The Big Jobs Number and How to Trade It – Part II

In the first part of this research article, we attempting to highlight how the huge jobs number shocked the market into a big upside price move on Friday, June 5, 2020, and how the underlying data continues to suggest we have quite a bit of work to do before the US economy supports current stock market price levels.  In this second part of our research article, we’ll continue to share data and charts that we believe paint a very real picture for skilled technical traders.

The huge upside price rally in the US stock market after the 2.5 million jobs number was posted at 8:30 am pushed the stock market higher by 3.5%+.  This is an incredible rally in terms of how primed the stock market was for this type of great news.  Yet, as we continue to try to suggest, we are still moderately cautious of this rally in terms of sustainability after the destruction to the US and the global economy as a result of the COVID-19 virus event.

Our researchers believe the current numbers may be slightly skewed because of the extreme contraction event that took place over the past 60+ days.  Additionally, many of these numbers are calculated using a modeling system that attempts to normalize outlier data.  Currently, with the markets pushing well into a bullish territory and the NASDAQ reaching new all-time highs, we can’t argue that the US stock market appears to want to move higher on any news (good or bad).

NASDAQ (NQ) E-MINI FUTURES DAILY

This NQ Daily chart highlights the incredible rally we’ve seen in the tech-heavy NASDAQ.  After recovering nearly 50% from the March lows, the NQ began to set up an upward sloping wedge formation near the middle of April.  This tightening wedge formation has apex’ed recently just as we got the new jobs number today.

In an unbelievable upside price rally, the NQ is now trading at the highest levels EVER.  After 38 million jobs lost, the US economy operating at only a fraction of what it was in January, huge consumer displacement factors, and thousands of pending solvency issues – hey, why not push the NASDAQ up to new all-time highs.  This makes no sense to us at the moment.

NAS100/GC DAILY RATIO CHART

The reality is that this incredible rally in the stock market may have already become a speculator “bubble” – a euphoric over-reaction to the deep decline related to the COVID-19 virus event.  Earnings and future revenues typically drive valuation growth higher.  Take a look at this NAS100 to Gold ratio chart to understand what has really happened in the markets over the past 4+ years.  The peak in values in October 2018 coincided with the US Fed action to raise interest rates which prompted a massive decline in the US stock markets throughout the end of 2018.  Near Christmas, 2018, the markets bottomed and began to rally higher.  Notice the peak in 2019 was not higher than the peak in 2018?  This suggests the real valuation peak in the market coincided with the peak Fed Funds Rate level in October 2018.

Additionally, the downward price channel that has setup in this ratio chart suggests the wild trending in the markets while Gold has pushed moderately higher has prompted a sideways pennant/flag formation.   The previous peak, in early 2020, and the current peak are well above the upper pennant level – this suggests an over-exaggeration of price advancement.  This type of ratio activity is very reminiscent of 2005 to 2007 – where the stock market rallied and gold rallied, eventually leading to the breakdown in the stock market in 2008-09 and a much deeper breakdown in this ratio.

US ISM NON-MANUFACTURING BUSINESS ACTIVITY INDEX

The current economic data does not support a US stock market rallying to new all-time highs – unless you attempt to account for investor over-enthusiasm and exuberance.  The business activity data over the past few months have shown the deepest decline over the past 20+ years.  There has never been a print of this indicator below 30, ever, except April 2020.  Even at the height of the 2008-09 housing/credit market crisis or the 911 terrorist attacks, US businesses continued to operate at moderate levels.

(Source: https://www.investing.com/)

US UNEMPLOYMENT RATE MONTHLY

The unemployment rates are still far higher than at any time in over 70+ years – everything is fine.  Why not push the stock market price levels higher by another 20 to 25% – right?  These people will eventually find work somewhere – sometime??  The consumers will eventually re-engage in the economy and push income and revenue levels higher – but not right now.

US ISM MANUFACTURING INDEX MONTHLY

The ISM Manufacturing Index suggests manufacturers are operating 25 to 45% or below capacity levels from early January/February 2020.  This will translate into bottom-line revenue data in the near future and likely result in much lower forward earnings guidance.

Our continued warnings may go unheeded by the masses – and maybe we are wrong.  Yet we continue to advise our clients to be very cautious of this upside price rally as we believe the technical factors driving this market are skewed.  Speculators and investors are caught up in an elated buying phase when real data suggests more moderate price valuations.  We are still very concerned about the risks of a breakdown in the markets related to a sudden shift in trader/speculator thinking.

