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 2s and 10s is widening) and this is helping to underpin the gains for the dollar. 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.
Lucky 8 – FX Trader of the Year 2016 competition update
I am continuing to look at the markets covered in Week 1 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.
• 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 (KCc1) – 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.
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