Archive March 2019

US Dollar May Rise as Sentiment Succumbs to Potent Headwinds


USD Chart

US DOLLAR FUNDAMENTAL FORECAST: NEUTRAL

  • US Dollar remains locked in a familiar 2019 trading range
  • Risk appetite breakdown needed for a sustained move higher
  • Capitulation may finally arrive on global slowdown fears

Gain confidence in your US Dollar trading strategy with our free guide!

The US Dollar swung higher against its top counterparts last week, but prices remained firmly confined within the trading range that has contained them since the beginning of the year. The absence of directional conviction probably reflects the currency’s transition from a yield-seeking to a haven-offering asset.

Risk appetite collapsed in late 2018 under the weight of an increasingly gloomy global growth outlook coupled with a broad assortment of political headwinds. The most potent of these in the immediate term are US-China trade war negotiations and the still-uncertain path forward for Brexit.

Priced-in 2019 Fed rate hike bets evaporated against this backdrop, a shift that the central bank has since endorsed. While that understandably withdrew yield-based support for the Greenback, the downbeat mood also put a premium on its unrivaled liquidity appeal and stoked haven demand. That locked it in place.

The FOMC has loudly signaled that is in wait-and-see mode and updated forecasts that might concretely point to anything otherwise are not due until June. That puts risk on/off dynamics firmly in focus, with the cooling business cycle capping the downside but the absence of true collapse limiting upward progress.

Looking for a technical perspective on the US Dollar? Check out the Weekly USD Technical Forecast.

DOWNBEAT DATA MAY STOKE GLOBAL SLOWDOWN FEARS

The week ahead offers ample opportunities to break the deadlock. The data docket features a flood of key growth indicators including US retail sales and employment data as well as back-to-back PMI readings from key economies including China and the Eurozone. The RBA will also issue a policy announcement.

The dour trend in global economic data outcomes relative to forecasts sets the stage for disappointments on the statistical releases, fueling investors’ worries. This may be reinforced by skittish central bank commentary, stoking risk aversion and pressuring USD upward.

US-CHINA TRADE TALKS, BREXIT FIASCO MUDDY THE WATERS

Meanwhile, a delegation from Beijing will arrive in Washington for trade talks and the UK House of Commons will hold yet another round of indicative Brexit votes to gauge where MPs want to take the process. That is after they rejected a plan from Prime Minister Theresa May for a third time Friday.

Signs of progress toward trade war de-escalation might briefly boost risk appetite, but such moves are unlikely to find follow-through absent a formal agreement. As for UK/EU divorce proceedings, there seem to be increasingly few reasons to be optimistic about MPs’ ability to compromise.

On balance, that sets the stage for US Dollar gains. Whether any such move plays out within familiar territory or plants the seeds for a lasting uptrend will depend on the degree of reinforcement from a parallel collapse in sentiment. For what its worth, the bellwether S&P 500 may be setting up for just such an outcome.

— Written by Ilya Spivak, Sr. Currency Strategist for DailyFX.com

To contact Ilya, use the comments section below or @IlyaSpivakon Twitter

US DOLLAR TRADING RESOURCES

Other Weekly Fundamental Forecast:

Crude Oil Forecast – Crude Oil May be Overextended, But Watch Out For Trade Headlines

British Pound Forecast – GBP/USD Rate Threatens Bull Trend Ahead of Brexit Deadline





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GBP/USD Rate Threatens Bull Trend Ahead of Brexit Deadline


GBP Chart

British Pound Rate Talking Points

The British Pound remains battered after days of strenuous negotiations as Prime Minister Theresa May fails to secure a Brexit deal, and the GBP/USD exchange rate may exhibit a more bearish behavior over the coming days as both price and the Relative Strength Index (RSI) threaten the upwards trends from late last year.

Looking for a technical perspective on the GBP? Check out the Weekly GBP Technical Forecast.

Fundamental Forecast for British Pound: Bearish

The Brexit saga continues as the third defeat for Prime Minister May forces Parliament to lodge alternative options ahead of the April 12 deadline, with the region facing a growing risk of leaving the European Union (EU) without a deal as U.K. lawmakers struggle to meet on common ground.

The British Pound is like to face a bearish fate from a no-deal Brexit as the Bank of England (BoE) warns that ‘the economic outlook will continue to depend significantly on the nature and timing of EU withdrawal,’ but it remains to be seen if an extension will be requested as European Council President Donald Tusk plans to hold an emergency meeting on April 10. With that said, headlines surrounding Brexit may continue to influence the British Pound as the economic docket for the U.K. remains fairly light throughout the first full-week of April, but the recent pickup in British Pound volatility appears to be shaking up market participation amid a shift in retail interest.

