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LondonCapitalGroup
Number of messages : 36
Date of Entry : 2017-03-08

Re: Market Research

on Wed Mar 22, 2017 7:48 pm
The Market Rundown

End of quarter makes traders shorter

It’s overly simplistic to lay the blame for the market decline at Donald Trump’s door. The first US rate hike this year, a slump in oil prices, the future of quantitative easing under higher inflation and end of quarter portfolio manoeuvring have played a part in markets changing course. Still the Trump Presidency, which has played such a large role in the rise in markets since November, is not to be ignored as a factor.
 
Probably the two biggest contributors to the idea that the world is reflating; a Trump-led fiscal boost and rising oil prices have come unstuck in the past fortnight. We have talked previously about the importance of Trump’s healthcare reform. The “Repeal and Replace” of Obamacare is a beta test for tax cuts. The universally agreed upon notion that ‘Obamacare is bad’ inside the Republican Party struggling to make headway in Congress is a bad omen for the trickier process of tax reform.
 
Stocks

The first 1%-plus decline in major US equity indices in over a hundred trading sessions has spread to Europe. Major European equity indices notched up a third day of declines. It must be a week where winning streaks get broken; first the England rugby team then US stock markets.
 
Banks led the decline in European stocks, matching a similar pattern in the US. The return to form of the banking sector since the US election has epitomised the reflation trade. With the reflation dynamic under scrutiny, banks stocks have been hit the most.
 
A shooting outside Westminster did little to calm nervous investors in the City of London. Its heavy weighting towards basic resources meant the FTSE 100 saw bigger declines than the rest of Europe as copper prices dropped nearly 2% on the day. Confusion over the introduction of new rules banning certain electronic devices on flights saw travel and leisure stocks loose altitude.
 
US stocks dipped again on the open, although the pace of declines slowed. The Nasdaq bucked the trend, rising slightly. Some investors are using the decline as an opportunity to load up on popular names including Apple and Netflix.

Currencies

A flight to safety in FX markets meant the US dollar was up against most major currencies bar the Japanese yen.
 
USD/JPY dropped below 111, a critical technical level which has held on three occasions since late November. While 100 offers round-number support, we suspect a bigger decline towards 109 and the 200 day-moving average.
 
GBP/USD slipped back on profit-taking after touching 1.25. Sterling is consolidating gains made after above-forecast inflation was reported on Tuesday. Whether Sterling extends its decline could depend on retail sales data released on Thursday. The recent trend in retail sales data has been that of disappointment, so signs of a turnaround would be especially well-received.
 
EUR/USD bounced back from early declines to retain 1.08. The euro benefitted as polls showed Emmanuel Macron extending his lead in the first round of the French presidential elections to 26% following a strong debate performance. Marine Le Pen on the other hand has seen support begin to wane as disenfranchised but more moderate voters gravitate towards Macron.

Commodities

Brent crude oil touched a fresh three-month low on Wednesday, dropping below $50 per barrel. A surprise 4.95M build in EIA crude oil inventories adds to the concern the supply glut could take longer to reverse. It took three days to unwind all of last week’s gain in the oil market. In Friday’s note we said “The pain may not be over quite yet. Questions over the size of and compliance to OPEC output cuts remain and are a headwind to further oil price gains.”
 
Gold has been the obvious beneficiary of the latest bout of uncertainty. The rise in the price of gold began March 15 when the Fed raised rates, pre-dating the stock sell-off this week. We said last week that gold refuses to lay down and die. We attribute gold’s durability to a duel benefit to investors holding it. Gold is a hedge against uncertainty but also does well during periods when interest rates look like staying lower for longer, typically when stocks do well too.
LondonCapitalGroup
Number of messages : 36
Date of Entry : 2017-03-08

Re: Market Research

on Thu Mar 23, 2017 7:39 pm
Markets sniffle over American Healthcare Act

Signs of life reappeared on Thursday when stocks got an afternoon pop and havens like gold and the Japanese yen pulled back from earlier gains.
   
The two percent retreat this week in the context of the epic rally that preceded it barely deservers the moniker of ‘caution.’ Still, the post US-election euphoria is visibly beginning to ebb. We view the Trump rally as a meaningful display of investor confidence but such extreme bullish sentiment means a consolidation is way overdue.
   
A lot of emphasis is being placed on the vote in the US Congress on the new Republican healthcare bill. At the moment the bill appears to hanging in the balance as conservatives bicker with themselves as to whether the ‘replacement’ does enough ‘repealing’. Whether the bill passes or fails on the first attempt, stocks have likely entered a correction phase anyway.
   
New details of the terrorist attack on London Bridge from Prime Minister Theresa May seemed to have had a negligible impact on typically sensitive areas of the market like travel and leisure sectors.
   
Next lifts the FTSE

Clothing retailers led gains on the FTSE 100 after investors took solace in unrevised forecasts from Next after it reported its first annual profit drop in 8 years. Lord Wolfson of Next appears acutely aware of the macro risks facing the clothing sector from shifting tastes towards ‘experience’ to higher input costs. Something Next is less keen to flag up is that its catalogue/online business faces a lot more competition these days. A pair trade in the retail sector going long Boohoo and short Next would have produced strong returns over the past year.
   
A rebound in UK retail sales in February coupled with a mix of broker upgrades and downgrades saw diverging fortunes amongst supermarkets with Tesco seeing gains while Sainsbury dropped into the red.
LondonCapitalGroup
Number of messages : 36
Date of Entry : 2017-03-08

Re: Market Research

on Fri Mar 24, 2017 1:46 pm

  • FTSE flat at 7340
  • DAX +2 points at 12042
  • CAC -8 points at 5025
  • Euro Stoxx -4 points at 3448


Dear Trader,

The US dollar pared losses against the G10 currencies as the critical health-care vote has been delayed in the US yesterday. President Donald Trump expects the deal to be validated on Friday. A validation would also grant Trump the credibility on his ability to pass through his fiscal policies, including tax reforms and large infrastructure spending. An eventual failure could letdown investors, yet it is worth noting that the major market focus is still on the US’ fiscal plans and the Trump administration could carry on with its expansive fiscal plans regardless of a disappointment on the health-care bill.

The US stocks closed the day slightly negative: S&P500 (-0.11%), Dow Jones (-0.02%) and NASDAQ (-0.07%).

