The Economic Week Ahead for 03.07.2016

March 7, 2016March 7, 2016 Forex Analysis

Main Macro Events This Week

United States: This week’s economic calendar is as thin as it could be with only 8 releases and none of the crucial. February trade price data (Friday) headlines the slate that includes the Fed’s LMCI and consumer credit reports (today) and January wholesale trade (Wednesday), along with weekly jobless claims, the Treasury budget, and Q4 QSS (Quarterly Services Survey) figures (Thursday). Import prices are forecast dropping 0.9% on the month, with export prices off 0.5% as weakness in energy prices remains a major drag. Wholesale sales are seen falling 0.8%, with inventories dipping 0.2%. These data will help fine tune GDP forecasts. After last week’s data we’re seeing a 1.5% growth pace for Q1, from an upwardly revised 1.1% in Q4 (was 1.0%). Note that the Atlanta Fed’s GDPNow estimate was revised up to 2.2% after jobs and trade data, from 1.9% previously.

Canada: It will be a very busy week of data and events, with the focus on the Bank of Canada’s rate announcement (Wednesday). We expect no change to the current 1.00% rate setting, with Poloz maintaining the cautiously constructive outlook for domestic and global growth. The slate of economic data due this week should support the Bank of Canada’s outlook. Employment (Friday) is the data highlight of the week, with jobs expected to rise 10.0k in February after the 5.7k drop in January. The unemployment rate is seen steady at 7.2%. Housing starts (Tuesday) are projected to improve to a 175.0k unit clip in February from the 165.9k unit pace in January. Building permits (Tuesday) are expected to rise 3.0% m/m in January after the 11.3% surge in December. While capacity utilization (Thursday) is expected to fall to 81.7% in Q4 from 82.0% in Q3, with the report consistent with an economy that has ample spare capacity. The new home price index (Thursday) is anticipated to rise 0.1% m/m in January after th e 0.1% gain in December. Net worth for Q4 (Friday) will feature another rise in the ratio of net worth to disposable income. Governor Poloz provides introductory remarks (Thursday) at the Canadian Institute for Advanced Research in Ottawa.

Europe: The ECB meeting clearly will overshadow data releases this week, which include German orders and production numbers for January. German factory orders came in better than expected earlier at -0.1% against expectations of -0.5%. The previous month was also revised up to -0.2% form -0.7%. Industrial production (Tuesday) meanwhile, is expected to pick up 0.6% m/m (median same), after the -1.2% m/m contraction in the previous month, which was also impacted by the mild weather at the end of last year, which cut back energy production. French industrial production (Thursday) should show a similar pattern. The final reading of Eurozone Q4 GDP (Tuesday) is expected to be confirm growth rates of 0.3% q/q and 1.5% y/y, but is too backward looking to change the outlook. The same holds for final February inflation readings from Germany, France and Spain, which are not expected to show major revisions. The calendar also has German trade data, as well as a German bond auction. Events include a Eurogroup meeting, which will be watched for comments on the progress on the Greek bailout review. There also is a one day summit on the EU refugee crisis. We don’t expect major progress, but rather the discussions will once again show the growing rift between countries on the issue.

United Kingdom: The Brexit debate will remain the central theme, with the pound sensitive to any signs that the “Outers” are making a serious challenge to the status quo of the “Inners.” So far this hasn’t been the case. The latest FT poll tracker has 46% favouring to remain in the EU, 41% wanting to leave, and 13% still undecided. Big misses in UK PMI numbers for February last week highlighted flagging growth momentum, though sterling markets have discounted a bearish narrative that has seen BoE tightening expectations being pushed out to 2017. The calendar this week brings the BRC retail sales report for February (Tuesday), industrial production for January (Wednesday) and January trade numbers (Friday). We don’t anticipate these to be market movers. December. The trade figures should see a deficit of GBP 10.2 bln in January. BoE Governor Carney is also due to testify before Parliament (Tuesday).

