Monday, 31 July 2017
Optimism takes on Wall Street ahead of fresh jobs data
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Wall Street
Wall Street top three stock indexes were set for a higher open in pre-session hours on Monday, with market players looking ahead of key employment data by the end of this week.
Last week, US markets ended in red territory, with Amazon stocks closing down by 2.5 percent after falling more than four percent during the session in the light of downbeat earnings.
According to the latest report, second-quarter earnings per share came in at $0.40, much lower than an initially forecasted earnings of $1.42 a share. Sales outperformed expectations.
The Nasdaq composite closed 0.1 percent to the downside at 6,374.68, as FAANG (Facebook, Amazon, Apple, Netflix, Google) stocks weighed heavily on the tech index.
The Dow Jones industrial average added 33.76 points to trade at 21,830.31 by the closing bell. The S&P 500 fell 0.13 percent to 2,472.10, with consumer staples pushing other sectors lower.
- Dow Jones Industrial Average: 33.76 / 0.15% / 21830.31
- Standard & Poor’s 500: -3.32 / -0.13% / 2472.10
- Nasdaq Composite: -7.51 / -0.12% / 6374.68
On the data front, the Commerce Department said second-quarter gross domestic product came in line with market analysts expectations at a 2.6 percent growth rate.
In a separate report, the University of Michigan showed a better-than-expected development of of consumer expectations and consumer sentiment in July. According to the report, they came in at 80.5 and 93.4 respectively, both above forecasted values.
Ahead in the session, the Chicago PMI for July is up at 13:45 GMT, with 61.0 on the watch, while pending home sales for June are set for release fifteen minutes later.
Weekly Outlook: July 31 - Aug 04
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weekly outlook
Monday
Europe: the Eurozone will present its latest consumer price index at 09:00 GMT, with a 1.3 percent expected. The unemployment rate for June is due at the same time and it’s likely to tick down to 9.2 percent.
United States: Chicago PMI for July is set for release at 13:45 GMT, with 61.0 on the watch. Pending home sales for June are due at 14:00 GMT.
Tuesday
Asia: China’s Caixin manufacturing PMI will be published at 01:45 GMT.
Europe: UK’s nationwide housing price index for July will be out at 06:00 GMT. Later on, Markit will be releasing manufacturing PMIs in Germany, the Eurozone and the United Kingdom at 07:55 GMT, 08:00 GMT and 08:30 GMT respectively. Also, a preliminary reading on the union’s second-quarter gross domestic product will be available as of 09:00 GMT.
United States: the Bureau of Economic Analysis will present its Core Personal Consumption Expenditure (PCE) Price Index for June at 12:30 GMT, with a month-to-month forecasted rise of 0.1 percent. The index gauges changes in goods and services prices and it’s considered one of Fed’s favourite indexes to keep an eye on inflation levels. The Institute for Supply Management is expected to release its manufacturing PMI for July at 14:00 GMT, with a 56.5 seen.
Wednesday
Europe: UK’s construction PMI for July is due at 08:30 GMT, with a forecast move to 54.0.
United States: ADP non-farm employment change will be presented at 12:15 GMT, with a 188,000 jobs growth expected. Attention will also be directed to crude oil reserves from the Energy Information Administration at 14:30 GMT. FOMC Mester and Williams are set to speak at 16:00 GMT and 19:30 GMT respectively.
Thursday
Asia: China’s Caixin services PMI will be published at 01:45 GMT.
Europe: Germany’s services PMI for July is scheduled at 07:55 GMT, with 53.5 seen. The European Central Bank will present its economic bulletin at 08:00 GMT and investors will likely pay attention to it in search for hints on monetary policy changes. Markit will release EU and UK services PMIs at 08:00 GMT and 08:30 GMT respectively. Thursday will be a key date for GBPUSD traders as the Bank of England will hold a new monetary policy meeting, with the rate announcement set for 11:00 GMT and BOE Governor Mark Carney's speech at 11:30 GMT.
United States: Initial jobless claims are to be presented at 12:30 GMT. Factory orders for June are up as of 14:00 GMT, with a 2.8 percent increase expected. By the same time, ISM non-manufacturing PMI will also be released.
Friday
United States: Average hourly earnings, nonfarm payrolls and unemployment rate for July are expected for release at 12:30 GMT. Baker Hughes oil rig count is due at 17:00 GMT.
