Market analysis and trade recommendations by FBS

[riki143]

OIL MARKET OVERVIEW
10:54 03.07.2017

Oil futures advanced for an eighth consecutive session on Monday. It is the longest winning streak of the year. WTI crude was trading up 0.3% at $46.22 per barrel on the NYMEX. Brent futures were 0.3% higher at $49.05 per barrel in London.

Major tailwind factors:
US oil industry
Oil prices rallied mainly due to the slowdown in the US oil production. Prices were already rebounding after official data published Wednesday showed total US crude production dropped by 100K barrels per a day (though many analysts refused to join jubilant traders saying that the fall is temporary; there was a storm in the Gulf of Mexico that disturbed the oil industry’s activity). Baker Hughes data released on Friday indicated that the number of active US rigs drilling for oil declined by 2 to 756 in the past week (which is the first drop in 23 weeks!). These 2 rigs fanned the flame in oil market and pushed oil prices higher. Famished Bulls have finally made a good haul on the falling output in the US oil industry.

Major headwind factors:
Other suppliers
Some investors remain skeptical about the continuation of the oil prices’ rally for compelling reasons. There is a potential for an increased output from Libya and Nigeria, members of the OPEC exempt from the OPEC-led output cut agreement. Libya’s oil production spiked to more than 1 million barrels a day for the first time in 4 years due to the reopening of the country’s largest oil field Sharara. Libya’s production is seen rising additional 300K barrels a day on average for the third quarter compared with the first quarter.

Qatari problem is still not resolved
On Monday, Qatar missed a deadline to comply with a list of demands from the Saudi-led alliance that blockaded the emirate since June 5. Saudi Arabia, Egypt, Bahrain and the United Arab Emirates accused Qatar of supporting the terrorist groups and having close ties with Iran.

The US policymakers confirmed that Qatar has funded Al Qaeda affiliates in Syria and some elements of ISIS – the very terrorist groups the American troops are bombing striving to liberate northern Iraq. Qatar also supports Hamas, Yemen-based Houthi rebels (which are against the Saudi regime), offered a sanctuary to the Muslim Brotherhood leaders and other spiritual guides of terrorists.

All these activities might have been tolerable, if not Qatari support of Iran. When Iran was under embargo, Qatar continued to sell Iranian natural gas to power-starved Europe. Having recognized that shipping the fuel resources by sea is costly, slow and very risky, Qatar proposed a building of a pipeline across Syria to move Iranian energy products to the European markets. But Syrian civil war and disobedience of Bashar Al-Assad made Qatar and Iran give up on their plans. In short, Qatari support destined for Iran was the last straw for its Arab neighbors. They demanded Qatari officials to stop financing the terrorists, backing armed uprisings between Sunnis and Shia groups.

More:
https://fbs.com/analytics/articles/oil_market_overview_1947

 

[riki143]

DO NOT BELITTLE G-20 SUMMIT
13:02 03.07.2017

Some traders simply disregard the importance of such political assemblies as G-20 summits viewing them irrelevant for interpretation of market’s moves. In some degree, they are right, markets are not really responsive to the G-20/G-7-like meetings. But the upcoming event has some ginger due to its agenda, the leaders representing 20 leading economies and due to some sidelines meetings.

Angela Merkel will host leaders of the G20 leading economies on this Friday at a Hamburg summit. On the agenda of the meeting are the most contentious and sensitive issues such as free trade, climate change, and immigration. Merkel will try hard to deliver a strong and clear message on the importance of international trade against any protectionist actions. A failure to agree on a commitment to keep global trade free and open will have negative consequences for financial markets.

It also will be interesting to see how Trump will try to defend his staunchy protectionist claims against the barrage of criticism from the part of other leaders. Obviously, he cannot simply reject them all at once as they served him well as a candidate.

Traders should also pay special attention to the sideline meeting of President Donald Trump and his Russian counterpart Vladimir Putin. The leaders agreed to hold their first meeting during the G-20 summit. We will eager to know how much Mr. Trump is willing to confront the man whose meddling in the 2016 election may have helped him win. The encounter between the two heads will be held on the back of widening deferral investigation into possible collusion between Trump’s confidants and the Russian political entities, the investigation into Trump’s decision to dismiss former FBI director James Comey (potentially leading to Trump’s impeachment). The US President will have a chance to demonstrate (or not demonstrate) that he is not the Putin’s puppet as Hillary Clinton once called him. Not only American voters will closely watch the highlights of the meeting, but so will a special counsel appointed for the examination of whether Trump tried to impede Russian investigation or not.

