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IronFX Daily Commentary | 28/09/15
Language English
• US and European politics change Last week it looked as if US politics would be in focus this week as the Republicans moved towards shutting down the government, while the Catalonian elections didn’t seem that important for European politics. However it looks like the situation is reversed.
• The resignation of US House of Representatives Speaker John Boehner means that it’s unlikely the US government will shut down this week (maybe later – stay tuned), because Boehner will now feel free to cut a deal with the Democrats without worrying that he’ll lose his job. In fact, Sunday he said that with the support of the Democrats, the House this week would pass a Senate-authored government funding bill that does not meet conservatives’ demands to cut off funding for Planned Parenthood.
• Unfortunately the bill only funds the government for an additional ten weeks, so it just pushes the problem off into the future a bit. Furthermore, Congress has to pass a transportation spending bill in October and raise the Federal debt ceiling by December, meaning there are plenty more opportunities for grandstanding. And by that time there will be a new House Majority Leader who may be less willing to compromise than Boehner was. (Some Republicans are even demanding that Senate Majority Leader Mitch McConnell also resign to make way for someone further to the right.) But it may be that Republican presidential nominating process will have progressed by then and none of the candidates will feel the need to boost their credentials by shutting down the entire government over such a minor issue. Pigs may also fly, and in formation at that, anything is possible.
• On the other hand, the separatist parties in Catalonia won a majority of the seats in their regional parliamentary elections. With most of the votes counted, the main separatist alliance and a smaller party won 72 seats in the 135-seat regional parliament. They had said previously that a majority would allow them to declare independence from Spain unilaterally within 18 months. However, the meaning of the results is not so clear. First off, the coalition won slightly less than 48% of the vote, i.e. not a majority. If it’s a referendum, then the votes should be what counts, not the seats. Declaring unilateral independence with less than 50% of the vote would have no credibility. Secondly, regional government head Artur Mas’ coalition won 9 fewer seats than in the previous elections of 2012, indicating less support for his separatist position. This mixed result is not likely to settle anything. The separatist parties are likely to use their majority in the regional parliament to keep pushing for independence, while the Madrid government is likely to point to the fact that a majority of the people want to remain within Spain. In any case, the next hurdle for Spain is the general election in December. The next government is likely to start negotiating more autonomy and fiscal powers for Catalonia. The results do not seem to be affecting the FX market this morning, as EUR/USD is pretty much unchanged from where it closed in New York on Friday.
• Today’s highlights: During the European day, Sweden’s retail sales for August are forecast to decelerate a bit. This could prove SEK-negative. Bank of England Deputy Gov. Jon Cunliffee and ECB Executive Board Member Sabine Lautenschlager speak.
• In the US, we have a very busy day. Personal income and personal spending for August are coming out. Both are expected to have risen at the same pace as in July. The focus is usually on personal spending and a significant positive surprise is needed for the USD to gain support. Even though the 3rd estimate of US GDP showed a stronger expansion in Q2 compared to the 2nd estimate, solid spending is needed to suggest that the economy has the necessary momentum to stay in its recovery path. The yoy rates of the PCE deflator and core PCE for August are also coming out. Both are forecast to remain unchanged in pace from the month before.
• Pending home sales for August are also due to be released. Even though existing home sales for the same month missed estimates, still it showed a firming housing sector. Therefore we could see another strong reading in pending home sales
• New York Fed President William Dudley and Chicago Fed President Charles Evans speak. Both are noted doves. If they too emphasize the likelihood of a rate hike within the year, then it’ll be clear there is a consensus for this. On the other hand, they may be less eager to raise rates, which could pressure USD.
• As for the rest of the week, on Tuesday, the German preliminary CPI for September is coming out. As usual, we will look at the larger regions for guidance on where the headline figure may come in and thereby as an indication for the near-term direction of EUR. A decline in the German CPI rate could indicate a decline in the Eurozone’s CPI to be released on Wednesday and could weaken EUR a bit.
• On Wednesday, from the US, we get the ADP employment report for September, two days ahead of the NFP release. The ADP report is expected to show another print below the crucial 200k level and that the private sector gained fewer jobs in September than it did in the previous month.
• In the UK, the final estimate of Q2 GDP is expected to confirm the 2nd estimate and show that the economy grew 0.7% qoq. Although the recent commentary by several BoE officials suggested that the policy normalization could start around the turn of this year, GBP has being under increased selling pressure. Therefore, a set of strong data are needed for the pound to gain momentum again.
• On Thursday, the Bank of Japan releases its quarterly Tankan business confidence survey for Q3. This is the most important indicator that comes out of Japan and so will be closely watched. All the indices for larger companies and the small companies are expected to decrease a bit or remain unchanged. This could push stock prices lower and drag USD/JPY lower with them.
• China’s official manufacturing and service-sector PMIs, as well as the final Caixin manufacturing PMI, for September are also due out.
• The final manufacturing and service-sector PMI figures for September from several European countries, and the Eurozone as a whole are also coming out. As usual, the final forecasts are the same as the initial estimates, thus the market reaction on these news is usually limited.
• Finally on Friday, the main event will be the US employment report for September. The current market forecast for July is for an increase in payrolls of 200k, up from the 173k in August. Another reading above 200k is needed to keep confidence up and suggest that the US labor market is gathering momentum.
Currency Titles:
EUR/USD rebounds again from slightly above 1.1100
GBP/USD rebounds from 1.5135
Gold pulls back
WTI slides after hitting resistance at 45.70
AUD/USD stays below 0.7040
Currencies Image Url:
http://shared.ironfx.com/Morning_Pictures_2015/September2015/September28/EURUSD_28Sep2015.PNG
http://shared.ironfx.com/Morning_Pictures_2015/September2015/September28/GBPUSD_28Sep2015.PNG
http://shared.ironfx.com/Morning_Pictures_2015/September2015/September28/XAUUSD_28Sep2015.PNG
http://shared.ironfx.com/Morning_Pictures_2015/September2015/September28/CLX5_28Sep2015.PNG
http://shared.ironfx.com/Morning_Pictures_2015/September2015/September28/AUDUSD_28Sep2015.PNG
Currencies Text:
• EUR/USD traded lower on Friday, but hit support slightly above the 1.1100 (S1) zone and rebounded to find resistance at 1.1215 (R1). Given that sellers failed to overcome the 1.1100 (S1) hurdle and ensure a forthcoming lower low, I would switch my stance to neutral. Taking a look at our short-term oscillators though, I see the likelihood that the current rebound may continue for a while. The RSI has turned up and now lies near its 50 line. It could cross above 50 anytime soon, while the MACD, although negative, stands above its trigger line and is headed towards its zero line. A clear break above 1.1215 (R1) is possible to confirm the case for further rebound, perhaps for another test at the 1.1300 (R2) line. However, a break above 1.1300 (R2) is needed to turn the short-term outlook positive in my view. In the bigger picture, as long as EUR/USD is trading between the 1.0800 key support and the psychological zone of 1.1500, I would hold a flat stance as far as the overall picture is concerned. I would like to see another move above 1.1500 before assuming that the overall outlook is back positive. On the downside, a break below the 1.0800 hurdle is the move that could shift the picture negative.
• Support: 1.1100 (S1), 1.1070 (S2), 1.1020 (S3)
• Resistance: 1.1215 (R1), 1.1300 (R2), 1.1340 (R3)
• GBP/USD traded lower on Friday, but triggered some buy orders near 1.5135 (S1) and rebounded to move slightly above the steep downtrend line drawn from the peak of the 18th of September. Although the price structure still suggests a short-term downtrend, I believe that the rebound is likely to continue. A break above 1.5210 (R1) could confirm the case and could initially target the next resistance at1.5255 (R2). Our short-term oscillators corroborate my view. The RSI just exited its below-30 zone, while the MACD has bottomed and crossed above its trigger line. What is more, there is positive divergence between both these indicators and the price action. Plotting the daily chart, I see that the rate is still below the 80 day exponential moving average. That moving average has now started to turn somewhat down, which turns the overall picture cautiously negative in my opinion.
• Support: 1.5135 (S1), 1.5100 (S2), 1.5030 (S3)
• Resistance: 1.5210 (R1), 1.5255 (R2), 1.5290 (R3)
• Gold traded lower on Friday, reaching the support barrier of 1142 (S1). The price structure on the 4-hour chart suggests a short-term uptrend. The metal has been printing higher peaks and higher troughs within an upside channel since the 15th of September. However, taking a look at our oscillators, I see signs that Friday’s setback may continue for a while before the bulls decide to pull the trigger again. The RSI exited its above-70 territory, while the MACD has topped and fallen below its trigger line. What is more, there is negative divergence between both the indicators and the price action. A break below the 1142 (S1) line is likely to aim for the lower bound of the aforementioned upside channel or the 1135 (S2) support line. As for the bigger picture, with no clear trending structure on the daily chart, I would hold my neutral stance as far as the overall outlook is concerned. I believe that a close above 1170 is needed to signal a newborn medium-term uptrend.
• Support: 1142 (S1), 1135 (S2), 1128 (S3)
• Resistance: 1155 (R1), 1164 (R2), 1170 (R3)
• WTI slid on Friday after it hit resistance at 46.30 (R2) and the downtrend line taken from the peak of the 17th of September. As long as the price is trading below that trend line, I believe that the short-term bias is to the downside. As a result, I would expect a clear move below 45.15 (S1) to initially aim for the 44.90 (S2) barrier. Another break below 44.90 (S2) is likely to set the stage for more bearish extensions, perhaps towards 44.50 (S3). Our short-term oscillators support somewhat the notion. The RSI stands slightly below its 50 line, while the MACD, although positive, lies below its trigger line. In the bigger picture, WTI has been trading in a sideways mode between 44.00 and 48.00 since the 1st of September. As a result, I would consider the longer-term picture to be flat for now.
• Support: 45.15 (S1), 44.90 (S2), 44.50 (S3)
• Resistance: 45.70 (R1) 46.30 (R2), 47.00 (R3)
• AUD/USD traded in a consolidative manner on Friday, staying marginally below the resistance hurdle of 0.7040 (R1). The short-term outlook remains negative in my view, so I would treat the recovery from near 0.6950 (S1) as a corrective move and I would expect the forthcoming wave to be negative. I would expect sellers to eventually take control and aim for another test at 0.6950 (S1). A break below that support could open the way for the 0.6900 (S3) line, marked by the low of the 4th of September. Plotting the daily chart, I still see a major downtrend. As a result, I would consider the 7th - 18th of September advance as a corrective phase and I would expect AUD/USD to extend its declines in the foreseeable future.
