Forex Fundamentals

**newdigital** · 01-19-2014, 12:50 PM

Forex Fundamentals : January 20 - 24

The dollar rose to two month highs against the euro on Friday as U.S. data reinforced the view that the economic recovery is gaining enough traction for the Federal Reserve to continue tapering stimulus measures.

U.S. industrial production rose 0.3% in December, data on Friday showed, rising for the fifth successive month.

A separate report showed that U.S. housing starts fell 9.8% last month, more than the 8.3% decline forecast by analysts. U.S. building permits rose less-than-expected in December, but remained close to November’s five year highs.

EUR/USD fell to 1.3517, the lowest level since November 25 and was last down 0.58% to 1.3539. For the week, the pair lost 0.94%.
Sentiment on the euro was hit by concerns that the subdued inflation outlook may prompt the European Central Bank to ease monetary policy in order to safeguard the fragile recovery in the region.

The dollar was little changed against the yen. USD/JPY fell to session lows of 104.20, and was last down just 0.02% to 104.31. For the week, the pair gained 1.17%.

USD/CHF rose as high as 0.9120, the highest since January 9 and settled at 0.9100, 0.60% higher for the day, and extending the week’s gains to 1.20%.

Elsewhere, the pound moved higher against the dollar on Friday after data showed that U.K. retail sales rose 2.6% in December from a month earlier, the fastest rate of increase in nine years. Analysts had expected retail sales growth of just 0.4%.

GBP/USD rose to highs of 1.6310, the strongest since January 14 and was last up 0.42% to 1.6420. For the week, the pair rose 0.20%.
Australia’s dollar ended the week at three-and-a-half year lows against the greenback after dire employment data on Thursday was seen as increasing the likelihood that the Reserve Bank will cut interest rates to bolster the economy. AUD/USD hit lows of 0.8764 on Friday, the weakest since July 2010 and was last down 0.465 to 0.8779. For the week, the pair tumbled 2.96%.

New Zealand’s dollar was sharply lower against the greenback on Friday, with NZD/USD dropping 1.17% to 0.8251 at the close, extending the week’s losses to 1.41%.

The Canadian dollar also ended the week sharply lower against the greenback, with USD/CAD settling at 1.0961, not far from the four year high of 1.0990 struck on Wednesday.

The loonie was pressured lower by expectations that the Bank of Canada will stick to its dovish stance on rates at its upcoming policy meeting after a recent series of weak economic data sparked doubts over the economic outlook.

In the week ahead, investors will be awaiting monetary policy decisions by the Bank of Japan and the BoC. China is to release data on fourth quarter growth as well as a closely watched report on manufacturing activity. The euro zone is to produce preliminary data on manufacturing and service sector activity, while the U.K. is to publish data on the unemployment rate.

Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.

Monday, January 20

China is to release data on fourth quarter gross domestic product, the broadest indicator of economic activity and the leading indicator of economic growth. The country is also to produce data on fixed asset investment, industrial production and retail sales.

Germany is to produce data on producer price inflation, while the Bundesbank is to publish its monthly report.

Markets in the U.S. are to remain closed for the Martin Luther King Day holiday.

New Zealand is to release data on consumer price inflation, which accounts for the majority of overall inflation.

Tuesday, January 21

The ZEW Institute is to release its closely watched report on German economic sentiment, a leading indicator of economic health.

The U.K. is to publish a private sector report on industrial order expectations.

Canada is to produce data on wholesale sales and manufacturing sales.

Wednesday, January 22

Australia is to publish data on consumer price inflation and a private sector report on consumer sentiment.

The BoJ is to announce its benchmark interest rate and publish its monetary policy statement, which outlines economic conditions and the factors affecting the bank’s decision. The announcement is to be followed by a press conference.

The U.K. is to release official data on the change in the number of people unemployed and the unemployment rate, as well as data on average earnings and public sector borrowing. Meanwhile, the Bank of England is to publish the minutes of its most recent policy setting meeting.

The ZEW Institute is to publish a report on economic expectations in Switzerland, a leading indicator of economic health.

The BoC is to announce its benchmark interest rate and publish its rate statement and monetary policy report. The announcement is to be followed by a press conference.

New Zealand is to release private sector data on manufacturing activity.

Thursday, January 23

China is to release the preliminary estimate of the HSBC manufacturing index, a leading indicator of economic health.

The euro zone is to release preliminary data on manufacturing and service sector activity, a leading indicator of economic health. Germany and France are also to release individual reports.

Canada is to produce data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity.

The U.S. is release the weekly report on initial jobless claims and a private sector report on existing home sales.

Friday, January 24

Canada is to round up the week with data on consumer price inflation.

