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Old May 18, 2018, 8:00am   #271
 
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KTM EURUSD Daily: Can the official data rebound in Q2?

KeyToMarketsUK started this thread Within the G10, the euro has underperformed

The euro continues to remain under pressure led by1Q weak economic data, dollar strength and recent Italian political concerns. The combination of these factors dampened the EURUSD near-term momentum.

Since the beginning of the year, the EZ economic growth fell below expectations. The fresh catalyst, EZ GDP, and core inflation data failed to impress the euro bulls.

GDP rose by 0.4% in both the EA and the EA during the first quarter of 2018, compared with the previous quarter. In the fourth quarter of 2017, GDP had grown by 0.7% in the euro area and by 0.6% in the EU. 1Q GDP data has provided a clear picture that EZ growth has slowdown. The critical question is Can the official data rebound in Q2?

“We still feel that peak growth is now behind us” according to ING Chief Economist Belgium, Peter Vanden Houte
He said “After a robust 2017, growth has somewhat slowed since the beginning of the year. While the first quarter has been affected by a number of one-off effects and underlying fundamentals remain supportive, we still feel that peak growth is now behind us.”

According to Williamson, Chief Business Economist, IHS Markit “The official growth rate for the first quarter was below the signal from IHS Markit’s Eurozone PMI, for which the first quarter average continued to run at a level broadly consistent with approximately 0.5-0.6% GDP growth.”

Inflation story remains weak

EA annual inflation rate was 1.2% in April 2018, down from 1.3% in March. A year earlier, the rate was 1.9%. EU annual inflation was 1.4% in April 2018, down from 1.5% in March. A year earlier, the rate was 2.0%. Especially the core inflation was 0.7%.

Since mid-April, the dollar is appreciating the fundamental shift. The yield on the benchmark 10-year treasury closed at 3.11% (Source: U.S. Department of Treasury).

“IHS Markit’s PMI surveys indicate that the US economy started the second quarter on a solid footing, commensurate with a robust increase in GDP. However, the surveys also point to accelerating inflationary pressures”, reported by Chris Williamson, Chief Business Economist, IHS Markit.

“The USD upward correction is not yet complete. Over the course of this week, our USD scorecard provided more signs of USD strength”, reported by Morgan Stanley. Also said, “However, there are limitations to this current USD advance. Ultimately, we believe that the steepening of the US yield curve, which for now is a USD-bullish signal, will undermine USD in the long term”,

Looking through Italian politics

We think EURUSD has been overreacting to the Italian political risk. As we pointed in our Tuesday’s article, we continue to be bullish on “EURCHF” over the medium term. The max downside we could expect is 1.1600 target at 1.2200 with supports are widely spread between 1.1730/1.1700-1.1660-1.1600. Every support is vital here.

Click the image to open in full size.

The major EURUSD is traidng at 1.1800 and expect to remain in a tight range 1.1700-1.2000 in the near-term.

UBS reported, “The Italian political situation has so far failed to prompt a return to the wider market panic we saw at the height of the Eurozone crisis.”

Petr krpata analyst at ING reported the same. “The eurozone political risk premium as a driver of EUR/USD has diminished meaningfully over the past years (recall the flattish EUR/USD during the summer 2015 Greek crises and the lack of EUR/USD downside ahead of the first round of French presidential elections last year). We thus don’t look for any eurozone political risk premia driven EUR/USD downside.”

Conclusion: We expect in EA various economic indicators to show an expansion in May. The Flash Manufacturing and Services May PMIs are due next week (May 23). The surveys will provide further clues to 2Q growth.
Credit Suisse forecast “Manufacturing and services PMI should rise to 56.7 and 55.2, respectively, in May and bring the composite PMI to 55.6 (vs. 55.1 previously).”

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Old May 20, 2018, 11:29pm   #272
 
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KTM FX Weekly: Global economic calendar (May 21-25). Chart of the week- Gold

KeyToMarketsUK started this thread
  • Inflation for UK and Japan
  • Flash PMIs for EA and PMIs for the US are in focus this week
  • May FOMC minutes could provide clues for future rate path

AUDUSD, NZDUSD, and Gold manage to off marginally from weekly lows. Whereas, EURUSD and GBPUSD closed at the multi-month lows. The USD strength since the end of Jan 2018 and rising US government bond yields have been the trigger for the sentiment. The 10-year government bond yields pushed to 3.11% on Thursday but retraced and closed at 3.06% on Friday.

