Once again, it’s been a rather dull session so far in European morning trade. Major currencies are not doing a whole lot, having little to work with in general this week. The dollar is steady on the day, trading near flat levels against the euro, yen, pound and loonie currently. Of note, USD/JPY continues to do a tango in and around the 150.00 mark this week:

The lack of developments in the bond market isn’t helping with that regard as well. 10-year Treasury yields are down 1.5 bps to 4.26% now but remains pinned in between 4.20% and its 100-day moving average of 4.33% in the bigger picture.

For trading today, the focus turns towards the FOMC meeting minutes release next. That might help to offer something for traders to act upon and to get out of this rut.

Besides that, keep a watchful eye on stocks as there are some jitters persisting since yesterday. Nvidia earnings is in the spotlight and that will come after the market close today. US futures are down again though, with S&P 500 futures lower by 0.2% and Nasdaq futures down by 0.4% currently.

This article was written by Justin Low at www.forexlive.com.

GBP

• The BoE left interest rates unchanged as expected at the last meeting
  removing the tightening bias but reaffirming that they will keep rates high for
  sufficiently long to return to the 2% target.
• The employment report beat expectations across the board
  with a positive revision to the December’s negative payroll figure.
• The UK CPI missed expectations across the board but with
  Services inflation remaining sticky, which continues to support the BoE’s
  patient stance.
• The latest UK PMIs showed the Manufacturing sector improving but
  remaining in contraction while the Services sector continues to expand.
• The latest UK Retail Sales beat expectations across the board
  by a big margin.
• The market expects the first rate
  cut in June.

JPY

• The BoJ kept its monetary policy unchanged as expected with interest rates at
  -0.10% and the 10 year JGB yield target at 0% with 1% as a reference cap.
• The Japanese CPI eased further across all measures
  which makes it even harder to expect a rate hike from the BoJ anytime soon.
• The latest Unemployment Rate ticked lower hovering around cycle
  lows.
• The Japanese PMIs improved for both the Manufacturing
  and Services measures although the former remains in contractionary territory.
• The Japanese wage data missed expectations again recently
  although there was a pick up from the prior reading.
• The Tokyo CPI, which is seen as a leading
  indicator for National CPI, fell much more than expected recently.
• The market expects the BoJ to hike
  rates in Q2.

GBPJPY Technical Analysis –
Daily Timeframe

On the daily chart, we can see that GBPJPY broke
through the cycle high and started to consolidate. The buyers should keep on
leaning on the 188.67 level to position for new highs while the sellers will
want to see a breakdown to start targeting new lows.

GBPJPY Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the 188.67
level is now a key support zone where
we can also find the confluence with the
trendline and the
red 21 moving average. This is
where we can expect the buyers to step in with a defined risk below the
trendline to position for new highs. The sellers, on the other hand, will want
to see the price breaking lower to invalidate the bullish setup and position
for a drop into the 185.21 level.

GBPJPY
Technical Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that the
price action has been pretty choppy recently but overall the pair kept on
printing higher lows as the buyers remained in control. The sellers should wait
for a break below the key support to regain control and have more conviction
for new lows.

Upcoming Events

Today we have the FOMC Meeting Minutes on the agenda
while tomorrow we get the latest UK and US PMIs, and the US Jobless Claims
figures.

This article was written by FL Contributors at www.forexlive.com.

The year
has just begun, and US companies are planning a $155 billion share buyback. In
total, forecasts for 2024 put this figure at $885 billion, 10% more than in
2023 but still 4% below the 2022 record.

For
investors, this intel should be a big deal. Since 2011, share buybacks have
been a major factor, accounting for 40% of total US stock market returns,
especially in the S&P 500 index.

Indeed,
other factors such as dividend growth, EPS, and P/E multiples also matter, but
Pavilion Global Markets‘ data suggests they carry less weight.

In
theory, buybacks make sense when companies have more liquidity than they pay
out in dividends or have profitable investments on the horizon and their shares
are undervalued.

At the
moment, large companies tend to focus more on returning capital than growing
it.

