Forex research

Alpari UK

Experienced member
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Dear t2w traders,

We have designed this thread to provide client focused research that will keep our clients up to date with developments in the FX market.

Our research material is provided in order to help our clients make more informed and hopefully more profitable trading decisions.

As a company we do not provide advice so this section should be used as a supplementary trading tool that educates and informs users of what is moving the markets rather than a trade advisor.

Some of the topics that we will cover in our regular posts are:

• The main themes and talking points in the FX market
• Which currency pairs are getting the most attention from traders and why
• Political and economic events that influence currency movements
• Economic releases round up, review and what effects they may have
• Looking back at events in the FX market to fully understand their significance
• Looking ahead to future events to get readers ready and prepared to make the best trading decisions possible


Alex

________
Alexander Chadwick
Alpari (UK) Representative
 

Alpari UK

Experienced member
1,502 5
UK Opening Call and FX Comment from Alpari UK on 4 February 2013

Today’s UK opening call provides an update on:

• Corporate earnings season begins to wind down this week;
• Focus turns to the euro area ahead of Italian elections;
• BoE and ECB meetings on Thursday likely to attract a lot of attention;
• EUR/USD, GBP/USD, USD/JPY & EUR/GBP analysis.

We may see a break in the recent stock market rally this week, as corporate earnings season begins to wind down and focus turns to the eurozone.

Corporate earnings season has been a major driver behind the stock market rally over the past month, and with that now coming to an end, we could now see the rally run out of steam. Economic data has been quite mixed over the past few weeks, with the fiscal cliff in the US taking its toll on everything from sentiment to consumer spending.

That being said, there has also been a lot of positives in there, including Friday’s jobs report, which despite showing unemployment rose, also contained huge upward revisions to the non-farm payrolls from the past couple of months.

The main focus over the next few weeks is likely to be back on the eurozone, with Italian elections on the 24/25th having the potential to cause a few problems in the area. As it stands, the centre left Democratic party remain firmly in the lead, however Berlusconi has starting to gather significant support in the polls which could make the final few weeks quite uncomfortable.

Last week there was a lot of attention on the US, with a combination of corporate earnings, the Fed meeting and some key economic data drawing a lot of attention. This week, Europe is likely to be the most closely watched, especially on Thursday with both the Bank of England and the ECB due to meet.

With the UK facing a possible first ever triple dip recession in this quarter, people are going to be following the BoE meeting very closely, with many anticipating a further injection of stimulus in a bid to stimulate the economy and avoid recession.

Meanwhile, at the ECB meeting, we are likely to see policy members consider a rate cut given that the economy remains in recession and the euro is getting quite strong which has the potential to damage any recovery. Last week it was confirmed that inflation fell back to 2% last month, which means there is room for further stimulus if the policy members judge it necessary.

The euro is trading lower against the dollar this morning. The pair ended last week strongly, closing easily above 1.35, which suggests it could move towards 1.42 in the coming months, based on the size of the inverse head and shoulders formed over the past year. The stochastic and RSI are both currently suggesting the pair is strongly overbought and given that the RSI is now pointing down and the stochastic has crossed on the daily chart, we could now see a retracement. The next target for the pair could be around 1.35, given that it was a key level of resistance, with the 200 week moving average providing support.


Sterling is trading higher against the dollar this morning. The pair found support on Friday around 1.57, where the 61.8% retracement, of the move from June’s lows to this year’s highs, crosses with the ascending trend line dating back to January 2009. This has previously been a key level of support and the pair looks unlikely to break below here at the moment. If it does break below, it could prompt a move towards 1.5350, based on the size of the double top formed over the past five months.


The dollar is trading lower against the yen this morning. The pair found resistance last week around 93.0, however the pair continues to look quite bullish, with the next target coming around 94.75 based on a previous key level of resistance. For now though, we may see a brief retracement, with both the stochastic and the RSI suggesting the pair is overbought. On the daily chart, the RSI is now pointing down, while the stochastic is crossing in overbought territory which can be a bearish signal.


The euro is trading lower against the pound this morning. The pair has become extremely overbought over the last month and is long overdue a retracement. Now that we’ve seen a cross on the stochastic on the daily chart, we could now see a period of selling, although the longer term outlook for the pair continues to look bullish. The pair could pull back as far as 0.85, to test the 200 week moving average as a new level of support.


