Forex research

US Opening Call from Alpari UK on 4 March 2013

FOMC members speak following failed sequester deal

Today’s US opening call provides an update on:

* Sequester and poor data hit investor sentiment;
* UK construction industry contracts faster than expected;
* Eurozone investor confidence falls on inconclusive Italian elections;
* FOMC members speak for the first time since Congress failed to avoid the sequester.

European stock indices are trading lower this morning, and US futures are pointing to a similar open, as a combination of the sequester in the US and poor data in Europe hits investor sentiment.

It’s been another miserable morning for the UK, after the February PMI figure showed the construction industry contracted faster than expected. A contraction figure was expected, however it was forecast to contract at a slower rate than the month before, instead it’s contracted much faster. This just adds to concerns that the UK is going to struggle to avoid a triple dip recession in the first quarter, let alone grow in 2013.

Investor confidence in the eurozone was dealt a blow this month, as inconclusive Italian elections and lower growth forecasts for the region quickly turned investors bearish, following a couple of months of optimistic figures. Surveys so far this year have been much better which prompted talk of a recovery later this year, however a drop in confidence from -3.9 to -10.6 shows just how fragile the region is in the eyes of investors.

Looking ahead to this afternoon and the economic calendar is looking very light, which is probably negative for sentiment, with the sequester and poor data this morning now weighing on sentiment. One point of interest in the US will be speeches from two voting FOMC members, Jerome Powell and Janet Yellen.

Fed Chairman Ben Bernanke went some way last week to easing concerns about the scaling back of QE in the coming months, but he isn’t the only voting member. On top of that, we could get some insight into how the sequester now changes things at the Fed, with the general consensus up until this point surely being that it would be avoided.

The euro is trading lower against the Australian dollar in early trading today, with the pair looking to continue the downtrend in existence since the triple top seen throughout early February. We have seen a devaluation of the euro across a number of major pairs and this is likely to continue over the coming period.

The triple top seen in February was broken around three weeks ago and the break below this 1.287 level can be seen as pretty bearish for the pair. The Fibonacci retracement levels (January low – February high) are being well respected recently and the most notable element of this is the turn from support found at the 38.2 retracement into resistance.

We have seen a third push back up towards this level throughout Monday morning trading and this has coincided with a touch of the 50 period simple moving average derived from the central bollinger band. The previous touch of this indicator resulted in a push back towards the downside and subsequently I expect to see a move towards the lower band, which coincides with the 61.8 Fibonacci retracement and previous resistance in January.

The CCi indicator has spiked above the 100 level which indicates a price action away from ‘normal’ and subsequently points to further confirmation that we may be in a downtrend today. The stochastic also points to a potential move south and subsequently the two targets for the day lie at 1.277 and 1.267.
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UK Opening Call from Alpari UK on 5 March 2013

UK data eyed as country flirts with triple dip recession

Today’s UK opening call provides an update on:

• Eurozone services PMIs expected to pull back on Italian uncertainty;
• Eurozone retail sales recover slightly in February;
• UK house prices set to rise for third month in four;
• UK retail sales rise 2.7% in February, highest since April 2011.

European stock index futures are pointing to a higher open on Tuesday, after the Dow closed in on its record highs in the US session last night.

Services PMI’s out of the eurozone are likely to be watched closely this morning for signs that the political uncertainty in Italy had an impact on activity, as seen already this week in March’s investor confidence figure. Given that these surveys were taken in February, it may be too early for them to reflect this, however Berlusconi closed the gap to within the margin of error when the last polls were taken on 10 February so the clues were there.

All five of the services PMIs (eurozone, Germany, France, Italy, Spain) are expected to fall slightly from a month before, with the French figure once again falling the furthest as the country continues to suffer from falling competitiveness at a time when the euro is appreciating.

Retail sales in the currency block are expected to have improved slightly in February, compared to the disappointing drop seen in January. An increase of 0.2% is forecast, however this would still represent a drop of 2.9% for the year, with the rapidly rising unemployment undoubtedly being the main cause of the drop.

UK economic data may provide some kind of a lift to the pound this morning, following the beating that it’s taken over the past couple of months. According to data from Halifax, house prices are expected to have risen by 0.2% in February, following a slight drop in the first month of the year. All in all, these figures have been positive recently, with three out of the last four showing house prices rising. This tends to be a good indicator of improving economic activity, but more importantly, it’s a sign that the BoE’s funding for lending scheme is loosening credit conditions for home buyers.

The services PMI will be watched very closely, given the UK’s reliance on the industry. We could see it fall back slightly from last month’s six month high of 51.5. however as long as it stays above 50, any reaction in sterling should be minor. However, a drop below 50 following the disappointing figures that we’ve seen out of the UK recently will spark fears that the country is headed for its first ever triple dip recession, which could push sterling below 1.50 against the dollar, a key psychological level.

That being said, the BRC retail sales figure released this morning suggests there’s nothing to be worried about. Sales rose by 2.7% compared to a year earlier, the biggest jump in almost two years. Given how much consumer spending contributes to output in the UK, we could still avoid another recession despite other data being so disappointing.

