S&P 500 Shaken to Start the Week, A Run of Rate Decisions Begins

ReversalTalking Points:

  • The Dow called an end to a 9-week advance – longest since May 1995 – last week, and Monday opened with a notable stumble
  • Momentum behind headlines of US-China trade negotiations doesn’t seem to be earning a steady build up of market optimism
  • Global PMIs (GDP proxy) start to hit the wires today, the RBA will touch off rate decisions and heavy event risk ratchets anticipation

See how retail traders are positioning in the FX majors, indices, gold and oil intraday using the DailyFX speculative positioning data on the sentiment page.

Risk Trends Off to a Painful Start Despite the Air of Threats Lifting

Sentiment seemed to slow and stall this past week following two months of persistent and productive rebound that erased much of the losses suffered through the fourth quarter of 2018 – at least that is for US indices. The S&P 500 and Dow carved aggressive rising wedges that earned the latter a remarkable 9 consecutive week advance, the longest such climb since May 1995. That tally was broken this past week in a rather lackluster slip that was borne of the congestion that aligns to the previous ‘shoulder’ of large head-and-shoulders patterns. That uncertainty was showed some serious signs of doubts to start this trading week. The selling pressure through Monday’s session was heavy. And, even though there was a bounce through the second half of the day, the reminder that a complacent bid is not a certainty seems to have shaken the speculative rank.

Throughout the young recovery in 2019, there question of ‘what is inspiring bulls’ has dogged those willing to consider the question seriously. Growth forecasts have dropped, warnings over financial conditions and preparations have arisen through numerous channels, and a complex of direct fundamental risks have expanded over the past year. Nevertheless, an underlying sense of complacency has encouraged opportunists to seek out favorable headlines. One such point of speculation was the eventual end of the US-China trade war. That favorable turn of events is already underway with President Trump’s declaration over a week ago that he would postpone the tariff escalation deadline.

As of the start of this week, sources have leaked expectations that China is willing to move on structural issues the US has been troubled by like intellectual property sharing. And yet, the markets are not finding any renewed sense of enthusiasm. Averting a crisis is not the same thing as fostering an environment of new opportunity. If the ‘relief rally’ mentality is fading away, we are left with far less favorable conditions like slowing growth measures which will be hit upon by monthly PMIs due today or monetary policy as an impediment which will intensify notably starting Tuesday. What I look for in market activity to inform a sense of market sentiment is correlation across assets that are otherwise independent. Those measures that I follow more regularly were all under pressure Monday.

Chart of the Dow Jones Industrial Average and Consecutive Candles (Weekly)

S&P 500 Shaken to Start the Week, A Run of Rate Decisions Begins

Australian Dollar Starts on Long Run of Data, Pound Simply Can Shake Brexit Distraction

For scheduled event risk over the next 24 hours, there are a few currencies with a few noteworthy highlights. One of the top listings and a run of data throughout the week goes to the Australian Dollar. The currency has already absorbed a disappointing 4Q corporate profit release along with inflation expectations and building permits. The combination did little to truly motivate the currency however, likely because attention is being centered upon what is ahead. Due today is the Reserve Bank of Australia’s (RBA) rate decision. This central bank is considered the most likely to realize a rate cut in 2019 according to overnight swaps. That inherently leverages speculation around the authority’s intended course. What’s more, the interest in AUD doesn’t stop after the policy update as we are expecting 4Q GDP numbers the day after. There are further events including remarks from Governor Lowe and a distinct connection to China which is due for serious fundamentals waves this week. As over-loaded as the currency is this week, that is likely to do more to destabilize and sideline a trend from the Aussie Dollar than it is to facilitate a meaningful trend.

Another currency dealing with multiple lines of fundamental influence over the next 24 hours is the British Pound. This past session offered up a construction activity (PMI) report that unexpectedly flipped into contractionary territory (anything below 50) with a 49.5 for February. Ahead, the ‘composite’ and service sector PMIs are due alongside the Financial Policy Committee’s minutes, yet these indicators are unlikely to draw attention away from the open-ended threat of Brexit. Prime Minister May’s next opportunity to gain support for her proposal is a weak away, and Parliament seems to be set on course to render the same verdict – which would necessitate a vote two days later on whether to request an extension from the European Union. Last week’s breakout attempt by the Sterling looks just as difficult to achieve now as it did during the attempt. The question is whether that seeds the opportunity for reversal.

Chart of GBPAUD (Daily)

S&P 500 Shaken to Start the Week, A Run of Rate Decisions Begins

Trump Weighs in on Dollar, Euro Won’t Break Focus from ECB, Gold Suffers Worst 4-Day Drop in Nearly 2 Years

Taking stock of the macroeconomic docket, there is an array of additional event risk for which we should keep tabs, but the potential for strong market response is an even taller order. The Dollar was even further unsettled this past weekend when President Trump revived his critique of the Federal Reserve’s policy course and his lament over the strength of the currency. He said that while he likes a strong currency, it shouldn’t be so strong as to harm business. Ahead, US event risk will touch on a few important economic highlights: the ISM service sector report and new home sales. The former accounts for two-thirds of output in the United States and the latter is a well-known pressure point for global financial markets. Still, I would not expect heavy Dollar movement unless some unexpected fundamental charge hits.

