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Weekly Review 27.3.17- 31.3.17

GBP/USD - Brexit woes remain in the center

GBP/USD advanced for a third week in-a-row , the pair closed at 1.2546. The pair fell to 1.2375 last Wednesday, when the UK formally triggered the Brexit through a letter to the EU, further undermined by news that the Scottish Parliament backed FM minister Sturgeon desire to trigger a second independence referendum. UK's final Q4 GDP suffered a modest downward revision (down to 1.9% from previous 2.0%), but the Pound managed to recover the ground lost. Positive thing is that U.K. economy grew 0.7% in the last three months of 2016. The Pound also got a nice boost from the latest BOE's meeting, unemployment fell but average weekly earnings, which the BoE has highlighted as a policy trigger, dropped to +2.2%, from +2.4%. The unemployment rate fell to 4.7% in the three months to January, level last seen in 2005 (positive news for GBP but wages are a real concern for the BoE and should continue to pressure the pound).

The US Central Bank hiked rates as largely anticipated, but retain the stance of a slow pace for upcoming hikes, being far more conservative than expected. Better-than-expected US macroeconomic figures, including a jump in consumer confidence for March that reached 125.6, its highest in over 16 years, a modest upward revision to Q4 growth, with the final GDP reading at 2.1%, and upward surprises in housing data, built back confidence in the US currency.The rate of inflation in consumer goods and services topped 2% in February for the first time since 2012 (William Dudley, the president of the New York Fed, told last week two more rate increases in 2017 “seems reasonable”). Two weeks ago, Trump announced that his party will probably work on the tax reform now, which partially offset dollar and equities' decline.

 

Technical analysis

When we look at the monthly chart of this pair ( 12 years period) we can see strong " bearish" correction. On this monthly chart I marked resistance levels, 1.7000, 1.4300, 1.4000 are long - term resistance levels, 1.3000 also represents strong resistance level. As long the price is below 1.4000 resistance level there is no indication of long trend reversal and this pair is in the "sell" zone ( there could be a short term jump but strong "BUY" signal would be if the price jumps above 1.4000 level).

 

 

On this weekly chart (1 candle is one week period) we can also see that major trend is "bearish", price has dropped from 1.7000 level to 1.1946 level ( this level represents now strong support). On this chart I marked support and resistance levels - 1.2750,1.3000 and 1.3500 represent resistance levels, 1.2000 and 1.1946 represent strong support levels. On this chart I marked trend line and as long the price is below this line there is no indication of trend reversal (The pair is trading below 1.3000 and the bearish momentum remains lively). Breaking above 1.2600 would open way to 1.2750, breaking below 1.2200 would open way to 1.2000.

 

 

 

EUR/USD

The EUR/USD pair closed the week at 1.0656 level (its lowest since mid March). The release of worse-than-expected EU preliminary inflation for March weighed on the EUR. EU preliminary March inflation released this Friday confirmed the ECB's case for further stimulus, as the core yearly inflation shrunk to 0.7% after holding steady at 0.9% for a couple of months. ECB president Draghi said that there is no longer risks of deflation, but he also added that the ongoing easing program will remain in place, and that rates could go further lower if needed, trying to prevent the EUR to appreciate further.

The US Central Bank hiked rates as largely anticipated, but retain the stance of a slow pace for upcoming hikes, being far more conservative than expected. Better-than-expected US macroeconomic figures, including a jump in consumer confidence for March that reached 125.6, its highest in over 16 years, a modest upward revision to Q4 growth, with the final GDP reading at 2.1%, and upward surprises in housing data, built back confidence in the US currency.The rate of inflation in consumer goods and services topped 2% in February for the first time since 2012 (William Dudley, the president of the New York Fed, told last week two more rate increases in 2017 “seems reasonable”). Two weeks ago, Trump announced that his party will probably work on the tax reform now, which partially offset dollar and equities' decline.

 

 

Tehnical analysis

When we look at the monthly chart of this pair we see that long trend is bearish (downtrend).  As long the price is below this trend line there is no indication of long trend reversal and EURUSD is in the sell zone(Big Investors are still in the short – SELL position on this pair). On this monthly chart I also marked support and resistance levels, 1.1500 (resistance) and 1.0500 (support) levels represent current trading range and breaking above/below this levels would open way to 1.2250 (resistance 2) or 1.000 ( psychological support).

 

 

If the price breaks 1.085 we have open way to 1.10 level. Most analysts agree that as long as below the critical 1.15 level , the risk will remain towards the downside. If the price breaks 1.055 support we have open way to 1.034 level and after that 1.01 level.

