iFOREX Daily Analysis : September 05,2018
iFOREX | Sep 05, 2018 06:11AM ET
The Dollar extended gains on Wednesday morning, pushing higher for the fifth consecutive day compared to other major currencies, with the US Dollar Index (USDX) more than one percent up compared to last week.
The South African Rand further extended losses on Tuesday and Wednesday. The annualized GDP contracted by 0.7% for Q2, despite expectations of positive growth and the Standard Bank PMI was at only 47.2 in August (previously 49.3).
Gold further retreated to the lowest level since the 24th August, pressured by the strong Dollar. Oil prices faced declines as the tropical storm threatening oil facilities on the US Gulf coast was not as strong as previously expected.
Fears of the effect of new tariffs between the US and China could have been responsible for losses in Asian markets on Wednesday, which extended into losses in European and American futures.
Cryptocurrency markets traded mixed with Ethereum and Ripple again facing pressure, while Bitcoin and especially Bitcoin Cash traded higher. Bitcoin reached on Tuesday its highest level in one month.
On Wednesday in the European Union PMI Composite and Retail Sales data is due to be released. In the UK the PMI Services Index will be published and in Canada the Merchandise Trades statistic. The Bank of Canada is also set to announce its interest rate decision with most analysts not expecting rates changes to be announced today. In the US then the Trade Balance will be announced. Later Australia will also disclose its Trade Balance for July.
GBP/USD
The Pound again traded lower due to the strength of the Dollar and possibly also because of negative sentiment from the uncertainty of how the post-Brexit relationship between the UK and the EU would look like. That negotiators will find common ground, given the tight timeline until the end of March 2019 seems increasingly doubtful, with German Chancellor Merkel warning that negotiations are in danger of collapse.
While data from the US was mostly positive with the ISM Manufacturing Index reported at 61.3 for August (expected 57.7), the uncertainty over Brexit could be a factor for subdued numbers from Britain with the CIPS/PMI Manufacturing Index reported on Monday at 52.8 (expected 53.9) and the PMI Construction on Tuesday at 52.9 (expected 54.9).
On Wednesday the CIPS/PMI Services Index will be released in the UK. Then on Friday the focus will be on the Halifax House Price Index.
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Europe 50
European indices traded mixed on Tuesday, while negative performance of the major stock indices in Germany and France weighted on the overall strength.
German banks are seen struggling with the Deutsche Bank (DE:DBKGn) (+0.79%) reported to be removed from the EuroSTOXX 50 index soon, while the Commerzbank (DE:CBKG) (+1.94%) will be pushed out of the DAX (Germany 30) index to make room for the fintech company Wirecard.
The pharmaceutical and chemical company Bayer (DE:BAYGN) released its Q2 earnings on Wednesday, reporting revenue up by 8.5%, with especially the ‘Crop Science’ revenue reported up by 39.2% following the takeover of Monsanto (NYSE:MON).
In the EU the PMI Composite and Retail Sales statistics are due to be released.
WTI Oil
After reaching a 1-1/2 month high in intraday trading on Tuesday, oil prices declined following reports that the tropical storm that hit the oil-rich US Gulf Coast was not as strong as initially anticipated regarding its impact on production.
Some analysts see the risk from a global slowdown from the crisis in emerging markets and global trade due to US tariffs also as a factor preventing prices moving higher, despite US-sanctions on Iranian oil exports coming into force within two months.
Due to the Labor Day Holiday in the US, the American Petroleum Institute (API) will release oil stockpile figures only on Wednesday, followed by the Energy Information Administration (EIA) on Thursday.
US 500
Persisting trade worries pushed indices overall lower, away from recent all-time highs seen in the S&P 500 (US 500) and NASDAQ (US Tech 100). Especially biotech (US Biotech ETF -1.04%) and real estate sector stocks (US Real Estate ETF -0.98%) traded overall lower, while chip sector stocks (US Semiconductors ETF +0.68%) further recovered.
AMD (+11.19%) skyrocketed to its highest level in 12 years, with analysts being positive that AMD could thrive in the processor market, while its main competitor Intel (NASDAQ:INTC) (-1.03%) has trouble shifting to the announced new 10nm productions process. AMD’s supplier TSMC on the other hand is expected to start producing AMD chips in the 7nm process soon.
On Wednesday in the US mortgage market data from the Mortgage Bankers’ Association will be released, followed by the release of the Redbook Store Sales statistic and the Trade Balance level for July, with analysts expecting deficit to exceed $50 bn.
Pivot: 2901 Support: 2886 2877 2871 Resistance: 2901 2907 2912.5 Scenario 1: short positions below 2901.00 with targets at 2886.00 & 2877.00 in extension. Scenario 2: above 2901.00 look for further upside with 2907.00 & 2912.50 as targets. Comment: the RSI advocates for further decline. The declining 50-period moving average is acting as resistance.
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