I’d put the same skepticism of a robust move on the Euro as its scheduled event risk is even less prominent. While Eurozone retail sales is certainly an economic update, it will not dent the anticipation circling the European Central Bank (ECB) rate decision on Thursday. The speculation built into an ‘eventual’ hike from this dovish policy group has set the market’s focus unreasonably high and the grouphas attempted to talk the market down from its lofty expectations. They will likely need to make more explicit their intentions this week which will not bode well for a currency still holding onto 2017 premium.

Outside of the relative strength equation for the FX market, the preferred alternative to traditional fiat, gold, continues to slide. The metal has suffered its worst four-day dive through Monday since the tumble in May 2017 – and it is very close to overtaking that decline which would bring November 16, 2016 into view. This weakness does not go away when we diversify the pricing of the metal into more of the majors – meaning it is not simply a Dollar reflection. So then, what does it mean? We discuss all of this and more in today’s Trading Video.

Chart of Gold and the Four-Day Rate of Change (Daily)

S&P 500 Shaken to Start the Week, A Run of Rate Decisions Begins

If you want to download my Manic-Crisis calendar, you can find the updated file here.

S&P 500 Shaken to Start the Week, A Run of Rate Decisions Begins

ReversalTalking Points:

  • The Dow called an end to a 9-week advance – longest since May 1995 – last week, and Monday opened with a notable stumble
  • Momentum behind headlines of US-China trade negotiations doesn’t seem to be earning a steady build up of market optimism
  • Global PMIs (GDP proxy) start to hit the wires today, the RBA will touch off rate decisions and heavy event risk ratchets anticipation

See how retail traders are positioning in the FX majors, indices, gold and oil intraday using the DailyFX speculative positioning data on the sentiment page.

Risk Trends Off to a Painful Start Despite the Air of Threats Lifting

Sentiment seemed to slow and stall this past week following two months of persistent and productive rebound that erased much of the losses suffered through the fourth quarter of 2018 – at least that is for US indices. The S&P 500 and Dow carved aggressive rising wedges that earned the latter a remarkable 9 consecutive week advance, the longest such climb since May 1995. That tally was broken this past week in a rather lackluster slip that was borne of the congestion that aligns to the previous ‘shoulder’ of large head-and-shoulders patterns. That uncertainty was showed some serious signs of doubts to start this trading week. The selling pressure through Monday’s session was heavy. And, even though there was a bounce through the second half of the day, the reminder that a complacent bid is not a certainty seems to have shaken the speculative rank.

Throughout the young recovery in 2019, there question of ‘what is inspiring bulls’ has dogged those willing to consider the question seriously. Growth forecasts have dropped, warnings over financial conditions and preparations have arisen through numerous channels, and a complex of direct fundamental risks have expanded over the past year. Nevertheless, an underlying sense of complacency has encouraged opportunists to seek out favorable headlines. One such point of speculation was the eventual end of the US-China trade war. That favorable turn of events is already underway with President Trump’s declaration over a week ago that he would postpone the tariff escalation deadline.

As of the start of this week, sources have leaked expectations that China is willing to move on structural issues the US has been troubled by like intellectual property sharing. And yet, the markets are not finding any renewed sense of enthusiasm. Averting a crisis is not the same thing as fostering an environment of new opportunity. If the ‘relief rally’ mentality is fading away, we are left with far less favorable conditions like slowing growth measures which will be hit upon by monthly PMIs due today or monetary policy as an impediment which will intensify notably starting Tuesday. What I look for in market activity to inform a sense of market sentiment is correlation across assets that are otherwise independent. Those measures that I follow more regularly were all under pressure Monday.

Chart of the Dow Jones Industrial Average and Consecutive Candles (Weekly)

S&P 500 Shaken to Start the Week, A Run of Rate Decisions Begins

Australian Dollar Starts on Long Run of Data, Pound Simply Can Shake Brexit Distraction

For scheduled event risk over the next 24 hours, there are a few currencies with a few noteworthy highlights. One of the top listings and a run of data throughout the week goes to the Australian Dollar. The currency has already absorbed a disappointing 4Q corporate profit release along with inflation expectations and building permits. The combination did little to truly motivate the currency however, likely because attention is being centered upon what is ahead. Due today is the Reserve Bank of Australia’s (RBA) rate decision. This central bank is considered the most likely to realize a rate cut in 2019 according to overnight swaps. That inherently leverages speculation around the authority’s intended course. What’s more, the interest in AUD doesn’t stop after the policy update as we are expecting 4Q GDP numbers the day after. There are further events including remarks from Governor Lowe and a distinct connection to China which is due for serious fundamentals waves this week. As over-loaded as the currency is this week, that is likely to do more to destabilize and sideline a trend from the Aussie Dollar than it is to facilitate a meaningful trend.