Ahead of the open we expect to see...

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Alpari UK

Experienced member
1,502 5
UK Opening Call and FX Comment from Alpari UK on 5 February 2013

UK retail sales jump as shoppers undeterred by poor weather

Today’s UK opening call provides an update on:

• Political uncertainty in Spain and Italy drag global markets lower;
• RBA keep rates on hold at 3%;
• Chinese services PMI jumps to 54.0 from 51.7 in January;
• UK retail sales rise 1.9%, as shoppers battle the bad weather to grab themselves a bargain;
• EUR/USD, GBP/USD, USD/JPY & EUR/GBP analysis.

The political uncertainty in Spain and Italy weighed on stock markets across the globe yesterday, as the US and Asia both closed lower, with the former suffering its biggest daily losses this year.

The uncertainty surrounding the future of Spanish Prime Minister Mariano Rajoy and the rise once again of Silvio Berlusconi’s party in Italian polls, has been a dagger to the heart of the recent rally in the markets, that has seen stock indices trading at multi-year highs.

We could now see a brief return to the risk on/risk off trading that we became accustomed to last year. It appeared that we had moved away from this over the last month, with traders instead paying more attention to corporate earnings and the economic data, however this could only ever last as long as the eurozone remained stable.

Overnight, the Reserve Bank of Australia opted to keep interest rates at 3%, in its first meeting of the year. The central bank cut interest rates four times last year in a bid to stimulate the economy in a time of falling commodity prices and attempt to curb the appreciation of the Aussie dollar. Interest rates are now at record lows and unlikely to be slashed further in the coming months.

The outlook for this year in Australia is generally more positive, helped significantly by an expected return to higher growth levels in China, its largest export partner. Economic data out of China has been improving significantly over the past few months, and January has been no different with the latest Services PMI rising to 54.0 from 51.7.

The economic calendar is once again looking pretty full today, with services PMI’s for the eurozone, UK and US being released throughout the day. In the eurozone, we’re expecting these figures to show some improvement from December, in line with the recent improvements seen in economic data out of the area. Although this does not apply to France, which continues to head in the wrong direction.

The threat of a first ever triple dip recession is doing little to deter people in the UK from splashing the cash, as retail sales in January rose 1.9%, despite expectations of a 0.5% drop. The difficult weather conditions were clearly no match for the lure of the January sales, although it is worth noting that sales of premium products including tablet computer also rose. This could mean that the 49.5 forecast for this month’s services PMI may be a little pessimistic, and could fall well short of the final figure.

The euro is trading lower against the dollar this morning. The pair has become very overbought over the past couple of weeks, so this period of correction has been expected for a while. It is currently finding support from a previous key level of resistance around 1.3490, the 50% retracement of the move from May 2011 highs to July 2012 lows. If the pair trades higher from here, the next target will be 1.3832, the 61.8% retracement of the same move, with a break above here being very bullish. If it breaks below the 50 fib level, it may suggest the bull run is over, prompting a move back towards 1.32, where it will find support from the ascending trend line dating back to July.


Sterling is trading flat against the dollar this morning. The pair has found support once again over the past couple of days around 1.57, where the ascending trend line dating back to January 2009 crosses the 61.8 fib level, of the move from June’s lows to this year’s highs. This second failed attempt to break this key support level may now lead to the formation of a double bottom as long as the neckline is broken around 1.5865. This would be quite a bullish move for the pair and based on the size of the double bottom, should prompt a move towards 1.60.


The dollar is trading flat against the yen this morning. The pair looks quite bearish in the short term, following a long period of buying that has seen the pair gain more than 20% since its lows back in September. Both oscillators are also providing sell signals on the daily and weekly charts, with the stochastic crossing in overbought territory and the RSI pointing down in overbought territory. The next level of support should come around 92.0, which is a previous level of support and resistance.


The euro is trading lower against the pound this morning. The pair has broken back below 0.8575, the 61.8% retracement of the move from June 2011 highs to July 2012 lows, despite finding support here yesterday. If it manages to close back above here it would be quite a bullish signal for the pair. If not, then the next key level of support will come around 0.8525 from the 200 week simple moving average. If it breaks below here, this could suggest that the bull run has come to an end for the pair, however if it holds as a new support level, it will act as confirmation of the original break above last week, and be quite a bullish signal.


