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    • Optimism fails, USD/JPY falls below 113.

      currency trading strategies Comments Off on Optimism fails, USD/JPY falls below 113.

      Once again, market has proven to be irrational.  Fed Chair Janet Yellen’s hawkish comments and positive US data failed to inspire the dollar bull.  USD/JPY ended last week below 113.

      US Producer Price Index (PPI), Consumer Price Index (CPI), Retail Sales and Unemployment Claims, every single piece of data outperformed expectation.  So why did USD/JPY weaken towards the end of last week?

      In the first semi-annual monetary policy report, Yellen reinforced Fed’s tightening plan and setting rate hikes expectation in 2017.  Yellen’s comments were more hawkish than what the market had anticipated.  They were in line with what we had expected, keeping rate hike alive, but not “over-promising” (refer the last week’s research).  We have to ask again, so why did USD/JPY weaken towards the end of last week?

      USD/JPY tracks the US treasury yield closely.  Both the 10-year yield and 30-year yield dropped towards end of last week, explaining the drop in USD/JPY as well.  Data have given Fed more reasons to raise rate soon and Fed is not shy of expressing their concern if it waits too long to tighten.  There are not much US data in the upcoming week.  The FOMC Meeting Minutes are likely to reflect similar hawkish sentiment.  If there is clear indication of the next rate hike, we could expect USD/JPY to climb towards 114 or beyond.

      UK feeling the heat

      The picture is not so pretty across the Atlantic.  UK CPI and Average Earnings underperformed.  Although Claimant Claim outperformed expectation by a big margin (-42.4K versus 1.1K), but it was based on a new measuring method by the Office for National Statistics (ONS).  The most recent PMIs underperformed as well.  These reasons ease some tightening pressure off Bank of England for the time being and sterling is likely to remain under pressure this week.  If the second estimate GDP surprises to the downside, we would expect sterling to go through another round of sell-off.

      We do not expect any surprise from Australia Monetary Policy Meeting Minutes and FOMC Meeting Minutes.  With only a handful of data releasing this week, it could favour technical play for traders.


      Our Picks

      AUD/NZD – Consolidation.  We do not expect surprises from RBA meeting minutes and AUD/NZD is likely to trade within 1.0700 and 1.0640.

      USD/JPY – Bullish.  Fed’s intention and data are supporting the dollar fundamentally.  We expect 113 to hold for this week.

      XAU/USD (Gold) – Bullish.  Gold is trading between 1222 and 1243.  Consider going Long around 1231 or 1222.


      Top News This Week
      (GMT+8 time zone)

      UK: Second Estimate GDP q/q.  Wednesday 22nd February, 5.30pm.
      We expect figures to come in at 0.6% (previous figure was 0.6%).

      Canada: Core Retail Sales m/m.  Wednesday 22nd February, 9.30pm.
      We expect figures to come in at 0.6% (previous figure was 0.1%).

      Canada: CPI m/m.  Friday 24th February, 9.30pm.
      We expect figures to come in at 0.2% (previous figure was -0.2%).

      Mario Singh Official Website

       
    • EUR/USD near 1.06. Will Yellen sink the dollar?

      currency trading strategies Comments Off on EUR/USD near 1.06. Will Yellen sink the dollar?

      Fed chair Yellen is scheduled to deliver the first semi-annual monetary policy report under the new leadership of President Trump.  Will she support or sink the dollar?

      Dollar is going through roller-coaster ride, driven by President Trump’s comments and policies.  He grumbled over nations gaining trade advantage by weakening their currency, in a way expressing his wish for the dollar to be weaker.  At the same time, he announced policies that are positive for the greenback.  The latest being a promise of “something phenomenal on taxes in 1-2 weeks”.  To date, EUR/USD and USD/JPY has lost 40% and 30% of the post-eleaction gains respectively.  So, who is the biggest currency manipulator?

      US data are pretty much supporting rate hikes.  Although consumer confidence and sentiment are both lower than expected, but jobs are adding at a healthy rate and unemployment claims are dropping.  We expect Yellen to keep the hopes of rate hike alive, but not “over promising”.

      Draghi “face-off” with Trump

      European Central Bank (ECB) president Draghi rebuted Trump’s accusations of the Euro being manipulated and Germany is gaining unfair trade advantage from the low euro.  Draghi put forward arguments saying ECB has not intervened in the forex market since 2011 and has not engaged in persistent one-sided intervention.  Draghi counter-attacked by warning of undesirable consequences by removing the Dodd-Frank Act.  “Frankly I don’t see any reason to relax the present regulatory stance which has produced a stronger banking and financial services industry than before the crisis,” Draghi said.  ECB is expected to maintain loose monetary policy amidst global and local uncertainties.

