Powell Warns Of 'Significant Uncertainty' About Timing, Strength Of Recovery

Trading 16 juin 2020 Commentaire »

Federal Reserve Chair Jerome Powell acknowledged recent signs of improvement in the economy during congressional testimony on Tuesday but cautioned that "significant uncertainty remains about the timing and strength of the recovery."

During his semiannual testimony before the Senate Banking Committee, Powell noted some recent indicators have pointed to stabilization and even a modest rebound in economic activity following the coronavirus-induced downturn.

Powell specifically cited the Labor Department's recent jobs report showing employment unexpectedly jumped by 2.5 million jobs in the month of May.

The Fed chief attributed the surprise job growth to some businesses reopening amid the easing of restrictions on mobility and commerce and the extension of federal loans and grants as well as stimulus checks and unemployment benefits supporting household incomes and spending.

However, Powell noted that output and employment levels remain far below their pre-pandemic levels and warned that there continues to be significant uncertainty about the economic outlook.

"Much of that economic uncertainty comes from uncertainty about the path of the disease and the effects of measures to contain it," Powell said. "Until the public is confident that the disease is contained, a full recovery is unlikely."

The Fed Chair cautioned that a prolonged economic downturn has the potential to create longer-term damage from permanent job loss and business closures.

"Long periods of unemployment can erode workers' skills and hurt their future job prospects," Powell said. "Persistent unemployment can also negate the gains made by many disadvantaged Americans during the long expansion."

"If a small or medium-sized business becomes insolvent because the economy recovers too slowly, we lose more than just that business," he added. "These businesses are the heart of our economy and often embody the work of generations."

In light of the continued uncertainty, Powell said the Fed remains committed to using its full range of tools to support the economy and reiterated that interest rates will remain at current near-zero levels until the central bank is confident that the economy has weathered recent events.

The Fed's latest economic projections indicated most central bank officials expect rates to remain at current levels through 2022.

Powell also touched on the Fed's recent move to start buying individual corporate bonds, which he said is intended to support employment and spending.

When asked about the move in the question-and-answer portion of his testimony, Powell explained that decision was made out of an "excess of caution" to preserve gains for market function.

"If the market function continues to improve, then we are happy to slow or even stop the purchases. If it goes the other way, we will increase," Powell said. "I don't see us as wanting to run through the bond market like an elephant."

Commenting on Powell's prepared remarks, Michael Pearce, Senior US Economist at Capital Economics, noted there was no mention of potential future policy tools the Fed might turn to, including explicit caps on Treasury yields.

"With yields currently at very low levels, there is little need for such a policy yet, so for now we expect the Fed's emphasis to remain on ensuring its lending programs are operating smoothly, while adding to calls for fiscal policy to provide more support," Pearce said.

Powell is scheduled to make his second virtual appearance on Capitol Hill on Wednesday, when he testifies before the House Financial Services Committee.


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

Swiss Economy Set For Worst Slump Since 1975: SECO

Trading 16 juin 2020 Commentaire »

Switzerland's economy is set for its worst slump since 1975 this year due to the impact from the coronavirus, or Covid-19, and a revival is likely in the second half of the year, if there is no second wave of the pandemic, the Federal Government's Expert Group said in a report released on Tuesday. Gross domestic product adjusted for sporting events is forecast to fall by 6.2 percent this year, which is slightly better than the 6.7 percent decline predicted in April, the State Secretariat for Economic Affairs, or SECO, said. That would be the worst slump since 1975, the SECO added. The unemployment rate is expected to average 3.8 percent this year. Experts expect private consumption to remain subdued for the rest of the year due to the high uncertainty surrounding the pandemic and also projected a significant reduction in investment in machinery amid the underutilized production capacity and deterioration in businesses' financial situation. The Swiss economy is likely to grow 4.9 percent in 2021, which is smaller than the 5.2 percent expansion predicted in April. This projection is based on the assumption that no renewed intensification of the health policy measures becomes necessary, that the second-round economic effects in the form of lay-offs and corporate bankruptcies remain limited and that demand from abroad returns to normal levels gradually. However, the labor market is expected to improve only very slowly and the unemployment rate is forecast to climb further to 4.1 percent next year. Employment is expected to log only a minimal rise. "The course the economy will take hinges on the progression of the pandemic," the SECO said. "Forecast uncertainty therefore remains extraordinarily high."

