Forex Forums | ForexLasers.com


Go Back   Forex Lasers Forum > FOREX TRADING > Forex Analysis


Tickmill UK Fundamental Analysis

Forex Analysis


Reply
 
LinkBack Thread Tools Search this Thread
  #41  
Old 03-07-2020, 14:58
Level IV Lasers Member
 
Join Date: Aug 2018
Posts: 101
Default Re: Tickmill UK Fundamental Analysis

June NFP report: Returning Workers Back is one Thing, it’s Another Thing to Keep Them

So yesterday we saw another big surprise in the US macro data: June Payrolls jumped 4.8M (3.2M exp), unemployment fell to 11.1%. However, these two indicators do not reveal the whole picture. It should be borne in mind that 31.5 million people continue to receive benefits, and the number of employed is 15M lower than in February. In addition, as some states began to partially reinstate lockdowns, numbers in July may be worse.



The report did not make a serious impression on the market, as the states continued to remove lockdowns in June and this process naturally leads to reopening of firms and return of workers back to work. Therefore, it’s more correct to talk about restarting old jobs. However, returning workers to their workplaces is one thing, it is another thing to keep them with a reduced sales volume. Time will tell.

Even after strong job growth in June, employment in the US economy is still lower than the February level by 14.66 million. Extended unemployment benefits cover the income gap, but this scheme will be valid only until July 31, and it is unlikely that these 14.66 million will return to work by August. As a result, some shock of consumption is a time bomb for the US economy.

Unemployment fell from 13.3% to 11.1% but given that more than 31 million people continue to receive benefits, the official figure may underestimate the true number of unemployed.

The hotel industry and leisure made the largest contribution to payrolls (+2.088Mjobs), retail grew by 740K, education and healthcare added 568K jobs.

“Sticky” initial and continuing unemployment claims in the last week of June is also worrying development. Initial claims again increased more than forecast (1.425M with a forecast of 1.35M), continuing claims remained at 19.2M with a forecast of 19M, slightly higher compared to the previous week:



Homebase data indicates gradual increase in layoffs in small businesses. Some of them could take advantage of PPP loans (which the government basically agreed to forgive) and now, after they spent the money, they decided to start firing staff. According to the National Federation of Independent Enterprises, 14% of respondents said they used the loan, but they would have to start firing workers because demand has not recovered to the level before the coronacrisis. The data once again points to the importance of the wage protection program offered by the government in containing a wave of layoffs. It is obvious that state support is effectively delaying the onset of true fallout from the lockdowns and it’s really hard to predict how far in this direction the government can go.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 76% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Reply With Quote
  #42  
Old 09-07-2020, 08:47
Level IV Lasers Member
 
Join Date: Aug 2018
Posts: 101
Default Re: Tickmill UK Fundamental Analysis

Big Surprise from ISM Data Stokes Inflation Concerns in the US

European markets trimmed Monday gains, USD recovered some lost ground after yesterday sell-off as the uncertainty remains high associated with the partial reinstation of lockdown in the United States.

The US service sector surprisingly improved in June. ISM business activity index in the services sector jumped from 41 to 66 points (49 points exp.). The leading component of new orders also advanced from 41.9 to 61.6 points, which bodes well for broad index of business activity in the next month.

[IMG][/IMG]

Saudi Arabia once again raised the August selling prices for oil for most grades going to Asia, the US and Europe. which is seen as a signal of strengthening demand. The price of Arab Light for the Asian region rose by $1, which, however, turned out to be less than the market expected. It should also be noted that the differential between the benchmark and the price of Russian Urals in Europe continues to widen, which indicates an improvement in EU energy consumption outlook. Of course, OPEC is forced to seek trade-off between production cuts and price strategy, which will put pressure on the margin of refineries.

Today we expect release of the monthly short-term energy outlook from EIA in which the agency provides forecast for oil production in the United States. Given that oil prices are rising and some producers in the United States said they plan to increase production in response to this, it will be interesting to see how the EIA takes this information into account in its forecast. Last month, the EIA predicted an average rate of US oil production at 11.57 million bpd, 660K bpd. lower than a year earlier. Also, API weekly inventory data is expected today, which is likely to indicate further inventory decline, which should help WTI to move higher.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 76% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Reply With Quote
  #43  
Old 09-07-2020, 09:04
Level IV Lasers Member
 
Join Date: Aug 2018
Posts: 101
Default Re: Tickmill UK Fundamental Analysis

Fed’s Bostic hints next leg of sharp M2 expansion may be around the corner, Gold breaks $1800

Gold futures climbed above $1800 level after one of the architects of the Fed’s current monetary stance, Rafael Bostik, made a less optimistic assessment of the US economic recovery than Fed Chairman Powell. Right in the midst of surprising economic updates in May and June, the head Atlanta’s Federal Reserve Bank said he sees signs that the recovery is moving into plateau. To save the room for maneuver in the future, he said that he hasn’t figured out whether it was just a pause or recovery in activity is changing regime.

But the most important statement, from the perspective of market impact, was the following:

“Given that possibility, to start thinking about what the next relief package should look like.”

As the latest examples of policy easing and fiscal stimulus have already shown, fiscal programs in 2020 are not only large in size but are also aggressive. In other words, the government is not just accumulating a lot of debt, but it is doing it intensively. This requires a so-called “coordination of monetary and fiscal policy” – increased supply of government bonds should be absorbed by the Fed to keep borrowing costs low. When the Fed buys Treasuries from private investors, this leads to an increase in money supply in the economy. A side effect of this process is suppression of market interest rates, the elimination of market price discovery (trading and investing turns into guessing a next Fed move), the flight of investors to the only class of assets that still have positive real yield – stocks. It is also known from macroeconomic theory that in the medium and long term, inflation path is almost solely determined by growth of money supply, so the signal from Bostic that M2 may start to rise again soon propels demand for assets which offer protection which is precisely gold:



As the latest examples of policy easing and fiscal stimulus have already shown, fiscal programs in 2020 are not only large in size but are also aggressive. In other words, the government is not just accumulating a lot of debt, but it is doing it intensively. This requires a so-called “coordination of monetary and fiscal policy” – increased supply of government bonds should be absorbed by the Fed to keep borrowing costs low. When the Fed buys Treasuries from private investors, this leads to an increase in money supply in the economy. A side effect of this process is suppression of market interest rates, the elimination of market price discovery (trading and investing turns into guessing a next Fed move), the flight of investors to the only class of assets that still have positive real yield – stocks. It is also known from macroeconomic theory that in the medium and long term, inflation path is almost solely determined by growth of money supply, so the signal from Bostic that M2 may start to rise again soon propels demand for assets which offer protection which is precisely gold:

If you look closely at the recent gold behavior, we can see domination of bullish forces with short corrective pullbacks. There are really no expectations of a bear market in gold because there are no expectations that the key contributing factor will change the sign – i.e. the Fed stance and its pledge to cooperate with government to help the Treasury market to weather increased supply. The bias of the government to borrow more in order to soften landing of the economy is huge now and it’s unlikely that we see a U-turn in the government’s fiscal policy.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 76% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Reply With Quote
  #44  
Old 10-07-2020, 18:45
Level IV Lasers Member
 
Join Date: Aug 2018
Posts: 101
Default Re: Tickmill UK Fundamental Analysis

USD Index: Focus on Signals from the Fed and Congress

Exports and imports of Germany, the biggest economy of the EU, indicated an improvement in May compared with April. It is not a surprise since lockdowns in April reached their peak in the EU. In monthly terms, exports grew by 9%, after falling by 24% in April. However, compared with February volumes, exports are 26% lower. Imports increased slightly (+3.5%) which casts shady on sustainability of spike in consumption after lockdowns were lifted, since change in imports are a kind of forward-looking indicators and reflect expectations of future domestic demand.

The data is interesting in the sense that global trade indicators for May spoke in sync that foreign demand continued to stall. If you look at trade figures of Asian economies (which are also export-oriented), the situation there is similar – weak export growth or even MoM decline in May. The divergence of foreign with domestic demand which rebounded in May suggests that the growth in consumption is forced and probably unstable. It was achieved due to the use of “steroids” in the form of fiscal programs of the EU government, which has evolved from a long-term saver to a big spender.

However, combined policy of the Fed and US Congress is suppressing any attempts of USD buyers to seize the initiative. Therefore, in currency pairs with USD, including EURUSD it’s crucial to analyze expectations related to the Fed and US government. The government is clearly inclined to borrow more because of signals of deterioration in rising US economic activity and the Fed will likely to continue to “collect” government debt on its balance sheet, because there is no other way to generate demand that can replace the lost demand in consumption and investment. The negative picture of USD is also confirmed by technical developments:



From the beginning of June, the bearish trend turned into a correction, which ended with the development of a fairly symmetrical double top. Usually this is a trend reversal pattern, but sometimes it acts as a continuation pattern, which is possible in our case. A convenient moment for sales may be a return to the key support zone at 96.50. We can set a fairly attractive stop loss not higher than intermediate resistance at 97.00, with reasonable take profit target – the previous low at 95.50-95.60.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 76% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Reply With Quote
  #45  
Old 10-07-2020, 18:53
Level IV Lasers Member
 
Join Date: Aug 2018
Posts: 101
Default Re: Tickmill UK Fundamental Analysis

US Labor Market on Steroids – How long will that last?

Market bears decided to find a pressing point of stock buyers before the weekend amid a release of worrying US employment data. In fact, the point of concern is quite unobvious, as it’s hiding behind the improvement of some “popular” indicators, but let’s try to figure it out what’s wrong.

US stocks closed in the red on Thursday, Friday trading shows that pressure remains, which can be seen in the modest sell-off of Asian and European equities as well as weak futures on US stocks.

Yesterday, attention of market participants was drawn to the piece of statistics released on every Thursday – initial and continuing claims for unemployment benefits. This data has gained particular significance after the US substantially expanded its income insurance program by introducing a variety of generous pandemic-related payments to unemployed. At the same time, the unemployed who are not in search of work also became eligible to receive payments, which created a situation where a good part of jobless is not captured by official unemployment measures. Consequently, the importance of alternative labor market metrics, which capture these “unreported” unemployed, has increased significantly.

The data this Thursday showed that the initial and continuing claims, in a positive sense, exceeded expectations:


Initial claims – 1.314M, 1.375M expected.
Continuing claims – 18.062M, 18.8M expected.
However, if we dig deeper, some disturbing underlying employment trends continue to unfold. For example, claims for all unemployment benefit programs, contrary to expectations, continued to increase and rose by 1.4M to 32.9M, highest on record. In the chart below, you can see how many people the BLS considers unemployed and how many people receive unemployment benefits – almost twice higher:



Using values of the gray curve, real unemployment should be now around 20% (compared to official 11.1% of the BLS)!