• Support: 0.6950 (S1), 0.6900 (S2), 0.6775 (S3)
• Resistance: 0.7040 (R1), 0.7095 (R2), 0.7140 (R3)
Benchmark Currency Rates:
http://shared.ironfx.com/Morning_Pictures_2015/September2015/September28/benchmark.JPG
Market Summary Url:
http://shared.ironfx.com/Morning_Pictures_2015/September2015/September28/table.JPG
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IronFX Daily Commentary | 29/09/15
Language English
Currency Titles:
EUR/USD rebounds from 1.1150 and breaks above 1.1215
USD/JPY trades sideways
EUR/GBP breaks above 0.7400
Gold breaks below the lower bound of the channel
DAX futures slide after hitting resistance at 9750
Currencies Image Url:
http://shared.ironfx.com/Morning_Pictures_2015/September2015/September29/EURUSD_29Sep2015.PNG
http://shared.ironfx.com/Morning_Pictures_2015/September2015/September29/USDJPY_29Sep2015.PNG
http://shared.ironfx.com/Morning_Pictures_2015/September2015/September29/EURGBP_29Sep2015.PNG
http://shared.ironfx.com/Morning_Pictures_2015/September2015/September29/XAUUSD_29Sep2015.PNG
http://shared.ironfx.com/Morning_Pictures_2015/September2015/September29/DAX_29Sep2015.PNG
Currencies Text:
•EUR/USD traded slightly lower on Monday, but hit support at 1.1150 (S2) and rebounded to break above the resistance (now turned into support) of 1.1215 (S1). Although I would expect the positive move to continue and perhaps challenge the 1.1300 (R1) barrier, I would maintain my flat stance as far as the short-term picture is concerned. A clear break above 1.1300 (R1) is needed to turn the near-term outlook positive, in my view. Our momentum studies show that the RSI emerged above its 50 line, while the MACD, already above its trigger line, has just turned positive. These signs support the idea that the pair is likely to continue trading higher for a while, at least for a test of the 1.1300 (R1) line. In the bigger picture, as long as EUR/USD is trading between the 1.0800 key support and the psychological zone of 1.1500, I would maintain a flat stance. I would like to see another move above 1.1500 before assuming that the overall outlook is back to positive. On the downside, a break below the 1.0800 hurdle is the move that could shift the picture negative.
• Support: 1.1215 (S1), 1.1150 (S2), 1.1100 (S3)
• Resistance: 1.1300 (R1), 1.1340 (R2), 1.1390 (R3)
•USD/JPY traded lower yesterday but remained within the sideways range it’s been trading in since the 8th of September, between the support of 119.20 (S1) and the resistance of 121.25 (R2). As a result, I would consider the short-term outlook to be neutral for now. I believe that a break below 119.20 (S1) is needed to turn the near-term picture negative. Something like that could initially aim for the next support at 118.60 (S2). Both our short-term momentum indicators oscillate around their equilibrium lines, confirming the sideways movement of the rate. As for the broader trend, the plunge on the 24th of August signaled the completion of a possible double top formation, which turned the medium-term outlook somewhat negative. As a result I would treat the recovery from the 116.00 zone as a corrective phase and I believe that it is more likely for the pair to exit its short-term sideways range to the downside.
• Support: 119.20 (S1), 118.60 (S2), 117.75 (S3)
• Resistance: 120.55 (R1), 121.25 (R2), 121.75 (R3)
•EUR/GBP surged on Monday, breaking above the key resistance (now turned into support) area of 0.7400 (S1). The price structure on the 4-hour chart suggests a short-term uptrend and therefore, I would expect the positive wave to continue and perhaps challenge the psychological zone of 0.7500 (R1). Our short-term oscillators reveal strong upside speed and support the notion. The RSI turned up and now appears ready to move above its 70 line, while the MACD, already positive, stands above its trigger line and points north. As for the broader trend, the move above 0.7170 on the 21st of August has turned the medium-term outlook positive. What is more, the break above 0.7400 confirmed a forthcoming higher high on the daily chart and reinforced that medium-term uptrend in my view.
• Support: 0.7400 (S1), 0.7335 (S2), 0.7300 (S3)
• Resistance: 0.7500 (R1), 0.7600 (R2), 0.7700 (R3)
•Gold plunged on Monday, falling below the 1135 (R1) line and the lower bound of the upside channel that had been containing the price action since the 15th of September. This has turned the short-term outlook cautiously negative in my view. A clear break below 1128 (S1) is likely to confirm the case and perhaps aim for the next support at 1121 (S2). Our short-term oscillators detect negative momentum and support somewhat the notion. The RSI stands below its 50 line, while the MACD, already below its trigger line, has just obtained a negative sign. As for the bigger picture, with no clear trending structure on the daily chart, I would hold my neutral stance. I believe that a close above 1170 is needed to signal a newborn medium-term uptrend.
• Support: 1128 (S1), 1121 (S2), 1115 (S3)
• Resistance: 1135 (R1), 1142 (R2), 1148 (R3)
•DAX futures traded lower on Monday after hitting resistance at 9750 (R1). The price structure still suggests a short-term downtrend in my view and therefore I would expect the negative move to continue and perhaps challenge the 9315 (S2) support, defined by the low of the 24th of August. Our momentum indicators detect downside momentum and amplify the case for further bearish extensions. The RSI edged lower after it hit resistance slightly below its 50 line, while the MACD, already negative, has topped and could fall below its trigger line soon. On the daily chart, the break below 10670 on the 20th of August has shifted the medium-term outlook to the downside, in my view. Therefore, I would treat the 24th of August – 9th of September recovery as a corrective phase and I would expect the index to extend its declines.
• Support: 9315 (S1), 9130 (S2), 9000 (S3)
• Resistance: 9750 (R1) 10025 (R2), 10170 (R3)
Benchmark Currency Rates:
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Market Summary Url:
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IronFX Daily Commentary | 30/09/15
Language English
•Revival in risk appetite boosts EM, commodity currencies, weakens JPY. Risk appetites improved Tuesday, helping risk assets to recover and reducing demand for safe-haven assets. US stocks recovered from early losses and closed marginally higher yesterday after consumer confidence surged, with the “jobs plentiful” index hitting a high for this cycle. The better mood continued in Asia this morning as all Asian stock markets rallied. Commodity prices were higher with 17 out of the 22 components of the Bloomberg commodity index rising, and Glencore stock bounced back sharply. As a result, the commodity currencies and the high-beta SEK gained, while the safe-haven yen was the only G10 currency to show a noticeable decline. Confidence came back into EM as well and all 15 EM currencies that we track rose against the dollar, with the hard-hit ZAR and BRL showing the largest gains.
• The exceptions were the safe-haven CHF, which rose modestly, and the oil-linked CAD. USD/CAD hit a high for this cycle of 1.3457 even though oil prices were higher. The pair then fell back in Asian trading to trade largely unchanged. This kind of counter-trend activity makes me think that sentiment towards CAD remains negative. Ahead of today’s GDP for July (see below), which is expected to be weak, I think the currency could remain under pressure. Another exception: within commodities, natural gas fell over 3% as forecasts for normal weather in the eastern half of the US contrasted with above-normal gas inventories.
• Japan Japan’s preliminary industrial production and retail sales, both for August, were disappointing. Production was expected to accelerate on a yoy basis, but in fact it barely budged – up 0.2% yoy from unchanged yoy. On a mom basis it contracted. Retail sales were unchanged mom and growth slowed on a yoy basis. Not good! Sluggish output growth and weak domestic demand only increase the importance of exports, and hence a weak yen, to Japan. This is particularly important in an environment of slowing global growth and competitive devaluations in Asia.
• New Zealand: ANZ business confidence for September rose slightly and the activity outlook improved, surprisingly (surprising to me at least, given the slowdown in China’s economy). The news helped to make NZD the day’s biggest gainer.
• Today’s highlights: During the European day, Eurozone’s flash CPI for September is coming out. The forecast is for the preliminary figure to show that the euro-area inflation rate has declined to 0.0% yoy from 0.1% yoy in August. Following the decline in the German rate on Tuesday to unchanged on a yoy basis, the likelihood that the bloc’s CPI will meet or even come below the forecast is high. This could add to expectations that the ECB will have to expand or extend its QE program, which could put EUR under selling pressure. The graph below shows the CPI for most of the countries in the Eurozone. The core countries (Germany, France, Austria, Belgium, Netherlands, Finland) are the blue dots, while the others are red. As you can see, before the financial crisis it was the smaller or weaker economies with high inflation while the core countries had below-average inflation. Now, it’s the weaker, troubled economies that are in deflation while the stronger economies continue to have positive price increases.
• We also get Germany’s retail sales for August and the nation’s unemployment rate for September. Eurozone’s unemployment rate for August is coming out as well.
• In the UK, the final estimate of Q2 GDP is expected to confirm the 2nd estimate and show that the economy grew 0.7% qoq. Although recent comments by several BoE officials suggested that the policy normalization could start around the turn of this year, GBP has being under increased selling pressure recently. Therefore, a set of strong data are needed for the pound to gain momentum again.
• From the US, we get the ADP employment report for September, two days ahead of the NFP release. The ADP report is expected to show that the private sector gained 190k jobs in September, the same as in August. Although an unreliable predictor of the NFP number, this could increase speculation that the NFP print on Friday may also come in below 200k. The Chicago Purchasing Managers’ index for September is also due out and is expected to have declined.
• From Canada, the monthly GDP for July is expected to have slowed to +0.2% mom from +0.5% mom. Given that the quarterly figure for Q2 came out negative, a slowdown in July could be a first sign that the Canadian economy contracted further in Q3. It looks like the effects of falling commodities prices on the Canadian economy are not going to fade out anytime soon. This could increase selling pressure on CAD.
• We have four speakers scheduled on Wednesday. During the European day, ECB Governing Council member Ardo Hansson will speak on the outlook for Estonia and the Euro area. In the US morning, New York Fed President William Dudley speaks on Market Liquidity in New York. Then later in the day, Fed Chair Janet Yellen and St. Louis Fed President James Bullard will make opening remarks at the Fed’s annual Community Banking Research and Policy conference. I don’t know how detailed “opening remarks” are likely to be, but whenever Yellen is speaking, the market pays attention.
