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Market Analysis 03/12/14
Language English
Bank of Canada to remain on hold the BoC is expected to sit tight at today’s meeting, keeping its benchmark interest rate unchanged in its final decision of 2014. Even though Canadian inflation is rising and the recent batch of data suggest that the economy has strong momentum, declining oil prices are likely to keep BoC on hold for longer than it would otherwise, leaving CAD vulnerable. On the other hand, since they won’t be providing new forecasts, a less dovish statement than previously could benefit CAD at least temporarily, not so against USD, but more vs its crosses like EUR and JPY.
The Australian dollar plunged to a 4 year low against the dollar after the country’s GDP grew 0.3% qoq in Q3, from 0.5% qoq in Q2, missing expectations of a 0.7% qoq rise. This left the year-on-year growth rate unchanged at 2.7%, from a downwardly revised prior figure and below consensus of a 3.1% rate. The fall in the growth rate underscores concerns about Australia’s outlook and is in contrast with the RBA statement on Tuesday that the most recent data are consistent with moderate economic growth. AUD/USD dipped briefly below 0.8400 at the release but bounced back to trade few pips above that level. A lower exchange rate is needed for Australia to achieve balanced growth and the ongoing decline of key commodities are likely to keep the AUD under selling pressure.
Elsewhere, NZD was the second worst performer against the dollar after whole milk powder price (the country’s main export product) fell 7.1% at the latest auction. The pair fell approximately 0.80% but bounced up after finding support a touch below the 0.7770 level. Given the negative sentiment towards NZD, we could see a test again of that level in the near future.
Overnight, China’s non-manufacturing PMI and HSBC service-sector PMI, both for November, increased a bit with limited impact on AUD and NZD.
As for today’s activity, we get the final service-sector PMIs for November from the countries we got the manufacturing data for on Monday. As usual, the final forecasts from France, Germany and Eurozone are the same as the initial estimates, while the UK service-sector PMI is expected to have increased slightly. The revisions in the final manufacturing PMIs on Monday, increase the possibilities that we could see revisions in the service-sector PMIs as well. Eurozone’s retail sales for October are also coming out and they are expected to have rebounded on a monthly basis. After the recent poor data, the forecast of a rebound will probably not be enough to reverse the negative sentiment towards EUR.
In the US, the most important indicator we get is the ADP employment report for November two days ahead of the NFP release. The ADP report is expected to show that the private sector gained fewer jobs in November than it did the previous month. The final Markit service-sector PMI and the ISM non-manufacturing index, both for November, are also to be released. Fed’s Beige book, a survey based on reports from the 12 regional banks of the Federal Reserve System, is also due out, in order to give the FOMC anecdotal information about the economy before its Dec. 16-17 policy meeting
As for the speakers, Philadelphia Fed President Charles Plosser and Fed Governor Lael Brainard speak.
Currency Titles:
EUR/USD tumbles once again below 1.2400
USD/JPY breaks above 119.00
GBP/USD slightly above 1.5600
Gold slides below 1205
WTI somewhat lower
Currencies Image Url:
http://shared.ironfx.co.uk/morning_pictures_2014/03december2014/EURUSD_03Dec2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/03december2014/USDJPY_03Dec2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/03december2014/GBPUSD_03Dec2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/03december2014/XAUUSD_03Dec2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/03december2014/CLF4_03Dec2014.PNG
Currencies Text:
EUR/USD declined on Tuesday after finding resistance at the black near-term downtrend line taken from back at the high of the 15th of October. The rate slid once again below the 1.2400 (R1) line and is now trading between that hurdle and the key support of 1.2360 (S1), defined by the lows of the 7th and 24th of November. As long as the rate is trading below the aforementioned downtrend line, I would stick to the view that the near-term outlook stays negative. A clear close below the 1.2360 (S1) barrier would confirm a forthcoming lower low on the daily chart and perhaps signal the continuation of the longer-term downtrend. Such a break is likely to pave the way for the 1.2250 (S2) area, defined by the lows of August 2012.
• Support: 1.2360 (S1), 1.2250 (S2), 1.2130 (S3)
• Resistance: 1.2400 (R1), 1.2430 (R2), 1.2490 (R3)
USD/JPY edged higher yesterday breaking above the resistance (turned into support) hurdle of 119.00 (S1). I would now expect the rate to challenge the critical line of 120.00 (R1), which happens to be the 61.8% retracement level of the 1998-2012 major downtrend. A clear violation of that key obstacle could have larger bullish implications and perhaps target the 122.50 (R2) resistance, marked by the high of the 20th of July 2007. On the daily chart, the price structure remains higher peaks and higher troughs above both the 50- and the 200-day moving averages. Thereafter I still consider the overall path of this pair to be to the upside.
• Support: 119.00 (S1), 117.00 (S2), 115.45 (S3)
• Resistance: 120.00 (R1), 122.50 (R2), 124.00 (R3)
GBP/USD slid after finding resistance marginally above the 1.5735 (R1) resistance line but the decline was stopped slightly above the well-tested 1.5600 (S1) area. Shifting our attention to our short-term oscillators, I see that both of them stay in their bearish zones and below their respective downside resistance lines. Moreover, the MACD stands below its trigger line and is pointing south. This designates negative momentum and amplifies the case that we are likely to see Cable lower in the near future. As for the broader trend, the price structure remains lower peaks and lower troughs below the 80-day exponential moving average, thus I would consider the overall picture of GBP/USD to stay negative.
• Support: 1.5600 (S1), 1.5500 (S2), 1.5430 (S3)
• Resistance: 1.5735 (R1), 1.5800 (R2), 1.5950 (R3)
Gold continued pulling back on Tuesday, to fall below the 1205 (R1) barrier and to find support at 1192 (S1). With no clear trending conditions in the near term I would prefer to maintain my flat stance for now. On the daily chart, the yellow metal found resistance near the downtrend line taken from back the high of the 10th of July, and this keeps the longer-term downtrend intact. However, the 14-day RSI stands above its 50 line, while the daily MACD, already above its trigger, appears ready to challenge its zero line. These momentum signs give me extra reasons to sit on the sidelines, at least for now.
• Support: 1192 (S1), 1180 (S2), 1165 (S3)
• Resistance: 1205 (R1), 1222 (R2), 1235 (R3)
WTI seems to be resuming its downtrend, as it declined after finding resistance slightly below the psychological line of 70.00 (R1). If selling pressure continues, I would expect another test at the support line of 64.00 (S1), defined, by the lows of Monday. On the daily chart, the price structure remains lower peaks and lower troughs below both the 50- and the 200-day moving averages, which keeps the overall path of WTI to the downside. The daily oscillators maintain a negative tone as well. The 14-day RSI appears able to enter again its oversold field, while the daily MACD, already at extreme low levels, stands below its signal line and is pointing down.
• Support: 64.00 (S1), 62.70 (S2), 60.00 (S3)
• Resistance: 70.00 (R1), 73.20 (R2), 75.50 (R3)
Benchmark Currency Rates:
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Market Summary Url:
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Market Analysis 04/12/14
Language English
ECB to take center stage The highlight of the day will be the European Central Bank policy meeting, the final rate-setting of 2014. Many Governing Council members speaking recently, signaled that the Bank will probably take time to assess the impact of stimulus measures announced in the recent months before considering new policies. At the press conference following the decision, the ECB President Draghi will probably maintain his dovish stance in order to keep the markets confident that the ECB will do what it takes to raise inflation and inflation expectations as fast as possible. The two contingencies in which the ECB will act, is the deterioration of the inflation outlook and the inability to reach the balance sheet expansion towards 2012 level, assumed the current measures. Another interesting point of this meeting will be the ECB staff forecasts, which will include the first inflation estimates for 2017. If those are still below target, it will be hard for the ECB to avoid taking more steps (although they did not move immediately even when the first 2016 forecasts came out at 1.5%).With this in mind, we are not expecting any new measures at today’s meeting and we believe the Council would wait until after the second TLTRO results are available on 11th of December, before considering on new policies.
Overnight, Australia’s trade deficit narrowed in October, while retail sales decelerated for the same month. Although both data exceeded expectations, they were not enough to reverse the negative sentiment towards the Australian dollar. AUD/USD jumped at these economic releases, but the bears found a renewed selling opportunity and pushed the rate below 0.8400 line. I expect weakening fundamentals following the soft GDP figures on Wednesday, to weigh on the currency and if the bears prove strong enough, we could see the pair testing the 0.8300 level in the near future.
On Wednesday, once again the US ADP report indicated job growth over 200k and the US ISM non-manufacturing index moved further into its expansionary territory, staying marginally below it’s almost 9 year peak in June. The ADP report suggests that Friday’s non-farm payroll figure may come in over 200k for the 10th consecutive month, although there is a lot of variation between the ADP and the NFP reports. The strong data suggest that the US recovery is on a stable path.
The Bank of Canada kept its main interest rate unchanged at its final rate decision of 2014. The policy statement showed a bit more optimistic stance about the country’s recovery suggesting that the output gap, a key measure of the spare capacity in the economy, is smaller than it was estimated two months ago. This raised the prospect of a rate hike in the next year. On the other hand, the lower oil prices are an additional downside risk to the longer-term outlook for economic growth and inflation, and could leave CAD vulnerable.
As for today’s events, besides the ECB, the Bank of England meets to decide on its policy rate. The BoE is unlikely to change policy and therefore the impact on the market should be minimal as usual. The minutes of the meeting however should make interesting reading when they are released on 17th of December.
In the US, we get the initial jobless claims for the week ended Nov. 29.
