Sample Category Title

On Friday, the US dollar strengthened against the basket of major currencies. The US dollar index (#DX) closed in the positive zone (+0.42%). Federal Reserve officials said about the need for further tightening of monetary policy after the meeting in September. Some FOMC representatives do not exclude 4 interest rate hikes during 2019. The escalation of the trade conflict between the US and China continues. Donald Trump stated the readiness to introduce new duties on the import of Chinese goods $200 billion worth. We also recommend monitoring up-to-date information on NAFTA negotiations.

Meanwhile, a rather weak statistics on the US economy was published on Friday. The core retail sales index fell to 0.3% in August, while experts expected 0.5%. The volume of retail sales increased by 0.1%, which is lower than market expectations of 0.4%.

The British pound weakened against contradictory news on Brexit. In general, the negotiations are being proceeded successfully, but the issue regarding the Irish border is unresolved.

The "black gold" prices show positive dynamics. At the moment, futures for the WTI crude oil are testing a mark of $69.00.

Market Indicators

On Friday, there was a variety of trends on the US stock market: #SPY (+0.02%), #DIA (+0.04%), #QQQ (-0.29%).

At the moment, the 10-year US government bonds yield is at the level of 2.95-2.96%

The news feed on 17.09.2018:

At 12:00 (GMT+3:00), the consumer price index will be published in the Eurozone.

WTI oil price ticks higher on Monday, supported by renewed concerns about US/China trade conflict and persisting concerns about the impact of sanctions on Iran.

On the other side, rise in global supply weighs on oil prices, as report on Thursday showed record of 100 million barrels per day.

Fresh recovery attempts after last Thursday's strong fall and Friday's long-legged Doji, signal formation of reversal pattern on daily chart.

Fresh advance pressures top of daily cloud ( $69.46) which is widening after twisting last Friday, with close above cloud needed to neutralize risk of renewed attack at 30SMA support ($68.04) and shift near-term focus higher.

Lift above converged daily MA's (20/100/10/55) and 14-d momentum emerging from negative territory and forming bull-cross, would support further recovery.

Res: 69.57, 69.89, 70.00, 70.26
Sup: 68.46, 68.34, 68.04, 67.48

The Aussie dollar attempts to regain traction after dipping on Friday, which ended day in red.

Concerns about an escalation of US/China trade conflict may weigh on near-term risk, with further news eyed for fresh direction signals.

Overall outlook remains negative, as last week's recovery attempts were capped by falling 20SMA and momentum is weak.

Pivotal support at 0.7140 (Fibo 61.8% of 0.7085/0.7229 upleg) holds for now, with break here to open way for retest of key support at 0.7085 (11 Sep 2 ½ year low).

Initial bullish signal could be expected on break above 20SMA (0.7226), with extension above 0.7268 (Fibo 61.8% of 0.7381/0.7085) needed to confirm reversal and open way for stronger recovery.

Res: 0.7198, 0.7226, 0.7268, 0.7323
Sup: 0.7141, 0.7085, 0.7000, 0.6906

EURUSD has declined considerably after touching the 38.2% Fibonacci retracement level of the upleg from 1.0340 to 1.2550, near 1.1708. The pair remains neutral since the end of August, trading between 1.1530- 1.1720. In the short-term, consolidation is likely to stay in place as the RSI continues to move around its 50 neutral level and the MACD flattened around zero and its red trigger line. However, the 20-day simple moving average (SMA) posted a bullish cross with the 40-day SMA, indicating possible gains.

In the wake of negative pressures again, the market could meet support at the 40-SMA near 1.1585 before being able to challenge the lower band of the recent range at 1.1530. A close below this level could see a retest of the 50.0% Fibonacci mark around 1.1450, while in case of steeper declines, the 1.1300 psychological obstacle would increasingly come into scope.

On the flipside, as the pair stands above the SMAs a bullish tendency is possible towards the 1.1720 resistance level, near the 38.2% Fibonacci. A stronger barrier, though, could be found at the 1.1750 region, taken from the highs at the end of July. A violation of this point could increase chances for further gains probably until the 1.1840 hurdle.

To sum up, EURUSD’s bias is neutral in the short-term but in the medium-term the pair is ready to form an inverted head and shoulders pattern, with the neckline being the 1.1750 resistance. A jump above this region would endorse the case for a bullish correction.

Here are the latest developments in global markets:

FOREX: The US dollar is down by a marginal 0.05% against a basket of six major currencies on Monday, largely holding on to the safe-haven gains it recorded in the previous session as concerns regarding an escalation in US-China trade row resurfaced. There was little movement elsewhere in the FX market, with investors appearing somewhat reluctant to initiate new bets with the risk of fresh tariffs being imposed soon hanging in the background.

