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Market Analysis 19/12/2013
Daily Commentary 19.12.2013, Time of writing: 03:30 GMT
The big picture Start of tapering = start of USD rally of 2014 The FOMC decided to begin tapering off its bond purchases at yesterday’s meeting, as we had expected. The Committee cut both its Treasury and mortgage-backed securities purchases by $5bn each, bringing its monthly purchases down to $75bn. They didn’t commit to a specific pace of tapering; Chairman Bernanke intimated that the Committee is likely to reduce purchases by a similar amount at each meeting, which would mean ending its purchases “late in the year, not certainly by the middle of the year,” but he stressed that the pace of tapering is not fixed but rather will depend on the course of the economy. If they do cut by the same amount at every meeting, then QE will end at the October meeting.
Markets were extremely volatile following the meeting, but at the end of the day the impact on the Treasury market was muted, with 10-year yields rising only 6 bps on the day (and most of that before the announcement), suggesting that the move was well discounted in that market. The implied rates on the 2016 Fed Funds futures on the other hand fell by 1 to 2.5 bps due to the inclusion of a new sentence in the statement that said “it likely will be appropriate to maintain the current target range for the federal funds rate well past the time that the unemployment rate declines below 6-1/2%, especially if projected inflation continues to run below the Committee's 2% longer-run goal.” In other words, the Fed balanced the tapering off of its bond purchases by extending its forward guidance and making it conditional on inflation expectations. Fed funds expectations are now below where they were before all the tapering talk began back in May, at least out to end-2015. This demonstrates the success of the Fed’s forward guidance in keeping rate expectations separate from tapering expectations. From now, investors will be watching the strength of the economy, particularly the labor market, to gauge if the Fed is likely to bring forward the time when it begins to tighten. This is exactly what’s been happening with Britain and the Bank of England’s forward guidance, and I would expect to see a similar result with the US and USD: as the US economy continues to improve (I assume), the market will adjust its estimate of the timing of the Fed’s move and the dollar will rally, much like the pound is currently rallying as unemployment there falls more rapidly than expected and rate expectations shift (see below).
The dollar soared against most currencies, with the largest gains over the last 24 hours against CHF (1.2%), CAD and JPY (1.0%), and EUR (0.8%). It was lower only against GBP, as a result of yesterday’s announcement of a surprisingly large fall in unemployment in October. The dollar also gained vs most EM currencies, particularly INR, KRW and HUF.
So where to from here? The response to the tapering was violent: USD first rose, then fell, then rallied back again after EUR/USD was unable to break through 1.3800 yet again. I think we may have reached a turning point for the dollar. I’m especially intrigued at the weakness in CHF. CHF was the biggest loser during yesterday’s European morning trading, which was rather difficult to explain as the Credit Suisse ZEW survey rose to 39.4 in December from 31.6. Then it was similarly the biggest loser overnight following the FOMC meeting. The rise in USD/CHF along with USD/JPY suggests to me that carry trade funding is moving decisively out of USD and into other currencies. Plus the last vestiges of the anti-inflation hedges are being dismantled (gold was also down 1% while silver fell 1.8%). I think this marks the start of the USD rally that many commentators have been predicting for 2014.
Today the UK retail sales for November, excluding autos, are expected to be up 0.3% mom, a turnaround from -0.6% in October. That would signal a continuation of the consumption-led expansion in Britain and probably add further fuel to the GBP rally. In the US, initial jobless claims for the latest week are expected to fall to 335k from 368k, which would bring the four-week moving average to 335k, in line with the previous 331k. The December Philadelphia Fed survey is expected to improve to 10.0 from 6.5, which would add to the bullish USD sentiment. Existing home sales for November are seen falling slightly to a 5.02mn annual pace vs 5.12mn in October, but that is probably not enough to disrupt expectations of continued tapering.
The Market EUR/USD
• EUR/USD plunged after the FOMC decided to dial back its monthly bond purchases by USD 10bn. The pair violated the 1.3710 barrier but the fall was halted by the 1.3655 (S1) support, which coincides with the lower boundary of the upward sloping channel. A clear dip below that hurdle may trigger further declines towards the next support at 1.3600 (S2). The MACD oscillator got a negative sign, confirming the bearish momentum of the price action. However, the uptrend remains in effect from a technical point of view since the rate is touching the trend line and a rebound may signal the continuation of the upward path.
• Support: 1.3655 (S1), 1.3600 (S2), 1.3530 (S3).
• Resistance: 1.3710 (R1), 1.3800 (R2), 1.3830 (R3).
EUR/JPY
• EUR/JPY moved higher, but gave back part of its gains after hitting the resistance of 142.80 (R1). The rate remains between the support of 140.88 (S1) and the aforementioned resistance level. A clear break from either direction would signal the short-term path of the pair. I remain neutral on EUR/JPY at the moment, since our technical studies provide mixed signals. The 50-period moving average provides reliable support to the price action, but negative divergence is identified between both momentum studies and the price action, indicating that the trend’s momentum is decelerating.
• Support: 140.88 (S1), 139.67 (S2), 138.00 (S3).
• Resistance: 142.80 (R1), 146.85 (R2), 148.75 (R3).
GBP/USD
• GBP/USD surged yesterday after the larger-than-expected fall in the UK unemployment rate. The pair rebounded from the support area between the 38.2% Fibonacci retracement level and the 1.6260 (S2) key barrier and jumped, breaking above the hurdle of 1.6347. The MACD entered its positive territory, crossing above the downward sloping resistance line, confirming the recent positive momentum. A break above the 1.6464 (R2) ceiling should drive the price in territories last seen back in August 2011 and could have larger bullish implications.
• Support: 1.6347 (S1), 1.6260 (S2), 1.6140 (S3).
• Resistance: 1.6415 (R1), 1.6464(R2), 1.6570 (R3).
Gold
• Gold fell sharply on the FOMC decision, breaking below the 1224 barrier. In early European trading the precious metal is trading between that level and the floor of 1210. A clear violation of the low at 1210 (S1) might confirm that the 4th-10th Dec advance was just a correction at the 38.2% Fibonacci retracement level of the prevailing downtrend and could turn the bias to the downside again.
• Support: 1210 (S1), 1180 (S2), 1155 (S3).
• Resistance: 1224 (R1), 1251 (R2), 1267 (R3).
Oil
• WTI continued consolidating above the 97.00 (S1) support barrier. If the bulls manage to gain momentum in the near future, I would expect them to drive the battle higher and challenge once again the resistance of 98.81 (R1). Nonetheless, both momentum studies lie near their neutral levels, giving no clues for the next directional movement of the price. As long as the 50-period moving average remains above the 200-period moving average and as long as WTI remains within the purple upward sloping channel, I consider the bias to the upside.