In the context of “awakening” pessimism in remarks of the Fed officials, such a dynamics of unemployment claims is quite expected. Recall that earlier this week the head of Atlanta Fed said that “there are signs” that recovery in economic activity starts to stifle and discussions about a new stimulus package are becoming more and more appropriate. One of the subtle signals that the government is working on this issue was the extension of the Paycheck Protection Program (that “non-repayable” paycheck loans) until August 8. Increased unemployment benefits expire at the end of this month and the growing dependence of consumer component of GDP on this program suggests that the government will be forced to extend them. Already according to the established, slightly ugly tradition, such a decision will probably only launch a new leg of rally in the US stock markets.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 76% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Reply With Quote
  #46  
Old 15-07-2020, 17:19
Level IV Lasers Member
 
Join Date: Aug 2018
Posts: 101
Default Re: Tickmill UK Fundamental Analysis

Developing Trading Setup Before July ECB Meeting

The final amount of economic damage from Covid-19 will be probably known in the second quarter of 2020. I think it is necessary condition for the ECB to start to act. For now, wait-and-see stance is more appropriate for the ECB as two key tasks have been solved – the Central Bank stabilized financial markets and, in tandem with the EU government, spurred some highly uneven economic activity. Signs of recovery are well seen in the rebound in consumer inflation in the Eurozone (+ 0.3% in June, 0.1% in May), retail sales in Germany (+ 13.9% in May, forecast 3.9%), consumer confidence indices, which are gradually recover from the zone of depression. Developments in stalling exports sector, especially the state of German automakers, which even without the virus experienced a decline in export orders, are worrying. In this regard, the ECB policy should somehow solve the problem of competitive devaluation of the euro, which should smooth out the decrease in the revenue of exporters in national currency.

What can the ECB do for the euro? I think that after three rounds of bold stimulus, substantial increase of the limit and duration of the key policy tool – PEPP lending program, there are only open mouth operations left. The euro will not be convinced.

Recent data have shown that the Central Bank has no reason to expect some material changes in inflation picture. Although inflationary pressures have appeared in some parts of the economy (primarily in retail, due to support of consumption), in general, the conditions for slowing inflation prevail (rising unemployment, increased risk of default for companies, etc.). Therefore, from this point of view, the ECB has little incentive to tweak its policy.

The ECB is likely to maintain the status quo.

It follows that the likelihood of further weakening of USD against the euro is also high. Recall that USD has not yet fully priced in the risk of a new round of stimulus in the US, the need for which is rising due to moderation of the pace of economic recovery. We learned about this from the hints of several Fed officials. On Tuesday, data on consumer inflation in the US is expected, which will likely indicate a further slowdown, which should also contribute to further retreat of the US currency, as this increases the likelihood of intervention in the economy by the Central Bank and the US government.

Technical setup:



Taking into account market expectations regarding the ECB July meeting, which is likely to pass without threats to the euro, there is a high probability of a repeated test of intermediate resistance at the 1.1350 zone and subsequent test of June high in the 1.1400 area. In case of retracement to intermediate support in the zone 1.1260, it may also be worth considering more appealing longs with a target at the June pivot high

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 76% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Reply With Quote
  #47  
Old 15-07-2020, 17:27
Level IV Lasers Member
 
Join Date: Aug 2018
Posts: 101
Default Re: Tickmill UK Fundamental Analysis

Is the EURUSD Poised to Gain More?

The dollar finally went into defense on Wednesday, the USD index broke through 96 points, the lowest since the start of June. Breaking down the index into components, it can be seen that the move was driven predominantly by strengthening of euro:



In the trade-weighted USD index euro has the biggest weight which also contributed to the magnitude of decline.

On Monday, we discussed a trading setup on EURUSD, I recommend that you carefully read my arguments why the common currency can easily discount July ECB meeting and why the long positions in the pair were (and most likely remain) justified.

The attention of the markets (including mine) was drawn by speeches of Fed’s “talking heads” yesterday. In short, officials continue to lament over “shrouded in a thick layer of fog” economic outlook while key stimulus programs expiring in a month. The head of the Federal Reserve Bank of St. Louis Bullard “expects” that Congress won’t stop halfway and approve at the end of this month a new “substantial” program to support firms and households. Depending on the size of the package, the Fed may need to step in with some asset-purchase program to prevent disruptions from the oversupply shock in the Treasury market. We know where that leads.

Of course, one can argue that the Fed and Congress should be constrained by inflation in their stimulus plans, however, Central Bank officials continue to insist that factors of strong disinflation have arisen and at work in the economy. Robert Kaplan cites the resulting excess of production capacities (the so-called overcapacity) as an argument. Let me explain what he means. When a consumption shock occurs, the demand curve quickly shifts to the left, which reduces the equilibrium prices in the economy (deflationary effect). However, the adjustment of the supply curve (reduction in production) takes longer (sometimes significantly), since the shock reveals excess capacity of manufacturers (+ oversupply of inventory) that cannot be quickly eliminated. This increases the time of adjustment. This leads to the situation where economy continues to produce more than can be sold and consumed for some time. And this is, of course, disinflationary.

As we see, Fed officials have both a desire and a sense of “impunity”, which is why new measures to support the economy are actively discussed, which have already shown how they can actively depreciate the dollar. Hence the market’s tendency to expect further weakening of the dollar, which, as we see, is gradually being realized. These expectations are also fueled by the deterioration of epidemiological situation in the United States, which objectively slows down the economy and dampens recovery, because individual states are careful in lifting lockdowns. The need for new stimulus and corresponding pressure on the US government is growing, which cannot be said, for example, about the EU, where the epidemic remains under control. This is an additional argument in favor of the strength of the euro against the dollar (i.e. underlying imbalance in stimulus expectations and recovery outlook).

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 76% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Reply With Quote
  #48  
Old 21-07-2020, 06:51
Level IV Lasers Member
 
Join Date: Aug 2018
Posts: 101
Default Re: Tickmill UK Fundamental Analysis

EURUSD: Next Stop at 1.15?
EURUSD Analysis.

This week focus in the US earnings season shifts from banks to the tech sector, but stock markets remains relatively resilient to headwinds of various intensity, whether it be the smoldering US-Sino conflict or far more serious accelerating daily gain in Covid-19 cases. Nonetheless, market sentiment and demand for USD are sensitive to the data that shed light on how quickly economies recover. In this context, weekly data on US mortgage applications on Wednesday and production PMI on Friday will be of particular interest.

Markets will be also sensitive to news related to extension of the government’s coronavirus relief measures which are set to expire at the end of July. Without them, the US economy which showed signs of takeoff, will likely to experience quick loss of altitude and hard landing. The reason for this is that states reopening in the US clearly went wrong – due to accelerating increase in the new cases, states which represent 80% of the population, paused or began to return lockdowns:


In the chart above, it can be seen that as of June 24, the states, where more than 90% of the population live, in one way or another were lifting restrictions (width of the blue area is 90%). With acceleration of the incidence of Covid-19, the situation has changed dramatically – the states, which represent 40% of the US nation, have paused lifting lockdowns (gray zone), in the states where the other 40% live, restrictions are increasing (red zone). Of course, this setback increases odds that removing fiscal support will unwind all recent achievements in the labor market and especially in protection of consumer confidence. Democrats leading in polls ahead of the presidential election put Republicans in a less favorable position so they may be more inclined to make concessions to approve new stimulus bill.

EURUSD continues to move upward thanks to the progress in negotiations on the Eurozone Recovery Fund. If member states manage to agree, for the first time in the history of the EU, Eurozone bonds (mutualized debt) will be issued, which will become a source of financing for the stimulus project.

Expectations of the issuance of “palatable debt” are drawing investors in the euro, and the closer the negotiations are to success, the more EURUSD strengthening can be expected. Nevertheless, some EU leaders warned that despite the compromises made, the negotiations could fail.

The Eurozone consolidated debt topic sets the euro apart from other dollar peers and is likely to allow the pair to test the important 1.15 level this week:



Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 76% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Reply With Quote
  #49  
Old 11-08-2020, 11:40
Level IV Lasers Member
 
Join Date: Aug 2018
Posts: 101
Default Re: Tickmill UK Fundamental Analysis

Flip Side of Strong July Payrolls

The US economy created more than expected jobs in July, a report showed on Friday. Despite small positive deviation with consensus estimate it was a big surprise since several alternative data sources (Homebase data, ADP report) indicated the risk of downside surprise. The solid report had material impact on USD position, highlighting case for broad DXY consolidation, but it wasnÂ’t a game-changer since the Fed made it clear major changes in policy should be expected in September. It is unlikely that positive July reading can prompt serious revisions in the track of recovery.

USD attempts to develop last weekÂ’s momentum on Monday, targeting the upper bound of the current range (92.50-94.00) buoyed by optimism related to positive expectations on retail sales report which is due on August 14.



Jobs count increased by 1.763M compared with consensus estimate of 1.48M while official unemployment rate declined to 10.2%. Wages grew by 4.8% YoY, but growth estimates are naturally skewed to the upside as proportion of high-skilled workers relative to low-skilled workers increased because of higher rate of layoffs among unqualified labor in this recession. Service sector posted predictably faster pace of recovery, adding 592 thousand jobs.

Despite declining official unemployment rate, the government continues to support an army of unemployed which is somewhat higher than official estimates. This can be seen from “alternative” unemployment benefits data. Although official estimate of unemployed is approximately 16M, about 13M people receive payments under PUA (Pandemic Unemployment Assistance), i.e. the number of people receiving unemployment benefits is more than 31M:



Excerpt from the latest report on unemployment benefits. Release date: August 6

In light of these figures, we can conjecture the negative side of strong July payrolls: Republicans and Democrats can now extend tug-of-war process in the negotiation of terms of the next fiscal deal thanks to easing pressure from improving incoming data. This extends duration of the dip in incomes since extended unemployment benefits program expired a week ago.

Having found support in the 92.50-92.60 zone, the dollar index entered a period of consolidation, which is likely to remain until the Republicans and Democrats agree on the terms of a new package of fiscal support for the economy.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the authorÂ’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 76% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Reply With Quote
  #50  
Old 11-08-2020, 15:20
Level IV Lasers Member
 
Join Date: Aug 2018
Posts: 101
Default Re: Tickmill UK Fundamental Analysis

Euro Demand Remains at 5-year High but Technical Picture Calls for Caution


The European currency posted record-high appeal among speculators for several years, showed the latest CFTC report. Net long speculative position rose to a 5-year high in the week ending Aug 4:



Extreme speculative bias calls for caution in assessing prospects of further Euro rise and played itself as a corrective factor:



Classic “double top” in the pair significantly slowed down the upward trend from a technical point of view, however, failed breakthrough of the trend line at 1.1710 level prevented early transfer of control to the sellers’ hands. Thus, the pair confirmed plans to remain in consolidation, probably until the terms of a new fiscal deal in the US are announced.

Expectations related to new round fiscal stimulus in the US offer solid support to the oil market. The European benchmark Brent rose 1.3% to nearly $45 per barrel. Drilling activity data from Baker Hughes released last Friday showed that rig count declined by 4 to 176 units, down nearly 75% from mid-March, hitting the lowest level since 2005.

