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IronFX Daily Commentary | 17/07/15

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• The fickle market Just last week the market was fixated on Greece, Greece and Greece. Now the country is nearly forgotten and it’s back to looking at monetary policy divergence. The Greek parliament passed the laws necessary to get a bailout, but the relief rally in EUR barely lasted. On the other hand, the DAX is up about 10% from its lows and Spanish 10-year bond yields are back below 2%, where they were at the beginning of June. So just as before, other financial assets are reflecting Greek developments more than the FX market is.

• Monetary policy divergence The old theme of monetary policy divergence got a boost yesterday as both Fed Chair Yellen and ECB President Dragi spoke. As I mentioned yesterday, Yellen has been reminding everyone that the Fed wants to hike rates this year, data permitting. Draghi on the other hand reiterated the ECB’s willingness to use “all the instruments available” to counter any tightening of monetary policy or further decline in inflation. This divergence is once again driving USD strength/EUR weakness.

• GBP also benefitting The other currency benefitting from this monetary policy divergence theme is GBP. Bank of England Gov. Carney made a speech yesterday in which he stated the Bank’s determination to raise rates within the next three years. The market is discounting that they start hiking next February, which would be more or less in line with Carney’s comment yesterday that “(t)he decision as to when to start such a process of adjustment will likely come into sharper relief around the turn of this year.” This is a very different tone from most other central banks, which are still talking about the need to safeguard recovery and prevent inflation from falling too low. EUR/GBP fell below 0.70 for the first time since 2007 (see technical comment).

• Commodity currencies to suffer On the other hand, countries that rely on commodity production are likely to see lower economic activity and hence lower inflation as Chinese growth slows. That could cause them to cut rates, as Canada did this week (and as New Zealand may do next week) and put downward pressure on their currencies. Oil prices fell further yesterday as investors wait for Iranian oil to hit the market. Watch out for CAD and NOK. AUD on the other hand rose steadily throughout the European and US day yesterday and maintained much of those gains today. The reason wasn’t clear.

• Draghi reaches out to Greece Getting back to ECB President Draghi, yesterday he surprised the markets by increasing the Emergency Liquidity Assistance (ELA) funds to Greek banks by EUR 900mn and suggesting that the ECB might start including Greek government bonds in its QE purchases. I think it was generally assumed he wouldn’t boost the ECB’s aid to Greece until the country had made the large payment to the ECB due on 20 July. However, he apparently thinks that so long as the Eurozone finance ministers have agreed to keep Greece in the Eurozone, he is obliged to do “whatever it takes” to ensure that the country can indeed remain in it. His actions will reduce tensions in the Eurozone. In that respect, his aid to Greece may be negative for the euro, in that a solution to the Greek problem makes it easier for the Fed to hike interest rates. Indeed, the moves to solve the Greek problem – the Greek parliamentary approval of the bailout conditions, bridge loan agreement to ensure repayment to the ECB, and the increase in ELA – may well explain why Fed funds rate expectations were up around 4.5 bps yesterday despite mixed US economic data (a big decline in initial jobless claims and a rise in the NAHB housing market index, but a disappointing fall in the Phili Fed index).

• Today’s highlights: On Friday, we have a relatively light calendar. There are no major economic indicators scheduled during the European session. Germany will vote on the Greek bailout; that might give rise to some stirring speeches but at the end of the day I expect they’ll pass it.

• In the US, we get the headline and core CPI rates for June. The headline figure is expected to rise after an unchanged reading in May, while the core rate is forecast to have accelerated to +1.8% yoy from +1.7% yoy. A rise in the CPI rate is likely to keep USD supported as this would add to the positive data from the country and increase the likelihood of a rate hike. A Cleveland Fed research paper yesterday said that “(t)he recent pickup in three-month inflation rates suggests the possibility—admittedly, not very likely, with just a few months of data—that trend inflation rates have bottomed out and begun to move back toward rates consistent with the FOMC’s 2-pct objective for PCE inflation."

• The preliminary U of M consumer sentiment index for July is also coming out along with the surveys of 1-year and 5-to-10 year inflation expectations. Housing starts and building permits for June are also to be released. Housing starts are forecast to increase a bit, while building permits, the more forward-looking of the two indicators, are forecast to moderate somewhat. Nevertheless, the overall strength in the housing sector supports the view that growth in Q2 could rebound somewhat and this could strengthen the greenback a bit.

• We get the June CPI data from Canada as well. Following the interest rate cut by the BoC on Wednesday, any CAD strengthening from a positive CPI data could be limited.

• As for the speakers, Fed Vice Chairman Stanley Fischer speaks.

Currency Titles:

EUR/USD rebounds from 1.0855

EUR/GBP falls and hits support at 0.6960

USD/JPY breaks above 123.75

WTI tumbles and hits again support near 50.90

Gold trades lower

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Currencies Text:

• EUR/USD continued declining on Thursday, falling below the support (now turned into resistance) of 1.0915 (R1). The decline was stopped at 1.0855 (S1) and then the pair rebounded. The price structure on the 4-hour chart still suggests a short-term downtrend and therefore I would expect a clear break below 1.0855 (S1) to pave the way for the next support of 1.0820 (S2), marked by the low of the 27th of May. However, our short-term momentum studies suggest that a further corrective rebound could be looming before sellers seize control again. The RSI hit support at its 30 line and turned up, while the MACD has bottomed and could move above its trigger line soon. As for the bigger picture, I still see a neutral longer-term outlook. I believe that a move above the psychological zone of 1.1500 is the move that could carry larger bullish implications, while a break below 1.0800 (S3) is needed to confirm a forthcoming lower low on the daily chart and perhaps turn the overall bias back to the downside.

• Support: 1.0855 (S1), 1.0820 (S2), 1.0800 (S3)

• Resistance: 1.0915 (R1), 1.0975 (R2), 1.1035 (R3)

• EUR/GBP continued its tumble yesterday. It managed to break below the psychological barrier of 0.7000 (R1) and hit support at 0.6960 (S1). The short-term trend is still to the downside, hence I would expect a clear move below that support to set the stage for extensions towards the 0.6920 (S2) line, a support marked by the 1st of November 2007. Nevertheless, our short-term oscillators provide evidence that a corrective bounce could be on the cards before sellers shoot again, perhaps to challenge the 0.7000 (R1) barrier as a resistance this time. The RSI has bottomed within its below-30 territory, while the MACD, although negative, has bottomed and could cross above its trigger line any time soon. As for the broader trend, the move below the round number of 0.7000 (R1) confirmed a forthcoming lower low on the daily chart and signaled the continuation of the prevailing longer-term downtrend.

• Support: 0.6960 (S1), 0.6920 (S2), 0.6900 (S3)

• Resistance: 0.7000 (R1), 0.7020 (R2), 0.7070 (R3)

• USD/JPY continued trading higher, breaking above the resistance (now turned into support) barrier of 123.75 (S1), marked by the high of the 2nd of July. As long as the rate is trading above the downtrend line taken from the peak of the 5th of June, I see a cautiously positive picture. I would expect the bulls to challenge the resistance of 124.45 (R1) in the short run. A clear break of that line is likely to pull the trigger for the psychological zone of 125.00 (R2). The short-term oscillators though suggest a possible pullback before the next positive wave. The RSI hit resistance at its 70 line several times and now points down, while the MACD has topped and just fell below its trigger line. On the daily chart, it looks like the recent rally is a first sign that the 5th of June – 8th of July decline was just a corrective phase and the longer-term uptrend is gearing up again.

• Support: 123.75 (S1), 122.90 (S2), 122.00 (S3)

• Resistance: 124.45 (R1), 125.00 (R2), 125.80 (R3)

• WTI traded lower yesterday and reached once again 50.90 (S1), the lower bound of the sideways range WTI has been oscillating since the 6th of July. As long as the price is trading within that range I would consider the short-term picture to be neutral. A decisive break below 50.90 (S1) is needed to signal the downside exit of the range and trigger the continuation of the prevailing downtrend. Something like that is likely to initially target the round figure of 50.00 (S2). On the daily chart, I see that the medium-term trend remains negative. As a result, I would expect the bears to eventually take control at some point and to drive the battle below 50.90 (S1). Our daily oscillators support the notion as well. The 14-day RSI appears ready to move again below 30, while the daily MACD stands below both its zero and signal lines and points south.

• Support: 50.90 (S1), 50.00 (S2), 48.15 (S3)

• Resistance: 52.00 (R1), 52.85 (R2), 53.80 (R3)

• Gold traded lower on Thursday, to touch once again the 1142 (S1) support barrier. As long as the metal is trading within the short-term downside channel that had been containing the price action since the 18th of June, I would consider the short-term outlook to remain negative. I would expect a break below the 1142 (S1) barrier to pull the trigger for our next support area of 1132 (S2), defined by the low of the 7th of November 2014. The RSI points down and appear ready to challenge its 30 line, but the MACD, although negative, shows signs of bottoming. On the daily chart, the tumble towards the 1142 (S1) line confirmed another forthcoming lower low and kept the overall picture of the yellow metal somewhat negative.

• Support: 1142 (S1), 1132 (S2), 1120 (S3)

• Resistance: 1150 (R1), 1158 (R2), 1165 (R3)

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IronFX Daily Commentary | 20/07/15

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• Confidence returns, with a twist The fears of Greece imploding and bringing the global financial system down with it – if they ever existed – have faded quickly. The VIX index, the so-called “Wall Street fear gauge,” has gone from a three-month high on 9 July to a three-month low on Friday. Eurozone peripheral bond spreads finished the week stable at significantly lower levels than they opened on Monday (Spain for example narrowed 10 bps over the week to 115, while Portugal tightened 9 bps to 185).

• Confidence in the US economy increased too as US inflation accelerated modestly in June and housing starts & building permits for the month both surpassed expectations. Fed fund rate expectations rose modestly while bond yields were little changed. Stocks rose for the sixth day out of seven and the NASDAQ index hit a new record high.

• Yet the confidence did not return to commodities, which continued to sink: WTI is down 0.5% from Friday morning’s opening and copper is down 2%. Gold, another measure of risk version, is down 3.2%. This is odd because usually when investors expect economic expansion, they foresee increased demand for commodities.

• So what does it mean when confidence seems to be coming back, yet investors don’t expect increase in demand for commodities? Two things are possible: one, a supply shock that means any increase in demand will be more than offset by an increase in supply, and secondly, a change in the nature of the demand. I think both are at play here. Certainly the price of oil and iron ore, for example, are being depressed by new supply coming on stream. At the same time, the increase in economic activity seems to be shifting from the EM countries, which are relatively commodity-intensive, to the developed nations, which use less commodities for each unit of GDP. Growth in the US and Eurozone taking over from growth in China as an engine of the global economy would be one such example.