The euro is trading flat against the dollar this morning. The pair is still finding support around 1.30, a key psychological level, however I expect to see it break below here as the week goes on. It has already broken below 1.3060, the 61.8% retracement of the move from 13 November lows to this year’s highs, which is quite a bearish signal. Below 1.30, the next key support level will be around 1.29, where the neckline of the inverse head and shoulders crosses with a previous level of support.
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Sterling is trading higher against the dollar this morning. The pair found strong support over the last couple of sessions around 1.50, a key psychological level. It could now pare some of its recent losses and test 1.53 as a new area of resistance, after breaking below this level a couple of weeks ago for the first time since July 2010. It is currently finding resistance around 1.5120 though and is likely to find further resistance around 1.52. In the longer term I remain bearish with the next target being 1.49.
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The dollar is trading lower against the yen this morning. The pair has lost a little momentum after trading higher for most of last week, although it is currently finding support around 93.15, so we could see it edge higher from here. I’m still quite bullish on the pair, with the break of this year’s high around 94.75 prompting a move towards 97.60, followed by 100.45.
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The aussie is trading higher against the greenback this morning. The pair found support yesterday around 1.013, the previous target after the pair broke below the neckline of the double top formation. It is also the neckline of the larger double top formation on the weekly chart. A break below here should prompt a move back towards 0.96, based on the size of the formation, which is a previous major level of support for the pair. In the shorter term, the pair is trading higher after finding support around 1.013, although it is now finding resistance around 1.025. This has previously been a key level of support so a break above here may be difficult.
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US Opening Call from Alpari UK on 5 March 2013

Today’s US opening call provides an update on:

* Eurozone services PMI’s much better in February;
* Retail sales pick up in the UK, easing concerns of a triple dip recession in Q1;
* US services expected to remain strong, despite falling from a month earlier.

It’s been a positive morning in terms of economic releases out of Europe, with only the Spanish services PMI falling short of expectations. The most reassuring data came out of France, which has been a major concern to investors so far this year.

The original figure released a couple of weeks ago showed the services industry contracting at a faster rate for a third consecutive month, whereas the revision was slightly higher than January’s figure, suggesting things could already be looking up. This has been reflected in investors’ appetite for risk again, with European stock indices all easily in the green early in the session.

A surge in retail sales at the start of the year in the eurozone has added to the better sentiment seen this morning, with a big jump in January contributing to a year on year drop of only 1.3%. While this doesn’t sound like much, when compared to a 3% fall in January, it’s a major step in the right direction.

It’s even been a more positive morning in the UK, with retail sales and services data both rising compared to a month earlier despite expectations of a small drop. Retail sales had their best performance since April 2011 according to data released by the BRC, easing some fears that the disappointing data already seen this quarter may push the UK back into recession.

The services PMI rose to 51.8 in February, which is equally important for the UK given how reliant it is on the industry. While poor manufacturing and construction data is far from ideal, if this had followed suit, the threat of a triple dip recession would be very real. As it is, I think it will be marginally avoided and the bounce seen in sterling suggests other traders agree. I still expect the pound to fall in the months ahead though, the threat of recession may be disappearing but a lack of growth this year still looks highly likely.

Finally today we’ll have the release of the services PMI out of the US, which is expected to remain strong at 55.0, down slightly from a month earlier. Unlike Europe, we are still seeing moderate growth in the US economy, despite the fact that unemployment remains stubbornly high.

The Australian dollar is trading lower against the greenback this morning, with a push lower in view. However, the decision of the RBA to keep the headline rate at 3%, along with a key level of support around 1.015 have the potential to shift market sentiment to the upside.

The pair have been trading in a downward channel since mid-February and given the price touched the higher boundary to this channel this morning, we have since got a reaction to the downside. Temporary support around the 61.8 Fibonacci level has been broken through and subsequently our targets are 1.02 and then 1.018. The stochastic and CCI both provide further backing to the notion that we may see this movement to the downside.

However, the existence of the long term level of support at 1.015 is going to be difficult to break and maintain below. Should this occur, we would likely see a further push to the downside with 0.97 a long term target. If the price moves back to the upside from this support, we would see the ability of the pair to break above the 50 period moving average as highly significant. The decision of the RBA to keep rates at 3% will no doubt strengthen the currency somewhat and this backs up the notion that we may see support and potentially a move out of decline and into ascendancy for this pair in the near term.
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UK Opening Call from Alpari UK on 6 March 2013

All eyes on Big Merv ahead of QE decision tomorrow

Today's UK opening call provides an update on:

• BoE Governor King appears before the Parliamentary Committee;
• ADP non-farm figure attracting little interest due to past inaccuracy;
• Beige Book could attract more interest than the ADP figure.

This morning we'll hear from Bank of England Governor Sir Mervyn King, when he testifies before the Parliamentary Committee. While the topic is of little concern to traders, he is likely to be questioned on the central banks monetary policy and his personal apparent indifference to the UK inflation rate when he voted for more asset purchases at last months meeting.

Given that the testimony comes one day before the Monetary Policy Committee announces its decision on interest rates and QE, King's comments are going to be scrutinised as traders seek to get some insight into tomorrows decision. The general consensus at this stage is that while the voting may be closer, the majority is likely to vote against additional purchases this month. Personally I think it will be next month when we see more asset purchases, with one additional member voting in favour tomorrow, leaving the voting at 5-4.

The key economic release today will be the ADP non-farm employment change, which is meant to be an accurate estimate of Friday's non-farm payrolls figure, especially since the calculation was modified. The only problem is this only applies to the final revision, in fact the first estimate has continued to be very inaccurate so irrespective of what figure we get today, I expect the reaction to be non-existent.