• Support: 97.00 (S1), 95.36 (S2), 92.00 (S3).
• Resistance: 98.81 (R1), 101.10 (R2), 103.15 (R3).
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
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Market Analysis 20/12/2013
Daily Commentary 20.12.2013, Time of writing: 03:30 GMT
The big picture Rethink of the taper: The market’s immediate reaction after the FOMC decision Wednesday was that it was largely dovish, in that the Fed extended its forward guidance by saying it would probably keep rates low “well past the time that the unemployment rate declines below 6.5%, especially if projected inflation continues to run below the Committee's 2% longer-run goal.” That idea got a radical rethink yesterday as investors considered the alternative: what else could the Fed have done? In fact there were several more aggressively dovish steps it could have taken, such as reducing the interest it pays on reserves or using actual inflation as the trigger, not “projected inflation.” (“Projected inflation” is always likely to be nearer to the target than actual inflation, because forecasts tend to be mean-reverting and not so extreme, whereas actual inflation is currently far below the target.) The fact that they didn’t take any of these more aggressive easing measures indicates either an unwillingness or inability to commit to further easing.
That idea sent the implied rate on Fed Funds futures soaring overnight: yields on the long-dated contracts rose 11 bps. The higher interest rates supported the dollar in the face of somewhat disappointing economic news and the dollar continued to rally against most other currencies, particularly JPY, SEK and CHF. On the other hand, the commodity currencies – NZD, AUD and especially CAD – recovered somewhat.
I would expect this rethink of Fed policy to support the dollar going forward, especially if we see an improvement in the indicators. Yesterday’s indicators were disappointing, but they were all hedged by caveats and therefore could be shrugged off: jobless claims rose (perhaps due to statistical distortions caused by the Thanksgiving holiday); the Philadelphia Fed survey came in below expectations (although slightly higher nonetheless); and existing home sales fell in November for the third consecutive month (although there was some debate about whether this was due to fewer buyers or fewer existing homes for sale). We will have to see the data support the change in view. Otherwise, investors may later change their mind about the FOMC’s bias as they get to know Chair-designate Janet Yellen better and hear more from her about her concerns about joblessness and her emphasis on that aspect of the Fed’s dual mandate. (Just for the record, I think she is absolutely correct in this: the appallingly high unemployment rate in the US is much more of a threat to the nation than inflation, which seems to be even a little too low according to official statistics.)
Bank of Japan keeps policy unchanged as inflation expectations are rising. No change there is likely until perhaps after the hike in the consumption tax in April; after that, look for further easing to help the economy, which should weaken the yen further.
There are a number of UK indicators out today. The Gfk survey of UK consumer confidence dropped slightly to -13 from -12 (it was expected to rise to -11). The current account deficit for Q3 is expected to deteriorate further to GBP 14.0bn from GBP 13.0bn, but nobody seems to care about Britain’s massive current account deficit. Later in the day, the final figure on GDP for Q3 is expected to be unchanged from the preliminary number at 0.8% qoq. There are several other UK indicators out during the day as well, but none of these seem likely to have much impact on GBP. German PPI for November will be watched to see if there are any downward pressures in the pipeline. The forecast is for prices to drop another 0.1% mom, suggesting that inflation is not going up anytime soon. Could be EUR-negative. In the US, the third estimate of GDP is forecast to remain unchanged from the second estimate at 3.6% qoq annualized. Canadian CPI for November is expected to rise to 1.0% yoy from 0.7%, with the core measure also accelerating a bit on a yoy basis. Canadian retail sales ex autos for October are forecast to be unchanged mom, the same as in September. Inflation stuck near the bottom of its target band and no growth in consumption means the Bank of Canada is more likely to keep rates low for longer, so this data may well be CAD-negative. Finally, EU consumer confidence is expected to rise slightly to -15.0 from -15.4.
The Market EUR/USD
• EUR/USD fell below the lower boundary of the upward sloping channel and below the 1.3655 barrier. In my view the bears may continue pushing the price lower, towards the support of 1.3600 (S1). A clear dip below that level would have larger bearish implications and may target the next support at 1.3530 (S2). The MACD oscillator remains below its trigger and zero lines, confirming the bearish momentum of the price action.
• Support: 1.3600 (S1), 1.3530 (S2), 1.3490 (S3).
• Resistance: 1.3655 (R1), 1.3710 (R2), 1.3800 (R3).
USD/JPY
• USD/JPY managed to overcome the previous high at 103.90, signaling the continuation of the uptrend. In early European trading the rate is slightly above that barrier and I would expect it to continue its advance, targeting the 105.45 (R1) hurdle which coincides with the 423.6% Fibonacci extension level of the bearish wave prior to the uptrend. The short-term trend remains in effect, since the price is well supported by the blue support line and the 50-period moving average. On the daily and weekly charts, the subsequent move upon the escape of the symmetrical triangle remains in effect.
• Support: 103.90 (S1), 102.14 (S2), 101.12 (S3).
• Resistance: 105.45 (R1), 108.25 (R2), 110.60 (R3).
EUR/GBP
• EUR/GBP continued its decline but the pair is now finding support at the 61.8% Fibonacci retracement level of the prevailing advance. A downward violation of that level, followed by a break of the 0.8320 (S1) obstacle, may target the short-term lows at 0.8255 (S2). The 50-period moving average turned down and seems ready to cross below the 200-period moving average, completing the negative picture of the pair.
• Support: 0.8320 (S1), 0.8255 (S2), 0.8225 (S3).
• Resistance: 0.8350 (R1), 0.8390 (R2), 0.8430 (R3).
Gold
• Gold also continued falling and yesterday managed to overcome the floor of 1210. That violation may be the first sign that that the 4th-10th Dec advance was just a correction at the 38.2% Fibonacci retracement level of the prevailing downtrend. The MACD lies below both its trigger and zero lines, confirming the negative momentum of the yellow metal. On the other hand, the RSI exited its oversold area, thus I would expect an upward corrective wave before the bears prevail again.
• Support: 1186 (S1), 1180 (S2), 1155 (S3).
• Resistance: 1210 (R1), 1224 (R2), 1251 (R3).
Oil
• WTI moved higher and reached the 98.81 (R1) resistance barrier. An upward penetration of that level might target the next resistance at 101.10 (R2). As long as the 50-period moving average remains above the 200-period moving average and as long as WTI remains within the purple upward sloping channel, the bias remains to the upside, in my view.
• Support: 97.00 (S1), 95.36 (S2), 92.00 (S3).