What’s next? – USDJPY 31.07.17
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what’s next
USDJPY
The dollar/yen was up 0.02 percent as of 07:15 GMT on Monday to trade at 110.72 as market participants looked ahead of key economic data from Japan and the United States later this week, including Japan’s manufacturing PMI, consumer confidence and core CPI, as well as US ISM manufacturing and non-manufacturing PMI and the latest jobs report.
Non-farm payrolls for July are scheduled at 12:30 GMT on Friday, with economists forecasting a 183,000 jobs build last month. The unemployment rate is likely to come in at 4.3 percent. Average hourly earnings are seen rising a moderate 0.3 percent.
As these reports will have serious effects on the likelihood of a Federal Reserve December interest rate hike, the risk on/ risk off mode will dominate the pair in the next few days.
Earlier in the session, Japan reported a 1.6 percent expansion of its industrial production in June, compared to a forecasted growth rate of 1.7 percent.
The US dollar remains under pressure due to the ongoing political crisis affecting the Trump administration, which weighs hard on Wall Street sentiment and expectations for further monetary policy tightening later this year.
According to Fed funds tracked by CME Group’s FedWatch program, traders are currently pricing in a 42.5 percent probability for a rate hike by December.
The US dollar index, which gauges the greenback against a basket of six major rivals, was up 0.22 percent at 93.32 on Monday morning, showing a slight recovery from its weakest level since June 22, 2016. On Friday, the American currency closed 0.61 percent to the downside.
Ahead in the session, participants are waiting for Chicago PMI at 13:45 GMT and Pending Home Sales for June as of 14:00 GMT.
What’s next? – DAX 31.07.17
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what’s next
DAX
The DAX futures traded 0.07 percent lower at 12,131.00 points as of 06:22 GMT on Monday, with traders awaiting activity indexes in Germany, as well as a fresh jobs data in the US.
Earlier today, Germany’s retail sales grew 1.1 percent in June, moving comfortably above an estimated 0.2 percent increase and a previous growth rate of 0.5 percent.
Upbeat data could support a higher open in Frankfurt on Monday, but investors will also be paying attention to the sentiment of US players ahead of a key week for Wall Street.
Germany’s manufacturing PMI is due for release on Tuesday at 07:55 GMT, accompanied by the unemployment rate. By the same time on Thursday, the services PMI for July will be out, while factory orders are set for publishing on Friday as of 06:00 GMT.
Last week, the German benchmark index ended 0.40 percent or 49.34 points lower at 12,162.70, with Food & Beverages, Basic Resources and Utilities weighing the most.
Among top performs we have seen Adidas AG adding 8.79 percent to 192.55, Prosiebensat 1 Media AG rising 0.98 percent to 33.440 and Commerzbank AG O.N. unchanged at 11.135.
On the downside, Linde AG O.N. easing 2.15 percent to 161.70, Continental AG O.N. falling 2.03 percent to 192.60 and E.ON SE NA down 1.95 percent to 8.262.
Market analysts are currently suggesting that the direction of the DAX will depend more on technical factors than on the fundamental environment. A recovery to 12,300 is likely after a brief consolidation period above the 12,100 is formed in the next few hours.
What’s next? – GOLD, OIL 31.07.17
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what’s next
GOLD
Gold futures notched down in Asian hours on Monday as market participants received a weaker than expected Chinese manufacturing and non-manufacturing activity indexes for July.
On the Comex division of the New York Mercantile Exchange, gold futures were down by 0.06 percent to trade at $1,274.50 a troy ounce as of 05:16 GMT.
China’s manufacturing PMI moved to 51.4 in July, expanding below expectations, while the activity index for the services sector came in at 54.5, also falling short of forecasted values. The Caixin manufacturing index is set for release on Tuesday, with an estimated reading of 50.4.
The Asian giant is expecting continuing growth in the services sector, which last year accounted for nearly half of China’s economy. Higher wages give the Chinese people an opportunity to spend more in a wide range of areas, which also serves to boost consumption.
The yellow metal ended last week in green territory, close to a one-and-a-half month peak following downbeat inflation data from the United States. Expectations for a Federal Reserve interest rate hike in December are currently standing at 42.5 percent.
The US dollar index, which gauges the greenback against a basket of six major rivals, ended 0.61 percent to the downside at 93.20 on Friday, its weakest level since June 22, 2016.
Earlier in the session, Japan presented its industrial production index for June, which came in at 1.6 percent, against an estimated 1.7 percent growth.
