Rising U.S. Prices Support Fed Inflation View

American households paid much less to fill their cars’ fuel tanks in January while most other costs rose, supporting the Federal Reserve’s view that inflation will eventually approach its goal.

A plunge in energy pulled the consumer-price index down by 0.7 percent, the biggest decline since December 2008, a Labor Department report showed Thursday in Washington. Excluding food and fuel, which are often volatile, costs rose 0.2 percent, more than projected.

Fed officials, trying to ensure inflation isn’t too low, may take comfort in rising costs for rents, hotel stays and clothing that lessen the risk the plunge in oil will restrain prices throughout the economy. At the same time, cheaper fuel is freeing up money for consumers to spend elsewhere, helping to underpin growth.

Bloomberg

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Japan’s Industrial Output Increases

Japan’s industrial output increased the most in more than three years while retail sales slid and inflation slowed, underscoring strength in export industries and weak domestic demand.

Production jumped 4 percent in January from the previous month, exceeding forecasts with the biggest gain since June 2011, according to trade ministry data. Retail sales fell 1.3 percent, household spending dropped and the central bank’s main inflation measure slowed to 0.2 percent, excluding sales-tax effects.

A pick up in exports driven by the weaker yen and stronger demand in the U.S. helped fuel manufacturing. The drop in the exchange rate is also increasing costs for households that have seen living expenses outpace incomes, highlighting the stakes for Prime Minister Shinzo Abe as he tries to get companies to boost pay in this spring’s negotiations with labor unions.

Bloomberg

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Asian Equities Mixed with Japan Higher Again

Asian equity markets were mixed early on Friday, following an uninspiring lead from Wall Street amid lower oil prices. However, Japanese stocks brushed off a raft of weaker-than-expected data to clinch fresh 15-year highs.

Overnight, U.S. stocks closed narrowly mixed, with stocks near recent highs, as concerns about oil prices and a worse-than-expected initial jobless claims figure weighed on investor sentiment. The Dow Jones Industrial Average finished flat, while the S&P 500 closed down 0.2 percent. The tech-heavy Nasdaq Composite outperformed to settle 0.4 percent higher.

Global oil prices dropped on Thursday amid ample global supply and increasing U.S. commercial inventories. U.S. crude settled $2.82 lower at $48.17 a barrel, while benchmark Brent crude fell $1.60 to $60 a barrel.

CNBC

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Gold – Rallies Well off Support at $1200

Gold for Friday, February 27, 2015

Gold has done well over the last few days to enjoy some support at $1200 and rally higher to a one week high at $1220 before easing in recent hours.  It is presently trading in a narrow range right below $1210 after easing back from $1220.  For the last month now gold has drifted steadily lower down to a one month low near the key $1200 level before finding solid support at this key level over the last week.  A few days ago saw gold move back and forth and tease the $1200 level a little however the demand kicked in and brought it right back above the key $1200 level before moving a little higher in the last 24 hours. A couple of weeks ago it rallied higher after dropping through $1220 before running into some resistance around the key $1240 level. The last month or so has now undone some great work earlier in the year which saw it surge to a five month high near $1308, before reversing and moving back to $1200. It presently finds itself trading in a narrow range right around $1200 where it is experiencing solid support. A few weeks ago gold eased back a little and steadied below the $1280 level after surging to that area and a four month high, before its recent strong surge higher.

At the beginning of December gold eased lower away from the resistance level at $1240 yet again back down to below $1200. During the second half of November gold made repeated runs at the resistance level at $1200 failing every time, before finally breaking through strongly. Throughout the first half of November Gold enjoyed a strong resurgence back to the key $1200 level where it has met stiff resistance up until recently. Throughout the second half of October gold fell very strongly and resumed the medium term down trend falling from above $1250 back down through the key $1240 level, down below $1200 to a multi year low near $1130. It spent a few days consolidating around $1160 after the strong fall which has allowed it to rally higher in the last couple of weeks.

Earlier in October Gold ran into the previous key level at $1240, however it also managed to surge higher to a five week high at $1255. In late August Gold enjoyed a resurgence as it moved strongly higher off the support level at $1275, however it then ran into resistance at $1290. In the week prior, Gold had been falling lower back towards the medium term support level at $1290 however to finish out last week it fell sharply down to the previous key level at $1275.

Gold pared gains on Thursday after stronger-than-expected U.S. data lifted the dollar and impetus from Chinese buying petered out, but it remained higher after the Federal Reserve indicated this week that it was in no rush to raise interest rates.  The dollar rose against a currency basket as data on U.S. durable goods orders in January beat forecasts, boosting confidence in business activity despite worries of the recent surge in the dollar hurting exports.  That weighed on gold, which is priced in the U.S. unit.  Spot gold was up 0.5 percent at $1,210 an ounce. Earlier it hit a session high of $1,220.00 above the 100-day moving average at $1,216.20, before retreating as the dollar firmed.  “The market feels a bit top heavy,” MKS head of trading Afshin Nabavi said. “We’ve had good buying of physical gold from the Far East as China opened up after the Lunar Week holiday, but above $1,210-1,212, that stopped.”  Gold prices have fallen around 10 percent over the last year, largely due to the prospect of higher U.S. rates, which would increase the opportunity cost of holding non-yielding bullion, while boosting the dollar.

(Daily chart / 4 hourly chart below)

Gold February 26 at 22:20 GMT   1209.2   H: 1220.1   L: 1203.7

Gold Technical

S3

S2

S1

R1

R2

R3

1200

1170

—

1240

1300

—

During the early hours of the Asian trading session on Friday, Gold is trading in a narrow range right below $1210 after easing back from a short surge up to $1220.  Current range: trading right around $1210.

Further levels in both directions:

• Below: 1200 and 1170.

• Above: 1240 and 1300.

OANDA’s Open Position Ratios

(Shows the ratio of long vs. short positions held for Gold among all OANDA clients. The left percentage (blue) shows long positions; the right percentage (orange) shows short positions.)

The long position ratio for Gold has moved back below 70% as it has dropped sharply back to near $1200. The trader sentiment is in favour of long positions.

Economic Releases

00:05 UK GfK Consumer Confidence (Feb)

00:30 AU Private Sector Credit (Jan)

05:00 JP Housing starts (Jan)

05:00 JP Housing starts (Ann.) (Jan)

06:00 JP Construction orders (Jan)

09:30 UK GDP (2nd Est.) (Q4)

09:30 UK Index of Services (Dec)

13:30 US Core PCE Price Index (2nd Est.) (Q4)

13:30 US GDP Annualised (2nd Est.) (Q4)

13:30 US GDP Price Index (2nd Est.) (Q4)

14:45 US Chicago PMI (Feb)

15:00 US Pending Home Sales (Jan)

15:00 US Univ of Mich Sent. (Final) (Feb)

* All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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Gold Unchanged After US GDP

Gold prices are not straying far from unchanged levels in early U.S. trading Friday. The key economic report out on this day is the second estimate to the fourth-quarter U.S. gross domestic product. The figure came in at up 2.2%, which is slightly better than expectations. The market place consensus was for a reading of up 2.0% versus the initial estimate of up 2.6%. The market place paid little attention to the report. April Comex gold was last down $0.50 at $1,209.90 an ounce. May Comex silver was last down $0.129 at $16.495 an ounce.

The key “outside markets” are in a bullish posture for the precious metals Friday morning, as the U.S. dollar index is lower and crude oil prices are higher. However, the overall technical posture of the dollar index remains bullish, while the overall chart posture for crude oil is still bearish.

In overnight news, Federal Reserve Bank of Atlanta president Dennis Lockhart told the Wall Street Journal that the June FOMC meeting and ones thereafter this year will find the door open to an interest rate increase from the Fed. Lockhart is a voting member of the FOMC.

Friday is the last trading day of the week and of the month, which makes it an extra important trading day, from a technical perspective. Weekly or monthly high or low closes on the last trading day of those periods are technically significant for a market.

via Kitco

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French FinMin Says Grexit Could Trigger Exodus

The European Union’s financial affairs chief Pierre Moscovici told German radio on Friday, just before a Bundestag vote on a bailout extension for Greece, that allowing any country to leave the euro zone would simply raise the question “who’s next?”.

“If a country, any country, leaves, the question will arise: who is leaving next?” the European Commissioner for Economic and Financial Affairs told Deutschlandfunk in an interview.

But he added that Greece had to meet its international commitments and ensure that any additional spending resulting from its economic policies were financed.

“The reforms the Greek government wants to launch must be financed. It is not time to talk about debts. We’ll talk about that at the right time. But it’s important for me to say that this is not about a reduction of debt – there’s no haircut.”

via Reuters

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Forecaster Says Job Data Adds to Fed Rate Hike

The steady drop in the U.S. unemployment rate has set up a simple set of arithmetic that will lead to a Federal Reserve interest rate rise soon to ward off future inflation, according to the most accurate forecaster in Reuters polls last year.

Jim O’Sullivan, chief U.S. economist at High Frequency Economics, isn’t yet completely convinced that Janet Yellen’s Fed will begin raising rates in June. But he says it’s only a matter of time before they will have to.

“The idea that the economy is so fragile that it can’t take a rate hike? I don’t think so,” he said.

He doesn’t believe that the U.S. being a lone engine of growth, while many parts of the world economy remain at risk to a renewed downturn, will prevent the Fed from focusing on its mandate of full employment and low inflation.

What concerns O’Sullivan in terms of judging the timing of the first U.S. rate hike in a decade is that even the core measure of inflation the Fed watches has remained surprisingly low at a time when the job market has taken off so strongly.

via Reuters

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Brent Oil Rises Above $61

Brent crude oil prices were poised on Friday for their biggest monthly gain since 2009, lifting the outlook for the battered commodity.

U.S. crude oil was set to end February with its first monthly rise in eight months, with signs of a pick-up in Chinese demand and supply outages in the North Sea lifting sentiment in oil markets.

“Evidence suggests the worst is over for oil because prices have stabilised,” said Neil Atkinson, head of analysis at Lloyd’s List Intelligence. “However, there is an argument that we have paused on a long-term downtrend as these is an ongoing surplus of demand.”

“It’s still too early to declare victory for oil,” he added.

