31 / 07 / 2017 | General

What to Look out for Today – Hedge Funds Opening Oil Positions?

It has been a good month for oil – although the mediocrely successful OPEC+ agreement to quell oil output amongst its members, fail to reach its projected goal – crude prices manage to reach previous years’ highs, currently in the region over $50/barrel.

German’s Retail sales for June (monthly) also surpassed expectations and forecasts creating another forecast – that growth in the Europe Union isn’t just something Draghi said during press conferences to comfort Brexit era market sentiment.

Although the EUR seems to be faring well and growing the story is very different in the United States – the dollars has drop to an almost three year low against the now robust one-currency. Trump’s administration seems unable to reform healthcare, implying that their economic reform will be equally contested – especially considering its highly invasive campaign promises. Compounding this uncertainty is the political instability Donald Trump’s presidency is experiencing with resignations, investigations and role-redefinition of key political players. There is one more factor playing into the dollars slump though – statements made by Federal Reserve officials that an interest rate hike is likely to be gradual to avoid outpacing salaries and inflation. Not only this the EUR gain against the dollar, but even the currently destabilized GBP also gained against its major currency counterpart.

This week seems to be much more mobile than last, especially for EUR, AUD, USD, GBP with these economic calendar events scheduled:

Monday July 31st
EUR – Consumer Price Index for July (YOY)
AUD – Interest Rate Decision and Statement
 
Tuesday August 1st
EUR – Gross Domestic Product second quarter (YOY)
USD – ISM Manufacturing PMI for July
USD – ISM Prices Paid for July
 
Wednesday August 2nd
EUR – Non-monetary policy’s ECB Meeting
 
Thursday August 3rd
GBP – BoE Asset Purchase Facility
GBP – BoE Interest Rate Decision
GBP – BoE MPC Vote Unchanged
GBP – BoE MPC Vote Cut
GBP – BoE MPC Vote Hike
GBP – BoE Minutes
 
Friday August 3rd
AUD – RBA Monetary Policy Statement
USD – Nonfarm Payrolls for July
USD – Unemployment Rate for July
CAD – Net Change in Employment for July
CAD – Unemployment Rate for July

This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.
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31 / 07 / 2017 | Market News

Fundamental Analysis 2017.07.31 – EUR/CHF, EUR, BoE and Oil

Market recap
EUR/CHF remains front and center in investors’ minds. This wasn’t the case even just a week ago - due to its lower liquidity made the currency highly susceptible to buy or sell trend, that might be the reason investors are looking at the Franc in a new light. Otherwise no fundamental reason should cause this –Switzerland’s stable economy is a reason the currency is considered a safe-have. Speculation might also be fueling this trend with investors waiting for an ECB to hike rates while the SNB holds rates creating a shift in the currency pair – or alternatively SNB could be manipulating the trend, via the stronger EUR, to boost the pair. It might also be plain serendipity – trading apps seeing an calculable upwards movement and buying.
The next upcoming resistance is speculated to be to be in the region 1.17, this is also the SNB estimation for a breakeven – i.e. the level that the central bank can feasibly sell its EUR reserve while making a profit. Although we can assume that market is going to resist it.
Oil although usually volatile it is showing significant growth in the EU – which also experienced its best week since last year. Crude oil reserves in the US are being significantly depleted with June having the highest consumption of fossil fuels for over a decade. Both Kuwait and UAE have promised to continue their quelling of production and actually S. Arabia asked other OPEC countries to keep to their promised amount of lowered production.  Another reason behind the boost was the news that addition of US oil rigs has drastically slowed, indicating towards a peak of US supplies.
https://media.clawshorns.com/uploads/files/97d3921930f1df1ff7d08826aa3ae803.png
 
 
The much higher than expected May GDP gain on Friday could have bolstered the CAD parallel gain. Markets will also be expecting the industrial product price index to see if this trend will continue or cease shortly.

Today’s market
The European day gets under way with the Bank of England data on UK mortgage approvals. They’re expected to fall slightly (around 200, or -0.31%) from the previous month. This would surprise no one, as the British Bankers’ Association mortgage figures were down by 87, or -0.22%. I would expect that if the number comes in around as expected it would be uneventful for the pound.

 
 
CPI out of the EU is expected shortly which is a significant data point for EUR traders . Germany released its year-on-year rate of growth of its harmonized index of consumer prices (HICP), otherwise known as the CPI index using a EU standard to calculate, and this figure remained stable. Being one of the EU’s most robust and influential economies, this had led investors to assume that the CPI across the Union might remain stable.


 
 
Canada’s equivalent to their producer price index is the industrial product prices. The expectation at the moment is a drop in month-on-month This might indicate  pressure to increase interest rates in Canada.


