Federal Reserve System (FRS) will probably play a key role in it," they added.

According to them, the further dynamics of the precious metal will be determined by the sentiment on the dollar, which may change tomorrow, when the results of the next Fed meeting will be known.

"In addition to the Central Bank's decision regarding the interest rate, market participants will wait for statements about the balance, and if there is a hint of a pause in both directions, this scenario will be" bearish "for the US currency and positive for the yellow precious metal. In this case, the gold rate can update the highs of 2019. If the rhetoric of the Fed's leadership turns out to be not such a "pigeon", as expected, then the precious metal risks facing a correction as part of profit-taking for long positions. However, after a possible pause, quotes may resume movement in the north direction," analysts said.

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China’s manufacturing sector alarms currency markets

Trading 29 jan 2019 Commentaire »

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China's manufacturing sector activity in January was likely to shrink for the second month in a row, heightening concerns about the risks associated with a slowdown in China and a threat to the global economy.

Industrial leader Caterpillar has become another major international company that warned of declining demand in China, followed by chip makers and Apple. According to the average forecast of 33 economists, the official index of purchasing managers in China (PMI) in January will drop to 49.3 points from 49.4 points in December. January figures may be the weakest since February 2016. In addition, in front of the big New Year holidays and many businesses just close. Some are closing even earlier than usual, because the protracted trade war with the United States has a negative effect on orders. If Washington and Beijing do not reach a compromise that will ease the pressure on tariffs, many businesses are likely to close down forever.

In any case, weak PMI data increases the likelihood that Beijing can accelerate and intensify policy mitigation and stimulation efforts this year. Nevertheless, there remains a high probability that in the coming months business conditions in China may deteriorate, growth may fall below 6 percent in the first half of the year from 6.4 percent in the fourth quarter and stabilize only at the end of the year. This is confirmed by sources in the government, who report that the authorities are planning to reduce the growth target to 6-6.5 percent this year from 6.5 percent in 2018.

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Brent armed with sanctions

Trading 29 jan 2019 Commentaire »

Aggressive cuts in Saudi Arabia and US sanctions against Venezuela could allow the North Sea variety to show better dynamics in January from 2006, and Texas from 1984. From the point of view of the monthly increase, Brent's achievements could be the most impressive since December 2016, when OPEC enlisted the support of other countries in the issue production cuts. The same thing took place in December, but this factor began to regain only after the fulfillment of obligations by the countries of the cartel. In particular, the Minister of Energy of Saudi Arabia, Khalid al-Falih, said that Riyadh reduced production to 10.2 million b / d in January and plans to reduce it to 10.1 million b / d in February. In accordance with the agreement of the cartel and other countries-producers, production in this country should fall to 10.33 million b / s.

OPEC took into account the experience of previous years, when overfulfilment of commitments made led to an increase in oil prices. At the same time, the support of the "bulls" in Brent and WTI was rendered by their ardent opponent Donald Trump, who planned to change the regime in Venezuela. The states recognized opposition leader Juan Guaido as the legitimate president and force Nicolas Maduro to resign under a ban on oil exports. According to White House estimates, Caracas will lose $ 11 billion in revenues from the export of black gold because of the sanctions. Venezuela is the fourth largest supplier of oil to the United States, and its liabilities amount to 500 thousand b / d.

Against this background, the "bearish" news about the increase in production in the States and the first in 2019 increase in the number of drilling rigs from Backer Hughes dissolved in the total mass of positive. By the end of the week, by January 22, hedge funds had increased their long positions in Brent by 17%, which is the biggest indicator since August. Shorts were reduced by 36%, and the size of the three-week cut is the most significant in more than a year.

Dynamics of Brent and speculative positions in the North Sea variety

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On the arm of the "bulls" in Brent and WTI is the weakening of the US dollar. The derivatives market assesses the chances of the continuation of the monetary restriction cycle of the Fed at a modest 21%, and rumors about the suspension of the process of folding the balance exert additional downward pressure on the USD index. If the FOMC at its first meeting in 2019 appears to be a pronounced "dove" and the statistics on the US labor market in January disappoint, the US currency will fall into a new wave of sales, which will support black gold.

The fact that the global economy led by China is slowing down has already been taken into account in the futures for Texas and the North Sea futures, but support at $ 64-65 a barrel for Brent is able to stop the attacks of the bulls. At these levels and above, US companies actively increased production in 2018.