Further, the risk of upheaval on the financial markets and further upward pressure on the Swiss franc is high amid rising debt levels and the risk of defaults and insolvencies, globally, the report added.


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

U.S. Business Inventories Slump More Than Expected In April

Trading 16 juin 2020 Commentaire »

A report released by the Commerce Department on Tuesday showed a bigger than expected decrease in U.S. business inventories in the month of April.

The Commerce Department said business inventories tumbled by 1.3 percent in April after falling by a revised 0.3 percent in March.

Economists had expected business inventories to decrease by 0.8 percent compared to the 0.2 percent dip originally reported for the previous month.

The bigger than expected decrease reflected a sharp pullback in retail inventories, which plunged by 3.7 percent in April after jumping by 1.1 percent in March.

Manufacturing inventories also fell by 0.4 percent in April after slumping by 1.1 percent in March, while wholesale inventories rose by 0.3 percent after tumbling by 1.1 percent.

The report also showed business sales plummeted by 14.4 percent in April following a 5.2 percent nosedive in the previous month.

Wholesale sales plunged by 16.9 percent, while manufacturing and retail sales cratered by 13.5 percent and 12.7 percent, respectively.

With sales falling by much more than inventories, the total business inventories/sales ratio spiked to 1.67 in April from 1.45 in March.


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

U.S. Homebuilder Confidence Improves Much More Than Expected In June

Trading 16 juin 2020 Commentaire »

Suggesting housing is well positioned to lead a post-pandemic economic recovery, the National Association of Home Builders released a report on Tuesday showing a continued rebound in U.S. homebuilder confidence in the month of June.

The report said the NAHB/Wells Fargo Housing Market Index spiked to 58 in June from 37 in May, continuing to rebound from the nearly eight-year low of 30 set in April. Economists had expected the index to climb to 45.

"Housing clearly shows signs of momentum as challenges and opportunities exist in the single-family market," said NAHB Chief Economist Robert Dietz. "Builders report increasing demand for families seeking single-family homes in inner and outer suburbs that feature lower density neighborhoods."

He added, "At the same time, elevated unemployment and the risk of new, local virus outbreaks remain a risk to the housing market."

The much bigger than expected jump by the housing market index reflected substantial increases by all three component indices.

The index gauging current sales conditions surged up to 63 in June from 42 in May, while the component measuring sales expectations in the next six months soared to 68 from 46 and the measure charting traffic of prospective buyers vaulted to 43 from 21.

Looking at the monthly average regional HMI scores, the NAHB said the Northeast surged 31 point to 48, the South jumped 20 points to 62, the Midwest posted a 19-point gain to 51 and the West catapulted 22 points to 66.

On Wednesday, the Commerce Department is scheduled to release a separate report on new residential construction in the month of May.

Housing starts are expected to jump to an annual rate of 1.095 million in May from 891,000 in April, while building permits are expected to surge up to an annual rate of 1.228 million from 1.066 million.


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

*Fed Chair Powell Begins Testimony Before Senate Banking Committee

Trading 16 juin 2020 Commentaire »

Fed Chair Powell Begins Testimony Before Senate Banking Committee


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

U.S. Industrial Production Rebounds Much Less Than Expected In May

Trading 16 juin 2020 Commentaire »

With a rebound in manufacturing output partly offset by sharp decreases in mining and utilities output, the Federal Reserve released a report on Tuesday showing U.S. industrial production increased by much less than expected in the month of May.

The Fed said industrial production jumped by 1.4 percent in May after plummeting by a downwardly revised 12.5 percent in April.

However, economists had expected industrial production to surge up by 2.9 percent compared to the 11.2 percent plunge originally reported for the previous month.

