The day ahead 31 May 2016

Good morning,

Tokyo led Asian stocks higher on Monday, as the Nikkei heads towards a close above 17,000 points for the first time in a month, after the yen plummeted against the strengthening dollar. Data released earlier in the session showed Japanese industrial output unexpectedly rose 0.3% in April, suggesting production is holding up despite weak exports and the impact from a series of earthquakes that struck southern Japan during that month. Shares in Shanghai surged +2.43% , Hong Kong +1.25%, while the ASX slipped  -0.19%. Underpinning Asian sentiment, European shares hit one-month highs on Monday amid otherwise light trade with markets in London and New York closed for public holidays.

In FX space the Aussie gained against its peers as building approvals data for April came in much better than expected (+3% against -3% exp). The positive sentiment also saw the Kiwi rally, whilst sterling soared above the 1.47 only to quickly retreat back towards the 1.4650 handle against the US dollar. The Euro is also under pressure as we head towards the European open.

Gold rose for the first time in 10 days -- breaking its longest losing streak in more than a year and currently sitting at $1212. Although strongly underpinned amid the extended broad based US Dollar correction, it looks to build a recovery towards the 100 dma located around $1217.50. Oil pushed back towards the psychologically key $50 a barrel mark as moves were limited ahead of Thursday's meeting of the Organization of the Petroleum Exporting Countries. WTI sits at %49.58 and Brent at $49.73.

So to the day ahead and it looks to be a busy day as we enter the last sessions of the month. First up we have  German Retail sales (0700 BST) and Unemployment Report (0855 BST). Last week’s sentiment data suggests that Germany’s moderate growth trend will roll on, based on survey figures for consumers, the financial community and the business sector. There’s still concern about the near-term outlook, according to business polling, but overall, the mood points to more of the same: Economic expansion that’s less than stellar but strong enough to support the Eurozone's modest recovery. Forecasters are looking for a positive retail sales number of 1% whilst the jobless rate is set to remain unchanged at a low 6.2%. Close attention will be paid to the monthly update on changes in the number of newly unemployed workers for deeper context about the labour market trend.

Canadian GDP (1330 BST) The economy declined 0.1% in March, its first decline since November 2015 and the estimate for April is more of the same. According to Bank of Montreal, first quarter GDP is expected to rise nearly 3% annualized, thanks to solid growth at the turn of the year and a nice boost from net exports. Unfortunately, it said, the economy lost momentum as the quarter progressed, with March GDP expected to come in flat after a small contraction in the prior month adding Canada is going to get some sizeable volatility in the months ahead due to the Alberta wildfires and resulting drop in oil production.

US Consumer Confidence Indicator (1500 BST) Last week’s revised data for the University of Michigan’s Consumer Sentiment Index for May points to an improvement in the mood at the Q2 midpoint. The benchmark was revised down a bit from the preliminary reading for this month, but the index still posted a solid bounce higher against April – and relative to recent history as well. The CSI’s strength bodes well for today’s release of the Conference Board’s Consumer Confidence Indicator (CCI), a competing measure. The two indices track one another, although there can be substantial differences in the short term. Economists think that today’s first look at the May data for CCI will post a solid rise to 96.0 for May against 94.2 in the previous month. A firmer reading for the Conference Board’s index isn’t surprising in the wake of CSI’s latest jump. If the upbeat forecast holds, the case will strengthen for arguing that consumer optimism is rising in the second quarter.

Trade Smarter

Anish 

The day ahead 26 May 2016

Good morning,

Asia stocks were mixed on Thursday following a rally during the previous session, but energy firms were mostly up after oil surged past $50 a barrel for the first time this year. Investors seemed to brush off another strong lead from Wall Street and Europe, treading softly as the Group of Seven leaders' summit kicked off in Japan, where the sputtering global economy is likely to top the agenda. The Nikkei is up 0.5%, the ASX +0.3% with Shanghai and the Hang Seng down 0.97% and 0.41% respectively.

The yen surged on Thursday, taking some of the wind out of the sails of the recently buoyant dollar and prompting investors to cover positions against a backdrop of potential event risks, including a speech by Federal Reserve chief Janet Yellen. A sudden spike in the yen in relatively illiquid conditions triggered stop-loss orders and brought the Japanese currency as low as 109.42 against the US dollar from a session high of 110.235. Japanese Finance Minister Taro Aso said on Wednesday that he told his G7 counterparts at a finance leaders' meeting last week that Japan will raise the tax as planned. But he did not say whether that meant Japan has officially pledged to the international community that it will go ahead with the increase.

The Aussie dollar was also a mover overnight as Q1 capex came in well below expectations (-5.2% v -3.2% exp), the initial move lower on the headline (0.7162 vs US dollar) then saw the Aussie rally back through the 0.72 handle as the full details were digested. Elsewhere the US dollar has been on the back foot throughout the session as risk trades are again prominent.

Having bottomed out near $1218 region during Wednesdays trading, gold staged a solid comeback overnight on the back of profit-taking after the recent weakness. The bullion finally brought an end to its six-day losing streak rising to highs of $1234.35 before consolidating around the $1230 handle.

