U.S. West Texas Intermediate crude oil futures are edging lower early Monday, pressured by a mixed bag of fundamental news that is causing just enough uncertainty to encourage some light profit-taking following an eight day rally.
Ahead of today’s trade, the market was being supported by the notion that demand would outstrip supply as bullish traders increased bets that the current rate of vaccinations would outweigh any damage by the resurgent coronavirus.
The news over the weekend was mixed, but traders decided to react to a potentially bearish story on Chinese factory output and its potential impact on future crude oil demand.
The main trend is down according to the daily swing chart, however, momentum is trending higher. The main trend will change to up on a trade through $74.90. A move through $65.01 will signal the resumption of the down trend.
The range is pretty wide which is why we believe there will be a pullback into a support zone before traders attempt another rally.
The minor range is up. This is controlling the momentum. A trade through $70.56 will change the minor trend to down. A move through $74.23 will indicate the buying is getting stronger.
The short-term range is $76.07 to $65.01. The market is currently trading on the strong side of its retracement zone at $71.85 to $70.54, making it support.
The minor range is $65.01 to $74.23. If the minor trend changes to down then look for the selling to possibly extend into its retracement zone at $69.62 to $68.53.
Daily Swing Chart Technical Forecast
It’s not a real promising chart pattern, but trader reaction to $74.23 and $72.93 is likely to determine the direction of the September WTI crude oil market on Monday.
A sustained move over $74.23 will indicate the presence of buyers. If this move is able to generate enough upside momentum then look for a potential surge into the main top at $74.90. Taking out this top will change the main trend to up and could trigger an acceleration into the contract high at $74.90.
A sustained move under $72.93 will signal the presence of sellers. This could trigger an acceleration into the short-term Fibonacci level at $71.85. Sellers took out this level earlier in the session, but couldn’t sustain the move. They could come back later during the regular U.S. session.
For the first time since mid-May, the pioneer cryptocurrency saw its price surge above the $40,000 mark over the weekend, but the rally started to falter on Sunday.
It topped $42,000 on Saturday, but by Monday morning, had fallen back to about the $40,000 price range on the FTX exchange.
Although bitcoin is essentially flat over the past five days, FTX data shows it has been up 14% month-to-date, and 38% year-to-date, despite being off by about 40% from its all-time high of around $65,000 in April.
Despite dropping below $30,000 on July 20, bitcoin has surged since then, partly because investors view it as a hedge against inflation and currency values if and when the Federal Reserve stops buying $120 billion in assets a month.
Bitcoin bears were not able to hold onto the lead in July as resistance levels fell and sentiment improved as the month drew to a close.
The perpetual funding rate has continued to trade negatively as an indicator of the directional bias of futures markets.
Accordingly, there is still a net bias against Bitcoin. In particular, this measure reveals that last week’s price rally may be connected to an overall short squeeze, with funding rates remaining at even more negative levels even after the price surged 30%.
On-chain activity and transaction volumes remain extraordinarily quiet compared to the volatility of spot and derivatives markets.
A 14-day median transaction volume of $5 Billion per day for Bitcoin is low based on entity-adjusted data. Despite the decline, $16 billion per day still remains a significant sum compared to what it was before the sell-off in May.
The Summer of 2021 has already largely overshadowed the whole of 2020, a truly exceptional year for the energy sector.
Take, for instance, the European part of the global gas market that is so much talked about. Europe’s main issue, which is low gas storage levels, has not only retained its relevance but has even become more acute since early April. As of 30 July 2021, NWE facilities were just 52.5pc full for the first time since at least 2011, with the current backwardation being a serious impediment to significantly speeding up injections into the regional UGSs.
In that context, LNG should have come to the rescue, but it was not to be. Amid a severe heatwave that gripped parts of Asia and Middle East, buyers from Japan, South Korea, as well as many other regional importers, has attracted a great number of spot cargoes this summer. As a result, European LNG send-out dropped by about 40pc between 1 April and 30 July, while the volumes re-exported last month from the region’s ports in an eastward direction rose to a six-year high, surpassing the level of early 2021. Asia´s total LNG imports in July nearly touched 24.5 Mt, a 10pc increase as compared to June, with deliveries from outside the region matching the record set in January 2021.
US gas market has also not been immune to rapidly evolving developments. Between April and July, the average monthly loadings from the country´s LNG plants exceeded 6 Mt, a figure comparable to the levels recorded in the first quarter that historically sees the highest exports during the year. On top of that, domestic gas consumption, supported by hotter temperatures, in recent months was generally above the average for the same period from 2013 to 2020, which together with strong export demand resulted in US storages falling below historical norms.
This paved the way for gas price rally across the regions, thus making it one of the most widely discussed issues among other commodities. And it seems like the gas market should remain an important newsmaker in the energy area much longer than the Tokyo Olympics will be the primary focus for sports media 🙂
The opinions expressed in this blog are mine only and do not reflect the views of my employer
Euro Moves Higher Against U.S. Dollar At The Start Of The Week
EUR/USD is currently trying to settle above the resistance at 1.1880 while the U.S. dollar is losing some ground against a broad basket of currencies.