Ahead of the open we expect to see...

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Alpari UK

Experienced member
1,502 5
UK Opening Call and FX Comment from Alpari UK on 6 February 2013

BoJ Governor sets earlier departure date

Today’s UK opening call provides an update on:

• BoJ Governor sets earlier departure date, paving the way for more stimulus this year;
• Moderate improvement expected in German factory orders;
• Kraft, Ralph Lauren and Visa all reporting fourth quarter earnings today;
• EUR/USD, GBP/USD, USD/JPY & EUR/GBP analysis.

Bank of Japan Governor, Masaaki Shirakawa, announced over night that he will leave his position earlier than planned in order to make way for his successor.

The decision by Shirakawa has fuelled speculation that the central bank will no longer wait until January next year to implement its open-ended asset purchase program. New Prime Minister, Shinzo Abe, has made no secret of his views that the central bank should be doing more to stimulate the economy, and this move suggests that he is unwilling to wait until next year to see results.

This now paves the way for Abe to appoint a much more dovish Governor who is now unlikely to delay the process of hitting the new 2% inflation target until next January. The decision has put further pressure on the yen, which has now fallen more than 20% against the dollar since September.

It’s looking pretty light on economic data today, with the German Factory orders for December being the main piece that stands out. We’re expecting to see a small improvement here compared to November, however what’s more telling is the year on year figure, which is expected to show a drop for the twelfth consecutive month.

Germany’s finally started showing signs of being dragged down by the debt crisis in 2012, as highlighted by this data, culminating in the economy contracting in the fourth quarter. However, an improvement in the data so far this year suggest it will easily avoid a recession and is looking at a stronger 2013.

Corporate earnings season may be coming to a close, however there are some noteworthy companies still due to report. Today we’ll get fourth quarter earnings from Kraft Foods and Ralph Lauren before the opening bell in the US, followed by Visa and Yelp after the close.

So far earnings season has been largely positive, with more than 70% of S&P 500 companies beating earnings expectations. This is probably due to lower expectations coming into the season, however clearly this isn’t a concern to investors at this stage, with them more focused on keeping the stock market rally going.

The euro is trading lower against the dollar this morning. The pair found resistance over the past few days, from the 200 week simple moving average which had previously acted as a level of resistance. If the weekly candle closes above this level, it would be quite a bullish signal for the pair, prompting a move towards 1.3832, the 61.8% retracement of the move from May 2011 highs to July 2012 lows. The next target for the pair continues to be 1.42, based on the size of the inverse head and shoulders that formed between February and December last year.


Sterling is trading lower against the dollar this morning. The pair found support yesterday around 1,5630, from the ascending trend line dating back to January 2009, before recovering slightly later in the session. It had previously found support around 1.57, the 61.8% retracement of the move from June’s lows to this year’s highs, however it broke below here yesterday which is quite a bearish signal for the pair as it suggests from we’re seeing now is a bearish trend reversal, rather than a retracement from the uptrend dating back to June. We could now see more pressure on the long term trend line, with a break of this level prompting a move back towards 1.5350, based on the double top which formed between August and January.


The dollar is trading higher against the yen this morning. The rally is showing no signs of easing up at this stage, however the pair has become extremely overbought, so it’s worth keeping an eye on the oscillators for early signs of a reversal in the trend. This may come around 94.75, which is a previous key level of support and resistance for the pair. However, if the pair does break above here then the next targets should be 97.6 and 100.45.


The euro is trading lower against the pound this morning. The pair found support over the past couple of days around 0.8575, the 61.8% retracement of the move from June 2011 highs to July 2012 lows, which is quite a bullish signal. The next target for the pair should be those June 2011 highs, around 0.9082, however in the shorter term it should find resistance around 0.8750, followed by 0.88 and 0.89. However, it’s worth noting that the RSI and stochastic are suggesting the pair is overbought are close to giving sell signals which could provide an early indication of a retracement.


Ahead of the open we expect to see...

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Alpari UK

Experienced member
1,502 5
UK Opening Call and FX Comment from Alpari UK on 7 February 2013

OECD urges Bank of England to go “the extra mile”

Today's UK opening call provides a update on:

• Bank of England expected to keep interest rates and QE on hold;
• OECD insists the BoE should do more to stimulate the economy;
• ECB unlikely to cut interest rates at this meeting;
• EUR/USD, GBP/USD, USD/JPY & EUR/GBP analysis.

