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Market Analysis 26-07-2013
Daily Commentary26.07.2013, Time of writing: 03:30 GMT
The Big Picture The U.S. dollar declined versus 15 of its 16 counterparts since investors are turning cautious ahead of next week’s Federal Reserve meeting. Speculation about Fed’s target to keep rates low in the long-term triggered another wave of unwinding in dollar long positions.
Crude oil was held steady above $107 barrel today as weak dollar and supply disruptions at some Middle Eastern and African oil producers offset worries about China’s economic slowdown.
Gold slightly bounced back and was steady after 0.9 percent rise in the previous session boosted by weaker dollar.
The Market USD/JPY
• USD/JPY has successfully broken below the pennant formation (flag in blue) on the 4hr chart and the 200 Moving Average. As we identified in previous comments, the break of the pennant lead to a strong directional move to the downside, reaching the support level of 98.57 (38% Fibonacci)
• Resistance: the 200 Moving Average is currently acting as resistance at 99.35, with more resistance at 100.85 and 101.53.
• Support: The next support levels as we move lower are 98.25, 97.65 (50%) and the region 96.95-96.74.
• Long term: It is interesting to note that a possible Head-and-Shoulders formation on the Daily and Weekly charts is being formed. The completion or failure of this pattern will provide us with strong directional moves in the future. This formation is not complete yet.
EUR/USD
• EUR/USD remains in a bullish short-term uptrend and has moved higher during the session, reaching the resistance level of 1.3283 previously identified. It trades above the 20 Moving Average and 200 Moving Average. On the long-term timeframes (Daily, Weekly), it remains in a trading range between 1.34/1.37 and 1.2750.
• Resistance: a successful break of resistance at 1.3283 should lead the pair to next resistance at 1.3416
• Support: support is identified at 1.3065 and the psychological level 1.30 on the downside.
USD/CAD
• USD/CAD continued its move lower, after finding resistance on the 20 Moving Average in yesterday’s session. Currently the pair is below the 20-period and 200-period Moving Average, in a bearish trend expected to lead the pair lower.
• Resistance: In a possible upward correction, the pair should find resistance at 1.0330 and 1.0432.
• Support: The next support area is identified at 1.0138 and 1.00, as the pair moves lower.
Gold
• Gold moved higher in yesterday’s trading day, after finding support on the 200 Moving Average. Despite the recent upmove, it remains below the 200 day moving average on the Daily chart and is reaching significant areas of resistance at Fibonacci retracement levels of 1346 (38%), 1398 (50%) and 1449 (62%). The current up-move is still considered as a healthy correction in a downtrend and will be interesting to follow how it unfolds.
• Resistance is identified at the levels of 1346, 1398 and 1449.
• Support is currently located near the 200 period moving average near 1300, which is also a round number and psychological level). Further support is identified at 1274 and 1181 if gold moves lower.
Oil
• WTI has moved higher in yesterday’s session, retracing some of the losses of the last few days. It remains below the 20 Moving Average and therefore in a correction short term. However, as it is above the 200 period moving average, we expect to see further continuation of the upward move in the next days.
• Resistance is identified at the recent highs of 107.51, 108.96 and significantly around the level of 110.
• Support levels can be determined using Fibonacci retracements on the 4hr chart at 102.71 (38.2%), 100.82 (50%) and 98.91 (62.8%)
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Market Analysis 29-07-2013
Daily Commentary29.07.2013, Time of writing: 03:30 GMT
The Big Picture This week is going to be a significant week for the financial markets with Central Bank meetings and economic data releases. Fundamental considerations are likely to dominate Technical factors this week. Currency markets has been very active as traders position for this week’s Fed meeting and economic data releases.
Fed will have a two day policy meeting on Tuesday to assess recent mixed data ass assess whether will start trimming bond purchases in September. Figures for second-quarter gross domestic product are due July 31, while payrolls data for this month are set for Aug. 2. USD Is under pressure ahead of Fed meeting and key US payrolls report.
On Thursday manufacturing data will be released from around the world, starting with the official China PMI. China is struggling with a loss of momentum in growth and keeps commodities under pressure but losses were limited by weaker dollar. China will start an audit of government debt to review overall public debt and evaluate the stress of its financial system.
Disappointing economic news of China rose yen rose to a one-month high against the dollar. Topix companies will announce first quarter earnings this week.
European Central Bank and Bank of England will also hold policy meeting this week and are expected to keep policy loose.
The Market EUR/USD
• EUR/USD remains in a bullish short-term uptrend and has achieved to penetrate upwards the important area of 1.325. It remains above both the 20 and 200 Moving Averages. On the longer time-frames (Daily, Weekly), it remains in a trading range between 1.3415 and 1.275.
• Support: Support levels are identified at 1.325 area (previous resistance), at 1.316 (Fibonacci 61.8%), and the psychological level 1.30.
• Resistance: After the successful penetration of the 1.325 area, a probable move to the 1.3415 is expected.
USD/JPY
• USD/JPY continued its downward bias after Friday’s penetration of the symmetrical triangle, and during the last trading hours of the week managed to violate the major importance support level of 98.65 (also 38.2% Fibonacci retracement level of the previous upward movement). Overnight the price reached the 50% Fibonacci level at 97.65. Moreover, the 20 Moving Average completed a “death cross” pattern by crossing below the 200 Moving Average, confirming the bearish attitude of the price.
• Support: Price is now testing the 50% Fibonacci support level at 97.65. If it manages to penetrate below, the next important area is in the area of 96.97- 96.74 (61.8% retracement) and 93.77.
• Resistance: Friday’s support at 98.25 has now become a resistance level. Other resistance are identified at 100.80 and 101.5 levels respectively.
AUD/USD
• AUD/USD seems to consolidate in an ascending triangle formation (marked in blue) on the short term (4hr) chart providing signs of a possible correction of the long-term downtrend still in effect (Daily Chart). As we can observe, price is trading near the resistance level of 0.9293 and is ready to retest it. As we can identify, price has crossed above the 20 Moving Average but is still below the 200 Moving Average which matches with the resistance level previously mentioned. The upward penetration of this level might be of major importance.
