Forex-novosti i prognoze od 10-02-2020

• Says coronavirus will have a real impact on Canada
• Pledges Canada will remain fiscally responsible

FXStreet notes that analysts at Nordea think the EUR/SEK pair is already pricing its fair value at 10.5555. 

“The Riksbank unveils its next monetary policy report Wednesday 12 February. While we see a spark of joy in recent macro numbers, we predict no happiness in the SEK front end.”

“Inflation is about to crash owing to plunging electricity and energy prices, and inflation expectations will likely follow suit.”

“EUR/SEK may already be trading close to its `fair value`, and that barring a new European debt crisis there’s not that much downside to EUR/SEK.”

FXStreet notes that economists at RBC Economics note that Canada has just released the data related to houses starts and building permits beating markets expectations. USD/CAD has risen with the data to 1.3324. 

“Housing starts hit a four-month high of 213,000 annualized units in January.”

“Six-month trend edged down to 211,000.”

“Building permits rose to 227,000 in December.”

“We think the pace of starts will remain close to the current six-month trend rate, and while that's stronger than the underlying pace of household formation, if anything there's upside risk with markets thirsty for supply.”

FXStreet notes that Russia is reluctant to a production cut so the energy market will have to deal with oversupply conditions. Strategists at TD Securities consider commodity trading advisor’s selling program is almost completed with the WTI trading at 50.08 after falling since the start of the year.  

“The energy market will have to contend without an emergency cut from OPEC, as Russia resists the cartel's call for a February meeting.” 

“We estimate that a large scale CTA selling program is nearing completion across the complex.”

“Libya's oil production is sitting at its lowest levels since the Arab Spring, therefore, any sign of a deal to restore nearly 1m bpd of production could add fuel to the fire in energy markets as the market is already struggling to cope with demand concerns and oversupply.”

FXStreet notes that bullish bets on the sterling were trimmed to the lowest level so far this year. Strategists at Rabobank are keeping an eye on the December low at 1.2905.

“The market seems to be bracing for tough trade negotiations between the UK and the EU in the coming months.”

“The short-term technical bias has shifted to the downside after GBP/USD fell below the support area around 1.2950-1.30. The December low at 1.2905 is the key level to watch on the downside.”

U.S. stock-index futures slipped on Monday as investors assessed the potential impact of the coronavirus on the global economy.

Global Stocks:

FXStreet reports that gloomy economic data expected from the European Union alongside confidence in the Japanese yuan are the reasons mentioned by strategists at TD Securities to add short in the EUR/JPY pair.

Key quotes

“This week's spate of EU data should provide a crude reminder that the Eurozone continues to contend in the ditch. We forecast German GDP to be flat in Q4.”

“EURUSD's near-term path of least resistance is lower. 1.0879/1.0925 will be the key pivot zone of support for the pair.” 

“We opt to add JPY long exposure. The JPY remains one of the most prevalent currencies among crosses and its beta to US equity market gyrations.”

“We add EUR/JPY short to our TOTW portfolio reflecting our tactical bearishness on the EUR.”

(company / ticker / price / change ($/%) / volume)

FedEx (FDX) upgraded to Buy from Neutral at UBS; target raised to $181

Lyft (LYFT) upgraded to Buy from Neutral at Northcoast

Statistics Canada announced on Monday that the value of building permits issued by the Canadian municipalities climbed 7.4 percent m-o-m in December, following a revised 3.5 percent m-o-m drop in November (originally a drop of 2.4 percent m-o-m).

Economists had forecast a 2.3 percent gain in December from the previous month.

According to the report, the value of residential permits surged 6.8 percent m-o-m in December, as permits for multi-family dwellings climbed by 15.9 percent m-o-m, while single-family permits fell by 3.2 percent m-o-m.

At the same time, the value of non-residential building permits jumped 8.3 percent m-o-m in December, as gains in commercial (+19.7 percent m-o-m) and institutional (+10.8 percent m-o-m) permits more than offset a drop in industrial permits (-21.0 percent m-o-m).

In y-o-y terms, building permits decreased 1.8 percent in December.

