Market Brief
Stock prices tumbled across the board on Monday as investors became increasingly convinced that the Federal Reserve will move soon. Asian equities fell the most since the Brexit vote following the negative lead from Wall Street. On Friday, hawkish comments from US Fed officials triggered a sell-off in the equity market and sent US treasury yields slightly higher. On Friday the S&P 500 fell 53 points or 2.45%, down to 2,127 points, while the VIX rose 40% to 15.50%. 10-year treasury yields increased by 7bps to 1.6610%. Even if we believe that this is a healthy reaction from the market -- especially given the strong rally of the last few weeks -- nothing has really changed with the speeches from Rosengren and Kaplan not providing fresh info. EUR/USD rose steadily from Friday’s low and returned to around 1.1250. Short-term momentum remains positive with 1.1350 as the first target.
Commodity currencies had a tough start into the week as investors reversed their positions, sending crude oil prices south and pushing up the Japanese yen. USD/JPY fell as much as 0.70% from yesterday’s highs to 102.31. In the short-term, the pair continues to trade within its uptrend channel but will find a resistance at 104.32. On the downside, the 101.21 level (low from September 7) will act as support.
Crude oil prices were also blinking red on the screen with investors increasingly doubtful that OPEC members will ever be able to agree on an output freeze. The international gauge, the Brent crude, was off 1.90% to $47.15 a barrel, while the West Texas Intermediate slide 2% to $44.95. We maintain our bearish view on crude oil as we expect the market has been overly optimistic regarding the presumed end of the supply glut and likelihood of an agreement over a potential output freeze.
Asian equities were down across the board with Japan’s Nikkei down 1.73% and Hong Kong’s Hang Seng off 2.89%. In mainland China, the Shanghai and Shenzhen Composites were down 2.07% and 2.64% respectively. Further South, Australian and New Zealand shares slid 2.24% and 2.53% respectively. European equities were doomed to open lower with futures falling across the board. The FTSE 250 was down 1.17%, the DAX slid 1.68%, while the SMI fell 1.085. Futures on the Dow were off 2.62%.
Today traders will be watching CPI from Denmark; total sight deposits from Switzerland; industrial production from India; weekly trade balance from Brazil; in the US Fed’s Lockhart, Kashkari and Brainard will speak.
Currency Tech
EUR/USD
R 2: 1.1616
R 1: 1.1428
CURRENT: 1.1259
S 1: 1.1046
S 2: 1.0913
GBPUSD
R 2: 1.5018
R 1: 1.3534
CURRENT: 1.3274
S 1: 1.3024
S 2: 1.2851
USD/JPY
R 2: 107.90
R 1: 104.32
CURRENT: 102.24
S 1: 99.02
S 2: 96.57
USD/CHF
R 2: 0.9956
R 1: 0.9885
CURRENT: 0.9736
S 1: 0.9522
S 2: 0.9444