• Resistance: 98.81 (R1), 101.10 (R2), 103.15 (R3).
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
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Market Analysis 23/12/2013
Daily Commentary 23.12.2013, Time of writing: 03:30 GMT
The big picture Positioning, not fundamentals, moves the market
Friday’s market action was purely technical. If anything the news was USD-positive, after US Q3 GDP was revised up yet again to +4.1% qoq saar on stronger results for consumption and business investment. In other words, US Q3 GDP was double the consensus forecast of +2.0% before the initial estimate was released on 7 Nov, which supports the Fed’s decision to begin tapering off its bond purchases. Yet US long-term bond yields peaked shortly after the release and the dollar declined with them during the day even though the implied yield on Fed Funds futures continued to rise, with the far 2016 contracts gaining another 8 bps or so. Stocks seem to be doing much better than the dollar.
The main action Friday was in USD/CAD, which initially rose to a high for the year on below-forecast inflation figures for November. However there was apparently considerable end-year demand for CAD and the pair managed to close lower on the day. The range for the day was 1.0628-.0738 or 1.04%, which is extraordinary considering the range for the entire year has been 9.39%. AUD was the biggest gainer on the day. Market participants were apparently impressed on Friday that AUD/USD failed to make a new low despite the ninth consecutive daily fall in Chinese stocks as liquidity fears continue to weigh on the market. With the Chinese market recovering somewhat Monday, AUD/USD recovered further with it. The move seems to be mostly due to the closing of short AUD/USD positions ahead of the holidays rather than any big change in view about Australia.
With the Christmas holidays this week, I expect activity to be quite thin and movements to be much more technical than fundamental. End-year window-dressing needs will dominate the market rather than any view on the prospects for a currency as investors are likely to do only the trades that they have to. In this thin market, prices can be either quite volatile or deadly dull: in 2007 the week of Christmas was tied for the second highest volatility week of the year and in 2008 it was the most volatile week of the year, while in 2011 it was in the bottom 20% and in 2012 it was the fifth quietest week of the year.
For today, there is a holiday in Japan and no major European indicators, just German import prices (expected to continue falling) and Italian consumer confidence (expected to rise a bit). The main indicator will be the US personal income & spending figures for November. They’re both expected to show solid rises of 0.5% mom. Meanwhile the personal consumption deflator, the Fed’s preferred inflation gauge, is expected to rise 0.9% yoy, a faster pace than 0.7% yoy in October – still well below the Fed’s 2% target but going in the right direction. The U of Michigan consumer confidence figure for December is also expected to be revised up slightly to 83.0 from 82.5. This kind of strong data is likely to support the dollar. In Canada, October GDP is forecast to slow to +0.2% mom from +0.3%, which could send CAD lower again – although given the sharp rebound on Friday, I wouldn’t bet on such a move lasting very long. Otherwise there’s little on the schedule, no speakers. I expect a day of quiet pre-holiday trading.
For the rest of the week there are a number of US indicators coming out, such as Richmond Fed and Chicago Fed indices, new home sales and durable goods orders that may add to the view of a strong US economy. Japan also sees the usual end-of-month data dump. Eurozone indicators however are very light while in the UK there is only mortgage applications. Thus today will probably be effectively the last day of serious trading for the year.
The Market EUR/USD
• EUR/USD moved higher on Friday but the advance was halted by the lower boundary of the upward sloping channel, which is now providing resistance. If the bears manage to take control and push the price lower, breaking the 1.3625 (S1) barrier, I expect them to trigger extensions towards the next support at 1.3540 (S2). Both momentum studies follow downward paths, confirming the negative momentum of the pair.
• Support: 1.3625 (S1), 1.3540 (S2), 1.3490 (S3).
• Resistance: 1.3710 (R1), 1.3800 (R2), 1.3830 (R3).
USD/JPY
• USD/JPY moved lower but the longs managed to maintain the rate above the 103.90 (S1) support. At the time of writing the currency pair is trading slightly above that barrier and I would expect it to continue its advance, targeting the 105.45 (R1) hurdle, which coincides with the 423.6% Fibonacci extension level of the bearish wave prior to the uptrend. The short-term trend remains in effect, since the price is well supported by the blue support line and the 50-period moving average. On the daily and weekly charts, the subsequent move upon the escape of the symmetrical triangle remains in effect.
• Support: 103.90 (S1), 102.14 (S2), 101.12 (S3).
• Resistance: 105.45 (R1), 108.25 (R2), 110.60 (R3).
EUR/GBP
• EUR/GBP moved higher after rebounding from the 61.8% Fibonacci retracement level of the prevailing short-term advance. However, in my view, we may see the pair weakening in the near future, since on the daily chart the rate is trading within a downward sloping channel (purple lines).The MACD oscillator crossed above its trigger line, while the RSI rebounded from its 30 level, thus I would not rule out some consolation or the continuation of the upward wave before the bears prevail again.
• Support: 0.8330 (S1), 0.8292 (S2), 0.8260 (S3).
• Resistance: 0.8390 (R1), 0.8431(R2), 0.8462 (R3).
Gold
• Gold moved higher, confirming our expectations for an upward corrective wave. The yellow metal is back within the downward sloping channel and since it’s forming lower highs and lower lows, I consider the bias to the downside. The 50-period moving average remains below the 200-period moving average, while both momentum studies follow downward paths, completing the negative picture of the price action.
• Support: 1187 (S1), 1180 (S2), 1155 (S3).
• Resistance: 1210 (R1), 1224 (R2), 1251 (R3).
Oil
• WTI moved slightly higher, but higher enough to overcome the 98.90 (S1) obstacle. During the early European morning, the price is trading near the resistance area between the 38.2% Fibonacci retracement level and the round number of 100 (R1). If the longs manage to overcome that area, they might drive the battle higher towards the next resistance at 101.10 (R2). On the other hand, a dip below the 98.90 (S1) barrier and the lower boundary of the channel may be the first sign that the recent advance was just a 38.2% retracement of the prior downtrend. As long as the 50-period moving average remains above the 200-period moving average and as long as WTI remains within the purple upward sloping channel, the bias remains to the upside, in my view.
• Support: 98.90 (S1), 97.25 (S2), 95.35 (S3).
• Resistance: 100.00 (R1), 101.10 (R2), 103.15 (R3).
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
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Market Analysis 24/12/2013
Daily Commentary24.12.2013, Time of writing: 03:30 GMT
The big picture Same story, same ending:
Once again solid US economic news sent stocks higher and Fed Funds implied interest rates higher, but largely left the dollar behind. It was higher this morning against AUD, JPY and NZD and lower against SEK, CAD, NOK and CHF.
