Thursday, December 31, 2015

Crypto Venture Investment Dries Up at End of Record 2015

Crypto Venture Investment Dries Up at End of Record 2015

Crypto Venture Investment Dries Up at End of Record 2015

Posted: 31 Dec 2015 03:44 PM PST

It was a record year for venture investment in the cryptocurrency industry, but 2015 might have been its peak for the foreseeable future.

Keep on reading: Crypto Venture Investment Dries Up at End of Record 2015

BGC Partners Revises Q4 2015 Outlook Post GFI and Trayport Deals

Posted: 31 Dec 2015 08:44 AM PST

BGC expects to pay a net tax rate of 10 percent or less with respect to the $650 million Trayport transaction, down from 15 percent or less.

Keep on reading: BGC Partners Revises Q4 2015 Outlook Post GFI and Trayport Deals

Understanding the Importance and Variety of WebTraders in Forex

Posted: 31 Dec 2015 06:43 AM PST

WebTraders are vital as the availability of browser-based platforms influences conversion rates and client loyalty.

Keep on reading: Understanding the Importance and Variety of WebTraders in Forex

Uphold Expands to China and Hong Kong with UnionPay Integration

Posted: 31 Dec 2015 05:41 AM PST

Cloud money services platform Uphold has announced its expansion to China and Hong Kong with support for UnionPay cards.

Keep on reading: Uphold Expands to China and Hong Kong with UnionPay Integration

ЕQMarkets (Infinity Trade) Joins the Financial Commission

Posted: 31 Dec 2015 05:13 AM PST

According to the company's website (available only in Russian at the moment), it offers the MT4 platform as well as copy and social trading.

Keep on reading: ЕQMarkets (Infinity Trade) Joins the Financial Commission

Key Basics You Should Know Before Trading Binary Options

Posted: 31 Dec 2015 05:13 AM PST

In order to better understand what a binary option is and how you can trade it, you will need to understand some terms.

Keep on reading: Key Basics You Should Know Before Trading Binary Options

With Vision and Nurturing, Fintech Can Meet Greater Global Potential

Posted: 31 Dec 2015 04:00 AM PST

Places as diverse as Kenya, China and Sweden push towards the 'cashless society' with online payments, purchases and settlement.

Keep on reading: With Vision and Nurturing, Fintech Can Meet Greater Global Potential

Can Israeli Regulators Curb Booming Algo Trading in FX?

Posted: 31 Dec 2015 03:05 AM PST

The ISA has banned a local FX brokerage from using robots, classifying it as unlicensed investment advising. But if traders set the perimeters, is the broker really advising?

Keep on reading: Can Israeli Regulators Curb Booming Algo Trading in FX?

Last Online Trading Takeaways for 2015

Posted: 31 Dec 2015 02:41 AM PST

A review of the 2015, a record year for online trading but a challenging one for commodities.

Keep on reading: Last Online Trading Takeaways for 2015
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Top Trading Opportunities for 2016

Top Trading Opportunities for 2016

Top Trading Opportunities for 2016

Posted: 31 Dec 2015 09:00 AM PST

As we countdown into 2016, take a look ahead of potential trading opportunities of the New Year summarized by our analysts.

Top 3 Themes for 2016, Part 3: Rates

Posted: 31 Dec 2015 07:34 AM PST

As we near the end of the year, we're looking at the top three themes for markets in 2016. Today, we look at the interest rate conundrum.

Silver Price: Sideways Trading In Place

Posted: 31 Dec 2015 04:51 AM PST

Trading is muted as most traders are off their desks to celebrate the New Year.

FTSE 100: Levels To Watch In 2016

Posted: 31 Dec 2015 03:55 AM PST

As we head into New Year we look at the weekly FTSE 100 chart to get an idea of which levels to watch in 2016.
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Wednesday, December 30, 2015

USD/CNH Technical Analysis: Rally Stalls at Five-Year High

USD/CNH Technical Analysis: Rally Stalls at Five-Year High

USD/CNH Technical Analysis: Rally Stalls at Five-Year High

Posted: 30 Dec 2015 01:35 PM PST

The US Dollar may be carving out a top after rising to the highest level since January 2011 against the Chinese Yuan in offshore trade.

GBP/JPY Technical Analysis: Major Support Broken, is a New Trend Afoot?

Posted: 30 Dec 2015 12:16 PM PST

Last week's holiday trading environment saw a break of a pivotal support level in GBP/JPY. Might we have a new down-trend to work with as we move into 2016?

Chinese Yields Fall on Diminished Rate Expectations

Posted: 30 Dec 2015 10:17 AM PST

PBOC Chief Economist highlights the risks of interest rate volatility, hinting towards potential delays in rate cuts next year.

Retail FX Traders Head into New Year Short Euro, Long USD

Posted: 30 Dec 2015 09:00 AM PST

Retail FX traders head into the New Year net-short the Euro, Australian Dollar, and New Zealand Dollar; we favor further near-term gains. But watch for Dollar gains versus GBP, CAD, and Gold Prices.

