Dollar Gains Against Most Major Rivals On Upbeat Data

Trading 17 mai 2019 Commentaire »

The U.S. dollar stayed stronger against most major currencies on Friday, extending recent gains, thanks to upbeat economic data.

The euro's weakness ahead of next week's Parliamentary elections in Europe and the British Pound Sterling's fall to a multi-month low due to rising concerns about Brexit kept the greenback up in positive territory right through the session on Friday.

The dollar index, which rose to 98.01, was up 0.13% at 97.98 in late afternoon trades.

The euro fetched $1.1160 dollar, 0.17% less than $1.1179 on Thursday, with weak consumer inflation data and caution ahead of parliamentary elections weighing on the currency.

Although the European currency found some support after the U.S. officially announced that it would delay imposing tariffs on cars imported from EU, it failed to make any significant move up as trade worries persisted.

Data released by Eurostat showed Eurozone's core inflation, which excludes prices of energy, food, alcohol and tobacco, accelerated in April at a faster than estimated pace to its highest level in two years.

Core inflation climbed to 1.3% in April, higher than the initial estimate of 1.2%. In March, the figure was 0.8%.

The consumer price index rose 1.7% year-on-year following a 1.4% increase in March, in line with its flash estimate. Headline Inflation was the highest since November, when prices rose 1.9%.

The Pound Sterling dropped to a four-month low with a unit fetching $1.2719, declining from $1.2809. Sterling tumbled as talks between Labour and the government aimed at breaking the Brexit impasse ended without an agreement today. Primer Minister Theresa May blamed the Labour Party's pro second referendum faction for failure of talks.

The yen was weak as well against the greenback. It was trading at 110.02 yen a dollar, down 0.16% from previous close.

Amid escalation in trade tensions, China's yuan hit a fresh low for the year, falling 0.5% to 6.9187 a dollar. According to a report in Reuters, some unamed sources said the Chinese central bank is likely to use foreign exchange intervention and monetary policy tools to ensure the yuan doesn't fall below 7 per dollar mark in the near term.

The dollar gained modest ground against the loonie and Swiss franc, and moved up nearly 0.4% against the Aussie.

In U.S. economic news, According to the report from the University of Michigan, consumer sentiment improved substantially in the month of May. The consumer sentiment index surged up to 102.4 in May from 97.2 in April, reaching its highest level in fifteen years. Economists had expected the index to inch up to 97.5.

The much bigger than expected increase by the headline index came as the index of consumer expectations soared to 96.0 in May from 87.4 in April.

"Consumers viewed prospects for the overall economy much more favorably, with the economic outlook for the near and longer term reaching their highest levels since 2004," said Surveys of Consumers chief economist Richard Curtin.

However, Curtin noted, "The gains were recorded mostly before the trade negotiations with China collapsed and China responded with their own tariffs."

Meanwhile, a reading on leading U.S. economic indicators rose by slightly less than expected in the month of April, according to a report released by the Conference Board on Friday.

The Conference Board said its leading economic index edged up by 0.2% in April after climbing by a revised 0.3% in March.

Economists had expected the index to rise by 0.3% compared to the 0.4% increase originally reported for the previous month.


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Treasuries Pull Back Well Off Best Levels But Close Modestly Higher

Trading 17 mai 2019 Commentaire »

After seeing initial strength, treasuries pulled back near the unchanged line over the course of morning trading on Friday but managed to finish the day modestly higher.

Bond prices moved roughly sideways throughout the afternoon. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.2 basis points to 2.393 percent after hitting a low of 2.364 percent.

Treasuries initially benefited from their appeal as a safe haven amid lingering concerns about the escalating trade dispute between the U.S. and China.

President Donald Trump has sought to blame China for backing out of a nearly completed trade deal, although a spokesperson for China's Ministry of Commerce claims the U.S. is responsible for serious setbacks in the trade talks.

Commerce Ministry spokesperson Gao Feng accused the Trump administration of "bullying behavior" with a recent increase in tariffs, according to state-run Chinese news agency Xinhua.

"It is regrettable that the U.S. side unilaterally escalated trade disputes, which resulted in severe negotiating setbacks," Gao said.

He added, "We urge the U.S. side to correct wrongdoings as soon as possible to avoid causing heavier damages to businesses and consumers in both countries and dragging down the global economy."

