A stronger yen affects the choice of investors in Japan

Trading 30 jan 2019 Commentaire »

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The yen has reached a mark that indicates that Japanese investors can return to US Treasury bonds. Japan's national currency rose above $ 110, and local funds began to increase the purchase of foreign securities at the fastest pace in four months. In Deutsche Bank AG and Credit Agricole SA, they believe that the trend will accelerate if the yen rushes to $ 100.

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Meanwhile, last year it was said that Japanese funds owning $ 2.4 trillion of overseas debt would change investment preferences, as the adjustment of the Central Bank rate led to an increase in the yield of government bonds. Now, it has become clear that this statement is very far from the truth, yields in Japan have fallen, and the yen has strengthened significantly in price.

"We can see a growth in the demand of local investors for unhedged Treasury bonds against the backdrop of the prospects for strengthening the yen, especially after the currency has risen above $ 110. It is possible that a huge amount of money went into foreign bonds, as the yen rose more than expected," representatives of the Tokyo-based Sumitomo Mitsui Trust Asset Management Co. fund comment on the situation.

Japanese life insurers are the largest holders of foreign paper, so their demand may be decisive. So, two companies in October announced their intention to buy unhedged foreign debt after the fall of the US dollar below 110 yen.

Last year, the gaining dollar made hedging expensive for the Japanese, prompting investors to net sales of 5.2 trillion yen ($ 47.5 billion) of US bonds in the first 11 months of the year. Three months before December, insurers sold foreign bonds worth about 900 billion yen. It is noted that now they have a sufficient amount of money.

Due to the fact that the yen is located below 110, the purchase of foreign securities in Japan from January 4 to January 18 amounted to approximately 3 trillion yen. This is the highest rate since September. On Wednesday, the USD / JPY was trading around $ 109.60 against the $ 114.55 mark at the beginning of October, which is an 11-month low.

Desire to risk

The yen has very good prospects ahead, in the coming months it may rise in price to the dollar by up to 100. Currency strategists attribute this to the fact that the slowdown in global growth and tension between the United States and China in the matter of trade keep investors from investing in risky assets.

At the end of last year, Japan's baseline 10-year yield became negative for the first time in more than a year and amounted to 0.005% on Wednesday. The yield premium that treasury bonds of the same maturity offer in relation to Japan's debt rose to 271 basis points. In early January, this figure was 256.

"Investors cannot invest in bonds in yen, as their profitability falls. They have to take risks and invest abroad to gain profitability," write local strategists.

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What puts pressure on the euro and what pushes up the Australian dollar

Trading 30 jan 2019 Commentaire »

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Markets focused on trade negotiations between the United States and China. According to a Reuters poll conducted last week, any aggravation of the trade conflict between the two largest economies in the world could lead to a sharp decline in the global economy. While China has indicated its willingness to buy more goods from the United States, sources say both sides remain "far apart" on key structural issues, and Washington threatens to raise tariffs if it does not see significant progress in improving relations before the start of March.

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And if the dollar looks more attractive against the background of these trade negotiations, then the world markets as a whole are declining due to fears. The euro is already losing against the pound and is likely to continue to slide down, but at the same time the single currency remains stable against the dollar, having even managed to update the two-week maximum of 1.1450 dollars. The American currency is held back by a pause in trading before the Fed has to report on the results of the meeting. The dollar index versus a basket of six major currencies fell by 0.1 percent, to 95.732 points, and the yield of US treasury bonds fell markedly.

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The dollar fell by 0.1 percent, to 109.29 yen, lost 0.5 percent to the Australian dollar, which rose after consumer price growth in the last quarter surpassed expectations. Australia's inflation in September-December was 0.5 percent, exceeding the forecast of 0.4 percent. Also, a sharp jump in iron ore prices contributed to the growth of the Australian. The Chinese yuan continues to rise, started at the beginning of the year - 6.7135 yuan per dollar, the highest since July 2018. However, the currency mainly grew on optimism regarding the negotiations between the United States and China and the soft attitude of the Fed, which limited the strengthening of the American currency.

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EUR / USD: Weak data for Germany and France did not allow the euro to continue to grow

Trading 30 jan 2019 Commentaire »

A good report on consumer sentiment in Germany did not help buyers of the European currency, and after another unsuccessful breakthrough of the resistance level of 1.1450, pressure on the euro resumed. Additional problems were created after the report on the growth of the French economy and lower inflation in Germany.

According to leading data, consumer sentiment in Germany this February may improve, which will support the country's economy in a period of slowing activity. As indicated in the GfK report, the leading consumer confidence index in Germany in February 2019 rose to the level of 10.8 points against 10.5 points in January. In this regard, the company expects private consumption in Germany to grow by 1.5%.

The index of economic expectations GfK in January fell to 10.7 points from 14.1 points in December, and the index of consumer expectations regarding revenues rose to 59.9 points from 53.8 points.

