September 21st 2021: EUR/USD Eyes H1 Prime Resistance at $1.1767-1.1776 After $1.17 Support

Charts: Trading View

EUR/USD:

(Italics: previous analysis)

Technical studies reveal movement hovering north of prime support at $1.1473-1.1583 on the weekly timeframe. Gleaning additional technical confluence through a 100% Fib projection at $1.1613 and 1.27% Fib extension at $1.1550, this base remains a key watch, long term. With respect to trend on the weekly chart, the market has largely been bullish since the early 2020.

Meanwhile, a closer reading of price on the daily timeframe reveals Monday spiked to within a stone’s throw of Quasimodo support at $1.1689. Albeit sponsoring a late August bid (black arrow), action from $1.1689 failed to find approval north of late July tops at $1.1909; therefore, this ranks $1.1689 as perhaps frail support. Assuming bearish leadership on the daily, the $1.1612 and $1.1602 (September/November 2020) lows signify downside support targets, followed by Fibonacci support between $1.1420 and $1.1522 (glued to the lower side of the weekly timeframe’s prime support at $1.1473-1.1583).

Charted a pip ahead of the daily Quasimodo, the $1.1690-1.1705 decision point put in an appearance on Monday, encouraging H4 sellers to dial back and hand the baton to buyers. Quasimodo support-turned resistance at $1.1742 is now in range on this timeframe, with subsequent bullish interest to perhaps take aim at Quasimodo resistance from $1.1771.

Intraday action on Monday was interesting. The US dollar, in addition to other safe-haven currencies such as the Japanese yen and Swiss franc, gained traction Monday, elevated amidst clear-cut risk-off sentiment. Europe’s single currency, however, reclaimed a large slice of lost ground, aided (technically) not only by the H4 decision point mentioned above at $1.1690-1.1705, but also $1.17 on the H1. At the time of writing, H1 resistance at $1.1728 is active; rupturing the latter paves the way to $1.1742 on the H4, a level shadowed by H1 prime resistance coming in at $1.1767-1.1776, joined by supply at $1.1762-1.1774.

Observed Levels:

Extending recovery gains on short-term charts may have sellers move in on prime resistance at $1.1767-1.1776 on the H1 and supply from $1.1762-1.1774, which dovetails with H4 Quasimodo resistance at $1.1771. However, prior to this, sellers might engage with Quasimodo support-turned resistance at $1.1742 on the H4.

An alternative scenario to be mindful of is a whipsaw south of $1.17 on the H1 to daily Quasimodo support parked at $1.1689. $1.1689 bids feeding off sell-stops below $1.17 could be enough to chalk up a bullish wave.

AUD/USD:

(Italics: previous analysis)

Latest out of the weekly timeframe has AUD/USD touching gloves with prime support at $0.6968-0.7242. Since printing a two-week recovery in late August, the currency pair has been fighting to entice fresh bullish interest. Failure to command position from $0.6968-0.7242 opens up support at $0.6673. Buyers regaining consciousness, nevertheless, has prime resistance at $0.7849-0.7599 to target. Trend studies on the weekly scale show we’ve been higher since early 2020. Consequently, the response from $0.6968-0.7242 could STILL be the beginnings of a dip-buying attempt to merge with the current trend.

The daily timeframe’s technical landscape informs traders bids are perhaps thin within weekly prime support, at least until price shakes hands with Fibonacci support at $0.7057-0.7126. Those who follow the relative strength index (RSI) will note the value journeyed through the 50.00 centreline last week and had Monday dip a toe below 40.00. This highlights a bearish atmosphere until making contact with oversold territory.

Price action on the H4 timeframe came within touching distance of a half-hearted decision point at $0.7200-0.7218 on Monday. To the upside, two resistances are on the radar at $0.7281 and $0.7317.

Lower on the curve, a H1 decision point at $0.7269-0.7259 elbowed into the spotlight, an area formed in the early hours of Monday which saw price tunnel through demand at $0.7248-$0.7259. Continued interest to the downside has $0.72 to target.

Observed Levels:

Each timeframe analysed underlines a bearish energy.

Weekly prime support at $0.6968-0.7242 appears vulnerable due to the daily timeframe exhibiting scope to approach Fibonacci support at $0.7057-0.7126. This, on top of the H1 timeframe’s decision point at $0.7269-0.7259 making a show, implies a short term move to $0.72 (H1) could be in the offing (note $0.72 aligns with the lower band of the H4 decision point at $0.7200-0.7218).

USD/JPY:

(Italics: previous analysis)

Since mid-July, ¥108.40-109.41 demand has failed to stir much bullish energy on the weekly timeframe. Nevertheless, recognising the area derives additional backing from neighbouring descending resistance-turned support, extended from the high ¥118.61, an advance could eventually emerge to familiar supply at ¥113.81-112.22.

The uninspiring vibe out of weekly demand is demonstrated by way of a consolidation on the daily timeframe between prime support at ¥108.96-109.34 and resistance from ¥110.86-110.27. Range support, as you can see, is currently in the frame. In the event price deviates from range extremes, Quasimodo resistance at ¥111.11 is seen, along with a concealed Quasimodo support at ¥108.43. Based on the relative strength index (RSI), the value is confined to a consolidation surrounding the 50.00 centreline, between 40.87 and 56.85.

Broad declines observed in major US equity indexes elevated demand for the safe-haven JPY Monday. USD/JPY downside swings technical curiosity to the H4 double-top pattern’s (¥110.44) profit target around ¥108.71—sharing chart space with a 1.618% Fibonacci projection at ¥108.86 and a 1.272% Fibonacci projection at ¥108.72. However, in order to reach the aforesaid pattern target, the lower edge of the daily range support highlighted above at ¥108.96-109.34 must be taken.

Heading into early US trading on Monday, H1 crossed swords with Quasimodo resistance-turned support at ¥109.45, and clocked a ¥109.65 top before changing gears and heading towards Quasimodo support at ¥109.31. Territory below the latter reveals support at ¥109.11.

Observed Levels:

In keeping with the H4 timeframe, booking additional losses is possibly on the cards until the double-top pattern’s (¥110.44) profit target around ¥108.71. Still, to reach the aforementioned profit target, sellers must marginally defeat the daily timeframe’s range support at ¥108.96-109.34 and take on any bullish interest from weekly demand at ¥108.40-109.41.

Should we nudge through H1 Quasimodo support at ¥109.31, this could be an early sign of bearish muscle making an entrance, and with this, additional selling might take shape.

GBP/USD:

(Italics: previous analysis)

In the shape of a hammer candlestick formation (bullish signal), supply-turned demand at $1.3629-1.3456 on the weekly timeframe stepped forward in July. The aforementioned zone remains active, welcoming an additional test mid-August. Yet, pattern traders will also note August’s move closed south of a double-top pattern’s neckline at $1.3669, broadcasting a bearish vibe. Conservative pattern sellers, however, are likely to pursue a candle close beneath $1.3629-1.3456 before pulling the trigger.

Sterling kicked off the week on the ropes, clocking one-month lows versus the US dollar. GBP/USD remains comfortable beneath the 200-day simple moving average at $1.3831 and is within reach of Quasimodo support at $1.3609. Previous analysis underlined the daily chart has communicated a rangebound environment since late June between a 61.8% Fib retracement at $1.3991 and the noted Quasimodo support. Momentum, according to the relative strength index (RSI) value, extended position below the 50.00 centreline and scraped through 40.00 on Monday. This informs traders that momentum to the downside is increasing in the form of average losses exceeding average gains.

Yesterday’s bearish presence established a decision point at $1.3750-1.3721, an area forming a decision to tunnel through Quasimodo support from $1.3693 (currently serving as resistance). Daily Quasimodo support mentioned above at $1.3609 calls for attention as a downside objective also on the H4 scale.

From the H1 timeframe, mid-way through London on Monday clipped the lower side of $1.37 and also brought in resistance at $1.3689—a previous Quasimodo support level drawn from 26th August. Further softening places Quasimodo support at $1.3618 and the $1.36 figure in sight.

Observed Levels:

Having noted scope for the daily timeframe to test Quasimodo support at $1.3609, retesting either H4 resistance at $1.3693 or the H4 decision point at $1.3750-1.3721 could stir a bearish theme. Adding weight to $1.3693 is H1 resistance coming in at $1.3689 and the $1.37 figure.

The H1 Quasimodo support at $1.3618 forms a reasonable downside target, arranged just north of the noted Quasimodo support on the daily timeframe.

DISCLAIMER:

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.

Morgan Stanley Cuts Boston Beer’s Target Price to $800 After Company Withdraws FY2021 Guidance

Morgan Stanley slashed their base stock price forecast on Boston Beer to $800 from $900, reiterating an “Overweight” rating on one of the largest craft brewers in the United States and said the company is experiencing a sharper deceleration in hard seltzer category growth than was previously expected.

On Wednesday, September 8, the alcoholic beverage company withdrew its 2021 financial guidance issued on July 22, 2021, citing uncertainty about hard seltzer demand trends for the remainder of 2021.

Boston Beer said since the last guidance update for the fiscal year 2021 financial performance, the market for hard seltzer products has continued to experience decelerating growth trends. Industry reports have estimated that the full year 2021 volume for the hard seltzer market retail sales will have over 100 million fewer cases than the volumes estimated in May 2021 and over 30 million fewer cases than the volumes estimated in July 2021, the company said in an SEC filing.

While demand for the Company’s hard seltzer products continues to grow at faster than category rates in measured off-premise channels, the company believe there will be continuing uncertainty about hard seltzer demand trends for the remainder of 2021.

Boston Beer (SAM) withdrew its FY21 guidance at an investor conference citing uncertainty on the growth outlook for the US hard seltzer category, despite continued Truly share gains. We lower our EPS estimates by 15% and price target by 19% but stay Overweight with the market pricing M-HSD% long-term topline growth, below our 13%,” noted Filippo Falorni, equity analyst at Morgan Stanley.

