Fed’s Bostic: US inflation is not so far away from Fed target

Atlanta Fed President Raphael Bostic crossed the wires in the last minutes arguing that the inflation in the U.S. was not “so far away” from the Federal Reserve’s target to unanchor expectations.

Key quotes (via Reuters)

  • Financial stability a risk that is “always on the list” but not risen to crisis levels yet.
  • Lack of wage pressure suggests natural rate of unemployment may be lower than previously thought.

Oil, Hot Stocks, and Currencies – Part III

By TheTechnicalTraders.com

In our continued effort to help skilled traders/investors understand the future risks associated with geopolitical market turmoil, the EU Elections next week and the continued US/China trade war, this Part III of our Sector Rotation article will highlight certain sectors that we believe may continue to perform over the next 12 to 24+ months and help traders/investors survive any extended price volatility/rotation over that same time. Read Part I, and Part II.

Currently, the US stock market has weathered a bit of a jolt in terms of price rotation.  After many stock indexes reached new all-time highs, the news of Iran Oil Sanctions, US/China trade talks failing and the political turmoil in DC as an incredible 2020 US Presidential election cycle heats up, investors are watching the markets for any signs of strength or weakness.  Meanwhile, the US Dollar continues to strengthen against other global currencies in an incredible show of “King Dollar” strength and dominance.  All of this plays into one of our favorite narratives that we started discussing over 30 months ago – the Global Capital Shift.

For those of you who remember our many articles about this global market phenomenon and the root causes of it, we’ll try to keep the following example/explanation of it fairly short.  For those of you that are new to our research, please allow us to try to explain the Capital Shift event and why it is important to understand.

The Capital Shift started after the 2008-09 global credit market collapse.  The US and many other nations created an easy money policy that was designed to spark investment and recovery across the globe.  This easy money, at first, supported failing companies and governments in order to maintain social order and structure.  After that process was completed, this capital went to work investing in under-valued global markets and assets.  As prices continued to rise and the easy money policies became rooted into the social structure, the hunt for greater returns rotated throughout the planet – diving into undervalued markets and opportunities, often with no regard for risk.



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After 2014, things began to change in the US and throughout the planet.  The US entered a period of extended sideways trading that caused many investors to reconsider the “buy the dip” mentality.  In 2014-15, China initiated “capital controls” in an effort to prevent outflows of capital from a newly rich population and corporate structure.  Just before 2014, the Emerging Markets went through a period of pricing collapse which was associated with over-inflated expectations and $100+ oil.  All of that started changing in 2014~2016 as Oil prices collapsed – taking with it the expectations and promises of many Emerging Market investors and speculators.

This shifting of capital in search of “returns with a moderate degree of risk” is what we are calling the “Capital Shift Event”.  It is still taking place and it is our opinion that the US stock market will become the central focus of global capital investment over the next 4+ years.  We believe the strength of the US Dollar and the strength of the US Stock Market/US Economy will drive future capital investment into US and other US Associated major markets in an attempt to avoid risks associated with the foreign market and currency market valuations.  In other words, when the crap starts flying across the globe, cash will rush into the US and other safe-haven investments to protect real value.

 

Currently, the potential for another price decline in Crude Oil is rather strong with our research expecting a move back below $55 ppb over the next 4+ months.  We believe a further economic contraction across the globe with a very strong potential for increased price volatility will drive Oil prices back below $55 with a very strong potential for prices to settle near $46~48 before the downward trend is completed.

The potential for some type of price contraction over the next 12+ months will be related to how the global and localized economic concerns play out over the next 24+ months.  Yet, investors can prepare for these extended price rotations now by becoming aware of weakening price trends and the potential that certain sectors will likely be hit harder than others.  For example, the most recent price weakness in the US stock market appears to be focused in certain sectors:

Technology, Semiconductors, Scientific Instruments, Financials, Asset Management, Property Management, Banking (Generally all over the US), Consumer Goods – Electronics, Airlines, Mail Order Services, Industrial Goods, Aerospace/Defense, Farming and Farming Supply, Medical Laboratories, Medical Appliances, Oil & Gas and others.  This type of market contraction is fairly common in an early stage Commodity and Industrial economic slowdown.

 

The sectors that are improving over the past week are : Healthcare, Electric Utilities, Diversified Utilities, Gas Utilities, Consumer Personal Products, Consumer Confectioners, Cigarettes, Entertainment, Beverages and Soft Drinks, Meat Products, Specialty Eateries, REITS (almost all types), Credit Services, Telecom and Telecom/Communication Services.

