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US Dollar Looks to Earnings, Economic Data to Shape Growth Bets

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USD

US DOLLAR FUNDAMENTAL FORECAST: NEUTRAL

  • US Dollar still mired in 2019 range, global growth bets next in focus
  • Q1 earnings reports, economic data deluge to inform slowdown fears
  • Thin pre-holiday liquidity may translate into kneejerk price volatility

Check out the latest US Dollar forecast and see what is expected to drive prices through mid-year!

Looking for a technical perspective on the US Dollar? Check out the Weekly USD Technical Forecast.

Another week of seesaw price action left the US Dollar mired within the same choppy range that has contained price action since the beginning of the year. The uptrend from early-2018 lows is nominally intact, but the currency has not made meaningful upside progress one way or another since mid-August.

Still, last week’s developments offered a couple useful tidbits. First, the markets still respond to reminders about cooling global growth. The IMF’s grim outlook update had a sobering effect. Second, price moves on the release of US inflation data and March FOMC minutes showed Fed policy speculation continues.

EARNINGS REPORTS, ECONOMIC DATA TO INFORM GLOBAL GROWTH BETS

Looking ahead, a focus on the macroeconomic narrative seems likely as trade war and Brexit negotiations recede to churn on in the background. A steady stream of high-profile corporate earnings reports and ample economic news will inform jittery investors eyeing a business cycle downshift.

US banks including Goldman Sachs, Citigroup and Bank of America are due to report first-quarter results. Upbeat announcements from JPMorgan and Wells Fargo buoyed market-wide risk appetite on Friday, sapping demand for haven assets and weighing on the anti-risk US unit.

This need not necessarily repeat however. The FOMC minutes painted the tone on the rate-setting committee more neutral than markets expected, boosting USD. A steady stream of Fed-speak due next week might reiterate that point, diluting scope for weakness on purely “risk-on” grounds.

The data docket is packed. Eurozone PMIs, Chinese GDP, and US industrial production are just some of the noteworthy activity indicators set to cross the wires. If the recently disappointing trend in macroeconomic news flow holds, the outcomes may weaken risk appetite on net. That bodes well for the Greenback.

LIQUIDITY TO SHRINK IN PRE-HOLIDAY TRADE

Finally, the week will be shortened by the Good Friday holiday and overall participation is likely to progressively diminish as Easter weekend draws closer in most of the world’s financial centers. Thin liquidity levels may sap conviction, but they might also amplify any kneejerk volatility.

— Written by Ilya Spivak, Sr. Currency Strategist for DailyFX.com

To contact Ilya, use the comments section below or @IlyaSpivakon Twitter

US DOLLAR TRADING RESOURCES

Other Weekly Fundamental Forecast:

Australian Dollar Forecast – Australian Dollar Outlook Bearish on RBA. AUDUSD Eyes China Q1 GDP

Crude Oil Forecast – Crude Could Crumble if Growth Concerns Catch Fire Again

British Pound Forecast – GBPUSD Rate Defends Bull Trend Ahead of UK CPI Amid Brexit Extension



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Crude Oil Price Outlook Bearish, Eyeing January Lows on Long Bets

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Crude Oil Technical Forecast: Bearish

  • Crude oil prices struggled sustaining upside momentum this past week
  • Technical signals on the daily, 4-hour chart hinting at weakness ahead
  • IG Client Sentiment offering stronger bearish crude oil contrarian bias

Build confidence in your own Crude Oil trading strategy with the help of our free guide!

Crude Oil Technical Outlook

Crude oil prices struggled to sustain upside momentum this past week as US recession fears plagued risk trends and the sentiment-linked commodity. From a technical standpoint, this falls in line with oil’s dominant downtrend since the middle of April when the commodity fell through rising support from the end of last year.

Looking at the oil daily chart, gains during the front-end of the past 5 trading days were tamed by a falling channel of resistance going back to the middle of July (parallel red lines below). Horizontal resistance also held at 57.38, former highs from February. This left crude oil sitting just above the lower boundary of psychological support which is a range between 54.55 and 55.41.

If descending resistance continues to define near-term price action in the commodity, we may see crude oil extend weakness down the road. Prices may eventually end up at the next critical psychological area between 50.41 and 52.08. This range held as support on multiple occasions such as in June and back in January. Meanwhile, near-term technical signals also hint towards downtrend resumption.

Crude Oil Daily Chart

Crude Oil Daily Price Chart

Crude Oil Chart Created in TradingView

Zooming in on the crude oil 4-hour chart below, rising support from August 7 was taken out this past week. As such, a close under 54.55 may pave the way for continued declines. Otherwise, the upside challenge for the commodity is taking out descending resistance from the middle of July which would expose the July 31 high at 58.79 down the road.

