USD/JPY is trying to continue its rebound as the U.S. dollar is gaining ground against a broad basket of currencies.
The U.S. Dollar Index managed to get above the 94 level and tries to continue its upside move. If the U.S. Dollar Index moves higher, USD/JPY will have a good chance to settle above 105.00.
Today, Japan provided flash readings of Manufacturing PMI and Services PMI for September. Manufacturing PMI increased from 47.2 in August to 47.3 in September while Services PMI grew from 45.0 to 45.6. Numbers below 50 show contraction.
PMI reports indicated that Japan’s economy remained under significant pressure due to the consequences of the coronavirus pandemic.
Meanwhile, Bank of Japan Governor Haruhiko Kurodo stated that he did not discuss the recent strength of the yen with the new Prime Minister Yoshihide Suga and added that currency rates should reflect fundamentals.
It remains to be seen whether Bank of Japan will find additional ways to support the economy as its options are limited. Most likely, USD/JPY will remain in the hands of general market sentiment, although continued weakness of Japan’s economic reports may ultimately push yen to lower levels.
USD/JPY has managed to get above the resistance at 104.90 and is trying to settle above 105.00. If this attempt is successful, USD/JPY will head towards the next resistance level at 105.30.
The 20 EMA is located at 105.40 so USD/JPY is set to face strong resistance in the 105.30 – 105.40 area. In case USD/JPY manages to settle above this resistance area, it will gain more upside momentum and head towards the next resistance at the 50 EMA at 105.85.
On the support side, the previous resistance at 104.90 will likely serve as the first support level for USD/JPY. A move below this level will open the way to the test of the material support level at 104.70.
If USD/JPY gets below the support at 104.70, it will move towards the next support level at 104.20.
At this point, USD/JPY is repeating action seen in late July when an unsuccessful test of the support at 104.20 led to a quick rebound. If USD/JPY manages to stay above 105.00, it will have a good chance to continue its current rebound.
There are 2 POC zones where we could see new wave of selling. The first POC 1.2760-90 is additionally supported by the order block (red line). In the case of a deeper retracement up watch for 1.2820-60. Reversal patterns in the zone could also show sellers and we should see a further drop towards 1.2780, 1.2685 and 1.2650. Below 1.2650, 1.2579 is the target. Selling the rallies continues.
The PMI is a leading indicator of economic health which essentially surveys purchasing managers at businesses that make up a given sector. Digging deeper, the headline PMI is a number from 0 to 100. Anything above 50 represents an expansion when compared with the previous month while under 50 represents a contraction.
It is worth keeping in mind that the direction of the PMI tends to precede changes in the trend of estimates such as gross domestic product and employment. If the PMI is painting an unpleasant picture, this could be an early warning sign for the economy and currency. Alternatively, a positive print has the potential to boost sentiment and raise confidence over the economic outlook.
All eyes on the Euro PMI
European investors will be keeping a very close eye on the latest eurozone purchasing manager’s index (PMI) data for September.
It will be released at 9 am London time and could offer some insight into the health of the region’s services and manufacturing industries in the face of Brexit related uncertainty and second wave of COVID-19 cases. Manufacturing PMI is expected to jump 51.9 in September from the 51.7 in the previous month while services PMI are projected to remain unchanged at 50.5.
What does this mean for the EURUSD?
The Euro has been punished by a resurgent Dollar this week with prices slipping to a two-month low under 1.1675.
A positive set of PMI figures from Europe could inject Euro bulls with enough inspiration to fight back, potentially pushing prices back towards 1.1750. However, if the data fails to meet expectations, the EURUSD could end up sinking to a fresh two month low around 1.1600.
Will pending PMI compound to Pounds woes?
Sterling has woken up on the wrong side of the bed today, weakening against the Dollar and most G10 currencies thanks to Brexit related drama and rising coronavirus cases. Fears over a second lockdown crippling the UK economy remain rife, and this continues to be seen in not only the Pound’s valuation but FTSE100.
