Daily Market Analysis by CapitalStreetFX

CapitalStreetFX

Master Trader
Aug 6, 2015
193
2
59
Dollar Plunges As China Devalues Yuan For Second Day
China devalued the Yuan for second day in-a-row, sending the American dollar sharply lower across the board, whilst stocks nose-dived and commodities also fell. Oil and Gold however, bounced, this last due to its safe-haven status.

In the EU Industrial Production in June resulted in a 0.4% drop monthly basis, whilst the year-on-year reading gained 1.2% against expectations of a 1.5% advance.

In the US, the number of job openings reached 5.2 million in June, according to the US Bureau of Labor Statistics, slightly below market’s expectations, whilst FED’s Dudley said that the hopes they can lift rates soon, but avoid to comment on a certain time.

The EUR/USD surged to a fresh 5-weeh high of 1.1213 in the American afternoon, but the pair retreated some from the mentioned daily high, ending the day, however, with strong gains, and despite being extremely overbought in the short term, the 1 hour chart is far from suggesting a reversal, as the price remains well above a bullish 20 SMA, whilst the technical indicators have barely corrected extreme readings and the RSI indicator is now turning flat around 69.

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In the 4 hours chart the technical indicators are also showing signs of upward exhaustion in extreme overbought territory, not yet suggesting a downward correction move.

As long as the price holds above 1.1120, the risk will remain towards the upside, with scope to extend its gains on a break above 1.1240, a strong static resistance level.
 

CapitalStreetFX

Master Trader
Aug 6, 2015
193
2
59
Aussie Dollar, Gold Look Positive As Bulls Gain Strength

The AUD/USD pair fell down to fresh multi-year lows at 0.7214, but erased most of its weekly losses by the close. The Aussie was among the most affected by China’s devaluation, but ever since RBA’s Governor, Glenn Stevens, said that the AUD depreciation has done enough to help the country’s economic growth, market sentiment has flipped to bullish for the antipodean currency.

Still, the pair is unable to advance beyond the 0.7400 level, with intraday sellers taking their chances around the level. Nevertheless, the daily chart shows that the pair has managed to hold above its 20 SMA that lost its bearish slope and now stands flat around 0.7335, providing an immediate support.

In the same chart, the Momentum indicator presents a mild bullish tone above its 100 level, whilst the RSI indicator remains flat in neutral territory, still failing to confirm a more sustainable rally.

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Shorter term, the 4 hours chart shows that the price develops above a bullish 20 SMA, although the technical indicators stand around their mid-lines, with the Momentum indicator presenting a strong bearish slope, coming from overbought levels, suggesting the pair may fall in the short term.

In the same chart, the 200 SMA stands now around 0.7415, offering a strong dynamic resistance, and a line in the sand, as the pair has remained below it since late June. Some follow through beyond the MA should signal an upward continuation towards the 0.7500 region.
 

CapitalStreetFX

Master Trader
Aug 6, 2015
193
2
59
The FTSE 100 closed the day flat at 6,550.30, with mining shares among the biggest losers, on the back of weaker metal prices. Also, supermarket group Morrisons fell 1.18% after reports that it may sell its 160 M-Local convenience stores.

The London benchmark has managed to recover from a fresh 3-week low set at 6,508, but technically, the index maintains its bearish tone, as the daily chart shows that it continues developing below a bearish 20 SMA whilst the Momentum indicator turned south around the 100 level and the RSI heads slightly lower around 40.

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In the 4 hours chart the 20 SMA has extended its decline above the current level, now offering a strong dynamic resistance around 6,597, but the Momentum indicator aims higher above the 100 level and the RSI indicator holds flat around 42, all of which limits the downside, at least in the short term.

A break below 6,480 is now required to confirm a stronger decline towards the 6,300 level, January 2015 low.
 

CapitalStreetFX

Master Trader
Aug 6, 2015
193
2
59
Pound Rallies To Seven-Week High After UK Inflation News

The GBP/USD pair surged to a fresh 7-week high of 1.5716, with the Pound getting a boost from the UK inflation figures that surprised to the upside.

The pair however, eased down to 1.5643 during the American afternoon, from where its slowly grinding back higher.

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Technically, the 1 hour chart shows that the technical indicators are resuming their advance after correcting extreme overbought readings, whilst the 20 SMA gained bullish slope below the current level, and offers now an intraday support around 1.5630.

