[{"post_title":"Commodity Currencies Crash On Trade War Woes","content":"

King Dollar<\/strong><\/h2>\r\nUSD has been trading firmly over the last European session of the week so far, extending gains from yesterday in reaction to better than expected US data as both building permits and continuing claims saw positive surprises.<\/strong> Looking ahead to the final US session of the week today, we have the University of Michigan confidence reading for May. This is expected to come in stronger than the prior month. If we see an inline or better than expected reading that should keep USD well bid over the rest of the day with little else in the way of market-moving data today. The index is back above the 97.68 level to end the week.\r\n\r\n[shortcode-variables slug=\"testusd\"]\r\n

EUR Weakens Further<\/strong><\/h2>\r\nEURUSD is trading lower again today, marking a week of straight losses as a resurgent US dollar has kept the single currency pressured. Weak euro zone\u00a0data this week has refocused concerns around the health of the eurozone<\/strong> economy, adding further pressure, to see EURUSD trading back down into the middle of the 1.1009\u20131.1217 range.\r\n

Pound Down Firmly<\/strong><\/h2>\r\nGBPUSD has been heavily weighed upon this week also with price breaking down to levels not seen since January. A stronger US dollar as well as concerns around the upcoming early June Brexit vote in parliament<\/strong>, which will be May\u2019s final attempt, has fuelled consistent downside this week with price breaking through the April and March lows to trade 1.2757 last.\r\n

Risk Sentiment Recovers From Monday\u2019s Crash<\/strong><\/h2>\r\nRisk sentiment, which had been sharply weaker at the start of the week, has recovered firmly over the week though is trading lower again today. SPX500 had broken above the 2877.30 level but has since retreated back below and is nearing 2856.30 support.<\/strong> Concerns around the ongoing US\/China trade war, as well as rising tensions in the Middle East,\u00a0 present persistent downside risks though for now, it seems the market is focusing on better US data.\r\n

Mixed End for Safe Havens<\/strong><\/h2>\r\nSafe havens have had a mixed end to the week with gold lower against the US dollar while JPY has traded higher.<\/strong> XAUUSD has had a disappointing week, reversing sharply from initial highs to trade 1285.16 last. While above 180.58 though, the focus remains on further upside. USDJPY, which has broken back above the 109.70 level, is now testing the level from above as JPY picks up the majority of safe haven inflows on softer equities prices today.\r\n

Middle East Worries Keep Oil Bid<\/strong><\/h2>\r\nOil prices are trading higher again today<\/a> despite a bearish report from the EIA yesterday<\/strong> which highlighted an unexpected build in US crude stocks. Rising by over 5 million barrels last week, crude stores are now at their highest level since 2017. However, oil remains supported by ongoing, rising, tensions in the Middle East<\/strong>. News that Iran attacked four Saudi Arabian oil tankers earlier in the week has heightened expectations of conflict between Iran and the US which currently has warships on the way to the Middle East. The potential supply disruption is keeping oil prices well bid despite the EIA report.\r\n

Commodity Currencies Crashing<\/strong><\/h2>\r\nRising crude prices have failed to help CAD into the end of the week<\/strong>, however, with a strong US dollar taking USDCAD firmly above the 1.3469 level resistance, headed for the 1.3502 May high next. Concerns around the health of global trade in light of the escalation between the US and China has weakened CAD despite rising crude prices.<\/a>\r\n\r\nAUDUSD has had a brutal week suffering five consecutive days of losses<\/strong> as price plummets toward the .6759 2019 low. Worsening trade relations between the US and China has increases expectations of an RBA rate cut in the coming months as trade between China and Australia will likely weaken.\r\n\r\n[shortcode-variables slug=\"tradingcad\"]","link":"https:\/\/www.orbex.com\/blog\/?p=82693","createdAt":"2019-05-17 15:39:53","image":"https:\/\/www.orbex.com\/blog\/wp-content\/uploads\/2019\/05\/shutterstock_397947598-1-300x200.jpg"},{"post_title":"How Australia's Elections Might Affect Currencies","content":"Tomorrow, Australians are heading\u00a0to the polls for the federal elections. The elections will determine their legislature and new Prime Minister. <\/span>\r\n\r\nElections usually generate some market volatility as investors digest the change in government, and what it means for the future prospects of the economy.<\/span>\r\n\r\n[shortcode-variables slug=\"aud\"]\r\n\r\nThe latest polling shows that the current Prime Minister Scott Morrison's Liberal\/National Coalition is just a percentage point behind opposition leader Bill Shorten's Labor. This is well within the margin of error.<\/span>\r\n\r\nAnything could happen! And that uncertainty isn't something that the markets like. In fact, one could argue that not wanting to affect change in the middle of an electoral period was one of the reasons for the RBA's hold.\r\n

