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Forex Analytics

 

BNP Paribas lowered EUR/USD forecast

 

Strategists at BNP Paribas have revised down their Q2 EUR/USD forecast from 1.3700  to 1.3500.

 

"Consistent with our economists’ forecasts for a deposit rate cut in June and acknowledging that the ECB’s recent FX rhetoric has limited EURUSD’s near-term upside, we have revised down our Q2 forecast to 1.35 from 1.37," BNPP outlines the rationale behind this revision.

 

"In the absence of further ECB action, EURUSD weakness towards 1.30 is likely to materialise gradually, in line with the improvement in the US economy and the shift to a less accommodative Fed policy," BNPP argues.

 

"However, our base case is that the ECB delivers QE in Q3 which should bring about an acceleration in the pace of the EURUSD’s decline, pushing it below 1.30," they add.

 

"We continue to see EURUSD at 1.26 by year-end," BNPP forecasts.

 

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Forex Analytics

7 May 2014

EUR/USD: what to expect?

 

Kira Iukhtenko, FBS

EUR/USD made another bullish move on Tuesday, hitting $1.3950. The greenback lost most of its shine on the back of the falling US yields. On Wednesday the market is consolidating the yesterday’s growth and waiting for the major events – Fed’s Yellen speech tonight and the ECB meeting tomorrow.

 

In our view, Mrs. Yellen is unlikely to influence the trade direction today. She is expected to repeat the dovish comments about the low inflation and weak labor market (supportive for EUR/USD). As for the ECB on Thursday, monetary policy will stay unchanged. A rate cut is widely expected in June, so Mr. Draghi may start preparing the investors for that. However, dovish rhetoric is not enough to impress the euro-bullish market.

 

What to expect from the pair in the coming days? Given the euro’s resilience – the currency simply ignores all the negative news – we see room to test $1.4000 this week. Strong resistance for the pair lies at $1.3967 (the 2014 high). Note that the market is overbought, however. There is a MACD divergence on a daily chart. We still put long-term bullish prospects of the pair on doubt. Support lies at $1.3800/3780 and $1.3660. 

 

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Chart. Daily EUR/USD

 

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May 8: Asian session

 

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Asian stock markets rose on Thursday, supported by the Fed’s Yellen dovish comments and upbeat Chinese trade data that suggest some signs of stabilization economy. China trade surplus increased from 7.7B to 18.5B in April. There are signs of tensions in Ukraine easing: Russian President Vladimir Putin called on pro-Moscow separatists to postpone a secession vote.

 

AUD/USD strengthened to $0.9375, supported by the upbeat Australia labor market data and a better-than-expected China trade balance. The number of people employed in Australia rose by 14.2K in April (forecast: 7.5K), while the jobless rate held unchanged at 5.8% (forecast: 5.9%). NZD/USD consolidates 30 pips above the session low of $0.8640 following the yesterday’s sharp selloff. USD/JPY faced resistance at the 102 figure and retraced to 101.70.

 

EUR/USD and GBP/USD consolidate slightly below the recent highs, waiting for the ECB and BoE policy meetings. 

 

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Danske Bank: trade signals (May 8)

 

EUR/USD: Long at 1.3910 with a target of 1.4005 and a stop at 1.3863

 

USD/JPY: Look to sell at 102.10/15

 

GBP/USD: Long at 1.6700 with a target of 1.7044 and a stop at 1.6880

 

USD/CHF: Short at 0.8824 with a target of 0.8698 and a stop at 0.8785

 

AUD/USD: Long at 0.9322 with a target of 0.9461 and a stop at 0.9261

 

USD/CAD: Short at 1.0980 with a target of 1.0858 and a stop at 1.0940

 

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May 8th: American session

 

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Tatiana Norkina, an analyst at FBS

 

Today the ECB kept interest rates at 0.25 %. This is generally consistent with the expectations of analysts. Therefore, the currency pair EUR/USD soared to new highs in the 1.3990 area. However, the subsequent statement of M.Dragi about the possibility of summer rate cuts collapsed the market. Moreover, the head of the ECB firmly stressed the undesirability of the strong euro. U.S. dollar began to strengthen against the euro. The pair is currently trading at 1.3850. Opposite situation occurred in the pair USD/CHF, the rate of which tested new lows of 0.8700, but recovered to the 0.8800 figure for now.

 

 

U.S. stock markets opened on the positive . So , DJIA continues yesterday's recovery, going up to 0.35 % today, and the S & P500 - more than 0.40 %.

 

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8 May 2014

 

BTMU: it is still hot in Ukraine

 

Despite the yesterday's risk appetite improvement, the BTMU economists remark the geopolitical risks fom Ukraine as a relevant factor for global markets.