• From fear to carry It was noticeable that the US high-grade bond market had its fifth busiest week ever last week, and most new issued tightened once trading began. The fall in the VIX and the demand for bonds indicate a shift from fear to carry. Will this spill over to the FX market? Although the TRY was the worst-performing EM currency we track on Friday, nonetheless it was the best-performing one over the week as a whole, followed by ZAR. Indeed, looking at the performance over the last week, it does seem that among EM currencies, those with the highest short-term interest rates were the best-performing ones. That should favour RUB, TRY, ZAR and MXN, although I suspect that RUB and MXN are more affected by oil prices than by carry. TRY not only has the benefit of some of the highest interest rates among currencies, but is also a commodity importer, not exporter, so its balance of payments should benefit from the fall in commodity prices.

• Among the G10 currencies however the level of interest rates had no discernible connection with the performance of the currency. Indeed NZD, with the highest short-term rates among the G10, was also the worst-performing currency. That shows one has to look at everything surrounding a currency, not just one factor.

• Speculators add to EUR shorts, cut JPY shorts Friday’s Commitment of Traders report showed that investors added to their EUR shorts and cut JPY shorts. Is EUR going to replace JPY as the funding currency of choice? EUR shorts are still at only the 30% rank over the last five years, indicating that positioning is short but not yet at an extreme level, unlike NZD and MXN, for example, which are the shortest they’ve been in the last five years (0% level). But the absolute number of NZD contracts, -19,654, is still relatively small so I believe investors can add to their position. MXN may be due for a rebound however, although that depends to a large degree on oil prices. Speaking of which, speculators are still very long oil – there could be further long liquidation that would pressure the price. The other notable point is that investors added to their short GBP positions last week – oops! Sterling was the only G10 currency to gain vs USD last week. I could envision a big repositioning in GBP that would push the currency higher.

• Today’s highlights: The calendar is relatively light with no major indicators on the agenda. During the European day, Eurozone’s current account for May is due to be released.

• As for the rest of the week, the highlights will be the RBNZ meeting on Thursday and three central banks (Japan, Australia and UK) releasing the minutes of their recent meetings.

• on Tuesday, during the Asian day, Bank of Japan releases the minutes of its June 18-19 meeting. As usual, these are not the minutes from the most recent meeting but rather from the previous one. Since at their latest meeting the Bank maintained the likelihood that it would achieve its 2% inflation target on schedule, despite having lowered slightly its FY2016 forecast, the minutes of the previous meeting shouldn’t be of much interest.

• In Australia, the RBA releases the minutes of its July meeting. At that meeting, the Bank kept its Cash Rate (CR) unchanged at 2% as expected and again, showed no clear bias with regards to the direction of the next move in rates. They could confirm that monetary policy should stay accommodative and that the data in the future will tell them whether their stance is appropriate. Therefore, the market reaction at this event could be minimal.

• On Wednesday, the Bank of England releases the minutes of its July meeting. Following the hawkish comments by the BoE Governor Mark Carney that the first rate hike is getting closer, it will be interesting to see if any of the MPC members who previously voted for a rate hike are likely to resume their hawkish stance any time soon. I would expect GBP to regain its momentum as investors continue to re-price their rate hike expectations by the BoE.

• As for indicators, from Australia, Q2 CPI is forecast to accelerate. The market seems to focus on the trimmed mean CPI rate, which is expected to remain unchanged at 2.3% yoy. Even though the positive data are likely to strengthen AUD somewhat, I would expect the low energy and commodity prices to drag down the currency.

• On Thursday, the highlight of the day will be the RBNZ policy meeting. At their last meeting, the Bank not only cut rates by 25 bps, as the market largely expected, but also announced an easing bias. Given the recent weakness in the milk auction results, the poor CPI data for Q2 and the exposure to the soft Chinese and Australian economies, New Zealand’s biggest trading partners, the Bank could act again to support the economy. One of the important facts about New Zealand is that it remains one of the few G10 countries that can still lower interest rates – at 3.25%, the cash rate is still far above the next highest country Australia, which stands at 2.0%. I believe that as rate cut expectations build up, NZD could come under renewed selling pressure.

• Finally Friday is a PMI day. During the European trading session, we get the preliminary manufacturing and service-sector PMI data for July from several European countries and the Eurozone as a whole. The expectations are for the figures to show a moderate improvement. With the Greek crisis now off investors’ radar, economic data are likely to start being important. A rise the PMI could strengthen EUR a bit.

• In the US, the Markit PMI is expected to increase somewhat, another sign that the US economy is on a stable path.

Currency Titles:

EUR/USD hits the 1.0820 barrier

GBP/USD trades in a consolidative manner

EUR/JPY breaks below 134.70

DAX futures find resistance near 11800 and retreat

Gold falls off the cliff

Currencies Image Url:

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Currencies Text:

• EUR/USD hit resistance at 1.0915 (R2) on Friday and tumbled to break below the support (now turned into resistance of 1.0855 (R1). Today, during the early European morning, the rate is testing the 1.0820 (S1) support, defined by the low of the 27th of May. A break below that line is likely to bring into the game the 1.0800 (S2) obstacle. A decisive dip below that level could carry larger bearish extensions and perhaps target the 1.0660 (S3) area defined by the low of 23rd April. Our short-term oscillators detect strong downside speed and amplify the case for further declines. The RSI looks able to move below its 30 line, while the MACD stands below both its zero and signal lines, pointing south. As for the bigger picture, a daily close below 1.0800 (S3) is needed to confirm a forthcoming lower low on the daily chart and perhaps turn the overall bias back to the downside.

• Support: 1.0820 (S1), 1.0800 (S2), 1.0660 (S3)

• Resistance: 1.0855 (R1), 1.0915 (R2), 1.0975 (R3)

• GBP/USD again hit resistance at 1.5675 (R1) and retreated to find support at 1.5550 (S1). Cable has been oscillating between these two barriers since the 14th of July and therefore, I would consider the short-term bias to be neutral for now. Taking a look at our short-term oscillators though, I see signs that we may experience the downside exit of the range in the near term. The RSI declined and now looks ready to move below its 30 line, while the MACD, although positive, stands below its trigger line and is headed towards its zero line. A clear move below 1.5550 (S1) is likely to confirm the case and perhaps pave the way for 1.5465 (S2). Switching to the daily chart, I see that Cable printed a higher low at around 1.5330, and that is still above the 80-day exponential moving average. As a result, I would consider the overall picture to stay somewhat positive and I would treat any possible near-term declines as corrective moves, at least for now.

• Support: 1.5550 (S1), 1.5465 (S2), 1.5420 (S3)

• Resistance: 1.5675 (R1), 1.5735 (R2), 1.5775 (R3)

• EUR/JPY slid on Friday after hitting resistance at 135.30 (R2), and managed to break below the support (now turned into resistance) barrier of 134.70 (R1). I would now expect the bears to pull the trigger for the well-tested support area of 133.30 (S2). Shifting my attention to our momentum indicators, I see that the RSI continued lower and is now headed towards its 30 line, while the MACD stands below both its zero and signal lines. These momentum signs corroborate my view and amplify the case for further declines, at least in the short run. On the daily chart, I see that the 133.30 (S1) support area stands marginally below the 50% retracement level of the 14th of April – 4th of June advance. As a result, although I expect some further short-term declines, I would like to see a daily close below that area before I assume that the medium-term picture has turned negative as well.

• Support: 133.30 (S1), 132.55 (S2), 131.40 (S3)

• Resistance: 134.70 (R1), 135.30 (R2), 136.35 (R3)

• DAX futures broke above the resistance (turned into support zone) of 11600 (S1) on Thursday, but the advance was halted fractionally below the 11800 (R2) zone. On Friday, the index retreated somewhat. As long as the index is trading above the upper bound of the downside channel that had been containing the price action from the last days of March until the 10th of July, I would consider the outlook to stay somewhat positive. If buyers are strong enough to overcome the 11800 (R1) zone, I would expect them to initially target the 11900 (R2) area. A break above 11900 (R2) is the move that could trigger larger bullish extensions, perhaps towards 12080 (R3). Taking a look at our near-term momentum studies, I see signs that further corrective pullback could be in the works before the bulls take charge again. The RSI exited its overbought territory, while the MACD has topped and fallen below its signal line. Plotting the daily chart, I see that the move out of the channel on the 13th of July, is a first sign that the 10th of April – 8th of July decline was just a corrective phase of the prior uptrend. What is more, the recent rally also confirmed the positive divergence between our daily oscillators and the price action.

• Support: 11600 (S1), 11400 (S2), 11250 (S3)

• Resistance: 11800 (R1) 11900 (R2), 12080 (R3)

• Gold plunged during the Asian morning Monday, dipped below the 1100 (S1) barrier, and hit support at 1072 (S3). Subsequently the metal rebounded to trade back above the 1100 (S1) zone. The metal is now trading below the lower line of the short-term downside channel that had been containing the price action from the 18th of June until today, and as a result, I would consider the short-term outlook to remain negative. I would expect another move below 1100 (S1) to initially target the 1085 (S2) line, marked by the 24th and 25th of March 2010. Nevertheless, taking into account our short-term oscillators and the fact that the fall was overextended, I would expect the current rebound to continue for a while, perhaps to challenge the 1120 (R1) zone as a resistance this time. The MACD stands well below both its zero and signal lines, confirming the strong downside momentum, but the RSI has bottomed within its below-30 territory, supporting the case that the current rebound may continue for a while.

• Support: 1100 (S1), 1085 (S2), 1072 (S3)

• Resistance: 1120 (R1), 1132 (R2), 1142 (R3)

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[IronFx]

IronFX Daily Commentary | 22/07/15

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•Downward revision to US IP causes mean reversion A market never goes in a straight line. Yesterday during New York time many of the markets that have been trending recently reversed: equities were lower, bonds yields declined, gold and oil rallied and the dollar fell. Fed fund rate expectations declined. However, the reversal partially reversed during Asian trading this morning and oil and gold are both lower, as are most other commodities. Almost all equity markets are trading lower and USD remains far below its opening levels of Tuesday.

• The trigger for the move was weak annual revisions to the US industrial production (IP) report,which significantly revised the post-recession performance of the US manufacturing sector and left the current capacity utilization further below the long-run average. These annual revisions to the IP report usually aren’t market moving, but this time the revision was enough to change investors’ thinking about the nature of the recent recovery and the amount of slack in the economy. IP for the last six years since the recession ended was revised down to annualized growth of 3.5% instead of 4.0%, and within that, oil drilling was much stronger and manufacturing much weaker than previously thought. For example, manufacturing output had been reported to have exceeded the 2007 peak in the middle of last year; now it’s known to be still 4% below the peak. Of particular importance for the dollar was the downward revision to capacity utilization: lower capacity utilization means less pressure on prices and less urgency to hike rates.

•Of course, weaker-than-expected manufacturing means even less-than-expected demand for commodities. Nonetheless the commodity currencies gained during US trading, although they began to weaken during the Asian trading day. I think the news is distinctly bearish for commodities and commodity currencies. It was bad enough that Chinese growth is slowing; if US manufacturing is also weak, then where will the support for commodities come from?

