Free Forex Analysis for 06.19.2015

June 19, 2015 Forex Analysis

Free Forex Signals for 06.19.2015

EURUSD, Daily

EURUSD stayed inside the wedge and created shooting star candle in daily resolution and reacted lower from proximity of 1.1324 resistance. This morning we’ve seen weakness and some reaction higher from 1.1304. As the Greek situation is not likely to have a quick resolution I don’t expect EURUSD to move strongly today. I expect the pair to find support today around 1.1296 (another support at 1.1270) while upside is probably limited to yesterday’s high of 1.1435. I am seeing an intraday resistance at 1.1353 while daily support and resistance levels in EURUSD are: 1.1296, 1.1152, 1.1020 and 1.1435, 1.1380, 1.1467.

According to Bloomberg reports ECB is to hold an emergency teleconference today to discuss a Greek central bank request for more ELA funding. The central bank apparently is worried about the amount of capital withdrawn from Greek banks, which reportedly amounted to EUR 2 bln this week. ELA funding was just lifted on Wednesday and is conducted by and at the risk of the Greek central bank, but the ECB can limit overall amounts. It is increasingly difficult to argue that Greek banks fundamentally are solvent, which is a precondition for ELA funding, but the ECB clearly doesn’t want to be the one pulling the plug on Greece. The EU emergency summit on Monday will give yet another chance for an agreement, and without a deal capital controls almost seem inevitable.

Greece continues to dominate Eurozone markets, the rumour mill and official comments from both sides. This means ongoing volatility and wider intra-day ranges. Eurozone bond spreads narrowed slightly and Bunds underperformed Gilts as some safe haven flows were unwound and this trend is likely to continue amid fresh action to get a deal with Greece. EU President Tusk called an emergency summit on Greece on Monday to try and stem capital outflows, which the ECB is increasingly worried about. Reports that the ECB suggested Greek banks may close Monday were denied, but the Greek central bank reported called for further ELA funding. The risk of capital controls is rising.

U.S. reports signaled a long-await June factory sector bounce that will hopefully permeate the remaining June data, alongside a 0.4% May CPI rise that slightly undershot market forecasts and a narrower than expected $113.4 bln Q1 current account gap. The June Philly Fed moved to 15.2 from 6.7 coincided with a ISM-adjusted rise to 53.2 from 50.0, and defied Monday’s weaker Empire State data to signal some upturn in sentiment after a half-year stretch of dismal readings. We also saw a 12k initial claims drop to a lean 267k in the BLS survey week that undershoots both prior BLS survey weekly readings and monthly averages. We saw a second consecutive 0.7% leading indicators rise in May that added to the positive spin, leaving the economy in good position to outperform the low-balled GDP estimates released after yesterday’s FOMC meeting.

Currency Pairs, Grouped % Performance

USD has been stronger this morning following EURUSD hitting and failing to penetrate the 1.1424 resistance yesterday and dollar finding support levels against other currencies as well. AUD has lost ground this morning and is down especially against the USD, CAD and GBP. There is some strength in GBP but the performance is a bit mixed. JPY performance has been likewise while EUR is down against most of the competitors.

Nearest daily support and resistance levels for AUD pairs:

AUDUSD               0.7605 / 0.7864
EURAUD               1.1127 / 1.4770
GBPAUD               2.0028 / 2.0775
AUDJPY                94.32 / 97.30
AUDCAD               0.9410 / 0.9717
AUDNZD               1.1115 / 1.1304

Main Macro Events Today

Bank of Japan Monetary Policy Statement. As expected BoJ maintained the low interest rates its stimulus programme while it remained positive in its assessment of the economy. BoJ has conviction that growth will strengthen enough to accelerate inflation to its 2 percent target without additional monetary easing.

German May PPI inflation rose to -1.3% y/y from -1.5% y/y in April, with prices unchanged over the month. Producer price inflation remains in negative territory, but has clearly bottomed out at the start of the year and is slowly moving higher as negative base effects from energy prices start to fall out of the equation.
Canadian CPI could expand at a 0.9% y/y rate in May following the 0.8% growth rate in April. CPI is seen rising 0.5% on a month comparable basis in May after slipping 0.1% in April. Forecast risk: Mixed for total CPI given the rise in gasoline prices but 1.3% appreciation in the CAD that could restrain prices of imported goods. April was the first month the CAD gained ground against the USD since July of 2014 and the improvement continued in May on an average basis. Core CPI risk is modestly upward given ongoing upward pressure on the core CPI.

Janne Muta

Chief Market Analyst

If you wish to get the latest forex brokers news,you can visit our TopForex Brokers official website: http://www.topforexbrokerscomparison.com

About Janne Muta, HotForex’s Chief Market Analyst

jmuta Janne Muta is a seasoned industry professional with over 16 years experience in the global markets. Originally from Finland, Janne has worked for institutions in both Helsinki and London as an institutional fund manager, global market analyst and FX educator.

Traders and fund managers from around the world have benefited greatly from Janne’s technical analysis methods. The indicators and price action based trading models he has developed, have, after rigorous testing, proven to be invaluable in identifying high probability trades.

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Free Forex Analysis for 06.18.2015

June 18, 2015 Forex Analysis

Free Forex Signals for 06.18.2015

EURUSD, Daily

After moving sideways for most of the day EURUSD found support at 1.1203 and bounced higher at the time of FOMC press conference. EURUSD is still trading inside a bearish wedge and near resistance levels. Yesterday’s close was well above the 1.1296 level and was a positive for the bulls but the upside is likely to be limited as price is trading at upper Bollinger Bands and close to resistance levels. We might see a bit more upside today but I expect price action to stay roughly inside the bearish wedge formation as I see resistance at 1.1424 while there is intraday support at 1.1330 – 1.1340. Daily support and resistance levels in EURUSD are: 1.1296, 1.1152, 1.1020 and 1.1380, 1.1467.

ECB’s Weidmann says ball is clearly in Greece court, something the Euro group is likely to mirror in its official statement today. Greek officials meanwhile say the ball is in the creditor’s court and with both sides continuing to play the blame game there is no sign of progress. Weidmann also repeated again that the ECB is forbidden to finance states directly and stressed that the Greek situation is very different to Italy and Spain. Nothing really new on the central bank’s position on Greece.