• Support: Support levels are identified at 0.9136 and 0.9011 respectively.
• Resistance: A confirmed penetration higher of the resistance at 0.9293 should lead the AUDUSD toward the next resistance levels at the 0.9380, 0.9607 (38.2%) and 0.9780 (50%) respectively.
USD/CAD
• USD/CAD is still following its short-term downtrend, remaining below of both the 20 and 200 Moving Average. On the Daily chart it has reached a trend line which could potentially offer support and reverse the down trend (blue). On the other hand, a downward penetration of it should lead the pair to further downward movement.
• Support: Support levels are identified at 1.023 area and 1.015 area.
• Resistance: Most important resistance levels for the short- term interest are 1.034 and 1.0427
Gold
• Gold is still in a retracement on the 4hr Chart but has lost some ground during the overnight trading activity. It remains above the 200 Moving Average, currently testing the 20 Moving Average and the 23.6% Fibonacci retracement level of the long term downtrend move (Daily chart). As a result, this upward move is still considered as a healthy correction of the long term downward move.
• Support: Support levels are identified at 1298.66 and 1268.43 price levels.
• Resistance: As we said price is currently testing the 23.6 Fibonacci level and if a penetration occurs, the next resistances in line are 1348.20 and 1416.
Oil
• WTI has reversed to a downtrend on the 4hr chart, after the completion of a head and shoulders formation (marked in red). As we can identify, after penetrating successfully the neckline (line in green), price has retested it and continued its downward move into the channel marked in blue. This is considered as a healthy correction of the longer term uptrend on the daily chart.
• Support: Price has penetrated the 23.6% Fibonacci retracement level at 105.03 and is heading towards the 38.2% Fibonacci level, which is very close to the 102.34 support level.
• Resistance: Resistance is identified at the recent highs of 107.57, 108.84 and significantly around the area of 110.
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Market Analysis 30-07-2013
Daily Commentary 30.07.2013, Time of writing: 03:30 GMT
The Big Picture Three monetary authorities take centre stage this week, Fed gathering on July 30 and 31 and the ECB and BOE announcing policy decisions Aug. 1. Expectations is that the Federal Reserve will emphasize plans to keep U.S. interest rates near zero. The BOE and ECB are expected to refine their respective versions of forward guidance that policy will stay loose for an extended period.
China central bank injected cash into money markets for the first time since late February that helped Asian shares to edge higher, even though is considered to be a short term lift for the Chinese banking sector. Weakening Yen also helped Asian Markets to move higher. From Asia the only economic indicator coming out is China’s manufacturing data that will be out on Thursday. Commodity markets area is still pressured by China's stuttering economy.
The dollar edged higher against a basket of major rivals on Tuesday. USD faces a lot of key even risk this week with the release of U.S. Q2 GDP report, Fed meeting and followed by the release of the U.S. employment report for July on Friday. The data to be released on Friday might offer clues as to when the stimulus reduction will begin.
EUR/USD little changed. USD gained against the Yen following mixed economic data from Japan and the pair continues to trade heavy. The standout currency was the Australian dollar which lost a full U.S. cent as it slid below $0.9200 after the central bank governor said inflation would be no bar to a cut in interest rates. The Canadian dollar reached a one-month high as crude oil, the nation’s largest export, remained above $100 per barrel for the 18th day.
The Market EUR/USD
• EUR/USD moved lower in yesterday’s session reaching the lower boundary of the uptrend channel in blue. It returned down to the support area of 1.325 currently testing that level and the 20 Moving Average. However, it remains in a bullish short-term uptrend, above the 200 Moving Averages. On the longer time-frames (Daily, Weekly), it remains in a trading range between 1.3415 and 1.275.
• Support: Support levels are identified at 1.325 area, at 1.316, and the psychological level 1.30.
• Resistance: Resistance identified near recent high at 1.3295 and the high of 1.3415
USD/JPY
• USD/JPY has managed to test successfully the 97.65 support level and is now retracing higher. The 20 Moving Average is still below the 200 Moving Average, thus price’s attitude is still considered bearish. The current short-term up-move is considered a retracement, before the price continues lower toward next support levels.
• Support: Price achieved a successful test of the 50% Fibonacci support level at 97.65. Next important support levels are the area of 96.97- 96.74 (61.8% retracement) and the 93.77 level.
• Resistance: Next resistance is identified at 98.95 followed by the 100.80 and 101.5 levels respectively.
AUD/USD
• AUD/USD was not able to complete the ascending triangle formation, and broke the lower boundary due to news from the Central Bank of Australia overnight. A big black candle broke the triangle’s uptrend line and the support level of 0.9136. On the long-term (Daily Chart) the downtrend mentioned in previous comments is still in effect.
• Support: The next support level identified on the short-term horizon is at 0.901.
• Resistance: The 0.929 level remains strong resistance in case of an up-move. The next in line resistance levels are at 0.9380, 0.9607 (38.2%) and 0.9780 (50%) respectively.
USD/CAD
• USD/CAD is still following its short-term downtrend, remaining below of both the 20 and 200 Moving Average. On the Daily chart it is still testing the long term trendline (blue) and is currently heading towards the support level of 1.023. We need to observe the price action near this trendline to identify the next direction of the pair.
• Support: Support levels are identified at 1.023 area and 1.015 area.
• Resistance: Most important resistance levels for the short- term interest are 1.034 and 1.0427
Gold
• Gold made minor moves during the overnight session and is still in a retracement on the 4hr Chart. It remains above the 200 Moving Average, currently testing the 20 Moving Average and the 23.6% Fibonacci retracement level of the long term downtrend move (Daily chart). As a result, this upward move is still considered as a healthy correction of the long term downward move.
• Support: Support levels are identified at 1298.66 and 1268.43 price levels.
• Resistance: As we said price is currently testing the 23.6 Fibonacci level and if a penetration occurs, the next resistances in line are 1348.20 and 1416.
