EURUSD

EUR/USD forecast 5 May 2014

My strategy:

1. Stay aside (I was going to keep Euro long till Thursday the 8th of May but changed my mind and closed all long positions before market closed on Friday due to growing uncertainty surrounding Ukraine.)

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Monthly moan ending April 2014

Time is said to be a wonderful healer: it is also capable of smacking one’s expectations of progress right back down again when it comes full circle.
I recently had the opportunity to return back to the womb of my formation – the UK – and in so doing, decided to extend my trip back to the head office… in order to visit the cash-strapped streets where as a teenager, I used to try and look cool. Oh how we may laugh at ourselves through the sternness of maturity.

Anyway, the location of my unknown embarrassment is irrelevant, as, being a small town adjacent to a city, and with little, to no greenbelt separating these two worlds, it is fairly representative of many others that are gridlocked within this septic isle. Yes, that’s right, it was a rather sore sight; festering, I would argue, under a lack of remedy for retail. All of which was already advertising Spring sales just as the Winter’s knockdown had finished – and with the plethora of charity shops and pawn-brokers fighting to sterilise the amount of fast-food outlets vying to fatten up the nation.

I was also listening the car radio, and its discussion concerning how the UK Secretary of State for Culture, Media and Sport, a Cabinet Minister (and so top level) by the name of Maria Miller, had added her name to the growing list of Members of Parliament that had been caught lying on their expenses. She is also afforded the title of the Right Honourable – an oxymoron if ever I heard one when explaining most politicians today – and who used her position to bully authority into not pursuing her fraud, deceit and abuse of position. Of course, if any of us lower down the chain of comfort (but higher up the ladder of morality, and so less inclined to corruption), had acted similarly, we would be swiftly prosecuted, and then incarcerated.

It was at about this time that I had to stop at a set of traffic lights within the centre of town, and was subsequently greeted by the local culture. Feral, is perhaps the best descriptive for it, and I’m not sure if any of these children were above the age of fourteen; with some of the younger ones appearing to be below the age of ten. Regardless, they demonstrated, through their behaviour, a distinct cultural shift away from that which I remember back in the days when I was a lad. Admittedly, that was quite some number of years ago.

Now, I’m in no way claiming that I was a paragon of virtue – I dreaded school report day, and the consequences for me once back at home - but I most certainly did not dare to do what one young man decided to. That is, bang his fist on the bonnet of my car – his friends of ten or so in number were doing likewise on other cars – whilst moving across the road.

I mean, I would have fully expected to face repercussions that involved either a clip around the ear, or kick up the arse. But then, that was in the days when public servants and role models exhibited a morality of higher standard that did trickle down to the general public.

Looking at the young man, my protestation against this action was met by my receiving the bird (middle finger gesture of appreciation of me)… and not by the young accoster, but by a younger lady of angelic appearance. Hmm, if she keeps that attitude up, she may be fun when she’s twenty one… pause, and another… okay - oh, what, a little close to the mark of being borderline humour?

Hmpf, charming, I thought, and, somewhat sadly, indicative, I think, of the degradation of behavioural standards that our youth (and adults) are being exposed to as time progresses on. And I blame such lack of consideration for others, on those at the very top. Indeed, the depravity of morality being exhibited seems only to be matched by the apparent lack of any sincere consideration for the fate of the nation.

As for the children in front of me, it did cross my mind that perhaps they had resigned themselves to a life of social depravity – kids aren’t stupid, and can see what is in front of them - but also to a lack of repercussions to their actions; supported, one could argue, by the almost daily reports of how power is allowed to reign as it sees fit; amend rules for itself in order to facilitate financial corruption that laws prevent the public from also engaging within; and generally, cultivating an environment of forgiveness for behaviour that, not a generation previous, would have been crushed under the mass of taking responsibility for one’s actions, and thus not acting so selfishly in the first place… a crack around the ear from an adult also helped. As too, did the support for such action from parents… if one was brave enough to tell one’s parents of why one was cracked in the first place.

And so I refrained from jumping out of the car and imparting a little wisdom upon the future of my motherland. Primarily out of the fear of being jumped on by a pack of prepubescent predators that these days, would be forgiven their actions, as no figure in authority is willing to anymore say that what these kids deserve is a dose of discipline. Instead, they will all of no doubt been diagnosed with some form of attention deficit disorder – read, just plain unruly, and with full knowledge of what they can these days get away with – and with no person in a position of social authority daring to utter anything other than the party line that will ensure continued tenure in their salaried positions.