In Canada, the Ivey PMI for November is forecast to increase from the previous month adding to the positive data coming out from the country. Despite the string of positive data coming out from Canada, I will repeat that the loonie remains exposed, mainly due to the falling oil prices.
As for the speakers, in addition to the ECB President Draghi, we have three more speakers on Thursday’s agenda. Riksbank Governor Stefan Ingves, Cleveland Fed President Loretta Mester and Fed Governor Lael Brainard speak.
Currency Titles:
EUR/USD plummets below 1.2360
NZD/USD dips below 0.7775
GBP/JPY firms up
WTI somewhat higher
Gold near the longer-term downtrend line again
Currencies Image Url:
http://shared.ironfx.co.uk/morning_pictures_2014/04december2014/EURUSD_04Dec2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/04december2014/NZDUSD_04Dec2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/04december2014/GBPJPY_04Dec2014.PNG
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http://shared.ironfx.co.uk/morning_pictures_2014/04december2014/CLF5_04Dec2014.PNG
Currencies Text:
EUR/USD continued falling on Wednesday, breaking below the key support (turned into resistance) line of 1.2360 (R1), defined by the lows of the 7th and 24th of November. The break confirms a forthcoming lower low on the daily chart, and signals the continuation of the longer-term downtrend. I would expect the rate to target the support area of 1.2250 (S2), determined by the lows of August 2012. Our daily momentum studies complete the negative picture of EUR/USD. Both of them lie within their negative territories, they fell below their respective upside support lines, and they point south. These signs designate bearish momentum and magnify the case that we are likely to see the pair lower in the close future.
• Support: 1.2300 (S1), 1.2250 (S2), 1.2130 (S3)
• Resistance: 1.2360 (R1), 1.2400 (R2), 1.2430 (R3)
NZD/USD continued its tumble yesterday, falling below the support (turned into resistance line) of 0.7775 (R1). I would now expect the rate to challenge the key support area of 0.7700 (S1). Our near-term momentum studies support the notion. The RSI moved lower and now stands slightly above its 30 line, while the MACD lies below both its zero and signal lines, and is pointing down. In the bigger picture, the rate oscillates between the 0.7700 (S1) support zone and the resistance of 0.7980 (R3), thus I see a sideways path longer-term.
• Support: 0.7700 (S1), 0.7660 (S2), 0.7600 (S3)
• Resistance: 0.7775 (R1), 0.7915 (R2), 0.7980 (R3)
GBP/JPY edged higher on Wednesday and during the early European morning Thursday, it is trading near 188.00. I still expect this rate to challenge the resistance hurdle of 189.00 (R1), which stands near the highs of the 3rd of October 2008. A clear move above that resistance is likely to pull the trigger for the psychological number of 190.00 (R2). Our near-term momentum studies maintain a positive tone. The RSI continued higher and entered its overbought field, while the MACD continued rising above both its zero and signal lines. As long as the pair is trading above both the 50- and the 200-period moving averages, I would consider the overall trend of GBP/JPY to stay to the upside.
• Support: 186.00 (S1), 184.00 (S2), 181.00 (S3)
• Resistance: 189.00 (R1), 190.00 (R2), 192.00 (R3)
WTI moved marginally higher yesterday to trade near 68.00 dollars/barrel. Taking a look at our near-term oscillators, I would be mindful that the rebound may continue, perhaps for another test near the 70.00 (R1) area, which currently coincides with the 50-period moving average. The RSI is pointing up and appears willing to challenge its 50 line any time soon, while the MACD, although negative, stands above its trigger line and is pointing north. On the daily chart, the price structure remains lower peaks and lower troughs below both the 50- and the 200-day moving averages, which keeps the overall path of WTI to the downside. Therefore, I would consider any possible upside extensions as corrective moves before the bears pull the trigger again.
• Support: 64.00 (S1), 62.70 (S2), 60.00 (S3)
• Resistance: 70.00 (R1), 73.20 (R2), 75.50 (R3)
Gold moved higher yesterday, but the advance was stopped slightly below the downtrend line taken from back the high of the 10th of July. With no clear trending conditions in the near term I would prefer to maintain my flat stance for now. On the daily chart, the yellow metal stays below the aforementioned downtrend line, and this keeps the longer-term downtrend intact. However, the 14-day RSI stands above its 50 line, while the daily MACD, already above its trigger, poked its nose above its zero line. These momentum signs give me extra reasons to sit on the sidelines, at least for now.
• Support: 1192 (S1), 1180 (S2), 1165 (S3)
• Resistance: 1222 (R1), 1235 (R2), 1255 (R3)
Benchmark Currency Rates:
http://shared.ironfx.co.uk/morning_pictures_2014/04december2014/Benchmark.JPG
Market Summary Url:
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Market Analysis 05/12/14
Language English
ECB on hold to reassess its previous measures The ECB didn’t introduce new measures at its final meeting in 2014, despite the petering Eurozone economy. The Governing Council decided to reassess the success of its existing stimulus programs in early 2015 along with the impact of weak oil prices on the Eurozone economy. The ECB staff cut growth and inflation forecasts for one more time. The new projections however, don’t include the currently prevailing oil prices which mean they can be revised further down. It now expects inflation to be just 1.3% in 2016, which could put EUR under pressure. Later in the question and answer session, President Draghi said that there is no need for unanimity to launch sovereign QE. On the other hand, he didn’t discuss on what kind of majority would be needed to launch a QE as it is pointless he said, to speculate what sort of majority will actually happen to be in place at the time when they decide. In discussing the possibility for additional easing measures, Draghi said that the board considered a wide range of assets, except gold. In answer to a question on why the ECB isn’t taking action, Draghi said that that the Bank needs time to assess the impact of the recent vast oil price changes, and that the stimulus measures taken in recent months haven’t had their full effect yet.
Thus, the Council will take its time before considering new policies. EUR/USD firmed up on the disappointment that no decisions were taken on QE and due to a less dovish stance by the ECB Draghi compared to his speech to the European Banking Congress, where he called inflation “excessively low”. Despite the move higher, we keep our long-term bearish euro view and could see the current rebound as providing renewed selling opportunity.
As for today’s events: the spotlight will be on the US nonfarm payrolls for November. The market consensus is for an increase in payrolls of 230k, up from the unexpectedly low increase of 214k in October. At the same time the unemployment rate is forecast to have remained unchanged at 5.8%, while average hourly earnings are expected to accelerate on a yoy basis. A figure above 200k will mark the 10th consecutive time of job gains over 200k. Such figures would be consistent with the FOMC view of a gradually improving labor market and could push up Fed funds rate expectations, thereby supporting the dollar. The country’s trade balance and factory orders, both for October are also coming out.
In Eurozone, the final Q3 GDP is forecast to confirm the preliminary figure and show a rise of 0.2% qoq. This will add to the growing body of evidence of a slowdown in the Eurozone recovery.
In Sweden, industrial production for October is expected to rise, a turnaround from the previous month.
In Norway, industrial production for October is to be released, but no forecast is available.
From Canada, we get the employment report for November. The forecast is for the unemployment rate to increase a bit, while the net change in employment is expected to drop to 0.0k from 43.1k the previous month. The October and September gains in jobs, marked the first time since November 2013 that the roller-coaster jobs report recorded two successive month of employment growth. Thus the switching pattern no longer holds.
As for the speakers, Cleveland Fed President Loretta Mester and Fed Vice Chairman Stanley Fischer speak.
Currency Titles:
EUR/USD shoots up on Draghi’s comments
USD/JPY pokes its nose above 120.00
GBP/USD finds again resistance near the 1.5735 line
WTI a bit lower
Gold finds resistance again near the trend line
Currencies Image Url:
http://shared.ironfx.co.uk/morning_pictures_2014/05december2014/EURUSD_05Dec2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/05december2014/USDJPY_05Dec2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/05december2014/GBPUSD_05Dec2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/05december2014/CLF5_05Dec2014.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/05december2014/XAUUSD_05Dec2014.PNG
Currencies Text:
EUR/USD surged on Thursday after ECB President Draghi said that the Bank will wait until next quarter to asses if additional stimulus measures are needed. However, the rally was stopped at 1.2455 (R2) and subsequently the pair moved lower to trade again near the 1.2360 (S1) obstacle. As long as the rate stays below the black downtrend line taken from back the high of the 15th of October, I would stick to the view that the near-term picture stays negative. Today, we get the US non-farm payrolls for November, which are expected to rise by more than in the previous month. This could cause another dip below the 1.2360 (S1) line and perhaps pull the trigger for another test near the 1.2300 (S2) zone. On the daily chart, the price structure still suggests a downtrend, thus the overall path of EUR/USD remains to the downside.
• Support: 1.2360 (S1), 1.2300 (S2), 1.2250(S3).
• Resistance: 1.2400 (R1), 1.2455 (R2), 1.2515 (R3).
USD/JPY continued rising and on Thursday it managed to poke its nose above the critical barrier of 120.00 (S1), which happens to be the 61.8% retracement level of the 1998-2012 major downtrend. A close above that obstacle could have larger bullish implications and perhaps target the 122.50 (R1) resistance, marked by the high of the 20th of July 2007. Our momentum studies maintain a positive tone as well. The RSI entered again its overbought field, while the MACD stands above both its zero and signal lines. However, the MACD shows some weakness signs. It is pointing down and could move below its signal line any time soon. As a result I would be mindful of a possible pullback before the bulls take the reins again.
• Support: 120.00 (S1), 119.00 (S2), 117.00 (S3).
• Resistance: 122.50 (R1), 124.00 (R2), 125.00 (R3).