STOCKS: Wall Street ended practically flat on Friday, with gains early in the session being mostly wiped out following headlines that the US plans to move forward with imposing tariffs on China, despite the US request for negotiations last week. The S&P 500 and the Dow Jones both gained a marginal 0.03%, while the tech-heavy Nasdaq Composite inched down by 0.04%. Anxieties seem to have lingered, as futures suggest a lower open for the S&P, Dow, and Nasdaq 100 today. The same was true in Asia, where most markets closed in the red on Monday. In Hong Kong, the Hang Seng fell by 1.38%, while South Korea’s Kospi 200 dropped by 0.69%. In Japan, markets remained closed for a public holiday. Market sentiment was sour in Europe as well, with futures tracking all the major benchmarks pointing to a significantly lower open today.

COMMODITIES: Oil was slightly higher on Monday, with WTI being up by 0.17% at $69.13 per barrel and Brent trading higher by 0.15% at $78.25 a barrel. The bulls so far seem undeterred by worrisome news on both the supply and the demand fronts. US drillers added two new oil rigs in the previous week according to Baker Hughes data on Friday. Meanwhile, a looming escalation in the US-China trade standoff is increasingly clouding the outlook for future oil consumption, with prices likely to remain sensitive to any updates. In precious metals, dollar-denominated gold is up by nearly 0.20% on Monday at $1195 per ounce, attempting to recover some of the notable losses it posted on Friday as the US currency surged.

Major movers: Dollar bounces as trade tensions come back on the radar

The US dollar rebounded sharply on Friday to close the day higher against all its major peers, recovering losses from earlier in the session. The bounce followed US retail sales data for August, which were softer than anticipated, though July’s prints were revised notably higher – helping to paint an overall positive picture for consumer spending. A few hours later, the greenback got another boost, this time from safe-haven inflows after media headlines suggested the US plans to move forward with the $200bn tariffs on Chinese goods it had threatened earlier. Indeed, the WSJ reported over the weekend the US will impose tariffs on $200bn Chinese goods as early as today, but at a reduced level of 10% – much lower than the 25% touted earlier.

To complicate things further, China hinted that if the US does implement levies, it will probably reject the recent US proposal for talks as the nation won’t negotiate “with a gun pointed to its head”. Overall, the relentless pressure from the Trump administration looks unlikely to subside anytime soon, at least not before the looming US midterm elections. At the same time, Chinese officials appear unwilling to “lose face” by caving to US demands, so another escalation in tensions looks all but inevitable. A potential US tariffs announcement today coupled with the typical threats of more to come, could take a toll on risk appetite – triggering a rotation back into haven-perceived assets like the yen and dollar, and out of riskier ones like the aussie or equities. In this sense, aussie/yen may be a good proxy for further trade anxieties.

Elsewhere, the Brexit saga remains as eventful as ever. In a post on Sunday, former UK foreign minister Boris Johnson fired another round of criticism at the government, writing that the UK is headed for a “car crash” under the Chequers plan. The next weeks will be particularly interesting as they could see PM Theresa May’s position being challenged by hardline Brexiteers in her party like Johnson, when the annual Conservative Party conference kicks off on September 30. Hence, sentiment surrounding sterling will likely remain fragile leading up to the event, given the risk that May could be replaced by someone seeking a “clean exit” from the EU

Day ahead: Trade concerns resurface; Eurozone final inflation figures and NY Empire State Manufacturing Index due

Trade fears will be in the forefront once again on Monday as sources from the Wall Street Journal reported that the US is preparing to announce additional tariffs against China as soon as Monday. Washington is expected to unleash import tariffs on $200 billion Chinese products, the biggest list in the multi-month trade dispute so far, with analysts anticipating Beijing to take countermeasures as well in the wake of further restrictions. The news come a few days after the US showed some sympathy by proposing to restart negotiations between the nations, with China welcoming the invitation. However, tensions might intensify even more if China refuses to hold talks with the US, potentially leading investors to shift funds from riskier assets to safe-havens, a move that could harm trade-sensitive currencies such as the aussie as well as the volatile emerging markets. Yet the dollar might remain resilient to heightened trade risks, supported by investors’ optimism on the path of the US economy. The size of the tariffs will be closely watched as sources believe it will probably be around 10%, compared to the 25% that was under consideration.

In terms of data releases out of the US, the New York Fed Empire State Manufacturing Index will attract attention at 1230 GMT. The index is said to have eased in September, falling from 25.60 in August to 23.

Earlier at 0900 GMT, the release of the Eurozone Harmonized Consumer Price Index (HCPI) for the month of August will be another event in focus today, though the euro might not react much as these will be the final readings. HCPI data, which use a common methodology across EU countries, are expected to confirm the preliminary estimate and show that the bloc’s yearly inflation rate was 2.0% in August, from 2.1% in July. Regarding the core measure, which excludes food, energy, alcohol, and tobacco, this is also expected to be in line with the initial estimate of 1.0%.

As for public appearances scheduled for today, a number of speeches are planned by ECB members. At 0900 GMT, ECB Board Member Benoit Coeure will be making comments at the German Institute for Economic Research in Berlin. Later at 1015 GMT, ECB Executive Board Member Peter Praet will be speaking on “Economic developments in the euro area” at Société Royale d’Economie in Brussels, while at 1200 GMT, ECB Executive Board Member Yves Mersch will step up to the rostrum for the unveiling of the new €100 and €200 banknote at the ECB headquarters in Frankfurt.