Q1 2016 Forecast: Gold Sell-Off to Accelerate as Fed Likely to Hike Rates

Posted: 30 Dec 2015 09:00 AM PST

Gold prices traded into fresh multi-year lows as the US Federal Reserve raised interest rates for the first time in eight years. Yet the immediate reaction following the highly-anticipated hike was relatively muted. What could continue to drive gold price trends through 2016?

Q1 2016 Forecast: Fed Rate Hikes and BoJ Action Points to USD/JPY Gains

Posted: 30 Dec 2015 09:00 AM PST

A stark difference between US Federal Reserve policy and the Bank of Japan should be enough to drive the USD/JPY higher through the New Year, but these are the key factors which will likely determine trends.

Q1 2016 Forecast: S&P 500, World Equities at Risk of Major Correction

Posted: 30 Dec 2015 09:00 AM PST

Can 2016 finally produce the significant correction which many have feared? We’ll watch a number of critical fundamental themes going forward, while our technical outlook suggests key assets are ripe for an important turn lower.

Q1 2016 Forecast: No End in Sight for Oil Price Declines

Posted: 30 Dec 2015 09:00 AM PST

Unless we see a marked shift in global industrial growth, we expect the value of Crude Oil will continue lower through 2016.

Q1 2016 Forecast: US Dollar Looks in Trouble Heading into 2016

Posted: 30 Dec 2015 09:00 AM PST

The US Federal Reserve has finally raised interest rates, and this in itself should support the US Dollar in 2016. Yet a key factor that may stand in the way of further Dollar gains is straightforward: expectations.

DailyFX Forecasts for the US Dollar, Gold, Equities, Yen, and Oil in 2016

Posted: 30 Dec 2015 09:00 AM PST

Forex and broader financial markets head into the New Year with a surprising amount of certainty: the Dollar seems in control as the Fed hikes rates and global equities rally. But can that last? Here are the key themes we’re watching.

Forex Traders End the Year Short the Euro, We Like Buying

Posted: 30 Dec 2015 08:55 AM PST

Retail forex traders remain short the Euro versus the US Dollar, and a contrarian view of crowd sentiment calls for further near-term gains.

Price of Gold Likely to Continue Lower

Posted: 30 Dec 2015 08:55 AM PST

Aggressively one-sided retail forex trader positions warn that Gold prices may continue to decline through near-term trading.

New Zealand Dollar Forecast to Strengthen Further

Posted: 30 Dec 2015 08:55 AM PST

The majority of retail FX traders in our sample remain short the New Zealand Dollar versus the US Dollar, and a contrarian view of crowd sentiment leaves us in favor of buying into NZD/USD gains.

Australian Dollar May Continue Lower versus US Dollar

Posted: 30 Dec 2015 08:55 AM PST

Retail forex traders remain short the Australian Dollar versus the US Dollar, and a contrarian view of crowd sentiment calls for further near-term gains.

Crowd Sentiment Continues to Favor USD/CAD Gains

Posted: 30 Dec 2015 08:55 AM PST

Retail FX traders remain aggressively short the US Dollar versus the Canadian Dollar, and until this changes we will maintain our contrarian calls for further USD/CAD strength.

British Pound Remains Likely to Fall Further

Posted: 30 Dec 2015 08:55 AM PST

Retail forex traders continue to buy aggressively into British Pound weakness, and a contrarian view of popular sentiment leaves us firmly in favor of selling the GBP/USD.

Silver Prices Slide On A Strong Dollar

Posted: 30 Dec 2015 07:52 AM PST

Silver prices are nearing the lower end of their December range. And on a bearish break to range I anticipate a decline to the July 29 2009 low at $13.17.

Back to the Well on EUR/GBP (Last Time?)

Posted: 30 Dec 2015 07:29 AM PST

Top 3 Themes as We Approach 2016, Part 2: Commodity Carnage

Posted: 30 Dec 2015 06:36 AM PST

As we near the end of a tumultous year, investors are facing a very new set of risks in 2016. Today, we look at the impact of continued weakness in commodities.

FTSE 100 Technical Correction Should Not Deter Bullish Trend

Posted: 30 Dec 2015 03:00 AM PST

At this point I am treating the decline in the FTSE 100 as a technical pullback as we lack a strong reason to expect a multiday reversal at this point in time.

DAX 30 Pulls Back Fueled By Softer Basic Resources, Oil & Gas Sectors

Posted: 30 Dec 2015 01:56 AM PST

Given the overall bullish trend I am seeing today's decline as a short-term correction rather than the beginning of a new trend.
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2016 Bitcoin Price Predictions Are Bullish But Tamer Than Previous Years

2016 Bitcoin Price Predictions Are Bullish But Tamer Than Previous Years

2016 Bitcoin Price Predictions Are Bullish But Tamer Than Previous Years

Posted: 30 Dec 2015 04:08 PM PST

What makes predicting long-term bitcoin prices so interesting is the fact that they are so difficult to predict.

