Daily Fundamental Analysis By ForexTime ( FXTM )

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Old Jan 10, 2017, 10:08am   #1
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Daily Fundamental Analysis By ForexTime ( FXTM )

Forextime Daily Market Analysis

Asian equities retreat as investors shift to cautious mode


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After a strong start for the year, equity markets started to cool down in the second trading week of 2017. Most Asian major indices are in red today, as Wall Street failed to make new highs and the Dow retreated further from the key psychological 20,000 mark, while oil suffered a steep selloff on Monday.

Investors who built their positions based on Trump’s victory are likely to start cashing out for the time being and shift their focus on fundamentals with the earning season kicking off later this week when U.S. big banks release their fourth quarter results. I’m not confident to call a correction yet, but certainly many investors got ahead of themselves betting on fiscal stimulus, and while business usually tends to under promise and over deliver, this doesn’t seem to be the case with the U.S. new President.

Although Kuwait’s Oil Minister Essam Al-Marzouk who is chairing the committee to oversee compliance of OPEC’s output assured the markets that OPEC and non-OPEC members will abide to the planned cuts, still both oil benchmarks dropped 4% on Monday. This clearly indicates that it’s not just an OPEC game, and the expected increase in U.S. and Canadian supplies are likely to threaten the oil rally. Data from the U.S. on Friday showed rig counts rose for ten consecutive weeks and it’s just about some time for this to translate into additional production, suggesting that downside risk may remain in play, and rather than just focusing on implementations of OPEC production cuts, investors should be looking at the bigger picture on whether supply will meet demand in the second half of 2017.

The U.S. dollar fell for a second day, extending its slide from the 14-year high hit on January 3. The pull back in the dollar came despite hawkish speeches from Fed officials suggesting that the central bank is getting closer to achieving its dual mandate. Both Fed presidents, Charles Evans and Patrick Harker aren’t ruling out three rate hikes in 2017, while Eric Rosengren called for stepping up the pace of interest rates hikes to prevent inflation from overshooting. However, traders are still not yet completely convinced and pricing in only two hikes for 2017 according to CME’s Fed Watch. With no tier one economic data on the calendar until Friday, U.S. bond yields will remain to be the key driver for the greenback.

The Pound remained under pressure after Monday’s steep selloff on comments from UK’s Prime Minister Theresa May which intensified fears of “Hard Brexit”. Although the pound looks undervalued, the risk of further selloff may remain in play as we get closer to triggering article 50. Meanwhile comments from Scotland’s First Minister on BBC that she’s not bluffing about her vow to hold a second referendum on Scottish independence if Britain leaves the single market is another factor to worry about on the medium-term.


By Hussein Sayed, Chief Market Strategist (Gulf & MENA)
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Last edited by Trader333; Jan 10, 2017 at 11:03am.
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Old Jan 17, 2017, 10:05am   #2
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FXTM Official started this thread Forextime Daily Market Analysis

Volatility elevated ahead of May’s Brexit speech; Pound recovers

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It’s Sterling’s day.

Financial markets are anxiously awaiting U.K.’s Prime Minister Theresa May speech later today where she will lay out a detailed divorce plan from the EU. Lot of reports were leaked since Sunday on what to expect her to say, and the most interesting part is that she has no interest in partial departure which suggests we’re heading towards a “Hard Brexit”. Traders were very fast to react, sending the pound 1.6% lower on Monday to trade below 1.20. However, the recovery in early Asian trade Tuesday indicates that lot of the bad news are already priced in, and for the pound to fall substantially lower it requires more than just signs of a hard Brexit plan.

If the Supreme court decided that May needs to secure the consent of Parliament before triggering article 50, potentially delaying Brexit for couple of months, this is likely to provide sterling a boost by unwinding many short positions. Traders should be aware that sterling won’t be a one way play and volatility could be elevated to extreme levels.

On the data front, UK CPI is expected to hit 1.4% in December, up 0.2% from November and 0.5% from October’s reading. This will not only mark the highest inflation rate since mid-2014 but the pace of inflation escalation is pulling U.K.’s real interest rates even lower. Of course, this is going to be a challenge for the BoE, but if it indicates anything, it’s interest rates next move is only upward, leaving monetary policy with very few options to support the economy if needed.

The safe haven Yen is the major beneficiary of the heightened uncertainty over U.K.’s Hard Brexit scenario and Trump’s policies. USDJPY has fallen for the seventh straight day, and declined by more than 4.3% from January 3 peak. The fall in bond yields worldwide will continue to lend some support for the Yen, but whenever this trade is over I expect the Yen to weaken again.