Take big
oil as an example.

Despite
earning a whopping $357 billion in the seven years following the Paris
Agreement, they chose to invest billions in share buybacks and dividends
instead of fully engaging in the transition to renewables.

Specifically,
the five major oil giants spent more than their profits on shareholders: $428
billion in 2016-2022, of which $316.7 billion went on dividends and the rest on
share buybacks.

The jury
is still out on whether this move makes sense for the greater good.

Big Tech
isn’t exactly in a better spot. The combined cash stash of companies like
Apple, Microsoft, Alphabet, Alibaba, Amazon, and Meta tops $500 billion. The
burning question: where’s all that moolah headed?

If it
goes into share buybacks, it’s a win for shareholders, but only in the short
run. Investing in promising projects or breaking into new business frontiers
would better serve long-term gains.

The fact
that companies are cutting back on investment
raises alarm bells about their future growth potential, including expansion and
competitiveness. It is, therefore, essential to be cautious about these stocks.

And
let’s not forget that while buybacks can increase EPS by reducing the number of
shares, this does not necessarily mean that the company’s fundamentals are
improving.

Relying
too much on buybacks can look like a financial maneuver rather than actual
value creation.

The
sweet spot? A balanced approach where a company distributes its free cash flow
not only in buybacks but also in growth investments, cutting debt, paying
dividends and maintaining a healthy cash cushion.

As for
how to detect a possible change in market sentiment towards a specific stock or
the index itself, it is crucial to follow the support and resistance indicators.

This article was written by FL Contributors at www.forexlive.com.

Swing trading is a style of trading that attempts to capture gains in a stock or any financial
instrument over a period of a few days to several weeks. Swing traders
primarily use technical analysis to look for trading opportunities. These
traders may utilize fundamental analysis in addition to analyzing price trends
and patterns.

Understanding Swing Trading

This type of trading requires patience to hold your trades
for several days at a time. Swing trading stands in contrast to day trading,
where positions are entered and exited within the same trading day. Swing traders take on overnight risk, and they also need to be mindful of
possible market gaps that could cause significant losses or profits when they
are not actively watching the markets.

Keys to Successful Swing Trading:

• Identify Trade Candidates: Successful swing trading starts with identifying the
  potential trade. Look for stocks that exhibit short-term price momentum or
  patterns like flags, pennants, or head and shoulders.
• Technical Analysis: Utilize charts and various technical indicators such
  as moving averages, MACD (Moving Average Convergence Divergence), RSI
  (Relative Strength Index), and Bollinger Bands to determine optimal entry
  and exit points.
• Risk Management: It’s vital to establish clear stop-loss orders to
  limit potential losses if the market moves against your position.
  Similarly, it’s wise to have profit targets to secure gains.
• Stay Updated with Market News: Even though swing trading is mostly based on technical
  analysis, staying informed about key economic events and earnings reports
  can be beneficial. This kind of news can lead to market movements that
  either align with your trading strategy or require you to adapt your
  approach.
• Have a Plan and Stick to It: Discipline is key. Develop a trading plan with defined
  rules for trade entries, exits, and money management — and stick to it
  meticulously.
• Keep Emotions in Check: Emotional decision-making can lead to mistakes. Trust
  your strategy, and don’t let fear or greed dictate your actions.
• Review Your Trades Regularly: Analyzing what worked, what didn’t, and why is
  essential for improving as a swing trader. Make regular reviews part of
  your routine.