The ECB upped ELA assistance to Greece again yesterday, indicating that it is not ready to pull the plug and take the blame for a worsening of the situation, but the assessment that Greek bank’s are solvent is increasingly becoming questionable. Still, ELA assistance is actually given by the Greek central bank, who also takes the risks.

According to Merkel Greece needs to meet obligations to creditors. It seems even the German Chancellor is running out of patience with Greece. She still said one needs to reflect carefully on Greece, but added that its always been aid for reforms on Greece and that the country has gotten “unprecedented” solidarity already. She highlighted that Ireland and Portugal have concluded their programs and that Cyrpus is on a good way while Greece has dragged its feet on some reforms and didn’t conclude the measures. Merkel also said Greece isn’t on the agenda at the next summit and that a deal between Greece and the three creditor institutions is still possible, reiterating that where there’s a will there’s a way on Greece.

There was nothing definitive regarding the timing of liftoff in the FOMC statement or press conference yesterday. September is still the best guess to start normalizing rates as the data show improvement in the economy and some pickup in inflation. Additionally, the markets are taking Yellen, and the dots, at their word that the trajectory will be “gradual.” Data, therefore, will continue to be scrutinized for hints on tightening, along with global financial conditions. Meanwhile, Fed funds futures are consistent with this stance as implied rates reveal a shallower trajectory. The market had been pricing in strong probability for 50 bps in hike by the end of the year, but that was trimmed to one 0.25% hike.

Yesterday Yellen also referenced to the strong dollar suggesting that although it has appreciated significantly, she takes into account its negative impact on the economy, but hasn’t seen it have a negative impact on exports. Though the drag from the dollar on the economy could continue for “some time”, the Fed has no target and takes its moves as one of many factors affecting the outlook. She still believes that tightening is warranted this year despite the strong dollar. The buck remains lower on the day, however, as the risk of an immediate rate hike is still somewhat distant.

Currency Pairs, Grouped Performance (% Change)

The NZD slipped near 2010 lows against the USD today after data showed economic growth was much weaker than expected. This caused markets to anticipate further cuts in interest rates and sell the currency. As a result NZD is down against all the other major currencies and seems to be the only game in town as it has moved in excess of 1.20% against its rivals. Significant weekly support and resistance levels for NZD pairs are 0.6562 (NZDUSD), 1.6595 (EURNZD), 2.3298 (GBPNZD), 1.1659 (AUDNZD), 83.37 (NZDJPY) and 0.5753 (NZDCHF).

Main Macro Events Today

The Swiss Rate Decision. The Swiss National Bank was widely expected to keep rates unchanged and the rate was kept at -0.75. The appreciation of the CHF since the SNB abandoned its currency target in January has put pressure on the export-oriented Swiss economy, and with the Greek crisis hanging over the Eurozone policymakers will likely take a wait-and-see stance while keeping the options of currency intervention and higher charges on sight deposits open.
US Philadelphia Fed Index: June Philly Fed comes out today. An increase to 7.0 is likely (median 8.0) following May’s dip to 6.7. The Empire State Index for the month has already been released with a drop to -2.0 from 3.1 alongside a more restrained ISM-adjusted decline to 51.6 from 51.7. Overall, producer sentiment should trend sideways in June with the ISM-adjusted average holding at 51 for a third month.
The US May headline CPI is expected to grow 0.5%, while the core index rises 0.2%. Forecast risk: upward, as the bounce in oil prices in May should help lift the headline. Market risk: downward, as inflation undershoots may affect the timing of rate hikes.

Janne Muta

Chief Market Analyst

If you wish to get the latest forex brokers news,you can visit our TopForex Brokers official website: http://www.topforexbrokerscomparison.com

About Janne Muta, HotForex’s Chief Market Analyst

“My mission is to help you to become a confident and successful trader”

USDCAD Weak After Bounce Higher From Support

June 17, 2015 Forex Analysis

USDCAD, Weekly

After running higher for the latter part of year 2014 USDCAD created a topping formation between January and the beginning of April. Since then we have seen a return rally that failed at this same topping formation and. Just two weeks ago the pair created a lower weekly high with a Doji candle that since then has also become a pivotal candle. This coincided with the rising regression channel bottom. The pair has rolled over from the resistance and Stochastics indicator has followed the lead. It looks like it will move below its signal line should the price close lower this week. Bollinger Bands are still a bit far in both directions suggesting that price action is taking place very much in the middle of the range. Price has also closed above a descending trendline (drawn from March high downward) and has since found support from the same trendline. As a result price is now trading between 1.2409 resistance and 1.1919 support created by the low end of the topping formation and a weekly pivotal candle below the current price. Additionally, the 38.2% retracement and lower Bollinger Bands coincide with this region. The next resistance level is the weekly pivotal candle high at 1.2563. It seems likely the over the coming weeks price action will be tied to a range between the 1.1919 support and 1.2563 resistance. Over the long term (next 12 months) the USD might have the upper hand as the Fed is expected to normalize the rates and even if it would take longer than current expectations (Q4 2015) suggest the US Fed would still be the central bank that is nearest to the beginning of the beginning of rate hike cycle.

USDCAD, Daily

The pair has found support around the 50% retracement level that also coincides with lower Bollinger Bands and 50 day SMA. Should this support fail the next interesting area is a Fibonacci cluster at 1.2142 – 1.2173. This area acted as a resistance area in May and is therefore likely to now have a reversed role. It also coincides with a weekly pivot candle high at 1.2144 and should therefore be a fairly strong area of support. A Doji candle two days ago indicates reversal and suggests that price will next move lower and test the support levels again.

Support levels: 1.2167, 1.2006 and 1.1919. Resistance levels: 1.2439 and 1.2564.

USDCAD, 240 min

USDCAD has been moving sideways since June 11^th and has been capped by 38.2% retracement level and a resistance at 1.2366 which price almost touched on June 15^th. Since then price has been moving slightly lower and making lower highs. Also price has been shying away from 50 period moving average. This suggests lower prices and increases possibility that price will retest support levels at and below 1.2200. But before that the pair needs to break an intraday support that coincides with 23.6% retracement level.