The U.S. Dollar Index did not manage to settle above the resistance at 92.15 and pulled back towards the support at the 92 level. In case the U.S. Dollar Index manages to settle below this level, it will move towards the next support at the 50 EMA at 91.90 which will be bullish for EUR/USD.
Germany has recently reported that Retail Sales increased by 4.2% month-over-month in June compared to analyst consensus which called for growth of 2%. On a year-over-year basis, Germany’s Retail Sales grew by 6.2%. Strong Retail Sales report from Europe’s leading economy provided some additional support to euro.
Today, foreign exchange market traders will also have a chance to take a look at the final reading of Euro Area Manufacturing PMI report which is projected to show that Euro Area Manufacturing PMI decreased from 63.4 in June to 62.6 in July.
EUR/USD continues its attempts to settle above the resistance level at 1.1880. In case EUR/USD settles above this level, it will get to the test of the resistance level which is located at the 50 EMA at 1.1900.
If EUR/USD manages to settle above the 50 EMA at 1.1900, it will head towards the resistance at 1.1925. A move above this level will open the way to the test of the resistance at 1.1945. In case EUR/USD gets above 1.1945, it will head towards the resistance at 1.1965.
On the support side, the nearest support level for EUR/USD is located at 1.1860. A successful test of this level will push EUR/USD towards the support at the 20 EMA at 1.1845.
In case EUR/USD gets below the 20 EMA, it will move towards the support at 1.1830. A move below this level will open the way to the test of the support at 1.1800.
GBP/USD is currently trying to settle back above 1.3900 while the U.S. dollar is flat against a broad basket of currencies.
The U.S. Dollar Index managed to settle above the 92 level and continues its attempts to settle above the next resistance at 92.15. In case the U.S. Dollar Index gets above this level, it will move towards the resistance at the 20 EMA at 92.30 which will be bearish for GBP/USD.
Today, foreign exchange market traders will have a chance to take a look at the final reading of UK Manufacturing PMI report for July. Analysts expect that UK Manufacturing PMI declined from 63.9 in June to 60.4 in July.
In the U.S., Manufacturing PMI is projected to increase from 62.1 in June to 63.1 in July. Traders will also pay attention to ISM Manufacturing PMI report which is projected to show that ISM Manufacturing PMI increased from 60.6 in June to 60.9 in July.
GBP/USD is currently trying to get back above 1.3900. In case this attempt is successful, GBP/USD will get to the test of the next resistance level which is located at 1.3920.
A successful test of the resistance at 1.3920 will open the way to the test of the next resistance at 1.3950. If GBP/USD moves above 1.3950, it will head towards the resistance level which is located near the recent highs at 1.3980. A move above this level will open the way to the test of the next resistance at 1.4000.
On the support side, the nearest support level for GBP/USD is located at the 50 EMA at 1.3880. If GBP/USD gets below this level, it will head towards the next support level at 1.3865.
A successful test of the support at 1.3865 will push GBP/USD towards the support which is located at the 50 EMA at 1.3850. In case GBP/USD manages to settle below 1.3850, it will move towards the support at 1.3835.
Chairman Jerome Powell said last week interest rate hikes were “ways away” and the job market still had “some ground to cover,” which sent gold jumping more than 1% last Thursday. This puts added weight on the importance of Friday’s jobs report. Last Friday, gold gave back most of the previous session’s gains after a report showed the pace of inflation slowing.
With the Fed not meeting until September 21-22, gold prices are expected to be more sensitive to U.S. economic data. Today at 14:00 GMT, the ISM Manufacturing PMI report is expected to come in at 60.8, down from 60.6.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. A trade through $1839.00 will reaffirm the uptrend. A move through $1795.60 and $1793.10 will change the main trend to down.
The minor range is $1793.10 to $1837.50. The market is currently straddling its 50% level at $1815.30.
The short-term range is $1910.10 to $1754.50. Its retracement zone at $1839.90 to $1859.70 is the primary upside target and resistance. This zone is controlling the near-term direction of the market.
The major support is the long-term 50% level at $1795.00.
Daily Swing Chart Technical Forecast
The direction of the December Comex gold market on Monday is likely to be determined by trader reaction to $1815.30.
A sustained move under $1815.30 will indicate the presence of sellers. If this move creates enough downside momentum then look for the selling to possibly extend into the support cluster at $1795.60 to $1793.10.
A sustained move over $1815.30 will signal the presence of buyers. The first upside target is a pivot at $1824.50. Overtaking this level could create the momentum needed to challenge the upside pivot at $1837.50 to $1839.90.
Amazon executives noted shifting consumer habits as the pandemic eases and people become more mobile. Amazon forecasted the next quarter’s sales at between $106 billion and $112 billion, compared to Wall Street expectations for right around $119 billion.
Amazon’s projections would still represent growth of +10% to +16%. Keep in mind, bears are also pointing to ongoing fears of supply chain hiccups, higher-trending inflation, and new coronavirus outbreaks. Earnings come at a busy pace again today with results from Caterpillar, Cerner, Chevron, CNH Industrial, Colgate Palmolive, Enbridge, Exxon Mobil, Johnson Control, and Procter & Gamble.
