Intermezzo

Intermezzo
It was a predictable snoozefest in FX overnight as global holiday sessions crimped activity. And adding to the void, there was scant data during European hours which severely nipped action as traders had few if any fundamental guideposts.

But the markets interlude included the usual holiday- liquidity induced mystery move as the dollar went bid at the NY open. But the step was humble and little more than an attempt to trigger some stops in low liquidity market conditions. But all near-term support levels held and the move and quickly retracted as there was no news to support the quickstep sell-off. Chalk it up to the ghosts of presidents past.

Currency markets have remained relatively muted with few if any headlines to sink one’s teeth into but as the markets pivot to Fed speak and the FOMC minutes this week, “deficit mania” is sounding a few decibels lower this morning.But none the less, ongoing concerns about swelling deficit’s and the Feds sequence of interest rate normalisation should be the markets key focus this week and the primary drivers of near-term volatility.
Oil Markets

Oil prices have started the week on a positive note.With risk aversion abating, equity markets have remained guardedly positive. Also, an escalation of middle east tensions on the back of Israeli Prime Minister Benjamin Netanyahu beating the war drums by suggesting that Isreal could act against Iran alone has nudged prices higher. Predictably this warmongering has put the region on a state of readiness fearing a head to head incident and boosted oil prices due to the fear of sizable supply disruptions. Of course, when Isreal comes into the equation it could spark contagion across a region

Also, convincing signals from OPEC and their partners to extend production cuts continues to resonate with investors.

Gold Markets

Gold prices slid lower overnight on a drop in volatility and a slightly stronger dollar. Selling pressure emerged after USD speculative buyers emerged along with some position short covering ahead of the plethora of critical Fed speak and of course the FOMC minutes. But given the late-January Fed meeting was primarily interpreted as Hawkish; the bar is high for the minutes to sound an even more Hawkish note,  but they will still attract the lions share of attention.

Given that the sun seldom shines on a capital hill along with escalating middle east tension, on the first sign of a dollar downdraft gold with ratchet higher.

G-10

The Japanese Yen

Markets are focusing on Friday’s crucial Japan CPI print, and with all the recent chatter about the BoJ extending YCC in perpetuity given the stronger Yen, short-term traders are paring back bearish dollar bets. And with a relative sense of calm in overall volatility,  dollar bears are taking an interlude in holiday thinned-trading conditions

The Euro

Very little buying interest yesterday after Friday’s sell-off so given the lack of demand the Euro could fall to low 1.23  on even minor unexpected hic-up on news flow given thin liquidity conditions. But dips should look attractive for long-term players.

The Malaysian Ringgit

Very quiet trading session to start the week with local trader biding time until the FOMC minutes release. In the meantime, the broader USD sentiment will dictate the pace of play for regional currencies and imparticular the USDJPY which is moving towards 107 which is mildly negative for the MYR

On a favourable note, Oil prices remain robust on the escalation of middle east tension and production cut compliance among OPEC members which should provide support for the MYR.

EUR/USD – Is the Rally Running Out of Steam?

Are We Looking at an Overcrowded Market?

It’s difficult to find anyone at the moment that isn’t bullish on this pair in the long term and under the current circumstances, they may have a point. However, these markets don’t move in a straight line (even bitcoin as the last couple of months has shown us) and corrections along the way are both normal and healthy.

So when I ask if the rally is running out of steam, I’m not necessarily calling a top in the pair and in this case, I’m certainly not. What I’m suggesting is that the recent run higher – and once again it’s been a good one – may be looking a little overstretched and a pull-back could be on the cards.

The pair first started to look a little overbought earlier this month when it failed to make a new high and even appeared to have formed a small double top, but as we saw, the dollar bashing wasn’t quite over yet and despite breaking the neckline, we didn’t see much of a pull-back before it was once again tearing higher.