Given the importance of these events in under present circumstances, we wait for some moves in the pairs containing the USD following the publication of the communique and play-by-play news from the G20 meeting.

More:
https://fbs.com/analytics/articles/do_not_belittle_g_20_summit_1950

 

[riki143]

USD/CAD DAILY OUTLOOK
14:18 03.07.2017

The sentiment surrounding the Loonie has turned bullish last week due to the recent hawkish BoC’s rhetoric. The Bank of Canada Governor Stephen Poloz and his deputy Carolyn Wilkins made it clear – a rate hike is imminent, if not in the July 12 meeting, then in September. Worries over the housing market and subdued inflation rates might temper the central bank’s willingness to act promptly. Raw material and industrial prices released last Friday dropped lower indicating the absence of inflation; CPI figures were lower than expected (0.1% against forecasted 0.2%).

The currency’s correlation to oil prices is becoming weaker. On the heels of the BoC’s comments, the Canadian dollar didn’t stop strengthening despite the declining oil prices. Today we saw a modest pick-up in the US dollar against the CAD despite the surging oil prices. So, we suggest the CAD will be driven predominantly by the economic releases and the BOC officials’ comments in the upcoming future. The next economic indicators will be published at 4:30 pm on Thursday – trade balance data and building permits. On Friday, we will get a package of labor data out of Canada and the US. If the US data beat market’s expectation on the back of disappointing release of the Canadian employment indicators, the USD/CAD will rise higher.

The current technical outlook is neutral. USD/CAD trades at 1.2975. On a sustained recovery back above the 1.3000 handle, a fresh bout of buying could lift the pair towards 1.3070/1.3100 resistance area. On the downside, 1.2965 level may serve as immediate support, which if broken would send the pair to 1.2945/1.2930 levels.

More:
https://fbs.com/analytics/articles/usd_cad_daily_outlook_1951

 

[riki143]

EUR/USD: DEVELOPING IMPULSE IN WAVE (I)
14:35 03.07.2017

Wave [v] of C may have been ended, so there's a developing impulse in wave . The main intraday target is 4/8 MM Level, which could be a departure point for an upward correction.

We've got a developing impulse in wave (i), which is likely going to be ended on 2/8 MM Level. If we see a pullback from this line, there'll be an opportunity to have wave (ii).

More:
https://fbs.com/analytics/articles/eur_usd:_developing_impulse_in_wave_(i)_1952

 

[riki143]

EUR/USD: TWO "TWEEZERS" PATTERNS IN A ROW
14:55 03.07.2017

We've got bearish patterns such a "Tweezers" and an "Engulfing", which both have been confirmed enough. Also, there's a bearish "Three Methods", so the market is likely going to test the lower "Window" in the short term.

There're two "Tweezers" patterns in a row, so the price is declining. Bears have reached the 55 Moving Average, but there isn't any reversal pattern so far. Therefore, the pair is likely going to continue moving down towards the 89 MA.

More:
https://fbs.com/analytics/articles/eur_usd:_two_"tweezers"_patterns_in_a_row_1953

 

[riki143]

USD/JPY: 21 MOVING AVERAGE ACTED AS SUPPORT
14:58 03.07.2017

The 21 Moving Average has acted as support, so we've got a new local high. Also, bulls have broken the "Window" and we don't have any bearish pattern. So, the market is likely going to continue rising until any reversal pattern forms.

All the last candles are bullish, so there isn't any reversal pattern so far. The main intraday target is the upper "Window". If a pullback from this level happens, bears will have a green light to deliver a downward correction.

More:
https://fbs.com/analytics/articles/usd_jpy:_21_moving_average_acted_as_support_1954

 

[riki143]

MORNING BRIEF FOR JULY 4
08:38 04.07.2017

The Aussie was hurt badly after the Reserve Bank of Australia held its interest rates unchanged at their record low. Governor Lowe’s statement was not as upbeat as many expected. He put a special emphasis on the subdued wage growth. Australia’s economic health was described as rather strong with business conditions and investments picking up stronger employment growth. Nevertheless, the board decided in favor of “no change” willing to support the country’s economic recovery and prevent A$ from rising higher.