Tips for Swing Trading

1. Start Small: When you’re new to swing trading, begin with smaller
   trades to get a feel for the market dynamics without taking on too much
   risk.
2. Choose Liquid Stocks: Trading in liquid stocks allows for easier entry and
   exit, reducing the risk of slippage – which is the difference between the
   expected price of a trade and the actual price at which the trade is
   executed.
3. Watch Multiple Time Frames: While swing traders typically operate on daily charts,
   looking at longer time frames can offer a better perspective on the
   overarching trend and support/resistance levels.
4. Utilize Paper Trading: Test strategies through paper trading before putting
   real money on the line. This allows you to hone your skills without
   financial risk.
5. Stay Organized: Keep an organized record of all your trades, including
   your rationale for entering and exiting them. This log will be valuable
   for learning and adjustment purposes.
6. Manage Capital Wisely: Don’t allocate more than a certain percentage of your
   portfolio to a single trade. This can help manage risk and keep you from
   being overly exposed to any single position.
7. Continuous Learning: The markets are always changing, so continuous
   education is crucial. Stay updated with trading books, online courses,
   webinars, and active trading communities.

Remember, no single strategy guarantees success in trading,
but swing trading can be profitable if approached with discipline, knowledge,
and a strong risk management framework.

This article was written by FL Contributors at www.forexlive.com.

• Wage growth, services inflation are twice the rate consistent with sustainable CPI
• But reasonably confident that wage growth will edge down further in coming months
• Expectation in wage growth fall is due to fall in headline inflation

Don’t expect to get much of a change to this narrative until we are right at the point where rate cuts are to present themselves. In the case of the BOE, it might only come around May.

This article was written by Justin Low at www.forexlive.com.

With the dollar sagging slightly today, gold is finding reason to cheer on the rebound from last week. The precious metal is up another 0.4% today to $2,026 as it has now erased its post-CPI drop.

The rebound comes as buyers defended the 100-day moving average (red line) last week, before breaking back above $2,000. And the run higher has since gathered pace with gold now just down 0.6% on the month.

The volatile action in gold to start the year is a reflection of the big swings in market odds on central bank rate cuts pricing. And as things are settling down now a little with traders readjusting, gold is still finding itself supported.

I’d argue that bodes well for the precious metal in the bigger picture. However, there could be some lingering concerns from a technical standpoint.

The rebound off the 100-day moving average has been a textbook trade for chartists. But there is a potential pattern forming which is showing lower highs and lower lows. That could come back to bite at gold for a bit before we can really talk about a major breakout to $2,100 and beyond again.

For now, the upside momentum might be capped closer to the trendline resistance near $2,053.

This article was written by Justin Low at www.forexlive.com.

• There has been a lot of emphasis on UK recession rather than strong story on employment

For now, their current policy stance is to stay on hold. As such, they will put out whatever narrative to support that. You can’t fault Bailey for trying to sell this side of the story, but the latest UK labour market report does come with a big caveat as highlighted in the report here at the time.

This article was written by Justin Low at www.forexlive.com.

EUR/USD is up 0.2% to 1.0800, keeping relatively unfazed by the ECB wages data earlier here. Overall, the dollar is down slightly across the board alongside lower Treasury yields to start the day. 10-year yields are down 2.4 bps to 4.271%, keeping limited below its 100-day moving average:

I would argue that is playing a role in keeping the dollar in check for the time being.

USD/JPY is back down to near flat levels around 150.17, after having touched a high of 150.43 in Asia trading. Meanwhile, the antipodean currencies are pushing to session highs right now despite a lack of risk enthusiasm. AUD/USD is up 0.3% to 0.6558 and contesting its 100-day moving average of 0.6541 while NZD/USD is up 0.3% to 0.6168 and contesting daily resistance around 0.6150-73 – both highlighted here earlier.

In other markets, gold is also up another 0.4% to $2,026 as the rebound continues while stocks are struggling with S&P 500 futures now down 0.4% on the day.

This article was written by Justin Low at www.forexlive.com.

The report says that Ursula von der Leyen has won the backing of her German centre-right party to put her in the running for a second term as European Commission president. This does confirm that she is seeking another term at the helm at least. For some context, the typical term length is five years. As such, the spot is up for grabs this year as von der Leyen has been in charge since 2019.

This article was written by Justin Low at www.forexlive.com.

• Germany likely in recession now on weak external demand, muted consumption
• There is still no recovery in the economy
• The weak phase in the economy will continue

Tell us something we don’t know. Am I right?

This article was written by Justin Low at www.forexlive.com.