It was the calm before the storm indeed yesterday. Another selloff in US and Asian markets meant another rally for the EUR and JPY as these currencies are inversely correlated to stock markets performance. Speculators often use low yielding currencies to fund positions in higher yielding currencies and equities so a worsening outlook for equity markets tends to boost currencies such as the EUR and JPY. As to why equity markets in US and China dropped again? In the US, the stock market is not happy for the possibility of a rate increase soon, and in China, well, it’s because its China. It doesn’t really need any reason to drop or rise anymore. Nevertheless, PMI numbers in china in August declined to 47.9 from 50.0 in July (lowest level in 3 years).
Notable market mover was oil (+8.8%) which’s move was missed if you blinked as it happened rapidly. Price rose after a government report showed a roughly 1% decline in June crude production and a bulletin from the Organization of the Petroleum Exporting Countries expressing the group’s concerns over the low price of oil.
Looking ahead, PMI data will be the main focus today. In particular UK PMI manufacturing and US ISM manufacturing. Other data to be watched include PMIs in Eurozone, unemployment rate, Canada GDP and construction spending.
Trading quote of the day: “It is not enough to have a good mind. The main thing is to use it well.” – Rene Descartes
USDJPY
Pivot: 120.6
Likely scenario: Long positions above 120.6 with targets @ 121.3 & 121.75 in extension.
Alternative scenario: Below 120.6 look for further downside with 120.25 & 119.75 as targets.
Comment: Intraday technical indicators are mixed and call for caution.
USDCAD
Pivot: 1.3225
Likely scenario: Short positions below 1.3225 with targets @ 1.311 & 1.3055 in extension.
Alternative scenario: Above 1.3225 look for further upside with 1.3275 & 1.3325 as targets.
Comment: A break below 1.311 would trigger a drop towards 1.3055.
USDCHF
Pivot: 0.958
Likely scenario: Long positions above 0.958 with targets @ 0.969 & 0.973 in extension.
Alternative scenario: Below 0.958 look for further downside with 0.955 & 0.9505 as targets.
Comment: Even though a continuation of the consolidation cannot be ruled out, its extent should be limited.
GOLD
Pivot: 1133
Likely scenario: Long positions above 1133 with targets @ 1146.5 & 1153 in extension.
Alternative scenario: Below 1133 look for further downside with 1125 & 1117 as targets.
Comment: The RSI advocates for further upside.
OIL
Pivot: 45
Likely scenario: Long positions above 45 with targets @ 50 & 52 in extension.
Alternative scenario: Below 45 look for further downside with 41.75 & 40.55 as targets.
Comment: The RSI is mixed with a bullish bias.
Important note: These technical and research reports are provided to easy-forex® as a subscriber of third party providers. They are provided for informative purposes only and in no way can they be considered as a recommendation by easy-forex® to you to engage in any trade. Hence, easy-forex® shall not be held responsible for any outcome of trading decisions, in regards with these reports or similar reports. You hereby acknowledge that using the information entailed in these reports is at your sole responsibility and you will have no claims with regards to these reports against easy-forex®. If you do not agree to this, you are strongly advised not to use these reports.
Easy Forex Pty Ltd (AFSL 246566 ABN 73107184510) makes no recommendations as to the merits of any financial product referred to in this website, emails or its related websites and the information contained does not take into account your personal objectives, financial situation and needs. Easy-Forex recommends that you read the Regulation Page, The Product Disclosure Statement, the Terms and Conditions and the Financial Services Guide before making any decision concerning Easy-Forex’s products.