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Market Analysis 23/08/2013: Risk on again as PMIs please
Daily Commentary23.08.2013, Time of writing: 03:30 GMT
The Big Picture Risk on again as PMIs please: The dollar is slightly higher against most G10 currencies this morning. It gained most vs JPY. Is USD/JPY up because Japanese stocks are up, or stocks up because of USD/JPY? Perhaps both were up in anticipation of BoJ Gov. Kuroda’s participation at the Fed’s Jackson Hole seminar tomorrow, or perhaps it’s just part of the general “risk on” sentiment today that may be encouraging JPY-funded carry trades. On the other hand, SEK recovered further vs USD in a continuing reaction to yesterday’s better-than-expected Swedish employment data for July. The stronger dollar followed a continued decline in the four-week moving average for jobless claims and a further rise in Fed Funds expectations to a new cyclical high. The Fed’s latest survey on tapering shows that primary dealers expect the Fed to reduce the pace of its asset purchases in Sept by $15bn to $70bn a month, falling to $45bn a month in December and then ending entirely in June 2014. This implies that professional investors have now fully discounted tapering. Bloomberg noted that outflows from bond funds in August as at 19 Aug. were already the third largest on record as the retail market too is positioning itself accordingly.
The big story overnight though was the rebound in EM currencies despite the USD-positive news. All of the 15 that we track were up vs USD, lead by MXN (+2.1%) and ZAR (+1.5%). Even the beleaguered IDR was up 1.2%. Yesterday’s announcement of improvement in purchasing managers’ indices world-wide, including China, Eurozone and the US, appears to be countering the fears of lower liquidity as the Fed tapers and dampening the sell-EM frenzy (for now).
Data today includes the details of Q2 GDP from the UK (not usually market-affecting) as well as new home sales in the US. The components of German GDP showed a rise in investment but a fall in private consumption from Q1.
The Market EUR/USD
• EUR/USD moved slightly lower and then rebounded at the 1.3300 (S1) psychological level. Currently the pair is trading between the 1.3300 (S1) and 1.3400 (R1) psychological levels. A break of one of them should indicate the next direction of the price. However, the EUR/USD remains in an uptrend, since it is forming higher highs and higher lows, also confirmed by the rate’s reading above the 200-period moving average.
• Support: Support is found at the 1.3300 (S1) psychological level, followed by the 1.3231 (S2) and the 1.3152 (S3) respectively.
• Resistance: Resistance levels are the 1.3400 (R1), followed by the 1.3448 (R2) and 1.3517 (R3) (daily chart).
USD/JPY
• USD/JPY moved higher during yesterday’s session, completing an inverse head and shoulders reversal formation and breaking above the 98.56 (S1) level. If the bulls are strong enough to maintain that momentum, I expect them to lead the pair towards the psychological resistance of 100.00 (R1). Meanwhile, the price has crossed above both the 20- and 200-period moving averages, confirming its bullish attitude.
• Support: Support levels are the 98.56 (S1), 98.06 (S2) and 97.00 (S3).
• Resistance: Resistance levels are the psychological level of 100 (R1), followed by the 100.84 (R2) and the 101.52 (R3).
GBP/USD
• GBP/USD moved slightly lower yesterday, reaching the 1.5569 (S1) support level. If selling pressure overcomes buying pressure at that level, I expect the price to continue correcting its uptrend towards the 1.5431 (S2), near the uptrend line. Furthermore, the MACD oscillator supports the weakness of the pair since there is negative divergence between the indicator and the price action.
• Support: Support levels are at the 1.5569 (S1), 1.5431 (S2) and 1.5200 (S3).
• Resistance: Resistance is identified at 1.5674 (R1) followed by the 1.5752 (R2) and 1.5840 (R3) (daily chart) levels.
Gold
• Gold moved higher yesterday and is currently near the 1376 (R1) resistance level. The bulls do not seem to give up and we expect them to retry once more breaking above it, leading the precious metal towards the resistance of 1394 (R2). If they fail to break through that level, a retracement towards the 1347 (S1) is likely. On the long term (daily) chart the 20-day moving average remains below the 200-day moving average, thus we believe gold is still correcting its long term downtrend.
• Support: Support levels are at 1347 (S1) followed by the 1320 (S2) and 1271 (S3).
• Resistance: Resistance is identified at 1376 (R1), followed by 1394 (R2) and 1422 (R3).
Oil
• WTI moved higher yesterday, returning back to the 105.00 (S1) psychological level. A clear break above it might lead the pair towards the 107.53 (R1) resistance level, encouraging the bulls for even more upward pressure. However, since WTI remains in a trading range between the 102.62 (S2) and 108.85 (R2) boundaries, we should wait for the exit direction in order to have a better picture.
• Support: Support levels are at the psychological level of 105.00 (S1), the 102.62 (S2) and 100.80 (S3).
• Resistance: Resistance levels are at 107.53 (R1), 108.85 (R2) and the 110.40 (R3) (weekly chart)
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MARKETS SUMMARY
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Market Analysis 26/08/2013: Dollar ends good week weak
Daily Commentary23.08.2013, Time of writing: 03:30 GMT
The Big Picture Dollar ends good week weak: The dollar had a good week last week, particularly against the commodity currencies. The biggest loser in the G10 was the NZD, which dropped 3.7% vs USD, followed by AUD, down about 2%. NOK and CAD were next in line. The poor performance of the commodity currencies despite the improvement in the China data is due in part to the correlation between these currencies and EM currencies, particularly the Asian currencies, and part because these countries have large current account deficits that will now have to be financed in competition with higher US yields. The restrictions on mortgage lending unveiled last week in New Zealand have also removed some of the previously very aggressive assumptions about monetary tightening in New Zealand. I don’t think the worst is over for these currencies yet. On the other hand, the dollar fell modestly against the SEK, EUR and CHF. The strength of EUR and particularly CHF is probably the counterpart to general weakness in the EM currencies; as money flows out of EM looking for a safer home, CHF is a natural safe-haven.
The dollar was gaining Friday until the new home sales figures for July came out. They were down 13.4% mom after the prior month was revised down as well. The figures are inconsistent with other data we have on the housing market and some people reasoned that slow sales may signify a lack of supply rather than a lack of demand. Nonetheless the immediate reaction was to send US bond yields lower, Fed Funds expectations lower and the dollar lower too. The Euro was hardly changed against the yen or Swiss franc, indicating that the day’s moves were largely focused on the dollar. GBP weakened a bit, perhaps in anticipation of BoE Gov. Carney’s speech on Wednesday, when he is likely to reinforce the case for forward guidance and try to calm market expectations of higher rates.
The week gets off to a quiet start. No major Eurozone or UK indicators are out today. It’s a bank holiday in the UK. Mr. Weidmann of the Bundesbank gives a speech in Berlin on “The Struggle for a Stable Framework for Monetary Policy.” US durable goods orders for July are expected to be down 4.0% mom, a turnaround from up 4.2% in June, but that’s due to an expected correction in aircraft orders, which more than doubled in May and June to a record high. Excluding transportation equipment orders are expected to be up 0.5% mom vs flat the previous month, which could help to support the dollar. On the other hand, the Dallas Fed index is forecast to be slightly lower at 3.9 in July vs 4.4 in the previous month. The Phili Fed and Empire surveys were both lower so this would not be a total surprise.