GBP/USD slid after finding resistance slightly below the 1.5735 (R1) resistance line. I would now expect the rate to challenge again the well-tested area of 1.5600 (S1). A clear dip below that line is likely to pull the trigger for the psychological hurdle of 1.5500 (S2). Shifting my attention to our short-term oscillators, I see that the RSI continued declining after falling below its 50 line, while the MACD, already negative, crossed below its trigger line. This designates negative momentum and amplify the case that we are likely to see Cable lower in the near future. As for the broader trend, the price structure remains lower peaks and lower troughs below the 80-day exponential moving average, thus I would consider the overall picture of GBP/USD to stay negative.
• Support: 1.5600 (S1), 1.5500 (S2), 1.5430 (S3).
• Resistance: 1.5735 (R1), 1.5800 (R2), 1.5950 (R3).
WTI moved somewhat lower yesterday and is currently trading near 66.50 dollars/barrel. The bears seem to have taken back control and therefore, I would expect another test at the support area of 64.00 (S1) in the close future. Our short-term momentum indicators support the notion. The RSI moved lower after finding resistance slightly below its 50 line, while the MACD, already negative, shows signs of topping and could move below its trigger any time soon. On the daily chart, the price structure remains lower peaks and lower troughs below both the 50- and the 200-day moving averages, which keeps the overall path of WTI to the downside.
• Support: 64.00 (S1), 62.70 (S2), 60.00 (S3).
• Resistance: 70.00 (R1), 73.20 (R2), 75.50 (R3).
Gold moved lower yesterday after finding again resistance near the black downtrend line taken from back the high of the 10th of July. Our momentum studies suggest that we may experience another test at the 1192 (S1) line in the close future. The RSI declined and reached its 50 line, while the MACD, even though positive, has topped and fell below its signal line. However, with no clear trending conditions in the near term I would prefer to maintain my flat stance for now. On the daily chart, the yellow metal stays below the aforementioned downtrend line, and this keeps the longer-term downtrend intact. Nevertheless, the 14-day RSI stands above its 50 line, while the daily MACD, already above its trigger, poked its nose above its zero line. These momentum signs give me extra reasons to sit on the sidelines, at least for now.
• Support: 1192 (S1), 1180 (S2), 1165 (S3).
• Resistance: 1222 (R1), 1235 (R2), 1255 (R3).
Benchmark Currency Rates:
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Market Summary Url:
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Market Analysis 08/12/14
Language English
US nonfarm payrolls boost the dollar The November employment report on Friday showed that the US added a stunning 321k new jobs. The biggest gains in nearly three years. The economy has now added at least 200k jobs for 10 consecutive months. A similar increase in hiring in December would result in the biggest annual gain in employment since 1999. Despite the very strong NFP print, the unemployment rate held steady at 5.8%, in line with market estimates. However, this is still well below the 7.0% in November last year. There was also good news from the participation rate, which appears to have stabilized this year, reflecting the improving economy. Still, wages are only up 2.1% in the past 12 months, a rate that is barely changed since the recovery began in 2009. The payroll gains were widespread but temporary workers rose almost 23k and retail rose over 50k. The 50k rise in retail employees suggest that retailers hired aggressively for the holidays and raise concerns for a drop in the figure when the holiday period ends. Although this report could raise speculation that the Fed will hike rates earlier than previously expected, the moderate wage growth and the soft inflation rate gives the Fed continued space to remain on hold. USD could remain elevated this week due to a “quiet” from major releases week ahead and as the alternatives within the G10 become less and less attractive.
Canada’s labor market held up in November as the employment change fell 10.7k, following the strong gains of 43.1k and 74.1k in the last two months. The unemployment rate rose to 6.6% from 6.5% previously. USD/CAD extended its gains following the weak economic data from Canada and the strong US employment report, remaining just below the 1.1480 line. I will retain my view that despite the strong overall outlook of the Canadian economy, the pair could move further up given the currently prevailing oil prices.
Overnight, Japan’s current account surplus more than doubled in October, while the final GDP for Q3 showed that the economy contracted a bit more than initially estimated. Net net the mixed data caused the JPY to strengthen a touch as the trade data offset the GDP contraction, which was more or less known from the preliminary reading. In China, trade surplus increased in November, exceeding expectations of a moderate decrease. The NZD and AUD weakened from the unexpected drop in imports due to concerns for a subdued demand from New Zealand’s and Australia’s largest trade partner.
In German industrial production for October decelerated from the previous month adding to the recent batch of weak data coming out from the country.
As for today’s activity: In Canada, housing starts for November are expected to increase a bit from the previous month.
In the US, we get the labor market conditions index for November. This is a monthly index that draws on a range of data to give a better sense of the employment conditions. It aims to produce a single measure to gauge whether the labor market is on the whole improving. In October, the index came 4.0, so a reading above that, following the strong nonfarm payrolls on Friday should indicate an improving labor market.
As for the rest of the week: On Tuesday, Germany’s trade surplus for October is expected to decrease. From the UK, we get the industrial production for October. In the US, we get only secondary importance data: the Job Opening and Labor Turnover Survey (JOLTS) report for November and wholesale inventories for October.
On Wednesday, the highlight will be the Reserve Bank of New Zealand meeting. The Bank is anticipated to leave its policy rate unchanged at 3.5% and Governor Graeme Wheeler could reiterate the view that the exchange rate has yet to adjust materially to the lower commodity prices and that its current level remains “unjustified and unsustainable”. From China, we get PPI and CPI for November. The forecast is for the CPI rate to remain unchanged suggesting that the monetary easing has yet to be seen in the prices. From France, we get the industrial production for October. In Norway, the CPI rate for November is expected to decline a bit. The further decline from the Norges Bank 2.5% target along with the declining oil prices could keep the NOK under increasing selling pressure.
On Thursday, the spotlight will be on the Norges Bank policy rate decision. In their previous meeting, the Bank left its key policy rate unchanged at 1.5%, and noted that the outlook for inflation and output are broadly in line with their projections. However, the forecast of a decline in Norway’s inflation rate on Wednesday could prompt a response from the central bank. From Japan, we get machinery orders for October. In Australia, unemployment rate for November is expected to increase. From Germany and France, we get the final CPI for November and as usual the forecasts are the same as the initial estimate. In the US, we get the retail sales for November.
Finally on Friday, we get the US PPI for November and the preliminary University of Michigan consumer confidence sentiment for December. Following the November’s survey 1-year and 5-year inflation expectations decline, an upward revision on Friday could strengthen the USD.
Currency Titles:
EUR/USD plummets on strong US employment data
EUR/JPY heading towards 150.00
GBP/USD breaks below 1.5600
WTI ready to challenge again the 64.00 zone
Gold finds support at 1186
Currencies Image Url:
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Currencies Text:
EUR/USD tumbled on Friday after the US nonfarm payrolls surged 321k in November, the biggest gains in nearly three years. EUR/USD fell below the 1.2360 (R2) line, to reach and break below the 1.2300 (R1) hurdle. I would now expect the pair to challenge the 1.2250 (S1) area, determined by the lows of the 10th of August 2012. A clear dip below that area is likely to trigger further downside extensions, perhaps towards the lows of the 2nd of August 2012, at 1.2130 (S2). Our daily momentum studies complete the negative picture of EUR/USD. Both of them still stand within their negative territories and below their respective upside support lines. As for the broader trend, the price structure still suggests a downtrend, thus the overall path of EUR/USD remains to the downside.
• Support: 1.2250 (S1), 1.2130 (S2), 1.2040 (S3).
• Resistance: 1.2300 (R1), 1.2360 (R2), 1.2400 (R3).
EUR/JPY continued rising, breaching the resistance (turned into support) of 149.00 (S1). I would now expect a test at the psychological line of 150.00 (R1). A break above that barrier is likely to have larger bullish implications and perhaps see scope for extensions towards the support-turned-into resistance line of 153.40 (R2), determined by the low of the 26th of September 2008. However, taking a look at the RSI on the 4-hour chart, I would be cautious of a possible pullback before buyers take the reins again. The oscillator is pointing down and appears ready to exit its overbought zone. As long as the price structure remains higher peaks and higher troughs above both the 50- and the 200-day moving averages, I would consider the overall outlook of this pair to stay to the upside.
• Support: 149.00 (S1), 148.00 (S2), 146.40 (S3).
• Resistance: 150.00 (R1), 153.40 (R2), 155.00 (R3).
GBP/USD continued its slide on Friday, and after the stunning NFP print, it broke below the 1.5600 (R1) barrier. I would now expect the bears to pull the trigger for the psychological hurdle of 1.5500 (S1). A dip below that line could set the stage for our next support line at 1.5430 (S2), defined by the low of the 28th of August 2013. Shifting my attention to our short-term oscillators, I see that the RSI continued declining after finding resistance at its 50 line, while the MACD stands below both its zero and signal lines, pointing south. These signs designate negative momentum and amplify the case that we are likely to see Cable lower in the near future. As for the broader trend, the price structure remains lower peaks and lower troughs below the 80-day exponential moving average, thus I would consider the overall picture of GBP/USD to stay negative.
• Support: 1.5500 (S1), 1.5430 (S2), 1.5200 (S3).
• Resistance: 1.5600 (R1), 1.5735 (R2), 1.5800 (R3).
WTI continued falling on Friday and is now heading towards the support area of 64.00 (S1). If the bears are strong enough to drive the battle below that zone, I would expect them to pull the trigger for the 62.70 (S2) support obstacle, marked by the lows of the 29th and 30th of July 2009. Our short-term momentum indicators support the notion. The RSI continued lower and appears able to enter its oversold territory, while the MACD, already negative, has dipped below its trigger line. These indications designate accelerating downside momentum in my view. On the daily chart, the price structure remains lower peaks and lower troughs below both the 50- and the 200-day moving averages, which keeps the overall path of WTI to the downside.