However, concerns about trade waned after the Trump administration officially delayed imposing tariffs on imported automobiles and parts for up to six months, confirming media reports from earlier this week.

A White House statement noted Trump has directed U.S. Trade Representative Robert Lighthizer to negotiate agreements to address the national security threat posed by auto imports.

"United States defense and military superiority depend on the competitiveness of our automobile industry and the research and development that industry generates," White House Press Secretary Sarah Sanders said.

She added, "The negotiation process will be led by United States Trade Representative Robert Lighthizer and, if agreements are not reached within 180 days, the President will determine whether and what further action needs to be taken."

On the U.S. economic front, the University of Michigan released a report showing a substantial improvement in consumer sentiment in May, although the data was recorded mostly before trade negotiations with China collapsed.

The preliminary report showed the consumer sentiment index surged up to 102.4 in May from 97.2 in April, reaching its highest level in fifteen years. Economists had expected the index to inch up to 97.5.

The economic calendar for next week is relatively light, although traders likely to keep an eye on reports on new and existing home sales and durable goods orders are as well as the minutes of the latest Federal Reserve meeting.


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Crude Oil Futures Settle Modest Lower

Trading 17 mai 2019 Commentaire »

Crude oil futures pared early gains and settled modestly lower on Friday, but still closed the week with solid gains, amid prospects of supply disruptions due to escalation in tensions in the Middle East.

The unexpected increase in U.S. crude inventories in the previous week and prospects of a drop in global energy demand in the event of the U.S. and China failing to end their trade dispute limited oil's decline.

West Texas Intermediate Crude oil futures for June ended down $0.11, or 0.17%, at $62.76 a barrel, after rising to a high of $63.64 earlier in the session.

On Thursday, WTI crude futures for June ended up $0.85, or 1.4%, at $62.87 a barrel. For the week, WTI crude oil futures gained 1.8%.

Brent crude oil futures were trading lower by nearly $0.50, at $72.11 a barrel about an hour past noon. For the week, Brent crude oil futures gained more than 2%.

OPEC-led supply cuts and the U.S. sanctions on Iranian oil have significantly reduced the supply level in global crude market this year.

The tensions in the Middle East following the attacks on Saudi Arabia's oil infrastructure and the subsequent airstrikes carried out by the Saudi-USE-led coalition on the Houthi-held capital Sanaa this week, have raised concerns about supply disruptions in the region.

Meanwhile, Iran's foreign ministry is reported to have rejected accusations by Saudi Arabia that Tehran had ordered an attack on Saudi oil installations claimed by Yemen's Iran-aligned Houthi militia.

Markets look ahead to the upcoming meeting of the OPEC/non-OPEC Joint Ministerial Monitoring Committee, scheduled to take place in Jeddah this Sunday, for clues about the oil cartel's further plans for reductions in outputs, if any.


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Gold Futures Settle At 2-week Low On Upbeat Economic Data

Trading 17 mai 2019 Commentaire »

Gold prices drifted lower on Friday as buoyant consumer sentiment data and the dollar's strength against most major currencies weighed on the commodity.

The bullion's weakness was also due to a recovery in global stocks after the U.S. officially announced that it would delay a decision on imposing tariffs on imports of cars from Japan and European countries.

The dollar index advanced to 98.01 before retreating slightly to 97.96, still up in positive territory with a gain of about 0.14%.

Gold futures for June ended down $10.50, or 0.8%, at $1,275.70 an ounce, the lowest settlement price since May 2.

On Thursday, gold futures for June ended down $11.60, or 0.9%, at $1,286.20 an ounce. Gold futures shed about 0.9% in the week.

Silver futures for July ended down $0.151, at $14.388 an ounce, while Copper futures for July settled lower by $0.0095, at $2.7385 per pound.

According to the report from the University of Michigan, consumer sentiment improved substantially in the month of May, thanks to a spike in consumer expectations.

The preliminary report showed the consumer sentiment index surged up to 102.4 in May from 97.2 in April, reaching its highest level in fifteen years. Economists had expected the index to inch up to 97.5.

The much bigger than expected increase by the headline index came as the index of consumer expectations soared to 96.0 in May from 87.4 in April.

"Consumers viewed prospects for the overall economy much more favorably, with the economic outlook for the near and longer term reaching their highest levels since 2004," said Surveys of Consumers chief economist Richard Curtin.

