The US dollar finished on a solid note after Friday’s mostly positive U.S. economic data renewed expectations that the Fed may raise interest rates again this year, and if this week’s US economic readings show further strength, particularly from the U.S. Jobs/NFP report, it will put a rate hike firmly back in focus, which would see the dollar continue to outperform. Stocks gave up early gains on the back of this outlook, finishing slightly lower on the session, as did oil, after reversing a strong move higher. This week will be busy, with plenty of data to watch although the US Jobs report will be the main focus. Highlights will be the RBA Interest Rate Decision and the global manufacturing PMIs (Tue), Australian GDP, EU PPI (Wed), The Services/Composite PMIs (Thur) and the Australian Retail Sales, UK Consumer Inflation Expectation and the US Jobs Report (Fri). Today kicks off with the NZ Building Permits, Australian New Home Sales, TD Inflation, the Japanese Industrial Production and Retail Sales and then from Europe, the important CPI, for Feb.
The G20 Meeting in China is over, and although the final statement fell short of putting forward any meaningful changes to global FX policy, it did state that “excess volatility and disorderly movements in exchange rates can have adverse implications for economic and financial stability”, and that the members “ will consult closely on exchange rates”. The final point, on “closer consultation” is probably the most notable difference to the previous communiqué. More meaningful, were the comments from the PBoC Governor Zhou, who assured markets that a CNY devaluation is not on the agenda. The message was “heard loud and clear” that Beijing has “no intent, no determination, no decision whatsoever to devalue the Yuan,” said Christine Lagarde, the managing director of the IMF, in Shanghai.
CURRENCIES
EURUSD: 1.0929
Res
1.0950
1.0975
1.1000
Sup
1.0910
1.0885
1.0865
USDJPY: 113.99
Res
114.00
114.35
114.50
Sup
113.60
113.35
113.00
GBPUSD: 1.3868
Res
1.3900
1.3940
1.3990
Sup
1.3850
1.3800
1.3750
USDCHF: 0.9959
Res
0.9980
1.0000
1.0025
Sup
0.9950
0.9925
0.9900
AUDUSD: 0.7124
Res
0.7145
0.7165
0.7185
Sup
0.7115
0.7100
0.7080
NZDUSD: 0.6622
Res
0.6650
0.6675
0.6700
Sup
0.6605
0.6585
0.6565
INDICES / COMMODITIES
S+P: 1941
Res
1950
1960
1968
Sup
1930
1920
1910
DJI: 16587
Res
16630
16720
16820
Sup
16500
16400
16300
ASX SPI: 4860
Res
4880
4900
4930
Sup
4840
4820
4800
GOLD: 1222
Res
1230
1242
1254
Sup
1210
1200
1190
SILVER: 14.69
Res
14.85
15.00
15.20
Sup
14.65
14.50
14.30
OIL (WTI): 32.80
Res
33.50
34.10
34.65
Sup
32.00
31.05
30.00
Indices/commodities
S&P Futures
1941
US stocks were mixed on Friday as concerns about the timing of future interest rate hikes, following the generally strong US data, offset gains in materials and energy stocks. After reaching a high of 1968, the S+P reversed lower and finished just above the lows of 1943. The dailies still look positive but the 4 hour charts are showing a degree of bearish divergence and it could be that an interim top is now in place – at least until this coming Friday’s NFP release. If so, further dips would head towards 1930 (23.6% of 1803/1968), 1920 (200 HMA) and to 1905 (38.2%). Below 1900 looks out of reach at present but further losses would see a run towards Wednesday low at 1886 and then to the 17 Feb low of 1881. Under there, some way off at this stage, the next Fibo levels lie at 1866 (61.8% of 1803/1968) and then at 1842 (76.4%). On the topside, resistance will be seen at 1955 (minor) and at 1968, where we now have a double top with the 7 Jan high. A break of this, unlikely for now, would head towards 1980 and then to 1992 (61.8% of 2109/1803). It may remain choppy in the early part of the week while awaiting the US Jobs report. Buying dips still looks to be the plan according to the long term charts, but a strong NFP – and the prospect of an early rate hike – would stymie that idea.
