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High-level NAFTA talks to continue as sideline of Summit of the Americas in Lima

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    ActionForex.com
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    High-level NAFTA negotiations will resume this week on the sidelines of the Summit of the Americas in Lima, Peru this weekend. U.S. Trade Representative Robert Lighthizer will be present in the occasion even though President Donald Trump cancelled is trip. Canadian Foreign Minister Chrystia Freeland and Mexican Economy Minister Ildefonso Guajardo will be there too.

    It’s believed that Trump is still seeking to close the NAFTA deal quickly and offered a concession regarding car contents. The timing is important as securing the deal by May should meet all the necessary deadlines to have the revised NAFTA agreement approved by Republican-controlled Congress, before mid-term elections. Another key milestone is Mexican elections on July 1.

    BoJ Kuroda and Maeda: Medium- and long-term inflation expectations improving

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      ActionForex.com
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      BoJ Governor Haruhiko Kuroda spoke at a branch manager meeting today. He expressed the an upbeat view on inflation. Kuroda noted improving output gap as well as heightening medium- to long-term inflation expectations. Thus, He expected “inflation accelerate as a trend and head toward 2 percent.” Also, “Japan’s economy is expected to continue expanding moderately”. Nonetheless, Kuroda maintained that the ultra loose monetary policy needs to be maintained “until needed to stably and sustainably achieve” its target.

      Separately, BOJ Executive Director Eiji Maeda told the parliament that “medium- and long-term inflation expectations are recently emerging from weaknesses. Also “wages and inflation are rising moderately.” Maeda also said that “Japan’s economy is making steady progress toward achieving the BOJ’s 2 percent inflation target”.

      RBNZ McDermott: We’re entering the next stage of evolution

        By
        ActionForex.com
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        RBNZ Assistant Governor and Head of Economics John McDermott discussed “evolution in inflation targeting” in a speech  delivered to the RBA conference on central bank frameworks in Sydney today. He noted that the New Zealand “framework has changed significantly over thirty years, reflecting lessons learned and the changing economic and political environment” And, the central bank is ” about to enter the next stage of that evolution.”

        A key recent change to RBNZ’s framework is duel mandates of inflation and employment. The exact wordings to be put on the Reserve Bank Act are not finalized yet. But putting a qualitative target like “maximum sustainable employment” would be a better choice rather than a numerical target. He pointed out that “focusing too narrowly on one indicator, such as the unemployment rate, can be misleading. For example, a fall in the unemployment rate could be the result of an increased demand for labour – typically reflecting a strong economy – or the result of people dropping out of the labour force altogether because they are unable to find a job and have become discouraged.”

        Full speech here. An interesting read for understanding how the RBNZ framework evolved in the past decades.

        Dollar gets no support from hawkish FOMC minutes, Dollar index breakout yet to occur

          By
          ActionForex.com
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          The minutes of the March FOMC meeting revealed nothing surprising. Almost all policymakers supported a rate hike even though there were a couple of them pointed to benefits of waiting a bit longer. All policymakers expected inflation to rise in the coming months, showing receding worry on the inflation outlook. Nonetheless, the pick-up in inflation is not enough to alter the projected rate path yet. Regarding the economy, it’s a consensus view that outlook has strengthened in recent month. Meanwhile, a strong majority of the members viewed escalation in trade tension and retaliation by other countries as downside risks for the economy.

          The minutes are seen as hawkish in general, but not more hawkish than expected.

          After the minutes, pricing of a June hike is little changed. Fed fund futures are pointing to over 95% chance of a June hike.

          Little change in USD’s performance too. It’s staying as the weakest one for the week.

          While dollar index weakened notably this week, it’s still staying in range above 88.25. We’d maintain that as it’s close to medium term trend line resistance, breakout is imminent. But probably a little more time is needed for selling to gather momentum.

          Gold breaking out from triangle pattern, heading to 1400?