Keep on reading: 2016 Bitcoin Price Predictions Are Bullish But Tamer Than Previous Years

Chain Issues Shares on the Nasdaq Blockchain Platform It Helped Create

Posted: 30 Dec 2015 10:20 AM PST

In an announcement, Nasdaq touted the move as the "first-ever private securities issuance documented with blockchain technology."

Keep on reading: Chain Issues Shares on the Nasdaq Blockchain Platform It Helped Create

Fintech Predictions and Thoughts for 2016: Innovation from the Big and Small

Posted: 30 Dec 2015 09:59 AM PST

Finance Magnates dusts off the crystal ball and looks into the future to see what will happen in the fintech sector in the coming year.

Keep on reading: Fintech Predictions and Thoughts for 2016: Innovation from the Big and Small

CME Changes Spread Fees on FX, E-mini and E-micro FX Products

Posted: 30 Dec 2015 07:28 AM PST

With E-mini and E-micro FX products, the CME is to begin rounding fractional rates up to the nearest whole cent.

Keep on reading: CME Changes Spread Fees on FX, E-mini and E-micro FX Products

Trading Light and Uneventful After Crypto's First IPO Listing

Posted: 30 Dec 2015 06:17 AM PST

Trading in shares of Coinsilium, which debuted on ICAP's ISDX growth market on Friday, has been light and uneventful thus far.

Keep on reading: Trading Light and Uneventful After Crypto's First IPO Listing

Breaking: Fortress Prime Switching Tech, Withdrawals Allegedly in First Week of 2016

Posted: 30 Dec 2015 06:08 AM PST

Fortress Prime's Senior Executive Mustafa Gameladine reveals another delay for withdrawals as clients worried about ever seeing their funds.

Keep on reading: Breaking: Fortress Prime Switching Tech, Withdrawals Allegedly in First Week of 2016

Trading the Bitcoin Bull With Binary Options - Benefits and Possibilities

Posted: 30 Dec 2015 04:55 AM PST

There are numerous benefits that you will enjoy as a trader once you decide to trade using bitcoins or when you pick them as an underlying currency.

Keep on reading: Trading the Bitcoin Bull With Binary Options - Benefits and Possibilities

Analysis: Carry Trades and the Japanese Yen

Posted: 30 Dec 2015 03:59 AM PST

Traders should pay careful attention to the yen, which is the most heavily traded currency in Asia as well as being very popular with carry traders.

Keep on reading: Analysis: Carry Trades and the Japanese Yen

Major Market Drivers to Watch Out For in 2016

Posted: 29 Dec 2015 06:45 AM PST

An analysis of the economic events that are likely to move markets, increase volatility and create risk and uncertainty in the coming year.

Keep on reading: Major Market Drivers to Watch Out For in 2016

Exclusive: Playtech Refocuses Markets.com onto Automation, Upgrades KYC

Posted: 29 Dec 2015 03:09 AM PST

Playtech has restructured the operations of its Markets.com financial trading subsidiary by focusing direct client relationships on retention.

Keep on reading: Exclusive: Playtech Refocuses Markets.com onto Automation, Upgrades KYC
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Tuesday, December 29, 2015

NZD/USD Technical Analysis: Two-Month Resistance Exposed

NZD/USD Technical Analysis: Two-Month Resistance Exposed

NZD/USD Technical Analysis: Two-Month Resistance Exposed

Posted: 29 Dec 2015 04:25 PM PST

The New Zealand Dollar looks poised to challenge two-month highs�against its US�counterpart below the 0.69 figure having extended upward for a third consecutive day.

AUD/USD Technical Analysis: Upswing to Yield Short Setup

Posted: 29 Dec 2015 12:37 PM PST

The Australian Dollar continues to push higher against its US namesake, rising to the highest level in three weeks and working to clear a path above the 0.73 figure.

USDOLLAR; Lots to Clear Up as New Year Begins

Posted: 29 Dec 2015 09:57 AM PST

Crude is Constructive; Possible Hiccups Near 40 and 42

Posted: 29 Dec 2015 09:57 AM PST

Gold Price Little Changed after Bounce from Support

Posted: 29 Dec 2015 09:57 AM PST

USD/CHF Former Resistance Provides Support on Pullback

Posted: 29 Dec 2015 09:57 AM PST

USD/CAD Consolidates Under Uptrend Resistance

Posted: 29 Dec 2015 09:57 AM PST

USD/JPY Trades around Long Term Support Line

Posted: 29 Dec 2015 09:57 AM PST

NZD/USD Trades above 200 Day Average and 17+ Month Trendline

Posted: 29 Dec 2015 09:57 AM PST

AUD/USD On Brink of Bullish Breakout?

Posted: 29 Dec 2015 09:57 AM PST

GBP/USD Rides Along Bearish Channel

Posted: 29 Dec 2015 09:57 AM PST

EUR/USD Low 1.08 to 1.1050 Range for Now

Posted: 29 Dec 2015 09:57 AM PST

Top Trading Opportunities for 2016

Posted: 29 Dec 2015 09:30 AM PST

As we countdown into 2016, take a look ahead of potential trading opportunities of the New Year summarized by our analysts.