I also feared getting stabbed with a blade...

1. 3 Reasons Why the Dollar Erased Post NFP Gains
2. What is the Greatest Risk for EUR Next Week?
3. What Could Drive GBP to 1.70
4. Will NZD Hit for Fresh 2 Year Highs?
5. AUD: Busy Week Ahead with RBA, PMI and Retail Sales on Tap
6. CAD: Oil and Gold Prices Rebound
7. Rally in Yen Crosses Fizzle, Disposable Incomes in Japan Fall

3 Reasons Why the Dollar Erased Post NFP Gains
When the non-farm payrolls report was initially released, the U.S. dollar traded sharply higher against all of the major currencies but by the end of the North American trading session not only did the greenback give up all of its gains but the S&P 500 and Treasury yields also turned lower. Even though non-farm payrolls rose by the largest amount since January 2012 and the unemployment rate dropped to its lowest level since September 2008, investors were not impressed. We can provide at least 3 reasons why the dollar erased its pose NFP gains. #1 - There was underlying weakness in the data with the improvement in the unemployment rate driven primarily by the drop in labor force participation. #2 - The NFP report won't change the Fed's stance on monetary policy. When Yellen speaks next week, she will remind us that tapering does not equal tightening #3 - The slide in U.S. yields after a strong jump in payrolls makes the dollar a more attractive funding currency. All of this has investors thinking that if the dollar can't rise after the increase in payrolls, nothing will be able to drive it higher in the near term. Outside of the ISM non-manufacturing report, there are no major U.S. data scheduled for release next week and with NFPs released before ISM, Monday's report carries even less significance. Instead, speeches from Federal Reserve officials will play a bigger role in how the dollar trades but we don't expect any excessive optimism.
The April labor market report blew out everyone's expectations. Non-farm payrolls rose 288k in the month of April, up from 203k. The most optimistic Wall St economists were calling for a 250k rise but what really caught the market by surprise was the sharp improvement in the unemployment rate, which fell to 6.3%, its lowest level since September 2008. At best, economists were looking for an improvement to 6.5% from 6.7%. The report would have been unambiguously positive for the dollar if not for the drop in the labor force participation rate, which indicates that the only reason why the unemployment rate declined was because 806k people dropped out of the work force. Average hourly earnings also stagnated so for the time being no there's major risk of inflation.
Everyone will be looking to next week's speech by Janet Yellen for indications on whether the improvement in the unemployment rate will accelerate the central bank's plans for tightening and unfortunately we think that the answer is still no. Internally, policymakers may consider pulling forward their rate hike plans but these views will not be shared publicly because of the upside risk they pose to yields. Job growth was very strong and the unemployment rate declined but Yellen will most likely downplay the improvement by saying that tapering does not equal tightening. When she delivered her first post monetary policy meeting press conference, she said rates could rise 6 months after QE ends. If the central bank continues its current pace of tapering, asset purchases should reach zero by October or December at the latest and 6 months after that would be sometime between April and June which is right in line with current market expectations. Given the drop in labor force participation and zero wage growth, there's no reason for the Fed to ramp up expectations for tighter monetary policy. In fact, it would be in their interest rates to keep rates low to encourage workers to return to the workforce.
Here are My Top 10 Takeaways from US Jobs Report:

1. Not a Game Changer for Fed Since Labor Force Participation Down and Wage Growth Flat
2. Flattening of yield curve post NFPs - Means USD Rally Limited
3. Rate Hike Expectations Pulled forward to June 2015 form July 2015 - No big deal
4. Non-Farm Payrolls 288k vs. 203k - Strongest since Jan 2012
5. Unemployment Rate 6.3% vs. 6.7% - Lowest since September 2008
6. Labor Force Participation Rate drops to 62.8% from 63.2% - Improvement in unemployment rate caused by shrinking workforce (806k people dropped out)
7. Broader U-6 Unemployment Rate drops to 12.3% from 12.7%
8. Average Hourly Earnings Stagnates - No Wage Growth
9. Manufacturing Employment grows 12k from 7k
10. ***Yellen is speaking next week, she will most likely repeat tapering does not equal tightening

