22 / 06 / 2018 | Analisi tecnica

Technical Analysis 22.06.2018 – AUD/JPY: Ichimoku clouds

Let's look at the four-hour chart. Tenkan-sen line is below Kijun-sen, the blue line is directed downwards, while the red one remains horizontal. Confirmative line Chikou Span is below the price chart, current cloud is descending. The instrument is trading below Tenkan-sen and Kijun-sen lines; the Bearish trend is still strong. One of the previous minimums of Chikou Span line is expected to be a support level (81.09). The closest resistance level is Tenkan-sen line (81.31).




On the daily chart Tenkan-sen line has crossed Kijun-sen from above, the lines are horizontal . Confirmative line Chikou Span is below the price chart, current cloud is going to reverse from ascending to descending. The instrument is trading below Tenkan-sen and Kijun-sen lines; the Bearish trend is still strong. One of the previous minimums of Chikou Span line is expected to be a support level (80.85). One of the previous maximums of Chikou Span line is expected to be a resistance level (81.70).




The Technical Analysis is provided by Claws and Horns (Cyprus) Limited, an independent analytical company. Any views and opinions expressed are explicitly those of the writer. Any information contained in the article, is believed to be reliable, and has not been verified by STO and is not guaranteed to be accurate. References to specific products, are for illustrative purposes only and are not a form of solicitation, recommendation or investment advice. Past performance is not a guarantee of future performance.
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22 / 06 / 2018 | Notizie sul mercato

Fundamental Analysis 22.06.2018 – Market Outlook

Trade concerns hit the market hard despite a report that China and the US are making last-minute behind-the-scenes efforts to avoid a trade war starting on 6 July 2018, when tariffs on an additional $16bn of Chinese goods will be triggered. More immediately though, Daimler AG cut its earnings outlook, citing US-China tensions. The S&P 500 was down 0.6% and NASDAQ off 0.9% from its record high, while US Treasury yields fell across the curve.

Adding to the gloom for USD was an unexpectedly large fall in the Philadelphia Federal Reserve Systems (Fed’s) manufacturing index, which dropped to 19.9 from 34.4 (29.0 expected). The new orders index saw its largely fall since 2008, which was particularly worrisome coming the day after Fed Chair Jerome Powell said companies were starting “to postpone investment, postpone hiring” because of uncertainty about the trade outlook.

Safe-haven JPY and CHF gained in response to the risk-off trend.

GBP gained after the Bank of England voted 6-3 to keep rates unchanged. The fact that Chief Economist Andy Haldane joined the two usual dissenters was quite significant, as he is an influential member of the Monetary Policy Committee (MPC). The MPC also said it will begin considering unwinding the bonds that they bought in the quantitative easing program once rates hit 1.5%, down from the 2% level that they had specified previously. Haldane’s change of heart significantly raised the market’s estimate of the likelihood of a rate hike in August 2018 to 63% from 48%. For now though more focus should be placed on the 28-29 June 2018 EU summit than the 2 August 2018 MPC meeting. I expect the summit to be harsh on Britain and for GBP to fall next week as a result.



Yesterday Wednesday 22nd of June 2018 a graph was included to show how confidence was coming back to Italy. Today it is included to show how confidence in Italy ebbed again following the announcement of two euroskeptic appointments to the Italian Senate finance and Lower House budget committees. EUR still managed to rise vs a weakened USD, however.



NZD was the best-performing currency as the market apparently agreed that yesterday’s decline was overdone.

Today’s market

The main event is the Organisation of Petroleum Exporting Countries (OPEC) meeting. With the cooperation of Russia – which last Friday 15th of June 2018 said it had decided to “institutionalize” its relationship with OPEC – the group has managed to withhold 1.8mn barrels a day (b/d) from the market. Now that supply and demand are back in balance, oil inventories are back to normal, and oil prices have recovered, Saudi Arabia and Russia want to relax the production ceiling, but the others don’t – naturally, since 10 out of the 14 OPEC countries are already producing almost as much as they can. Since OPEC takes decisions by consensus, it’s unusually hard to predict this time what will happen.

There was a Joint Ministerial Monitoring Committee meeting yesterday that was supposed to hammer out an agreement for the group to ratify today, but it was unable to reach an agreement. Apparently Iran doesn’t want to agree to any increase in production by the other members, as that would in effect inoculate the world against the impact of the US sanctions that have been reimposed on the country.



