Treasuries Close Modestly Higher After Late-Day Jump

Trading 08 oct 2019 Commentaire »

After seeing initial strength, treasuries gave back ground over the course of the trading day on Tuesday before jumping going into the close of trading.

Bond prices surged back into positive territory in late-day trading but closed well off their best levels. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.6 basis points to 1.537 percent.

The spike seen late in the session came after Federal Reserve Chairman Jerome Powell indicated in remarks at the National Association for Business Economics annual meeting in Denver, Colorado, that the central bank intends to resume increasing the size of its balance sheet.

Powell cited unexpectedly intense volatility in wholesale funding markets, noting liquidity pressures in money markets in mid-September caused overnight interest rates to spike, with the effective federal funds rate briefly moving above the Fed's target range.

The Fed responded by conducting temporary open market operations, which Powell said kept the federal funds rate in the target range and alleviated money market strains more generally.

"While a range of factors may have contributed to these developments, it is clear that without a sufficient quantity of reserves in the banking system, even routine increases in funding pressures can lead to outsized movements in money market interest rates," Powell said.

"This volatility can impede the effective implementation of monetary policy, and we are addressing it," he added. "Indeed, my colleagues and I will soon announce measures to add to the supply of reserves over time."

Powell pointed out that increasing the supply of reserves or even maintaining a given level over time requires the Fed to increase the size of its balance sheet.

"As we indicated in our March statement on balance sheet normalization, at some point, we will begin increasing our securities holdings to maintain an appropriate level of reserves," Powell said. "That time is now upon us."

The Fed chief stressed that the growth of the Fed's balance sheet for reserve management purposes should not be confused with the large-scale asset purchase programs deployed after the financial crisis.

"Neither the recent technical issues nor the purchases of Treasury bills we are contemplating to resolve them should materially affect the stance of monetary policy," Powell said.

With regard to monetary policy, Powell reiterated his pledge to "act as appropriate" to support continued growth, a strong job market, and inflation moving back to the Fed's symmetric 2 percent objective.

Meanwhile, traders largely shrugged off the results of the Treasury Department's auction of $38 billion worth of three-year notes, which attracted modestly below average demand.

The three-year note auction drew a high yield of 1.413 percent and a bid-to-cover ratio of 2.43, while the ten previous three-year note auctions had an average bid-to-cover ratio of 2.49.

Looking ahead, the Treasury is due to announce the results of its auctions of $24 billion worth of ten-year notes on Wednesday.

Trading on Wednesday may also be impacted by reaction to more comments from Powell as well as the minutes of the Fed's latest monetary policy meeting.


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

Fed's Powell Signals Resumption Of Balance Sheet Growth

Trading 08 oct 2019 Commentaire »

Citing unexpectedly intense volatility in wholesale funding markets, Federal Reserve Chairman Jerome Powell indicated on Tuesday that the central bank intends to resume increasing the size of its balance sheet.

Powell noted in remarks at the National Association for Business Economics annual meeting in Denver, Colorado, that notable liquidity pressures in money markets in mid-September caused overnight interest rates to spike, with the effective federal funds rate briefly moving above the Fed's target range.

The Fed responded by conducting temporary open market operations, which Powell said kept the federal funds rate in the target range and alleviated money market strains more generally.

"While a range of factors may have contributed to these developments, it is clear that without a sufficient quantity of reserves in the banking system, even routine increases in funding pressures can lead to outsized movements in money market interest rates," Powell said.

"This volatility can impede the effective implementation of monetary policy, and we are addressing it," he added. "Indeed, my colleagues and I will soon announce measures to add to the supply of reserves over time."

Powell pointed out that increasing the supply of reserves or even maintaining a given level over time requires the Fed to increase the size of its balance sheet.

"As we indicated in our March statement on balance sheet normalization, at some point, we will begin increasing our securities holdings to maintain an appropriate level of reserves," Powell said. "That time is now upon us."

The Fed chief stressed that the growth of the Fed's balance sheet for reserve management purposes should not be confused with the large-scale asset purchase programs deployed after the financial crisis.

"Neither the recent technical issues nor the purchases of Treasury bills we are contemplating to resolve them should materially affect the stance of monetary policy," Powell said.

With regard to the U.S. economic outlook, Powell said the Fed continues to see a sustained expansion of economic activity, strong labor market conditions, and inflation near the symmetric 2 percent objective as most likely.

However, Powell noted there are risks to this favorable outlook due in part to uncertainties around trade, Brexit, and other issues.

"As those factors have evolved, my colleagues and I have shifted our views about appropriate monetary policy toward a lower path for the federal funds rate and have lowered its target range by 50 basis points," Powell said. "We believe that our policy actions are providing support for the outlook."

"Looking ahead, policy is not on a preset course," he added. "The next FOMC meeting is several weeks away, and we will be carefully monitoring incoming information. We will be data dependent, assessing the outlook and risks to the outlook on a meeting-by-meeting basis."