The Pounds outlook this week may be influenced by the pending manufacturing and services PMI data due to be released this morning.
Manufacturing activity is projected to slip to 54.1 compared to the 55.2 in the previous month while services are forecast to decline to 56 from the 58.8 in August. A figure that fails to meet expectations is likely to compound to the Pound’s woes and provide permission for anxious investors to drag the currency lower.
Looking at the technicals, the GBPUSD is approaching 1.2650. A breakdown below this level could open the doors towards 1.2500.
Dollar Index breaks above key resistance
It took a four-letter word to push the Dollar Index higher, will the pending IHS Markit’s ‘flash’ Purchasing Managers’ Indices for US manufacturing and services in September support the upside?
Talking technicals, the Dollar Index is turning bullish on the daily timeframe. The solid daily close above 94.00 could encourage a move towards 94.65 and potentially 96.00. Should 94.00 prove to be reliable resistance, the DXY may decline back towards 92.70.
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U.S. Dollar Gets Support From Chicago Fed President’s Hawkish Comments
EUR/USD is currently trying to settle below 1.1700 as fears about the second wave of coronavirus in Europe continue to put pressure on the euro.
In addition, the U.S. dollar is supported by surprisingly hawkish comments from Chicago Fed President Charles Evans who stated that the Fed could start raising rates before average inflation gets to 2%.
The U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, got an additional boost from these comments and is currently trying to settle above the 94 level.
It remains to be seen whether the market will start to price in the possibility of higher interest rates in the U.S. The pandemic is still a major problem, and there’ll likely be no opportunity to increase rates in the next two years.
Today, traders will have a chance to evaluate flash PMI numbers from Euro Area and U.S. Euro Area Manufacturing PMI is expected to increase from 51.7 in August to 51.9 in September while Euro Area Services PMI is projected to stay flat at 50.5.
EUR/USD managed to get below the nearest support level at 1.1695 and tries to develop additional downside momentum.
The next support level for EUR/USD is located at 1.1630. If EUR/USD moves below this support level, it will head towards the next support at 1.1600.
On the upside, the previous support at 1.1715 will likely serve as the first resistance level for EUR/USD. A move above this level will open the way to the test of the next resistance at the 50 EMA at 1.1755.
At this point, EUR/USD looks ready to establish a new downside trend. To do this, EUR/USD must settle below the August low at 1.1695. There are no serious levels between 1.1500 and 1.1700 so the downside move may be fast in case the right catalysts emerge.
The Dollar/Yen is trading higher on Wednesday, supported by positive U.S. economic data and concerns about a second wave of coronavirus infections in Europe and Britain. Safe-haven buying is likely to continue to grind higher in the short-term as the coronavirus rattles sentiment in Europe, but uncertainty about this year’s U.S. presidential election means the Forex pair could be prone to more volatile price swings.
At 06:40 GMT, the USD/JPY is trading 105.126, up 0.173 or +0.16%.
On Tuesday, the greenback was bolstered by data showing U.S. home sales surged to their highest level in nearly 14 years in August, but comments from a prominent Federal Reserve official sent mixed signals.
The U.S. economy risks a longer, slower recovery and “recessionary dynamics” if Congress fails to pass an additional fiscal stimulus package, Chicago Federal Reserve President Charles Evans said.
Evans also shook up the financial markets when he said it is possible for the Fed to raise interest rates before inflation starts to average 2%.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart, however, momentum is trending higher with the formation of the closing price reversal bottom on Monday and its subsequent confirmation yesterday.
The confirmation of the closing price reversal bottom doesn’t change the main trend to up, but it could lead to a 2 to 3 rally or a 50% to 61.8% correction of the last sell-off.
A trade through 104.002 will negate the closing price reversal bottom and signal a resumption of the downtrend. The main trend will change to up on a trade through 107.049.