•Australian CPI mixed; headline below estimates Australia’s Q2 CPI came in mixed Wednesday. The closely watched trimmed mean was in line with estimates on a qoq basis and slightly higher than expected on a yoy basis, which initially send AUD higher, but the headline figure was lower than expected on both a qoq and yoy basis and after some time that seemed to win out and AUD moved lower. The fact that almost every commodity listed on Bloomberg is falling this morning may also have something to do with the weakness in AUD. Plus RBA Governor Glenn Stevens repeated previous comments that the question of further cuts in interest rates remains on the table.

•Self-defeating austerity: Endeavour Greece, a non-profit group that supports entrepreneurs, found that 58% of the 300 companies it surveyed between July 13 and July 17 reported a significant impact on their operations caused by the limitations imposed to cross-border transactions.Over two-thirds reported a significant drop in revenues. Most stunning, 23% are now planning to transfer their headquarters abroad for security, cashflow, and stability reasons. In this way, the restrictions on the banking sector are causing the economy to hollow out. This will only increase unemployment, decrease tax revenues and further increase the debt/GDP ratio.

•Today’s highlights: During the European day, the Bank of England releases the minutes of its July meeting. Even though the market consensus is for another 9-0 vote in favor of unchanged rates, the recent hawkish comments by BoE Governor Mark Carney that the time for the first rate hike is getting closer put some risk on this scenario. We will be watching to see if any of the MPC members who previously voted for a rate hike are likely to resume their hawkish stance any time soon, perhaps at the August meeting. Based on the commentary from Bank officials over the past month and the two successive months of a jump in wage growth, the hawks could be encouraged to dissent soon. If this is the case, we would expect GBP to resume its bullish trend, mainly against the commodity related currencies and EUR. The decision was “finely balanced” at the last two meetings, and it would be interesting to see if it remains so.

•In the US, existing home sales for June are forecast to have increased a bit. The housing starts and building permits released last week were consistent with an improving housing market. If the existing home sales are in line with a strong housing sector, this could keep confidence up and USD-supportive. The FHFA housing price index for May is also due out.

Currency Titles:

EURUSD shoots up and stops fractionally below 1.0975

GBPUSD continues to consolidate

USDJPY slides after hitting resistance at 124.45

DAX futures tumble

Gold trades back below 1100

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Currencies Text:

•EUR/USD shot up on Tuesday and hit resistance fractionally below the 1.0975 (R1) barrier, near the 38.2% retracement level of the 10th – 20th of July decline. Personally, I would treat yesterday’s rally as a corrective move and I would expect the forthcoming wave to be negative. A clear break below the 1.0910 (S1) line is likely to confirm the case and could initially target the next support of 1.0870 (S2). Looking at our short-term oscillators, I see that the RSI turned down and that it could be headed towards its 50 line again, while the MACD shows signs that it could start topping marginally below its zero line. As for the bigger picture, a daily close below 1.0800 (S3) would confirm a forthcoming lower low on the daily chart and perhaps turn the overall bias to the downside.

• Support: 1.0910 (S1), 1.0870 (S2), 1.0800 (S3)

• Resistance: 1.0975 (R1), 1.1035 (R2), 1.1085 (R3)

•GBP/USD continued trading sideways on Tuesday, staying between the support of 1.5550 (S1), which currently coincides with the 200-period moving average, and the resistance of 1.5590 (R1). Our short-term oscillators support the recent trendless mode as they both stand near their equilibrium lines. I still believe that we may experience a clear break below 1.5550 (S1) in the near term. Something like that could pave the way for 1.5465 (S2). Switching to the daily chart, I see that Cable printed a higher low at around 1.5330, and that is still above the 80-day exponential moving average. As a result, I would consider the overall picture to stay somewhat positive and I would treat any possible near-term declines as corrective moves, at least for now.

•Support: 1.5550 (S1), 1.5465 (S2), 1.5420 (S3)

•Resistance: 1.5590 (R1), 1.5675 (R2), 1.5735 (R3)

•USD/JPY traded lower on Tuesday after it hit resistance at 124.45 (R1), but the decline was paused at 123.60 (S1). Taking a look at our momentum indicators, I see signs that the decline may continue for a while. The RSI fell back below its 50 line, while the MACD, although positive, stands below its signal line and is headed towards its zero line. A clear move below 123.60 (S1) is likely to reaffirm the case and perhaps open the way for our next support at 122.90 (S2). As for the broader trend, I still believe that the move above the downtrend line taken from the peak of the 5th of June is a sign that the longer-term uptrend is gearing up again. Therefore I would expect any possible further setbacks to provide renewed buying opportunities.

• Support: 123.60 (S1), 122.90 (S2), 122.00 (S3)

• Resistance: 124.45 (R1), 125.00 (R2), 125.80 (R3)

•DAX futures tumbled yesterday after hitting resistance at the 11800 (R1) resistance territory. The decline was halted at 11570 (S1), but taking a look at our near-term momentum studies, I see signs that it could continue. The RSI is now testing its 50 line, while the MACD has topped and fallen below its trigger line. However, as long as the index is trading above the upper bound of the downside channel that had been containing the price action from the last days of March until the 10th of July, I would consider the outlook to stay somewhat positive. I would expect buyers to eventually take control again and to aim for another test at the 11800 (R1) zone. Plotting the daily chart, I see that the move out of the channel on the 13th of July is a first sign that the 10th of April – 8th of July decline was just a corrective phase of the prior uptrend. I would treat any further short-term setbacks as just temporary pullbacks.

• Support: 11570 (S1), 11400 (S2), 11250 (S3)

• Resistance: 11800 (R1) 11900 (R2), 12080 (R3)

•Gold slid on Tuesday after hitting resistance at 1110 (R2), and managed to break below the support (turned into resistance) of 1095 (R1). As long as the metal is trading below the lower line of the short-term downside channel that had been containing the price action from the 18th of June until yesterday, I would consider the short-term outlook to remain negative. I would expect the move below 1095 (R1) to initially target the 1085 (S2) line marked by the 24th and 25th of March 2010. Our short-term momentum studies detect strong downside speed and corroborate my view that further declines could be looming. The RSI is back below its 30 line, while the MACD, already negative, has turned down again near its signal line. In the bigger picture, Monday’s plunge triggered the continuation of the longer-term downtrend and kept the overall bias of the yellow metal to the downside.

• Support: 1085 (S1), 1072 (S2), 1060 (S3)

• Resistance: 1095 (R1), 1110 (R2), 1120 (R3)

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IronFX Daily Commentary | 23/07/15

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•RBNZ cuts rates, says further easing likely; NZD gains The Reserve Bank of New Zealand (RBNZ) cut rates by 25 bps overnight and said that “some further easing seems likely.” This was a stronger easing bias than last month, when they said that “(w)e expect further easing may be appropriate” depending on the data. Nonetheless the NZD gained as the market had put a 34% probability on a 50 bps cut. Furthermore, the statement was less aggressive on the NZD valuation. “The New Zealand dollar has declined significantly since April..,” the RBNZ observed. “While the currency depreciation will provide support to the export and import competing sectors, further depreciation is necessary given the weakness in export commodity prices.” The call for “further depreciation” is not as strong as in June, when the Bank said that “a further significant downward adjustment is justified.”

• Nonetheless, I think they are likely to see some “further depreciation” in NZD. The steep fall in the price of milk products, New Zealand’s major export, has worsened the country’s terms of trade. Furthermore, NZD remains highly overvalued on some measures of purchasing power parity (PPP), although to be fair it is slightly undervalued according to the OECD’s methodology. (It’s also a very cheap place to buy a Big Mac, if you like Big Macs.) I look for further depreciation in the currency at least vs USD and perhaps even vs AUD as well.

• Other commodity currencies ease Aside from NZD, the other commodity currencies fell. CAD for example was the worst performing of the G10 currencies, while among EM currencies, BRL fell and USD/MXN extended further into record high territory as oil continued to decline and many other commodities, including agricultural commodities such as soybeans, fell. The unexpected rise of 2.5mn barrels in US crude oil inventories in the latest week despite a small decline in oil output depressed oil prices and oil-related currencies. No sign of a change here in the near future!

• GBP best performing currency On the other hand, GBP was the best performing G10 currency after yesterday’s Bank of England minutes showed an increasing split on the Monetary Policy Committee. “There were, however, differences of view as to how significant the increases in domestic cost pressures had been,” the minutes said. “For some, they were no more than a part of the increase that would be necessary in order for inflation to rise sufficiently to meet the 2% target after the commodity-related factors that were temporarily depressing it had waned. For others, it appeared as though domestic cost pressures had risen more quickly than expected which, combined with the view that spare capacity in the labor market was close to being exhausted." This suggests we could soon see some votes in favor of tightening.

• Today’s highlights: During the European day, Sweden’s unemployment rate for June is expected to increase somewhat. PES unemployment rate for the same month increased a bit, showing the potential direction of the official rate. Coming on top of the further dip into deflationary territory in June, the deteriorating fundamentals justify Riksbank’s decision at its 2 July meeting to cut interest rates further. An increase in the unemployment could add to these soft data and weaken SEK.

• In the UK, retail sales for June are forecast to accelerate. Following the acceleration seen in wages in April and May, retail sales could show some improvement. This may add to the positive sentiment towards the pound given the rate hike expectations and push sterling higher against its peers.

• From the US, we get the initial jobless claims for the week ended July 18 (survey week for the July NFP figures). Using our simple analysis of the value of the four-week moving average of jobless claims against the NFP figure, the latest figure (283k) would imply a NFP figure of some 260k – quite a robust number. Separately, the Chicago Fed National activity index for June and Conference Board leading index for June ae also due to be released. The latter is expected to decelerate from the previous month.

Currency Titles:

EUR/USD hits support at 1.0870 and rebounds

EUR/GBP rebounds from near 0.6970

USD/JPY rebounds from 123.60

WTI hits support at 49.00

Gold rebounds from fractionally above 1085

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Currencies Text:

• USD/JPY traded slightly higher on Wednesday after it hit support at 123.60 (S1). However, the rate stayed between that barrier and the resistance of 124.45 (R1). I maintain the view that the pair could correct lower in the near future. A clear move below 123.60 (S1) is likely to reaffirm the case and perhaps open the way for our next support at 122.90 (S2). Our momentum studies support the notion somewhat. The RSI looks able to move back below its 50 line, while the MACD, although positive, stands below its signal line and could turn negative any time soon. As for the broader trend, I still believe that the move above the downtrend line taken from the peak of the 5th of June is a sign that the longer-term uptrend is gearing up again. Therefore I would expect any possible further setbacks to provide renewed buying opportunities.

• Support: 123.60 (S1), 122.90 (S2), 122.00 (S3)

• Resistance: 124.45 (R1), 125.00 (R2), 125.80 (R3)

• EUR/GBP hit support fractionally below the 0.6970 (S1) barrier and rebounded, printing a higher low on the 4-hour chart. Since the rate is now trading back above the psychological zone of 0.7000, I would switch my stance to neutral. A move above 0.7040 (R1) is needed to confirm a forthcoming higher high and perhaps turn the short-term outlook positive. Our momentum indicators support that the pair could trade higher for a while, at least for another test at 0.7040 (R1). The RSI is back above its 50 line, while the MACD has just poked its nose above its zero line. As for the broader trend, although the rate is back above 0.7000, the price structure on the daily chart remains lower peaks and lower troughs. Therefore, I still believe that the overall path of this pair is to the downside.

