Dagelijkse Markt Analyse 11 Januari 2019

DAGELIJKSE MARKT ANALYSE 3 FEBRUARI 2014

• Euro Unlikely to Find Support in Upbeat Manufacturing PMI Data
• US Dollar Vulnerable if January’s ISM Print Proves Disappointing
• New Zealand Dollar Outperformed in Otherwise Quiet Asian Trade

Final revisions of January’s Eurozone Manufacturing PMI readings headline the economic calendar in European hours. Flash estimates put the most closely-watched German and regional-wide measures at 32-month highs. Confirmation of these seemingly robust results seems unlikely to boost the Euro as traders remain focused on anemic inflation trends and their implications for an expansion of ECB stimulus efforts, perhaps as soon as this week. We continue to hold short EURUSD.

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DAGELIJKSE MARKT ANALYSE 4 FEBRUARI 2014

• Dollar Posts Uneven Gains as Equities Collapse
• Yen Crosses Suffer Universal Decline, Risk Aversion is Spreading
• Australian Dollar Surges after RBA Holds Rates Steady

Dollar Posts Uneven Gains as Equities Collapse
Equities, high yield bonds and FX-based carry trade all collapsed to open the week. The market’s foundation for risk appetite is crumbling; and yet, the dollar’s performance Monday was decidedly uneven. The Dow Jones FXCM Dollar Index (ticker = USDollar) was virtually unchanged through the day. On an individual basis, the greenback seemed to be at a standstill, with the more active British pound and Japanese yen strong arming the biggest moves on the majors’ behalf. This disconnect is remarkable considering the S&P 500 posted its biggest single-day drop in over six months (2.3 percent) and the VIX Volatility Index closed at a 13-month high. All things considered, these benchmarks of investor sentiment are flashing disturbing warning signs to the markets, and yet the dollar is not capitalizing on its safe haven status.

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DAGELIJKSE MARKT ANALYSE 5 FEBRUARI 2014

• Dollar At Risk of Tumble Awaits Next Risk Move
• Euro: Speculation of New ECB Stimulus Growing
• Yen Crosses Rebound as Volatility Trends Take a Breather

Dollar At Risk of Tumble Awaits Next Risk Move
The greenback is at risk of suffering a significant technical tumble and needs either a concerted risk aversion move or Taper-based yield swell to safeguard its three-month bull wave. This week, we have seen one of the most foreboding sentiment stumbles in months fail to generate a meaningful bid for the currency market’s traditional liquidity provider. Tuesday’s stabilization move fortified the S&P 500, but the recent positive correlation with the dollar notably faltered and left the latter benchmark behind. From the Taper front, both Chicago Fed President Evans (the group’s most dovish member) and Richmond Fed President Lacker both reiterated the policy authority’s position that a steady reduction in stimulus was the plan so long as conditions remain stable. Ahead, the ADP jobs changes and ISM service sector report will further this line.

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DAGELIJKSE MARKT ANALYSE 6 FEBRUARI 2014

• Dollar: Is the Bullish Taper Drive Running on Fumes?
• Euro Will Respond to ECB Whether They Hold or Increase Stimulus
• British Pound Strength Eroding as Hike Optimism Fades

Dollar: Is the Bullish Taper Drive Running on Fumes?
A quick look at the Dow Jones FXCM Dollar (ticker = USDollar) reveals the bulls are struggling to keep the control over the market. The index shows the greenback probing the floor of a three-month rising trend channel – a threat of correction reflected equally across EURUSD, AUDUSD and USDJPY. The lack of progress is a fundamental concern. Between the two dominant market themes for the greenback and broader FX market, both risk trends and relative monetary policy should be theoretically offering support to the greenback. And yet, the currency is threatening to suffer a move lower. This difficulty may turn the tide for the currency’s persistent upside drift in otherwise steadfast markets. In other words, the dollar may be prone to a short-term tumble unless something more ‘dramatic’ happens.

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DAGELIJKSE MARKT ANALYSE 7 FEBRUARI 2014

• Dollar: Can the NFPs Salvage a Tentative Breakdown?
• Euro Rallies After the ECB Holds Monetary Policy Unchanged
• British Pound Steady Through BoE Decision, Bigger Moves Ahead

Dollar: Can the NFPs Salvage a Tentative Breakdown?
Having loitered at a multi-month level of support, the Dow Jones FXCM Dollar (ticker = USDollar) finally made a conspicuous, bearish break this past session. That is a troubling move ahead of Friday’s closely-watched January NFPs release. Where the scenarios for the labor report in previous months may have leaned in favor of a bullish interpretation for the greenback – as it would weigh on the speculation of the eventual Taper – we have seen the market’s interest in the Fed’s QE wind-down fade since they made their first definitive move back on December 18. This is not to mean that this important policy shift is not important to the dollar and global capital markets, but it does imply a higher threshold for encouraging the benchmark currency to substantial short-term gains.

