Thursday, May 16, 2013

PAXFOREX : European Fundamental Outlook, EU Session, 05/16/13



Euro Wanes Further Ahead Inflation Data

For Thursday, anticipate the Euro to continue threading the negative territory and show pessimism in its currency valuation, as the Euro strength is again undermined, this time due to the annual inflation data in the region, as most expect it to hold at the lowest in three years, a level that opened the door for the European Central Bank to cut the benchmark interest rate earlier this month. In addition, Markets saw some hectic movements yesterday, when gold prices bottomed at $1,400 a barrel for the first time in more than three weeks as the Greenback surged against major currencies, while the euro continues to stretch the downward trend ahead of key inflation data from the 17-nation bloc.
Furthermore, figures from the European Union’s statistics office Eurostat are expected to confirm today that the euro-area’s annual inflation rate in April stuck at March’s three-year low if 1.2%, down from 1.7% a month ago, and comfortably below the ECB’s 2% target. The signal currency fell is extended drop to $ 1.2865 as of 10:52 GMT today. In addition, Gross Domestic Product data showed yesterday that the euro area economy shrank for the sixth straight quarter at the first three months of the year, with GDP registering a rate of -0.2%. Meanwhile, German GDP was disappointing as well as data showed Europe’s largest economy grew a soft 0.1% at the start of the year, with a 0.2% slump in growth on the year, while France’s economy shrank by 0.2% from the fourth quarter and 0.4% on the year.
Moreover, the European inflation confirmed its lowest since February 2010 in April, giving more room for policymakers to cut interest rate further in the coming months. The Euro area CPI recorded 1.2% in the year ended April from a previous of 1.7%, the European Union’s Statistics Office in Luxembourg said today. In addition, the data shows that inflation resumed its drop below the ECB target as the slowdown in economic activities weighed on prices. The austerity measures used by many European economies to trim budget deficit have pushed the euro region to a drop of 0.2% in the first three months of 2012, after a sharp 0.6% fall in the last three months of 2012, while ramped up unemployment to a recoded high of 12.1% in March.
Further, European services sector showed an ease in contraction to 47.0 in April from 46.4 in March, the manufacturing sector’s contraction widened to 46.7 in April, the lowest this year, from the prior of 46.8. CPI recorded -0.1% on the monthly basis from 1.2% while annual core CPI reached 1.0%. Looking at the currency movement in April, the euro rebounded against the dollar in April to hit a high of 1.3199 from an opening of 1.2802, yet it is showing a retreat this month. A separate report showed that euro is trade balance reached 18.7 billion euros from 12.7 billion euros. However, it seems that the bank is worried of the drop in inflation below target as the rate is still in safe territories where the ECB is probably giving higher priority to bolstering growth.

Commentary

For the coming European session, anticipate further signs of pessimism for the euro area, as the Euro strength is again undermined, this time due to the annual inflation data in the region, as most expect it to hold at the lowest in three years, a level that opened the door for the European Central Bank to cut the benchmark interest rate earlier this month. In addition, Markets saw some hectic movements yesterday, when gold prices bottomed at $1,400 a barrel for the first time in more than three weeks as the Greenback surged against major currencies, while the euro continues to stretch the downward trend ahead of key inflation data from the 17-nation bloc.
In addition, figures from the European Union’s statistics office Eurostat are expected to confirm today that the euro-area’s annual inflation rate in April stuck at March’s three-year low if 1.2%, down from 1.7% a month ago, and comfortably below the ECB’s 2% target. The signal currency fell is extended drop to $ 1.2865 as of 10:52 GMT today. In addition, Gross Domestic Product data showed yesterday that the euro area economy shrank for the sixth straight quarter at the first three months of the year, with GDP registering a rate of -0.2%. Meanwhile, German GDP was disappointing as well as data showed Europe’s largest economy grew a soft 0.1% at the start of the year, with a 0.2% slump in growth on the year, while France’s economy shrank by 0.2% from the fourth quarter and 0.4% on the year.

AUDCAD Contrarian Call

AUDCAD Contrarian Call

The AUDCAD currency pair has been on a long corrective path as visible in this D1 chart. After forming adouble top formation is collapsed through its 50 DMA and reached new multi-months lows close to parity. The last two candlestick formations indicate that this pair is trying to build support around this key support level. We believe this pair has bottomed out and will launch a counter-trend rally back intodescending resistance levels.
MACD has completed a bearish centerline crossover and momentum has been extremely bearishwhich confirms the correction. The current level of bearishness is below its moving average and at unsustainable levels which we take as a contrarian indicator. RSI has dropped into extreme oversoldterritory and flirted with a single digit reading before stabilizing at record lows.
We recommend a long position at 1.0050 and a second entry level at 0.9950. We currently do not recommend a stop sell order as this currency pair is trading close to very strong support levels.
Traders who wish to exit this trade at a loss are advised to place their stop loss level at 0.9950. We will execute this trade as recommended. Place your take profit level at 1.0205.
Here are the reasons we call the AUDCAD currency pair higher
  • The AUDCAD has corrected down close to parity and approaches very strong support levels
  • The last two candlestick patterns indicate this pair is trying to build a bottom at support
  • Contrarian view on the forex chart as well as indicators
  • Profit taking
  • Bargain hunters




Disclaimer The analysis we provide is based on the average estimate of price movements in one day. Does not guarantee what we deliver is actually a proper and correct. Everything that happens in the decisions you make on your trading transaction is to be Your responsibilities. Flag Counter Visit Us www.deryworldscorp.web.id Visit Us www.deryworldscorp.asia

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