In 2019, permits were up 2.6 percent compared with 2018.

• Expects inflation to rise gradually toward Fed's 2%-target
  
  

The Canada Mortgage and Housing Corp. (CMHC) reported on Monday the seasonally adjusted annual rate of housing starts was at 213,224 units in January 2020, up 8.8 percent from a downwardly revised 195,892 units in December 2019 (originally 197,329 units).

Economists had forecast an annual pace of 202,500 for January.

According to the report, urban starts surged by 9.8 percent m-o-m last month to 202,407 units, as multiple urban starts climbed by 13.6 percent m-o-m to 155,140 units, while single-detached urban starts decreased by 0.9 percent m-o-m to 47,267 units. At the same time, rural starts were estimated at a seasonally adjusted annual rate of 10,817 units, down 6.6 percent m-o-m.

According to two banking sources, more than 300 Chinese firms are seeking bank loans totaling at least 57.4 billion yuan ($8.2 billion) amid coronavirus outbreak. The sources also said that the firms were either involved in the control of the epidemic or had been hardest hit. 

These companies are likely to get fast-track approvals and preferential rates but that the banks will have the final say on any lending decisions.

Allergan (AGN) reported Q4 FY 2019 earnings of $5.22 per share (versus $4.29 per share in Q4 FY 2018), beating analysts' consensus estimate of $4.53 per share.

The company's quarterly revenues amounted to $4.351 bln (+6.6% y/y), beating analysts' consensus estimate of $4.091 bln.

AGN rose to $197.66 (+0.31%) in pre-market trading.

EUR traded little changed against most other major currencies in the European session on Monday amid lingering fears over the economic impact of the outbreak of coronavirus.

The World Health Organization's (WHO) chief said the thousands of coronavirus cases in the Chinese city of Wuhan, the epicenter of a coronavirus, is likely "just the tip of the iceberg". The death toll in mainland China reached 908 on Sunday, with a total of 40,171 cases. China's President Xi Jinping said on Monday that the situation over the prevention of the coronavirus outbreak is still severe. He also promised to adopt more decisive measures to contain the spread of the coronavirus and speed up the development of drugs against it.

Market participants also assessed the survey from the Sentix research group, which revealed that the Eurozone investor confidence weakened in February due to uncertainty created by the coronavirus outbreak in China. According to the report, the investor confidence index dropped to 5.2 from 7.6 in January after three consecutive rises. The current situation index of the survey fell to 4.0 from 5.5 and the expectations gauge declined to 6.5 from 9.8.

FXStreet reports that FX Strategists at UOB Group noted USD/CNH is expected to keep the consolidative fashion in the near-term.

24-hour view: “Expectation for USD to trade sideways was incorrect as it rebounded to a high of 7.0095 last Friday. The advance appears to be running ahead of itself and further USD strength appears unlikely. From here, USD could edge lower but any weakness is viewed as part of a 6.9800/7.0150 range.”

Next 1-3 weeks: “Despite the relatively strong bounce of +0.43% last Friday, we continue to hold the view that USD is likely to ‘trade sideways for now’. Only a clear break above 7.0230 would indicate that USD is ready to tackle 7.0500. Otherwise, the current movement is viewed as part of a broad 6.9500/7.0230 range (adjusted from 6.9300/7.0100 previously).”

FXStreet reports that strategists at Westpac Institutional Bank would be expecting a shift to neutral bias from the Reserve Bank of New Zealand (RBNZ) if coronavirus had not outbroken. They have also lowered their near-term outlook for the NZD/USD pair.

“We expect the RBNZ to retain an easing bias at its Monetary Policy Statement on Wednesday, although it will probably be described as a conditional one, dependent on the impact of the coronavirus pandemic.” 

“The OCR forecast will probably continue to show a terminal rate of 0.9% which effectively signals a rate cut as a 50/50 likelihood.”

“NZD/USD lower near term to sub-0.6400, affected by global concerns about coronavirus epidemic. Then possible rebound to 0.6600 as NZ economic outperformance is recognised, but ongoing global risks will weigh.”