Brent Crude prices rose 2.3 percent on Friday to trade at around $61.42, while U.S. oil futures gained 2.2 percent to $49.24 per barrel.

Oil prices slid 60 percent between June and January, with Brent crude falling close to $45 a barrel, amid a weak recovery in the global economy and reluctance by oil-producing group the Organization of the Petroleum Exporting Countries to cut production.

via CNBC

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German Parliament Approves Greek Extension

The German parliament has voted to extend financial aid to Greece by another four months.

The extension – approved by creditors last week in exchange for a series of Greek government reforms – needs to be ratified by eurozone members.

Some MPs had expressed doubts about the deal and there is substantial public scepticism but the vote passed easily.

It comes after police and protesters clashed during anti-government demonstrations in Athens on Thursday.

They were the first such disturbances since Greece’s leftist Syriza was sworn in as the main government party exactly a month ago, promising to renegotiate the country’s debt and end austerity.

Dozens of activists hurled petrol bombs and stones at police and set cars alight after a march involving hundreds of protesters. Some carried banners calling for Greece to leave the EU and for its debt to be cancelled.

via BBC

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US GDP Expands at 2.2% in Q4

U.S. economic growth braked more sharply than initially thought in the fourth quarter amid a slow pace of stock accumulation by businesses and a wider trade deficit, but the underlying fundamentals remained solid.

Gross domestic product expanded at a 2.2 percent annual pace, revised down from the 2.6 percent pace estimated last month, the Commerce Department said on Friday. The economy grew at a 5 percent rate in the third quarter.

With consumer spending accelerating at its quickest pace since the first quarter of 2006 and sturdy gains in other measures of domestic demand, the slowdown in growth is likely to be temporary.

Growth in consumer spending, which accounts for more than two-thirds of U.S. economic activity, was revised down by one-tenth of a percentage point to a 4.2 percent pace in the fourth quarter, still the fastest since the first quarter of 2006.

A tightening labor market and lower gasoline prices are likely to keep supporting domestic demand and help the economy navigate a turbulent global economy.

via Reuters

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USD/JPY – Little Activity as Japanese Inflation Reports Meet Expectations

The Japanese yen is unchanged on Friday, as USD/JPY trades in the mid-119 range. On the release front, the US will issue its second estimate of GDP for Q4, with a forecast of 2.1%. This is lower than the initial estimate of 2.6% in January. We’ll also get a look at Revised UoM Consumer Sentiment and Pending Home Sales. In Japan, today’s only event was Housing Starts. The indicator posted a weak reading of -13.0%.

Japanese data was a mix on Thursday. Inflation indicators met expectations in February. Tokyo Core CPI was unchanged at 2.2%, matching the forecast. National Core CPI posted an identical gain, close to the estimate of 2.4%. Consumer spending looked awful. Household Spending plunged 5.1%, worse than the estimate of -4.0%. Retail Sales had its worst showing since May, with a decline of 2.0%. The markets had expected a softer decline of 1.2%. There was some good news on the manufacturing front, as Preliminary Industrial Production climbed 4.0%, well above the forecast of 2.9%.

Thursday’s US inflation and job numbers were not impressive. US inflation indicators continue to struggle. CPI posted a third straight decline, coming in at -0.7%. This was very close to the forecast of -0.6%. Core CPI improved to 0.2%, edging above the estimate of 0.1%. On the employment front, there was disappointing news, as Unemployment Claims jumped to a 6-week high, coming in at 313 thousand. This was much higher than the estimate of 288 thousand.

Janet Yellen testified before Congressional committees on Tuesday and Wednesday, saying that the Fed was “unlikely” to raise interest rates in the next few months, given current economic conditions. Her remarks seemed aimed at quelling rising speculation about a rate hike sometime in mid-2015, which has helped boost the US dollar’s performance against its major rivals. Yellen noted that the continuing economic growth should lead to unemployment continuing to fall, but wages and inflation need to move higher before the Fed raises interest rates.

USD/JPY for Friday, February 27, 2015

USD/JPY February 27 at 12:20 GMT

USD/JPY 119.34 H: 119.44 L: 119.12

USD/JPY Technical

S3

S2

S1

R1

R2

R3

116.69

117.49

118.69

119.83

120.63

121.69

USD/JPY has shown limited movement in the Asian and European sessions.

118.69 is an immediate support line. 117.49 is next.

119.83 is a weak resistance line. 120.63 is stronger.

Current range: 118.69 to 119.83

Further levels in both directions:

Below: 118.69, 117.49, 116.69, 115.56 and 113.83

Above: 119.83, 120.63, 121.69 and 122.19

OANDA’s Open Positions Ratio

USD/JPY ratio is pointing to gains in short positions on Friday. This is not consistent with the lack of movement we’re seeing from the pair. The ratio has a majority of long positions, indicative of trader bias towards the US dollar breaking out and moving to higher ground.

USD/JPY Fundamentals

5:00 Japanese Housing Starts. Estimate -11.1%. Actual -13.0%.

13:30 US Preliminary GDP. Estimate 2.1%.

13:30 US Preliminary GDP Price Index. Estimate 0.0%.

14:45 US Chicago PMI. Estimate 58.4 points.

15:00 US Pending Home Sales. Estimate 2.5%.

15:00 US Revised UoM Consumer Sentiment. Estimate 94.2 points.

15:00 US Revised UoM Inflation Expectations.

15:15 US FOMC Member William Dudley Speaks.

18:30 US FOMC Member Stanley Fischer Speaks.

*Key releases are highlighted in bold

*All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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EUR/USD – Euro Stable After Sharp Slide to 1.12

EUR/USD has stabilized on Friday, as the pair trades in the low-1.12 range in the European session. The euro took a dive on Thursday in response to better-than-expected US durables data. Durable Goods Orders jumped 2.8%, while Core Durable Goods improved to 0.3%. Friday is busy on the release front. In the Eurozone, today’s highlight is German Preliminary CPI, with the markets expecting a respectable gain of 0.6%. The US will release its second estimate of GDP for Q4, with a forecast of 2.1%. This is lower than the initial estimate of 2.6% in January. We’ll also get a look at Revised UoM Consumer Sentiment and Pending Home Sales.

It had been an uneventful week for EUR/USD, but that all changed on Thursday, as the euro shed 160 points following strong US durables data. Durable Goods Orders led the way with an excellent gain of 2.8%, easily beating the forecast of 1.7%. Core Durable Goods broke a string of four straight declines, posting a gain of 0.3%. However, this fell short of the estimate of 0.6%.

Greece and its international creditors have agreed to extend the bailout agreement after Greece’s list of economic reforms was accepted by the country’s creditors on Tuesday. Under this agreement, the Greek government has promised to continue with privatization plans and to meet budget targets. Still, the extension is a stop-gap measure and with sharp differences remaining between Greece and its creditors, the bailout crisis is far from over. If Greece and Germany again lock horns and raise doubts about whether Greece will remain in the Eurozone, we could see the euro lose ground.

Janet Yellen testified before Congressional committees on Tuesday and Wednesday, saying that the Fed was “unlikely” to raise interest rates in the next few months, given current economic conditions. Her remarks seemed aimed at quelling rising speculation about a rate hike sometime in mid-2015, which has helped boost the US dollar’s performance against its major rivals. Yellen noted that the continuing economic growth should lead to unemployment continuing to fall, but wages and inflation need to move higher before the Fed raises interest rates.

EUR/USD for Friday, February 27, 2015

EUR/USD February 27 at 9:55 GMT

EUR/USD 1.1221 H: 1.1231 L: 1.1196

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.

On the downside, 1.1231 is under strong pressure. Will the pair break below this line during the day? 1.1154 is stronger.

1.1340 is a strong resistance line.

Current range: 1.1231 to 1.1340

Further levels in both directions:

Below: 1.1231, 1.1154, 1.1066 and 1.0909

Above: 1.1340, 1.1426, 1.1525, 1.1634 and 1.1754

OANDA’s Open Positions Ratio

EUR/USD ratio is pointing to sharp gains on Friday. This is consistent with the sharp gain of the euro on Thursday, which led to long positions being covered and resulting in a lower percentage of short positions. The ratio currently has a majority of long positions, indicative of trader bias towards EUR/USD moving to higher ground.

EUR/USD Fundamentals

7:00 German Import Prices. Estimate -0.8%. Actual -0.8%.

All Day – German Preliminary CPI. Estimate 0.6%.

7:45 French Consumer Spending. Estimate -0.3%. Actual +0.6%.

8:00 Spanish Flash CPI. Estimate -1.5%. Actual -1.1%.

10:00 Italian Preliminary CPI. Estimate 0.2%. Actual 0.3%.

13:30 US Preliminary GDP. Estimate 2.1%.

13:30 US Preliminary GDP Price Index. Estimate 0.0%.

14:45 US Chicago PMI. Estimate 58.4 points.

15:00 US Pending Home Sales. Estimate 2.5%.

15:00 US Revised UoM Consumer Sentiment. Estimate 94.2 points.

15:00 US Revised UoM Inflation Expectations.

15:15 US FOMC Member William Dudley Speaks.

18:30 US FOMC Member Stanley Fischer Speaks.

*Key releases are highlighted in bold

*All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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Gold Stable Ahead of US GDP Release

Gold has shown limited movement on Friday, as the spot price stands at $1205.02 in the European session. On the release front, the US will issue its second estimate of GDP for Q4, with a forecast of 2.1%. This is lower than the initial estimate of 2.6% in January. We’ll also get a look at Revised UoM Consumer Sentiment and Pending Home Sales.

Thursday’s US inflation and job numbers were not impressive. US inflation indicators continue to struggle. CPI posted a third straight decline, coming in at -0.7%. This was very close to the forecast of -0.6%. Core CPI improved to 0.2%, edging above the estimate of 0.1%. On the employment front, there was disappointing news, as Unemployment Claims jumped to a 6-week high, coming in at 313 thousand. This was much higher than the estimate of 288 thousand.

Greece and its international creditors have agreed to extend the bailout agreement after Greece’s list of economic reforms was accepted by the country’s creditors on Tuesday. Under this agreement, the Greek government has promised to continue with privatization plans and to meet budget targets. Still, the extension is a stop-gap measure and with sharp differences remaining between Greece and its creditors, the bailout crisis is far from over. If Greece and Germany again lock horns and raise doubts about whether Greece will remain in the Eurozone, we could see the euro lose ground.