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DAGELIJKSE MARKT ANALYSE 10 FEBRUARI 2014

• Japan’s Eco Watchers Survey Outlook Index 49.0 in Jan versus 54.7 in Dec
• Report Reflects the Weakest Retail Services Sentiment Since November 2012
• Yen Stronger as Soft Data Weighs on Risk Appetite, Boosts Haven Demand


Japan’s Eco Watchers Survey of retail service providers showed sentiment soured for a second consecutive month, with the forward-looking Outlook index falling to the lowest level since November 2012 (49.0 in January versus 54.7 in the prior month).

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DAGELIJKSE MARKT ANALYSE 11 FEBRUARI 2014

Dollar: When will the Market Start Pricing in the First Fed Hike?
The Dow Jones FXCM Dollar Index (ticker = USDollar) only lost modest ground to open the new week, but that didn’t prevent the benchmark from closing out its sixth consecutive decline. Already in the red early this morning, the greenback is working on its longest bear trend since the final trading days of 2010. Such a persistent selling pressure following the failure of the convincing bullish bias from late October is an ominous portend ahead of Tuesday’s top event risk: Janet Yellen’s first Congressional testimony on monetary policy as Chair of the Federal Reserve. The tangible shift in the central bank’s policy bearings with the Taper move starting December has failed to generate a serious bid for the dollar. What would happen if the new Central Bank head employed some effective, dovish jawboning?

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DAGELIJKSE MARKT ANALYSE 12 FEBRUARI 2014

• Dollar Confirms Longest Tumble in 3 Years After Yellen Testimony
• British Pound: BoE to Reconcile Traders and Bank’s Divergent Outlook
• Euro Outlook Mixed between Growth Forecast Growth Upgrades, Fitch Warning

Dollar Confirms Longest Tumble in 3 Years After Yellen Testimony
Janet Yellen delivered her first official testimony on monetary policy before Congress as the Fed Chair this past session and the dollar notably extended its decline while equities climbed more than 1 percent. This would seem an easy read for cause-and-effect, but the impact of the news likely carries less sway over FX and capital markets than many suspect. For all the sound bites and headlines that the new Fed Chair’s statement and Q&A inspired, she stuck remarkably well to the playbook Ben Bernanke had setup before her. This includes support for the current pace of consistent Tapering alongside a forecast for a more distant return to rate hikes that the simple thresholds may imply. So where is the impetus for this 7-day USDollar decline – the longest since December 2010 – coming from? Simple momentum.

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DAGELIJKSE MARKT ANALYSE 13 FEBRUARI 2014

• Dollar Notches 8th Decline for Worst Stumble in Nearly 6 Years
• British Pound Posts Its Biggest Rally in Months, But Is This Momentum?
• Australian Dollar Tumbles after Unemployment Rate Hits 10-Year High

Dollar Notches 8th Decline for Worst Stumble in Nearly 6 Years
The Dollar keeps notching records…unflattering ones. With the Dow Jones FXCM Dollar Index (ticker = USDollar) closing down another 15 points just above the 16,000-level, the benchmark has extended its slide to an eighth straight trading session. This painful decline matches the worst performance for the benchmark since July of 2007. That said, of the only six times in the Index’s history that it has posted bear waves of this consistency, this is the ‘weakest’. Through this decline, the USDollar has shed only 102 points. This compliments the deceleration of global equity indexes as their ‘rebound’ hits levels that venture into the outright ‘bull trend’ category. There is a considerable difference between corrections and true trend – one of conviction, momentum and potential follow through.

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DAGELIJKSE MARKT ANALYSE 14 FEBRUARI 2014

• Dollar Collapse Now Third Worst in Over a Decade
• Euro Has Clear Levels but Can GDP Generate Breakout Velocity?
• British Pound Extends Run Though Market Second Guessing BoE Hike

Dollar Collapse Now Third Worst in Over a Decade
The bleeding doesn’t stop. With Thursday’s close, the Dow Jones FXCM Dollar Index (ticker = USDollar) has dropped for 9 consecutive trading days. We have only seen this level of consistent bearish pressure for the benchmark twice before in the index’s history. Yet, it should be noted that the pressure behind the move is still lacking for conviction. The 126-pip decline through this move contrasts to the 173-pip drop in July of 2007 or the 302-pip plunge through May of 2006. The selling pressure is being felt across all of the major counterparts, but there is still a measure of obvious technical restraint for most (the exception being GBPUSD). The failed transition towards risk aversion is certainly an aspect of this move, but that driver was never truly realized. The greenback seems to be losing the persistent appeal of Taper speculation.