**newdigital** · 01-19-2014, 12:55 PM

USDJPY Fundamentals : January 20 - 24

Data released on Friday showed that U.S. industrial production rose 0.3% in December, in line with expectations, rising for the fifth successive month.

Another report showed that U.S. housing starts fell 9.8% last month, more than the 8.3% decline forecast by analysts. U.S. building permits rose less-than-expected in December, but remained close to November’s five year highs.

Separately, data showed that the University of Michigan's consumer sentiment index ticked down to 80.4 in January from 82.5 in December. Analysts had expected the index to rise to 83.5.

USD/JPY touched session lows of 104.20 on Friday and was last down just 0.02% to 104.31. For the week, the pair gained 1.17%.
The pair was likely to find support at 103.75 and resistance at 105.00.

Earlier in the week, data showed that U.S. retail sales posted a larger than expected gain in December.

The data indicated that while the recovery in the U.S. remains uneven, the economic outlook is continuing to improve. The dollar has strengthened broadly since the Fed announced its decision in December to scale back its asset purchase program, cutting it by USD10 million, to USD75 billion-per-month.

Elsewhere, the yen was higher against the euro on Friday, with EUR/JPY down 0.61% to 141.26 at the close of trade.

Sentiment on the euro was hit by concerns that the subdued inflation outlook may prompt the European Central Bank to ease monetary policy in order to safeguard the fragile recovery in the region.

In the week ahead, Wednesday’s monetary policy decision by the Bank of Japan will be in focus, while U.S. data on jobless claims and home sales will also be closely watched.

Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets. The guide skips Tuesday and Friday as there are no relevant events on these days.

Monday, January 20

Markets in the U.S. are to remain closed for the Martin Luther King Day holiday.

Wednesday, January 22

The Bank of Japan is to announce its benchmark interest rate and publish its monetary policy statement, which outlines economic conditions and the factors affecting the bank’s decision. The announcement is to be followed by a press conference.

Thursday, January 23

The U.S. is release the weekly report on initial jobless claims and a private sector report on existing home sales.

**newdigital** · 01-19-2014, 12:57 PM

USDCHF Fundamentals : January 20 - 24

USD/CHF rose as high as 0.9120, the highest since January 9 and settled at 0.9100, 0.60% higher for the day. For the week, the pair gained 1.20%.

The pair was likely to find support at 0.9031, Thursday’s low and resistance at 0.9126, the high of January 8.
Data released on Friday showed that U.S. industrial production rose 0.3% in December, in line with expectations, rising for the fifth successive month.

Another report showed that U.S. housing starts fell 9.8% last month, more than the 8.3% decline forecast by analysts. U.S. building permits rose less-than-expected in December, but remained close to November’s five year highs.

Separately, data showed that the University of Michigan's consumer sentiment index ticked down to 80.4 in January from 82.5 in December. Analysts had expected the index to rise to 83.5.

Earlier in the week, data showed that U.S. retail sales posted a larger than expected gain in December.

The data indicated that while the recovery in the U.S. remains uneven, the economic outlook is continuing to improve. The dollar has strengthened broadly since the Fed announced its decision in December to scale back its asset purchase program, cutting it by USD10 million, to USD75 billion-per-month.

Swiss National Bank Chairman Thomas Jordan said Thursday that the minimum exchange rate floor of 1.20 francs to the euro is likely to remain the focus of monetary policy for some time to come, as the value of the franc remains high.

The euro was little changed against the Swiss franc on Friday. EUR/CHF touched session highs of 1.2335, and was last up 0.02% to 1.2322.
In the week ahead, U.S. data on jobless claims and home sales will be closely watched.

Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets. The guide skips Tuesday and Friday as there are no relevant events on these days.

Monday, January 20

Markets in the U.S. are to remain closed for the Martin Luther King Day holiday.

Wednesday, January 22

The ZEW Institute is to publish a report on economic expectations in Switzerland, a leading indicator of economic health.

Thursday, January 23

The U.S. is release the weekly report on initial jobless claims and a private sector report on existing home sales.

**newdigital** · 01-19-2014, 01:05 PM

GBPUSD Fundamentals : January 20 - 24

Fundamental Forecast for the British Pound: Bullish

British Pound Soars as UK Retail Sales Rise Most in 3 Years
Price & Time: Sell GBP/USD Next Week?

The British Pound appears to be coiling up for another run at the 1.6600 handle as the positive developments coming out of the U.K. economy raises the Bank of England’s (BoE) scope to normalize monetary policy ahead of schedule.

With the BoE Minutes due out next week, a more hawkish policy statement may spark a near-term rally in the sterling, and Governor Mark Carney may show a greater willingness to raise the benchmark interest rate later this year as U.K. Jobless Claims are projected to contract another 32.0K in December. Indeed, Monetary Policy Committee (MPC) board member Ben Broadbent emphasized that unemployment is falling faster than the central bank expected while speaking earlier this week, but it seems as though there’s growing bets that the BoE will implement a dovish twist to its forward-guidance in order to preserve its highly accommodative policy stance for an extended period of time.