• Support: 0.6970 (S1), 0.6920 (S2), 0.6900 (S3)

• Resistance: 0.7040 (R1), 0.7070 (R2), 0.7130 (R3)

• USD/JPY traded slightly higher on Wednesday after it hit support at 123.60 (S1). However, the rate stayed between that barrier and the resistance of 124.45 (R1). I maintain the view that the pair could correct lower in the near future. A clear move below 123.60 (S1) is likely to reaffirm the case and perhaps open the way for our next support at 122.90 (S2). Our momentum studies support the notion somewhat. The RSI looks able to move back below its 50 line, while the MACD, although positive, stands below its signal line and could turn negative any time soon. As for the broader trend, I still believe that the move above the downtrend line taken from the peak of the 5th of June is a sign that the longer-term uptrend is gearing up again. Therefore I would expect any possible further setbacks to provide renewed buying opportunities.

• Support: 123.60 (S1), 122.90 (S2), 122.00 (S3)

• Resistance: 124.45 (R1), 125.00 (R2), 125.80 (R3)

• WTI plunged yesterday, fell below the round figure of 50.00 (R1) and found support at 49.00 (S1). Then it rebounded somewhat. In my view, the short-term trend is still negative, and I would expect a clear move below 49.00 (S1) to open the way for the 48.00 (S2) territory, defined by the low of the 2nd of April. Nevertheless, our short-term oscillators give evidence that a corrective bounce could be looming first, perhaps to challenge the 50.00 (R1) zone as a resistance this time. The RSI edged higher after it rebounded from slightly below its 30 line, while the MACD has bottomed and could move above its trigger line soon. On the daily chart, I see that the medium-term trend is negative as well. Moreover, our daily oscillators detect strong downside speed and magnify the case for further declines. The 14-day RSI fell again below 30, while the daily MACD stands below both its zero and signal lines, and points south.

• Support: 49.00 (S1), 48.00 (S2), 47.00 (S3)

• Resistance: 50.00 (R1), 50.55 (R2), 51.45 (R3)

• Gold traded somewhat lower on Wednesday, hit support fractionally above the 1085 (S1) line and then rebounded. As long as the metal is trading below the lower line of the short-term downside channel that had been containing the price action from the 18th of June until yesterday, I would consider the short-term outlook to remain negative. However, taking a look at our short-term momentum studies, I would expect the upside corrective move to continue and perhaps challenge once again the 1110 (R1) resistance obstacle. The RSI exited its below-30 zone and could be headed towards its 50 line now, while the MACD has bottomed and crossed above its trigger line. Furthermore, there is positive divergence between both these indicators and the price action. In the bigger picture, Monday’s plunge triggered the continuation of the longer-term downtrend and kept the overall bias of the yellow metal to the downside.

• Support: 1085 (S1), 1072 (S2), 1060 (S3)

• Resistance: 1110 (R1), 1120 (R2), 1130 (R3)

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IronFX Daily Commentary | 24/07/15

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•The commodity rout continues Commodities continued to collapse, with most of the metals and agriculture futures lower this morning. Oil is seeing a small rebound after yesterday’s further declines into its second bear market this year (i.e., down 20% or more from the recent peak). The trend got a further kick this morning from the first of the July PMIs, when the Caixin/Markit manufacturing PMI (apparently Caixin is taking over from HSBC) fell to 48.2 from 49.4, far below estimates of a rise to 49.7. This number indicates that manufacturing hasn’t yet stabilized by any means and only further calls into question the official Q2 GDP estimate of 7.0% growth. That’s bad for demand in China, therefore bad for commodities and bad for the commodity currencies.

• Almost all Asian stock markets are lower this morning as a result, the exception being the Chinese markets, oddly enough. I suppose the reason there is the old “bad news is good news” idea: that the decline in the PMI makes it more likely the authorities will come in and do something to rescue the economy and the stock market. My view is that if they could solve the problems that easily, they would have done so already. I don’t think anyone has a magic wand that will turn things around with a wave.

• US earnings point to sluggish global economy, outperforming US Many of the US earnings reports that have been announced so far have mentioned the theme of a sluggish global economy, but within that, the US seems to be outperforming. Caterpillar, for example, said its sales to mining companies and energy generation equipment worldwide were down amidst the slump in ore and energy prices. “While economic conditions in the US are modestly positive, the global economy remains relatively stagnant,” CEO Doug Oberhelman said. “Many of the key industries we serve remain weak, and we haven’t seen sustained signs of improvement.” This is a key statement for the currency markets in general and the commodity currencies in particular. Even if the US is only “modestly positive,” the FX markets are about relative performance, and the US is outperforming the rest of the developed world, particularly those countries dependent on commodity production, such as Australia, New Zealand and Canada. The Atlanta Fed’s forecast for 2Q GDP growth is 2.4% qoq SAAR. Meanwhile, yesterday’s US jobless claims for the week ended July 18th hit the lowest level since 1973 – particularly significant since that was the week the survey for the July nonfarm payrolls were taken.

• Meanwhile, Vale SA, the world’s largest iron ore producer, boosted its iron ore production in Q2 to the second-highest ever for the company despite plunging prices. BHP Billiton and Rio Tinto are also raising iron ore production. Given the slump in demand in China, increased production is likely to weigh on prices and weigh on the AUD (iron ore accounts for about 25% of Australia’s exports of goods).

• The weaker commodity price is helping to boost the dollar’s value against EM currencies. The dollar’s value against a basket of EM currencies, as measured by the Fed’s “trade weighed dollar index – other important trading partners” hit a high for this cycle and, at 143.64, is approaching the record high of 146.85 set in 2003 (although in percentage terms, the Fed’s index against the major currencies has outperformed the OITP index so far this year, 8.7% vs 3.5%. This may be because so many EM currencies -- particularly CNY, which accounts for 16% of US trade -- are pegged vs USD.) Meanwhile the JP Morgan Emerging Market currency index, an index of 10 EM currencies vs USD that has been calculated since Jan. 2000, hit a record low.

• One question: will the fall in commodity prices feed through to lower global inflation, which will in turn delay Fed tightening? Stay tuned for next week’s FOMC meeting to hear more on that topic, possibly.

• Today’s highlights: During the European day, we get the preliminary manufacturing and service-sector PMI data for July from several European countries and the Eurozone as a whole. The expectations are for the manufacturing PMIs to remain unchanged or increase a bit, while service-sector PMIs are likely to decline somewhat. With the Greek crisis now off investors’ radar, economic data are likely to start being important. A rise the PMI could strengthen EUR a bit.

• In the US, the Markit PMI is expected to remain unchanged. Market pays more attention to the ISM figure. Thus the reaction could be limited. New home sales for June are also due to be released. In line with the recent strong housing data, new home sales are expected to show a firming housing market. USD could strengthen a bit.

Currency Titles:

EUR/USD trades higher and hits resistance at 1.1020

AUD/USD falls below the 0.7330 obstacle

NZD/USD hits resistance at 0.6550 and slides

DAX futures continue lower

Gold hits resistance near 1105 and tumbles

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Currencies Text:

• EUR/USD traded higher on Thursday, but hit resistance at 1.1020 (R1) and then retreated. Yesterday’s advance confirmed a forthcoming higher high on the 4-hour chart and turned the short-term outlook positive. However, taking a look at our oscillators, I see the possibility that the current pullback may continue for a while before the next positive leg. The RSI hit resistance below its 70 line and turned down, while the MACD, although positive, shows signs of topping. A break below 1.0960 (S1) is likely to confirm the case of a pullback and perhaps target the 1.0910 (S2) barrier. As for the bigger picture, as long as the pair is trading between 1.0800 and 1.1500, I would see a neutral longer-term picture. I believe that a move above the psychological zone of 1.1500 is the move that could carry larger bullish implications, while a break below 1.0800 is needed to confirm a forthcoming lower low on the daily chart and perhaps turn the overall bias back to the downside.

• Support: 1.0960 (S1), 1.0910 (S2), 1.0870 (S3)

• Resistance: 1.1020 (R1), 1.1085 (R2), 1.1150 (R3)

• AUD/USD fell sharply during the Asian morning Friday after the flash estimate of China’s Caixin/Markit manufacturing PMI for July came well below expectations. The release caused the rate to fall sharply below the support (now turned into resistance) of 0.7330 (R1). That move confirmed a forthcoming lower low and kept the bias negative. I would now expect the bears to challenge our next support of 0.7250 (S1), marked by the inside swing high of the 24th of April 2009. A break below that area is likely to open the way for the psychological zone of 0.7000 (S2). Our short-term oscillators support the notion. The RSI stands below 50, it points down, and is headed towards its 30 line, while the MACD, stands below both its zero and signal lines, and points south as well. On the daily chart, the completion of a head and shoulders formation and the move below the psychological zone of 0.7500 (R2) signaled the continuation of the prevailing long-term downtrend, in my opinion.

• Support: 0.7250 (S1), 0.7000 (S2), 0.6900 (S3)

• Resistance: 0.7330 (R1), 0.7420 (R2), 0.7500 (R3)

• NZD/USD tumbled after it hit resistance at 0.6690 (R1) and the upper bound of the downside channel it has been trading within since the 23rd of April. Currently, the rate is testing the 0.6550 (S1) support line, where a dip is likely to bring into the game once again the psychological barrier of 0.6500 (S2). As long as NZD/USD is trading within the aforementioned downside channel, I would consider the outlook to stay negative. A clear break below the psychological line of 0.6500 (S2) would confirm a forthcoming lower low and perhaps target the 0.6430 (S2) zone, marked by the lows of the 19th and 20th of July 2009. The RSI has fallen back below its 50 line and points down, while the MACD, although positive, has topped and just crossed below its signal line. These signs corroborate my view that further declines are on the cards. Switching to the daily chart, I see that after breaking below the lower line of a rising wedge formation on the 1st of May, NZD/UZD accelerated lower. The price structure has been lower peaks and lower troughs and this keeps the overall outlook negative as well, in my opinion.

• Support: 0.6550 (S1), 0.6500 (S2), 0.6430 (S3)

• Resistance: 0.6690 (R1), 0.6770 (R2), 0.6885 (R3)

• DAX futures continued declining, falling back below the 11600 (R1) zone. The index is now headed towards the 11400 (S1) support line, where a decisive dip is likely to open the way for the 11250 (S2) barrier and the upper bound of the downside channel that had been containing the price action from the last days of March until the 10th of July. Our momentum studies detect downside momentum and support the case for the continuation of the decline. The RSI stands below its 50 line and is pointing down, while the MACD, already below its trigger line, has just turned negative. However, as long as the index is trading above the upper bound of the aforementioned downside channel, I would consider the overall outlook to stay somewhat positive. Plotting the daily chart, I see that the move out of the channel on the 13th of July is a first sign that the 10th of April – 8th of July decline was just a corrective phase of the prior uptrend and that that uptrend is back in force. I would treat any further short-term setbacks as temporary pullbacks.

