Thursday, January 29, 2015

EUR/USD – Sharp Losses for Euro After Fed Statement

The euro is flat on Thursday, as EUR/USD trades at the 1.13 line in the European session. On the release front, German Preliminary CPI will be released later in the day. The markets are braced for a sharp decline of 0.8%. German Unemployment Change matched the forecast, with a drop of 9 thousand. In the US, today’s key events include Unemployment Claims and Pending Home Sales.

On Wednesday, the Federal Reserve reiterated that it would be “patient” regarding the timeline for a raise in interest rates, which have been close to zero since 2008. However, the Fed also noted that the US economy was expanding at a “solid pace” and this vote of confidence helped the dollar post sharp gains against the euro. The markets expect the Fed to raise rates sometime during the year, so the “Fed rate watch” is sure to continue, as the markets look for clues as to when the Fed will make a move.

German confidence indicators continued to point upwards in January. GfK German Consumer Climate improved to 9.3 points, edging above the estimate of 9.2 points. The key indicator has now risen for four consecutive releases, as the German consumer remains optimism. This follows an excellent business confidence report. German Ifo Business Climate rose for a fourth straight month, hitting 106.7 points which matched the estimate. This marked a six-month high.

Earlier in the week, US durable good reports disappointed, as Durable Goods Orders plunged 3.4%, marking a 4-month low. There was no relief from Core Durable Goods Orders, which declined by 0.8%, its fifth drop in six readings. The markets had expected gains from both indicators. There was much better news later in the day, as CB Consumer Confidence jumped to 102.9 points, crushing the estimate of 95.3 points. New Home Sales followed suit, rising to 481 thousand, well above the forecast of 452 thousand.

EUR/USD for Thursday, January 29, 2015

EUR/USD January 29 at 11:40 GMT

EUR/USD 1.1318 H: 1.1327 L: 1.1261

EUR/USD Technical

S1

S2

S1

R1

R2

R3

1.1066

1.1154

1.1231

1.1340

1.1426

1.1525

EUR/USD has shown little movement in the Asian and European sessions.

1.1231 is a strong support level.

On the downside, 1.1340 is under pressure. 1.1426 is stronger.

Current range: 1.1340 to 1.1426

Further levels in both directions:

Below: 1.1340, 1.1231, 1.1154, 1.1066 and 1.0906

Above: 1.1426, 1.1525, 1.1634 and 1.1754

OANDA’s Open Positions Ratio

EUR/USD ratio pointing to gains is short positions on Thursday. This is not consistent with the lack of movement we’re seeing from the pair. The ratio currently has a majority of short positions, indicative of trader bias towards the euro moving lower.

EUR/USD Fundamentals

All Day – German Preliminary CPI. Estimate -0.8%.

8:55 German Unemployment Change. Estimate -9K. Actual -9K.

9:00 Eurozone M3 Money Supply. Estimate 3.6%. Actual 3.6%.

9:00 Eurozone Private Loans. Estimate -0.5%. Actual -0.5%.

10:34 Italian 10-year Bond Auction. Actual 1.62%.

13:30 US Unemployment Claims. Estimate 301K.

15:00 US Pending Home Sales. Estimate 0.6%.

15:30 US Natural Gas Storage. Estimate -113B.

*Key releases are highlighted in bold

*All release times are GMT

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China Stocks Lead Asia Lower

Asian stocks fell, led by Chinese shares as regulators increase scrutiny of margin loans, while U.S. oil traded near an almost six-year low. Bonds in the region rallied while Malaysia’s ringgit weakened.

The MSCI Asia Pacific Index dropped 0.8 percent by 11:03 a.m. in Tokyo, as the Hang Seng China Enterprises Index retreated 1.2 percent. Dow Jones Industrial Average futures gained 0.3 percent after the index’s biggest two-day drop in almost a year. Ten-year Australian bond yields slipped to a record low. The ringgit weakened 0.4 percent as crude traded at $44.45 a barrel in New York, while New Zealand’s dollar was near a four-year low.

Chinese regulators are probing the margin lending that’s helped drive the benchmark Shanghai Composite Index up 47 percent since the end of August. Oil’s bear market is damping inflation prospects and spurring worldwide monetary easing, with New Zealand’s central bank the latest to hint its next move could be a rate cut. The Federal Reserve maintained a pledge to be “patient” on raising benchmark borrowing costs, citing risks to the U.S. economy from an international slowdown.

Bloomberg

Gold Drops Below $1280 after Fed

Spot gold prices were little changed on Wednesday after the Federal Reserve signaled that it would remain patient when it comes raising interest rates.

In a statement after its latest policy meeting, the Fed made clear that no rate increase is imminent. Chair Janet Yellen said after last month’s meeting that by saying it would be “patient,” the Fed was signaling there would be no rate increase for at least two meetings.

The Fed’s statement Wednesday said the factors holding inflation below its 2 percent target rate have intensified since its last meeting in December. Inflation has stayed ultra-low partly because of a plunge in energy prices and a steadily strengthening dollar.

CNBC

West TX Oil Around $44 on Record Stock Build

U.S. crude futures were trading near 6-year lows just below $44.50 a barrel in early Asian trade on Thursday, remaining under pressure after data showing U.S. crude stocks surged to their highest on record.

U.S. crude’s front-month contract shed 1 cent at $44.44 a barrel as of 0000 GMT. In the previous session, it settled down $1.78, or almost 4 percent, to $44.45 a barrel. It hit a low of $44.08 before the close, the weakest since April 2009.

Benchmark Brent crude closed down $1.13, or 2.3 percent, at $48.47, after a session low at $48.29.  U.S. crude inventories rose by 8.9 million barrels during the week, according to the Energy Information Administration (EIA). Analysts had expected an increase of 4.1 million barrels. The bulk of the rise, 5.5 million barrels, occurred in the Gulf Coast PADD 3 region.

CNBC

Fed Won’t Move Until June at Earliest

The Federal Reserve kept its options open on Wednesday, signaling that it would not raise short-term interest rates any earlier than June, while leaving unresolved how much longer it might be willing to wait before lifting its benchmark rate from near zero, where the central bank has held it for more than six years.

Treating the recent turmoil in markets as essentially meaningless noise, the Fed issued its most upbeat assessment of economic conditions since the recession, after its first policy-making meeting of the year, in a statement that noted solid economic growth and strong job growth.

But the optimistic tone was tempered by the Fed’s acknowledgment that inflation has slowed markedly in recent months and is likely to slow even more, making it harder for the Fed to determine how quickly to retreat from its stimulus campaign.

NY Times

Oil Remains in the Dumps

Oil prices opened up weak on Thursday in Asia after record U.S. stockpiles sent it tumbling to near six year lows in the previous session, and analysts said that the outlook remained weak.  U.S. crude prices tumbled on Wednesday after the U.S. reported record-high inventories that raised anxieties about the global oil glut that had pressured the market since last summer.

The U.S. Energy Information Administration (EIA) said domestic crude oil stocks rose by almost 9 million barrels last week to reach nearly 407 million, their highest since the government began keeping records in 1982.  “The market expects stockpiles to keep rising, pushing front-month prices further down as refineries enter maintenance season and are likely run at lower utilisation rates,” ANZ said in a morning note on Thursday.

Thursday’s markets opened up close to their previous settlement levels, and analysts said the outlook remained weak.  Brent crude LCOc1 was trading at $48.60 a barrel at 0131 GMT, U.S. crude CLc1 was at $44.43 a barrel, both close to six year lows.

Reuters