• Support: 64.00 (S1), 62.70 (S2), 60.00 (S3).
• Resistance: 70.00 (R1), 73.20 (R2), 75.50 (R3).
Gold continued lower on Friday but the decline was halted at 1186 (S1). I would prefer to wait for a dip below our next support of 1180 (S2), before expecting larger bearish extensions. Such a move is likely to pull the trigger for the 1165 (S3) support obstacle. Our near-term momentum indicators maintain a somewhat negative tone. The MACD, already below its trigger, has obtained a negative sign, while the RSI stays within its bearish field. Nevertheless, the RSI is pointing sideways, reflecting the metal’s pause after finding support at 1186 (S1). On the daily chart, the yellow metal stays below the aforementioned downtrend line, and this keeps the longer-term downtrend intact. However, our daily oscillators are still in a rising mode, thus I would prefer to maintain my “wait and see” stance as far as the overall picture of gold is concerned.
• Support: 1186 (S1), 1180 (S2), 1165 (S3).
• Resistance: 1210 (R1), 1222 (R2), 1235 (R3).
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Market Analysis 09/12/14
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Oil prices fell further on oversupply concerns Oil prices slipped further on concerns over supply surplus after new US projections released on Monday, showed production from the big three US shale companies should carry on growing at over 100k barrels per day into January. Benchmark West Texas Intermediate crude for January delivery fell below USD 63.00 a barrel, while Brent crude oil dipped to just above USD 65 a barrel on these developments. It looks to us that the decline in oil prices is likely to continue, particularly against the background of a slowing Chinese economy and stagnating European economy and continued high US domestic production.
The dollar strengthened against the high-yielding and commodity currencies after a speculation that the Fed officials are considering to shift their tone at their next week policy meeting. An article from WSJ said that the FOMC members are considering to remove the reference that they will keep interest rates low for a “considerable time”. Expectations of a “hawkish” Fed following the strong employment data are likely to keep the dollar strong especially as the alternatives within the G10 become less attractive.
Overnight, National Australia Bank (NAB) business confidence index for November declined to the lowest level since July 2013. The results of the survey prompted NAB to change its interest rate prediction to two cuts of 25 bps in 2015 from the Reserve Bank of Australia, or for the Bank to remain on hold until 2016. The Aussie extended its losses amid these news and fell to a 4-year low. On top of that, China, Australia’s biggest trading partner, showed weak domestic demand through Monday’s trade figures with plunging imports and slowed exports, piling more pressure on AUD. The subdued growth seen in Australia in the recent months, triggered mainly by the falling iron ore prices, has pushed AUD/USD down 14% from its peak in June. I expect weakening fundamentals to weigh on the Aussie and if the decline in commodity prices continue, the pair could reach our next support of 0.8100 in the not-to-distant future.
As for today’s events: In the UK, industrial production for October is expected to have decelerated from the previous month. The decline in the industrial production rate could raise concerns about the slowdown in UK’s recovery and put GBP under selling pressure.
In the US, only secondary importance data are coming out. The NFIB small business optimism for November is expected to have increased fractionally and to have remained near its highest level since October 2007. While this indicator is not particularly market-affecting, it’s well worth watching because of the Fed’s emphasis on the labor market. Small businesses employ the majority of people in the US. The Job Opening and Labor Turnover Survey (JOLTS) report for October is forecast to show that the number of job openings have increased marginally. Following last week’s strong employment data, this is likely to keep the dollar supported. Wholesale inventories for October are also coming out.
Currency Titles:
EUR/USD reaches 1.2250
USD/JPY pulls back
AUD/USD dips below 0.8300
WTI slides below 62.70
Gold finds resistance marginally below 1210
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Currencies Text:
EUR/USD rebounded after finding support near 1.2250 (S2), a support area determined by the low of the 10th of August 2012. As long as the rate is trading below the black downside resistance line taken from back the high of the 15th of October, I would consider the near-term bias to stay negative. I still expect a clear move below the 1.2250 (S2) area to pull the trigger for the lows of the 2nd of August 2012, at 1.2130 (S3). However, bearing in mind our momentum signs, I would stay cautious that the current rebound may continue a bit more before the bears prevail again. The RSI moved higher after finding support near its 30 line, while the MACD, although negative, stands above its trigger and is pointing up. Furthermore, I see positive divergence between both these oscillators and the price action. On the daily chart, the price structure is still lower peaks and lower troughs below both the 50- and the 200- day moving averages, thus the overall path of EUR/USD remains to the downside in my view.
• Support: 1.2300 (S1), 1.2250 (S2), 1.2130 (S3)
• Resistance: 1.2360 (R1), 1.2400 (R2), 1.2455 (R3)
USD/JPY pulled back after finding resistance at 121.85 (R1). The decline was halted by the 120.00 (S1) psychological hurdle, which happens to be the 61.8% retracement level of the 1998-2012 major downtrend. Taking into account our momentum signs, I would be careful of further declines. Both of them fell below their respective upside support lines. Moreover, the RSI is testing its 50 line and appears able to move below it. On the daily chart, the price structure still suggests an uptrend. However, our daily oscillators corroborate my view that further correction could be in the works. The 14-day RSI looks ready to exit its overbought field, while the MACD, although positive, fell below its trigger. I also see negative divergence between the MACD and the price action.
• Support: 120.00 (S1), 119.00 (S2), 117.00 (S3)
• Resistance: 121.85 (R1), 122.50 (R2), 124.00 (R3)
AUD/USD continued its tumble, falling below the support (turned into resistance) line of 0.8300 (R1) defined by the lows of July 2010. I would now expect sellers to drive the battle towards the support area of 0.8100 (S1) marked by the lows of the 7th and 8th of June 2010. Our near-term oscillators confirm the negative momentum and enlarge the case that we are likely to see the pair lower in the close future. The MACD lies below both its zero and signal lines, pointing south, while the RSI dipped again below its 30 line. On the daily chart, since the rate remains below both the 50- and 200- day moving averages, I still see a longer-term downtrend.
• Support: 0.8100 (S1), 0.8000 (S2), 0.7900 (S3)
• Resistance: 0.8300 (R1), 0.8415 (R2), 0.8480 (R3)
WTI continued falling on Monday and today during the early European morning, it slid slightly below the 62.70 (R1) support (turned into resistance) obstacle, marked by the lows of the 29th and 30th of July 2009. I would now expect the bears to challenge the psychological barrier of 60.00 (S1). Our short-term momentum indicators support the notion. The RSI entered its oversold zone and is pointing down, while the MACD stays below both its zero and signal lines. These indications designate accelerating downside momentum in my view. On the daily chart, the price structure remains lower peaks and lower troughs below both the 50- and the 200-day moving averages, which keeps the overall path of WTI to the downside.
• Support: 60.00 (S1), 58.70 (S2), 56.70 (S3)
• Resistance: 62.70 (R1), 64.00 (R2), 66.70 (R3)
Gold moved higher after finding support at 1186 (S1) but the advance was halted marginally below the resistance hurdle of 1210 (R1). With no clear trending conditions in the near term I would prefer to maintain my flat stance. On the daily chart, the yellow metal stays below the aforementioned downtrend line, and this keeps the longer-term downtrend intact. Nevertheless, the 14-day RSI stands above its 50 line, while the daily MACD stands above both its zero and signal lines. These momentum signs give me extra reasons to sit on the sidelines, at least for now.
• Support: 1186 (S1), 1180 (S2), 1165 (S3)
• Resistance: 1210 (R1), 1222 (R2), 1235 (R3)
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Market Analysis 10/12/14
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Risk reduction reduced Risk reduction was the name of the game yesterday after Chinese equities collapsed. The 5.4% fall in the Shanghai stock index, plus the 13% fall in Greek stocks on the increasing likelihood of a Greek election caused some risk aversion. The S & P 500 was down 1.3% at one point and USD/JPY fell through some important support lines. Fed funds rate expectations retreated, US interest rates fell and the dollar dropped against most currencies, including the euro. However US stocks managed to recover during the day and close little changed, which allowed the dollar to recover broadly, although not entirely. This morning it is opening lower than its early Tuesday levels against most currencies, the main exception being RUB. It’s also noticeable that precious metals did not reverse along with stocks and the dollar and finished the US day only slightly off their highs.
The main impact of yesterday’s volatile market was to establish new ranges for several currencies. It’s possible now that these ranges may hold during the slow December market, as long as we don’t get any more scares. The rebound in Chinese stocks today (Shanghai up 0.6%, Shenzhen up 2.5%) bodes well. Then again, the thin market as we approach the holidays could mean more volatile conditions… During the Asian day, China’s PPI and CPI for November were released and both were lower than expected, with the PPI further in deflation and the rise in the CPI less than expected. This shows that the additional monetary easing has yet to be seen in the prices, which suggests that more easing is still possible – this would be supportive for risk and for the dollar.
Today’s market: With no major economic indicators out during the day, I expect the FX market to follow the lead of European equity markets. It’s hard to say how they will go however, given the mixed run-up in other markets (US unchanged, China up, Japan and South Korea down). Nor are there any speeches by senior ECB officials that would be likely to give Europe a boost, as occurred yesterday with ECB Board Member Peter Praet (although there are several speakers – see below).
French industrial production for October is expected to have accelerated following a stalled reading in September.
From Norway, we get the PPI and CPI for November. Growth in CPI inflation is expected to slow slightly on a yoy basis. Just a day ahead of the Norges bank meeting, the low oil prices and expectations of a decline in the inflation rate could prompt a response from the Bank to prevent deterioration of the Norwegian economy. That could be negative for the NOK.