What may attract more interest is the release of the Federal Reserve's Beige Book which provides insight into how the central bank views the economy in the months ahead. Ben Bernanke may have gone some way to reassuring investors that the QE3 program won't be scaled back quite yet, however if economic conditions are seen improving significantly, given the risks and costs that certain members are concerned about, we could see more support for an alternative.

The euro is trading higher against the dollar this morning. The pair has found resistance early in the session around 1.3060, the 61.8% retracement of the move from 13 November lows to this year’s highs, which could be quite a bearish signal. I now expect to see the pair edge lower again, with the next level of support coming around 1.30, a key psychological level that it failed to close below on Friday or Monday. Below here, 1.29 should provide strong support, given that its previously a key level of support and resistance, followed by 1.2850, from the 200 day simple moving average.
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Sterling is trading higher against the dollar this morning. The pair in continuing to consolidate following the sharp sell-off over the past couple of months, which is quite a bearish signal. This consolidation may be turning into a small retracement, with the pair potentially testing 1.53 over the coming weeks as a new area of resistance, following the significant break below here a couple of weeks ago. That does change the bearish outlook in the longer term though, with the next major area of support coming around 1.50, a key psychological level, followed by 1.49.
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The dollar is trading flat against the yen this morning. It’s early in the session, but the pair has already formed a spinning top which is a trend reversal signal, so we could now see another assault on 94.75. That being said, the weekly chart suggests the more bearish momentum at this stage, with last weeks candle forming a perfect hammer. On top of that, the stochastic has crossed in overbought territory and is beginning to move back below 80, while the stochastic is also overbought but pointing lower. The pair is currently finding support around 93.20, a previous level of support and resistance, while the next target looks like being 92.0.
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The aussie is trading higher against the greenback this morning. The pair starting edging higher after finding support around 1.013, the target level from the double top which formed between November and February, but also the neckline of the longer term double top, which formed between July and this week. A break below the neckline of the latter should prompt a move towards 0.96 based on the size of the double top formation. However, given that there’s just been a RBA meeting with quite a hawkish tone, we’ll probably see some more upside instead. The next level of resistance should come around 1.0335 from the 200 day simple moving average, with a break above here prompting a move towards 1.0360.
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US Opening Call from Alpari UK on 6 March 2013

US employment data up next ahead of NFPs on Friday

Today’s US opening call provides an update on:

* FTSE and DAX follow the Dow’s lead;
* The holiday season fails to inspire consumers in the euro area;
* NFP estimate released this afternoon;
* Fed’s Beige Book provides insight into how long QE3 will last.

Stock markets in Europe are higher this morning, as the FTSE and DAX hit five year highs less than 24 hours after the Dow closed at its highest ever level in the US.

It’s been pretty quiet this morning in terms of market moving news, I think this is simply the case of investors taking full advantage of the buzz that’s been created in the markets after the Dow hit all time highs.

The majority of investors out there know this rally is on borrowed time, highlighted by the amount of buying recently of defensive stocks (those which are least impacted by major sell-offs), so this was just seen as an opportunity to profit from the bull market while they still can.

One piece of economic data released this morning was the eurozone’s fourth quarter GDP figure, which showed the region contracted by 0.6%. As this was a revision of the preliminary figure released last month, the reaction in the markets was non-existent, however that’s not to say it’s not concerning.

Not even the holiday season could encourage consumers to hit the shops, as the eurozone contracted at its fastest rate last year, which just shows the magnitude of the job ahead for the eurozone leaders in getting the area growing again. If consumers aren’t spending it’s very difficult to create jobs or attract investment and that is something the countries will have to address this year.

Looking ahead to this afternoon and a lot of the attention is going to be on the US. The ADP employment change figure will be released shortly before the opening bell and is expected to show that 173,000 jobs were added in February, down from 192,000 in January.

The only reason people really pay attention to this figure is that it’s meant to provide an accurate estimate on the non-farm payrolls figure on Friday, however given its inaccuracy even since the new calculation, especially in respect to the first estimate, it’s likely to be largely ignored again unless there’s a major swing in either direction.

This evening the Fed’s Beige Book will also be released. It may not attract as much attention as it did last year when the Fed was debating whether to launch QE3, however given the amount of debate among Fed voting members at the moment in relation to when and how they start to scale it back, this could provide some insight into how they vote.

The kiwi is trading higher against the greenback for the third consecutive day, off the back of a swing down towards the lower boundary of a long term channel dating back to June 2012. This has brought about a renewed upside emphasis upon the pair should we see a push above the current level of resistance provided by an ascending trend-line and a key area of previous support.

This pair has certainly been trading in some fairly substantial swings over the recent months, however the signs are there that point to a potential flattening out of this trend, which could ultimately lead to a reversal and push to the downside.

For the time being, the pair has been trading in this blue ascending channel for around eight months and there is the potential for a similar push back towards that central trend-line which would likely coincide with the 0.846 region. However, the current price represents significant resistance owing to two factors. Firstly, we have the ascending trend-line derived from the 50.0 Fibonacci fan from August low to February high. This has provided support and resistance over a number of occasions and subsequently the recent push below has the potential to see support turn to resistance. Secondly, we are also at a key level around 0.833, which has also provided both support and resistance as highlighted with the oval shapes.

Whether this area provides enough resistance to result in a swing back to the downside is unlikely, however we can see that there has been a progressive flattening of the trend, with previous highs respecting the blue channel, whereas recent highs have been found around the 0.846 region, which points towards a progression into the sideways channel in purple.