Focus is back on the central banks today, with both the BoE and the ECB expected to keep monetary policy on hold.

There are strong arguments for additional stimulus from both central banks, in particular the Bank of England given that the UK is at threat of falling into its first ever triple dip recession. This was backed up yesterday by the OECD, who put the onus on the central bank to do more for the economy, claiming it should go "the extra mile" in order to allow the government to stick to its deficit reduction program.

The advice is likely to fall on deaf ears over at the BoE, where policy makers appear convinced that the asset purchases are having little positive impact on the economy. Instead they're likely to stick by the Funding for Lending scheme which they insist is doing more for the real economy than the entire £375 billion of stimulus we've seen in the form of QE.

What may be of more interest is Mark Carney's testimony to the Treasury Select Committee. First and foremost, people want to know whether he's more dovish or hawkish when it comes to current monetary policy. Also, following his recent comments that the bank should also have a growth target, we could see quizzed on how the bank would achieve this without creating inflation risks.

The ECB is also likely to keep interest rates on hold today. It's looking more and more likely that the bank will cut interest rates at some point over the coming months, but the consensus appears to be that it won't be today. However, it's difficult to see what will be gained by waiting a few extra months, especially with inflation now at 2%.

The main argument for a rate cut at this moment in time is the strength of the euro. French President Francois Hollande, in particular, has voiced his concerns repeatedly about how a strong euro is likely to damage the recovery in the eurozone. Unfortunately for Hollande, at the moment Germany and the ECB don't appear as concerned about it so a rate cut for this reason appears to be off the table.

The euro is trading flat against the dollar this morning. The pair has found support around 1.3520, from the 200 week simple moving average. If the weekly candle closes above here it will be a very bullish signal as it will act as confirmation of last week's break above it. Based on the size of the inverse head and shoulders that formed since February last year, we could see the pair target 1.42, although it is likely to face significant resistance around 1.3832, the 61.8% retracement of the move from May 2011 highs to July 2012 lows.


Sterling is trading higher against the dollar this morning. The pair found strong support over the past few days from the ascending trend line, dating back to January 2009, which could now prompt a move higher. However, it also broke below 1.5692 earlier in the week, the 61.8% retracement of the move from June 2012 lows to this year's highs. This is usually quite a bearish signal, so the next big test for the pair will be breaking back above here. If it fails to do that, we could see another assault on the ascending trend line, with a break below that potentially prompting a move back towards 1.5350, based on the size of the double top that formed between August and January.


The dollar is trading flat against the yen this morning. The pair found resistance over the past couple of days around 93.60, a previous level of support and resistance, which has resulted in yesterday's candle forming a perfect doji. Given that both the stochastic and the RSI suggest the pair is overbought, we could now see a pull back in the pair, with the likely target being 91.05, where the ascending trend line, dating back to 11 December crosses with the 50 fib level, of the move from 23 January lows to yesterday's highs.


The euro is trading higher against the pound this morning. The pair has found strong support over the past few days around 0.8575, the 61.8% retracement of the move from July 2011 highs to July 2012 lows. This is a very bullish signal for the pair, especially considering it also recently moved back above the 200 week simple moving average. The next target is therefore those July 2011 highs of 0.9082, however it is likely to find resistance along the way, around 0.875, 0.88 and 0.89. It is worth noting though that the RSI and stochastic on the weekly chart are both offering sell signals in overbought territory, so we could see another pull back, potentially testing the 200 week moving average as a new level of support before continuing its move higher.


Ahead of the open we expect to see...

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Alpari UK

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US Opening Call and FX Comment from Alpari UK on 7 February 2013

Cautious start in Europe ahead of BoE and ECB decisions

Today’s US opening call provides an update on:

* OECD put pressure on BoE to do more to boost the economy;
* Mark Carney’s testimony gets underway;
* ECB unlikely to cut interest rates, but press conference could bring volatility;
* Jobless claims expected at 360,000 after returning to normality last week.
* There’s an element of caution in the markets this morning ahead of the BoE and ECB monetary policy decisions.

The BoE will decide today on whether to take the advice of the OECD and go “the extra mile” to aid the recovery in the UK at a time when the government is cutting spending. The OECD yesterday heaped pressure on the MPC, claiming the government is right to stick to its deficit reduction plan and the onus should be on the central bank to pick up the slack, with further asset purchases.