There are three basic scenarios:
  1. The market seems to be pricing in a modest increase of 500k-800k b/d. Russia apparently is looking for 1mn to the entire 1.8mn b/d; Saudi Arabia wants a much smaller 300k; settle for something in the middle. That would more or less offset the decline from Venezuela, whose output has collapsed.
  2. A larger increase of 1mn b/d to offset not only lost production from Venezuela, but also the expected decrease in output from Iran as the sanctions start to bite.
  3. No official change in the ceiling. If that happens, Russia and Saudi Arabia are likely to increase output on their own initiative in coming months, as the Saudis did back in 2014, but less aggressively than they had hoped so as not to anger the other producers.
#1 could be as expected and therefore might elicit a “sell the rumor, buy the fact” response. Oil could move up slightly and with it, CAD. #2 would definitely be bearish oil, bearish CAD. And #3 would probably be bullish oil, bullish CAD.

The three currencies most closely correlated with oil are CAD, NOK and RUB. The correlation of CAD isn’t as great as it used to be back in 2016, perhaps because North American Free Trading Agreement (NAFTA) has emerged as a more important driver of the currency.  



Today’s data

Today is the start of the monthly purchasing managers’ indices (PMIs). In Europe, the EU-wide service-sector PMI is expected to be unchanged, but the more cyclical manufacturing PMIs are forecast to decline in France, Germany and the EU as a whole. This suggests that the EU economy hasn’t yet stabilized and is still losing momentum – a worrisome thought for the markets. This could be negative for EUR.




Later in the day, the US manufacturing PMI is also expected to decline, but by rather less. The service-sector PMI is also expected to decline, but that comes after a sharp jump in the previous month and so is to be expected.



The fact that the US manufacturing PMI remains above its EU counterpart is likely to reassure investors that the outlook for the US economy is more certain and may therefore boost USD vs EUR.



Canada’s retail sales are forecast to rebound after the previous month’s decline. Much of the rise may be just from gasoline prices, which really doesn’t say anything about the overall economy. Nonetheless, a rise is a rise, and since this is an above-trend rise, the figure should prove modestly positive for CAD.



Canada’s headline inflation rate is expected to accelerate further, vaulting into the upper part of the Bank of Canada’s target range as gasoline prices rise. But the rate of change in the “core inflation – common component” measure (a measure of core inflation that tracks common price changes across categories in the CPI basket) is expected to be unchanged at just below the 2% target. The market puts a 65% probability on a rate hike at the next Bank of Canada meeting on 11 July 2018, meaning there’s still some question. This figure can therefore still raise expectations. Unfortunately there isn’t enough data available to judge whether the market puts more weight on the headline figure or the core figure. The Bank of Canada has said that while it expresses its inflation target in terms of the headline CPI, it “looks through” the impact of temporary factors on inflation by utilizing the various measures of core inflation to strip out their effect. “Using multiple indicators will help the Bank transparently manage the risks associated with the shortcomings of any single indicator,” is how they explain their technique. This could be positive for CAD.



The Fundamental Analysis is provided by Marshall Gittler who is an external service provider of Claws and Horns (Cyprus) Limited, an independent analytical company. Any views and opinions expressed are explicitly those of the writer. Any information contained in the article, is believed to be reliable, and has not been verified by STO and is not guaranteed to be accurate. References to specific products, are for illustrative purposes only and are not a form of solicitation, recommendation or investment advice. Past performance is not a guarantee of future performance.
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21 / 06 / 2018 | Analisi tecnica

Technical Analysis 21.06.2018 – EUR/JPY: Ichimoku clouds

Let's look at the four-hour chart. Tenkan-sen and Kijun-sen lines have merged, the lines are horizontal . Confirmative line Chikou Span is below the price chart, current cloud is descending. The instrument is trading around lower border of the cloud. Merged Tenkan-sen and Kijun-sen lines have become a strong support level (127.56). The closest resistance level is the upper border of the cloud (128.54).



On the daily chart Tenkan-sen line is above Kijun-sen, the lines are horizontal . Confirmative line Chikou Span is below the price chart, current cloud is descending. The instrument is trading below Tenkan-sen and Kijun-sen lines; the Bearish trend is still strong. One of the previous minimums of Chikou Span line is expected to be a support level (126.63). The closest resistance level is the upper border of the cloud (130.19).