Brent crude passed $50 a barrel for the first time in 2016 on Thursday after data showed a fall in US crude inventories, adding to expectations of a tightening global market. Markets are now eyeing a June 2 meeting of the Organization of the Petroleum Exporting Countries in Vienna where it is hoped a deal on reducing production can be reached. WTI currently sits at $49.88 and Brent $50.10.

So to the day ahead and first up we have UK Second Estimate GDP (0900 BST). The markets had their first look at GDP figures for Q1 with the release of Preliminary GDP in April, which showed a gain of 0.3%. This was short of the estimate of 0.5%. Little change is expected in the Second Estimate GDP release, with a forecast of 0.4% which is in line with the macroeconomic figures released lately.

US: Durable Goods Orders (1330 BST) Manufacturing appears to be recovering from its recent recession, but the preliminary numbers for May via survey data suggest otherwise. Markit’s purchasing managers’ index revealed that output fell this month for the first time more than six years. The hard data for April, however, is expected to deliver brighter news, albeit in terms of a one-month lag relative to the latest PMI update with headline orders for durable goods rising for a second month in a row, which hasn’t happened since last summer.

US: Initial Jobless Claims (1330 BST) New filings for unemployment benefits fell a hefty 16,000 to a seasonally adjusted 278,000 for the second week of May. The decline is the first weekly slide since mid-April. The question is whether the recent surge in claims will continue in today’s release. Although last week’s report offered an encouraging change of pace, it’s always risky to reason from one number with the volatile claims data. A second weekly decline, however, will offer a more reassuring message. The crowd will be looking at today’s claims data to help decide if the PMI warning is noise or an early sign of trouble for the labour market.

Good luck

Anish S. Lal – VP Sales

FX & Precious Metals, Atom8 Financial Services LLP

2nd Floor, Centenary House, Palliser Road, London W14 9EQ, UK

T: +44(0)20 3405 3910 | M: +44 (0)7983701816 | anish.lal@atom8.com | www.atom8.com

Risk Warning

Trading on margin (spread betting, CFDs and FX) carries a high level of risk and may not be suitable for all investors.  The high degree of leverage can work against you as well as for you.  Before deciding to trade your live account, you should carefully consider your investment objectives, level of experience and risk appetite.  You could lose more than your initial investment and should not trade with funds you cannot afford to lose.  You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

The Day Ahead 23 May 2016

Good morning,

Asian shares rose on Monday following Friday’s solid session on Wall Street, while the dollar moved away from recent highs though remained supported as investors bet that the U.S. Federal Reserve was on track to raise rates sooner rather than later. However, the  Nikkei extended losses, slipping 0.6% on worrying economic data and reports that Japan's sales tax increase would proceed as planned. Data released before the open showed Japan's exports tumbled 10.% in April from a year earlier, in line with expectations but down for a seventh straight month, reflecting sluggish demand from China and emerging markets. Imports also fell sharply, which in turn boosted the country's trade surplus above expectations. On top of this  Japan’s Flash Manufacturing PMI showed activity contracted at the fastest pace in more than three years in May as new orders  slumped.  China’s Shanghai is up 0.5%, The Hang Seng 0.66%, whilst the ASX trades 0.19% lower.

In FX Space the US dollar fell against the safe haven yen after Tokyo's threat to intervene to tame its resurgent currency faced criticism at the G7 ministers' meeting. Japan last intervened in currency markets around November 2011, when it tried to stem the yen's rise against the greenback to keep an economic recovery on track after the quake-tsunami disaster earlier that year. In a statement which presented a clear rebuff to Tokyo, the G7 group "underscored the importance of all countries refraining from competitive devaluation". A stronger yen hurts Japanese exporters, a key driver of the world's third largest economy, by making their products relatively more expensive overseas. Elsewhere the start of the week brought a session of consolidation for currencies with pairs trading within tight ranges as the market awaits fresh inspiration.

Gold has halted a 3 day slide and trades higher at $1255 whilst Oil slipped on both sides of the Atlantic as investors locked in profits after a second week of gains. WTI currently sits at $48.15 and Brent $48.53.

So to the day ahead and the week kicks off with a host of PMI reading from the Eurozone. Manufacturing and Services PMIs (0900 BST) Sentiment data for manufacturing has been firming in recent months while the comparable numbers for services remains steady, albeit modestly below levels in 2015. Taken together, these results suggest that Europe will hold on to a growth bias in the second quarter. The trend may tick lower relative to the first quarter's relatively robust 0.5% rise in GDP (quarter over quarter rate). But for the moment, the economic outlook for Europe in the second quarter remains in the plus column. Yet there’s also hints that the trend is slowing so today’s flash data on PMIs for May will provide fresh guidance on Europe’s macro trend at the mid-point for the second quarter.

US Manufacturing PMI (1445 BST) Manufacturing activity in the US expanded in April, but just barely, according to two national sentiment benchmarks. In a rare case of unity, both the ISM Manufacturing Index and Markit’s PMI settled at 50.8 in April — just above the neutral 50 mark that separates growth from contraction. Two early clues for May, via last week’s releases from regional Fed banks, point to weakness for this month. The New York Fed’s Empire State index fell sharply for the May reading, sliding to negative 9 — a dramatic reversal after April’s positive 9 value. The Philly Fed’s regional benchmark for manufacturing in May was also in negative territory. The market consensus calls for a rise in the Manufacturing PMI to 51.0 for May vs. 50.8 in the previous month. Better, but a reminder that the manufacturing trend remains shaky at best.