China: There is a lot of data from China this week. The February trade report (Tuesday) should show a narrowing in the surplus to $53.0 bln from $63.3 bln in January. February foreign direct investment (Tuesday) is seen sliding further to -3.3% y/y from -3.2% in January. February CPI (Thursday) is forecast accelerating to a 2.0% y/y pace from 1.8%, while PPI likely edged up to -5.0% y/y from -5.3%. February loan data is also due Thursday. January industrial production will be released on Saturday, and is likely to come in up 5.5% y/y from the 6.13% pace in January.

Japan: BoJ Governor Kuroda will be speaking at a Yomiuri Shimbun event ahead of next week’s (March 14, 15 policy meeting). Q4 GDP (Tuesday) is expected to be revised down to -1.5% from the preliminary -1.4%, while the January current account surplus (Tuesday) is seen narrowing to JPY 900 bln from 960.75 bln previously. February consumer confidence (Tuesday) is forecast to have dipped to 42.3 from 42.5. February bank loans and first 20-day February trade data are also due Tuesday. February PPI (Thursday) is expected to improved slightly to -2.4% y/y from -3.1% in January.

Australia: calendar is sparse this week after last week’s data barrage and the RBA meeting. The feature economic release is January housing finance (Wednesday), expected to fall 1.0% m/m following the 2.6% gain in December. ANZ job ads (today) disappointed. The actual number -1.2% was lower than anticipated after the 1.0% gain in January. RBA Deputy Governor Philip Lowe speaks (Tuesday) at the Urban Development Institute of Australia’s (UDIA) National Industry Congress in Adelaide.

Janne Muta

Chief Market Analyst

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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.

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Increased number of The US jobs data but weakness in wages

March 4, 2016 Forex Analysis

Increased number of jobs but weakness in wages

EURUSD, Daily

The US jobs data revealed encouraging upside surprises for the payroll and household employment figures, but substantial weakness in the hours-worked, workweek, and wage figures that lowered our forecasts for the month. The mix reversed the January pattern of weakness in payrolls but strength everywhere else, leaving establishment data for Q1 overall that are still a positive signal for GDP growth on net, and with what is now a sharp five-month upturn in the household data that suggests an emerging return of workers to the labor force alongside a jobless rate that remained at the cycle-low 4.92% for a second consecutive month, and another climb in the participation rate to 62.9%.

EURUSD dipped on better than expected jobs numbers but then found support on a regression channel that it broke out of yesterday. Trading has been mixed after the report was published and without direction. Nearest daily support levels are: 1.0883 and 1.0818 while the nearest resistance levels are at 1.1035 (38.2% Fibonacci retracement) and 1.1070.

Janne Muta

Chief Market Analyst

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Macro Events & News for 03.04.2016

March 4, 2016 Forex Analysis

FX News Today

The AUD, NZD and emerging nation currencies gained ground against the USD, JPY and other currencies, continuing to outperform as stocks in Asia built on weekly gains, posting the best winning streak of the year in many cases. AUDUSD logged a three-month high at 0.7376, and AUDJPY a one-month peak. USDJPY, meanwhile, recouped to near 114.00 from the low 113s. EURUSD consolidated in the mid-1.09s after yesterday’s short-covering rally following above-forecast data out of the Eurozone. In the stock market realm, Japan’s Nikkei closed 0.3% for the better, up by over 4% on the week, while the main Chinese indexes are set to make today the fourth consecutive daily gain. Oil prices have continued to consolidate the 30%-plus gains seen from January lows amid signs of an improving supply-demand balance. The PBoC’s cutting of its reserve requirement ratio for big commercial banks on Monday, expectations of more stimulus from the ECB at its meeting next Thursday, and encouraging data in the US this week, coupled with market-satisfyingly confident-but-cautious guidance from Fed policymakers have collectively underpinned the prevailing risk-on sentiment this week. Attention is now on today’s US payrolls report, which is expected to show a decent 190k headline gain.

Dallas Fed’s Kaplan sounded relatively dovish emphasizing patience on rate hikes and policy accommodation, especially relative to tighter global financial conditions so far this year. That said, he sees resilience in the US economy for 2016 with a 1.9% GDP forecast, once accounting for slowing global growth and tighter financial conditions. As a Texas-based policy maker he sees potential ripple effects from weakness in the energy sector, though oil inventories may begin to fall by mid-2017. He also forecasts the jobless rate falling at a slower pace this year, though a low rate is more sustainable given global overcapacity. Kaplan said that inflation as tracked by the Dallas Fed ticked up in January, which bears watching. Markets remain inert ahead of payrolls.

