IForex Daily : August 12, 2014

The dollar fell against most major currencies on Tuesday, after data showed that U.S. unit labor costs rose more than expected in the second quarter, while non-farm productivity came in below forecasts. The U.S. Bureau of Labor Statistics reported on Tuesday that unit labor costs increased by 0.5% in the three months to June, above forecasts for a gain of 0.1% and following rise of 2.3% in the first quarter. Elsewhere, the People's Bank of China made an unexpected move devaluing its currency in an attempt to revitalize its economy in order to support falling export prices and weak manufacturing. The bank lowered the yuan by 1.9%, posting its largest decline in more than 20 years. On Monday, data showed that Chinese exports had slumped 8.3%, the biggest drop in four months. The move reduced chances for U.S. stocks to extend Monday's recovery causing them to end the day in negative territory. Crude oil prices posted a sharp drop following China's currency devaluation, which threatens to make crude oil imports more expensive for the country, a significant hit for demand. Today, the U.K. is to publish its latest employment report, eurozone will publish data on industrial production, while in the U.S., the more closely watched report on weekly crude oil inventories is due from the Energy Information Administration.

EUR/USD

The euro ended the day slightly higher against the dollar on Tuesday, following higher than expected unit labor costs in the U.S. and as China surprised the markets worldwide with an unexpected devaluation of the yuan by 1.9%, its largest decline in more than 20 years raising worries of a potential global currency war. Separately, Greece agreed on the framework of the €86 billion bailout from its international creditors, which needs to be completed before the deadline for a critical repayment of a loan that expires next week. Without a deal, it is feared that the country could default on its debt be removed from the euro triggering a new global crisis. For today, markets will be focusing on industrial production data from the euro zone.

Pivot: 1.101Support: 1.101 1.0955 1.092Resistance: 1.1115 1.1155 1.12Scenario 1: Long positions above 1.101 with targets @ 1.1115 & 1.1155 in extension.Scenario 2: Below 1.101 look for further downside with 1.0955 & 1.092 as targets.Comment: The RSI is bullish and calls for further upside.

Oil

Crude oil prices posted a sharp drop after China's currency devaluation, which threatened to make crude imports more expensive for the nation, posing a significant threat for demand. In addition, data showing record production from the Organization of Petroleum Exporting Countries added even more pressure on the fuel. Oil-producing countries pumped the most crude oil in July in more than three years as Iran increased its output to its highest level since international sanctions were placed.
West Texas Intermediate dropped 4.2% to $43.08 a barrel, its lowest closing in six years. For today, the U.S., will produce the closely watched report on weekly crude oil inventories from the Energy Information Administration.

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Pivot: 44.4Support: 42.5 41.9 41.4Resistance: 44.4 45.15 46.55Scenario 1: Short positions below 44.4 with targets @ 42.5 & 41.9 in extension.Scenario 2: Above 44.4 look for further upside with 45.15 & 46.55 as targets.Comment: As long as 44.4 is resistance, likely decline to 42.5.

Dow Jones

The main U.S. stocks indices were sent falling on Tuesday as China's devaluation of its yuan currency hit companies with a big exposure to one of the world's biggest economies and added to worries about the global economic outlook. The move poses a threat for demand for commodities, basic materials and crude oil as well. The basic materials sector took the hardest hit on fears China would import fewer raw materials and metals from multinational players such as Alcoa (NYSE:AA) which fell by 6%, and Freeport-McMoRan which dropped by 12.3%. Tech giant Apple Inc (NASDAQ:AAPL), which is largely exposed to the Chinese market fell by 5.2 percent to end the day at $113.54, posting its biggest daily percentage decline since January 2014. The Dow Jones industrial average posted the biggest drop of all 3 main indices, falling by 1.21 percent. Stock traders will now be focusing on what the upcoming economic data might mean for the Federal Reserve's upcoming rates decision next month.

Pivot: 18350Support: 17200 17040 16820Resistance: 18350 18650 18900Scenario 1: Short positions below 18350 with targets @ 17200 & 17040 in extension.Scenario 2: Above 18350 look for further upside with 18650 & 18900 as targets.Comment: The RSI is capped by a declining trend line

Google (NASDAQ:GOOGL)

Google posted sharp gains on Tuesday after the search engine company announced the formation of its new parent company called Alphabet. The parent company will house Google, while Google X lab and its Ventures and Capital investment businesses will be separate. Larry Page will act as CEO of Alphabet, while head of Google's core products, Sundar Pichai, will act as new CEO of Google. Google will become a wholly-owned subsidiary of Alphabet. Following the news, Google shares climbed 4.3%.

Pivot: 604 Support: 604 566 491 Resistance: 714 745 785 Scenario 1: Long positions above 604 with targets @ 714 & 745 in extension. Scenario 2: Below 604 look for further downside with 566 & 491 as targets. Comment: Even though a continuation of the consolidation cannot be ruled out, its extent should be limited.

Written By: iFOREX