Thursday, 13 November 2014

Markets | 13/11/2014 | Sterling Hurt by Dovish BoE Inflation Report

         Sterling Hurt by Dovish BoE Inflation Report. Sterling slouched towards recent 14-month lows against the dollar as investors pushed back rate-hike expectations to the fourth quarter of 2015 after the Bank of England's inflation report on Wednesday. The BoE said inflation was likely to fall below 1% and monetary tightening would happen at a slower pace. Governor Mark Carney said it was appropriate that markets expected somewhat easier monetary conditions than they did three months ago and highlighted economic risks from a struggling euro zone. "Dovish inflation data has effectively overshadowed a generally positive UK jobs report and pushed back expectations of a rate hike," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.

         Yen Gains on Reduced Speculation for Early Elections. The yen advanced for the first time in three days versus the dollar as Japanese officials downplayed speculation on an early election that may boost Prime Minister Shinzo Abe’s mandate for unprecedented stimulus. Japan’s Chief Cabinet Secretary Yoshihide Suga told reporters in Tokyo he isn’t preparing for an early election, and there was no change to the government’s stance to make a decision by the end of this year on raising the country’s sales tax. “If an election is called, dollar-yen “will gap higher as people will presume that he will have an even stronger mandate,” said Sebastien Galy, a senior currency strategist at Societe Generale SA in New York.

         Swissie Overshadowed by Intervention Risks. Investors are keeping a wary eye on the Swiss franc, which raced to a 2-year high of 1.2016 francs per euro on Wednesday. Markets appear to be testing the Swiss National Bank's resolve to defend the 1.20 per euro ceiling ahead of the country's Nov. 30 referendum on whether the central bank should boost its gold reserves. A 'yes' vote would force the SNB to buy around 70 billion Swiss francs ($73 billion) worth of gold and could limit the bank's capability to maintain the stability of its currency, the central bank chief warned.

         Ukraine Army Prepares for Possible Rebel Offensive. Ukrainian government forces are redeploying in preparation for a possible new offensive by pro-Russian separatists in eastern regions, Defense Minister Stepan Poltorak said. He told a government meeting the rebels had received reinforcements despite a ceasefire that was agreed on Sept. 5 but has been repeatedly violated. "We are repositioning our armed forces to respond to the actions of the (rebel) fighters," Poltorak said. A military spokesman said the rebels were beefing up their forces, including around the port city of Mariupol in the southeast, control of which would open up roads to territory in southern Ukraine.

      Japanese Shares Rally Make the Rest of Asia Shade. Japanese stocks scaled seven-year highs on Wednesday, putting the rest of Asia in the shade. Nikkei success to gained with closed up 0.43 percent as investors gave the thumbs-up to a media report that Prime Minister Shinzo Abe will delay a second sales tax hike to avoiding damaging Japan's economic recovery, and call a snap election to cement his position. South Korean equities finished 0.22 percent higher as investors still buying the shares as they optimistic following news of a free-trade deal with China on last Monday after more than two years of negotiations. Meanwhile Hong Kong shares end rose 0.55 percent on Wednesday, lifted by Chinese financial after the city's central bank scrapped the daily yuan conversion limit for local residents ahead of the launch of a landmark scheme linking Hong Kong's stock market with Shanghai's.

      Banks Dragged Europe Shares Lower. European shares closed lower with investors shunning banking stocks after regulators announced penalties for the alleged manipulation of foreign exchange markets. U.S., Swiss, and British regulators fined lenders including HSBC Holdings Plc, Royal Bank of Scotland Group Plc and UBS AG to settle a probe into foreign-exchange manipulation. In earnings news, U.K. supermarket group J Sainsbury dropped 4% after it reported a 6.3% drop in underlying pre-tax profit for the first half of the year. Burberry shares fell 1.2% after the luxury brand highlighted a tough environment despite seeing a revenue rise in the first half of the year and upping its interim dividend by 10 percent. Germany’s DAX and France’s CAC fell 1.69% and 1.51% respectively while FTSE slide 0.25%.

      Europe's Slowdown Weigh on Wall Street. Wall Street wavered as investors mulled the slowdown in Europe's economy.Concerns that European struggles may weigh on the U.S. economy were stoked today after Bank of England Governor Mark Carney unveiled lower U.K. growth and inflation forecasts as officials adjusted to account for “moribund” global expansion and stagnation in Europe.Investors are also watching developments in Ukraine, where the country’s defense minister said the military should prepare for clashes, as growing tensions in the nation’s eastern combat zone threatened to boil over into open conflict.  Dow Jones and S&P500 fell 0.02% and 0.07% respectively while Nasdaq gained 0.31%.

        Strengthening US Dollar Erode Gold’s Appeals. Gold prices edge lower as strengthening US Dollar erode gold’s appeal as alternative investments. Overall sentiment stayed with the bears as outflows from bullion funds showed no sign of slowing. Assets in the SPDR Gold Trust, the world’s biggest exchange-traded product backed by the metal, dropped for six straight sessions, the longest slump since Nov. 25, 2013. Holdings have dropped to the lowest since September 2008. While Societe Generale SA’s Michael Haigh sees the chances of gold dropping to $1,000 increasing, Standard Chartered Plc has said purchases in Asia will help buoy prices.