The Market EUR/USD
• EUR/USD moved higher Friday, testing the psychological resistance level of 1.3400 (R1). Currently the pair is trading slightly below that level and a clear break above it should indicate further upward movement towards the 1.3448 (R2) and 1.3517 (R3) levels respectively. Moreover, the EUR/USD remains in an uptrend, since it is forming higher highs and higher lows, also confirmed by the rate’s reading above both the 20- and the 200-period moving averages.
• Support: Support is found at the 1.3300 (S1) psychological level, followed by the 1.3231 (S2) and the 1.3152 (S3) respectively.
• Resistance: Resistance levels are 1.3400 (R1), followed by 1.3448 (R2) and 1.3517 (R3) (daily chart).
USD/JPY
• USD/JPY moved lower Friday and is currently testing the 98.56 (S1) support level. If the bulls are strong enough to keep the pair above that level, I expect them to lead the rate towards the 100.00 (R2) psychological level. If they fail to do so, a pullback towards the 98.06 (S2) is probable. Meanwhile, a bullish cross of the 20-period moving average above the 200-period moving average has occurred, confirming the pair’s upward trend.
• Support: Support levels are the 98.56 (S1), 98.06 (S2) and 97.00 (S3).
• Resistance: Resistance levels are 99.13 (R1), followed by the psychological level of 100.00 (R2) and 100.84 (R3).
GBP/USD
• GBP/USD moved sideways, still testing the 1.5569 (S1) support level. If selling pressure overcomes buying pressure at that level, I expect the price to continue correcting its uptrend towards the trend line. Furthermore, the MACD oscillator supports the weakness of the pair since it has entered bearish territory (below zero line) and there is negative divergence between the indicator and the price action.
• Support: Support levels are at the 1.5569 (S1), 1.5431 (S2) and 1.5200 (S3).
• Resistance: Resistance is identified at 1.5674 (R1) followed by the 1.5752 (R2) and 1.5840 (R3) (daily chart) levels.
Gold
• Gold moved higher Friday, regaining levels last seen in June. Currently the price is testing the 1394 (R1) resistance level and a clear break above it would aim for the 1422 (R2) level and new short-term highs. Furthermore, the precious metal is trading above both the 20- and 200-period moving averages, confirming investors’ bullish intentions. The positive momentum is also confirmed by the crossover of the MACD above its trigger line in bullish territory above zero. On the long term (daily) chart the 20-day moving average remains below the 200-day moving average, thus we believe gold is still correcting its long term downtrend.
• Support: Support levels are at 1376 (S1) followed by the 1347 (S2) and 1320 (S3).
• Resistance: Resistance is identified at 1394 (R1), followed by 1422 (R2) and 1440 (R3) (daily chart).
Oil
• WTI moved higher Friday, breaking above the 105.00 (S1) psychological level and currently heading towards the resistance of 107.53 (R1). A clear break above that level might lead oil towards the 108.85 (R2) resistance level, encouraging the bulls for even more upward pressure. However, since WTI remains in a trading range between the 102.62 (S3) and 108.85 (R2) boundaries, we should wait for the exit direction in order to have a better picture.
• Support: Support levels are at the psychological level of 105.00 (S1), 103.44 (S2) and 102.62 (S3).
• Resistance: Resistance levels are at 107.53 (R1), 108.85 (R2) and 110.40 (R3) (weekly chart)
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MARKETS SUMMARY
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Market Analysis 27/08/2013
Daily Commentary27.08.2013, Time of writing: 03:30 GMT
The Big Picture The dollar continued its ascent yesterday despite more disappointing news on the US economy. Following last week’s lower-than-expected new home sales, yesterday’s durable goods orders also disappointed. While the market had expected the headline figure to be lower due to a fall-off in airplane sales, even the ex-transportation and ex-defense numbers declined, calling into question the strength of US investment in the light of higher interest rates. Yet USD rose against most currencies except the yen, probably due to safe-haven flows in light of the increasing tensions with Syria. (That may explain too why USD/CHF was unchanged.) The continued risk aversion in the market put more downward pressure on EM currencies, which mostly fell vs USD.
The dollar’s resilience in the face of negative news is impressive. There seem to be two schools of thought in the market: those who expect the US economy to continue to improve and thus dismiss the recent weak indicators as the usual statistical noise, and those who expect growth to remain tepid and see the recent data as confirmation of their view. The gyrations in the US bond market, which are a major determinant of the dollar, reflect the tug-of-war between these two views. The revised Q2 US GDP figures, due out on Thursday, may help to settle this argument for the time being. Market expectations are for the figure to be revised up, which may confirm the views of those who are optimistic on the US economy and thereby underpin the dollar.
The Ifo index for August is the main feature today. The market is expecting the fourth consecutive rise for the business climate index, to 107.0 from 106.2. Better sentiment in Europe’s largest economy may support EUR/USD today. In the US, the closely watched S&P/Case-Shiller house price index is coming out. Market consensus is 1.0% mom in June, more or less the same as in May. The Richmond Fed manufacturing index is forecast to improve to -5 in August from -11 in July. The Conference Board consumer confidence index for August is expected to be slightly lower at 79.5 vs 80.3. This would be less of a drop than the preliminary U of Michigan survey for August, which fell to 80.0 from 85.1. Within the Conference Board survey, market attention will focus particularly on the “jobs plentiful/jobs hard to get” indicator, which will be one more input to the FOMC’s decision on whether to begin tapering off QE.
The Market EUR/USD
• EUR/USD moved sideways yesterday, remaining between the 1.3300 (S1) and 1.3400 (R1) psychological levels. Currently the pair lies below the 1.3400 (R1) level. A clear break above it should indicate further upward movement towards the 1.3448 (R2) and 1.3517 (R3) levels respectively. It still looks as if EUR/USD remains in an uptrend, since it is forming higher highs and higher lows, also confirmed by the rate’s reading above both the 20- and the 200-period moving averages.
• Support: Support is found at the 1.3300 (S1) psychological level, followed by 1.3231 (S2) and 1.3152 (S3) respectively.
• Resistance: Resistance levels are 1.3400 (R1), followed by 1.3448 (R2) and 1.3517 (R3) (daily chart).
USD/JPY
• USD/JPY moved lower overnight, breaking below the 98.56 (R1) level and finding support at 98.06 (S1). Currently the rate is testing that support and a break below it would target the blue uptrend line followed by the psychological 97.00 (S2) level. If selling pressure fails to overcome, then the price will form a higher low, confirming its uptrend and the scenario for further upward extension towards the 100.00 (R3) level will be reactivated.
• Support: Support levels are the 98.06 (S1), 97.00 (S2) and 95.77 (S3).
• Resistance: Resistance levels are 98.56 (R1), followed by 99.13 (R2) and the psychological level of 100.00 (R3).
GBP/USD
• GBP/USD continued moving sideways, still struggling at the 1.5569 (S1) support level. If the bears manage to overcome that hurdle, we expect the correction to continue towards the uptrend line and the 1.5431 (S2) support respectively. If they fail to win that battle, then the pair will continue its uptrend towards the 1.5674 (R1) resistance level. Meanwhile, the MACD oscillator supports the weakness of the pair since it remains in bearish territory (below zero line).