Support levels: 1.2284 and 1.2000. Resistance levels: 1.1.2339, 1.2366 and 1.2449.

Conclusion

USDCAD has bounced from a support but the lack of momentum and the distance to the major support levels (1.2000) suggests that the pair will move lower before finding support. The bigger picture suggests sideways market over the coming weeks between 1.1919 and 1.2563 and in longer term (12 months) the USD should be the one benefitting from the fact that from the world central banks Fed is closest to starting rate normalization. For short term I am looking for this pair to move down to 1.2000 and look for buying opportunities at major support levels and shorting opportunities at significant resistance levels.

Janne Muta

Chief Market Analyst

If you wish to get the latest forex brokers news,you can visit our TopForex Brokers official website: http://www.topforexbrokerscomparison.com

About Janne Muta, HotForex’s Chief Market Analyst

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Free Forex Analysis for 06.17.2015

June 17, 2015 Forex Analysis

Free Forex Signals for 06.17.2015

EURUSD, Daily

Yesterday’s US May building starts and permits divergence was good news on net but didn’t have an impact on the US Dollar Index. The 11.1% drop in housing starts from an upwardly-revised April cycle-high reflected the tail-end of the winter’s weather gyrations while an 11.8% permits surge to a robust 1.275 mln new cycle-high rate bodes well for housing activity into mid-year. Starts under construction is climbing at a healthy 14% rate into Q2, and home completions have risen 28.3% over the past two months after a 17.3% February-March setback that was likely weather-related. The surge in new home construction and completions will fuel a climb in new home sales into mid-2015.

FOMC began the first “live” meeting in terms of a possible rate move but there are no expectations for a rate hike to happen now. Risk is still for rate lift-off in September, but that could be just a token move according to market speculation. The improvement in growth, strengthening in the labor market, and the pickup in some inflation indicators support expectations the Fed will finally start to normalize policy next quarter. But, many are now of the opinion that Greece will default and increased market volatility could keep the FOMC inactive for the rest of the year. The Fed’s forecast revisions will be important for fine-tuning expectations on the rate trajectory. Yellen’s press conference also will be parsed for indications on the tightening path. So far the Fed Chair has taken the dovish path at each junction in the road given uncertainty over growth in the US and abroad, subdued inflation, and the impact from the stronger dollar. We suspect she will remain cautiously optimistic that the economy will perform in line with policymakers’ outlooks for stronger growth and a pickup in wages and prices.

EURUSD traded sideways yesterday as I expected in analysis but the pair found support a bit higher than I suggested, at lower 4h Bollinger bands at 1.1203. This created yet another higher low in 4h chart which suggests that EURUSD should push higher today. At the time of writing intraday this is happening with EURUSD trending higher this morning. Resistance level at 1.1280 has been limiting the move and judging from the intraday charts the area between 1.1280 and 1.1330 could well be the area that turns EURUSD lower today. The bearish view with potential to 1.1000 level over the coming few trading days is still valid. This is supported by the bearish wedge and the proximity of higher time frame resistance level. The nearest significant daily resistance levels are at 1.1380 and 1.4167 while support levels are at 1.1152 and 1.1050.

Currency Pairs, Grouped Performance (% Change)

This morning we are seeing AUD weakness and CHF strength. EUR has shown some strength against everything else but CHF which has been rather strong this morning against all the majors. USD, GBP and JPY performances are mixed as there is no clear trend across the board in these currencies.The strongest GBP pair over the last few days has been GBPNZD. This has taken the pair close to year 2011 weekly high at 2.2525. Another strong mover is AUDNZD and is trading near a resistance, the weekly pivot candle low (1.1140) from September last year.

Main Macro Events Today

UK Claimant Count Change: a drop of -11.1k in May claimant looks likely with the ILO unemployment for April seen steady at 5.5%.
UK Average Hourly Earnings: Markets will give particular attention to average household earnings to the three months to April, as this is expected to show the with-bonus figure rise 2.1% y/y from +1.9% and by 2.5% y/y in the ex-bonus figure, up from 2.2% previously. Such outcomes would mark new cycle highs, and anything stronger would likely reanimate BoE tightening expectations, which currently centre on Q2 next year.
Fed’s Interest Rate Decision and Policy Statement: No change is expected in this meeting. Risk is still for rate lift-off in September, but that could be just a token move according to market speculation.

Janne Muta

Chief Market Analyst

If you wish to get the latest forex brokers news,you can visit our TopForex Brokers official website: http://www.topforexbrokerscomparison.com

About Janne Muta, HotForex’s Chief Market Analyst

“My mission is to help you to become a confident and successful trader”

Palladium Trading At Lower Weekly Bollinger Bands

June 15, 2015 Forex Analysis

Palladium, Weekly

Palladium has been trading sideways in a wide range since October last year. In the process market has created a lower weekly high and has now moved close to support levels. This suggests that in there is weakness in the long term picture but it doesn’t mean there can’t be short term rallies. Stochastics oscillator is now oversold and price is trading at lower Bollinger bands. This highlights the fact that price trading fairly close to important higher time frame support. Nearest support level is at 723.00 while the 23.6% Fibonacci resistance level at 767 practically coincides with a resistance created by a weekly pivot low 772.10. The fact that this region coincides with a 38.2% Fibonacci level when drawn from the year 2011 low the 2014 high increases its significance as a resistance level.

Palladium, Daily

The daily down trend that has been in force since the beginning of this month has taken Palladium inside a daily pivot near the weekly support level . This has caused the downside momentum to wane a bit and lifted Stochastics oscillator slightly higher. Nearest daily support level at 723 is the same as in the weekly chart. There is some resistance right above the current prices from the sideways moved seen last week. Nearest significant resistance after the sideways move above the 739.35 is at 767.

Palladium, 240 min

Since June 8^th the down trend in Palladium has been changing the slope to less bearish (black channel vs. blue and red regression channel lines). A sign that buyers are slowly stepping in and trying to create a reversal as price is getting close to a major support. Stochastics is pointing higher suggesting that price might be actually doing just that. However, there are resistance levels ahead and it probably takes some short term consolidation before price can turn higher. Nearest intraday support level is at 731.32 while the bottom of the sideways range above at 739.35 is likely to act as a resistance. The next more significant resistance level is in the region of 746 to 750 where the 23.6% Fibonacci level, 50 period SMA and the upper Bollinger bands coincide.