Nominal personal consumption expenditures (PCE) were up +0.5% in Nov after upward revisions, although personal income was only up +0.2%, meaning the gap was made up from savings: the savings rate declined -0.3% to +4.2%. This level of spending implies another strong 4Q GDP report in the order of 3% to 4%. The strong data has investors rethinking the likely course of Fed policy already and the implied interest rate on the far Fed Funds contracts were up another 8 bps. But the dollar generally weakened in New York trading nonetheless, apparently on end-year position-squaring. Given the strong indicators recently and the general rethink of Fed intentions – the market has now priced in one additional full rate hike by mid-2016 -- I would expect to see the dollar begin rallying strongly as soon as the end-year position-squaring ends and the New Year begins. Remember that for USD/JPY at least, the lows for the year in 2013 were set on Jan. 2nd.
CAD gained on solid economic news. Canadian GDP for October, released yesterday, showed that the Canadian economy expanded by a faster-than-expected 0.3% in October, the fourth month in a row for expansion. Also there was some strength in household and business credit in November. However CAD couldn’t hold onto all the gains and the pair drifted back up, leaving CAD only slightly stronger on the day.
Activity yesterday was very thin – apparently it was largely over by midday in New York. It’s likely to e only thinner today. The economic calendar in Europe is almost empty: the only indicator coming out from Europe is France’s final GDP for Q3. The forecast is at -0.1% qoq, the same as the initial estimate.
In US, durable goods orders for November are coming out. The headline figure is expected to have risen by 2.0% mom, a turnaround from a revised -1.6% mom in October, while the excluding transportation release is estimated to have accelerated to +0.7% from a revised +0.4% the previous month. The US Federal Housing Finance Agency (FHFA) house price index is estimated to have risen by 0.5% in October, a faster pace than +0.3% in September, while new home sales for November are expected to have seen a fall of 0.9% mom, not surprising after October’s 25.4% mom rise. The Richmond Fed Manufacturing survey for December is expected to decline to 10 from 13. All told in theory this news should add to the view of a robust US economy and boost the dollar, but recently that doesn’t seem to be happening.
No comment tomorrow.
The Market EUR/USD
• EUR/USD hit the 1.3710 (R1) resistance level and moved lower, forming a lower high than the previous at 1.3800 (R2). A clear break below the 1.3625 (S1) hurdle would confirm a forthcoming lower low and we may see the bears targeting the next barrier at 1.3540 (S2). The MACD oscillator continues to follow a downward path, while the Stochastic found resistance near its 80 level and moved lower with the %K crossing below the %D.
• Support: 1.3625 (S1), 1.3540 (S2), 1.3490 (S3).
• Resistance: 1.3710 (R1), 1.3800 (R2), 1.3830 (R3).
EUR/JPY
• EUR/JPY moved higher and seems ready to escape from its sideways path. The pair is currently testing the upper boundary of the range between the support of 140.88 (S1) and the resistance of 142.80 (R1). An upward break of that resistance would trigger bullish extensions towards the next barrier at 146.85 (R2). The 50-period moving average lies above the 200-period moving providing reliable support to the price action.
• Support: 140.88 (S1), 139.67 (S2), 138.00 (S3).
• Resistance: 142.80 (R1), 146.85 (R2), 148.75 (R3).
GBP/USD
• GBP/USD continued consolidating between the support of 1.6320 (S1) and the resistance of 1.6395 (R1). I remain neutral on the pair since we need to see the rate overcoming the high of 1.6465 (R2) to assume a further advance, while it would take a dip below the 1.6260 (S2) key support to confirm a downtrend. Both momentum studies lie near their neutral levels confirming the sideways range of the currency pair.
• Support: 1.6320 (S1), 1.6260 (S2), 1.6140 (S3).
• Resistance: 1.6395 (R1), 1.6465 (R2), 1.6570 (R3).
Gold
• Gold also moved in a consolidative mode during a quiet trading Monday. Since the metal is forming lower highs and lower lows, I consider the bias to the downside. The 50-period moving average remains below the 200-period moving average, while both momentum studies follow downward paths, completing the negative picture of the price action.
• Support: 1187 (S1), 1180 (S2), 1155 (S3).
• Resistance: 1210 (R1), 1224 (R2), 1251 (R3).
Oil
• WTI moved slightly lower on Monday and is now back below the 98.90 level. The price also broke slightly below the lower boundary of the upward sloping channel. If the bears manage to maintain the price below those levels, we may see extensions towards the support barrier of 97.25 (S1). On the other hand we would w20asbwneed to see WTI overcoming the resistance area between the 38.2% Fibonacci retracement level of the prevailing downtrend and the round number of 100 (R2) in order to assume further advance. WTI is trading above both moving averages and a move back within the channel may signal that the current exit was just a fake break out.
• Support: 97.25 (S1), 95.35 (S2), 92.00 (S3).
• Resistance: 98.90 (R1), 100.00 (R2), 101.10 (R3).
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
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Market Analysis 26/12/2013
Daily Commentary26.12.2013, Time of writing: 03:30 GMT
The Market EUR/USD
• EUR/USD moved slightly lower, remaining between the 1.3625 (S1) support and the resistance of 1.3710 (R1). A downward violation of the 1.3625 (S1) barrier would confirm a forthcoming lower low and we may experience extensions towards the next support at 1.3540 (S2). The RSI follows a downward path as indicated with the blue resistance line, while the Stochastic moved lower with the %K remaining below the %D.
• Support: 1.3625 (S1), 1.3540 (S2), 1.3490 (S3).
• Resistance: 1.3710 (R1), 1.3800 (R2), 1.3830 (R3).
USD/JPY
• USD/JPY moved significantly higher during the Asian morning. The bulls manage to maintain the rate above the 103.90 barrier and pushed the price higher as expected. I believe that the pair will continue its advance, targeting the 105.45 (R1) hurdle, which lies near the 423.6% Fibonacci extension level of the 17th -25th Oct. bearish wave. The short-term trend remains in effect, since the price is well supported by the blue support line and the 50-period moving average. On the daily and weekly charts, the subsequent move upon the escape of the symmetrical triangle remains in effect.
• Support: 103.90 (S1), 102.14 (S2), 101.12 (S3).
• Resistance: 105.45 (R1), 108.25 (R2), 110.60 (R3).
EUR/GBP
• EUR/GBP found resistance at the 0.8390 (R1) barrier and moved lower, confirming our expectation of further decline. The pair is now heading once again towards the 61.8% Fibonacci retracement level of the previous short-term advance at 0.8330 (S1). A clear dip below that obstacle may challenge the next support level at 0.8292 (S2). On the daily chart, the rate remains within a downward sloping channel (purple lines).
