How low can EUR/USD go? - FXTM

Over the previous week, the EURUSD has recorded several fresh 2014 lows and the pair registered a further one yesterday. The EURUSD continued to be sold in anticipation of the latest German CPI data, but it was the US GDP announcement which triggered bearish movement.

The latest figures from the US Department of Commerce showed that the US economy expanded by an annualised 4% between April and June, far surpassing all expectations. The EURUSD fell as low as 1.3369 on the news, its lowest valuation since the 13^th November 2013.

Where this pair movesfrom here will be largely dependent on how the markets react to today’s German employment report and EU CPI. Although on headline it would appear that the EU CPI is higher risk, it is worth keeping a close eye on the German employment report. Although it is widely expected that EU CPI remained at 0.5% for the third successive month in July, it does appear that the ECB are prepared to offer their recentstimulus measures time before considering the possibility of implementing QE. As long as EU CPI refrained from further decreasing last month, this might provide the EURUSD with some breathing space.

In reference to the German employment report, this is where investors looking for downside moves could find more opportunities. The German economy has been a casualty of the geopolitical conflict in Eastern Europe, with their recent IFO data representing a third consecutive decline. Additionally, the Bundesbank recently warned that there is a possibility that the German economy stagnated in Q2.

It is currently expected that the German employment sector contracted by 5,000 jobs in July and if this is confirmed, it will add additional pressure on the EURUSD valuation. Potentialupcoming EURUSD support levels can be found located at 1.3365 and 1.3335.

Written by Jameel Ahmad, Chief Market Analyst at FXTM.

For more information please visit: Forex Time

Is GBPUSD oversold and ready for a rebound? - FXTM

It is difficult to understand how the GBPUSD has sharply transitioned from registering a new 5-year high (1.7189) to recording eight days of successive losses for the first time since May 2010. The pair declined by a further 50 pipsand reached a six-week low on Tuesday after the latestUK Mortgage Approvals were stronger than expected. Bank of England (BoE) Governor, Mark Carney had previously expressed opinion that the UK housing sector posed one of the largest threats to the UK economy.

A major contributing factor behind the recent GBPUSD decline is not necessarily due to faltering UK economic optimism, but due to international geopolitical tensions attracting the attention of the financial markets. Over the past week, investors have been attracted to safehavens, such as the USD, and this has devalued the GBPUSD.

Looking at the Daily timeframe, as long as geopolitical tensions quieten down technical traders could now be observing an ideal time to look into this pair. Both the Stochastic Oscillator and RSI are each suggesting that the GBPUSD is oversold and looking at the historical correlation between these two momentum indicators, the price seems to quickly rebound after approaching the oversold boundaries. Additionally, the pair is now only a fractional distance away from a bullish trendline that has controlled the overall direction of the GBPUSD since November 2013. If the trendline is touched, it should either act as a dynamic support level or further support can be found at 1.6919.

In order for the GBPUSD to bounce back, the bulls need a reason to rally. Tomorrow afternoon, the US 2^nd Quarter GDP release may provide an opportunity. It is currently expected that the US GDP will be announced at around 3%, but the markets will be keeping a very close eye on what proportion of the 1^st quarter GDP contraction was recovered in the following quarter.

I remain unconvinced that the US economy recovered as much of the 2.9% Q1 contraction as currently expected. A large amount of the economic contraction was caused by reduced consumer expenditure and construction activity. Recent US consumer data can be considered soft, such as the past three Advance Retail Sales missing expectations, alongside average wage growth declining. This raises a threat that a proportion of the reduced consumer expenditure in Q1 (which reportedly accounts for 70% of the overall US GDP), might not have been recovered in Q2. In reference to the US construction sector, it is possible projects that were delayed during the atrocious winter weather period have since commenced, but only 6,000 construction jobs were created by the US economy in June. Furthermore, the US construction sector remains over 20% bellows its peak before the global financial crisis emerged.

If the US GDP does disappoint, this will likely bring some risk appetite back into the currency markets. It will also allow an opportunity for the GBPUSD to begin rebuilding some of the previous week’s lost momentum. Due to the UK economic calendar being light this week, exactly how the markets react to the US GDP release will likely determine the GBPUSD’s next move. In regards to the next noticeable economic release from the United Kingdom, RBS are currently suggesting that Friday’s Manufacturing PMI for June will be recorded at a yearly high.

If this is confirmed, we can expect the GBP bulls to wake up.

Written by Jameel Ahmad, Chief Market Analyst at FXTM.

For more information please visit: Forex Circles 

UK. Regulators want reckless bankers to be criminally liable under new plans

The bosses of leading City firms are to be made more accountable for their actions under proposals that could make them wait up to seven years for their bonuses and potentially be jailed if their banks fail.

Responding to recommendations made by the parliamentary commission on banking standards, the two main City regulators on Wednesday set out lengthy consultations (pdf) aimed at framing a new licencing regime for bankers and the creation of a "potential criminal liability under a new offence relating to a reckless decision causing a financial institution to fail".

The Financial Conduct Authority and the Bank of England's regulation arm, the Prudential Regulation Authority, want the new regime to be in force by January next year and would force bankers to prove they had acted appropriately – a reversal of the burden of proof.

Bankers would be subjected to annual checks to ensure they comply with a regime which covers those involved in what is known as a "significant harm function".

"The behaviour and culture within banks played a major role in the 2008-09 financial crisis and in conduct scandals such as payment protection insurance mis-selling and the attempted manipulation of Libor. However, under the statutory and regulatory framework in place at the time, individual accountability was often unclear or confused. This undermined public trust in both the banking system and in the regulatory response," the regulators said.

But the regulators have stepped back from the idea of the parliamentary commission – set up in the wake of the Barclays' fine for rigging Libor two years ago – that bonuses be deferred for as long as 10 years.

"The PRA and FCA note that increasing the overall length of deferral is not the only way in which the typical present pattern of deferrals might be altered to improve risk alignment. There is scope to increase the proportion of awards that are held for longer within the overall deferral period, either by requiring a greater proportion of awards to be deferred, or by delaying the start of vesting, which typically starts a year following the initial award," the regulators said.

Instead, for the most senior bankers, bonuses must be deferred for seven years and for less senior staff for five years, according to the consultation.

But new rules coming into force will allow bonuses to be clawed back for up to 10 years. This would force bankers to repay bonuses already received as well as having deferred bonuses withheld.

The regulators are also looking at ways of stopping bankers being bought of their bonuses by new employers, and avoiding a repeat of scenario at Royal Bank of Scotland where former CEO Fred Goodwin's pension payments were eventually reduced.

The regulators note that the longer deferral periods for bonuses and tougher regime "may affect the labour market as risk-averse staff might be less willing to take on additional responsibility and progress to senior management level as a result".

Since the 2008 banking crisis changes have already been made to bonuses to ensure top bankers no longer receive payouts entirely in cash and that they are deferred for at least three years. New rules this year require bonuses to be capped at one times salary or twice if shareholders approve.

"While the PRA and FCA believe the new regime will deliver significant improvements, behavioural and cultural change must also come from individuals themselves as they carry out their roles," the paper said.

Source: The Guardian(UK.)