Oil
• WTI has consolidated in yesterday session, with no major movement. It remains within the blue downtrend channel and is expected to possibly continue correcting lower, following the completion of a Head & Shoulders pattern on the 4hr chart.
• Support: Support is identified at 102.77 (38.2% Fibonacci level) and 100.80 (50%)
• Resistance: Resistance is identified at the peak of 105.74, and the recent highs of 107.57 and significantly around the area of 110.
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Market Analysis 31-07-2013
Daily Commentary31.07.2013, Time of writing: 03:30 GMT
The Big Picture European main stock markets ended the trading session higher on Tuesday. Australian shares moved higher on rising expectations of an interest rate cut. Japanese stocks fell on Wednesday weighed by persistent strength in Yen. Walls Street seen minor changes as investors are waiting monetary policy meeting. Of the 302 companies in the S&P500 that posted quarterly results so far, 73 percent have exceeded analysts’ estimates for profit.
Commerce Department will release its report on second- quarter GDP on July 31 at 8:30 a.m. in Washington. It is estimated that the U.S. gross domestic product probably grew at 1 percent annualized rate from April through June compared with 1.8% in the previous quarter.
Federal Reserve policy makers will meet for the second day evaluate the economy and give indication as to when they will start trimming monthly bond purchases. Bernanke will not be briefing the press afterwards but will release a post meeting.
In Europe ECB is expected to leave its benchmark interest rate unchanged at 0.5 percent tomorrow and BOE is expected to keep its bond-purchase program at 375 billion pounds. BOE is expected to provide forward guidance on August 7 after release of its quarterly Inflation Report
In Europe the divergence in business cycles between U.S. and euro area may become more apparent and ECB might consider LTROs injections
Economic confidence in the euro area improved and Europe is showing increasing signs that is emerging from a long recession of six quarters of contraction. Unemployment stayed at a record 12.2 % percent in June and is projected to move higher in coming months. Europe may encounter political concerns in Spain and Italy and on German constitutional decision on ESM, banking sector health.
USD is set to close out a monthly loss against most of its major peers as investors await the Federal Reserve’s policy statement today. AUD depreciated against all 16 of its major peer and reached the weakest level in three years versus following its Central Bank’s statement about cutting interest rates. GPB weakened for a third session against the dollar before Britain’s policy makers release their quarterly Inflation Report next week.
The Market EUR/USD
• EUR/USD moved sideways during the overnight session and currently is testing the lower boundary of the uptrend channel in blue. The pair remains above the 20 Moving Average and the 200 Moving Average, thus in an uptrend on the 4hr chart. On the longer time-frames (Daily, Weekly), it is in a trading range between 1.3415 and 1.275.
• Support: Support levels are identified at 1.325 area, at 1.316, and the psychological level 1.30.
• Resistance: Resistance is identified near the highs at 1.3415, also identified as the upper boundary of the long term trading range.
USD/JPY
• USD/JPY moved sideways during yesterday’s session. The 20 Moving Average is still below the 200 Moving Average, thus price’s attitude is still considered bearish. On the long term (Daily Chart) the pair remains above the 200 Moving Average, however it is forming a possible Head & Shoulders pattern on the Daily chart. This pattern will be confirmed if the pair breaks below the 95 area.
• Support: A downward penetration of the 97.65 support level might lead the pair down to the area of 95.63. The next in line support is identified at 93.73.
• Resistance: Resistance is identified at 98.95 followed by the 100.80 and 101.5 levels respectively.
AUD/USD
• AUD/USD moved lower during yesterday’s session and managed to reach close to the 0.90 psychological support level. The future price action near that level should give us more indications about the next direction of the pair. On the long-term (Daily Chart) the downtrend mentioned in previous comments is still in effect.
• Support: Support level is identified at the psychological level of 0.90, which is currently being tested. Long term, the next significant support level is at 0.80 from the Weekly chart.
• Resistance: The 0.929 level remains strong resistance in case of an up-move. The next in line resistance levels are at 0.9380, 0.9607 and 0.9780 respectively.
USD/CAD
• USD/CAD moved higher during yesterday’s session achieving an upward penetration of the short term downtrend line and the 20 Moving Average. On the Daily chart it is trading near the long term trend line (blue), which might provide support. We need to observe a clear price action near this trend line in order to determine the future direction of the pair.
• Support: Support levels are identified at 1.023 area and 1.015 area.
• Resistance: Most important resistance levels for the short- term interest are 1.034 and 1.0427
Gold
• Gold moved higher during the overnight session after testing the 20 Moving average and the lower boundary of the uptrend channel. However, on the long term (Daily) chart the 20 Moving Average remains below the 200 Moving Average. As a result, this upward move is still considered as a healthy correction of the long term downward move.
• Support: Support levels are identified at 1299.13 and 1268.43 price levels.
• Resistance: Price is near the 1348.20 resistance level and if a penetration occurs, the next resistance in line is1414.75.
Oil
• WTI has moved lower in yesterday’s session reaching the support at 102.75 (38.2% Fibonacci level). It remains within the blue downtrend channel and a downward penetration of the pre-mentioned support should lead the pair lower at the 100.80 level (50%), following the completion of a Head & Shoulders pattern on the 4hr chart. Price is trading below the 20 Moving Average and is approaching the 200 Moving Average. Since WTI is in an uptrend on the Daily chart, the current downward move is considered a correction to the longer term uptrend.
• Support: Support is identified at 102.77 (38.2%) and 100.80 (50%)
• Resistance: Resistance is identified at the peak of 105.74, and the recent highs of 107.57 and significantly around the area of 110.
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Market Analysis 01-08-2013
Daily Commentary01.08.2013, Time of writing: 03:30 GMT
The Big Picture FED yesterday gave no signal as to when it intends to start scaling down its bond purchase. U.S economic growth data released yesterday grew more than forecast. Next market mover event from US will be on Friday when U.S employment data will be released
In Europe today BOE and ECB take centre stage with both central banks expected to reiterate a dovish forward guidance
Japanese and Australian shares rose on Thursday after U.S. economy grew faster than expected.