The US 10-year yields held the ground above 2.40%. Trump-positive news would be supportive of the US dollar, the US yields and also the banking stocks across the global markets, given that a large fiscal spending in the US would mean a faster rate tightening from the Federal Reserve (Fed) and could restore a smile on Fed hawks’ faces.

Gold traded down in Asia, after extending gains to $1253 yesterday. The momentum remains marginally positive, yet is clearly losing strength suggesting an eventual pullback to $1230/1224 (minor 23.6 % retracement on December – February rise / 50-day moving average). Improvement in the US yields could hinder the positive trend toward the 200-day moving average ($1260).

The yen is softer on weaker risk aversion. The USDJPY rebounded just above the critical support of 110.55 (50% level on post-Trump rally) on Thursday and consolidated gains above the 50-hour moving average (111.20) in Tokyo. Nikkei (+0.93%) and Topix (+0.88%) recorded their biggest rally in two weeks on softer yen.

Else, Asian stock markets portrayed a mixed session. Shanghai’s Composite (+0.59%) and Hang Seng Index (-0.25%) remained on the back foot before the US vote, while the Australia’s ASX 200 closed 0.80% higher on falling Aussie. Financials (+1.11%) and energy stocks (+1.28%) lead gains in Sydney.

Australian dollar extended losses to 0.7610 against the US dollar, as iron ore delivered to Qingdao (China) tanked to lowest levels since February. The AUDUSD slipped below the 50-day moving average (0.7630) and tested 0.7609 (minor 23.6% retracement on December – March recovery). Breaking this level could encourage a further slide to 0.7550 (200-day moving average).

In the Eurozone, the banks took 233.5 billion euro worth of free long-term loan from the European Central Bank (ECB) versus Bloomberg’s 110 billion medium estimate. This has been the largest take-up since the ECB launched the TLTRO (Targeted Long-term Refinancing Operation). The final TLTRO owed its success to growing anticipations that the ECB would start unwinding its ultra-expansive monetary policy at the end of 2017.

The EURUSD pared gains for the third consecutive day. The pair traded at 1.0760. The positive trend is fading and the pullback could extend to 1.0707 / 1.0660 (major 61.8% retracement on post-Trump decline / 50-day moving average).

Across the Channel, the GBPUSD rallied to 1.2530 on the back of solid retail sales data released yesterday. Higher inflation, solid retail sales, combined to several Bank of England (BoE) members’ concerns about keeping the bank rate at the current historical low level for a longer period of time should continue supporting the pound recovery. The GBPUSD could extend gains to 1.2565 (minor 76.4% retracement on February – March rise), before 1.2605 (200-day moving average).

The FTSE 100 stocks stood strong against the pound appreciation. The FTSE index held the ground above the 7300p level on Thursday’s session and is set for a flat open on Friday. Improved global risk appetite could encourage a recovery toward 7360p, the 200-day moving average, before the weekly closing bell. Support is eyed at 7300p (weekly support).
LondonCapitalGroup
Number of messages : 36
Date of Entry : 2017-03-08

Re: Market Research

on Fri Mar 24, 2017 7:58 pm
Week Ahead: Article 50, OPEC & Trumpcare

Last week saw the beginnings of what could be a bigger correction in equity markets as investors showed some long-awaited uncertainty about the Trump policy agenda. The difficulty of ‘repealing and replacing’ Obamacare has investors worried about Trump’s ability to pass tax reform and infrastructure spending bills later, a major reason behind the excitement in markets post-election.  
 
This weekend’s meeting from OPEC will be important for the future direction of the oil price. The triggering of Article 50 will be a big moment for GBPUSD, EU inflation data could determine whether EURUSD breaks 1.08 and the latest GDP stats from the US and UK will be important for confidence in global growth.
Watch this video for a closer look at next week's events.
LondonCapitalGroup
Number of messages : 36
Date of Entry : 2017-03-08

Re: Market Research

on Mon Mar 27, 2017 8:18 pm
Global stocks decline, USD pare gains

Lack of appetite in mining and energy stocks combined to stronger pound weighed on the FTSE stocks (-0.89%) at the weekly open in London. The FTSE 100 broke the 50-day moving average (7275p) on the downside. The acceleration in the sell-off could encourage a deeper correction to 7225p (minor 23.6% retracement on Trump rally) before 7191p (February 23th dip).

PM Theresa May will trigger the Article 50 on Wednesday, which will officially start the Britain’s exiting process from the European Union. Given that the Brexit is already fully priced in the pound’s value, the GBP-crosses are expected to move on the back of domestically and internationally developing stories, such as the potential reversal of the US reflation trade, the retracement in the US dollar and  the hawkish shift in the Bank of England’s (BoE) policy expectations.

The GBPUSD is trending toward the 1.2565 (minor 76.4% retracement on February – March retreat), then 1.2600 (200-day moving average).


Bunds rally on Merkel victory, Le Pen’s comments overlooked

German Chancellor Angela Merkel secured her biggest victory in thirteen years in Saarland regional vote. Merkel strengthened her position before the German federal election due on September 24th. German bund yields spiked down at the open in Frankfurt, as investors rushed into the German sovereign papers on Merkel hopes.

In France, the odds for Le Pen victory declined to 25% according to the latest Bloomberg survey. In her latest speech, the far-right Front National’s leader Marine Le Pen claimed that the ‘EU will die’. In an attempt to reassure her voters, she said that an eventual euro exit would not be chaotic for France. The latter scenario is considered as a tail-risk by the global markets and is being priced to a very tight extent across the board.

The EURUSD tested the 200-day moving average (1.0850). Solid positive momentum hints at a further upside potential toward 1.0932 (major 61.8% retracement on post-Trump rally) before the 1.10 mark.
The euro strength encouraged a downside correction in the European stock markets. The DAX slipped below the €12'000 level in Frankfurt. The 50-day moving average, €11’835, will be the critical battle field between the mid-term longs and shorts.


US reflation rally reverses, US dollar, yields and stocks under pressure

The US dollar started the week weaker against all of its G10 counterparts. Donald Trump’s defeat over the health-care replacement plan dented investors’ appetite in the ‘reflation’ trading theme. The US 10-year yields broke below 2.40%, as the DXY (the US dollar index) returned back to the pre-US election levels.  

The US stock futures traded in the red in Asia. The Dow Jones (-0.53%), NASDAQ (-0.72%) and the S&P500 futures (-0.73%) hint at a melancholic open in the US on increasing worries regarding President Trump’s ability to realize massive fiscal reforms as promised.  

