Gold price pulls back towards key short-term support

Trading 21 mai 2020 Commentaire »

Gold price is trading around $1,727 where we find the first support by the tenkan-sen Daily indicator. Key support remains at $1,710-$1,700 area where we find the kijun-sen and the broken downward sloping resistance trend line.

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Black line - resistance broken

Gold price is back testing the Ichimoku cloud indicators and the broken trend line resistance. Inability to hold above $1,710-$1,700 will open the way for a push towards $1,650-30. Price remains above the kijun-sen. As we explained in previous posts, Gold price might be still in a daily up trend, technicals however show us that price is vulnerable at the area of $1,750-70.

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USDCAD forms a descending triangle pattern

Trading 21 mai 2020 Commentaire »

USDCAD since mid March has been making lower highs starting from 1.4343, while the last lower high is at 1.4141. At the same time price is pulling back towards 1.3850 and so far we have seen 3 lows in the same price area.

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Red lines - triangle boundaries

USDCAD has formed what we call a descending triangle pattern. Price so far respects support and this increases the chances for another bounce towards the upper triangle boundary. Usually this kind of formations break to the downside, but unless we see a clear break down of 1.3850 we should not ignore bulls. Key resistance is at 1.4120.

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South Africa Central Bank Cuts Rates Again; Signals More Easing Ahead

Trading 21 mai 2020 Commentaire »

South Africa's central bank reduced interest rates for a fourth consecutive session and signaled more easing ahead as it expects a sharp economic contraction this year, due to the disruption caused by the coronavirus, or Covid-19, pandemic.

The Monetary Policy Committee decided to cut the repo rate by 50 basis points to 3.75 percent, the South African Reserve Bank said in a statement. The decision was in line with economists' expectations. The decision was taken in a split vote with three members preferring a 50 basis point cut, while two policymakers sought a quarter-point reduction. In April, the bank had cut the rate by 100 basis points. The SARB has reduced the rate in each policy session thus far this year, starting January. "The implied path of policy rates over the forecast period generated by the Quarterly Projection Model indicates two repo rate cuts of 25 basis points in the next two quarters of 2020," SARB Governor Lesetja Kganyago said. The next policy announcement is scheduled for July 23. The SARB lowered its GDP forecast for this year and now expects a 7 percent contraction versus 6.1 percent predicted in April. Investment, exports and imports are expected to decline sharply in coming months and job losses are expected to increase even after the lockdown in withdrawn, the bank said.

Easing of the lockdown will support growth in the near term and some high frequency activity indicators show a pickup in spending from extremely low levels, the bank said, adding that getting back to pre-pandemic activity levels will take time. The central bank expects GDP to grow by 3.8 percent in 2021 and by 2.9 percent in 2022.

Headline consumer price inflation is forecast to average 3.4 percent this year and 4.4 percent in 2021 and 2022. Core inflation is seen lower at 3.5 percent this year and 3.8 percent in 2021, and 4.1 percent in 2022.


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*S. Africa CB Cuts Key Interest Rate By 50 Bps To 3.75% As Expected

Trading 21 mai 2020 Commentaire »

S. Africa CB Cuts Key Interest Rate By 50 Bps To 3.75% As Expected


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U.S. Leading Economic Index Shows Another Steep Drop In April

Trading 21 mai 2020 Commentaire »

Suggesting the U.S. economy is now in recession territory, the Conference Board released a report on Thursday showing a continued nosedive by its reading on leading economic indicators.

The Conference Board said its leading economic index tumbled by 4.4 percent in April after plunging by a revised 7.4 percent in March.

Economists had expected the index to plummet by 5.9 percent compared to the 6.7 percent slump originally reported for the previous month.

"In April, the US LEI continued on a downward trajectory, after posting the largest decline in its 60-year history in March," said Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board.

He added, "The erosion has been very widespread, except for stock prices and the interest rate spread which partially reflect the rapid and large response of the Federal Reserve to offset the pandemic's impact and support financial conditions.

The report said the coincident economic index cratered by 8.9 percent in April after falling by 1.5 percent in the previous month.

On the other hand, the Conference Board said the lagging economic index jumped by 4.1 percent in April after climbing by 1.7 percent in March.

"Business conditions may recover for some sectors and industries over the next few months," said Bart van Ark, Chief Economist at the Conference Board.

He added, "But, the breadth and depth of the decline in the LEI suggests that an imminent re-opening of some sectors does not imply a fast rebound for the economy at large."


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U.S. Existing Home Sales Plunge To Nearly 10-Year Low In April

Trading 21 mai 2020 Commentaire »

With economic lockdowns temporarily disrupting home sales, the National Association of Realtors released a report on Thursday showing another steep drop in U.S. existing home sales in the month of April.

NAR said existing home sales plunged by 17.8 percent to an annual rate of 4.33 million in April after tumbling by 8.5 percent to 5.27 million in March. Economists had expected existing home sales to plummet to a rate of 4.30 million.

The continued nosedive pulled existing home sales down to their lowest level since hitting 3.45 million in July of 2010.

"The economic lockdowns - occurring from mid-March through April in most states - have temporarily disrupted home sales," said NAR chief economist Lawrence Yun. "But the listings that are on the market are still attracting buyers and boosting home prices."

The report said the median existing-home price for all housing types in April was $286,800, up 2.2 percent from $280,700 in March and up 7.4 percent from $267,000 in April of 2019.

