iFOREX Daily Analysis – 08/12/2015

The dollar remained broadly higher against the other major currencies in quiet trade on Monday, as Friday's strong U.S. jobs data continued to fuel expectations for a December rate hike by the Federal Reserve, supporting demand for the greenback. The dollar gained after the Labor Department reported on Friday that the U.S. economy added 211,000 jobs last month, while the unemployment rate held steady at 5%. In China, key trade data for November showed a 6.8% drop in exports, more than the 5.0% decline seen, and imports down 8.7%, less than the 12.6% drop expected. The overall surplus came in at $54.10 billion, compared to an expected $63.30 billion. Earlier, in Japan, bank lending rose 2.3% as expected year-on-year in November, while the current account for October came in at a surplus of ¥1.458 trillion, slightly narrower than the expected ¥1.659 trillion surplus. Also in Japan, third quarter GDP surged 1.0% year-on-year compared to a 0.1% gain seen. For today, the U.K. is to produce data on industrial production and Canada is to release data on building permits. Later in the day, Bank of Canada Governor Stephen Poloz is to speak at an event in Toronto.

The euro posted a slight drop against the dollar on Monday, as currency traders continue to react to further indications of major policy divergence between central banks in the U.S. and the euro zone.

The currency pair traded between 1.0796 and 1.0887 before settling 0.41% lower for the session. Last Thursday, the dollar suffered its worst one-day fall against the euro in six years after the European Central Bank spooked markets by implementing limited easing measures in Frankfurt. However, the strong employment report followed by a dovish speech by Janet Yellen last week provide support to the dollar, and confirm that the U.S. economy has improved enough in recent weeks to justify a December interest rate hike. For this week investors will be focusing on Thursday’s jobless claims data from the U.S, while retail sales, inflation and consumer sentiment data are due on Friday.

Pivot: 1.09Support: 1.076 1.069 1.0635Resistance: 1.09 1.098 1.109Scenario 1: short positions below 1.09 with targets @ 1.076 & 1.069 in extension.Scenario 2: above 1.09 look for further upside with 1.098 & 1.109 as targets.Comment: as long as 1.09 is resistance, likely decline to 1.076.

Gold fell from three-week highs on Monday amid a recovering dollar, as investors anticipate that the Federal Reserve will raise interest rates for the first time in nine years when it meets next week. Investors continue to assess data from Friday's relatively optimistic U.S. jobs report which brings the Fed one step closer to increasing interest rates next week. The precious metal received further pressure from mixed trade data in China for November which showed a 6.8% drop in exports, more than the 5.0% decline seen, and imports down 8.7%, less than the 12.6% drop expected, The overall surplus came in at $54.10 billion, compared to an expected $63.30 billion. Gold traders will be focusing on Thursday’s jobless claims data from the U.S, while retail sales, inflation and consumer sentiment data are due on Friday.

Pivot: 1078Support: 1065.5 1058 1053Resistance: 1078 1082 1088Scenario 1: short positions below 1078 with targets @ 1065.5 & 1058 in extension.Scenario 2: above 1078 look for further upside with 1082 & 1088 as targets.Comment: as long as 1078 is resistance, likely decline to 1065.5.

U.S. crude futures fell below $38 a barrel falling to fresh six-year lows, in the first full day of trading since OPEC concluded a meeting by leaving its output ceiling unchanged as members were divided on the need for production cuts. OPEC leaders appear hesitant to alter their strategy until economic sanctions against Iran are lifted next year. When the sanctions are fully eased, Iran is expected to boost its production by as much as 1 million barrels per day. OPEC is not expected to alter its output strategy until its meets again in Vienna next June. The severe downturn in oil prices has weighed on smaller OPEC member states, such as Venezuela, Ecuador and Nigeria, whose economies are heavily reliant on oil proceeds. For this week, Wednesday’s crude oil inventories report from the EIA remains in focus for further indications on demand for the fuel.

Pivot: 39.2Support: 37 36.4 35.9Resistance: 39.2 39.8 40.7Scenario 1: short positions below 39.2 with targets @ 37 & 36.4 in extension.Scenario 2: above 39.2 look for further upside with 39.8 & 40.7 as targets.Comment: as long as 39.2 is resistance, likely decline to 37.

As investors have accepted the likelihood of a December rate hike, another big uncertainty resurfaced: the price of oil. Worries over how low oil prices could fall returned on Monday, heightening concerns that the steep selloff is only the beginning of a renewed downward push for equity markets. Crude oil prices closed at their lowest level since February 2009 after a recent meeting of the Organization of Petroleum Exporting Countries failed to produce significant guarantees to reduce output. West Texas Intermediate crude fell approximately 5.8% a barrel causing the S&P 500 to fall 0.7%, the Dow Jones Industrial Average declined 0.65%, and the Nasdaq slid 0.79%. The steep selloff in crude on Monday pushed the energy sector deep in the red. Major oilers including Exxon Mobil (N:XOM), Chevron (N:CVX), PetroChina, Royal Dutch Shell (L:RDSa) and BP (L:BP) were more than 2% lower. Gun stocks pushed higher on Monday after a speech from President Barack Obama on Sunday evening called for tighter regulation of firearms. Smith & Wesson and Sturm Ruger jumped around 6% each. For this week investors will be focusing on Thursday’s jobless claims data from the U.S, while retail sales, inflation and consumer sentiment data are due on Friday.

Pivot: 2019 Support: 2019 1953 1867 Resistance: 2116 2135 2180 Scenario 1: long positions above 2019 with targets @ 2116 & 2135 in extension. Scenario 2: below 2019 look for further downside with 1953 & 1867 as targets. Comment: the RSI is supported by a bullish trend line.