The Dow Jones Industrial index lost over the four out of the five past trading sessions last week. As it appears, the downside correction in the US stocks could intensify. The recent pullback raised several questions on whether the Trump reflation rally is over and what is the potential of a further drop.

The Dow Jones rolling index retreated below the 50-day moving average $20’490 for the first time under Trump’s presidency. The Dow is expected to gap-open 124 points lower at $20472 in New York.

The next important technical level is eyed at $20’293, the minor 23.6% retracement on November 9th to February 28th rally. Breaking this level would pave the way for the critical psychological level of $20’000.


USDJPY’s journey to 110

Among the G10 currencies, the yen (+0.92%) gained the most against the greenback. The USDJPY extended losses to 110.15, after taking out the 110.55 Fibonacci 50% support on post-Trump rally. As such, the US dollar gave back half of gains accumulated during the ‘reflation’ rally against the yen. As we are moving toward the fiscal year end in Japan, it could be just a matter of time before the $110.00 is breached.


Gold traders focus on 200-dma

Gold extended gains to $1259, just shy of the closely monitored $1260 level, the 200-day moving average. The retracement in the US yield curve is supportive of a positive breakout above $1260 for a further rise to $1280/1300.  

Oil unchanged on OPEC, Russia get-together

The unscheduled OPEC meeting over the weekend did little to cheer up the bulls in the oil market. Oil producer countries announced to stick to their plan to reduce production and highlighted that the recent price drop was due to the high inventory levels, not to a failure in compliance. It has been said that it may take longer than previous anticipated draining the global supply glut. The production cuts could be extended up to 6 months, according to some producer countries. Unfortunately, the issue is more complex given that all global players are not up to the same speed. We remind that the sell-off in the oil markets was triggered by record high levels of US oil inventories, which are not meant to fade under the Trump administration, which is longing for less energy dependency for the US.

The barrel of WTI traded between $47.75/48.28. Trend and momentum indicators point at a comfortably short market stabilizing within the $47/50 range. A negative breakout should bring the $45 in radar, while a positive getaway should suggest a short-term bullish reversal with solid resistance pre-$55.
LondonCapitalGroup
Number of messages : 36
Date of Entry : 2017-03-08

Re: Market Research

on Sat Apr 01, 2017 1:37 pm
Week Ahead: Nonfarm payrolls & dip-buying

Hello, welcome to LCG’s look ahead to the key events in markets for the week starting April 3rd, 2017. The video edition will return next week, and in a new location!

Stock markets are consolidating near recent peaks and the big question is whether the ‘Trump Slump’ will pick up steam again, sending stocks lower. Article 50 was finally triggered last week and all eyes are on the pound for how it will handle the inevitable ups and downs of the negotiations.

Oil prices rebounded last week with OPEC seemingly managing to convince investors that compliance with output cuts has improved in March.

One month chart comparing EURUSD with GBPUSD and EURGBP


Read the full article for a closer look at next week's events.
LondonCapitalGroup
Number of messages : 36
Date of Entry : 2017-03-08

Re: Market Research

on Mon Apr 03, 2017 3:17 pm

  • FTSE +25 points at 7347
  • DAX +68 points at 12,380
  • CAC +13 points at 5135


Dear Trader,

European markets look set for a positive open on Monday with little in the way of movement in currencies in the Asian trading session. A mixed bag of Australian economic data left the Aussie dollar lower by 0.25%.

Stocks finished slightly downbeat last week. The big question on every trader's mind will be whether the sell-off from two weeks ago will begin to pick up steam again this week. An absence of major economic and political events is often when markets are able to move most freely.

The main data focus for today will be manufacturing PMIs out of the UK and Europe. Sterling traders will be look for any signs that the weaker currency has helped manufacturing at a time when other parts of the UK economy have started to slow.

Read the full article
LondonCapitalGroup
Number of messages : 36
Date of Entry : 2017-03-08

Re: Market Research

on Wed Apr 05, 2017 10:01 am

  • FTSE +15 points at 7337
  • DAX +3 points at 12285
  • CAC +4 points at 5105
  • Euro Stoxx +4 points at 3485


Dear Trader,

The US dollar index consolidated near its 50-day average before the release of ADP employment data and the FOMC’s (Federal Open Market Committee) March meeting minutes due later in the day. The Federal Reserve (Fed) raised the interest rates by 25 basis points at the March meeting and investors qualified the Fed action as a ‘dovish hike’ on the back of the Fed’s accompanying statement. However, soon after the interest rate hike, several FOMC members voiced hawkish comments, mentioning the possibility of two or three additional rate hikes in 2017.

The Fed minutes are expected to give some clarity to confused investors. The US 10-year yields tested the 2.30% level on the downside, sending the gold higher to its 200-day moving average for the second time in two weeks. Offers are sheltered at $1260, yet heavy US yields could encourage further capital inflows into the yellow metal and underpin a recovery toward $1280. SPDR Gold shares, the world’s biggest gold ETF, benefits from light inflows to challenge the $120 resistance.

Of course, the Fed hawks need the economic data to be supportive for a steeper rate normalization path in the US. This week’s labour data could give a fresh direction to the US dollar and the yield curve.

The US ADP report is due today. According to analyst expectations, the US economy may have added 184’000 new private jobs in March, versus 298’000 printed a month earlier. The nonfarm payrolls data is due on Friday; the consensus is 174’000 versus 235’000 in February. Given the weak expectations, there is room for a positive surprise.

Therefore the Fed hawks are expected to remain alert into the labour data and the minutes.

The USDJPY continues weighing on the 110 mark on the back of softer US yields. Nikkei (+0.31%) and Topix (+0.06%) saw limited demand in Tokyo. Gains came in toward the end of the session.

Chinese stocks opened mixed after two-day bank holiday. Hang Seng (-0.17%) and Shanghai’s Composite (+1.38%) diverged as the US President Trump and Chinese President Xi are preparing for their first face-to-face meeting scheduled on Thursday. Discussions could be tense between the two leaders, especially given Donald Trump’s unenthusiastic take against China.

The AUDUSD had a positive session in Sydney following five consecutive days of losses. The AUD-bears are willing to break the 200-day moving average (0.7552) support, before attempting to 0.7490 (March low).  

