Thread: Daily Market Analysis from ForexMart

The USD increased tremendously against the JPY during Thursday’s trading session after investors posted a somewhat hopeful sentiment towards President-elect Trump’s term, as well as his ability to add stimulus to the US economy as well as increase the nation’s interest rates. The USD bounced back to 106.94, its highest level reached since July. The USD/JPY pair closed down the previous trading session at 106.793 points after increasing by +1.08% or 1.139 and is expected to make further gains at 3.5%.


Since today is a US bank holiday, the USD is expected to get high levels of support from the US Treasury market, which could possibly lead to limited upside activity or profit taking, especially since US Treasury yields reached its highest levels this week, its highest after 10 months. The USD/JPY could either increase further if the US reflation trade gains momentum and long-term US Treasury yields go higher, or the currency pair could be augmented by a steady flow of interest rate hikes from the Federal Reserve. However, there is also a possibility that the USD could lose its footing against the JPY, especially since one of the major highlights of the Trump presidency is protectionism, which could adversely affect the US foreign trade.


The recent activity of the USD as well as the US equity markets suggest that investors are expecting that Trump would be able to become successful with regards to expanding the US economy by way of tax cuts and fiscal spending. These could induce inflation levels and add up to the US debt, prompting the Fed to increase interest rates next year in a more frequent succession than previously expected.


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The GBP/USD also experienced the effect of the increased market volatility during the US elections, however its reaction was largely different compared to that of the other currency pairs. The GBP/USD pair was steadily increasing amid initial market expectations of a Clinton victory but as it became clear that Trump was winning the presidency, the currency pair suddenly increased in value as opposed to other currency pairs, which either went up and down or experienced a large decline.


The GBP/USD reached the 1.2550 range but slowly decreased as the market reconciled with a Trump victory and as the USD slowly regained some of its lost value. However, as the other currency pairs steadily dropped in value as the USD rose, the sterling pound instead rose higher and came to rest at a much higher trading range than the USD. This led to speculations that since the US was able to survive the sudden onslaught brought about by a Trump victory, the UK would also be able to hold off on its own as the Brexit progresses. The increase in the GBP was largely due to a minimizing of the initial market overreaction to Brexit, and causing the pair to go up to 1.2670 and ended the previous week with just a little below 1.2600.


The market is expecting the release of the CPI data and inflation reports from the UK this week, which could give hints regarding the overall status of the UK economy and help in evaluating the further effects of Brexit on the nation’s economy.


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The USD/CAD pair was able to reach its short-term target of 1.3500 since the pair was one of the least volatile currency pairs after the market’s reaction to the US presidential elections last week. The USD in particular exhibited wild up-and-down motions while the US elections was in process as investors did not know how to react to the sudden victory of Donald Trump. Trump is not yet known how to act as a political figure, however he is expected to implement protectionist policies and it is expected that Canada would also be affected by Trump’s “neighbor” policy, causing the CAD’s reaction to the elections to become somewhat muted as compared to other currencies.


Oil prices have also experienced added activity last week, as this commodity has a significant effect on the Canadian economy. For this week, major economic releases from the US include the retail sales data as well as a testimonial from Fed’s Janet Yellen who is expected to outline the Federal Reserve’s future policies. The market is still expecting a rate hike in December, and the Fed is also expected to increase the frequency of its rate hikes for 2017, and this speculation has been one of the reasons behind the large upticks occurring in the USD/CAD pair. However, these policies might be subject to changes as the weeks progress and as Trump assumes office next year.


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The USD experienced a sharp increase against the JPY following a series of investor reactions regarding Donald Trump’s sudden victory in the US elections. The USD/JPY pair closed down last week’s session at 106.615 points after increasing by +3.45% or 3.552 points.


A large number of investors had a flight to safety on November 8 due to uncertainties brought about by the elections, a move highly similar to the Brexit referendum last June. This resulted to increases in the prices of gold and CHF, but as the market came to terms with a Trump victory this has resulted to a steady increase in the US dollar. The market is now expecting added inflation due to Trump’s policies, which include added fiscal spending and production of trade. This has caused the US Treasury yields to increase, therefore putting upward pressure on the USD and making the USD a more sensible investment as compared to Japan’s government bonds. Analysts are now saying that this could compel the Federal Reserve to increase the frequency of its rate hikes.


The USD/JPY pair is expected to continue increasing if the US Treasury yields continue to strengthen as well. Major economic releases from Japan include the nation’s Preliminary GDP, which is expected to clock in at 0.2%, which is the same as the previous GDP report. For the US, expected economic releases are the Retail Sales data, Philadelphia Fed reports, Building Permits data and the Producer Price Index data. Federal Reserve Chairwoman Janet Yellen is also expected to make a statement on Thursday.


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The EUR/GBP pair lost its sellers below the 0.86 region for the third consecutive session, maintaining the currency pair’s stance over the key levels in the light of a highly active economic calendar. The market is expecting the release of Germany’s GDP report for the third quarter of 2016. The CPI data for the UK is also expected to exhibit an increased cost of living for the nation at 1.1% for October. The GDP report for the European Union is also expected to get significant attention from market players as it gets released later in the session.


The increased activity in the economic calendar could lead to an increase in stock market activity, which will then have a significant impact on the demand for EUR. The EUR/GBP is currently trading at the 0.8610 range, and incessant bounces from the 0.86 handle could possibly cause the pair to break through the handle and could lead the pair to trade at 0.8652 points and 0.85. On the positive territory, if the pair manages to go above its 100-DMA of 0.8628 then this could cause the pair to go over 0.8664 and possibly even reach its zero figure of 0.8700.