Technical Analysis – USDJPY looks weaker in the short-term

USDJPY started the week on the downside after climbing to as high as 112.16 on Friday, increasing further the distance above the Ichimoku cloud. In the short-term, however, the RSI and the Stochastics suggest that the price might lose positive momentum as both signal that the price moves in overbought territory; the former has risen near 70, while the latter has already entered overbought zone, with the green %K line and the red %D line being ready to post a bearish cross above 80.

Should the downside extend below the 61.8% Fibonacci retracement of the downleg from 113.15 to 109.76, the price might pause around the 50% Fibonacci of 111.46, where the pair stopped in late May and July. Lower than that, the 111 key level, which coincides with the 38.2% Fibonacci could come into view ahead of the 23.6% Fibonacci of 110.55.

Alternatively, a reversal to the upside could retest Thursday’s high of 112.16 before targeting the 78.2% Fibonacci of 112.42. Steeper increases may meet a challenge to break the six-month high of 113.15.

Eurozone CPI was finalized at 2.0% in August, down from 2.1% in July. That was still notably higher than 1.5% back in August 2017. Core CPI was finalized at 1.0% yoy. EU CPI was finalized at 2.1%, down from July's 2.2%.

Highest contribution to Eurozone CPI was from energy (0.87%), followed by services (0.59%), food, alcohol & tobacco (0.48%) and non-energy industrial goods (0.09%).

Full release here.

UK Prime Minister Theresa May expressed her confidence that the parliament will vote for any Brexit deals that she strikes with the EU. She added that "parliament will vote for a deal because people will see the importance of a deal that maintains a good trading relationship with the EU ... but gives us the freedom to take the benefits and opportunities of Brexit."

Also regarding the possibility of being rejected by the Parliament, she said "do we really think ... we've been through this negotiation we get to the point where we've agreed a deal that if parliaments was to say no go back and get a better one, do you really think the European Union is going to give a better deal at that point." And, "the alternative to that will be having no deal."

Separately, Austrian Chancellor Sebastian Kurz said EU should "do everything possible to avoid a hard Brexit". French President Emmanuel Macron said "it's indispensable that we reach an agreement and that European Union rules be fully maintained."

Donald Trump is determined to put another $200 billion of tariffs on Chinese goods

US futures are trading lower as investors are highly concerned about Trump’s upcoming decision. The president of the United States, Donald Trump is determined to put another $200 billion of tariffs on Chinese goods. There was some hope last week that the White House may be able to resolve this matter with Beijing more peacefully.

China has made one thing clear for Trump that threats and such behaviour isn’t going to work with the country. There are real chances that the new set of negotiations may never begin. So far, the Chinese government has declined to resume the trade talks because Trump is telling his aid to prepare for the next round of trade tariffs. This is the prime reason that we have seen the stocks tumbled over in Asia and the same momentum is highly likely to continue over in the Europe.

Back in the UK, we are seeing more positivity when it comes to sterling as traders are more optimistic about the Brexit deal. The positive momentum is building and the EU has mulled a new Irish border option and Theresa May is likely to get more support from the two notable pro-Brexit personalities- Liam Fox and Michael Gove.

The British prime minister is also optimistic and is confident that the deal is within reach with the European Union and she is determined to fight in order to achieve her version of Brexit. Her version of Brexit is based on keeping close trading ties to the block and this puts her on a collision path with hardline eurosceptics in her own party. There are strong chances that her version of Brexit could create changes for her job because Boris Johnson is more than likely to ranch up the opposition against her.

The precious metal looks promising once again as the risk off trade is the most famous one on the street. If the US slaps fresh tariffs on China, it is highly likely that we would see another bull run for the gold price. The yellow metal is finding it difficult to hold the level of $1200 for now,

EUR/USD

Current level - 1.1628

The failure at 1.1730 signals another corrective leg within the prolonged consolidation pattern below 1.1750. Intraday allow a dip towards 1.1530 area.

USD/JPY

Current level - 111.99

The bias remains bullish, for a rise towards 112.60 area. Key support lies at 111.65.

GBP/USD

Current level - 1.3079

The uptrend has ran out of steam with the recent peak at 1.3150 and there is s risk of a further decline towards 1.2960 area. The overall bias is still bullish, for 1.3250.

The pair holds in red in early European trading, following quiet Asian session as Tokyo was closed for holiday.

Bulls hit new recovery high at 112.16 on Friday (the highest in two months), in extension of strong bullish acceleration on Friday.

Repeated close above 111.87 (Fibo 61.8% of 113.17/109.77 fall) was bullish signal, reinforced by strong bullish weekly close (the biggest one-week advance since early July).

Bulls look for clear break above cracked barrier at 112.15 (01 Aug high) for test of next target at 112.37 (Fibo 76.4%).

Bulls may take a breather before resuming, with consolidation to be ideally held by broken Fibo barrier (111.87), with extended dips to find ground above rising 10SMA (111.45) to keep bullish bias.

Res: 112.16, 112.37, 112.62, 112.92
Sup: 111.87, 111.64, 111.45, 111.28