Powell reiterated his pledge to "act as appropriate" to support continued growth, a strong job market, and inflation moving back to the Fed's symmetric 2 percent objective.


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

Fed's Powell Signals Resumption Of Balance Sheet Growth

Trading 08 oct 2019 Commentaire »

Citing unexpectedly intense volatility in wholesale funding markets, Federal Reserve Jerome Powell indicated on Tuesday that the central bank intends to resume increasing the size of its balance sheet.

Powell noted in remarks at the National Association for Business Economics annual meeting in Denver, Colorado, that notable liquidity pressures in money markets in mid-September caused overnight interest rates to spike, with the effective federal funds rate briefly moving above the Fed's target range.

The Fed responded by conducting temporary open market operations, which Powell said kept the federal funds rate in the target range and alleviated money market strains more generally.

"While a range of factors may have contributed to these developments, it is clear that without a sufficient quantity of reserves in the banking system, even routine increases in funding pressures can lead to outsized movements in money market interest rates," Powell said.

"This volatility can impede the effective implementation of monetary policy, and we are addressing it," he added. "Indeed, my colleagues and I will soon announce measures to add to the supply of reserves over time."

Powell pointed out that increasing the supply of reserves or even maintaining a given level over time requires the Fed to increase the size of its balance sheet.

"As we indicated in our March statement on balance sheet normalization, at some point, we will begin increasing our securities holdings to maintain an appropriate level of reserves," Powell said. "That time is now upon us."

The Fed chief stressed that the growth of the Fed's balance sheet for reserve management purposes should not be confused with the large-scale asset purchase programs deployed after the financial crisis.

"Neither the recent technical issues nor the purchases of Treasury bills we are contemplating to resolve them should materially affect the stance of monetary policy," Powell said.

With regard to the U.S. economic outlook, Powell said the Fed continues to see a sustained expansion of economic activity, strong labor market conditions, and inflation near the symmetric 2 percent objective as most likely.

However, Powell noted there are risks to this favorable outlook due in part to uncertainties around trade, Brexit, and other issues.

"As those factors have evolved, my colleagues and I have shifted our views about appropriate monetary policy toward a lower path for the federal funds rate and have lowered its target range by 50 basis points," Powell said. "We believe that our policy actions are providing support for the outlook."

"Looking ahead, policy is not on a preset course," he added. "The next FOMC meeting is several weeks away, and we will be carefully monitoring incoming information. We will be data dependent, assessing the outlook and risks to the outlook on a meeting-by-meeting basis."

Powell reiterated his pledge to "act as appropriate" to support continued growth, a strong job market, and inflation moving back to the Fed's symmetric 2 percent objective.


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

Oil Futures End Slightly Weak Ahead Of Inventory Data, Trade Talks

Trading 08 oct 2019 Commentaire »

Crude oil futures ended lower on Tuesday as fading optimism about U.S.-China trade talks weighed on prospects for near term energy demand.

Traders were also awaiting weekly crude inventories data from the American Petroleum Institute (API) and U.S. Energy Information Administration (EIA) for directional clues.

While the API will release its weekly oil report later today, the EIA's data will be out on Wednesday morning.

Data showing an unexpected fall in U.S. producer prices in September due to lower costs of goods and services weighed as well on crude oil prices.

West Texas Intermediate Crude oil futures for November ended down $0.12, or about 0.2%, at $52.63 a barrel.

On Monday, WTI Crude oil futures for November ended down $0.06 at $52.75 a barrel, after having surged to $54.06 earlier in the day.

Prospects for progress in U.S.-China trade talks dimmed after U.S. President Donald Trump said a quick deal was unlikely.

However, White House economic adviser Larry Kudlow said he is hopeful about the trade talks with China, saying that the delegates are starting with a "clean slate, reopening the door."

"And as you know, Thursday and Friday, the principals' levels will be meeting and we are waiting for the Chinese offer. We are open, open to almost anything right now."

Meanwhile, the South China Morning Post said Chinese Vice Premier Liu He is leading China's delegation to Washington but will not carry the title of "special envoy" for President Xi Jinping, an early indication that Liu has not been given any particular instructions from China's leader.

A source briefed on preparations for the trade talks also told the SCMP that the Chinese delegation may cut short their stay in Washington.

News that the U.S. has expanded its trade blacklist to include some of China's top artificial intelligence firms may also cast a shadow over the talks. Additionally, a Bloomberg report said the White House is discussing blocking government pension funds from investing in China.

The U.S. Department of Commerce has blacklisted 28 Chinese organizations that are accused of violating human rights and committing abuses, targeting Uighurs and other mostly Muslim minorities in the Xinjiang Uighur Autonomous Region.