• Support: 0.8330 (S1), 0.8292 (S2), 0.8260 (S3).
• Resistance: 0.8390 (R1), 0.8431(R2), 0.8462 (R3).
Gold
• Gold moved slightly higher but since it is forming lower highs and lower lows of the same degree, I consider the current rise as merely an upward corrective wave. In my view, the downtrend remains in effect since the precious metal is trading below the downtrend line and the 50-period moving average remains below the 200-period moving average.
• Support: 1187 (S1), 1180 (S2), 1155 (S3).
• Resistance: 1210 (R1), 1224 (R2), 1251 (R3).
Oil
• WTI moved higher and returned back into the upward sloping channel. The price is currently testing the 38.2% Fibonacci retracement level of the prevailing downtrend. An upward violation of that level followed by a break of the 100.00 (R1) round number may signal the continuation of the uptrend. On the other hand, the failure to overcome that barrier would be the first sign that the recent advance was just a 38.2% retracement of the prevailing downtrend.
• Support: 98.90 (S1), 97.25 (S2), 95.35 (S3).
• Resistance: 100.00 (R1), 101.10 (R2), 103.15 (R3).
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MARKETS SUMMARY
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Market Analysis 27/12/2013
Daily Commentary 27.12.2013, Time of writing: 03:30 GMT
The Market EUR/USD
• EUR/USD moved significantly higher violating the 1.3710 barrier (yesterday’s resistance). The pair seems to follow a new support trend line and we might see the rate challenging once again the area between 1.3800 (R1) and 1.3830 (R2). The RSI broke above its blue resistance line, while the MACD poked its nose into the positive area. The rate is once again above both moving average, shifting the odds for further advance.
• Support: 1.3710 (S1), 1.3625 (S2), 1.3540 (S3).
• Resistance: 1.3800 (R1), 1.3830 (R2), 1.4170 (R3).
EUR/JPY
• EUR/JPY managed to escape from its sideways path, breaking above the 142.80 ceiling (today’s support level). I expect the advance to continue towards the 147.00 (R1) area. The 50-period moving average remains above the 200-period moving average, providing reliable support to the price action. My only concern is that the RSI lies within its overbought zone and a price pullback upon its exit cannot be ruled out.
• Support: 142.80 (S1), 140.88 (S2), 139.67 (S3).
• Resistance: 147.00 (R1), 150.00 (R2), 156.77 (R3).
GBP/USD
• GBP/USD violated the 1.6395 hurdle and is now heading towards the highs of 1.6465 (R1). An upward break of that obstacle may signal further advances and target the next resistance at 1.6570 (R2). The price is trading above both moving averages, while the MACD oscillator lies above both its zero and trigger lines. On the other hand, the RSI entered its overbought area, thus a downward corrective wave in the near future should not surprise us.
• Support: 1.6395 (S1), 1.6320 (S2), 1.6260 (S3).
• Resistance: 1.6465 (R1), 1.6570 (R2), 1.6735 (R3).
Gold
• Gold moved higher yesterday but the advance was halted by the 50% retracement level of the prior bearish wave. Since the precious metal is trading below the blue downtrend line and the 50-period moving average remains below the 200-period moving average, I consider the recent advance to be an upward corrective wave. Only a violation of the trend line and the resistance at 1224 (R2) would be a reason to reconsider our analysis.
• Support: 1187 (S1), 1180 (S2), 1155 (S3).
• Resistance: 1212 (R1), 1224 (R2), 1251 (R3).
Oil
• WTI remained where we left it yesterday. The price is still testing the 38.2% Fibonacci retracement level of the prevailing downtrend, confirming the validity of that hurdle. An upward violation of that level followed by a break of the 100.00 (R1) round number may signal the continuation of the uptrend. On the other hand, a failure to overcome that barrier may be a first sign that the recent advance was just a 38.2% retracement of the prevailing downtrend.
• Support: 98.90 (S1), 97.25 (S2), 95.35 (S3).
• Resistance: 100.00 (R1), 101.10 (R2), 103.15 (R3).
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Market Analysis 30/12/2013
Daily Commentary 30.12.2013, Time of writing: 03:30 GMT
Economic calendar The day starts with trade data and retail sales from Sweden for November. No forecast is available for the country’s trade balance, while retail sales are estimated to be up 0.4% mom from 0.0% mom in October. From Italy, business confidence for December is expected to rise to 99.0 from 98.1.
Later in the day, US pending home sales are estimated to have risen 1.0% mom in November, a turnaround from -0.6% mom in October. This will bring the yoy rate up to -0.2% from -2.2%. Finally, Dallas Fed Manufacturing Activity for December is expected to rise to 2.0 from 1.9.
As for the rest of the week, on Tuesday we have the S&P/Case-Shiller house price index for October, the Chicago purchasing manager’s index and the Conference Board consumer confidence, both for December. During the Asian morning Wednesday, China releases its manufacturing PMI for December. More manufacturing PMIs are coming out on Thursday. We have the final data for December from France, Germany and Eurozone as a whole. We also have December manufacturing PMIs from Italy, Sweden, the UK and the US. Finally on Friday, China releases its non-manufacturing PMI and Italy its preliminary CPI for December. From UK we get the nationwide house price index for December, construction PMI for the same month and mortgage approvals for November. Eurozone’s M3 annual growth for November is also coming out.
The Market EUR/USD
• EUR/USD surged on Friday but after hitting 1.3893 (R2) it gave back a big portion of its daily gains. At the time of writing, the pair is trading above the 1.3710 (S1) barrier, and a rebound near that level may challenge once again the resistance area near 1.3830 (R1). The rate is trading above both the moving averages and above the blue trend line, thus the upside path remains in effect at the moment. A break below 1.3625 (S2) is needed to turn the picture negative.
• Support: 1.3710 (S1), 1.3625 (S2), 1.3540 (S3).
• Resistance: 1.3830 (R1), 1.3893 (R2), 1.4170 (R3).
USD/JPY
• USD/JPY continued its advance and is now slightly below the resistance area between the barrier of 105.45 (R1) and the 423.6% Fibonacci extension level of the 17th -25th Oct. bearish wave. The short-term trend remains in effect, since the price is well supported by the blue support line and the 50-period moving average. However the RSI lies in its overbought zone, pointing downwards, thus I would expect a price pullback before the bulls prevail again.
• Support: 103.90 (S1), 102.14 (S2), 101.12 (S3).
• Resistance: 105.45 (R1), 108.25 (R2), 110.60 (R3).