Yesterday’s US reports revealed disappointments across the factory goods, ISM-NMI, and claims figures that trimmed prospects for both GDP and payrolls, though the pattern of upside surprises in US data over the past week remains intact despite today’s setbacks. The productivity report tracked estimates with welcome Q4 boosts in productivity and output alongside big downward bumps in Q3 and Q4 compensation that allowed a hefty trimming in Q3 and Q4 growth for unit labor costs.

Talks between OPEC and non-OPEC oil producers are on the table potentially in the first half of April, according to a Gulf OPEC delegate, but have not been formally set just yet. The source believes the meeting would likely be held in Doha, or some other Gulf city. A production “freeze” at elevated levels was agreed between the Saudis and Russia, but a wider agreement remains to be hammered out. Oil prices continue to consolidate gains in the meantime.

Main Macro Events Today

US Employment: February nonfarm payrolls are expected to increase by 190k, with a 180k private payroll gain. Forecast risk: upward, as improving claims could provide a lift. Market risk: downward, as substantial weakness could impact the path of rate hikes. The unemployment rate is expected to hold steady at 4.9%. The workweek is expected to remain at 34.6 from January. Hourly earnings are expected to be up 0.1% which would leave a 2.5% y/y rise. Hours-worked should be up 0.1% for the month following a 0.4% increase last month.

Canada Ivey PMI: Canada’s Ivey PMI is expected to drop to 60.0 in February after jumping to 66.0 in January. The run-up in the January Ivey did not mean sentiment across Canada switched from mild pessimism in December to a level of optimism not seen since February of 2012’s 66.5 reading. Underlying not seasonally adjusted data typically sees big swings over November, December and January that are proving difficult to adjust in the seasonally adjusted series. That was likely again the case this time around.

Canada Trade: The trade deficit is projected to widen modestly to -C$0.8 bln in January (median -C$1.0 bln) from -C$0.6 bln in December. We see a 0.5% m/m gain in exports after the 3.9% surge in December. We see a 0.5% m/m gain in exports after the 3.9% surge in December. Imports are expected to rise 1.0% in January after the 1.6% bounce in December. Oil prices are a key risk, having plunged in January, which should weigh on import and export values.

Janne Muta

Chief Market Analyst

If you wish to get the latest forex brokers news,you can visit our Top Forex Brokers official website:

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About Janne Muta, HotForex’s Chief Market Analyst

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

EURAUD Analysis oversold and at support

March 3, 2016 Forex Analysis

EURAUD, Daily

After falling for three weeks in a row EURAUD is oversold and near lower weekly Bollinger Bands and an important daily support at 1.4830. This is a level that caused prices to rally in December and created an uptrend that lasted for several weeks. Even if we didn’t get a similar move from this support this time, the previous move indicates how important this level has been to the market participants.

Obviously I don’t know beforehand if the support will hold but it price consolidates above or near the 1.4830 support we should see buyers emerging and moving the pair higher again. The first intraday resistance level can be found at 1.4986-1.5025 while a more significant resistance will test the bulls’ commitment above the 23.6% Fibonacci level at 1.5172.

I look for buy opportunities above 1.4830 support with target 1 at 1.4986 and target 2 at 1.5075.

If you don’t know how to utilize the above analysis, please join my free webinars for further training. Below I have a EURAUD trade example from last Tuesday’s Live Analysis Webinar. This setup worked perfectly and those shorting EURAUD as per my analysis made a nice pile of pips. If you want to learn to find similar trades, you need to attend some webinar training. I look forward to seeing you there!

EURAUD_short_setup

Janne Muta

Chief Market Analyst

If you wish to get the latest forex brokers news,you can visit our Top Forex Brokers official website:

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About Janne Muta, HotForex’s Chief Market Analyst

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

Macro Events & News for 03.03.2016

March 3, 2016 Forex Analysis

FX News Today

Caixin China Services PMI disappointed in February and came in at 51.2 while analysts expected a 0.2 point rise to 52.6 from January. Index is still an indication of expanding services sector but growth was modest and much weaker than the average growth in long term. The survey shows that contraction in the manufacturing sector can spill over into service sector. This could be a red flag for the government and push it to increase its stimulative efforts further. Chinese government has been trying to replace manufacturing and export with private consumption as a key driver for the economy.

