Strong UK Retail sales = More GBP strength

May 19, 2016 Forex Analysis

EURGBP, Daily

Sterling has lifted on the surge in UK retail sales in April data released earlier. Cable rallied to a 16-day peak of 1.4663, and EURGBP fell to its lowest level since Feb-4, of 0.7649, with subsequent bounces so far being curtailed by fresh selling. Retail sales surged 4.3% y/y versus the median forecast for a 2.5% rise, with the m/m comparison lifting by 1.3%. March data were revised higher too, to -0.5% m/m from -1.3%, and to +3.0% y/y from +2.7%. The data tallies with yesterday’s labour market report showing a new record high level of employment and a hotter than expected +2.0% y/y rise in average household income (ex-bonuses). The data also mitigates concerns that Brexit uncertainties might have been affecting consumer-sector activity.

All very interesting and we could have reached a Tipping Point in the referendum debate too. I am bullish sterling from here anticipating that Brits will vote to remain in the EU at the Jun-23 referendum. This will start to be priced into GBP over the coming weeks, (there are five weeks left until polling day). GBPUSD broke through 146.00 yesterday and a break over 147.00 would be needed for more GBP strength, however, with a June / July FED hike now looking probable instead of possible the better trade looks like the EURGBP.

The EURGBP looks to have a downside Target 1 0.7530 – 0.7500 and the 200 DMA, further down 0.7420 is a Weekly support and 61.8 FIB, and finally 0.7330 is the 2016 low.

The big move in the pair yesterday was three times the normal daily range. It broke through the March and February lows around 0.7720-0.7700 and closed exactly on the 38.2 Fibonacci level and outside the lower Bollinger band. Following such a large move my entry would be triggered on a retracement to the 0.7720 – 0.7770 area.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

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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UK Labour Data Positive – Sterling Lower

May 18, 2016 Forex Analysis

GBPUSD, H1

UK labour data showed an unexpected rise in pay, Average household income (excluding bonuses) lifting to a +2.0% y/y rate in the three months to March, up from 1.8% at the last measure. The bonus-included figure remained unchanged at +2.1% y/y. Unemployment for March remained unchanged at the cycle low of 5.1%, while the April claimant count dipped by 2.4k and the claimant rate remained unchanged at 2.1%. The pound very briefly rallied on the data in a knee-jerk reaction to the BoE-watched pay headline, but quickly turned lower. GBPUSD currently trading at day lows of 1.4410, with the One Hour chart having broken below some key moving averages and outside the lower Bollinger band.

The Brexit issue continues to dominate the horizon for sterling markets. The latest FT poll of polls has the Remain group on 46% the Leave campaign on 44% and the undecided down to 10%. A little over five weeks to referendum day and the polls continue to be erratic, no wonder GBP keeps finding sellers.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

Janne Muta

Chief Market Analyst

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About Janne Muta, HotForex’s Chief Market Analyst

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US CPI better than expected at 0.4%

May 17, 2016 Forex Analysis

US CPI popped up by 0.4% in April with the core rate up 0.2%, in line with expectations. There were no revisions to prior data where March posted gains of 0.1% for both the headline and the ex-food and energy component. The annual headline pace rose to 1.1% from 0.9% y/y in March, with the core slowing slightly to 2.1% y/y from 2.2% y/y; it’s a 6th straight month with a 2 handle. Energy prices were up 3.4% after the 0.9% March gain broke a string of 3 straight monthly declines. Transportation jumped 1.6%. Housing costs were up 0.2%. Food/beverage costs edged up 0.2%. Medical care was 0.3% higher. Commodities rose 0.6%. Apparel slid 0.3%.

EURUSD reacted slightly lower as improved inflation data supports the view that the Fed will hike the rates this year. Our view is that there will two rate hikes in the latter half of the year. I’m expecting the first hike will be announced in the June meeting even though the date is near the British EU referendum. The nearest EURUSD support and 4h resistance levels are at 1.1282 and 1.1340.

Janne Muta

Chief Market Analyst

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Sterling Strong – Awaiting CPI data

May 17, 2016 Forex Analysis

GBPUSD, Daily

Sterling has rallied strongly on news that the latest Brexit poll by ORB shows 55% wanting to remain in the EU and just 40% wanting to leave. Ladbrokes now giving 75% odds for UK to remain in the EU, up from 71% this time yesterday. The poll was reported in the Daily Telegraph newspaper, with the The Guardian newspaper publishing a separate ICM poll showing the Remain camp 8% ahead of the Leave. GBPUSD continued to rally is currently trading over 1.4500 at new weekly highs at 1.4515.