In the 4 hours chart the price has recovered from a horizontal 200 EMA and broke through its 20 SMA , whilst the technical indicators are also resuming their advances after correcting lower. A new advance beyond 1.5690 should lead to a test of the 1.5733 level, July monthly high, whilst beyond this last, 1.5770 is the next probable bullish target for Wednesday.
 

CapitalStreetFX

Master Trader
Aug 6, 2015
193
2
59
The GBP/CAD advanced up to 2.0614, boosted by a slump in Canadian dollar, as oil fell to fresh lows on an unexpected increase of US stockpiles.

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The EIA reported that the commercial inventories increased by 2.6 million barrels last week, against expectations of a decline of 1.2 million barrels, with WTI crude oil falling down to $ 40.80 a barrel.

As for the GBP/CAD, the 1 hour chart shows that the price is well above a bullish 20 SMA, whilst the technical indicators are easing partially from extreme overbought levels.

In the 4 hours chart, however, a strong bullish tone prevails, with the 20 SMA leading the way higher and attracting buyers on dips, whilst the technical indicators maintain strong upward slopes well above their mid-lines.
 

CapitalStreetFX

Master Trader
Aug 6, 2015
193
2
59
AUD/USD Sinks To 1.7284 As Asian Stocks Slide Down

The AUD/USD fell down to 0.7284 on Thursday, as the Aussie took a hit from falling Asian share markets.

The pair however, recovered on dollar’s weakness, reaching 0.7362 before stalling.

On daily basis, the pair is closed in the red, with a lower low and a lower high, and below its 20 SMA, suggesting bears maintain the lead.

Talking about the short term scenario, the 1 hour chart shows that the price is now above a mild bearish 20 SMA, but that the technical indicators present a mild negative tone right below their mid-lines.

In the 4 hours chart, the 20 SMA caps the upside around 0.7345, whilst the technical indicators lack directional strength around their mid-lines.

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Despite dollar’s negative tone, the pair may continue finding selling interest in the 0.7400 region on advances, while a break below 0.7290 should lead to a continued decline down to the 0.7210 price zone.
 

CapitalStreetFX

Master Trader
Aug 6, 2015
193
2
59
GBPCAD Hits Multi-Year High Amid Slump In Oil Prices

The GBP/CAD cross reached a multi-year high of 2.0969, adding over 250 pips to its latest rally, and maintaining its gains by the end of the day, after a sharp intraday decline. The slump in oil prices put the Canadian dollar under strong selling interest, as WTI crude oil futures fell down to $37.75 a barrel, levels not seen since 2009.

As for the GBP/CAD technical picture, the 1 hour chart shows that the bullish momentum prevails, with the technical indicators heading higher near overbought levels, and the 20 SMA attracting intraday buyers, currently around 2.0800.

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In the 4 hours chart, the technical indicators are beginning to lose their upward strength near overbought levels, but the upside remains favored, as the 20 SMA heads sharply higher below the current price, while there’s no clear sign the pair may reverse its gains during the upcoming hours.
 

CapitalStreetFX

Master Trader
Aug 6, 2015
193
2
59
AUDUSD: Bears Remain In Control Ahead of RBA Governor’s Speech

The Australian dollar enjoyed some demand against its American rival earlier yesterday, setting a daily high of 0.7249 before erasing most of its intraday gains, ending the day a few pips above its daily opening, on renewed dollar’s demand.
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During the upcoming Asian session, RBA’s Governor Glenn Stevens is scheduled to speak at the National Reform Summit, in Sydney. He is not particularly expected to talk about the ongoing economic policy of the country, but his remarks will be closely followed by investors.

Technically, the pair presents a bearish potential in the short term, as in the 1 hour chart the price is extending below its 20 SMA, whilst the RSI indicator heads lower around 39 and the Momentum indicator holds flat below its 100 level.

In the 4 hours chart, the 20 SMA maintains a sharp bearish tone, currently around 0.7240, whilst the technical indicators lack directional strength near oversold levels, maintaining the risk towards the downside, and favoring additional declines on a break below 0.7125 the immediate support.
 

CapitalStreetFX

Master Trader
Aug 6, 2015
193
2
59
Dow Jones Up by 3.95% After A Record-Breaking Intraday Gain

Wall Street closed sharply higher, with the DJIA up 3.95% or 619 points, closing the day at 16,285.51, and posting one if its largest ever intraday gain.