The view is unlikely to be shared by the policy members at today’s meeting, who have recently questioned the effectiveness of the government bond purchases. However they have yet to try more unconventional policy similar to that seen in the US, with the purchase of mortgage backed securities, ultra low interest rates or the linking of interest rates to unemployment levels.

This may be something we may have to wait until later this year for, following the appointment of Mark Carney as the new Bank of England Governor. Carney, who is currently being questioned by the Treasury Select Committee, takes over on 1 July and has shown in the past that he’s willing to try these more unusual measures.

We could get hints about Carney’s approach during his testimony, which is why in many ways it is likely to be a much higher impact event today than the BoE’s interest rate decision.

Following this, the ECB’s press conference is also likely to attract more attention than normal, in particular the Q&A. If we see no rate cut, as expected, there’s likely to be questions raised about the strength of the euro and whether it’s likely to damage the recovery this year.

Over in the US today, we have jobless claims data which is expected at 360,000 after returning to normality last week, following two weeks in which it hit five year lows.

Ahead of the open we expect to see...

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Alpari UK

Experienced member
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UK Opening Call and FX Comment from Alpari UK on 8 February 2013

Chinese recovery continues as exports jump by 25%

Today’s UK opening call provides an update on:

• Chinese imports and exports jump again in January;
• Inflation a concern in China following a second high monthly reading;
• Wall Street lower as Draghi effect hits global sentiment;
• EUR/USD, GBP/USD, USD/JPY & EUR/GBP analysis.

Stock index futures are pointing to a higher open in Europe this morning, following some positive data out of China.

The Chinese trade data showed a significant increase in both imports and exports compared to a year ago, suggesting that what we saw in the fourth quarter of last year may not have been a blip in a longer term down trend. The data has continued to improve so far this year, with manufacturing continuing to grow at a faster pace and the increase domestic consumption picking up the slack from falling export demand from the US and the eurozone.

One concern may be inflation though, which for the majority of last year was well below the 4% target. The improvement seen in the economy over the past six months has been largely driven by large amounts of stimulus, which could be reduced if inflation continues to rise as it has been in the last couple of months.

Over on Wall Street, stock markets followed the lead from Europe, as traders took profits following the slight change in tone from Mario Draghi at the ECB press conference. Draghi suggested the recovery in the eurozone would begin later in the year, rather than in the second half, which he predicted a month ago. This is only a slight change of tone, but markets were quick to pick up on it.

It has become very clear that fear has crept back into the markets recently. Traders are very aware that stocks are very overbought at the moment and while everyone is willing the rally higher, we’ve seen a few cases of panic selling now at the first sign of trouble. This isn’t necessarily a bad thing though, what it could lead to is a very gradual correction, rather than the sharp selloff that people appear to be waiting for.

The economic calendar is looking pretty light as the week comes to a close. There is trade balance data out of Germany this morning, which is expected to remain solid, with both imports and exports picking up in December. We then have industrial output data out of Italy which is expected to show a drop of 7.2% from a year earlier, although on a more positive note, we’re expecting a small increase compared to November.

The euro is trading higher against the dollar this morning. The pair fell significantly yesterday, breaking below a key area of support between 1.3490 and 1.3520, before finding further support around 1.34, where the 100 day simple moving average crosses with the 50 fib level, of the move from the end of December lows to January’s highs. With the last two weekly candles now forming a bearish engulfing pattern and both the RSI and the stochastic giving sell signals, the short term outlook for the pair is quite bearish. If it continues to edge lower in the coming sessions, it should find further support around 1.3270, where the ascending trend line, dating back to July, crosses with the 61.8 fib level of the same move.


Sterling is trading higher against the dollar this morning. Yesterday, the pair closed back above 1.57, the 61.8% retracement of the move from June 2012 lows to this year’s highs, after finding support earlier in the week from the ascending trend line, dating back to January 2009. If the weekly candle closes above here it could be quite a bullish signal, suggesting that what we’ve seen recently is simple a retracement of the longer term bullish move dating back to June. If that is the case, the pair should target this year’s highs of 1.6380 over the next few weeks, with the next key level of resistance coming around 1.5823.