 

"Investors were encouraged yesterday by comments from Russian President Putin which appeared to strike a more conciliatory tone. President Putin asked “representatives of south-east regions of the Ukraine and federalisation supporters to reschedule the referendum scheduled for the 11th May”, in order to create the necessary conditions for dialogue between current Kiev authorities and representatives of south-east Ukraine."

 

"President Putin also backed the Ukraine’s plans to hold presidential elections on the 25th May which he described as a “step in the right direction”, but added that the Ukraine government must first hold talks with separatists in the east and suspend its military operation against pro-Russian groups. However, Nato and the Pentagon have stated that there has been no sign of a pullback in Russian troops from the Ukraine border. The Russian rouble and other local currencies strengthened in a knee-jerk manner following the comments from President Putin, with USD/RUB falling back below the 35.00-level."

 

What's important, the Ukrainian separatists disagreed to delay the referendum - so the topic will remain in the center of attention over the weekend.

 

ukraine-1_2751537b.jpg

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8 May 2014

 

Draghi dropped EUR/USD

 

EUR/USD hit a 2.5-year high of $1.3990 as the European Central Bank left monetary policy unchanged with a minimum bid rate at 0.25%.

 

Euro plummeted by 100 pips $1.3890 as the ECB president Draghi hinted on a rate cut in June on the press-conference that followed the policy announcement.  

 

Key points of the press-conference:

 


ECB open to cut rates in June if needed;

Euro’s impact on inflation is a serious cause for concern;

Inflation is expected to remain around present low levels for month ahead, rising in 2015 and reaching target only in 2016;

Economic risks remain to the downside, so the bank will closely monitor the geopolitical and exchange rate risks.


 

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May 12: Asian session

 

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Capital markets are cautious as the Ukraine crisis remains in focus. Investors are ready for a possible escalation in Ukraine's civil conflicts after anti-Kiev rebels declared victory in the separation referendum. Russia president Putin didn’t give any comments on the situation so far.

 

Chinese shares were boosted by hopes of capital market reform, while Indian shares jumped to record high on the prospect of a more business-friendly government winning India's general election, with exit polls later coming out later in the day. MSCI Asia-Pacific stock index outside Japan added 0.6% during the session.

 

USD/JPY was the most active currency in the session, opening the week with a bullish gap. Gains were capped by the 102.05 mark so far. AUD/USD added 30 pips, but holds below the $0.9400 mark, while NZD/USD consolidates around $0.8620. Both EUR/USD and GBP/USD are well-bid following the last week’s sharp selloff.

 

There is a lack of major economic releases on Monday. On Tuesday watch the industrial production and retail sales in China and the retail sales in the US. 

 

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12 May 2014, 

 

CBI: BoE to hike rates in Q1 2015

 

According to the latest Confederation of British Industry report, the Bank of England will likely raise interest rates in Q1 2015.

 

Confederation’s 2014 UK growth forecast was revised up from 2.7% to 3.0%. As for 2015, the economy is expected to grow by 2.7% vs. previously forecasted 2.5%.

 

 However the CBI warned that political uncertainty remained “a major risk to the recovery” (they mean the elections coming in May 2015):

 

“Businesses recognize the realities of election time but want all parties to ensure their policies make a positive difference. Politicians must be wary of the risk of headline-grabbing policies that weaken investment, opportunity and jobs”.

 

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May 12: American Session

 

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Tatiana Norkina, analyst at FBS

 

U.S. dollar index is consolidating around the 79.90 mark today which it reached on Friday, but the market is expecting a report on past month's administration of the budget. So, volatility increase is possible. Major stock indexes in America are showing steady growth today. Thus, DJIA has set new highs for the past few years, rising to the 16690.50 figure (+0.55 %). S&P500 is adding about 0.73%.

 

It is relatively calm in the currency markets. The EUR/USD pair is consolidating in the 1.3750-1.3770 range. USD/CHF is in the sideways trend as well - the bulls can not break through 0.8780. The GBP/USD currency pair was correcting to the 1.6900 figure, but the bears have stepped up the pressure and lowered the rate to 1.6870. The Dollar is quite confident against the Japanese Yen: USD/JPY has grown to the 102.16 figure, but it may stumble upon a powerful resistance yet in the 102.20-102.25 area.

 

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May 13: Asian session

 

asian1.png

Asian stock markets are mostly trading in the positive zone with MSCI Asia-Pacific index excluding Japan adding 1% and Japanese Nikkei 225 index adding almost 2%. Indian shares also rose by 2%, boosted by exit polls predicting India's business-friendly opposition party would win the elections. The markets showed limited reaction to industrial production and retail sales data from China, which came out almost in line with forecasts.

