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Market Outlook by Capital Street FX

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Market Outlook by Capital Street FX

Postby CSFX.Support » Wed Aug 31, 2016 2:53 pm

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Will The EURUSD Sustain Its Recent Gains? Key Technical Support Broken Ahead of Non-Farm Payrolls

The euro maintained downside bias on Wednesday, heading for a monthly loss against the U.S dollar amidst rising speculation over divergent monetary policies between the U.S Federal Reserve and the European Central Bank. Both central banks are scheduled to hold their next monetary policy meeting in September, where the Fed is expected to raise rates while the ECB is likely to introduce more stimulus measures.

Today has been a busy day for the Eurozone as a spate of economic data readings were published. Germany reported better than expected employment numbers, with the unemployment rate remaining steady in August at 6.1%, according to data from the German Federal Employment Agency. The result was not only in line with forecasts and but also marked a record low. The Unemployment Change figure also beat expectations by reporting a decline of 7,000, confirming a healthy labor market which is seemingly not affected by Brexit.

A low unemployment rate has helped encourage German spending, boosting retail sales by 1.7% in July compared to June, which is the largest jump since January 2014. However, other parts of the Eurozone do not seem to be as healthy economically. French consumer spending unexpectedly dropped by 0.2% in July, compared to June as households cut back on cars and home furnishing.

In other data EU data, the European Union’s statistics agency reported that Eurozone-wide consumer prices were 0.2% higher in August than during the same month a year earlier, but fell short of estimates of 0.3% price growth. The growth in the prices of services and manufactured goods could not offset the decline in energy prices. As a result, the measure of core consumer prices – which excludes volatile prices such as those for energy and food – grew by 0.8% in August – from the 0.9% rate of price growth in July.

Meanwhile, upbeat U.S. data is supporting the greenback to trade higher versus most of its peers. An earlier report from the ADP showed that the U.S private-sector added 177,000 jobs in August, virtually in line with estimates of about 180,000, from economists polled by The Wall Street Journal. Although the ADP data is not always an accurate gauge of the non-farm payrolls due on the first Friday of every month, investors still watch the report closely to get an advance indication on what to expect in the Labor Department’s employment report.

In other data of importance, The Conference Board published the the U.S Consumer Confidence Index for August yesterday. The index reading came in at 101.1 – the highest level since September 2015. In an interview with Bloomberg yesterday, Fed Vice Chairman Stanley Fisher said that the improvements in the labor market should help the economy withstand any headwinds caused by tightening of interest rates. Fisher also stressed that the pace of rate hikes will be based on upcoming economic data. Therefore, this Friday’s NFP is being considered a key factor in helping the market assess the possibility of a rate increase at the Fed’s late-September meeting.

EURUSD has been extending the slide since it hit serious resistance at the 23.6% retracement level at 1.13505. The solid support at the 38.2% level was broken easily yesterday after the pair had crossed over the MA20 at 1.12101 from above, indicating a strong bearish bias. RSI (14) is heading downwards from near the overbought zone while ADX (14) has also confirmed the downtrend by rising to as high as 32.16. A wide gap between the –DI and +DI lines is encouraging the pair to attempt a break below the psychological support at 1.11300.

Trade suggestion

Sell Stop at 1.11300, take profit 1.10580, stop loss at 1.11900
Benefit from 0 Pips Spreads, 200% Bonus, 1:1000 Leverage, 100% Risk Free
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DAX30 Market Outlook by Capital Street FX

Postby CSFX.Support » Thu Sep 01, 2016 1:24 pm

Banking Sector Merger Talks Push DAX30 Higher – Long Positions Favored

European stocks rose on Thursday morning, boosted by advances in the financial and mining sectors. In Frankfurt, the DAX 30 index opened the first trading day of the new month with a gap up, as Chinese manufacturing data released earlier pointed to an expansion in the world’s second largest economy, thus refueling investor confidence after it had been sapped by falling crude prices.

According to the China Federation of Logistics and Purchasing, the country’s official manufacturing purchasing managers index for August unexpectedly rose last month to the highest in almost two years, after dropping below the 50 threshold in July. The Manufacturing PMI rose to 50.4 last month while Non-manufacturing PMI stood at 53.5, remaining above 50 – which indicates improving conditions.