Very similar to the enthusiasm of 2006 to 2008, traders can sometimes fall into a trap that expectations do not correlate with real data/technicals – and this can be dangerous.  If you play these upside moves very cautiously and target the best asset for your investment objectives, you can do very well while this rally pushes higher.  Yet, you also have to be very aware of the risks of a breakdown in price related to the tightening economic conditions and price channels.

YM – DOW JONES E-MINI FUTURES 30 MINUTE CHART

This YM 30-minute chart highlights the incredible rally that took place very early in trading on June 5, 2020 – just after the jobs number hit.  The traders and speculators want anything that seems positive after months of uncertainty related to the COVID-19 virus event.  This bias towards anything positive suggests traders will attempt to push price levels into a feeding frenzy – ignoring all risks and other data.  No Fear is an excellent description of what is happening right now in the US stock market – traders have absolutely no fear of any downside risks.  We’ve seen this before – and it usually ends badly for some people (remember the DOT COM rally?).

Concluding Thoughts

Our opinion is that traders should stay moderately cautious near these current levels.  Even though it appears the markets can do nothing wrong and speculators will likely be telling you “this is the opportunity of a lifetime – just buy anything right now”, our experience is that these types of crazy, euphoric rallies are very dangerous.  Price breakdowns come fast and hard in markets like this – they happen quickly.

Cover your open long trades with moderate stop levels.  Be picky about what you invest in and target quick gains.  Remember the market can act irrationally much longer than many people can stay whole.  The shorts are under severe pressure right now, but the data is pointing to a very different outcome in our opinion.  We urge you to stay cautious right now – this seems very similar to the exuberance that we saw in 2006-2008 – just before it all fell apart.

As a technical analyst and trader since 1997, I have been through a few bull/bear market cycles in stocks and commodities. I believe I have a good pulse on the market and timing key turning points for investing and short-term swing traders. 2020 is an incredible year for traders and investors.  Don’t miss all the incredible trends and trade setups.

Subscribers of my Active ETF Swing Trading Newsletter had our trading accounts close at a new high watermark. We not only exited the equities market as it started to roll over in February, but we profited from the sell-off in a very controlled way with TLT bonds for a 20% gain, and we closed out another winning trade on Friday.

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

Chris Vermeulen
Chief Market Strategies
Founder of Technical Traders Ltd.

 

As The Trade Talk Pendulum Swings

One of our banks reckons all trade headlines should be taken with a grain of salt; I’m thinking a barrel. 

In the latest rumor mill-churn, Chinese headlines suggest the mood in Beijing was “pessimistic” regarding the trade deal as Trump is supposedly not in favor of any tariff rollbacks. It appears that

Beijing is very much bothered as China thought both sides had agreed to do so in principle. With the constant stream of trade talk confusion, it makes one wonder if anyone is even remotely on the same page.

Equity markets and other riskier assets were stifled overnight as a cloud of pessimism rolled in again. While stocks churned their way to nowhere, equity markets remain very resilient as the buoyant beat goes on. And while the tone was a little softer, overall risk behaved quite asymmetrically.

Trust remains a considerable problem, and there is still little clarity on how that trust gap might be bridged, especially given China has made it abundantly clear that removing existing additional tariffs is a precondition for reaching a deal.

But on the back of the constant zig-zags in the US-Sino trade headlines over the past two weeks, I guess it’s safe to assume a positive trade headline will be next up on the news feed agenda?

Oil Markets

From trade talk optimism, to trade talk pessimism, so the pendulum swings.

Oil prices slipped after despair set in as the prospects for a resolution to the U.S.-China trade war took a turn for the worse.

To suggest the oil market is concerned about the US-China trade talks could be the understatement of the decade as it has been the primary catalyst steering the ship for the past year. But for the oil markets, especially, a trade deal without a tariff rollback is like a ship without a rudder.

The market reaction may have gone a bit too far, especially considering last week, where the markets didn’t seem to care about President Trump’s comments on trade while chalking his rhetoric up to posturing.

Currency Markets

The Yuan

The Yuan traders continue to wear trade talk emotions on their sleeves as there was another long Yuan position squeeze overnight in relatively thin market conditions driven by adverse trade talk headline risk. The USDCNH briefly traded above 7.03 before cooler heads prevailed.

