iFOREX Daily Analysis : March 05,2018
iFOREX | Mar 05, 2018 05:49AM ET
The US Dollar traded lower against other major currencies with the US Dollar Index (USDX) closing 0.36% as markets fear the fall out the proposed US tariffs on steel and aluminum would have. As affected countries such as Canada, China and the EU vow to impose countermeasures if the US would follow through and unilaterally impose tariffs, US President Trump threatened to impose taxes on car imports in case other countries retaliate on his initial tariffs.
On Sunday the German SPD party announced an agreement to a coalition with Angela Merkel’s CDU/CSU, paving the way for a fourth term for her in the Chancellor’s office. The markets are eagerly expecting the results of the Italian elections as to see what impact the anti-Euro parties will have. The EU-critical ‘5 star movement’ party suggested holding a referendum on whether Italy should remain in the Euro.
Gold traded higher in this uncertain market environment, also supported by weakness in the Dollar. The oil price was also supported by a weaker Dollar as otherwise the Baker Hughes Oil Rig Count indicated again a higher amount of operating oil rigs as markets are already edgy about the increase in US oil production.
Equity indices closed mixed with especially the biggest companies affected as the Dow Jones Industrial Average (US 30) closed -0.44% lower. However smaller company’s stocks were seen trading higher with the Russell 2000 (US 2000) closing 1.90% higher.
After breaking through the $11,000 barrier, Bitcoin remained clearly above that level throughout the weekend. One of the leading Bitcoin exchanges – Coinbase – was hit by a class action lawsuit due to the introduction of Bitcoin Cash on its platform. Cryptocurrencies are to a significant extent unregulated and such a lawsuit could set a precedent in the cryptocurrency market.
On Monday the EU publishes PMI Composite and Retail Sales numbers. The United Kingdom releases CIPS/PMI Services Index data and the US release the ISM Non-Manufacturing Index data on Monday.
This week the central banks of Australia, Japan and the Euro-Zone are due to make an announcement about their interest rate decisions. In the US we will see the release of trade balance (deficit) and NFP data later in the week.
EUR/USD
The EUR/USD continued its strong recovery on Friday as markets are concerned about the unilateral plans of the United States to impose tariffs on steel and aluminum. In this environment the below estimates German Retail Sales m/m at -0.7% (expected +0.8%) and the EU Producer Price Index (PPI) - y/y at +1.5 (expected +1.6%) did not seem to have a significant effect on the Euro against the weakening Dollar. Analysts are worried that in a trade war could lead to withdrawals in capital flow from the US.
On Monday the European Union (EU) releases its PMI Composite and Retail Sales data. In the US many will look at the NPF due on Friday. The trade balance deficit of the US is due for publication on Wednesday with an expected deficit of $55.1 bn. (previously $53.1 bn. deficit).
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Pivot: 1.2285 Support: 1.2285 1.225 1.222Resistance: 1.2345 1.2365 1.2395 Scenario 1: long positions above 1.2285 with targets at 1.2345 & 1.2365 in extension. Scenario 2: below 1.2285 look for further downside with 1.2250 & 1.2220 as targets. Comment: the RSI shows upside momentum.
Gold
Gold broke the downwards trend and closed higher on Friday as uncertainty shook the markets over US President Trump’s trade war talk. The rebounding Treasury yields were not able to stop the upward movement supported by the weaker Dollar and insecurity in the market.
Besides the escalating rhetoric between the US and the rest of the world about tariffs, this week’s focus will be also on interest rate decisions as the Reserve Bank of Australia (RBA) is due to announce its decision on Tuesday, the Bank of Japan (BoJ) on Thursday and the European Central Bank (ECB) also on Thursday.
Pivot: 1315.5 Support: 1315.5 1311 1304Resistance: 1325.5 1330 1334 Scenario 1: long positions above 1315.50 with targets at 1325.50 & 1330.00 in extension. Scenario 2: below 1315.50 look for further downside with 1311.00 & 1304.00 as targets. Comment: the RSI is mixed to bullish.
WTI Oil
Oil closed slightly higher on Friday after reaching intraday a 2-weeks low. The Baker Hughes Oil Rig Count was again higher at 800 operating oil rigs (799 previously). The expansion in production and higher stockpiles according to last week’s EIA figures are a concern to markets despite the ongoing OPEC production deal. Analysts indicated that the rebound on Friday from the intraday low could be attributed to the weakness of the Dollar.
On Tuesday the American Petroleum Institute (API) will release oil stockpile figures, followed by the Energy Information Administration (EIA) on Wednesday.
Pivot: 60.15 Support: 60.15 59.75 59.3Resistance: 61.55 62.35 62.95 Scenario 1: long positions above 60.15 with targets at 61.55 & 62.35 in extension. Scenario 2: below 60.15 look for further downside with 59.75 & 59.30 as targets. Comment: the RSI broke above a bearish trend line. Prices broke above a descending triangle.
US 500
US equity indices closed mixed in after-hours trading, despite the insecurity about Trump’s proposed tariffs on steel and aluminum and the threat of affected countries to implement countermeasures. Biotech stocks (US Biotech ETF +2.50%) were among the best performing equities on Friday, while utilities (US Utilities ETF -0.31%) stock were the worst performers.
Snapchat (+4.47%) continues to trade with significant volatility. The company announced that they want to bring out a new version of their Spectacles glasses this year despite the announcement a couple months back that the available Spectacles sales did not meet expectations and the company lost $40 on them.
On Monday the ISM Non-Manufacturing Index figures will be published, while later this week the ADP Employment Report and Nonfarm Payrolls (NFP) statistic will be released.
Pivot: 2631 Support: 2631 2612 2580 Resistance: 697.5 2730 2762.5 Scenario 1: long positions above 2631.00 with targets at 2697.50 & 2730.00 in extension. Scenario 2: below 2631.00 look for further downside with 2612.00 & 2580.00 as targets. Comment: the RSI shows upside momentum. Prices broke above a falling wedge pattern (bullish).
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