DJI Futures
16587
The Dow headed up to as high as 16819, before reversing quite sharply to finish the week at close to 16600. As with the S+P, some bearish divergence is apparent on the 4 hour charts, suggesting further downside momentum in the near term, which could see a return towards 16500 (23.6% of 15450/16819), to 16430 (200 HMA ) and then towards 16330/300 (rising trend support/38.2%). Another turn higher will find offers at 16700 and 16800 ahead of Friday’s high. Beyond there, unlikely in the short term, would then open the way towards 16928 (61.8% of 17904/15362). The dailies/weeklies remain positive, so buying dips still appears to be the side to trade from.
ASX SPI
4860
The SPI had another choppy session on Friday but closed more or less unchanged at 4860. More of the same could be in store today (New Home Sales/TD Inflation are due) and if so, we could yet see another move back to 4900, where the 100/200 HMAs capped it on Friday, but above which could see a squeeze on towards 4925 (minor) and then to 4955. Above this would revisit the previous hurdle at 4980 and then again the 5000/10 area, albeit not today. A failure here would see another run to the minor support at 4820 ahead of the 4800 lows. Below there would head towards 4783 (61.8% of 4643/5007) albeit probably not today. If wrong, the next targets are at 4773 (16 Feb low), below which would see an acceleration towards 4728 (76.4%). Waiting for the RBA, tomorrow, to provide the direction, seems to be the medium term plan.
GOLD
1222
Gold headed sharply lower on Friday after the Q4 GDP rose by its highest annual percentage in more than three years, underpinning the case for a rate hike. The end of the session did see a partial recovery from its lows though, and after falling from 1240 to 1211, it finished at 1223. Resistance will now be seen in the 1230/40 area above which could head to last Wednesday’s top at 1253, above which would then look towards the trend high of 1263, albeit that the momentum indicators do not suggest a move of this sort in the short term. As we said before, the daily indicators still appear to be in the process of turning lower from an overbought condition, so we could see another run to the downside, and below Friday’s low of 1211 could see a run back towards 1200. Below there – unlikely today I suspect – would see further losses towards 1190 (38.2% of 1071/1263), 1180 (38.2% of 1046/1263) and then 1167 (50% of 1071/1263.
SILVER
14.69
Silver headed sharply lower on Friday, in line with Gold, reaching 14.66 (100 DMA) before a dead-cat bounce to close at 14.70. Further losses look possible and a test of 14.52 (61.8% of 13.64/15.95) and possibly 14.18 (76.4%) could lie ahead, below which would see another run towards 14.00 and the 13.64 trend low (14 Dec). On the topside, resistance will be seen at 14.90 (minor) and again at 15.00 (200 DMA). Above here now looks a bit unlikely, but further strength would see Silver head back towards minor levels at 15.20 and 15.40, ahead of last week’s 15.57 top.
OIL (WTI)
32.80
After an early run up to 34.66, oil reversed sharply to finish just above the session lows of 32.64 on Friday as traders locked in profits ahead of the weekend. Pricewise, not too much damage was done as the close was in line with the Thursday close and leaves the outlook relatively unchanged. A return to the topside, which looks unlikely given the bearish divergence in the 4 hour charts, would see another run to back above 33.00 and on towards 33.85, to 34.00 and to Friday’s high at 34.66. This lies just below 34.79 (28 Jan high), where the long term descending trend resistance now also arrives, which will be a tough hurdle to overcome, if/when seen. On the downside, support will once again be seen at 32.00 and then at the Thursday low at 31.05. Under there could see a return to the Wednesday low at 30.53 although this seems doubtful today. Beyond there though would open the way towards 30.00/29.90 (50% of 26.03/33.81). A break of this would open to 29.00 (61.8% of 26.03/33.81) but not yet I suspect.
EURUSD: 1.0929
The Dollar was generally stronger on Friday following the positive economic data that saw the Q4 GDP growth revised up to 1.0% qq, compared to the expectation of 0.4% qq. The GDP price index was also revised up to 1.0% versus expectation of 0.8% and, following on from last Thursday’s positive Durable Goods reading, helped to re-awaken the possibility that the Fed may hike rates later this year. In other data, the US consumer sentiment index final figure came in at 91.7 in Feb vs 91.0, further underpinning the dollar, while earlier, from Germany the CPI was worse than expected, at 0.0%, while the Harmonised Index of Consumer Prices (HICP) turned negative (-0.2%) in February, hitting a one year low, and not doing the Euro any favours. The Fed’s Mester also helped the dollar by saying the March FOMC should be a live meeting with the chance of an early hike.