The minor trend is also down. The minor trend will change to up on a trade through the last minor top at 106.550.
The short-term range is 107.049 to 104.002. Its retracement zone at 105.526 to 105.885 is the primary upside target. Since the main trend is down, sellers are likely to come in on a test of this retracement zone.
Daily Swing Chart Technical Forecast
The current short-covering rally is being driven by the headlines and the closing price reversal bottom chart pattern.
If the upside momentum continues then look for the short-covering rally to possibly extend into the short-term retracement zone at 105.526 to 105.885. Since the main trend is down, look for short-sellers to return on the initial test of this area.
The inability to follow-through to the upside after the earlier gains could be a sign of new selling pressure, or that the short-covering is ending.
The new minor range is 104.002 to 105.199. If there is a correction, then its 50% level at 104.601 will become the first downside target. If this fails then look for a retest of the main bottom at 104.002.
NIKE, Inc. (NKE) shares soared 13% in extended-hours trading Tuesday after the athletic footwear and apparel giant reported a surge in quarterly online sales and remained upbeat about growing demand throughout the upcoming holiday season.
The company posted fiscal Q1 adjusted earnings of 95 cents per share, almost double the Street’s forecast of 48 cents a share. Meanwhile, revenue of $10.59 billion came in comfortably ahead of the $9.15 billion figure analysts had expected. Furthermore, the company also lifted its fiscal full-year outlook. It now expects sales to register in the high single digits to low double digits from the previous year.
Through Tuesday’s close, Nike stock has a $182 billion market cap, yields 0.86%, and trades 16% higher on the year. Over the past three months, the shares sport a 17.69% gain as of Sept. 23, 2020. From a valuation standpoint, the stock looks pricey. It trades at about 47 times projected earnings – 67% above its five-year average multiple of 28.34 times.
Digital Sales Spike
Nike’s Q1 digital sales, which account for roughly 30% of its total quarterly revenue, jumped 82% from a year earlier and 75% from the previous quarter as more shoppers purchased gear online during the pandemic. “We know that digital is the new normal. The consumer today is digitally grounded and simply will not revert back,” CEO John Donahoe told investors during the conference call. In recent years, the company has invested heavily in its website and mobile apps as more consumers move away from department stores and shopping malls.
Wall Street View
Bank of America expects Nike to continue benefiting from consumers’ shift to more solitary leisure activities. “We believe COVID-19 is accelerating the consumer spending shift away from traditional entertainment (e.g. amusement parks, movie theaters, & tourist attractions) and international travel to solitary leisure activities (bicycling, golf, marine, hiking, camping),” the investment bank said in a note cited by Investor’s Business Daily.
Sentiment elsewhere on Wall Street also remains bullish. The stock receives 23 ‘Buy’ ratings, 3 ‘Overweight’ ratings, 4 ‘Hold’ ratings, and 1 ‘Underweight’ rating. Analysts have an average 12-month price target on the stock at $126.07 – nearly 8% above yesterday’s $116.87 close.
Technical Outlook and Trading Tactics
Nike shares have continued trending higher after breaking above multiyear resistance in mid-August. Moreover, aftermarket data indicates the stock will open above $132 Wednesday, taking its price to an all-time high (ATH).
Given the recent runup into the company’s quarterly earnings, don’t be surprised to see profit-taking over the mid- to short-term as traders take some money off the table. Instead of chasing the price, look for a retracement entry back to $105, where previous resistance now acts as support.
GBP/USD continues to trend down as the U.S. dollar is gaining ground against a broad basket of currencies.
The U.S. Dollar Index managed to get above the 50 EMA at 93.85 and is trying to gain additional upside momentum above the 94 level. The next material resistance level for the U.S. Dollar Index is located at 94.65. If the U.S. Dollar Index moves towards this level, GBP/USD will find itself under additional pressure.
