Having rallied sharply on Monday, crude price went sidewaysin the morning session of Asian trade.Brent crudeprice hit one-year high at $53.72 per barrel,while U.S light, sweet crude WTI re-attempted the highest in six months at $51.58 per barrel. The rally came from comments from top leaders of Saudi Arabia and Russia, who reinforced the possibility of a global deal to curb production being reached in the next OPEC’s formal meeting in November.
However, Goldman Sachs, in a note to clients dated October 10th, supposed that the oil market is not likely to re-balance in 2017, even OPEC and other oil exporters can unleash an agreement to freeze or cut output. It is not only because any reduction will not be deep enough to trim the currently global surplus, but also since higher prices would allow U.S. shale drillers to raise output.
Moving on to China, Premier Li Keqiang said on Tuesday that Chinese economy had shown positive changes in last quarter, and the country's debt risks have been under control. Li also claimed that the world’s second largest economy is fully capable of maintaining medium- to high-speed growth and the government will take action to stabilize the property market.
Commenting on the case of the U.S Federal Reserve to raise rate in December, Fed ChicagoPresident Charles Evans said on Tuesday he "could be fine", but he would prefer to seemore evidences ofthe economy andespeciallyinflation making progress before deciding.Evans saidlast Friday'snon-farmpayrolls report was a "pretty good number",which indicated the U.S. economy was on a solid footing, therefore,a hike in December would not be a surprise.
Fig: EURCHF H4 technical chart
EURCHF has generally been on a steady rally as the pair has been supported by two moving averages placed below the price action. As can be observed from the price chart, since the start of this month, the pair has never dropped below the lower dynamic support which is the long-term MA50. The market remains in the bullish zone with RSI once again rebounding from the 50-line. The target at 61.8% level is within the sight.
Buy Stop at1.09500, Take profit at1.09775, Stop loss at1.09300
Fig:USDCADH4 technical chart
USDCAD has just pulled back from the upwards slopping trend line that has connecting higher lows since September 07th. The pair peek out of the support yesterday but failed to sustain the bearish momentum. The U.S dollar is anticipated to surge back above the two moving averages. As can be seen from the stochastic chart, the % K line penetrating the %D line from below has consolidated the upside.
Buy Stop at1.32000, Take profit at1.32310, Stop loss at1.31750
Fig:USDCHFH4 technical chart
For the third time of this month, USDCHFsurpassed the resistance at 0.98170. The currency pair had to give up its rally and reversed downwards back below this level two times before as market had been close or in the oversold territory. This time, even the U.S dollar has already made a breakout, RSI index has only surged to 65.44, which indicated that there is more room for the pair to soar higher. Higher lows and higher highs also reflects stronger bulls, not to mention the divergence between +DI and –DI lines of the ADX chart.
Buy Stop at0.98400, Take profit at0.98840, Stop loss at0.98000
Fig:SILVERH4 technical chart
Silver has been trading under indecisive mood following some corrective moves last Friday. Silver market has escaped fromthe overbought zone but is still in favor of sellers, as indicated by the RSI chart. The grey metal is expected to return to the downtrend as it remains challenging for silver price action to cross over the short-term MA20.
SellStop at17.600, Take profit at17.400, Stop loss at17.800
Fig:COPPERH4 technical chart
Copperhas fell into a consolidation after soaring strongly since last Friday. Recent candles that showed short bodies suggested an equal force between buyers and sellers. However, bulls are expected to regain strength to boost price higher. Not only does RSI remain above 50 but the large gap between +DI and –DI line suggest upbeat moves.
Buy Stop at2.1980, Take profit at2.2150, Stop loss at2.1845
Fig:DOW JONESH4 technical chart
For the last month, U.S Dow Jones index has been moving in a shrinking range with lower highs and higher lows. The index breached the upper boundary yesterday but could not go far from the downtrend lineand eventually fell back into the range. As consolidated by stochastic indicator with %K line crossed over the %D line southwards, Dow Jones may fall further.
Sell Stop at 18.29500, Take profit at 18.20000, Stop loss at 18.40000
Asian shares declined for a fourth day after a Wall Street’s sell-off on Tuesday. Not only did a stronger dollar weigh on multinational companies, but a gloomy start of the earnings session knocked down investor confidence in stock markets. The Dow Jones fell 1.09%, to 18,128.66, the S&P 500 lost 1.24%, to 2,136.73 and the Nasdaq Composite dropped 1.54%, to 5,246.79, led by 11.4% decline in Alcoa’s shares.