China’s official manufacturing data released yesterday showed a small improvement. On the same day HSBC released a report that contrasted China’s official version of the Manufacturing PMI indicating that China’s manufacturing activity shrank for a third month
USD retreats against major currencies following Feds’ meeting. The Yen fell against all of its majors pairs as Japanese investors started investing in foreign bonds. GPB touched the weakest versus the EUR before Central Banks meetings. AUD reached the lowest level following the rate cut statement but losses were pared by strong Chinese manufacturing data.
The Market EUR/USD
• EUR/USD moved higher during last night’s session following the US news, staying inside the uptrend channel in blue. The pair remains above the 20 Moving Average and the 200 Moving Average, thus in an uptrend on the 4hr chart. On the longer time-frames (Daily, Weekly), it is in a trading range between 1.3415 and 1.275.
• Support: Support levels are identified at 1.321 area, at 1.316, and the psychological level 1.30.
• Resistance: Resistance is identified near the highs at 1.3415, also identified as the upper boundary of the long term trading range.
USD/JPY
• USD/JPY continued moving sideways during yesterday’s session, finding resistance at the 20 Moving Average. The 20 Moving Average is still below the 200 Moving Average, thus price’s attitude is still considered bearish. On the long term (Daily Chart) the pair remains above the 200 Moving Average. However it is forming a possible Head & Shoulders pattern on the Daily chart which will be confirmed if the pair breaks below the 95 area.
• Support: A downward penetration of the 97.65 support level might lead the pair down to the area of 96.74-96.96. The next support is identified near 95 on the rising trendline from the Daily chart.
• Resistance: Resistance is identified at 98.95 followed by the 100.80 and 101.5 levels respectively.
AUD/USD
• AUD/USD moved lower during yesterday’s session and managed to penetrate and close below the 0.90 psychological support level. It is still trading below both 20 Moving Average and 200 Moving Average, confirming its bearish direction. On the long-term (Daily Chart) the downtrend mentioned in previous comments is still in effect.
• Support: A significant support level is identified at the 0.80 psychological level from the Weekly chart.
• Resistance: The 0.929 level remains strong resistance in case of an up-move. The next in line resistance levels are at 0.9380, 0.9607 and 0.9780 respectively.
USD/CAD
• USD/CAD broke above the short-term downward trendline and tested the resistance at the 1.033 level. On the Daily chart it is trading near the long term trend line (blue), which might provide support. We need to observe a clear price action near this trend line in order to determine the future direction of the pair.
• Support: Support levels are identified at 1.023 area and 1.015 area.
• Resistance: Most important resistance levels for the short- term interest are 1.034 and 1.0427
Gold
• Gold moved lower during the overnight session penetrating downwards the lower boundary of the uptrend channel. On the long term (Daily) chart the 20 Moving Average remains below the 200 Moving Average. A possible break below the 1.300 psychological support level could lead to continuation of the longer term downtrend
• Support: Support levels are identified at 1300 and 1268.43 price levels.
• Resistance: Resistance levels are identified at 1348.20 and 1414.75 price levels.
Oil
• WTI has moved higher in yesterday’s session breaking the upper boundary of the blue channel. Currently it is trading close to 105.74 resistance level, possibly signaling the continuation of the prior uptrend on the Daily chart.
• Support: Support is identified at 102.75 (38.2%) and 100.80 (50%)
• Resistance: Resistance is identified at the peak of 105.74, and the recent highs of 107.57 and significantly around the area of 110.
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Market Analysis 02/08/2013: The market doesn’t listen to the barking dogs
Daily Commentary 02.08.2013, Time of writing: 03:30 GMT
The Big Picture The market doesn’t listen to the barking dogs: Yesterday’s Bank of England and ECB meetings added little to our knowledge of the policy biases of the two central banks. The statement following the BoE’s meeting only said that the MPC’s latest projections and its response to the Chancellor’s request for an assessment of the use of thresholds and forward guidance will be released next Wednesday, Aug. 7th, along with the quarterly Inflation Report. That now becomes the date to watch for GBP. As for the ECB, President Draghi largely reiterated the message from the July meeting. The crucial part, concerning forward guidance, was almost exactly the same and Draghi gave little clarification in the question and answer session. Our impression is that with the data showing modest improvement, the ECB’s scenario for a gradual recovery is more solid now and so they can pause for the time being and wait to see developments. This should in theory be EUR-supportive.
However, it was noticeable that both GBP and EUR weakened steadily throughout the day, even after the final manufacturing PMIs for both were better than expected. Indeed the averages for the Eurozone core and the periphery PMIs are not only both above 50, but the gap between them is the narrowest it’s been in eight years, which suggests that the Eurozone policy of internal adjustments is actually starting to work. Added to the fact that there were no further hints of easing from either central bank, one might have expected EUR and GBP to gain. Instead the emphasis was on the likely improvements in the US, where the data didn’t disappoint – weekly jobless claims were the lowest in over five years and the US ISM index soared, particularly the production index. This demonstrates that the attention is firmly on the US, where continued strong data is likely to underpin the dollar going forward. Given the possibility of further political problems in Europe, this recent back-up in EUR/USD could be a good opportunity to go short from a fundamental point of view. Watch especially what happens in Italy now that former PM Berlusconi has lost his final appeal against a tax-fraud conviction.
Today the focus will be on the July non-farm payrolls. The market consensus is for a rise of 185k, a bit lower than 195k in June, but several new estimates released in the last 24 hours have been in the 190k-210k range, suggesting that bank dealers may be pricing in a better figure than is reflected in the average of analysts’ estimates. Thus the risk today may be some profit-taking if there is a good but not great figure – that is, if it isn’t towards the top of the 1 standard deviation range for forecasts of 210k, there could be a “buy the rumor, sell the fact” response. USD/JPY is likely to be the most responsive pair, in our view. Any pull-backs on profit-taking following the number could be an attractive opportunity to establish new longs.