Currency Titles:
EUR/USD rebounds from 1.1200
GBP/USD hits again support near 1.5135
AUD/USD rebounds from near 0.6950
Gold falls below 1128
WTI slides after hitting 45.70
Currencies Image Url:
http://shared.ironfx.com/Morning_Pictures_2015/September2015/September30/EURUSD_30Sep2015.PNG
http://shared.ironfx.com/Morning_Pictures_2015/September2015/September30/GBPUSD_30Sep2015.PNG
http://shared.ironfx.com/Morning_Pictures_2015/September2015/September30/AUDUSD_30Sep2015.PNG
http://shared.ironfx.com/Morning_Pictures_2015/September2015/September30/XAUUSD_30Sep2015.PNG
http://shared.ironfx.com/Morning_Pictures_2015/September2015/September30/CLX_30Sep2015.PNG
Currencies Text:
• EUR/USD traded slightly lower on Tuesday, but hit support near 1.1200 (S1) and rebounded to trade virtually unchanged. Although I still believe that it is possible to see a test near the 1.1300 (R1) barrier, I would maintain my flat stance as far as the short-term picture is concerned. A clear break above 1.1300 (R1) is needed to turn the near-term outlook positive in my view. Taking a look at our momentum studies, I see that the RSI rebounded from near its 50 line, while the MACD stands above both its zero and signal lines. These signs support that the pair is likely to continue trading higher for a while, at least for a test at the 1.1300 (R1) line. In the bigger picture, as long as EUR/USD is trading between the 1.0800 key support and the psychological zone of 1.1500, I would hold a flat stance as far as the overall picture is concerned. I would like to see another move above 1.1500 before assuming that the overall outlook is back positive. On the downside, a break below the 1.0800 hurdle is the move that could shift the picture negative.
• Support: 1.1215 (S1), 1.1150 (S2), 1.1100 (S3)
• Resistance: 1.1300 (R1), 1.1340 (R2), 1.1390 (R3)
• GBP/USD traded lower yesterday after it hit resistance marginally below the 1.5210 (R1) hurdle. However, the decline was stopped once again by the 1.5135 (S1) barrier and today during the Asian morning, the pair rebounded somewhat. Given the inability of the bears to overcome the 1.5135 (S1) line, I would expect the forthcoming wave to be positive, perhaps for another test at 1.5210 (R1). A move above that line could extent the bullish move towards 1.5240 (R2). Our momentum studies support my view. The RSI edged higher after it rebounded from near its 30 line, while the MACD, although negative, stands above its trigger line and points up. Furthermore, there is positive divergence between both these indicators and the price action. Plotting the daily chart, I see that the rate is still below the 80 day exponential moving average. That moving average has now started to turn somewhat down, which turns the overall picture cautiously negative in my opinion.
• Support: 1.5135 (S1), 1.5100 (S2), 1.5030 (S3)
• Resistance: 1.5210 (R1), 1.5240 (R2), 1.5290 (R3)
• AUD/USD traded higher on Tuesday, after it hit support once again near the 0.6950 (S1) support barrier. The rate now looks to be headed for another test at 0.7040 (R1), where an upside break could see scope for more bullish extensions, perhaps towards the next resistance at 0.7095 (R2). The RSI edged higher after it hit support at its 30 line and is now testing its 50 line. The MACD, although negative, stands above its trigger line and points north. What is more, there is positive divergence between both the indicators and the price action. Plotting the daily chart, I still see a major downtrend. However, the fact that the rate looks able to print a higher low near 0.6950 (S1) is the reason I would stay flat for now with regards to the broader trend.
• Support: 0.6950 (S1), 0.6900 (S2), 0.6775 (S3)
• Resistance: 0.7040 (R1), 0.7095 (R2), 0.7140 (R3)
• Gold traded lower on Tuesday, falling below the support (now turned into resistance) barrier of 1128 (R1). The short-term bias remains negative in my view, and therefore, I would expect a test at 1121 (S1) in the near future. A clear break below 1121 (S1) is likely to set the stage for extensions towards the 1115 (S2) line. Our short-term oscillators detect negative momentum and support somewhat the notion. The RSI edged lower after it hit resistance near its 50 line, while the MACD lies below both its trigger and signal lines. However, the RSI has turned somewhat up again, giving evidence that a minor corrective bounce could be looming before the bears shoot again. As for the bigger picture, with no clear trending structure on the daily chart, I would hold my neutral stance as far as the overall outlook is concerned. I believe that a close above 1170 is needed to signal a newborn medium-term uptrend.
• Support: 1121 (S1), 1115 (S2), 1110 (S3)
• Resistance: 1128 (R1), 1135 (R2), 1142 (R3)
• WTI slid after it hit resistance at 45.70 (R2) and the line taken from the peak of the 17th of September. As long as the price is trading below that trend line, I believe that the short-term bias is to the downside. The price has also broke below the psychological line of 45.00 (R1) and therefore, I would expect the decline to continue and challenge the 44.35 (S1) barrier. A break below that obstacle is likely to aim for the 44.00 (S2) zone. Our hourly oscillators amplify the case that further declines could be in the works. The RSI fell below its 50 line and is now pointing down, while the MACD, already below its signal line, has just turn negative. In the bigger picture, WTI has been trading in a sideways mode between 44.00 and 48.00 since the 1st of September. As a result, I would consider the longer-term picture to be flat for now.
• Support: 44.35 (S1), 44.00 (S2), 43.70 (S3)
• Resistance: 45.00 (R1) 45.70 (R2), 46.30 (R3)
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IronFX Daily Commentary | 01/10/15
Language English
• China PMI: it could’ve been worse Markets breathed a sigh of relief this morning as the China manufacturing PMIs for September showed that things weren’t any worse than expected. The official manufacturing PMI for the month came in at 49.8, a bit higher than expected (expected: 49.7, same as in August), while the final Caixin manufacturing PMI for the month was revised up slightly to 47.2 from the initial 47.0 (previous: 47.3). The indices therefore show continued deterioration, given that they are both below 50, but there’s some relief that at least the speed of deterioration is not accelerating. There’s also some hope that yesterday’s relaxation of minimum down payment requirements for some cities in China may help to support the Chinese construction industry, which is probably the most important single sector in the world.
• The indications of stabilization encouraged investors and risky assets were doing well this morning. All Asian stock markets were higher, as were AUD and NZD.
• Note: Markit announced that it was discontinuing the flash estimate of the Caixin/Markit China PMI every month. The official indicator will still be announced on the first business day of the following month, along with the other global PMIs.
• Japan tankan disappointing for manufacturers The Bank of Japan’s quarterly Tankan business confidence survey for Q3 showed that confidence among large manufacturers was even worse than expected. The diffusion index (DI) for large manufacturers fell more than expected, and expectations for Q4 are that it is likely to be even lower. Large non manufacturers on the other hand showed an improvement in their attitude, although they too expected things to be worse in Q4. Given the key role that manufacturers still play in the Japanese economy, the results show the need to keep the yen weak to support exports. The figure is JPY negative, although my guess is that today’s movement has more to do with the China PMI, which pushed stocks up and dragged USD/JPY higher too, than with the tankan.
• Canada’s GDP surprises on the upside Canada’s GDP in July rose 0.3% mom, beating expectations of 0.2% growth. The rise was driven by sharply higher “non conventional oil extraction” as production recovered from seven straight monthly declines. That suggests Q3 GDP as a whole is likely to rebound, ending two consecutive quarters of contraction. With the economy rebounding, the Bank of Canada is less likely to lower interest rates further and the market is now pricing in only a small chance of any easing in the next year. CAD could gain further as investors trim their extremely short positions in the currency, but with oil prices likely to weaken further (in my view), I remain bearish on the currency over the medium term.
• Today’s highlights: During the European day, the final manufacturing PMI figures for September from several European countries, and the Eurozone as a whole are also coming out. As usual, the final forecasts are the same as the initial estimates, thus the market reaction on these news is usually limited, unless we have a huge revision from the preliminary figures. UK manufacturing PMI for September is forecast to decrease a bit, which could prove GBP negative.
• From Canada, we get the RBC manufacturing PMI for September. Market pays more attention to the Ivey PMI to be released next week. Thus, the reaction is usually limited at the release.
• In the US, the ISM manufacturing PMI and the final Markit manufacturing PMI, both for September, are also due out. The ISM index is expected to decline slightly but to stay above the 50 level, but that seems unlikely to me. All of the Fed’s regional PMIs are in contractionary territory, so I think wonder if the national PMI can still be in expansionary territory. There could be some disappointment in today’s ISM that would weaken the dollar.
• Initial jobless claims for the week ended Sep. 25 is also coming out.
• As for the speakers, Atlanta Fed President Dennis Lockhart and San Francisco Fed President John Williams speak. Both men have spoken recently and so no surprise is likely. Lockhart last spoke on Sep. 23rd, when he said the decision to keep rates on hold was “risk management” and that normalization will signal a healthier economy. Williams spoke on Tuesday and he saw the normalization process starting this year.
Currency Titles:
EUR/USD breaks below 1.1200
GBP/JPY rebounds from near 181.00
AUD/USD breaks above 0.7040
Gold falls below 1121
DAX futures hit again support at 9315 and rebound
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• EUR/USD traded lower on Wednesday, breaking below the support (now turned into resistance) line of 1.1200 (S1). The decline was halted by the 1.1150 (S1) barrier, where a clear break is likely to open the way for our next support at 1.1100 (S2). Taking a look at our momentum studies, the RSI fell below its 50 line and below its upside support line. It now points south. The MACD has topped slightly above zero and crossed below both its zero and signal lines. These indicators detect negative momentum and amplify the case that EUR/USD could fall below the 1.1150 (S1) support line. In the bigger picture, as long as EUR/USD is trading between the 1.0800 key support and the psychological zone of 1.1500, I would hold a flat stance as far as the overall picture is concerned. I would like to see another move above 1.1500 before assuming that the overall outlook is back positive. On the downside, a break below the 1.0800 hurdle is the move that could shift the picture negative.
• Support: 1.1150 (S1), 1.1100 (S2), 1.1070 (S3)
• Resistance: 1.1200 (R1), 1.1300 (R2), 1.1340 (R3)
• GBP/JPY traded lower yesterday, but hit support fractionally below 181.00 (S1) and today during the Asian morning it rebounded. Although the short term trend looks to be negative, there is the possibility that the rebound may continue for a while, perhaps to challenge the black downtrend line or the 183.20 (R1) resistance hurdle. This is also supported by our short term oscillators. The RSI turned up again and looks to be headed towards its 50 line, while the MACD, although negative, rebounded from near its trigger line and is now pointing north. There is also positive divergence between both these studies and the price action. On the daily chart, given the completion of a double top pattern on the 24th of August, I would consider the medium term path to be cautiously negative. I would treat any further near term advances as corrective moves before the bears decide to shoot again.