The British pound continues to suffer from coronavirus-related uncertainty in the UK. Yesterday, UK Prime Minister Boris Johnson encouraged people to work from home and ordered bars and restaurants to close early.
The market fears that these moves were just the first steps on the way to a real lockdown so traders continued to sell the pound.
Today, the UK will provide flash readings of Manufacturing PMI and Services PMI reports for September. Manufacturing PMI is projected to decrease from 55.2 in August to 54.1 in September while Services PMI is expected to decline from 58.8 to 56.
If the UK PMI numbers are weaker than expected, GBP/USD may fall closer to the next significant support level at 1.2650.
GBP/USD gained significant downside momentum and managed to settle below the support level at 1.2750. Currently, GBP/USD is heading towards the next material support at 1.2650.
If GBP/USD gets below the support at 1.2650, it will move towards the next support at 1.2550. A move below 1.2650 will be a very important development for GBP/USD as it will signal that GBP/USD may be ready to get back to its previous trading range between 1.2250 and 1.2650.
On the upside, the previous support at 1.2750 will likely serve as the first important resistance level for GBP/USD. A move above this level will open the way to the test of the next material resistance level at 1.2880. If GBP/USD gets above 1.2880, it will head towards the 50 EMA at 1.2940.
I’d note that GBP/USD has mostly ignored weaker levels in recent trading sessions so traders should focus on strong levels that have proved their strength.
The New Zealand Dollar is being pressured on Wednesday by a stronger U.S. Dollar and a dovish Reserve Bank of New Zealand (RBNZ) that left the door open for more interest rate cuts.
Early in the session, the RBNZ held its official cash rate at a record low and hinted at further easing while warning the economy may need support for a long time as the world grapples with the coronavirus pandemic.
At 06:00 GMT, the NZD/USD is trading .6613, down 0.0021 or 0.31%.
The RBNZ also retained its large scale asset purchase (LSAP) program at NZ$100 billion ($66.1 billion).
It added that further stimulus may be needed and that it was prepared to use additional tools like a cheap funding facility for banks, negative rates, and purchases of foreign assets.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. The trade through .6601 earlier in the session changed the main trend to down. The main trend will change to up on a move through .6798. This is highly unlikely, but there is room for a counter-trend 50% to 61.8% retracement especially if the Forex pair closes higher today.
The main range is .6381 to .6798. Its retracement zone at .6589 to .6540 is the primary downside target. Trader reaction to this zone could determine the longer-term direction of the NZD/USD.
The short-term range is .6489 to .6798. The NZD/USD is currently straddling its retracement zone at .6607 to .6644. Trader reaction to this zone could determine the direction of the Forex pair on Wednesday.
The minor range is .6798 to .6599. If momentum shifts to the upside, we could see a near-term rally into its retracement zone at .6699 to .6722.
Daily Swing Chart Technical Forecast
Based on the early price action, the direction of the NZD/USD on Wednesday is likely to be determined by trader reaction to the short-term Fibonacci level at .6607.
A sustained move under .6607 will indicate the presence of sellers. This could trigger a quick break into the intraday low at .6599, followed by the main 50% level at .6589.
Watch for a technical bounce on the first test of .6589, but if it fails then look for a possible acceleration to the downside with the main Fibonacci level at .6540 the next likely target.
A sustained move over .6607 will signal the presence of buyers. This could trigger a short-covering rally into the short-term 50% level at .6644. Since the main trend is down, sellers could return on a test of this level. Overcoming it, however, could trigger an acceleration to the upside.
The company Siemens (SIEG) is in a strong uptrend like many other stocks. But the price action in August was calm and sideways. Reversal chart patterns also started to appear. What is the next expected price swing based on the price patterns?