The coming week will be busy throughout but with the focus looking towards Friday’s release of the Non Farm Payrolls (exp +195K). Ahead of that, today sees the German Retail Sales and the EU CPI, tomorrow gets the Manufacturing PMIs, Wednesday, the ADP Jobs data and then Thursday, the Services/Composite PMIs. All up, enough to make it an active week!
Technically, the data has seen the dollar take out several support levels in heading down to a session low of 1.0911 before finishing Friday at 1.0930.
The daily charts suggest that further downside momentum is possible, and below 1.0900 would head towards 1.0867, which should be strong support, being both 61.8% of 1.0521/1.1375 and 76.4% of 1.0710/1.1375. Beyond this would look towards the interim lows of 1.0809 (29 Jan) and to 1.0885 (21 Jan) that lie ahead of the 1.0710 low seen on 5 January.
On the topside, resistance will be seen at 1.0950 (100 DMA), 1.0985 (minor) and at 1.1000. Beyond here looks unlikely today, but further gains would see a return to the 1.1030 area and then on towards Friday’s high at 1.1067. Further resistance would be found at 1.1087 (38.2% of 113.75/1.0910) and then at 1.1100 a break of which could then had back to 1.1140 (50%) but looks unlikely today.
The generally negative look of the near term momentum indicators suggest that selling rallies is probably the way to go, with this outlook backed up by the bearish outside day seen in the Euro on Friday, but it could just be rather choppy ahead of the US jobs data on Friday.
Economic data highlights will include:
M: German Retail Sales, EU CPI, US Chicago Purchasing Managers Index, Pending Home Sales,
T: EU Manufacturing PMIs, German Unemployment
W: EU PPI, US ADP Jobs data, EIA Crude Oil Stocks Weekly Change, Beige Book
T: EU Services PMIs, Composite PMIs, Retail Sales, US Jobless Claims, Services/Non Mfg PMIs, Factory Orders, US Markit/ISM Mfg PMIs, ISM Prices Paid, Total Vehicle Sales, Construction Spending, API Weekly Crude Oil Stock Inventory
F: US Jobs/NFP/Average Hourly Earnings data.
Meta Trader – AxiTrader
EURUSD: 4 Hour
…
USDJPY: 113.99
US$Jpy finished the week on a firm note, helped by the stronger stock markets and also by the US data, which allowed the dollar to run up to finish on its high of 113.99.
The positive momentum has so far been capped by sellers at 114.00, and not helped by the Fibo resistance at 113.95 (76.4% of 76.4% of 114.86/110.98), but a clean break to the topside would take the dollar above 114.00 and on towards 114.50 (17 Feb high) and to 114.86 (16 Feb high). Beyond there would want to take a look at 115.05 (38.2% of 121.68/110.98) and a break of that would then allow a run towards the 116.30 area which is the neckline of the major Head/Shoulders formation that we have been watching, although that remains some way off right now. Having said that, the momentum indicators are looking positive, so a squeeze back towards 115/116 seems to be quite possible in the days ahead, but possibly not before Friday’s US Jobs data.
On the downside, support will be seen at 113.40 (minor) and then at the 200 HMA at 112.95. Beyond this would head towards 112.50 (50% of 110.98/113.98) and to 112.15 (61.8%). Back under 112.00, which currently looks less likely, would allow a return to 111.70 (76.4%). Further out, a sustained break of 111.00 would see a run towards 110.35 (61.8% of 100.82/125.85), to 110.00 and then towards 109.80 (76.4% of 105.19/125.85).
Economic data highlights will include:
M: Industrial Production, Retail Trade, Housing Starts
T: Unemployment, Nikkei Manufacturing PMI
W:
T: Foreign Bond/Stocks Investment
F:.
Meta Trader – AxiTrader
USDJPY: 4 Hour
…
GBPUSD: 1.3868
After an early European squeeze up to 1.4042, triggering some stops, Sterling turned sharply lower following the release of the US data and finished the week at new 7 year lows of 1.3853, and looking very sick.