• Support: 181.00 (S1), 180.30 (S2), 180.00 (S3)
• Resistance: 183.20 (R1), 184.15 (R2), 185.00 (R3)
• AUD/USD hit support at 0.7000 (S2) and today during the Asian morning it traded higher and managed to break above the 0.7040 (S1) obstacle. The break above 0.7040 (S1) signaled the completion of a short term double bottom formation and confirmed the positive divergence between both our short term oscillators and the price action. Therefore, I would expect the bulls to pull the trigger for the 0.7095 (R1) resistance obstacle. The RSI rebounded from near its 50 line and is now pointing up, while the MACD, although negative, stands above its trigger line and could turn positive soon. Plotting the daily chart, I still see a major downtrend. However, the fact that the rate looks able to print a higher low near 0.6950 (S1) is the reason I would stay flat for now with regards to the broader trend.
• Support: 0.7040 (S1), 0.7000 (S2), 0.6950 (S3)
• Resistance: 0.7095 (R1), 0.7140 (R2), 0.7200 (R3)
• Gold continued trading lower on Wednesday, and managed to fall below the support (now turned into resistance) hurdle of 1121 (R1). The decline was stopped slightly above the 1110 (S1) barrier. The short term bias remains negative in my view and therefore, I would expect a break below 1110 (S1) to set the stage towards the next support at 1102 (S2). Our short term oscillators detect downside speed and support the negative near term outlook. The RSI edged lower after it hit resistance slightly below its 50 line and now appears ready to fall below its 30 line, while the MACD lies below both its zero and signal lines. As for the bigger picture, with no clear trending structure on the daily chart, I would hold my neutral stance as far as the overall outlook is concerned. I believe that a close above 1170 is needed to signal a newborn medium term uptrend.
• Support: 1110 (S1), 1102 (S2), 1095 (S3)
• Resistance: 1121 (R1), 1128 (R2), 1135 (R3)
• DAX futures once again hit support at the 9315 (S1) barrier and rebounded to challenge the resistance of 9750 (R1). Given the inability of the bears to overcome the 9315 (S1) support obstacle, I see the likelihood for the positive wave to continue for a while. A clear break above 9750 (R1) could signal the completion of a short term double bottom formation and perhaps open the way for the next resistance at 10025 (R2). Our near term oscillators support the notion as well. The RSI rebounded from near its 50 line, while the MACD, although negative, lies above its trigger line. What is more, there is positive divergence between both these indicators and the price action. On the daily chart, the break below 10670 on the 20th of August has shifted the medium term outlook to the downside, in my view. Therefore, I would treat the 24th of August to 9th of September recovery as a corrective phase and I would expect the index to extend its declines.
• Support: 9315 (S1), 9130 (S2), 9000 (S3)
• Resistance: 9750 (R1) 10025 (R2), 10170 (R3)
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IronFX Daily Commentary | 02/10/15
Language English
•PMIs are decent, but not that exciting Manufacturing in most major countries continued to expand, but at a somewhat slower pace than before. The US ISM index managed to remain in expansionary territory as domestic activity remained steady even though international activity slowed. China of course is the main exception, with the Markit PMI there remaining deep in sub-50 territory.
• Currencies remain in a narrow range EUR/USD is opening this morning in Europe at 1.1180. Since August 28th, there have been only four days that it did not open with either at 1.11 or 1.12 handle (three of those days it was 1.13, the other 1.14). That’s 22 out of 26 trading days. During the same time, USD/JPY has opened at either 119 or 120 every day but two. There may be intraday volatility but there is not much direction.
• There’s more variation in GBP/USD, where there were five days each starting at 1.51 and at 1.52, seven at 1.53, and five each at 1.54 and 1.55. So the range was much wider and more evenly distributed. That indicates more uncertainty, more disagreement and debate in the market about the likely course of the UK economy. The difference between the Bank of England’s rhetoric and the market’s forecast for interest rates is quite noticeable – as I mentioned recently, Bank officials are warning that interest rate hikes will start to be a topic of discussion around the turn of the year, but the market is predicting that nothing will happen until next September. Like in the US and Japan too, the market is less optimistic about a return to inflation than officialdom is. So far, the market has been right and officialdom has been wrong. Does that mean a delay in hiking rates in the US and UK and perhaps more QE in the Eurozone and Japan? That’s the main topic of debate and disagreement.
• Today’s highlights: During the European day, Norway’s unemployment rate for September is estimated to decline bit. Following the improved manufacturing PMI on Thursday, and the slightly higher oil prices, a decline in the unemployment rate could push USD/NOK lower. Eurozone’s PPI for August is also coming out.
• The main event will be the US employment report for September. The current market forecast is for an increase in payrolls of 200k, up from the 173k in August. Another reading above 200k is needed to keep confidence up and suggest that the US labor market is gathering momentum. Fed officials noted the strength of the labor market at their September FOMC meeting, but because of uncertainties abroad they refrained from hiking. As such, another strong NFP figure could keep USD supported against its peers, but it is unlikely to cause Fed members to raise rates at their next meeting unless the global environment calms down. It seems likely that the figure will bounce back from August’s unusually low level. August has been the least reliable month for the NFP data in recent years. Not only has August been the weakest month for NFP, it also has around twice the average revision. A bounce-back in September and an upward revision to the August figure would probably reassure the markets that the normalization process will soon start, and support the dollar. At the same time, the unemployment rate is forecast to remain unchanged at 5.1%, while average hourly earnings are expected to accelerate somewhat.
• As for the speakers, Philadelphia Fed President Patrick Harker, St. Louis Fed President James Bullard and Fed Vice Chairman Stanley Fischer speak. Harker just took office on July 1st and has made no public comments so far that I can find. Unfortunately he’s just making some opening remarks at a Philly Fed conference on credit and payments markets and won’t say anything about the economic outlook for monetary policy, apparently.
Currency Titles:
EUR/USD rebounds from slightly below 1.1150
USD/JPY continues sideways
EUR/GBP rebounds but hits resistance at 0.7400
Gold is headed towards 1110
WTI hits resistance slightly above 47.00 and collapses
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• EUR/USD rebounded on Thursday, after it hit support slightly below the 1.1150 (S1) line. However, the advance was halted by the 1.1200 (R1) barrier. I still believe that the short-term bias is negative, and I would treat yesterday’s rebound as a minor corrective move. Today we get the US employment report and expectations are for a solid report. This could be the catalyst for the next leg down. A clear below 1.1150 (S1) is likely to open the way for our next support at 1.1100 (S2). Taking a look at our momentum studies, I see that the RSI hit resistance at its 50 line and turned down, while the MACD stands below both its zero and signal lines and shows signs that it could turn down again. In the bigger picture, as long as EUR/USD is trading between the 1.0800 key support and the psychological zone of 1.1500, I would hold a flat stance as far as the overall picture is concerned. I would like to see another move above 1.1500 before assuming that the overall outlook is back positive. On the downside, a break below the 1.0800 hurdle is the move that could shift the picture negative.
• Support: 1.1150 (S1), 1.1100 (S2), 1.1070 (S3)
• Resistance: 1.1200 (R1), 1.1300 (R2), 1.1340 (R3)
• USD/JPY continued moving within the sideways range it’s been trading since the 8th of September, between the support of 119.20 (S1) and the resistance of 121.25 (R2). As a result, I would still consider the short-term outlook to be neutral. I believe that a break below 119.20 (S1) is needed to turn the near-term picture back to the downside. Something like that could initially aim for the next support at 118.60 (S2). Both our short-term momentum indicators oscillate around their equilibrium lines confirming the sideways mode of the rate. As for the broader trend, the plunge on the 24th of August signaled the completion of a possible double top formation, which turned the medium-term outlook somewhat negative. As a result I would treat the recovery from the 116.00 zone as a corrective phase and I believe that it is more likely for the pair to exit its short-term sideways range to the downside in the foreseeable future.
• Support: 119.20 (S1), 118.60 (S2), 117.75 (S3)
• Resistance: 120.55 (R1), 121.25 (R2), 121.75 (R3)
• EUR/GBP traded higher on Thursday, but hit resistance at 0.7400 (R1) and today during the Asian morning, it retreated somewhat. I still believe that the pair could correct lower in the short run. A clear move below 0.7360 (S1) is likely to initially aim for the next support at 0.7335 (S2). Our short-term oscillators support the case as well. The RSI turned down and now looks able to fall below its 50 line soon, while the MACD, although positive, stands below its trigger line and points down. What is more, there is still negative divergence between the RSI and the price action. As for the broader trend, the move above 0.7170 on the 21st of August has turned the medium-term outlook positive. As a result, I would treat the any short-term declines as a corrective move for now.
• Support: 0.7360 (S1), 0.7335 (S2), 0.7300 (S3)
• Resistance: 0.7400 (R1), 0.7435 (R2), 0.7500 (R3)
• Gold continued trading lower on Thursday, and during the Asian morning Friday, it looks to be headed towards the 1110 (S1) support obstacle. The short-term bias remains negative in my view and therefore, I would expect a break below 1110 (S1) to set the stage towards the next support at 1102 (S2). Our short-term oscillators detect downside speed and support the negative near-term outlook. The RSI turned down again and could fall below its 30 line soon. The MACD stands below both its zero and trigger lines and looks ready to turn south again. As for the bigger picture, with no clear trending structure on the daily chart, I would hold my neutral stance as far as the overall outlook is concerned. I believe that a close above 1170 is needed to signal a newborn medium-term uptrend.
• Support: 1110 (S1), 1102 (S2), 1095 (S3)
• Resistance: 1121 (R1), 1128 (R2), 1135 (R3)
• WTI traded higher yesterday, but hit resistance at 47.00 and collapsed. Then, it rebounded somewhat, but the rebound stayed limited near 45.30 (R1). Although we do not have a clear trending structure on the 1-hour chart, I would expect the forthcoming wave to be to the downside, perhaps for another test near the 44.75 (S1) barrier. A break below that hurdle is possible to aim for the 44.35 line in my view. Our hourly momentum studies corroborate my view. The RSI hit resistance at its 50 line and turned down, while the MACD, already negative and below its trigger line, has also started to turn south. In the bigger picture, WTI has been trading in a sideways mode between 44.00 (S3) and 48.00 since the 1st of September. As a result, I would consider the longer-term picture to be flat for now.