Janet Yellen testified before Congressional committees on Tuesday and Wednesday, saying that the Fed was “unlikely” to raise interest rates in the next few months, given current economic conditions. Her remarks seemed aimed at quelling rising speculation about a rate hike sometime in mid-2015, which has helped boost the US dollar’s performance against its major rivals. Yellen noted that the continuing economic growth should lead to unemployment continuing to fall, but wages and inflation need to move higher before the Fed raises interest rates.

XAU/USD for Friday, February 27, 2015

XAU/USD February 27 at 10:25 GMT

XAU/USD 1205.02 H: 1212.36 L: 1204.73

XAU/USD Technical

S3

S2

S1

R1

R2

R3

1154

1175

1200

1215

1240

1255

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

On the downside, 1200 is under strong pressure and could break during the day. 1175 is next.

1215 is a weak resistance line.

Current range: 1200 to 1215

Further levels in both directions:

Below: 1200, 1175, 1154 and 1131

Above: 1215, 1240, 1255, 1275 and 1307.11

OANDA’s Open Positions Ratio

XAU/USD ratio is unchanged on Friday. This is consistent with the limited movement we are seeing from the pair. The ratio has a majority of long positions, indicating trader bias towards gold moving to higher ground.

XAU/USD Fundamentals

13:30 US Preliminary GDP. Estimate 2.1%.

13:30 US Preliminary GDP Price Index. Estimate 0.0%.

14:45 US Chicago PMI. Estimate 58.4 points.

15:00 US Pending Home Sales. Estimate 2.5%.

15:00 US Revised UoM Consumer Sentiment. Estimate 94.2 points.

15:00 US Revised UoM Inflation Expectations.

15:15 US FOMC Member William Dudley Speaks.

18:30 US FOMC Member Stanley Fischer Speaks.

*Key releases are highlighted in bold

*All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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Week In FX – Fed Gives Nothing Away, Dollar in Demand

Fed sticks to lower for longer

U.S CPI an excuse to buy more dollars

Fed September hike fully priced in

Central Banks rate announcements dominate proceedings

As to be expected, the Fed dominated this past week. Although the markets did not get the anticipated price moves when Yellen was giving her testimony on the ‘hill’, that came on the back of Thursday’s U.S CPI, she has certainly been able to keep market guessing on the timing of rate lift off in the U.S.

The Fed Chair did not give the hawks what they were expecting, but on the other hand she was not overtly dovish either. Like any good Central Banker she was extremely “vague and ambiguous” enough to keep markets guessing on when the Fed will move and what the move will be. The Fed bar remains at the “lower for longer” even while a June lift-off remains on the cards.

That being said, nothing appears to have startled U.S policy makers off the trail to rate normalization. During her testimony Yellen struck a more upbeat tone on labor market conditions and included how the forward guidance will be amended. Everything is data dependent, and next week’s non-farm payroll numbers will again be expected to play a major role.

U.S CPI woke Capital Markets from Inertia

On Thursday, U.S CPI inflation reading for January fell into negative territory for the first time in five-years, with the -0.1% decline a big slip from the previous month’s +0.8% reading.

The reading was widely expected, with crude prices being the main culprit. The core reading, which strips out energy prices, remains well short of Fed expectations, was unchanged from the prior month at +1.6%, but still healthy. Somewhat offsetting was the U.S durable goods data bouncing back from the very weak showing in December (+2.8% vs. +1.7%), with most components growing strongly.

The market did not have to wait long for a Fed response. Fed moderate Bullard responded to the CPI data by highlighting the core reading. He said the impressive monthly jobs reports would continue and wage growth around +2% is roughly appropriate with where the economy is performing right now, given +1.5% core-CPI and +0.5% productivity growth.

Fed Governor Williams said if data kept coming in as expected, rate hikes could begin as early as this summer. He said that he expects to see U.S unemployment to fall to around +5% by the end of the year (full employment) and sees an increase in the purchasing powers of businesses. In other words, the Fed needs to start removing some accommodation before full employment and +2% inflation.

Normally, longer dated bonds would be the big loser on an upside surprise to core-CPI. However, this week most of the damage has occurred in the short-end with yields on two-year notes rising faster (+0.642% from +0.611%) than their much longer dated counterpart. This would suggest that a June rate hike remains on the table even with Yellen’s highly touting data dependence this week. Fed futures are now pricing in a +33% chance of a +25bps hike in June while a September hike is fully priced in.

The EUR managed to fall off its own cliff in the wake of the U.S CPI data and this despite most of the market wading to the sidelines hoping to wait out month-end activities. Outright, the 19-member single currency fell to a one-month low just under the psychological €1.1200 handle. The USD continues to consolidate its recent strength into the weekend following the US core inflation as the lower European yields are helping to give the greenback an advantage ahead of the formal launch of the ECB’s QE program. The EUR bears remain confident and are now waiting for QE to begin.

On Tap for Next Week

Thrills and spills are very much on the cards for next week. Central Banks rate announcements will dominate the agenda, followed in hot pursuit by next Friday’s U.S non-farm payrolls release. Ms. Yellen and her colleagues spoke positively about the U.S job situation this week. Will U.S employment data back the Fed up?

Like Yellen, Governor Poloz from the BoC did not provide a clear signal about whether the Bank of Canada will again lower interest rates at next week’s policy meeting during a speech this week. He emphasized that last months -25bps cut (on the back of plummeting energy prices) buys time to see how the Canadian economy responds.

The majority assumed it was a slam-dunk that the BoC would be easing again on March 4; however, the possibility of a potential pause has thrown an extra spanner into the Canada’s bear tool kit. The cut last month was aimed at taking out “some insurance” against these risks. Being proactive gives the governor confidence that the Canadian economy will return to capacity by the end of next year. Last months rate cut to +0.75% was the first since 2009. The Governor seems to have stepped away from “transparency” and has become rate “opaque.” The loonie dealers could be in for a wild ride now that the BoC has everyone guessing.

The ECB’s next meeting on March 5 will not match the January 22 meeting in terms of excitement. However, investors may be privy enough to getting some QE direction. The ECB might be in a position to reveal the exact starting date and list of agencies eligible for QE purchases.

The bulk of next week’s excitement will be centered on the U.S job market data. Can the world’s largest economy continue to churn out a strong monthly report? Will the U.S manage to move the unemployment needle towards full-employment?

MarketPulse Economic Calendar

WEEK AHEAD

* CNY HSBC Final Manufacturing PMI
* GBP Manufacturing PMI
* EUR CPI Flash Estimate
* USD ISM Manufacturing PMI
* AUD Rate Statement
* GBP Construction PMI
* CAD Gross Domestic Product GDP
* AUD Gross Domestic Product GDP
* GBP Services PMI
* USD ADP Non-Farm Employment Change
* CAD BOC Rate Statement
* USD ISM Non-Manufacturing PMI
* GBP Official Bank Rate
* EUR ECB Press Conference
* USD Unemployment Claims
* CAD Ivey PMI
* CAD Trade Balance
* USD Non-Farm Employment Change
* USD Trade Balance

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Asian Equities Headed for Reasonably Monthly Gain

Most Asian stocks rose, with the regional benchmark’s poised for its biggest monthly advance since September 2013, as health-care and consumer shares climbed.

About three shares rose for every two that fell on the MSCI Asia Pacific Index, while added less than 0.1 percent to 146.35 as of 9:07 a.m. in Tokyo. The gauge is on track for a 4.3 percent gain this month and a 0.9 percent weekly advance after Greece and its creditors this week brokered a deal to extend bailout funding for four months and Federal Reserve Chair Janet Yellen damped concerns of an imminent rate increase.

“The market has been performing largely with the help of the Fed the last couple of years,” Scott Wren, a senior equity strategist who helps oversee $1.4 trillion at Wells Fargo Advisors LLC, said on Bloomberg Television. “Valuations aren’t stretched at this point. We have more upside.”

Bloomberg

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A Different Story with Debt in Asia

This year was tipped to be the one when U.S. interest-rate increases would suck money from emerging markets. It’s not turning out that way in Asia.

Unprecedented economic stimulus from Europe to Japan has prompted investors to pump a combined $14.4 billion into Indian, South Korean and Indonesian local-currency government debt this year, the most on record for the three markets, exchange data show. That’s helped cut the average yield on emerging-market sovereign notes in Asia by 21 basis points to 4.19 percent, compared with the 4.72 percent for developing nations globally.

The flows underscore the growing investor conviction that as the Federal Reserve prepares to raise U.S. borrowing costs for the first time in nine years, Asia is best-placed to weather the impact. While falling oil prices are supporting the external balances of nations from India to Turkey, political and corporate scandals in Brazil and Argentina are sapping confidence in Latin America and the crisis in Ukraine is fueling a cash exodus from Central Europe.

Bloomberg

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Many Eyes on U.S. GDP

The primary data point in focus for investors on Friday is the second reading on the U.S. fourth-quarter gross domestic product growth.  “People are looking at GDP to make sure the economy is still intact,” said Marc Chaikin, CEO of Chaikin Analytics.  Analysts polled by Reuters expect GDP growth of 2.1 percent, after 3.9 percent in the third quarter.

“Obviously, expectations there are lowered pretty significantly,” said JJ Kinahan, chief derivatives strategist at TD Ameritrade. The “GDP can only hurt the market. If we don’t meet those expectations we’ll be pretty much in trouble (because those expectations are already so low).”

Chris Gaffney, senior market strategist at EverBank Wealth Management, expects less of a pullback on the initial reading of 2.6 percent and a figure that still shows that the U.S. economy is growing as “a star of the developed world.”