Later, near the close of the US session, the spotlight will be on the Reserve Bank of New Zealand meeting. The Bank is universally expected to leave its policy rate unchanged at 3.5%. Governor Graeme Wheeler could reiterate the view that the exchange rate has yet to adjust materially to the lower commodity prices and that its current level remains “unjustified and unsustainable.” Also, some pundits are now predicting that the next move in NZ rates will be a cut, rather than another hike, and the market will be looking for any clues about this. If Gov. Wheeler adopts a dovish stance and moves away from his on-hold stance at Wednesday’s meeting, this could add further selling pressure on the kiwi and push NZD/USD to even lower levels. The market will be waiting for his press conference following the rate decision. Bank of Canada Gov. Poloz also holds a press conference on the release of their Financial System Review.
Speakers: ECB Executive Board Member Coeure participates in a panel discussion; Bank of Spain Gov. Linde speaks at banking conference; Estonian Central Bank Gov. Hansson speaks on outlook for Euro area and Estonia
Currency Titles:
EUR/USD continues the rebound
USD/JPY continues correcting lower
GBP/USD hits support at 1.5540
WTI in a quiet mode
Gold breaks the downtrend line taken from back in July
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Currencies Text:
EUR/USD continued higher on Tuesday to hit resistance marginally below the 1.2455 (R2) resistance hurdle. The extension of the rebound confirmed the validity of the 1.2250 (S3) area as a support and the positive divergence between both our near-term oscillators and the price action. On the daily chart, I see a possible morning star candle formation, which favors the continuation of the rebound. Both our daily momentum studies are in a rising mode, supporting the notion. Nevertheless, as long as the price structure stays lower peaks and lower troughs below both the 50- and the 200-day moving averages, I would consider the overall path of EUR/USD to remain negative. I would treat any further upside extensions as a corrective phase before sellers take the reins again.
• Support: 1.2360 (S1), 1.2300 (S2), 1.2250 (S3)
• Resistance: 1.2400 (R1), 1.2455 (R2), 1.2515 (R3)
USD/JPY continued its slide on Tuesday, falling below the key barrier of 120.00 (R1) and finding support near the 118.00 (S1) line. Bearing in mind our momentum signals, I would remain vigilant in case the retracement continues. The RSI stands below its 50 line and is pointing down, while MACD, already below its signal line, dipped in its negative territory. On the daily chart, the price structure still suggests an uptrend. However, our daily oscillators corroborate my view that further correction could be in the works. The 14-day RSI exited its overbought filed and is pointing south, while the while the MACD, although positive, stands below its trigger. I also see negative divergence between the MACD and the price action.
• Support: 118.00 (S1), 117.00 (S2), 115.45 (S3)
• Resistance: 120.00 (R1), 121.85 (R2), 122.50 (R3)
GBP/USD remained above the psychological barrier of 1.5500 (S3) on Monday and found support at 1.5540 (S2) before rebounding back above 1.5600 (S1). On Tuesday, the rate moved in a consolidative mode and during the early European morning Wednesday is trading near 1.5680. Taking a look at our short-term momentum studies, I see that the RSI moved above its 50 line and is pointing north, while the MACD, already above its trigger, obtained a positive sign. Even though these indicators favor further upside extensions, I believe that as long as Cable is trading below the 80-day exponential moving average, the overall path is negative. Therefore, I would see any possible extensions of the aforementioned rebound as renewed selling opportunities.
• Support: 1.5600 (S1), 1.5540 (S2), 1.5500 (S3)
• Resistance: 1.5735 (R1), 1.5800 (R2), 1.5950 (R3)
WTI moved in a consolidative manner on Tuesday, staying between the 62.00 (S1) and 64.00 (R1) lines. The price action still suggests a downtrend, thus I still expect the bears to challenge the psychological barrier of 60.00 (S2), which stands slightly above the lows July 2009. Our daily technical studies complete the negative picture of WTI. Both the 50- and the 200-day moving averages stand above the price curve and their slope is to the downside. The RSI lies within its oversold territory pointing down, while the MACD, already at extreme low levels, stands below its trigger. These momentum signs designate strong downside momentum and enlarge the case that we are likely to see lower oil prices in the close future. Nevertheless, back on the 4-hour chart, I see positive divergence between the MACD and the price action, something that makes me a bit cautious about a possible short-term corrective bounce before the next leg down.
• Support: 62.00 (S1), 60.00 (S2), 58.70 (S3)
• Resistance: 64.00 (R1), 64.70 (R2), 66.70 (R3)
Gold shot up yesterday, breaking above the black downtrend line taken from back at the high of the 10th of July. Nonetheless, the rally was halted marginally above our resistance hurdle of 1235 (R1). A clear move above that barrier could prompt extensions towards our next resistance barrier at 1255 (R2), determined by the high of the 21st of October. The 1255 (R2) zone currently coincides with the 200-day moving average. In the bigger picture, the break above the aforementioned trend line flips the overall picture of the yellow metal mildly to the upside, in my view. Our daily momentum indicators corroborate that view. The 14-day RSI edged higher after hitting support at its 50 line, while the MACD, already above its trigger line, obtained a positive sign.
• Support: 1222 (S1), 1210 (S2), 1186 (S3)
• Resistance: 1235 (R1), 1255 (R2), 1270 (R3)
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Market Analysis 11/12/14
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New Zealand returns to tightening path The Reserve Bank of New Zealand (RBNZ) kept its benchmark interest rate unchanged overnight, as was universally expected, but surprised the market by stating that the next move in rates was likely to be up. “Some further increase in the official cash rate is expected to be required at a later stage,” according to the statement that accompanied the decision. The RBNZ had moved to a neutral stance at its Oct. 30th meeting, when it said, “A period of assessment remains appropriate before considering further policy adjustment,” which left open the possibility that the next move would be a cut in rates. The change to a tightening bias sent NZD soaring. The move reaffirms my belief that NZD is likely to be the strongest of the commodity currencies, although it may still lose ground over time against the resurgent USD if milk prices fall further.
Oil continued to decline after the US Energy Information Administration said that supplies in the US rose unexpectedly last week and OPEC forecast that demand for its oil would fall in 2015. (Note however that OPEC still expects global demand for oil to increase next year, although it also cut its forecast for that slightly too.) To make matters worse, Saudi Arabia’s oil minister rejected the idea of cutting production. His comment – “Why should I cut production?” – makes a decisive dip in WTI below the round number of 60 in the near future all the more likely, in my view.
Australia’s unemployment rate rose to 6.3% in November from 6.2% in October as expected, but this was good news as it indicates discouraged workers are returning to an improving labor market. Employment jumped by 42.7k, almost double last month’s 24k. Nonetheless AUD was only slightly stronger against the USD, perhaps because of the continued decline in commodity prices and global stocks. I remain much more enthusiastic about NZD than AUD, which seems to be at the mercy of global risk appetite.
Today’s events: There are two central bank meetings today: the Norges Bank and the Swiss National Bank (SNB). At its last meeting in October, Norges Bank left its key policy rate unchanged at 1.5% while Governor Olsen noted that the outlook of inflation and output were broadly in line with their September projections. Yesterday it was announced that Norway’s CPI rate declined to +1.9% yoy in November from 2.0% yoy in October. Although the small decline in the inflation rate seems harmless, bearing in mind that the low oil prices have given rise to uncertainty over its growth outlook, Norges Bank could signal a rate cut early next year. This could prove negative for the Krone today.
As for the SNB, after Swiss voters rejected the “Save our Swiss Gold” referendum, the bank is most likely to reaffirm the EUR/CHF floor of 1.20 and to keep its benchmark interest rate close to zero. A press conference will follow the decision. The main question about Swiss monetary policy is whether they will institute negative interest rates. So far the market has not challenged the EUR/CHF floor significantly and so I believe they will hold fire on such a move until it’s absolutely necessary.
Also, the ECB will carry out its second targeted long-term refinancing operation (TLTRO) today. The total available for banks in the September and December TLTROs is EUR 400bn. Only EUR 83bn was allotted in September, meaning that up to EUR 317bn is available today. However, nobody expects the full amount to be taken up. The low end of expectations is around EUR 120bn and the high end around EUR 180bn. A lower-than-expected allotment will increase the likelihood that the ECB will have to embark on a full-fledged quantitative easing program and thus could be somewhat EUR-negative. Market expectations are not very high for the operation, however, so a higher-than-expected result would probably be a bigger surprise. That would cause some doubt about the likelihood of a QE program and thus would probably cause a sharp rise in EUR/USD.
In Europe, it’s CPI day. Germany’s final CPI for November is coming out but as usual the forecast is the same as the initial estimate. The French CPI for the same month is forecast to have decelerated. Sweden’s CPI is the inflation figure that will attract most of the attention. The country is expected to have fallen deeper into deflation in November. This could really hurt the Krona. The big question now is: what aces do the Riksbank have hidden in its sleeve for its meeting next week, since at their last meeting, policy makers cut rates to zero? Sweden’s unemployment rate for November is also coming out and is estimated to have declined by a percentage point.
In the US, headline retail sales are forecast to have accelerated. However, usually the focus is on retail sales excluding auto and gasoline, which is forecast to show a slowdown. That could weaken the dollar a bit. Initial jobless claims are expected at 297k, the same as the previous week. This will leave the 4wk moving average more or less unchanged.
During the European day, Bank of England Governor Mark Carney speaks at a news conference in London and Bank of Canada Governor Poloz will give a speech at the Economic Club of New York.