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DAGELIJKSE MARKT ANALYSE 17 FEBRUARI 2014

• US Dollar Sold as Asian Markets Play Catch-Up to Friday’s Wall Street Rally
• Lull in European, US Event Risk Set to Make for Quiet Start to Trading Week
• Fed Minutes and US CPI May Sink Sentiment Anew, Boosting Dollar and Yen

The US Dollar continued to face broad-based selling pressure at the start of the trading week as Asian markets played catch-up to Friday’s rally on Wall Street that brought the benchmark S&P 500 index to the highest level since January 22. The area corresponds with where prices traded on the eve of the knee-jerk selloff that materialized following the emergence of a diverse bouquet of emerging-market jitters.

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DAGELIJKSE MARKT ANALYSE 18 FEBRUARI 2014

Dollar Finds Relief with First Advance in 11 Days, Will it Last?
A break in the speculative feedback loop worked in the US dollar’s favor Monday. TheDow Jones FXCM Dollar Index (ticker = USDollar) posted its first gain in 11 trading days – ending the worst run for the benchmark since 2006. We could just write this off as a side effect of liquidity and little more, but a look at the market’s performance around holidays seems to highlight something of statistical relevance. Over the past 12 months, breaks in the transmission of risk trends from session to session due to US holidays tend to align to changes in direction and/or tempo for the S&P 500, USD and VIX Volatility Index. There are certainly additional circumstances that play into this situation, but current conditions present a very interesting picture. The dollar’s tumble and US equity market’s rally has played out with a limited fundamental engine. The moves seem more born out of routine than dedication. Breaking the trance as significant technical milestones come into view puts the drive at far greater risk of turn. Looking ahead to the first active US session, watch for the TIC capital flows and 4Q New York Fed debt figures.

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DAGELIJKSE MARKT ANALYSE 19 FEBRUARI 2014

• Dollar Rebound Begins Slow, Looks to Risk and Taper for Fuel
• British Pound Tests Rate Forecast Again on Jobs Data
• Yen Crosses’ Climb Post BoJ Stalls Quickly

Dollar Rebound Begins Slow, Looks to Risk and Taper for Fuel
Having broken its oppressive 10-day consecutive decline on Monday, the Dow Jones FXCM Dollar (ticker = USDollar) is not attempting to mount an offense. Yet, as we have seen often enough in these markets, a break in the trance of persistent trends is not enough to fundamentally change the bearings and pace of the markets. As is usually the case, this counter trend requires a lightning rod for bullish conviction. It could find it easily enough from underlying risk trends or perhaps a renewed affection for Taper / interest rate timetables. Yet, we need market turmoil to bolster these themes to the headlines and start the ball rolling.

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DAGELIJKSE MARKT ANALYSE 20 FEBRUARI 2014

• Dollar Attempts First 4 Day Rally in 3 Months, CPI Ahead
• British Pound Rate Outlook Deflating Quickly After Jobless Uptick
• Yen Crosses: A Steadfast BoJ Doesn’t Bode Well for Record Trade Deficits

Dollar Attempts First 4 Day Rally in 3 Months, CPI Ahead
Two very potent fundamental themes are starting to throw their weight behind the dollar’s recovery. Yet, to mount enough strength to force a EURUSD, GBPUSD or AUDUSD reversal; these catalysts need to hit a fundamental stride we have not seen in the past weeks. In the meantime, the greenback has nevertheless managed a broad – albeit tepid – advance. In fact, its gains against the Euro and British pound were more technical than qualitative. That is the same impression we draw from the Dow Jones FXCM Dollar Index’s (ticker = USDollar) 21 point cumulative gains through the first half of the week.

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DAGELIJKSE MARKT ANALYSE 21 FEBRUARI 2014

• Dollar Posts Fourth Measured Advance after Data Feeds the Taper
• British Pound Breakout Building Alongside Gilt Yields
• Euro Unfazed by Weak PMI Data, Spain Long-Term Debt Sale

Dollar Posts Fourth Measured Advance after Data Feeds the Taper
In the green through early trade Friday, the Dow Jones FXCM Dollar Index (ticker = USDollar) is working on its fifth consecutive daily advance. If we close this final session for the week in the green, it would be the first drive of this magnitude since the run through November 1 – notably, the beginning of a multi-month bull leg. Yet, consistency is not a complete measure of conviction. The drive behind this upswing is as subdued as the decline that preceded (a 10-day slide that covered only 160 points). A failure of this recovery and shift to more meaningful lows would require either the Fed abandoning its Taper ambitions or global capital markets embarking on a participation-heavy asset build up – low probability scenarios. Alternatively, a persistent speculative deleveraging is the best medicine for a dollar rally – probable but elusive.