The limited slide in Chinese stocks after the latest PBoC decision to cut rates, alongside with Dudley’s comments, suggesting that the FED may delay a rate hike, boosted optimism among US traders.

The benchmark however, is still far from Friday’s close around 16,455, the level to break to confirm an interim bottom in place.

Technically the daily chart shows that the 20 SMA maintains a sharp bearish slope well above the current level, although the technical indicators head clearly higher, recovering from extreme oversold readings and supporting and upward continuation, at least in corrective mode.

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The 4 hours chart presents a more constructive outlook, as the Momentum indicator has crossed above its 100 level and maintains its bullish slope, whilst the RSI indicator heads higher around 49 and the index extends below its 20 SMA, still with a clear bearish slope.
 

CapitalStreetFX

Master Trader
Aug 6, 2015
193
2
59
EURUSD Eyes 1.1120 After US Q2 GDP News

The EUR/USD pair fell to a fresh weekly low of 1.1202 before bouncing up to the current 1.1250 area, and still looking short-term heavy, as in the 1 hour chart, the price is clearly consolidating below its 200 SMA, whilst the technical indicators are posting mild declines below their mid-lines.

In the 4 hours chart, the technical indicators are bouncing from oversold readings, but remain far from suggesting the decline is over, whilst the 20 SMA has turned sharply lower well above the current price. A break below 1.1200 should see the pair extending its decline down to 1.1120, a key mid-term static support level.

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Not to mention the American dollar was on demand ever since the day started, as the recent risk-negative sentiment reverted during the past Asian session, following a sharp recovery in the Shanghai Composite, up 5.34% this Thursday.

The USD dollar advance after the release of the US Q2 GDP advanced reading showing that the economy grew at a faster-than-expected pace, printing 3.7% against expectations of a 3.2% advance.

Stocks closed with gains both in the US and Europe, supporting another positive day in Asian share markets.
 

CapitalStreetFX

Master Trader
Aug 6, 2015
193
2
59
Dow Jones: An Upbeat NFP Figure Might Incite Renewed Selling Pressure

Wall Street rallied at the opening, but faded before the closing bell, with the indexes closing barely unchanged daily basis.

The Dow Jones Industrial Average surged 23 points and ended the day at 16,374.76, down from a daily high around 16,554. The initial rally came after yesterday’s big rebound and local positive data, showing the services sector keeps growing.

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However, investors choose to take profits out of the table ahead of Friday’s US employment report, the ultimate risk event ahead of FED’s economic policy meeting in two weeks.

Technically, the downward potential is firm in place, as the daily chart maintains the negative tone seen on previous updates, with the index well below its moving averages and the technical indicators unable to pick up below their mid-lines.

The 4 hours chart presents a neutral stance, with the index hovering above a bearish 20 SMA and the technical indicator losing their upward strength, barely above their mid-lines.

The index upcoming direction will likely be determinate by how the market understands the employment figures, as if investors suspect that the FED may raise rates as soon as this month, stocks may plummet by reflex.
 

CapitalStreetFX

Master Trader
Aug 6, 2015
193
2
59
AUD/USD Hovers Around 6-Year Low Ahead of Aussie Employment News

The AUD/USD pair closed last week at its lowest level in over six years, as the liquidation of the antipodean currency remains firm in place.

The Aussie was also affected by the sharp slide in metals, as except for platinum, all closed in the red last Friday.

The overall negative sentiment has increased these last few weeks amid of the Chinese economic slowdown weighing on the local recovery.

Later on this week, Australia will release its monthly employment figures, and a positive reading may take off some of the pressure over the local currency.

Nevertheless, the pair has broken below a long term ascendant trend line coming from September 2001 low at 0.4815, currently around 0.7160, with high bearish implications for the upcoming weeks.

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The daily chart shows that the technical indicators continue to head south, despite being I extreme oversold territory, whilst the 20 SMA has accelerated its decline well above the current price.

In the 4 hours chart, the technical indicators also head lower in oversold levels, with no signs of exhaustion at the time being whilst the 20 SMA provides a strong dynamic resistance around 0.6990 in the case of an upward correction.
 