Currency Titles:
EUR/USD breaks the short-term downtrend line
GBP/JPY falls below 186.00
NZD/USD shoots up as RBNZ signals future rate hikes
Gold consolidates below the 1235 area
WTI finds support marginally above 60.00
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EUR/USD continue firming up on Wednesday, breaking above the black downtrend line and confirming the morning star candle formation identified on the daily chart. However, the advance was halted slightly below our resistance of 1.2515 (R1), near the 200-period moving average. Given that the rate stays above the aforementioned trend line, I would expect further upside and a test of 1.2515 (R1). A clear move above that barrier is likely to pull the trigger for the 1.2600 (R2) area. Our short-term momentum studies maintain a positive tone as well. The RSI continued higher and now appears able to enter its overbought field, while the MACD stands above both its zero and signal lines. On the daily chart, the 14-day RSI is pointing north and could move above its 50 line any time soon, while the MACD, although negative, stands above its trigger. These signs reinforce the case that we are likely to see further upside corrective moves in the near future. Also, I can spot positive divergence between both these daily indicators and the price action, which indicates that the longer-term downturn is losing momentum.
• Support: 1.2450 (S1), 1.2400 (S2), 1.2360 (S3)
• Resistance: 1.2515 (R1), 1.2600 (R2), 1.2665 (R3)
GBP/JPY continued its slide, falling below the 186.00 (R1) support (turned into resistance line). On the daily chart, I can spot an evening star candle pattern, which favors the continuation of the pullback. Our daily momentum studies support the notion. The 14-day RSI continued lower after exiting its oversold territory, while the MACD, although at extremely high levels, crossed below its trigger line. However, since the rate is still trading above both the 50- and the 200-day moving averages, I still believe that the broader trend is to the upside, thus I would consider the recent setback or any extensions of it as a retracement of the longer-term uptrend.
• Support: 184.00 (S1), 181.00 (S2), 178.00 (S3)
• Resistance: 186.00 (R1), 188.00 (R2), 190.00 (R3)
NZD/USD surged yesterday after RBNZ Governor Graeme Wheeler said that more rate increases will eventually be needed. The pair rallied back above the 0.7700 (S2) to hit resistance at 0.7870 (R1). Both our near-term momentum studies entered their positive territories, but the RSI topped marginally below its 70 line and is now pointing down. As a result, I would be mindful of a possible pullback perhaps towards the 0.7760 (S1) support barrier. As for the bigger picture, the rate is back within the sideways channel between the 0.7700 (S2) and 0.7980 (R3) zones, and this keeps the overall outlook of this pair neutral in my view.
• Support: 0.7760 (S1), 0.7700(S2), 0.7660 (S3)
• Resistance: 0.7870 (R1), 0.7915 (R2), 0.7980 (R3)
Gold moved in a consolidative manner yesterday, staying between the support line of 1222 (S1) and the resistance of 1235 (R1). A clear move above the 1235 (R1) barrier could prompt bullish extensions towards our next resistance barrier at 1255 (R2), determined by the high of the 21st of October. It is worth noting that the 1255 (R2) obstacle currently coincides with the 200-day moving average. In the bigger picture, the move above the trend line taken from back the high of the 10th of July flips the picture of the precious metal mildly to the upside in my view. Our daily momentum indicators corroborate that view. Both of them are in a rising mode and the both lie within their positive territories.
• Support: 1222 (S1), 1210 (S2), 1186 (S3)
• Resistance: 1235 (R1), 1255 (R2), 1270 (R3)
WTI continued lower yesterday, breaking below the support (turned-into-resistance) line of 62.00 (R1). Nevertheless, the decline hit support marginally above the round number of 60.00 (S1). Taking a look at our near-term momentum studies, I would be cautious as we may see an upside corrective wave before sellers pull the trigger again. The RSI seems ready to exit its oversold field, while the MACD, although negative, could move above its signal line any time soon. However, our daily technical studies support a negative overall outlook. Both the 50- and the 200-day moving averages stand above the price curve and their slope is to the downside. The 14-day RSI lies within its oversold territory pointing down, while the daily MACD, already at extreme low levels, stands below its trigger. These momentum signs designate strong downside momentum and reinforce the case that we are likely to see lower oil prices in the close future. A decisive dip below the round number of 60.00 (S1) is likely to challenge as a first support the low of the 10th of July 2009, at 58.60 (S2).
• Support: 60.00 (S1), 58.60 (S2), 56.65 (S3)
• Resistance: 62.00 (R1), 64.00 (R2), 66.70 (R3)
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Market Analysis 12/12/14
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Commodity currencies hit by oil plunge Investors continue to struggle with the implications of lower oil prices. Are lower prices good for the economy because they mean more cash in the hands of consumers? Or are they negative because they mean less capital spending (capital spending by the oil sector accounts for about one-third of capital spending by all the S & P 500 companies)? Higher-than-expected retail sales figures in the US yesterday lifted stocks 1.4% in the morning, with energy stocks being the strongest sector, but then another plunge in oil prices (for no clear reason) sent stocks down 1% from their highs, with energy as the worst performing sector. Meanwhile, the VIX index of implied volatility on stock options rose yet again for the largest four-day advance since 2011 as investors worried that the drop in oil could destabilize financial markets.
Personally, I own a car but no oil wells, so lower oil prices are an advantage for me and I assume other consumers are in the same condition. The idea that if companies don’t spend their money digging oil wells then they won’t spend money at all seems illogical to me. As consumers spend their money on other things besides gasoline, then other companies will invest in other things, too, such as auto manufacturing plants. Of course, things could be different in a zero marginal cost economy. If consumers spend their money on music downloads instead of filling up their car, then maybe server farms will have to expand somewhat but the economic effect on investment and employment probably won’t be as great as drilling more wells.
AUD dropped sharply after Reserve Bank of Australia (RBA) Gov. Stevens was interviewed in the Australian Financial Review. He said he thought “it’s quite likely” that AUD would be lower a year from now and he lowered his target rate for AUD. “...A year ago I said probably 85 U.S. cents was better than 95. And if I had to pick a figure now, I would say probably 75 is better than 85,” Stevens said. With the currency now trading around 83 US cents, that still leaves substantial downside. I expect that slower Chinese growth and falling commodity prices will continue to exert downward pressure on AUD.
Other commodity currencies were also under pressure as oil prices fell. USD/CAD reached a new high for the year as Bank of Canada Gov. Poloz said that Canada’s labor market still shows considerable excess capacity. Most EM currencies were also under pressure, led by oil producers MXN, BRL, RUB and IDR. Oil importing currencies, such as SGD, KRW and TWD, fell vs USD as well but nowhere near as much.
Today’s market: During the European morning, Sweden’s PES unemployment rate for November came out as expected at 4.1%, down from 4.2% in October. This was in line with the decline in the month’s official unemployment and had little impact on SEK, which was weakening into the figure. Thursday’s data showed that the country remains stuck in deflation, which reinforces our expectations that the Riksbank is likely to move towards unconventional measures, perhaps even as soon as next week’s meeting. Finally, Eurozone’s industrial production is forecast to have slowed in October.
In the US, the headline PPI for November is expected to have risen 1.4% yoy, a slowdown from +1.5% yoy in October, while the core rate (excluding food and energy) is forecast to remain unchanged at +1.8% yoy. That should not be a major market-mover. The preliminary UoM consumer sentiment for December is forecast to show a modest rise.
We have only one speaker on Friday’s agenda: Norges Bank Governor Olsen speaks at an event in Oslo. It’s unlikely he will surprise the market any more than yesterday’s cut in the deposit rate did. His comments could however give the currency another leg down.
Sunday will be the Japanese Lower House election. The overall result is not in question: the ruling Liberal Democratic Party will win. The only question is how big a victory they will get. They currently have 294 seats in the 475-seat house. If they get a two-thirds majority, or 317 seats, then they will no longer need to rule in a coalition with the Komei Party. Since the polls have shown a comfortable LDP victory, people opposed to the LDP are losing interest in voting, which makes it all the more likely that they will win big. If they do get a supermajority, then there are concerns that the government could change its focus to PM Abe’s social and political goals rather than economic goals. That could be bad for stocks and therefore send USD/JPY lower. On the other hand, if they remain in power through a coalition, then his victory would strengthen his hand in dealing with the Ministry of Finance and with opponents in his own party who oppose his “third arrow” of structural reform. That could be good for Japanese stocks and hence send USD/JPY higher. A substantial loss of seats would be the biggest surprise and probably send stocks and USD/JPY lower as it could endanger his reform policy.
Currency Titles:
EUR/USD back below the downtrend line
USD/JPY finds buy orders near 117.35
GBP/USD approaching the longer-term downtrend line
WTI dips below 60.00
Gold hits support at 1215
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Currencies Text:
EUR/USD slid after finding resistance near the 200-period moving average to trade back below the black downtrend line. However, given that the positive divergence between our near-term oscillators and the price action is still in effect, the possibility for a higher low and another break above the trend line still exists. A move above 1.2450 (R2) could reaffirm the case and pull the trigger for the resistance line of 1.2515 (R3). On the daily chart, the rate is still printing lower highs and lower lows below both the 50- and the 200- day moving averages and this keeps the overall path to the downside. However, I still see positive divergence between the daily momentum studies and the price action, which indicates that the longer-term downtrend is losing momentum and that further upside corrective waves could be looming.