Good luck

Anish S. Lal – VP Sales

FX & Precious Metals, Atom8 Financial Services LLP

2nd Floor, Centenary House, Palliser Road, London W14 9EQ, UK

T: +44(0)20 3405 3910 | M: +44 (0)7983701816 | anish.lal@atom8.com | www.atom8.com

Risk Warning

Trading on margin (spread betting, CFDs and FX) carries a high level of risk and may not be suitable for all investors.  The high degree of leverage can work against you as well as for you.  Before deciding to trade your live account, you should carefully consider your investment objectives, level of experience and risk appetite.  You could lose more than your initial investment and should not trade with funds you cannot afford to lose.  You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

Overnight and The Day Ahead 12.05.2016

Good Morning,

After yesterday’s gains is the Kiwi, today it is the poor performance of the Aussie dollar that catches the attention of the market.

Despite some interest at 79.50 in AUD/JPY out of Tokyo, the AUD/USD is down 0.5% on the day and down 4% over the past month.

Last week the RBA cuts rates to 1.75% and they have another 40 bps of cuts priced into the 1-year curve with the next cut fully priced in for November.

Toyota and Bridgestone earnings were disappointing, Nissan announces a tie up with Mitsubishi, Nissan are looking to take a third stake in the company, both boards are meeting. All Asian stocks markets indices are in the red, the risk off environment remains.

 The BOJ Governor Haruhiko Kuroda has had comments published from an interview with German’s Boersen-Zeitung, the headline statement was “Technically we can go as low as the ECB”.  Other comments included it is “Desirable for FX to reflect economic analysis“ and the “Finance Minister is responsible for Japan’s FX Policy.”

The day ahead has ‘Super Thursday’ here in the U.K, finally some data to get our teeth into, actually it will be the speech by Governor Carney that will be of interest. Journalist will be quizzing his ‘Brexit / Bremain’ views. The Manufacturing sector continues to come under scrutiny output is still less than 20 years ago.

In other news Oil had a strong day yesterday up 3.5%, as output has declined to 8.8mio barrels a day the lowest level since September 2014, stockpiles fell 3.4mio barrels.

And finally Chelsea have ended their kit deal with Adidas six years early or have Adidas ended the deal early, who next? Under Armour, Nike, Puma and New balance are all believed to be interested. Google ban pay loans ads.

                                                                                                                (Cons)   (Prev)

09:00     EUR Industrial Production (MoM) (Mar)                                 0.0%      -0.8%

09:00     EUR Industrial Production (YoY) (Mar)                                     1.1%      0.8%

11:00     GBP BoE Asset Purchase Facility (May)                                   £375B    £375B

11:00     GBP BoE Interest Rate Decision (May 12)                               0.5%      0.5%

11:00     GBP Bank of England Quarterly Inflation Report

11:00     GBP BOE MPC Vote Unchanged                                                 9:9

11:00     GBP BOE MPC Vote Cut                                                                 0:0

11:00     GBP BOE MPC Vote Hike                                                               0:0

11:00     GBP Bank of England Minutes Report

11:45     GBP BOE's Governor Carney speech

12:30     USD Initial Jobless Claims (May 6)                                              270K      274K

12:30     USD Continuing Jobless Claims (Apr 29)                                  2.120M 2.121M

12:30     USD Import Price Index (YoY) (Apr)                                                          -6.2%

12:30     USD Export Price Index (MoM) (Apr)                                       0.1%      0.0%

12:30     USD Export Price Index (YoY) (Apr)                                                           -6.1%

12:30     USD Import Price Index (MoM) (Apr)                                       0.5%      0.2%

12:30     CAD New Housing Price Index (YoY) (Mar)                                             1.8%

12:30     CAD New Housing Price Index (MoM) (Mar)                         0.1%      0.2%

14:30     USD EIA Natural Gas Storage change (May 6)                                       68B

15:45     USD Federal Reserve Bank of Boston President Rosengren Speech

17:00     USD 30-Year Bond Auction                                                                           2.596%

17:30     USD Fed's George Speech

Have a great day

Anish S. Lal – VP Sales

FX & Precious Metals, Atom8 Financial Services LLP

2nd Floor, Centenary House, Palliser Road, London W14 9EQ, UK

T: +44(0)20 3405 3910 | M: +44 (0)7983701816 | anish.lal@atom8.com | www.atom8.com

Risk Warning

Trading on margin (spread betting, CFDs and FX) carries a high level of risk and may not be suitable for all investors.  The high degree of leverage can work against you as well as for you.  Before deciding to trade your live account, you should carefully consider your investment objectives, level of experience and risk appetite.  You could lose more than your initial investment and should not trade with funds you cannot afford to lose.  You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

CALLS FROM THE TRADING FLOOR - BUY GOLD!

Ladies & Gentlemen

After a four-year slide, the price of Gold has nowhere to go but higher and many investors are starting to agree. The case for the "safe-haven" was further assured today, as China's manufacturing data showed a contraction.

