Market Overview
Despite signs on Tuesday that markets were on the brink of some key moves, there has been a settling down of sentiment overnight which could be a signal that traders will keep their powder dry in front of the third and final Presidential debate this evening. The dollar looked to be developing a slight corrective move, however rallies on gold, the euro and GBP/USD have been pared with key near term breaks averted, for now. This comes with a slight risk aversion (the yen is strengthening) ahead of the latest round of Trump versus Clinton. Previous debates have seen Clinton coming out marginally on top and this has helped to drive positive risk sentiment, however with Donald Trump’s campaign seemingly on the ropes perhaps he will come out swinging tonight and the impact of this is as yet unknown. China announced GDP for Q3 at 6.7% which was in-line with expectations and was to an extent reassuring after the weaker trade data recently, whilst Fixed Asset Investment was also in line at +8.2%, as were Retail Sales at +10.7%, with the slight drop in Industrial Production to +6.1% (+6.4% exp) perhaps adding to a slightly cautious sentiment today.
Wall Street closed higher with the S&P 500 +0.6% at 2140, whilst Asian markets have been mildly higher today with the Nikkei +0.2%. European markets are also slightly higher in early moves. In forex, there is a mixed outlook for the dollar, with a drop back in sterling the main mover as it has unwound some of yesterday’s gains, whilst it is also interesting to see the yen beginning to regain a bit of lost ground. Gold and Silver have also dropped back from yesterday’s highs, whilst oil has started on the front foot up around a percent after inventories from the API showed a surprise drawdown.
Traders will be looking out for the UK employment data with UK unemployment at 0930BST expected to stay flat at 4.9% whilst average weekly earnings ex-bonus are expected to stay at +2.1%. US Building Permits (+1.17m exp) and Housing Starts (+1.18m exp) are at 1330BST whilst the Bank of Canada monetary policy decision is at 1500BST and is expected to be unchanged at +0.5%. EIA Oil inventories are at 1530BST with crude stocks (+2.8m barrels exp), distillates (-1.5m barrels exp) and gasoline stocks (-1.4m barrels exp) in focus.
- EUR/USD – Rallies are still a chance to sell and the resistance is now building up below $1.1050 with yesterday’s high at $1.1025 and the struggles today at $1.1000. The Presidential debate is likely to drive some volatility, but all signals point towards further pressure on $1.0950 with a breach opening $1.0910. (See below for more detail).
- USD/CAD – The daily chart shows a series of bear candles and that downside towards 1.3000 is possible with ongoing corrective momentum. Perhaps though a bit of a stalling today, but the hourly chart shows a basis of resistance 1.3100/1.3180 which could find the next chance to sell. Watch out for the Bank of Canada at 1500BST.
- EUR/JPY – The near to medium term drift lower is heaping pressure on the support around 114.00 and a decisive break would open moves towards 112.50 and the key support at 112.00. Momentum indicators suggest continuing to use intraday rallies as a chance to sell. The hourly chart shows downtrend resistance around 114.50.
- CAD/JPY – Can the bulls hold on to the breakout? Momentum remains positive but the hourly chart continues to show key support at 78.90 needs to hold to prevent a near term correction. Watch out for the Bank of Canada at 1500BST.
- USD/TRY – Another small bodied candle posted (this time negative too) suggests the market is consolidating and could be close to a correction. Near term support at 3.0865 could still be an indicator whilst 3.0685 remains key. Resistance at 3.1130 has held for a third time.
- DAX – Can the bulls sustain the traction and finally seriously challenge the range resistance. The lower high at 10,692 will be key today. The hourly chart shows the momentum is still ranging and selling opportunities continue around these levels. Support at 10,491 is key.
- Gold – A close above $1265 would be bullish near term for an $18 upside target. However the hourly chart shows this resistance is clearly being considered by the bulls as the hourly momentum rolls over. Back below $1256 would maintain the near term range play. (See below for more detail).
- Wheat (WZ6 or W#_Z16) – Corrections continue to be bought into following the breakout above 412. The last few days show that the bulls remain in control and the market is still looking higher. The hourly chart shows a minor consolidation but also a support band 416/420 is being bought. Above 428 opens the upside
EUR/USD
The dollar may be looking more corrective against sterling, however the bulls are still unable to make much of a dent in EUR/USD. The overhead supply continues to weigh the pair down, whilst yesterday’s failure of a rally at $1.1025 adds to the resistance below the key $1.1050 long term pivot. On a day that the dollar was generally under pressure, the candle was still fairly bearish and this will be a concern for the bulls. The momentum indicators remain in corrective configuration and suggest that rallies will continue to be seen as a chance to sell for pressure on $1.0950. The hourly chat shows continued declining moving averages and the overhead pressure around $1.1000 is now building. A breach of $1.0950 would open $1.0910 and potentially towards $1.0800.
With the selling pressure having abated for now, Cable has turned into a range play. The hourly chart shows that the trend lower has been broken and a move above $1.2270 resistance yesterday improved the outlook. The bulls will now be eying the resistance at $1.2330 which held yesterday and forms the neckline of a near term base pattern. A decisive break would imply around 200 pips of further recovery. The momentum indicators have dropped off overnight but the outlook for now is still improving. I have been looking at the role the 55 hour moving average (c. $1.2227) has played in recent weeks and this has become a key gauge for the hourly chart, so watch this as a basis of support now. As the Europeans take over the support of $1.2270 is being tested and the market could also see this as a near term watermark for the prospect of a recovery.
The creep higher is just beginning to stall now and the market is consolidating. This could just be traders keeping their powder dry in front of the final Presidential debate tonight but Dollar/Yen has hit a lean patch and there is a lack of conviction. The last two daily candles reflect the uncertainty with yesterday’s doji a very neutral move. Once more the market has been unable to close above 104.30 but this time could not breach the level intraday either. The hourly chart shows a slight drift lower but the support of the pivot at 103.35 is increasingly important, with the previous breakout support at 102.80 now key. There is now near term resistance at 104.20.
Gold
Can gold make the breakout above the resistance at $1265? This is the key near term level that has been preventing a recovery but a breakout would complete a small base pattern with a minimum recovery target of around $18 (towards $1283). Interestingly the daily RSI continues to recover above 30, whilst it would still be wise to look for multiple confirmation across the Stochastics and MACD lines which is yet to be seen. The last two daily candles have started to show some improved traction but the hourly chart shows the overnight loss of impetus slightly. This needs to be reclaimed and near term support above yesterday’s intraday ow at $1256 held. The key near term supports are now $1247 and $1241. Next resistance beyond $1265 is $1277.
WTI Oil
Despite the late rally above $50.50 yesterday, oil remains a consolidation play near term. The failure to breakout above $51.67 key resistance has resulted in a number of corrective candles. However, the market also still remains supported above the key near term band $48.75/$49.15 and yesterday’s positive candle has been followed by early gains today. This is a range between $49.15 and $51.60 however the momentum has gone out of the rally now. Although a top pattern is unlikely today, the bulls will be beginning to get concerned by the creeping deterioration of the momentum indicators with the Stochastics close to giving a near term sell signal (similar to the one in late August), and especially if the RSI drops back below 60. In spite of the momentum deterioration there is actually a series of converging highs and lows, with the support at $49.47 and resistance at $51.15 the initial levels to watch for development within the consolidation.
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