Lower oil prices were also one of factors dragging down equity markets yesterday. Crude oil finished lower on Tuesday amidst concerns that Russia will not be fully committed to an OPEC deal to curb oil output, even after Russian President Putin had pledged to join the cartel to re-stabilize the oil market.
Topping up to comments by Russia’s Energy Minister Alexander Novak that his country is currently only considering output freeze option, not production cut, Igor Sechin - the Executive Chairman of oil giant Rosneft - said his company will not trim or freeze output as part of a possible agreement with OPEC.
All major Asian benchmarks ticked lower today. The MSCI Asia Pacific Index dropped 0.4%. Hong Kong’s Hang Seng Index and the Shanghai Composite Index declined 1.1% and 0.3%, respectively. The British Pound bounced back 1.5% against the greenback on the news reported by Bloomberg that Prime Minister Theresa May had accepted the participation of Parliament in the decision on when to trigger the two-year period of negotiation with the EU regarding the departure of the U.K.
Britain’s Parliament will debate on Wednesday to gain the right to “properly scrutinize” the government’s plan for leaving the EU before PM May begins formal talks. If it wins, the triggering of Article 50 of the Lisbon Treaty, which starts the exit process, may be delayed compared to May’s initial plan as most parliamentarians are in favor of remaining within the EU.
Fig: USDJPY H4 Technical Chart
As can be observed from the chart, the pair USDJPY has resumed its uptrend after crawling back from near 104.100 handle. Recent candles have long lower shadows and nearly no upper shadows, which suggested that the pair may have bottomed out. Bulls which are still dominating the market, have stepped in to support the pair from lows. The fact that %K line has crossed over the %D line from below has consolidated upbeat moves.
Buy Stop at 103.650, Take profit at 104.100, Stop loss at 103.300.
Fig: AUDUSD H4 Technical Chart
The Aussie pulled back from near 38.2% retracement but the upside seem limited as the pair is struggling with two MAs lingering above the price action. Lower lows since the end of September and consistent reversals upon coming up against the moving averages have indicated strengthening bears. RSI is close to the 50 line and is likely to pull back like it did on Monday. The support at 38.2% level is within sight.
Sell Stop at 0.75750, Take profit at 0.75300, Stop loss at 0.76100
Fig: GBPNZD H4 Technical Chart
GBPNZD has been under heavy downward pressure exerted by the two MAs placed above the price action. The short-term MA20 that forced the pair to reverse lower yesterday, continued to push the pair lower today. With the RSI remaining in bearish territory and pointing towards the oversold zone, GBPNZD is expected to test the low at 1.71400 again.
Sell Stop at 1.73050, Take profit at 1.71400, Stop loss at 1.74000
Fig: BRENT H4 Technical Chart
Brent crude extended its rally after the price fell from one-year highs at around 53.72. Thanks to the dynamic support from the MA20, the market pulled back again and is heading upwards to re-attempt the resistance at 53.36 which is the 61.8% Fibonacci level where it had to give up its strength and reverse lower. Along with the stochastic chart that has shown the convergence of the %K line and %D line, the ADX chart where ADX index surged above 20 are factors consolidating the uptrend.
Buy Stop at 52.70, Take profit at 53.35, Stop loss at 52.00
Fig: Natural Gas H4 Technical Chart
Having soared above the 38.2% retracement at 3.187 to as high as 3.300, Natural gas trimmed its rally as the one way move may have exhausted bulls for now. Too many buyers created an overblown market vulnerable to reversals, as everyone who wanted to buy may have already bought. Sellers, therefore, jumped in and pushed the price back down. But as can be seen from the chart, all of the recent candles have closed at the same/similar levels, which suggested that bears could not dampen the price lower. Hence, this may be a possibility for a reversal back into an uptrend.
Buy Stop at 3.230, Take profit at 3.300, Stop loss at 3.200
Fig: Euro Stoxx 50 H4 Technical Chart
Euro Stoxx 50 has generally been following an uptrend supported by a couple of moving averages hovering below the price action. The index has reversed consistently after hitting highs, but we can observe higher highs and higher lows, which suggests that buyers are the overwhelming force currently. As the RSI index has bounced back from the dividing line between bullish and bearish territory, Euro Stoxx 50 may re-attempt the high at 3061.00 logged on September 22nd.
Buy Stop at 3030.00, Take profit at 3061.00, Stop loss at 3010.00
OPEC Output Report Dilutes Prospects of A Production Deal – Powerful Opportunity For Sellers
WTI crude oil plunged on Wednesday, extending losses after hitting six month highs at around $51.58 per barrel recorded on Monday. Crude prices plummeted after the OPEC published its production data for September. On top of the fact that the cartel’s oil output last month reached eight-year highs, the report sapped investor confidence in a potential production cut/freeze deal by reporting data that conflicts with information provided by individual member countries.