As indicated above, the weak report on the growth of French GDP has put pressure on risky assets. The decline in the 4th quarter was due to anti-government protests. According to the first estimate of the statistical bureau of France Insee, GDP in the 4th quarter grew by only 0.3% compared with the previous quarter, while economists expected a larger increase compared to the 3rd quarter of last year.

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The weak consumer price report in Germany, which fell much stronger than economists had predicted in January of this year, underlines the recent weakness in economic data, which will force the European Central Bank to think about it several times before talking about interest rates and their future.

According to the Federal Bureau of Statistics Destatis, the harmonized index of consumer prices in January fell by 1.0% compared with the previous month and grew by 1.7% compared with the same period of the previous year. Economists had expected a 0.8% decline.

As for the CPI of Germany, calculated by national standards, it decreased by 0.8% compared with the previous month and showed an annual growth of 1.4%.

In the afternoon, all attention will be focused on the Federal Reserve decision on interest rates. Most likely, the Fed will be more cautious about monetary policy due to the fact that the risk of a slowdown in the US economy has seriously increased lately, and volatility in financial markets has only calmed down after the December tightening of monetary policy.

As for the technical picture of the currency pair EUR / USD, the bulls left the market after an unsuccessful break of the resistance level of 1.1450 in the first half of the day. The downward correction scenario continues to be played, and the support breakout of 1.1410 will lead to a larger sale around 1.1370 and 1.1330.

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The pound will continue to try to gain a foothold, and the dollar is waiting for the Fed report

Trading 30 jan 2019 Commentaire »

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The pound will continue to attempt to strengthen its position after fears of the "problematic" Brexit have declined, and the dollar will weaken on the eve of the Fed meeting.

Last week, the pound reached $ 1.3218, the highest since mid-October, in the hope that London will be able to make a deal with the EU. The deadline set for Brexit, March 29, is likely to be extended, and the main question for the pound is when and how the renewal decision will be made. As for the dollar, the focus is now shifting back to key events that threaten the dollar with more serious consequences, such as the FOMC (Federal Open Market Committee) meeting, US-China trade negotiations, and the US jobs report. The Fed is expected to leave interest rates unchanged.

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Markets are waiting for signals about the future of the Fed's policy after recent official comments made it clear that rates of rate hikes this year will be reduced amid growing uncertainty about the state of the US economy, the global economy and fragile financial markets. Experts estimate the likelihood of a rate hike in 2019 as very low, although some still expect two approaches in the second and fourth quarters. The dollar may face pressure if the Fed decides to highlight the negative effects of the closure of the US government in its report.

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What to expect from the Fed?

Trading 30 jan 2019 Commentaire »

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Already this evening, the results of the first meeting of the Federal Reserve System (FRS) of the United States this year will be announced. How the market will react to them will depend on three factors: a shift in the timing of monetary tightening, risk assessment and a rebalancing.

Increases in interest rates this time are hard to be expected, given the slowdown in the growth of the American economy and the recent "shutdown", which may resume in mid-February. However, this does not mean that this year the regulator will not increase the cost of lending.

According to most economists surveyed recently by Bloomberg, in 2019, the Fed will raise the interest rate twice, but it will be in June and December, and not in March and September, as was previously expected.

Meanwhile, the derivatives market is laid on the fact that until the end of the year the Central Bank will not change the cost of borrowing at all.

"Today, investors clearly expect Jerome Powell "pigeon" rhetoric. To avoid a repeat of last year's mistakes, the Fed chief is likely to be forced to balance between signals about a still strong economy, which allows us to expect an increase in interest rates later this year, and statements about a patient position," the experts noted.

"It is assumed that the regulator will retain the risk assessment as generally balanced and will make a choice in favor of a more vague wording about the need for a further gradual increase in the rate or replace it with a phrase about a patient approach. In addition, the US Central Bank seems to be thinking about suspending a reduction in its balance sheet. The minutes of the meeting will probably not talk about this, but the recent speeches of the FOMC representatives clearly hint at this. The main question is this: Has the market already priced these hints? If yes, then the strategy "buy on rumors, sell on facts" can work, and the dollar will grow. If not (and the head of the Fed will confirm the intention to curtail the program ahead of time), then comments on this topic may put pressure on the greenback," they added.

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Bitcoin analysis for January 30, 2019

Trading 30 jan 2019 Commentaire »

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Bitcoin has been trading sideways at the price of $3.420. Our view from yesterday is still active. Since the key support cluster at $3.420 is broken and successfully retested, we expect downward continuation. I also found a successful breakout of the mini upward Pitchfork channel, which is another sign of underlying weakness.The short-mid term trend is bearish and you should go with the direction of the overall trend.

