Watch my interview with Jill Malandrino from The Street where we discuss Japan’s recession, my upcoming outlook on the economy and movements of Yen and Kiwi.
The interview is from yesterday and my forecast of a USD/JPY pullback just proved this morning which is pretty exciting. We should see more up-moves in the pair once the pullback is completed at potentially one of the Fibonacci levels.
FOMC Minutes
The Federal Reserve meeting minutes proved to be a passing breeze, with a little market volatility around the announcements, but back to business as usual pretty quickly afterwards.
The Federal Reserve was expected to be more dovish than they were, but by the same measure, they weren’t any more hawkish either. Hawkish members highlighted the consistent gains in hiring and the rebound in inflation as reasons for the central bank to prepare the markets for a potential rate hike. Dovish policymakers, on the other hand, cautioned that any change in Fed bias might spark too much volatility.
To give an example of how closely the market scrutinizes the text in the minutes; the main reason that this statement wasn’t perceived as being as dovish as many hoped is because the Fed chose not to drop the phrase “considerable time” when talking about keeping interest rates low. So billions of dollars were hanging on just two words!
Staying with the US, the FT runs an interesting article this morning on how the fall in oil prices is a double edged sword, with the fall in prices at the pumps totalling an annual saving of about $80bn. This saving could be immediately spent by consumers elsewhere in the economy. On the flip side, US oil producers are going to lose pretty similar amounts in revenues with the price drop, which will impact shareholders’ dividends, albeit with a delay. The net upshot, they argue is that with shareholders being generally better off and not spending their dividend income anyway, the US economy could be much better off as a result of the fall.
Fitch ratings concur that not only America will be net beneficiaries from cheap oil, but that mot most of Asia would be too. The ratings agency says that if 2015 prices can remain below $90 per barrel then we could see alterations to sovereign ratings as countries face spending less of their total incomes on fuel imports and government subsidies reduce in cost. India would probably see the most benefit, but Fitch warn that strong government policy is also needed to lock in long term benefits of what could be temporarily reduced price pressures.
BoE and UK Car Exports
From the UK, the Bank of England mentioned that inflation could build if spare capacity in the UK economy keeps falling at the rate that it is, but this was certainly no reason to expect them to bring rate rises into play until at leas the second half of next year, as much of the market is now suggesting.
One of our most successful sectors, automotive export, showed signs of not keeping up with the growth trend as well as many had hoped. Last month the UK manufactured 7% less cars than they did in October of the year before and for the year to date production is half a percent lower than 2013. More than eight out of every ten cars made in the UK is exported, so this sector has a greater exposure to global economic conditions than most and on a more immediate basis. Perhaps we could use the Society of Motor Manufacturers and Traders’ data as the proverbial canary in the coal mine?
Today we’ll be looking at manufacturing and services data from France, Germany and Europe as a whole. From the UK we see retail sales, which are forecast to reverse the disappointment of last month’s numbers. Later on the day we see some US employment numbers as well as inflation data and some preliminary manufacturing numbers for November so far.
Intraday Forex Technical Levels
EUR/USD 4-hour: Consolidating Below Resistance
Invest Diva Likes: Long positions above 1.2487 with targets at 1.2563 and 1.2624 in extension.
Alternative Scenario: Failure to break above 1.2563 would alter the outlook back to bearish with targets at 1.2363 and 1.2299.
What’s up on the Forex Dance Floor: The pair remains above the 23% Fibonacci level and above the Ichimoku’s cloud. The RSI is heading up above the neutrality area.
Supports and Resistances
1.2686
1.2624
1.2563 Pivot Point
1.2487
1.2363
GBP/USD 4-hour: Broke Above Pivot Point
Invest Diva Likes: Long positions above 1.5656 with targets at 1.5731 and 1.5817.
Alternative Scenario: Below 1.5656 look for further downside towards 1.5591 and 1.5481.
What’s up on the Forex Dance Floor: The pair finally broke above the pivot level at 1.5656 while remaining below the Ichimoku’s cloud. The RSI however is moving up above the neutrality area.
Supports and Resistances
1.5817
1.5731
1.5656 Pivot point
1.5591
1.5481
USD/CHF 4-hour: Broke below 38% Fibonacci level.
Invest Diva Likes: Short positions below 0.9592 with targets at 0.9548 and 0.9503 in extension
Alternative Scenario: Above 0.9592 Look for further drops with targets at 0.9648 and 0.9687 in extension.?
What’s up on the Forex Dance Floor: The pair has broken below the Ichimoku’s as well as the 38% Fibo level at 0.9592 in a rapid sentiment. The RSI is heading down below the neutrality area.
Supports and Resistances
0.9687
0.9648
0.9592 Pivot Point
0.9548
0.9503
USD/JPY 4-hour: Pullback Confirmed
Invest Diva Likes: Short positions below 118.60 with targets at 117.50 and 115.47 in extension.
Alternative Scenario: Above 118.60 look for further upside towards previous highs of 123.
What’s up on the Forex Dance Floor: As predicted, the pair finally confirmed a pullback at the high of 118.60 and we could see drops towards Fibonacci level at 115.47. The RIS is heading down from the overbought zone.
Supports and Resistances
123.00
118.60 Pivot Point
117.50
115.47