The Euro

The Euro has fallen slightly on the trade talk pessimism but remains bid on the back of the rotation into Europe’s value stocks despite the broad market going nowhere.

But also, the Euro remains a much cheaper and less risky proxy to the Brexit deal. As GBP continues to power ahead after the latest opinion polls showed the Tory lead remaining to widen, and the odds on them securing a majority have also narrowed, so the Euro remains bid.

Gold

Gold continues to track US-Sino trade developments as in the absence of fresh catalyst traders are merely reacting to the latest trade headline. And while Gold continues to be a critical defensive strategy against escalating US-China trade friction, without a dovish impulse from the Fed or a significant equity market sell-off, price action might be capped in the near term.

This article was written by Stephen Innes, Asia Pacific Market Strategist at AxiTrader

Second-Quarter Dollar Direction to be Determined by Jobs and Inflation

The U.S. Dollar finished higher against a basket of currencies during the first quarter, surviving three attempts between January and March to break the greenback and continue the weakness that began in early December 2018 and continued into the first week of the new year. The price action was primarily driven by wild swings in Treasury yields and safe-haven buying. The catalysts behind the price action was central bank activity led by the U.S. Federal Reserve and the European Central Bank.

For the quarter, U.S. Dollar Index futures finished at 96.845, up 1.287 or +1.35. Here is how the components of the index faired. The EUR/USD settled at 1.1218, down 0.0250 or -2.18%. The USD/CHF finished at .9951, up 0.0137 or +1.39%. The USD/JPY closed at 110.844, up 1.241 or +1.13%.

The U.S. Dollar lost ground to the British Pound and Canadian Dollar. The GBP/USD settled at 1.3033, 0.0279 or +2.19% and the USD/CAD closed at 1.3351, down 0.0289 or -2.12%.

Price Action

The U.S. Dollar began the year under pressure as economic uncertainty drove investors to speculate the Fed would be forced to soften its tone toward hiking interest rates. The sell-off which began on December 14 at 96.655 lasted until January 10 when the index bottomed at 94.150. This was a drop of 32.505 points in 17 market sessions.

The low at 94.150 turned out to be the low of the quarter. The dollar began its rally from a three-month low after Federal Reserve Chairman Jerome Powell said the central bank intends to further shrink the balance sheet, suggesting it is not done tightening monetary policy yet. The Fed chairman also said he sees no near-term risk of a U.S. recession and expects continued momentum in economic data. However, he reiterated that the Fed can be patient on monetary policy and can move “flexibly and quickly” if economic data warrants it.

The second major rally for the U.S. Dollar Index began on January 31 at 94.380. This rally drove the index to 96.685 on February 15 before sellers pushed it back down to 95.240 on February 28.

This rally was fueled by the strong January jobs report which calmed some recession fears as did a stronger than expected ISM manufacturing report. The jobs report showed the economy added 304,000 jobs in January. Earlier in the week, the Fed had removed a big concern for investors, when its post-meeting statement and Fed Chairman Jerome Powell’s briefing tilted dovish, assuring markets the Fed would pause in its interest rate hiking.

The third rally for the quarter began on March 20 at 95.17 and is likely to continue into April after finishing the quarter on a high note at 96.845.

This rally began when the Fed said it sees no rate hikes in 2019. It also said it plans to slow balance sheet reduction. Furthermore, after the Fed meeting, traders indicated they saw nearly even chances of a Fed rate cut in early 2020.

Second-Quarter Outlook

The first quarter was highlighted by “sell the rumor, buy the fact situations”. In other words, the dollar weakened in anticipation of dovish news from the Fed, and rallied when they delivered what the markets were expecting.

The dollar started the year under pressure because investors thought the Fed would turn a little a dovish, while the rest of the major central banks would continue on a path toward higher interest rates. However, as the global economy began to weaken, the major central banks turned dovish. So when the Fed also turned dovish, the situation was neutralized. Given this change in events and the upside momentum into the end of the first quarter. The dollar index may have the fire power to reach a new multi-month high in the second quarter.

The dollar is likely to weaken against the major currencies if the economy continues to show weakness especially the employment situation and inflation. If these two components weaken then look for talk to surface about a rate cut. This would put pressure on the dollar.