All of these are protectionist rallies based on the US/China trade war and the market rotation away from Technology/manufacturing growth and into more consumer protectionist spending mode – where the consumer and larger firms focus on core items while expecting a mild recession within the economy.  All of this is very common at this time within the US Presidential Election cycle.  In fact, our researchers have shown that nearly 80% of the time when a major US presidential election is taking place, the US stock markets will decline within the 24 months prior to the election date.

The Monthly S&P heat map is not much different.  It is still showing weakness where we expect and strength in sectors that have been somewhat dormant over the past 4+ years.  The key to success for skilled traders is to be able to play this future price rotation very effectively as the different sectors continue to rotate headed into the 2020 US Presidential Elections and with all of the external foreign market factors taking place.

 

It is quite likely that the US Dollar will continue to push high, possibly well above $102, before finding any real resistance.  It is very likely that most of the US stock market will fair quite well over the next 24+ months – yet we do expect some extended price rotation over this time and we believe Technology, Financials, Real estate, and Industrial/Consumer related stock sectors could take a hit over the next 16 to 24 months.  These rotations are, again, common for this type of US Presidential Election cycle.  Skilled traders are already aware of this cycle and have begun to prepare for this event to unfold.  The unknowns of the current global market is China and the EU at present.

 

And with that last US Dollar chart, there you have it.  Our three-part article about how the Global Capital Shift is about to intensify and continue to drive a US Sector rotation that many traders have failed to consider.  The EU elections, the US/China trade wars, and the US Presidential Election event are all big factors in what we believe will drive in an increased level of uncertainty over the next 16~24 months.  Additionally, we are very concerned that China is very close to experiencing what we are calling a “broken backbone” over the next 12+ months.  We believe the pricing pressures in combination with a slowing economy and a consumer move into a protectionist stance could create a waterfall event in China/Asia.

Our advice for traders is to protect open long positions and to prepare for 16 to 36 months of “repositioning” of the global markets.  The US elections are certain to drive an incredible range of future expectations throughout the world.  Combine that with the EU elections, the BREXIT effort and the continued repositioning of US/China/Foreign market relations and we are setting up for a big shock-wave event in the near future.

Follow our research.  We’ve already mapped out the next 24 to 36 months of market price activity with our proprietary price modeling tools.  We believe we know what will happen over the next 24 to 36 months, we are just waiting for the price to confirm our analysis. Visit TheTechnicalTraders.com to learn more.

Chris Vermeulen
Technical Traders Ltd.

 

Pound knocked below 1.27 as Brexit fears mount

The British Pound descended deeper into the abyss this morning with prices falling below $1.27 for the first time since January 2019 as uncertainty over Brexit dented investor sentiment.

Rising concerns over the UK crashing out of the European Union without any kind of transition deal coupled with political drama in Westminster compounded to the Pound’s woes. With a broadly stronger Dollar rubbing salt in the wound and punishing Sterling further, the GBPUSD remains heavily bearish on the daily timeframe.

Much attention will be directed towards today UK inflation report hearings by the Bank of England’s Governor. While this event could impact the Pound, the currency is likely to be more concerned with Brexit developments and the Political drama at home.

Technical traders will continue to closely observe how the GBPUSD behave around the 1.2700 level. A solid daily close below this point signals a move lower towards 1.2620 and 1.2500 as discussed earlier in the week.



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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Indicator analysis. Daily review for May 21, 2019 for EUR/USD and GBP/USD currency pairs

On Monday, the market in both currencies moved to the side channels. The GBP / USD pair opened with a gap upwards, and then they tried to close it all day. On the other hand, the EUR / USD pair remained in a standby mode. Traders could not decide in any way where to go further, or what to break through – either the line of support or resistance. On Tuesday, strong calendar news comes out at 8.30 and 14.00 Universal time.

Trend analysis (Fig. 1).

Today, the price can continue to move downwards with the target of 1.1147 – the support line (blue bold line) and further movement downwards with the target of 1.1112 – the lower fractal.

Fig. 2 (daily schedule).

Comprehensive analysis:

– indicator analysis – down;

– Fibonacci levels – down;

– volumes – down;

– candlestick analysis – up;

– trend analysis – down;

– Bollinger lines – down;

– weekly schedule – down.