The Market EUR/USD
• EUR/USD moved lower during yesterday’s session, penetrating the uptrend channel. It also crossed below the 20-period moving average but is still trading above the 200-period moving average. Moreover, the stochastic oscillator has moved into the oversold area, confirming the bearish attitude of the pair. On the longer time-frames (Daily, Weekly), it remains in a trading range between 1.2750 and 1.3415.
• Support: We identify support levels at 1.3160 and the psychological level of 1.3000.
• Resistance: Resistance is at 1.3300 and near the highs at 1.3415, which is the upper boundary of the long-term trading range.
USD/JPY
• USD/JPY moved higher during yesterday’s session, after finding support at the 97.60 level. It came back to test the breakout from the triangle formation earlier this week. The 20-period moving average is still below the 200-period moving average. The critical area to watch for the resolution in the fight between bulls and bears is the psychological level of 100, right in the middle of the triangle. On the long term horizon it is still forming a possible Head & Shoulders pattern on the daily chart, which will be confirmed if the pair breaks below the 95 area.
• Support: Support levels are at the 98.45 and 97.65 levels and near the 95 area on the rising trend line from the Daily chart.
• Resistance: Since the price has penetrated the 98.45 level to the upside, the next resistance level is at the 100.80 level, followed by 101.50.
USD/CHF
• USD/CHF moved higher during yesterday’s session, achieving a break above the channel formation previously containing the price. Short term, this move should lead the pair towards Fibonacci resistance at 0.9426 (38%) and 0.9487 (50%). Longer term, the 200-day moving average is flat, indicating a sideways trading range on the Daily and Weekly charts, moving between the areas of 1.00 and 0.90 psychological levels.
• Support: Support levels are at 1.316, and the psychological level 1.30.
• Resistance: Resistance is at the Fibonacci retracement levels of 0.9426 (38%), 0.9487 (50%) and 0.9550 (62%).
Gold
• Gold moved lower during yesterday’s session and is currently trading near the 1300 psychological area. On the long term (daily) chart the 20-day moving average remains below the 200-day moving average. A possible break below the 1300 psychological support level could lead to continuation of the longer term downtrend.
• Support: Support levels are at 1300 and 1268.43 price levels.
• Resistance: Resistance levels are at 1348.20 and 1414.75 price levels.
Oil
• WTI moved higher in yesterday’s session, currently testing the highs at 108.90 resistance level. This strong move following the pullback to 38% support indicates the strength of the upmove, which we expect to continue from a technical point of view.
• Support: Support is at 102.75 (38.2%) and 100.80 (50%)
• Resistance: The only short term interest resistance is at the peak of 108.90 and the psychological area of the 110 level. Next resistance is identified from the weekly chart at 114.40.
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Market Analysis 05/08/2013: NFP hangover (cured in part by milk)
Daily Commentary05.08.2013, Time of writing: 03:30 GMT
The Big Picture NFP hangover (cured in part by milk): The dollar is still suffering from a hangover after Friday’s disappointing non-farm payrolls. USD was lower this morning against most G10 currencies, the notable exception being the three commodity currencies, which all lost ground. The decline in the commodity currencies may be due more to individual factors than to any overarching factor. The big loser was the NZD, which fell sharply after China halted milk powder imports from Fonterra, the dominant milk producer in the country. The weakness in AUD and CAD was more surprising though as it was announced over the weekend that China’s official service-sector PMI rose to 54.1 in July from 53.9 in June, suggesting that the slowdown in China may be moderating. The CAD may be weakening because of its high beta relative to the US economy; if US activity is slowing (something I’m not sure of, but the employment data certainly suggests that), then the Canadian economy is not likely to grow as much as investors had thought.
AUD though is probably weakening ahead of the Reserve Bank of Australia’s rate-setting meeting tomorrow morning our time. The punditocracy is nearly unanimous in expecting a 25 bps cut in the cash rate target to 2.50. Investors expect that to be the last of the rate cuts, although the futures market implies there is still a small possibility of another cut sometime by next March. Accordingly, we could get a bounce in AUD after the meeting, assuming that the RBA does make some statement corroborating the view that this is the bottom. The speculative community is massively short AUD; the currency is down about 16% vs USD since its recent peak on 11 April and the Commitment of Traders report shows speculative accounts with 72,600 net short position, the largest net short ever for AUD and the second-largest net short of all the currencies at the moment (after JPY). If the rate-cutting cycle is coming to an end, there could be some (brief) profit-taking on these positions, although the continued erosion of the terms of trade caused by China’s slowdown will probably keep AUD on a declining trend longer-term.
In any event, we would be buyers of USD on this weakness. Believe it or not, on average the dollar gains more in the week following a miss in the non-farm payrolls than it does on average when the data beats estimates. Of course past performance is no guarantee of future performance, but in any case I am still a long-term dollar bull for fundamental reasons and even more so now with better entry levels.
The rest of the service sector PMIs are due out today, with the initial number out for the UK, Italy, Switzerland and a number of other countries, while the final German, French, and overall EU numbers will be released. Later in the day comes the equivalent for the US, the service-sector ISM index. We also have June retail sales for the Eurozone, which is expected to be down 0.7% mom, a turnaround from +1.0% in May – possibly EUR-negative.
The Market EUR/USD
• EUR/USD moved higher during Friday’s session and is currently trading in a short-term trading range between the 1.3185 and 1.3300 boundaries. A clear penetration and close on the daily chart out of the trading range should determine the next direction of the pair. On the longer time-frames (Daily, Weekly), it also remains in a trading range between 1.2750 and 1.3415.
• Support: We identify support levels at 1.3185, 1.3058 and the psychological level of 1.3000.
• Resistance: Resistance is at 1.3300 and near the highs at 1.3415, which is the upper boundary of the long-term trading range.
USD/JPY
• USD/JPY moved lower during Friday’s session, after finding resistance at the 100 psychological level and the middle of the triangle formation mentioned in previous comments. The 20-period moving average is still below the 200-period moving average. On the long term horizon it is forming a possible Head & Shoulders pattern (daily chart), which will be confirmed if the pair breaks below the 95 area.