GBPUSD Client Positioning

The IG Client Sentiment Report shows 65.8% of traders are net-long GBP/USD, with the ratio of traders long to short at 1.92 to 1. The percentage of traders net-long is now its highest since March 11 when GBP/USD traded back above the 1.3100 handle. The number of traders net-long is 26.5% higher than yesterday and 17.1% higher from last week, while the number of traders net-short is 28.0% lower than yesterday and 20.9% lower from last week.

The sharp decline in net-short exposure is likely a result of profit-taking behavior as GBP/USD trades to a fresh weekly-low (1.2977) on Friday, and it seems as though the retail crowd is attempting to trade the range-bound price action carried over from late-February amid the jump in net-long interest. However, a further shift in retail interest may warn of a broader change in GBP/USD behavior, with recent developments raising the risk for a further decline in the exchange rate as both price and the Relative Strength Index (RSI) snap the bullish trends from earlier this year.

Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss potential trade setups.

GBP/USD Rate Daily Chart

GBPUSD Rate Daily Chart

The broader outlook for GBP/USD is no longer bullish as both price and the Relative Strength Index (RSI) threaten the upwards trends from late last year, and the advance from the 2019-low (1.2373) may continue to unravel following the string of failed attempts to close above the Fibonacci overlap around 1.3310 (100% expansion) to 1.3370 (78.6% expansion).

Recent series of lower highs & lows raises the risk for a further depreciation in GBP/USD, but need a break/close below the 1.2950 (23.6% retracement) to 1.3000 (61.8% retracement) area to open up the next downside hurdle around 1.2880 (50% retracement) to 1.2890 (23.6% expansion).

The 1.2760 (38.2% retracement) to 1.2800 (50% expansion) zone comes up next followed by the overlap around 1.2610 (23.6% retracement) to 1.2640 (38.2% expansion).

Additional Trading Resources

For more in-depth analysis, check out the 2Q 2019 Forecast for GBP/USD

Are you looking to improve your trading approach? Review the ‘Traits of a Successful Trader’ series on how to effectively use leverage along with other best practices that any trader can follow.

Want to know what other currency pairs the DailyFX team is watching? Download and review the Top Trading Opportunities for 2019

— Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.

Other Weekly Fundamental Forecast:

Crude Oil Forecast – Crude Oil May be Overextended, But Watch Out For Trade Headlines



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No Brexit Deal- Pound Losses Mount


The British Pound is down nearly 1.5% this week against the US Dollar to trade at 1.3024 ahead of the New York close on Friday. These are the updated targets and invalidation levels that matter on the GBP/USD weekly chart heading into the close of the month/quarter. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.

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GBP/USD Weekly Price Chart

GBPUSD

Notes: In my last GBP/USD Weekly Technical Outlook we noted that,” The threat remains for further loses in the British Pound within the confines of ascending formation we’ve been tracking off the 2018 & 2019 lows.” An outside weekly reversal into parallel resistance early in the month has continued to govern the range in price with the recent pullback now testing the 61.8% line of the ascending pitchfork formation.

The threat remains for a deeper pullback within the confines of the uptrend with a break lower here to challenge key support and broader bullish invalidation at 1.2754-1.2801 – a region defined by the 2019 open, the 61.8% retracement and pitchfork support. Resistance stands at 1.3296–1.3302 – a breach / close above this threshold would be needed to fuel the next leg higher targeting the 2017 high-week close / slope resistance at 1.3494.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

Bottom line:

The broader risk remains weighted to the downside heading into the close of the month / quarter but ultimately the broader outlook remains constructive while above yearly open support at 1.2754. From a trading standpoint, look for a reaction at this support level early in the month – a break / close below would expose a move on the lower parallel- an area of interest for possible downside exhaustion IF reached. I’ll publish an updated GBP/USD Technical Outlook once we get further clarity in near-term price action.

Even the most seasoned traders need a reminder every now and then- Avoid these Mistakes in your trading

GBP/USD Trader Sentiment

GBPUSD

Looking for a fundamental perspective on GBP? Check out the Weekly GBP Fundamental Forecast.

  • A summary of IG Client Sentiment shows traders are net-long GBP/USD – the ratio stands at +1.92 (65.8% of traders are long) – bearish reading
  • The percentage of traders net-long is now its highest since March 10th
  • Long positions are26.5% higher than yesterday and 17.1% higher from last week
  • Short positions are 28.0% lower than yesterday and 20.9% lower from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBP/USD prices may continue to fall. Traders are further net-long than yesterday & last week, and the combination of current positioning and recent changes gives us a stronger GBP/USD-bearish contrarian trading bias from a sentiment standpoint.