Another currency dealing with multiple lines of fundamental influence over the next 24 hours is the British Pound. This past session offered up a construction activity (PMI) report that unexpectedly flipped into contractionary territory (anything below 50) with a 49.5 for February. Ahead, the ‘composite’ and service sector PMIs are due alongside the Financial Policy Committee’s minutes, yet these indicators are unlikely to draw attention away from the open-ended threat of Brexit. Prime Minister May’s next opportunity to gain support for her proposal is a weak away, and Parliament seems to be set on course to render the same verdict – which would necessitate a vote two days later on whether to request an extension from the European Union. Last week’s breakout attempt by the Sterling looks just as difficult to achieve now as it did during the attempt. The question is whether that seeds the opportunity for reversal.

Chart of GBPAUD (Daily)

S&P 500 Shaken to Start the Week, A Run of Rate Decisions Begins

Trump Weighs in on Dollar, Euro Won’t Break Focus from ECB, Gold Suffers Worst 4-Day Drop in Nearly 2 Years

Taking stock of the macroeconomic docket, there is an array of additional event risk for which we should keep tabs, but the potential for strong market response is an even taller order. The Dollar was even further unsettled this past weekend when President Trump revived his critique of the Federal Reserve’s policy course and his lament over the strength of the currency. He said that while he likes a strong currency, it shouldn’t be so strong as to harm business. Ahead, US event risk will touch on a few important economic highlights: the ISM service sector report and new home sales. The former accounts for two-thirds of output in the United States and the latter is a well-known pressure point for global financial markets. Still, I would not expect heavy Dollar movement unless some unexpected fundamental charge hits.

I’d put the same skepticism of a robust move on the Euro as its scheduled event risk is even less prominent. While Eurozone retail sales is certainly an economic update, it will not dent the anticipation circling the European Central Bank (ECB) rate decision on Thursday. The speculation built into an ‘eventual’ hike from this dovish policy group has set the market’s focus unreasonably high and the grouphas attempted to talk the market down from its lofty expectations. They will likely need to make more explicit their intentions this week which will not bode well for a currency still holding onto 2017 premium.

Outside of the relative strength equation for the FX market, the preferred alternative to traditional fiat, gold, continues to slide. The metal has suffered its worst four-day dive through Monday since the tumble in May 2017 – and it is very close to overtaking that decline which would bring November 16, 2016 into view. This weakness does not go away when we diversify the pricing of the metal into more of the majors – meaning it is not simply a Dollar reflection. So then, what does it mean? We discuss all of this and more in today’s Trading Video.

Chart of Gold and the Four-Day Rate of Change (Daily)

S&P 500 Shaken to Start the Week, A Run of Rate Decisions Begins

If you want to download my Manic-Crisis calendar, you can find the updated file here.

Asia Stocks Under Pressure, Will US ISM Services PMI Sink S&P 500?

Asia Pacific Markets Wrap Talking Points

  • Market mood continued souring after weakness on Wall Street
  • AUD/USD weakened after a slight uptick on the RBA, PHP down
  • Sentiment may worsen if US ISM Services PMI data disappoints

Find out what retail traders’ equities buy and sell decisions say about the coming price trend!

Asia Pacific benchmark stock indexes traded mostly lower, adding to declines seen during the prior Wall Street trading session as expected. Markets have been struggling to build on some of the most significant progress made in US-China trade talks. Meanwhile, technical cues offer early warning signs that S&P 500 could be topping.

The Nikkei 225 declined over 0.5% while Australia’s ASX 200 fared slightly better, down roughly 0.3%. South Korea’s KOSPI fared worse, down over 0.6% heading into the close. Meanwhile, China’s Shanghai Composite rallied roughly 0.2%. The government set out on fiscally-supportive policies to bolster their economy before worse-than-expected Caixin PMI data crossed the wires.

Looking at the major currencies, the pro-risk Australian and New Zealand Dollars depreciated. The former got a slight boost on the RBA rate decision, as expected, but risk trends took their toll on the Aussie. The haven-linked US Dollar appreciated. Meanwhile, the Philippine Peso set itself up for its worst day since December after President Rodrigo Duterte gave a surprise when he named the next Governor of the BSP.

S&P 500 futures remain pointing lower, opening the door for sentiment to continue souring over the rest of the day. This may benefit the anti-risk Japanese yen. Later, US ISM non-manufacturing data will cross the wires. Lately, economic data out of the world’s largest economy has been tending to underperform relative to economists’ expectations. This may weigh on market mood, sending Wall Street into the red again.

