Strong Canadian Retail Sales & the USDCAD

June 22, 2016 Forex Analysis

USDCAD, Daily

Canada’s retail sales are consistent with a resumption in April GDP growth of 0.1%. The 0.1% gain in retail shipment volumes during April (values grew 0.9%) follows the equally subdued 0.2% rise in April wholesale shipment volumes. There was a sizable 1.4% gain in April manufacturing shipment volumes, however. The expected 0.1% gain in April GDP would follow the 0.2% pull-back in March and 0.1% dip in February. But that will give way to a hefty 0.5% m/m decline in May, leaving a 1.0% drop in real Q2 GDP due to the temporary halt in oil sand production. As for the other related data housing starts did slow 5.2% to a 191.4k unit clip in April, which could leave a negative contribution from construction production. Mining, oil and gas production are the usual wildcard, but appear to be on track to add to total GDP growth in April. Manufacturing petroleum and coal product shipment values rose 8.3% in April while energy exports grew 7.6% in April.

Canada CPI is also outperforming US, EU and Japan. Canada’s CPI outperforms comparable measures in the US, Japan, and Eurozone. Notably, the potential for deflation is a minor concern in Canada, contrasting with ongoing worries in Japan and Europe and lingering concern that the U.S. recovery will underwhelm and thus restrain price growth. While there are caveats to Canada’s inflation outperformance in recent years, faster total and core CPI growth remains an important advantage as the G-7 nations maintain historically accommodative monetary policy conditions in order to facilitate the long sought return to self-sustaining economic and inflation growth.

USDCAD traded to a nine-session low of 1.2743 following the better Canadian retail sales outcome, before reversing to 1.2800. WTI crude is off earlier highs, now trading south of $50/bbl, as weekly US Crude Oil inventories, expected to show a drawdown of 1.3 million barrels, actual came in the same as last week at 0.9million barrels.

Next support for USDCAD is penciled in at 1.2700, 1.2640 and then not till 1.252. To the upside there is resistance at 1.2850 (50 DMA) 1.2970 and 1.3100.

Janne Muta

Chief Market Analyst

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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.

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

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Gold reflecting Brexit fears easing

June 22, 2016 Forex Analysis

Gold, 60 min

Yesterday in her prepared testimony before the Senate Banking Committee the Fed Chair Yellen repeated her view that the Fed will continue raising rates cautiously. She said that she’s optimistic on further growth although she noted there are still considerable uncertainties over the outlook. The Fed is monitoring the job market carefully to see whether the weakness in the May report was transitory, she said, and added it is important not to react to one or two reports. On the positive front, Yellen said spending has picked up smartly while housing is recovering but cautioned that the Fed can’t dismiss the slow productivity growth.

Her comments didn’t have significant impact on gold futures. Rather it seems that the price of gold has been following the improved sentiment on Brexit. In the longer term, Fed decisiveness on sticking to the rate hikes could be a risk to gold bulls. The result will obviously depend on other factors as well. While rate hikes should create selling pressure for gold they could turn the stock market lower as well. In addition to safe haven buying amongst the ordinary investors this would increase money managers’ need for diversification in their portfolios. Historically gold and stock markets have had an inverse correlation and in the times of stock markets experiencing trouble reallocating assets from stocks to gold can help to diminish volatility in the portfolios.

This week however everything is about the Brexit vote. There could be a rally before the result is clear and published but should the remain campaign win, like we do believe it will, this rally should be an opportunity to sell at higher prices.

Since our Live Analysis Webinar a week ago gold tried to rally beyond the high of $1306 but failed to attract sufficient demand to stay above the level. This led to the market correcting considerably. Gold broke below the 1280 support in yesterday’s trading thus creating a resistance at the level. Since then it has remained in a relatively tight 60 min channel that is sloping downward. There is some minor intraday support at 1264 – 1267 while the downward sloping channel is top is currently at 1270. I expect the very near term movements to be defined by these technical factors while the more significant S&R levels can be found in the daily picture at 1251 and 1280. In the daily picture gold is currently getting oversold as per Stochastics Oscillator (7.3.3)

The current price action in smaller timeframe charts support the view that gold will move higher from the 1267 support. If price breaks above 1270 momentum could carry on and could bring it up to the 1280 resistance. I’m therefore looking for short entry signals between 1276.50 and 1283 with Target 1 at 1271 – 1273 and Target 2 at 1259 – 1262.