See how shifts in GBP/USD retail positioning are impacting trend- Learn more about sentiment!

Learn how to Trade with Confidence in our Free Trading Guide

— Written by Michael Boutros, Technical Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex

Other Weekly Technical Forecast:

Crude Oil Prices Edge to 5-Month High, Doesn’t Feel Like a ‘Breakout’





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S&P 500 Ends Quarter Strong, Pound Hit on Brexit Again, Dollar Reaps


BrexitTalking Points:

  • The S&P 500 gapped higher Friday but did little to progress recent congestion – though it did close the best quarter in a decade
  • UK Prime Minister May was dealt another rejection on her Brexit proposal (344 against and 286 for), where to from here?
  • If the Pound and Euro continue to slide – on themes such as monetary policy or local events like Brexit – the Dollar can break higher

See how retail traders are positioned in GBPUSD after the most recent Brexit vote failed, Gold as it forms a head-and-shoulders pattern, the Dow as it works into a decision-making wedge along with the rest of the FX majors and indices intradayusingthe DailyFX speculative positioning data on the sentiment page.

Risk Trends’ Strong Quarter, Modest Month, Tepid Week

Depending on what time frame you evaluate the capital markets, you could be left with a sense of extraordinary enthusiasm for a sustained risk-based charge moving forward or deeply skeptical that the bulls will retain control of the yoke for much longer. The S&P 500 is a great example of how we can change time frame to draw a different conclusion of just how robust our current market sentiment. Given that Friday was the last trading day for March, we have closed the ‘first quarter 2019’ candle. This high time frame that very few – even technical traders – reference stamped the strongest quarterly advance for the benchmark equity index in a December (specifically the second quarter of 2009). That is an extraordinary reference point, but not a particularly appropriate one if you intend to extrapolate where we head to from here. The scale of this remarkable three-month climb is comparable in intensity to the preceding period’s collapse – a tumble that nearly qualified as a technical ‘bear market’, coming up just shy of a 20 percent retreat from record highs on a close-over-close basis. When we increase the frequency of historical data to see more recent pacing, it quickly becomes obvious that there is far less unchecked optimism in the markets. That is even more apparent when we compare the unique, outperforming US indices to more grounded risks assets like global equities, emerging markets, junk bonds, carry trade and government bond yields.

Chart of S&P 500 and 1-Period Rate of Change (Quarterly)

Chart of S&P 500 and Quarterly Change

To garner genuine traction for the likes of the Dow as it attempts to forge new record highs or to simply muster enough enthusiasm to simply return so many other assets to their highs at the very start of 2018, it is critical to foster genuine conviction. That will prove difficult to achieve and such systemic influencing can work both ways. Heading into the new week, it seems like the negotiations around trade wars is being proactively promoted as a reason for enthusiasm. US and Chinese officials have voiced optimism and remarked on what they see as critical progress in their discussions to roll back tariffs on over $350 billion in goods. While that removes a threat, it doesn’t exactly foster a renaissance in growth or speculative wave. Growth remains a principal concern as well. The 10-year/3-month spread in Treasury yields notably flipped positive again Friday, but that hardly absolves the fear it aroused – not that the initial signal was particularly reliable. We will now revert to tabulating the global signals from data, sentiment surveys and forecasts from various sources – a slower, uneven process for taking control. If the focus shifts back to monetary policy, we may start to register an unfavorable level of desperation that the market sniffs out quickly. This past week, White House Economics Advisor Larry Kudlow called on the Fed to cut 50 bps, but he said the economy still looked strong… Elsewhere, an OECD member warned a central bank of France crowd that if conditions soured in the Eurozone, the ECB would not have the capacity to ward off the trouble.

Another Brexit Vote Against May, The Euro and Pound Will Be Pulled in the Spider Web

As a regional risk, the Brexit troubles are increasingly spilling over the boarders of the British Pound and UK markets. That isn’t a surprise given the time to work a solution is dwindling and the possible outcomes are narrowing with the more extreme solutions seem to be gaining in probability. This past week of important votes ended with the same sense we have registered so many times over the months: no clear path forward. The government fielded Prime Minister Theresa May’s Brexit proposal for a third time this past Friday, hoping that the failure of the indicative votes 8 options would warm her party to offer support. That didn’t prove to be the case. In the week ahead, we have another round of non-binding indicative votes on Monday, but there is little confidence in the market that any new resolution is at hand. The April 12th time fame is now in effect for the UK to find an acceptable path forward to unlock the extension to May 22nd. EC President Donald Tusk called a European Council for April 10th to ready Europe an increasingly threatening course forward. If you intend to trade the Pound, beware the high probability of volatility with uncertainty cutting liquidity and leveraging the impact of headlines. If we find any consistency, I like GBPUSD’s range as a bullish candidate with a Pound rally – path of least resistance. If the Sterling is to enter a concerted drop, I like the head-and-shoulders patterns from GBPJPY and GBPAUD.