The Sides<\/strong><\/h2>\r\nShould Scott Morrison prevail, it would be a continuation of the status quo. And the market would likely positively interpret this.\r\n\r\nCurrently, the government has a majority of just one. And the lack of support in the Senate has stymied the administration's ability to push policy. This has frustrated the electorate, and by a small margin, they are turning to Labor.\r\n\r\nLabor has promised a series of reforms. However, these would largely be seen as negative for the business climate. This is especially true regarding cutting GHG emissions. Shorten has also proposed expanding social spending, raise the minimum wage and eliminate tax breaks.\r\n

The Results<\/strong><\/h2>\r\nThe markets would most likely want a solid victory. The ideal scenario to restore stability in policy would be for the party in power to attain a clear cut majority in the Senate. Over the last 12 years, Australia has had half a dozen leaders, which has led to policy stagnation.\r\n\r\nWhat would concern the markets the most would be a hung parliament. Without a clear winner, one of the major parties would have to cobble together an uneasy coalition with smaller parties and crossbenchers.\r\n\r\nThis would undoubtedly cause uncertainty. There would need to be extended coalition negotiations and policy concessions to get support. This could prompt businesses and consumers to hold off on buying until they get some clarity on what things will look like in Canberra.\r\n\r\nAdding extra uncertainty to the current election is the change in the voter rules. This is upsetting the electoral math.\r\n

Considerations for the Markets<\/strong><\/h2>\r\nGenerally, the stock market trades sideways ahead of the elections. There is then somewhat of a \"relief\" bump once the results come out. This risk-off sentiment generally translates into more investments in bonds<\/a>, pushing up yields and strengthening the currency.\r\n\r\nIf a clear victory is attained, there could be a shift away from bonds<\/a> back to the stock market. This implies that there will be more pressure on the currency.\r\n\r\nLabor-proposed policies such as increased spending and raising the minimum wage are likely to support inflation. This would provide further downward pressure on the currency.\r\n\r\nOn the other hand, Liberal policies are likely to be interpreted as business-friendly. These would attract foreign investment, easing some of the downward pressure on the currency.\r\n\r\nAn unclear result would probably prolong the sideways trading. In turn, this would keep the currency from weakening. The other factor is the tone that comes out of the leaders following the election, and the likelihood they will form a coalition in the near term. This could cause the currency to weaken quite quickly after the announcement of the results.\r\n\r\n[shortcode-variables slug=\"trade-usd-movement-open-account\"]","link":"https:\/\/www.orbex.com\/blog\/?p=82645","createdAt":"2019-05-17 13:54:25","image":"https:\/\/www.orbex.com\/blog\/wp-content\/uploads\/2019\/05\/shutterstock_1151943374-1-300x200.jpg"},{"post_title":"Heartbreaking Reversal In Gold As USD Surges on Once More","content":"