• Support: Support levels are at the 1.5569 (S1), 1.5431 (S2) and 1.5200 (S3).
• Resistance: Resistance is identified at 1.5674 (R1) followed by the 1.5752 (R2) and 1.5840 (R3) (daily chart) levels.
Gold
• Gold moved slightly higher and then slightly lower yesterday, returning back to the 1394 (R1) resistance level. A clear break above it would aim for the 1422 (R2) level and new short-term highs. Furthermore, the precious metal is trading above both the 20- and 200-period moving averages, confirming investors’ bullish intentions. The positive momentum is also confirmed by the crossover of the MACD above its trigger line in bullish territory above zero.
• Support: Support levels are at 1376 (S1) followed by the 1347 (S2) and 1320 (S3).
• Resistance: Resistance is identified at 1394 (R1), followed by 1422 (R2) and 1440 (R3) (daily chart).
Oil
• WTI moved lower, covering the gap it created at yesterday’s opening, when it gapped higher from Friday’s closing level. The price remains within its trading range between the 102.62 (S3) and 108.85 (R2) boundaries, where it has remained since the beginning of July. A clear break of either side should reveal investors’ views and we should reconsider our analysis after the new trend becomes clear.
• Support: Support levels are at 105.50 (S1), 103.44 (S2) and 102.62 (S3).
• Resistance: Resistance levels are at 107.53 (R1), 108.85 (R2) and 110.40 (R3) (weekly chart)
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MARKETS SUMMARY
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Market Analysis 28/08/2013: All eyes on Syria
Daily Commentary 28.08.2013, Time of writing: 03:30 GMT
The Big Picture All eyes on Syria: Syria dominated the day’s activity as there was talk about the Western powers bombing the country in retaliation for President Assad’s use of chemical weapons. Oil prices spiked sharply higher and there was a flight-to-safety in currencies, with USD/JPY in particular falling sharply and USD/CHF also falling. Although USD was mixed against the G10 currencies, it gained against virtually all EM currencies, particularly those that import oil such as INR. However IDR (Indonesia is a member of OPEC) and MXN also fell vs USD, so this was clearly more of a “risk off” move than simply looking at oil importers vs exporters. The US economic indicators were generally positive, but bond yields declined and Fed Funds expectations continued to plunge, indicating that the market is concerned that oil prices could be headed high enough to derail the US economy (and hence the Fed’s tapering). Gold and silver gained.
What happens to currencies when the oil price spikes? Looking back at the last period of rising oil prices – January to July 2008, when WTI peaked out at $142/bbl – the main winners were BRL, CHF, AUD, EUR, and DKK in that order, while the losers were ZAR, KRW, CAD, NZD, and GBP. Indeed yesterday BRL was one of the few EM currencies to gain vs USD. The difference between the 2008 experience and now though is that the former rise in prices was due to higher demand, while the current spike is due to a disruption of supply. I think the currencies that lose out from higher oil prices may well be similar in both periods, but those that gain are likely to be a different bunch. CHF is likely to remain among the winners. USD should benefit more this time as US oil production has risen considerably since 2008, plus of course when oil prices are higher, other countries have to buy more dollars to pay for their oil. EUR may benefit once again from petroleum-exporting countries diversifying their receipts. JPY may gain from some flight-to-safety flows, but its oil dependency has risen considerably because its nuclear reactors are all shut down, so it may be more vulnerable than before.
The focus today will be on Bank of England Governor Mark Carney’s first speech, in which he is expected to defend his commitment to keep interest rates steady until UK unemployment comes down to 7.0% under the Bank’s new forward guidance. GBP has weakened in anticipation of the speech so there could be a “sell the rumor, buy the fact” reaction afterwards if he is not convincing enough. In the US, pending home sales for July are forecast to remain unchanged (previous -0.4%) mom. A result like that could help to calm fears of a weakening housing market and be USD supportive (if people are looking at the data, which they are probably not today). Also, the weekly MBA mortgages applications will be released (no forecast).
The Market EUR/USD
• EUR/USD moved higher yesterday, once again finding resistance at the psychological level of 1.3400 (R1). A clear break above that significant level should signal further upward movement towards the 1.3448 (R2) and 1.3517 (R3) levels respectively. However, a repeated fail of the long holders to drive the pair above it should keep it between the 1.3300 (S1) and 1.3400 (R1) boundaries. Meanwhile, the 20-period moving average remains above the 200-period moving average, thus our trend is still considered an uptrend.
• Support: Support is found at the 1.3300 (S1) psychological level, followed by 1.3231 (S2) and 1.3152 (S3) respectively.
• Resistance: Resistance levels are 1.3400 (R1), followed by 1.3448 (R2) and 1.3517 (R3) (daily chart).
USD/JPY
• USD/JPY plunged during yesterday’s activity, violating the 98.09 (R1) level and the uptrend line. Currently the pair is finding support at the 97.00 (S1) psychological level and a failure to break below it should reinforce upward momentum back to 98.09 (R1). However, if the downward bias continues, I expect bears to lead the rate towards 95.77 (S2). Stochastic oscillator favors the first scenario, since it lies in an overbought area, heading towards the exit.
• Support: Support levels are the psychological 97.00 (S1), followed by the 95.77 (S2) and 93.77 (S3).
• Resistance: Resistance levels are 98.09 (R1), followed by 99.13 (R2) and the psychological level of 100.00 (R3).
GBP/USD
• GBP/USD moved lower, breaking below the 1.5569 (R1) level and finding support at the uptrend line. Currently the pair is lying above the trend line and a return above 1.5569 (R1) might indicate the end of the correction we are experiencing since the 21st of August. However, the MACD oscillator remains in bearish territory (below the zero line), telling us to be careful if a break below the trend line and the 1.5431 (S1) level occurs.
• Support: Support levels are at the 1.5431 (S1), 1.5200 (S2) and 1.5100 (S3).
• Resistance: Resistance is identified at 1.5569 (R1) followed by 1.5674 (R2) and 1.5752 (R3) (daily chart).
Gold
• Gold moved higher, penetrating upwards the 1394 (S1) level and reaching 1422 (R1). The price is finding resistance at that level, which coincides with the Fibonacci 38.2% retracement of the October-July downtrend (daily chart) and a break above it should lead the precious metal towards the 1440 (R2) and 1485 (R3) (Fibo 50%). Additionally, MACD oscillator remains above its trigger in a bullish zone above zero, confirming gold’s bullish momentum.
• Support: Support levels are at 1394 (S1) followed by the 1376 (S2) and 1347 (S3).
• Resistance: Resistance is identified at 1422 (R1), followed by 1440 (R2) and 1485 (R3), both identified from the daily chart.
Oil
• WTI surged to 111.65 overnight, crushing three resistance levels in a row (107.53, 108.85 and 110.40) and most importantly exiting the trading range that was in effect since the beginning of July. Currently the price is moving towards new highs and resistance areas are only identified on the weekly chart. Both Stochastic and RSI oscillators lie in their overbought areas and a pullback in the recent future should not surprise us.