OIL
Oil prices moved up in early trading hours on Monday as Chinese manufacturing and services PMI indexes boosted expectations for a higher crude demand in the near future.
The US West Texas Intermediate crude contract for September delivery was 0.40 percent higher to $49.91 per barrel as of 06:15 GMT. Meanwhile, Brent futures on the ICE Futures Exchange in London were slightly down by 0.15 percent to $52.44 a barrel.
China’s manufacturing PMI rose to 51.4 in July, expanding below expectations, while the activity index for the services sector came in at 54.5, also falling short of forecasted values. The Caixin manufacturing index is set for release on Tuesday, with an estimated reading of 50.4.
A few hours earlier, Japan said its industrial production index grew 1.6 percent in June, against an estimated growth rate of 1.7 percent.
On Friday, oilfield services provider Baker Hughes said US drillers added two oil rigs to 766 units, showing a smoother growth compared to previous weeks.
Oil benchmarks settled in green territory last week, posting their strongest weekly gain so far this year as market players bet on rising demand in the second part of 2017.
Also, energy authorities from Saudi Arabia and Nigeria continued to promise that crude exports and output will be scaled down further in the future, boosting sentiment among investors.
Last week, the US Energy Information Administration reported a much higher-than-expected decrease in crude stockpiles of 7.208 million barrels against a forecasted decline of 2.6 million.
Later on, attention will be directed to fresh stockpiles data from the American Petroleum Institute on Tuesday and the EIA on Wednesday.
Wednesday, 26 July 2017
FOREX consolidates as FOMC rate decision is ahead.
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trading signals
The general market expectation does not imply a change in interest rates at this stage, but attention will be directed to the tone of US central bank statements. Traders hope to clarify when Fed starts its balance sheet operations. In the technical picture there are signs that current trend is weakening as consolidation may turn into correction.
EURUSD – corrected from key resistance level around 1.1715
The EURUSD has been in a steady uptrend over the last month. However, the market has approached a key resistance zone near 1.1715, which is a major turning point and the upper level of the current middle-term range.
The trend still looks strong and we stay bullish. However, due to the approaching key resistance at 1.1715 and immediate pullback, the question has arisen if the current decline is the beginning of downward correction.
For a while, market does not look eager to sell and otherwise it is dangerous to go long on current levels. However, the pair is trading tight today within 4 days range and made up a new four-day low - a little lower than $1.1615. A break lower of the $1.1600 area could see a quick downward impulse to $1.1570. A break of this level would likely be seen as a signal that the consolidation is turning into a correction.
The nearest support is located around 1.1570, the next one is 1.1475. The main resistance is the same 1.1715.
AUDUSD – upward sentiment eased as market met strong resistance level around 0.7965
AUDUSD moved higher last week after breaking up through resistance level of 0.7880 that is now the closest support zone and 23.6 level of FIBO extension. For the current week, market is trading in a consolidation mode. The resistance is now around $0.7970. Recent pullbacks above the $0.7870 keeps the consolidative tone intact. The technical indicators start warning us that the consolidation may turn into a correction if $0.7920 level can not be overcome. Near-term support is located 0.7825 and then around 0.7790.
Oil gained amid returned positive after OPEC meeting, however 50.5051 is a strong resistance zone
Yesterday oil gained from $48.63 to $50.85, despite the fact that the OPEC monitoring committee provided only to verbal comments and support, which previously had no special effect. However, news on Saudi Arabia's plans to reduce exports by 1 million barrels per day brought back longs in the market. Preliminary data from the API showed a decline in oil inventories. Today market expect official data on oil inventories from US Energy Department. The 51 level is the key support zone that will test the power of current upward momentum.
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.
Tuesday, 18 July 2017
The market lowered the general expectations of a sooner rate hike.
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trading signals
After Yellen's testimonial and the latest weak data of US statistics, the market lowered the general expectations of a sooner rate hike in the United States. Now this week's, ECB meeting is the main event in the market focus. We expect some increased volatility in the equity markets, however we do not expect that Draghi will make any hint on a soonest slowdown in the asset purchase program as inflation is still lower than regulator target. Despite this, pressure on the dollar is likely to remain, though we stay on guard of possible expected EUR/USD and gold correction.