• Support: 44.75 (S1), 44.35 (S2), 44.00 (S3)
• Resistance: 45.30 (R1) 45.70 (R2), 46.30 (R3)
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IronFX Daily Commentary | 05/10/15
Language English
• Disappointing NFP is half forgotten already. Friday’s US nonfarm payrolls for September was a terrible figure – not only did the September figure come in far below market estimates, but the disappointing August figure was further revised down. There wasn’t even any solace in the fact that the unemployment rate held steady – that was only due to a drop in the participation rate as employment in the household survey fell. And the average workweek fell, too. Almost nothing good. It’s particularly worrisome when the key question the market is debating nowadays is global growth and the US is/was the one bright spot. Fed fund rate expectations collapsed as much as 10 bps in the long end and the dollar collapsed with them. The market is now expecting just barely two rate hikes by end-2016.
• Nonetheless, the dollar quickly recouped at least half its losses, more against some currencies. EUR/USD for example shot from 1.1156 to 1.1316 in seconds, but by the end of the New York day it was back to 1.1217 – well within the recent range. USD/JPY plunged from 120.41 to a low of 118.68, but by the end of the New York day traded back around 120.00 – more or less where it had started the day. The reasons were: the figure was bad, but not that bad (the figure was within the normal range of data, which is ±76k); looking at the longer term, year-to-date payrolls are almost in line with last year (198k vs 238k); and Fed officials downplayed the report, saying it’s more important to look at the trend rather than one or two months’ figures. St. Louis Fed President James Bullard said it was “just one number” in a series “that has been improving for a long time.” (The 12m moving average of NFP, for example, is still 229k.) Boston Fed President Eric Rosengren said the weak figure validated the decision not to hike in September, but with the unemployment rate at 5.1% they could still start raising rates in December.
• I expect the dollar to gyrate as investors ask two questions : one, how quickly is the Fed likely to hike rates (if it does at all), and secondly, is any other central bank likely to hike any earlier? There can certainly be different opinions about #1, but not #2 – nobody else is going to hike before the Fed does. That should continue to support the dollar going forward as investors reconsider the outlook.
• In particular, I think the commodity currencies are likely to come under more pressure going forward. They’re in a lose-lose proposition: if the US hikes, then they get left behind, and if the US doesn’t hike, it’ll probably be because global growth is weak and China is in trouble, in which case the commodity currencies will come under even more pressure. Watch out for the RBA meeting tomorrow though, which could temporarily boost AUD (see below).
• This week it will be crucial to listen to how Fed officials interpret the data. The numbers are neither here nor there; what matters is what people make of the numbers. If the other FOMC members are also focused on the trend, or if they also see it natural for the monthly addition to jobs to slow, then Fed rate expectations are likely to rebound and the dollar recover with them. We will get the hawk view on Tuesday from Kansas City Fed President George. San Francisco Fed President Williams (dove) is a busy man: he speaks twice on Wednesday and again on Thursday. St. Louis Fed President Bullard and Minneapolis Fed President Kocherlakota also speak on Thursday, which should give a nice contrast as the former is relatively hawkish and the latter is the #1 dove on the FOMC -- apparently he’s going for a rate cut this year. Finally on Friday, Atlanta Fed President Lockhart (dove) and Chicago President Evans (dove) weigh in.
• Today’s highlights: During the European day, we get the final service-sector PMIs for September from the countries we got the manufacturing data for on Thursday. As usual, the final forecasts for France, Germany and Eurozone are the same as the initial estimates, therefore the market reaction is usually limited at these releases.
• The UK service-sector PMI is forecast to have risen to 57.0 from 55.6. Following the better-than-expected construction index on Friday and the above expectations manufacturing PMI on Thursday, another positive surprise in the service-sector PMI looks possible.
• In the US we get the labor market conditions index for September. This is a monthly index that draws on a range of data to produce a single measure to gauge whether the labor market is on the whole improving. Although not major market mover, the LMCI index will show the broader US labor conditions following the soft US employment report. Both the final Markit service-sector and the ISM non-manufacturing PMIs are also coming out. The market pays more attention to the ISM index. A possible decline in ISM non-manufacturing index will be in line with the decline in the manufacturing index, and could push USD lower, at least temporarily.
• As for the rest of the week, on Tuesday, the highlight of the day will be the RBA policy meeting. At their last meeting, Bank officials kept the key policy rate unchanged at 2%, as expected. Moreover, Gov. Stevens’ comments following the meeting were almost unchanged from their previous meeting. He maintained his neutral bias and as for AUD, he simply repeated that “(t)he Australian dollar is adjusting to the significant declines in key commodity prices.” In our view, the fact that they showed no significant concern about the Australian economy despite the increased weakness in the Chinese economy and the turmoil in global stock markets, AUD is likely to benefit from another neutral statement.
• As a result, the main focus will most probably be on the statement accompanying the decision for any comments that the moderate expansion in the economy continues and that the labour market data have been decent recently.
• On Wednesday, the highlight will be the Bank of Japan policy meeting. Market expectations – and ours -- are for no change in BoJ policy at this meeting. The more important meeting will be the one at the end of the month, when new long-term projections for growth and inflation will be released in the semi-annual Outlook for Economic Activity and Prices report. Therefore, the focus at Wednesday’s meeting will most likely be on Gov. Kuroda’s press conference afterwards. BoJ officials said recently that they see little need for an immediate expansion of monetary stimulus and would prefer to hold off to get a clearer picture of the economic outlook. It will be interesting to see if Gov. Kuroda maintains his upbeat view that the underlying trend of inflation is improving, despite the renewed fall in core CPI.
• On Thursday, the main event will be the Bank of England monetary policy meeting. With no change in policy expected, the number of dissenting votes is the key point again. The consensus is that the vote will once again be split 8-1 with Ian McCafferty to maintain his call for a rate rise. Market participants will be eager to see if McCafferty is joined by the formerly hawkish Martin Weale or Kristin Forbes, who argued that the underlying inflation should start to pick up soon and monetary policy would need to be tightened sooner. As you can see on the graph however, despite the hawkish comments recently, market expectations for BoE tightening have been pushed back, with the timing for the first rate hike now slipping from around 8 months in August (meaning the first hike to occur around March) to 12 months in September. This explains a bit the recent weakness seen in GBP.
• In addition to the BoE meeting, the Fed releases the minutes of its September FOMC meeting. At this meeting the FOMC remained on hold, as the market had anticipated, but surprised investors by presenting a more dovish outlook than expected. The Committee did discuss the idea of hiking rates at this meeting, but decided not to because of global factors (as opposed to strong domestic factors.) Several Fed officials who spoke recently maintained their willingness to raise rates at some point this year. If the minutes show that they are likely to start hiking if the global environment calms down, then USD could regain its momentum.
• On Friday, Norway’s CPI for September is coming out. Even though the country’s CPI is close to the Bank’s 2.5% target, low oil prices, soft industrial production and weak manufacturing PMI pushed the Norges bank to cut its key rate at their September meeting. The Bank also maintained the likelihood for further cuts, therefore, a decline in the CPI rate could put NOK under renewed selling interest. Canada’s unemployment rate for September is also coming out.
Currency Titles:
EUR/USD surges following the weak NFP figure
GBP/JPY breaks above a short-term downtrend line
AUD/USD rebounds from 0.7000
Gold rallies after the US employment report disappoints
DAX futures rebound from 9400
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• EUR/USD surged on Friday after the US employment report showed that non-farm payrolls rose by much less than expected. The pair emerged above the 1.1200 (S1) barrier following the release, but the advance was stopped between the 1.1300 (R1) and 1.1340 (R2) resistance lines. Subsequently, the rate retreated to hit the 1.1200 (S1) line as a support. Friday’s rally has changed the outlook to cautiously positive and as a result, I would expect the forthcoming wave to be bullish, perhaps for a test at the 1.1300 (R1) barrier. A break above 1.1300 (R1) is likely to aim for the next resistance at 1.1340 (R2). Our short-term oscillators detect upside momentum and support somewhat the notion. The RSI rebounded from near its 50 line, while the MACD has crossed above both its zero and signal lines. In the bigger picture, as long as EUR/USD is trading between the 1.0800 key support and the psychological zone of 1.1500, I would hold a flat stance as far as the overall picture is concerned. I would like to see another move above 1.1500 before assuming that the overall outlook is back positive. On the downside, a break below the 1.0800 hurdle is the move that could shift the picture negative.
• Support: 1.1200 (S1), 1.1150 (S2), 1.1100 (S3)
• Resistance: 1.1200 (R1), 1.1300 (R2), 1.1340 (R3)
• GBP/JPY hit support slightly below 181.00 (S2) on Friday, and today during the Asian morning it rebounded and managed to break above the short-term downtrend line taken from the peak of 17 Sep. The rebound confirmed the positive divergence between our near-term oscillators and the price action. I believe that the rate is likely to continue higher and perhaps challenge the 183.20 (R1) resistance. A clear move above that line could pave the way for the next obstacle at 184.45 (R2). Our oscillators detect upside speed and corroborate my view. The RSI emerged above its 50 line and points up, while the MACD, although negative, stands above its trigger line and is headed towards zero. On the daily chart, the completion of a double top pattern on the 24th of August has shifted the medium-term picture cautiously negative. However, given that we have a higher low near the 181.00 (S2) zone, I would switch my stance to neutral for now.
• Support: 182.00 (S1), 181.00 (S2), 180.30 (S3)
• Resistance: 183.20 (R1), 184.15 (R2), 185.00 (R3)
• AUD/USD hit support at 0.7000 (S2) and today during the Asian morning it traded higher and managed to break above the 0.7055 (S1) obstacle. The pair is trading within a short-term upside channel and therefore, I would consider the short-term picture to be somewhat positive. I would expect the pair to continue higher for a while and to challenge the 0.7095 (R1) barrier. A clear move above that could prompt extensions towards the next resistance at 0.7140 (R2). The RSI rebounded from its 50 line and is now pointing up, while the MACD stands above both its trigger and zero lines, pointing north as well. Plotting the daily chart, I still see a major downtrend. However, the fact that the rate printed a higher low near 0.6950 (S3) is the reason I would stay flat for now with regards to the broader trend.
• Support: 0.7055 (S1), 0.7000 (S2), 0.6950 (S3)
• Resistance: 0.7095 (R1), 0.7140 (R2), 0.7200 (R3)
• Gold rallied on Friday following the disappointing US employment data, breaking above the short-term downtrend line taken from the peak of the 24th of September. This has turned the near-term bias positive in my view. Currently, the metal is trading between the support of 1135 (S1) and the resistance hurdle of 1141 (R1). A clear move above 1141 (R1) is likely to carry more bullish extensions and perhaps aim for the next resistance at 1148 (R2). Taking a look at our short-term momentum studies, I see that the RSI emerged above 50, but now has turned sideways. The MACD, already above its signal line, edged north and obtained a positive sign. Both these studies reveal positive momentum, but the fact that the RSI has turned east makes me cautious that a minor pullback is possible before the bulls decide to shoot again. As for the bigger picture, with no clear trending structure on the daily chart, I would hold my neutral stance as far as the overall outlook is concerned. I believe that a close above 1170 is needed to signal a newborn medium-term uptrend.