The worry on Wall Street is that this new normal rate of growth will be slower than many analysts and trading firms are forecasting coupled with higher inflation and or supply chain dislocations corporate profits could fall under some pressure or in this case be less than Wall Street is forecasting for the next few quarters. Bulls expect more consumer spending will shift from goods and pandemic-related services (delivery, video games, cloud/collaboration software) but are still betting on pent-up demand for things people missed out on during lockdowns, as well as goods and services that are currently in short supply.
Data to watch
Updated inflation data is also on tap with the ISM Manufacturing Index on Monday and the Services Index on Wednesday.
I have mixed feelings about SP500. There are a few signs of weakness. However, it might be the result of low summer activity. Advance-Decline Line is clearly bearish. Insider Accumulation is also not that strong. Moreover, the Volatility Index is very low and potentially it could bring a pullback. In any case, SP500 futures failed to close the week above Gann resistance. And that is also a negative sign.
The Federal Reserve policy is still supportive. But keep in mind, that SP500 has rallied around 100% since the pandemic bottom without any pullback. And the retest of key support zones near 4200 and 4000 is realistic.
On the other hand, the continuation of the rally is also possible but only if price sustains above 4400. If that happens, bulls will target 4500 and 4600 in extension.
After outsized U.S. draws in everything, from crude oil to gasoline and diesel, bulls helped the market bounce back at the last trading session in July.
Oil prices have been rising for a fourth consecutive month as both New York-traded WTI crude and British Brent crude traded at modest gains in July.
On Friday, West Texas Intermediate settled at $73.95 per barrel, up 0.5%. In the week ending Friday, U.S. oil rose 2.1%, marking its highest week in five. July’s figures showed an increase of 0.7% as well.
Oil price benchmark Brent crude settled at $75.41, an increase of 0.4% on the day. Brent gained 1.8% in the past week. The price of Brent rose 1.1% for July. Those were its best six-week results.
Brent crude bulls face a strong resistance level at $75 a barrel thus waiting for positive momentum that will help push the price to surpass this level and confirm extending the bullish wave up to $77.5 as the next positive target.
An influx of Delta variant cases of COVID-19 held back oil prices prior to the week ending July.
With commercial inventories falling to their lowest point since January 2020 and indications that this tightening will continue, crude prices received major support this week from U.S. inventory dynamics.
Similarly, the markets have seemingly adjusted to the fact that President-elect Raisi will be sworn into office next week, which mitigates concerns that Tehran might flood the market with incremental barrels. Several European countries are experiencing rising Delta variant cases despite the COVID headwinds.
Despite growing investor risk appetite in oil in recent days, bulls did not dominate the market as much as they could have earlier in the year when crude prices rose almost without break week after week.
The Australian Dollar is trading steady-to-lower early Monday as traders square positions ahead of Tuesday’s Reserve Bank of Australia (RBA) policy meeting. Traders expect policymakers to leave interest rates unchanged and to back track on their previously announced plans to begin tapering its current bond stimulus.
At 05:32 GMT, the AUD/USD is trading .7345, down 0.0003 or -0.03%.
Bloomberg is saying that 18 economists surveyed last week expect the RBA to put off until later in the year plans to scale back weekly bond purchases, while keeping the cash rate at 0.1%. The surge in coronavirus cases in the country as well as government imposed lockdowns and restrictions are the catalysts behind the move.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. A trade through .7317 will change the main trend to down. A move through .7414 will signal a resumption of the uptrend.
The AUD/USD is currently trading on the weak side of a major retracement zone at .7379 to .7499. This zone is controlling the longer-term direction of the Forex pair.
The minor range is .7290 to .7414. Its pivot at .7352 is acting like resistance early Monday.
The short-term range is .7503 to .7290. Its retracement zone at .7397 to .7422 is resistance. It stopped the rally last week at .7414.
Daily Swing Chart Technical Forecast
The direction of the AUD/USD on Monday is likely to be determined by trader reaction to .7352.
A sustained move under .7352 will indicate the presence of sellers. If this creates enough downside momentum then look for the selling to possibly extend into .7317. Taking out this level will change the main trend to down. This could trigger an acceleration into the next main bottom at .2790.
A sustained move over .7352 will signal the presence of buyers. This could lead to a labored rally with potential upside targets layered at .7379, .7397 and .7414.
Taking out .7414 will change the main trend to up, but don’t expect an acceleration to the upside unless buyers can take out .7422 with conviction.
Home improvement retailer Lowe’s is forecast to report earnings per share of $3.97, which represents an increase of about 6% over the previous year, up from $3.75 per share.
However, the company that distributes building materials and supplies through stores in the United States would see a revenue decline of about 2% to $26.87 billion. During the full year, Zacks Research estimates the company will earn $10.82 per share and generate $91.63 billion in revenue, which would be up +22.12% and +2.26%, respectively, from the prior year.
