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The Dow Jones Index Closed Above 22,000 For The First Time Ever
Market movers today
Focus today will be on the Bank of England (BoE) meeting, with the subsequent press conference of Governor Carney and the publication of a new Inflation Report . We expect the BOE to vote 6-2 in favour of keeping the Bank Rate unchanged and west ill do not expect a rate hike before some time in 2019. We believe the BoE will revise down its optimistic GDP growth projection and we also expect it to announce that the Term Funding Scheme (TFS) will end in February 2018.
After the decline in the UK Construction PMI released yesterday, today's Services PMI for July will be watched closely for further signs of the expected economic slowdown in the UK.
In the US, non-manufacturing ISM is due out and weestimate the index to have moderated slight ly to 56.5 in July, in line with the observed drop in the manufacturing ISM.
In Scandinavia, the Services PMI in Sweden is due to be released. Norwegian house prices will also be watched closely for any further signs of weakness, which could prompt speculation on further Norges Bank stimulus.
Selected market news
The highlight of the week will be the US labour report tomorrow. Yesterday, we got the ADP report which can sometimes give an indication of the direction of the report. The ADP report showed solid job growth of 178,000 in July and June was revised higher from 158,000 to 191,000. It bodes well for the labour market on Friday, but remember that the ADP report is not always the best indicator of actual job growth.
After a strong Tuesday in global equity markets, we saw some profit taking in Europe yesterday, and most indices ended the day in the red. The sentiment was slightly better in the US as the 5% gain in Apple led indices higher. The Dow jones index closed above 22,000 for the first time ever.
The market is following Fed comments closely as the FOMC is widely expected to start reducing its balance this autumn. The Fed's James Bullard on the one side who is a known ‘dove' said yesterday that he is concerned about the soft inflation data. On the other side, we had less ‘dovish' comments from the Fed's John Williams and Loretta Mester, who both argue that inflation will reach the 2% target over the coming years.
The US debtceiling is an ongoing concern for the US market . The US Treasury said yesterday in its Q3 refunding statement that it is able to fund the government until the end of September. Treasury Secretary Steven Mnuchin said a few days ago in a letter to Congress that it was critical to act no later than 29 September. In respect of the refunding statement , note that it was said at the press conference that the US Treasury is still looking at the possible introduction of ultralong bonds (50Y bonds), but there was no announcement on the topic.
Trade Idea : USD/CHF – Buy at 0.9600
USD/CHF - 0.9691
Most recent candlesticks pattern : N/A
Trend : Near term up
Tenkan-Sen level : 0.9699
Kijun-Sen level : 0.9681
Ichimoku cloud top : 0.9672
Ichimoku cloud bottom : 0.9660
Original strategy :
Buy at 0.9600, Target: 0.9700, Stop: 0.9565
Position : -
Target : -
Stop : -
New strategy :
Buy at 0.9600, Target: 0.9700, Stop: 0.9565
Position : -
Target : -
Stop : -
Although the greenback rebounded after finding support at 0.9631, break of indicated resistance at 0.9727 is needed to signal recent upmove has resumed and extend gain to 0.9750-60, then 0.9780, however, near term overbought condition should limit upside to 0.9800-10, bring retreat later. If said resistance at 0.9727 continues to hold, then further consolidation would take place and another retreat to 0.9650 and 0.9631 cannot be ruled out but 0.9596 (previous resistance turned support) should limit downside and bring another rise later.
In view of this, would not chase this rise here and would be prudent to buy dollar on subsequent pullback as previous resistance at 0.9596 should turn into support and contain dollar’s downside. Below 0.9580 (61.8% Fibonacci retracement of 0.9490-0.9727) would defer and suggest a temporary top is formed instead, bring correction to 0.9540-50 but price should stay well above support at 0.9490, bring another rise later.
Trade Idea : GBP/USD – Buy at 1.3130
GBP/USD - 1.3221
Most recent candlesticks pattern : N/A
Trend : Near term up
Tenkan-Sen level : 1.3221
Kijun-Sen level : 1.3227
Ichimoku cloud top : 1.3211
Ichimoku cloud bottom : 1.3171
Original strategy :
Buy at 1.3130, Target: 1.3230, Stop: 1.3095
Position : -
Target : -
Stop : -
New strategy :
Buy at 1.3130, Target: 1.3230, Stop: 1.3095
Position : -
Target : -
Stop : -
As cable has eased after marginal rise to 1.3251, suggesting minor consolidation below this level would be seen and pullback to 1.3191 support cannot be ruled out, however, reckon downside would be limited to 1.3150-60 and 1.3125-30 should hold, bring another rise later, above said resistance at 1.3251 would extend gain to 1.3275-80 but near term overbought condition should prevent sharp move beyond there and reckon 1.3300-10 would hold from here, risk from there has increased for a retreat to take place later.