• Support: If the price manages to penetrate the 98.55 level, we believe that it will continue its downward move towards 97.67(50%) and 96.77(61.8%) respectively.
• Resistance: The first resistance is found at the psychological level of 100 followed by the 100.84 and 101.52 levels.
GBP/USD
• GBP/USD moved higher during Friday’s session, after finding support at the 1.5123 level (50% retracement of the previous upward move). In our opinion, the pair completed its correction and returned to continue its prior up trend. Also, price has achieved an upward penetration of both the 20-period and 200-period moving averages, confirming its bullishness. On the long term (daily) chart it is moving sideways in a trading range between the 1.5597 and 1.4811 boundaries.
• Support: Support levels are at 1.5123, 1.5050 and 1.4981.
• Resistance: The pair is heading towards the 1.5433 resistance level and a successful penetration of it should lead the pair up to the 1.5597.
Gold
• Gold moved higher during Friday’s session after finding support at the 38.2% Fibonacci retracement level of the previous upward move. As a result, we believe that the recent downward move was a correction of the uptrend and the price has returned to continue moving upwards. On the long term (daily) chart the 20-day moving average remains below the 200-day moving average, thus the price is still moving in a downtrend.
• Support: Support levels are at 1300 and 1264.15.
• Resistance: Resistance levels are at 1347.27 and 1414.75.
Oil
• WTI moved lower in Friday’s session, after finding resistance at the recent highs of 108.90 level. Since the 20-period moving average is above the 200-period moving average, we believe the recent downward move is a pullback and expect that the price will probably continue moving upwards to retest the recent highs.
• Support: Support is at 105.74, 102.75 (38.2%) and 100.80 (50%)
• Resistance: The only interesting short-term resistance level is at the peak of 108.9 and the psychological area of the 110 level. Next resistance is identified from the weekly chart at 114.4.
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Market Analysis 06/08/2013
Daily Commentary06.08.2013, Time of writing: 03:30 GMT
The Big Picture The dollar continued falling against most of the G10 currencies overnight. It fared better vs EM currencies, gaining more than it lost. Not even a much-better-than-expected US service-sector index (56.0 vs expected 53.1, previous 52.2) could outweigh the lingering impact of last Friday’s non-farm payrolls. Nor was the market convinced by comments from Dallas Fed President Fisher, a non-voting ultra-hawkish member of the FOMC, who said that the fall in the unemployment rate announced Friday means the Fed is closer to tapering. The dollar’s downward momentum does seem to be slowing though and I would expect it to start recovering ground today. The exception could be USD/JPY, where expectations of no change at tomorrow’s BoJ Policy Board meeting may continue to exert downward pressure on the pair.
The only G10 currency that was modestly lower vs the dollar overnight was the euro, which also fell vs GBP and JPY. The euro’s weakness was probably due to the unusual downward revision to the German service-sector PMI yesterday; the original figure of 52.5 was revised down sharply to 51.3, even while the service sector and composite indices for the EU as a whole were revised up slightly. It may be that the weak service-sector performance has caused some doubts about today’s German factory orders figure. The market is looking for +1.0% mom, a turnaround from -1.3% last month. I think that could be difficult to achieve though, given the slowdown in imports in China, an important export market for Germany. A disappointment here – which I believe is possible – would be likely to send EUR/USD lower still.
In the US, the focus will be on a press conference by Chicago Fed President Charles Evans. Evans, a non-voting ultra-dove, is at the opposite end of the scale from Fisher; if he too says the Fed is poised to begin tapering, believe him! He said back in May that he’d like ot see employment gains of 200k a month or more for at least six months before judging the labor market to be improved enough to start withdrawing support. Any confirmation from Evans that the Fed is still on the way to tapering would be likely to trigger a sharp reversal in the dollar.
The Market EUR/USD
• EUR/USD moved sideways during the overnight session and remains in a short-term trading range between the 1.3185 and 1.3300 boundaries (blue lines). A clear penetration and close on the daily chart out of the trading range should give indications to determine the next direction of the pair. On the longer time-frames (Daily, Weekly), it also remains in a trading range between 1.2750 and 1.3415.
• Support: We identify support levels at 1.3185, 1.3058 and the psychological level of 1.3000.
• Resistance: Resistance is at 1.3300 and near the highs at 1.3415, which is the upper boundary of the long-term trading range.
USD/JPY
• USD/JPY moved lower during yesterday’s session, managing a successful downward penetration of the 98.55 support level. The pair is moving in a downtrend as indicated by the blue trend-channel and is heading towards the 97.67(50%) level.
The 20-period moving average (on our four-hour chart) is below the 200-period moving average, confirming the downtrend mentioned above. On the long term horizon it is forming a possible Head & Shoulders pattern (daily chart), which will be confirmed if the pair breaks below the 95 area.
• Support: If price penetrates the 97.67 (50%) level, we believe that it will continue its downward move towards the 96.77(61.8%) and 95.75 respectively.
• Resistance: The first resistance is found at the psychological level of 100 followed by the 100.84 and 101.52 levels.
GBP/USD
• GBP/USD moved higher during yesterday’s session, breaking above the 200-period moving average. The break of resistance at 1.5432 will positively confirm the continuation of the uptrend following the recent correction to the 50% retracement. On the long term (daily) chart is moving sideways in a trading range between the 1.5597 and 1.4811 boundaries.
• Support: Support levels are at 1.5123, 1.5050 and 1.4981.
• Resistance: The pair is heading towards the 1.5432 resistance level and a successful penetration of it should lead the pair up to the 1.5597.
Gold
• Gold moved lower during the overnight session, establishing a downtrend as indicated by the blue channel. Moreover, during yesterday’s activity, the 20-period (4 hour intervals) moving average crossed below the 200-period moving average, confirming the bearish momentum of the price. On the long term (daily) chart the 20-day moving average remains below the 200-day moving average, thus is still moving in a downtrend.
• Support: Support levels are at 1283.77and 1264.15.
• Resistance: Resistance levels are at 1347.27 and 1414.75.