• Support: Support levels are at 110.40(S1), 108.85 (S2) and 107.53 (S3).
• Resistance: Resistance levels are at 114.21 (R1), 121.13 (R2) and 128.54 (R3), all found from the weekly chart.
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MARKETS SUMMARY
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Market Analysis 29/08/2013: EM wild, DM calm
Daily Commentary29.08.2013, Time of writing: 03:30 GMT
The Big Picture EM wild, DM calm: The contrast between the volatility in EM and typical summer calm in G10 is astonishing. Over the last 24 hours USD/IDR has traded between 10,913 and 11,433, a 4.8% range, USD/BRL traded in a 4.1% range and USD/INR a 3.0% range. That’s over one day or so. By contrast, EUR/USD has started the morning in Europe with a 1.32 or 1.33 handle for 32 straight business days, according to our data. The turmoil in EM shows no signs of abating while the shock to DM from the Syrian crisis calmed down somewhat yesterday. An attack on Syria seemed less immanent yesterday as the UN inspectors suggested the need more time to complete their report and Russian’s UN representative said no action can be taken until they complete their report. Oil prices came down and many of the risk aversion trades retreated. As a result most currencies Wednesday just moved in the opposite direction from what they had done on Tuesday.
Bank of England Gov. Carney’s speech yesterday failed to change people’s view of UK monetary policy. He argued that the UK was not likely to reach 7% unemployment by mid-2015, when the first interest rate move is priced in, and stressed furthermore that the 7% level was not a trigger for tightening in any event. Furthermore he said the Bank would be willing to ease further if high market rates started to impact growth. But that’s the rub – they have to start impacting growth. So long as growth remains in an uptrend, he implied, they won’t do anything. That just reinforced the market’s belief that the Bank is likely to start tightening in 2015 and GBP strengthened. I’m not so sure; I think the UK economy may be weaker than many private-sector economists are expecting. I think as growth expectations are revised down, so too will GBP/USD forecasts.
The economic calendar is looking pretty busy today. In Europe, the German unemployment rate in August is forecast to remain unchanged at 6.8%. CPI for August is estimated to have risen 0.1% mom, a slowdown from July’s +0.5%, which is not likely to impact ECB thinking. Business confidence in France and consumer confidence in Italy and the UK are also due out today. They are expected to be unchanged to higher, corroborating the gradual improvement in the Eurozone. In the US, 2Q GDP is expected to be revised up to 2.2% from 1.7%. That could help to improve confidence in the US although 2Q is looking further and further in the past. Initial jobless claims in August are projected to show a smaller rise of 331K vs 336K last week, which may help to reassure the markets that tapering is indeed on its way.
The Market EUR/USD
• EUR/USD moved lower yesterday, finding support at the psychological level of 1.3300 (S1). Currently the pair is moving in a sideways trading range between the psychological levels of 1.3300 (S1) and 1.3400 (R1). Investors would have to push the pair outside of those boundaries in order to let it enter a trending phase. For the past few days, the MACD oscillator’s value is around zero, confirming the neutral momentum of the price and the sideways action.
• Support: Support is found at the 1.3300 (S1) psychological level, followed by 1.3231 (S2) and 1.3152 (S3) respectively.
• Resistance: Resistance levels are 1.3400 (R1), followed by 1.3448 (R2) and 1.3517 (R3) (daily chart).
USD/JPY
• USD/JPY moved higher during yesterday’s activity, rebounding once again off the psychological level of 97.00 (S1). Currently the pair is below the 98.09 (R1) resistance level and the previous uptrend line. An upward break of them should target the next resistance at 99.13 (R2). However, if it finds resistance at those levels, forming a lower high, we expect the downward movement to continue.
• Support: Support levels are the psychological 97.00 (S1), followed by the 95.77 (S2) and 93.77 (S3).
• Resistance: Resistance levels are 98.09 (R1), followed by 99.13 (R2) and the psychological level of 100.00 (R3).
GBP/USD
• GBP/USD moved sideways during yesterday’s session, after managing to test with a candle’s shadow the 1.5431 (S1) support level. Currently the pair is trading at the uptrend line and if the bulls are strong enough to push it higher, I expect them to break the 1.5569 (R1) level and target the resistance of 1.5674(R2). This scenario should confirm the end of the short term correction and the continuation of the rate’s uptrend. However, the MACD remains below zero and we should wait to enter its bullish zone in order to add significance to the aforementioned probable move.
• Support: Support levels are at the 1.5431 (S1), 1.5200 (S2) and 1.5100 (S3).
• Resistance: Resistance is identified at 1.5569 (R1) followed by 1.5674 (R2) and 1.5752 (R3) (daily chart).
Gold
• Gold moved lower yesterday, after finding resistance at the area of 1422 (R1) which coincides with the Fibonacci 38.2% retracement of the October-July downtrend (daily chart). Currently the price is sitting at the 20-period moving average and a cross below it and the 1394(S1) support should signal the beginning of a short-term correction. Additionally, MACD oscillator remains in a bullish zone above zero, but crossed below its trigger line, confirming the current weakness of the precious metal.
• Support: Support levels are at 1394 (S1) followed by the 1376 (S2) and 1347 (S3).
• Resistance: Resistance is identified at 1422 (R1), followed by 1440 (R2) and 1485 (R3), both identified from the daily chart.
Oil
• WTI corrected yesterday’s rally, returning to test the upper boundary of the trading range at 108.85(S1). If the price achieves a rebound at that level, it will strengthen the likelihood that the uptrend continues. Meanwhile, both Stochastic and RSI oscillators exited their overbought areas confirming the pre-mentioned correction.
• Support: Support levels are at 108.85(S1), 107.53 (S2) and 105.50 (S3).
• Resistance: Resistance levels are at 112.14 (R1), followed by 121.13 (R2) and 128.54 (R3), both found from the weekly chart.
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MARKETS SUMMARY
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Market Analysis 30/08/2013: Oil in the spotlight
Daily Commentary 30.08.2013, Time of writing: 03:30 GMT
The Big Picture Oil in the spotlight: Once again the oil market was the center of attention. Oil moved higher during the US day on news that the UN inspectors in Syria would leave earlier than expected, which gave rise to thoughts that perhaps they had found something important. But later the International Energy Association (IEA) said that the global oil market is well supplied and doesn’t require the release of emergency stockpiles, and furthermore it “stands ready” to respond by releasing emergency stocks if there is a major disruption. The comments sent oil prices down sharply. Yet most EM currencies continued to fall, demonstrating that the rout in EM is only exacerbated by risk aversion linked to daily events, not caused by it. The dollar gained against all its G10 counterparts.
The European economic news yesterday was largely ignored while the US economic news moved the market. EUR/USD should have rallied during the European day based on the better-than-expected French and Italian economic sentiment and business confidence surveys. In addition, the ECB’s Nowotny said that forward guidance won’t remain in place forever, which also should have shored up EUR/USD, but there was no response. (On the other hand, German CPI was a bit lower than expected and unemployment rose a bit instead of falling, which would tend to offset the impact somewhat.) On the other hand, the better-than-expected upward US GDP revision did push EUR/USD down when it came out. This suggests to me that the market views the ECB as on hold while the Fed retains the ability to move and so the focus is much more on the US data than on the European data. Meanwhile, there was virtually no response in USD/JPY to the end-of-month onslaught of data from Japan, including a rise in headline inflation to +0.7% yoy from +0.2% (as expected). All eyes are on the Fed and the US data; remember that when you are trading.