The rebound in industrial production came as manufacturing output spiked by 3.8 percent in May following a 15.5 percent nosedive in April.

Most major industries saw increases in output as many factories resumed at least partial operations following the coronavirus shutdowns, with the largest gain registered by motor vehicles and parts.

Meanwhile, the report said mining output tumbled by 6.8 percent in May after plunging by 6.1 percent in April, while utilities output slumped by 2.3 percent after inching up by 0.1 percent in the previous month.

"Overall, although production rebounded more slowly than retail sales in May, that is mostly because plants didn't reopen until mid-month or later," said Paul Ashworth, Chief U.S. Economist at Capital Economics.

He added, "Supply chain issues could hold back production from reaching pre-pandemic levels any time soon but, if sales are recovering, production will eventually follow."

The Fed also said capacity utilization climbed to 64.8 percent in May from a downwardly revised 64.0 percent in April.

Economists had expected capacity utilization to jump to 66.9 percent from the 64.9 percent originally reported for the previous month.

While capacity utilization in the manufacturing sector rose to 62.2 percent in May from 60.0 percent in April, capacity utilization in the mining and utilities sectors dropped to 75.4 percent and 69.1 percent, respectively.


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

EUR/USD and GBP/USD. US dollar will continue to seek recovery, despite the fundamental and macroeconomic backgrounds

Trading 16 juin 2020 Commentaire »

4-hour timeframe

analytics5ee93e270202b.jpg

Average volatility over the past five days: 119p (high).

After the US dollar again began to fall in price across the entire spectrum of the market on Monday, today there was a downward movement again during the day. Thus, so far we are still inclined to the option that the pair will continue the corrective movement. Moreover, today quotes consolidated back below the critical Kijun-sen line, which therefore disconfirms the desire of the bulls to continue and continue to buy European currency. We have already said that, from our point of view, the euro has already risen in price quite a lot in recent days. Too strong for the set of fundamental and macroeconomic reasons that was at the disposal of traders. So now, in a way, it's time to repay the debts. On Monday, no important macroeconomic information regarding the European Union or the United States was published. There were no speeches by important officials or politicians. Nevertheless, in recent days, the pair's volatility has increased, which may even mean a certain panic in the foreign exchange market. Considering the groundless growth of the euro and the pound in recent weeks, as well as the growth of volatility, we can assume that there is not too much logic in the actions of traders. Nevertheless, we still recommend not trying to guess the pair's reversals, but trading strictly according to the trend, even if the foundation and macroeconomics speak of the futility of this option.

Trading on the EUR/USD pair took place in a completely calm manner on Tuesday, June 16. Nevertheless, the dollar at the time of writing the article has risen in price by more than 60 points, so there is definitely a trend within the day. Let's try to figure out whether there were reasons for the strengthening the US dollar today or whether the fall of the pair is a purely technical phenomenon. There were many macroeconomic statistics today, but most of them could hardly interest traders in the current conditions. Inflation in Germany was 0.6% year-on-year in annual terms, while the harmonized consumer price index (published by the official statistics office of the European Union) was 0.5% y/y. However, such low figures have not surprised anyone in the market for several months now, since falling inflation in the crisis (as well as hyperinflation) is a normal phenomenon. Studies were also published by the ZEW Institute on economic sentiment in Germany and the European Union in June. It turned out that most investors are optimistic about the future, as indicators have grown significantly. However, at the same time, the index of current economic conditions in Germany remains at a level "below the baseboard", which reflects the current deplorable state of the economy and the pace of its recovery after the coronavirus epidemic. By and large, all these statistics did not have much significance for traders. It can not be called positive or negative for the euro.

