EUR/GBP: Sterling rally halted by soft UK inflation data
- British Office for National Statistics said consumer prices rose 0.3% yoy in April, below market expectation for inflation to remain at 0.5% yoy. Core consumer price inflation, which strips out changes in the price of energy, food, alcohol and tobacco, fell to 1.2%, compared with economists' expectations for 1.4%.
- The Bank of England forecast inflation would stay below 1% until the tail end of this year and to undershoot its target until 2018, due to the global slump in oil prices, the effect of past rises in sterling and lacklustre wage growth.
- But the dip in consumer price inflation is likely to be short-lived. Prices charged by manufacturers, which tend to be responsive to changes in energy and raw material prices, fell last month at the slowest annual rate since November 2014. North Sea oil prices rose 22% last month and have recovered further in May, hitting a six-month high on Monday after slumping around 35% in dollar terms in 2015. What is more, expectations among people in Britain for inflation over the coming year rose in April to their highest level since July of last year, according to a YouGov survey published at the end of April.
- House prices were 9.0% higher yoy in April, the biggest rise in a year. In London, prices rose by 13.0%, mainly due to an extra property purchase tax that took effect in April.
- A below forecast UK inflation reading halted sterling's rise on Tuesday after a pair of polls showed the "In" camp well ahead in the run-up to Britain's June 23 referendum on European Union membership.
- The sterling appreciated against the EUR and the USD, drawing support from the latest poll from ORB for the Telegraph newspaper that showed the "In" camp holding a 15-point lead over its "Out" rivals. Those wanting Britain to stay in the EU also held an eight-point lead in an ICM poll for the Guardian newspaper on Monday, though another poll showed the "Out" camp in front.
- Our short-term EUR/GBP outlook is bearish. We opened a short position at 0.7865 yesterday with the target of 0.7665. The nearest support level is 100-dma at 0.7769.
AUD/USD: RBA Minutes Less Dovish Than Expected
- The Australian dollar rallied 1% on today after minutes of the Reserve Bank of Australia's May policy meeting encouraged markets to pare back the chances of a cut in interest rates.
- In minutes of the policy review, where the Reserve Bank of Australia reduced the cash rate by a quarter point to a record low 1.75%, the central bank said it was discussed leaving interest rates on hold but decided on balance that a cut then would help return inflation to target over time.
- The RBA noted there had been no material change in its outlook for growth and was still of the view that the economy was continuing to rebalance away from the mining sector, thanks to "very accommodative" monetary policy and a lower exchange rate since 2013.
- The minutes gave little away on whether the RBA would cut rates again.
- A few days after the rate decision, the RBA published its quarterly policy report which revealed the central bank had slashed its 2016 underlying inflation forecasts to below its target band of 2 to 3%.
- It saw inflation drifting back to the bottom of its target band from 2017 through mid-2018, a material downgrade that prompted investors to bet on at least one more cut in interest rates this year.
- Interbank futures are fully priced for a quarter point easing by October and have a one-in-three chance for yet another cut by year-end. In our opinion there is a risk of no more cuts this year.
- Investors are focused on Australian jobs report now (Thursday, 1:30 GMT). Rate cuts expectations could be dampened if the April data lead to an improvement in the employment trend.
- Our long-term AUD/USD outlook remains bullish, because our monetary policy expectations are more hawkish than market consensus. What is more the AUD should be supported by rises in commodity markets.
FOREX - MAJOR PAIRS:
FOREX - MAJOR CROSSES:
It is usually reasonable to divide your portfolio into two parts: the core investment part and the satellite speculative part. The core part is the one you would want to make profit with in the long term thanks to the long-term trend in price changes. Such an approach is a clear investment as you are bound to keep your position opened for a considerable amount of time in order to realize the profit. The speculative part is quite the contrary. You would open a speculative position with short-term gains in your mind and with the awareness that even though potentially more profitable than investments, speculation is also way more risky. In typical circumstances investments should account for 60-90% of your portfolio, the rest being speculative positions. This way, you may enjoy a possibly higher rate of return than in the case of putting all of your money into investment positions and at the same time you may not have to be afraid of severe losses in the short-term.
How to read these tables?
1. Support/Resistance - three closest important support/resistance levels
2. Position/Trading Idea:
BUY/SELL - It means we are looking to open LONG/SHORT position at the Entry Price. If the order is filled we will set the suggested Target and Stop-loss level.
LONG/SHORT - It means we have already taken this position at the Entry Price and expect the rate to go up/down to the Target level.
3. Stop-Loss/Profit Locked In - Sometimes we move the stop-loss level above (in case of LONG) or below (in case of SHORT) the Entry price. This means that we have locked in profit on this position.
4. Risk Factor - green "*" means high level of confidence (low level of uncertainty), grey "**" means medium level of confidence, red "***" means low level of confidence (high level of uncertainty)
5. Position Size (forex)- position size suggested for a USD 10,000 trading account in mini lots. You can calculate your position size as follows: (your account size in USD / USD 10,000) * (our position size). You should always round the result down. For example, if the result was 2.671, your position size should be 2 mini lots. This would be a great tool for your risk management!
Position size (precious metals) - position size suggested for a USD 10,000 trading account in units. You can calculate your position size as follows: (your account size in USD / USD 10,000) * (our position size).
6. Profit/Loss on recently closed position (forex) - is the amount of pips we have earned/lost on recently closed position. The amount in USD is calculated on the assumption of suggested position size for USD 10,000 trading account.
Profit/Loss on recently closed position (precious metals) - is profit/loss we have earned/lost per unit on recently closed position. The amount in USD is calculated on the assumption of suggested position size for USD 10,000 trading account.
Source: Growth Aces - Forex And Precious Metals Trading Signals