Speaking of data, there are several Eurozone figures out today: unemployment for July is expected to remain unchanged at 12.1%, while economic confidence in August is expected to rise to 93.8 from 92.5 and CPI inflation for August is expected to slow to 1.4% yoy from 1.6%. German retail sales are expected to have risen 0.6% mom in July vs a revised -0.8% mom in June. In general such news might be EUR-supportive but as outlined above, I don’t expect much reaction. In the US, growth in both personal income and spending are forecast to have decelerated in July: income to +0.2% vs 0.3%, spending to +0.2% from +0.5%. That could take some of the steam out of USD. On the other hand, the U of Michigan consumer confidence figure for August is expected to be revised up slightly to 80.5 vs the preliminary estimate of 80.0. Canada’s 2Q GDP is forecast to have slowed to +1.6% qoq annualized from 2.5% in Q1, which could put further upward pressure on USD/CAD. But in general, I expect the oil market to be more important for FX than the indicators today.
The Market EUR/USD
• EUR/USD moved lower yesterday, breaking below the psychological level of 1.3300 (R1). Currently the pair is testing the 1.3231 (S1) support level and if the bears continue their momentum, I expect them to break below it and target the 1.3152 (S2). On the other hand, if the price rebounds at that support, it might return to test once again the 1.3300 (R1) level. However, the MACD oscillator lies below zero and its trigger line, favoring the bearish side of our analysis.
• Support: Support is found at the 1.3231 (S1) psychological level, followed by 1.3152 (S2) and 1.3077 (S3) respectively.
• Resistance: Resistance levels are 1.3300 (R1), followed by 1.3400 (R2) and 1.3448 (R3) respectively.
USD/JPY
• USD/JPY moved higher, breaking above the 98.09 (S1) level. Currently the rate is trading near that level and if buying pressure pushes it higher, it should test the resistance of 99.13 (R1). Moreover, the pair is moving in an upward sloping channel marked in blue, and the MACD just poked its nose into bullish territory above zero, adding positive indications.
• Support: Support levels are at 98.09(S1), followed by psychological level of 97.00 (S2) and 95.77 (S3).
• Resistance: Resistance levels are 99.13 (R1), followed by the round number of 100.00 (R2) and the 100.84 (R3) level.
EUR/GBP
• EUR/GBP fell sharply during yesterday’s activity, crushing the 0.8577(R2) and 0.8545 (R1) levels respectively. The current move is an indication that the price has returned to its downtrend after correcting to the Fibonacci 50% retracement level (0.8634) of the previous move. If the bears continue their pressure, they will have to challenge the 0.8503 (S1) support, and a break below it should drive the battle towards the 0.8480 (S2) level. Additionally, the MACD oscillator’s reading is below zero, indicating bearish momentum.
• Support: Support levels are at 0.8503 (S1), 0.8480 (S2) and 0.8437 (S3) (daily chart).
• Resistance: Resistance is identified at 0.8545 (R1) followed by 0.8577 (R2) and 0.8604 (R3).
Gold
• Gold moved sideways, remaining between the 1394 (S1) support and 1422 (R1) resistance levels. The price is still near the 20-period moving average and a cross below it and the 1394 (S1) support should signal the beginning of a short-term correction. Additionally, MACD oscillator remains in a bullish zone above zero, but crossed below its trigger line, confirming the current weakness of the precious metal.
• Support: Support levels are at 1394 (S1) followed by the 1376 (S2) and 1347 (S3).
• Resistance: Resistance is identified at 1422 (R1), followed by 1440 (R2) and 1485 (R3), both identified from the daily chart.
Oil
• WTI didn’t manage to stay above its trading range, and with the selling pressure winning yesterday’s battle, returned to its familiar territory. Currently oil is testing the 107.53 (S1) support and a break below it should target the 105.50 (S2) support. However since we cannot establish a trending direction, we should wait to see an exit of the sideways formation’s boundaries before jumping on the trend.
• Support: Support levels are at 107.53(S1), 105.50(S2) and 103.44 (S3).
• Resistance: Resistance levels are at 108.85(R1), followed by 112.14 (R2) and 114.21 (R3), found from the weekly chart.
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Market Analysis 02/09/2013
Daily Commentary02.09.2013, Time of writing: 03:30 GMT
The Big Picture The dollar was little changed Monday morning, gaining against some of the G10 currencies but easing slightly against the three commodity currencies and GBP. It was also mixed vs the EM currencies, ranging from +2.9% against the beleaguered IDR but losing 2.2% vs the similarly troubled INR. The weekend announcement of a rise in China’s official PMI to a 16-month high of 51.0, plus the rebound in the HSBC/Markit PMI to 50.1 from 47.7, restored some confidence in EM, plus the fall in oil prices as the threat of US intervention in Syria recedes has also helped sentiment. As a result most of the Asian currencies were gaining. But the fleeting nature of the recovery can be seen from the fact that four Asian stock markets were already lower by mid-day Asian time (seven higher, and China mixed).
There was some talk over the weekend about whether EM countries were going to put together a fund to defend their currencies. While that plan develops, we could be in for some respite in the EM world, particularly after the better China data. That might help currencies such as HUF, which have been losing ground, and PLN, as well as the Asian currencies. But overall I would expect this week to see continued USD strength. Last week should have been a good one for EUR: consistently strong economic indicators (rising economic confidence, falling unemployment in Italy) plus talk of rate cuts by an ECB member, yet European equities had one of their worst weeks of the year so far and EUR/USD traded below 1.3200 for the first time since Aug. 2nd. The currency movement alone could have been end-of-month reserve rebalancing but the equities suggest that as the summer ends, “today is the tomorrow you worried about yesterday” becomes the slogan. People have been talking for a long time about what might happen after the German elections; now that those elections are almost here, the concern about what will happen afterwards becomes more real. That – plus the expected rise in non-farm payrolls this week – should support the dollar this week, in my view.
The main data for today’s market will be the final reading of the Eurozone manufacturing PMI for August, together with manufacturing PMIs for countries that don’t release preliminary numbers, such as the UK, Italy and the peripheral countries. UK manufacturing PMI in August is forecast to rise at 55.0 from 54.6 previously, which could boost GBP further. The US and Canada are out on holiday today so there are no indicators from there. The US ISM will be released Tuesday.
On Wednesday we get the revised Eurozone Q2 GDP and the final service sector PMIs for August, plus the US trade data for July and the Beige Book. Thursday will be a busy day; in addition to all the central bank meetings, we also get German factory orders, and in the US, the ADP employment report (released one day later than usual because of the Labor Day holiday), factory orders and the service sector PMI. On top of that, the two-day G20 Summit in St. Petersberg begins on Thursday. Finally on Friday, German and UK industrial production will be released as well as the NFP.