The Technical Analysis is provided by Claws and Horns (Cyprus) Limited, an independent analytical company. Any views and opinions expressed are explicitly those of the writer. Any information contained in the article, is believed to be reliable, and has not been verified by STO and is not guaranteed to be accurate. References to specific products, are for illustrative purposes only and are not a form of solicitation, recommendation or investment advice. Past performance is not a guarantee of future performance.
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21 / 06 / 2018 | Notizie sul mercato

Fundamental Analysis 21.06.2018 – Market Outlook

After wobbling a bit for a few days, markets recovered their poise and it’s back to risk-on despite warnings from the world’s central bankers that the worsening trade disputes could derail the global economy (see below). S&P 500 was up only a bit, but NASDAQ 100 and Russell 2000 gained more to close at record highs. Chinese stocks though continued to decline on a Xinhua report that China will take strong measures to counter the US tariffs. JPY and CHF fell in the calmer atmosphere.
 
In the currency market, the big story of the day is clearly NZD, which fell sharply ahead of the Q1 Gross Domestic Product (GDP) report. The figure came in exactly as expected, with growth slowing to 0.5% qoq (2.5% yoy) from 0.6% qoq (2.9% yoy) in the previous quarter. The qoq change is 0.2 ppt less than the Reserve Bank of New Zealand (RBNZ) forecast last month and suggests that the RBNZ may be on hold for even longer than people had thought. Investors already saw  little chance of a rate hike this year (12% probability) and some forecasters are now saying they won’t move until 2020.
 
Although the figure exactly matched expectations, there was no “sell the rumor, buy the fact” response; on the contrary, NZD kept falling afterwards. Oddly enough, NZ bond yields also rose; usually you would expect yields to decline after a weak GDP figure. But the auction of 20-year bonds had the lowest bid-to-cover ratio since they started issuing such bonds in 2016, while 10-year yields were up 8 bps. Perhaps the idea is that the government will have to embark on a more stimulatory fiscal policy?  Really though, growth of 2.5% yoy is hardly a recession (yet). I think the decline is overdone and NZD should stage a modest comeback today, especially with risk sentiment improving.
 
USD gained on the day as Federal Reserve System (Fed) Chair Jerome Powell reiterated his faith and confidence in the US economy. Speaking at the European Central Banks (ECB’s) Sintra forum, Powell said, “With unemployment low and expected to decline further, inflation close to our objective, and the risks to the outlook roughly balanced, the case for continued gradual increases in the federal funds rate is strong,” He did mention concerns over US trade policy as the one factor that could derail the economy. “Changes in trade policy could cause us to have to question the outlook,” he said. “For the first time, we’re hearing about decisions to postpone investment, postpone hiring.” The other three central bank heads on the panel chimed in as well on that theme, all with negative comments as you can well imagine.

Today’s market
There are two central bank meetings:  the Swiss National Bank and the Bank of England. Plus an Ecofin meeting.
 
The Swiss National Bank (SNB) is simple. It’s on hold so long as the European Central Bank (ECB) is on hold. They will never move first, because their main target is the EUR/CHF exchange rate, which has started to come down again, no doubt much to their distress. Since the ECB just announced that they’ll keep rates on hold at least until the summer of 2019, don’t expect anything from the SNB for the next year, either.


 

The Bank of England is certainly going to be the more interesting of the two. The market sees almost no possibility of raising rates this month. Rather, the question will be what hints they give about the future course of policy, especially a rate hike at the next meeting in August 2018. After three months of declines, inflation stabilized in May 2018 at an above-target level. Does that make it more likely that they’ll hike in August? The odds of an August rate hike are put at slightly less than 50-50, probably because the Q2 data so far have been mixed. The manufacturing, trade and pay data for April 2018 was weak, but retail sales rebounded and the May 2018 services Purchasing Managers’ Index (PMI) was fairly strong. The mixed data makes it unlikely that the Monetary Policy Committee (MPC) will change its view notably in either direction. A similar tone is expected to the May 2018 statement and the same 7-2 vote to keep rates unchanged, with result that GBP probably ends the day a little weaker.


 

Later in the day, Bank of England (BoE) Governor John Carney will deliver the Mansion House Speech, so we can expect to get a little more clarity on the situation then. He is likely to adopt a more dovish tone in this speech while still keeping to the Bank’s tightening bias.
 