China Enters Bull Market, Trade Hopes Lift EU, Trump-Xi Summit In Sight

Asian Markets Entered Bull Market Territory As Trade Hopes Lift Stocks

Chinese equity indices surged more than 5.5% on Monday following news US and Chinese negotiators were making substantial progress on key trade issues. The news was backed up by Trump-Tweets to the effect he would delay the implementation of March 1 tariffs. The news is mitigated by the fact tariffs may still be levied if a final deal isn’t made. Regardless, the Shanghai and Shenzen indices are now both up more than 20% from their recent lows.

Elsewhere in the region stocks were buoyant but less so than in China. The Hong Kong-based Hang Seng led with a gain of 0.50%. Shares of China Construction Bank and ZTE were at the top of listings with gains of 2.3% and 2.2%. The Japanese Nikkei, aided by a near 1.0% increase in retail giant Fast Retailing, was close behind the Hang Seng at 0.48%. The Austrialian ASX and Korean Kospi were up 0.30% and 0.09% respectively.

Trade Hopes Lift, Brexit Woe Weighs, EU Indices Mixed

Trading was mixed in the EU on Monday because of trade hopes and Brexit woe fighting for dominance. On the one hand, trade talks are progressing quickly and promise to bring an end to trade-war between the US and China. The EU, also in the tariff-crosshairs, is expected to reach a tariff-avoiding deal with the US in the near future.

On the other hand, another delay in the Brexit process has traders worried hard-Brexit is unavoidable. Theresa May has delayed a key vote by Parliament because the wording on the Irish Backstop is still not acceptable. Because the deadline for Brexit is less than five weeks away there is a growing chance no deal will be reached.

The DAX was leading advancing indices at midday. The German index was up about 0.50% with the French CAC up about half that. The UK FTSE, understandably, lagged Monday trading with a loss near -0.25%.

In stock news, shares of UK home builder Persimmon were down -5.0% after lawmakers revealed it is under investigation. Lawmakers are concerned about practices relating to the Help To Buy Scheme. In Italy, banks led with gains near 2.0% after Fitch reaffirmed its BBB credit rating on the country.

A Trump/Xi Summit Is In Sight

Shares of US-listed stocks were moving higher in the early Monday session. The major indices were looking at an open near 0.55% in the premarket session as trade hopes intensify. Trump says “substantial progress” has been made on key issues like intellectual property rights and technology transfers. The news Trump would delay the March 1st tariffs was also compounded by emerging details about a Trump/Xi Summit. The summit is expected in late March and will be located at Trump’s Mar-a-Lago resort.

Shares of GE were on the move in early trading after it announced the sale of its biopharma unit for $21.4 billion. The deal includes $21 billion in cash that GE plans to use for deleveraging and balance sheet improvement. Barrick Gold has made an all-stock offer to merge with rival Newmont Mining. Newmont is already discussing terms to merge with Goldcorp, Barrick Gold says its deal is a superior offer.

China Cracking Down On Australia, Trade Hopes Lift Stocks, The Worst May Not Be Over For Equity Markets

China Bans Coal From Australia

Shares of Australia’s coal miners took a hit on news China banned coal imports from Australia. The ban affects so far only one of the northern ports but worth about 2% of Australia’s export volume. The move is in retaliation of Australia’s treatment of Huawei earlier this year and closely related to US/China trade issues. Despite the weakness in the mining sector, most shares in Australia were able to post gains, the ASX closed up 0.46%.

Chinese markets led the advance on growing hopes a trade deal in principle would soon be reached. Thursday’s news that draft memoranda were in progress outlining a commitment to principles is the reason. That, along with a high-level meeting in Washington, helped the Shanghai Composite advance 1.91%.

The Hong Kong Heng Seng was also higher but a more modest 0.65%. The Korean Kospi was closer to flat, up only 0.08%, while the Japanese Nikkei fell -0.18%. Japanese sentiment was weighed down by bad results from chain-store retailer Family Mart. The company miss expectations sending shares down nearly -1.0%.

Trade Hopes Lift Stocks In Europe, Confidence Falls

Major equity indices were higher across the board in the early EU session. The UK FTSE 100 was in the lead at midday with a gain over 0.60% and closely followed by the German DAX and French CAC. Basic resources were in the lead, they have extensive exposure to China, and may extend their gains as the US/China trade deal develops. With one week to go until the March 1st deadline hopes are high talks will progress enough for Trump to postpone or cancel the next round of tariffs.

Today’s data is another reminder of the effect of global trade on the economy. Business Confidence in the EU fell much more than expected in the last month and now at 4 year low. The gauge of Business Confidence has been in decline for six months as trade tensions escalated and the effects of tariffs set in, now that negotiations are on the upswing that may change.