However, Curtin noted, "The gains were recorded mostly before the trade negotiations with China collapsed and China responded with their own tariffs."

Meanwhile, a reading on leading U.S. economic indicators rose by slightly less than expected in the month of April, according to a report released by the Conference Board on Friday.

The Conference Board said its leading economic index edged up by 0.2% in April after climbing by a revised 0.3% in March.

Economists had expected the index to rise by 0.3% compared to the 0.4% increase originally reported for the previous month.


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Weekly EURUSD technical analysis

Trading 17 mai 2019 Commentaire »

EURUSD is ending the week below 1.1170. Despite reaching 1.1260 resistance area price could not break out and above the long-term bearish channel. The rejection was a bearish sign and as we warned the inability to break above 1.1230 combined with a double rejection at 1.1230 has led us to expect a move towards 1.11 is coming.

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Red lines - bearish channel

EURUSD has been trading inside this red bearish channel for some time now. The upper channel boundary remains important and confirmed resistance as price could never close above it over the last few months. The rejection at 1.1260 has led to a break below 1.12 and we are now seeing a potential move towards 1.11 or lower as price has also broken below 1.1170. EURUSD remains in a bearish trend as long as price is below 1.1230-1.1260. The weekly black candle implies more downside is more probable, unless bulls retake 1.1260.

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Weekly Gold analysis

Trading 17 mai 2019 Commentaire »

Gold price started this week on a strong foot breaking above $1,290 and reaching $1,302. However this strength was short-lived and it now looks more like a fake break out and a bull trap. Gold price ends the week below $1,280. The weekly candle cautions for more downside to come.

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Blue line - major trend line resistance

Red line - major trend line support

Red rectangle - short-term support

Gold price is ending the week below $1,280 and the bearish black candle with the long upper tail implies that the move above $1,290 was most probably a fake break out. Gold price has support at $1,276 as we mentioned in previous posts and a break below it will open the way for another leg down in Gold price towards $1,250-30 area. Resistance remains at $1,300 as we noted in previous posts. Bulls need to recapture and stay above of $1,300 in order for them to be in control of the trend. The major rejection back in January at $1,347 may lead to a move towards the red upward sloping major trend line support. This gives us a target between $1,200-$1,220.

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May 17, 2019 : EUR/USD Intraday technical analysis and trade recommendations.

Trading 17 mai 2019 Commentaire »

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Few weeks ago, a bullish Head and Shoulders reversal pattern was demonstrated around 1.1200.

This enhanced further bullish advancement towards 1.1300-1.1315 (supply zone) where significant bearish rejection was demonstrated on April 15.

Short-term outlook turned to become bearish towards 1.1280 (61.8% Fibonacci) then 1.1235 (78.6% Fibonacci).

For Intraday traders, the price zone around 1.1235 (78.6% Fibonacci) stood as a temporary demand area which paused the ongoing bearish momentum for a while before bearish breakdown could be executed on April 23.

That's why, the mentioned price zone around 1.1235-1.1250 has turned into supply-zone to be watched for bearish rejection.

Shortly-after, the market has failed to sustain bearish pressure below the price Level of 1.1175 during last week's consolidations.

That's why, another bullish pullback was expected to occur towards the price zone of 1.1230-1.1250 where significant bearish pressure was expected to be existing there.

Recently, the EURUSD pair has been maintained above the depicted key-zone (1.1175) since May 3.

However, a bearish breakout below 1.1175 was achieved Today. This enhances further bearish decline towards 1.1115.

Trade recommendations :

Conservative traders who were advised to have a SELL entry around the supply zone (1.1235-1.1250) should lower their S/L towards 1.1190 to secure more profits.

Remaining Target level should be projected towards 1.1115.

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EUR/USD: Chinese trick, Italian populism, and British failure

Trading 17 mai 2019 Commentaire »

The currency market continues to be dominated by anti-risk sentiment. The news background is getting darker every day, putting pressure on both the euro and other high-yield currencies. The fundamental picture really leaves much to be desired: only in the last day, it became known that the Brexit talks finally failed, China is ready to withdraw from the negotiation process with the United States, and Italian politicians intend to violate the EU budget rules. And this is only the basic, most high-profile rumors that determine investor sentiment. Macroeconomic reports, whatever they were – with a plus or minus sign – faded into the background and actually lost their influence on the dynamics of trading. The financial world is frozen in anticipation of global changes and important decisions – and these decisions are primarily political in nature.