A rate change – or even a change in tone – is more likely in August 2018, when they issue a new Inflation Report with new forecasts. That will also be the last meeting with Messrs. McCafferty and Saunders, the two hawks who keep dissenting in favor of a rate hike. They’re both leaving the Monetary Policy Committee (MPC) shortly after the meeting, to be replaced by people who apparently have more middle-of-the-road views. It might make it more difficult to get a consensus for a rate hike after that.
 
The Eurogroup/Ecofin meeting of finance ministers from the EU and the Eurozone meets. As you may have already guessed, they’ll be discussing Greece. The country’s last debt repayment is scheduled for 2059, so I imagine that Greece will be a semi-permanent agenda topic for them. As for what they’ll be discussing, they have to decide on the final disbursement to Greece and possibly on additional debt relief for the troubled country. It’s more complicated than that, and the International Monetary Fund (IMF) is in there somewhere, but as long as they can paper over the cracks until 2059, then it shouldn’t be a major factor for the markets again.
 
Now if it were Italy instead of Greece that they’re discussing, that would be a different story, because Italy is too big to bail out. But Italian bond yields have come back down substantially, indicating that everyone thinks the country is more or less OK for now. (But notice that spreads have not returned to where they were before the election.)


 

Other indicators and events
 
Today 21st of June 2018 and tomorrow 22nd of June 2018, the Bundesbank and the Banque de France will hold a joint conference in Paris on “Monetary Policy Challenges.” International experts will discuss the current challenges facing monetary policy and the international role of the euro. Bundesbank President Jens Weidmann will give the keynote speech today. There are a number of papers and panel discussions that might be worth listening to if you happen to be interested in such topics as “How Global Currencies Work: Past, Present, and Future,” but since most of the speakers are academics except for Weidmann and Banque de France’s Villeroy (who gives a 15-minute welcoming speech), probably only Weidmann’s speech might have something of immediate interest to the market.
 
Later in the day, there will be a conference in Vienna about The Future of the EU, a few days before Austria takes over the Presidency in the EU Council. ECB Governing Council members Ewald Nowotny and Gaston Reinesch (Governor of the Central Bank of Luxembourg will participate in a panel discussion on Competitiveness, Solidarity and Subsidiarity. In case you’re wondering, “subsidiarity” is EU jargon for taking decisions at the most local level possible rather than at the EU-wide level.
 
As for the routine data, the UK public sector net borrowing (PSNB) (excluding banks) is expected to rise, except since the figure isn’t seasonally adjusted, we have to look at the 12-month moving average to make any sense out of it. The forecast amount would keep the 12-month average on a gradual decline, consistent with the government’s pledge to bring down borrowing.
 
But what would be the effect on GBP? Would healthy government finances be considered a plus and therefore good for the currency, or would a less expansionary fiscal stance, coupled with fewer gilts for foreigners to buy, mean a weaker currency? The Mundell-Fleming model of exchange rate determination shows it can go either way.




The Philadelphia Federal Reserve System (Fed) manufacturing survey is expected to be down somewhat, although still well in expansionary territory. This compares with the Empire State survey last Friday 15th of June 2018, which was forecast to fall to 18.8 from 20.1 but in the event rose to 25.0. Will we see a similar outperformance this time too? Looking at the data for the last 10 years, the two have moved in the same direction 45% of the time, meaning it’s basically random.


 

Finally, overnight Japan releases its national Consumer Price Index (CPI) data. The national rate of inflation is expected to follow the Tokyo rate of inflation and decelerate somewhat. In particular, the poor pitiful core inflation measure is expected to be a little closer to the dreaded zero line. No wonder the Bank of Japan last week changed its statement to read that inflation was “in the range of 0.5-1.0 percent” rather than “around 1 percent” as they said in March 2018. (They’re referring to the old-style core CPI, which just excludes fresh food. It’s expected to remain at +0.7% yoy this time.) In theory a slower rate of inflation should be negative for the currency, but since nobody expects the Bank of Japan (BoJ) to loosen rates further nor to tighten at any time in the foreseeable future, it probably won’t have much effect.