EUR/GBP
• EUR/GBP found resistance for a second time at the 0.8390 (R1) barrier and moved lower. Currently the pair is heading for a third test at the 61.8% Fibonacci retracement level of the previous short term advance at 0.8330 (S1). A clear dip below that obstacle may challenge the next support level at 0.8292 (S2). On the daily chart, the rate remains within a downward sloping channel (purple lines).
• Support: 0.8330 (S1), 0.8292 (S2), 0.8260 (S3).
• Resistance: 0.8390 (R1), 0.8431(R2), 0.8462 (R3).
Gold
• Gold moved in a consolidative mode, remaining near the 50% retracement level of the prior bearish wave. The RSI is pointing downwards, while the MACD seems ready to cross below its trigger line. Since the precious metal is trading below the blue downtrend line and the 50-period moving average remains below the 200-period moving average, I consider the recent advance as an upward corrective wave. Only a violation of the trend line and the resistance at 1224 (R2) would be a reason to reconsider our analysis.
• Support: 1187 (S1), 1180 (S2), 1155 (S3).
• Resistance: 1212 (R1), 1224 (R2), 1251 (R3).
Oil
• WTI managed to overcome the key barrier of 100.00. If the bulls are strong enough to drive the battle higher and violate the 101.10 (R1) resistance level, we may experience extensions towards the next resistance at 103.15 (R2). The price remains within the upward sloping channel, while the 50 period moving average lies above the 200-period moving average, confirming the bullish picture of WTI.
• Support: 100.00 (S1), 98.90 (S2), 97.25 (S3).
• Resistance: 101.10 (R1), 103.15 (R2), 104.45 (R3).
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Market Analysis 31/12/2013
Daily Commentary 31.12.2013, Time of writing: 03:30 GMT
The Big Picture Active right to the end
The end of the year is usually a placid time for markets, but this year there have been some dramatic moves right down to the end. The range for the year in USD/SEK was 9.4% (from 6.2732 to 6.8654), but just yesterday the range was 2.0% or 21% of the entire year’s range. Similarly with NOK, the range for the year was 15.5% and the spread yesterday was 1.5% or 10% of the entire year’s range in one day. NZD/USD also had a 1.3% range yesterday, quite substantial within the context of a 12.9% range for the year. In Sweden’s case the movement was clearly related to the news flow (higher-than-expected Swedish retail sales in November) but the sharp moves in other currencies suggest that something more widespread is afoot.
True, yesterday’s US pending home sales figure was somewhat disappointing, but overall the US economic indicators remain not only broadly positive but far more surprisingly positive than in most other countries, and that’s usually what counts (see top graph). Also the implied rates on Fed Funds futures have come down slightly – they peaked last Thursday and are down 5-6 bps in the 2016 region since then, but this is still substantially higher – 17 to 27 bps – than before the FOMC meeting on 18 Dec (bottom graph). Yet the dollar is quite mixed since then, up against four of its G10 counterparts (JPY, NZD, CAD and CHF) and down vs four (SEK, NOK, GBP and EUR). (It’s unchanged vs AUD.)
Why has the announcement of tapering, the better-than-expected US economic indicators and the sharp upward revision to Fed Funds expectations failed to boost the dollar? This goes against all fundamental logic. I can only surmise that this is end-of-year distortions. Over the last five years, the dollar has on average weakened in December vs EUR, CHF, NZD and AUD (but gained vs GBP, JPY and CAD). It seems likely that there are some seasonal factors at play here that may well be unwound in the New Year, particularly after European banks finish repatriating their funds in preparation for next year’s Asset Quality Review. I look for the dollar to resume its upward climb in the new year.
A quiet New Year’s Eve is expected today since the calendar is light once again. We have releases coming out only from the US. The S&P/Case-Shiller home price index is expected to have risen 13.45% yoy in October, not much of a change from 13.29% yoy in September. The Chicago purchasing manager’s index for December is forecast to fall to 60.5 from 63.0, while the Conference Board consumer confidence index for December is estimated to rise to 76.3 from 70.4. All told however I would expect to see position-squaring dominate the market. After a few down days, we could see some dollar buying Tuesday.
On New Year’s Day the only indicator expected out will be China’s manufacturing PMI for December. The figure is forecast to slightly fall to 51.2 from 51.4.
The Market EUR/USD
• EUR/USD moved higher on Monday, but the upward movement was halted by the 1.3810 level. An upward violation may drive the battle once again towards the 1.3893 (R2) barrier. However, since the RSI rebounded near its 70 level and moved lower, I would expect a downward corrective wave during the day. The current uptrend is still in progress and as long as the low of 1.3625 (S2) is intact, I consider the short-term bias to be to the upside.
• Support: 1.3710 (S1), 1.3625 (S2), 1.3540 (S3).
• Resistance: 1.3810 (R1), 1.3893 (R2), 1.4170 (R3).
EUR/JPY
• EUR/JPY found resistance at the psychological level of 145.00 (R1) and moved slightly lower. A clear break of that hurdle may signal the continuation of the advance towards the 147.00 (R2) area. The RSI exited its overbought zone, while the MACD, although still in a bullish territory, seems ready to cross below its trigger line and as a result we may experience a downward corrective wave before the uptrend resumes. The 50-period moving average remains above the 200-period moving providing reliable support to the price action.
• Support: 142.80 (S1), 140.88 (S2), 139.67 (S3).
• Resistance: 145.00 (R1), 147.00 (R2), 150.00 (R3).
GBP/USD
• GBP/USD remained above the 1.6465 (S1) support barrier. Since the RSI exited its overbought area and the MACD poked its nose below its trigger line, I would expect the price to overcome that hurdle and target the next support at 1.6395 (S2). Nonetheless, as long as the low of 1.6320 (S3) holds, I would consider any downward movement as a renewed buying opportunity. The rate is trading above both moving averages, thus the short-term picture remains positive for now.
• Support: 1.6465 (S1), 1.6395 (S2), 1.6320 (S3).
• Resistance: 1.6575 (R1), 1.6735 (R2), 1.6885 (R3).
Gold
• Gold moved lower after finding resistance at the 50% retracement level of the prior downward wave. A break below the 1187 support level is needed to signal the continuation of the downward path. The MACD crossed below both its trigger and zero lines. The precious metal remains below the blue trend line and below both the moving averages, thus I consider the downtrend to be valid at the moment. Only a violation of the trend line and the resistance at 1224 (R2) would be a reason to reconsider our analysis.
• Support: 1187 (S1), 1180 (S2), 1155 (S3).
• Resistance: 1212 (R1), 1224 (R2), 1251 (R3).