A report on retail sales for May was just released in the United States. The main indicator grew by 17.7%, the retail control group added 11%, and the indicator excluding car sales grew by 12.4%. All three indicators significantly exceeded forecast values and could cause increased demand for the dollar in the US trading session. Jerome Powell's speech in the US Congress is set for today and a lot will depend on the Federal Reserve chief's rhetoric. As with the ZEW Institute, it will be very difficult to expect any positive speech from Powell. The US economy has been hit hard by the coronavirus crisis, key indicators of its condition have fallen, and it is not known how long it will take to fully recover. It should also be understood that the whole world must recover from the epidemic at once. If, for example, the United States announces the resumption of air travel, but the airports in Europe and China continue to remain closed, then this will not help American airlines. If trips and flights are allowed around the world, but at the same time most people will be afraid of the coronavirus, the tourism sector will continue to remain in a deplorable state and will not be restored. Thus, we still believe that in order for the global economy and the economy of each individual country to begin to grow fully, a victory over the pandemic is needed. There are still no signs of a victory over the pandemic. People continue to become infected in the United States. The total number of cases is already more than two million. Europe seems to have managed to completely suspend the distribution of COVID-2019, but many other countries cannot boast of this, for example, Brazil, India or Russia. This means that communication with these countries will either be limited, or it will be closed altogether, and a virus without a vaccine or medicine can again spread to the recovered countries at any time. Thus, the second wave of the epidemic is not something hypothetical, it is a very real threat.

4-hour timeframe

analytics5ee93e3c4853a.jpg

Average volatility over the past five days: 146p (high).

The GBP/USD currency pair also sought to resume the downward movement on June 16, however, unlike the EUR/USD pair, it did not succeed. Thus, today's correlation between the two main pairs was weak. Given the fact that no important news and messages were received from the European Union today, this looks strange. It turns out that the US dollar has risen in price against the euro, but has not risen in price with the pound. Why? Is it because the pound received real support from market participants due to frank rumors about the possible signing of an agreement between London and Brussels in the near future? Recall that in the first years of Brexit, the British currency, if it grew, then only on such unsubstantiated rumors that regularly appeared in the press, the media and on television. After a few days it became clear that the rumors were still just rumors and the pound fell again. It seems that the same thing is happening with the British pound. The GBP/USD currency pair has consolidated above the critical Kijun-sen line, however, it is unlikely to be able to continue the upward movement. A more likely scenario is the euro consolidating below the critical line. However, the bears in the GBP/USD pair are extremely uncertain and are not yet ready for such a development. Perhaps they will help Powell?

Recommendations for EUR/USD:

For short positions:

The EUR/USD pair resumed its downward movement on the 4-hour timeframe. Thus, the targets for short positions are now levels 1.1196 and 1.1171, which are still advised to be considered in small lots due to the weakness of the current sell signal.

For long positions:

Buy orders can be opened but first you must consolidate the price above the critical line with the first objectives of 1.1380 and 1.1434. However, the implementation of this option is not expected in the near future - the pair has just declined.

Recommendations for GBP/USD:

For long positions:

The pound/dollar pair crossed the Kijun-sen line, but cannot continue to move up. Thus, formally, buy orders with targets of 1.2732 and 1.2946 are formally relevant now, however, we do not recommend considering longs yet, since we believe that the pound will resume its decline.

For short positions:

It is advised that sales of the GBP/USD pair be considered in small lots while aiming for a volatility level of 1.2440 not earlier than consolidating quotes below the Kijun-sen line.

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

Restless in Asia: dollar temporarily strengthened amid a surge in anti-risk sentiment

Trading 16 juin 2020 Commentaire »

The euro-dollar today is trading in different directions. The European currency reacted positively to very good ZEW reports, while the greenback demonstrates sensitivity not only to statistics from the US, but also to the external fundamental background. The unexpected escalation of long-term, long-smoldering, geopolitical conflicts led to a surge in anti-risk sentiment, which was used by dollar bulls.