What is the Greatest Risk for EUR Next Week?
At the beginning of this week we promised an increase in the volatility of the EUR/USD and while we were right in that the weekly range expanded from 77 pips to 116 pips, it was hardly a cause for enthusiasm. It wasn't too long ago when the currency pair would move 100 pips each day, adding to an existing trend. The consolidative price action in the EUR/USD over the past 2 weeks reflects the market's expectation that there won't be any surprises from the ECB or the Fed in the near future. Both central banks are comfortable with their current course of monetary policy even though the ECB has been talking about doing more. The focus will shift from the U.S. dollar to the euro next week with inflation, spending, industrial production and trade data scheduled for release. Of course the biggest event risk on the calendar is the European Central Bank's monetary policy decision. While no changes are expected from the ECB, Mario Draghi's press conference always has the potential to trigger a big move in EUR/USD. In an attempt to talk down the euro last month, Draghi outlined all of the ways the central bank could loosen monetary policy. The greatest risk for euro in the coming week is the press conference because if Draghi intensifies his criticism about the strength of the euro, it could send the currency tumbling. However the words need to be very strong to send a clear message to the market. Draghi has never called the euro move "brutal" but if he adopts the language used by his predecessor Trichet, it would do the trick.
What Could Drive GBP to 1.70
As we have seen over the past week, it does take much to drive the British pound to fresh highs. Despite slower growth in construction activity during the month of April, sterling held onto this week's gains, ending the day just shy of its 4.5 year highs. Based on the overall momentum of the currency and the weakness of the U.S. dollar, we would not be surprised if GBP/USD hit 1.70 in the coming week. There's no shortage of catalysts including the PMI services report, industrial production and trade balance. If service sector activity accelerated last month, it could trigger an extended rally in the currency. The Bank of England also has a monetary policy announcement but they are widely expect to leave policy unchanged which makes it a nonevent for the British pound. Softer U.S. data or dovish comments from Janet Yellen could also drive GBP/USD higher. Its worth noting that speculators took profits on some of their long sterling positions this past week when the currency pair struggled to break 1.6850 according to the CFTC but now that it has, we would not be surprise if those long positions were reloaded.
Will NZD Hit for Fresh 2-Year Highs?
The best performing currency pair this week was NZD/USD. On Friday alone, the currency added approximately 0.4% to its gains. Although there was very little New Zealand data released this week to support the rally, NZD benefited from its yield advantage over the dollar. NZD/USD appreciated 4 out of the last 5 trading days and in order for the rally to continue and for the currency to hit fresh 2-year highs, next week's New Zealand employment report needs to be strong. Economists are looking for the unemployment rate to drop to 5.8% from 6% and employment change to rise by 0.6%. Considering that these are optimistic forecasts to begin with, if the data simply meets expectations, NZD/USD could test 0.8745. There are a lot of important economic reports scheduled for release from the 3 commodity producing-countries next week. AUD will be in play with RBA, retails sales, PMI services and Chinese data scheduled for release. Canada has trade, IVEY PMI and its monthly employment report. Unlike NZD, AUD has been stuck in a narrow 0.9203 to 0.9316 trading range versus the dollar for the past week and there are enough Tier 1 economic reports on the calendar for the range to be broken. The Canadian dollar on the other hand is vulnerable to additional losses if job growth slowed in April.
Rally in Yen Crosses Fizzle, Disposable Incomes in Japan Fall
A number of Japanese economic reports were released overnight but it was U.S. non-farm payrolls that dictated the performance of USD/JPY. After the initial NFP report, USD/JPY touched 103 but by the end of the North American trading session, it had given up all of its gains and this sell-off dragged all of the Yen crosses lower. We need to look no further than the intraday reversal in Treasury yields for an explanation of why the rally in USD/JPY fizzled. According to the latest economic reports from Japan, consumers spent voraciously ahead to consumption tax hike. Overall household spending jumped 7.2%, the largest increase ever. While this is great news for Japan, it is also worth noting that real disposable incomes dropped 3.2%, marking the 8th straight month of decline. In order to maintain a steady recovery, the Japanese government needs to make sure that wages rise in lockstep with inflation. If disposable incomes continue to fall as prices rise, it would be viable reason for the central bank to ease monetary policy. However for the time being, the data has been good. In addition to spending, the job to applicant ratio also rose slightly to its highest level since July 2007. Looking ahead we have a quiet week in Japan but with the abundance of Tier 1 economic reports from other parts of the world, don't expect the Yen pairs to remain dormant. The 102-level is still at risk and it won't take much for the support level to break.