Oil
• WTI moved lower, breaking the lower boundary of the downward sloping channel. The bulls didn’t manage to maintain the price above 100.00. WTI is now trading slightly above its 50-period moving average and the 98.90 (S1) support barrier. A dip below that zone may target the next support at 97.25 (S2) which coincides with the 38.2% Fibonacci retracement level of the 92.00-100.60 advance. On the other hand, a rebound at 98.90 may drive the battle higher and resume the short-term uptrend.
• Support: 98.90 (S1), 97.25 (S2), 95.35 (S3).
• Resistance: 100.60 (R1), 101.90 (R2), 103.15 (R3).
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Market Analysis 02/01/2014
Daily Commentary 02.01.2014, Time of writing: 03:30 GMT
The Big Picture It’s working already!
I had expected that the dollar’s weakness in late December was due largely to end-year position-closing and was not a reflection on the currency’s likely direction in 2014. We’re only a few hours into the year but so far it seems that I was right: the dollar is up against most of its G10 counterparts this morning as well as the EM currencies. The only major exception is GBP, which has gained across the board this morning. I would expect to see more USD buying as the day goes on.
The only major economic indicator out yesterday was China’s manufacturing PMI for December, which was a bit worse than expected, falling to 51.0 from 51.4 (expected: 51.2). Much of the rest of the world will announce its manufacturing PMIs for December today. Sweden’s manufacturing PMI for December is expected to fall to 55.2 from 56.0. That could prompt some profit-taking on the SEK, which has had a pretty good run recently (2nd best performing G10 currency in December) while Italy’s figure is estimated to rise modestly to 51.7 from 51.4. We also have the final manufacturing PMIs from France, Germany and Eurozone as a whole. The UK number for the month is forecast to have remained unchanged at 58.4, which could continue to support GBP. From the US, the ISM manufacturing PMI is also expected to fall to 56.9 from 57.3 in November, while the weekly jobless claims are forecast to rise to 342k from 338k. The news could put a dent in the dollar’s strong start, although as the FX market seemed to have decoupled from fundamentals in the last week or two of the year, we could have a similar period immediately following the beginning of the New Year.
No speakers during the day. A couple of Fed officials will give the first speeches of the year on Friday.
What worked in 2013 and what’s forecast to work in 2014? Last year, the Danish Krone (DKK) was the best-performing currency vs the dollar on a spot basis (+4.18%, ignoring interest paid), followed closely by the EUR (+4.17). After that came CHF (+2.52%), GBP (+1.86%) and SEK (+1.01%). NZD (-0.89%), CAD (-6.61%), NOK (-8.34%) and AUD (-14.21%) all weakened vs USD, with JPY (-17.62%) being the worst performing G10 currency. But for some of these, the interest return made up for part of the losses. EUR for example at least still has positive interest rates, while DKK has negative rates. Taking that into account, the total return on holding a long EUR/USD position rose to +4.31% while short USD/DKK fell to 4.16%, meaning EUR pushes out DKK for the best-performing spot. After that are CHF, GBP, and SEK, the same order as without interest. NZD’s negative spot return turned into a positive total return of +1.95% after taking into account the currency’s 2.87% interest rate in 2013. After that, the losers were the same order: CAD, NOK, AUD and JPY.
For this year, using Bloomberg’s consensus forecasts, the market expects the AUD to be the winner: the smallest expected spot decline vs US (-1.3%), which, after interest, is expected to turn into a +1.35% total return. NZD is expected to show a 2.61% spot decline but a +0.31% positive total return. All of the other G10 currencies are forecast to show both negative spot and total returns, with CHF being the bottom (-8.92% forecast total return). JPY is expected to be in the middle, with a -3.39% spot loss and -3.28% total loss. This seems unlikely to me as JPY is usually at the extremes: for the last 11 years it hasn’t been in the middle.
The Market EUR/USD
• EUR/USD moved lower after finding resistance at the 1.3810 (R1) barrier. Both our momentum studies confirm the downward movement since the RSI’s slope is to the downside, while the MADC, although in positive territory, crossed below its trigger line. Nonetheless, the uptrend is still in progress and as long as the low of 1.3625 (S2) is intact, I consider the short-term bias to be to the upside and the current downward wave as a pullback.
• Support: 1.3710 (S1), 1.3625 (S2), 1.3540 (S3).
• Resistance: 1.3810 (R1), 1.3893 (R2), 1.4170 (R3).
USD/JPY
• USD/JPY moved in a consolidative mode, remaining below the resistance area between the barrier of 105.45 (R1) and the 423.6% Fibonacci extension level of the 17th -25th Oct. bearish wave. If the longs are strong enough to overcome that strong resistance area, I would expect them to trigger extensions towards the area of 107.00 (R2). The short-term uptrend remains in effect, since the price is well supported by the blue support line and the 50-period moving average. My only concern is that negative divergence is identified between the MACD oscillator and the price action.
• Support: 103.90 (S1), 102.14 (S2), 101.12 (S3).
• Resistance: 105.45 (R1), 107.00 (R2), 109.00 (R3).
EUR/GBP
• EUR/GBP fell below the 61.8% Fibonacci retracement level of the previous short term advance at 0.8330 and reached the support barrier of 0.8290 (S1). In early European trading the price is testing that hurdle and a clear dip below it may target the next support at 0.8260 (S2). The MACD momentum study crossed below its trigger line in its bearish zone, increasing the possibilities for further decline. On the daily chart, the rate remains within a downward sloping channel (purple lines).
• Support: 0.8290 (S1), 0.8260 (S2), 0.8220 (S3).
• Resistance: 0.8330 (R1), 0.8390 (R2), 0.8431 (R3).
Gold
• Gold surged on Tuesday, breaking above the short-term blue resistance line. During the early European morning, the precious metal is testing the resistance barrier of 1224 (R1). If the positive momentum continues and a violation of that obstacle occurs, we may see the price challenging the next resistance at 1251 (R2). Relying on our momentum studies does not seem a solid strategy. The MACD managed to cross above both its signal and zero lines, but the RSI is finding resistance near its 70 level. On the daily and weekly charts the longer-term downtrend remains in effect.
• Support: 1187 (S1), 1155 (S2), 1082 (S3).
• Resistance: 1224 (R1), 1251 (R2), 1268 (R3).
Oil
• WTI broke below the 98.90 on Tuesday, but today is moving slightly upwards. If the price finds resistance at the 98.90 (R1) level and the bears manage to take control, we may experience extensions towards the support of 97.25 (S2), which coincides with the 38.2% Fibonacci retracement level of the 92.00-100.60 advance. On the other, hand a continuation of the rise above 98.90 (R1) might challenge once again the 100.60 (R2) resistance level. Our momentum studies provide mixed signals. The MACD oscillator lies below its trigger line and managed to obtain a negative sign, while the RSI rebounded near its 30 level and moved upwards. As a result I remain neutral on WTI until the picture becomes clearer.
