Weekly analytics- Forex Fundamental Analysis – Oil Uptrend Ramping Up

Forecast for the week August 7 through August 11:XAU/USD:At the beginning of the week gold rates fall may be expected, while US dollar strengthens. After Friday Non-Farm, USDX rose by 0.87%, and gold dropped by 0.84%. Investors are taking profit on short US dollar positions, for this reason greenback competitors are weakening. Based on CFTC reports we can conclude that investors have positive opinion about gold. Over the last week net speculative positions increased by 38.9 thousand contracts, by 8.2 thousand more than on the previous week. Growth rate is accelerating and we are expecting another XAU/USD rise. Trading signals: Buy 1255/1246 and take profit 1270.Brent:At the beginning of the week moderate decline may be expected due to US dollar growth. Oil and greenback traditionally go in different directions, and considering USDX correction oil drop is likely. This drop is likely to be a short-term one, as investors are anticipating oil uptrend to continue. In August, as usually, we are observing boosted oil products demand due to vacations season, that will support oil rates. Speculators are also ramping up long oil positions on US futures market. Over the last week net speculative positions on crude oil increased by 63.5 thousand contracts, by 36.7 thousand contracts more than the previous week. Buy positions reached a five-month maximum. Trading signals: Buy 51,90/50,42 and take profit 53,40.S&P500:During this week I expect quotes growth to the area of psychological level at 2500. Positive July employment data indicates that in the third quarter of this year the majority of corporations will release strong financial results. This week Alibaba earnings report on August 9 and NVIDIA earnings report on August 10 are worth attention. Last year Alibaba eliminated many local offline retailers in USA. Americans eagerly order goods via the Internet and less frequently visit shops. The market is anticipating positive release, for this reason we may expect strong Alibaba shares growth. Trading signals: Buy 2477/2465 and take profit 2500.
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GBP Falls From Yearly High as BOE Lowers UK Growth Forecasts

The British pound (GBP) fell towards the $1.3100 level against the US dollar (USD), after the Bank of England (BOE) left its key interest rate unchanged and confirmed withdrawal of part of the monetary policy stimulus introduced last year. The central bank also downgraded forecasts for the UK economy as it said reduced consumer spending will drag GDP growth to 1.7% this year, down from a previous forecast of 1.9%.

The GBP had previously touched a new 2017 trading high against the USD, hitting 1.3269, just hours before the BOE rate decision came.

BOE Vote Split

The MPC voted by six votes to two to leave bank rate untouched at its historically low level of 0.25%, with Ian McCafferty and Michael Saunders dissenting. The Bank’s chief economist, Andy Haldane, did not vote for a hike, after previous suggestions he might. However, despite the downgrade to its growth outlook, the rate-setting monetary policy committee also gave a more hawkish signal that rates could rise earlier than markets are currently pricing.

The Bank’s central forecasts now imply an interest rate hike by the third quarter of 2018, and a second by the end of the forecast period, but the MPC’s minutes added: “Monetary policy could need to be tightened by a somewhat greater extent over the forecast period than the path implied by the yield curve underlying the August projections.”

NFP Report Better than Expected

US private employers added 178,000 jobs in July, below economists’ expectations, a report by a payrolls processor showed last week. Economists surveyed by Reuters had forecast the ADP National Employment Report would show a gain of 185,000 jobs, with estimates ranging from 151,000 to 225,000 jobs added. Private payroll gains in the month earlier were revised up to 191,000 from an originally reported 158,000 increase.

The unemployment rate in the Eurozone fell to its lowest since February 2009, according to the latest official figures out last week. The EU unemployment rate dropped to 9.1% last month, from a downwardly revised 9.2% in May. Separately, inflation for the region remained unchanged in July at 1.3%, however, core inflation, which excludes food, alcohol and energy prices, rose to 1.2% from 1.1% in June. Inflation in the 19-nation bloc still remains well below the European Central Bank’s target of close to, but below, 2%.