The Hardest Part Is Still To Come…

US futures indicated a positive open in early Friday trading as hopes rise a trade is close to hand. The major US indices were looking at gains in the range of 0.35% to 0.45% at the open with traders looking forward to today’s big meeting. Chinese Vice Premier Liu He is slated to meet with President Trump as both sides prepare for the final confrontation. Now that negotiations have reached the point core issues are stake the risks negotiations will fail are intensified.

There were no economic reports in today’s news and earnings season is all but over. About 90% of the S&P 500 has reported for the 4th quarter with only a few names of note left on the schedule. Today’s earnings news includes Cabot Oil & Gas. The company says revenue grew 78.9% over the past year and beat consensus estimates. Shares of the stock held steady in pre-market trading however as EPS fell short of estimates.

Fed Minutes Not So Dovish, Scandal Rocks EU, The Trade Deal Is Coming Into Focus

Asian Markets Are Mixed Following FOMC Minutes

Asian markets were mixed on Thursday following the release of the FOMC’s meeting minutes. The minutes were more and less than what the market expected in that the end of QT is in sight but rate hikes are still on the table. The FOMC, in their discussion, highlighted the mounting risk to global and US economics that can all be traced back to heightened trade tensions between the US and China.

The Australian ASX advanced the most, aided by a 1-2% increase in the Big Banks, posting a gain of 0.70%. The Hong Kong Hang Seng closed with a gain of 0.41% and was supported in the final hours by Lenovo. Lenovo, the world’s largest manufacturer of PCs, reported earnings blowing past expectations. The company has returned to profit sooner than expected and says that profit is sustainable. The company suffered from a one-off tax-hit related to US tax reform that will not impact results in future quarters.

Korean equities were less buoyant despite the release of Samsung’s new phone. Shares of Samsung closed with a gain of only 0.10% while the greater Kospi posted a small loss. The Shang Hai Composite closed with the largest decline but that was only -0.34%.

Europe Rocked By Scandal, Again

EU markets were weighed down by a new scandal in European banking. The latest allegations involve Swedbank and Danske Bank and dubbed serious by regulators. The charges involve cross-border money-laundering and could result in jail time for guilty parties.

The FTSE 100 was showing the most loss at midday, down about -0.75%, as Brexit Angst and weaker than expected PMI readings create another drag on sentiment. The pan-European Markit Flash Manufacturing PMI fell more than expected and into contractionary territory as businesses cut back on activity due to US/China trade relations.

Countering that, Services and other business were strong enough to more than offset the weakness in manufacturing. The Composite PMI rose 3.4 points to 51.4 which shows a net increase in EU economic activity. The DAX was trading slightly higher at midday while the CAC was slightly lower.

A Trade Deal Comes Into Focus

The major US equity indices were trading flat in the early premarket session. The S&P 500 was in the lead with a meager advance, about -0.17%, while the Dow Jones Industrials and NASDAQ Composite were both down about -0.10%. The move is in the wake of yesterday’s FOMC minutes, minutes that show a Fed ready to pounce should business activity reaccelerate, but still supported by trade-related news.

The latest reports say that US and Chinese negotiators are working on documents that would essentially end the trade war. The packet includes six memorandum outlining structural issues and the path to their resolution. The deal also includes a list of ten items China would begin buying from the US among other concessions from both sides.

Today’s economic data is mixed. The initial claims data shows joblessness decreased more than expected, net positive for the dollar, but Durable Goods was only 1.2% and the Philly Fed MBOS fell into negative territory. The data is yet another indication global and US economies are slowing, confirmation US/China trade tensions are hurting both countries.

Asia Falls On US Data, Trade Talks Remain In Focus, US Futures Rise In Early Trade

Weak US Data From US Sends Asian Stocks Ducking For Cover

Asian equity indices took a dive in Friday trading following a round of weak data from the US. December US Retail Sales made their biggest one month decline, down -1.2%, and renewed fears of a slowing global economy. The data, while shocking, was largely shrugged off by US markets in favor of trade optimism.

On the trade front, US/China trade talks have concluded for the week with no major headlines to speak of. US Secretary of State Steve Mnuchin says progress has been made but no details were given other than that another round of talks have been scheduled for next week in Washington.