Lowe’s shares have gained over 20% so far this year. The stock closed 0.48% lower at $192.69 on Friday.
“Shares of Lowe’s have risen and outpaced the industry in the past six months. The company remains well-positioned to capitalize the demand in the home improvement market backed by investments in technology, merchandise category and strength in Pro business. Notably, Lowe’s posted sturdy first quarter fiscal 2021 results, wherein the top and bottom lines beat the Zacks Consensus Estimate and grew year-over-year,” noted analysts at ZACKS Research.
“Results benefited from the strong execution of strategies to meet the broad-based demand. Also, its new total home strategy that includes providing complete solutions for various types of home repair and improvement needs bodes well. The strategy is an extension of the company’s retail-fundamentals approach. Going forward, management is committed toward expanding market share and boosting operating margin expansion.”
Lowe’s Stock Price Forecast
Eighteen analysts who offered stock ratings for Lowe’s in the last three months forecast the average price in 12 months of $230.47 with a high forecast of $250.00 and a low forecast of $205.00.
The average price target represents a 19.61% change from the last price of $192.69. From those 18 analysts, 14 rated “Buy”, four rated “Hold” while none rated “Sell”, according to Tipranks.
Morgan Stanley gave the stock price forecast of $230 with a high of $293 under a bull scenario and $125 under the worst-case scenario. The firm gave an “Overweight” rating on home improvement retailer’s stock.
“We view Lowe’s (LOW) favourably given its longer-term transformation opportunity and structural industry tailwinds, with substantial near-term uplifts from COVID-19 spending shifts that likely translate to longer-term sales retention,” noted Simeon Gutman, equity analyst at Morgan Stanley.
“Assuming a healthy underlying housing backdrop, we think comps can accelerate longer-term from stronger sales/sq ft trends, driven by e-comm accelerating, better in-stocks, product refreshes/exclusive launches, greater traction with Pro initiatives, and removing friction from the customer shopping experience.”
Several other analysts have also updated their stock outlook. In May, CFRA raised the target price to $220. Credit Suisse lifted the price objective to $205 from $188. JPMorgan lowered the stock price forecast to $214 from $219.
Natural gas futures posted a volatile trade last week, initially pushed higher when the August futures contract rolled off the board amid strong domestic cooling needs and robust demand for U.S. exports of liquefied natural gas (LNG) then driven lower into the close as forecasters predicted easing demand in the week ahead. However, this weakness could be short-lived as outlooks called for sweltering heat to return before mid-August, Natural Gas Intelligence wrote.
According to NatGasWeather for August 1 to August 7, “National demand will ease to lighter levels this week as weather systems sweep across the eastern ½ of the U.S. with showers, thunderstorms, and highs of only 70s to lower 80s. The West into Texas and the Plains will be very warm to hot with highs of upper 80s to 100s as strong upper high pressure rules. Temperatures will increase across the South and East late next weekend with highs warming into the mid-80s to lower 90s. Overall, moderate national demand this week, then increasing to high late next weekend.”
Weekly US Energy Information Administration Storage Report
The U.S. Energy Information Administration (EIA) reported Thursday that domestic supplies of natural gas rose by 36 billion cubic feet for the week-ended July 23. Ahead of the report, NGI wrote that this week’s EIA storage report was expected to show an injection into storage in the low 40s Bcf.
NGI also reported a Reuters poll found projections ranging from a build of 33 Bcf to 52 Bcf, with a median injection of 42 Bcf. Results of a Bloomberg survey showed estimates spanning 34 Bcf to 49 Bcf, with a median of 41 Bcf and a Wall Street Journal survey produced estimates from 39 Bcf to 47 Bcf with an average of 43 Bcf. The NGI model predicted a 49 Bcf injection.
Total stocks now stand at 2.714 Tcf, down 523 Bcf from a year ago and 168 Bcf below the five-year average, the government said.
Last week’s storage report continued to show “tight supply/demand balances, and that likely will remain the case until production can make a significant push higher,” Bespoke Services said.
“Either weather needs to step in, be it by way of cooler trends, or with higher wind on a substantial basis, or production simply must grow to new 2021 highs in order to alleviate” supply concerns, Bespoke said. “On that weather side we do see higher wind forecast in the medium range, but also hotter temperatures, especially with respect to normal, as a more LaNina-ish pattern looks set to arrive, favoring heat…It remains difficult to argue against the overall bullish backdrop.”
What this means is that the market is still in “buy the dip” mode. There are three potential downside targets.
The short-term support zone is $3.869 to $3.751. The intermediate support zone is $3.830 to $3.751 and the main support zone is $3.660 to $3.54.
The major support cluster is $3.869 to $3.751. This zone stopped the selling on July 28 at $3.837.
U.S. West Texas Intermediate and international-benchmark Brent crude oil futures posted a strong recovery rally last week, but alas, the move still fell short of a pair of tops formed in early July.
The size and the speed of the rally from the July 20 bottom suggests that short-covering and buying may be behind the move, however, without a trading base, some traders relieve the steep rally will not be able to sustain itself. Fundamentally this means traders may want to see some definitive bullish news to support the rally and not just speculation.