CNBC

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Australia 200 – Continues to Consolidate Around 5900

Australia 200 for Friday, February 27, 2015

In the last few days the Australian 200 index has reached a new six year high above 5900 before easing a little and consolidating around 5900, where it presently sits.  In the last month or so the Australian 200 index has done very well and surged higher to move back above the key 5400 level. Over the last week or so it has spent some time consolidating around the 5900 level, while the support from 5800 is not that far away. It recently retreated however found solid support at the current key level of 5800 which has propped it up and moved it to the new high. In the couple of weeks leading up to the new high, it spent a week or so battling with resistance at the key 5800 level which repeatedly fended off the index, resulting in it easing back a little. Several weeks ago saw the resistance at 5500 stand tall and fend off all advances, however this now been broken strongly through. The recent move higher from below 5300 to above the key level of 5400 is important as it desperately tries to hang on to this important trading range for the index above 5400. In the week prior, the Australia 200 Index eased back again under the 5400 level after making numerous attempts to clear it over the last month, which saw it drop to a three week low below 5250 before its recent surge higher.

The moderate support from around the 5300 level held it up well for a a couple weeks before the surge higher. The short-term resistance level at 5500 has returned and now resumes its role of placing selling pressure on the index. Throughout most of November and December, the Australia 200 Index fell steadily lower down towards support around 5150 and two month lows before rallying back above 5400 again. Over the last few weeks the Australia 200 index has struggled with resistance at 5400 which has forced it lower time and time again. The 5400 level has been a major player for the last 12 months and the index must get back above this level to encourage more buying and bullish sentiment. It enjoyed a solid resurgence throughout October after getting much needed support from the 5200 level, which has resulted in it moving back above the 5400 and 5500 levels, around a two month high.

Throughout most of September the Australia 200 Index declined strongly from its multi-year high after running into resistance around 5650 back to enter its previously established trading range between 5400 and 5500, before falling further below 5200 and to an eight month low around 5120 a few weeks ago. Several weeks ago it received solid support from the 5100 level which saw it rally well to close out a couple of weeks ago. Back in early September the 5400 level was called upon to offer support as the index desperately tried to stay in touch with its range, however it fell through there before rallying strongly back up to 5400. Up until recently, the 5400 level had done well and propped up price to keep it within the range. In its recent fall at the beginning of August it moved down to a three week low around 5375, however it received solid support at the 5400 level which has allowed to consolidate and rally higher.

The Reserve Bank of Australia’s (RBA) claim that the Australian dollar is overvalued is not only wrong, it’s disingenuous, according to new research by National Australia Bank. “We’re taking issue with the contention that the RBA continues to repeat that the Australian dollar remains fundamentally overvalued, in particular with relation to the weakness in commodity prices,” Ray Attrill, co-head of FX Strategy at National Australia Bank (NAB), told CNBC. In the RBA’s recent monthly policy statements, the central bank frequently stated that the currency “remains above estimates of its fundamental value, given the significant declines in key commodity prices,” particularly Brent crude’s 40 percent decline over the past six months and a decline in iron ore prices to a six-year low. Fair value, according to RBA governor Glenn Stevens, is 75 U.S. cents – a 4 percent decrease from current levels.

(Daily chart below)

Australia 200 February 26 at 21:05 GMT   5892   H: 5925   L: 5885

Australia 200 Technical

S3

S2

S1

R1

R2

R3

5800

5400

5150

5900

—

—

During the hours of the Asian trading session on Friday, the Australia 200 Index will be looking to rally off the support at 5800 and continue its push above the 5900 level.

Further levels in both directions:

• Below: 5800, 5400 and 5150.

• Above: 5900.

Economic Releases

00:05 UK GfK Consumer Confidence (Feb)

00:30 AU Private Sector Credit (Jan)

05:00 JP Housing starts (Jan)

05:00 JP Housing starts (Ann.) (Jan)

06:00 JP Construction orders (Jan)

09:30 UK GDP (2nd Est.) (Q4)

09:30 UK Index of Services (Dec)

13:30 US Core PCE Price Index (2nd Est.) (Q4)

13:30 US GDP Annualised (2nd Est.) (Q4)

13:30 US GDP Price Index (2nd Est.) (Q4)

14:45 US Chicago PMI (Feb)

15:00 US Pending Home Sales (Jan)

15:00 US Univ of Mich Sent. (Final) (Feb)

* All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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Japan’s CPI Eases to 2.2%

Japan’s consumer inflation eased in January for a sixth straight month pushing the Bank of Japan further from its 2 percent price target.

The consumer price index (CPI) rose 2.2 percent in January from the year-ago period, government data showed on Friday, compared with Reuters’ forecast for a rise of 2.3 percent and compared with a 2.5 percent rise in December.

In other data, household spending for January fell 5.1 percent from the year before, versus expectations for a 4.1 percent decline and after declining 3.4 percent in the previous month.  Japan’s economy has been on the backfoot ever since the government raised nationwide consumption tax to 8 percent from 5 percent last April, in a bid to reduce the country’s massive debt.

CNBC

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U.S. Stocks Close Mixed

U.S. stocks closed narrowly mixed on Thursday, with stocks near recent highs, as lackluster economic data and oil concerns weighed on investor sentiment.

“We tend to get vertical when we get close to all-time highs,” said Art Hogan, chief market strategist at Wunderlich Securities. He noted that while economic data could be interpreted as fairly positive, oil continued to trade sideways as concerns about oversupply persisted.

Crude oil futures settled down 5.53 percent at $48.17 a barrel. Brent fell to trade below $61 a barrel on Thursday.  Energy fell nearly 2 percent as the greatest decliner in the S&P 500.  Exxon Mobil, Chevron and Caterpillar each fell more than one percent as some of the greatest blue chip laggards.The Dow Jones industrial average briefly flirted with positive territory, led by Cisco, Johnson & Johnson and McDonald’s.

CNBC

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GBP/USD- Limited Movement Ahead of Key US Reports

The pound has stabilized on Friday, as GBP/USD trades at the 1.54 line in the European session. On the release front, the US will issue its second estimate of GDP for Q4, with a forecast of 2.1%. This is lower than the initial estimate of 2.6% in January. We’ll also get a look at Revised UoM Consumer Sentiment and Pending Home Sales. There are no UK releases on Friday.

Thursday’s US inflation and job numbers were not impressive. US inflation indicators continue to struggle. CPI posted a third straight decline, coming in at -0.7%. This was very close to the forecast of -0.6%. Core CPI improved to 0.2%, edging above the estimate of 0.1%. On the employment front, there was disappointing news, as Unemployment Claims jumped to a 6-week high, coming in at 313 thousand. This was much higher than the estimate of 288 thousand.

Janet Yellen testified before Congressional committees on Tuesday and Wednesday, saying that the Fed was “unlikely” to raise interest rates in the next few months, given current economic conditions. Her remarks seemed aimed at quelling rising speculation about a rate hike sometime in mid-2015, which has helped boost the US dollar’s performance against its major rivals. Yellen noted that the continuing economic growth should lead to unemployment continuing to fall. Recent US data has been mixed, but employment numbers have generally been solid.

GBP/USD for Friday, February 27, 2015

GBP/USD February 27 at 11:10 GMT

GBP/USD 1.5402 H: 1.5448 L: 1.5384

GBP/USD Technical

S3

S2

S1

R1

R2

R3

1.5165

1.5282

1.5392

1.5505

1.5642

1.5786

GBP/USD moved higher in the Asian session but has given up these gains in European trade.

On the downside, 1.5392 remains under strong pressure. Will the pair break below this line? 1.5282 is stronger.

1.5505 is an immediate resistance line.

Current range: 1.5392 to 1.5505

Further levels in both directions:

Below: 1.5392, 1.5282, 1.5165, 1.5008 and 1.4873

Above: 1.5505, 1.5642, 1.5786 and 1.5888

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in long positions on Friday. This is not consistent with the lack of movement we’re seeing from the pair. The ratio has a majority of long positions, indicative of trader bias towards the pound moving higher.

GBP/USD Fundamentals

13:30 US Preliminary GDP. Estimate 2.1%.

13:30 US Preliminary GDP Price Index. Estimate 0.0%.

14:45 US Chicago PMI. Estimate 58.4 points.

15:00 US Pending Home Sales. Estimate 2.5%.

15:00 US Revised UoM Consumer Sentiment. Estimate 94.2 points.

15:00 US Revised UoM Inflation Expectations.

15:15 US FOMC Member William Dudley Speaks.

18:30 US FOMC Member Stanley Fischer Speaks.

*Key releases are highlighted in bold

*All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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U.S. Dollar Gains Again as Inflation Fuels Fed Rate Bets

The dollar headed for an eighth straight month of gains against major peers after signs U.S. inflation may rebound revived speculation the Federal Reserve has scope to raise interest rates.

A gauge of the greenback erased losses for February, climbing to within 0.1 percent of a record closing high Thursday after a greater-than-forecast increase in so-called core inflation offset concern that overall consumer prices tumbled last month. Fed Chair Janet Yellen told Congress this week that short-term declines in inflation are linked to the plunge in crude-oil prices and are likely to prove temporary.

“Everyone had pre-positioned for a pretty weak CPI,” said Matt Derr, a foreign-exchange strategist in New York at Credit Suisse Group AG. “Even if it wasn’t a huge surprise, it was enough to get that unwound. Things moved pretty aggressively after Yellen’s testimony.”

Bloomberg

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China Stocks Headed for Monthly Gain

Chinese stocks were poised for a monthly gain before the start of the annual National People’s Congress meeting next week, while the yuan weakened.

Industrial companies led gains Friday, with Power Construction Corp. of China jumping more than 8 percent. PetroChina Co. and China Shenhua Energy Co. paced declines by commodity producers after crude prices plunged overnight. The yuan fell to its lowest level since October 2012.

The Shanghai Composite Index added 0.2 percent to 3,304.53 at 10:07 a.m. local time. The gauge has risen 3 percent during the holiday-shortened month. The measure jumped 2.2 percent yesterday after Premier Li Keqiang called for more active fiscal policy and a central bank publication said additional monetary easing is needed.

Bloomberg

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A Downward Revision Expected in U.S. GDP

Friday we get a second look at U.S. gross domestic product for the fourth quarter. The Commerce Department report is slated to hit the wires at 8:30 a.m. and will incorporate data that wasn’t available in the first release a month ago. Here’s what to expect:

The value of all goods and services produced in the U.S. rose at about a 2 percent annualized pace in the fourth quarter, a marked step down from the initial estimate of 2.6 percent, according to the median forecast of economists surveyed by Bloomberg. This would follow a 5 percent rate in the third quarter that was the strongest in 11 years.