Chart of GBPAUD (Daily)

Chart of GBPAUD

So long as we move forward with the UK-EU divorce with no resolution in sight, the concern surrounding the economic and financial fallout will radiate further and further outward. The most immediate blowback outside of the UK’s borders is the direct implications an economic and liquidity break would mean for the European Union / Eurozone. We are already starting to register some of the weight of this trade partner issue with an equally-weighted Euro index dropping support dating back to 2017 this past week when local issues have failed to do so. That said, there are additional local issues that could amplify the currency’s trouble. The ECB’s position will come into view with their preferred data (CPI and jobless rate) on tap along with the central bank’s minutes. Italy is another Euro issue that can be revived. If Europe is generally depressed by a painful divorce (along with their own individual, local issues), there is only one direction for capital to flow: towards greater liquidity. The only FX source with greater depth that the Euro and Pound is the US Dollar. That chief alternative view role is similar to its utility as an ‘ultimate haven’. Liquidity first, second and last.

The Important Risk Signal from Global Yields, Crude Oil Prices and Gold

As we keep tabs on blatant systemic risks and regional fundamental troubles, it is important that we look to a variety of market measures to garner a more complete picture of what we are dealing with. The US indices for example may be the best performing risk assets, but that also comes with a poor track record for giving early signal of tentative tide changes towards global risk aversion. In particular, I am focusing on the implications of global government bond yields in their capacity as a reflection of investor expectations – just like the Dow – but also their more reliable connection to growth. It could be said that yields are being artificially driven lower by central banks’ penchant for extreme accommodation, which would be fair. That said, these authorities are theoretically applying policy against their expectations for economic and financial health which would thereby be troubled. The severe disparity between the S&P 500 and aggregate 10-year government bond yield index (US, UK, German and Japanese issues) troubles me the most. These two measures will converge, and it is not likely yields that will be closing the gap.

Chart of the S&P 500 and Aggregate Yields of US, UK, GE, JP 10-Year Gov’t Bonds (Daily)

Chart of S&P 500 and Treasury Yields

Meanwhile, commodities are offering important signals of their own. Crude oil is another asset that finds deeper rooting in economic health, which is often a throttle on sheer speculative appetite which a measure like the US indices enjoy. The rebound from crude oil prices so far this year is a far smaller percentage than its local equity counterpart. Nevertheless, its first quarter was still the strongest in 10-year – and following the worst quarterly performance since the Great Financial Crisis. More recent price action shows a very unconvincing effort to break weeks of range and close above $60 in only the most technical of capacities. This doesn’t register well for the connection of economic fortitude and investor appetite. As for gold, the risk implications are far less significant. The metal is a safe haven of a particular sort: seeking an alternative to traditional ‘fiat’ assets that are degraded by extreme central bank actions, burgeoning deficits and an unwillingness of governments to pick up the flagging system. As much as that mix seems to have progressed these past weeks, gold has actually dropped this past month and week. Friday’s tumble was hefty and we find the market is staging a very clean head-and-shoulders pattern. The chart says one thing, but the financial system and this commodity’s role suggest a very different next stage. We discuss all of this and more in this weekend Trading Video.

Chart of Gold and 100-day Moving Average (Daily)

Chart of Gold

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Crude Oil Prices Edge to 5-Month High, Doesn’t Feel Like a ’Breakout’


Crude Oil Technicals Talking Points:

Technical Forecast for Crude Oil Prices: Bullish

With this past Friday’s close, we have not only cleared a week, but the month (March) and quarter as well. From a 30,000-foot view, crude oil’s performance through Q1 was exceptional. In a raw measure of movement, the commodity posted its biggest three-month rally (32 percent) since the second quarter of 2009. That is a remarkable performance for the market and it is easy to project assumptions for next steps. However, it is important to look more closely than just the quarterly candles. Even at this scale, we can tell that the best quarter seems a product of an even more extreme tumble the period before. That registers as reactive rather than productive. Further, previous instances of extreme declines have not prompted equivalent recoveries nor even the ability to fully unwind those preceding losses.