“In connection with an investor conference, SAM issued an 8-K withdrawing its FY21 guidance provided with Q2 results and announced that it currently expects that FY21 EPS will fall below the previously reported estimate of between $18.00 and $22.00, excluding the impact of ASU 2016-09. SAM indicated that growth for the hard seltzer category remains uncertain with decelerating trends in recent months. SAM cited industry reports that indicated that the FY21 volume for the hard seltzer market retail sales will have over 100M fewer cases than the volumes estimated in May 2021 and over 30M fewer cases than the volumes estimated in July 2021.”

Other equity analysts also recently cut their stock price outlook. Berenberg slashed the target price to $550 from $978. Guggenheim cut the target price to $775 from $1,200. UBS lowered the target price to $775 from $850. Credit Suisse cut the target price to $965 from $1,281.

Thirteen analysts who offered stock ratings for Boston Beer in the last three months forecast the average price in 12 months at $686.23 with a high forecast of $990.00 and a low forecast of $400.00.

The average price target represents a 26.42% change from the last price of $542.82. Of those 13 equity analysts, six rated “Buy”, five rated “Hold” while two rated “Sell”, according to Tipranks. Boston Beer shares dipped over 45% so far this year. The stock closed 0.84% higher at $542.82 on Friday.

Morgan Stanley gave the stock price forecast of $1,000 under the bull scenario and $300 under the worst-case scenario.

“We are Overweight on Boston Beer (SAM) as we see a compelling long-term topline growth story, albeit with higher uncertainty given the recent category slowdown. We forecast ~13% LT topline forecast at SAM, above consensus and market expectations of ~6%, driven by the Truly brand within the high-growth US hard seltzer category,” Morgan Stanley’s Falorni added.

“We believe the secular growth drivers of the hard seltzer category (favorable demographics with a younger consumer base, expanding the consumer base to wine/spirits drinkers, innovation contribution, distribution expansion opportunities) are still in-place, even though the recent growth slowdown, as the category matures, has been faster than we originally expected.”

Check out FX Empire’s earnings calendar

USD/CAD: Loonie Gains After Solid Jobs Report Leaves BoC on Track to Taper

The Canadian dollar strengthened against its U.S. counterpart for the second straight session on Friday after an upbeat August jobs report puts the Bank of Canada on track for another taper next month.

The USD/CAD pair fell to 1.2578 today, down from Thursday’s close of 1.2662. The Canadian dollar lost over 1.2% last month and has depreciated about 0.2% so far this month.

In August, Canada added 90,200 jobs, and the unemployment rate fell to 7.1%, its lowest level since the COVID-19 pandemic began. The data might support the Bank of Canada’s next taper in October.

The Governor of the Bank of Canada, Tiff Macklem, said yesterday that Canada is on its way to no longer needing quantitative easing to stimulate the economy.

On Wednesday, the Bank of Canada held its key interest rate, citing fears that the pandemic and supply bottlenecks might stall the economic recovery. The central bank has maintained its overnight rate target at 0.25% and said it will continue buying bonds at a rate of $2 billion a week as part of its quantitative easing program.

“There is some progress and we think the data should offset a lot of the concern about the Bank’s policy stance following the weak Q2 GDP data and should provide some additional lift for the CAD via some stabilization (or re-widening) in short-term US-Canada spreads that have moved against the CAD in recent weeks,” noted Shaun Osborne, Chief FX Strategist at Scotiabank.

“Technical signals are mixed, reflecting some of the choppy trade seen in the past few weeks.  The USD retains a fair degree of bullish trend momentum on the daily and weekly DMI oscillators but the longer run charts also reflect persistent USD selling pressure on strength over the past two months and spot has pressure daily support (40-day MA) at 1.2593 into the end of the week.  A clear push below this point is needed to unlock more USDCAD weakness towards 1.2500/10 and, potentially, the low 1.24 zone (early August low at 1.2424).”

Canada is the world’s fourth-largest exporter of oil, which edge higher on low U.S. output after Hurricane Ida. U.S. West Texas Intermediate (WTI) crude futures were trading 2.22% higher at $69.65 a barrel. Higher oil prices lead to higher U.S. dollar earnings for Canadian exporters, resulting in an increased value of the loonie.

The dollar index, which measures the value of the dollar against six foreign currencies, was trading 0.01% higher at 92.487. After news that Chinese President Xi Jinping and US President Joe Biden talked for the first time in seven months, pro-growth currencies gained, weakening the greenback.

However, it is highly likely that the world’s dominant reserve currency, the USD, will rise by end of the year, largely due to the expectation of two rate hikes by the Fed in 2023. With the dollar strengthening and a possibility that the Federal Reserve will raise interest rates earlier than expected, the USD/CAD pair may experience a rise.

USD/CAD: Loonie Snaps Three-Day Losing Streak Ahead of BoC Macklem’s Speech

The Canadian dollar snapped its three-day losing streak against its U.S. counterpart on Thursday as investors were awaiting Bank of Canada Governor Tiff Macklem’s speech that may provide insight into future bond purchases.

The USD/CAD pair fell to 1.2651 today, down from Wednesday’s close of 1.2689. The Canadian dollar lost about 1% in July and has further dropped over 1.2% last month.

On Wednesday, the Bank of Canada held its key interest rate, citing fears that the pandemic and supply bottlenecks might stall the economic recovery. The central bank has maintained its overnight rate target at 0.25% and said it will continue buying bonds at a rate of $2 billion a week as part of its quantitative easing program.

At 1600 GMT, Governor Macklem will deliver a speech regarding the reinvestment phase of the QE program.

“In general, it appears that most of the negatives are already in the price when it comes to CAD: our short-term fair value model is showing a 2.1% overvaluation in USD/CAD, which is above the 1.5 standard deviation band, so clearly indicating a risk premium has been built on the loonie. At the same time, a more cautious BoC should mean that CAD may struggle to recover some of the recent losses just yet,” noted Francesco Pesole, FX Strategist at ING.

The dollar index, which measures the value of the dollar against six foreign currencies, was trading 0.04% lower at 92.614. After the European Central Bank said it would reduce its emergency bond purchases in the coming quarter, the euro remained modestly up against the greenback.

It is highly likely that the world’s dominant reserve currency, the USD, will rise by end of the year, largely due to the expectation of two rate hikes by the Fed in 2023. With the dollar strengthening and a possibility that the Federal Reserve will raise interest rates earlier than expected, the USD/CAD pair may experience a rise.

Canada is the world’s fourth-largest exporter of oil, which edge higher on low U.S. output after Hurricane Ida. U.S. West Texas Intermediate (WTI) crude futures were trading 0.29% higher at $69.51 a barrel. Higher oil prices lead to higher U.S. dollar earnings for Canadian exporters, resulting in an increased value of the loonie.

On the other hand, Global demand for crude oils is declining due to recent restrictions over the Covid-19 Delta variant and a lack of buyers. The slowing Chinese economy dampened sentiment and have knocked investors off balance. As a major exporter of commodities, including oil, Canada’s dollar tends to be sensitive to the outlook for global economic growth.

Gold Tumbles after Last Week’s Dramatic Rise

Economists polled by Dow Jones and Bloomberg were anticipating that there would be an additional 700,000 to 750,000 new jobs added last month. However, the actual numbers came in far below the estimates, with the U.S. adding only 374,000 nonfarm payroll jobs in August.

This disappointing number compared to the estimates meant that the Federal Reserve would probably maintain its accommodative monetary policy. Their dual mandate of inflationary rates around 2% and full employment has shifted, favoring full employment while letting inflationary rates run hot. This put pressure on the U.S. dollar and concurrently was a major factor in taking gold moderately higher.

While the Federal Reserve had anticipated the onset of tapering their $120 billion monthly asset purchases as soon as November or December, the disappointing jobs report made it plausible that if they do taper, it will be at a slower pace, or they could wait until the beginning of next year to initiate the process.

Besides a disappointing jobs report, there was the real concern of the Delta variant infecting record numbers of Americans. MarketWatch reported that “U.S. COVID-19 case tally tops 40 million, and hospitalizations over Labor Day holiday were more than double last year’s.”

Currently, there have been more than 221 million confirmed cases of the coronavirus globally. However, the United States continues to have the largest case count. According to the New York times, tracker United States is averaging more than 1500 deaths daily, this for the first time since March.

The Financial Express summarized Friday’s fundamental basis for gold moving higher, saying that, “The Fed has made a labor market recovery a condition for paring back its pandemic-era asset purchases and with the current data, the expectation is that start of tapering assets may begin early next year instead of December. Americans have become reluctant to return to the workforce for fear of infection, and August jobs data reflects that.”

However, even with a disappointing jobs report and a rise in reported cases of Covid 19, gold prices fell sharply today, giving up $37.90, just over a 2% price decline. Gold futures basis the most active December 2021 Comex contract is currently fixed at $1795.90. Current pricing is just above the intraday low of $1793.70 and far below today’s intraday high of $1833.50.

Gold F Sept 7

Dollar strength certainly was a component of today’s sharp selloff in gold. The dollar gained 0.56 and is currently fixed at 92.545. Rising yields in U.S. debt instruments were also cited as a key component creating bearish sentiment in gold pricing today.

USDX sept7

However, collectively both dollar weakness and higher yields in U.S. debt are not enough to account for the dramatic 2% fall in gold pricing. Many analysts are citing the fact that when gold was unable to trade and close above $1830, it set into motion long position liquidation and profit-taking from short-term futures traders as a key component to today’s dramatic selloff.

On a technical basis, it is critically important that gold remains at or above the current 50-day moving average, fixed at $1797. With current pricing at $1796.10, it is at a critical price point. A break below this price point would mean that gold could fall to the next support level at $1781, the intraday low achieved on August 26. Resistance is again based upon both the 200-day and 100-day moving averages, which occur at $1810 (200- day) and $1814.80 (100-day).

For those who would like more information, simply use this link.

Wishing you, as always, good trading and good health,

Gary Wagner

USD/CAD: Loonie Hits Over Three-Week High as Weak U.S. Jobs Data Hurt Greenback

The Canadian dollar strengthened to over a three-week high against its U.S. counterpart on Friday after a sharp slowdown in U.S. jobs growth signalled that the Federal Reserve is likely to maintain its massive stimulus measures, sending the greenback down further.