Conclusion

Long term picture is a sideways market with a bearish slant to it as price has just recently made lower high and the March low was a lower low especially on a closing basis. The short to medium term picture has potential turn bullish as price has moved close to levels that sent price considerably higher in March. Therefore, we are looking for momentum reversal signals above 723 resistance this week. The daily chart suggests that the short term move has potential to 767 (23.6% Fibonacci level).

Janne Muta

Chief Market Analyst

If you wish to get the latest forex brokers news,you can visit our TopForex Brokers official website: http://www.topforexbrokerscomparison.com

About Janne Muta, HotForex’s Chief Market Analyst

“My mission is to help you to become a confident and successful trader”

Free Forex Analysis for 06.12.2015

June 12, 2015 Forex Analysis

Free Forex Signals for 06.12.2015

EURUSD, Daily

EURUSD remained weak yesterday and the pair closed below the shooting star candle from day before amidst positive US data. Yesterday US retail sales was reported to have surged 1.2% in May, with the ex-auto figure up 1.0%, close to expectations. April’s headline unchanged figure was revised up to 0.2%, and the ex-auto number was left at 0.1%. Sales excluding autos, gasoline, and building materials increased 0.6% versus 0.3% previously (revised from 0.1%). Atlanta Fed boosted its Q2 GDP forecast to 1.9%up from 1.1% previously in the wake of the firm May retail sales report, which was propped up by auto sales and gasoline prices. That closed the gap somewhat with Blue Chip economists, who have a median forecast of around 2.65%. US household net worth rose to $84.9 tln in Q1 from a revised $83.3 tln in Q4 (raised from $82.9 bln), according to the Fed, thanks to rising home values and investment gains. Household debt increased at a 2.2% annual pace, down from a revised 2.8% previously (was 2.7%). Increased returns and lower borrowing is a relatively healthy development for the outlook on consumer spending and dovetails with some of the better contemporary readings on the economy.

U.S. business inventories rose 0.4% in April, with sales up 0.6%, both higher than expected. March’s 0.1% rise in inventories was not revised, but the February gain is now 0.3% from 0.2%. The 0.4% sales increase in March was bumped up to 0.6%, with the 0.2% February drop revised to -0.3%. The inventory-sales ratio was steady at 1.36 and is just a shade below the expansionary high of 1.37 in February. The data are good news for Q2 GDP. US initial jobless claims rose 2k to 279k in the week ended June 6, from a revised 277k in the prior week (was 276k). That brought the 4-week moving average to 278.75k from 275k (revised from 274.75k). Continuing claims were up 61k to 2,265k in the week ended May 30, from a revised 2,204k (was 2,196k). US consumer comfort index sank to 40.1 for the period ended June 7, down from 40.5 the week prior and the lowest reading since November, according to Bloomberg. That’s down about 8-points from an 8-year high in mid-April. Rising gasoline prices contributed to the decline, though wage gains and firmer equities supported household sentiment.

IMF doesn’t see progress on Greece. IMF’s Rice said the IMF has major differences with Greece in key areas and doesn’t see a progress on the way to an agreement with obstacles still including pensions, taxes, financing. Markets have been buying into hopes of a deal with Greece today, but that always seemed premature, considering that comments from most officials continue to stress that talks continue, but also that Greece needs to make more commitments and that there are still differences. Even if there is a bailout extension, it would not solve the problem as any payout of funds still hinges on the implementation of reform commitments that Tsipras is unwilling to subscribe to.

Germany prepares for Grexit, according to a German newspaper Handelsblatt. Tabloid paper Bild meanwhile reported that the government is preparing for default with considerations of capital controls and a haircut on Greek debt. So far it was mainly Tsipras who threatened that a Grexit would mean the beginning of the end for the Eurozone, but after the IMF finally lost patience with the lack of progress in the talks with Greece, the reports suggest that Germany is also not willing to keep Greece in at all costs. A Bloomberg story meanwhile said creditors will give Greece less than 24 hours to come up with a serious counter-proposal to its own reform list. There may not be any real progress, but it seems the beginning of the end to the Greek crisis is finally here, even if it could still go one way or the other.

Today’s data calendar being quite thin EURUSD might not move that much today. Over the next couple of days I think that bias is still to the downside due to the shooting star candle from two days ago. Today’s price action has taken place below Wednesday’s low and yesterday’s low was also below Wednesday’s shooting star low, which is inline with the expectation that EURUSD is likely to remain weak and retest the support 1.1006 to 1.1049 region. The nearest significant daily support and resistance levels are at 1.1049 and 1.1380 while the low from Wednesday has clearly been a resistance today.

Currency Pairs, Grouped Performance (% Change)

Today’s currency mover is AUD which is down by roughly 30 to 40 basis points against everything else but NZD that is weak after the RBNZ cut the rates yesterday in a surprise move. AUDCHF is reacting lower after rallying to a pivotal resistance. The pair is making lower lows and lower highs in a daily chart. GBPAUD has been moving sideways and still trying to push higher through the resistance. EURAUD moved lower yesterday after creating two no-demand candles. AUD weakness is the only clear theme this morning as other currencies’ performance has remained mixed.

Main Macro Events Today

German Wholesale Price Index numbers improved both on m/m and y/y basis. Monthly change in May came in at 0.5% compared to 0.4% in April while the yearly change improved from -0.9% to -0.4%.
US Producer Price Index data for May is out today and should reveal a 0.8% (median 0.4%) headline with the core up 0.1%. After a long run of drops driven by falling oil prices we have now begun to see rebounds which should help lift the PPI headline. The trade price data for May began to reveal this effect with a 1.3% import price increase following a steady string of declines through the winter.
US Michigan Consumer Sentiment: The first release on June Michigan Sentiment is due today and should reveal a decline to 90.0 (median 91.5) from 90.7 in May. The IBD/TIPP poll for the month eased to 48.1 from 49.7 in May. Confidence measures have eased over the Spring as gasoline prices begin to rebound off lows and consumers become accustomed to their new level.