The U.S. dollar is falling against all its major peers with the index dropping below 101. There’s no fundamental reason for the selloff and I don’t think the dollar’s rally is over yet, but the “Trump trade” has clearly cooled down in the past couple of days as markets still have many answered questions regarding future fiscal policies. Let’s hope we get some answers on Fridays inauguration.



By Hussein Sayed, Chief Market Strategist (Gulf & MENA)
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Last edited by Trader333; Jan 17, 2017 at 11:37am.
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Old Jan 23, 2017, 9:02am   #3
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FXTM Official started this thread Daily Market Analysis

The Week ahead: Politics to take center stage

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Donald Trump is finally in power, a new era has arrived, and his policy plans in the first couple of weeks will override fundamentals. Markets spent more than two months pricing in growth policies promises, lowers corporate taxes, and deregulations, now it is time to deliver as markets will no more move on words but actions.

U.S. dollar bulls were not really impressed in the new Presidents’ inauguration speech, as it was focused more on protectionism and lacked any concrete plans to drive growth. Repealing Obamacare, building a Mexican border wall, and withdrawing from the Trans Pacific Partnership are not the kind of news investors want to hear, they need to know when pro-growth fiscal policies will come into play and more importantly whether congress will approve them.

The days and weeks ahead will likely see volatility increase in equities, fixed income, and currency markets. Investors are already buying exchange-traded products that track volatility, this explains the level of expected uncertainty going forward.

The week ahead will also see U.S. earnings season move into high gear with more than 20% of S&P 500 companies reporting fourth quarter results including Alphabet, Amazon, Microsoft, McDonald’s, Verizon, Johnson & Johnson, Boeing, EBay, and AT&T. According to Factset, 61% of the companies that reported results so far managed to beat profit estimates, while only 47% managed to beat on revenues.

On the U.S. economic data front, all eyes will be on Friday’s U.S. Q4 GDP release. Growth is anticipated to slow significantly from Q3 3.5% to only 2.2%, as net trade expected to turn negative. Homes sales, services PMI’s, trade balance, and durable goods are also on the agenda for next week.

It will also be an interesting week for sterling as U.K.’s supreme court will eventually deliver its ruling on Tuesday on whether Prime Minister Theresa May can activate the process for Brexit without parliamentary approval. We highly expect that the court will rule in favor of Parliament’s approval to trigger article 50, but any spike in sterling likely to be short lived.


By Hussein Sayed, Chief Market Strategist (Gulf & MENA)
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Old Feb 7, 2017, 7:17am   #4
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FXTM Official started this thread Daily Market Analysis

The Week ahead: Politics to take center stage


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The Australian dollar is taking the spotlight as the Reserve Bank of Australia is set to have its decision about the current interest rate levels, and the market thus far is not expecting anything much from the RBA. With the interest rate held at 1.50% it still remains one of the highest in the developed world, but the Australian economy is currently waiting to see what the outcome will be from the Trump effect, and while things have been rocky it does seem that the economy is starting to look slightly better. However, yesterdays retail sales showed that it's not all smooth sailing as it dipped to -0.1% m/m (0.3% exp), this result lends weight to the fact that the RBA may touch on the consumer economy not picking up as expected. But the real weight will be focused I feel on the economy as a whole and the commodity sector which has been recovering in recent months in anticipation of the global economy picking up.

Markets have been very much a fan of commodity currencies in recent weeks, with global risk appetite picking up the demand for yield has lead to large jumps in the NZD and of course the AUD, with the AUD looking very much the stronger of the two. So far the AUDUSD has been on a very bullish trend and it certainly has not seemed to lose any steam at present. The 20 day moving average has acted as dynamic support as it has moved up the chart, and this looks likely to be the first real test as comes under pressure. After all markets can't remain bullish forever, especially when it comes to FX markets. At the same time resistance at 0.7680 has so far stifled the bulls in there run up the charts, but the recent bearish movement has found strong bullish sentiment so expectations are building for further movements past this level onto the next major level at 0.7730.

Global up turn has so far been talked about, but not come through just yet. However, oil markets have been looking more and more uncertain when it comes to direction for the majority of traders. One thing that does remain clear is that oil is coming under further pressure in the markets to find some direction. At present the 20 day moving average continues to act as dynamic support and is pushing the bears out of the market as it looks to take on the key level of resistance at 54.46. As the two come together expectations will build for a bullish breakout, or if we had a reversal we could see some strong bearish pressure. Pressure will build though, and the bulls have the advantage in this sort of scenario and fundamentals starting to lean in their favour.