Chart of US Crude Oil with 1 Period Rate of Change (Quarterly)

U.S crude oil

On the opposite end of the time frame spectrum, we find pacing is much less inspiring than what we encapsulate into a single quarterly candle. On the four-hour chart below, we can clearly see the hard fought progress working its way out over the weeks. Through Friday, the bulls were driving hard to overtake the cap on 60.30 – 58.00 range that has been in place over the past two weeks. On an intraday basis, the market managed to overtake the double top high, but there was little follow through on the effort. Perhaps this is merely a function of the fading liquidity into Friday, but it does not set the scene for overwhelming follow through to start next week.

Chart of an US Crude Oil (4-Hour)

U.S crude oil

On my preferred time frame charts – daily – we see both the extraordinary bearish-to-bullish structures over the past six months, as well as the struggle more recently to translate bullish interests into progress. There are a few meaningful technical cues to note in the chart below. The 200-day moving average is standing overhead at approximately 61.65, we are overtaking the midpoint of the October to December tumble and there is a sense of waning momentum in the channel that took root in late December. Also a prominent point on the chart below is the instances where the US President has attempted to ‘jawbone’ the commodity lower, to very limited success. I am not watching the headlines for either President Trump’s insights or OPEC’s supply updates as I doubt they can muster enough of an impact to override the speculative rank’s current aversion to trend. That said, volatility is critical to keep track of.

US Crude Oil with 50-day and 200-day Moving Averages (Daily)

US crude oil moving average

Speaking of volatility, assumptions and activity are set far too low. Below, we have both expected and historical volatility. The red line is actual volatility in crude oil priced measured as the 20-day average true range. It is the lowest we have seen since January 2018. Comfort in bull trends has further reinforced expectations of controlled oil market volatility with the CBOE’s activity measure for the commodity itself at an October low. As it happens, implied volatility seems to be strong across many assets that have a common denominator in risk trends – equities, emerging markets, yields, etc. It is possible that markets are simply settling down for a long period of reflection, but 2018 should stand as a lesson that we cannot fall back on those assumptions and not face considerable risk of another wave.

US Crude Oil with 50-day Moving Averages, 20-day ATR and CBOE’s Oil Volatility Index (Daily)

US crude oil moving average

One of the problems with low volatility is that it can lull us into unrealistic expectations of steady and bullish-leaning markets. This is certainly one of the assets whereby there exists an inverse correlation between direction and volatility level (ie as markets climb, volatility drops and vice versa). If volatility is therefore likely to ‘normalize’ it will carry with it the risk of a bearish move. That would run against the prevailing trend at present, but that would suggest it has greater potential for gaining traction. Meanwhile, the range on the market is extremely tight. In fact, the 10-day historical range as a percentage of current spot is the lowest we have seen since October – before the significant trends developed. Taken together, a break is likely in the short-term, but the strength of follow through is disproportionately supportive of a bearish move below 58.

US Crude Oil with 50-day Moving Average and 10-Day Historical Range (Daily)

US crude oil 50 day moving average

Though the principal focus here is technicals, that doesn’t mean we should write off the influence of fundamental motivation. Where Trump tweets and OPEC warnings will struggle for serious traction – as discussed above – there is a more systemic driver that we can follow in a rather simple comparison. Crude oil is a risk-based asset with a little more rudimentary economic connection than a purely financial product like the S&P 500 and shares. The fact that crude has trailed the index is in part recognition of its connections to more traditional measures of value. Nevertheless, the general connection is an important one to watch. With a strong general correlation (the red surface is a 20-day correlation coefficient), a sharp decline in stocks and risk in general could result in an exceptionally strong response from crude oil. In contrast, just as the advance is more difficult for the S&P 500 moving forward, so too could crude find an advance throttled.

US Crude Oil with S&P 500 and 20-Day Correlation Coefficient (Daily)

Crude oil

In terms of positioning, large speculative futures traders have started to buy into the possibility of a systemic reversal from the market. We’ve seen a shift favoring a build up of net long exposure following the record high we set nearly a year ago. Just as the high in speculative interest was disproportionate to the level of the underlying, the unwinding fell far short of the lows established in the market. Volatility in positioning is likely to remain high which means volatility in the underlying will likely result. In the meantime, retail traders have transitioned to range trading with a net position flipping back and forth around a balanced exposure, which is far more practical given conditions. While general habit shortfalls for the retail crowd sometimes make their actions a contrarian signal, this may be an environment that proves their interests appropriate.

Looking for a fundamental perspective on oil? Check out the Weekly Crude Oil Fundamental Forecast.

Chart of Net Speculative Positioning in Crude Oil Positions from CFTC Report (Weekly)

US oil and COT

Chart of Retail Trader Positioning from IG Clients (Daily)

oil sentiments



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Crude Oil May Be Overextended, But Watch Out For Trade Headlines


Crude Oil Chart

Fundamental Crude Oil Forecast: Neutral

  • Crude oil’s uptrend looks solid enough
  • However, it also looks overbought at a time of deep fundamental uncertainty
  • A consolidation could be coming, assuming no left-field trade news

Looking for a technical perspective on Crude Oil? Check out the Weekly Crude Oil Technical Forecast.