You should post the authors name...Kathy Lien

http://seekingalpha.com/author/kathy-lien

.. I was just about to post the same thing.

Well, fingers crossed.
She has been labouring for quite sometime under the weight of the crisis, but it's a bullish signal for me.
This constant reminder of Draghis threats of action reminds me of the taper mania that caught so many traders off side mid last year.
When he acts and does what ever he is able to do, then that's when he acts.
Until then, it's speculation and just go with the flow.
I have been reading from Long time investor Larry Edelstone that the USD is beginning a 3 year "overall" bear cycle.
I'm sure this may offend a lot of viewers, but this is coming from a long time investing US patriot with a very good track record who knows his macro fundamentals.
He's actually moving his accounts overseas as he sees some dark times ahead.
He does also see Europe folding at some point, but from a cyclical point of view, now does not seem the time to start selling.
Cable is a tear away, and when I see a currency push up that fat without a retrace from a multi year low of 1.48, it seems to be creating a shift in the balance on a very high timeframe such as the quarterly etc.
Have a great weekend

After last week news should we buy or sell e/u??
In other word u see e/u going UP or Down

Just pick up one
A-BUY -UP
B-SELL - Down
C-SIDELINE

As tapering unfolds, it's the USD that needs extra support from base currencies. I expect a break from this at some point in summertime.
This Monday it's bank holiday in Japan and UK, so EURUSD may take any direction but I expect a little changed close anyway. Wednesday when Yellen speaks, we will see where USD is really headed to.

That's way more than fair use, will have to be trimmed down I think.

It'll drop soon. I can't imagine it going much farther without significant retrace. The farthest I could even fathom it getting is 1.42469, which is a good distance away but there are all sorts of signs that pro money is shorting this already.

Yep, we will let Yellen have the last word.
She keeps highlighting Bens assertion that tapering is not tightening and low interest rates to stay for quite sometime.
Im cautious about putting too much emphasis on the taper.
Charts just don't suggest to me that it is time to sell yet that's all.

What signs?

The dollar is weak at the moment. Long term bulls are still strong.

Charts are bullish, agreed. They were bullish even before the NFP. However, charts didn't always work well for me recently. The NFP confirmed solid recovery but with a dove as new FED governor I doubt she would like USD to appreciate quickly as tapering ends. Self-sustainable growth is yet to be proven and it will take time to convince a dove. Furthermore, criteria to decide when to start tightening are back to the dark age so market disappointment is on the cards. Buying the dips seems the better strategy. Upside could be limited though as low inflation in EZ might get serious.

Buy at your own risk, I'll be shorting.

i dont disagree with bulls. i have had 4146 since last year. i am simply stating i am short and the reasons why. it has been bullish since we had the b/o pointing to 4146. i missed my Long entry at norm by 1 pip + spread. all this you read now is a 1/2 year after. people are long/bullish 300 pips from 4146. like i said i missed my entry by a pip. we never went to 3102 or 3103.5 depending on broker has not been satisfied. most times before 4146 4148 depending on broker, we will reach 3102 3103 first. most times is not 100%. its all posted in real time before that level. this is another reason i hold some shorts, we are still due to go to 3102 before 4146.. the closer to 4146 the better.. of course if one is using momentum they will not see this. i am not ridiculing the ones trading long, i may be the one on the losing side. the thing is i posted step by step what i was doing.

it does look weak. it usually does, usd bears need to break support. thats not a done deal atm. bulls had the b/o last. atm may just be a retrace before bounce on the usdx chart. the r/r shaded green verse red

Wow nice post, eloquently spoken. LOL. Yes same in USA and Canada. Tazer the little buggers I say.. but seriously though.. adult court should be lowered here to 10 years old 'kids' and up. Might change some attitudes towards crime, when 'Terror Tim tear you a new butthole' is your cell mate.

The Euro has been difficult to pick for the last 12 months or more as the bull drive began from 1.2 area.
It looked ready to collapse.
but looking at the monthly chart, the last main monthly bear drive contained far more bullish monthly candles than the previous 2 monthly bear drives.
The last swing low was a higher low, and there was significant bullish weekly MACD divergence.

Thats why I have maintained an over all bullish stance since the Euro summit.

Not so much because of the summit, but simply there were 3 separate signs that buyers were snapping up a bargain.

Throw in the fact that my favourite contra indicators (US banks) were saturating the FF news section with sell signals and calls for parity, and I had a hat trick of bullish signals + 1.