Interestingly, the Daily candle found support at the 50 DMA yesterday at 1.4340, with the 20 DMA higher at 1.4475.

UK CPI data is published at 08:30 GMT and expectations are for unchanged data at 0.5% year on year.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

Janne Muta

Chief Market Analyst

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About Janne Muta, HotForex’s Chief Market Analyst

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USDZAR – Hits Target 1 & remains interesting

May 16, 2016 Forex Analysis

USDZAR, Daily

Last Tuesday (May 10^th) I posted “The USDZAR broke some key levels yesterday and looks to be in a bullish up move:

Last week it rallied to the 23.6 Fib level and the psychological round number at 15.0000.
It finally closed above 15.0000 yesterday having reached the level in the three previous trading sessions but was unable to breach the level. So we have had a fairly typical, reach, breach and broken pattern.
Yesterday’s close (15.1650) was also at a key level, which had previously been support, during February and March, and had turned to resistance for April. A close today over this level indicates strength for this pair.

I will be looking for Target 1 area around 15.5000 – 15.5380 and Target 2 around 16.0000 – 16.3000”

At the time the pair was trading at 15.2322 it closed the day below the important 15.1650 level and traded as low as 14.8883 on Thursday. However, following the strong US retail sales and sentiment data on Friday the pair rallied into the close and earlier today the trade reached its Target 1 for a net gain of over 300 pips.

Today’s US calendar is fairly uneventful. The May Empire State report headlines. We expect a dip to 7.0 after surging about 9 points to 9.6 in April. The May NAHB housing market index is seen improving to 59 from 58.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

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”

AUDUSD – Target 2 Hit after US data Friday

May 16, 2016 Forex Analysis

AUDUSD, H4

On May 6^th I posted “Technically we now have Daily support and downside Target 1 at 0.7330 – the 50% Fib level, which also coincides with the Weekly retracement levels. Further down we have 200 DMA, support and Target 2 at 0.7260.”

This trade has now achieved both Target 1 and Target 2 within the week following the strong US data on Friday for a net gain of 110 pips. The AUD is heavily influenced by data from China and the weak news over the weekend has pushed the AUDUSD below the 200 DMA and 0.7260 again, only to recover to 0.7290 this morning.

Chinese retail sales and industrial production underperformed in April with annual sales sliding to a 10.1% y/y pace last month, versus 10.5% y/y in March. Slippage was relatively broad-based, with autos tumbling to a 5.1% y/y rate, less than half of the 12.3% y/y from March. Petroleum declined to -3.8% y/y from 0.3% y/y. Industrial production dropped to a 6.0% y/y clip compared to 6.8% y/y thanks to weakness in mining, high energy consumption, and seasonal factors. Renewed signs of slowing in these key indicators could revive the markets’ fears over the economy that dominated at the start of the year, especially as authorities have been aggressively adding to stimulus measures.

Having achieved both T1 and T2 this trade is now closed, however, the pair remains bearish and the Monthly chart shows support at 0.7050 and 0.7000.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

Janne Muta

Chief Market Analyst

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About Janne Muta, HotForex’s Chief Market Analyst

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US Consumer Sentiment – A Big Beat

May 13, 2016 Forex Analysis

GBPUSD, Daily

US preliminary May consumer sentiment jumped 6.8 points to 95.8, much stronger than expected, after dipping 2 points to 89.0 in April. It is the highest since last June, and recently has been high as 98.1, reached in January 2015 (which was the best in over a decade). The current conditions index rose to 108.6 from 106.7. The expectations index climbed almost 10 points to 87.5 from 77.6, and is the biggest increase since 2006. The 12-month inflation gauge slid to 2.5% from 2.8%, while the 5-year index sped up slightly to 2.6% from 2.5%.

The Michigan sentiment bounce to a 95.8 eleven-month high reversed a four-month string of declines to 89.0 in April from 92.6 in December, as the index rises well above the 87.2 ten-month low in September but below the 98.1 cycle-high in January of 2015 that marked the strongest reading since January of 2004. The pattern of upward revisions in “final” Michigan sentiment reports has dissipated, given boosts in just four of the last ten months, and an average revision in 2016 of zero. We saw prior average boosts of 0.4 in 2015, 0.6 in 2014 and 1.8 in 2013. We will assume a 95.8 “final” print for May. For other May measures, the IBD/TIPP index rose to 48.7 from 46.3, versus a 54.0 cycle-high in October of 2012. The Bloomberg Consumer Comfort index slipped to 41.7 in the second week of May from 42.0 in the prior week and a 43.0 average in April, versus a 45.7 cycle-high average in April of 2015. We expect a consumer confidence rise to 95.0 from 94.2 in April but a higher 96.1 in March, versus a 103.8 cycle-high in January of 2015.

