Market Overview
The US dollar remains strong as the positive US data releases begin to rack up and FOMC members lean hawkish. The ISM Non-Manufacturing data beat forecasts to join Monday’s beat on the ISM Manufacturing to show an improving sentiment for the US economy in the coming months.
Ahead of the Non-farm Payrolls report tomorrow, we have got US Treasury yields that are moving strongly higher, with a steepening yield curve (the spread between US 2-Ys and 10-Ys is widening) and this is helping to underpin the gains for the dollar. This is also being helped as FOMC members seem to be increasingly setting up the market for a December hike which is now around a 60% probablility according to CME Group FedWatch.
The stronger dollar is being seen across forex markets with the traction on dollar/yen a suggestion of improved investor sentiment. With oil prices also continuing higher the current outlook ahead of Non-farm Payrolls is that good news is good for markets. Safe haven assets are under pressure with precious metals also continuing to fall away, with equities supported.
Wall Street rebounded yesterday with the S&P 500 +0.4% and Asian markets also supported by a weaker yen (Nikkei +0.5%), all meaning that there is further support for European markets in the early moves today. In forex trading, the dollar is stronger against all of the major currencies today, with sterling again under pressure.
However, it is interesting to see the euro once more fighting hard, with the market seemingly finding a degree of support since the Bloomberg reports that the ECB may look to taper asset purchases. Gold and silver are trading mixed today with the dollar strength yet to impact too much, whilst oil is off by around half a percent, possibly on a little profit taking with WTI turning lower from $50 yesterday.
It is a very quiet day for economic data today with US Weekly Jobless Claims the only significant release, at 1330BST, with 255,000 expected which is basically in line with last week.
- USD/JPY – The bulls continue to gain ground with another overhead resistance having been overcome. Above 103.35 now opens the key September high at 104.30. The market is using the rising 21 hour moving average as the basis of support but there is also a near term support range 102.60/103.00 for corrections. (see below for more detail).
- AUD/USD – The Aussie has dropped back below the $0.7640/50 near term support which has now turned resistance for a rebound today. The daily chart shows an attraction towards a pivot at $0.7580 within what has become a near term range phase. Lower highs suggest rallies are being sold into. The hourly chart shows resistance at $0.7630 and $0.7645.
- AUD/NZD – A consolidation of the gains yesterday means that near term support at 1.0587 protects from a corrective move. However the hourly momentum indicators are in reverse and suggests pressure is building for a pullback. There is a support band 10.550/60.
- GBP/JPY – Gains for sterling yesterday has pulled the pair higher but there is still a sizeable resistance around 132.50 so the range play continues. There is though a slight bullish bias within the range with support now 131.35/50 as the near term momentum unwinds.
- USD/SEK – There is a mild positive bias within the range that is just pulling the price higher towards the near term ceiling around 8.6330. With 8.5540 supportive intraday dips are being bought into.
- US30 (Dow Jones Industrial Average) – The choppy range play continues the rally from just above the support at 18,100 has now brought the market back higher again towards the near term resistance at 18,370. Notice how the bearish engulfing hourly candles have called the top on recent rallies within the range, with another yesterday around the close.
- Silver – The bears remain in control with another negative move yesterday. However the market is now testing the long term uptrend which for now is holding around $17.50. The hourly chart shows there is resistance being formed around old support levels at $17.80 and $18.00 which would be a concern. The hourly RSI shows the bulls have lost control under 50/55 in the sell-off. Below $17.50 opens $17.07. Above $18.00 turns it around.
- Coffee – The support at 147.00 remains key as the market has rebounded. However the corrective configuration on the daily (and hourly) momentum indicators suggests that rallies continue to be seen as a chance to sell. 151.70 is a near term resistance with 154.95 still key. Further pressure on 147.00 is likely, with yesterday’s low at 146.80.
The euro seems to still be very resilient considering the dollar strength the market has seen in recent days. Despite another strong US data release (ISM Non-manufacturing PMI) the dollar still failed to gain the traction that would drive the market lower to test the support at $1.1120 again. The mixed outlook on the daily chart continues with another small bodied candle that suggests the market remains indecisive. A slight drift lower in the past few days has flipped the momentum indicators to marginally more corrective momentum but in reality the market simply continues to range sideways. The hourly chart shows that the hourly RSI continues to fail around 60, whilst there is an interesting consistent attraction for the price to come back towards $1.1200 which is bang in the middle of the $1.1120/$1.1280 near term range. Perhaps payrolls will be the catalyst needed for a decisive move.
After the selling pressure of the past week a short pause for breath was seen yesterday and a brief bounce. However in the larger scheme of things this move is very much counter to the bear pressure and likely to be seen as a chance to sell again. The market has now closed for two days clear of the old key support and floor of the medium term trading range and this suggests that the market is accepting the new levels. Technically the outlook is very weak with the momentum indicators bearishly configured, the RSI is around 30 but has historically been much lower than this during selling phases, whilst the MACD lines are only really just getting going to the downside. The hourly chart shows yesterday’s rebound turned back lower at $1.2770 with the overhead supply of the old range around $1.2800. A retest of $1.2683 is likely before further weakness into new 31 year lows.
USD/JPY
The recovery is impressive in recent days with the acceleration of the bounce that is now forming consistently strong bull candles. The resistance is getting ticked off one after another as the market pushes towards the key September high at 104.30. The momentum is increasingly strong with the Stochastics rising decisively and perhaps more importantly from a medium to longer term perspective, the RSI has pushed above 60 (which is an area where the rallies have tended to fail in recent months). The hourly chart shows a strong trend higher supported by the rising 21 hour moving average (c. 103.40) and strong configuration on the hourly momentum indicators that suggest any intraday dips are a chance to buy. The previous resistance at 103.35 could now become a basis of support, with a subsequent band 102.60/103.00. The big resistance is 104.30 and above this would constitute a bullish breakout that would have to be taken seriously.
Gold
Gold has now completed seven consecutive bearish candles as the decline continued yesterday. The candle posted may have only been a marginal $1 down on the day but the market continues to look towards the initial breakdown target at $1250. The momentum indicators are all now bearishly configured with the RSI now the most negative since November. This is not a range play, it is becoming a trending move, so the RSI would not necessarily bounce simply because it was oversold, it could stay around these levels for a while. This means that downside potential remains and with the Stochastics bearishly configured the market remains under pressure. Rallies will be seen as a chance to sell and yesterday’s rebound to $1277 has left resistance now under the neckline of the breakdown at $1300. The hourly chart shows the consolidation is helping to unwind the stretched momentum and 40/l50 on the hourly RSI seems to be an area where the sellers resume control. The next support below $1261.60 is the key low at $1251 and then the main top pattern target of $1225 before the key May low at $1200.
WTI Oil
Another strong candle was posted yesterday, supported by surprise drawdowns on the EIA crude oil stocks, distillates and gasoline. The market subsequently continues to push strongly higher and a test of the resistance band $50.00/$50.55 is now open. The RSI has pushed above 60 now and is increasingly strongly configured. A move above $50.55 would open the crucial resistance at $51.67. The hourly chart shows the consistent sequence of higher lows and higher highs since the OPEC production agreement. The initial support is at $49.10, whilst the key near term level the bulls need to hold on to in a correction is $48.30. The hourly RSI shows how corrections that unwind the indicator to 45/50 are being used as a chance to buy. Today’s initial dip could be a degree of profit taking with the market hitting the resistance and psychological barrier of $50, so watch out for supports to see if the positive momentum remains.
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