There’s speculation that the BoE will lower the unemployment threshold to 6.5% from 7.0% in its quarterly inflation report scheduled for February 12, and this theme presents the largest risk to the bullish British Pound forecast as market participants weigh the outlook for monetary policy. Nevertheless, Credit Suisse overnight index swaps are starting to show expectations for higher interests over the next 12-months as the BoE moves away from its easing cycle, and the shift policy outlook should continue to prop up the sterling over the near to medium-term as the central bank starts to unwind its non-standard measures.

With that said, we will continue eye the topside targets for the GBPUSD as long as it holds above the 1.6300 handle, and the rebound from key support may spark fresh highs in the pound-dollar as it continues to carve a series of higher highs paired with higher lows.

**newdigital** · 01-19-2014, 01:13 PM

EURUSD Fundamentals : January 20 - 24

Fundamental Forecast for Euro: Neutral

The Euro was smacked with reality this week when 2013 German GDP came in at +0.4%.
Incoming January PMI figures offer little reason for enthusiasm.

The Euro was the second worst major performer this past week, losing -0.95% to the top US Dollar, while gaining only against the beleaguered Australian Dollar, by +1.44%. By no means was this severely negative for the Euro, but no longer are the positive fundamental drivers providing the same spark – namely speaking sustained low Italian and Spanish yields and a lack of deflation appearing in regional CPI readings.

The past week showed signs of the hope and optimism that has helped carry the Euro starting to crack. It was a stark reminder that the Euro-Zone remains mired in a period of stagnation when the final 2013 German growth reading showed that the Euro-Zone’s largest economy only grew +0.4%. Euro-Zone inflation remained near multi-year lows in December (core at +0.7% (y/y) unch), showing that demand across the region remains weak. Neither screamed “buy the Euro.”

These data aren’t necessarily surprising: the policy of diminished government spending and higher taxes (“austerity”) creates a difficult environment for consumers and businesses alike. Market participants simply may be overstimulated by the ‘abstract’ reasons to be long the Euro – a shrinking European Central Bank balance sheet, especially relative to other major central banks (namely the BoJ and the Fed) – as near-term growth data loses its luster.

Certainly, the data due over the coming week paints a similarly improving yet unenthusiastic picture. On Tuesday, the January German ZEW survey is expected to show the highest Current Expectations reading (63.0) since March 2006 (63.4). This optimism may suggest that the Euro-zone’s recovery remains on pace, but in context of how the German economy performed last year these hopes have yet to fully translate into tangible reality.

The same can be said for the incoming PMI surveys due out on Thursday. Both the German and the broader Euro-Zone figures are expected show improvement across the board – in the Manufacturing, Services, and Composite indexes. Perhaps most interesting to watch – and what arguably jumpstarted Euro weakness at the beginning of the year – would be the French PMI surveys. The December figures showed a harrowing situation for early growth and labor prospects at least in the first half of 2014, a developing thorn in the side of the Euro as its second largest economy sputters.

As we’ve noted previously, it’s going to take a little more than some soft non-German data to provoke the ECB to do anything in the slightest. The November policy decision best exemplified this: only after German CPI showed consistent disinflation/deflation did the ECB act. The best reason for further easing from the ECB would be low excess capital levels – well-below the levels that prompted LTRO1 in December 2012. Nevertheless, with the positivity around the Euro morphing into a more neutral tone, we choose to take a more neutral outlook for the week ahead in absence of convincing positive or negative data due.

**Taylor Woods** · 02-18-2019, 05:39 AM

It is our duty to ensure patience for our trading journey in forex. Conducting analysis is a time consuming matter and many foreign currency exchange traders leave their energy in the midst of cut throat trading environment. However, we can’t ignore the fact that when trading in forex, along with technical analysis we sometimes may require detailed market analysis and fundamental analysis to get an impression the genuine representation of trading.

**mql5** · 08-16-2019, 05:34 PM

Forex Fundamentals-snip20190614161328.png

A large number of participants in liquid markets, who operate with different investment horizons, produce a lot of market noise. Thus markets have a low signal-to-noise ratio. The situation can be worsened by attempts of integer time series differentiation, which erases the remaining memory and converts quotes to a series characterized by stationarity.

Price series have memory, because each value depends on a long history of price levels. Time series transformations, such as for example the logarithm of increments, crop the memory because they are created based on a limited window length. When transformations to stationarity remove market memory, statisticians use complex mathematical methods to extract the remaining memory. That is why many of the related classical statistical approaches lead to false results.