The US Dollar Index which measures the greenback’s strength against a trade-weighted basket of six major currencies was down 0.07% to 95.85. US markets are closed today for the Independence day holiday, so we don’t expect big swings here.

USD/JPY crept down to 113.10 in Tokyo morning, but managed not to drop below the key resistance at 113.00 and remained not far away from the seven-week high of 113.47 touched earlier (after the US factories powered up in June at their fastest pace in 3 years). The yen gained strength after South Korea announced that Pyongyang once again fired their ballistic missile. The missile landed in Japan's Exclusive Economic Zone (EEZ), the Japanese government said. North Korea is repeatedly ignoring warnings from the international community, Japan's Prime Minister Shinzo Abe said on Tuesday. Abe said he will ask the heads of China and Russia to play more constructive roles in efforts to stop North Korea from launching additional missiles.

Leaders of the world’s 20 strongest economies will gather in Hamburg for a two-day summit hosted by German Chancellor Angela Merkel. Donald Trump will attend the following event and meet Russia’s Vladimir Putin for the first time as being a President. Donald Trump commented the recent missile firing in Twitter: "North Korea has just launched another missile. Does this guy have anything better to do with his life?" referring to the North's leader Kim Jong Un.

Today’s focus will on the Japan’s core CPI figures which are due at 9:00 am. Any uptick in the inflation figures will help the yen to strengthen.

The euro was little changed on Tuesday’s morning in the absences of the economic releases and central bankers’ speeches. It fell to 1.1355 against the greenback having lost its last week steam. Pay special attention to the ECB's official Novotny's speech which is due at 19:30 (MT team). He will speak of the economic consideration of the ECB's monetary policy.

The British pound inched higher but failed to recoup its yesterday’s losses after worse-than-expected data from the UK’s manufacturing sector. Theresa May striving to keep her slim majority on the side and gain the approval of more Britons signaled the end of austerity in the upcoming future. In today’s spotlight – the British construction PMI which is coming out at 11:30 am (MT time).

USD/CAD was trading a bit lower despite declining oil prices. Brent and WTI futures retreated in the Asian session halting a run of eight straight days of gains as traders received a signal that a relentless rise in US crude production is running out of steam. USD/CAD is trading near 1.2995. There is a strong support at 1.2945 (last Friday’s low) which is if broken will allow Loonie to test lower levels. The immediate resistance can be found at 1.3040.

More:
https://fbs.com/analytics/articles/morning_brief_for_july_4__1974

 

[riki143]

USD/CAD: LOONIES NEEDS A REST
09:41 04.07.2017

On the USD/CAD daily chart, the final target in the Wolfe Waves pattern has been fulfilled and the 23.6% level of the 2016 downward near-term wave has been reached. As a result, the risks for the correction from the current levels, or from the 113% target of Shark pattern have increased.

On the USD/CAD hourly chart, Bulls’ positions seem hopeless. Nevertheless, a successful test of the resistance in the form of the convergence zone at 1.303 – 1.304 will increase the risks of the rollback towards 38.2%, 50%, 61.8% from the last downward wave.

More:
https://fbs.com/analytics/articles/usd_cad:_loonies_needs_a_rest_1975

 

[riki143]

AUD/USD: AUSSIE PREPARES FOR TRANSFORMATION
09:52 04.07.2017

On the AUD/USD daily chart, there was a rollback after target 88.6% of the Bat pattern had been hit. The Bear’s failure to test the support at 0.7635 tells us about their weakness. Update of the June high may lead to the transformation of the Bat pattern into the Crab pattern. The targets of the latter pattern are located above the 0.8 level.

On the AUD/USD hourly chart, the exit of quotes beyond the limits of the downward short-term channel followed by the test of the resistance at 0.7695 will increase the risks of the activation and realization of the AB=CD pattern.