EUR/GBP Technical Analysis: Short Trade Setup Established

Posted: 29 Dec 2015 09:29 AM PST

The Euro has transitioned into consolidation mode after recovering against the US Dollar as expected following the ECB monetary policy announcement.

Trading Opportunities of 2016: This is Finally the Year that Stock Prices May Tumble

Posted: 29 Dec 2015 09:00 AM PST

Watch out stock market reversal after the ending of the Fed’s ZIRP.

Trading Opportunities of 2016: More Than Irish Look for the Pot of Gold

Posted: 29 Dec 2015 09:00 AM PST

Gold prices could move back if any dovish tone to the Fed’s interest rate hikes; broad sterling weakness will drive XAUGBP higher.

Trading Opportunity of 2016: Buying Dips in the AUD/USD and ASX 200

Posted: 29 Dec 2015 09:00 AM PST

Technical analysis shows support levels ahead for ASX200, against the backdrop of slow and steady recovery of the Australian economy.

Trading Opportunities of 2016: USDCHF Long

Posted: 29 Dec 2015 09:00 AM PST

The next leg of the USD bull may be led by a weakening CHF.

Trading Opportunities of 2016: Key Currency Crosses to Watch amid the Diverging Paths for Monetary Policy

Posted: 29 Dec 2015 09:00 AM PST

The disparity in monetary policies of the ECB and BoE may carry the bearish trend in EURGBP into 2016; an inverse head-and-shoulders formation and a change in the tune of the RBNZ suggest a potential upward movement of NZD against AUD.

Trading Opportunities of 2016: Japanese Yen Set to Shock Markets (Short GBP/JPY)

Posted: 29 Dec 2015 09:00 AM PST

The contrast in economic, fiscal, monetary, and political conditions of Japan and the U.K. lead to trading opportunities of GBPJPY.

Trading Opportunities of 2016: If a Base is in, EURGBP Could be a Juicy Short Squeeze

Posted: 29 Dec 2015 09:00 AM PST

A bullish trend in EURGBP is forming up.

Trading Opportunities of 2016: Finding Potential Trading Opportunities in EURGBP

Posted: 29 Dec 2015 09:00 AM PST

Trading opportunities in EURGBP will occur if the pair continues to move lower in 2016.

Trading Opportunities of 2016: Yen Selling is Falling Out of Style – Time to Buy

Posted: 29 Dec 2015 09:00 AM PST

The shift in the BoJ asset purchases will likely drive the Yen to recover from the 2015 low.

Trading Opportunities of 2016: Risk-off in the Front, Policy in the Back

Posted: 29 Dec 2015 09:00 AM PST

Risk aversion and divergent monetary policies following the Fed tightening bring up trading opportunities.

Trading Opportunities of 2016: Yen Will Break Complacency and BoJ Force

Posted: 29 Dec 2015 09:00 AM PST

The enlarging gap between the expected income of carry trades and market price of Yen crosses is hard to sustain: some Yen crosses would “come back down to Earth”.
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Fintech Spotlight: IPOs are Broken, but That’s an Opportunity

Fintech Spotlight: IPOs are Broken, but That’s an Opportunity

Fintech Spotlight: IPOs are Broken, but That’s an Opportunity

Posted: 29 Dec 2015 03:24 PM PST

For the final Fintech Spotlight column of the year, we take a look at the broken IPO process and what could be a great opportunity for fintech startups.

Keep on reading: Fintech Spotlight: IPOs are Broken, but That's an Opportunity

Turkish Watchdog Blocks Access to MXTrade’s Website

Posted: 29 Dec 2015 12:47 PM PST

The move against MXTrade comes after similar warnings about the broker from other European authorities.

Keep on reading: Turkish Watchdog Blocks Access to MXTrade's Website

JPM Pledged $7.5M for Blythe Masters Blockchain Startup, Other Banks Balk

Posted: 29 Dec 2015 12:09 PM PST

Digital Asset Holdings, the blockchain startup led by Blythe Masters, has received a $7.5 million pledge from JPMorgan, but other banks are balking.

Keep on reading: JPM Pledged $7.5M for Blythe Masters Blockchain Startup, Other Banks Balk

Reuters: China Appoints New Head of FX Regulator SAFE

Posted: 29 Dec 2015 11:53 AM PST

The banking executive, Pan Gongsheng, will oversee the growing foreign exchange market while continuing his post at the People's Bank of China.

Keep on reading: Reuters: China Appoints New Head of FX Regulator SAFE

Russian Ruble Risks Volatility Spike Despite Oil Prices Rally

Posted: 29 Dec 2015 10:16 AM PST

The Russian ruble has continued its underperformance amid economic woes and lack of confidence in the country's policymakers.