The EURUSD rebounded from 1.0635, after trading a stone’s throw higher than the 100-day moving average (1.0622). The French election polls suggest that Emmanuel Macron could win against the far-right, anti-EU candidate Marine Le Pen at the second and final round of the presidential election. As such, the French election worries do not currently weigh on the euro. The short-term resistance is presumed at 1.0700 (50% retracement on March rise), if surpassed, could encourage a further recovery toward 1.0750 (38.2% retracement). The Eurozone services PMI data is not expected to hide any surprises; the action on the USD market should determine whether the EURUSD could consolidate and extend gains.

The 100-day moving average, 1.2410, continues lending support to Cable despite the Brexit volatility and traders’ reluctance to purchase the pound in the middle of the EU/UK shenanigans. From a technical perspective, daily trend and momentum indicators remain positive; suggesting that dip-buyers could continue seeing opportunity in dips pre-100-day moving average. 

The UK PMI services data is due at 09:30 London time. Analyst expectations are slightly optimistic; 53.5 versus 53.3 printed previously. A solid read could underpin the GBP-bulls and encourage a recovery to 1.2496 (minor 23.6% retracement on March rise), before the critical 200-day moving average, 1.2570, comes back in the radar. Below 1.2410, the GBPUSD should face the critical mid-term support at 1.2360 (50% retracement).

The EURGBP trades in the green for the third consecutive session. The cross is currently testing 0.8590/0.8596 (50-day moving average / 50% retracement on February-March rise) on the upside, if surpassed, should encourage a further rise to 200-day moving average, 0.8615.

The FTSE futures (+0.21%) traded upbeat in Asia, on the back of the recovery in oil and commodity prices. Copper futures gained 1.23%.

The barrel of WTI extended gains to $51.40, 100-day moving average, as the American Petroleum Institute announced that the US stockpiles decreased by 183000 barrel over the past week. The EIA report is due later in the session and is expected to print a decline as well.

Firmer oil and commodity prices hint at a slightly positive open in London. European stock markets are set for a flat open.

Read the full article
LondonCapitalGroup
Number of messages : 36
Date of Entry : 2017-03-08

The Market Rundown

on Wed Apr 05, 2017 7:08 pm
A slightly off-kilter French presidential debate performance from Marine Le Pen has lessened a little more of the political tension across markets.
 
The French CAC index outshined the German DAX. Investors appear to be pre-empting the French election result, taking on a little more exposure in France at the expense of “safer” German assets. Voters like Le Pen’s clear policy message but are worried on the issue of the euro. Undecided French voters face the unenviable choice of protesting a corrupt establishment or putting their euro-denominated savings at risk.
 
The mining sector tracked a rise in the price of copper while bank stocks reacted positively to strong economic data to lead the FTSE 100 higher. Lloyd’s shares underperformed bank peers after it announced the closure of 100 high street branches.
 
Wall Street watching Trump and Xi

Wall Street opened higher on Wednesday with the Dow Jones breaking out to a 2-week high. A surprise jump in US private sector job growth reignited the reflation trade while the $7.6bn acquisition of Panera Bread by JAB Holding added to the optimism.
 
A little apprehension before Federal Reserve minutes and the meeting between US President Trump and Chinese Premier Xi capped some of the enthusiasm. The assumption seems to be that Trump will toe the line for President Xi. This seems like a big assumption. Confronting German Chancellor Merkel over Germany’s NATO contributions is not the action of a man who kowtows to foreign leaders.
 
Trump has openly labelled China a currency manipulator so his position is clear. The open questions are whether Trump follows through on his rhetoric, and if he does how China adjusts. Neither of these will be answered this week.
 
Aussie in crosshairs of trade war

Sterling erased the previous day’s losses after service-sector data saw an upside surprise. The Services PMI for March rose to a three month high after a five-month low in February. The bounce back in services despite signs of higher prices is comforting after disappointing data on Monday showed the Sterling-inspired jump in manufacturing hasn’t quite taken hold just yet.
 
The US dollar rose on Wednesday after private payrolls grew faster than expected but a slowdown in the service sector took the edge off before the release of Federal Reserve minutes. Fed speakers have been quite transparent since March about the number of rate hikes expected this year. The unanswered questions relating to the minutes relate to the balance sheet. We doubt the minutes will give any details on how or when the Fed could shrink its balance sheet.
 
Politics were probably a positive influence on the euro after the French presidential debate but positive surprises in UK and US economic data saw it decline against the pound and the dollar.
 
The Australian dollar could be one to watch during the Trump-Xi meeting. Anything that threatens the Chinese economy almost always prompts a negative reaction in the Aussie. The last thing Australia needs is the world’s superpower picking a fight with its biggest customer.
 
Cyclone Copper and oil nears $55

Copper prices jumped on concern of disruption to mining in Australia from a cyclone as Chinese traders returned after a long holiday weekend.
 
A rise in the price of copper seems to show investors comfortable there will be no Trump-Xi showdown. If one makes the natural assumption that a trade war is bad for the Chinese economy, then the price of copper, which is heavily consumed in China, should fall if US-China tensions escalate.
 
Brent crude neared $55 per barrel as sentiment continued to improve in oil markets. Last Thursday we said “Given the velocity of the oil price slump three weeks ago, if sentiment has turned, the recovery could be equally fast. $55 per barrel in Brent would be a natural upside objective for oil bulls.” The declines three weeks ago were akin to releasing the pressure valve. Oil bulls are returning now the steam has been let off.

Read the full article
LondonCapitalGroup
Number of messages : 36
Points : 297
Date of Entry : 2017-03-08
Year : 47

Morning Call

on Thu Apr 06, 2017 9:58 am

  • FTSE -60 points at 7271
  • DAX -62 points at 12155
  • CAC -26 points at 5065
  • Euro Stoxx -17 points at 3455


Dear Trader,

The Federal Reserve (Fed) minutes revealed the FOMC members’ will to start shrinking the $4.47 trillion worth of balance sheet ‘later this year’. This has been an important piece of additional information that has been brought on the table for the first time since the Fed stopped tapering its asset purchases.

Fed’s Dudley warned that the balance sheet shrinkage would act as a ‘substitute for short-term rate hikes’, warning that the Fed may need to decide whether ‘to take a little pause in terms of raising short-term rates’.