While some members such as Saudi Arabia, Iraq and Venezuela said they pumped more oil last month than what has been reported, Nigeria said its production was lower and Iran declined to report its numbers. Markets are showing concerns over the possibility of any real agreement on a production ceiling, and the details of the specific quota for each member, which will be discussed next month.
The question is how can OPEC reach a consensus on how much each country should pump if the cartel cannot accurately estimate the production of each member?
Sell Stop at 49.95, take profit at 49.10, stop loss at 50.20
Gold Moves Indecisively Ahead of FOMC Meeting Minutes – Will 1250.00 Threshold Be Broken?
Gold rose in the early part of the Asian trading session in the wake of a retreating U.S dollar, but has been edging lower in early European trading hours as the greenback claimed back its strength ahead of the release of the minutes from the September FOMC meeting, which are due to be released later today.
The precious metal has lost about 10% compared to the 28 month peak level of $1375.00 per ounce recorded in early July this year. Particularly, since September 28th, gold has dropped more than 6.7% amid signs of improving U.S. economic data and hawkish comments from Fed officials that have fueled expectations that the U.S Federal Reserve will raise interest rates by the year end.
Minutes from the September meeting of the Federal Reserve Open Market Committee (FOMC) are scheduled to be released at 18:00 GMT on Wednesday. At the last meting, policy makers left the federal funds rate target unchanged and maintained the target range of 0.25% to 0.5%. However, 3 of the 10 voting members of the FOMC including Boston Fed President Eric Rosengren had dissented the decision, and voted for a rate increase instead.
Rosengren has been considered as being dovish for a long time, as he has supported ultra-low rates in order to push down unemployment. With the number of new jobs added remaining steady month after month, and the jobless rate at or below 5 percent so far this year, Rosengren urged his colleagues to tighten policy to avoid overheating the labor market and triggering inflation.
The minutes are expected to provide markets with more details about the division within Fed officials. A hawkish leaning within the Fed, may cement the likelihood of a hike in December and consequently push up the U.S dollar. Traders have priced in only an 8.3% probability that the Fed will raise rates at its November meeting, but the chance of such a move by mid-December has risen to nearly 70%, according to the CME’s Fed Watch Tool.
The yellow metal is highly sensitive to U.S. interest rates. Not only will a strengthening greenback reduce gold’s appeal as it makes the dollar-denominated asset more expensive for investors holding other currencies, but higher yields from interest-bearing assets such as bonds will also dampen the metal’s competitiveness.
As stated by the Associated Chambers of Commerce of India, the country’s gold imports declined by 58.96% to 270 tons in the period January to September 2016, from 658 tons that were imported during the same period last year. According to the research report, gold imports declined partly due to a prolonged strike by jewelers in March and April to demand a roll back of the 1% excise duty that was imposed on gold and silver jewelry.
Another reason for the downturn in Indian gold imports is the continuation of the 10% customs duty on import of gold bars, which has spurred smuggling of gold, leading to a decline in official imports and reported numbers.
GOLD technical analysis
Fig: GOLD D1 Technical Chart
Gold has been trading sideways for five trading days in a row above the 38.2% retracement level at around 1250.00. With the cautiousness on the fundamental side, and the fact that the gold market has entered the oversold zone, sellers have restrained the downward push and are simply waiting it out. If the minutes are not in favor of the precious metal, gold can breach the 38.2% level and collapse to as low as the 50.0% level.
Sell Stop at 1249.50, Stop loss at 1265.00, Take profit at 1235.00
Asian shares slumped for the fifth trading session in a row, stumbling to three-week lows after an unexpected decline in Chinese exports raised fresh concerns about the health of the world’s second biggest economy. MSCI's broadest index of Asia-Pacific shares outside Japan dropped 1% to the lowest since mid-September. Other Asian stock indices such as Hong Kong’s Hang Seng index, and the Japanese Nikkei 225 also fell today.
According to the General Administration Customs - China, the country’s exports diminished by 10% in September from a year earlier while imports also witnessed a decline of 1.9% after a pickup in August. Worse-than-expected data left China with a trade surplus of $41.99 billion for the month – a level that missed the forecast for a surplus of $53.1 billion.
Minutes of the U.S. central bank’s September meeting, released on Wednesday reinforced the case for tighter monetary policy before the end of the year.