• Support: 11400 (S1), 11250 (S2), 11135 (S3)

• Resistance: 11600 (R1) 11800 (R2), 11900 (R3)

• Gold traded somewhat higher during the European morning Thursday but hit resistance near the 1105 (R2) level and then it tumbled to find support a few dollars above Monday’s low of 1072 (S1). As long as the metal is printing lower peaks and lower troughs below the lower line of the short-term downside channel that had been containing the price action from the 18th of June until Monday, I would consider the short-term outlook to remain negative. Our momentum studies detect strong downside speed and amplify the case that further declines could be on the cards, at least in the short run. The RSI turned down and crossed back below its 30 line, while the MACD, already negative, has topped and could fall below its trigger line soon. In the bigger picture, Monday’s plunge triggered the continuation of the longer-term downtrend and kept the overall bias of the yellow metal to the downside.

• Support: 1072 (S1), 1060 (S2), 1050 (S3)

• Resistance: 1090 (R1), 1105 (R2), 1120 (R3)

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IronFX Daily Commentary | 27/07/15

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•Stocks fall around the world as commodities slump Stock markets fell around the world on Friday and continued to decline in Asia on Monday as the selloff in commodities only worsened. The Bloomberg pages with commodity prices are largely red; only some of the metals are higher this morning, such as tin, copper and some of the precious metals. News that China’s industrial enterprises’ profits declined 0.3% from a year earlier in June, after two months of yoy gain, corroborated last week’s fall in the China manufacturing PMI and reinforced the idea that Chinese growth was likely to slow and demand for commodities was likely to slow with it.

• Dollar down vs G10, up vs EM With commodity prices, particularly oil, falling so sharply, inflation is likely to be subdued. In such an environment, the need for Fed tightening is diminished and as a result, Fed funds rate expectations declined again on Friday. This is putting downward pressure on the dollar vs the G10 currencies. However, the US unit is stable to higher against most of the EM currencies that we track, with the commodity-heavy BRL, RUB and ZAR leading the way down. (The worst performing EM currency was TRY, which plunged as the country launched attacks on ISIS targets in Syria and Kurds in Iraq.) It’s noticeable that the weakness in EM currencies has not translated into an increase in these countries’ exports. Total global trade grew only 0.4% yoy by volume in May as imports by the advanced economies rose only 1.1% yoy vs an average of 3.1% yoy in the last six months of 2014. By value, imports by the advanced economies plunged 13.9%. The sharp difference in the volume and value indices shows the deterioration in the terms of trade for these EM countries and explains to a large degree why their currencies are depreciating. Note how much better the dollar has performed relative to the JP Morgan EM currency index than against the major currencies.

• COT report: managed funds go net short gold The weekly Commitment of Traders (COT) report showed that investors largely added to their existing positions during the week, increasing their USD longs and currency shorts. JPY and AUD shorts saw particularly large increases. On the other hand, investors trimmed short positions in GBP and NZD. The most interesting positioning though was in gold. Speculative investors (i.e., hedge funds) are now holding extremely small long positions by historical standards, and if we look at the category “managed money net total,” which includes commodity funds, they are net short gold for the first time ever (data going back to June 2006).

• Today’s indicators: During the European day, we get the German Ifo survey for July. The weak ZEW indices released earlier this month, added to the recent soft data coming out from the country. The expectations index declined from the previous month, while the moderate increase in the current situation index was not enough to reverse the negative sentiment towards Eurozone’s largest economy. Therefore, another weak Ifo reading could add to evidence that the bloc’s growth engine is losing steam.

• In the US, durable goods orders for June are expected to rise, a rebound from the month before, while durable goods excluding transportation equipment are estimated to remain unchanged in pace. The focus is usually on the core figure where a positive surprise could suggest the possible start of a turnaround in business investment that could be bullish for the dollar.

• As for the rest of the week, the highlight will be the FOMC meeting for July on Wednesday. With no press conference scheduled or new forecasts, the focus will be on the accompanying statement for investors to judge if September could be the month when Fed begins the process of normalizing interest rates. We expect no significant changes from the June statement, just perhaps some tweaks to the first paragraph, the one in which they describe the current economic environment. One point to watch out for is the voting. Any dissent in favor of hiking rates would probably shift the market’s expectations about the timing of the first rate hike and thereby support the dollar.

• On Tuesday, the main event will be the UK’s 1st estimate of Q2 GDP. The forecast is for the growth rate to accelerate on qoq basis, while the annual rate is estimated to decelerate a bit. Given the weak industrial production in April and May and the poor retail sales figures in Q2, there is a chance of some disappointment in the Q2 growth figure. On the other hand, a strong positive surprise along with the recent hawkish stance by several central bank members could encourage the bulls to push the pound higher.

• On Thursday, the German CPI for July is coming out. As usual, we will look at the larger regions for a guidance on where the headline figure may come in and thereby as an indication for the near-term direction of EUR. As the Greek drama comes to an end, investors may start paying less attention on politics and more attention to the economic data. A rise in the German CPI rate could indicate a rise in the Eurozone’s CPI to be released on Friday and strengthen EUR a bit.

• In the US, the 1st estimate of Q2 GDP is expected to rebound from Q1. This is in line with the Fed’s expectations for a stronger Q2 growth, and could provide a boost to USD. Given that Fed hiking expectations are in focus again after Yellen reaffirmed that she expects to start hiking within the year, the dollar is becoming increasingly data-driven and significant positive data surprises are likely to keep USD in a bullish trend. The 1st estimate of the core personal consumption index, the Fed’s favorite inflation measure, is also coming out.

• Finally on Friday, during the Asian trading session, we have the usual end-of-month data dump from Japan. The focus will be on the National CPI rate for June and the Tokyo CPI rate for July after comments by Governor Kuroda that he expects the inflation to accelerate considerably in the coming months due to a tight labour market. On top of that, at the last BoJ policy meeting, the members reaffirmed their view that they expect to meet their 2% inflation target sometime around the first half of next fiscal year. A rise in the CPI rate would support Bank officials’ optimism and probably strengthen JPY somewhat.

Currency Titles:

EUR/USD is headed towards 1.1020

GBP/USD rebounds from 1.5465

USD/JPY breaks below 123.60

Gold rebounds and hits 1100

WTI continues lower and finds support at 47.70

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Currencies Text:

• EUR/USD traded higher on Friday and during the early European morning Monday is headed towards the resistance line of 1.1020 (R1). On the 4-hour chart the price structure still suggests a short-term uptrend. Therefore, I would expect a decisive move above 1.1020 (R1) to open the way for the 1.1085 (R2) barrier. Our short-term oscillators support the notion. The RSI rebounded from its 50 line and now points up, while the MACD, already positive, rebounded from near its trigger line.

• As for the bigger picture, as long as the pair is trading between 1.0800 and 1.1500, I see a neutral longer-term picture. I believe that a move above the psychological zone of 1.1500 is the move that could carry larger bullish implications, while a break below 1.0800 is needed to confirm a forthcoming lower low on the daily chart and perhaps turn the overall bias back to the downside.

• Support: 1.0925 (S1), 1.0870 (S2), 1.0810 (S3)

• Resistance: 1.1020 (R1), 1.1085 (R2), 1.1150 (R3)

• GBP/USD found support at 1.5465 (S1) on Friday and rebounded to hit resistance at 1.5540 (R1). Taking a look at our oscillators, I would expect the rebound to continue for a while. The RSI rebounded from above its 30 line and is now headed towards its 50 barrier, while the MACD has bottomed and could cross above its trigger line any time soon. A break above 1.5540 (S1) is likely to initially target the next resistance of 1.5580 (R2). On the daily chart, at the time of the rebound, the 1.5465 (S1) support coincided with the 80-day exponential moving average. This makes me believe that the overall picture remains somewhat positive and that there is still the likelihood for the rate to trade higher in the not-to-distant future.

• Support: 1.5465 (S1), 1.5420 (S2), 1.5345 (S3)

• Resistance: 1.5540 (R1), 1.5580 (R2), 1.5670 (R3)

• USD/JPY slid on Friday and today during the Asian day, it fell below the support (now turned into resistance) barrier of 123.60 (R1). That move confirmed a forthcoming lower low on the 4-hour chart and turned the short-term picture negative in my opinion. I would now expect the bears to pull the trigger for the 122.90 (S1) barrier, marked by the low of the 14th of July. Our short-term momentum studies detect negative momentum and magnify the case that USD/JPY could trade lower in the short run. The RSI turned down after finding resistance near its 50 line, while the MACD, already below its trigger line, has just obtained a negative sign. As for the broader trend, I still believe that the move above the downtrend line taken from the peak of the 5th of June is a sign that the longer-term uptrend is gearing up again. Therefore I would expect any possible further setbacks to provide renewed buying opportunities.

• Support: 122.90 (S1), 122.00 (S2), 121.60 (S3)

• Resistance: 123.60 (R1), 124.15 (R2), 124.45 (R3)

• Gold traded higher on Friday and hit resistance near the psychological level of 1100 (R1). As long as the metal is printing lower peaks and lower troughs below the lower line of the short-term downside channel that had been containing the price action from the 18th of June until Monday, I would consider the short-term outlook to remain negative. I would expect the bears to eventually take control again and aim for another test at the 1077 (S1) hurdle. Taking a look at our short-term momentum studies though, I would be careful of further rebound, perhaps towards the 1110 (R2) line. The RSI raced higher and hit resistance at its 50 line, while the MACD, although negative, has bottomed and crossed above its trigger line. Moreover, there is positive divergence between both these indicators and the price action. In the bigger picture, the plunge on the 20th of July triggered the continuation of the longer-term downtrend and kept the overall bias of the yellow metal to the downside in my view.

• Support: 1077 (S1), 1072 (S2), 1060 (S3)

• Resistance: 1100 (R1), 1110 (R2), 1120 (R3)

• WTI continued declining on Friday and hit support at 47.70 (S1). The price structure is still lower peaks and lower troughs and therefore the short-term picture remains negative in my view. I believe that a clear dip below the 47.70 (S1) barrier is likely to open the way for the 47.00 (S2) line, defined by the low of the 1st of April. However, given that I see positive divergence between both our hourly momentum indicators and the price action, I would be careful that an upside corrective bounce could be on the cards before the bears seize control again. A move above 48.25 (R1) would confirm the case and perhaps target the next resistance at 49.00 (R2). On the daily chart, I see that the medium-term trend is negative as well. Moreover, our daily oscillators detect strong downside speed and magnify the case for further declines. The 14-day RSI stays below its 30 line and points down, while the daily MACD stands below both its zero and signal lines, also pointing south.