Technically, the correction to the "bearish" oil trend is continuing as part of the transformation of the Shark pattern to 5-0. Dropouts from 38.2% and 50% of the CD wave are usually used for sales. They correspond to the marks of $ 64.1 and $ 68.45 per barrel.

Brent, the daily chart

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GBP / USD: Does the pound have a "plan B"?

Trading 29 jan 2019 Commentaire »

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Since early January, the pound sterling has risen in price against the dollar by more than 3%, demonstrating the best dynamics among the G10 currencies.

In this case, most of the growth took place last week.

Against the background of reducing the likelihood of the United Kingdom leaving the European Union without a deal, as well as waiting for the extension of article 50 of the Lisbon Treaty, the GBP / USD pair reached its maximum level for the first time since November last year. However, she could not stay above the level of 1.32, as investors decided to take profits, probably fearing that the euphoria around Brexit had taken the pound too far.

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Tonight, the House of Commons should consider a renewed draft divorce agreement, the so-called "Plan B".

The main intrigue is what amendments will be adopted by the parliamentarians to the document and what steps the head of the Cabinet of Ministers Theresa May will take in the future.

Among the existing proposals is to exclude the possibility of the implementation of the "hard" scenario, to postpone Brexit for several months, to limit the action of the "backstop".

Apparently, the Prime Minister has to solve an extremely difficult task, since it is possible that today's vote will be only the beginning of new debates and discussions with the Parliament or the EU. This is likely to increase, then smooth out the uncertainty.

It is assumed that if specific decisions are not made before March 29, then the GBP / USD correction is expected. Clearing the situation, on the contrary, will allow the pair to continue the rally in the direction of 1.32-1.33.

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Fed provokes storm

Trading 29 jan 2019 Commentaire »

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Voting for the draft agreement on Brexit postponed to February 13, Theresa May promised to make adjustments to the document to increase the chances of success. Judging by the active purchases of the pound since mid-January, investors are waiting for a favorable outcome. But the decline of the British currency against the euro and the dollar should not be ruled out, as it is not yet clear what the draft document will be for the next vote.

Traders are concentrating on two other events, the Fed meeting and the US-China trade negotiations. According to some market participants, the narrowing of the Fed's bond portfolio was the cause of volatility in stock markets. Such a conclusion puzzled members of the Central Bank and other financiers, since there is no crisis in both areas where the regulator often intervenes.

The US Central Bank reduces its asset portfolio by $ 4 trillion, allowing for the redemption of bonds and mortgage-backed securities without reinvestment. Each month, the program provides for the redemption of liabilities up to $ 50 billion, while the figure was previously at $ 40 billion.

In 2017, the markets gave a minimal response to the announcement of the program, and recently many reputable players, including Stanley Druckenmiller, argue that the contraction of the portfolio is one of the main causes of volatility. Donald Trump, because of fluctuations in stock prices, advised the Central Bank to abandon such a venture.

According to Scott Minerd, director of investments at Guggenheim Partners, "this changes the psychology of investors."

The Fed is reducing its bond portfolio at the same time as the Ministry of Finance issues bonds to cover a large deficit, he noted. The overall effect, more than $ 1 trillion of government bonds and mortgage-backed securities come to the market, squeezes out capital from other investments.

CB denies

A representative of the regulator and other economists in public comments deny the fact that the contraction of the portfolio significantly increases market volatility. Recently, long-term interest rates have been falling, rather than rising, indicating strong demand for new treasury bonds, they explain. In addition, the repayment program is much narrower than the volume of new obligations that are needed to cover the increasing deficits.

The yield on 10-year bonds fell to 2.75% from 3.25%, recorded in November, when market volatility was on the rise.

The program to buy the Fed's securities, launched 10 years ago due to the financial crisis, is aimed at stimulating the economy by containing long-term rates. Lower rates provoke investors to buy risky assets, including stocks, corporate securities, and other assets, thereby boosting their growth.

Concerned about the decline in balance, they are confident that the purchase of bonds has well stimulated the interest of market participants in risky assets. Currently, the curtailment of the program also discourages investors from taking risks, but with a delayed reaction.

Rates and balance

It is not easy to separate the effect of lowering the balance and raising the rates of the US Central Bank on financial conditions. Last year, the cost of lending was increased 4 times, each time by a quarter percent, in December, the rate approached 2.25-2.5%. At the two-day meeting that started today, the Fed is unlikely to change the rates, but it will touch on the subject of reducing the balance.