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

Gold Futures Pare Early Gains, Settle Slightly Weak

Trading 08 oct 2019 Commentaire »

Gold futures gave up early gains and settled slightly lower on Tuesday after the dollar rebounded from lower levels with traders looking ahead to the minutes from the Federal Reserve's monetary policy meeting held in September.

Prices rose earlier in the day as the dollar eased with investors awaiting the minutes from the Federal Reserve's September meeting and looking ahead to the resumption of trade talks between the U.S. and Chinese officials.

However, the dollar's recovery from lower levels and subsequent firmness took the sheen off the yellow metal.

The dollar index, which was down more than 0.1% at 98.85 earlier in the day, rose to 99.21 as the day progressed, gaining nearly 0.25%.

Gold futures for December ended down $0.50, or about 0.03%, at $1,503.90 an ounce, after hitting a high of $1,514.30 around mid morning.

On Monday, gold futures for December ended down $8.50, or about 0.6%, at $1,504.40 an ounce.

Silver futures for December ended up $0.160 at $17.700 an ounce, while Copper futures for December ended down $0.0085 at $2/5685 per pound.

In economic news, Producer prices in the U.S. unexpectedly decreased in the month of September, according to a report released by the Labor Department on Tuesday.

The Labor Department said its producer price index for final demand fell by 0.3% in September after inching up by 0.1% in August. The drop surprised economists, who had expected another 0.1% uptick.

Excluding food and energy prices, core producer prices also slid by 0.3% in September after climbing by 0.3% in August. Economists had expected core prices to rise by 0.2%.


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

Three-Year Note Auction Attracts Modestly Below Average Demand

Trading 08 oct 2019 Commentaire »

On Tuesday, the Treasury Department announced the results of this month's auction of $38 billion worth of three-year notes, revealing the auction attracted modestly below average demand.

The three-year note auction drew a high yield of 1.413 percent and a bid-to-cover ratio of 2.43.

The Treasury also sold $38 billion worth of three-year notes last month, drawing a high yield of 1.573 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 three-year note auctions had an average bid-to-cover ratio of 2.49.

Looking ahead, the Treasury is due to announce the results of its auctions of $24 billion worth of ten-year notes and $16 billion worth of thirty-year bonds on Wednesday and Thursday, respectively.


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

EUR/USD for October 08,2019 – Bearish flag on the daily, sell zone in place

Trading 08 oct 2019 Commentaire »

EUR/USD has been trading downwards today. The price tested the level of 1.0950. I see potential more downside on the EUR/USD due to rejection of the 20SMA on the daily time-frame.

analytics5d9cb5832d03b.jpg

Green lines – Downward sloping Bollinger channel

Purple falling line – Expected path

Yellow Rectangle- Support zone

My advice is to watch for selling opportunities on the EUR/USD since it is still in the downtrend channel and most recently,I found successful test of the 20SMA. Downward target is set at the price of 1.0890 ( last week low). In my opinion, it is bearish flag on daily time-frame, which may result new new move downward.

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

USDCAD could reach 1.3430 soon

Trading 08 oct 2019 Commentaire »

USDCAD has so far made one attempt at the resistance area of 1.3380 but it got rejected. Short-term price action though looks like bulls are just getting ready for a break out as a bullish flag has been formed.

analytics5d9cb4729eb97.png

Black rectangle - short-term resistance

Price has formed a bullish flag pattern and we see price now trying to break out of the flag. With resistance at the black rectangle area, we see price reaching at least 1.3430 if we break above 1.3350. We are short-term bullish as long as price holds above 1.3285. The 1.3350-1.3380 is a major resistance area and a break above it will open the way for a move above 1.35.

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

EURUSD inside wedge pattern eyeing 1.0880

Trading 08 oct 2019 Commentaire »

EURUSD is turning lower after topping around 1.10. Price remains inside the long-term downward sloping wedge pattern and we could expect next for price to reach 1.0880 area once again. As long as price is below 1.10-1.1030 we remain bearish.

analytics5d9cb39c83bab.png

Price is moving lower aggressively. Trend remains bearish in the medium and long-term. As we said in previous posts, any bounce is a selling opportunity as long as price was below 1.1050. The upper wedge boundary is at 1.1030. Recent high is at 1.10. Resistance is in that area and as long as we do not break above it, we expect prices to move lower.1.0880 next downside target.The material has been provided by InstaForex Company - www.instaforex.com

Gold 10.08.2019 – Sell zone on the Gold

Trading 08 oct 2019 Commentaire »

Gold has been trading sideways at the price of $1,500. Most recently, I found rejection of the important resistance cluster from $1,508. Downside potential is in play.

analytics5d9cb2c9a7925.jpg

Purple lines – Downward channel

Purple falling line – Expected path

Red rectangles – Important support levels

Yellow Rectangle – Resistance zone

My advice is to watch for selling opportunities on the Gold since it is still in the downtrend. As long as the Gold is trading below the $1,510, I would prefer downside opportunities. Support levels are seen at $1,493 and $1,486.

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