While on the surface this looks bad, it was also probably caused by two of the most volatile components in GDP: trade and inventories. Household consumption, which is the biggest factor in growth, is forecast to hold at the previously reported 4.3 percent pace.

Bloomberg

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U.S. Dollar Moves Higher

Emerging-market currencies weakened against the dollar, with China’s yuan at its lowest since October 2012, and Standard & Poor’s 500 Index futures dropped on speculation rising U.S. inflation will spur interest rate increases. Oil in New York held below $50 a barrel.

The greenback was 0.2 percent stronger against the yuan by 12:20 p.m. in Tokyo and added at least 0.2 percent versus the currencies of South Korea, Malaysia and Thailand. The Bloomberg Dollar Spot Index is set for an eighth monthly advance. Contracts on the S&P 500 dropped 0.2 percent, while the MSCI Asia Pacific Index held a 4.3 percent February gain. U.S. oil traded at $48.73 while Brent was at $60.70 in London, the biggest gap in more than a year.

A bigger-than-forecast increase in U.S. core inflation sent the dollar soaring Thursday after Federal Reserve Chair Janet Yellen signaled this week that while inflation is still too low for an imminent rate increase, the bank’s patience has limits. U.S. fourth-quarter economic growth may be revised down today. Declining North American rig counts have failed to dent record crude surpluses, obliterating gains for the U.S. oil benchmark as signs of recovery in overseas markets send Brent to its biggest monthly advance in almost six years.

Bloomberg

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Germany Hint at Greek Plan Approval

German lawmakers signaled that they will approve an extension of Greece’s bailout with an overwhelming majority in parliament on Friday although many will do so reluctantly amid fears Athens will not deliver on its reform promises.

Angela Merkel’s coalition has a big enough majority to easily win the vote in the Bundestag lower house to extend the rescue by four months. But many lawmakers, including Finance Minister Wolfgang Schaeuble, have expressed concern in recent days about whether Athens is to be trusted.

In Thursday’s test ballot 22 of 311 lawmakers in chancellor Merkel’s conservative bloc, comprising her Christian Democrats (CDU) and their Bavarian sister party, the CSU, opposed the extension and five abstained.

CNBC

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U.S. Treasury Yields Edge Slightly Higher

U.S. Treasury yields extended earlier gains on Thursday after the government’s lukewarm auction of seven-year notes, the last of three debt offerings this week.

Treasury Department auctioned $29 billion in seven-year notes at a high yield of 1.834 percent, higher than January’s 1.590 percent. The bid-to-cover ratio, an indicator of demand, was 2.37, the lowest since November 2013.

Benchmark yields edged up modestly after the announcement. Ten-year note yields rose to 2.00 percent, while seven-year note yields rose to 1.83 percent. Thirty-year bond yields edged up to 2.59 percent.

CNBC

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GBPUSD – Strong dollar interest forces correction

Despite its strength over the last month, the pound was no match for the US dollar’s powerful rally on Thursday. It was always going to be a difficult ask for the pair to break through 1.5550 at the first time of asking, with it previously being a strong support level and the 100-day SMA providing additional resistance.

That doesn’t necessarily mean the rally in this pair has come to an abrupt end though, rather it may just be taking a breather. The bearish engulfing pattern on the daily chart would certainly suggest that the next few trading sessions may favour the dollar but beyond that there may still be some upside to come. The recent cross of the 20-day SMA above the 50-day SMA would certainly support this and suggest there has been an upward momentum shift. Every rally has corrections along the way and right now, I see little reason to assume this is any different.

The pair has already run into support around 1.54 which has frequently acted as support and resistance, probably because it’s a round number and this does often have an impact. I’m not sure this is going to hold though and therefore the first big initial test of this dollar rally will come around 1.5350. This has historically been a key level of support and resistance and on this occasion, the 100-period SMA on the four hour chart may provide further support.

Not far below this we have the 38.2% fib level – 23 January lows to 26 February highs – and two previous support levels from the last couple of weeks. This area of congestion could prove to be a strong barrier to any further decline in the pair. Below here we have the 50 fib level from the same move which also happens to fall on 1.5250 which has again been a fairly significant support and resistance level in the past.

If both of these levels are broken, then 1.5180 – 1.5220 provides further congestion for the pair with strong previous support and resistance levels and the 61.8 fib level potentially providing another barrier.

If all of these are broken, it would suggest that this is actually a continuation of the longer term downtrend, but until I see that, I remain bullish.

As it stands, OANDA traders certainly don’t appear to believe the cable rally has run its course.

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GBP/USD Rally Continues as GDP Comes in Line With Expectations

Not since 2009 has the pound begun the year so bullishly, a sign traders believe higher U.K. interest rates are coming.

Britain’s currency has gained 4 percent this year on a trade-weighted basis as Bank of England officials said the next move in interest rates is likely to be up and that a slowdown in inflation is temporary. Sterling reached the strongest level in seven years against the euro on Thursday as data confirmed the U.K. gross domestic product grew for an eighth consecutive quarter. The pound touched an eight-week high versus the dollar.

“We’re still expecting a rate hike at some point and the GDP figure came out in line” with economists’ forecasts, said Harry Adams, head of trading at Argentex LLP, a currency advisory company in London. “As long as we stay on the same track, I don’t see the pound weakening off substantially.”

According to an index comprising the currencies of its major trading partners, the pound was set for its best start to a year since 2009, when it gained 5.8 percent in January alone. While other European central banks are easing monetary policy, the Bank of England has signaled that it is still moving toward its first rate increase since 2007.

via Bloomberg

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U.S CPI Falls on Fuel Slump

The cost of living in the U.S. fell in January by the most in six years, led by a plunge in energy prices that so far isn’t spreading to services.
The consumer-price index declined 0.7 percent after dropping 0.3 percent in December, a Labor Department report showed Thursday in Washington. The median forecast of economists surveyed by Bloomberg called for a 0.6 percent decrease. Excluding volatile food and fuel, the so-called core measure rose 0.2 percent, more than projected.

The core reading was propelled by gains in services such as rents and hotel rates that support the Federal Reserve’s view that total inflation will eventually return toward their 2 percent goal once the plunge in fuel costs abates. At the same time, cheaper energy is freeing up money for Americans to spend elsewhere, helping to sustain demand and underpin growth.

For consumers, the drop in energy costs “is generally good as it increases their purchasing power,” Josh Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York, said before the report. “The Fed’s going to look at the numbers and say, ‘we expected it.’”

Bloomberg

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U.S Jobless Claims Jump by most in 14-months

The number of Americans filing for unemployment benefits rose by the most since December 2013 last week from a week earlier, a sign of uneven progress in the labor market.

Jobless claims increased by 31,000 to 313,000 in the week ended Feb. 21 from a revised 282,000 in the prior period, a Labor Department report showed today in Washington. The median forecast of 49 economists surveyed by Bloomberg saw claims rising to 290,000.

Looking past the weekly data, which can often be volatile, job-market fundamentals have improved as payroll growth accelerates and Americans stream into the labor force looking for work. Continued improvement will be needed to generate faster wage growth and support consumer spending, which accounts for 70 percent of the economy.

“We dug ourselves in an enormous hole in the recession, and it’s going to take a long time to climb out of,” Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, said before the report.
Estimates in the Bloomberg survey ranged from 280,000 to 315,000. The prior week’s claims were revised from an initial reading of 283,000.

The four-week average of claims, a less-volatile measure than the weekly figure, gained to 294,500 from a revised 283,000 the week before.

Bloomberg

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USD/JPY – Yen Unchanged on Weak US Data

The Japanese yen is unchanged on Thursday, as USD/JPY trades just above the 119 line. In the US, Unemployment Claims climbed to 313 thousand, while CPI slipped 0.7%, However, Core CPI edged higher, posting a small gain of 0.2%. In Japan, we’ll get a look at a host of indicators, highlighted by Tokyo Core CPI and Retail Sales. So, we could see some movement from USD/JPY following the Japanese releases.

US indicators were mixed on Thursday. Unemployment Claims jumped to a 6-week high, coming in at 313 thousand. This was much higher than the estimate of 288 thousand. On the inflation front, CPI posted a third straight decline, coming in at -0.7%. This was very close to the forecast of -0.6%. Core CPI improved to 0.2%, edging above the estimate of 0.1%.

Janet Yellen testified before Congressional committees on Tuesday and Wednesday, saying that the Fed was “unlikely” to raise interest rates in the next few months, given current economic conditions. Her remarks seemed aimed at quelling rising speculation about a rate hike sometime in mid-2015, which has helped boost the US dollar’s performance against its major rivals. Yellen noted that the continuing economic growth should lead to unemployment continuing to fall. Recent US data has been mixed, but employment numbers have generally been solid.

USD/JPY for Thursday, February 26, 2015

USD/JPY February 26 at 14:10 GMT

USD/JPY 119.13 H: 119.23 L: 118.68

USD/JPY Technical

S3

S2

S1

R1

R2

R3

116.69

117.49

118.69

119.83

120.63

121.69

USD/JPY was flat in the Asian session. The pair tested support at 118.69 in the European session but then recovered and moved higher.

118.69 is a weak support line. 117.49 is stronger.

119.83 is an immediate resistance line.

Current range: 118.69 to 119.83

Further levels in both directions:

Below: 118.69, 117.49, 116.69, 115.56 and 113.83

Above: 119.83, 120.63, 121.69 and 122.19

OANDA’s Open Positions Ratio

USD/JPY ratio is almost unchanged on Thursday. This is consistent with the pair’s movement, which is almost unchanged. The ratio has a majority of long positions, indicative of trader bias towards the US dollar breaking out and moving to higher ground.

USD/JPY Fundamentals

13:30 US CPI. Estimate -0.6%. Actual -0.7%.

13:30 US Core CPI. Estimate 0.1%. Actual 0.2%.

13:30 US Unemployment Claims. Estimate 288K. Actual 313K.

13:30 US Core Durable Goods Orders. Estimate 0.6%. Actual 0.3%.

13:30 US Durable Goods Orders. Estimate 1.7%. Actual 2.8%.

14:00 US HPI. Estimate 0.5%. Actual 0.8%.

14:30 US Natural Gas Storage. Estimate -241B.