Keep on reading: Russian Ruble Risks Volatility Spike Despite Oil Prices Rally

St. Kitts PM Blames Predecessor for Buy-a-Passport Uproar

Posted: 29 Dec 2015 09:19 AM PST

Roger Ver had reportedly run a "Passports for Bitcoin" program that would allow anyone to buy a St. Kitts passport with bitcoin.

Keep on reading: St. Kitts PM Blames Predecessor for Buy-a-Passport Uproar

Top Five Successful Strategies For Trading Binary Options

Posted: 29 Dec 2015 05:49 AM PST

If you are trading without a strategy or a tactic to help you with binary options, you might as well consider yourself a gambler.

Keep on reading: Top Five Successful Strategies For Trading Binary Options

How We Fared in Our 2015 Crypto Predictions

Posted: 29 Dec 2015 03:31 AM PST

We anticipated the evolution of 'Bitcoin 2.0', but had no idea that 2015 will become the year of the blockchain.

Keep on reading: How We Fared in Our 2015 Crypto Predictions

Ghost Spam: Stop Celebrating and Check if Your Traffic is Real

Posted: 29 Dec 2015 02:26 AM PST

Is your website really as popular as Google Analytics claims? Open your eyes and stop fake traffic before it stops you.

Keep on reading: Ghost Spam: Stop Celebrating and Check if Your Traffic is Real

Alpari Adds MT4 Market News Service from FxWirePro

Posted: 28 Dec 2015 08:55 AM PST

According to FxWirePro, the service is built on a global network of analysts from thirteen countries.

Keep on reading: Alpari Adds MT4 Market News Service from FxWirePro

Spotware Adds a Trio of New Marketing Tools to cTrader

Posted: 28 Dec 2015 08:45 AM PST

Trading technology provider Spotware has widened the availability of marketing tools for forex and CFDs brokers with a new update to cTrader.

Keep on reading: Spotware Adds a Trio of New Marketing Tools to cTrader
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Top Forex Themes for 2016

Top Forex Themes for 2016

Top Forex Themes for 2016

Posted: 28 Dec 2015 09:53 AM PST

Top Forex Themes for 2016

Since the next two weeks are generally the quietest periods in the financial markets, we want to take this opportunity to think longer term and share with you our currency forecasts for 2016. We'll start with an initial review of the top themes and explore them in further detail as the week progresses in our outlook for each of the major currencies.

But first – 2015 has been a big year for the foreign exchange market. Divergences in monetary policies led to strong moves in currencies with the U.S. dollar as the best performer. The U.S. saw its first rate hike in nearly a decade while other major central banks in the Eurozone, China, Canada, Australia, New Zealand and Japan eased. In response, the greenback climbed to multiyear highs and this strength translated into significant weakness for many major currencies along with a collapse for commodities. These are some of the milestones reached in currencies this year:

The greatest risk for the financial markets and the global economy in the coming year is the feedback loop from the dollar and Fed policy.

While the quarter point hike in December represents only a nominal increase in U.S. rates, the Federal Reserve expects to tighten 4 additional times next year which will have broad ramifications for currencies, equities and commodities. In mid-December, we published a piece outlining the Consequences of a Strong Dollar and a lot of these issues will return to focus in 2016.

The first few months of the year should be good for the dollar as long as Fed officials don't backtrack on their hawkish views.

There will be more hawks voting on the FOMC in 2016 than 2015 so the balance swings in favor of continued tightening. Between the warm El Nino weather and gas prices below $2.00 a gallon in some states, consumer spending should also rise in the first quarter. So while the dollar is rich, the path of least resistance is still in higher. However our outlook changes in the second half of 2016 as we believe rate hikes and the strong dollar will force the Fed to slow tightening makring the top for the greenback and the bottom for other major currencies.

Here are some of the themes that we are looking for in 2016:

Monetary policy gaps will expand in the first half and narrow in the second – The Federal Reserve's rate hike ushers in a new phase of monetary divergence.

In the coming year, the Fed will continue to reduce accommodation at a time when other central banks maintain and even expand their stimulus programs. While the Fed will be the only major central bank raising interest rates for most if not the entire year, in the first few months, investors will be actively thinking about who needs to move next. This speculation could accelerate as the strains of low commodity prices, slow growth and weak external demand hits many economies. But at the end of the day for most countries, the bar is high for additional easing. The global easing cycle is nearing an end as long as the Fed raises interest rates responsibility and avoids wrecking havoc on the financial markets. As such we believe that this past year's dominant trends should continue in the first few months and reverse as the year progresses and monetary policy divergences stop widening. Another way to look at this is that while we expect dollar strength to continue, it should abate through the year.

Commodity prices will find a bottom in 2016.