In view of this, would not chase this rise here and would be prudent to buy cable on pullback as 1.3125-30 should contain downside, bring another upmove later. Only below indicated support at 1.3097 would abort and signal a temporary top is possibly formed, bring further fall towards previous support at 1.3052.
Trade Idea : EUR/USD – Sell at 1.1880
EUR/USD - 1.1845
Most recent candlesticks pattern : N/A
Trend : Near term up
Tenkan-Sen level : 1.1846
Kijun-Sen level : 1.1864
Ichimoku cloud top : 1.1812
Ichimoku cloud bottom : 1.1785
Original strategy :
Sold at 1.1850, stopped at 1.1885
Position : - Short at 1.1850
Target : -
Stop : - 1.1885
New strategy :
Sell at 1.1880, Target: 1.1780, Stop: 1.1915
Position : -
Target : -
Stop : -
Although the single currency extended recent upmove to 1.1910 yesterday, the subsequent retreat suggests consolidation below this level would be seen and mild downside bias is for weakness to 1.1810-15, however, break of 1.1780-85 (50% Fibonacci retracement of 1.1650-1.1910 and previous support) is needed to signal top is formed, bring retracement of recent rise to 1.1745-50 (61.8% Fibonacci retracement) but support at 1.1723 would remain intact.
In view of this, we are looking to sell euro on recovery as 1.1880-85 should limit upside. Above said resistance at 1.1910 would signal recent upmove is still in progress and may extend headway to 1.1940-50 and possibly towards 1.1970-75 before correction takes place.
Trade Idea : USD/JPY – Hold short entered at 110.90
USD/JPY - 110.60
Most recent candlesticks pattern : N/A
Trend : Near term down
Tenkan-Sen level : 110.70
Kijun-Sen level : 110.63
Ichimoku cloud top : 110.52
Ichimoku cloud bottom : 110.42
Original strategy :
Sold at 110.90, Target: 109.90, Stop: 111.00
Position : - Short at 110.90
Target : - 109.90
Stop : - 111.00
New strategy :
Hold short entered at 110.90, Target: 109.90, Stop: 111.00
Position : - Short at 110.90
Target : - 109.90
Stop : - 111.00
As the greenback has rebounded after finding support at 110.28, suggesting further consolidation would be seen, however, as long as resistance at 110.98 (yesterday’s high) holds, bearishness remains for another retreat, below said support at 110.28 would suggest the rebound from 109.92 has ended, bring retest of this level later. A break there would confirm recent selloff from 114.50 top has resumed and extend weakness to 109.70–75 but loss of downward momentum should limit downside to 109.50.
In view of this, we are holding on to our short position entered at 110.90. Above 111.05-10 (50% Fibonacci retracement of 112.20-109.92) would defer and risk test of 111.29 resistance but only break there would signal a temporary low has been formed instead, bring rebound to 111.50-55 first.
Australia’s Trade Surplus Sharply Narrowed In June, Services Sector Activity Rose In July
For the 24 hours to 23:00 GMT, the AUD declined 0.05% against the USD and closed at 0.7958.
LME Copper prices declined 0.01% or $0.5/MT to $6300.0/MT. Aluminium prices rose 0.9% or $17.0/MT to $1904.0/MT.
In the Asian session, at GMT0300, the pair is trading at 0.7933, with the AUD trading 0.31% lower against the USD from yesterday's close, following downbeat trade balance data in Australia.
Australia's seasonally adjusted trade surplus narrowed more-than-expected to a level of A$856.0 million in June, amid a drop in exports. The nation had recorded a revised surplus of A$2024.0 million in the previous month, while markets were expecting it to narrow to a level of A$1800.0 million. On the other hand, the nation's AiG performance of services index registered a rise to a level of 56.4 in July, compared to a reading of 54.8 in the previous month.
Elsewhere in China, Australia's largest trading partner, the Caixin/Markit services PMI eased to a level of 51.5 in July. In the prior month, the PMI index had recorded a reading of 51.6.
The pair is expected to find support at 0.7901, and a fall through could take it to the next support level of 0.7869. The pair is expected to find its first resistance at 0.7979, and a rise through could take it to the next resistance level of 0.8025.
Moving ahead, traders will focus on the Reserve Bank of Australia's monetary policy statement and Australia's retail sales data for June, slated to release tomorrow.
The currency pair is trading below its 20 Hr and 50 Hr moving averages.
Euro-Zone’s Producer Prices Grew At Its Weakest Pace This Year In June
For the 24 hours to 23:00 GMT, the EUR rose 0.35% against the USD and closed at 1.1849.
In economic news, data indicated that the Euro-zone's producer price index (PPI) advanced 2.5% on an annual basis in June, meeting market expectations and rising at its weakest pace this year. The PPI had risen by a revised 3.4% in the preceding month.