            By
            ActionForex.com
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            Gold surges to as high as 1365.24 so far and is attempting to break out from recent triangle consolidation. Immediate focus is now on 1366.05 high, which is nor far away. Based on current momentum, break of 1366.05 should send gold to 61.8% projection of 1236.66 to 1366.05 from 1319.82 at 1399.78, which is close to 1400 handle.

            However, we’d pointed this out before, and would like to reiterate this point again. There are two resistance levels to overcome from a longer term point of view. Firstly, that’s 1375.15, 2016 high. Secondly, that 38.2% retracement of 1920.94 (2011 high) to 1046.54 (2015 low) at 1380.56. This 1375/80 zone is the real test for gold ahead.

            Fresh selling in USD after Saudi Arabia intercepted missiles over Riyadh, CAD follow oil higher

              By
              ActionForex.com
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              USD suffers another round of selloff after report that Saudi Arabia intercepted missiles over Riyadh after at least three blasts were heard in the city. WTI crude oil surges to as high as 66.82. It remains to be seen if it can sustain above key resistance level at 66.66. But momentum is promising.

              Riding on the news, USD/CAD extends recent to as low as 1.2544. It’s on course to next support level at 1.2450.

              DOW opened lower but stabilized in initial trading. It’s currently struggling around 55 H EMA, feeling heavy. Losing 24200 handle will likely prompt sellers to come out and send DOW back to 24000 handle.

              US CPI and Core CPI accelerated, But USD weak against Euro and Yen

                By
                ActionForex.com
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                US headline CPI dropped -0.1% mom in March, below expectation of 0.0% mom. But annual rate accelerated to 2.4% yoy, up fro 2.2% yoy and met expectation. Core CPI rose 0.2% mom, 2.1% yoy, up from 1.8% yoy in February, and met expectations.

                CPI provides little support the USD. Rising geopolitical tension in Syria is weighing market sentiments and the greenback. Trump’s attention is now temporary away from China and back to Russia, with his tweeted to warn Russia of missiles in Syria.

                USDJPY’s immediate focus in now on 106.61 minor support in early US session. Break will put 105.65 into focus.

                EURUSD doesn’t bother much about the Syira news and is on track for 1.2475.

                FOMC minutes will be the next major focus in US session. But even something hawkish there is unlikely to give USD a lift.

                ECB Draghi: EU cannot solve problems just at national levels

                  By
                  ActionForex.com
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                  ECB President Mario Draghi spoke at the Generation €uro Students’ Award today. He said that EU cannot solve its problem just at national levels. And, more integration will allow EU to face economic challengers more effectively. Draghi also sounded easy regarding recent escalation in trade tension between US and China. In his view, the impact of the tariffs “announced” is small. Nonetheless, this could still hurt investor confidence. And Draghi emphasized that while “the direct effects are not big… in the end the key issue is retaliation.”

                  Separately, ECB released a paper titled “Completing the Banking Union with a European Deposit Insurance Scheme: who is afraid of cross-subsidisation?” The paper noted that study results indicated that a ” fully-funded DIF (Deposit Insurance Fund) would be sufficient to cover payouts even in very severe crises – even more severe than the 2007-2009 global financial crisis.” And, “EDIS (European Deposit Insurance Scheme) would offer major benefits in terms of depositor protection while posing limited risks…since the probability and magnitude of interventions are likely to be low.”

                  The 57-page paper can be found here.

                  JPY rebounds as Trump tells Russia to get ready for missiles

                    By
                    ActionForex.com
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                    European stocks dive while JPY rebound strongly after Trump’s Syria warning.

                    In his usual morning tweet, Trump wrote “Russia vows to shoot down any and all missiles fired at Syria. Get ready Russia, because they will be coming, nice and new and “smart!” You shouldn’t be partners with a Gas Killing Animal who kills his people and enjoys it!

                    In the current 4H heatmap, JPY and CHF are the clear winners. GBP started to pare back recent gains after weaker than expected industrial and manufacturing production released earlier today. Commodity currencies, AUD, CAD and NZD are also pressured as risk aversion resurfaces.