analytics5ee94b14e33be.jpg

So, one of the centers of geopolitical tension was on the border of India and China. As a result of an armed skirmish, three Indian soldiers died - an officer and soldiers. This is the first death of the military in several decades of border confrontation between the two powers. Both countries possess nuclear weapons, therefore, all the world media have shown interest in the outbreak of conflict. In fact, the territorial conflict between India and China around the Ladakh region in the Himalayas has been smoldering since the beginning of the 60s - in 1962, a border war was fought between the countries for control over the region. In the 1990s, the parties agreed to de-escalate in the disputed region. Starting in 2017, the border conflict between the two nuclear powers resumed with renewed vigor because of Beijing's intention to build a new road in Ladakh. A number of units were pulled to the control line in May of this year, replacing the border between the two countries. This happened after the military of the two countries engaged in hand-to-hand combat in the area of the mountain border post. And yesterday, another skirmish escalated into an armed confrontation, which killed three people. Similar conflicts occur in many border areas in different parts of the world, but, given the fact that India and China are members of the "nuclear club", this incident also affected the mood of the foreign exchange market traders. According to the latest data, now the parties are trying to reduce the degree of incandescence, but the problem itself is unlikely to be resolved in the near future.

Another escalation of geopolitical conflict occurred on the Korean peninsula. The situation over there has been aggravating for several weeks. Pyongyang reacts extremely sharply to the distribution of campaign leaflets, which South Korean activists send over the border to the North in balloons. At the end of last week, the DPRK leader's sister, Kim Yo Jong, announced that her country was preparing a "new step in response to sending false leaflets." Then she called Seoul an enemy and stated that it was time to "confidently end relations with the South Korean authorities." Then, the DPRK unilaterally stopped communicating with its southern neighbor through all communication channels, including the military and the special line between the top leadership of the two countries. But today, the North Korean authorities have undermined the Office of inter-Korean communications in the city of Kaesong, after which South Korea brought the troops on high alert. North Korea, in turn, once again threatened military action against the southerners.

It is worth noting that if the Indian-Chinese conflict is most likely to be resolved (or rather, to return it to the "smoldering" stage), then the situation on the Korean peninsula is on increasing amplitude. Therefore, it is not surprising that today's events provoked a surge in anti-risk sentiment in the foreign exchange market and increased demand for the dollar, which continues to enjoy the status of a protective asset.

analytics5ee94b2916f3e.jpg

The dollar also received indirect support from the Bloomberg news agency: according to their data, the US government plans to allocate a trillion dollars for infrastructure restoration activities - the US Department of Transportation plans to spend this money on bridges and roads, as well as providing Americans with 5G Internet. But for now, these are just plans: according to journalists, the White House is now exploring various options for allocating funds. For example, this amount can be included in the next package of measures to provide assistance in a pandemic, or a separate bill can be developed for it.

Thus, the US currency today received plenty of reasons for strengthening - the greenback dominated in all dollar pairs in the second half of Tuesday. Speaking directly about the EUR/USD pair, here we observe a wide-range flat. Today's strengthening of the dollar did not help the bears to reverse the trend, despite an impressive downward momentum. Despite a surge in anti-risk sentiment, the US currency could not go below the 1.1250 mark (Tenkan-sen line on the daily chart), while the pair has been trading for the third day in a row in the range of 1.1250-1.1350.

Apparently, traders are in no hurry to open large sales positions on the eve of the summit of the EU leader, which will be held this Friday. The online meeting will discuss the European Commission's anti-crisis plan, which is worth 750 billion, so this event's importance for the euro can hardly be overestimated.

Given such an ambiguous fundamental background, as well as the fact that the bears could not overcome the lower limit of the above range, at the moment, we can consider purchases from current positions with a growth target at around 1.1350. The influence of the Sino-Indian conflict has already waned, while Korean events have a short-term impact on the market: if the DPRK does not realize its threats regarding a military invasion of the demilitarized zone, then tomorrow traders will switch to other fundamental factors.

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

Comprehensive analysis of movement options for Gold & Silver (Weekly timeframe) for the second half of 2020

Trading 16 juin 2020 Commentaire »

Intermediate operational scale (Weekly)

How the battle for the Gold & Silver metal will unfold in the second half of 2020 in the weekly timeframe - options for the development of the movement.