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DAGELIJKSE MARKT ANALYSE 24 FEBRUARI 2014

• Soft German IFO Report Unlikely to Yield Lasting Follow-Through
• Euro May Decline if January’s CPI Reading is Revised Downward
• Japanese Yen Rose on Haven Flows as Stocks Sank in Asian Trade

Germany’s IFO Survey of business confidence headlines the economic in European trading hours. The headline Business Climate index is expected to tick gently lower to 110.5 in February compared with 110.6 in the prior month, snapping a three-month winning streak. Eurozone economic news-flow has increasingly disappointed relative to expectations since late January (according to data from Citigroup), which would be consistent with a pullback in sentiment. The ECB’s decision not to expand stimulus efforts at February’s policy meeting may have likewise soured survey-takers’ disposition.

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DAGELIJKSE MARKT ANALYSE 25 FEBRUARI 2014

• Dollar Slow Advance Sidetracked by S&P 500 Surge
• Euro Holds Fast Despite Sharp Drop in Inflation
• Yen Crosses Fail to Authenticate Risk Run

Dollar Slow Advance Sidetracked by S&P 500 Surge
Though the US Dollar’s relationship to risk trends has been confused over the past months, a record high from the S&P 500 certainly leverages the occasion of a bearish close from the safe haven dollar. The benchmark equity index managed to overtake the 1,850 range high that has capped the market since we first approached the level on the final trading day of 2013. However, the headline-grabbing move couldn’t muster enough fortitude to keep above the threshold into the close. Digging further into the impetus behind the ‘risk on’ position of the day, we would note that the yen crosses and Emerging markets were little moved. What does this tell us? That the market is still lacking for the bullish commitment that would help us scale resistance and engage a new wave of capital inflow into the financial markets (in other words transition a breakout into a trend). The limited level of confidence translates into limited losses for the greenback. The Dow Jones FXCM Dollar Index (ticker = USDollar) was down 0.2 percent – breaking the five-day run before it but not causing any panic. In the upcoming session, we should focus more on the ‘depth’ of any risk tides. Otherwise, the docket brings a Fed Tarullo speech and a Consumer Confidence survey

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DAGELIJKSE MARKT ANALYSE 26 FEBRUARI 2014

• British Pound May Not Find a Catalyst in Revised 4Q UK GDP Data
• Dollar, Yen May Rise on Soft US Home Sales Data, Pro-Taper Rhetoric
• Australian Dollar Underperforms in Otherwise Quiet Overnight Trade

A revised set of fourth-quarter UK GDP figures headlines the economic calendar in European hours. The initial estimate showing the economy added 0.7 percent in the three months through December is expected to be confirmed. Such an outcome would carry relatively limited implications for Bank of England monetary policy expectations, limiting its impact on the British Pound. Needless to say, a significant upgrade is stands to boost the currency in the near term on bets the central bank may move to withdraw stimulus relatively sooner, whereas a downgrade could be expected to yield the opposite result.

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DAGELIJKSE MARKT ANALYSE 27 FEBRUARI 2014

• Markets Likely to Look Past German Jobs Data, Focus on Flash CPI Print
• Euro May Decline if Soft Inflation Figures Fuel ECB Stimulus Speculation
• US Dollar May Extend Rebound on Pro-Taper Fed-Speak, Durables Data

The Euro is likely to look past another decline in German Unemployment to focus on the preliminary set of German CPI figures as the markets remain focused on the implications of continued disinflation for the trajectory of ECB monetary policy. The currency bloc’s largest economy is expected to see the ranks of the jobless shrink by 10,000 in February while the unemployment rate holds unchanged at 6.8 percent. The outcome carries relatively limited near-term implications for Mario Draghi and company on its own, whose narrow mandate keeps them focused on price stability.

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DAGELIJKSE MARKT ANALYSE 28 FEBRUARI 2014

• Dollar Dribbles Lower, Docket to Light the Fires Next Week
• Euro Takes in Key Data Ahead of Next Week’s ECB Decision
• Yen Crosses Clear Support but Fail for Trend

Dollar Dribbles Lower, Docket to Light the Fires Next Week
The Dollar technically put in for a complete reversal this past session. Yet, the hand off of the controls to the bears wouldn’t translate into a more motivated speculative crowd. Activity levels are fading to extreme levels. We find activity measures (the 20-day average true range) for AUDUSD cooling after its January reversal from lows and GBPUSD idling at lows for the year as the 1.6800 overhead. Far more concerning though is EURUSD’s health. The dollar’s and the world’s most liquid currency pairing, its own average range this past month has shrunk to its narrowest span since July 24, 2007. This is more than a technical statement on the nature of this particular pair or even the dollar itself. It is another symptom of the global financial markets’ hesitation and doubt. When the dollar moves, it will likely be a systemic move.


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