For the majority of the Commodity markets, January was another bad month in a long bear-market cycle - apart from Gold. Gold rallied 5% in Jan, the best monthly gain in a year.  

Turmoil in Chinese markets (with the view of a potential Global Sell-Off), Oil price uncertainties and a slowing US growth has tickled Investors demand for the traditional safe-haven asset. Again, their remains a high chance the FED will hold off on further interest rate rises this year adds to the attraction for the yellow metal. 

There is really no sign of a re-surge in inflation and this has also been a large factor to Golds rise and this relationship goes back to the 1980's. However, what is interesting is that through the last 12 month Gold slide, we have had China, Russia and India continuing to purchase Gold (about 55% more in 2015) - but then why did not this affect the Price? It seems investors are more focused on Financial Assets & The state of the US Economy rather than Countries Gold holdings. 

James Cordier, CEO of a US based Options firm said "With stock markets looking to crash all over the worlds and the US economy growing slowly, nothing is pointing to rate hikes and that is why Gold will continue to rally" . 

However, as mentioned in posts prior - it is important to note that Gold does not pay a coupon like other competing assets, although the price elasticity (over the last 5 years) seems to have drawn Investors (especially Central Banks, like China, Russia and India) towards the Bullion. 

For the coming weeks, months / Central bankers like Kuroda and Draghi have key speeches scheduled (as well as NFP this week) which could further spur the rally in Gold as the consensus is for further tightening and talks of Negative interest rates and more uncertainty.  

As always, Trade Smarter

Anish @Anish8Fx 

This Amazing Week So Far...

Good morning

The rout returned on the global stock markets, with the Asian equities mirroring the sharp declines seen on the Wall Street overnight. A classic risk-off sentiment prevailed in Asia this Thursday amid falling equities and oil prices, despite another neutral Chinese yuan fix today failing to calm markets. Safe-havens benefited the most, with the Japanese yen emerging the top performer, while the CHF, EUR and gold posted modest gains. The dollar-yen pair now attempts recovery around 117.50 levels, having found strong support near 117.30 region. While the upside in EUR/USD remains capped by 1.09 handle, and gold prices gains for the second day in a row and trades around $ 1093, unable to extend beyond 1095 levels. The Australian Dollar showed a tepid response against the US Dollar after December’s employment report crossed the wires. Australia lost 1k employees compared to the -10k forecast. This was the most amount of jobs lost over the course of one month since April 2015.

Multiple bomb and gun attacks in the Indonesian capital of Jakarta sent the rupiah and the Indonesian stock market lower.

A quiet start to the day data wise with the BOE’s ‘Super Thursday’ likely to grab a lot of attention. The BOE will publish its minutes and the asset purchase target, although no major surprises are expected from the British central bank. The policy makers are expected to vote 8-1 in favour of keeping rate unadjusted at record low of 0.50% as also the asset purchases program unchanged. While the ECB monetary policy account of the Dec 3 meeting will be also published. Moving on towards this afternoons session, Canada’s housing prices index will be on tap while from the US, unemployment claims and import prices index will be published. Initial jobless claims are expected to remain largely unchanged at 275,000 during the week ending January 9, following a figure of 277,000 booked previously. 

12:00 GMT  UK BOE Official Bank rate and minutes

13:30 GMT US Unemployment claims

Good luck

The Day Ahead...

Good morning

The safe-havens were back in demand as the sentiment on the Asian markets remained soured, despite stabilizing China stock markets (currently holding small gains across the board). While lower oil prices and persistent Chinese economic slowdown worries continued to weigh on the commodities-currencies. The People's Bank of China continued to act on its intention to calm the yuan market today, squeezing offshore yuan shorts and keeping a steady fix, confounding those looking for further Yuan devaluation. Overnight Yuan HIBOR (Hong Kong Interbank Offered Rate - Offshore yuan borrowing rates) has jumped to a new record high of 66.82% from 13.4%.

The Japanese Yen has again benefited with USD/JPY despite a brief move towards 118.00 it has since reversed and is pushing towards 117.30 as I type. The Nikkei has been trading heavy as Japan return to work from their extended weekend, currently down -2.70% on the day.

Oil has been hit hard again as Asia sends Brent to a 12 year low and sees Hedge Funds starting to exit the commodity. Morgan Stanley warn that a strong US Dollar may send Brent down to as low as $20 a barrel.

The day ahead brings risk events for the British Pound. We have MoM Manufacturing and industrial production at 09:30 GMT followed by BOE’s Carney speaking this afternoon, although whether he can add any gems is to be seen. BoJ Governor Kuroda is also speaking at 10:30 GMT. But as ever this year the main focus will be all things China and the subsequent fallout.

Good luck.

First NFP of 2016.... "Risk On"!

Ladies and Gentlemen,

It has been a very busy start to the financial year, the stock markets have had a rough ride, the DAX is down 7% YTD and the S&P is below the pivotal 1990 level.

Risk off has been the theme in the FX market, until the correction overnight, has the sentiment turned ahead of the Non-Farm Payrolls?