What I feel is likely for this pair is resistance around 0.833, followed by an attempted push towards the upper boundary of this sideways channel; found at 0.846. However, we are looking for further signs of a reversal in the pair, with a downturn looking increasingly likely in the medium term. The CCi and stochastic both point to further upside in the near term which backs up the theory that we are likely to see upside momentum and a further attempt to break above 0.833.
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The dollar is trading higher against the swissy. The release of better than expected ADP employment change figures in the US has pushed the greenback upwards towards the recent level of resistance around 0.946. Should this occur, we would be looking towards 0.9493 as a further level to the upside.

This price movement is looking like a continuation of the upward momentum found around February and subsequently we are looking to see if resistance can be broken signalling a push higher. Furthermore, the 50 hour moving average is turning back to the upside, indicating a bullish bias for the pair.

However, the RSI and stochastic oscillators are around overbought levels and the stochastic in particular is moving to the downside, signalling a potential move downward over the coming period. Nonetheless we are looking to see if the level of 0.946 can be broken to signal a push towards the 80 day high of 0.9493.
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UK Opening Call from Alpari UK on 7 March 2013

Voting will be close at BoE and ECB meetings today

Today’s UK opening call provides an update on:

• BoJ monetary policy unchanged at Shirakawa's last meeting as Governor;
• No further asset purchases expected from BoE, but voting will be close;
• ECB likely to hold off on a rate cut for at least another month.

It’s all about the central bank meeting on Thursday, with the BoE and ECB likely to follow in the footsteps of the BoJ and hold off for one more month.

The Bank of Japan unsurprisingly opted to keep monetary policy unchanged over night, at Masaaki Shirakawa’s final meeting as Governor. The decision was widely expected given Shirakawa’s reluctance to ease aggressively until now, despite the 2% inflation target and long history of deflation, and with a much more dovish Haruhiko Kuroda due to take over from next month, it made little sense to shake things up at this meeting.

Assuming his nomination is approved in parliament next week, Haruhiko Kuroda will chair his first meeting on 4 April and is expected to hit the ground running. Traders have been holding off on the next stage of yen weakening until we actually see some aggressive action, while the Nikkei has continued to creep higher, hitting four and a half year highs in the process.

One positive sign at this meeting was discussions around more unconventional measures, such as keeping rates low until the 2% inflation target has been hit. Even more positive was the discussion over potentially bringing the open ended bond buying program forward to this year, and while it was rejected in an 8-1 vote, I still expect to happen once Kuroda is appointed.

The Bank of England is also expected to hold of on any further easing at its meeting today. The vote on asset purchases last month came as quite a surprise, especially given that Sir Mervyn King was one of the three to have voted in favour of additional easing. In the past, we have usually seen further QE from the BoE the month after King votes in favour, however that is not expected to be the case today.

The MPC is stuck between a rock and a hard place at the minute, with inflation at the top end of its target and not expected to return to 2% for at least two years and growth continuing to elude the UK. On top of that the pound has weakened off the back of a long list of disappointing data, which is only going to push inflation higher, while the policies being undertaken by the government are making life even more difficult when it comes to maintaining price stability.

In the months ahead, we’ll probably see the BoE turn a blind eye to the rising inflation in a bid to revive some growth to the economy, however I don’t expect that to start today. At this months meeting we may see one additional vote in favour of further easing, drawing even more attention to the meeting in April. This is unlikely to stop the pound weakening in the meantime though, with the 1.50 level potentially being broken today by the prospects of additional easing next month.

The euro is trading higher against the dollar this morning. The pair fell yesterday and closed below 1.30 after finding resistance around 1.3060, the 61.8% retracement of the move from 13 November lows to this year’s highs. This suggests there’s more selling to come, with the next major target being 1.29. I think we could see it find strong support here, given that it’s a previous level of support and also the neckline of the inverse head and shoulders. If it breaks below here, the next big support level should be 1.2840, the 200 day simple moving average, followed by 1.27.
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Sterling is trading lower against the dollar this morning. The pair has now broken below 1.50, a key psychological level, which should prompt a move back towards 1.49. From here we could see the pair target 1.53 again and test it as a new level of resistance, given that it was such a major support level previously, however whether we see this will depend on whether the pair finds support at 1.49, or breaks below it. A break should prompt a move in the coming months towards 1.44.
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The dollar is trading lower against the yen this morning. The pair has been consolidating for around a month now, following an aggressive move higher. We could see further consolidation over the next month or so, with traders clearly waiting for some signal that the Bank of Japan is going to increase its asset purchase program. Until then, it’s probably going to trade in a range between 92.0 and 94.75.
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The aussie is trading higher against the greenback this morning. The pair has been strengthening following the hawkish comments at the RBA meeting this week, and with no rate cut now expected in the coming months, I think the aussie could continue to appreciate. The next target for the pair should be 1.3060, which is a previous level of support and resistance. The pair should also find resistance here from the 200 day simple moving average.
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US Opening Call from Alpari UK on 7 March 2013

Japan leads the way as focus is centered upon central bank policy decisions

Today’s US opening call provides an update on:

* Cameron to dash hopes of more government spending in this month’s annual budget;
* BoE voting will be close, however no more QE expected this month;
* ECB expected to keep rates on hold until inflation falls further;
* Spain pays below 5% for 10-year debt for first time since November 2010.

