AUD/USD: AIG Manufacturing Index

The AUD/USD currency pair ignored a downbeat AIG Manufacturing Index report, as it considered to be used as an information on the country rather than market shaker.

Australian manufacturing sector's revealed modest growth pace in December, but continued to expend or remained in a stable condition that arose in October 2016. The AIG Manufacturing Index for November came in at 56.2, compared with 57.3 in the prior month. In the absence of two unlikely factors, which are higher interest rates or solid increase in the Australian Dollar, the expansion in the sector is anticipated to keep running through the most of the new year. Wage component fell, but remained above average, pointing to fewer chances of pay growth.

The GBP/USD spiked during early trading hours, and despite the holiday markets we see volatility in the GBP/USD pair. At this point, we can see a bullish zig-zag pattern trying to close above the D H3 level with a bullish candle. A dip towards POC zone (W L3, D L3, ATR projection low, EMA89, bullish order block)1.3450-3470 could spike the price up towards 1.3550 again but also watch out for a 4h candle close above 1.3540. Strong momentum above 1.3540 might lead the pair to 1.3570, 1.3586 and 1.3623.

W L3 - Weekly Camarilla Pivot (Weekly Interim Support)

W H3 - Weekly Camarilla Pivot (Weekly Interim Resistance)

W H4 - Weekly Camarilla Pivot (Strong Weekly Resistance)

D H4 - Daily Camarilla Pivot (Very Strong Daily Resistance)

D L3 – Daily Camarilla Pivot (Daily Support)

D L4 – Daily H4 Camarilla (Very Strong Daily Support)

POC - Point Of Confluence (The zone where we expect price to react aka entry zone)

EURUSD is completing a tremendous upside movement over the last three days and has appreciated more than 1.4% since December 27. The new year has found the pair extending its upside pressure and opening today’s daily session with a gap up, posting an almost 4-month high at 1.2038.

Also, the price opened the door for a gaining week and on the upside, the next resistance comes in at 1.2090, while on the bigger picture, we could easily see a run until the 1.2400 strong psychological level. The aforementioned obstacle is the 161.8% Fibonacci retracement level of the last big down-leg with high at 1.1615 and low at 1.0340.

Conversely, support lies at the 1.1960 level where a violation could push the price further down at the 1.1710 barrier. It is worth mentioning that the world’s most traded currency pair needs to go through the 50- and 100-day simple moving averages before it slips.

Remaining on the short to medium-term timeframe the Relative Strength Index (RSI) has turned sharply higher and is approaching the overbought area, while the MACD oscillator is endorsing the rising move too on price as it is holding above its trigger and zero lines.

All in all, EURUSD faces further upside pressure in all timeframes. The price recorded the second bullish month in a row as well as the second consecutive green week successfully surpassing the 1.1960 barrier.

US Dollar weakened further in the first few trading hours of 2018, slipping against most of the other majors, with the exception of the Japanese Yen. Japanese markets do not reopen until Thursday and therefore USDJPY is in a tight range presently. Switzerland is also on a bank holiday today, reopening tomorrow. Caixin Manufacturing PMI (Dec) was out earlier, with a reading of 51.7 v 50.6 expected, from 50.8 prior. The USDCNH pair has been in decline since hitting a low of 6.48953 but is currently off the lows to trade at 6.51463, down -0.40%. With USD under pressure, Commodities are trading higher this morning with Silver up 0.60% to 17.020.

Today, PMI data is being released for many economies. This represents the Purchasing Managers Index, where respondents to the survey are asked to rate the relative level of business conditions. Purchasing Managers are aware of the outlook their company has on market conditions because they have to prepare for the months ahead. Therefore, this is an advance indicator of the health of the economy. A reading above 50 indicates expansion, while a reading below 50 indicates contraction.

German Harmonised Index of Consumer Prices (YoY) (Dec) was released on Friday 29th of December, at 1.6% from the expected 1.4%. The previous reading was 1.8%. EURGBP moved lower after the result to 0.88592.