FXStreet reports that in the opinion of FX Strategists at UOB Group prospects of further downside appear dissipated and USD/JPY is now likely to trade within a consolidative fashion.

24-hour view: “After trading on a relatively firm note for several days in a row, the sudden and sharp drop in USD to a low of 109.52 came as a surprise. The recent positive momentum has or less dissipated and the bias for USD is tilted to the downside. That said, any weakness is likely limited to a test of 109.30 (next support is at 109.00). Resistance is at 109.90 followed by 110.10.”

Next 1-3 weeks: “As highlighted, USD is expected to trade sideways for a period, likely between two major levels of 108.30 and 110.30. While the top of the expected range is within sight, at this stage, there is no early indication that USD is ready to move above this level in a sustained manner.”

• China will definitely win the fight against coronavirus outbreak
• Will adopt more decisive measures to contain the spread of the coronavirus in Hubei province and speed up the development of drugs that have relatively good clinical effects against coronavirus

FXStreet reports that Thomas Harr, PhD, Global Head of FI&C Research at Danske Bank does not expect a recovery for the euro while some investors argued that the risk is higher for 1.20 in the EUR/USD pair.

"I believe the USD will remain strong particularly against European currencies due to capital flows."

"I have had many meetings with investors who argued that the risk is higher for 1.20 than parity in EUR/USD and the 'pain-trade' is for a stronger EUR/USD. I disagree with that view, as I believe that some investors added EUR/USD longs early in the year banking on an upside European growth surprise."

According to the report from Istat, in December 2019 the seasonally adjusted industrial production index decreased by 2.7% compared with the previous month. The change of the average of the last three months with respect to the previous three months was -1.4%.

The index measures the monthly evolution of the volume of industrial production (excluding construction). With effect from January 2018 the indices are calculated with reference to the base year 2015 using the Ateco 2007 classification.

The calendar adjusted industrial production index decreased by 4.3% compared with December 2018 (calendar working days in December 2019 being 20 versus 19 days in December 2018).

The unadjusted industrial production index decreased by 1.3% compared with December 2018.

FXStreet reports that FX Strategists at UOB Group suggested AUD/USD could grind lower and test 0.6620 if 0.6670 is breached.

24-hour view: "Expectation for AUD to 'trade sideways' was incorrect as it lurched lower and cracked last year's 0.6670 low. The rapid improvement in downward momentum suggests further AUD weakness towards 0.6640. On the upside, only a move above 0.6705 would indicate that the current downward pressure has eased."

Next 1-3 weeks: "Our view for a 'short-term bottom' in AUD from last Thursday (06 Feb, spot at 0.6750) was proven wrong quickly as AUD cracked several strong support levels with ease (AUD took out the 2019 low of 0.6670 as it dropped to 0.6662). The price action suggests further AUD weakness is likely from here. The next support is at 0.6620. For the next few days, the 'strong resistance' at 0.6740 is expected to be strong enough to cap any short-term recovery in AUD."

FXStreet reports that according to analysts at ANZ Research, the NZD/USD pair is set to be controlled by the risks coming from the Chinese economy.

"Disruption in the Chinese economy is already impacting New Zealand's exports, and this will likely cause a sharp near-term dent to GDP growth. If the virus is contained quickly, then a vigorous bounce back inactivity is expected. But a larger impact cannot be ruled out."

"We expect the RBNZ to keep the OCR on hold, but that they will highlight significant downside risks to the outlook - signalling that they will respond with more monetary stimulus if required."

"NZS/USD expected to be dominated by risk sentiment as NZD trades as a proxy for China risk. Markets will primarily be looking to gauge the RBNZ's responsiveness to emerging global risks."

"Support 0.6360 Resistance 0.6490"

According to the report from Sentix research group, the outbreak of the corona virus has led to uncertainty among investors. However, its influence is still limited in economic terms.

In the Euro zone, the economic index has fallen moderately to 5.2

points after three consecutive rises. Even in Germany, although it is heavily dependent on global trade and the Asian economy, investors are still relatively relaxed. The overall index declined by only 2.1 points.