The Hong Kong Heng Seng led the decline with a loss of -1.87% and posting most of the loss in the final hour of trading. The Shanghai Composite shed -1.37% followed by a -1.34% decline in the Korean Kospi. The Japanese Nikkei fell -1.13% while the Australian ASX bucked the trend to post a small gain. Tech led the decline as it is the most vulnerable to trade woe with shares of Samsung and SK Hynix moving lower -3.0% and -4.66% respectively.

European Indices Move Higher On Hope

European indices were buoyed by trade hope after it was revealed another round of trade talks has already been slated for next week. The news is far from concrete but is taken as a sign the negotiation is progressing in a satisfactory manner, perhaps satisfactory enough to allow US President Trump to postpone the implementation of the March 2nd tariff deadline.

The French CAC was in the lead in midmorning trading, up nearly 1.60%, with the German DAX and UK FTSE trailing at 1.22% and 0.58% respectively. In stock news, Germany’s Scout24 surged to the top of the listings after a consortium of private equity firms including Blackstone offered to buy the online classified ads business for $6.4 billion. France’s Eutelstat was among the days worst performers posting a loss near -6.0% after reporting weaker than expected earnings.

US Futures Point To Positive Open

US futures were pointing to a positive open on Friday. The major indices were looking at gains near 0.25% after posting similar losses in the previous session. The move is supported by trade optimism and some better than expected data including a more-current read on Retail Sales.

The January read on retail sales was a bit weaker than expected but nothing like the miss posted for December. The headline and core were both flat at 0.0% versus an expectation for 0.1% and 0.2%. Manufacturing data, the Empire State Manufacturing Survey, was better than expected at 8.8 and suggests the US economy is still in decent shape.

Today’s action is likely to be affected by options expiration. Today is expiration day for US equity options which may induce volatility as traders take profits and settle contracts.

USD/JPY Fundamental Daily Forecast – BOJ Hold Policy Steady, but Makes Framework More Flexible

The Dollar/Yen is trading higher early Tuesday after the Bank of Japan kept its policy steady as widely expected. The major news coming out of the central bank’s decision is that it would make its policy framework more flexible for the long-term yield target.

At 0653 GMT, the USD/JPY is trading 111.252, up 0.185 or 0.16%.

The details of the BOJ decision show that the central bank maintained its target for the 10-year government bond yield at around zero percent and the short-term interest rate target at minus 0.1 percent, however.

In its monetary policy statement, it explained that the yields may move up or down “to some extent mainly depending on developments in economic activity and prices.”

The BOJ also acknowledged that it will take “more time than expected” to achieve its inflation target of 2 percent.

In other news, the unemployment rate rose to 2.4%, versus a 2.3% estimate and 2.2% previous read. Preliminary Industrial Production fell by 2.1%, worse than the -0.3% forecast and -0.2% previous read.


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Forecast

Based on the market’s reaction after the release of the BOJ news, it looks as if investor’s read the announcement as dovish. Soon after the announcement, the yield on U.S. 10-year Treasurys fell almost 3 basis points to 2.950 percent. This widened the spread between U.S. Government bond yields and Japanese Government bond yields, making the U.S. Dollar a move attractive investment.

Economists interpreted the BOJ’s action to be a mild policy change, but its policy vector is heading towards tightening. Essentially, the central bank said it will let long-term yields go higher.

Tuesday could be a big day for the U.S. Dollar so investors will have to watch for heightened levels of volatility. Key reports that could influence the Fed and move Treasury yields and the U.S. Dollar are the Core PCE Price Index, Personal Spending, Personal Income and the Conference Board’s Consumer Confidence report.

Core PCE, the Fed’s favorite measure of inflation, is expected to come in at 0.1%. Personal Spending is expected to show a gain of 0.4%. Personal Income is expected to show a similar gain.

Consumer Confidence is expected to come in only slightly better at 126.5. This report is likely to reflect investor concerns over the trade disputes.

The key level to watch on the daily chart is 110.868. This price is a major technical pivot. Holding above this level will signal the presence of buyers. If the move can create enough upside momentum then we could see a rally into 111.899 to 112.208.

The main trend will change to down on a move through 110.588

AUD/USD Forex Technical Analysis – August 25, 2017 Forecast

The AUD/USD is trading higher on Friday, shortly ahead of the U.S. opening. The price action suggests position-squaring is taking place ahead of the U.S. Durable Goods report and speeches by Fed Chair Janet Yellen and ECB President Mario Draghi.

