Market Overview
The dollar bulls have just had some of their recent profits shaved on the back of a slightly weaker than expected Non-farm Payrolls report on Friday. This looked to take some of the shine off the bull run which has been having such a big impact across major markets. The US is on public holiday today for Columbus Day whilst markets are also waking up to the implications of the second Presidential Debate in which there was no clear winner. However, the fact that Donald Trump was unable to claw back ground after a weekend of lurid headlines, would have been taken as slightly risk positive, but also mildly dollar positive too. However, as shown with the Mexican Peso, which some are calling the “Trump Trade”, the reduced threat of a Trump Presidency is a key factor in the movement on some emerging markets trades. Sterling remains under pressure as the volatility continues and concerns over a hard Brexit and the flash crash show no signs of receding quite yet. Equity markets in Europe have started mildly higher too, despite a mixed performance on Asian markets and a slightly weaker close on Wall Street on Friday.
Forex markets show the dollar is actually clawing back some losses, with the underperformance of sterling still an issue after Friday’s flash crash. With China back from a week long holiday, gold has found some support today with around $7 higher, with a rebound in silver too. The oil price started to dip back on Friday and this move has continued today on suggestions that Non-OPEC countries may not follow the example of the OPEC production cut.
There are no major economic events today.
Lucky 8 – FX Trader of the Year 2016 competition update
I am now moving on to look at a new set of Lucky 8 instruments for Week 2 of our competition that we are running throughout October. I will be giving daily updates on how the Lucky 8 instruments of the week are performing.
- GBP/USD – The market is yet to settle from the huge volatility but $1.2470 is a barrier and bearish momentum is likely to continue to weigh on Cable. A further slide back towards a low from Friday at $1.2223 could easily be seen. (See below for more detail).
- NZD/USD – The break below $0.7220 completed a top pattern on the daily chart that means the bears are in corrective control within the uptrend channel. The neckline at $0.7220 will also now be the basis of resistance and rallies be seen as a chance to sell. The hourly chart shows $0.7200 is a basis of resistance near term and Friday’s unwind has helped to renew downside potential. Expect a retest of $0.7107.
- EUR/GBP – The incredible moves on Friday and subsequent reaction means that higher lows are continuing with £0.8958 and £0.8995 as the market looks to continue towards £0.9100 for further gains. The 21 hour moving average is a basis of support. Losing £0.8900 would change the outlook.
- EUR/AUD – The upswing on the daily Stochastics suggests that near term momentum is positive for continued pressure on 1.4780. The mild positive bias on the hourly chart suggests that corrections will be bought into. Support at 1.4680 protects 1.4650.
- USD/ZAR – The sequence of higher lows in the past couple of weeks and the advancing daily Stochastics suggests that a drift higher is on and little corrections should be bought into. However the pivot support on the hourly chart around 13.685 needs to hold.
- FTSE 100 – The corrections are being bought into and building from the support at 7000 the bulls will be looking for another attempt at 7122 the all-time high. The key support this week will be the previous breakout at 6955.
- WTI Oil – Have the bulls now lost control? The support at $49.00/$49.35 needs to hold to prevent a drop back towards $48.30. The resistance is building back up around $50.00 once more. (See below for more detail).
- Cocoa (CCc1) – Since June, Cocoa has been posting a series of lower highs and lower lows. Last week’s high at 2848 adds to resistance below 2876 and 2934. The daily momentum indicators have unwound to cross lower with renewed bear potential (especially the Stochastics). Expect a retest of 2708 with rallies a chance to sell.
The market once more effectively used the key medium term supports on Friday to embark upon a rally that unwound the market back towards the near term pivot within the range at $1.1200 which is once again a magnet for prices and is now a basis of resistance. The strong bull candle that followed Thursday’s sell-off was a reaction that would have given the bulls confidence, but in effect the move simply unwound the previous weakness and changes the outlook very little. The outlook remains very much one of consolidation and although the initial support at $1.1120 was breached early on Friday the long term pivot level at $1.1100 once more acted as a basis of support. The converging trendlines are now beginning to put the squeeze on and now sit at $1.1100/$1.1250. Momentum indicators have a neutral configuration with a marginal bearish bias, but are nothing to suggest an imminent break will be seen.
GBP/USD
Markets are still trying to settle down following Friday morning’s flash crash in thin markets during Asian trading, however the early moves today still suggests there is a negative pressure on sterling that could result in further weakness. The daily chart remains strongly negatively configured and the RSI is at 22 which in this case reflects the extent of the bear move. Incredibly, the daily Stochastics are rising (due to the huge intraday rebound on Friday) but this is not a signal that can be trusted in isolation currently. The hourly chart shows $1.2470 is a basis of resistance. The only meaningful support is really now at the intraday low at $1.2223 from Friday morning and this could again have a drift back to be retested. There is further resistance above $1.2600.
The near term corrective move has set in as the Non-farm Payrolls report just gave traders enough of an excuse to take profits after such a strong run higher in the past two weeks. The question is now whether the move will continue. The early slip further back today could put pressure on but it is Columbus Day in the US today so we may not get a true view until tomorrow. The Stochastics have crossed lower so it is certainly a warning for long positions. The old resistance at 102.80 is a basis of support near term. The hourly chart shows the 21 hour moving average which had been supportive during the rally is now becoming a basis of resistance, whilst the hourly momentum indicators are also more corrective. A breach of 102.80 would open support at 101.85/102.00. The bulls need to break back above 103.35 which is increasingly becoming a pivot level.
Gold
After eight consecutive strong bear candles, the market has started to generate a recovery. In a bit of a volatile session, Friday’s positive close (albeit very minor) has been followed by early gains today. This now has the potential to generate some positive momentum recovery signals if continued. The RSI is close to rebounding back above 30 and the Stochastics are crossing. The hourly chart shows to improvement too, but the resistance at $1270 needs to be overcome and the unwinding move continue to generate positive momentum configuration. Also quite whether we can trust moves today with the US public holiday, perhaps it would be better to take a view tomorrow. However in the meantime, $1251 is a basis of support that is protecting a retest of the $1241.20 Friday low.
WTI Oil
After a seven session bull run the market finally took a bit of a pause for breath on Friday. This does not necessarily mean that the market will now undergo a significant correction, however, it does mean that the reaction in the next session or two could be key. The technical indicators have been strong but the RSI is looking to drop back below 60 and the Stochastics are crossing lower. If there is another strong bear candle posted then the profit taking could turn into something more considered. The 55 hour moving average had previously been supportive but has now turned lower and adds to the resistance overhead around $50.00 There is a band of support between $49.00/$49.35 which needs to hold otherwise a further decline back towards $48.30 could be seen. The bulls need to break back above $50 to signal renewed gains.
"DISCLAIMER: This report does not constitute personal investment advice, nor does it take into account the individual financial circumstances or objectives of the clients who receive it. All information and research produced by Hantec Markets is intended to be general in nature; it does not constitute a recommendation or offer for the purchase or sale of any financial instrument, nor should it be construed as such.
All of the views or suggestions within this report are those solely and exclusively of the author, and accurately reflect his personal views about any and all of the subject instruments and are presented to the best of the author’s knowledge. Any person relying on this report to undertake trading does so entirely at his/her own risk and Hantec Markets does not accept any liability. "