Bank shares are the best performers currently, with Deutsche Bank adding 3.75% and Commerzbank surging 4.92%. The two institutions – among Germany’s biggest lenders are still supported by speculation of a potential merger between the two, even though the plan has been postponed to allow both banks to focus on their own internal reorganization before proceeding with a merger.

The two top German banks coming together is expected to create a bigger European lender that would be able to cut costs and compete more effectively, against the backdrop of a fall in the revenues and profitability of banks. Banks worldwide have been affected significantly due to low interest rates and high competition. According to the European Central Bank, Germany has the least consolidated banking sector in the Eurozone. The five biggest banks in Germany only make up one-third of market share in 2014. A consolidation within the banking sector could help improve efficiency and performance in the financial services sector as well as set the stage for further consolidation within the sector, which could help improve balance sheets as well as profitability within the sector.

Out of 30 stocks on the list of the index, only 10 companies’ shares were trading lower including German personal-care company Beiersdorf and Europe’s largest sportswear manufacturer Adidas.

The DAX is trading comfortably above the 50.0% Fibonacci retracement level after breaking through the resistance created by the downward sloping trend line in early August. The index has been moving in an ascending trading range and is heading towards the upper boundary of the range. The market sentiment is strongly bullish, but the market has not yet entered into overbought territory. Further advances are expected. The market could attempt a retest of the eight-month high at 10805.50 created on August 15.

Trade suggestion

Buy Stop at 10654.25, Stop loss at 10541.00, Take profit at 10805.50
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USDCAD Market Outlook by Capital Street FX

Postby CSFX.Support » Fri Sep 02, 2016 1:03 pm

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Caution Holds USDCAD Around Key Level 1.31000 – How To Trade The USDCAD From Here?

USDCAD has been nearly flat over the past three days, against the backdrop of all major markets bracing for the monthly jobs report which is due for release later on Friday. Disappointing factory activity data from the U.S yesterday, helped offset the effect of the sharp decline in crude prices on the CAD, easing the divergence between two currencies which has pushed the pair up nearly 3 percent in the past couple of weeks.

The Canadian dollar has been weakened recently due to renewed concerns over the global oil surplus, as well as a train of negative economic data from the Canadian economy.

Regardless of recent positive signals showing the good-will of the world’s major producers and exporters to cooperate and stabilize the oil market, the fear over U.S producers coming back to benefit from higher prices has cast downward pressure on oil prices. U.K benchmark Brent crude fell back to below $46 per barrel while U.S WTI crude prices also slumped to below $43 per barrel.

The U.S. Energy Information Administration on Wednesday indicated that domestic crude inventories rose by 2.3 million barrels in the week ended Aug. 26, while economists had forecast the report to show an increase of only 1.1 million barrels. Last week’s buildup has been the fifth jump in the last 6 weeks. The rise in inventories, after a period of decreases, is indicating that more U.S supply is pouring into an already imbalanced market

In an interview with Bloomberg on Thursday, Russian President Vladimir Putin stated that he expected that an output freeze deal could be reached at an informal meeting later this month in Algeria. The president stated that “it was the right decision for world energy.” In spite of calling on key oil-producing countries to cap output together, Putin argued that Iran could be granted an exemption and any agreement could be reached with the Saudi side, complimenting Saudi Arabia’s Deputy Crown Prince, Mohammed bin Salman, as “a very reliable partner”.

On Friday, Saudi Arabia’s Foreign Minister Adel al-Jubeir said that he was optimistic about producers moving to a common position on oil production. “We are beginning to have a meeting of the minds but it is a work in progress and we’ll see what happens in the meeting in Algeria. And I’m hopefully optimistic,” he told reporters.

Members of the Organization of the Petroleum Exporting Countries and other non-OPEC oil exporters are due to meet on the sidelines of the International Energy Forum late in September, and are expected to set a new celling on oil output.

In terms of economic data which is the second factor going against the CAD, Canadian Trade Balance is the latest data release being watched. It is set for release at the opening of the U.S session, and is forecast to show a deficit of 3.2 million dollars, while Canadian Labor Productivity for second quarter probably rose 0.2% compared to the June period. Recent data releases have painted a gloomy picture regarding the prospects of the commodity-based economy. Recent reports from Statistics Canada indicated that retail sales fell 0.1 percent in June while Core retail sales that strip out automobiles reported an even worse performance – reporting a 0.8 percent contraction.