FX Trading Resources

— Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

USD/SEK, USD/NOK Climbing Toward Key Resistance Barriers

NOK, SEK TALKING POINTS – WEEKLY TECHNICAL FORECAST

  • NOK, SEK approaching key resistance levels
  • US economic reports may drive Nordic moves
  • ECB commentary may pressure NOK and SEK

See our free guide to learn how to use economic news in your trading strategy!

SWEDISH KRONA TECHNICAL ANALYSIS

Since February 28, USD/SEK has climbed over 1.6 percent and has recently reentered a key resistance range between 9.3110-9.4066. This comes shortly after the pair retreated from a sugar high that led it past a price barrier not reached since December 2016. The next obstacle before the upper band could be the inter-range resistance at 9.3714.

USD/SEK – Four-Hour Chart

USD/SEK, USD/NOK Climbing Toward Key Resistance Barriers

Zoomed out, the pair has closed higher for over two straight months after a painful 31 days in December. After touching the January floor at 8.8469, it blew threw several price barriers and rose over six percent. The particularly sharp spike in February followed on from CPI data indicators falling short of expectations, which led traders to believe the Riksbank would delay its intended rate hike this year.

USD/SEK – Monthly Chart

USD/SEK, USD/NOK Climbing Toward Key Resistance Barriers

The dramatic upward movement in the pair since the start of last year appears to have been the result of US-China trade tensions and Fed tightening. Both contributed to risk aversion, consequently causing a flight of capital from the export-driven SEK to the haven US Dollar, which simultaneously was gaining a yield appeal.

Deteriorating economic data in Europe has also contributed to the pair’s rise in 2019 along with a softened outlook for growth in the Swedish economy. The connection between European economic activity and the Krona’s performance requires understanding the nature of EU-Nordic relations.

USD/NOK TECHNICAL ANALYSIS

Much like USD/SEK, USD/NOK has been climbing since March 1 and is now trading above the upper bound of the 8.5596-8.6323 range. However, negative RSI divergence may signal that the pair is losing underlying upside momentum, opening the door to a potential temporary reversal. USD/NOK appears to be aiming toward 8.6673, the next possible price barrier.

USD/NOK – Four-Hour Chart

USD/SEK, USD/NOK Climbing Toward Key Resistance Barriers

Since the tail-end of 2015 and beginning of 2016, USD/NOK was trading in downward-inclined channel until approximately July of 2018 when the pair broke above the upper bound. Confidence in the upward trajectory was confirmed when USD/NOK retested the former resistance and continued trading higher. Since October, the pair has risen over six percent.

The fundamental outlook suggests USD/NOK will continue to rise if global demand wanes and European affairs continue to deteriorate. To understand why, read up on the Norwegian Krone here.

As outlined in the weekly fundamental forecast for Scandinavian currencies, factors from abroad will likely be the key influencers for USD/SEK and USD/NOK this week. European data – such as Italian GDP and several Markit reports – may cause the pairs to edge higher if they underperform. This comes on top of the ECB’s rate decision and several key US economic reports which may cause investors to flock to the US Dollar.

SWEDISH KRONA, NORWEGIAN KRONE TRADING RESOURCES

— Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter

S&P 500 Shaken to Start the Week, A Run of Rate Decisions Begins

ReversalTalking Points:

  • The Dow called an end to a 9-week advance – longest since May 1995 – last week, and Monday opened with a notable stumble
  • Momentum behind headlines of US-China trade negotiations doesn’t seem to be earning a steady build up of market optimism
  • Global PMIs (GDP proxy) start to hit the wires today, the RBA will touch off rate decisions and heavy event risk ratchets anticipation

See how retail traders are positioning in the FX majors, indices, gold and oil intraday using the DailyFX speculative positioning data on the sentiment page.

Risk Trends Off to a Painful Start Despite the Air of Threats Lifting

Sentiment seemed to slow and stall this past week following two months of persistent and productive rebound that erased much of the losses suffered through the fourth quarter of 2018 – at least that is for US indices. The S&P 500 and Dow carved aggressive rising wedges that earned the latter a remarkable 9 consecutive week advance, the longest such climb since May 1995. That tally was broken this past week in a rather lackluster slip that was borne of the congestion that aligns to the previous ‘shoulder’ of large head-and-shoulders patterns. That uncertainty was showed some serious signs of doubts to start this trading week. The selling pressure through Monday’s session was heavy. And, even though there was a bounce through the second half of the day, the reminder that a complacent bid is not a certainty seems to have shaken the speculative rank.

Throughout the young recovery in 2019, there question of ‘what is inspiring bulls’ has dogged those willing to consider the question seriously. Growth forecasts have dropped, warnings over financial conditions and preparations have arisen through numerous channels, and a complex of direct fundamental risks have expanded over the past year. Nevertheless, an underlying sense of complacency has encouraged opportunists to seek out favorable headlines. One such point of speculation was the eventual end of the US-China trade war. That favorable turn of events is already underway with President Trump’s declaration over a week ago that he would postpone the tariff escalation deadline.