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The USD has been recently exhibiting a steady increase, causing the EUR/USD pair to open this week’s session with a weaker value and went even lower as the previous session progressed. The currency pair closed last week’s session at its support levels of 1.0850 and the market was expecting further support levels at 1.0800. However, the EUR/USD started out the previous trading session at below 1.0800 in the light of a broadly increasing USD value.


The EUR/USD further decreased in value, going through 1.0750 at the London session and tested support levels at 1.0700 at the start of the New York trading session. The movements of the EUR/USD were somewhat muted during the course of the trading session, mainly due to the significant strength of the USD plus Draghi opting to stay mum with regards to the ECB’s future plans on its monetary policies. The currency pair spent the rest of the New York session consolidating after the market chose to keep a positive outlook for the Trump presidency, and the USD is expected to have a continuously positive reaction in the market.


The market is now expecting the release of Germany’s preliminary GDP during the European session, as well as the retail sales data from the US to be released during the New York session. These are expected to confirm market speculations with regards to the Fed rate hike in December.


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The JPY was subject to selling pressure following a speech from the Bank of Japan’s Haruhiko Kuroda. The Japanese yen was unable to receive substantial support from domestic demand in spite of the positive output for the Japanese GDP for the third quarter. Meanwhile, the USD was subject to increased buying pressure, causing the USD/JPY pair to increase in value. The currency pair’s value continued to trade along the upper range, with the pair testing the 108.00 range, where it remained until the end of the London trading session. The New York session saw the USD/JPY break through its previous level and buyers were able to extend profits beyond the 108.00 region.


The USD/JPY’s 4-hour chart shows the pair going well beyond its current moving averages, while the pair’s 50, 100, and 200 EMAs showed a significant increase in value. Resistance levels for the USD/JPY is currently at 108.50, while support levels are expected to be at 108.00. The pair’s technical indicators are all situated at the positive region. The USD will have to go beyond 108.00 in order to maintain the pair’s bullish stance and to keep the pair going up to 108.50. Sellers are also expected to make a comeback in the market, with the 106.50 as their primary aim for the USD/JPY.


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The AUD/USD pair exhibited increased volatility during Tuesday’s session but ended the session on a higher range at 0.7559 points after increasing by +0.05% or 0.0004 points. Meanwhile, the NZD/USD closed down the previous trading session at 0.7099 after decreasing by -0.24% or 0.0017 points.


The Australian dollar received substantial support after the Reserve Bank of Australia released the minutes of its recently concluded policy meeting. The minutes of the RBA showed a balanced inflation risk, indicating a more stable monetary policy which is expected to go forward. The RBA has also showed a positive stance with regards to global growth. However, the market has to consider that the RBA meeting took place prior to the election of Donald Trump.


The Australian dollar broke sharply as the session closed due to the release of the US retail sales data which came out on a much positive note as compared to October’s data. According to report, majority of households in the US purchased a wide range of goods, including motor vehicles. The retail sales report indicates that the US economy is sustaining enough growth which could increase the possibility of a Fed rate hike in December. However, the Federal Reserve has stated that it will be closely watching the regulation of the financial market as well as interest rates due to Trump’s fiscal spending proposals. The Fed Vice Chairman has also stated that however risky the market liquidity is at present, the liquidity is just enough to sustain the movement of the global market.


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The USD continued to rise against the JPY as investor reaction caused the USD/JPY to reach its highest levels since June 2016. This has caused the market to reach its striking distance range since May at 111.44 points. The USD/JPY pair finished off the previous session at 109.181 points after increasing by 0.760 or +0.70%.


This recent rally was mainly caused by a sharp increase in US Treasury yields following the bullish report for the US retail sales data. The US Commerce Department has reported that retail sales data went up by 0.8% for the previous month, with September retail sales data revised to have increased by 1.0%. The retail sales data for both months were the highest data release since 2014, with retail sales data increasing by 4.3% as compared to last year.


Traders also reacted to an increase in import prices from 0.2% to 0.5%, a signal that inflation rates are now steadily increasing. The USD/JPY is expected to continue increasing towards 111.444 as US Treasury yields are still expected to increase further. Meanwhile, Japanese Government Bonds are still at the bottom range while US Treasury 30-year Bonds are steadily rising. Investors are waiting for the release of the Produce Price Index which is expected to maintain its previous reading of 0.3%. The data for the Capacity Utilization Rate is also expected to remain at 75.5%, while Industrial Production data could possibly show a slight increase from 0.1% to 0.2%.


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The GBP/USD pair remains in the lower trading range even though it has managed to stay above 1.2400. Market players have long been speculating that the after-effects of the Brexit referendum will continue to have an influence on the sterling pound no matter how many times it would increase and its bulls will not be able to stay put. The GBP will have difficulty with regards to getting and maintaining a substantial bull stance since the Brexit process will be too risky for investors and traders for them to make long-term bets. The currency pair has recently been trying to break through its rut, but any uptick by the sterling pound is always met with suspicion from investors and is always seen as a sell opportunity. The pair was somewhat able to increase by 200-300 pips during the past trading sessions but was incessantly pushed down by bears and has returned below 1.2500.


For today’s trading session, investors are expecting the release of the UK retail sales data during the European session, with investors waiting whether this particular data release would be able to exceed initial expectations. The CPI data from US and comments from Fed’s Janet Yellen is also expected to make its rounds today, and the GBP/USD could possibly benefit if Yellen confirms the occurrence of the Fed rate hike in December by going down to the 1.2300 region.


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