EURUSD
In General
EUR turned out to be stronger in the shortest term as we expected and almost reached 1.1600. However, the market is overheated as well as ECB meeting eyed which makes this market highly risky
Fundamental
USD dollar is to remain under pressure. Trump’s difficulties with the Congress persist as US Senators are getting ready to vote against Healthcare Bill, confirming that the bill will not succeed in nearest time.
Technical
The pair is overbought and we expect profit taking and correction right after Draghi’ press conference. The main support remains at 1.1495. 1.1610-1.1615 is the resistance zone.
Recommendation
Out of the market
We have to note that longs in current conditions (1.1562) look dangerous.
USDJPY
In general
USD/JPY reversed and declined to 111.80 right after Yellen testimonial as traders lowered expectations for sooner rate hike
Technical
The support zone is around 111.30-111.90 and there might be a kind of corrective upward impulse. However, the downward impulse looks strong.
Recommendation
Careful longs at 111.65-111.70 with shorts stops
Crude Oil
Fundamental
July 24 OPEC meets in St. Petersburg, and therefore there is a good chance that efforts to bring Libya and Nigeria into a common system of production quotas can be implemented.
Technical
Yesterday Brent corrected from an important level of $ 49 per barrel but already today the market is set to break higher this level. Today, in the focus: weekly data from the API, tomorrow there will be official data from the US Department of Energy. Until the end of the week, the market can gain to levels of 51 dollars per barrel.
Recommendation
Longs once market settle above $49
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.
Friday, 14 July 2017
Wall Street flat ahead of inflation data and key earnings
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Wall Street
US equity indexes pointed to a flat open on Friday, with market players focusing on inflation data and looking ahead of corporate earnings reports from major investment banks.
On Thursday, Wall Street top three indexes were able to secure a green close thanks to Target stocks, which rose 4.8 percent following a statement from the company saying it expects a “modest increase” in Q2 comparable-store sales.
The Dow Jones industrial average added 20.95 points to end at 21,553.09 by the closing bell, with Wal-Mart and Goldman leading advancers. The S&P 500 edged up 0.19 percent, with the retail sector showing its best performance in the year. The SPDR S&P Retail grew 2.3 percent.
- Dow Jones Industrial Average: 20.95 / 0.10% / 21553.09
- Standard & Poor’s 500: 4.58 / 0.19% / 2447.83
- Nasdaq Composite: 13.27 / 0.21% / 6274.44
On the data front, the producer price index showed a 0.1 percent increase in June, up from an initially estimated flat outcome. Weekly jobless claims were above expectations at 247,000.
Federal Reserve Chairwoman Janet Yellen spoke for the second time this week before the House Financial Services Committee, recognizing improvements in the economy and reassuring that the plan to raise interest rates for a third time this year is still on place.
Ahead in the day, market players will be paying close attention to a batch of economic data from the United States, including the consumer price index and retail sales at 12:30 GMT. June’s industrial production is set for release as of 13:15 GMT.
In a separate report, the University of Michigan will present its preliminary consumer expectation and consumer sentiment indexes at 14:00 GMT, with 84.0 and 95.0 eyed.
On the earnings front, the Street will count on the Q2 earnings and revenues from JPMorgan Chase, Wells Fargo and Citigroup before the bell.
Weekly Outlook: July 17 - July 21
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weekly outlook
Monday
Asia: Japanese stock markets will remain closed due to the Ocean Day holiday. China will capture all attention with the release of its fixed asset investment, gross domestic product for the second quarter 2017 and industrial production for June. Analysts are forecasting an 8.5, 1.7 and 6.5 percent increase respectively.
Europe: the Eurozone will present its consumer price index for June at 09:00 GMT.
United States: the New York Empire State manufacturing index for July is due at 12:30 GMT, with a 15.0 reading eyed by economists.
Tuesday
Europe: UK consumer price index for June is up at 08:30 GMT, together with the producer price index input. Half an hour later, Germany’s ZEW economic sentiment for July is due for release, with an estimated result of 16.8.
United States: Export and import price indexes for June will be out as of 12:30 GMT. TIC Net Long-Term Transactions for May is due at 20:00 GMT.
Wednesday
United States: building permits and housing starts are set for 12:30 GMT. The US Energy Information Administration will also release its weekly inventory report on crude and refined products at 14:30 GMT.
Asia: Japan leads the way with a batch of economic data ahead of Bank of Japan’s monetary policy meeting. Adjusted trade balance figures will be presented at 23:50 GMT.