As of the start of this week, sources have leaked expectations that China is willing to move on structural issues the US has been troubled by like intellectual property sharing. And yet, the markets are not finding any renewed sense of enthusiasm. Averting a crisis is not the same thing as fostering an environment of new opportunity. If the ‘relief rally’ mentality is fading away, we are left with far less favorable conditions like slowing growth measures which will be hit upon by monthly PMIs due today or monetary policy as an impediment which will intensify notably starting Tuesday. What I look for in market activity to inform a sense of market sentiment is correlation across assets that are otherwise independent. Those measures that I follow more regularly were all under pressure Monday.

Chart of the Dow Jones Industrial Average and Consecutive Candles (Weekly)

S&P 500 Shaken to Start the Week, A Run of Rate Decisions Begins

Australian Dollar Starts on Long Run of Data, Pound Simply Can Shake Brexit Distraction

For scheduled event risk over the next 24 hours, there are a few currencies with a few noteworthy highlights. One of the top listings and a run of data throughout the week goes to the Australian Dollar. The currency has already absorbed a disappointing 4Q corporate profit release along with inflation expectations and building permits. The combination did little to truly motivate the currency however, likely because attention is being centered upon what is ahead. Due today is the Reserve Bank of Australia’s (RBA) rate decision. This central bank is considered the most likely to realize a rate cut in 2019 according to overnight swaps. That inherently leverages speculation around the authority’s intended course. What’s more, the interest in AUD doesn’t stop after the policy update as we are expecting 4Q GDP numbers the day after. There are further events including remarks from Governor Lowe and a distinct connection to China which is due for serious fundamentals waves this week. As over-loaded as the currency is this week, that is likely to do more to destabilize and sideline a trend from the Aussie Dollar than it is to facilitate a meaningful trend.

Another currency dealing with multiple lines of fundamental influence over the next 24 hours is the British Pound. This past session offered up a construction activity (PMI) report that unexpectedly flipped into contractionary territory (anything below 50) with a 49.5 for February. Ahead, the ‘composite’ and service sector PMIs are due alongside the Financial Policy Committee’s minutes, yet these indicators are unlikely to draw attention away from the open-ended threat of Brexit. Prime Minister May’s next opportunity to gain support for her proposal is a weak away, and Parliament seems to be set on course to render the same verdict – which would necessitate a vote two days later on whether to request an extension from the European Union. Last week’s breakout attempt by the Sterling looks just as difficult to achieve now as it did during the attempt. The question is whether that seeds the opportunity for reversal.

Chart of GBPAUD (Daily)

S&P 500 Shaken to Start the Week, A Run of Rate Decisions Begins

Trump Weighs in on Dollar, Euro Won’t Break Focus from ECB, Gold Suffers Worst 4-Day Drop in Nearly 2 Years

Taking stock of the macroeconomic docket, there is an array of additional event risk for which we should keep tabs, but the potential for strong market response is an even taller order. The Dollar was even further unsettled this past weekend when President Trump revived his critique of the Federal Reserve’s policy course and his lament over the strength of the currency. He said that while he likes a strong currency, it shouldn’t be so strong as to harm business. Ahead, US event risk will touch on a few important economic highlights: the ISM service sector report and new home sales. The former accounts for two-thirds of output in the United States and the latter is a well-known pressure point for global financial markets. Still, I would not expect heavy Dollar movement unless some unexpected fundamental charge hits.

I’d put the same skepticism of a robust move on the Euro as its scheduled event risk is even less prominent. While Eurozone retail sales is certainly an economic update, it will not dent the anticipation circling the European Central Bank (ECB) rate decision on Thursday. The speculation built into an ‘eventual’ hike from this dovish policy group has set the market’s focus unreasonably high and the grouphas attempted to talk the market down from its lofty expectations. They will likely need to make more explicit their intentions this week which will not bode well for a currency still holding onto 2017 premium.

Outside of the relative strength equation for the FX market, the preferred alternative to traditional fiat, gold, continues to slide. The metal has suffered its worst four-day dive through Monday since the tumble in May 2017 – and it is very close to overtaking that decline which would bring November 16, 2016 into view. This weakness does not go away when we diversify the pricing of the metal into more of the majors – meaning it is not simply a Dollar reflection. So then, what does it mean? We discuss all of this and more in today’s Trading Video.

Chart of Gold and the Four-Day Rate of Change (Daily)

S&P 500 Shaken to Start the Week, A Run of Rate Decisions Begins

If you want to download my Manic-Crisis calendar, you can find the updated file here.

Australian Dollar Ticks Up As RBA Holds Rates, Lowe Speech Up Next

Australian Dollar, RBA Monetary Policy Decision, Talking Points:

  • AUD/USD rose briefly following the RBA’s decision
  • Its statement offered no change from previous recent efforts, but was certainly no more dovish
  • Australian rates are clearly going nowhere soon, and markets still price in a cut as next move

Join our analysts for live, interactive coverage of all major economic data at the DailyFX Webinars. We’d love to have you along.