      Divergence in Aussie and Kiwi

      Both Reserve Bank of Australia (RBA) and Reserve Bank of New Zealand (RBNZ) kept their  interest rates unchanged.  RBA acknowleged the recent improvements in global economy.  Their optimism on export growth and moderate consumption growth boosts their growth outlook.  New Zealand’s economy is growing at more than 3% in a year, sparking speculations on tightening.  However, RBNZ eliminated any tightening bias by opting to maintain a neutral policy.  The key divergence came from their views towards their respective currency.  RBA is unsure if the Aussie can be consider too strong given their positive growth outlook.  On the other hand, RBNZ said the Kiwi is higher than the sustainable level for balanced growth.  A strong Kiwi could hold back inflation from hitting their 2% target.  Given this divergence, traders could possibly continue to look to go Long on AUD/NZD.  Do watch out for Australia’s employment data and New Zealand’s retail sales towards end of the week.


      Our Picks

      AUD/NZD – Bullish.  Traders are likely to continue to buy into the divergence in opinions between RBA and RBNZ.  Possible to buy at dips.

      EUR/USD – Bullish.  We expect Yellen to play safe, avoid strengthening the dollar too much before the next rate hike.  1.06 could be the support for EUR/USD this week.

      XAG/USD (Silver) – Bullish.  Price made a new high; the bullish momentum is in tact.  Consider buying at dips.


      Top News This Week
      (GMT+8 time zone)

      UK: CPI.  Tuesday 14th February, 5.30pm.
      We expect figures to come at 1.8% (previous figure was 1.6%).

      Australia: Employment Change.  Thursday 16th February, 8.30am.
      We expect figures to come at 18K (previous figure was 13.5K).

      New Zealand: Retail Sales q/q.  Friday 17th February, 5.45pm.
      We expect figures to come in at 0.6% (previous figure was 0.9%).

      Mario Singh Official Website

       
    • China Reserves Edge Below $3 Trillion as Yuan Pressure Rises

      currency trading strategies Comments Off on China Reserves Edge Below $3 Trillion as Yuan Pressure Rises

      CHINA, FEBRUARY 7, (BLOOMBERG): China’s foreign-currency reserves edged just below $ 3 trillion in January, falling to the lowest since early 2011 after the yuan capped its steepest annual decline in two decades.

      Reserves decreased $ 12.3 billion to $ 2.998 trillion, the People’s Bank of China said Tuesday. That compares with the $ 3.004 trillion estimate in a Bloomberg survey of economists and added to the $ 320 billion decrease in the holdings last year.

      Further erosion of the world’s largest stockpile may prompt policy makers to again tighten measures for controlling outflows and on companies transferring money to other countries. Authorities recently rolled out stricter requirements for citizens converting yuan into foreign currencies as the annual $ 50,000 foreign exchange quota for individuals reset Jan. 1.

      Mario Singh Official Website

       
    • NFP fails to inspire. Will USD/JPY fall below 112?

      currency trading strategies Comments Off on NFP fails to inspire. Will USD/JPY fall below 112?

      Non-farm payroll came in much stronger than expected, but wage growth and unemployment rate disappointed.  Where will USD/JPY be heading?

      Non-farm payroll printed 227K, outperformed expectation by more than 50K.  However, unemployment rate and wage growth missed their mark, came in at 4.8% (versus forecast 4.7%) and 0.1% (versus forecast 0.3%) respectively.  The data were overshadowed by recent Trump’s policies and comments against the strength of the dollar.  Fed kept their interest rate unchanged as expected, but their statement appeared less hawkish.  We believe USD/JPY will be in a dilemma this week and here are the reasons why :

      Bearish for USD/JPY

      • Trump is not in favour of the dollar being too strong.
      • Market is scaling back expectation from 3 rate hikes to 2 rate hikes in 2017.

      Bullish for USD/JPY

      • Bank of Japan (BOJ) announced plans to buy an unlimited amount of Japanese Government Bonds (JGBs).