The virus is a considerable burden for China, the previous hope of the global economy. Here the effects are much stronger and the index for Asia ex Japan falls significantly by 11.3 points. However, investors are not yet expecting any further far-reaching effects, which is also due to the strength of the USA.

FXStreet reports that ANZ researchers expect the effect of a dent in tourism to be transient and think their April rate cut is at risk due to the shift of the Reserve Bank of Australia (RBA) to a more relaxed mode. AUD/USD is trading at 0.6697 after starting the year at 0.7020.

"GDP growth in Q1 will likely turn negative, due mainly to a dent in tourism. We expect the effect to be temporary with only a small impact on full-year growth. We also expect the travel ban to add downside risks to the budget in the near term."

"There is a growing case for the government to consider fiscal easing to offset these shocks, and the RBA has shifted to a patient mode, which puts our call for an April rate cut at risk."

According to the monthly index of business activity (MIBA) from Bank of France, GDP is expected to increase by 0.3% in the first quarter of 2020 (first estimate).

In the manufacturing industry, the business sentiment indicator stood at 96 in January as in December. Industrial production fell back slightly in January. The contraction was particularly pronounced in the aeronautics, automobile and electrical equipment sectors. However, the IT and electronic equipment sectors recovered strongly. Order books were stable. Business leaders expect a return to trend growth in February.

In services, the business sentiment indicator stood at 98 in January, after 97 in December. Service sector activity picked up, with particularly robust activity in accommodation and catering, publishing, technical services to businesses and personal services. Staff levels rose more rapidly. Business leaders expect service sector activity to slow in February.

In construction, the business sentiment indicator stood at 106 in January, after 105 in December. Construction sector activity was up sharply in January, both in structural and finishing works. Order books remained strong. Business leaders expect construction sector activity to continue to grow at a sustained pace in February.

FXStreet reports that China market economist at ANZ Research Zhaopeng Xing notes that China has surprised markets with the inflation data for the month of January.

"China's CPI overshot market expectations in January, partially due to the virus outbreak, because a 1.4% m/m spike is higher than the seasonal increases seen over the past three years."

"The virus outbreak has dampened commodity prices with Brent crude dropping more than 20% over the past two weeks. We expect China's PPI to turn negative in February, exerting downward pressure on industrial activities in H1 2020."

"The probability of another cut in the 7-day reverse repo is low, as the People's Bank of China (PBoC) will place emphasis on financial stability and efforts to contain the virus via liquidity injections and re-lending."

eFXdata reports that Credit Suisse discusses the USD outlook in the medium-term and maintains a structural bullish bias.

"Where to from here? We entered 2020 as USD bulls, and argued that coronavirus added further fuel to that view as opposed to clipping its wings, initially targeting 1200 for BBDXY. With the market at exactly this level at time of writing, we feel inclined to stick to our guns," CS notes.

"Firstly, it's not clear that matters will necessarily come to a quick conclusion, which leaves open room for another leg higher for USD if USDCNH again surpasses 7.00 and this time meets less resistance. On the flip side, we see little reason for the Chinese authorities to engineer a strong rally to 6.90 or below given the clear hit China's economy is likely to take at least in Q1 2020. This underlines a broader point we would like to make, which is that it's totally possible that the next phase of price action will see non-US equity markets regain their upward momentum, but without corresponding strength in their currencies against the USD," CS adds.

FXStreet reports that FX Strategists at UOB Group now believe the door is open for EUR/USD to slip back and test the 2019 low in the 1.0880 region.

24-hour view: "We highlighted last Friday that 'there is scope for EUR to test 1.0955 first before a recovery can be expected'. The pace and extent of the subsequent decline exceeded our expectation as EUR dropped to 1.0940 before ending the day on a weak note at 1.0943 (-0.34%). While the rapid drop appears to be running ahead of itself, there is no sign of stabilization just yet. From here, barring a move above 1.0980 (minor resistance at 1.0960), EUR is likely to edge lower towards 1.0910. Last year's low at 1.0877 is unlikely to come into the picture for now."