Furthermore, for about two weeks, bullish traders have been operating under the guise that demand will continue to outstrip supply into at the end of the year. These traders essentially believe that the rate of vaccinations will outweigh the spread of the new COVID-19 Delta Variant.
Up until now, they probably have been right because there haven’t been any supply/demand reports or economic data to refute this belief. But now that we’ve had a full month of surging infections, the impact of the rapid spread may start to show up in the numbers.
However, they are likely going to be the first reports that point toward a drop in demand so their numbers will fall under increased scrutiny and traders are likely to become more sensitive to the data.
Traders have had about two weeks to prepare for the increased output from OPEC+, but that doesn’t mean they won’t have a negative reaction to the news that OPEC and its allies have begun to raise production by 400,000 barrels per day starting August 1.
Manufacturing in both China and the United States will also be at the forefront this week. By the time you read this traders will have already begun to react to the weak Manufacturing PMI data out of China and are now preparing for the U.S. Manufacturing PMI report, due to be released on Monday at 13:45 GMT.
The resurgence in coronavirus cases will move to the forefront this week as traders look for evidence of demand destruction. They’ll be looking at the U.S Manufacturing PMI report early Monday. It is expected to come in at 60.8, up slightly from 60.6.
The second key indicator of early demand destruction will be an increase in gasoline stocks in either the API or EIA weekly inventories.
If you liked the price action in the gold futures market last Thursday and Friday then you’ll likely enjoy this week’s expected movement. This is because we expected to continue to see a rangebound trade due to a mixed interpretation of the fundamentals.
The bulls see inflation, historically low interest rates and a sputtering economy as reasons to anticipate higher prices. Furthermore, they also believe the Federal Reserve isn’t really confident as to when and how it will begin tapering its long-term asset buying stimulus.
The bears see an improving economy although a little too smooth and steady for some. Whatever the speed of the recovery, it has been consistent. They believe that inflation is temporary and it’s just a matter of time before the labor market starts to recover some of the big chunks of jobs lost at the peak of the 2020 pandemic.
The number reason gold see prices moving higher is likely rising inflation. Last week, higher inflation was confirmed by the PCE price index. Trader also cite the surge in the U.S. consumer price index (CPI).
The personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, rose 0.4% in June after advancing 0.5% in May. The so-called core PCE price index was lifted by increases in prices of airline tickets, used cars as well as hotel and motel accommodation.
In the 12 months through June, the core PCE price index shot up 3.5%, the largest gain since December 1991, after rising 3.4% in May. The core PCE price index is the Federal Reserve’s preferred inflation measure for its flexible 2% target.
Additionally, in its latest monetary policy statement released last Wednesday, the U.S. Federal Reserve left its interest rates at historically low levels and chose not to adjust the pace at which it buys government bonds each month. In other words, it maintained its current level of stimulus.
Furthermore, Fed Chair Powell said the U.S. economy is still a good deal away from making “substantial further progress” toward the Fed’s dual mandates of stable prices and maximum employment. This was an especially bullish assessment.
Why Bears Expect Lower Prices
Last week, bearish traders looked at the PCE price index and saw that the rate of the rise in inflation was slower than previous recorded. This was enough to bring in the sellers because they read this to mean that perhaps the Fed was right and that the rise in inflation was temporary.
Additionally, while many traders were focusing on the Powell’s dovish comments, the bears were focusing on the language of the Federal Reserve’s monetary policy statement. In the statement, the policymakers acknowledged it was making some progress toward the economic improvement it wants to see before slowing down its bond buying.
Finally, gold is likely to remain under pressure as long as the U.S. Dollar is strengthening. The greenback had a setback last week, but it has posted strong gains since June 16 when the Fed moved up its timeline for its first rate hike.
With the U.S. not scheduled to release its July Non-Farm Payrolls report until Friday and the Fed not expected to make any major decisions until September 21-22, the direction of the gold market is likely to be controlled by the whipsaw tendency of U.S. economic data and Federal Reserve member comments.
The ISM Manufacturing and Non-Manufacturing reports can drive prices in either direction. Fed speakers can offer two-sided commentary from those that want to begin tapering and those that believe the economy still has room for improvement while facing risks due to the resurgence of the coronavirus.
The Australian and New Zealand Dollar finished slightly lower last week after gains from a promising mid-week rally were erased by domestic economic concerns, central bank decisions and a drop in risk sentiment.
This week, the catalysts beyond the price action are spread evenly between the Reserve Bank of Australia’s (RBA) monetary policy decisions and a pair of New Zealand employment reports. The wildcard is risk sentiment. That’s being influenced by a number of factors including China’s crackdown on technology companies, a potentially overvalued U.S. stock market and the rapidly spreading COVID-19 variant.
Last week, the AUD/USD settled at .7347, down 0.0016 or -0.22% and the NZD/USD finished at .6976, down 0.0002 or -0.03%.
Will the RBA Walk Back Last Month’s Taper Announcement?