      BOJ Retaliates

      BOJ maintained their interest rate at -0.1%.  What’s worth taking note of are their plans to purchase an unlimited amount of 5-10 year JGBs, hoping to hit their inflation target as soon as possible.  We see this as a form of retaliation to Trump’s policies and comments, which had caused the USD/JPY to fall more than 600 pips since the start of 2017.  Like it or not, every country will put their interest in the number one spot.  At this moment, we think BOJ is likely to maintain some balance.  On one hand, prevent the yen from strengthening too much, jeopardising their exports and plans to hit inflation target.  On the other hand, avoid excessive interventions to weaken their currency and agitating their number one trading partner (in terms of exports), the US.

      BOE Cautious

      Bank of England (BOE) expressed cautious outlook in their official statement.  Even though they upgraded their GDP outlook from 1.4% to 2%, but their dovish bias shown unwillingness to tighten.  This switch from their hawkish bias in December sent the sterling lower.  The main challenge faced by BOE is the uncertainties from Trump’s policies, Brexit plans and their impact on UK’s economy.  With only the manufacturing production scheduled to release this week, we expect the sterling to remain weak.


      Our Picks

      GBP/USD – Slightly Bearish.  The bearish momentum is likely to continue towards the support around 1.2420.  Lack of economic data should provide support around 1.2420.

      NZD/USD – Slightly Bearish.  We expect RBNZ to remain dovish in their statement this week.  The resistance around 0.7330 is likely to hold.

      XAU/USD (Gold) – Possible buy at dips.  Price is near key resistance around 1224, but the bull should still dominate.  Consider buying at dips.


      Top News This Week
      (GMT+8 time zone)

      Australia: Cash Rate.  Tuesday 7th February, 11.30am.
      We expect figures to remain unchanged at 1.5% (previous figure was 1.5%).

      New Zealand: Offiicial Cash Rate.  Thursday 9th February, 4am.
      We expect figures to remain unchanged at 1.75% (previous figure was 1.75%).

      UK: Manufacturing Production m/m.  Friday 10th February, 5.30pm.
      We expect figures to come in at 0.4% (previous figure was 1.3%).

      Mario Singh Official Website

       
    • Sterling’s Biggest Rally Since 2008

      currency trading strategies Comments Off on Sterling’s Biggest Rally Since 2008

      GBP/USD rallied 360 pips after UK prime minister Theresa May’s speech.  Will the reality of hard Brexit eventually bring the sterling down?

      Sterling surprising rallied after May announced her plans for a hard Brexit last Tuesday, the biggest single day rally since 2008.  How would a hard Brexit benefit the sterling?  Let us take a look at the few key points in her speech.

      1. Give Parliament a vote on the final Brexit deal.
      2. Aim for phased transition and “smooth” Brexit.
      3. Seek a “full” exit from EU.
      4. Will not propose membership of EU Single Market.

      Seeking a “full” exit from EU and not proposing to be a member of EU Single Market will have significant impact on UK’s economy.  New trade agreements will be needed between UK and its trading partners.  Negotiations will bring about uncertainties, possible impact to current trades and/or diplomatic relationships.  Apparently, the market has been expecting May to lean towards a hard exit.  The intention of working on a phased transition to ensure a “smooth” Brexit was cheered on by investors. If the court rules in favour of parliamentary approval in invoking Article 50 this week, then the momentum could carry on in near term.  Stay tuned for more episodes of Brexit!

      Donald Trump, 45th President of the United States

      Dollar tanked after Trump’s inauguration speech and continues to fall at the opening of this week.  USD/JPY fell below 114.  The initial plans announced by the White House includes withdraw from Trans Pacific Partnership, renegotiate NAFTA and other orders aiming at policies implemented by Obama.  Trump and his team has launched a frontal attack on China, ranging from its excessively weak currency to its one-China policy.  In short, it looks like Trump is setting up for a clash of the titans between the No. 1 and No. 2 economies in the world.  What about his fiscal spending plans to boost the economy?  Nothing mentioned yet.  One of the major reason supporting the dollar is Trump’s promise of fiscal spending.  It is no surprise the dollar tanked.  Little economic data is scheduled for this week.  With only unemployment claims, advance GDP and core durable goods orders on the table, politics is likely to be the main driver for this week.  We expect the dollar to be in a roller-coaster, unless Trump announces clear plans for fiscal stimulus soon.


      Our Picks

       

      GBP/USD – Possible Short.  Price is near key resistance around 1.2420.  Court ruling may result in short term rally, possible to go Short if GBP/USD fails to break resistance.