R1: $3.442

R2: $3.489

R3: $3.538

Pivot: $3.392

S1: $3.345

S2: $3.295

S3: $3.248

Trading recommendation: We are still short BTC/USD from $3.392 and with the target at $3.107. Protective stop is placed at the price of $3.550

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

GBP/USD analysis for January 30, 2019

Trading 30 jan 2019 Commentaire »

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Trading recommendation: We are bullish about GBP/USD from 1.3090 with expectation that price would reach the POC in the background at 1.3152 or a weekly high at 1.3210. The protective stop is placed at 1.3050.

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

Analysis of Gold for January 30, 2019

Trading 30 jan 2019 Commentaire »

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Gold continues to rally as expected. It respects the Pitchfork upward channel nicely and it is doing a good job towards the median line ($1.340.00) of the larger channel. According to the daily chart, Gold is making higher highs and higher lows which is a sign that buyers are in total control. There are no signs of a reversal yet and you should only watch for the upside.

R1: $1,312.55

R2: $1,316.60

R3: $1,321.75

Pivot: $1,307.00

S1: $1,303.45

S2: $1,298.00

S3: $1,294.70

Trading recommendation: We are still long Gold from $1,285 and $1,300.00 (added position yesterday). We are moving our stop loss order on both positions at $1,309.00, thereby securing even larger profit comparing to yesterday. Our main target is $1,340.00 (median line).

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

Oil continues to rise on fears of supply disruptions from Venezuela

Trading 30 jan 2019 Commentaire »

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The cost of oil has gone up against the backdrop of concerns about interruptions in the supply of raw materials from Venezuela, which may arise as a result of the introduction of US sanctions against Venezuelan oil company PDVSA.

According to the auction, the price of Brent crude rose to $ 61.90 a barrel. The cost of WTI crude oil rose to $ 53.90 a barrel.

The oil prices are supported by the tense situation around Venezuela, which may adversely affect the export of raw materials. On January 28, the United States announced new sanctions measures against the South American country, in particular against the energy sector of the economy, including it in the "blacklist" of the Ministry of Finance (SND-list). According to the rules, the assets of all sanction companies fall under blockade in the United States.

In addition, market participants are waiting for the publication of data from the US Department of Energy (on Thursday). According to forecasts, crude oil reserves in the country are expected to grow by 3.1 million barrels after increasing reserves by 7.97 million barrels recorded last week.

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

Gold exploded off the bat

Trading 30 jan 2019 Commentaire »

Jerome Powell's pigeon rhetoric at the press conference following the FOMC's January meeting, rumors of a pause in the process of collapsing the Fed's balance sheet and fears about the fate of the global economy pushed gold futures to May. The precious metal is preparing to close in the green zone for the fourth month in a row and gradually licks the wounds received in 2018. Then the aggressive monetary restriction of the Federal Reserve, the acceleration of US GDP and a strong dollar seriously spoiled the mood for the bulls at XAU / USD. In 2019, the situation has seriously changed.

Gold dynamics

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The Fed chairman realized the mistake he made in December when, after raising the federal funds rate from 2.25% to 2.5%, he declared that the US economy was in good health, which meant continuing the cycle of monetary policy tightening at the same rate (4 rate increases for year). Stock indexes collapsed, and investors had to reassure statements about the flexibility and patience of the Central Bank. Judging by the survey of experts from Bloomberg, he is unlikely to resort to the next act of monetary restriction before June. As a result, the chances of gold to continue the rally increase. According to 36 Reuters economists, its average price in 2019 and 2020 will be $ 1305 and $ 1350 per ounce.

Along with the expectations of a long pause in the process of normalizing the monetary policy of the Fed, support for the bulls at XAU / USD has concerns about the fate of the global economy and the associated improvement in demand for a physical asset. Leading indicators show that China's GDP after the saddest dynamics over the past three decades last year continues to slow down in the first quarter, which boosts Asians 'interest in gold. In particular, Switzerland reports an increase in deliveries of the analyzed asset to the Middle Kingdom in 2018 to 431 tons, which is 38% more than in 2017. The stocks of specialized exchange funds from the October bottom increased by 4 million ounces (+ 7.6%).

The slowdown in the global economy is forcing central banks to either pause in the process of normalization or follow an ultra-soft monetary policy. In particular, the Fed is not set to raise the rate for more than two years in 2019, the ECB is unlikely to increase the refinancing rate before 2020, the Bank of Japan will continue the quantitative easing program, and the People's Bank of China will increase its monetary stimulus. In such conditions, the global debt market rates will be under pressure. If they were to grow on expectations of a tightening of monetary policy, prices for non-interest-bearing gold risked falling.

In the short term, the precious metal can be characterized by mixed dynamics. It grows on the expectations of Jerome Powell's pigeon's rhetoric, but if the market does not wait for it, speculators will begin to take profits. Accelerate sales will contribute to a strong report on the US labor market in January.

Technically, the rally of gold continues. "Bulls" activated the AB = CD pattern and are seriously determined to fulfill its target by 261.8%. It corresponds to the mark of $ 1337 per ounce.

Gold, the daily chart

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