General conclusion:

On Tuesday we are waiting for the continuation of the downward movement. The first lower target of 1.2662 is the pullback level of 76.4% (blue dashed line).

The material has been provided by InstaForex Company – www.instaforex.com

Source:: Indicator analysis. Daily review for May 21, 2019 for EUR / USD and GBP / USD currency pairs




Wave analysis of EUR/USD and GBP/USD for May 21, 2019

EUR / USD

On Monday, May 20, trading on the Forex market ended for the pair EUR / USD with a rise of several base points. However, the wave pattern remains the same and implies the construction of a downward wave of 3, 3, 3 as part of a downward trend section with targets located below the 11th figure. On Monday, the markets did not receive any interesting news and reports from world leaders. Only China said that negotiations with Trump on trade conditions were really deadlocked, and the American side was blamed for this. Allegedly, the States do not show sincerity and increase pressure, using various tricks to disrupt the negotiations. In fact, this only means that countries are unlikely to be able to agree in the near future. The US dollar, which continues to rise against the euro, may respond to this event with a new increase.

Sales targets:

1.1097 – 161.8% Fibonacci

1.1045 – 200.0% Fibonacci

Purchase goals:

1.1324 – 0.0% Fibonacci

General conclusions and trading recommendations:

The euro / dollar is still in the process of building a downward trend. Now, I recommend the bears to remain on the instrument with targets of 1.1097 and 1.1045, which corresponds to 161.8% and 200.0% in Fibonacci and a restrictive order above the level of 50.0% in Fibonacci, which can be gradually carried down.

GBP / USD

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nOW3ir_j-mj65wCoIzN8McThXEP5BrRT00Wgvqrn

On May 20, the GBP / USD pair lost another 10 basis points and continues to build the estimated wave. Monday was marked by extremely low activity in the foreign exchange market. Nevertheless, wave c still looks very simple, but there are no signs of completion for its construction right now. An unsuccessful attempt to break the Fibonacci mark of 161.8% can lead to a departure of quotes from the lows reached. News background remains negative for the pound sterling. There are no positive news and messages from the UK. Accordingly, the markets find no reason to refuse selling the pound sterling. As a result, the decline in the pair GBP / USD will continue. Markets are waiting for the fourth vote in agreement with the European Union. And if the parliament again refuses to accept this agreement, then, at this moment Theresa May will surely resign.

Sales targets:

1.2675 – 161.8% Fibonacci

1.2554 – 200.0% Fibonacci

Purchase goals:

1.3175 – 0.0% Fibonacci

General conclusions and trading recommendations:

The wave pattern of the pound / dollar instrument implies a continuation of the instrument decline within the wave c. Thus, now, I recommend sales with targets located near the estimated marks of 1.2675 and 1.2554, which corresponds to 161.8% and 200.0% in Fibonacci. An unsuccessful attempt to break through the 161.8% mark may lead to a departure of quotes from the lows reached.

The material has been provided by InstaForex Company – www.instaforex.com

Source:: Wave analysis of EUR / USD and GBP / USD for May 21. China accuses America of disrupting trade agreement negotiations.




Bitcoin is preparing a new wave of growth

The Bitcoin exchange rate is preparing for a new wave of growth, and it must be done in the near future, otherwise, the risk of a larger downward correction will increase significantly.

Signal to buy Bitcoin (BTC):

Bitcoin buyers face a level of 8100, the breakthrough of which will provide good demand and lead to new annual highs in the area of 8440 and 8700, where I recommend fixing the profit. Of course, the main goal will be the test of the psychological mark of 9000 USD. In the down scenario, there is a support level of 7650, but it is best to open long positions immediately on a rebound from a minimum of 7250.

Signal to sell Bitcoin (BTC):

Bears should wait for the formation of a false breakdown in the resistance area of 8150, and it is best to try to return Bitcoin to the support level of 7650, from where the demolition of a number of stop orders will collapse the cryptocurrency rate to the area of minimums 7260 and 6820, where I recommend fixing the profit.

