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Old 19-03-2014, 14:18
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Default Re: Market news and trade recommendations by FBS

What to expect from the Fed?

The US Federal Reserve will announce the results of its March policy decision on Wednesday at 18:00 GMT. The new Fed's chief Janet Yellen will start her first press-conference at 18:30 GMT.

According to the market consensus, the FOMC decision will include another $10 billion cutback in the pace of asset purchases, slowing QE3 to $55 billion per month. Fed's qualitative "forward guidance" (6.5% unemployment and 2.5% inflation thresholds) is likely to be replaced with a more qualitative guidance. The new guidance is expected to underline that rates will remain unchanged well beyond the end of the QE program ("low for longer" fed funds rates). Markets will of course react to any changes to the Fed projections for growth, unemployment and interest rates.

BNP Paribas: We anticipate relatively neutral market impact on USD from the meeting. As long as Chairman Yellen largely attributes weak US activity to the weather, USD should stay resilient.

Mar. 19: European session

European stocks paused from a two-day rally, with investors awaiting the US Federal Reserve's policy decision at 18:00 GMT. Markets have rallied earlier in the week as Ukraine woes eased a little. Although Crimea moves into Russia, investors interpreted the yesterday's Vladimir Putin's speech, in which he said he wouldn't seek a further division of Ukraine, as a step away from an escalation of the crisis.

EUR/USD trades around $1.3920, staying above the key $1.3880 near-term support. GBP/USD strengthened to $1.6645 on the upbeat UK labor market data. Claimant count fell by 34.6K in February (forecast: - 23.3K). January claimant count change reading was revised from 27K to 34K. As expected, unemployment rate stayed at 7.2%. BoE March meeting show all 9 MPC members voted to leave policy unchanged.

Mar. 19: Asian session

Asian stocks were mixed on Wednesday ahead of the outcome of the FOMC first policy meeting under its new chief Janet Yellen. The Fed is widely expected to continue to reduce the QE size by $10 billion. Traders are also focused on the Fed’s forward guidance, with many expecting the cancellation of a 6.5% unemployment threshold. China concerns remain a negative factor for the risk sentiment. The MSCI Asia Pacific Index rose by 0.2%, while Nikkei 225 added 0.3%.

Currency markets had a calm session. USD/JPY consolidates, capped at 101.60 and supported by the 101.30 mark. Data showed Japan trade deficit unexpectedly widened to 1.13 trillion. According to a Reuters poll, released today, 7 out of 16 economists expect the BoJ to ease further in July.

Commodity currencies are trading under a slight bearish pressure. AUD/USD retraced lower to $0.9115 after testing the $0.9135 resistance (200-day MA) to the upside at the very beginning of the session. NZD/USD followed the Aussie, retracing from the yesterday’s high of $0.8640 towards the $0.8600 mark.

EUR/USD remains in a sideways $1.3950/3880 range, hanging at $1.3920 as of writing. GBP/USD sits at $1.6590 following the yesterday’s dip to $1.6545. Great Britain will release a bunch of employment data and monetary policy minutes at 9:30 GMT.

Nomura: buy USD/JPY ahead of FOMC

Nomura traders bought another $10 million of USD/JPY from 101.75 and with a stop at 100.00. Nomura thinkst the FOMC meeting could be a catalyst for dollar gains vs. the yen.

"Specifically, we think removal of guidance related to the 6.5% unemployment threshold will weaken the Fed’s forward guidance on the margin, which could see some increase in US rates and USD support," Nomura clarifies.

GBP/USD back above $1.6600

Cable recovered from a 1-month low hit yesterday at $1.6544 to $1.6620. The market is waiting for a bunch of UK data to come at 9:30 GMT (MPC March minutes, labor market numbers and later – UK annual budget). Weakening performance and its acknowledgement by the UK authorities may push traders to speculate that this will delay interest rate hikes for a longer period than currently expected.

Cable is trading under a moderate bearish pressure since mid-February, retracing from highs above $1.6800. Major near-term support lies in the $1.6545/40 area (55-day MA, 8-month uptrend). Break below here could open the way towards $1.6260/30 support (September high and the 23.6% retracement of the move up from July 2013).

Trade signals from Danske Bank (Mar. 19)

*Danske Bank uses trailing stop orders (moved together with the price)

EUR/USD: Long at $1.3915 with a target of $1.4075 and a stop at $1.3869

USD/JPY: Short at 101.75 with a target of 100.76 and a stop at 102.43

GBP/USD: Short at $1.6625 with a target of $1.6538 and a stop at $1.6675

USD/CHF: Short at 0.8747 with a target of 0.8632 and a stop at 0.8790

AUD/USD: Long at $0.9035 with a target of $0.9204 and a stop at $0.9054

USD/CAD: Long at 1.1035 with a target of 1.1225 and a stop at 1.1070
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