Thursday
Asia: the Bank of Japan will release its monetary policy statement, outlook report and interest rate decision as of 06:00 GMT. A press conference will follow half an hour later. There are no rate changes expected in Japan.
Europe: Germany’s producer price index for June will be available at 06:30 GMT. But all eyes will be placed at a new policy meeting from the European Central Bank. The rate decision is up at 11:45 GMT, while the press conference is due as of 12:30 GMT. UK retail sales will be published at 08:30 GMT.
United States: Philadelphia Fed manufacturing index for July is scheduled at 12:30 GMT.
Friday
No relevant data scheduled.
What’s next? – USDJPY 14.07.17
USDJPY
The dollar/yen was up 0.14 percent as of 05:25 GMT on Friday, trading around 113.45 in the light of downbeat economic data from Japan.
Japan’s Ministry of Economy, Trade and Industry said industrial production fell 3.6 percent in May, below the initial forecast and previous decline of 3.3 percent.
Fed Chair Janet Yellen testified before the House Financial Services Committee for the second day on Thursday, emphasizing the improvements of the US economy and reminding that the plan to gradually raise interest rate is still active.
Yellen explained that the labor market "is quite tight which cause pressure on wages." and that while inflation has dropped in recent months, she still believes it’s rather "premature to say the underlying inflation trend is below 2 percent."
Her comments provided strong support to the US dollar, which strengthened against the yen and other major rivals across the currency market.
According to Fed funds tracked by CME Group’s FedWatch program, traders are currently pricing in a 47.2 percent probability for a rate move by December.
Ahead in the session, investors await an important batch of data from the United States, including the consumer price index, retail sales and industrial production for June.
Also, the University of Michigan will release preliminary readings on its consumer expectation and consumer sentiment indexes, with 84.0 and 95.0 eyed.
From a technical view, the pair is now looking to the 113.50 mark as an immediate target. If we can clear that level, an upward extension to 115.00 seems likely. Strong volatility is expected ahead of inflation data in the United States.
What’s next? – GOLD, OIL 14.07.17
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what’s next
GOLD
Gold lost shine in early trading hours on Friday, on the back of stronger US dollar following second-day remarks from Fed Chair Janet Yellen.
Speaking at the House Financial Services Committee, Yellen recognized the improvements of the US economy and said that plan to raise interest rates was still active.
In a rising rate environment, market participants feel less attracted by safe-haven assets such as the yellow metal. Plus, gold is a dollar-denominated commodity.
On the Comex division of the New York Mercantile Exchange, gold futures were down by 0.03 percent to trade at $1,216.90 a troy ounce as of 07:10 GMT.
On Wednesday, China’s trade figures contributed to repair pro-risk sentiment. Initial jobless claims came in at 247,000, two thousand more than the forecast. The producer price index grew 0.1 percent in June month-to-month.
Today, all attention will be directed to the release of June’s consumer price index, retail sales and industrial production in the United States.
Investors will closely monitor these reports as they assess probabilities for a rate hike later in the year. According to Fed funds gauged by CME Group’s FedWatch tool, players are pricing in a 47.2 percent probability for a rate adjustment by December.
In a separate report, the University of Michigan will present preliminary readings on its consumer expectation and consumer sentiment indexes, with 84.0 and 95.0 eyed.
OIL
Crude benchmarks slowed their growth in early trading hours on Friday, with market participants looking ahead of Baker Hughes oil rig count later in the day.
Oilfield services provider Baker Hughes is scheduled to release its weekly count on rigs operating in US soil as of 17:00 GMT. Last week, the company said US drillers added platforms, leaving the total count at 763 units.
The US West Texas Intermediate oil futures traded at $46.09 a barrel, up 0.02 percent from its prior close. Meanwhile, the London-based Brent crude oil futures eased 0.02 percent to trade at $48.41 a barrel as of 07:10 GMT.
Despite a little easing in Asian hours today, crude oil benchmarks had one of their best week in recent times in the light of larger-than-expected stockpiles decline in the United States.
The US Energy Information Administration said crude inventories decreased by 7.6 million barrels in the week ended July 7, compared to an initially forecasted drop of 2.850 m barrels.
On Thursday, Nigeria announced it would limit its crude output after stabilizing at 1.8 million barrels per day. In May, the country reported a production level of 1.733 million bpd.
Meanwhile, traders are looking ahead of an OPEC meeting on July 20 to define the course of the cut agreement and its effectiveness to push prices upward.
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