What we are looking for
- USD in consolidation: As yields have slipped slightly the boost from Nonfarm Payrolls has ebbed away. This period of ranging may be set in now front of US CPI tomorrow.
- Indices flattening: Recent bull run recoveries are losing momentum and a series of indecisive sessions has taken hold.
- Commodities mixed: Oil has steadied as the selling pressure has eased. However, precious metals are fluctuating more than most major markets. Reaction to silver breaking out will be one to watch.
- Data trading: With no major economic data it is a quiet day ahead for data traders.
Market markets have seen a drop off in volatility in recent days. A lack of drivers on the economic calendar has certainly played a role. However, unless there are explicit catalysts it seems that markets are increasingly into the summer holiday season. Upwards of 90% of S&P 500 companies have now reported earnings for Q2, there will be limited drivers from the US earnings season now. There are also limited geopolitical factors, aside from the continued posturing of Chinese warships off the coast of Taiwan. Markets may have a jolt into action with tomorrow’s important US CPI inflation, but for now, consolidation is setting in.
There is a mild risk of negative bias that has formed as the European session has developed. This is meaning that AUD and NZD are slipping (A larger than forecast drop in Australian consumer confidence is playing a role here too). Also, the German DAX has drifted back by -0.5%, whilst oil is almost -1% lower. US Treasury yields are all but flat, USD is marginally weaker against EUR, GBP and JPY, whilst US futures are all lacking direction. It is a case of wait-and-see.
The economic calendar is fairly bare today with no major economic data due.
Market sentiment showing the slightest risk negative bias: But this is only because AUD and NZD are weakening and the oil price is lower.
Treasury yields are steady: After yesterday’s drop, yields are holding steady this morning.
Australian Consumer Confidence drops more than expected: Confidence fell to 81.2 in August from 85.0. This was more than the expected decline to 83.8.
Cryptocurrencies drop back slightly: After a strong opening to the week, Bitcoin has fallen back slightly this morning. A decline of -1% to back under $24,000 has been seen
- No major economic data is due
Major markets outlook
Broad outlook: A mixed start to the day. A slight risk-negative bias, but the USD is not benefitting from this.
Forex: AUD and NZD are the only real underperformers with little decisive USD direction.
- EUR/USD continues to fluctuate in a 200 pip trading range between support at 1.0095 and resistance at 1.0293. Technicals are relatively neutral on a near-term basis, but the RSI remains stuck under 50 and the multi-month downtrend is intact. The pair closed slightly higher yesterday and is continuing this move today, but in effect, there are few moves of any conviction. Losing the important higher low support at 1.0095 would re-open parity again. A close above 1.0295 opens 1.0350.
- GBP/USD has steadied following Friday’s sharp move lower. The market has picked up from 1.2002 but a new corrective downtrend has formed over the past week and needs to be watched now. This is adding near-term negative pressure. A move back below 1.2000 would suggest strengthening corrective momentum. Initial resistance is 1.2210 and then 1.2293.
- AUD/USD has been choppier than most major pairs but continues to see frequent swings within what is increasingly becoming a trading range. Support comes in at 0.6875/0.6910 and has ticked strongly higher this morning. However, resistance is mounting between 0.7030/0.7045. Breaking either would subsequently define the outlook over the near to medium term basis. The daily RSI is neutral, hovering around the 50 mark.
Commodities: Gold is holding the breakout, but silver is hitting resistance. Oil is looking to recover a downside break.
- Gold has fluctuated in recent sessions but picked up yesterday to sustain a near three-week recovery uptrend. Despite yesterday’s rebound, the resistance at $1795 adds to the overhead supply around $1805. We are looking at the support of $1765 as a breach would confirm the breaking of the uptrend. A closing break of the uptrend would begin to put pressure on the higher low support at $1754 again. The daily RSI holding above 50 would suggest the recovery outlook remains on track.
- Silver posted a strong bull candle yesterday to burst through the resistance at $20.45/$20.60. This move now needs to hold for it to be confirmed. It also means that $19.54 is now a key higher low in the recovery. The daily RSI above 50 remains positive for recovery. Holding above $20.45/$20.60 opens for what could be a bull flag and this would imply an upside target of $21.75.
- Brent Crude oil ticked solidly higher yesterday but is still struggling around the old $98/$100 band of support which is now a basis of resistance. There is still room for a near-term technical rally, but the market would need to overcome the resistance around $102.50 to engage in a more considerable rebound. We favour using rallies as a chance to sell for a test of the support at $95/$96.
Indices: Wall Street is consolidating following recent gains as key resistance is being tested. This is a similar picture in Europe too.
- S&P 500 futures have now completed three daily candlesticks in a row of almost no direction and very small bodies. This signifies indecision. The recovery trend remains intact and with momentum remaining strong this suggests buying into weakness continues for a test of 4170/4200. The importance of support at 4080 is growing. Above 4201 opens 4305 initially.
- German DAX continues to run higher along a four-week uptrend as a basis of support, but with the recent consolidation, the trend is being tested. The resistance band between 13665/13785 is holding firm. With RSI momentum solidly strong into the 60s, we look to buy into near-term weakness. Initial support is at 13550 with the higher low at 13330 now key support. A continued move higher would open 14250/14300.
- FTSE 100 is holding the breakout above 7370 and is slowly building higher along a near three-week uptrend. Another positive close yesterday adds to this. There is minor resistance between 7490/7513 but a close above would open moves towards 7650. Positive momentum is building with the RSI moving into the 60s which suggests weakness is a chance to buy. There is good support in the band 7370/7415.
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