The RBA will release its latest monetary policy rate statement and interest rate decisions at 04:30 GMT on Tuesday. Due to the resurgence of the coronavirus, which has led to lockdowns and restrictions, while raising concerns over a potential contraction during the third quarter, some investors feel that central bank policymakers may be forced to walk back their plan to begin tapering its bond purchases announced on July 6.
Lowe is expected to put off until later in the year plans to scale back weekly bond purchases, while keeping the cash rate at 0.1% on Tuesday. That’s the view of a large majority of 18 economists surveyed by Bloomberg last week. Two of them went a step further and flagged the risk of the bank also extending its three-year yield target to the November 2024 bond.
Up until the latest outbreak, Australia’s economy had been on track to achieve the RBA’s goal of unemployment around 4%, the level RBA Governor Philip Lowe hoped would spur faster wage growth, and stable inflation in the RBA’s 2-3% target range.
However, with the resurgence of COVID-19 infections, the likelihood of another contraction is strengthening. This is also leading some economists to issue dire forecasts.
“Commonwealth Bank of Australia and Westpac Banking Corp., the nation’s top lenders, expect 200,000-300,000 jobs to be lost and unemployment to climb as high as 5.7% from the current 4.9% due to the outbreak. Both expect much of those losses to be recouped once the outbreak is contained and as vaccinations ramp up,” Bloomberg reported.
The Dollar/Yen closed lower last week as dovish comments from the U.S. Federal Reserve and its Chairman Jerome Powell pushed Treasury yields and the U.S. Dollar lower, making the U.S. Dollar a less attractive asset. The dollar did pick up a little strength on the back of better-than-expected economic data later in the week as well as safe-haven buying tied to a sell-off in global equity markets on Friday.
Last week, the USD/JPY settled at 109.663, down 0.887 or -0.80%.
With the Federal Reserve not scheduled to meet until September 21-22, Dollar/Yen traders will be left to interpret U.S. economic data for its potential impact on the Fed’s plans to begin tapering its bond stimulus purposes. Fed member comments will also have an impact on the price action as well as risk sentiment. These factors will likely have a volatile influence on the Forex pair with investors have nearly seven weeks to interpret whether the monetary stimulus can start being lifted.
Investors feel the Fed will eventually begin tapering. That’s a given. They just want to know when and how. Without that information becoming available for at least seven weeks, look for choppy, two-sided price action.
Last Week’s Recap
The direction of the USD/JPY last week was primarily driven by the Federal Open Market Committee’s decision to leave interest rates at historically low levels and to refrain from making a decision on tapering. Comments from Powell were behind most of the volatility and the sell-off.
Fed Chair Powell triggered a late session reversal last Wednesday and a follow-through rally on Thursday after he said the U.S. economy is still a good deal away from making “substantial further progress” toward the Fed’s dual mandates of stable prices and maximum employment.
“I’d say we have some ground to cover on the labor market side,” Powell said Wednesday. “I think we’re some way away from having had substantial further progress toward the maximum employment goal.”
With Powell focusing mainly on the labor market during last week’s press conference after the central bank’s policy statement was released on Wednesday, we feel that this week’s U.S. Non-Farm Payrolls report, due to be issued on Friday, will carry a lot of weight over the near-term.
Last Friday, the government report that the personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, rose 0.4% in June after advancing 0.5% in May. However, the pace of the increase was a little slower than previously reported.
Powell thinks inflation will eventually subside, but he doesn’t seem to have enough confidence in the labor market recovering at a fast pace especially if the COVID resurgence causes a bump in unemployment.
Any combination of tepid inflation and strong labor market gains will be supportive for the USD/JPY. A weak jobs report will drive investors out of the U.S. Dollar.
Ethereum rose by 0.86% on Sunday. Following a 2.84% gain on Saturday, Ethereum ended the week up by 16.53% to $2,555.43.
A mixed start to the day saw Ethereum fall to an early morning intraday low $2,511.5 before making a move.
Steering clear of the first major support level at $2,452, Ethereum rallied to a late intraday high $2,699.00.
Ethereum broke through the first major resistance level at $2,585 and the second major resistance level at $2,636.
A late pullback, however, saw Ethereum fall back through the major resistance levels to end the day at sub-$2,560 levels.
At the time of writing, Ethereum was up by 0.71% to $2,573.67. A mixed start to the day saw Ethereum fall to an early morning low $2,545.70 before rising to a high $2,579.22.
Ethereum left the major support and resistance levels untested early on.
For the day ahead
Ethereum would need to move through the $2,589 pivot to bring the first major resistance level at $2,666 into play.
Support from the broader market would be needed, however, for Ethereum to break back through to $2,650 levels.
Barring an extended crypto rally, the first major resistance level and Sunday’s high $2,699.00 would likely cap any upside.
In the event of another broad-based crypto rally, Ethereum could resistance at $2,800 before any pullback. The second major resistance level sits at $2,776. Ethereum would need plenty of support, however, to breakout from the 38.2% FIB of $2,740.
Failure to move through the $2,589 pivot would bring the first major support level at $2,478 into play.