Any hopes from Bank of England that the government will ease up on the deficit reduction plan in order to revive growth in the annual budget on 20 March will be dashed today, when David Cameron speaks in Yorkshire. The Prime Minister is expected to highlight the importance of sticking to the current path of austerity, claiming the benefits are starting to be seen.

Vince Cable’s comments recently that the government should utilise the low interest rates, in order to revive growth through capital spending, clearly fell on deaf ears here and are unlikely to convince the Prime Minister or the Chancellor any time soon that their single focus on austerity is the wrong path.

What this means for Sir Mervyn King and the other MPC members is that there’s even more pressure on them to provide support for the economy at a time when inflation is already at the upper end of its target and a depreciating pound is pushing it even higher. The BoE are in a lose lose situation at the moment, they must choose between heaping more pressure on the general public with higher inflation at a time of low wage growth or be criticised for not being accommodative enough at a time when there’s a real threat of a third recession in four years.

While no increase in the asset purchase facility looks likely today, last month’s voting suggests we’re going to see a central bank more focused on growth than inflation in the near future. The voting in today’s meeting will probably be neck and neck with those against more QE edging it by five votes to four.

The ECB is also expected to leave monetary policy unchanged for now, ignoring calls for a rate cut in order to counter negative economic growth and a strong currency that threatens certain member states. I still expect to see a rate cut in the coming months, however we may have to see inflation fall sufficiently below 2% target level before certain policy makers climb on board.

On a more positive note for the eurozone, Spain had a very successful bond auction this morning, raising more than its initial target at the lowest rates in almost two and a half years.

It is the first time that the government has been able to sell 10-year debt below 5% since November 2010, which suggests the recent concerns over political instability in Spain or the knock on effect of the Italian elections are not as great as people first thought.

The Aussie dollar has been trading in an ascending channel against the loonie over the past four weeks, which has now brought the price level towards the key level of 1.6 which was touched in yesterday’s trading. Subsequently we have come to a crossroads whereby a pushy back towards the downside is likely, despite the potential of a push towards 1.075 driven by negative Canadian data.


The pair have exhibited consistent swings since March 2011 between the two boundaries of 1 – 1.6, with the only exception being a double top to 1.075 in January 2012. Subsequently we know there is a significant area of resistance to be found at these levels which will largely require a substantial shift in emphasis to reject.

This channel in particular can be seen very clearly, including a distinct respect of the halfway marker, derived from the blue linear regression channel. This also coincides with the 61.8 Fibonacci retracement of the August to October 2012 swing. Subsequently, should we see this reversal to the downside, the level of 1.034 is highly likely to provide support, in much the same way as it has done in late 2012.

Taking a look at the CCi indicator, this is currently above 100, which in previous occasions has signaled a potential for significant movement to the downside as marked out by the red vertical lines. The stochastic also points to an overbought market, which adds more credibility to the notion that we may see a downturn in the coming days. I would generally see a push of the CCi back below 100 as an indicator that we may have begun a downtrend and that the sentiment is shifting.

However, we must also bear in mind that the Canadian data has recently been slightly disappointing and we are also expecting an increase in the unemployment rate from 7.0% to 7.1% on Friday, which could provide the catylyst to push that price action back towards 1.075. However, for me the emphasis remains bearish for this pair given both are innately strong commodity currencies and the size of the upward trend over recent months.

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UK Opening Call from Alpari UK on 8 March 2013

Calm before the storm ahead of US jobs report

Today’s UK opening call provides an update on:

• Nikkei hits four and a half year highs as traders sell the yen;
• China posts surprising trade surplus, despite week long holiday in February;
• Calm before the storm this morning, with US jobs report released this afternoon.

The second phase of yen weakening may be upon us less than 24 hours after Masaaki Shirakawa chaired his final meeting as Bank of Japan Governor, with a much more dovish Haruhiko Kuroda expected to ease aggressively starting next month.

Japanese stocks pushed higher over night, hitting new four and a half year highs, after the yen began weakening again following a month of consolidation. It was always clear that we were going to see further weakness in the Japanese currency, it was just a matter of what would spark the next move. Now that we’ve seen this breakout, we could see a lot more weakness for the yen in the coming months, which is good for Japanese exporters and therefore the Nikkei, which will now be eyeing those June 2008 highs of 14,470.

In Europe, stock index futures are pointing to a higher open following the release of some strong Chinese trade balance data. Imports fell much more than expected, dropping 15.2%, while exports were higher, more than doubling analysts expectations with a year on year rise of 21.8%. This gave an overall trade surplus of 15.3 billion yuan, against expectations of a rare deficit of 8.8 billion yuan, which we tend to expect here due to the impact of Chinese Lunar New Year, a week long holiday in February.

We’re likely to see the calm before the storm this morning, as traders act with an element of caution ahead of the jobs report in the US. This isn’t unusual as the jobs report is seen as the big daddy of all the economic releases, given that it gives the most clear insight into the health of the worlds largest economy. I’m quite optimistic about these figures today, especially given the significant improvement seen in the weekly jobless figures this year. If we see a non-farm payrolls figure similar to the ADP figure released Wednesday, I think we’ll see the unemployment rate come down a notch.