The USD/CAD pair fell to 1.2489 today, down from Thursday’s close of 1.2551. The Canadian dollar lost about 1% in July and has further dropped over 1.2% last month.

“The markets are heading into the long weekend in North America with time to contemplate whether today’s US non-farm payrolls report is just a blip, bad or bad-bad. For stocks, “bad” can mean “good” if soft data suggest the Fed’s shift towards tapering asset purchases might be delayed. “Bad-bad” data, on the other hand,  is negative for risk assets  (and,  by virtue of its still elevated correlations with stocks and commodities, the CAD) as it suggests slower growth and, potentially, lower corporate earnings,” noted Shaun Osborne, Chief FX Strategist at Scotiabank.

Due to the COVID-19 Delta variant, hiring in the leisure and hospitality sector last month was at its lowest level in seven months. Nonfarm payrolls increased by 235,000 in August, which missed the economists’ forecast of 728,000. The Labor Department reported a drop in unemployment to 5.2% from 5.4% a month earlier.

There won’t be a tapering announcement after the job report in September. And due to this uncertainty over Fed policy, the U.S. dollar has been subdued.

The dollar index, which measures the value of the dollar against six foreign currencies, fell to its lowest level since Aug. 4, was trading 0.14% lower at 92.099. Dollar broadly weakened after Federal Reserve Chair Jerome Powell gave no indication of a tapering in a much-anticipated speech last week.

However, it is highly likely that the world’s dominant reserve currency, the USD, will rise by end of the year, largely due to the expectation of two rate hikes by the Fed in 2023. With the dollar strengthening and a possibility that the Federal Reserve will raise interest rates earlier than expected, the USD/CAD pair may experience a rise.

“We think there is a window of opportunity for the CAD to recover a little of the ground lost ground against the USD recently in the short run. Seasonal trends suggest the CAD typically does a little better from early September through mid-October before the USD embarks on its usual turn of the year rally. Our fair value models suggest there is still a fairly significant discrepancy between the CAD’s modeled estimated fair value and spot even if background factors have turned mildly less supportive recently (lower commodity prices and less favourable spreads),” Scotiabank’s Osborne added.

“Technically, this week’s push under a range of key support points at or just below 1.26 tilts the technical outlook towards a deeper retracement of the USD’s rebound from June’s low near 1.20. We spot technical resistance now between 1.2550/60 and, stronger, at 1.2590/00. USDCAD support is 1.2478 (50% Fibonacci retracement of the 1.20/1.2950 move up) and 1.2367 (61.8% retracement). We favour looking to fade USD gains.”

Next week, the Bank of Canada will also announce its interest rate decision.

“Next week’s BoC meeting won’t result in any policy changes ahead of the federal election, but softer data of late is unlikely to alter the BoC’s course, with policy normalisation well underway. Less supportive domestic drivers (BoC repricing, political uncertainty) may keep CAD capped in September, but we expect the overvalued USD/CAD to decline in 4Q,” noted James Knightley, Chief International Economist at ING.

Canada is the world’s fourth-largest exporter of oil, which edge lower amid a slow post-hurricane recovery in Gulf Coast operations. U.S. West Texas Intermediate (WTI) crude futures were trading 0.80% lower at $69.42 a barrel. Lower oil prices lead to lower U.S. dollar earnings for Canadian exporters, resulting in a decreased value of the loonie.

On the other hand, Global demand for crude oils is declining due to recent restrictions over the Covid-19 Delta variant and a lack of buyers. The slowing Chinese economy dampened sentiment and have knocked investors off balance. As a major exporter of commodities, including oil, Canada’s dollar tends to be sensitive to the outlook for global economic growth.

Gold Gives Up Recent Gains as the Nasdaq and S&P 500 Trade to New Record Highs

This might have prompted short-term traders to pull profits after Monday’s price surge, which took gold prices back above $1800 per ounce.

Gold August 25

On Monday, gold opened just above $1780 and closed at $1806 in brisk trading. This was followed by Tuesday’s price action, which included a higher high and a higher low than Monday. However, on Tuesday, gold futures were unable to close above the 100-day moving average (currently fixed at $1809.50) which on a technical basis has served as the first level of resistance, followed by major resistance, which occurs at the 200-day moving average, which is currently fixed at $1812.50.

This would have prompted short-term futures traders to pull any profits they obtained if they entered the market on Friday of last week or this Monday. This is being cited as one of the primary forces which took gold lower today. It is also important to note that market sentiment continues to favor the risk-on asset class as U.S. equities continued to rally into Wednesday’s trading session.

New record highs were achieved in the NASDAQ composite today, which gained 22 points (+0.15%), closing at 15,041.8585. The NASDAQ’s new record high occurred in conjunction with a new all-time high in the S&P 500 which gained 9.96 points (+0.22%) and is currently fixed at 4496.19. Although the Dow Jones industrial average gained roughly 1/10 of a percent in trading today it is still trading below the record high that was achieved on Monday, August 16.

As reported by CNBC, Bart Melek, head of commodity strategies at TD Securities said, “There has been a boost in risk appetite and the dollar has also climbed up resulting in some consolidation in the metal.” He also said that some investors were taking profits on positions in gold.

The U.S. dollar traded to a high of 93.14 before closing down by almost 1/10 of a percent and is currently fixed at 92.82.

A CNBC analysis wrote that “Investors remain divided over whether they will get a roadmap on when the U.S. central bank may start trimming its bond-buying program and if Powell would tone down the Fed’s hawkish tone, in turn helping gold.” The article also quoted Michael Matousek, head trader at U.S. Global Investors , “The longer-term (gold) holders are on the sidelines right now, until they get a little clarity out of the Jackson Hole (Symposium).”

While we acknowledge the division amongst investors regarding what Chairman Powell will say during his speech on Friday, if the Federal Reserve’s action continues to be based on the most recent data it would be hard to conceive that they would ignore the data involving the recent surge of the Delta variant as it spreads unevenly throughout the United States. The recent surge in new infections undoubtedly will have economic repercussions which should temper the more hawkish tone acknowledged in the minutes of the last FOMC meeting released last week.

As of 5:32 PM EST gold futures basis, the most active December 2021 Comex contract is down $15.60 and fixed at $1792.70, approximately $1.00 below gold’s 50-day moving average.

For more information on our service, simply use this link.

Wishing you, as always, good trading and good health.

Gary Wagner

Ethereum: We Got the “Pullback, Rally,” Expect a More Significant Pullback Soon

Last week, see here, I was looking for a smaller degree 4th wave pullback, then a 5th wave rally to complete a larger 1st wave top. Ethereum, aka Ether (ETH), took a slight detour by first rallying to the ideal 161.80% extension for a b-wave and then dropped into this week’s low for what is most likely the c-wave of wave-iv and wave-v (the “Rally”) to ideally $3415-3585 should now be underway. See Figure 1 below.

Figure 1. ETH daily chart with EWP count and technical indicators.

The pullback came and went, now in the rally to complete wave-1

Elliott Wave Principle (EWP) fourth waves are inherently difficult to forecast, track, and trade, and the last few days showed once again this is the case. Namely, what we got was most likely an irregular flat 4th wave, where the (green) b-wave topped above the end of the 3rd wave (red wave-iii). Since corrections, and flat waves, in particular, are always made up of at least three waves (a, b,c), we know that “after wave-b, comes wave-c” and in this case (green) wave-c of (Red) wave-iv bottomed on Wednesday.

Albeit not shown, 4th waves typically retrace between 23.60 and 38.20% of the prior 3rd wave, which would be the $2935-2785 zone. ETH bottomed at $2952 on Wednesday, off by 0.58% and thus close enough (well within the margins of error!). Therefore, as long as this low holds, we should expect ETH to reach the ideal wave-v of the wave-1 target zone of $3415-3585. From there, a multi-week correction, wave-2, should unfold. See Figure 1 above. It can target anywhere between $2145-2865 depending on how deep or shallow this wave-2 will become. It is impossible to know beforehand.

However, typically 2nd waves retrace about 50-62% of the entire prior 1st wave, so I anticipate for now -without having any data at hand yet to confirm a bottom in the $2380-2590 zone (orange rectangle). Once more price data becomes available, I can fine-tune this pending and anticipated low. Remember, all we can do is “anticipate, monitor, and adjust”. But few methods, if any, can already make such forecasts as the EWP can. For now, ETH has topped and bottomed where it should for a smaller 3rd and a 4th wave, so there’s nothing yet to suggest the minor 5th wave and more significant 2nd wave will not unfold as anticipated.

Last but not least, please note how price reached the (blue arrow) symmetry breakout target to the T. When classic Technical Analysis and the EWP align, price forecast can be very accurate and reliable. Now “the traffic light” is also back to full green, so I expect higher prices over the next few days.

Bottom line: The devil is always in the details, and one can therefore not foresee every move. The anticipated “pullback” became a bit more complex, but ETH is overall tracking along with the preferred EWP impulse pattern well. As such, my premium crypto trading members knew exactly where to expect the pullback bottom and subsequent rally. Thus, as long as this low holds, we should expect ETH to reach the ideal wave-v of the wave-1 target zone of $3415-3585. From there, I still anticipate a correction back to the mid-$2000s before the rally to new All-time highs should kick in.

Start trading Ethereum now with eToro

El Salvador Unveils Banking Regulations For Bitcoin, Says Bitcoin Use Is Optional

El Salvador’s Bitcoin adoption is expected to become official in less than three weeks, and the government has now published a draft to guide banks on how to handle the cryptocurrency.

El Salvador Publishes Banking Regulations For Bitcoin

The El Salvador central bank, Banco Central de Reserva (BCR), has published two documents designed to help financial institutions in the country deal with Bitcoin. The guidelines would make it easier for banks to understand how to offer Bitcoin-related services to their customers.