The positive set of data helped boost the sentiment towards the single currency, and pushed the euro to two and half year trading high against the US dollar, with the EUR/USD pair hitting 1.1910.

RBA Kept Rates Unchanged

The Reserve Bank of Australia (RBA) kept its benchmark rate unchanged on Tuesday in a widely expected move. The country’s cash rate has stayed at 1.5% since August 2016. Commenting on the Australian dollar, the RBA said the recent strength “is expected to contribute to subdued price pressures in the economy.” RBA governor Philip Lowe said “It is also weighing on the outlook for output and employment. An appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast”.

The Australian dollar fell towards the 0.7900 level against the US dollar, after reaching a weekly price high of 0.8042, slightly below the 2017 price set the previous week, at 0.8065.

The New Zealand dollar fell over half a percent against the US dollar, after Q2 employment figures came in much lower than expected. The kiwi was previously trading above the $0.7500 level, but quickly fell towards $0.7400 after the release of employment figures from New Zealand showed a quarter-on-quarter fall in employment of 0.2%, forecasters had predicted a 0.7% increase. Year-on-year growth in employment slowed to 3.1% in the quarter ended June from 5.7% in the first three months of 2017, whilst the unemployment rate came in at 4.8%.

In the upcoming trading week, the Reserve Bank of New Zealand decides on interest rates, at a time when other Central Banks are starting to tighten monetary policy.

We also see the release of July PPI and Core CPI figures from the United States, as the Federal Reserve (Fed) started to raise concerns about persistently weak inflation in the US economy.

 

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The EUR is the strongest, the NZD is the weakest as North American traders enter

A snapshot of the strongest and weakest as the week begins The snapshot of the strongest and weakest currencies are showing that the EUR is the strongest while the NZD is the weakest.   The EURUSD has moved back above the 1.1800 level (traded as low as 1.17266 on Friday) and retraced to the 50% line

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Elliott waves for Forex correlation analysis – The cable around a key daily support line 1.3025

GBPUSD - Flat Wave Analysis During the previous week’s last two trading days, the cable dropped almost 300pips and is currently rallying above a key daily support level 1.3025. As long as this level protects the lower side, we expect a possible rebound from this level to rebuy the impulsive wave (c) to the upper side but should not go beyond 1.33. If the support (1.3025) is broken, then a bearish acceleration towards 1.2774 will be inevitable. This pair should be traded alongside GBPAUD, EURUSD, AUDUSD and NZDUSD. These pairs have a strong positive correlation of up to +61% and will move in the same direction during this intraday. Trade Recommendations: Expect a rebound from 1.3025 to buy the cable towards 1.33
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Elliott waves for Forex correlation analysis – Eur Retracing

EURUSD - Up Wave Analysis Instead of continuing long as previously anticipated, Euro dropped in price and is still showing signs of pullback even lower. We expect the previous day’s bearish price rally to be an onset of a corrective three wave cycle and should not go beyond the support level 1.1627, if this level is broken, then the price could drop lower with the next target at 1.1477. This bearish correction is highly anticipated since the intraday stochastic is rallying above its overbought level of 80, and should rebound towards 50. This pair should be traded alongside GBPUSD, AUDUSD, NZDUSD. These pairs have a strong positive correlation of up to +69% and will move in the same direction during this intraday. Trade Recommendations: Expect a possible bearish price rally towards 1.1627.
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(07 AUGUST 2017)DAILY MARKET BRIEF 2:Germany: Industrial production fell unexpectedly

Markets did not expect it, German industrial production has surprisingly strongly declined in June to -1.1% (monthly performance) while markets estimated the data to increase around 0.2%. However the overall annualized performance remains positive at 2.4%. It is nonetheless the biggest decline in 6 months.

The Eurodollar has barely moved amid the release of this data and the pair keeps on trading slightly above its opening level around 1.18. Seasonality may also be responsible as historically there always a decline in German industrial production growth during the summer, yet it often happens in July or August and not so early. Indeed construction tends to slow during those months.

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