EURUSD

Following a strong rally in the pair yesterday, the euro has found resistance just above 1.31 from the 100 day simple moving average. A significant move has been the break back above the 61.8 fib level, which suggests there aren’t too many sellers left and we may have seen the full extend of this retracement. If we see a break above the 100 day moving average that would act as confirmation to me that the pair has turned bullish in the short term, with the next level of resistance coming around 1.3150.
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GBPUSD

Sterling has broken back below 1.50 this morning, which suggests there’s plenty more downside in the pair yet. The next key level will be 1.49, a break below here will be a very bearish signal with the next major support being 1.44. However if this holds, or if the weekly candle closes back above 1.50, I expect to see the pair edge higher towards 1.53 in the short to medium term. Here, we will see this previous key level of support tested as a new resistance level. If this acts as resistance, it would act as confirmation of the break below a couple of weeks ago and would be very bearish.
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USDJPY

Following a month of consolidation, we may have finally seen that break to the upside which looks to have sparked the next phase of yen weakening. Personally, I need to see a weekly close above 95.0 before I become bullish, however the early signs are encouraging. If this is a legitimate break above, it could prompt a move back above 100 for the first time in four years, although that probably won’t happen straight away. In the shorter term, my target would be those March 2009 highs around 97.60, although the pair will probably find resistance along the way around 95.50 and 96.50.
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AUDUSD

The aussie rally may have run out of steam early, having found resistance around 1.0280. The pair reacted strongly to the decision by the RBA not to cut interest rates earlier this week and looked to be heading back towards 1.05 to test the long term descending trend line. I still expect to see the bullish move continue in the coming weeks, although the 200 day simple moving average should be a big test now, around 1.0340. Before that, the pair should also find resistance around 1.03.
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Ahead of the open we expect to see...

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US Opening Call from Alpari UK on 8 March 2013

Would a strong NFP be bad for stocks?

Today’s US opening call provides an update on:

* Europe higher on strong Chinese trade data;
* US jobs report up next;
* US unemployment could fall as weekly jobless claims fall back below 350,000;
* Strong NFP figure could be bearish for stocks.

European stock markets are all higher this morning after trade balance figures out of China pointed to a strong recovery this year.

A strong Chinese economy, in the same way as the US, is beneficial for the global economy as a whole so positive data out of China tends to be reflected in most stock indices. This is especially true at a time when the financial markets are being flooded with liquidity, traders are simply waiting for any excuse to join the rally.

The rest of the morning may be a little quieter in the equity markets, with only German industrial production data due to be released before the US jobs report this afternoon. This is usually the case when it comes to non-farm payrolls day, with traders positioning themselves ahead of what is the headline figure of every month.

The number of jobs added in February is expected to be similar to the month before, at around 160,000. That being said, if the ADP figure released Wednesday is anything to go by we could be in for a surprise to the upside, with that particular estimate showed slightly less than 200,000 jobs being added last month. It is worth noting though that it has proven to be quite an unreliable estimate of NFP in the past.

The unemployment rate could also cause a stir in the markets today, following a number of lower weekly jobless claims figures so far this year. Despite market expectations that the rate will remain at 7.9%, I think we could see this come down today, although the impact this has is difficult to predict.

Naturally people assume that a strong figure is positive for the US economy and therefore good for US equities. However, at a time when certain Federal Reserve members are uneasy about the risks and costs associated with the large amounts of stimulus being injected into the financial system every month, a positive figure could actually lead to the scaling back of QE, which in term spooks investors and halts the rally, which has pushed the Dow to all time highs this week.

In terms of the dollar, strong figures can only be seen as positive for the greenback. A scaling back of QE would naturally see the dollar strengthen, while positive economic data is generally positive for the currency and finally, if strong NFPs prompt risk aversion, the dollar is a major safe haven.

The euro swissy pair have been trading in a strong uptrend over six of the past seven trading days and today it seems as though we have the potential for resistance to kick in with a subsequent move back to the downside. This pair is highly correlated around the 1.2 mark and therefore a resumption of a move back towards that level is expected in the near future.

This pair were trading consistantly around the 1.2 mark for a number of months as can be seen below on the weekly chart. This is owing to the cap placed upon the Swiss franc refraining from allowing it to move below the 1.2 mark in accordance with the significant devaluation of the pair since the beginning of the economic crisis in 2007 (rate fell from 1.67 to 1 within four years).
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Recent rumours of a potential increase in the cap to 1.25 served to bring speculative movement of the pair, peaking at 1.256 in January. However, these have since been largely dispelled, bringing the price action into a downward trajectory until recently. As we can see in the daily chart, the downward movement has been primarily constrained by the downward standard deviation channel; a channel which has now been reached via recent upside momentum. This current level also coincides with a key area of resistance provided by the region between 1.235-1.2375 which has provided support and resistance throughout 2013.

There is likely to be an increased degree of sideways movement for the pair as this recent run slows down somewhat, providing the potential for a reversal back to the downside. The overbought stochastic points to this potentially occurring on Monday, at which point we would look for the CCi to cross back under the 100 level as a potential confirmation signal.

Should this reversal occur, we will be looking towards 1.232 as the initial target, pushing down towards 1.227 and subsequently 1.22.
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Ahead of the open we expect to see...

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UK Opening Call from Alpari UK on 11 March 2013

Europe to open higher despite worrying Chinese data

Today's UK opening call provides an update on:

• Chinese industrial production and retail sales fall below expectations in February;
• Inflation jumps to 3.2% prompting talk of monetary tightening from the PBOC;
• Investors focusing on strong US employment data;
• Second GDP estimates for Italy, Greece and Portugal released this morning.