The Australian Dollar made modest immediate gains on Tuesday following the Reserve Bank of Australia’s decision to leave interest rates alone yet again. The Official Cash Rate thus stays at the record, 1.50% record low in place since August 2016.

The RBA’s accompanying statement went very much with the form of recent months. It noted low, stable inflation, labor market strength and the increase in global downside risks. Governor Philip Lowe will probably add more detail later as he is scheduled to speak in Sydney on Wednesday.

AUD/USD rose in the immediate aftermath of the decision, possibly on some relief that the RBA has not become any more dovish in its outlook. However, those gains were short-lived and there was little here to suggest that Australian rates are going anywhere soon.

Australian Dollar Vs US Dollar, 5-Minute Chart.

On its broader, daily chart AUD/USD remains above the downtrend channel which characterized much of 2018 as US interest rates rose and Australian rates remained stuck. Aussie bulls have benefitted this year from a rethink about the Federal Reserve’s intentions, and also from the stoking of risk appetite occasioned by expectations of a durable trade settlement between China and the US.

Australian Dollar Vs US Dollar, Daily Chart

Still, the Australian Dollar would appear to lack interest rate support of its own, with domestic futures markets pricing in a quarter point cut to the Official Cash Rate by April of next year. With inflation still stubbornly below the RBA’s 2% target this seems unlikely to change anytime soon. While overall risk appetite is likely to play its part in AUD/USD direction, it is notable that the pair has been stuck in a new overall downtrend since late January.

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!

Dovish RBA Rhetoric to Keep AUD/USD Rate Under Pressure

Trading the News: Reserve Bank of Australia (RBA) Interest Rate Decision

The Reserve Bank of Australia (RBA) meeting may keep AUD/USD under pressure if the central bank alters the forward-guidance for monetary policy.

Image of DailyFX economic calendar

Recent comments from Governor Philip Lowe suggest the RBA will adopt a more dovish tone in 2019 as ‘available data suggest that the underlying trend in consumption is softer than it earlier looked to be,’ and the central bank may show a greater willingness to further support the economy as the ‘progress towards our goals was expected to be only gradual.’ In turn, a batch of a dovish comments from Governor Lowe & Co. may trigger a bearish reaction in the AUD/USD exchange rate as it fuels bets for a rate-cut.

However, more of the same from the RBA may undermine the recent weakness in the Australian dollar especially if the central bank reiterates that ‘there was not a strong case for a near-term adjustment in monetary policy.’ Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss potential trade setups.

Impact that the RBA rate decision has had on AUD/USD during the last meeting

February 2019 Reserve Bank of Australia (RBA) Interest Rate Decision

AUD/USD 5-Minute Chart

Image of audusd 5-minute chart

The Reserve Bank of Australia (RBA) kept the official cash rate (OCR) at the record-low of 1.50% after holding its first meeting for 2019, with the central bank largely sticking to the same script as ‘the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.

The remarks suggest the RBA is in no rush to alter the monetary policy outlook as ‘the low level of interest rates is continuing to support the Australian economy,’ and it seems as though the central bank will stick to the wait-and-see approach over the coming months ‘the central scenario is for the Australian economy to grow by around 3 per cent this year and by a little less in 2020 due to slower growth in exports of resources.

Nevertheless, the lack of dovish comments generated a bullish reaction in the Australian dollar, with AUD/USD advancing from the 0.7200 handle to close the day at 0.7233. Learn more with the DailyFX Advanced Guide for Trading the News.

AUD/USD Daily Chart

Image of audusd daily chart

  • Keep in mind, the broader outlook for AUD/USD remains tilted to the downside as the flash-crash rebound stalls at the 200-Day SMA (0.7253), with the Relative Strength Index (RSI) at risk of highlighting a bearish trigger as the oscillator comes up against trendline support.
  • In light of recent price action, the February range remains on the radar amid the failed attempt to close above the overlap around 0.7170 (23.6% expansion) to 0.7180 (61.8% retracement).
  • Another closing price below the 0.7090 (78.6% retracement) to 0.7110 (78.6% retracement) region raises the risk for a run at the February-low (0.7054), with the next region of interest comes in around 0.7020 (50% expansion) followed by the 0.6950 (61.8% expansion) area.

Additional Trading Resources

New to the currency market? Want a better understanding of the different approaches for trading? Start by downloading and reviewing the DailyFX Beginners Guide!

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.

— Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.

AUD/USD May Recover Losses on Soft China Caixin Services PMI Data

Australian Dollar, Caixin PMI Talking Points

  • Australian Dollar falls after China Caixin services PMI missed expectations
  • Data underscored need for stimulus as China, Nikkei 225 fell as mood soured
  • AUD/USD could yet recover losses if the RBA disappoints dovish policy bets

Trade all the major global economic data live and interactive at the DailyFX Webinars. We’d love to have you along.