The Fundamental Analysis is provided by Marshall Gittler who is an external service provider of Claws and Horns (Cyprus) Limited, an independent analytical company. Any views and opinions expressed are explicitly those of the writer. Any information contained in the article, is believed to be reliable, and has not been verified by STO and is not guaranteed to be accurate. References to specific products, are for illustrative purposes only and are not a form of solicitation, recommendation or investment advice. Past performance is not a guarantee of future performance.
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21 / 06 / 2018 | Notizie sul mercato

3 ways to improve the performance of an investment portfolio

The term investment portfolio is used to refer to investment collections held by individuals, banks or other financial institutions. The main function of a financial portfolio is to manage two or more types of investments. Many people invest in different types of investments to make profits, while they try to ensure that the initial capital is protected.

Investment portfolios include bonds, real estate, stocks, equities, and mutual funds among others. Many investors like to diversify their investment portfolio in order to control potential losses of capital in the event of a market downturn. However, diversification should be the result of careful thinking because it isn’t unusual for investors to exaggerate, reversing its potential positive effects. Our article will shed light to which rules should be followed in to form the right investment portfolio. 

Rebalancing the portfolio

If aiming for a long-term investing strategy, then the mix of assets in your portfolio should reflect the investor’s goals and risk tolerance. As different investments earn different returns, the investment portfolio should be periodically rebalanced to restore it to its proper proportions. By having funds spread out across multiple stocks, a downturn in one will be partially offset by the activities of the others, which can provide a level of portfolio stability.

There is no arranged schedule for rebalancing an investment portfolio. Some market analysts suggest that investors should check their portfolio and examine the market conditions at least once per year. Rebalancing gives investors the opportunity to sell high and buy low, taking the gains from high-performing investments and reinvesting them in areas that have not yet experienced such notable growth. That’s why experienced investors note that not rebalancing a portfolio may lead to poor performance. 

Research about new investments before spending capital

Preparing an investment portfolio that will have increased chances to perform well is not an easy task. Investors should have a thorough understanding of how investments work, and which elements should be taken into consideration before hard-earned capital is spent on them. Some investors believe that constantly adding new investments to their portfolio will bring them more profits. 

However, this is not always the case. Firms have found the right ways to advertise their shares in the financial markets, with investors sometimes getting carried away and acting on impulse. Seasoned investors suggest that it’s better to have a simple investment portfolio that efficiently balances risk and return rather than adding new asset classes or investments for which information may be limited or, even, false. 

Limit the number of investments and examine them better

The quality of an investment portfolio is much more important than the quantity of shares, bonds or other assets included in it. There is no standard number of investments that a portfolio should include. Economists suggest that having an increased number of investments may lead to overlapping. There is even the chance that investors may venture into investments that they don’t really need. 

People who would like to invest should know how each one of the potential investments works, giving extra attention to the information that they can collect from the financial media and the markets. Investors should take into consideration three essential characteristics that define any investment which are the risks they are willing to take, the potential return and the liquidity. 
 
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Trading Forex and CFDs, which are leveraged products, are high risk investments and puts your capital at risk. You may sustain a loss of some or all of your invested capital. Only speculate with money you can afford to lose.
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20 / 06 / 2018 | Notizie sul mercato

Fundamental Analysis 20.06.2018 – Market Outlook

The worsening trade war between the US and China sent stock markets and bond yields down in a classic “risk off” move. Yet its impact on currencies seems to be fading already. USD was the top-performing currency overnight, followed by AUD – quite notable, since AUD was the hardest hit by the “trade war” fears on Monday 18th of June 2018. The currency bottomed out during the US trading day as New York stocks proved more resiliant and has since recovered to trade unchanged vs USD and higher against many of the country’s other trading partners.

The trade dispute is hitting CAD however. The difference is that AUD is peripherally affected via possible weakness in the Chinese economy, whereas Canada has its own trade dispute with the US. Canadian Foreign Minister Chrystia Freeland yesterday Tuesday 19th of June 2018, said that Canada already has plans in place to respond to any US trade restrictions on autos, and “has no choice but to reciprocate” to US tariffs on steel and aluminum. With this “trade war” likely to run for some time further, Canadian monetary policy may have to be on hold because of the uncertainty and CAD is likely to decline further. You can see from the graph how although the odds of a rate hike sometime this year have remained fairly constant, the maket has just over the last week become more cautious about the likelihood of a hike at the 11 July 2018 meeting – although the odds are still greater than 50-50 that it will happen.