A strong dollar, weak global demand and high inventories have caused oil prices to collapse this year and while prices could fall further in the near term as the U.S. ends its 40 year ban on oil exports and sanctions are lifted on Iran, when the dollar peaks, commodities will bottom. The price of oil could fall below $30 a barrel but we do not see much weakness beyond that and by the end of the year we expect prices to settle closer to $40. In the long run, China's focus on domestic demand should be positive for energy prices. We expect further easing and a lower currency in the coming year. A bottom in commodity prices would not only affect the outlook for commodity currencies but could also mark a shift in G7 monetary policies as inflation starts to stabilize and turn upwards. Lifting inflation is the greatest challenge for many central banks and while a strong dollar lowers the value of local currencies, it also adds to disinflationary pressure by lowering prices and the question then becomes which has greater impact on growth and inflation – right now its lower commodities and not a lower currency.

2016 should also be a year of diminishing stock market returns. The era of easy money is coming to an end and the strong dollar along with Fed tightening will take a big bite out of corporate profitability. Single digit gains are the best that investors should expect in earnings growth. The prospect of a persistently strong dollar, sluggish global growth and lower commodity prices in the first half of the year means that earnings and stocks could suffer. We are looking for a correction in equities in early 2016 that could trigger a flight to safety in the currency market.

At many points in the year politics will overshadow economics.

We have the U.S. election, the U.K. referendum, ongoing Eurozone refugee crisis, possible showdown with Russia and risk of more aggression by ISIS. The U.S. election is definitely a second half story and while there are a lot of different factors at play this year according to our study, the EUR/USD has a lower bias during U.S. election years. In the 10 elections going back to the 1970s the EUR/USD weakened in 8 out of the 10 periods. The U.K. referendum poses a major risk that we will explore in our sterling outlook while the risk of more aggression by ISIS, possible show down with Russia and the ongoing refugee crisis has the greatest impact on the euro.

There's a lot more to explore and we will do that in the individual currency outlooks but for now, these are some of the most important themes that we believe will dominate trading in the coming year.

Is Buying Dollars in 2016 a Smart or Foolish Trade?

Posted: 28 Dec 2015 09:51 AM PST

Is Buying Dollars in 2016 a Smart or Foolish Trade?

2015 has been a great year for the U.S. dollar but with only 5 trading days left many investors are wondering if being long dollars in 2016 is still a smart trade. December has been a difficult month for the greenback with dollar bulls struggling to maintain control. The Federal Reserve raised interest rates for the first time since June 2006 but instead of appreciating, the dollar erased nearly all of November's gains. Now many investors are wondering that if a rate hike and hawkish forward guidance can't lift the dollar, is it foolish to be buying greenbacks in 2016.

To answer that question we have to understand why investors sold dollars in December. The bet that the dollar would rise in 2015 was one of the world's most crowded trades and according to the CFTC's Commitment of Traders report, forex futures traders were busy adjusting positions ahead of the December 16 FOMC meeting. The biggest changes were in euro and yen where investors aggressively cut their short euro and short yen positions. This means that investors started to unwind their long dollar trades ahead of FOMC and based on the price action after the meeting, liquidated further after the rate hike. Buying dollars became a very crowded trade in 2015 and a lot of money moved to the sidelines at the end of the year.

This means there's money to put back into play in 2016.

Yet positioning was not the only reason why investors bailed out of the greenback. According to the following chart past tightening cycles have not been good for the dollar and this scared many investors. While USD/JPY generally appreciated leading up to the rate hike, on a number of occasions it reversed course after tightening but this cycle is different because the first few months of the year will be good for the U.S. economy and the dollar. The warm El Nino weather and low gas prices will boost consumer consumption, which is already supported by steady job creation, wage growth and consumer borrowing. The Fed also welcomes new hawks to their roster of FOMC voters.


But first lets be clear, the Fed's rate hikes will not cause a recession. It may slow the economy in the second half of the year but contraction is highly unlikely. Some investors are worried that the recent move by the Fed could trigger a recession but there are very few indicators and low oil prices have never caused a downturn in the U.S. Of course that could change as the Fed raises interest rates if they move too quickly. One of the greatest challenges is that higher interest rates do not hit the economy in predictable ways. They take time to percolate and it is difficult to predict the point at which the impact shifts from mild to severe. The quarter point hike is only a small tweak in rates and even if the Fed hikes by another 50 to 75bp next year (which is our preferred scenario), the impact on consumer spending and investment will be limited by the fact that most American mortgages are fixed rate, unlike Europe. Also businesses could view the Fed's tightening as a sign of confidence in the economy and they could be slow to adjust their investments. So at the onset the biggest impact will be on the U.S. dollar.

More Hawks in the Birdcage in 2016 – The performance of dollar hinges on when the Federal Reserve will raise interest rates again. The next meeting is on January 26-27 and as there's zero chance that rates will be increased in the first few weeks of the New Year, consolidation in the dollar is likely. However if the Fed maintains an optimistic view on the economy, expectations for a rate hike in March will grow, leading to renewed strength for the greenback. It is important to understand that with each new year comes a new group of Fed Presidents and in 2016 4 votes rotate. Four hawks and 1 dove will replace 1 hawk, 1 dove and 2 neutrals. So the balance swings in favor of more consistent tightening. So while the dollar is rich, we believe the path of least resistance is still in higher in the first half of the year. Our outlook changes in the second half of 2016 when we believe rate hikes and the strong dollar will force the Fed to slow their pace of tightening marking the top for the greenback and the bottom for other major currencies.