 
  
 



 This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.
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31 / 07 / 2017 | Technical Analysis

Technical Analysis 2017.07.31 - USD/JPY

Technical Analysis 2017.07.31 - USD/JPY

Current trend
It seems that the trend of last three weeks continues today – with the JPY gaining against the USD.
The BoJ sustained its dovish stance regarding rates – and held the interest rate at its previous level. The previous week it also announced it monetary policy, which will mainly focus on bolstering economic consumer activity by maintaining a soft policy. To further help this prerogative the BoJ to inject credit into their banking system and sustaining a zero return on their bonds.
Their previous 2% inflation goal was of course extended to the 2019-2020 year.
USD/JPY is again slipping though largely due to a weakening dollar, which revisited its year minimum the previous week. This is largely due to  to the economic and political instability recently, and the Fed’s statements regarding a gradual interest hike, instead of a immediate hike.
USA GDP data was also announced, reaching its maximum growth until now.
The practical free-fall of the pair a 200 points fall in fact, reaching 110.50 set as the strong support, with the next one being suspected to be around 109.00–109.60.

Support and resistance
Support levels USD/JPY: 110.50, 109.60, 109.00, 108.10.
Resistance levels USD/JPY: 111.50, 112.50, 113.20.


 
 

 
 This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.
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28 / 07 / 2017 | General

What to Look out for Today 2017.07.28 – Chinese/US Trade Deteriorating?

The USD has had a tumultuous few weeks – the Fed’s decision to hold interest rates at current levels, statements saying that interest rate hikes will be gradual and of course the Trump’s administration unsuccessful attempt to once again usurp so-called Obamacare (and final attempt according to a statement made by Senate Majority Leader Mitch McConnell).

Now the USD also has to deal with the potential market blowback as a result of straining trade with China. U.S. acquisitions in China have fallen to the lowest they’ve been since 2003, due largely to Chinese government regulations (i.e. the infamous banning of cellphones produced by Chinese companies under the premise that they have included security “back-doors” that allow surveillance of users). The frictions go beyond governmental intervention though – Trump promised a repatriation of manufacturing to the US – facilities that are largely based in China. Compounding these intergovernmental frictions – was another (as of yet unfulfilled) promise to impose staggering tariffs on Chinese steel.

Although there is some dollar-positive news today – Economic growth forecast for the second quarter might yield an increase in the area of 2.9%. Although we still have a few hours left until the official report of the GDP – this might actually help bolster the USD and currency pairs involving it before the weekend.

This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.
 
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28 / 07 / 2017 | Technical Analysis

Technical Analysis 2017.07.28 - GBP/USD Strengthening or Correcting?

GBP experienced a boost this week from the UK GDP (released on the 26th), which yielded 0.3% growth during Q2. US Fed held its current interest, resulting a drop of USD price, in turn strengthening GBP/USD which reached a 10 mo. max.

News out of the US fundamental was questionable, but none-the-less USD price saw an increase, which pushed most major (and some minor) pairs, GBP/USD included, into a correction. GBP/USD moves into the zone of the upper limit of the pink channel on day chart.

Traders will be on the look-out for the Nationwide Housing Prices publication released 08:00 GMT+2, forecasts at the moment expect a slight drop.

Today the US GDP is scheduled to be released  at 14:30 (GMT+2) today, forecasts expect the index to show significant growth in the area of 1.2%. With the volatility of sentiment surrounding crude oil production another significant event for commodity traders – the Baker Hughes Oil Rig Count will be released at 19:00 GMT+2.

A slight correction is expected.

Support and resistance
Support levels GBP/USD: 1.3040, 1.2990, 1.2865, 1.2780.
Resistance levels GBP/USD: 1.3110, 1.3150, 1.3200.1.3280.

 
 

 
 
This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.
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28 / 07 / 2017 | Market News

Fundamental Analysis 2017.07.28 – US FOMC & GDP

Previous Days’ Review

The dollar partially saw a reversion when the FOMC completed its meeting. We saw a sharp drop in the price of USD upon the conclusion of the FOMC’s meeting, even though the post-meeting statements didn’t say anything unknown to markets – or wasn’t mentioned previously. The USD still managed to recover. This might have been assited slightly by the durable goods order that was very strong, wholesale inventories also surpassed forecasts and another number surpassing expectations  was the trade deficit which bolstered sentiment regarding today’s US 2Q GDP. Although the market estimation is at 2%, the Atlanta Fed increased its 2Q GDPNow estimated to reach an ambitious 2.8%.

EUR/CHF, saw an EUR-positive trend – as a lack of CHF liquidity causes observable fluctuation even from moderate buy or sell trends. Unfortunately for the CHF the trend was to sell – impacting the currency negatively.

GBP saw a gain after CBI distributive trade survey also surpassed expectations, but unfortunately lost its gain after the announcement of the new BoE Deputy Governor Sir David Ramsden. Ramsden is expected to against the grain – which up to now has been a dovish stance – further adding to the general volatility plaguing the GBP since the enactment of article 50 launching the Brexit process.

Today’s market

With the opening of the markets, investors will be on the outlook for Saxony’s (the German State’s) CPI. Analysts have notice that the inflation rate in Saxony seems to be tightly correlated with the national harmonized index of consumer prices (HICP)  in the arena of 88% accuracy post crisis, and in turn Germany’s HICP is tightly correlated and a forecaster of the CPI across the EU, making the small state’s CPI a significant event. No forecasts are available as of yet regarding this figure though.