EUR was slightly lower as European Central Bank (ECB) President Mario Draghi confirmed the market’s interpretation of his recent comments. Speaking at the ECB’s Sintra conference, he said that “We will remain patient in determining the timing of the first rate rise and will take a gradual approach to adjusting policy thereafter…The path of very short-term interest rates that is implicit in the term structure of today’s Wednesday 20th of June 2018 money-market interest rates broadly reflects these principles.” Some market participants had thought he might use his speech to fight back against the market’s dovish interpretation of his comments. It’s clear that the monetary diversion trade is back in force for EUR/USD, which is likely to lead USD higher, assuming that US President Donald Trump’s trade war doesn’t lead it off a cliff.

Today’s market

The Confederation of British (CBI) industrial trends survey is a second tier indicator at best, but with little else to trade on, people may focus on it. Economists expect the total orders DI to recover to be slightly in positive territory.  The selling price index is arguably the more interesting of the two though, as inflation is in focus. Unfortunately economists have stopped forecasting it.




The US current account deficit is forecast to widen slightly. This is exactly what the US administration doesn’t want to see, although to be fair, Donald Trump doesn’t seem to know the difference between the current account and the trade balance, as demonstrated by his frequent criticism of US trade with Canada (Canada has a surplus with the US in merchandise trade, but the US has a surplus in overall trade in goods & services). Nonetheless, a further deterioration could be the occasion for another tweet, which could be negative for the dollar.




The ECB’s Sintra forum ends today with the much-anticipated panel discussion with the heads of the Federal Reserve System (Fed), ECB, Reserve Bank of Australia, and Bank of Japan. This panel will be particularly interesting given the divergence in stance of the panel’s participants:  the Fed debating when it will have finished normalized policy, the ECB debating when to start normalizing policy, the RBA on hold for the time being, and the Bank of Japan (BoJ) wary of even hinting that they might ever start normalizing policy. The contrast with last year’s conference, when all the central bank heads in attendance seemed fairly certain that monetary stimulus would be withdrawn everywhere and rates headed higher simultanously, is notable. The market will particularly want to hear what Fed Chair Jerome Powell has to say about the subject of the conference, because at his press conference following the recent Federal Open Market Committee (FOMC) decision he had problems explaining why there was so little upwards pressure on wages even though the economy was beyond what the Committee thinks of as “full employment.” 

US existing home sales are expected to be up by a modest 1.3% mom. This is somewhat surprising, given that pending home sales the previous month were down by 1.3% mom. A recovery in this series would be taken as good news, given the recent rise in mortgage rates, and could therefore be positive for the dollar.




Overnight, New Zealand releases its first estimate of 1Q Gross Domestic Product (GDP). It’s expected to be up 0.5% qoq. This is below the 0.7% qoq growth that the Reserve Bank of New Zealand (RBNZ) forecast in its latest Monetary Policy Statement, but it is doubtful whether the miss would be enough to change any views at the RBNZ. In any case, investors already see virtually no chance of a rate hike this year (only 14% probability), so it’s hard to see weak data moving the market – only stronger data that might move up the expected time of tightening. Furthermore, there’s two more weeks before the end of Q2, so don’t expect them to steer the ship with Q1’s data. This could be neutral for NZD.




The Fundamental Analysis is provided by Marshall Gittler who is an external service provider of Claws and Horns (Cyprus) Limited, an independent analytical company. Any views and opinions expressed are explicitly those of the writer. Any information contained in the article, is believed to be reliable, and has not been verified by STO and is not guaranteed to be accurate. References to specific products, are for illustrative purposes only and are not a form of solicitation, recommendation or investment advice. Past performance is not a guarantee of future performance.
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20 / 06 / 2018 | Analisi tecnica

Technical Analysis 20.06.2018 – USD/CHF: wave analysis

The pair can grow.

On the 4-hour chart, the upward momentum is developing as a first wave of the higher level 1 of (3). Now the fifth wave v of 1 is developing, within which the wave (i) of v of the lower level is forming. If the assumption is correct, the pair will grow to the levels of 1.0057–1.0190. The level of 0.9914 is critical and stop-loss for this scenario.






The Technical Analysis is provided by Claws and Horns (Cyprus) Limited, an independent analytical company. Any views and opinions expressed are explicitly those of the writer. Any information contained in the article, is believed to be reliable, and has not been verified by STO and is not guaranteed to be accurate. References to specific products, are for illustrative purposes only and are not a form of solicitation, recommendation or investment advice. Past performance is not a guarantee of future performance.