The above analysis is relevant if gold moves to the Sell Area relatively quickly and reacts to it promptly well before the referendum results are published. If price happens to be at or inside the area when the results are published the liquidity could be low thus increasing the risk of unruly market moves. As per usual I am advising that all clients refrain from geared positions at the time of major news publication.

Janne Muta

Chief Market Analyst

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The Biggest Brexit Beneficiary would be

June 22, 2016 Forex Analysis

USDJPY, Daily

The Japanese Yen

The fallout on Friday from a Brexit vote would reverberate around all financial markets, from Commodities to Stocks to Bonds and of course Currencies. There would be winners and loser’s huge volatility and certain uncertainty. The vote is far too close to call but my view remains (no pun intended) that the UK population, with 10-11% of the electorate still undecided, will decide its “better the devil you know” and vote to Remain in the EU.

One day to go now and the polls continue to point to a too-close-to-call outcome. The FT’s poll tracker is showing Leave with 45% support and Remain with 44% support, with the former gaining one percentage point at the latest update. UK bookmaker Ladbrokes continues to show an implied probability of the UK remaining in the EU of 76%, unchanged from yesterday and showing a much more confident view than polls would suggest on the idea that the status quo option in referendums tends to have the advantage. While the possible market reactions on Friday are clinically polarized — the one being a sterling and euro risk-on trade and the other being a sterling and euro negative risk-on trade — there is also a likelihood of protracted uncertainty if the Remain side win by only a narrow margin. This would embolden Brexiters, embittered after the loss, to carry on the fight. This could in turn maintain longer-term uncertainties for sterling markets.

All that said the greatest beneficiary of a Brexit is the Japanese Yen, Swiss Franc and GOLD. Of the three the YEN would appreciate furthest even with BOJ intervention. USDJPY 101.90 – 100.90 remains a possible intervention zone prior to the key psychological 100.00. Further down 98.20 and even 95.00 are not unrealistic. In an uncertain post Brexit world risk off would prevail for some considerable time.

Janne Muta

Chief Market Analyst

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FED to continue to raise rates….cautiously

June 21, 2016 Forex Analysis

EURUSD, H4

Fed Chair Yellen repeated the Fed will continue raising rates cautiously, in her prepared testimony before the Senate Banking Committee. She’s optimistic on further growth but noted there are still considerable uncertainties over the outlook. The Fed is monitoring the job market carefully to see whether the weakness in the May report was transitory, she said, and added it is important not to react to one or two reports. On the positive front, she said spending has picked up smartly while housing is recovering. But she cautioned that the Fed can’t dismiss the slow productivity growth. Brexit could have significant economic repercussions. The cautiously optimistic outlook is as expected.

Yellen said the Fed is relying less on forward guidance than during the financial crisis credibility. The Fed still issues quarterly projections, which Yellen believes are helpful for the public to understand the path of the economy. The Fed Chair stressed again, however, that the Fed is not on a preset course. Economic developments have been mixed for some time, with some sectors remaining slow due to the recession in the energy sector and as a result of the stronger dollar, while others, such as the labor market, have performed well, at least until recently.

Key pivot and resistance sits at 1.1300 and 1.1350 in the 4h time frame with support at 1.1240, 1.1220 and 1.1180.

Janne Muta

Chief Market Analyst

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Draghi: further monetary easing in the pipeline

June 21, 2016 Forex Analysis

EURUSD, 240 min

While the ECB President Draqhi is answering the questions here’s a quick update on his speech. According to Draqhi recovery is gaining momentum in the euro area and is supported by the solid domestic demand. While low oil prices benefit the consumers investment is edging up as favourable financing supports it together with corporate profits. GDP in 2016 is expected to come in at 1.6%, and in 2017 at 1.7% and inflation is expected to remain at low levels.

He commented that bank lending rates have fallen to historical lows while credit growth turned positive already in 2015. Bank shares have benefited from readily available financing and growing corporate profits but also SME’s are reporting easy access to credit.

More action is needed to boost Eurozone investment. Draqhi promised that further monetary easing is in the pipeline. At first markets didn’t react to this promise at all but at the time of writing EURUSD has started to edge lower. Draghi also sees the downside risks significant and spend considerable amount of time to justify the recent ECB actions.