Price Charts and Technical Analysis
Siemens is starting a bearish retracement according to our Elliott Wave indicator (red candle). This occurred after price action showed chart patterns such as a rising wedge (purple trend lines) and a head and shoulders pattern (dark red boxes). But the long-term trend remains very bullish due to the gap between price and the 21 ema zone versus the long-term moving averages (144,233,610 emas). And also the momentum on the weekly chart has recently been confirmed (green diamond in purple box). Price is expected to retrace deeper but not much before support stops price from falling. The main support levels are at the 23.6% Fibonacci retracement level and the previous top (dark green box). Or at the confluence of long-term MAs and the 38.2% Fib (blue box). This would confirm the usual retracement level for a wave 4 (purple).
The 4 hour chart (see below) seems to be indicating a pullback via an ABC wave pattern (purple). Price is moving below the 21 ema zone so if price retests that same zone, it could turn into resistance. And price could bounce and aim for the Fibonacci targets and Wizz levels. Only a break, pullback, and bounce above the 21 ema zone would indicate an immediate uptrend without a deeper bearish pullback. Earnings date is November 5, 2020.
The analysis has been done with the indicators and template from the SWAT method (simple wave analysis and trading). For more daily technical and wave analysis and updates, sign-up to our newsletter
The Australian Dollar is under pressure early Wednesday, falling to its lowest level since August 12, after the Reserve Bank of Australia (RBA) said it is assessing policy options. The news is being perceived as dovish.
According to Deputy Governor Guy Debelle, the RBA is assessing various monetary policy options including currency market intervention and negative rates to meet its inflation and employment goals.
At 02:11 GMT, the AUD/USD is trading .7135, down 0.0033 or -0.47%.
On Tuesday, Debelle said the board was assessing other policy options “given the outlook for inflation and employment is not consistent” with the Bank’s objectives over the period ahead.
One option is buying government bonds with maturities beyond three years. A second potential tool is foreign exchange intervention and a third option would be to lower the cash rate without taking it into negative territory. The final option was negative rates, though Debelle said the empirical evidence on its success was mixed.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. The main trend changed to down on Monday when sellers took out the previous main bottom at .7192. A trade through .7345 will change the main trend to up.
The main range is .6833 to .7414. Its retracement zone at .7123 to .7055 is the next downside target. Trader reaction to this zone could determine the longer-term direction of the AUD/USD. Watch for a possible technical bounce on the first test of this area.
The early price action on Wednesday suggests the direction of the AUD/USD the rest of the session is likely to be determined by trader reaction to the main 50% level at .7123.
A sustained move under .7123 will indicate the presence of sellers. This could trigger a further break into the August 12 main bottom at .7109. Taking out this level could trigger an even further decline into a Fibonacci level at .7055.
Holding above .7123 will signal the return of buyers. If this move is able to create enough upside momentum then we could see a 50% to 61.8% retracement of the break from the .7345 main top.
U.S. West Texas Intermediate crude oil futures finished slightly higher on Tuesday ahead of tomorrow’s weekly U.S. inventory figures, rebounding modestly from the previous day’s steep break that was driven by a surge in overseas coronavirus infections. The market was helped by a private industry report that showed a large gasoline draw despite an unexpected crude inventory build.
Late Tuesday, the American Petroleum Institute (API) reported a build in crude oil inventories of 691,000 barrels for the week-ending September 18. Analysts were looking for an inventory draw of 2.256-million barrels.
The API also reported a draw in gasoline inventories of 7.735 million barrels of gasoline for the week-ending September 11 – compared to last week’s 3.762-million-barrel build. Analysts had expected a much smaller 614,000-barrel draw for the week.
Distillate inventories were down by 2.104 million barrels for the week, compared to last week’s 1.123-million-barrel draw, while Cushing inventory rose by 298,000 barrels.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart, however, momentum is trending a little higher. A trade through $37.11 will signal a resumption of the downtrend. The main trend will change to up when buyers take out $44.33.
The minor trend is also down. A trade through $42.02 will change the minor trend to up. This move will confirm the shift in momentum to up.