This week we will have a lot of reports related to the oil market. These are API and EIA reports that are released on a weekly basis and are expected to show a decline by another 3.7 million barrels in commercial inventories. Today, the release of a short-term energy outlook by the EIA is expected, which will contain updated forecasts for growth of US oil output in 2020 and 2021. OPEC is to release its monthly report for July on Wednesday that will shed light on what was the cartel’s output in July and what dynamics of demand they expect in the coming months. On Thursday, monthly bulletin from the IEA is expected, in which the agency will assess the potential for market rebalancing in light of OPEC’s gradual lifting of production curbs.

An outcome of the US-China talks on Saturday, during which the parties will take stock of implementation of the first phase of the trade deal, may also have a positive effect on the markets. Despite a number of reports and measures pointing to escalating tensions between the two countries, the latest US export data indicated an increase in agricultural exports to China. In the week ending August 6, corn exports to China increased to 264 kt. There is a positive trend in the export of soybeans to China. USDA data showed that the share of quality crops in the United States increased compared to last year (from ~ 54% to ~ 70%). This is one of the market factors that China referred to when describing which suppliers would be preferred, which indicates a high likelihood of a positive outcome for the market from Saturday negotiations.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 76% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Reply With Quote
  #51  
Old 18-08-2020, 07:58
Level IV Lasers Member
 
Join Date: Aug 2018
Posts: 101
Default Re: Tickmill UK Fundamental Analysis

Quick Reminder from the Fed that it is not Done with Stimulus

S&P 500 braces for renewing all-time peak deliberately ignoring three major factors of risk: uncertainty over fiscal deal in the US, Covid-19 data and US-China tensions.

The growth of US equities was fueled on Wednesday by the speech of Eric Rosengren, the head of the Federal Reserve Bank of Boston. In full accordance with opinion of his peers from the Fed, he delivered shock dose of bullish comments. Below are the most notable ones:

Fiscal and monetary measures are now “critical” for the economy;
Some signals that recovery moves to plateau;
Not worried about inflation acceleration.
Looks like a call to get ready for a new leg of monetary easing. The first two comments address concerns about why more stimulus is needed while the third explains why it is still safe.

Note that Rosengren is traditional hawk – he tends to speak and vote for curtailing stimulus rather than increasing it. It is unusual to hear about stimulus from him and this fact lends more weight to his comments.

Data on Wednesday showed that core inflation rose 1.6% on an annualized basis

The monthly growth in consumer prices also beat expectations – 0.6% against the forecast of 0.2%. This was hinted at by a surprise in PPI, which rose by 0.5% in monthly terms against the 0.1% forecast. However, the impulse in inflation, as in other indicators, is quite natural and reflects lifting of quarantine restrictions, i.e. there is a risk that it will soon fizzle out with recovery getting in plateau phase. Therefore, markets’ response on the release of positive data was muted.

The EURUSD pair climbed above the 1.18 level, but the gain was mainly driven by USD weakness. The euro could lag behind its G10 counterparts if US-EU relations begin to escalate again, which might be suspected from an escalating tariff war. USTR has introduced tariffs on German and French goods that are linked to EU subsidies to Airbus.

As for the GBP, the baseline scenario for the end of this week is consolidation above 1.30 level, as a number of positive UK macro data released this week strengthened position of GBP. USD remains weak and the key driver for rally of the pair is trade negotiations with the EU, which are now on pause.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 76% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Reply With Quote
  #52  
Old 18-08-2020, 08:07
Level IV Lasers Member
 
Join Date: Aug 2018
Posts: 101
Default Re: Tickmill UK Fundamental Analysis

Gold: All Signs of a Profit-booking Move

Since mid-July, bullish bets on Gold started to resemble mania or hasty shift to safe haven in anticipation of some disaster. The rally seemed well-founded, but more recently, an irrational buying spree was also felt. For example, from July 17 to August 6, only one daily candle was down and the past high from 2013 (~ $ 1920) was overcome relatively easily.

Gold crossing through $2000 level at ease created impression that it targets $2,500, $3,000 and even $ 4,000 per troy ounce. Bearing that in mind, it was difficult to trade countertrend. For the same reason, it was difficult to estimate the level from which correction would begin. Now, after the pullback has occurred, we have the opportunity to discuss whether it is an interim correction or the signal of global U-turn which in my view is a better trading opportunity.

Among potential factors explaining 5% downside move in gold was a surge in Treasury yields (direct rivals of Gold in investment portfolios), increased optimism related to the development of Covid-19 vaccine, economic news, new details on the US fiscal deal, etc. Let’s go through the points.

The yield on 10-year bonds hit 0.5% on August 6, from which it began to rise and reached 0.67% on Wednesday. Around the same moment, the decline in gold began which suggests that gold’s decline is related to Treasuries’ move. However, as we can see from recent history, there were larger in amplitude fluctuations in treasury yields which caused smaller decline in gold:



It is fair to say that the liquidation of gold positions in March was also exacerbated by liquidity crunch. But if we consider June spike in yields which is larger than current one, gold’s reaction was relatively muted.

We can look at the connection between gold and the Treasury market from a slightly different angle. Gold has high correlation with TIPS (inflation-indexed Treasury bonds) – both are hedges against inflation, only for different time horizons. So, if we assume that some shift in inflation expectations was a factor in the correction, then TIPS should have corrected as well – however, the move in TIPS yield was much weaker:



It turns out that with such a sluggish move in the “peer” asset, the fall in gold can be explained either by the fact that mainly long-term inflation expectations were sharply revised or a shift in inflationary expectations was not the main explanatory factor.

There are absolutely no signs of U-turn in Fed’s accommodative policy, since the Central Bank made it clear that until 2022 there won’t be any steps towards normalization (famous “we don’t even think about thinking of raising rates”) and if there will be changes, then only in the direction of further policy easing & balance sheet expansion.

On August 7, the NFP was released, which posted modest surprise in jobs count however, the effect of the report on the market quickly fizzled out. It’s unlikely that jobs report could cause some profound shift in expectations.

As a result, one likely explanation of the sharp decline in gold is a technical correction (profit taking move) which, taking into account gold’s position at historical peak, turned into avalanche of sales, exacerbated by momentum selling from algos. Fundamentally, expectations for Gold remain the same, since as we can see, key factors of the rally remain in place.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 76% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Reply With Quote
  #53  
Old 18-08-2020, 09:03
Level IV Lasers Member
 
Join Date: Aug 2018
Posts: 101
Default Re: Tickmill UK Fundamental Analysis

US Retail Sales and U. Michigan Consumer Data may Drive USD lower

Commodity markets started Friday on a weaker footing. There is a noticeable tilt to the downside in silver as high volatility should persist after falling almost 16% on Tuesday. Gold futures are also under slight pressure, but buying interest is expected to remain strong. Sales in commodity markets are occurring despite USD scratching intention to move out of the range, testing resistance near 94 level on Wednesday, as there were no strong disturbances in the news background on the night from Thursday to Friday.

It is important to point out that the risk of failure of US fiscal deal looms on the horizon although it is still low. Despite that there is perception that markets may be greatly unprepared to that outcome. Although the news background is full of reports that talks are under way, it has been two weeks since the expiration of major federal aid programs, and there are still no concrete details.

The data on claims for unemployment benefits indicated a sharp decline in the inflow of unemployed – minus 263K compared to the previous week. This is a direct consequence of the cut in weekly unemployment payments from $600 to $200 per week, which made unemployment so “unpopular”.

The data on industrial production in China indicated continuing struggle – YoY rebound in July came at 4.8% against the forecast of 5.1%. This is the “Chinese signal” that the recovery is slowing down. Retail sales continued their slide which is even more frustrating since lots of hope is pinned to its rebound. Retail sales decreased by 1.1% YoY in July. Weak data on the largest Asian economy has sobered the markets today.

Another piece of highly important economic release is the US July retail sales. They are important because fiscal negotiations are likely to be sensitive to the data clarifying recovery path. The data on job creation and unemployment rate released last week signaled that fiscal&post-lockdown economic impetus in the US was likely extended to July. Retail sales are expected to confirm this assumption. In my view, retail sales below consensus will strengthen market risk-on and press USD lower as strong confirmation of fading upturn will increase pressure on Republicans and Democrats and help to find a middle ground faster. At the same time, positive surprise will allow the process to be delayed further. However, the odds of a negative deviation in the retail sales report, in my opinion, is somewhat less than 50%.

The report on consumer confidence and inflation expectations from U. Michigan can hit US Dollar.



Why the data is on the market radar? The point is that if the report indicates an acceleration of inflation expectations above 3.0%, given the Fed’s stance, which does not even think about raising rates, real yields in the US will again be under pressure. For stocks, this will mean more upside, sales for USD and, of course, renewed interest for gold.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 76% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Reply With Quote
  #54  
Old 18-08-2020, 09:15
Level IV Lasers Member
 
Join Date: Aug 2018
Posts: 101
Default Re: Tickmill UK Fundamental Analysis

Positive Eco Data Extends State of Suspense

It’s a relatively calm Monday for the FX market. Yield on 10-year T-Note which caught the markets’ attention last week saw reduced pressure on Monday, trimming gains. Treasuries were under great pressure last week causing yields to rise from 0.5% to 0.7%, the highest level since the end of June. Gold exhibited some weakness last week as well but saw renewed interest on Monday, rising half a percent.

The context of the new trading week, namely continued state of suspense, has been determined to some extent by positive US reports released last Friday. US consumer spending continued to rise strongly in July, showed July retail sales report. Sales exceeded the level of February, the last “healthy” month before coronacrisis hit world economy. Consumer sentiment also remained consistently high.

However, this is not good enough. It is clear that both Republicans and Democrats have a goal of maximizing political gain from the new round of fiscal aid ahead of the elections. This goal ensures long negotiations and intense search of trade-offs. It is the positive data on the US economy that allows negotiators to gain precious time and necessary economic stability. The latter does not allow politicians to be accused of inaction, since the data continues to indicate an ongoing recovery.

On a monthly basis, retail sales rose 1.2% in July against the forecasted 2.1%. Monthly growth in June was revised upwards from 7.5% to 8.4%. In monetary terms, the volume of sales in July exceeded the level of February by 1.6%, i.e. climbed out of the crisis pit. Sales in the “control group” of goods (which excludes goods with volatile prices, allows better identification of consumer trends by excluding goods with low elasticity of income), rose 1.4%. This is more than the 0.8% forecast.

However, there is hardening perception that next phase of recovery will be full of pain without proper action. Consumer confidence began to decline in July which is in line with stalling recovery in consumer spending which hit a plateau. In early August, consumer spending began to decline, clearly reflecting the end of the income insurance program



Source:tracktherecovery.org

There are also more solid signals of slowing recovery. Shifts in oil’s futures curve hints that world stockpiles are not declining as quickly as we would like. The difference in price (spread) between the nearest contract and the contract of the next month reached 50 cents a barrel, the highest level since May. Recall that we had a deep contango (i.e. widening positive timespreads) in May which was associated with surplus of reserves. As we see that spreads started to widen again this indicates that oil demand is not recovering as quickly as previously thought. This was also reflected in the IEA and OPEC reports released last week, according to which the agencies revised down their forecasts for oil demand for 2020 and 2021. With the rise in prices, US oil production is growing which is reflected in the latest US data.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 76% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Reply With Quote
  #55  
Old 25-08-2020, 15:11
Level IV Lasers Member
 
Join Date: Aug 2018
Posts: 101
Default Re: Tickmill UK Fundamental Analysis

USD: Extreme Shorts are not the Reason for U-turn

The main trading theme in the FX market on Tuesday became the wake-up of dormant USD sell-off, which was a foreseeable development due to the presence of medium to long-term bearish USD macro factors. The only question was when the downward trend would resume. As it turned out, the pause in talks on new fiscal package failed to support greenback.