In the dirt of details regarding the timing and the size of the balance sheet operation, the Fed doves were rapidly pushed out of the market. The probability of a June interest rate hike increased to 63.2%; the 10-year yields held the ground above 2.30%.

The US dollar shortly gained against the G10 currencies, yet the lack of clarity on the Fed’s policy turn prevented the US dollar from taking a fresh bullish direction.

On the data front, the US ADP report beat analyst estimates, as the US economy added 263’000 new private sector jobs in March, versus 185’000 anticipated by analysts.

The consensus for the nonfarm payrolls (NFP), due on Friday, is 180’000 versus 235’000 released a month earlier. The 12-month moving average stands at 185’000. Given the weak expectations, there is room for a positive surprise in March payrolls data.

The Aussie (-0.37%) has been the biggest loser against the greenback, as the Fed minutes failed to revive the carry appetite in the AUDUSD and the slower than expected expansion in China’s services sector weighed on the appetite heading into the meeting between Chinese President Xi and the US President Donald Trump today. 

Downside risks prevail given that news in China - Australia’s biggest trade partner, have a significant impact on the value of the Australian dollar. The AUDUSD broke below its 200-day moving average (0.7552) and is preparing to test the 100-day moving average at 0.7530. Below this level, the March low of 0.7490 should be a natural downside target for the AUD-bears. Mixed option expiries trail above 0.7550 for today.

Gold continues seeing a decent resistance at $1260, its 200-day moving average. A further slide in the US yields, due to an eventual pullback in Fed interest rate expectations, could pave the way for a further recovery toward $1280 mark.

The USDJPY remained under pressure as sellers stepped in pre-110.75 in Tokyo. Nikkei (-1.66%) and Topix (-1.68%) traded lower. Decent put options trail below 110.75 to 110.00 at today’s expiry, warning that the 110.00 is at risk despite a better bid USD.

In Europe, the European Central Bank (ECB) meeting minutes and the ECB President Mario Draghi’s speech in Frankfurt will be in traders’ focus. French election worries are pushed back as the most recent polls suggest that the anti-European candidate Marine Le Pen may not make her way to the Elysée.

The EURUSD continues seeing support above its 100-day moving average, 1.0620. The pair is stuck within the 1.0620-1.0700 range. A breakout in either direction could gain momentum. On the upside, we watch 1.0748 and 1.0808 (major 38.2% and minor 23.6% retracement on March rise). On the downside, the move could extend toward 1.0500/1.0495 (March low).

Cable remained capped by 1.2500 offers. Trend and momentum indicators remain marginally positive, keeping the possibility of a renewed rise toward the 200-day moving average, 1.2565. The short-term support to the recent positive trend is eyed at 1.2420/1.2506 (major 38.2% retracement on March rise / 100-day moving average).

The FTSE rolling index extended losses to 7251p in Asia. The FTSE 100 is called lower at the open due to the strong pound and solid topside in oil and commodity markets.

The WTI bounced lower from $52.00 after the EIA reported that the US inventories increased by 1.6 million barrels last week, versus a contraction of 100’000 barrels expected.  The bias remains positive with dip-buyers eyed at $50.00.

Quick glance at technicals on LCG Trader:

  • CAC 40 intraday: key resistance at 5133
  • EURGBP: key resistance at 0.8575
  • Gold spot intraday: downside prevails
  • Crude oil (WTI) intraday: under pressure


Read the full article
LondonCapitalGroup
Number of messages : 36
Points : 297
Date of Entry : 2017-03-08
Year : 47

The Market Wrap

on Thu Apr 06, 2017 1:35 pm
EUR reverses gains on Draghi's comments

The single currency reversed gains, as the European Central Bank (ECB) President Mario Draghi’s comments revived the ECB doves in Frankfurt. Draghi said that a ‘reassessment of the current monetary policy stance is not warranted at this stage’ and saw ‘no need to deviate from wording of the forward guidance’.

The EURUSD tested the 100-day moving average, 1.0620.

The pair is stuck within the 1.0620-1.0700 range. A breakout in either direction could gain momentum. On the upside, we watch 1.0748 and 1.0808 (major 38.2% and minor 23.6% retracement on March rise). On the downside, the move could extend toward 1.0500/1.0495 (March low).



FTSE down, financials, energy stocks lead losses

The FTSE opened downbeat; financials and energy stocks were sold at the London open. Lloyds erased 4% as news that the bank will close 100 branches hit the wires.

BP (-1.44%) and Royal Dutch Shell (-1.00%) traded south as the WTI bounced lower from $52.00 after the EIA reported that the US inventories increased by 1.6 million barrels last week, versus a contraction of 100’000 barrels expected.

Cable remained capped by 1.2500 offers. Trend and momentum indicators remain marginally positive, keeping the possibility of a renewed rise toward the 200-day moving average, 1.2565. The short-term support to the recent positive trend is eyed at 1.2420/1.2506 (major 38.2% retracement on March rise / 100-day moving average).



Will the Fed’s balance sheet shrinkage plans moderate the rate normalization?

The Federal Reserve (Fed) minutes revealed the FOMC members’ will to start shrinking the $4.47 trillion worth of balance sheet ‘later this year’. This has been an important piece of additional information that has been brought on the table for the first time since the Fed stopped tapering its asset purchases.

Fed’s Dudley warned that the balance sheet shrinkage would act as a ‘substitute for short-term rate hikes’, warning that the Fed may need to decide whether ‘to take a little pause in terms of raising short-term rates’.

In the dirt of details regarding the timing and the size of the balance sheet operation, the Fed doves were rapidly pushed out of the market. The probability of a June interest rate hike increased to 63.2%; the 10-year yields held the ground above 2.30%.

The US dollar shortly gained against the G10 currencies, yet the lack of clarity on the Fed’s policy turn prevented the US dollar from taking a fresh bullish direction.

On the data front, the US ADP report beat analyst estimates, as the US economy added 263’000 new private sector jobs in March, versus 185’000 anticipated by analysts.

The consensus for the nonfarm payrolls, due on Friday, is 180’000 versus 235’000 released a month earlier. The 12-month moving average stands at 185’000. Given the weak expectations, there is room for a positive surprise in March payrolls data.

The US stocks are expected to be affected by the bearish mood at the US open.

The Dow is called 55 points lower at $20593.



