Tuesday, 14 March 2017
Trading signals - Yellen press conference and the rate decision in the market focus
Posted by Fort Financial Services at 04:23 Labels: dollar , euro , gold , oil , trading signals , yen
Last week, the Brent oil market unexpectedly broke out from the medium-term channel of $54- $57.30 where oil traded since December 2016. Strong data on US oil reserves as well as stronger USD gained amid expectations of rate hike. This led to the closure of long positions and triggered accumulated stops below the level of $54 that brought massive sale-off down to the area of $53 and $51. In general, the situation can be characterized as the outflow of large speculative capital from long oil positions amid global capital relocation in anticipation of interest rate hike in the United States at the next meeting. Nevertheless, we believe that oil at current levels is strongly oversold and the level of $50-51 per barrel acts as an important strategic support. Some pressure on the oil market will continue from strong US currency, but after the results of the Fed meeting we expect a partial oil recovery. Medium-term longs at current positions seem attractive to us.
Trading recommendations: Longs at levels $50- $52.
During the decline in the previous week, gold futures reached strategic resistance at $1190- $1195. Throughout the previous week (March 6-10), the gold market was under pressure. Players sold gold on sharply increased expectations of an interest rate hike in the US at the next meeting on March 15. However, as soon as Friday's data on the US labor market came out and surpassed expectations, investors sharply fixed profits, thereby rolling back price back to the area of $1208- $1210. Taking into account the inflation indicators that coincided with the targets of the US regulator, as well as the general positive outlook for the US economy for the coming year, we can talk about three or four rate increases this year. This is the intrigue that the market is going to clarify at the Yellen's press conference. From a fundamental point of view, in the medium term, this is a negative factor for the gold. At the same time, it is not necessary to expect further short-term decline of gold on the factor of the higher rate, the players have priced in the forthcoming event in the prices as much as possible. The overall mood of the market is rather neutral - US dollar index indicates. From a technical point of view, last week's decline set a mid-term uptrend that began in December 2016 ($1120- $1265) at risk. The situation indicates the transition to sideway mid-term trading, where the support level is $1190- $1195, and the resistance will be at $1210- $1220. We recommend waiting for the market reaction at the next meeting of the Fed.
Trading recommendations: Out the market.
USD / JPY
The pair is slowly but surely fulfils our expectations - we were expecting an upward momentum with the aim of JPY116.70-JPY117 after settlement above JPY114.60. American currency was overheated last days and followed profit taking has slowed down the implementation process of this scenario. Nevertheless, the fundamental factors and the technical picture indicate the continued gain of USD/JPY. The news about the interest rate hike can lead to increased volatility. However, long positions on this market after pullbacks look attractive.
Trading recommendations: Longs at JPY114.60 on pullbacks.
Rumors about a possible slowing of the bond purchase program and that the ECB is considering options for raising the interest rate amid the return of European inflation to the regulator's targets, completely changed the alignment of forces on this instrument. Traders temporarily forgot about political risks and the upcoming elections in a number of European countries. The pair gained in the area EUR 1.0705. Although the prospects for European currency strengthening have increased significantly, we believe that the pair will remain in the range EUR 1.0500-EUR1.0830 for some time.
Trading recommendations: Out of the market.
Fort Financial Services
This trading analysis is for informational purposes only and is not intended to be a strict recommendation for action or an offer for the purchase or sale of any currency, future or stock. Publishing the information we do not try or to attract any funds or deposits. We share our analytical view of current market situation and we don’t have any open position in instruments discussed and no plans to open any positions. Any person considering this research should carefully consider the risks associated with this and the level of trading experience.
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