The drop in energy prices caused prices to fall by 0.2 percent in July compared to June. According to Statistics Canada, domestic annual inflation slowed to 1.3 percent last month, led by a 14% slump in gasoline prices in July from a year ago.

On the other hand, the U.S dollar looks set to benefit from the second rate hike since December 2015 despite much-worse-than-expected manufacturing data published on Thursday. A report from the Institute of Supply Management reported that U.S. factory activity in August contracted for the first time since February. The drop in new orders and production dragged the index down by 3.2 percentage points to a reading of 49.4.

However, solid performance in the labor market which has spurred hawkish comments from some Fed officials in recent weeks, probably could still act as a valid reason for a rate hike this month. Therefore, the NFP report out later today is being closely watched and is being considered a key factor in helping the market assess the possibility of a rate increase at the Fed’s late-September meeting.

As can be seen from the stochastic chart, the market has been remained in the overbought zone for almost a week and the bull seems to be getting exhausted as it has not been able to support prices tick higher for the last three days. Despite having been supported by the two MAs placed below the price action, cautious sentiment has pinned the price around the 1.31000 psychological level. We may need a real push from the fundamental side to define a clear direction for the market.

Trade suggestion

Sell Stop at 1.31000, take profit at 1.30000, stop loss at 1.315000
Benefit from 0 Pips Spreads, 200% Bonus, 1:1000 Leverage, 100% Risk Free
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Natural gas Market Outlook by Capital Street FX

Postby CSFX.Support » Mon Sep 05, 2016 9:31 am

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Natural Gas Weighed Down By Stocks – Is This A Good Time To Pick A Bottom?

Natural gas prices have been in a down-move since last Tuesday and are currently suffering a fourth session of losses in the last five trading days. August witnessed prices dropping by more than 3%, and the market opened September with large losses on Thursday after data from the U.S. Energy Information Administration showed a larger-than-expected storage addition during the week through August 26th. However, the natural gas market’s surplus is expected to be nearing its end, as cheap prices are discouraging production but stoking consumption.

Reports from the U.S EIA showed that natural gas stockpiles rose by 51 billion cubic feet (bcf) for the week ended August 26. The figure was far beyond expectations of a 43 bcf increase, taking total stocks to 3.401 trillion cubic feet, up 238 bcf from a year ago and 334 bcf above the five-year average.

High temperatures have been the main driver for the rally in natural gas this summer. Consistently intense heat powered consumption of air conditioning, and raised demand for electricity. Although weather forecasts are still reporting hotter-than-normal weather across the eastern half of the country for the next two weeks, September has stepped in with less extreme heat and cooled down the usage of air conditioners.

Additionally, according to market sources, wind-power generation also increased enough during the week ended August 26th to have caused a reduction in power plants’ gas consumption by 1.6 bcf a day. These two factors could have helped cause the larger-than-expected storage number.

Nonetheless, the current surplus could be erased in upcoming months as onshore natural-gas production has been falling in June for the fourth consecutive month. According to Bakes Hughes, the number of rotary rigs drilling for gas in North America hit an all-time low at 81 last week.

Along with the reduction in drilling rigs, the cheapness of gas has nudged U.S power producers to replace coal with natural gas. Last year, the U.S electricity sector used 1.4 times as much coal by energy value as compared to natural gas. This is a huge contraction compared to a ratio of 4.5 times 20 years ago. The EIA had forecast in March that gas use would overtake coal for the first time ever, in 2016.

As financial markets in Canada and the U.S. are shut on Monday for the Labour Day holiday, the natural gas market is expected to be relatively quiet and thin today.

Natural gas prices created a wide gap down on the market open and also broke below the ascending trend line which connects the higher lows for the period August 2nd to September 2nd. Lower lows being formed by the recent price action (over the last 1 week) and lower lows being created in the indicator window suggest that the bear is getting stronger. The 20-period MA has converged with the 50-period MA, signaling further declines.

Trade suggestion

Sell Stop at 2.750, Take profit at 2.730, Stop loss at 2.765
Benefit from 0 Pips Spreads, 200% Bonus, 1:1000 Leverage, 100% Risk Free
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Copper Market Outlook by Capital Street FX

Postby CSFX.Support » Tue Sep 06, 2016 7:36 pm

Copper Picks Up On Signs of Rising Demand – Traders Advised To Be Cautious As Market May Not Easily Re-Balance

Copper opened Tuesday’s trading session with a small gap down but quickly covered the gap to extend bullish momentum to a second consecutive trading day despite swelling inventories, as demand is showing signs of pick-up while cross currents in supply reduced pressure cast by worries over a market surplus.