AUDUSD breaks below 200-dma, attention shifts to 0.7500/0.7490

The Aussie (-0.37%) has been the biggest loser against the greenback, as the Fed minutes failed to revive the carry appetite in the AUDUSD and the slower than expected expansion in China’s services sector weighed on the appetite heading into the meeting between Chinese President Xi and the US President Donald Trump today. Downside risks prevail given that news in China - Australia’s biggest trade partner, have a significant impact on the value of the Australian dollar. The AUDUSD broke below its 200-day moving average (0.7552) and is preparing to test the 100-day moving average at 0.7530. Below this level, the March low of 0.7490 should be a natural downside target for the AUD-bears. Mixed option expiries trail above 0.7550 for today.



Gold tests $1260 resistance

Gold continues seeing a decent resistance at $1260, its 200-day moving average. A further slide in the US yields, due to an eventual pullback in Fed interest rate expectations, could pave the way for a further recovery toward $1280 mark.

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LondonCapitalGroup
Number of messages : 36
Points : 297
Date of Entry : 2017-03-08
Year : 47

Morning Call

on Fri Apr 07, 2017 10:13 am

  • FTSE -18 points at 7285
  • DAX -45 points at 12185
  • CAC -10 points at 5111
  • Euro Stoxx -9 points at 3480


Dear Trader,

The barrel of WTI crude rallied to $52.94 following the US strike on Syria, as a response to the Syrian gas attack on civilians earlier this week. Money flew into safe haven assets, such as the yen, gold and the US Treasuries.

Gold broke the 200-day moving average ($1260) on the upside. The positive breakout could gather further momentum toward $1280. Softer US yields are also supportive of the yellow metal. The US 10-year yields slipped below 2.30% in New York for the first time since November 30th.

In Japan, the average earnings slowed to 0.4% year-on-year in February from 0.5% printed a month earlier, keeping the Bank of Japan (BoJ) doves alert. Nikkei (+0.66%) and Topix (+1.01%) traded in the green, as the USDJPY rebounded after hitting 110.13 earlier in the session. As such, the USDJPY weighed on the 110.00 mark for the third session since March 26th. Softer US yields and safe haven flows could keep the yen bid into the weekly closing bell. Decent option barriers trail below 112.00 at today’s expiry and could further weigh on the pair. Stops are presumed below the 110 mark and could send the pair toward its 200-day moving average (119.40) if broken.

Chinese stocks traded mixed; Hang Seng erased 0.75% while Shanghai’s Composite (+0.29%) recorded light gains. The meeting between US’ Trump and China’s Xi appeared to be a positive step for US-China relationships. According to the latest news, China could offer the US companies a better access to its market, especially in agriculture and automobile sectors. Time will tell whether Xi’s visit to Mar-a-Lago could melt the ice away and soften Trump’s sharp tone vis-à-vis China.


UK and the European stocks are set for a negative open this Friday.

The UK’s manufacturing and industrial data are due in London and are expected to have improved compared to last month’s contraction. Solid read could give a reason to GBP-bulls to fight back the 1.25 offers against the US dollar. The 200-day moving average (1.2565) could be a reasonable target, if the 1.25 resistance is cleared. The daily technical bias remains positive, yet the MACD (Moving Average Convergence Divergence) indicator warns that the positive momentum is currently losing pace. Support is seen at 1.2420 (major 38.2% retracement on March rise) and 1.2405 (100-day moving average).

The FTSE rolling index reversed earlier losses and could fill in an eventual negative gap at the open, on the back of improved demand in mining and energy stocks.

In the US, the major talking points are the US nonfarm payrolls (NFP) and the Fed Dudley’s speech. The US economy is expected to have added 174’000 nonfarm jobs in March, versus 235’000 reported previously. The expectations are soft, given that the last 12-month average stands at 185’000. On a side note, the ADP report, released on Wednesday, surprised on the upside. Although the correlation between the ADP and the NFP figures are not statistically significant, there could be a positive surprise in the US data before the weekly closing bell.

In addition, Fed’s Dudley will speak later in the session. After the March minutes mentioned the Fed’s will to start shrinking the size of its balance sheet, Dudley warned that the latter could be a ‘substitute for short-term rate hikes’ and warned that the balance sheet strategy could bring the Fed to decide whether ‘to take a little pause in terms of raising short-term rates’.
 
As such, Dudley could dent the short-term USD appetite if he gives any hint regarding the timing or the size of the balance sheet reduction.


Quick glance at technical on LCG Trader:

  • GBPUSD: watch 1.2450 and 1.2420.
  • Gold spot intraday: further upside with targets at 1273 and 1278
  • Crude oil (WTI) intraday: upside prevails with targets at 53.38 and 53.75 in extension.



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LondonCapitalGroup
Number of messages : 36
Points : 297
Date of Entry : 2017-03-08
Year : 47

The Market Wrap

on Fri Apr 07, 2017 2:03 pm
GBP softer on data, NFP in focus

UK’s manufacturing and industrial production unexpectedly contracted for the second month in a row.Soft data revived the Bank of England (BoE) doves and backed the idea that the inflation alone may not be a sufficient reason to raise the interest rates in the UK.

Cable sold off to 1.2430 as a knee-jerk reaction, the intra-day trend turned bearish for an eventual extension of losses toward 1.2420 (major 38.2% retracement on March rise) and 1.2405 (100-day moving average).

On the upside, the 1.25 offers are expected to remain intact, as the positive momentum is currently losing pace.

FTSE flat near 7300p


  • The FTSE opened downbeat; mining stocks pulled the markets lower in London.
  • Rio Tinto (-2.16%), Glencore (-1.49%), Anglo American (-2.29%)
  • Gold miners and energy stocks outperformed, yet couldn’t offset the risk-off traders.


Gold miners gained on the back of firmer gold prices. Randgold Resources rallied past 2.50% as the yellow metal traded at the highest levels since the US presidential election. The barrel of WTI crude rallied to $52.94 following the US strike on Syria, as a response to the Syrian gas attack on civilians earlier this week. Royal Dutch Shell (+1.09%) and BP (+0.48%) were among the leading gainers in London.

NFP data, Dudley’s speech in focus

The US nonfarm payrolls (NFP) and Fed Dudley’s speech are the major talking points in the US. The US economy is expected to have added 174’000 nonfarm jobs in March, versus 235’000 reported previously. The expectations are soft, given that the last 12-month average stands at 185’000. On a side note, the ADP report, released on Wednesday, surprised on the upside. Although the correlation between the ADP and the NFP figures are not statistically significant, there could be a positive surprise in the US data before the weekly closing bell.