The Market EUR/USD
• EUR/USD moved lower during Friday’s session, breaking below the 1.3231 (R1) level which was support on Friday (it now switches to resistance). Currently the price is heading towards the 1.3152 (S1) support and a clear break below it should lead us towards the next support at 1.3077 (S2). Moreover, the 20-period moving average has just crossed below the 200-period moving average and alongside with MACD’s reading lying in a bearish territory, they confirm the bearish picture of the pair.
• Support: Support is found at the 1.3152 (S1) level, followed by 1.3077 (S2) and the psychological level of 1.3000 (S3) respectively.
• Resistance: Resistance levels are 1.3231(R1), followed by the psychological levels of 1.3300 (R2) and 1.3400 (R3).
USD/JPY
• USD/JPY moved higher after several consultative panels backed PM Abe in recommending an increase with the sales tax, coupled with stimulus to offset the blow to consumption. The pair currently lies between the 98.09 (S1) and 99.13 (R1) levels. If buying pressure overcomes selling pressure, I expect the bulls to drive the battle towards the 99.13 (R1) resistance, where an upward break should lead them towards the psychological level of 100.00 (R2). The pair remains in its upward sloping channel marked in blue, and the MACD lies in its bullish territory above zero, adding bullish indications for a further upward movement.
• Support: Support levels are at 98.09(S1), followed by psychological level of 97.00 (S2) and 95.77 (S3).
• Resistance: Resistance levels are 99.13 (R1), followed by the round number of 100.00 (R2) and the 100.84 (R3) level.
GBP/USD
• GBP/USD moved higher Friday after finding support at the uptrend line and the Fibonacci 38.2% retracement level (1.5482) of the previous upward move. Currently the pair is below the 1.5569 (R1) resistance level and if buying pressure is strong enough to drive the price above it, it would indicate the end of the downward correction and the continuation of the rate’s uptrend. However, MACD’s value is negative, still indicating bearish momentum, and in my opinion we should wait for it to enter its bullish zone in order to confirm the pre mentioned scenario.
• Support: Support levels are at 1.5425 (S1), 1.5296 (S2) and 1.5200 (S3).
• Resistance: Resistance is identified at 1.5569 (R1) followed by 1.5674 (R2) and 1.5752 (R3).
Gold
• Gold moved lower Friday, breaking below the 1394 (R1) level and testing with a candle’s shadow the 1376(S1) support level. Currently the price is lying between the aforementioned levels and if the bears are strong enough to push it lower, I expect them to target the trend line and the support of 1347 (S2). It is worth noting that the MACD oscillator just entered its bearish territory, after being bullish since the 9th of August. For the moment, we consider this downward movement a short term correction of the precious metal, since the price is still above the trend line and the 200-period moving average.
• Support: Support levels are at 1376 (S1), followed by the 1347 (S2) and 1320 (S3).
• Resistance: Resistance is identified at 1394 (R1), followed by 1422 (R2) and 1440 (R3).
Oil
• WTI moved lower on Friday, breaking below the 107.53 (R1) level. The price also achieved a break below the 105.50(S1) with a candle’s shadow, but didn’t manage to maintain below it. However, the WTI remains in its trading range between the 102.62 (S3) and 108.85 (R2), after last week unsuccessful attempt to escape from it, and as a result we should wait for the real exit in order to determine the next trending direction of the price.
• Support: Support levels are at 105.50 (S1), 103.44 (S2) and 102.62 (S3).
• Resistance: Resistance levels are at 107.53 (R1), followed by 108.85 (R2) and 112.14 (R3).
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Market Analysis 03/09/2013: Better PMIs mean better risk appetite
Daily Commentary02.09.2013, Time of writing: 03:30 GMT
The Big Picture Better PMIs mean better risk appetite: Risk appetite made a comeback Monday as manufacturing purchasing managers’ indices from around the world generally beat expectations, raising expectations for global growth. The rebound was particularly noticeable in EM currencies, many of which gained against the dollar in a reversal of the recent trend. In the G10, AUD and NZD gained as Asian stock markets rose for the second day in a row, while USD/JPY moved higher along with Japanese stocks, as is usual.
Amidst this recovery in risk taking, it’s noticeable that EUR/USD finally started the day in Europe with a 1.31 handle, ending a string of 1.32 or 1.33 starting rates that went on for 34 consecutive business days. While EUR/USD remains within its trading range, the small breakout on the downside is significant given the generally good PMIs that came out yesterday. The EU as a whole was revised up a bit (to 51.4 from 51.3) and even Greece and Spain improved, with Spain finally recovering above the 50-line to 51.1. That EUR/USD could move lower despite such vivid signs of recovery (or at least stabilization) in Europe and with the US closed for a holiday suggest to me strong pro-USD sentiment. Assuming that this Friday’s non-farm payrolls come in as expected, leading the Fed to begin tapering off its quantitative easing at its meeting this month, I expect the dollar’s strength to continue and to spread to the other G10 currencies as well. GBP seems particularly vulnerable to me as the Bank of England is likely to fight the market’s assumption of earlier-than-expected tightening (although the technical suggest further GBP strength; see technical section). Meanwhile, a Bloomberg poll of currency strategists ranks the CHF as the #1recommended short among the G10 currencies. The reasoning is that the CHF has benefitted from money flowing out of the EUR; as the situation in the Eurozone stabilizes, the upward pressure on CHF should abate and the currency fall. This is certainly possible but as I expect the EUR to weaken further, especially following the German elections in late September, that would mean little room for EUR/CHF to move lower.
The big news today is already out as the Reserve Bank of Australia (RBA) kept its overnight cash rate unchanged at 2.5%. AUD gained following the decision as the RBA’s statement accompanying the decision omitted the usual reference to there being scope for more easing. Given the resurgence in confidence in the Asian economies and the rethinking of the likely path of Australian monetary policy, AUD could be in for some recovery over the next several sessions. If so, AUD/JPY could be a good way to play this as JPY is likely to weaken further as confidence comes back and Tokyo stocks move higher.
In other data, the UK construction PMI for August is forecast to fall slightly 0.1 to 56.9. Eurostat will release data on Eurozone PPI, which is expected to be up 0.1% mom vs an unchanged figure in the previous month, but this is not usually market affecting. Later in the day the US ISM manufacturing index is forecast to decline to 54.0 in August from 55.4, which would be a contrast with the improvement shown in other countries and could weaken USD somewhat. Overnight the focus will be on Australia Q2 GDP, where the economy is expected to expand 0.6% qoq for the third consecutive quarter.
The Market EUR/USD
• EUR/USD moved slightly lower, remaining between the 1.3152 (S1) and 1.3231 (R1) levels. Currently the short holders are driving the rate towards the 1.3152 (S1) support and a clear downward break of it would aim for the next support at 1.3077 (S2). Moreover, the 20-period moving average lies below the 200-period moving average and alongside with MACD’s reading lying in a bearish territory, they confirm the bearish picture of the pair.
• Support: Support is found at the 1.3152 (S1) level, followed by 1.3077 (S2) and the psychological level of 1.3000 (S3) respectively.
• Resistance: Resistance levels are 1.3231(R1), followed by the psychological levels of 1.3300 (R2) and 1.3400 (R3).
