Connect with us

Forex

Dow Turns an 8-Day Advance, Dollar Ratchets Up the Bullish Pressure

Published

on


Talking Points:

  • US equity indices turned pause into decline Tuesday, but this didn’t seem a wide risk move on events like North Korea fears
  • Dollar posted a strong rally alongside the charge in 10-year Treasury yields to 7-year highs but key levels are still ahead
  • Pound and Euro face Brexit and Italian dissent, but it is the Kiwi and Swiss franc that still present the appealing setups

See how retail traders are positioning in the FX majors, indices, gold and oil intraday using the DailyFX speculative positioning data on the sentiment page.

Risk Trends Sour but it is US Equities Leading the Way

Speculative sentiment started off the week on shakey ground, but it started to genuinely slip through Tuesday’s session. Taking their position as symbolic leader of risk trends seriously once again, the US equity indices were opened this past session with sizable gaps down on the the open. The selling pressure gained a little more traction through the active trading hours without tipping into a full-tilt bear trend. The S&P 500 curbed its bullish breakout bid, the Nasdaq 100 is starting to form a right shoulder through a head-and-shoulders pattern, and the Dow broke its longest streak of daily gains (8) in 12 months. The damage done in altitude loss may be modest, but the impact on already flimsy conviction can prove more crippling than many appreciate. Looking further afield on the risk spectrum, there isn’t evidence of a full buy-in. Europen equities were steady, Yen crosses didn’t commit but emerging markets certainly felt the pain. Currencies like the Brazilian real, Turkish lira and Indian rupee suffered mightily to the US dollar.

Dow Turns an 8-Day Advance, Dollar Ratchets Up the Bullish Pressure

Dollar: Not Ready to Capitulate Just Yet

The fundamental drive behind the Greenback may be an uneven mix of half stabile drivers, but it is nevertheless keeping the currency buoyant. Facing a recent slip, the DXY Index staged an impressive rebound Tuesday to plug the hole it had sprung following a month-long recovery effort. The currency’s rally earned a noteable break for USD/JPY above 110 with a long-term trend break for the battered NZD/USD, but the progress was far less ‘critical’ elsewhere. For EUR/USD, a return to the 2018 low was as good as it would get. The jump for GBP/USD, USD/CHF and AUD/USD would simply build a little favorable pressure in recently established ranges. If you were looking for the signal for Dollar bidding in the docket or headlines, you wouldn’t find much. Aside from housing data that offers little regular market moving, the Fed speak on tap struke familiar chords. The testimony of two Fed candidates – Clarida and Bowman – raises the potential of a heavier hawkish skew in the Board, but that hardly seems a relaible ladder rung. A moderate risk appetite, monetary policy advantage, speculative bid and counterpart pain can combine to gains moving forward; but it is not an easy mix to keep.

Dow Turns an 8-Day Advance, Dollar Ratchets Up the Bullish Pressure

Key Fundamentals without Key Move: Pound, Euro and Yuan

We have registered some remarkable fundamental developments for key currencies this past session that resulted in very unimpressive market moves. A run of Chinese data offering a miss on Chinese retail sales and industrial production along with the new offer of the country’s jobless rate resulted in little tangible USD/CNH response as we would expect from a managed exchange rate. A little more surprising was the limited response from the Sterling to the UK data. The jobless claims change jumped more than three times the forecast with an uptick in the claimant count rate. Add to that the Scottish Parliament offering more trouble for Britains withdrawal proposal and news that a Brexit white paper will come out next month, and it is impressive that GBP/USD would take out its range low with the Dollar’s performance. From the Euro, a concerning headline of demands from Italy’s Five Star and League didn’t gain much rotation amid updates like North Korea’s threat to cancel the summit with President Trump. Demands that 250 billion euros in ECB purchased Italian debt be forgiven, reform of European treaties and making easier to exit the EU are troubling. Yet, the Euro didn’t seem too troubled looking around at the broad performance beyond EUR/USD.

Dow Turns an 8-Day Advance, Dollar Ratchets Up the Bullish Pressure

Impressive Moves with Less Fundamental Source

In contrast to the heavy-news-light-action mix above; the Kiwi dollar, Swiss franc and gold were doing much more with less. The docket was essentially open for the New Zealand currency, and yet the pain continued with a critical extension on NZD/USD. This is not a free to roam bear run however as GBP/NZD, EUR/NZD and NZD/JPY are near the boarders of critical technical levels. If the pain continues, these are pairs that should be watched closely – but even if it makes a bid for recovery, these are still strong opportunities. From the Swiss franc, we don’t expect a traditional fundamental response; but it is clear that EUR/CHF exerts particular influence. The pair made a more threatening correction this past session and pairs like CAD/CHF pose impressive opportunity. Even gold put in for an impressive day. Certainly the strength for the Dollar and 10-year Treasury yield contributed to the metal’s problems, but the break from a month’s-long range was still a surprise. Looking to retail speculative interest, traders are confident range conditions will kick back in with extreme net long interest on virtually no short exposure. Beware extreme conviction as it can prove to be delusion. We discuss all of this and more in today’s Trading Video.