Against the background of weak Chinese reports suggesting tepid domestic and foreign demand, increasing expectations of a U.S. interest-rate hike and uncertainties spurred by Britain’s efforts to leave the European Union, the Japanese Yen has been rising in a knee-jerk reaction. A fall in equities gave a lift to the yen – one of the safe haven currencies which investors seek in times of market stress.
Oil extended losses following the report by the American Petroleum Institute that U.S. crude inventories rose by 2.7 million barrels to 470.9 million barrels in the week to Oct. 7. This would be the first rise in oil stocks following five straight weeks of declines. The U.S. Energy Information Administration (EIA) is due to publish official inventory data lateron Thursday.
Fig: AUDUSD H4 Technical chart
The Aussie is following a steady downtrend that has pushed AUDUSD to break below the 38.2% retracement level at 0.75255. The currency pair pulled back yesterday after encountering the resistance zone between two moving averages. These two MAs are expected to cast downward pressure on the pair for the near future and may send AUDUSD to as low as the 50.0% level.
Sell Stop at 0.75000, Take profit at 0.74550, Stop loss at 0.75300
Fig: NZDUSD D4 Technical chart
NZDUSD dropped below the 38.2% level on Monday and continues to head southwards through this week. After some correction yesterday, the Kiwi resumed the down moves today and is anticipated to find support at around0.69600. The RSI index has neared the oversold zone and the ADX has soared as high as 51.83. Therefore after hitting this level, a pullback could come about.
Sell Stop at 0.70400, Take profit at 0.69600, Stop loss at 0.71000.
Fig: EURJPY H4 Technical chart
As can be seen from the chart, EURJPY has re-entered the trading range between a lower boundary at 114.000 and the upper boundary at 116.000, where it had been trapped from late-August to mid-September. The pair is heading towards the support at 114.000 and may break through this level as the bearish signals are quite strong. The two MAsare verylikely to converge and are placed above the price action, the RSI index is pointing downwards, and there is wide divergence between the %K line and the %D line in the stochastic charts. All of this combines to suggest a powerful downtrend.
Sell Stop at 113.900, Take profit at 113.000, Stop loss at 114.500
Fig: GOLD H1 Technical chart
As can be observed from thehourly chart, the gold market has received a signal suggesting a reversal into an up-move as the 20-period MA has penetrated the 50-period MA from below. With the RSI indicator surging above the 50 line yesterday and heading upwards to the overbought zone,the yellow metal can soar as high as 1265.00.
Buy Stop at 1260.00, Take profit at 1265.00, Stop loss at 1253.00
Fig: Sugar H1 Technical chart
Sugar had to give up its strength after coming up against a couple of moving averages which are placed above the price action. The sugar market has been floating in bearish territory, as indicated by the RSI index that has inched down to as low as 44.36. The support at 22.50 can be where we take profit.
Sell Stop at 22.90, Take profit at 22.50, Stop loss at 23.20
Fig: NASDAQ 100 H4 Technical chart
The NASDAQ 100 index created a gap down at the market open on Wednesday. The index has fallen back into the trading range between 4840.00 and 4750.00 and might pay a visit to the lower boundary at 4750.00 as the short-term MA20 has crossed over the long-term MA50 from above, indicating bears overshadowing the market.
Sell Stop at 4780.00, Take profit at 4750.00, Stop loss at 4800.00
Shares of CSX Corporation rose more than 3% in after hours trading on Wednesday after the transportation services company reported better-than-expected quarterly earnings after the closing bell.
CSX’s third-quarter earnings fell to $455 million, or 48 cents a share, from $507 million, or 52 cents a share, a year earlier. Net profit for the railroad operator was hurt by the drop in revenue and freight volumes. During the three-month period through September, CSX’s revenue shrank 8% to $2.71 billion compared to the same quarter one year ago. Still, the results came in above market expectations of 45 cents EPS, on revenue of $2.69 billion.
The U.S’s third largest railroad transportation company observed a total decline of 8% in shipping volume across most of its goods categories including metals, equipment business and coal. Among decliners, coal shipments posted the worst performance, slipping 21% as a result of oversupply in the world market and a stronger U.S. dollar that made U.S. exports more expensive overseas.
Additionally, plunging fuel prices and increasing use of natural gas that is being encouraged by the government are putting pressure on coal demand and coal shipments. As natural gas produces less carbon dioxide than coal when burned, the U.S government has planned to get off coal used by power plants, to reduce emissions.
However, the Florida-based company’s third quarter’s data still bettered forecasts thanks to strong cost performance and productivity measures. The bottom line was helped by 6.8% cut in expenses, driven by $112 million of efficiency gains and $53 million of volume-related cost reductions.