EURUSD Daily Chart

OANDA fxTrade Advanced Charting Platform

Once again though, we find ourselves testing the 1.25 region and we appear to be finding a lot of resistance. The two notable differences on this occasion though is that we did make a new high and we did not have the momentum indicators – MACD and stochastic – confirming the moves. This has left us with a negative divergence between price and momentum that is red flag for the bulls.

USD/JPY – Yen Edges Lower in Thin Holiday Trade

It’s worth noting at this point that a divergence in itself is not a sell signal, nor does it indicate that a pair won’t make a new high. It quite easily could, although if it does so with less momentum again, this would be a second red flag and further suggest that a correction may be coming. If a new high is made on rising momentum it would, however, suggest that bulls have found further reason to be bullish and negate the previous red flag warning.

With the pair now showing a divergence though and Friday’s daily candle looking rather bearish, having rallied above Thursday’s high and closed well below its low, I wonder whether the downside is at least going to be tested.

The first interesting level for me is 1.2320, this was a resistance level in mid-January that became support shortly after and then the neckline of the double top that never fully completed it’s corrective projection. While we broke above here quite easily on the way back up, it could prove more tricky this time if indeed the market is still bullish. A break below may be an early correction confirmation signal.

Gold Trading Sideways in Thin Holiday Trade

The more interesting level is 1.22 though, with it being roughly the area where the last two dips found support. A failure to do so on this occasion would be a bearish signal and could create an imperfect double top with the neckline here and the peaks being 25 January and 16 February highs. It would also signal an arguably overdue correction in the dollar with the last having been a little brief considering the move that preceeded it.

Given the size of the double top – roughly 1.25 to 1.22 – this could give us a possible price projection of 300 pips, creating possible support around 1.19. This would bring us back to a prior area of support and resistance and represent a 61.8% retracement from the November lows to the recent highs at which point traders longer term bullish appetite could be tested.

Gold Trading Sideways in Thin Holiday Trade

Gold prices are trading sideways in the Monday session. Currently, the spot price for an ounce of gold is 1347.25, down 0.02% on the day. There are no US releases on Monday, as bank and stock markets are closed for Presidents Day.

Volatility in the stock markets last week translated into gains for safe-haven assets such as gold. The base metal gained 2.3%, as nervous investors lost their appetite for risk. On Friday, gold lost ground but managed to briefly push above $1360, for the first time since late January. US fundamentals have been generally strong, pointing to a robust US economy. This has raised speculation of a quicker pace of rate hikes from the Fed, but gold has managed to hold its own against the US dollar, largely due to the recent stock market correction.

The US posted sharp housing and consumer confidence reports on Friday, but the dollar failed to make headway against the surging Japanese yen. Building Permits jumped to 1.40 million in January, up from 1.30 million in December. This easily beat the estimate of 1.29 million. Housing Starts followed suit and improved to 1.33 million in January, up from 1.19 million a month earlier. This was well above the forecast of 1.28 million. There was more positive news from consumer confidence, as UoM Consumer Confidence climbed to 99.9, well above the estimate of 95.4 points.

 

XAU/USD Fundamentals

Monday (February 19)

  • There are no US events

*All release times are EST

*Key events are in bold

XAU/USD for Monday, February 19, 2018

XAU/USD February 19 at 12:50 EST

Open: 1347.53 High: 1351.46 Low: 1345.82 Close: 1347.15

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1285 1307 1337 1375 1416 1433
  • XAU/USD posted small gains in the Asian session but retracted. The pair was flat in European trade and this continues in North American trade
  • 1337 is supporting support
  • 1375 is the next resistance line
  • Current range: 1337 to 1375

Further levels in both directions:

  • Below: 1337, 1307, 1285 and 1260
  • Above: 1375, 1416 and 1433

OANDA’s Open Positions Ratio

On the Monday session, XAU/USD ratio is showing short positions with a majority (57%). This is indicative of trader bias towards XAU/USD breaking out and moving lower.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

GBP/USD – Pound Dips at Start of Week

The British pound is trading quietly in the Monday session. In North American trade, GBP/USD is trading at 1.4002, down 0.21% on the day. On the release front, there are no US events, with US markets closed for Presidents’ Day. In the UK, Rightmove HPI gained 0.8%, its strongest gain in four months. On Tuesday, the UK releases CBI Industrial Order Expectations.