Barring an extended sell-off, however, Ethereum should continue to steer clear of sub-$2,400 levels. The second major support level at $2,401 should limit the downside.
Looking at the Technical Indicators
First Major Support Level: $2,478
Pivot Level: $2,589
First Major Resistance Level: $2,666
23.6% FIB Retracement Level: $3,369
38.2% FIB Retracement Level: $2,740
62% FIB Retracement Level: $1,725
Litecoin fell by 2.89% on Sunday. Following a 0.81% decline from Saturday, Litecoin ended the week up by 9.81% to $140.28.
A mixed start to the day saw Litecoin rise to an early morning intraday high $149.87 before hitting reverse.
Litecoin broke through the first major resistance level at $147 and the second major resistance level at $149.
The reversal, however, saw Litecoin slide to a late intraday low $138.14.
Litecoin fell through the first major support level at $142 and the second major support level at $140 before a partial recovery to $140 levels.
At the time of writing, Litecoin was up by 0.63% to $141.17. A mixed start to the day saw Litecoin fall to an early morning low $139.93 before rising to a high $141.36.
Litecoin left the major support and resistance levels untested early on.
For the day ahead
Litecoin would need to move through the $143 pivot to bring the first major resistance level at $147 into play.
Support from the broader market would be needed, however, for Litecoin to break out from $145 levels.
Barring an extended crypto rally, the first major resistance level and resistance at $150 would likely cap any upside.
In the event of another extended breakout, Litecoin could test the second major resistance level at $155.
Failure to move through the $143 pivot would bring the first major support level at $136 into play.
Barring another extended sell-off, however, Litecoin should continue to steer clear of sub-$130 levels. The second major support level at $131 should limit the downside.
Looking at the Technical Indicators
First Major Support Level: $136
Pivot Level: $143
First Major Resistance Level: $147
23.6% FIB Retracement Level: $178
38.2% FIB Retracement Level: $223
62% FIB Retracement Level: $296
Ripple’s XRP fell by 2.83% on Sunday. Following a 0.89% loss on Saturday, Ripple’s XRP ended the week up by 19.54% to $0.72533.
After a mixed start to the day, Ripple’s XRP rose to a mid-morning intraday high $0.77741 before hitting reverse.
Ripple’s XRP broke through the first major resistance level at $0.7581 and the second major resistance level at $0.7697.
The reversal, however, saw Ripple’s XRP slide to a late intraday low $0.70587.
Ripple’s XRP fell through the first major support level at $0.7363 and the second major support level at $0.7262.
Steering clear of sub-$0.70 levels, Ripple’s XRP moved back through to $0.72 levels to reduce the deficit.
At the time of writing, Ripple’s XRP was up by 0.68% to $0.73027. A mixed start to the day saw Ripple’s XRP fall to an early morning low $0.72250 before rising to a high $0.73027.
Ripple’s XRP left the major support and resistance levels untested early on.
For the day ahead
Ripple’s XRP will need to move through the $0.7362 pivot to bring the first major resistance level at $0.7665 into play.
Support from the broader market would be needed, however, for Ripple’s XRP to break out from $0.75 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 resistance at $0.80 before any pullback. The second major resistance level sits at $0.8077.
Failure to move through the $0.7362 pivot would bring the first major support level at $0.6950 into play.
Barring another extended sell-off, however, Ripple’s XRP should steer clear of the second major support level at $0.6647.
Looking at the Technical Indicators
First Major Support Level: $0.6950
Pivot Level: $0.7362
First Major resistance Level: $0.7665
23.6% FIB Retracement Level: $0.8533
38.2% FIB Retracement Level: $1.0659
62% FIB Retracement Level: $1.4096
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It was a bearish end to a bullish month of July for the European majors on Friday,
The CAC40 fell by 0.32%, with the DAX30 and the EuroStoxx600 ending the day down by 0.61% and by 0.45% respectively.
Disappointing GDP numbers from Germany followed weaker than expected 2nd quarter GDP numbers from the U.S on Thursday.
Adding to the market angst at the end of the week was further concern over the continued spread of the Delta variant.
From China, the CSI300 and the Hang Seng resumed their downward trajectories amid regulatory uncertainty placing further pressure on riskier assets at the end of the month. Beijing’s attempts to calm the markets failed late in the week, with the Hang Seng and CSI300 ending the week down by 4.98% and by 5.46% respectively.
Limiting the damage, however, was better than expected 2nd quarter GDP numbers for France and the Eurozone.
Following interest in the German economy through much of the week, it was the Eurozone and member state economies in focus on Friday.
The numbers were skewed to the positive, supporting market optimism.
In the 2nd quarter, the French economy expanded by 0.9%, quarter-on-quarter, reversing a 0.1% contraction in the previous quarter.
The German economy expanded by 1.5%, partially reversing a 2.1% contraction from the 1st quarter.
Italy and Spain also saw growth in the quarter.
In the 2nd quarter, the Spanish economy grew by 2.8%, reversing a 0.4% contraction from the 1st quarter. Stats from Italy were also positive, with the economy growing by 2.7%. In the 1st quarter, the economy had grown by just 0.2%, quarter-on-quarter.