• Support: 47.70 (S1), 47.00 (S2), 46.50 (S3)

• Resistance: 48.25 (R1) 49.00 (R2), 49.50 (R3)

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[IronFx]

IronFX Daily Commentary | 28/07/15

Language English

Currency Titles:

EUR/USD surges and hits 1.1130

EUR/GBP rallies and hits 0.7160

GBP/JPY hits support at 191.00 and rebounds

Gold trades somewhat lower

DAX falls off the cliff

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Currencies Text:

• EUR/USD raced higher on Tuesday, breaking above the resistance (now turned into support) of 1.1020 (S1). On the 4-hour chart, the price structure still suggests a short-term uptrend, Therefore, I would expect a clear break above 1.1130 (R1) to set the stage for extensions towards the 1.1200 (R2) hurdle. But before that, I believe that we are likely to experience a corrective move, perhaps to challenge the 1.1020 (S1) barrier as a support this time. Our short-term oscillators support the case for a pullback as well. The RSI exited its above-70 territory and is now pointing down, while the MACD shows signs of topping and could fall below its trigger line soon. As for the bigger picture, as long as the pair is trading between 1.0800 and 1.1500, I would see a neutral longer-term picture. I believe that a move above the psychological zone of 1.1500 is the move that could carry larger bullish implications, while a break below 1.0800 is needed to confirm a forthcoming lower low on the daily chart and perhaps turn the overall bias back to the downside.

• Support: 1.1020 (S1), 1.0925 (S2), 1.0870 (S3)

• Resistance: 1.1130 (R1), 1.1200 (R2), 1.1245 (R3)

• EUR/GBP traded higher on Tuesday, breaking above the 0.7100 (S1) barrier and hit resistance at 0.7160 (R1).

• The price structure on the 4-hour chart remains higher peaks and higher troughs, and this prints a positive short-term picture in my opinion. I would expect a clear break above the 0.7160 (R1) obstacle to extend the trend and perhaps challenge the next resistance at 0.7200 (R2), marked by the high of the 13th of July. Nevertheless, I would expect a downside corrective move before the next positive leg, perhaps to challenge the 0.7100 (S1) zone as a support. Our oscillators amplify the case that a downside correction could be on the cards before the bulls shoot again. The RSI exited its above-70 territory and is pointing down, while the MACD has topped and could fall below its trigger soon. On the daily chart, I still see a longer-term downtrend, thus I would consider the short-term uptrend to be a corrective phase of the overall down path.

• Support: 0.7100 (S1), 0.7050 (S2), 0.7000 (S3)

• Resistance: 0.7160 (R1), 0.7200 (R2), 0.7225 (R3)

• GBP/JPY hit support at 191.00 (S1), and rebounded. Although the short-term trend seems to be negative, I would expect the upside move to continue. The rate is now headed towards 192.50 (R1), where an upside break is possible to open the way for the next resistance of 193.90 (R2). Our short-term oscillators support the notion. The RSI hit support at its 30 line and edged higher. It is now headed towards its 50 line, while the MACD, although negative, shows signs of bottoming and could cross above its trigger line soon. On the daily chart, I see that on the 8th of July, the rate rebounded from the 185.00 psychological zone, which stands pretty close to the 50% retracement level of the 14th of April – 24th of June rally. As a result, I would consider the overall path of this pair to still be to the upside.

• Support: 191.00 (S1), 189.25 (S2), 187.35 (S3)

• Resistance: 192.50 (R1), 193.90 (R2), 194.50 (R3)

• Gold traded above 1100 (R1) for a while, but failed to reach the next resistance of 1110 (R2), and retreated back below 1100 (R1). As long as the metal is printing lower peaks and lower troughs below the lower line of the short-term downside channel that had been containing the price action from the 18th of June until the 20th of July, I would consider the short-term outlook to remain negative. I would expect the bears to eventually take control again and to aim for another test at the 1077 (S2) hurdle. Taking a look at our short-term oscillators though, I would be careful about a further upside correction before sellers take charge again. The RSI, although below 50, has turned up again, while the MACD stands above its trigger line and is headed towards its zero line. Moreover, there is positive divergence between both these indicators and the price action. In the bigger picture, the plunge on the 20th of July triggered the continuation of the longer-term downtrend and kept the overall bias of the yellow metal to the downside in my view.

• Support: 1088 (S1), 1077 (S2), 1072 (S3)

• Resistance: 1100 (R1), 1110 (R2), 1120 (R3)

• DAX continued its plunge yesterday, falling below 11280 (R2) and reaching 11035 (S1). The short-term bias remains to the downside in my view, and I would expect a clear move below 11035 (S1) to target our next support of 10900 (S2). Our short-term momentum studies detect strong downside speed and amplify the case for further declines. The MACD stands well below both its zero and trigger lines and points down, while the RSI entered its below-30 territory. Nevertheless, the RSI shows signs that it could start bottoming and as a result I would be careful of a possible corrective bounce before the bears shoot again. As for the broader trend, given the recent plunge, I would switch my stance to neutral. Only a daily close below 10670 would confirm a forthcoming lower low on the daily chart and turn the overall bias of DAX to the downside.

• Support: 11035 (S1), 10900 (S2), 10800 (S3)

• Resistance: 11140 (R1) 11280 (R2), 11415 (R3)

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[IronFx]

IronFX Daily Commentary | 29/07/15

Language English

• A bit better tone There was a bit better tone to markets today. Chinese stocks were up at the opening and managed to poke their nose above yesterday’s close now and then, although at the time of writing they had slipped back into negative territory. Commodities were doing much better, with oil, most metals and about half the agricultural commodities rising. The calm in the Chinese market may be due to news that the China Securities Regulatory Commission set up a legal enforcement taskforce to check for clues related to the plunge in stocks on Monday, which is yet another sign that the government will do whatever it can to keep the market from collapsing.

• USD lower nonetheless Nonetheless the dollar continued to deteriorate. Over the past few days the dollar fell as the turmoil in China caused Fed funds rate expectations to retreat, but the dollar has continued to fall even though China stabilized and Fed funds rate expectations were steady yesterday. This may have been because of the disappointing US consumer confidence figures yesterday, which missed expectations by the largest amount since 2010. The view on jobs deteriorated as well. The economic surprise index for the US has started to turn down recently, indicating that US economic indicators have been disappointing recently. This may be hurting the dollar, although it’s notable that the same trend is visible in most other regions as well. US growth may well be slowing, but if so it’s only part of a general slowdown in global growth.

• A change in expectations may hit the dollar more than other currencies for the simple reason that nobody expects a change in most other currencies’ monetary regime for some time, so economic conditions may have less bearing on their currencies. Only USD and GBP rates are expected to change within the foreseeable future, so a change in the economic outlook will only affect the outlook for those currencies, or at least will affect them more than the others.

• NZD was the best-performing G10 currency after Reserve Bank of New Zealand Gov. Graham Wheeler said that NZD should fall further, but ruled out sharply lower interest rates. ““At current levels of export prices, a more substantial exchange rate depreciation will be required to stabilise the net external liabilities position relative to GDP,” he said. He also predicted that tightening by the Fed and BoE could help NZD to ease. Nonetheless, he also said that large declines in interest rates would only be consistent with the economy moving into recession, and he didn’t see that happening. The statement reduced expectations of a large cut in rates and supported NZD. I expect that the rebound in NZD may be temporary,however, largely because I’m still concerned about China, its growth prospects and its stock market. Moreover, as I mentioned yesterday, China may be aiming to allow the CNY to depreciate and that could dampen demand in China for New Zealand’s milk. I expect milk prices to fall further and for NZD to fall with them.

• USD fell vs most EM currencies as well, except TRY, which collapsed further. RUB was lower as well despite the rise in oil prices. The rebound in EM currencies was nothing like the recent falls, however, showing only modest short-covering. It seems that the market’s view on these currencies remains negative, not surprisingly.

• Today’s highlights: The main event today is of course the results of the two-day FOMC policy meeting. I don’t think it’s going to be a major event. There is no update to the forecasts and no press conference following the meeting. The Committee will probably just tweak the first paragraph of the statement, the one that gives their view of the current economic conditions. The recent Beige Book showed that conditions continue to improve modestly, so they are likely to raise their evaluation of the economy somewhat, but not enough to shift anyone’s expectations about whether they are going to pull the trigger at the next meeting in September. For that we’ll probably have to wait till the minutes of the meeting are released on Aug. 19th.

• Chair Yellen said recently that the labor market is getting “demonstrably closer” to normal, so labor isn’t a major bone of contention. The biggest thing that I’ll be looking for in the statement is any new comment on inflation. The gap between core inflation, currently running at 1.2%, and the Fed’s goal of 2% is still a major hurdle to tightening. I will also be looking for any comments on the dollar. A recent Fed paper determined that the earnings of U.S. foreign subsidiaries account for about 25% of the overall profits of US nonfinancial corporations, and the dollar's strength likely explains roughly a third of the recent decline in profits earned from foreign subsidiaries. So 1/3rd of 25% = 8% of the decline in US profits was due to the strength of the dollar; significant, but probably not enough to make them hold off changing policy.

• As for the impact of the statement, after the April meeting, the last time there was no press conference, EUR/USD fell from 1.1170 to 1.1076, so about 1 cent, then rebounded to trade around 1.1120, so net net down 50 cents. USD/JPY moved 35 pips. GBP fell then 60 pips then came back 30, for a net decline of 30 pips. So there was some good volatility at the time of the announcement, but it didn’t cause a new trend.

• Of course, if they say anything that really puts a date on lift-off, then it could be different. But they’ve been quite clearly for some time now that it’s meeting-by-meeting dependent on the data, so I don’t think the statement will say anything beyond what Chair Yellen said at her recent testimony, namely that if the economy continues to perform in line with expectations, then liftoff later this year will be appropriate.

• Around four out of five economists believe that’s going to be in September, although the Fed funds futures for September are only at 18 bps, indicating that the market still has a lot of doubts. That’s why there could still be a surprise, at least in September. But probably not in July.

• As for today’s indicators, the German GfK consumer confidence index for August and the French consumer confidence index for July are coming out. Neither is a market affecting indicator though.

• Norway’s AKU unemployment rate for May is forecast to have risen to 4.3% from 4.2%. The official unemployment rate for May however, declined to 2.7% from 2.9%. This increases the possibilities for the AKU rate to decline as well, something that could support NOK.

• In the US, pending home sales for June are forecast to have risen at the same pace as in May. Housing starts, building permits, and existing home sales for the same month all beat estimates, therefore we could see another positive surprise in pending home sales. This could prove USD-positive.

Currency Titles:

EUR/USD hits support at 1.1020

EUR/JPY hits support at 136.35

NZD/USD races higher after Wheeler’s comments

WTI rebounds and finds resistance slightly above 48.25

Gold stays slightly below 1100

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Currencies Text:

•EUR/USD pulled back on Tuesday, but after hitting support at 1.1020 (S1), it rebounded. On the 4-hour chart, the price structure still suggests a short-term uptrend. Therefore, I would expect the bulls to continue driving the battle higher and to challenge once again the 1.1130 (R1) resistance barrier. A clear break above 1.1130 (R1) is likely to set the stage for extensions towards the 1.1200 (R2) hurdle. The RSI rebounded from slightly above its 50 line, while the MACD could move back above its trigger line soon. These signs show that the momentum is turning positive again and they support the case that EUR/USD could continue trading higher in the short run. As for the broader trend, as long as the pair is trading between 1.0800 and 1.1500, I would see a neutral longer-term picture. I believe that a move above the psychological zone of 1.1500 is the move that could carry larger bullish implications, while a break below 1.0800 is needed to confirm a forthcoming lower low on the daily chart and perhaps turn the overall bias back to the downside.