         Oil Still Worry About Supply. U.S. WTI crude closed at a three-year low with prices under pressure from the growing oil glut created by the U.S. shale boom and the restart of Libya's largest operational oilfield. Saudi Arabia, the world's largest exporter, said it was doing its best with other producers to ensure price stability. But, many oil traders and analysts doubt OPEC members will take a decisive stance as they compete to hold onto market share. Adding to supply, Libya restarted production at its large El Sharara oilfield, though exports remained blocked from the 120,000-bpd Hariga port by protesters involved in a wage dispute.

         Regulators Fine Global Banks in Forex Probe. Regulators fined five major banks $3.4 billion for failing to stop traders from trying to manipulate the foreign exchange market, the first settlement in a year-long global investigation. UBS, HSBC, Citigroup, Royal Bank of Scotland, and JP Morgan all face penalties resulting from the probe that has also put the largely unregulated $5 trillion-a-day market on a tighter leash. In the latest scandal to hit the financial services industry, dealers shared confidential information about client orders and coordinated trades to make money from a foreign exchange benchmark used by asset managers and corporate treasurers to value their holdings. Dozens of traders have been fired or suspended. Dealers used code names to identify clients without naming them and created online chatrooms with pseudonyms.

     Yahoo to Buy Video-Ad Service BrightRoll. Yahoo! Inc. agreed to acquire video-advertising service BrightRoll Inc. for about $640 million in cash, adding marketing tools to drive Chief Executive Officer Marissa Mayer’s turnaround effort. BrightRoll serves many of the largest brands and agencies, including 87 of the AdAge Top 100 U.S. advertisers, according to the statement. It specializes in what’s called programmatic advertising, which helps automate the buying of ads. The acquisition would help bolster Yahoo’s position in a growing part of the digital-advertising market. Yahoo will have just 2.4 percent of the worldwide market for all digital ads this year, lagging behind Google Inc. and Facebook Inc. “Video, along with mobile, social, and native, is driving a surge in digital advertising,” Mayer said in the statement. “BrightRoll is a terrific, strategic and financially compelling fit for our video advertising business.”
Technical Outlook
     EUR/USD. The bias is bearish in nearest term especially if price able to make a clear break back below 1.2400 area to trigger further bearish momentum aiming 1.2340 region. On the upside, only a clear break back above 1.2490 area would trigger further bullish correction scenario retesting 1.2530 region.
         GBP/USD. The bias is bearish in nearest term but we need a clear break back below 1.5750 area to trigger further bearish pressure targeting 1.5715 support area. On the upside, only a consistent break above 1.5845 area would trigger further bullish correction scenario perhaps retesting 1.5910 area as price getting oversold.
       USD/JPY. The bias is neutral in nearest term with potential trading range seen between 114.50 – 115.70 area. Another consistent breakdown below 114.50 area would trigger further bearish correction scenario retesting 114.10 region or even lower. On the upside, only a clear break back above 115.70 area would continue major bullish trend aiming 116.30 resistance area.
        USD/CHF. The bias is bullish in nearest term especially if price able to make a clear break above 0.9680 area to trigger further bullish momentum aiming 0.9730 area. Immediate support is seen around 0.9620 area, another consistent break below that area would bring the price to neutral zone as direction would become unclear in nearest term perhaps retesting 0.9580 region.
       AUD/USD. The bias is bearish in nearest term but we need a clear break below 0.8670 area to trigger further bearish momentum aiming 0.8620 area. Immediate resistance is seen around 0.8765 area, another consistent break above that area would bring the price to neutral zone as direction would become unclear in nearest term perhaps retesting 0.8810 region.
      XAU/USD. Rising Stochastic on daily chart could give short-term upward bias. But, gold still trade below MA 50-100-200 days with falling MACD that could signal the bearish pressures is still exist. Sentiment quite mixed where gold may trade sideways with trading range 1130 - 1180. Strategy: sell-on-rally with stop-loss 1171 and profit-taking 1146. Nevertheless, a clear break above 1170 could trigger upward movement to test area 1177.
        Hang Seng Futures. Falling Stochastic on daily chart could give short-term downward bias. But, Hang Seng now trade inside bullish channel that may provide upward movement. Hang Seng may just move sideways for a while as it is still trapped between MA 100 and MA 200-days.  Strategy: buy-on-dips with stop-loss 23710 and profit-taking 24000. Nevertheless, a clear break below 23720 could trigger downward movement to test area 23600.
       Nikkei Futures. The bias is bullish as Nikkei trade above MA 50-100-200 days with a raising MACD. But, Nikkei need to create daily close above resistance 17455 to give more power for rally. A failure to break resistance 17455 could trigger profit-taking as daily Stochastic in overbought area. Strategy: buy-on-dip with stop-loss 17020 and profit-taking 17450. Nevertheless, a clear break below 17040 could trigger downward movement to test area 16855.

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