The material has been provided by InstaForex Company – www.instaforex.com

Source:: Bitcoin. Bitcoin is preparing a new wave of growth




GBP/USD – Pound under pressure as manufacturing orders sink

After a flat start to the week, GBP/USD has edged lower on Tuesday. Currently, the pair is trading at 1.2694, down 0.23% on the day. On the release front, Mark Carney’s testimony on inflation before a parliamentary committee has been cancelled. British CBI Industrial Order Expectations slipped to -10, weaker than the estimate of -6. This marked the lowest score since November, as manufacturing orders continue to decline. In the U.S., existing home sales is projected to climb sharply to 5.35 million.

Brexit has been on the backburner in recent weeks, but the upcoming election for the European Parliament could boost anti-Brexit parties. Key issues in the election, which covers all 28 member EU states, include the economic slowdown, the migrant crisis and the rise in Euroskpeticism. Euro-skeptics increased their representation in parliament from 12% to 25% in the last election, and with the dramatic increase in strength of populist parties, this trend could well continue. The U.K. will participate in the vote, although the country is on its way out of the EU. The Conservatives are expected to have a poor showing, while anti-Brexit parties could make major gains. This could weigh on the British pound which plunged 2.1% last week.

U.S.- China trade tensions continues to simmer, which has boosted the safe-haven U.S. dollar. On Friday, the Trump administration had announced it was imposing trade sanctions on the Chinese telecom giant, a move which sent stock markets reeling on Monday. However, the U.S. Commerce Department has taken a step back, saying that it will provide 3-month exemptions to U.S. companies that sell to Huawei. The tussle over Huawei has exacerbated the trade war between the two economic giants, and risk appetite will remain soft until the sides resume negotiations.

Sterling Trades at Five Month Lows on Brexit worries

Dow futures pop 150 points after US eases trade restrictions on Huawei

GBP/USD Fundamentals

Monday (May 20)

  • 9:30 British CB Leading Index. Actual -0.5%
  • 12:30 British MPC Member Broadbent Speaks
  • 13:05 US FOMC Member Clarida Speaks
  • 19:00 US Federal Reserve Chair Powell Speaks

Tuesday (May 21)

  • 6:00 British CBI Industrial Order Expectations. Estimate -6
  • 10:00 US Existing Home Sales. Estimate 5.35M

*All release times are DST

*Key events are in bold

GBP/USD for Tuesday, May 21, 2019

GBP/USD May 21 at 7:40 DST

Open: 1.2723 High: 1.2735 Low: 1.2685 Close: 1.2694

GBP/USD Technical

GBP/USD was flat in the Asian session and has edged lower in European trade

  • 1.2615 is the next support level
  • 1.2723 is a weak resistance line. It was tested earlier in the session
  • Current range: 1.2615 to 1.2723

Further levels in both directions:

  • Below: 1.2615, 1.2477 and 1.2401
  • Above: 1.2723,  1.2841, 1.2910 and 1.3000

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.

DAX recovers as U.S. softens sanctions on Huawei

The volatility continues for the DAX index this week. Currently, the index is at 12,176, up 1.1% on the day, after falling 1.6% on Monday. For a second successive day, there are no major German or European events on the schedule. The eurozone releases consumer confidence, which is expected to remain in negative territory, with a forecast of -8.

The DAX had a dismal start to the week, but has rebounded on Tuesday, as the U.S. lowered tensions over the Huawei crisis. The Trump administration had announced it was imposing trade sanctions on the Chinese telecom giant, a move which sent stock markets reeling on Monday. However, the U.S. Commerce Department has taken a step back, saying that it will provide 3-month exemptions to U.S. companies that sell to Huawei. The tussle over Huawei has exacerbated the trade war between the two economic giants, and risk appetite will remain soft until the sides resume negotiations.

Voters in all 28 members of the European Union will head to the polls for a 4-day election, beginning on Thursday, to elect members to the European Parliament. Election turnout has been on the decline, with only 43% of eligible voters casting a vote in 2014. Key issues included the economic slowdown, the migrant crisis and the rise in Euroskpeticism. Euro-skeptics increased their representation in parliament from 12% to 25% in the last election, and with the dramatic increase in strength of populist parties, this trend could well continue. A strong showing by parties with an anti-EU agenda could weaken the euro. As well, the outcome of the vote could have an impact on the choice of the new head of the ECB, as Mario Draghi steps down in October, after an eight-year term.

RBA’s Lowe caps Aussie’s election rally

The empire strikes back?

Economic Calendar

Tuesday (May 21)

  • 10:00 Eurozone Consumer Confidence. Estimate -8

*All release times are DST

*Key events are in bold

DAX, Tuesday, May 21 at 6:45 DST

Previous Close: 12,041 Open: 12,101 Low: 12,066 High: 12,176 Close: 12,175

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.