18:00 US FOMC Member Dennis Lockhart.

23:30 Japanese Household Spending. Estimate -4.0%.

23:30 Japanese Tokyo Core CPI. Estimate 2.2%.

23:30 Japanese National Core CPI. Estimate 2.4%.

23:30 Japanese Unemployment Rate. Estimate 3.4%.

23:50 Japanese Preliminary Industrial Production. Estimate 2.9%.

23:50 Japanese Retail Sales. Estimate -1.2%.

*Key releases are highlighted in bold

*All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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Japan Stocks Set for Strong Monthly Gain

Japanese stocks rose, with the Topix index poised to post its best month since September 2013, as consumer lenders rose while investors weighed data showing inflation slowed last month.

Commercial finance company Orix Corp. climbed 2.8 percent after saying it will offer investors “yutai,” or gifts, for owning its shares. Nexon Co. jumped 8 percent after the online game distributor said it’ll buy back 10 billion yen ($84 million) of it stock. Yokogawa Electric Corp. sank 4.5 percent after its rating was cut by Goldman Sachs Group Inc.

The Topix climbed 0.2 percent to 1,524.61 at the break in Tokyo, poised for a 1.6 percent gain for the week, its sixth weekly advance. The measure is up 7.7 percent in February, the most since an 8 percent gain in September 2013. The yen traded at 119.21 per dollar after weakening 0.5 percent yesterday. The Nikkei 225 Stock Average added 0.1 percent to 18,799.26.

Bloomberg

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Japan’s Inflation Slows to 2.2%

Japan’s inflation slowed more than forecast in January, highlighting central bank chief Haruhiko Kuroda’s challenge in reflating the world’s third-biggest economy.

Consumer prices excluding fresh food rose 2.2 percent from a year earlier, the statistics bureau said Friday. That was less than the median projection of 2.3 percent. Stripped of the effect of sales-tax increase last April, core inflation — the Bank of Japan’s key measure — was 0.2 percent.

While the tumble in oil prices will pull down inflation in the near term, underlying consumer price trends remain on track for the BOJ’s 2 percent goal, Kuroda said last week. Economists at BNP Paribas SA and JPMorgan Chase & Co. see consumer prices falling in the coming months.

Bloomberg

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U.S. Dollar Moves to One Month High

The dollar rose to a one-month high against a basket of currencies on Thursday as data on U.S. inflation and business orders revived confidence in the world’s biggest economy and supported bets the Federal Reserve will raise interest rates in the middle of the year.

The greenback also received support from San Francisco President John Williams and St. Louis Federal Reserve chief James Bullard, with both making remarks that suggested the U.S. central bank might end its near zero interest rate policy sooner than some traders expect.

The dollar’s rise followed back-to-back days of declines stemming from perceived dovish signals from Fed Chair Janet Yellen in her semiannual testimony before Congress.

CNBC

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West TX Oil Down Near $48 on Rising U.S. Inventories

Ample global supply and increasing U.S. commercial inventories weighed on U.S. crude prices on Thursday after expectations for better demand going forward lifted prices a day earlier, traders and analysts said.

U.S. crude settled 5.5 percent lower, or $2.82, at $48.17 a barrel, following a more than 3 percent gain in the previous session.  Brent losses were tempered by expectations for improving global demand and geopolitical concerns about energy supplies from Libya and Russia.

Benchmark Brent crude fell $1.60 to $60 a barrel, after hitting a session peak of $62.63. On Wednesday, Brent surged 5 percent.  Earlier, Brent’s premium to U.S. crude increased to $12.06 intraday on Thursday, the widest since January 2014.

CNBC

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Gold Rallies to $1210 on U.S. Rate Hike View

Gold pared gains on Thursday after stronger-than-expected U.S. data lifted the dollar and impetus from Chinese buying petered out, but it remained higher after the Federal Reserve indicated this week that it was in no rush to raise interest rates.

The dollar rose against a currency basket as data on U.S. durable goods orders in January beat forecasts, boosting confidence in business activity despite worries of the recent surge in the dollar hurting exports.

That weighed on gold, which is priced in the U.S. unit.  Spot gold was up 0.5 percent at $1,210 an ounce. Earlier it hit a session high of $1,220.00 above the 100-day moving average at $1,216.20, before retreating as the dollar firmed.

CNBC

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Asian Equities Open Mixed

Asian equity markets appear set for a mixed open on Friday following an uninspiring lead from Wall Street amid lower oil prices and as traders await a raft of data from Japan.

The world’s third-largest economy will hand in key economic indicators including household spending, jobless numbers, retail sales and industrial production for January before market opens, but attention will like fall on the closely-watched inflation figures.

Australia’s S&P ASX 200 index slipped 0.3 percent in early trade, with energy producers down due to lower oil prices overnight. Oil Search and Woodside Petroleum opened down 0.9 and 0.7 percent each, while Santos edged down 0.3 percent.

CNBC

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Fed’s Bullard: Stop Whining about the Dollar

St. Louis Fed President James Bullard told CNBC on Thursday the word “patient” should come out of the policy statement in March to give options for raising interest rates this summer.  “There’s too much focus about the first move,” he said. “It’s really the path of rates that matter.”

Bullard, who’s generally hawkish, called possible rate hikes “the normalization process,” as he expects the unemployment rate to fall below 5 percent in the second half of the year and overall economic growth at 3 percent for 2015.

“I’d be for starting a little bit earlier on the normalization process. It’s not tightening,” he said in a “Squawk Box” interview. “It’s still going to be a very accommodative policy even if we move off zero.”  He characterized the policy rate as 375-400 basis points below normal.  “These labor markets are improving so rapidly,” Bullard said. “If you haven’t even come off zero and the unemployment rate has come down below 5 percent, that seems like a bit little extreme to me.”

CNBC

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Mixed Feelings About U.S. Recovery

Societe Generale’s notoriously bearish strategist, Albert Edwards, has poured scorn on the belief that the U.S. economy is recovering and predicts “violent” reactions in asset markets during the second half of 2015.

“The downturn in U.S. profits is accelerating and it is not just an energy or U.S. dollar phenomenon – a broad swathe of U.S. economic data has disappointed in February,” he said in a research note published Thursday.  U.S. indexes have continued to hit all-time highs this year and the Nasdaq is also looking to break through a level last seen at the peak of the tech bubble in 2000.

However, Edwards said that, rather than concentrating on these corporate earnings or dismal economic data points, market participants were too focused on the “pillow talk” about decent payroll data from the U.S. Federal Reserve.

CNBC

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More Mixed Feelings About U.S. Recovery

Markets dipped Wednesday morning, but Adam Parker, Morgan Stanley’s chief U.S. equity strategist, told CNBC that the outlook for the U.S. economy is looking good for the next few years.  His target for the S&P 500 this year is 2,275 or a nearly 8 percent gain.

“What we’re focusing investors on is do you think the economy is improving in the U.S. and are corporate earnings going to continue to expand,” Parker told CNBC’s “Squawk on the Street” on Wednesday. He said his answer is yes to both of those questions. “Odds are earnings can continue to expand for another few years,” he added.

Parker said that financials may stand to benefit from expectations that the Federal Reserve is going to move on interest rates sometime this year.  He’s also confident that the sector will do really well.  “I think you will clearly see money flow out of these expensive defensives like utilities and telecoms into financials if people get more confident that the Fed is going to move the front end.”

CNBC

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Investors Being Urged Caution on Oil

As private equity turns its attention to the oil and gas sector amid a slide in oil prices, one executive at the SuperReturn industry conference in Berlin stressed caution.

“The question is: when do you engage? Markets have a history of jumping in too soon,” Mitch Truwit, co-CEO of private equity and venture capital firm Apax Partners, told CNBC.  He said there was a widely held belief that, because oil prices have moved back up to $50 a barrel, it was time to buy.

“I’m not sure I buy that. We have to let it (the oil price move) play out a little longer,” he said. “The effects of things like reducing oil production are not felt in the near term…I bet (oil) will retest lower prices with knock-on effects.”

CNBC

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Greenspan: Effective Demand as Weak as Depression-era

The fact that the market is anticipating that the Federal Reserve will raise interest rates, yet the yields on the 10- and 30-year Treasurys are falling is an indication of how weak the overall global economy is, former Fed Chairman Alan Greenspan told CNBC on Thursday.

In fact, effective demand is extraordinarily weak, he said.  “The way I measure it, it’s probably tantamount to what we saw in the later stages of the Great Depression,” Greenspan said in an interview with “Closing Bell.”

That said, he acknowledged “it’s not anywhere near what the problems were back then but we haven’t seen anything like that since then.”  Greenspan, who served as Fed chair from 1987 to 2006, also called the overall economic data for the United States “not strong.”  While the jobs growth has been very significant, there is evidence of weakened productivity, he said.

CNBC

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AUD/USD – Returns to Familiar Territory Below Resistance at 0.7850

AUD/USD for Friday, February 27, 2015

After finally springing to life, the Australian dollar has dropped sharply in the last 12 hours back down below 0.7800 again to more familiar territory below the resistance level at 0.7850.  In the last few days the Australian dollar moved through the resistance at 0.7850 to reach a new four week high around 0.7900 before falling recently.  For the last few weeks the Australian dollar has steadied well and traded in a narrow range between support at 0.77 and 0.78, although to finish out last week it rallied higher to a two week high near 0.7850. To start this new week it has slowly eased back a little from resistance at 0.7850 however it is finally made its way through there. It has enjoyed receiving solid support from the 0.77 level throughout this time. A couple of weeks ago it rallied a little higher again back towards 0.78 however it then eased back to receive more support from 0.77. A few weeks ago the Australian dollar was on a roller-coaster ride dropping sharply to a new multi-year low below 0.7630 before rallying strongly and moving back up above the 0.77 level and more recently 0.78. In the second half of January, the Australian dollar fell very sharply and break lower from the trading range that had been established roughly between 0.8050 and 0.8200.