                    ECB Hansson: Low inflation in Euro area due to temporary factors

                      By
                      ActionForex.com
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                      ECB governing council member Ardo Hansson said recent low inflation in the euro area has been the result of “a combination of factors.” And, most of these factors are “temporary in nature”. Therefore, impact from these factors will “weaken over time”. Therefore, Hansson said “we need to be more patient in achieving our price stability goal.” Nonetheless, ECB still has to monitor the side effects of policy carefuly.

                      GBP pares gain as industrial and manufacturing production missed expectation

                        By
                        ActionForex.com
                        -

                        GBP/USD pares some of earlier against after disappointing data.

                        • Industrial production rose 0.1% mom, 2.2% yoy in February, below expectation of 0.4% mom, 2.9% yoy.
                        • Manufacturing production dropped -0.2% mom, rose 2.5% yoy, below expectation of 0.2% mom, 3.3% yoy.
                        • Construction output dropped -1.6% mom in February versus expectation of 0.7% mom.
                        • Visible trade deficit narrowed to USD -10.2b in February versus expectation of GBP -11.9b.

                        While GBP/USD retreats after hitting 1.4222, it’s still on track to 1.4243 as long as 1.4144 minor support holds.

                        RBA Lowe: No strong case for near term adjustment in interest rate

                          By
                          ActionForex.com
                          -

                          RBA Governor Philip Lowe devoted a section on monetary policy is his address to Australia-Israel Chamber of Commerce (WA) today. And, he brought out four broad points.

                          1. He expects a “further pick-up” in the Australian economy, with increased investment, hiring and exports. Inflation is also expected to “gradually pick up” with wages growth too. But there are uncertainties “lying in the international arena”. Lowe warned that “a serious escalation of trade tensions would put the health of the global economy at risk and damage the Australian economy”. And, “we also have a lot riding on the Chinese authorities successfully managing the build-up of risk in their financial system.” Domestically, the level “high level of household debt remains a source of vulnerability”.

                          2. The next interest rate move will likely be “up, not down”. And that might “come as a shock to some people”.

                          3. Inflation returning to midpoint of target zone is expected to be “only gradual”. And, “it is still some time before we are likely to be at conventional estimates of full employment.

                          4. “Reserve Bank Board does not see a strong case for a near-term adjustment in monetary policy.” Lowe reiterated that other global central banks have lower policy rates than Australia “over the past decade”. So, the situations are different.

                          Here is Lowe’s full speech.

                          IMF Lagarde: Sun is still shining but we have to “steer clear of protectionism”

                            By
                            ActionForex.com
                            -

                            In a speech at the University of Hong Kong, IMF Managing Director Christine Lagarde expressed her optimism on the global economy. She said the “economic picture is “mostly bright” and “the sun is still shining”. Global momentum is driven by “stronger investment”, “rebound in trade” and “favorable financial conditions”. She said the forecast to be release next week will “continue to be optimistic”.

                            Regarding advanced economies, Lagarde said Eurozone’s upswing is “now more widely spread across the region”. US growth will “likely accelerate further due to expansionary fiscal policy”. In Asian emerging markets, China and India lead by “rising exports and higher domestic consumption. But she also warned of “darker clouds looming”. Momentum in 2018 and 2019 will eventually slow because of “fading fiscal stimulus” in the US China, rising interest rates and tighter financial conditions.

                            Lagarde emphasized three priorities for the global economy, including 1. Steering clear of Protectionism, 2. Guard against Fiscal and Financial Risk, 3. Foster Long-term Growth that Benefits Everyone.

                            Here is her full speech.

                            Oil Price Jumped to 4 Years’ High before Profit-taking

                              By
                              ActionForex.com
                              -

                              Brent crude oil price jumped to a fresh 4- year high of US$ 71.34/bbl before settling at US$ 71.04/bbl, up +3.48%. WTI crude oil price also gained +3.3%, ending the day at US$ 65.51/bbl. The rally was driven by the broadly based improvement in risk appetite as Chinese President Xi Jinping’s speech in Boao appeared to have eased US-China trade tensions. Meanwhile, Saudi Arabia’s Energy Ministry indicated that the Kingdom would keep exports below 7M bpd and restore its inventories to “normal” level.