• Support: 1135 (S1), 1128 (S2), 1121 (S3)
• Resistance: 1141 (R1), 1148 (R2), 1155 (R3)
• DAX futures traded lower on Friday, but hit support near the 9400 (S1) level and rebounded strongly. The price has been oscillating between 9315 (S2) and 9750 (R1) since the 21st of September and therefore, I would consider the short-term bias to be flat at the moment. During the early European morning, the index is headed for another test of the 9750 (R1) obstacle, where an upside break is needed to turn the near-term picture positive. Something like that could set the stage for extensions towards the next resistance at 10025 (R2). The RSI rebounded and is back above 50, while the MACD, although negative, stands above its trigger line and looks to be headed towards zero. These signs support the idea that DAX could trade higher for a while, at least for another test at 9750 (R1). On the daily chart, the break below 10670 on the 20th of August has shifted the medium-term outlook to the downside, in my view. Therefore, I would treat any possible near-term advances that stay limited below 10670 as a corrective phase.
• Support: 9400 (S1), 9315 (S2), 9130 (S3)
• Resistance: 9750 (R1) 10025 (R2), 10170 (R3)
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IronFX Daily Commentary | 06/10/15
Language English
• More mean reversionThe rethink of the nonfarm payrolls continued on Monday. Fed fund rate expectations as measured by the futures retraced a little more than half the ground that they lost on Friday as the strength in equities and the possibility of an upward revision to the nonfarm payrolls increased the possibility of a rate hike slightly. Ten-year bond yields, which dropped 4 bps on Friday, rose 6 bps to stand higher than they were before the number came out. (The two years though only regained 2.5 bps of the 6.5 bps that it lost on Friday.) And yet the S+P 500 continued to rise. High yield bonds bounced back as well, indicating more confidence in the economy. Volatility declined across markets, with the VIX index falling below 20 for the first time since late August.
• One reason for the bounce back was a solid number for the employment index of the non-manufacturing ISM index. The overall index was nothing to get excited about as it fell somewhat, but the employment index was strong and so was the employment index (rose to 58.3 from 56.0), which has a good correlation with the final figure for private nonfarm payrolls. That suggests to many people that the revisions to come may change the picture significantly and helped the markets to mean revert.
• With the rebound in confidence, the commodity currencies gained (plus some individual reasons – see below). On the other hand, the safe haven CHF was the weakest currency as people feel less need for a safe haven. USD/CHF is opening almost exactly where it opened on Thursday, when people were looking forward to a good NFP the following day. EUR/USD is once again opening with a 1.11 handle – yesterday it was a 1.12 handle. So despite the NFP shock on Friday, it’s still in the range it’s been in for several weeks now.
• Australia keeps rates steady, as expected The RBA kept rates unchanged, as expected, and maintained its neutral stance. They seemed relatively content with the state of the world, saying that there was some further softening in conditions in China and east Asia of late, but stronger US growth and that Equity market volatility has continued, but the functioning of financial markets generally has not, to date, been impaired. This makes us think that they are unlikely to lower rates in the near future, and indeed the futures are showing only a very small chance of a change over the next year, with the odds of a cut or a hike nearly balanced (17.5% chance of a cut, 15.3% chance of a hike = 67.2% likelihood of no change). This helped AUD to recover today.
• TPP to help NZ milk exports The Trans Pacific Partnership trade deal between the US, Japan and 10 other Pacific Rim countries has been concluded. It will gradually open the Canadian market to foreign milk slightly. This helped NZD this morning.
• Today’s highlights: German factory orders for August unexpectedly fell by 1.8% mom vs an expected rise of +0.5% mom. To make matters worse, the July figure was revised down sharply as well. Orders from the Eurozone rose, but domestic orders fell and orders from outside the Eurozone fell by the most of all. The figures show that Germany is vulnerable to the downturn in global trade just like any other country. Of course the figures are likely to be even worse in the future as a result of the Volkswagen scandal. This is negative for the EUR in that any weakness in Europe’s biggest economy increases the likelihood that the ECB eventually ramps up its QE program.
• From Canada, we get the Ivey PMI for September. Following the decline in the RBC manufacturing PMI last week, we could see a decline in the Ivey figure as well. Coming on top of the low oil prices, CAD could come under renewed selling pressure.
• From the US, we get the trade balance for August.
• As for the speakers, ECB President Mario Draghi and Kansas City Fed President Esther George speak. Draghi is giving a welcome speech at the Art on Site Inauguration, it doesn’t sound like the venue for any major policy initiatives. George is one of the most hawkish people on the FOMC. Her comments are likely to reinforce the idea that the Fed is still on track to hike rates this year, the September nonfarm payrolls notwithstanding. That could firm up the dollar.
Currency Titles:
EUR/USD hits resistance fractionally below 1.1300 and slides
GBP/USD rebounds from 1.5135
Gold consolidates below 1141
AUD/USD edges up following the RBA decision
WTI finds resistance slightly below 47.00
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Currencies Text:
• EUR/USD traded higher on Monday, but found resistance marginally below the 1.1300 (R2) line and slid to trade back below the 1.1200 (R1) barrier. Having in mind that the rate is back below 1.1200 (R1), I would adopt a neutral stance for now with regards to the short-term picture. The RSI is now back below 50 and points sideways, while the MACD has turned negative again and fell below its trigger line. The fact that both these indicators oscillate above and below their equilibrium lines supports my choice to stay flat for now. In the bigger picture, as long as EUR/USD is trading between the 1.0800 key support and the psychological zone of 1.1500, I would hold a flat stance as far as the overall picture is concerned. I would like to see another move above 1.1500 before assuming that the overall outlook is back to positive. On the downside, a break below the 1.0800 hurdle is the move that could shift the picture to negative.
• Support: 1.1150 (S1), 1.1100 (S2), 1.1020 (S3)
• Resistance: 1.1200 (R1), 1.1300 (R2), 1.1340 (R3)
• GBP/USD traded lower yesterday but found support at the 1.5135 (S1) barrier. Today, during the Asian morning, Cable rebounded somewhat. Given that the rate is still trading above the upper bound of the short-term downside channel, I see the possibility for the next wave to be positive, perhaps for another challenge at the 1.5240 (R1) zone. Our short-term oscillators support the notion as well. The RSI rebounded from its upside support line and now appears ready to move back above 50, while the MACD shows signs that it could rebound from its support line as well. Plotting the daily chart, I see that Cable remains below the 80 day exponential moving average. That moving average shifted somewhat down, which turns the overall picture cautiously negative in my opinion.
• Support: 1.5135 (S1), 1.5100 (S2), 1.5030 (S3)
• Resistance: 1.5240 (R1), 1.5290 (R2), 1.5330 (R3)
• Gold traded in a consolidative manner yesterday, staying slightly below the resistance hurdle of 1141 (R1). I still believe that since the metal has broken above the short-term downtrend line taken from the peak of the 24th of September, the short-term bias has turned positive. A clear move above 1141 (R1) is likely to carry more bullish extensions and perhaps aim for the next resistance at 1148 (R2). Taking a look at our short-term oscillators though, I see that a retreat could be on the works before the bulls decide to shoot again. The RSI, although above 50, has turned down again, while the MACD shows signs of topping slightly above its zero line. As for the bigger picture, with no clear trending structure on the daily chart, I would hold my neutral stance as far as the overall outlook is concerned. I believe that a close above 1170 is needed to signal a newborn medium-term uptrend.
• Support: 1130 (S1), 1121 (S2), 1110 (S3)
• Resistance: 1141 (R1), 1148 (R2), 1155 (R3)
• AUD/USD traded higher during the early European morning after the RBA decided to keep its benchmark interest rate unchanged and said that it sees inflation remaining consistent with the target over the next one to two years. The pair is trading within a short-term upside channel and therefore I would consider the short-term picture to stay positive. At the time of the release, AUD/USD emerged above the 0.7095 (S1) line and at the time of writing is headed towards the resistance of 0.7140 (R1). A break above 0.7140 (R1) is likely to carry larger bullish implications and perhaps aim for the 0.7200 (R2) zone. Our short-term oscillators detect strong upside speed and support the positive near-term picture. The RSI moved higher and now looks able to cross above its 70 line, while the MACD stands above both its zero and signal lines and points north. Nevertheless, although I would expect the rate to continue its near-term uptrend, given our proximity to the upper bound of the upside channel, I would be careful of a possible setback before the bulls take the reins again. On the daily chart, I still see a major downtrend. However, the fact that the rate printed a higher low near 0.6950 is the reason I would stay flat for now with regards to the broader trend.
• Support: 0.7095 (S1), 0.7055 (S2), 0.7000 (S3)
• Resistance: 0.7140 (R1), 0.7200 (R2), 0.7270 (R3)
• WTI traded higher yesterday, but hit resistance slightly below 47.00 (R2) and retreated to find support fractionally above 46.00. Although we do not have a clear trending structure on the 1-hour chart, I would expect the forthcoming wave to be positive. A clear move above 46.40 (R1) is likely to confirm the case and perhaps open the way for another test near 47.00 (R2). Our hourly momentum studies support the notion somewhat. The RSI shows signs of bottoming slightly above its 50 line, while the MACD, already positive, shows signs of bottoming as well and could move above its trigger line soon. In the bigger picture, WTI has been trading in a sideways mode between 44.00 and 48.00 since the 1st of September. As a result, I would consider the longer-term picture to be flat for now.
• Support: 46.00 (S1), 45.70 (S2), 45.20 (S3)
• Resistance: 46.40 (R1) 47.00 (R2), 47.30 (R3)
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IronFX Daily Commentary | 07/10/15
Language English
•Bank of Japan remains on hold. BoJ kept monetary policy unchanged as was widely expected, and said that the Japanese economy has “continued to recover moderately”. At the press conference afterwards, Gov. Kuroda maintained his upbeat view that the underlying trend of inflation is improving, despite the renewed fall in core CPI. He expects the CPI to reach 2% target around first half of 2016, but the timing may change depending on oil price. Gov. Kuroda also repeated that the monetary easing is having the intended effects and they will keep easing until the inflation target is stable. JPY gained on the news and fell below the psychological level of 120.00. Bank officials said recently that they see little need for an immediate expansion of monetary stimulus and would prefer to hold off to get a clearer picture of the economic outlook. Nevertheless, call for additional stimulus have been building up and the more important meeting will be the one at the end of the month, when new long-term projections for growth and inflation will be released in the semi-annual Outlook for Economic Activity and Prices report.