• Support: 1.2360 (S1), 1.2300 (S2), 1.2250 (S3)
• Resistance: 1.2410 (R1), 1.2450 (R2), 1.2515 (R3)
USD/JPY rebounded on Thursday after triggering some buy orders near 117.35 (S1). Nonetheless, I would prefer to see another break above the key line of 120.00 (R1) before getting confident about the upside. As long as the rate remains below that line, I see chances that the downside corrective move may extend a bit lower. Our daily momentum studies support the notion: the 14-day RSI fell near its 50 line after exiting its overbought territory, while the MACD, even though at extremely high levels, stands below its trigger line and is pointing south. As for the broader trend, the price structure is still higher peaks and higher troughs above both the 50- and the 200-day moving averages and this keeps the overall path of USD/JPY to the upside. Therefore, I would consider the recent setback or any extensions of it as a retracement of the longer-term uptrend.
• Support: 117.35 (S1), 115.45 (S2), 114.00 (S3)
• Resistance: 120.00 (R1), 121.85 (R2), 122.50 (R3)
GBP/USD firmed up after finding support at 1.5650 (S1), but the advance was halted by the 1.5735 (R1) barrier. With no clear trending conditions on the 4-hour chart, I would adopt a neutral stance as far as the short-term picture is concerned. On the daily chart, I still believe that as long as Cable is trading below the 80-day exponential moving average, the overall path is negative. But our daily momentum studies are in a rising mode, supporting the possibility that a test near the black downtrend line or even a break above it may be looming. The RSI moved higher and now lies near its 50 line, while the MACD stays above its trigger and is pointing up. I would treat any bullish waves that stay limited below the 80-day exponential moving average as renewed selling opportunities.
• Support: 1.5650(S1), 1.5600 (S2), 1.5540 (S3)
• Resistance: 1.5735 (R1), 1.5800 (R2), 1.5950 (R3)
WTI continued its tumble on Friday, breaking below the psychological barrier of 60.00 (R1). The decline hit support a few cents above our support level of 58.60 (S1), the low of the 10th of July 2009. A dip below that barrier is likely to challenge the 56.65 (S2) hurdle, defined by the lows of the 15th and 16th of May 2009. Our daily technical studies paint a negative picture. Both the 50- and the 200-day moving averages stand above the price curve and their slope stays to the downside. The 14-day RSI stays within its oversold territory pointing down, while the daily MACD, already at extreme low levels, stands below its trigger line pointing down as well. These momentum signs designate strong downside momentum and reinforce the case that we are likely to see lower oil prices in the close future.
• Support: 58.60 (S1), 56.65 (S2), 55.00 (S3)
• Resistance: 60.00 (R1), 62.00 (R2), 64.00 (R3)
Gold pulled back on Thursday but triggered some buy orders near 1215 (S1). As long as the precious metal is trading above the black downtrend line taken from back the 10th of July, I would still consider the outlook to be mildly to the upside. A clear move above the 1235 (R1) is likely to reaffirm the case and perhaps prompt bullish extensions towards our next resistance barrier at 1255 (R2), determined by the high of the 21st of October. It is worth noting that the 1255 (R2) obstacle currently coincides with the 200-day moving average. Our daily oscillators corroborate my view. Both of them are in a rising mode and the both lie within their positive territories.
• Support: 1215 (S1), 1210 (S2), 1186 (S3)
• Resistance: 1235 (R1), 1255 (R2), 1270 (R3)
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Market Analysis 15/12/14
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Japan in focus; oil continues to fall Japan was in focus this morning as the country’s ruling Liberal Democratic Party (LDP) scored a major victory Sunday. It won 290 seats in the Lower House, down only slightly from 294 before the election. Its coalition partner, Komei Party, increased its seats, raising the coalition’s total representation by one to 325. This was probably the best result for the markets in that it will strengthen PM Abe’s hand in carrying out his economic reforms, such as they are, without strengthening him so much that he gets sidetracked into the realm of social or defense programs. The fact that voter turnout was the lowest in the post-war era also weakens the argument for dramatic social engineering. Given that the vote was presented as a referendum on “Abenomics,” the pace of economic reform is likely to accelerate as a result, although the opposition from vested interests remains strong so it remains to be seen how much he can accomplish. Perhaps the one area where Abenomics has been successful has been in weakening the yen. I expect that trend to continue next year.
Nonetheless, the disappointing tankan survey seems to have been more significant for markets than the election. Most of the indicators failed to match expectations and turned lower, especially the key large manufacturers’ outlook index. Japanese stocks fell on the news, pushing USD/JPY back down so that it traded more or less unchanged from Friday’s opening levels.
Oil prices continued to fall after the UAE’s oil minister said that OPEC will leave output unchanged even if oil prices fall to USD 40/bbl. “We’re not targeting a price; the market will stabilize itself,” he said, echoing recent comments from the Saudi oil minister as well. The International Energy Agency (IEA) Friday lowered its forecast for oil consumption next year while simultaneously raising its forecast for non-OPEC supply, just a month or so after revising its forecast in November. With news like this, I expect the commodity currencies to remain under pressure, at least until oil finds a bottom.
AUD was additionally hit after Australian Treasurer Joe Hockey said the budget deficit would widen significantly because of the slump in iron ore prices. Hockey forecast that it would remain at “around USD 60 a ton for the foreseeable future,” compared to recent prices of $68.49. Iron ore accounts for about 20% of the nation’s export income and with Australian mining companies continuing to expand production, the glut may worsen. The worsening terms of trade are likely to keep AUD under pressure, in our view. RBA Gov. Stevens may yet get his wish of AUD/USD at 0.75!
Today’s indicators: No major economic releases are due out during the European morning. ECB Governing Council member Ewald Nowotny presents the financial stability report of the Austrian Central Bank.
In the US, industrial production for November is estimated to have risen 0.7% mom, a turnaround from -0.1% the previous month. The Empire State manufacturing survey and the NAHB housing market index, both for December, are expected to show improvement as well. These data could support the dollar somewhat.
Rest of the week: The highlight this week will be the FOMC meeting that ends Wednesday. After the Committee ended its QE3 program in October, expectations are now that they will continue to normalize policy and drop the “considerable time” phrase from the statement following the meeting. If they do drop it, the market will debate the nuance of whatever they replace it with (if anything). The Committee will also give new forecasts for the economy, inflation and interest rates, including the famous “dot plot” of Fed funds rate expectations. Fed Chair Yellen holds a press conference following the decision. We expect the meeting to be bullish for USD in that it may reinforce the divergence of monetary policy between the US and other countries.
There are two other central bank meetings this week: the Riksbank meets on Tuesday. Thursday’s CPI data showed that the country remains stuck in deflation, which reinforces our expectations that the Riksbank will move towards unconventional measures, perhaps even at this meeting. On Friday the Bank of Japan ends its two-day policy meeting; no change in policy is expected following the additional stimulus introduced in October. We also get the minutes from the Reserve Bank of Australia on Tuesday and Bank of England on Wednesday.
Tuesday is a busy day: major indicators out include the preliminary December manufacturing PMIs for China and several European countries; the German ZEW survey; and UK CPI for November. On Wednesday we have the UK labor market data and US CPI. Thursday sees the Ifo indices, UK retail sales and the Philadelphia Fed index, while on Friday we get Canada’s CPI and retail sales.
Currency Titles:
EUR/USD above the downtrend line
USD/JPY in a consolidative mode
GBP/USD near the 1.5735 resistance line
WTI still below 60.00
Gold hits support at 1215
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http://shared.ironfx.co.uk/morning_pictures_2014/13december2014/WTI.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/13december2014/XAUUSD.PNG
Currencies Text:
EUR/USD moved higher after finding support at the 50-period moving average and breaking above the black downtrend line. Nevertheless, the move was halted near the 200-period moving average and during the early European hours the pair is heading lower again for another test of the 1.2410 (S1) support line. A break below that hurdle could pull the trigger for the well-tested support line of 1.2360 (S2). Our short-term momentum signs support this notion and increase the possibility for a move lower and a test of the downtrend line as support this time. On the daily chart, the rate is still printing lower highs and lower lows below both the 50- and the 200- day moving averages and this keeps the overall path to the downside. The positive divergence between the daily momentum studies and the price action is still in effect, which indicates that the longer-term downtrend is losing momentum and that further upside corrective waves could be looming.
• Support: 1.2410 (S1), 1.2360 (S2), 1.2300 (S3).
• Resistance: 1.2515 (R1), 1.2570 (R2), 1.2620 (R3).
USD/JPY consolidated during the Asian session, remaining within the 120.00 (R1) resistance and 117.35 (S1) support line. I would prefer to see another break above the key line of 120.00 (R1) before getting confident for further upside move. As long as the rate remains below that line, I see chances that the downside corrective move may extend a bit lower. In the bigger picture our daily momentum studies support the notion: the 14-day RSI find support near its 50 line and is pointing down, while the MACD, even though at extremely high levels, stands below its trigger line and is also pointing down. As for the broader trend, the price structure is still higher peaks and higher troughs above both the 50- and the 200-day moving averages and this keeps the overall path of the pair to the upside. Therefore, I would consider the recent setback or any extensions of it as a retracement of the longer-term uptrend.
• Support: 117.35 (S1), 115.45 (S2), 114.00 (S3) .
• Resistance: 120.00 (R1), 121.85 (R2), 122.50 (R3).
GBP/USD firmed up after finding support just above the 80-period moving average but the advance was halted by the 1.5735 (R1) barrier. With no clear trending direction on the 4-hour chart, I would adopt a neutral stance as far as the short-term picture is concerned. On the daily chart, I still believe that as long as Cable is trading below the 80-day exponential moving average, the overall path is negative. But our daily momentum studies are in a rising mode, supporting the possibility for small move higher in the near future. The RSI moved higher and now lies just below its 50 line, while the MACD stays above its trigger and is pointing up. Since the overall path of the pair is to downside I would treat any upside correction waves that stay limited below the 80-day exponential moving average as renewed selling opportunities.