Find out what retail foreign exchange traders make of the Australian Dollar’s prospects right now, in real time, at the DailyFX Sentiment Page

Crude oil prices head into a new week still very much within the uptrend on their daily chart which has endured since the lows of last December.

To be sure clear uncertainties still glower over likely global economic growth. Data from all key regions has disappointed of late, with last week’s softer US growth numbers only adding to the sense of deepening malaise.

Of course, a feeble global economy will lead inevitably to reduced oil demand, so it’s reasonable to assume that the current up-move remains rooted in expectations of reduced supply. After all, oil prices are now about 30% above their 2018 lows supported by output cuts from the Organization of Petroleum Exporting Countries and other major players, along with US sanctions on Venezuela and Iran.

US President Donald Trump last week called on OPEC to ‘increase the flow of oil.’ He seems to have done so in less bellicose terms than those in which he has previously couched similar entreaties, this time noting fragile global markets.

This week will bring news of Chinese economic performance in the form of official and private Purchasing Managers Index surveys, with the country’s manufacturing sectors expected to keep contracting, as it has for three straight months already. The markets will also get a look at Japanese business confidence in the bellwether Tankan survey due for release on Monday. Official US labor statistics will round out the week’s numbers.

Given recent data disappointments there would seem to potential risks for oil prices in all this data. Moreover, the crude oil spot market is also edging up toward overbought levels judging by momentum indicators such as its Relative Strength Index. It could be due a rest.

The main risk to current, bearish fundamentals is potential good news on the trade front from talks between China and the US. News of any settlement will probably see all growth-linked markets get a substantial fillip, probably including that for crude. There’ve been encouraging noises from both parties on this score of late, but the coming week may be too early for definitive progress.

With that in mind it’s a neutral call.

US Crude Oil

Resources for Traders

Whether you’re new to trading or an old hand DailyFX has plenty of resources to help you. There’s our trading sentiment indicator which shows you live how IG clients are positioned right now. We also hold educational and analytical webinars and offer trading guides, with one specifically aimed at those new to foreign exchange markets. There’s also a Bitcoin guide. Be sure to make the most of them all. They were written by our seasoned trading experts and they’re all free.

— Written by David Cottle, DailyFX Research

Follow David on Twitter@DavidCottleFX or use the Comments section below to get in touch





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Yen and US Dollar May Resume Offensive on Brexit, Soft Data Flow


TALKING POINTS – LYFT, US-CHINA TRADE TALKS, BREXIT, GLOBAL GROWTH

  • Hopes for progress in US-China trade talks, Lyft IPO lift market mood
  • Another botched Brexit vote, soft economic data may cool risk appetite
  • Yen, US Dollar may resume offensive as S&P 500 chart warns of top

The Australian and New Zealand Dollars tracked stocks higher while the anti-risk US Dollar and Japanese Yen backpedaled as sentiment firmed on Asia Pacific bourses. US Treasury Secretary Mnuchin stoked hopes for progress in US-China trade talks and Lyft managed a seemingly strong IPO. The ride-hailing company raised $2.34 billion – coming in at the top end of forecasts – before today’s trading debut.

Futures tracking bellwether US and European stock index futures are pointing higher before London and New York come online, hinting at more of the same ahead. Follow-through may yet fizzle however. Trade war de-escalation has been a flimsy upside catalyst of late, another Brexit vote in the House of Commons may end in stalemate, and incoming economic activity data might stoke global slowdown worries.

The impact of recent upturns in US-China negotiations – like the Trump administration’s shelving of a planned tariff hike on $200 billion in imports – was limited to brief bursts of intraday optimism. Meanwhile in Westminster, a third drubbing for UK Prime Minister May’s EU withdrawal plan would prolong uncertainty and sour the markets’ mood. If Lyft thus falls on its first trading day, so much the worse for sentiment.

On the data front, GDP reports from the UK and Canada as well as US PCE and home sales numbers are in focus. Market participants may painfully reminded of the precarious state of the global business cycle if the results that cross the wires disappoint, echoing the increasingly entrenched tendency for economic news flow to underperform relative to baseline forecasts.

What are we trading? See the DailyFX team’s top trade ideas for 2019 and find out!