 
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20 / 06 / 2018 | Notizie sul mercato

BoE likely to keep interest rates unchanged at June 2018 meeting

In a poor week of economic data releases, the Bank of England’s (BoE) governing board meeting scheduled for Thursday June 21st 2018 will attract the attention of investors and traders. The June 21st meeting will be the first of two BoE’s board meetings during the summer with the second one scheduled for August 2nd 2018. 

The BoE’s meeting is important because its results will indicate how the central bank’s policymakers perceive the condition of the United Kingdom’s (UK) economy. Right after the meeting, the BoE will publish its monetary policy summary and will announce whether it’s going to lift interest rates or keep them on hold. 

Monetary Policy Committee (MPC) to convene

The majority of economists polled by Reuters on June 19th 2018 suggested that the Monetary Policy Committee (MPC) will decide to keep the BoE’s benchmark interest rate unchanged at 0.5%. Some of them appeared doubtful that the BoE will consider raising its borrowing costs even in the August 2018 meeting because, as the report accompanying the poll, noted “inflation fell to 2.4% on an annualised basis in April 2018, which is a one-year low according to the Office For National Statistics (ONS), while the industrial and construction output data in the same month was strikingly weak.”

The BoE’s board decided to raise borrowing costs for the last time in November 2017. The board decided to lift the benchmark interest rate by 25 base points, reaching 0.50%. This was the first pick up on interest rates in the UK since 2007.

Economists debate over the timing of the next interest rate hike

 Analysts at BNP Paribas commented on June 18th 2018 that “the MPC will be wary of providing any firm guidance over the likely timing of the next hike as it won’t want to tie its hands.” Fabrice Montagne, one of the chief economists at Barclays bank, noted while speaking to Reuters’ reporters that “August 2018 would be too much of a gamble and we see the November 2018 BoE meeting as the next best opportunity for an interest rate hike, assuming data strengthens more than we expect, and that Brexit remains free of major disruption.”

James Smith, a Developed Markets Economists at ING (Internationale Nederlanden Groep), wrote in the bank’s latest report that the mixed UK economic data released during the last month may mean that the chances of a summer rate hike are still hanging in the balance. “Data since May 2018 has been pretty mixed and hasn’t given a clear steer on whether the economy is fully recovering, prompting markets to temper their expectations for the August 2018 meeting. However, with wage growth picking up, we still suspect policymakers would like to hike rates then if they can. Based purely on recent BoE commentary, we still feel an August hike is slightly more likely than not – but there’s a long way to go before the next meeting,” the ING’s economist noted.

The same Reuters poll, published on June 19th 2018, showed that economists forecast the UK’s economic growth to come in at 1.4% in 2018 with the figure being a bit higher than their previous forecast. They also anticipate that the UK’s inflation will hover around 2.5%, on a year-to-year basis, during 2018 and is expected to decline to 2.1% in 2019. 

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The British Pound against the Euro, the US Dollar against the British Pound and the British Pound against the Japanese Yen are just three of the major currency pairs that you can trade with on the STO platform. STO provides its clients with all the necessary educational material such as webinars to help them with preparing a suitable trading strategy. 

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19 / 06 / 2018 | Analisi tecnica

Technical Analysis 19.06.2018 – AUD/JPY: Ichimoku clouds

Let's look at the four-hour chart. Tenkan-sen line is below Kijun-sen, both lines are directed downwards. Confirmative line Chikou Span is below the price chart, current cloud is descending. The instrument is trading below Tenkan-sen and Kijun-sen lines; the Bearish trend is still strong. One of the previous minimums of Chikou Span line is expected to be a support level (81.23). The closest resistance level is Tenkan-sen line (81.85).





On the daily chart Tenkan-sen line is above Kijun-sen, the red line is directed downwards, while the blue one remains horizontal. Confirmative line Chikou Span has crossed the price chart from above, current cloud is going to reverse from ascending to descending. The instrument is trading below Tenkan-sen and Kijun-sen lines; the Bearish trend is still strong. One of the previous minimums of Chikou Span line is expected to be a support level (81.09). One of the previous maximums of Chikou Span line is expected to be a resistance level (82.26).




