iFOREX Daily Analysis : September 21,2017
iFOREX | Sep 21, 2017 06:31AM ET
The Dollar gained significantly on Wednesday with the US Dollar Index (USDX) which represents the value of the US Dollar against a basket of major currencies being down by 0.66% after the Federal Reserve at its meeting that they would begin to unwind the balance sheet beginning in October and hinted that an interest hike this year is still possible.
Gold traded down on the announcement from the Federal Reserve as gold is sensitive to interest rates and the news again pushed US bond rates higher.
Oil traded up by over 1% on Wednesday and continued its recovery which started the previous Monday. The Energy Information Administration (EIA) oil stockpile figures were up but this was offset by bigger stockpile reductions of gasoline and oil distillates.
The Dow Jones Industrial Average (DJIA) and S&P 500 (US 500) reached new all-time highs on Wednesday as bank stocks were up supported by the announcements by the Federal Reserve.
Cryptocurrencies were mixed on Wednesday. The major cryptocurrencies were slightly up with Bitcoin trading again just slightly below $4,000. Following its recovery between last Friday and Monday Bitcoin has traded mostly around the level of $4,000 unable to break much higher while remaining over the level of $3,800.
On Thursday we will see jobless claim data and results of the Philadelphia Fed General Business Conditions from the US. Switzerland will publish its merchandise trade balance statistics, while Australia releases its GDP in the Asian trading session.
EUR/USD
EUR/USD traded down below 1.18 after the Federal Reserve meeting where it was announced that the Federal Reserve would shrink the balance sheet. The Federal Reserve indicated that the rates would rise but at a gradual pace. The “normalization” of the balance sheet is to begin in October and is to be done in “a gradual and predictable manner”.
Also noteworthy is that of the FOMC participants four indicated that rates should remain the same for this year and only one (down from two previously) suggested two interest rate hikes this year. Market participants read into the statements from the Federal Reserve that an interest rate hike until the end of the year is still possible.
On Thursday we will see from the US jobless and business conditions data (Philadelphia Fed General Business Conditions - level) published.
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Pivot: 1.1925
Support: 1.186 1.1835 1.1805
Resistance: 1.1925 1.195 1.198
Scenario 1: short positions below 1.1925 with targets at 1.1860 & 1.1835 in extension.
Scenario 2: above 1.1925 look for further upside with 1.1950 & 1.1980 as targets.
Comment: the RSI advocates for further decline.
Gold
With the decline in the Dollar following the FOMC meeting Gold also came under pressure. Gold is traded primarily in US Dollars and a higher valued US Dollar makes it more expensive to non-US Dollar markets.
US bonds were up again on Wednesday and put Gold under pressure as Gold is sensitive to rates as higher rates make non-interest-bearing Gold less attractive.
Gold traders will be looking at further fundamental data from the US economy while also watching the development surrounding North Korea and Iran. The new US administration and Iran are on a confrontation course how to implement and value the nuclear deal made earlier under the Obama administration.
Pivot: 1308
Support: 1295.5 1290.5 1285
Resistance: 1308 1311 1316
Scenario 1: short positions below 1308.00 with targets at 1295.50 & 1290.50 in extension.
Scenario 2: above 1308.00 look for further upside with 1311.00 & 1316.00 as targets.
Comment: the RSI broke below a rising trend line.
WTI Oil
Oil traded up on Wednesday, continuing its recovery which started last week.
Inventory numbers from the Energy Information Administration (EIA) shown that the crude oil supply in the US increased by 4.6 million barrels which was offset by the declining inventories of gasoline (-5.7 million barrels and distillate -2.1 million barrels). As oil refineries are restarting after the recent storms any lack of domestic supply in processed oil products will be targeted by the refineries thus consuming crude oil in the process.
The recent statements from OPEC members being for an extension of production cuts reassured oil investors at the start of the week with the Iraqi oil minister Jabar Al-Luaibi voicing support for such measures.
The next relevant data on oil will be the Baker Hughes Rig Count for North America published on Friday.
Pivot: 49.7
Support: 49.7 49.35 48.9
Resistance: 51.25 51.8 52.31
Scenario 1: long positions above 49.70 with targets at 51.25 & 51.80 in extension.
Scenario 2: below 49.70 look for further downside with 49.35 & 48.90 as targets.
Comment: a support base at 49.70 has formed and has allowed for a temporary stabilisation.
US 500
Major US equity indices traded higher on Wednesday with the exception of the NASDAQ (US Tech 100). This another day of record highs for the S&P 500 (US 500) and Dow Jones Industrial Average (US 30).
The statements from the Federal Reserve at the FOMC meeting where the market understood from the statements that a rate hike in December could be possible gave rise to bank stocks. The US Banks ETF was up by 1.17%.
One of the biggest losers of the day was the pharmacy chain Walgreens which was down by 2.92% after the U.S. Federal Trade Commission approved an agreement for them to buy 1,932 stores from their competitor Rite Aid.
On Thursday markets will be watching the figures published about the new jobless claims and the Philadelphia Fed Business Conditions survey.
Pivot: 2500
Support: 2500 2497 2494
Resistance: 2507.25 2510 2513
Scenario 1: long positions above 2500.00 with targets at 2507.25 & 2510.00 in extension.
Scenario 2: below 2500.00 look for further downside with 2497.00 & 2494.00 as targets.
Comment: the RSI calls for a new upleg.
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