Note that over the weekend, the G20 have been strident in their views of what may happen in the event of the UK leaving the EU, noting in the formal communiqué that “a British exit from the EU would deliver a shock to the global economy”. The British press is reporting that this was instigated by UK officials with a political interest in getting their point across, so how much effect it is likely to have on Sterling at the Monday opening is doubtful. Elsewhere, the former BOE Governor, Mervyn King, has a new book to flog, and has put everyone on notice by writing in it that a new global financial crisis is certain to occur, and that without reform it is likely to happen sooner rather than later.
The UK will see scant data this week, with the focus to be on political manoeuvrings over the Brexit campaign which will dominate trad until the 23 June referendum. The Manufacturing PMI may cause some volatility on Tuesday, as could the Consumer Inflation Expectation (Friday) but it will most likely be politics and offshore flows that drive the direction.
Further downside potential seems to be the path of least resistance for Cable, and as we said last week there is now very little support until 1.3653 (March 2009 low) and the Jan 2009 low of 1.3502, although the June 2001 low is seen at 1.3681. These are some way off yet, and a choppy move to the downside would seem to be the most likely outcome, interspersed with the occasional short squeeze, which may be quite fierce given that the market is now getting itself increasingly short.
If we do see such a squeeze, we could head back towards 1.3900 and 1.3985(23.6% of 1.4406/1.3853). Back above 1.4000 looks out of reach for now, although if wrong, look for a run back to Fridays high (1.4042) and to 1.4065 (38.2%).
As before, looking to sell into strength still seems to be the plan.
Economic data highlights will include:
M: UK Consumer Credit, Mortgage Approvals
T: UK Manufacturing PMI,
W:
T:
F: Consumer Inflation Expectation.
Meta Trader – AxiTrader
GBPUSD: 4 Hour
…
USDCHF: 0.9959
US$Chf recovered from its lows of 0.9870 on Friday but has yet to see last week’s high at 1.0000, after making it up to a high of 0.9988 heading into the weekend.
The daily/weekly charts look mixed so, overall, more choppy trade not too far removed from current levels appears likely. The dailies though appear to be mildly positive, so a more sustained test of parity could lie ahead, above which would look towards 1.0025 (61.8% of 1.0253/0.9660), to 1.0074 (4 Feb high) and then to 1.0115 (76.4%) although this is possibly a step too far at this stage.
On the downside, support will be seen at the 100/200 HMAs which sit at 0.9920, a break of which would allow a run back to 0.9900 and to the Friday low of 0.9870. Below this, unlikely today, would head towards the 24 Feb low of 0.9852. If 0.9850 can be taken out, look for a run towards 0.9830 (50% of 0.9660/1.0000), 0.9790 (61.8%) and to 0.9740 (100 DMA/76.4%).
Economic data highlights will include:
M:
T: Retail Sales
W: Q4 GDP
T:
F.
Meta Trader – AxiTrader
USDCHF: 4 Hour
…
AUDUSD: 0.7124
The Aud got up to 0.7256 in Asia on Friday, but was capped ahead of the 200 DMA (0.7265), before reversing sharply after the release of the US data and now sits at 0.7125, more or less at the day’s lows. The momentum indicators are hinting that further weakness could lie ahead and are backed up by the bearish outside day seen in the Aud on Friday
It is going to be a busy week ahead, with the New Home Sales, TD Inflation, Private Sector Credit and the China Leading Economic Index leading the charge today. Tomorrow will see the RBA Interest Rate Decision where no change is expected and all the interest will lie in the wording of the statement. A dovish leaning could well take out some of the wind out of the sails of the Aud. Wednesday sees the Q4 GDP and then on Thursday it will be the turn of the Trade Balance and the Caixin China Flash Manufacturing to provide direction. Finally, Friday sees the January Retail Sales although the direction is likely to be dominated later in the session by the US Jobs numbers.
If we do head lower, expect a test of the Friday low at 0.7117 (55DMA), and then 0.7100, where the rising trend line off the multi year lows will provide some support. Below there would open the way to the 19 Feb low at 0.7068 and on towards 0.7040 (50% pivot of 0.6826/0.7258) and then to 0.7000 (0.6992: 61.8% of 0.6826/0.7258).