US Baker Hughes Oil Rig Count data was released on Friday, coming in as expected, unchanged from the previous week, at 747. Oil was largely unchanged after the data in late Friday trading, closing at $60.23.

EURUSD is up 0.11% overnight, trading around 1.20232.

USDJPY is up 0.08% in early session trading, at around 112.689.

GBPUSD is up 0.08%, to trade around 1.35186.

Gold is up 0.45% in early morning trading, at around $1,308.50.

WTI is up 0.50%, trading around $60.62.

Major data releases for today:

At 08.55 GMT, German Markit Manufacturing PMI (Dec) with consensus pointing to an unchanged value of 63.3. Euro pairs could see price movement should there be variation in the data presented.

At 09.00 GMT, Eurozone Markit Manufacturing PMI (Dec) data is expected to be 60.6, unchanged from the previous reading. Last month’s number was the highest this decade, showing strength in the economy.

At 09.30 GMT, UK Markit Manufacturing PMI (Dec) is expected at 58.0, with a prior number of 58.2. GBP crosses may experience volatility if the number differs from the expected reading. This data point has returned to levels not seen since December 2013.

At 14:30 GMT, Canadian Markit Manufacturing PMI (Dec) with a consensus of 54.5 and a prior of 54.4. Canadian Dollar pairs may be impacted if there is a deviation from the consensus figure.

At 14:45 GMT, US Markit Manufacturing PMI (Dec) with a consensus of 55.0 expected, unchanged from the previous reading. USD crosses may be impacted by this release.

Major data releases for the week:

Wednesday 3rd at 19:00 GMT: FOMC Meeting Minutes.

Friday 5th at 13:30 GMT: Non-Farm Payrolls (Dec) with 189K expected, from a previous reading of 228K.

Oil price surged on Iranian tensions
Ethererum made another record high

Cryptocurrencies

2017 was the year which had all the major headlines about Bitcoin. In 2018, the Cryptocurrency king, Bitcoin began on a much weaker start. This is for the first time that Bitcoin has started the year on a lower note since 2015. It hit $14,156 on the final day of 2017 and traded in around 13K on Monday. However, the cryptocurrency is trading higher today as the wave of trading in other Alt-coin has changed the momentum.

Ethereum is making the most amount of noise to start the year. Nearly, $3 billion worth of Ethereum has been traded between the exchanges in only 24 hours. The total market capitalisation surged to $ 84.12 billion as the cryptocurrency surged to an all-time high of $869.83. No doubt that Ripple was the best performing cryptocurrency last week, but today all the momentum is behind Ethererum. The total market capitalization of all cryptocurrencies has surged to astonishing $620 billion.

Iran and Oil

Iran is one of the biggest Middle Eastern members of OPEC and the current turmoil in the country could potentially have a much larger impact on the oil price. Iran's security forces clash with demonstrators (who are rallying against the government and country's leader). Historically speaking, over the last two decades, the protests in the country had a very inconsistent impact on crude prices. The major shock to the oil price was in 1979 when religious leaders rose to power and it helped the oil price to rise 90 percent in that year. Initially, the demonstrations in the country started over economic depression, however, it has quickly changed its colour. Revolutionary Guards, the protector of the religious leader have taken over to control the situation.

A similar uprising did take place back in 2009, this time the effect of foreign forces, such as tweet by Donald Trump (who has divided the nation in his own country), support for demonstrators by Israel (old rival country) and a more favourable stance towards protestors by Britain's foreign secretary Mr. Boris (once again divided the nation) are all riding on this bandwagon. The foreign influence would only yield more instability in the country as the government would press hard to stop it. The situation, if not controlled would have some serious impact on oil prices. Higher oil prices would surely help the Saudi's agenda, the country is consistently trying to support the oil price in order to have a successful IPO for their own oil company.

Asian stocks were mostly higher during early trading on Tuesday, after an unexpectedly upbeat survey of Chinese manufacturing activity in December stimulated risk appetite.

In Europe, shares are expected to open on a mixed note despite the gains witnessed in Asia, as investors continue to closely observe growing tensions between Saudi Arabia and Iran. With the caution from European markets potentially encouraging market players to adopt a watchful approach, Wall Street could come under some selling pressure later in the afternoon.

