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Author Topic: InstaForex Analysis
IFX-
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IFX Gertrude
Post Re: InstaForex Analysis
on: December 4, 2017, 04:52
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The dollar weakens against the backdrop of political threats

Adjusted data on US GDP in the third quarter were better than expected, the growth rate was revised to 3.3%, and by all means, the US economy is recovering successfully. This is despite the fact that the Congress has not yet approved the draft of the tax reform.

However, the main factor of positive growth is not so much the growth of the economy as the growing consumer activity. According to the updated data, in the third quarter, the personal consumption expenditure index was 1.4%, and not 1.3%, as previously reported. This was released the day after the data on personal incomes in October also outperformed forecasts, with growth at 0.4% against expectations of 0.3%.

The market reacted positively to the reports, while the data on business activity in the manufacturing sector released by ISM on Friday made it possible to revise the forecast for US GDP in the fourth quarter to reach 3.5%, reflecting generally confidently positive expectations.

At the same time, it should be noted that the positive dynamics of consumer activity is not due to fundamental changes. The simplest calculations show that the growth of expenses is not based on revenue growth, but on the growth of lending, which in turn reflects certain hopes associated with the future tax reform. The growth of expenses in terms of the potentially able-bodied population is growing steadily, while personal savings are falling and have already reached the pre-crisis level of 10 years ago.

Thus, a certain revival of the consumer sector is associated with hopes for a reduction in tax pressure. If, however, the approval of the reform program in the Congress faces difficulties, then in this case one can expect a sharp decline in consumer activity and an increase in deflationary expectations.

The grounds for such fears are: On Friday, the Senate postponed the vote on the tax reform, the stumbling block was the report of the Tax Committee, from which it follows that the reform will not lead to filling the budget and the deficit will remain at the level of at least $1 trillion in a 10-year perspective. The economic analysis of the tax reform plan by the Minister of Finance Mnuchin has not yet been released. Therefore, the financial effect of the reforms may not be the same as the government represents. Before the markets closed on Friday, the final vote in the Congress did not take place, which ultimately contributed to the depreciation of the dollar.

Another reason for the fall of the dollar is that former adviser to Donald Trump, Michael Flynn, who was accused earlier of providing false information to the FBI, is prepared to testify against Donald Trump. If this news is confirmed, the opponents of Trump will have good reasons for initiating the impeachment procedure, which will automatically put an end to the tax reform program.

This scenario can lead to a rapid reduction in inflation expectations and will call into question the possibility of the Fed to implement the outlined plan for the growth rate in 2018, and the dollar will drop sharply against the yen and the euro. Fears remain hypothetical, but the dollar is losing momentum.

On Monday, the dynamics of the dollar will be determined. First of all, by political news related to the passage of the tax plan through the Congress and the development of the situation with Flynn. Acceptance of the tax plan is of fundamental importance in the light of approaching the date of December 8. Namely, before this date, the law on financing state institutions due to borrowing is in force.

On Tuesday, the ISM report on business activity in the services sector will be published, after a rapid growth in August-October, a slight slowdown is expected, but the level of PMI will remain high and can support the dollar.

In general, the dollar remains the favorite, and any positive news can contribute to a new wave of buying. However, one must assume that the probability of a smooth phased solution of all the issues at the beginning of this week is not very high, and therefore the growth of the euro to 1.20 appears quite certain.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

Analysis are provided by InstaForex

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Post Re: InstaForex Analysis
on: December 5, 2017, 05:16
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Pound is selected from the politics

Over the past two weeks, the British pound added 2% versus the US dollar and more than 1% versus the euro, against a background of lower political risks. Popular newspaper, like The Times, reported that London and Brussels managed to agree on the amount of compensation for the divorce, as well as on the issue of the Irish border. It seems like investors are satisfied that Theresa May is paying for a mild Brexit loss of government members. The market will closely follow the phrasing from the table of her talks with Jean-Claude Juncker and Michel Barnier, in order to understand whether it is worth selling due to the fact on initial rumors of buying.

