What we are looking for
- USD continues to move higher: With key levels being broken on major forex pairs at the end of last week, we are seeing the USD continuing to strengthen on Monday.
- Indices turning increasingly corrective: Wall Street sold off into the close on Friday and US futures are lower once more this morning. European indices are coming under mounting corrective pressure.
- Commodities in decline: Precious metals broke support last week and are continuing to fall. Oil has turned lower from another near-term move higher.
- Data trading: Data traders have a quiet day today. However, AUD and JPY traders will need to be mindful of the flash PMIs for Japan and Australia early tomorrow morning.
There is a growing feeling that market sentiment is souring. The recovery in equity markets is reversing. Having fallen hard on Friday, we are seeing US futures lower again this morning. Coming at the same time that the USD is strengthening once more on major forex, commodities are also under corrective pressure.
A rate cut by the People’s Bank of China has helped the Aussie and Kiwi jump initially today. However, if the trend of corrective sentiment continues to build, these gains are likely to be short-lived.
It is quiet on the economic calendar with no major economic data due. However, watch for the flash PMIs for Australia and Japan early tomorrow morning.
Market sentiment turning increasingly corrective: Equities and commodities are feeling this especially. USD strength is weighing on major forex.
Treasury yields have moved higher: A slight pullback on the US 10yr this morning, but the yield is still trading around one-month highs.
Nord Stream 1 is set to be shut for 3 days: The outage is expected to be at the end of August. This will continue the concerns over energy prices.
People’s Bank of China interest rate cut: the 1-year Loan Prime Rate was cut by 5bps to 3.65% and the 5yr LPR was cut by 15bps to 4.30%. Expectations had been for a 10bps cut on both.
Cryptocurrencies holding on: After a sharp decline into the end of the week, prices have held ground over the weekend and are relatively steady this morning. Bitcoin is around -0.3% lower at a shade above $21000.
- No major economic data is due.
Major markets outlook
Broad outlook: A USD positive and risk-negative bias continues to develop.
Forex: USD is performing well again major forex, although AUD and NZD are higher after the PBoC rate cut.
- EUR/USD has broken decisively below support at 1.0095 and is once more around parity this morning. Although the last time parity was tested, it induces a basis of support, a test of the July low at 0.9950 is likely now. Resistance is now between 1.0095/1.0120, with intraday rallies seen as a chance to sell.
- GBP/USD has fallen sharply in recent sessions, paying little regard to previous support levels. Having broken decisively below 1.1890 a test of 1.1760 is now clear. If support of the July low at 1.1760 is broken, there is no support until 1.1410. The old support at 1.1890 is now initial resistance.
- AUD/USD hung on to the support at 0.6860/0.6870 with a pick-up this morning. However, with momentum indicators increasingly corrective, we expect further pressure on 0.6860 in due course. A breakdown would be confirmation of a more corrective outlook now. We look to use intraday strength as a chance to sell. The initial resistance is 0.6920/0.6970.
Commodities: Precious metals are increasingly corrective, whilst the latest rally in oil looks to be another chance to sell.
- Gold has now posted five corrective candles in a row on the daily chart. Breaking the support at $1754 turns the market decisively corrective now. Also, with the daily RSI under 40, there is plenty of downside potential in the move. Intraday rallies are seen as a chance to sell. Resistance is growing between $1754/$1772. Initial support is around $1711/$1713.
- Silver continues to drive lower as corrective momentum increases. A move back to test the $18.14 July low should not be ruled out now. The daily RSI has deteriorated below 40 to suggest mounting corrective momentum but with further downside potential too. We look to use intraday rallies as a chance to sell. Initial resistance is now between $19.15/$19.40.
- Brent Crude oil rebounded from $93.25 to post another bull failure of a lower high at $99.50. Near-term rallies continue to be a chance to sell. Any unwinding move towards 40/50 on the RSI is seen as an opportunity. There is an old pivot around the $99/$100 area which has become another basis of resistance. There would need to be a rally above $102.90 resistance at least to improve the near-term outlook. A retest of the $93.25 low is favoured.
Indices: US futures beginning to accelerate lower in a corrective move. European indices are following this move.
- S&P 500 futures corrected sharply on Friday and are continuing lower today. The market is now back into the key band of support 4145/4200. This is important as if this can hold, it would be positive. However, if the support at 4080 is broken the outlook would turn increasingly corrective. Initial resistance is now between 4220/4249.
- German DAX has turned sharply corrective following a decisive close lower on Friday and early losses today. The move has broken below the first key higher low of the recovery at 13446. Coming with the daily RSI faltering sharply below 50 turns the market corrective. Near-term rallies are now seen as a chance to sell. Initial resistance is between 13446/13600. A close below 13330 support opens a test of 13035.
- FTSE 100 is holding up relatively well amid its major peers that have turned sharply lower. However, a move below the initial support at 7492 opens the more considerable support at 7457. There are no outright sell signals yet, but with other indices falling so hard, it will be difficult for the FTSE 100 to hold higher. Resistance is growing now at Friday’s high of 7478.
This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. INFINOX is not authorised to provide investment advice. No opinion given in the material constitutes a recommendation by INFINOX or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.