According to Natixis Bank experts, a decline in the balance sheet may be equivalent to a 0.5% increase in the short-term rate. Some investors experienced discomfort and anxiety about the bond portfolio after the signal about the general attitude of the Central Bank in relation to rates and the economy. The market can take a strong commitment to reduce assets in the portfolio for a hint of the willingness of the regulator to withstand high rates while economic growth is slowing.

Jerome Powell on the eve attempted to eliminate these fears. He argued that the decline in the balance sheet was not a serious factor affecting the market turbulence that began at the end of last year.

The Fed has everything under control

According to Powell, if the bank came to a different conclusion, then "without the slightest hesitation would make the appropriate changes."

The majority of respondents The Wall Street Journal shares the words of the head of the Central Bank of the USA. Half of the respondents believe that the regulator's policy "had little or even zero effect on financial conditions, while 44% called the measures of financial officials relevant to the markets. They were considered "extremely important" by 5% of economists.

Note that the narrowing of the balance sheet could lead to a drop in the value of assets and toughening of financial conditions against the background of the movement of reserves in the banking system, accumulated during the purchase of bonds. Reserves are banks' deposits on the Fed's balance sheet, with which you can assess the security of the financial system with capital.

This channel also has no significant effect. The reduction of reserves has been going on since 2014, and the stock market has been growing most of the time in the last 5 years. Prior to last week, reserves reached $ 1.6 trillion compared with a peak of $ 2.8 trillion in 2014.

And yet, there is little evidence that the reduction in reserves in the banking system has worsened the growth of lending. In the fourth quarter, the indicator approached multi-year highs.

According to the chief economist of JPMorgan Michael Feroli, it is pointless to believe that the decline in the Fed's liquidity level is reflected in the markets. "Many years ago there were widespread fears that the Fed would flood the world with dollars, and these fears were ultimately in vain," he concluded.

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GBP / USD: plan for the American session on January 29. Traders continue to wait for the next Brexit vote

Trading 29 jan 2019 Commentaire »

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

The situation in the pound has not changed, except that buyers managed to keep the support level of 1.3137, which leaves hope for the continued growth of the pound. In the evening, another vote will be held on Brexit in the British Parliament, which can support the British pound, provided that it is possible to agree on a transfer of the date of exit from the EU. The breakthrough of the resistance level of 1.3186 will be a signal to new purchases of the pound in order to update the maximum of 1.3257 and 1.3348, where I recommend fixing the profits. In the case of a decrease in the pound below the support level of 1.3137, it is best to return to long positions to rebound from the lows of 1.3077 and 1.3013.

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

Under the scenario, if the Brexit agreement is not accepted, exactly like the changes that Theresa May offers today, the pressure on the pound may increase. The repeated test of the support level of 1.3137 will be the first signal to open short positions in order to decrease to the area of 1.3077 and 1.3013, where I recommend fixing the profit. In the case of a pound rising above 1.3186, it is best to consider new sales, provided that a false breakdown is formed in the resistance area of 1.3257 or on a rebound from the maximum of 1.3348.

Indicator signals:

Moving Averages

Trade has moved to the area of 30-day and 50-day moving, which indicates the possible formation of a downward corrective trend.

Bollinger bands

Bollinger Bands indicator volatility has decreased, which does not give signals on market entry.

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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
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EUR / USD: plan for the US session on January 29. The bears in no hurry to return to the market

Trading 29 jan 2019 Commentaire »

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

The euro buyers failed to cope with the morning task of returning to the resistance area of 1.1457, which could lead to the formation of a downward correction in the afternoon. It is best to consider long positions after the formation of a false breakdown in the support area of 1.1422 or to rebound from a larger level of 1.1387. The main goal of buyers is a breakthrough and consolidation above the maximum of 1.1457, which will lead EUR / USD to the area of new levels of 1.1490 and 1.1526, where I recommend fixing the profits.

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

The divergence, to which I paid attention in my morning review, worked fine for myself, and as long as trading continues to be below the resistance level of 1.1457, the pressure on the euro will continue. The breakthrough and consolidation below the support level of 1.1422 will lead to a larger sale of EUR / USD with a minimum of 1.1387 and 1.1342, where I recommend fixing the profits. In the case of growth above 1.1457, you can sell the euro to rebound from a maximum of 1.1490.

Indicator signals:

Moving Averages

Trade is gradually returning to the area of 30-day and 50-moving averages, which indicates a possible change in the upward trend.

Bollinger bands

Bollinger Bands indicator volatility has decreased, which does not give signals on market entry.

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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