Shares of CSX Corp have been on a decline after reaching 15-month highs at around 31.28. In general, the shares are trading above the 20-day and 50-day MAs and the market is still in favor of buyers, as indicated by the RSI chart. Share prices are expected to reverse today, partly due to fundamental factors, but also because the price action has neared the short-term DMA20.
CSX Trade suggestion
Sell Stop at 31.00, Take profit at 30.50, Stop loss at 30.00
Natural Gas Screams to Record Highs On Smaller-than-expected Rise in U.S. Stocks– Buy Call Options
Natural gas prices turned sharply higher Thursday following a two-day slide. The commodity hit the highest since December 2014 at $3.347 per million British thermal units after the U.S. Energy Information Administration reported that natural gas supplies rose 79 billion cubic feet for the week ending Oct.7th.
The increase in stocks was below analyst estimates that had called for a rise of 87 billion cubic feet.
According to the report, total stocks now stand at 3.759 trillion cubic feet, up 56 billion cubic feet from a year ago and 192 billion cubic feet above the five-year average.
Buy Stop at 3.350, Take profit at 3.380, Stop loss at 3.320
Copper Plunges As Demand Falls, Risk Of Supply Glut Rises – Short Positions Encouraged
Copper has been slumped for the most part of the week, collapsing nearly 4% after reaching intra-week high at $2.2018 per pound on Monday. The commodity market is forecast to witness more decline as it is going to confront with significant supply glut and dropping demand in the coming months.
Copper witnessed the biggest one-day loss on Thursday since June 07th, after the Chinese General Administration Customs reported worse-than-expected exports and imports data for September. According to the report, China’ exports diminished by 10% in September from a year earlier while imports also witnessed a decline of 1.9%, which spurred concerns over weak demand for goods both in China and many other parts of the world such as the U.S., Europe and much of Asia.
Demand for copper imports of China was also reported to decelerate last month to the lowest in more than a year. China’s imports of the red medal fell by 26 percent from a year ago to 340,000 tons in September, which is the lowest since at least August 2015. On a monthly basis, imports to the world’s leading copper consumer dropped by 2.9%.
On the supply side, commodity analysts at Goldman Sachs said that considering the rise of supply, copper prices would be under downward pressure over the next three to six months.
In a separate report by BMI Research, the research firm forecast Iran’s mining industry will resurge after years of Western sanctions. According to BMI, foreign investment will help accelerate Iran’s mining sector as the Middle-Eastern nation possesses vast underdeveloped reserves but is still looking for modernization and new technology.
Iran’s copper output is expected to outperform in the coming years and reach the growth rate of 13% each year top 500,000 tons by the end of the decade.
In a week, copper has breached through two important Fibonacci levels - the 38.2% and 50.0% , to fall as low as 2.1120. The price action also has also crossed below both the long-term DMA50 and short-term DMA20 from above. The market is under pressure from two MAs placed overhead, and the overwhelming strength of sellers in the market. Copper prices are approaching the 61.8% handle at 2.0860. The RSI is also heading towards bearish territory, providing further confirmation for the down-move. Trade suggestion Sell Stop at 2.1120, Take profit at 2.0860, Stop loss at 2.1400
Asian stocks bounced back on Friday, but were still heading for the biggest weekly decline in almost a month. Shares erased some losses from the start of this week, thanks to the rally in oil prices that boosted energy sector stocks, and stronger-than-expected Chinese inflation data which helped ease concerns about the health of world's second-biggest economy.
After triggering chaos in global stock markets by reporting a steep drop in exports and imports in data released yesterday, China once again set the tone for the markets, but in the opposite direction. Chinese producer prices unexpectedly rose in September for the first time in nearly five years, thanks to stronger commodity prices.
Meanwhile, China’s consumer inflation also beat expectations, accelerating more than expected to 1.9 percent in September compared to the same month last year. The price rise was mainly due to higher food prices. On a yearly basis, Chinese food prices added 3.2 percent in September, topping a 1.3 percent gain (year-on-year) in August.
Oil turned higher even though the U.S. Energy Information Administration on Thursday reported that U.S. crude stocks rose for the first time in six weeks. Crude stockpiles in the U.S swelled by 4.9 million barrels in the week to Oct. 7th .Total inventories rose to 474 million barrels, but distillates, which include diesel and heating oil, dropped by 3.7 million barrels and gasoline fell by 1.9 million barrels.