The dollar is trading lower against the yen this morning. The pair is starting to look quite bearish following the formation of two doji candles on the daily chart, which may suggest we’re about to see a long overdue retracement. If we do see a pull back, we could see it target 91.0, where the ascending trend line, dating back to 11 December, crosses with the 50 fib level, of the move from 23 January lows to this week’s highs. In the shorter term, the next level of support is likely to come around 93.14, followed by 92.50.


The euro is trading lower against the pound this morning. The pair broke below 0.8575 yesterday, the 61.8% retracement of the move from June 2011 highs to July 2012 lows, which has recently been a key level of support. It has found further support just below here though, around 0.8528, from the 200 week simple moving average. If the weekly candle closes above here, it would be quite a bullish signal for the pair. However, the RSI and stochastic are giving sell signals, which suggests we could see more of a retracement over the next few sessions, with the next level of support coming around 0.8465, followed by 0.8440.



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Alpari UK

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US Opening Call and FX Comment from Alpari UK on 8 February 2013

Today’s US opening call provides an update on:


* Chinese imports and exports rise significantly in January;
* Substantial rise in exports to US and eurozone encouraging;
* EU leaders agree on a budget deal for the next seven years.

European stock markets have been boosted this morning by surprisingly strong Chinese trade balance data.

Chinese data is once again driving sentiment this morning, pushing European stock indices higher early in the session. Investors are easing their way back in after Mario Draghi yesterday offered a more pessimistic outlook for the year ahead, claiming the recovery would kick in later in the year rather than in the second half.

The finer details in this morning’s trade balance figures is what traders are really latching on to. Exports rose by 25% compared to a year earlier, which included a 14.5% increase to the US and a 5.2% increase to the eurozone, the highest figures in 10 months and 13 months respectively.

I have so far been pessimistic about Chinese economic growth this year, with its two largest export markets facing strong headwinds and domestic demand being relatively low. However this data is very encouraging, especially when you also take into consideration the rise in imports which suggests domestic demand is also picking up.

It would appear that EU leaders have finally agreed on a budget framework for the next seven years. On the face of it, the deal looks like a huge win for David Cameron, but the problem with these deals is that there’s so many technicalities that each leader is going to head home with their own “victory”.

David Cameron will surely be one of those declaring the negotiations as a win for the UK, after securing the first net reduction in spending in the history of the EU. The payments figure was finally agreed at €908.4 billion, with the headline figure being €960 billion.

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Alpari UK

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UK Opening Call from Alpari UK on 11 February 2013

Pull back imminent as Italian elections and the sequester loom

Today’s UK opening call provides an update on:

• Stock market pull back could start this week;
• Berlusconi’s PDL party continues to close the gap;
• Political infighting continues as sequester looms;
• Eurogroup meeting today should attract attention.

We could see the start of a long overdue pull back in the stock markets this week, as a light economic calendar and the winding down of corporate earnings season puts the focus back on the political uncertainty in Italy and the upcoming spending cuts in the US.

The rising popularity of Silvio Berlusconi’s PDL party in Italy is by far the most concerning of these, given the pace at which they have gathered support over the past few weeks. The fact that with two weeks to go, the gap between the Democratic Party and the PDL is already within the margin of error means we could be facing the very real possibility that the PDL could return to power, just over 12 months after leaving it on the verge of needing a bailout, with the eurozone facing collapse.

The mandatory spending cuts that come into play at the end of the month is also going to do little to ease the uncertainty. Political infighting has so far made a deal to avoid the sequester impossible, despite both parties agreeing that they desperately want to avoid the spending cuts. This has come alongside unconvincing bluffing from both parties that they’d allow the cuts to occur if they don’t get what they want, which means what we’ll actually see is the can kicked down the road once more.

With both of these on the horizon, we could be looking at as much as a 10% pull back over the next month or so, as traders instead look to protect their cash and wait for the next good buying opportunity. The interesting thing will be how much traders now view Spanish and Italian debt, given the rising political uncertainty, despite the OMT backstop.

Today’s eurogroup meeting may attract some attention, with the inevitable bailout of Cyprus likely to be on the agenda. Ordinarily, this would not be such a big deal, but given Greece’s exposure to Cyprus, the threat of default is being taken very seriously. Also likely to be raised once again is France’s concern over the current exchange rate, although this is likely to fall on deaf ears, with northern European countries not seeing it as a threat at this stage.