•Support: 1.1020 (S1), 1.0925 (S2), 1.0870 (S3)

•Resistance: 1.1130 (R1), 1.1200 (R2), 1.1245 (R3)

•EUR/JPY hit support at the 136.35 (S1) barrier and traded somewhat higher on Tuesday. On the 4-hour chart, the price structure seems to be higher peaks and higher troughs above the short-term uptrend line taken from the low of the 20th of July. As a result, I would see a somewhat positive short-term picture. A break above 137.20 (R1) is the move that would confirm a forthcoming higher high and perhaps pave the way for the next resistance zone of 138.00 (R2). Nevertheless, our momentum studies indicate that a downside corrective move could be on the cards. The RSI, although above 50, has turned down, while the MACD has topped and fallen below its trigger line. On the daily chart, the pair is still trading above the 133.30 support area, which stands marginally below the 50% retracement level of the 14th of April – 4th of June advance. As a result, I would consider the medium-term picture to be cautiously positive. I would like to see a daily close below that area before I assume that the medium-term picture has turned negative.

•Support: 136.35 (S1), 135.50 (S2), 135.00 (S3)

•Resistance: 137.20 (R1), 138.00 (R2), 138.70 (R3)

• NZD/USD raced higher during the Asian morning Wednesday after RBNZ Governor Wheeler said that NZD should be weaker consistent with current economic conditions, but sharply lower interest rates are not the way to that goal. The pair broke above the resistance (now turned into support) barrier of 0.6690 (S1), and I would now expect it to challenge the 0.6770 (R2) barrier. A break above that obstacle could prompt extensions towards the 0.6885 (R2) territory. Our short-term momentum studies support that NZD/USD could continue trading higher in the near term. The RSI is testing its 70 line and could move above it soon, while the MACD stands well both its zero and signal lines and points north. Switching to the daily chart, I see that after breaking below the lower line of a rising wedge formation on the 1st of May, NZD/UZD accelerated lower. The price structure has been lower peaks and lower troughs and this keeps the overall outlook negative in my opinion. As a result, I would treat the rebound from the psychological zone of 0.6500 (S3), or any extensions of it, as a corrective phase of the larger downside path.

• Support: 0.6690 (S1), 0.6560 (S2), 0.6500 (S3)

• Resistance: 0.6770 (R1), 0.6885 (R2), 0.6980 (R3)

•WTI hit support at 46.75 (S2) and rebounded strongly to find resistance slightly above the 48.25 (R1) line. WTI is still trading within a downside channel and therefore the short-term picture remains negative on my view. A clear move below the 47.65 (S1) line is likely to confirm the case and perhaps open the way for another test at 46.75 (S2). Our hourly oscillators give evidence that yesterday’s rebound was just a corrective move and that the next wave is likely to be negative. The RSI has turned down and it could be headed back towards its 50 line, while the MACD has topped and could fall below its trigger line any time soon. On the daily chart, I see that the medium-term trend is negative as well. Moreover, our daily oscillators detect strong downside speed and magnify the case for further declines. The 14-day RSI stays below its 30 line, while the daily MACD stands below both its zero and signal lines.

•Support: 47.65 (S1), 46.75 (S2), 45.00 (S3)

•Resistance: 48.25 (R1) 49.00 (R2), 49.50 (R3)

•Gold traded in a consolidative manner yesterday, staying slightly below the resistance hurdle of 1100 (R1). As long as the metal is printing lower peaks and lower troughs below the lower line of the short-term downside channel that had been containing the price action from the 18th of June until the 20th of July, I would consider the short-term outlook to remain negative. I would expect sellers to eventually take control again and aim for another test at the 1077 (S2) hurdle. Looking at our short-term oscillators though, I would stay cautious that an upside corrective move could be looming before the next leg down. The RSI looks able to move above its 50 line, while the MACD stands above its trigger line and is headed towards its zero line. Moreover, there is positive divergence between both these indicators and the price action. In the bigger picture, the plunge on the 20th of July triggered the continuation of the longer-term downtrend and kept the overall bias of the yellow metal to the downside in my view.

• Support: 1088 (S1), 1077 (S2), 1072 (S3)

•Resistance: 1100 (R1), 1110 (R2), 1120 (R3)

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IronFX Daily Commentary | 30/07/15

Language English

• Fed makes a subtle point to keep September rate hike possibilities open The dollar initially fell following the release of the statement following the FOMC meeting. Although the discussion of the labor market showed more confidence than in June (“further improvement in the labor market”), the conclusion remained that “the Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced.” With no change there, investors thought no change overall and sold dollars.

• However, then people noticed a very subtle change: in discussing the future path of rates, the statement changed “improvement” to “some improvement,” making the criteria for hiking a bit more vague. It now said that the committee expects to raise rates “when it has seen some further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.” Adding the term “some” lowers the bar for what constitutes improvement. It will make it easier for the Committee to justify a September tightening if they want to. As a result, fed funds rate expectations rose and the dollar firmed against all the G10 currencies and most of the EM currencies that we track too (the two exceptions being RUB, which recovered somewhat along with oil, and BRL, which gained along with commodities in general).

• While labor market indicators are improving, the inflation outlook hasn’t changed that much. Inflation expectations continue to decline, despite what the Fed says, and the core personal consumption expenditure (PCE) index, the Fed’s preferred inflation indicator, still runs far below target. (That will be a major point of interest later today when the Q2 GDP figures are released – see below.) Nonetheless, I continue to believe that the FOMC is determined to hike this year if at all possible and will do so unless there is some external catastrophe. Their point is that zero interest rates are an extraordinary policy setting that is only appropriate for an emergency, and that emergency no longer exists. The start of a hiking cycle should be positive for the dollar, if history is any guide.

• NZD is worst-performing currency How quickly sentiment turns! NZD had been the best-performing G10 currency when I was writing yesterday morning, but it’s been the worst-performing one over the last 24 hours. The enthusiasm apparently peaked shortly after Gov. Wheeler’s speech and the currency has steadily declined ever since. There doesn’t seem to have been any single trigger, just apparently people shared my view that the external situation wasn’t likely to change and therefore Gov. Wheeler was right – the currency is likely to decline. As Chinese imports of milk decline, Fonterra Cooperative Group Ltd., the country’s (and the world’s) largest dairy exporter, Thursday slashed its payments to New Zealand farmers almost in half, to NZD 4.40 per kg of milk solids from NZD 8.40 a year earlier. This is below the break-even level for most of the country’s 12,000 farmers, estimated at the low NZD 5.00/kg level. Another NZ milk company is forecasting a payment of less than NZD 4.00 for the current season. This fall in farm incomes is likely to cause considerable distress in the sector and makes further rate cuts more likely. It’s a big negative for the currency.

• Oil rose as US production fell and inventories declined in the latest reporting week. However, I would argue that with the US rig count going back up and the Iran settlement likely to be implemented, the supply picture is still negative for oil. I expect oil prices to decline further and for the oil-related currencies to remain under pressure.

• Today’s highlights: During the European day, the German CPI for July is coming out. As usual, we will look at the larger regions for a guidance on where the headline figure may come in and thereby as an indication for the near-term direction of EUR. A rise in the German CPI rate could indicate a rise in the Eurozone’s CPI to be released on Friday and strengthen EUR a bit. The country’s unemployment rate for July is also coming out.

• In Sweden, the preliminary Q2 GDP is expected to show that the economy expanded a bit from Q1. Coming on top of the dip of the CPI back to deflation, a strong growth figure is needed to stave off pressure from the Riksbank to take further action.

• From Norway, retail sales for June are expected to rise, a turnaround from the previous month. This could prove NOK-supportive.

• In the US, the 1st estimate of Q2 GDP is expected to show that economic activity bounced back after slowing in Q1. This is in line with the Fed’s expectations for a stronger Q2 growth, and could provide a boost to USD. The annual revisions to GDP will also be released to data between 2012 and Q1 2015. As such, investors will be looking not only at the Q2 estimate, but at the revisions as well. We have mentioned several times that the dollar is becoming increasingly data-driven and significant positive data surprises are likely to keep USD in a bullish trend. The 1st estimate of the core personal consumption index, the Fed’s favorite inflation measure, is also coming out. Initial jobless claims for the week ended July 25 are also due to be released.

Currency Titles:

EUR/USD breaks back below 1.1020 post FOMC

EUR/GBP falls below the 0.7050 barrier

USD/JPY hits support at 123.40 and races higher

DAX futures are testing a short-term downtrend line

Gold still traded slightly below 1100

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Currencies Text:

•EUR/USD fell sharply on Wednesday following the end of the FOMC policy meeting. In the statement, Fed officials noted that they see signs of an improving US labor market and economy and subtly lowered the bar to a September rate hike. The pair fell back below the 1.1020 (R1) hurdle, completing a failure swing top formation and turning the short-term picture back to the downside. I would now expect the pair to challenge the 1.0925 (S1) barrier in the near future. Our momentum studies support the case for further declines as well. The RSI fell below its 50 line, while the MACD has topped and fallen below its trigger line. Nevertheless, I see that the RSI turned up again, giving evidence that an upside corrective bounce could be looming before the next negative leg, perhaps to test as a resistance the 1.1020 (R1) line. As for the broader trend, as long as the pair is trading between 1.0800 and 1.1500, I would see a neutral longer-term picture. I believe that a move above the psychological zone of 1.1500 is the move that could carry larger bullish implications, while a break below 1.0800 is needed to confirm a forthcoming lower low on the daily chart and perhaps turn the overall bias back to the downside.

•Support: 1.0925 (S1), 1.0870 (S2), 1.0810 (S3)

•Resistance: 1.1020 (R1), 1.1085 (R2), 1.1130 (R3)

•EUR/GBP continued falling yesterday, falling below the short-term uptrend line and subsequently below the 0.7050 (R1) barrier. The short-term bias has now turned negative in my view, and therefore, I would expect the bears to continue driving the battle lower and perhaps challenge the psychological zone of 0.7000 (S1). Another break below that line is likely to open the way for the next support of 0.6970 (S2). Our momentum studies detect negative momentum and corroborate my view. The RSI fell below its 50 line and edged lower, while the MACD, already below its trigger line, has just obtained a negative sign. On the daily chart, I still see a longer-term downtrend, thus I would consider the short-term uptrend to be a corrective phase of the overall down path.

•Support: 0.7000 (S1), 0.6970 (S2), 0.6935 (S3)

•Resistance: 0.7050 (R1), 0.7100 (R2), 0.7160 (R3)

•USD/JPY hit support at 123.40 (S1), raced higher, and now is testing the resistance of 124.15 (R1). A move above that obstacle is likely to bring into play the 124.45 (R2) line, but a break above the latter level is the move that could carry larger bullish extensions, perhaps for a test at 125.00 (R3). Our short-term momentum studies reveal upside speed and support the case that the pair could continue trading higher. The RSI emerged above its 50 line and is now headed towards its 70 line, while the MACD, already above its trigger line, has just obtained a positive sign. As for the broader trend, I still believe that the break above the downtrend line taken from the peak of the 5th of June signaled the continuation of the longer-term uptrend.