GBP/USD gained 1.3% last week, as the dollar continued to lose ground to its major rivals. However, the dollar rebounded with gains on Friday, following strong US housing and consumer confidence reports on Friday. Building Permits jumped to 1.40 million in January, up from 1.30 million in December. This easily beat the estimate of 1.29 million. Housing Starts followed suit and improved to 1.33 million in January, up from 1.19 million a month earlier. This was well above the forecast of 1.28 million. There was more positive news from consumer confidence, as UoM Consumer Confidence climbed to 99.9, well above the estimate of 95.4 points. Despite stock market volatility, consumer confidence was boosted by the recent tax reform package and a red-hot labor market.

Should cryptocurrencies be regulated? Bitcoin has seen wild fluctuations in recent months, ranging from under $1000 to just under $20,000. There are growing calls for these currencies to be regulated, and central banks could play a key role in such a move. However, last week, ECB President Mario Draghi poured cold water on any ECB involvement, saying that it was not the ECB’s responsibility to ban or regulate Bitcoin. Draghi added that the ECB was exploring the use of blockchain, a digital technology to monitor bitcoin transactions. Still, with Bitcoin gaining more and more popularity, the Bank of England and other central banks will have to pay greater to attention to the impact of Bitcoin on the currency markets.

GBP/USD Fundamentals

Sunday (February 18)

  • 19:01 British Rightmove HPI. Actual 0.8%

Monday (February 19)

  • 14:45 BOE Governor Carney Speaks

Tuesday (February 20)

  • 6:00 British CBI Industrial Order Expectations

*All release times are GMT

*Key events are in bold

GBP/USD for Monday, February 19, 2018

GBP/USD February 19 at 12:25 EDT

Open: 1.4032 High: 1.4050 Low: 1.3959 Close: 1.4002

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.3744 1.3809 1.3901 1.4010 1.4128 1.4271

GBP/USD posted gains but then retracted in Asian trade. In the European session, the pair showed limited movement. In North American trade, GBP/USD headed lower but has recovered

  • 1.3901 is providing support
  • 1.4010 was tested earlier in resistance and remains under pressure

Current range: 1.3901 to 1.4010

Further levels in both directions:

  • Below: 1.3901, 1.3809 and 1.3744
  • Above: 1.4010, 1.4128, 1.4271 and 1.4345

OANDA’s Open Positions Ratio

In the Monday session, GBP/USD ratio is showing a majority for short positions (54%). This is indicative of trader bias towards GBP/USD continuing to move lower.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

USD/JPY – Yen Edges Lower in Thin Holiday Trade

The Japanese yen has posted slight losses in the Monday session. In North American trade, USD/JPY is trading at 106.54, up 0.23% on the day. On the release front, there are no US events, with US markets closed for Presidents’ Day. In Japan, the current account surplus jumped to JPY 0.37 trillion in January, up from JPY 0.09 trillion a month earlier. This easily  beat the estimate of JPY 0.14 trillion. On Tuesday, Japan releases Manufacturing PMI and All Industries Activity.

The US posted sharp housing and consumer confidence reports on Friday, but the dollar failed to make headway against the surging Japanese yen. Building Permits jumped to 1.40 million in January, up from 1.30 million in December. This easily beat the estimate of 1.29 million. Housing Starts followed suit and improved to 1.33 million in January, up from 1.19 million a month earlier. This was well above the forecast of 1.28 million. There was more positive news from consumer confidence, as UoM Consumer Confidence climbed to 99.9, well above the estimate of 95.4 points.

The yen enjoyed a banner week, as the currency climbed 2.5% this week. This marked the strongest weekly gain since July. Nervous investors continued to snap up the safe-haven yen, as stock markets across the globe continued to show volatility, draining risk appetite. On Friday, the dollar dropped below 106 yen for the first time since November. If the markets continue to fluctuate during the week, the yen rally could continue.