Fed’s Beige Book reiterated growth expanded in most Districts, according to the report prepared by the KC Fed, with contacts generally optimistic over future economic growth. Consumer spending increased in most regions, but some weakness was noted in KC and Dallas. Auto sales remained elevated. Manufacturing was mostly flat, but conditions varied considerably across Districts. Most note weak demand originating from the energy sector, not surprisingly. Additionally, the stronger dollar and weaker global growth outlook were headwinds to exports. Nonfinancial services activity was up slightly, with demand for staffing services in the rise. Transportation was mixed. Residential real estate was mostly on the rise, while home inventories were low. Residential construction activity had strengthened. Nonresidential sales also improved. Labor market conditions continued to improve. Wage growth varied from flat to strong across the 12 Districts, and most noted consumer prices were holding steady.

SF Fed’s Williams said that domestic demand is overwhelming weakness from abroad and he sees the US service sector as the driver next year, while inflation should move back to 2% over the next couple years. He doesn’t see the stock market a good indicator of where the economy is going and doesn’t think that China will be a huge risk to the US economic outlook. Williams sees no tangible risk that the US will fall into recession and the Fed strategy of raising rates is the right one. He still sees some accommodation as needed, but over time favors normalization. This is in keeping with his more bullish view of the economy and consistent favoring of normalizing rates for this hawkish dove.

The 214k February ADP rise beat the analyst estimates. The mining-restrained 5k rise in February goods jobs included a big 27k increase for construction jobs follows yesterday’s solid construction spending report to signal encouraging prospects for that sector, though we saw a 9k drop for factory jobs. A stronger than expected 208k climb for service sector jobs explained the headline ADP overshoot, and countered fears of a weakening service sector. U.S. reports over the last week have largely countered the market narrative of a slowing economy despite the big hit to trade revealed in last Friday’s trade data.

Main Macro Events Today

EMU Final Services PMI: The Eurozone Markit Services PMI for February, is expected to be confirmed at 53.0, unchanged from the preliminary reading. Confidence has been coming off, although mainly in the manufacturing sector, which is more focused on global headwinds and slowing emerging market growth. The services sector continues to benefit from robust domestic demand and PMI levels suggest ongoing expansion, but growth momentum is clearly slowing down and even a better than expected number would do little to dampen demands for further easing from the ECB.

US initial jobless claims: Jobless claims are expected to be 270k in the week-ended February 27. Continuing claims are expected to fall to 2,229k for the week-ended February 20. Forecast risk: upward, as the end of the holidays should slow layoffs. Market risk: downward, as weaker than expected data could slow the path of rate hikes

US Factory Orders: January factory orders are expected to grow 2.0% with inventories down 0.2%. Forecast risk: upward, given the stronger topline durable inventory numbers. Market risk: downward, as weaker data could impact the path of rate hikes.

Janne Muta

Chief Market Analyst

If you wish to get the latest forex brokers news,you can visit our Top Forex Brokers official website:

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About Janne Muta, HotForex’s Chief Market Analyst

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

Gold Analysis for 03.02.2016

March 2, 2016 Forex Analysis

Gold, Weekly

Almost a month ago, while Gold was still rallying strongly I wrote an analysis on Gold saying that it might have more upside in the longer run judging from the increased risk aversion in different asset classes but in the short run the upside is likely to be limited due to the channel top and 50% Fibonacci retracement being near. I said at the time that this could mean that the line of least resistance is for a change on the downside and traders could benefit from short exposure while (potential) correction takes place. I also gave a resistance area for sell entries and two target levels. Gold overshot my resistance area first but then started to consolidate giving short sellers several opportunities to enter in trades. My target one was reached while target two was almost touched and now market has moved back into my original resistance area and has consolidated there.