The Non-Farm Payroll number will be announced at 13:30 GMT the consensus is for a 200k number following on from 211k in December, keep a keen eye out for the unemployment rate which is currently 5% and the average earnings increase, which is released at the same time. Reference to wage inflation and levels of employment where mentioned at the ‘Lift off’ press conference.

Why is this number so important? The market is trying to work out the pace of rate hikes in 2016, it is important to remember that the FED only has 8 meeting in a year. Will the hiking cycle be gradual or more aggressive? Fed Chair Yellen mentioned at her press conference that ‘future policy actions will obviously depend on how the economy evolves’ stressing that unemployment and inflation figures are factors that guide the Fed in arriving at rate hike decisions.

The Federal Reserve official publish their forecasts for the central bank’s key interest rate on a chart known as the ‘dot plot’. The dots has 4 hikes whereas Fed funds only has 3 who will be correct?

This year has already been touted as the year of ‘Doom Gloom and lack of Boom’, and i am looking forward to more positive 2016.

Good Luck

The FX Stories of 2015

Ladies and Gentlemen,

As the year comes to a close here, I would like to reflect on the performance of all the major currencies.

This is a good opportunity to look at the best and worst performers of 2015 against the USD.

Returns ag $	2015
Brazilian Real	-31.22%
South African Rand	-24.95%
Canadian Dollar	-16.21%
Norwegian Krone	-14.86%
Mexican Peso	-14.70%
New Zealand Dollar	-12.01%
Australian Dollar	-10.91%
Euro	-9.64%
British Pound	-4.89%
Japanese Yen	-0.57%
Swiss Franc	0.30%

The worst performer has been the Brazilian Real, will this change as Rio hosts the Olympics in 2016?

The best performer has been CHF, is this desired by the SNB?

There is a lot to think about and I  would like to take this opportunity to thank you for your business and wish you a healthy, happy and prosperous 2016.

Kind regards

 Anish S. Lal 

The Future Is Bright - The Future Is Silver!

Ladies & Gentlemen, 

As we tick closer to "Lift-Off" from the FED, the Precious Metals continue to remain cursed by the USD bulls. But what will happen after the initial FED fiasco? Will the Markets quickly learn to appreciate reality of US Debt? Will investors flock into the Metals?... I'm not too sure, but I do make a good case to stay long Silver (XAGUSD) for the next 5-10 years. 

Commissioned from Mr. Hague (SocGen), he has created a propriety model on measuring a move in the commodities in relation to Macro factors, the Strength of the USD, Interest Rates & Market Fundamental (Variables) & from his analysis, it is clear that Fundamentals have taken a back-seat over the past 12 months. The Macro variables are the driving force behind the Markets, covering the environment for Risk Attitude, the Volatility Index & Equities.... This is what (according to Mr. Hague) is moving Silver (chart below): 

Over the past 2-3 years, Silver has been trading more like Gold & recent moves have been primarily driven by the strong USD and all-round been a strong head-wind for the Metals.  With Silver being 60% Demand driven, more for Industrial uses (mainly Electronics).. we begin to see Silver evolve from a Precious Metal to a Base Metal. 

The long-term outlook for Silver is bright, and a big part could be due to the anticipated exponential use of Solar. According to the IEA's growth forecasts (on a mass scale) over the next 5-years, they would be using nearly 1 Billion ounces of Silver! 

This bodes very well for Investors looking at today's chart, as you finally have (after 12-13 years) Silver Supply declining, especially when you think about the 2011 peak. The longer term Demand sets to pick up and it looks to be setting itself up for a Constructive move. 

Silver is absolutely everywhere! In your computers, in your phones... & as Emerging Market demand picks up over the next 10 years for Electronics, only naturally should this Market increase in value. 

So Anish, how do you see the Market shaping for the end of the year?... Well there is not much left for this year as we remain merciful to the FED's hiking plans but I do expect Fundamentals adding more promise to the Metals market in the Longer term & hope to prove the doubters wrong, as I am personally a big fan of Silver. 

Best of Luck

Anish8FX @ Atom8.Com 

Will 2016 Mark The Fall Of The Emerging Markets?

Ladies & Gentlemen, 

Brace yourself for a complete change in dynamics for 2016 and of course, the FED hiking cycle will become the catalyst. 

So should I still stay long the USD in 2016? Well in theory - Yes! In practice however, as the FED raises interest rates the USD will strengthen but these persistent increases (during the proposed cycle) will worry investors - especially for companies with Overseas Investment & for Industrial corporates (with the continued decline of commodities). It could be very expensive! 

A stronger USD now becomes a touchy situation. Mainly because the majority of Emerging Market Countries hold USD debt and this puts a stranglehold on the USD rallies. The probabilities of larger outflows from Countries like China, India is likely and will be the epicentre of pressure. It will be interesting to see how these Push/Pull Economic factors react next year.. Will it help their continued debt? 

The stage for 2016 has been set. 

China is an almost perfect author to this story. With recent trade numbers declining (6.9% yoy) and a staggering 18.8% decline in imports - Other Asian nations who once so heavily relied on China could now look elsewhere.  As the commodity boom slows, the GDP growth required for China to maintain its growth pattern could also fall off the charts! Instead we see a Global Deflationary Threat.