In addition, Fed’s Dudley will speak later in the session. After the March minutes mentioned the Fed’s will to start shrinking the size of its balance sheet, Dudley warned that the latter could be a ‘substitute for short-term rate hikes’ and warned that the balance sheet strategy could bring the Fed to decide whether ‘to take a little pause in terms of raising short-term rates’.
As such, Dudley could dent the short-term USD appetite if he gives any hint regarding the timing or the size of the balance sheet reduction.

The US equity futures pared early losses and are set for a flat open in the US.Gold cleared the 200-dma resistance. Gold broke the 200-day moving average ($1260) on the upside and extended gains to $1269.

The positive breakout could gather further momentum toward $1280. Softer US yields are also supportive of the yellow metal. The US 10-year yields slipped below 2.30% in New York for the first time since November 30th.

USDJPY weighs on the 110.00 mark

Safe haven inflows fed into the yen. The USDJPY tested the 110.00 mark on the downside for the third session since March 26th.
Softer US yields and safe haven inflows could keep the yen bid into the weekly closing bell. Decent option barriers trail below 112.00 at today’s expiry and could further weigh on the pair. Stops are presumed below the 110 mark and could send the pair toward its 200-day moving average (119.40) if broken.

On the data front, Japanese average earnings slowed to 0.4% year-on-year in February from 0.5% printed a month earlier. Soft data read kept the Bank of Japan (BoJ) doves alert.

Nikkei (+0.36%) and Topix (+0.65%) traded in the green, as the USDJPY rebounded after hitting 110.13 earlier in the session.
From a technical point of view, the Nikkei is moving toward 18’325, the critical 38.2% retracement on post-Trump reflation rally, which should distinguish between the current positive trend and a mid-term bearish reversal.

If the USDJPY hold the ground above the 110 level, dip-buyers could seek dip-buying opportunities in the current downside correction in the Japanese stock markets.

Trump said to ‘have developed a friendship’ with China’s Xi

The meeting between US’ Trump and China’s Xi appeared to be a positive step for China-US relationships. According to the latest news, China could offer the US companies a better access to its market, especially in agriculture and automobile sectors. Time will tell whether Xi’s visit to Mar-a-Lago could melt the ice away and soften Trump’s sharp tone vis-à-vis China.

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LondonCapitalGroup
Number of messages : 36
Points : 297
Date of Entry : 2017-03-08
Year : 47

Re: Market Research

on Sun Apr 09, 2017 5:06 pm
Week Ahead: China data & Fed watch


Markets experienced a potential game-changer last week when the Federal Reserve mentioned shrinking its $4.5 trillion balance sheet for the first time. The future pace of rate hikes and what The Fed does with its balance sheet will be an ongoing theme for markets this year.

Specifically this week there is a spate of Chinese economic data following last week’s meeting between US President Donald Trump and Chinese Premier Xi Jinping. Any threat to China’s economy typically has negative consequences for commodities like copper and the Aussie dollar.

UK inflation and unemployment data will be important for how the Bank of England weighs up the uncertainty of Brexit with a strong economy and higher prices.

Join Jasper Lawler and Rowena Harris-Doughty in the Week Ahead, as they discuss the Fed's interest rate and balance sheet shrinking plans, China's growth stability, Sterling and Aussie dollar.

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LondonCapitalGroup
Number of messages : 36
Points : 297
Date of Entry : 2017-03-08
Year : 47

Morning Call

on Mon Apr 10, 2017 12:54 pm

  • FTSE +6 points at 7355
  • DAX +17 points at 12242
  • CAC -2 points at 5133
  • Euro Stoxx flat at 3495


Dear Trader,

Asian markets opened the week on a positive note. Nikkei (+0.71%) and Topix (+0.62%) gained on weaker yen (-0.31%) against the US dollar; Chinese stocks traded mixed after Xi-Trump meeting has resulted in a good friendship, yet nothing concrete in terms of trade partnership or else.

European and UK stocks are expected to benefit from a light, risk-on mood at the open, helped by the softer euro and pound after the US jobs data failed to bring the USD-bears back to the market.

Released on Friday, the US nonfarm payrolls data has been a big miss. The US economy added 98’000 new nonfarm jobs in March, versus 174’000 expected by analysts. Last month’s read has been revised down to 219’000 from 235’000. The average earnings grew at the steady pace of 0.2% on the same month.

Although the US labour data remained well behind the expectations, it didn’t discourage the USD-bulls from gaining more field against the majority of its counterparts. The EURUSD hit a month-low, the AUDUSD traded at the lowest levels since mid-January and the USDJPY advanced to a week-high.

In the aftermath of the Friday’s trading mood, it is obvious that the markets are focused on the Federal Reserve’s (Fed) tightening policy and much less on how fast the rate normalization would happen. There is a tacit consensus that two or more rate hikes are sufficiently suitable. Clearly, the Fed’s balance sheet reduction plans added an extra hawkish flavour into the mix, although the issue remains unclear in terms of market pricing at this early stage.

Fed’s Dudley reassured that the Fed’s major focus is the interest rate tightening, in contradiction with his earlier suggestion that the balance sheet shrinkage could interfere with, or potentially delay the rate tightening plans.

All in all, the Fed hawks remain in charge of the market before FOMC Chair Janet Yellen’s speech later in the session. Yellen will speak for the first time since the Fed revealed its plans regarding the balance sheet. We expect Yellen to prioritize the actual rate tightening policy, yet to remain discreet regarding the balance sheet reduction plans.


The US dollar extended gains against the G10 currencies, except the pound.

The pound (+0.10%) started the week flat-to-positive, in an effort to consolidate Friday’s losses after the unexpected contraction in UK’s manufacturing and industrial data sent the GBPUSD below its 100-day moving average (1.2398). The nearest support is eyed at 1.2360 (Fibonacci 50% retracement on March recovery), if broken, could encourage a further slide to 1.2301 (major 61.8% retracement).

The UK’s inflation (Tue) and labour data (Wed) could affect this week’s price action. The rising inflation has become a major concern in the UK, since the Bank of England (BoE) eased the monetary conditions to support the British economy through the Brexit. The headline inflation surpassed the BoE’s 2% target in February. Good news is that analysts expect a cool down in March figures. 

