UK Construction PMI falls sharply

July 4, 2016 Forex Analysis

EURGBP, H4

UK June construction PMI dove to 46.0, firmly and unexpectedly signalling that the sector is in contraction. This compares to the 51. 2 reading of May and the median forecast for a much more modest dip to 50.7. The 46.0 reading is the lowest level this series has seen since June 2009. Incoming new work fell by its steepest pace since December 2012. The survey found there has been a steep drop in residential building and the first decline in commercial work for the first time since May 2013. The survey is almost entirely a snapshot of conditions before the June 23 referendum on EU membership, and reflects caution in the sector ahead of the vote. Given the vote to leave and consequent political turmoil and uncertain economic future, the construction sector is likely to remain in decline over the coming months. The manufacturing PMI figure for June (also a pre-Brext vote snapshot), painted a much better picture, however, and focus will now be on the PMI survey of the big service sector, released tomorrow.

“Widespread delays to investment decisions and housing market jitters saw the UK construction sector experience its worst month for seven years in June. Construction firms are at the sharp end of domestic economic uncertainty and jolts to investor sentiment, so trading conditions were always going to be challenging in the run-up to the EU referendum. However, the extent and speed of the downturn in the face of political and economic uncertainty is a clear warning flag for the wider post Brexit economic outlook.”

GBPUSD fell below 1.3250 having been as high as 1.3296 earlier and EURGBP grinds higher to 0.8380.

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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Live Analysis – USA500 Hits Target 2 too

June 29, 2016 Forex Analysis

USA500, Daily

Brexit Day 5 The uncertainty continues but the bounce back also continues. UK PM Cameron outlined the choices the country will face in negotiations to establish a new relationship with the EU. He said, during a comparatively un-tempestuous prime ministers question time session in parliament, that his successor will have to examine the different ‘models’ to see what works best, mentioning as examples the Canadian model, the Swiss model and the Norwegian model. All of these would constitute a marked deterioration in the UK’s current trading terms with the EU as a fully paid up member, and in the case of the Swiss and Norwegian examples would involve an open-border commitment. Many of those who had been in the Leave campaign, meanwhile, are hoping that the EU itself, sensing an existential threat, will change its attitude toward the migration issue and allow the UK access to the single market while controlling its borders. The idea is that there will be free movement of labour as opposed to free movement of people, with a reformed Europe comprised of individual but globalised economies. Some right-wing Leavers have been promoting Singapore as an example model.

Cable made up some ground overnight, topping at 1.3454, though so far unable to best Monday’s 1.3485 peak. EUR-USD traded over 1.1100, though continues to find sellers over the level. USD-JPY gains have stalled despite the improved risk backdrop, while USD-CAD has traded under 1.3000 on higher oil prices. Brexit uncertainty remains a market driver, though for now at least, unwinding of the sharp risk-off movements which began last week continue.

Global equities moved higher for the second day, and U.S. futures indicate a higher Wall Street open today. This meant that Target 2 at 2042 on the USA500 was achieved and a further advance to 2067 cannot be ruled out, however, this position is now closed.

I explained the approach to taking this trade during yesterday’s live analysis webinar together with the importance of risk management and always doing what is probable.

Janne Muta

Chief Market Analyst

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USA500 Analysis – USA500 Hits Target 1

June 28, 2016 Forex Analysis

USA500, Daily

Brexit Day 4 the uncertainty continues. The US stock markets both closed below the key 200 DMA yesterday, normally a signal for further sell–offs and a bearish market ahead. However, following a lackluster session in Asia there was short-covering on GBP, commodities and European bourses this morning which prompted me to look for a similar bounce from oversold on US stocks.

The USA500 had breached both the 200 DMA and the powerfully psychological support at 2000.00 to close at 1990.67. The overnight retrace was significant with the 2000 level offering support. The oversold Daily time frame and pin bar entry on the 1 hour time frame provided a simple Target 1 at 2022 and Target 2 at 2042. Target 1 was reached shortly after the US stock markets opened today.

I explained the approach during today’s live analysis webinar together with the importance of risk management and always doing what is probable.