NAR said there were 1.47 million homes for sale at the end of April, down 1.3 percent from 1.49 million at the end of March and down 19.7 percent from 1.83 million a year ago.

The unsold inventory represents 4.1 months of supply at the current sales rate compared to 3.4 months of supply in March and 4.2 months of supply in April of 2019.

"Record-low mortgage rates are likely to remain in place for the rest of the year, and will be the key factor driving housing demand as state economies steadily reopen," Yun said. "Still, more listings and increased home construction will be needed to tame price growth."

The report also said single-family home sales slumped by 16.9 percent to a rate of 3.94 million in April, while existing condominium and co-op sales plunged by 26.4 percent to 390,000.

Next Tuesday, the Commerce Department is scheduled to release a separate report on new home sales in the month of April. New home sales are expected to plummet by about 17.0 percent.


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Bank of Japan emergency meeting: preview

Trading 21 mai 2020 Commentaire »

The Bank of Japan will hold an emergency meeting tomorrow. As a rule, members of the Japanese regulator do not hold meetings in May - after the April meeting, there is a June meeting. But, to paraphrase a Latin expression, we can say that "desperate coronavirus times require desperate measures." Therefore, Harukiko Kuroda decided to convene the Board of Governors of the central bank a month ahead of schedule.

The official notice states that the BOJ will hold a policy meeting to "approve a new lending program to support businesses during the coronavirus crisis." A rather dry and uninformative wording, which, nevertheless, caused some excitement in the market - after a weekly flat within the range of 106.80–107.40, the price of USD/JPY jumped to the 108th figure, however, it could not gain a foothold there: the weakened dollar played a cruel joke with the buyers of the pair.

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At the same time, contrary to many dollar pairs, USD/JPY did not follow the general trend and maintained its positions near the boundaries of the current price level. It is also worth noting that the 10.10 mark corresponds to the upper border of the Kumo cloud and at the same time to the upper line of the Bollinger Bands indicator on the daily chart. Therefore, if traders can gain a foothold above this target, the Ichimoku indicator will form one of its strongest signals, the Parade of Lines, and the bulls will have access to the next resistance level of 109.10 (the upper limit of the Kumo cloud is already on the weekly chart). This scenario is very likely, especially if Kuroda surprises the market with his ultra-soft decisions at tomorrow's meeting.

The formal reason for the emergency meeting was the release of data on the growth of the Japanese economy. Japan's GDP index suddenly fell by 3.4% in the first quarter. The key indicator has been declining for two consecutive quarters, so from a technical point of view, we can say that the Japanese economy has plunged into recession. And although the indicator came out slightly better than the forecasts (most experts predicted a decline to 4.6%), in fact, this fact did not change anything. On a quarterly basis, GDP slowed by 0.9% (against the consensus forecast of -1.2%). But the figure for the fourth quarter was revised downward to -7.3%. The structure of the release indicates a reduction in personal consumption (in quarterly terms, the indicator decreased by 0.7%), capital expenditures (a decline of 0.5%) and export volumes (by 0.6%).

It is worth noting that this is the first recession in the last five years, and the country's economy was not affected by the coronavirus crisis in the fourth quarter of last year, since the COVID-19 virus appeared only in November-December 2019. Part of the economic downturn is due to tax policy. After the sales tax was raised in Japan, consumer spending collapsed by three percent at once. Business investment also declined significantly. Similarly, exports showed weak dynamics. The coronavirus factor joined all the economic problems in the first quarter of 2020. Therefore, according to the overwhelming majority of experts, the Japanese economy will show negative dynamics in the period of April-June, indicating the reality of a recession.

The BOJ could not ignore such disappointing statistics. The downward trend has become stable, so the regulator is likely to move from words to deeds tomorrow. Last week, Harukiko Kuroda warned that the central bank "will not hesitate to ease monetary policy again if circumstances require it." He clarified that the regulator may expand the asset purchase program or lower rates. At the same time, he admitted that the Japanese economy "for some time" will remain in a difficult state.

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According to many experts, the BOJ will expand QE at the meeting, but will leave interest rates unchanged. But in my opinion, the risk of lower rates is quite high. It is worth recalling that back in July 2018, the Japanese regulator expanded the range, or rather, the limits of long-term interest rates - this allows the regulator to go deeper into the negative area at any meeting. However, the central bank does have other additional levers of influence in its arsenal.

Thus, if the Japanese regulator confines itself to QE expansion tomorrow, the yen may demonstrate short-term weakness, and the pair will temporarily jump to the middle of the 108th figure. But if Kuroda still decides to lower rates, then the pair's growth will take a protracted character. In this case, the yen will weaken to the level of 109.10 (the upper border of the Kumo cloud is already on the weekly chart), indicating a new price horizon in the form of the 110th figure.

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Dollar Little Changed After U.S. Existing Home Sales

Trading 21 mai 2020 Commentaire »

U.S. existing home sales and leading index for April have been released at 10:00 am ET Thursday. After the data, the greenback changed little against its major counterparts.

The greenback was trading at 1.2241 against the pound, 107.73 against the yen, 1.0987 against the euro and 0.9667 against the franc around 10:05 am ET.


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*U.S. Leading Economic Index Tumbles 4.4% In April

Trading 21 mai 2020 Commentaire »

U.S. Leading Economic Index Tumbles 4.4% In April


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*U.S. Existing Home Sales Plunge 17.8% In April

Trading 21 mai 2020 Commentaire »

U.S. Existing Home Sales Plunge 17.8% In April


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