The headline inflation may have softened to 2.2% year-on-year from 2.3%, the core inflation could have eased to 1.8%y/y from 2.0%. If this is the case, the pound could resume its descent this week. On the other hand, an upside surprise could revive the BoE hawks despite last week’s weak economic data and trigger a fresh, hawkish rally in the pound given that an increasing number of BoE members would consider an interest rate hike sooner rather than later.

Demand in FTSE futures (+0.13%) is boosted by the weaker pound. The FTSE rolling index traded above the 200-day moving average (7335p) in Asia. Cheaper pound and firmer oil prices hint at a positive open in London.

Across the Channel, the EURUSD extended losses to 1.0570. We remind that the European Central Bank (ECB) President Mario Draghi said ‘reassessment of the current monetary policy stance is not warranted at this stage’ and saw ‘no need to deviate from wording of the forward guidance’. Hence, the divergence between the Fed and the ECB policy outlook hint at the possibility of a further dive toward 1.0500/1.0490.

Quick glance at technicals on LCG Trader:

  • GBPUSD: under pressure. Short positions below 1.2410 with targets 1.2335 & 1.2305 in extension. Above 1.2410, further upside to 1.2450 & 1.2475.
  • Gold spot intraday: under pressure. Short positions below 1261 with targets at 1251 & 1245.80 in extension. Above 1261, further upside to 1264 & 1269.50.
  • EURGBP: mixed sentiment. Long positions above 0.8450 with targets at 0.8570 & 0 8590 in extension. Below 0.8540, further downside to 0.8520 & 0.8500.


Read the full article
LondonCapitalGroup
Number of messages : 36
Points : 297
Date of Entry : 2017-03-08
Year : 47

The Market Wrap

on Mon Apr 10, 2017 2:25 pm
GBP fragile pre-CPI, USD firm before Yellen's speech

The pound (+0.16%) started the week flat-to-positive, in an effort to consolidate Friday’s losses after the unexpected contraction in UK’s manufacturing and industrial data sent the GBPUSD below its 100-day moving average (1.2398).

The 1.2360-support (Fibonacci 50% retracement on March recovery) has been tested for the third consecutive session. Breaking below this level should pave the way toward 1.2301 (major 61.8% retracement). The key resistance stands at 1.2422 (major 38.2% retracement & down-trending triangle top).

UK inflation & labour data in focus The UK’s inflation (Tue) and labour data (Wed) are the key events of the week.

The rising inflation has become a major concern in the UK, since the Bank of England (BoE) eased the monetary conditions to support the British economy through the Brexit. The headline inflation surpassed the BoE’s 2.0% target in February.

Good news is that analysts expect a cool down in consumer prices in March. According to estimates, the headline inflation may have softened to 2.2% year-on-year from 2.3%, the core inflation could have eased to 1.8%y/y from 2%. If this is the case, the pound could resume its descent throughout this week.

On the other hand, an upside surprise in CPI (consumer price index) could revive the BoE hawks despite last week’s weak economic data and trigger a fresh, hawkish rally in the pound given that an increasing number of BoE members would consider an interest rate hike sooner rather than later.

Pound recovery weighs on FTSE

The appetite in the FTSE reversed soon after the weekly opening bell, as the pound extended recovery to 1.24 mark.Energy stocks (-0.55%) opened under pressure, despite a third positive session in the oil markets.

Miners remained ahead of the game, as BHP Billiton rallied past 5.00% after Elliott Advisors, an activist fund, said its three-step operation restructure plans could give a boost up to 50% to the company’s share value. Elliott said that ‘most of BHP’s underperformance [related to comparable companies] in terms of total shareholder returns has been driven by the incomplete status of management’s streamlining and value-optimisation of BHP’s group structure and asset portfolio’.

EURUSD hits 1.0570

Across the Channel, the EURUSD extended losses to 1.0570. We remind that the European Central Bank (ECB) President Mario Draghi said ‘reassessment of the current monetary policy stance is not warranted at this stage’ and saw ‘no need to deviate from wording of the forward guidance’. Hence, the divergence between the Fed and the ECB policy outlook hint at the possibility of a further dive toward 1.0500/1.0490.

USD-bulls in charge of the market after Friday’s NFP shocker, Yellen in focus

Released on Friday, the US nonfarm payrolls has been a big miss. The US economy added 98’000 nonfarm jobs in March, versus 174’000 expected by analysts. Last month’s read has been revised down to 219’000 from 235’000. The average earnings grew at the steady pace of 0.2% on the same month.

Although the US labour data remained well behind the expectations, it didn’t discourage the USD-bulls. In the aftermath of Friday’s trading mood, it is obvious that the markets are focused on the Federal Reserve’s (Fed) tightening policy and much less on how fast the rate normalization would happen. There is a tacit consensus that two or more rate hikes are sufficiently suitable. Clearly, the Fed’s balance sheet reduction plans also added a hawkish bias, although the issue remains unclear in terms of market pricing at this early stage.

Fed’s Dudley reassured that the Fed’s major focus is the interest rate tightening, in contradiction with his earlier suggestion that the balance sheet shrinkage could interfere with, or potentially delay the rate tightening plans.

The Fed hawks remain in charge of the market before FOMC Chair Janet Yellen’s speech later in the session. Yellen will speak for the first time since the Fed revealed its plans regarding the balance sheet. We expect Yellen to prioritize the actual rate tightening policy, yet to remain discreet regarding the balance sheet reduction plans.


AUDUSD slides to lowest in almost two months

The AUDUSD slid below its 100-day moving average (0.7525) for the first time since mid-January. The pair stepped in the bearish consolidation zone, below 38.2% retracement on December- March recovery.The bearish reversal could dent the carry appetite and underpin the sell-off in the Aussie.

The MACD (Moving Average Convergence Divergence) gains momentum on the downside, suggesting that the current negative trend could extend to 0.7454 (Fibonacci 50% retracement on December – March rally), before 0.7385 (major 61.8% retracement).


USDJPY sailing away from 110.00

It appears that the USDJPY is sailing away from the 110.00 level, as the USD-bulls gain more field on hawkish Fed expectations.From a technical point of view, the upside correction pushed the USDJPY to the first milestone, 111.40 (minor 23.6% retracement on March-April decline). The pair should take over the 112.20 resistance (major 38.2% retracement on March-April decline) to grant a mid-term bullish reversal.

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