Gold is still trading near the upper end of the bearish channel but shows some resilience. Since April 2013 when price of gold dropped below the topping formation lows at around 1550 all gold rallies have been sold aggressively. Peaks have been sharp, with the price of gold dropping quickly after it hit a resistance. Even though gold is yet again at a resistance and Stochastics is in the overbought zone it seems to me that this time is different. Price has managed to move sideways for almost three weeks and has created a flag formation. This was helped by the fact that gold found support at October 2015 high, right where my target 2 was.

2016-03-02_1420

Gold, 240 min

In the four hour picture we can clearly see how price fluctuation has created a series of higher lows and higher highs. This far all of these have stayed below the upper end of the resistance area (1255.60) I defined in my earlier analysis. However, the fact that this market is creating higher lows means that traders have been willing to bid gold at higher price levels than before. Also, the fact that price has created higher highs tells us that those shorting gold have been forced to do so at higher prices than during the previous swings. This suggests certain degree of bullishness in this market while it means that the worries market participants have had about so called risk assets have not yet disappeared.

Conclusion

As the price of gold has been resilient in the face of risk on assets rising and has in the process created a flag formation that points to higher prices. The projection target based on the length of the flag pole is at 1434 and coincides with a high from August 2013. As I said earlier, since April 2013 all gold rallies have been sold aggressively. Peaks have been sharp, with the price of gold dropping quickly after it hit a resistance. Now things seem to be different as price has managed to move sideways for almost three weeks. This indicates that psychology has changed and gold should have more upside ahead.

This is in line with my views in February 11^th report. Now, as long as it is evident in the four hour time frame that gold keeps on attracting bidders at higher levels after each correction I deem it more probable that gold will move higher and look for long opportunities when price is oversold according to Stochastics oscillator (7,3,3) in four hour time frame. If you decide to take these traders, it’s advisable keep the Target 1 conservative (as per my teaching in the live analysis webinars) while price stays inside the consolidation formation. After the potential breakout the 1434 high could be a reasonable medium term target. Trade safe, use protective stops and remember you are always very welcome to join my webinars to learn how to manage the risks and find buy and sell signals.

Janne Muta

Chief Market Analyst

If you wish to get the latest forex brokers news,you can visit our Top Forex 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”

Macro Events & News for 03.02.2016

March 2, 2016 Forex Analysis

FX News Today

Swiss growth much better than expected at +0.4% q/q, up from -0.1% in Q3 (revised down from 0.0%). The median forecast had been for a 0.2% rise. The y/y figure was also +0.4%, down from 0.8% in Q3 but above the 0.1% median forecast. The jump in the franc in January 2015 following the SNB’s abandonment of its former cap, along with sluggishness in the Eurozone economy have been dragging on the Swiss economy, though the year finished well with the 0.4% growth the best quarterly performance of 2015.

ECB’s Draghi brandished his dovish bazooka again, noting that the bank’s policy review in March will be seen against the background of increased downside risks to the prior outlook and there “are no limits” to how far we are willing to deploy our instruments within our mandate to achieve our objective of inflation rates below but close to 2% over the medium-term. Moreover, Euro area inflation dynamics continue to be weaker than expected. Speaking from Frankfurt, Draghi continues to keep expectations high for action in March, which helped relegate the already weak euro to session lows after being weighed firmer rounds of US data earlier.

The US February ISM rose to 49.5 (median 48.5) from 48.2 in January while US construction spending grew by 1.5% (median 0.5%) in January following a 0.6% (was 0.1%) pace in December and US Markit manufacturing PMI slid to 51.3 in the final February print, from 52.4 in January, though it improved slightly versus the 51.0 flash February reading. This just beats the all-time low of 51.2 set in December.

Canada’s real GDP grew 0.8% in Q4, contrary to expectations (median flat) following the revised 2.4% bounce in Q3 (was +2.3%, q/q saar). The separate December GDP tally showed a 0.2% gain (m/m, sa) that topped expectations (median +0.1%) after the 0.3% bounce in November. The BoC expected a flat reading for real Q4 GDP, so these reports further trim the chances for a near term rate cut from the bank. Note, however that trade made a sizable contribution to growth as exports fell by less than imports, consumption slowed and business investment contracted. So at first glance the dynamics of the Q4 report appear to be roughly in-line with bank projections. Yet these are better than anticipated reports overall, notably the December GDP gain that shows the economy with some momentum going into 2016.