Gold<\/strong><\/h2>\r\nIts been a frustrating week for gold bulls.<\/strong> What started out with a promising rally has ended with a disappointing sell-off as a resurgent USD weighs on price. Gold initially traded strongly to the upside at the start of the week.<\/strong>\r\n\r\nNews that President Trump was considering tariffing the remaining $300 billion of Chinese goods<\/strong> increased safe haven inflows. Gold traders reacted to tumbling equity markets<\/strong>. China responded by applying its\u00a0own set of 25% tariffs on $60 billion of US goods thus exacerbating t<\/span>his risk-off tone.\u00a0<\/span>\r\n\r\nFurthermore, news that Iran had attacked four Saudi Arabian oil tankers<\/a><\/strong> in the Middle East compounded fears of conflict in the region as US warships head there. At the beginning of the week, the US dollar was trading lightly and risk aversion seeped the markets. Gold prices were firmly higher,<\/strong> breaking out to fresh monthly highs.\r\n\r\n[shortcode-variables slug=\"tradinggold\"]\r\n\r\nHowever, following the initial collapse on Monday, risk appetite recovered firmly over the week.<\/strong>\u00a0Equities were trading back up to last week\u2019s levels as US data printed surprised to the upside.<\/strong>\u00a0Data on US homes was better than expected and continuing unemployment claims falling on the week.\r\n\r\nThese data sets added a boost to USD which has surged higher into the end of the week. This sent\u00a0gold firmly lower<\/strong> despite lingering risk factors in the Middle East and with the US\/China trade war.\r\n\r\nLooking ahead to the final US session of the week today we have the University of Michigan confidence<\/strong> reading for May. The reading is expected to come in stronger than the prior month. If we see an inline or better than expected reading that should keep USD well bid<\/strong> over the rest of the day with little else in the way of market-moving data today.\r\n

Technical Perspective<\/strong><\/h3>\r\n\"xauusd\"<\/a>\r\n\r\nThe rally in gold this week saw price breaking out above the upper trend line of the recent bearish channel. However, the advance was capped upon a test of the 1298.68<\/strong> resistance level. This turned price lower, moving back inside the bearish channel. While price remains above the 1280.58 level, focus remains on further upside. The next level to watch to the topside is\u00a0<\/span>1308.19 .<\/span>\r\n

Silver<\/strong><\/h2>\r\nSilver prices have tracked the moves in their golden counterpart this week. We saw\u00a0price breaking down to levels not seen since December 2018.<\/strong> A firmer US dollar has proved an immovable obstacle for silver upside this year with price cascading lower as the dollar has strengthened.\r\n\r\nIndeed, silver has not enjoyed the same safe haven linked upside as gold has recently given its typical industrial usage which often sees it weighed upon when equities are tanking.<\/strong>\r\n

Technical Perspective<\/strong><\/h3>\r\n\"xagusd\"<\/a>\r\n\r\nSilver prices have now broken down below the low of the largest bullish pin bar of the two printed over the prior month. If we see a weekly close below the 14.5640 level, this will negate the pin bar and keep focus firmly on further downside.<\/strong> 14.3321 is the next key support region to watch while any retracement higher should find sellers into 14.9161.\r\n\r\n[shortcode-variables slug=\"risk-management-downopen-account\"]","link":"https:\/\/www.orbex.com\/blog\/?p=82667","createdAt":"2019-05-17 11:45:28","image":"https:\/\/www.orbex.com\/blog\/wp-content\/uploads\/2018\/10\/gold-5-750x430-1-150x150.png"},{"post_title":"UoM Consumer Sentiment to Rise After Falling to 97.2 in April","content":"The University of Michigan\u2019s consumer sentiment index is forecast to rise in May following the decline in April. Economists forecast that consumer sentiment will improve to 97.8 for the current month. <\/strong>This follows the declines in April where consumer sentiment fell to 97.2.\r\n\r\n[shortcode-variables slug=\"testusd\"]\r\n\r\nThe UoM\u2019s measure of consumer sentiment fell for the first time in April<\/a>, after rising for three consecutive months. The data missed the estimates of an increase to 98.1.\r\n\r\nAs a result, economists have scaled back their optimism on the index. The data for May is forecast to show only a modest pickup from April. Focus will be on the underlying index gauges.<\/strong> For example, despite the dip in April, the current conditions index remained firm. There was also optimism among consumers.\r\n\r\nIt wasn\u2019t surprising, then, to see this reflecting in other economic data points such as the retail sales report. With the general consensus pointing to tame inflation, consumer spending and optimism could maintain the trend.\r\n\r\nThe Trump administration implemented tax cuts across the board in a bid to prop up the economy late last year. While this gave an initial boost to the consumer sentiment, the effects are starting to fade.\r\n