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Even during the Asian session, the market was stirred up by the news that China may withdraw from the negotiation process with Washington. Although this information is not official, it was circulated in the state media of China. According to journalists, the Chinese side "does not see sincere intentions" of the Americans to find a compromise and conclude a mutually beneficial deal. Instead, the White House, according to representatives of the PRC, professes a policy of trade protectionism that prevents negotiations. Most likely, we are talking about Huawei, for which Trump announced a state of emergency in the country in the field of information and communication infrastructure. This allowed the US Department of Commerce to blacklist Huawei and 70 associated companies from using US components and technology. It is worth noting that this company is one of the world's largest suppliers of telecommunications equipment so Beijing could not ignore Trump's actions.

There is another version explaining the demarche of the Chinese side. According to some experts, Xi Jinping decided to take a wait-and-see position against the backdrop of the upcoming US presidential elections, which are only a year and a half away. It is worth noting that before Trump was almost an absolute favorite of the presidential campaign in 2020 – until the election scene came Joe Biden. The representative of the Democrats ahead of schedule won the primaries (he is much ahead of the nearest rivals), so now he focused only on one political "target", unleashing a flurry of criticism on the incumbent President.

This tactic is already bearing fruit: according to the first survey, which was conducted by the influential American publication The Hill, former US Vice President Joe Biden is 6 points ahead of Donald Trump in the ranking of presidential candidates. So, 43% said they would choose Biden, and 37% said they would prefer Trump. This electoral advantage is rather indicative: the incumbent President has a real rival, who even at the start is ahead of him in terms of points. By the way, The Hill is considered a publication, "favor" relating to the Republicans.

Given this disposition, the Chinese can continue to take a defensive position in the hope that the White House will change its owners next fall. Trump has already warned China against such intentions, hinting at the aggravation of their position during his (possible) second term – but Beijing's actions indicate that the Chinese are not ready to conclude a deliberately losing party for themselves. In this context, the G20 will be a significant event. A meeting of the leaders of the United States and China can take place on the "fields" of the G-20 summit, which will be held in late June – at least, the head of the White House National Economic Council Larry Kudlow did not rule out this possibility. If the de facto parties for any reason avoid in-person dialogue, the prospects for trade negotiations will indeed be in big question.

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Brexit also exerts pressure on the euro: today, it became known that the negotiations between the May government and the Labor Party finally failed. The parties put an end to the month-and-a-half dialogue and returned to mutual accusations of a political nature. Theresa May expressed confidence that the Conservative Party will be able to bring the Brexit process to its logical conclusion, while the Labor Party said that the current composition of the Cabinet of Ministers is similar to Titanic in the last moments before the collision with the iceberg. In other words, the situation with Brexit returned to zero, bringing down the pound and pulling the euro.

The rhetoric of Italian politicians also puts pressure on the single currency. Just today, Italian Deputy Prime Minister Salvini said that the Italian government "wants to change the EU banking rules." He also noted that, in his opinion, such a structure as the European Union was created exclusively to defend German interests, including economic ones. But in this case, I would not jump to conclusions about the prospects of the conflict between Rome and Brussels: it is likely that after the elections to the European Parliament, the position of Italian politicians will significantly soften.

Despite this negative array, the bears of the EUR/USD pair failed to overcome the key support level of 1.1130 (the lower line of the Bollinger Bands indicator on the daily chart) to enter the 10th figure. To help the bulls of the pair came, oddly enough, Trump, who decided to postpone for up to 6 months the decision to impose duties on imports of European cars and spare parts. Now, this information has acquired the shape of the official notification of the White House, and this fact helped buyers of EUR/USD to return to the mark of 1.1180. Nevertheless, the fundamental background for the pair still remains negative, so the bears retain the potential for a further decline to the above support level.

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Who seeks to take the place of May?

Trading 17 mai 2019 Commentaire »

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Theresa May will sooner or later leave her Prime Minister's chair, and this is already perceived as a fact. The interest now is something else: when will this happen and who will replace May.

As is known, the current British Prime Minister has extended her time until the beginning of June. Another parliamentary vote on Brexit is scheduled for this period. The government expects to approve the deal and withdraw from the EU before the end of July. However, there is no certainty that an agreement three times rejected by Parliament will be adopted this time. It is rumored that May will resign before the expected time, and regardless of whether the vote on the Brexit bill passes in the first week of June or not.