Weekly dynamics of the pound

Source: Bloomberg.
Positive news from Brexit, the problems of promoting tax reform in the United States, as well as the surfaced story of Russia's interference in the US presidential election, helped the GBP/USD pair to rise to a two-month high. The rate of the sterling, weighted by trade, jumped altogether to a peak record in the last six months. At the same time, some people are concerned that Britain's GDP is growing much slower than its US and European counterparts. Investors win back political risk and are ready to turn a blind eye to the long-term pessimistic prospects of the UK economy in order to obtain immediate benefits. Therefore, Credit Agricole believes that the hopes for progress on Brexit will push the GBP/USD pair to 1.4, near which it traded in the first half of 2016.

Commerzbank, on the contrary, is confident that investors are already sold on the factor of positive rhetoric of Brussels at the EU summit in mid-December. If they do not get what they expected, we should prepare for a selling of the sterling. On the other hand, if everything goes according to plan, then it's unlikely that the GBP/USD pair will sharply strengthen. In such circumstances, market attention can shift to macroeconomic data and not related to it, the continuation of the cycle of normalization of the monetary policy of the Bank of England. In this regard, the pound is able to respond sensitively to the release of data on business activity in the services sector, scheduled for December 5. The index of purchasing managers in the manufacturing sector has already pleased the fans of sterling. The figures from the largest sector of the economy of the UK is awaited.

The alignment of forces in the analyzed pair will be influenced by events in the United States. The Senate passed a tax reform project with 51 votes to 49, but now both chambers of Congress are required to find a compromise on the timing of its implementation and on other issues. The dollar could not benefit from the "bullish" news, as uncertainty persists. At the same time, the willingness of former National Security Adviser Michael Flynn to cooperate with the FBI can cast a shadow on the US president, which will negatively affect the USD index.

Technically, updating the November, and then the autumn peak, activates the AB = CD pattern with a target of 127.2%. It corresponds to 1.385. However, we should not rule out a retest of the upper limit of the range of the previous consolidation of 1.304-1.332.

GBP/USD, daily chart

Analysis are provided by InstaForex

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Post Re: InstaForex Analysis
on: December 6, 2017, 05:39
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Fundamental Analysis of AUD/USD for December 6, 2017

AUD/USD has been quite corrective recently after a strong bearish pressure pushing the price off the 0.8150 price area. AUD had been quite mixed with the economic reports where negatives are more in quantity than positive reports for which the currency is currently struggling to gain over USD despite the current weak status of USD. Recently AUD Current Account report was published with negative figure of -9.1B from the previous figure of -9.7B though it is less than the previous figure but could not meet the expectation of much less deficit at -8.8B, Retail Sales report was published with an increase to 0.5% from the previous value of 0.1% which was expected to be at 0.3% and in the Rate Statement the Cash Rate of Australia was unchanged as expected at 1.50% which did not quite helped with the gains of AUD but was able to stop the impulsive bearish pressure in the pair. Today, AUD GDP report was published with a worse value of 0.6% decrease from the previous value of 0.9% which was expected to be at 0.7%. The worse economic report did affect the currency quite well which lead to impulsive bearish pressure today. On the USD side today, ADP Non-Farm Employment Change report is going to be published which is expected to decrease to 189k from the previous figure of 235k, Revised Non-Farm Productivity is expected to increase to 3.3% from the previous value of 3.0%, Revised Unit Labor Cost is expected to decrease to 0.2% from the previous value of 0.5% and Crude Oil Inventories is expected to show less deficit at -3.2M from the previous figure of -3.4M. The forecasts are quite mixed in nature where any better than expected economic report is expected to add to the gains of USD against AUD in the coming days. To sum up, AUD has been quite weak in comparison as it could not dominate USD in its weakest period which is expected to lead to further USD gains in the coming days if USD publishes better economic report results in the future.

Now let us look at the technical view, the price is being held by the dynamic level of 20 EMA and it has worked very well as a resistance to keep the price lower. As the price is currently quite near to the support area of 0.7500-50 the bears are expected to push the price towards the support level in the coming days and any bounce or breaks off the area will lead to further directional movement in this pair. As the price remains below the dynamic level of 20 EMA and 0.7650 price area the bearish bias is expected to continue further.