                              Profit-taking in both oil benchmarks on Wednesday was facilitated by the inventory report released after US market close. The industry- sponsored API estimated that crude oil inventory surprisingly increased +1.56 mmb in the week ended April 6. For refined oil products, gasoline stockpile added +2.01 mmb while distillate fell -3.85 mmb for the week. EIA, the US governmental agency, today probably reports a -0.19 mmb draw in crude oil inventory. Gasoline and distillate stockpiles might have dropped -1.43 mmb and -0.03 mmb respectively.

                              UK CBI: Don’t diverge from EU rules after Brexit

                                By
                                ActionForex.com
                                -

                                The Confederation of British Industry published a report showing that UK business overwhelming prefer to stay with EU rules after Brexit. Carolyn Fairbairn, CBI Director-General, said the report comes from “heart of British business” and it provides “unparalleled evidence to inform good decisions that will protect jobs, investment and living standards across the UK.” She urged “major acceleration” in the partnership between businesses and the government to deal with Brexit issues.

                                She warned that “it’s vitally important that negotiators understand the complexity of rules and the effects that even the smallest of changes can have. Deviation from rules in one sector will have a knock-on effect on businesses in others, and divergence from rules in one part of a production process will have consequences for market access throughout entire supply chains.”

                                Fairbairn added that “it’s hard to overstate the importance of the decisions that will be taken over the next six months. Put simply, for the majority of businesses, diverging from EU rules and regulations will make them less globally competitive, and so should only be done where the evidence is clear that the benefits outweigh the costs.”

                                CBI devised three principles for further Brexit negotiations:

                                • Where rules are fundamental to the trade or transport of goods, the UK and EU must negotiate ongoing convergence.
                                • In the negotiation of the new relationship, both sides should look to set a new international precedent in the trade of services and digital products.
                                • Alignment will need to come with mechanisms for influence and enforcement that benefit both sides.

                                Here is the 114-paged reported titled “Smooth operations: An A-Z of the EU rules that matter for the economy“.

                                China PBoC Yi outlines specifics on opening financial market access at Boao

                                  By
                                  ActionForex.com
                                  -

                                  New People’s Bank of China Governor Yi Gang pledged to further open the financial markets in the Boao Forum for Asian in China. And some specifics were offered by Yi too.

                                  Firstly, the government will remove foreign ownership caps on Chinese banks by the end of June.

                                  Secondly, foreign securities and life insurance companies will be allowed to hold majority stakes in their Chinese counterparts. That is, ownership could be raised from 49% to 51%. And such restriction will also be abolished in three years.

                                  Thirdly, by the end of June, the permitted business scope for foreign insurance agents will be expanded.

                                  Fourthly, the daily quota for foreign investors to buy Chinese stocks and for Chinese investors to buy Hong Kong traded stocks will be quadrupled.

                                  In addition, by the end of 2018, China will launch a trading link between Shanghai stock markets to London’s.

                                  Separately, Yi also said that China won’t devalue Yuan as part of the moves of trade war with the US.

                                  Oil price surges as Syria decision imminent

                                    By
                                    ActionForex.com
                                    -

                                    Brent crude oil surged above 70 yesterday partly as USD depreciated. But more importantly, Trump’s decision on Syria in imminent as geopolitical tensions in the Middle East escalates.

                                    Similar picture is seen in WTI crude oil. As seen in the continuation chart, WTI drew strong support from 55 day EMA and rebounded, closing at 65.51 yesterday. 66.66 high is now back in radar. Based on current momentum, this resistance could be taken out very soon.

                                    More importantly, 66.66 is close to long term fibonacci resistance of 50% retracement of 107.68 to 26.05 at 66.87. A strong break of the level will pave the way to 61.8% retracement at 76.50 and above. And that might give USD/CAD another push down towards 1.2 handle.