Election years are good for the dollar. The table below shows that the Dollar Index increased an average of 5% during an election year with the index rising 8 out of the last 10 periods. In 1 of the 2 years that the Dollar Index declined, the greenback lost approximately 0.5%. While it can be argued that Fed policy is not affected by elections, the time of major monetary policy shifts has often coincided with presidential elections. The second chart was created by the Washington Post and while their data only covers 6 election cycles, there's definitely a notable trend.

Technically there appears to be a double top forming in the Dollar Index. However 96 is a fairly significant support level that should hold and we expect the index to make another run for 100 after which it should test the 61.8% Fibonacci retracement of the 2001 to 2008 decline near 102.

EUR 2016 Outlook – Forget About Parity

Posted: 28 Dec 2015 09:47 AM PST

EUR 2016 Outlook – Forget About Parity

By Kathy Lien, Managing Director of BKAsset Management

Six years after the financial crisis and the European Central Bank is still struggling to turn around their economy.

As recently as December, they increased stimulus in a desperate attempt to revive growth and drive inflation higher. This illustrates how deeply entrenched the slowdown is and how poor of a job Eurozone policymakers have done this past year. In the third quarter, the Eurozone economy expanded by a mere 0.3%. During this same period the U.S. economy grew 2%. Inflation is low around the world but the approximately 10% slide in EUR/USD combined with the full scale QE program launched in early 2015 should have been more effective in boosting inflation, which ran at a 0.2% annualized pace in November – well short of the central bank's 2% target.

2016 brings more challenges for the Eurozone economy.

While the ECB is comfortable with the current level of monetary policy they will need to extend bond purchases beyond September 2016. September is only a soft target and we can't see a scenario where growth or inflation will improve enough 9 months forward to warrant a reduction in stimulus. Also, if inflation and growth do not make significant upside progress, the ECB may need to expand the program in the coming year. The ECB's decision to provide additional stimulus in December reflected their sense of urgency and their overall concern about the economy. Their efforts are paying off as there have been signs of recovery in the Germany but meaningful risks lie ahead. The prospect of further weakness in emerging markets, particularly China, unstable geopolitical situations in the Middle East and Russia, high unemployment, stagnant wages are just some of the problems posing downside risks for the Eurozone in 2016. Countries in the region will benefit from the new round of stimulus, weaker euro and low oil prices but the benefits will be slow to come. France and Italy have not made much progress in terms of growth and while Spain is doing well it is only the fourth largest economy in the region. The fiscal position of most Eurozone nations is also very weak with only a handful producing a budget surplus in the past 3 years. The largest sector, financials will suffer from negative deposit rates. Debt levels are high and major progress towards reducing that burden is not expected over the next 12 months.


The greatest risks for the Eurozone in 2016 are political. Greece will be back in the headlines as the government struggles to enact reforms and meet the demands of its bailout. According to S&P, the country is still at risk of default. At the same time, migration will be a touchy subject for Europe. In 2015, European nations welcomed millions of Syrian refugees with open arms but the Paris attacks have transformed the attitude within Europe and there are now calls for tighter border controls. These demands will quickly intensify if ISIS stages another attack in the region. There's no question that there will be attempts and it will be up to European intelligence to avoid another catastrophe. In 2015 Russia's brazen intervention in Ukraine shattered Europe's illusion that conflict on the continent was long gone history. The EU was forced to enact sanctions, straining relations with Russia and in the middle of the year, they will need to decide whether the sanctions which last until July, should be scrapped or extended. So between sluggish growth, deepening refugee crisis, ISIS aggression and Russian tensions, 2016 will be full of challenges for Europe.

As for the currency, forget about parity.

In 2015, many analysts saw parity in sight but euro never reached that level. In 2016 big names such as Goldman Sachs, Deutsche Bank and BNP Paribas still see that target being met. While the prospect of even higher rates in the U.S. and continued ECB stimulus will keep the euro under pressure, parity is nothing more than a headline grabbing target. Experienced traders know that these overstretched goals are hard to reach. We agree that EUR/USD will move lower in the coming year and see 1.05 being tested but weaker currencies drive stronger economies and at 1.05, the Eurozone stands to benefit significantly from the combination of ECB stimulus and a lower euro. When the benefits start to be felt through more consistent improvements in Eurozone data, the ECB will feel more optimistic about the economy and less pressured to increase stimulus and that could mark the turning point for the euro. For now, lets focus on the next 4 to 5 cent opportunity in currency. We expect EUR/USD to test its 12 year low of 1.0459 and then bounce 1 to 2 cents before figuring out where it wants to head next.

Technically, there's only 2 important support levels in EUR/USD – the 12 year low of 1.0459 and parity.