Analysis are provided by InstaForex

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Gertrude
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IFX Gertrude
Post Re: InstaForex Analysis
on: December 7, 2017, 06:50
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Technical analysis of USD/JPY for Dec 07, 2017

In Asia, Japan will release the Leading Indicators and 30-y Bond Auction data, and the US will release some Economic Data, such as Consumer Credit m/m, Natural Gas Storage, Unemployment Claims, and Challenger Job Cuts y/y. So, there is a probability the USD/JPY will move with a low to medium volatility during this day.

TODAY'S TECHNICAL LEVEL:
Resistance. 3: 113.02.
Resistance. 2: 113.80.
Resistance. 1: 112.58.
Support. 1: 112.30.
Support. 2: 112.08.
Support. 3: 111.86.

Analysis are provided by InstaForex

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IFX Gertrude
Post Re: InstaForex Analysis
on: December 11, 2017, 04:50
Quote

Euro and pound will be determined with direction

Eurozone
The euro area economy continues to expand at a steady pace, GDP growth in Q3 was 0.6%, at an annual rate of 2.6%, preliminary data was revised upwards, which is consistent with the overall economic trend.

Growth is primarily due to increased investment and exports. Despite the fact that household expenditures have decreased somewhat, the general level of optimism continues to improve, as indicated by the recent reports of ZEW and IFO.

On Wednesday, a report on industrial production will be released, on Thursday - PMI Markit index. This will be the latest data ahead of the ECB meeting, they will help to predict the overall tone of the commentary and the position of Mario Draghi at a subsequent press conference.

On Thursday, investors do not expect the ECB to decide to make any concrete steps, since there is no reason for this yet. However, forecasts for economic growth and inflation will be updated upwards, as indicated by both growing business activity in recent months and rising oil prices.

The euro as a reaction to the meeting of the FOMC may decline to a support level of 1.1670, growth is limited to the level of 1.1880.

United Kingdom

The pound on the eve of the meeting of the Bank of England on December 14 is seent to be positive. According to Halifax, housing prices have stabilized after more than a year of decline and activity in the construction sector decreased. The inflation forecast published by the Bank of England rose from 2.8% to 2.9%, the trade deficit instead of expanding has unexpectedly remained virtually unchanged. Sufficiently, the industry appears much better, which was clearly facilitated by the protracted period of the weak pound, which supported the export industries.

The industrial sector is growing for the sixth month in a row, on an annualized basis, growth was 3.9%, which is higher than expected

The National Institute for Economic and Social Research (NIESR) reports that, according to their calculations, UK GDP growth for the last 3 months was 0.5%, which exceeds both the indicators of the beginning of the year and 0.4% in the third quarter.

These factors increase the likelihood that the Bank of England will continue to gradually raise rates, and will also contribute to the growth of the pound. Although at the next meeting, the Bank of England will not raise the bid, the general trend is in favor of an increase, which is clearly a bullish factor for the pound.

On Friday, there was news that the UK and the EU agreed on three key points in the first phase of the Brexit talks. The border between Ireland and Northern Ireland was agreed upon, migration policies concerning the rights of EU citizens in the UK, and, most importantly, London's payment for the withdrawal from the EU. Thus, the first phase of negotiations is completed, and at the EU meeting on December 14, it will be possible to announce the progress achieved. This news will strengthen the positions of both the euro and pound.

The pound, nevertheless, will still be under pressure, since there are no serious internal drivers in the coming week. Presumably, a decline towards 1.3250 as an intermediate target and 1.2850 as a long-term goal.