The short-term range is $44.33 to $37.11. Its retracement zone at $40.72 to $41.57 is potential resistance.
The minor range is $37.11 to $42.02. Its retracement zone at $39.57 to $38.99 is support. It stopped the selling at $39.21 on Monday.
Holding between the two retracement zones will produce a rangebound trade. On the upside, the trigger point for an acceleration is the Fibonacci level at $41.57. Taking out the Fibonacci level at $38.99 could trigger an acceleration to the downside. The daily chart indicates there is plenty of room to the downside with the next major target the September 9 main bottom at $37.11.
Why is a rangebound trade possible? Because some traders believe renewed lockdown restrictions in Europe will have only a limited impact on fuel demand, which could prevent a pronounced selloff in oil markets. Additionally, with major oil-producing nations still restricting supply, the market has been locked in a range for most of the summer. This time, it is likely to be at lower prices.
December E-mini NASDAQ-100 Index futures are poised to close higher for the session on Tuesday after buyers confirmed yesterday’s closing price reversal bottom. The chart pattern doesn’t indicate a change in trend, but it could be signaling the start of a 2 to 3 day correction. The buying may actually be stronger than anticipated since the index has already reached its first upside objective.
Tuesday’s rally is being led by tech-heavyweights such as Amazon.com, Apple, Microsoft Corp, Alphabet and Facebook Inc. Amazon led the way with a 2.2% jump after Bernstein upgraded its stock to “outperform”, saying the company will continue to receive a boost from premium subscribers and third-party merchants even beyond the pandemic.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart, however, momentum may be getting ready to shift to the upside following Monday’s closing price reversal bottom and Tuesday’s subsequent confirmation of the chart pattern.
A trade through 10656.50 will negate the closing price reversal bottom and signal a resumption of the downtrend. The main trend will change to up on a move through the last main top at 11539.00.
The main range is 9390.50 to 12444.75. Its retracement zone at 10917.50 to 10557.25 is support. This zone stopped the selling at 10656.50 on Monday.
The minor range is 11539.00 to 10656.50. Its retracement zone at 11094.75 to 11199.75 is currently being tested. Trader reaction to this zone could determine the direction of the index the rest of the week.
The short-term range is 12444.75 to 10656.50. Its retracement zone at 11550.75 to 11761.75 is the primary upside target and potential resistance area.
We’re going to be watching trader reaction to 11094.75 to 11199.75 the rest of the week for direction.
An upside bias could develop on a sustained move over 11199.75, and the downside bias could continue on a sustained move under 11094.75.
Taking out 11199.75 with enough buying volume could lead to a test of the resistance cluster at 11539.00 to 11550.75.
A move under 11094.75 could lead to another test of the major support zone at 10917.50 to 10557.25. The trigger point for an acceleration to the downside is the Fibonacci level at 10557.25.
December E-mini Dow Jones Industrial Average futures are edging higher shortly before the close on Tuesday in a relatively lackluster trading session. The inside trading range, following Monday’s steep sell-off, suggests investor indecision and impending volatility as they reassess the current economic environment.
U.S. stocks started this week on the back foot as fears about a new round of lockdowns in Europe and a stalemate in Congress over the size and shape of another coronavirus-response bill dented hopes of a swift economic recovery.
Investors are now bracing for an extended period of market volatility on concerns over growing political uncertainty in Washington that have been sharpened by the death of Supreme Court Justice Ruth Bader Ginsburg.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. A trade through 26584 will signal a resumption of the downtrend. The main trend will change to up on a trade through 28251.
The main range is 24377 to 29050. Its retracement zone at 26714 to 26162 is potential support. This zone stopped the selling on Monday at 26584.
The intermediate range is 25777 to 29050. The Dow is currently straddling its retracement zone at 27027 to 27414.
The short-term range is 29050 to 26584. Its retracement zone at 27817 to 28108 is also a potential upside target.