CHART OF THE DAY – S&P 500 SEEMINGLY WAITING FOR A SELLOFF TRIGGER

Yen and US Dollar May Resume Offensive on Brexit, Soft Data Flow

The bellwether S&P 500 stock index started this week showing an ominous Bearish Engulfing candlestick pattern coupled with negative RSI divergence, warning that a top is forming. Meaningful downside progress has not materialized but prices are tellingly struggling to close back above former support in the 2814-25 area. That may imply that the path of least resistance favors weakness, if only a potent catalyst emerged.

FX TRADING RESOURCES

— Written by Ilya Spivak, Currency Strategist for DailyFX.com

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter





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Best Q1 Since 1998 Despite ETF Outflows


Stock Market Talking Points:

  • SPY, IVV, and VOO shed capital during the S&P 500’s best quarter in nearly ten years
  • Elsewhere, government debt ETFs saw demand that reflects the recent yield curve inversion
  • Interested in equities and ETF fund flows? Sign up for the weekly webinar – Stock Market Catalysts for the Week Ahead

S&P 500: Best Q1 Since 1998 Despite ETF Outflows

The S&P 500 looks to cap off this week – and the first quarter – with a marginal increase from the prior session but large enough to solidify the best quarterly performance for the index since Q3, 2009 around 12.50%. Compared exclusively to other first quarters, Q1, 2019 offered the highest return since Q1, 1998.

S&P 500 Quarterly Returns (Chart 1)

S&P 500 quarterly performance

Learn tips and tricks to day trading the S&P 500

Despite the stellar quarterly return, the aggregate fund flows from SPY, IVV and VOO recorded an outflow of $1.6 billion during the period, assisted by the largest intraday outflow for the funds ever. It is also worth noting that the majority of inflows were recorded in the second half of the quarter, specifically during March which saw $9.1 billion in inflows.

Aggregate Fund Flows of SPY, IVV and VOO ETFs (Chart 2)

Please add a description for the image.

February saw $2.9 billion in net inflows while January notched a rather painful $13.6 billion in outflows following December’s rout. It appears many investors were hesitant to buy into the recovery rally until it was well underway.

Exchange Traded Funds and the Yield Curve Inversion

Elsewhere, fund flows offered further evidence for the recent yield curve inversion. The BIL ETF – which grants exposure similar to that of 1-3 month treasury bills – saw $146 million in inflows this week. Interestingly, the fund recorded net outflows of $617 million for the quarter with consistent outflows during January and February.

BIL ETF Fund Flows (Chart 3)

S&P 500: Best Q1 Since 1998 Despite ETF Outflows

On the other hand, funds that grant exposure to longer-term treasuries recorded outflows this week as the yield curve inverts further. The TLT ETF saw net outflows reach $175 million for the week, nearly a perfect contrast to the inflows into BIL. For the quarter, TLT saw $775 million in fresh capital.

TLT ETF Fund Flows (Chart 4)

S&P 500: Best Q1 Since 1998 Despite ETF Outflows

The contrasting performances potentially reflect the type of demand behind the flows throughout the quarter. In January – when investors were wrestling with the recent rout and seeking relative safety – both short and long-term government debt ETFs recorded inflows.

As the quarter progressed, shorter-term debt was cast aside while TLT saw continued demand amid global growth uncertainty and an uncertain outlook for the S&P 500. Since the March FOMC meeting, TLT has seen $536 million in outflows while BIL recorded $256 million in inflows, reflecting the lack of upside in exposure to longer-term debt as futures markets begin to price in a cut to the Federal Funds rate range in 2020 and uncertainty about the future grows.

As the record first quarter draws to a close, the outlook for the second is muddied with conflicting themes. Should the yield curve inversion strengthen, investors may continue the current trend in BIL and TLT. Elsewhere, the three broad-market tracking funds could witness deeper outflows as investors look to shift capital allocation out of the S&P 500 in its tenth year of a bull-run. That being said, relatively high correlations in other markets present ample trading opportunities in the coming quarter.

Read more: Will the Stock Market Crash in 2019?

–Written by Peter Hanks, Junior Analyst for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX

DailyFX forecasts on a variety of currencies such as the US Dollar or the Euro are available from the DailyFX Trading Guides page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.





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GBPUSD Price Struggles Above 1.3000 Ahead of Another Brexit Vote


GBPUSD Price, News and Brexit Latest

  • GBPUSD breaks below trend and now eyes 1.3000 as the next level of support.
  • PM May’s withdrawal bill back in the House, or at least part of it.

Q1 2019 GBP Forecast and USD Top Trading Opportunities

GBPUSD and Latest Brexit Vote:

The UK voted to leave the EU nearly three years ago and today was originally signed-off as the Brexit day. Since then the complete inability to get any sort of consensus deal agreed within the House of Commons that the EU would sign off has forced the UK’s departure day back by at least another two weeks, and maybe much longer.

