EUR/USD: Scope For Recovery To 1.0840
Growth Aces | Nov 30, 2016 06:22AM ET
EUR/USD: Scope for recovery to 1.0840
- U.S. BEA revised real GDP growth in the third quarter higher to a gain of 3.2% qoq annualized, the best growth rate in eight quarters. The result compares to the Q3 advance estimate of 2.9% and the Q2 final reading of 1.4%. The stronger-than-expected results give the U.S. economy more momentum heading into the fourth quarter, where growth is likely to exceed 3.0%. So far in 2016, real GDP growth is averaging 1.8% per quarter, but should finish the year above 2.1%, handily surpassing the Fed staff's most recent median projection for 2016 and the longer run, both 1.8%.
- Much of the upward revision to real GDP and real final sales stemmed from the larger increase in personal consumption expenditures than previously estimated. Partly offsetting this gain, were downward revisions to nonresidential fixed investment and private inventory investment. Personal consumption expenditures now contributed 1.89 pp to third-quarter GDP, up from 1.47 pp in the advance estimate. Consumption of both goods and services moved higher than in the early report. The contribution from gross domestic private investment fell to 0.34 pp from 0.52 pp, mostly due to a markdown in nonresidential structures.
- Residential investment was still a drag on growth, but less so after revision and less so than in the second quarter. It subtracted 0.17 pp from growth in the third quarter, a bit better than the 0.24 pp drag first reported and notably better than the 0.31 pp drag in the second quarter.
- The change in private inventories added 0.49 pp to third-quarter growth, down from 0.61 pp in the advance estimate. We think the smaller inventory rebuild gives the economy more of a runway in the fourth quarter, as firms are more likely to increase production in response to rising aggregate demand.
- The Conference Board's Consumer Confidence Index rebounded sharply to 107.1 in November, a 6.3-point increase over October's upwardly revised level of 100.8 (previously 98.6). Both the present situation and expectations sub-indices moved smartly higher this month. The present situation index rose 7.2 points to 130.3, with October's index revised 2.5 points higher to 123.1. The expectations index added 5.7 points to 91.7, though October's index was revised higher by 2.1 points to 86.0. Those expecting fewer jobs in the next six months fell to 13.8%, the smallest since July 2004. Despite the demand-pull inflationary nature of tight labor markets, inflation expecations 12 months hence fell back to 4.7%, tied with February and July as the lowest since early 2007. The 2015 average expectation was 5.0%.
- Fed Governor Jerome Powell said that while the central bank has so far been wise to be patient on policy, moving too slowly as inflation continues to rise could leave it scrambling. He added:
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In my view, the case for an increase in the federal funds rate has clearly strengthened since our previous meeting earlier this month.
- Our EUR/USD short was closed after the rate came back to 1.0665 today. The rate broke above 7-day exponential moving average and daily RSI is biased up again. This suggests the EUR/USD is likely to recover slightly in the coming days. We think there is scope for gains to 1.0840. We switched to long at 1.0645 today.
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USD/CAD: Short at 1.3415 - all eyes on OPEC meeting
- The most important event for CAD investors is today’s OPEC meeting, at which its members discuss terms of a potential deal to cut production.
- Saudi Energy Minister Khalid al-Falih said on Wednesday OPEC was getting close to clinching a deal to limit oil output, adding it was fine for Iran to freeze production at pre-sanctions levels. The comments could be seen as a compromise by Riyadh, which in recent weeks insisted that Iran fully participate in cuts. Falih also said the Organization of the Petroleum Exporting Countries was focusing on reducing output to a ceiling of 32.5 million barrels per day. He added that even if OPEC failed to reach a deal, the market would slowly recover as fundamentals were moving in the right direction.
- "I think we are looking at a very positive meeting," said UAE Energy Minister Suhail bin Mohammed al-Mazroui. His colleagues from Angola, Algeria and Nigeria also said they believed OPEC would reach a deal on Wednesday.
- Documents prepared for Wednesday's meeting propose the group cut production by 1.2 million bpd from October levels. The papers also propose Saudi Arabia reduce production to 10.07 million bpd from 10.54 million bpd in October and that Iran freeze output at 3.797 million bpd.
- Oil jumped more than 5% on Wednesday, after the Saudi oil minister said an agreement among OPEC members on cutting output was close. Higher oil prices supported the loonie.
- The market shrugged off Canadian macroeconomic data yesterday. Canada's current account deficit narrowed to CAD 18.3 billion in the third quarter from a revised CAD 19.02 billion deficit in the second quarter as exports picked up. Canada's GDP data for the third quarter is due on Wednesday. The market expects growth of 3.4%, up from a 1.6% drop in the second quarter. But the reading may be overshadowed by OPEC meeting outcome.
- We opened USD/CAD short position at 1.3415 today.
TRADING STRATEGIES:
Forex - Major Pairs:
Forex - Major Crosses:
Precious Metals:
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: GrowthAces.com - Daily Forex Trading Strategies
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