The Australian Dollar declined in morning Tuesday trade following softer-than-expected Chinese Caixin PMI data. Services data, the sector in which the world’s second-largest economy is slowly transitioning more into, clocked in at 51.1 in February versus 53.5 expected. That was the weakest pace of expansion (above 50 equals growth while below 50 means contraction) since October 2018. Composite PMI was 50.7 from 50.9 prior.

China is also Australia’s largest trading partner. Softer economic performance in the former could have adverse knock-on effects on the latter.

Risk trends were also souring, with the Nikkei 225 aiming lower on the announcement. China’s economy is slowing, and these numbers continue to show the need for economic stimulus. Speaking of which, a little over an hour before the Caixin PMI data, China announced that it will be cutting taxes as it lowered GDP estimates. AUD/USD could yet recover some of its gains over the next few hours.

Join me as I cover the RBA rate decision LIVE and the reaction in the Australian Dollar where I will also be looking at the risks for AUD/USD ahead!

That is because we could be in for a less-dovish RBA rate decision. The central bank is still quite patient on its approach for interest rates. While it sees its outlook as more neutral from favoring a hike now, it is in no rush to adjust its monetary-setting tool as is. Thus, with over half of the markets pricing in a cut by the end of this year, we may see some of those unwind. That may push AUD/USD back higher. You may follow me on Twitter for the latest updates on the Greenback here at @ddubrovskyFX.

AUD/USD 5-Minute Chart Reaction to Caixin PMI Data

AUD/USD May Recover Losses on Soft China Caixin Services PMI Data

Chart Created in TradingView

Australian Dollar Trading Resources

— Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

Euro, Dollar and Aussie: The Most Difficult FX Majors this Week

Top Charts Talking Points:

  • An abundance of volatility – and fundamental event risk by relation – does not make for better trading conditions
  • Among the more difficult to trade currencies this week, the Aussie Dollar may be most troubled major for event risk and recent habit
  • Euro has a one-track mind but for event risk Thursday while the Dollar can’t even be sure of its motivations

See how retail traders are positioning in US Crude Oil, EURUSD, FX majors, indices, commodities and cryptocurrency on an intraday basis using theDailyFX speculative positioning data on the sentiment page.

Heavy Event Risk Does Not Always Ensure Acute Volatility but it Does Ensure Difficult Trading

Traders harbor a natural appetite for volatility. This is a psychological need that I talk about frequently to remind myself as much as anyone else. In extraordinary market activity, market participants fantasize about reaching aggressive targets for larger profits and in a much shorter time. As with most fantasies, the favorable elements are emphasized and the risks associated are all but ignored. Volatility is by its nature not simply an increase in tempo but also a decline in certainty about where markets will be in the future. This is the foundation of how value is discovered: the greater the risk that markets move unfavorably and you lose money, the greater the expected return for pursuing the position. Whether wise or not, those chasing volatility frequently find it in assets that are already naturally active owing to an undercurrent of instability or will otherwise find a period of elevated action due to speculative charge, fundamental theme or scheduled event risk. The general environment is starting to show an increase in frequency and scale of market moves, but it is as-yet far from consistent. That keeps our reliance for measurable moves on known fundamental themes and scheduled updates. Volatility derived from fundamentals can sometimes provide a scenario where its impact is underappreciated, scenario influence dramatically skewed and outcome more readily discounted. Yet, that is the exception to the rule. Anticipation of key events or unresolved themes can render markets incapable of plotting a course, an abundance of updates can confuse as to which node is most important and key events are either fully discounted or very difficult to establish a reasonably reliable forecast.

Chart of VIX Volatility Index and Aggregate EURUSD, GBPUSD, USDJPY Volatility (Daily)

Euro, Dollar and Aussie: The Most Difficult FX Majors this Week

The Australian Dollar is the Most Troubled Major this Week

Among the ‘majors’ (the most liquid currencies in the world), the Australian Dollar will prove the most difficult to trade this week. It is showing nearly all of the risky elements with trading fundamentals simultaneously. First of all, the trading environment behind the currency is exceptionally convoluted. We can see in the lack of conviction in direction and pace – broken up by the extreme volatility of the early January flash crash – on any AUD-based cross but also in an equally-weighted representation of the currency as well. This is in large part a result of an overt disconnect from historical motivations such as risk trends, carry interest, China-connection, traditional economics, etc. If we could say the primary driver for the markets when under motion was on risk trends, we could simply focus on the correlation to the S&P 500 and the bearing of that index. Unfortunately, it is not that straightforward. Add to this general complication the fact we are due a laundry list of catalyst this week, and those trading the market are forced to keep a closer watch on developments with little conviction in how events may unfold. More general in nature, traditional risk assets have shuddered to start the week but the currency neither enjoyed the preceding twomonth advance and has little premium to speak of relative to the past year. Links to China also seem to be overlooked in recent price action as neither the improved rhetoric around the trade wars nor recovery for the Yuan and Shanghai Composite have offered the Aussie Dollar any traction. Add to that anticipation of the RBA rate decision Tuesday morning and the Australian 4Q GDP release the following day, and traders will have to split their focus to discrete releases. Theme or event risk, growth or sentiment, internal or external drivers – which will take the reins for this currency?