Basically, when we talk about fresh round of fiscal support, less uncertainty in negotiations on the new fiscal deal also means less uncertainty in the plans of government borrowing, i.e. growth of supply on the Treasuries market and possibly money supply (if the Fed resumes purchases to absorb the supply). For now, it seems that the risk of negotiations put on hold would increase uncertainty about bond supply and cause steeper pullback in T-bonds seems premature.

Accordingly, contrary to my expectations, short positions in Gold were routed earlier and the precious metal went into offensive. Demand returned to the Treasuries market as well. The 10-year Treasury yield appears to have completed its pullback from the last week (after hitting key support at 0.5%) and the trend resumption seems to be finding support and appeal among investors. This allows us to assume that the momentum in assets-safe heavens may be extended to the rest of this week. The rise in risk-free assets, coupled with lull in the stock market (i.e. risky assets), means that roots of the current trend are in the expectations for a new round of borrowing of the US government and corresponding expansionary policy of the Fed.

The CFTC data on USD from August 11 (the latest report) showed that bearish sentiment on USD is one the rise despite extreme positioning. On the contrary, the main opponent, the euro, saw increasing long positions. The net speculative positioning in euro reached 28% of open interest, which is slightly below the previous peak of 30%, which was observed in April 2018. EURUSD was 1.24-1.25 back then, but then turned into a nosedive, which lasted until March of this year.

Weighted by G-10 currencies, the net position on USD declined to -15% of open interest, below October 2017 and is moving to the lows of 2012-2013
So, from historical perspective USD is significantly oversold, but now, as we understand, there are completely different expectations for the path of expansion of the money supply in the US, therefore, it will hardly be possible to break the trend due to the presence of some extreme positioning.

USD positions were also shaken by mortgage and manufacturing data from the US, released earlier. Negative surprises prepare for a weak August and possible Fed interventions in the fall.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 76% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Reply With Quote
  #56  
Old 25-08-2020, 15:15
Level IV Lasers Member
 
Join Date: Aug 2018
Posts: 101
Default Re: Tickmill UK Fundamental Analysis

US Fiscal Talks Steer Towards Frugality Risking to cap T-bond Gains

So, here we go. Some Democrats and GOP members are no longer convinced that the economy needs a large fiscal aid package, a senior White House official told Reuters on Tuesday.

According to the official, there are signs of growing bipartisan bias towards frugality, both in the House of Representatives and in Congress, when it comes to discussing the size of the aid. It can be now reduced to $500 billion which is at least twice less than discussed before. The way how the government will spend may be less stimulating in terms of consumer spending boost since the funds are expected to be directed to financing US Postal Service and payroll loans for small and medium-sized businesses. It means that stimulus checks and extended unemployment benefits, which significantly spurred consumer spending in May-July, may not be included in the new package.

As we discussed earlier, stalling progress in fiscal talks increase the risk of markets being wrong in pricing in the final size and timing of the deal. With new details from the US administration official, the likelihood of this outcome increased.

Why should investors be bothered about that? Let’s explore the chain of the effects.

Firstly, size of the fiscal package has a direct bearing on how much the government would need to borrow. It is clear that more spending means more borrowing and vice versa. The level and intensity of borrowing will determine the flow of a large portion of bond supply to the Treasury market and it is not known whether the market will be able to absorb it without the help of the Fed.

Therefore, bond-buying plans of the Fed may depend on how actively the government would need to tap the Treasury market. Open market operations of the Fed have direct impact on the flow of liquidity in the banking system (bank reserves) and increase of money stock. Expectations of aggressive bond-buying (in case of large fiscal package) may ignite concerns about expansionary monetary policy what means rising pressure on real yield as well as supply of USD which have direct implications for risk assets (bonds vs. stocks story) and USD exchange rate (greenback supply/demand story).

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 76% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Reply With Quote
  #57  
Old 25-08-2020, 15:20
Level IV Lasers Member
 
Join Date: Aug 2018
Posts: 101
Default Re: Tickmill UK Fundamental Analysis

Fed’s “Revision of monetary policy strategy” – what is this?

The biggest piece of market moving data released on Wednesday was the Minutes of the July Fed meeting, which included some surprising points. For example, committee members were concerned about the side effects of yield curve targeting, thus significantly reducing probability that the Fed starts to control medium and long-term rates in September. Equity sell-off and some gains in USD that we saw on Wednesday are basically revision of the odds of this outcome towards zero.

According to the Minutes, FOMC members felt it necessary to provide more clarity on the path of Federal Funds rate. Of course, this is a reference to the so-called “Revision of monetary policy strategy”, which the Fed has been talking about for several months. As part of the current strategy, the Fed communicates its intentions in such a way that it retains some degree of uncertainty. If we think about underlying principles of this strategy, we can draw some interesting conclusions about propagation of policy changes in markets and economy.

Suppose the Fed, based on all available information about the current and future state of economy, decides that it makes sense to raise interest rate at the next meeting. At the same time, it communicates this intention to the public at the current meeting. Clearly, market players will price in the future hike immediately possibly causing divergence of the markets (and economy) from the state expected by the Fed during the next meeting. At the time when the Fed actually hikes the rate, it affects the economy which may be in completely different state and impact of the rate hike may be completely different from expectations of the Fed. In other words, “full openness” policy leads to systematic bias in the Fed expectations about the impact from policy decisions. It seems that the Fed needs to “systematically mislead market participants” but do it smartly to make policy changes effective in boosting output and make correct expectations about the impact of its decisions.

However, due to lack of success of the current policy framework in stimulating inflation, the Fed wants to revise its policy in such a way as to tie its decisions to specific economic outcomes – raising inflation to n%, lowering unemployment to t%, or upon reaching some combination of inflation and unemployment. … In other words, markets can be confident that policy changes will not occur, at least until the economic outcome is realized. In this case, the Fed will still retain uncertainty in its decisions but only after the economic parameters reach some predetermined values.

Lack of enthusiasm in the plans for YCC disappointed the markets a little since after the last meeting and bearish comments from the officials the markets had been actively pricing in this outcome in September.
Reply With Quote
  #58  
Old 25-08-2020, 15:28
Level IV Lasers Member
 
Join Date: Aug 2018
Posts: 101
Default Re: Tickmill UK Fundamental Analysis

EURUSD: Weak August PMIs Increase Chances of a Sell-off

Minutes of the ECB July meeting, released on Thursday, showed that the central bank has little understanding of what lies ahead for the European economy. The word uncertainty (i.e. unquantifiable likelihood of future events) were mentioned in the minutes as many as 20 times. Perhaps this is a record.

It is no coincidence that the ECB tried to speak about why it is important to distinguish between recovery and rebound. EU economy is experiencing some kind of pickup and the central bank wants to make sure that market participants and economic agents understand its characteristics. A rebound can gain momentum, but it is natural to expect that the rebound sooner or later runs out of steam. In contrast, economic recovery is self-sustained process which can be interrupted only by a shock of some kind. To put it in another way, the ECB doubts that the economic growth we saw in the summer is the beginning of a new expansionary phase of the cycle.

And indeed, it didn’t take long to see first confirmations of these concerns. On Friday we’ve got first signs of a slack in ongoing rebound on the side of mfg./non-mfg. PMIs:



Manufacturing and combined manufacturing/non-manufacturing activity in the Eurozone came lower than expected in August. Euro was sold aggressively on the news, which gives us a useful insight – slowing EU recovery may be heavily underpriced in EURUSD because of excessive focus on USD side:



The minutes also showed that positive economic projections from July were based on the fact that strong support from the monetary policy will remain in place. According to the ECB, normalizing policy too early would be like pulling out a lifeline for drowning, which indicates a reluctance to move the rate in the next year or two.

There were also hawkish moments in the protocol. For example, ECB mentioned that the size of asset buybacks under the pandemic asset buyback program (PEPP) should be viewed as an upper bound, not a target. In addition, according to the ECB, economic reports in recent months have been more surprising in a positive way than in a negative one, and some of the risks that the ECB was concerned about in June have lost their urgency.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 76% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Reply With Quote
  #59  
Old 25-08-2020, 15:35
Level IV Lasers Member
 
Join Date: Aug 2018
Posts: 101
Default Re: Tickmill UK Fundamental Analysis

Two Big Rules of the Bearish USD Trend

Fatigue is growing in the upward trend of EURUSD, which became rather apparent on Friday, when the release of PMI data provoked sustained sell-off in the pair. The index of activity in the EU non-manufacturing sector showed that almost “mechanical” post-lockdown recovery is losing steam and at best enters plateau.

In the analysis of PMI data, it may be helpful to focus on how deviation of actual reading from the forecast changed in time to see how it corresponds with the story of consumer spending impulse. For example, in the August report, we see that PMI reading in the services sector lagged far behind the forecast (50.1 points against the forecast of 54.5 points).



In May and June, it was the other way around – the actual values ​​were significantly ahead of the forecasts. This dynamic suggests there is a rise and fading of some impulse (most likely in consumption), which is reflected in respective acceleration and subsequent slowdown in the services sector activity.

Sustained economic momentum in the EU in the first months after lockdown period mixed with less dovish (compared to the Fed) ECB served as a driver for euro advance for some time, but now this factor is gradually fading away.

On Monday, USD came under strong pressure on news that Trump is interested in accelerated approval of vaccines, including foreign-made ones. Such a move, undoubtedly, has a political motive, but this does not negate the fact that it may approach the date of vaccination in the US. However, exploring new lows in USD, in my opinion, will be possible if two conditions are met:


US data will continue to point on sustained economic momentum
The Fed will retain dovish tone or sound more bearish.
If we look closely at the conditions under which the dollar declined in June-July, we can notice that positive economic surprises (i.e. momentum) were combined with expectations of aggressive easing by the Fed. However, in August, the minutes of the Fed meeting in July showed that the central bank, if it continues easing, will be less aggressive than expected. On the data side, we started to see some signs of weakness in the US economic data. Therefore, in my opinion, it becomes much more difficult for USD to make its way to new lows, as the factor of declining real yield weakens. The Jackson Hole symposium, which will take place as an online conference on Thursday, at which Jeremy Powell will have to outline the updated guidelines of the Fed in shaping monetary policy, will clarify a lot in this sense.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 76% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Reply With Quote
  #60  
Old 01-09-2020, 05:57
Level IV Lasers Member
 
Join Date: Aug 2018
Posts: 101
Default Re: Tickmill UK Fundamental Analysis

A Few Remarks on Yesterday’s Powell Speech


Well, yesterday the Fed, represented by its head Jeremy Powell, formally confirmed that it adjusts reaction function to changes in inflation. Whereas previously the Fed used to target specific rate of inflation (2%), new framework implies average inflation targeting.