USD/JPY
• USD/JPY moved noticeably higher yesterday, easily breaking above the 99.13 (S1) level (yesterday’s resistance) and reaching the upper boundary of the upward sloping channel. The bulls are now setting the target at the psychological round number of 100.00 (R1) and if they manage to overcome it, they are likely to trigger extensions towards 100.84 (R2).However, since both the RSI and Stochastic oscillator lie on their overbought area, we should not be surprised if we observe a pullback in the near future. On the longer time frame (daily chart), the price exited the upper boundary of a symmetrical triangle, adding significance to the pair’s bullish attitude.
• Support: Support levels are at 99.13(S1), followed by 98.09 (S2) and the psychological level of 97.00 (S2).
• Resistance: Resistance levels are the round number of 100.00 (R1), followed by the 100.84 (R2) and the 101.52 (R3) levels respectively.
EUR/GBP
• EUR/GBP continued falling yesterday, breaking below 0.8503 (R1). Currently the pair is testing the 0.8480 (S1) support level and if the bears continue their pressure, I expect them to drive the pair towards new short term lows. Furthermore, MACD oscillator’s reading is negative, below its trigger line, and alongside with the moving averages’ bearish cross, confirms the rate’s downward momentum.
• Support: The only support level identified on the short term horizon is at 0.8480 (S1), followed by 0.8437(S2) and 0.8410 (S3), both found from the daily chart.
• Resistance: Resistance is identified at 0.8503 (R1) followed by 0.8545 (R2) and 0.8577 (R3).
Gold
• Gold moved sideways yesterday, making minor moves and struggling below the 1394 (R1) level. A clear failure to break above that resistance should drive the price towards the 1376 (S1) and 1347 (S2) levels. It is worth noting that the MACD oscillator lies in its bearish territory, below its trigger line, after being bullish since the 9th of August. For the moment, we consider this downward movement a short term correction of the precious metal, since the price is still above the trend line and the 200-period moving average.
• Support: Support levels are at 1376 (S1), followed by the 1347 (S2) and 1320 (S3).
• Resistance: Resistance is identified at 1394 (R1), followed by 1422 (R2) and 1440 (R3).
Oil
• WTI moved sideways yesterday, remaining between the 105.50 (S1) and 107.53 (R1) levels. WTI remains in its trading range between the 102.62 (S3) and 108.85 (R2), after last week’s unsuccessful attempt to escape from it, and as a result we should wait for the real exit in order to determine the next trending direction of the price.
• Support: Support levels are at 105.50(S1), 103.44(S2) and 102.62 (S3).
• Resistance: Resistance levels are at 107.53 (R1), followed by 108.85 (R2) and 112.14 (R3).
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Market Analysis 04/09/2013: Good news moves USD but not EUR
Daily Commentary04.09.2013, Time of writing: 03:30 GMT
The Big Picture Good news moves USD but not EUR : Once again, EUR didn’t rally on better-than-expected news about the Eurozone economy but USD certainly rallied on good news about the US. The rise in Eurozone manufacturing PMIs announced Monday failed to support EUR/USD, but the dollar moved generally higher Tuesday after a surprising rise in the manufacturing ISM index. It had been expected to decline to 54.0 in August from a robust 55.4 in July but instead it rose further to 55.7. The index is being driven by extremely high readings for new orders and production. The strength in new orders is particularly encouraging, because it is a leading indicator of future manufacturing and suggests that the September ISM reading will be similarly strong. News that several senior Republicans backed President Obama in recommending military action in Syria dampened the bullish sentiment, but nonetheless rate forecasts from the Fed Funds futures finished the day as much as 5 bps higher to equal the 5 July peak.
The only G10 currency to make a noticeable gain against USD was the AUD, which continued the rally that started after Tuesday’s Reserve Bank of Australia meeting. We think this move has further to run and are now recommending going long AUD, particularly vs JPY and EUR. The Commitment of Traders (COT) report shows short AUD positions at nearly the lowest level in 5 years; we could see some position closing that would send the currency higher. Meanwhile, better risk sentiment should keep JPY on a depreciating trend. Or again looking at the COT report, we can see that EUR positions are at the high end of the range for the last five years. Closing out of those positions as EUR/USD starts to break out on the downside could weaken EUR.
It was noticeable though that despite the improvement in risk sentiment and the generally brighter outlook for the global economy, EM currencies continued to deteriorate. It’s hard to imagine how INR and IDR can lose so much every day, but they do. This is getting worrisome. We should remember that large crises can start from small beginnings. Thailand was just a tiny part of the global economy back in 1997 when it touched off the Asia Crisis. Brazil, Indonesia, India, South Africa and Turkey, the five countries at the epicenter of this year’s EM troubles, are 15x as large as Thailand was then. That’s one reason why I am not as bearish on CHF as most analysts. I think there are plenty more crises to come and the safe-haven CHF, backed by Switzerland’s huge current account surplus, is likely to remain in demand.
Final service sector PMIs for August for the Eurozone are due out today, but given that Monday’s manufacturing indices barely made any impact on the market, I wouldn’t expect these to have much effect either. Eurozone retail sales for July are expected to increase 0.2% mom, a turnaround from -0.5% mom in June, which would agree with the small rise in consumer confidence that we saw during the month. That could bolster EUR somewhat. Revised Eurozone GDP for Q2 will also be released today; the headline figure is rarely revised. In the US, the surprisingly narrow trade deficit of USD 34.2bn in June is expected to have widened back to a more normal level in July of USD 38.8bn. Later in the day, the Fed releases the Beige book. The Bank of Canada Monetary Policy Council meets; economists unanimously expect it to keep the overnight rate unchanged at 1.0%.
The Market EUR/USD
• EUR/USD continued making minor moves to the downside, remaining between the 1.3152 (S1) and 1.3231 (R1) levels. At the time of writing the pair is slightly above the 1.3152 (S1) support. A clear downward break of that level would aim for the next support at 1.3077 (S2). We expect EUR/USD to move in that direction as the 20-period moving average lies below the 200-period moving average and alongside with MACD’s reading lying in a bearish territory, they confirm the bearish picture for the pair.
• Support: Support is found at the 1.3152 (S1) level, followed by 1.3077 (S2) and the psychological level of 1.3000 (S3) respectively.
• Resistance: Resistance levels are 1.3231(R1), followed by the psychological levels of 1.3300 (R2) and 1.3400 (R3).
USD/JPY
• USD/JPY moved sideways after finding resistance on the upper boundary of the uptrend channel. The pair is still trading in an uptrend, but currently lies between the 99.13 (S1) and the psychological round number of 100.00 (R1). A clear break above that significant level should reveal investors’ intentions. I expect them to challenge the 100.84 (R2) level next. However, since both the RSI and Stochastic oscillator lie near their overbought levels, we should not be surprised if we observe a pullback in the near future (although in recent months USD/JPY has occasionally remained in technically overbought territory for significant lengths of time). On the longer time frame (daily chart), the price exited the upper boundary of a symmetrical triangle, adding significance to the pair’s bullish attitude.
• Support: Support levels are at 99.13(S1), followed by 98.09 (S2) and the psychological level of 97.00 (S3).
• Resistance: Resistance levels are the round number of 100.00 (R1), followed by the 100.84 (R2) and the 101.52 (R3) levels respectively.