UK PM May will present part of her withdrawal agreement to the House this afternoon – ex-political declaration – in yet another effort to force a consensus in Parliament. Her withdrawal bill has been defeated heavily twice before and this attempt to pass her partial bill this time is also likely to be defeated. PM May has put the bill to vote, hoping that if it passes that the EU will postpone Brexit until May 22. If the bill is defeated, the UK will have until April 12 to find a consensus and indicate if it will put forward candidates for the European Elections. The EU will decide if the UK leaves the single-block without a deal or if a longer-delay to Brexit is warranted.

GBPUSD has sold-off in the last 2 days and, importantly, broke and closed below the trend support from the start of the year. This trend will now turn to resistance, leaving the pair looking for further support. Currently 1.3000 is holding but if this level is broken conclusively, the March 11 low at 1.2960 and the 200-day moving average around 1.2945 come into play. GBPUSD traders should also be aware of this afternoon’s US data releases, especially the Fed’s favorite inflation indicator, core PCE, released at 12:30 GMT.

GBPUSD Resilience Being Tested After Brexit Vote Shambles.

GBPUSD Daily Price Chart (August 2018 – March 29, 2019)

GBPUSD Price Struggles Above 1.3000 Ahead of Another Brexit Vote

British Pound Volatility Continues and a Break is Inevitable.

Retail traders are 65.8% net-long GBPUSD according to the latest IG Client Sentiment Data, a bearish contrarian indicator. Recent changes in daily and weekly sentiment however give us a stronger bearish GBPUSD bias.

Traders may be interested in two of our trading guides – Traits of Successful Traders and Top Trading Lessons – while technical analysts are likely to be interested in our latest Elliott Wave Guide.

What is your view on GBPUSD – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author at nicholas.cawley@ig.comor via Twitter @nickcawley1.





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GBPUSD Drops Below 1.3000 as Third Vote Fails


BREXIT LATEST – TALKING POINTS

  • UK PM Theresa May’s EU-UK Withdrawal Agreement has been defeated again, this time by a margin of 286 votes in favor to 344 against. GBPUSD dropped below 1.3000 for the first time since March 11 following the results
  • European Council President Donald Tusk has called for an emergency Brexit summit on April 10; the UK is set for a no deal, ‘hard Brexit’ on April 12
  • Take a look at this Brexit Timeline for a chronological series of events surrounding UK leaving the EU and impact on the British Pound

Looking for longer-term forecasts on the British Pound? Check out the DailyFX Trading Guides

UK PM Theresa May’s EU-UK Withdrawal Agreement has been defeated again, this time by a margin of 286 votes in favor to 344 against. The third failed vote now puts the prime minister in the uneasy position of feeling immense pressure to resign.

After reaching an agreement with the European Commission to extend the Brexit deadline to April 12, the failure of the third vote means that a nodeal, ‘hard Brexit’ is possible in two weeks time. This can still occur despite British MPs voting previously against no-deal Brexit as the motion was not legally binding – hard Brexit thus remains the legal default.

GBPUSD CURRENCY PRICE CHART: 1-MINUTE TIMEFRAME (MARCH 27, 2019 TO MARCH 29, 2019)

GBPUSD Currency Price Chart After Third Brexit Vote

GBPUSD plunged from 1.3065 to a low of 1.2984 immediately following the news but has since climbed back above the 1.3000 handle.

In response to today’s third ‘meaningful vote’ results, European Commission President Donald Tusk has called for an emergency summit on April 10 in hopes to avoid the worst-case scenario as the fate of Brexit – as well as GBP and the UK’s economy – hangs in limbo.

However, Tusk and other EU leaders have adamantly stated that the European Council will not re-open Brexit discussions to further negotiate outstanding issues like the Irish backstop which has caused much of the impasse. As such, the vast uncertainty surrounding Brexit has recently pushed GBP implied volatility to extremes.

BRITISH POUND IMPLIED VOLATILITY AND TRADING RANGES

GBPUSD EURGBP GBPJPY British Pound Currency Price Chart Implied Volatility and Trading Ranges After Third Brexit VoteBritish Pound GBP Implied Volatility Price Chart against Euro and Japanese Yen EUR JPY

FOREX TRADING RESOURCES

Whether you are a new or experienced trader, DailyFX has multiple resources available to help you: an indicator for monitoring trader sentiment; quarterly trading forecasts; analytical and educational webinars held daily; trading guides to help you improve trading performance, and even one for those who are new to FX trading.

Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him in the DailyFX Real Time News feed and Twitter at @CVecchioFX



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