The fact that the markets are waiting for the Fed Chair Yellen to speak at 2 pm GMT is likely to keep the participants from reacting strongly on what the ECB president is saying.

Major support and resistance levels in EURUSD are 1.1220, 1.1239 and 1.1300, 1.1350 and 1.1380.

Janne Muta

Chief Market Analyst

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Mixed reaction to Germany’s OMT ruling

June 21, 2016 Forex Analysis

EURUSD, 60 min

Draghi’s promise to do “whatever it takes” to safeguard the Eurozone came with the promise of the OMT (Outright Monetary Purchases) and helped to end the debt crisis. Germany’s top court today finally gave its final clearance after initially referring it back to the EU’s top court, although with a caveat with the German Constitutional Court voicing concerns, but saying they were bound by the EU ruling, which argued that the plan contained sufficient safeguards to prevent the bond purchases from being disproportionate.

Germany’s Ifo institute said the ruling was a “pity”, because it is “obvious that the OMT primarily pursues the fiscal aim of maintaining credit access for highly indebted states”. The Ifo would have liked the court to set tighter rules for the Bundesbank’s participation in the program. The ZEW meanwhile said the ruling is “very Europe friendly”, saying the focus on the implementation of the program in the ruling, means government and parliament will need to watch how the OMT is implemented, but also that “financial markets can now relax”. Germany has been trying to safeguard the ECB’s prohibition of direct government financing, but it seems the pressure for a mutualisation of costs and risks is getting ever stronger and the critics see the OMT as one step in the direction of direct financing.

EURUSD is attracting some buying after the ruling was published but resistance levels are near. The nearest intraday resistance is at 1.1330 with the next intraday resistance at 1.1340. Intraday support at 1.1320. ECB’s Draghi will speak in about one hour’s time and might cause some extra volatility in the pair. I advise to reduce risk and when necessary to exit geared positions before an event that might move the markets in unpredictable ways.

Janne Muta

Chief Market Analyst

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RBA Minutes support AUDUSD

June 21, 2016 Forex Analysis

AUDUSD, Daily

The RBA Meeting Minutes from from the June 7th policy review were published today. Minutes contained no indication of further rate cuts which has kept a positive momentum going in the AUD. It has gained today against the USD, EUR and CAD while it has lost ground to against JPY and NZD. In May the central bank cut rates lower to 1.75 (a record low) in a surprise move and signalled at the time that inflation was expected to remain subdued for some time. Lower AUD has helped the economy and supported the labour market. Unemployment has dropped from 6.25 to 5.75 in the first quarter. At first the rate cut produced further depreciation in the currency but it was soon reversed and AUDUSD has rallied over 4% since the low at the end of May. At the time of writing AUDUSD is trading above the levels it was at the time of the May 7th rate cut. Traders seem to be bidding the pair higher on the back of the belief that the RBA has reached the end of the easing cycle. This however could change if the currency appreciated significantly from the current levels and started to impact the employment numbers.

Technically AUDUSD has created a bullish higher low (at 0.7285) in the daily picture and is currently challenging the high at 0.7504 created in the beginning of June. This level coincides with the 0.50 Fibonacci retracement level but the preceding higher low together with the strong economic picture and the recent RBA communication suggests that the market is more likely to push through this resistance. The next significant resistance area after 0.7504 is at 0.7574 – 0.7600 while the nearest daily support is at 0.7410. The nearest intraday support area can be found at 0.7435 – 0.7465. I’m looking for buy signals inside the support area. My targets are as follows: T1 is at 0.7500 and T2 at 0.7570. Alternatively, if price breaks above the resistance without a retracement to support then I’m applying the strategy our traders know from the Live Analysis Webinars. Should that be the case, the 0.7570 becomes the T1 while T2 would then be at 0.7605.