About a month ago it made numerous attempts at the resistance level at 0.82 only to be sent back often before finally finishing that week moving through this key level. In doing so it was able to reach a one month high near 0.83 before being sold back down again towards 0.82 as the resistance and selling activity above this level kicked in. Over the Christmas / New Year period, the Australian dollar seemed to have been content with trading in a narrow range below the resistance at 0.82, which continues to remain a key level as it is presently provides resistance. The Australian dollar experienced a disappointing November and December moving from resistance around 0.88 down to the new lows recently. For a couple of months from September through to November, the Australian dollar did well to stop the bleeding and trade within a range between 0.8650 and 0.88 after experiencing a sharp decline throughout September which saw it move from close to 0.94 down to below 0.8650.

Back at the beginning of September the Australian dollar showed some positive signs as it surged higher again bouncing off support below 0.93 and reaching a new four week high around 0.94 however that all now seems a distant memory. It seems a long way away now but the Australian dollar reached a three week high just shy of 0.9480 at the end of July after it enjoyed a solid period which saw it surge higher through the resistance level at 0.9425 to the three week around 0.9480, before easing back towards that level. The Australian dollar enjoyed a solid surge higher reaching a new eight month high above 0.95 at the end of June, only to return most of its gains in very quick time to finish out that week. Since the middle of June the Australian dollar has made repeated attempts to break through the resistance level around 0.9425, however despite its best efforts it was rejected every time as the key level continued to stand tall, even though it has allowed the small excursion to above 0.95.

The Reserve Bank of Australia’s (RBA) claim that the Australian dollar is overvalued is not only wrong, it’s disingenuous, according to new research by National Australia Bank. “We’re taking issue with the contention that the RBA continues to repeat that the Australian dollar remains fundamentally overvalued, in particular with relation to the weakness in commodity prices,” Ray Attrill, co-head of FX Strategy at National Australia Bank (NAB), told CNBC. In the RBA’s recent monthly policy statements, the central bank frequently stated that the currency “remains above estimates of its fundamental value, given the significant declines in key commodity prices,” particularly Brent crude’s 40 percent decline over the past six months and a decline in iron ore prices to a six-year low. Fair value, according to RBA governor Glenn Stevens, is 75 U.S. cents – a 4 percent decrease from current levels.

(Daily chart / 4 hourly chart below)

AUD/USD February 26 at 21:50 GMT   0.7799   H: 0.7913   L: 0.7785

AUD/USD Technical

S3

S2

S1

R1

R2

R3

0.7700

—

—

0.7850

0.8200

0.8650

During the early hours of the Asian trading session on Friday, the AUD/USD is trying to rally a little higher after dropping so sharply in the last 12 hours back down below 0.7800 again.  Current range: trading right below 0.7900 around 0.7890.

Further levels in both directions:

• Below: 0.7700.

• Above: 0.7850, 0.8200, and 0.8650.

OANDA’s Open Position Ratios

(Shows the ratio of long vs. short positions held for the AUD/USD among all OANDA clients. The left percentage (blue) shows long positions; the right percentage (orange) shows short positions.)

The long position ratio for the AUD/USD has moved back above 55% as the Australian dollar has moved back below the resistance level at 0.7850.  The trader sentiment has shifted to being in favour of long positions.

Economic Releases

00:05 UK GfK Consumer Confidence (Feb)

00:30 AU Private Sector Credit (Jan)

05:00 JP Housing starts (Jan)

05:00 JP Housing starts (Ann.) (Jan)

06:00 JP Construction orders (Jan)

09:30 UK GDP (2nd Est.) (Q4)

09:30 UK Index of Services (Dec)

13:30 US Core PCE Price Index (2nd Est.) (Q4)

13:30 US GDP Annualised (2nd Est.) (Q4)

13:30 US GDP Price Index (2nd Est.) (Q4)

14:45 US Chicago PMI (Feb)

15:00 US Pending Home Sales (Jan)

15:00 US Univ of Mich Sent. (Final) (Feb)

* All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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Some Longer Term Hope for Gold

Gold will come under further pressure over the course of the year as the Federal Reserve moves closer to lifting rates, but prospects for the precious metal looks far more promising in the next few years, according to Bank of America Merrill Lynch.

“Right now, investors are not in the mood for holding gold because they see the Fed raising rates. So, I think in the next three months you’ll see downside risk, $1,100 an ounce is likely,” Francisco Blanch, commodities analyst at Bank of America Merrill Lynch told CNBC.  “But if you look out 2-3 years, things are a lot brighter for gold,” he said.

Gold kicked off the year with a bang, rising around 8 percent in January. However, the yellow meal has since erased most of its gains as a stronger dollar – driven by rate hike expectations –and gains in equities dim its appeal. Spot gold last traded around the $1,210 level.

CNBC

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GBP/USD – Sharp Losses As British GDP Softens

The pound has posted sharp losses on Thursday, as GBP/USD is trading slightly above the 1.54 line in the North American session. In the UK, Second Estimate GDP posted a gain of 0.5%, matching the estimate. Over in the US, CPI declined by 0.7%, while Core CPI edged higher, posting a small gain of 0.2%. Unemployment Claims climbed to 313 thousand, well above expectations.

As expected, US inflation indicators continue to struggle. CPI posted a third straight decline, coming in at -0.7%. This was very close to the forecast of -0.6%. Core CPI improved to 0.2%, edging above the estimate of 0.1%. On the employment front, there was disappointing news, as Unemployment Claims jumped to a 6-week high, coming in at 313 thousand. This was much higher than the estimate of 288 thousand.

Janet Yellen testified before Congressional committees on Tuesday and Wednesday, saying that the Fed was “unlikely” to raise interest rates in the next few months, given current economic conditions. Her remarks seemed aimed at quelling rising speculation about a rate hike sometime in mid-2015, which has helped boost the US dollar’s performance against its major rivals. Yellen noted that the continuing economic growth should lead to unemployment continuing to fall. Recent US data has been mixed, but employment numbers have generally been solid.

GBP/USD for Thursday, February 26, 2015

GBP/USD February 26 at 17:35 GMT

GBP/USD 1.5413 H: 1.5552 L: 1.5397

GBP/USD Technical

S3

S2

S1

R1

R2

R3

1.5165

1.5282

1.5392

1.5505

1.5642

1.5786

GBP/USD was flat in the Asian session. The pair posted sharp losses in the European session. In the North American session, the pair is steady.

1.5392 has weakened in support as the pair trades at lower levels. 1.5282 is stronger.

1.5505 is a strong resistance line.

Current range: 1.5392 to 1.5505

Further levels in both directions:

Below: 1.5392, 1.5282, 1.5165, 1.5008 and 1.4873

Above: 1.5505, 1.5642, 1.5786 and 1.5888

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in long positions on Thursday. This is not consistent with the pair’s movement, as the pound has posted sharp losses. The ratio has a majority of long positions, indicative of trader bias towards the pound reversing ground and moving higher.

GBP/USD Fundamentals

9:30 British Second Estimate GDP. Estimate 0.5%. Actual 0.5%.

9:30 British Preliminary Business Investment. Estimate +2.0%. Actual -1.4%.

9:30 Index of Services. Estimate 0.7%. Actual 0.8%.

13:30 US Core CPI. Estimate 0.1%. Actual 0.2%.

13:30 US CPI. Estimate -0.6%. Actual -0.7%.

13:30 US Core CPI. Estimate 0.1%. Actual 0.2%.

13:30 US Unemployment Claims. Estimate 288K. Actual 313K.

13:30 US Core Durable Goods Orders. Estimate 0.6%. Actual 0.3%.

13:30 US Durable Goods Orders. Estimate 1.7%. Actual 2.8%.

14:00 US HPI. Estimate 0.5%. Actual 0.8%.

14:30 US Natural Gas Storage. Estimate -241B. Actual -219B.

18:00 US FOMC Member Dennis Lockhart Speaks.

*Key releases are highlighted in bold

*All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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USD/CAD – Steady as Canadian CPI Beats Estimate

The Canadian dollar has posted slight gains on Thursday, as USD/CAD trades in the low-1.24 range. In Canada, Core CPI posted a 0.2% gain, beating the estimate. CPI, however, came in at -0.2%. In the US, CPI declined by 0.7%, However, Core CPI edged higher, posting a small gain of 0.2%. Unemployment Claims climbed to 313 thousand, well above expectations.

There were no surprises on the inflation front, as inflation indicators remain at weak levels. Canadian CPI was up 0.2% in January, good enough to beat the estimate of 0.1%. Core CPI declined by 0.2%, but this also beat the forecast, which was -0.4%. Over in the US, CPI posted a third straight decline, coming in at -0.7%. This was very close to the forecast of -0.6%. Core CPI improved to 0.2%, edging above the estimate of 0.1%. Unemployment Claims jumped to a 6-week high, coming in at 313 thousand. This was much higher than the estimate of 288 thousand.

Janet Yellen testified before Congressional committees on Tuesday and Wednesday, saying that the Fed was “unlikely” to raise interest rates in the next few months, given current economic conditions. Her remarks seemed aimed at quelling rising speculation about a rate hike sometime in mid-2015, which has helped boost the US dollar’s performance against its major rivals. Yellen noted that the continuing economic growth should lead to unemployment continuing to fall. Recent US data has been mixed, but employment numbers have generally been solid.

USD/CAD for Thursday, February 26, 2015

USD/CAD February 26 at 16:05 GMT

USD/CAD 1.2473 H: 1.2531 L: 1.2388

USD/CAD Technical

S3

S2

S1

R1

R2

R3

1.2261

1.2387

1.2469

1.2543

1.2680

1.2761

USD/CAD was flat in the Asian session. The pair posted gains in the European session and broke above resistance at 1.2469. USD/CAD is steady in the North American session.

1.2469 has reverted to a support role and remains fluid. 1.2387 is stronger.

1.2543 is an immediate resistance line.

Current range: 1.2469 to 1.2543

Further levels in both directions:

Below: 1.2469, 1.2387, 1.2261, 1.2190 and 1.2015

Above: 1.2543, 1.2680, 1.2761 and 1.2950

OANDA’s Open Positions Ratio

USD/CAD ratio is pointing to gains in short positions on Thursday, reversing the direction we saw a day earlier. This is not consistent with the pair’s movement, as the Canadian dollar has posted slight gains. The ratio has a majority of long positions, indicative of trader bias towards USD/CAD moving to higher ground.

USD/CAD Fundamentals

13:30 Canadian Core CPI. Estimate 0.1%. Actual 0.2%.