By Alex Gurr, Guest Analyst
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Old Nov 1, 2017, 11:03am   #5
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FXTM Official started this thread Daily Fundamental ForexTime ( FXTM )

Currencies stay range bound ahead of Fed’s decision


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It is a quiet Wednesday in the currency markets. Traders are favoring to remain on the sidelines ahead of multiple key risk events, including the Federal Reserve monetary policy decision later today; the Bank of England’s rate decision on Thursday; President Trump’s nomination of the next Fed Chair; the U.S. tax reform announcement and Friday’s NFP report.

Today’s FOMC meeting will not be accompanied by an update on economic projections, nor by a press conference. Traders have to act on very few amendments on a 500 words statement. The main theme is unlikely to change, and the Fed will stick to its plans of gradual tightening. However, recent economic releases have shown significant improvement in the U.S. economic activity, and GDP has grown 3% for two consecutive quarters, suggesting that we may see slight, positive changes in assessing economic activity.

Despite an uptick in headline inflation in September, core CPI continued to miss estimates, and remained below the targeted 2%. Thus, I expect little to no change on inflation assessment.

Overall, the Fed will likely meet market expectations, by keeping interest rates unchanged in November, and signal a rate hike in its final meeting in December.

President Trump’s nomination for Fed Chair on Thursday could easily overshadow today’s statement, especially if Fed Governor Jerome Powell is not his first choice. Powell has been supportive of Janet Yellen's policy of gradual tightening in monetary policy; thus, I do not expect big moves in Treasuries, or the U.S. dollar, if he is nominated. However, if Stanford University’s Professor of Economics, John Taylor, is nominated instead, expect big moves in Treasury yields and the dollar, which could appreciate sharply against its peers. According to Taylor rule, a forecasting model that determines where interest rates should be, based on targeted inflation and full employment, interest rates should be much higher the current levels.

The Kiwi was the only outperforming currency today, surging 1% against the dollar after labor market statistics showed that the cost of labor grew 1.9%, and the unemployment rate fell to a nine-year low. If wages continue to show signs of strengthening, the Reserve Bank of New Zealand will likely start raising rates next year, as opposed to earlier forecasts of tightening in 2019.



By Hussein Sayed, Chief Market Strategist (Gulf & MENA)
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Old Nov 3, 2017, 6:35am   #6
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FXTM Official started this thread Daily Fundamental ForexTime ( FXTM )

Markets poised for Nonfarm Payroll


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The build up has begun for tomorrows NFP announcement and the market is betting big time on a strong result of 313K; this is a very large expectation, but it makes a lot of sense when you consider the seasonal impact that Christmas has on markets. Labour markets certainly boom during this period and even part time workers are considered part of the work force. I will say one thing, with such a large number it will be hard to beat, and I'm not certain that markets will take kindly to anything below the 313K, so it could be the NFP of the year on this basis. Markets will also be digesting the recent announcement that Powell will take over from Yellen as the FED chair. The markets thus far have been positive regarding this, with a number of heavy weight finance figures speaking out in favour of him. Many had expected a hawk, but the reality is that he's likely to take over from the Yellen framework and continue it in the short to medium term until he has a good grasp of the situation.

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For the NFP traders, the metal markets is always the big calling when it comes to movements. Gold has thus far been creeping up on whatever USD weakness it can find, which is not surprising as the bulls are always there. Any NFP weakness tomorrow could see gold catapulted above the current resistance level at 1281 with the potential to even break through 1295 if it's quite bad. In the event it's a very strong result and in line with expectations then 1267 and 1247 are likely to be key levels of support for the gold market. All the moving averages at present are not likely to impact any shifts upwards or downwards so it will be a case of playing of key price levels that the market can digest at this present time.

It was also a big day for the British market as the Bank of England raised interest rates by 25 basis points, leaving the intraday banking rate at 0.5%. This move had been widely expected, but the comments afterwards helped drive the pound down and encourage the doves in the market as the Bank expected inflation to taper off (as the pound stabilised) and also Brexit would bring uncertainty to the market causing issues in the long run.

