The dollar fell by more than 1% to one-month lows against other major currencies on Wednesday, as markets are still shocked by the latest move from China to devaluate it’s currency. The yuan dropped to a four-year low against the dollar in a move that aims to revitalize the Chinese economy and to support falling export prices and weak manufacturing. The yen was supported as demand for safe haven assets gained while riskier assets such as stocks and commodities lost ground. On top of the currency situation, China also released even more disappointing data that highlighted its economy's continued slowdown. Industrial production climbed 6% in July, below an expected 6.7% increase, while retail sales growth of 10.5% came in short of estimates of 10.6%. The dollar was also lower against the pound as U.K. average weekly earnings, remained unchanged at an annualized 2.8% in the three months to June and the U.K. unemployment rate also remained unchanged at 5.6%. For today, the European Central Bank is to publish the minutes of its latest policy meeting, Canada is to release a report on new house price inflation and the U.S. is to produce data on retail sales, initial jobless claims and import prices.
The euro continues to gain against the dollar, ending Wednesday 1% higher and reaching 1-month highs as major, longstanding crises in Greece and China occupied the attention of currency traders worldwide. The currency pair fluctuated in a range between 1.1025 and 1.1214 on Wednesday, settling close to 1.1162, 1.09% higher. In Greece, the prime minister agreed on major reforms related to pensions and spending cuts, as well as a reduction in early retirement benefits as part of the deal, however, the Greek Parliament is still expected to approve the deal. If ratified, the deal could be finalized in time for Greece to meet a €3.2 billion obligation to the European Central Bank on August 20. For today, the European Central Bank is to publish the minutes of its latest policy meeting while the U.S. is to produce data on retail sales, initial jobless claims and import prices.
Pivot: 1.109Support: 1.109 1.103 1.098Resistance: 1.1215 1.127 1.131Scenario 1: Long positions above 1.109 with targets @ 1.1215 & 1.127 in extension.Scenario 2: Below 1.109 look for further downside with 1.103 & 1.098 as targets.Comment: Even though a continuation of the consolidation cannot be ruled out, its extent should be limited.
Oil
Crude oil prices recovered part of the drop later in the day and energy stocks rebounded, driven by data which showed progress in the global supply-demand imbalance of the oil markets. Crude inventories fell by 1.68 million barrels to 453.6 million barrels, according to the Energy Information Administration. The drop was slightly smaller than the 1.9-million-barrel drop expected. West Texas Intermediate ended the day almost unchanged at $43.39 a barrel. The drop, combined with a positive outlook on demand as reported by the International Energy Agency, helped commodity markets partially recover from six-year lows suffered on Tuesday amid fears of slowing demand from China. Oil traders will now be focusing on the oil rig count data from Baker Hughes (NYSE:BHI) Company on Friday.
Pivot: 43.9Support: 42.8 42.5 41.9Resistance: 43.9 44.4 45Scenario 1: Short positions below 43.9 with targets @ 42.8 & 42.5 in extension.Scenario 2: Above 43.9 look for further upside with 44.4 & 45 as targets.Comment: As long as 43.9 is resistance, likely decline to 42.8.
Dow Jones
The prospect that China's devaluation of its currency could cause further delay in the Federal Reserve's rate hike plans supported sentiment on Wall Street and helped the main stock indices to recover most part of the drop posted on Wednesday. Investors currently believe there's a 39% likelihood of a September rate hike, according to the Fed funds futures compiled by CME Group's (NASDAQ:CME) FedWatch. Investors' confidence in a September hike has fallen sharply from 56% a week earlier as concerns in global markets intensified. However, multinational companies that export to China took a hard hit as their products become more expensive for China to import. Apple (NASDAQ:AAPL) initially fell more than 1% and then recovered some losses on news of a deal to allow Apple Pay at drugstore chain Rite Aid . Other consumer stocks were caught up in the selloff, including Amazon (NASDAQ:AMZN), Nike (NYSE:NKE), Starbucks (NASDAQ:SBUX) and Costco (NASDAQ:COST). Stock traders will now be focusing on what the upcoming economic data might mean for the Federal Reserve's upcoming rates decision next month.
Pivot: 18350 Support: 17200 17040 16820 Resistance: 18350 18650 18900 Scenario 1: Short positions below 18350 with targets @ 17125 & 17040 in extension. Scenario 2: Above 18350 look for further upside with 18650 & 18900 as targets. Comment: The RSI is capped by a declining trend line.