CapitalStreetFX

Master Trader
Aug 6, 2015
193
2
59
Oil Dips Below $45 After EIA Forecast

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Oil futures dipped below $45 a barrel yesterday, settling at the lowest level in nearly two weeks after the Energy Information Administration lowered its crude-oil price forecasts for this year and next. Prices also saw pressure ahead of weekly data that’s expected to show a rise in U.S. crude supplies.

On the New York Mercantile Exchange, October West Texas Intermediate crude fell $1.79, or 3.9%, to settle at $44.15 a barrel. October Brent crude on London’s ICE Futures exchange fell $1.94, or 3.9%, to $47.58 a barrel.

Both contracts saw their weakest settlement since Aug. 27. Overall, oil prices have fallen by around 17% so far this year.

In a monthly report, the EIA said it expects WTI prices to average $49.23 a barrel this year, down from a previous forecast of $49.62. It also reduced its forecast to $53.57 for 2016, versus $54.42. For Brent, its 2015 forecast was at $54.07, down from the previous forecast of $54.40.

Oil prices lost more ground after the report. Considering the overall technical and fundamental outlook, waiting for a solid reversal candle on daily chart appears to be a good strategy in short to medium term.
 

CapitalStreetFX

Master Trader
Aug 6, 2015
193
2
59
FTSE100 Sheds 1.18% After Strong Fall In Morrisons Stock

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The FTSE 100 lost 1.18% or 72 points, ending the day at 6,155.81, weighed not only by worldwide investors’ negative mood, by also by a strong fall in Morrisons shares, as the supermarket announced it was closing stores amid falling sales and profits.

Also, Home Retail Group edged lower, after reporting another fall in sales of Argos, which it owns, accounting for the 70% of the company’s revenues.
Beyond affecting shares, the decline in those stocks indicates, as the BOE announced earlier in the day that there are little chances for inflation to pick up in the upcoming months.

Technically, the index has made little progress over the last 24 hours, with the index stalling on an early advance around a still bearish 20 SMA, whilst the technical indicators remain in negative territory, albeit the Momentum indicator continues heading higher.

In the 4 hours chart, the index is now above a flat 20 SMA, while the technical indicators also lack directional strength right above their mid-lines, giving no clues on what’s next for this Friday.
 

CapitalStreetFX

Master Trader
Aug 6, 2015
193
2
59
Dow Bulls Remain In Control Amid Rate Hike Speculations

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Wall Street closed with gains, with the DJIA up 102 points or 0.63%, ending the day at 16,433.09, and the week 2.05% higher.

A series of poor US data released on Friday, lifted hopes among stocks investors, on a delay towards December before the Central Bank actually raises rates.

The US Producer Price Index was unchanged in August compared to a month before, and down 0.8% on a yearly basis. Consumer sentiment, according to the preliminary Michigan/Reuters survey, declined down 85.7 in September, the lowest in a year.

The Dow managed to close the week above the 50% retracement of its latest decline and above a still bearish 20 SMA, but the technical indicators are far from supporting additional gains, as the Momentum indicator turned sharply lower above the 100 level, whilst the RSI hovers around 46.

In shorter term, the 4 hours chart shows that the technical readings are mostly neutral, with the index a few points above a horizontal 20 SMA, whilst the technical indicators aim higher around their mid-lines, lacking directional strength.
 

CapitalStreetFX

Master Trader
Aug 6, 2015
193
2
59
Gold Holds Range Ahead of US Interest Rate Decision

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Gold prices held steady in European morning hours on Tuesday, as markets were jittery ahead of the Federal Reserve’s policy statement this week amid growing uncertainty over a potential rate hike.

On the Comex division of the New York Mercantile Exchange, gold futures for December delivery were steady at $1,107.40.

The December contract ended Friday’s session 0.40% higher at $1,107.70 an ounce.

Futures were likely to find support at $1,098.20, the low of September 11 and a one-month low and resistance at $1,111.70, the high of September 11.

Investors remained cautious amid concerns that mixed U.S. economic reports and recent volatility in global financial markets will prompt the U.S. central bank to refrain from hiking interest rates on Thursday.

Fed Chair Janet Yellen has said that an interest rate increase is data dependent but has also indicated that she expects to begin raising rates before the end of the year.

Expectations of higher borrowing rates going forward is considered bearish for gold, as the precious metal struggles to compete with yield-bearing assets when rates are on the rise.