Inventories tracked by the London Metal Exchange rose by 10,025 tons to 328,525 tons, causing stocks of copper held at LME approved warehouses to rise by more than 60 percent since Aug. 11. However, stocks held by the Shanghai Futures Exchange fell to 152,404 tons as of September 2, down eight percent compared to the previous week.

The decline in SHFE may be the result of a marginal rise in demand in Europe and Asia after the summer vacation has ended. “Feedback from fabricators onshore points to a pick-up in orders from the construction sector in recent weeks”, said Standard Chartered.

Elsewhere, striking workers at Codelco’s small Salvador mine (producing 49,000 tons per year) and Anglo American’s Los Bronces mine (producing 437,800 tons per year) following failed wage negotiations in Chile – the world’s top copper producing nation – could cause production to fall further in the coming months.

Meanwhile, also on the supply side, Vedanta – India’s second largest copper producer with current output of 400,000 tons a year – is harboring the ambition to dethrone its rival Hindalco (500,000 tons) from first place in terms of output. Vedanta is reported to be restarting a cooper mine on Tasmania’s west coast in 2017, three years after the mine’s operations were suspended due to the death of two workers in 2014 and another in 2013. The mine is estimated to possess 200 million tons of reserves with an annual output of 100,000 tons

Previously, CEO of Vedanta’s Copper business R Ramnath stated that the conglomerate is planning to invest up to Rs. 3,000 crore ($450 million) in its Indian copper operations to double the capacity to 800,000 tons by 2019, making the firm India’s largest producer of the metal.

In a recent meeting with the government, India’s top copper producers — Hindalco, Vedanta and Hindustan Copper — have demanded that import duty on finished copper products be raised to 7.5% from 5% now as the country’s imports are growing at an alarming rate of over 20% for the last five years. These domestic producers are afraid that copper from Asean countries and Japan which is benefitting from export incentives could take over their market share that is about 80% at around 1 million tons a year in total.

Copper has been trading sideways in a thin range between 2.0900 and 2.0695 for nearly two weeks, after stabilizing post the sharp down move between mid/late July and August 24. The metal continues to remain in the downward sloping trading channel. Bears currently seem exhausted after having continuously pushed prices lower and held the market near oversold zone. Some bullish interest has come back into the market at the lows, but bulls are facing strong resistance at 2.0900. Bears are expected to get back into the market, after a period of short-covering inspired bounce-backs, and may push copper prices back down again.

Trade suggestion

Sell Stop at 2.0900, take profit at 2.0680, Stop loss at 2.1140
Benefit from 0 Pips Spreads, 200% Bonus, 1:1000 Leverage, 100% Risk Free
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GBPAUD Market Outlook by Capital Street FX

Postby CSFX.Support » Wed Sep 07, 2016 1:56 pm

Comfortable Aussie Pressuring Wobbly Sterling – Selling GBPAUD Suggested

The GBP and the AUD both trimmed their streak of gains versus the greenback on Wednesday. The Sterling has witnessed relatively larger declines after a report showed that U.K manufacturing output slumped at the fastest pace in a year.

Data from the Office for National Statistics (ONS) indicated a sharp month-on-month contraction in the UK manufacturing sector in July, with activity falling by 0.9%, as factories restricted production in the immediate aftermath of the Brexit vote. Prior to today’s data, economists had forecast a 0.3 per cent decline in manufacturing production for July, on a month on month basis

Among 13 manufacturing sub-sectors, only six recorded an output increase. Transport equipment manufacturers led the gainers with a 5.7% rate of growth(monthly basis), while the largest fall was recorded in the manufacture of pharmaceuticals, which decreased by 5.3%.

The report also confirmed overall industrial production output rose 0.1% on a monthly basis in July, which defied expectations for a contraction, as the sharp decline in the manufacturing was offset by growth in the other three sectors, especially mining and quarrying with an increase of 4.7%.

Today’s report is among the first official statistics offering a broad-based view of the economy for a full month after the Brexit vote. While recent data have delivered the message that the economy has so far held up better than expected, this negative report comes at a time when hopes were building, that a softening GBP (post Brexit) would support manufacturers by making British goods more attractive to overseas buyers.