                                    DOW, S&P 500, NASDAQ not out of the woods yet despite relief rally

                                      By
                                      ActionForex.com
                                      -

                                      Major US equity indices followed other global indices and rebounded strongly overnight on easing trade war fear. DOW closed up 428.90 pts or 1.79% at 24408.00. S&P 500 rose 43.71 pts or 1.67% to 2656.87. NASDAQ also gained 143.96 pts or 2.07% to 7094.30.

                                      However, we’d like to note that all three indices are bounded in recent consolidative pattern started last March/early April.

                                      DOW, despite yesterday’s rise, is staying below last week’s high at 24622.26, below 55 day EMA at 24591.41. It’s also limited below near term falling trendline at around 24722.90. This 24600/700 zone is the key resistance zone to overcome for the near term. As long as it holds, current rebound is seen as part of a consolidation pattern from 23344.52. Once this consolidation completes, there will be another decline through 23344.52 to resume the fall from 26616.71. Firm of the 24600/700 zone will delay the immediate bearish case and bring stronger rebound back towards 25800.35 first.

                                      Similarly, S&P 500 also stays below last week’s high at 2672.08, as well ass 55 day EMA at 2685.16.

                                      NASDAQ breached last week’s high of 7112.38 but didn’t close above. It’s also limited below 55 day EMA at 7159.69.

                                      While US stocks rebounded, they’re not out of the woods yet.

                                      CADJPY, AUDJPY, NZDJPY, which is our preferred choice to go long?

                                        By
                                        ActionForex.com
                                        -

                                        AUD/JPY, NZD/JPY and, CAD/JPY are the clear winners for the day on easing risk aversion. These three pairs are in the top 10 movers across time frames. But which one pair is the better one to go long?

                                        Let’s take a look at respective Action Bias.

                                        A quick glance at AUD/CAD. The cross is clearly in persistent downside D action bias table. And there is no sign of a turn in both 6H and H action bias. This is consistent with smooth decline as seen in the D action bias chart.

                                        The action bias table of AUD/NZD looks even worse with downside biases seen all over the place across 6H, D and W time frame. H neutral action bias suggests the decline might be slowing temporarily. But there is no sign of a reversal. This could also be reflected in the D action bias chart too, that the cross is in a clear down trend.

                                        So, while AUD/JPY is the top mover for today, it seems that NZD/JPY and CAD/JPY will have a better advantage.

                                        How about NZD/CAD? The action bias table shows it’s having persistent blue bars in W time frame and persistent red bars in D time frame. But red bars of downside bias are not apparent in 6H and H time frames. Looking at the D chart, NZD/CAD has been in a solid up trend since December, but turned into correction/consolidation since mid March.

                                        So, for quick intraday trade, there is not much difference between NZD/JPY and CAD/JPY. But for position trading, NZD/JPY is slightly preferred as our choice to go long.

                                        The NZD/JPY action bias table showed persistence upside bias blue bars in H and 6H time frame. This also pushes D action bias to upside side blue too. Taking into consideration that 78.61 resistance is taken out decisively today to confirm near term reversal. NZD/JPY presents long opportunity for 81.55 resistance in near term.

                                        AUD & NZD strong on risk appetite, but EUR overtaking

                                          By
                                          ActionForex.com
                                          -

                                          The financial markets are generally on risk on mode today as Chinese President Xi Jinping’s speech in Boao eased the fear of immediately escalation of trade tension with the US. Nikkei closed up 0.54%, HSI closed up 1.65%. At the time of writing, DAX is up 0.8%, CAC up 0.5% and FTSE up 0.55%. US futures also point to higher open.

                                          In the forex markets, it’s typical in such risk on mode that Aussie and Kiwi are strong while Yen is weak, as seen in the D heatmap. But it also revealed that USD is getting no support from investors’ optimism. And the USD is somewhat dragging down CAD too.

                                          The top movers table revealed pretty much the same picture. In particular, NZDJPY is the among the top 10 across time frame. Both AUDJPY and NZDUSD have their top 10 places in 4H bar overtaken by EUR pairs.

                                           

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