In the 2nd quarter, the Eurozone economy grew by 2.0%, quarter-on-quarter, reversing a 0.3% contraction from the previous quarter.
Year-on-year, the economy grew by 13.7% after having contracted by 1.3% in the previous quarter. Economists had forecast a 12.6% increase.
Inflation figures were also in focus, with the annual rate of inflation ticking up from 1.9% to 2.2%. Economists had forecast an annual rate of inflation of 2.0%.
The pickup in inflationary pressures muted unemployment figures for the Eurozone, however. In June, the Eurozone’s unemployment rate slipped from 8.0% to 7.7%. Economists had forecast a fall to 7.8%.
From the U.S
Personal spending and inflation were in focus later in the European session.
The stats were skewed to the positive for riskier assets but failed to give the European majors a boost.
Personal spending rose by 1.0% in June, coming in well ahead of a forecasted 0.5% increase.
Inflationary pressures picked up less than expected, with the annual rate of inflation picking up from 3.4 to 3.5%. Economists had forecast 3.6% for June.
The Market Movers
For the DAX: It was a bearish day for the auto sector on Friday. Daimler and BMW both saw losses of 1.17% respectively to lead the way down. Continental and Volkswagen ended the day down by 0.99% and by 0.46% respectively.
It was also a bearish day for the banks. Deutsche Bank and Commerzbank fell by 1.57% and by 0.18% respectively.
From the CAC, it was a bearish day for the banks. BNP Paribas fell by 1.19%, with Soc Gen and Credit Agricole declining by 1.01% and by 0.86% respectively.
It wasn’t much better for the French auto sector. Stellantis NV fell by 1.00%, with Renault ending the day down by 3.35%.
Air France-KLM slid by 4.58%, with Airbus SE falling by 0.26%
On the VIX Index
It was back into the green for the VIX on Friday, marking the 3rd gain of the week.
Reversing a 3.33% fall from Thursday, the VIX rose by 3.05% to end the day at 18.24.
The NASDAQ fell by 0.71%, with the Dow and the S&P500 ending the day down by 0.42% and by 0.54% respectively.
The Day Ahead
It’s a particularly busy day ahead on the economic calendar. Eurozone and member state manufacturing PMI numbers for July will be in focus along with retail sales figures from Germany.
Barring any marked revision to prelim PMIs for France and Germany, expect Italy and the Eurozone’s PMIs to be key. German retail sales figures will also draw plenty of interest, however.
With Germany’s unemployment rate in decline, the markets will be looking for a pickup in spending to support the economic recovery. Weak numbers may test support on the day.
From the U.S, ISM Manufacturing PMI numbers late in the day will also draw attention.
Ahead of the European open, however, China’s Caixin Manufacturing PMI will set the tone. NBS Manufacturing numbers from the weekend were disappointing.
Away from the economic calendar, COVID-19 news updates will also need considering, however.
In the futures markets, at the time of writing, the Dow Mini was up by 130 points.
Stocks were weighed down on Friday after Amazon shares took a tumble. All three major stock market indices finished the session in the red. And while the S&P 500 was down for the day, it clocked a gain for the month of July as a whole. Also on Friday, the Dow Jones Industrial Average fell almost 150 points, while the tech-heavy Nasdaq was down more than 100 points.
That Was Then, This Is Now
Stock index futures are trading in the green across the board on Sunday evening. At this rate, investors are poised to leave Friday’s declines and inflation fears behind and begin the month of August on a positive note.
Stocks to Watch
Amazon’s stock plummeted 7.5% on Friday after the e-commerce giant fell short on the top line, a disappointment that hasn’t happened in three years. As the economy has reopened, consumers have turned their attention to other things beyond online shopping.
As a result, Amazon’s Q3 revenue is expected to similarly fall below Wall Street estimates, though it will likely remain above the USD 100 billion threshold. Amazon is not alone amid a trend among big tech companies where revenue is retreating from pandemic-related highs.
Square reported its Q2 earnings sooner than expected. In the report, Square revealed that it is scooping up Afterpay, an Australia-based buy now, pay later (BNPL) startup, in a blockbuster USD 29 billion deal using all stock. Square CEO Jack Dorsey said that his company and Afterpay have a “shared purpose.” Square will integrate AfterPay into its Cash App and Seller divisions, giving more merchants the opportunity to offer BNPL.
In Q2, Square’s revenue soared more than 143% to USD 4.68 billion. Bitcoin revenue came in at USD 2.72 billion via the Cash App. Square’s earnings call will take place on Monday. The call was originally planned for Aug. 5 but that one has been cancelled.
The ISM Manufacturing index for the month of July will be released on Monday. Wells Fargo economists predict that the ISM index fell slightly due to the one-two punch of hiring challenges and supply-chain constraints that have taken a toll on the manufacturing sector.
Construction spending data for June will also come out on Monday. Wells Fargo economists are expecting an increase of 0.6% in “construction outlays.”
On the earnings front, Uber Technology reports its Q2 results on Wednesday. DraftKings will report its quarterly results on Friday.