More:
https://fbs.com/analytics/articles/aud_usd:_aussie_prepares_for_transformation_1976

 

[riki143]

EUR/USD: "V-TOP" PATTERN
11:31 04.07.2017

We've got a "V-Top" pattern, so the price reached support at 1.1340. Meanwhile, the market is likely going to continue moving down towards the next support at 1.1307 in the short term. If a pullback from this level happens, there'll be an opportunity to have an upward price movement towards the next resistance at 1.1365 - 1.1398.

The 55 Moving Average has been broken, so the price faced support at 1.1340. At the same time, there's a "V-Bottom", which pushed the price to resistance at 1.1354. In this case, the market is likely going to reach the 34 Moving Average in the short term. If a pullback from this line happens, bears will have a green light to test the closest support at 1.1307.

More:
https://fbs.com/analytics/articles/eur_usd:_"v_top"_pattern_1979

 

[riki143]

GBP/USD: CONFIRMED "DOUBLE TOP"
11:42 04.07.2017

There's a "Double Top", which has been confirmed, so bears found support at 1.2926. Therefore, the pair is likely going to decline in the direction of the nearest support at 1.2887. However, if a pullback from this level happens, bulls will probably try to achieve the next resistance at 1.2964 - 1.2976.

The price is consolidating between the 34 & 55 Moving Averages. So, bulls are likely going to reach the closest resistance at 1.2964 - 1.2976. If we have a pullback from this area, there'll be an option to have another decline towards support at 1.2926 - 1.2915.

More:
https://fbs.com/analytics/articles/gbp_usd:_confirmed_"double_top"_1980

 

[riki143]

THE MISSING FACTOR IN YOUR FUNDAMENTAL ANALYSIS
12:02 04.07.2017

In this article we will tell about one of the most significant fundamental factors the traders sometimes overlook while analyzing the currency’s movement. This is a country’s foreign exchange reserves. Then, we will talk about the banks’ “favorite” currencies (constituting the great share of the banks’ foreign reserves) in the recent years.

Almost all countries hold foreign currency reserves for multiple purposes. For a country with a fixed exchange rate and free cross-border capital flows, a large stock of reserves is indispensable for the maintenance of the desired exchange rate. A good example would be China, which pegs the value of its domestic currency – the yuan (renminbi) – to the USD. When China increases its holdings of the US dollars, it raises its values as compared to the yuan. That makes the country’s exports cheaper compared to the good of American origin.

From today’s headlines: China’s state-own banks selling USD/CNY to support the yuan – the result of this operation – depreciation of the USD against CNY.
For an advanced country with a floating exchange rate, a smaller, but still sufficient stock of reserves is required. The following country’s interventions in the exchange markets are normally infrequent. The primary purpose for holding the reserves in foreign currencies, therefore, may relate to the risk that extreme market disorder could compromise the functioning of the FX markets in ways that create significant difficulties for the country’s real economy. The advanced countries, like Japan, would also be willing to keep some foreign currencies to artificially support their currencies from unexpected valuations. Another purpose for the countries to keep sufficient foreign currency reserves is to be able to pay for three to six months of imports, to cover the country's debt payments and current account deficits for the next 12 months.

So, as you see, the decision of a bank to stockpile a certain foreign currency affects this currency’s and the bank’s domestic currency exchange rates. With this axiom we now may explicate the recent appreciation of some major currencies.

The USD has crashed down significantly this year (compared to the last year so-called “Trump’s rally). In contrast, the yen and the Aussie experienced some surprising rallies since the beginning of this year. What are the primary causes of the following FX market’s moves? To some extent, it’s the central banks’ handiwork.

The International Monetary Fund released data last week on the composition of global foreign exchange reserves. We have identified some changing dynamics in the buy-and-hold investors’ preferences in the past few years.

The British pound was kicked out from the central banks’ list of all-time favorites constituting the largest shares of foreign currency reserves. The yen and Aussie were among the beneficiaries in the first quarter of this year as you may see from the chart. The same can be said about their outstanding performance in the given period.

In the second quarter, investors switched their attention to the euro and cooled on JPY and AUD. The euro picked up in the course of the period.

Source: IMF

Despite some drops in the demand for the USD, it still remains the preeminent reserve currency.

More:
https://fbs.com/analytics/articles/the_missing_factor_in_your_fundamental_analysis_1981

 

[riki143]

EUR/USD: PRICE DECLINING IN WAVE
13:30 04.07.2017

The price is still declining in wave . Previously, wave [v] of C has been ended near 7/8 MM Level. So, the market is likely going to continue moving down towards 4/8 MM Level.

