Global FX Weekly - 25th March 2016 - US Durable goods fails to inspire US equties

Forex Market Commentary  

Easter weekend.

Today, US Durable Goods Orders for FEB 16 came in at  -2.8% compared to JAN 16 4.2% and that really failed to inspire the US equities markets. Although the USD had a good week against it's major currency pairs, there wasn't really that spark that could conclusively spiral into a large spec action coming into the holiday weekend. But the Dow has slipped from last Friday's 17,602 to come in at 17,515 today. Equities trader's are nervous and wary of a steeper Dow correction but so far Fed Chair Yellen has manouvered with a tight balancing act on the need for further rate increments and the needs of corporate USA. Notice how the VIX has now come down to 17.40 to indicate low volatility on stock options ahead of earnings season running contrary to market fears of a plunge. Should we be entering a sideways consolidation period for the Dow there should be some great opportunities for applying straddles on US equities options as premiums are relatively cheap for the moment. Trading the last 2 days has been thin understandably. On the data front the US Initial Jobless Claims MAR 16 came in at a net  265k  vs 259k for FEB 16 and the USD Manufacturing PMI MAR 16 came in at 51.5 vs  51.3 for FEB 16. Earlier in the week US new home sales FEB 16 came in at 512k with an increase over 502k for JAN 16 month on month +2% compared to Jan 16 -7.0%.


USDX - is turning positive closing at 96.275 +0.146 +0.19%  with a spate of strong US data. Having briefly breached the 95 support USDX has now crossed on top of 96. USDX is still below the 200 day moving average at 97.2 but momentum is turning in it's favor. Longs are now firmly in play.

 
EUR/ USD - For our purposes of studying the EUR/ USD this year 2016 we shall be keeping an eye out for yield convergence/ divergence signs.is slowly losing it's momentum. The technical structure for EUR/ USD is weakening as the pair slipped today to 1.11. Resistance at 1.1376 (11/02/2016 high) looks all too far. In the longer term, the technical outlook looks to a weakening EUR/USD given a resumption of the divergence yield expectation with the ECB set to maintain rates at - 0.4 for the balance of this year 2016 and the US Fed set to raise interest rates at least 25 basis points more with headline inflation perilously near the limit 2% parameter for raising rates. The current failure of the pair to breach the 1.14 and overt ECB willingness to push the pair lower indicates a path back down to 1.08 with massive support at 1.05. Shorts are in play as stated last week.  
   

GBP/ USD - Our purposes of watching this pair would be to identify a trading opportunity on the GBP as the Brexit talks increase volatility. GBP/USD is gradually weakening and  it's recent short-term bullish momentum that took the pair to 1.45 last weak. Yesterday's UK Retail Sales figures FEB month on month came in at -0.2% compared to JAN + 2.3% reigniting the bearish outlook. Strong resistance  at 1.4514 (18/03/2016 high) seems daunting for another push and more likely a continuation of the decline is in place with a further decline towards the key support area at 1.3503 (23/01/2009 low). Shorts are in play as stated last week with a bias to 1.35 area.

Gold bullion -  The price collapse we anticipated last week came suddenly this week and the shorts had a decent romp at it putting to sword the last of the die-hard bullion bulls. Last week COT data with heavy net longs over 75% was untenable. Is this the breaking of the back of bullion? Gold bullion has steadily declined this week even in the face of the recent events in Belgium where traditionally investors flee to Gold and US Treasuries and CHF in any chaotic event as a safe haven. but bullion is losing it's shine even as a safe haven. Strong  resistance at 1284 (11/03/2016 high) has broken the current bullion euphoria to fall to the low 1200 region. it's not quiet over yet for the bullion bulls and next week should be a key determinant on direction. Should a bear market appear to reverse the growth of 2015 then large specs could push once again to the 1045 (05/02/2010 low). it was the large specs taking us to the 1280 beyond rationale and now it seems were back down to the 1200 mark and faltering. I would expect the market to drift sideways 1150 to 1220 now as most of the weaker longs are flushed out. But should the 1200 mark cave in dramatically this week then we may have a serious run at 1045. Shorts are still in play.


Crude Oil WTI - WTI rose dramatically this year with large spec buying pushing the crude to top $43. Since the double lows of $26 in Jan 17 and Feb 15 2016 this kind of pricing in a glut physical market has not been anticipated. The $43 level in price has not been seen since the decline started badly in Nov 2015. Still Wti is currently trading well below the all important 200-Day Moving Average at $47. Oversold conditions have since led to short covering as well as price supporting news of a possible OPEC agreement on curtailing
production. But overall the technical structure of WTI favors a retracement
back to the $35 with indications of support and fund buying at $35. Yet, speculation apart, the strong daily resistance at 43.46 (24/11/2016 high) seems a bridge too far given continuing logistical problems of over-supply.
Shorts are in play so dont jump on the crude bull wagon yet. 

Read on Bloomberg:

www.bloomberg.com/news/articles/2016-03-24/the-fed-wants-markets-to-stop-taking-the-dot-plot-so-seriously 

and

http://www.bloomberg.com/news/articles/2016-03-24/why-the-ecb-could-get-some-junk-with-its-bond-buying-program


and on Reuters today:

http://www.reuters.com/article/us-global-oil-idUSKCN0WQ036


Important data:


FX:


EUR/ USD 1.117830    -0.000365    -0.03% 


USD/CHF 0.975950    +0.000500    +0.05%
 
USD/JPY 112.832    +0.492    +0.44%

CNY/ USD 0.153330  + 0.00050 +0.1%


GBP/USD  1.41515    +0.00430    +0.30%
 
AUD/ USD  0.752435    +0.000635    +0.08%

USD/CAD  1.32456    +0.00264    +0.20%

NZD/USD  0.67020    -0.00088    -0.13%


Fixed Income Markets:

US Federal Reserve -  +0.50%    

US 30 Day Fed Fund 99.605    -0.005    -0.01%
US 2 year T-Notes 109.054688    -0.031250    -0.03%
US 10 year T-Notes 129.187500    -0.140625    -0.11%
ECB Base rate -0.040 % 
Chinese interest rate PBC     China     4.35 % 
Japanese interest rate (BoJ)    0.10 % 


Equities Markets:

Nikkei 16,974.96  + 82.63 (0.49%)
SSE Composite Index    2,968.65   + 7.68(0.26%)    
Hang Seng   20,345.61     - 269.62 (1.31%)
DAX  9,851.35 -171.58 (1.71%)
FTSE 100   6,106.48 -92.63 (1.49%)
DJIA  17,515.73 + 13.14(0.08%)
 

Commodities Futures Cash:

Crude Oil WTI   39.60     -0.19 -0.48%
Gold 1217.155     -4.860 -0.40%


Indicies:

USDX  95.057     +0.282 +0.36%
VIX  17.40 - 0.33 - 1.83%

Pieter Bergli - DeLoren Trust Holdings

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