Janne Muta

Chief Market Analyst

If you wish to get the latest forex brokers news,you can visit our TopForex Brokers official website: http://www.topforexbrokerscomparison.com

About Janne Muta, HotForex’s Chief Market Analyst

“My mission is to help you to become a confident and successful trader”

MSCI World Index Is Topping Out

June 12, 2015 Forex Analysis

On May 7^th I tweeted on MSCI World Index saying that the bull market for stocks is over. I pointed out that MSCI World etf charts (weekly and monthly) indicate that the markets have entered to a volatile topping phase. This phase typically takes place after a long move higher and leads to a severe correction or a period of bear market. Monthly chart showed an increase in volatility and a bearish shooting star candle with the next candle moving well below the shooting star low. The weekly chart showed how this MSCI World index tracking etf had moved outside the up trending regression channel, a clear sign of increased volatility and weakness. Since my tweet price action has been exactly what you’d expect of a market that is topping out.

In this report I will take a closer look at some of the main stock market indices around the world and provide an updated view on the MSCI World index.

Over the last few years the financial media has been full of people trying to figure out when the global stock market rally might be ending. Most experts and commentators focus only on fundamentals and macroeconomics as they try to figure out the most likely future course of the markets while others take the view that central bank money printing (sometimes called funny money) makes fundamental analysis obsolete. There are high level examples of very skilled people misunderstanding and misinterpreting the impact of macroeconomic developments. Probably the most famous example is the Fed president Ben Bernanke failing to see subprime crisis impacting the economy. This was of course followed by a huge downward market in stocks that lasted until March 2009.

On May 28th Bloomberg TV highlighted a big sell off that took place in Shanghai listed shares. Shanghai Composite index fell by 6.5% on one single day. Another Chinese index, Hang Seng Composite Index finished the day down by almost 3.4%. Such moves often come as a surprise for those that don’t know how to read price action and focus solely on fundamentals. Fortunately technicals and market dynamics are quite revealing when it comes to spotting the early indications of developments that often lead to increased volatility. Let’s take a look at some of the world’s most followed stock market indices.

Hang Seng Composite Index, Weekly

Hang Seng Composite Index, Daily

Strong rally in Chinese stock market started in March as traders and investors alike started focussing on central bank stimulus. Market participants started buying stocks not because the underlying economy was performing and economic growth accelerating but because there was hope of increased liquidity in the economy. In other words the underlying economy and the real value of Chinese companies did not go up but the expected future value money went down as it was likely to be diluted by the extra liquidity by the central bank. This is not a great basis for investments fundamentally but certainly can lift the markets higher (or push the value of money down) for a period of time.

Hang Seng Composite reached the topping formation from year 2007 and has been since facing severe challenges in trying to move higher. Week starting on April 27^th created a doji candle (a sign that upside momentum was lacking) and has since failed to move to new highs. Index dived twice from the top of the range before dropping below the support area (3810 -3840). Roughly at the time of my tweet on MSCI World index etf it was also reported that institutions have significantly increased their stock liquidations in Chinese stocks. Increased volatility was supporting the report and now that Hang Seng index has topped we have the ultimate proof that validates the rumour. Price made a return move to resistance at 3812.50 while the nearest significant support level is at 3461. A new lower high would mean further confirmation to this bearish technical picture.

CNX Nifty, Weekly

CNX Nifty, Daily

Indian stock market had a solid run higher for the whole of the 2014. The rally started in August 2013 and made the 2015 high in March. Since March high of 9119 CNX Nifty drifted lower until it attracted buyers at 7997 support level in early May. Also, the 50 week SMA and lower Bollinger Bands coincide with this area adding to its significance. This area has been a support since but even though a couple of weekly pin bars were created the rally from this level was weak and index has returned to this level again. This is not encouraging and suggests that buyers are not in overwhelming majority at this support. Therefore, violation of this support on a weekly closing basis is now more likely. Daily chart shows how Nifty has been trending lower and making lower highs and lower lows. If the current support doesn’t hold it is likely that the recent volatility is indeed a new market top and a more severe correction is ahead in Indian stock market. The next significant weekly support level is at 6415.

Nikkei 225, Weekly

Nikkei 225, Daily

Japanese stock market has been moving higher ever since 2012 driven up by the QE programs driving the value of JPY down. This has taken Nikkei close to a year 2000 highs at 20833. The proximity of this resistance has made this market a little hesitant but at the same time hope of additional stimulus has caused the bulls to bid after the dips. Normally I would say that because Japanese stock market is trading near the upper end of the regression channel and close to a major resistance, upside is getting limited. However, in the world of seemingly endless supply of central bank funny money only seeing equates to believing and we don’t yet have signs of weakness in the daily timeframe chart. Therefore this market could well push through the year 2000 high. The nearest significant weekly support level is between 18030 and 18300.

DAX, Weekly

DAX, Daily

German DAX has been trending higher ever since the low of 2009 but in October 2014 this market started a strong rally that extended outside the trend channel this year in February. This accelerated rally failed in April and the German index moved outside the rising regression channel. DAX made a daily closing high of 12374 on April 10^th and has since had a good sized correction all the way to the 38.2% Fibonacci retracement level. The 12374 high and the correction that followed coincide with EURUSD creating a higher weekly low. This indicates that traders had been buying German shares based on the idea that EURUSD moving lower will increase competitive advantage of European companies. Now that EURUSD has rallied and created a higher low the pair is less likely to move below the March support. This has made the investors and traders more careful and they have been taking money off German shares.

Some months ago EURUSD was the easiest game around with the result that investors poured money in German shares. However, now that EURUSD has stabilised due to more careful views on when the US Fed might raise interest rates and the IMF has suggested Japan should introduce more QE to achieve the 2% inflation target the USDJPY has become more interesting playground than EURUSD. At first this meant sideways movement and consolidation in DAX index which then created a lower high in the region of 50 day moving average and has been moving below this average for over a month now. This hasn’t happened since October last year.

Four days ago DAX found support from 38.2% Fibonacci level that coincided with the lower Bollinger Bands. DAX rallied from this support and is now trading just below the 23.6% Fibonacci level that has provided support on a closing basis (weekly chart) in April and May. Major weekly support and resistance levels are at 10050 and 11920. Yesterday market reacted lower from the same level. This suggests further weakness to come in DAX.