Bank of Japan Governor Harohiko Kuroda has been reappointed to another 5-year term, the first time a BoJ governor has received a second term in 60 years. The move is a clear message from the Bank that it is no rush to make any change to the massive stimulus program, a key component of Abenomics. Kuroda has made it a priority to raise inflation, but this has proven a daunting task, as inflation is still below of the BoJ’s inflation target of 2%. In this period of strong volatility in the currency markets, Kuroda’s re-election may have a calming effect on the markets. What’s next for the BoJ? With the yen continuing to rise, policymakers may contemplate further easing in order to curb the yen’s value and protect the export sector, which has improved due to stronger global demand.

 

USD/JPY Fundamentals

Sunday (February 18)

  • 18:50 Japanese Trade Balance. Estimate 0.14T. Actual 0.37T

Monday (February 19)

  • There are no Japanese or US events

Tuesday (February 20)

  • 19:30 Japanese Flash Manufacturing PMI. Estimate 55.2
  • 23:30 Japanese All Industries Activity. Estimate 0.5%

*All release times are EST

*Key events are in bold

USD/JPY for Monday, February 19, 2018

USD/JPY February 19 at 11:20 EST

Open: 106.30 High: 106.73 Low: 106.10 Close: 106.54

 

USD/JPY Technical

S3 S2 S1 R1 R2 R3
103.16 104.32 105.53 106.64 107.29 108.00

USD/JPY ticked higher in the Asian session. The pair was flat in European trade. In North American trade, the pair posted small gains but has retracted.

  • 105.53 is providing support
  • 106.64 was tested earlier in resistance and remains a weak line

Current range: 105.53 to 106.64

Further levels in both directions:

  • Below: 105.53, 104.32 and 103.16
  • Above: 106.64, 107.29, 108.00 and 109.11

OANDA’s Open Positions Ratios

In the Monday session, USD/JPY ratio is showing long positions with a majority (75%). This is indicative of trader bias towards USD/JPY continuing to move higher.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Macron Inspires New UK Party Intent on Blocking Brexit

A new British party inspired by French President Emmanuel Macron’s movement launched a campaign on Monday to thwart Brexit by convincing MPs to block any EU withdrawal deal Prime Minister Theresa May can strike.Sandra Khadhouri, together with fellow Renew party members James Clarke and James Torrance, speaks at the launch of the new political party in London, Britain, February 19, 2018. REUTERS/Peter NichollsWith just over 13 months left until Britain is due to leave the EU, opponents of Brexit are exploring ways to stop what they call Britain’s biggest mistake since World War Two.The Renew party, founded last year after Macron’s En Marche! movement propelled him to power, said it would target pro-Brexit MPs in constituencies with high levels of support for EU membership.

Source: New British party inspired by Macron seeks to overturn Brexit – Reuters

Don’t go barking up the wrong tree in the Year of the Dog

Dollar Regains Ground Ahead of Fed Minutes

USD/CAD – Canadian Dollar Unchanged, No Fundamentals to Start Off Week

The Canadian dollar is almost unchanged in the Monday session, after posting losses on Friday. Currently, USD/CAD is trading at 1.2493, up 0.07% on the day. On the release front, there are no Canadian or US events on the schedule, so traders can expect the pair to have a quiet day. In the US, banks and stock markets are closed for Presidents’ Day.

The Canadian dollar posted losses on Friday, but managed to post slight gains last week. The currency weakened on Friday, after the US posted sharp housing and consumer confidence reports. Building Permits jumped to 1.40 million in January, up from 1.30 million in December. This easily beat the estimate of 1.29 million. Housing Starts followed suit and improved to 1.33 million in January, up from 1.19 million a month earlier. This was well above the forecast of 1.28 million. There was more positive news from consumer confidence, as UoM Consumer Confidence climbed to 99.9, well above the estimate of 95.4 points. This marked a 4-month high. On Wednesday, the Canadian dollar recorded its best one-day performance in 2018, gaining close to 1 percent against the greenback. The US dollar sagged as investors focused on poor retail sales reports in January. Retail Sales was flat at 0.0%, short of the estimate of 0.5%. Core Retail Sales declined 0.3%, well off the forecast of +0.2%.