Further out, below 0.7000 would then open the way towards a deeper decline towards 0.6930(76.4% of 0.6826/0.7240), to 0.6918 (26 Jan low) and then to 0.6900 and lower, towards the trend low at 0.6826.
On the topside, resistance will be seen at 0.7145/50 (minor) ahead of the 200/100 HMAs at 0.7170 and 0.7200. Above here seems unlikely today, but further gains could see a run towards 0.7230 and potentially back to 0.7255/60. The 200 DMA is currently at 0.7265 and we have not been above there since 10 Sept 2014, so a break of this, if and when we see it, could spark quite a rally although it does not seem likely to be bothered early in the coming week, but worth watching.
Overall, look for it to be choppy on Monday, with a mild downside bias, but with the RBA to provide much of the direction early in the week. An overly dovish outlook could see another test of 0.7000 in the not too distant future.
Economic data highlights will include:
M: HIA New Home Sales, TD Inflation, Private Sector Credit, China Leading Economic Index
T: AIG Performance of Mfg Index, RBA Interest Rate Decision/Statement
W: Q4 GDP,
T: AIG Performance of Services Index, Trade Balance, Caixin China Flash Manufacturing
F: Retail Sales .
Meta Trader – AxiTrader
AUDUSD: 4 Hour
…
NZDUSD: 0.6622
After breaking up to a new 3 month high of 0.6773 on Friday following the solid trade data, the Kiwi reversed sharply following the US data, which reignited the chance of a US rate hike, while at the same time the RBNZ are contemplating another easing.
Today sees the January Building Permits although Tuesday will probably be more important for the Kiwi. The Terms of Trade will lead things off, and then later in the day the Global Dairy Trade Index will be released. That aside, with no other major domestic data due it will be offshore flows that drive the direction.
Technically the Kiwi has come back to rest close to the converging 55/100/200 DMAs at 0.6635. Another downside move would find support at the rising trend support at 0.6610, but below 0.6600 would then allow a run towards 0.6585 and then to the 19 Feb low at 0.6565 and on to the 17 Feb low of 0.6552 which is also 61.8% of 0.6416/0.6774. Under there would then head back towards 0.0.6500 (76.4%) and then towards 0.6461 (2 Feb low) and to 0.6416 (28 Jan low) although this looks unlikely to be seen again for quite a while.
On the topside, resistance will be seen at 0.6650 (200 HMA/DMA) and then at 0.6675 (100 HMA). Above this could allow a return to 0.6700 although this seems doubtful today. If wrong, look for a move back towards 0.6725, 0.6750 and to last Friday’s top at 0.6773.
The short term momentum indicators are negative but the dailies, thus far, remain pretty flat. I prefer to sell into strength, but there may be better pairs to look at.
Economic data highlights will include:
M: Building Permits
T: NZ Terms of Trade, Global Dairy Trade Index
W:
T: ANZ Commodity Prices
F.
Meta Trader – AxiTrader
NZDUSD: 4 Hour
…
DXY: 98.09
The DXY had another positive week in heading higher from the previous week’s close of 96.61, to finish at 98.08 on Friday following the release of the strong US GDP data, after some choppy trade seen in midweek.
With the dailies building on the mildly positive bias that we mentioned last week, it could be that we are in for further gains, beyond Friday’s high (98.26) and on towards the breakout level from the previous triangle formation, at 98.50, and then back to the 2 Feb high at 99.08. If that were to get taken out, then we could see the DXY head towards the previous weeks high of 99.82 and on to 100.00, beyond which 100.51 (2 Dec high) will provide stern resistance.
The weekly and monthly charts though still suggest that some caution is warranted on the topside. If we do see a failure at current levels, look for a return to the nearby support at 97.94 (100 DMA), a break of which would then re-open the path to the consolidation area between 97.00/50 (97.00: 100 DMA). Back under there would revisit the 96.60 area, seen at the beginning of last week, below which would head towards the previous week’s low of 95.97.
Further out, below here could see a decline towards the 11 Feb low at 95.23, a break of which would then target 95.00 and beyond, towards the choppy consolidation area that could eventually see the DXY trade down to 93.80 and possibly even towards the August 2015 spike low at 92.62. This is still a long way off.
Look for the chance of a choppy week, as traders position themselves for the all-important US Jobs data on Friday.
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DXY: Daily
DXY: Weekly.
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