The key area to watch the rest of the week is 26714 to 26162. The lower or Fibonacci level at 26162 has to hold or prices could collapse as far as 24377, the June 15 bottom, over the near-term.
Holding above the 50% level at 26714 will signal the presence of buyers, but bullish traders will have to overcome a series of retracement levels at 27027, 27414, 27817 and 28108 before having a shot at the nearest main top at 28251 and a possible change in trend.
December E-mini S&P 500 Index futures are nudging higher late in the session on Tuesday. The index is posting an inside move following yesterday’s plunge, suggesting investor indecision and impending volatility. The benchmark index is being supported by a bounce in shares of Amazon.com and Apple, but gains are being capped by uncertainty over more U.S. fiscal stimulus.
Seven of the 11 major S&P 500 indexes were trading higher, with real estate and consumer discretionary leading gains.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. A trade through 3217.75 will signal a resumption of the downtrend. The main trend will change to up on a move through 3419.50.
The main range is 2916.50 to 3576.25. Its retracement zone at 3246.25 to 3168.50 is potential support. It stopped the selling at 3217.75 on Monday. Also inside this zone are a pair of main bottoms at 3184.75 and 3181.75.
The minor range is 3419.50 to 3217.75. Its 50% level at 3318.75 could become a pivot later this week.
The short-term range is 3576.25 to 3217.75. Overcoming the pivot could lead to a test of its retracement zone at 3397.00 to 3439.25.
The inside move and holding between a pair of 50% levels at 3246.25 to 3318.75 indicates investor indecision and impending volatility. This chart pattern also indicates that today may be a reassessment day as traders assess whether the current pullback has further downside potential.
A sustained move over 3318.75 will indicate the presence of buyers. This could trigger an acceleration to the upside with the first target a short-term 50% level at 3397.00.
A failure at 3246.25 will signal the presence of sellers, but this could lead to a labored break with potential downside targets coming in at 3217.75, 3184.75 and 3181.75, followed by the Fibonacci level at 3168.50.
The Fib level at 3168.50 is most important because it is also the trigger point for an acceleration to the downside with potential targets at 3095.00, 2972.00 and 2916.50.
Comex gold futures are trading lower for a second straight session on Tuesday as the U.S. Dollar climbed to a near two-month peak against a basket of major currencies. U.S. Federal Reserve commentary was behind the catalyst behind the price action.
Early in the session, Federal Reserve Chair Jerome Powell told a congressional panel that the path ahead for the economy remains uncertain and the U.S. central bank will do more if needed. Additionally, Chicago Federal Reserve President Charles Evans said the economy risks recession, if the U.S. Congress fails to pass a fiscal package.
The main trend is down according to the daily swing chart. The trend turned down on Monday when sellers took out a pair of main bottoms at $1911.70 and $1908.40. A trade through yesterday’s low at $1885.40 will signal a resumption of the uptrend. The new main top is $1983.80. A trade through this price will change the main trend to up.
The main range is formed by the June 5 main bottom at $1690.10 and the August 7 main top at $2089.20. Its retracement zone at $1889.70 to $1842.60 is potential support. It stopped the selling at $1874.20 on August 12 and on Monday at $1889.70.
The new minor range is $1983.80 to $1885.40. Its 50% level at $1934.60 is the next potential upside target.
The short-term range is $2089.20 to $1874.20. Its retracement zone at $1981.70 to $2007.10 is the best resistance area.
The key level to watch this week is $1889.70. It’s the 50% or top level of the main retracement zone.
Holding above $1889.70 indicates that investors are trying to defend against an even steeper plunge. It also indicates that longer-term investors are recognizing this area as value.
A failure at $1889.70 won’t be a disaster, but it could lead to a test of the lower or Fibonacci level at $1842.60. Given that the longer-term fundamentals are bullish, investors have to begin to recognize the retracement zone as value or prices will collapse under the Fibonacci level.