EUR:

Also read: Can the official data rebound in Q2?
http://www.keytomarkets.com/blog/blo...rebound-in-q2/

We expect in EA various economic indicators to show an expansion in May. The Flash Manufacturing and Services May PMIs are due next week (May 23). The surveys will provide further clues to 2Q growth.

GBP:

After the Bank of England monetary policy summary, market participants and economists have downgraded the GBP bullishness. April inflation report, CPI data and the 2nd estimate of 1Q GDP are the catalysts for the pound’s near-term action. These releases will provide clues for BOE’s future rate hike path.

According to Chris Williamson, Chief Business Economist, IHS Markit “The week includes a particular wealth of data releases which will provide clues as to whether the Bank of England will remain on course to hike interest rates this year.”

USD:

The USD strength since the end of Jan 2018 and soaring US government bond yields are the little reason to focus on the FOMC minutes in an ultra-edge view. In May meeting FOMC has changed the inflation language. “Inflation on a 12-month basis is expected to run near the Committee’s “symmetric” 2 percent objective over the medium term.” Also said, “The Committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal.” We are seeking more clarification in the May minutes.

Chart of the week: Gold

Click the image to open in full size.

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Old Today, 2:58am   #273
 
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Joined Mar 2017
KTM EURUSD Weekly: Every support is vital

KeyToMarketsUK started this thread It’s a big week for EUR with concerns over Italian politics and May PMIs grab the central stage. The common currency tested the 38.2% fib reaction 1.1716 and rebound to 1.1795 overnight. Italy 40 (KTM terminal: Italy FTSE MIB 40) index closed below 100MAs and retraced 50.0% of the recent rally (March 05-May 07).

The Eur enthusiasts are more concentrating on “Mini-BOTs” a common Italian Treasury bill which pays no interest, proposed by Five Star Movement and the anti-immigration League.

“Mini-BOT — is a play on BOT, or Buoni Ordinari del Tesoro, a common Italian Treasury bill or short-term credit note,” reported by Bloomberg.

Data preview:
  • GDP rose by 0.4% in both the EA and the EU during the first quarter of 2018, compared with the previous quarter
  • EA annual inflation rate was 1.2% in April 2018, down from 1.3% in March. A year earlier, the rate was 1.9%

Data preview:

We expect in EA various economic indicators to show an expansion in May. The Flash Manufacturing and Services May PMIs are due next week (May 23). The surveys will provide further clues to 2Q growth.

Credit Suisse forecast “Manufacturing and services PMI should rise to 56.7 and 55.2, respectively, in May and bring the composite PMI to 55.6 (vs. 55.1 previously).”

Nomura: We expect the euro area composite PMI for May to climb to 55.3 from 55.1 in April. At the sector level, we expect the regional manufacturing PMI to increase to 56.4 from 56.2 and the services PMI to increase to 54.9 from 54.7.

Read full story:
http://www.keytomarkets.com/blog/blo...rebound-in-q2/

TECHNICAL OVERVIEW


Eur manages to hold the 38.2% fib reaction (1.0340-1.2550 rally) which is our lower end of the forecasted range. As we pointed in our earlier articles, the near-term action packed in a tight range between 1.1700-1.2000. Break lower could open further to 1.1660 and Nov 07 low 1.1555 with resistance seems to be at 1.1900 and 1.2000.

Click the image to open in full size.


Looking through Italian politics

We continue to be bullish on “EURCHF” over the medium term. The max downside we could expect is 1.1600 target at 1.2200 with supports are widely spread between 1.1730/1.1700-1.1660-1.1600. Every support is vital here.
Read full story:
http://www.keytomarkets.com/blog/blo...rebound-in-q2/

It is important to always keep in mind the risks involved in trading with leveraged instruments.

Have a question? Let us help!

A KTM Analyst is ready to assist you, click on the comment section below
KeyToMarketsUK is offline Broker   Reply With Quote
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