Investors are now turning their attention to Prime Minister Theresa May, who is preparing to begin negotiations with European Union leaders over the terms of the U.K.’s exit from the trading bloc. Theresa May is determined to begin EU exit negotiations early in 2017 in spite of warnings from a senior Tory MP that she should wait until French and German elections are concluded.

On the other hand, the Australian dollar was not hit much versus sterling following the Australian Bureau of Statistics’ report that the rate of GDP growth in the second quarter decelerated to 0.5%. The Aussie has been trading quite comfortable since the Reserve Bank of Australia decided to stand pat on interest rates on Tuesday.

GBPAUD had to retreat from the resistance at 1.76700 as the pair could not stand the double trouble caused by the descending trend line connecting the lower highs from the period between May 26 to date, and the MA50, which is placed above the price action. As can be seen from the stochastic chart, the %K line is falling rapidly ahead of the %D line, after having crossed it recently from above, with a large distance between two lines. The currency pair is expected to decline further.

Trade suggestion

Sell Stop at 1.73800, Take profit at 1.71000, Stop loss at 1.76700
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USDZAR Market Outlook by Capital Street FX

Postby CSFX.Support » Thu Sep 08, 2016 2:09 pm

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Blockbuster Economic Dominates Political Uncertainty – USDZAR Set To Crash

USDZAR continued to drop on Thursday after a sole winning session in the month-to-date on Wednesday. News about a rebound in South Africa’s economy came at the same time as weaker-than-anticipated economic data from the the U.S. Prospects of a Federal Reserve rate hike in September worsened significantly after the weaker than expected data reading, which helped boost demand for higher-yielding emerging-market assets and in particular, helped power the Rand to rally nearly 6% in September against the background of political uncertainty.

South Africa reaped the benefits of a weak rand in the second quarter, posting an 18.5% surge in exports and a 5.1% decline in imports. The country managed to avoid a recession in the April-June period, as mining and factory output rebounded. A report from the national statistics agency on Tuesday reported that the country’s gross domestic product (GDP) grew at an annualized rate of 3.3 percent on-year, recovering from a 1.2% contraction in the first quarter.

Manufacturing, which accounts for the largest share in South Africa’s GDP at 13%, reported growth of 8.1% compared with the previous quarter, reaching the highest rate of quarterly growth in three years. Meanwhile, mining output recovered from an 18.1% decline in the first quarter to increase by 11.8% in the three months through June.

Given the positive figures released a day earlier, The South African Reserve Bank Governor Lesetja Kganyago stated on Wednesday that “the Monetary Policy Committee will be able to revise upwards its annual economic performance estimates at the September meeting”. South Africa’s Central Bank is scheduled to hold its monetary policy meeting on September 22.

The Rand added to its recent gains earlier today after an unexpected rise in Chinese imports. China’s imports rose for the first time in nearly two years in August, suggesting a pick-up in domestic demand and buoying commodity-linked currencies such as the Rand, as China is one of the biggest markets for all commodity producing countries(if not the biggest market).

However, data from Statistics South Africa indicated that manufacturing output expanded only by 0.4% year-on-year in July, well below expectations of 3% advance after rising by a revised 4.7% in June. Factory production was also down 1.5% on a monthly basis last month. The results of the nation’s Q3 business confidence survey on Friday will round up the week for the Rand. Forecasts point to a dip from a reading of 32 points to 30.

The currency has recently been under pressure due to political uncertainty after its respected Finance Minister Pravin Gordhan was summoned by a special unit of the police, in relation to an investigation over the activities of a surveillance unit set up during his time as head of South Africa’s tax agency. Gordhan has not been arrested but his case has put the country in danger of a ratings downgrade to junk level by rating agencies, as he is widely considered to be a progressive policy maker.

USDZAR penetrated both the short-term and long-term Mas from above, heading back towards the nearly one-year low at 13.19334 after a sharp spike in the second half of August. Obviously bears have taken over the market. The –DI line has already crossed over the +DI from above while the RSI has retreated to 32.14 from the high of 42.52 reached during the recent rally. A short correction yesterday has balanced the market a little and prevented a move into the oversold territory. The RSI is indicating that there is room for the pair to fall further.