 

USD/JPY pair extends the upside for a third day in a row, testing 102.30. AUD/USD failed to rise above the $0.9400 mark for now, rolling back to $0.9340. NZD/USD consolidates around $0.8620. EUR/USD and GBP/USD were almost unchanged in the Asian session. Markets are waiting for the EZ and German ZEW indices releases. 

 

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CFTC: USD shorts increased

 

Here are the essentials of the latest Commitments of Traders (COT) report, released on May 9 by the Commodity Futures Trading Commission (CFTC) for a week ended on May 6. According to the report, large traders and speculators increased their short USD positions from $0.7 billion on April 29 to $2 billion on May 6. The overall USD position is now at the lowest level of the year. 

 

Cot-Values.png

 

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May 13th: American session

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Tatiana Norkina , an analyst at FBS

 

The U.S. dollar strengthened before the advent of European statistics today. According to the report of the Centre for European Economic Research economic expectations in Europe fell to 55.2 points in the past month, while analysts expected growth to 63.5. However, the appearance of weak data on U.S. retail sales (0.1 % vs. 0.4%) weighed on the dollar index, which now adds only 0.17 %. However, the positive trend continues. U.S. stock indexes grow as well. So,

 

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May 14: Asian sessiona

 

Asian stock markets rose with the MSCI Asia Pacific Index adding 0.7% in the session. Commodity currencies are in demand today. AUD/USD pushed higher, testing the $0.9400 resistance to the upside. NZD/USD also is trading in the positive zone, but holds below the yesterday’s high of $0.8670. New Zealand retail sales growth slowed to 0.7%. RBNZ’s Wheeler said on press-conference that rate rises will help damp the house price inflation.

 

EUR/USD stabilized above the 5-week low, finding support at $1.3700. However, the euro remains weak against the other major currencies following the last week’s ECB meeting.

 

GBP/USD bounced from the daily lows around $1.6820 to $1.6870. Markets wait for the UK labor market data (8:30 GMT) and for the BoE Inflation Report and Carney speech (9:30 GMT).

 

asian1.png

 

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14 May 2014

 

GBP/USD down on labor data

 

UK labor market data came out mixed. Unemployment rate fell from 6.9% to 6.8% in line with forecasts, but the jobless claims contracted less than expected (-25K vs. expected -30.7K). Weak wage growth remains a matter of concern for the markets. GBP/USD came under a selling pressure right after the release.

 

The markets now await the BoE Inflation Report and Marc Carney’s speech at 9:30 GMT. 

 

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Chart. H1 GBP/USD

 

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May 15: Asian session

 

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Asian shares fell as a stronger yen weighed on Japanese shares and after US equity indices dropped from the record highs. Nikkei 225 is down by about 1%. MSCI Asia Pacific Index declined by 0.3%.

 

USD/JPY dipped to 101.66, but then recovered to the opening level of 101.87. US 10-year Treasury yields fell to the 6-month low yesterday. Japanese GDP product expanded at the fastest pace in 2 1/2 years (+1.5%) reducing the odds for additional Bank of Japan easing.

 

AUD/USD pulled down to $0.9375 after having tested $0.9410 yesterday. Gold also consolidates, following the yesterday’s bullish move. Meanwhile, NZD/USD extends the upside, testing $0.8685. New Zealand annual budget was released today and showed the government sees a lot of progress in the economy in recent years.

 

EUR/USD is trading in the $1.3715 area. French economy stagnated in Q1, while German economic growth was slightly better than expected (+0.8%). GBP/USD edged up a bit to $1.6770 after yesterday’s decline.

 

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Key option levels (May 15)

 

Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (14:00 GMT). 

 

Here are the key options expiring today: 

 

EUR/USD: $1.3675/80 (large), $1.3700/10 (large), $1.3720 (large), $1.3750 (large large), $1.3775, $1.3800 (large);

 

GBP/USD: $1.6680/85 (large), $1.6750 (large), $1.6775, $1.6800;

 

USD/JPY: 101.15/20 (large), 101.50 (large), 101.60 (large), 101.80 (large), 102.00 (large), 102.35 (large), 102.50/55 (large);

 

AUD/USD: $0.9355 (large);

 

USD/CAD: 1.0825 (large), 1.0845/50 (large), 1.0875 (large), 1.1000 (large).

 

flatline.jpg

 

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15 May 2014

 

Germany grows, France stagnates

 

Today’s data showed the divergence between French and German economies keeps on growing. German economic growth accelerated more than forecasted in the first quarter, helping the euro zone’s economy to offset the unexpected stagnation in France.

 

German GDP rose by 0.8% in Q1 vs. 0.4% growth in Q4 2013, statistics shows, while the economists expected a 0.7% growth. Earlier data showed France, the euro zone’s second largest economy, showed a zero GDP growth in Q1 after growing by 0.2% in Q4.  