For more updates on crude oil, including fundamental developments, feel free to follow me on Twitter here @ddubrovskyFX.

Crude Oil 4-Hour Chart

Crude Oil 4-Hour Price Chart

Crude Oil Chart Created in TradingView

Crude Oil Sentiment Outlook – Bearish

Meanwhile, IG Client Positioning is offering a stronger crude oil bearish contrarian trading bias. Traders are further net long on August 16 than compared to the prior day. To learn more about how you can use this in our own trading strategy, join me every week on Wednesday’s at 00:00 GMT as I uncover what market positioning has to say about the prevailing trends in financial markets.

Crude Oil IG Client Positioning

Oil Client Positioning Chart

FX Trading Resources

— Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter



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Into the Jackson Hole Vortex

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Weekly Gold Price Forecast: Into the Jackson Hole Vortex

Traders shouldn’t be surprised if gold prices spend most of the week trading sideways ahead of the Federal Reserve’s Jackson Hole Economic Policy Symposium.

Weekly Gold Price Forecast: Into the Jackson Hole VortexWeekly Gold Price Forecast: Into the Jackson Hole Vortex

Weekly Fundamental Gold Price Forecast: Neutral

  • Gold prices (as well as other precious metals) continue to outperform in an environment defined by falling real sovereign yields – that is, inflation-adjusted yields remain in negative territory.
  • Traders shouldn’t be surprised if gold prices spend most of the week trading sideways ahead of the Federal Reserve’s Jackson Hole Economic Policy Symposium.
  • The IG Client Sentiment Index shows that gold prices in USD-terms (XAUUSD) may give back some of their recent gains in the days ahead.

See our long-term forecasts for Gold and other major currencies with the DailyFX Trading Guides.

Gold Prices Week in Review

Gold prices, no matter how you measure them, had another good week. Not one major currency gained ground against gold, with gold prices in EUR-terms (XAUEUR) leading the way higher with a 2.11% rally. Now, gold prices in EUR-terms (XAUEUR) are quickly approaching the all-time high established in October 2016; for many of the gold-crosses, fresh all-time highs have already been achieved (gold prices in AUD-terms (XAUAUD), gold prices in GBP-terms (XAUGBP), and gold prices in NZD-terms (XAUNZD) come to mind).

But the central focus of most market participants is gold prices in USD-terms (XAUUSD), and that too produced another strong week, adding 1.11%. Gold prices, regardless of the currency basis, have been on a strong run higher in recent weeks in part to the global monetary response to the US-China trade war; we’ll get clarification on the state of global easing this week as central bankers from around the world descend on Jackson Hole, Wyoming for the Federal Reserve’s annual Economic Policy Symposium.

Global Trade War Concerns Keep Gold Prices Elevated

Despite improved trading conditions for global equity markets in recent weeks, not much has changed in a positive manner along the US-led trade war front. Sure, there is a détente in the US-China trade war after the US tariffs at a clip of 10% on $300 billion of imported Chinese goods were pushed back from September 1 to December 15.

Yet there is a strong argument to be made with central banks unveiling more accommodative, dovish policy in recent weeks – a trend that is expected to continue – the fundamental backdrop for gold prices remains bullish in the long-term horizon. Falling sovereign bond yields (particularly German Bunds, UK Gilts, and US Treasuries since the start of May) continue to drop lower, and as a result inflation-adjusted yields remain in negative territory – good news for precious metals.

Volatility Tamped Down Ahead of Fed’s Jackson Hole Meeting

The Fed’s Jackson Hole Economic Policy Symposium this coming week should keep volatility tamped down in the days ahead. Traders typically don’t like to stake out significant positions ahead of the Fed’s annual summit; indeed, at the end of August, many trading desks have been left absent for summer vacation.

Beyond the prospect of an unforeseen development (see: US President Trump’s tweets) in the US-China trade war, the week leading into the Fed’s Jackson Hole Economic Policy Symposium is likely to be a quieter one – even if there are several significant pieces of data set to be released.

Other Top FX Events in Week Ahead

Early in the week, on Tuesday, gold prices in AUD-terms (XAUAUD) will be in focus with the release of the Reserve Bank of Australia’s August meeting minutes. Gold prices in AUD-terms (XAUAUD) are holding near their all-time highs ahead of the minutes. Elsewhere, the commodity currencies will remain in focus with the release of the July Canada inflation report on Wednesday, drawing attention to gold prices in CAD-terms (XAUCAD).

Elsewhere, gold prices in EUR-terms will come into focus with the release of the August Eurozone PMIs, particularly as odds for more easing from the European Central Bank at their September policy meeting have crept higher in recent weeks.