The decision was widely expected, but I would like to make a few remarks about why that was necessary and how it could affect expectations on tentative dates of policy normalization.

According to the Fed’s report entitled “Review of The Monetary Policy “, the decision is based on the fact that the US is entering a “new normal”, which is characterized by the following observations:

Productivity (output per worker) continues to decline, and the population is aging.
The hypothetical neutral interest rate (at which GDP and inflation grow at a stable rate) is decreasing which implies that you need less interest rate hikes to get to the desired level.
Increasing the workforce (i.e. the level of labor force participation) should become a priority. By the way, the last decade of monetary stimulus was able to inflate many nominal indicators and raise some real indicators, but it was the LFPR that mysteriously remained at low levels, and drifted even lower during the pandemic:

The crucial importance of LFPR in driving inflation can be demonstrated with the following hypothetical example: Suppose unemployment level is 0% which is associated with extreme economy overheating and thus inflation. If LFPR is low, for example 30%, only 30% of the working population will get paid and feed inflation through spending. In this case, contrary of our expectation of high inflation, we may barely see its move towards a target level.

A related issue with point 3 is that jobless rate sufficient to generate desired level of inflation decreases over time. Unemployment of 4% now and 10 years ago are clearly different in terms of potential to create inflation pressures.
Now let’s discuss the Powell speech.

The first thing that sticks out is extremely vague definitions. “Moderate” inflation overshoot over 2%, “period” during which inflation will average 2% … What does “moderate” mean in quantitative terms? When this very “period” will start, when it should end – all this remained unclear. According to Powell himself, there won’t be “mathematical formula”, everything will be very flexible (i.e. at the discretion of the Fed). The new framework is clearly a progress towards greater flexibility. We didn’t get nothing concrete except for the strong feeling that in the next 6+ years the rates will be likely near zero. But why? Firstly, from June FOMC projections we know that for the next three years, Central Bank officials expect the interest rate to stay at current level, and Core PCE below 2%:



Second, if we recall how long inflation stayed above 2% in the last decade after massive easing and fiscal stimulus…



… we can conjecture that pursuing average inflation of 2% without additional stimulus may require quite wide period which extends beyond 2030.

Hence, the bond market reaction to the Powell speech was mainly concentrated at the far end of the yield curve – the yield on long bonds rose, as the risks of increased inflation in the longer term increased. In the closer parts of the yield curve, there was less news from the speech, so the reaction wasn’t so strong.

The main conclusion from Powell’s speech is that rates will remain at a low level for a longer time. It is a key ingredient in further, sustained declines in US real yields, a powerful driver of USD depreciation and Gold gains that have already shown its potential this year.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 76% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Reply With Quote
  #61  
Old 01-09-2020, 06:32
Level IV Lasers Member
 
Join Date: Aug 2018
Posts: 101
Default Re: Tickmill UK Fundamental Analysis

Fed’s Mester: Rising Corporate Profits in 3Q Doesn’t Mean Recession is Behind

Economic activity and hiring have been constrained during coronavirus outbreak, confirming that the recovery will be slow and economy will need more support from monetary and fiscal authorities, Cleveland Federal Reserve Bank chief Loretta Mester said on Friday.

“I really think the recovery will be slow,” Mester told CNBC.

The economic data is likely to point to third-quarter growth after companies resume operations, but that doesn’t mean the economy is no longer in danger, Mester said.

“I actually think there are more challenges ahead and we will have to support the economy to overcome them,” she added.

Powell speech on Thursday indicated that the Fed becomes increasingly inclined to hold rates near zero bound for a very long time to generate inflation above 2% for some time. This inflation risk spooked investors in long-term bonds as well as fuelled speculations that the Fed will make additional easing of monetary conditions in the coming months. USD is expected to remain under pressure next week because of these expectations.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 76% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Reply With Quote
  #62  
Old 01-09-2020, 06:42
Level IV Lasers Member
 
Join Date: Aug 2018
Posts: 101
Default Re: Tickmill UK Fundamental Analysis

Long-term bond yields rise. Will the Fed conduct “Operation Twist 2”?

Following Jerome Powell’s speech at Jackson Hole last week, 30-year bond yields advanced to the highest level for two months on Friday. There are signs that the market expects consumer inflation to accelerate, and these expectations hit the far end of the yield curve hardest due to longer maturity.

As the Fed needs to keep borrowing costs under control, including long-term rates, the outflow of investors from long-term bonds started to gradually shape expectations that this demand will be replaced by the Fed purchases on the open market, i.e. increased QE. However, it is not clear how much the yields should rise, that the Central Bank started to worry.

Since the start of the pandemic, the Fed has bought nearly $2 tn in government bonds from the open market bringing its Treasury holdings to $4.36 tn. Short bonds prevailed in the composition of purchases.

In a similar situation after the GFC, when the yields of long-term bonds began to rise faster than short ones (steepening of the yield curve), the Fed resorted to a technique, which consisted in changing the composition of treasuries on the balance sheet – selling short and using proceeds to buy long-term bonds (so-called operation twist). The Fed began to do this in September 2011, curiously, it coincided with gold making a U-turn after it reached the then all-time high of $1900:



Perhaps this happened because investors tried to front-run purchases of the Fed, dumping safe gold and increasing demand for long-term bonds anticipating large buyer would soon appear on the market. If the Fed hints in September that it is interested in conducting “Operation Twist 2” there is a risk that the market reaction may be similar. It is necessary to closely monitor how the Central Bank will comment/react to the rally of long-term yields.

Consumer inflation in the US (Core PCE metric) accelerated in July, which was the expected development amid data on unemployment and retail sales. Consistent with the volatility in economic data in the post-pandemic period, consumer spending also exceeded expectations (1.9% monthly growth, 1.5% forecast), so the effect was small. Much more interesting and unexpected was the report from U. Michigan on consumer sentiment and expectations for August. It is August that is the hypothetical starting point for the second phase of the US economic recovery – the phase of deceleration, so the data for August may pave the way for risk appetite in the market. In August, the sentiment index rose slightly – from 72.5 to 74.1 points, remaining in the same depressive range after it plunged in April.

The more important point of the report was inflation expectations. They rose to 3.1% in August, up from 3.0% in July, the report showed on Friday. Market metric of inflation expectations – the difference between the yield on unprotected and inflation-protected bonds reacted immediately, strengthening to 1.77%, the highest since mid-January 2020:



Since the Fed decided to play openly, announcing its readiness to keep rates low for a long time and tolerate inflation, the risk of a further decline in the dollar increases due to increasing risk of acceleration of inflation expectations including due to the Fed commitment.
Reply With Quote
  #63  
Old 14-09-2020, 11:34
Level IV Lasers Member
 
Join Date: Aug 2018
Posts: 101
Default Re: Tickmill UK Fundamental Analysis

Bears in SPX Still Struggle to Make Downside a Base Case

US stock futures declined on Wednesday, followed by European indices, promising a tough day for those who are betting on extension of Wednesday bounce. S&P 500 futures slipped below 3400 points, but moderate selling indicates that the acute phase of the correction had passed and a period of “healthy” consolidation in the 3250-3400 range is coming.

Short-term tests below the range are possible, however, there are no fundamental catalysts in sight nor U-turn in market sentiments for consolidation below the lower bound.



On September 4, when the S&P500 dropped below 3,400, Goldman Sachs maintained its year-end projection of 3,600. The presidential election now poses the greatest risk as Trump is again betting on anti-Chinese rhetoric and “bring back manufacturing jobs in the US.” This adds uncertainty to the political and economic course of the next US leader. It is unknown how far he can go in his campaign pledges. So far, the incumbent has threatened to strip firms from federal contracts which try to save on labor by moving jobs to China.

Corporate reporting of the US firms included in the S&P 500 for the second quarter beat forecasts in 23.1% of cases (data from Lord Abbett), which is a way higher than 4.7%, the average for the previous 5 years. In the context of yield suppression in alternative asset classes better-than-expected 2Q performance may give some justification to their market valuations.

The US Senate, controlled by Republicans, is going to vote on a fiscal package, the proposed volume of which is significantly thinner compared to previous proposals and amounts to only $300 billion. This is much less than what the Democrats want to pass ($2 tn). Approval of a fiscal package worth at least $1tn would be a powerful shot of optimism for risk assets, but time shows that the GOP wants to approve less and less, increasing uncertainty about the final size date of approval.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 76% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Reply With Quote
  #64  
Old 14-09-2020, 11:44
Level IV Lasers Member
 
Join Date: Aug 2018
Posts: 101
Default Re: Tickmill UK Fundamental Analysis

Stalemate in Fiscal Talks, Growing Slack in eco Data put a dent in Equities Rally

US equities were unable to develop positive start of Thursday session and bulls ceded ground to sellers later. There may be growing conviction in the market that US lawmakers (both the Fed and Congress) will not be able to enact monetary or fiscal support before the US presidential elections. This is a negative scenario for equity markets which reinforces the case for consolidation.

Yesterday I wrote that the GOP wanted to adopt skinny fiscal package – in the amount of only $300 billion. The vote on it was scheduled for Thursday. The vote failed and it looks like that the talks headed for a dead end.

A break below 3300 points in SPX early in the session today may set persistent corrective tone for risky assets extending for the rest of the session. However, rising US index futures indicate that breaking support won’t be an easy task.

In the economic calendar, the focus is on the US CPI release for August. Core inflation is expected at 1.6%, and the market will be more sensitive to negative deviations from the forecast than positive ones. Market response to accelerating inflation is limited by the Fed’s new “patient” inflationary stance (FAIT). Slowing inflation in the US is critical for sentiment, since nothing can be opposed to it yet due to the stalemate in fiscal negotiations. Yesterday’s PPI release which beat estimates indicates that inflation pressure could rise in the prices of consumer goods as well.

The report on unemployment claims in the US released on Thursday was a blow to market optimism. The number of unemployed increased for the fourth consecutive week. This is a subtle signal that slack in economic activity is growing in the US.



Key points from the September ECB meeting

Earlier in this week I wrote that the chance for the resumption of EURUSD rally is high, since the ECB cannot stop the growth of the Euro with any specific measures. This statement can be strengthened by considering key meeting takeaways:

The ECB’s response to the Fed’s new inflation targeting concept is in the works, so the euro could not get anything out of it;
Inflation forecasts for 2020, 2021 are unexpectedly revised upwards – the ECB’s bias to ease policy becomes lower;
The ECB is closely monitoring the exchange rate of the euro and believes that the expensive euro slows inflation. However, targeting of Euro exchange rate is not included in monetary policy objectives. This is the verbal intervention that we talked about, and which did not make an impression on the euro. The base scenario for EURUSD, despite the growing chances of the dollar bullish pullback in the next two weeks, is continue rally towards 1.25 level.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 76% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Reply With Quote
  #65  
Old 07-10-2020, 06:34
Level IV Lasers Member
 
Join Date: Aug 2018
Posts: 101
Default Re: Tickmill UK Fundamental Analysis

The RBA left cash rate unchanged on Tuesday but gave clear-cut indications that it wants to float additional easing measures at the next meeting to stimulate hiring.

