The dollar moved lower against against most major currencies on Tuesday, after data showed that manufacturing activity in the U.S. expanded at the slowest rate in more than two years in August and as concerns over growth in China continue to pressure the markets. The Institute of Supply Management said its manufacturing index fell to 51.1 from 52.7 in July. It was the lowest reading since May 2013 and was below economists’ forecasts of 52.6. In a separate report, Markit said the final reading of its manufacturing index fell to 53 from 53.8 in August. This was the lowest level since October 2013. The weak data added doubts on whether the Federal Reserve will hike interest rates in September. Manufacturing activity in China contracted at its fastest rate in three years in August, while service sector activity also slowed. The reading rattled equity markets throughout the euro zone, as the U.K.'s FTSE 100, the German DAX and the French CAC all fell by more than 2.3% In the euro zone, data on Tuesday showed that manufacturing growth also slowed in August. The euro zone manufacturing index fell to 52.3 last month, from 52.4 in July as solid growth in Germany, the Netherlands and Spain was offset by fresh contractions in France and Greece.Wall Street fell sharply on Tuesday due to a worsening outlook for global equities demand. For today, in the euro area, Spain is to report on the change in the number of people unemployed, the U.K. is to publish data on construction sector activity and the U.S. is to release the monthly ADP nonfarm payrolls report, as well as data on factory orders. For the week ahead, Investors were looking ahead to Friday’s U.S. jobs report for August for more clues on the timing of the long awaited rate hike.
The Euro gained against the dollar on Tuesday extending gains from the previous two days, after China’s global equity markets took another hit from weak manufacturing data in August which renewed fears of further recession in the world's second largest economy. The world's second largest economy is on pace for its slowest expansion in nearly a decade, amid sharp decreases in exports and structural shifts in its productivity, capital and workforce.The pair was also supported by weak manufacturing data in the U.S. reported by the Institute of Supply Management which fell to the lowest level since May 2013. The currency pair fluctuated within a range between 1.1208 and 1.1332 before settling above 1.13 for the first time in 5 days. For today, in the euro area, Spain is to report on the change in the number of people unemployed. The U.S. is to release the monthly ADP nonfarm payrolls report, as well as data on factory orders.
Pivot: 1.123 Support: 1.123 1.12 1.1155 Resistance: 1.135 1.14 1.144 Scenario 1: Long positions above 1.123 with targets @ 1.135 & 1.14 in extension. Scenario 2: Below 1.123 look for further downside with 1.12 & 1.1155 as targets. Comment: The pair has broken above a declining trend line and remains on the upside.
Oil
Oil prices posted a sharp drop on Tuessday, after posting the largest three-day increase since February 2011. West Texas Intermediate crude rose by more than 8% on Monday to levels above $49 only to drop back down again on Tuesday, covering most part of Monday’s rise and ending the day below $45. Oil prices retreated after data from industry group the American Petroleum Institute on Tuesday showed U.S. crude stocks surged by 7.6 million barrels to 456.9 million in the week to Aug. 28. Analysts in a Reuters poll expected just a 32,000 barrel gain. Weaker than expected U.S. manufacturing data from the Institute for Supply Management which slowed to its lowest level since May 2013, also weighed on oil prices.For today, official inventory data will be released by the U.S. Energy Information Administration later on Wednesday.
Pivot: 47 Support: 41.75 40.55 39.8 Resistance: 47 49.4 52 Scenario 1: Short positions below 47 with targets @ 41.75 & 40.55 in extension. Scenario 2: Above 47 look for further upside with 49.4 & 52 as targets. Comment: The RSI lacks upward momentum.
Dow Jones
U.S. stocks fell broadly on Tuesday as weak U.S. and Chinese manufacturing data and sharp losses in crude oil prices erased nearly all of the gains from the recent rise in stocks. The Dow Jones Industrial Average and the S&P 500 each fell by nearly 3%, while the NASDAQ Composite index moved into negative territory for 2015 posting one of biggest daily declines for the year. In the S&P 500, all 10 sectors closed in the red. Stocks in the Energy, Financials, Technology and Basic Materials industries all fell by more than 3%. Exxon Mobil Corporation (NYSE:XOM) ended Tuesday's session as the worst performer on the Dow, after losing 4.47%. Markets will now be focusing on further economic data from the U.S. for clues on whether the Fed rate hike will actually take place in September. For today, stock traders will be watching on the monthly ADP nonfarm payrolls report from the U.S., as well as data on factory orders.
Pivot: 17570 Support: 15370 14765 14200 Resistance: 17570 18350 18650 Scenario 1: Long positions above 16055 with targets @ 16790 & 16945 in extension. Scenario 2: Below 16055 look for further downside with 15580 & 15330 as targets. Comment: Even though a continuation of the consolidation cannot be ruled out, its extent should be limited.