Also in the U.S, filings for unemployment benefits were reported to be at a four-decade low over the past two weeks. According to the weekly report by the U.S Department of Labor, jobless claims were 246,000 in the week ended October 8th, remaining below 300,000 for 84 straight weeks and indicating a healthy labor market.
Fig: EURCHF H4 Technical chart
EURCHF pulled back from two-week lows at 1.08687 on Thursday but failed to surpass the 50.0% retracement level at 1.09093. The currency pair crawled back to the downside as it is still under the downward pressure of the two moving averages placed above the price action. Down moves are being supported by indicators. As can be observed from indicator windows, while stochastic lines are pointing downwards, the RSI index has also retreated to as low as 38.42.
Sell Stop at 1.08900, take profit at 1.08520, stop loss at 1.09100
Fig: EURUSD H4 Technical chart
EURUSD broke out of the recent trading range on Tuesday and fell below the 50.0% retracement at 1.10573 on the same day. The pair plummeted to as low as 1.09847 yesterday, before buyers stepped in and liberated it from the oversold zone. However, a brief correction was not enough to support the pair back above the 50.0% level again. In the event of a continual downtrend, the pair may find support at the 61.8% handle.
Sell Stop at 1.10200, take profit at 1.09800, stop loss at 1.10600
Fig: AUDUSD H4 Technical chart
We have seen a strong rally in the Aussie that lifted the market from the 38.2 level to near the 23.6% level. Nonetheless, those rapid up moves also sent AUDUSD into the overbought territory and prompted bears to jump in and push the pair down back below the long-term MA50. The %K line has reversed lower to penetrate the %D line from north to south, but we may need to wait for a confirmation from the RSI index which has reached but not surpassed the 50 line yet.
Sell Stop at 0.75650, take profit at 0.75250, stop loss at 0.76000
Fig: SILVER H4 Technical chart
Silver has been trading sideways to lower above the 50.0% Fibonacci level since the start of this week. The metal has consistently been pressurized by the short-term MA20 placed above the price action. However, bears have failed to make a breakout below the 50.0% retracement level at 17.416. With U.S data coming out later today, the silver market is anticipated to escape out of the thin trading range it has been in recently. Better-than-expected numbers may push silver to retest last-week's lows at 17.090
Sell Stop at 17.390, take profit at 17.090, stop loss at 17.500
Fig: WTI H4 Technical chart
U.S crude prices have still remained within an overall uptrend, after having suffered losses earlier this week. Having bounced back from the lower band of the Bollinger range, the price action has moved towards the middle band and has just crossed over the middle band (which is also the 20-period MA20). WTI is expected to keep moving upwards since the market continues to enjoy bullish momentum, as indicated by the RSI chart. The upside may be contained by the 0.0% level which is very close to the upper band of the Bollinger range.
Buy Stop at 50.85, take profit at 51.55, stop loss at 50.30
Fig: FTSE 100 H4 Technical chart
U.K’s FTSE 100 index surged above 7000.00 again following a drop below this level yesterday. The index extended Thursday’s gains and looks set to trade above the short-term MA20 after crossing over the long-term MA 50 from below, on Thursday. As can be observed from the stochastic chart, the %K line is moving far ahead of the %D line, suggesting further upside moves.
Central Bank Meetings Back In Focus, Busy Week for British Pound
U.S stocks were almost unchanged on Friday after paring earlier gains in the second half of the session. At the close, the Dow Jones Industrial Average rose 0.22%, while the SP 500 index and the NASDAQ Composite index finished just above break-even.
Financials led advancers as JPMorgan Chase, Wells Fargo and Citigroup, all reported third-quarter earnings data before the opening bell, and posted better-than-expected quarterly results. Stock investors were taken for a choppy ride this week, with sentiment largely driven by Chinese economic data, U.S earnings reports, and comments from the U.S Federal Reserve about the possibility of a move on interest rates this year.
The second presidential debate between Democrat Hillary Clinton and Republican Donald Trump started the week-gone-by without causing any significant moves on the major markets as investors continue to retain their view that Clinton holds an edge going into presidential election against her Republican rival. The only real market that witnessed some major moves based on the progress of the candidates was the USD/MXN(Mexican Peso) cross. The Mexican Peso rallied strongly against the USD after the Trump campaign was hit by the sexual harassment allegations against Trump.
The past week also witnessed the return of Chinese traders after a week-long break, and was marked by a significant drop in the local currency. The Chinese Yuan dipped to a six-year low against the U.S dollar last Monday, after the central bank’s announcement that the country’s foreign exchange reserves dropped more than expected in September. This drop in reserves marked a decline for the third month in a row and once again rang alarm bells over capital outflows from the world’s second-largest economy.