Macroeconomic data released in the US indicated that ADP's private sector employment climbed less-than-expected by 178.0K in July, after jumping by a revised 191.0K in the prior month and missing market expectations for an advance of 190.0K. Additionally, the nation's MBA mortgage applications slid 2.8% in the week ended 28 July, after recording a gain of 0.4% in the prior week.
Meanwhile, the St. Louis Fed President, James Bullard, stated that he would not be in favour of further rate hikes in the near-term as inflation remains at stubbornly low level. Meanwhile, the San Francisco Fed President, John Williams, signalled that the central bank could start rolling back its $4.5 trillion balance sheet this autumn.
In the Asian session, at GMT0300, the pair is trading at 1.1845, with the EUR trading a tad lower against the USD from yesterday's close.
The pair is expected to find support at 1.1792, and a fall through could take it to the next support level of 1.1739. The pair is expected to find its first resistance at 1.1904, and a rise through could take it to the next resistance level of 1.1963.
Moving ahead, market participants will keep a close watch on the Euro-zone's retail sales data for June and the final Markit services PMI for July across the Euro-zone, slated to release in a few hours. Moreover, traders will eye the US ISM non-manufacturing PMI as well as the final Markit services PMI, both for July coupled with factory orders and durable goods orders, both for June and initial jobless claims data, all slated to release later today.
The currency pair is showing convergence with its 20 Hr moving average and trading above its 50 Hr moving average.
UK’s Construction Sector Growth Hit 11-Month Low In July
For the 24 hours to 23:00 GMT, the GBP rose 0.09% against the USD and closed at 1.3221, despite data showing a sharp decline in UK's construction activity.
On the macro front, Britain's Markit construction PMI fell more-than-anticipated to a level of 51.9 in July, expanding at its weakest pace in eleven months, as heightened political uncertainty along with concerns over Brexit led to a slowdown in new orders. In the prior month, the PMI had recorded a level of 54.8, while market participants had envisaged for a fall to a level of 54.0.
In the Asian session, at GMT0300, the pair is trading at 1.3215, with the GBP trading marginally lower against the USD from yesterday's close.
The pair is expected to find support at 1.3190, and a fall through could take it to the next support level of 1.3164. The pair is expected to find its first resistance at 1.3246, and a rise through could take it to the next resistance level of 1.3276.
Looking forward, investors will pay attention to the Bank of England's (BoE) interest rate decision, scheduled later in the day. The central bank is widely expected to stand pat on monetary policy. Also, Britain's Markit services PMI for July, set to be released in a few hours, will be on investors' radar.
The currency pair is trading below its 20 Hr moving average and showing convergence with its 50 Hr moving average.
Japan’s Services Sector Expanded At A Slower Pace In July
For the 24 hours to 23:00 GMT, the USD rose 0.37% against the JPY and closed at 110.77.
On the economic front, Japan's consumer confidence index advanced to four-month high level of 43.8 in July, surpassing market expectations of a rise to a level of 43.5. In the previous month, the index had registered a level of 43.3.
In the Asian session, at GMT0300, the pair is trading at 110.64, with the USD trading 0.12% lower against the JPY from yesterday's close.
Overnight data showed that the nation's Markit services PMI declined to a level of 52.0 in July, compared to a reading of 53.3 in the previous month.
The pair is expected to find support at 110.29, and a fall through could take it to the next support level of 109.95. The pair is expected to find its first resistance at 110.98, and a rise through could take it to the next resistance level of 111.33.
The currency pair is showing convergence with its 20 Hr moving average and trading above its 50 Hr moving average.
Switzerland’s Manufacturing Sector Growth Surged To A 6-Year High In July
For the 24 hours to 23:00 GMT, the USD rose 0.53% against the CHF and closed at 0.9707.
On the data front, Switzerland's SECO consumer confidence index improved to a level of -3.0 July, meeting market expectations, reflecting greater optimism about the nation's economic growth and job market. In April, the index had registered a level of -8.0. Additionally, the nation's real retail sales rebounded 1.5% on an annual basis in June, after recording a revised drop of 0.8% in the previous month.
Another data indicated that the nation's SVME manufacturing PMI recorded an unexpected rise to a level of 60.9 in July, notching its highest level in six years. Investors had anticipated the PMI to fall to a level of 58.8, after registering a reading of 60.1 in the prior month.
In the Asian session, at GMT0300, the pair is trading at 0.9708, with the USD trading slightly higher against the CHF from yesterday's close.
The pair is expected to find support at 0.9667, and a fall through could take it to the next support level of 0.9625. The pair is expected to find its first resistance at 0.9732, and a rise through could take it to the next resistance level of 0.9755.
The currency pair is trading above its 20 Hr and 50 Hr moving averages.