European stock indices are expected to open higher on Monday, as positive US employment data released on Friday continues to overshadow concerning figures out of China over the weekend.

Industrial production and retail sales both fell short of expectations in February, raising fears that the improvement seen in China over the last six months is only temporary, and growth could fall back towards 7% later this year. The retail sales figure is particularly concerning as China can no longer rely on export driven growth alone, with the US and the eurozone both expected to have another difficult year. Domestic spending needs to continue to rise and this data suggests it's not rising fast enough to offset falling export growth.

Just as worrying is the jump in inflation, rising to 3.2% in February from 2% the month before. While the figure is deceivingly high due to the jump in prices around the Chinese Lunar New Year, which we see every year, inflation is expected to reach 4% in the second half of the year, which is likely to prompt some monetary tightening from the PBOC. This has been a huge driver behind the recovery over the last six months, which means we're likely to see a pull back in the data once again, with growth unlikely to exceed 8% this year, as previously hoped.

While the Chinese data is a concern, investors are still focusing more on the strong employment figures out of the US on Friday. The non-farm payrolls figure smashed even the most optimistic of forecasts, while unemployment fell by 0.2%, the clearest sign yet that businesses have not been discouraged by the political issues in Washington and higher taxes for consumers.

The economic calendar is looking pretty light on Monday, with German trade balance data due out early this morning, followed by French industrial output. This will be followed by the second GDP estimates for Italy, Greece and Portugal, all of which are expected to remain deep in contraction territory.

EURUSD

The euro has started the week positively, despite opening below 1.30, which could have been seen as a bearish signal. The pair has been consolidating over the past couple of weeks, following a significant period of selling after hitting the 1.3710 highs at the start of February. This could be seen as a continuation signal, which means we could see further selling in the short term, with 1.29 providing the next level of support after 1.30. That being said, if the pair breaks above the descending trend line, it would suggest the outlook is actually quite bullish, with the next levels of resistance coming around 1.3060 and 1.3150.
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GBPUSD

Sterling is trading higher this morning after finding support on Friday around 1.49. If the pair breaks below here, the next target would be around 1.44, with support in the shorter term coming around 1.4840, 1.4720 and 1.4650. At the moment it looks like this isn’t going to happen, with the pair instead looking like pushing higher, with the next target being 1.53. Given that this was previously a key level of support, the pair may test it as a new level of resistance, which would act as confirmation of the original break and prompt a move back towards 1.44. The next resistance levels should now come around 1.4980, 1.5020 and 1.5150.
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USDJPY

The dollar yen pair has been consolidating for the last month, following a period of intense buying that saw it gain more than 20%. On Friday, it finally broke above 94.75, which should now prompt the next wave of buying, with the next target being 97.60, followed by 100.45. In the shorter term, the pair should find resistance around 96.30, followed by 96.65 and 97.0.
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EURGBP

The euro is trading flat against the pound this morning, having found support for a second day from the descending trend line. A break above here could prompt a move higher for the pair, which has been trading sideways for around six weeks now, with the next level of resistance coming around 0.875. I think 0.88 is going to be a key level here, with it being both a previous level of support and resistance, and the 78.6 fib level. A break above here should be quite bullish for the pair, with the next target then being 0.9082.
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Ahead of the open we expect to see...

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US Opening Call from Alpari UK on 11 March 2013

Recession looms for France as data disappoints again

Today’s US opening call provides an update on:

* Eurozone economic data disappoints;
* Big drop in French industrial output in January;
* Italian GDP figure revised lower.

Disappointing data out of the eurozone is weighing on European stocks on Monday.

The most concerning of the releases has once again come out of France, where industrial output fell by 1.2% in January, well short of forecasts for a 0.1% rise. France is going to be a constant worry this year, given its reluctance up until this point to adopt similar programs of austerity and reforms to that of its neighbours, which looks to have left it behind in its bid to regain competitiveness.

The majority of data released this year in respect to France has been negative, which points to more pain down the road, especially if we see further appreciation of the euro which I expect to hit 1.42 against the dollar later this year.

The GDP figure out of Italy wasn’t any better, as it showed the country contracted 2.8% in the fourth quarter compared to a year earlier, a small revision higher on a previous estimate. Italy has much more pressing issues to worry about than small revisions to GDP figures, such as who will lead the country, which is why the reaction to the revision was minimal.

The US session is going to be a little quieter compared to last week, with no economic data due to be released. There are a couple of short term issues of treasury notes however this is unlikely to attract too much attention. We may just see further reaction to Friday’s jobs report this afternoon, with traders now more upbeat about the economic recovery and the apparent lack of impact from the sequester.

Ahead of the open we expect to see...

Read the full report at Alpari News Room​
 
UK Opening Call from Alpari UK on 12 March 2013

UK growth and German inflation in focus this morning

Today's UK opening call provides an update on:

• S&P closes within 9 points of all time highs, while Dow hits them for a fifth day;
• BoJ Governor elect hints at aggressive easing before April meeting;
• NIESR GDP estimate provides insight into first quarter performance;
• Expectations low ahead of UK manufacturing and industrial output data;
• German inflation data could prompt speculation of future ECB rate cut.

After a slow start to the week, European stock index futures are pointing to a slightly lower open after the Dow and S&P in the US posted gains for a seventh consecutive session, with the latter now within 9 points of all time highs.