• Support: 97.25 (S1), 95.35 (S2), 94.00 (S3).
• Resistance: 98.90 (R1), 100.60 (R2), 101.90 (R3).
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Market Analysis 03/01/2014
Daily Commentary 03.01.2014, Time of writing: 03:30 GMT
The Big Picture Starting the year with mean reversion:
The new year began with the reversal of last year’s trends. Looking at the G10 currencies, most of the movement was mean reversion: the currencies that gained in December lost, and those that lost (notably the yen) gained. (AUD was the only G10 currency to buck the trend, eking out a small gain on top of December’s 2.1% rise.) The mean reversion trend was not so great in the EM currencies, though, with only 13 out of 22 EM currencies that we track following this pattern. It held in other markets though as gold rallied and stocks generally declined around the world. US bond yields declined and the Fed Funds rates expectations eased one or two bps further in the long end.
The beginning of the year is by no means a guaranteed indicator of what’s to come. Last year USD/JPY hit its lows for the year on 1 January and its high on 31 December. The S&P 500 hit its 2013 low on 8 January and its high on 31 December. EM equities hit their highs for the year on 3 January (lows on 24 June), while EM bonds also hit their highs for the year in early January. Gold’s high was 22 January, its low 19 December. On the other hand, the dollar overall didn’t bottom until 2 February (as measured by the DXY index). Nonetheless, the 1.2% decline in EM stocks yesterday bodes ill for EM currencies this year, particularly as it went along with lower US Treasury yields. That suggests the Fed’s tapering is starting to hit sentiment towards EM (Asian ex-Japan stock markets are lower this morning as well). So far, the market’s expectation of dollar strength this year is indeed playing out. The case looks particularly strong for the dollar to rally against the EM currencies as the Fed’s tapering draws liquidity away from those countries.
On Friday, the calendar includes several releases from the UK. The nationwide house price index (which will be released by the time this comment is published) is expected to have risen 0.7% mom in December, an acceleration from 0.6% mom in November. Construction PMI for December is forecast to fall slightly to 62.0 from 62.6 in November, but mortgage approvals for November are estimated to rise to 69.7k from 67.7k in October. Such figures would corroborate the idea that Britain’s housing boom continues unabated, which is likely to support GBP.
Elsewhere, Eurozone’s M3 annual growth is estimated to have accelerated to 1.5% yoy in November from 1.4% yoy in October. Nonetheless on that basis the 3-month moving average would slow to 1.7% from 1.9%. The main point of interest will be whether bank lending starts to turn up. It’s been falling on a yoy basis since May 2012and the pace of decline has been accelerating, not decreasing. This must be a big concern for the ECB. Continued deceleration in money growth and contraction in credit should eventually push the ECB to taking further steps to loosen monetary policy. This divergence of policy with the Fed is what we believe will drive EUR/USD lower this year. Italy’s preliminary CPI for December is estimated to have risen 0.3% mom in December, a turnaround from a revised -0.3% mom in November. Outside the Eurozone, Switzerland’s manufacturing PMI for December is estimated to fall slightly to 56.2 from 56.5.
We have four Fed speakers during the day. Fed Chairman Bernanke addresses the American Economic Association annual meeting. Philadelphia Fed President Charles Plosser speaks on “Transitioning from a low interest rate environment”, Federal reserve Governor Jeremy Stein speaks on “Banks as Patient Debt Investors” and Richmond Fed President Jeffrey speaks on the economic outlook.
The Market EUR/USD
• EUR/USD fell sharply yesterday, breaking the short-term blue uptrend line. The fall was stopped by the 1.3625 (S1) support barrier. A downward violation of that level may argue that the recent uptrend has finished and we may experience extensions towards the next support level at 1.3540 (S2). On the other hand, a rebound near the 1.3625 (S1) support would confirm a trading range between that barrier and the resistance at 1.3810 (R2).
• Support: 1.3625 (S1), 1.3540 (S2), 1.3400 (S3).
• Resistance: 1.3730 (R1), 1.3810 (R2), 1.3893 (R3).
EUR/JPY
• EUR/JPY moved significantly lower after failing to overcome the psychological resistance barrier of 145.00 (R2). The pair violated the blue support line and is now trading below the resistance of 142.80 (R1). We may see the price moving lower to challenge the support level of 140.88 (S1). The MACD oscillator, already below its trigger line, entered its negative territory, confirming the recent bearish momentum.
• Support: 140.88 (S1), 139.67 (S2), 138.00 (S3).
• Resistance: 142.80 (R1), 145.00 (R2), 147.00 (R3).
GBP/USD
• GBP/USD moved significantly lower after getting a taste of the key 1.6600 (R2) level. The pair penetrated below the 1.6465 (R1) barrier and is now consolidating slightly below it. The rate is trading above the blue uptrend line with the 50-period moving average still above the 200-period on, thus technically, the short-term uptrend remains intact. Nonetheless, we can identify a bearish engulfing candlestick pattern on the daily chart and observe negative divergence between the daily MACD and the price action, so we should be cautious as the trend is losing momentum.
• Support: 1.6395 (S1), 1.6320 (S2), 1.6260 (S3).
• Resistance: 1.6465 (R1), 1.6600 (R2), 1.6735 (R3).
Gold
• Gold moved higher, breaking above the 1224 level. If the bulls are strong enough to maintain the price above that barrier, I would expect them to drive the battle higher and challenge the resistance hurdle of 1251 (R1). Relying on our momentum studies does not seem a solid strategy. The MACD remains above both its signal and zero lines, but the RSI is still finding resistance near its 70 level. On the daily and weekly charts the longer-term downtrend remains in effect.
• Support: 1224 (S1), 1187 (S2), 1155 (S3).
• Resistance: 1251 (R1), 1268 (R2), 1290 (R3).
Oil
• WTI collapsed on Thursday, after confirming the validity of the 98.90 (R2) resistance barrier. The plunge was halted by the 61.8% Fibonacci retracement level of the 92.00-100.60 advance. The MACD oscillator lies below both its trigger and zero lines, while the RSI lies within its oversold area, thus we may experience some consolidation or an upward corrective wave before the bears prevail again. The 50-period moving average remains above the 200-period moving average, but is pointing downwards. A bearish cross in the near future may increase the possibility of establishing a new short- term downtrend.
• Support: 95.35 (S1), 94.00 (S2), 92.00 (S3).
• Resistance: 97.25 (R1), 98.90 (R2), 100.60 (R3).
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