Dow Turns an 8-Day Advance, Dollar Ratchets Up the Bullish Pressure



Source link

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Forex

Brexit Newsflow and Political Manoeuvres

Published

on

By


GBPUSD 2-Hour Price Chart

Sterling (GBP) Price Fundamental Forecast:Neutral

Q3 2019 GBP Forecast and Top Trading Opportunities

No UK Data Next Week Will Leave Sterling Vulnerable to Rumor Risk

Sterling has nudged higher over the week, aided principally by slightly better-than-expected wages, jobs and retail sales data. UK inflation also edged higher and in a world without Brexit, these releases would have the Bank of England discussing whether the current monetary policy was appropriate or if it needed to be tightened. However, as has been the case for many, many months, Brexit is still the driver for Sterling and will remain so until October 31.

Next week there is no market moving hard UK data of note, leaving Sterling at risk of Brexit rumors and news flow. The UK market will also be holiday-thinned next week, leaving GBP potentially exposed to outsized moves in limited liquidity markets.

Brexit news flow continues unabated with the latest batch of headlines suggesting that a cross-party alliance of MPs may come together to form a national unity party if UK PM Boris Johnson loses the expected vote of no-confidence likely to be called in early September. The current Labour Party leader has said that he will act as interim PM is this succeeds ahead of an early general election with the Labour Party promising a second referendum. According to reports, four prominent remainer Conservative MPs are involved in talks with Corbyn.

Sterling technical are covered in a different section but the chart below shows a familiar pattern. Since late-April there have been three occasions when moves lower are met with a quick reversal before the overall bearish pattern takes over. Will the current move prove to be the fourth occasion?

GBPUSD Daily Chart (December 2018 – August 16, 2019)

GBPUSD Price Chart

The IG Client Sentiment Indicator shows retail traders are 75.6% net-long GBPUSD, a bearish contrarian bias. However daily and weekly changes suggest that GBPUSD prices may reverse higher.

Traders may be interested in two of our trading guides – Traits of Successful Traders and Top Trading Lessons – while technical analysts are likely to be interested in our latest Elliott Wave Guide.

What is your view on Gold – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author at nicholas.cawley@ig.comor via Twitter @nickcawley1.



Source link

Continue Reading

Forex

Crude Oil Price Outlook Bearish, Eyeing January Lows on Long Bets

Published

on

By


Crude Oil Technical Forecast: Bearish

  • Crude oil prices struggled sustaining upside momentum this past week
  • Technical signals on the daily, 4-hour chart hinting at weakness ahead
  • IG Client Sentiment offering stronger bearish crude oil contrarian bias

Build confidence in your own Crude Oil trading strategy with the help of our free guide!

Crude Oil Technical Outlook

Crude oil prices struggled to sustain upside momentum this past week as US recession fears plagued risk trends and the sentiment-linked commodity. From a technical standpoint, this falls in line with oil’s dominant downtrend since the middle of April when the commodity fell through rising support from the end of last year.

Looking at the oil daily chart, gains during the front-end of the past 5 trading days were tamed by a falling channel of resistance going back to the middle of July (parallel red lines below). Horizontal resistance also held at 57.38, former highs from February. This left crude oil sitting just above the lower boundary of psychological support which is a range between 54.55 and 55.41.

If descending resistance continues to define near-term price action in the commodity, we may see crude oil extend weakness down the road. Prices may eventually end up at the next critical psychological area between 50.41 and 52.08. This range held as support on multiple occasions such as in June and back in January. Meanwhile, near-term technical signals also hint towards downtrend resumption.

Crude Oil Daily Chart

Crude Oil Daily Price Chart

Crude Oil Chart Created in TradingView

Zooming in on the crude oil 4-hour chart below, rising support from August 7 was taken out this past week. As such, a close under 54.55 may pave the way for continued declines. Otherwise, the upside challenge for the commodity is taking out descending resistance from the middle of July which would expose the July 31 high at 58.79 down the road.

For more updates on crude oil, including fundamental developments, feel free to follow me on Twitter here @ddubrovskyFX.

Crude Oil 4-Hour Chart

Crude Oil 4-Hour Price Chart

Crude Oil Chart Created in TradingView

Crude Oil Sentiment Outlook – Bearish

Meanwhile, IG Client Positioning is offering a stronger crude oil bearish contrarian trading bias. Traders are further net long on August 16 than compared to the prior day. To learn more about how you can use this in our own trading strategy, join me every week on Wednesday’s at 00:00 GMT as I uncover what market positioning has to say about the prevailing trends in financial markets.