Main Macro Events Today

Euro Area PPI: The Euro Area Producer Price Index (Y/Y) for January is released today and is expected to come in almost unchanged at -2.9%. December reading was -3.0%. This should put ammunition in the hands of the doves in the ECB.

US ADP Employment Change: The ADP unemployment survey for February is due today with an expectation of 195K new jobs against the previous number of 205K.

US Fed Beige Book: Traders look forward to this month’s Beige Book release as it is used by the FOMC to help in their interest rate decisions. In the previous release, the Philadelphia Fed stated that the economy was expanding moderately while consumer spending remained mixed.

Janne Muta

Chief Market Analyst

If you wish to get the latest forex brokers news,you can visit our Top Forex 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”

Macro Events & News for 03.01.2016

March 1, 2016 Forex Analysis

FX News Today

Reserve Bank of Australia held rates steady at 2.00%, as was widely expected. Policy remains, not surprisingly, data and event driven as the bank will follow new information to see if the improvement in the job market is sustainable and (repeating a key line from February) whether the “recent financial turbulence portends weaker global and domestic demand.” Notably, Stevens now says “continued low inflation would provide scope for easier policy” should that be needed to support demand. He said it “may” provide scope back in February. He was again largely constructive on domestic growth, saying that the expansion in the non-mining parts of the economy strengthened in 2015. On the exchange rate, he said it “has been adjusting to the evolving economic outlook.”

The People’s Bank of China (PBOC), restarted easing operations on Monday. The bank added approximately $100 billion worth of long-term financing into the Chinese economy to mitigate the pain from increased unemployment and bankruptcies in those industries that have been suffered from overcapacity. According to a statement on PBOC website the bank was cutting the reserve requirement ratio, or the amount of cash that banks must hold as reserves, by 50 basis points, taking the ratio down to 17 percent for the biggest lenders.

China’s manufacturing sentiment shrunk in February, adding to ongoing concerns over the pace of slowing in China’s economy. The official manufacturing PMI fell to 49.0 in February from 49.4 in January. The Caixin manufacturing PMI declined to 48.0 in February from 48.4 in January.

Yesterday’s US reports revealed a sharp 8-point Chicago PMI February plunge to 47.6 alongside a 3-point uptick in the Dallas Fed index to -31.8 from a -34.6 expansion-low. We also saw a 2.5% January drop in the pending home sales index to a lean 1.4% y/y rise, which reinforces the view that housing sector growth is moderating despite a winter weather-lift. Yesterday’s figures counter Friday’s more encouraging reports that documented resilience in the US economy to the global growth pull-back.

Main Macro Events Today

EMU Unemployment Rate: So far the slowdown in confidence indicators hasn’t reached the labour market and jobless numbers continue to come down. We are looking for a further decline in the German sa number of 10K (median same) in February, which would leave the jobless rate unchanged at 6.2%. Eurozone January unemployment meanwhile is seen steady at 10.4%, with headline rates coming off highs, but disparities across countries remaining large and youth unemployment still much too high. With confidence indicators heading south and global headwinds getting stronger, it seems only a matter of time until the labour market starts to feel the chill.

Canada GDP: The Q4 and December GDP reports are due today. These two releases are the key reports in a busy week. December GDP is expected to moderate to a 0.1% m/m pace (median same) following the 0.3% gain in November. The separate real GDP measure is seen edging 0.3% higher in Q4 (median is for no change) after the 2.3% bounce in Q3. The reports will show a domestic economy that was limping along, yet still expanding, going into the new year.

US Manufacturing ISM: The February ISM is expected to decline to 48.0 (median 48.5) from 48.2 in January and 48.0 in December. Other measures of February producer sentiment have been mixed and despite some headline improvements the various components of the releases have remained weak which could spell downside risk for the ISM. Broadly speaking, we expect the ISM-adjusted average of all measures to decline to 48 for the month, a new cycle low, from 49 in January and 50 in December.