The first document roughly translates as “Guidelines for the Authorization of Operation of the Digital Wallet Platform for Bitcoin and Dollars.” The document defines Bitcoin as a legal tender after the legislation was passed a few months ago. Following the approval of the bill, Bitcoin is set to become an official legal tender in El Salvador on September 7.

The second document is called Technical Standards to Facilitate the Application of the Bitcoin Law,” and it contains details on how financial institutions and banks should offer Bitcoin services to their customers.

Per the regulation, financial institutions would have to apply to the El Salvador central bank if they wish to offer digital wallets. Furthermore, the applications are required to contain details on the type of products the banks would be offering, the target market, risk assessments, charges to customers, various complaint processes and education resources for the customers.

The banks would make it easy for people to convert Bitcoin to US Dollars and vice versa. The financial institutions are also required to ensure customers go through the standard Know-your-customer (KYC) verification processes. They also need to implement anti-money laundering (AML) procedures when dealing with Bitcoin.

Bitcoin’s Use Is Optional

El Salvador’s finance minister Alejandro Zelaya pointed out earlier this week that the use of Bitcoin is totally optional. According to the minister, the US Dollar remains the dominant currency in El Salvador, but Bitcoin is available as an option for people that want to use it.

BTC/USD chart. Source: FXEMPIRE

Bitcoin has been in a bearish mode for the past few days, with its price down by 0.67% over the past 24 hours. Currently, Bitcoin is trading just above the $44k mark, dropping from the $47k level it attained during the weekend.

Dogecoin – Daily Tech Analysis – August 15th, 2021

Dogecoin

Dogecoin rallied by 11.14% on Saturday. Following a 2.80% gain from Friday, Dogecoin ended the day at $0.2942.

A choppy morning saw Dogecoin rise to a late morning intraday high $0.2988 before hitting reverse.

Dogecoin broke through the first major resistance level at $0.2798 and the second major resistance level at $0.2949

The reversal saw Dogecoin slide to a late morning intraday low $0.2671.

Steering clear of the first major support level at $0.2530, Dogecoin broke back through the first major resistance level to end the day at $0.294 levels.

The second major resistance level at $0.2949 capped the upside late in the day.

At the time of writing, Dogecoin was up by 4.88% to $0.3086. A mixed start to the day saw Dogecoin fall to an early morning low $0.2887 before rising to a high $0.3098.

Dogecoin broke through 23.6% FIB of $0.3016 and the first major resistance level at $0.3063 early on.

DOGEUSD 150821 Hourly Chart

For the day ahead

Dogecoin would need to avoid a fall back through the first major resistance level and 23.6% FIB to bring the second major resistance level at $0.3184 into play.

Support from the broader market would be needed, however, for Dogecoin to break out from this morning’s high $0.3098.

Barring an extended rally, the second major resistance level at $0.3184 would likely cap any upside.

In the event of an extended breakout, Dogecoin could test resistance at $0.33 levels before any pullback. The third major resistance level sits at $0.3501.

A fall back through first major resistance level and 23.6% FIB of $0.3016 would bring $0.28 levels back into play.

Barring a fall through the day’s $0.2867 pivot, however, Dogecoin should steer clear of the first major support level at $0.2746.

Looking at the Technical Indicators

First Major Support Level: $0.2746

Pivot Level: $0.2867

First Major Resistance Level: $0.3063

23.6% FIB Retracement Level: $0.3016

38.2% FIB Retracement Level: $0.3859

62% FIB Retracement Level: $0.5221

Please let us know what you think in the comments below.

Thanks, Bob

Trade Dogecoin with eToro (Ad)

August 12th 2021: AUD/USD Daily Resistance at $0.7453-0.7384 Remains a Key Watch

Charts: Trading View

EUR/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Thanks to June’s 3.0 percent loss, support at $1.1857-1.1352 entered the frame. A bullish revival shines light on 2021 peaks at $1.2349; additional enthusiasm welcomes ascending resistance (prior support [$1.1641]).

Month to date, August trades 1.0 percent lower.

Based on trend studies, a primary uptrend has been underway since price broke the $1.1714 high (Aug 2015) in July 2017. Further adding to this, price penetrated major trendline resistance, taken from the high $1.6038, in July 2020.

Daily timeframe:

In conjunction with monthly support, Wednesday steadied off the upper edge of a breached falling wedge (between $1.1847 and $1.1975) in the shape of a bullish outside reversal—plotted north of Quasimodo support at $1.1688. Aside from technical forces, the US dollar index (ticker: DXY) retreating on the back of lower US inflation numbers aided the bullish vibe.

Continued pressure to the upside on EUR/USD shines the technical spotlight on the falling wedge pattern take-profit level at $1.1943.

With regards to long-term trend, we have been somewhat directionless since the beginning of the year, despite healthy gains in 2020. From the relative strength index (RSI), the value spun higher ahead of oversold territory in recent trading, which could eventually see the indicator take on trendline resistance, taken from the low 27.11, and resistance at 51.36.

H4 timeframe:

Albeit suffering a breach, Quasimodo support at $1.1720 maintained position on Wednesday and hauled the currency pair to within touching distance of resistance at $1.1763. Air space north of here shifts attention towards resistance at $1.1800.

Below Quasimodo support, a 100% Fib projection at $1.1680 (represents an AB=CD bullish pattern) and a 1.618% Fib extension at $1.1650 is observed.

H1 timeframe:

Violating trendline resistance, drawn from the high $1.1900, and subsequently retesting Quasimodo support from $1.1711 witnessed bulls enter an offensive phase heading into US hours yesterday. As of current price, buyers and sellers are battling for position just south of supply at $1.1766-1.1754, an area accompanied by the 100-period simple moving average.

36.94 holding as support on the relative strength index (RSI) propelled the value through the 50.00 centreline to within close reach of overbought space and neighbouring resistance at 78.97. The aforementioned resistance, therefore, is a level to be mindful of going into Thursday’s session.

Observed levels:

Recognising monthly flow testing support at $1.1857-1.1352 and daily price forging a bullish candlestick off the upper edge of a breached falling wedge places a bullish theme in a favourable light.

However, before short-term flow navigates higher levels, sellers could make a show from H1 supply at $1.1766-1.1754, an area not only joined by the 100-period simple moving average, but also H4 resistance at $1.1763.

AUD/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Following June’s 3.0 percent decline, and July tumbling 2 percent, this positions demand at $0.7029-0.6664 in sight.

Month to date, August is up 0.4 percent.

Trend studies (despite the trendline resistance [$1.0582] breach in July 2020) show the primary downtrend (since mid-2011) is in play until breaking $0.8135 (January high 2018).

Daily timeframe:

Technical structure unchanged from previous analysis

In spite of the Australian dollar launching a one-way move higher against a softer dollar across the board—influenced by lower US inflation data—resistance at $0.7453-0.7384 remains central focus, capping upside since 22nd July.

The next downside objective falls in around a 1.272% Fib projection at $0.7273, followed by support at $0.7204. Ground above the aforementioned resistance area brings light to the 200-day simple moving average at $0.7603, a dynamic value sheltered south of resistance at $0.7626.

With respect to trend, 2021 is underwater right now, emphasised by the close below the 200-day simple moving average at the beginning of July. Momentum, as per the relative strength index (RSI), is on the verge of overthrowing resistance at 41.63, a move drawing attention to the 50.00 centreline.

H4 timeframe:

Tuesday confronting the head and shoulder’s profit objective at $0.7328 (the pattern emerged around the lower side of a 38.2% Fib retracement at $0.7408), and whipsawing to Fibonacci structure between $0.7293 and $0.7315, observed a bullish phase materialise on Wednesday.

Sustained bullish interest shifts attention back to $0.7408, with a break pointing to a 61.8% Fib retracement value at $0.7482.

H1 timeframe:

Quasimodo support at $0.7323 served well, elevating short-term action above the 100-period simple moving average at $0.7356 Wednesday. $0.74 now calls for attention as possible resistance, with supply residing at $0.7450-0.7436 should price overrun the psychological base.

Interestingly, the relative strength index (RSI) exited overbought territory, leaving resistance at 78.26 unchallenged. Dropping from overbought is recognised as a bearish cue by some analysts, which may motivate a bearish scene should $0.74 enter the frame.

Observed levels:

Daily resistance at $0.7453-0.7384 is a key watch on the bigger picture, particularly as the monthly timeframe exhibits scope to tunnel lower. This positions the H4 timeframe’s 38.2% Fib retracement value at $0.7408 in the line of fire as feasible resistance, sharing chart space with $0.74 on the H1. Note both levels inhabit the aforementioned daily resistance.

USD/JPY:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Since April retested descending resistance-turned support, etched from the high ¥118.66, price action has maintained moderate support. Pursuing higher levels could eventually strive for long-term supply at ¥126.10-122.66.

Month to date, August trades 0.7 percent in the green.

Daily timeframe:

Technical structure unchanged from previous analysis

Persuaded by US Treasury yields trimming gains—benchmark 10-year note down 2.0 percent—following the US inflation release, USD/JPY wrapped up Wednesday considerably off best levels.

Technically speaking, however, we remain north of local trendline resistance-turned support, forged from the high ¥111.66, movement that could eventually pull in resistance from ¥111.88-111.20 and neighbouring supply at ¥112.68-112.20.

When it comes to trend, USD/JPY has been higher in 2021.

Resistance at 54.00 is under pressure, according to the relative strength index (RSI), showing traders that momentum is directed to the upside and overbought terrain may be on the cards.

H4 timeframe:

Although already welcoming sellers early July, supply at ¥110.99-110.80 was tested to the pip yesterday and offered a bearish platform for sellers to work with.

Stacked demand between ¥109.42-109.68 and ¥109.69-109.89 demand attention should sellers remain in the driving seat. In the event current supply is taken out, nonetheless, resistance exists at ¥111.56.

H1 timeframe:

Arranged within the lower limits of H4 supply at ¥110.99-110.80, H1 supply at ¥110.92-110.81 came within a whisker of making an appearance on Wednesday before price slumped back to support at ¥110.38. Technical elements reveal the aforesaid level brings with it a nearby 100-period simple moving average at ¥110.28.