The Technical Analysis is provided by Claws and Horns (Cyprus) Limited, an independent analytical company. Any views and opinions expressed are explicitly those of the writer. Any information contained in the article, is believed to be reliable, and has not been verified by STO and is not guaranteed to be accurate. References to specific products, are for illustrative purposes only and are not a form of solicitation, recommendation or investment advice. Past performance is not a guarantee of future performance.
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19 / 06 / 2018 | Notizie sul mercato

Fundamental Analysis 19.06.2018 – Market Outlook

With little data out, the market is focused on the growing “trade war” between the US and China. Shortly after the US Senate passed a bill with an amendment that would kill US President Donald Trump’s rescue of Chinese telecom firm ZTE, Donald Trump directed the US Trade Representative to identify $200bn of Chinese goods for additional 10% tariffs. Needless to say, China has threatened to retaliate with “comprehensive measures” if the US goes ahead with this plan. China-related stocks are down sharply this morning, e.g. the CSI 300 -2.85% and the Shenzhen Composite -4.35%. The S&P 500 held up fairly well yesterday (-0.2%) but the futures were trading -0.9% this morning.

Clearly it’s a risk-off environment. Against that background, it’s no surprise that the commodity currencies did badly and the “safe haven” JPY and CHF did well. AUD was particularly hard hit, for two reasons:  first off, it’s often traded as a more free-floating proxy for CNY, and secondly, Australia’s economy would be hardest hit by a slowdown in the Chinese economy. USD fell, as is to be expected in a trade war that’s likely to take an increasing toll on the US economy (see Mr. Bostic’s comments below).

So far the “trade war” has been confined to trade. The fear however is that it may spill over into the financial world. Specifically, China could start selling off some of its massive holdings of Treasury bonds. The country owns some $1.18tn of Treasuries, or 30% of all foreign official holdings of Treasuries, which is not to mention their holdings of agency bonds and others.




Of course to some degree it would be shooting themselves in the foot to sell these bonds aggressively, because once the market realized what was happening, bond prices would plunge. However, US mortgage rates would soar as a result, and China might feel the pain was worth it to make middle-class US voters sit up and take notice.




Would that be good or bad for the dollar? Oddly enough, it might be good for the dollar. As you can see, in general USD has risen and fallen along with US yields over the past several years.



We had some interesting Fedspeak yesterday, with two voting members presenting quite different assessments of the outlook.

Atlanta Federal Reserve System (Fed) President Raphael Bostic said, “I began the year with a decided upside tilt to my risk profile for growth, reflecting business optimism following the passage of tax reform. However, that optimism has almost completely faded, replaced by concerns about trade policy and tariffs. In contrast, incoming NY Fed President John Williams said, “Our economy’s in great shape; we’re in the second-longest expansion in history,and economic data from both the United States and countries around the world continue to trend upwards.” So a mixed view on the FOMC.

Today’s market

A relatively quiet schedule today.

In Europe, European Central Bank (ECB) President Draghi will be giving the opening speech at the ECB’s forum in Sintra, Portugal on Price and wage-setting in advanced economies. His speech is to last 30 minutes. Then, ECB Chief Economist Peter Praet will chair the first session, on Macroeconomics of price and wage setting. Participants include St. Louis Fed President James Bullard. They break for lunch at 13:30 local time and that’s it for the day.

The only major data out from the US today is housing starts and building permits. The market is looking for a 1.9% mom increase in starts, a rebound from the fall in the previous month, but a 1.0% mom decrease in permits. A fall in permits of that degree wouldn’t be particularly worrisome though as the upward trend seems to be still in place. This could be positive for USD.



Overnight, New Zealand announces its current account balance for Q1. It’s expected to be slightly in surplus. However, the 4-quarter calculation of the current account as a percent of GDP will show a slightly wider deficit, because the Q1 2017 surplus, which now falls out of the calculation, was a bit larger than the Q1.



Early in the European day Wednesday 20th of June 2018, Bank of France Governor and ECB Board Member Villeroy de Galhau will hold a press conference on the Annual Report of the Banque de France. According to Google Translate, he’ll talk about the economic situation of France and the Eurozone. We might get more insights into the ECB’s recent decision.

The Fundamental Analysis is provided by Marshall Gittler who is an external service provider of Claws and Horns (Cyprus) Limited, an independent analytical company. Any views and opinions expressed are explicitly those of the writer. Any information contained in the article, is believed to be reliable, and has not been verified by STO and is not guaranteed to be accurate. References to specific products, are for illustrative purposes only and are not a form of solicitation, recommendation or investment advice. Past performance is not a guarantee of future performance.
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