____________________

Spot Gold

In the second half of 2020, the movement of Spot Gold will depend on the development and direction of the breakdown of the range:

  • resistance level of 1764.02 - initial line SSL of the Minor (Daily) operational scale forks - maximum from May 17, 2020;
  • support level of 1707.00 - lower limit of the channel 1/2 Median Line of the Intermediate operational scale fork (Weekly).

The downward movement of Spot Gold will be important in case of breaking the support level of 1707.00 at the lower border of the channel 1/2 Median Line of the Intermediate operational scale fork (Weekly) and will be directed to the channel borders 1/2 Median Line (1616.00-1560.00-1515.00) and equilibrium zone (1560.00-1490.00-1430.00) of the Minor (Daily) operational scale fork.

The upward movement of Spot Gold will be continued in the breakdown of the resistance level 1764.02 on the starting line SSL of the Minor (Daily) operational scale fork - maximum from May 17, 2020 and will be directed to the goals:

  • 1/2 Median Line Intermediate (1835.00);
  • upper border of the channel 1/2 Median Line Intermediate (1970.00);
  • lower bound of ISL38.2 (1985.00) equilibrium zone of the Intermediate operational scale fork (Weekly).

Spot Gold movement options are shown on the animated chart.

analytics5ee8f2bc54109.jpg

____________________

Spot Silver

In the second half of 2020, the movement of Spot Silver will also depend on the direction of the breakdown of the range:

  • resistance level 17.500 - the upper limit of ISL61.8 balance zone of the Minor (Daily) operational scale fork;
  • support level 16.850 - upper limit of 1/2 medium Line channel of the Intermediate (Weekly) operational scale fork.

The downward movement of Spot Silver can be continued at the breakdown of the support level of 16.850 and will flow inside the boundaries of the channel 1/2 Median Line (16.850-16.100-15.350) and equilibrium zones (15.500-14.600-13.800) of the Intermediate (Weekly) operational scale fork, taking into account the development of the Median Line (16.500) of the Minor (Daily) operational scale forks.

The upward movement of Spot Silver can take place in the event of a breakout of the resistance level of 17.500 at the upper border of ISL61.8 balance zone of the Minor (Daily) operational scale fork and will be directed to the goals:

  • initial SSL line (18.320) of the Intermediate (Weekly) operational scale fork;
  • UTL Intermediate control line (19.150);
  • uwl38.2 Intermediate warning line (19.500);
  • maximum 19.610 from September 1, 2019.

Options for Spot Silver movement are shown on the animated chart (opens in a separate tab).

analytics5ee8f2d84f989.jpg

____________________

The review is compiled without taking into account the news background, the opening of trading sessions of the main financial centers, and is not a guide to action (placing "sell" or "buy" orders).

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

June 16, 2020 : GBP/USD Intraday technical analysis and trade recommendations.

Trading 16 juin 2020 Commentaire »

analytics5ee8f0e45ec4e.jpg

Recently, Bullish breakout above 1.2265 has enhanced many bullish movements up to the price levels of 1.2520-1.2590 where temporary bearish rejection as well as a sideway consolidation range were established (In the period between March 27- May 12).

Shortly after, transient bearish breakout below 1.2265 (Consolidation Range Lower Limit) was demonstrated in the period between May 13 - May 26.

However, immediate bullish rebound has been expressed around the price level of 1.2080. This brought the GBPUSD back above the depicted price zone of 1.2520-1.2600 which failed to offer sufficient bearish rejection.

Hence, short-term technical outlook has turned into bullish, further bullish advancement may be expressed towards 1.2780 (Previous Key-Level) where signs of bearish rejection were expressed.

Short-term bearish pullback was being expressed, initial bearish destination was located around 1.2600 and 1.2520.

Moreover, any bearish breakdown below 1.2500 pauses the bullish outlook for sometime and should be considered as an early exit signal for short-term buyers.

Trade recommendations :

Intraday traders can consider the current bearish pullback towards the price zone around 1.2520 ( Backside of the broken uptrend & a recent demand level) as a valid BUY signal.

T/P level to be located around 1.2600, 1.2715 and 1.2750 while S/L should be placed below 1.2450.

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