Janne Muta

Chief Market Analyst

If you wish to get the latest forex brokers news,you can visit our Top Forex Brokers official website:

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About Janne Muta, HotForex’s Chief Market Analyst

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

Brexit fears cause volatility in GBP pairs

February 29, 2016 Forex Analysis

GBPJPY, 240 min

Recently GBP has been under pressure due to fears that the country might leave the European Union. I view this as a very low probability event but that doesn’t stop markets from being volatile. While Sterling has been under pressure the Japanese Yen has been either rising or moving sideways. This has brought the GBPJPY significantly lower and I don’t see an immediate reason for this psychological setting to change. We therefore look for opportunities to sell the rallies to join the trend as long as the trend lasts.

The pair is trending lower in weekly, daily and 4h time frames and is currently oversold as per Stochastics in weekly timeframes while there’s some attempt to move Stochastics higher in the daily chart. On February 22^nd GBPJPY moved below an important support at 159.79 and therefore turned it into a resistance. This resistance also coincides with the 23.6% Fibonacci retracement level. We are interested in short trades GBPJPY between 159.50 and 160.54 if the price rallies there and give us a sell signal. Target 1 for this potential trade is at 154.70 – 155.65 while target 2 is at 148.55-149.30.

If you don’t know what to look for as a sell signal and how to set stops and plan your position sizes, you are welcome to join my Live Analysis Webinar on March 1^st and 1pm GMT. Come along and bring your trading friends as well but please remember that seats are limited! This webinar is free, therefore it advisable to register asap.

Janne Muta

Chief Market Analyst

If you wish to get the latest forex brokers news,you can visit our Top Forex Brokers official website:

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About Janne Muta, HotForex’s Chief Market Analyst

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

The Economic Week Ahead for 02.29.2016

February 29, 2016 Forex Analysis

Main Macro Events This Week

United States: US data is front and center ahead with the February employment report highlighting Friday, though as forecast it’s not likely to alter the outlook on the labor market or necessarily the Fed trajectory. We forecast a 190k gain along with a steady 4.9% unemployment rate. Also on tap is a small 0.1% forecast hourly earnings rise and likely 34.5 hour workweek (median 34.6). Initial jobless claims have been trending lower of late and this could lend some upside risk to payrolls this month. As a prelude to payrolls the economic calendar will close out the month of February (today) with Chicago PMI expected to dip to 54.5 in February (median 53.1) from 55.6, NAR pending home sales may rebound to 107.7 in January from 106.8 and the Dallas Fed index is still seen tortured by the oil sector at -33.0 in February, up slightly from -34.6 in January. The ISM manufacturing index (Tuesday) should show minor improvement to 48.5 from 48.2, though still in contraction, accompanied by construction spending set to rise 0.5% for January vs 0.1%. Vehicle sales are projected to increase 0.8% to a 17.6 mln unit pace. MBA mortgage application report is on tap (Wednesday), along with the February ADP Employment report, which should show a 180k gain for the month (195k median), below the January figure of 205k. There’s quite a data hurdle (Thursday), starting with the revision of Q4 productivity seen at -3.2% (median -3.1%) vs -3.0% initially, while unit labor costs may accordingly be revised up to 4.7% (median 4.5%) from 4.5%. Initial jobless claims are set rebound 10k to 282k for the week ending February 27, while the ISM Non-Manufacturing index should reveal sluggish growth at 54.0 in February (53.1 median) vs 53.5 and factory goods orders rebound 0.7% in January (median +1.5%) vs -2.9% in December. Wrapping up the week will be wholesale trade data (Friday). Fed’s Beige Book (Wednesday) adds to the rich tapestry of data and events, but it shouldn’t provide any major new insights or alter outlooks on the economy.

Canada: The Canadian calendar is packed with top tier economic releases this week. The Q4 and December GDP reports (Tuesday) along with the trade figures (Friday) highlight. December GDP is expected to moderate to a 0.1% m/m pace, while the separate real GDP measure is seen edging 0.3% higher in Q4. The reports will show a domestic economy that was limping along, yet still expanding, going into the new year. The January trade report is expected to show a widening in the deficit to -C$0.8 bln from -C$0.6 bln in December. A variety of other reports are on the docket: The Q4 current account (today) is seen narrowing to a -C$15.5 bln deficit from -C$16.2 bln in Q3. The industrial product price index (today) is expected to decline 0.1% m/m in January after the 0.2% drop in December. The Ivey PMI (Friday) is projected to slump to a still firm 60.0 in February from the seasonally adjusted 66.0 in January. Productivity (Friday) is seen flat in Q4 (q/q, sa) after the 0.1% gain in Q3. The RBC manufacturing PMI for February is due out Tuesday.