      EUR/GBP – Slightly Bearish.  EUR/GBP may head towards the support around 0.8625 ahead of the UK court ruling or thereafter.

      XAG/USD (Silver) – Possible Short.  Price is near key resistance around 17.20.  Possible to go Short after Silver shows sign of rejection off the resistance.


      Top News This Week
      (GMT+8 time zone)

      Australia: CPI q/q.  Wednesday 25th January, 8.30am.
      We expect figures to come in at 0.7% (previous figure was 0.7%).

      UK: Prelim GDP q/q.  Thursday 26th January, 5.30pm.
      We expect figures to come in at 0.6% (previous figure was 0.6%).

      US: Advance GDP q/q.  Friday 27th January, 9.30pm.
      We expect figures to come in at 2.3% (previous figure was 3.5%).

      Mario Singh Official Website

       
    • British pound falls in Asia as markets brace for ‘hard’ Brexit speech

      currency trading strategies Comments Off on British pound falls in Asia as markets brace for ‘hard’ Brexit speech

      LONDON, JANUARY 16, (CNBC): Sterling slumped to three-month lows in thin Asian trade on Monday with investors again concerned by media reports that the British government is prepared to make a “hard” exit from the European Union.

      The pound fell 1.04 percent against the dollar at $ 1.2047 during early Asian time, after falling as low as $ 1.1979 earlier. This was the most the dramatic fall since last October when the pound nosedived to a three-decade low at $ 1.1819 amid fat-finger speculation and Brexit fears.

      The euro was quoted up 0.85 percent at 0.8816 pounds, while sterling fell 1.4 percent on the safe-haven yen to 137.69 yen. The Japanese currency gained broadly, with the U.S. dollar dipping to 114.28 yen.

      Mario Singh Official Website

       
    • Sterling Close To 32-Year Low

      currency trading strategies Comments Off on Sterling Close To 32-Year Low

      GBP/USD opened the week with a 170 pips gap.  Will the sterling slide further this week?

      Over the weekend, reports saying UK Prime Minister Theresa May will announce intention of a clean and hard Brexit early this week.  GBP/USD is on the brink of hitting 1.20 and closing in on 32-year low.  The price action is telling us a hard Brexit is not fully priced in yet.  The source of report was not revealed; neither were there any comments from the prime minister’s office.  May is scheduled to speak on Tuesday and we think there are 2 possible outcomes.

      1. May announces plans leading to a hard Brexit. Sterling is likely to fall further.
      2. May announces plans leading to a soft Brexit. A relief rally is likely.

      CPI, employment data and retail sales will be released, but the focus will be on May’s speech.

      The dollar bull retreated after a disappointing press conference by Trump.  USD/JPY fell below 114 the lowest in more than a month.  Will Trump disappoint again during his inauguration speech this week?  Hope has been building up since his victory last November.  Promise of tax cut and fiscal spending has pushed both the dollar and stocks up.  We believe Trump is well aware how important it is to uphold his promise and keeping the fire of hope burning, especially on his first day as US president.  The other pillar supporting a strong dollar is Fed’s tightening plan, which in turn, is supported by healthy jobs growth, rising spending and inflation.  3 rate hikes remain on the table.  Dollar is expected to find support and possibly stage a recovery, unless Trump fails to live up to expectations.

      European Central Bank (ECB) is expected to maintain their monetary policy.  ECB announced an extension of their stimulus until end of this year in their last meeting.  Some investors may be looking out for some hints of tightening since recent Eurozone data have shown improvements.  We remain sceptical towards ECB considering tightening at this moment.  There are too many uncertainties lying ahead, ready to pounce on the fragile recovery.  We expect ECB continue to dispel any rumours or expectations of tightening considerations in their press conference following their interest rate announcement.

      Bank of Canada is expected to remain neutral in their policy.  Oil prices have stabilised, WTI is consolidating between $ 51 and $ 55.  USD/CAD has fallen from 1.36 to 1.31 since end of last year.  A strengthening loonie is presenting a challenge to inflation, but it should ease the pressure once dollar finds its strength again.  We do not expect the central bank to express too much concern regarding renegotiation of the North American Free Trade Agreement (NAFTA).  US and Canada are likely to maintain their current relationship, especially when US imports a lot of oil from Canada.


      Our Picks

       

      USD/JPY – Possible Long.  The level 114 is expected to hold, unless President-elect Trump fails to live up to expectation in his inauguration speech.