Kraken is Offering Preferred Shares, Raises $6.8 Million in a Day

The United States-based cryptocurrency exchange Kraken has begun to offer preferred shares to accredited investors.

As announced by the exchanges, it has partnered with investment platform Bnk to the Future to allow any registered investor to buy its shares. Interested investors can purchase the stocks with a minimum amount of $1,000 till June 20th.

Discover Barcelona Trading Conference – A Top Tier Crypto Trading Event

 

As seen on the fundraising page, Kraken has already raised $6.8 million, as of press time, surpassing the minimum investment goal of $6.2 million within a day of listing. So far, 326 investors participated in the fundraising as the company is aiming to raise $10.2 million.

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Kraken is one of the longest-operating cryptocurrency exchange on the globe which lists 24 digital currencies, offering 74 trading pairs. According to the company, it has handled $85 billion worth crypto trades in 2018, a year when the market went down significantly.

Bother to disclose financials?

Though the San Francisco-based exchange is offering its shares to both large and small investors, it did not mention publically how it will utilize the raised funds, neither did it published its financial reports.

This is not the first attempt by the crypto exchange to gather funds from the public as last year it sought funds from its prominent clients, keeping its valuation at $4 billion. Then the minimum investment amount was set at $100,000.

The long reigned bear in the crypto market has made massive dents on established crypto-related businesses. Similar to Kraken, many other digital asset exchanges were also forced to seeks funds via different means.

Earlier this year, Bithumb’s operator received $200 million from a Japanese blockchain fund while the controversial crypto exchange Bitfinex recently raised $1 billion by distributing native tokens in a private sale.

Meanwhile, Kraken is also focusing on its business expansion and has acquired the futures trading startup Crypto Facilities for an undisclosed amount.

US Dollar News: USD Price Nears 2-Year High; Fed Speak, FOMC Minutes Loom

US Dollar News: USD Price Analysis and Charts.

  • US dollar bullish run continues, threatening recent highs.
  • Fed speak and FOMC minutes may underpin latest up-tick.

DailyFX Q2 Forecasts and Top 2019 Trading Opportunities.

US Dollar News – Federal Reserve Speeches and FOMC Minutes up Next

The US dollar remains in favor with investors as risk sentiment sours on the US-China trade spat, global growth concerns and Brexit, to name just a few market negatives. Further, while the next move in US interest rates is very likely lower, the US dollar still commands a yield premium over a wide range of other currencies, helping to underpin its value. This is reflected on the daily chart with a continuous series of higher highs and higher lows from January 10 this year.

While boosted by risk concerns, the US dollar (DXY) will likely need a fresh stimulus to break above the April 26 high at 97.84, after which the greenback will back at highs seen in May 2017. Over the next two days, five different Federal Reserve members will be speaking, and their remarks will be needed to be monitored closely for any clues as to the strength, or not, of the US economy and the path of potential interest cuts ahead.

US Dollar News: USD Price Nears 2-Year High; Fed Speak, FOMC Minutes Loom

The DailyFX Calendaris a comprehensive guide to all market moving data releases and events.

Later Wednesday, the FOMC minutes from the May 1 meeting will be released and these will be parsed for any further explanation from Chair Powell on how ‘transitory factors’ are keeping US inflation in check. If the Fed believes that inflation in the US is picking-up towards target, any interest-rate cut may be pushed further down the line until price pressures consistently sit near the 2% target.

The US dollar (DXY) chart has enjoyed a positive run later, six green candles out of the last seven disregarding Sunday’s, and trades above all three moving averages. The May 3 sell-off candle’s high at 97.61 is within reach, which would leave the previously mentioned 97.84 as the short-term target if positive momentum continues. The CCI indicator is currently showing the US dollar in overbought territory.

US Dollar (DXY) Daily Price Chart (August 2018 – May 21, 2019)

US Dollar News: USD Price Nears 2-Year High; Fed Speak, FOMC Minutes Loom

IG Client Sentiment data show how retail traders are positioned in a wide range of asset classes and how daily and weekly sentiment changes can help drive momentum.

— Written by Nick Cawley, Market Analyst

To contact Nick, email him at nicholas.cawley@ig.com

Follow Nick on Twitter @nickcawley1