AUDUSD
Daily AUDUSD

Technical Analysis

The main trend is down according to the daily swing chart. However, momentum is starting to shift to the upside. A trade through .7962 will change the main trend to up. A trade through .7866 will indicate the return of sellers. A move through .7807 will signal a resumption of the downtrend.

The main range is .7807 to .7962. Its retracement zone is .7884 to .7866. This zone provided support on Thursday.

The short-term range is .7962 to .7866. Its retracement zone at .7914 to .7925 is currently being tested. This area could become resistance.

The major resistance zone is .7936 to .7966. The major 50% level support is .7818.

Forecast

Based on the current price at .7908, the direction of the AUD/USD is likely to be determined by trader reaction to the 50% level at .7914.

A sustained move over .7914 will indicate the presence of buyers. This could lead to a labored rally with short-term targets at .7925, .7932, .7936 and .7947.

The daily chart will open up to the upside on a sustained move over .7947 with the next major target .7962.

The inability to overcome .7914 will signal the presence of sellers. The first downside target is .7902. This is followed by a potential support cluster at .7887 to .7885.

Look out to the downside if .7885 fails as support. This could trigger a steep break into .7866. This is also the trigger point for an acceleration into .7847 then .7827. The latter is the last potential support angle before the .7807 main bottom.

US Dollar Index (DX) Futures Technical Analysis – August 9, 2017 Forecast

September U.S. Dollar Index futures are trading slightly lower shortly before the regular session opening. The market is trading inside yesterday’s range which suggests investor indecision and impending volatility.

The index closed higher on Tuesday, but if you actually watched the price action you would know that the index rallied on robust U.S. economic data that slightly increased the chances of a Fed rate hike later in the year, and weakened after investors began shedding higher-risk assets due to increasing tensions between North Korea and the United States.

Based on today’s early price action, the U.S. Dollar is not being treated as a safe-haven asset. It is being treated as a higher-risk, higher-yielding asset. This is important to know.

The safe-haven buying is taking place in the Japanese Yen, gold and the U.S. Treasury markets. It’s pretty simple. When T-Bonds rise, yields go down. When yields go down, the dollar becomes a less attractive investment.

The dollar is not a safe-haven asset today and is likely to continue to weaken if the selling of higher-risk assets like stocks continues. The only reason investors are going to sell stock is if they feel that their investments are at risk. They will then hedge their profits in the safe haven assets.

U.S. Dollar Index
Daily September U.S. Dollar Index

Technical Analysis

The main trend is down according to the daily swing chart. Momentum has shifted to the upside. Momentum will increase when 93.77 is taken out, but the main trend will change to up when buyers take out 94.115.

The short-term range is 94.115 to 92.39. Its retracement zone is 93.46 to 93.25. Holding above this zone will give the market an upside bias. Falling below this area will mean momentum is shifting to the downside.

The main range is 95.96 to 92.39. Its retracement zone at 94.175 to 94.60 is the primary upside target.

Forecast

Based on the current price at 93.515, the direction of the dollar index today is likely to be determined by trader reaction to the short-term Fib at 93.46.

Holding above 93.46 will indicate the presence of buyers. This should drive the market into an uptrending angle at 93.64. Crossing to the strong side of this angle will put the index in a bullish position with the next target 93.77.

Overcoming 93.77 with conviction could drive the index into 94.115 to 94.175.

A sustained move under 94.46 will signal the presence of sellers. This could trigger a break into 93.34 then 93.25.

Look for an acceleration to the downside on a move under 93.25. The next two targets are 93.02 and 92.70. The latter is the last potential support angle before the 92.39 main bottom.

E-mini Dow Jones Industrial Average (YM) Futures Analysis – March 30, 2017 Forecast

June E-mini Dow Jones Industrial Average futures are trading lower but inside Tuesday’s wide range and Wednesday’s narrow range. This indicates investor indecision and impending volatility.

Like yesterday, the market is trading in the middle of nowhere which typically means momentum will determine the direction of the market.

E-mini Dow Jones Industrial Average
Daily June E-mini Dow Jones Industrial Average

On the downside, the first target is the short-term 50% level or pivot t 20592. If this price fails to hold as support then look for the selling to extend into perhaps 20380 over the near-term.

If the buyers come in to drive this market higher then look for a possible drive into a 50% level and a downtrending angle at 20770.

Since the trend is down, look for selling on the first test of 20770. If this angle fails as resistance then look for the rally to extend into the major Fibonacci level at 20820.