• Support: 1.5650 (S1), 1.5600 (S2), 1.5550 (S3).
• Resistance: 1.5735 (R1), 1.5800 (R2), 1.5840 (R3).
WTI jumped on Monday after finding some buy orders near the 56.25 (S1) level but the advance was halted few cents above our support-turned-into-resistance line of 58.60 (R1). In the bigger picture the overall path remains to the downside and our daily technical studies support this notion. Both the 50- and the 200-day moving averages remain above the price structure and their slope stays to the downside. The 14-day RSI stays within its oversold territory, while the daily MACD, already at extreme low levels, stands below its trigger line pointing down. These momentum signals designate strong downside momentum and reinforce the case that we are likely to see lower oil prices in the near future.
• Support: 56.25 (S1), 55.00 (S2), 53.80 (S3).
• Resistance: 58.60 (R1), 60.00 (R2), 62.00 (R3).
Gold pulled back on Friday and declined a bit more during early European trading Monday to find support near 1215 (S1) line. A move below that hurdle could trigger further extensions towards our next support of 1.210 (S2). Our short-term indicators support the notion for further declines as the 14-period RSI moved below its 50 line and is pointing down, while the MACD, already below its trigger line is willing to move into its negative territory.
• Support: 1215 (S1), 1210 (S2), 1186 (S3).
• Resistance: 1235 (R1), 1255 (R2), 1270 (R3).
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Market Analysis 16/12/14
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Russia defense of RUB likely to be insufficient Russia shocked the markets by hiking rates dramatically in the middle of their night Monday. Just before 1 AM in Moscow, the central bank raised rates from 10.5% to 17.0%, the largest hike since the collapse of the Russian bond market in 1998. The move highlights the conundrum that Russia finds itself in. With money fleeing the country, the banking system is in danger of collapse. The plunge in the currency threatens to raise the inflation rate (already around 9%) to intolerable levels. Moreover, companies that had borrowed money in foreign currencies are in serious trouble. The hike in rates is meant to make holding RUB more attractive and thereby stop the depreciation. Unfortunately, this strategy is more successful when the problem is foreign speculators borrowing a currency to short it. In Russia’s case, when domestic capital flight is the problem, the rise in rates might only make things worse by spreading the pain to domestic borrowers and causing the economy to contract. That will make stocks, real estate and other RUB-denominated assets less attractive. I believe it will take more than a hike in rates to stabilize the currency. A bottom to oil prices and some resolution of the tensions with the West over Ukraine are necessary before capital will be attracted back into the country, in my view. Unfortunately, both those targets remain far away.
Yesterday’s brief bounce in oil didn’t last long. Oil futures fell as much as 1.2% in New York yesterday with no particular trigger, just a continuation of the recent fall. Our technical analysis concludes that the overall path remains to the downside. See the technical section for more details.
As might be expected, the currencies of oil producers are generally suffering – RUB, BRL and IDR – while oil importers are generally benefitting – KRW, SGD, and TWD. A long/short basket of EM currencies based on whether the country is an oil importer or exporter could be rewarding, although many of these currencies are not accessible to the retail investor.
Nonetheless, the impact of lower oil prices on EM currencies is not entirely consistent. TRY fell to a record low yesterday while MXN was little changed. TRY is apparently suffering from political risk as President Erdogan moved against journalists and other perceived enemies. Even though Turkish assets have been among the top performers in EM as the collapse in oil prices ameliorates some of Turkey’s balance-of-payments problems, investors are not likely to give the government the benefit of the doubt in the current risk-off environment. And while the MXN may have been fairly stable yesterday, the Mexican stock market fell the most of any major stock market yesterday, so clearly the fall in oil prices is being reflected in MXN-denominated assets. I don’t think the worst is over for the peso yet.
Surprisingly, gold and silver both fell sharply despite the increasing volatility. It appears that they are trading more like commodities than investment vehicles. True, the need for an inflation hedge is diminishing, but one might expect the need for a safe haven asset to increase – that’s why JPY was the best-performing currency overnight. The inability of gold to perform in this environment shows that it is losing a lot of its allure.
The minutes from the latest RBA policy meeting showed that the board discussed why the market is pricing in the possibility of a rate cut. That could be the beginning of a deeper consideration of the possibility, which would be a negative for the currency. Also, the board once again repeated that AUD is “above most estimates of its fundamental value…” AUD weakened as a result, including against NZD.
Today’s market: Today is PMI day. In China, the preliminary HSBC manufacturing PMI for December fell further into contractionary territory than was expected. With China accounting for around 11% of global oil demand, slowing Chinese growth is of course another negative for oil prices. We also get the preliminary manufacturing and service-sector PMI data from several European countries and the Eurozone as a whole. Those are expected to have risen, which could boost the euro. The German ZEW survey for December may also be EUR-positive. Both indices are forecast to have risen. After last month’s surge, a rise in the expectations index could be a sign that the German economy may have started to stabilize and could strengthen the euro somewhat.
During the European day, the spotlight will be on the Riksbank policy rate decision. Last Thursday’s CPI for November showed that the country remains in deflation, which reinforces our view that the Riksbank will move towards unconventional measures, perhaps even at this meeting. Riksbank Governor Stefan Ingves will hold a press conference following the rate decision.
In the UK, the CPI for November is expected to slow to 1.2% yoy from 1.3% yoy, which could push further back the expectations for BoE tightening and leave the pound vulnerable. BoE Governor Mark Carney holds a press conference following the release of the Financial Stability Review.
In the US, we get housing starts and building permits, both for November. Starts are expected to be higher but permits lower. The preliminary Markit manufacturing PMI for December is also due out.
Currency Titles:
EUR/USD finds support near 1.2410
USD/JPY test the 117.35 support line
GBP/USD dipped below 1.5665
WTI below 56.00
Gold break two support lines in a row
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http://shared.ironfx.co.uk/morning_pictures_2014/16december2014/USDJPY.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/16december2014/GBPUSD.PNG
http://shared.ironfx.co.uk/morning_pictures_2014/16december2014/WTI.PNG
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Currencies Text:
EUR/USD moved higher after finding support near 1.2410 (S1) line. However, the move was topped by the 200-period moving average, which has proved a good resistance to the price action recently. I would expect a break above the 200-period moving average to trigger further extensions towards our 1.2515 (R1) resistance hurdle. On the other hand, a break below 1.2410 (S1) is necessary for a leg down towards the well-tested support line of 1.2360 (S2). On the daily chart, the rate is still printing lower peaks and lower troughs below both the 50- and the 200- day moving averages and this keeps the overall path to the downside. The positive divergence between the daily momentum studies and the price action is still intact, which indicates that the longer-term downtrend is losing momentum, allowing EUR to trade correctively higher.
• Support: 1.2410 (S1), 1.2360 (S2), 1.2300 (S3).
• Resistance: 1.2515 (R1), 1.2570 (R2), 1.2620 (R3).
USD/JPY declined on Monday but remained within the 120.00 (R1) resistance and 117.35 (S1) support line. During the early European hours, the pair is testing the 117.35 (S1) support hurdle where a break below could push the rate to our next support of 115.45 (S2). Looking at our short-term momentum signals, the RSI is heading towards the 30 line, while the MACD, already in its negative territory, crossed below its trigger. Although these signs designate accelerating bearish momentum, I would wait for a clear break below the support of 117.35 (S1) to get confident for further downside corrective moves. As for the broader trend, the price structure is still higher highs and higher lows above both the 50- and the 200-day moving averages and this keeps the overall path of the pair to the upside. Therefore, I would consider the recent setback or any extensions of it as a correction of the longer-term uptrend.
• Support: 117.35 (S1), 115.45 (S2), 114.00 (S3) .
• Resistance: 120.00 (R1), 121.85 (R2), 122.50 (R3).
GBP/USD declined sharply on Monday, breaking our support-turned-into resistance line of 1.5655 (R1) but bounced back to trade around that level again. With no clear trending direction in the short-term time frames, I would wait for today’s CPI rate and banks stress-test results to print a better technical picture. On the daily chart, I maintain the view that as long as Cable is trading below the 80-day exponential moving average, the overall path is negative.
• Support: 1.5600 (S1), 1.5550 (S2), 1.5500 (S3).
• Resistance: 1.5655 (R1), 1.5735 (R2), 1.5800 (R3).
WTI plunged on Monday, breaking below the support-turned-into-resistance 56.25 (R1) level. The decline was stopped at 55.00 (S1) support line. A break below that line could push the price even lower perhaps towards our next support of 53.80 (S2) defined by the lows of 30th January 2007. In the bigger picture the overall path remains to the downside and our daily technical studies support this notion. Both the 50- and the 200-day moving averages remain above the price structure and their slope stays to the downside. The 14-day RSI remains within its oversold territory, while the daily MACD, already at extreme low levels, stands below its trigger line pointing down. These momentum signals designate strong downside momentum and reinforce the case that we are likely to see even lower oil prices in the near future.
• Support: 55.00 (S1), 53.80 (S2), 52.60 (S3).
• Resistance: 56.25 (R1), 58.60 (R2), 60.00 (R3).
Gold plunged on Monday, breaking two support lines in a row. The precious metal found support near the 1190 (S1) area where it remained elevated during the early European hours. Looking at our short-term momentum signals, the RSI found support at its 30 line and moved up, while the MACD fell into its negative territory. Although a test of the 1210 (R1) resistance hurdle seems possible, these mixed momentum signs give me enough reasons to adopt a neutral stance.
• Support: 1190 (S1), 1186 (S2), 1175 (S3).
• Resistance: 1210 (R1), 1215 (R2), 1235 (R3).
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