Elsewhere in metals trading, silver futures for December delivery was little changed at $14.360 a troy ounce, while copper futures for December delivery held steady at $2.404 a pound.
 

CapitalStreetFX

Master Trader
Aug 6, 2015
193
2
59
GBP/CAD Remains Vulnerable As Bearish Gain Momentum

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The GBP/CAD edged lower this Tuesday, as the Pound was among the weakest currencies of the day, following the release of tepid Britain’s CPI figures, suggesting a rate hike in the UK may be delayer further beyond the first half of 2016.

Crude oil prices were hardly changed, with WTI crude oil futures advancing some cents, but ending the day below $ 45.00 a barrel. The GBP/CAD presents a clear negative tone by the US close, with the 1 hour chart showing that the 20 SMA gained bearish slope around 2.0410, and that the technical indicators maintain their sharp negative slopes, despite being in oversold territory.

In the 4 hours chart, the technical indicators head sharply lower whilst the price is now extending below its 200 EMA, currently around 2.0330.

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A downward acceleration through the 2.0300 level exposes the cross to a test of 2.0260 region, where it has several intraday highs and lows. Additional declines below this last should see a stronger bearish momentum, with the target then at the 2.0200 level.
 

CapitalStreetFX

Master Trader
Aug 6, 2015
193
2
59
US Inflation Disappoints Ahead of Fed Interest Rate Decision

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The U.S. Department of Labor released August’s CPI reading as being a drop by 0.1%. Forecast was calling for the reading to be flat. Another black eye on the headline CPI was that July’s inflation report was revised to 0.0% from a preliminary 0.1% gain.

The core-CPI, which excludes food and energy, showed a gain of 0.1% on the monthly reading. Bloomberg was looking for a consensus of 0.2% in August. The prior month was revised upward to a gain of 0.2% from 0.1%.

Perhaps the Fed can hang its hat on the annual numbers, comparing the inflation at the consumer level to August of 2014. That annual change was up 0.2% on the headline, but the core-CPI reading was up by 1.8% on an annual basis.

Remember that the Federal Reserve really wants the inflation rate at 2.0% to 2.5%.
 

CapitalStreetFX

Master Trader
Aug 6, 2015
193
2
59
Yellow Metal To Face Strong Resistance at $1143

Spot gold got a nice boost from the FED, rising up to a daily high of $ 1,135.74 a troy ounce, its highest since September 2, after US policy makers voted to keep the federal funds rates unchanged.

The bright metal closed the day around $ 1,132.00 a troy ounce, as the US Central Bank decision took out some of the pressure over the commodity.

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Nevertheless, the recovery stalled short from confirming a longer term advance, although the daily chart shows that the price has managed to advance beyond its 20 SMA, whilst the RSI indicator heads higher around 56.

In the same chart however, the 100 DMA maintains a strong bearish slope above the current level, providing a strong dynamic resistance now around 1,143.50, while the Momentum indicator heads higher below the 100 level.

In the 4 hours chart, the price has extended above a now bullish 20 SMA, whilst the technical indicators have lost their upward strength near overbought levels. The immediate support is now around 1,126.60, September 8 daily high, with a break below it pointing for a continued decline towards the 1,110 region.
 

CapitalStreetFX

Master Trader
Aug 6, 2015
193
2
59
GBP/CAD Seeks Direction As Oil Strength Weighs

The GBP/CAD cross reversed its Friday’s losses and closed barely up at 2.0534, as the Canadian dollar was weighed by a slump in oil prices.

The black gold started the week with a strong note, with WTI advanced up to $ 47.69 a barrel, although the FED’s decision to maintain its economic policy unchanged raised concerns about the local economy, and therefore the energy demand.

News that US oil rig count fell the previous, with the Baker Hughes report showing 644 active rigs against previous 652, did little to help the black gold, particularly considering that oil production is still high.

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The GBP/CAD however, closed at a 3-week high, and a slightly bullish tone prevails, as the daily chart shows the price bounced from a bearish 20 SMA providing a strong support around 2.0335, whilst the technical indicators lack directional strength above their mid-lines.

In the 4 hours chart, the price is well above a flat 20 SMA, whilst the RSI indicator heads higher around 58 and the Momentum indicator holds directionless above its 100 level.