• Fed’s Williams affirms plans for 2015 rate hike San Francisco Fed President John Williams said that it still makes sense to raise rates this year. He also acknowledged that the pace of job growth is slowing, citing the weak September jobs report, but said that this is normal and even desirable at this point in the economic cycle. With the economy nearing full employment, Fed Williams expects to see job growth declining to that level and considers monthly gains of 140k to 170k making progress toward that goal. Even though the overall tone of the speech was positive, USD was weaker across the board. Odds of a rate hike this year have plunged following the weaker-than-expected September employment report on Friday. Fed funds futures point to March as the most likely month for a rate hike and the probability for a December move has fallen to 35%.
• Today’s highlights: During the European day, the German industrial production fell in August, a turnaround from the previous month. Even though the market reaction was limited at the release, this added to the recent soft data coming from the country. Norway’s industrial production for August is also coming out.
• In the UK, the construction PMI increased in August, but both the manufacturing and service-sector indices declined, driving the composite PMI lower. Industrial production is expected to rise in August, a turnaround from the month before, which could strengthen GBP. However, the disappointing PMI figures for August increase the likelihood for another slump. In such case, GBP is likely to come under renewed selling pressure.
• From Canada, we get the building permits for August.
• As for the speakers, San Francisco Fed President John Williams speaks again. He is a voting member of the Federal Open Market Committee this year and he reiterates his positive tone, USD could strengthen somewhat
Currency Titles:
EUR/USD rebounds and breaks above 1.1200
EUR/GBP trades in a consolidative manner
USD/JPY hits resistance at 120.55 and slides
Gold hits resistance fractionally above 1150
WTI breaks out of a sideways range
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Currencies Text:
• EUR/USD traded higher on Tuesday, breaking above the resistance (now turned into support) barrier of 1.1200 (S1). Today, during the early European morning, the rate looks to be headed for another test at the 1.1300 (R1) line. A break above that line could aim for the next resistance at 1.1340 (R2). The RSI is back above 50 and now appears to be headed towards its 70 line, while the MACD stands above both its zero and trigger lines and points north. These indicators detect positive momentum and support that the rate could trade higher for a while. In the bigger picture, as long as EUR/USD is trading between the 1.0800 key support and the psychological zone of 1.1500, I would hold a flat stance as far as the overall picture is concerned. I would like to see another move above 1.1500 before assuming that the overall outlook is back positive. On the downside, a break below the 1.0800 hurdle is the move that could shift the picture negative.
• Support: 1.1200 (S1), 1.1150 (S2), 1.1100 (S3)
• Resistance: 1.1300 (R1), 1.1340 (R2), 1.1390 (R3)
• EUR/GBP has been trading in a consolidative manner since the 28th of September, between the support of 0.7360 (S1) and the resistance of 0.7435 (R2). Yesterday, the rate found resistance at the 0.7410 (R1) line and then retreated somewhat. I would now expect the rate to continue lower and perhaps challenge once again the lower bound of the aforementioned range at 0.7360 (S1). Our short-term momentum studies oscillate around their equilibrium lines, confirming the short-term sideways mode of the pair. As for the broader trend, the move above 0.7170 on the 21st of August has turned the medium-term outlook positive. However, I would like to see a clear close above 0.7435 (R2) before getting again confident on the upside. Something like that could initially aim for the psychological zone of 0.7500 (R3).
• Support: 0.7360 (S1), 0.7335 (S2), 0.7300 (S3)
• Resistance: 0.7410 (R1), 0.7435 (R2), 0.7500 (R3)
• USD/JPY traded lower on Tuesday, after it hit resistance at 120.55 (R1). The rate is still trading within a sideways range between the support of 119.20 (S1) and the resistance of 121.25 (R2). As a result, I would still consider the short-term outlook to stay neutral. I believe that a break below 119.20 (S1) is needed to turn the near-term picture back to the downside. Something like that could initially aim for the next support at 118.60 (S2). Both our short-term momentum indicators oscillate around their equilibrium lines confirming the sideways mode of the rate. As for the broader trend, the plunge on the 24th of August signaled the completion of a possible double top formation, which turned the medium-term outlook somewhat negative. As a result I would treat the recovery from the 116.00 zone as a corrective phase and I believe that it is more likely for the pair to exit its short-term sideways range to the downside in the foreseeable future.
• Support: 119.20 (S1), 118.60 (S2), 117.75 (S3)
• Resistance: 120.55 (R1), 121.25 (R2), 121.75 (R3)
• Gold traded higher yesterday, breaking above the resistance (now turned into support) barrier of 1141 (S1). The advance was stopped fractionally above 1150 (R1), and I would expect another attempt above that zone to target the next resistance at 1155 (R2), defined by the peak of the 24th of September. Taking a look at our short-term oscillators, I see that the RSI moved higher and could cross above 70 soon, while the MACD stands above both its zero and trigger lines, pointing north. As for the bigger picture, with no clear trending structure on the daily chart, I would hold my neutral stance as far as the overall outlook is concerned. I believe that a close above 1170 (R3) is needed to signal a newborn medium-term uptrend.
• Support: 1141 (S1), 1130 (S2), 1121 (S3)
• Resistance: 1150 (R1), 1155 (R2), 1170 (R3)
• WTI surged on Tuesday, breaking above 48.00 (S3), the upper bound of the sideways range it’s been trading since the beginning of September. The price now looks ready to challenge once again the 49.30 (S1) obstacle, where a clear break is likely to open the way for the psychological zone of 50.00 (R2). Our hourly momentum indicators detect strong upside speed and support further advances. The RSI, already within its overbought territory, rebounded from its 70 line and is now pointing up again, while the MACD stands well above both its zero and trigger lines. Nevertheless, the MACD shows signs of topping, giving evidence that a possible setback could be on the cards before the bulls take the reins again. In the bigger picture, the upside exit of the aforementioned sideways range has shifted the medium-term outlook somewhat positive in my view.
• Support: 48.70 (S1), 48.30 (S2), 48.00 (S3)
• Resistance: 49.30 (R1) 50.00 (R2), 50.50 (R3)
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IronFX Daily Commentary | 08/10/2015
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•Chinese markets open higher after a week-long break. Chinese stock markets, which have been under heavy selling pressure due to growth concerns and the devaluation of the yuan, rallied a bit after re-opening following the break since the end of September. The Shanghai Composite was up around 3.8%, trying to catch up the recent rally in global equity markets. The positive sentiment could roll into the European markets and keep them elevated.
• Overnight Japan’s current account surplus rose further in August, beating expectations of a moderate decline. On the other hand, machine orders plunged 5.7% mom in August, from -3.7% mom previously, missing expectations a 2.3% rise. This was the third successive drop, adding to the recent weak data coming from the country. The reaction on JPY was limited, as investors remain focus on the much anticipated end of October meeting.
• Today’s highlights: During the European day, the spotlight will be on the Bank of England monetary policy meeting. With no change in policy expected, the number of dissenting votes is likely to be the key point again. The consensus is that the vote will once again be split 8-1 with Ian McCafferty to maintain his call for a rate rise. Market participants will be eager to see if McCafferty is joined by the formerly hawkish Martin Weale or Kristin Forbes, who argued that the underlying inflation should start to pick up soon and monetary policy would need to be tightened sooner. Despite the recent hawkish comments however, market expectations for BoE tightening have been pushed back, with the timing for the first rate hike now slipping from around 9 months in August (meaning the first hike to occur around April) to 15 months in October. This explains a bit the recent weakness seen in GBP.
• In addition to the BoE meeting, the Fed releases the minutes of its September FOMC meeting. At this meeting the FOMC remained on hold, as the market had anticipated, but surprised investors by presenting a more dovish outlook than expected. The Committee did discuss the idea of hiking rates at this meeting, but decided not to because of global factors (as opposed to strong domestic factors). Although the market has shifted expectations of a Fed hike out to March 2016, many Fed officials continue to signal their willingness to raise rates before the end of the year. In the minutes released today, we will have the opportunity to see how close the call for a September liftoff was, and if they are likely to start hiking if the global environment calms down. In such case, USD could regain some of its lost momentum.
• As for the indicators, German trade surplus declined more than expected in August. This weakened EUR a bit.
• From Canada, we get the housing starts for September. The forecast is for the figure to decline somewhat, which could prove CAD-negative.
• In the US, initial jobless claims for the week ended Oct. 3 are coming out.
• We have several speakers in today’s agenda, ECB Executive Board member Peter Praet, St. Louis Fed President James Bullard, Minneapolis Fed President Narayana Kocherlakota, BoE Governor Mark Carney and San Francisco Fed President John Williams speak.
Currency Titles:
EUR/USD hits support slightly above 1.1200
GBP/USD finds resistance near 1.5330 ahead of the BoE meeting
USD/JPY trades somewhat lower
Gold hits resistance slightly below 1155 and pulls back
DAX futures trade higher and hit resistance at 10100
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Currencies Text:
• EUR/USD traded lower on Wednesday, but hit support marginally above 1.1200 (S1) and then it rebounded somewhat. I would expect the rebound to continue for a while and perhaps aim for the 1.1300 (R1) line. A break above 1.1300 (R1) is likely to target the next resistance at 1.1340 (R2). The RSI turned up after it found support near its 50 line, while the MACD, already positive, shows signs that it could rebound from near its trigger line. These indicators detect positive momentum and support that the rate could still trade higher for a while. In the bigger picture, as long as EUR/USD is trading between the 1.0800 key support and the psychological zone of 1.1500, I would hold a flat stance as far as the overall picture is concerned. I would like to see another move above 1.1500 before assuming that the overall outlook is back positive. On the downside, a break below the 1.0800 hurdle is the move that could shift the picture negative.
• Support: 1.1200 (S1), 1.1150 (S2), 1.1100 (S3)
• Resistance: 1.1300 (R1), 1.1340 (R2), 1.1390 (R3)
• GBP/USD traded higher yesterday, and managed to hit resistance slightly above the 1.5330 (R1) key resistance line. The short-term trend remains positive in my view, but we need a clear move above 1.5330 (R1) to have its continuation. Something like that could initially target the 1.5365 (R2) line and then the 1.5440 (R3) hurdle. Today, we have a BoE meeting and we also get the minutes of the meeting at the same time. The market attention will be once again be on whether any other members will join McCafferty in voting for a rate hike. In such a case, the pair could strengthen and manage to overcome the 1.5330 (R1) zone. Our short-term oscillators though, give evidence that a pullback could be looming ahead of the meeting, perhaps even below the 1.5290 (S1) support line. The RSI has topped within its overbought territory and just fell below 70, while the MACD, although positive, shows signs of topping. Plotting the daily chart, I see that Cable remains below the 80 day exponential moving average. However, given the recent rally and that it is possible to continue, I would adopt a “wait and see” stance as far as the overall outlook of the pair is concerned.