“The Board continues to consider how additional monetary easing could support jobs as the economy opens up further”, the policy statement said.

Three out of four major Australian banks - Westpac, NAB and ANZ expect the central bank to cut the cash rate in November.

The implicit pledge of the RBA to reduce borrowing costs was made just before the release of the government's budget for 2020/21. The government is expected to ramp up borrowing, but accommodative policy of the RBA should help the government bond market to absorb increased supply.

We can also notice a subtle shift in emphasis in the policy statement towards employment goals (instead of routine discussion of inflation targets) which is reminiscent of the Fed’s shift toward flexible average inflation targeting policy.If it’s true, then the RBA may be willing to tolerate higher inflation as well in exchange for lower future unemployment. Of course, this development bodes ill for the national currency, AUD.

From the technical perspective the RBA’s dovish bias helped AUDUSD to complete formation of the double-top reversal pattern in the pullback that started on September 28, which in turn was part of the bearish trend initiated in September:



A breakthrough of the local minimum at 0.7130 should allow us to consider targets at 0.7080 and 0.70 levels.

The AUDUSD decline of more than 5% in September and the episode of "resistance" since September 28 were consistent with waves of correction and rally in equity markets, indicating a link between the events. Then a further decline in AUDUSD suggests a nix in the stock markets, which is very likely to happen due to upcoming pre-election volatility. Earlier, retail brokers in the US (such as IB) announced an increase in initial and maintenance margins for some instruments, mentioning the risks of "elevated volatility" ahead of the elections.

The trade balance of Australia in August was almost half of the forecast (2.64 billion against 5.15 billion Australian dollars), which indicates a reduction in exports. Business activity in Australia is especially sensitive to the dynamics of foreign trade, therefore, the weakening of exports is an additional blow to Australian assets and hence the demand for AUD.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Reply With Quote
  #66  
Old 23-10-2020, 09:05
Level IV Lasers Member
 
Join Date: Aug 2018
Posts: 101
Default Re: Tickmill UK Fundamental Analysis

Last Chance for Trump to Narrow the Gap

Biden’s lead in polls declined last week, albeit slightly, which still kept markets under pressure. The event which jumps into the foreground this week is the second presidential debate. It is Trump's last big chance before the election to leap forward and narrow the lead. In my opinion, if Trump manages to weaken Biden’s advantage, it will be a risk-off event since this outcome increases the chance of contested elections (which is a great source of uncertainty). Extension of Biden’s lead should be a boon for the markets helping them to extend the rally.

Important data on the US economy this week will be new home sales, the Fed's Beige Book and, of course, the initial jobless claims, which will receive a little more attention as the jobs market exhibited some weakness last week. The rest of the calendar for America is not particularly remarkable.

On Monday, the USD index began to decline aggressively, continuing the downward trend from September 25. Recall that at the same time the probability of Biden's victory and the probability of a complete victory for the Democrats began to rise
The Covid situation in the United States was generally calm in September, but became alarming in early October
The numbers are not so critical yet to tighten measures (and crash the market), but let’s keep the finger on the pulse.


In my opinion, there are little grounds to expect some surprise in Trump performance on the debates and expectations that Biden will extend or retain its lead should drive USD decline this week. The target for USD index is 93.00 level and 1.1830 - 1.1850 in EURUSD.

The data on Chinese economy left a mixed impression. GDP in the third quarter increased by 4.9% (forecast 5.2%), but the growth of industrial production in September (which is tied to external demand) beat expectations - 6.9% against the forecast of 5.8%. Retail sales jumped 3.3% YoY last month, against a more modest forecast of 1.8%. Unemployment has dropped.

Today, a meeting of the OPEC + joint monitoring commission is scheduled, at which it will be discussed how responsibly the participants are approaching production cuts. Europe has tightened measures due to rising incidence of Covid-19, which curbs fuel demand and OPEC is increasingly aware of the need to adjust supply. Specific decisions, however, may happen at the full OPEC+ meeting due on November 30 - December 1, but today's meeting should contribute to the discussion about what OPEC + will do at the full meeting.

COT data showed that long positions of Brent speculators increased by 37,531 lots in the last reporting week. The net position increased to 120,108 lots. Most of the changes occurred in short covering - 28K out of 37K (~ 75%). It looks like speculators were unwilling to stay short ahead of news from OPEC + this week which creates opportunity for prices to test some monthly resistance levels.
Reply With Quote
  #67  
Old 23-10-2020, 09:11
Level IV Lasers Member
 
Join Date: Aug 2018
Posts: 101
Default Re: Tickmill UK Fundamental Analysis

SPX and USD Index: What to Expect in the Second Half of the Week?

Looking at recent volatility, especially vigorous move to the upside, stock markets could rally on hopes that fiscal deal will be approved before the elections. But on Tuesday, much hoped talks fell through once again. House Speaker Pelosi and Mnuchin still “hold hope” and continue tense negotiations almost 24/7, but rumors suggest that there is no progress on key differences. Reuters reported that the GOP’s head in the Senate Mitch McConnell would not want to approved aid before the elections.

The SPX was unable to sustain gains, bouncing down from the level of 3500 last week, without much upside impulses this week. The slide was accompanied by a sharp decline of the odds of Democratic sweep outcome:



On the hourly chart we see that 200-day SMA test failed, but on October 19 the market gave up important support:



Now the battle unfolds for the horizontal level of 3420. It has sustained multiple tests so far due to weak sellers’ indecision, but chances are good that we will go lower with 50-day MA on the daily chart (the next important support at 3400) as the next target. Depending on the struggle at the level it will be seen whether the prospects remain to switch quickly to the growth. Accordingly, there is an opportunity for a near-term short trade, and a pause is assumed for buyers, since they can wait for more discount.

The dollar sold heavily in line with the ideas set forth in my Monday post. The tests of 93.00 and 92.76 levels have been successfully complete and, in my view, it is time to correct upwards with potential entries in the 92.70 - 92.45 area. For EURUSD, this should be the zone 1.1890 - 1.19160

The reason is potential downside in the US stock market.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Reply With Quote
  #68  
Old 23-10-2020, 09:24
Level IV Lasers Member
 
Join Date: Aug 2018
Posts: 101
Default Re: Tickmill UK Fundamental Analysis

SPX Tests 50-day SMA at 3400 Points. Will the Level Hold?


The "jingle" from the Congress, Treasury and the US administration about coronavirus aid was hollow again. Controversial messages culminated in Trump's trash talk in Twitter that Democrats want to hand out cash to Democratic states - poorly run and with high crime rates. Who would doubt that the fiscal deal is nothing more than a convenient opportunity to please traditional and potential voters and earn extra political points. The horse trading that we observe looks like attempts to hog the covers.

As long as the harm from delaying the aid (i.e. wrath of constituents) does not outweigh the expected political gain from striking a deal with an opposing party, it makes sense to delay it. There is no urgent need, judging by the US labor market data and retail sales, yet. Democrats can deliberately pursue disadvantageous for the GOP channels of cash distribution, based on Biden's lead in polls.

It is not entirely clear why futures reacted up yesterday after so many promises and hopes, but awareness came quickly. The test of 3400 level in SPX futures, which we discussed yesterday, is almost complete, the USD is correcting upward, also in line with yesterday post:



SPX sellers weren’t especially confident or assertive yesterday, but this is just the first test of important level. 200-hour SMA has flipped down but given that the lead of Biden and Democrats in polls has retraced slightly (which drives up the odds of contested elections i), there is little reason to switch to brisk rally and a slightly larger correction and a second test of the 50-SMA are likely.

The situation with the virus in the US continues to be tense, the news front is filled with reports of some kind of new measures there. Europe also actively dampens optimism. I would not be in a hurry to go into longs on the benchmark, even at 3400 level.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Reply With Quote
  #69  
Old 02-11-2020, 08:28
Level IV Lasers Member
 
Join Date: Aug 2018
Posts: 101
Default Re: Tickmill UK Fundamental Analysis

EURUSD: Case for Deeper Pullback as Markets Enter Turbulent Pre-election Week

Eurusd: Case for Deeper Pullback as Markets Enter Turbulent Pre-election Week
US index futures slipped into negative territory on Monday as the greenback went on a massive offensive (gained both against major and EM currencies). Oil bounced down. US 10yr bond yield dropped indicating some fresh demand for risk-free assets. There are good chances that the last week before the US elections will be marked by risk-off, as by the end of last week there was little confidence that Trump would not resist the outcome of the elections.

Another important theme for the markets is the number of Covid-19 new cases in the US, which has set a new record:


In my view, US government and local authorities currently don’t have means to resist other than returning part of restrictions, decreasing mobility and thus increasing social distancing. But they will probably be less severe than in the first wave. Nevertheless, as we have already seen with the example of European assets, these measures weigh heavily on market sentiments. While the US stock market compensated for the fall in September with subsequent rebound, European equities failed to soar in the same fashion, remaining largely in consolidation mode.

In addition, on Friday we saw the indexes of activity in the EU service sector for September, which behaved significantly worse than the manufacturing ones, i.e. services business is suffering again.

The ECB will hold a policy meeting this week, where the focus will be on regulator's response to the recent weakening of activity in the service sectors and downgrade of the EU growth forecasts by market experts. Together with increased demand for USD on risk-aversion, I would consider another downside correction in EURUSD this week with targets at 1.178 and 1.17:


In addition, the plight of the EU services sector suggests that soon the fiscal or monetary authorities will have to offer some substantial monetary cushion, putting medium-term pressure on the Euro.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Reply With Quote
  #70  
Old 02-11-2020, 08:41
Level IV Lasers Member
 
Join Date: Aug 2018
Posts: 101
Default Re: Tickmill UK Fundamental Analysis

What can we expect from the EURUSD after the ECB meeting?

What Can We Expect From the Eurusd After the Ecb Meeting?
As expected, EURUSD crashed after the ECB meeting on Thursday, as policymakers almost openly stated that the central bank will continue to ease credit conditions in December. The only question is what policy instruments will be involved (depo rate cut, increase in QE, expansion of TLTRO or increased asset-purchases within the PEPP). The coronavirus impacts began without warning, causing the ECB to act almost preemptively:



All members of the ECB governing council unanimously supported the need for intervention in December. Recent tightening of social restrictions in Europe threaten to plunge the economy into another recession (this becomes the baseline scenario now!).

ECB President Lagarde announced that all instruments will undergo recalibration. In fact, this means that in December a mix of a rate cut, an increase in QE, etc. can be announced. Amid a pause in the actions of other central banks, yesterday's announcement by Lagarde is a very hard blow for the euro. Common currency was sold much faster than expected.

As a result, a noticeable imbalance of statements in favor of the ECB is formed in the central bank policy environment. The virus activity in the US has not yet forced the Fed to announce similar easing of credit conditions, which could balance the pressure on the euro in EURUSD. Also, judging from the dynamics of the disease in the United States, no urgent statements by the Fed are expected:


The United States has already “visited” the ~ 70K daily case zone in July, so I think that the US is quite away from the critical point of depletion of healthcare reserves. Therefore, there is no need to impose tougher curbs or introduce lockdowns. This means that there is no need for the Fed to rush to ease monetary policy. Hence, the Central Bank policy imbalance will linger for some time which should be properly priced in the Euro.

