Trading Signals Wednesday, 22 October 2014

GBP/USD Trend: SELL
USD/CHF Trend: BUY
USD/JPY  Trend: SELL
EUR/USD Trend: SELL

The current support/resistance level are :

EUR/USD 1.2610, 1.2695, 1.2746, 1.2781, 1.2831, 1.2866, 1.2952
USD/JPY 105.81, 106.42, 106.68, 107.03, 107.29, 107.64, 108.25
GBP/USD 1.5940, 1.6040, 1.6101, 1.6139, 1.6200, 1.6239, 1.6339
USD/CHF 0.9308, 0.9374, 0.9399, 0.9439, 0.9464, 0.9505, 0.9570

Euro Weakens on Talk of New Stimulus

The EUR/USD broke sharply today although it remained inside of last week’s range. The catalyst behind the move was speculation the European Central Bank is looking to buy corporate bonds on the secondary market. This move would increase liquidity, which would put pressure on the currency.

The Forex pair likely stayed inside last week’s range and didn’t break further because the ECB is denying the story about buying corporate debt.

The GBP/USD edged a little higher on Tuesday in limited price action. Today was a light trading session as many traders took to the sidelines ahead of Wednesday’s MPC Asset Purchase Facility Votes and the MPC Official Bank Rate Votes. Traders believe the vote was 7 to 2 to hold interest rates at historical levels.

December Comex Gold rallied on Tuesday as traders increased bets the U.S. Federal Reserve will push back its decision to increase interest rates in 2015. This news weakened the U.S. Dollar which supported gold prices.

Gold rallied on Tuesday to $1254.10. This completed a move into the major 50% level at $1253.80. This retracement zone was created by the $1324.30 to $1183.30 trading range.

December Crude Oil continued to consolidate despite the bearish fundamentals. The consolidation taking place is just position squaring and profit-taking because of oversold conditions. Once this passes then look for the price slide to continue.

Overproduction is the main concern. Although most reports suggest that OPEC is not going to cut production, some short-sellers may be lightening up their positions in case there is a surprise. There are also rumors circulating that the U.S. is manipulating the demand figures in order to drive prices lower. This move is intended to hurt the Russian economy which relies heavily on crude oil production.

Russia needs cash right now to sustain its economy and is heavily producing crude to maintain its cash flow. The sanctions imposed on the country by Europe because of the crisis in Ukraine is preventing the Russians from accessing bank loans.

EUR/GBP Fundamental Analysis October 22, 2014 Forecast

The EUR/GBP fell 28 points to trade at 0.7891 after comments from the ECB sent the euro tumbling. The euro dropped on Tuesday after reports said the European Central Bank may start buying corporate bonds on the secondary market. Citing people familiar with the matter, Reuters said the ECB could decide on the purchases as soon as in December, with the bond buying beginning as early as next year. A spokesperson from the ECB told MarketWatch that the Governing Council “has taken no such decision” in regards to start purchasing corporate bonds. The Reuters report comes a day after the ECB said it had started buying covered bonds as part of its most recent stimulus program to boost the eurozone economy.

“It increases the potential scale of the purchases the ECB will be able to make if they extend out into the corporate bond market,” said Lee Hardman, a strategist with Bank of Tokyo-Mitsubishi in London.

“That reinforces market confidence in (ECB chief) Mr. Draghi’s pledge to increase the bank’s balance sheet by a significant amount. The ECB is still under pressure to do more.”

GBP/USD Fundamental Analysis October 22, 2014 Forecast

The GBP/USD tumbled 13 points to trade at 1.6154 as the US dollar gained momentum ahead of the US data on housing due later in the NA session. The pound gave back some of yesterday’s gains. Sterling rose against the dollar on Monday, as traders bought it after last week’s sharp losses, with its near-term direction set to be dictated by UK growth data.

Third-quarter gross domestic product numbers on Friday could provide some support for the currency, which has been plagued by increasing doubts in the solidity of Britain’s economic recovery in the face of a worsening outlook in Europe.

Before then retail sales numbers, judging by other already released surveys, may support the softer outlook on growth which has led investors to push back expectations for a first rise in interest rates into the second half of next year.

Sterling had its biggest loss in eight months against the euro last week on the back of that re-pricing of expectations on rates

Metals Pack Fundamental Analysis October 22, 2014 Forecast – Silver & Copper

Silver added 51 points to trade at 17.405 following cues from gold, while Copper recovered from its 2014 low to trade at 3.008 up by 20 points in today’s session, helped by positive Chinese industrial output and growth numbers. Copper rebounded as economic growth and factory output data from China, the biggest user of industrial metals, beat analysts’ estimates. Copper rallied as much as 0.8 percent in London after losing 1.2 percent yesterday. China’s gross domestic product in the third quarter rose 7.3 percent from a year earlier, compared with the 7.2 percent median estimate. Industrial output in September expanded 8 percent, compared with the 7.5 percent forecast in a separate survey and 6.9 percent in August.

Most of the base metals traded down on last day’s trading session and among the bourse nickel fell the most. Despite the Chinese GDP came at 7.30% there has been no impact on the metals prices amid Asian equities trading mixed to positive. Markets are seeing a steady trade day on metal this morning while going ahead we could see prices moving in a range trade. However, in the US session we could see some sort of positive momentum in the select metal ahead of home sales number from the US. For today analysts believe nickel which has fallen the most may floor its losses and likely scenario for a good short covering. The only concern for this metal is it has very less open interests and the volumes are very low so possibly wide swings in the prices could be noticed.

USD/CAD Fundamental Analysis October 22, 2014 Forecast

The USD/CAD eased by 31 points to trade at 1.1254 with no real direction or reason for the CAD to gather momentum as the US dollar is trading up this session and the climb in gold and oil has been scant. China said its economy expanded 7.3 percent year-on-year in July-September, its slowest since 2008 at the depths of the global financial crisis. The third-quarter figure announced was lower than the 7.5 percent expansion in the previous three months, although it exceeded the median forecast of 7.2 percent in an AFP survey of 17 economists. Investors will now turn their attention to US home sales later in the day.

The U.S. currency has lost roughly 2 per cent over the last 10 days on signs that global growth and inflation are faltering, fuelling doubts about whether the U.S. Federal Reserve will be able to push ahead in the next year with its first post-financial crisis interest rate hike.

Bank of Governor Stephen Poloz and his senior deputy, Carolyn Wilkins, take center stage, first with a rate decision and monetary policy report on Wednesday morning, and then appearances before Commons and Senate committees Wednesday and Thursday.

Obviously there will be no change in the central bank’s benchmark overnight rate, but markets will be looking for any change in signal.

Gold Fundamental Analysis October 22, 2014 Forecast

Gold added $4.30 to trade at 1249.00 as traders continue to worry about global growth and recovery as the eurozone slides backwards. Two weeks have passed in October, wherein gold has just made a swift turnaround from key support levels of $1180 and currently trading at $1249. The recent US FOMC minutes came as a surprise making USD to decline and Gold to go up. Interestingly SPDR gold holdings which were all down for last several months are stable with no major changes seen up till today. Gold advanced to the highest level in six weeks as investors assessed the global economy and the outlook for monetary policies amid the biggest sale in a year from the largest exchange-traded product. There are no major cues in the market especially from the economic data front this session, possibly gains could be very minimal.

The Asian equity markets traded on a mixed to positive note tracking the positive close of the US equity markets, and buoyed by the GDP data from China that has been released this morning. China GDP came in at 7.3% against 7.2% expectations by the markets, cooling off the concerns about highly weaker growth in China.