Chart of Equally-Weighted Australian Dollar Index (Daily)

Euro, Dollar and Aussie: The Most Difficult FX Majors this Week

Euro and Dollar Will Prove Difficult to Trade for Very Different Reasons

To round out the top three currencies that will prove difficult to trade this week, we have the two most liquid members of the entire market. The Euro has established a clear trend as it has generally failed ot follow a clear motivation between shifting tides of economic update, political instability and monetary policy reversal. Far from being impervious, the currency is simply awaiting clarity and significant change on any one of the various channels. Yet, just because it isn’t clear on exactly what light to follow doesn’t mean that the currency won’t also find distraction from high level scheduled event risk ahead. In particular, the European Central Bank (ECB) rate decision scheduled for Thursday (sign up for the live coverage webinar of the ECB rate decision on Thursday) carries extraordinary weight both for the general environment of policy shifting to a more dovish course and the unique level of speculation built into the Euro through previous years. And so, with our attention pulled out to Thursday, what kind of productive movement can we expect in the days leading up to the release? What would we really expect from currency in the aftermath? In contrast, the Dollar does not have an explicit release that will not place its undivided attention on a single event. Where some may suggestion the Friday NFPs is uniquely leveraged, I would point out that the monthly release hasn’t generate much in the way of immediate volatility, much less follow through. There will certainly be ‘media hype’ in the lead up and day of, but markets are acclimating to its tempered capabilities. What really makes for difficult Dollar trading is the abundance of effective, high-level themes competing for influence. Fed rate expectations have taken a dramatic turn over the past 5 months, growth forecasts have ground to lackluster pace, a ballooning deficit is starting to bring reserve quality questions into the main stream and even its safe haven status has not proven consistent (in bullish or bearish phases). In fact, it seems the most consistent role for the Greenback of late has been a counterpart to more productive currencies. This makes for quite a difficult trading environment. We look at the top three most difficult majors to trade this week in this Quick Take video.

Chart of Equally-Weighted Euro Index (Weekly)

Euro, Dollar and Aussie: The Most Difficult FX Majors this Week

If you want to download my Manic-Crisis calendar, you can find the updated file here.

ASX 200 Technical Analysis: Long Uptrend Could Be Losing Steam

ASX 200 Technical Analysis Talking Points:

  • The ASX 200 remains within its dominant uptrend
  • However, it looks tired and may need to pause
  • Where this process takes it could be key

Get live, interactive coverage of all major Australian economic data at the DailyFX Webinars

The ASX 200 is right in the center of a respected uptrend channel from January’s lows which has not taken it very close to a key resistance zone.

On its daily char the Sydney stock benchmark is sitting just below a band between 6239 and 6381 which last held trading sway between July and September of 2018.

Impressive Bounce. ASX 200, Daily Chart.

The top of that band represents a high which had not previously been seen for very nearly ten years. Of course, we know that the selloff which followed that high last year took the index all the way down to the lows of January. That being so there will inevitably be questions about the ASX’s ability to survive long in such a rarified atmosphere should it get back up there. After all, it has not ever done so for very long.

But a more pressing question might be whether or not the index can convincingly break into that resistance zone. It shows some tentative signs of exhaustion and a failure to push on beyond its most recent intraday highs (around 6239) on a daily or weekly closing basis might make those signs more obvious.

Of course, the uptrend is still very much with us and any pauses in the near-term could be no more than some needed consolidation. The index looks rather overbought, unsurprisingly, so some time to cool down may be no bad thing for the bulls.

Still, a closer look at the daily chart might suggest scope for the formation of a ‘head and shoulders’ pattern, with the shoulder coming in around 6200.

Topping Out? ASX 200, Daily Chart

This would be quite a serious ‘topping out’ sign, with a break below the current uptrend line perhaps the first clear signal that this could indeed be what we are dealing with. As evidence either way is likely to come fairly soon the uncommitted might want to wait and see at this point.

Its also worth noting that, while the index has regained the uptrend from February 2016 on its longer term monthly chart, it is in danger of making a lower high there this month, unless it can top those ten-year peaks.

Lower High In Prospect: ASX200 Monthly Chart

None of this is conclusive proof that we are at any sort of turning point, and a surge in global risk appetite could well put the fundamental bull train back on the rails in some style. But there are a few points of technical concern here that do bear watching.

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!