Nationwide CPI though is expected to drop slightly, and even though the ECB has indicated towards an imminent rate hike this might not be feasible to implement it in the near future. ECB President Draghi has gone on record stating inflation should reach their 2% target, but has at the moment failed to do so. At the moment, the market hasn’t decided on its sentiment regarding the EUR, we will have to wait until market opening to discern this. 

The US 2Q GDP Figure showed an increase in consumer spending and a ramped-up inventory accumulation which is anticipated to facilitate growth and ultimately propel it to 2.5%. That leaves growth in the first half of 2017 floating in the region of 2.0%, which doesn’t deviate far from the average since the end of the Global Financial Crises in 2010. Empirical proof of growth should be a positive effect for the dollar.

Of course, the annual revisions for the past three year’s GDP including this year’s Q1 might cause movement, but again this is something that will have to be seen and not concrete. 
 
This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.
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27 / 07 / 2017 | Technical Analysis

Technical Analysis 2017.07.27 - AUD/JPY & GBP/JPY

Technical Analysis 2017.07.27 - AUD/JPY & GBP/JPY
 

 
AUD/JPY
 
The above chart is showing the Kijun-sen below the Tenkan-sen line, both lines have an upward vector. The Chikou Span confirmative line is over the AUD/JPY, indicating towards a ascending cloud.  AUD/JPY has surpassed both the Kijun-sen and Tenkan-sen; this means the potential bullish trend still has traction. The most proximate support  is delineated by Tenkan-sen at 88.447. Likewise the most proximate resistance is set by Tenkan-sen at 90.370.
 
 

 
GBP/JPY
 
The Kijun-sen is currently under the Tenkan-sen, the blue has an upward vector, while the red remains parallel to the bottom of the chart. The Chikou Span confirmative line is over the current price of the currency pair, indicating an ascending cloud. The pair seems to have corrected back to Tenkan-sen. The most proximate support is delineated by the Tenkan-sen line at 145.788. The resistance level are the previous maximums of Chikou Span line set at 147.347.
 
This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.
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27 / 07 / 2017 | General

What to Look out for Today 2017.07.27 – Fed Decision Causes Dollar Drop

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27 / 07 / 2017 | Market News

Fundamental Analysis 2017.07.27 – Fed Decision Impacts USD

The US dollar slipped against most other major currency after the Fed’s meeting yesterday. The decision Yellen and her board made was to keep interest rate at the current level of 1.25%, and well under their target of 2%, compounding this effect was the Fed’s statement saying it intends to reduce its balance sheet – further perturbing investors. As previously stated by Yellen - the FOMC intends to perform an increase of the interest rate gradually to avoid outpacing inflation and salaries, At the time of writing this article the USD drop is slowing, and there’s a possibility of a full reversal turning into a correction by the end of the trading day.

EUR/USD reached its 2015 high at 1.1775.

GBP/USD reached last year’s high at 1.3155 AUD/USD reached its 2015 level -  0.8060. The currency then slipped to 110.77, but and partially recovered to 110.00.

As expected in lieu of the USD volatility metals gained as risk aversion to the instability created by both not knowing the interest rate hike and reduction of the Fed’s balance sheet timeline. Gold saw levels reaching 1264.50, silver reached16.70, both of which are levels the metals trading at today.

Continuing the previous days’ trend Oil prices held without observable or significant fluctuation. Wednesday evening saw prices grow after EIA report on Crude Oil stocks, which a slip in stocks in the area of 7.2 million/barrel. Brent is currently at 51.20, WTI is currently around yesterday’s price of 48.60.

Stock markets experienced a slight influx;

FTSE100 -7456.5

CAC40 – 5192

DAX – 12293.0

DOW reached 21728.0

S&P500 – 2479.0

NQ – 5981.0

This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.
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26 / 07 / 2017 | General

What to Look out for Today – UAE Cutting Output, Will Oil Go Up?

Although it’s not news anymore the dollar took another significant hit after the announcement that the Federal Reserve decided on keeping interest rates at their current levels. Unfortunately for the USD though the current levels of inflation are below the Fed’s target of 2%.

The more positive news from the US is that demand is surpassing the US’s oil production – at the moment it is actually the world’s leading exporter of crude. This is a substantial paradigm shift of the US as leading consumer and importer of global crude. Ironically the global demand for shale oil gapped waning domestic demand for the fuel.

Another reason the US has so enthusiastically increase crude output is to counter-balance the on-going saga of the OPEC+ agreement – that sought to restrict the production of oil, to exhaust crude reserves around the world ultimately bring the price of oil up. Beyond this with the primary role that the US has taken as a global leader in energy, investors and traders will be watching American production closely.

Today we can expect even more US-centric news with the second quarter Gross Domestic Product being released along with an estimate for the second quarter of 2017.   
 
This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.
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