How will the USD react to each FED Rate Hike? - Looking at the past 11 Rate Cycles and in particular more recently when the FED moved from neutral to tightening, the USD fell 7% and to tell the way the USD could react now - one would have to look at the yield curves. Whenever it has been steep (and right now it is steep) it falls over double digits! But again, that would also depend on the forecasted tightening cycle... but really how long could it be? 

What about the Equity Markets? You want to be really focusing on Industrial, Tech & Energy stocks, because they will benefit from the inflationary cycle of the US Economy. But really does the public trust equities anymore? There are currently huge disparities in the major US indexes as during the past 5 years the Public have not really put any money into the equities, it has all been primarily driven by the FED & a lot of these position builders could effectively price in the first hike. 

Next stop... December 17. 

Trade Smarter
Anish8FX @ Atom8.com 

The "Long $" Play Over The Medium Term

Ladies and Gentlemen,

Tomorrow at 13:30 GMT we get the October Non-Farm Payroll number, the September figure was a disappointing 142k. A bounce to 182k is the Bloomberg survey consensus.

The FOMC members believe the chance of ‘lift off’ in December is still ‘live’, needing a reason not to hike is the new sentiment.

Tomorrow will give us further insight into the decision making process on 16^th December.

The Fed has maintained that the appropriate time to raise rates is when the sustained improvement in the labour market is attained, combined with confidence that inflation will move back to its 2% target over the medium term. These are the exact words from the press on 28^th October ‘the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of declines in energy and import prices dissipate’. The dual mandate of Fed has been talked about in previous Event Risk updates.

I see the divergence in Central Bank policy as an opportunity to express ‘Long $’ plays over the medium term.

$/Jpy sits above the 200 day moving average at 121.10 and just below the 100 day moving average at 121.70, a daily close above 122 will see momentum accounts add to existing long positions. The first Friday of the month is always interesting.

Good Luck

Anish8FX @Atom8.Com

Still Holding My Gold Shorts

Ladies and Gentlemen, 

The Gold Market has been subject to huge downward pressures amid the timing of the FED's rate hike decisions. Gold now again hovers at 1-month lows, coming of the back of the biggest 4-day losing streak since September 2013 - falling 5 consecutive quarters. 


But even with soaring demand from Asia, why are the Markets so reliant on the FED decision? Well if the FED do increase rates, nobody wants stock hold bonds, because they will pay lower coupons than newer bonds... and turning to Gold - that asset pays no Coupon at all! The more hawkish the FED remain, the worse the impact on the Gold price. Not forgetting that Gold is still priced against USD.  

This close relationship was marked again today by this mornings rally to $1120 and was completely sold off and there are even more headwinds/failures in recent breaks to the upside. $1075 was the recent bottom and this is not far our of reach. I don't think we will see a reversal anytime soon to the upside. 

Figure below from Atom8's MT4 Terminal (XAUUSD.v) - Gold Staying Down 

When will we see a reveral? Here's hoping Ms Yellen gives some more indication tonight about future direction of the Hiking Cycle. Perhaps all that is needed for the Metals is some clarity, then we can move on & up! Theoretically, the FED could continue to hike rates up to infinity and that would cause USD weakness. Given historical trends, Gold could remain the preferred safe-haven asset & may well return back to $1400-1500 in the next few years. 

Best of Luck
Anish8FX @ Atom8.com 

How Do I Trade The FED Rate Hikes?

Ladies and Gentlemen,

After a surge in Bitcoin prices, more doubts grow about the stability & long-term value of the USD. Many Economists & Analysts believe the USD to be heavily over-valued & have been calling a reversal in the USD for over 2 years now, but the brute force that is QE has only but stood in the way of purists.

Figure : DXY over last 2 years







Let's first turn our eyes to the Euro and as it currently hovers around the 1.10 mark, as the FED breathes more clarity over the coming months (heading into early 2016) - many Traders are calling for 1.15-1.16 as the "Fair-Value Equilibrium". However, until then we could still stay on the weaker side of 1.10, as Draghi continues to seemingly over-deliver on expectations... But could we really go to parity or lower? - To be honest, there is nothing magic here! When you throw in lots of numbers, taking into account coherent Econometric studies (interest rate differentials, relative to the size of the Eurozone's balance sheets) - you can't really go near numbers close to parity.

What about the FED? The FED has a mandate which is not related to the FX Market whatsoever, and this is one of the main arguments from more sophisticated FX watchers (in the short-run at least). Since the first Quarter of this year, the rates market has remained completely flat but the USD has only but rocketed (more so since April)... The main question beckons.. Will the FED pull the trigger in December or not? If yes, it would only be by 25 basis points & would that really cause a huge impact?.. I don't think so.

Reality Check again! The USD is overvalued and what the FX Trader should be wary of is the Hiking Cycle that the FED will signal. In order to really justify the USD at current levels, they would need to plot an aggressive hiking path. We could actually see another 150-175 basis points over the next few years.... & that would really hurt! Again, this depends on a variety of Domestic/External factors.. (as well as the price of Oil).. A difficult one to predict now.
                                                                                       

So what do I trade? Well I would look at Cable. The Market expectations are that the BOE are maybe 9-12 months away for changing pricing, and if you compare this to the FED/ECB outlook, the "time-gap" is extremely stretched. If you look back in time, since the inception of the Bank Of England as n independent Central Bank, there has never been such a significantly wide time gap between movements in the FED to a change in the BOE. Two things to look at here, the Fundamentals & what the Market has already priced in. I do believe (as per the graph above) 1.70 to be fair value for £/$.