Janne Muta

Chief Market Analyst

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Eurozone PMI numbers very mixed

June 23, 2016 Forex Analysis

EURUSD, Daily

Eurozone PMI very numbers mixed, with the manufacturing reading coming in much stronger than expected at 52.6, up from 51.5 in the previous month, and the services reading falling back more than anticipated to 52.4 from 53.3, which left the composite at 52.8 in June, down from 53.1 in May. German manufacturing in particular bounced back, but French readings are once again in contraction territory and the data highlights that the Eurozone recovery is not evenly spread and remains subject to downside risks. As Draghi highlighted, structural reforms are needed and ever more monetary accommodation won’t fix the Eurozone’s underlying problems. Bund futures already moved higher going into the overall release, after the weaker than expected French numbers earlier on and the key question also for the Eurozone outlook will be how the U.K. votes in today’s referendum on EU membership.

EURUSD continues to track Cable in a thin-market, Brexit-related correlation. Today’s vote in the UK, needless to say, presents the euro with significant polarized risk. Overnight sterling vols best reflect the magnitude of the event risk having surged to a record high of 106.2%. EURUSD support is at 1.1296-1.1353 while the Jun-8 high at 1.1415, a six-week peak, provides an upside waypoint.

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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Bremain 75% – Are the bookmakers always right?

June 23, 2016 Forex Analysis

GBPUSD, Daily

U.K. Referendum Day: The day of the U.K.’s referendum on EU membership if finally here, although polling stations don’t close until 21:00GMT and results won’t be in until early Friday. FT and Economist opinion poll trackers give the “remain” camp a slight lead, but also suggest a tight outcome, that could still go either way. If the U.K. really votes for an exit from the EU it would likely cause considerable turbulences tomorrow, as markets now seem to be going with bookmakers, who are giving good odds for “Bremain”.

Central bank officials have stressed that they stand ready and are prepared to step in and provide additional liquidity to cope with the short term fallout, but the longer term impact will be much more difficult to predict and deal with. The short term impact aside, biggest risk is that the U.K. vote would just be the start of a general unravelling of the EU, as protest parties elsewhere jump on the band wagon.

The bookmakers are clearly tilting towards Remain causing GBPUSD to rally as high as 1.4830 overnight and closed yesterday over the key pivot point of 1.4700 and above the 200 DMA. However, the bookmakers are only reflecting the volume of money placed and as Mathew Shaddick Labrokes Head of Politics noted yesterday :

“On the eve of referendum day we face a very similar scenario to last year’s general election. Back then, the polling averages showed a tie between Labour and the Tories, whilst the betting markets gave the Conservatives an 80 per cent chance of being the largest party.

This time, the polling averages have it as a dead heat, yet the bookies are rating the chances of a Remain vote at 76 per cent. Of course, it’s a bit of an unfair comparison; pollsters aren’t paid to predict anything, just to provide a snapshot of public opinion at a given time. That’s proving tricky enough, as shown by the very different results being generated by phone and online polls.

So, should we be following the money again? Maybe not: the huge rally on the financial markets and the big swing to Remain on the betting this week seem curious. Many people assumed it was anticipating some very good polling news for the Remain camp, but that didn’t really happen – the recent surveys have just confirmed that this is very, very close. It’s widely expected that the status quo side will improve somewhat on polling day (because that’s what tends to happen in these sorts of referenda), but that factor should already have been priced in.

One interesting pattern in the betting for this vote has been that whilst 75 per cent of the money staked has been for Remain, the majority of actual bets have been for Leave. That’s because the average bet stake for Remain is around £450, for Leave it’s just £70.”

Sterling remains strong this morning with GBPUSD trading at 1.4780 and EURGBP at 0.7670.

As always, do what is probable and trade with strict risk management, this is a once in a generation fundamental news event for the GBP with repercussions for many asset classes.

Janne Muta

Chief Market Analyst

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About Janne Muta, HotForex’s Chief Market Analyst

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

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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About Janne Muta, HotForex’s Chief Market Analyst

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

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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About Janne Muta, HotForex’s Chief Market Analyst

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

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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About Janne Muta, HotForex’s 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

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”