Europe: this week’s data releases will add to the arguments of the doves with national inflation data suggesting that overall EMU HICP (today) will fall back to -0.1% y/y. Final PMI numbers for February will only confirm that confidence is hit by uncertainty about the outlook for the world economy and ongoing market turbulences and the EMU Feb Manufacturing PMI (Tuesday) is expected to be confirmed at 51.0 and the Services PMI (Wednesday) at 53.0 (medians same). Data still indicates expansion across both sectors, but growth momentum is clearly ebbing. For now though at least labour markets continue to improve, which underpins consumption trends, but this is a lagging indicator and if growth slows down it is only a matter of time until this will also be reflected in unemployment data. For February we still see another dip in the German sa jobless total (Tuesday) of 10K (median same), which would leave the unemployment rate unchanged at a very low 6.2%. The overall Eurozone rate for January meanwhile is seen steady at 10.4% (median same). Data releases also include more national unemployment and inflation numbers as well as German retail sales and import prices.

United Kingdom: The calendar this week, in chronological order, brings January BoE lending data (today), the February Markit PMI surveys for manufacturing (Tuesday), construction (Tuesday) and services (Wednesday). Lending is likely to be strong, while markets will be keeping close tabs on the PMI reports following weakness in January data. We expect the BoE report to show a GBP 1.3 bln rise in unsecured consumer lending, near to underlying trend, and a jump in mortgage approvals to 74.0k from 70.8 in the previous month, likely to be reflective of a rush of so-called buy-to-let purchases ahead of tax changes. The manufacturing PMI has us expecting an ebb to a 52.3 headline reading (median 52.2), down from 52.9 in January. The data is too early to reflect the jump in Brexit concerns that has happened over the last week, but will still show the erosive affect that slowing Eurozone and global growth is having. The construction PMI is anticipated at 55.5 from 55.0, holding near recent trends. The services PMI should come in at 55.1 (median 55.0), down from 55.6, which would leave the composite figure at 55.7, down from 56.1.

China: In China, data includes January leading indicators (today) and February PMIs (Tuesday). The Caixin/Markit series is expected to dip to 48.2 from 48.4, while the official CFLP reading is seen at 49.2 from 49.4. February services PMI (Thursday) are penciled in at 52.0 from 52.4.

Japan: January preliminary industrial production (today) rebounded nicely and came in at 3.7% m/m, as compared to the previous -1.7% outcome. January retail sales fell to a -0.1% y/y pace from flat for large retailers, though total sales should improve slightly to a -0.7% y/y clip from -1.1% y/y overall. January housing starts improved to 0.2% from -1.3%. January unemployment (Tuesday) likely remained steady at 3.3%, with the job offers/seekers ratio static as well at 1.27. January PCE (Tuesday) is forecast at a -3.0% y/y rate from the -4.4% y/y outcome in December. February auto sales are on the docket (Tuesday) as well. January Markit/Nikkei PMI (Wednesday) is expected to fall to 51.0 from 52.3, as the Q4 MOF capex survey (Wednesday) is seen slowing to 7.0% y/y from 11.2% y/y previously.

Australia: calendar is headlined by the RBA meeting (Tuesday), expected to result in no change to the 2.00% policy rate setting. A busy economic calendar has real Q4 GDP (Wednesday), expected to slow to a 0.5% growth rate after the 0.9% gain in Q3 (q/q, sa). January building approvals (Tuesday) are seen dipping 1.0% m/m following the 9.2% bounce in December. The current account deficit (Tuesday) is projected to worsen to -A$20.5 bln in Q4 from -A$18.1 bln in Q3. The trade report (Thursday) is expected to show a narrowing in the surplus to -A$2.8 bln in January from -A$3.5 bln in December. Retail sales (Thursday) are seen rising 0.3% m/m in January after the flat reading in December.

Janne Muta

Chief Market Analyst

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