Looking at the Markets Carney has a responsibility for bringing the market back in and delivering on his mandate. He sees risk moving way too much against him and the Market seems to remain complacent.

End of the day! USD is over-valued and has been for many months. Look at Cable & it should be grinding higher and the main view on USD is that the over-evaluation will also slowly cause other Central Banks to ease of.

Best of luck

Anish8FX @ Atom8.Com

Could Monetary Policy Divergence cause EURUSD to hit parity by December?

Ladies & Gentlemen, 

We have heard it over and over again & now it is crunch time, where Economic theories come into practice and the Markets click to the tune of the Central Bank Announcements. 

Here is what ING predicted at the start of 2015 and low & behold how the year has turned out to map  the below 

Over the last 12 months the Markets have remained bearish and the EURUSD has fallen from 1.40 to 1.05.. but why?  And the concept is pretty simple to understand, as the FED stop QE at the same time of the ECB continuing their QE policies. This is known in the Markets as a "Divergence in Monetary Policy" and as the Markets price in their expectations of a FED non-hike, the divergence is set to continue... Implicating parity and if not parity, then sub 1.00. 

Vamvakidis, head of G10 Strategy at Bank Of America calls for EURUSD to hit parity by December 15 and also the USDJPY to hit 125. 

What needs to happen for EUR parity? Well, in order for this prediction to hold - the divergence needs to move further. If we get more QE by the ECB in December and the FED does not hike (which is very ikely) we could easily see parity. But the FED hike is a matter of time and could be as early as Jan 2016. The equilibrium of the EURUSD cross is around 1.15, however, the Euro zone still has a significantly large Output Gap compared to the US & if the ECB announces an "open ended" (or Infinity based QE) - that could stir up a recipe for disaster - as the Bears would then look to push down to 0.75. 

How do I trade these markets? Volatility remains high and it is mainly the bears driving the markets, supported by the facts pushed from Central Bank data this month. Looking at the bigger picture, the FED will eventually look to hike rates but more than likely, it will not be until next year - even though Domestic data has improved in the US, I would not expect anything significant this week. Keep your eyes on the data A balance between Domestic Developments & External Developments is key for the FEDs decision & once we do see the hike... the bad news will hit hard & remain bad news! 

Can I Jump on The Karoda Vs Draghi Trade? The international expectation is for more BOJ easing and if you look at the currently inflation rate in Japan, the BOJ should actually be doing more. The USDJPY currently is not that strong, either not that weak. However, it would be ideal to remain long the volatility as no matter what happens USDJPY will move! 

I wish you the best of luck with your Trades & hope you keep your fingers on the right side of your mouse triggers! 

Anish @ Atom8.com 

The Vicious Cycle Of Oil

Ladies & Gentlemen

Oil once more trades at a near 2-month low and as vicious as it has been, the oil price collapsing cycle does not look to be over just yet. However, large institutions and Central Banks further seek a longer period of stability, especially in the eyes of the Bond Markets.

The US are still heavily over-supplied and refineries continue to close down, due to mounting costs  from a alack of productivity. The big players are still looking at holding sub $50 and hedging their risk with the Futures Markets... These "players" may be the ones the Central Banks turn to in the near future to assist in the un-cuffing of this downward spiral.

OPEC have been heavily pressured by Venezuela (Country with the World's largest known Oil reserves) to do something about the Oil price and have been supported by one of Africa's biggest Oil producer, Algeria. Contrary to views from the Gulf who are welcoming the lower prices, seeing it as a chance to reform & these contrast of views continue to bear onto a larger Geo-Political issue. But how big is this issue?

Saudi Arabia, the world's largest Oil mover has been doing things recently, that in the last 30 years have been unimaginable ;
1. Withdrawing money from overseas;
2. Delaying contract payments; and
3. Taxing lands.

So how does the Market quantify these issues?.. Let's pause for a second and cast our mind backs to mid 2007 when the Oil price hit $145.00 per barrel and the Gulf generated more money that they knew what to do with & the fact remains that Saudi's Debt:GDP ratio is still less than 2% and in the next 10 years is estimated to stay below 7%... The main Gulf states could actually live comfortably for several years from these revenues built.  So contrary to the "Geo-Politics" - Investors are more focused on the supply-side issues and may be more keen to ignore the political nature surrounding the MENA regions.

Storage is still reaching tank-tops and if this trend continues, we may see for the first time in 20 years - oil investments declining for two consecutive years and this may be an indication for future oil markets.. as they look to continue their downward spiral.

Optimists still seek a bottoming level - looking at Iran supplies for next year to help boost $60+ for 2017 (perhaps a fascinating new dynamic for the near future), however the fundamentalists outlook is further lower to find a strong re balance in the market.