I expect that the pressure on the euro will continue in November and most likely we will see a breakthrough of the September low in EURUSD (1.161) after the elections.
Reply With Quote
  #71  
Old 24-11-2020, 07:35
Level IV Lasers Member
 
Join Date: Aug 2018
Posts: 101
Default Re: Tickmill UK Fundamental Analysis

German Government may be Preparing a Surprise for the Markets

German Government May Be Preparing a Surprise for the Markets
Increasing social restrictions in the US in response to unabated advance of coronavirus cases appears to be a convenient reason to extend stocks correction on Thursday. SPY and QQQ closed down 1.2% and 0.74% on Wednesday while decline of index futures on Thursday suggests that US markets are likely to open lower today. USD index, bouncing to the upside is an extra signal of strong risk-off mood as key bullish catalysts (Biden’s win, vaccine news) have been already reflected in prices.

The release of manufacturing activity figures from the Philly Fed, initial claims for unemployment benefits, US home sales today are expected to pass unnoticed as the focus is on the short-term impact of the new social curbs. New York's decision to move schools to distance learning was a punch to economic recovery as this may also lock at home a good part of economically active population (i.e. parents). In addition, it leaves the question open about extension of restrictions as the path to new records appears to be unchecked. Meanwhile, the daily growth in the US has renewed record this week exceeding 190K cases, while the 7-day trend remains upward

Note that the Europe brought its epi curves under control after more or less strict restrictions were introduced. The United States will probably have to follow the same path.

It is important to keep tab on the deadlines for extension/easing of lockdowns in Europe as potential catalysts for stocks decline/rebound:


Germany decides on the current lockdown on November 30, but today the head of the Koch Institute (advising the government on the epidemic) apparently has tried to leave a room for a possible extension, stating the following.
So, on November 30, there is a chance to see a shocking announcement from German authorities and current price action in equities may reflect these concerns already.

On November 22, the decision on lockdowns is expected in Italy, the shape of the epi curve there, as well as in Germany, draws the second peak (see chart below). On this basis, we can assume that Italy decision can help to predict German’s one
Reply With Quote
  #72  
Old 24-11-2020, 07:58
Level IV Lasers Member
 
Join Date: Aug 2018
Posts: 101
Default Re: Tickmill UK Fundamental Analysis

Negative Headlines Grab Markets’ Attention as Equity Rally Stalls

There are convincing signs that the rally on equity markets has stalled in the second half of this week. European indices gained less than 1% on Friday attempting to price in some early positive developments in coronavirus trends. There is not much to rally on in the short term, while increasing number of negative headlines feeds cautious state of the markets. The NYC authorities are mulling over extension of restrictions after closing schools as the mayor of the city de Blasio said that restaurants could be closed within the next week or two. Another heavy blow of economic activity in the US which the markets have not yet fully absorbed.

US Treasury Chief Mnuchin said that the $ 4.5 trillion emergency lending programs, which expire at the end of this year, won’t be extended. The Fed loses significant potential to absorb toxic debt in the event of a new shock, while medium-sized businesses lose access to direct loans from the Central Bank (through the Main Street lending program). However, it is possible that the proceeds will be used by Congress to fund other programs.

Initial jobless claims in the US fell short of forecasts for the first time in four weeks. Really bad signal. The increase in the unemployed amounted to 742K against the forecast of 707K, which likely reflects the impact of coronavirus restrictions, which are increasing in the US:



The negative print in the data point can be an early flare of slack in labor market recovery which warrants more attention to the data update in the next week. To continue the upward trend, equity markets would need a breakthrough in the fiscal deal negotiations which seemed like the only thing that can offer broad-based help to bullish sentiment.

However, it makes sense to expect a breakthrough not earlier than in January 2021 as runoff elections to the Senate in Georgia will take place then and determine who will get majority in the Senate. Based on the following chart, the Republicans should have a negotiating advantage with Democrats:


Source:Smarkets.com

The growth of existing home sales in the United States left many forecasters bewildered. In October, sales increased by 4.3% versus September (-1.2% forecast), while the monthly growth in September was revised to 9.9%. Thus, in annual terms, sales increased by as much as 26.61%. Interestingly, the median price of home sold also increased - by 15.5%. Demand grew despite pandemic restrictions, falling incomes, high unemployment, to the extent that 2020 turned out to be the best year for the secondary market since 2009:


Source: NAHB

Obviously, the sales dynamics should offer some prolonged demand for goods and services of companies in home-improvement market.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Reply With Quote
  #73  
Old 24-11-2020, 08:11
Level IV Lasers Member
 
Join Date: Aug 2018
Posts: 101
Default Re: Tickmill UK Fundamental Analysis

Expectations of a new Business Cycle Warrant Pressure on USD


US index futures started the week in high spirits, trading in modest positive territory thanks generally supportive fundamental background. Oil prices continue to move higher ahead of the OPEC meeting on November 30 and are likely to hold onto gains after the second test of $43 resistance level. As expectations brew in the markets that global economy enters recovery phase of a new business cycle, the commodity market, in particular energy prices, should be the leading indicator of these expectations. Commodity markets, especially oil tend to outperform in this phase of the cycle.

Recovery of drilling activity in the US, major OPEC’s rival unexpectedly slowed despite rise in the rise prices, which further supported the market on Monday. Baker Hughes reported on Friday that rig count declined from 236 to 231 units.

Consumer confidence in the Eurozone declined took predictable downward path, the corresponding index fell to -17.6 points in November against the forecast of -17.7 points. This is a first indication that the shock to the EU economy from the reimposed lockdowns may be in line with general level of concerns.

Since the start of November, the best performance among major currencies has been shown by currencies tied to business cycle while the currencies where defensive assets prevail underperformed. The greenback turned out to be the main outsider:


The index of US currency (DXY) is expected to play with 92.00 support this week without conclusive movement below the level, thanks to steadily rising optimism in the leading commodity markets, keeping expectations of a new investment cycle high.

Price action in the equity markets is expected to remain muted in the first half of this week, as the US celebrates Thanksgiving on Thursday and the start of shopping season on Friday. Economic calendar this week is relatively uneventful with durable goods orders, US Q3 GDP, Core PCE inflation set to hit the wires Wednesday. Perhaps the most important report this week will be the Fed's November meeting minutes, which will be scrutinized for clues about possible increase in QE purchases in the next month.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Reply With Quote
  #74  
Old 30-11-2020, 19:25
Level IV Lasers Member
 
Join Date: Aug 2018
Posts: 101
Default Re: Tickmill UK Fundamental Analysis

Opposition in OPEC+, Fed’s Powell speech: key events to watch this week


EURUSD resumed its movement towards 1.20 on Monday in line with our expectations outlined last week, however buyers are in no hurry to break through the level. Greenback index remains in a mild downtrend and there are no prerequisites for a significant pullback in December. A breakdown of the 1.20 level in EURUSD in the first half of this week will depend on whether OPEC + decides to extend current output cuts. Then the pair will likely pay attention to the macro updates from the US (ADP, NFP, PMI indices) and remarks of the head of the Fed Powell and Treasury Secretary Mnuchin, which are going to speak in the Senate this week.

The minutes of the Fed's November meeting showed that the question of additional monetary easing in December remains open. Powell's rhetoric this week is expected to shed light on the Central Bank's December action. Risks are biased towards the announcement of additional easing (most likely increase in Treasury purchases), which is a factor of pressure on the USD.

The minutes of the ECB meeting and the comments of the chief economist of the Central Bank Lane last week indicated that the Central Bank is reluctant to cut deposit rate or increase QE (due to low efficiency and high costs) and is likely to resort to soft and targeted measures. Expectations of strong monetary easing, which were priced in the euro, are being gradually priced out, removing one of the burdens from EUR.

Oil opened lower as an “insider fact” leaked to the market ahead of the upcoming meeting that some participants rebelled over the extension of the current production restrictions. The opposition was Kazakhstan and the UAE - the participants, which, fortunately, make up an insignificant share of production in OPEC +. Chances are high that key players, such as Russia and Saudi Arabia, will be able to convince those who disagree to change their stance, or agree to take on part of the obligations (as was the case with Mexico at the last meeting). Moreover, the story with the opposition is a good reason to correct downward. As a result, oil may still jump up on removal of purely “formal” uncertainty, but medium-term prospects are not clear.

China's manufacturing PMI rose, indicating that economic activity in the sector was picking up in the controversial month of November, which at least maintains state of relax in key equity markets. The index rose from 51.4 to 52.1 points, beating expectations.

This week, the focus may be on measures to contain Covid-19 in the United States. The United States let Thanksgiving Day pass without tight restrictions, which could trigger a new leg of rise in daily cases after levelling off at the end of the month:





The dollar index is expected to test 91.50 in the first half of the week, with the highest pressure exerted by the European currency.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Reply With Quote
  #75  
Old 03-12-2020, 17:14
Level IV Lasers Member
 
Join Date: Aug 2018
Posts: 101
Default Re: Tickmill UK Fundamental Analysis

OPEC decision is likely to have short-term impact as focus turns to demand side

Positive update on oil inventories in the US pulled WTI above the key level of $ 45, however, prices have been moving in a narrow box as OPEC is dragging its feet on key output decision:



EIA data unexpectedly indicated US crude oil inventories declined by 679 thousand barrels. Stocks at Cushing decreased by 317 thousand. Drawdown in inventories was an unexpected outcome which produced some upside in the market as it came against the backdrop of an increase in oil imports and a decrease in refinery utilization rate, indicating that increased oil exports in the reporting week made up for this decline. The data showed that oil exports from the US surged by 625 thousand bpd to 3.5 million bpd, which indirectly indicates a rapid recovery in demand from foreign refineries.

OPEC is making an important decision today about output cuts. Initially, the decision was supposed to be made on December 1, but disagreements arose among the participants and it was decided to postpone the meeting. The market is leaning in favor of a positive outcome of the meeting, but in my opinion, OPEC will opt for balanced solution because recent economic data around the world indicates brisk recovery and oil producing nations may be reluctant to miss this demand opportunity.



Disclaimer:* The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning:* CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Reply With Quote
  #76  
Old 05-12-2020, 03:56
Level IV Lasers Member
 
Join Date: Aug 2018
Posts: 101
Default Re: Tickmill UK Fundamental Analysis

Oil market appears to be slow to digest OPEC+ new trade-off

The new OPEC+ deal appears to be a massive success both for oil producing nations and the market. Agreeing to boost production in January the group could convince market participants that surplus inventories will nevertheless decline. The deal was somewhere in the middle between the worst and the best possible outcome of the meeting. Oil-producing nations will start to increase output from January 2021, but great flexibility of the new plan was a key to soothe market concerns.