 

 

Oil

 

Oil had its biggest weekly increase in 2017 last week, with futures advancing 5.5% to climb back above $50 a barrel. Crude stockpiles are starting to decline in a sign that the production cuts implemented this year are bringing the market to balance, according to OPEC's Secretary-General Mohammad Barkindo. Exports in March from the Organization of Petroleum Exporting Countries dropped by 1.18 million barrels a day from the previous month to 24.4 million. Oil rose to a three-week high after Kuwaiti comments bolstered optimism that OPEC and its partners will extend output curbs.

A joint committee of ministers from OPEC and non-OPEC oil producers meeting in Kuwait has agreed to evaluate whether a global pact to limit supplies should be extended by six months. The committee had requested a technical group and the OPEC Secretariat "review the oil market conditions and revert... in April, 2017 regarding the extension of the voluntary production adjustments." While U.S. crude supplies rose to a record last week, they increased by less than they were expected to, signaling that more oil is being pulled out of storage. That optimism and the disruption in Libyan output has helped drive prices for three days, their longest stretch of gains in more than a month. Most analysts are expecting an increase in oil price for the first half of 2017 (a slow but steady rising of prices). In the second half of 2017, analysts are expecting the price to continue to grow at a similar rate (they also expect continued growth in Oil demand). Going forward, the Oil Production cuts and inventory and production levels will ultimately drive the market. Still, increasingly supportive rhetoric from OPEC nations to extend the cuts into latter part of 2017 has helped brighten market sentiment. OPEC is expected to announced it’s decision at its May 25 meeting.

 

Technical analysis

Oil had its biggest weekly increase in 2017 last week, with futures advancing 5.5% to climb back above $50 a barrel. Holding above 50 usd support level (psychological level) is important to achieve the waited targets, this supports the continuation of bullish trend overview efficiently for the upcoming period, and the way is open the achieve more gains that its next target located at 55 usd ( 60 - 62 usd is very strong resistance level). If the price jumps above 60 usd resistance level, 70 usd could be the next target. If the price falls below 40 usd it would be a strong "SELL" signal but for now this is not a possible scenario.

 

 

Indices

Dow Jones Industrial Average

U.S. stocks closed lower on Friday, the S&P 500 index SPX, -0.23%  closed 5.34 points, or 0.2%, lower at 2,362.72. The Dow Jones Industrial Average DJIA, -0.31%  shed 65.27 points, or 0.3%, to 20,663.22. Economic data and speeches from Federal Reserve officials appeared to have little impact on the market. The rate of inflation in consumer goods and services topped 2% in February for the first time since 2012 (William Dudley, the president of the New York Fed, told two more rate increases in 2017 “seems reasonable”).

When we look at 5 year chart we see that Dow Jones Industrial Average is moving in "uptrend". As long DJIA is above this trend line and 20,000 points this index is in the "BUY" zone ( 20,000 and 19,000 represent support levels). Short term support and resistance levels are 20,500 and 21,000/21,500 points - If DJIA jumps above 21,500 points that would be a confirmation of "BULLISH" trend. If DJIA falls below 19,000 points it would be strong "SELL" signal and than we have open way to 18,000 level support. Stocks remain expensive, but index inflows keep supporting the market, and for now there is no sign of a major dip emerging any time soon.

 

 

FTSE 100 Index GBP - Brexit woes remain in the center

 

The FTSE 100 index finished lower, but ended the quarter higher, its longest quarterly winning streak since 2011. The stocks fell last Wednesday (and recovered after), when the UK formally triggered the Brexit through a letter to the EU, further undermined by news that the Scottish Parliament backed FM minister Sturgeon desire to trigger a second independence referendum. For the first quarter, that ended on Friday, the London benchmark scored a 2.5% gain, its fourth quarterly advance in a row. The final reading on fourth-quarter gross domestic product confirmed the U.K. economy grew 0.7% in the last three months of 2016.

When we look at 2 year chart we see that FTSE 100 Index is moving in "uptrend". As long FTSE 100 is above this trend line and 6,700 points this index is in the "BUY" zone ( 6,700 and 7,000 represent support levels). Short term support and resistance levels are 7,200 and 7,500 points - If FTSE 100 jumps above 7,500 points that would be a confirmation of "BULLISH" trend and open way to 8,000. If FTSE falls below 6,700 points it would be strong "SELL" signal and than we have open way to 6,400 level support.

 

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