Dollar sinks into 2018

The Dollar dipped to a fresh three-month low against a basket of major currencies on Tuesday morning, as financial markets re-opened for the New Year.

It seems that the initial market excitement witnessed during early Q4 of 2017 over US tax reforms has diminished, while concerns remain elevated over stubbornly low inflation levels. Although sentiment remains bullish towards the US economy amid the improving economic conditions, investors seem more concerned with tax reforms and rate hike expectations. While the Dollar was initially supported by the prospect of tax cuts being implemented, bulls may take a pause as investors investigate whether the cuts will lift growth materially in the longer run. The Dollar remains at threat of depreciating further in 2018, if the impact of Trump's $1.5 trillion tax overhaul fails to meet market expectations.

GBPUSD punches above 1.3520

Sterling has appreciated against the Dollar in recent days, however I believe this has nothing to do with a change of sentiment towards the Pound with ongoing Dollar weakness. With the Brexit negotiations drama and political risk at home still weighing on Sterling, the current upside is likely to face headwinds down the road. Taking a look at the technical picture, the GBPUSD broke back above the 1.3520 resistance level during Tuesday's trading session. Prices are trading above the 50 Simple Moving Average, while the MACD has also crossed to the upside. A daily close above 1.3520 could open a path higher towards 1.3600. Alternatively, a failure of prices to keep above this resistance level could encourage a decline back to 1.3440.

Commodity spotlight – Gold

Gold extended gains during Tuesday's trading session, with prices marching to levels not seen in over three months, trading above $1308 amid a vulnerable US Dollar.

With the Dollar stumbling into the New Year under renewed selling pressure, Gold is likely to remain heavily supported, with prices potentially appreciating towards $1320 this week. From a technical standpoint, the yellow metal is bullish on the daily charts, as there have been consistently higher highs and higher lows. Prices are trading well above the 50 Simple Moving Average, while the MACD has also crossed to the upside. The decisive breakout above $1300 has opened a path higher towards $1320. With today being the first trading day of 2018 and gold already off to a strong start, it will be interesting to see if the upside momentum elevates the metal beyond $1320 this month.

Here are the latest developments in global markets:

FOREX: The dollar traded lower against a basket of major currencies, with the dollar index touching a 3-month low.

STOCKS: Asian markets started the year on a strong footing, with Hong Kong's Hang Seng being up nearly 1.9%, while China's CSI 300 was 1.40% higher, possibly boosted by the better-than-expected Chinese Caixin manufacturing PMI for December released earlier. In Japan, equity markets (Nikkei 225, Topix) will remain closed until Thursday. At 0732 GMT, Euro stoxx 50 futures were 0.17% higher, while futures tracking the Dow Jones, S&P 500 and Nasdaq 100 were all slightly in the green as well.

COMMODITIES: WTI and Brent crude were up 0.4% and 0.5% respectively, extending their recent gains. WTI is currently trading near $60.88 while Brent is at $66.68 per barrel, both highs were last seen in 2015. Dollar-denominated gold traded 0.5% higher to touch the $1310/ounce mark before pulling back slightly, likely lifted by the continued weakness in the greenback and the anti-government protests in Iran.

Major movers: Greenback slips to a 3-month low; commodity-linked currencies extend gains

The US dollar continued to lose ground against its major counterparts to start the year, with the dollar index currently trading near 92.10, its lowest level since late-September. Both euro/dollar and sterling/dollar were up roughly 0.2%, while dollar/yen was trading practically unchanged.

Dollar/loonie was down a little more than 0.1%, with the Canadian currency possibly enjoying increased demand due to the surge in oil prices. The latest leg up in the precious liquid is being attributed to the rising political unrest in Iran, where anti-government protests continue for a sixth day. Considering Iran's status as a major oil exporter, the protests may have been seen by market participants as increasing the risk of supply disruptions, in case the situation escalates further.