Chinese economic data for September set the tone for markets in the second half of the week ending on October 14th. While Thursday’s disappointing export-import data spurred concerns over weak demand in both China itself and other parts of the world such as the U.S, Europe and most part of Asia, Friday’s better-than-anticipated inflation results helped ease worries about the health of Chinese economy and spurred a bounce back in stock markets.
The U.S dollar continued to sustain its strength and finished the week higher against most of its peers as solid data on U.S. retail sales and producer prices reinforced the list of data releases supporting perceptions of a reasonably strong US economy and also reinforced perceptions of inflation making progress towards the central bank’s target.
As stated by the Census Bureau on Friday, sales at U.S. retail stores rebounded to 0.6% in September, after declining 0.3% in August. Core retail sales that strip out sales of automobiles also posted a gain of 0.5%. The data was in line with expectations. Producer prices and core producer prices, increased 0.3% and 0.2%, respectively, which were stronger than the market’s forecast.
Positive figures are believed to nudge a data-dependent Fed closer to a rate hike decision in the coming months. In an interview with The Wall Street Journal on Friday, New York Fed President William Dudley stated that he expected a rate rise to come as soon as this year.
Dudley’s remarks followed comments earlier in the day from Fed Chair Janet Yellen that indicated that the Fed might want to let inflation run hot for a while. Faced with an unusual situation of weak demand against strong supply, Yellen supposed that the central bank may be inclined to maintain easier monetary policy for longer. The comments were considered as dovish, but markets were not seeing them as a reason for the central bank to back-off from raising rates by year end.
Looking ahead to the coming week, investors focussing on the U.S dollar will be waiting for multiple economic data releases through the week. September consumer price data is due to be released on Tuesday. Building permits data is slated for Wednesday. Speeches by Fed officials including Fed Vice President Stanley Fischer and New York Fed President William Dudley are also scheduled in the week, in addition to the regular economic releases released every week such as Jobless Claims and Energy Inventories Data.
Moving on to the EU, the EUR observed the most severe weekly loss since the week ending June 24. The euro dropped below 1.10000, collapsing to the lowest since July 27th versus the U.S dollar amidst talks about the European Central Bank extending the QE at next week’s meeting. ECB President Mario Draghi has continuously stated that ECB policymakers are comfortable with the current level of stimulus, but may be willing to increase it anytime, if the economy weakens and demands a bigger stimulus.
At the last ECB meeting, President Draghi expressed more confidence about the outlook for the Eurozone economy, and even stated that the central bank had not discussed about changes to the QE program. Interest rates are expected to remain unchanged at the ECB meeting on Thursday. However, if Mario Draghi reinforces his concerns about the economy and puts greater emphasis on the need for more stimulus, further losses in the euro currency are likely.
Over in the U.K, the Sterling will also be under the spotlight next week given a busy economic calendar. From Tuesday to Thursday, the British pound will be affected by the results of data on inflation, average earnings, retail sales and employment numbers.
Above all, the outcome of the British High Court’s proceedings regarding the participation of the U.K Parliament in negotiations on the future EU-U.K. relationship will also exert significant effect on the GBP and the London Stock Exchange, not to mention indirect effects on the Euro Currency and European Stock Markets as well.
Last week, Prime Minister May made a concession to allow the Parliament to scrutinize the government’s plan for leaving the EU before she begins formal talks. However, PM May argued that she has the sole right to determine when Article 50 is invoked. In case the court finds that Parliamentary approval is needed, it would delay the process beyond the first quarter of 2017, as most parliamentarians are in favor of remaining within the EU. Nevertheless, regardless of the outcome from the high court, the case is likely to be sent to the Supreme Court, which may hear the case before the end of the year.
Out in Canada, the CAD traded higher this week as oil prices hovered near 4-month highs. No major economic reports were released during the past week, so a rise in crude prices played a key role in sustaining the Canadian dollar’s strength against its American counterpart. However, next week the focus will return to the Canadian economy, when its central bank will announce its rate decision on Wednesday. Prior to the Bank of Canada’s meeting, readings on August’ manufacturing sales will be released on Tuesday. Economic data on Canadian retail sales and inflation will round up the week for the CAD.
While the Australian dollar closed the week above the flatline, the Kiwi extended losses for the second consecutive week. In the coming week, the New Zealand dollar will take a back seat as only CPI data is due for release. In Australia, the minutes from the last central bank meeting will be released ahead of September data on the labour market. Another set of data releases that are likely to have a significant impact on the Australian dollar include Chinese third-quarter GDP data, as well as Chinese retail sales and industrial production numbers, that are slated to be published on Wednesday. Start Trading Forex, Indices, Commodities And Hundreds of Other Markets With Capital Street FX Now!