Voyaging beneath noted supports shows $110 psychological support.

Relative strength index (RSI) resistance at 78.38—located within overbought—has proved stubborn since mid-June. Yesterday had the value step through the 50.00 centreline and join space just ahead of oversold and support at 18.76.

Observed levels:

H1 support at ¥110.38 offers a potential floor for dip-buying scenarios, having seen the base align closely with the 100-period simple moving average. However, the majority of interested traders here will likely pursue additional confirmation before pulling the trigger, given the H4 chart demonstrates room to move to as far south as stacked demand between ¥109.42-109.68 and ¥109.69-109.89.

An alternative bullish theme, of course, is a run beneath ¥110.38 to test ¥110, which is open to a whipsaw into H4 demand mentioned above at ¥109.69-109.89.

GBP/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Since February, GBP/USD has echoed an indecisive environment south of $1.4377: April high 2018. This follows December’s (2020) trendline resistance breach, taken from the high $2.1161, a descending barrier possibly serving as support if retested.

Month to date, August trades 0.3 percent lower.

Primary trend structure has faced lower since early 2008, unbroken (as of current price) until $1.4377 gives way.

Daily timeframe:

Since early August, the daily candles have been busy carving out a bullish flag between $1.3983 and $1.3888. Having seen the relative strength index (RSI) modestly defend the 50.00 centreline as support (showing average gains in this market exceed average losses), and Wednesday establish a bullish outside reversal, a push higher could be in the offing. Rupturing the upper edge of the current bullish flag, however, faces resistance at $1.4003. Breaking this base helps validate a bullish existence, targeting Quasimodo resistance at $1.4250.

To the downside, the 200-day simple moving average at $1.3765 is visible, followed by Quasimodo support at $1.3609.

With reference to trend on this chart, the pair has been somewhat rangebound since late February.

H4 timeframe:

Fibonacci support between $1.3813 and $1.3826 entered the picture yesterday and served buyers well.

Supply at $1.3933-1.3917 is recognised as the next upside target available on this scale, an important decision point that breached $1.3875ish lows.

H1 timeframe:

Confirmed by the relative strength index (RSI) chalking up bullish divergence within the oversold region (movement showing downside momentum slowing), along with a waning USD, lifted cable higher on Wednesday.

Guiding the unit above the 100-period simple moving average at $1.3866 led to a test of Quasimodo resistance at $1.3882. Above this point, we’re then likely looking at touching gloves with H4 supply underlined above at $1.3933-1.3917.

Additional RSI observations show the indicator levelling off a whisker below overbought territory, currently engaging with 60.00.

Observed levels:

The daily timeframe’s bullish flag is likely to interest a number of longer-term traders, though many will seek a close above resistance at $1.4003 before committing.

As far as the short-term picture goes, H1 Quasimodo resistance at $1.3882 holds for the time being. Though having seen the 100-period simple moving average around $1.3866 in place to perhaps serve as support, and the H4 displaying room to move for supply at $1.3933-1.3917, a short-term bullish setup may emerge upon breaking $1.3882.

DISCLAIMER:

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.

ADP Jobs Report Comes in Well Below Expectations

Considering that private-sector jobs saw an additional 680,000 individuals added to the workforce in June, July’s number is the lowest number of jobs added since February 2021.

Estimates by Dow Jones anticipated an additional 653,000 private-sector jobs were added in July. According to ADP chief economist Nela Richardson, “The labor market recovery continues to exhibit uneven progress, but progress nonetheless July payroll data reports a marked slowdown from the second quarter pace in jobs growth.”

According to today’s report, the largest gains in private-sector jobs were in leisure and hospitality, which added 139,000 employees. Education and health services added 64,000, and professional business services increased by only 36,000.

The ADP private sectors jobs report collated in conjunction with Moody’s Analytics is always released two days before the U.S. Labor Department’s nonfarm payrolls jobs report. Historically the two reports do not always have a strong correlation. It has been noted by many analysts that numbers obtained in the ADP report can vastly differ from the numbers that are released by the U.S. Labor Department. However, in the case of this year, the two reports have had a much greater correlation than in past years.

The key difference between the U.S. Labor Department’s report and the ADP report is that the Labor Department includes U.S. government jobs added. Currently, forecasts for Friday’s jobs report are anticipating a gain of 845,000 new jobs added in July. If this forecast is accurate when added to June’s 850,000 jobs added, it would mean an additional 1.6 million jobs were added in the last two months.

However, according to Reuters, “That offset the ADP report showing private payrolls rose by 330,000 jobs last month, less than half of the 695,000 that had been anticipated by a Reuters survey of economists.”

According to CNBC, one explanation for the tepid ADP numbers is that new jobs added in July come, “amid concerns that the spreading delta variant could contribute to an overall climate that indicates the post-recession economic boom is slowing. Though the variant’s spread is largely concentrated among a handful of states where vaccinations are low, the total case count has eclipsed the peak of the original Covid spread and is sparking worries that it will slow activity.”

As of 5:24 PM EST gold futures basis, the most active December 2021 Comex contract was trading up $0.20 and fixed at $1814.30. With only fractional gains today, it is the intraday high that is most interesting. Upon the release of the ADP report, gold prices surged to $1835.90 intraday before giving up almost all of its gains to close, in essence unchanged. Since the Federal Reserve uses the data from the Labor Department’s jobs report as a key data set used to shape monetary policy, market participants will focus intently on Friday’s numbers. With expectations anticipating an extremely strong jobs report if the report comes in as weak as today’s ADP report as we could expect the Federal Reserve to continue to maintain its extremely accommodative and dovish monetary policy, which would be bullish for gold prices.

Gold August 4 2021

For more information on our service, simply use this link.
Wishing you, as always, good trading and good health,

Gary Wagner

 

Bitcoin Gets Bumped Up but not Pumped Up

How After yesterday’s tremendous rise in Bitcoin and Bitcoin futures, today BTC gave up about half of Monday’s gains, and currently, as of 2 PM Eastern Standard Time, the most active August contract of BTC futures is trading down a little over 4% or $1625 on the day at $37,835.

tuesday chart #1

The description in the posting was worded in a way that had many believing that the juggernaut of e-commerce was looking into accepting cryptocurrency as a payment option in the future. This belief was enough to shift market sentiment, which at the time was extremely bearish. The result was the liquidation of over $950 million worth of crypto shorts which was enough to propel Bitcoin above $40,000 intraday on Monday.

The optimism was squelched when an Amazon spokesperson denied that the company would accept Bitcoin as a payment option this year. This brought pricing well off of the highs, but the statement did not state that Bitcoin wouldn’t be accepted in the following year or that another crypto isn’t being considered for a possible sooner integration. Nonetheless, when the announcement was made at around 4 PM Eastern Standard Time, Bitcoin’s price fell from its highs at around $40,000 down to approximately $37,750 in a single hour.

tuesday chart #2

On a technical basis, BTC futures still remain within the downward channel it has followed since the all-time highs in April. However, a few levels of resistance have now become areas of possible support. This includes the 50 and 200-day moving averages as well as the 2.618 Fibonacci extension at $33,000. As well as the current support level at the 50% retracement residing at $36,500. The volume levels in BTC had a dramatic spike today, giving the above-mentioned areas of support more validity.

Resistance remains at $40,000, and the ultimate support level at the 61.8% retracement of $29,750 has remained intact.

tuesday chart #3

European Equities: Economic Data from China and the U.S to Give Direction

Economic Calendar

Thursday, 15th July

Italy Inflation Rate MoM Final JUN

Friday, 16th July

Eurozone Balance of Trade MAY

Eurozone Core Inflation Final JUN

The Majors

It was another mixed day the European majors on Wednesday, following modest moves on Tuesday.

The EuroStoxx600 fell by 0.08%, while the DAX30 and the CAC40 both ended the day flat.

Economic data from the Eurozone disappointed once more, pegging the majors back mid-week.

While the numbers were disappointing, continued central bank assurances of unwavering support propped up the majors on the day.

The Stats

While inflation was back in focus on Wednesday, industrial production figures for the Eurozone was of greater influence.

Spanish Consumer Prices

Spain’s annual rate of inflation held steady at 2.7% in June, which was up from a prelim 2.6%. The harmonized index for consumer prices rose by 2.5%, which was up from a prelim and May 2.4%.

Eurozone Industrial Production

In May, industrial production fell by 1.0%, reversing a 0.6% increase from April. Economists had forecast a 0.2% decline.

According to Eurostat,

Production of non-durable consumer goods fell 2.3%, energy by 1.9%, and capital goods by 1.6%.

While the production of intermediate goods slipped by 0.2%, durable consumer goods production rose by 1.6%.

Greece (-4.7%) and Ireland (-4.6%) recorded the largest monthly declines in production. By contrast, Lithuania recorded a 7.7% jump in production to lead the way.

Compared with May 2020, industrial production was up 20.5%. In April, production had been up by 39.4%. Economists had forecast a 22.2% increase.

From the U.S

Wholesale inflation was in focus following the sharp pickup in consumer price inflation from the day prior.

In June, the producer price index rose by 1.0%, following a 0.7% increase in May.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Wednesday. Volkswagen slipped by 0.05% to buck the trend on the day. BMW and Daimler rose by 0.67% and by 0.59% respectively, with Continental ending the day up by 1.58%.

It was a mixed day for the banks. Deutsche Bank slipped by 0.10%, while Commerzbank rose by 0.11%.

From the CAC, it was a relatively bullish day for the banks. Credit Agricole and Soc Gen saw gains of 0.60% and 0.45% respectively, with BNP Paribas rising 0.61%.

It was a bearish day for the French auto sector, however. Stellantis NV and Renault ended the day down by 0.20% and by 1.23% respectively.

Air France-KLM slid by a further 2.51%, with Airbus SE falling by 0.23%.

On the VIX Index

It was back into the red for the VIX on Wednesday, marking a 3rd decline in 4-sessions.