Trade suggestion

Sell Stop at 13.88000, Take profit at 13.64845, Stop loss at 14.08500
Benefit from 0 Pips Spreads, 200% Bonus, 1:1000 Leverage, 100% Risk Free
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EURUSD Market Outlook by Capital Street FX

Postby CSFX.Support » Fri Sep 09, 2016 12:38 pm

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EURUSD Longs In Play As ECB Powers Market Higher – Upside Limited

EURUSD rose in the early European trading session on Friday, heading for a higher weekly closing for the first time in the last three weeks. The burden of a widely expected extension to the Eurozone’s asset purchasing program was taken off the Euro, which seems to be outweighing any negative impact from today’s weaker-than-expected data on the single currency.

German Trade Balance Data for July that was reported earlier, came out with a lower than expected reading. According to the Federal Statistical Office, Destatis, Germany’s trade surplus for July fell to 19.4 billion euros ($21.9 billion) from a revised 21.4 billion euros in June, missing the forecasts for a surplus of 22.7 billion euros.

In seasonally-adjusted terms, exports slipped by 2.6% from one month earlier and 10% compared to a year ago, while imports dropped by 0.7%. Subsequently, Germany’s current account balance showed a surplus of only 18.6 billion euros in July, well below expectations for a reading of 22.9 billion euros. The large contraction in July 2016’s data compared to the same month last year was in part because of July 2015 being among the strongest months of the entire 2015 for German exporters.

Today, France’s National Institute of Statistics and Economic Studies (INSEE) reported that the country’s industrial production dropped unexpectedly in July. Industrial production in the EU’s second-largest economy fell by 0.6% in July, following a 0.7% decline in June. In particular, manufacturing of equipment skid by 3.3% on a month on month basis, in July, and production of transport materials lost by 1.4%.

The euro seemed resilient after the data releases, as at the moment, the shared currency is not under any threat of rate cuts or any other upcoming stimulus measures. The European Central Bank decided to leave interest rates unchanged on Thursday as expected but disappointed the markets with no explicit guidance about the central bank’s next moves.

Speaking at the press conference after the rate decision, ECB President Mario Draghi stated that the bank was studying potential changes to its asset-buying program, and maintained the March 2017 end-date for the ongoing program. However, he also reiterated the current risk to inflation and reassured markets that “If warranted, we will act by using all the instruments available within our mandate.”

Investors are shifting their focus now to the meeting of the U.S Federal Reserve later this month. Despite a chorus of Fed officials including President Janet Yellen and her top Deputy Stanley Fisher signalling that the time to hike rates is approaching as the economy is at or near the full-employment level, investors have trimmed bets that the Fed would be raising rates as early as this month, especially after recent data echoing the disappointment of a smaller-than-expected NFP last Friday.


EURUSD has been receiving huge support from both the 20-day and 50-day MA’s that were intercepted by the price action from below, earlier in the week. Both the MA’s are now placed below the price action and underpinning the current up-move. While the long-term moving average played an important role in supporting the market last week, the short term MA is currently acting as a handle that forces the euro to reverse higher, on every attempt to test it. The market has entered the bullish zone and set the stage for further advances. Nonetheless, the uptrend seems to be limited as a downward sloping trendline connecting the highs from earlier in the year, is currently weighing on the price action.

Trade suggestion

Buy Stop at 1.12740, Stop loss at 1.12278, take profit at 1.13100
Benefit from 0 Pips Spreads, 200% Bonus, 1:1000 Leverage, 100% Risk Free
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Re: Market Outlook by Capital Street FX

Postby CSFX.Support » Mon Sep 12, 2016 8:09 pm

U.S Treasury Notes Tick Lower As Markets Brace for Higher U.S Rates

U.S. government bonds fell further on Monday, sending yields to their highest levels since late June amid concerns that major central banks in Europe and Japan are reaching the limits of policy easing measures, and mounting speculation over this month’s rate hike by the U.S Federal Reserve.

The bond market resumed its selloff on Thursday after the policy meeting of the European Central Bank when it disappointed investors by not extending the asset purchase program in which it is buying €80 billion worth of bonds a month, beyond the March 2017 end-date. Lower demand dampened bond prices and drove yields higher in return.

Consequently, Treasuries no longer appear as attractive to foreign investors compared to local currency bonds as they did earlier this year, as the spike in other government bond yields has wiped out the “yield pick-up”. This is the amount foreign investors expect to earn when they sell local government bonds in their respective countries to invest the proceeds into buying 10-year U.S. Treasuries.