EuroStoxx 50, Weekly

EuroStoxx 50, Daily

While German DAX is more exposed to currency fluctuations and represents the strongest economy in Eurozone the EuroStoxx 50 index represents a wider take on European countries. France has a 34.6% weight, while Germany’s weight is 30.82% and Spain’s 12.58%. Italy, Netherlands, Belgium and Finland all have a lower than 8 percent weighting in the index. This index has not had the extraordinary performance that German DAX has over the last 12 months but has still corrected lower with it. EuroStoxx found support from levels near 38.2% Fibonacci level from which it has rallied strongly higher over the last three days. Nearest significant weekly support is at 3325.50 (coincides with a 50% Fibonacci level) while the pivot from May 27^th at 3691.40 is the nearest major weekly resistance. This market is closer to support levels than DAX and therefore not so vulnerable to major corrections. After two days of rallying higher index met resistance at previous but now penetrated support level and has reacted slightly lower today. I expect further weakness in this index as well.

S&P500, Weekly

S&P500, Daily

While DAX and Nikkei have been rallying strongly due to central bank money printing the S&P 500 index has been one of the most boring stock markets for both investors and traders alike. Market has been range bound for the best part of the year. Against the backdrop of what’s happening in German and Japanese markets this suggests that those moving the markets have forgotten this sandbox and are trading where the real action is.

Technology stocks have the highest weighting in S&P 500 index and the fact that Nasdaq is trading at year 2000 peak is slowing the index down. Banking stocks has been another sector causing sluggish performance lately. Finance sector etf (XLF) has been moving sideways since February and is only now challenging the highs from December last year.

When global stock markets start to sell off it is usually the US market that will be the last to resist moves lower. Fund managers see less liquid and therefore more volatile markets (such as Hong Kong) more risky and therefore off load them before they start selling more defensive US positions. In the US the last 100 days’ positioning has been favouring cyclicals, technology, health care and financials while two safe play sectors, utilities and consumer staples, have not been in the favour. This hints that the US positioning this year has been slightly on the bullish side when the sector performance comparison is made against the S&P 500 index.

However, according to Bloomberg Goldman Sachs research note in May the US stock market is quite overvalued at the moment. According to GS dividends and buybacks will be responsible for supporting a market where the median stock in the Standard & Poor’s 500 Index is trading at 18.2 times earnings, putting it in the 99th percentile of historical valuation. This means that the future long term upside is likely to be limited and investors are therefore cautious. However, with extremely low interest rates it is the equities market that is still more attractive option when compared to fixed income investments. Therefore, it seems that with QE from the Fed now out of the equation the US stock market can rise modestly if the Fed decides to keep the interest rates low. This should be a worry to long term investors in stocks.

IQQW-XET, MSCI World Index tracker ETF, Monthly

IQQW-XET, MSCI World Index tracker ETF, Weekly

Until October last year this etf tracking the most widely followed stock market index globally (MSCI World Index) was trending higher in a steady upward movement. However, since then it has rocketed higher which is never a sign of a lasting and steady up market. If a market moves too far too fast it is bound to have a sizeable correction (or even enter a bear market) at some stage. This correction usually takes place after a sideways movement and could lead to a bear market, which is what happened in 2000 and 2007. This time however, virtually all the central banks around the world are involved in funny money printing. It seems that people don’t care if the value of their money is diluted by the central banks that have an unlimited licence to just keep on printing. After six years of QE it has almost become a norm. Unless things get really ugly for reasons we don’t see at the moment, this might lead to buyers stepping in earlier than in these two earlier occasions (2000 and 2007).

The monthly shooting star candle in April pointed to lower prices and since then upside momentum has been missing from most of the global stock markets. Weekly chart reveals that the index ETF has made a lower high and has since then moved back to the support at 32.73, which once more bounced IQQW higher. This is very bearish and the peak of the lower high is a clear sell area should the market still manage to rally up there. After a weekly lower high it is probable that this market is now on sell the rallies mode but this sideways or a topping movement can last for several months before it is resolved. There are some minor weekly support levels at higher levels but the nearest major level where at least two technical factors roughly coincide is the area from 25.70 (2007 high) to 26.67 (38.2% Fibonacci level). This is some 20% below the current prices and could well be the extent of the downmarket.

Conclusion

It has been claimed by analysts that fundamentally global economies are still in an inflationary stage. But this view was shared by many analysts in 2007 as well. As we know global equity markets discount the future and the new macro trends are notoriously difficult to spot. The challenge lies in recognising those trends from macro data and news flow. In retrospect many things in economies are evident but often at the time of market tops the majority of analysts and commentators are still focussing on the current economic trends, not on the factors potentially changing the trend. And to be fair spotting those changes ahead of time is extremely challenging. Therefore after seeing two major market tops in my career (2000 and 2007) I am convinced that the collective opinion of market participants’ as it is displayed in different markets is be the best indicator of things to come. Therefore, a lack of momentum after a multiyear run higher is a sign that we need to pay attention to. The message from the MSCI World index is that we have a strongly increased chance of global stock markets topping and then rolling over.

There will always be markets that react differently and depending on central bank activity there might even be markets that don’t correct that much. However, this far (since my tweet on MSCI world index etf) market action in this etf has been exactly what I suggested it would be. MSCI World Index tracking etf has been moving sideways in a way that is typical for a market that is topping. This development is a good reason to steer clear from long term stock investments and concentrate these funds on forex trading where we can choose when to have market exposure and when to stay in the sidelines. This is highlighted by the fact that the US stock market valuation (still the most important stock market globally) is firmly on the high side.

The cautiousness I have on stock markets is legitimate in the light of price action but I would like to remind the readers that we do live in a world where easy QE money has become almost a norm. The negative stock market development could therefore be reversed for instance by a concentrated central bank effort. A strong liquidity increase would kick the famous can further down the road and if the liquidity boost was strong enough it would send the stock markets into new highs. According to some analysts co-ordination among central bankers is at the time of writing still as strong as at the time of financial crisis even though no such crisis exists. This either tells about them seeing the world economies much more fragile than we are lead to believe, or simply that this club of bankers is enjoying the global power they have managed to gain.