There's a bearish impulse, which could be wave (i), so bulls are likely going to deliver wave (ii) in the coming hours. Nevertheless, we could have another bearish impulse in wave (iii) afterwards.

More:
v

 

[riki143]

EUR/USD: PRICE DECLINING IN WAVE
13:30 04.07.2017

The price is still declining in wave . Previously, wave [v] of C has been ended near 7/8 MM Level. So, the market is likely going to continue moving down towards 4/8 MM Level.

There's a bearish impulse, which could be wave (i), so bulls are likely going to deliver wave (ii) in the coming hours. Nevertheless, we could have another bearish impulse in wave (iii) afterwards.

More:
https://fbs.com/analytics/articles/eur_usd:_price_declining_in_wave_[i]_1982

 

[riki143]

BITCOIN: IS THERE A BUBBLE?
14:03 04.07.2017

Bitcoin hovered to $3000 in recent weeks more than doubling its value since the beginning of this year. Anyone smart or lucky enough to have bought a pile of these coins in July 2010, when the price stood steadily at $0.05, would now have earned a great fortune without even stirring a finger. From day to day the digital currency’s value rises with unprecedented speed. It got a substantial boost and attracted additional investors’ attention after some governments made it a legal form of payments in their countries. At the present moment, Bitcoin continues its seemingly endless bull rally (although with some shakeouts –here we refer to the June 12 surprise retracement), gaining additional 300 points from its recent downfall and picking convincingly above $2590. Will it rise higher? Is there a bubble? These are the questions most traders ask nowadays.

There are tons of articles and personal opinions labeling Bitcoin’s current sustainable surge as being in a bubble. The main evidence for a bubble lies at least on the ease and on the speed with which people are making money off of the recent Bitcoin’s swing. For some analysts, easy profits are the first indication of the lack of price stability in the longer term.

Other experts thoughtfully explicate Bitcoin’s gains and say that there is no bubble in effect. They site at least three reasons in Bitcoin’s defense. The first one is that its decentralization. Bitcoin is immune to any sort of manipulations; there is no special entity that would authorize the issuance of additional coins or that would take control of Bitcoin’s value. The second reason is the Bitcoin’s limited supply – there only 21 million of cryptocurrencies in circulation. The fact that all Bitcoin transactions are logged in the Blockchain stems the risks of fraud. So, Bitcoin’s transactions are secure; this makes the digital currency even more valuable.

The journalists from the Economist took nobody’s side in this big analytical dispute and dubbed the Bitcoin’s recent appreciation a healthy bubble (a bubble but with probably good consequences for investors).

Overall, most of the strategists and billionaire investors remain optimistic towards cryptocurrencies. Goldman Sachs analysts have recently said that in the longer term Bitcoin after a small rollback will bounce to much higher levels in the area between $3212 and $3915. They recommend their clients to arm themselves with lots of patience before gaining eminent profits from future Bitcoin’s rise.

And you, do you believe in the further Bitcoin’s appreciation?

More:
https://fbs.com/analytics/articles/_bitcoin:_is_there_a_bubble__1983

 

[riki143]

EUR/USD: BEARS GOING TO TEST 89 MA
15:04 04.07.2017

There are two bearish "Three Methods" patterns in a row. In this case, the market is likely going to decline towards the lower "Window", which could be a departure point for another upward price movement.

We don't have any reversal pattern so far, so bears are likely going to test the 89 Moving Average. If a pullback from this line happens, we could have a local correction. However, we should keep in mind the 144 MA as the next bearish target.

More:
https://fbs.com/analytics/articles/eur_usd:_bears_going_to_test__89_ma_1985

 

[riki143]

USD/JPY: BULLISH "ENGULFING" PATTERN
15:08 04.07.2017

The price fixated above the "Window", so there's a bullish "High Wave" pattern, which hasn't been confirmed yet. In this case, the pair is likely going to continue moving up towards the nearest resistance.

We've got a bullish "Engulfing" pattern, so the price is rising. However, if a pullback from the upper "Window" happens, there'll be an opportunity to have a local bearish correction.