Topping up the selling pressure were hawkish comments from the Federal Reserve Bank of Boston President Eric Rosengren, a Fed Member widely considered to be a dove. In a speech delivered on Friday, Rosengren discussed the risks of waiting too long to raise interest rates as the labor market has been near or at full employment, while inflation is slowly returning towards the central bank’s 2% target.

Another Fed governor who has maintained a dovish stance on monetary policy will be speaking later on Monday. Lael Brainard has generally been advocating maintaining low rates in the current economic climate, and will round up the appearances by U.S. central bankers until they gather for the FOMC meeting on September 21 in Washington.

Therefore, if a different argument, or hints of a change in opinion are delivered tonight, the possibility of a rate hike this month will shoot up, and in turn, pave the way for a further rise in bond yields. The Treasury Department is scheduled to auction the benchmark 10-year notes before Ms. Brainard’s speech. The uptake from the auction combined with the effects of the speech could magnify the volatility in the 10-year notes.

The 10 year T-notes have been on a slide since early June. The price once again fell below the 38.2% retracement level after a spike last week. With the downward pressure which being cast by the two moving averages placed above the price action, U.S 10-year treasury prices are anticipated to continue the downtrend and may retest the 50% fibonacci retracement level.

Trade suggestion

Sell Stop at 130.20, Take profit 129.90, Stop loss at 130.50
Benefit from 0 Pips Spreads, 200% Bonus, 1:1000 Leverage, 100% Risk Free
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USDJPY Market Outlook by Capital Street FX

Postby CSFX.Support » Tue Sep 13, 2016 2:30 pm

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Japanese Data Surprises Markets – Traders Undecided Ahead Of BOJ/FED

The Japanese Yen was almost unchanged against the U.S dollar in the early European session on Tuesday after having risen to the highest since last Thursday at 101.409. The Yen was powered by upbeat data released earlier today. Meanwhile the greenback nursed losses following the decline on Monday as the case for a September rate increase became “less compelling”.

Adding to Monday’s core machinery orders data that unexpectedly rose by 4.9%, (contrasting considerably with estimates calling for a decline of 2.8%), Japan’s economic data extended the upbeat sentiment today, offering some encouragement to policymakers working towards re-energizing business investment, domestic demand and price growth.

According to a joint survey by the Ministry of Finance and the Economic and Social Research Institute, large Japanese manufacturers turned optimistic over the country’s business conditions in the third quarter. The business survey index (BSI) which measures business sentiment among big manufacturers’ for the July-September period, came out at 2.9, beating expectations for a reading of -6.5.

In other notable data readings, the Japanese economy grew at a pace greater than initially reported. Data released on Thursday indicated that the reading for the annualized growth rate was revised upwards to 0.7% in the second quarter (on a year on year basis). The preliminary reading had reported a 0.2% rate of expansion. On a quarter-on-quarter basis, the world’s third biggest economy expanded by 0.2%, largely due to upbeat capital expenditure and inventories, which outpaced the decline in domestic and overseas demand caused by a strong yen.

The Bank of Japan is scheduled to hold its policy meeting on September 20-21, where it will assess the effectiveness of stimulus measures deployed recently within the economy. On the same day that BoJ policymakers announce the results of their comprehensive assessment, the Federal Open Market Committee will gather in Washington to discuss the next steps within their monetary policy, and any possibility of a rate hike at the meeting.

Fed officials are expected to go into the meeting divided. Besides some governors claiming that the U.S labor market has come close to full employment and urging a rate hike sooner, rather than later, Fed voter Lael Brainard has opined that the Fed should be patient and wait for more evidence of stronger consumer spending and rising inflation. In a speech to the Chicago Council on Global Affairs, Brainard maintained her dovish stance on rate policy, and referring to potential weakness at home and risks of an economic downturn abroad, as potential risk factors.


The Japanese Yen has generally been on a rise against the USD, but is trading sideways around the key level at 102.000. While the RSI is swinging back and forth around the dividing line between bullish and bearish territory, the ADX index has turned lower to 24.95 from the high at 42.57, suggesting no clear opinion being formed in the market. With no data releases scheduled till the end of the day, neutral sentiment is expected to reign in the pair.

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