Over in Asia, the Nikkei pulled back slightly, while the yen extended its losses after Haruhiko Kuroda, who is expected to be confirmed as new BoJ Governor this week, hinted at easing monetary policy before the next meeting in April. All this talk of aggressive action has been building in the markets for weeks now, to the point where expectations are so high it's going to be difficult for the BoJ to live up to them. We're going to need to see something special at the next meeting, such as bringing the open ended asset purchases forward to the first half of this year just to keep the Nikkei ticking higher and the yen pushing lower.

The RICS house price balance fell back to -6% in January, due mainly to poor whether, however surveys have also shown that property professionals are actually more optimistic about property prices this year. This is quite a positive sign for the UK as it suggests that not only are banks coming round to the idea of lending, probably due to the funding for lending scheme, but also that people see the market improving and want in. Given the correlation between economic performance and property prices in the past, this can only be a good thing for the UK which is forecast to barely grow again this year.

We'll get our first insight into how the UK has performed in the first two months of the year this morning, when the NIESR releases its GDP estimate for the period December - February. While this estimate is far from perfect, it could give an indication as to whether the country has grown or contracted so far this year, which is especially important after the UK contracted in the fourth quarter of last year, meaning it now faces a possible first ever triple dip recession.

Manufacturing and industrial production figures are expected to show a slight improvement in January, rising 0.1%. This still represents a drop of more than 1% in both compared to a year earlier, highlighting the difficulties facing both industries in the UK, where even the most optimistic people are expecting marginal growth this year.

There's been a lot of speculation recently that the ECB are strongly considering cutting interest rates, after a strong euro pushed inflation back in line with its target of 2% or lower, with the figure expected to fall further in the months ahead. The release of Germany's inflation figure for February this morning will only increase expectations of a rate cut if it's released in line with forecasts at 1.5%. Jens Weidmann has openly opposed a cut until now due to inflation risks, however even he would find it difficult to fight a cut at future meetings with inflation falling at a rapid pace and well below target.

EURUSD

Despite recent attempts to break above the descending trend line, the euro is continuing to edge lower against the dollar this morning. The pair did break back above 1.30 yesterday, however we’re likely to see this tested again today, with a break below here prompting a move back towards 1.29. Alternatively, we could see another attempt at a break above the descending trend line, with a daily close above here being quite bullish for the pair, with the next big resistance levels being 1.3060, 1.3125 and 1.3150.
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GBPUSD

Sterling is continuing to look quite weak against the dollar in the longer term, however a lack of a daily close below 1.49, despite numerous attempts in the last couple of days, suggests we may see a retracement before the next move lower. This was capped off with a doji candle yesterday, a reversal signal, which could form a morning star today if the pair closes higher than the opening price. This would be a very bullish signal and could prompt a move back towards 1.50, potentially even as far as 1.53.
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USDJPY

We’re seeing more yen weakness today, with the dollar rallying as high as 96.70 over night, hitting more than three and a half year highs. The pair is only looking like heading in one direction at the moment, with the next big resistance level being 97.60. Above here the next target will be 100.45. In the shorter term, we’re currently seeing resistance around 96.40 and could see further resistance around 96.75 and 97.0.
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EURGBP

The euro broke back above the long term descending trend line yesterday, before finding resistance this morning around 0.875. The next major resistance level comes just above here around 0.88, the 78.6% retracement of the move from July 2011 highs to July 2012 lows. This is also a previous level of support and resistance. A break above here should prompt a move towards 0.9082.
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Ahead of the open we expect to see...

Read the full report at Alpari News Room​
 
US Opening Call from Alpari UK on 12 March 2013

Yen rallies as Democrats refuse to support Iwata nomination

Today’s US opening call provides an update on:

* Kuroda receives back from opposition Democratic party, deputy nominee Iwata relying on fringe votes;
* More shocking data out of the UK prompts talk of a triple dip recession;
* German inflation falls to 1.5%;
* Spanish debt auction a success.

The focus has been on Japan this morning, after the Democratic Party revealed that they would not support the nomination of Kikuo Iwata as deputy governor of the BoJ.

As Shinzo Abe’s party don’t hold the majority in the upper chamber, they are reliant on opposition parties to support their nominations if they are to be passed, something that until this morning didn’t appear to be a problem.

While the Democrats have agreed to support the nominations of Kuroda and Nakaso, the lack of support for Iwata means Abe now has to rely on votes from the fringe parties, who are still expected to offer their support. The yen still rallied on the back of this as a vote against Iwata is seen as a vote against a more radical approach to reflating the economy, which would further weaken the yen.

More abysmal data out of the UK this morning has once again prompted talk of a triple dip recession. Manufacturing and industrial production figures have not been a strong point for the UK for quite a while now but these have been especially poor. Both fell more than 1% compared to a month earlier, despite expectations of a small rise.

Inflation in Germany was 1.5% in February, dropping another 0.2% compared to January, and taking the total fall since December to 0.6%. This should go some way to easing concerns in Germany about the inflation risk associated with an ECB rate cut, which surely increases the probability that we’ll see one in the coming months.

Spain successfully auctioned €5.83 billion of short term debt this morning with much lower yields than at a similar auction a month earlier. There were concerns following the Italian elections last month that investors may boycott Spanish and Italian bonds, however this was clearly just a knee jerk reaction.

Ahead of the open we expect to see...

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