•Support: 123.40 (S1), 123.00 (S2), 122.00 (S3)

•Resistance: 124.15 (R1), 124.45 (R2), 125.00 (R3)

•DAX futures rebounded from the 11035 (S1) support line and during the early European morning, they are testing the short-term downtrend line taken from the peak of the 21st of July. As long as the index is trading below that trend line, the short-term picture remains negative. However, taking a look at our short-term oscillators, I see signs that the bulls may break the trend line this time. The RSI edged higher after exiting its oversold territory, while the MACD, already negative, has bottomed and crossed above its trigger line. A break above 11280 (R1) would confirm the case and perhaps open the way for a test at 11415 (R2). As for the broader trend, given the 20th -27th July plunge, I would switch my stance to neutral. Only a daily close below 10670 would confirm a forthcoming lower low on the daily chart and turn the overall bias of DAX to the downside.

•Support: 11035 (S1), 10900 (S2), 10800 (S3)

•Resistance: 11280 (R1) 11415 (R2), 11555 (R3)

•Gold continued to trade in a consolidative manner yesterday, staying slightly below the resistance hurdle of 1100 (R1). As long as the metal is printing lower peaks and lower troughs below the lower line of the short-term downside channel that had been containing the price action from the 18th of June until the 20th of July, I would consider the short-term outlook to remain negative. I would expect sellers to eventually take control again and aim for another test at the 1077 (S2) hurdle. Looking at our short-term oscillators, I see that the RSI turned down after hitting resistance at its 50 line, while the MACD, already negative, has topped and could fall below its trigger line soon. In the bigger picture, the plunge on the 20th of July triggered the continuation of the longer-term downtrend and kept the overall bias of the yellow metal to the downside in my view.

•Support: 1088 (S1), 1077 (S2), 1072 (S3)

•Resistance: 1100 (R1), 1110 (R2), 1120 (R3)

Benchmark Currency Rates:

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[IronFx]

IronFX Daily Commentary | 31/07/15

Language English

• Commodities, commodity currencies continue to fall The dollar is mixed this morning vs the G10 currencies, up vs the commodity currencies as commodity prices fell further but down vs the safe-haven JPY and CHF. On the other hand, it’s up against almost all the EM currencies, the only notable exception being MXN, which recovered after the Mexican central bank announced that it would intervene to shore up the peso. So is this a general bout of risk aversion? Commodities resumed their decline; all the metals, both industrial and precious, are lower, as are most energy futures, while agricultural commodities are mixed. But stock markets were generally higher yesterday and are mostly up in Asia today too. Chinese stocks are the exception, but a 1% decline in the Shanghai Composite is nothing to get excited about nowadays.

• US GDP disappoints, but inflation rises = lift-off more likely Yesterday’s first estimate of US GDP was notable for the mixed picture it presented. Q2 GDP missed estimates, but Q1 was revised up sharply and now shows an expansion, instead of the contraction that was initially estimated. The revisions to earlier data weren’t so kind, however; 2012 and 2013 were revised down, as were two of the four quarters in 2014 (Q2 was unchanged and Q1 was revised up). The revisions suggest that trend GDP growth in the US isn’t as strong as had been thought. On the other hand, the core personal consumption expenditure (PCE) index for Q2 rose to +1.8% qoq SAAR from +0.8% qoq SAAR, bringing the Fed’s preferred inflation gauge quite near its 2% target. Fed fund rate expectations were up about 4 bps, but it was notable that the 2017 expectations rose a bit more than the 2018 expectations

• Perhaps the view is that with inflation getting closer to the target, the Fed may start tightening earlier than expected, but with trend growth apparently somewhat lower than people had thought, their terminal rate is not likely to be as high. The impact on the dollar should be supportive however as the market probably isn’t as concerned with terminal rates in the far distant future as it is with the expected timing of lift-off. Wednesday’s FOMC statement seemed much more confident about the labor market than about the inflation outlook, so the inflation outlook is now the limiting factor for a rate hike.

• Japan remains out of deflation, just barely Japan’s national CPI excluding fresh foods rose 0.1% yoy in June, the same pace of increase as in May and keeping Japan just barely out of inflation. Excluding energy as well it was up 0.6% yoy, which did show some acceleration in price increases from May’s +0.4% pace. On the other hand, household spending in the month was down 2% yoy, the 14th decline out of the last 15 months. Moreover the unemployment rate rose while the job-offers-to-applicants ratio fell, calling into question for the moment BoJ Gov. Kuroda’s thesis that the tight labor market would cause inflation to accelerate. All told not an encouraging report. The only really good news we’ve had out of Japan recently was the higher-than-expected industrial production figures for June, which may have something to do with recent strong increases in exports. That makes me think that it’s external demand, not domestic demand, that’s keeping the Japanese economy going. In that case, there’s going to be pressure for the BoJ to keep the yen weak. I remain bearish on the currency.

• Today’s highlights: During the European day, Eurozone’s flash CPI for July is coming out. The forecast is for the rate to remain at +0.2% yoy, same as in June. Following the steady German inflation rate on Thursday, the likelihood that the bloc’s CPI will meet the forecast is high. We should keep in mind however that any disappointment could add to expectations that the ECB will have to keep QE in place for longer, which could put EUR under selling pressure. The bloc’s unemployment rate for June is also due out.

• In Norway, the unemployment rate for July is expected to increase a bit, which could prove NOK-negative.

• From Canada, the monthly GDP for May is expected to be unchanged mom and this is expected to cause the annual growth rate to decelerate. This may weaken CAD somewhat.

• In the US, the employment cost index (ECI) for Q2, a closely followed gauge that reflects how much firms and government pay their employees in wages and benefits, is coming out. It is expected to decelerate a bit from Q1, which could weaken USD, at least temporarily. The final University of Michigan consumer sentiment for July is coming out along with the surveys of 1-year and 5-to-10 year inflation expectations. The Chicago Purchasing managers’ index for July is also due to be released.

Currency Titles:

EUR/USD continues its tumble and hits the 1.0900 zone

GBP/USD hits support at 1.5560

AUD/USD trades in a consolidative manner

Gold continues lower and falls below 1090

WTI looks south again

Currencies Image Url:

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Currencies Text:

• EUR/USD continued trading lower on Thursday and managed to hit support at the 1.0900 (S1) territory before rebounding. Since the rate is trading below the short-term downtrend line taken from back at the peak of the 27th of July, I would consider the short-term picture to stay negative. A break below 1.0900 (S1) is likely to bring into play the 1.0870 (S2) hurdle, while a dip below 1.0870 (S2) is the move that could trigger extensions towards 1.0810 (S3). Nevertheless, taking a look at our short-term oscillators, I see signs that the corrective bounce may continue for a while before the bears seize control again. Perhaps to challenge the resistance line of 1.0985 (R1). As for the broader trend, as long as the pair is trading between 1.0800 and 1.1500, I would see a neutral longer-term picture. I believe that a move above the psychological zone of 1.1500 is the move that could carry larger bullish implications, while a break below 1.0800 is needed to confirm a forthcoming lower low on the daily chart and perhaps turn the overall bias back to the downside.

• Support: 1.0900 (S1), 1.0870 (S2), 1.0810 (S3)

• Resistance: 1.0985 (R1), 1.1020 (R2), 1.1085 (R3)

• GBP/USD traded somewhat lower yesterday, but hit support at 1.5560 (S1) and then rebounded. I still believe that the short-term picture is cautiously positive, and therefore I would expect the rate to trade higher for another test at around 1.5670 (R1). A break above that resistance would confirm a forthcoming higher high on the 4-hour chart and perhaps open the way for the 1.5735 (R2) line. The RSI hit support at its 50 line and turned up, while the MACD, already positive, looks ready to cross again above its trigger line. These signs reveal positive momentum and support that the pair could trade higher, at least in the short run. On the daily chart, Cable is still trading above the 80-day exponential moving average. This makes me believe that the overall picture remains somewhat positive as well, and that there is still the likelihood for the rate to trade higher in the not-to-distant future.

• Support: 1.5560 (S1), 1.5465 (S2), 1.5410 (S3)

• Resistance: 1.5670 (R1), 1.5735 (R2), 1.5780 (R3)

• AUD/USD has been trading in a sideways mode between 0.7250 (S1) and 0.7350 (R1) since the 24th of July. Having that in mind I would consider the near-term picture to be neutral. Taking a look at our short-term oscillators though, I see signs that the forthcoming wave could be positive. The RSI turned up and could move above 50 soon, while the MACD, although negative, looks ready to cross above its trigger line. What is more, there is positive divergence between both these indicators and the price action. A break above 0.7350 (R1) would confirm the case and perhaps target our next resistance at 0.7420 (R2). On the daily chart, the completion of a head and shoulders formation and the move below the psychological zone of 0.7500 (R3) signaled the continuation of the prevailing long-term downtrend, in my opinion. Therefore, I would consider any possible future advances as a corrective move of that major down path. I would expect a clear move below 0.7250 (S1) in the future to open the way for the psychological zone of 0.7000 (S2)

• Support: 0.7250 (S1), 0.7000 (S2), 0.6900 (S3)

• Resistance: 0.7350 (R1), 0.7420 (R2), 0.7500 (R3)

• Gold continued to trade lower yesterday, falling below the 1090 (R1) level. As long as the metal is printing lower peaks and lower troughs below the lower line of the short-term downside channel that had been containing the price action from the 18th of June until the 20th of July, I would consider the short-term outlook to remain negative. I still expect sellers to eventually take control again and aim for another test at the 1077 (S1) hurdle. Looking at our short-term oscillators, I see that the RSI edged lower after hitting resistance at its 50 line, while the MACD, already negative, has topped and fallen below its trigger line. In the bigger picture, the plunge on the 20th of July triggered the continuation of the longer-term downtrend and kept the overall bias of the yellow metal to the downside in my view.

• Support: 1077 (S1), 1072 (S2), 1060 (S3)

• Resistance: 1090 (R1), 1100 (R2), 1110 (R3)

• WTI tumbled after hitting resistance at the 49.50 (R2) barrier, which happens to be the 38.2% retracement level of the 15th – 28th of July decline. Subsequently, the price fell below the support (now turned into resistance) of 48.60 (R1), and is now headed towards the 48.00 (S1) line. In my view, the intraday bias is back to the downside and I would expect a clear break below 48.00 (S1) to open the way for the next support at 47.30 (S2). Our hourly oscillators detect downside speed and support the notion. The 14-hour RSI edged lower after falling below 50, while the hourly MACD, already below its trigger line, has turned negative. On the daily chart, I see that the medium-term trend is negative as well.

• Support: 48.00 (S1), 47.30 (S2), 46.75 (S3)

• Resistance: 48.60 (R1) 49.50 (R2), 50.00 (R3)

Benchmark Currency Rates:

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Market Summary Url:

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