Natural gas prices moved lower on Tuesday reversing Monday’s rally. Prices formed and outside day which is a bearish signal. Cooler than normal weather is expected to cover most of the mid-west for the next 2-weeks while the weather is expected to be warmer than normal on the east coast. This would create a wash in heating demand. Tropical Depression Beta is moving inland in Texas, dropping significant rain in Houston. There is another storm over the Caribbean, but it has a very small chance of becoming a tropical cyclone in the next 48-hours according to NOAA.
Natural gas prices dropped 4.7% reversing Monday’s rally. Prices formed an outside day, which is a higher high a lower low, and a lower close which is a bearish signal. Short term momentum has turned negative as the fast stochastic generated a crossover sell signal. Medium-term momentum is negative as the MACD (moving average convergence divergence) histogram prints in the red with a downward sloping trajectory which points to lower prices.
Supplies Fall in Latest Week
Supply falls amid shut-ins in the Gulf of Mexico. According to data from the EIA the average total supply of natural gas fell by 1.2% compared with the previous report week. Dry natural gas production decreased by 1.5% compared with the previous report week. The average net imports from Canada increased by 7.2% from last week.
Gold prices were heavy and continued to trading under pressure as the dollar rallied despite a decline in US yields. Stronger than expected US existing home sales helped buoy the greenback which paved the way for lower gold prices. The dollar continued to benefit from a safe-haven bid, which has not been the case for gold prices.
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Gold prices consolidated after breaking down on Monday. Resistance is seen near the 50-day moving average at 1,939. Target support is the August lows at 1,862. The 10-day moving average is poised to cross through the 50-day moving average which would mean a short-term downtrend is in place. Medium-term momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line). Short-term momentum is flat to negative as the fast stochastic recently generated a crossover sell signal. The relative strength index is moving lower reflecting accelerating negative momentum.
Existing-Home Sales Rise
US existing home sales increased by 2.4% to a rate of 6 million units, according to the National Association of Realtors. Sales were 10.5% year over year. This is the highest sales pace since December 2006. Sales were weighed on by the lack of inventory. There were 1.49 million homes for sale at the end of August, down 18.6% year over year. This elevated the median price of an existing home sold in August to a record high of $310,600. That is up 11.4% annually.
USD/CAD continues its attempts to settle above the nearest resistance level at 1.3330 as the U.S. Dollar Index is trying to get above the 94 level.
The U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, has managed to move above the 50 EMA at 93.80 after U.S. released a strong Existing Home Sales report.
Existing Home Sales grew from 5.86 million in July to 6 million in August, fully in line with analyst consensus. This is the highest level since Decmeber 2006. It looks like the unprecedented monetary stimulus from the U.S. Federal Reserve is providing significant support to the housing market which is good for the health of the economy.
Meanwhile, oil managed to stay near the $40 level and provided some support to commodity-related currencies including the Canadian dollar.
Tomorrow, traders will focus on flash readings of U.S. Manufacturing PMI and Services PMI reports. Manufacturing PMI is expected to stay flat at 53.1 while Services PMI is projected to decline from 55 in August to 54.7 in September. If PMI reports are better than analyst projections, the U.S. dollar may get an additional boost which will be bullish for USD/CAD.
USD to CAD is currently trying to settle above the nearest resistance level at 1.3330. If this attempt is successful, USD to CAD will gain more upside momentum and head towards the next resistance level at 1.3400.
If USD to CAD manages to settle above the resistance at 1.3400, it will move towards the next major resistance level at 1.3450.
On the support side, the nearest support level for USD to CAD is located at the 50 EMA at 1.3250. A move below this level will open the way to the test of the next support level at the 20 EMA at 1.3200.
From a big pciture point of view, USD to CAD managed to settle above the 50 EMA and will try to establish an upside trend. RSI is still in the moderate territory so there is plenty of room to gain additional momentum in case the U.S. dollar continues to gain ground against a broad basket of currencies.