• Support: 1.5290 (S1), 1.5240 (S2), 1.5215 (S3)
• Resistance: 1.5330 (R1), 1.5365 (R2), 1.5440 (R3)
• USD/JPY continued trading lower on Wednesday, after it hit resistance at 120.55 (R1) on Tuesday. The rate is still trading within a sideways range between the support of 119.20 (S1) and the resistance of 121.25 (R2). As a result, I would still consider the short-term outlook to stay neutral. I believe that a break below 119.20 (S1) is needed to turn the near-term picture back to the downside. Something like that could initially aim for the next support at 118.60 (S2). The RSI fell below its 50 line and is pointing down, while the MACD, already below its trigger line, has just obtained a negative sign. These momentum indicators support that the rate could continue trading lower, at least for a test at 119.20 (S1), the lower bound of the aforementioned sideways range. As for the broader trend, the plunge on the 24th of August signaled the completion of a possible double top formation, which turned the medium-term outlook somewhat negative. As a result I would treat the recovery from the 116.00 zone as a corrective phase and I believe that it is more likely for the pair to exit its short-term sideways range to the downside in the foreseeable future.
• Support: 119.20 (S1), 118.60 (S2), 117.75 (S3)
• Resistance: 120.55 (R1), 121.25 (R2), 121.75 (R3)
• Gold traded somewhat higher yesterday, but hit resistance slightly below the 1155 (R1) obstacle, defined by the peak of the 24th of September. Subsequently, the metal retreated to challenge the 1141 (S1) line as a support this time. Although the price structure still suggests a short-term uptrend, I see the likelihood for the pullback to continue for a while. A clear break below 1141 (S1) could confirm the case and perhaps open the way for the next support at 1130 (S2). Our short-term oscillators support the notion as well. The RSI hit resistance at its 70 line and edged lower, while the MACD, although positive, has topped and fallen below its signal line. As for the bigger picture, with no clear trending structure on the daily chart, I would hold my neutral stance as far as the overall outlook is concerned. I believe that a close above 1170 is needed to signal a newborn medium-term uptrend.
• Support: 1141 (S1), 1130 (S2), 1121 (S3)
• Resistance: 1155 (R1), 1170 (R2), 1185 (R3)
• DAX futures traded higher, breaking above the resistance (turned into support) barrier of 9780 (S2) and completing a short-term triple bottom formation. Yesterday, the index hit resistance at 10100 (R1), where a clear upside break is likely to open the way for the next obstacle at 10325 (R2). Our momentum studies reveal upside speed and magnify the case for further advances. The RSI edged higher, hit resistance near its 70 line, but turned up again and could break above 70 in the near future. The MACD stands above both its zero and trigger lines and points north. On the daily chart, the break below 10670 on the 20th of August has shifted the medium-term outlook to the downside, in my view. However, given that the index has printed two lows at around 9315, I would change my stance to neutral for now, as far as the overall picture is concerned.
• Support: 9935 (S1), 9780 (S2), 9670 (S3)
• Resistance: 10100 (R1) 10325 (R2), 10525 (R3)
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IronFX Daily Commentary | 09/10/15
Language English
• Fed minutes: September decision was not a close call The minutes of the September FOMC meeting showed that Fed officials remained uneasy with low inflation, which has been below the 2% target for more than three years. In the Summary of Economic Projections, all FOMC participants projected that inflation would be at or close to the Committee’s 2% longer-run objective in 2018. This means that if the Fed sticks to its dual mandate, it will not raise rates this year. Even though several policymakers since the September meeting said that the decision to hike was a close call, the minutes described a committee that wasn’t very inclined to raise rates. Many participants acknowledged that recent global economic and financial developments may have increased the downside risks to economic activity. This signaled that overseas factors are increasingly important in their decision of a lift-off, mirroring the press conference from Fed Chair Yellen. Another point of concern was the strong greenback, which could delay or diminish the expected upturn in inflation. Fed members referred to the strong dollar 25 times in September meeting, compared to around 12 in July.
• The outcome of the minutes favored risk appetite, with US stocks ending higher on Thursday and the dollar staying vulnerable against almost all its peers. Fading expectations of a rate hike are likely to keep USD in a corrective phase, in our view.
• Crude oil surges above USD50 a barrel WTI jumped above USD50 per barrel after comments by OPEC Secretary-General that demand will climb more this year than previously projected amid cheaper fuel price. He also predicted a significant drop in production growth, which could add further upside support to WTI. (see technical below).
• Today’s highlights: From Norway, the CPI for September is coming out. Even though the inflation is close to the Norges bank 2.5% target, low oil prices, soft industrial production and weak manufacturing PMI pushed the Bank to cut its key rate at their September meeting. The Bank has also maintained the likelihood for further cuts. But the recent rally in oil prices strengthened the Norwegian krone and a positive surprise in the inflation figure today, could keep NOK supported.
• In the UK, trade balance for August is coming out.
• From Canada, we get the unemployment rate for September. The labor market has continued to add jobs at a moderate pace, with positive momentum in public sector hiring offsetting restructuring in the oil sector. With just more than a week ahead of the October 19 federal election, a strong jobs report could strengthen CAD.
• From the US, wholesale inventories for August are due to be released.
• As for the speakers, Atlanta Fed President Dennis Lockhart, Chicago Fed President Charles Evans and Riksbank Governor Stefan Ingves speak.
Currency Titles:
EUR/USD trades higher and hits resistance slightly above 1.1315
AUD/USD rebounds from 0.7235 and hits resistance at 0.7280
Gold hits support at 1136 and rebounds
WTI rebounds from slightly below 48.00
EUR/JPY rebounds from 134.70
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Currencies Text:
• EUR/USD traded higher on Thursday, breaking above the downside resistance line taken from the peak of the 24th of August. The bulls tried to drive the rate above the 1.1315 (R1) hurdle, but failed to do so. I would expect another attempt above that line to challenge the upper bound of the channel that has been containing the price action since the 23rd of September, or the next resistance at 1.1385 (R2). Our short-term oscillators reveal positive momentum and support somewhat that EUR/USD could trade a bit higher. The RSI rebounded from above its 50 line, but now points sideways, while the MACD, stands above both its zero and trigger lines, but points sideways as well. In the bigger picture, as long as EUR/USD is trading between the 1.0800 key support and the psychological zone of 1.1500, I would hold a flat stance as far as the overall picture is concerned. I would like to see another move above 1.1500 before assuming that the overall outlook is back positive. On the downside, a break below the 1.0800 hurdle is the move that could shift the picture negative.
• Support: 1.1210 (S1), 1.1170 (S2), 1.1100 (S3)
• Resistance: 1.1315 (R1), 1.1385 (R2), 1.1450 (R3)
• AUD/USD surged on Thursday after it hit support at 0.7165 (S2). However, the advance was halted by the 0.7280 (R1), defined by the peak of the 18th of September. Although the price structure on the 4-hour chart still suggests a short-term uptrend, I prefer to see a clear move above 0.7280 (R1) before trusting that uptrend again. Something like that could see scope for larger bullish extensions, perhaps towards the 0.7360 (R2) zone. Our short-term oscillators detect strong upside speed and support that the rate is possible to emerge above 0.7280 (R1) this time. The RSI reentered its above-70 territory and is pointing up, while the MACD, at already extreme positive levels, rebounded from near its trigger line, and is pointing north as well. On the daily chart, the break above 0.7280 (R1) is likely to signal the completion of a failure swing bottom formation and perhaps bring a medium-term trend reversal.
• Support: 0.7235 (S1), 0.7165 (S2), 0.7130 (S3)
• Resistance: 0.7280 (R1), 0.7360 (R2), 0.7400 (R3)
• Gold continued pulling back yesterday, but hit support at around 1136 (S1) and then it rebounded. The price structure on the 4-hour chart still suggests a short-term uptrend and therefore, I believe that the rebound is likely to continue. It is possible to see buyers aiming for another test near the 1155 (R1) obstacle, defined by the peak of the 24th of September. Our momentum studies corroborate my view as well. The RSI hit twice support at its 50 line and turned up, while the MACD, already positive, shows signs it could turn up and that it could move above its trigger line soon. As for the bigger picture, with no clear trending structure on the daily chart, I would hold my neutral stance as far as the overall outlook is concerned. I believe that a close above 1170 is needed to signal a newborn medium-term uptrend.
• Support: 1136 (S1), 1130 (S2), 1121 (S3)
• Resistance: 1155 (R1), 1170 (R2), 1185 (R3)
• WTI surged on Thursday, after rebounding from slightly below 48.00 (S2), the upper bound of the sideways range it had been trading since the beginning of September. Today, during the Asian morning, the price emerged above the 49.70 (S1) hurdle, marked by Wednesday’s peak, I would expect the positive move to continue and to initially target the peak of the 22nd of July at around 50.60 (R1). A break above 50.60 (R1) could set the stage for the next resistance at 51.40 (R2). Our short-term oscillators support that WTI could continue trading higher, at least for a test at 50.60 (R1). The RSI edged higher and just poked its nose above its 70 line, while the MACD, already positive, has bottomed and crossed above its trigger line. In the bigger picture, the upside exit of the aforementioned sideways range has shifted the medium-term outlook somewhat positive in my view.
• Support: 49.70 (S1), 48.00 (S2), 47.10 (S3)
• Resistance: 50.60 (R1) 51.40 (R2), 53.80 (R3)
• EUR/JPY traded higher after it hit support around the 134.70 (S1) line. The rate now looks to be headed for another test near the 135.70 (R1) barrier, where an upside break is likely to open the way for the peak of the 21st of September at 136.15 (R2). Our short-term momentum studies reveal upside speed and support the case. The RSI rebounded from near its 50 line and is now pointing up, while the MACD, already positive, has rebounded and crossed above its trigger line. On the daily chart, I see that EUR/JPY is trading above the upside support line taken from the low of the 14th of April. However, I believe that a clear close above 137.50 is needed to confirm a forthcoming higher high and turn the overall outlook somewhat positive.
• Support: 134.70 (S1), 134.40 (S2), 134.00 (S3)
• Resistance: 135.70 (R1), 136.15 (R2), 136.75 (R3)
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