Oil
China, which is the world's major oil consumer, supported the growing trend on Friday, posting significantly higher than expected trade balance data in November. Crude oil imports increased by 19.37% in November, demand remains firmly high, which, combined with a number of restrictive measures by OPEC + and significant financial losses of shale companies in the US, contribute to the formation of a stable demand against the backdrop of stable production in the context of the price war with OPEC. Together, these factors support oil, which allows us to predict a breakthrough of resistance at 63.50 for Brent in the short term.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

Analysis are provided by InstaForex

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IFX Gertrude
Post Re: InstaForex Analysis
on: December 12, 2017, 05:04
Quote

Pound fled from politics

A busy economic calendar and the departure of political risks into obscurity allows us to hope for the return of investors in actively trading the pound. Semiannual negotiations between London and Brussels, judging by the statements of the latter, were completed successfully, which makes it necessary to shift attention to macroeconomic data. In general, there is plenty of data at the beginning of the second week of the month for the UK. Inflation, the labor market, retail sales and the meeting of the Bank of England will satisfy even the highest demands of trade analysts on the news.

The fall of sterling in response to positive news from the negotiation table on Brexit has become a classic example of the implementation of the principle of "buy on the rumor, sell on the facts." Traders sold the GBP/USD quotes on the factor of harmonizing the conditions of the divorce between Britain and the EU, and the message that the round-the-clock work was over and the issue of the Irish border was resolved. This launched a wave of selling against the backdrop of profit taking. Moreover, popular media referring to competent sources reported that the trade deal before the spring of 2018 will not be achieved. However, the bridgehead is laid, and the bulls on sterling, including Nomura and ING, believe that the reduction of political risks of the UK will push the GBP/USD pair in the direction of 1.4 in 2018 and 1.36 in the near future.

On the contrary, "bears" criticize the agreement that was reached, blaming it for lack of details, and referred to the futures market, where the value of options to sell sterling is higher than the purchase. Derivatives are used for risk insurance, and the current dynamics of an indicator such as the risk of reversal (the ratio of premiums on call and put), indicates that investors still fear the sterling's collapse.

Dynamics of the ratio of premiums on options

Source: Bloomberg.

On the other hand, speculators in the futures market held a net long position on the pound for 6 of the last 10 weeks, although before that they acted as net sellers for 98 five-day consecutive days.

Lately, there have been too many news with political coloring, and it's time for the sterling to turn its focus on the economy. In general, the outlook for upcoming releases is moderately positive. Bloomberg experts do not expect inflation to exceed the critical level of 3%, while the acceleration of average wages from 2.2% to 2.5% y/y. In addition to that, the exit from the negative territory of retail sales inspires optimism for bulls in the GBP/USD pair. Moreover, it is beneficial for the Bank of England to maintain a strong pound with the help of "hawkish" rhetoric, and the dollar cannot take advantage of strong data on the US.

It is possible that the growth of the fiscal deficit as a result of the implementation of the tax reform, the reluctance of Donald Trump to see the US currency strong and the recovery of the economies of the competing countries will force the USD index to restore the downward trend in 2018.

Technically, the GBP/USD pair is preparing to retest the upper bound of the previous consolidation range at 1.304-1.332. Assuming that it, like the previous one, ends with the defeat of the "bears", the likelihood of a restoration of the uptrend in the sterling will then increase.

GBP/USD, daily chart

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

Analysis are provided by InstaForex

IFX-
Gertrude
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Posts: 1934
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IFX Gertrude
Post Re: InstaForex Analysis
on: December 13, 2017, 06:04
Quote

BTC/USD reacting off our selling entry perfectly, remain bearish

Bitcoin has reached our selling area and is reacting off it nicely. We remain bearish looking to sell below 17459 resistance (Fibonacci extension, bearish price action, bearish divergence) for a drop towards at least 14739 support (Fibonacci retracement, horizontal overlap support).

Stochastic (34,5,3) is seeing major resistance below 98% and also displays bearish divergence vs price, signaling that a reversal is impending.

Reason for the trading strategy (fundamentally):

Bitcoin January futures (which are contracts that let investors buy or sell something at a specific price in the future) price are about $17,800 which is rather close to where we forecast major resistance. This is in line with the immediate resistance we're seeing on the technical side so it would be safe to start looking to short Bitcoin for a correction.

Sell below 17459. Stop loss is at 18770. Take profit is at 14739.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

Analysis are provided by InstaForex

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