Best of luck

Anish

Event Risk - ECB Meeting

Ladies and Gentlemen,

 

This Thursday the European Central Bank meeting takes place on the Mediterranean island of Malta, there is strong belief that there will be hints at further fresh stimulus to ward off the threat of deflation in the press conference following the Governing Council congress at 14:30CET

 

Last month Eurozone inflation fell below 0% to -0.1% this is the first time since March. Presently the ECB is currently committed to buying €60bn of government and corporate bonds each month until September 2016. But as Ewald Nowotny, an ECB Policymaker, has been quoted as saying it is “quite obvious” that additional instruments would be needed, as the ECB is “clearly missing” its inflation target. It is not if, but when.

 

What tools are available to the ECB? The obvious answer is it could boost QE to €80bn a month and/or further extended the programme beyond next September 2016.

 

Will they announce further ECB Stimulus? We believe there will be hints but no action.

 

One of the consequences of the Fed delaying ‘lift off’ has been a strengthening €, this is an unwelcome development adding deflationary pressure.

 

We believe the tone to this meeting will be dovish a weakening currency is the other unquantifiable tool that can help the Eurozone

 

Good Luck

 

Anish Lal 

 

Atom8 Financial Services LLP www.atom8.com

Will the USA run out of cash by November?

Good Morning,

The overnight news was New Zealand’s inflation surprised marginally to the upside and US Treasury secretary Jacob Lew suggests  the US government will exhaust its emergency cash-management measures by November 3 and risks running out of cash if Congress doesn't raise the federal borrowing limit. Today’s data is 

10:00     Eurozone Trade Balance

                Eurozone CPI

13:30     Canadian Manufacturing Sales for August

14:15     Industrial Production for September

Capacity Utilization for September

15:00     University of Michigan Sentiment, Current Conditions and Expectations

On the speaking front we have we have BoJ’s Kuroda speaking at national Credit Union Association in Japan. BoE’s Forbes speaks at the `Brighton Chamber of Commerce on ’Growing your business in a Global Economy’ and ECB’s Coeure speaks in Berlin titled “Towards a Progressive Europe”

There are large 1.15 Eur/$ expiries and 120s in $/Jpy

Have a great week end

All aboard the GBP/USD Roller-Coaster

Ladies & Gentlemen

In the last 24 hours we have witnessed one of the most wildest days for Cable, with a near 200 pip swing - behaving more like a "spoiled kid" trading FX for the first time.  We moved to 1.5390 when the AB InBEV / SAB Miller deal (now the world's biggest brewery) was announced before a sharp move to 1.5210.

UK employment data this morning has kept calmer the beast that could form this month in Sterling as it is held below 1.53... For now at least! The UK ILO Jobless rate was posted at 5.4%, actually the lowest since mid-2008... giving a further insight into an all important component for the UK employment sector, as people get their butts into work before Christmas.

So what are the important intra-day levels to watch? Well the initial hurdle of 1.53 is clear and above that to really prove bullish power would be 1.5345, where the 200-Day SMA marks. However, a breakdown in Cable this week could fast see an exposure of 1.5107 - the low from October 1st and then a bearish eye towards the 1.50 levels once more (lows of May & also key psychological support).

What is the Future for Cable? - Again the long-term dynamics of £/$ are likely to be determined by the continued debate around rate hikes and as we all know the global economy is slowing slightly and this slow-down could backlash on the UK as well as the USA. The near-term bias could still be on the down-side.

Wishing you the best of Luck

Anish 8FX

Will NZ Interest Rates be cut by 25 basis points tonight?

Ladies and Gentlemen,

At 10 pm tonight, as the End of Day Reports filter through, the RBNZ announce their interest rate decision.

All 17 economist surveyed by Bloomberg believe they will cut interest rates by 25 basis point, however in recent days the currency has rallied from 0.6250 to 0.6425, why?

It looks as if this particular story is more about will they cut 25 basis point and infer the cutting cycle is over or will bearish Central bank rhetoric continue, Governor Wheeler holds a press conference immediately after the announcement.

The recent Chinese meltdown is not good news for NZ, the June trade date in NZ was the worst in 6 years and the main reason was exports to China slumped 29%, with Dairy exports falling 24%.

The Dairy industry in NZ is not in a good way, employers hiring is at the lowest pace for 2 years, there is falling consumer confidence, weaker retail sales, softer manufacturing PMI and poor business confidence. Altogether this makes for a gloomy picture. Asset price inflation via the housing market is about the only positive, but not strong enough to avert a cut.

I personally believe a cut is on the card and that technically 0.6425, 0.6458 and 0.6550 act as good resistance levels

Good Luck

Anish S. Lal @anish8fx

FX & Precious Metals, Atom8 Financial Services LLP

2nd Floor, Centenary House, Palliser Road, London W14 9EQ, UK

T: +44(0)20 3405 3910 | M: +44 (0)7983701816 | anish.lal@atom8.com | www.atom8.com

Risk Warning

Trading on margin (spread betting, CFDs and FX) carries a high level of risk and may not be suitable for all investors.  The high degree of leverage can work against you as well as for you.  Before deciding to trade your live account, you should carefully consider your investment objectives, level of experience and risk appetite.  You could lose more than your initial investment and should not trade with funds you cannot afford to lose.  You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.