GBP/USD
• GBP/USD moved sideways yesterday, still struggling below the 1.5569 (R1) resistance level. If buying pressure is strong enough to push the price above that level, it would indicate the end of the downward correction and the continuation of the uptrend towards the next resistance at 1.5674 (R2). The MACD oscillator crossed above its equilibrium zero line, indicating bullish momentum for the pair and favoring the aforementioned scenario.
• Support: Support levels are at 1.5425 (S1), 1.5296 (S2) and 1.5200 (S3).
• Resistance: Resistance is identified at 1.5569 (R1) followed by 1.5674 (R2) and 1.5752 (R3).
Gold
• Gold moved higher after managing to overcome the 1394 (S1) level (yesterday’s resistance). Currently the price is heading towards the 1422 (R1) resistance level. If buyers are strong enough to push the price above it, they are likely to target the 1440 (R2) level, thus establishing new short-term highs. The MACD returned to its familiar territory above zero, adding significance to the price’s upward momentum. However, a failure for the price to move higher might signal the continuation of the short-term correction we are experiencing since last week.
• Support: Support levels are at 1394 (S1), followed by 1376 (S2) and 1347(S3).
• Resistance: Resistance is identified at the1422 (R1) level, followed by 1440 (R2) and 1485 (R3) (daily chart).
Oil
• WTI moved significantly higher as senior US Republican Party leaders endorsed President Obama’s decision to strike at Syria. It broke above the 107.53 (S1) level (yesterday’s resistance) and reached the upper boundary of the trading range at 108.85 (R1). Currently the price is lying below that level, and if long holders have the strength to win the battle at that level, the real exit of the sideways formation might occur. However, both RSI’s and MACD’s readings are near their neutral levels, giving no indications of what might be the next price action.
• Support: Support levels are at 107.53(S1), 105.50(S2) and 103.44 (S3).
• Resistance: Resistance levels are at 108.85(R1), followed by 112.14 (R2) and 114.21(R3), found from the weekly chart.
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Market Analysis 05/09/2013: Traders’ focus today will be on ECB and BoE
Daily Commentary05.09.2013, Time of writing: 03:30 GMT
The Big Picture Traders’ focus today will be on ECB and BoE: The news had little impact on the dollar in yesterday’s session, which weakened throughout much of the day against the G10. The British pound was the main winner as it gained against the USD and EUR after the release of the service-sector PMI which came better than expected at 60.5 in August.
It's a big day for central bank meetings. The Bank of Japan overnight kept policy unchanged, as expected, but modestly upgraded its view on the economy to "recovering moderately" from "starting to recover." Today in Europe we have the Riksbank, the Bank of England and the European Central Bank. No change in policy is expected at any of them. The focus of attention therefore will be on the statements and the press conferences afterwards and particularly whether the BoE and ECB can clarify their forward guidance and convince the market that they do intend to maintain a loose monetary policy. In that respect the press conferences if successful are likely to be negative for GBP and EUR.
Later in the day, the weekly job claims are forecast to fall slightly to 330k from 331k, while the ADP employment report for August is forecast to be 185k vs 200k in July. The July figure far exceeded the rise in non-farm payrolls of 162k, so it’s by no means certain that this is a good forecaster of the NFP. Over the last four months the average difference between the ADP and the NFP has been 42k or 26% of the size of the latest change, which is a pretty big discrepancy. The NFP has been higher than the ADP 81 times since Jan. 2001 and lower 70 times, so there doesn’t seem to be a strong bias either way. Nonetheless, it’s the best independent forecast of the NFP around so people watch it carefully.
Finally, the two-day G20 meeting begins in St. Petersburg today and will mainly focus on the slowdown of the growth in the world’s leading economies and how to find new sources of long term growth. An initiative on regulating derivatives will be presented. But the meeting is likely to be overshadowed by the debate over Syria.
The Market EUR/USD
• EUR/USD moved higher, after finding support at the 1.3152 (S1) level and remained between the 1.3152 (S1) and 1.3231 (R1) levels. At the time of writing the pair is making minor moves to the downside towards the 1.3152 (S1) support. A clear downward break of that level would aim for the next support at 1.3077 (S2). We expect EUR/USD to move in that direction as the 20-period moving average lies below the 200-period moving average and alongside with MACD’s reading remaining in a bearish territory, they confirm the pair’s bearish attitude.
• Support: Support is found at the 1.3152 (S1) level, followed by 1.3077 (S2) and the psychological level of 1.3000 (S3) respectively.
• Resistance: Resistance levels are 1.3231(R1), followed by the psychological levels of 1.3300 (R2) and 1.3400 (R3).
USD/JPY
• USD/JPY moved slightly higher following the slope of the channel’s upper boundary. The price is currently below the psychological round number of 100.00 (R1) and if the long holders manage to overcome that hurdle, they should target the resistance of 100.84 (R2). However, since both the RSI and Stochastic oscillator lie near their overbought levels, we should not be surprised if we observe a pullback in the near future (although in recent months USD/JPY has occasionally remained in technically overbought territory for significant lengths of time). On the longer time frame (daily chart), the price remains above the upper boundary of a triangle formation, adding significance to the pair’s bullish picture.
• Support: Support levels are at 99.13(S1), followed by 98.09 (S2) and the psychological level of 97.00 (S3).
• Resistance: Resistance levels are the round number of 100.00 (R1), followed by the 100.84 (R2) and the 101.52 (R3) levels respectively.
EUR/GBP
• EUR/GBP continued falling but yesterday found support at the 0.8437(S1) level. If the rate’s downward bias continues, we expect it to break below that support, driving the battle towards new short term lows. Furthermore, the MACD oscillator remains in a bearish territory, indicating negative momentum for the price action. On the longer time frame (daily chart) a head and shoulders reversal formation has been completed adding significance to our expectations for the continuation of the downtrend.
• Support: The only support level identified on the short term horizon is at 0.8437 (S1), followed by 0.8410 (S2) and 0.8363 (S3), both found from the daily chart
• Resistance: Resistance is identified at 0.8480 (R1) followed by 0.8503 (R2) and 0.8545(R3).
Gold
• Gold moved lower, forming a lower high and returning slightly below the 1394 level (R1). As a result, we consider that the price is still correcting its uptrend. If the precious metal moves further down, we expect it to challenge the next support levels of 1376 (S1) and 1347 (S2). On the other hand, if it manages to re-cross above the 1394 (R1) level, we should wait for a higher top in order to apply scenarios about the end of the correction and the uptrend’s continuation.
• Support: Support levels are at 1376 (S1), followed by 1347 (S2) and 1320 (S3).
• Resistance: Resistance is identified at the1394 (R1) level, followed by 1422 (R2) and 1440 (R3).
Oil
• WTI found resistance at the upper boundary of the trading range and returned lower. At the time of writing the price is testing the 107.53 (R1) level, but since it remains in a sideways action, we should be patient until the exit and the establishment of a new trending phase occur. Both RSI’s and MACD’s readings are lying at their neutral levels, confirming the sideways movement and giving no indications of what might be the next price action.
• Support: Support levels are at 105.50(S1), 103.44(S2) and 102.62 (S3).
• Resistance: Resistance levels are at 107.53 (R1), followed by 108.85 (R2) and 112.14 (R3), found from the weekly chart.
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
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