Oil
• WTI moved sideways during yesterday’s session, consolidating at the current levels. Since the 20-period moving average is above the 200-period moving average, we consider the recent downward move to be a pullback and believe the price will probably continue moving upwards to retest the recent highs.
• Support: Support is at 105.74, 102.75 and 100.80.
• Resistance: The only interesting short term resistance is at the peak of 108.9 and the psychological area of the 110 level. Next resistance is identified from the weekly chart at 114.4.
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Market Analysis 07/08/2013: Inexplicable market
Daily Commentary 07.08.2013, Time of writing: 03:30 GMT
The Big Picture Inexplicable market: A mysterious day that makes one wonder what is moving investors. USD declined against most of the other majors despite some quite positive news. The US trade deficit narrowed more than anyone had forecast to the narrowest in four years, owing in part to record exports, which will significantly boost Q2 GDP when the figures are revised. At the same time, the JOLTS (Job Openings and Labor Turnover) job survey also exceeded expectations, with more job openings than had been thought. That should give the Fed more confidence to taper off QE. Fed Funds expectations edged up a bit as Fed officials confirmed that view. Even ultra-dove Charles Evans, President of the Chicago Fed, said there has been “good improvement” in the labor market and said he would “clearly not rule out” tapering off from September, as many Fed officials have hinted. Atlanta Fed President Dennis Lockhart said the Fed could start tapering at any of the remaining policy meetings this year, including ones without press conferences scheduled (such as October). Yet at the end of the day, the US currency was lower. I have no good explanation.
My feeling though is that the market cannot continue to ignore these USD-positive indicators indefinitely. True, yesterday’s news from Europe was not that bad either; German factory orders far exceeded expectations and Italian GDP fell less than expected (although was still negative for the eighth consecutive quarter). Nonetheless, the data out of the US and the comments from Fed speakers should have been enough to reverse Friday’s change of heart on tapering off QE and reverse the loss on the dollar. It hasn’t done so yet, but I expect that it will.
Today’s major event will be the unveiling of the Bank of England’s new approach to monetary policy, assessing “the use of thresholds and forward guidance.” A poll by Market News International showed most analysts (17 out of 32) expect the Monetary Policy Committee to announce that they will keep rates low until certain thresholds are met, such as unemployment (currently 7.8%) falling to 6.5% or 7%. There may also be a time threshold as well, such as a promise to keep rates low until mid-2015. An inflation constraint – making the other thresholds contingent on inflation remaining close to the BoE’s 2% target – is also a possibility. I would expect EUR/GBP to rise on the news. The pair has fallen pretty steadily since last week, when the BoE said even less than the ECB did after their meetings; now it’s the turn of the BoE to take the spotlight.
Overnight the focus will be on Japan. The Bank of Japan holds a Monetary Policy meeting, which will be followed by a press conference early in the European morning Thursday. There is little hope for any further moves by the Bank of Japan for now, which is depressing USD/JPY, although why on earth anyone thinks they would change their approach four months after starting it is beyond me. They’re bound to give it some time to see how things are going before they started making adjustments. In the absence of any change in the details of the program, people are looking for some stronger commitment from BoJ Gov. Kuroda along the lines of Mr. Draghi’s “do anything necessary” pledge.
The Market EUR/USD
• EUR/USD moved higher during yesterday’s session and it is currently testing the upper boundary of the short-term trading range between the 1.3185 and 1.3300 (blue lines). A clear penetration and close on the daily chart out of the trading range should give indications to determine the next direction of the pair. On the longer time-frames (Daily, Weekly), it also remains in a trading range between 1.2750 and 1.3415.
• Support: We identify support levels at 1.3185, 1.3058 and the psychological level of 1.3000.
• Resistance: Resistance is at 1.3300 and near the highs at 1.3415, which is the upper boundary of the long-term trading range.
USD/JPY
• USD/JPY moved lower during yesterday’s session, managing a successful downward penetration of the 97.67 (50% retracement of the previous upward move) level. The pair is moving in a downtrend as indicated by the blue trend-channel and is heading towards the 96.77(61.8%) level. The 20-period moving average is below the 200-period moving average on our four-hour chart, confirming the downtrend mentioned above. On the long term horizon it is forming a possible Head & Shoulders pattern (daily chart), which will be confirmed if the pair breaks below the 95 area.
• Support: Support is at the 96.77(61.8%) level and the 95 area where the neckline of the daily “head and shoulders” formation lies.
• Resistance: The 97.67 level reversed its role becoming resistance, followed by 100 (psychological level), 100.84 and 101.52.
GBP/USD
• GBP/USD moved sideways during yesterday’s session, remaining above the 200-period moving average on our four-hour-period chart. Since the stochastic oscillator is entering the oversold area, we expect the price to move higher as soon as the momentum indicator breaks above it. The break of resistance at 1.5432 will positively confirm the continuation of the uptrend following the recent correction to the 50% retracement. On the long term (daily) chart is moving sideways in a trading range between the 1.5597 and 1.4811 boundaries.
• Support: Support levels are at the 1.5123, 1.5050 and 1.4981.
• Resistance: The pair is heading towards the 1.5432 resistance level and a successful penetration of it should lead the pair up to the 1.5597.
Gold
• Gold moved lower during yesterday’s session despite the weaker dollar, remaining in a downtrend as indicated by the blue channel. The price has achieved a downward penetration of the 1283.77(38.2%) level and is now heading towards the 1264.15(50%).Moreover, it is trading below both the 20-period and 200-period moving averages on our four-hour charts, confirming its bearish behavior. On the long term (daily) chart the 20-day moving average remains below the 200-day moving average, thus is still moving in a downtrend.
• Support: Support levels are at 1264.15(50%) and 1245.03(61.8%).
• Resistance: Resistance levels are at 1283.77 (previous support), 1320.78 and 1347.27.
Oil
• WTI moved lower during yesterday’s session, approaching the blue uptrend line. It achieved a downward penetration of the 105.74 support level, but in my opinion the recent downward move is just a pullback and the price will probably continue moving upwards to retest the recent highs. Indications for this are coming from the stochastic oscillator, since it currently broke above the oversold area and by the fact that the 20-period moving average is above the 200-period moving average.