More:
https://fbs.com/analytics/articles/usd_jpy:_bullish_"engulfing"_pattern_1986

 

[riki143]

MORNING BRIEF FOR JULY 5
08:44 05.07.2017

It has not been a big session if we refer to the price actions. As the US markets were closed yesterday for the Independence Day holiday, today’s and overnight’s liquidity was thinner than normal elsewhere. The largest moves were registered in AUD/USD and USD/JPY.

Aussie negatively reacted to the RBA’s “no change” in the monetary policy settings. While everybody expected a board leaving its cash rate on hold, the market participants waited something that could be inferred as at least having a partly hawkish tilt. The Reserve Bank of Australia’s officials hardly moved away from their neutral stance, remained cautious of subdued real wage growth and housing markets, refused to remove their monetary accommodation.

The yen gained some strength following the escalation of the conflict on the Korean peninsula. North Korea conducted a test of its new intercontinental ballistic missile that can carry a large and heavy nuclear warhead. South Korea and the US responded with firing missiles to show the deep strike precision of their weaponry.

USD/JPY swiftly slipped 112.70 following the missile launches. Not it is trading near 113.20. There is a strong resistance ahead lying at 113.50 which if broken may push the quotes even higher. On the downside, we suggest targeting the support at 112.20.

The euro skipped some points overnight as the ECB’ chiefs Peter Praet and Nowotny failed to surprise markets with their speeches. Economist Praet said that the bank’s inflation forecasts are “crucially contingent” on very easy financing conditions (there is no even a hint for a hawkish tilt as you see). Governing Council member (interest rate setter) Nowotny noted that normalization of the extremely loose policy will be conducted as soon as economy allows, possibly the ECB will be a bit more hawkish, but nor overly so. EUR/USD is at 1.3555 now a bit higher from yesterday’s low. While short-term downward pressure has waned somewhat, a further move below 1.3330 is still not ruled out. On the upside, there are some resistances at 1.3350/1.3400 levels. In the European session later today, we will get the second estimates of the European countries’ services PMI and monthly update of the European retail sales. The key focus will be on the Fed’s meeting minutes, though, which are due at 9:00 pm MT time. We don’t expect they might surprise markets somehow; there has been already a full exposition of the Fed’s QE wind-down process. But we will see what they bring us.

USD/CAD ticked a bit higher in Tokyo morning to 1.2945 after falling to 1.2907 in the course of the past few sessions due to hawkish commentary from BoC Governor Stephen Poloz. Canadian rate hike is now priced in a 87% chance (the rate decision will be delivered next week on Wednesday). Oil prices were trying hard to stabilize around $50 per barrel. Brent oil futures are now at $49.55 one pip higher from its weekly opening price. It may slide lower from the current levels in the absence of data/event stimuli.

NZD/USD fell 0.7260 overnight on the marginally lower dairy prices. In the Asian session, kiwi added some points and moved higher to 0.7286.

More:
https://fbs.com/analytics/articles/morning_brief_for_july_5_2001

 

[riki143]

EUR/USD: EURO IN CORRECTION TO CLOUD
09:04 05.07.2017

Technical levels: support – 1.1315; resistance – 1.1390.

Trade recommendations:

Buy — 1.1320; SL — 1.1300; TP1 — 1.1390; TP2 – 1.1430.
Reason: bullish Ichimoku Cloud with falling Senkou Span A and B; a dead cross of Tenkan-sen and Kijun-sen, falling Tenkan-sen; the market is in the correction to the Cloud.

More:
https://fbs.com/analytics/articles/eur_usd:_euro_in_correction_to_cloud_2002

 

[riki143]

AUD/USD: AUSSIE SUPPORTED BY CLOUD
09:05 05.07.2017

Technical levels: support – 0.7600; resistance – 0.7650, 0.7690.

Trade recommendations:

Buy — 0.7620; SL — 0.7600; TP1 — 0.7690; TP2 — 0.7730.
Reason: narrow bullish Ichimoku Cloud with rising Senkou Span B; a dead cross of Tenkan-sen and Kijun-sen, horizontal Tenkan-sen and Kijun-sen; the prices supported by Senkou Span A and the market may go higher.

More:
https://fbs.com/analytics/articles/aud_usd:_aussie_supported_by_cloud_2003