Janne Muta

Chief Market Analyst

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Free Forex Analysis for 06.11.2015

June 11, 2015 Forex Analysis

Free Forex Signals for 06.11.2015

EURUSD, Daily

Germany may be considering a staggered deal on Greek aid. Greece will apparently be required to commit to at least one economic reform to win partial access to bailout funds. German Chancellor Merkel was reportedly quoted as saying “where there is a will there is a way. The goal is to keep Greece in the euro area”. The ECB has agreed to increase the Emergency Lending Assistance to Greek banks by 2.3 billion euros. According to Bloomberg the ECB is trying to strike a balance between keeping Greek lenders afloat and safeguarding the country’s central bank, which provides the aid, as the government veers toward a debt default. This is the biggest weekly increase since February 18^th.

Standard & Poor’s downgraded Greek bonds deeper into junk status, questioning whether Athens can pay its debts. Reuters reported that Tsipras emerged early on Thursday from talks with Chancellor Angela Merkel and President Francois Hollande to express confidence. “We decided to intensify the efforts to bridge the remaining differences and proceed, I believe, to a solution in the coming period.”

EURUSD traded most of the day yesterday below the 1.1380 resistance identified in my previous report with the result that yesterday’s candle formed a shooting star. There was a brief rally above the 1.1380 level yesterday with the pair creating a high print of 1.1386 but it wasn’t sustainable and rally failed. Most of the morning EURUSD was trading in a small range between intraday support and resistance levels. Market was truggling with an intraday resistance and created a shooting star in 60 min resolution after which it headed towards yesterday’s low at 1.1260 and at the time of writing is trading below it at 1.1244. In daily context the pair is trading close to a daily and weekly resistance which suggests that in the daily resolution the line of least resistance is down. The nearest significant daily support and resistance levels are at 1.1049 and 1.1380.

Currency Pairs, Grouped Performance (% Change)

This morning AUD and USD have been strong while almost all currencies are up against JPY and NZD. The NZD rate cut keeps the currency weak while USD strength might be just down to the technical picture of euro, the heaviest weighted currency in US Dollar Index. AUDNZD is the best performer this far today with a performance of approx. 0.80% as it continues a daily trend after breaking out of a sideways range yesterday. Other strong movers are USDPJY (found support yesterday) and AUDJPY that is moving higher after the pair reacted higher intraday from a support.

Main Macro Events Today

RBNZ eased rates 25 bps to 3.25%, surprising expectations for a steady stance at 3.50%. This is the first cut since the 50 bp move in March 2011. The most recent policy shift was a 25 bp hike last July. Governor Wheeler said the action was taken to address low inflationary expectations and the weaker demand. And further easing may be necessary, according to the policy statement. The NZD dropped on the news.
U.S. Retail Sales for May are out today and should reveal a 1.4% (median 1.2%) headline with the ex-autos figure up 1.0%. The big auto sales jump to 17.7 mln from 16.5 mln in April will be a major contributor as will the rebound in gasoline prices that we witnessed over the course of the month.
U.S. Business Inventories for April are due today. The headline should have inventories up 0.2% (median 0.2%) with sales up 0.5% for the month. Data in line with this forecast would leave the Inventory to Sales ratio steady at 1.36 from last month. Retail inventories are expected to be up 0.1% in April.
U.S. Initial Jobless Claims Preview: Claims data for the first week of June will be released on Thursday and should reveal a 280k (median 277k) headline, up from 276k last week. We expect claims to set a 279k average in June, down from a 274k average in May.

Janne Muta

Chief Market Analyst

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Free Forex Analysis for 06.09.2015

June 9, 2015 Forex Analysis

Free Forex Signals for 06.09.2015

EURUSD, Daily

EURUSD moved to a five day high (on a closing basis) at 1.1345 this morning bringing last Thursday’s peak at 1.1379 back into scope, with the May-15 peak at 1.1466 just behind. A run of encouraging data, and perky May inflation data, out of the Eurozone has enabled to the euro to hold ground against the dollar, despite the rekindled Fed tightening narrative following the strong May US payrolls report. The forex market is also taking a sanguine view of Greece’s continuing standoff with its creditors at bailout negotiations. There were fresh reports that the European Commission is trying to look into ways to get Greece some alternative funding that doesn’t require a positive bailout review, but even Juncker is increasingly exasperated with Greece’s hostility towards creditors and their offers. As Greece will have to negotiate further funding beyond the remaining monies from the current bailout, the hard line stance taken by Tsipras and Co is a gamble with Greece obviously banking on the fact that foreign ministers and heads of state, as well as the G7 will eventually value Greece’s strategic position in the south-east of Europe and its importance as a Nato partner more than the fact that continuing Eurozone membership will cost taxpayers elsewhere in the Eurozone dearly, and that without solving the country’s underlying problems.

According to ECB’s Liikanen QE could be extended, beyond September 2016 if needed. We have heard this before, but in the current climate it may go some way to dampen the rise in yields although the official commitment to bond buying it counterbalanced somewhat by the central bank’s very relaxed attitude to the rise in long term yields. Bund futures, which fell into negative territory, are slightly up again on the day, but off opening highs.

EURUSD moved on Friday pretty well according to my script. I said in Friday’s report that the pair was approaching an intraday resistance at 1.1285 and that EURUSD is not likely to rise much higher but will react lower and remain weak. I also said that I don’t expect the pair to move to 1.1006 support today. The pair turned lower from 1.1280, remained weak and moved to the south after NFP figures came out with a big surprise. And price never moved to 1.1006 that day.

Now we’ve seen a rally back into the same resistance area that turned the pair lower Thursday last week. The picture is less clear than on Friday as price has reacted lower from the resistance but has since found buyers at the same region that resisted moves higher on Friday. If prices keeps on making lower timeframe higher lows over the next two to three hours it is likely that buyers try to challenges the daily resistance levels again. Should this fail and price move lower from here the next intraday support would be at 1.1178 after which there are no clear support levels before intraday support before 1.1133. The pivotal daily low from Friday is at 1.1050. This range could be target for intraday shorts. However, if price create a lower daily high at current levels it is more likely that serious buyers are looking to buy EURUSD long between 1.0887 and 1.1006. Daily support and resistance levels are 1.1049, 1.1006 and 1.1324, 1.1380.