• Support: Support levels are at 102.75 and 100.80.
• Resistance: Resistance levels are at 107.53 followed by the recent highs of 108.89. The next resistance level we can identify is at 114.43, identified from the weekly chart.
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Market Analysis 08/08/2013: Doubting the central banks
Daily Commentary 08.08.2013, Time of writing: 03:30 GMT
The Big Picture Doubting the central banks: Yesterday’s attempt by the Bank of England to talk down interest rates through “forward guidance” failed miserably. The BoE pledged to keep its asset purchase program intact until unemployment came down to 7% from 7.8% currently, much like the Fed’s pledge to keep rates low until unemployment hits 6.5%. In theory that should mean a long time of easy policy – the BoE’s own forecasts don’t have unemployment coming down to those levels until end-2016 at the earliest. But the BoE introduced three conditions around this pledge that were sufficiently flexible that the market immediately questioned the Bank’s commitment to keeping rates low. As a result sterling interest rates actually rose, not fell, and the pound strengthened.
I believe the market is being unduly pessimistic. Central bankers feel they have to maintain their credibility. They have to talk the talk regardless of what they actually do. In this case, the first condition is that BoE forecasts for inflation must not be 2.5% or above 18-24 months ahead. In fact their forecasts have never been higher than 2.3% even when inflation was over 5%, so this is not likely to be a problem. The second condition is if medium-term inflation expectations are no longer “sufficiently well anchored.” This is clearly open to interpretation, which can cut either way; I assume that under Mr. Carney, they would find some reason to dismiss any concerns, as they have up to now. Finally, they can change if there is a “significant threat to financial stability;” but this too is a judgement call, and which central bank has admitted in recent years to such a threat? In other words, I think the MPC felt the need to include these outs in order to maintain their credibility and I doubt whether the MPC will ever trigger them, but nonetheless these outs undermined the very purpose of forward guidance --- which Paul Krugman famously said is for central banks to “credibly promise to be irresponsible.” Over time though I would expect the market to realize that the BoE has no intention of triggering these clauses and for sterling to weaken as a result, but it’s likely to take some time for people to become convinced of this while officials are saying the opposite. Thus we could see further sterling strength for some time.
The market’s doubts about the BoE echo its recent doubts about the Fed, too. Even the dovish members of the FOMC have reasserted recently that the Fed is likely to begin tapering off soon, yet the dollar continues to decline. It appears that the market doesn’t believe these Fed members either. Similar doubts have occurred with regards to other central banks’ guidance on rates too, such as Sweden’s Riksbank. As the message from central banks becomes more muddled, the market looks more and more closely at the data. I would expect we are in for a period of rising volatility as each number gets assessed for its importance with regards to policy.
German trade and current account and the weekly US jobless claims are the only notable indicators out today.
The Market EUR/USD
• EUR/USD moved higher during yesterday’s session and managed to penetrate the upper boundary of the short-term trading range between 1.3185 and 1.3300 (blue lines). We expect the pair to continue moving upwards towards the highs at 1.3415. Moreover, the price is trading above both the 20-period and 200-period moving averages on our four-hour chart, confirming the bullishness of the trend. On the longer time-frames (Daily, Weekly), it remains in a trading range between 1.2750 and 1.3415.
• Support: Support is found at the psychological level of 1.3300, followed by the 1.3185 and 1.3058 respectively.
• Resistance: The only resistance level identified on the short-term horizon (4hour chart) is at 1.3415. The next in line are 1.3525 and 1.3705, found from the daily chart.
USD/JPY
• USD/JPY moved lower during yesterday’s session, testing the lower line of the downtrend channel and the 61.8% retracement level at 96.75. The Bank of Japan kept its asset purchase program unchanged, which although unanimously expected was still a slight disappointment to those who are looking for a more intense commitment from the BoJ. The 20-period moving average is below the 200-period moving average, confirming the bearish attitude of the pair. On the long term horizon it is forming a possible Head & Shoulders pattern (daily chart), which will be confirmed if the pair breaks below the 95 area.
• Support: Support is the 95 area where the neckline of the daily “head and shoulders” formation lies, followed by the 93.73 level.
• Resistance: Resistance levels are at 97.67, followed by the 100 (psychological level), 100.84 and 101.52.
GBP/USD
• GBP/USD moved higher in a volatile session yesterday, breaking the resistance at 1.5432. As mentioned in yesterday’s comment, the break of that level indicates the continuation of the uptrend. Price is trading above both the 20-period and 200-period moving averages, confirming its bullishness. On the long term (daily) chart is moving sideways in a trading range between the 1.5597 and 1.4811 boundaries.
• Support: Support levels are at the 1.5431 (previous resistance), 1.5201 and 1.5102.
• Resistance: The pair is near the 1.5528 resistance level and an upward penetration of it might lead us to the 1.5674 and 1.5752 levels.
Gold
• Gold moved higher during yesterday’s session, testing the 20-period moving average, but remains in a downtrend as indicated by the blue channel. Therefore, we consider the current upward move as a pullback before the price resumes moving lower. Moreover, the 20-period moving average is below the 200-period moving average, confirming the downward movement of the pair. On the long term (daily) chart the 20-day moving average remains below the 200-day moving average, thus is still moving in a downtrend.
• Support: Support levels are at 1264.15(50%) and 1245.03(61.8%).
• Resistance: Resistance levels are at 1320.78, 1347.27and 1376.73
Oil
• WTI continued moving lower during yesterday’s session and is currently trading at the uptrend’s line area. A clear penetration will be confirmed by a daily close below this line. A possible double top is forming on the chart which will be closely followed during the next trading days.
• Support: The penetration of the 102.75 support level will signal the completion of the double top formation. Next in line supports are at 100.80 and 97.85.
• Resistance: Resistance levels are at 107.53 followed by the recent highs of 108.89. The next resistance level we can identify is from the weekly chart at 114.43.
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