Looking ahead to the rest of the week, tomorrow’s inflation data is going to be followed closely following the BoE’s decision to leave the QE program as it is despite the risk of the first ever triple dip recession in the UK. This suggests that the economy is not doing as badly as first thought or this figure tomorrow is headed in the wrong direction.

The other main event will be Wednesday when we’ll get the GDP figures for the eurozone countries, which are not expected to paint a pretty picture. On a brighter note, the economic data so far has pointed to a much brighter start to this year, so barring any significant misses, the reaction to these should be minor.

The euro is trading higher against the dollar this morning. The pair found support last week around 1.3350, the 50% retracement of the move from this year’s lows to highs. We could see further downside in the pair this week though, given that the last two weekly candles have formed a bearish engulfing pattern and the RSI has given a sell signal, crossing in overbought territory. The next key level of support would be 1.3269, where the ascending trend line dating back to July’s lows crosses the 61.8 fib level, of the same move.


Sterling is trading higher against the dollar this morning. The pair has recovered strongly despite dropping below 1.57 last week, which could have led to a much sharper fall. The pair is now close to forming a double bottom, dating back to 18 January. If the neckline is broken, based on the size of the formation, it could prompt a move back above 1.60. However, the neckline falls on what is likely to be a key level of resistance, around 1.5823, which was previously a key support level and is the 50% retracement of the move from June lows to this year’s highs. This would make the break even more significant.


The dollar is trading lower against the yen this morning. The pair has been long overdue a pull back, which is what we appear to be seeing now. On the daily chart, we had two perfect doji candlesticks, followed by a lower close on Friday, while last weeks candle is a spinning top, following six weeks of strong gains. On top of this, the oscillators have given strong sell signals. Given that I remain bullish in the longer term, I expect the next key level of support will come around 91.05, where the ascending trend line, dating back to 10 December crosses the 50% retracement of the move from 23 January lows to this months highs.


The euro is trading higher against the pound this morning. The pair made substantial losses towards the end of last week to end a run of four consecutive weekly gains. It also created a bearish engulfing pattern on the weekly chart which suggests we may see a pull back in the coming weeks. The next level of support is likely to come around 0.8419, the 50% retracement of the move from July 2011 highs to July 2012 lows. This is also a previous level of support and resistance which suggests it won’t easily be broken.


Ahead of the open we expect to see...

Read the full report at Alpari News Room
 

Alpari UK

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US Opening Call from Alpari UK on 11 February 2013

French problems mount as industrial output falls in December

Today’s US opening call provides an update on:

* French industrial output falls by only 0.1% in December;
* Fourth quarter GDP figure released Friday expected to still show contraction;
* Italian elections likely to weigh on sentiment over the next few weeks;

Sequester also likely to add to uncertainty, potentially prompting pull back in overbought stock indices.
European stock indices are trading higher this morning, boosted by a better industrial output figure from France.

The French economy has become a cause for concern recently, with data suggesting the economy is struggling to adapt to the higher euro and increased competition from its neighbours. PMI figures released this month for example showed manufacturing and services both contracting at a faster rate than both Spain and Italy.

Industrial output fell less than expected in December, which has provided a boost to European indices, in particular the CAC 40, and the euro this morning. This is no way suggests the outlook is any better for France this year, it’s more a reflection of lower trading volumes and a lack of market drivers with the economic calendar very light this week and corporate earnings season drawing to a close.

It’s also unlikely to be enough to stop France contracting in the fourth quarter of last year, when the eurozone figures are released on Thursday. The interesting thing could even be whether the previous quarters reading is revised lower, which could potentially leave France in recession.

All in all, this week is likely to be a difficult one for Europe especially. The Italian elections are quickly coming to the attention of investors following the extraordinary rise of the PDL party in the polls. The political uncertainty that this brings, given the PDL’s part in bringing the country to its knees and some of the promises made in relation to taxes recently, is unlikely to boost risk appetite this week.

Stock markets are already extremely overbought so this could be the catalyst for the pull back over the next month or so, with stock indices falling as much as 10%. On top of the election, the sequester is due to come into play on 1 March, unless Congress can come up with an alternative. History would suggest this is unlikely to happen quickly, with the sequester probably being moved back a few months.

Ahead of the open we expect to see...

Read the full report at Alpari News Room
 
 
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