iFOREX Daily Analysis : September 18,2018
iFOREX | Sep 18, 2018 05:08AM ET
The US Dollar traded lower against other major currencies, with the US Dollar Index (USDX), which measures the performance of the Dollar against six other major currencies, closed 0.52% lower. The strong Pound (GBP) due to possible progress in the Brexit negotiations with the EU was one factor weighing down on the Dollar.
Despite the intensifying China-US trade conflict gold failed to gain momentum and continued trading in a tight range, while oil prices also had limited upside possibly also affected by the trade standoff.
While stock markets, especially in China and by extension in Hong Kong were under pressure following the announcement that US President Trump’s administration would stay the course and impose a 10% duty $200 bn. worth of Chinese exports to the US, most Chinese equity indices traded strongly higher on Tuesday despite these confrontations intensifying as China announced it would discuss its countermeasures.
Bitcoin traded again lower as analysts point out that the market movements could be attributed to so-called ‘whales’ activities in the market. An owner of a significant amount of cryptocurrency tokens, whose market activity can move the market is considered a ‘whale’. Another concern is what will happen when Bitcoin holdings of the defunct cryptocurrency Mt Gox exchange will be distributed and possibly exchanged into fiat currency.
On Tuesday in Canada Manufacturing Sales data and in the US Redbook Store Sales and Housing Market Index data will be released. In terms of emerging markets in Poland wages and employment growth statistics, in Russia the PPI and in Hungary the central bank’s interest rate decision are expected. In the Asian-Pacific trading session on Wednesday in Japan the trade balance level data will be published.
GBP/USD
The Pound rose to its highest level in 1-1/2 months as analysts and traders seem more confident that a Brexit deal with the European Union will be reached in time. Austrian and German leaders voiced support to do all they can to avoid a no-deal Brexit. Meanwhile IMF chief Christine Lagarde warned that a no-deal Brexit would have dire consequences, especially for the United Kingdom.
On Wednesday in the UK Consumer Price Index (CPI and Producer Price Index (PPI) data will be released, as well as House Price Index data. Then on Thursday Retail Sales and on Friday the Bank of England Quarterly Bulletin will be released.
Pivot:1.3135Support:1.31351.3111.308Resistance:1.31851.321.3215Scenario 1:long positions above 1.3135 with targets at 1.3185 & 1.3200 in extension.Scenario 2:below 1.3135 look for further downside with 1.3110 & 1.3080 as targets.Comment:a support base at 1.3135 has formed and has allowed for a temporary stabilisation.
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Gold (EUR)
While the weak Dollar helped gold to rise again above the $1,200 level the escalating trade tensions between China and the United States were not enough to keep prices up. A possible factor weighing down on gold is the rising yield on US Treasury Notes as the 10 Year Treasury pushed firmly above the 3% yield. Generally it is assumed that in theory as Treasury Notes and gold are both seen as safe haven assets, a higher yield on Treasuries makes them more attractive to investors and thus has a competitive advantage against the precious metal.
Last Friday the Commodity Futures Trading Commission (CFTC) reported in its weekly Commitments of Traders (COT) report that the amount of net short positions on gold decreased from the record of 13.5 thousand to 7.6 thousand contracts.
Some key events possibly affecting the Dollar this week are the release of the Philadelphia Fed General Business Conditions and Jobless New Claims on Thursday.
Pivot:1202Support:11961192.51187.5Resistance:120212051208.5Scenario 1:short positions below 1202.00 with targets at 1196.00 & 1192.50 in extension.Scenario 2:above 1202.00 look for further upside with 1205.00 & 1208.50 as targets.Comment:the RSI lacks upward momentum.
WTI Oil
After initially trading moderately higher, crude oil contracts closed lower amidst the escalating trade standoff between the US and China as US President Trump announce the implementation of new tariffs on Chinese goods within a week, which would according to other reports reduce the willingness of the Chinese to go back to the negotiations. A prolonged trade conflict between the two economic superpowers could affect global growth and thus also the demand for oil.
Meanwhile reports indicated that more oil rigs in the US could undergo maintenance in the coming weeks and thus the demand for crude oil to be processed could be affected.
On Tuesday the American Petroleum Institute (API) will release oil stockpile figures, followed by the Energy Information Administration (EIA) on Wednesday.
Pivot:69.2Support:68.0567.4566.85Resistance:69.269.770.15Scenario 1:short @ 68.63 with targets @ 68.05 & 67.45 in extension.Scenario 2:above 69.20 look for further upside with 69.70 & 70.15 as targets.Comment:the RSI is mixed to bearish. The prices has broken below a rising trend line.
US 500
In the wake of an extended trade standoff as US President Trump was about to confirm the application of tariffs on $200 bn. worth of Chinese exports to the US, most equity indices traded lower. Especially technology and related sectors like the chip (US Semiconductors ETF -1.55%) and biotech sector (US Biotech ETF -1.42%) were affected.
Twitter (-4.35%) fell to its lowest level since April this year after analysts voiced concerns that the company would not be able to keep costs at the current low level while growth is slow and government scrutiny of this sector increases in the wake of election manipulation allegations.
Netflix (NASDAQ:NFLX) (-4.03%) further extended losses, closing lower for the third day in a row before Netflix original series won 23 Emmy Awards in total on Monday night.
On Tuesday in the US the Redbook Store Sales, Housing Market Index and Foreign Demand for Long-Term US Securities data will be released.
Pivot: 2900 Support: 2883.5 2875 2869.5 Resistance: 2900 2905.5 2910.25 Scenario 1: short positions below 2900.00 with targets at 2883.50 & 2875.00 in extension. Scenario 2: above 2900.00 look for further upside with 2905.50 & 2910.25 as targets. Comment: technically the RSI is below its neutrality area at 50. The declining 50-period moving average is acting as resistance now. The resistance level at 2900 should limit the upside room.
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