iFOREX Daily Analysis – 03/02/2016

The dollar remained moderately lower against the other major currencies on Tuesday, as oil prices resumed their downward trend and as concerns over global economic growth persisted.

The safe-haven yen strengthened as oil prices dropped over 5% back toward $30 a barrel after Iran said it planned to increase crude exports to 2.3 million barrels per day in its next fiscal year, starting March 21.

Meanwhile, investors remained cautious amid ongoing concerns over global economic growth after data on Monday showed that manufacturing activity in China contracted for a sixth straight month in January.

Elsewhere sterling came under pressure after research firm Markit said its U.K. construction purchasing managers' index fell to 55.0 last month, from a reading of 57.8 in December.

The Australian and New Zealand dollars were weaker, because the Reserve Bank of Australia held its benchmark interest rate at 2.00% on Tuesday. In a statement following the decision, the central bank said however that subdued inflation may “provide scope for easier policy”.

Today the U.K. is to produce a report on service sector activity and the U.S. is to publish the ADP report on private sector jobs creation plus the ISM is to publish data on service sector activity.

But investors are mainly awaiting Friday’s U.S. jobs report for January, for fresh indications on the strength of the labor market.

EUR/USD

The euro rose modestly on Tuesday to continue its recent hot streak, as investors continued to digest dovish comments from an influential Federal Reserve policymaker on the increased possibility of a delayed interest rate hike from the U.S. central bank.
The currency pair traded in a broad range between 1.0815 and 1.094, before settling up 0.21% on the session.

Earlier Tuesday, Eurostat said that the euro zone’s unemployment rate fell to 10.4% from 10.5% in November. This is the lowest rate recorded in the euro area since September 2011.

The report came shortly after Germany's Federal Statistics Office said the unemployment rate fell to 6.2% in January from 6.3% a month earlier. But the number of unemployed people in Germany decreased by 20,000 last month, better than expectations for a drop of 7,000. Jobless claims fell by 16,000 in December, whose figure was revised from a previously reported decline of 14,000.

Today investors’ focus will be on US ADP and ISM reports for further indications on the strengths of the American economy and on whether the Federal Reserve will continue to raise interest rates gradually during its first tightening cycle in nearly a decade.

Pivot: 1.094Support: 1.089 1.0875 1.086Resistance: 1.094 1.0965 1.0995Scenario 1: short positions below 1.094 with targets @ 1.089 & 1.0875 in extension.Scenario 2: above 1.094 look for further upside with 1.0965 & 1.0995 as targets.Comment: the RSI is capped by a declining trend line.

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Gold

Gold reached fresh three-month highs before falling back slightly at the close of trading on Tuesday, as investors continued to digest dovish comments from an influential Federal Reserve policymaker on the increased possibility of a delayed interest rate hike from the U.S. central bank.

On Tuesday, investors continued to react to a closely watched speech by Fed vice chair Stanley Fischer on the possibility that the Federal Open Market Committee could delay its next interest rate hike beyond the first quarter. At an address before the Council of Foreign Relations in New York, Fischer noted that further declines in oil prices and a persistently strong dollar could suggest that inflation will remain lower than the Fed previously anticipated.

Now investors are mainly awaiting Friday’s U.S. jobs report for January, for fresh indications on the strength of the greenback.

Pivot: 1122Support: 1122 1118 1111Resistance: 1133 1138.5 1144Scenario 1: long positions above 1122 with targets @ 1133 & 1138.5 in extension.Scenario 2: below 1122 look for further downside with 1118 & 1111 as targets.Comment: the RSI is mixed to bullish.

WTI Oil

Crude oil prices fell sharply on Tuesday, closing below $30 a barrel for the first time in more than a week, amid reports that Iran could pencil in a line item on its annual budget, which would enable the Persian Gulf state to ramp up its oil exports above the 2 million barrel threshold in fiscal year 2016.

With the second consecutive major decline, U.S. crude futures erased nearly all of their gains from a five-day winning streak last week, when they soared more than 10%. WTI crude is approaching multi-year low from late last month when it slid below $27 a barrel to fall to its lowest level since 2003.

Crude oil prices fell further on Wednesday after U.S. industry estimates showed solid builds in stockpiles last week. The American Petroleum Institute said crude oil stocks rose 3.837 million barrels last week, while distillate supplies gained 400,000 barrels and gasoline stocks increased 6.5 million barrels.

Now investors’ focus will be on today's government report from the Department of Energy, which could show that crude inventories rose by 4.8 million barrels for the week ending on January 29. Last week crude stockpiles nationwide surged by more than 8 million barrels, to remain near their highest levels in at least 80 years.

Pivot: 31.27Support: 29.26 28.5 27.88Resistance: 31.27 32.07 33.35Scenario 1: short positions below 31.27 with targets @ 29.26 & 28.5 in extension.Scenario 2: above 31.27 look for further upside with 32.07 & 33.35 as targets.Comment: as long as 31.27 is resistance, look for choppy price action with a bearish bias.

S&P 500

U.S. stocks fell sharply on Tuesday, erasing most of their gains from a two-day rally dating back to last week, as the prolonged downturn in oil prices continued to weigh.

The Dow Jones Industrial Average fell 1.80%, while the NASDAQ Composite index lost 2.24%, halting a three-day winning streak. The S&P 500 Composite index, meanwhile, dipped 1.87%, as all 10 sectors closed in the red. Stocks in the Energy, Financials and Consumer Services industries lagged, each falling by more than 2% on the session. With the sharp losses, the S&P 500 fell back into correction territory.

Now investors are mainly awaiting Friday’s U.S. jobs report for January, for further indications on the strengths of the American economy and on whether the Federal Reserve will continue to raise interest rates gradually during its first tightening cycle in nearly a decade.

Pivot: 1950 Support: 1821 1738 1650 Resistance: 1950 2010 2080 Scenario 1: short positions below 1950 with targets @ 1821 & 1738 in extension. Scenario 2: above 1950 look for further upside with 2010 & 2080 as targets. Comment: the RSI has just struck against its neutrality area at 50% and is reversing down.

Written By: iFOREX