Now, one thing is very clear – this summer, the elections of the leader will be held. Ex-foreign minister and member of the Conservative Party, Boris Johnson, has already confirmed that he is in action.

It should be noted that the Labor Party stopped negotiations with the Theresa May government since they no longer have incentives and reasons for meetings. Jeremy Corbyn said that the parties discussed everything that could be discussed. Besides, May is now mostly bankrupt for them.

This topic has made the British pound the main outsider this week. In five days, the loss was 1.6%. The strongest decline in sterling was recorded on Thursday when the GBP/USD pair fell to the lowest level in three months. On Friday, the downward movement continued – the pound passed the four-month milestone.

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Investors are upset by the events surrounding Brexit, as well as the aggravation of the trade conflict between the US and China. Both of these factors are equally detrimental to the national currency of Great Britain.

China and the USA

Tensions between the two largest economies in the world increased after the White House virtually blocked Huawei and other Chinese companies from accessing the US market. In response, Beijing promised countermeasures and recalled that it would never make concessions on important issues of principle.

Representatives of Huawei, in turn, said that US restrictions would lead the country to stay outside of 5G and that they would interact with the US government regarding product safety. They also announced their desire to maintain "close relations" with European countries and carriers.

Donald Trump urged colleagues from Europe to follow the path of America – to ban Huawei in their markets, but they have not done it yet. I must say that Beijing and Washington are already moving on thin ice, and the situation with Huawei – if it increases significantly – can become a turning point that will lead to the collapse. Even if this does not happen, the tension will still increase, as the fire seems to have flared up.

So, unexpectedly tough rhetoric was chosen by the state media of China, commenting on the course of trade negotiations. The WeChat blog on behalf of the Taoran Notes account, owned by the state publication Economic Daily, said that it was meaningless for Chinese officials to meet with the US delegations without their sincere desire to sign a trade agreement.

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EUR/USD. May 17. Results of the day. Inflation in the eurozone is not interested in foreign exchange market participants

Trading 17 mai 2019 Commentaire »

4-hour timeframe

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The amplitude of the last 5 days (high-low): 41p – 42p – 43p – 47p – 58p.

The average amplitude over the last 5 days: 46p (50p).

The main indicator of the consumer price index in the eurozone for April was fully consistent with the forecasts of experts and amounted to +1.7% in annual terms and +0.7% in monthly terms. Only the basic consumer price index was higher than market expectations and amounted to +1.3% y/y. However, as we can see, this rather important report did not bring any changes to the current trend. The euro is still prone to fall, and the reaction to today's inflation report from traders was not even followed. Thus, we continue to draw the attention of traders to the fact that now in the first place are clearly technical factors. Namely: the non-renewal of the previous local maximum, frankly a downward trend in 2019, and the weakness of the bulls. If we add to this the absence of a positive fundamental background from Europe, it becomes clear that the path of the euro is one – to the South. Just moving down the pair will not be as fast and zealous as the pound. Now, we expect the EUR/USD pair to decline to 1.1100, but most likely the pair will go below this level. In a few hours, the US will publish a fairly important index of consumer confidence of the University of Michigan. It is expected that the value for May will exceed April. Thus, at the US session on Friday, May 17, the US dollar may receive additional support. The volatility of the instrument remains low. The downward movement is not recoilless, therefore, intraday positions are not entirely rational. The best time of deals for the pair is now 2-3 days. During this time, the pair can pass at least 70-100 points.

Trading recommendations:

The pair EUR/USD resumed its downward movement. Therefore, it is still recommended to consider sell positions with the targets at 1.1131 and 1.1118 and before the MACD indicator turns upwards.

It will be possible to return to buy positions if traders manage to consolidate back above the critical line. In this case, the first target for the long positions will be the resistance level of 1.1268.

In addition to the technical picture should also take into account the fundamental data and the time of their release.

Explanation of illustration:

Ichimoku Indicator:

Tenkan-Sen – red line.

Kijun-Sen – blue line.

Senkou Span A – light brown dotted line.

Senkou Span B – light purple dotted line.

Chinkou Span – green line.

Bollinger Bands Indicator:

3 yellow lines.

MACD:

A red line and a histogram with white bars in the indicator window.

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