Asian shares retreated on Monday along with oil prices while the U.S dollar held on to its strength against a basket of major currencies. The greenback extended its gains following strong data on U.S retail sales and producer prices for September, that was released on Friday that reinforced expectations of a December interest rate hike by the Federal Reserve.
Also contributing towards supporting the U.S dollar index to seven-month highs, were U.S Treasury yields, that were at over-four-month highs after Federal Reserve Chair Janet Yellen suggested the Fed may allow inflation to exceed its 2 percent target. Higher U.S. bond yields attract more foreign investors, consequently pushing demand for the U.S dollar up.
Fed Vice Chair and FOMC member Stanley Fischer is due to deliver a speech today after the release of September industrial output data, while the earnings season will continue with big names including the U.S’ second largest lender by assets Bank of America Corporation and New York-based technology company International Business Machines Corporation reporting third quarter results today.
Oil prices dropped early on Monday, weighed by rising rig count in the United States. Coming on top of record OPEC-output that triggered renewed fears of global glut, a closely watched report by oil services provider Baker Hughes on Friday showed four oil drilling rigs were added in the week to October 14. This marked the 16th consecutive week of a rise in the oil rig count, which indicates increasing production within the US too.
Elsewhere, Bank of Japan Governor Haruhiko Kuroda said on Monday that the central bank will adjust monetary policy as needed to achieve its 2 percent inflation target. In its monetary policy meeting last month, the BOJ announced a shift in its focus towards interest rates, instead of expanding the monetary base further, after years of massive money printing and asset purchases, which have failed to pull the economy out of stagnation.
Fig: EURNZD H4 technical chart
The New Zealand dollar has been on a rally against the Euro for almost a week. The pair has breached the support at 1.55500 on Friday and may make a breakout below the upward sloping support trendline connecting the higher lows. Signaling further down moves, the short-term MA20 has crossed over the long-term MA50 from above. RSI that dipped as low as 31.62 and ADX index that has reached 38.44 consolidated the downside.
Sell Stop at 1.54400, Take profit at 1.53400, Stop loss at 1.55000
Fig: GBPJPY H4 technical chart
After a period of time moving sideways between the support at 130.000 and the resistance at 132.300, the pair fell out of the range and sustains its down moves. The British Pound has been weighed down by the short-term MA20 and has stayed within the bearish territory for two weeks, as can be seen in the RSI indicator window. The continuation of the downtrend may bring the pair to as low as 125.300.
Sell Stop at 126.500, Take profit at 125.300, Stop loss at 127.700
Fig: AUDUSD H4 technical chart
AUDUSD peeked out of 23.6% retracement on Friday but failed to sustain the bullish sentiment to push the pair higher. The Aussie pulled back below this level but bottomed out around 0.75800 and is approaching the 23.6% handle again. RSI is moving sideways above the 50 line, indicating a strong bull in the market. The pair is expected to breach the 23.6% resistance with support from two MAs.
Buy Stop at 0.76200, Take profit at 0.76450, Stop loss at 0.75800
Fig: GOLD H4 technical chart
Gold proved to be resilient against the support at 38.2% Fibonacci retracement. The metal did fell below this level twice before but buyers jumped in to buy the dips every time to support the price back up to its range. The price action has crossed over the short-term MA20 and the gold market has entered the bullish zone, as indicated by the RSI chart. Gold may reach the upper boundary at 1265.00 in case the upside extends.
Buy Stop at 1256.00, Take profit at 1265.00, Stop loss at 1249.50
Fig: WTI H4 technical chart
U.S WTI has been fluctuating widely since it hit the four-month highs at around 51.60. The commodity may resume its downtrend after some corrective moves which brought the pair back to above the 50.00 level, as the short-term MA20 has crossed over the long-term MA50 above. RSI index remains below 50 line and is pointing downwards to the oversold zone, suggesting further declines.
Sell Stop at 50.00, Take profit at 49.30, Stop loss at 50.40
Fig: NASDAQ 100 H4 technical chart
U.S Nasdaq 100 index has had a choppy trading session last Friday. The price action could not break out of the range between 4750.00 and 4840.00 and had to pull back after hitting the upper boundary. The level at 4840.00 also witnessed a failed attempt of the index to surpass the long-term MA50. A reversal into the downtrend has been confirmed by the stochastic chart where the %K line penetrated the %D line from above.