Partially reversing a 5.88% gain from Tuesday, the VIX fell by 4.61% to end the day at 16.33.

The NASDAQ slipped by 0.22%, while the Dow and the S&P500 ended the day up by 0.13% and by 0.12% respectively.

VIX 150721 Daily Chart

The Day Ahead

It’s a relatively quiet day ahead on the economic calendar. Finalized June inflation figures for Italy will be in focus later today. We don’t expect the numbers to have a material impact on the European majors, however.

From the U.S, weekly jobless claims and Philly FED Manufacturing PMI numbers will draw plenty of attention, however.

Other stats from the U.S include manufacturing numbers for NY State and industrial production figures for June. Barring particularly dire numbers, however, we don’t expect these numbers to have a material impact on the majors.

Following a sharp pickup in inflationary pressures, a marked fall in jobless claims would likely test support for riskier assets.

Ahead of the European open, 2nd quarter GDP numbers, fixed asset investment, industrial production, and retail sales figures from China will set the tone.

Lingering market jitters over the resilience of the global economic recovery will place greater emphasis on the Q2 GDP numbers.

The Futures

In the futures markets, at the time of writing, the Dow Mini was down by 25 points.

For a look at all of today’s economic events, check out our economic calendar.

Economic Data and the Bank of Canada Put the EUR, the GBP, and the Loonie in the Spotlight

Earlier in the Day:

It was another relatively busy start to the day on the economic calendar this morning. The Aussie Dollar was in focus, with the RBNZ also in action. Later this morning, finalized industrial production figures from Japan will also draw attention.

For the Aussie Dollar

Consumer confidence was in focus this morning, In July, the Westpac Consumer Confidence Index rose by 1.5% to 108.8. Economists had forecast a 2.5% decline to 105.0.

According to the latest Westpac Report,

  • A pickup in confidence came in spite of COVID-19 restrictions in Sydney.
  • The upside came in response to a marked pickup in confidence in Victoria and WA.

Looking at the sub-components

  • Family finances vs a year ago increased by 4.6% to 93.7, with finances vs next 12-months up 2.5% to 109.9.
  • Sentiment towards the near-term economic outlook improved, with the economic conditions next 12-months rising by 0.8% to 109.5.
  • There was a 3.1% fall in the Economic Conditions next 5-years, however, to 110.5.
  • The unemployment expectations index also disappointed, rising by 1.1% to 109.6.
  • In spite of this, the time to buy a major household item rose by 3.5% to 120.6.

The Aussie Dollar moved from $0.74430 to $0.744250 upon release of the figures. At the time of writing, the Aussie Dollar was up by 0.21% to $0.7463.

For the Kiwi Dollar

The RBNZ left the official cash rate unchanged at 0.25% and also left the Funding for Lending programme unchanged, which was in line with market expectations. Catching the markets off guard, however, the RBNZ did agree to end the additional asset purchases under the LSAP programme by 23rd July.

Salient points from the Rate Statement included:

  • The Committee noted that global economic growth continued to recover, with a positive outlook.
  • Rising vaccination rates across many countries together with accommodative monetary and fiscal policies supported household spending.
  • Ongoing health and economic risks remained, however, as some need to reinstate COVID-19 containment measures.
  • Recent economic data indicate the NZ economy remains robust despite international border restrictions.
  • Aggregate economic activity is above its pre-COVID-19 level.
  • Economic conditions since late 2020 have been persistently stronger than anticipated.
  • Employment growth has remained strong, with economic confidence up from their extreme lows.
  • Exports and domestic spending have compensated for the absence of international tourists.
  • Near-term spikes in inflation are expected to be temporary.
  • The Committee agreed that the significant level of monetary policy support in place since mid-2020 could be reduced sooner.
  • Members agreed that some monetary stimulus remains necessary to best ensure CPI inflation will be sustained at the 2% target mid-point and that employment is at its maximum sustainable level.

The Kiwi Dollar moved from $0.69690 to $0.70030 upon the decision. At the time of writing, the Kiwi Dollar was up by 0.95% to $0.70140.

For the Japanese Yen

Finalized industrial production figures are due out later this morning.

At the time of writing, the Japanese Yen was up by 0.09% to ¥110.530 against the U.S Dollar.

The Day Ahead

For the EUR

It’s a relatively busy day ahead on the economic data front. Finalized June inflation figures for Spain and Eurozone industrial production figures are due out later this morning.

Expect the industrial production figures for May to draw plenty of attention. The markets have recently become a little concerned over the resilience of the economic recovery. Weak numbers will test support for the EUR.

At the time of writing, the EUR was up by 0.04% to $1.1781.

For the Pound

It’s a busier day ahead on the economic calendar, with UK inflation figures due out later this morning.

With little else for the markets to consider, expect plenty of Pound sensitivity to today’s stats. Softer inflation would ease pressure on the BoE to make a near-term move.

Away from the economic calendar, COVID-19 and the Delta variant will remain a near-term driver.

At the time of writing, the Pound was up by 0.04% to $1.3820.

Across the Pond

It’s a quiet day ahead on the economic calendar. There are no material stats due out of the U.S to provide the markets with direction.

A lack of stats will leave the Greenback in the hands of central bank chatter and market risk sentiment on the day.

At the time of writing, the Dollar Spot Index was down by 0.01% to 92.739.

For the Loonie

It’s a busier day ahead on the economic data front. Finalized manufacturing sales figures for May are due out later today.

We don’t expect the numbers to influence, however, with the Bank of Canada in action this afternoon.

Markets are expecting the BoC to stand pat on policy, so it will boil down to the Bank’s outlook on the economy and any forward guidance on policy.

At the time of writing, the Loonie was up by 0.12% to C$1.2498 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

Pepsico Surges to All-Time High After Earnings

Pepsico Inc. (PEP) is trading at an all-time high in Tuesday’s pre-market session after handily beating Q2 2021 top and bottom line estimates and raising fiscal year 2021 earnings-per-share (EPS) guidance. The snack and beverage giant posted a $1.72 per-share profit during the quarter, $0.19 better than expectations, while revenue rose a healthy 20.5% year-over-year to $19.22 billion, beating consensus by more than $1.25 billion.

Managing Food Inflation

The bullish results eased shareholder worries that food inflation will lower margins going forward. The company has done an excellent job so far raising prices and instituting cost saving programs to make up the shortfall, which has forced rivals that include General Mills Inc. (GIS) to post cautionary guidance.  Better yet, Pepsico now expects to “deliver 6 percent organic revenue growth (versus previous guidance of mid-single-digit growth)”.

BofA Securities analyst Bryan Spillane examined the food industry’s pricing challenges this week, noting the macro focus on “inflation as the market bifurcates food and beverage stocks into two camps a) those who are already realizing price increases to cover inflation and protect margins, seen as “the winners” and b) those who have pricing coming through later in 2021 and may experience gaps in earnings/margins over the next few quarters, i.e. “the underperformers”.

Wall Street and Technical Outlook

Wall Street consensus has eased to an ‘Overweight’ rating in the last three months, based upon 11 ‘Buy’, 1 ‘Overweight’, 10 ‘Hold’, and 1 ‘Underweight’ recommendation. Price targets currently range from a low of $135 to a Street-high $167 while the stock is set to open Tuesday’s session about $5 below the median $156 target. This humble placement should support a rapid advance into the mid-$150s, given strong results and guidance.

Pepsico topped out above 147 in February 2020 and plunged to a two-year low during the pandemic decline. The subsequent uptick completed a round trip into the prior high in November, yielding a pullback and bounce that completed a bullish cup and handle pattern in April. Buying interest has surged during the slow advance since that time, signaling a breakout that could gather steam in coming weeks. Better yet, the pattern forecasts a long-term target in the 190s.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held Pepsico in a family account at the time of publication. 

Ethereum, Litecoin, and Ripple’s XRP – Daily Tech Analysis – July 12th, 2021

Ethereum

Ethereum rose by 1.43% on Sunday. Partially reversing a 1.72% fall from Saturday, Ethereum ended the week down by 7.85% to $2,140.82.

A mixed start to the day saw Ethereum fall to an early morning intraday low $2,081.51 before making a move.

Finding support at the first major support level at $2,059, Ethereum rallied to a late intraday high $2,173.37.

Coming within range of the first major resistance level at $2,177, Ethereum eased back to end the day at sub-$2,150 levels.

At the time of writing, Ethereum was down by 0.40% to $2,132.28. A mixed start to the day saw Ethereum rise to an early morning high $2,142.63 before falling to a low $2,126.69.

Ethereum left the major support and resistance levels untested early on.

ETHUSD 120721 Hourly Chart

For the day ahead

Ethereum would need to avoid a fall back through the $2,132 pivot to bring the first major resistance level at $2,182 into play.

Support from the broader market would be needed, however, for Ethereum to break out from Sunday’s high $2,173.37.

Barring an extended crypto rally, the first major resistance level would likely cap any upside.

In the event of a broad-based crypto rally, Ethereum could test resistance at $2,250 before any pullback. The second major resistance level sits at $2,224.

A fall back through the $2,132 pivot would bring the first major support level at $2,090 into play.

Barring an extended sell-off, however, Ethereum should steer clear of sub-$2,000 levels. The second major support level at $2,040 should limit the downside.

Looking at the Technical Indicators

First Major Support Level: $2,090

Pivot Level: $2,132

First Major Resistance Level: $2,182

23.6% FIB Retracement Level: $3,369

38.2% FIB Retracement Level: $2,740

62% FIB Retracement Level: $1,725

Litecoin

Litecoin rose by 0.17% on Sunday. Partially reversing a 0.45% loss from Saturday, Litecoin ended the week down by 7.37% to $134.26.

A mixed start to the day saw Litecoin fall to an early intraday low $132.13 before making a move.

Steering clear of the first major support level at $131, Litecoin rallied to a late intraday high $136.44.

Falling short of the first major resistance level at $137, Litecoin eased back to end the day at $134 levels.

At the time of writing, Litecoin was up by 0.05% to $134.33. A mixed start to the day saw Litecoin rise to an early morning high $134.44 before falling to a low $133.63.