This week was difficult for OPEC as due to disagreements the meeting scheduled for Tuesday had to be postponed to Thursday. The deal participants came to a new agreement, but initial market reaction to it was tepid. OPEC+ plans to increase production from the current level by 500K bpd starting from January 2021, which is less than in the worst-case scenario (1.9 million bpd). In doing so, the organization will monthly assess market conditions in order to better adjust the supply. The deal also included the condition that the members cannot increase output by more than 500K bpd per month.

The best outcome for prices would be to extend current output cuts for another three additional months, however, judging by the market reaction, the market liked the OPEC+ flexible output plan.

At first, the market reacted with a small upward leap, but on Friday spot prices increased by another 1%. A barrel of WTI was trading above $ 46 a barrel, the highest level since early March while Brent was trading above $49 a barrel. An important point was the very fact of the deal - recall that in March prices collapsed due to the fact that among the main producers a short-term situation arose where "everyone produces as much as they want."

The parameters of the deal were determined in such a way that implementing it OPEC+ should keep the market in a deficit, thus drawing down inventories and pushing prices up. As a new coronavirus shock becomes less likely to happen, there are no major obstacles for a recovery in demand, so prices have a room to rise. In December, Brent will probably be able to touch $51 per barrel, but it is preferable to wait for a pullback, if we want to bet on this outcome:




However, next year, after Biden moves to the White House, Iran's return to the market could become a serious threat to the market. In other words, the risk of successful negotiations between the United States and Iran on the nuclear program. If sanctions on Iran are lifted, the market will face a challenge in the form of a potential 1-2 million barrels of additional supply from Iran. However, this risk is not traced on the horizon of 3-4 months.


Disclaimer:* The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
High Risk Warning:* CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Reply With Quote
  #77  
Old 07-12-2020, 17:25
Level IV Lasers Member
 
Join Date: Aug 2018
Posts: 101
Default Re: Tickmill UK Fundamental Analysis

A case for a bearish pullback in S&P 500. What could go wrong?



US job growth fell short of expectations in November, pointing to waning recovery momentum in the US economy. However, it didn’t stop the US equities from renewing all-time highs. SPX inched closer to 3700 points, DOW rose above 30,000 mark.


On Monday, equity markets went into a mild retreat while US currency recovered some of the lost ground. The biggest question is the strength of this downside move. In my view, fundamental background and news flow expected this week suggest that the 3700 mark should remain a local resistance for SPX for a week or so and a retracement to 3650 (100-hour SMA support) is likely. The next target that we could then consider is a test of an intermediate trend line at 3620 points:





Let’s look at the arguments.


The NFP report was actually worse than the headline numbers suggested. Job growth calculated on the basis of firms' payrolls (so-called establishment survey) slowed to 245K (460K exp.). The same indicator, calculated through the household survey (more precise measure), was -78K. There is a backstory that indicated that we had to expect this kind of a surprise - November dynamics of initial claims for unemployment benefits (which I wrote about here). Unemployment rate decreased by 0.1% but it remains a highly biased indicator - if we look at employment rate (share of employed from working-age population), it is still significantly lower than it was in February:





Over the weekend, the data showed that the US hit a fresh record for daily cases of Covid-19, hospitalizations, and ICU occupancy rate:





In other words, the pressure for local government to tighten restrictions at least for some time, increased, which present a near-term risk for the markets.


Certainty about the vaccine, unfortunately, does nothing to ease the short-term pressure from rising Covid-19 positivity rate. The latter has intensified thanks to lax rules during Thanksgiving and the start of shopping season which led to more crowded shopping places. Therefore, there is a risk that social restrictions in the US could be briefly tightened again, and with the economy losing momentum in November, December could be very weak in terms of employment and economic recovery. It is no coincidence that Congress stirred in December and is going to adopt a $ 900 billion stimulus package within a week or two.


Basically, swift approval of the stimulus bill is a key obstacle for prolonged decline as positive headlines can quickly spur another leg of buying momentum making bearish pullback quickly losing integrity.



Disclaimer:* The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning:* CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Reply With Quote
  #78  
Old 08-12-2020, 16:56
Level IV Lasers Member
 
Join Date: Aug 2018
Posts: 101
Default Re: Tickmill UK Fundamental Analysis

This broken link between banks and bond markets indicates Central Bank support is the only thing that matters for stocks


Price action in European equities and US futures lack clear direction on Tuesday as markets wait for a "Christmas gift" in the form of a fiscal deal. In the absence of news headlines signaling about progress in stimulus talks, there is a chance for equity markets to stage a minor pullback (scenario that we discussed yesterday) and the signs of bearish pressure do persist. The greenback remained weak against other majors, trading below the key foothold at 91 points.


While stocks markets trade near all-time highs, sustained by expectations and liquidity backstop from the Central Banks, signaling that the worst is over, the Bank of International Settlements issued a warning, saying that the crisis is moving from liquidity to default phase.


In its quarterly report released on Monday, the "bank of all central banks" said that while the recent rally in global equity markets was justified by compression of interest rates in bond markets and rotation of investors into risky assets, quick development of vaccine and thus foreseeable end of the pandemic, current market valuations may not fully reflect the risks of defaults. This is better reflected in dynamics of credit spreads in the US and Europe which rapid decline remains out of step with stalling recovery of firm revenues, key measure of quality of a firm as a borrower. It means that bond market valuations may underestimate risks of corporate defaults as well.


In this regard, it is significant how the two major groups of lenders - banks and market investors (indirect and direct channel of financing) changed their lending attitude. If the former has been tightening their credit standards, the latter, on the contrary, has been lowering the credit risk bar:





Bank and bond market assessment of credit risk usually move in sync, but now we a strong divergence which suggests there is a strong factor breaking the interplay. This factor is obviously “unlimited” credit facilities offered by Central Banks and it means that complacency in bond markets may hinge heavily on the Central Bank backstop.


Anyway, current focus remains on the stimulus talks in the US. In addition to disagreements between parties, there is another obstacle on the way to a fiscal deal - a Christmas shutdown. The work of Congress is funded until December 11, so in order not to interrupt negotiations, legislators will first have to approve a bill that will finance another week of work and bring fiscal negotiations to their logical conclusion. Therefore, the focus of the markets is primarily on whether Congress will succeed in approving funding bill. The voting on the bill is due on Wednesday.


Disclaimer:* The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning:* CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Reply With Quote
  #79  
Old 16-12-2020, 18:00
Level IV Lasers Member
 
Join Date: Aug 2018
Posts: 101
Default Re: Tickmill UK Fundamental Analysis

Explaining 10yr-2yr spread and Fed’s meeting baseline scenario. Near term USD outlook


Decline of US Dollar accelerated on Wednesday before the Fed meeting as the consensus strengthened that the US Central Bank will float additional monetary easing measures today. On Monday we discussed the possible forms of this easing - an increase in the duration of the Treasury portfolio, or an outright increase in QE (which is less likely). QE is when the central bank tries to adjust basic risk-free market rates - government bond yields, through guaranteed monthly asset purchases of some volume. By adjusting risk-free rates, the Fed expects other interest rates (including lending rates) to adjust as well. An increase in portfolio duration is when the central bank decides to buy more long-term bonds than short-term bonds in order to lower the long-term borrowing costs.


And here is the key argument why the Federal Reserve may need to increase duration of its bond purchases:





This "somewhat forgotten" chart of the spread between 10-year and 2-year Treasury yields is a well-known "harbinger" of recessions and booms. Recall that from the summer of 2019 this chart was a popular “workhorse” for gloomy forecasts of some market doomsayers. When the spread is at its minimum, the market, roughly speaking, expects stagnation or recession, and vice versa, when the spread grows, it expects a rise. Surprisingly, the market was not wrong about the latest recession, despite its completely non-obvious and sudden origin.


The chart now shows that the demand of long government bonds relatively bonds with shorter maturity is rapidly declining. In other words, the near-term outlook for a return on capital looks more promising than the long-term one. At least that's what the market thinks. Because of this, long-term rates rise as the market demands ever higher returns in order to invest in a “less promising”, long period of time. The Fed may intervene today if it considers that such an increase in long-term rates is not good for long-term borrowers and will slow down the economic recovery. An increase in QE for this purpose looks like overkill, therefore, changes in the composition of purchases within the current volume are more likely - which is what the US stock market and US Dollar are trying to price in.


Short-term USD technical setup:





As for the dollar index, several attempts to break the key 90.50 support ended with a breakout of the range (90.50-91.10), which, in my opinion, is a clear signal of resumption of downside pressure. At the same time, the downward movement today brought the price beyond the short-term descending channel, which sets the stage for a test of the channel's lower border on a higher timeframe (89.75) and only then a somewhat significant correction (to 90.50).


Disclaimer:* The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning:* CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Reply With Quote
  #80  
Old 19-12-2020, 05:07
Level IV Lasers Member
 
Join Date: Aug 2018
Posts: 101
Default Re: Tickmill UK Fundamental Analysis

Democrats see this as an attempt to tie the hands of the Biden administration (in terms of ability to respond to possible economic shocks) and, of course, will not easily back down on this issue.


Senate Republican leader McConnell said the talks could drag on over the weekend. It seems that politicians are trying to hold out until January's Senate run-off elections in Georgia where representatives from the two parties will compete for key seats that will determine whether the Republicans will receive a majority in the Senate.


While the pandemic has lost some of its news coverage, data shows it continues to wreak havoc on key economies:









At the end of November, the curve seemed to be drawing a peak, however, as we are now seeing, it was only a pause before new highs. And if the United States is trying to cope without lockdowns, then Europe is more conservative in this regard. The data shows that the path is open for greater social constraints.


From the fundamental statistics, it is worth paying attention to the update on applications for unemployment benefits, which indicated that worrying trends in labor market gain momentum. Regarding to initial claims, consensus was + 800K but the indicator printed + 880K. Initial claims have sped up sharply in the past two weeks:






As the US labor market began to show weakness in November, jobless claims have become more significant in understanding how quickly the recovery wanes and how much the economy needs new stimulus. Judging by the data, December promises to be very weak in terms of US employment growth and the NFP in January is likely to show a negative surprise.


In my opinion, unless we get a breakthrough in fiscal negotiations over the weekend, next week will be a correction week for the dollar index in line with the technical idea I described on Wednesday. The target of bullish retracement is 90.50 mark.


Disclaimer:* The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning:* CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Reply With Quote
Reply

Thread Tools Search this Thread
Search this Thread:

Advanced Search

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are Off
[IMG] code is On
HTML code is On
Trackbacks are On
Pingbacks are On
Refbacks are On


Similar Threads
Thread Thread Starter Forum Replies Last Post
Tickmill UK Fundamental Analysis TickmillNews Forex Analysis 0 24-03-2020 14:23
Tickmill UK Fundamental Analysis TickmillNews Forex Analysis 0 24-03-2020 14:20
Tickmill UK Fundamental Analysis TickmillNews Forex Analysis 0 24-03-2020 14:17
Understanding Fundamental Analysis ForexArticles Forex Articles 0 01-12-2016 12:04
When Fundamental Analysis Fails ForexArticles Forex Articles 0 22-06-2016 20:09


All times are GMT. The time now is 14:19.


Powered by vBulletin® Version 3.8.10
Copyright ©2000 - 2021, vBulletin Solutions, Inc.