The rest of the commodity-linked currencies also advanced against the greenback, with aussie/dollar being up 0.4% and kiwi/dollar being almost 0.3% higher. The positive sentiment surrounding the antipodean currencies was likely amplified by the release of China's Caixin manufacturing PMI for December overnight. The index came in notably higher than the consensus, which probably helped to alleviate some concerns that the world's second-largest economy headed for a slowdown in economic growth. Good news out of China are usually positive for the aussie and the kiwi as China, Australia, and New Zealand have close trade relationships.

Day ahead: Manufacturing PMI numbers in the spotlight

The first trading day of the year will be light of economic releases and price actions are expected to be muted as markets will be partially open on Monday.

Looking at today's economic events, final Markit manufacturing PMI readings for the month of December will attract some attention during the European session. At 0900 GMT the Eurozone final manufacturing PMI is anticipated to stand flat at a record high of 60.6, whereas the British measure due at 0930 GMT is said to inch down to 58.0 from a seven-year peak of 58.2 it hit in November. Note that British PMI numbers will be more important for the pound as flash estimates are not published for the UK. In the US, the Markit gauge of the level of the manufacturing activities is expected to remain unchanged at 55.0.

Investors will also keep a close eye on the kiwi as changes in global dairy prices reported today at a tentative time might bring some volatility to the currency.

In energy markets, the API weekly report which tracks oil inventories in the US will be published at 2130 GMT.

However, later on this week, preliminary inflation data out of the Eurozone on Thursday and Friday's US non-farm payrolls will be much more of interest. The minutes from the December FOMC meeting – due out Wednesday – are also likely to attract attention.

Technical Analysis: WTI crude oil futures bullish but overbought

WTI crude oil futures have been posting higher highs and higher lows since the end of June, painting a bullish picture both in the short and the medium-term. However, downside risks are not ruled out in the near-term as the RSI is currently positively sloped in overbought territory above 70.

Should prices head down, an immediate support is likely to emerge at the 60 key-level, while steeper decreases would shift focus to the area between 55-59 which was repeatedly tested in December. A break below this range would turn the bias from bullish to bearish.

Alternatively, if price actions drive the market to the upside, resistance could be found between 61-63 levels which were last seen back in May 2015.

The British pound continues to move higher against the US dollar, as the greenback starts 2018 under heavy selling pressure. The U.S dollar index trades well below major technical support, and holds price-action around the lows of September 2017. The GBPUSD pair currently trades around the 1.3520 level, with the former monthly swing price-high at 1.3551 the next technical barrier on the way to 1.3600. Sterling traders now look to Manufacturing PMI data from the United States and United Kingdom economies.

The GBPUSD pair is strongly bullish while trading above the 1.3468 level, buyers will likely target the 1.3551 and 1.3656 resistance levels.

Should price-action on the GBPUSD pair trade below the 1.3468 level, sellers will likely push price-action back towards the 1.3420 support level.

The euro continues to trade above the psychological 1.2000 level against the U.S dollar, with the single currency remaining well-bid in the first trading day of 2018. The EURUSD pair currently trades around the 1.2020 region, with buyers still struggling to hold price-action above the key 1.2030 technical resistance level. During the upcoming European trading session, eurozone economic data takes center stage, as traders and investors react to a flurry of PMI Manufacturing activity during the month of December.

The EURUSD pair is strongly bullish while trading above the 1.2000 level, buyers can easily move push price-action towards 1.2040 and 1.2092.

Should the EURUSD pair move below the 1.2000 technical level, sellers target back towards the 1.1959 and 1.910 support regions.

Ethereum started the year on a high note. On Monday, the currency gained 149 points to establish a double top position at the all-time price of $876. It then started what seems like a short-correction after its RSI reached a high of 90, indicating an overbought position.

Could this be an indication of better things to come?

On the same day, Bitcoin continued to slide, falling from a high of $13,903 to a low of $13,297, which is an important support area.

Ethereum’s rise in the New Year reminds us of bitcoin in 2017, which started the year just below $1,000 and ended at more than $13,000.

In the short-term, traders should wait for the RSI to touch the 57.42 level before initiating long positions as shown below.