Litecoin left the major support and resistance levels untested early on.

LTCUSD 120721 Hourly Chart

For the day ahead

Litecoin would need to avoid a fall back through the $134 pivot to bring the first major resistance level at $136 into play.

Support from the broader market would be needed, however, for Litecoin to break back through to $136 levels.

Barring an extended crypto rally, the first major resistance level and Sunday’s high $136.44 would likely cap any upside.

In the event of an extended breakout, Litecoin could test resistance at $140. The second major resistance level sits at $139.

A fall back through the $134 pivot would bring the first major support level at $132 into play.

Barring another extended sell-off, however, Litecoin should steer clear of sub-$130 levels. The second major support level at $130 should limit the downside.

Looking at the Technical Indicators

First Major Support Level: $132

Pivot Level: $134

First Major Resistance Level: $136

23.6% FIB Retracement Level: $178

38.2% FIB Retracement Level: $223

62% FIB Retracement Level: $296

Ripple’s XRP

Ripple’s XRP rose by 1.43% on Sunday. Partially reversing a 1.98% fall from Saturday, Ripple’s XRP ended the week down by 8.75% to $0.63499.

A mixed start to the day saw Ripple’s XRP fall to an early morning intraday low $0.61227 before making a move.

Steering clear of the first major support level at $0.6086, Ripple’s XRP rallied to a late afternoon intraday high $0.64478.

Ripple’s XRP broke through the first major resistance level at $0.6442 before a slide back to sub-$0.63 levels.

Finding late support, however, revisited $0.64 levels before a 2nd pullback to end the day at sub-$0.64 levels.

At the time of writing, Ripple’s XRP was flat at $0.63497. A mixed start to the day saw Ripple’s XRP rise to an early morning high $0.63601 before falling to a low $0.63304.

Ripple’s XRP left the major support and resistance levels untested early on.

XRPUSD 120721 Hourly Chart

For the day ahead

Ripple’s XRP will need to avoid the $0.6323 pivot to bring the first major resistance level at $0.6474 into play.

Support from the broader market would be needed, however, for Ripple’s XRP to break out from $0.6450 levels.

Barring an extended crypto rally, the first major resistance level would likely cap any upside.

In the event of another breakout, Ripple’s XRP could test the second major resistance level at $0.6599.

A fall through the $0.6323 pivot would bring the first major support level at $0.6199 into play.

Barring another extended sell-off, however, Ripple’s XRP should steer clear of sub-$0.60 levels. The second major support level at $0.6048 should limit the downside.

Looking at the Technical Indicators

First Major Support Level: $0.6199

Pivot Level: $0.6323

First Major resistance Level: $0.6474

23.6% FIB Retracement Level: $0.8533

38.2% FIB Retracement Level: $1.0659

62% FIB Retracement Level: $1.4096

Please let us know what you think in the comments below.

Thanks, Bob

What Distinguishes Japanese Technicians from Western Technicians

However, within years I realized that there were major shortcomings to the Western technical approach as they were based upon technical studies which used lagging indicators.

One of my mentors, Larry Williams expressed that sentiment in the best possible way. He said that as a Western technical analysts we are like individuals sitting at the back of a boat looking at the wake caused by the propellers. We are attempting to derive where the boat is headed by determining where it has been. Truly a lagging indicator. But he added one caveat, “only the captain knows when he will turn the wheel”.

However, it was a client of mine that first exposed me to the art of Japanese technical analysis. Within my first few years of trading, I noticed that the vast majority of first-time futures traders lost money. Within that pool of new traders, I noticed one gentleman who had the uncanny knack of selling market tops right before a key reversal, as well as buying market bottoms before a pivot occurred.

After witnessing him correctly predict and profit from 10 consecutive trades, I realize he was using a technique that was completely foreign and unfamiliar to me. I asked him what techniques he used to have such a stellar performance and he answered that it would be too complicated to explain, but he could send me a book that would detail this technique.

The book I’m referring to is the Japanese chart of charts written by Seiki Shimizu. It was the first book written by a famous Japanese trader and translated into English in 1986. It is one of the more difficult books I have ever tackled in that the Japanese language is composed of “Kanji”, or word pictures.

According to Seiki Shimizu, “A chart is like a cat’s whiskers” In his book, he writes “Standing on the corner we notice many things… in the case of a skipping rope, a child will always focus on the moving rope while jumping. However, this habit and instinct are not limited to human beings. A cat preying for a mouse will wait near a likely hiding hole. If a mouse does appear, the cat must decide which way it thinks the mouse will go and springs in that direction once the mouse begins to move. I don’t think the cat understands the mouse’s feelings and thought patterns. It’s the cat’s whiskers that are said to have the telepathic power of being able to interpret a mouse’s movement by smell, light, and wind. Therefore, I believe it is this power that moves a cat’s whiskers, whereupon the cat decides whether to wait or chase after the mouse.

It is said that “A market price is a living thing.”

Japanese Candlestick Charts and their patterns were conceived over three hundred years ago by a rice trader named Sokyu Honma (1716 -1803). Sokyu lived in Sakata, Japan, and was also known as Sokyu Honma and Munehisa Homma.

It was rumored that he made 100 consecutive profitable trades. His success was so great that he achieved the rank of honorary Samurai, as well as attaining the government rank of a financial advisor.

At first, his methods of trading were kept a secret as they were passed down when he compiled a book in 1755 called the ‘Fountain of Gold – the Three Monkey Record of Money’. This book detailed his findings and observations of market sentiment.

Simply put the Japanese technical approach can mathematically quantify market sentiment. Something that has alluded to Western traders.

This article has been written as an ancillary discussion to the interview that David Linda myself did this morning in which we spoke about my methodology. As it is too complex to be able to discuss the totality within a single opening letter I am providing links to articles that I have written for Kitco education at the end of this article.

I hope that the knowledge presented within these brief presentations will allow you as a trader to gain insight, and most importantly be a more effective trader.

For those who want more information, please use this link.

Wishing you, as always, good trading and good health,

Gary S. Wagner

References on the Japanese candlestick technique found in the Kitco education section;

THE HISTORY OF JAPANESE TECHNICAL ANALYSIS

EAST VERSUS WEST (LESSON ONE)

EAST VERSUS WEST – CLASSIC NAMES AND EXPLANATIONS OF JAPANESE CANDLESTICKS (LESSON TWO)

THE SAKATA FIVE

AN INTRODUCTION TO HEIKIN-ASHI CHARTS

July 8th 2021: Dollar Index Unmoved Following Fed Minutes

Charts: Trading View

EUR/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Closing the book on the month of June witnessed EUR/USD—in the shape of a near-full-bodied bearish candle—touch gloves with familiar support at $1.1857-1.1352 and erase 3.0 percent. A bullish revival from the aforesaid support shines the technical spotlight on 2021 peaks at $1.2349; additional enthusiasm may welcome ascending resistance (prior support [$1.1641]).

July currently trades 0.4 percent lower.

Based on trend studies, the primary uptrend has been underway since price broke the $1.1714 high (Aug 2015) in July 2017. Furthermore, price breached major trendline resistance, taken from the high $1.6038, in July 2020.

Daily timeframe:

Unchanged technical structure from previous analysis.

Quasimodo support at $1.1836 remains underwater on the daily scale, despite Europe’s shared currency receiving a modest boost following the latest FOMC minutes[1]. Continued interest south of $1.1836 throws light on another Quasimodo formation at $1.1688.

As for trend on the daily scale, the currency pair has exhibited an early consolidation phase since 2021, following healthy gains in 2020.

According to the RSI indicator, bullish divergence is still on the table out of oversold space, action implying that despite price registering fresh lows, downside momentum has slowed and warns traders that buyers are perhaps on the doorstep.

H4 timeframe:

Demand from $1.1794-1.1822 appears overstretched, having US hours on Wednesday clip the lower edge of the zone and touch a session low of $1.1781. With buyers perhaps troubled and breakout sellers filled, Quasimodo support at $1.1749 could be the next level to welcome price action.

H1 timeframe:

US trading on Wednesday witnessed H1 establish a hammer pattern—typically viewed as a bullish cue. What’s interesting is the candle formed a whipsaw through $1.18 bids. This filled protective stop-loss orders from those attempting to long $1.18 and trapped breakout sellers (bear trap). Support at $1.1784 (a previous Quasimodo resistance) was in place to facilitate a $1.18 stop run and, as a result, permitted informed buyers to jump on board.

Maintaining position north of $1.18 brings forward demand-turned supply at $1.1838-1.1850 and the 100-period simple moving average at $1.1844 (a logical upside target for $1.1784 longs), with a break unmasking $1.19.

The view from the RSI shows bullish divergence, informing traders downside momentum is slowing.

Observed levels:

Should H1 buyers secure position above $1.18 and head for H1 demand-turned supply at $1.1838-1.1850, this could be a location sellers attempt to make a show from. The rationale comes from Quasimodo support at $1.1836 on the daily timeframe offering little right now and H4 demand at $1.1794-1.1822 echoing a feeble tone. On top of this, June has displayed a series of lower lows and lower highs.

AUD/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Since the beginning of 2021, buyers and sellers have been squaring off south of trendline resistance (prior support – $0.4776 low) and supply from $0.8303-0.8082. Thanks to June’s 3.0 percent decline, however, support is featured at $0.7394. Additional downside pressure brings light to demand at $0.7029-0.6664 (prior supply).

July is down 0.2 percent.

Trend studies (despite the trendline resistance [$1.0582] breach in July 2020) show the primary downtrend (since mid-2011) remains in play until breaking $0.8135 (January high 2018).

Daily timeframe:

Unchanged technical structure from previous analysis.

Buyers and sellers are in the process of battling for position between supply-turned demand at $0.7453-0.7384 (houses a number of Fibonacci levels) and the 200-day simple moving average at $0.7570, a dynamic value sheltered south of resistance from $0.7626.

In terms of trend, 2020 was a respectable year for AUD/USD, though 2021 is on the back foot.