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The big benefactor of this was of course the FTSE 100 which lifted sharply on the news as the bulls rushed in to take advantage, and as the UK oil producers showed strong earnings as well. The market is now poised to have another crack at resistance at 7600 and NFP could be a catalyst which could push it through tomorrow as well. In the event that markets fall back down support at 7551 and 7436 is likely to be key levels, and markets will be looking to stop the rot if anything does transpire.
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Old Nov 7, 2017, 5:05am   #7
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FXTM Official started this thread Daily Fundamental ForexTime ( FXTM )

RBNZ set for change on new government mandate



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The New Zealand government continues to be in the eye of traders as the current changes to the Reserve Bank of New Zealand look to be fast tracked. So far what we know is that the focus will not only be on inflation, but almost full employment for the NZ economy. This should come as no surprise given the recent elections and the want for the government to change to focus on this. Additionally, there is the need for a change on current FX policy which could have far reaching impacts on the NZ economy, as the current minor party (NZ first) wants to see the RBNZ intervene in FX markets to help drive export markets and keep the NZD lower. This has been seen as futile in the past given the RBNZ being quite small compared to world markets, so it could cause minor issues going forward. Either way markets are not currently upbeat regarding the prospects of the NZDUSD, but I believe the NZD is starting to stabilise compared to other currencies and is showing the odd signs of the bulls back in the market.


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So far the NZDUSD bull have managed to claw back a considerable amount of ground in the face of uncertainty in the NZ economy. For me resistance at 0.6960 is the current strong level that is holding back any further gains on the charts, the reason being is that no one knows the current direction of the NZ market after elections. If it was positive then I would expect a jump to 0.7029, but a potential slow down shortly after this jump. In the event we did see minor falls on the charts then support could be found at 0.6891 and 0.6834 respectively, with the ability to go lower as markets are considerably more bearish after the recent election.

Oil has been one of the big jumpers on the charts as markets have been quick to worry about the situation in Saudi Arabia recently. The anti corruption crackdown has taken a few high profile heads, and the markets are worried about the state of play from the world's largest oil producer. Certainly, there have been drawdown's on global oil supplies, but the shakeup of affairs could have the largest impact in the long run and drive oil prices higher in the short term.


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So far Oil bulls have charged forward and knocked out support at 56.17 as the oil markets continued to run higher. Resistance level can be found at 59.08 and 62.12 on the charts with the potential to go higher if more political uncertainty presents itself. There is also the potential for charts to dip lower and support can be found at 56.17 and 50.21 as the market looks to drift lower as news looks more promising potentially.
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Old Nov 13, 2017, 10:39am   #8
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FXTM Official started this thread Daily Fundamental ForexTime ( FXTM )

Sterling slides, Bitcoin tumbles & Investors seeking more clarity on tax reforms


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Sterling fell more than 0.5% early Monday, after the Sunday Times reported yesterday that 40 Conservative Party MP’s agreed to sign a letter of no confidence in the Prime Minister, Theresa May. While this remains short of the 48 votes needed to force a new leadership, it still creates much frustration amongst investors seeking clarity on Brexit negotiations. With May’s position being potentially at risk and no significant progress after six rounds of talks with EU, Sterling may come under increased pressure in the next couple of days, with the 1.3024 support level at risk of being breached. A leaked letter from Boris Johnson and Michael Gove pushing for Hard Brexit, add to the uncertainty as House of Commons meet on Tuesday.

It is also a busy week on the UK’s economic data front, with Consumer Price Index, Producer Price Index, labour data and retails sales due to release. However, politics are likely to remain the dominant factor moving the pound this week.

For investors finding the low volatility environment boring, have a look at Bitcoin. The cryptocurrency lost more than quarter of its value after reaching a high of $7,888 on Nov 8. The cancellation of a plan to increase the bitcoin’s block size “Segwit2x” on Wednesday, is what to be blamed for the price crash, but given that prices rallied $400 on Monday it seems the news has been digested. We have seen similar steep falls in Bitcoin throughout the year; specifically in June and September, but every time a considerable decline occurs, new investors jump in to experience the new asset class. The increasing investor interest in the cryptocurrency market has pushed CME Group to announce the launch of a bitcoin derivative soon, indicating that more fund managers and professional investors will become involved. Although Bitcoin might not be a suitable asset for conservative investors due to its volatility, I still see a great potential ahead.

Given that the earnings season has come to an end, equity investors will shift their attention to the U.S. tax reform plans. There is a considerable difference between the Senate and the House on how to proceed, and if no clear path evolves, I expect a further pullback in equities. The Senate’s proposed delay of the tax cut until 2019 is definitely not what President Trump is looking for, so it remains to be seen whether he can push Republicans to unify when he returns from his Asia tour.



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