Should cryptocurrencies be regulated? Bitcoin has seen wild fluctuations in recent months, ranging from under $1000 to just under $20,000. There are growing calls for these currencies to be regulated, and central banks could play a key role in such a move. However, last week, ECB President Mario Draghi poured cold water on any ECB involvement, saying that it was not the ECB’s responsibility to ban or regulate Bitcoin. Draghi added that the ECB was exploring the use of blockchain, a digital technology to monitor bitcoin transactions. Still, with Bitcoin gaining more and more popularity, the Bank of Canada and other central banks will have to pay greater to attention to the impact of Bitcoin on the currency markets.

USD/CAD Fundamentals

  • There are no US or Canadian indicators

USD/CAD for Monday, February 19, 2018

USD/CAD, February 19 at 8:05 EST

Open: 1.2555 High: 1.2566 Low: 1.2527 Close: 1.2563

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.2190 1.2351 1.2494 1.2630 1.2757 1.2855

USD/CAD ticked lower in the Asian session but has recovered in European trade

  • 1.2494 is providing support
  • 1.2561 is the next resistance line
  • Current range: 1.2494 to 1.2630

Further levels in both directions:

  • Below: 1.2494, 1.2351, 1.2190 and 1.2060
  • Above: 1.2630, 1.2757 and 1.2855

OANDA’s Open Positions Ratio

USD/CAD ratio is showing little movement in the Monday session. Currently, short positions have a slender majority (52%), indicative of slight trader bias towards USD/CAD breaking out and moving lower.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Cryptocurrencies Could Fall to Near-Zero at Any Time

Cryptocurrencies are a nascent asset class and could fall violently at any time, the founder of blockchain network Ethereum warned on Saturday.

“Reminder: cryptocurrencies are still a new and hyper-volatile asset class, and could drop to near-zero at any time,” Vitalik Buterin said on Twitter. “Don’t put in more money than you can afford to lose.”

Buterin added: “If you’re trying to figure out where to store your life savings, traditional assets are still your safest bet.”

Cryptocurrencies have recovered slightly from a severe sell-off which saw the market lose as much as $100 billion in market value in a single day. Bitcoin recovered to a price above $10,000 last week after falling as low as $5,947.40 the week before.

CNBC

Don’t go barking up the wrong tree in the Year of the Dog

Dollar Regains Ground Ahead of Fed Minutes

Bitcoin Breaks $11,000 as Recovery Continues

Bitcoin broke through the $11,000 mark over the weekend for the first time since the end of January as its price continues to slowly rise following a violent sell-off at the start of the month.

The price of the cryptocurrency went as high as $11,279.18 on Sunday, its most elevated level since January 30, according to CoinDesk’s bitcoin price index, which tracks prices from four major cryptocurrency exchanges.

On Monday, bitcoin was trading below $11,000, at $10,789, at around 9:30 a.m. London time (4:30 a.m. ET).

CNBC

Don’t go barking up the wrong tree in the Year of the Dog

Dollar Regains Ground Ahead of Fed Minutes

Venezuela Preparing to Launch Petro Cryptocurrency

Venezuela will launch a pre-sale of its commodity-backed “petro” cryptocurrency on Tuesday.

President Nicolas Maduro hopes the country’s own digital currency will help it to make financial transactions and get around Western sanctions.

Both the United States and the European Union have imposed economic sanctions on Venezuela over their opposition to its autocratic government. Last year, the Economist Intelligence Unit’s Democracy Index downgraded Venezuela from a “hybrid regime” to an “authoritarian regime” due to its “continued slide towards dictatorship.”

CNBC

Don’t go barking up the wrong tree in the Year of the Dog

Dollar Regains Ground Ahead of Fed Minutes