From the RSI, the value continues to ease out of oversold, establishing bullish divergence. This reveals downside momentum is slowing and may fuel a bullish phase.

H4 timeframe:

Between Quasimodo resistance at $0.7599 (a level welcoming sellers on Tuesday) and support at $0.7440 (parked under Friday’s low at $0.7445) are key levels to be mindful of on the H4 timeframe.

H1 timeframe:

Demand at $0.7479-0.7492—though not a premium formation—aided an AUD bid heading into the early hours of Europe on Wednesday, dethroning $0.75 and clocking highs just south of resistance at $0.7546. Things soured amid US hours, nonetheless, dropping through noted areas to test space ahead of Quasimodo support at $0.7460 before retesting the mettle of $0.75 as resistance in recent hours.

Momentum, according to the RSI, reveals mild bullish divergence forming. This essentially shows pressure to the downside easing, serving as a warning that buyers could enter the fray.

Observed levels:

The response from the lower side of $0.75 is likely to draw technical eyes on the H1. Evidence in favour of sellers taking the wheel here is room to push lower on H4, daily and monthly timeframes, with H1 players perhaps taking aim at Quasimodo support from $0.7460, followed by the upper side of supply-turned demand at $0.7453-0.7384 on the daily timeframe.

USD/JPY:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Following January’s bullish engulfing candle and February’s outperformance, March concluded up by 3.9 percent and cut through descending resistance, etched from the high ¥118.66.

Although April finished lower by 1.3 percent and snapped the three-month winning streak, May (+0.2 percent) held the breached descending resistance and echoed support in June, higher by 1.4 percent.

July trades 0.5 percent in the red.

Daily timeframe:

Tuesday cutting through trendline support, taken from the low ¥102.59, and Wednesday embracing this position—albeit in the shape of a doji indecision candle—highlights supply-turned demand at ¥107.58-106.85 as a reasonable downside target.

Territory north underlines long-term resistance at ¥111.88-111.20, located south of supply at ¥112.68-112.20.

Trend studies reveal the pair has been trending higher since the beginning of the year.

In terms of where we stand on the RSI, the value marginally dropped through the lower wall of an ascending channel between 58.82 and 47.51. Below here, the 50.00 centreline is in sight.

H4 timeframe:

For those who read Wednesday’s technical outlook you may recall the following (italics):

Resistance from ¥111.56 made a show at the tail end of last week, delivering a bearish bias on Friday. Territory north of current resistance shines light on Quasimodo resistance at ¥112.17.

Continued interest to the downside positions Quasimodo support at ¥110.48 in the crosshairs, sharing chart space with Fib retracement levels (Fib cluster) and trendline support, extended from the low ¥108.56.

As evident from the H4 chart, Quasimodo support at ¥110.48 and associated Fib studies delivered a floor on Wednesday. Buyers, although appearing hesitant, could take aim as far north as resistance from ¥111.56.

H1 timeframe:

Support coming in from Fib studies on the H4 at around ¥110.50 appears to have reinvigorated interest at H1 demand from ¥110.47-110.55, despite its lower edge giving way early Wednesday.

Bulls taking the lead from current demand draws attention to ¥111 and the 100-period simple moving average around ¥110.97, while knocking under the aforesaid demand places support at ¥110.33 in the light.

Coming from the RSI, the indicator is engaging the 50.00 centreline. Important structure to be aware of are support at 18.76 and resistance from 78.38.

Observed levels:

As mentioned in previous analysis, longer term, a decisive trendline support breach on the daily timeframe, drawn from the low ¥102.59, is likely to place any buying under pressure. Until that point, though, short-term action is focused on support around the ¥110.50ish region on the H4, and H1 demand at ¥110.47-110.55. Near-term upside targets rest between the ¥111 level and the 100-period simple moving average around ¥110.97 on the H1.

GBP/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Since February, GBP/USD has echoed a rangebound environment just south of $1.4377: April high 2018. This follows December’s (2020) trendline resistance breach, taken from the high $2.1161, which could serve as support if retested.

July is currently down 0.2 percent.

Primary trend structure has faced lower since early 2008, unbroken (as of current price) until $1.4377 gives way.

Daily timeframe:

Unchanged technical structure from previous analysis.

Quasimodo support at $1.3609 is likely to remain on a number of watchlists, having seen the base dovetail closely with a 38.2% Fib retracement at $1.3641 and the 200-period simple moving average, circling $1.3658. To the upside, emphasis is on resistance at $1.4003.

Momentum, measured by the RSI, has slowed to the downside of late, despite fresh (price) lows recently forming. This is shown by way of RSI bullish divergence.

H4 timeframe:

Unchanged technical structure from previous analysis.

Quasimodo support from $1.3761 re-entered the fight on Wednesday and held a mild bullish tone. Ultimately, aside from Tuesday’s top at $1.3899 and a handful of highs around $1.3939, scope to climb to supply at $1.3986-1.3958 is seen. Note that a resistance zone is also present directly above at $1.4027-1.3998.

Venturing south of this level unlocks another Quasimodo support at $1.3712.

H1 timeframe:

Unchanged technical structure from previous analysis.

Similar to Tuesday, Wednesday settled around the lower side of $1.38 and nearby 100-period simple moving average at $1.3814, following earlier optimism a touch north of $1.3750.

Sellers establishing position at $1.38 potentially unlocks support from $1.3750, set beneath H4 Quasimodo support mentioned above at $1.3761. North of $1.3814, on the other hand, shifts interest to resistance at $1.3861 and $1.39.

The RSI recently formed bullish divergence off support at 30.00 (the oversold threshold), with the indicator now touching gloves with the 50.00 centreline. Above here, overbought resistance is found at 72.00.

Observed levels:

With H4 coming from Quasimodo support at $1.3761, this may discourage $1.38 sellers on the H1. A H1 close above the 100-period simple moving average around $1.3814, therefore, could witness bulls take control and head for H1 resistance at $1.3861.

DISCLAIMER:

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.

  1. https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20210616.pdf

European Equities: U.S Nonfarm Payrolls in Focus

Economic Calendar

Friday, 2nd July

German Retail Sales (MoM) (May)

The Majors

It was a relatively bullish day for the European majors on Thursday.

The CAC49 led the way, rising by 0.71%, with the DAX30 and the EuroStoxx600 seeing gains of 0.47% and 0.62% respectively.

Market focus returned to economic data from the Eurozone and the U.S, supporting a partial recovery of Wednesday’s losses.

The upside was limited, however, in spite of a fresh record high Eurozone PMI and a weaker EUR.

Concerns over the rising number of new COVID-19 cases continued to limit the upside across the European majors.

The Stats

It was a busy economic calendar this morning. Following Tankan survey numbers from Japan and manufacturing PMI numbers from China, manufacturing PMI and unemployment figures from the Eurozone were in focus.

The Member States

Spain’s manufacturing PMI rose from 59.4 to 60.4, while Italy’s manufacturing PMI slipped from 62.3 to 62.2 in June.

Economists had forecast PMIs of 58.6 and 61.5 respectively.

For Germany, the manufacturing PMI increased from 64.4 to 65.1, which was down from a prelim 64.9.

The French manufacturing PMI fell from 59.4 to 59.0, which was up from June’s prelim 58.6.

The Eurozone

In June, the Eurozone’s manufacturing PMI increased from 63.1 to a record high 63.4, which was also up from a flash 63.1.

According to the June Survey,

  • Production increased sharply, with jobs growth hitting a survey peak in June.
  • Investment goods producers recorded the strongest growth, followed by intermediate goods producers.
  • While consumer goods producers continued to lag, growth was the most marked since Jun-2020.

By country, the Netherlands led the way in spite of a 2-month low PMI of 68.8. By contrast, Greece sat at the bottom of the table despite a 254-month high PMI of 58.6.

Germany ranked 3rd, with a 2-month high PMI of 65.1, with Italy’s 2-month low PMI of 62.2 leaving Italy in 5th spot.

Eurozone Unemployment

In May, the Eurozone’s unemployment rate fell from 8.1% to 7.9%, which was in line with forecasts.

From the U.S

Jobless claims and manufacturing sector PMIs were in focus.

In the week ending 25th June, initial jobless claims fell from 415k to 364k, which was better than a forecasted 370k.

The ISM Manufacturing PMI slipped from 61.2 to 60.6, however. Economists had forecast a more modest decline to 61.0.

The Market Movers

For the DAX: It was a relatively bullish day for the auto sector on Thursday. BMW rose by 0.74%, with Continental and Daimler ending the day up by 0.58% and by 0.52% respectively. Volkswagen saw a more modest 0.45% gain on the day.

It was also a bullish day for the banks. Deutsche Bank and Commerzbank ended the day up by 0.45% and by 0.33% respectively.

From the CAC, it was a bullish day for the banks. BNP Paribas and Credit Agricole rose by 1.15% and by 1.47% respectively. Soc Gen led the way, however, rallying by 3.38%.

It was also a bullish day for the French auto sector, however. Stellantis NV rose by 0.89%, with Renault rallying by 4.47%.

Air France-KLM and Airbus SE saw gains of 1.38% and 1.35% respectively.

On the VIX Index

It was a 2nd consecutive day in the red for the VIX on Thursday.

Following a 1.19% loss on Wednesday, the VIX fell by 2.21% to end the day at 15.48.

The NASDAQ rose by 0.13%, with the Dow and the S&P500 ending the day up by 0.38% and by 0.52% respectively.

VIX 020721 Daily Chart

The Day Ahead

It’s a quieter day ahead on the economic calendar. There are no material stats from the Eurozone to provide the majors with direction.

From the U.S, the stats will be more significant, however. June’s nonfarm payroll figures and unemployment rate will provide direction late in the session.

A number of FOMC members have begun talking of a shift in policy as early as next year. A marked increase in payrolls may force further pressure on the FED as inflationary pressures linger.

Away from the economic calendar, COVID-19 news will once more need monitoring. Any further lockdown measures will test support for the majors.

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 29 points, with the DAX up by 48 points.

For a look at all of today’s economic events, check out our economic calendar.