Next 1-3 weeks: "We highlighted last Friday (07 Feb, spot at 1.0980) that 'downward momentum has improved further' and added, 'EUR could move towards 1.0945'. Our view was correct as EUR dropped quickly to a low of 1.0940. The subsequent weak closings (both daily and weekly) suggest further EUR weakness would not be surprising. The next support of note is at the 2019 low of 1.0877 (there is a minor support at 1.0910). In view of the solid downward momentum, 1.0877 appears to be within reach. Only a move back above 1.1010 ('strong resistance' level was at 1.1040 on Friday) would indicate the current downward pressure has eased."

According to the report from Federal Statistical Office (FSO), the consumer price index (CPI) fell by 0.2% in January 2020 compared with the previous month, reach-ing 101.5 points (December 2015 = 100). Inflation was +0.2% compared with the same month of the previous year. Economists had expected a 0.1% increase.

The decrease of 0.2% compared with the previous month can be explained by several factors including falling prices for clothing and footwear due to seasonal sales. The prices for medicines and international package holidays also declined. In contrast, prices for hotel accommodation and cars increased.

The US dollar was almost unchanged against the euro and strengthened against the Japanese currency in trading on Monday.

The yuan rose against the dollar thanks to liquidity injections by the People's Bank of China. The Central Bank of China continues to support financial markets in the context of the spread of the coronavirus. On Monday, the Central Bank poured 900 billion yuan ($129 billion) into the financial system through reverse REPO operations.

Investors fear for the economy of China and the world, as the coronavirus poses a threat to a number of industries, including tourism, trade and transportation. On Monday, some enterprises in China return to work after a long vacation, while others remain closed.

Chinese data also came into focus. Consumer prices in China were up 5.4 percent on year in January, the National Bureau of Statistics said. That exceeded forecasts for an increase of 4.9 percent following the 4.5 percent gain in December.

The ICE Dollar index, which shows the value of the US dollar against six major world currencies, fell by 0.03% compared to the previous day.

According to the surveys conducted by the State Secretariat for Economic Affairs (SECO), 121'018 unemployed persons were registered at the regional employment centres (RAV) at the end of January 2020, 3'741 more than in the previous month. The unemployment rate thus rose from 2.5% in December 2019 to 2.6% in the reference month. Compared to the same month of the previous year, unemployment fell by 2,944 people (-2.4%).

Youth unemployment (15-24 year olds) increased by 207 people (+1.7%) to 12,597. Compared to the same month of the previous year, this corresponds to a decrease of 866 people (-6.4%).

The number of unemployed people aged 50-64 increased by 1,011 persons (+3.1%) to 34,150. Compared to the same month of the previous year, this corresponds to a decrease of 55 persons (-0.2%).

A total of 194'233 job seekers were registered, 1'278 more than in the previous month. Compared to the same period of the previous year, this number fell by 5,892 persons (-2.9%).

EUR/USD

Resistance levels (open interest**, contracts)

$1.1071 (4252)

$1.1036 (1518)

$1.1010 (402)

Price at time of writing this review: $1.0953

Support levels (open interest**, contracts):

$1.0910 (2727)

$1.0878 (2367)

$1.0838 (1721)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date March, 6 is 88995 contracts (according to data from February, 7) with the maximum number of contracts with strike price $1,1200 (6290);

GBP/USD

Resistance levels (open interest**, contracts)

$1.3044 (1527)

$1.3011 (674)

$1.2983 (359)

Price at time of writing this review: $1.2903

Support levels (open interest**, contracts):

$1.2855 (1174)

$1.2838 (1856)

$1.2816 (2070)

Comments:

- Overall open interest on the CALL options with the expiration date March, 6 is 22163 contracts, with the maximum number of contracts with strike price $1,3050 (3009);

- Overall open interest on the PUT options with the expiration date March, 6 is 21557 contracts, with the maximum number of contracts with strike price $1,2800 (2382);

- The ratio of PUT/CALL was 0.97 versus 0.82 from the previous trading day according to data from February, 7

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.