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”

All about Sentiment, Fundamentals on hold

June 17, 2016 Forex Analysis

GBPUSD, H4

The tragic events on the streets of small town in northern England yesterday prompted a dramatic about turn in the UK political tone, which was mirrored in the markets. The EU Referendum campaign has been suspended, with no indication of when it will be restarted; however the referendum will still go ahead next Thursday. The FT’s poll tracker is showing 48% support to leave the EU and 43% support to remain in the EU, with the Leave campaign having gained one percentage point and the Remain camp having lost one percentage point following the inclusion of the two latest polls. While the last six polls have all shown higher support for leaving the EU than remaining a part of the single market, bookmakers are still showing the betting market that the UK will vote to remain in the EU. Ladbrokes, for instance, is showing a 64% implied probability in favour of Remain. This backdrop and news of the suspension of campaigning prompted an unwinding in sterling short positions yesterday. The pound is sitting 2% above the two-month low seen yesterday against the dollar at 1.4012 and currently trades at 1.4290. There was also major volatility yesterday, on the Gold market as a dramatic reversal from recent highs at $1315 took hold. The key commodity declined almost 3% to trade as low as $1276 before recovering to the $1280 -1285 level.

Sentiment is the major driver of the markets at the moment with technicals and fundamentals taking a back seat. These wild intra-day swings and volatility will persist until the resolution of the UK Referendum. This is likely to be “around breakfast time” (anywhere between 03:00-05:00 GMT) next Friday June 24, however , there is considerable uncertainty about when the actual national declaration will take place as it is dependent on all 382 local totals being declared.

Although there is no official exit poll, referendum rules do allow exit polls on the day of the referendum so long as they are not published until after polls close (19:00hrs GMT). The UK hedge fund industry has commissioned private exit polls to get an early warning of the result and this will inevitably move sterling as they take their positions based on the result of their polling. However, doing an exit poll in a referendum is very difficult as there is not a lot of past data on which to base your findings. There have not been many referenda in the UK and therefore it is difficult to get the methodology correct. The major UK media outlets will not be publishing exit polls due to these problems. So, as always, trade with strict risk management and expect increased volatility to be the only constant in the week ahead.

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”

UK Retail Sales Stronger – Sterling weaker

June 16, 2016 Forex Analysis

GBPJPY, H4

Post-UK data gains in the pound were reigned in as the stellar retail sales report for May, which was replete with big up revisions in April data, were offset by a new Brexit poll from Ipso Mori putting the Vote Leave campaign six points in the lead. Seven of the last eight polls have put Leave ahead.

UK retail sales, meanwhile, came in much stronger than expected in official data for May, rising 0.9% m/m and by 6.0%y/y from upwardly revised April figures of +1.9% m/m (originally 1.3%) and +5.2% (originally 4.3%). The median forecasts had been for just 0.1% m/m and 3.7% y/y growth. The data kicks into touch the idea that the run-in to the Brexit vote would have impeded retail activity. Cable, after some oscillations, is presently near the midpoint of the day’s range, at 1.4165 which has itself remained within yesterday’s range. GBPJPY remains south of 148.00 and EURGBP north of 0.7950. Risk remains to the downside given the real chance for the UK voting to leave the EU at next Thursday’s referendum.

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”

JPY Keeps on giving – USDJPY Target 1 hit

June 16, 2016 Forex Analysis

USDJPY, Daily

The USDJPY Daily trade I identified on Monday (June 13^th) was triggered on the close of the Daily candle that night with the Target 1 realised yesterday (June 15) for a 75 pip gain. This was prior to the huge move we have seen following the FOMC and BOJ announcements and press conferences overnight where we now see the pair sub 104.00 (another 150 pips further down).

It is also a reminder to “trade what you see and not what you think”. One of the many mind games that lead to successful trading is to not worry about “what might have been” or how many pips you would have made if you’d “just left the trade on that little bit longer”. That nagging little inner voice will ultimately detract from your success. The comfort of trading from completed candles and completing analysis before the event is that you set your entries and targets and let the market come to you. You do not need to “chase” trades or go “trade hunting.”

Trading on the Daily timeframe allows for Target and Entry levels to be set without the “noise” of the intra-day moves, and although I have “missed” the larger moves trading this way, the benefit is that you do not enter a market too soon and you can trade with much less stress. Patience is a skill that all successful traders practice very time they open a trade.

The strength of the yen and weakness of sterling has also seen the GBPJPY 148.80 Monthly support I identified on Monday to be breached this morning, a 100+ pip move. Next down levels remain 145.15 and the 2013 low of 140.20. Brexit and its implications continue to dominate markets and with polling day less than a week away uncertainty continues to rise as quickly as the YEN and the price of GOLD.

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”