Currency Pairs, Grouped Performance (% Change)

USD, JPY and EUR strength has been the overall theme for this morning but now we are seeing some change with EUR performance getting a bit more mixed and GBP weakening. AUD has been weak while NZDJPY, AUDJPY and GBPJPY have been among the weakest performers in individual pairs while EURAUD and EURNZD have been strong. NZDJPY is still trading sideways at a daily support and lower Bollinger Bands (20) while AUDJPY is edging closer to pivotal daily candles and the lower end of consolidation range. EURAUD is continuing the uptrend that got boosted when Eurozone core CPI was reported well above expectations at 0.9%.

Main Macro Events Today

Chinese CPI and PPI were released today. CPI fell 0.2% in May from April, below the forecast median of 0.0%, rising 1.2% vs a year-ago May compared to a 1.3% median and 1.5% in April. Food CPI rose 1.6% in May vs a year-ago, while non-food CPI grew 1.0%. PPI sank 4.6% vs year-ago levels, below -4.5% median forecasts, but same as April levels. Overall, this still points to price declines, especially on the producer side, amid ongoing signs of overcapacity and economic slowing.
Eurozone GDP: there was no variation in the actual figures from expectations. Eurozone GDP was expected the second reading of Eurozone Q1 GDP to confirm growth rates of 0.4% q/q and 1.0% y/y respectively. This left the focus on the breakdown but without a major revision, however, the numbers are too backward looking to change the overall outlook for growth and monetary policy.
Swiss CPI for May dipped to a new cycle low of -1.2% y/y, meeting the median forecast and down from April’s -1.1%. The sharp drop into deflation in recent months is largely a consequence of the franc’s 15%-plus appreciation in January when the SNB abandoned its cap. This is troubling to Swiss policymakers, though they will be consoled by last week’s appreciation in EUR-CHF to 10-weeks above 1.0500.

Janne Muta

Chief Market Analyst

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“My mission is to help you to become a confident and successful trader”

Gold Edging Closer To A Support

June 8, 2015 Forex Analysis

Gold, Weekly

Ever since the US dollar started move strongly higher last year most analysts have predicted Gold would considerably lower in USD terms. This however has not taken place and the price of Gold has been moving sideways since November last year. This has been a clear sign of relative strength and suggests that there have been underlying demand factors supporting this market. However, price action in Gold since the US Dollar index (DXY) started topping has not supported the Relative Strength idea. A market that has true relative strength bounces sharply higher when factors constraining its move higher are removed. As soon DXY started to move lower the price of Gold should have rallied strongly and moved beyond the resistances at 1250 and 1300. Instead Gold rallied only 7.3% from March low to May high and is currently trading only 2.17% above the March low. The more dovish stance taken by the Fed Chief Yellen has not been to move the price of Gold higher and suggests that market participants still believe the Fed is not too far from starting tightening on its interest rate policy. Historically the price of Gold not performed brilliantly during the seasons of DXY strength. Another important reason for investors being careful with this market is that the huge rally between 2001 and 2011 that multiplied the value of yellow metal by a factor of 7.5 and sent it to extreme levels that weren’t sustainable. It is common that a market that experiences an extreme rally will correct strongly and be out of favour for a period of time. This has for instance happened with tech stocks (Nasdaq) and Hong Kong listed Chinese stocks (Hang Seng ).

The last time there was a similar rally in the price of Gold was in the 1970s. In August 1976 Gold made a low of 101.50 and in a space of four years rallied approximately almost nine times higher. The recent rally was almost as extreme in terms of price multiples but it happened over a longer period of time. The rally started in 2001 and lasted till 2011. After peaking in 1980 the price of Gold lost almost 75% over the next 18 months. Therefore the 38% correction over the 18 months following the 2011 peak suggests that market participants can better stomach volatility that takes place over a longer time period and that this time around there has been more safe haven buying.

Over the last three weeks Gold has corrected to 1168 support after being rejected from 1224.50 resistance level and 50 week moving average. The lower Bollinger Bands are not too far and the Stochastics Oscillator is getting oversold. The price of Gold has now reached an area where reversals have happened in the past. This suggests that the downside is getting limited. The nearest support and resistance levels are at 1168 and 1224.50.

Gold, Daily

Gold is now trading between a daily resistance at 1179.90 and 1168.40 after penetrating the support on intraday basis on Friday. The 23.6% Fibonacci level coincides with the 1179.90 resistance. This suggests further weakness before price can turn around and is in line with the current down trend that has been in force since the May high. I look Gold to consolidate and turn between Friday’s low of 1162.60 and March low of 1141.70.

Gold, 240 min

Descending regression channel points to lower prices in Gold as the nearest resistance is at 1179.80 and Friday’s low was below a low from May 1^st. Stochastics is not above it’s so called official overbought threshold but it still at levels that have indicated overbought conditions in several occasions since May 21^st and supports the view that this market is in a downtrend. Nearest support and resistance levels are at 1162.30 and 1179.80. The 38.2% Fibonacci level coincides with the nearest resistance level while the next important S/R levels are at 1152.40 and 1186.

Conclusion

Despite weakness of the US dollar the price of Gold has failed to rally above 1224 resistance level. The lack of conclusive rallies from over the last two months is not a sign of strength for the long term. This increases the risk of Gold violating the major support at 1131.50. Price is still in a longer term downtrend while the recent sideways move has been an attempt to build a base from which to bounce higher. The recent failure to rally above 1224.50 is a red light that longer term investors need to pay attention to. I am still expecting Gold to turn higher from or near the 1141.60. If price starts to stall after a small rally and cannot close above 1168 it is an indication to decrease long term Gold positions significantly.

The short term picture (daily and 4h) is suggesting that price not far from levels it could stage a rally from. However, there are resistance levels above current price which should lead to a down move that would take the price of Gold to levels below Friday’s low. I am expecting it to attract buyers above 1141.70 and attempt a turn around.

Janne Muta

Chief Market Analyst

HotForex

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