More positive news for the USD today, USDIndex rallies to a two week high at 94.7 and GBPUSD falls to three week low at 1.4361.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

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”

US Retail Sales beats estimates, PPI inline

May 13, 2016 Forex Analysis

USDJPY, H1

US retail sales jumped 1.3% in April, and were up 0.8% excluding autos, much better than expected following a 0.3% headline decline in March, with the ex-auto component revised up to 0.4% from 0.2%. Excluding autos, gas, and building materials, sales climbed 0.8% versus a 0.1% gain previously (revised from flat). Auto sales bounced 3.2% to erase the 3.2% drop previously. Gasoline station sales increased 2.2% with back-to-back gains unwinding the 5.2% February decline. Non-store retailers increased 2.1%. Miscellaneous sales were up 1.5%. Clothing sales rebounded 1.0%. Health and personal care continued to post strong gains for a 3rd straight month, up 0.9% versus 1.3% previously.

US April final demand PPI increased 0.2% with the core up 0.1%, following March declines of 0.1% for both. On an annual basis, producer prices were flat (0.0%) versus -0.1% y/y previously, with the ex-food and energy component expanding 0.9% y/y after the 1.0% y/y gain in March. Inflation in the goods sector grew 0.2% in April after an identical 0.2% gain in March, with energy up 0.2% from 1.8% previously. Food prices fell -0.3% after the -0.9% decline in March. Inflation in the services sector rose 0.1% after an 0.2% decline.

Two good pieces of news for the US economy, (particularly the retail figure). The USD and US stock market futures both up

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”

Euro area Q1 GDP revised down

May 13, 2016 Forex Analysis

EURUSD, H1

Eurozone Q1 GDP growth was revised down to 0.5% q/q from 0.6% q/q reported initially. Still a solid acceleration from the 0.3% q/q in Q4 last year, but it seems stronger than expected German growth failed to compensate for the modest acceleration in Italy, the weaker than expected number in Portugal and the ongoing contraction in Greece. In any case, while the earlier timing of Easter may have helped Q1 growth along, indicators already point to a slowdown ahead and the balance of risks going ahead remains firmly tilted to the downside. For now the ECB is on hold and focused on implementing the measures already announced, but at the same time officials are keeping the door to further easing wide open.

Although a revision downwards it was a relatively good figure, with only Greece and Latvia not growing, EURUSD ticked up to the 1.1350 area, but down from yesterdays 1.1400 this morning.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

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”

GBPCAD – Looking Bearish as Oil grinds higher

May 13, 2016 Forex Analysis

GBPCAD, Daily

The BoE left inflation forecasts near unchanged and maintained that the next policy move would likely be a tightening. It also emphasized that economic and financial indicators are likely to be less informative than usual due to Brexit uncertainties. It seems that both sterling markets and the BoE are in a wait-and-see mode. Much will depend on the evoluation of polling outcomes as the Jun-23 referendum draws nearer. The FT Brexit poll tracker currently has 46% for “Remain” and 43% for “Leave,” while Ladbroke betting odds show 71% for the UK to remain in the EU.

The press conference was even more interesting than usual with the normally unflappable Mr Carney seemingly somewhat stressed by the constant referrals to Brexit. He was pushed by the BBC correspondent and he finally (some in the leave camp say it was planned) uttered the “R” word. Recession. In his defence the BoE have two mandates that of fiscal prudence and secondly of transparency. If the UK did tip in to negative growth (and even recession) in the second half of 2016 and he had not expressed the BOE’s view prior to the Referendum, then he (they) would have been accused of poor judgement.

This glut of data surrounding sterling yesterday and the inevitable noise that comes with it lead me to take a closer look at the GBP pairs on yesterdays close. GBPCAD was the pair on the daily chart that looked most interesting:

The Canadian oil sands fires have not damaged production as much as initially thought and the facilities will be back sooner than anticipated, the rally in the oil price keeps grinding higher, for now.

Break of the upper Bollinger band not sustained,
Long tail on Tuesdays candle and break of the 50 DMA at close on Wednesday from overbought levels
Thursday close below the 50 DMA and no direction from associated with volatile Oil price, triggered an entry 1.8562
Daily Oil chart remains bullish positive for CAD
Higher time frame Monthly chart remains bearish
Target 1 – (Daily ATR) – 1.8420 also coincides with 20 DMA.
Target 2 – (Recent low and close to lower Bollinger band) – 1.81300

The recent down trend appears to be weakening so probability of Target 2 lower than normal.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

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”