 

“The outlook for the German economy remains good,” UniCredit economists say. “There is a lot of pent-up demand in investment and with low inflation and growing wages we have the perfect environment for strong private demand.”

 

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May 16: Asian session

 

Asian stock markets declined on Friday, following the yesterday’s US and European markets losses. Stocks closed weak overnight amid some disappointing earnings and economic reports. Ukraine woes and weaker commodity prices add to the decline.

 

Currency markets were slow in the Asian session. USD/JPY dipped to 101.30 yesterday, but, as expected, found support there and recovered another 20 pips. AUD/USD dipped to $0.9330 yesterday, but recovered into the $0.9355 area today, while NZD/USD consolidates in the positive zone around $0.8660.

 

EUR/USD consolidates slightly above the $1.3700 mark after having dipped to $1.3650 yesterday. GBP/USD hovers slightly below the $1.6800 mark . Yesterday the cable’s selloff found support at $1.6730.  

 

Friday’s economic calendar is light. The volatility may increase later in the day - US will release building permits, housing starts and consumer sentiment data later in the day.

 

asian1.png

 

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16 May 2014

 

China banks: bad loans rise

 

Chinese banks had the biggest quarterly increase in bad loans since 2005 as defaults rise because of the slowdown in the world’s second-largest economy.

 

According to data released by the China Banking Regulatory Commission yesterday, the nonperforming loans rose by 54 billion yuan ($8.7 billion) in the 3 months to 646.1 billion yuan, the highest level since September 2008. Bad loans accounted for 1.04% of total lending, up from 1% in the previous quarter. 

 

“Asset quality is now the biggest overhang on the banking sector,” analysts at Masterlink Securities Corp. say. “The government’s reluctance to use stimulus and ease monetary policy has made it difficult for many borrowers to repay debt.”

 

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Key option levels (May 16)

 

Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (14:00 GMT). 

Here are the key options expiring today:

 

EUR/USD: $1.3725 (large), $1.3745/55 (large);

 

GBP/USD: $1.6680 (large);

 

USD/JPY: 101.35/45 (large), 102.20 (large), 102.50 (large);

 

AUD/USD: $0.9300 (large);

 

USD/CAD: 1.0800 (large), 1.0850 (large), 1.0890/0900 (large), 1.0925/35 (large).

 

flatline.jpg

 

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May 16: American Session

 

america1.png

 

Tatiana Norkina, FBS analyst

 

 

 

Dollar slightly reacted to mixed U.S. data. So, after the appearance of a fairly strong statistics on the number of building permits issued (1.08 million vs. 1.01 million), the index of American suddenly began to fall. A little later, index of consumer sentiment of Michigan University was published (only 81.8, vs. 84.5). It has a little strengthened U.S. dollar unexpectedly, which is trading slightly above the figure of 80.00, but still in the red zone, losing about 0.03%. Stock markets also show uncertain opening. DJIA has gone into the red, losing 0.01% and the S&P is at zero mark, but with a tendency to strengthen.

 

Most currency pairs today is consolidating in narrow ranges. The EUR/USD pair is currently fixed on the figure of 1.3700 after testing 1.3690 support area. Currency pair USD/CHF holds above 0.8900 support. GBP/USD pair has recovered to the level of 1.6840, and then adjusted at 1.6820 mark. The pair USD/JPY holds above 101.40.

 

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May 19: Asian session

 

Asian stock markets were down on Monday, as concerns about slower growth in China pressure the risk appetite. MSCI Asia-Pacific index outside Japan lost 0.3% in the session.

 

Currency market started the week in a quiet mode with the major currency pairs trading range bound on the Friday’s US session levels. USD/JPY edged down a bit to 101.40, while the Nikkei 225 index remains almost flat. Core machinery orders in Japan came surprisingly strong, confirming the economic recovery is on the way.

 

AUD/USD weakened from the daily high of $0.9375 into the $0.0350 area. The next event to watch in Australia will be the RBA meeting minutes on Tuesday – there shouldn’t be much surprises, though. NZD/USD hovers in the middle of the $0.8655/25 sideways range.

 

EUR/USD is trading in the $1.3700 area, while GBP/USD edged up to $1.6830.

 

asian1.png

 

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19 May 2014

 

CFTC: USD positions turned long

 

Here are the essentials of the latest Commitments of Traders (COT) report, released on May 16 by the Commodity Futures Trading Commission (CFTC) for a week ended on May 13.

 

According to the report, large speculators turned bullish on the US dollar, with net longs climbing to the highest in more than two months. The value of the dollar's net long position was $4.51 billion, up from short contracts totalling $2.03 billion the previous week. This week's long position came after 4 straight weeks of shorts. It's also important to note that speculators turned net short the euro

 

cot-values.png

 

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EUR/USD

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GBP/USD

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