Tax Cut Stimulus Starting to Fade \u2013 April Survey<\/strong><\/h2>\r\nOne of the leading causes for the decline in the consumer sentiment index was that consumers felt that the tax cut stimulus effects were fading.<\/strong>\r\n\r\nData for the previous month revealed that tax refunds fell compared to the same period a year ago. While this might prove to dent the overall report, American consumers were confident in their personal finances. The prospects for the year ahead remained elevated, reflecting the conditions on the ground.\r\n\r\n[caption id=\"attachment_82220\" align=\"aligncenter\" width=\"1360\"]\"UoM<\/a> UoM Consumer Sentiment Index, April 2019[\/caption]\r\n\r\nAccording to the survey report for April, data showed that the gauge of current conditions index rose to a four-month high of 112.3.<\/strong>\r\n\r\nBut expectations on future conditions fell to 85.8.<\/strong> The decline in the sentiment index underlined the anticipated weakness in the economy. This could partially be explained by the fact that consumers were gearing up for a weaker growth patch. But data for the first quarter proved to be otherwise. The US economy was seen rising at a pace above 3% comparing to the estimates of a 2% growth rate on average.\r\n\r\n\r\n\r\n\r\n\r\n\r\n
\u00a0<\/strong><\/td>\r\nApr 2019\r\n<\/strong><\/td>\r\nMar 2019\r\n<\/strong><\/td>\r\nApril 2018\r\n<\/strong><\/td>\r\nM\/M Change\r\n<\/strong><\/td>\r\nY\/Y Change<\/strong><\/td>\r\n<\/tr>\r\n
Index of Consumer Sentiment<\/strong><\/td>\r\n97.2<\/td>\r\n98.4<\/td>\r\n98.8<\/td>\r\n-1.2%<\/td>\r\n-1.6%<\/td>\r\n<\/tr>\r\n
Current Economic Conditions<\/strong><\/td>\r\n112.3<\/td>\r\n113.3<\/td>\r\n114.9<\/td>\r\n-0.9%<\/td>\r\n-2.3%<\/td>\r\n<\/tr>\r\n
Index of Consumer Expectations<\/strong><\/td>\r\n87.4<\/td>\r\n88.8<\/td>\r\n88.4<\/td>\r\n-1.6%<\/td>\r\n-1.1%<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\nThe broader index levels reveal that optimism among consumers still remains strong<\/strong>. At the center of this optimism is the US labor market. <\/strong>Jobs were seen to be plentiful, as determined by the weekly jobless claims. Initial claims fell to historic lows during April. Consumers were also buoyed by the fact that the U.S. could negotiate a trade deal with China.<\/strong>\r\n\r\nThe official of the University of Michigan\u2019s consumer sentiment index was that consumer optimism did not waver much. Despite the miss in the estimates and some minor concerns, confidence was still high.\r\n\r\nAs a result, the official view that the decline in April was rather insignificant.<\/strong>\r\n\r\nThis view could be put to the test as the data comes out later today.\r\n

Higher Chances for Consumer Sentiment to Rebound<\/strong><\/h2>\r\nAnother monthly decline on the index could start to raise concerns. With the U.S. economy seen starting the first quarter on a firm footing, growth could remain within the 2% - 3% range for the current second quarter.\r\n\r\nThe Fed pledged to keep rates unchanged<\/a> at its big meeting March. The next major policy meeting will be in June. Yet, consumers do not see the Fed to raise rates. The survey for April saw only 55% of respondents expecting a rate hike. Although this is well above the 50% benchmark, it is still low by historical standards.<\/strong>\r\n\r\nUntil then, with the status quo remaining stable, the consumer confidence report is unlikely to spring a downside surprise.\r\n\r\n[shortcode-variables slug=\"trade-usd-movement-open-account\"]","link":"https:\/\/www.orbex.com\/blog\/?p=82219","createdAt":"2019-05-17 08:57:25","image":"https:\/\/www.orbex.com\/blog\/wp-content\/uploads\/2019\/05\/shutterstock_535762630-1-300x200.jpg"}]