13:30 Canadian CPI. Estimate -0.4%. Actual -0.2%.

13:30 US Core CPI. Estimate 0.1%. Actual 0.2%.

13:30 US CPI. Estimate -0.6%. Actual -0.7%.

13:30 US Core CPI. Estimate 0.1%. Actual 0.2%.

13:30 US Unemployment Claims. Estimate 288K. Actual 313K.

13:30 US Core Durable Goods Orders. Estimate 0.6%. Actual 0.3%.

13:30 US Durable Goods Orders. Estimate 1.7%. Actual 2.8%.

14:00 US HPI. Estimate 0.5%. Actual 0.8%.

14:30 US Natural Gas Storage. Estimate -241B.

18:00 US FOMC Member Dennis Lockhart Speaks.

*Key releases are highlighted in bold

*All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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Gold Pares Gain on Positive US Data

Gold pared gains on Thursday after stronger-than-expected U.S. data lifted the dollar and impetus from Chinese buying petered out, but it remained higher after the Federal Reserve indicated this week that it was in no rush to raise interest rates.

The dollar rose against a currency basket as data on U.S. durable goods orders in January beat forecasts, boosting confidence in business activity despite worries of the recent surge in the dollar hurting exports.

That weighed on gold, which is priced in the U.S. unit.

Spot gold was up 0.3 percent at $1,207.90 an ounce at 1503 GMT. Earlier it hit a session high of $1,220.00, before retreating as the dollar firmed.

“The market feels a bit top heavy,” MKS head of trading Afshin Nabavi said. “We’ve had good buying of physical gold from the Far East as China opened up after the Lunar Week holiday, but above $1,210-1,212, that stopped.”

Gold prices have fallen around 10 percent over the last year, largely due to the prospect of higher U.S. rates, which would increase the opportunity cost of holding non-yielding bullion, while boosting the dollar.

via Reuters

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AUD/USD – Aussie Dips on Weak Capital Expenditure Data

AUD/USD has lost ground on Thursday, as the pair trades in the low-78 range. On the release front, Australian Private Capital Expenditure posted a decline of 2.2%, missing expectations. In the US, Unemployment Claims climbed to 313 thousand, while CPI slipped 0.7%, However, Core CPI edged higher, posting a small gain of 0.2%.

US indicators were mixed on Thursday. Unemployment Claims jumped to a 6-week high, coming in at 313 thousand. This was much higher than the estimate of 288 thousand. On the inflation front, CPI posted a third straight decline, coming in at -0.7%. This was very close to the forecast of -0.6%. Core CPI improved to 0.2%, edging above the estimate of 0.1%.

Janet Yellen testified before Congressional committees on Tuesday and Wednesday, saying that the Fed was “unlikely” to raise interest rates in the next few months, given current economic conditions. Her remarks seemed aimed at quelling rising speculation about a rate hike sometime in mid-2015, which has helped boost the US dollar’s performance against its major rivals. Yellen noted that the continuing economic growth should lead to unemployment continuing to fall. Recent US data has been mixed, but employment numbers have generally been solid.

AUD/USD for Thursday, February 26, 2015

AUD/USD February 26 at 14:55 GMT

AUD/USD 0.7824 H: 0.7912 L: 0.7821

AUD/USD Technical

S3

S2

S1

R1

R2

R3

0.7582

0.7684

0.7799

0.7904

0.8081

0.8150

AUD/USD lost ground in the Asian session. In European trade, the pair moved higher but then reversed directions. AUD/USD continues to lose ground in the North American session and is putting pressure on support at 0.7799.

0.7799 is providing weak support. 0.7684 is stronger.

On the upside, 0.7904 has some breathing room as the pair trades at lower levels.

Current range: 0.7799 to 0.7904

Further levels in both directions:

Below: 0.7799, 0.7684, 0.7582, 0.7403 and 0.7265

Above: 0.7904, 0.8081, 0.8150, 0.8214 and 0.8379

OANDA’s Open Positions Ratio

AUD/USD ratio is pointing to gains in long positions in Thursday, continuing the movement we saw a day earlier. This is not consistent with the pair’s movement, as the Aussie has posted losses. The ratio has switched to a majority of long positions, indicative of trader bias towards the Australian dollar reversing direction and moving higher.

AUD/USD Fundamentals

00:30 Australian Private Capital Expenditure. Estimate -1.7%. Actual -2.2%.

13:30 US CPI. Estimate -0.6%. Actual -0.7%.

13:30 US Core CPI. Estimate 0.1%. Actual 0.2%.

13:30 US Unemployment Claims. Estimate 288K. Actual 313K.

13:30 US Core Durable Goods Orders. Estimate 0.6%. Actual 0.3%.

13:30 US Durable Goods Orders. Estimate 1.7%. Actual 2.8%.

14:00 US HPI. Estimate 0.5%. Actual 0.8%.

14:30 US Natural Gas Storage. Estimate -241B.

18:00 US FOMC Member Dennis Lockhart Speaks.

*Key releases are highlighted in bold

*All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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ECB to Accept Greek Collateral if Reforms on Track

The European Central Bank is willing to again accept Greek bonds for funding if Athens keeps to reform pledges, its president said on Wednesday, defending the euro zone central bank’s treatment of Athens.

In a sometimes heated exchange with lawmakers in the European Parliament, Mario Draghi said the ECB could reverse an earlier decision that makes it harder for Greece and its banks to access finance.

“The ECB had no choice other than lifting the waiver,” Draghi told lawmakers, during an appearance in the parliament, raising his voice to overcome heckles as he defended the central bank’s treatment of Greece.

“Having said that, we are ready to reinstate the waiver as soon as the Governing Council will decide that the conditions for a successful completion of the program are in place.”

It appeared from Draghi’s remarks, however, that no such move to again accept Greek bonds as security for ECB funding would be immediate.

The ECB lifted the waiver on February 4.

In its absence, Greek banks are relying on short-term emergency finance.

via CNBC

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Greek Savers Withdrew €12B in January

Anxious savers withdrew €12bn (8.8bn) from Greece’s banks in January, underlining the desperate challenge facing Athens’ anti-austerity ministers during last week’s debt talks.

Figures for February are not yet available from the European Central Bank, but the exodus is likely to have continued after the Syriza-led coalition came to power, and battled to secure a four-month extension on its €172bn bailout loan.

With the ECB offering only limited support to Greek banks under the emergency liquidity assistance (ELA) programme, the scale of the capital flight suggests Athens had to strike a deal last week to halt a bank run that could have endangered the country’s financial system.

Its finance minister, Yanis Varoufakis, who led last week’s Brussels negotiations, eventually secured an agreement in principle on extending emergency funding for Greece. On Thursday, he boasted that deposits had since flooded back into the country.

“There was a deposit flight back into the Greek banking sector,” Varoufakis told Bloomberg TV. “It’s a question of direction. Once you turn the tide, you hope.” He added that €700m was deposited at Greek banks on Tuesday alone.

via The Guardian

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US CPI Falls 0.7% Largest since 2008

U.S. consumer prices in January posted their biggest drop since 2008 as gasoline prices continued to tumble, which could give a cautious Federal Reserve ammunition to keep interest rates low a bit longer.

The Labor Department said its Consumer Price Index fell 0.7 percent last month, the largest decline since December 2008, after slipping 0.3 percent in December. It was the third straight month of decline in the index.

In the 12 months through January, the CPI fell 0.1 percent, the first decline since October 2009 and a sharp deceleration from November’s 0.8 percent rise.

Economists polled by Reuters had forecast the CPI falling 0.6 percent last month and slipping 0.1 percent from a year ago.

Separately, the Commerce Department said a gauge of business investment plans rebounded in January after four straight months of declines.

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending intentions, increased 0.6 percent last month after a revised 0.7 percent fall in December.

via Reuters

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Fed Bullard Wants Summer Rate Hike

The Federal Reserve should make a change to its policy statement next month that would allow it to monitor inflation readings through the spring and then hike interest rates some time in the summer, a top Fed official said on Thursday.

St. Louis Fed President James Bullard said on CNBC the U.S. central bank should drop the word “patient” from its statement at a March 17-18 meeting, in order “to provide optionality … going forward.”

“If we take it out, then we can move at any of the meetings during the summer,” he added. “If expected inflation goes back to more normal levels then I’d have confidence that actual inflation would follow behind. Through the spring here we’ll have to see evidence of that.”

via Reuters

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US Jobless Claims Rise Above Estimates

More Americans sought unemployment aid last week, though the number of applications was still consistent with steady hiring.

The Labor Department said Thursday that weekly applications rose 31,000 to a seasonally adjusted 313,000, the most in six weeks. The four-week average, a less volatile measure, increased 11,500 to 294,500.

Economists polled by Reuters expected a reading of 290,000 in the latest week.
Applications are a proxy for layoffs. The average has been near or below 300,000 since September, a historically low number that suggests companies are holding onto their staffs and may even be stepping up hiring.

via CNBC

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O’Neill Says US Too Reliant on Consumers

The U.S. may not be as strong as investors think because it is growing overly dependent on the consumer for economic growth, said Jim O’Neill, former chairman of Goldman Sachs Asset Management.

“When the U.S. consumer is starting to be more than 70 percent of GDP, as it’s threatening to do again, the U.S. structural story is not as powerful as so many people seem to now believe it is,” O’Neill told CNBC on Thursday. “It was, but it’s weakening.”

A bull case emerged for the United States after the financial crisis in part because investors saw growth coming from structural improvement, rather than cyclical momentum, O’Neill said. The idea was the country would begin rebuilding its savings rate and shore up exports and investments as the consumer took a smaller role in fueling growth, he said.

That shift was beginning to take shape, but in the last year, signs are beginning to emerge that “the consumer is back to being king,” O’Neill said in a “Squawk Box” interview.

“In some ways, the reason we had the whole mess in the first place is because the U.S. consumer was too much of the king,” he said, referring to the financial and subprime mortgage crises.

He pointed to the role of oil production in improving the country’s balance of payments with the rest of the world. Last year, President Barack Obama’s Council of Economic Advisers highlighted strength in the American oil industry as one of three structural changes that would support sustained U.S. growth.

via CNBC

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