Net-Long Gold Futures Positioning Just Off the Yearly High

Weekly Gold Price Forecast: Into the Jackson Hole Vortex

Finally, looking at positioning, according to the CFTC’s COT for the week ended August 13, speculators decreased their net-long gold futures positions to 290.1K contracts, down slightly from the 292.6K net-long contracts held in the week prior. The market is still the most net-long since September 2016 despite the slight moderation in bullish positioning.

FX TRADING RESOURCES

Whether you are a new or experienced trader, DailyFX has multiple resources available to help you: an indicator for monitoring trader sentiment; quarterly trading forecasts; analytical and educational webinars held daily; trading guides to help you improve trading performance, and even one for those who are new to FX trading.

— Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher, email him at cvecchio@dailyfx.com

Follow him in the DailyFX Real Time News feed and Twitter at @CVecchioFX



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Dow Jones, DAX 30, FTSE 100, Nasdaq 100 Technical Forecasts

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Dow Jones, DAX 30, FTSE 100, Nasdaq 100 Forecast:

Dow Jones, DAX 30, FTSE 100, Nasdaq 100 Forecasts

Stock volatility has been heightened across the various equity markets as traders continue to come to terms with conflicting fundamental themes and uncertainty. Amidst the volatility, the Dow Jones, DAX 30 and FTSE 100 have slipped beneath their longer-term trendlines from late 2018 whereas the Nasdaq remains narrowly above. In the week ahead, a continuation of Friday’s rally could see the Indices target prior support which will now look to offer resistance. Here are the levels to watch.

Dow Jones Forecast

Technical Outlook: Neutral

The DJIA closed Friday trading slightly beneath a band of resistance and the ascending trendline from late December 2018. If bulls can surmount the area of confluence in the week ahead, subsequent resistance may reside around 26,705 which marks the high from January 2018. On the other hand, bears will look to break the potential trendline posed by the June and August lows. If selling accelerates, June lows around 24,600 could be the final line in the sand before steeper losses.

Dow Jones Price Chart: 4 – Hour Time Frame (May – August) (Chart 1)

DJI Price Chart

Nasdaq 100 Forecast

Technical Outlook: Neutral

Unlike the Dow Jones, the Nasdaq was able to recapture its ascending trendline from December. It will look to provide buoyance – as will the prospective trendline from June and August lows – next week. Topside barriers may exist at 7,670 to 7,720 before the ascending trendline originating from March lows (the dotted red line above August swing highs) can become a factor. The trendline has influenced price throughout the last two quarters, most recently rebuking a move higher on August 13.

Nasdaq 100 Price Chart: 4 – Hour Time Frame (May – August) (Chart 2)

NDX Price Chart

DAX 30 Forecast

Technical Outlook: Bearish

Shifting to the DAX, recent price action has not been kind to the German equity Index. Consequently, it is now well beneath the ascending trendline from December – similar to the line the Dow Jones is within reach of. If bulls return in earnest, however, two horizontal levels at 11,500 and 11,840 will look to stall a rebound before it can test the trendline near 12,200.

Interested in longer-term trades? Check out our Q3 Forecasts for equities, Gold, oil and more.

For support, the DAX is running rather shorthanded. Initial levels to watch are the August bottom – coinciding with lows from March – around 11,268. Should the lows from last week surrender to renewed bearishness, it could open the door to deeper losses down to the 11,000 area where multiple swing-lows from Q1 2018 reside.

DAX 30 Price Chart: Daily Time Frame (March – August) (Chart 3)

DAX Price Chart

FTSE 100 Forecast

Technical Outlook: Bearish

Finally, the FTSE 100 finds itself in a similar situation to the DAX 30. As bulls yield to bears, price has collapsed in August with the Index roughly 600 points lower than its July high. If bears continue to drive the FTSE lower, initial support might reside near the swing lows of March and June around 7,080 – but likely only over short timeframes. Longer-term support could materialize at the psychological 7,000 level before the door is opened to probe subsequent support.

FTSE 100 Price Chart: Daily Time Frame (February – August) (Chart 4)

FTSE 100 Price Chart

Conversely, topside barriers near 7,200 will look to stall rebounds before the Index can look to target August swing-highs around 7,300 and the ascending trendline from December at 7,365. Given that the DAX and FTSE have plunged through multiple support levels in August, it would be presumptuous to assume they have completed their descents without clear cut evidence.

To that end, the technical outlook for two European indices is bearish, while the Dow Jones and Nasdaq 100 lack a clear technical leaning in my view – resulting in a neutral bias. Follow @PeterHanksFX for updates and analysis on these themes as they progress and what it means for equity markets.

–Written by Peter Hanks, Junior Analyst for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX

Read more:Will the Stock Market Crash in 2019?

DailyFX forecasts on a variety of currencies such as the US Dollar or the Euro are available from the DailyFX Trading Guides page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.



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