      EUR/JPY – Possible Long.  Price is near support of 121.  ECB is expected to remain neutral and Trump is likely to re-ignite risk-appetite again.

      D30/EUR (DAX) – Possible Long.  We identified the key support of 11530.  ECB stimulus will last until end of this year.  Possible to look for buying opportunity around the support.


      Top News This Week
      (GMT+8 time zone)

       

      US: Core CPI m/m.  Wednesday 18th January, 9.30pm.
      We expect figures to come in at 0.5% (previous figure was 0.5%).

      Canada: Overnight Rate.  Wednesday 18th January, 11pm.
      We expect figures to remain unchanged at 0.5% (previous figure was 0.5%).

      Europe: Minimum Bid Rate.  Thursday 19th January, 8.45pm.
      We expect figures to remain unchanged at 0.0% (previous figure was 0.0%).

      Mario Singh Official Website

       
    • Dollar Dances With Speeches

      currency trading strategies Comments Off on Dollar Dances With Speeches

      5 FOMC members are scheduled to make 6 speeches this week, including Fed Chair Janet Yellen.  How will the dollar dance along with their speeches?

      The first non-farm payroll of 2017 fizzled out at 156K, market was expecting 175K jobs added.  Unemployment rate rose slightly to 4.7% as expected, due to higher participation rate.  Average hourly earnings came in at 0.4% versus forecast of 0.3%.  Anyone who took a quick glance at these data would make a call to sell the dollar.  Oh! … We forgot to mention the previous figure was revised upwards from 178K to 204K!  I bet you would be scrambling to reverse your earlier decision to sell the dollar now.  This is exactly what happened last Friday.  The EUR/USD shot up 40 pips in an instant, only to reverse to wipe out the gain and went another 30 pips lower.  All of these happened in the first minute after the data were released.  The dollar remains resilient, as the data are not bad enough to derail Fed’s tightening plan.

      5 FOMC members are scheduled to speak this week, including Fed chair Janet Yellen.  We expect the speeches to echo optimism in Trump’s economy and also express concern of global uncertainties.  It is just the start of the year, there is no necessity to steer away from their plan of 3 rate hikes, neither is there a hurry to raise interest rate soon.  If the market does not see a high possibility of a rate hike in the first quarter, the dollar may weaken slightly this week.

      UK PMIs scored a hat trick.  All three PMIs came in better than expected.

      1. Manufacturing PMI : 56.1 vs 53.3

      2. Construction PMI : 54.2 vs 52.6

      3. Services PMI : 56.2 vs 54.8

      However, the hat trick failed to inspire the sterling to maintain the lead for last week.  It crumbled as possible “hard exit” continues to haunt the sterling and nothing is derailing the dollar from 3 rate hikes yet.  We expect this phenomenon to continue, the sterling may rally on positive data, but will likely lose its gain thereafter.

      The biggest event was PBOC’s intervention to prop up the yuan against dollar.  Capital outflow, uncertainties in China’s economy and Fed’s tightening plan have resulted in the yuan coming close to break the 7.0 level, which has been maintaining a clean sheet for 8 years.  The intervention strengthened the yuan by 1.3%, which also sent the offshore yuan (CNH) losing more than 1700 pips in 2 days, the biggest move since August 2015.  PBOC has demonstrated time and again, they are ready to intervene whenever necessary.  We could possibly see more of such interventions if Fed rate hikes bring the USD/CNY towards the 7.0 level again.


      Our Picks

      GBP/USD – Possible Long.  Impact from the exit is unable to be assessed at the moment and Fed rate hike in near future is unlikely.  We expect the 1.22 support to hold.

      EUR/JPY – Possible Short.  ECB stimulus continues and no further easing from BOJ.  We expect the 123.80 resistance to hold.

      XAU/USD (Gold) – Possible Short.  Gold is near 23.6 Fibo level, possible to look for short entry on prospect of Fed rate hikes.


      Top News This Week
      (GMT+8 time zone)

       

      Australia: Retail Sales m/m.  Tuesday 10th January, 8.30am.
      We expect figures to come in at 0.5% (previous figure was 0.5%).

      UK: Manufacturing Production m/m.  Wednesday 11th January, 5.30pm.
      We expect figures to come in at 0.7% (previous figure was -0.9%).

      US: Core Retail Sales m/m.  Friday 13th January, 9.30pm.
      We expect figures to come in at 0.5% (previous figure was 0.2%).

      Mario Singh Official Website

       
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