Crude Oil IG Client Positioning

Oil Client Positioning Chart

FX Trading Resources

— Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter



Source link

Continue Reading

Forex

Into the Jackson Hole Vortex

Published

on

By


By

Published:

Weekly Gold Price Forecast: Into the Jackson Hole Vortex

Traders shouldn’t be surprised if gold prices spend most of the week trading sideways ahead of the Federal Reserve’s Jackson Hole Economic Policy Symposium.

Weekly Gold Price Forecast: Into the Jackson Hole VortexWeekly Gold Price Forecast: Into the Jackson Hole Vortex

Weekly Fundamental Gold Price Forecast: Neutral

  • Gold prices (as well as other precious metals) continue to outperform in an environment defined by falling real sovereign yields – that is, inflation-adjusted yields remain in negative territory.
  • Traders shouldn’t be surprised if gold prices spend most of the week trading sideways ahead of the Federal Reserve’s Jackson Hole Economic Policy Symposium.
  • The IG Client Sentiment Index shows that gold prices in USD-terms (XAUUSD) may give back some of their recent gains in the days ahead.

See our long-term forecasts for Gold and other major currencies with the DailyFX Trading Guides.

Gold Prices Week in Review

Gold prices, no matter how you measure them, had another good week. Not one major currency gained ground against gold, with gold prices in EUR-terms (XAUEUR) leading the way higher with a 2.11% rally. Now, gold prices in EUR-terms (XAUEUR) are quickly approaching the all-time high established in October 2016; for many of the gold-crosses, fresh all-time highs have already been achieved (gold prices in AUD-terms (XAUAUD), gold prices in GBP-terms (XAUGBP), and gold prices in NZD-terms (XAUNZD) come to mind).

But the central focus of most market participants is gold prices in USD-terms (XAUUSD), and that too produced another strong week, adding 1.11%. Gold prices, regardless of the currency basis, have been on a strong run higher in recent weeks in part to the global monetary response to the US-China trade war; we’ll get clarification on the state of global easing this week as central bankers from around the world descend on Jackson Hole, Wyoming for the Federal Reserve’s annual Economic Policy Symposium.

Global Trade War Concerns Keep Gold Prices Elevated

Despite improved trading conditions for global equity markets in recent weeks, not much has changed in a positive manner along the US-led trade war front. Sure, there is a détente in the US-China trade war after the US tariffs at a clip of 10% on $300 billion of imported Chinese goods were pushed back from September 1 to December 15.

Yet there is a strong argument to be made with central banks unveiling more accommodative, dovish policy in recent weeks – a trend that is expected to continue – the fundamental backdrop for gold prices remains bullish in the long-term horizon. Falling sovereign bond yields (particularly German Bunds, UK Gilts, and US Treasuries since the start of May) continue to drop lower, and as a result inflation-adjusted yields remain in negative territory – good news for precious metals.

Volatility Tamped Down Ahead of Fed’s Jackson Hole Meeting

The Fed’s Jackson Hole Economic Policy Symposium this coming week should keep volatility tamped down in the days ahead. Traders typically don’t like to stake out significant positions ahead of the Fed’s annual summit; indeed, at the end of August, many trading desks have been left absent for summer vacation.

Beyond the prospect of an unforeseen development (see: US President Trump’s tweets) in the US-China trade war, the week leading into the Fed’s Jackson Hole Economic Policy Symposium is likely to be a quieter one – even if there are several significant pieces of data set to be released.

Other Top FX Events in Week Ahead

Early in the week, on Tuesday, gold prices in AUD-terms (XAUAUD) will be in focus with the release of the Reserve Bank of Australia’s August meeting minutes. Gold prices in AUD-terms (XAUAUD) are holding near their all-time highs ahead of the minutes. Elsewhere, the commodity currencies will remain in focus with the release of the July Canada inflation report on Wednesday, drawing attention to gold prices in CAD-terms (XAUCAD).

Elsewhere, gold prices in EUR-terms will come into focus with the release of the August Eurozone PMIs, particularly as odds for more easing from the European Central Bank at their September policy meeting have crept higher in recent weeks.

Net-Long Gold Futures Positioning Just Off the Yearly High

Weekly Gold Price Forecast: Into the Jackson Hole Vortex

Finally, looking at positioning, according to the CFTC’s COT for the week ended August 13, speculators decreased their net-long gold futures positions to 290.1K contracts, down slightly from the 292.6K net-long contracts held in the week prior. The market is still the most net-long since September 2016 despite the slight moderation in bullish positioning.

FX TRADING RESOURCES

Whether you are a new or experienced trader, DailyFX has multiple resources available to help you: an indicator for monitoring trader sentiment; quarterly trading forecasts; analytical and educational webinars held daily; trading guides to help you improve trading performance, and even one for those who are new to FX trading.

— Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher, email him at cvecchio@dailyfx.com

Follow him in the DailyFX Real Time News feed and Twitter at @CVecchioFX



Source link

Continue Reading

Trending

Copyright © 2017 Zox News Theme. Theme by MVP Themes, powered by WordPress.