If the recent low is broken, it should kick off a quick slide to 1.0000. Taking a look at the longer term chart of the currency, a major top formation can be clearly seen. When EUR/USD broke its 2010 low of 1.1877, there was a quick drop to the 61.8% Fibonacci retracement of the 2000 to 2008 rally. This Fib level at 1.1215 is now resistance and a strong close above this level is needed to reverse the negative sentiment in the currency.

British Pound and the Defining Issues for 2016

Posted: 28 Dec 2015 09:43 AM PST

British Pound and the Defining Issues for 2016

By Kathy Lien, Managing Director for BK Asset Management

2016 will be a defining year for the British pound – a year when politics will overshadow economics.

Considering that sterling ended the year near 7 month lows against the U.S. dollar, some of our readers may find it surprising that the U.K. was one of the best performing G10 economies. However according to the latest figures for the third quarter, the U.K. economy grew at an annualized pace of 2.1% which matches the pace of U.S. growth. In contrast the Eurozone and Japanese grew 1.6%, Australia expanded 2.5% and Canada contracted by 0.2%. There's also very little debate that the Bank of England will be the next major central bank to raise interest rates. Yet sterling benefited from none of this and instead weakened versus the euro, Japanese Yen, U.S. and New Zealand dollars over the past 6 months. Part of the underperformance was driven by U.S. dollar strength but slow U.K. wage growth, mixed data and cautious policymakers has the market looking for rates to rise in 2017 and not 2016.

We believe the market is underestimating the Bank of England and the U.K. economy because 2016 should be a year of strong growth.

Consumer spending is the backbone of the economy and sales surged in the month of November. While wage growth slowed, labour force participation rates remain near their highest levels in 20 years and service sector activity is accelerating according to the latest reports. As the labor market tightens and inflation bottoms out, wages should rise as well. Slow Chinese and Eurozone growth poses a risk to the economy and the manufacturing sector but the U.K. is still expected to be one of the fastest growing G10 economies in 2016.

From the perspective of growth alone, the Bank of England should raise interest rates in the first half of the year. However there are 2 primary issues holding the central bank back – low commodity prices and the risk of Brexit. Oil prices could remain low for a large part of the year and as of November consumer prices are running at a 0.1% annualized pace, which is far short of the central bank's forecast. Considering that the Federal Reserve raised rates with yoy inflation at 0.5%, the BoE may not need to see CPI above 1% before tightening monetary policy but they could be reluctant to do so until there is greater clarity on Britain's position within Europe.

The greatest risk that the U.K. economy and the British pound faces in 2016 is Brexit.

What is scarier is that opinion polls show voters split almost 50:50 on whether the U.K. should remain in the European Union. The Paris attacks and the country's confidence in Cameron's ability to reform freedom of movement rules for EU migrants played a large role in narrowing of polls but for most of the year, support for staying in the U.K. overshadowed the resistance by only a small margin. Leaving the EU would bring a period of deep economic uncertainty that will hurt consumer, business and investor confidence. The actual cost to the economy is difficult to estimate. Supporters of Brexit say that it would save British taxpayers billions and ease their economic responsibilities to the union. However at the same time, there could be significant costs to trade, investment, and jobs. The answer lies in how the exit is structured.

If Britain maintains a free trade agreement, pursues very ambitious deregulation of its economy and opens up trade almost fully with the rest of the world, the best case scenario calculated by Open Europe, a UK lobby group estimates that a Brexit could lift UK GDP growth by 1.6% in 2030. However in the worst case scenario where the U.K. fails to strike a trade deal with the EU, Brexit could cost the economy as much as -2.2% in GDP growth. Realistically, the best and worst case scenarios are not the most likely outcomes. Predicting the long term impact of Brexit is nearly impossible at this stage because we don't know what the terms of the new relationship will be and we won't know until well after the referendum but in the lead up and immediate aftermath of the vote, we expect significant volatility and most likely weakness in sterling and other U.K. assets.

It is not in the Bank of England's interest to raise rates during turbulent times and considering the greatest volatility for sterling will come in the lead up to the referendum, policymakers could err on the side of caution and forgo a rate hike. Of course there's another way to look at this – they could raise rates sooner, which would give them the leeway to cut rates later if the markets collapse. There's no set date for the in/out referendum – it could be in the second half of 2016 or 2017 which means if the BoE wanted to raise rates, they could do so the first half and avoid conflict with the referendum

The Brexit vote will be a defining moment for not only the U.K. but all of Europe.

Aside from the political ramifications of shifting the power in the European Council, the EU as a whole would be a less attractive partner. The economic implications are unknown but there could be greater competition between the U.K. and E.U. but ultimately the short and medium term ramification is uncertainty, which is never good for a currency.

Technically GBP/USD is very weak but there are a number of significant support areas below current levels.

First we have the 2013 low at 1.4814, a level that has limited losses for the currency pair in the second half of the year. Below that is the 2015 low of 1.4566. In order for the downtrend to be officially negated, we need to see a much stronger rally in GBP/USD that takes the currency pair above 1.55. With that in mind, we believe that the wide 1.45 to 1.65 trading range in GBP/USD will remain intact in the year ahead.

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